305 Sunkist Growers, Inc v. Winckler Smith Citrus Products Co, 241

• Decision Date: 28 May 1962
• Docket Number: No. 241,241
• Citation: 82 S.Ct. 1130,370 U.S. 19,8 L.Ed.2d 305
• Parties: . 8 L.Ed.2d 305 SUNKIST GROWERS, INC., et al., Petitioners, v. WINCKLER & SMITH CITRUS PRODUCTS CO. et al
• Court: U.S. Supreme Court

370 U.S. 19

82 S.Ct. 1130.

8 L.Ed.2d 305

SUNKIST GROWERS, INC., et al., Petitioners,

v WINCKLER & SMITH CITRUS PRODUCTS CO. et al.

No. 241.

Argued March 21 and 22, 1962.

Decided May 28, 1962.

Rehearing Denied June 25, 1962.

See 370 U.S. 965, 82 S.Ct. 1577.

Herman F. Selvin, Los Angeles, Cal., for petitioners.

William C. Dixon, Oakland, Cal., Holmes Baldridge, on the brief, for respondents.

Mr. Justice CLARK delivered the opinion of the Court.

This is a treble damage suit brought under § 4 of the Clayton Act, 38 Stat. 731, 15 U.S.C. § 15, 15 U.S.C.A. § 15, charging petitioners, Sunkist Growers, Incorporated, and The Exchange Orange Products Company, with conspiracy to restrain and monopolize interstate trade and commerce in citrus fruits and by-products and with actual monopolization thereof in violation of §§ 1 and 2 of the Sherman Act, 26 Stat. 209, 15 U.S.C. §§ 1, 2, 15 U.S.C.A. §§ 1, 2, as amended. The petitioners are each agricultural cooperative organizations, Exchange Orange being a wholly owned subsidiary of Sunkist. Petitioners contend the case was submitted under instructions permitting the jury to find an illegal conspiracy among them and Exchange Lemon Products Company, a cooperative processing association owned and operated exclusively by a number of lemon-grower associations all of which are members of Sunkist Growers, Inc. They say that under the exemptions from the antitrust laws granted agricultural associations by § 6 of the Clayton Act, 38 Stat. 731, 15 U.S.C. § 17, 15 U.S.C.A. § 17, and § 1 of the Capper-Volstead Act, 42 Stat. 388, 7 U.S.C. § 291, 7 U.S.C.A. § 291, Sunkist, Exchange Orange, and Exchange Lemon, being made up of the same growers and associations, cannot be charged with conspiracy among themselves. The trial court overruled this contention, among others, and the jury returned a verdict of $500,000. Judgment for treble this amount and attorney fees, less some minor offsets, was entered. The Court of Appeals, accepting petitioners' view of the instructions, held that the exemption claimed did not apply here and affirmed the judgment as to liability but reversed as to the amount of damages. 9 Cir., 284 F.2d 1. We granted certiorari limited to the issue of the immunity of interorganizational dealings among the three cooperatives from the conspiracy provisions of the antitrust laws. 368 U.S. 813, 82 S.Ct. 56, 7 L.Ed.2d 22. We have concluded that the case was submitted to the jury on the theory claimed by petitioners and that this was erroneous. Thus we reverse the judgment.

Sunkist Growers, Inc., has at its base 12,000 growers of citrus fruits in California and Arizona. These growers are organized into local associations which operate packing houses. The associations in turn are grouped into district exchanges, and representatives from these exchanges make up the governing board of Sunkist, a nonstock membership corporation. Sunkist serves the members as an organization for marketing their fresh fruit and fruit products¹ through its field, advertising, sales, and traffic departments. All of its net revenues are distributed to the members.

In 1915 several member associations of Sunkist undertook to develop by-products for lemons in order to create a market for produce not salable as fresh fruit. Because this was a new, untried field the entire cooperative did not participate. Rather a separate cooperative—Exchange Lemon, a nonprofit stock corporation was formed for this venture by the interested associations. Since that time Exchange Lemon has retained its separate identity although it is made up exclusively of lemon-grower associations which are also members of Sunkist. Its function now is primarily one of processing, and the resultant products are marketed for the owners by Sunkist through its products department, which is jointly managed by directors of Exchange Lemon and Exchange Orange.

One year after the organization of Exchange Lemon a similar association was formed to develop by-products for oranges. This organization, Exchange Orange, was comprised of a number of Sunkist member associations until 1931. At that time the Sunkist directors decided to make the processing facilities of Exchange Orange available to all of its member associations by purchasing it and operating it as a wholly owned subsidiary.

In sum, the individual growers involved each belong to a local grower association. Fruit which is to be sold fresh is packed by the associations and marketed by Sunkist, a nonstock membership corporation comprised of district exchanges to which the associations belong. Most fruit which is to be processed into by-products is handled by Exchange Orange, a subsidiary of Sunkist, or by Exchange Lemon, a separate organization comprised of a number of Sunkist member associations.² It is then marketed by the products department of Sunkist which is managed by directors of Exchange Orange and Exchange Lemon.

Competing with the three cooperatives in the California-Arizona area in the business of processing and selling canned orange juice were four independent processors, which were primarily dependent upon Sunkist for their supply of by-product oranges.³ In 1951 two of these concerns, TreeSweet Products Company and E. A. Silzle Corporation, had process-and-purchase contracts with Exchange Orange. Under its contract TreeSweet agreed to process at cost an undetermined amount of oranges provided by Exchange Orange and to purchase the resultant orange juice at the then current price of Sunkist. The average net price for the oranges under this contract was alleged to have been $25.10 per ton.⁴ The contract with Silzle provided that it would process a stated amount of oranges for Exchange Orange and purchase the juice at a stated price less its processing cost alleged to have netted $17.66 per ton.⁵ The third producer, Case-Swayne Company, allegedly declined Sunkist's offer of a similar contract. Respondent Winckler & Smith Citrus Products Company, the final processor, was offered oranges only at the list price of $40 to $44 per ton, depending upon content of soluble solids, and was refused the process-and-purchase arrangements described above.

Respondents brought this suit on the theory that Sunkist and Exchange Orange controlled the supply of by-product oranges available in the California-Arizona area to independent processors; that they combined and conspired with Exchange Lemon, TreeSweet, and Silzle to restrain and to monopolize interstate trade and commerce in 1951 in the processing and sale of citrus fruit juices, particularly canned orange juice; that they in fact monopolized such trade and commerce; and that the purpose or effect thereof was the elimination of Winckler as a competitor in the sale of such juices. Respondents relied on six specific acts and contracts which allegedly furthered the conspiracy, namely: (1) the processing of oranges at cost by Exchange Lemon for Exchange Orange during 1951; (2) the processing of lemons at cost by Exchange Orange for Exchange Lemon during 1951; (3) the establishment by Sunkist and Exchange Orange of a price to independent processors alleged to be too high to enable purchasers to compete, i.e., the $40—$44 per ton list price; (4) the contract between Exchange Orange and TreeSweet in 1951; (5) the contract between Ex- change Orange and Silzle in 1951; (6) the refusal to sign a comparable contract with respondent Winckler.

After a lengthy trial producing a 4,000-page transcript, the case went to the jury under a necessarily complicated charge. As to the parties the jury might find to have participated in an illegal conspiracy, the court gave several instructions. One, given early in the charge, was that:

'a parent corporation and its wholly-owned subsidiary can be guilty of combining or conspiring together to violate the antitrust laws. The defendants Sunkist Growers, Inc., and its wholly-owned subsidiary Exchange Orange Products Company, can accordingly combine or conspire together or with others to violate Sections 1 and 2 of the Sherman Act as charged in the first and second causes of action, subject to other instructions concerning the Capper-Volstead Act, and Section 6 of the Clayton Act, and the exemptions contained therein.'

The instructions on the Clayton and Capper-Volstead Acts merely stated that the cooperatives could lawfully have a monopoly of the fruit and products in which they dealt. Later references to the alleged conspiracy often mentioned only petitioners and the two independent processors, e.g., 'If you find that either or both of the defendants (Sunkist and Exchange Orange, petitioners here) combined with TreeSweet or Silzle to eliminate the competition of the plaintiff * * *.' However, the court's concluding instructions on the subject could well have been taken by the jury as permitting them to find an illegal conspiracy solely among the three cooperatives:

'Unless you find, therefore, from the preponderance of the evidence, that Sunkist or Exchange Orange or either of them, combined or conspired with either TreeSweet, or Silzle, or ELP (Exchange Lemon Prod- ucts), and in 1951 did one or more of the specific acts charged * * *.

'* * * Unless you find from the preponderance of the evidence that defendants Sunkist and Exchange Orange, or either of them, and one or more of the alleged co-conspirators (one of which was Exchange Lemon), combined and conspired, and pursuant to such combination or conspiracy * * *.

'Those are summary instructions which sort of sum up what is charged and what the plaintiff must prove.'

And in a final addendum after consultation with counsel the court instructed that:

'I also am told that I spoke about how the defendants had conspired on one occasion. The charge is not that the defendants conspired. The charge is that the defendants and co-conspirators conspired.

'However, as a matter of fact, you may find that nobody conspired, or you may pick out and decide that...