Petition — Meat Price Investigators Ass'n v. Safeway Stores, Inc.

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No DEC 10 383

—— 8 a TEVAS,

? 9 CLERK

IN THE

Supreme Court of the United States

October Term, 1983

IN RE BEEF INDUSTRY ANTITRUST LITIGATON

M. D. L. Docket No 248

MEAT PRICE INVESTIGATORS ASSOCIATION,

et al.,

Petitioners,

SAFEWAY STORES, INC., et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE FIFTH CIRCUIT

LEX HAWKINS

GLENN L. NORRIS

GEORGE F. DAVISON, JR.

HAWKINS & NORRIS

2801 Fleur Drive

Des Moines, Iowa 50309

Telephone : 515/288-6532

December 10, 1983

[List of attorneys continued on the signature page]

224-7651 — Review Publishing Co., 287 E. 6th Gt, St. Paul, Mim. 55101 — 224-7631

QUESTIONS PRESENTED

1. Whether cattle sellers who sell live cattle to packers,

who in turn sell the beef therefrom to retail chain stores are

prohibited from maintaining price-fixing actions against the

retail chain stores by Illinois Brick Co. v. Illinois, where the

price received by the cattlemen for the live cattle is the same

price paid the packers by the retailers for the beef.

2. Whether each sales transaction must be analyzed to

determine whether a perfect price pass-on is achieved, as

opposed to analyzing the habit of the packing industry and

the results actually received, over time.

8. Whether the cattlemen plaintiffs’ summary judgment

evidence raised material questions of fact regarding whether

or not the packing industry’s purchasing practices resulted in

the functional equivalent of the cost-plus contract exception

of Illinois Brick Co. v. IUinois.

4. Should the exception to the Illinois Brick-Hanover Shoe

rule be expanded or altered to fit sellers selling into a rigged

market under the circumstances of this case?

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PARTIES TO THESE PROCEEDINGS

The consolidated cases herein involve several thousand

named plaintiffs and a potential class of more than 60,000

plaintiffs and 24 named defendants. '

1 NO. 82-1433:

Meat Price Investigators Association, et al. v. Safeway Stores,

Inc., et al.

Meat Price Investigators Association, et al. v. Safeway Stores,

Inc., et al. (District of Columbia)

Ronald Becker, et al. v. Safeway Stores, Incorporated, et al.

(District of Columbia)

Plaintiffs:

A class consisting of all persons who are engaged in the busi-

ness of raising what is commonly known in the cattle business

as fat cattle, and each person who has in the period in question

sold more than 100 head of fat cattle per annum.

Ronald Becker

Eugene Vander Hamm

Francis Stecker

Dean Stecker

James R. Glenn

Meat Price Investigators Association:

Rick Lundt, Arthur H. Van Wyk, Shelby Back, Finley Back,

Dilenbeck, Duane Dilenbeck for Horace C. Dilenbeck, Arthur

Morken, John O. Hedquist and Lazy H Ranch, Inc., Stanley

R. Pankratz and Oakridge Farms, Inc., Henry Vonk, J. P.

Hampton, Byron C. Hayes and Hayes Cattle Company, Inc.,

Ralph E. Henke, Robert Kessler and Kessler & Greeley, Earl

W. Louden, Marion H. Mahnken and Mahnken Cattle Co.,

Omar W. Mahnken, Alfred Neuberger, Victor Ousley, Alvin

Siteman, Boyd Simons and Triple T Cattle Corp. So., Arvin

Aageson & Aageson Grain & Livestock, Franklin E. Barber

and Peoples Creek Cattle Co., Jack Dahlin and Bar-Triangle

J Ranch, Leonard Faber, Giles W. Gregoire, Arnold Hokan-

son, Pavlovick Brothers, Ambrose Phalen, Robert Sivertsen,

Martin P. Toth, William W. Young and Sons, Wallace War-

burton, Lyle Anderson and Anderson Bros., Charles Clark,

Peter A. Duffy, Eldon Fetzer, Joseph Rand Foster, Lloyd Fox,

Gay Hatle, Merrill Hinckley, Ava M. Hoff, Roy T. Hulm, Gary

Lensegrav. Olav Lensegrav, Jay Lundt, William T. Malloy,

James E. McKenna, Dell Oliver, Berwyn Svoboda, Dorothea

Green, Edgar J. Boner, Willard V. Wilson, Beverly Green,

James E. Allen, Vincent Amgerer, Arnold Andersen, James R.

Arens, Emmet Ascher and Ascher! Circle Steel, Inc., Donald

Balvanz and Sons, Millard J. Barz, Howard J. Beatty, Arthur W.

Benning, Robert J. Benz, LaVerne L. Berner, Eugene Bertelsen,

Allan Bertram, Paul F. Bettin, Robert Billerbeck, Ralph Black-

ford, Harold Blome, Richard Bockwoldt, E. John Boehlje, Wal-

ter Boehlje, Eugene Bogenrief, Ronald Bohnsack, Clarence N.

Bomgaars, Ivan C. Borcherding, Robert Borcherding, L. G. Bor-

chers, Myron Borchers, Edward Bossard, Emil H. Bredekamp,

David L. Brennecke, Ronald Brick, Paul R. Brinkmeyer,

Alvin H. Broders, Lowell Broer, Terril Brophy and Brophy

T. Car-

Sons, Ronald Daale,

Hayden Davis, Dick

Dewell, Harold De

J. Paul

Harold Dub-

A. Dykstra, Vernon

Edgington, Jr., Arno Edler, Darrell Egli, Rudy Ehm and

Ehm Feedlots, Inc., William J. Eljah, Craig D. Elliott and

J. & C. Elliott Farm, Rex Engebretson, William P. Eno and

Eno Farms, Inc., Richard Ermer, Jack Estle, Fred Faber,

Tom Faber, Pat Farrell, Dale Fischer, David Fox, Glenn Freie,

Kenneth Frey, William Lilienthal, Otto Frey, Curtis C. Frick

and Frick & Frick, Peter J. Fromm, Jr., Roger Galles, Roy

W. Gaunt, Robert L. Glaser, Gordon W. Goettsch, Sr., Ronald

J. Good, Lloyd Goode, Vernon Goos, Lowell E. Gose and Gose

Farms, Inc., Norman Graham, David L. Granzow, Melvin T.

Gray, Jay Griggs, Joseph L. Griswold, Eugene Guth, Everett

Guth, Dale C. Hackbarth, Elvern Hake, Gayland Hamann,

Melvin L. Hamilton, Fred L. Hammans, Earle Hanselman,

Robert N. Hanson, Thomas A. Hardersen, Lloyd L. Harmsen,

Mrs. Inez B. Hass, David W. Hawkins, Harlan L. Hayes,

Merlyn Hagland, Lin C. Heiller, Darel D. Hein, Clarence A.

Cyrel Holthaus & Sons, Robert C. Holz, Royal Holz and Holz

Brothers, Inc., Roger F. Honold, Alvin J. Howe, John Howe,

Merlin Hoyer, Thomas J. Hughes, Tony Hulstein, Thomas

Huston, Dean M. Jackson and Jackson Farms, Brad Jackson,

Herbert R. Jackson, William P. Welsch, Wayne D. Jackson,

Hartford Jackson, Lincoln Jackson, William Jass and Jass

Farm, Philip S. Lehman, L. F. Lehmeier, Harold L. Lewis,

Donald D. Liska, H. S. Lovett, Jack Lovett, Wayne Lowe,

Don Ludvigson, Howard Markwardt, Dean Markwardt, Arthur

C. Marx, Elvyn Mateer, Cletus J. Mathis, Jack May, Wayne

C. Meier, Robert S. Mendenhall & Sexton Farms, Hope B.

Mendenhall, Joe Mente, Kenneth D. Meyer, Marvin Meyer &

751

loth and McClinmon & Schneckloth, Jason McCoskey, Glenn

E. McCulloh, Bruce McLaughlin, Raynard McNaughton, Rich-

ard D. McNickle, Larry R. Neuhring, Dennis Patterson, Art

Paulsen, Ralph Paulsen, Darwin Paulsen, Merlin Paulson,

Carl Pennings, Ronald W. Petersen, Terry Petersen, Donald

E. Peterson, Brad Peterson, Charles R. Peterson, John A.

Peterson, Wendell Peterson, James A. Picht and Picht Farms,

Inc., Carl Ploen, Clark Ploen, Duane O. Poor, Cecil W. Potte-

baum, Leon R. Pralle, John Pretz, Leo Rathjen, Donald J.

Reilly, Walter H. Reinholdt, Robert Reinke, Atlee Reisetter,

Glenn Reisetter, Greg Reisinger, Roger Remmers, Tom Ren-

ner, William S. Renner, Melvin Renze, Dale Riediger, Ronald

Riediger and D & R Farm Co., Rudolf Riessen and Riessen

& Riessen, Ross C. River and River Family Farms, Inc., G.

E. Roberts, Doyle Robinson, Arnold Rochau, Lorain Rock,

Harley Rockow, John Rother, Walter Rother, William A.

Rowson, Wilbur Rust, Keith Schlapkohl and Mud Creek

Farms, Vernon Schlapkohl, Klaus P. Schnack, Jim Schneck-

loth, Hugo Schneckloth and Sunny View Farms, James C.

Schmidt, LaVerne C. Schmidt, John A. Schneckloth and

Sunny View Farms, C. Schneckloth and McClimon & Schneck-

loth, Alvy Schoenherr, Clem Schroeder, Vern Schroeder,

David A. Schuett, Walter B. Schuver, Richard E. Schwartz,

Glen Seberg, Roland Sharp, Rex Shaha, Kyle Shaha, William

Sheriff, Jr. and Sheriff Farms, Inc., L. L. Sheriff, Norma

Teske and Teske Bros., Alfred Te Slaa, E. Elmer Thomas,

Robert Timmons, Victor C. Tomka, John Toomsen, Ray-

nold and Topp Brothers, David Topp, Donald J. Treinen,

Griffeth Troester, Dale C. Upmeyer, William R. Utesch and

Triple U Ranch, Severt Van Berkle, Kenneth Van Duzer,

Wayne Van Duzer, Eugene Van Roikel, Dale Van Wyk and

Sons, Paul Van Wyk, Wayne Van Wyk, Jerry Viotho, Marvin

Volkert & Volkert Farms, Inc., LeRoy Vos, Clarence Vos,

Richard Walter, Clyde Walton, Merlin R. Watsabaugh, Byron

K. Wegner, Dean H. Weih, Francis J. Weiland, Leonard Wei-

land, Daniel Welsh, Claire J. Weite, John H. Wenzel, Allan

J. Werthmann, Gene Wetterling, A. B. White, R M. Whitham,

Lloyd A. Whiton and Whiton Brothers, Charles R. Whitt,

Dallas Williams, C. Wayne Wilson, Leland J. Wilson, Steve

L. Wilson, Dean D. Wing, Henry Winter & Son, Martin

Winter, Robert R. Wisor, Vernold Woebbeking, Kenneth D.

Wright, Dennis Wulf, Alva Yoder, W. J. Zenishek, J. W.

Zickefoose and E-Z Farms, Inc., Karl Zimmerman, Tom Hall,

Larry Borchering, Ralpheal Knobbe, Larry D. Behrens, Rob- ¢

ert W. Eason, Curtis Franzeen and Franzeen Farms, Edward

P. Tomka, Mrs. Albert Hannasch, Donald E. Schechinger,

Roger Bomgaars, Donald Sparks, Boyd Kimberley, Harry Kim-

berley, Leo J. Ullrich, Raymond P. Ullrich, Lee J. Vonnahme,

Leo Danner, Peter Danner, Gerald F. Schreck, Ronald P.

Seuntjens, Gerald G. Hall, Staiert Farm Partnership, Victor

Wendl, Harold E. Reiman, Helen L. Conn and Conn Land

& Cattle Co., Inc., Loras J. Stork, Donald J. Danner, Elmer

D. Wiederin and Brincks and Wiederin Farms, Donald Bad-

ding, Curtis Freie, Victor Tomka and APT, Marvin H. Mohr,

Victor J. Tomka, Jr., Vernal Onken, Waynes J. Reisberg, 7

Billy Wanninger, James G. Tomka

Bob Severtson

Idlewild Farms, an Iowa partnership

Edna Feedlot, a Kansas Corporation.

NO. 82-1434:

Pony Creek Cattle Company, Inc. et al. v. The Great Atlantic

& Pacific Tea Co., et al.

Plaintiffs:

Pony Creek Cattle Company, Inc., Lazy 8 Cattle Company, Cold-

water Cattle Company, Hitch and Cantrell, Hitch-Atkinson

Cattle Co., Inc., H. C. Hitch, Jr., Henry C. Hitch Ranch, Inc.,

Company, Joe McGrew, Panhandle Cattle Feeders, Inc., Ralph

Grounds, R. G. Grounds, Grounds-Sarchet, Grounds-Feil, Leo

Winters d/b/a S & S Cattle Company, Leo Winters d/b/a WW

Livestock Company, Glen Cantrell, Elmer Graham, Gene Stipe,

C. O. Sage, Ravco Cattle Company, Vose & Son, Redd Feeding

Company, Redd Feeding Corporation, Western Trio Cattle Fund

No. 1, Western Trio Cattle Fund No. 2, Western Trio Cattle

Fund No. 3, Western Trio Cattle Fund No. 4, Western Trio

Cattle Fund No. 5, Western Trio Cattle Fund No. 6, Western

Trio Cattle Fund No. 7, Western Trio Cattle Fund .

; Western Trio Cattle Fund No. 9, Western Trio Cattle Fund 2

Ks No. 10, Western Trio Cattle Fund No. 11, Western Trio Cattle 1

Fund No. 14, Western Trio Cattle Fund No. 15, Western Trio

Cattle Fund No. 16, Western Trio Cattle Fund No. 17, Western

Trio Cattle Fund No. 18, Western Trio Cattle Fund No. 19,

Western Trio Cattle Fund No. 21, Western Trio Cattle Fund

No. 22, Western Trio Special Option Fund A, Western Trio-B,

Western Trio Special Option Fund BN, Western Trio Special

Option Fund C, Western Trio Special Option Fund D, Western

Trio Special Option Fund F, Western Trio Special Option Fund

H, Western Trio Special Option Fund K, Western Trio Special

Option Fund M, Western Trio Special Option Fund N, Western

Trio Special Option Fund O, Western Trio Special Option Fund

P, Western Trio Special Option Fund PC, Western Trio Special

Option Fund PC-2, Western Trio Special Option Fund V, West-

ern Trio Special Option Fund VR, Western Trio Special Option

Fund W, Western Trio Special Option Fund X, Western Trio

Special Option Fund Y and Western Trio Special Option Fund Z.

NO. 82-1435:

Richard S. Lowe, et al. v. Safeway Stores, Inc., et al.

Plaintiffs:

Richard S. Lowe, David Lorch, Percy Zylstra, Robert P. Knips,

Clarence Kremer, Otto Lorch, Elmer Peters, Harlan D. Peter-

son, Walter Ranschau, Anthony Strouth, John Strouth and

William Strouth, a partnership trading as Strouth Brothers,

Bernard Thier, Richard Thier, Carl Winterboer, Charley Zylstra

and Robert C. Zylstra, a partnership, and Charley Zylstra &

Sons, Inc., an Iowa corporation.

O. 82-1436:

Wagon Rod Ranch, et al. v. Safeway Stores, Inc. et al.

Trigg Cattle Company, Inc., et al. v. Safeway Stores, Inc., et al.

Seven Rivers Cattle Co., et al. v. Safeway Stores, Inc., et al.

Sagebrush Cattle Feeders, Inc., et al. v. Safeway Stores, Inc.,

et al.

Mrs. J. V. McAdoo, et al. v. Safeway Stores, Inc., et al.

A. D. Lee, et al. v. Safeway Stores, Inc., et al.

John T. Bean, et al. v. Safeway Stores, Inc., et al.

R. Dirk Agee, et al. v. Safeway Stores, Inc., et al.

Chaparral Cattle Corp., et al. v. Safeway Stores, Inc., et al.

Burke Petersen, et al. v. Safeway Stores, Inc., et al.

John O. Varian, et al. v. Safeway Stores, Inc., ec al.

D. W. Lewter, et al. v. Great Atlantic & Pacific Tea Co., et al.

Plaintiffs:

Pecos Valley Feeders No. 1, Pecos Valley Feeders No. 2, Pecos

Valley, Inc., Pecos Valley Management, Red River Properties,

vii

Inc., S & L Land and Cattle Co., John A. Scarborough, Service

Grain Co., Inc., Seven Rivers Cattle, Edward I. Smith, R. B.

Stanton, Sudan Livestock & Feeding Co., Jim Turnbough, M.

D. Weber, David White, David White and George Moreland,

Bill Winchell a/k/* WIN Cattle Co., J. Troy Woodward, Irving

de Cordova, Allen and Welch Adams, Adams Ranch, Allen

Children Partnership, Robert N. Allen, Big 7 Cattlefeeders, Inc.,

Sarah Shepard Bobo, Fred Boston, Henry Boston, T. Coe

Branch, Don Burson, Cagle & Love, James V. Campbell, L. B.

Campbell, C. E. Carter & Sons, Carter Cattle Feeders, Carter-

Kirchoff Feed Yards, Inc., Center Cattle Feeders, Cerrie Cattle

Co., C. E. Christian, H. T. Copeland, Cowboy Cattle Co., James

G. Cruce, Mark Curry Cattle Co., Dare Lock d/b/a Dare Lock

Cattle Co., Gerald Darroh, F. S. Cattle Co., F & S Cattle Co.,

Don Ferrel, Gary Fletcher, Flying Cattle Feeders, Garrison

Cattle, Inc., Given Bros., H. E. Graham, Eva Graham, Hamlett-

Carter, Inc., Hammer- Carter, Inc., Otis Harmon, HCK Cattle

Co., Inc., J. E. Helm, Reo Hinton, Hughes-Carter, Inc., D. D.

& G. Jordan, E. M. Kee, Jr., Kelton- Carter, Inc., King Carter,

Inc., Kiowa Cattle Co., L & L Farms, Lee- Carter, Inc., Jack

R. Love, M & M Cattle, MacKenzie Cattle Co., Martin Cattle

Co., Inc., Charles B. Martin, Jr., Max Marble, T. C. Meinecke,

Moreland- Carter, Inc., Morris-Carter, Inc., Richard Nall, O. K.

Cattle Co., Howard Paine, Phillip D. Pinnell, Plainview Cattle

Feeders, Plateau Cattle Co., Jana Posey, Jim Posey, James A.

Potts, John Rogers, S & S Cattle Co., S.T.S.PM. & F., Sage

brush Cattlefeeders, Inc., Shepard Cattle Co., Grady Shepard,

Pat Shepard, Smith-Carter, Inc., Gerald & Dale Smith, John V.

St. Evens, Larry Strugess, Roy Stockett, Victor Stout, Morgan

Sturgess, T.L.&H Cattle Co., Tadlock Land & Cattle Co., Inc.,

Tee Pee Cattle Co., Texico Cattle Co., Inc., Texico Feedlots,

Inc., Noah Tipton, Tobert Tipton, Paul Toliver, Triangle J.

Cattle Co., Trinchera Cattle Co., Inc., Triple M Cattle Co., Inc.,

Val Verde and C. E. C., Merlin Weber, Merlin Weber & M..,

Carroll Wiech, Weldon Young, K & 8 . R. Evans, J.

B. Bean, Bills & Ellis Feedlot, Inc., J. P. „ Bramblett, G. R

Bryan, Charles Cunningham, Jewel Lutich, Louis Lutich, J.

V. McAdoo, Jim McNeil, L. D. McNeil, d/b/a J & L Cattle Co.,

Ernesto Valenzuela, d/b/a Chihiahua Cattle Co., Thomas Wad-

K. Alban, Alp Company, Inc., Jewell Avent, d/b/a Avent Cattle

Co., Avent & Avent, Avent & Farris, Avent and Hrbacek, Avent

viii

& Lodin, Avent & Redd, Avent & Tipton, Avent & Tye, B. J.

Cattle Co., Valdy Investment Co., V. R. Barnett, B. M. Bevis,

Big Dipper Investment Co., Big Ten Investment Co., Bogle

Farms, Inc., Margie Boles, Bert Buchanan, Jack Builtup,

Johnnie Burson, C & C Cattle Co., Carne Rojo, Inc., Carol

Investment Co., Cooperman Cattle Co., Fred B. Corn & Sons,

Inc., Gayle Cotten, Cow Lick Cattle Inc., D & P Cattle Co.,

Dawn Cattle Corp., Carl Day, Jack Deason, Doc Cattle Feeders,

Easter Cattle, H. W. “Bud” Eppers, Excalibur Cattle Co., Inc.,

Farmers Cattle Co., Feco Cattle Co., Feedum, Ltd., Five Star

Cattle Co., Fleethaven Investment Co., Four E Cattle Co., Four

I Cattle Co., 4-J Cattle Co., Four Star Cattle Co., Ganado Feeders,

Mary Lou Glass, Sid Goodloe, Grofat, Ltd., Hall Cattle Co., Inc.,

Hall Four, Harshey Feed Lot, Inc., Kalman Heider, Charles

Hoover, James T. Hull, A. D. Jones Estate Corp., Just Waiting

Cattle Co., Kadee Cattle Co., Ketchum Ltd., Beaver & Baker *

Kerr, Carl Kleuskens, James E. Lankford, Lazy U Cattle Co.,

Losal, Ltd., M. D. Cattle Co., Markely-Barton-Hill, Matador

Cattle Co., David McGee, the Estate of H. H. McGee, Phillip

S. McKee, Melrose Cattle Co., Florene Menefee, L. D. Neumayer

d/b/a Neumayer Ranch, Noland & Lawrence, J. B. Noland d/b/a

Noland Cattle Co., Old Mill Investment Co., Warren Owen,

Owens Electric Cattle Co., Peters Cattle Co., Frank Peters,

Pruitt & Burney, Pruitt, Burney and Burney, R.W.&W., Ralph

Rainwater, Ribeye Investment Co., Runningbrook Cattle, Inc.,

Sagebrush Cattle Feeders, Sanchez & Avent, Sawtooth Invest-

ment Co., Schrimsher Brothers, Inc., Silver Cattle Co., Simpson

Brothers, Six-Way Cattle Co., Smith & Avent, Arnold Smith,

Star Cattle Co., Sun Valley Cattle Co., T-Bone Feeders, Inc.,

Tex-Cal Feeders, Inc., Three E Cattle Co., Trojan Cattle Co.,

Tule Creek Cattle Co., 2 Way Cattle Co., WAF Investment Co.,

Warminski, Warren-Alban Cattle Co., Albert Watson,

Watson & CE & W. Watson & Eiffert, Watson &

Horney, Watson & Wiggins, Watson Feed Yards, Inc., Watson

Feed Yards & A & A, Watson Feed Yards, Inc. & C. M.

Eiffert, Watson Feed Yards, Inc. & Arch Wilson, III, Lynn

Welch, Benny Wilde Children, L. B. Worthan, Zavtig Invest-

ment Co., Jim Bean, John T. Bean, Lettunich Farms, Paul

Lettunich, Harry O. Watkins, Avenales Cattle Co., Circle Bar

Ranches, Diamond Cattle Co., Diamond Land & Cattle, Charles 5

B. Evans, Jr., Peggy D. Evans, Liberty Livestock, McCormick 5

Brothers, James B. Sinton, Norma M. Sinton, U X Livestock 7

Co., William B. Wright, Jr., Linda S. Wright, John P. Wright, 1

d/b/a Mary’s River Ranch, Elias Goicoechea, d/b/a Holland

Ranch, Dean Rhoads, Walter Gardner, d/b/a W & C Cattle

Co., Hillary Barnes, d/b/a Barnes Ranches, Inc., Bertrand Paris

& Sons, S & R Cattle Co., Don and Martha Sims, Leslie Stewart,

Chaparral Catfle Corp., Chaparral Cattle Corp., et al., d/b/a

NB Cattle Co., Noonam Assoc., Thomas C. Noonan, Jr., Burke

Petersen, Yvonne Peterson, d/b/a Eureka Ranch Co., Petersen

Cattle Co., John O. Varian and Zera L. Varian, Durward W.

Lewter, Melvin K. Dalton, Vonnie Dalton, Val Dalton, Aleta

Dalton, Lynn Patterson, Linda Patterson, d/b/a Bar M. K.

Ranches, Alma J. Redd, Robert Redd, Lynda Redd, d/b/a the

Indian Creek Cattle Co.

NO. 82-1437:

A. L. Black, et al. v. Albertson’s, Inc., et al.

Plaintiffs:

A. L. Black

Estate of G. B. “Pete” Buske:

; Loy Deanne Styles; Lila Gay Vars; Phila May Weatherly;

B. K. Buske; Lila M. Buske, Independent Executrix

Pioneer Cattle Order Buyers, Inc.

Board of Directors: Don Foster; A. L. Black; Mary Bingham;

Redge Priest; Doug Stephenson; Tom B. Simmons, Jr., trustee;

Estate of John G. Carrothers

Officers: Don Foster; A. L. Black; Murry Bingham; Redge

Priest; Doug Stepher - u: Larry Knowles

Hereford Feedyards, Inc.:

Texas Beef Feedyards, Inc., doing business as Hereford Feed-

yards, Inc.

Texas Beef Feedyards, Inc., a wholly owned subsidiary of

AZL Resources, Inc.:

Directors: Maurice F. Strong; Richard G. Brierley; Leonard

Hentsch; William L. Holt; Michel LeGoc; Tom F. Marsh;

James G. Niven; John M. O’Mara; Donald W. Solmonson;

Scott M. Spangler; James W. Witherspoon

Officers: Maurice Strong; Scott M. Spangler; Mel P. Mel-

sheimer; Donald W. Solmonson; Robert D. Josserand;

Kenneth M. Gould; Joseph J. Lund; Franklin D. Dodge;

Thomas M. Foster; Walter P. Pruitt; H. W. Van Loo

Solano Corporation: F

Scott M. Spangle: 5

Prochemco Cattle Company, Inc. te

; Prochemco Cattle Company is a wholly-owned subsidiary of

3 AZL Resources, Inc. (whose directors and officers are named

above under Hereford Feedyards, Inc.); Walter P. Pruitt is

trustee.

Eureka Cattle Co., Inc.:

Stockholders: Wilbur Gibson; James W. Witherspoon; Paul

Engler; John Seiver; A. Warren Owen; Lloyd Olson

Prochemco, Inc.

Prochemco, Inc., also known as Procor, Inc., is a wholly-

owned subsidiary of AZL Resources, Inc. (whose directors

and officers are named above under Hereford Feedyards,

Inc.); Walter P. Pruitt is trustee.

The following listed persons and/or companies are defendants

in some or all of the above-listed cases:

Albertson’s, Inc., American Stores Company, f/k/a Acme

Markets, Inc., Arden-Mayfair, Inc., Borman’s, Inc., First Na-

tional Stores, Inc., Food Marketing Institute, f/k/a National

Association of Food Chains, Food Fair Stores, Inc., Giant

Food, Inc., The Grand Union Company, The Great Atlantic

& Pacific Tea Company, Inc., Jewel Companies, Inc., The

Kroger Co., Lucky Stores, Inc., National Provisioner, Inc.,

National Tea Company, Safeway Stores, Incorporated, Skaggs

Companies, Inc., Skaggs-Albertson's, The Stop & Shop Com-

panies, Inc., Super Valu Stores, Inc., Supermarkets General

Corporation, Thriftimart, Inc., Vons Grocery Co., Winn-Dixie

Stores, Inc.

TABLE OF CONTENTS

Reasons for Granting the Writ ....................

I. The Court of Appeals erred in applying the

Illinois Brick-Hanover Shoe rule and its excep-

tion to sellers of fungible commodities who sell

to purchasers who have price-fixed the purchas-

nne ee tae 7. Ie 1S Dr es 12

II. The Court of Appeals erred in affirming the

District Court’s granting of a motion for sum-

mary judgment on the “pass-on” issue because

plaintiff-petitioners profferred evidence creating

a material fact dispute requiring a jury trial 18

Appendix A

Appendix B

TABLE OF AUTHORITIES

Cases: Page

In re Beef Industry Antitrust Litigation,

600 F.2d 1148 (5th Cir. 1979), cert. denied

ee 3, 4, 14, 18, 19

In re Beef Industry Antitrust Litigation,

710 F.2d 216 (5th Cir. 1983), rehearing denied

916 PBa O01 (th Gee. BOGE) ole eee eins 1

In re Beef Industry Antitrust Litigation,

542 F. Supp. 1122 (N.D. Tex. 1982) 1., 20, 22, 23, 24

Blue Shield v. McCready,

457 U.S. 465, 102 S. Ct. 2540 (1982) ............ 16, 18

Florida Power Corp. v. Granlund,

78 F.R.D. 441 (M.D. Fla. 1978) ................ 18

Fontana Aviation, Inc. v. Cessna Aircraft Co.,

ee 16

Hanover Shoe, Inc. v. United Shoe Machinery Corp.,

DD 12, 13, 16, 18

Illinois Brick Co. v. Illinois,

431 U.S. 720 (1977), rehearing denied

434 U.S. 881 (1977) 3, 12, 18, 15, 16, 17, 18, 19, 21, 22

Mandeville Is. Farms v. American C.S. Co.,

884 U.S. 219 (1947), rehearing denied

, b's cbs ove bbee nu ed.ov se 16

United States v. Diebold Inc., .

ss ven ca picrceyesecobens 25

United States v. Patten,

. 14

United States v. Socony- Vacuum Oil Co.,

F 15

Statutes:

a Clayton Act 54, 16 U.S. C. 1s panne :

% 4

xiv 4

IN THE

Supreme Court of the United States

October Term, 1983

No.

IN RE BEEF INDUSTRY ANTITRUST LITIGATON

M.D.L. Docket No. 248

MEAT PRICE INVESTIGATORS ASSOCIATION,

et al., if

Petitioners,

SAFEWAY STORES, INC., et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE FIFTH CIRCUIT

OPINION BELOW

The opinion of the Court of Appeals, which is reproduced

in Appendix A, has been reported. In re Beef Industry Anti-

trust Litigation, 710 F.2d 216 (5th Cir. 1983, rehearing

denied 716 F.2d 901 (5th Cir. 1983). The District Court for

the Northern District of Texas entered judgment in the case,

which has been reported. I. Re Beef Industry Antitrust

Litigation, 542 F. Supp. 1122 (N. D. Tex. 1982).

JURISDICTION

The judgment of the Court of Appeals, which is reproduced

in Appendix A, was entered on July 25, 1983. A timely peti-

tion for rehearing was filed on August 8, 1983 and was denied

on September 12, 1983. The order denying rehearing is re-

produced in Appendix B. This Court has jurisdiction under

28 U.S.C. § 1254(1).

STATUTES INVOLVED

Section 4 of the Clayton Act, 15 U.S.C. § 15, provides:

“Any person who shall be injured in his business or

property by reason of anything forbidden in the antitrust

laws may sue therefor in any district court of the United

States in the district in which the defendant resides or

is found or has an agent, without respect to the amount

of controversy, and shall recover threefold the damages

by him sustained, and the cost of suit, including a rea-

sonable attorney’s fee.”

STATEMENT OF THE CASE

These 19 cases were originally filed beginning in 1975 and

subsequently consolidated as M.D.L. No. 248, In re Beef

Industry Antitrust Litigation. The complaints allege that the

defendants, retail chain grocery stores, conspired to fix

artificially low the wholesale price for edible beef and to

monopolize the beef market in violation of Sections 1 and 2

of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2, seeking

injunctive relief and treble damages for injury caused to

Plaintiffs/Petitioners’ businesses and properties, 15 U.S.C,

§§ 15, 26. The District Court has jurisdiction of the subject

matter pursuant to 28 U.S.C. § 1337.

Plaintiffs sell fat cattle to packers, who in turn sell the

meat portion (carcass) to the defendants. Plaintiffs allege

that the price the defendants pay to packers for the beef

carcass predetermines the price the packers pay the plaintiffs

for the entire animal. The packer customarily pays the cattle-

man the retailers’ carcass price for the live animal; the packer

makes his costs and profit on processing and selling the re-

maining non-meat portion of the animal, the “offal” which

includes the hide, blood and entrails.

Following this Court’s decision in Illinois Brick Co. v.

Illinois, 481 U.S. 720 (1977), the District Court dismissed

these cases for failure to state a claim upon which relief

can be granted. Plaintiffs appealed, and the Court of Appeals

reversed and remanded. In re Beef Industry Antitrust Litiga-

tion, 600 F.2d 1148 (5th Cir. 1979), cert. denied 449 U.S. 905

(1980). Based upon the Court of Appeals opinion, remand

proceedings concerned solely the “pass-on” issue. September

15, 1981, defendants filed a motion for summary judgment,

which the District Court granted on July 14, 1982. On appeal,

the Fifth Circuit Court of Appeals, affirmed the District

Court.

The evidence considered to be overwhelming by the District

Court consists entirely of affidavits of packers who deny that

they rigidly, lock-step pass on the carcass price. No packer

affidavit asserts that packers absorb any part of the de-

pressed carcass price given by retailers. No packer has sued

the defendant retailers for price fixing. There is no possibility

of double recovery from these suits.

STATEMENT OF THE FACTS

1. Parties

Plaintiff cattlemen are the primary producers of this coun-

try’s largest food industry item—beef. Cattle are bred and

raised on farms, ranches and commercial feedlots. Plaintiffs

produce fat cattle:

“|. . standardized cattle which have been placed on a

high-energy feed for fattening to an optimum weight

for sale; the benchmark for fat cattle is U.S.D.A. Choice

Grade 8. The term is sufficiently well known and the

cattle sufficiently fungible for the Chicago Mercantile

Exchange to have a commodities contact for “fat cattle“.“

In re Beef Industry Antitrust Litigation (Packer Cases), 607

F.2d 167, 178 (5th Cir. 1979), cert. denied, 452 U.S. 905

(1981).

Defendants are the nation’s twenty-five largest retail food

chains, who purchase beef from packers and slaughterers to

supply the retail beef to the consuming public. °

Also named as defendants are the retail food chains’ na-

tional trade association and the publisher of the beef industry's

price reporting mechanism, the National Provisioner. The

National Provisioner publishes a daily market report, the

“Yellow Sheet”, which shows the price for carcass beef on

any yiven day. This document is used by packers and retailers

as the basis for the price paid by retailers to packers for

carcass beef, the packers in turn use this price as the price

they pay for live cattle.

2. Wholesale Beef Industry’s Operation

Plaintiffs allege that the two largest retail food chains,

A&P and Safeway, establish the wholesale price of beef uni-

laterally, through market dominance, custom and agreement

in the industry. A&P and Safeway buy carcass beef on Tues-

day and Wednesday of each week and are the only significant

purchasers in the market on those days. These prices are

reported by the Nationa] Provisioner in the Yellow Sheet as

the wholesale beef price. Each of the other defendant retail

food chains purchase beef at wholesale based upon the Yellow

Sheet price established by A&P and Safeway. These retail

defendants contract in advance for carcass beef with packers,

the contract price being determined by an agreement upon a

certain day’s issue of the Yellow Sheet. The agreed upon date

was usually Tuesday and Wednesday, sometimes Thursday.

Government studies indicate that during the mid-1970’s

from seventy to ninety percent of the carcass beef sold at

wholesale to the retail defendants was sold under this formula

pricing mechanism. Sales to A&P and Safeway account for

most of the remaining carcass beef sold.

3. Yellow Sheet Cattle Pricing

The Yellow Sheet beef reporter’s call sheet shows the beef

market is “made” daily by calling eleven major packers. In

all major cattle feeding areas east of the Rocky Mountains,

the beef prices reported in the Yellow Sheet are used as the

basis for the live price offered for fat cattle by all packers.

Cattlemen have noted a direct relationship between the

rise and fall of live prices and the rise and fall of the Yellow

Sheet price. In fact, IBP, by far the largest beef packer, radios

the Yellow Sheet prices to its buyers as the prices are received

through telephone conversations with Yellow Sheet reporters.

In December, 1978, the United States Department of Agri-

culture, Agricultural Marketing Service, Packers and Stock-

yards Program issued a “Beef Pricing Report”. Carlot sales

of steer and heifer carcasses were chosen for study because

most price information is based upon such sales. USDA em-

ployees interviewed persons from 35 packing plants repre-

senting 26% of the federally inspected steer and heifer

slaughter for all firms in the United States in 1976. These

plants account for a majority of carlot beef trading. The

report concluded that 70% of all steer and heifer carlot

carcass sales of the 35 plants were formula sales based on

Yellow Sheet published prices. The report further stated that

interviews at the 35 plants indicated that the Yellow Sheet

is the principle guide used in determining the bid price in

the purchase of live cattle by slaughtering packers.

4. Packing Industry’s Operation

Packers purchase fat cattle from cattlemen essentially on

two bases:

a. Live Buying: where the packer-buyer will offer a per

pound live weight date-of-sale price determined at the feedlot

after estimating the cattle’s yield-grade basis after slaughter;

and

b. Yield-grade on date of kill: where the packer-buyer will

offer a carcass price based on a yield-grade determination

after the animal is slaughtered.

In both methods, the packer-buyer is given a ceiling price

by his head buyer which he may pay for that portion of the !

animal which will be carcass beef. The packer-buyer, upon

viewing the lot of cattle, determines the live weight by a

formula which employs the factors of the estimated carcass #

percentage weight of the animal, multiplied by the Yellow 1

Sheet price for each of the particular grades. f a

Russell Walker, IBP’s head cattle buyer, testified that he

gives buying prices to over 75 cattle buyers working for IBP

twice a day. Russell Walker further testified that most of

IBP’s competitors, including all the major packers, attempt

to buy the same grade and yield of beef, and that the base

price quoted by IBP to its buyer is for yield grade 3 choice

beef. Variations in price for different yield grades and quality

grades are based on the quotation for choice yield grade 3.

Cattle are generally purchased a pen at a time with the objec-

tive of getting 85% choice in the purchase of a pen.

Packer-buyers, including those employed by all of the major

packers, have explained the uniformity in price for live cattle

by stating that the Yellow Sheet dressed beef price is the

ceiling price they can offer. The prices offered by the dif-

ferent packers to cattle producers at the same time are usually

the same, and any variance is almost always less than one-half

cent per pound. Any variance between live prices on the same

pen of cattle offered by different packers can be explained

either by an intervening movement of the Yellow Sheet price

or by differences in estimating the quality or yield character-

istics of the pen by the various different packer-buyers. Plain-

tiffs’ evidence established that the packer buyers are ex-

tremely accurate in estimating the grade-yield expectation

from live cattle and bids vary by less than one-half of one

percent.

The alternative method of purchase, yield-grade on date-

of-kill, amounts to an absoiute and direct, perfect pass through

of the price received by the packer from the retail food chain.

In the yield-grade on date-of-kill method, the packer specifies

that on the day the cattle are slaughtered and graded, the

packer will pay to the cattleman the Yellow Sheet carcass

beef price, depending upon the grade and weight of the

animal.

While the most prevalent method of buying fat cattle in

any of the major fat cattle producing areas of the country

is by live weight, between 1973 and early 1978, most packer-

buyers, including all the major packer-buyers, have from time

to time refused to buy cattle on any other basis than carcass

basis, grade-yield per Yellow Sheet on date-of-kill. Most

demonstrative of a clear pass-back of the price depression,

there have been occasions when the wholesale market declined

over a period of time and the packers offered to reserve a

place in the kill line on a future date, giving the fat cattle

producer the Yellow Sheet price for corresponding quality

and yield grade and carcass weight of the slaughtered animal.

The price-determining mechanism for each buying basis has

been the dressed beef prices quoted in the Yellow Sheet.

5. Live Cattle Industry’s Operation

Cattle feeding is confined to 23 states, mostly Iowa, Ne-

braska, Kansas, Colorado, Texas, Arizona and California.

Over 70% of the fat cattle fed in the United States are fed

in an area within a 200-mile radius of points on a line between

Amarillo, Texas, and Sioux City, Iowa, generally known as

the “river points”. Main fat cattle concentrations are in the

high plains or panhandle area (parts of Texas, New Mexico,

Oklahoma, Kansas and Colorado), the Corn Belt area (pri-

marily western Iowa and eastern Nebraska) and the Imperial

Valley region of California and Arizona.

Cattle feeding is done primarily in areas where corn or

other similar high energy grain can be raised. Cattle are

fattened essentially the same way in all cattle feeding areas,

by concentrated rations intended to produce cattle graded

U.S.D.A. Choice Y-3 or better beef. According to market

studies, over 80% of all fat cattle slaughtered in the United

States is U.S.D.A. choice, yield grade 3 or better.

Fat cattle producers usually must sell their product within

a 100-mile radius of their feed lot since further transportation

leads to adverse market prices and product damage. Fat cattle

must be sold in a three week optimum period of readiness or

else the cattle will become overfat and much less valuable.

Once fat cattle are on high energy rations, they cannot

successfully be removed from them. Virtually all fat cattle are

purchased by packer-slaughterers from fat cattle producers

in three manners: (1) packer-buyers purchase directly from

the feedlots; (2) packer-buyers purchase cattle at terminal

or auction markets; (3) order-buyers purchase cattle from

either the feedlots or the terminal or auction markets for

various packers for whom they are agents.

6. Products of the Beef Packing Industry

There are, in essence, two products of the beef packing

industry :

a. the edible dressed beef carcass; and

b. the non-edible by-products of the slaughtering process,

such as hides, bone meal, blood, intestines, etc., known

generally as the “offal”.

Because packers uniformly and habitually recover their

costs and profits from the offal, the dressed beef portion of

the animal is the “by-product” of the packing industry. The

packer serves as a funnel between the cattlemen and the retail

food chains, through which passes the dressed beef carcass.

The packer uses the carcass price established by the retailers

as a ceiling price for the price he will pay for the live animal.

“3

—

;

There is no price competition for dressed carcasses; the

wholesale price is determined by A&P, Safeway and the

Yellow Sheet. There is competition in the price the packers

receive for selling the various components of the offal or

drop. If the market for the various components of offal is

good enough, packers will give the cattlemen some more

money, on the top of the carcass price, in their effort to bid

for the offal. Packers make a profit if they can sell the offal

for more than the cost of slaughter (including any premium

packers might pay to the cattlemen to get the offal). This

also works in reverse, If the offal market is down, then pack-

ers will habitually bid something lower than wholesale car-

cass price, again to make sure they are covering slaughter

costs. The offal market is affected by different market factors,

in that many offal items are not as perishable as carcass beef,

resulting in an ability to store offal items to ride out price

declines.

On a temporary basis, packers might adjust the price of

live animals to fill up their kill lines. This practice is due to

a temporary shortage of the kind of animals needed for

slaughter. This variation does not detract from the basic

habitual practice of taking the Yellow Sheet wholesale dressed

beef price as the top price which will be given for the live

animal. Rather, packers temporarily cut into their offal

revenues if they need animals.

Packers depend upon averages to break even between live

animal purchases and carcass beef sales. The habit or custom

of packers to use the Yellow Sheet on the date of purchase

of the animal, despite the possibility that the wholesale price

received from the sale of the dressed carcass will be different

some three or more days later when the carcass is finally sold.

Packers depend on averages—matching and directly passing

through the price received for the carcasses sold on that day

to the price paid for animals purchased on that day. As the

Court of Appeals stated in its first opinion, beef carcasses

are fungible products. Once cattle are killed and dressed,

it is impossible to distinguish between the breed and sex of

different carcasses of the same yield grade. Because of the

fungibility of beef carcasses, and because packers habitually

pay the same price for cattle purchased as they are receiving

for carcasses, the wholesale carcass price received will match

the basic live price paid over a period of time.

7. “Pass-On” Issue

Plaintiff's summary judgment evidence, and the reasonable

inferences that may be drawn from it, demonstrates the fol-

lowing:

Carcass beef, in the context of profits and losses, is a “by-

product” of the packing industry, with the profitable “prod-

uct” being the offal, the portion free from the retail food

chains’ price-fixing powers. The retail food chains establish

the depressed price, paying it to the packers who in turn

purchase the carcass beef from the cattlemen, dollar for dollar,

with the packers uniformly and habitually making their

profits in the separate offal market. Cattlemen are simply

selling the carcass beef of the live animal to the retail food

chains through conduits called “packers”. Likewise, retailers

are paying the cattlemen for carcass beef through the same

conduit, “packers”.

The packers’ passing back to the cattlemen monies received

from the retail food chains does not have any relationship to

packers’ profits, or losses, because the custom in the packing

industry is to pay only the carcass sale price for the live

animal. There is no absorption of the retailers price depres-

sion, for to do so would require, in the mirror-image Illinois

Brick fact situation, packers to pay an additional increment

to the cattlemen to offset the retailers’ depression. Evidence

of the packing industry's habit and custom in breaking even

on the price of the meat comes best from the packers them-

selves. As stated by Russell Walker, long-time head cattle

buyer of IBP, by far the predominant packer in the beef

industry :

The dressed weight price I give my buyers is a price

that will enable IBP to break even on the actual cost

of the animal—if the dressed market says the same. This

means that IBP’s kill costs and profits must be made,

if at all, on the sale of the by-products—-the traditional

way in which the packing industry is operated.

REASONS FOR GRANTING THE WRIT

I, THE COURT OF APPEALS ERRED IN APPLYING THE

ILLINOIS BRICK-HANOVER SHOE RULE AND ITS EX-

CEPTION TO SELLERS OF FUNGIRLE COMMODITIES

WHO SELL TO PURCHASERS WHO HAVE PRICE-

FIXED THE PURCHASING PRICE,

The Court of Appeals over-generalized the holdings of the

United States Supreme Court in Hanover Shoe, Inc. v. United

Shoe Machinery Corp., 892 U.S. 481 (1968), and /idjnois Brick

Co. v. Illinois, 481 U.S. 720, rehearing denied, 484 U.S. 881

(1977), by broadly applying the holdings of those cases to

sellers. Hanover Shoe held that a manufacturer could not

assert a “pass-on theory of damages” defense against a direct

purchaser who paid an overcharge. Illinois Brick held that an

indirect purchaser could not use a “pass-on theory of dam-

ages” offensively to recover overcharges paid.

Petitioner-plaintiffs’ complaints allege, however, that peti-

tioner-plaintiffs are damaged, not by the payment of over-

charges, but by the inadequate price that they received because

the market was artificially depressed through the activities

of the respondent-defendants, and other unnamed co-conspira-

tors, in violation of the federal antitrust laws. Neither Han-

over Shoe nor Illinois Brick deals with—or even refers to

first sellers of fungible commodities into a conspiratorially

rigged market for an artificially depressed price. See Florida

Power Corp. v. Granlund, 78 F. R. D. 441 (M.D. Fla. 1978).

These causes of action pose no apportionment problem be-

cause no overcharge has been paid. The allegations of the

Amended and Substituted Complaint assert an artificially

depressed market price for fat cattle. In contrast, the problem

addressed by this Court in Hanover Shoe-Illinois Brick is

what might be termed a “trickle down” problem—a problem

of tracing the overcharge to and overpayment by a direct

purchaser through successive levels of overcharge and over-

payment where, at any of the several levels, all or part of

the damages suffered by reason of the payment of the over-

charge might be absorbed by the payor. In this action, how-

ever, there is no “trickle down“. The cattlemen, who are selling

their perishable product at a conspiratorially depressed price

into an artificially depressed market which, in short term is

inelastic, can neither recoup or pass-on any loss they suffer

nor make up that loss by passing on an overcharge because

they are the first sellers into the rigged market. Therefore,

any apportionment of damages will be only among the first

sellers into the conspiratorially depressed market—not, as in

Illinois Brick, among successive levels of the market itself.

The Court of Appeals accurately recognized:

The plaintiffs’ theory of damages is not in all respects

a pass-on type of theory. Their theory, stated most broad-

ly is that the activities of the alleged price-fixing con-

spiracy depressed wholesale prices generally, and not

simply the prices paid by members of the conspiracy, and

that packers and slaughterers based their purchases of

live cattle on the depressed wholesale price. It is im-

material whether or not a steer purchased from a plain-

tiff found its way into the hands of a conspirator retailer.

It is enough if, as alleged, the conspirators’ activities

caused a general depression 4n wholesale prices and the

intermediary purchasing from a plaintiff based his pric-

ing decision on the depressed wholesale beef price.

In re Beef Industry Antitrust Litigation, 600 F.2d 1148, 1166

n.24 (5th Cir. 1979).

This Court has recognized the seriousness of monopsony

or oligopsony power at the dominant position of the market

place. If a violation of the antitrust laws occurs in this critical

position, the entire market place is directly affected and in-

jured. As this Court noted in United States v. Patten, 226 U.S.

525 (1912), with regard to allegations concerning the de-

fendant’s alleged “cornering” of the cotton market:

It well may be that running a corner tends for a time

to stimulate competition; but this does not prevent it

from being a forbidden restraint, for it also operates to

thwart the usual operation of the laws of supply and

demand, withdraw the commodity from the normal cur-

rent of trade, to enhance the price artificially, to hamper

users and consumers in satisfying their needs, and to

produce practically the same evils as does the suppression

of competition. Jd. at 542. (Emphasis added.)

In another monopsony case, United States v. Socony-

Vacuum Oil Co., 310 U.S. 150 (1940), this Court again

recognized that a conspiracy, which exists in that position

of the market where a commodity is purchased and put into

the stream of commerce is the critical position of the entire

market. “And those who [are] in that strategic position would

have it in their power to destroy or drastically impair the

competitive system.” Id. at 22.

Therefore, a violation of the antitrust laws by those persons

who stand in this key position in the market creates not just

an individualized injury, which occurs when there is an over-

charge passed through a chain of distribution to an ultimate

consumer as in Illinois Brick, but creates an injury which

permeates the entire market, “directly interfering with the

free play of market forces.” Socony-Vacuum, 810 U.S. at 221.

In the present cause, plaintiffs have aileged that defendants

have conspired to restrain trade in the entire market for the

production, slaughter and purchase of fat cattle. Defendants

have chosen as their tool for the manipulation of this market,

the price they have agreed to pay for fresh processed carcass

beef produced from fat cattle. Defendants, who occupy a key

position in the market, were therefore able to manipulate

and to conspiratorially rig the entire market which is inelastic

in the short-term and into which plaintiffs were forced to

sell their live fat cattle.

While recognizing that plaintiffs claim damage to the

market in general and that “[plaintiffs] sold their livestock

for less than they would have in the open and competitive

market,” the Fifth Circuit Court of Appeals held that Illinois

Brick was of such general application that it applied to cir-

cumstances where the market was allegedly manipulated by

use of price and where the defendants monopolized and at-

tempted to monopolize said market by use of illegal pricing

practices. The purpose of the federal antitrust laws is to

regulate and protect competition. Mandeville Is. Farms v.

American C. S. Co., 334 U.S. 219, 243 rehearing denied 334

U.S. 885 (1947); Fontana Aviation, Inc. v. Cessna Aircraft

Co., 617 F.2d 478, 482 (7th Cir. 1980). Surely this Court did

not intend Illinois Brick to thwart the Congressional scheme

of regulation and protection by barring recovery of damages

by those persons injured in their business or property where

the free market forces are conspiratorially and illegally con-

trolled through the use of illegally depressed pricing.

The beef marketplace in 1890 was essentially no different

than it exists today. When the Sherman Act was passed, Con-

gress clearly sought to protect the farmer from the very evils

complained of in this case. Subsequently, Congress passed

Clayton 4, giving a private remedy to “any person who shall

be injured in his business or property by reason of anything

forbidden in the antitrust laws.” 15 U.S.C. § 15.

Today, the cattleman sells live cattle into the funnel end

of a distribution chain, claiming that a remote purchaser,

who controls the buying power, has depressed the wholesale

price for what that purchaser buys, directly injuring the

cattle producer. The intermediary, the packer, is unconcerned

about the price he received for the meat, since he merely

passes that price back to the cattleman as his cost in the live

animal. (In fact, the cheaper the price for the meat, the less

the packer has to pay to acquire the offal.) In this context

the concerns espoused in Illinois Brick-Hanover Shoe do not

prevail. Plaintiffs’ claims here do not rest “at bottom on

some abstract conception or speculative measure of harm.”

Blue Shield v. McCready, 457 U.S. 465, 102 S. Ct. 2640, 2646-

47, n.11 (1982). In this recent case, this Court re-focused its

attention on the Illinois Brick-Hanover Shoe rule, providing

additional guidance in applying those concerns to the present

action:

It is reasonable to assume that Congress did not intend

to allow every person tangentially affected by an anti-

trust violation to maintain an action to recover threefold

damages for the injury to his business or property.

[however] the unrestrictive language of the section, and

the avowed breadth of the congressional purpose, cautions

us not cabin § 4 in ways that will defeat its broad re-

medial objective. But the potency of the remedy implies

the need for some care in its application. In the absence

of direct guidance from Congress, and faced with the

claim that a particular injury is too remote from the

alleged violation to warrant § 4 standing, the courts

are thus forced to resort to an analysis no less elusive

than that employed traditionally by courts at common

law with respect te the matter of “proximate cause”.

See Perkins v. Standard Oil Co., 395 U.S. 642, 649, 89

S. Ct. 1871, 1875, 23 L.Ed.2d 599 (1969); Karseal Corpo-

ration v. Richfield Oil Corporation, 221 F.2d 358, 368

(CA9 1955). In applying that elusive concept to this

statutory action, we look (1) to the physical and economic

nexus between the alleged violation and the harm to the

plaintiff, and (2) more particularly, to the relationship

of the injury alleged with those forms of injury about

which Congress was likely to have been concerned in

making defendant’s conduct unlawful and in providing

a private remedy under § 4.

102 S.Ct. at 2547-48.

In the present case “the physical and economic nexus be-

tween the alleged violation and the harm to the plaintiff[s]”

is direct; it is, in fact, predictable. Likewise, Congress was

directly concerned with the tangible economic injury suffered

here by plaintiffs when the Sherman Act was originally

passed.

The Court in Blue Shield v. McCready was concerned at a

practical level with ensuring that someone be available to

bring an action which would “further Cortain basic objectives

of the private enforcement scheme embodied in § 4.” 102

S.Ct. at 2546, n.10. In the present case members of the pack-

ing industry have failed to sue the retailers for violations

occurring during the relevant period claimed in plaintiffs’

complaints. Those claims are time barred. Cattlemen are the

only private parties available to bring this action and should

be allowed to sue to recover the full amount of the illegal

price depression in wholesale meat.

II. THA COURT OF APPEALS ERRED IN AFFIRMING

THE DISTRICT COURT’S GRANTING OF A MOTION

FOR SUMMARY JUDGMENT ON THE “PASS-ON”

ISSUE BECAUSE PLAINTIFF-PETITIONERS PROF-

FERRED EVIDENCE CREATING A MATERIAL FACT

DISPUTE REQUIRING A JURY TRIAL.

Even if this Court determines that Illinois Brick applies to

this case, petitioners submit they provided evidence before

the District Court that Petitioners fall within the equivalent

of the recognized exception to Illinois Brick.

A. The Exception To: Illinois Brick-Hanover Shoe.

The court of appeals held that although these cases are

controllet by the Supreme Court’s decision in Illinois Brick,

plaintiffs had pleaded themselves within an exception to the

Illinois Brick rule. lx re Beef Industry Antitrust Litigation,

600 F.2d 1148 (5th Cir. 1979), cort. denied, 449 U.S. 906

(1980). The exception allowed was traced througi: Illinois

Brick to this Court’s decision in Hanover Shoe, Inc. v. United

Shoe Machinery Corp., 392 U.S. 481 (1968).

It is clear from the Hanover Shoe and Illinois Brick opinions

that the exception to the use of pass-on is not solely proof of

the existence of a cost-plus contract between parties in the

chain of distribution. That example works only in the context

of suits brought by plaintiffs upstream in the chain of dis-

tribution. Where plaintiffs are suing a remote defendant-

purchaser situated downstream in the chain of distribution,

alleging that they are selling their product into a rigged

marketplace and, thus, receiving an artificially low price for

their product, restricting the exception to the cost-plus

pass-on situation would make pass-on offensively or defen-

sively impossible to show. The use of a cost-plus contract

between packers and retailers in the context of the present

case would render logically impossible price-fixing claims by

cattlemen against retailers. Obviously the exception to the

Hanover Shoe-Illinois Brick rule must encompass sit: tions

other than “pre-existing cost-plus contracts”. That is essen-

tially a portion of the holding by the Court of Appeals in the

first appeal:

As we understand these cases [Hanover Shoe and Illinois

Brick], the Court meant the scope of the exception to be

narrow, but it did not imply that only cases involving

cost-plus contracts qualify. Commentators have observed

that Hancver Shoe and Illinois Brick permit the assertion

of passing-on in situations that are fui.ctional equivalent

of the cost-plus contract case.

600 F. ad at 1168. Although the District Court paid lip service

to this admonition, a reading of the District Court’s opinion

demonstrates that plaintiffs were actually held to a stricter

standard: detailed proof that every transaction accomplished

the same result as a cost-plus contract, i.e., “push-pull-click-

click”. 542 F. Supp. 1134.

B. The Court of Appeals erred in affirming the District

Court, who failed to pose the correct factual issue to

be determined by defendants’ motion for summary

judgment.

In deciding a motion for summary judgment a trial court

must of necessity determine the factual questions for decision;

and if evidence regarding the answer to the question is in

dispute, the question must be put to the jury. The Trial Court

undertook this exercise, but asked the wrong question. 542

F. Supp. at 1130-31.

The Trial Court stated the issue thus:

It follows that the retailers must prove that no genuine

issue of material fact exists with regard to the feeders’

inability to present cost-plus equivalency proof in a non-

complex manner.

542 F. Supp. at 1311. That question could hardly be posed to

a jury as framed, and would not address the basic issue

even if it could be answered. The correct fact question is:

“During the relevant period, did the packing industry absorb

any portion of the artificially depressed price for wholesale

beef?“

If the plaintiffs produce evidence that the packers did not

absorb any portion of the price depression (regardless of

the mechanism), they must surely prevail on the motion for

summary judgment, unless that evidence is of the speculative

nature condemned by this Court. For the following reasons

we believe plaintiffs met their summary judgment burden of

producing evidence which, at the least, created issues of

material fact.

There is essential fallacy in the district court’s insistence

on evidence of a “rigid, lock-step” relationship between cattle

price and the Yellow Sheet as being necessary to comply with

the Illinois Brick-Hanover Shoe standards.

The middleman packer must make a margin over his costs

somewhere in his operations in order to survive economically.

The packer has two ways of doing this: either sell some por-

tion of his product above cost, or reduce costs. Plaintiff's

evidence shows, uncontraverted, that the head cattle buyer

for the largest packer in the country has stated in 1977 that

the traditional way the packing industry operated is to at-

tempt to break even on the carcass, i.e., the carcass is sold

at the cost of procuring the animal. The packer has costs of

obtaining, slaughtering and processing the animal that must

be met in order to stay in business. These costs are met by

either selling the offal at a profit or obtaining the animal at

a lower cost. Thus one would expect to see the live cattle price

to be either at or lower than the Yellow Sheet, even if the

packers pursued the second strategy.

All Hanover Shoe and Illinois Brick require is evidence that

the middleman uses some device to protect against absorption

of loss from the price-fixed item. Plaintiffs’ evidence shows

that the packer used the Yellow Sheet for such protection.

By analogy to the cost plus situation, the carcass is the cost“

and the offal is the “plus.” There is nothing in the case law

that requires the “plus” to be “rigid” or “lock-step.” Indeed,

a middleman could have a variable “plus” and certainly the

“plus” might not cover all of his other costs. The essence of

“cost-plus” for Illinois Brick purposes is in the unvarying

passing of the “cost” part, not in the rigidity or lack thereof

of the “plus” part.

The packer does not move cattle through his plant for the

carcass, but for the offal. All of defendants’ evidence shows

that the packer might vary his pricing decisions with re-

spect to cattle depending on supply and demand conditions

for offal. This is the traditional and habitual way the packing

industry works. This is no more inconsistent with “perfect

pass-through” of the price fix than a cost plus contract with

a variable plus“ would be. This proof complies with Illinois

Brick and Hanover Shoe.

C. The Retailers’ evidence failed to make a prima facie

case that the Packers absorbed some portion of the

alleged undercharge.

The Court of Appeals affirmed the District Court, finding

that the defendants presented evidence that:

a variety of factors influenced the pricing decisions

made by packers .. . it is beyond reasonable factual

dispute that the feeders cannot show that the pricing

decisions of the packers are.. determined in advance

without regard to the interactions of supply and demand,

600 F.2d at 1165, or that the. . . habitual use of pre-

determined formula would enable measurement of the

effect on prices for fat cattle or changes in wholesale

price.” Id.

542 F. Supp. at 1311. Accordingly, the District Court held for

the defendants, even though they presented no evidence as to

whether or not the packers, over any given period of time,

actually absorbed any of the illegal depression in the whole-

sale meat price.

The evidence submitted by defendants indicated that the

packers’ pricing decisions sometimes wandered from strict

adherence to the “Yellow Sheet” price because of five in-

fluencing factors: (1) Packer’s individual needs, (2) Competi-

tion and negotiations for cattle, (3) Estimating cattle char-

acteristics, (4) Conditions of the cattle market, and (5) the

By-Product market. 542 F. Supp. at 1311-34.

Without regard to plaintiffs’ evidence that these factors

resulted in de minimis changes in the packers’ bid price, the

District Court concluded that because a perfect pass-on of

the wholesale price might not occur, plaintiffs could not pre-

vail. Petitioners submit, however, that defendants have the

burden of showing, prima facie at least, that the packers

absorbed some portion of the depression in the wholesale

meat price when they purchased cattle, over time. For indeed,

if there is no absorption, there is no injury to the packers

and therefore no basis for claiming a duplicative recovery.

There is no evidence of absorption by packers in the record.

To the contrary, plaintiffs presented evidence that the

packing industry traditionally (“habitually”) breaks even

on the meat, covering costs and profits from the “offal”

market. The price influencing factors seized upon by the

District Court, thus, relate not to the meat, but to the drop,

the “plus” in this “functional equivalent” to a “cost-plus”

contract.

D. The Court of Appeals, in affirming the District Court,

erroneously ignored evidence submitted by plaintiffs

which created, at the least, material factuai disputes.

Plaintiffs’ summary judgment evidence showed that the

packing industry, through the consistent and habitual use of

a formula applied to the “Yellow Sheet” wholesale beef price,

passed on to cattlemen (plaintiffs) that price for the live

animal; that the packing industry has traditionally attempted

to pay cattlemen an amount for the live animal equal to the

amount the packer receives for the red meat; and that the

packing industry has traditionally been successful in achiev-

ing this result. This evidence included testimony, depositions

and affidavits of cattle purchasers, packer buyers, packer

owners, economists and others. Not only did the District

Court ignore much of this evidence, but the District Court

improperly weighed the evidence. All inferences made by the

court were in defendants’ favor, as best exemplified by the

speculative excursion taken in pages 29-30 of the Memoran-

dum Opinion. Although the District Court acknowledged the

proper summary judgment standards and burden of proof

542 F. Supp. at 1129-1131, it departed from those require-

ments in analyzing the evidence in this case.

In reaching the conclusion that a packer’s individual needs

affected pricing decisions, the District Court accepted at face

value a portion of Russell Walker’s testimony 542 F. Supp.

at 1811, but entirely ignored his original affidavit that stated:

“The dressed weight prices I give my buyers is a price that

will enable I.B.P. to break even on the actual cost of the

animal. In this regard the District Court, likewise,

ignored the evidence from Mr. Whorton, the head cattle buyer

for Spencer Foods, which established that the packers passed

on the money they received for the carcass to the cattlemen

1 . 4

18 Nee

as the total price for the live animal and worked with the

offal on the losses and gains. The District Court refused to

consider packer and other evidence showing the habitual

method of purchasing and the goal sought to be achieved.

In concluding that competition between packers affects

their pricing decisions, the District Court accepted at face

value the defendants’ affidavits from Swift and Sunflower,

542 F. Supp. at 1182, but dismissed plaintiffs’ evidence that

any variance between packer offering prices on the same pen

oi cattle can be explained by an intervening movement in

the wholesale price or by differences in estimating the quality

of the pen of cattle. The court simply disregarded that these

differences were de minimis in any case. This amounted to

the District Court giving all favorable inferences to the mov-

ing party which is directly contradictory to this Court’s hold-

ing in United States v. Diebold, Inc., 369 U.S. 654, 655 (1962).

The retailers’ argument (and the District Court's ruling)

assumes that there is a price fix at the wholesale, retail level.

The illogic of the District Court’s ruling can be demonstrated

by asking the question: How can a wholesaler survive under

such circumstances, where he is bidding into a' free market

for his essential supply and then selling his product into a

rigged price floor? The cost of obtaining the essential supply

(live cattle) is a huge cost to the packer. If the slaughterer

purchases 50,000 head of cattle weighing 1100 pounds each at

an average of 90¢ per pound dressed, his outlay is $29,700,000.

If he can receive only 89¢ from the retailer, he has lost

$330,000.

In a short time, under such circumstances, the packer would

be forced out of business. During the relevant time, however,

packers remained in business. How were they able to do this?

Two possibilities exist. Either the wholesale price of beef

moved in response to the live price, or the live price moved in

response to the wholesale price, in order to assure that the

packer would at least break even.

There is no evidence in the record that the packer estab-

lished price to the retailer in reference to the live price. Such

evidence would have to show a cost based pricing with refer-

ence to the live price. In fact, all evidence shows the wholesale

price to be determined by reference to the wholesale price

guide—the Yellow Sheet. The pricing of wholesale carcasses

is shown by interrogatory to be established in advance by a

certain day’s Yellow Sheet price. An IBP study shows the

price of all boxed beef was also established in advance by

reference to “Yellow Sheet—Top Half.”

Inasmuch as selling price is known in advance to be the

wholesale market as quoted in the Yellow Sheet, tolerance by

packers of a free market for the essential supply—live cattle—

would result in quick bankruptcy.

Thus we have Russell Walker of IBP saying that the price

he gives his cattle buyers for live cattle is the price that will

enable IBP to, break even on the beef, the traditional way the

packing industry works. He relies on the Yellow Sheet, be-

cause the Yellow Sheet determines the price at which IBP

can sell the beef to the retailers. That is the only way the

packer can avoid a huge loss in the gigantic dollar cost of

obtaining cattle.

The evidence shows that the business of the packer is the

processing and sale of the “by-product”, “offal”, or “drop”.

This is a separate and distinct product which has a separate

market. The retailers do nut buy the by-product. The packers

#1 business revolves around obtaining and processing the

offal for less money than is received from its sale. Accord-

ingly, there is some price fluctuation in live price because of

competition for the offal.

A packer’s kill costs and other overhead are covered by

sale from the offal. Hence, the packer might be willing to

bid more than the wholesale price to the cattlefeeder in order

to get the offal.

There is no evidence that the packer ever bids more for the

animals in order to obtain carcasses meat that he will sell to

the retailer at a loss. Common sense and the dollars involved

in such a possible strategy indicate its essential foolishness

and lack of basis in fact.

The only justification for finding a free live cattle market

would be a finding that the wholesale market was not rigged.

This finding is not even attempted in the District Court’s

ruling.

Pass-on is simple to prove in this case. There is no evidence

in the record that any packer went out of business because

he could not obtain live cattle for less than he could sell the

beef at wholesale. The reason for this lack of evidence is the

industry wide “tradition” of packers to use the Yellow Sheet

price to determine live cattle price.

CONCLUSION

For each of the foregoing reasons the petitioners respect-

fully petition that this Court issue a Writ of Certiorari to

the United States Court of Appeals for the Fifth Circuit to

review the substantial questions presented.

Respectfully submitted,

LEX HAWKINS

GLENN L. NORRIS

GEORGE F. DAVISON, JR.

HAWKINS & NORRIS

2801 Fleur Drive

Des Moines, Iowa 50321

Telephone: 515/288-6532

JOHN A. COCHRANE

> STEWART C. LOPER

COCHRANE & BRESNAHAN

Suite 300, 360 Wabasha Street

St. Paul, Minnesota 55102

Telephone: 612/298-1950

LOWELL V. SUMMERHAYS

EDWARD T. WELLS

SUMMERHAYS, RUNYAN &

McLELLAND

420 Continental Bank Building

Salt Lake City, Utah 84101

Telephone: 801/355-5200

JAMES W. WITHERSPOON

JAMES E. ELLIOTT

WITHERSPOON, AIKEN &

LANGLEY

Post Office Box 181

Herford, Texas 79045

Telephone : 806/364-1100

BURT A. BRAVERMAN

FRANCES J. CHETWYND

COLE, RAYWID &

BRAVERMAN

1919 Pennsylvania Ave., N.W.

Washington, D.C. 20006

Telephone : 202/659-9750

ROBERT E. EIDSMOE

GLEYSTEEN, HARPER,

EIDSMOE, HEIDMAN &

REDMOND

200 Home Federal Building

Sioux City, Iowa 51102

Telephone : 712/255-8838

BEN L. KRAGE

KASMIR, WILLINGHAM &

KRAGE

1300 Bryan Tower

Dallas, Texas 75201

Telephone: 214/744-5511

Plaintiffs’ Liaison Counsel

on behalf of all Petitioners

Attorneys for Petitioners

A-1

APPENDIX

APPENDIX A

In re BEEF INDUSTRY ANTITRUST LITIGATION—

MDL DOCKET NO. 248.

A. L. BLACK, et al.,

Plaintiffs-Appellants,

ALBERTSON’S, INC., et al.,

Defendants-Appellees.

R. DIRK AGEE, a/k/a Shoshone Indian Tribe of

Duckwater, et al.,

Plaintiffs-Appellants,

SAFEWAY STORES, INC., et al.,

Defendants-Appellees.

MEAT PRICE INVESTIGATORS ASSOCIATION,

etc., et al.,

Plaintiffs-Appellants,

SAFEWAY STORES, INC., et al.,

Defendants-Appellees.

RONALD BECKER, et al.,

Plaintiffs-Appellants,

SAFEWAY STORES, INC., et al.,

Defendants-Appellees.

PONY CREEK CATTLE COMPANY, INC., et al.,

Plaintiffs-Appellants,

A-2

The GREAT ATLANTIC & PACIFIC TEA

COMPANY, et al.,

Defendants-Appellees.

RICHARD S. LOWE, et al.,

Plaintiffs-Appellants,

SAFEWAY STORES, INC., et al.,

Defendants-Appellees.

Nos. 82-1433 to 82-1437.

United States Court of Appeals,

Fifth Circuit.

July 25, 1983.

Appeals from the United States District Court for the

Northern District of Texas.

Before REAVLEY and JOHNSON, Circuit Judges, and

WYZANSKI", District Judge.

REAVLEY, Circuit Judge:

This case reaches us for the second time. On the prior ap-

peal, In re Beef Industry Antitrust Litigation, 600 F.2d 1148

(5th Cir. 1979), (Beef 1) this court reversed the district

court’s dismissal on the pleadings of the plaintiffs’ claim.

Returning to the district court, the defendants once again

prevailed, this time on a motion for summary judgment. In

re Beef Industry Antitrust Litigation, 542 F.Supp. 1122

(N. D. Tex. 1982) (Beef II). Plaintiff-appellants return, but

we agree with the district court’s opinion and affirm.

* District Judge of the District of Massachusetts, sitting by desig-

nation.

A-3

FACTS ;

Plaintiffs are feeders who fatten cattle and prepare them

for market. Defendants are, with certain exceptions, retail

grocery chains who sell beef to the public.' Plaintiffs alleged

that defendants engaged in a conspiracy to set wholesale beef

prices at artificially depressed levels. Plaintiffs, however, do

not sell their cattle directly to the defendants. Instead, the

plaintiffs sell to middlemen, the packers, who slaughter the

cattle and sell the beef to defendants. Plaintiffs alleged that

the packers passed on these artificially depressed prices with-

out absorbing any losses.

This allegation ran into the seemingly insurmountable ob-

stacle of the Supreme Court’s pronouncements in Hanover

Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88

S. Ct. 2224, 20 L.Ed.2d 1231 (1968) and Illinois Brick Co. v.

Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977).

In Hanover Shoe, the court held that a defendant may not

assert that the plaintiff was not damaged by the defendant’s

monopoly price when the plaintiff passed on that price to its

customers. The court rejected this pass-on“ defense because

of the difficulty in reconstructing a company’s pricing and

output decisions, and because of concerns with overburdening

already complicated antitrust actions. In Illinois Brick, the

court rejected the offensive use by plaintiffs of this pass-on

theory. The court relied on a rationale similar to Hanover

Shoe, but stressed more heavily the potential impairment of

the treble damage remedy by the introduction of complicated

tracing evidence regarding pricing decisions.

The exceptions are one wholesale grocer, a national trade asso-

ciation and the publisher of a beef industry price list, the Yellow

Sheet. :

Faced with this obstacle, the plaintiffs asserted that their

suit fell within an exception for cost- plus contracts mentioned

in both Hanover Shoe and Illinois Brick. The court in Illinois

Brick explained the exception’s rationale:

The [Hanover Shoe] Court allowed a pass-on defense

because the pre-existing cost-plus contract makes easy

the normally complicated task of demonstrating that the

overcharge has not been absorbed by the direct purchaser.

431 U.S. at 732 n. 12, 97 S.Ct. at 2067 n. 12.

Plaintiffs argued that certain peculiarities and practices of

the beef industry created the functional equivalent of a cost-

plus contract. They alleged that the defendants set beef prices

that were reported daily in the National Provisioner Daily

Market and News Service or “Yellow Sheet,” and that the

packers then engaged in rigid formula pricing based on the

Yellow Sheet. Plaintiffs also ulleged that due to the relatively

short period of time in which a fattened steer or heifer will

achieve and remain at choice grade, the supply of cattle is

inelastic, and the plaintiffs are therefore unable to negotiate

price or withhold their product.

This court in Beef I agreed with plaintiffs in the procedural

posture of a dismissal on the pleadings. The court stated:

[T]he allegations of the complaints state a case within

the “cost-plus” exception. The complaints sufficiently

allege that the impact of the retail chains’ price changes

upon the pricing decisions of the packers is determined

in advance without regard to the interactions of supply

an d. The plaintiffs allege that the packers set the

price of live cattle by strictly applying certain formulae

to the Yellow Sheet or Safeway wholesale beef price.

Under these allegations a plaintiff would be entitled, once

he proved what the competitive wholesale pric: would

A-5

have been for a given grade of beef in a given region at

a given time, and once he established that the packer to

whom he sold strictly applied a formula to the Yellow

Sheet price for the particular sale, to damages in the

amount of the difference between the price he actually

received on that sale of fat cattle and the price he would

have received absent price-fixing (computed by applying

the packer’s formula to the constructed competitive

wholesale price). The packer’s habitual use of prede-

termined formulae would enable measurement of the

effect on prices for fat cattle of changes in wholesale

prices. The plainiiffs have alleged the functional equiva-

lent of cost-pius contracts.

(footnotes omitted) 600 F.2d at 1165. The court, however,

also emphasized that the plaintiffs would be required to

present “detailed proof as to individual transactions,” Jd. at

1166.

Plaintiffs’ summary judgment proof, however, falls far

short of their allegations. The defendant-retailers showed

that there was no genuine issue as to any material fact and

that they were entitled to judgment as a matter of law. Fed.

R.Civ.P. 56(c); Mississippi Hospital Association, Inc. v.

Heckler, 701 F.2d 511, 516 (5th Cir. 1983). The defendants’

overwhelming proof demonstrates that other factors beyond

the Yellow Sheet quotations influenced the packers’ pricing

decision. Specifically, the proof showed that the following

factors influenced packers’ pricing decisions:

(1) The packers’ individual needs in regard to obtain-

ing a minimum amount of cattle each week. This was

necessitated by labor contracts which required that if

the packers opened their doors on Monday, they had to

they worked.

pay their employees for the week, regardless of whether

PEE Te Pose ye

A-6

(2) Temporary local market conditions such as the

weather or an over or undersupply of beef. This forced

the packers to bid over or under the Yellow Sheet price.

(3) Price competition among the packers.

(4) The beef by-product market (i.e. the sale of hides

and nonedible parts of cattle). This market was highly

competitive and forced the packers to pay prices over and

under the Yellow Sheet price.

Plaintiffs do not seriously contest that these factors did, on

occasion, affect the packers’ pricing decision. Instead, they

assert that at a trial on the merits, the district court should

examine evidence of the effect of these factors over time, as

opposed to a transaction by transaction basis. Plaintiffs pre-

sented affidavit testimony that the packers attempted to break

even on the beef and recover slaughtering costs and profits

from the sale of the beef by-products.

While at first blush this argument may seem appealing, it

does not withstand close examination. In Beef I, we stressed

that plaintiffs alleged that defendants “strictly appli [ed] cer-

tain formulae to the Yellow Sheet. .. price.” 600 F. ad at 1165,

and we characterized the packers alleged pricing practices as

“rigid formula pricing.” Jd. at 1166. This emphasis on the

rigidity and strictness of this formula pricing was not inad-

vertent. It was mandated by the nature of the cost-plus con-

tract and the Supreme Court’s rejection of an exception for

cost based rules of thumb in Illinois Brick. The nature of a

cost-plus contract is such that there is absolute certainty as

to the application and the amount of the pass-on. Individual

transactions do not have to be weighed to measure whether

and to what extent the pass-on occurred. Plaintiffs’ averaging

theory does not partake of this certainty. As the district court

A-7

noted, “[i]f packers averaged out gains and losses, . . they

would absorb some loss on some days.” Beef II, 542 F.Supp.

at 1139 n. 19. To show how much of the loss was absorbed

by the packers would be to resort to the sort of speculative

evidence forbidden by Illinois Brick.

Plaintiffs’ averaging theory also runs afoul of Illinois

Brick’s rejection of an exception for “cost-based rules of

thumb in setting prices.” 431 U.S. at 744, 97 S.Ct. at 2078.

To say that on the average, packers attempted to pay the

Yellow Sheet price for beef is to say that the Yellow Sheet

was no more than a rule of thumb. As the Court explained in

Illinois Brick:

These rules are not adhered to rigidly, however; the ex-

tent of the markup (or the allocation of costs) is varied

to reflect demand conditions. The intricacies of tracing

the effect of an overcharge on the purchaser’s prices,

costs, sales, and profits thus are not spared the litigants.

(citations omitted). Id.

Plaintiffs also invite us to reverse Beef I and hold that

Illinois Brick does not apply. We decline this invitation, be-

cause we are bound and, as well, because we agree with it.

AFFIRMED. ee

4 W

re a, ete

r~ we

A-

APPENDIX B

UNITED STATES COURT OF APPEALS

Fifth Circuit

DENIALS OF REHEARING EN BANC

(Rule 35 Federal Rules of Appellate Procedure; Local Fifth

Circuit Rule 35)

Group 1—Denials where no member of the panel nor Judge

in regular active service on the Court requested

that the Court be polled on rehearing en banc.

Group 2—Denials after a poll requested by a member of the

panel or a Circuit Judge in regular active service.

Group 8—Denials on the Court’s own motion after a poll re-

quested by a member of the panel or a Circuit

Judge in regular active service.

Docket Date of Citation of

Title Number Denial Panel Decision

GROUP 1

Becker v. Safeway

D 82-1433, 9/12/83 N.D.Tex., 710

82-1437 F.2d 216

Beef Industry Antitrust

Litigation, In re. 82-1433, 9/12/83 N.D.Tex., 710

82-1437 F.2d 216

2 „ „

Meat Price Investigations Ass’n

v. Safeway Stores, Ine 82-1433, 9/12/83 N.D.Tex., 710

82-1437 F.2d 216

(Published at 716 F.2d 901 (5th Cir. 1983))

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.