The curious case of Bumble Bee Tuna, one of the long-running multidistrict litigations, took an unexpected turn. The corporate bigwigs mingling in private equity could learn more than a thing or two about the court’s recent decision. The cause: an alleged price-fixing conspiracy involving none other than a leading provider of seafood, canned tuna to be precise, charges now extending as far as a private equity firm and its investment advisor, who are now facing trial.
Both the private equity firm and its investment advisor are likely to be held accountable for participating in the alleged price-fixing conspiracy, despite not being direct competitors in the canned tuna market. An article by Venable LLP provides the underlying facts and analysis of the case.
The judge presiding over this case denied the motion for summary judgment, citing reasons that could alter the assumptions held by private equity firms regarding their potential involvement and liability in the legal issues of their portfolio companies. The connection between the firm and advisor to the price-fixing conspiracy stems from their relationship with their portfolio company, Bumble Bee Tuna.
While the stakeholders and the legal community keep a close eye on this unusual case, we can succinctly summarize the key takeaway for legal professionals and big corporations around the world. The court’s ruling serves as a stern reminder for private equity firms to ensure they maintain requisite distance from operational decisions of their investment portfolio companies, lest they inadvertently expose themselves to substantial legal risk.
This case offers a precedent, reminding businesses, especially private equity firms, that they may be held accountable for laws breached by their portfolio companies, despite their non-competitive position in the marketplace. The ripple effects of this case could be significant and are worth monitoring. It’s yet another reiteration of the axiom: in law, as in life, a stitch in time, saves nine.