Wednesday, December 24, 2008

Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'

FTC v. Whole Foods Market - Whole Foods Market v. FTC

In this December 22 story [Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation] about the FTC v. Whole Foods Market, Inc. antitrust case and the related Whole Foods Market, Inc. v. FTC counter lawsuit hearing this week in the U.S. Federal Court for the District of Columbia courtroom of Judge Paul Friedman (pictured at top), we commented:

"Something tells us Judge Friedman is less than happy to have the case back in his courtroom. However, he signaled today he plans to give the deal complete new consideration in terms of the anti-competitive arguments from the FTC, saying at the hearing that the appeals court wouldn't have sent the case back to him unless it thought doing so was valid."

This comment has to do with the fact that Judge Friedman is the federal jurist who heard the original FTC v. Whole Foods Market, Inc. case last year in which the federal regulatory agency filed a legal claim opposing Whole Foods' acquisition of Wild Oats on antitrust grounds, claiming (as it still is) that a combined Whole Foods-Wild Oats is a monopoly in numerous U.S. markets in what the FTC calls the 'premium natural and organic retailing segment."

After numerous back-and-forth legal motions and hearings, Judge Friedman ended up ruling in Whole Foods' favor and against the FTC, giving the natural foods grocery chain the green light to go forward with the merger and integrate Wild Oats into its operations and culture, including changing the Wild Oats' banner stores over to the Whole Foods brand.

The FTC reopened its administrative case against the deal this year though, as federal regulations allow it to do. It then appealed Judge Friedman's ruling in favor of the merger to a federal appeals court, which ended up ruling in favor of the FTC and sending the 'whole matter' back to Judge Friedman.

As we've reported, the FTC also has set an administrative trial before an FTC Administrative Law Judge, first for February, 2009 and now postponing it until April 6 of next year. At that hearing or administrative trial, the Administrative Law Judge will make a ruling on the merger, either that it can remain a done deal or that it should be overturned. If the ruling goes against it, Whole Foods can appeal to a federal court.

Meanwhile, since the matter is now back before Judge Friedman, he also will rule on the deal -- once again.

For the judge it's, as we wrote yesterday in this piece [Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009], in the words of Yogi Berra, deja vu all over again.

The fact is, Judge Friedman thought he had obtained a couple of legal careers' worth of premium organic category and segment talk, whole grain and oats' (wild or otherwise) debates, and whole rather than partially-whole foods' retailing written and oral arguments as it all pertains to natural and healthy foods retailing in America. But like baseball great and sidewalk philosopher Yogi Berra also has said: "It's not over until it's over."

The Legal Times legal publication appears to agree with Natural~Specialty Foods Memo's analysis of Judge Friedman and his return to the world of natural and organic food retailing merger and acquisition debate in the form of FTC v. Whole Foods Market, Inc. 2.0 and now Whole Foods Market, Inc. v. FTC, "The Lawsuit."

In a piece in its Blog published yesterday titled: "Judge to Whole Foods, FTC: What's My Role Here?, written by Mike Scarcella, the writer describes a scene in Judge Friedman's courtroom at the first status hearing on Monday, December 22. Below (in italics) is the writer's post from the BLT (Blog of the Legal Times):

Judge to Whole Foods, FTC: What's My Role Here?
Blog of the Legal Times (BLT)
By Mike Scarcella
December 23, 2008

There was a homecoming of sorts in the D.C. courtroom of U.S. District Judge Paul Friedman this week when lawyers for Whole Foods and the Federal Trade Commission gathered together for the first time in court in a long time. The BLT did not note any hugs.

The saga of the Whole Foods antitrust dispute with the FTC is long and complicated, and somewhere in the middle—or perhaps on one side—is Friedman (pictured at left). Friedman ruled against the FTC effort to block the merger between Whole Foods and Wild Oats. The companies merged in a $565 million deal in August 2007.

But Friedman’s decision was reversed on appeal this year in a rare 1-1-1 vote by Judges Janice Rogers Brown, David Tatel, and Brett Kavanaugh of the U.S. Court of Appeals for the D.C. Circuit. Brown and Tatel voted for remand. And so the lawyers met again before Friedman.

“It is truly a pleasure to see you again,” Matthew Reilly of the FTC’s Bureau of Competition told Friedman. “I’m much happier to see you than Judge Brown or Judge Tatel,” responded Friedman, drawing laughter from the more than two dozen people at the hearing.

Dechert partners Paul Denis and Paul Friedman (not the judge) were among the lawyers representing Whole Foods, which is now defending the merger in federal court and at the FTC. An FTC administrative trial is set for next year.

Lanny Davis of Orrick, Herrington & Sutcliffe was there, too. Davis, also representing Whole Foods, is fighting the FTC in court in a suit that alleges the FTC is biased and should be barred from holding the administrative trial. In the suit filed this month, Davis says the FTC has prejudged the merits of the merger and that Whole Foods won’t find impartiality at the FTC. The complaint is also before Judge Friedman; government lawyers have filed a motion to dismiss.

At the status conference Monday, Judge Friedman said he would hold a subsequent hearing on the government's motion to dismiss. Simple enough. The more complex issue discussed at the hearing was the scope of the remand proceedings. Friedman and the lawyers struggled over what is expected from the judge.
Judge Friedman compared the D.C. Circuit split opinion to the Supreme Court’s decision in 2000 in Bush v. Gore. The appellate court opinion, Friedman said, “doesn’t stand for anything” because there is no clear majority.

Friedman asked Whole Foods’ lawyers and the FTC to write up briefs—no more than eight pages—telling him how he should interpret the D.C. Circuit opinion. “My gut reaction is that it requires me to read these two opinions a couple more times,” Friedman said. Friedman will issue an opinion articulating his role in the remand proceedings.

Not to take the quoting business too far (we hope readers will allow us just one more) but Natural~Specialty Foods Memo is reminded of just one more quote. This one is from the late comedian Flip Wilson, and it is his signature line, which is -- "Here Come Da Judge."

Stay tuned.

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