DeLaughter v. Borden Company

• Decision Date: 23 November 1966
• Docket Number: No. 22342.,22342.
• Citation: 364 F.2d 624
• Parties: Clyde DeLAUGHTER, d/b/a Bogalusa Dairy Products, Appellant, v. The BORDEN COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

364 F.2d 624 (1966)

Clyde DeLAUGHTER, d/b/a Bogalusa Dairy Products, Appellant, v. The BORDEN COMPANY, Appellee.

No. 22342.

United States Court of Appeals Fifth Circuit.

August 9, 1966.

Rehearing Denied November 23, 1966.

Richard F. Knight, Bogalusa, La., for appellant.

Richard B. Montgomery, Jr., New Orleans, La., Richard J. Flynn, Washington, D. C., Joseph A. Greaves, George W. McBurney, Stuart S. Ball, Chicago, Ill., for appellee. Montgomery, Barnett, Brown & Read, New Orleans, La., Sidley, Austin, Burgess & Smith, Chicago, Ill., of counsel.

Before JONES and GEWIN, Circuit Judges, and HUNTER, District Judge.

GEWIN, Circuit Judge:

In a state antitrust action for treble damages allegedly resulting from appellee's (defendant) violation of the Louisiana Orderly Milk Marketing Act, removed to the United States District Court for the Eastern District of Louisiana on the basis of diverse citizenship, 28 U.S.C. § 1332, the court held that appellant's (plaintiff) cause of action had prescribed under the one-year provision of the Louisiana Civil Code, Article 3536 and granted the defendant's motion for summary judgment, Rule 56, F.R.Civ.P. Plaintiff appeals from the order of the District Court dismissing the suit.

Plaintiff,¹ a resident of Washington Parish, Louisiana, was engaged in the manufacturing, processing and packaging of milk and various milk products as Bogalusa Dairy Products with his main office in the City of Bogalusa, Washington Parish, Louisiana. The defendant, The Borden Company, also engaged in the manufacturing, processing and packaging of milk and milk products, domiciled in New Jersey with its principal office in New York City, operates plants and establishments at various places in Louisiana. Both plaintiff and defendant are governed by the provisions of the Louisiana Orderly Milk Marketing Act, LSA-R.S. 40:940.1-40:940.23 (1965) and come under the classification of a processor, handler or distributor as defined by LSA-R.S. 40:940.2(7) (8) (1965).

Plaintiff instituted an antitrust action against Borden on March 25, 1961, and alleged that Borden, accrued, offered and paid rebates and discounts from sometime prior to February 1, 1960, until February 9, 1961,² in violation of Section 940.3(1) of the Orderly Milk Marketing Act which prohibits a processor, handler, or distributor from giving or offering any discount or rebate in connection with the sale of products and Section 940.10 which prohibits a processor, handler, or distributor from giving or offering rebates or discounts with the intent or with the effect of unfairly diverting trade from a competitor or of injuring a competitor. Because of the above alleged violations, plaintiff also averred that he had sustained injury to his business and sought treble damages pursuant to Section 940.15 of the Act.

Borden, in its amended answer, asserted that with respect to all matters which occurred more than one year prior to the filing of this action, March 25, 1961, plaintiff's claim was prescribed by virtue of Article 3536 of the Louisiana Civil Code, and that various sections of the Act were unconstitutional in that they deprived Borden of its property without due process of law. In the pretrial hearing on these two affirmative defenses, Borden moved for summary judgment. The District Court in granting the motion did not pass upon Borden's constitutional defense but held that plaintiff's entire claim was barred by prescription.

We do not reach the merits of this case, whether Borden committed any of the acts set forth in plaintiff's complaint or whether these acts violated the Orderly Milk Marketing Act, nor do we reach the contention that certain sections of the Act are unconstitutional; for the District Court has not ruled on these issues. We are confronted with the sole issue of whether the District Court erred in its determination that the Louisiana prescription statutes barred plaintiff's entire cause of action.

The pertinent portions of the Louisiana prescription statutes, LSA-C.C. Art. 3536 and 3537 read thusly:

"Art. 3536. The following actions are also prescribed by one year:

That for * * * damages * * * resulting from offenses or quasi offenses."

"Art. 3537. The prescription mentioned in the preceding article runs:

* * * from that on which the injurious words, disturbance or damage were sustained." (Emphasis added)

The District Court found that the one year period of limitation applied to the Orderly Milk Marketing Act by analogizing Loew's Inc. v. Don George, Inc., 237 La. 132, 110 So.2d 553 (1959) where the Louisiana Supreme Court applied the provision to a private anti-monopoly action brought under the State Monopoly Act for "injury to business."³ Neither we nor the parties to this appeal question this holding.

The District Court then determined that the "injury to business" complained of by plaintiff, was a single wrong constituting a single cause of action. Applying this determination to the language of the prescription statute, Article 3537, the court concluded that prescription began to run on the "single cause of action" from the time plaintiff acquired sufficient knowledge of the offense, the "single wrong," to realize that he was sustaining damages. According to the testimony of Elton DeLaughter,⁴ plaintiff's son and former assistant manager of the Bogalusa Dairy Products, the plaintiff knew of Borden's allegedly injurious activities in February of 1960 and had even heard rumors to the same effect prior to February, 1960. Therefore, the District Court held that prescription began to run in February of 1960, and since legal action was not commenced until March 25, 1961, plaintiff's cause of action was barred.

The plaintiff contends the District Court erred in its finding of a single wrong constituting a single cause of action, which oddly enough was plaintiff's own argument before the court, because it failed to apply the provisions of Section 940.15 of the Orderly Milk Marketing Act which states in part: "Each day's violation shall constitute a separate offense." Applying this provision to the prescription statute, plaintiff argues that prescription begins to run on each separate offense when that offense causes damage. Recognizing that an offense can cause the continuing creation of damages and that the prescription statute does not specifically say that the period of limitation begins to run when damages are first sustained, plaintiff concludes, therefore, that any wrongful acts of Borden which caused plaintiff to sustain damages during the year March 25, 1960 to March 25, 1961, can be the basis of a cause of action for damages so sustained. Thus it is argued, the prescription statute begins to run anew each day the alleged offense causes new damages. Since it is a jury question as to when and to what extent damages were sustained by plaintiff as a result of Borden's allegedly wrongful conduct, he argues it was error for the District Court to dismiss the suit on a motion for summary judgment.

The Borden Company contends that prescription begins to run from the date the alleged wrongful act causes immediate and apparent damage and after one year from this date the prescription statute is a bar to any action based on these wrongful acts, even though the damages resulting from the acts continue to accrue to a date within a year prior to commencement of the action. Thus all causes of action based upon allegedly wrongful acts of Borden from which the plaintiff sustained damages prior to March 25, 1960, are barred. This would be true, Borden contends, even if plaintiff's interpretation of the Act is correct, that each violation gives rise to a separate and distinct cause of action. But, if plaintiff's interpretation is correct, Borden admits⁵ that the prescription statute has not barred a cause of action based on its wrongful acts committed after March 25, 1960, which caused damage to plaintiff's business. Borden also points out that the District Court held that prescription began to run from the time plaintiff acquired sufficient knowledge of the offense to realize that he was sustaining damage. Borden contends that according to plaintiff's own testimony,⁶ he was aware of Borden's allegedly wrongful acts and knew that he was sustaining immediate and apparent damage.

The District Court, Borden and the plaintiff have presented to us varied approaches to the determination of whether plaintiff's claims are barred by the Louisiana prescription statute. We begin our study of the problem with the District Court's finding that the acts of Borden created a single cause of action. In view of the language of the statute which clearly states that such is not the case, "each day's violation shall constitute a separate offense," we find the court to be in error. Therefore, we conclude that each act committed by Borden in violation of a provision of the Orderly Milk Marketing Act is a separate and distinct offense which gives rise to a separate cause of action. We take note of the fact that the reasoning of the District Court is not seriously urged by either of the parties in support of its respective contentions.

Having determined that each act gives rise to a separate cause of action and therefore the prescriptive period runs separately for each act, we find that plaintiff's claim is not barred in its entirety.⁷ Clearly, those acts of Borden committed after March 25, 1960, for which plaintiff has suffered actual damages may be the basis for a cause of action, for they are within the statutory period.

Calculating when the period began to run on the acts of Borden committed prior to March 25, 1960, presents the major problem in this case. We agree with the District Court's holding that one must know or should have known that he is sustaining an actionable injury before the prescription period begins to run. See R. J. Reynolds Tobacco Co. v. Hudson, 314 F.2d 776 (5 Cir. 1963). It has been established that plaintiff knew of...