369 F.2d 449 (9th Cir. 1966), 20070, Case-Swayne Co. v. Sunkist Growers, Inc.

Docket Nº:20070.
Citation:369 F.2d 449
Party Name:CASE-SWAYNE CO., Inc., a corporation, Appellant, v. SUNKIST GROWERS, INC., a corporation, Appellee.
Case Date:November 21, 1966
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 449

369 F.2d 449 (9th Cir. 1966)

CASE-SWAYNE CO., Inc., a corporation, Appellant,


SUNKIST GROWERS, INC., a corporation, Appellee.

No. 20070.

United States Court of Appeals, Ninth Circuit.

November 21, 1966

Rehearing Denied Jan. 12, 1967.

Page 450

William Henderson, of Johnson & Harmon, Salt Lake City, Utah, for appellant.

Beardsley, Hufstedler & Kemble, Los Angeles, Cal., for appellee.

Page 451

Before JERTBERG and ELY, Circuit Judges, and JAMESON, District Judge.

JAMESON, District Judge:

This is an action seeking treble damages under section 4 of the Clayton Act (15 U.S.C. § 15) 1 for alleged monopoly and attempt to monopolize in violation of sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2). 2 The district court granted the defendant's motion for a directed verdict at the close of the plaintiff's case. 3

Plaintiff (appellant), Case-Swayne, Inc., is engaged in the manufacture of single strength juices (canned orange juice and blends of orange juice with other fruit juice) as an independent operator. Defendant (appellee), Sunkist Growers, Inc., is an association of citrus producers. 4 It has as its base 12,000 citrus growers in Southern California and Arizona. The growers are organized into local associations which operate packing houses. The associations in turn are grouped into district exchanges and representatives from the exchanges make up the governing board of Sunkist. The Sunkist organization handles its members' fruit in effect from tree to store.

Appellant contends that the district court erred (1) in granting the defendant's motion for a directed verdict; and (2) in ruling that Sunkist was organized in conformance with section 1 of the Capper-Volstead Act 5 and therefore could not be held in violation of section 1 of the Sherman Act for conspiracy to restrain and monopolize trade in product oranges. If Sunkist Growers, Inc., was in fact organized as an agricultural cooperative association pursuant to the Capper-Volstead Act, as the district court found, any interorganizational dealings among the various agricultural cooperative associations are immune from the conspiracy provisions of section

Page 452

1 of the Sherman Act; 6 but Sunkist may still be found liable under section 2 of the Sherman Act for wrongful use of monopoly power and attempt to monopolize. 7 The question presented under the first specification in error is whether the evidence was sufficient for the jury to find that Sunkist wrongfully used monopoly power or attempted to monopolize trade in product oranges.

In ruling on a motion for a directed verdict the trial court is required to view the evidence in the light most favorable to the party against whom the motion is made. 'On appeal, likewise, the appellate court must consider the evidence in its strongest light in favor of the party against whom the motion * * * was made, and must give him the advantage of every fair and reasonable intendment that the evidence can justify'. 5 Moore's Federal Practice 2316 (2d ed. 1951.) This is true 'even though contrary inferences might reasonably be drawn'. Continental Ore Co. v. Union Carbide, 1962, 370 U.S. 690, 696, 82 S.Ct. 1404, 1409, 8 L.Ed.2d 777.

Sunkist controlled approximately 70% of all oranges produced in Southern California and Arizona, and approximately 67% of the oranges diverted to product use. Product or 'excess' oranges are those not sold as fresh fruit. They are used to make various orange products and are the only kind used by plaintiff in its business. On a national basis Sunkist controlled 6 to 7% of the total production.

Other small cooperatives controlled for their own use approximately 18% of the oranges grown in Southern California and Arizona. The balance of the oranges, approximately 12%, represented those grown by independent growers and available to independent manufacturers.

Additional facts set forth in the order granting defendant's motion for directed verdict include the following: 8

(1) Prior to the development of the citrus juice industry there was no market for fruit not required by the fresh fruit market, and the remainder of the fruit, then called 'culls', was destroyed by the packing houses. With the development of the citrus juice industry, the demand for culls, now designated 'excess fruit', could be sold to processors to convert into juice and other byproducts.

(2) At the beginning of its processing activity plaintiff had d no difficulty in obtaining at a reasonable price sufficient fruit for its needs. When it was demonstrated that conversion of excess fruit into juice and other citrus by-products was profitable, Sunkist decided to process its own fruit and for that purpose organized Exchange Orange Products Company and Exchange Lemon Products Company.

(3) Fruit not so processed was sold to independent processors, including plaintiff. Sunkist had excess fruit available for sale to independent processors only when it was unable to process its own fruit. For several years Sunkist sold its excess fruit to independent processors by a bid system. All independent processors, including plaintiff, were invited to present bids for fruit to be sold.

(4) As time went on and as Exchange Orange and Exchange Lemon developed processing capabilities, more and more excess fruit from Sunkist packing houses was channeled to Exchange Orange and Exchange Lemon until, at the present time, practically no Sunkist fruit is sold to independent processors.

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(5) Plaintiff attempted to obtain from other mutual citrus associations its requirement of fruit to process, only to find that such associations had entered into individual contracts with other processors; hence plaintiff was able to obtain very little fruit supply from mutual associations.

(6) Approximately 12,000 citrus fruit growers annually signed contracts with Sunkist agreeing to sell fruit through the Sunkist organization. The contracts provided that if a grower did not abide by his contract, sanctions might be imposed. Occasionally a grower failed to sell his fruit to Sunkist, and sanctions were imposed by the Sunkist organization.

(7) Sunkist trade-mark or trade name was a valuable asset, and defendant had spent large sums in establishing its trade-mark or trade name.

(8) Sunkist employees observed operations of member growers to make certain that the growers handled their crops through the Sunkist organization and if it was discovered that a member grower sold fruit contrary to his contract, a report was made to Sunkist and, in certain instances, penalties were imposed upon the violating grower.

(9) The Department of Agriculture, pursuant to the school lunch program, requested bids for single strength orange juice. One year Sunkist bid but did not receive the contract and another year, Sunkist bid and was awarded the contract.

(10) Sunkist made a large profit from sale of citrus fruit.

(11) The great majority of citrus grown in Southern California and Arizona goes into the fresh fruit market. The greater amount of oranges grown in Florida goes into the citrus products market. Fresh fruit from California, Arizona and Florida compete on the eastern and foreign markets.

(12) It was possible for processors in Florida to make single strength orange juice, can and ship it to California, and sell it at the same price as (or at a price lower than) the Southern California-Arizona produced juice. Florida processors of single strength orange juice could assimilate transportation costs from Florida to California and sell their product in competition with single strength orange juice made within the Southern California-Arizona area. This was possible because of the lower price for which Florida fruit could be purchased.

(13) The price paid for Florida oranges was the dominant factor in determining the price for which single strength orange juice could be sold to the ultimate consumer.

(14) There is also competition between single strength orange juice and orange juice concentrates. Neither of the parties is a producer of concentrated or frozen juice.

The alleged violations of the Sherman Act arise out of 'Sunkist's dominant control of oranges grown in Arizona and California together with its vertical integration and dual distribution with respect to oranges designated for product use * * *'. More particularly, plaintiff complains that it was unable to purchase oranges for product use from Sunkist at a price that would enable it to compete with canned juice shipped in from Florida. 9

The District Court's granting of the directed verdict was premised upon the conclusion that the 'relevant market' was national rather than limited to California-Arizona, and that in light of this plaintiff had not shown evidence of an illegal monopoly. 10

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The cases uniformly hold that 'a party has monopoly power if it has, over 'any part of the trade or commerce among the several states', a power of controlling prices or unreasonably restricting competition'. United States v. E.I. du Pont de Nemours & Co., 1956, 351 U.S. 377, 389, 76 S.Ct. 994, 1004, 100 L.Ed. 1264. In determining whether a party has monopoly power it is first essential to define the 'relevant market'.

This court has held that determination of the relevant market, 'both as respects products and as concerns geographical area' is a 'necessary step precedent to determining whether within that market there was a probability' of violation of section 7 of the Clayton Act. Crown Zellerbach Corporation v. F.T.C., 9 Cir., 1961, 296 F.2d 800, 804, (cert. denied (1962)) 370 U.S. 937, 82 S.Ct. 1581, 8 L.Ed.2d 807. While Crown Zellerbach involved a violation of the Clayton Act with respect to corporate...

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