Supermarket of Marlinton, Inc. v. Meadow Gold Dairies, Inc.

Decision Date01 December 1995
Docket NumberNo. 94-2602,O-R,94-2602
Citation71 F.3d 119
Parties, 1995-2 Trade Cases P 71,191, 43 Fed. R. Evid. Serv. 492 SUPERMARKET OF MARLINTON, INCORPORATED, Plaintiff-Appellant, v. MEADOW GOLD DAIRIES, INCORPORATED; Borden, Incorporated; Valley Rich Dairy; Flav-ich, Incorporated; The Valley of Virginia Cooperative Milk Producers Association, Defendants-Appellees. State of Maryland; State of Alaska; State of Arizona; State of Arkansas; State of Connecticut; State of Delaware; State of Florida; State of Hawaii; State of Idaho; State of Indiana; State of Kansas; State of Kentucky; State of Louisiana; State of Massachusetts; State of Michigan; State of Mississippi; State of Missouri; State of Nevada; State of New Hampshire; State of New Jersey; State of New Mexico; State of North Carolina; State of Ohio; State of Oklahoma; State of Pennsylvania; State of Rhode Island; State of South Dakota; State of Virginia; State of West Virginia; the District of Columbia, Amici Curiae.
CourtU.S. Court of Appeals — Fourth Circuit

ARGUED: Charles Leonard Egan, Fort & Schlefer, L.L.P., Washington, DC, for Appellant. Michael Francis Urbanski, Woods, Rogers & Hazlegrove, Roanoke, Virginia; Michael A. Doyle, Alston & Bird, Atlanta, Georgia, for Appellees. ON BRIEF: William C. Buckhold, Fort & Schlefer, L.L.P., Washington, DC, for Appellant. Francis H. Casola, Woods, Rogers & Hazlegrove, Roanoke, Virginia, for Appellees Valley Rich Dairy and Milk Producers Assoc.; Teresa D. Thebaut, Julia O'Meara Lynch, Alston & Bird, Atlanta, Georgia, for Appellees Meadow Gold and Borden; John McLaughlin, Goldberg & Simpson, P.S.C., Louisville, Kentucky, for Appellee Flav-O-Rich. J. Joseph Curran, Jr., Attorney General of Maryland, Ellen S. Cooper, Assistant Attorney General/Chief, Antitrust Division, Katharine M. Ebersberger, Assistant Attorney General, Baltimore, Maryland, for Amici Curiae.

Before MICHAEL and MOTZ, Circuit Judges, and CHAPMAN, Senior Circuit Judge.

Reversed and remanded by published opinion. Judge MOTZ wrote the opinion, in which Judge MICHAEL and Senior Judge CHAPMAN joined.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

In this antitrust action a group of retail food stores alleged that certain large dairies conspired to fix milk prices. The district court granted summary judgment to the defendant dairies, finding this action to be barred by the applicable statute of limitations. In doing so, the court rejected the food stores' contention that the statute of limitations had been tolled by the doctrine of fraudulent concealment. Because we conclude that the district court used an improper standard to determine that the fraudulent concealment doctrine did not apply, we reverse and remand for further proceedings.

I.

Supermarket of Marlinton, Inc. filed this action in 1993, against Valley Rich Dairy, Flav-O-Rich, Inc., Meadow Gold Dairies, Inc., Borden, Inc., and Valley of Virginia Co-operative Milk Producers Association, alleging that the dairies had conspired to fix the price of milk sold in the wholesale market in violation of the Sherman Act, 15 U.S.C. Sec. 1. Marlinton's complaint followed a 1992 investigation by the United States Department of Justice into the milk industry, which had resulted in Valley Rich, Meadow Gold, and Borden pleading guilty to charges that they had rigged school milk bids. This investigation also led to the indictment and subsequent trial of three Meadow Gold officials. The three were individually charged with rigging school milk bids and with conspiring to fix the price of milk sold to commercial and institutional customers in western Virginia and southern West Virginia.

The government based its case against the Meadow Gold officials primarily on the testimony of Paul French, a former general manager of Valley Rich. French testified, under a grant of immunity, about meetings in which he and the Meadow Gold officials had conspired to fix milk prices. French stated that all meetings were in person, prearranged, and conducted away from the office in parking lots, restaurants, or private automobiles. Aware that price-fixing violated the law, French related that he would not discuss the subject over the telephone or if non-conspirators were present. French further testified that he would fill out his expense accounts in such a manner that no one, including his co-workers at Valley Rich, would know of his meetings with rival dairy officials. Despite this evidence, the trial of the Meadow Gold officials ended in a hung jury and the United States dropped the charges. French's testimony, however, became the basis for Marlinton's present action against the dairies.

In its complaint Marlinton alleged that the dairies' price-fixing conspiracy continued from 1984 until 1987. Marlinton acknowledges that on its face the complaint, filed in 1993, appears to be time-barred by the applicable four-year statute of limitations, Sec. 4B of the Clayton Act (15 U.S.C. Sec. 15b), but asserts that the doctrine of fraudulent concealment tolls the limitations period. The doctrine applies, Marlinton contends, because the dairies fraudulently concealed their price-fixing conspiracy, preventing Marlinton from discovering its claim until the 1992 federal criminal action provided Marlinton notice of the claim.

After the parties conducted discovery as to whether Marlinton had standing to bring this action and whether the fraudulent concealment doctrine tolled limitations, the dairies moved for summary judgment. The district court granted the dairies' motion on the ground that the statute of limitations barred Marlinton's claim. The court ruled that Marlinton could not rely on the fraudulent concealment tolling doctrine because Marlinton had not provided evidence that the dairies engaged in fraudulent concealment "separate and apart" from the antitrust conspiracy itself. Supermarket of Marlinton, Inc. v. Meadow Gold Dairies, Inc., 874 F.Supp. 721, 729 (W.D.Va.1994). French's testimony, the court ruled, was inadmissible hearsay and so could not be considered in determining whether the dairies had engaged in fraudulent concealment. Id. at 725-29. Because the court granted summary judgment based on the dairies' statute of limitations defense, it never addressed Marlinton's standing.

On appeal, Marlinton raises two related issues. First, it contends that the district court employed the wrong standard to determine that the fraudulent concealment doctrine did not toll the limitations period. Second, Marlinton maintains that because the court used this erroneous standard, it then incorrectly excluded French's testimony as inadmissible hearsay. In opposition, the dairies not only assert that the district court properly granted them summary judgment on the grounds set forth in its opinion, but claim they are also entitled to summary judgment because Marlinton failed to exercise due diligence and never established its standing to bring this action.

II.

The purpose of the fraudulent concealment tolling doctrine is to prevent a defendant from "concealing a fraud, or ... committing a fraud in a manner that it concealed itself until" the defendant "could plead the statute of limitations to protect it." Bailey v. Glover, 88 U.S. (21 Wall.) 342, 349, 22 L.Ed. 636 (1874). Thus, pursuant to this doctrine, "when the fraud has been concealed or is of such a character as to conceal itself," and the plaintiff is not negligent or guilty of laches, the limitations period does not begin to run until the plaintiff discovers the fraud. Id. Although Bailey was a fraud action, the Supreme Court subsequently stated that the fraudulent concealment tolling doctrine is to be "read into every federal statute of limitation." Holmberg v. Armbrecht, 327 U.S. 392, 397, 66 S.Ct. 582, 585, 90 L.Ed. 743 (1946). To invoke the doctrine in this circuit, a plaintiff in an antitrust action must satisfy each element of a three part test. Specifically, a plaintiff must demonstrate: (1) the party pleading the statute of limitations fraudulently concealed facts that are the basis of the plaintiff's claim, and (2) the plaintiff failed to discover those facts within the statutory period, despite (3) the exercise of due diligence. Weinberger v. Retail Credit Co., 498 F.2d 552, 555 (4th Cir.1974).

In recent years, federal courts have developed different standards for determining whether antitrust plaintiffs have satisfied the first element of this test. These are denominated the "self-concealing" standard, the "separate and apart" standard, and the intermediate, "affirmative acts" standard. Pursuant to the self-concealing standard, a plaintiff satisfies the first element merely by proving that a self-concealing antitrust violation has occurred. See New York v. Hendrickson Bros., Inc., 840 F.2d 1065, 1084 (2d Cir.), cert. denied, 488 U.S. 848, 109 S.Ct. 128, 102 L.Ed.2d 101 (1988). At the opposite end of the spectrum is the separate and apart standard in which a plaintiff is required to provide evidence, separate and apart from the acts of concealment involved in the defendants' antitrust violation, that the defendants affirmatively acted to conceal the plaintiff's claim. See Colorado v. Western Paving Construction Co., 630 F.Supp. 206, 210 (D.Colo.1986), aff'd en banc by an equally divided court, 841 F.2d 1025 (10th Cir.), cert. denied, 488 U.S. 870, 109 S.Ct. 179, 102 L.Ed.2d 148 (1988). Finally, under the intermediate standard, a plaintiff must prove that the defendants affirmatively acted to conceal their antitrust violations, but the plaintiff's proof may include acts of concealment involved in the antitrust violation itself. See Texas v. Allan Construction Co., 851 F.2d 1526, 1532 (5th Cir.1988).

Our most recent antitrust precedent involving the application of the fraudulent concealment doctrine is Pocahontas Supreme Coal Co. v. Bethlehem Steel Corp., 828 F.2d 211 (4th Cir.1987). There we did not expressly adopt any of the...

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