Opposition — National Boiler Marketing Assn. v. United States

INDEX

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CITATIONS

Cases:

Bayside Enterprises, Inc. v. National Labor

Relations Board, 429 U.S. 298 .............ccccccceeeeeees 5

Cantor v. Detroit Edison Co., 428 U.S. 579 .......... 5

Case-Swayne Co. v. Sunkist Growers, Inc.,

SOD IG... TG siacheittietitrtiiitniniadetibiiecsicsicesiins 3, 7, 9-10

Federal Trade Commission v. Bunte Bros.,

Bet, BEA She GOP cceeinicihitihiininatinesiiiiedtinn 11

Maryland and Virginia Milk Producers As-

' sociation, Inc. v. United States, 362

OB. GOB iccbik ickintisbisti ccna: wesesnsneesseeenees 3, 7, 10

Otter Tail Power Co. v. United States, 410

ee EE tre so Ra Le ee 10-11

United States v. Borden Co., 308 U.S. 188 ....... 3, 10

Statutes and regulation:

Agricultural Fair Practices Act of 1967, 82

SOME, GH TF VA. Bae 00 TOG, ccvckictticnccecorersdeces 10

Capper Volstead Act, 42 Stat. 388, 7 U.S.C.

PEE Kcchadctdawabiiscicapiihan iciaiamiaiiaia ied stitial Passim

Page

Statutes and regulation:

Clayton Act, Section 6, 38 Stat. 731, 15

SRN Sy cicccatebddaiidasdaneapetanaivacmbcbesethediadsenassetins 3

Cooperative Marketing Act of 1926, Section

5, 44 Stat. 'GOS,.7 U.S.C. 45S ........cccssesecccoscecccense 3

Sherman Act, Section |, 26 Stat. 209, as

IR: BR Tr ri re Fs ncdecscccsescshnvscccdincccossonene 2, 10

28 C.F.R. 50.6 ............ Sti alas cic d ode Leg gutnciniielbode 5

Miscellaneous:

Broiler Business (October 1976) ............cccccsseeeeeeeeees 6

59 Cong. Rec. 7855-7856 (1920) ............ccceeeeeeeeeseeee 8

G2 Comm, Rec. 2068 CI9ZE) o.ecscccsccccccsccccccsessevcessesees 8

62 Cong. Rec. 2050-2051 (1922) 2.0... eeeeeeeeeeeees 8

G2 Cotes: Tae. Bee COMED niccvccdcsccccccasondecsessscssenp gees 8

62 Cong: Rec. 2060 (1922) .0..............ecceeeeeeeeeseeeeeeees 7

62 Cong. Rec. 2274-2275 (1922) .....cececcceceseeeeeeeeeeeee 7

Hearings on S. 109 (Agricultural Producers

Marketing Act) before a Subcommittee of

the Senate Committee on Agriculture and

Forestry, 90 Cong., Ist Sess. (1967) ................... 10

H.R. Rep. No. 24, 67th Cong., Ist

SOS RR Set NT ee ere Cm 6,7

Landes and Posner The Independent

Judiciary in an Interest-Group Perspec-

tive, 18 J.L. & Econ. 875 (1975) oo... eee 7

S. Rep. No. 90-474, 90th Cong., Ist

OG: GRINS inckneidaitleniininnd crssesctsanseeemedintetwvcbgeniti 10

In the Supreme Court of the Hnited States

OCTOBER TERM, 1977

No. 77-117

NATIONAL BROILER MARKETING ASSOCIATION, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES

IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. A-1

to A-22) is reported at 550 F. 2d 1380. The opinions of the

district court (Pet. App. A-23 to A-36) are not officially

reported.

JURISDICTION

The judgment of the court of appeals (Pet. App.

A-37) was entered on April 22, 1977. The petition for a

writ of certiorari was filed on July 21, 1977. The jurisdic-

tion of this Court is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether poultry processors that neither own nor op-

erate farms but that contract with others to feed and

(1)

.

raise chickens are “engaged in the production of agricul-

tural products as farmers” within the meaning of the

Capper-Volstead Act, 7 U.S.C. 291.

STATUTES INVOLVED

The pertinent portion of Section | of .the Sherman Act,

26 Stat. 209, as amended, 15 U.S.C. 1, is set forth at Pet.

2. The Capper-Volstead Act, 42 Stat. 388, 7 U.S.C. 291-292,

is set forth at Pet. App. A-5S to A-7 n. 5.

STATEMENT

Petitioner is a marketing cooperative composed pri-

marily of vertically integrated broiler producers known

as “integrators.” Most integrators own breeding flocks

of chickens that lay eggs, which hatch into chicks. The

integrators take the chicks to independent contractors or

“growers” that tend them during the “grow-out phase”

while the birds become large enough to eat. The growers

own the land and buildings in which the grow-out process

occurs, and they supply the necessary labor. The integra-

tors supply and own the birds, and they also supply the

necessary feed and veterinary services. At the end of a

prescribed period the integrators retrieve the chicks and

prepare them for sale. See generally Pet. App. A-4 to A-5.

The members of the cooperative routinely exchange

price information and attempt, in other ways, to ensure a

market at stable prices for their products. On April 16,

1973, the United States commenced this civil antitrust

action against petitiuner, contending that it represented a

combination of its members in violation of Section | of

the Sherman Act, 15 U.S.C. 1. Petitioner contended that

its activities were lawful because it is an agricultural

cooperative that is largely exempt from the antitrust laws

by virtue of the Capper-Volstead Act. 7 U.S.C. 291-292.

3

The Capper-Volstead Act exemption applies to “[p]er-

sons engaged in the production of agricultural products as

farmers * * *.”! Petitioner contended that the integrators

produce the broilers from egg to market and consequently

are “farmers.” The district court agreed. The court rea-

soned that the integrators bear most of the economic risk

in the process of producing broiler chickens for market

and that the integrators consequently should be treated

as the “farmers.”?

The court of appeals reversed (Pet. Wied A-l to A-22).

The court concluded that the Capper-Volstead Act's

reference to “farmers” included a smaller group than “all

'The exemption is not total. See Maryland and Virginia Milk Pro-

ducers Association, Inc. vy. United States, 362 U.S. 458, 465-467;

United States v. Borden Co., 308 U.S. 188, 204-206. In its amended

complaint (see note 2, infra), the United States does not allege that

petitioner engaged in any practices that would not be exempt if the

integrators are “farmers.” however, so that the reach of the anti-

trust laws to Capper-Volstead “farmers” therefore is not in issue

here.

The Capper-Volstead issue also controls petitioner's claim to anti-

trust exemption under Section 6 of the Clayton Act, 38 Stat. 731, 15

U.S.C. 17, since that statute provides protection coextensive with

Capper-Volstead immunity. Case-Swarne Co. v. Sunkist Growers,

Inc., 389 U.S. 384, 391.

?The district court initially granted petitioner's motion for partial

summary judgment; after the United States filed an amended com-

plaint eliminating additional issues, the courf entered a final judy-

ment to permit appellate review. Tie court did not reach petitioner's

argument that Section 5 of the Cooperative Marketing Act of 1926. 44

Stat. 803. 7 U.S.C. 455. furnished a defense to the antitrust charges.

The parties have stipulated (R. 567, 574) that after resolution of

the Capper-Volstead issues a new complaint may be filed to revive

any other issues that remain open. (“R.” refers to the joint appendix

in the court of appeals. Petitioner has lodged a copy of this appendix

with this Court.)

4

persons engaged in the production of agricultural pro-

ducts”; it held that petitioner's members, although en-

gaged in the production of agricultural products, are not

“farmers.”

The court first took an ordinary-language approach to

the statute and explained that “[w]hatever else farming

may mean, an irreducible minimum must be either hus-

bandry of animals or crops or farm ownership” (Pet. App.

A-13). The integrators do not own the places where the

broilers are grown and do not tend them during the grow-

out phase. The court of appeals therefore turned to the

legislative history of the Capper-Volstead Act to deter-

mine whether Congress intended to exempt from the anti-

trust laws a group broader than those ordinarily under-

stood to be “farmers.”

The court concluded that the Capper-Volstead Act had

been designed to grant special advantages to small farmers

in order to improve their position vis-a-vis middlemen.

The court observed that Congress had defeated an amend-

ment that, would have extended the Act’s protection to

integrated processors (like sugar processors that turn

agricultural products into refined sugar) that entered into

pre-planting contracts with growers (Pet. App. A-17 to

A-18). Since petitioner’s members fall closer to the sugar

processors that are outside the Act than to the ordinary

understanding of “farmers,” the court concluded, they

could not be the beneficiaries of the Act.

ARGUMENT

The decision of the court of appeals is one of first

impression. There is no conflict among the circuits, and

the court of appeals has tracked this Court’s analogous

decision that drivers employed by integrated poultry pro-

ducers are not farmers for purposes of exemption from the

5

National Labor Relations Act. Bayside Enterprises, Inc.

v. National Labor Relations Board, 429 U.S. 298.

Petitioner’s major argument is that broiler production

and marketing is a major industry that will be affected

throughout the nation by this decision, since it applies to

a nationwide cooperative of integrators. Review of the

present case is necessary, petitioner argues, because there

can never be a conflict among the circuits with respect

to broiler integrators (Pet. 9-10, 13).

‘Petitioner also seems to argue (Pet. 6-7) that the Court should

grant review because it was misled by the Department of Justice

into believing that its operations would be lawful. yet now finds

itself facing substantial monetary liability if the decision below is

allowed to stand. This argument is itself misleading.

In 1969 the Department issued a business review letter to the Na-

tional Egg Co., expressing an intent not to institute a criminal prose-

cution of a cooperative that planned to admit a corporation that con-

tracted with farmers for the care of laying hens and the production

of eggs. The letter was issued pursuant to a procedure for the review

of particular proposed actions on a case-by-case basis. The Depart-

ment expressly reserves the right to change its mind and institute

a prosecution if the public interest should so require (28 C.F.R.

50.6).

Petitioner was formed in 1970. It did not seek approval pursuant

to the business review procedure. On November 17, 1971, the De-

partment issued a business review letter to Holly Farms Poultry.

Inc.. concerning Holly's proposal to join petitioner. The business

review letter stated that integrators that contracted out for the grow-

ing of broilers were not themselves farmers within the meaning of

the Capper-Volstead Act. and in a simultaneous press release the

Department took the position that agricultural cooperatives might

forfeit their limited antitrust exemption if they admitted integrators.

Although petitioner was thus on formal notice of the Department's

legal position. it continued to operate as before. The Department

brought suit in 1973. Since the Department seeks only an injunction

against petitioner's marketing practices. petitioner is not entitled to

defend on the ground that it was “mislead.” Whether such a defense

would be valid in a treble damages action is a question that need not

be faced in this case. Cantor v. Detroit Edison Co., 428 U.S. 579.

592-595.

6

Petitioner's argument is unpersuasive. Whenever a par-

ticular combination in restraint of trade is alleged to vio-

late the antitrust laws, there cannot be a conflict among

the circuits with respect to that particular combination;

res judicata ensures that there will be only one decision,

unless private cases should reach other courts of appeals.

As petitioner concedes (Pet. 13), the same legal issue

easily could arise with respect to other agricultural pro-

ducts (or even with respect to other poultry marketing

associations), and such suits may be brought in other

courts. The claim, therefore, is not a sufficient reason to

grant review in the present case.‘

1. The court of appeals correctly held that the language

and legislative history of the Capper-Volstead Act establish

that it provides only a narrow antitrust exemption limited

to persons who own or operate “farms.” The statute’s

language was carefully chosen to make the exemption

narrower than one that would have covered all “agricul-

tural producers”; the language Congress used excludes all

but “actual farmers” (H.R. Rep. No. 24, 67th Cong., Ist

Sess. | (1921)) from the Act’s coverage.

‘Petitioner's assertion (Pet. 10-13) that the decision of the court

of appeals portends immediate and far-reaching consequences in the

poultry industry is speculative. The decision permits integrators to

maintain their operating structure so long as they avoid fixing prices

or otherwise violating the antitrust laws. Whether integrators now

will enter the grow-out phase of broiler production, as petitioner

contends (Pet. 11-12), will turn on countless legal, economic and

other factors in addition to the interpretation of the Capper-Volstead

Act. Integrators might hesitate to become farmers because of the

capital investment required (R. 532) and the lower productivity of

farm employees as opposed to independent farmers (Broiler Busi-

ness, October 1976, pp. 10-11). Petitioner also retains the option of

seeking relief from Congress if it believes that integrated agricultural

producers should be immune from antitrust liability.

7

The Act does not reach persons who do not own or

operate “farms” in the traditional sense. Congress de-

feated a proposed amendment that would have extended

the antitrust exemption to integrated producers that, like

petitioner’s members, prepare agricultural products for

market but do not own or operate the farms on which the

products are raised. See Pet. App. A-17 to A-18; Case-

Swayne Co. v. Sunkist Growers, Inc., 389 U.S. 384, 392

n. 9.

Petitioner contends that this represents a romantic view

of farming in a day when most agricultural operations are

carried on by large integrated producers (Pet. 10-11).

Perhaps that is so. But we believe that there is overwhelm-

ing evidence that Congress passed the Capper-Volstead

Act with just such a view, and we submit that its decision

to limit the scope of the antitrust exemption to ordinary

“farmers” should be respected.‘

Congress artfully crafted the Capper-Volstead Act to

advance two overriding goals. The first was to increase

farmers’ income at the expense of middlemen but not

consumers.® This could be accomplished, in the judgment

of Congress, by providing antitrust immunity to farmers

collectively engaged in processing or marketing agricul-

tural produce, while denying such immunity to persons

who might injure consumers or competitors.’ Second,

5See. e.g., Landes and Posner, The Independent Judiciary in an

Interest-Group Perspective. 18 J.L. & Econ. 875, 877, 883. 894 (1975).

*Case-Swayne Co. v. Sunkist Growers, Inc., supra, 389 U.S. at

393; H.R. Rep. No. 24, 67th Cong.. Ist Sess. 2 (1921); 62 Cong.

Rec. 2060 (1922) (remarks of Senator Capper): id. at 2274-2275 (re-

marks of Senators Kellogg and Norris): id. at 2275 (defeat of the

Phipps amendment).

*Marvland and Virginia Milk Producers Association, Inc., supra.

362 U.S. at 466-467.

8

Congress sought to encourage farmers to remain on their

land and thus to preserve traditional farm life.* The tradi-

tional farmer was viewed by many as the backbone of

the Nation’s economic and social individualism, and as the

foundation of its democratic institutions.®

Extending antitrust immunity to petitioner would not

serve these goals. The integrators do not raise chickens;

they contract with others to do so.!°

The independent growers with whom the integrators

contract invest in land, buildings, equipment, and labor

to raise chickens (R. 393-394). This investment may exceed

an integrator’s aggregate investment in breeder flocks,

hatcheries, and processing facilities (R. 393).

Moreover, independent growers assume, in addition to

their contribution of labor and capital, a substantial por-

tion of the business risks involved in raising broilers.

Some contracts with integrators provide (R. 398-399):

(1) that the grower pay taxes on the chickens and the cost

of feed, grit, litter, fuel and sanitation products; (2) that

‘Petitioner's assertion (Pet. 16) that Capper-Volstead supporters

eschewed any special concern for the individual farmer is erroneous.

The debates are replete with references to the desirability of pre-

serving the family farm and of limiting Capper-Volstead protection

to the man who tills the soil. See, e.g.. 59 Cong. Rec. 7855-7856

(1920) (remarks of Congressman Evans); 62 Cong. Rec. 2048. 2050-

2051 (1922) (remarks of Senator Kellogg).

%62 Cong. Rec. 2058 (1922) (remarks of Senator Capper): id. at

2050-2051 (remarks of Senator Kellogg).

“Petitioner's claim of antitrust immunity fails if any member is

not a “farmer.” Case-Swayvne Co. v. Sunkist Growers, Inc., supra.

Petitioner's assertion (Pet. 17) that all of its members are engaged

in more than the processing of broilers is erroneous: two of its 32

members neither own nor operate farms and “do not own or control

any breeder flocks. hatcheries or feed mills. either” (R. 392).

9

the grower absorb chick losses in excess of five percent;

(3) that the grower pay damages for lost profits due to

chick casualties caused by grower negligence; or (4) that

feed losses be split between the member and grower if

chicks die in the event of fire or natural disaster. Several

contracts tie the grower’s payment to the market price of

broilers and the integrator’s costs of supplying feed or

services (R. 395-396). The independent growers thus bear

a substantial part of the risks traditionally associated with

farming.

2. Petitioner dwells upon its members’ financial in-

terest in the chicks. But this Court has rejected the view

that persons with a financial stake in agricultural produc-

tion automatically qualify as “farmers.” Case-Swayne

Co. v. Sunkist Growers, Inc., supra, 389 U.S. at 394. The

integrators, unlike the growers, do not bear the risks: of

investment in land and buildings that are unique to farm-

ing. The integrator’s risk is limited to the cost of each

group of chicks and to the necessary feed, medicines and

veterinary services (Pet. 4) during one growing cycle of

seven to nine weeks.'! An integrator may decline to renew

a grower’s contract after each cycle (R. 397-398), leaving

the grower with an investment that cannot readily be

shifted to other endeavors.

3. Petitioner’s inventive interpretation of the Capper-

Volstead Act is inconsistent with the well-established

principle that antitrust exemptions, including that created

by that Act, should be narrowly construed. Case-Swayne,

''Petitioner’s attempt (Pet. 14-15) to analogize integrators to

farm owners who use tenant farmers to produce crops is flawed in

at least two respects. First, the owner's investment in farm land is

fixed in a way similar to the growers rather than to the integrators.

Second. the farm owner, unlike the integrator, assists in the preser-

vation of traditional farm life.

10

Co. v. Sunkist Growers, Inc., supra, 389 U.S. at 393;

Maryland and Virginia Milk Producers Association, Inc.

v. United States, 362 U.S. 458, 466-467; United States

v. Borden Co., 308 U.S. 188, 198, 204-206. As the court of

appeals noted (Pet. App. A-22), arguments that the list

of persons eligible for the antitrust exemption should be

extended must be directed to Congress rather than the

courts. !2

4. Petitioner contends (Pet. 17-18) that the court of

appeals failed to give controlling weight to the views of

the Department of Agriculture and the Farm Credit Ad-

ministration concerning the status of integrators. But

neither agency has ever expressed an opinion on the anti-

trust issue in this case or claimed any authority to do so.'?

Nothing in either the language or the legislative history

of the Capper-Volstead Act suggests that these agencies

are empowered to determine who is eligible for the anti-

trust exemption. The agencies lack antitrust expertise, and

there was no reason for the court of appeals to give their

interpretation of statutes and regulations unrelated to the

antitrust laws any antitrust significance.'* See Orter Tail

"The Agricultural Fair Practices Act of 1967, 82 Stat. 93, 7

U.S.C. 2301 et seq., and its legislative history support our argument

that integrators are not “farmers.” See Hearings on S. 109 (Agri-

cultural Producers Marketing Act) before a Subcommittee of the

Senate Committee on Agriculture and Forestry, 90th Cong.. Ist

Sess. 12, 90-91, 95-96 (1967); S. Rep. No. 90-474, 90th Cong., Ist

Sess. 2-3, 5-6 (1967).

Section 2 of the Capper-Volstead Act, authorizing the Secretary

of Agriculture to prevent cooperative associations from unduly en-

hancing prices. was not intended to displace. postpone or prevent

prosecutions under Section | of the Sherman Act. United States v.

Borden Co., 308 U.S. 188, 206. The Secretary has never issued a

complaint in the exercise of his Section 2 responsibilities.

'4Although the Department of Agriculture has urged the forma-

tion of agricultural cooperatives. the practices and publications cited

Power Co. v. United States, 410 U.S. 366, 372-374; Federal

Trade Commission v. Bunte Bros., Inc., 312 U.S. 349, 353.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

Wave H. McCree, Jr.,

Solicitor General.

JOHN H. SHENEFIELD,

Acting Assistant Attorney General.

JOHN J. Powers, Ill,

Bruce E. FEIn,

Attorneys.

SEPTEMBER 1977.

by petitioner (Pet. 17-18: Pet. App. A-38 to A-46) do not suggest

that integrators are “farmers” or that cooperatives have antitrust

immunity.

DOJ-1977-09