# Petition — California & Hawaiian Sugar Co. v. California > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2580%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1979 - **Citation:** 441 U.S. 932 ## Text 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 a [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_2580%3A1. Public record. Not legal advice.