In January 2016, in a federal antitrust lawsuit, Global Blue Technologies (GBT), a shrimp farm/hatchery/broodstock facility in Texas, sued Shrimp Improvement Systems (SIS), a shrimp hatchery/broodstock facility in Florida, claiming that SIS could not use a non-compete agreement to stifle competition.
SIS is owned by owned by Charoen Pokphand Foods Public Company Limited in Thailand and Central Proteinaprima (CP Prima) in Indonesia. It makes clients sign restrictive covenants, including non-competition agreements, that preclude them from using its shrimp to start rival breeding programs. GBT argued that its new, state-of-the-art shrimp breeding operation in Taft, Texas, doesn’t violate the non-compete deal it signed with SIS. GBT claims “it is not feasible” for any USA farmer to start a rival program without using SIS shrimp because: “(a) the quantities produced by other breeders are too small, (b) the United States’ strict importation requirements and the even more strict requirements imposed by the State of Texas impede would-be breeders from obtaining broodstock from outside the United States, and (c) the cost of obtaining broodstock or postlarvae shrimp from Hawaii is cost prohibitive.”
Also, Global Blue says SIS should not be allowed to monopolize USA shrimp breeding because it obtained its lines of shrimp in the 1980s from the USA Department of Agriculture, which ran a shrimp farming program to make the USA competitive with burgeoning shrimp production around the world.
GBT says that due to SIS’s monopoly, it has no incentive to maintain the quality of its shrimp, which has diminished over the years. In fact, GBT says that the Texas shrimp farmers who used SIS postlarvae in 2015 had their worst-ever harvest, adding that the last batch it bought from SIS contaminated its entire population of shrimp and hatchery.
GBT launched a breeding program in 2015 and made a sale in May 2015 to one of SIS’s biggest clients. “That client obtained great results from GBT’s products while every other shrimp farmer in Texas—all of whom purchased from SIS—received poor results,” the complaint states.
GBT attributes its success to its genetics manager, Eduardo Figueras, who worked for SIS from March 2010 to June 2014, but had nothing to do with its breeding program. Nonetheless, SIS recently sent GBT a draft lawsuit, accusing it and Figueras of violating the non-compete agreement by running its own program. GBT disagreed and sought a declaratory judgment, an injunction and damages for violations of the Sherman and Clayton Acts and the Texas Free Enterprise and Antitrust Act.
Global Blue alleged that by “crushing competitors” with its monopoly in the production of “pure lines” of broodstock, Shrimp Improvement Systems effectively controls the market for the specialized shrimp, declining to sell them to any entity it suspects will develop them into competing lines of broodstock. SIS requires postlarvae hybrid shrimp buyers to sign deals not to breed the shrimp to create broodstock, the complaint alleged.
Global Blue sought an undetermined amount of damages and asked to triple the damages and include pre and post-judgment interest, costs and attorneys’ fees. It also sought injunctions that would put an end to the restrictions that it claims SIS includes in contracts for the specialized shrimp.
On February 19, 2016, Shrimp Improvement Systems moved to dismiss Global Blue’s complaint, saying that Global Blue Technologies failed to plead sufficient facts regarding SIS’s alleged conspiracy and the alleged refusal of SIS to sell shrimp to Global Blue for broodstock purposes is not anti-competitive conduct.
On May 20, 2016, an initial pretrial conference was held before USA Federal District Judge Nelva Gonzales Ramos in Texas and arguments were heard on Shrimp Improvement Systems’ motion to dismiss the lawsuit. The court took the motion under advisement and setup a status conference for May 31, 2016, when proceedings were held before Judge Ramos, and the parties agreed to mediate the case in June 2016 with an agreed-upon mediator.\
On August 3, 2016, in a Texas federal court, SIS and GBT attended a status conference and settled their legal differences on terms that were not made available in the court record. Unlike court proceedings, mediation settlements may not become part of the public record.
Judge Ramos said: “The parties have announced to the court that all matters in dispute and controversy between them have been fully and finally compromised and settled. They have further announced their intention to request dismissal of this action.” Judge Ramos required the parties to file papers dismissing the action by September 26, 2016.
Global Blue was represented by Joe A. Flores and by John Da Grosa Smith and Kristina M. Jones of Smith LLC.
Shrimp Improvement Systems was represented by Jason Michael Powers of Vinson Elkins LLP.
The case carried the titled “Global Blue Technologies-USA LLC et al. versus Shrimp Improvement Systems LLC et al”., with a case number of 2:16-cv-00027, in the USA District Court for the Southern District of Texas.
Other News on Global Blue Technologies
GBT Inks First International Project: On July 14, 2016, GBT-International announced the signing of a joint-venture agreement to build a shrimp farm in Japan. It will be the first GBT facility located outside of the United States.
Contracts were signed after nearly a year of intense discussions and visits to GBT’s operations in Texas by Japanese officials that included multiple “tastings” of GBT’s shrimp by an impressive range of the highest level of representatives of Japan’s cultural, financial and agricultural sectors. The contracts focused on bringing GBT to Japan with the intent of safeguarding Japan’s strict standards of quality, safety and excellence of seafood. The construction phase of the initial Japanese facility is targeted to break ground in the first quarter of 2017.
The project will operate under the corporate auspices of GBT-International’s Japanese partners as GBT-Japan. GBT-International will oversee construction, training and technical management of the system. GBT-Japan will provide on-site staffing and be responsible for day-to-day operations. Biosecurity will be maintained by the exclusive use of GBT broodstock and postlarvae for stocking in biosecure ponds.
Sustainable Sea Products International (SSPI) working with GBT-Japan will handle marketing and distribution. Located in Rockville, Maryland, USA, SSPI, an importer, processor and wholesaler, specializes in farmed and wild shrimp from the USA. The company sources its farm-raised products from its sister company GBT in Texas, which grows shrimp in the largest indoor recirculating aquaculture system in the United States. GBT’s shrimp—branded “Copano Blues”—are raised without hormones, growth promoters or antibiotics. The company’s wild shrimp are harvested from USA Gulf waters by trawlers using newly designed equipment and nets that reduce benthic impact, lessen drag and save fuel. All of SSPI’s shrimp are packed and processed within an hour of the farm and fishing port.
GBT’s Copano Bay Site Given the “Green Light” by Texas Parks and Wildlife Department (TPWD): Effective April 15, 2016, TPWD issued Global Blue Technologies an “Exotic Species” permit paving the way for Texas and the USA to experience firsthand GBT’s “game changing” shrimp aquaculture technology. The Exotic Species Permit entitles GBT to legally purchase, transport and raise non-native Pacific white shrimp (Penaeus vannamei) legally.
TPWD personnel have closely monitored the progress of Global Blue Technologies since 2011, when the company opened its R&D demonstration facility in Port Isabel, Texas, where GBT demonstrated its ability to grow shrimp larger, faster and more economically than any shrimp farming system in the United States or abroad.
On April 11, 2016, TPWD officials inspected the new GBT commercial site and determined that its technology protected the Texas environment from the threat of a non-native species. With its “Exotic Species” permit in hand, GBT’s 170-acre site on the shores of Copano Bay in Taft, Texas, will be stocking its biosecure, covered ponds with the finest pathogen-free postlarvae. GBT is poised to bring the moribund USA shrimp farming industry into the 21st Century.
Sources: 1. Courthouse News Service. Antitrust Complaint Against Big Shrimp. Cameron Langford. January 28, 2016. 2. Law360. Shrimp Farm Settles Monopoly Claims Against Breeder. Joyce Hanson (Additional reporting by Kevin Penton, editing by Rebecca Flanagan). August 4, 2016. 3. Global Blue Technologies’ Webpage. Website visit on August 13, 2016. 4. FishChoice.com. Sustainable Sea Products International. Website visit on August 13, 2016.