United States District Court, D. Minnesota
In re Wholesale Grocery Products Antitrust Litigation This Relates to All Actions
Joseph Bruckner, Esq., and Elizabeth R. Odette, Esq.,
Lockridge Grindal Nauen PLLP, Minneapolis, MN; Matthew J.
Henken, Esq., and Richard B. Drubel, Esq., Boies, Schiller
& Flexner LLP, Hanover, NH; and Daniel A. Kotchen, Esq.,
Kotchen & Low LLP, Washington, DC, on behalf of the
J. Lender, Esq., Eric Shaun Hochstadt, Esq., and Luna Ngan
Barrington, Esq., Weil Gotshal & Manges LLP, New York,
NY; and Todd A. Wind, Esq., Fredrikson & Byron, PA,
Minneapolis, MN, on behalf of Defendant C&S Wholesale
Stephen P. Safranski, Esq., Robins Kaplan LLP, Minneapolis,
MN, on behalf of Defendant SuperValu, Inc.
MEMORANDUM OPINION AND ORDER
MONTGOMERY U.S. DISTRICT JUDGE.
September 6, 2017, the undersigned United States District
Judge heard oral argument on Defendants C&S Wholesale
Grocers, Inc.'s (“C&S”) Motion to Exclude
Expert Testimony [Docket No. 790] and Motion for Summary
Judgment [Docket No. 809]. The Midwest Plaintiffs oppose both
Motions. For the reasons set forth below, the Motion to
Exclude Expert Testimony is granted in part and denied in
part, and the Motion for Summary Judgment is denied.
multi-district litigation consolidates the antitrust lawsuits
of retail grocers against C&S and SuperValu, Inc.
“Defendants”), the two largest full-line grocery
wholesalers in the United States. See Second Consol.
Am. Class Action Compl. [Docket No. 99] (“Second Am.
Compl.”) ¶ 1. The Plaintiff retail grocery stores
purchased wholesale grocery products and related services
directly from Defendants. Id. ¶¶ 5-7,
9-10. Plaintiffs allege that in 2003, Defendants conspired to
allocate customers and territories through an Asset Exchange
Agreement (“AEA”), and that Defendants used the
allocations to charge retailer grocers supra-competitive
prices, in violation of Section 1 of the Sherman Act, 15
U.S.C. § 1. See id. ¶¶ 34-44, 77-83.
Plaintiffs assert their claims as a class action and are
suing for damages under Section 4 of the Clayton Act, 15
U.S.C. § 15. Id. ¶¶ 67-75, 83.
Wholesale Grocery Industry
wholesalers such as SuperValu and C&S act as
“middlemen” in the grocery supply chain,
purchasing products from manufacturers, storing those
products at distribution centers, and later reselling those
products to retail grocers. Expert Report Jeffrey J.
Leitzinger, Ph.D., Supp. Pls.' Mot. Class Certification
[Docket No. 621] (“Leitzinger Class Report”)
¶ 11; Expert Report Dr. John H. Johnson, IV, Related
Class Certification [Docket No. 624] (“Johnson Class
Report”) ¶ 26. “Full-line” wholesalers
such as SuperValu and C&S distribute tens of thousands of
products in every product category, whereas “partial
line” wholesalers offer a more limited set of product
categories. Leitzinger Class Report ¶¶ 40-42;
In re Wholesale Grocery Prods. Antitrust Litig., 752
F.3d 728, 729 (8th Cir. 2014), cert. denied 135
S.Ct. 2805 (2015). The large volume purchases by full-line
wholesalers result in cost and logistics benefits that are
passed from the wholesaler to the retailer in the form of
lower prices. Leitzinger Class Report ¶ 11. The
Plaintiff grocers require access to a full-line wholesaler to
maintain their competitiveness because full-line wholesalers
generate economies of scale and also carry the full line of
products that Plaintiffs need to sell to their customers.
Id. ¶ 46.
New England and Midwest Markets
business is primarily in the Midwest, and C&S's
business is largely concentrated in New England. Second Am.
Compl. ¶ 1. Prior to June 2002, SuperValu was
C&S's largest competitor in New England, where
C&S was the primary wholesaler. Wholesale
Grocery, 752 F.3d at 729. C&S did not compete with
SuperValu in the Midwest, where SuperValu's main
competitor was Fleming Companies (“Fleming”).
Id. at 729-30; Leitzinger Class Report ¶ 17.
2003, Fleming declared bankruptcy, and C&S announced its
intention to acquire Fleming's Midwest wholesale grocery
distribution business, which would have resulted in C&S
becoming SuperValu's major competitor in the Midwest.
Leitzinger Class Report ¶ 17; Wholesale
Grocery, 752 F.3d at 730.
Asset Exchange Agreement
September 2003, C&S and SuperValu entered into the AEA,
which provided that SuperValu would receive Fleming's
Midwestern assets and SuperValu in turn agreed to transfer
its New England assets to C&S. Wholesale
Grocery, 752 F.3d at 730. The AEA included reciprocal
non-compete provisions. Id. Each Defendant agreed
not to supply former customers served from a distribution
center exchanged in the agreement for two years. Id.
Each Defendant also agreed not to solicit those customers for
a period of five years. Id.
filed this antitrust action in 2009, alleging that the
purpose of the AEA was to allocate customers and territory
and to agree not to compete with each other for the customers
and territories they exchanged. Second Am. Compl.
¶¶ 1-3, 33, 76-83. Plaintiffs aver the elimination
of competition between SuperValu and C&S in regional
markets allowed each Defendant to charge supra-competitive
prices to their retail customers. Id. ¶¶
SuperValu's ABS Pricing
Midwest market, SuperValu uses a pricing formula known as
“activity based sell” (“ABS”) pricing
for its dry grocery, general merchandise, dairy, and frozen
product categories. See In re Wholesale Grocery Prods.
Antitrust Litig., No. 09-MD-2090, 2012 WL 3031085, *3
(D. Minn. July 25, 2012) [Docket No. 352]. The ABS pricing
system sells products to retail grocers at each product's
actual average cost to SuperValu plus two types of
fees-operating fees and service fees. Id.
fees consist of SuperValu's costs in filling the
customer's order (calculated using nine “fee
driver” classifications) plus a margin. Leitzinger
Class Report ¶ 19, n.43. Operating fees apply in
approximately 85% of ABS sales. Wholesale Grocery,
2012 WL 3031085, at *3. Service fees are fixed fees that
apply when orders with sufficient volume requirements are
placed far in advance. Expert Rebuttal Report Jeffrey J.
Leitzinger, Ph. D. [Docket No. 637] (“Leitzinger Class
Rebuttal”) ¶ 14, n.16. Service fees apply in
approximately 15% of ABS sales. Wholesale Grocery,
2012 WL 3031085, at *3.
assert that Defendants' alleged conspiracy enabled
SuperValu to “ensure the continuation of ABS pricing
in the Midwest rather than having to engage in aggressive
price competition like that which it experienced in competing
with C&S in New England . . . . As a result, retail
customers . . . in the Midwest have sustained overcharges in
their purchases of grocery wholesale products and services
from Defendants.” Second Am. Compl. ¶ 40.
Class Certification History
Certification of Two Broad Midwest and New England Classes
October 31, 2011, Plaintiffs moved to certify two broad
putative classes: (1) retailers who purchased products or
related services from Defendants in the Midwest market (the
“Midwest Class”); and (2) retailers who purchased
products or services in the New England market (the
“New England Class”). Plaintiff D&G Inc.
(“D&G”) was the class representative of the
Midwest Class, and Plaintiff DeLuca's Corporation
(“DeLuca's”) was the class representative of
the New England Class. See Pls.' Mot. Class
Certification [Docket No. 202] at 1-3.
Court denied class certification of both proposed classes on
July 16, 2012, after determining that Plaintiffs could not
show class-wide impact through common evidence. See
Wholesale Grocery, 2012 WL 3031085, at *9-17. The
Court found that prices charged to retail grocer customers in
the New England Class are individually negotiated and that
upcharges vary from customer to customer depending on the
size and frequency of a customer's orders, local market
conditions, the distance from a customer's store to a
C&S distribution center (“DC”), and
individually-negotiated price concessions. Id. at
*2. The Court rejected Plaintiffs' argument that
classwide impact could be shown through three methods-the
contrary hypothesis test, the variance test, and list
prices-because none of the methods could establish that
upcharges had uniformly increased for all class members.
Id. at *10-14.
the Midwest Class, the Court noted that the “formulaic
nature” of the ABS pricing method applied by SuperValu
to charge customers in the Midwest market made a better case
for certification than the New England Class. Id. at
*16. Nevertheless, the Midwest Class could not prove impact
by common evidence because each of SuperValu's DCs across
the Midwest inserted different values into the ABS formula,
requiring an analysis of each DC's fees and competitive
August 31, 2012, D&G requested leave to move for
certification of a narrower Midwest Class of grocers who were
charged using ABS pricing and who were supplied by
SuperValu's Champaign, Illinois DC. See Letter,
Aug. 31, 2012 [Docket No. 362]. D&G argued that the Champaign DC-based
Class would “entirely avoid the problems created by
different ABS formulas for different distribution
centers.” Id. at 1.
January 11, 2013, the Court granted summary judgment to
Defendants. In re Wholesale Grocery Prods. Antitrust
Litig., No. 09-MD-2090, 2013 WL 140285 (D. Minn. Jan.
11, 2013) [Docket No. 427]. Based on the grant of summary
judgment to Defendants, the Court denied as moot
D&G's request for renewed class certification of the
narrower Midwest Class. Id. at *15. D&G appealed
both the summary judgment ruling and the denial of
certification of the Midwest Class. Notice of Appeal [Docket
21, 2014, the Eighth Circuit reversed the grant of summary
judgment against D&G, but affirmed the denial of
certification of the Midwest Class. Wholesale
Grocery, 752 F.3d at 733-36. Additionally, the Eighth
Circuit vacated the denial of D&G's request for leave
to pursue certification of a narrower class of SuperValu
customers in the Midwest who were supplied by the Champaign,
Illinois DC and charged using the ABS pricing formula.
Id. at 736. The Eighth Circuit stated that
“the evidence suggests the ABS fee inputs would be
standardized for this narrow class, ” and that this
Court should “consider, in light of our holding that
the wholesalers are not entitled to summary judgment, whether
to certify this class.” Id.
Five Classes of Midwest Plaintiffs Certified
March 2016, the Midwest Plaintiffs moved for certification of
five litigation classes consisting of customers who paid ABS
fees in all four SuperValu ABS product categories (grocery,
frozen, dairy, and general merchandise) purchased directly
from one of four SuperValu Midwest DCs from December 31, 2004
through September 13, 2008 (the “Class Period”).
Pls.' Mot. Class Cert. [Docket No. 607].
Class-Wide Impact: Dr. Leitzinger's Margin
support of their renewed request for class certification, the
Midwest Plaintiffs presented a three-pronged argument that
class-wide impact could be shown with common evidence:
first, the Defendants' conspiracy eliminated
competition, enabling SuperValu to achieve supra-competitive
net margins; second, the supra-competitive margins
strongly support the conclusion that SuperValu charged
supra-competitive ABS prices; and third, every class
member paid supra-competitive ABS prices because every member
(i) made purchases in all four ABS product categories and
(ii) was charged according to the same ABS formula for the
vast majority of its purchases.
one of the argument, the Midwest Plaintiffs asserted that
after Defendants' alleged agreement not to compete,
SuperValu enjoyed net margins at its Midwest Class DCs that
were more than three times higher than they would have been
but for Defendants' alleged conspiracy.
to a net margin comparison conducted by the Midwest
Plaintiffs' expert, Dr. Jeffrey Leitzinger (“Dr.
Leitzinger”), SuperValu's net margins for the Class
DCs after the AEA (when SuperValu faced no competition from
C&S in the Midwest) were over 5%, whereas its net margins
in New England prior to the AEA (where SuperValu formerly
competed with C&S) were only 1.7%.
Net Margins: Class Period
Net Margins: Class Period
Net Margins: New England Pre-AEA
Net Margin Difference (Overcharge Amount)
Green Bay, WI
Pleasant Prairie, WI
Class Report ¶ 140. The amount by which the net margins
of the Class DCs exceed those of pre-AEA New England is the
amount by which SuperValu's ABS fees were allegedly
inflated. The Midwest Plaintiffs referred ...