Knuth v. Erie-Crawford Dairy Coop. Association

• Decision Date: 03 May 1968
• Docket Number: No. 16656.,16656.
• Parties: Robert M. KNUTH, on behalf of himself and all others similarly situated v. ERIE-CRAWFORD DAIRY COOPERATIVE ASSOCIATION et al., Robert M. Knuth, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

395 F.2d 420 (1968)

Robert M. KNUTH, on behalf of himself and all others similarly situated v. ERIE-CRAWFORD DAIRY COOPERATIVE ASSOCIATION et al., Robert M. Knuth, Appellant.

No. 16656.

United States Court of Appeals Third Circuit.

Argued December 8, 1967.

Decided May 3, 1968.

Rehearing Denied June 20, 1968.

Paul A. Simmons, Tempest & Simmons, Monongahela, Pa., for appellant.

Thomas W. Pomeroy, Jr., Kirkpatrick, Pomeroy, Lockhart & Johnson, Pittsburgh, Pa. (W. Walter Braham, Jr., Harry W. Turner, Pittsburgh, Pa., on the brief), for appellees, Erie-Crawford Dairy Cooperative, Dairymen's Cooperative Sales Assn., and others.

Frank L. Seamans, Robert C. McCartney, Edward G. O'Connor, Eckert, Seamans & Cherin, Pittsburgh, Pa., for appellees, Sealtest Foods Div. of Nat. Dairy Products Corp. and Akron Milk Producers Cooperative.

Clyde W. Armstrong, Victor P. Gottschall, Thorp, Reed & Armstrong, Pittsburgh, Pa., for appellees, Golden Glow Dairy, Yaple's Dairy, Inc., Schruer's Dairy, Golden Crown Dairy and Erie Dairy Land, Inc.

Willis F. Daniels, Daniels & Swope, Harrisburg, Pa., for appellee, Sterling Milk, Inc.

William W. Knox, Knox, Pearson & McLaughlin, Erie, Pa., for appellee, H. Robert Fischer.

Nathan Routman, Routman, Moore & Goldstone, Sharon, Pa., for appellee, Klein Dairy.

Henry E. Rea, Jr., Brandt, Riester, Brandt & Malone, Pittsburgh, Pa., for appellee, Schneider's Dairy.

Errol Fullerton, New Castle, Pa., for appellee, Linger Light Dairy.

Before BIGGS, KALODNER, and SEITZ, Circuit Judges.

OPINION OF THE COURT

SEITZ, Circuit Judge.

This is an appeal from a judgment dismissing an amended complaint with prejudice for failure to state a claim.¹

Plaintiff's class action claim (Count I) asserted under Section 4 of the Clayton Act,² alleged violations of Sections 1 and 2 of the Sherman Act.³ The class represented by appellant allegedly consisted of approximately 1,200 Pennsylvania farmer-producers ("producers") who furnished milk for the period designated to one of the defendants Erie-Crawford,⁴ a Pennsylvania cooperative marketing organization. Erie-Crawford in turn sold the milk to certain of the other defendants ("processors") who processed it and sold it to retailers as bottled milk or dairy products.

The appellant and the other Pennsylvania producers he purports to represent furnished raw milk to their marketing cooperative, Erie-Crawford, under a contract by which the net proceeds of all money received by Erie-Crawford was to be paid to them as their interests appeared. This milk was sold to the processors at prices per hundredweight fixed by the Pennsylvania Milk Control Commission under statutory authority.⁵ Erie-Crawford also received milk from producers outside of Pennsylvania. This milk was shipped into Pennsylvania and sold to the processors at prices per hundredweight which were less than the fixed selling price of the Pennsylvania produced milk. All proceeds received by Erie-Crawford from the sale of milk were placed in a market-wide milk price pool. From this pool, all farmer-producers were paid an equal net amount per hundredweight of milk supplied regardless of the amounts received for any particular farmer-producer's milk.

The best analysis we can make of Count I of plaintiff's amended complaint reveals that three courses of conduct involving defendants are alleged to constitute violations of Sections 1 and 2 of the Sherman Act. We first state them in summary fashion and then treat them seriatim.

Plaintiff alleges a conspiracy by all appellees:

I. to fix the price of milk shipped into Pennsylvania by granting rebates to the processors on the milk produced in Pennsylvania and purchased by them from Erie-Crawford;

II. to suppress and eliminate competition in the sale of milk and other dairy products as evidenced by the Erie-Crawford directors' action in causing Pennsylvania milk to be shipped into Ohio and other states and then reshipped to Pennsylvania so that it can be sold to the processors at a price below the minimum price fixed by the Pennsylvania Milk Control Commission;

III. to suppress and eliminate competition in the sale of milk and other dairy products by the processors' concerted refusal to deal directly with the producers, and also by their refusal to buy milk from any source other than those sources approved by Erie-Crawford.

The damages from the foregoing conduct are alleged to be an amount equal to the rebates plus other specific economic loss.

Since Count I was dismissed with prejudice for failure to state a claim, we must take the material allegations of the complaint to be true. Doubts should be resolved in favor of the position which will uphold the pleading as such. Decisions of the United States Supreme Court indicate that we should be extremely liberal in construing antitrust complaints. See Radiant Burners, Inc. v. Peoples Gas, Light & Coke Co., 364 U.S. 656, 660, 81 S.Ct. 365, 5 L.Ed.2d 358 (1961); Radovich v. National Football League, 352 U.S. 445, 453-454, 77 S.Ct. 390, 1 L.Ed.2d 456 (1957); and United States v. Employing Plasterers' Ass'n, 347 U.S. 186, 188-189, 74 S.Ct. 452, 98 L. Ed. 618 (1954). Indeed, in the Employing Plasterers' case, the Supreme Court made it clear that, "whether the charges be called `allegations of fact' or `mere conclusions of the pleader,' * * * they must be taken into account in deciding" whether a claim for relief is stated. Above at p. 188, 74 S.Ct. at p. 454. And they further said that,

"* * * Where a bona fide complaint is filed that charges every element necessary to recover, summary dismissal of a civil case for failure to set out evidential facts can seldom be justified. If a party needs more facts, it has a right to call for them under Rule 12(e) of the Federal Rules of Civil Procedure. And any time a claim is frivolous an expensive full dress trial can be avoided by invoking the summary judgment procedure under Rule 56." Above at p. 189, 74 S.Ct. at p. 454.

The "liberal" approach to the consideration of antitrust complaints is important because inherent in such an action is the fact that all the details and specific facts relied upon cannot properly be set forth as part of the pleadings. See Noerr Motor Freight, Inc. v. Eastern R. R. Presidents Conference, 113 F. Supp. 737 (E.D.Pa.1953).⁶ In the use of Section 4 of the Clayton Act, the courts have attributed to a private litigant the role of an ancillary force to supplement governmental enforcement of the antitrust laws. See United States v. Borden Co., 347 U.S. 514, 74 S.Ct. 703, 98 L.Ed. 903 (1954). All the law requires to state a private treble damage action claim are allegations adequate to show a violation of the antitrust acts and that plaintiff has been damaged thereby. Radiant Burners, Inc. v. Peoples Gas, Light & Coke Co., above.

We also take occasion to note that Section 1 of the Capper-Volstead Act⁷ does not authorize combinations or conspiracies between cooperatives and others in restraint of trade. United States v. Borden Co., 308 U.S. 188, 60 S. Ct. 182, 84 L.Ed. 181 (1939). Indeed, such a cooperative may even be liable under the Sherman Act without proof of involvement of non-cooperatives if the activity under attack is predatory. Maryland and Virginia Milk Producers Ass'n, Inc. v. United States, 362 U.S. 458, 80 S.Ct. 847, 4 L.Ed.2d 880 (1960).

We turn now, with the aforementioned principles in mind, to a seriatim analysis of the three courses of conduct which we infer from the amended complaint are the alleged violations of the Sherman Act.

I. Rebates

Plaintiff claims that the defendants conspired to fix the price of milk shipped into Pennsylvania by the use of rebates to the processors on milk produced in Pennsylvania and purchased by them from Erie-Crawford. The date of the conspiracy is alleged, plus an allegation concerning defendants' knowledge of the price set for milk by the Pennsylvania Milk Control Commission. Rebates given solely on Pennsylvania milk allegedly result in the suppression and elimination of competition by preventing the free flow of milk in interstate commerce from sources outside the State of Pennsylvania into the State of Pennsylvania. The object of this alleged combination and conspiracy was to accomplish the raising, fixing, controlling, setting, stabilizing and affecting the price of milk shipped in interstate commerce.

As we read the opinion of the district court it held that the rebate allegation involved solely a question of state law, i. e., whether the rebate practice was contrary to the Pennsylvania Milk Control Act. But it does not matter whether the practice was legal or illegal under state law if it was prohibited action under the Sherman Act. Certainly, it is not suggested that the rebate practice is required by state law. Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). The issue then is whether the allegations sufficiently show a violation of the Sherman Act to withstand a motion to dismiss.

Plaintiff's allegation of a conspiracy to fix prices in the interstate transportation of milk by the use of rebates states the elements necessary to show a violation of Section 1 of the Sherman Act. The payment of rebates to processors who purchase Pennsylvania produced milk, without other evidence, would tend to encourage such processors to purchase more Pennsylvania milk in proportion to out-of-state milk than they would purchase without such rebates. As a consequence of such practice one would expect a reduction in the amount of milk being shipped into Pennsylvania. We think these are permissible inferences, at least at the "complaint" stage of this proceeding.

Damage to plaintiff is alleged to be an amount equal to the rebates paid to the processors. Such rebates directly affected plaintiff because the contract under which he furnished milk to his cooperative provided that his milk was to be disposed of by Erie-Crawford to the best possible economic advantage and the net proceeds of...