Borgeson v. Archer-Daniels Midland Co.
| Decision Date | 12 October 1995 |
| Docket Number | No. CV95-5745 ABC (AJWx),CV95-5746 ABC (AJWx).,CV95-5745 ABC (AJWx) |
| Citation | 909 F. Supp. 709 |
| Court | U.S. District Court — Central District of California |
| Parties | Patricia BORGESON, on behalf of herself and all others similarly situated, Plaintiff, v. ARCHER-DANIELS MIDLAND CO., a Minnesota corporation; Cargill, Inc., a Delaware corporation; A.E. Staley Manufacturing Company, a Delaware corporation; CPC International, Inc., a Delaware corporation; and Does 1 through 50, Defendants. Nedra GOINGS, on behalf of herself and all others similarly situated, Plaintiff, v. ARCHER-DANIELS MIDLAND CO., a Minnesota corporation; Cargill, Inc., a Delaware corporation; A.E. Staley Manufacturing Company, a Delaware corporation; CPC International, Inc., a Delaware corporation; and Does 1 through 50, Defendants. |
COPYRIGHT MATERIAL OMITTED
John N. Zarian, Mission Viejo, CA, Adam D. Duncan, Palsads, CA, Mark C. Rifkin, Haverford, PA, for Plaintiff, Nedra Goings.
Kevin M. Prongay, Palsads, CA, Eugene Mikolajczyk, Elizabethtown, PA, for Plaintiff, Patricia Borgeson.
Seyfarth, Shaw, Fairweather & Geraldson, Jerry M. Hill, David D. Jacobson, Steven B. Katz, Los Angeles, CA, for defendants.
These related jurisdictional matters were taken under submission on September 22, 1995. After reviewing the materials submitted by the parties and the case file, the Court hereby REMANDS these actions to state court.
On July 21, 1995, Plaintiff PATRICIA BORGESON, on behalf of herself and all others similarly situated, filed a Complaint against ARCHER-DANIELS-MIDLAND CO. ("ADM"), CARGILL, INC. ("Cargill"), A.E. STALEY MANUFACTURING CO. ("Staley"), AND CPC INTERNATIONAL, INC. ("CPC"), in the Los Angeles County Superior Court.1 Also on July 21, 1995, Plaintiff NEDRA GOINGS, on behalf of herself and all others similarly situated, filed a Complaint against the same Defendants in the Orange County Superior Court.
On August 25, 1995, Defendant Staley filed a Notices of Removal, asserting diversity jurisdiction over these actions under 28 U.S.C. § 1332.2 After receiving Staley's Notices of Removal of the Borgeson case, the Court issued an Order to Show Cause ("OSC") why the action should not be remanded to state court for failing to show a proper basis for federal court jurisdiction.3 The Court listed two grounds for its OSC. First, Staley failed to show that the other defendants (Cargill, ADM, and CPC) had joined in the removal. Staley has satisfied the Court's concern on this ground.4 Second, and more importantly, the Court ordered Staley to show that the requirements for diversity jurisdiction were satisfied.
On September 11, 1995, Defendant Staley filed a Response to OSC re: Remand. On September 15, 1995, Plaintiff filed a Memorandum of Points and Authorities in Response to OSC re: Remand, in support of remand to state court.5 On September 22, 1995, Defendant Staley filed a Reply.6
On September 11, 1995, Defendants filed a joint motion before the Judicial Panel on Multi-District Litigation to transfer this action and others to the Southern District of Iowa for coordinated and consolidated pretrial proceedings. On September 29, 1995, Plaintiffs in the actions filed a response.
In both the Borgeson and Goings Complaints, Plaintiffs allege as follows:
1.) At least as early as July 1992 and through the present, Defendants entered into and have engaged in a contract, combination, and conspiracy to suppress competition and unreasonably restrain commerce and trade, by fixing the prices of high-fructose corn syrup and/or its by-products ("corn syrup") sold to consumers in the State of California. Corn syrup is a corn-derived sweetener sold in pure form and used in most soft drinks, as well as some baked goods and other food products. There is no substitute for corn syrup in the production, manufacture, distribution, and sale of many consumer products. Corn syrup is a fungible product, and the corn syrup produced by one company is completely interchangeable with that of any other company.
2.) As a result Defendants' conduct, the price of corn syrup has increased in recent years at a substantially faster rate than the price of the raw materials.
3.) During the relevant time period, Defendants have sold many millions of dollars of corn syrup in the United States, and a significant portion of those sales has occurred in the State of California.
4.) Because of Defendants' conduct, there are significant barriers to new competitors wishing to enter the corn syrup industry.
5.) In 1992, Mark E. Whitacre ("Whitacre"), an executive of ADM, agreed to cooperate with a federal investigation into possible antitrust law violations after company officials had asked him to participate in collusive pricing agreements. Since that time, Whitacre has recorded hundreds of conversations and meetings involving employees of Defendants ADM, Cargill, Staley, and CPC.
6.) In June and July of 1995, the national press reported that Defendants were the subject of a major criminal antitrust investigation by the Federal Bureau of Investigation ("FBI"). ADM is the primary target of the federal investigation. Numerous managers and executives of ADM, as well as each of the other Defendants, have received subpoenas and/or have had search warrants executed against them. A grand jury in Chicago has begun hearing evidence as a result of that investigation.
7.) As a result of Defendants' alleged wrongdoing, corn syrup prices have remained at an artificially high and uncompetitive level. In addition, competition for the sale of corn sweetener products has been unreasonably restrained in the State of California.
8.) Therefore, the prices that Plaintiffs and other members of the classes have paid are higher than the prices would be in a free and competitive market.
Plaintiffs pray for the following relief: an order certifying these actions as class actions, with Plaintiffs as the representatives of the classes and Plaintiffs' counsel as class counsel; judgment that the acts of the Defendants constitute unlawful and unreasonable restraint of trade and unfair competition; treble damages; fees; costs; disgorgement and restitution; and, such other relief as the Court deems just and proper.
When an action could have been brought originally in federal court based on diversity jurisdiction, see 28 U.S.C. § 1332, a district court has removal jurisdiction pursuant to 28 U.S.C. § 1441. District courts have original jurisdiction under 28 U.S.C. § 1332 where the civil action is between citizens of different states, and the amount in controversy exceeds $50,000. In a class action, only the domicile of the class representative (plaintiff) is considered, rather than that of the class members. William W. Schwarzer, et al., Federal Civil Procedure Before Trial ¶ 10:394 (citing Supreme Tribe of Ben Hur v. Cauble, 255 U.S. 356, 41 S.Ct. 338, 65 L.Ed. 673 (1921); see also Friedman v. Meyers 482 F.2d 435 (2nd Cir.1973). For the purposes of diversity jurisdiction, a corporation is deemed to have two (2) states of citizenship — its state of incorporation and the state wherein it has its principal place of business. See 28 U.S.C. § 1332(c)(1).
On removal, the burden of establishing grounds for federal jurisdiction rests on the defendant. Indeed, there is a "strong presumption" against removal jurisdiction. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992). Accordingly, when there is doubt as to removability, it is resolved in favor of remanding the case to state court. Schwarzer, et al., supra, ¶ 2:606 (citing Gaus, 980 F.2d 564; Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941))
Plaintiffs Borgeson and Goings are citizens of the State of California. Defendant STALEY is incorporated in the state of Delaware and its principal place of business is in Illinois. Defendant ADM is a Minnesota Corporation with its principal place of business in the State of Illinois.7 Defendant CPC is a Delaware Corporation with its principal place of business in New York. Since no Defendant is a citizen of the same state as the Plaintiff, and the Court need not consider the citizenship of defendants sued under fictitious names (Does), there is diversity of citizenship. 28 U.S.C. § 1441(a) ().
Defendant Staley argues that the amount in controversy requirement can be satisfied in one of two ways. First, Staley asserts that the entire amount of the attorneys' fees should be allocated to the named Plaintiffs, giving the Court jurisdiction over their claims, and that the Court should then assert supplemental jurisdiction over the other members of the classes based on 28 U.S.C. § 1367. Alternatively, Defendant Staley contends that punitive damages should be considered a "common and undivided" interest shared by all the class members, giving the Court jurisdiction over both of the entire classes.
Defendant Staley's argument that all attorneys' fees should be attributed to the named Plaintiffs, and that the Court should use supplemental jurisdiction, contradicts the rulings in Zahn v. Int'l Paper Co., 414 U.S. 291, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973), and Goldberg v. CPC Int'l, Inc., 678 F.2d 1365, 1366-67 (9th Cir.1982), cert. denied, 459 U.S. 945, 103 S.Ct. 259, 74 L.Ed.2d 202 (1982). Staley first argues that Zahn has been legislatively overruled, and, because the Goldberg court relied on Zahn, suggests that Goldberg is no longer sound authority. The Court must therefore address the threshold issue of the validity of the Supreme Court's decision in Zahn.
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