Monfort of Colorado, Inc. v. Cargill, Inc., 83-2588

• Citation: 761 F.2d 570
• Decision Date: 23 April 1985
• Docket Number: 84-1305,No. 83-2588,83-2588
• Parties: , 1985-1 Trade Cases 66,576 MONFORT OF COLORADO, INC., Plaintiff-Appellee, v. CARGILL, INC. and Excel Corporation, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 570

761 F.2d 570

53 USLW 2549, 1985-1 Trade Cases 66,576

MONFORT OF COLORADO, INC., Plaintiff-Appellee, v. CARGILL, INC. and Excel Corporation, Defendants-Appellants.

No. 83-2588, 84-1305.

United States Court of Appeals Tenth Circuit.

April 23, 1985.

Robert F. Hanley (Ronald G. Carr, Alan K. Palmer, and W. Stephen Smith with him on the briefs), of Morrison & Foerster, Denver, Colo., for defendants-appellants.

William C. McClearn (James E. Hartley and Marcy G. Glenn with him on the briefs) of Holland & Hart, Denver, Colo., for plaintiff-appellee.

Before LOGAN, BREITENSTEIN, and McWILLIAMS, Circuit Judges.

LOGAN, Circuit Judge.

Monfort of Colorado, Inc. has brought this private antitrust action seeking to enjoin its competitor, Excel Corporation, a wholly owned subsidiary of Cargill, Inc. (hereinafter defendants or Excel), from acquiring another competitor, Spencer Beef Division of Land O'Lakes, Inc. Defendants appeal the district court's grant of a permanent injunction prohibiting Excel from acquiring Spencer Beef. See Monfort of Colorado, Inc. v. Cargill, Inc., 591 F.Supp. 683, 710-11 (D.Colo.1983). Defendants also appeal an enforcement order that the district court issued after defendants acquired one of Spencer Beef's plants in spite of the original injunction.

Plaintiff Monfort packs and fabricates beef at plants in Greeley, Colorado, and Grand Island, Nebraska. It is the fifth largest beef packer in the country. Defendants Cargill and Excel operate four integrated beef packing and fabrication plants in Kansas, Missouri, and Texas, a slaughter facility in Nebraska, and a fabrication plant in Kansas. Excel is the second largest beef packer in the United States. Its parent company operates subsidiaries in at least thirty-five countries.

Spencer Beef, which Excel seeks to acquire, is a division of the agricultural cooperative Land O'Lakes, Inc. and was the third largest beef packer in the United States when all of its plants in Spencer, Iowa, Oakland, Iowa, and Schuyler, Nebraska were operating. Spencer's Schuyler plant, which has been closed for more than two years, 591 F.Supp. at 689, is approximately sixty miles from Monfort's Grand Island plant. Spencer and Land O'Lakes are not parties to this litigation, although at one time they sought to intervene. See Monfort of Colorado, Inc. v. Cargill, Inc., No. 84-1060 (10th Cir. Aug. 8, 1984) (appeal dismissed).

Monfort brought this suit in July 1983, seeking an injunction under section 16 of the Clayton Act, 15 U.S.C. Sec. 26. It claimed that Excel's proposed acquisition of Spencer Beef would violate section 7 of the Clayton Act, 15 U.S.C. Sec. 18, and section 1 of the Sherman Act, 15 U.S.C. Sec. 1. This case presents the significant threshold issue of whether a company has standing to seek a section 16 injunction against its competitor's horizontal acquisition of a competing firm. It also presents questions concerning the propriety of the proposed acquisition under section 7, as well as the propriety of a partial acquisition of assets once a district court has enjoined the originally proposed transaction. We find that Monfort has antitrust standing, that the district court properly granted Monfort's request for an injunction, and that Excel's subsequent acquisition of a Spencer Beef plant violated this injunction. Therefore, we affirm the district court's judgments.

I

A

The threshold issue is whether Monfort has antitrust standing to challenge this merger. The landmark case governing analysis of antitrust standing is Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977), with its oft-quoted holding that "[p]laintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Id. at 489, 97 S.Ct. at 697 (emphasis in original). Brunswick involved a claim for damages under section 4 of the Clayton Act; the Court there was particularly concerned with section 4's specific reference to injury: suit may be brought only by persons "who shall be injured." See 429 U.S. at 485-86, 97 S.Ct. at 695-96. In section 16 injunction cases, however, the courts do not require proof of actual injury because they need not calculate damages. Instead, they follow section 16's command to apply equitable standards for an injunction. See, e.g., Cia. Petrolera Caribe, Inc. v. Arco Caribbean, Inc., 754 F.2d 404, 407-08 (1st Cir.1985); Christian Schmidt Brewing Co. v. G. Heileman Brewing Co., 753 F.2d 1354, 1357-58 (6th Cir.1985), cert. dismissed, --- U.S. ----, 105 S.Ct. 1155, 84 L.Ed.2d 309 (1985). The Supreme Court has held that because section 16 does not require actual injury it does not foreclose antitrust claims for which the injury has yet to occur. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 130, 89 S.Ct. 1562, 1580, 23 L.Ed.2d 129 (1969).

The antitrust claims in this case and in Brunswick involve both a remedial statute, section 16 or section 4, and a substantive statute defining the antitrust violation, section 7 of the Clayton Act. To obtain antitrust standing a plaintiff must meet the threshold requirements of both the remedial and substantive statutes. In Brunswick the Court observed that to recover section 4 damages for a section 7 violation a plaintiff must prove more than that defendant violated section 7. See 429 U.S. at 486, 97 S.Ct. at 696. The same is true in a section 16 case, but the threshold of proof beyond the section 7 violation remains lower than it would be in a section 4 case. See Board of Regents of the University of Oklahoma v. National Collegiate Athletic Association, 707 F.2d 1147, 1151 (10th Cir.1983), aff'd, --- U.S. ----, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984) (certiorari not sought on standing issue, id. at ---- n. 14, 104 S.Ct. at 2958 n. 14); see also Schoenkopf v. Brown & Williamson Tobacco Corp., 637 F.2d 205, 210 (3d Cir.1980). The practical result of this distinction is that in a section 16 case, because actual injury need not be shown, it is much easier for a plaintiff to show causation of its hypothetical antitrust injury by a putative antitrust violation. The Court in Brunswick recognized this distinction by not foreclosing plaintiffs in that case from seeking an injunction even though they lacked standing to seek damages. ¹ See 429 U.S. at 491, 97 S.Ct. at 698.

Therefore, when we consider Brunswick's requirements for antitrust standing in this section 16 case, the Court's concerns with restricting section 4 cases, in part because of the peculiar risks of unrestrained treble damages claims, are of little consequence. See, e.g., id. at 485-88, 97 S.Ct. at 695-97; see also Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 543-45, 103 S.Ct. 897, 911-13, 74 L.Ed.2d 723 (1983) (discussing problems of duplicate recovery and complex apportionment of awards in section 4 cases); Blue Shield of Virginia v. McCready, 457 U.S. 465, 473-75, 475 n. 11, 102 S.Ct. 2540, 2545-46, 2546 n. 11, 73 L.Ed.2d 149 (1982); Illinois Brick Co. v. Illinois, 431 U.S. 720, 746, 97 S.Ct. 2061, 2074, 52 L.Ed.2d 707 (1977) (Clayton Act section 4 was intended to compensate victims of antitrust injury as well as to deter antitrust violations). Thus most of the Supreme Court and lower court cases that have addressed antitrust standing are distinguishable in a section 16 case because they involve treble damages and section 4's actual injury requirement.

In a section 16 case, Brunswick mandates only an inquiry into the causal connection between the threatened injury and the putative antitrust violation. If a plaintiff surmounts this causation hurdle it has standing to seek an injunction. Of course it still must satisfy section 16's requirements in order to obtain the injunction, ² and in the course of doing so it will have to prove a substantive antitrust violation such as the section 7 violation alleged here. The Supreme Court has said that this causation inquiry is like proximate cause analysis, see Blue Shield, 457 U.S. at 477, 102 S.Ct. at 2547; Associated General Contractors, 459 U.S. at 535-36, 103 S.Ct. at 907-08. To decide whether Monfort has antitrust standing, we now consider whether Excel's increased market power after acquisition of Spencer Beef would be a proximate cause of Monfort's threatened injury. ³

B

Excel and Monfort are direct horizontal competitors in the beef packing and fabricating business. Excel contends that competitors generally should be denied standing to challenge a merger because they actually benefit from any increased concentration in the industry. Excel argues, in effect, that Monfort would have fewer competitors if the proposed merger were consummated and thus would accrue some of the advantages of oligopoly rather than suffer any antitrust injury. Excel also suggests that even if Monfort suffers from the merger it would only be suffering the effects of competition; it alludes to the statement, recently reaffirmed in Brunswick, that the "antitrust laws were enacted for 'the protection of competition, not competitors.' " Brunswick, 429 U.S. at 488, 97 S.Ct. at 697 (emphasis in original) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521, 8 L.Ed.2d 510 (1962) ). ⁴

In support of its theory that the acquisition may injure competition, Monfort does not claim that consumers of beef will immediately be hurt by higher beef prices. Indeed, Monfort would surely benefit if beef prices rose following Excel's acquisition. Instead Monfort claims that Excel will be able to engage in what we consider to be a form of predatory pricing in which Excel will drive other companies out of the market by paying more to its cattle suppliers and charging less for boxed beef that it sells to institutional buyers and consumers. The resulting cost-price squeeze will, according to Monfort,...