D&G, Inc. v. Supervalu, Inc. et al
MEMORANDUM OPINION AND ORDER denying [113 in 0:09-md-02090-ADM-TNL] MOTION to Dismiss filed by C&S Wholesale Grocers, Inc., Supervalu, Inc. (Written Opinion). Signed by Judge Ann D. Montgomery on 03/16/2015. Associated Cases: 0:09-md-02090-ADM-TNL et al.(TLU)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
In re Wholesale Grocery Products
Court File No. 09-MD-2090 ADM/TNL
This Order Relates to All Actions
W. Joseph Bruckner, Esq., Elizabeth R. Odette, Esq., and Kate M. Baxter-Kauf, Esq., Lockridge
Grindal Nauen PLLP, Minneapolis, MN; Richard B. Drubel, Esq., and Kimberly H. Schultz,
Esq., Boies, Schiller & Flexner LLP, Hanover, NH; Daniel A. Kotchen, Esq., and Daniel L.
Low, Esq., Kotchen & Low LLP, Washington, DC; and Edward T. Dangel III, Esq., Dangel
Dwyer, LLC, Boston, MA, on behalf of Plaintiffs.
Stephen P. Safranski, Esq., Martin R. Lueck, Esq., K. Craig Wildfang, Esq., Heather M.
McElroy, Esq., and Damien A. Riehl, Esq., Robins Kaplan LLP, Minneapolis, MN, on behalf of
Defendant SuperValu, Inc.
Todd A. Wind, Esq., and Nicole M. Moen, Esq., Fredrikson & Byron, PA, Minneapolis, MN;
and Christopher J. MacAvoy, Esq., and Charles A. Loughlin, Esq., Baker Botts LLP,
Washington, DC, on behalf of Defendant C&S Wholesale Grocers, Inc.
This matter is before the Court on remand from the Eighth Circuit for further proceedings
on Defendants SuperValu, Inc. (“SuperValu”) and C&S Wholesale Grocers, Inc.’s (“C&S”)
(collectively, “Defendants” or “Wholesalers”) Partial Motion to Dismiss or Stay [Docket No.
113]. See King Cole Foods, Inc. v. SuperValu, Inc. (In re Wholesale Grocery Prods. Antitrust
Litig.), 707 F.3d 917, 924-25 (8th Cir. 2013). The issue on remand is whether Defendants may,
under the successor-in-interest doctrine, enforce arbitration agreements that they have assigned.1
Additional issues resulting from a subsequent Eighth Circuit decision in this litigation
will be addressed in a separate order to be issued at a later date. See Case Management Order
[Docket No. 498] ¶ 2 (identifying additional issues); In re Wholesale Grocery Prods. Antitrust
Litig., 752 F.3d 728, 735-37 (8th Cir. 2014) (reversing grant of summary judgment for
Defendants and remanding on issue of whether to certify narrower class).
Id. For the reasons set forth below, the Court concludes that the successor-in-interest doctrine
does not apply and that Defendants, as non-signatories to the arbitration agreements, cannot
compel arbitration under the agreements.
This multi-district litigation consolidates antitrust lawsuits brought by retail grocers
against SuperValu and C&S, two of the largest wholesale grocers in the United States. See
Second Consol. Am. Class Action Compl. [Docket No. 99] (“Second Am. Compl.”) ¶ 1.
SuperValu’s business is primarily in the Midwest, and C&S’s business is largely concentrated in
New England. Id.
Plaintiffs operate retail grocery stores and purchased wholesale grocery products and
related services directly from C&S and SuperValu. Id. ¶¶ 9-10. Plaintiffs allege Defendants
conspired to allocate customers and territories through a September 6, 2003 Asset Exchange
Agreement (“AEA”) and that Defendants used the allocations to charge retailers
supra-competitive prices, all in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Id. ¶¶
34-44, 77-83. Plaintiffs assert their claims as a class action. See id. ¶¶ 67-75.
A. Arbitration Agreements Exchanged Under the AEA
Under the September 2003 AEA, Defendants exchanged certain business assets,
including some supply and arbitration agreements that Defendants had with retail grocers.
Plaintiffs JFM, Inc. and MJF, Inc. (collectively, “Village Market”) are retail grocers in
New England who had supply and arbitration agreements with SuperValu prior to the AEA.
Riehl Decl., Apr. 25, 2011 [Docket No. 129] Exs. 8, 9. C&S acquired those agreements from
SuperValu in the AEA. Id. Ex. 5 § 1.3(a), (m).
Plaintiff Millennium Operations, Inc. (“Millennium”) (collectively, “Plaintiffs”) is a
retail grocer in the Midwest who had a supply and arbitration agreement with wholesale grocer
Fleming Companies, Inc. (“Fleming”) prior to the AEA. Second Am. Compl. ¶ 9; Riehl Decl.
Exs. 2, 3. Fleming filed for bankruptcy in early 2003, and SuperValu acquired rights to those
agreements in the AEA.2 Riehl Decl. Ex. 5 § 1.1(a), (m). Millennium subsequently entered into
a new supply agreement and arbitration agreement with SuperValu. Id. Exs. 6, 7, Second Am.
Compl. ¶ 9.
After the AEA, New Village and Millennium each purchased goods from the Defendant
with whom they had a supply and arbitration agreement (the “signatory Defendant”). New
Village purchased goods from C&S, with whom they had a supply and arbitration agreement,
and Millennium purchased goods from SuperValu, with whom they had a supply and arbitration
agreement. King Cole, 707 F.3d at 920.
B. Village Market and Millennium Each Assert Claims Against Nonsignatory Defendant
Village Market and Millennium have each asserted an antitrust conspiracy claim against
the wholesaler Defendant with whom it does not do business and does not have an arbitration
agreement (the “nonsignatory Defendant”). See Second Am. Compl. Count I. Specifically,
Village Market has asserted an antitrust claim against SuperValu only, and Millennium has
asserted an antitrust conspiracy claim against C&S only. Id.
The parties disagree as to whether the Fleming’s agreements with Millennium were
transferred directly from Fleming’s bankruptcy estate to SuperValu, as Millennium argues, or
whether C&S first acquired those agreements from Fleming’s bankruptcy estate and then
assigned them to SuperValu. Regardless of whether C&S ever acquired rights to the agreements
with Millennium before transferring those rights to SuperValu, there is no dispute that the
agreements were ultimately assigned to SuperValu.
C. Relevant Procedural History
In its Partial Motion to Dismiss, Defendants moved to dismiss or stay the claims of
Village Market and Millennium, arguing that the doctrines of equitable estoppel or successor-ininterest allowed them to enforce the arbitration agreements to which they were no longer
This Court granted Defendants’ motion to dismiss, finding that the nonsignatory
Defendants could compel arbitration under the doctrine of equitable estoppel. In re Wholesale
Grocery Prods. Antitrust Litig., No. 09-MD-2090, 2011 WL 9558054, at *3-*4 (D. Minn. July 5,
2011). Because the Court held that equitable estoppel applied, it did not address the Defendants’
successor-in-interest argument. See id.
On appeal, the Eighth Circuit Court of Appeals reversed this Court’s holding on the issue
of equitable estoppel. King Cole, 707 F.3d at 923-24. A majority of the Eighth Circuit panel
held that the doctrine of equitable estoppel did not apply because the antitrust conspiracy claims
against the nonsignatory Defendants are “statutory claims [that] exist independent of the supply
and arbitration agreements.” Id. at 923. Thus, the claims against the nonsignatories were not “so
intertwined with the agreement containing the arbitration clause that it would be unfair to allow
the signatory to rely on the agreement in formulating its claims but disavow availability of the
arbitration clause of that same agreement.” Id. (quoting PRM Energy Sys., Inc. v. Primenergy,
Defendants’ Partial Motion to Dismiss also sought dismissal of antitrust conspiracy
claims brought by Plaintiffs Blue Goose Market, Inc. (“Blue Goose”) and King Cole Foods, Inc.
(“King Cole”). Blue Goose and King Cole are retail grocers who have arbitration agreements
with SuperValu and have filed antitrust conspiracy claims against C&S only. King Cole, 707
F.3d at 920. The Blue Goose and King Cole arbitration agreements were not exchanged under
the AEA. Thus, Defendants sought to enforce those arbitration agreements under the doctrine of
equitable estoppel only, and not under a successor-in-interest theory.
L.L.C., 592 F.3d 830, 835 (8th Cir. 2010)). The Eighth Circuit then remanded the case to this
Court for consideration of the nonsignatory Defendants’ argument that they can enforce the
arbitration agreements as successors-in-interest because those agreements were exchanged as
part of the AEA. Id. at 924-25.
A. Successor-in-Interest Argument
“[S]tate contract law governs the ability of nonsignatories to enforce arbitration
provisions.” PRM Energy Sys., 592 F.3d at 833. Under Minnesota law, the general rule is that
“arbitration clauses are contractual and cannot be enforced by persons who are not parties to the
contract.” Onvoy, Inc. v. SHAL, LLC, 699 N.W.2d 344, 356 (Minn. 2003). However, the
Minnesota Supreme Court has recognized that there are exceptions to this rule: “Federal cases
have set out at least three principles on which a nonsignatory to a contract can compel
arbitration: equitable estoppel, agency, and third-party beneficiary.” Id. (citing MS Dealer Serv.
Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999)). Minnesota appears to follow federal law
regarding these exceptions. See id.; cf. King Cole, 707 F.3d at 922 (relying on Minnesota
Supreme Court’s reference to federal law in Onvoy to conclude that “Minnesota appears to
follow federal law regarding equitable estoppel”).
Defendants argue that the “close relationship” exception, also known as the agency
theory,4 applies here because “SuperValu and C&S are successors-in-interest, standing in each
The close relationship doctrine has been referred to as the “agency theory” by the
Eighth and Eleventh Circuits. See PRM Energy Sys., 592 F.3d at 835 (referencing the “close
relationship or agency theory recognized in CD Partners”); MS Dealer, 177 F.3d at 948 (stating
that the court’s finding of equitable estoppel made it unnecessary to determine whether the
“agency theory” applied).
other’s shoes with respect to the supply and arbitration agreements they exchanged in the AEA.”
Defs.’ Supplemental Mem. [Docket No. 501] 8-9. Defendants contend that permitting
Millennium and Village Market to avoid arbitration by pleading their antitrust claims against the
assignor, rather than the assignee, of the arbitration agreements would render those agreements
The close relationship or agency exception “relies on agency and related principles to
allow a nonsignatory to compel arbitration when, as a result of the nonsignatory’s close
relationship with the signatory, a failure to do so would eviscerate the arbitration agreement.”
PRM Energy Sys., 592 F.3d at 834 (citing CD Partners, LLC v. Grizzle, 424 F.3d 795, 798 (8th
Cir. 2005)); see also MS Dealer, 177 F.3d at 947. For example, in CD Partners, the Eighth
Circuit determined that three officers of a corporation could enforce the arbitration clause of a
contract between the corporation and the plaintiff, even though the officers were not signatories
to the contract. CD Partners, 424 F.3d at 798-800. The Eighth Circuit reasoned that the only
way the corporation’s promises under the contract could be fulfilled was through the conduct of
the corporation’s nonsignatory officers and employees. Id. at 800.
Similar to CD Partners, courts applying the close relationship exception have done so
only where an agency relationship or corporate affiliation exists between the signatory and
nonsignatory to an arbitration agreement. See, e.g., Nesslage v. York Sec., Inc., 823 F.2d 231,
233 (8th Cir. 1987) (allowing nonsignatory who was a “disclosed agent” of signatory to invoke
arbitration); Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1121 (3d Cir.
1993) (ordering arbitration for signatory’s agent and corporate subsidiary); J.J. Ryan & Sons,
Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 320-21 (4th Cir. 1988) (holding that claims
against signatory’s parent company were subject to arbitration even though the parent company
was not a signatory); Letizia v. Prudential Bache Sec., Inc., 802 F.2d 1185, 1188 (9th Cir. 1986)
(allowing nonsignatory employees of brokerage firm to enforce firm’s arbitration clause).
Here, the relationship between Supervalu and C&S is not based on agency or related
principles. Defendants are competitors; they do not control each other and do not rely on one
another to act. To the extent Defendants have a relationship under the AEA, the relationship is
one of assignor and assignee, because each wholesaler assigned to the other their rights to an
arbitration agreement. Thus, Defendants’ relationship differs greatly from agency or agencyrelated relationships that courts have deemed to be sufficiently close for purposes of permitting a
nonsignatory to enforce an arbitration agreement.
Defendants’ successor-in-interest argument fails for the additional reason that the
nonsignatory Defendants are predecessors-in-interest, not successors-in-interest, to the
arbitration agreements they seek to enforce. For example, SuperValu seeks to enforce the
Village Market arbitration agreement that it assigned to C&S under the AEA. As the assignor of
the Village Market arbitration agreement, SuperValu is the predecessor-in-interest and C&S is
the successor-in-interest to the agreement. Defendants themselves acknowledge that C&S now
stands in SuperValu’s shoes with respect to the Village Market arbitration agreement. Defs.’
Supplemental Mem. 8-9.
Defendants cite no authority, and the Court finds none, for the proposition that a
predecessor-in-interest’s assignment of rights creates a “close relationship” with its assignee that
warrants allowing the predecessor-in-interest to assert the rights that it unconditionally assigned
and voluntarily relinquished. Thus, Defendants cannot use a successor-in-interest theory to
enforce arbitration agreements to which they are not signatories.
B. Direct Enforcement Argument
Defendants also argue they may directly enforce the arbitration agreements to which they
are no longer signatories because some of the events giving rise to Millennium and Village
Market’s claims occurred before the arbitration agreements were transferred. To support this
argument, Defendants rely on the principle that a claim may be arbitrable even under a
terminated agreement if it involves “facts and occurrences that arose before expiration, . . . or
where, under normal principles of contract interpretation, the disputed contractual right survives
expiration of the remainder of the agreement.” Defs.’ Supplemental Mem. 6 (quoting Litton Fin.
Printing Div. v. NLRB, 501 U.S. 190, 205-06 (1991)).
Assuming without deciding that this argument is within the scope of the Eighth Circuit’s
remand, the argument nevertheless fails. The cases cited by Defendants are inapposite because
they concern agreements that were terminated. See, e.g., Litton, 501 U.S. at 193; Riley Mfg. Co.
v. Anchor Glass Container Corp., 157 F.3d 775, 781 (10th Cir. 1998); Koch v. Compucredit
Corp., 543 F.3d 460, 466 (8th Cir. 2008). The issue in those cases was whether a party to an
expired arbitration agreement could compel arbitration after the agreement had terminated. See
id. Here, the arbitration agreements were assigned, not terminated. Thus, the issue is not
whether the right to arbitrate survives, but rather who is entitled to assert that right.
Under Minnesota law, “[a]n assignment generally operates to transfer all rights possessed
by the assignor and the assignor retains no interest in the right transferred.” Martin ex rel. Hoff
v. City of Rochester, 642 N.W.2d 1, 13 (Minn. 2002). Consistent with this principle, where a
party assigns agreements that include an arbitration clause, the assignor’s “right to compel
arbitration under those agreements ‘is extinguished.’” HT of Highlands Ranch, Inc. v.
Hollywood Tanning Sys., Inc., 590 F. Supp. 2d 677, 684-85 (D.N.J. 2008) (quoting Restatement
(Second) of Contracts § 317(1) (1981)). Thus, the nonsignatory Defendants are not entitled to
assert rights under arbitration agreements that they voluntarily and unconditionally transferred.
Based upon the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that Defendants C&S Wholesale Grocers, Inc. and SuperValu Inc.’s
Partial Motion to Dismiss or Stay [Docket No. 113] is DENIED.
BY THE COURT:
s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: March 16, 2015.
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