Blades v. Monsanto Co.

• Decision Date: 07 March 2005
• Docket Number: No. 03-3993.,03-3993.
• Parties: Randy BLADES, Collin Cain, Fredrick L. Samples, Mark A. Jent, Roger Rivest, on behalf of themselves and all others similarly situated, Plaintiffs, Bob McIntosh, C-K Farms, Plaintiffs-Appellants, v. MONSANTO COMPANY, Pioneer Hi-Bred International, Inc., Syngenta Seeds, Inc., Defendants-Appellees, Syngenta Crop Protection, Inc., Defendant, Aventis Crop Science Usa Holding, Inc., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

400 F.3d 562

Randy BLADES, Collin Cain, Fredrick L. Samples, Mark A. Jent, Roger Rivest, on behalf of themselves and all others similarly situated, Plaintiffs, Bob McIntosh, C-K Farms, Plaintiffs-Appellants, v. MONSANTO COMPANY, Pioneer Hi-Bred International, Inc., Syngenta Seeds, Inc., Defendants-Appellees, Syngenta Crop Protection, Inc., Defendant, Aventis Crop Science Usa Holding, Inc., Defendant-Appellee.

No. 03-3993.

United States Court of Appeals, Eighth Circuit.

Submitted: September 13, 2004.

Filed: March 7, 2005.

COPYRIGHT MATERIAL OMITTED

Michael D. Hausfeld, argued, Washington, D.C. (Richard S. Lewis and Richard A. Koffman, Washington, D.C., Joseph F. Devereux, Jr. and Richard P. Sher, St. Louis, MO, on the brief), for Appellant.

John H. Beisner, argued, Washington, D.C. (Lisa A. Pake, Haar and Woods, LLP, St. Louis, MO, Timothy G. Barber, Bradley C. Morris, K. Matthew Miller, Womble, Carlyle, Sandridge & Rice, P.L.L.C., Charlotte, NC, on the brief for Aventis CropScience USA Holding, Inc.; Stephen H. Rovak, Stephen J. O'Brien, Sonnenschein, Nath & Rosenthal LLP, St. Louis, MO, Philip D. Bartz, Cameron Cohick, Donna M. Donlon, Stephen M. Lastelic, McKenna Long & Aldridge LLP, Washington, D.C., Phillip A. Bradley, McKenna Long & Aldridge LLP, Atlanta, GA, on the brief Monsanto Co.; Andrew Rothschild, Duane Coleman, C. David Goerisch, Lewis, Rice & Fingersh, L.C., St. Louis, MO, Jame P. Denvir, III, Scott E. Gant, Paul Kunz, Boies, Schiller & Flexner LLP, Washington, D.C., on the brief for Pioneer Hi-Bred Int'l, Inc.; Thomas B. Weaver, Glenn E. Davis, Daniel C. Nelson, Armstrong Teasdale LLP, St. Louis, MO, Vincent R. FitzPatrick, Jr., Robert A. Milne, Michael J. Gallagher, Jack E. Pace, III, White & Case LLP, New York, N.Y., on the brief for Syngenta Seeds, Inc.), for Appellees.

Before MORRIS SHEPPARD ARNOLD, BRIGHT, and FAGG, Circuit Judges.

BRIGHT, Circuit Judge.

Plaintiffs/Appellants brought this case as a putative class action under sections four and fifteen of the Clayton Act, 15 U.S.C. §§ 15 & 16, for treble the damages caused by an alleged price-fixing conspiracy in violation of section one of the Sherman Act, 15 U.S.C. § 1. Appellants appeal from the district court's¹ denial of their motion to certify two classes. We affirm.

I. Appellants' Allegations and Procedural History

Appellants allege as follows: Monsanto wished to extract the monopoly profits it would have earned from certain genes it had patented, which could be used to develop genetically modified corn and soybean seeds (GM seeds).² But Monsanto had surrendered its monopoly over the genes by giving broad licenses to Pioneer and Syngenta. Monsanto therefore secured the agreement of Pioneer and Syngenta to inflate the prices of their own GM corn and soybean seeds, to support Monsanto's technology fees (for inclusion of the patented genes in seeds Monsanto sold) rather than to undercut the fees through normal price competition. Monsanto propped up its technology fee also by securing the agreement of Appellee Aventis to limit its production of LibertyLink soybean seeds, which competed with the GM soybean seed sold by Monsanto, Pioneer, and Syngenta. The parties to the conspiracy performed their obligations under their illegal agreement to an extent sufficient to injure all members of the proposed classes.

Appellants moved for certification of two classes. The first class consisted of farmers (other than as distributors) who, from 1996 to present, purchased Roundup Ready soybean seeds or the right to grow the seeds directly from one of the defendants. The second class consisted of farmers (other than as distributors) who, from 1996 to present, purchased Yieldgard corn seeds or the right to grow the seeds directly from one of the defendants. Appellants sought certification of these classes under Fed. R.Civ.P. 23(b)(3), which provides for class certification if "questions of law or fact common to the members of the class predominate over any questions affecting only individual members" and "a class action is superior to other available methods for the fair and efficient adjudication of the controversy."

To recover damages under section four of the Clayton Act, plaintiffs must prove defendants violated the antitrust laws and that plaintiffs suffered some resulting injury, and plaintiffs must estimate the measure of damages. Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1490 (8th Cir.1992). Appellants allege a price-fixing conspiracy in violation of section one of the Sherman Act. For a class to be certified, plaintiffs need to demonstrate that common issues prevail as to the existence of a conspiracy and the fact of injury. See In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 135-40 (2d Cir.2001). The district court found that plaintiffs satisfied the Rule 23(a) prerequisites to a class action, but that common questions do not predominate over individual questions. The district court held that neither the existence of a conspiracy to fix prices, nor the existence of some resultant harm constitute questions common to the class.

II. Standard of Review & Class Certification Law

A district court's denial of class certification is reviewed for abuse of discretion. Chaffin v. Rheem Mfg. Co., 904 F.2d 1269, 1275 (8th Cir.1990). The district court's rulings on issues of law are reviewed de novo, and the court abuses its discretion if it commits an error of law. Emery v. Hunt, 272 F.3d 1042, 1046 (8th Cir.2001). The district court also abuses its discretion if its conclusions rest on clearly erroneous factual determinations. Forest Park II v. Hadley, 336 F.3d 724, 731 (8th Cir.2003).

The requirement of Rule 23(b)(3) that common questions predominate over individual questions "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). The nature of the evidence that will suffice to resolve a question determines whether the question is common or individual. See In re Visa, 280 F.3d at 136-40. If, to make a prima facie showing on a given question, the members of a proposed class will need to present evidence that varies from member to member, then it is an individual question. If the same evidence will suffice for each member to make a prima facie showing, then it becomes a common question. See id.

To determine whether common questions predominate, a court must conduct a limited preliminary inquiry, looking behind the pleadings. See General Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 160, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). In conducting this preliminary inquiry, however, the court must look only so far as to determine whether, given the factual setting of the case, if the plaintiffs general allegations are true, common evidence could suffice to make out a prima facie case for the class. Cf. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). See also In re Visa, 280 F.3d at 134-35. When the decision on class certification comes before full merits discovery has been completed, the court must necessarily conduct this preliminary inquiry prospectively. A decision to certify or not to certify a class may therefore require revisiting upon completion of full discovery.

The preliminary inquiry at the class certification stage may require the court to resolve disputes going to the factual setting of the case, and such disputes may overlap the merits of the case. See Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676-77 (7th Cir.2001). See also Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 166-69 (3d Cir.2001). Nonetheless, such disputes may be resolved only insofar as resolution is necessary to determine the nature of the evidence that would be sufficient, if the plaintiff's general allegations were true, to make out a prima facie case for the class. The closer any dispute at the class certification stage comes to the heart of the claim, the more cautious the court should be in ensuring that it must be resolved in order to determine the nature of the evidence the plaintiff would require. Cf. Eisen, 417 U.S. at 177-78, 94 S.Ct. 2140.

III. Factual Background

The parties do not dispute the essentials of the factual setting of this case.³ In the early 1990's, Appellee Monsanto was a producer of genetic research pertinent to the seed industry but was not itself a major producer of seeds. Monsanto had developed a genetic modification for soybean seeds which made the plants resistant to Roundup, a widely-used herbicide, and a genetic modification for corn seeds which made them resistant to the European Corn Borer, a pest. While Monsanto enjoyed a lawful monopoly over these genes, by virtue of its patents, it was unable to commercialize the genes itself. In 1992 and 1993, Monsanto granted broad licenses to Appellees Pioneer and Syngenta, major seed producers and distributors, to develop commercial seeds using these patented genes, thus surrendering its monopoly over the genes. The licenses did not restrict in any material way Pioneer's or Syngenta's development, marketing, or pricing of seeds containing the genes. For the soybean licenses, Monsanto received full up-front payment from both Pioneer and Syngenta. For the corn licenses, Monsanto received full up-front payment from Pioneer. Syngenta's corn license required payment of royalties which floated with whatever premium Syngenta might charge for its GM corn seed sales as compared to its nonGM corn seed sales.

After thus surrendering its patent-derived monopoly over the seed genes to two major seed producers, Monsanto in the mid-1990's became a major seed producer in its own right. Monsanto also began licensing many other independent seed companies to produce and sell seeds using the patented genes. These licenses, and Monsanto's own sales of GM seeds, required payment of specified ...