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In re Packaged ICE Antitrust Litigation

United States District Court, E.D. Michigan, Southern Division

September 19, 2017

IN RE PACKAGED ICE ANTITRUST LITIGATION INDIRECT PURCHASER ACTION

         CORRECTED [1] OPINION AND ORDER (1) GRANTING INDIRECT PURCHASER PLAINTIFFS' MOTION FOR FINAL APPROVAL OF THEIR SETTLEMENT WITH THE HOME CITY ICE COMPANY (ECF NO. 547): (2) GRANTING FINAL CERTIFICATION OF THE SETTLEMENT CLASSES: (3) OVERRULING OBJECTIONS TO THE SETTLEMENT (ECF NOS. 539, 540, 548): (4) DENYING OBJECTOR WILLARD'S MOTION FOR ATTORNEYS' FEES (ECF NO. 551): AND (5) GRANTING FINAL APPROVAL OF THE SETTLEMENT AGREEMENT BETWEEN THE INDIRECT PURCHASER PLAINTIFFS AND HOME CITY

          PAUL D. BORMAN UNITED STATES DISTRICT JUDGE

         This matter is before the Court on the Indirect Purchaser Plaintiffs' ("Plaintiffs") Motion for Final Approval of their proposed Settlement Agreement with Defendant the Home City Ice Company ("Home City"). (ECF No. 547, Indirect Purchaser Plaintiffs' Motion for Final Approval of Their Settlement With the Home City Ice Company.) The Court held a Final Fairness Hearing on July 11, 2017 and heard from both Plaintiffs' and Home City's counsel, and also heard from two objectors (only three class members filed objections to the proposed Settlement Agreement) who asked to speak at the Final Fairness Hearing. The Court then required a post-hearing submission to be filed by Plaintiffs addressing the final number of valid claims filed and the final administrative costs that would be required to complete the claims payment process. Plaintiffs timely filed that submission on July 17, 2017. (ECF No. 553, Order; ECF No. 554, Indirect Purchaser Plaintiffs' Response.)

         After careful consideration of the written submissions, as well as the comments of counsel and objectors at the Final Fairness Hearing, and based upon this Court's nine-year history with this multidistrict litigation that has resulted in the successful settlement of all disputes with the exception of the present proposed settlement agreement between the Plaintiffs and Home City, and for the reasons that follow, the Court GRANTS Plaintiffs' motion for final approval of the settlement with Home City.

         I. BACKGROUND

         This action is the lead case in the consolidated multidistrict litigation In re Packaged Ice Antit, Litig., No. 08-MD-1952. The subject matter is packaged ice, sold in blocks or bags, manufactured by Defendants Reddy Ice Holdings, Inc. and its wholly owned subsidiary Reddy Ice Corporation ("Reddy Ice"), Arctic Glacier Income Fund, its wholly owned subsidiary Arctic Glacier, Inc. and Arctic Glacier Inc.'s wholly owned subsidiary Arctic Glacier International, Inc. ("Arctic Glacier"), and Home City Ice Company ("Home City"), then sold directly to retailers for resale to their customers. This multidistrict litigation involves consolidated actions of both direct purchaser plaintiffs (retail stores and gas stations) and indirect purchaser plaintiffs (individuals who purchased from retail stores and gas stations). The direct and indirect purchaser plaintiffs allege that the Defendants conspired to allocate customers and markets throughout the United States, in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1.

         The private civil suits that form the basis for the present multidistrict litigation were spawned in large measure by a 2008 criminal investigation by the Department of Justice ("DOJ") Antitrust Division into the packaged ice industry and the alleged anticompetitive conduct of its three largest producers - Reddy Ice, Arctic Glacier and Home City. On June 5, 2008, the Judicial Panel on Multidistrict Litigation ("JPML") transferred all then-pending related civil actions to this District and ordered that they be consolidated for pretrial purposes in this Court. Subsequent related tag-a-long actions, involving both direct and indirect purchaser claims, have been similarly transferred to this Court. This Court previously denied motions to dismiss both the Direct and Indirect Purchaser Complaints. See In re Packaged Ice, 723 F.Supp.2d 987 (E.D. Mich. 2010) (Direct Purchasers); In re Packaged Ice, 779 F.Supp.2d 642 (E.D. Mich. 2011) (Indirect Purchasers, Denying in Part and Granting in Part); In re Packaged Ice, No. 08-MD-1952, 2011 WL 6178891 (E.D. Mich. Dec. 12, 2011) (Indirect Purchasers, Denying in Part and Granting in Part).

         Subsequent to those decisions, two of the Defendants, Arctic Glacier and Reddy Ice, filed for bankruptcy protection in other districts. All of the claims in the direct purchaser action have now been resolved through settlement. On February 22, 2011, this Court granted final approval of a proposed settlement agreement between Home City and the Direct Purchaser Plaintiffs, (ECF No. 329.) On December 13, 2011, this Court granted final approval of a proposed settlement agreement between Arctic Glacier and the Direct Purchaser Plaintiffs. (ECF No. 406.) On November 13, 2012, this Court granted final approval of a settlement agreement between Reddy Ice and the Direct Purchaser Plaintiffs. (ECF No. 476.)

         On November 18, 2016, the Court received the Direct Purchaser Plaintiffs' Motion for Authorization to Make a Final Distribution of the Home City Settlement Funds. (ECF No. 532.) On December 19, 2016, this Court entered an Order authorizing the final distribution of the settlement funds in the Direct Purchaser case, which ended the Direct Purchaser portion of this MDL. (ECF No. 536, Order Authorizing Final Distribution of Settlement Funds.)

         The Indirect Purchaser Plaintiffs' actionhas proceeded along a less direct path, as explained in several prior Orders of the Court. To summarize, on May 18, 2012, the United States Bankruptcy Court for the Northern District of Texas granted final approval of a settlement agreement between the Indirect Purchaser Plaintiffs and Reddy Ice in the amount of $700, 000. Indirect Purchaser Plaintiffs' counsel, the Wild Law Group, has already received from that settlement fund $23 3, 333.3 3 in attorneys' fees plus $80, 000 for ongoing expenses. No distribution plan or allocation plan for the Reddy Ice settlement fund is currently in place in the Northern District of Texas. In 2014, the United States Bankruptcy Court for the District of Delaware granted final approval of a settlement agreement, reached between the Indirect Purchaser Plaintiffs and Arctic Glacier in Arctic Glacier's Canadian bankruptcy proceedings, in the amount of $3, 950, 000. (ECF Nos. 497, 498, 502, 503, 504.) Indirect Purchaser Plaintiffs' counsel, the Wild Law Group, received attorneys' fees from that settlement in the amount of $1.3 million plus $305, 000 in costs, $1, 000 for each class representative and a $200, 000 "kicker" fee out of the assets of the Arctic Glacier bankruptcy estate - not out of that settlement fund, A plan of allocation and distribution was approved in the Arctic Glacier proceeding. (ECF No. 504-3, Proposed Long Form Notice, PgID 9986-9988.) The claims process for the Arctic Glacier Indirect Purchaser settlement has closed, with a less than robust claims response, resulting in the filing of approximately 19, 000 claims for a $6 payment. Any funds not ultimately distributed from the Arctic Glacier Indirect Purchaser settlement fund will inure to the benefit of the Arctic Glacier bankruptcy estate.

         This Court was not invited to weigh in or be involved in any way in the approval process governing either the Reddy Ice or the Arctic Glacier Indirect Purchaser settlement agreements, both of which were finalized in their respective bankruptcy proceedings.

         Thus, the only unresolved aspect of this MDL litigation that remains for determination by this Court is the proposed settlement agreement between Home City and the Indirect Purchaser Plaintiffs that is presently before the Court for final approval. The process of approval for the Home City settlement with the Indirect Purchasers has faced its own challenges in this Court, with the Court sending Indirect Purchaser Plaintiffs' counsel back to the drawing board on several occasions for a variety of issues that, in the opinion of this Court, were significant to the overall fairness and reasonableness of the Settlement Agreement. In summary, the Indirect Purchaser Plaintiffs filed their initial motion for preliminary approval of their settlement with Home City on April 10, 2012. (ECF No. 442, Motion to Approve Consent Judgment for Preliminary Approval and Permission to Disseminate Notice.) The Court identified several failings in the proposed notices that required revision and following the hearing on the Indirect Purchaser Plaintiffs' initial motion for preliminary approval of the Home City Settlement Agreement, it was agreed that any final resolution of the preliminary approval motion should await the outcome of the Arctic Glacier Bankruptcy proceedings that were concurrently underway in Winnipeg, Canada. (ECF No. 472, Transcript of Oct. 19, 2012 at 41.)

         As discussed supra, the Reddy Ice and Arctic Glacier settlements with the Indirect Purchaser Plaintiffs were approved in other districts in 2012 and 2014, and proceedings in this Court on the Home City Settlement with the Indirect Purchaser Plaintiffs were put on hold pending the outcome of the Arctic Glacier settlement. On July 31, 2014, following the Delaware bankruptcy court's final approval of the Arctic Glacier settlement, the Indirect Purchaser Plaintiffs supplemented in this Court their previously-filed motion for preliminary approval of their proposed Settlement Agreement with Home City. (ECF No. 504, Supplemental Brief.) On March 11, 2015, this Court ordered Indirect Purchaser Plaintiffs to appear for a status conference on April 6, 2015, to discuss what the Court determined were several remaining insufficiencies in the proposed Settlement Agreement and proposed Notice. (ECF No. 512, Transcript of April 6, 2015 Status Conference.) Following that Status Conference, the Court directed the Indirect Purchaser Plaintiffs to make several changes and resubmit the motion and proposed notices. On January 25, 2016, the Court issued an Order requiring the Indirect Purchaser Plaintiffs to submit a written status report by February 16, 2016. The Court ordered the parties to appear for a status conference on February 23, 2016, to update the Court on their progress. On February 15, 2016, Class Counsel for the Indirect Purchaser Plaintiffs submitted a written response to the Court's January 25, 2016 Order, which presented not only the changes to the proposed notices that the Court had requested in April, 2015, but in addition presented an entirely new proposed settlement agreement with Home City that sought to combine the Home City fund with the Reddy Ice settlement fund for a common distribution. (ECF No, 517, Class Counsel for Indirect Purchaser Plaintiffs' Response to Court's Order Dated January 25, 2016.) In the end, because of significant legal problems caused by combining the funds, the Court rejected this proposed combination of the Home City and Reddy Ice settlement funds and ordered the Home City parties to revert to their original proposed Settlement Agreement. (ECF No. 526, August 9, 2016 Opinion and Order Denying Motion to Approve Consent Judgment.) On October 26, 2016, Indirect Purchaser Plaintiffs submitted their Motion for Order Granting Preliminary Approval of Indirect Purchasers' Settlement with Home City Ice Co. (ECF No. 529.) The Court held a hearing on the motion for preliminary approval on November 17, 2016 and requested Class Counsel to provide additional information regarding critical dates that were missing from the information submitted in support of the motion for preliminary approval. (ECF No. 531, Transcript of 11/17/2016 Hearing.) Those supplemental materials were provided to the Court on November 27, 2016. (ECF No. 533, Supplemental Brief.) The Court issued its Order Granting Preliminary Approval and Authorization to Disseminate Notice on December 7, 2016, setting a date for the Final Fairness Hearing of July 11, 2017. (ECF No. 535.)

         On June 6, 2017, the Indirect Purchaser Plaintiffs submitted the Motion for Order Granting Final Approval of the Home City Settlement that is presently before the Court. (ECF No. 547, Motion for Final Approval.) Having considered the extensive briefings and history of this case, and having considered the three objections to the Home City Settlement Agreement that have been filed with the Court, the Court is now persuaded that a fair, reasonable, and adequate settlement agreement has been reached by these parties, and that the best practicable notice of that agreement has been disseminated to the Class Members. The Court finds that the Settlement Classes satisfy the requirements of Fed.R.Civ.P. 23(a) and 23(b)(2) and (b)(3) and further finds that the settlement is fair, reasonable and adequate. Accordingly, the Court will CERTIFY the Settlement Classes I and II, and GRANT the motion for final approval of the Settlement Agreement between the Indirect Purchaser Plaintiffs and Home City.

         II. JURISDICTION

         This Court has personal jurisdiction over the Plaintiffs, the Classes, and Defendants and subject matter jurisdiction overthe action pursuant to Section 1 of the Sherman Act, 15 U.S.C. § 1, Section 16 of the Clayton Act, 15 U.S.C. § 26, 28 U.S.C. § 1331, and 28 U.S.C. § 1367.

         III. THE TERMS OF THE SETTLEMENT AGREEMENT

         The Settlement Agreement consists of: (1) the Original March 7, 2012 Settlement Agreement (ECF No. 529, Ex. 2); (2) a December 20, 2012 Modification Agreement (ECF No. 480, Notice, Ex. 2, Modification Agreement) ("the Original Modification Agreement); and (3) an October 24, 2016 Modification Agreement (ECF No. 529, Ex. 3) ("the 2016 Modification Agreement") (collectively "The Settlement Agreement.")

         A. The Proposed Settlement Classes

         The Proposed Settlement Agreement provides for two separate settlement classes:

Class I - All purchasers of Packaged Ice who purchased Packaged Ice in the United States indirectly from any of the Defendants or their subsidiaries or affiliates (including all predecessors thereof) at any time during the period from January 1, 2001 and March 6, 2008. Excluded from the Settlement Class are governmental entities and Defendants, including their parents, subsidiaries, predecessors or successors, Defendants' co-conspirators, and the Releasees.
Class II - All purchasers of Packaged Ice who purchased Packaged Ice in Arizona, Arkansas, California, District of Columbia, Florida, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, South Dakota, Tennessee, Utah, Vermont, West Virginia, Wisconsin and Wyoming, indirectly from any of the Defendants or their subsidiaries or affiliates at any time between January 1, 2001 and March 6, 2008. Excluded from the Settlement Class are governmental entities and Defendants, including their parents, subsidiaries, predecessors or successors, Defendants' co-conspirators, and the Releasees.

(ECF No. 529, Mot. Ex. 2, Settlement Agreement ¶¶ 11, 13.)

         The Proposed Settlement Agreement further provides that in the event that a new indirect purchaser class action brought under the law of a state other than those states covered in Settlement Class II, Home City has the right until final approval to add that state to the Class II states provided Home City first moves to dismiss those claims and is denied such relief. Home City also agrees to pay the increased notice costs associated with any states that are added to the Class II states in such a manner. (Settlement Agreement ¶ 32.)

         Home City agreed to, and did, comply with all notice and filing requirements under the Class Action Fairness Act ("CAFA"). (Settlement Agreement ¶ 21; ECF No. 541, Certification of CAFA Compliance.)

         B. The Proposed Settlement Amount and Injunctive Relief

         The Proposed Settlement Agreement provides for Injunctive Relief to Class I and Class II Members, and Monetary Relief to only Class II Members.

         1. The Settlement Amount (available for distribution only to Class II members)

The Proposed Settlement Agreement provides that:
Home City shall pay or cause to be paid the Settlement Amount of two million seven hundred thousand Dollars ($2, 700, 000) in settlement of the Action. The Settlement Amount shall be wire transferred by Home City within fifteen (15) business days after the Execution Date. The Settlement Payment shall be paid into the Settlement Fund, which shall be established as an escrow account designated by Class Counsel, and administered in accordance with the provisions of Section G of this Agreement. In the event that the Court denies preliminary approval, the Settlement Payment shall be returned to Home City.

(ECF No, 529, Ex. 2, Settlement Agreement ¶ 25.) This amount has been transferred into an escrow account of the Wild Law Group PLLC and is federally insured. The Modification Agreement gives Class Counsel certain rights, and places certain limitations on Class Counsel's handling of the Settlement Fund. (ECF No. 529, Ex. 3, 2016 Modification Agreement ¶ 5.) The 2016 Modification Agreement also authorized an increase in the amount of Settlement Funds permitted to be spent for purposes of providing notice, generating claims and/or administering the Settlement from $500, 000 to $650, 000. (2016 Modification Agreement ¶ 4.) This increase was necessitated in part by the Court imposed changes to the proposed Notices, which the Court found to be insufficient when Plaintiffs first presented their motion for preliminary approval of the Home City Settlement Agreement. (ECF No. 459, Order Requiring Submission of Revised Notices; ECF No. 472, Transcript of Oct. 19, 2012 Hearing on Indirect Purchasers' Motion to Approve Consent Judgment for Preliminary Approval and Permission to Disseminate Notice 32.)

         2. Injunctive Relief (available to Class I and Class II)

         The Proposed Settlement Agreement provides that Home City shall consent to entry of an injunction that provides:

Home City is hereby enjoined from entering into any combination, conspiracy or agreement with Arctic Glacier International, Inc., Reddy Ice Corporation or other person or entity or organization to allocate Packaged Ice customers, territories or markets, or raise, fix, maintain, or stabilize the price of Packaged Ice that would be considered a per se unlawful restraint of trade under Section 1 of the Sherman Act.

(ECF No. 529, Ex. 2, Settlement Agreement ¶ 26.) The injunction lasts for a period of three (3) years from the "Effective Date" of the Settlement Agreement, as defined in ¶ 22 of the Settlement Agreement, and does not prohibit Home City from entering into lawful joint venture arrangements or acquisitions or from establishing or maintaining co-packing relationships in the course of its business. Id.

         C. Notice

         The October 24, 2016 Modification Agreement provides that: "Pursuant to an order granting preliminary approval, notice of the settlement and claims generation shall be done in a manner ordered by the Court." (ECF No. 529, Ex. 3, 2016 Modification Agreement ¶ 3.) The Revised Notices, which explain the nature of the action in general terms and also explain what class members are entitled to receive, along with their rights to obj ect and exclude themselves, were attached to the Indirect Purchaser Plaintiffs motion for preliminary approval. Plaintiffs agreed to and did provide direct mail notice to all Arctic Glacier claimants. For the remaining million plus consumers, as to whom individual notice would be impractical, Plaintiffs agreed to and did advertise in both Parade and USA Today, which have an aggregate circulation of 22, 000, 000. Plaintiffs also agreed to and did employ an internet outreach program that directs consumers to a dedicated website. The Court concluded in its Preliminary Approval Order that the Revised Notices were "reasonably calculated under all the circumstances to apprise Class Members of the pendency of the action and to afford them an opportunity to obj ect." UA Wv. General Motors Corp., 497 F.3d 615, 629 (6th Cir. 2007). See discussion infra at Sections V and VI, regarding the Notice campaign and the Claims Procedure.

         D. The Claims and Releases

         The Claims are defined as any and all actions ... that are related to the subject matter of this MDL Litigation. (ECF No. 529, Ex. 2, Settlement Agreement ¶ 1.) Releasors are defined by the Class to which they belong, i.e. Class I Releasors and Class II Releasors. Id. ¶¶ 7, 9. Releasees are defined as Home City and all of its officers, directors, and affiliates not including any of the Reddy Ice or Arctic Glacier entities. Id. ¶ 6.

         E. Attorneys' Fees, Clear Sailing Clause, and Incentive Awards

         The Settlement Agreement provided that Class Counsel may seek up to $900, 000 in attorneys' fees, but Class Counsel has elected to seek zero attorneys' fees from the Home City Settlement Fund. (ECF No. 544, Notice of No Attorney Fee Application.) In addition, while the original Settlement Agreement did contain a Clear Sailing Clause, Settlement Agreement ¶ 31, it was deleted in the 2016 Modification Agreement, 2016 Modification Agreement ¶ 7. In any event, the issue of the Clear Sailing Clause is now moot, given that Class Counsel does not intend to seek any attorneys' fees from the Home City Settlement Fund. In addition to Class Counsel waiving any claim to attorneys' fees, the named Plaintiffs are not seeking any incentive awards.

         IV. CERTIFICATION OF THE SETTLEMENT CLASSES

         For purposes of this proposed settlement only, two settlement classes have been defined:

Settlement Class I
All purchasers of Packaged Ice[2] who purchased Packaged Ice in the United States indirectly from any of the Defendants or their subsidiaries or affiliates (including all predecessors thereof) at any time during the period from January 1, 2001 to March 6, 2008. Excluded from Settlement Class I are governmental entities, Defendants, including their parents, subsidiaries, predecessors or successors, and Defendants' coconspirators, and the Releasees [i.e. The Home City Ice Company and its past and present officers, directors, individual shareholders, employees, and the successors, heirs, and executors of each of the foregoing and each of The Home City Ice Company's subsidiaries, and divisions and the predecessors and successors-in-interest of each],

And,

Settlement Class II
All purchasers of Packaged Ice who purchased Packaged Ice in Arizona, Arkansas, California, District of Columbia, Florida, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, South Dakota, Tennessee, Utah, Vermont, West Virginia, Wisconsin and/or Wyoming, indirectly from any of the Defendants or their subsidiaries or affiliates (including all predecessors thereof) at any time during the period from January 1, 2001 to March 6, 2008. Excluded from Settlement Class II are governmental entities, Defendants, including their parents, subsidiaries, predecessors or successors, Defendants' co-conspirators, and the Releasees [i.e. The Home City Ice Company and its past and present officers, directors, individual shareholders, ...

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