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A war over chocolate seems to be bubbling. Since the end of last year, more than 40 class actions alleging a price-fixing scheme among Hershey Co., Mars Inc., Cadbury Schweppes, Nestl� S.A., and some of their affiliates, have shown up in federal courts across the country. As a result, the four chocolate behemoths have enlisted the help of nearly a dozen lawyers, based primarily in Washington, to combat the not-so-sweet claims against them. For instance, Washington partner Stefan Meisner and Chicago partner David Marx Jr. of McDermott Will & Emery are representing Mars — the company best known for making M&Ms. For now, just keeping tabs on the dozens of nearly identical suits makes up a huge part of the workload, Marx says. American plaintiffs were quick to jump on the bandwagon after findings from a Canadian investigation into chocolate pricing became public in December. Fifteen of the roughly 45 American cases are filed in the U.S. District Court for the District of New Jersey. That’s also where the first of the claims, for plaintiffs CNS Confectionery Products and Winn Corp., both direct purchasers of chocolate, was filed on Dec. 21. Several petitions have been filed with the Judicial Panel on Multidistrict Litigation, however, to condense the cases into one court. Marx says consolidating the suits will likely alleviate “whatever headache there is” over having to wrangle with filings in multiple courts. Alleviate, perhaps, but definitely not cure. The lawsuits describe a cartel that was covertly established by the chocolate makers in violation of federal antitrust laws in an attempt to raise prices while keeping sales stable. The complaints emphasize that the four defendants control almost half of the worldwide chocolate market. Additionally, they allege that as members of the same trade associations, company executives had ample opportunity to conspire at meetings of organizations such as the Chocolate Manufacturers Association. Though the candy-makers contend that rising costs of dairy products and other commodities are to blame for the escalating price of chocolate, the defense will not file a response to the allegations until a jurisdiction is chosen for the litigation. Lawyers for the defendants are set to submit their petition to the multidistrict litigation panel on Feb. 19. And though Marx is the only member of the defense team allowed to comment on the cases, he is not alone. Kirkland & Ellis partners Jonathan Brightbill, Craig Primis, and Thomas Yannucci — all based in Washington — are representing Hershey. Howrey partners Roxann Henry, Joseph Ostoyich, and Christina Sarchio, all in D.C., are handling Nestl�. Morrison & Foerster partners Thomas Mueller and Dennis Orr and associate Phuong-Anh Le — all in New York — are working on the matter for Cadbury. And helping Marx and Meisner for Mars are Washington associate Nicole Castle and Chicago associate Holland Tahvonen. OH CANADA The suits, filed primarily by candy distributors, confectioners, and other direct purchasers of chocolate, stem from the Canadian investigation. Though the complaints contend that a Justice Department investigation into chocolate pricing is also under way, very little is known about that probe. A Justice spokesperson declined to comment, but Nestl� spokeswoman Laurie MacDonald confirmed the company was “aware of a preliminary investigation” being conducted by Justice into “marketing practices in the U.S. chocolate industry.” Canadian court documents, however, offer specific details of that ongoing investigation. Two affidavits filed by the Canadian Commissioner of Competition in the Ontario Superior Court of Justice tell of an inquiry that began Nov. 2, 2007, into “communications between employees of the Cooperating Party, Hershey, Mars, Nestl� and others known and unknown, who exchanged confidential pricing information.” The “Cooperating Party” is the unnamed participant who informed the commissioner of the alleged offenses in exchange for immunity. According to one affidavit, signed Nov. 28, 2007, a Canadian competition law officer’s search of a filing cabinet on the premises of Ontario-based food distributor ITWAL Limited turned up letters from February 2002 addressed to Nestl�, Hershey, Mars, and Cadbury from ITWAL’s president. “At the �end of the day,’” the letter states, “it is only the suppliers’ control and discipline of the trade spending that can restore the functionality of the marketplace … I urge you to meet and take action before this chocolate bar �bubble bursts.’” CHOCOLATE DISCOVERY The investigation into possible price fixing also extends overseas. Last week, German authorities raided seven chocolate companies, including Nestl� and Mars, in a probe of pricing practices there. The potentially international scope of the alleged conspiracy could lead lawyers involved in the U.S. litigation on a worldwide discovery mission. And in the end, says Hollis Salzman of New York’s Labaton Sucharow, a plaintiffs lawyer who filed the first chocolate case in New Jersey on Dec. 21, damages could amount to billions of dollars. That calculation would be based on an estimate of the difference between the amounts plaintiffs paid in the alleged price-fixing compared to the cost they should have paid. That day may never come, however. Based on the evidence presented in the complaints, Marx says accusations of an American chocolate cartel are weak. “None of the complaints contain any factual basis for a claim that any of the conduct under investigation in Canada occurred in, or affected the United States,” he says. Indeed, if the Justice Department probe does not result in a corresponding criminal case, it could be much harder to prove the U.S. civil claims. However, it wouldn’t be impossible. Kenneth Adams, an antitrust partner in Dickstein Shapiro’s Washington office, is not involved in the cases but has handled similar matters. He has seen civil cases succeed even when Justice didn’t meet the burden of proof to bring a criminal action. He adds that just because the American complaints rely heavily on the Canadian investigation, it doesn’t automatically discount them in the United States. In the mid-1990s, Adams represented clients who alleged price fixing of the amino acid methionine among international chemical companies. Though authorities in Europe took action in the matter, the U.S. Justice Department’s probe did not result in charges. Nonetheless, Adams’ clients won “substantial settlements” in civil cases. This early in the game, though, he says it’s anyone’s guess whether the chocolate cases will end as sweetly for the plaintiffs. The lawyers involved in the chocolate cases also realize they’re at the beginning of a process that will likely stretch on for years. By year-end, plaintiffs attorney Salzman says, “if we’re lucky, we’ll get through motions to dismiss.”
Marisa McQuilken can be contacted at [email protected].

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