389 U.S. 384 (1967), 66, Case-Swayne Co., Inc. v. Sunkist Growers, Inc.

Docket Nº:No. 66
Citation:389 U.S. 384, 88 S.Ct. 528, 19 L.Ed.2d 621
Party Name:Case-Swayne Co., Inc. v. Sunkist Growers, Inc.
Case Date:December 18, 1967
Court:United States Supreme Court
 
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Page 384

389 U.S. 384 (1967)

88 S.Ct. 528, 19 L.Ed.2d 621

Case-Swayne Co., Inc.

v.

Sunkist Growers, Inc.

No. 66

United States Supreme Court

Dec. 18, 1967

Argued October 18-19, 1967

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

Petitioner brought a treble damage Clayton Act suit for alleged violations by respondent of §§ 1 and 2 of the Sherman Act. The District Court granted a directed verdict for respondent. The Court of Appeals reversed as to the § 2 complaint, but affirmed the dismissal of the § 1 charge, holding that Sunkist qualified as a cooperative organization under the Capper-Volstead Act, and thus could not be held for an intra-organizational conspiracy to restrain trade. Section 1 of that Act privileges collective activity in processing and marketing for "persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers. . . ." Sunkist, which controls approximately 70% of the oranges grown in California and Arizona, and approximately 67% of the "product" oranges (used for processing), is composed of about 12,000 citrus growers, who are organized into 160 local associations, of which 80% are cooperative associations in which all members are growers. However, about 15% of the local associations, called "agency associations," are private corporations or partnerships owning and operating packing houses for profit. They have marketing contracts with growers to handle fruit for cost plus a fixed fee. All the local associations participate in the control and policy making of Sunkist.

Held: Respondent is not entitled to assert the Capper-Volstead Act as a defense to the suit based on § 1 of the Sherman Act, as it was not the intention of Congress to allow an organization with such nonproducer interests to avail itself of the exemption provided by that Act. Pp. 390-396.

369 F.2d 449, reversed and remanded.

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MARSHALL, J., lead opinion

MR. JUSTICE MARSHALL delivered the opinion of the Court.

This is a treble damage action under § 4 of the Clayton Act, 38 Stat. 731, 15 U.S.C. § 15, for alleged violations of both § 1 and § 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1, 2. The District Court granted a directed verdict, at the close of plaintiff' case, for the defendant, Sunkist Growers, Inc. The Court of Appeals for the Ninth Circuit reversed as to that portion of the complaint predicated on § 2 of the Sherman Act, holding that sufficient evidence was presented that Sunkist monopolized or attempted to monopolize trade in the relevant market;1 it affirmed a to the dismissal of the Sherman Act § 1 charge, holding that Sunkist qualified as a cooperative organization under the Capper-Volstead Act, 42 Stat. 388, 7 U.S.C. § 291,2 and therefore could

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not be held for any intra-organizational conspiracy to restrain trade. In order to determine the scope of that exemption from the antitrust laws, we granted certiorari. 387 U.S. 903 (1967).

The issue is whether Sunkist is an association of "[p]ersons engaged in the production of agricultural products as . . . fruit growers" within the meaning of the Capper-Volstead Act, notwithstanding that certain of its members are not actually growers. We hold that it is not.

I

The organizational structure of the Sunkist system is as follows. At the base are some 12,000 growers of citrus fruit in Arizona and California. The growers are organized into "local associations," as they are designated in Sunkist's bylaws, numbering approximately 160, each of which operates a packing house for the preparation of the fruit for market. The vast majority of these local associations -- about 80% by number and 82% by volume of fruit marketed in the Sunkist system -- are, it is stipulated, cooperative associations in which all members are fruit growers.3 A few of the local associations

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-- no more than 5% by number and volume of fruit -- are corporate growers whose total volume is sufficient to justify installation of their own packing house facilities.

The remainder of the local associations (also designated as "agency associations") -- about 15% by number handling about 13% of the fruit in the Sunkist system -- are private corporations and partnerships, owning and operating packing houses for profit. Their relationship to the growers whose fruit they handle is defined not by a cooperative agreement, but by a marketing contract, i.e., these packing houses contract with each grower to handle his fruit for cost plus a fixed fee. It is the membership of these agency associations in the Sunkist system that gives rise to the issue presented here.

The local associations, including these private packing houses, are members of "district exchanges," nonprofit membership corporations. The principal functions of the approximately three-score district exchanges are in the marketing of the fresh fruit of their member associations; they negotiate sales, arrange for shipment, and serve as conduits of communication between the local associations and Sunkist. Representatives of the district exchanges select the board of directors of Sunkist.

Sunkist itself, since 1958,4 has two classes of "members": the district exchanges, [88 S.Ct. 531] whose principal membership

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function is to select the board of directors, and the local associations, which vote on all other matters and which have the proprietary ownership of Sunkist's assets. The corporate entity Sunkist Growers, Inc., owns the trade name "Sunkist" under which the fruit of its members is marketed. It has an extensive sales organization; employs marketing and traffic specialists, and performs many other services for its members through, for example, its research facilities.

More particularly, Sunkist owns processing facilities for what is known as "product" fruit, i.e., fruit that for various reasons is not sold in the fresh fruit market, but rather is used for processed fruit products such as canned or concentrated juices.

Sunkist controls approximately 70% of the oranges grown in California and Arizona, and approximately 67% of the product oranges. This control is manifested through various contractual agreements. For example, each grower in the cooperative local associations agrees that he will market all of his fruit through his association. Each grower who contracts with an agency association packing house appoints it as the marketing agent for all of his fruit. That agreement is generally for five shipping seasons, although it may be canceled at any time "by mutual consent" or on written notice by the grower during August of any year in which it is in force. An escape clause permits the grower to sell such fruit as may be "mutually agreed upon" between him and the packing house to others, if he can obtain a price higher, in the judgment of the packing house, than that which the grower would obtain through his agreement with it. Should the grower be so released from his agree ment, he is to pay to the packing house $2.50 per ton of fruit released.

Each of the local associations, including the private packing house agency associations, contracts with its

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district exchange and with Sunkist Growers, Inc., to market all of its fruit -- product and fresh -- in the Sunkist system. Each association, under the Sunkist-District Exchange-Association Agreement, reserves the right to decide to what market it will ship and what price it is willing to receive for its fruit; however, Sunkist may decide to pool product fruit and fruit for export, in which event that fruit is handled solely in Sunkist's discretion. Sunkist also determines "the maximum amount of fresh fruit to be marketed currently," and allocates the "opportunity to ship equitably among Local Associations." Each local association agrees not to release any of its growers from the marketing contract without notifying its district exchange and Sunkist, and must obtain the approval of both if releases total more than 5% of the volume of the particular variety of fruit handled by the association. Further, each district exchange and local association agrees that "[a]ll prices, quotations and allowances shall be issued and distributed solely by Sunkist."

Petitioner Case-Swayne manufactures single-strength orange juice and other blended orange juices. In its complaint, insofar as relevant to the issues here, petitioner charged that the Sunkist system was a conspiracy in restraint of trade in violation of § 1 of the Sherman Act, the effect of which was to limit sharply the supply of product citrus fruit available to petitioner during the period covered by the complaint.

[88 S.Ct. 532] II

Section 1 of the Capper-Volstead Act (see n. 2, supra) privileges collective activity in processing and marketing on the part of "[p]ersons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers. . . ." 42 Stat. 388, 7 U.S.C. § 291. Despite that specific language, Sunkist

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argues that Congress, in enacting the measure, intended to give sanction to any organizational form by which the benefits of collective marketing inured to the grower, and that, because the agency packing houses, by charging cost plus a fixed fee5 for their services, do not participate directly in the gain or loss involved in the collective marketing of fruit through the Sunkist system, they are, in the Sunkist system, a privileged form of organization for the growers who contract with them.6 We think that argument misconceives the requirements of the Act and runs counter to the relevant legislative history.

Congress enacted § 6 of the Clayton Act in response to the urgings of those who felt the Sherman Act's...

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