Petition — California & Hawaiian Sugar Co. v. California
Supreme Court brief1979
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Sunreme Court, U. &
FILED
| ag 8 1979
In the Supreme Court of the. KODAK, 12 CLERK
United States
OCTOBER TERM, 1978
No. ...... <8 ] 3 7 0
IN RE SUGAR ANTITRUST LITIGATION
MDL-201
CALIFORNIA AND HAWAIIAN SUGAR COMPANY, AMALGAMATED
SUGAR COMPANY, AMERICAN CRYSTAL SUGAR COMPANY, AM-
STAR CORPORATION, THE GREAT WESTERN SUGAR COMPANY,
Ho.iy SuGAR CORPORATION, UNION SUGAR DIVISION, CON-
SOLIDATED Foops CORPORATION, U AND I INCORPORATED, and
CALIFORNIA BEET GROWERS ASSOCIATION, LTD.,
Petitioners,
Vv.
STATE OF CALIFORNIA AND MADELYNE BRINKER,
Respondents.
Petition for a Writ of Certiorari
to the United States Court of Appeals for
the Ninth Circuit
Of Counsel:
BROBECK, PHLEGER & HARRISON MoOsEs LASKY
Spear Street Tower JOHN E. SPARKS
One Market Plaza WILLIAM S. BoyD
San Francisco, CA 94105 : ,
Telephone: (415) 442-0900 Attorneys f or Calif ornia
and Hawaiian Sugar
Company
March 7, 1979
(Other counsel listed inside of front cover)
SORG PRINTING COMPANY OF CALIFORNIA, 346 FIRST STREET, SAN FRANCISCO 94105
Of Counsel:
LAWLER, FELIX & HALL
800 Standard Oil Bldg.
605 W. Olympic Boulevard
Los Angeles, CA 90015
Telephone: (213) 620-0060
Orrick, HERRINGTON,
ROWLEY & SUTCLIFFE
600 Montgomery Street
San Francisco, CA 94111
Telephone: (415) 392-1122
MorRISON & FOERSTER
One Market Plaza
Spear Street Tower
San Francisco, CA 94105
Telephone; (415) 777-6000
Brewer, PARTRIDGE & MorRis
1209 North El Dorado Street
P. O. Box 27
Stockton, CA 95201
Telephone: (209) 466-4516
Of Counsel:
ARNOLD & PORTER
1229 19th Street, N.W.
Washington, D.C. 20036
Telephone; (202) 872-6679
WHITE & CASE
14 Wall Strect
New York, NY 10005
Telephone: (212) 732-1040
HELLER, EHRMAN, WHITE
& MCAULIFFE
44 Montgomery Street
San Francisco, CA 94104
Telephone: (415) 981-5000
PILLSBURY, MADISON & SUTRO
P. O. Box 7880
San Francisco, CA 94120
Telephone: (415) 983-1000
RICHARD F, OUTCAULT, JR.
ROBERT P, MALLORY
Attorneys for The
Amalgamated Sugar
Company
JAMEs R. MADISON
Attorneys for American
Crystal Sugar Company,
a dissolved New Jersey
corporation
Rosert D. RAVEN
Marc P. FAiRMAN
Attorneys for Amstar
Corporation
JAMEs M. Morris
Attorneys for California
Beet Growers
Association, Ltd.
Bruce L. MONTGOMERY
PETER K. BLEAKLEY
Attorneys for The Great
Western Sugar Company
RAYNER M. HAMILTON
Attorneys for Holly Sugar
Corporation
STEPHEN V. BOMSE
Attorneys for Union Sugar
Division, Consolidated
Foods Corporation
FRANCIS R. KIRKHAM
JAMES F, KIRKHAM
JAMES B. YOUNG
Attorneys for U and 1
Incorporated
SUBJECT INDEX
Page
Opinions Below Sdn cishcenisibasheciinibennssinsencnimesinnanmesseeanace 2
Jurisdiction -........-.-..---n-seessnssenseessnseeneeensenseneeenecnennnensee:seasenseens 2
Questions Presented .........--.-----o--s+ss-sseseesseesesensenseneententteneentenees 2
nner 4
Statement of the Case .............--.-c---s-+-+-:essscscsesenssenenecsenenensnenees 6
A. The Parties and the Proceedings Below ...............--------- 6
B. The District Court’s Opinion .............-.------+-----0-0-e+0---- 8
C. The Opinion of the Court of Appeals .............-------------- 10
Reasons for Granting the Writ ...........-.-----------------------eeee 13
I. The State Claims Arose Under Federal Law ................ 15
A. The Complaints Allege Interstate Price-Fixing
in Violation of the Sherman Act and Spring
From Pre-Existing Federal Jurisdiction ................ 15
B. Respondents’ Preference for a State Remedy
Does Not Defeat Federal Jurisdiction ................ 16
C. The Court of Appeals’ Reliance on Illinois Brick
Is Misplaced ..........---.--------o-oreor-nsonscceeseneereneeneeeees 22
Il. The Doctrine of Derivative Jurisdiction Does Not
Require Remand ....... Saeiianasieesthaiiaeactatasiovororen 25
I caw csi iciciesnsceriiescesnrorenvevenenecorcecvonsnccoscs 27
Appendices .......-------secsseeessoeeeeeseesseesseeennninnnne:pesnnecnenneeentens App. 1
TABLE OF AUTHORITIES
CASES Pages
American Synthetics Rubber Corp. v. Louisville & Nashville
R. Co., 422 F.2d 462 (6th Cir. 1970) siaueannimiecibcbsdeiabathies 16
Appalachian Coals, Inc. v. United States, 288 U.S. 344
gh REE GEENA ee aS Sea 17
Avco Corp. v. Aero Lodge 735, 390 U.S. 557 (1968) ....14, 16, 23
Bee Yo Rage, Da? 0.5. GPO. £1986) on... 14, 22-23
Belliston v. Texaco, Inc., 521 P.2d 379 (Utah 1974) ............ 26
Bement v. National Harrow Co., 186 U.S. 70 (1902) ........ 26
Blumenstock Bros. v. Curtis Pub. Co., 252 U.S. 436 (1920) 26
Charles Dowd Box Co. v. Courtney, 368 U.S. 502 (1962) .... 16
Clearfield Trust Co. v. United States, 318 U.S. 363 (1943) 17
Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978) .............. 24
DiGiovanni v. Camden Ins. Assn., 296 U.S. 64 (1935) ........ 24
Flood v. Kuhn, 407 U.S. 258 (1972) .....-......c:cssassascsseeensseees 14, 18
Ford Motor Co. v. Superior Court, 35 Cal.App.3d 676
Gp Sa ie Sears Oo ae 26
Fowler Mfg. Co. v. Gorlick, 415 F.2d 1248 (9th Cir. 1969),
Cert. denied, 396 U.S. 1012 (1970) nanan nennccenennseee 26
Freeman v. Bee Machine Co., Inc., 319 U.S. 448 (1942) .... 26-27
General Investment Co. v. Lake Shore Ry., 260 U.S. 261
RT RIERA tas ame vale Vern WOR 25
Harold Butler Enterprises, Inc. v. Vanlandingham, 505 P.2d
1149 (Ore. 1973). ance
Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) ....3, 10-12, 14,
19-20, 22, 24
In Re Corrugated Container Antitrust Litigation, 441
eee: Or EO, UPTTY i 22
TABLE OF AUTHORITIES iii
Pages
Johnson v. England, 356 F.2d 44 (9th Cir. 1966) cert.
denied, 384 U.S. 961 (1966) -........-...cssnscesseeeeecsenee 16
Lambert Run Coal Co. v. Baltimore & Ohio R.R., 258 U.S.
377 (i084) n.. ii di esi iecpnesiratmentiiiaa 3, 8, 10, 13, 25, 27
Mandeville Island Farms v. American Crystal Sugar Co., 334
Si SU Bint stich 6
Mitchell v. Maurer, 293 U.S. 237 (1934) -....----------c2-e+0-o-ee000 24
Mountain Navigation Co. v. Seafarers’ Int'l. U. of N.A.,
348 F.Supp. 1298 (W.D. Wisc. 1971) ---nccnc--esece-seeeeeeees 16
Perma Life Mufflers, Inc. v. International Parts Corp., 392
OS 00 CONE so ek Be 17
R. E. Spriggs Co. v. Adolph Coors Co., 37 Cal.App.3d 653
CI i rein laminae 26
Sola Electric Co. v. Jefferson Co., 317 U.S. 173 (1942) ........ 17-18
Speegle v. Board of Fire Underwriters, 29 Cal.2d 34
CRG i cisiescciti nictnsinirenemnigi oe
Standard Oil Co. v. United States, 221 U.S. 1 ( 1910) ano ee
Temtan v. Heat, S30 WS, SOG CIGGT ) naan iessccenceeenteeene 26
Textile Workers v. Lincoln Mills, 353 U.S. 448 (1957) .... 16
Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336
COUN cited ales cacutadaliesteniticlnpasnclnnenes 23
Three J Farms, Inc. v. Alton Boxboard Co., 1979-1 Trade
Conan, 901408 CEE, TOD sancti 21
Ulichny v. General Electric Co., 309 F.Supp. 437
CRU EIIG VRID). rainisesnnstssnervcniscecentenin: pee caleeerionn 16
United Mine Workers v. Gibbs, 383 U.S. 715 (1966) ........ 26
iv TABLE OF AUTHORITIES
Pages
Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623 (1977) ...... 26
Villarreal v. Brown Express, Inc., 529 F.2d 1219 (5th Cir.
| ae 21
Washington v. American League of Professional Baseball
Clubs, 460 F.2d 654 (9th Cir, 1972) .2..n...-eeeccceeseseeeeess 8, 13,15
Watkins v. Grover, 508 F.2d 920 (9th Cir. 1974) ................ 24
Wheeldin v. Wheeler, 373 U.S. 647 (1963) ..........---2. +--+ 14, 23
STATUTES AND RULES
California Business & Professions Code
Sec. 16600-2008, —.....--cne eae 7
En lp eae OW RP RAD 5, 19
Bac, NGIOO nisi ee 13, 19
Clayton Act of October 15, 1914, c. 323, 38 Stat. 730, as
amended
See. 1 (15 USA. § 02) W..nc cde 4
Sec. 4 (15 U.S.C. $15) ... 4,10, 11, 22
Hart-Scott-Rodino Antitrust Improvement Act of 1976, Pub.
Law 94-435; 90 Stat. 1394
Tithe TEE (25 USC. § BSG}. sasvsec. ce apaeeteliapians 21
Labor Management Relations Act of 1947, 61 Stat. 156-157
Sec. 301(a) (29 US.C. § 185) ...... os 16
Sherman Act of July 2, 1890, c. 647, 26 Stat. 209, as amended
Sec. 1 (15 USE. OW Vc 4, 6, 7, 8, 15, 17, 25-27
Sec. 2 (15 USC. §2) cee 4,17
United States Code
Tale 28, $1294f1) 3. 2
Se ee . 2,10
$1460? (a) 0. ca 3, 4,9, 14, 21
$17) eee 5
B 2668 Ge) nn esssisieciesee 5
S 16RD) .cccccame 3, 3, 15
§ 1447(c) ....... ; 5, 23-24
TABLE OF AUTHORITIES v
Federal Rules of Civil Procedure
Ee DL mivoctnivconemssameebenenes 21
OTHER AUTHORITIES
Chaffee, Bills of Peace with Multiple Parties, 45 Harv.
L.Rev. 1297 (1932) .. he scare 24
21 Cong. Rec. 311-312 (April 8, 1890) .....---.---sseecoseeee 26
122 Cong. Rec. 8272 (May 28, 1976) ..........- saci 21-22
1A Moore’s Federal Practice (2d ed.) at pp. 557-58 -.....-..--- 24
Note, The Federal Common Law, 82 Harv. L. Rev. 1512,
1531-35 (1969) von LES licks Ras ae
In the Supreme Court of the
United States
OCTOBER TERM, 1978
CALIFORNIA AND HAWAIIAN SUGAR COMPANY, AMALGAMATED
SUGAR COMPANY, AMERICAN CRYSTAL SUGAR COMPANY, AM-
STAR CORPORATION, THE GREAT WESTERN SUGAR COMPANY,
Hotty SUGAR CORPORATION, UNION SUGAR DIVISION, CON-
SOLIDATED Foops CORPORATION, U AND I INCORPORATED, and
CALIFORNIA BEET GROWERS ASSOCIATION, LTD.,
Petitioners,
Vv.
STATE OF CALIFORNIA and MADELYNE BRINKER,
Respondents.
Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Ninth Circuit
Petitioners pray that a writ of certiorari issue to review the
judgment of the United States Court of Appeals for the Ninth
Circuit in State of California v. California and Hawaiian Sugar
Co., et al. and Madelyne Brinker v. Amalgamated Sugar Co., et.
al., Nos. 76-2937 and 76-3001 below.
2
OPINIONS BELOW
The opinion of the court of appeals (Appendix A, infra) and
the opinion of the court of appeals denying rehearing (Appendix
B, infra) are not yet officially reported. The first opinion appears
at 1978-2 CCH Trade Cases paragraph 62,363. The opinion of
the district court (Appendix C, infra) is reported at 1976-2 CCH
Trade Cases paragraph 61,004.
JURISDICTION
The district court certified its decision for appeal under 28 U.S.C.
§ 1292(b), and the court of appeals had jurisdiction under that
section after its acceptance of the certification. The opinion of the
court of appeals was filed on November 28, 1978. The petition for
rehearing was denied on January 29, 1979. The jurisdiction of this
Court is invoked under 28 U.S.C. § 1254(1).
QUESTIONS PRESENTED
More than 100 private class action lawsuits alleging interstate
price-fixing conspiracies by the nation’s major sugar refiners in
violation of the Sherman Act and seeking treble damages under
Section 4 of the Clayton Act are consolidated for pretrial proceed-
ings pursuant to 28 U.S.C. § 1407 in the Northern District of
California. Among these cases is one brought by California on
behalf of a class of state entity purchasers and a class of house-
hold purchasers of sugar at grocery stores. Shortly after briefing
and argument but before decision of the matter of class certifica-
tion in the district court, respondents here, California and Made-
lyne Brinker, respectively, filed actions in the California Superior
Court alleging the same antitrust cause of action of price-fixing
in interstate commerce set forth in the complaints consolidated
in federal court and seeking treble damages under California’s
little Sherman Act on behalf of the same class of household pur-
chasers of sugar at grocery stores sought to be represented by
California in its federal court action.
3
1. Are not these state court cases removable to the federal
district court pursuant to 28 U.S.C. § 1441(b) ?
(a) Does not a complaint alleging a price-fixing conspiracy in
interstate commerce against an entire interstate industry arise
under, and call for the application of, federal antitrust law, even
though the plaintiff may seek a state remedy under a state little
Sherman Act, and is not such a case therefore removable? Is this
not especially so when the state court complaints aliege the same
cause of action as cases then consolidated in federal court pur-
suant to 28 U.S.C. § 1407 and were, according to the district
court’s finding, deliberately fashioned to avoid the pre-existing
jurisdiction of the federal court?
(b) If the cases prima facie arise under federal law, does the
district court’s subsequent denial of a motion to certify a “con-
sumer class” and this Court’s subsequent decision in I/linois Brick
Co. v. Illinois, 431 US. 720 (1977), denying a treble damage
remedy under Section 4 of the Clayton Act to indirect purchasers,
divest the district court of federal removal jurisdiction? This is
what the court of appeals held. Has not this Court repeatedly
held that the existence of federal jurisdiction is a separate question
from the existence of a valid recoverable claim, and did not the
court of appeals err by confusing the two questions?
2. Should Lambert Run Coal Co. ». Baltimore & Ohio R.R.,
258 U.S. 377 (1922), be confined to its facts with the consequence
that the principle that the jurisdiction of federal courts on
removal is derivative from jurisdiction of the state court would
not require dismissal or remand of a Sherman Act claim removed
to the federal court in the circumstances presented at bar? The
district court held that it should; the court of appeals found it
unnecessary to decide. Should not certiorari be granted to consider
this question as well?
4
STATUTES INVOLVED
Sherman Act of July 2, 1890, c. 647, 26 Stat, 209, as amended:
Section 1 (15 U.S.C. § 1):
Every contract, combination in the form of trust or other-
wise, Or conspiracy, in restraint of trade or commerce among
the several States, or with foreign nations, is declared to be
illegal...
Section 2 (15 U.S.C. § 2):
Every person who shall monopolize, or attempt to mono-
polize, or combine or conspire with any other person or per-
sons, to monopolize any part of the trade or commerce among
the several States, or with foreign nations, shall be deemed
guilty of a felony....
Clayton Act of October 15, 1914, c. 323, 28 Stat. 730, as
amended:
Section 1 (15 U.S.C. § 12):
“Antitrust laws” as used herein, includes the Act entitled
“An Act to protect trade and commerce ‘against unlawful
restraints and monopolies,” approved July second, eighteen
hundred and ninety ....
“Commerce”, as used herein, means trade or commerce
among the several States and with foreign nations... .
Section 4 (15 U.S.C. § 15):
Any person who shall be injured in his business or prop-
erty by reasons of anything forbidden in the antitrust laws
may sue therefor in any district court of the United States in
the district in which the defendant resides or is found or has
an agent, without respect to the amount in controversy, and
shall recover threefold damages by him sustained, and the
cost of suit, including a reasonable attorney's fee.
28 United States Code, Section 1407
(a) When civil actions involving one or more common
questions of fact are pending in different districts, such
actions may be transferred to any district for coordinated or
5
consolidated pretrial proceedings. Such transfers shall be
made by the judicial panel on multidistrict litigation author-
ized by this section upon its determination that transfers for
such proceedings will be for the convenience of parties and
witnesses and will promote the just and efficient conduct of
such actions... .
(b) Such coordinated or consolidated pretiral proceedings
shall be conducted by a judge or judges to whom such actions
are assigned by the judicial panel on multidistrict litiga-
tion....
28 United States Code, Section 1441
(a) Except as otherwise expressly provided by Act of Con-
gress, any civil action brought in a State court of which the
district courts of the United States have original jurisdiction,
may be removed by the defendant or the defendants, to the
district court of the United States for the district and division
embracing the place where such action is pending.
(b) Any civil action of which the district courts have
original jurisdiction founded on a claim or right arising
under the Constitution, treaties or laws of the United States
shall be removable without regard to the citizenship or res-
idence of the parties. Any other such action shall be remov-
able only if none of the parties in interest properly joined
and served as defendants is a citizen of the State in which
such action is brought.
28 United States Code, Section 1447 (c)
If at any time before final judgment it appears that the
case was removed improvidently and without jurisdiction,
the district court shall remand the case, and may order the
payment of just costs. A certified copy of the order of
remand shall be mailed by its clerk to the clerk of the State
court. The State court may thereupon proceed with such case.
Cartwright Act, Calif. Bus & Prof. Code § 16750, as amended:
(a) Any person who is injured in his business or property
by reason of anything forbidden or declared unlawful by this
chapter, may sue therefor in any court having jurisdiction in
6
the county where the defendant resides or is found, or any
agent resides or is found, or where service may be obtained,
without respect to the amount in controversy, and to recover
three times the damages sustained by him, and shall be
awarded a reasonable attorneys’ fee together with the costs
of the suit.
Such action may be brought by any person who is injured
in his business or property by reason of anything forbidden
or declared unlawful by this chapter, regardless of whether
such injured person dealt directly or indirectly with the
defendant.
STATEMENT OF THE CASE
A. The Parties and the Proceedings Below.
Petitioners constitute most of the major refiners ana marketers
of sugar in the Western United States. Their businesses are
inherently interstate in character. Mandeville Island Farms v.
American Crystal Sugar Co., 334 US. 219, 239 (1948).
Respondents are the State of California and Madelyne Brinker,
a resident of California who has allegedly purchased sugar refined
and marketed by certain of petitioners at grocery stores in Calli-
fornia.
In December 1974, the United States filed civil complaints and
criminal indictments charging several of the petitioners with price-
fixing conspiracies in violation of Section 1 of the Sherman Act.
We attach as Appendix D the indictment in U.S. v. C and H.3
Private civil suits mirroring the allegations in the Government's
indictments began to be filed the very next day. In all, some 100
private class action civil cases have been filed in some 18 different
district courts virtually all of which allege the identical price-
fixing conspiracies described in the Government's indictments.
1. There were two indictments and three civil actions, all filed in the
United States District Court for the Northern District of California, involv-
ing alleged conspiracies in different parts of the United States. The indict-
ment in United States v. California and Hawaiian Sugar Co., et al (U.S.
v. C and 2H”), CR 74 829 ACW in the files of the district court, alleged a
at conspiracy in the geographic area of California, Arizona and
evada,
4
By order of the Judicial Panel on Multi-district Litigation filed
June 4, 1975, the private actions were consolidated in the United
States District Court for the Northern District of California, desig-
nated as In re Sugar Industry Antitrust Litigation, MDL 201, and
assigned to the Honorable George H. Boldt pursuant to 28 U.S.C.
§ 1407. Among the cases consolidated before Judge Boldt was one
filed by the State of California, on July 7, 1975, in the United
States District Court for the Northern District of California. Cal-
ifornia’s complaint (Appendix E) sought treble damages on be-
half of a class of state entities and on behalf of a class of pur-
chasers of sugar at grocery stores.
A number of the plaintiffs, including California, filed motions
seeking certification of classes. The claims for class representation
were numerous and conflicting. On the one hand, Judge Boldt
was asked to certify classes of wholesalers and retail grocers and,
on the other hand, was asked to certify a class consisting of con-
sumers who purchased sugar at grocery stores. The matter of class
certification was briefed and taken under submission by Judge
Boldt after hearing oral argument on December 9, 1975.
Madelyne Brinker's complaint in the California Superior Court
(Appendix G) was filed on or about December 16, 1975, and
California filed its state court complaint (Appendix F) on Feb-
ruary 4, 1976. California’s complaint in the state court is virtually
a carbon copy of its prior Sherman Act complaint in the federal
court. It charges “a combination and conspiracy in unreasonable
restraint of the aforesaid interstate trade and commerce” (Appen-
dix F, p. 43) and at a later point characterizes the conspiracy as
being “in violation of Section 1 of the Sherman Act” (Appendix
F, p. 44). Madelyne Brinker's state court complaint also closely
follows the Government's Sherman Act indictment, charging the
defendants with the same price-fixing conspiracy, and specifies that
she is complaining of restraints of trade in interstate commerce.
Both complaints seek remedies provided by California’s Cart-
wright Act (Cal. Bus. & Prof. Code §§ 16,600, et seq.).
8
Petitioners filed petitions for removal March 18, 1976, and both
California and Brinker filed timely motions to remand.
In its Opinion and Order Re Class Actions, dated May 20, 1976,
the district court certified industrial and grocery classes and
declined to certify consumer classes, The order of May 20, 1976,
was subsequently modified and made final by order of August 16,
1976."
B. The District Court's Opinion.
By his Memorandum Decision on Plaintiffs’ Motion to Remand,
dated July 23, 1976, Judge Boldt denied the motion to remand.
In doing so, the court noted that the California Cartwright Act
under which the two state court actions had been brought is in
substance “identical to the Sherman Act” and that “‘on the face
of the present record the pleadings of all plaintiffs present alleged
Sherman Act violations .. . .” (Appendix C, p. 12, n.) The dis-
trict court then addressed the question as to whether the doctrine
of “derivative jurisdiction” as fashioned in Lambert Run Coal Co.
v. Baltimore & Ohio R.R., supra (“Lambert Run’), would re-
quire that the Sherman Act aspects of the state court complaint
be dismissed and the case remanded to state court for disposition
of state law claims. Since the Ninth Circuit had previously applied
the derivative jurisdiction doctrine for the purpose of remanding
an antitrust case to state court (Washington v. American League
of Professional Baseball Clubs, 460 F.2d 654 (9th Cir. 1972)
(“Baseball”), the court discussed at length reasons that the doc-
trine should not be applied to the cases at bar. Noting that legal
scholars have ‘‘denounced the doctrine as being contrary to sound
and ‘practical judicial administration’ (Appendix C, p. 14),
Judge Boldt drew on his own experience to explain the impor-
tance of maintaining control of complex multi-district antitrust
litigation in the federal courts (Appendix C, p. 15):
2. On November 28, 1978, the court of appeals dismissed an appeal
from Judge Boldt’s order denying certification of consumer classes.
9
In the several years since Baseball was decided substantial
changes occurred in the conduct of antitrust litigation. Due
to the widespread application of multidistrict litigation
authorized by 28 U.S.C. § 1407 and the frequent certification
of class action in such litigation, remands comparable to
that sought in the California and Brinker cases will have
highly adverse effects upon efficiency, expediting, avoiding
duplication and control of time and expense incurred in dis-
covery and almost every other phase of conducting multi-
district litigation. [Footnote omitted.} The above statement
is based on extensive personal experience in conducting multi-
district litigation beginning with the “Electrical Equipment”
cases, wherein unprecedented procedures were devised to
cope with many unprecedented legal problems, many of
which were removed by 28 U.S.C. § 1407.
Judge Boldt went on to say that he thought it “unlikely that Con-
gtess in enacting § 1407 had any intimation that the Lambert Run
doctrine might substaatially minimize the use and effectiveness of
the new type of litigation,” and predicted that a remand would
“stimulate a flood of litigation identical to that now at issue.’
Noting that the California and Brinker actions “were deliberately
fashioned for the calculated purpose of precluding federal juris-
diction” and that interstate antitrust litigation “has been generally
considered essentially federal,” the court emphasized “the critical
importance of the national antitrust laws and their enforcement
to our nation and its economy” and concluded that “only the
United States Supreme Court or Congress should determine
national policy of such magnitude” (Appendix C, p. 17).
. Appendix » AP,
The ee canitctnion of the correctness of this prediction is found in
the files of the Minnesota District Court for the Fourth Judicial District,
State of Minnesota v. American Crystal Sugar Co., et al., No. 753748.
Minnesota’s complaint filed February 16, 1979 is virtually identical to that
filed by Minnesota in federal court below and it seeks recovery on behalf
of household purchasers of sugar at grocery stores with res to the
same sugar soll to the retail grocers classes with whom all of petitioners
have settled in the federal court.
10
Judge Boldt certified his order denying remand for interlocutory
appeal pursuant to 28 U.S.C. § 1292(b) so that the “unique facts
and circumstances of this particular proceeding” could “provide
a means by which our Circuit Court can offer the United States
Supreme Court an early opportunity to reappraise the much con-
demned Lambert Run doctrine . . . .”* Judge Boldt concluded his
discussion with the following observation:
“The undersigned judge is confident that neither our Cir-
cuit nor the United States Supreme Court will preclude early
review by that court of the Lambert Run doctrine; at a min-
imum as applied to multi-district litigation.”
C. The Opinion of the Court of Appeals.
Contrary to Judge Boldt’s expectations, the opinion of the court
of appeals did not reexamine Lambert Run. Instead, the opinion
holds that the state court complaints, which concededly were born
of a massive federal litigation under the Sherman Act, did not
arise under federal law. This unexpected conclusion is based,
first, on the hypothesis that the states are “free” to fashion and
apply to the same causes of action that are the subject of multi-
district federal antitrust litigation state antitrust principles that
are in conflict with federal, and, second, on the notion that a
complaint stating a cause of action for price-fixing under the
Sherman Act does not arise under federal law if brought on
behalf of a class of indirect purchasers of the kind held by this
Court in I/linois Brick to be without a treble damage remedy under
Section 4 of the Clayton Act.®
4. Appendix C, p. 18. Judge Boldt referred in his opinion to an
address by Chief Justice Burger on the “Causes of Popular Dissatisfaction
with the Administration of Justice, which urges reappraisal of all time-
honored procedures and practices, ‘even if . . . presently tolerable’ in order
to cope with the problems that will be encountered during the next half
century. (Emphasis added.)” (Appendix C, p. 18.)
5. Illinois Brick was decided by this Court more than a year after
the state cases were removed to federal court and several months after
the briefs were filed in the court of appeals.
11
After stating the facts, the opinion summarizes the essence of
petitioners’ contentions in the court of appeals (Appendix A, p.
4): That the state complaints “state claims under federal law as
well as under state law’, that ‘the existence of a federal cause of
action depends on the pleaded facts and not upon a plaintiff's
decision to give those facts a federal label’, that “the charging
allegations of both complaints are copied from criminal indict-
ments filed . . . by the United States’, that “the commerce in which
the restraints are said to occur is interstate’, that California “is
attempting to circumvent the denial” by the federal court of con-
sumer class certification, and that “the district court acted prop-
erly in protecting its jurisdiction over the claims before it and
over the classes certified and in avoiding the chaos that they feel
would result from simultaneous prosecution of complex state
and federal actions pursuing the same relief”.
The opinion of the court of appeals then digresses on a tangent
that was neither briefed nor argued by the parties, holding, in
effect, that denial of consumer class certification by the district
court and this Court’s decision in I/linois Brick, both subsequent
to removal, rendered the cases non-removable (Appendix A, pp.
4-6, emphasis vurs).
However appealing these contentions might be in other
contexts, they have no merits here. Here we are squarely
faced with claims asserted under California anti-trust law on
facts which do not state a federal claim.
The order of the district court denying consumer class
certification in the consolidated federal litigation presaged
the decision in I/linois Brick Co. v. Illinois, 431 U.S. 720
(1977). There, in construing § 4 of the Clayton Act... ,
the Court held that with rare exception only direct purchasers
could claim and recover for injury caused by price fixing.
.. . Under this holding, a consumer class . . . cannot claim
under the Clayton Act that overcharges had been passed on
to them. ...
12
It follows from Illinois Brick that the consumer class action
claims of these plaintiffs, if construed by us as arising under
federal law, would be dismissed in federal court. While the
process of removal of state actions looks to trial of the
removed cause in a more appropriate forum, here removal
will assure that the cause will never be tried at all. It would
be incongruous for us to construe these state law consumer
class claims as arising under federal law when, under federal
law as announced in Illinois Brick, it would appear that they
never arose at all.
The opinion then goes on to hold that since the plaintiffs would
not be able to recover treble damages in federal court, the cases
should be remanded to state court for a determination as to
whether state law might not provide a treble damage antitrust
remedy (Appendix A, pp. 6-7, emphasis ours) :
We make no pretense of forecasting state law in this area.
We do say that however state law might be construed, the
state should be free to settle the question. To deny remand
under these extraordinary circumstances amounts to federal
preemption of the antitrust laws by judicial act where it is
conceded that there is no congressional preemption. Should
such action become the general practice, the state would be
deprived of any power to legislate other than in accordance
with the Clayton Act as construed in Illinois Brick.
The court’s holding is thus necessarily based on the hypothesis
that there is xo federal preemption in the field of antitrust and
that the state courts are “free” to apply to essentially interstate
industries and transactions antitrust principles in conflict with
federal antitrust law. This holding on federal preemption is
reflected at an earlier footnote in the opinion (Appendix A, p. 5,
n. 5) where the court purports to distinguish certain removal
6. Petitioners did not concede that there is no federal preemption in
Sherman Act cases. Petitioners contended in the court of appeals and urge
here that the Sherman Act is the paramount law of the land and that
conflicting state laws cannot be applied to interstate transactions.
13
cases as “alleging claims under federal statutes which effectively
pre-empted the state law.”
The opinion of the court of appeals disposes in a footnote of
the derivative jurisdiction question, which was the primary focus
of the district court’s opinion (Appendix A, pp. 4-5, n. 4). The
opinion notes that the district court had distinguished Lambert
Run, supra, and Baseball, supra, ‘‘on the ground that here the
cases are multi-district and class action cases.” The opinion of the
court of appeals concludes its discussion of this point as follows
(Appendix A, p. 5, n. 4 emphasis ours) :
“We need not reach the question whether the procedure
followed in Baseball {viz, remand of the state claims to state
court} should apply in multi-district class action cases where
both federal and state claims are intermingled or whether
the distinction drawn by the district court should apply. As
we discuss, infra, here there is no federal consumer class
claim to be consolidated with the other multi-district claims.”
At this point the opinion of the court of appeals simply ignores
the fact, acknowledged elsewhere in the opinion (Appendix A,
p. 3), that California asserted a consumer class claim in the
federal court and that certification of the class was denied after
the state court actions had been removed.
By Order, filed January 29, 1979, the court of appeals denied
rehearing and modified footnote 6 of its opinion by expanding
its quotation from Section 16760, California Business and Pro-
fessions Code, which neither adds to nor detracts from the funda-
mental errors of the opinion.
REASONS FOR GRANTING THE WRIT
The first question stated above calls for a granting of the writ
because it involves the extent to which the federal courts are to
retain their power, first, to fashion federal principles of antitrust
law that apply uniformly to industries engaged in interstate com-
14
merce and, second, to control the course of multi-district class
action antitrust litigation that has been consolidated before a
federal district judge pursuant to 28 U.S.C. § 1407. The holding
of the court of appeals that the federal antitrust law is not para-
mount in interstate price-fixing cases cannot be squared with the
prior decisions of this Court. E.g., Flood v. Kuhn, 407 US. 258,
284-85 (1972). It is a question of enormous importance to the de-
velopment of a uniform federal antitrust law. The reliance by the
court of appeals on J//inois Brick Co, v. Illinois, supra, for the
proposition that an antitrust cause of action cannot arise under
federal law when brought on behalf of indirect purchasers reflects
a fundamental misunderstanding of the holding of that case as
well as a subversion of its fundamental animating principle that
multiple recoveries in interstate price-fixing cases should not be
permitted against a manufacturer by successive purchasers in the
chain of distribution.” Finally, the opinion of the court of appeals
erroneously departs from the well-established principle that the
federal courts have jurisdiction to adjudicate controversies arising
under federal law, even though the plaintiff may not have stated a
valid cause of action giving rise to recovery. Bell v. Hood, 327 US.
678 (1946); Wheeldin v. Wheeler, 373 US. 647, 649 (1963);
Avco Corp. v. Aero Lodge 735, 390 U.S. 557 (1968).
If the writ is granted as to the first question, the Court should
address itself to the second question as well. The Lambert Run
doctrine as applied in antitrust cases evolved in an earlier era
when the conduct of federal antitrust litigation and the law
itself were fundamentally different from what they have become
today. Today the antitrust laws include not only the Sherman
7. The opinion of the court of appeals itself creates the specter of mul-
tiple recoveries against the petitioners here, who to date have paid and
agreed to pay $60 million in settlement of most of the class suits certified
by Judge Boldt, including a class of grocery purchasers. If the states are
now free to certify consumer classes, petitioners will be subjected to double
recovery with respect to the same alleged price fix on the same sugar resold
to the consumer classes by the classes with whom petitioners have settled.
15
and Clayton Acts but also Rule 23 and 28 U.S.C. § 1407, by
which Congress has created the means of conducting private
treble damage antitrust suits against entire industries on behalf
of whole populations and has commanded that such suits be
consigned to the control of a single federal judge. It would be
inappropriate to extend Lambert Run to defeat federal control of
such cases.
1. The State Claims Arose Under Federal Law
A. THE COMPLAINTS ALLEGE INTERSTATE PRICE-FIXING IN VIOLATION
OF THE SHERMAN ACT AND SPRING FROM PRE-EXISTING FEDERAL
JURISDICTION
The removal statute, 28 U.S.C. § 1441(b) provides in part
(emphasis ours) :
"Any civil action of which the district courts have original
jurisdiction founded on a claim of or right arising under the
Constitution treaties or laws of the United States shall be
removable without regard to citizenship or residence of the
parties.”
Although only the complaint in California overtly refers to the
Sherman Act, both the Brinker and California complaints allege
a set of facts constituting a violation of the Sherman Act. The
charging allegations of both complaints are copies of the criminal
indictments filed against certain of the petitioners by the United
States. Both complaints allege price-fixing conspiracies in inter-
state commerce and therefore necessarily arise under a federal
statute, to wit Section 1 of the Sherman Act. Moreover, California
was already a party to the federal proceedings where it was seek-
ing to represent a consumer class, and its state complaint was a
virtual copy of its federal complaint. The complaints so self-
evidently arose out of federal law that the district court's opinion
relegated this phase of the matter to the footnotes.®
8. In Baseball, supra, the court had assumed without deciding that
the asserted claims under Washington’s little Sherman Act arose under
federal law.
16
B. RESPONDENTS' PREFERENCE FOR A STATE REMEDY DOES NOT DEFEAT
FEDERAL JURISDICTION
The respondents here sought in the state court to rely exclu-
sively on the remedies available to them under California’s little
Sherman Act and thereby avoid federal jurisdiction. A plaintiff
may not prevent removal of a case that states a cause of action
under a federal statute by seeking solely a state remedy.
The cases most clearly in point are those arising under Section
301(a) of the Labor Management Relations Act of 1947 (29
U.S.C. § 185, 61 Stat. 156-157), which confers jurisdiction on the
federal courts over suits for violations of contracts between an
employer and a labor union in an industry affecting commerce.
In Textile Workers v. Lincoln Mills, 353 U.S. 448, 456 (1957),
this Court held that the substantive law applicable “in suits under
Section 301(a) is federal law, which the courts must fashion from
the policy of our national labor laws.” While suits seeking state
remedies in state court to enforce contracts cognizable under Sec-
tion 301(a) may be maintained, Charles Dowd Box Co. v. Court-
ney, 368 U.S. 502 (1962), such cases are removable to federal
court because the substantive labor law that must be applied by
the states is federal. Avco Corp. v. Aero Lodge 735, 390 U.S. 557,
560 (1968). Such cases are removable even though the plaintiff
seeks a state remedy in a state court and disavows any reliance on
the federal statute. Johnson v. England, 356 F.2d 44 (9th Cir.
1966) cert. denied, 384 U.S. 961 (1966) .°
As noted above, the court of appeals distinguished the Section
301 cases on the basis of its assertion that the states are at liberty
to fashion and apply to alleged interstate antitrust violations
substantive state antitrust law in conflict with the federal law. We
submit that this is palpable error.
9. Cf. American Synthetics Rubber Corp. v. Louisville & N.R. R.,
422 F.2d 462 (6th Cir. 1970); Mountain Navigation Co. v. Seafarers’
Int'l. U. of N.A., 348 F.Supp. 1298, 1301 (W.D. Wisc. 1971); Ulichny
v. General Electric Co., 309 F.Supp. 437 (N.D.N.Y. 1970).
17
The intent of Congress to create a paramount federal antitrust
law is if anything more clearly manifest than the need for primacy
of federal law in the field of labor relations.1° The broad terms
used in Sections 1 and 2 of the Sherman Act “took their origin in
the common law” and were intended “by an all embracing enu-
meration to make sure that no form of contract or combination
by which an undue restraint of . . . commerce was brought about
would save such restraint from condemnation.” Standard Oil Co.
v. United States, 221 US. 1, 51, 59-60 (1910). “As a charter of
freedom, the Act has a generality and adaptability comparable
to that found to be desirable in constitutional provisions. . . . Its
general phrases, interpreted to attain its fundamental objects
. call for vigilance in the detection and frustration of all
efforts unduly to restrain the free course of interstate commerce
....” Appalachian Coals, Inc. v. United States, 288 US. 344,
359-60 (1933). This Court is thus the ultimate guardian of this
nation’s antitrust laws; it has repeatedly recognized that con-
flicting state and common law doctrines? must give way to the
overriding policy of the Sherman Act as interpreted by this
Court.
In Sola Electric Co. v. Jefferson Co., 317 U.S. 173 (1942), a
diversity suit to recover patent royalties, the defendant alleged
in a counter-claim that patentee’s licensing contract violated the
Sherman Act. The district court and the court of appeals applying
10. See Note, The Federal Common Law, 82 Harv. L. Rev. 1512,
1531-35 (1969). Clearfield Trust Co. v. United States, 318 U.S. 363
(1943) recognized the obligation of the federal courts to fashion and
apply federal common law respecting rights and duties arising out of the
federal Constitution and statutes when there was a need for national
uniformity.
11. Cf. Perma Life Mufflers, Inc. v. International Parts Corp., 392
US. 134, 139 (1969), where the Court refused to permit the common
law defense of in pari delicto in a Sherman Act case. {W]e cannot accept
the Court of Appeals’ idea that courts have power to undermine the anti-
trust acts by denying recovery to injured parties merely because they have
participated to the extent of utilizing illegal arrangements formulated and
tore out by others.”
18
state law held that the licensee was estopped to deny validity of
the license. This Court reversed, holding that federal law gov-
erned the question of illegality and that conflicting state laws
must give way (317 USS. at 176-77):
When a federal statute condemns an act as unlawful, the
extent and nature of the legal consequences of the condemna-
tion, though left by the statute to judicial determination,
are nevertheless federal questions, the answers to which
are to be derived from the statute and the federal policy
which it has adopted. To the federal statute and policy, con-
flicting state law and policy must yield. . . .
Local rules of estoppel which would fasten upon the
public as well as the petitioner the burden of an agreement
in violation of the Sherman Act must yield to the Act’s
declaration that such agreements are unlawful, and to the
public policy of the Act... .”
In Flood v. Kuhn, 407 U.S. 258 (1972), this Court was con-
fronted with application of state antitrust laws to an interstate
business to which the Sherman Act does not apply, to wit profes-
sional baseball. The Court adopted the reasoning of the lower
courts that to permit application of state antitrust laws to such
transactions would conflict with the policy of the Sherman Act
(407 USS. at 284):
The petitioner's argument as to the application of state
antitrust laws deserves a word. Judge Cooper rejected the
state law claims hecause the state antitrust regulation would
conflict with federal policy and because national “uniformity
[is required} in any regulation of baseball and its reserve
system.” 316 F.Supp., at 280. The Court of Appeals, in
affirming, stated, [As the burden on interstate commerce
outweighs the state's interest in regulating baseball’s reserve
system, the Commerce Clause precludes the application here
of state antitrust law.” 443 F.2d, at 268. As applied to organ-
ized baseball . . . these statements adequately dispose of the
state law claim.
19
While the Court's holding is expressly limited to baseball, its
tationale more strongly calls for recognition of the paramountcy
of the Sherman Act in the context of the case at Bar. Here federal
jurisdiction under the Sherman Act is being exercised over the
same cause of action that the court of appeals would remand for
application of state antitrust laws in conflict with IJ/linois Brick.
The overriding importance of a uniform national antitrust law
applicable in interstate commerce is illustrated by the facts of
these cases. The petitioners, interstate refiners and marketers of
sugar, are charged in federal court with a conspiracy to fix prices
throughout the Western United States. Under Illinois Brick, the
direct purchasers may recover treble the full amount of any over-
charge resulting therefrom, but indirect purchasers may not re-
cover damages for such overcharges. California has recently
enacted a statute’ authorizing recovery of treble damages by
persons who dealt “indirectly with the defendant”. Most of the
petitioners have paid large sums to settle with the grocer classes
certified by the district court on the assumption that no class of
purchasers at grocery stores had been or could be certified. If
California may now permit recovery by consumers,” the policy
of the federal antitrust laws as expressed in I/Jinois Brick will be
thwarted. The Court in that case was at pains to spell out its deter-
12. On August 25, 1978, California amended § 16750 of the Calli-
fornia Business and Professions Code to provide for recovery of treble
damages by indirect purchasers in state antitrust cases and to provide
that the amendment is declaratory of existing law. Ch. 536, 1978 Laws,
1978 Cal. Legis. Serv. 1667, set forth at pp. 5-6, supra.
13. In its opinion and order denying rehearing (Appendix B) the
court of appeals sets forth a portion of Section 16760, California Business
and Professions Code, which reduces damages recoverable in state parens
patriae cases “by amounts which have been awarded for the same injury.’
Whether this reduction is applicable in private class action suits, whether it
covers amounts paid in settlement of federal suits, or whether it would
prevent any recovery by indirect purchasers when there has already been
recovery by direct purchasers are all matters that will presumably be
decided by the courts of California. And what will be the result if state
court recovery by indirect purchasers precedes federal court recovery by
direct purchasers? The potentialities for conflict with federal law are
manifest.
20
mination that multiple recoveries not be countenanced under the
antitrust laws (431 U.S. at 730-31, emphasis ours):
First, allowing offensive but not defensive use of pass-on
would create a serious risk of multiple liability for defend-
ants, Even though an indirect purchaser had already recov-
ered for all or part of an overcharge passed on to it, the
direct purchaser would still recover automatically the full
amount of the overcharge . . .; similarly, following an auto-
matic recovery of the full overcharge by the direct purchaser,
the indirect purchaser could sue to recover the same amount
...+ A one-sided application of Hanover Shoe substantially
increases the possibility of inconsistent adjudications—and
therefore of unwarranted multiple liability for the defend-
ants. . .; [Overlapping recoveries are certain to result. . .
unless the indirect purchaser is unable to establish any pass-
on whatsoever... . {We are unwilling to “open the door
to duplicative recoveries” under § 4.
The opinion of the court of appeals opens the door that this
Court so recently closed. If 50 states are now at liberty to adopt
statutes that permit recovery of treble damages by indirect pur-
chasers in the chain of distribution from interstate manufacturers
charged with price-fixing, what can be said of the authority of
this Court or of Congress to fashion a coherent antitrust law?
What will be the consequences for major interstate businesses
that are confronted with a welter of conflicting state antitrust
laws ?
And could it be prudent for the nation’s judiciary to be endlessly
and repetitively embroiled in the same controversy in a host of
state and federal forums? Chief Justice Burger has eloquently
expressed the importance of flexibility to meet the increas-
ing burdens of the administration of justice (note 4, supra).
Indeed, recent developments in the law have augmented the fed-
eral character of major antitrust litigation by vesting in the federal
district courts powers for the effective adjudication of national
controversies, which themselves suggest the appropriateness of
21
removal of cases filed in state court in the circumstances at bar."
Rule 23 of the Federal Rules of Civil Procedure and 28 U.S.C.
§ 1407 have combined to permit massive federal antitrust litiga-
tion, where the often conflicting claims of class members and
private litigants can be addressed by a single judge who can
weigh the competing interests. As noted in the opinion of the
district court (Appendix C, pp. 14-17), the problems of managing
such litigation are enormous. Typically, a relatively small group of
plaintiffs’ lawyers is designated by the court or otherwise to
form a steering committee charged with the responsibility of
coordinating discovery and prosecuting the cases for the plain-
tiffs. If any plaintiff's counsel who is dissatisfied with the makeup
of the steering committee or the manner in which the court is
managing the litigation should file the same case in one or more
state courts, the unified control of the federal court would be
defeated.”
Addition of the parens patriae remedy enacted as Title III of
the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (Pub.
Law 94-435; 90 Stat. 1394; 15 U.S.C. §15(c)) enhances the
federal character of massive antitrust litigation by providing a
federal forum for state attorneys general on behalf of consumers.
In responding to the question as to whether it would be prefer-
able for the states to enact statutes creating a right in attorneys
general to sue in parens patriae, Senator Hart replied, in part,
that “we are talking about a private right of action to secure
damages in violation of a Federal Statute which consumers . . .
14. The power of the federal courts to protect a pre-existing juris-
diction by exercise of the writ of removal has been recognized in other
contexts less compelling than this. Villarreal v. Brown Express, Inc., 529
F.2d 1219 (Sth Cir. 1976).
15. Illustrative of this sort of maneuver is Three J Farms, Inc. v.
Alton Boxboard Co., 1979-1 Trade Cases, {] 62,423 (US.D.C,, ax.
1978). The court there denied a motion to remand an antitrust class
action suit to the South Carolina state court when the “facts alleged by
the present plaintiffs are almost identical to those set forth in the Unified
and Consolidated Complaint” (Jd. at p. 76,548) filed in the Southern
District of Texas, which has been consolidated by order of the Judicial
22
have enjoyed since 1890’, that “if 50 States enacted 50 different
State Antitrust Statutes, corporations would really be confused
and uncertain over what conduct was legal and what conduct was
illegal”, and that a corporate defendant “would have to litigate
50 different trials in 50 different jurisdictions under 50 different
standards” (122 Cong. Rec. 8272, May 28, 1976).
C. THE COURT OF APPEALS’ RELIANCE ON ILLINOIS BRICK IS MISPLACED
The conclusion of the court of appeals that the complaints do
not state federal claims because under Illinois Brick the plaintiffs
could not recover treble damages under Section 4 of the Clayton
Act is an erroneous interpretation of that case as well as a mis-
application of long established principles of federal removal
jurisdiction.
Illinois Brick was a determination on the merits that the plain-
tiff indirect purchasers could not recover treble damages under
Section 4 of the Clayton Act. There was no determination that
the federal courts were without jurisdiction of the subject matter.
The complaints in Brinker and California in the state court either
stated federal claims arising under the Sherman Act or they did
not; I/linois Brick changed the available federal remedy, but not
whether the cases arose under federal law.
In Bell v. Hood, 327 US. 678 (1946) a suit was brought against
federal officers for trespass in violation of the plaintiffs’ alleged
Panel on Multidistrict Litigation. In Re Corrugated Container Antitrust
Litigation, 441 F.Supp. 921 (J.P.M.L. 1977). The opinion of the court
observes that it is “obvious that the present plaintiffs are making a deter-
mined effort to prevent their action from being consolidated for pretrial
proceeding with the other cases arising out of the same facts and allega-
tions” and asserts that ‘these actions raise a serious question as to whether
the desire to return to the South Carolina state court is for the benefit
of the South Carolina plaintiffs or for the benefit of their attorneys.” The
court observed that the action of the plaintiffs’ attorneys was designed to
“put the defendants in an impossible position of running back and forth
between the Texas and South Carolina courts producing the same docu-
ments and information in both places. This would destroy the effectiveness
of the Judicial Panel on Multidistrict Litigation and for all practical
purposes irradicate 28 U.S.C. 1407” (Id. at 76,548, 76,549.)
23
rights under the Fourth and Fifth Amendments. The district court
dismissed for want of federal jurisdiction without ruling on the
question as to whether a cause of action had been stated in the
complaint. This Court reversed, stating, in part, as follows (327
U.S. at 682):
Jurisdiction, therefore, is not defeated as respondents seem
to contend, by the possibility that the averments might fail
to state a cause of action on which petitioners could actually
recover. For it is well settled that the failure to state a proper
cause of action calls for a judgment on the merits and not
for a dismissal for want of jurisdiction. Whether the com-
plaint states a cause of action on which relief could be
granted is a question of law and just as issues of fact it must
be decided after and not before the court has assumed juris-
diction over the controversy. If the court does later exercise
its jurisdiction to determine that the allegations in the com-
plaint do not state a ground for relief, then dismissal of the
case would be on the merits, not for want of jurisdiction.
Accord: Wheeldin v. Wheeler, 373 U.S. 647, 649 (1963).
In Avco Corp. v. Aero Lodge 735, supra, a suit for injunction
was brought in state court under a “no-strike’” clause in a collec-
tive bargaining agreement. The defendant union removed the case
to the federal court on the ground that it arose under Section 301
of the Labor Management Relations Act. The jurisdiction of the
federal court on removal was sustained, even though it was ad-
mittedly without power to grant a federal injunction (390 U.S.
at 561):
The nature of the relief available after jurisdiction attaches
is, of course, different from the question whether there is
jurisdiction to adjudicate the controversy.
The only issue before the court on a motion to remand under
28 U.S.C. § 1447(c) is whether the case is within the subject
matter jurisdiction of the federal courts. Thermtron Products Inc.
v. Hermansdorfer, 423 U.S. 336 (1976). As stated by Professor
Moore, “in applying § 1447(c), a distinction must be made be-
24
tween the federal court’s lack of jurisdiction, in which case the
court can only remand, and the plaintiff's failure to allege a claim
upon which relief can be granted, in which case the federal court
with jurisdiction can order dismissal of the claim.” 1A Moore’s
Federal Practice 557-58 (2d ed.). The assertion in the opinion
of the court of appeals that removal “‘looks to trial” of the action
is only half right. Removal also may look to dismissal or sum-
mary judgment in favor of the removing defendant.
Neither could the refusal of the district court to certify a con-
sumer class several months after removal require that the state
consumer claims be remanded. The district court’s decision deny-
ing certification for reasons of atypicality and unmanageability
self-evidently applied to California's removed state case as well.
The decision disallowing consumer representation was not the end
of California’s case, and the fact that after denial of certification
there was “‘no federal consumer class claim to be consolidated
with the other multi-district claims” (Appendix A, p. 5) was im-
material to the court's jurisdiction. Brinker was free to seek con-
sumer class certification in federal court, and if denied, her
remedy like California’s remedy is to await the end of the litiga-
tion and appeal from the denial of consumer classes. Coopers &
Lybrands v. Livsay, 437 U.S. 463 (1978).
It is ironic that the court of appeals should rely on I/linois
Brick to divest the federal courts of jurisdiction in circumstances
that will produce a result diametrically at odds with the objectives
of that decision—the prevention of multiple recoveries and the
simplification of litigation. The federal courts have equitable
powers to bring ancillary claims together in one forum for the
benefit of the parties and to prevent waste of judicial time.
DiGiovanni v. Camden Ins. Ass’n., 296 US. 64, 70 (1935);
Mitchell v. Maurer, 293 U.S. 237, 243 (1934); CHAFFEE, Bills of
Peace with Multiple Parties, 45 Harv. L.Rev. 1297 (1932). This
16. Illustrative of cases from the Ninth Circuit in which dismissal
of the federal claims followed removal is Watkins v. Grover, 508 F.2d
920 (9th Cir. 1974).
25
Court should reaffirm the power of the federal courts to protect
their jurisdiction and to prevent a pestilence of litigations by
exercise of the writ of removal in the circumstances at bar.
ll. The Doctrine of Derivative Jurisdiction Does Not Require Re-
mand
In Lambert Run, supra, this Court held that a federal case
removed from a state court that did not have jurisdiction in the
first instance must be dismissed, stating the rule as follows (258
US. at 382):
The jurisdiction of the federal court on removal is, in a
limited sense, a derivative jurisdiction. If the state court lacks
jurisdiction of the subject matter or of the parties, the federal
court acquires none, although it might in a like suit originally
brought there have had jurisdiction.
The same year, in General Investment Co. v. Lake Shore Ry., 260
U.S. 261, 288 (1922) the Court dismissed a suit under the Sher-
man Act for lack of derivative removal jurisdiction.
In Lambert Run the plaintiffs sought in the state court to re-
strain the defendant railroad from complying with certain rules
promulgated by the Interstate Commerce Commission allocating
coal cars. Since a suit against the United States could only be
brought in federal court, there was no cause of action cognizable
in state court. Similarly, in General Investment Co. v. Lake Shore
Ry., supra, Ohio had no state antitrust law, and there was there-
fore no antitrust remedy that could be afforded in state court.
The principles of these cases do not reach the circumstances
at bar. This is so both because the state court remedies available
have been expanded and because class action multi-district litiga-
tion is of a different genre from the cases there involved.
To say that the federal courts have exclusive jurisdiction to
enforce the remedies afforded by the Sherman Act and Clayton
26
Act'’ does not mean that the states are precluded from creating
an antitrust remedy. But the substantive law for which the
remedy is a sanction in interstate transactions remains the federal
antitrust law, not an independent body of law at odds with federal
antitrust policy as declared by this Court. When a case is brought
in state court seeking a remedy under California's little Sherman
Act alleging price-fixing conspiracies that implicate interstate
commerce,’* the state court must apply federal substantive law
under the Sherman Act.”® Hence, a single cause of action governed
by federal law exists, and the federal court has derivative juris-
diction on removal.”
17. The notion that the federal courts have exclusive jurisdiction to
grant the treble damage remedy afforded by the Sherman Act, Blumenstock
Bros. v. Curtis Pub. Co., 252 U.S. 436, 440 (1920); Freeman v. Bee
Machine Co., 319 U.S. 448, 451 (1943); Vendo Co. v. Lektro Vend
Corp., 433 U.S. 623, 633 (1977); is based on a historical anachronism.
At the time the Sherman Act was debated in the Senate, Congress doubted
its authority to vest jurisdiction in the state courts to impose a federal
penalty, to wit treble damages. 21 Cong. Rec. 311-312 (April 8, 1890).
The view was nonetheless expressed by Senator Edmunds during the
debate that the states would have concurrent jurisdiction under the
Sherman Act to grant a state remedy of ordinary damages, even though
they could not enforce the federal treble damage remedy (Id. at 317).
Many years later this Court held that the states could be compelled to
award a treble damage remedy afforded in a federal statute. Testa v.
Katt, 330 U.S. 386 (1947).
18. The California courts have held that they may entertain juris-
diction over antitrust cases involving interstate commerce, and have here-
tofore eye law in such cases. Speegle v. Board of Fire Under-
writers, 29 Cal.2d 34 (1946); R. E. Spriggs Co. v. Adolph Coors Co.
37 Cal. App. 653 (1974). sib: eens
19. The obligation of the state courts to apply the Sherman Act has
been previously recognized by this Court. Bement v. National Harrow Co.
186 U.S. 70, 83 (1902). Compare Harold Butler Enterprises, Inc. v.
Vanlandingham, 505 P.2d 1149 (Ore. 1973).
20. yew 3 ys modern view a single cause of action arises from a
common nucleus of operative facts giving rise to the invasion of a prim
right of the plaintid. United Mine Workers v. Gibbs, 383 US 715,
725 (1966). Applying this principle, a number of cases have held there
is but a single cause of action under state and federal antitrust laws arising
from the same nucleus of operative facts. Fowler Mfg. Co. v. Gorlick,
27
The doctrine of derivative jurisdiction evolved in a different
era long before multi-district class action antitrust litigation.
Application of that doctrine to defeat a unified federal control
over such litigation in circumstances where federal jurisdiction is
preexisting at the time the state court action is brought would
constitute an extension of the Lambert Run doctrine. This Court
refused to extend Lambert Run when it was invoked to pre-
vent an amendment to add a Sherman Act claim to a case
removed from state court on grounds of diversity of citizenship.
Freeman v. Bee Machinery Co., supra. This Court should decline
to extend the derivative jurisdiction doctrine to the case at bar.
CONCLUSION
We respectfully pray that the petition be granted.
JOHN E, SPARKS
On behalf of the attorneys and
petitioners above named
415 F.2d 1248, 1254 (9th Cir. 1969), cert. denied, 396 U.S. 1012
(1970); Belliston v. Texaco, Inc, 521 P.2d 379 (Utah 1974); Ford
Motor Co. v. Superior Court, 35 Cal.App.3d 676 (1973).
rs <0 See oe
Appendix A
In the United States Court of Appeals
for the Ninth Circuit
Filed—Nov 28 1978
Emit E. MELFI, JR. Clerk
U.S. Court of Appeals
In Re: Sugar Antitrust Litigation MDL 201
The State of California, etc.,
Plaintiffs-Appellants,
vs. No. 76-2937
California and Hawaiian Sugar Co., et al.,
Defendants-Appellees.
Madelyne Brinker, on her own behalf and that
of all others similarly situated,
Plaintiff-Appellant,
ve. No. 76-3001
Amalgamated Suger Co., et al.,
Defendants-Appellees.
OPINION
On Appeal from the United States District Court for the
Northern District of California
Before: MERRILL and SNEED, Circuit Judges, and LINDBERG,*
District Judge
MERRILL, Circuit Judge:
These two actions were commenced in the superior court for
San Francisco, California, and were removed by the defendants
*Honorable William J. Lindberg, Senior United States District Judge
for the Western District of Washington, sitting by designation.
2 Appendix
(here appellees) to the United States District Court for the
Northern District of California. There they joined a massive
multi-district treble damage antitrust litigation involving several
hundred plaintiffs and fourteen defendants in about a hundred
consolidated cases. Appellees removed the state court actions
pursuant to 28 U.S.C. § 1446 with jurisdiction for removal asserted
under 28 U.S.C. § 1441(b).” Plaintiffs (here appellants) promptly
moved for orders remanding the actions to the California courts,
contending that removal jurisdiction did not exist. The district
court denied the motions; the issue of jurisdiction was certified
for appeal under 28 U.S.C. § 1292(b) and leave to appeal the
interlocutory orders was granted by this court. The principal
question presented is whether, under § 1441(b), the California
actions were ‘founded on a claim or right arising under the * * *
laws of the United States.” We here hold that they were not.
The state court complaints in both actions charge that the
appellees engaged in a combination and conspiracy to restrain
trade by fixing and raising the price of refined sugar and fixing
prepaid freight applications. Both complaints specify that the
restraints were in violation of § 16720 of the California Business
and Professions Code, commonly known as the California Cart-
wright Act, and that a right of action is conferred by § 16750 of
that code.* Pursuant to California Code of Civil Procedure § 382
1. 28U.S.C. § 1441(b) reads as follows:
“Any civil action of which the district courts have original juris-
diction founded on a claim or right arising under the Constitution,
treaties or laws of the United States shall be removable without
regard to the citizenship or residence of the parties.”
2. California Business and Professions Code § 16750 reads as follows:
“(a) Any person who is injured in his business or “hg md by
reason of anything forbidden or declared unlawful by this chapter,
may sue therefor in any court having jurisdiction in the county where
the defendant resides or is found, or any agent resides or is found,
or where service may be obtained, without respect to the amount in
controversy, and to recover three times the damages sustained by
him, and shall be awarded a reasonable attorneys’ fee together with
the costs of the suit.”
Appendix 3
both appellants sought to represent a class of persons similarly
situated. Brinker defined the class as follows:
“The Class consists of all private individuals who, during
the relevant time period, have purchased refined sugar at
retail in its original bulk-package forms within the State of
California through retail outlets that sell refined sugar sup-
plied by one or more of the Defendants in its original bulk-
package form for consumption off the premises * * *.”
The state, in seeking representation, defined the class as follows:
‘“* * * California citizens and residents who have pur-
chased refined sugar at retail for use or consumption during
the period of the alleged conspiracy.”
Prior to filing its state court action, California had filed an
action in the United States District Court for the Northern Dis-
trict of California asserting claims under the Sherman and Clayton
Acts based upon alleged price fixing of sugar. That action was
consolidated with the others before the district court below. In
that action the state sought to represent the members of two
classes: a public entity class and a consumer class. The district
court in due course acted on the many applications for class cer-
tification presented by the consolidated cases. It declined to certify
a consumer class and California's prayer in this respect was
denied, While this federal action was commenced by California
prior to its state court action, the latter was commenced before
the district court’s refusal to certify a consumer class.*
3. A brief chronology of the events above mentioned might be helpful.
July 7, 1975. California’s federal action was commenced.
December 16, 1975. Brinker's state action was commenced.
February 4, 1976. California’s state action was commenced.
March 18, 1976. Removal petitions were filed in the state actions.
March 26 and 31, 1976. Motions to remand the state actions were filed
in federal court.
May 20, 1976. The court order denying consumer class certification was
entered,
July 23, 1976. The court order denying remand, from which these
appeals are taken, was entered.
4 Appendix
Appellants both contend that their claims alleging that state
law was violated to their injury arise under state law and not
under federal law.
Appellees contend that the facts alleged in the state court com-
plaints state claims under federal law as well as under state law
and thus can be said to arise under federal law. They assert that
a cause of action depends upon the facts alleged and not upon
the legal labels attached to the facts; that the existence of a
federal cause of action depends upon the pleaded facts and not
upon a plaintiff's decision to give those facts a federal label.
They emphasize that the charging allegations of both complaints
are copied from criminal indictments filed against certain of the
appellees by the United States, and that the commerce in which
the restraints are alleged to have occurred is interstate. They sug-
gest that there is something improper in California's seeking
state court relief; that it is attempting to circumvent the district
court’s denial of consumer class certification. They assert that the
district court acted properly in protecting its jurisdiction over the
claims before it atid over the classes certified and in avoiding the
chaos that they feel would result from simultaneous prosecution
of complex state and federal actions pursuing the same relief.
However appealing these contentions might be in other con-
texts,* they have no merit here. Here we are squarely faced with
4. Even accepting these contentions, a serious problem is posed b
State of Washington v. American League of Professional Baseball Clubs,
460 F.2d 654 (9th Cir. 1972) (Baseball). There the same contentions
were made as are made here—that the antitrust claims alleged arose
under federal as well as under state law. This court pointed out that the
jurisdiction of a federal court on removal is derivative; that under
Lambert Run Coal Co. v. B. & O. R.R. Co., 258 U.S. 377 (1922), if the
state court lacks jurisdiction over the subject-matter of an action (for
example, when a federal statute grants exclusive jurisdiction to the federal
courts, as do the federal antitrust statutes), that lack is not cured by
removal. The removed action must be dismissed by the federal court
since it has acquired no jurisdiction from the state court. In Baseball we
concluded that under Lambert Run the federal court was without jurisdic-
Appendix 5
claims asserted under California antitrust law on facts which do
not state a federal claim.°
The order of ‘the district court denying consumer class certifica-
tion in the consolidated federal litigation presaged the decision
in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). There, in
construing § 4 of the Clayton Act, 15 U.S.C. § 15, the Court held
that with rare exception only direct purchasers could claim and
recover for injury caused by price fixing and that the recovery
should include the whole of the injury caused by overcharging,
whether that injury was shared by indirect purchasers or not.
Under this holding, a consumer class (not composed of direct
tion to proceed on the federal antitrust claims but that the state claims
pron for disposition. We directed that the case be remanded to the
state court.
In our case the district court, in its opinion denying remand to the
state courts, dealt at length with Lambert Run and Baseball, and dis-
tinguished them on the ground that here the cases are multidistrict and
class action cases. It concluded that to apply Lambert Run and Baseball
in multidistrict class actions would be to defeat the — of Congress
in enacting 28 U.S.C. § 1407 dealing with the consolidation of pretrial
proceedings in multidistrict actions. It stated:
“Due to the widespread application of multidistrict litigation author-
ized by 28 U.S.C. § 1407 and the frequent certification of class
action in such litigation, remands comparable to that sought in the
California and Brinker cases will have highly adverse effects upon
efficiency, expediting, avoiding duplication and control of time and
expense incurred in discovery and almost every other phase of con-
ducting multidistrict litigation.”
We need not reach the question whether the procedure followed in
Baseball should apply in multidistrict class action cases where both federal
and state claims are intermingled or whether the distinction drawn by the
district court should apply. As we discuss, infra, here there is no federal
consumer class claim to be consolidated with the other multidistrict claims.
5. Appellees would have us “transform” the claims under the Cali-
fornia statute into one stating a federal claim. They cite as authority for
this transformation a series of removal cases in which complaints pur-
porting to state claims under state law were found to state facts actually
alleging claims under federal statutes which effectively pre-empted the
state law. See, e.g., Johnson v. England, 356 F.2d 44 (9th Cir.), cert.
denied, 384 U.S. 961 (1966); American Synthetic Rubber Corp. v.
Louisville & N. R. Co., 422 F.2d 462 (6th Cir. 1970). That is not the
situation facing us.
6 Appendix
purchasers) cannot claim under the Clayton Act that overcharges
had been passed on to them by those selling to them.
It follows from I/linois Brick that the consumer class action
claims of these plaintiffs, if construed by us as arising under
federal law, would be dismissed in federal court. While the
process of removal of state actions looks to trial of the removed
cause in a more appropriate forum, here removal will assure
that the cause will never be tried at all. It would be incongruous
for us to construe these state law consumer class claims as arising
under federal law when, under federal law as announced in
Illinois Brick, it would appear that they never arose at all. On the
other hand, under California state law they may not be foreclosed.®
We make no pretense of forecasting state law in this area. We
do say that however state law might be construed, the state should
be free to settle the question. To deny remand under these ex-
traordinary circumstances amounts to federal pre-emption of the
6. While the Supreme Court’s construction of § 4 of the Clayton Act
undoubtedly will be given great deference by state courts in their con-
struction of the state law counterpart (Cal. Bus. & Prof. Code § 16750,
supra n. 2), still it cannot be said with assurance that state policy would
not be held to call for a different construction. The state has recently
enacted California Business and Professions Code § 16760, which provides
in part:
, “The Attorney General may bring a civil action in the name of
the people of the State of California, as parens patriae on behalf
of natural persons residing in the state * * *.”
Here the state has given indication of greater concern for small claims
than is afforded by class action provisions standing alone. It has indicated
a desire that such claimants should not have to rely on private representa-
tion; that the state as parens patriae should attend to their needs. It is
not wholly irrational to suppose that the state had in mind the claims of
ultimate consumers and that it would not approve of wiping out all such
claims against the price fixer in favor of the claims of direct purchasers.
The Hart-Scott-Rodino Antitrust Improvement Act of 1976, 15 U.S.C.
§ 15c, et seq., has made the same provision for parens pea representa-
tion. As Mr. Justice Brennan notes in his dissent in I/linois Brick, ‘The
Senate ag accompanying the new Act expressly found that ‘[t}he
economic burden of most antitrust violations is borne by the consumer
in the form of higher prices for goods and services.’ S.Rep., No. 94-803
* * *”” 431 USS. at 756.
Appendix 7
antitrust laws by judicial act where it is conceded that there is no
congressional pre-emption. Should such action become the general
practice the state would be deprived of any power to legislate
other than in accordance with the Clayton Act as construed in
Illinois Brick.
It may well be true that to have complex state and federal
actions proceeding simultaneously against the same parties will
pose grave problems in the management of litigation. Appellees
urge as another ground for removal that we regard removal here
as in the nature of a bill of peace, designed simply to put together
in one forum all claims based upon the same cause of action,
thus avoiding the harassment that otherwise they feel will surely
result.’
But, as we have noted, that is not what will happen here. State
and federal courts will not be adjudicating identical claims, since
these plaintiffs, as consumers or representatives of consumers,
have no federal claims whatsoever under I/linois Brick. They seek
to advance their claims in a jurisdiction where they may yet
receive recognition.
We conclude that the claims of appellants in their complaints
filed in the superior court for San Francisco, California, arise
under state law and do not arise under federal law; and that the
district court has no jurisdiction to entertain removal of the actions
from state court.
The order denying remand is vacated. The cases are remanded
to the district court with instructions that the motions of appel-
lants for orders remanding the actions to state court be granted.
7. Even were we to favor the bill of peace analogy we doubt that
removal would be an appropriate vehicle. Removal, as we have noted,
contemplates federal trial. Where the purpose is not to bring the chal-
lenged action to trial but to stay it, in order to eliminate complicating
and overlapping litigation, a forthright motion to enjoin state action would
focus on the true problem more accurately and would more directly pre-
sent the values that are competing for accommodation.
8 Appendix
Appendix B
FILED JAN 29 1979
Emile E. Melfi, Jr. Clerk
U.S. Court of Appeals
In the United States Court of Appeals
for the Ninth Circuit
In Re: Sugar Antitrust Litigation State of
California, Madelyne Brinker, et al.,
Plaintiffs-Appellants,
ia No. 76-2937
: No. 76-3001
California and Hawaiian Sugar Co., et al.,
Defendants-Appellees.
ORDER
Before: Merrill and Sneed, Circuit Judges, and Lindberg, District
Judge
The panel as constituted in the above case has voted to modify
the opinion heretofore filed in the respect hereinafter set forth.
With such modification, the panel has voted to deny the petition
for rehearing. Judge Sneed has voted to deny the suggestion for
rehearing en banc, and Judges Merrill and Lindberg have recom-
mended such rejection.
The full court has been advised of the suggestion for en banc
rehearing and of the vote and recommendation of the panel, and
no judge of the court has requested a vote on the suggestion for
rehearing en banc. Fed.R.App.P. 35(b).
The opinion heretofore filed herein is modified in the following
respect:
Appendix : 9
“The quotation from § 16760, California Business & Pro-
fessions Code, set forth in footnote 6 of the opinion on file
herein, is expanded to read as follows:
‘The Attorney General may bring a civil action in the
name of the people of the State of California, as parens
patriae on behalf of natural persons residing in the state,
in the superior court of any county which has jurisdiction
of a defendant, to secure monetary relief as provided in
this section for injury sustained by such natural persons
to their property by reason of any violation of this chapter.
The court shall exclude from the amount of monetary
relief awarded in such action any amount of monetary
relief (A) which duplicates amounts which have been
awarded for the same injury or (B) which is properly
allocable to * * * (ii) any business entity.’ ”
The petition for rehearing is denied and the petition for re-
hearing en banc is rejected.
10 Appendix
Appendix C
United States District Court
Northern District of California
Master File No. MDL-201
In Re: Sugar Antitrust Litigation
This Document Relates To:
State of California, on behalf of itself and its
citizens and residents similarly situated, and
as parens patriae,
Plaintiff, \ 36561 GHB
vs.
California & Hawaiian Sugar Company et al.,
Defendants.
Madelyn Brinker, on her own behalf and that
of all others similarly situated,
Plaintiff,
vs. C-76-562 GHB
Amalgamated Sugar Company, et al.,
Defendants.
ORDER RE: MEMORANDUM DECISION
ON PLAINTIFFS’ MOTION TO REMAND
STATEMENT OF THE CASE
The multidistrict litigation of which the above two cases in
question are a part, is a massive litigation involving several
hundred plaintiffs in about one hundred separate cases, and four-
teen defendants, ten of which are named as defendants in either
one or the other or both of the above cases. The pleadings raise
a considerable number of complex issues and problems. Plaintiffs
are represented by 78 large firms and defendants by 27 large firms
Appendix 11
and on both sides two or more firm members have been assigned
to this litigation. All of the cases have been assigned to the under-
signed judge for the conduct of all phases of pretrial procedure,
including a Final Pretrial Order. A considerable number of the
cases in the litigation have been assigned to this Transferee Judge
for all purposes. Thus, some or all of the cases might be tried by
this judge. On May 24, 1976, the court entered an Order Certifying
a Class Action applicable to all cases in the litigation.
The two cases involved in the remand motion to be determined
in this order are:
The State of California, on behalf of itself and its citizens
and residents similarly situated, and as parens patriae, (here-
inafter California)
v.
California & Hawaiian Sugar Company; Holly Sugar Corpo-
ration; Consolidated Foods Corporation; American Crystal
Sugar Company; Sprekels {sic} Sugar Company, a division
of Amstar Corporation; and California Beet Growers Asso-
ciation, Ltd. and
Madelyn {sic] Brinker, on behalf of herself and all those
similarly situated, (hereinafter Brinker)
v.
Amalgamated Sugar Company; American Crystal Sugar Com-
pany; California & Hawaiian Sugar Company; Great West-
ern Sugar Company; Holly Sugar Corporation; National
Sugar Beet Growers Federation; Amstar Corporation; and
Utah Idaho Sugar Company.
California filed a complaint in the California Superior Court for
San Francisco County alleging three causes of action, each based
on California antitrust laws, California Business and Professions
Code §§ 16720, 16750, 19754 and 16754.5. California also filed a
separate but substantially identical complaint in the Northern
District of California based on alleged violations of the Sherman
Act, which action is pending in this court, (multidistrict litigation
12 Appendix
MDL-201; C 75 1401) against all of the same defendants. Trans-
fer of that case to the state court is not sought by California, Both
state court actions have been removed to this court by defendants
pursuant to 28 U.S.C. § 1446. Defendants contend that this court
has removal jurisdiction under 28 U.S.C. §§ 1441(b) and (c).
The Brinker action alleges one cause of action, based on the
California antitrust laws, specifically California Business and Pro-
fessions Code §§ 16600 through 17096 (Cartwright Act).? De-
fendants have removed the Brinker case to this court pursuant to
28 U.S.C. § 1441(c).
Plaintiffs contend that in their state court cases their alleged
causes of action are based solely on state law and that neither com-
plete diversity of citizenship nor the requisite judisdictional
amount exist.? Alternatively, plaintiffs contend that, if in fact a
federal Sherman Act antitrust claim is asserted in their state court
cases, the state court would have been without jurisdiction to hear
the case, and on removal the federal court would lack jurisdiction
to retain the case. Defendants assert these contentions are without
merit.
The sole basic issue presented is identical in both cases; i.e.,
whether in the particular facts and circumstances of the Sugar
Litigation, remand of these two cases to the state court is manda-
tory. If so, plaintiffs’ motion must be granted, and if not, the
motion should be denied.
DISCUSSION
An order granting remand is not appealable.* Therefore, if
remand is granted, none of the ten defendants in the Brinker and
1. Insubstance, identical to the Sherman Act.
2. On the face of the present record the pleadings of all plaintiffs
present alleged Sherman Act violations the nature of which, if established,
would necessarily support single damage recoveries, each far in excess of
the amount required for diversity jurisdiction.
3. 28 U.S.C. § 1447(d) (1970).
Appendix 13
California state cases will ever have an opportunity to seek review
by either the Ninth Circuit Court of Appeals or by the Supreme
Court of the United States. Courts have long held that the district
courts should be cautious in granting remand so as not to deprive
a defendant of his right to adjudicate in a federal court.* This
admonition, in a matter of national importance, appears to be
equally applicab:e to appellate courts.
This court is well aware that a district judge should follow
decisions of the circuit court in which the judge sits, unless they
can be distinguished either in facts or law and is also aware that
decisions by a panel of that circuit should be followed as though
they were en banc decisions. These propositions are emphasized
because a decision of a 3-judge panel of the Ninth Circuit, at first
glance, appears to preclude denial of remand in the California and
Brinker cases. That case, State of Washington v. American League
of Professional Baseball Clubs, 460 F.2d 654 (9th Cir. 1972),
(hereafter Baseball) involved both an alleged antitrust violation
and a remand to a state court.
However, the California and Brinker cases can be distinguished
from the Baseball case because the cases involved in this proceed-
ing are both multidistrict and class actions. The significance of
these distinctions will be discussed later herein.
The basic problem in both the Baseball case and the instant
cases concerns removal jurisdiction and in particular “derivative
jurisdiction.” Baseball includes an extremely detailed and thorough
review of the doctrine of ‘derivative jurisdiction,” which has its
judicial base in the decision in Lambert Run Coal Company v.
Baltimore and Ohio Railroad Company, 258 U.S. 377 (1922). In
that case Justice Brandeis stated:
“The jurisdiction of the federal court on removal is, in a
limited sense, a derivative jurisdiction. If the state court lacks
4. Boatman’s Bank of St. Louis, Mo. v. Fritzlen, 135 F. 650 (8th Cir.
1905) at 653-655; cert. den. 198 U.S. 586 (1905); Vann v. Jackson, 165
F.Supp. 377 (D.N.C. 1958).
14 Appendix
jurisdiction of the subject matter or of the parties, the federal
court acquires none, although it might in a like suit originally
brought there have had jurisdiction.” Id, at 382.
This doctrine has been vigorously and repeatedly criticized for
several decades. Noted legal scholars have denounced the doctrine
as being contrary to sound and “‘practical judicial administration,”®
courts have criticized the harsh and illogical results produced by
the doctrine,® and the American Law Institute has proposed the
abolition of the doctrine.”
The Ninth Circuit Panel that rendered the decision in Baseball
obviously was very much troubled by the Lambert Run doctrine.
The exhaustive research recorded in their opinion suggests that
Judge Duniway, author of the opinion, and his colleagues on the
Panel made diligent search for a judicial basis on which to dis-
5. J. Moore, COMMENTARY ON THE U.S. JUDICIAL CODE,
219, n. 6 (1949): “Practical judicial administration can look with little
favor upon this technical and subtle doctrine’; 1A J. Moore, FEDERAL
PRACTICE, {| 157[3]} (2d ed. 1974) at 46-7:
“With some logic, but indefensibly from the standpoint of practical
judicial administration, the principle of derivat:ve jurisdiction, as it pertains
to subject-matter jurisdiction of the state court, has been applied so that
any action, commenced in a state court, involving a matter over which the
federal courts have exclusive jurisdiction, is subject to dismissal, after
removal, for want of jurisdiction even though the federal court would have
jurisdiction of a similar case brought originally therein:”
C. Wright, THE LAW OF FEDERAL COURTS (2d ed. 1970) at 132:
“ft}he doctrine may be justifiable ge gE but the results to which
it leads are often absurd”; H. Hart and H. Wechsler, THE FEDERAL
COURTS AND THE FEDERAL SYSTEM (2d ed. 1973) at 1200: citing
J. Moore, COMMENTARY ON THE U.S. JUDICIAL CODE, 219 n. 6
(1949), the authors question the validity of the doctrine.
6. Leesona Corp. v. Concordia Mfg. Co., 312 F. Supp. 392 (D.R.I1.
1970) at 396 (citing Professor Moore and the A.L.I. Proposed Drafts,
[see footnote 7} but following the existing law as stated in the Lambert
Run case); Cunningham v. Bethlehem Steel Co., 231 F. Supp. 934
(S.D.N.Y. 1964) at 937 (citing Professor Moore in a criticism of the
doctrine of derivative jurisdiction).
7. American Law Institute STUDY OF THE DIVISION OF JURIS-
DICTION BETWEEN STATE AND FEDERAL COURTS §§ 1312(d),
1317(b) (1969 Draft).
Appendix 15
tinguish Baseball from the thrust of Lambert Run but finally con-
cluded with obvious misgivings, that “whatever we think of it,
the rule has been applied by the Supreme Court to antitrust cases.”
See Baseball at 659.
In the several years since Baseball was decided, substantial
changes have occurred in the conduct of antitrust litigation. Due
to the widespread application of multidistrict litigation authorized
by 28 U.S.C. § 1407 and the frequent certification of class action
in such litigation, remands comparable to that sought in the
California and Brinker cases will have highly adverse effects upon
efficiency, expediting, avoiding duplication and control of time
and expense incurred in discovery and almost every other phase
of conducting multidistrict litigation.® The above statement is
based on extensive personal experience in conducting multidistrict
litigation beginning with the ‘Electrical Equipment” cases, where-
in unprecedented procedures were devised to cope with many
unprecederited legal problems, many of which were removed by
28 U.S.C. § 1407.
In denying remand in a practically identical situation to that
presented in this proceeding, Judge Inzer B. Wyatt, S.D.N.Y.,
briefly stated the major problems in conducting multidistrict litiga-
tion if identical state litigation was in the course of adjudication
at the same time:
8. In re: Plumbing Fixture Cases, 298 F. Supp. 484 (1968) at 498
contains an appendix briefly summarizing the development and enactment
of 28 U.S.C. § 1407.
In the seven years from enactment of 28 U.S.C. § 1407 in 1968 to
June 30, 1975, over 3,900 civil actions involving innumerable litigants
have been processed in multidistrict litigation by order of the Judicial
Panel on Multidistrict Litigation. Of those cases over 2,500 have been
remanded for trial or terminated in transferee courts. As of June 30, 1975,
approximately 1,400 cases were being processed simultaneously in multi-
district litigation.
In the opinion of this judge, the number of such litigations will continue
to increase indefinitely in the foreseeable future, unless the Supreme Court
or Congress determines that identical state and federal antitrust litigations
may be conducted simultaneously.
16 Appendix
“Under the circumstances of this litigation, there is every
reason to retain jurisdiction over the claims of all plaintiffs
in this action. This is one of some one hundred and fifty
antibiotic drug antitrust actions begun here or transferred
here by the Panel under 28 U.S.C. § 1407. Some twenty-eight
of these are brought by private hospital or Blue Cross
plaintiffs. One of the actions, already referred to, is brought
by these same plaintiffs, represented by the same counsel,
and is based on the same factual situation as in the case at
bar and in all the other cases before the Court. It would be
burdensome and wasteful, both for the parties and for the
judicial system, were pretrial proceedings to be conducted
in this Court in the same one hundred and fifty actions and
at the same time be conducted in the state court in Florida
in one action. The same reasons which caused the Panel to
transfer this action to this Court would dictate the exercise
of discretion to retain jurisdiction over all three plaintiffs
in this action.” Lee’s Prescription Shops, Inc, v. Chas. Pfizer
Co., Inc., CCH Trade Reg. Rep. 973,180 (S.D.N.Y. 1970)
at p. 88, 660).
Grossly unsound judicial administration is inexcusable in a
time when all courts, particularly federal courts and judges, are
overwhelmed to near exhaustion by massive calendars and man-
dated speed-up provisions which, in many instances, are impossible
to achieve without causing grievous injustice to other litigants
whose rights of whatever magnitude must thereby be long delayed
in judicial determination.
It is clear beyond doubt that Congress, in enacting 28 U.S.C.
§ 1407, intended to create a new and unique category of litigation
for federal courts, with the purpose of vesting district courts with
authority, in trial preparation and trial of multiple cases sub-
stantially identical or closely similar and filed in various district
courts throughout the nation, to avoid most, if not all, of the
duplicative and often contradictory practices and procedures estab-
Appendix 17
lished by ill-advised legislative enactments or by overage judicial
decisions now clearly and unmistakably unsound judicial admin-
istration.
It is unlikely that Congress in enacting § 1407 had any intimation
that the Lambert Run doctrine might substantially minimize the
use and effectiveness of the new type of litigation in pursuing the
functions which Congress intended it to perform. The juris-
diction of all federal courts in exclusively vested in Congress and
by that body may be granted, extended, modified or abolished.
In these circumstances, before the remand sought by California
and Brinker can stimulate a flood of litigation identical to that
now in issue, it appears reasonable and desirable that the pro-
posed remand be reviewed by the Ninth Circuit, through a Panel
or en banc, and finally by the United States Supreme Court.
In urging that procedure, perhaps it would be helpful to a
reviewing court to know that both the California state action and
Brinker were deliberately fashioned for the calculated purpose of
precluding federal jurisdiction of their actions. Antitrust litigation
was established by Congress to be enforced by federal courts and
ever since has been generally considered essentially federal litiga-
tion. The enactment of state litigation identical or comparable to
the Sherman Act and other related federal Acts has been of rela-
tively recent origin. Undoubtedly, if the California state action
and Brinker ultimately be remanded, similar state enactments
will rapidly and widely proliferate throughout the nation. Whether
as a matter of national policy that be good or bad for either state
or federal courts or litigants therein, certainly it should not be
determined by indirect means and the contrivance of two resource-
ful litigants. Congress and the United States Supreme Court have
repeatedly emphasized the critical importance of the national
antitrust laws and their enforcement to our nation and its economy.
Only the United States Supreme Court or Congress should deter-
mine national policy of such magnitude.
18 Appendix
Fortunately, the unique facts and circumstances of this particular
proceeding provide a means by which our Circuit Court can offer
the United States Supreme Court an early opportunity to reap-
praise the much condemned Lambert Run doctrine promulgated
54 years ago in an extraordinary case in which the sole basic issue
was what remedy, if any, should be imposed for deliberate con-
cealment of facts pertaining to jurisdiction. Neither the case nor
the decision had even remote relationship to the national antitrust
laws, let alone to multidistrict litigation created only eight years
ago. Moreover, during the last half century great changes have
occurred in our economy and also innumerable important advances
and improvements in sound judicial administration have been
inspired or ordained by the United States Supreme Court.
On April 7, 1976, Chief Justice Burger delivered his Keynote
Address to the National Conference on the Causes of Popular
Dissatisfaction with the Administration of Justice, portions .of
which were published in the April issue of The Third Branch. The
full text is available from the Federal Judicial Center Information
Services and should be read and studied by everyone in the legal
profession who is concerned with improvement in the administra-
tion of justice in this country. The message urges reappraisal of
all time-honored procedures and practices, “even if ... presently
tolerable,” in order to cope with the problems that will be en-
countered during the next half century. (Emphasis added).
The undersigned judge is confident that neither our Circuit nor
the United States Supreme Court will preclude early review by
that court of the Lambert Run doctrine; at a minimum as applied
to multidistrict litigation.
For the reasons above stated, the court finds and holds that the
motions of plaintiffs in Brinker and California for remand of their
state cases to the California Superior Court in and for San Fran-
cisco County, should be and hereby is denied.
Appendix 19
In the opinion of this court, this order involves a controlling
question of law as to which there is substantial ground for differ-
ence of opinion and an immediate appeal from the order may
materially advance the disposition of an impotrant issue in this
litigation. Accordingly, the request for an order certifying for
interlocutory appeal under 28 U.S.C. § 1292(b) is hereby granted.
IT IS HEREBY SO ORDERED this 23rd day of July, 1976.
GEORGE H. BOLDT, SR. U.S. DISTRICT JUDGE
WD WASH-—Sitting by Designation
20 Appendix
Appendix D
Robert J. Staal
Mark F. Anderson
Antitrust Division
Department of Justice
450 Golden Gate Avenue—Room 16432
Box 36046
San Francisco, California 94102
Telephone: (415) 556-6300
FILED: DEC. 19 1974
United States District Court
Northern District of California
Criminal No. CR 74 829 ACW
United States of America,
Vv.
California and Hawaiian Sugar
Company;
Holly Sugar Corporation; and
Consolidated Foods Corporation,
Defendants.
INDICTMENT
15 U.S.C. §1
(Sherman Antitrust Act)
Filed:
The Grand Jury charges:
I
DEFINITIONS
1. As used herein:
(a) “Refined sugar” means any grade or type of saccharine
product derived from sugar beets or sugar cane which
contains sucrose, dextrose or levulose;
Appendix 21
(b) “Refiner’” means any company engaged in the proc-
essing of sugar beets or the refining of raw cane
sugar into, and the sale of, refined sugar;
(c) “Basis price’ means the list price of refined sugar
sold by a refiner f.0.b. its refinery or processing factory;
(d) “Prepaid freight application,’ commonly known as
a “prepay,” means a portion of the delivered price
for refined sugar equal in amount to a freight charge
from a basing point to the customer’s location;
(e) “Delivered price’ means the price of refined sugar
delivered to the customer and generally consists of
the basis price plus the prepaid freight application;
(f) “Allowance” means a discount from delivered price;
(g) “Effective selling price” means the price actually charged
to the customer by the refiner and generally consists
of the delivered price, less any allowance; and
(h) “The Market” means the States of California and
Arizona and the Cities of Las Vegas and Reno, Nevada.
These states and cities have customarily been described
by refiners as the California-Arizona territory.
II
DEFENDANTS
2. Each of the corporations named below is hereby indicted
and made a defendant herein. Each is organized and exists under
the laws of the state, and has its principal place of business in
the city indicated below:
State of Principal Place
Name of Corporation Incorporation of Business
California and Hawaiian Sugar Company....California San Francisco, California
Holly Sugar Corporation...................-..--..-+++ New York Colorado Springs, Colorado
Consolidated Foods Corporation.................... Maryland Chicago, Illinois
22 Appendix
3. During all or part of the period covered by this indictment,
each of the defendant corporations was engaged in the business
of processing and selling refined sugar in The Market.
Ill
CO-CONSPIRATORS
4, Various corporations, firms and individuals not named as
defendants in this indictment participated as co-conspirators in
the offense charged and performed acts and made statements in
furtherance thereof.
IV
TRADE AND COMMERCE
5. Refined sugar is made by processing sugar beets or by
refining raw sugar’ which is derived from crushed sugar cane.
Grocery sugar is sold to grocery wholesalers and retailers for
eventual sale to consumers; industrial sugar is sold in liquid or
dry form in bags or bulk to firms engaged in the preparation and
manufacture of food and beverages. Approximately 22 percent
of the sugar sold in the United States is sold as grocery sugar;
nearly all of the remainder is sold as industrial sugar.
6. Total domestic sales of refined sugar in 1972 amounted
to approximately 212 million hundredweights which had a value
of about $2.5 billion. Of this, in excess of 23 million hundred-
weights or approximately $268 million worth of refined sugar
was sold in The Market. Defendants accounted for over 69 per-
cent of refined sugar sales in The Market.
7. During the period of time covered by this indictement, the
defendant California and Hawaiian Sugar Company received
substantial quantities of raw sugar derived from sugar cane grown
and crushed in the State of Hawaii. There was a substantial and
continuous flow in interstate commerce of said raw sugar from
eo
Appendix 23
the State of Hawaii to the State of California where it was refined
by defendant California and Hawaiian Sugar Company and sold
in The Market.
8. During the period of time covered by this indictment, sub-
stantial quantities of refined sugar, refined or processed in the
State of California, was sold and shipped by defendant and co-
conspirator corporations to customers located in the State of
Arizona and in the Cities of Las Vegas and Reno, Nevada. There
was a substantial and continuous flow of refined sugar in inter-
state commerce from the cane refinery and the sugar beet process-
ing factories of defendants and co-conspirators in the State of
California to customers located in the State of Arizona and in
the Cities of Las Vegas and Reno, Nevada.
Vv
OFFENSE CHARGED
9. Beginning sometime prior to 1970, the exact date being
to the Grand Jurors unknown, and continuing thereafter at least
through 1972, the defendants and co-conspirators engaged in a
combination and conspiracy in unreasonable restraint of the afore-
said interstate trade and commerce in The Market in violation
of Section 1 of the Sherman Act as amended (15 U.S.C. § 1).
10. The aforesaid combination and conspiracy consisted of a
continuing agreement, understanding and concert of action among
the defendants and co-conspirators, the substantial terms of which
were, among others:
(a) to fix and raise the basis prices of refined sugar;
(b) to fix prepaid freight applications;
(c) to eliminate, reduce and prevent giving of allowances
to customers for refined sugar; and
(d) to fix, raise, maintain and stabilize the effective selling
price of refined sugar.
24 Appendix
11. In formulating and effectuating the aforesaid combina-
tion and conspiracy, defendants and co-conspirators did those
things which, as hereinbefore charged, they combined and con-
spired to do, including, among other things, the following:
(a) caused brokers and other third parties to act as go-
betweens in carrying price information and exchanging
assurances on price actions between and among refiners;
(b) discussed data and reached agreements concerning the
formulation of prepaid freight applications for the
purpose and with the effect of maintaining uniform
prepaid freight applications; and
(c) published basis price lists and prepaid freight appli-
cation tables in accordance with agreements reached.
VI
EFFECTS
12. The aforesaid combination and conspi:acy has had the
following effects, among others:
(a) the price of refined sugar has been raised, fixed, main-
tained and stabilized at artificial and noncompetitive
levels;
(b) purchasers of refined sugar have been deprived of
free and open competition in the sale of refined sugar,
and
(c) competition between and among defendants and co-
conspirators has been restricted, suppressed and re-
strained.
VII
JURISDICTION AND VENUE
13. The aforesaid combination and conspiracy was in part
entered into and carried out within the Northern District of
Appendix 25
California and within the jurisdiction of this Court within five
years next preceding the return of this indictment.
Dated:
A TRUE BILL
R. W. Staal
Foreman
ROBERT J. STAAL
Thomas E, Kauper
THOMAS E, KAUPER Mark F. Anderson
Assistant Attorney General MARK F, ANDERSON
Baddia J. Rashid
Christopher S. Crook
BADDIA J. RASHID CHRISTOPHER S, CROOK
Glenda R. Jermanovich
ANTHONY E. DESMOND GLENDA R. JERMANOVICH
Attorneys, Attorneys,
Department of Justice Department of Justice
26 Appendix
Appendix E
Evelle J. Younger
Attorney General
Warren J. Abbott
Assistant Attorney General
Michael I. Spiegel
Richard N. Light
Deputy Attorneys General
6000 State Building
San Francisco, California 94102
Telephone: (415) 557-0211
Attorneys for Plaintiff
State of California
United States District Court
Northern District of California
Master File No. MDL 201
IN RE: SUGAR ANTITRUST LITIGATION
This Document Relates to:
The State of California, on behalf of itself,
political subdivisions, public agencies, and
districts of the State of California, and its
citizens and residents, similarly situated,
Plaintiffs,
v.
California and Hawaiian Sugar Company;
Holly Sugar Corporation; Consolidated
Foods Corporation; American Crystal Sugar
Company; Spreckels Sugar Company, a divi-
sion of Amstar Corporation, and California
Beet Growers Association, Ltd.,
Defendants.
Se
Appendix 27
Civil Action No.
C 75 1401 GHB
SECOND AMENDED CLASS ACTION COMPLAINT FOR
TREBLE DAMAGES UNDER THE ANTITRUST LAWS
(JURY DEMANDED)
COMPLAINT
The State of California, acting on its own behalf and on behalf
of a class consisting of all political subdivisions, public agencies
and districts formed and existing under the laws of the State of
California and similarly situated, and on behalf of a class con-
sisting of its citizens and residents and similarly situated, demands
a jury trial, and complains and alleges as follows:
I.
JURISDICTION AND VENUE
1. Plaintiff, the State of California, files complaint and invokes
the jurisdiction of this court under the provisions of sections 4 and
16 of the Act of Congress of October 15, 1914 (15 U.S.C. §§ 15
and 26), commonly known as the Clayton Act, to recover treble
damages for injuries sustained by the State of California, and by
the two classes it represents, resulting from violations of sections
1 and 2 of the Act of Congress of July 8, 1890, as amended
(15 U.S.C. §§$ 1, 2), commonly known as the Sherman Act, and
to prevent and restrain continuing violation by the defendants
of the Act. .
2. Each of the defendants maintains an office, or is an inhab-
itant, or has an agent, or transacts business, and is found within
the Northern District of California. (15 U.S.C. § 22.)
3. Many of the unlawful acts done pursuant to the alleged
combination and conspiracy have been performed within the
Northern District of California and the interstate trade and
commerce described in this complaint is carried on, in part, within
this district.
28 Appendix
Il.
DEFINITIONS
4. Asused herein:
(a) “refined sugar” means any grade or type of saccha-
rine product derived from sugar beets or sugar cane which
contains sucrose, dextrose or levulose;
(b) “refiner” means any company engaged in the pro-
cessing of sugar beets or the refining of raw cane sugar into,
and the sale of, refined sugar;
(c) “basis price” means the list price of refined sugar
sold by a refiner f.0.b. its refinery or processing factory;
(d) “prepaid freight application,” commonly known as
a “prepay”, means a portion of the delivered price for refined
sugar equal in amount to a freight charge from a basing
point to the customer’s location;
(e) ‘delivered price” means the price of refined sugar
delivered to the customer and generally consists of the basis
price plus the prepaid freight application;
(f) “allowance” means a discount from delivered price;
(g) “effective selling price” means the price actually
charged to the customer by the refiner and generally consists
of the delivered price, less any allowance; and
(h) “The Market” means the states of California and
Arizona and the cities of Las Vegas and Reno, Nevada.
These states and cities have customarily been described by
refiners as the California-Arizona territory.
Il.
PLAINTIFF
5. Plaintiff, the State of Cakifornia, brings this action under
Rule 23 of the Federal Rules of Civil Procedure, on behalf of
itself and two alleged classes.
a owe a ee ote ee te
Appendix 29
6. Plaintiff, the State of California, purchases and, during the
period in suit, has purchased, large amounts of refined sugar,
either directly from one or more of the defendants, except defen-
dant California Beet Growers Association (hereinafter referred
to as “Association”, or other refiners or indirectly through dis-
tributors, including retail grocery stores, and has sustained dam-
ages as a result of the combination and conspiracy and violations
of the autitrust laws herein alleged.
IV.
PUBLIC ENTITY CLASS
7. Plaintiff, the State of California, represents a class consist-
ing of all public agencies, political subdivisions, public entities
and districts which were formed and exist under the laws of the
State of California and which have, during the period in suit,
purchased refined sugar, either directly from one or more of
defendants, except defendant Association, or other refiners, or
indirectly through distributors. The number of members of this
class is presently unknown, but it is estimated to be well in excess
of several hundred governmental entities.
8. Because of the large number of public entity class members
and the expense and burden to the parties and to the court of liti-
gating each of their claims separately, it is impractical to bring
them all before this court. This class action is superior to any
other method for the fair and efficient adjudication of the contro-
versy described herein.
9. The claims of plaintiff, the State of California, are sub-
stantially the same as the claims of the public entity class, except
as to the amount of damages and threatened damage or injury
the class has or will have by itself sustained; all other questions
of fact and law are common to the class, including, but not limited
to, the alleged combination, conspiracy and continuing course
of conduct in violation of sections 1 and 2 of the Sherman Act
(15 USS.C. §§ 1, 2) and the effects of such violation.
30 Appendix
10. The questions of law and fact common to the members
of the public entity class predominate over any questions affecting
only individual members. ;
11. Plaintiff, the State of California, through its Attorney
General, can and will fairly and adequately represent the interests
of the entire class.
V.
CONSUMER CLASS
12. Plaintiff, the State of California, in addition represents
a consumer class pursuant to Rule 23 of the Federal Rules of
Civil Procedure consisting of California citizens and residents
who have purchased refined sugar at retail for use or consumption
during the period of the alleged conspiracy. Citizens and residents
purchase refined sugar at retail for use or consumption on the
basis of household units. The number of members of this class,
based on the number of household units in California, is estimated
to be at least 7,000,000.
13. Because of the large number of consumer class members
and the expense and burden to the parties and to the court of
litigating each of their claims separately, it is impractical to bring
them all before this court. This class action is superior to any
other method for the fair and efficient adjudication of the con-
troversy described herein.
14. The claims of plaintiff, the State of California, are sub-
stantially the same as the claims of the consumer class, except
as to the amount of damages and threatened damage or injury
the class has or will have by itself sustained; all other questions
of fact and law are common to the class, including, but not limited
to, the alleged combination, conspiracy and continuing course of
conduct in violation of sections 1 and 2 of the Sherman Act (15
U.S.C. §§ 1, 2) and effects of such violation.
a eee
Appendix 31
15. The questions of law and fact common to the members
of the consumer class predominate over any questions affecting
only individual members.
16. Plaintiff, the State of California, through its Attorney
General, can and will fairly and adequately represent the interests
of the entire class.
VI.
DEFENDANTS
17. Each of the corporations named below is made a defendant
herein. Each is organized and exists under the laws of the state,
and has its principal place of business in the city, indicated below,
except that defendant American Crystal Sugar Company is a dis-
solved New Jersey Corporation whose principal place of business
before dissolution was Denver, Colorado,
State of Principal Place
Name of Corporation Incorporation of Business
California and Hawaiian Sugar Company....California San Francisco, California
Holly Sugar Corporation New York Colorado Springs, Colorado
Consolidated Foods Corporation.................... Maryland Chicago, Illinois
American Crystal Sugar Company............ New Jersey Denver, Colorado
Spreckels Sugar Company, a division
of Amstar Corporation. .............ccccceccececeoeee Delaware San Francisco, California
California Beet Growers Association, Ltd.....California Stockton, California
18. During all or part of the period covered by this complaint
each of the defendant corporations, except defendant “‘Associa-
tion”, was engaged in the business of processing and selling
refined sugar in The Market. The “Association” is a corporation
and a trade association whose members consist of growers of sugar
beets.
VII.
CO-CONSPIRA TORS
19. Various corporations, firms and individuals not named
as defendants in this complaint participated as co-conspirators
32 Appendix
in the violations alleged and performed acts and made statements
in furtherance thereof. Said co-conspirators include, but are not
limited to McKeaney-Flavell Co., Inc., Saroni Sugar & Rice, Inc.,
Syrup Products, Ltd. (formerly known as Sugar Products Co.,
Inc.), and Wallenbrock-Bleuel, Inc.
VIII.
NATURE OF TRADE AND COMMERCE
20. Refined sugar is made by processing sugar beets or by
refining raw sugar which is derived from crushed suger cane.
Grocery sugar is sold to grocery wholesalers and retailers for
eventual sale to consumers; industrial sugar is sold in liquid or
dry form in bags or bulk to firms engaged in the preparation and
manufacture of food and beverages. Approximately 22 percent
of the sugar sold in the United States ‘s sold as grocery sugar;
nearly all of the remainder is sold as industrial sugar.
21. Total domestic sales of refined sugar in 1972 amounted to
approximately 212 million hundredweights, which had a value
of about $2.5 billion. Of this, in excess of 23 million hundred-
weights or approximately $268 million worth of refined sugar
was sold in The Market. Defendants, except for defendant “Asso-
ciation”, accounted for over 99 percent of refined sugar sales
in The Market.
22. During the period of time covered by this compla.ut,
defendant California and Hawaiian Sugar Company received
substantial quantities of raw sugar derived from sugar cane grown
and crushed in the State of Hawaii. There was a substantial and
continuous flow in interstate commerce of said raw sugar from
the State of Hawaii to the State of California where it was refined
by defendant California and Hawaiian Sugar Company and sold
in The Market.
23. During the period of time covered by this complaint,
substantial quantities of refined sugar, refined or processed in
Se eS
Appendix 33
the State of California, was sold and shipped by defendants,
except defendant “Association”, and co-conspirator corporations
to customers located in the State of Arizona and in the cities
of Las Vegas and Reno, Nevada. There was a substantial and
continuous flow of refined sugar in interstate commerce from the
cane refinery and the sugar beet processing factories of defendants
and co-conspirators in the State of California to customers located
in the State of Arizona and in the cities of Las Vegas and Reno,
Nevada.
IX.
VIOLATIONS ALLEGED
24. Beginning sometime prior to 1949, the exact date being
to the plaintiff unknown, and continuing thereafter at least through
1972, the defendants and co-conspirators engaged in a combina-
tion and conspiracy in unreasonable restraint of the aforesaid
interstate trade and commerce in The Market in violation of sec-
tion 1 of the Sherman Act, as amended (15 U.S.C. § 1); and have
combined and conspired to monopolize and attempted to monopo-
lize such trade and commerce in violation of section 2 of the
Sherman Act (15 U.S.C. §2). These violations of law may
continue unless the relief hereinafter prayed for is granted.
25. The aforesaid combination and conspiracy to restrain trade
in violation of section 1 of the Sherman Act consisted of a con-
tinuing agreement, understanding and concert of action among
the defendants and co-conspirators, the substantial terms of which
were, among others:
(a) to fix and raise the basis prices of refined sugar;
(b) to fix prepaid freight applications;
(c) to eliminate, reduce and prevent the giving of allow-
ances to customers for refined sugar; and
(d) to fix, raise, maintain and stabilize the effective sell-
ing price of refined sugar.
34 Appendix
26. In formulating and effectuating the aforesaid combination
and conspiracy to restrain trade in violation of section 1 of the
Sherman Act, defendants and co-onspirators did those things
which, as hereinbefore alleged, they combined and conspired
to do, including, among other things, the following:
(a) caused brokers and other third parties to act as
go-betweens in carrying price information and exchanging
assurances on price actions between and among refiners; |
(b) discussed data and reached agreements concerning
the formulation of prepaid freight applications for the pur-
pose and with the effect of maintaining uniform prepaid
freight applications; and : é
(c) published basis price lists and prepaid freight appli-
cation tables in accordance with agreements reached.
X.
EFFECTS
27. The aforesaid combination and conspiracy has had, among
others, the following effects: |
(a) the price of refined sugar has been raised, fixed, main-
tained and stabilized at artificial and noncompetitive levels;
(b) purchasers of refined sugar have been deprived of
free and open competition in the sale of refined sugar; and
(c) competition between and among defendants and co-
conspirators has been restricted, suppressed and restrained.
XI.
INJURY TO PLAINTIFFS
28. During and throughout the period of the aforesaid con-
spiracy, plaintiff and the public eptity class it represents purchased
substantial quantities of refined sugar, either directly from the
defendants, except defendant “Association”, or other refiners
ye See
Appendix 35
or indirectly through distributors. By reason of the defendants’
illegal conduct, plaintiff and the public entity class it represents
was compelled to pay and has paid substantially higher prices
for refined sugar than they would have paid had the defendants’
combination and conspiracy not existed,
29. During and throughout the period of the aforesaid con-
spiracy, plaintiff and the consumer class it represents purchased
substantial quantities of refined sugar from the defendants, except
defendant “Association”, or other refiners indirectly through dis-
tributors including retail grocery stores. By reason of the defend-
ants illegal conduct, Plaintiff and the consumer class it represents
were compelled to pay and have paid substantially higher prices
for refined sugar than they would have paid had the defendants’
combination and conspiracy not existed.
30. As a result of the defendants’ illegal combination and
conspiracy, plaintiff and the public entity and consumer classes
it represents have each sustained substantial loss and damage
in its property in an amount which is presently undetermined.
When such amount has been ascertained, plaintiff will seek leave
of court to amend this complaint to insert said amount herein.
XII.
FRAUDULENT CONCEALMENT
31. Plaintiff State of California and every member of the two
classes it represents had no knowledge of the aforesaid combina-
tion and conspiracy, or of any fact which through the exercise of
reasonable diligence would have led to the discovery thereof, prior
to the issuance of an indictment against said defendants relating
to the acts complained of herein on December 19, 1974. Plaintiff
State of California and every member of the two classes it repre-
sents could not have discovered, by the exercise of due diligence,
the alleged combination and conspiracy at an earlier date since
the conspiracy had been fraudulently concealed by defendants
by various means and methods used to avoid the detection thereof.
36 Appendix
32. By virtue of this fraudulent concealment, plaintift ‘aenerts
the tolling of any applicable statute or period of limitations
affecting the rights of action of plaintiff and the two classes it
represents.
XIII.
EQUITABLE RELIEF
33, Plaintiff and the two classes it represents are now and
have been purchasers of refined sugar. ;
34. The violations herein alleged have caused and are causing
great, lasting and irreparable injuries to plaintiff, to the two
classes it represents and to the public interest in general, and can
be expected to continue unless and until enjoined by the court.
XIV.
JURY DEMAND
35. Plaintiff respectfully demands a jury pursuant to Rule
35(b) of the Federal Rules of Civil Procedure.
PRAYER FOR RELIEF
36. WHEREFORE, plaintiffs pray:
A. That the court adjudge and decree that the aforesaid
combination and conspiracy, and the acts done in pursuance
thereof, were and are in unlawful restraint of trade and
commerce, in violation of section 1 of the Sherman Act;
B. That the court adjudge and decree that the defendants
have combined and conspired to monopolize and attempted
to monopolize trade and commerce in violation of section 2
of the Sherman Act;
C. That the court determine, as provided by Rule 23
of the Federal Rules of Civil Procedure, that this action is a
proper class action as to both public entities and co1isumers
a
Appendix 37
and that the State of California is a proper class representa-
tive as to each class, and that the best practicable notice
of this action be given to each and every member of the two
classes represented by plaintiff in this action;
D. That plaintiff and the two classes represented herein
recover from defendants three fold the damages determined
to have been sustained, and that joint and several judgments
in favor of plaintiff and the two classes, respectively, be
entered herein against the defendants and each of them;
E. That the defendants be enjoined from continuing the
combination and conspiracy herein alleged, and from enter-
ing into any combination, conspiracy, agreement, understand-
ing or concert of action having similar purposes or effects;
F. That the plaintiff and the two classes represented
herein recover from defendants the cost of this suit and
reasonable attorneys’ fees, as provided in section 4 of the
Clayton Act; and
G. That the plaintiff and the two classes represented
herein have such other, further and different relief as the
nature of this case may require or as to the court shall seem
just.
DATED: March 31, 1976
EVELLE J. YOUNGER
Attorney General
WARREN J. ABBOTT
Assistant Attorney General
MICHAEL I. SPIEGEL
Deputy Attorney General
RICHARD N. LIGHT
Richard N. Light
Deputy Attorney General
38 Appendix
Appendix F
FEB 7 1976
Evelle J. Younger, Attorney General
Warren J. Abbott
Assistant Attorney General
Michael I. Spiegel
Richard N. Light
Deputy Attorneys General
6000 State Building
San Francisco, California 94102
Telephone: (415) 557-0211
Attorneys for Plaintiff
State of California
ENDORSED—FILED
FEB 4 - 1976
CARL M. OLSEN, Clerk
BY F. MELANEPHY
Deputy Clerk
Superior Court of the State of California
City and County of San Francisco
The State of California, on behalf of itself and
its citizens and residents similarly situated,
ns pattiae,
en eee Plaintiffs,
v.
California and Hawaiian Sugar Company;
Holly Sugar Corporation; Consolidated
Foods Corporation; American Crystal Sugar
Company; Spreckels Sugar Company, a divi-
sion of Amstar Corporation, and; California
Beet Growers Association, Ltd.,
Defendants.
i Bk es a nt ke
Ap pendix 39
No. 701-607
COMPLAINT FOR TREBLE DAMAGES AND FOR
EQUITABLE RELIEF UNDER THE CALIFORNIA
ANTITRUST LAWS
The State of California, acting on behalf of itself and a class
consisting of California citizens and residents and similarly sit-
uated, and as parens: patriae, brings this complaint against the
defendants named herein and alleges:
I,
FIRST CAUSE OF ACTION
JURISDICTION AND VENUE
1. Plaintiff, the State of California, files complaint and invokes
the jurisdiction of this court under the provisions of section 16750,
of the California Business and Professions Code, to recover treble
damages for injuries sustained by it and by the class it represents,
arising from violation by defendants of section 16720 of the
California Business and Professions Code, commonly known as
the California Cartwright Act.
2. Plaintiff State of California brings this action through its
Attorney General, Evelle J. Younger, to recover damages for
itself and the class it represents based on California Business and
Professions Code section 16750(c) and California Civil Code
section 382;
3. Each defendant transacts business within the State of Cali-
fornia, and resides or is found or does business, or has an agent
who resides or is found or does business, or is subject to service
of process, in the City and County of San Francisco.
4. Many of the unlawful acts done pursuant to the alleged
combination and conspiracy have been performed within the
City and County of San Francisco, and the trade and commerce
described in this complaint is carried on, in part, within the
City and County of San Francisco.
40 Appendix
DEFINITIONS
5. Asused herein: |
(a) “refined sugar” means any grade or type of saccharine
product derived from sugar beets or sugar cane which con-
tains sucrose, dextrose or levulose; ;
(b) “refiner” means any company engaged in the proces-
sing of sugar beets or the refining of raw cane sugar into,
and the sale of refined sugar;
(c) “basis price” means the list price of refined sugar
sold by a refiner f.o.b. its refinery or processing factory;
(d) “prepaid freight application,” commonly known as
a “prepay”, means a portion of the delivered price for
refined sugar equal in amount to a freight charge from a
basing point to the customer's location ;
(e) “delivered price” means the price of refined sugar
delivered to the customer and generally consists of the basis
price plus the prepaid freight application;
(f) “allowance” means a discount from delivered price;
(g) “effective selling price’ means the price actually
charged to the customer by the refiner and generally consists
of the delivered price, less any allowance; and
(h) “The Market” means the states of California and
Arizona and the cities of Las Vegas and Reno, Nevada.
These states and cities have customarily been described by
refiners as the California-Arizona territory.
PLAINTIFFS
6. Plaintiff, the State of California, purchases and, during the
period in suit, has purchased substantial quantities of refined
sugar from one or more defendants, except defendant California
Beet Growers Association (hereinafter referred to as “Associa-
Appendix 41
tion”), or other refiners, including indirectly through, among
other intermediaries, retail grocery stores, and has sustained
damages as a result of the combination and conspiracy and viola-
tions of the antitrust laws herein alleged.
CONSUMER CLASS
7. Plaintiff, the State of California, represents a consumer
class pursuant to California Civil Code section 382 consisting of
California citizens and residents who have purchased refined
sugar at retail for use or consumption during the period of the
alleged conspiracy. Refined sugar is purchased by citizens and
residents at retail for use or consumption on the basis of house-
hold units. The number of members of this class based on the
number of household units in California, accordingly, is estimated
to be at least 7 million.
8. The alleged class is ascertainable and has a well defined
community of interest in the questions of fact and law arising
from the matters alleged herein.
9. Because of the large number of class members and the
expense and burden to the parties and to the court of litigating
each of their claims separately, it is impractical to bring them
all before this court. This class action is superior to any other
method for the fair and efficient adjudication of the controversy
described herein.
10. The claims of plaintiff, the State of California, are sub-
stantially the same as the claims of the class, except as to the
amount of damages the class has or will have by itself sustained;
all other questions of fact and law are common to the class,
including, but not limited to, the alleged combination, conspiracy
and continuing course of conduct in violation of section 16720
of the California Business and Professions Code and the effects of
such violation.
42 Appendix
11. The questions of law and fact common to the members
of the class predominate over any questions affecting only indi-
vidual members.
12. Plaintiff, the State of California, through its Attorney
General, can and will fairly and adequately represent the interests
of the entire class.
DEFENDANTS
13. Each of the corporations named below is made a defend-
ant herein. Each is organized and exists under the laws of the
state, and has its principal place of business in the city, indicated
below, except the defendant American Crystal Sugar Company
is a dissolved New Jersey Corporation whose principal place of
business before dissolution was Denver, Colorado.
State of Principal Place
Name of Corporation Incorporation of Business
ifornia and Hawaiian Sugar Company....California San Francisco, California
aa roe Corporation New York Colorado Springs, Colorado
Consolidated Foods Corporation.................-. Maryland Chicago, Illinois
American Crystal Sugar Company.............. New Jersey Denver, Colorado
Spreckels Sugar Company, a division age
a race Corporation Delaware San Francisco, California
California Beet Growers Association, Ltd.....California Stockton, California
14. During all or part of the period covered by this complaint
each of the defendant corporations, except defendant “Associa-
tion”, was engaged in the business of processing and selling refined
sugar in The Market. The “Association” is a corporation and a
trade association whose members consist of growers of sugar beets.
CO-CONSPIRATORS
15. Various corporations, firms and individuals not named
as defendants in this comp.aint participated as co-conspirators
in the violations alleged and performed acts and made statements
in furtherance thereof, Said co-conspirators include, but are not
a a ee
ptt teithes th = yee eee
Appendix 43
limited to McKeaney-Flavell Co., Inc., Saroni Sugar & Rice, Inc.,
Syrup Products, Ltd. (formerly known as Sugar Products Co.,
Inc.), and Wallenbrock-Bleuel, Inc.
NATURE OF TRADE AND COMMERCE
16. Refined sugar is made by processing sugar beets or by
refining raw sugar which is derived from crushed sugar cane.
Grocery sugar is sold to grocery wholesalers and retailers for
eventual sale to consumers; industrial sugar is sold in liquid or
dry form in bags or bulk to firms engaged in the preparation and
manufacture of food and beverages. Approximately 22 percent
of the sugar sold in the United States is sold as grocery sugar;
nearly all of the remainder is sold as industrial sugar.
17. Total domestic sales of refined sugar in 1972 amounted
to approximately 212 million hundredweights, which had a value
of about $2.5 billion. Of this, in excess of 23 million hundted-
weights or approximately $268 million worth of refined sugar
was sold in The Market. Defendants, except for defendant
“Association”, accounted for over 99 percent of refined sugar
sales in The Market.
VIOLATIONS ALLEGED
18. Beginning sometime prior to 1949, the exact date being
to the plaintiff unknown, and continuing thereafter at least
through 1972, the defendants and co-conspirators engaged in a
combination and conspiracy in unreasonable restraint of the afore-
said interstate trade and commerce in The Market in violation
of California Business and Professions Code section 16720; and
have combined and conspired to monopolize such trade and com-
merce in violation of California Business and Professions Code
section 16720.
19. The aforesaid combination and conspiracy to restrain
trade in violation of California Business and Professions Code
44 Appendix
section 16720 consisted of a continuing agreement, understanding
and concert of action among the defendants and co-conspirators,
the substantial terms of which were, among others:
(a) to fix and raise the basis price of refined sugar;
(b) to fix prepaid freight applications;
(c) to eliminate, reduce and prevent the giving of allow-
ance to customers for refined sugar; and
(d) to fix, raise, maintain and stabilize the effective
selling price of refined sugar.
20. In formulating and effectuating the aforesaid combina-
tion and conspiracy to restrain trade in violation of section 1 of
the Sherman Act, defendants and co-conspirators did those things
which, as hereinbefore alleged, they combined and conspired to
do, including among other things, the following:
(a) cause brokers and other third parties to act as go-
betweens in carrying price information and exchanging assur-
ances on price actions between and among refiners;
(b) discussed data and reached agreements concerning
the formulation of prepaid freight applications for the pur-
pose and with the effect of maintaining uniform prepaid
freight applications; and
(c) published basis price lists and prepaid freight appli-
cation tables in accordance with agreements reached.
EFFECTS
21. The aforesaid combination and conspiracy had, among
others, the following effects:
(a) the price of refined sugar has been raised, fixed,
maintained and stabilized at artificial and non-competitive
levels; :
(b) purchasers of refined sugar have been deprived of
free and open competition in the sale of refined sugar; and
ee ee eee eee
Appendix 45
(c) competition between and among defendants and co-
conspirators has been restricted, suppressed and restrained.
INJURY TO PLAINTIFFS
22. During and throughout the period of the aforesaid con-
spitacy, plaintiff and the consumer class it represents, purchased
substantial quantities of refined sugar from defendants, except
defendant “Association”, or other refiners, including indirectly
through, among other intermediaries, retail grocery stores. By
reason of the defendants’ illegal conduct, plaintiff and the con-
sumer class it represents, were compelled to pay and have paid
substantially higher prices for refined sugar than they would have
paid had the defendants’ combination and conspiracy not existed.
23. As a result of the defendants’ illegal combination and
conspiracy, plaintiff and the consumer class it represents, have
sustained substantial loss and damage in their property in an
amount which is presently undetermined. When such amounts
have been ascertained, plaintiff will seek leave of court to amend
this complaint to insert said amount herein.
FRAUDULENT CONCEALMENT
24. Plaintiff State of California and every member of the
consumer class it represents had no knowledge of the aforesaid
combination and conspiracy, or of any fact which through the
exercise of reasonable diligence would have led to the discovery
thereof, prior tu the issuance of an indictment against said
defendants relating to the acts complained of herein on December
19, 1974, Plaintiff State of California and every member of the
class it represents could not have discovered, by the exercise of
due diligence, the alleged combination and conspiracy at an
earlier date since the conspiracy had been fraudulently concealed
by defendants by various means and methods used to avoid the
detection thereof.
46 Appendix
25. By virtue of this fraudulent concealment, plaintiff asserts
the tolling of any applicable statute or period of limitations
affecting the rights of action of plaintiff, on behalf of itself and
the class it represents.
II.
SECOND CAUSE OF ACTION
(PARENS PATRIAE)
26. Plaintiff, State of California, realleges and incorporates
by reference Paragraphs 3 through 21, inclusive, except para-
graphs 7 through 12, of the First Cause of Action, as though set
forth at length herein.
27. Plaintiff, the State of California, as parens patriae, files
complaint and invokes the jurisdiction of this court under the
provisions of section 16750 of the California Business and Pro-
fessions Code, to recover treble damages for injuries sustained by
its citizens arising from violations by defendants of section 16720
of the California Business and Professions Code, commonly
known as the California Cartwright Act.
28. Plaintiff State of California brings this action parens
patriae as representative of its citizens to recover damages through
its Attorney General, based on the common law, and based on
California Constitution Article 5, section 13 establishing the
Attorney General as the chief law officer of the State.
29. Plaintiff, the State of California, as sovereign, protector,
guardian, and agent of all its citizens sues parens patriae as
representative of its citizens who are natural persons and who
have not sued in their own right. This parens patriae action 1s
brought for treble the amount of damages suffered by the citizens
of California as a result of defendants’ violation of the antitrust
laws as alieged herein. Plaintiff, the State of California, brings
this action parens patriae pursuant to its duty to protect the in-
terests of its citizens, where it is impractical or impossible for its
SE ke A ET ernie ed set
Me A ABP 0.
OT aA tanta aa GTR at rt Mel os Ee le BE a Te et BP A
Appendix 47
citizens to protect their own interests by bringing individual suits
to recover damages.
INJURY TO PLAINTIFFS
30. During and throughout the period of the aforesaid con-
Spiracy, plaintiff and the California citizens here represented
parens patriae, purchased substantial quantities of refined sugar
from defendants, except defendant “Association”, or other re-
finers, including indirectly through, among other intermediaries,
retail grocery stores. By reason of the defendants’ illegal conduct,
plaintiff and the California citizens here represented parens
patriae, were compelled to pay and have paid substantially higher
prices for refined sugar than they would have paid had the de-
fendants’ combination and conspiracy not existed.
31. As a result of the defendants’ illegal combination and
conspiracy, plaintiff and the California citizens here represented
parens patriae, have sustained substantial loss and damage in
their property in an amount which is presently undetermined.
When such amounts have been ascertained, plaintiff will seek
leave of court to amend this complaint to insert said amount
herein.
FRAUDULENT CONCEALMENT
32. Plaintiff State of California and every California citizen
here represented parens patriae, had no knowledge of the afore-
said combination and conspiracy, or of any fact which through
the exercise of reasonable diligence would have led to the dis-
covery thereof, prior to the issuance of an indictment against
said defendants relating to the acts complained of herein on
December 19, 1974. Plaintiff State of California, and every
California citizen here represented parens patriae, could not have
discovered by the exercise of due diligence the alleged combina-
tion and conspiracy at an earlier date since the conspiracy had
48 Appendix
been fraudulently concealed by defendants by various means and
methods used to avoid the detection thereof.
33. By virtue of this fraudulent concealment, plaintiff asserts
the tolling of any applicable statute or period of limitations affect-
ing the rights of action of plaintiff, on behalf of itself and the
California citizens it represents as parens patriae.
Il.
THIRD CAUSE OF ACTION
(Equitable relief with Exemplary Damages)
34. Plaintiff, the State of California, realleges and incorporates
by reference paragraphs 3 through 21, inclusive, except para-
graphs 7 through 12, of the First Cause of Action, as set forth at
length herein.
35. Plaintiff, the State of California files complaint and invokes
the jurisdiction of this court under the provisions of sections 16754
and 16754.5 of the California Business and Professions Code for
equitable relief by way of injunction and return or disgorging
of all overcharges with exemplary damages, arising from violation
by defendants of section 16720 of the California Business and
Professions Code, commonly known as the California Cartwright
Act.
36. Plaintiff State of California brings this action through its
Attorney General for equitable relief by way of injunction and -
return of disgorging of overcharges based on California Business
and Professions Code sections 16754 and 16754.5, and seeks
exemplary damages based on California Civil Code section 3294.
INJURY TO PLAINTIFFS
37. During and throughout the period of the aforesaid con-
spiracy, plaintiff and citizens of California purchased substantial
quantities of refined sugar from defendants, except defendant
Appendix 49
“Association”, or other refiners, including indirectly through,
among other intermediaries, retail grocery stores. By reason of
the defendants’ illegal conduct, plaintiff and the citizens of
California were compelled to pay and have paid substantially
higher prices for refined sugar than they would have paid had
the defendants’ combination and conspiracy not existed.
38. As a result of the defendants’ illegal combination and
conspiracy, plaintiff and California citizens have sustained sub-
stantial loss and damage in their property in an amount which is
presently undetermined. When such amounts have been ascer-
tained, plaintiff will seek leave of court to amend this complaint
to insert said amount herein.
FRAUDULENT CONCEALMENT
39. Plaintiff State of California and every California citizen
had no knowledge of the aforesaid combination and conspiracy.
or of any fact which through the exercise of reasonable diligence
would have led to the discovery thereof, prior to the issuance of
an indictment against said defendants relating to the acts com-
plained of herein on December 19, 1974. Plaintiff State of Cali-
fornia and every California citizen could not have discovered, by
the exercise of due diligence, the alleged combination and con-
Spiracy at an earlier date since the conspiracy had been fraudu-
lently concealed by dciendants by various means and methods
used to avoid the detection thereof.
40. By virtue of this fraudulent concealment, plaintiff asserts
the tolling of any applicable statute or period of limitations
affecting the rights of action of plaintiff and the citizens of
California.
41. Plaintiff the State of California and many of its citizens
are now and have been purchasers of refined sugar.
42. The violations herein alleged have caused and are causing
great, lasting and irreparable injuries to plaintiff, to many of its
50 Appendix
citizens, and to the public interest in general, and can be expected
to continue unless and until enjoined by the Court in accordance
with California Business and Professions Code section 16754.5.
43. Complete justice requires that defendants be required to
return to plaintiff State of California and to those citizens who
have been purchasers of refined sugar, or otherwise to disgorge,
the illegal overcharges they have realized as a result of the
violations herein alleged, and that they in addition be required
to pay exemplary damages pursuant to California Civil Code
section 3294 to plaintiff State of California and to its citizens
who have suffered injury as a result of the violations herein
alleged.
PRAYER FOR RELIEF
44, WHEREFORE, plaintiffs pray:
A. That the court adjudge and decree that the aforesaid
combination and conspiracy, and the acts done in pursuance
thereof, were and are in unlawful restraint of trade and
commerce, in violation of section 16720 of the California
Business and Professions Code.
B. That the court adjudge and decree that the defend-
ants have combined and conspired to monopolize trade and
commerce in violation of section 16720 of the California
Business and Professions Code.
C. That the court determine that this action is a proper
consumer class action and that the State of California is a
proper class representative, and that the best practicable
notice of this action be given to each and every member of
the class represented by plaintiff in this action;
D. That, in the event the court determines that this
action is not a proper consunter class action, the court deter-
mine instead that the State of California may bring this
action parens patriae as representative of its citizens;
le i 2 he ect ee ——————
Appendix 51
E. That plaintiff and the class represented herein, or in
lieu of said class plaintiff acting as parens patriae, recover
from defendants three-fold the damages determined to have
been sustained, and that joint and several judgments in
favor of plaintiff and the class, or in lieu of said class plain-
tiff acting as parens patriae, respectively, be entered herein
against the defendants and each of them;
F. That the defendants be enjoined from continuing the
combination and conspiracy herein alleged, and from enter-
ing into any combination, conspiracy, agreement, under-
standing or concert of action having similar purposes or
effects;
G. That the Court, in the event it determines that this
action is not a proper consumer class action and that the
State of California may not bring this action parens patriae
as representative of its citizens, instead order defendants to
return to plaintiff State of California and to its citizens, or
otherwise disgorge, the illegal overcharges the defendants
have realized, and that it enter joint and several judgments
in favor of plaintiff and its citizens against the defendants
and each of them;
H. That, in the event the Court orders defendants to
return the illegal overcharges they have realized, defend-
ants in addition be required to pay exemplary damages to
plaintiff and its injured citizens;
I. That the plaintiff recover from defendants the cost
of this suit and reasonable attorneys’ fees, as provided in
section 16750(a) of the California Business and Professions
Code; and
Appendix
J. That the plaintiff and the class represented herein, or
in lieu of said class plaintiff acting as parens patriae, have
such other, further and different relief as the nature of this
case may require or as to the court shall seem just.
Datep: February 4, 1976
EVELLF J. YOUNGER
Attorney General of the State of
California
WARREN J. ABBOTT
Assistant Attorney General
MICHAEL I. SPIEGEL
RICHARD N. LIGHT
Deputy Attorneys General
By RICHARD N. LIGHT
Deputy Attorney General
Attorneys for Plaintiff
State of California
ce A rT te
Appendix
Appendix G
Ronald Lovitt
J. Thomas Hannan
Lovitt & Hannan, Inc.
Agriculture Building
Embarcadero at Mission
San Francisco, CA 94105
Telephone: (415) 362-8769
Attorneys for Plaintiff (s)
Endorsed—Filed Dec 16 1975
Carl M. Olsen, Clerk
By F. Melanephy
Deputy Clerk
In the Superior Court of the State of California
In and for the City and County of San Francisco
Madelyne Brinker, on behalf of herself and
all those similarly situated,
Plaintiffs,
vs.
Amalgamated Sugar Company; American
Crystal Sugar Company; California and
Hawaiian Sugar Company; Great Western
Sugar Company; Holly Sugar Corporation;
National Sugarbeet Growers Federation;
Amstar Corporation; and Utah Idaho Sugar
Company,
Defendants.
No. 699 579
COMPLAINT FOR UNFAIR TRADE PRACTICES IN
RESTRAINT OF TRADE (BUSINESS AND
PROFESSIONS CODE, SECTIONS 16600-17096)
CLASS ACTION
53
54 Appendix
I,
JURISDICTION AND VENUE
This Complaint is filed and these proceedings are instituted
under Section 16750 of the California Business and Professions
Code, §§ 16600-17096, commonly known as the Cartwright Act,
to redress injuries sustained by Plaintiff and members of the class
as a result of the violations of said statutes by Defendants.
II.
PLAINTIFF
The Plaintiff in this action is MADELYNE BRINKER, an
individual who during the relevant time period as hereinafter
defined, purchased refined sugar in its original bulk package at
retail from all Defendants through retail outlets supplied by
one or more of the Defendants. As a result of the illegal activities
of Defendants and their co-conspirators described herein, the price
paid by said Plaintiff for such refined sugar was illegally fixed,
raised, stabilized and maintained.
Il.
DEFINITIONS
A. ‘Allowance’ means a discount from delivered price;
B. “Basis price” means the list price of refined sugar to be sold
by a refiner f.0.b. its refinery or processing factory;
C. “Delivered price” means the price of refined sugar delivered
to the customer and generally consists of the basis price plus the
prepaid freight application;
D. “Effective selling price” means the price actually charged
to the customer by the refiner and generally consists of the delivered
price, less any allowance; ;
E. “Prepaid freight application,” commonly known as a “pre-
pay,” means a portion of the delivered price for refined sugar equal
Appendix 55
in amount to a freight charge from a basing point to the customer's
location;
F. “Refined sugar” means any grade or type of saccharine
product derived from sugar beets or sugar cane which contains
sucrose, dextrose or levulose;
G. “Refer sugar’ means any company engaged in the pro-
cessing of sugar beets or the refining of raw cane sugar into, and
the sale of, refined sugar.
IV.
PARTIES DEFENDANT
The following Defendants reside or may be found in the City
and County of San Francisco, California:
A. Amalgamated Sugar Company is incorporated in the State
of Utah with its principal place of business in Ogden, Utah.
B. American Crystal Sugar Company is incorporated in the
State of New Jersey with its principal place of business in Denver,
Colorado. On June 14, 1974, the Defendant, American Crystal
Sugar Company was dissolved. Its successor is the American
Crystal Sugar Company of Fargo, North Dakota, a Minnesota
cooperative.
C. California and Hawaiian Sugar Company is incorporated
in the State of California with its principal place of business in
San Francisco, California.
D. Great Western Sugar Company is incorporated in the State
of Delaware ar.J its principal place of business is in Denver,
Colorado,
E. Holly Sugar Corporation is incorporated in the State of
New York and its principal place of business is in Colorado
Springs, Colorado.
F, National Sugarbeet Growers Federation is incorporated in
the State of Colorado with its principal place of business in
Greeley, Colorado, The National Sugarbeet Growers Federation
56 Appendix
is an agricultural cooperative which is composed of sixteen mem-
ber associations of sugar beet growers located in ten Western
States. Among other things, the National Federation acts as a
bargaining agent for growers in contracting with refiners for the
sale of the growers’ sugar beets.
G. Amstar Corporation is incorporated in the State of Dela-
ware with its principal place of business in New York City, New
York.
H. Utah-Idah [sic] Sugar Company (hereinafter referred
to as “U-I") is hereby made a defendant herein. U-I was incor-
porated in 1907 under the laws of the State of Utah. U-I’s prin-
cipal place of business is in Salt Lake City, Utah. During all or
part of the period of time covered by this Complaint, Defendant
U-I engaged in the business of processing and selling refined
sugar in The Market.
V.
During all or part of the period covered by this Complaint,
each of the Defendant corporations except National Sugarbeet
Growers Federation was engaged in the business of processing
and selling refined sugar in The Market.
VI.
CO-CONSPIRATORS
Various corporations, firms and individuals including McKeany-
Flavell Company, Inc., Guell Brokerage, K.D. Pierson, Inc. and
Imperial Sugar Company, Inc. participated as co-conspirators
with Defendants in the unlawful conduct alleged herein and
performed acts and made statements in furtherance of such con-
spiracy.
VII:
TRADE AND COMMERCE INVOLVED
Refined sugar is made by processing sugar beets or by refining
raw sugar which is derived from crushed sugar cane. Grocery
tl TR Et A ect
CE ee. ALK OS ecm a ee
Appendix 57
sugar is sold to grocery wholesa’ ¢ and retailers for eventual sale
to consumers;
VIII.
Total California sales of refined sugar in 1972 amounted to
approximately 20 million hundredweights which had a value of
about $23.5 million. Defendants accounted for over most of the
refined sugar sales in The Market.
IX.
UNLAWFUL CONDUCT ALLEGED
Beginning with a period prior to 1955, the exact date to the
Plaintiffs unknown, and continuing thereafter at least through
1972, the Defendants and co-conspirators engaged in an agree-
ment, scheme, combination and conspiracy in unreasonable restraint
of the aforesaid interstate trade and commerce in The Market in
violation of Section 16720 of the Business and Professions Code,
as amended.
X.
The aforesaid combination and conspiracy consisted of a con-
tinuing agreement, understanding and concert of action among the
defendants and co-conspirators, the substantial terms of which
were, among others:
(a) to fix and raise the basis prices of refined sugar;
(b) to fix prepaid freight applications;
(c) to eliminate, reduce and prevent giving of allowances
to customers for refined sugar; and
(d) to fix, raise, maintain and stabilize the effective selling
price of refined sugar.
In formulating and effectuating the aforesaid combination and
conspiracy, Defendants and co-conspirators did those things which,
58 Appendix
as hereinbefore alleged, they combined and conspired to do, includ-
ing, among other things, the following:
(a) caused brokers and other third parties to act as go-
betweens in carrying price information and exchanging assur-
ances on price actions between and among refiners;
(b) discussed data and reached agreements concerning the
formulation of prepaid freight applications for the purpose
and with the effect of maintaining uniform prepaid freight
applications; and
(c) published basis price lists and prepaid freight appli-
cation tables in accordance with agreements reached.
XII. [sic}
EFFECTS OF CONSPIRACY
The aforesaid combination and conspiracy has had the follow-
ing effects, among others:
(a) the price of refined sugar has been raised, fixed, main-
tained and stabilized at artificial and non-competitive levels;
_ (b) Pl
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