Court Opinion

ID: 4149289
Source: CourtListenerOpinion
Date Created: 2017-03-01 16:01:05.830677+00
Date Added: 2024-06-11T09:21:37.110310
License: Public Domain

United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 15-1786
                         ___________________________

              In re: Wholesale Grocery Products Antitrust Litigation

                              ------------------------------

        Millennium Operations, Inc.; JFM Market, Inc.; MJF Market, Inc.

                        lllllllllllllllllllll Plaintiffs - Appellees

                                            v.

                  SuperValu, Inc.; C&S Wholesale Grocers, Inc.

                      lllllllllllllllllllll Defendants - Appellants
                                       ____________

                     Appeal from United States District Court
                    for the District of Minnesota - Minneapolis
                                   ____________

                              Submitted: May 17, 2016
                               Filed: March 1, 2017
                                  ____________

Before RILEY, Chief Judge, COLLOTON and KELLY, Circuit Judges.
                              ____________

RILEY, Chief Judge.

       A number of retail grocers sued two large full-line wholesale grocers, alleging
the wholesalers’ contract to exchange retailer supply agreements constituted market
allocation in violation of the Sherman Act, see 15 U.S.C. § 1. The retailers formed
two putative classes, the Midwest Class and the New England Class. Each class had
an Arbitration Subclass of retailers who had arbitration agreements with their current
(post-swap) wholesaler. Each Arbitration Subclass sued only its previous wholesaler,
with which it no longer had a current arbitration agreement. The district court1
dismissed the Arbitration Subclasses from the case on the theory that the previous
wholesalers, as “nonsignatory” defendants, could compel the retailers to arbitrate
based on equitable estoppel. See In re Wholesale Grocery Prods. Antitrust Litig., No.
09-MD-2090, 2011 WL 9558054, at *3-4 (D. Minn. July 5, 2011).

       We reversed and then remanded for the district court to consider the
wholesalers’ alternate theory that the nonsignatory defendants could compel
arbitration because they were successors-in-interest to the signatory defendants. See
In re Wholesale Grocery Prods. Antitrust Litig., 707 F.3d 917, 919-20, 925 (8th Cir.
2013) (Wholesale Prods. I). The district court rejected the successors-in-interest
theory, as well as the wholesalers’ third alternate theory that they could directly
enforce their previous arbitration agreements because some of the conduct at issue
occurred when the previous agreements were still in effect. The wholesalers appeal.

I.      BACKGROUND
        In 2003, wholesale grocery suppliers SuperValu, Inc. (SuperValu) and C&S
Wholesale Grocers, Inc. (C&S) (collectively, wholesalers or defendants) entered into
an Asset Exchange Agreement (AEA). C&S had recently purchased Fleming
Companies, Inc.’s (Fleming) Midwest wholesale grocery business assets out of
bankruptcy. In the AEA, C&S sold Fleming to SuperValu and C&S purchased
SuperValu’s New England business. Among the assets exchanged were supply
agreements and arbitration agreements between each wholesaler and its numerous
retail customers (the swap). According to the parties, the AEA contained reciprocal

      1
       The Honorable Ann D. Montgomery, United States District Judge for the
District of Minnesota.

                                         -2-
non-compete provisions.2 See id. at 920. Several retailers sued SuperValu and C&S,
alleging the AEA unlawfully allocated the New England market to C&S and the
Midwest market to SuperValu, in violation of the Sherman Act, 15 U.S.C. § 1. See
Wholesale Prods. I, 707 F.3d at 920.

       The plaintiff retailers proposed two classes: Midwest SuperValu customers and
New England C&S customers. Each class had an Arbitration Subclass of retailers
who had arbitration agreements with SuperValu or C&S during the class period.
Village Market (comprised of JFM Market, Inc. and MJF Market, Inc.) was the
representative of the putative New England Arbitration Subclass and Millennium
Operations, Inc. (Millennium) was the representative of the putative Midwest
Arbitration Subclass. This appeal relates to the Arbitration Subclasses (collectively,
retailers or plaintiffs).

       As the district court explained, the Arbitration Subclasses “each asserted an
antitrust conspiracy claim against the wholesaler Defendant with whom it d[id] not
[then] do business and d[id] not [then] have an arbitration agreement (the
‘nonsignatory Defendant’). . . . Village Market . . . asserted an antitrust claim against
SuperValu only, and Millennium . . . asserted an antitrust conspiracy claim against
C&S only.” The wholesalers moved to dismiss or stay the case, arguing equitable
estoppel and successor-in-interest theories allowed the wholesalers to enforce the
arbitration agreements to which they were no longer signatories. See id. at 920-21;
Federal Arbitration Act, 9 U.S.C. § 1 et seq.

      In July 2011, the district court granted the partial motion to dismiss or stay,
concluding the nonsignatory defendants could compel arbitration through equitable
estoppel. See In re Wholesale Grocery Prods. Antitrust Litig., 2011 WL 9558054, at

      2
       The parties agree such provisions existed, although we do not find these
provisions in the AEA.

                                          -3-
*3-4. “A non-signatory can ‘force a signatory into arbitration under the [equitable]
estoppel theory when the relationship of the persons, wrongs and issues involved is
a close one.’” Wholesale Prods. I, 707 F.3d at 922 (alteration in original) (quoting
CD Partners, LLC v. Grizzle, 424 F.3d 795, 799 (8th Cir. 2005)). “[Equitable]
estoppel typically relies, at least in part, on the claims being so intertwined with the
agreement containing the arbitration clause that it would be unfair to allow the
signatory to rely on the agreement in formulating its claims but to disavow
availability of the arbitration clause of that same agreement.” Id. (alteration in
original) (footnote omitted) (quoting PRM Energy Sys., Inc. v. Primenergy, L.L.C.,
592 F.3d 830, 835 (8th Cir. 2010)).

       In February 2013, we reversed the district court’s equitable estoppel ruling.
See id. at 919. We concluded plaintiffs’ claims against the nonsignatory defendants
were not “‘so intertwined with the agreement containing the arbitration clause that it
would be unfair to allow the signatory to rely on the agreement in formulating its
claims but to disavow availability of the arbitration clause of that same agreement.’”
Id. at 923 (quoting PRM Energy Sys., 592 F.3d at 835). This is because plaintiffs’
antitrust claims arose out of the Sherman Act, not alleged breaches of the parties’
contracts themselves. See id. at 923-24. We remanded the case for the district court
to consider the wholesalers’ alternate successor-in-interest theory. See id. at 925.

       On remand, the wholesalers argued they could enforce each other’s arbitration
agreements under a “close relationship” exception because they “are successors-in-
interest, standing in each other’s shoes with respect to the supply and arbitration
agreements they exchanged in the AEA.” The district court first rejected this theory
because SuperValu and C&S did not have the type of close, agency-like relationship
that would give rise to an exception to the general rule that a nonsignatory cannot
enforce an arbitration agreement.

                                          -4-
       The district court also reasoned that the nonsignatory defendants were
“predecessors-in-interest, not successors-in-interest, to the arbitration agreements
they seek to enforce.” That is, “SuperValu seeks to enforce the Village Market
arbitration agreement that it assigned to C&S under the AEA,” so as the assignor,
“SuperValu is the predecessor-in-interest.” The same is true of C&S’s attempt to
enforce Millennium’s arbitration agreement that C&S assigned to SuperValu. The
district court observed the wholesalers had cited no authority supporting “the
proposition that a predecessor-in-interest’s assignment of rights creates a ‘close
relationship’ with its assignee that warrants allowing the predecessor-in-interest to
assert the rights that it unconditionally assigned and voluntarily relinquished.”

      Finally, the district court rejected the wholesalers’ additional theory that “they
may directly enforce the arbitration agreements to which they are no longer
signatories because some of the events giving rise to Millennium and Village
Market’s claims occurred before the arbitration agreements were transferred,” on the
grounds that an “‘assignor retains no interest in the right transferred.’” (Quoting
Martin ex rel. Hoff v. City of Rochester, 642 N.W.2d 1, 13 (Minn. 2002)). The
wholesalers appeal.3

II.   DISCUSSION
      We review de novo the district court’s decision whether to compel arbitration.
See Lebanon Chem. Corp. v. United Farmers Plant Food, Inc., 179 F.3d 1095, 1099
(8th Cir. 1999). The wholesalers advance two legal theories which they believe
permit them to compel arbitration under the arbitration agreements they assigned to
each other.

      3
       In 2014, Nemecek Markets, Inc. (Nemecek), a former customer of Fleming,
joined the litigation. Nemecek had an arbitration agreement with Fleming, and has
agreed to be bound by the arbitrability determination in this case.

                                          -5-
       A.     Close Relationship/Successor-in-Interest
       First, the wholesalers argue that even if they cannot directly enforce the
arbitration agreements they assigned, they can enforce them as nonsignatories under
a “close relationship” theory. “‘[S]tate contract law governs the ability of
nonsignatories to enforce arbitration provisions,’” PRM Energy Sys., 592 F.3d at 833
(quoting Donaldson Co. v. Burroughs Diesel, Inc., 581 F.3d 726, 732 (8th Cir.
2009)), and the parties agree Minnesota law applies here. Under that exception, a
nonsignatory can compel arbitration “when ‘the relationship between the signatory
and nonsignatory defendants is sufficiently close that only by permitting the
nonsignatory to invoke arbitration may evisceration of the underlying arbitration
agreement between signatories be avoided.’” CD Partners, 424 F.3d at 798 (quoting
MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999), abrogated on
other grounds by Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009)).

         The wholesalers cite CD Partners, in which we concluded three corporate
officers could compel arbitration under an arbitration agreement to which their
corporation was a signatory, even though the officers themselves were not
signatories, because the relationship between the corporation and the officers was
sufficiently close and because the underlying arbitration agreement would be
eviscerated if the officers could not compel arbitration. Id. at 797-800. According
to the wholesalers, “the ‘close relationship’ doctrine is not limited only to agents or
affiliates of a corporate signatory,” but also applies to “‘third-party beneficiaries of
a contract, . . . corporate officers or corporate entities affiliated with a signatory,
or . . . successors-in-interest of a signatory,’” (quoting Cent. Transp. Servs., Inc. v.
Cole, No. 13-1295, 2013 WL 6008303, at *4 (D. Kan. Nov. 13, 2013)).

       But here, as assignors, the “nonsignatory” defendants are predecessors-in-
interest to their assignees, not successors-in-interest. We are aware of no authority
supporting the proposition that a predecessor-in-interest bears a sufficiently close
relationship to a successor-in-interest such that the predecessor-in-interest can compel

                                          -6-
arbitration under an agreement to which only the successor-in-interest is a signatory.
Such a rule could create unforeseen mischief and encourage collusion. We conclude
the district court did not err by rejecting this theory.

       B.     Direct Enforcement
       Second, the wholesalers assert they can compel arbitration under the
agreements to which they were once signatories “because plaintiffs’ claims are based
on an alleged conspiracy that occurred when the original arbitration agreements were
in effect between the arbitration plaintiffs and their former suppliers.” The
wholesalers quote Litton Financial Printing Division v. NLRB, 501 U.S. 190, 205-06
(1991), for the proposition that “a party’s right to compel arbitration survives the
expiration of the agreement if the dispute ‘involves facts and occurrences that arose
before expiration.’” But here the agreements between the wholesalers and the
retailers did not expire or terminate, as in Litton. Instead, the wholesalers expressly
agreed to “convey, assign, transfer and deliver” to each other “all of [their] right, title
and interest” in the underlying supply and arbitration agreements. See also Hoff, 642
N.W.2d at 13 (“An assignment generally operates to transfer all rights possessed by
the assignor and the assignor retains no interest in the right transferred.”);
Restatement (Second) of Contracts § 317(1) (“An assignment of a right is a
manifestation of the assignor’s intention to transfer it by virtue of which the
assignor’s right to performance by the obligor is extinguished in whole or in part and
the assignee acquires a right to such performance.”). We see no reason to extend a
presumption about what rights and obligations the parties to a contract might have
intended to keep after the contract expired, see Litton, 501 U.S. at 204-06, to a
situation where a party has affirmatively given up—indeed, sold—everything it had
under the contract.

       The wholesalers insist—and the partial dissent takes for granted, post at 12-
13—that Litton’s presumption about when a party retains the right to compel
arbitration should apply “regardless of what caused the termination of the enforcing

                                           -7-
party’s [other] contractual rights and obligations,” whether expiration of the contract
or deliberate relinquishment. But Litton, following Nolde Bros., Inc. v. Local No.
358, Bakery & Confectionary Workers Union, 430 U.S. 243, 250-54 (1977), was
about inferring an intent to arbitrate post-expiration disputes arising out of a contract
from the parties’ “extensive obligation to arbitrate under the contract,” which
suggested they did not mean to “eliminate all duty to arbitrate as of the date of
expiration.” Litton, 501 U.S. at 203-04. Whether the parties to a contract intended
to be able to compel arbitration even after assigning away the right to do so, along
with all their other rights, is an entirely different matter, and, we think, much less
clearly implied by a general willingness to arbitrate disputes arising out of the
contractual relationship. For one thing, although parties do not necessarily have the
final say over whether a contract is allowed to expire or is terminated by their
counterparty, and presumably would not want to subject the availability of “a pivotal
dispute resolution provision” to such fortuities, id. at 208, they generally do have
control over whether and when they transfer their own rights.

       In important respects, this case presents the flip side of Koch v. Compucredit
Corp., 543 F.3d 460 (8th Cir. 2008). There, one bank had assigned a contract
containing an arbitration clause to another. See id. at 462-63. After applying Litton
to conclude the obligation to arbitrate survived even though the contract arguably had
terminated, we held the assignee bank could compel arbitration of a dispute arising
out of the contract because “[t]hrough the assignment, [the assignee] assumed all of
[the assignor’s] remaining rights and obligations under the contract.” Id. at 465-67.
Here, it is the assignors, not their assignees, claiming a right to compel arbitration.
The clear consequence of Koch’s logic is that the assignors—in this case, the
nonsignatory wholesalers—should have nothing left to enforce, since “all of [their]
remaining rights” were “assumed” by someone else.

       It is true, as the partial dissent points out, “[t]he Asset Exchange Agreement did
not transfer pre-assignment liabilities.” Post at 12. Knowing that, as they must have,

                                          -8-
perhaps the wholesalers should have bargained not to transfer the corresponding
rights to compel arbitration on disputes regarding those pre-assignment liabilities.
But they did not, and nothing in Litton or Koch convinces us to treat them like they
did.4 The wholesalers may not directly enforce the arbitration agreements to which
they are no longer signatories.

III.   CONCLUSION
       The district court is affirmed.

COLLOTON, Circuit Judge, concurring in the judgment in part and dissenting in part.

      The principal question on this appeal is whether the antitrust plaintiffs in this
case are required to arbitrate their claims against the wholesale grocer defendants,
SuperValu, Inc. and C&S Wholesaler Grocers, Inc. I conclude that the claims
brought by Village Market against SuperValu are subject to arbitration, and I would
therefore reverse the decision of the district court in relevant part.

       From April 2001 through September 2003, Village Market and SuperValu were
parties to a supply agreement that was accompanied by an arbitration agreement. The

       4
        We also find questionable the wholesalers’ position that because some of the
challenged conduct occurred before the execution of the AEA, and some of it
occurred after, both the assignor and assignee wholesaler can enforce the arbitration
agreement in the same dispute. See HT of Highlands Ranch, Inc. v. Hollywood
Tanning Sys., Inc., 590 F. Supp. 2d 677, 684 (D.N.J. 2008) (explaining that if all
rights and obligations under a contract are transferred, the assignor’s right to compel
arbitration is extinguished, while leaving “unresolved” the factual matter of what
rights the assignor actually transferred); cf. RRCI Constructors, LLC v.
Charlie’s/Diamond Ready Mix, Inc., No. 2007-147, 2009 WL 799660, at *5 (D.V.I.
Mar. 24, 2009) (rejecting the theory that “both the assignor and assignee of an
agreement may be compelled to arbitrate a dispute that comes within the scope of a
valid arbitration agreement. Such a position is unsupported by law”).

                                         -9-
arbitration agreement required arbitration of “[a]ny controversy, claim or dispute of
whatever nature arising between [Village Market] and SUPERVALU . . ., including
but not limited to those arising out of or relating to any agreement between the
parties.” App. 106.

      In September 2003, as part of an asset exchange between SuperValu and C&S,
Supervalu assigned its agreements with Village Market to C&S. Village Market later
brought an antitrust claim against SuperValu, alleging that SuperValu conspired with
C&S in violation of the Sherman Act. For several years, the parties have litigated
whether Village Market should be compelled to submit its antitrust claim against
SuperValu to arbitration. See In re Wholesale Grocery Prods. Antitrust Litigation,
707 F.3d 917 (8th Cir. 2013).

       In this appeal, SuperValu contends that because Village Market alleges an
antitrust conspiracy that began while the parties were subject to an agreement that
required arbitration of such a claim, Village Market should be compelled to submit
the antitrust claim to arbitration. Applying the principles set forth in Litton Financial
Printing Division v. NLRB, 501 U.S. 190 (1991), and Koch v. Compucredit
Corporation, 543 F.3d 460 (8th Cir. 2008), I would direct the district court to compel
arbitration. That Supervalu later assigned the arbitration agreement to C&S does not
eliminate Village Market’s obligation to arbitrate a dispute that involves facts and
occurrences that arose before the assignment.

       Litton raised the question whether parties to a collective bargaining agreement
with an arbitration clause had a duty to arbitrate grievances that were brought by a
union after the expiration of the agreement. Litton applied Nolde Brothers, Inc. v.
Bakery Workers, 430 U.S. 243 (1977), which found in the context of an expired
agreement that there were “strong reasons to conclude that the parties did not intend
their arbitration duties to terminate automatically with the contract.” Id. at 253.
Nolde Brothers established “a presumption in favor of postexpiration arbitration of

                                          -10-
matters unless ‘negated expressly or by clear implication,’” id. at 204 (quoting Nolde
Brothers, 430 U.S. at 255), as long as the arbitration was “of matters and disputes
arising out of the relation governed by contract.” Id.

        Litton clarified that Nolde Brothers applies “only where a dispute has its real
source in the contract.” Id. at 205. In other words, “[t]he Nolde Brothers
presumption is limited to disputes arising under the contract.” Id. “A postexpiration
grievance,” the Court explained, “can be said to arise under the contract only where
[1] it involves facts and occurrences that arose before expiration, [2] where an action
taken after expiration infringes a right that accrued or vested under the agreement, or
[3] where, under normal principles of contract interpretation, the disputed contractual
right survives expiration of the remainder of the agreement.” Id. at 206. Because the
employee layoffs at issue in Litton took place almost one year after expiration of the
agreement, and the second and third categories were not implicated, the grievance
was not arbitrable. Id. at 209-10.

       In Koch, this court applied Litton outside the context of collective bargaining.
Koch involved a credit agreement with an arbitration clause. A credit card obligor
alleged violations of the Federal Debt Collection Practices Act by the creditor, and
assignees of the original creditor sought to compel arbitration. We concluded that
even though the underlying credit agreement arguably was terminated by an earlier
settlement, the obligation of the parties to arbitrate disputes arising under the contract
survived any termination. Because the dispute at issue there involved facts and
occurrences that arose before expiration of the credit agreement, it was a dispute
“aris[ing] under the contract.” 543 F.3d at 466 (quoting Litton, 501 U.S. at 206). The
dispute also fell within the scope of the arbitration clause, which covered “any claim,
dispute, or controversy arising from or related to the Agreement.” Id. Because the
obligor’s claim “would have been subject to [arbitration] had it arisen during the
contract’s term,” id. (quoting Nolde Bros., 430 U.S. at 252), and nothing in the
arbitration clause excluded a dispute that was based in part on events occurring after

                                          -11-
termination of the agreement, we directed the district court to compel arbitration. Id.
at 466-67.

       A similar analysis demonstrates that Village Market should be compelled to
arbitrate its antitrust claim against SuperValu. Village Market’s antitrust claim
involves facts and occurrences that arose before SuperValu assigned the arbitration
agreement in September 2003: the claim is that SuperValu formed an antitrust
conspiracy while negotiating an asset exchange agreement with C&S between July
and September 2003. Although the arbitration agreement was assigned in September
2003, the evidence does not clearly negate a presumption that the parties intended to
arbitrate matters that arose under the contract before the assignment. If, for example,
Village Market and SuperValu found themselves in a mine-run dispute under the
supply agreement based on events in July 2003, there is nothing in the various
agreements to suggest that the parties wanted that dispute litigated in federal court
just because SuperValu assigned the arbitration agreement to C&S in September
2003. The Asset Exchange Agreement did not transfer pre-assignment liabilities.
Although the instant claim asserts an antitrust violation rather than a breach of the
supply agreement, the broad arbitration agreement covers it: “[a]ny controversy,
claim or dispute of whatever nature arising between [Village Market] and
SUPERVALU” must be arbitrated.

      In rejecting SuperValu’s position, the court declines to apply the Nolde
Brothers presumption of intent to arbitrate when a contract is assigned, apparently
because an assignor “generally has control over whether and when they transfer their
own rights.” Ante, at 8. But of course a contracting party generally has control over
the expiration of a contract too: the termination date is a negotiated term of the
agreement. The point of Nolde Brothers is that even when parties intentionally cause
a contractual relationship to end, there are strong reasons to believe that the parties
intend to retain arbitration duties for disputes arising under the contract. A contrary
rule “would preclude the entry of a post-contract arbitration order even when the

                                         -12-
dispute arose during the life of the contract but arbitration proceedings had not begun
before termination. The same would be true if arbitration processes began but were
not completed, during the contract’s term.” 430 U.S. at 251. The Court thought “it
could not seriously be contended in either instance that the expiration of the contract
would terminate the parties’ contractual obligation to resolve such a dispute in an
arbitral, rather than a judicial forum,” id., yet the majority reaches precisely that
unlikely conclusion here.

       In a footnote, ante, at 9 n.4, the majority also questions whether assignment of
the agreement extinguished SuperValu’s right to compel arbitration. But the cited
decision of a district court—accepting a broad allegation as true on a motion to
dismiss—said only that the extent to which an assignment transferred the right to
compel arbitration was “an unresolved issue.” HT of Highlands Ranch, Inc. v.
Hollywood Tanning Sys., Inc., 590 F. Supp. 2d 677, 684 (D.N.J. 2008). Two other
district courts have concluded that an assignor seeking to arbitrate a dispute arising
before the assignment is still a “party aggrieved” who may compel arbitration under
the Federal Arbitration Act. Vainqueur Corp. v. Lamborn & Co., 305 F. Supp. 1007,
1008 (S.D.N.Y. 1969); Stations West, LLC v. Pinnacle Bank of Oregon, No. CIV 06-
1419-KI, 2007 WL 1219952, at *3 (D. Or. Apr. 23, 2007). Consistent with our
circuit precedent in Koch, the better view is that unless there is persuasive evidence
that parties intended to extinguish a duty to arbitrate disputes that are based in part
on facts that arose before an assignment, the arbitration agreement continues in effect
as to those disputes. Accordingly, I would direct the district court to compel
arbitration of Village Market’s claim against SuperValu.5

      5
       The majority’s effort, ante, at 8, to glean support from the “logic” of Koch is
unpersuasive. In Koch, an assignor transferred pre-assignment assets and liabilities
to an assignee, and the assignee was then entitled to compel arbitration of a pre-
assignment dispute. Here, the assignor retained pre-assignment liabilities, and Koch
says nothing to undermine the presumption that pre-assignment disputes arising under
the contract remain subject to arbitration under the terms of the original agreement.

                                         -13-
       As to the appeal by C&S concerning arbitration of the antitrust claim brought
by Millennium Operations, I concur in the judgment affirming the district court. It
is doubtful that C&S actually acquired Millennium’s supply agreement after Fleming
Companies went through bankruptcy. The Asset Exchange Agreement required C&S
to “use reasonable best efforts to cause Fleming to convey” the assets at issue
“directly to SuperValu.” In any event, the scope of Millennium’s arbitration
agreement was narrower than Village Market’s. It provided only for arbitration of
disputes “relating to this Agreement,” and alleged unlawful restraint of trade is not
conduct relating to the retail supply agreement. See In re Wholesale Grocery
Products, 707 F.3d at 923-24. I also agree with the court that C&S cannot compel
arbitration under a “close relationship” theory.

       For these reasons, I would affirm the decision of the district court concerning
the claim of Millennium Operations, but reverse the decision concerning Village
Market and remand with directions to compel arbitration of Village Market’s claim
against SuperValu.
                       ______________________________

                                        -14-