Agritronics Corp. v. National Dairy Herd Ass'n

• Decision Date: 01 February 1996
• Docket Number: No. 94-CV-0066.,94-CV-0066.
• Parties: AGRITRONICS CORPORATION, and Farm Dairy Records, Ltd., Plaintiffs, v. NATIONAL DAIRY HERD ASSOCIATION, INC., Northeast Dairy Herd Improvement Association, Inc., Ohio Dairy Herd Improvement Cooperative, Inc, Pennsylvania Dairy Herd Improvement Association, Inc., and Vermont Dairy Herd Improvement Association, Inc., Defendants.
• Court: U.S. District Court — Northern District of New York

914 F. Supp. 814

AGRITRONICS CORPORATION, and Farm Dairy Records, Ltd., Plaintiffs, v. NATIONAL DAIRY HERD ASSOCIATION, INC., Northeast Dairy Herd Improvement Association, Inc., Ohio Dairy Herd Improvement Cooperative, Inc, Pennsylvania Dairy Herd Improvement Association, Inc., and Vermont Dairy Herd Improvement Association, Inc., Defendants.

No. 94-CV-0066.

United States District Court, N.D. New York.

February 1, 1996.

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Hinman, Howard Law Firm, Albert J. Millus, Binghamton, NY and Kohn, Nast Law Firm, Lindsey B. Slaughter, Philadelphia, PA and Weinstein, Kitchenoff Law Firm, David H. Weinstein, Esq. Robert S. Kitchenoff, Philadelphia, PA, for Plaintiffs.

Office of Richard Grace, Richard J. Grace, Binghamton, New York, Shumaker, Loop

Law Firm, Michael M. Briley, David W. Wicklund, Toledo, OH, for Defendants Nat'l DHIA and Ohio DHIC.

Office of Richard Grace, Richard J. Grace, Binghamton, New York and Paley, Rothman Law Firm, Daniel S. Koch, Bethesda, MD, for Defendant Vt DHIA.

Office of Richard Grace, Richard J. Grace, Binghamton, New York and Levin, Fishbein Law Firm, Michael D. Fishbein, Philadelphia, PA and Adler, Claraval Law Firm, Robert F. Claraval, Harrisburg, PA, for Defendant Pa DHIA.

Nixon, Hargrave Law Firm, James D. Kole, John Stuart Smith, Rochester, NY, for Defendant NE DHIA.

MEMORANDUM-DECISION and ORDER

McAVOY, Chief Judge.

I. INTRODUCTION

Plaintiffs Agritronics Corporation and Farm Dairy Records are private, for-profit corporations that recently have entered the milk testing and farm dairy record-keeping business. On January 19, 1994, plaintiffs filed the present action in this Court against defendants Northeast Dairy Herd Improvement Association, Inc., Ohio Dairy Herd Improvement Cooperative, Inc., Pennsylvania Dairy Herd Improvement Association, Inc., Vermont Dairy Herd Improvement Association, Inc., and National Dairy Improvement Association, Inc. Plaintiffs allege that defendants' conduct (1) constitutes a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; (2) constitutes either a conspiracy to monopolize, an attempt to monopolize, or outright monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2; (3) violates the provisions of the Donnelly Act, N.Y. General Business Law § 340.1; and (4) amounts to "tortious interference with prospective business advantage" under the common law of the State of New York. Plaintiffs seek treble damages, injunctive relief, attorneys' fees and costs.

Four defendants now move for summary judgment pursuant to Fed.R.Civ.P. 56. Plaintiffs cross-move for summary judgment. The Court heard oral arguments on these motions on October 27, 1995; the following constitutes the Court's findings of fact and conclusions of law with respect to the issues raised.

II. BACKGROUND

Defendants Northeast Dairy Herd Improvement Association, Inc. ("NE DHIA"), Ohio Dairy Herd Improvement Cooperative, Inc. ("Ohio DHIC"), Pennsylvania Dairy Herd Improvement Association, Inc. ("Pa DHIA"), and Vermont Dairy Herd Improvement Association, Inc. ("Vt DHIA") are cooperative associations whose membership is composed of dairymen engaged in the operation of dairy farms and the production of milk. Each of these "State DHIAs" is a nonprofit corporation without capital stock that issues no dividends. Each of the farmer members of the State DHIAs is entitled to an equal vote concerning the affairs of the associations. The remaining defendant, National Dairy Herd Improvement Association, Inc. ("Nat'l DHIA") is a cooperative association whose affiliate membership is limited to state and regional associations that are farmer controlled, non-profit "cooperative membership organizations," and each of the State DHIAs named as a defendant herein is a member of the National DHIA. Nat'l DHIA also admits "associate members" that have no control over the affairs of the organization.

The principal function of the State DHIAs and National DHIA is to gather and report information on the history and characteristics of dairy animals owned by member dairymen, as well as the milk produced by such animals. This data-collection program is referred to as the National Cooperative Dairy Herd Improvement Program ("NCDHIP"). As set forth in the Complaint, employees of the State DHIAs visit the farms of member dairymen and record information on each cow in the herd. Characteristics such as parentage, age, calving history, feeding, and maintenance conditions are included in this information. The milk produced by each cow is also sampled and weighed to determine data such as the quantity and quality of milk produced. The testing employees submit information gathered to the State DHIAs. The State DHIAs in turn forward the information to dairy records processing centers ("DRPCs") that are recognized by defendant Nat'l DHIA and operated in accordance with its rules and regulations. Furthermore, the milk samples collected by the State DHIA supervisors are submitted to laboratories certified by Nat'l DHIA and operated under its rules and regulations. These laboratories test and analyze the milk and report the results to the applicable DRPC. The DRPCs then generate reports concerning the information and milk samples submitted.

The State DHIA-generated records are known as the "official" records and are used by farmer members for herd management and to make decisions concerning cost effective herd improvement. In addition, because the value of a dairy animal is determined by its productivity, the State DHIA-generated records are relied upon by third parties, such as artificial insemination companies ("IAs") to determine the value of dairy animals and their reproductive products. Given this fact, it is essential that the "official" information reported by the State DHIAs be as accurate as possible. Defendants have adopted and implemented a wide range of controls designed to assure that the milk production records furnished through them have been generated without fraud, mistake, or any other circumstance that would render their reports inaccurate and unfairly affect the value of a member's dairy animals. One of the many things that State DHIAs have done to help assure the accuracy of the information in the reports has been to rely exclusively on their own employees to visit member farms and collect raw data that is used to make the DHIA record on each cow submitted for test.

Plaintiffs Agritronics Corporation and Farm Dairy Records are private, for-profit corporations that recently have entered what they describe as "the milk testing and farm dairy record-keeping business." On January 19, 1994, plaintiffs filed the present action in this Court complaining that defendants "refused plaintiffs both the opportunity to provide DHIA services and full voting membership in National DHIA" and "refused to permit anyone other than their employees ... to perform dairy records processing services that result in the generation of `official' DHIA milk production records." Plaintiffs complain that, as a result, they are not able to provide records for existing and potential clients that have the same market acceptance as the records generated by defendants.

Plaintiffs assert four distinct legal theories upon which they claim a right to relief. In Count I of their Complaint, plaintiffs allege that defendants' conduct constitutes a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. In Count II, plaintiffs assert that defendants' conduct constitutes either a conspiracy to monopolize, an attempt to monopolize, or outright monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. In Count III of the Complaint, plaintiffs claim that defendants have violated the provisions of the Donnelly Act, N.Y. General Business Law § 340.1. Finally, in Count IV, plaintiffs posit that defendants' alleged activities amount to "tortious interference with prospective business advantage" under the common law of the State of New York. Plaintiffs seek treble damages, injunctive relief, attorneys' fees and costs.

Four defendants, Nat'l DHIA, Ohio DHIC, Vt DHIA, and NE DHIA, now move for summary judgment pursuant to Fed.R.Civ.P. 56, alleging that (1) defendants are immune from antitrust liability for their participation in the NCDHIP because the program is authorized by federal law; (2) defendants are immune from liability here under the Noerr-Pennington doctrine; (3) defendants are immune from liability under the "state action" doctrine; (4) defendants are immune from liability under the Capper-Volstead Act because they are covered by the "agricultural exemptions;" (5) defendant Nat'l DHIA is immune from liability under the Donnelly Act; and (6) defendants have not engaged in activity that violates any antitrust laws. Plaintiffs cross-move for summary judgement in regard to several of defendants' affirmative defenses and in regard to their Sherman Act claims.

III. DISCUSSION

A. SUMMARY JUDGMENT STANDARDS

Rule 56(c) provides that the court may grant summary judgment where there are no genuine issues of material fact for trial. Fed.R.Civ.P. 56(c). If there are no genuine issues, the movant is entitled to judgment as a matter of law. An issue is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Thus the moving party must establish that there is no genuine issue of material fact remaining for trial, as any doubt as to the existence of a genuine issue for trial is to be resolved in favor of the non-moving party. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). See also Lopez v. S.B. Thomas, Inc., 831 F.2d 1184, 1187 (2d Cir.1987) (the court must view the evidence in light most favorable to ...