NASH CTY. BD. OF ED. v. Biltmore Company

• Decision Date: 27 November 1978
• Docket Number: Civ. A. No. 76-0188-CIV-5.
• Citation: 464 F. Supp. 1027
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: The NASH COUNTY BOARD OF EDUCATION, Plaintiff, v. The BILTMORE COMPANY et al., Defendants.

464 F. Supp. 1027

The NASH COUNTY BOARD OF EDUCATION, Plaintiff, v. The BILTMORE COMPANY et al., Defendants.

Civ. A. No. 76-0188-CIV-5.

United States District Court, E. D. North Carolina, Raleigh Division.

November 27, 1978.

Harris A. Marshall, Jr., Orangeburg, S. C., I. T. Valentine, Jr., Nashville, N. C., J. Nat Hamrick, Rutherfordton, N. C., William L. Thorp, Rocky Mount, N. C., for plaintiff.

George Ward Hendon, Adams, Hendon & Carson, P. A., Asheville, N. C., Joseph R. Gladden, King & Spalding, Atlanta, Ga., Venable Vermont, Spartanburg, S. C., for the Biltmore Co.

John M. Murchison and W. T. Covington, Jr., Kennedy, Covington, Lobdell & Hickman, Charlotte, N. C., Glenn S. Dennis, House Counsel, Borden, Inc., Columbus, Ohio, Wilburn Brewer, Jr., Nexsen, Pruet, Jacobs & Pollard, Columbia, S. C., for Borden, Inc.

J. Melville Broughton, Broughton, Witkins, Ross & Crampton, Raleigh, N. C., Joseph H. Leonard, Leonard & Snyder, Lexington, N. C., Thomas Kemmerlin, Jr., Belser, Kemmerlin, Adams & Ravenel, Columbia, S. C., for Coble Dairy Products Cooperative, Inc.

Wright T. Dixon, Jr., Bailey, Dixon, Wooten, McDonald & Fountain, Raleigh, N. C., Robert H. Duesenberg, Asst. Gen. Counsel, St. Louis, Mo., Fred D. Turnage, Cleary, Gottlieb, Steen & Hamilton, Washington, D. C., Julius W. McKay, McKay, Sherrill, Walker & Townsend, Columbia, S. C., for Pet, Inc.

Henry A. Mitchell, Jr., Smith, Anderson, Blount & Mitchell, Raleigh, N. C., Charles W. Knowlton, Boyd, Knowlton, Tate & Finlay, Columbia, S. C., for Pine State Creamery Co. John R. Jordan, Jr., Jordan, Morris & Hoke, Raleigh, N. C., David L. Aufderstrasse, Chadwell, Kayser, Ruggles, McGee & Hastings, Chicago, Ill., Theodore L. Banks, William G. Taffe, Glenview, Ill., John W. Thomas, Roberts, Jennings & Thomas, Columbia, S. C., for Kraftco Corp.

Jerry W. Amos of Brooks, Pierce, McLendon, Humphrey & Leonard, Greensboro, N. C., William A. Carey, Barnett, Alagia & Carey, Washington, D. C., D. Paul Alagia, Jr., Barnett & Alagia, Charles L. Owen, Barnett, Alagia, Greenebaum, Miller & Senn, Louisville, Ky., Rex L. Carter, Carter, Philpot, Johnson & Smith, Greenville, S. C., for Flav-O-Rich, Inc.

MEMORANDUM

MERHIGE, District Judge.

Plaintiff, Nash County Board of Education (Nash County), a body politic created by the legislature of the State of North Carolina, brings this federal antitrust action seeking treble damages against nine defendant dairy companies that sell milk, ice cream, and cottage cheese to public schools in North Carolina. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of itself and all other county and city boards of education in North Carolina, as described in chapter 115 of the General Statutes of North Carolina. The nine defendants are: The Biltmore Company, a Delaware corporation; Borden, Inc., a New Jersey corporation; Coble Dairy Products Cooperative, Inc., a North Carolina corporation; Dairymen, Inc., a Kentucky corporation; Maola Milk and Ice Cream Company, a North Carolina corporation; Pet, Inc., a Delaware corporation; Pine State Creamery Co., a North Carolina corporation; Kraftco Corporation, a Delaware corporation; and Flav-O-Rich, Inc., and its predecessor United Dairies, Inc., both North Carolina corporations.

Plaintiff alleges that the defendants, jointly and severally, have combined and conspired since no later than February 1, 1970 to fix prices and to monopolize and attempt to monopolize the public school market for milk, ice cream, and cottage cheese in North Carolina, in violation of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. Jurisdiction is appropriate under 15 U.S.C. § 15 and 28 U.S.C. § 1337.

Each of the defendants has moved for summary judgment on the sole ground that this action is barred by the doctrine of res judicata. The parties have addressed the issues extensively in briefs and at oral argument, and the matter is now ripe for disposition. The undisputed facts show that in 1973, in response to complaints by various school boards, the North Carolina Attorney General's office began investigating the defendant dairy companies to determine whether they were fixing prices and dividing up markets in violation of North Carolina's antitrust statute. On October 21, 1974, the Attorney General of North Carolina filed suit on behalf of the state in the General Court of Justice, Superior Court Division, of Wake County, North Carolina against the same nine dairy companies who are defendants in the instant suit. Alleging violations of the state (but not federal) antitrust statute, the Attorney General sought both injunctive relief and treble damages. Additionally, he sought certification, pursuant to Rule 23(a) of the North Carolina Rules of Civil Procedure, to represent a class consisting of all public school systems in North Carolina that had used state tax monies to purchase milk from any of the nine defendants.

The purported class was never certified, however, and the action never went to trial. Instead, the suit was terminated on May 12, 1975 by a consent decree entered by the presiding state court judge and endorsed by all parties. The consent decree represented that "all matters in controversy arising out of this action have been agreed upon and settled in a manner satisfactory both to the Plaintiff, State of North Carolina, and to the aforementioned Defendants." The consent decree provided injunctive relief in the form of mandatory procedures to be followed by the defendants over the ensuing three years for reporting to the state Attorney General all bids and negotiated prices for milk contracts with North Carolina public school systems. The decree, however, did not provide for any monetary damages, either for the state or for any of the school boards in the state.

On June 18, 1975, approximately one month after entry of the consent judgment, the North Carolina Attorney General sent a letter to all school superintendents and food service directors in the state, notifying them of the consent decree and its terms. The letter also contained the following paragraph:

Additionally, it should be pointed out that the settlement in no way proscribes actions by individual school systems to recover monetary damages for overcharges that resulted from the rigging of bids.

Apparently acting on the Attorney General's letter, the Nash County Board of Education filed the instant suit against all of the defendants who were parties to the state court consent decree. Not surprisingly, the motion presently under consideration followed.

The principles of res judicata are well established. The general rule was stated by the United States Supreme Court in Commissioner v. Sunnen, 333 U.S. 591, 68 S.Ct. 715, 92 L.Ed. 898 (1948):

The general rule of res judicata applies to repetitious suits involving the same cause of action. It rests upon considerations of economy of judicial time and public policy favoring the establishment of certainty in legal relations. The rule provides that when a court of competent jurisdiction has entered a final judgment on the merits of a cause of action, the parties to the suit and their privies are thereafter bound "not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose."

Id. at 597, 68 S.Ct. at 719 (quoting Cromwell v. County of Sac, 94 U.S. 351, 352, 24 L.Ed. 195 (1876) ). Thus, the doctrine of res judicata bars relitigation when the prior suit (1) was on the same cause of action, (2) was between the same parties or their privies, and (3) was concluded by a final judgment on the merits. The Court finds that all three of these requirements are satisfied in the instant case.

I. The Same Cause of Action.

This inquiry has two facets. Reserving for the moment consideration of whether the cause of action in the instant suit is substantively the same as that in the North Carolina action, the Court must first resolve the threshold question of whether, notwithstanding all considerations of traditional res judicata doctrine, federal district courts are bound to entertain all federal antitrust actions because Congress intended the district courts to have exclusive and mandatory jurisdiction over such lawsuits. Simply stated, the initial inquiry is whether, as a matter of federal-state relations, a suit in federal court under the Sherman Act is a fortiori a different cause of action from a state court action under that state's antitrust statute, even if conventional notions of res judicata would otherwise bar the action.

Section 15 of Title 15 of the United States Code provides that, "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district where the defendant resides or is found or has an agent . . .." Nash County relies heavily on this provision, as well as several decisions of the federal courts interpreting it, in contending that this court must hear the instant suit.

The seminal decision in this area is Lyons v. Westinghouse Electric Corp., 222 F.2d 184 (2d Cir.), cert. denied, 350 U.S. 825, 76 S.Ct. 52, 100 L.Ed. 737 (1955). In an opinion by Judge Hand, the court of appeals issued a writ of mandamus to the district court directing the judge to vacate the stay order he had issued in Lyons' antitrust suit against Westinghouse and another corporation. 222 F.2d at 190. The district judge had stayed the federal antitrust suit pending the resolution of a state contract action brought by Westinghouse against Lyons, as a defense to which Lyons pleaded that Westinghouse had violated the federal antitrust laws. Id. at 185. As the antitrust allegations raised by Lyons as a defense in the state court action against him were the same as those upon which he was suing...