687 F.2d 1173 (8th Cir. 1982), 81-1235, Alexander v. National Farmers Organization

Docket Nº:81-1235 to 81-1237.
Citation:687 F.2d 1173
Party Name:Robert B. ALEXANDER, et al., v. NATIONAL FARMERS ORGANIZATION, Appellant, v. ASSOCIATED MILK PRODUCERS, INC., Mid-America Dairymen, Associated Reserve Standby Pool Cooperative, Appellees. Wesley Johnson, Gary Hanman, Harold S. Nelson and David Parr, Central Milk Producers Cooperative, Appellee. Robert B. ALEXANDER, et al., v. NATIONAL FARMERS ORGAN
Case Date:August 31, 1982
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Page 1173

687 F.2d 1173 (8th Cir. 1982)

Robert B. ALEXANDER, et al.,

v.

NATIONAL FARMERS ORGANIZATION, Appellant,

v.

ASSOCIATED MILK PRODUCERS, INC., Mid-America Dairymen,

Associated Reserve Standby Pool Cooperative, Appellees.

Wesley Johnson, Gary Hanman, Harold S. Nelson and David

Parr, Central Milk Producers Cooperative, Appellee.

Robert B. ALEXANDER, et al.,

v.

NATIONAL FARMERS ORGANIZATION, Appellee,

v.

ASSOCIATED MILK PRODUCERS, INC., Appellant.

Mid-America Dairymen; Associated Reserve Standby Pool

Cooperative; Wesley Johnson; Gary Hanman; Harold

S. Nelson; David Parr; Central Milk

Producers Cooperative.

Robert B. ALEXANDER, et al.,

v.

NATIONAL FARMERS ORGANIZATION, Appellee,

v.

ASSOCIATED MILK PRODUCERS, INC., Mid-America Dairymen, Inc.,

Appellant.

Associated Reserve Standby Pool Cooperative; Wesley Johnson;

Gary Hanman; Harold S. Nelson; David Parr; Central

Milk Producers Cooperative.

Nos. 81-1235 to 81-1237.

United States Court of Appeals, Eighth Circuit

August 31, 1982

Submitted Nov. 11, 1981.

Rehearing and Rehearing En Banc Denied Nov. 10, 1982.

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David A. Donohoe, Paul B. Hewitt, Robert G. Berger, Akin, Gump, Strauss, Hauer & Feld, Washington, D. C., for appellant Nat. Farmers Organization; Richard A. Green, Marvin Beshore, Washington, D. C., of counsel.

Donald M. Barnes, Michael M. Eaton, Dennis C. Cuneo, Washington, D. C., Colvin A. Peterson, Jr., Kansas City, Mo., for appellee Associated Milk Producers; Arent, Fox, Kintner, Plotkin & Kahn, Washington, D. C., Watson, Ess, Marshall & Enggas, Kansas City, Mo., of counsel.

Harry P. Thomson, Jr., George E. Leonard, Russell S. Jones, Jr., Shughart, Thomson & Kilroy, P.C., and John C. Gage, Gage & Tucker, Kansas City, Mo., for Mid-America Dairymen, Inc.

Sydney Berde, Richard M. Hagstrom, Sydney Berde, P.A., St. Paul, Minn., for appellee Central Milk Producers Co-op.

William A. Carey, St. John Barrett, Mary Cheryl Matheis, Barnett, Alagia & Carey, Washington, D. C., for appellee Associated Reserve Standby Pool Co-op., Inc.

Before HEANEY and MCMILLIAN, Circuit Judges, and BENSON, [*] Chief Judge.

HEANEY, Circuit Judge.

This case involves reciprocal antitrust actions arising out of the often fierce competition in the Midwest milk industry during the late 1960s and early 1970s. The actions were tried in three phases, generating an extensive record more than 15,000 pages in length. See In Re Midwest Milk Monopolization Litigation, 510 F.Supp. 381 (W.D.Mo.1981) (hereinafter Midwest Milk ). The district court 1 found that none of the parties presented sufficient evidence to meet their respective burdens of proof and, therefore, denied relief on all substantive claims.

We affirm the district court's conclusion that National Farmers Organization (NFO) has not violated the antitrust laws. NFO's dairy organizing and marketing efforts fall within the Capper-Volstead exemption which permits farmers to band together for the purpose of collectively marketing their products.

With respect to NFO's claims against Mid-America Dairymen, Inc. (Mid-Am), Associated Milk Producers, Inc. (AMPI), Central Milk Producers Cooperative (CMPC) and Associated Reserve Standby Pool Cooperative (ARSPC), we affirm in part and reverse in part. Mid-Am, AMPI and CMPC did conspire to monopolize milk and eliminate competition through the use of predatory, anticompetitive and unlawful tactics. Such conduct falls outside the Capper-Volstead exemption and violates Sections 1 and 2 of the Sherman Act. The contrary conclusion below is reversed and the case is remanded for a determination of the amount of damages NFO may recover. We affirm the dismissal of NFO's claim against ARSPC because the evidence does not establish that this entity participated in the unlawful conspiracy.

I.

Factual Background and Governing Law.

The structure of supply and pricing in the Midwest milk industry may be summarized as follows. Minnesota, Wisconsin and part of Southwest Missouri are the principal areas

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of surplus production, accounting for approximately twenty-five percent of the nation's total milk production. These areas supply milk to the midwest region and to regional markets in the south, southwest and southeast. Milk production is highest in the spring and early summer, while demand for fluid milk products is usually highest in the fall. Thus, some reserve capacity is generally necessary to balance fluctuations between supply and demand.

Grade A milk is that milk which is approved for sale as fluid milk for human consumption (Class I products) and is produced under stricter sanitary conditions than Grade B milk, which may be used only for manufactured products such as cheese and butter (Class II products). Thus, only Grade A may be used for Class I products, while both Grades A and B may be used for Class II products. The USDA regulates the minimum price paid for Grade A milk, which is based upon a "blend price" formula that accounts for the proportion of such milk allocated to Class I and Class II uses in any given market order. 2 Class I uses command a higher price to compensate producers for the added cost of producing milk for such uses and to ensure an adequate supply of wholesome fluid milk. The Class I price is not the same in each regulated local market, however. The minimum price for such milk generally increases from north to south, in part to reflect the transportation cost of shipping from the surplus areas of Minnesota and Wisconsin to the more distant markets.

Individual dairy farmers have too little market power to affect the price paid for their milk. Midwest Milk, supra, 510 F.Supp. at 443. By representing numerous farmers, however, dairy cooperatives may achieve higher prices for their members (called a "premium" when it exceeds the minimum federal order price) and this, of course, is a major purpose of such co-ops. It is the competition between the NFO and certain of the large midwest co-ops which forms the basis of this action.

NFO was formed in 1955 as a nonprofit corporation to engage in protest, lobbying and organizing activities on behalf of farmers. Since 1957, it has also engaged in collective bargaining on behalf of farmers, the principal aim of which is to improve farm income by raising the commodity prices paid to farmers. In the 1960s, NFO pursued a series of programs aimed specifically at the dairy industry-including efforts to establish a common marketing agency, to bargain collectively with established dairy co-ops and, finally, to directly market dairy products. These programs generally were not supported by the large, established dairy cooperatives. Particularly from 1969 onward (when NFO commenced its direct marketing efforts), NFO and the established co-ops became vigorous competitors in the marketing of raw Grade A milk produced in the midwest.

The late 1960s were also marked by a massive consolidation of many midwestern co-ops into a few, larger cooperatives. Mid-Am was formed in 1968, ultimately combining what earlier had been more than sixty independent co-ops and dairies from across the midwest. 3 AMPI was formed in 1969 and is comprised of more than seventy such entities. CMPC is a federation of co-ops, including AMPI, which supplies milk solely to the Chicago market. ARSPC is also a cooperative federation, including Mid-Am and AMPI as members, engaged in standby pooling operations with its members and with certain proprietary dairies.

The pattern of consolidation and use of certain marketing practices led the Justice

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Department to sue both Mid-Am and AMPI for antitrust violations, matters which were settled by consent decrees. 4 They are not significant here except insofar as such decrees may affect any claim by NFO for injunctive relief. 5

The present case is a private antitrust action. It began in 1971 when Mid-Am filed several claims against NFO, of which essentially two remain on appeal: that NFO violated Section 1 of the Sherman Act and Section 4 of the Clayton Act by (1) engaging in illegal price-fixing with respect to marketing of milk, and (2) promoting a group boycott of Mid-Am by enlisting Mid-Am members to breach their contracts and refuse to deal with Mid-Am. NFO counterclaimed against Mid-Am, AMPI, CMPC and ARSPC, alleging unlawful monopolization, attempted monopolization and conspiracy to monopolize milk marketing and to unlawfully eliminate NFO as a competitor. AMPI then counterclaimed against NFO, alleging essentially the same price-fixing claims asserted by Mid-Am and alleging violations of the Agricultural Fair Practices Act as well as an illegal conspiracy to "destroy" AMPI and to monopolize milk.

The allegations of the parties include assertions of actual and attempted monopolization under Section 2 of the Sherman Act, conspiracies to monopolize under Section 2, conspiracies to eliminate competition through unlawful means under Sections 1 and 2 and certain per se violations under Section 1. The parties are not often clear on which factual allegations are linked to which of their legal theories, and the nature of legal liability is further complicated by the Capper-Volstead Act, 7 U.S.C. § 291, which immunizes certain activities of farm cooperatives. Before turning to the specific claims of each party, a summary of the applicable law will be helpful.

A Section 2 claim of actual monopolization generally requires, inter alia, a showing of monopoly power in the relevant...

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