In re High Fructose Corn Syrup Antitrust Litig.
| Decision Date | 23 August 2001 |
| Docket Number | MDL No. 1087. |
| Citation | 156 F.Supp.2d 1017 |
| Parties | In re HIGH FRUCTOSE CORN SYRUP ANTITRUST LITIGATION. This Document Relates to All Actions. |
| Court | U.S. District Court — Central District of Illinois |
Michael J. Freed, Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., Chicago, IL, Robert N. Kaplan, Kaplan, Kilsheimer & Fox, LLP, New York City, H. Laddie Montague, Jr., Berger & Montague, P.C., Philadelphia, PA, for Class Plaintiffs.
Brian Posewitz, Tonkon Torp, LLP, Portland, OR, for Plaintiff Gray & Co.
Mark W. Ryan, Mr. Richard J. Favretto, Mayer, Brown & Platt, Washington, DC, for Defendant Cargill, Inc.
Aubrey M. Daniel, III, Mr. Steven R. Kuney, Williams & Connolly, Washington, DC, for Defendant Archer Daniels Midland Co.
Terry M. Grimm, Mr. Joseph Spiegler, Winston & Strawn, Chicago, IL, for Defendant A.E. Staley Manufacturing Co.
Donald R. Harris, Edward F. Malone, Jenner & Block, LLC, Chicago, IL, for Defendant American Maize-Products Co.
This matter is now before the Court on various motions for summary judgment by Defendants. For the reasons set forth below, Cargill's Motion for Summary Judgment [# 630] is GRANTED; A.E. Staley's ("Staley") Motion for Summary Judgment [# 632] is GRANTED; American Maize's Motion for Summary Judgment [# 650] is GRANTED; and Archer Daniels Midland's ("ADM") Motion for Summary Judgment [# 652] is GRANTED.
Plaintiffs are a consolidated class consisting of all U.S. purchasers of high fructose corn syrup ("HFCS") who purchased this product directly from any Defendant at any time during the period from July 21, 1991, through June 30, 1995.1 Excluded from this class are governmental entities, Defendants, subsidiaries/affiliates of Defendants, other HFCS producers and their subsidiaries/affiliates, and those purchasers who have opted out of the class. Defendants ADM, Cargill, Staley, and American Maize are United States based manufacturers and sellers of HFCS.2 The HFCS industry in the United States is highly concentrated and is an oligopoly.3
ADM produced HFCS at corn wet milling plants in Clinton and Cedar Rapids, Iowa, and Decatur, Illinois. Cargill's HFCS plants were located in Cedar Rapids and Eddyville, Iowa, Dayton, Ohio, Memphis, Tennessee, and Blair, Nebraska (after August 1995). Staley produced HFCS at corn wet milling plants in Decatur, Illinois, Lafayette, Indiana, and Loudon, Tennessee. American Maize produced HFCS at plants in Decatur, Alabama, and Dimmitt, Texas. CPC's HFCS production was done at plants in Argo, Illinois, Winston Salem, North Carolina, Stockton, California, Port Colborne, Ontario, London, Ontario, and Cardinal, Ontario. During the time period relevant to this litigation, ADM, Cargill, Staley, American Maize, and CPC accounted for an average of more than 90% of the production capacity for HFCS in the United States and Canada.
HFCS is produced from corn and is used as a sweetener in various applications. In the initial milling process, corn is separated into "starch slurry" and corn coproducts, which include corn gluten feed, corn gluten meal, and corn oil. Starch slurry can then be used to make a variety of products including HFCS, ethanol, dextrose, crystalline fructose, potable alcohol, industrial starch, and regular corn syrup. To produce HFCS, enzymes are added to the starch slurry to convert it into dextrose syrup. It can be manufactured to have various sweetener characteristics, depending on the percentage of fructose in the blend. HFCS producers manufacture two primary types of the product, HFCS 42, which contains 42% fructose, and HFCS 55, which contains 55% fructose. To create HFCS 42, another enzyme is added to the dextrose syrup; the HFCS 42 can then be blended with syrup containing a higher percentage of fructose to create HFCS 55.
Both HFCS 42 and HFCS 55 are commodities in that their characteristics do not change from producer to producer. HFCS 42 is used as a sweetener in products such as soft drinks, canned goods, baking products, condiments, jams, dairy products, and alcoholic beverages and is purchased by a broad range of customers, including food processors, confectioners, bakers, dairy producers, canners, and soft drink manufacturers. HFCS 55 is primarily used in the soft drink industry as a substitute for sugar but is also used in canned goods, fountain syrups, confectionery products, baked goods, dairy products, and alcoholic beverages. Demand for HFCS is inelastic and cyclical because of seasonal changes in demand for products containing HFCS; demand peaks in the summer when sweetened beverage sales rise.
There is very little substitutability between corn syrup and HFCS, and the end uses for corn syrup differ from the end uses for HFCS. Although sugar was formerly used by the soft drink industry as a sweetener, the industry has since shifted to HFCS, as functional differences in many applications make HFCS preferable to sugar.
Between 1988 and 1995, the industry's total HFCS output increased by 3.6 billion pounds. ADM increased its shipments by 13%, Cargill increased its shipments by 60%, Staley increased its shipments by 21%, American Maize increased its shipments by 37%, and CPC increased its shipments by 18%. HFCS producers also increased their HFCS finishing capacities;4 ADM, American Maize, Cargill, CPC, and Staley increased their finishing capacities by 88.9%, 47.9%, 52.4%, 38.7%, and 33.2% respectively. During this same period, there were fluctuating market shares. Cargill's market share went from 20.8% in 1988 to 26.3% in 1991 to 25.6% in 1994. ADM's market share went from 30.6% in 1988 to 25.3% in 1991 to 26.6% in 1995. Staley's market share went from 22.3% in 1988 to 15.6% in 1992 to 19.5% in 1994. Furthermore, capacity increased by more than the increase in demand.
Each of the Defendants was a member of the Corn Refiners Association ("CRA"), a trade association for members of the corn refining industry, and each had been a member prior to 1988. The CRA stems from a predecessor organization that was founded in 1913 and has a professional staff of nine persons, including a President, a Vice President, and directors of congressional affairs, communications, and technical affairs. The CRA's activities are conducted through a Board of Directors and several committees. Between 1988 and 1995, the members of the CRA sent their monthly grind and shipment figures for HFCS and other products (such as corn syrup, starch, and dextrose) to the accounting firm of Ernst & Young ("E & Y"), which was retained by the CRA to gather members' statistical data. E & Y combined the individual producers' data and transmitted only the aggregate numbers to the individual producers. Only the independent accountants at E & Y saw individual company data; none of the CRA staff or representatives of the corn refiner members saw individual company data. Monthly shipment information was then provided by the CRA to the U.S. Department of Agriculture and the Federal Reserve.
Defendants regularly published list prices for HFCS before, during, and after the alleged conspiracy period. Competitors' price lists were obtained from customers and industry observers. However, many large customers nevertheless bargained individually with producers on multi-year volume contracts or tolling agreements in order to receive discounts off the published list prices. A tolling agreement is an arrangement where a customer purchases corn and pays the HFCS producer a processing fee to manufacture corn into HFCS, receiving a credit for sale of the coproducts produced during the process; the parties negotiate the processing fee, and the customer assumes the risk of gains or losses associated with fluctuations in corn and co-product prices. Tolling agreements accounted for significant sales during the alleged conspiracy period. Defendants also contend that these large customers changed HFCS suppliers in order to obtain lower prices. Contracts for the purchase of HFCS are typically negotiated in the fall for the following year.
In 1992, the Federal Bureau of Investigation ("FBI") began an undercover investigation of price fixing at ADM with the aid of Mark Whitacre ("Whitacre"), who was at that time the president of ADM's Bio-Products Division, the division which produced lysine.5 Over the next two and a half years, Whitacre secretly made between 120 and 130 tapes of conversations and meetings in the lysine industry, none of which contained any recording of any employee of Cargill, Staley, CPC, or American Maize. The investigation culminated in an FBI raid on ADM's headquarters in June 1995. As a result of the investigation, ADM pled guilty to price fixing in the lysine industry, as well as the citric acid industry, and paid $100,000,000.00 in criminal fines; civil cases followed closely on the heels of the criminal proceedings. Additionally, three ADM executives, Michael Andreas ("Andreas"), Terry Wilson ("Wilson"), and Whitacre, were criminally prosecuted, convicted, and sentenced to prison. With the exception of ADM, none of the other Defendants involved in this case were implicated in either the lysine or citric acid conspiracies, and no indictments were returned with respect to HFCS.6
The Plaintiff class contends that beginning as early as 1988, Defendants, through their senior executives responsible for corn wet milling products, conspired to unlawfully fix prices in the HFCS industry in violation of § 1 of the Sherman Act. Like the conspiracies identified by the Department of Justice in the lysine and citric acid markets, the HFCS conspiracy was allegedly accomplished by these executives dictating prices to be quoted and charged to purchasers, limiting knowledge to a centralized core group of executives, negotiating inter-company purchases among...
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