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IN RE CITRIC ACID ANTITRUST LITIGATION

January 31, 2001

IN RE: CITRIC ACID ANTITRUST LITIGATION. THIS DOCUMENT RELATES TO: ALL ACTIONS.


The opinion of the court was delivered by: Legge, U.S. District Judge.

ORDER REGARDING PROPOSED PLAN OF DISTRIBUTION OF SETTLEMENT PROCEEDS TO CLASS MEMBERS

Plaintiffs' class counsel brings this motion for approval of a proposed plan for the distribution of the proceeds of the class settlement. Certain class members object to the plan, because the proposed method of distribution would pay settlement proceeds calculated on purchases some of the class members made from a non-settling defendant which was found not to be liable. The motion has been briefed, argued and submitted for decision. The court has reviewed the record of the case, the moving and opposing papers on this motion, the arguments of counsel, and the applicable authorities.

I.

This antitrust action arises from an alleged conspiracy by certain manufacturers, sellers and distributors to fix the prices of citric acid. Numerous class actions were filed and were later transferred to this court by the Judicial Panel on Multidistrict Litigation.

The class complaints name five defendants. Four defendants settled in 1996 for approximately $86 million, leaving Cargill Inc. as the sole remaining defendant. Class counsel did not seek approval to distribute the settlement proceeds at that time. Instead, they chose to wait until the action against Cargill was resolved. However, Cargill defeated plaintiffs' claims at summary judgment. That judgment was affirmed on appeal. In re Citric Acid Litigation, 191 F.3d 1090, 1106 (9th Cir. 1999). In affirming the judgment, the Ninth Circuit found that the evidence in the record ". . . does not support a reasonable inference that Cargill was involved in the citric acid price-fixing conspiracy." Id. The U.S. Supreme Court denied certiorari.

Class counsel then brought this motion for approval of a plan for the distribution of the proceeds paid by the four settling defendants. The plan proposes to allocate the settlement proceeds among all class members pro rata. The problem is that the calculation of each class member's share would be based upon the dollar amounts that each class member paid for direct purchases of citric acid from all five defendants, including from Cargill.

Class members Van Waters & Rogers Inc. and Ashland Inc. (the "objectors") oppose the plan of distribution because it allows class members to recover based upon their purchases from Cargill. The objectors argue that such a plan is legally improper, and that it is unfair because it would materially decrease the shares of the class members who did not purchase from Cargill. The dollar differences resulting from the two methods of calculation are substantial.

II.

Approval of a plan for the allocation of a class settlement fund is governed by the same legal standards that are applicable to approval of the settlement: the distribution plan must be "fair, reasonable and adequate." In re Computron Software Inc., 6 F. Supp.2d 313, 321 (D.N.J. 1998) (citing Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1284-85 (9th Cir. 1992).) A plan of allocation that reimburses class members based on the type and extent of their injuries is generally reasonable. See id.; see also In re Ikon Office Solutions, Inc. Securities Litig., 194 F.R.D. 166, 184 (E.D.Pa. 2000).

The issue here is whether it is "fair, reasonable and adequate" to allocate settlement proceeds to class members based on their purchases from Cargill, after it has been judicially determined that the class did not have a valid claim against Cargill.

III.

The court first looks at what the class members were told. Both parties point to the class settlement notices and releases. Those documents, however, do not resolve the present issue.

The class settlement notice stated that the settlement funds are "for the benefit of the class." But the notice says nothing about the allocation of the settlement proceeds. A supplemental notice of settlement was later sent to all class members, but it was specifically addressed to class members who purchased from the settling defendants only. It excludes any mention of Cargill purchasers' stake in the settlement proceeds. The language of the settlement notices is therefore inconclusive.

Addressing the releases obtained from the class in favor of the four settling defendants, plaintiffs contend that they demonstrate that the four defendants sought to "buy peace" with all class members, regardless of who purchased from whom. Even if this argument is relevant, it is not determinative. First, the Ninth Circuit has found that the mere fact of signing a release does not, by itself, entitle a class member to recover. In re Cement & Concrete Antitrust Litigation, 817 F.2d 1435, 1443-44 (9th Cir. 1987). Second, the releases state that they are not dependent on how the settlement proceeds are allocated. Instead, the releases expressly state that class members may not sue the settling defendants even if the class members ...


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