102 F.3d 1494 (9th Cir. 1996), 94-15803, Amarel v. Connell

Docket Nº:94-15803, 95-16121.
Citation:102 F.3d 1494
Party Name:96 Cal. Daily Op. Serv. 8638, 96 Daily Journal D.A.R. 14,359, 97 Daily Journal D.A.R. 569 J. William AMAREL; Jack E. Carrico and Pamela Fawn Carrico; Reason Farms; Starkey Ranch, Inc.; Danley Bros., Inc.; Rodrick Ranch, Inc.; Allen Etchepare; A. Charles Etchevarry; Sohnrey Ranches; Jay Dee Garr; Maxwell Spyres; Morley Green, aka Nor-Cal Brokerage;
Case Date:December 02, 1996
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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102 F.3d 1494 (9th Cir. 1996)

96 Cal. Daily Op. Serv. 8638,

96 Daily Journal D.A.R. 14,359,

97 Daily Journal D.A.R. 569

J. William AMAREL; Jack E. Carrico and Pamela Fawn Carrico;

Reason Farms; Starkey Ranch, Inc.; Danley Bros., Inc.;

Rodrick Ranch, Inc.; Allen Etchepare; A. Charles

Etchevarry; Sohnrey Ranches; Jay Dee Garr; Maxwell

Spyres; Morley Green, aka Nor-Cal Brokerage; Yuba Farms

Co.; Johnson Equities, Inc.; Lambirth, C. Farms, Inc.;

McKnight, J.H. Ranch, Inc.; Larry E. Middleton; Henry C.

Moore, Plaintiffs-Appellants,


Grover CONNELL; Connell Rice and Sugar Co.; Joseph L.

Alioto, Defendants-Appellees.

Nos. 94-15803, 95-16121.

United States Court of Appeals, Ninth Circuit.

December 2, 1996

As Amended Jan. 15, 1997.

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Howard I. Langer and Kenneth L. Fox, Berger & Montague, Philadelphia, PA, for plaintiffs-appellants.

Eugene Crew and Margaret C. McHugh, Townsend, Townsend, Khourie & Crew, San Francisco, CA; and Mitchell Blumenthal, Sunnyvale, CA, for defendants-appellees.

Appeal from the United States District Court for the Northern District of California, Barbara A. Caulfield, District Judge, Presiding in No. 94-15803, Vaughn R. Walker, District Judge, Presiding in No. 95-16121. D.C. Nos. CV-89-00558-BAC, CV-89-00558-VRW.

Before: SCHROEDER and HAWKINS, Circuit Judges, and FITZGERALD, [*] District Judge.


This appeal arose out of a complex, lengthy, and bitterly contested antitrust suit. Plaintiffs-appellants, independent California rice farmers, appeal the district court's March 1994 judgment for defendants-appellees, a rice exporter, its president, and its lawyer. That judgment was based in part on a jury verdict for defendants as to plaintiffs' Section 2 Sherman Act conspiracy claims and violations of the California Unfair Practices Act, and in part on the district court's judgment as a matter of law for defendants as to plaintiffs' claims for conspiracy to restrain trade in violation of Section 1 of the Sherman Act and California's Cartwright Act.

The litigants raise numerous procedural and substantive issues on appeal. Defendants insist plaintiffs lack standing to maintain this antitrust action. Plaintiffs allege several instances of trial error, challenge the district court's rulings involving antitrust immunity under the Noerr-Pennington doctrine, and argue that it was error for the district court to enter judgment as a matter of law as to the restraint of trade claims on which the jury was divided. Plaintiffs also appeal the district court's post-trial award to defendants of nearly $100,000 in costs.

We have jurisdiction pursuant to 28 U.S.C. § 1291. 1

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I. The Rice Industry

A. Crisis in the World Rice Market

The marketplace can be a harsh teacher and it certainly was here. These events have their beginning in 1980, when a worldwide rice shortage drove prices on the international rice market to record highs. The following year, many rice farmers reacted to these abnormally high prices by substantially increasing rice production. This, in turn, resulted in an oversupply of rice and the collapse of world rice prices in 1981.

The 1980 shortage was especially severe in the Republic of Korea ("Korea"), which had experienced a domestic rice crop failure as a consequence of bad weather. To meet domestic demand, Korea needed to import large quantities of rice. In light of the Korean shortage, the United States agreed to the export of one million tons of rice from Japan to Korea. That decision invoked an emergency exception to a U.S.-Japan bilateral agreement, executed earlier in 1980, which prohibited Japan from "dumping" rice on markets to which U.S. companies exported rice.

In exchange for this exemption, Korea committed in early 1981 to the purchase of certain rice quotas from the United States: (1) 200,000 tons of 1980 U.S. Southern short grain rice, 2 (2) the remaining balance of the 1980 California rice crop, 3 and (3) 500,000 tons of the 1981 California rice crop.

The current litigation was precipitated by the alleged actions of certain participants in the California rice market in responding to Korea's commitment to purchase rice from United States producers. The response transpired against a backdrop of continuing decline in rice prices occasioned by the 1981 world rice surplus.

B. The Parties

Plaintiffs are nineteen 4 independent California rice farmers who grow California rice, harvest it in "rough" or "paddy" form, and sell it to a handful of independent rice mills: Pacific International Rice Mills, Inc. ("PIRMI"), Comet Rice of California, and Grosjean Rice Milling. 5 The independent rice mills then mill the rice and sell it in milled form. The independent rice growers generally sell paddy rice to the independent mills through "participation contracts," under which they share profits from the sale of milled rice.

The original defendants in this action included two cooperatives of rice farmers, Farmers Rice Cooperative ("FRC") and Rice Growers Association of California ("RGA"). 6 These cooperatives grow, mill, and sell rice. Plaintiffs allege that these cooperatives represent a vertical integration of all phases of rice production. Three defendants are still party to the action: Connell Rice & Sugar Company ("Connell Rice"), the export marketing agent for cooperatives RGA and FRC; Grover Connell, president of Connell Rice; and Joseph L. Alioto, a partner in the San Francisco law firm of Alioto & Alioto, past president of RGA, and sometime legal counsel to RGA, FRC, and Connell Rice.

C. Rice Sales to Korea

  1. 1981-82 rice sales to Korea pursuant to Korea's

    commitment to purchase 200,000 tons of 1980 U.S.

    Southern short grain rice

    On December 12, 1980, defendant Connell Rice bid to sell Southern rice at $515 per ton to Korea. Connell Rice was subsequently underbid, however, by an independent rice mill--PIRMI--which won the contract to

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    supply Korea with 200,000 tons of 1980 Southern rice at $449.50 per ton. A formal contract was executed January 23, 1981 by PIRMI and the Office of Supply of the Republic of Korea ("OSROK"), the Korean government agency responsible for the purchase of rice.

    When it came time to perform, PIRMI had insufficient supplies to deliver on the entire 200,000 tons. PIRMI officials blamed this on two things: (1) Connell Rice's purchase of Southern rice (thereby depleting the overall supply of such rice), and (2) Connell Rice's subsequent sale of that rice to OSROK, both occurring just a few days after PIRMI's January 23, 1981 contract with OSROK. On February 3, 1981, OSROK confirmed that it had purchased 120,000 tons of Southern rice from Connell Rice at $449.90 per ton. PIRMI was able to deliver only 105,000 tons of Southern rice to Korea.

    To make up for the shortfall on its promised delivery of Southern rice to OSROK, PIRMI offered to substitute 1981 California rice for the Southern rice. By letter of January 22, 1982, PIRMI's president offered to sell OSROK 70,000 tons of California rice at $349.90 per ton, a decrease in price of $100 per ton from the Southern rice PIRMI was unable to obtain.

    On January 25, 1982, while PIRMI was still discussing this substitution with OSROK, Connell Rice, aware that OSROK was negotiating for the purchase of California rice, offered to sell 500,000 tons of California rice at $260 per ton. 7

    Plaintiffs later alleged in their lawsuit that defendants had conspired to depress the price of California rice, and that this conspiracy was part of a larger, prolonged effort to drive both the independent farmers and the independent mills out of business. They claimed they were damaged by defendants' alleged predatory pricing because this pricing reduced the return they earned on the paddy rice they sold to the independent mills for export to Korea.

    At trial, plaintiffs attempted to establish that $260 per ton was a predatorily low price. A PIRMI official and plaintiffs' expert witness, an agricultural economist, testified that $260 was "below the [average] variable cost [of production]." Defendant Grover Connell testified, however, that $260 was a competitive price, given the oversupply in the world market at the time.

    Simultaneous with its $260 bid, Connell Rice made other efforts to sell California rice to Korea. First, Connell Rice's attorney, defendant Joseph Alioto, sent several telegrams on Connell Rice's behalf to OSROK and other Korean officials, including the Korean ambassador to the United States, "request[ing] the opportunity to bid or negotiate on the competitive merits of the impending sale of American rice to Korea." Alioto's telegrams also mentioned "disturbing reports that other American suppliers are attempting to persuade you to exclude Connell [Rice] from the business and to deny it even the opportunity to bid or negotiate competitively on the forthcoming sale," and warned that such conduct would be actionable under U.S. antitrust laws.

    Second, Connell Rice president Grover Connell accused Korean government officials of having accepted bribes from PIRMI in exchange for rice sale contracts. Such statements sparked investigations of commercial bribery by both the U.S. State Department and the Korean National Assembly. When State Department officials asked Grover Connell why he suspected bribery, he cited the difference between the price PIRMI negotiated with OSROK in early 1981 and the dramatically lower prices Connell Rice had bid, explaining that he inferred bribery from OSROK's alleged "overpayment" to PIRMI. 8 No evidence of bribery was ever found, however.

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    PIRMI eventually negotiated a contract with OSROK...

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