Other Litigation

A. The Purity Products lawsuits (1976-88).

Purity Products, Inc. was a Baltimore orange juice distributor.  Between 1976 and 1988 Purity Products filed a series of unfair competition suits in Maryland federal court, as follows:  

The July 1988 settlement with Lang and American Citrus included a covenant whereby Purity’s lawyer, Jeffrey Hines—whom Grove Fresh would hire in September 1988—agreed not to represent any person or entity who had claims against American Citrus or its predecessor (Home Juice) arising out of any acts or omissions prior to the date of settlement.

The August 1988 settlement with Holiday Juice included a similar covenant protecting not only that corporation, but also its affiliates (including Everfresh) and its parent (John Labatt. Ltd.).

All of the complaints filed by Purity Products from 1976-88 were supported by independent laboratory tests showing that the defendants’ orange juice products were adulterated. The results of these tests were summarized in the complaints Purity Products filed.  See 90c5009 Amended Complaint, ¶¶110(h), (i), and Ex. 16, 23-24.  

B. The FDA investigations (1976-89.)

In 1976-77, 1983-84, and 1988-89, the FDA investigated Ever Fresh for using undeclared preservatives, including the unsafe additive Oleum 320/IDEA.

See FDA Investigations §§II-B, C, D, F for a summary of those investigations.

C. The investigation by the Florida Department of Citrus (1979-86).

Florida law charges the Florida Department of Citrus (“FDOC”) with responsibility for developing and protecting the state’s citrus industry.  During the 1960s and 1970s, FDOC scientists developed procedures for testing the authenticity of products labeled as “100% pure orange juice from concentrate.” 

In 1979, in response to rising complaints that out-of-state processors were engaged in large-scale adulteration, the FDOC established a program for testing the authenticity of orange juice products sold throughout the continental United States.  By 1983, FDOC had identified five Midwest processors as major culprits:  Bodine’s; Home Juice; Ever Fresh; Holiday Juice; and Flavor Fresh.  Four of these companies—all but Bodine’s—competed with Grove Fresh.

In 1983, FDOC hired a Washington law firm (Keller & Heckman) to investigate and develop legal strategies for dealing with cheaters.  Initially, the law firm focused on four companies: Bodine’s; Boden Products; Home Juice; and Ever Fresh.  Eventually, the law firm narrowed its investigation to Bodine’s, in large part because Joe Boden, the brother of Ed Boden, Bodine’s president, had volunteered to inform on him. 

In 1986 the FDOC turned over the results of its investigation to the FDA, which opened a grand jury investigation that led to indictments in July 1989. These indictments are discussed below in §F.  

In 1989, the FDOC investigative files were made public under Florida’s open records statute.  These records were an important source of information for the investigation by Grove Fresh that led to the filing of the 90c5009 complaint in August 1990.

D. Bosch’s October 1988 complaint to the FDA. 

In October 1988, Everfresh fired Duane Bosch, a probationary employee who had been asking questions about the plant's use of Oleum 320/IDEA. Bosch reported his suspicions to the Detroit FDA office.

The FDA’s investigation of Bosch’s complaint is discussed at FDA Investigations §II-F.

E. Bosch’s January 1989 whistleblower complaint. 

In January 1989, Bosch sued Everfresh under the Michigan Whistleblower’s Protection Act, alleging that he had been wrongfully fired because Everfresh knew that he would be complaining to state and federal regulators about Everfresh's manufacturing practices.

Bosch's suit prompted Labatt to hire William Appler and his law firm, McDermott Will & Emery, for “advice on how this matter should be handled, including what information should be conveyed to the FDA.” (Appler Affidavit ¶3)

McDermott Will & Emery’s investigation is discussed in Analytical & Procedural History of the Grove Fresh Litigation, Introduction, §B-1.

Everfresh settled Bosch's claims in November 1989 for a payment of $4,000.

F. The July 1989 indictment of three former Bodine’s executives.

On July 26, 1989, a federal grand jury in Chicago indicted Ed Boden and two other former executives of Bodine’s, Inc. for making and selling misbranded orange juice products from 1978 to 1985.

All three defendants made plea bargains. Ed Boden was sentenced to two years in prison, a $250,000 fine, 1,000 hours of community service, and five years’ probation. 

G. The consumer class action suit against Bodine’s, et al.

On July 27, 1989, the New York Times (Section IV, p. 14) and many other newspapers and magazines reported the indictment of the former Bodine’s executives. The next day Chicago attorney Lawrence Walner filed a consumer class action against Bodine’s and the indicted ex-executives. 

In the case against Boden, et al., the Illinois Court of Appeals approved, for the first time in Illinois, a fluid recovery mechanism for consumer class actions.  Gordon v. Boden, 224 Ill. App. 3d 195, 205-06, 586 N.E. 2d 461 (1st Dist. 1991).  This mechanism makes it easier for consumers to recover damages from orange juice companies that make misbranded products. 

The fluid recovery mechanism is a format in which the damages incurred by the class as a whole are determined in a single adjudication, creating a common damage fund.  Individual claimants who can prove valid claims obtain their share of the fund.  The unclaimed portion of the fund is applied to the class’s benefit through the actual fluid recovery, under which the remainder is distributed through the market in the form of reduced prices, or else it is used to fund a project which is likely to benefit absent class members.

Before the indictment issued, Bodine’s sold its assets and operations to a Canadian firm that continued operations under a different name and had no liability for the misconduct of the prior owners.  The class sought a recovery against the former executives.  To my knowledge, the case ended without any significant recovery by the class. 

H. Attorney Walner’s interest in the Grove Fresh litigation.

Attorney Walner became interested in the Grove Fresh litigation in the summer of 1992.  At his request I provided him with copies of the complaints that my predecessor (Maryland lawyer Jeffrey Hines) had filed in February 1989 against Everfresh, American Citrus, and Flavor Fresh.  I did not provide him with the 90c5009 Complaint or with the March 1991 Order denying motions to dismiss that complaint because the entire case was still under seal. 

I. The criminal case in the Western District of Michigan (February-November 1993).

On February 18, 1993—the day before the 90c5009 defendants and Grove Fresh made an oral settlement agreement— a federal grand jury in Michigan issued a 33-count indictment charging Flavor Fresh, Peninsular, Marshall, Kohlbach, and seven other individuals with a scheme to sell consumers adulterated orange juice.  United States v. Peninsular Products Co., et al., 93 CR 21 (W.D. Mich.).

The indictment accused the defendants of using large amounts of low-cost inferior ingredients like sugar, citric acid and amino acids and falsely labeling the product as orange juice from concentrate.  The indictment also alleged a scheme to extend shelf life using Oleum 320/IDEA.  The indictment covered juices that were distributed under at least 23 different labels nationwide in 1979-91.

Flavor Fresh pleaded guilty to 32 counts and was fined $320,000. Marshall pleaded guilty to two counts and was sentenced to 37 months in prison and fined $125,000.  His partner, James Benton, pleaded guilty to one count and was sentenced to 30 months in prison and fined $25,000. The charges against Peninsular were dropped because the company was in a Chapter 7 bankruptcy. 

For further details, see FDA Investigations, §III-H.

J. The consumer class actions in the Circuit Court of Cook County: 1993-2000.

A day or two after Peninsular, Flavor Fresh, and others were indicted, Walner’s consumer clients (“the Walner plaintiffs”) filed three separate class action cases in the Circuit Court of Cook County—one against Flavor Fresh, another against the Everfresh entities and Labatt, and the third against American Citrus. 

Walner’s complaints alleged breaches of warranties and violations of RICO and consumer fraud laws.  The complaints did not allege any conspiracy among the defendants in the three cases.  The complaints were filed as three separate cases and were assigned to three different judges. 

1. The Walner plaintiffs’ intervention in 90c5009.

In the spring of 1993 the Walner plaintiffs moved to intervene in 90c5009 to modify the seal and protective orders so as to gain access to Grove Fresh’s evidence.  They based their claim on Wilk v. American Medical Association, 635 F.2d 1295 (7th Cir. 1980).

In Wilk, five chiropractors sued various medical organizations for violations of the antitrust laws.  Later, the State of New York filed a lawsuit against many of the same organizations alleging similar, but not identical claims.  At the time of the second suit, discovery in the first suit was nearly complete.  The State of New York moved to intervene in the first suit to modify a protective order so as to permit it access to discovery.  The district court denied intervention.  The Seventh Circuit reversed, holding that where a third party wishes to modify a protective order so as to avoid duplicative discovery in collateral litigation, policy considerations favoring the efficient resolution of disputes justify modification unless such an order would tangibly prejudice substantial rights of the party opposing modification.

Wilk squarely supported the Walner plaintiffs’ claim to intervene.  Wilk also put the burden on the 90c5009 defendants to demonstrate why the Walner plaintiffs should not have access to the 90c5009 discovery.  Nevertheless, Judge Zagel denied the Walner plaintiffs’ motion in its entirety, without even requiring the defendants to show why access should be denied. Walner appealed.

In May 1994 the Seventh Circuit reversed and, citing Wilk as “dispositive,” held that the consumers were presumptively entitled to the discovery had in 90c5009 on the same terms as Grove Fresh.  The court remanded the appeal with instructions that the burden was on the defendants to establish that the consumers were not entitled to that discovery.  Grove Fresh Distributors, Inc. v. Everfresh Juice Co., 24 F.3d 893, 896 (7th Cir. 1994).

2. The dismissal of the RICO claims.

Under the doctrine of offensive collateral estoppel[2] Judge Zagel’s March 1991 ruling denying motions to dismiss the 90c5009 RICO claims should have precluded the Labatt Judgment Creditors from challenging the sufficiency of the Walner plaintiffs’ RICO claims.  That ruling was still under seal, however, so the Walner plaintiffs’ did not have access to it during the briefing on the motions to dismiss the state-court RICO claims.

In or about 1994, the state court dismissed those RICO claims for failure to state causes of action. 

3. The limited access on remand.

On remand, Judge Zagel, without explanation, repeatedly postponed ruling on the Walner plaintiffs’ claims for access. In December 1995, after nineteen months of unexplained postponements, the motion for access was resolved by agreement.

The defendants gave the Walner plaintiffs access to the documents that had been produced to Grove Fresh during discovery.  They also gave the Walner plaintiffs access to deposition transcripts, to the redacted complaint, and to the other papers that were unsealed as a result of the Coalition’s appeal.  However, they did not give the Walner plaintiffs access to any of the briefs in which Grove Fresh marshaled the evidence and legal theories supporting its conspiracy claims.

4. The December 1995 agreement to suspend discovery.

In December 1995, after the Walner plaintiffs had gotten access to the 90c5009 discovery, they suspended further discovery while they and the Labatt Judgment Creditors negotiated over a global settlement of all three class actions.

As of the date discovery was suspended the Walner plaintiffs had not taken a single deposition, nor had they filed an amended complaint against American Citrus, nor had they responded to a motion to dismiss for lack of personal jurisdiction that Labatt had filed two years earlier.

The global settlement discussions were, I would later learn, conditioned on two promises by the Walner plaintiffs:

5. The injunction against my representing consumers.

In April 1994 Judge Zagel enjoined me from filing a consumer class action complaint in state court without first getting his prior approval.  In order to obtain his approval I had to demonstrate that my proposed complaint did not include any information subject to the 90c5009 seal order.

In September 1995, April 1996, and August 1996 I presented motions for leave to file a consumer class action complaint in state court.  The complaint that I proposed to file included specific allegations for subjecting Labatt to long-arm jurisdiction in Illinois. The proposed complaint also alleged a single conspiracy encompassing all of the juice manufacturers named as defendants in the three separate class actions filed by the Walner plaintiffs.  If proven at trial, this alleged conspiracy would have held Labatt and Home Juice jointly and severally liable for the $45 million in damages caused by Flavor Fresh and Peninsular Products.

The first and second times I presented my motion, Judge Zagel added new procedural wrinkles to the previously-announced requirements for his approval.  On my third try he ruled that he was “satisfied that Mr. Messina in his proposed complaint does not reveal information which has been deemed confidential.”  Nevertheless, he barred me from filing the complaint because in his opinion, I was not fit to serve as class counsel:

But I am not satisfied, based on past experience, that Mr. Messina should serve as class counsel.  See, e.g., Grove Fresh Distributors, Inc. v. John Labatt Ltd., 888 F. Supp. 1427, 1447-48 (N.D. Ill. 1995) (“Mr. Messina’s willingness to hurt his perceived enemies ... pales beside his willingness to run roughshod over the best interests of his client ... Had he been class counsel, I would have afforded him no fees, because he was seemingly incapable of placing his client’s interests above his own.”)  Therefore, I deny Mr. Messina’s motion for leave to file the complaint. 
Judge Zagel issued this permanent injunction without giving me notice or a hearing regarding his opinion about my fitness as class counsel. 

6. The referral to Walner. 

In the fall of 1996, with Judge Zagel’s permission, I disclosed my proposed class action complaint to Walner and referred my consumer clients to him.  Walner wanted to use my complaint’s conspiracy claim in his negotiations with Labatt and American Citrus, but, he told me, he did not want to file a formal conspiracy claim because Labatt and American Citrus had threatened to terminate settlement negotiations if he did. 

I sought the advice of several experienced class action lawyers regarding the propriety of Walner’s decision not to file a conspiracy claim because of the defendants’ threat not to negotiate with him. The consensus opinion was that the decision not to file the conspiracy claim created a conflict of interest between two distinct subsets of the absent class members represented by Walner’s clients.  See Standards and Guidelines for Litigating and Settling Class Actions, 176 F.R.D. 375, 389 (1997) (“class counsel should proceed cautiously in discussing settlement of claims other than those alleged in pleadings and certified by the court.”) The conflict was between:

  1. the absent class members in the case against Flavor Fresh and Peninsular, where a conspiracy claim holding Labatt and American Citrus jointly and severally liable was the only route to recovery, and
  2. the absent class members in the separate cases against American Citrus and Labatt, where the defendants were solvent and a conspiracy claim was unnecessary to an adequate recovery. 

7. The Seventh Circuit’s critique of Walner. 

At about this time I learned of the decision in Kamilewicz v. Bank of Boston Corp., 92 F.3d 506 rehearing denied, 100 F.3d 1348 (7th Cir. 1996), which has been described as “the most notorious example of abuse” of the class action device.  B. Wolfman, Forward: The National Association of Consumer Advocates Standards and Guidelines for Litigating and Settling Class Actions 176 F.R.D. 370 (1998) [hereafter cited as “Wolfman.”].

Kamilewicz concerned a class action suit that Walner and others had brought in Alabama state court regarding the Bank of Boston’s practice of not promptly posting interest to real estate escrow accounts.  The Bank proposed a settlement in which it would make refunds and pay attorney’s fees.  Under the Bank’s proposal the entire amount of the escrow refund would have gone to the class members; it would have paid $500,000 in attorney’s fees out of its own pocket.  Walner and his co-counsel rejected this proposal.  They eventually worked out a settlement in which their fee award was a percentage of the escrow refunds.  Under that settlement class members received one-time payments ranging from 0.00 to $8.76.  His fee allegedly came out to $14 million.  The Bank deducted the attorney’s fee from the class members escrow accounts. 

Kamilewicz, a class member, was assessed $91.33 in attorney’s fees to recover $2.19 on the merits.  He sued Walner, the other plaintiffs’ lawyers,  and certain of the Alabama defendants alleging malpractice and RICO claims.  The district court dismissed the complaint on the ground that it was a dressed-up collateral attack on a state court judgment, which is prohibited by the Rooker-Feldman doctrine.  That doctrine is based on the principle that inferior federal courts do not have the right to exercise appellate review over state court decisions.  The Rooker-Feldman test is whether the federal plaintiff seeks to set aside a state court judgment or whether he is presenting an independent claim.  If the injury resulted from the state court judgment itself, Rooker-Feldman controls.

The Seventh Circuit affirmed.  The court described the settlement in disdainful terms, but it held that Rooker-Feldman left it no choice but to affirm.  In a dissent from the denial of a petition for rehearing en banc, Judge Easterbrook focused on the fraudulent nature of the presentation at the fairness hearing:

Representative plaintiffs and their lawyers may be imperfect agents of the other class members—may even put one over on the court, in a staged performance.  The lawyers support the settlement to get fees; the defendants support it to evade liability; the court can’t vindicate the class’s rights because the friendly presentation means that it lacks essential information.  This possibility, a staple of the literature about class actions [citations omitted], enjoys judicial recognition. [citations omitted]  Recall that even the active opposition of class members does not automatically block the settlement, which therefore rests on the lawyers’ consent, not the litigants’ agreement or the legal decision of a court.

100 F.3d at 1352 (emphasis added). 

After considering the criticisms in Kamilewicz, and after failing to persuade Walner that his decision not to file the conspiracy claim put him in a conflict of interest, I withdrew the referral to him.

8. The settlement between the Walner plaintiffs and the Labatt Judgment Creditors. 

On February 5, 1998, the Seventh Circuit issued an unpublished order affirming the Contempt Order. The next day, the Walner plaintiffs and Labatt and American Citrus filed a motion in the Circuit Court of Cook County for approval of a settlement on the following terms:

The statements filed in support of the settlement did not analyze the real value of the settlement, i.e., the rate at which consumers were likely to redeem the coupons.  Studies show that coupon settlements result in rates of redemption ranging from less than 1% to 18%.  See authorities cited in Wolfman, 176 F.R.D. 370, nn.3, 10, & 13 (1998).

These studies suggest that the real value of the Walner plaintiff’s settlement was in a range between $225,000 and $4,050,000.  Even these amounts may overstate the real-world value of the settlement because “the defendant[s] may be able to use [their] specialized knowledge of the industry to recover the cost of the coupon in the marketing of the relevant product.”  Wolfman, 176 F.R.D. at 383.

In February 1998 the state court gave its preliminary approval to the proposed settlement and set a hearing for final approval for March 31, 1998.

9. The orders barring me from providing successor counsel with information from the public domain that supported objections to the proposed settlement.

In about January 1997, I filed a motion for leave to disclose my proposed complaint to an experienced class action lawyer in Philadelphia.  I also sought leave to represent one of my consumer clients, Stuart Cohen, on an individual basis in the state court proceedings.  The motion was supported by an affidavit from Mr. Cohen.  Judge Zagel entered and continued the motion and never ruled on it.

Thirteen months later, in February 1998, I received notice that the state court had given preliminary approval to a settlement between the Walner plaintiffs and the Labatt Judgment Creditors.  The Philadelphia lawyer was not available to represent my clients in connection with the proposed settlement, so I referred them to another attorney, William Norine of Wisconsin.  On March 20, 1998, Norine filed objections to the proposed settlement.  One of his objections was that Walner’s decision not to file a conspiracy claim was tainted with a conflict of interest and deprived absent class members and the court of vital information.

Another objection was that Labatt and American Citrus had interfered with the objectors’ right to counsel of their choice by obtaining a federal court injunction barring me from filing a class action complaint that included the conspiracy claim.

On March 27, 1998, Labatt and American Citrus responded to Norine’s objections.  They argued that the “prohibition against Mr. Messina’s participation in these proceedings is not the product of improper ‘interference’ by the defendants.  It is the inevitable consequence of Mr. Messina’s repeated and extensive misconduct.”  They supported this argument with their version of the facts underlying the Contempt Order.

On the morning of March 31, 1998, Norine appeared before Judge Zagel to obtain relief from the prior restraint on my speech about Labatt and American Citrus so that I could provide him with information relevant to the fairness hearing scheduled for later in the day.  He asked for permission to receive a copy of my proposed state-court complaint, which Judge Zagel had already found to be based on information in the public domain; Judge Zagel denied that request.

Norine also asked for leave to call me as a witness at the fairness hearing and to have me testify as to facts in the public domain that supported his objections to the settlement; Judge Zagel denied that request as well.

I obeyed Judge Zagel’s rulings.

On the afternoon of March 31, 1998, the state court gave final approval to the settlement.  Norine filed a timely post-judgment motion.  On June 2, 1998, the trial court denied that motion.  Norine’s clients filed an appeal, but in March 2000, the Appellate Court affirmed. 

[1] “Ever Fresh” is the format used in these essays when discussing that firm’s operations prior to December 1986, when Labatt acquired the firm and changed the format of the name to “Everfresh.”

[2] Under the doctrine of offensive collateral estoppel, a litigant who was not a party to a prior judgment may nevertheless use that prior judgment “offensively” to prevent a defendant from relitigating issues resolved in the earlier proceeding.  Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979).