In re Processed Egg Prods. Antitrust Litig.

• Decision Date: 13 September 2016
• Docket Number: No. 08-md-2002,08-md-2002
• Parties: IN RE: PROCESSED EGG PRODUCTS ANTITRUST LITIGATION THIS DOCUMENT APPLIES TO: ALL ACTIONS
• Court: U.S. District Court — Eastern District of Pennsylvania

IN RE: PROCESSED EGG PRODUCTS ANTITRUST LITIGATION

THIS DOCUMENT APPLIES TO: ALL ACTIONS

No. 08-md-2002

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

SEPTEMBER 13, 2016

MULTIDISTRICT LITIGATION

MEMORANDUM

PRATTER, J.

Direct and indirect purchasers of eggs accuse major egg producers of conspiring to control and limit the nation's egg supply, thereby increasing egg prices through a number of allegedly interrelated, anticompetitive programs. Specifically, the defendant egg producers are accused of violating Section 1 of the Sherman Act by developing and implementing an unlawful egg certification program, exporting eggs at a loss, and colluding to reduce egg production in periods of oversupply through coordinated action, such as reducing chick hatch, promoting early molting, and expediting hen disposal. The defendants deny that these programs violate the Sherman Act.

The Direct Purchaser Plaintiffs (DPPs), Indirect Purchaser Plaintiffs (IPPs) and Direct Action Plaintiffs¹ (DAPs) (collectively, "plaintiffs") have moved for summary judgment as to the affirmative defenses asserted by Defendants United Egg Producers, Inc., ("UEP"), United States Egg Marketers, Inc. ("USEM"), Cal-Maine Foods, Inc., Ohio Fresh Eggs, LLC, Daybreak Foods, Inc., Morak, LLC, Michael Foods, Inc., Rose Acre Farms, Inc., and R.W. Sauder, Inc., basedupon statutory agricultural cooperative exemptions from the federal antitrust laws. This motion specifically alleges that neither UEP nor USEM are so-called Capper-Volstead agricultural collectives and therefore are not shielded from antitrust liability. The defendants have filed opposition memoranda addressing the arguments relevant to UEP and USEM, respectively. The plaintiffs submitted reply papers. The Court heard oral argument on the motion and permitted additional briefing.

For the reasons discussed below, the Court will grant the plaintiffs' motion as to UEP but deny the motion as to USEM.

I. FACTUAL BACKGROUND

As noted in the Court's prior opinions on the various motions for summary judgment, the issues raised in connection with this motion are limited in scope, and, therefore, the Court need only discuss the factual background relevant to the pertinent arguments presented. Here, that consists of the nature and membership of the two agricultural cooperatives named as defendants in this case.

United Egg Producers ("UEP") came into existence in 1998. The defendants allege that UEP was created as a Capper-Volstead Agricultural Cooperative comprised of five regional marketing cooperatives. The UEP's primary activities include providing a variety of services its members, related to lobbying and marketing, animal welfare, food safety, and environmental issues. The UEP, its president, and its staff reflect and serve the interests of its members. During the alleged conspiracy period, UEP membership included R.W. Sauder, Inc., Hillandale Farms, Inc., and Michael Foods, Inc.

For reasons that will be explained in greater detail below, the parties are at pains to describe with some particularity the nature of the operations of certain of the UEP members.Briefly, the reason for this focus is that Capper-Volstead's shield only immunizes actual farmers. While Sauder interacted closely with its contract farmers, during the conspiracy period the company itself did not own any farms which produced eggs. The plaintiffs also contend that the record establishes Hillandale did not own any farms which produced eggs, but, rather, was engaged principally in marketing and selling eggs as a distributor. Similarly, Michael Foods was engaged primarily in egg processing. The company was vertically integrated, securing approximately 30% of its egg requirements from company-owned chickens. The remaining eggs it purchased from third parties.

United States Egg Marketers ("USEM") is a cooperative involved in the export of eggs. In 2000, UEP entered into an agreement to provide management services and staff to USEM. The defendants likewise claim that USEM is a Capper-Volstead cooperative. The plaintiffs identify five separate entities which were members of USEM, which the plaintiffs contend were principally engaged something other than egg farming.

II. STANDARD OF REVIEW

The applicable standard of review here should be familiar. Summary judgment is appropriate where, viewing the record in the light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) ("[S]ummary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."). The Court must not "weigh the evidence and determine the truth of the matter but . . . determine whether there is a genuine issue for trial." Id.at 249. The moving party has the burden of establishing the basis of its motion and identifying the portions of the record which demonstrate the absence of a genuine issue of material fact. After the moving party has made this initial showing, then the nonmoving party must "make a showing sufficient to establish the existence of [every] element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322; Goldenstein v. Repossessors Inc., 815 F.3d 142, 146 (3d Cir. 2016) (citing Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 265 (3d Cir. 2014) ("[W]here a non-moving party fails sufficiently to establish the existence of an essential element of its case on which it bears the burden of proof at trial, there is not a genuine dispute with respect to a material fact and thus the moving party is entitled to judgment as a matter of law." ).

III. ANALYSIS

The defendants have asserted affirmative defenses based upon alleged agriculture cooperative exemptions to the antitrust laws found in Sections 1 and 2 of the Capper-Volstead Act, 42 Stat. 388, 7 U.S.C. §§ 291, 292 (West), Section 6 of the Clayton Act, 38 Stat. 731, 15 U.S.C. § 17, and Section 455 of the Cooperative Marketing Act, 44 Stat. 803, 7 U.S.C. § 455. The pending motion attacks these affirmative defenses from several different angles.

A. Capper-Volstead Act and Clayton Act Section 6²

The defendants assert that they cannot be liable under the antitrust laws for the actions of UEP or USEM because each is a cooperative protected by Section 1 of the Capper-Volstead Act and Section 6 of the Clayton Act. The motion raises a number of separate challenges to theapplicability of Capper-Volstead, most of which need not be addressed here for reasons explained below.

The statute is clear that the relevant exemption only covers cooperatives comprised exclusively of egg farmers. Based upon the record here, UEP counted as members at least one, and very likely more than one, non-producer. Consequently, the Court finds, as a matter of law, UEP is not protected under Capper-Volstead or Section 6 of the Clayton Act.

To explain: the Capper-Volstead Act provides an exemption from some of the antitrust prohibitions of the Sherman Act and the Clayton Act. In re Mushroom Direct Purchaser Antitrust Litig., 655 F.3d 158, 165 (3d Cir. 2011); see 7 U.S.C. § 291. In relevant part, this Act provides

Persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers may act together in associations, corporate or otherwise, with or without capital stock, in collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of persons so engaged. Such associations may have marketing agencies in common; and such associations and their members may make the necessary contracts and agreements to effect such purposes: Provided, however, That such associations are operated for the mutual benefit of the members thereof as such producers . . . .

7 U.S.C.A. § 291 (West) (emphasis added). The Capper-Volstead Act exempts certain agricultural cooperatives, made up of farmers, planters, ranchmen, dairymen, or nut or fruit growers, from some of the provisions of the antitrust laws, allowing such farmers to act through agricultural cooperatives with "the same unified competitive advantage—and responsibility—available to businessmen acting through corporations as entities." Maryland & Virginia Milk Producers Ass'n v. United States, 362 U.S. 458, 466 (1960) (discussing both Capper-Volstead and Section 6 of the Clayton Act); Nat'l Broiler Mktg. Ass'n v. United States, 436 U.S. 816, 823, (1978); Mushroom Antitrust Litig., 655 F.3d at 166.

Section 6 of the Clayton Act preceded Capper-Volstead, but operates in much the same manner. The statute was adopted in 1914 in order to clarify that the antitrust laws did not extend to certain agricultural organizations or labor unions. It states in relevant part:

The labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws.

Maryland & Virginia Milk Producers Ass'n v. United States, 362 U.S. 458, 466 n.11 (1960) (citing 38 Stat. 731 (1914), 15 U.S.C. § 17). Capper-Volstead, adopted in 1922, had the effect of extending Section 6 of the Clayton Act to capital stock...