Amarel v. Connell, C000557

• Decision Date: 15 June 1988
• Docket Number: No. C000557,C000557
• Citation: 248 Cal.Rptr. 276,202 Cal.App.3d 137
• Court: California Court of Appeals Court of Appeals
• Parties: , 1988-2 Trade Cases P 68,129 J. William AMAREL et al., Plaintiffs and Appellants, v. Grover CONNELL et al., Defendants and Respondents.

Page 276

248 Cal.Rptr. 276

202 Cal.App.3d 137, 1988-2 Trade Cases P 68,129

J. William AMAREL et al., Plaintiffs and Appellants, v. Grover CONNELL et al., Defendants and Respondents.

No. C000557.

Court of Appeal, Third District, California.

June 15, 1988.

Morgan, Morgan, Towery, Morgan & Spector, W. Robert Morgan, Kevin Allmand, San Jose, Carrico & Carrico, Pamela Fawn Carrico, Jack E. Carrico, Yuba City, Berger & Montague, P.C., David Berger, H. Laddie Montague, Jr., Howard Langer, Alan Sandals, and Barry Kramer, Philadelphia, Pa., for plaintiffs and appellants.

Alioto & Alioto, Joseph L. Alioto, John I. Alioto, Mitchell Blumenthal, and R. Michael Lieberman, San Francisco, for defendants and respondents.

EVANS, Associate Justice.

Plaintiffs appeal from a judgment of dismissal after the trial court sustained, without leave to amend, defendants' demurrer to the second amended complaint. The question presented is whether causes of action asserted under state law for anticompetitive practices impermissibly intrude upon the federal domain in foreign relations and foreign commerce when the alleged unlawful practices incidentally involve trade with a foreign nation. We conclude they do not and shall reverse the judgment.

I

We begin with the settled principle that a demurrer challenges only the legal sufficiency of the complaint, not the truth or the accuracy of its factual allegations or the plaintiff's ability to prove those allegations. (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 922, 216 Cal.Rptr. 345, 702 P.2d 503; Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214, 197 Cal.Rptr. 783, 673 P.2d 660.) "In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties." (Code Civ.Proc., § 452.) We therefore treat as true all of the complaint's material factual allegations, including facts that may be implied or inferred from those expressly alleged. (Kiseskey v. Carpenters' Trust for So. California (1983) 144 Cal.App.3d 222, 228, 192 Cal.Rptr. 492.) We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)

Plaintiffs are independent California rice growers. ¹ Defendants are various domestic individuals, agricultural cooperatives, and other entities engaged in the business of growing, milling, processing, marketing, and trading of California rice. ² The relevant markets are those for California paddy rice, the milling of California paddy rice, and milled California rice. The defendant agricultural cooperatives participate in these markets by virtue of their vertically integrated operations. Because plaintiffs frequently sell paddy rice to mills under participation contracts giving plaintiffs a share in the profit from the sale of the milled rice, plaintiffs compete with the defendant cooperatives in these markets. By 1980, defendant cooperatives controlled over 75 percent of the California rice market, as well as almost all the port and storage facilities for shipping rice through the Port of Sacramento, the port closest to all California rice mills. Two independent rice mills--Pacific International Rice Mills, Inc. (PIRMI), in Woodland, and Comet Rice, Inc., in Maxwell--shared the remaining 25 percent of the milled rice market.

Plaintiffs' first cause of action alleges combinations and conspiracies among defendants in restraint of trade in violation of the Cartwright Act (Bus. & Prof. Code, § 16700 et seq.) ³ The defendants, in combination with one another, allegedly undertook to acquire independent rice mills through anticompetitive and predatory practices such as manipulation of market prices for California paddy and milled rice; boycotts and refusal to sell to purchasers of independently milled California rice; discriminatory pricing; and exclusion of independent mills from economically practicable port facilities. The ultimate purpose of these anticompetitive practices was to force plaintiff independent growers to join the agricultural cooperatives or to drive them and the independent mills out of the market. Using their monopoly power, defendants succeeded in destroying the California paddy rice market by driving down the prices; they succeeded in destroying one independent rice mill; and they succeeded in driving numerous independent growers from the market or to join the agricultural cooperatives. The effect has been to substantially restrain trade and commerce in the relevant markets; to severely limit the number of independent rice mills and purchasers of California paddy rice, restricting the ability of the independent growers to sell their rice and depriving them of full competition among purchasers of paddy rice; to severely restrain competition among sellers and marketing agents for milled California rice; to deny consumers the benefits of full and unrestricted competition; and to cause plaintiffs economic loss.

Plaintiffs' second cause of action is for violation of the Unfair Practices Act ( § 17000 et seq.) for below-cost sales ( § 17043) and collusion ( § 17048). Plaintiffs allege that the cooperatives, in collusion with the other defendants, sold paddy rice to defendant Connell Rice and Sugar at below cost, causing a depressed market for milled California rice, further causing plaintiffs to receive less than they otherwise would have received under their participation contracts with independent mills.

Plaintiffs' third cause of action incorporates the previous allegations and is for violation of the Unfair Practices Act for locality discrimination ( § 17040), secret rebates, refunds, commissions, or discounts tending to destroy competition ( § 17045), threats, intimidation, and boycotts to effect violation of the Unfair Practices Act ( § 17046), solicitation of violation of the Act ( § 17047), and collusion ( § 17048).

Plaintiffs' fourth cause of action incorporates the previous allegations and is for violation of the Unfair Practices Act for below-cost sales and collusion. This cause of action specifically alleges defendant Connell's offer, in collusion with the other defendants, to sell milled California rice to the Office of Supply, Republic of Korea (OSROK), at below cost, causing a depressed market, to plaintiffs' injury.

Plaintiffs' fifth cause of action is for tortious interference with existing and potential business relationships. In 1981, PIRMI had entered into a contract with OSROK for the sale of milled California rice. In response to OSROK's attempt to deal with independent California rice mills, and with the intent to cause breach of the PIRMI-OSROK contract, defendants supplied OSROK with false market information and incorrect statements of American law, as well as publicly accusing Korean officials of accepting bribes in connection with the contracts with independent California rice mills. Defendants' actions caused Korea to stop purchasing California rice after expiration of the PIRMI contracts in 1982. As a result of their participation contracts with independent California rice mills, plaintiffs thereafter received lower than expected prices on the 1981 and 1982 contracts with OSROK; they lost Korean sales that they had a legitimate expectation of receiving; and they received lower prices overall as a result of Korea's withdrawal from the California rice market.

Plaintiffs' sixth cause of action, in addition to incorporating all previous allegations of the complaint, is for unfair competition ( § 17200). Specifically, defendants are alleged to have knowingly and falsely represented to OSROK and the Republic of Korea the current prevailing market price for milled California rice; that defendants' competitors' contracts with OSROK were secured through payment of bribes; and that defendants' competitors and OSROK and the Republic of Korea were in violation of section 2(c) of the Robinson-Patman Act (15 U.S.C. § 13(c)). These misrepresentations were made for the purpose of injuring plaintiffs and, indeed, did injure plaintiffs in that they received less than a fair price on their contracts and lost the market for California rice in Korea.

Defendants interposed general and special demurrers to the complaint. The demurrers were sustained and the second amended complaint ordered dismissed without leave to amend. The court concluded that plaintiffs' causes of action were preempted by the Sherman Antitrust Act (15 U.S.C. §§ 1-7): "1. Plaintiff[s'] Second Amended Complaint, when read in light of plaintiffs' prior pleadings in this action, charges violations of the Cartwright Act and other California laws which alleged violations affect United States foreign commerce or United States foreign relations. [p ] 2. The Cartwright Act and other California laws are preempted by the federal antitrust laws in cases such as this which charge violations affecting United States foreign commerce or United States foreign relations. Therefore, plaintiffs' claims are not justiciable in California State Courts under California State laws and are dismissed for want of jurisdiction."

Judgment of dismissal was entered, and this appeal followed.

II

Initially, we reject defendants' argument that the legal sufficiency of plaintiffs' second amended complaint must be determined by reference to plaintiffs' original and first amended complaints. "The court on appeal will not consider the sufficiency of a superseded complaint where the plaintiff has amended it after demurrer sustained." (Rolley, Inc. v. Merle Norman Cosmetics (1954) 129 Cal.App.2d 844, 852, 282 P.2d 991; Hayter v. Fulmor (1944) 66 Cal.App.2d 554, 562, 152 P.2d 746; see Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 884, 92 Cal.Rptr. 162, 479 P.2d 362.) "An exception is recognized where there are allegations in the prior complaint...