The End of the Consent Decree

by Nicholas Walsh, PA

Left to right: John Knight, Rodney Cushing, Leslie Dyer, and Alan Grossman at the federal courthouse in Portland. The picture was probably taken during the price-fixing trial in 1958. Photo courtesy of Barry Faber. The Great Lobster War, Ron Formisano, courtesy University of Massachusetts Press, Amherst, Mass.

On July21, 2014, Judge Hornby of the United States District Court for Maine issued an order terminating the 56 year old consent judgment entered into between the Maine Lobstermen’s Association and the U.S. Department of Justice (DOJ). It was a historic day.

In October 1957 the Department of Justice sued the Maine Lobstermen’s Association, its president Leslie Dyer, and “persons, firms and businesses not named as defendants herein” as defendants in an antitrust suit. The allegation was that beginning in June 1957 “the defendants and the co-conspirators have engaged in a combination and conspiracy to fix, stabilize and maintain the prices for live Maine lobsters sold by both MLA member and non-member lobstermen to lobster dealers, in unreasonable restraint of the aforesaid interstate trade and commerce in live Maine lobsters, in violation of Section 1 of the Sherman Act.”

The result of the complaint was a consent decree, a judgment entered into by agreement of the parties, and this judgment enjoined the defendants from entering into an agreement to set the lobster price or terms of lobster sale, or limiting competition, or urging others not to sell for a given price, or not fishing. The judgment applied not merely to the MLA and President Dyer, but also to “all persons . . . .who shall have received actual notice of this Final Judgment by personal service or otherwise.” Now, thanks to an effort by MLA beginning in 2010, the decree is no more.

Why did the MLA seek to end the consent decree? Was it so the MLA could more easily seek an exemption for lobstermen to the Sherman Antitrust Act’s prohibitions on price collusion, similar to that enjoyed by some milk producers, or so it could urge its members and others to limit effort? According to Patrice McCarron, executive director of the MLA, nothing quite so sensational prompted the MLA to enter into negotiations with the DOJ to end the decree.

The MLA is organized as a “cooperative corporation” under Maine law. A co-op lacks many of the tax advantages of a 501(c)(6) business association, including the ability to allow donors to deduct contributions. The MLA’s mission has changed in its long history, and now it is much more of an advocate for the lobster industry than it is a fishing cooperative. For that reason the MLA desired to reorganize itself into two entities, one a pure business association (the MLA) and the other a 501(c)(3) non-profit (the Maine Lobstermen’s Community Alliance).

The problem was the consent decree. As an industry organization, central to the MLA’s mission is promoting, among its members, efforts and techniques to reduce costs, increase productivity, and enhance profits. Nothing wrong with that except that some of those activities could expose the MLA to a charge of violating the consent decree’s prohibition on actions to “reduce, curtail or limit the catch or supply of live Maine lobsters.” The Department of Justice itself told the court that the consent decree deterred the MLA from “engaging in legitimate, lawful advocacy and education efforts related to fisheries management.”

For legal reasons, as a cooperative the MLA had greater protections against such a charge than it would enjoy as a business association, so a cooperative it has remained.

Now the MLA can reorganize. It still cannot engage in discussions concerning effort and price control, and as it noted to Judge Hornby, the sanctions for such activity are far more severe now than in 1958. (A $100 million fine, anyone?) But for its day to day mission, the absence of the consent decree is huge and very welcome. As MLA executive director Patrice McCarron told me, “It feels like a weight has been lifted. [Under the consent decree] you feel like you’re being held to a higher standard, that you’re being singled out. This will help the MLA in the long run.”

Nicholas Walsh is a Portland maritime attorney with 26 years’ experience. He may be reached at (207) 772-2191, or nwalsh@gwi.net.