In re Peanut Farmers Antitrust Litigation

ED

IN THE UNITED STATES DISTRICT COURT MAY | 3 2020

FOR THE EASTERN DISTRICT OF VIRGINIA

Norfolk Division CPen NOREGLE □□ cour

D&M FARMS, MARK HASTY, and

DUSTIN LAND, individually and on behalf

of all others similarly situated;

Plaintiffs,

v. CIVIL ACTION NO. 2:19-cv-463

BIRDSONG CORPORATION,

and

GOLDEN PEANUT COMPANY, LLC,

Defendants.

MEMORANDUM OPINION AND ORDER

Before the Court are Birdsong Corporation and Golden Peanut Company’s (collectively

“Defendants”) Motions to Dismiss. ECF Nos. 47-50; see also ECF No. | (Plaintiffs’ Complaint),

ECF Nos. 65, 67 (Defendants’ requests for a hearing on their Motions to Dismiss). After

reviewing the relevant filings, the Court finds that a hearing on the Defendants’ Motions to

Dismiss is not necessary. Accordingly, Defendants’ requests for a hearing on their Motions to

Dismiss are DENIED. Further, Defendants’ Motions to Dismiss are DENIED.

I. FACTUAL AND PROCEDURAL HISTORY

The Plaintiffs in the instant matter are a group of peanut farmers who sell raw, harvested

Runner peanuts to the Defendants to be processed and sold to food companies or other

manufacturers. ECF No. | at 1. Plaintiffs filed their Complaint on September 5, 2019. /d. The

Complaint accuses Defendants using their 80-90% market share in the peanut selling industry to

facilitate a price fixing conspiracy to depress the price of Runner peanuts. /d. Plaintiffs seek a

single claim for relief on behalf of a nationwide class under Section 1 of the Sherman Antitrust

Act. Id. at 33.

Defendants Birdsong Corporation and Golden Peanut Company filed separate Motions to

Dismiss on October 21, 2019. ECF Nos. 47-50. Plaintiffs received leave to file a single omnibus

memorandum of law in response to Defendants’ Motions to Dismiss on November 6, 2019. ECF

No. 58. Plaintiffs filed their response in opposition to Defendants’ Motions to Dismiss on

November 11, 2019. ECF No. 59. Defendants Birdsong Corporation and Golden Peanut Company

replied separately to Plaintiffs’ response and requested a hearing on the Motions to Dismiss on

November 19, 2019. ECF Nos. 64-67. The Court finds that a hearing is unnecessary to resolve

Defendants’ Motions to Dismiss. Accordingly, the matter is ripe for disposition.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of actions that fail to state

a claim upon which relief can be granted. The United States Supreme Court (“Supreme Court”)

has stated that in order “[t]o survive a motion to dismiss, a complaint must contain sufficient

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.”” Ashcroft v.

Igbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

Specifically, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows

the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

Iqbal, 556 U.S. at 678. Moreover, at the motion to dismiss stage, the court is bound to accept all

of the factual allegations in the complaint as true, but is “not bound to accept as true a legal

conclusion couched as a factual allegation.” Jd. However, “[t]hreadbare recitals of the elements of

a cause of action, supported by mere conclusory statements, do not suffice.” Jd. Assessing the

claim is a “context-specific task that requires the reviewing court to draw on its judicial experience

and common sense.” /d. at 679.

III. DISCUSSION

A. Claims Under Section 1 of the Sherman Act

To state a claim under Section 1 of the Sherman Act, plaintiffs must allege facts supporting

the following: (1) a contract, combination, or conspiracy; (2) that imposed an unreasonable

restraint on trade. Dickson v. Microsoft Corp., 309 F.3d 193, 202 (4th Cir. 2002) citing Oksanen

v. Page Mem’! Hosp., 945 F.2d 696, 702 (4th Cir. 1991) (en banc). Concerted action to set prices,

or price fixing, has been per se illegal for over a century and is prohibited by Section | of the

Sherman Act. See Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984). Plaintiffs’

Complaint advances a single claim for relief against the Defendants, alleging that they engaged in

a conspiracy to restrain trade by fixing prices for Runner peanuts in the United States, in violation

of Section 1 of the Sherman Act. ECF No. | at □□ 116-21; see 15 U.S.C. § 1. Because price fixing

constitutes a per se violation of the Sherman Act, the only question is whether the Complaint

contains sufficient facts to support the inference that a price-fixing conspiracy existed between the

Defendants.

In general, pleading a Section | conspiracy requires enough factual matter so that an

agreement to violate the Sherman Act may be plausibly inferred, rather than a mere conceivable

possibility. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 570 (2007). Moreover, district courts

retain the power to insist on some specificity in pleading before allowing an antitrust complaint to

proceed. Jd. at 558 quoting Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519,

528 n. 17 (1983). Parallel conduct, or similar actions undertaken by entities in related industries

during the same time period, is not sufficient to support an allegation of an unlawful conspiracy.

Twombly, 550 U.S. at 556-57. Such parallel conduct may be a product of the defendants’ lawful

and independent goals, which is not suggestive of unlawful activity without some other indication

of an antitrust conspiracy. Jd. Instead, such an allegation must be placed in a context that raises the

plausible suggestion of an agreement to engage in unlawful activity before the parallel conduct by

the relevant entities occurred. Jd. at 557. As a practical matter, a complaint must contain enough

factual material to form the “reasonably founded hope that the discovery process will reveal

relevant evidence” of the alleged antitrust conspiracy. /d. at 570.

B. Adequacy of the Complaint

1. Sufficiency of the Factual Allegations Supporting a Section 1 Conspiracy in the Complaint

Defendants argue that the price of Runner peanuts from 2014 to 2018 was a result of natural

market forces and subsidies in the 2014 Farm Bill. See generally ECF Nos. 48, 50 (discussing

Defendants’ views on the forces impacting the Runner peanut market). Defendants further argue

that their exhibits may be considered because the underlying facts are derived from official

government reports and statistics and are discussed, quoted, and copied in the Complaint. See e.g.

ECF No. 50 at 4 fin. 4 (discussing the Plaintiffs’ utilization of National Agricultural Statistics

Service (“NASS”) data in the Complaint to support Defendant Golden Peanut’s factual contentions

on Runner peanut prices); ECF No. 48 at 19 (referencing agency fact sheets and the 2014 Farm

Bill legislative history to support Defendant Birdsong’s factual counterargument regarding Runner

peanut prices); see also id. at Ex. A (attaching an option contract for Defendant Birdsong to

purchase Runner peanuts from Plaintiff D&M Farms in 2019). These exhibits and references

contain material that purportedly supports the “obvious alternative explanation” for the depressed

prices of Runner peanuts during the time of the alleged conspiracy. See ECF No. 48 at 18-20

(discussing the “fundamentals of oversupply” and the growing incentives created by the 2014 Farm

Bill); ECF No. 50 at 13-14 (same); see also Twombly, 550 U.S. at 557 (finding dismissal of

antitrust claims to be appropriate when an obvious alternative explanation for the defendants’

conduct can be identified). The sum of Defendants’ contentions is that once their preferred

interpretation of the economic data (including the material not directly associated with the

Complaint) is applied, it will be obvious that the low prices of Runner peanuts from 2014 to 2018

were a response to natural market forces and the subsidy-based incentives created by the 2014

Farm Bill, not the price fixing conspiracy. ECF No. 48 at 8-13; ECF No. 50 at 13-14.

In contrast, the Plaintiffs accuse the Defendants of manipulating and coordinating their

inventory reports to overstate the supply of Runner peanuts, making the NASS price and inventory

data unreliably distorted by the alleged conspiracy between Birdsong and Golden Peanut. ECF No.

1 at §§ 84-91. Plaintiffs also accuse Defendants of using the trade associations as their conduit for

facilitating the alleged price fixing conspiracy. Jd. at {| 63-71. Clearly, the parties do not agree on

the efficacy of the economic and peanut inventory data and the Defendants’ role in influencing

that data as a factual matter. In evaluating the sufficiency of the Complaint, the Court will not

consider any material outside its scope in response to Defendants’ Motions to Dismiss. See supra

Part II (discussing pleading standards); ECF No. 48, Ex. 1-3; ECF No. 50, Ex. 1-4; see also ECF

No. 59 at 27-28 (listing interpretive material outside the Complaint submitted by the Defendants,

including hyperlinks within their Motions to Dismiss). In other words, the Court’s examination of

the Complaint is limited to the sufficiency of the factual allegations supporting the inference of a

price fixing conspiracy, not the effectiveness of the alleged conspiracy, the price of Runner

peanuts, or the parties’ factual interpretations of peanut price and inventory data considered alone.

Instead, the Court will examine the totality of the factual allegations the Complaint presents in

order to make a determination on its sufficiency.

The Court finds that the Complaint contains sufficient factual allegations to state a claim

under 15 U.S.C. § 1. Taken in context, the Complaint alleges that Defendants used their

supermajority market share and control over the peanut shelling trade associations to overstate

Runner peanut inventory data that was submitted to the USDA and to coordinate the terms of the

option contracts offered to farmers. See ECF No. 1 at 48, 63-71, 86-91. The Complaint points

out that the Defendants had numerous opportunities to make such an arrangement by virtue of

geographic proximity and the social and professional associations of the Defendants’ leadership

structure. Jd. at §§ 61-71. Critically, the Complaint alleges that Defendants released identical

shelling contract price offers on the same day, year after year to take advantage of the Plaintiffs’

need to offload their harvested peanuts in the spring of each growing cycle. /d. at 4 89.

Plaintiffs have not simply alleged that the prices of runner Peanuts were depressed because

a conspiracy between the Defendants existed or that the Defendants engaged in parallel conduct.

Instead, the Complaint outlines facts that support the plausible inference of a price fixing

conspiracy by (1) providing a motive of the stabilization of Runner peanut prices, (2) connecting

Defendants’ simultaneously issued price offers to the broader context of the Runner peanut market,

and (3) alleging efforts by the Defendants to coordinate price offers and conceal their actual peanut

inventory using peanut shelling trade associations. In sum, while none of the Complaint’s

allegations are sufficient to state a Section 1 claim when considered in isolation, the totality of the

factual assertions within the Complaint give rise to the plausible inference of a price fixing

conspiracy. Additionally, the Runner peanut price and inventory data Plaintiffs offer in the

Complaint to support their Section 1 claim is not definitively contradicted by an “obvious

alternative explanation” for the depressed price of Runner peanuts. In fact, Plaintiffs are

challenging the accuracy of much of the data that illuminates the dispute between the parties. See

e.g. ECF No. 59 at 15-16 (alleging that Defendants controlled Runner peanut market data,

including pricing and inventory numbers reported to the USDA). Accordingly, Plaintiffs’ pleading

is sufficient and Defendants’ Motions to Dismiss are denied.

2. The Statute of Limitations of 15 U.S.C. § 15b and Active Concealment

Defendants further contend that Plaintiffs’ claims are undercut by the limitations periods

for Title 15 antitrust actions, while Plaintiffs argue that Defendants concealed their antitrust

collusion until after Hurricane Michael in 2018. See 15 U.S.C. § 15b; ECF No. | at {{] 86, □□□□

115 (Plaintiffs allegations of Defendants’ active concealment, including manipulation of peanut

inventory reporting to the USDA); ECF No. 48 at 26-30 (Defendant Birdsong’s discussion of the

limitations period); ECF No. 50 at 20-24 (Defendant Golden Peanut’s discussion of the limitations

period).

To toll the statute of limitations, a claimant must establish the following: (1) the party

pleading the statute fraudulently concealed facts which are the basis of the claim; (2) the claimant

failed to discover those facts within the statutory period; and (3) the claimant exercised due

diligence. Pocahontas Supreme Coal Co., Inc. v. Bethlehem Steel Corp., 828 F.2d 211, 218 (4th

Cir. 1987) citing Weinberger v. Retail Credit Co., 498 F.2d 552, 555 (4th Cir. 1974). Although

price fixing is not inevitably deceptive or concealing, the statute of limitations may be tolled if

affirmative acts to conceal are contained within any antitrust conspiracy. See generally

Supermarket of Marlinton, Inc. v. Meadow Gold Dairies, Inc., 71 F.3d 119 (4th Cir. 1995)

(adopting the intermediate, affirmative acts standard for fraudulent concealment for all federal

statutes, including price fixing conspiracies and other antitrust violations).

Here, Plaintiffs allege that Defendants underreported their inventory of Runner peanuts to

the USDA beginning in 2014, which obscured the alleged price fixing by producing flawed peanut

price data that was endorsed by a government agency. ECF No. | at 42, 54. The Plaintiffs then

relied on that flawed USDA data in their exercise of due diligence in evaluating the runner Peanut

market and the prices that could be commanded from Defendants. Jd. at {| 48, 54, 55. The

Complaint proffers that the alleged price fixing was only discovered because of the anticipated

shortage of Runner peanuts that did not occur in the aftermath of Hurricane Michael in 2018. /d.

at §§| 111-113. These allegations satisfy the requirements to toll the statute of limitations by

alleging that Defendants concealed their price fixing by underreporting their inventory to the

USDA, frustrating any attempts at due diligence by the Plaintiffs from 2014 to 2018. Therefore,

the Complaint contains enough factual material to toll the limitations period.

IV. CONCLUSION

For the foregoing reasons, Defendants’ requests for a hearing on their Motions to Dismiss

are DENIED. Further, Defendants’ Motions to Dismiss are DENIED.

The Court DIRECTS the Clerk to provide a copy of this Order to the parties.

IT IS SO ORDERED.

Norfolk, Virginia Kee

( 5. 2020 Raymond A/ Jackson

United States District Judge