American Crystal Sugar Co. v. Mandeville Island Farms

• Decision Date: 26 May 1952
• Docket Number: No. 12946.,12946.
• Parties: AMERICAN CRYSTAL SUGAR CO. v. MANDEVILLE ISLAND FARMS, Inc. et al.
• Court: U.S. Court of Appeals — Ninth Circuit

195 F.2d 622 (1952)

AMERICAN CRYSTAL SUGAR CO. v. MANDEVILLE ISLAND FARMS, Inc. et al.

No. 12946.

United States Court of Appeals, Ninth Circuit.

March 11, 1952.

Writ of Certiorari Denied May 26, 1952.

Louis W. Myers, Pierce Works, Los Angeles, Cal. (Donald S. Graham and Lewis, Grant, Newton, Davis & Henry, all of Denver, Colo., O'Melveny & Myers, Los Angeles, Cal., of counsel), for appellant.

Wood, Crump, Rogers & Arndt, Stanley M. Arndt and Guy Richards Crump, all of Los Angeles, Cal., for appellee.

Before HEALY, BONE and ORR, Circuit Judges.

Writ of Certiorari Denied May 26, 1952. See 72 S.Ct. 1052.

HEALY, Circuit Judge.

This appeal is from a judgment awarding to appellees treble damages and attorneys' fees under Section 4 of the Clayton Act, 15 U.S.C.A. § 15.

Appellant, here for convenience called Crystal, is a beet sugar manufacturer. The suit, waged under the anti-trust laws, is the outgrowth of a change in Crystal's method of determining the price to be paid appellees and other sugar beet growers for beets grown under contract with Crystal in the area which supplied the latter's Clarksburg, California, refinery. Both prior and subsequent to the crop years 1939, 1940 and 1941, Crystal's growers were paid on the basis of a contract formula comprising two variable factors: (1) the percentage sugar content of the beets grown by the particular grower, and (2) the average net return from the sugar manufactured in the Clarksburg refinery and sold during the crop year in question. This is termed the single net method, measured by the net returns from sugar from Crystal's own factory. These returns were divided approximately 50-50 between manufacturer and grower.

During the years in suit, 1939, '40 and '41, the second variable of the price formula was changed by Crystal to the average net return from the sale of the sugar manufactured at the factories of the three sugar companies operating in Northern California, that is to say, Crystal and its two competitors in that area. This is termed the joint net method. Thus, instead of getting the advantage of Crystal's net returns, appellees were obliged to accept as the price basis the joint net return of the three manufacturers. The difference, trebled, between the price they would have received had the single net method been followed and the prices actually received during the three years is what appellees are seeking to recover.

The case has been in this court before, when we affirmed the trial court's dismissal of it while still in the pleading stage, on the ground that interstate commerce was not involved.¹ The Supreme Court, in a lengthy opinion, reversed, 334 U.S. 219, 68 S.Ct. 996, 92 L.Ed. 1328. In the latter opinion the integrated nature and peculiarities of the industry, the background of the relationship between refiner and grower, and the latter's virtually helpless situation, together with other factors of significance, were extensively developed. The sketchy outline we have given above will suffice, since the reader must of necessity examine what the Supreme Court had to say of the matter.

On remand the case was tried on the merits. The court found that the joint net method described was the result of a combination and conspiracy on the part of Crystal and its two competitors, that it eliminated competition in the purchase of sugar beets, that it deprived the beet growers of a reasonable price for their beets, that it illegally fixed the price of sugar beets, that it intentionally hindered and obstructed the free and natural flow in the purchase of sugar beets, and that an illegal monopoly had been established during the three years in which it was in vogue. The court did not find as a fact, and appears studiously to have refrained from finding, that the activities complained of affected interstate commerce in the end product, sugar, which alone was shipped and sold interstate. However, the court did determine in its conclusions of law that Crystal "wrongfully and unlawfully entered into, and during the crop years 1939, 1940 and 1941 remained and operated under, a combination and conspiracy which was in restraint of trade and commerce among the several states, and wrongfully and unlawfully conspired with other persons to monopolize part of the trade and commerce among the several states, in violation of and contrary to the Sherman Anti-Trust Act 15 U.S.C.A. §§ 1-7, 15 note * * and did and performed acts forbidden" thereby, to the injury and damage of the plaintiffs. The court added that "these conclusions of law are in accordance with the law as held by the decision of the Supreme Court" when the case was before it.

This lack of an express finding that the price fixing combination had some substantial effect on interstate commerce is the first of two grounds on which Crystal relies for a reversal. Whether the ground is thought well chosen depends on the way one construes the Supreme Court's decision in the case. The opinion is ambiguous in this particular, and must ultimately be construed by the Court itself; but we may say at once that we feel obliged to agree with the trial court's appraisal of it.

The Court had before it only the pleadings, not the evidence as here. Nevertheless its discussion was not confined to a consideration of the allegations of fact but ranged beyond them into pronouncements concerning the inevitable effect of the price fixing combination upon the whole of this closely integrated industrial process. Thus the court stated at pages 240-241 of 334 U.S., at page 1008 of 68 S.Ct.:

"When therefore the refiners cease entirely to compete with each other in all stages of the industry prior to marketing the sugar, the last vestige of local competition is removed and with it the only competitive opportunity for the grower to market his product. Moreover it is inconceivable that the monopoly so created will have no effects for the lessening of competition in the later interstate phases of the over-all activity or that the effects in those phases will have no repercussions upon the prior ones, including the price received by the growers.

"There were indeed two distinct effects flowing from the agreement for paying...