Pacific Coast Agricultural Export Asso. v. Sunkist Growers, Inc.

• Decision Date: 11 November 1975
• Citation: 526 F.2d 1196
• Court: U.S. Court of Appeals — Ninth Circuit

526 F.2d 1196

1975-2 Trade Cas. (CCH) P60,617

PACIFIC COAST AGRICULTURAL EXPORT ASSOCIATION, Plaintiff-Appellant, Cross-Appellee v SUNKIST GROWERS, INC., Defendant-Appellee, Cross-Appellant. M-C INTERNATIONAL, INC., Plaintiff-Appellant,

v SUNKIST GROWERS, INC., et al., Defendants-Appellees, Cross-Appellants

Nos. 74-1093, 74-1128, 74-1094, 74-1129, 74-1130

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

November 11, 1975

Kristina M. Hanson, Esq. (argued) of Sullivan, Jones & Archer, San Francisco, California, For Appellant in 74-1093 and 74-1094, For Appellee in 74-1128, 74-1129, 74-1130.

Herbert A. Bernhard, Esq. (argued) of Greenberg, Bernhard, Weiss & Karma, Los Angeles, California, For Appellee in 74-1093 & 74-1094, For Appellant in 74-1128, 74-1129, 74-1130.

Duniway, Ely and Wright, Circuit Judges.

WRIGHT

WRIGHT, Circuit Judge:

In this private antitrust action several parties appeal and cross-appeal from aspects of a judgment for treble damages, attorneys' fees and injunctive relief. We affirm.

Plaintiff-appellant Pacific Coast Agricultural Export Association (the Association) is a Webb-Pomeraine association of fresh fruit exporters who among other things serve as middlemen in exporting oranges to Hong Kong and the Far East. Plaintiff-appellant M-C International, Inc. (M-C) also exports oranges to Hong Kong.

Defendant and cross-appellant Sunkist Growers, Inc. (Sunkist) is a federated agricultural cooperative comprised of several thousand Arizona and California citrus fruit growers who grow and pack citrus fruits for sale in the United States and abroad. Defendant and cross-appellant Reliance Commercial Enterprises, Inc. (Reliance) conducts business as a broker of citrus fruits in the Far East.

As assignee of the rights of seven of its members, the Association charged Sunkist with violating Section 1 of the Sherman Act [15 U.S.C. § 1], by conspiring with Reliance to restrain trade, and with violating Section 2 [15 U.S.C. § 2], by conspiring and attempting to monopolize and monopolizing exports from Arizona and California to Hong Kong. In a separate action M-C similarly charged both Sunkist and Reliance. The actions were consolidated for trial by agreement.

The jury returned a general verdict and answered 16 special interrogatories in favor of plaintiffs, finding that Sunkist and Reliance had engaged in each alleged anticompetitive practice. The jury fixed damages at $238,704 for the Association's assignors, and $2,363 for M-C.

The district court thereafter awarded treble damages and attorneys' fees of $205,250. It ordered the termination of defendants' exclusive sales agreement, and enjoined Sunkist from refusing to sell oranges through its domestic and export departments to qualified buyers at competitive prices. The court refused to enjoin Sunkist from selling to Hong Kong importers, either directly or through nonexclusive agents, and also denied plaintiffs' request that Sunkist be dissolved.

Sunkist and Reliance object to any form of equitable relief and on cross-appeal urge that the verdicts be set aside for procedural irregularities, errors in the admission of evidence and insufficiency of evidence to support a verdict against either defendant. They also urge that plaintiffs failed to prove actual damages and that the attorneys' fees are excessive.

The Association and M-C argue that the district court's refusal to order dissolution was an abuse of discretion and urge that at the very least the court should have enjoined Sunkist from selling oranges, directly or indirectly, to Hong Kong for a period of six years (a period equal to that of the alleged violations).

I. FACTS

Sunkist citrus growers produce about 75% of the oranges grown in Arizona and California. They process the fruit through 105 packing houses, each of which uses its own brand name as well as the Sunkist trademark. The packing houses are grouped into 20 sales exchanges.

Domestic purchasers may request specific packing house brands, although a federal marketing order limits the number of brand oranges which each packing house can sell in a given time period.

Hong Kong importers purchasing from Sunkist's export department may not specify particular brands, although they may specify a general varietal preference for central valley or southern California oranges. While no federal marketing order limits export sales, Sunkist's export department allocates sales, by means of "pooling" arrangements, largely on a pro rata basis among the several packing houses.

Until 1966, Sunkist's export department relied upon numerous exporting companies, including members of the Association, to generate and maintain sales to Hong Kong importers. In March of that year, Sunkist terminated these arrangements and began direct sales to Hong Kong through Reliance, its new exclusive agent there. Sunkist performed all export functions, including handling, shipping and insurance. Reliance, through its Hong Kong manager Newman Wu, obtained letters of credit from Hong Kong importers, transmitted orders and price quotations to Sunkist, and generally represented Sunkist's interests in Hong Kong.

In the six months following its agreement with Reliance, Sunkist (which had previously sold direct to Hong Kong only upon occasion) was able to capture nearly 70% of the market for American oranges sold there. The plaintiffs, who had previously been largely supplied by Sunkist's export department, were now able to obtain Sunkist oranges only on the domestic market. Evidence was introduced from which the jury might have inferred that the plaintiffs were at times prevented from purchasing even on the domestic market.

II. SCOPE OF CAPPER-VOLSTEAD IMMUNITY

As a threshold matter we must determine the extent to which the federal antitrust laws apply to Sunkist's activities. Sunkist claims that it presently qualifies as a grower cooperative under Section 1 of the Capper-Volstead Act [7 U.S.C. § 291], and that therefore its members' joint activities enjoy a broad exemption from the antitrust laws under that act and Section 6 of the Clayton Act [15 U.S.C. § 17]. See generally Treasure Valley Potato Bargaining Association v. Ore-Ida Foods, Inc., 497 F.2d 203, 210-18 (9th Cir. 1974); Annotation, 20 A.L.R. Fed. 924 (1974).

The district court in the case at bar instructed the jury that Sunkist was entitled to the protections of the Capper-Volstead Act. We assume for the purpose of this case that Sunkist qualifies but need not decide the question. See generally 20 ALR Fed. 913, et seq.(1974).

Sunkist contends that the designation of Reliance as its exclusive agent in Hong Kong was protected conduct under the language of Capper-Volstead Act § 1 providing that:

[such] [cooperative] associations may have marketing agencies in common; and such associations and their members may make the necessary contracts and agreements to effect such purposes . . . .

It is well settled, however, that the rights of growers to market cooperatively cannot be deemed to authorize any combination or conspiracy with others which unreasonably restrains interstate or foreign commerce. United States v. Borden Co., 308 U.S. 188, 204-05, 84 L. Ed. 181, 60 S. Ct. 182 (1939). The court instructed the jury that to find a violation of the Sherman Act, Section 1, the jury had to find that "the purpose and effect of such an agreement is unreasonably to exclude the former distributors [plaintiffs] from engaging in the trade in question." To this instruction no party objected. [See F.R. Civ. P. Rule 51.]

Nor does the Act immunize cooperatives engaged in competition-stifling practices from actions under the antimonopolization provisions of Sherman Act § 2. Maryland & Virginia Milk Producers Association, Inc. v. United States, 362 U.S. 458, 463, 4 L. Ed. 2d 880, 80 S. Ct. 847 (1960); Treasure Valley Potato Bargaining Association v. Ore-Ida Foods, Inc., supra, 497 F.2d at 216. See also Tillamook Cheese & Dairy Association v. Tillamook County Creamery Association, 358 F.2d 115 (9th Cir. 1966).

The district court properly instructed the jury as to the scope of Capper-Volstead immunity, and there was no challenge by any party.

III. SECTION 1 CLAIM

The unchallenged jury instruction on the Section 1 claim fairly embodied the law of this circuit which requires evidence of an agreement the purpose or effect of which is to unreasonably restrain trade. Bushie v. Stenocord Corp., 460 F.2d 116, 119-20 (9th Cir. 1972); Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke Liquors, Ltd., 416 F.2d 71 (9th Cir. 1969), cert. denied 396 U.S. 1062, 24 L. Ed. 2d 755, 90 S. Ct. 752 (1970). The jury was properly instructed that the formation of an exclusive agency agreement was not illegal per se. Hawaiian Oke at 76. A good faith, economically motivated decision to switch exporters, as Sunkist has correctly noted, would not subject it to Section 1 liability. Alpha Distributing Co. v. Jack Daniel Distillery, 454 F.2d 442, 452 (9th Cir. 1972). Rather, the plaintiffs were required to show that Sunkist's refusal to deal was motivated by a desire to exclude the plaintiffs from the market or to accomplish some other anti-competitive objective. Bushie, 460 F.2d at 119-20; Ricchetti v. Meister Brau, Inc., 431 F.2d 1211, 1215 (9th Cir. 1970). Deciding Sunkist's motivation was peculiarly a question for the jury. Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 375, 71 L. Ed. 684, 47 S. Ct. 400 (1927). Its determination is conclusive unless erroneous as a matter of law. Id.

The jury's finding that defendants had unlawfully agreed to unreasonably restrain trade is amply supported by the evidence. There were communications from Reliance to Sunkist seeking restrictions on the supply of domestic oranges available to the exporters, followed by Sunkist actions which could be interpreted as attempts to prevent regional exchanges under its control from selling oranges to plaintiffs. Sunkist attempted to secure more shipping space...