The Clackamas-based company has used its huge resources and an array of hard-nosed tactics to control the West Coast seafood industry and suppress prices paid for certain seafood product by as much as 15 to 50 percent, the commercial fishermen claim.
PORTLAND — In 26 years, Frank Dulcich has transformed Pacific Seafood Group from a minor fish distributor in Southeast Portland to perhaps the dominant seafood player in North America.
But a class-action lawsuit filed Tuesday alleges that Dulcich has built his $1 billion-a-year empire on the backs of the fishermen who provide Pacific Seafood with its product.
Lloyd Whaley and his son, Todd Whaley, both commercial fishermen based in Brookings, on Tuesday filed a class-action suit in U.S. District Court in Medford alleging that Dulcich and his company has abused the company's market power.
The Clackamas-based company has used its huge resources and an array of hard-nosed tactics to control the West Coast seafood industry and suppress prices paid for certain seafood product by as much as 15 to 50 percent, the Whaleys claim.
The Oregon and California justice departments also have sent investigators in recent months to the coast asking questions about Pacific Seafood and its tactics.
The Whaleys' lawsuit alleges that Pacific Seafood has bought out a series of processor competitors, some of which it simply shut down. It has sat on empty or unused parcels of waterfront industrial land in order to lock out potential competition. It has assembled its own commercial fishing fleet that competes with independent fishermen, and it has lent money to other skippers, sometimes requiring that they sell all the seafood they catch to Pacific.
The Whaleys hope an entire generation of commercial fishermen follows their lead. Their lawsuit is open to more than 3,000 commercial fishermen or vessel owners who delivered Dungeness crab, groundfish, Pacific whiting or Pacific coldwater shrimp to Oregon, Washington or California processors between June 2006 and the present.
"He's taken the whole fun out of fishing, and he's taken our livelihood with it," Lloyd Whaley said of Dulcich.
Craig Urness, Pacific's general counsel, said the lawsuit is baseless. "This is a free market, there is no limit to a buyers' ability to enter the business at any time," he said.
Moreover, Pacific has helped fishermen by helping create seafood demand and investing millions of dollars in processing plants, he said, adding that in an industry where bounced checks are not all that unusual, Pacific also has brought the benefit of financial strength and stability.
"Fishermen have a choice," Urness said. "But those fishermen who have been our business partners for the last 20 years know that when they sell product to Pacific, they're going to get paid."
Gaining more than 50 percent market share is not against the law. What is illegal is for dominant market players to use "anti-competitive" tactics to ensure their continued growth and profitability.
Antitrust cases "are very difficult to prove," said Michael Hanlon, a Portland attorney who has tried antitrust cases. "The key is proving the monopoly power, that the defendant has the ability control prices."
The lawsuit seeks to break up Pacific Seafood into smaller parts as well as at least $394 million in damages. The damages would be divvied up among commercial fisherman and their lawyers.
Mike Haglund, a Portland lawyer whose firm is representing the Whaleys, spent the last seven months building a case against Pacific Seafood. Haglund admits finding commercial fishermen willing to sign on as plaintiffs and take on Dulcich was difficult.
Whether Oregon officials plan to take their own action against Pacific is unclear. Todd Whaley said he was quizzed by an Oregon investigator last summer.
Tony Green, spokesman for the Oregon attorney general, declined to comment on Pacific Seafood.
Commercial fishing has long been a hardscrabble existence, marked in recent years by tight limits, short seasons and declining numbers of some fish on top of the perennially harsh working conditions.
The sometimes bitter power struggle between fishermen and seafood buyers in the processing plants is nothing new.
But Dulcich has shifted the balance of power. Since 1983, Dulcich has transformed the family's small seafood operation into a national powerhouse.
After nearly three decades of expansion, Pacific Seafood now owns or co-owns seafood processing plants in Warrenton, Bay City, Depoe Bay, Newport, Charleston and Brookings. It also owns plants in Westport, Wash.; Eureka, Calif.; and at least six more in British Columbia and Alaska. The company is now the largest seafood company in the country, with revenue of about $1 billion, according to Seafood Business, a trade magazine.
Pacific's Urness declined to confirm or deny that revenue number. He did say the company employs 1,500 to 2,000 employees, 600 of them in Oregon.
The Whaleys allege Pacific Seafood now controls between 50 and 75 percent of the market in Pacific whiting, groundfish, Dungeness crab and Pacific coldwater shrimp.
Pacific's financial ties to some commercial fishermen extend beyond seafood prices.
The company has also lent money to independent fishermen, which the plaintiffs contend is another way it has exerted control over fishermen.
In February 2009, Pacific Coast Seafood Co., a Pacific affiliate, lent more than $135,000 to Kelly Smotherman, an Astoria commercial fisherman. A year later, Pacific Coast sued Smotherman in Clatsop County Circuit Court demanding that Smotherman immediately repay the $87,130 balance of the loan.
Pacific Coast alleged that Smotherman breached the terms of the loan agreement when he sold product to a competing processor. A condition of Pacific Coast's loan was a requirement that Smotherman supply only Dulcich companies, even if another processor offered a higher price.
Bitter conflicts are nothing new for Pacific or Dulcich.
Frank's mother, Melba Dulcich, as well as his brother and sister, have sued him over the years claiming that he wasn't dealing fairly with them.
In 2002, Pacific Surimi, another Pacific Seafood affiliate, pleaded no contest to first-degree theft charges. The charges stemmed from findings that the company was reducing Pacific whiting payments to fishermen by fraudulently inflating the percentage of the catch that was deemed to be damaged or otherwise unusable.
In every catch, there is some percentage of so-called "weigh back," fish that are too small or too damaged to use. But a protracted Oregon State Police investigation found that Pacific Surimi was shortchanging fishermen by inflating the weigh back and then processing virtually the entire catch.
Pacific Surimi agreed to pay $800,000 in restitution.
Josh Marquis, Clatsop County district attorney, hammered out Pacific Surimi's plea deal. He included a five-year nonretaliatory clause into the agreement out of concern that fishermen who crossed Pacific would pay a price.
"Pacific Surimi was cheating these fishermen," Marquis said. "But what struck me was that these guys were scared. Their entire lives depend on their ability to sell their fish. If somebody has a lock on the market and they won't buy their product, then there is no market and the fisherman is out of business."