People v. Elmhurst Milk & Cream Co., Inc.

• Decision Date: 08 October 1982
• Citation: 455 N.Y.S.2d 473,116 Misc.2d 140
• Court: New York Supreme Court
• Parties: , 1982-83 Trade Cases P 65,070, 1982-83 Trade Cases P 65,215 PEOPLE of the State of New York v. ELMHURST MILK & CREAM CO., INC., et al.

Page 473

455 N.Y.S.2d 473

116 Misc.2d 140, 1982-83 Trade Cases P 65,070,

1982-83 Trade Cases P 65,215

PEOPLE of the State of New York v. ELMHURST MILK & CREAM CO., INC., et al.

Supreme Court, Criminal Term Kings County, Part 20.

Oct. 8, 1982.

Robert Abrams, Atty. Gen. of the State of New York, New York City, for plaintiff by Bonnie G. Wittner, Ilona M. Kirshon, Alice McInerney, Asst. Attys. Gen., New York City, of counsel.

Botein, Hays, Sklar & Herzberg, New York City, for Dellwood Foods, Inc.

Pollner, Mezan & Stolzberg, New York City, for Beyer Farms, Inc. and Mike Beyer.

Herbert A. Lyon, Kew Gardens, for Caldwell Farms, Inc. and Bertram Beyer.

Obermaier, Morvillo, Abramowitz & Fitzpatrick, New York City, for Elmhurst Milk & Cream Co., Inc. and Charles Schwartz.

Scoppetta & Seiff, New York City, for Ferndale Farms, Inc.

Kase & Druker, Mineola, for Glenridge Farms, Inc. and Anthony Colletti.

Marcus & Katz, Mineola, for Holland Farms, Inc.

Julien, Schlesinger & Finz, New York City, for Park Lane Dairies, Inc., Silvercrest Farms, Inc. and George Goldman.

Saxe, Bacon, Bolan & Manley, New York City, for Queensboro Farm Products, Inc., Allan Miller and Ronald Silver.

Elliott Press, Brooklyn, for Rainbow Dairies, Inc.

Farrell, Fritz, Caemmerer & Cleary, Mineola, for M.H. Renken Dairy Co.

Moses & Singer, New York City, for Sunnydale Farms, Inc. and Alan Kulick.

Suozzi, English, Cianciulli & Peirez, Mineola, for Trieagle Dairies, Inc.

Kasanof, Schwartz & Iason, New York City, for Weissglass Gold Seal Dairy Corp. and William Szuman.

Michael Gillen, New York City, for Nicholas Albanese.

Stanley Hochberg, Brooklyn, for Louis Bono and John Kennedy.

Paul Rooney, New York City, for Bernie Clark.

Henry Putzel III, New York City, for Hugo Gercich.

Howard Wachtel, Hicksville, for Nathan Krinsky.

Newman & Adler, New York City, for Robert Minkoff.

Reisch, Clarey & Kent, Mineola, for Joseph Renna.

Maloney, Viviani & Higgins, New York City, for Pat Mortorella.

Gregory J. Perrin, New York City, for Evergreen Dairies, Inc. and John Corallo.

MEMORANDUM

GLORIA GOLDSTEIN, Judge.

Defendants, sixteen corporations and nineteen individuals, are charged in a one-count indictment with the crime of combination in restraint of trade and competition in violation of sections 340 and 341 of the New York General Business Law. Defendants are alleged to have participated over a ten-year period in an agreement to fix milk prices and to allocate customers in Kings County.

Indictments alleging similar unlawful agreements among milk companies have been issued by grand juries in the Bronx and Queens, and the New York Attorney General has filed a civil suit in the United States District Court for the Southern District of New York against defendants in these criminal actions seeking treble damages, civil monetary penalties, and an injunction. Defendants in the action before this court have filed a joint omnibus motion This opinion follows the organization of defendants' joint memorandum of law.

to dismiss the indictment on numerous grounds and for discovery and bill of particulars. For the reasons that follow, the motion to dismiss the indictment is denied.

POINT I

In Point I, defendants move to dismiss the indictment on the grounds (1) that New York's antitrust law, General Business Law section 340 et seq., commonly known as the Donnelly Act, is inapplicable to the conduct alleged in the indictment and (2) that the New York State Department of Agriculture and Markets has primary jurisdiction over the alleged conduct.

This motion rests on the contention that the New York Legislature has given the Department of Agriculture and Markets, if not exclusive, at least primary jurisdiction over dairy and milk industry activities, including agreements allegedly in restraint of trade. Defendants claim that the unique characteristics of the milk industry--a perishable product, intense competition among distributors, limited retail outlets, and extreme price sensitivity--render the application of the antitrust laws inappropriate. They claim that the Legislature has acknowledged this inapplicability and has implicitly exempted the conduct alleged in this indictment from the proscriptions of the Donnelly Act by subjecting the milk industry to the extensive supervision and regulation of the Department of Agriculture and Markets under a body of law "wholly inconsistent" with general antitrust principles. They argue that because of this implied exemption this court should dismiss the indictment or, alternatively, stay the prosecution of the action pending a preliminary determination by the Department of Agriculture and Markets of the legality of defendants' conduct under the Agriculture and Markets Law.

The Donnelly Act prohibits "contract, agreement, arrangement or combination whereby ... or the free exercise of any activity in the conduct of any business, trade or commerce or in the furnishing of any service in this state is or may be restrained ..." (General Business Law § 340 ). Like the federal antitrust laws, the Donnelly Act "represents a public policy of the first magnitude... in favor of free competition for New York." (Matter of Aimcee Wholesale Corp. 21 N.Y.2d 621, 625, 626, 289 N.Y.S.2d 968, 237 N.E.2d 223 [1968].)

Defendants contend that it is the conflict between this policy of free competition and the policy of regulated competition inherent in the Agriculture and Markets Law which invokes the doctrine of exclusive jurisdiction and exempts defendants from the operation of the Donnelly Act. Yet the same conflict exists in every regulated industry and it is manifest that the mere existence of a regulatory scheme that affects competition does not automatically exempt those regulated from the operation of state and federal antitrust laws. (See, Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 California v. Federal Power Commission, 369 U.S. 482, 82 S.Ct. 901, 8 L.Ed.2d 54 United States v. Radio Corporation of America, 358 U.S. 334, 79 S.Ct. 457, 3 L.Ed.2d 354 Georgia v. Pennsylvania Railroad Co., 324 U.S. 439, 65 S.Ct. 716, 89 L.Ed. 1051 Capital Telephone Co., Inc. v. Pattersonville Telephone Co., Inc., 56 N.Y.2d 11, 451 N.Y.S.2d 11, 436 N.E.2d 461 Columbia Gas of New York, Inc. v. New York State Electric and Gas Corp., 28 N.Y.2d 117, 320 N.Y.S.2d 57, 268 N.E.2d 790 State v. McBride Transportation, 56 Misc.2d 90, 288 N.Y.S.2d 170 State v. New York Movers Tariff Bureau, Inc., 48 Misc.2d 225, 264 N.Y.S.2d 931 See also 7 Von Kalinowski, Antitrust Laws and Trade Regulation, ch. 44A "Exclusive and Primary Jurisdiction: Regulated Industries and the Antitrust Laws"; 54 Am.Jur.2d Monopolies, Restraints of Trade, and Unfair Trade Practices §§ 190-250: "Federal Antitrust Laws: Application to Regulated Industries".)

A court will cede its jurisdiction over an antitrust case to the exclusive jurisdiction of a regulatory agency only when it finds that "its exercise of jurisdiction is so repugnant to the regulatory scheme that the regulatory scheme would be destroyed by virtue of the court's adjudication." (7 Von Kalinowski, supra, § 44A.01 see Otter Tail Power Co. v. United States, 410 U.S. at 372, 93 S.Ct. at 1027; United States v. Philadelphia National Bank, 374 U.S. 321, 350-51, 83 S.Ct. 1715, 1734, 10 L.Ed.2d 915 This doctrine of exclusive jurisdiction is invoked rarely, and only where an express substantive exemption in the regulatory statute immunizes the specific activities involved in the antitrust action (see Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359; Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363, 93 S.Ct. 647, 34 L.Ed.2d 577 Minneapolis and St. Louis Railroad Co. v. United States, 361 U.S. 173, 80 S.Ct. 229, 4 L.Ed.2d 223 Georgia v. Pennsylvania Railroad Co., 324 U.S. at 457, 65 S.Ct. at 726) or where the court must imply a legislative intent to immunize the challenged activity in order to make the regulatory scheme work (Silver v. New York Stock Exchange, 373 U.S. at 357, 83 S.Ct. at 1257; Pan American World Airways v. United States, 371 U.S. 296, 305, 83 S.Ct. 476, 482, 9 L.Ed.2d 325 ). Courts are very reluctant to imply immunity from the existence of a "pervasive regulatory scheme." (See California v. Federal Power Commission, 369 U.S. at 485, 82 S.Ct. at 903; United States v. Radio Corporation of America, 358 U.S. at 350, 79 S.Ct. at 466.)

Under the doctrine of primary jurisdiction, the court does not cede its jurisdiction over the case, but merely withholds or postpones action until the regulatory agency has acted. (United States v. Philadelphia National Bank, 374 U.S. at 353, 83 S.Ct. at 1736; Capital Telephone Co., Inc. v. Pattersonville Telephone Co., Inc., 56 N.Y.2d at 10, 451 N.Y.S.2d 11, 436 N.E.2d 461. See also Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 93 S.Ct. 573, 34 L.Ed.2d 525 Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 86 S.Ct. 781, 15 L.Ed.2d 709 Federal Maritime Board v. Isbrandtsen Co., 356 U.S. 481, 78 S.Ct. 851, 2 L.Ed.2d 926 This doctrine "requires judicial abstention in cases where protection of the integrity of a regulatory scheme dictates preliminary resort to the agency which administers the scheme." (United States v. Philadelphia National Bank, 374 U.S. at 353, 83 S.Ct. at 1736; see Federal Maritime Board v. Isbrandtsen Co., 356 U.S. at 498-99, 78 S.Ct. at 861; Far East Conference v. United States, 342 U.S. 570, 574-75, 72 S.Ct. 492, 494, 96 L.Ed. 576 ). It is invoked when "(1) defendants' conduct is arguably immune from antitrust liability under the regulatory statute or (2) the agency has jurisdiction over some of the issues and its decision would help clarify and narrow the antitrust issues." (7 Von Kalinowski, supra, § 44A.01[2][b].)

A court should not invoke either doctrine if enforcement of the...