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Winnipeg Free Press - PRINT EDITION

Ruling creates cold, hard reality for ice company

By: Martin Cash

Posted: 06/4/2009 1:00 AM | Comments: 0 (including replies)

A judge in Michigan has ruled on a couple of matters that will likely mean Arctic Glacier's legal bills -- which reached $9 million by mid-May -- will keep mounting.The Winnipeg packaged ice company's involvement in an anti-trust investigation continues and scores of U.S. civil suits have now been organized into one.

In a separate matter, a Michigan judge last Friday threw out some elements of a suit against Arctic by the original whistle-blower who initiated the U.S. Department of Justice investigation into anti-trust activities in the ice business.

In that suit, Arctic's former Michigan sales executive, Martin McNulty, is alleging that after Arctic terminated his employment it conspired with other packaged ice companies to effectively blackball him from the industry because he would not participate in the alleged conspiracy to divvy up customers and territory among the major players.

He documented cases where he was told to stay away from certain potential customers because they were spoken for, in a pre-arranged agreement, by one of the competitors.

The judge threw out anti-trust claims McNulty was making against all the industry players, essentially because he was not injured by those activities. However, the judge ruled that McNulty can continue with his case against Arctic because of its alleged efforts to prevent him from getting another job in the industry.

McNulty's lawyer, Washington-based Daniel Low, said he was pleased with the ruling because it will be simpler to prove its case against Arctic.

Arctic CEO Keith McMahon also claimed to be happy with the result.

"The judge dismissed the bulk of his claims against us," McMahon said.

McMahon characterized the matter as "largely a wrongful dismissal case," but Low -- and the court documents -- disagree.

Low said the action is related to Arctic's role in conspiring with the other ice companies to agree to not hire McNulty.

While there are some who say the McNulty case is really a side-show in the larger anti-trust case, in many respects he is central to the whole thing.

He was the guy who originally came forward with details about the alleged conspiracy -- eventually going so far as to tape incriminating conversations for the FBI -- and his own personal livelihood became compromised as a result.

After the DOJ investigation became public knowledge, scores of civil suits in the United States and Canada were filed seeking redress from the alleged unfair competitive practices.

This week, the same Michigan judge appointed legal counsel for the group of 86 U.S. plaintiffs alleging violation of federal and state antitrust laws.

Arctic, the second largest packaged ice company in the U.S. (the largest in Canada) is joined as defendants in those civil suits by Reddy Ice, the largest ice company, and Home City Ice, the third largest in the U.S.

All three are believed to be subjects of the DOJ investigation.

Home City has pleaded guilty to charges it conspired with others to divvy up territory and customers, specifically in Detroit and southeastern Michigan.

As part of its plea agreement, Cincinnati-based Home City agreed to participate with the DOJ. It has had its sentencing date postponed on more than two occasions. Among other things, industry and legal observers say that Home City will likely not be sentenced until its co-operation with the DOJ has been completed.

A new sentencing date for Home City has been set for Oct. 1, which has led some to believe the investigation is nearing completion.

McMahon said Arctic continues to try to resolve the matter with the DOJ, but Wednesday would not suggest how close the company is to that resolution.

In addition to the large group of civil suits in the U.S., there is another Canadian group of civil suits as well as a Canadian investor class action suit. One analyst who would not allow his name to be used, said the fact that Arctic is spending so much to defend itself is an indication both that it has a franchise worth defending and also that the DOJ, if not the class action plaintiffs, also have something at stake.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition June 4, 2009 B5

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