Petition — National Farmers' Organization, Inc. v. Associated Milk Producers, Inc.
Supreme Court brief1983
Ask Donna
What actually matters in this document.
Text
82-1824 = feexna
No, ___ | FER o> 1983
IN THE ees
Supreme Court of the United States —~
OCTOBER TERM, 1983
THE NATIONAL FARMERS’ ORGANIZATION, INC.,
Petitioner,
Vv.
ASSOCIATED MILK PRobUCcERS, INC.,
MID-AMERICA DAIRYMEN, INC., and
CENTRAL MILK PRODUCERS COOPERATIVE,
Respondents.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF
APPEALS
FOR THE EIGHTH CIRCUIT
Davip A. Donouoe, P.C.
Counsel of Record
Of Counsel: Paut B. Hewitt
RicHarp A. GREEN Axin, Gump, Strauss,
STOHLMAN, BeucHERT, EGAN Haver & Fevp —
& Smit 1333 New Hampshire Ave., N.W.
1775 Pennsylvania Ave., N.W. Suite 400
Suite 400 Washington, D.C. 20036
Washington, D.C. 20006 (202) 887-4000
(202) 452-1175 Counsel for Petitioner
PRESS OF BYRON 8S. ADAMS PRINTING, INC., WASHINGTON, D.C.
i
QUESTION PRESENTED
Whether antitrust conspirators are immune from the
antitrust laws when they (1) bring multiple suits against a
competitor and (2) solicit and subsidize third-party litiga-
tion against that competitor, for the specific purpose of
burdening it with the expense of litigation and driving it
out of the market, so long as the litigation they bring and
foment is not wholly groundless.
LIST OF PARTIES
Pursuant to Rule 21.1(b), Rules of the Supreme Court,
counsel for Petitioner certifies that the following is a
complete list of all parties to the proceedings below:
1. All parties listed in the caption of this petition.
2. Associated Reserve Standby Pool Cooperative.
Petitioner, The National Farmers’ Organization, Inc.,
has no parent or subsidiaries and has the following affili-
ates:
NFO Members’ CD&D Corporation
NFO Members’ Meat Custodial Account, an Iowa
Trust
NFO Members’ Dairy Custodial Account, an lowa
Trust
NFO Members’ Grain Custodial Account, an Iowa
Trust
NFO Members’ Grain Custodial Account, a Minnesota
Trust
ii
TABLE OF CONTENTS
ED cco sccscuebssebovsccsvesccess
LIST OF PARTIES .
STATEMENT OF THE CASE ....ccccccccccccccccccccees
REASONS For GRANTING THE WRIT .............2000:
CONCLUSION ....
APPENDIX ......
TABLE OF AUTHORITIES
CASES: Page
Associated Radio Service Co. v. Page Airways, Inc., 624
a 00 (5th Cir. 1980), cert. denied, U.S. 1030 “
Baxter Travenol Laboratories v. LeMay, 536 F. Supp.
og Sey ery
California Motor Transport Co. v. Trucking Unlimited,
Se i SSO a cavcobucseuanasenueres 8, 12, 14
Clipper Exxpress v. Rocky Mountain Motor Tariff, 690
st ED CO Ss SE Sane rcsvedevescesanes 10
Eastern Railroad Presidents Conference v. Noerr Motor
Freight, Inc., 365 U.S. 127 (1961) ..........0e ee. 11
— . Hahn, Inc. v. Codding, 615 F.2d 830 (5th Cir.
Grip-Pak, Inc. v. Illinois Tool Works, Inc., 694 F.2d 466
lee Sa EE ch aceceatebsccckancaces 8, 9, 12, 18, 14
Hospital Building Co. v. Trustees of Rex Hospital, 691
Fee Ee SEED hb vacpaivessventccsceess 10
Kobe, Inc. v. Dempsey Pump Co., 198 F.2d 416 (10th
Cir.), cert. denied, 344 U.S. 837 (1952) ..... 8, 12, 14
Landmark Holding Corp. v. Bermant, 664 F.2d 891 (2d
Se MEE Sst oes cea dcancuseuen rial enuessdeas 10
MCI Communications Corp. v. American Tel. & Tei.
Co., 462 F. Win 1072 (N.D. Ill. 1978), cert. denied,
440 U.S. 971 aetiktnecee ena tiaes awamies 10
Su y Communities v. Aristek Properties, Ltd., 535
F, Sm. Se Se EE basis a revesteresas 10
United Mine Workers v. Pennington, 381 U.S. 657(1965) = 11
United States v. Otter Tail Power Co., 410 U.S. 366
(1973), on remand, 360 F. Supp. 451 (D. Minn. 1973),
affirmed, 417 U.S. 901 (1974) ........... 8, 12, 13, 14
STATUTES:
ee ED. os ba veuad dae uke hebkes anueate 2
ES oe tee ee kee eee Ee oe eba ss 5
Se I 6. ccabeneevch eee Cue eankwseeneuee 5
LT 65 6 6b d0 ba0ccAAR ROOD eeT ER ER ONES 24.7
EE EE nce i cé cuekeadausesn ceunbahaaes 2, 4, 7
iv
Table of Authorities Continued
AP EF SPT reereePereree reer ye eee 3, 5
BW Ns OUP vce cecccrerscesspeseetarecvccesecs 4,5
MISCELLANEOUS AUTHORITIES:
Balmer, Sham Litigation and the Antitrust Laws, 29
RR AR ai el ea a re
R. Bork, The Antitrust Paradox (1978) ......... 9, 10, 13
IN THE
Supreme Court of the Anited States
OCTOBER TERM, 1983
a
THE NATIONAL FARMERS’ ORGANIZATION, INC.,
Petitioner,
Vv.
ASSOCIATED MILK Propucers, INC.,
MID-AMERICA DAIRYMEN, INC., and
CENTRAL MILK PRODUCERS COOPERATIVE,
Respondents.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF
APPEALS
FOR THE EIGHTH CIRCUIT
Petitioner, The National Farmers’ Organization, Inc.,
prays that a Writ of Certiorari issue to review the judg-
ment of the Eighth Circuit Court of Appeals entered in
this matter on August 31, 1982.
OPINIONS BELOW
The opinion of the court of appeals (App. A) is reported
at 687 F.2d 1173 (8th Cir. 1982). The opinion of the district
court (App. B) is reported at 510 F. Supp. 381 (W.D. Mo.
1981).
2
JURISDICTION
The United States Court of Appeals for the Eighth
Circuit entered judgment on August 31, 1982. The Court
of Appeals denied Respondents’ timely Petitions for
Rehearing and Suggestions for Rehearing En Banc on
November 10, 1982. (App. D) The jurisdiction of this
Court is invoked pursuant to 28 U.S.C. § 1254(1).
STATUTES INVOLVED
Section 1 of the Sherman Act, 15 U.S.C. §1, as
amended, provides:
Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or
commerce among the several States, or with forei
nations, is declared to be illegal. Every person who
shall make any contract or engage in any combination
or ow hereby declared to be illegal shall be
deemed guilty of a felony, and, on conviction thereof,
shall be punished by fine not exceeding one million
dollars if a corporation, or, if any other person, one
hundred thousand dollars or by imprisonment not
exceeding three years, or by both said punishments,
in the discretion of the court.
Section 2 of the Sherman Act, 15 U.S.C. § 2, as
amended, provides:
Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other
person or persons, to monopolize any part of the
trade or commerce among the several States, or with
foreign nations, shall be deemed guilty of a felony,
and, on conviction thereof, shall be punished by a fine
of not exceeding one million dollars if a corporation,
or, if any other person, one hundred thousand dollars
or by imprisonment not exceeding three years, or by
both said punishments, in the discretion of the court.
3
Section 4 of the Clayton Act, 15 U.S.C. § 15, as
amended, provides:
Any person who shall be injured in his business or
property by reason of anything forbidden in the anti-
trust laws may sue therefor in any district court of
the United States in the district in which the defend-
ant resides or is found or has an agent, without
respect to the amount in controversy, and shall re-
cover threefold the damages by him sustained, and
the cost of suit, including a reasonable attorney’s fee.
The court may award under this section, pursuant to
a motion by such person promptly made, simple in-
terest on actual damages for the period beginning on
the date of service of such person’s pleading setting
forth a claim under the antitrust laws and ending on
the date of judgment, or for any shorter period there-
in, if the court finds that the award of such interest
for such period is just in the circumstances. In
determining whether an award of interest under this
section for ce | period is just in the circumstances,
the court shall consider only—
(1) whether such person or gets pom. party,
or either party’s representative, e motions or
asserted claims or defenses so lacking in merit as
to show that such party or representative acted
intentionally for delay, or otherwise acted in bad
faith;
(2) whether, in the course of the action in-
volved, such person or the opposing party, or
either party’s representative, violated any appli-
cable rule, statute, or court order providing for
sanctions for dilatory behavior or otherwise
providing for expeditious proceedings; and
(3) whether such person or the opposing party,
or either party’s representative, engaged in con-
duct primarily for the ager of delaying the
litigation or increasing the cost thereof.
1
Section 16 of the Clayton Act, 15 U.S.C. § 26, as
amended, provides:
Any person, firm, corporation, or association shall
be entitled to sue for and have injunctive relief, in
any court of the United States having jurisdiction
over the parties, against threatened loss or damage
by a violation of the antitrust laws, including sections
13, 14, 18, and 19 of this title, when and under the
same conditions and principles as injunctive relief
against threatened conduct that will cause loss or
damage is granted by courts of equity, under the
rules governing such proceedings, and upon the ex-
ecution of proper bond against damages for an in-
junction improvidently granted and a showing that
the danger of irreparable loss or damage is immedi-
ate, a preliminary injunction may issue: Provided,
That nothing herein contained shall be construed to
entitle any person, firm, corporation, or association,
except the United States, to bring suit in equity for
injunctive relief against any common carrier subject
to the provisions of the Act to regulate commerce,
approved February fourth, eighteen hundred and
eighty-seven, in respect of any matter subject to the
regulation, supervision, or other jurisdiction of the
Interstate Commerce Commission. In any action
under this section in which the plaintiff substantially
prevails, the court shall aw the cost of suit, in-
cluding a reasonable attorney’s fee, to such plaintiff.
STATEMENT OF THE CASE
The National Farmers’ Organization, Inc. (“NFO”),
Petitioner here, established in the court below that the
respondents violated Sections 1 and 2 of the Sherman
Antitrust Act by conspiring to exclude NFO, restrain
trade and monopolize milk marketing in the midwest.'
NFO seeks here to correct one serious error in the lower
' Alexander v. National Farmers’ Organization, 687 F.2d 1173,
1179 (8th Cir. 1982).
5
court’s decision—a rejection of NFO’s claim for damages
resulting from the respondents’ institution and sponsor-
ship of bad faith litigation against NFO. The Court of
Appeals held that even though respondents had in-
stituted multiple lawsuits against NFO and sponsored
third-party litigation against NFO for collateral
purposes—¢e.g., burdening NFO with heavy litigation ex-
penses and inhibiting NFO’s ability to compete—this
anti-competitive litigation was not actionable because the
respondents’ various suits against NFO were not
“groundless.”
It is this pure legal issue—whether litigation brought
for collateral anti-competitive purposes must be “ground-
less” to be actionable—which we seek to have resolved
here. It is in itself an important question of federal law
and, moreover, is an issue wit!) respect to which the
Seventh and Eighth Circuits are in acknowledged and
irreconcilable conflict.
The following is as brief a summary of the proceeding
below as atwelve-year case permits. NFO, an association
of farmers including dairy farmers, was sued by Mid-
America Dairymen, Inc. (“Mid-Am”), a dairy coopera-
tive, inthe Western District of Missouri in March of 1971,
in a purported antitrust class action.’ In the complaint,
and in each of five successive amended versions thereof,
Mid-Am charged NFO—a newcomer marketing milk for
a couple of hundred farmers—with actual monopolization
of a ten-state relevant market. In addition, Mid-Am
asserted a multitude of other claims against NFO, includ-
ing violations of the Internal Revenue Code and the Fair
Labor Standards Act, almost all of which were voluntari-
? Jurisdiction was vested in the District Court pursuant to 28
U.S.C. § 1337, and 15 U.S.C. §$§ 15 and 26. Jurisdiction over the
appeal was vested in the Court of Appeals pursuant to 28 U.S.C.
§ 1291.
6
ly dropped. NFO filed a counterclaim against Mid-Am,
Associated Milk Producers, Inc. (“AMPI”), a dairy coop-
erative, Central Milk Producers Cooperative (“CMPC”),
a dairy marketing federation, and others who are no
longer parties. NFO’s counterclaim charged that Mid-
Am, AMPI, CMPC and the others were involved in a
conspiracy to restrain trade and monopolize milk market-
ing in the midwest and to exclude NFO from that market.
NFO charged that the counterclaim defendants had, pur-
suant to this conspiracy, committed a number of predato-
ry and exclusionary acts directed at NFO.
NFO asserted that one of the predatory acts was Mid-
Am’s institution of the original suit against NFO. Specifi-
cally, NFO charged that the Mid-Am suit had been
brought “in bad faith, not for the purpose of securing an
adjudication of their legal rights, but for the purpose of
. . . interfering with NFO’s ability to compete with AMPI
and Mid-America. . . .” NFO Counterclaim 4 66(h).
Thereafter, AMPI filed a case against NFO in the
Wisconsin state court charging that NFO was unlawfully
soliciting members. A few days later AMPI filed a
counterclaim against NFO in the Western District of
Missouri essentially duplicating the state court charges
but couching them in terms of antitrust and Agricultural
Fair Practices Act violations.
In April of 1972, AMPI’s highest officials met to discuss
having North Central Dairymen’s Cooperative (“North
Central”), a cooperative not affiliated with AMPI, bring
another suit—at AMPI’s expense—against NFO in order
to subject NFO to additional litigation costs (“break
NFO’s back”) and thus to force NFO to get out of the
dairy business. (NFO Exh. 1523) A month later, North
Central did intervene in the Western District of Missouri
case against NFO, and in that effort was represented ona
contingent fee by AMPI’s attorneys. Later, North Cen-
7
tral brought a duplicative suit against NFO in Wisconsin
state court, again represented by AMPI’s lawyers on a
straight contingent fee.
After years of pre-trial discovery, motions and brief-
ing, the various claims were tried to the court. (The
North Central claims were never tried and were
voluntarily dismissed.) After trial, the District Court
dismissed Mid-Am’s claims, AMPI’s claims and NFO’s
claims on the merits. On appeal, the United States Court
of Appeals for the Eighth Circuit affirmed the dismissal of
the Mid-Am and AMPI claims but reversed the dismissal
of the NFO claims. The Eighth Circuit ruled NFO had
established that Mid-Am, AMPI and CMPC had violated
Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ land 2,
ruled NFO had been injured by these violations, and
remanded the case for a determination of the amount of
damages and the scope of injunctive relief.
The Eighth Circuit found that the counterclaim defend-
ants had utilized litigation and threats of litigation against
NFO customers to coerce them into boycotting NFO and
that this misuse of litigation violated the antitrust laws.
(687 F.2d at 1200-03; 44a-51a, infra) Notably, it held that
Mid-Am named Beatrice Foods as a defendant in this
very action just because it bought milk from NFO, then
dismissed Beatrice after it stopped buying from NFO,
and that the “action against Beatrice was more a spring-
board for threatening other dairies than it was a legiti-
mate complaint against Beatrice.” (687 F.2d at 1202;50a,
infra)
The Court of Appeals also found that the counterclaim
defendants had sued NFO and sponsored third-party
litigation against NFO:
(1) in order “to hamper NFO’s ability to compete,”
687 F.2d at 1200; 45a, infra;
3
(2) “in the hope that the added cost of such litiga-
tion would ‘break NFO’s back,’ ” /bid;
(3) to impose on NFO the “burdensome cost of the
litigation,” Jbid; and
(4) to get anon-communication “gag order” against
NFO, thus preventing NFO from competing for
farmer-members, by filing the original Mid-Am
case as a class action. bid.
NFO sought to recover the costs of defending all this
anticompetitive litigation—an amount in excess of
$2,000,000—under the authority of California Motor
Transport Co. v. Trucking Unlimited, 404 U.S. 508
(1972) and Kobe, Inc. v. Dempsey Pump Co., 198 F.2d
416 (10th Cir.), cert. denied, 344 U.S. 837 (1952). Not-
withstanding its findings on intent, however, the Court of
Appeals refused to find the counterclaim-defendants’
litigation against NFO to be actionable, stating that be-
cause there were genuine disputes as to NFO’s method of
soliciting farmer-members, the claims against NFO, even
though unsuccessful, were not “so groundless” as to con-
stitute actionable “sham litigation.” 687 F.2d at 1200 (45a,
infra). It is this single aspect of the Eighth Circuit’s
decision—the refusal to permit NFO to recover the enor-
mous costs of defending against this vexatious
litigation—which NFO petitions this Honorable Court to
correct.
REASONS FOR GRANTING THE WRIT
The Court of Appeals decision collides squarely with
the Seventh Circuit’s decision in Grip-Pak, Inc. v. IIli-
nois Tool Works, Inc., 694 F.2d 466 (7th Cir. 1982) (Pos-
ner, J.) decided less than three months later. Grip-Pak
correctly followed this Court’s teachings in California
Motor Transport Co. v. Trucking Unlimited, 404 U.S.
508 (1972) and United States v. Otter Tail Power Co., 410
U.S. 366 (1973) and held that the use of litigation to
9
disrupt customer relationships and to burden competitors
with litigation costs violates the antitrust laws even if the
litigation is “colorable.”
The clear conflict between the Seventh and Eighth
Circuits was explicitly recognized by Judge Posner's
Seventh Circuit decision:
[W]e are supported by most of the cases, which are
not numerous, on the question [citing 9th and 10th
Circuit cases) though Alexander v. National Far-
mers Organization, 687 F.2d 1173, 1200 (8th Cir.
1982) appears to be to the contrary.
Grip-Pak, Inc. v. Illinois Tool Works, Inc., supra, at
473,
The conflict presented by these decisions is also deserv-
ing of resolution by this Court because it involves critical-
ly important federal questions of antitrust policy and the
integrity of the judicial system. There is widespread
recognition of the crushing effect that litigation expenses
can have on a private litigant who is drawn into large and
protracted legal proceedings. R. Bork, The Antitrust
Paradox, 347-48 (1978); Balmer Sham Litigation and the
Antitrust Laws, 29 Buffalo L. Rev. 39 (1980). Among the
weapons available to conspirators who would exclude or
destroy a competitor, as these authorities recognize,
none is more lethal than the use of burdensome litigation,
particularly where the target is, as NFO was, a vulner-
able new entrant. See R. Bork op. cit. at 347-50. For
twelve years, NFO has been defending itself against the
defendants’ multiple oppressive litigation tactics, and is
at last on the brink of total victory in resisting these
claims,’ but the cost of defense has been enormous.
‘The AMPI and Mid-Am suits against NFO in the ir ent litigation
were dismissed by both the district court and the court of appeals,
Mid-Am’s class action allegations against NFO, designed solely to
10
NFO’s legal defense costs alone exceeded $2,000,000 by
1978,
The burdens inflicted on NFO by the defendants’ litiga-
tion campaign, while staggering, are by no means unique.
In recent years there have been dozens of reported deci-
sions involving complaints of this nature,‘ and even this
impressive list only accounts for those instances in which
the victim has the resources and will to resist the oppres-
sive litigation. The use of litigation to hamstring and
destroy competitors is becoming the stock-in-trade of
antitrust violators, and, with the increasing cost of such
litigation, its value as an anticompetitive tool is growing.
See R. Bork, op. cit. at 348. If the Eighth Circuit's view of
the law is upheld, it will present predators with a hunting
secure a gag order, were voluntarily dismissed after the gag order
was lifted. The AMPI-sponsored claims of North Central against
NFO were voluntarily dismissed after years of discovery and motion
practice. Only a single aspect of AMPI’s Wisconsin state court
claims—a misrepresentation theory injected when the case was
several years old—has not yet been resolved with a final judgment in
NFO’s favor. AMPI’s state court case has had a bizarre history.
Three times the trial court has issued injunctions against NFO and all
have been reversed by higher courts, 687 F.2d at 1189-1190 (23a-24a,
infra). In January 1983 another injunction was issued, despite para-
llel claims having been finally dismissed in federal court, and NFO
has again appealed,
‘See, ¢.g., Hospital Building Co. v. Trustees of Rex Hospital, 691
F.2d 678, 687 (4th Cir, 1982); Clipper Exxpress v. Rocky Mountain
Motor Tariff, 690 F.2d 1240, 1251-59 (9th Cir, 1982); Landmark
Holding Corp. v. Bermant, 664 F.2d 891, 896 (2d Cir, 1981); Assoei-
ated Radio Service Co, v. Page Airways, Inc., 624 F.2d 1342, 1358
(5th Cir, 1980), cert. denied, 450 U.S, 1030 (1981); Ernest W, Hahn,
Inc, v, Codding, 615 F.2d 830, 841 (9th Cir, 1980); Baxter Travenol
Laboratories v. LeMay, 536 F. Supp. 247, 251 (S.D. Ohio 1982);
Sunenergy Communities v, Aristek Properties, Ltd., 585 F. Supp.
1327, 1329-31 (D, Colo, 1982); MC] Communications Corp, v. Amer-
ican Tel, & Tel. Co,, 462 F, Supp. 1072, 1103 (N.D, Ill, 1978), cert,
denied, 450 U.S, 971 (1979),
11
license to oppress their competitors by subjecting them to
the huge financial burdens of such litigation, so long as the
monopolist-plaintiffs can come up with some colorable
theory to satisfy the “not groundless” test.
The circumstances present here bring these concerns
into very sharp focus. As the Eighth Circuit found, the
defendants sued, and sponsored suits against, NFO for
the specific purpose of hamper*ng NFO’s ability to com-
pete, getting a backdoor “gag order” preventing NFO
from competing for members and, most importantly, at-
tempting to “break NF‘O’s back” with litigation costs (687
F.2d at 1200; 45a, infra). None of these objectives de-
pended in any way upon the successful litigation of the
claims asserted. The anti-competitive objectives were to
be achieved just by the institution and maintenance of the
suits themselves. The court below held that even in these
circumstances the judiciary had no choice but to become a
knowing ally of those who had adopted a “kill by litiga-
tion” strategy, because the claims brought for these pur-
poses were not “groundless.” This outcome would be
extraordinary in any circumstances, but when the court
system’s resources are already overtaxed as they are, it
would be most unfortunate to burden them further with
proceedings which run so directly counter to the public
interest.
The Eighth Circuit arrived at its conclusion on the basis
of the Noerr-Pennington doctrine, derived from this
Court’s decisions in Eastern Railroad Presidents Confer-
ence v. Noerr Motor Freight Inc., 365 U.S. 127 (1961) and
United Mine Workers v. Pennington, 381 U.S. 657
(1965). These decisions accord a measure of antitrust
immunity to efforts to influence governmental action, but
the immunity does not extend to “sham” activities. The
court below acknowledged that litigation designed to
stifle competition is unlawful if it falls within the “sham”
12
exception to the Noerr-Pennington doctrine, but then
held, without explanation, that the sham exception only
applies to such anti-competitive litigation if it is “ground-
less.” 687 F.2d at 1200; 45a, infra). This expansive view of
the Noerr-Pennington doctrine cannot be squared with
this Court’s decisions, nor with the common law’s con-
sistent condemnation of the misuse of litigation for
oppressive purposes.
The proposition that the Noerr-Pennington doctrine
exempts all but groundless anti-competitive lawsuits has
already been rejected by the major Supreme Court case
dealing with the subject. In California Motor Transport
Co. v. Trucking Unlimited, 404 U.S. 508, 512 (1972), this
Court condemned a scheme to invoke adjudicatory
proceedings “ ‘with or without probable cause’ ” (empha-
sis supplied), in order to suppress competitors. Indeed, in
perhaps the earliest case condemning the use of litigation
for anti-competitive collateral purposes, the Tenth Cir-
cuit held a patentee liable for bringing anti-competitively
motivated patent-infringement suits, even though the
patentee actually won some of the cases. Kobe, Inc. v.
Dempsey Pump Co., 198 F.2d 416, 424-25 (10th Cir.),
cert. denied, 344 U.S. 837 (1952).
In both these cases, and in Judge Posner’s thoughtful
analysis of the issue in Grip-Pak, the critical element was
that it was the fact of the litigation’s being brought and
pursued—as opposed to the litigated result of the case—
that inflicted the competitive harm. A perfect illustration
of this principle is United States v. Otter Tail Power Co.,
410 U.S. 366 (1973), on remand, 360 F. Supp. 451 (D.
Minn. 1973), affirmed, 417 U.S. 901 (1974) in which the
antitrust violation included the filing of a series of law-
suits which by their mere pendency prevented the victim
trom getting the clean legal opinion needed to float a bond
13
issue.’ Indeed, the record in Otter Tail indicated that
some of the lawsuits actually succeeded at the trial level.
Brief for the United States at 21-27, 78-80, United States
v. Otter Tail Power Co., 410 U.S. 366 (1973).
This Court’s past emphasis on this collateral effect
element is, moreover, completely consistent with the
common law’s general condemnation of the use of litiga-
tion to achieve collateral results.
As Judge Posner’s opinion for the Seventh Circuit in
Grip-Pak explains, immunization of all oppressive litiga-
tion which is colorable would abolish the long-recognized
tort of abuse of process, which does not depend on a
showing that the lawsuit was brought without probable
cause, 694 F.2d at 471. The opinion then goes on:
If abuse of process is not constitutionally protected,
no more should litigation that has an improper anti-
competitive purpose be protected, even though the
plaintiff has a colorable claim.
Ibid. Similarly, in The Antitrust Paradox op. cit. at 358,
Bork reasons that if the constitutional protection of litiga-
tion is read to cover litigation brought for collateral anti-
competitive purposes, then “every abuse of the proce-
dures of courts and administrative tribunals would be
‘political expression’ and thus sanctified.”
* In Otter Tail, as here, some of the cases were not brought by the
defendant but were instead third-party cases instigated and spon-
sored by the defendant.
14
The Seventh Circuit correctly held that, just as in
traditional abuse of process situations:
[T)he line is crossed when his purpose is not to win a
favorable judgment against a competitor but to
harass him. . . by the process itself—regardless of
outcome—of litigating.
694 F.2d at 472.
The logic of Judge Posner’s analysis is inescapable and,
as cases such as California Motor Transport, Otter Tail
and Kobe confirm, is consistent with the way in which the
anti-competitive litigation issue has been dealt with in the
past. The Eighth Circuit’s ruling collides directly with
this analysis and would create a serious and anomalous
loophole in the antitrust laws.
CONCLUSION
There is a compelling need to resolve this direct conflict
between the circuits and to decide this far-reaching ques-
15
tion of federal antitrust policy. Accordingly, the petition
for a writ of certiorari should be granted.
Respectfully submitted,
Davip A. DONOHOE, P.C.
PAUL B. HEWITT
AKIN, GUMP, STRAUSS,
HAUER & FELD
1333 New Hampshire Ave., N.W.
Suite 400
Washington, D.C. 20036
(202) 887-4000
Of Counsel:
RICHARD A, GREEN
STOHLMAN, BEUCHERT, EGAN
& SMITH
1775 Pennsylvania Ave., N.W.
Suite 400
Washington, D.C. 20006
(202) 452-1175
la
APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 81-1235
RosBert B. ALEXANDER, et al,
Vv.
NATIONAL FARMERS ORGANIZATION,
Appellant,
Vv.
ASSOCIATED MILK Probucers, INC.,
Mip-AMERICA DAIRYMEN, ASSOCIATED
RESERVE STANDBY POOL COOPERATIVE,
Appellees.
WESLEY JOHNSON, GARY HANMAN,
HAROLD S. NELSON and Davip Parr,
CENTRAL MILK PRODUCERS COOPERATIVE,
Appellee.
No. 81-1236
RoBerT B. ALEXANDER, et al,
Vv.
NATIONAL FARMERS ORGANIZATION,
Appellee,
Vv.
ASSOCIATED MILK PRODUCERS, INCc.,
Appellant.
Mip-AMERICA DAIRYMEN, ASSOCIATED
RESERVE STANDBY POOL COOPERATIVE;
WESLEY JOHNSON; GARY HANMAN;
HAROLD S. NELSON; DAviD Parr;
CENTRAL MILK PRODUCERS COOPERATIVE.
2a
No. 81-1237
RosBert B. ALEXANDER, et al,
Vv.
NATIONAL FARMERS ORGANIZATION,
Appellee,
Vv.
ASSOCIATED MILK PRODUCERS, INC.,
Mip-AMERICA DAIRYMEN, INC.,
Appellant.
ASSOCIATED RESERVE STANDBY POOL
COOPERATIVE; WESLEY JOHNSON; GARY
HANMAN; HAROLD S. NELSON;
Davip Parr; CENTRAL MILK
PRODUCERS COOPERATIVE.
Submitted: November 11, 1981
Filed: August 31, 1982
Before HEANEY and McMILLIAN, Circuit Judges, and BEN.
son,* Chief Judge.
HEANEY, Circuit Judge.
*The Honorable PAUL BENSON, Chief Judge, United States
District Court for the District of North Dakota, sitting by designa-
tion.
3a
This case involves reciprocal antitrust actions arising out of
the often fierce competition in the Midwest milk industry dur-
ing the late 1960’s and early 1970’s. The actions were tried in
three phases, generating an extensive record more than 15,000
pages in length. See In Re Midwest Milk Monopolization
Litigation, 510 F.Supp. 381 (W.D. Mo. 1981)(hereinafter Mid-
west Milk). The district court’ found that none of the parties
presented sufficient evidence to meet their respective burdens
of proof and, therefore, denied relief on all substantive claims.
We affirm the district court’s conclusion that NFO has not
violated the antitrust laws. NFO dairy organizing and market-
ing efforts fall within the Capper-Volstead exemption which
permits farmers to band together for the purpose of collective-
ly marketing their products.
With respect to NFO’s claims against Mid-America Dairy-
men, Inc. (Mid-Am), Associated Milk Producers, Inc. (AMPI),
Central Milk Producers Cooperative (CMPC) and Associated
Reserve Standby Pool Cooperative (ARSPC), we affirm in
part and reserve in part. Mid-Am, AMPI and CMPC did con-
spire to monopolize milk and eliminate competition through the
use of predatory, anticompetitive and unlawful tactics. Such
conduct falls outside the Capper-Volstead exemption and
violates Sections 1 and 2 of the Sherman Act. The contrary
conclusion below is reversed and the case is remanded for a
determination of the amount of damages NFO may recover.
We affirm the dismissal of NFO’s claim against ARSPC be-
cause the evidence does not establish that this entity partici-
pated in the unlawful conspiracy.
Factual Background And Governing Law
The structure of supply and pricing in the Midwest milk
industry may be summarized as follows. Minnesota, Wisconsin
'The Honorable John W. Oliver, Senior Judge, United States
District Court for the Western District of Missouri.
da
and part of Southwest Missouri are the principal areas of
surplus production, accounting for approximately twenty-five
percent of the nation’s total milk production. These areas sup-
ply milk to the midwest region and to regional markets in the
south, southwest and southeast. Milk production is highest in
the spring and early summer, while demand for fluid milk
products is usually highest in the fall. Thus, some reserve
capacity is generally necessary to balance fluctuations be-
tween supply and demand.
Grade A milk is that milk which is approved for sale as fluid
milk for human consumption (Class I products) and is produced
under stricter sanitary conditions than Grade B milk, which
may be used only for manufactured products such as cheese
and butter (Class II products). Thus, only Grade A may be
used for Class I products, while both Grades A and B may be
used for Class II products. The USDA regulates the minimum
price paid for Grade A milk, which is based upon a “blend price”
formula that accounts for the proportion of given milk allocated
to Class I and Class II uses in any given market order.’ Class I
uses command a higher price to compensate producers for the
added cost of producing milk for such uses and to ensure an
adequate supply of wholesome fluid milk. Class I price is not
the same in each regulated local market, however. The mini-
mum price for such milk generally increases from north to
south, in part to reflect the transportation cost of shipping
from the surplus areas of Minnesota and Wisconsin to the more
distant markets.
Individual dairy farmers have too little market power to
affect the price paid for their milk. Midwest Milk, supra, 510
F. Supp. at 443. By representing numerous farmers, however,
dairy cooperatives may achieve higher prices for their mem-
2 A federal market order is a geographic area defined as a market
by the USDA and is suject to minimum price and other regulation
under a market administrator. The greater Chicago area, for ex-
ample, is a Federal Market Order (Order 30).
5a
bers (called a “premium” when it exceeds the minimum federal
order price) and this, of course, is a major purpose of such
co-ops. It is the competition between the National Farmer's
Organization (NFO) and certain of the large midwest co-ops
which forms the basis of this action.
NFO was formed in 1955 as a nonprofit corporation to en-
gage in protest, lobbying and organizing activities on behalf of
farmers. Since 1957, it has also engaged in collective bargain-
ing on behalf of farmers, the principal aim of which is to
improve farm income by raising the commodity prices paid to
farmers. In the 1960’s, NFO pursued a series of programs
aimed specifically at the dairy industry—including efforts to
establish a common marketing agency, to bargain collectively
with established dairy co-ops and, finally, to directly market
dairy products. These programs generally were not supported
by the large, established dairy cooperatives. Particularly from
1969 onward (when NFO commenced its direct marketing
efforts), NFO and the established co-ops became vigorous
competitors in the marketing of raw Grade A milk produced in
the midwest.
The late 1960’s were also marked by a massive consolidation
of many midwestern co-ops into a few, larger cooperatives.
Mid-American Dairymen, Inc. (Mid-Am) was formed in 1968,
ultimately combining what earlier had been more than sixty
independent co-ops and dairies from across the midwest.’
Associated Milk Producers, Inc. (AMPI) was formed in 1969
and is comprised of more than seventy‘such entities. Central
Milk Producers Cooperative (CMPC) is a federation of co-ops,
including AMPI, which supplies milk solely to the Chicago
* The merged co-ops include Square Deal Milk Producers of High-
land, Illinois; Mid-America Dairymen of Kansas City, Missouri; Twin
Cities Milk Producers of St. Paul, Minnesota; Producers Creamery of
Springfield, Missouri; Sanitary Milk Producers of St. Louis, Mis-
souri; and Producers Creamery of Chillicothe, Missouri. See Midwest
Milk, supra, 510 F.Supp. at 443-448.
6a
market. Associated Reserve Standby Pool Cooperative
(ARSPC) is also a cooperative federation, including Mid-Am
and AMPI as members, engaged in standby pooling operations
with its members and with certain proprietary dairies.
The pattern of consolidation and use of certain marketing
practices led the Justice Department to sue both Mid-Am and
AMPI for antitrust violations, matters which were settled by
consent decrees.‘ They are not significant here except insofar
as such decrees may affect any claim by NFO for injunctive
relief.°
The present case is a private antitrust action. It began in
1971 when Mid-Am filed several claims against NFO, of which
essentially two remain on appeal: that NFO violated Section 1
of the Sherman Act and Section 4 of the Clayton Act by (1)
engaging in illegal price-fixing with respect to marketing of
milk, and (2) promoting a group boycott of Mid-Am by enlisting
Mid-Am members to breach their contracts and refuse to deal
with Mid-Am. NFO counterclaimed against Mid-Am, AMPI,
CMPC and ARSPC, alleging unlawful monopolization, at-
tempted monopolization and conspiracy to monopolize milk
marketing and to unlawfully eliminate NFO as a competitor.
*See United States v. AMPI, 394 F.Supp. 29 (W.D. Mo. 1975);
United States v. Mid-Am, Inc., 1977-1 Trade Cases € 61,508 (1977).
Both the public and private antitrust actions were conducted before
the Honorable John W. Oliver, Senior Judge, United States District
Court for the Western District of Missouri.
5Part of NFO’s claim is based, for example, upon allegedly
predatory acquisitions by AMPI. Under the consent decree, AMPI is
enjoined from making certain acquisitions without Justice Depart-
ment approval. See United States v. AMPI, note 4, supra, 394
F.Supp. at 54. Moreover, in approving the consent decree, the court
determined that divestiture of AMPI’s acquisitions was not neces-
sary in the public interest. Jd. Although some conduct enjoined under
the consent decree is similar to conduct complained of here, the
consent decree evidences neither admission, denial nor any ultimate
conclusion as to any facts at issue here.
7a
AMPI then counterclaimed against NFO, alleging essentially
the same price-fixing claims asserted by Mid-Am and alleging
violations of the Agricultural Fair Practices Act as well as an
illegal conspiracy to “destroy” AMPI and to monopolize milk.
The allegations of the parties include assertions of actual and
attempted monopolization under Section 2 of the Sherman Act,
conspiracies to monopolize under Section 2, conspiracies to
eliminate competition through unlawful means under Sections
1 and 2 and certain per se violations under Section 1. The
parties are not often clear on which factual allegations are
linked to which of their legal theories, and the nature of legal
liability is further complicated by the Capper-Volstead Act, 7
U.S.C. § 291, which immunizes certain activities of farm
cooperatives. Before turning to the specific claims of each
party, a summary of the applicable law will be helpful.
A Section 2 claim of actual monopolization generally re-
quires, inter alia, a showing of monopoly power in the relevant
product and geographic market. See, e.g., United States v.
Grinnell Corp., 384 U.S. 563 (1966). An attempt to monopolize
claim generally requires the specific intent to monopolize and a
showing of a “dangerous probability” of success, the latter of
which is also examined by reference to the offender’s share of
the relevant market. See, e.g., Walker Process Equip., Inc. v.
Food Machinery & Chem. Corp., 382 U.S. 172, 177 (1965);
Agra Shell, Inc. v. Hammons Products Co., 479 F.2d 269,
285-287 (8th Cir.), cert. denied, 414 U.S. 1022 (1973).° The
“relevant market” element is important because monopoliza- -
tion and attempt cases often stand or fall on the definition of the
product and geographic market. See, e.g., Von Kalinowski,
5 But see Greyhound Computer Corp. v. [BM Corp., 559 F.2d 488,
504 (9th Cir. 1977), holding that “relevant market” is not at issue in an
attempted monopolization case and that a plaintiff must show only
that an “appreciable amount of commerce” is involved. The Ninth
Circuit’s view of attempted monopolization has not been followed in
this Circuit. See Agra Shell, Inc. v. Hammons Prods., supra, 479
F.2d at 287.
8a
Antitrust Laws and Trade Regulation, $§ 8,02[3)c, 9.01[3)
(1992) collecting cases)(hereinafter, Von Kalinowski).
A Section 2 claim for conspiracy to monopolize, however,
generally does not require proof of a relevant market, at least
not in the manner required in actual and attempted
monopolization cases. Cf. United States v. DuPont de
Nemours & Co,, 361 U.S. 377, 395 n.23 (1956), This is because
the essential elements of a Section 2 conspiracy claim are
concerted action and specific intent to monopolize, such that it
need only be further shown that the conspiracy affected “some
appreciable part of interstate commerce.” L/nited States vy,
Consolidated Laundries Corp., 291 F.2d 563, 573 (2d Cir.
1971). Some commentators have argued, however, that rele-
vant market should be considered a necessary element of Sec-
tion 2 conspiracy claims, at least in civil cases, See, ¢.g., 3 Von
Kalinowski, supra, § 9.02[4). In our view, a civil Section 2
conspiracy claim, standing alone, does require a minimal show-
ing of product and geographic context—what and where the
alleged conspiracy is focused—to ensure that a claim is not
based upon some abstract showing of unlawful intent. The
nature of such proof, however, is simply to show the context of
the conspiracy, It need not be as rigorous as the relevant
market showing for other Section 2 claims, because actual
attainment of “dangerous probability” of monopoly power is
not at issue in a conspiracy claim.
These general antitrust principles must be construed in light
of the immunity afforded farm cooperatives under the Capper-
Volstead Act, 7 U.S.C, § 291. Such entities are exempt from
liability for price-fixing and other joint marketing efforts
which seek to achieve the lawful aims of the cooperative move-
ment, i.e., collective marketing of farm products so as to im-
prove economic conditions for individual farmers, See, ¢.g.,
Maryland & Virginia Milk Producers Assoc, v. United States,
362 U.S, 458, 466 (1960), Cooperatives may combine with each
other to do together what they may lawfully do individually
and, hence, they cannot be conspirators to the extent their
concerted action is in pursuit of legitimate aims. See Sunkist
9a
Growers, Inc. v. Winckler & Smith Citrus Products, Co,, 370
U.S. 19 (1962) (Sunkist J), Similarly, cooperatives may, singly
or in combination with other exempt cooperatives, obtain mo-
nopoly power in a given market so long as it is achieved through
natural growth, voluntary confederation and without resort to
predatory or anti-competitive practices. E.g., Fairdale Farms
v. Yankee Milk, Inc., 635 F.2d 1087, 1044 (2d Cir, 1980),
Capper-Volstead provides only limited immunity and co-ops
have occasionally sought to extend their market power in ways
not intended by Congress. Co-ops cannot, for example, con-
spire or combine with nonexempt entities to fix prices or con-
trol supply, even though such activities are lawful when en-
gaged in by co-ops alone. See United States v. Borden, 308 U.S.
188, 207-208 (1939).
Similarly, the Capper-Volstead Act “did not leave coopera-
tives free to * * * restrain and suppress competition with the
cooperatives.” Maryland and Virginia Milk Producers Asso-
ciation, supra, 362 U.S. at 467, The scope of prohibited prac-
tices has been increasingly clarified through case law,
There is no immunity, for example, for attempts to restrain
competition through discriminatory pricing, Knuth v, Erie-
Crawford Dairy Cooperative Assoc. , 395 F.2d 420, 424 (2d Cir,
1968); coercion of persons to join the cooperative, Gulf Coast
Shrimpers and Oystermans Assoc, v, United States, 236 F.2d
658, 665 (5th Cir. 1956); predatory harassment, Otto Milk Co,
v. United Dairy Farmers Cooperative Association, 388 F.2d
789, 797 (3d Cir. 1967); or illegal boycotts, North Texas Pro-
ducers Assoc, v. Metzger Dairies, Inc,, 348 F.2d 189, 196 (5th
Cir. 1956), In Maryland and Virginia Milk Producers Associ-
ation, supra, 362 U.S. at 468, the Supreme Court summarized
a number of “anticompetitive activities which are so far outside
the ‘legitimate objects’ of a cooperative that, if proved, they
would constitute clear violations of Section 2 of the Sherman
Act.” Included among such activities were a co-op’s attempt to
interfere with truck shipments of nonmembers’ milk and its
use of prior debt to influence a dairy to buy only from the co-op.
10a
Id, Moreover, in reviewing an otherwise lawful dairy acquisi-
tion as part of an alleged attempt to eliminate competition, the
same Court held that “even lawful contracts ad business
activities may help to make up a pattern of conduct unlawful
under the Sherman Act.” /d, at 472.
Whether a co-op’s given business practice is unlawful thus is
not merely a question of whether it is “predatory” in a strict
sense, ¢.g., lacking a legitimate business justification, As the
Sixth Circuit recently noted, “[aJn anti-competitive practice
may have economic justification, but its use may be under-
taken with unlawful intent and in the desire to achieve an
unlawful goal.” United States v. Dairymen, Inc., 660 F.2d 192,
195 (6th Cir, 1981), That Court squarely rejected the argument
that Section 2 prohibits co-ops only from engaging in narrowly
defined “predatory practices.” /d, at 194, We agree. A cooper-
ative may not use its position, no matter how lawfully ac-
quired, “to stifle or smother competition.” Maryland and Vir-
ginia Milk Producers Association, supra, 362 U.S, at 463,
Where such an unlawful intent is clear, overt acts in further-
ance of this purpose are not immunized simply because they
might also have other justifications or because they are merely
“anti-competitive” rather than “predatory.”
These limited immunity principles must also be harmonized
with the ordinary intent element of Section 2, Attempted
monopolization and conspiracy to monopolize usually require a
showing of specific intent to monopolize, see pp. 4-5, supra, but
as we have noted, a cooperative may form such an intent
lawfully. The impermissible aim is to pursue monopoly power
by eliminating or restraining competition with the co-op
through predatory or anti-competitive practices, An intent to
do so is, therefore, the proper intent element of an attempted
monopolization or conspiracy claim under Section 2, Of course,
a conspiracy or combination to eliminate competition through
such unlawful means would also violate Section 1 as an un-
reasonable restraint of trade, See Maryland and Virginia
Milk Producers Association, supra, 362 U.S, at 463,
lla
With this background in and, we turn to the specific claims
at issue,
Il.
CLAIMS AGAINST NFO
A. Price-Fixing And The Capper-Volstead Exemption
Central to the antitrust claims of Mid-Am and AMPI is the
contention that a number of NFO programs constituted hori-
zontal price-fixing, a per se violation of the Sherman Act unless
exempt. See, e.g., United States v. Socony-Vacuum Oil Co.,
810 U.S, 150 (1940). Mid-Am and AMPI further argue that
NFO cannot claim the Capper-Volstead exemption, principally
because a small number of non-farmers were nominal members
of NFO during certain periods at issue here.
The district court did not rule on the Capper-Volstead ques-
tion because it concluded that NFO’s activities did not con-
stitute price-fixing. Midwest Milk, supra, 510 F.Supp. at 423-
426. We cannot agree with this conclusion. In reviewing the
district court’s decision, we note that most of the relevant facts
are not in dispute. The parties stipulated to 3,206 facts with
respect to Mid-Am’s Phase I claims against NFO and the
district court noted: “(T]he real disputes in regard to Phase 1
* * * present legal questions and relate, on the facts, to ques-
tions of what inferences should be drawn from stipulated and
undisputed underlying factual circumstances.” /d. at 386.
The stipulated facts are that, initially, NFO did not market
milk at all, but instead promoted a common marketing agency
for co-ops and individual farmers—an organization that could
bargain more effectively by collectively representing a larger
share of milk producers. NFO iater presented “Master Con-
tracts” to cooperatives which, by their terms, would be acti-
vated once sixty percent of the milk supply in a particular area
was subject to such agreements. One purpose of the Master
Contracts was to enable NFO to bargain for the price paid to
producers for their milk. These Master Contracts were never
activated, however, because the sixty percent share level was
12a
never reached. NFO later began direct marketing of milk,
pusuant to “supply contracts” with various processors. Under
these agreements, the processor would pay a flat formula price
for all “NFO milk” which, in turn, would be paid to the individ-
ual producers of such milk.’
The foregoing practices are the principal basis of the price-
fixing allegations made by both Mid-Am and AMPI. It is argu-
able whether NFO’s efforts to promote a common marketing
agency could constitute actionable price-fixing. Such an entity,
if ever formed, presumably could have been structured to
comply with the Capper-Volstead exemption for cooperatives.
The price-fixing dimension of the NFO Master Contract pro-
gram is also somewhat unclear because such contracts were
never activated and their operation in practice, therefore,
cannot be fully ascertained. The NFO Supply Contracts, how-
ever, involved direct milk marketing by NFO. Individual far-
mers signed supplemental agreements under which NFO
would represent them for purposes of selling milk. Buyers of
NFO milk entered into supply contracts that provided a fixed
formula price to be paid to the NFO National Trust which, in
turn, was paid on a patronage basis to the individual producers
of such milk. This arrangement plainly reflects a horizontal
combination of producers agreeing to have NFO fix the prices
at which their product wi!l be sold. Unless exempt from the
antitrust laws, horizontal price-fixing is, of course, a per se
violation of the Sherman Act. See, e.g., United States v. Tren-
ton Potteries Co., 273 U.S. 392 (1927). Because the stipulated
facts make out a prima facie case of price-fixing, it was error for
the district court to conclude otherwise without reaching the
issue of NFO’s exemption. NFO is nonetheless not liable for
price-fixing, however, because its milk marketing arrange-
ments were exempt under the Capper-Volstead Act.
7 Because of bylaws restricting NFO’s receipt and use of funds, a
separate NFO Trust was created which processed dairy sales
monies. See slip op., infra, at 15-16.
l3a
The Capper-Volstead Act, 7 U.S.C. § 291, was adopted in
1922 to make clear that the antitrust laws would not prohibit
farmers from organizing collectively for purposes of marketing
their products. The Supreme Court has construed the exemp-
tion as permitting “farmer-producers to * * * fix prices at
which their cooperative will sell their produce * * * without
thereby violating the antitrust laws.” Maryland and Virginia
Milk Producers Association, supra, 362 U.S. at 466 (emphasis
added). Thus, the milk marketing arrangements of NFO are
clearly within the scope of activities contemplated under the
Capper-Volstead exemption.
The exemption is an affirmative defense and NFO in-
troduced sufficient evidence to establish prima facie entitle-
ment to the exemption. The stipulated facts show that NFOisa
nonprofit, non-stock corporation which gives collective
bargaining and marketing services exclusively to its members
in connection with their agricultural commodities. The record
further shows that in 1970, the Department of Agriculture
deemed NFO to be a qualified cooperative marketing associa-
tion, although the parties disputed that determination when it
was made and do so here as well. The challenge to NFO’s
exemption relates to (1) the corporate structure of its market-
ing program, and (2) certain non-farmers who appear to have
been members of NFO at various periods.
The structural issue arises because NFO’s bylaws prohibit
distribution of income to its members. As a result, when it
began to market milk, NFO created a separate legal entity—
essentially a trust custodial account—that received payment
for milk sales and, in turn, paid the producers. The Cap; -r-
Volstead Act requires that a cooperative be “operated for the
mutual benefit of the members thereof, as such producers.” 7
U.S.C. § 291. Mid-Am argues that because NFO cannot dis-
tribute income, its marketing program cannot be considered to
be “for the mutual benefit” of its members. This precise claim
was squarely rejected in Waters v. NFO, Inc., 328 F.Supp.
1229, 1245 (S.D. Ind. 1971). We also find no merit in Mid-Am’s
claim.
l4a
MidAm concedes that the NFO Trust properly operates for
the mutual benefit of producer-members who market through
NFO. Mid-Am insists, however, that each entity must be
considered entirely independent for Capper-Volstead pur-
poses. Such reasoning is contrary to the facts and would defeat
the purpose of the Capper-Volstead exemption. NFO mem-
bers who sold milk here in fact paid on a patronage basis for
their products and buyers of such milk who paid the NFO
National Trust knew they were dealing with NFO as essential-
ly one organization. Under less compelling circumstances, the
Supreme Court has indicated that organizational distinctions
should not be permitted to defeat the clear purposes of the
Capper-Volstead exemption. In Sunkist Growers, Inc. v.
Winckler & Smith Citrus Products Co., 370 U.S. 19 (1962)
(Sunkist I), the Supreme Court was presented with three
legally distinct entities formed by a huge group of citrus grow-
ers. The three entities were alleged to have illegally conspired
with each other, although the actual activity was lawful if
engaged in by any one cooperative. The Supreme Court held
they must be considered as one organization for Capper-
Volstead purposes, noting:
To hold otherwise would impose grave legal consequences
upon organizational distinctions that are of de minimus
meaning and effect to these growers who have banded
together for processing and marketing purposes within
the purview of the Clayton and Capper-Volstead Acts.
Sunkist I, supra, 370 U.S. at 29.
The Sunkist I rationale applies with special force where, as
here, it is obvious that NFO’s milk mar«eting, through the
mechanism of the Trust Account, was fairly operated for the
mutual benefit of all dairy farmers who participated.
The second and primary challenge to NFO’s exemption,
made by both Mid-Am and AMPI, relates to a small number of
persons who appear to have been non-farmer members of NFO
for certain periods in the late 1960's and early 1970's. Although
this issue is more serious than the structural claim raised by
Mid-Am, we again are guided by the overriding purpose of the
l5a
Capper-Volstead Act which, in our view, supports upholding
the exemption claimed by NFO.
The unmistakeable purpose of the Capper-Volstead Act is to
permit farmers and only farmers to band together and benefit
economically from collective marketing of their products. See,
e.g., Case-Swayne Co., Inc. v. Sunkist Growers, Inc., 389
U.S. 384, 391-393 (1967)(Sunkist IJ). Here, this purpose
unarguably has been served by NFO. There is no dispute that
only dairy farmers—true producers—marketed milk through
NFO. Only such farmers sold milk through NFO and only such
farmers were paid for NF0’s sale of their milk products. More-
over, NFO complied with the requirement that non-farmers be
excluded from membership by adopting bylaws in 1970 which
make clear that any member who quits farming “shall automat-
ically cease to be a member, and his or her membership agree-
ment shall become null and void.”” Such bylaws also restrict
membership to those engaged in actual production of agricul-
tural products.
The non-farmer issue arises largely because of ignorance or
sloppiness on the part of NFO in policing its membership rolls.
The stipulated record includes letters from approximately
twenty-five individuals which generally indicate they never
were or no longer were farmers, had received membership
dues billings from NFO and did not want to pay such dues.
Mid-Am and AMPI assert that these letters are conclusive
proof that NFO had non-farmer members and thus should be
denied the Capper-Volstead exemption. On the unusual facts
of this case, we disagree.
* The record indicates that prior to 1970, NFO, in apparently two
instances, permitted officers or staff members to retain their mem-
berships even though the scope of their NFO duties resulted in their
no longer being active farmers. One such officer’s Board position was
terminated in 1967, prior to Mid-Am or AMPI’s formation; the other
staff member apparently retained membership status until the 1970
bylaw was adopted.
l6a
The issue is a close one because of language in a 1978 Su-
preme Court decision which suggests that even one non-
farmer member disqualifies a cooperative from claiming the
Capper-Volstead exemption. See National Broiler Marketing
Assn. v. United States, 436 U.S. 816, 827-829 (1978). Although
it was clear prior to National Broiler that only farmers were
within the scope of the Capper-Volstead exemption, it was not
at all clear that careless membership practices would, standing
alone, preclude operation of the exemption. The district court
read National Broiler as imposing a duty to police ene’s mem-
bership to ensure that “not even one” non-farmer is a member.
Midwest Milk, supra, 510 F.Supp. at 426. On this ground, the
district court indicated that if it had reached the exemption
question, it would have ruled that NFO was disqualified. The
district court further indicated that, except for National Broil-
er, it would be inclined to sustain NFO’s exemption because
the non-farmer issue was “factually predicated upon mere
record-keeping formalities—the mere presence on the mem-
bership list of names of individuals who, by express bylaw
provision, had been stripped of all vestiges of membership.”
Id. at 425. The district court’s discussion of the exemption is, of
course, only dicta because the Court expressly did not reach
the issue. It is helpful here, however, because it confirms how
different the NFO situation is from the non-farmer issue in
National Broiler.
National Broiler involved a marketing association of
vertically integrated poultry producers. A number of members
were only processors in that they did not own or control breed-
er flocks, hatcheries or grow-out facilities. Jd. at 822. The
United States challenged the exemption because these mem-
bers were essentially middlemen, not farmers, and the Su-
preme Court agreed that Congress did not intend to exempt
“even one” such middleman. /d. at 826-828. The Supreme
Court’s rationale is consistent with its earlier decision in Sunk-
ist IJ, supra, 389 U.S. 384 (1967), in which it denied the
Capper-Volstead exemption to a citrus growers association
because approximately fifteen percent of its members were
17a
non-farmer processors. Both cases make clear that no middle-
men are to be permitted to “infiltrate” otherwise exempt
cooperatives; and that vertical integration in agricu!tural in-
dustries cannot extend to a point where non-farmer middlemen
can claim the Capper-Volstead shield. The “not even one”
language in National Broiler cannot be divorced from that
Court’s emphasis on the economic role of such middlemen and
on the intent of Congress not to permit such middlemen to
participate in price-fixing. National Broiler, supra, 436 U.S.
at 827-829.
There is no suggestion here that dairy industry processors
were members of NFO. On the contrary, the stipulated record
shows that the non-farmers who were putative members of
NFO included, for example, a car dealer, a truck driver, a
fertilizer salesman, a school teacher, a retired farmer, a TV
salesman and a telephone company employee. The letters in
the record further indicate that many of these non-farmers
never considered themselves NFO members. When they re-
ceived dues’ billings, they typically wrote of having made
“donations” to “help get things started” and of not wanting to
continue doing so.
It appears that NFO may have been overly broad in its
solicitation of support, but receipt of twenty-five dollars in
“dues” from a handful of individuals is hardly the same as
shielding middlemen from price-fixing liability, as in Sunkist
II and National Broiler. Moreover, unlike the cooperatives in
those two cases, NFO does not contend that the putative
non-farmer members should be permitted to claim any exemp-
tion. Indeed, NFO’s bylaws prohibit such persons from assert-
ing any membership interest and there is no contention that
such persons bought or sold milk through NFO.
We are not called upon to decide whether National Broiler
requires a rigid rule for membership practices employed after
that case was decided in 1978. The district court’s view on such
a question may well be proper. The issue here only relates to
the late 1960’s and early 1970’s and is much narrower. Simply
18a
put, the cuestion is whether NFO can claim the exemption for
its milk marketing activities during the period at issue here,
when such activities were conducted exclusively for true dairy
farmers, notwithstanding that a small number of non-farmers,
unrelated to the dairy industry, apparently paid dues to NFO
during that period. We think the answer is “yes” in light of the
overriding purpose of the Capper-Volstead Act.
As Justice Brennan noted, concurring in National Broiler,
supra, 436 U.S. at 830, the Capper-Volstead Act was “populist
legislation” designed to allow farmers to band together “in
order to survive against the economically dominant manufac-
turing, supplier, and purchasing interests with which they had
to interrelate.” NFO is the kind of populist farm organization
contemplated by the Capper-Volstead Act. Regardless of the
wisdom of its programs, NFO’s entry into milk marketing
exclusively on behalf of dairy farmers is precisely the kind of
cooperative endeavor that Congress intended not to be subject
to antitrust attack. To hold the otherwise would defeat the
purpose of the Capper-Volstead Act. Moreover, it would be
cruelly ironic to exempt large co-ops like Mid-Am and AMPI—
professionally managed and operated by many non-farmers—
while denying exemption to the farmers who banded together
in NFO. We decline to do so.
Thus, we hold that the milk marketing contracts and pro-
grams promoted by NFO during the period at issue in this
action do not constitute actionable price-fixing in light of the
Capper-Volstead exemption.
B. Mid-Am’s Boycott Claims
Mid-Am contends that NFO enlisted dairy farmers in a
boycott of Mid-Am with the intent to force Mid-Am to sign an
NFO milk supply contract. Mid-Am further argues that such a
group boycott is a per se antitrust violation regardless of
whether its promoter is exempt under the Capper-Volstead
Act. We agree that the Capper-Volstead exemption does not
shield a cooperative from liability for predatory trade prac-
19a
tices, including group boycotts. See slip op., supra, at 9-11.
Here, however, the district court rejected the crucial factual
findings upon which Mid-Am’s claim is based. After close
analysis of the record, we cannot say the district court’s find-
ings are clearly erroneous.
Mid-Am’s theory essentially is tnat virtually all of NFO’s
milk marketing activity had the sole purpose of eliminating the
established cooperatives. It construes NFO’s solicitation of
producers as an attempt to induce such farmers to breach their
agreements with Mid-Am. It argues that NFO’s entry into
direct marketing was not as a bona fide competitor, but rather
was only intended to pressure Mid-Am into signing an NFO
Supply Contract. Similarly, it characterizes NFO’s spon-
sorship of milk withholding as coercion of the co-ops, again to
pressure them into signing a supply contract. In this context,
Mid-Am makes much out of a comment by an NFO official in a
meeting with Mid-Am to the effect that “NFO had been a burr
under the saddle of the co-ops and would just have to continue
to be.”
We have no doubt that NFO was such a “burr.” That alone,
of course, does not violate the antitrust laws. More important,
Mid-Am’s characterization of NFO’s activities was squarely
rejected by the district court. It is true that many Mid-Am
members were the object of NFO’s solicitations, but this was
inevitable because in some regions, nearly all of the producers
had been Mid-Am members. Indeed, prior te NFO’s entry into
marketing in Missouri, some dairy farmers had no practical
alternative to Mid-Am. Midwest Milk, supra, at 469. Solicita-
tion of business, however, is not the same as inducing a breach
of contract; and Mid-Am failed to prove that NFO’s activities
rose to the level of the latter. Mid-Am’s position would, on this
record, employ the antitrust laws as a barrier to market
entry—stifling the very competition which such laws are de-
signed to encourage. We also note that Mid-Am lost and does
not appeal its state law claim that NFO allegedly induced dairy
farmers to breach their Mid-Am contracts.
20a
NFO’s sponsorship of a two-week milk withholding action
was broad in scope and part of concerted demands for higher
dairy prices. The court found that no individual farmer’s deci-
sion to withhold milk was coerced by NFO or otherwise. When
not directed at the elimination of competition, this type of
activity, as a general matter, is within the scope of the Capper-
Volstead exemption. The court found that Mid-Am failed to
show that the action was intended to eliminate co-ops and we
cannot say this finding was clearly erroneous.
Finally, we cannot agree with Mid-Am that NFO did not
intend to be a bona fide competitor in milk marketing. We
recognize that NFO’s marketing program was fraught with
problems, but there is no merit in Mid-Am’s suggestion that it
was just another “expedient” in attempting to eliminate the
established co-ops. As the district court noted:
[T]he record would come closer to supporting a set of
findings that NFO became a victim of its own propaganda
and that its ignorance and inexperience in the dairy field
——— it to experiment with one unsound idea after
another.
Midwest Milk, supra, 510 F.Supp. at 420.
We affirm the district court’s conclusion that Mid-Am failed
to carry its burden with respect to its claim that NFO engaged
in predatory practices and an illegal boycott.’
C. AMPI’s Counterclaim
AMPI’s claims were tried in Phase III of the proceedings
below. Its price-fixing claim, of course, is resolved by our
holding above that NF0O’s activity was shielded by the Capper-
® The district court did not rule on damage issues, but NFO argues
on appeal that Mid-Am cannot recover damages because its harm, if
any, resulted from NFO’s pro-competitive entry into marketing. See
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977).
Although there is support in the record for this theory, we need not
reach the issue in light of our holding.
2la
Volstead Act, see slip op., supra, at 18-20. The gravamen of its
other charges, as characterized by AMPI, is that NFO and
others conspired to gain control of sufficient milk as to control
the price of milk nationwide and employed the predatory prac-
tice of inducing AMPI members to breach their agreements
with AMPI. The alleged conspiracy also was aimed at
“destroying” AMPI, presumably as a competitor of NFO."
AMPI also contends that NFO violated the Agricultural Fair
Practices Act (AFPA), 7 U.S.C. § 2303.
On this record, there can be no substantive claim of attempt-
ed monopolization under Section 2. A necessary element of
such a claim is a showing of a “dangerous probability” of suc-
cess, which no one asserts was ever posed by NFO. Indeed,
AMPI characterizes NFO’s marketing programs as “gran-
diose” but “inept and incompetent” and the district court found
them “quite unsuccessful.” Midwest Milk, supra, 510 F.Supp.
at 419-420. The only issue then is an alleged conspiracy under
Sections 1 and 2, which AMPI asserts operated at two levels.
One alleged conspiracy was between NFO and certain
nonexempt entities. Specifically, the alleged coconspirators
were certain milk haulers, bottling plants and others that
entered into various contracts with NFO in connection with its
direct marketing efforts. The district court expressly found
that these were normal business relationships and that such
entities did not conspire with NFO in terms of any matters
which might involve antitrust concerns. On appeal, AMPI has
offered nothing which would show this conclusion to be
erroneous.
The other alleged conspiracy was internal, involving various
officers and employees of NFO. AMPI contends that these
individuals conspired to eliminate AMPI as a competitor and
AMPI and Mid-Am contend that NFO was not a true competitor,
which is probably why AMPI casts its claim simply as a conspiracy to
“destroy AMPI.” We treat the claim as an alleged conspiracy to
eliminate competition cognizable under the Sherman Act.
22a
employed predatory practices toward this goal. The district
court did not reach the question of whether NFO is legally
capable of conspiracy in this manner, and there are unsettled
questions in the law of so-called intra-corporate conspiracies.
Cf. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd.,
416 F.2d 71 (9th Cir. 1969); Shoenberg Farms, Inc. v. Denver
Milk Producers, Inc., 231 F.Supp. 266 (D. Colo. 1964); 3 Von
Kalinowski, supra, § 7.02{1]. We need not reach this legal
issue, however, because AMPI’s claims fail as a factual matter.
AMPI concedes that NFO’s attempt to achieve a common
marketing agency, prior to its direct marketing efforts, was
pursued by seeking to have the existing cooperatives join
together. The record further shows that until 1969, NFO sup-
ported the concept of voluntarily merging co-ops to form
stronger bargaining units. Thus, these efforts hardly reflect on
intent to destroy the co-ops, as AMPI argues.
AMPI’s more serious contention is that NFO employed un-
lawful, predatory practices once it commenced direct
marketing—specifically, coercing farmers to leave AMPI, join
NFO, or retain their membership in NFO and unlawfully in-
aucing AMPI members to breach their marketing contracts.
The coercion claim is also alleged as a violation of the AFPA, 7
U.S.C. § 2303. The district court, however, expressly found
that NFO coerced no farmers, either its members or AMPI
members, and nothing in the record would make this finding
erroneous. See Midwest Milk, supra, 510 F.Supp. at 526-527.
The inducement of breach contention is closely related to
AMPI’s claim that NFO used fraudulent misrepresentations to
induce AMPI members to “switch” to NFO, thereby violating
the AFPA. These issues have been extensively litigated in a
Wisconsin state court action initiated by AMPI, upon which
NFO and AMPI now make assertions of collateral estoppel and
res judicata.
There is no doubt that by 1971, NFO and AMPI were in
full-scale competition for milk producers. NFO solicited dairy
farmers, including AMPI members, to ship through NFO’s
23a
direct marketing program. AMPI brought suit in Wisconsin
state court to stop NFO’s activity, commencing litigation
which has twice reached the Wisconsin Supreme Court and
recently an intermediate appellate court as well. The Wiscon-
sin trial court has adopted AMPI’s view and enjoined NFO
three times and on all three occasions, it has been reversed and
had its orders vacated.
In Pure Milk Products Cooperative v. NFO, 64 Wis.2d 241,
219 N.W.2d 564 (1974)(Pure Milk I)" the Wisconsin Supreme
Court reversed a temporary injunction which had been en-
tered against NFO. It found the injunction overly broad, in-
dicating that legitimate competition would allow inducement of
AMPI members to terminate their marketing agreements in
accordance with the terms of such contracts. /d. at 572, 575. It
also found the record inadequate with respect to any claim of
fraudulent misrepresentations. /d. On remand, the trial court
found that approximately 1,200 AMPI members had been in-
duced by NFO to “switch” milk shipments to NFO and that
such actions breached their marketing agreements with
AMPI. It further found that NFO had made fraudulent
misrepresentations in the course of soliciting AMPI members.
On appeal, in Pure Milk Products Cooperative v. NFO, 90
Wis.2d 781, 280 N.W.2d 691 (1979)(Pure Milk 7), the Wiscon-
sin Supreme Court again reversed. The court emphasized
AMPI’s practice of permitting its members to ship to plants of
their choice without thereby breaching their AMPI con-
tracts." Jd., 280 N.W.2d at 696-698. On this basis, the Su-
'' The captioned plaintiff is a predecessor of AMPI, and the litiga-
tion was later carried forward by AMPI. We continue the Pure Milk
designation to avoid confusion.
" The key apparently was that AMPI be permitted to nonetheless
receive fees for testing its members’ milk. Although there were
disputes over NFO paying such fees to AMPI, the record shows that
AMPI generally did not view such disputes as involving breach of a
member’s contract. See Pure Milk Products Cooperative v. NFO, 90
Wis.2d 781, 280 N.W.2d 691, 697-698 (1979) (Pure Milk II).
24a
preme Court squarely held that the mere “switching” of ship-
ments to NFO, and NFO’s solicitation of such shipments, were
not a breach of any contract. Jd. at 697, 698. The Court also
reversed the finding of fraudulent misrepresentations, direct-
ing that on remand such questions be considered only in the
context of the approximately 160 AMPI members who had
terminated their marketing agreement altogether." /d. at 701.
On remand, the trial court reissued a broad injunction based
on findings which were contrary to the Supreme Court’s man-
date in Pure Milk IT. This third order was recently reversed by
an intermediate appellate court in an opinion which makes
clear that the issue of fraudulent representations is still open
upon appellate review. Pure Milk Products Cooperative v.
NFO, No. 80-1812 (Wis. Ct. App., Nov. 11, 1981)(Pure Milk
III).
AMPI argues that because of the third decision of the Wis-
consin trial court, collateral estoppel bars NFO from contest-
ing whether it made fraudulent misrepresentations. This is
plainly wrong. That trial court’s findings have been reversed
three times and, in the last instance, its misrepresentation
findings were expressly reserved for further review. Such
determinations thus lack the finality required for collateral
estoppel.
NFO, on the other hand, argues that res judicata bars
AMPI’s assertion of both its inducement of breach and
misrepresentation claims. This too misses the mark. Res judi-
cata involves claim preclusion, not issue preclusion. Here,
AMPI’s claim under the Agricultural Fair Practices Act is a
different cause of action from its state law claim. Thus, AMPI’s
assertion that NFO made “knowing misrepresentations” in
violation of the AF PA is properly raised in the present action
The trial court presumably was to consider whether such
terminations were fraudulently induced and was allowed to reopen
fact finding on the scope and scale of such matters.
25a
and must rest, not on collateral estoppel, but on the facts
adduced below.
It appears, however, that collateral estoppel would bar
AMPI’s assertion that NFO’s solicitation of AMPI members
constituted an inducement to breach their contracts. All of the
elements of the collateral estoppel doctrine are present. The
parties in the Wisconsin action are identical to the parties here.
The issue—whether NFO’s solicitations induced a breach of
contract by AMPI members—is identical to the issue here,
although it is now cast as part of a predatory practice claim.
The parties had a full and fair opportunity to litigate the issue,
and the Wisconsin Supreme Court reached a final judgment.
Its resolution of the issue was necessary to its judgment and
was expressly reached. Collateral estoppel, therefore, seems
applicable. See Montana v. United States, 440 U.S. 147, 153-
154 (1979); Oldham v. Pritchett, 599 F.2d 274 (8th Cir. 1979).
Indeed, AMPI argued vigorously in its brief that judicial econ-
omy and federalism principles weigh heavily in favor of
precluding relitigation of issues settled in the Wisconsin litiga-
tion.
The district court, however, rejected AMPI’s inducement of
breach claims as a factual matter on the merits. Much of the
evidence adduced below consisted of the evidence adduced in
the Wisconsin litigation, where AMPI also lost its contention
that “switching” members constituted a contract breach. After
reviewing the record, we cannot find the district court’s con-
clusion clearly erroneous.
The only remaining claim against NFO is that it made know-
ing misrepresentations in violation of the AFPA, 7 U.S.C.
§ 2303(c), (e) & (f). Whether a “knowing” violation requires
intentional conduct or mere negligence is not clear under the
Act and has not been addressed by any court. We find it
unnecessary to reach this issue, however. The district court
found both that there was insufficient evidence that false
representations about AMPI were made and that, in any
event, there were no “knowing” violations of the Act. Midwest
26a
Milk, supra, 510 F.Supp. at 526-527. Even reviewing these
conclusions under a negligence standard, we cannot say they
were clearly erroneous.
For all of the foregoing reasons, we affirm the district court’s
judgment against Mid-Am and AMPI in their Phase I and
Phase III claims against NFO.
Il.
NFO’S CLAIMS AGAINST MID-AM, AMPI, CMPC AND
ARSPC
NFO’s claims were tried over an eighteen-month period,
comprising the bulk of the record." NFO alleges that Mid-Am,
AMPI, CMPC and ARSPC conspired to eliminate competition,
in violation of Section 1 of the Sherman Act, and monopolized,
attempted to monopolize and conspired to monopolize, in viola-
tion of Section 2 of the Sherman Act. The district court ruled
that NFO failed to meet its burden of proof on any of its
theories under Sections 1 and 2. Midwest Milk, supra, 510
F.Supp. at 434-435, 502-503.
Review of this conclusion is difficult because of the paucity of
the factual findings. On many of the crucial factual issues, the
court’s findings consist only of seriatum rejections of findings
proposed by NFO— in most instances, without explanation and
without adoption of alternative findings. These “negative”
findings are nonetheless against NFO on such issues, and we
review all of the findings under the clearly erroneous standard.
Based upon such findings, we affirm the district court’s dis-
missal of NFO’s actual and attempted monopolization claims.
The district court’s affirmative factual findings and record
evidence in support thereof, however, unmistakably show that
AMPI, CMPC and Mid-Am illegally conspired to monopolize
“ By contrast, Mid-Am’s Phase I claim was tried over a nine-day
period.
27a
Grade A milk marketing and to eliminate competition in the
marketing of such milk, and that NFO was a specific target of
the conspiracy. This conspiracy violates Sections 1 and 2 of the
Sherman Act, notwithstanding the Capper-Volstead exemp-
tion, because it involved the concerted use of predatory and
other unlawful, anti-competitive means to eliminate competi-
tion and pursue monopoly power. We affirm the dismissal of
NFO’s claim against ARSPC, however, because the record
does not clearly establish it was a participant in the conspiracy.
A. Actual And Attempted Monopolization
One essential element of these claims is a showing of the
relevant market within which the offender achieved either
monopoly power or a “dangerous probability” of such power.
See slip op., supra, at 7-8. The district court ruled that NFO
failed to establish relevant product or geographic markets or
make a sufficient showing of market power within a properly
defined market. Midwest Milk, supra, 510 F.Supp. at 502.
In our view, NFO clearly established that raw Grade A milk
is a relevant product market. The court’s affirmative findings
are sufficient to prove this element, and it was legal error not to
so conclude. Briefly, the findings show that only Grade A milk
may be used for fluid products for human consumption; that
Grade B milk, by definition, cannot be a substitute for or be
interchanged with Grade A milk for Class I uses; that demand
for Grade A fluid products is relatively inelastic; that produc-
tion of Grade A milk requires stricter sanitary methods and
necessitates conversion costs and higher production costs than
Grade B milk; that Grade A milk is supported by minimum
federally regulated prices, while Grade B prices are estab-
lished in the open market; and that “premium” prices negoti-
ated by cooperatives primarily relate to Grade A milk used for
Class I purposes. Midwest Milk, supra, 510 F.Supp. at 437-
443. In any commercially meaningful sense, Grade A milk is
thus a relevant product market for antitrust purposes and has
been deemed such in other milk monopolization cases. See,
e.g., United States v. Dairyman, Inc., 660 F.2d 192 (6th Cir.
1981).
28a
The relevant geographic market and market share evidence
is more problematical, chiefly because it does not appear that
NFO had a consistent theory of the geography underlying its
actual and attempted monopolization claims. At trial and on
appeal, NFO has variously asserted that the relevant geo-
graphic market is a ten-state region, or ten federal order
markets therein, or a number of other submarkets, such as the
regulated Chicago market (Order 30). The district court, how-
ever, found NFO’s market definitions and market share data
inadequate.
On this record, there is no doubt that AMPI, Mid-Am and
CMPC are the major marketers of milk produced in the Mid-
west. CMPC’s control of supply in the Chicago market, for
example, is so great that at least one Chicago dairy simply
could not meet its full supply needs without turning to CMPC.
See Midwest Milk, supra, 510 F.Supp. at 482. Similarly, prior
to NFO’s entry into Grade A marketing in Missouri, “some of
the Grade A milk producers in Southern Missouri had no prac-
ticable alternative other than to ship through Mid-Am.” Jd. at
469. Moreover, the official USDA milk pooling statistics re-
ported in the findings overwhelmingly establish the significant
market position of AMPI, CMPC and Mid-Am—singly or
together pooling from seventy percent to over ninety percent
of all milk pooled in various of the major federal order markets
at issue here." Jd. at 448-449; see also id. at 488, 496.
The defendants do not deny having such significant market
power. Indeed, the record reveals public assertions by Mid-
Am that it controls over eighty-five percent of the Grade A
milk in a number of “strategic” metropolitan markets; and
similar assertions by CMPC that it represents over ninety
‘6 Notwithstanding defendants’ assertions to the contrary, it is
proper to look at such statistics collectively because the defendants
were engaged in extensive joint marketing and territorial allocations
and NFO alleges concerted, conspiratorial conduct. See generally
Von Kalinowski, supra, { 8.02(3).
29a
percent of the producers selling into the Chicago market, and
supplies over ninety percent of that market’s fluid milk use.
The defendants, however, dispute the sufficiency of NFO’s
market definition and share data, arguing that it fails to ac-
count for milk which is pooled on one order but actually sold in
another, or for certain unregulated milk supplies not reflected
in the “pooling” statistics or for other milk movements be-
tween orders and across boundaries variously proposed as
market definitions by NFO. This raises issues of fact which the
district court resolved against NFO, albeit without explana-
tion. We thus are presented with the certainty, on this record,
that AMPI, CMPC and Mid-Am are the major marketers of
raw milk produced in the Midwest, but with uncertainty as to
monopoly power in a properly defined market or submarkets.
The burden to show monopoly power or “dangerous probabil-
ity” of it, however, is on NFO. We cannot say it was clearly
erroneous for the district court to find that NFO’s statistical
evidence was not sufficiently well defined to support its claims
of actual and attempted monopolization. Accordingly, we
affirm the dismissal of such claims.
B. The Conspiracy To Monopolize And Eliminate Competi-
tion
NFO alleges that AMPI, Mid-Am, CMPC and ARSPC con-
spired to monopolize and eliminate competition in the market-
ing of raw Grade A milk. Moreover, it alleges that the con-
spiracy involved concerted use of predatory and other unlawful
tactics and that NFO was a specific target of the conspiracy.
Such a conspiracy would violate Section 2 of the Sherman Act
to the extent its aim is to unlawfully acquire monopoly power; it
would violate Section 1 to the extent its aim is to unlawfully
eliminate competition. See Maryland and Virginia Milk Pro-
ducers Association, supra, 362 U.S. at 463 (Sections 1, 2 and 3
“closely overlap and the same kind of predatory practices may
show violations of all.”). A threshold question is the nature of
the relevant market and intent elements of this claim.
30a
The record evidence as to relevant market is clearly suffi-
cient to support NFO’s Section 2 conspiracy claim. It is
generally held that relevant market is not a necessary element
of such a claim because actual attainment or “dangerous prob-
ability” of monopoly power are not at issue. See slip op., supra,
at 8-9. In our view, a minimal showing must nonetheless be
made as to the product and geographic context of the alleged
conspiracy. Here, NFO made a more than adequate showing of
the ten-state region within which the defendants engaged in
concerted efforts to gain control over and eliminate NFO as a
competitor in the marketing of raw Grade A milk. NFO has
also demonstrated that the conspiracy affects a substantial
amount of interstate commerce—millions of pounds of Grade A
milk shipments by NFO alone. See, e.g. Forgett v. Scharf, 181
F.2d 754, 787 (3d Cir.), cert. denied, 340 U.S. 825 (1950); 3 Von
Kalinowski, supra, § 9.02[4]. Of course, an unlawful con-
spiracy under Section 2 necessarily violates Section 1 as an
“unreasonable” restraint of trade."
The more crucial issue is the element of intent. Here, the
defendants do not seriously dispute, nor could they on this
‘6 The defendants concede that a Section 2 conspiracy is a fortiori
conspiracy under Section 1, e.g., CMPC Br. at 35, n.134, but attempt
to circumvent this by proposing a rather convoluted application of the
antitrust laws. Essentially, the assertion is that NFO tried its Sec-
tion 1 claim under a rule of reason approach below and should be
barred from asserting a per se theory on appeal; that NFO’s Section 1
claim fails under the rule of reason because of an inadequate showing
as to market power; and that NFO’s Section 2 claim should be
dismissed because otherwise a gross incongruity would result from
finding a Section 2 violation which is not also a Section 1 violation.
Such strained reasoning has no merit here. At trial, NFO alleged
concerted predatory conduct in violation of Sections 1 and 2. Such a
conspiracy, if proven, is “unreasonable” under Section 1 regardless of
whether the per se label is attached; moreover, the record evidence
as to defendants’ market power is sufficient to render their alleged
conduct unlawful even under the rule of reason. See slip op., supra, at
31-32.
3la
record, that they acted in concert with the intent to eliminate
competition and gain sufficient control of milk to enable them
to set higher prices." They properly argue that such intent is
not unlawful, standing alone, because Capper-Volstead
cooperatives may agree to eliminate competition between
themselves and to pursue monopoly power through lawful
means. The prohibited aim is to pursue such power or seek to
eliminate competition through predatory, anticompetitive or
other unlawful tactics. It is this unlawful intent which NFO
must establish and which it has shown as to Mid-Am, AMPI
and CMPC, but not as to ARSPC.
We summarize below the defendants’ overt acts which NFO
contends evidence the illegal conspiracy. Most of the actual
conduct is not in dispute as much as is the inference of intent
and conspiracy: whether the actions were in concert and were
unlawfully intended to eliminate competition in general and
NFO in particular; or whether they were unilateral actions
taken for legitimate business reasons. The district court
appears to have viewed the many incidents discussed below as
isolated, self-contained actions. We recognize that when
viewed in this manner, there is conflicting record evidence
which could support findings that at least some of the conduct
was not unlawful. When the conduct is viewed as a whole,
however, there is only one conclusion that can be drawn.
AMPI, Mid-Am and CMPC did conspire to monopolize and
eliminate competition in the marketing of Grade A milk pro-
duced in the Midwest, through the use of discriminatory pric-
See, e.g., CMPC Ex. 767, a promotional brochure stating that
CMPC “was organized for the primary purpose of improving prices to
all milk producers serving” Chicago, and noting in a quiz section: “Q.
Is there currently a Super Pool premium on Order 30? A. No, but
there could well be if all milk producers were to join the efforts of
CMPC.” See also slip op., infra, at 36-37, describing Mid-Am and
AMPI consignment agreements, territorial allocations and other
joint marketing efforts.
32a
ing, coercive supply disruptions and threats of similar conduct,
as well as bad faith harassment and threats of litigation against
independent buyers of NFO milk. Although some of the dis-
trict court’s “negative findings” are clearly erroneous, as de-
scribed below, it is in large measure the court’s affirmative
findings—the actual conduct viewed as a whole—which estab-
lishes the unlawful conspiracy. The findings and record evi-
dence, however, do not clearly show that ARSPC participated
in the conspiracy and we therefore affirm the dismissal of
NFO’s claim against this co-op.
The specific overt acts of the defendants must be viewed in
light of their concerted marketing practices as a whole. AMPI
and Mid-Am contend they are vigorous competitors with each
other, but while they have competed at various times, the
concerted nature of their marketing activities is undeniable.
AMPI became a member of Mid-Am and Mid-Am became a
member of AMPI. They entered into consignment agreements
which effectively divided up certain marketing territories in
the Midwest, South and Southwest. Mid-Am consigned some
of its members’ milk to AMPI for sale in the Oklahoma Metro-
politan, North Texas, South Texas and Central Arkansas mar-
kets. Midwest Milk, supra, 510 F.Supp. at 452. Mid-Am and
AMPI reached a similar consignment agreement covering the
Wichita market “because there was a possibility that Mid-Am
was going to begin making sales in Wichita.” Jd. These recip-
rocal arrangements were extended to cover the St. Louis,
Nebraska—Western Iowa, Des Moines, Kansas City and Twin
Cities federal market orders, the result being that Mid-Am
marketed AMPI milk in some areas, and AMPI marketed
Mid-Am milk in others. Jd. To help facilitate their joint activi-
ties, Mid-Am has since 1969, assigned staff as liason with
AMPI “to eliminate problems which may develop between the
two organizations.” Jd. at 479.
CMPC is a federation of cooperatives which exists to sell
milk into the greater Chicago market. As CMPC characterizes
its own federated structure, it could function only through
persons employed by or representing its constituent co-ops.
33a
CMPC Br. at 50, n.168. AMPI is a member of CMPC and,
moreover, serves as CMPC’s marketing agent for Chicago.
Midwest Milk, supra, 510 F.Supp. at 476. An AMPI official,
for example, was chairman of the CMPC price development
committee. With these overlapping roles of AMPI and CMPC
staff, it sometimes is difficult to distinguish which entity is
responsible for specific actions in the Chicago market, but the
generally concerted nature of CMPC and AMPI marketing
efforts is obvious.
NFO began to assemble a direct marketing program in 1969,
and aggressive competition ensued between NFO and AMPI,
Mid-Am and CMPC, both to garner farmers as producer-
suppliers and to win supply contracts from proprietary dairies.
As anew entrant, NFO sometimes offered milk at lower prices
than the principal co-ops, but could initially pay its members
competitive prices because its overhead apparently was not as
great as that of the large, established co-ops. Jd. at 457.
NFO’s marketing efforts became a serious problem for Mid-
Am, AMPI and CMPC. Mid-Am viewed NFO as a competitor
in the raw milk supply business, and by 1970, “Mid-Am viewed
NFO as a substantial threat to Mid-Am’s maintenance of its
membership.” Jd. at 457-458. AMPI, too, experienced signifi-
cant membership problems from NFO and commenced ex-
tensive litigation in Wisconsin with the stated purpose of
protecting marketing contracts with its members. See slip op.,
supra, at 25-28. Moreover, AMPI, CMPC’s marketing agent,
was concerned that NFO’s price cutting would “undermine”
the premiums being paid on the Chicago market. Jd. at 479.
The Chicago price problems were of tremendous concern to
CMPC and AMPI which sold directly in that market, and were
also important to Mid-Am, as one of its official’s testified,
because Chicago essentially functioned like a base-pricing
point for other markets served by Mid-Am. See id.; Hanman
Dep. at 180-181, 863-872.
If there could be any doubt that CMPC, AMPI and Mid-Am
jointly perceived NFO as a competitive threat, such doubt is
34a
removed by the district court’s express findings that Mid-Am
and AMPI officials met from time to time to discuss their
concerns regarding NFO and that senior officials of CMPC,
Mid-Am and AMPI—during one of the more fierce stages of
the competition—assembled a joint meeting specifically to dis-
cuss NFO’s “cut-rate” rnarketing and solicitation of their mem-
bers. Id. at 469, 480."
Against this background, we turn to evidence of the overt
acts of CMPC, AMPI and Mid-Am, largely as described in the
district court’s affirmative findings of fact.
1. Attempt To Block NFO’s Qualification.
To effectively compete in the marketing of milk, NFO had to
become “qualified” by the USDA on various federal market
orders. See Midwest Milk, supra, 510 F.Supp. at 439-441.
Mid-Am, AMPI and CMPC engaged in a series of governmen-
tal contacts aimed at blocking NFO from becoming so “qual-
ified.” Contacts were made with the Wisconsin Department of
Agriculture, the Missouri attorney general, regional USDA
administrators and more senior USDA officials. At one point,
these defendants proposed an amendment to the definition of
“cooperative association” which would have seriously ham-
pered NFO’s efforts to become qualified. Some of the letters,
requests and initiatives were made by Mid-Am or AMPI alone,
although copies of such correspondence were typically circu-
lated to the other co-op or co-ops. The effort clearly was a
coordinated one joined in by CMPC, AMPI and Mid-Am, the
purpose of which “was to foreclose NFO from the marketing of
Grade A milk under Federal Orders as a qualified coopera-
tive.” Id. at 458; see also id. at 469, 480-481.
'SCMPC contends it was not “present” at this meeting,
notwithstanding that one of the attendees, McWilliams, was chair-
man of CMPC’s Price Development Committee and was an official of
AMPI, CMPC’s marketing agent.
35a
The three co-ops contend that they objected to NFO in good
faith and that, in any event, their efforts cannot constitute an
antitrust violation because of the Noerr-Pennington doctrine.
Whether the objections to NFO were in good faith is arguable.
When NFO becanie qualified to market milk in Chicago, for
example, CMPC solicited NFO to join and market through
CMPC. It thus would appear that at least CMPC’s concern was
related as much to NFO’s independence as to its atypical
structure.
The Noerr-Pennington doctrine, however, does exempt the
concerted effort to block NFO’s qualification. Absent a sham,
joint efforts to influence public officials, even if intended to
eliminate competition, are “not illegal either standing alone or
as part of a broader scheme itself violative of the Sherman
Act.” United Mine Workers v. Pennington, 381 U.S. 657, 670
(1965); Feminist Women’s Health Center v. Mohammad, 586
F.2d 530, 542-543 (5th Cir. 1978), cert. denied, 444 U.S. 924
(1979). The sham exception generally involves governmental
contacts which are not a genuine attempt to influence official
decision making, but instead are merely an attempt to in-
terfere directiy with the business relationships of a competi-
tor. See Feminist Women’s Health Center v. Mohammad,
supra, 586 F.2d at 543; Fischel, Antitrust Liability for At-
tempts to Influence Government Action. The Basis and Limits
of the Noerr-Pennington Doctrine, 45 U.Chi. L.Rev. 80, 105-
111 (1977). Here, NFO’s structure and some of its programs
were not typical of farmer cooperatives, see slip op., supra, at
15-16, and we cannot say that the attempts to block it from
being deemed a qualified cooperative were not genuine at-
tempts to influence official policymaking. Thus, the pattern of
governmental contacts are not actionable alone or as an ele-
ment of the larger scheme."
In so holding, we do not consider what role, if any, AMPI’s
political contributions might have played in its efforts to get the
USDA to deny NFO’s qualification. AMPI officials made a sub-
staniial series of allegedly unlawful financial contributions to the
Nixon Reelection Committee at approximately the same time they
36a
Exempt conduct may be considered, however, to the extent
it tends to show the “purpose or character” of other,
nonexempt activity. United Mine Workers v. Pennington,
supra, 381 U.S. at 671 n.3; Feminist Women’s Health Center
v. Mohammad, supra, 586 F.2d at 543; Webb v. Utah Tour
Brokers Assn., 568 F.2d 670, 672 (10th Cir. 1977). Here, the
district court’s findings are noteworthy because they show
CMPC, AMPI and Mid-Am acting in concert with the specific
intent to block NFO from competing as a qualified cooperative.
While not illegal because of the exemption, this conduct does
have evidentiary value as to the purpose and concerted charac-
ter of these co-ops’ contemporaneous nonexempt activities.
2. Gandy Dairy
AMPI’s handling of Gandy Dairy in the Central West Texas
Market Order is one unequivocal illustration of predatory con-
duct aimed at coercing buyers to eliminate their purchases
from independents. The district court’s affirmative findings of
fact and underlying record evidence may be summarized brief-
ly. See Midwest Milk, supra, 510 F.Supp. at 474.
Prior to May of 1971, Gandy Dairy purchased all of its Grade
A milk from AMPI. In March and April of that year, however,
Gandy arranged to purchase part of its supply from four in-
dependents. An AMPI official met with Gandy in April to
discuss such purchases and, according to one Gandy partici-
pant, expressed AMPI’s “disappointment” and indicated he
“didn’t know what his people might do * * * There were two or
three possibilities.”” AMPI’s response became clear. The very
were seeking to influence the USDA. See slip op., infra, at 62. NFO
apparently did not pursue at trial and does not argue on appeal that
AMPI’s financial contributions were linked to the joint efforts to
block NFO’s qualification. Thus, we need not decide whether such
conduct would vitiate the exemption which is otherwise applicable
here.
” Chandler Dep. at 85-86.
37a
day that the independent shipments commenced, AMPI began
short-shipping Gandy and making late deliveries of the milk
which it did deliver. Simultaneously, AMPI’s Gold Spot Divi-
sion began soliciting Gandy’s customers, offering them
competing products at prices close to Gandy’s cost of produc-
tion. The purpose and intent of these efforts was “to get Gandy
to return to AMPI for its full requirements of milk.” /d.
Although the supply shorting and late deliveries persisted
only briefly, they functioned as a warning to Gandy of the
disruption it risked by making independent purchases.
Similarly, the solicitations of Gandy’s customers — perhaps
lawful under other circumstances — were clearly part of the
effort to put futher pressure on Gandy. The conduct as a whole
was blatantly predatory.
AMPI’s defense essentially is that its Gandy Dairy efforts
were not directed specifically at NFO and that, in any event,
NFO was not casually harmed because Gandy’s decision not to
purchase NFO milk was based upon price considerations, not
AMPI’s conduct. We find this unpersuasive. NFO was actively
soliciting Gandy at the time of AMPI’s predatory conduct. By
definition, AMPI’s attempts to secure a full-supply arrange-
ment are directed at eliminating all non-AMPI suppliers.
Moreover, the record shows that while price may have been a
significant factor in Gandy’s negotiations with NFO, it also
shows that Gandy officials feared further AMPI retaliation if
they made additional independent purchases beyond those
which initially triggered the predatory conduct. On this rec-
ord, to adopt AMPI’s position would mean that clearly
predatory conduct is excused when it is only partially success-
ful or only one factor influencing the target company. We de-
cline to adopt such a position.** AMPI’s unlawful conduct to-
ward Gandy is also significant because it tends to show an
*! Of course, in assessing damages, the district court may consider
the extent to which NFO’s harm is attributable to AMPI’s conduct.
See slip op., infra, at 71-73.
38a
unlawful intent behind similar AMPI conduct which was
directed even more specifically at NFO. See Kansas City Star
Co. v. United States, 240 F.2d 648, 650-651 (8th Cir. 1957)
(kindred acts doctrine).
3. Wanzer Dairy.
The Chicago market informally functions as a basepricing
point for many markets south and west of Chicago. See slip op.,
supra, at 4-5, 37. The record is replete with statements by
Mid-Am, AMPI and CMPC officials with respect to the import-
ance of establishing a “superpool” or premium (over-minimum
price) for Chicago milk. Accordingly, AMPI and CMPC
aggressively sought to establish such a premium. Their
efforts, however, included discriminatory pricing and coercive
threats toward the Wanzer Dairy,” a substantial Chicago dai-
ry whose purchases from NFO and others had undermined the
CMPC premium.
The major trade association of proprietary milk buyers in
metropolitan Chicago, AMDI, had a Producer Relations Com-
mittee which met from time to time with CMPC’s Price Devel-
opment Committee. AMDI dealers continually protested pay-
ing a premium for CMPC milk while another proprietary—
Wanzer Dairy—was buying non-CMPC milk (including NFO
milk) at lower prices. Midwest Milk, supra, 510 F.Supp. at
477-478, 482. CMPC dropped the premium in early 1970 and
successfully reinstated it in January, 1971, after Wanzer en-
tered into a committed supply contact with CMPC. It is the
conduct employed in securing the Wanzer supply contract
which is primarily at issue. The parties vigorously dispute
“ AMPI was a member of and marketing agent for CMPC. The
chairman of CMPC’s Price Development Committee was an AMPI
regional manager. Thus, although we refer in this subsection to
CMPC, some of the contacts discussed were made by AMPI officials
and, clearly, both must be viewed as responsible for their joint role in
the Chicago marketing.
39a
whether such conduct also evidences that CMPC unlawfully
conspired with the nonexempt AMDI group and what effect
securing the Wanzer contract had on NFO. We first summa-
rize the district court’s affirmative factual findings.
Throughout the period at issue, Wanzer Dairy purchased
from both independents and CMPC, It intially purchased from
North Central Dairymen’s Cooperative (NCDC) at prices be-
low any CMPC premium, but by October of 1970, NCDC had
joined and was marketing through CMPC. /d. at 478, 480. In
April of 1970, when NCDC and others were independently
selling into Chicago, CMPC issued a discriminatory price an-
nouncement which imposed a number of additional service
charges, applicable in part to any buyer “who accounts to and
settles with CMPC for less than 100% of his class I require-
ments (fluid Grade A products).”™ Jd. at 478.
Wanzer continued to make independent Class I purchases,
including major purchases of such milk from NFO which com-
menced in July of 1970, and reached nearly ten million pounds
of such milk per month during the fall peak. Jd. at 479. In
October of 1970, after NCDC had begun marketing through
* The price announcement imposed a series of service charges for
both full supply and partial supply buyers. For example, a handling
charge was imposed for quantities of milk actually supplied by
CMPC, at one rate for seven-day-a-wee committed supply ship-
ments and at a higher rate for less frequent deliveries or for supplies
not subject to a committed seven-day-a-week arrangement. An addi-
tional “market service charge” was imposed, for full and partial
supply customers, consisting of a flat fee for all Class I usage, regard-
less of the source of supply. In lieu of the actual handling charge plus
the “market service charge,” a buyer could pay a substantially higher
rate just for the milk supplied by CMPC. Thus, although no buyer
was forced to take a full supply from CMPC or to reach a committed
supply agreement, the discriminatory pricing scheme created a sub-
stantial inducement for doing so. CMPC contends that the pricing
scheme was a legitimate attempt to recoup the higher unit costs of
filling supply needs of !ess regular buyers. See slip op., infra, at 46-47
40a
CMPC, CMPC announced a new discriminatory price struc-
ture, elements of which again applied to any dealer “who does
not report to or settle with CMPC for his total Class I
requirements,”™ notwithstanding questions raised at the
CMPC Board meeting concerning the legality of the new pric-
ing. Id. at 480.
A flurry of exchanges between Wanzer, Southland (Wan-
zer’s parent corporation), CMPC and NFO followed in Novem-
ber and early December of 1970 — a period in which Wanzer
sought to buy all of the NFO milk that it could but, as a
practical matter, was forced to buy at least some milk from
CMPC in order to meet its total supply needs. Jd. at 481-482.
Following the October price announcement, Wanzer notified
NFO that it would cease NFO purchases and notified CMPC
that it would comply with one option under the new price
announcement.” Jd. at 482. NFO offered to reimburse Wanzer
against additional service charges and, for one month, Wanzer
continued its split NFO-CMPC purchases while negotiations
with CMPC continued. /d. at 482. By early December, Wanzer
notified NFO that it would make its Class I purchases on a
day-to-day basis. Jd. at 483. On December 2, CMPC and AMDI
dealers met and discussed, inter alia, whether Wanzer would
pay CMPC’s “market service charge.” /d. at 482. AMDI deal-
ers renewed their objection to paying more for milk than their
competitors and specifically to paying any CMPC premium as
long as their competitors were buying at a lower price. Jd. at
482 On December 10, CMPC by letter notified Wanzer and
Southland” that it was cutting off all supplies, effective in five
* Essentially, the new announcement raised the “market service
charge” applicable to all Class I usage and raised the much higher
optional charge. See note 23, supra.
* Wanzer indicated it would pay the “market service charge” and
not the higher “in lieu of” option. See note 23, supra.
* Southland, Inc., also was negotiating with AMPI to get supplies
for its facilities in Texas, Oklahoma and Memphis. Midwest Milk,
supra, 510 F.Supp. at 482.
4la
days, because “we have become aware that you have been
engaged with others in unlawful attempts to interfere with
producers whose milk is subject to effective marketing agree-
ments with CMPC and its members.” /d. at 483. CMPC did not
terminate shipments after this threat, but instead made ship-
ments on a day-to-day basis while negotiations continued. Jd.
Within days, Wanzer entered into a one-year committed sup-
ply contract with CMPC for major Class I purchases. /d.
The Wanzer-CMPC negotiations were the specific subject of
various AMPI and CMPC discussions with AMDI dealers con-
cerning reinstatement of a premium. /d. at 482-483. After the
Wanzer-committed supply contract was reached, CMPC met
with AMDI dealers, showed them the Wanzer contract and,
within a few weeks, successfully reinstated an over-order pre-
muim. /d. at 483.
The foregoing events and chronology are summarized from
the district court’s affirmative findings of fact. In our view, the
conduct described in such findings is plainly predatory. Simply
put, CMPC and its agent AMPI sought to establish a premium
for their milk, a goal which was obstructed by AMDI dealers’
objections to Wanzer’s purchase of much of its Class I needs
from non-CMPC sources at lower prices, including NFO milk.
Facing continuing rejection of a premium under these condi-
tions, AMPI and CMPC employed discriminatory pricing and
coercive threats of supply cutoffs against Wanzer, secured a
substantial committed supply agreement from Wanzer,
showed this contract to the other dealers and, within weeks,
successfully imposed a new premium. The attempts by CMPC
27 This threat relates to AMPI’s contention that some NFO milk
came from Wisconsin producers who were obligated to market
through AMPI. AMPI commenced extensive litigation against NFO
on this issue. See slip op., supra, at 25-28. Threatened litigation
against buyers of NFO milk was employed elsewhere by AMPI and
Mid-Am, and threatened supply cutoffs, were also employed by
AMPI in other markets. See slip op., infra, at 50-57.
42a
and AMPI to explain away each step of the campaign against
Wanzer cannot obscure this overriding factual pattern.
CMPC contends that the price discrimination was simply a
legitimate attempt to recover costs associated with supplying
less regular customers. Such a contention might be valid in
some other context, but the conduct here—viewed as a
whole—clearly establishes an unlawful purpose. In addition to
the conduct itself, the record reveals testimony by a CMPC
official that, in adopting its pricing scheme, CMPC’s major
concern was with “the split supply sources at the Wanzer
Dairy.” An AMDI dealer, who was present in meetings with
AMPI and CMPC regarding the price structure, also testified
that the higher service charges were designed to affect plants
buying lower-priced milk from NFO and directly from farmers
and to make such plants “realize that they would be better off if
they participated [in CMPC’s pool] on a weekly basis or daily
basis” and, moreover, confirming that the Wanzer committed
supply contract was critical to restoring any CMPC premuim.”
CMPC also attempts to characterize its problems with Wan-
zer as deriving from hostility by Wanzer’s local manager to-
ward CMP(C; contends its threatened supply cutoff was simply
a legitimate response to AMPI’s membership dispute with
NFO; and implies that the committed supply contract was
achieved in the ordinary course of business once Wanzer’s
parent company officials entered negotiations. See CMPC Br.
At XXXIX-XLIV, 67-68. This version of events is con-
tradicted by the testimony of the Southland official who negoti-
ated the supply contract, which indicates that Southland
% See Tr. at 15, 446; Wells Dep. at 58-66. The record also reveals
the testimony of a Mid-Am officer that it was his understanding from
AMPI officials that the Chicago pricing was designed to respond to
the Wanzer-NFO problems. The latter evidence may be hearsay but
it nonetheless corroborates the other evidence as to purpose; and
coming from a codefendant in a conspiracy case, has more than usual
guarantees of trustworthiness.
43a
threatened legal action against CMPC to counter the impend-
ing supply cutoff and also shows that Wanzer’s decision to
enter into the committed supply contract was prompted large-
ly by the pricing scheme imposed by CMPC. Moreover, the
CMPC version is simply untenable in light of the record as a
whole.
In looking at the evidence underlying the findings, we do not
contemplate a de novo review. We recognize there are some
conflicts in testimony; that some witnesses deny or attempt to
explain away what others admit. CMPC’s conduct itself, how-
ever, is the strongest evidence of an unlawful purpose and such
conduct is largely established in the district court’s affirmative
findings. In our view, the conduct so established is predatory
on its face. Our examination of the underlying evidence only
confirms that an inference of unlawful purpose must be drawn.
It was clear error for the district court not to find that the
pricing scheme was unlawfully discriminatory and that the
threatened supply cutoff was unlawfully coercive.”
* CMPC also disputes the precise effect which the Wanzer contract
had on NFO’s marketing. Wanzer continued to buy a small percen-
tage of its Class I needs through NFO, but the bulk of NFO’s sales to
Wanczer involved Class II allocations. CMPC contends this reflects a
voluntary cutback and diversion by NFO to other Class II uses,
which at the time garnered a higher price for NFO members. NFO
contends that it lost Wanzer as a Class I outlet because Wanzer’s
committed supply contract with CMPC, while not a total supply
contract, required Wanzer to allocate its CMPC purchases to Class I
uses. The findings are not particularly helpful on this issue and the
record is mixed. The findings do show, however, that NFO repeated-
ly and unsuccessfully sought alternative Class I outlets in the Chica-
go market, Midwest Milk, supra, 510 F.Supp. at 484, at the very
time that, according to CMPC, NFO was “voluntarily” cutting back
Class I sales to Wanzer. Moreover, the Southland official who
reached the supply agreement testified that although Wanzer was
still interested in purchasing from NFO, the committed supply
arrangement with CMPC would mean a reduction in the proportion
44a
We affirm, however, the district court’s rejection of the
claim that CMPC conspired with AMDI dealers to fix prices
and to boycott NFO. In our view, the record simply does not
support an inference that AMDI dealers’ decisions not to buy
from NFO were linked by any conspiratorial boycott agree-
ment with CMPC. Such decisions may have been influenced by
CMPC’s conduct (which may go to damages issues), but that
does not rise to the level of conspiracy. On the other hand, the
record would support an inference of conspiracy to fix prices
between AMDI and CMPC, but the evidence is not so strong as
to make the district court’s contrary conclusion clearly
erroneous.
4. Litigation And Related Harassment.
Mid-Am and AMPI filed separate actions against NFO in
Wisconsin and Missouri, based upon membership disputes and
alleged antitrust violations, issues on which NFO largely
prevailed.” The membership dispute involved a claim that
some farmers’ marketing through NFO were contractually
obligated to market through Mid-Am or AMPI and that NFO
had induced these farmers to breach such agreements. Based
upon this claim, Mid-Am, AMPI and, in one instance, CMPC
on behalf of AMPI, engaged in a pattern of litigation,
threatened litigation and related harassment against in-
dependent buyers of NFO milk. The controlling legal principle
is clear in this case. Resort to judicial processes is exempt from
antitrust attack under the Noerr-Pennington doctrine, unless
it may be characterized as a sham cover for what is really just
of Wanzer’s needs which would be purchased from NFO. In our view,
this record sufficiently establishes the fact of injury to NFO, such
that the extent of harm and precise effect of the Wanzer contract only
go to the question of the amount of damages. See slip op., infra, at
71-73.
® AMPI’s claims were asserted in Wisconsin state court and in a
counterclaim in the present action; Mid-Am’s claims commenced the
present action. See slip op., supra, 7, 25-28.
45a
an attempt to directly interfere with the business relations ofa
competitor. See, e.g., Vendo Co. v. Lektro-Vend Corp., 433
U.S. 623 (1977); United States v. Otter Tail Power Co., 410
U.S. 366 (1973); Hahn, Inc. v. Codding, Inc., 615 F.2d 830,
839-841 (9th Cir. 1980). Here, the actions directly against NFO
come within the exemption, but the conduct directed toward
NFO’s customers clearly constitutes bad faith, unlawful
harassment.
We recognize that the litigation directly against NFO was
intended in part to hamper NFO’s ability to compete. The
burdensome cost of the litigation was one factor. Notes from
internal AMPI meetings and corroborating testimony show,
for example, that senior AMPI officials considered sponsorship
of additional third-party litigation against NFO in the hope
that the added cost of such litigation would “break NFO’s
back.”"' Such third-party litigation was filed and was con-
ducted by the same attorneys who represented AMPI, al-
though the record does not clearly establish that it was brought
in bad faith. Other evidence as to the goal of the litigation is
that when Mid-Am commenced its action, it intended to have
its membership certified as a class so as to restrict communica-
tion by NFO with Mid-Am’s members during the pendency of
the litigation. Mid-Am’s action was also selectively directed at
NFO. Mid-Am did not bring actions against other co-ops that
the court found had solicited Mid-Am members to breach their
Mid-Am marketing contracts. Midwest Milk, supra, 510
F.Supp. at 471.
Notwithstanding the foregoing evidence of intent, we can-
not say that the legal claims against NFO were so groundless
as to come within the “sham litigation” exception to the Noerr-
Pennington doctrine. There were genuine disputes regarding
NFO’s solicitation methods. Thus, in our view, the direct
litigation against NFO is not actionable as an antitrust viola-
tion.
4% See, e.g., NFO Ex. 1523.
46a
Mid-Am, AMPI and CMPC, however, used the membership
disputes with NFO as a pretext for threatening litigation
against and otherwise harassing proprietary dairies which
bought or considered buying NFO milk. At least one court has
ruled that directing such conduct toward a competitor’s cus-
tomers is clearly outside the Noerr-Pennington exemption.
See Oahu Gas Serv. Inc. v. Pacific Resources, Inc., 460
F.Supp. 1359, 1386 (D. Hawaii 1978). Here, Mid-Am, AMPI
and CMPC argue that their conduct was intended merely to
protect their legitimate marketing rights. Any legitimate
claims as to unlawful membership “raiding,” however, could be
fully pursued and vindicated in direct actions against NFO.
The co-ops might also have sought specific performance of
their marketing contracts. The findings and record evidence
reveal instead a broad pattern of litigation threats and harass-
ment against buyers of NFO milk. There may be circum-
stances in which actions against a competitor’s customers are
in good faith but, here, the pattern of conduct plainly estab-
lishes that the purpose was to put proprietary buyers into the
middle of the membership dispute and to make NFO milk “too
hot to handle,” all in order to deter such companies from
dealing with NFO.
As noted above, AMPI’s claim with respect to rights over
certain Wisconsin milk marketed by NFO was the pretext for
CMPC’s threat to cut off Wanzer Dairy’s supplies. See note 27,
supra. Subsequently, when AMPI wrote to NFO announcing
its intention to sue NFO and demanding certain payments for
such milk, copies of the threat and demand were sent to Wan-
zer Dairy and to its parent corporation, Southland. Similarly,
after NFO began making sales to Kraml Dairy in Chicago,
AMPI wrote to Kraml asserting that some of the NFO milk
was subject to AMPI’s marketing rights’ claim and demanding
that AMPI be paid directly for such milk.
The pattern is hardly limited to AMPI and CMPC. Mid-Am
participated in a number of threats, including some against
dairies with which AMPI was having problems. Perhaps the
most blatant threat involves the Beatrice Company’s facility at
Fort Worth, Texas, which had been a full supply customer of
47a
AMPI. The court’s findings and underlying record evidence
show that through most of 1970 and 1971, Beatrice and AMPI
engaged in negotiations over maintaining AMPI purchases
when AMPI’s price was higher than the price paid by a number
of Beatrice’s competitors who were buying non-AMPI milk.
See Midwest Milk, supra, 510 F.Supp. at 470. AMPI vigorous-
ly sought to retain its sales and premium price. At least one
source of pressure on Beatrice apparently involved Beatrice’s
Tulsa facility, which faced competition from AMPI’s Gold Spot
division whose pricing practices prompted further complaints
from Beatrice to AMPI. /d. at 471.
In any event, Beatrice began making purchases from or
through NFO in July, 1970, and the volume of such purchases
increased to several million pounds per month by February,
1971." Id. at 471. The NFO milk sales in part involved milk
from Missouri producers which Mid-Am asserted it had the
right to market. In late 1970 or early 1971, Mid-Am advised
Beatrice of its claim that NFO’s marketing was illegal; in
February, 1971, Mid-Am met with and corresponded with
Beatrice to press its claim, demanding certain payments for
the disputed NFO milk, threatening legal action against Beat-
rice and, on March 12, 1971, sued Beatrice along with NFO. /d.
at 472-473. In late March, 1971, Beatrice notified NFO that
because of payment disputes and NFO's unwillingness to in-
demnify Beatrice against the possible double payment situa-
tion, it was immediately terminating its NFO purchases from
the Springfield facility. Jd. at 462.
The Beatrice incident is just one illustration of Mid-Am’s
conduct. The Kraft Dairy in Springfield, Missouri, had been
® Although the record is somewhat unclear, many of the shipments
apparently involved “independent producer” milk—transactions
arranged through NFO as “independent” sales when NFO was not
yet qualified on a particular federal market order. It is clear, how-
ever, that Mid-Am’s threats were directed at purchases of milk “by
or through” NFO which allegedly were in breach of Mid-Am’s
marketing rights; and that Beatrice directed its termination notice to
NFO, not to individual producers.
48a
scheduled to receive NFO milk shipments at about the time
that the Beatrice cutoff occurred. Midwest Milk, supra, 510
F.Supp. at 473. Mid-Am wrote to Kraft, indicating it had
become aware of a “situation” which might involve Kraft in
Mid-Am’s claim over some of the milk marketed through
NFO’s Springfield plant, and enclosed a copy of Mid-Am’s
complaint which had been filed against NFO and Beatrice. The
letter stated that Mid-Am had not yet investigated “the extent
of involvement of Kraft,” but that Mid-Am wanted to know
“what agreement Kraft Foods had made with respect to the
price of this milk, with whom, and when payment will be
commenced.” At approximately the same time that Beatrice
cut off NFO, Kraft notified NFO that it would no longer buy
NFO milk. /d., at 473.
In May of 1971, NFO began selling milk to Marigold Dairy in
Fort Worth. Jd. at 474. On May 4, Mid-Am wrote Marigold to
the effect that Mid-Am had learned of a “possible sale of Grade
A milk of Missouri producers by or through the auspices of”
NFO to Marigold. The letter described Mid-Am’s claims
regarding some of such milk and indicated that if its under-
standing of the possible sale was confirmed, then Mid-Am
would “enforce its contractual rights including the right to
receive payments for said milk.” Marigold ceased buying NFO
milk later that same month. Jd. at 474.
Another illustration is found in the deposition testimony of
the president of Cloverleaf Creamery, a Twin Cities’ dairy that
had purchased NFO milk:
They [Mid-Am and TCMPA] told me that you buy milk
from NFO and you are going to i yourself involved in
some kind of a lawsuit spendin sorts of time involvin
yourself. And here I am. By , they told the truth.'
*'Holeombe Dep. at 89. Holcombe apparently was deposed by
NFO and was never actually sued by Mid-Am. The testimony is cited
here only because it corroborates the other evidence that the pattern
of threatened litigation was very broad in scope.
49a
There is, finally, substantial evidence that Mid-Am’s prac-
tice of threatening or harassing buyers of NFO milk was
planned as a strategy at Mid-Am board meetings. A Mid-Am
director admitted that at a board meeting shortly after filing
the suit against NFO and Beatrice, Mid-Am’s counsel asked
the Board and staff to notify him of any NFO dealer solicita-
tions so that he could inform such dealers that they might
become involved in a lawsuit if they bought from NFO. Mid-
Am’s subsequent conduct shows that the board room dis-
cussion was not merely idle talk.
Mid-Am and AMPI ignore most of the foregoing incidents in
their argument on appeal. On the one incident which is ad-
dressed — the Beatrice situation — Mid-Am does not attempt
to justify its actions against Beatrice, but instead argues that
its conduct was not the primary cause of Beatrice’s termination
of NFO purchases.” This argument misses the point. The effect
* Both Mid-Am and AMPI contend that Beatrice’s cutoff of NFO
was a unilateral, uncoerced business judgment based upon price and
quality considerations. Much of the support for this contention is
drawn from developments after the termination, which might relate
to why Beatrice did not subsequently resume NFO purchases, but
which does not bear on the reasons for the March, 1971, cutoff. As te
that cutoff, the termination letter itse!f and contemporaneous deposi-
tion testimony of the Beatrice officials involved in the decision leave
no doubt that the acute factor behind the cutoff was Mid-Am’s legal
claim. This is fully corroborated by the testimony of the Foremost
official as to what Beatrice told him immediately after the cutoff
when Foremost considered buying the milk. See slip op., infra, at 58.
Beatrice did not resume NFO purchases and NFO came to view
Beatrice and other dairies as “coerced coconspirators;” indeed, NFO
later named Beatrice as a defendant although this claim was sub-
sequently settled. It is in this light that one must view the 1973
deposition of a Beatrice official suggesting, inconsistent with his 1971
deposition, that Beatrice’s cutoff was a matter of “purely economics.”
Whatever price or other problems may have accompanied NFO milk,
the undisputed facts are that Beatrice purchased an ever-increasing
volume of such milk for a nine-month period continuing right up to the
sudden cutoff, which came twelve days after Mid-Am filed suit
50a
of threatening conduct goes to the question of damages; it does
not in any manner explain or justify the conduct itself. We must
look to the complaint Mid-Am initially filed against Beatrice,
which alleged essentially that Beatrice was a coconspirator
with NFO in an antitrust conspiracy to reduce or eliminate
“responsible cooperatives” like Mid-Am, On this record, how-
ever, all Beatrice had done was arrange to buy milk through
NFO. That Mid-Am voluntarily dismissed Beatrice as a de-
fendant, after Beatrice had stopped purchasing NFO milk,
speaks volumes, Mid-Am’s conduct as a whole, moreover,
shows that its action against Beatrice was more a springboard
for threatening other dairies than it was a legitimate complaint
against Beatrice.
The only justification for the conduct directed against Wan-
wer Dairy would be that a Wanzer official appears to have
assisted NFO in its efforts to get its cheaper milk marketed
into Chicago. The discriminatory price treatment and other
coercive conduct toward Wanzer, however, clearly establish
that the true reason for harassing Wanzer was simply to deter
NFO purchases so as to secure and maintain as large a supply
as possible through CMPC,
No specfic justification has been asserted for attempting to
harass Kraft Dairy, Marigold Dairy or Kram! Dairy, nor has
any justification been offered for Mid-Am’s policy of broadly
seeking out dealers which NFO was soliciting to “warn” them
of possible litigation. The only defense offered is the general-
ized assertion of Mid-Am and AMPI that they intended only to
protect their legitimate marketing rights over certain farmers’
milk. There is simply no evidence in this record, however, that
proprietaries were engaged in any sort of scheme to induce
against Beatrice. In view of the timing and other contemporaneous
evidence and the fact that the cutoff was made in consultation with
Beatrice’s legal department, there is simply no doubt that the Mid-
Am litigation was a material cause of the cutoff.
5la
farmers to breach their marketing contracts with any co-op.
Those who bought or considered buying from NFO were mere-
ly interested in obtaining an independent, hopefully cheaper
source of supply.
When this pattern of litigation, threats of litigation and
related harassment is viewed as a whole, it becomes obvious
that such conduct was an unlawful attempt to deter dairies
from buying NFO milk, The district court’s findings are clearly
erroneous to the extent they fail to recognize these incidents
and reject or fail to draw the inferences which we have found
inescapable from the record as a whole,”
5. Foremost Dairy.
The evidence relating to NF'O's attempted 1971 sale to Fore-
most Dairy clearly demonstrates the cumulative effect of coer-
cive conduct by Mid-Am and AMPI,
Foremost had a facility in Springfield, which was supplied by
Mid-Am, and one in Dallas, which was supplied by AMPI and
at various times in part by independents, The Springfield
facility is not at issue in the 1970-1971 time frame, Foremost’s
dealings with AMPI at its Dallas plant are another matter, The
principal Foremost witness, James Rudy, testified to certain
“confrontations” with AMPI over Foremost’s periodic pur-
chases of independent, non-AMPI milk—incidents involving
two AMPI staff members, one Joe Murphy and J. G. Ander-
son. Murphy is the undisputed author of a 1969 memorandum
to superiors recommending that AMPI engage in short-
shipping of Foremost and another dairy in order to “resolve”
the nonmember, independent purchase problem.”
“ Implicit in the findings may be determinations as to the extent to
which NFO was harmed by this aspect of defendants’ conduct. Such
questions can be fully considered upon remand,
” The district court's finding that “there is no evidence that anyone
acted on the recommendation proposed by Murphy” is clearly
erroneous. Murphy's own testimony that no one liked his idea must
52a
Rudy’s testimony and contemporaneous memoranda in-
dicate that Foremost experienced short-shipping by AMPI in
1969, and that Anderson of AMPI threatened similar conduct
in 1970, both times—in Foremost’s view—due to independent
purchases by Foremost. AMPI concedes “a brief interruption”
in its supply to Foremost in 1969, AMPI Br, at 42, but denies
any threat in 1970, The person who is alleged to have made the
1970 threat, however, testified only that when he learned
Foremost would make certain independent purchases, he told
Rudy, “I was disappointed they were going to and that I hated
to lose those sales,” but he could “not recall” saying anything
else.
This is the background against which Foremost’s March,
1971, rejection of NFO milk must be viewed, NFO’s offer to
Foremost involved a shipment assembled for Beatrice which
was cancelled by Beatrice, as noted above, about two weeks
after Mid-Am’s suit was filed against Beatrice. NFO offered it
to Foremost, in what Rudy characterized as a rather “desper-
ate” manner, Upon receiving the offer, Rudy contacted Beat-
rice to ascertain why they were cancelling the shipment, and
was told about the Mid-Am litigation and certain problems
with the market administrator.” Rudy indicated that he was
told “that all they [Beatrice] had tried to do was to buy the milk
and they ended up involved in litigation and they decided it was
be viewed in light of his admission that he actively destroyed docu-
ments under the direction of one of his superiors, See slip op., infra,
at 62. Moreover, the evidence establishes actual and threatened
supply cutoffs or short-shipping against Gandy Dairy (by AMPI) and
Wanzer Dairy (by CMPC on behalf of AMP), in addition to the 1969
Foremost incident,
"The NFO milk apparently was shipped as independent-producer
milk and, from time to time, questions would arise as to identification
of the proper party to pay for such milk, The risk of double payment
became acute when Mid-Am made payment demands and ultimately
commenced its litigation.
53a
in their best interest to discontinue purchasing the milk.”
Rudy then contacted NFO and turned down the milk, indicat-
ing the Springfield facility was adequately supplied by Mid-
Am; and that with respect to the Dallas plant, he was not ready
to “take the plunge” by buying NFO milk. Rudy stated that to
“take the plunge” meant risking possible new “confrontations”
with AMPI similar to the 1969 and 1970 incidents noted above;
but he also indicated that the primary consideration involved
the “legal implications.”
The arguments of Mid-Am and AMPI on this incident con-
firm NFO’s complaint. AMPI emphasizes that it never dis-
cussed the 1971 NFO shipment with Foremost, pointing to
Rudy’s testimony that his decision was “independent and
objective” and that no one from AMPI told him to reject the
NFO milk. AMPI also underscores the role of Mid-Am’s litiga-
tion against Beatrice as a factor in Rudy’s decision, notwith-
standing Rudy’s stated concern over possible retaliation from
AMPI. AMPI Br. at 43, 44 n.45. Mid-Am, on the other hand,
argues that Rudy’s decision was based “solely” upon his dis-
cussion with Beatrice and not upon “anything Mid-Am said or
did.” Mid-Am Br. at 56. It is clear that neither AMPI nor
Mid-Am directly threatened Foremost concerning the 1971
NFO shipment. It is equally clear that Foremost’s “objective”
decision to reject that shipment was pervaded by Mid-Am’s
litigation tactics against buyers of NFO milk and AMPI’s prior
reprisals for independent purchases. The only real dispute in
the record is over which of these factors was more dominant in
Foremost’s decision.
Viewed in the larger context of the overall conduct engaged
in by these co-ops, the Foremost incident gives rise to only one
conclusion: NFO was caught in a whipsaw created by the
coercive conduct of AMPI and Mid-Am toward buyers of in-
dependent milk in general, and of NFO milk in particular.
6. Other Overt Acts.
NFO alleges a number of additional incidents or actions as
evidence of an unlawful conspiracy, including certain mem-
5da
bership and hauler terminations, milk pooling practices and
acquisitions and mergers. Most of this conduct would be lawful
standing alone or in some other context but, here, we agree
with NFO that some of the conduct was unlawfully aimed at
eliminating NFO as a competitor.
One such action involves Mid-Am’s response to members
who terminated their relationship with Mid-Am in order to
market through NFO. The district court’s affirmative findings
reveal a pattern of efforts designed to thwart such movements.
In one incident, Mid-Am refused to honor termination notices
from thirteen NFO members because they were one day late.
Midwest Milk, supra, 510 F.. Supp. at 495. In other instances,
Mid-Am refused to reveal termination dates. /d. at 471, 475.
Moreover, after the present litigation was commenced, Mid-
Am—virtually as a policy—either refused to acknowledge or to
honor termination notices from members known to be related
to NFO activities, genera!!y regardless of the producers’ right
to terminate. This conduct was obviously intended to hamper
NFO’s ability to secure producers and, in turn, to supply
customers.
Both the significance and possible mootness of this conduct
are reflected in the consent decree entered in the govenment’s
antitrust action against Mid-Am.” That action was con-
solidated before the same court which heard the immediate
case. One finding from the consent decree proceedings is that
Mid-Am’s market power is “based upon its power to require
farmers to become or to remain members, rather than upon
ownership of assets.” United States v. Mid-Am, Inc., 1977-1
Trade Cases { 61,508 at p. 71,977 (emphasis added). Under the
consent decree, Mid-Am was required, for one year, to permit
“ We recognize that consent decree proceedings do not establish
any ultimate factual or legal conclusions in lieu of a trial. We note the
decree’s possible mootness effect only in the sense that conduct
conforming to the decree might well bear on the need for or scope of
injunctive relief fashioned on remand. See slip op., infra, at 73.
55a
any terminations upon thirty days notice; thereafter, Mid-Am
could adopt one-year contracts, but { r a period of five years,
such contracts would be subject to certain requirements which
facilitate terminations. /d, at p. 71,978.
Another action involves a dairy farmer, Billy Stacey, who
shipped through Mid-Am and also was a contract hauler for
Mid-Am in Southwest Missouri. Stacey became active in
assisting NFO’s efforts to establish a reload facility and, as the
district court found, was fired by Mid-Am because of his activi-
ties in helping NFO. Midwest Milk, supra, 510 F.Supp. at
471-472,”
Perhaps the most egregious conduct revealed in this case
relates to suppression and destruction of evidence by AMPI.
In connection with this conduct, the district court granted
NFO’s motion for Rule 37 sanctions, but reserved ruling on the
question of which sanctions to impose, apparently indicating
that a monetary award may be appropriate. See AMPI Br. at
69. The conduct may be described simply: AMPI engaged in a
deliberate pattern of shuffling and hiding documents—to
warehouses, homes or other locations—specifically to avoid
discovery. Some of this conduct was uncovered during the
government’s participation in the litigation and most of the
suppressed documents appear to have ultimately surfaced.
Such conduct required extensive additional proceedings to
ascertain the scope of suppression and no doubt also required
further review by NFO of virtually every aspect of AMPI’s
involvement in the case.
More serious is the stipulated fact that AMPI ordered the
destruction of documents and that some were in fact des-
troyed. The district court characterized this conduct as involv-
” Here again, the Mid-Am consent decree forbids exclusive haul-
ing agreements, which may bear on the scope of injunctive relief
fashioned here on remand, See 1977-1 Trade Cases { 61,508 at p.
71,977.
56a
ing “admitted bonfires.” The scope of destruction remains
unclear and AMPI disputes the relevancy of the destroyed
documents. AMPI was involved in a series of substantial,
allegedly unlawful political contributions which became the
subject of the Senate Watergate investigation. Before the
Senate group, at least one AMPI official who ordered destruc-
tion contended that the documents related to NFO and possi-
ble antitrust claims against AMPI, not to political matters.
Other AMPI officials, on whose testimony AMPI now relies,
claim the destruction related to political contributions, not
antitrust matters. One of those who actually destroyed docu-
ments, Joe Murphy, contends the documents he destroyed
related to his efforts to secure a merger and to certain Texas
marketing activity, but not to any NFO matter. This individual
is also the author of the memo proposing to short-ship Fore-
most Dairy and others to eliminate independent purchases, a
document which managed to survive.
We can only describe AMPI’s conduct as outrageous.
Obviously, the relevance of and resulting prejudice from
destruction of documents cannot be clearly ascertained be-
cause the documents no longer exist. Under the circum-
stances, AMPI can hardly assert any presumption of irrele-
vance as to the destroyed documents. On this record, the
district court properly could have imposed the most severe
sanctions upon AMPI--dismissal of its claims and default judg-
ment against it on NFO’s claim. Nonetheless, we cannot say it
was an abuse of discretion not to do so. See Fow v. Stude-
baker-Worthington, Inc., 516 F.2d 989 (8th Cir. 1975). It was
error, however, not to draw factual inferences adverse to
AMPI on matters undertaken in or through offices and in-
dividuals involved in the destruction of documents.” See Jn Re
“We note that only AMPI was found to have engaged in willful
suppression and destruction of documents. Our holdings as to a
conspiracy between Mid-Am, CMPC and AMPI are based on the
record as a whole and are entirely independent of this aspect of
AMPI’s conduct. Moreover, the adverse inferences which may be
57a
Grace Line, Inc., 517 F.2d 404, 409 (2d Cir. 1975); Cecil Corley
Motor Co., Inc. v. General Motors Corp., 380 F.Supp. 819, 859
(M.D. Tenn. 1974).
NFO also contends that the acquisition and merger com-
paigns of Mid-Am and AMPI were intended to eliminate NFO,
a finding which the district court rejected. There were so many
mergers and acquisitions that it would be impossible to de-
scribe, even briefly, the evidence relating to each such transac-
tion. Several overriding conclusions, however, are quite clear.
Mid-Am and AMPI engaged in broad efforts to merge with
formerly independent co-ops and, during a period of massive
consolidation, successfully emerged as tremendously ex-
panded entities. One purpose of these efforts, without doubt
the dominant intent, was to consolidate marketing control over
sufficient quantities of milk as to set and obtain higher prices
for such milk. It is lawful, however, for Capper-Volstead
cooperatives to specifically pursue monopoly power and, in-
deed, NFO itself supported the merger trend until 1969 when
it undertook its own direct marketing program. Such mergers
are unlawful when achieved through coercive, predatory tac-
tics. See slip op., supra, at 9-11. Mid-Am and AMPI also
acquire a number of independent proprietary dairies. Standing
alone, such acquisitions may lawfully be intended to achieve
production economies or similarly legitimate aims of a coopera-
tive. Such acquisition . however, may not lawfully be em-
ployed to foreclose competition.
Thus, the overriding issue is one of tactics and intent. Here,
most of the co-op mergers were clearly voluntary. There is
substantial evidence, however, that certain milk pooling prac-
tices engaged in by Mid-Am and AMPI were designed to
pressure independent co-ops and individual producers to join
drawn against AMPI relate to the type of conduct which has been
described herein as unlawful and not, for example, to the pooling
practices and acquisitions which have not been shown to be a part of
the conspiracy.
58a
with Mid-Am or AMPI. Although the pooling practices are
quite complicated, the alleged scheme essentially involved
manipulating the regulated market price system as follows:
pooling additional milk supplies in a given market order so as to
depress the blend price, while maintaining higher actual pay
prices for the co-op’s members through receipt of option pay-
ments on the out-of-order milk. In some instances, the so-
called “pressure pooling” or “pool loading” was alleged simply
to have been an intimidation tactic to coerce nonmembers to
join; in others, it was alleged to have achieved a spread in the
effective price paid to members and nonmembers. Based upon
this evidence, the district court could have found that at least
some of the mergers were influenced by unlawful coercion. In
addition, at least one acquisition of an independent dairy in-
volved a NFO customer which NFO lost after the acquisition.
See Midwest Milk, supra, 510 F.Supp. at 489. On the other
hand, there is substantial evidence of lawful business purposes
behind formation of standby pools, related pooling practices
and consolidation of marketing through mergers.
Whether the merger and acquisition campaign was an un-
lawful part of the conspiracy is thus an extremely close ques-
tion of fact, further complicated by the sometimes hazy line
between lawful and unlawful monopolization efforts when
undertaken by Capper-Volstead cooperatives. After a careful
review of the record, we cannot say it was clearly erroneous for
the district court to reject findings that the acquisitions, mer-
gers and related milk pooling practices were part of an unlaw-
ful conspiracy.’ In instances where acquisitions of in-
*! We also note that the consent decrees applicable to Mid-Am and
AMPI regulate many of the milk pooling practices complained of
here, as well as any further acquisition by AMPI; and that in those
proceedings, the district court determined that dissolution or divesti-
ture of Mid-Am or AMPI holdings was not required in the public
interest. See United States v. AMPI, 394 F.Supp. 29 (W.D. Mo.
1975); United States v. Mid-Am, 1977-1 Trade Cases { 61,508. We
affirm the district court’s conclusion that, here, NFO has not estab-
lished a right to relief in the form of divestiture or dissolution.
59a
dependent dairies resulted in actual displacement of preexist-
ing NFO sales, however, the district court, on remand, should
consider whether such conduct following acquisition reflects an
intent to block NFO rather than a legitimate business decision
based upon price, quality or similar factors. Where post-
acquisition terminations of NFO sales are found to be part of
the scheme to eliminate NFO, such lost sales would form a
basis for NFO’s damage claim.
Our view of the milk pooling practices also prompts affirm-
ance of the district court’s finding against liability on the part of
ARSPC. The principal basis for NFO’s claim against ARSPC is
the latter’s formation and operation of standby milk pools, a
practice which in principle at least is important to providing a
stable supply of milk. See slip op., supra, at 4, 6. ARSPC
participated in certain of the pooling practices complained of
above, but because we find no liability attaches to such prac-
tices, none can attach to ARSPC’s participation. NFO also
contends that the existence of ARSPC’s standby pools
effectively reduced independent supplies making it easier for
CMPC, Mid-Am and AMPI to squeeze out NFO and other
independents. ARSPC’s pooling, however, served legitimate
business purposes and NFO failed to show that it was con-
spiratorically linked to the unlawful conduct of the other de-
fendants.
The foregoing pattern of conduct establishes that Mid-Am,
AMPI and CMPC conspired to gain control over milk market-
ing and to eliminate competition through unlawful practices. It
is true that each defendant did not participate in every aspect
of the conduct as a whole. CMPC, for example, exists as a
federation to sell into the Chicago market and thus has no
occasion to act in other markets. Mid-Am, in turn, did not sell
into the Chicago market and thus had no occasion to participate
in AMPI and CMPC conduct in that market. Each defendant,
however, engaged in specific overt acts which on their face
were in furtherance of the conspiracy. Moreover, that these
acts were in concert is unmistakeable when the record is
viewed as a whole. At the outset, the three co-ops engaged in
60a
an admittedly concerted attempt to block NFO’s qualification
as a milk marketer. What followed in approximately the same
time frame is a series of unlawful acts by each defendant aimed
at eliminating independent sales of milk in general and NFO in
particular, including discriminatory pricing and actual or
threatened supply cutoffs, litigation and similar harassment.
Some of Mid-Am’s litigation threats were directed against
buyers of NFO milk that had been AMPI customers, not Mid-
Am customers. Mid-Am in fact gave AMPI advance notice of
the suit it filed against NFO and Beatrice. AMPI and CMPC, of
course, are inextricably bound together in the predatory ac-
tions undertaken in the Chicago market. The record also re-
veals that the defendants jointly discussed what they viewed
as common “problems” posed by NFO.
Apart from the actual conduct of the defendants, the record
reveals straightforward admissions of predatory motive by
various AMPI officials and former officials. AMPI argues that
such persons were too biased to be credible and we give AMPI
the benefit of any such doubt which might support the findings
of the district court. Much of the record, however, consists of
deposition testimony and over 5,000 documentary exhibits.
Included is a substantial paper trail of meeting minutes and
contemporaneous memoranda, from Mid-Am and AMPI meet-
ings and from independent dealers, which tend to confirm the
conspiratorial and predatory character of the conduct de-
scribed here as unlawful. In short, the defendants’ conduct on
its face demonstrates concerted, unlawful tactics and such a
conclusion is confirmed, not contradicted, by examination of
the underlying record.
Piece by piece, the defendants attempt to explain away the
record evidence, ultimately characterizing it as “equivocal
hearsay, speculation and sharply conflicting testimony.” As
the Supreme Court has noted, however, “plaintiffs should be
give the full benefit of their proof without tightly compartmen-
talizing the various factual components and wiping the slate
clear after scrutinizing of each.” Continental Ore Co. v. Union
Carbide and Carbon Corp., 370 U.S. 690, 699 (1962). Here, the
6la
totality of the record leaves no doubt that Mid-Am, CMPC and
AMPI conspired to gain cotrol over and eliminate competition
in the marketing of Grade A milk, through the unlawful tactics
noted above. We reverse the contrary conclusion below be-
cause we are “left with the definite and firm conviction that a
mistake has been committed.” United States v. United States
Gypsum Co., 333 U.S. 364, 395 (1948). See also United States
v. General Motors Corp., 384 U.S. 127, 141-146, n.16 (1966).
C. Standing And Damages.
In light of its ruling as to liability, the district court did not
decide any question of standing to recover damages, the appro-
priateness of particular damage theories, or the amount of any
damages. Midwest Milk, supra 510 F.Supp. at 503. Absent
relevant findings in a case of this complexity, the matter must
be remanded for a determination of damages. We address,
however, a number of threshold legal challenges to recovery
by NFO which have been raised by the defendants. Nearly all
of them arise from NFO’s structure as a nonprofit membership
corporation which cannot make distributions to its members.
As aresult of this structure, when NFO began marketing milk,
it formed a trust account which received payments from
buyers, paid sales proceeds to producers and paid various
marketing expenses.
The defendants contend that NFO lacks standing in the
constitutional sense of having a sufficient “personal stake in
the outcome;” that NFO is not the “real party in interest,” as
required by Rule 17(a), F.R.Civ.P.; and that NFO has not
incurred any injury to its “business or property,” as required
under Section 4 of the Clayton Act, 15 U.S.C. § 15. See CMPC
Br. at 2-19. In support of these contentions, the defendants
rely on a line of cases holding that an association lacks standing
to sue for antitrust injury inflicted solely upon its members,
and additional cases in which the antitrust plaintiff was not
directly harmed, was not the direct target of the antitrust
conspiracy, or similarly incurred losses which were deemed too
remote or indirect. See, e.g., Illinois Brick Co. v. Illinois, 431
62a
U.S. 720 (1977); Associated General Contractors v. Otter Tail
Power Co., 611 F.2d 684 (8th Cir. 1979). Some of the cases
relied upon by the defendants merge standing questions with
issues of how to measure damages, but the essential point is
that an antitrust plaintiff cannot recover for indirect injury or
for derivative harm where the plaintiff is not the target of the
unlawful conduct.
We agree with the defendants that NFO cannot recover its
asserted “price reduction” damages. On this theory, NFO
sought to recover the difference between the price that it
would have obtained but for the conspiracy and the price that it
actually did obtain for sales of the its milk. One threshold
factual issue is causation. If NFO chose to enter a specific
market at lower prices and the defendants simply lowered
prices to meet such competition, there can be no recovery for
such a price spread. On the other hand, if NFO can show that
the defendants’ unlawful conduct was a material cause in fore-
ing NFO to lower prices, e.g., if because of defendants’ harass-
ment some buyers would only consider NFO milk if it was
offered at a lower price, then NFO will have established suffi-
cient causation to pursue such damages. The measure of harm
to NFO, however, because of its method of doing business,
would not be the price reduction spread. NFO is a nonprofit
entity which paid producers the proceeds of its sales efforts
after deducting out certain marketing expenses (e.g., at x
cents per hundredweight). NFO’s net revenues were thus tied
to the volume of its marketing, not to the price it earned. The
price reduction issue may be relevant to NFO’s damages in
that, by virtue of selling at lower prices, NFO may have lost
members or, in turn, marketing volume. The measure of such
harm, however, would be the lost fees and dues from those who
stopped marketing through NFO, not the price differential.
Those who directly suffered price reduction damages are indi-
vidual farmers, but NFO cannot recover the measure of their
injury—it can only recover for its direct injury.
The defendants attempt to bootstrap from this price reduc-
tion issue to deny NFO standing to recover any damages. The
63a
contention essentially is that the NFO Trust Fund was a mere
conduit for passing on monies from buyers to producers, and
that in any event, the Trust must be considered entirely apart
from NFO such that NFO, standing alone, is viewed as suffer-
ing no harm. See, e.g., Buckley Towers Condominium, Inc. v.
Buckwold, 533 F.2d 934 (5th Cir. 1976), cert. denied, 429 U.S.
122 (1977).
In our view, NFO cannot be considered in isolation from the
trust fund through which it transacted business; nor can NFO
and its trust fund be deemed a mere conduit for monies to pass
from buyers to producers. Buyers of NFO milk arranged pur-
chases through NFO, not through individual farmers. When
some of such buyers terminated purchases in the face of de-
fendants’ harassment, they sent notice of such action to NFO,
not to individual farmers. Buyers thus dealt with NFO as a
single entity and viewed the trust arrangement, if at all, as a
bookkeeping matter. The trust fund was not a mechanical
pass-through device either. NFO reblended the proceeds of its
marketing efforts through the trust, to determine the actual
pay price to individual producers. It also deducted certain
marketing expenses from such proceeds. These determina-
tions were made in NFO’s discretion, based in part on the
perceived need to maintain competitive pay prices to pro-
ducers.
Moreover, NFO’s marketing program was in direct competi-
tion with the defendant co-ops and NFO, as acompetitor, was a
direct target of the unlawful conspiracy. NFO thus was not an
indirect or derivative victim of actions aimed at individual
farmers. As NFO’s market penetration grew, it earned net
revenues in the form of membership dues and checkoff fees
from those who marketed milk through NFO. Losses of such
dues and fees, to the extent attributable to the defendants’
unlawful conduct, represent direct injury to NFO in its “busi-
ness or property.”” It is axiomatic that a competitor directly
“ The cooperative industry is unique, as defendants have stressed
in other contexts, in that the ability to retain members to market
64a
injured from such a conspiracy is a real party in interest and
has a sufficient personal stake in the outcome to have standing
to assert an antitrust claim. See Zenith Radio Corp v, Hazel-
tine Research, 395 U.S, 100, 123-125 (1969); ef. Reiter v. Sono-
tone Corp., 442 U.S. 330, 339-340 (1980)(holding that injury to
“business or property” is not limited to commercial intrests;
consumer’s pecuniary loss was sufficient); see also 15 Von
Kalinowski, supra, § 115,.01-.08.
The defendants also attack NFO’s right to recover mem-
bership dues and checkoff fees on the ground such damages are
speculative, present impossible tracing problems, and
ultimately reflect self-inflicted harm rather than damage
causally linked to defendants’ unlawful conduct, These argu-
ments largely raise factual questions for the district court, but
the fundamental legal guidelines are clear.
A plaintiff must, as a threshold matter, establish “the fact of
injury.” As the Supreme Court has construed it, a plaintiff's
“burden of proving the fact of damage under § 4 of the Clayton
Act is satisfied by its proof of some damage flowing from the
unlawful conspiracy; inquiry beyond this minimum point goes
only to the amount and not the fact of damage.” Zenith Radio
Corp. v. Hazeltine Research, supra, 395 U.S, at 114, n.9
(emphasis in original). Causal links also may properly be a
matter of inference from the circumstances and evidence as a
whole, /d. at 123-125, Here, there is no doubt that the unlawful
conspiracy was the material cause, for example, of Beatrice’s
cutoff decision in March of 1971 and of Foremost’s subsequent
rejection of the same shipments. See slip op., supra, at 53-54,
55-56, 57-59. The extent to which rejections of NFO milk by
these dairies in other periods (or by other dairies in the face of
through the cooperative is a key element of the organization's ability
to compete. Indeed, loss of membership dues is one damage
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.