In re: Citric Acid Lit. 7-Up bottling Co v. Varni Brothers

• Decision Date: 19 May 1999
• Docket Number: No. 98-15344,98-15344
• Citation: 191 F.3d 1090
• Parties: (9th Cir. 1999) In re: CITRIC ACID LITIGATION 7-UP BOTTLING CO.OF JASPER INC., et al., Plaintiffs, and VARNI BROTHERS CORP., on its own behalf and all others similarly situated dba Seven-Up Bottling of Modesto; 7-UP BOTTLING COMPANY OF PHILADELPHIA, INC. Plaintiffs-Appellants, v. ARCHER DANIELS MIDLAND CO., INC., a Delaware corporation, et al., Defendants, and CARGILL, INC., Defendant-Appellee
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1090

191 F.3d 1090 (9th Cir. 1999)

In re: CITRIC ACID LITIGATION 7-UP BOTTLING CO.OF JASPER INC., et al., Plaintiffs and VARNI BROTHERS CORP., on its own behalf and all others similarly situated dba Seven-Up Bottling of Modesto; 7-UP BOTTLING COMPANY OF PHILADELPHIA, INC. Plaintiffs-Appellants, v. ARCHER DANIELS MIDLAND CO., INC., a Delaware corporation, et al., Defendants and CARGILL, INC., Defendant-Appellee.

No. 98-15344

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted May 19, 1999--San Francisco, California

Filed September 1, 1999

[Copyrighted Material Omitted] Jerome B. Falk, Jr. (argued), Therese M. Stewart, Sue A. Krenek, Howard, Rice, Nemerovski, Canady, Falk & Rabkin, San Francisco, California; Leonard Barrack, Steven A. Asher, Barrack, Rodos & Bacine, Philadelphia, Pennsylvania; Joseph W. Cotchett, Bruce L. Simon, Marie S. Weiner, Steven C. Keller, Cotchett, Pitre & Simon, Burlingame, California; Guido Saveri, Richard Saveri, R. Alexander Saveri, Saveri & Saveri, San Francisco, California, for plaintiffs-appellants Varni Brothers Corp., on its own behalf and on behalf of all others similarly situated, dba Seven-Up Bottling of Modesto; 7-Up Bottling Company of Philadelphia, Inc.

Robert E. Bloch, Robert L. Bronston, Richard J. Favretto (argued), Lawrence S. Robbins, Mark W. Ryan, Mayer, Brown & Platt, Washington, D.C.; Charles F. Preuss, Vernon I. Zvoleff, Michael J. Stortz, Preuss, Walker & Shanagher, San Francisco, California, for defendant-appellee Cargill, Incorporated.

Frederick S. Fields, Steven H. Winick, Bronson, Bronson & McKinnon, San Francisco, California; Christian M. Hoffman, Peter M. Casey, Daniel H. Haines, Foley, Hoag & Eliot, Boston, Massachusetts, for non-party appellee Coopers & Lybrand L.L.P.

Appeal from the United States District Court for the Northern District of California; Fern M. Smith, District Judge, Presiding, D.C. No. MDL-01092-FMS.

Before: Diarmuid F. O'Scannlain, M. Margaret McKeown,and Kim McLane Wardlaw, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We must decide whether purchasers were able to establish that a citric acid manufacturer conspired with competitors to fix prices and to allocate market share in violation of the federal antitrust laws.

I

Citric acid is a corn derivative with a wide variety of uses in the manufacture of food, soft drinks, detergents, and pharmaceuticals. Varni Brothers Corp. and 7-Up Bottling Company of Philadelphia, Inc. (collectively "Varni") filed civil antitrust class actions against Cargill, Incorporated ("Cargill"), Archer Daniels Midland ("ADM"), Haarman & Reimer ("H&R"), Hoffman LaRoche ("HLR"), and Jungbunzlauer ("JBL"), alleging that these firms conspired to fix citric acid prices and to allocate market share. These cases were consolidated and transferred to the Northern District of California. The district court certified a class consisting of all people and entities (other than government purchasers and the defendants themselves and affiliated companies) who had purchased citric acid directly from the defendants.

Conceding the existence of a conspiracy in the citric acid market but denying its participation therein, Cargill moved for summary judgment. ADM, H&R, HLR, and JBL (collectively the "admitted conspirators") each admitted to conspiring to fix citric acid prices and reached settlements with Varni. Thus, the only question before the district court was whether Cargill was a member of this conspiracy or, more precisely, whether Varni had produced sufficient evidence such that a reasonable fact finder could so infer. The district court concluded that Varni failed to satisfy this test because its evidence did not "tend[ ] to exclude the possibility that [Cargill] acted independently." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (internal quotation marks and citation omitted). Accordingly, the court granted summary judgment in favor of Cargill and commented that "[a]pparently hoping that quantity will substitute for quality, plaintiffs have submitted voluminous but weak circumstantial evidence that they argue indicates that Cargill was a member of the conspiracy."

On appeal, Varni argues that Cargill's participation in the conspiracy can be reasonably inferred from the circumstantial evidence in the record. Varni also appeals the district court's denial of a discovery motion, an issue we consider in Part IV.

II

To avoid extensive repetition of the facts, we will first consider the legal standard by which we decide whether Varni has produced sufficient evidence to survive summary judgment. By understanding the proper legal framework applicable at the summary judgment stage, we can better analyze the evidence.

A

Price fixing is illegal per se under section 1 of the Sherman Act. See 15 U.S.C. S 1; United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223 (1940). "On a claim of concerted price fixing, the antitrust plaintiff must present evidence sufficient to carry its burden of proving that there was such an agreement." Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 763 (1984). Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) ("Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.").

Varni can establish a genuine issue of material fact by producing either direct evidence that Cargill conspired to fix citric acid prices or circumstantial evidence from which a reasonable fact finder could conclude that Cargill so conspired. Although Varni argues halfheartedly that it has produced direct evidence that Cargill entered into illegal price fixing agreements with the admitted conspirators -in which case summary judgment would, of course, be inappropriate, see McLaughlin v. Liu, 849 F.2d 1205, 1208 (9th Cir. 1988); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631-32 (9th Cir. 1987) -Varni concedes that such evidence is, at best, weak. Having reviewed the proffered evidence, we can find nothing in the record that establishes, without requiring any inferences, that Cargill participated in the citric acid price-fixing conspiracy. See In re Baby Food Antitrust Litig., 166 F.3d 112 118 (3d Cir. 1999) ("Baby Food") ("Direct evidence in a Section 1 conspiracy must be evidence that is explicit and requires no inferences to establish the proposition or conclusion being asserted."). We thus agree with both parties that the essential question in this case is whether Varni's circumstantial evidence is sufficient to permit a reasonable fact finder to conclude that Cargill was a participant in the citric acid conspiracy.¹

Matsushita is the Supreme Court's foremost explanation of how summary judgment works in the antitrust context. See Matsushita, 475 U.S. at 585-97. The Matsushita Court began by reaffirming horn book law that courts are obligated to construe the evidence in the light most favorable to the nonmoving party, to give the non-moving party the benefit of all reasonable inferences, and to refrain from making credibility determinations. See id. The Court cautioned, however, that, although plaintiffs are to be given the benefit of the doubt, they "must do more than simply show that there is some metaphysical doubt as to the material facts." Id. at 588. Importantly, "conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy." Id. at 586. Instead, an inference of conspiracy is sustainable only if "reasonable in light of the competing inferences of independent action," and "[t]o survive a motion for summary judgment . . . , a plaintiff seeking damages for a violation of S 1 must present evidence `that tends to exclude the possibility' that the alleged conspirators acted independently." Id. at 588 (quoting Monsanto, 465 U.S. at 764); accord City of Long Beach v. Standard Oil Co. of California, 872 F.2d 1401, 1404 (9th Cir. 1989). The Court warned that permitting the inference of conspiratorial behavior from evidence consistent with both lawful and unlawful conduct would deter pro-competitive conduct -an especially pernicious danger in light of the fact that the very purpose of the antitrust laws is to promote competition. See id. at 593 ("[C]ourts should not permit fact finders to infer conspiracies when such inferences are implausible, because the effect of such practices is often to deter procompetitive conduct.").

Based on Matsushita, this circuit has outlined a two-part test to be applied whenever a plaintiff rests its case entirely on circumstantial evidence. First, the defendant can "rebut an allegation of conspiracy by showing a plausible and justifiable reason for its conduct that is consistent with proper business practice." Richards v. Neilsen Freight Lines , 810 F.2d 898, 902 (9th Cir. 1987); accord City of Long Beach , 872 F.2d at 1406; Wilcox v. First Interstate Bank of Oregon , 815 F.2d 522, 526-28 (9th Cir. 1987); T.W. Elec. Serv. , 809 F.2d at 632, 635. The burden then shifts back to the plaintiff to provide specific evidence tending to show that the defendant was not engaging in permissible competitive behavior. See Long Beach, 872 F.2d at 1406; Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148, 1159 (9th Cir. 1988); Wilcox, 815 F.2d at 525; Richards, 810 F.2d at 902, 904; T.W. Elec. Serv., 809 F.2d at 632.²

B

We have repeatedly applied this summary judgment...