Impro Products, Inc. v. Herrick

• Decision Date: 11 August 1983
• Docket Number: No. 82-2124,82-2124
• Citation: 715 F.2d 1267
• Parties: 1983-2 Trade Cases P 65,540 IMPRO PRODUCTS, INC., a Minnesota corporation, Appellant, v. John B. HERRICK; Babson Brothers, Co., an Illinois corporation; Richardson, Meyers and Donofrio, a Maryland corporation; Upjohn Co., a Delaware corporation; and Philips Roxane, Inc., a Delaware corporation, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1267

715 F.2d 1267

1983-2 Trade Cases P 65,540

IMPRO PRODUCTS, INC., a Minnesota corporation, Appellant, v. John B. HERRICK; Babson Brothers, Co., an Illinois corporation; Richardson, Meyers and Donofrio, a Maryland corporation; Upjohn Co., a Delaware corporation; and Philips Roxane, Inc., a Delaware corporation, Appellees.

No. 82-2124.

United States Court of Appeals Eighth Circuit.

Submitted June 13, 1983.

Decided Aug. 11, 1983.

James Borthwick, Floyd R. Finch, Jr., Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, Mo., for appellee Philips Roxane, Inc.; L.W. Rosebrook, Ahlers, Cooney, Dorweiler, Haynie & Smith, Des Moines, Iowa, of counsel.

H.R. Randy Duncan, Lorraine J. May, Duncan, Jones, Riley & Finley, Des Moines, Iowa, for appellee The Upjohn Co.

Randall G. Horstmann, of Nyemaster, Goode, McLaughlin, Emery & O'Brien, P.C., Des Moines, Iowa, for appellee Richardson, Myers & Donofrio, Inc.

Philip C. Jones, Qualley, Larson & Jones, Washington, D.C., George T. Qualley, Qualley, Larson & Jones, Sioux City, Iowa, for appellant Impro Products, Inc.; John F. Daniels, Qualley, Larson & Jones, Kansas City, Mo., Harry L. Capadano, III, Qualley, Larson & Jones, Omaha, Neb., of counsel.

Henry A. Harmon, Mark J. Wiedenfeld, Grefe & Sidney, Des Moines, Iowa, for appellee Babson Bros. Co.

Thomas D. Hanson, Barry A. Russell, Blanchard, Cless, Hanson & Pundt, John Scott, Asst. Atty. Gen., Des Moines, Iowa, for appellee John B. Herrick.

Before HEANEY, Circuit Judge, and HENLEY and BROWN, ^* Senior Circuit Judges.

HEANEY, Circuit Judge.

Impro Products, Inc., appeals from a district court order granting summary judgment in favor of the defendants on Impro's claims under Sections 1 and 2 of the Sherman Act. The court found no evidence that any of the defendants had conspired to suppress Impro as a competitor in the animal health field. We affirm.

I. BACKGROUND

A. THE INDUSTRY STRUCTURE

Antibiotics are used in the animal health industry to treat specific illnesses, and to serve as a health maintenance additive in animal feed. Because antibiotics are drugs within the meaning of the Food, Drug and Cosmetic Act, 21 U.S.C. § 321, they are subject to regulation by the federal Food and Drug Administration (FDA). This regulation extends both to drugs marketed in interstate commerce, and to those marketed in intrastate commerce which contain components that have been shipped interstate.

Animal biologics are products prepared from animal tissues or fluids, or from microorganisms, and are used to prevent or treat disease in animals. Pursuant to the Virus, Serum and Toxin Act of 1913, 21 U.S.C. §§ 151 et seq., the United States Department of Agriculture (USDA) regulates animal biologics distributed in interstate commerce. Grand Laboratories, Inc. v. Harris, 660 F.2d 1288, 1289 (8th Cir.1981), cert. denied, 456 U.S. 927, 102 S.Ct. 1972, 72 L.Ed.2d 442 (1982). Animal biologics marketed solely in intrastate commerce, however, are subject to regulation by the states, if they choose to exercise such authority, and by the FDA pursuant to the Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301 et seq. See Grand Laboratories, Inc. v. Harris, supra, 660 F.2d at 1289-1292.

The significance of these separate federal regulatory schemes is as follows: Antibiotic drugs can be marketed--either interstate or intrastate--only after they have been tested and approved by the FDA. Similarly, animal biologics can be sold in interstate commerce only if they have been licensed by the USDA. Animal biologics, however, can be marketed on an intrastate basis without a USDA license, but they are subject to FDA review. See Grand Laboratories, Inc. v. Harris, supra, 660 F.2d at 1290-1292; id. at 1293-1295 (Heaney, J., dissenting).

B. THE PLAINTIFF

Impro Products, Inc., is a Minnesota corporation with its principal place of business in Waukon, Iowa. It produces and markets a variety of animal biologics containing whey antibodies. ¹ It classifies its products into three categories: (1) food supplements which are intended to increase milk production in dairy cattle and which are marketed in interstate commerce; (2) whey blends which are intended to prevent and control infections in animals and which are marketed on an intrastate basis; and (3) teat dips (containing no whey antibodies) which are sold in interstate commerce.

C. DEFENDANT HERRICK

Dr. John Herrick, during the events in question here, was a USDA extension veterinarian, and a tenured professor of veterinary science at Iowa State University. He is a past president of the American Veterinary Medical Association and has been a member of many veterinary groups, farm organizations and industry associations.

Dr. Herrick's primary function as a USDA extension veterinarian on the Iowa State University staff was to accumulate information on current developments and problems in the animal health care field and to disseminate that information to farmers, government officials, veterinarians, academicians and industry representatives in the animal health field.

Between 1966 and 1976, Dr. Herrick entered into consulting arrangements with each of the corporate defendants. None of them, however, knew that Dr. Herrick had similar consulting arrangements with the other corporate defendants until this lawsuit was filed. Between November, 1959, and the spring of 1962, Dr. Herrick also was in communication with Impro officials concerning the use, efficacy and commercial possibilities of Impro's products. Impro contends that Dr. Herrick ceased rendering any assistance to the company after it refused his request in 1962 for a monthly consulting fee of $100. Dr. Herrick denies making such a request.

D. THE CORPORATE DEFENDANTS ²

1. Babson Brothers Company

Babson is an Illinois corporation with its principal place of business in Oakton, Illinois. It markets milking equipment, related dairy supplies, and teat dips. It does not manufacture or distribute any antibiotics, vaccines or serums. Babson retained Dr. Herrick beginning in 1976 to author a column in its publication Dairy Illustrated, to author a book on milking principles, to be available for speaking engagements and meetings, and to otherwise act as a consultant for the company. Babson paid Dr. Herrick a monthly fee of $500, plus travel expenses.

2. Richardson, Meyers and Donofrio, Inc. (RM & D)

RM & D is a Baltimore-based advertising agency which includes among its clients American Cyanamid Company, a manufacturer and seller of livestock health products, including antibiotics. RM & D prepares printed advertisements in farm media and veterinary journals for American Cyanamid. RM & D retained Dr. Herrick beginning in 1975 to provide it with general information relating to the animal health economy, management trends, new products, new ideas and problem areas. In return, RM & D paid Dr. Herrick an annual fee of $10,000 for which American Cyanamid reimbursed RM & D.

3. Upjohn Company

Upjohn is a Delaware pharmaceutical corporation with its principal place of business in Chicago. It markets antibiotic drugs for animal health care. Upjohn began retaining Dr. Herrick in 1966 to provide its marketing staff with information concerning trends in the livestock health industry and competing products. ³ Upjohn paid Dr. Herrick $1,500 per year for his duties. Upjohn also has participated in trade organizations and sponsored university research relating to the animal health care industry.

4. Philips Roxane, Inc.

Philips Roxane is a Delaware corporation with its principal place of business in St. Joseph, Missouri. It sells a variety of animal health products, including antibiotics, biologics, teat dips, insecticides and instruments. Dr. Herrick began consulting for Philips Roxane in the mid-to-late 1960s. His duties included providing information on recent developments and problems in the animal health field, appearing at press conferences and meetings concerning the company's products, and providing answers to inquiries from Philips Roxane's technical marketing and sales staffs. In return, Philips Roxane provided Dr. Herrick with an automobile and reimbursed his automobile expenses. Philips Roxane also has participated in trade organizations and sponsored university research in the animal health field.

E. COMPETITION BETWEEN IMPRO AND THE CORPORATE DEFENDANTS

According to Impro, its intrastate biological products are in competition with the antibiotic drugs produced by the corporate defendants (or in the case of RM & D, the antibiotics produced by its client American Cyanamid). ⁴ Impro contends that its products are effective in increasing milk production, and in preventing or controlling infections, and that its products do not produce the adverse side effects--primarily the creation of resistant bacteria and the existence of antibiotic residues in meat and dairy products--caused by antibiotic drugs.

Impro further asserts that the corporate defendants entered into a single conspiracy or several conspiracies with Dr. Herrick--under the guise of consulting agreements--to destroy Impro or to limit its effectiveness as a competitor. Its theory is that in return for compensation from the corporate defendants, Dr. Herrick used his various positions to promote the products of the corporate defendants, to disparage Impro's products, and to influence various federal and state governmental officials to deny Impro necessary licensing for its products.

The corporate defendants deny that any of them entered into a conspiracy with Dr. Herrick to suppress Impro as an effective competitor in the animal health field. They contend that there would be no reason for any of them to enter into such an agreement because Impro's biologics do not compete with their products and because there is no adequate scientific data indicating that Impro's products are efficacious. They additionally assert that Dr. Herrick's comments with respect to the products of Impro...