Albertson's, Inc. v. Amalgamated Sugar Co., 73-1894

• Decision Date: 02 October 1974
• Docket Number: No. 73-1894,73-1894
• Citation: 503 F.2d 459
• Parties: 1974-2 Trade Cases 75,261 ALBERTSON'S, INC., a Delaware corporation, et al., Plaintiffs-Appellants. v. The AMALGAMATED SUGAR COMPANY, a Utah corporation, and Utah-Idaho Sugar Company, a Utah corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 459

503 F.2d 459

1974-2 Trade Cases 75,261

ALBERTSON'S, INC., a Delaware corporation, et al Plaintiffs-Appellants. v. The AMALGAMATED SUGAR COMPANY, a Utah corporation, and Utah-Idaho Sugar Company, a Utah corporation Defendants-Appellees.

No. 73-1894.

United States Court of Appeals, Tenth Circuit.

Argued July 10, 1974.

Decided Oct. 2, 1974.

Dennis McCarthy, Salt Lake City, Utah (Richard W. Giauque and Ricardo B. Ferrari, Salt Lake City, Utah, on the brief), for plaintiffs-appellants.

R.F. Outcault, Jr., Los Angeles, Cal. (Ray, Quinney & Nebeker, Marvin J. Bertoch and James W. Freed, Salt Lake City, Utah, Allan M. Lipman, Jr.; Lawler, Felix & Hall, Marcus Mattson and Robert P. Mallory, Los Angeles, Cal., on the brief), for defendant-appellee The Amalgamated Sugar Co.

Francis R. Kirkham, San Francisco, Cal. (William E. Mussman and James F. Kirkham, San Francisco, Cal., on the brief), for defendant-appellee Utah-Idaho Sugar co.

Before BREITENSTEIN, McWILLIAMS and BARRETT, Circuit Judges.

McWILLIAMS, Circuit Judge.

This is an appeal pursuant to 28 U.S.C. 1292(b) of an interlocutory order of the trial court granting in part, and denying in part, the plaintiffs' motion that their civil antitrust action be maintained as a class action. 62 F.R.D. 43. Fed.R.Civ.P. 23. The action was instituted in the United States District Court for the District of Utah by Albertson's Inc., a retail grocery chain, Spudnut Industries, Inc., a manufacturer of pastries and confections, and Fisher Baking Company, Inc., a now defunct food processor, on behalf of themselves, and all persons and concerns similarly situated. The two named defendants are the Amalgamated Sugar Company, a Utah corporation, and the Utah-Idaho Sugar Company, also a Utah corporation, each of which has its principal place of business in Utah and which maintain sugar beet processing plants in Utah, Idaho, Washington and Oregon. The three named plaintiffs were purchasers of beet sugar from the defendants, and the main thrust of their complaint is that in setting the price of their beet sugar the defendants have violated federal and state antitrust laws.

The complaint contains three counts. Count one alleges that the defendants have agreed, combined, and conspired to fix, raise, maintain and stabilize the price of processed beet sugar in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. 1. Count one additionally alleges that the defendants have attempted to monopolize trade and commerce in beet sugar in violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. 2. As to these particular claims, the trial court granted the plaintiffs' motion that such be maintained as class actions on behalf of all direct purchasers of beet sugar from the defendants within what is described as the 'complaint area,' about which more will be said later. This ruling is not involved in the present proceeding.

Count one also contains an additional claim that the defendants have engaged in an unlawful tying arrangement in violation of the aforesaid Sections 1 and 2 of the Sherman Antitrust Act. The trial court denied plaintiffs' motion that this particular claim be maintained as a class action, and in this interlocutory appeal the plaintiffs challenge the propriety of such order.

Count two alleges that the defendants through their use of a distant basing point price system are guilty of unlawful price discrimination in violation of Section 2(a) of the Clayton Antitrust Act, as amended by the Robinson-Patman Act, 15 U.S.C. 13(a). Count three alleges that the defendants have unlawfully combined and conspired to control the price of beet sugar and charges for its transportation in violation of the Utah Constitution and local Utah antitrust laws. The trial court denied plaintiffs' request that counts two and three proceed as class actions, and plaintiffs also challenge the propriety of those orders in this appeal.

A two-day evidentiary hearing was held in connection with the plaintiffs' motion that their entire case proceed as a class action. Though the trial court probably did not make 'findings of fact,' as that term is used in Fed.R.Civ.P. 52, nonetheless in its carefully prepared memorandum consisting of some twenty-six typewritten pages it did 'give certain facts' as thus developed by the parties at the aforesaid evidentiary hearing. Thus the trial court did not resolve this matter in a factual void and the record as thus made, coupled with the trial court's memorandum order granting in part, and denying in part, the plaintiffs' motion, gives insight into the trial court's reasoning, save and except as to Count three in the complaint alleging violation of Utah laws. We will reserve comment on that part of the trial court's order denying the request that Count three proceed as a class action, and will first consider the propriety of the trial court's order that the claims based on tying arrangement and price discrimination should not be maintained as class actions.

In denying plaintiffs' request that their claims based on a tying arrangement and price discrimination proceed as class actions, the trial court concluded that there was a conflict of interest within the class and a lack of commonality of interest as required by Fed.R.Civ.P. 23(a)(3) and (4) and (b) (3). Before considering the conflict of interest issue, we, like the trial court, would refer to the evidence before the trial court at the time of its ruling.

The so-called 'complaint area' with which we are here concerned consists of the states of Utah, Idaho, Washington, western Wyoming, and all of Oregon, except for the extreme southern portion thereof. The plaintiffs are currently engaged in their respective business enterprises within that area, except for the one plaintiff, Fisher Baking Industries, Inc., which has now ceased operations, but was operating during the complaint period, which was January 1, 1961, to December 31, 1970. One defendant, Amalgamated Sugar, maintains three sugar beet processing plants in Idaho and one in Oregon, and the other defendant, Utah-Idaho, maintains two processing plants in Washington, and one such plant in both Idaho and Utah.

Albertson's purchases beet sugar from the defendants for purposes of resale, and also for use in the preparation of baking goods, ice creams, and the like, which in turn are sold to the public. The other two named plaintiffs purchased beet sugar from the defendants for use in the preparation of bakery goods, confections, and the like. The members of the class which the named plaintiffs seek to represent are all other direct purchasers for purpose of resale of beet sugar from the defendants in the complaint area, including, according to the defendants, hundreds of grocers, bottlers, confectioners, bakeries, dairies, canners, and others situate throughout the complaint area, who have purchased sugar from the defendants at any time during the complaint period, which is from 1961 through 1970. As indicated, the gravamen of the complaint relates to the manner in which the defendants set the price for their sugar. Let us look at the manner in which the defendants fix the price of their beet sugar in the complaint area.

Sugar, whether it be cane or beet, is a fungible goods, with the ultimate product being chemically identical. Hence, if there were a retail price differential between cane and beet sugar, the buying public would generally purchase the lower price sugar, be it beet or cane, since there is little real difference between the two. Because of this identity, the pricing policy followed by the defendants is to meet the price for which cane sugar sells in any given locality, and the defendants will quickly follow any increase or decrease in the price of cane sugar. The defendants, according to testimony, cannot profitably operate if they undersell the charge made for cane sugar. On the other hand, the defendants never attempt to charge more than the figure for which cane sugar is selling in a particular market, since, as indicated, the buying public would purchase the sugar, be it cane or beet, selling for the lower price, sugar being an essentially fungible goods. It is for these reasons that the defendants attempt to tie their pricing into that of the cane sugar processors. The cane sugar processors were in the continental United States market before the beet sugar processors, and it is perhaps for this reason, i.e., a custom that has developed in the trade, that the beet sugar processors gear their pricing to that of the cane sugar processors, rather than vice versa. In any event, that's the way it is.

The price which the defendants charge for sales of processed beet sugar to purchasers within the complaint area is made up of two components: (1) The base price charged by California and Hawaii Sugar Company, a cane sugar refiner found by the trial court to be a price leader, FOB its Crockett, California, refinery; plus (2) a 'prepay' equal to the cost of shipping the cane sugar from the Crockett refinery to the particular price zone within the complaint area in which the purchaser is located, the complaint area being itself subdivided into some ten to twelve price zones. In thus setting their price, the defendants will meet the price of C & H.

As indicated, the main thrust of the plaintiffs' action is that the manner in which the defendants set the price of their...