Mandeville Island Farms v. American Crystal Sugar Co.

• Decision Date: 09 January 1946
• Docket Number: No. 4643.,4643.
• Citation: 64 F. Supp. 265
• Court: U.S. District Court — Southern District of California
• Parties: MANDEVILLE ISLAND FARMS, Inc., et al. v. AMERICAN CRYSTAL SUGAR CO.

64 F. Supp. 265

MANDEVILLE ISLAND FARMS, Inc., et al. v. AMERICAN CRYSTAL SUGAR CO.

No. 4643.

District Court, S. D. California, Central Division.

January 9, 1946.

Wood, Crump, Rogers & Arndt, of Los Angeles, Cal., for plaintiffs.

O'Melveny & Myers, of Los Angeles, Cal., for defendant.

HARRISON, District Judge.

This action comes before me on a motion to dismiss the amended complaint of certain sugar beet growers, who are seeking treble damages under the Anti-Trust Act, Secs. 1 to 7, 15 note, Title 15 U.S.C.A., from the defendant sugar refiner, alleging a conspiracy, the effect of which prevented the sale of sugar beets on a free and open competitive market. The motion to dismiss is based on the ground that the raising of sugar beets has no direct effect upon interstate commerce and therefore does not come within the purview of the Anti-Trust Act.

The amended complaint alleges in effect that the plaintiffs are growers of sugar beets north of the 36th parallel in California and the only outlets for their products are three certain sugar refineries located in the same area within the State of California; that the sugar refineries in said area entered into a conspiracy in violation of Section 1, Title 15 U.S.C.A., whereby each refiner agreed to pay the growers the same price for sugar beets and entered into identical contracts with all the growers of said area. The identical contracts among other things provided:

"2. The seed to be used in growing said beets shall be furnished by the Company for the price of fourteen cents (14 cents) per pound, which the grower agrees to pay. Seed furnished by the company shall not be planted upon any land not contracted to the Company. Any seed furnished by the Company and not planted shall be returned in good order to the Company, at the end of the planting season, and the Grower credited therefor. No credit will be given for seed not returned prior to July 1, 1940."

"5. All sound beets grown in accordance with and under this contract shall be bought by the Company and paid for by it according to the following terms and schedule of prices:

"The price per ton (2,000 pounds) for beets delivered hereunder to the Company shall be determined upon the average net returns (said net returns being defined in Paragraph No. 6 hereof) received for sugar manufactured at beet sugar factories located in California north of the 36th parallel, and sold during the period of twelve months commencing August 1, 1940, and based upon the Company's test of sugar content of the individual grower's beets in accordance with the following schedule: (Schedule omitted)"

It is further alleged that prior to the said conspiracy the contracts of the defendant provided that the price paid for sugar beets would be based upon the net returns of the defendant, instead of the average net returns of all the sugar refineries in said area; that during the crop years complained of the defendant received .265 cents per pound more for its raw sugar than the other refineries and as a result of said conspiracy the plaintiffs have received less for their sugar beets than they would have received except for said conspiracy.

Plaintiffs further complain that they failed to receive the fair market value for said sugar beets in accordance with the fair market price fixed by the Secretary of Agriculture; that the difference actually received by them and the price fixed by the Secretary of Agriculture represents the damages suffered by them and under the provisions of the Anti-Trust Act said damages should be trebled.

From the complaint it appears that the net result of the conspiracy is that all beet growers in said area received the same price for their sugar beets and, while the plaintiffs may have suffered a detriment, growers delivering their beets to other sugar refineries received an advantage.

The complaint coupled with the contracts attached thereto as exhibits clearly establish that the sugar refineries were working in concert in the purchase of sugar beets from the grower plaintiffs. This brings us to the main question of law raised by the motion to dismiss.

The defendant contends that the raising of the beets, the sale to the refineries for the purpose of processing the same into sugar is an intrastate matter and beyond the reach of the Anti-Trust Act. With this contention I agree.

In the case of Coe v. Town of Errol, 116 U.S. 517 at page 526, 6 S.Ct. 475, 477, 29 L.Ed. 715, the court stated:

"There must be a point of time when they cease to be governed exclusively by the domestic law, and begin to be governed and protected by the national law of commercial regulation, and that moment seems to us to be a legitimate one for this purpose, in which they commence their final movement for transportation from the state of their origin to that of their destination. When the products of the farm or the forest are collected, and brought in from the surrounding country to a town or station serving as an entrepot for that particular region, whether on a river or a line of railroad, such products are not yet exports; nor are they in process of exportation; nor is exportation begun until they are committed to the common carrier for transportation out of the state to the state of their destination, or have started on their ultimate passage to that state. Until then it is reasonable to regard them as not only within the state of their origin, but as a part of the general mass of property of that state, subject to its jurisdiction, and liable to taxation there, if not taxed by reason of their being intended for exportation, but taxed, without any discrimination, in the usual way and manner in which such property is taxed in the state."

To the same effect see Crescent Cotton Oil Co. v. State of Mississippi, 257 U.S. 129, 42 S.Ct. 42, 66 L.Ed. 166.

The case closest in point is Dothan Oil Mill Co. v. Espy, 220 Ala. 605, 127 So. 178, 179, 182, wherein the court had before it the identical question now before this court. The court covered the question in the following language:

"We are not of opinion, however, that the business of buying cotton seed, confined wholly to the state, to be crushed and manufactured into oil and other products, in such state, constitutes interstate commerce, within the scope and purpose of said act or within the sense of the Sherman and Clayton Acts (15 U.S.C.A. §§ 1-7, 15 and sections 12-27, 44) which confer on the federal courts exclusive jurisdiction to enforce...