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In re Broiler Chicken Antitrust Litigation

United States District Court, N.D. Illinois, Eastern Division

February 21, 2018

IN RE BROILER CHICKEN ANTITRUST LITIGATION This Document Relates To All Actions

          MEMORANDUM ORDER

          Jeffrey T. Gilbert United States Magistrate Judge.

         This matter is presently before the Court for resolution of a dispute between Direct Purchaser Plaintiffs (“DPPs”) and Commercial and Institutional Indirect Purchaser Plaintiffs (“CIIPPs”), on one side, and Defendants, on the other, about the discoverability of DPPs' and CIIPPs' downstream sales and market information. Defendants served separate sets of Rule 34 requests for production of documents on DPPs [674-2] and CIIPPs [674-3]. Each set contained 13 requests for production that encompass certain aspects of downstream discovery, such as documents related to DPPs' and CIIPPs' interactions with customers, demand for their products, customers' preferences, and market factors. [674 at 1, 3 n.2-14]. DPPs and CIIPPs object to producing any downstream discovery. [673 at 1; 675 at 1; 675-1 at 3-4]. The parties first brought this issue to the Court's attention in a joint status report and several short and summary filings. [415 at 33-50; 429; 434; 506; 522; 523]. The Court then ordered more fulsome briefing. [580 at 7-9; 627]. Consistent with the schedule set by the Court, the parties now have filed supplemental briefs. [673; 674; 675; 690; 691; 692]. Because the supplemental briefs incorporate and build upon the arguments raised in the parties' previous filings, the Court's analysis in this Memorandum Order focuses on those briefs.

         Defendants argue the requested downstream discovery is relevant to, among other things, class certification in the cases brought by CIIPPs and End User Consumer Plaintiffs (“EUCPs”) (collectively, “IPPs”-short for “indirect purchaser plaintiffs”) and to certain aspects of the merits of all of the putative class cases. Defendants also say Plaintiffs already have sought discovery from Defendants and from third parties on similar issues thereby conceding the relevance of the information. Lastly, Defendants contend DPPs and CIIPPs have not made an adequate showing of burden or lack of proportionality to support their argument that Defendants should be denied access to this relevant discovery. In response, DPPs and CIIPPs dispute each theory of relevance offered by Defendants. They also say that, even if some downstream discovery is relevant, the limited value of the discovery Defendants are seeking does not justify the significant burden and potential chilling effect on private antitrust enforcement that would follow from a court order that such information be produced by named putative class representatives. DPPs and CIIPPs also maintain that Defendants can obtain any relevant information they need to defend against Plaintiffs' claims from other sources and through other methods that are more proportionate to the needs of the case. For the reasons stated below, the Court finds that, at this time and on this record, Defendants have not shown they are entitled to the extensive downstream discovery they apparently seek through the general and broad requests for production of documents that Defendants have served on DPPs and CIIPPs.[1]

         I.

         Although there is no absolute rule barring downstream discovery in private antitrust cases, In re Urethane Antitrust Litig., 237 F.R.D. 454, 462-63 (D. Kan. 2006), courts usually do not require direct purchaser plaintiffs to produce such information. Among other reasons, that is because generally there is no pass-through defense available to defendants in federal antitrust cases brought by direct purchasers. In re Plasma-Derivative Protein Therapies Antitrust Litig., 2012 WL 1533221, at *2 (N.D.Ill. Apr. 27, 2012) (citing a “plethora of case law”); In re Air Cargo Shipping Servs. Antitrust Litig., 2010 WL 4916723, at *1 (E.D.N.Y. Nov. 24, 2010); In re Aspartame Antitrust Litig., 2008 WL 2275528, at *1 (E.D. Pa. Apr. 8, 2008); In re Auto. Refinishing Paint Antitrust Litig., 2006 WL 1479819, at *7 (E.D. Pa. May 26, 2006); In re Pressure Sensitive Labelstock Antitrust Litig., 226 F.R.D. 492, 497 (M.D. Pa. 2005); In re Vitamins Antitrust Litig., 198 F.R.D. 296, 301 (D.D.C. 2000).

         Defendants argue that downstream discovery from DPPs is justified in this case, however, because it may be relevant to the merits of particular claims and defenses. Defendants say, for instance, that downstream discovery may show whether the pre-existing cost-plus exception-which allows for the assertion of a pass-through defense under certain circumstances-applies to DPPs' claims. As DPPs note, though, the cost-plus exception is narrow; in fact, some courts have said it is so narrow as to seemingly “preclude its application in any case.” State of Ill., ex rel. Burris v. Panhandle E. Pipe Line Co., 935 F.2d 1469, 1478 (7th Cir. 1991); see also First Impressions Salon, Inc. v. Nat'l Milk Producers Fed'n, 214 F.Supp.3d 723, 729 (S.D. Ill. 2016).[2] And there has been no threshold showing that the cost-plus exception may apply in this case. This limited and to some extent hypothetical (at least in this case) exception, therefore, cannot be used to seek general and broad discovery of, for example, all “documents and contracts about DPPs' sales.” [674 at 11].

         Defendants also contend that DPPs' downstream information will evidence consumers' reactions to price changes, which in turn will be relevant to market power if DPPs pursue a rule of reason case or to the plausibility of an alleged conspiracy in a per se case. Id. at 9-11. These theories of relevance are at least somewhat questionable with respect to downstream discovery when most of the focus in a conspiracy case is on upstream conduct. See Aspartame, 2008 WL 2275528, at *4-5; Auto. Refinishing Paint, 2006 WL 1479819, at *8. In addition, at least at the motion to dismiss stage, Plaintiffs' claims passed the plausibility threshold when the District Judge denied Defendants' motions to dismiss, which is when the plausibility determination usually is made. Even if the Court were to assume that Defendants' proffered theories of relevance potentially are sound, though, Defendants' existing requests for production still would be problematic for other reasons discussed below.

         Defendants' requests for production are very broad and seek a tremendous amount of granular information particularly if the more general requests are interpreted to apply to downstream sales and market information. See, e.g., [674-2 at 9] (“All budgets, forecasts, projections, or strategic plans concerning market factors affecting the current or future pricing or availability of Broilers and Excluded Broilers”); id. at 10 (“All documents, reports and analyses concerning market factors affecting the current or future pricing or availability of Broilers and Excluded Broilers”); id. at 11 (“All contracts, invoices, purchase orders, or agreements pursuant to which You resold any Broilers or Excluded Broilers”); id. at 12 (“All budgets, forecasts, or strategic plans with respect to your sales of Broilers and Excluded Broilers”); id. (“All documents reflecting or concerning Your reactions or responses to changes in the price of Broilers”); id. (“All documents constituting, commenting on, or concerning any actual or proposed price increases or price increase announcement applicable to Broilers”). DPPs have responded to Defendants' requests for production by saying they will produce certain of the information requested as it relates to the claims alleged in Plaintiffs' complaints concerning their purchases of Broilers, but they have objected to the extent the requests encompass downstream sales and other information. It, therefore, is difficult on the present record to understand specifically what downstream information Defendants are requesting and the burden on DPPs of producing that information or, for that matter, Defendants' ability to obtain that information in other ways.

         Although Defendants complain about DPPs' unwillingness to discuss more specific objections to their downstream discovery requests and to suggest ways in which the requests can be narrowed so they are less burdensome, it is Defendants' job in the first instance to promulgate discovery that is focused on relevant downstream information. While it is true, as Defendants point out, that DPPs have not developed their burden argument in the type of detail that typically would be required, the limited information that DPPs have provided along with common sense supports the notion that responding to the extremely broad and granular downstream discovery requested by Defendants would be burdensome. To be clear, the Court is not saying that Defendants' requests for production are overbroad or otherwise objectionable outside of the context of downstream discovery, which is the only issue now before the Court. The Court only is making the point that Defendants' general requests for production may be more inclusive than necessary with respect to downstream discovery.

         There is another flaw with Defendants' argument that they are entitled to discovery concerning market power and the plausibility of Plaintiffs' claims. These are market-wide, not firm-specific, issues. Obtaining information from the limited number of named DPPs, which “are not large resellers that control a significant portion of the indirect purchaser market” [675 at 5], may not provide much benefit in analyzing the market downstream from the $20 to $30 billion Broiler market, [709, ¶ 114]. EUCPs already have served subpoenas on ten of Defendants' larger customers and on other absent members of the putative DPP class that are of a similar size to the named DPPs. [674 at 2; 691 at 1 n.1; 692 at n.3]. Defendants will get copies of any documents and information that may be produced in response to these subpoenas. Defendants also will receive information from CIIPPs and EUCPs about their own purchases of Broilers, which are downstream from DPPs.

         In addition, at the status hearing on February 7, 2018, Defendants indicated their intention to seek discovery, including downstream discovery, from several new direct purchaser plaintiffs who recently filed their own opt-out actions, and those new plaintiffs represent that they are among the largest purchasers of Broilers from Defendants in the country. (Those new plaintiffs also, however, stated their intention to oppose such discovery.) Defendants also can obtain industry-wide data from other third party sources. It is not clear to the Court, nor do Defendants offer any reason, why the information they receive or may receive from alternative sources, along with any relevant data about the Broiler market downstream from DPPs that they already have, is or will be insufficient for Defendants' purposes. Given the contours of Defendants' market power and plausibility arguments and the alternative sources of information that may be available to Defendants, the Court is not now convinced that the burden on the named putative class representatives of ordering production of the requested downstream discovery is justified and proportional to the needs of the case.

         Defendants' final argument is that downstream discovery from DPPs is relevant to class certification in the IPP cases. Defendants contend the information requested from DPPs will allow Defendants to better understand the downstream distribution chain for Broilers and whether there is common proof of the injury suffered by IPPs based on the extent of price changes throughout the entire distribution chain. DPPs do not dispute Defendants' contention that CIIPPs and EUCPs must show that an overcharge was passed on to them to establish they suffered an antitrust injury or that DPPs are upstream from CIIPPs and EUCPs. Defendants also claim downstream discovery is relevant to the class action predominance analysis because individualized issues may arise if the distribution chain is complex or products change significantly as they move through the distribution chain. DPPs do not offer a particularly strong response to this point though, in fairness, it also is not fully developed by Defendants. Even if these two theories could make some downstream discovery from DPPs relevant, which the Court is not now deciding, the actual requests for production served by Defendants still would be too broad and sweep in significant amounts of information that may not be related to these theories.

         Moreover, the Court's analysis in this respect does not end with relevance. DPPs are not parties to the IPP cases. To the extent Defendants are seeking downstream discovery from DPPs that is relevant only in the IPP cases, their requests might be analogized to subpoenas issued to non-parties to the IPP cases under Federal Rule of Civil Procedure 45 than to requests for production under Rule 34 in the DPPs' case. Rule 45, of course, provides more protection for the recipient of a third-party subpoena than Rule 34 provides to a party. Further, the same flaws that the Court identified with respect to the Defendants' market power and plausibility arguments can be raised here. DPPs are relatively smaller players in the distribution chain, and Defendants may be able to obtain sufficient discovery to address the commonality and predominance issues in the IPP cases from other sources, to the extent those issues need to be addressed at all. Again, the points that Defendants want to make at the class certification stage seem to be about the market as a whole (or entire segments of the market), not about any ...


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