Allen v. Dairy Farmers of Am. Inc.

• Decision Date: 30 August 2010
• Docket Number: Case No. 5:09–cv–230.
• Citation: 748 F.Supp.2d 323
• Court: U.S. District Court — District of Vermont
• Parties: Alice H. ALLEN and Laurance E. Allen, d/b/a Al–Lens Farm, and Garret Sitts and Ralph Sitts, on behalf of themselves and all others similarly situated, Plaintiffs,v.DAIRY FARMERS OF AMERICA, INC., Dairy Marketing Services, LLC, Dean Foods Company, and HP Hood LLC, Defendants.

748 F.Supp.2d 323

Alice H. ALLEN and Laurance E. Allen, d/b/a Al–Lens Farm, and Garret Sitts and Ralph Sitts, on behalf of themselves and all others similarly situated, Plaintiffs,

v.DAIRY FARMERS OF AMERICA, INC., Dairy Marketing Services, LLC, Dean Foods Company, and HP Hood LLC, Defendants.

Case No. 5:09–cv–230.

United States District Court, D. Vermont.

Aug. 30, 2010.

Andrew D. Manitsky, Gravel and Shea, Burlington, VT, Benjamin D. Brown, Esq., Brent W. Johnson, Esq., Daniel A. Small, Esq., Emmy L. Levens, Esq., Kit A. Pierson, Cohen Milstein Sellers & Toll PLLC, Craig D. Minerva, Esq., Danyll W. Foix, Esq., Gregory J. Commins, Jr., Robert G. Abrams, Esq., Robert L. Green, Esq., Howrey, LLP, Washington, DC, George F. Farah, Esq., Cohen Milstein Sellers & Toll PLLC, New York, NY, for Plaintiffs.Amber L. McDonald, Esq., Kimberly N. Shaw, Esq., W. Todd Miller, Esq., Baker & Miller PLLC, Carl R. Metz, Esq., Christopher R. Looney, Esq., Greg S. Hillson, Esq., Kevin Hardy, Esq., Shelley J. Webb, Esq., Steven R. Kuney, Esq., Williams & Connolly LLP, Paul T. Denis, Esq., Paul D. Frangie, Esq., Paul H. Friedman, Esq., Dechert LLP, Washington, DC, Elizabeth Hawkins Miller, Mary N. Peterson, Esq., Spink & Miller, PLC, John T. Sartore, Paul Frank Collins PC, Burlington, VT, Carolyn H. Feeney, Dechert LLP, Philadelphia, PA, Michael J. Marks, Esq., MarksPowers LLP, Middlebury, VT, for Defendants.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS (Docs. 23, 24, 25)

CHRISTINA REISS, District Judge.

This matter came before the court on May 6, 2010 for oral argument on the motions to dismiss filed by Defendants, Dairy Farmers of America, Inc. (“DFA”), Dairy Marketing Services, LLC (“DMS”), Dean Foods Company (“Dean”), and HP Hood LLC (“Hood”) (collectively, “Defendants”). Defendants seek dismissal of the Amended Complaint filed by Plaintiffs, Alice H. Allen and Laurance E. Allen, d/b/a Al-lens Farm, Garret Sitts and Ralph Sitts (collectively, “Plaintiffs”) on the following grounds: (1) failure to state a claim; (2) Capper–Volstead Act immunity; (3) failure to satisfy Iqbal/ Twombly's pleading and plausibility standards; and (4) statute of limitations.

I. Factual and Procedural Background.

Plaintiffs seek permission for their lawsuit to proceed as a class action. Their sixty-seven page, seven-count Amended Complaint ¹ contains 212 paragraphs, many of which contain subparts. It asserts the following claims:

Count I: Sherman Act § 2 violation (Conspiracy to Monopolize and Monopsonize) (against all Defendants);

Count II: Sherman Act § 2 violation (Attempt to Monopolize) (against DFA and DMS);

Count III: Sherman Act § 2 violation (Attempt to Monopsonize) (against Dean and, in the alternative, against Dean, Hood, and DFA);

Count IV: Sherman Act § 2 violation (Unlawful Monopolization) (against DFA);

Count V: Sherman Act § 2 violation (Unlawful Monopsony) (against Dean and, in the alternative, against Dean, Hood, and DFA);

Count VI: Sherman Act § 1 price-fixing violation (against DFA and DMS); and

Count VII: Sherman Act § 1 conspiracy violation (against all Defendants).

All Defendants have filed timely motions to dismiss. The following factual allegations set forth in the Amended Complaint provide a context for analyzing those motions.

The Allens operate a dairy farm in Wells River, Vermont and the Sitts brothers operate a dairy farm in Franklin, New York. The Sitts brothers' farm was a member of DFA from 1998–2007. During the class period (Oct. 9, 2005–Oct. 8, 2009), both groups of Plaintiffs sold, through DMS, raw fluid Grade A milk to bottling plants.

DFA, a not-for-profit corporation, is the largest dairy cooperative in the United States. As a vertically-integrated cooperative with 1,900 members in the Northeast, DFA engages in milk production and markets, hauls, processes, bottles, and distributes milk. DMS is a limited liability company created by DFA and Dairylea Cooperative, Inc. (“Dairylea”). Acting as DFA's marketing agent, DMS markets approximately 80% of the milk marketed to bottling plants in the Northeast (on behalf of 9,000 Northeast dairy farmers) and manages a system of 180 contract milk haulers. Dean is alleged to be the largest milk bottler, with Hood the second largest milk bottler, in the Northeast.

Plaintiffs' antitrust claims arise out of DFA's alleged unlawful creation of monopsony and monopoly power in the milk distribution system by tying up access to milk bottling plants in the Northeastern United States through unlawful exclusive supply agreements and then using that monopsony power to force independent farmers to join DFA or to market their raw milk through its marketing affiliate, DMS. DFA allegedly utilized its and DMS's market power “to reduce fluid raw milk prices paid to its members and other class members relative to what would have prevailed in a competitive market. These lowered fluid raw milk prices allegedly increased profits for Defendants Dean and Hood with whom DFA allegedly conspired and contracted to establish and maintain its market power.” (Doc. 16 ¶ 2.) Plaintiffs allege that through “carefully planned and collaborative steps,” the monopolization/monopsonization conspiracy has “eliminated competition by and between Defendants” and “fixed at artificially low levels” the fluid raw milk prices that farmers would otherwise receive in a competitive market. (Doc. 16 ¶¶ 39–40.)

The Amended Complaint alleges that the relevant geographic market is the Northeast United States, consisting of Federal Milk Market Order 1 (“FMMO 1”), “cover[ing] areas in Delaware, [the] District of Columbia, Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia.” (Doc. 16 ¶ 35.) It alleges that the relevant product market “consists of the market for the sales or marketing of fluid Grade A milk to, or purchase of fluid Grade A milk by, bottling plants.” (Doc. 16 ¶ 36.)

II. Conclusions of Law and Analysis.A. Standard of Review.

When assessing a motion to dismiss pursuant to Rule 12(b)(6), the court takes the complaint's “factual allegations to be true and draw[s] all reasonable inferences in the plaintiff's favor.” Harris v. Mills, 572 F.3d 66, 71 (2d Cir.2009). The court need not credit “legal conclusions” in the complaint or “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Id. at 72 (quoting Ashcroft v. Iqbal, ––– U.S. ––––, ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)) (internal quotation marks and alteration omitted). In its analysis under Rule 12(b)(6), the court must confine its consideration “to facts stated on the face of the complaint, in documents appended to the complaint or incorporated in the complaint by reference, and to matters of which judicial notice may be taken.” Allen v. WestPoint–Pepperell, Inc., 945 F.2d 40, 44 (2d Cir.1991) (citation omitted).

“[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 129 S.Ct. at 1950 (internal citation omitted). “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id.; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). B. Whether Plaintiffs Have Adequately Pled Claims Against Hood.

In their Amended Complaint, Plaintiffs allege four claims against Hood. In Count I, they allege that Hood, as part of a conspiracy with all other defendants, violated Section 2 of the Sherman Act by monopolizing the relevant market. In Count III, Plaintiffs assert claims against Dean, and allege an attempt to monopsonize in violation of Section 2 of the Sherman Act. They allege, “[i]n the alternative” that “Defendants Dean, Hood and DFA collectively have attempted to and continue to attempt to obtain market power in the market for the purchase of fluid Grade A milk by fluid Grade A bottling plants in the Northeast market.” (Doc. 16 ¶ 171.) In Count V, Plaintiffs charge Dean with unlawful monopsony in violation of Section 2 of the Sherman Act. They allege, “[i]n the alternative,” that Dean, Hood and DFA collectively have “abused their monopsony power to maintain and enhance their market dominance....” (Doc. 16 ¶ 189.) In Count VII, Plaintiffs allege a Sherman Act Section 1 conspiracy claim against all Defendants. Accordingly, all of Plaintiffs' claims against Hood depend upon evidence that Hood has agreed to participate in a conspiracy.

Hood seeks dismissal of Plaintiffs' claims because the Amended Complaint lacks the requisite specificity in that it fails to answer the “basic questions” of “who, did what, to whom (or with whom), where, and when?” (Doc. 23–1 at 11) (quoting Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1048 (9th Cir.2008)). Were the court to deem the Amended Complaint's conspiracy allegations against Hood adequately pled, Hood seeks dismissal on the further ground that the Amended Complaint does not support an economically plausible inference that Hood violated any provision of the antitrust laws. Because the court agrees that the Amended Complaint is facially deficient insofar as it pertains to Hood, the court does not reach the issue of economic plausibility.

To state a claim under Section 1 of the Sherman Act, a plaintiff must allege: “(1) concerted action, (2) by two or more persons that (3) unreasonably restrains trade.” In re Nine West Shoes Antitrust Litig., 80 F.Supp.2d 181, 190 (S.D.N.Y.2000). A successful conspiracy claim under Section 2 of the Sherman Act requires: “(1)...