Diversified Foods and Seasonings, Inc. v. SK Foods LP ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 Four In One Company, Inc., et al., No. 2:08-cv-3017 KJM JDP 12 Plaintiffs, ORDER 13 v. 14 SK Foods, L.P., et al. 15 Defendants. 16 17 Diversified Foods and Seasoning, Inc., et al., No. 2:08-cv-03074- KJM-JDP 18 Plaintiffs, 19 v. 20 SK Foods, L.P., et al. 21 Defendants. 22 23 Bruce Foods Corporation., et al., No. 2:09-cv-00027-KJM-JDP 24 Plaintiffs, 25 v. 26 SK Foods, L.P., et al. 27 Defendants 1 2 Cliffstar Corporation., et al., No. 2:09-cv-00442 KJM JDP 3 Plaintiffs, 4 v. 5 SK Foods, L.P., et al. 6 Defendants 7 8 Plaintiffs Four in One Company, Inc., Bruce Foods Corporation, Cliffstar Corporation and 9 Diversified Foods & Seasonings, Inc. are food product manufacturers that purchased processed 10 tomato products from defendants, SK Foods L.P., Ingomar Packing Company, Los Gatos Tomato 11 Products, Scott Salyer, Stuart Woolf and Greg Pruett. Consolidated Compl. ¶¶ 1–2, 9–12, 12 ECF No. 113. Plaintiffs move for cy pres distribution of the remaining class funds, $8,766.85, to 13 the Institute for Consumer Antitrust Studies at Loyola University Chicago School of Law 14 (ICAS/Loyola) and dismissal of the action. Mem. In Support of Cy Pres Disbursement (Mem.), 15 ECF No. 136. Defendants did not file an opposition, and the court submitted the matter without a 16 hearing. For the following reasons, the motion is granted. 17 I. BACKROUND 18 In 2009, another judge of this court issued an order consolidating the four above captioned 19 cases. Consolidation Order (March 12, 2009), ECF No. 88. Plaintiffs then filed a consolidated 20 complaint alleging defendants violated federal antitrust laws by conspiring to raise and fix the 21 prices of a variety of processed tomato products. Consolidated Compl. ¶¶ 1–2. In January 2014, 22 the court granted provisional certification of the settlement class and preliminarily approved class 23 settlement. See Order (Jan. 2, 2014) at 1, ECF No. 222. Eight months later, the court granted 24 plaintiffs’ motion for final approval of the class settlement as to defendants Ingomar, Pruett, 25 Woolf and Los Gatos. Order (Aug. 18, 2014), ECF No. 239. The class has received all funds 26 from those settlements and the court entered final judgement against them. Id. 27 ///// 1 The actions against SK Foods, L.P. and Scott Salyer remained pending due to an ongoing 2 bankruptcy action in the United States Bankruptcy Court for the Eastern District of California. 3 Mem. at 2–3; see also Not. of Filing Bankruptcy, ECF No. 102. On November 20, 2020 the 4 Chapter 11 Trustee for SK Foods filed a motion for approval of a distribution of unclaimed funds 5 after the final distribution and entry of a final decree and closure of the bankruptcy case, which 6 the Bankruptcy Court granted on December 30, 2020. Atty. Arthur N. Bailey, Jr. Decl. ¶ 5, 7 ECF No. 314. Before closure of the bankruptcy case, in April 2015, class members began to 8 receive pro rata shares from the distribution of these defendants’ funds culminating recently with 9 the final distribution in January 2021. Id. ¶ 6. Even more recently, plaintiffs were advised that 10 $8,766.85 in uncashed checks remained in the class funds account. Id. ¶ 7. 11 Plaintiffs now move to resolve the pending claims against remaining defendants SK 12 Foods, L. P, and Scott Salyer given the completion of the distribution of the class funds and 13 termination of the bankruptcy action. Mem. at 3. Plaintiffs move to disburse the remaining funds 14 to their proposed cy pres designee, ICAS. Mem. at 3–4. Additionally, plaintiffs move to dismiss 15 the actions against remaining defendants, SK Foods, L.P. and Scott Salyer. Mem. at 1. 16 Defendants do not oppose the motions. 17 II. LEGAL STANDARD 18 When a class action settlement results in unclaimed funds, the alternatives available are cy 19 pres distribution, escheat to the government, or reversion to the defendants or the identified class 20 members. Six Mexican Workers v. Ariz. Citrus Growers, 904 F2d 1301, 1307 n.4 (9th Cir. 1990) 21 (also noting a fourth option is the pro rata distribution of the funds to located class members). 22 “Cy pres provides a mechanism for distributing unclaimed funds to the next best class of 23 beneficiaries.” In re Easysaver Rewards Litig., 906 F.3d 747, 760 (9th Cir. 2018) (internal 24 citations omitted). Where, as here, the original settlement did not provide for the cy pres 25 designee, nothing appears to prevent the plaintiffs moving for such a designee in a separate 26 motion. 27 “Not just any worthy” recipient will qualify, however. Dennis v. Kellogg Co., 697 F.3d 28 858, 865 (9th Cir. 2012). There must be a “driving nexus between the plaintiff class and the cy 1 pres beneficiary.” Id. The cy pres distribution must “(1) address the objectives of the underlying 2 statutes, (2) target the plaintiff class, or (3) provide reasonable certainty that any member will be 3 benefitted.” Nachshin v. AOL, LLC, 663 F.3d 1034, 1040 (9th Cir. 2011). 4 III. ANALYSIS 5 The court finds that ICAS/Loyola’s advocacy efforts align with the nature of the 6 plaintiffs’ lawsuit and the consumer protection objectives of the Sherman Act, 15 U.S.C. § 1. 7 Plaintiffs alleged defendants violated Section 1 of the Sherman Act by conspiring “to fix prices, 8 allocate customers, and rig bids for Processed Tomato Products, including tomato paste and diced 9 tomatoes.” Consolidated Compl. ¶ 87; see 15 U.S.C. § 1 (“Every contract, combination in the 10 form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several 11 States, or with foreign nations, is declared to be illegal.”). Plaintiffs propose ICAS/Loyola as cy 12 pres designee “because of its work on behalf of consumers in the area of antitrust law to protect 13 the rights of individuals from the types of predatory behavior underlying the lawsuit.” Mem. at 4. 14 ICAS/Loyola is a “non-sectarian charitable organization” and “non-partisan, independent 15 academic center that advocates for a more just, competitive, and consumer-friendly economy.” 16 Bailey Decl. ¶¶ 9–10. 17 Silent class members’ interests will reasonably be benefitted by the distribution to 18 ICAS/Loyola. Plaintiffs argue that ICAS/Loyola reflects the interests of the silent class members 19 because “it has a nationwide reach sufficient to justify receipt of the cy pres award.” Mem. at 5. 20 The court agrees. ICAS/Loyola works on behalf of people such as the “[c]lass members in this 21 case, who were consumers of commodities that were the subject of price-fixing agreements 22 subject to antitrust liability.” Bailey Decl. ¶ 9. University programs may be appropriate 23 designees when the focus of the program aligns with the interests of a nationwide class. See In re 24 Easysaver Rewards Litigation, 906 F.3d at 761–62 (a university program focused on internet 25 security and data privacy was an appropriate cy pres designee because its research would have 26 far-reaching impact for a nationwide class injured by the mishandling of personal information). 27 Likewise, ICAS/Loyola’s research on creating a more just economy will benefit the silent, 28 ///// 1 nationwide class impacted by alleged price fixing. Therefore, the organization is an appropriate 2 cy pres designee due to the nexus between the class interests and the designee’s interest. 3 Plaintiffs also request dismissal of the action against the remaining defendants, SK Foods, 4 L.P. and Scott Salyer, under Federal Rule Civil Procedure 41(a)(2). Mem. at 1. Given the 5 conclusion of the bankruptcy proceedings against these defendants, the court grants this motion. 6 IV. CONCLUSION 7 The motions are granted as follows: 8 (1) The court grants the disbursement of the remaining class funds in the amount 9 of $8,766.85 to the appropriate cy pres designee, the Institute for Consumer 10 Antitrust Studies at Loyola University Chicago School of Law. 11 (2) The court dismisses on the merits and with prejudice the remaining causes of 12 action against SK Foods, L.P. and Scott Salyer. 13 This order resolves ECF No. 313. This case is closed. 14 IT IS SO ORDERED. 15 DATED: September 30, 2021.