LaSalvia v. United Dairymen of Arizona

Decision Date21 November 1986
Docket NumberNo. 85-1592,85-1592
Citation804 F.2d 1113
Parties1986-2 Trade Cases 67,355, 6 Fed.R.Serv.3d 639 Jerome LaSALVIA and Peggy LaSalvia, husband and wife, Plaintiffs-Appellants, v. UNITED DAIRYMEN OF ARIZONA, an Arizona marketing association; Robert M. Girard; and Leonard F. Cheatham, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Rex Lee, Robert J. Gibson, Phoenix, Ariz., for plaintiffs-appellants.

Sydney Berde, Berde & Hagstrom, P.A., St. Paul, Minn., for defendants-appellees.

Appeal from the United States District Court for the District of Arizona.

Before GOODWIN, HUG and REINHARDT, Circuit Judges.

GOODWIN, Circuit Judge:

Jerome and Peggy LaSalvia, operators of an independent dairy farm in Laveen, Arizona, appeal the dismissal of their antitrust claims against defendants United Dairymen of Arizona ("UDA"), a dairy farmers' cooperative, Robert Girard, its general manager, and Leonard Cheatham, its president until 1983. Both the LaSalvias and UDA produce milk within the U.S. Department of Agriculture's Central Arizona Milk Marketing Area ("CAMMA"). The district court excluded evidence of several of the LaSalvias' allegations on the grounds that the LaSalvias lacked standing to challenge the conduct alleged. 1 The court then granted summary judgment for the defendants on the grounds that the LaSalvias' remaining claims were time-barred under 15 U.S.C. Sec. 15b (1982). The court also denied a motion for leave to file an amended complaint. We reverse and remand for further proceedings.

The LaSalvias sued UDA for violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1, 2 (1982), section 2 of the Clayton Act as amended by the Robinson-Patman Act, 15 U.S.C. Sec. 13 (1982), and section 3 of the Clayton Act, 15 U.S.C. Sec. 14 (1982). Their complaint alleged that UDA, beginning shortly after its formation in 1959, had monopolized and attempted to monopolize the marketing of Grade A raw milk in the CAMMA, and that UDA had conspired to restrain trade with area raw milk processors ("handlers"). Plaintiffs cite six practices to support their claims:

1. UDA's entering into full supply contracts with handlers and discriminating against handlers unwilling to enter into such contracts (the concerted refusal to deal claim);

2. UDA refused to purchase plaintiffs' excess fluid milk for processing into storable form until after this action was filed (the unilateral refusal to deal claim), and then paid them a price below the Order 131 blend price; 2

3. UDA gave rebates to handlers 4. UDA adopted and enforced a "base plan" system for calculating its members' monthly milk payments that included overly restrictive covenants not to compete; 3

5. UDA entered into reserve and pooling agreements with out-of-state cooperatives, and;

6. UDA acquired control of raw milk transportation in the CAMMA.

The district court granted UDA's motion to exclude from trial evidence of its base plan, its rebates to handlers, and its acquisition of milk transportation facilities on the grounds that the LaSalvias were not proper parties to challenge this conduct. The court also excluded evidence of UDA's marketing agreements with other cooperatives, its purchase of other producer-handler operations, and its refusal to process the milk of other producer-handlers on the grounds that these allegations were not included in the complaint. 4

I. The Exclusion of Evidence Under Rule 16

Section four of the Clayton Act, 15 U.S.C. Sec. 15(a) (1982), affords a private action for damages to "any person who shall be injured in his person or property by reason of anything forbidden in antitrust laws." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977), and its progeny limit section four's scope to those plaintiffs who have sustained the type of injury that the antitrust laws were meant to remedy. In Brunswick, the Court concluded that a competitor seeking to enjoin a potentially procompetitive merger was not a proper party to sue under the antitrust laws. Brunswick thus requires that the conduct alleged be harmful to the competitive process, and not merely to a given competitor. In Blue Shield of Virginia v. McCready, 457 U.S. 465, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982), the Court relied on a remoteness analysis to grant a consumer standing to challenge a conspiracy to exclude psychologists from the health care market. McCready looked to two factors in assessing whether the plaintiff was a proper party to challenge the defendants' conduct. First, it cited Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), which required that the plaintiff be directly injured by the anticompetitive conduct. 457 U.S. at 473-78, 102 S.Ct. at 2545-48. Second, it looked to the Brunswick competitive harm requirement. Id. at 478-79, 102 S.Ct. at 2547-48.

In Associated General Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), the Court set out the factors to be considered in determining whether a plaintiff is the proper party to challenge given conduct. Although a plaintiff must allege harm to himself from the defendant's anticompetitive conduct, this does not, standing alone, bring the plaintiff within section four's reach. Id. at 537, 103 S.Ct. at 908.

We recently summarized the Associated General Contractors' factors as follows:

"[T]he nature of plaintiff's injury, the directness or indirectness of the asserted injury, the potential for duplicative recovery or complex apportionment of damages, the speculative nature of damages asserted, and the existence of more direct victims of the alleged violation are factors a court must consider when making the 'proper party' determination."

Exhibitors' Service, Inc. v. American Multi-Cinema, Inc., 788 F.2d 574, 578 (9th Cir.1986).

The LaSalvias undoubtedly are proper parties to challenge UDA's allegedly anticompetitive conduct. As one of UDA's remaining competitors in the CAMMA, they meet the directness requirement, and they have an incentive vigorously to seek redress for the harms caused by any exploitation by UDA of its market position. Plaintiffs allege that the base plan, the rebates to handlers, and the acquisition of the transport facilities were employed in an unlawful quest for market dominance. The harm alleged is thus precisely the sort that the antitrust laws were intended to remedy.

We reject defendants' argument that because the LaSalvias have not alleged harm from the allegedly monopolistic practices they lack constitutional and antitrust standing. The LaSalvias have alleged unlawful monopolization and attempted monopolization, and are entitled to set forth the practices they believe UDA used in an effort either to obtain monopoly power or to exploit it. Rather than giving rise to liability independently, the allegedly unlawful practices serve an evidentiary function. See Ostrofe v. H.S. Crocker Co., 740 F.2d 739, 743 (9th Cir.1984), cert. dismissed, 469 U.S. 1200, 105 S.Ct. 1155, 84 L.Ed.2d 309 (1985) (evidence of a price-fixing conspiracy admissible as probative of the existence of a second, related conspiracy). Lastly, defendants' theory that their questioned practices are lawful go to the merits of plaintiffs' claim, which are not before this court. 5

The district court, in excluding the evidence of the base plan, the rebates, and the integration of milk transportation facilities, confused the prudential limitations on private antitrust actions with the requirements of damage-in-fact and causation. The court based the exclusion upon the LaSalvias' purported failure to show injury independent of that resulting from the alleged refusals to deal. This concern goes not to the limitation on private antitrust suits, but to a perceived failure of the LaSalvias' proof to show damage from the questioned practices. The district court's exclusion of the evidence of the UDA base plan, its rebates to handlers, and its acquisition of milk transportation facilities requires reversal of the judgment.

We also note that the court's exclusion of the evidence of UDA's marketing agreements with other cooperatives was error. Under the federal rules a plaintiff need not allege every act he or she intends to prove in support of the claim for relief. A complaint need only contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). See also 2A J.W. Moore & J.D. Lucas, Moore's Federal Practice p 8.03 (2d ed. 1983).

II. The Grant of Summary Judgment on the Refusal to Deal Claims

The district court concluded that the Clayton Act's four-year statute of limitations, 15 U.S.C. Sec. 15b (1982), barred both the unilateral and concerted refusal to deal claims. Plaintiffs filed the complaint on March 31, 1980. The court found that UDA did not unilaterally refuse to deal with plaintiffs within the four preceding years. It also found that the concerted refusal to deal claim stemmed from contracts entered into between UDA and other Arizona handlers as early as 1960, and that plaintiffs were aware of these contracts before the end of 1975.

We review grants of summary judgment de novo, and like the district court apply Federal Rule of Civil Procedure 56. British Airways Board v. Boeing Co., 585 F.2d 946, 951 (9th Cir.1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979). We reverse as to both claims. 6

A. The Unilateral Refusal to Deal Claim.

The district court relied upon David Orgell, Inc. v. Geary's Stores, Inc., 640 F.2d 936 (9th Cir.), cert. denied, 454 U.S. 816, 102 S.Ct. 92, 70 L.Ed.2d 84 (1981), in granting summary judgment for defendants on the LaSalvias' unilateral refusal to deal claim. The court's treatment of Orgell is ambiguous. Defendants understand the district court's view to be that any refusal to deal subsequent to an initial refusal is...

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