Thursday, June 20, 2013

Evergreen Partnering Group v. Pactiv Corporation

Jun 19: In the U.S. Court of Appeals,  First Circuit, Case No. 12-1730. Appealed from the U.S. District Court of Massachusetts, Boston. Plaintiff Evergreen Partnering Group, Inc. (Evergreen) appealed from a judgment of the United States District Court for the District of Massachusetts dismissing its Second Amended Complaint (complaint). The complaint alleges that defendants-appellees, polystyrene food service packaging manufacturers and two trade associations, refused in concert to deal with Evergreen in a recycling business method for polystyrene food service products. Evergreen also appeals the district court's refusal to grant it leave to amend its complaint. The Appeals Court ruled, "After careful consideration, we vacate the judgment of dismissal and remand for further proceedings." The lengthy opinion provides fascinating insight into the inner workings of the polystyrene recycling business and its major players.
    Evergreen, founded in 2002 by Michael Forrest (Forrest), is the first company to develop a business model to recycle polystyrene products by using a post-consumer polystyrene resin (PC-PSR) to create trademark products known as "Poly-Sty-Recycle." Polystyrene food service products must be "food-grade" as deemed by the Food and Drug Administration (FDA), and Evergreen's Poly-Sty-Recycle was the first recycled polystyrene product to be so deemed.
    The complaint paints a picture of the polystyrene industry increasingly coming under criticism from environmental advocacy groups, local governments, and dissatisfied customers prior to and during the period of the alleged conduct. Past efforts to make polystyrene products more environmentally friendly resulted in failure, and the producer defendants have maintained that their products are non-recyclable because production of recyclable polystyrene is not economically feasible. This has resulted in movements to ban polystyrene products -- including city-wide bans in 30 California cities -- as well as to discourage their use through implementing producer-responsibility mandates and product surcharges.
    The five polystyrene producer defendants -- Pactiv Corporation (Pactiv), Genpak, LLC (Genpak), Dart Container Corporation (Dart), Dolco Packaging, a Tekni-Plex Company (Dolco"), and Solo Cup Company (Solo) -- are alleged to control an estimated 90 percent of the market for single-service polystyrene food service packaging and tableware.Defendant American Chemistry Council (ACC) is a trade association that engages in advocacy, trade and lobbying for the chemical and plastic industry. The Plastics Food Service Packaging Group (PFPG) is a business group within the ACC. In or about late 2005 or 2006, the PFPG met to address criticisms of the polystyrene industry, and at that meeting, the complaint alleges, John McGrath of Pactiv announced to PFPG members that recycling polystyrene products was not an option in the industry's battles with polystyrene's critics.
    The complaint alleges that, following the meeting, the named defendants "combined and conspired to unreasonably restrain trade and commerce in the market for single[-]service polystyrene food service products by refusing in concert to deal with Evergreen in a sole-source closed-loop recycling business method for polystyrene food service products" until at least 2009. The purpose of the concerted refusal to deal was to:

"ensure that polystyrene products will remain non-recyclable and without post-consumer content recycled material so that the Defendants' existing market shares will not be disrupted, the status quo will be maintained, and the Defendants will be able to offer higher-priced products such as paper, pulp, bio-plastics, R-PET, PLA, ceramic, bamboo, and others, without any low cost options for consumers."

    Defendants collectively and individually moved to dismiss Evergreen's complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. They argued, inter alia, that the complaint did not set forth a plausible basis for finding any agreement, but rather merely listed allegations consistent with unilateral refusals to deal based on business decisions. Evergreen opposed defendants' motions, arguing that the complaint met the standard established in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), but requested in its opposition permission to file an amended complaint if the court did not agree.
    Evergreen argues on appeal that the allegations in its complaint are sufficient to support a plausible conspiracy claim under § 1 of the Sherman Act, and the district court erred in concluding otherwise. The Appeals Court says, "After reviewing the district court's analysis of the facts alleged and its application of the Twombly plausibility standard, we agree with Evergreen. . .we hold that Evergreen alleged sufficient facts to adequately plead its § 1 claim. Since the district court summarily dismissed Evergreen's Massachusetts Chapter 93A claim because it 'fail[ed] for the same reasons that the Sherman Act claim fails,' we remand for the district court to reconsider this issue consistent with the strictures of this opinion. We thus vacate the district court's judgment and remand the case for further proceedings. Costs of appeal awarded to plaintiff. Vacated and Remanded."
    Access the complete opinion (click here). [#P2, #Solid, #CA1]
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