Christofferson Dairy, Inc. v. MMM Sales, Inc.

• Citation: 849 F.2d 1168
• Decision Date: 13 June 1988
• Docket Number: 87-3888,Nos. 87-3765,s. 87-3765
• Parties: , 1988-1 Trade Cases 68,083 CHRISTOFFERSON DAIRY, INC., a Washington corporation, Plaintiff-Appellant, v. MMM SALES, INC., a California corporation; Darigold, Inc., a Washington corporation; Consolidated Dairy Products, Inc., a Washington corporation; Northwest Dairymen's Association, an agricultural corporation, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1168

849 F.2d 1168

57 USLW 2025, 1988-1 Trade Cases 68,083

CHRISTOFFERSON DAIRY, INC., a Washington corporation, Plaintiff-Appellant, v. MMM SALES, INC., a California corporation; Darigold, Inc.,

a Washington corporation; Consolidated Dairy Products,

Inc., a Washington corporation; Northwest Dairymen's

Association, an agricultural corporation, Defendants-Appellees.

Nos. 87-3765, 87-3888.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 13, 1988.

Decided June 13, 1988.

John C. Guadnola, Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim, Tacoma, Wash., for plaintiff-appellant.

Richard J. Wallis, Bogle & Gates, Seattle, Wash., for defendant-appellee MMM Sales, Inc.

James L. Magee, Graham & Dunn, Seattle, Wash., for defendants-appellees Darigold, Inc. and Northwest Dairymen's Ass'n.

Appeal from the United States District Court for the Western District of Washington.

Before TANG, ^* HALL and WIGGINS, Circuit Judges.

WIGGINS, Circuit Judge:

Christofferson Dairy brought suit under sections 1 and 2 of the Sherman Act against MMM Sales and its customer Darigold alleging a conspiracy to prevent Christofferson from purchasing California surplus

milk. The district court granted summary judgment in favor of MMM and Darigold, finding that Christofferson did not present sufficient evidence of an intent to restrain competition, or of an actual injury to competition. We AFFIRM.

I. FACTS AND PROCEEDINGS BELOW

Christofferson Dairy, Inc. operates a fluid milk bottling plant in Mt. Vernon, Washington. Christofferson purchases raw milk from suppliers and produces bottled Grade A milk and some other Grade A milk products. ¹ Cache Foods, Inc. bought Christofferson in April, 1981. Cache ceased operating the dairy and leased the physical plant in December, 1982.

Appellee MMM Sales, Inc. is a California corporation that purchases raw milk from California producers and resells it to bottling plants and manufacturing facilities. MMM deals principally in Grade A milk and mainly sells to California customers.

Appellee Darigold is a Washington corporation that operates bottling and manufacturing plants in Washington and Oregon. Northwest Dairymen's Association (NDA) is an agricultural cooperative, owning virtually all of Darigold's stock. Consolidated Dairy Products, Inc. (CDP) is a Washington corporation, controlled by NDA.

During 1981 and 1982, high support prices resulted in a "milk surplus" in California. California milk producers asked MMM to attempt to arrange for the sale of their surplus milk. In 1981, MMM decided to try to sell to out-of-state customers. MMM sold milk for manufacturing purposes to several companies in Washington and Oregon, including Darigold.

Later in 1981 and in 1982, MMM was approached by other out-of-state processors wishing to buy surplus milk for bottling. These included Klamath Falls Creamery, Echo Springs Dairy, and Umpqua Dairy, all located in Oregon, as well as Christofferson. Christofferson could purchase California surplus milk at a lower price than milk produced in Washington because the milk came into Washington on a episodic basis and therefore was not subject to federal price regulation. MMM claims it determined in 1981 that for business reasons, it was unable to ship milk for bottling purposes to out-of-state customers. MMM asserts three justifications for refusing to sell to Christofferson. First, MMM bought surplus milk from some producers that were not Grade A certified. Milk that does not meet California's Grade A standards cannot be used for bottling purposes in any state. Further, MMM was not sure that it could furnish Grade A milk on a reliable schedule. Second, MMM could not guarantee that the milk would be suitable for bottling by the time it reached out-of-state processors. Third, MMM did not wish to deal with state and federal regulatory requirements for the sale of milk out-of-state for bottling. ² Christofferson claims, on the other hand, that MMM's refusal was the result of an agreement with Darigold not to sell to Christofferson or to other bottling plants in Washington and Oregon. Christofferson points to several conversations between employees of MMM and employees of Christofferson and of other bottling plants. MMM employees allegedly said they could not sell without checking with Darigold, and later that Darigold had given In 1982, Christofferson complained of MMM's actions to the Federal Trade Commission. The FTC investigated but did not bring any charges.

MMM a list of companies to which it was not to sell bulk milk.

Cache Foods, Inc., as the sole stockholder of Christofferson, filed suit against MMM, Darigold, NDA, and CDP in September, 1985, alleging that the defendants had conspired in violation of sections 1 and 2 of the Sherman Act, and various state statutes. ³ In November, 1986, defendants moved for summary judgment on the merits. Discovery continued throughout the briefing and consideration of the motion.

Cache decided in January, 1987, only to pursue claims arising from Christofferson's alleged overpayment for raw milk. Defendants moved for summary judgment based on Cache's lack of standing. Cache then moved for leave to amend the complaint pursuant to Fed.R.Civ.P. 17(a) to substitute Christofferson as plaintiff. The district court granted the motion on March 2, 1987, noting that Cache's failure to name Christofferson as plaintiff was not an understandable mistake, but that defendants would not be prejudiced by the substitution, and that the defendants had not promptly raised the objection. The district court also found that Cache's motion unreasonably multiplied the cost of proceedings and therefore ordered Cache and/or Christofferson to pay defendants' costs and attorney's fees incurred in responding to the motion for substitution.

On March 6, 1987, the district court granted defendants' motion for summary judgment on the merits and entered an order dismissing all claims on March 10. The court found that the conspiracy did not make "economic sense" as to MMM and that defendants had presented "competing inferences" of independent action. Therefore, the court concluded that Christofferson had failed to make out a "reasonable inference" of a conspiracy. The court denied Christofferson's motion for reconsideration on May 1, 1987. In an order reaffirming summary judgment, the court concluded that there were disputed facts regarding the existence of the conspiracy but that Christofferson's showing of intent to restrain competition and of actual injury to competition was not sufficient to withstand summary judgment. This appeal followed.

II. STANDARD OF REVIEW

This court reviews a grant of summary judgment de novo. California Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988). The court must determine, viewing the evidence in the light most favorable to Christofferson, whether there are genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir.1986). Although summary judgment generally is disfavored in antitrust litigation, it is appropriate when the nonmoving party does not show any issues of material fact and does not present an adequate record to support a finding in his favor. Dimidowich v. Bell & Howell, 803 F.2d 1473, 1477 (9th Cir.1986). Attorney's fees awards are generally reviewed for an abuse of discretion. Beaudry Motor Co. v. ABKO Properties, Inc., 780 F.2d 751, 756 (9th Cir.), cert. denied, --- U.S. ----, 107 S.Ct. 100, 93 L.Ed.2d 51 (1986).

III. ANALYSIS

A. Section 1 Claims

Section 1 of the Sherman Act prohibits "[e]very contract, combination ... or conspiracy, in restraint of trade or commerce among the several States...." 15 U.S.C.

                Sec. 1.  To maintain a successful section 1 action, Christofferson must show:  1) a contract, combination, or conspiracy, 2) that the agreement unreasonably restrained trade, and 3) that the restraint affected interstate commerce.   See T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 632-33 (9th Cir.1987).  Even if the evidence is sufficient to establish a conspiracy in violation of the antitrust laws, Christofferson cannot prevail unless it also shows that it suffered an injury resulting from the illegal conduct.   Richards v. Neilsen Freight Lines, 810 F.2d 898, 902 (9th Cir.1987).  We assume without deciding that Christofferson has met its burden under T.W. Elec. Serv. of presenting sufficient evidence of a conspiracy. 4   Christofferson has not, however, adequately shown that the agreement unreasonably restrained trade or that Christofferson suffered an injury resulting from the allegedly illegal conduct
                

An essential element of a section 1 claim is that the agreement unreasonably restrained trade. T.W. Elec. Serv., 809 F.2d at 632-33. The alleged agreement here was between a supplier and customer. Vertical arrangements are almost always judged by the rule of reason. Cascade Cabinet Co. v. Western Cabinet & Millwork, Inc., 710 F.2d 1366, 1371 (9th Cir.1983); Gough v. Rossmoor Corp., 585 F.2d 381, 387 (9th Cir.1978), cert. denied, 440 U.S. 936, 99 S.Ct. 1280, 59 L.Ed.2d 494 (1979). ⁵ Under the rule of reason approach, the plaintiff must show an injury to competition, rather than just an injury to plaintiff's business. See Robert's Waikiki U-Drive, Inc. v. Budget Rent-A-Car Systems, Inc., 732 F.2d 1403, 1408 (9th Cir.1984). "The conduct must have an adverse impact on the competitive conditions in general as they exist within the field of commerce in which the plaintiff is engaged." Gough, 585 F.2d at 386.

In reaffirming summary judgment, the district court found that Christofferson's showing of an intent to harm competition and of an actual injury to competition were inadequate. Christofferson asserts two objections to this ruling: 1) ...