Pipe Fitters Local Union No. 120 Pension Fund v. Barclays Capital Inc. et al

Filing 84

ORDER GRANTING DEFENDANTS 66 MOTION TO DISMISS AND GOLDMAN SACHS 67 MOTION TO DISMISS. Responses due by 1/12/2012. Replies due by 1/26/2012. Motion Hearing set for 2/16/2012 02:00 PM before Hon. Claudia Wilken. Motion Hearing set for 11/17/2011 02:00 PM before Hon. Claudia Wilken. Signed by Judge Claudia Wilken on 8/30/2011. (ndr, COURT STAFF) (Filed on 8/30/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

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PIPE FITTERS LOCAL UNION NO. 120
PENSION FUND, on behalf of itself
and all others similarly
situated,
Plaintiff,

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v.

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ORDER GRANTING
DEFENDANTS’ MOTION
TO DISMISS AND
GOLDMAN SACHS’
MOTION TO DISMISS
(Docket Nos. 66
and 67)

BARCLAYS CAPITAL INC.; THE
GOLDMAN SACHS GROUP, INC.;
KOHLBERG KRAVIS ROBERTS & CO.,
LP; VESTAR CAPITAL PARTNERS INC.;
CENTERVIEW PARTNERS LLC; and
PETER J. MOSES,

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No. C 11-01064 CW

Defendants.
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Plaintiff Pipe Fitters Local Union No. 120 Pension Fund

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charges Defendants Barclays Capital Inc.; The Goldman Sachs Group,

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Inc.; Kohlberg Kravis Roberts & Co., L.P. (KKR); Vestar Capital

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Partners Inc.; Centerview Partners LLC; and Peter J. Moses with

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violating section 1 of the Sherman Act, 15 U.S.C. § 1.

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have filed a joint motion to dismiss.

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separate motion to dismiss.

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2011.

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the parties, the Court GRANTS Defendants’ joint motion and Goldman

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Sachs’ motion.

Defendants

Goldman Sachs has filed a

The motions were heard on August 25,

Having considered oral argument and the papers submitted by

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BACKGROUND
The following allegations are taken from Plaintiff’s first
amended complaint (1AC).
Plaintiff, a public retirement trust fund, was a shareholder

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in Del Monte Foods.

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buyout (LBO) of Del Monte, which was structured as a merger.

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Defendants were involved in the leveraged

In the latter half of 2009, Barclays, one of Del Monte’s

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investment banks, suggested to several private equity firms the

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idea of acquiring the company.

Moses, a Barclays managing

United States District Court
For the Northern District of California

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director, approached several firms, including KKR and Apollo

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Management.

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Barclays’ and Moses’ overtures.

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Del Monte was not aware of, nor did it prompt,

In early January 2010, Moses again met with KKR.

He

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explained that bidding for Del Monte would occur through “a narrow

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private solicitation of interest to a small group of private

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equity firms and no strategic buyers, such as another food

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company.”

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arrangement, by advising Del Monte on the sell-side and providing

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financing to a private equity firm on the buy-side.

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that it was interested in bidding for Del Monte and would partner

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with Centerview to do so.

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1AC ¶ 41.

Barclays would benefit at both ends of this

KKR indicated

That same month, Apollo independently informed Del Monte that

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it was interested in purchasing the company for $14 to $15 per

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share.

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as its sell-side adviser.

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Del Monte consider only a select group of private equity firms.

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Del Monte adopted this recommendation.

In response to Apollo’s offer, Del Monte retained Barclays
In this role, Barclays recommended that

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Barclays did not disclose

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to Del Monte that it previously had recommended the company to

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private equity firms as an acquisition target.

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Thereafter, Barclays invited KKR, Apollo, The Carlyle Group,

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The Blackstone Group and CVC Capital Partners to participate in

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the bidding process.

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strategic buyer, asked Barclays to be included in the process.

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Subsequently, Vestar and Campbell’s Soup, a

In February 2010, the entities that expressed interest in Del

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Monte entered into a confidentiality agreement with the company,

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which contained a “No-Teaming” provision that “prohibited the

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For the Northern District of California

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bidders from entering into any ‘agreement, arrangement or

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understanding, or any discussions which might lead to such

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agreement, arrangement or understanding, with any other

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person . . . including other potential bidders and equity or debt

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financing sources, regarding a possible transaction involving the

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Company.’”

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1AC ¶ 48.

On March 11, 2010, Del Monte received written indications of

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interest from KKR, Apollo, Carlyle, CVC and Vestar.

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submitted the highest bid, pledging to buy the company for $17.00

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to $17.50 per share.

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need to partner with another private equity firm in order to

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fulfill its bid.

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Centerview, tendered the second-highest bid, at $17 per share.

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Vestar

Vestar, however, disclosed that it would

KKR, along with its disclosed partner

On March 18, 2010, Del Monte rejected the bids.

Del Monte

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instructed Barclays to “‘shut [the] process down and let buyers

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know the company is not for sale.’”

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1AC ¶ 53.

Despite Del Monte’s directive, Barclays continued to pursue

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the sale of the company.

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2010, Moses suggested to KKR and Vestar that they “combine to

Sometime between August and September

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acquire Del Monte.”

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violated the No-Teaming Provision of the February 2010

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confidentiality agreement.

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Centerview agreed to join Vestar to attempt to purchase Del Monte.

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1AC ¶ 56.

This suggestion and arrangement

Nonetheless, KKR and its partner

On October 11, 2010, KKR and Centerview offered to acquire

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Del Monte for $17.50 per share.

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Barclays concealed Vestar’s involvement in the bid.

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25, 2010, Del Monte decided to negotiate solely with KKR and

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Centerview, without knowledge that Vestar was part of the venture.

KKR, Centerview, Vestar and
On October

United States District Court
For the Northern District of California

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On October 27, 2010, Del Monte rejected the offer.

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urging,” Del Monte did not solicit additional offers.

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“At Barclays’
1AC ¶ 60.

On November 8, 2010, a newspaper reported that KKR and

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Centerview intended to acquire Del Monte for $18.50 per share.

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Thereafter, KKR and Centerview tendered an increased bid of $18.50

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per share.

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per share.

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However, they had authority to raise the bid to $19

While Del Monte was considering the $18.50-per-share bid, KKR

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and Centerview finally sought permission from the company for

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Vestar to be a part of the bidding team.

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Centerview did not disclose to Del Monte that Vestar actually had

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been involved in the bidding process since September 2010.

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Monte granted KKR and Centerview’s request.

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However, KKR and

Del

On November 9, 2010, KKR agreed to obtain one-third of the
financing for the proposed Del Monte LBO from Barclays.
On November 24, 2010, relying on Barclays’ recommendation,

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Del Monte accepted the KKR-led team’s $19-per-share offer and

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approved of the team’s decision to seek financing from Barclays.

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Del Monte retained Perella Weinberg Partners LP to evaluate the

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fairness of the transaction.

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The Del Monte Merger Agreement, signed by the company and the

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KKR-led team, required a forty-five-day “go-shop” period, during

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which Del Monte could solicit additional offers.

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offered to administer the go-shop period on behalf of Del Monte.

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Barclays expressed to KKR its concern that Goldman Sachs was

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intending to “‘scare up competition.’”

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offered Goldman Sachs five-percent participation in the

Goldman Sachs

1AC ¶ 70.

Thereafter, KKR

United States District Court
For the Northern District of California

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syndication rights on the LBO financing.

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discontinued its efforts to handle the go-shop period, which

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Barclays ultimately conducted.

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Goldman Sachs then

On January 10, 2011, the go-shop period expired; no “pro-

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competitive superior offers” were made.

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14, 2011, a Delaware Chancery Court enjoined the shareholder vote

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on the LBO to permit an additional twenty-day go-shop period,

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during which additional offers on Del Monte could be made.

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no offers were made.

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so-called “club rules” agreed to by members of a cartel of the

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largest private equity firms, which included KKR, Apollo, Carlyle

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and Blackstone.

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among others, “agreed not to compete among themselves for” LBO

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transactions.

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1AC ¶ 72.

On February

Again,

The absence of offers was consistent with

Goldman Sachs knew of these rules.

These firms,

1AC ¶ 5.

On or about March 8, 2011, the Del Monte LBO merger took

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effect, and Del Monte shareholders were paid $19 per share.

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2010, various financial analysts believed stock in the company to

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be worth more than this amount.

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In

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Plaintiff brings a claim under section 1 of the Sherman Act

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against all Defendants.

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engaged in “a horizontal bid-rigging scheme.”

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P & A at 10:3.

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action.

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Plaintiff contends that Defendants
Pl.’s Corr. Mem. of

It intends to prosecute this case as a class

LEGAL STANDARD
A complaint must contain a “short and plain statement of the

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claim showing that the pleader is entitled to relief.”

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Civ. P. 8(a).

Fed. R.

When considering a motion to dismiss under Rule

United States District Court
For the Northern District of California

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12(b)(6) for failure to state a claim, dismissal is appropriate

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only when the complaint does not give the defendant fair notice of

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a legally cognizable claim and the grounds on which it rests.

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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

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considering whether the complaint is sufficient to state a claim,

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the court will take all material allegations as true and construe

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them in the light most favorable to the plaintiff.

NL Indus.,

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Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986).

However, this

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principle is inapplicable to legal conclusions; “threadbare

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recitals of the elements of a cause of action, supported by mere

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conclusory statements,” are not taken as true.

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129 S. Ct. 1937, 1949-50 (2009) (citing Twombly, 550 U.S. at 555).

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When granting a motion to dismiss, the court is generally

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required to grant the plaintiff leave to amend, even if no request

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to amend the pleading was made, unless amendment would be futile.

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Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911

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F.2d 242, 246-47 (9th Cir. 1990).

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amendment would be futile, the court examines whether the

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complaint could be amended to cure the defect requiring dismissal

In

Ashcroft v. Iqbal,

In determining whether

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"without contradicting any of the allegations of [the] original

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complaint."

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Cir. 1990).

Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th

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DISCUSSION

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To state a claim under section 1 of the Sherman Act, a

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plaintiff “must demonstrate: ‘(1) that there was a contract,

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combination, or conspiracy; (2) that the agreement unreasonably

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restrained trade under either a per se rule of illegality or a

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rule of reason analysis; and (3) that the restraint affected

United States District Court
For the Northern District of California

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interstate commerce.’”

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1062 (9th Cir. 2001) (quoting Hairston v. Pac. 10 Conference, 101

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F.3d 1315, 1318 (9th Cir. 1996)).

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Tanaka v. Univ. of S. Cal., 252 F.3d 1059,

As explained below, Plaintiff fails to plead the first and

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second elements of its section 1 claim.

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not sufficiently state a section 1 claim, the Court does not

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address Defendants’ argument that Plaintiff fails to allege

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antitrust injury or that its antitrust claim is impliedly

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precluded by federal securities laws.

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I.

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Because Plaintiff does

Unreasonable Restraint of Trade
The Sherman Act does not condemn every restraint of trade;

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instead, the law “was intended to prohibit only unreasonable

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restraints of trade.”

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468 U.S. 85, 98 (1984) (emphasis added).

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NCAA v. Bd. of Regents of Univ. of Okla.,

To determine whether an alleged restraint is unreasonable, a

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court may employ a rule of reason analysis or a per se rule of

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illegality.

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presumptive or default standard,” a plaintiff must “‘demonstrate

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that a particular contract or combination is in fact unreasonable

Under the rule of reason analysis, which “is the

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and anticompetitive.’”

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F.3d ___, 2011 WL 2684942, at *11 (9th Cir.) (quoting Texaco Inc.

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v. Dagher, 547 U.S. 1, 5 (2006)).

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significant costs” because litigation “of the effect or purpose of

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a practice often is extensive and complex.”

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Cnty. Med. Soc., 457 U.S. 332, 343 (1982) (citation omitted).

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California ex rel. Harris v. Safeway, ___

Making this showing “entails

Arizona v. Maricopa

The per se rule of illegality obviates the need for the

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resource-intensive inquiry into reasonableness.

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treating categories of restraints as necessarily illegal,

“The per se rule,

United States District Court
For the Northern District of California

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eliminates the need to study the reasonableness of an individual

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restraint in light of the real market forces at work . . . .”

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Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877,

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886 (2007).

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restraints . . . that would always or almost always tend to

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restrict competition and decrease output.”

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appropriate only after courts have had considerable experience

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with the type of restraint at issue and only if courts can predict

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with confidence that it would be invalidated in all or almost all

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instances under the rule of reason.”

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omitted).

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the economic impact of certain practices is not immediately

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obvious.”

“Resort to per se rules is confined to

Id.

A “per se rule is

Id. at 886-87 (citations

Courts should be reticent to adopt a per se rule “where

Id. at 887.

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As noted above, Plaintiff labels Defendants’ challenged

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conduct as a horizontal bid-rigging arrangement, which is per se

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illegal under the Sherman Act.

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1057, 1068 (9th Cir. 2010).

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Defendants rigged bidding for Del Monte, Plaintiff points to the

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alleged violation of the No-Teaming Provision of the February 2008

United States v. Green, 592 F.3d

To support its assertion that

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confidentiality agreement.

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breach of this provision constituted an unreasonable restraint of

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trade, let alone per se illegal bid rigging.

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It is not apparent, however, how the

Plaintiff cites Green, which does not support its position.

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In that case, Green had near absolute control over the bidding

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process, in which contractors fashioned their bids “without regard

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to the competition.”

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allegations do not imply that Barclays, or any other entity or

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combination of entities, had the same control over the process as

592 F.3d at 1068-69.

Here, Plaintiff’s

United States District Court
For the Northern District of California

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Green.

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only the KKR-led team’s bid, there are no allegations that

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Barclays required KKR and Centerview to join Vestar in order to

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bid, that Barclays influenced the team’s bid or that Barclays

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prevented other entities from making offers before or during the

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go-shop periods.

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KKR-led team made its bid “without regard to the competition;” the

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bid was made before the go-shop periods, during which other bids

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could have been made.

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during the go-shop periods because members of a private equity

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firm cartel “do not compete against each other during” such

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periods.

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potential for bids from entities not part of the cartel, such as

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CVC, which placed a bid during the first round and was not

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allegedly a cartel member.

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which had expressed interest in acquiring Del Monte in the first

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round of bidding and was a “strategic buyer,” not a private equity

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firm.

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process, it is not apparent that Defendants undertook any conduct

While Barclays allegedly steered Del Monte to consider

There are no allegations suggesting that the

1AC ¶ 74.

Plaintiff alleges that no bids were made

However, this allegation does not address the

Nor does it address Campbell’s Soup,

Without any party holding absolute control over the bidding

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that had “‘manifestly anticompetitive’ effects and lack[ed] ‘any

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redeeming virtue.’”

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Leegin, 551 U.S. at 886).

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restraint of trade that is per se illegal.

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Safeway, 2011 WL 2684942, at *11 (quoting
Thus, Plaintiff has not alleged a

Nor does Plaintiff allege an unreasonable restraint of trade

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under a “quick look” antitrust analysis.

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reason . . . analysis may be appropriately used where ‘an observer

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with even a rudimentary understanding of economics could conclude

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that the arrangements in question would have an anticompetitive

This “truncated rule of

United States District Court
For the Northern District of California

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effect on customers and markets.’”

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*11 (quoting Cal. Dental Ass’n v. FTC, 526 U.S. 756, 770 (1999)).

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To support use of a quick-look analysis, Plaintiff repeats only

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its flawed argument that Defendants engaged in horizontal bid

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rigging.

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may have been violated, it is not apparent that its breach

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necessarily had an anticompetitive effect.

Safeway, 2011 WL 2684942, at

As explained above, although the No-Teaming Provision

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Finally, because it has not alleged a relevant market,

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Plaintiff does not satisfy its pleading burden to sustain a

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section 1 claim under a rule of reason analysis.

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at 1063 (stating that, under a rule-of-reason analysis, the

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failure “to identify a relevant market is a proper ground for

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dismissing a Sherman Act claim”) (citing Big Bear Lodging Ass’n v.

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Snow Summit, Inc., 182 F.3d 1096, 1105 (9th Cir. 1999)).

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Forsyth v. Humana, Inc., 114 F.3d 1467 (9th Cir. 1997), Plaintiff

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maintains that a relevant market need not be plead because it has

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alleged direct anticompetitive effects.

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monopolization case under section 2 of the Sherman Act, which

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Tanaka, 252 F.3d

Citing

However, Forsyth was a

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addressed the evidence necessary to show a defendant’s market

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power.

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See id. at 1475-76.

Accordingly, Plaintiff fails to state its section 1 claim

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against Defendants.

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plead an unreasonable restraint of trade.

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II.

The claim is dismissed with leave to amend to

Antitrust Conspiracy

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Defendants contend that, even if Plaintiff were to plead an

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unreasonable restraint of trade, it fails to allege an antitrust

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conspiracy.

United States District Court
For the Northern District of California

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As an initial matter, Barclays’, Moses’ and Goldman Sachs’

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participation in the purported conspiracy is not inconsistent with

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a theory that Defendants engaged in an alleged horizontal

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restraint of trade, even though these Defendants were not KKR,

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Centerview and Vestar’s competitors.

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Sharp Elecs. Corp., 485 U.S. 717, 730 (1988) (“Restraints imposed

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by agreement between competitors have traditionally been

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denominated as horizontal restraints.”).

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agree to participate in a horizontal conspiracy.

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Ins. Brokerage Antitrust Litig., 618 F.3d 300, 337 (3d Cir. 2010)

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(“The fact that Marsh, an entity vertically oriented to the

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insurers, appears to be a sine qua non of the alleged horizontal

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agreement is not necessarily an obstacle to plaintiffs’ claim.”);

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United States v. MMR Corp. (LA), 907 F.2d 489, 498 (5th Cir. 1990)

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(“[A] noncompetitor can join a Sherman Act bid-rigging conspiracy

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among competitors.”).

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consultant who did not compete with the contractors in the case;

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nevertheless, the Ninth Circuit found sufficient evidence to

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sustain her conviction for participating in a horizontal bid

See Bus. Elecs. Corp. v.

Non-competitors can
See, e.g., In re

Indeed, in Green, the defendant was a

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rigging scheme.

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not KKR, Centerview and Vestar’s competitors does not require

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dismissal of Plaintiff’s conspiracy claim.

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Thus, that Barclays, Moses and Goldman Sachs were

Nevertheless, Plaintiff does not allege facts that imply that

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all the parties agreed to the purported antitrust conspiracy.

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state a claim under section 1, a plaintiff must plead “enough

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factual matter (taken as true) to suggest that an agreement was

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made.”

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conduct, even conduct consciously undertaken, needs some setting

Twombly, 550 U.S. at 556.

To

“A statement of parallel

United States District Court
For the Northern District of California

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suggesting the agreement necessary to make out a § 1 claim;

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without that further circumstance pointing toward a meeting of the

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minds, an account of a defendant's commercial efforts stays in

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neutral territory.”

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Id. at 557.

Here, Plaintiff pleads reasons as to why each of the parties

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was interested in having the KKR-led team prevail in bidding for

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Del Monte.

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of the deal.

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lowest possible price.

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percent of the financing syndication rights, as promised by KKR.

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Plaintiff also alleges roles for Defendants in a conspiracy.

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This, on its own, is not sufficient; “plaintiffs must allege

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additional facts that tend to exclude independent self-interested

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conduct as an explanation for defendants’ parallel behavior.”

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Twombly, 550 U.S. at 552 (citation and internal quotation and

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editing marks omitted).

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Barclays and Moses wanted to benefit from both sides
KKR, Centerview and Vestar wanted to prevail at the
Goldman Sachs wanted to obtain five-

Additionally, Plaintiff’s allegations do not suggest that

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Goldman Sachs was aware of what had occurred in the bidding

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process prior to it receiving the offer of a percentage of the
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syndication rights from KKR.

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Sachs dropped its efforts to run the go-shop period after KKR

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offered it five percent of the syndication rights.

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imply that Goldman Sachs had any knowledge of any arrangement

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between Barclays, Moses, KKR, Centerview and Vestar.

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Plaintiff pleads only that Goldman

This does not

Plaintiff’s reliance on the alleged “club rules” complicates

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its antitrust theory.

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Moses, or Vestar were aware of the alleged private equity firm

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cartel or that its rules could preclude bids by some firms during

Plaintiff does not allege that Barclays,

United States District Court
For the Northern District of California

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a go-shop period.

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meeting of the minds that Defendants’ alleged antitrust conspiracy

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would depend on the operation of the “club rules.”

Without such an allegation, there can be no

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Accordingly, Plaintiff’s claim is dismissed for the

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additional reason that Plaintiff does not allege an antitrust

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conspiracy.

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CONCLUSION

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For the foregoing reasons, the Court GRANTS Defendants’ joint

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motion to dismiss (Docket No. 67) and Goldman Sachs’ motion to

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dismiss (Docket No. 66).

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restraint of trade and a cognizable an antitrust conspiracy.

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Plaintiff fails to plead an unreasonable

Plaintiff may file an amended complaint by September 15,

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2011.

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complaint within twenty-one days of the date it is filed.

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Defendants move to dismiss Plaintiff’s amended pleading, they

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shall submit a consolidated brief, not to exceed thirty-five

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pages.

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points and authorities, they may do so, so long as Defendants’

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briefing collectively does not exceed the thirty-five-page limit.

Defendants shall answer or move to dismiss any amended
If

If some Defendants desire to file separate memoranda of

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Plaintiff shall respond in a brief not to exceed thirty-five

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pages.

Defendants’ reply, if necessary, shall not exceed twenty

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pages.

Any motion to dismiss will be heard on November 17, 2011

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at 2:00 p.m.

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Unless the parties stipulate to the contrary, Plaintiff’s

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motion for class certification is due November 17, 2011,

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Defendants’ opposition is due January 12, 2012, and Plaintiff’s

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reply is due January 26, 2012.

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February 16, 2012 at 2:00 p.m.

United States District Court
For the Northern District of California

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The motion will be heard on

IT IS SO ORDERED.

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Dated: 8/30/2011

CLAUDIA WILKEN
United States District Judge

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