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Lawsuits accuse Idaho and U.S. potato cooperatives of price fixing

by Rand Green | June 29, 2010
Two antitrust cases have been filed against the United Potato Growers of America and others, but a spokesperson for United has termed the allegations "unfounded."

"Two antitrust cases have been filed against United Potato Growers of America and 23 other entities. The complaints allege that United and its members do not qualify for the limited antitrust protection accorded cooperatives by the Capper-Volstead Act," Barb Shelley, chief communications officer for UPGA, said in a written statement June 29.

"The allegations are unfounded," Ms. Shelley continued in the statement. "We are careful and diligent to ensure that we are in full compliance with the law." Also named in the suit were United Potato Growers of Idaho and 22 other individuals and companies, mostly in Idaho, involved in potato production. Phone calls to UPGI were referred to UPGA.

"At this point, we have not been formally served," Lee Frankel, president and chief executive officer of the Salt Lake City-based UPGA, said in a telephone interview with The Produce News June 29. "Until we are served, it is hard to make additional comments, but … our general stance is that we have followed the law." UPGA is "properly organized as a co-op" under Capper-Volstead, "and we work to make sure that all of our activities comply with the law," he added.

In the first of the two cases, a class-action complaint filed June 18 in the U.S. District Court for the District of Idaho Eastern Division, lists Brigiotta's Farmland Produce & Garden Center Inc. in Jamestown, NY, as plaintiff "on behalf of itself and all others similarly situated," which it further defines as "a class consisting of all United States direct purchasers of fresh and process potatoes from the defendants and their co-conspirators."

The complaint "alleges a conspiracy … to fix, raise, maintain and/or stabilize the prices" of potatoes "by controlling and reducing the aggregate supply of potatoes."

Tom Galbato, co-owner of Brigiotta's, an 86-year-old company whose operations include wholesale and retail produce sales, told The Produce News that he was not allowed to comment on the case and deferred to his attorneys for comment.

James Pizzirusso, an attorney with Hausfeld LLP in Washington, DC, said June 30, "The case has just been filed. We are just getting started, but we have been investigating it for a very long time. And what we have uncovered is that the potato growers in Idaho and across the country were coming together to plan ways to reduce the supplies of potatoes with the express purpose of fixing the prices of those potatoes. Our complaint alleges that that is a per se illegal agreement under the Sherman Act … and a violation of U.S. antitrust laws."

Capper-Volstead "certainly allows producers to get together, form cooperatives and jointly market their product," he continued. But "groups like United Potato Growers" have "stretched it to the absurd and essentially tried to form a cooperative of the entire industry, and then tried to get the entire industry to reduce supplies to raise prices. I don't think that was the intent of Capper-Volstead."

Mr. Pizzirusso said that his firm recently received a $25 million settlement in a similar case involving U.S. egg producers, and "we are in ongoing investigations … of other potential cooperatives that might be violating Capper-Volstead. But right now our focus is on the potatoes case, and we have identified about a dozen reasons why Capper-Volstead does not apply particularly to them."

UPGA's Ms. Shelley said in her written statement that "United's mission is to bring stability to the potato industry by helping growers to recover their costs while providing the market with an adequate supply of high-quality potatoes. This allows buyers to focus on serving their customers, knowing that their investment will be rewarded with a sustainable supply of fresh potatoes. A stable industry allows growers the financial resources to continue to develop products to better serve buyers and their customers' needs today and in the future.

"United and its members have shown great care to follow the law and will defend ourselves against the complaint. United will work to defend our growers so that the industry can continue to have access to an excellent source of America's favorite vegetable," she added.

The second class-action lawsuit, which lists the same defendants as the first and makes similar allegations, was filed June 23 on behalf of one Todd Simon "and all others similarly situated." No company affiliation is listed for Mr. Simon, who is, according to the civil docket for the case, represented by the Los Angeles firm Glancy Binkow & Goldberg LLP. Calls to the law firm were not immediately returned. The firm's web site indicates that it has "expertise prosecuting securities fraud, antitrust and complex commercial litigation" and that it primarily represents investors and consumers.

The Produce News was able to determine that the Todd Simon who is the plaintiff in the case is definitely not the same Todd Simon who is the fifth- generation co-owner of Omaha Steaks International Inc. in Omaha, NE.