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$110 Million Antitrust Settlement Reached Over Potash Prices
The National Law Journal
A federal judge in Chicago gave preliminary approval on January 30 to a cash settlement in multidistrict antitrust litigation against producers of potash, a natural chemical used in fertilizers. The deal brought the total recovery to $110 million.
Bruce Simon, a partner at Pearson, Simon, Warshaw & Penny in San Francisco, spoke to The National Law Journal about the settlements, which followed a closely watched ruling for the plaintiffs last summer by an en banc panel of the U.S. Court of Appeals for the Seventh Circuit.
In announcing the deal, the chief executive officer of Canada's Potash Corp. called the entire case a "wasteful and unnecessary cost of doing business in the United States" and an "abuse of class actions."
The remarks below have been edited for length and clarity.
NLJ: This case revolves around the global market for potash. What is that?
Bruce Simon: It's an essential ingredient in most fertilizers and is heavily relied upon by American farmers and agricultural interests. It's actually a naturally occurring chemical in the ground. It's basically potassium and it's mined in various parts of the world. The principal deposits are in Canada and Russia. That's why the defendants involved in the case are Canadian and Russian defendants.
NLJ: This actually is a group of cases consolidated as multidistrict litigation. What role did your firm play in the case?
Simon: We were co-lead counsel with Joe Bruckner out of Minneapolis -- he's with Lockridge Grindal Nauen. We were for the direct-purchaser plaintiffs. In antitrust cases, cases are often split into those who purchased directly and indirect purchasers.
NLJ: Who are your clients in this case?
Simon: We had several. The lead plaintiff in the caption is Minn-Chem Inc., an agricultural company in Minnesota that sold agricultural supplies and bought potash for mixing fertilizer that it sold to other folks. We also had several other clients. For the most part, they were small businesses that were in the agricultural sector.
NLJ: And who were the indirect purchasers in the case?
Simon: The main difference is that a direct purchaser bought from one of the defendants, so it purchased from them directly -- invoiced and paid for it. Indirect purchasers would have paid through a third party. In both the direct and indirect classes, you could have farmers and agricultural businesses. It just depends who they purchased from.
NLJ: What were the allegations in the case?
Simon: That the potash producers had a cartel where they limited production in order to keep the price up at artificial levels, and that damaged American consumers. There were alleged meetings among the defendants; there were coordinated efforts to reduce production by not mining as much and distributing as much of the potash; and there were price increases that looked abnormal given the fact that there should have been more competition between the defendants.
NLJ: You survived a motion to dismiss, but [a three-judge panel of] the Seventh Circuit disagreed, throwing out the case. What were your arguments in convincing an en banc panel to reverse the appellate court's earlier ruling?
Simon: The Seventh Circuit reversed the panel and upheld the complaint on an 8-0 decision, which was issued June 27, 2012. The en banc panel looked at the allegations of the complaint and tried to judge whether those allegations were plausible and, in fact, found they were not only plausible but compelling. It also looked at a statute called the [Foreign Trade Antitrust Improvements Act], and that's a statute that relates to whether foreign companies that sell into the U.S. can have antitrust liability, depending on the circumstances of a particular case. And they interpreted the allegations of the complaint to show that the U.S. law applied to these foreign defendants.
NLJ: You argued the case before the en banc panel in Chicago. What was that like?
Simon: It was a big deal. There must have been over 200 people in the courtroom and eight judges with all their clerks. It was quite an event and certainly one of the highlights of my career, and resulted in an important decision, which ultimately led to the settlement of the case.
NLJ: In fact, a first group of settlements was reached soon after the decision. How did the ruling affect negotiations with the defendants?
Simon: The appellate decision was certainly a very important event in the case. We not only got an 8-0 decision, but it really clarified what the allegations were in the complaint -- and also, obviously, put us back in the trial court, where we went into full-fledged discovery on all the matters related to the alleged cartel. There were basically the Russian defendants and multiple companies there; and then there were Canadian and American defendants, and each had subsidiaries named in the complaint. The first group, the Russians, settled, and then the remaining three settled: Agrium, Mosaic and Potash Corp. The total amount of settlements, both direct purchaser and indirect purchaser, is $110.25 million.
NLJ: In announcing the settlement, Potash chief executive officer and president William Doyle accused the plaintiffs attorneys of enlisting nominal plaintiffs for the case, which he called an "abuse of class actions" in the United States. What's your reaction to this?
Simon: First of all, the comment by the CEO of Potash probably doesn't deserve a response, because the amount of the settlement speaks for itself. We don't have nominal plaintiffs. We have farmers, small businesses and people hurt allegedly by the conduct, and those people are perfectly entitled to bring claims. The Seventh Circuit opinion probably says it best: Foreign companies that want to do business in the United States should expect to comply with U.S. law, and that's exactly the point. We stand by the settlement as being an excellent result. It was voluntarily entered into with the trial court judge, [U.S. District] Judge [Ruben] Castillo, and a mediator, [U.S. District Judge] Morton Denlow, and all the parties participated voluntarily in that process.
NLJ: What's next for the litigation?
Simon: It's over. We've settled with all the defendants, and the court preliminarily approved the settlement. And the final approval of the settlement will take place at a fairness hearing currently set for June 12.
NLJ: How much are plaintiffs expected to get from this settlement?
Simon: It depends on how many people make claims, and proportionately what somebody bought.
NLJ: Are you seeking attorney fees out of the $110 million?
Simon: It's a common-fund settlement, so we'll seek attorney fees and a fee petition that is not yet filed from the common fund. We haven't put it in yet, so I don't have a dollar amount for you. There are certain standards within the Seventh Circuit on what percentage you can ask for, and we'll stay within the standards established by that circuit.