Ideal Dairy Farms, Inc. v. Farmland Dairy Farms, Inc.

• Decision Date: 27 February 1995
• Parties: , 1995-2 Trade Cases P 71,074 IDEAL DAIRY FARMS, INC., Plaintiff-Respondent, Cross-Appellant, v. FARMLAND DAIRY FARMS, INC., a corporation, Defendant-Appellant, Cross-Respondent, and Jacob Goldman; Mark Goldman; Lotz Benchester Farms, Inc.; Sunnybrook Farms, Inc., a/k/a Hohnecker Dairy; V. Puzino ; Don's Dairy Products a/k/a Staal's; and XYZ, being individuals, corporations and partnerships, presently unknown, Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 140

282 N.J.Super. 140

659 A.2d 904, 1995-2 Trade Cases P 71,074

IDEAL DAIRY FARMS, INC., Plaintiff-Respondent, Cross-Appellant, v. FARMLAND DAIRY FARMS, INC., a corporation, Defendant-Appellant, Cross-Respondent, and Jacob Goldman; Mark Goldman; Lotz Benchester Farms, Inc.;

Sunnybrook Farms, Inc., a/k/a Hohnecker Dairy; V. Puzino

[Aurek Dairy Products]; Don's Dairy Products a/k/a Staal's;

and XYZ, being individuals, corporations and partnerships,

presently unknown, Defendants.

Superior Court of New Jersey,

Appellate Division.

Argued Nov. 30, 1994.

Decided Feb. 27, 1995.

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Stuart I. Friedman, for appellant Farmland Dairies (McCarter & English, and Friedman, Wittenstein & Hochman attorneys; John L. McGoldrick, of counsel and on the brief; Richard M. Eittreim, and Andrew A. Wittenstein, of counsel).

Clark E. Alpert, for respondent (Alpert & Raice, attorneys; Mr. Alpert, of counsel; Mr. Alpert, David N. Butler, Robert J. Greenbaum and M. Nancy Flanagan, on the brief).

Before Judges KING, MUIR, Jr. and D'ANNUNZIO.

The opinion of the court was delivered by

KING, P.J.A.D.

I

This case involves claims under both the New Jersey Antitrust Act, for a conspiracy in restraint of trade, and the common law, for tortious interference with prospective economic advantage, based on alleged predatory pricing. Plaintiff Ideal Dairy Farms, Inc. (Ideal), prevailed at trial and recovered seven-figure damages under both theories against defendant Farmland Dairy Farms, Inc. (Farmland). We conclude that the Law Division judge erred as a matter of law, reverse and order judgment for Farmland.

The factual framework relevant to this appeal is essentially undisputed. Before 1985 Ideal was a dealer and distributor of Farmland dairy products. In March 1985 Ideal ended this relationship and became a dealer and distributor of Tuscan Dairy

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Farms, Inc.'s (Tuscan) dairy products. This parting was not friendly. In February 1986, eleven months later, Farmland and several of its distributors canvassed Ideal-Tuscan's customers and offered to sell them milk at prices substantially lower than Ideal's prices. Forty-eight Ideal accounts agreed to switch to Farmland. In order to recoup these accounts, Ideal was forced to lower its prices to meet Farmland's offers. Ultimately, Ideal retained forty-three of the forty-eight solicited customers, although at substantially lower prices. This spat of price competition, adverse to Ideal but of benefit to its customers, led to this law suit by Ideal for damages.

II

On March 3, 1986 Ideal filed this complaint in the Chancery Division against Farmland and its officers and principals, Jacob Goldman and Mark Goldman (collectively, Farmland); Lotz Benchester Farms, Inc.; Sunnybrook Farms, Inc., a/k/a Hohnecker Dairy; V. Puzino, Abrew Dairy Products; Don's Dairy Products a/k/a Staal's (collectively, the distributors); and unknown individuals, corporations, and partnerships. Ideal's claims included civil conspiracy, tortious interference with business advantage, common-law unfair competition, and violations of the Milk Control Act, N.J.S.A. 4:12A-1 to -58, and of the New Jersey Antitrust Act, N.J.S.A. 56:9-3, all stemming from Farmland's solicitation of the forty-eight Ideal customers in February 1986. Farmland allegedly offered these customers "below cost" prices for the purpose of damaging or eliminating Ideal as a competitor. Ideal demanded injunctive relief, compensatory and punitive damages, and attorneys fees.

Farmland denied liability and asserted a number of affirmative defenses including (1) the finding by Woodson Moffett, Director of the Division of Dairy Industries (DDI), that Farmland's pricing was not below cost, was a conclusive and final determination of a New Jersey administrative agency; (2) the Law and Chancery Divisions of the Superior Court were without subject matter

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jurisdiction to hear and decide matters within the exclusive realm of the DDI, and (3) in accordance with R. 2:2-3(a)(2), any appeal from the DDI's final determination must be taken to the Appellate Division. In July 1986 Farmland counterclaimed and filed a third-party complaint against Ideal, ten retail customers who allegedly repudiated contracts to purchase milk from Farmland and retained Ideal as their milk supplier, and Tuscan, Ideal's supplier of milk. The third-party action alleged a breach of contract by the retail customers and that Tuscan and Ideal tortiously interfered with Farmland's contractual relationship with those ten customers.

In April 1987 Farmland moved to dismiss Ideal's suit pursuant to R. 4:69-5 on the ground that Ideal had failed to exhaust its available administrative remedies or, in the alternative, sought an order in accordance with R. 2:2-3(a)(2) dismissing the action for failure of Ideal to appeal to the Appellate Division from the final administrative determination of the Director of the DDI rendered by letter of May 2, 1986. The motion was denied. Farmland sought leave for an interlocutory appeal to this court. By order of July 24, 1987 we granted the motion for the sole purpose of ordering the trial court to hold a hearing to decide whether any issues in the action were barred by the doctrine of collateral estoppel, and to make appropriate factual findings and conclusions of law with respect to each issue which Farmland claimed was barred by estoppel.

On October 14, 1987 Ideal filed an amended complaint which alleged that DDI Director Moffett entered into a conspiracy with Farmland to deprive Ideal of its civil rights, in violation of 42 U.S.C.A. §§ 1983, 1985, and 1986. Moffett was not joined as a defendant. Ideal later filed a third amended complaint, alleging that Farmland violated the civil provisions of the New Jersey and federal RICO statutes ( N.J.S.A. 2C:41-1 to 6.2; 18 U.S.C.A. §§ 1961 to 1968).

The Law Division judge then held a plenary hearing on the collateral estoppel issue. The judge found that the requirements for collateral estoppel had not been met and struck that defense.

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Farmland eventually and voluntarily dismissed its third-party complaint against Ideal's customers and against Tuscan. Codefendant Don's Dairy Products, a/k/a Staal's, filed a crossclaim against Farmland. The first count sought indemnification, based on Farmland's "primary" misconduct, while the second count sought contribution. This crossclaim was dismissed by consent of the parties prior to the start of trial. Codefendant Lotz Benchester Farms (Lotz) also filed a crossclaim against Farmland for indemnification or contribution. This crossclaim was dismissed with prejudice by consent of the parties at trial. In October 1990 codefendant Lotz and Ideal entered into an agreement in which Ideal agreed not to seek a judgment against Lotz.

Trial began on January 2 and ended on March 22, 1991. The trial judge was scheduled to retire on February 1, 1991. However, by order dated January 16, 1991, and pursuant to N.J.S.A. 43:6A-13, the Supreme Court recalled him for temporary service without pay, for the specific purpose of completing the trial. On October 10, 1991 the Supreme Court again temporarily recalled the judge for the purpose of writing the opinion and entering judgment.

On September 30, 1991 the judge issued an opinion with his findings of fact and conclusions of law. The judge found that: 1) there was a campaign by Farmland and its codefendant distributors to attack Ideal in a predatory fashion; 2) Farmland offered to sell milk to Ideal customers below cost; 3) Farmland practiced "predatory pricing" and solicited Ideal's customers for the sole purpose of injuring Ideal and intimidating other distributors who were considering dropping Farmland as a supplier of milk; 4) the codefendant distributors conspired with Farmland against Ideal; 5) Moffett, the director of DDI, did not conspire with Farmland against Ideal; and 6) Farmland had a "hold" on its co- conspirator distributors due to the fact that these small distributors relied on Farmland for products and were indebted to Farmland through its generous credit policies.

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The judge concluded that Farmland was liable to Ideal under the New Jersey Antitrust Act and the common-law, for tortious interference with economic advantage. Ideal's claim for common-law unfair competition was held subsumed in these claims. With respect to the Antitrust Act, the judge determined that there was a "per se" violation based upon the combined efforts of the defendants to damage Ideal. The judge rejected Ideal's "racketeering" claims under New Jersey and federal RICO statutes and its civil conspiracy claim under 42 U.S.C.A. §§ 1983, 1985, and 1986.

With respect to damages, the judge acknowledged that "the convoluted method devised to measure plaintiff's losses [was] most troubling." He also recognized the fact that Ideal lost some of the most important records pertaining to damages while the case was pending, and stated that he found this "astonishing" in light of the time, effort, and personal attention given to the case by Ideal's executives. Although the loss of documents created "difficulty in corroborating the damage claims," the judge nonetheless awarded compensatory damages in the full amount requested by Ideal, $1,302,871.99. The damage award was assessed solely against Farmland. The Goldmans and the distributors were found not liable.

The judge also awarded punitive damages in the amount of $1,500,000 finding that the actions of Farmland were malicious, and that it was necessary to deter similar conduct in the future. The punitive damages were also assessed solely against Farmland, not against the codefendants and distributors. The judge reasoned that the distributors were not directly culpable but had participated because they were indebted to Farmland which was their only source of supply for milk.

On October 22, 1991 the judge ruled that pursuant to N.J.S.A. 56:9-12, the antitrust judgment would be entered...