Whalen v. Albertsons Companies Inc.

Background

Twenty-five individual plaintiffs sued Albertsons Companies Inc. and other defendants over a proposed merger between Albertsons and Kroger. They alleged that the merger would harm competition among grocery stores throughout the United States. They also challenged a dividend payment, alleging that it would weaken Albertsons financially and lead to higher prices, worse services, and a possible “failing firm” defense for the merger.

The plaintiffs sought a preliminary injunction, which is a court order intended to prevent action while a case is pending. The defendants moved to dismiss.

Standing

The court granted the motions to dismiss because the plaintiffs failed to allege Article III standing. Constitutional standing requires a plaintiff to show a personal, legally recognized injury. The court said the plaintiffs did not explain how the merger would affect any particular plaintiff in the area where that person lived and bought groceries. The court rejected the plaintiffs’ reliance on federal antitrust statutes as a basis for constitutional standing.

The court also held that the plaintiffs lacked standing to challenge the dividend payment. Their allegations that the dividend would cause higher prices, worse services, and a possible failing-firm defense were not supported by credible facts. The plaintiffs did not describe Albertsons’s financial condition before the dividend or how the company had performed afterward, and therefore did not plausibly allege a substantial risk of harm.

Ripeness

The court added that, even if the plaintiffs had adequately alleged standing, the lawsuit would be dismissed or stayed because it was not ripe. Ripeness asks whether a dispute is sufficiently developed for judicial decision. The merger’s terms were not yet definite enough to evaluate its competitive effects. Up to 650 stores might be sold before the merger, the specific stores had not been identified, and the Federal Trade Commission was still reviewing the transaction. The companies could also agree to changes as a condition of approval. The court therefore said it would be premature to decide the antitrust claims, even assuming the complaint adequately alleged antitrust violations.

Rulings

The order granted the motions to dismiss and dismissed the claims against all defendants without prejudice and with leave to amend. The court also allowed the plaintiffs to amend the dividend-disgorgement claim, while noting that it was difficult to see how that claim could be stated. Any amended complaint was due October 2, 2023, and the plaintiffs could request more time if necessary for the merger’s terms to become clearer.

Because the plaintiffs failed to allege standing, Judge Vince Chhabria denied the motion for a preliminary injunction. The court also stated that the plaintiffs had not provided enough information to determine whether antitrust concerns about the merger were warranted, but it did not decide the merits of those antitrust claims.