Quality Foods de Centro America, S.A. v. Latin American Agribusiness Development Corp., S.A.

• Decision Date: 08 August 1983
• Docket Number: No. 82-5212,82-5212
• Citation: 711 F.2d 989
• Parties: 1983-2 Trade Cases P 65,532 QUALITY FOODS de CENTRO AMERICA, S.A. and Duroparts de El Salvador, S.A., Plaintiffs-Appellants, v. LATIN AMERICAN AGRIBUSINESS DEVELOPMENT CORPORATION, S.A., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 989

711 F.2d 989

1983-2 Trade Cases P 65,532

QUALITY FOODS de CENTRO AMERICA, S.A. and Duroparts de El

Salvador, S.A., Plaintiffs-Appellants,

v.

LATIN AMERICAN AGRIBUSINESS DEVELOPMENT CORPORATION, S.A.,

et al., Defendants-Appellees.

No. 82-5212.

United States Court of Appeals, Eleventh Circuit.

Aug. 8, 1983.

Smathers & Thompson, James W. Crabtree, Douglas C. Broeker, Miami, Fla., for plaintiffs-appellants.

James Beasley, Jr., Beasley, Olle & Soto, Edward Soto, Richard C. Williams, Jr., Miami, Fla., for Latin American Agribusiness Development.

Keith S. Rosenn, Coral Gables, Fla., for Joel D. Dreer.

Appeal from the United States District Court for the Southern District of Florida.

Before RONEY and HILL, Circuit Judges, and MORGAN, Senior Circuit Judge.

JAMES C. HILL, Circuit Judge:

Plaintiffs, Quality Foods de Centro America ("Quality Foods") and Duroparts de El Salvador ("Duroparts"), bring this action under the Sherman Act, 15 U.S.C. § 1, 2, and the Clayton Act, 15 U.S.C. §§ 15, 18, 19, 16, for antitrust injuries allegedly caused by defendant Latin American Agribusiness Development Corporation ("LAAD"), and certain officers and wholly owned subsidiaries of LAAD. The district court dismissed with prejudice plaintiffs' third amended complaint on grounds that it failed to state a valid antitrust claim. Prior to this dismissal, the district court twice granted plaintiffs leave to amend, dismissed Duroparts for lack of standing, and refused to exercise pendent jurisdiction over plaintiffs' alleged state law claims. Upon review, we conclude that the third amended complaint should not have been dismissed with prejudice and that the district court should reconsider whether it will hear the pendent claims of Quality Foods. However, we affirm the dismissal of Duroparts as a party and those pendent claims relating to Duroparts.

I.

Quality Foods is an El Salvador corporation in the business of growing and processing frozen vegetables. Duroparts also is an El Salvador corporation, which shares a common owner with Quality Foods, but which is in the business of selling reconditioned auto parts. The primary defendant is LAAD, a Panama investment company with its principal place of business in Miami. LAAD is in the business of assisting the development of private agribusiness in Central America with private funds and loans procured from the United States Government. ¹ The remaining defendants include: Laad de Centro America ("LAAD-CA"), a wholly owned subsidiary of LAAD responsible for the direction of loans and investments in Central America; LAAD Marketing Company ("LAAD-M"), a wholly owned subsidiary of LAAD that offered marketing services to Central American exporters until going out of business in 1975; United States Agricultural Processor Marketing Services, Inc. ("Marketing Services"), a marketing company formed in 1975 to provide similar services as LAAD-M; Joel D. Dreer, a consultant for LAAD-M and controller of Marketing Services, and Robert Ross, president of LAAD, LAAD-CA and LAAD-M.

This appeal has its roots in a state proceeding initiated by Marketing Services and Dreer against inter alia Quality Foods and Duroparts for damages arising from breach of a marketing/representation contract. Quality Foods and Duroparts removed the case to federal district court and counterclaimed for an accounting and sums due on the contract. United States Agricultural Processors Marketing Services, Inc. v. Quinonez Hermanos, S.A. et al., No. 76-839-CIV-EBD (pending). Quality Services and Duroparts also attempted to assert a third party complaint against LAAD-M, Ross, and Dreer. When the trial court dismissed the third party complaint on grounds that it was unrelated to the main suit, Quality Foods and Duroparts filed a separate suit in federal court against LAAD, the parent company, alleging various antitrust violations, as well as the breach of contract and common law fraud claims dismissed with the attempted third party complaint.

The present antitrust suit was filed in December 1976, and was accompanied by a request to produce. LAAD responded with a motion to dismiss for failure to state a claim and a motion to strike or for a more definite statement. LAAD, however, complied with the request to produce. As a result of these motions, Quality Foods and Duroparts amended their complaint in January 1977. The amended complaint added the remaining LAAD defendants as well as Dreer and Marketing Services. Also included were eighteen additional state law claims.

In March 1978, defendants moved to dismiss the first amended complaint on grounds that the trial court lacked subject matter jurisdiction, that plaintiffs did not have standing, and for failure to state a claim. Defendants also moved "to limit discovery in this case until this Court has ruled upon the jurisdictional issues raised ...." Record, vol. I, at 125. By an order dated July 8, 1978, the motions were granted and the action dismissed. Plaintiffs, however, were granted twenty days to file a second amended complaint "properly setting forth the basis for the court's subject matter jurisdiction over the cause of action ... the plaintiffs' standing ... and the basis for this court's pendent jurisdiction." At that time, all discovery motions also were held in abeyance until further order of the court.

In July 1978, plaintiffs filed a second amended complaint. The amendments addressed standing, and pendent jurisdiction, but the antitrust allegations remained virtually the same as in the earlier complaints. Again the district court dismissed the complaint with leave to amend. In its order of August 11, 1981, the Court capsulized the complaint as alleging that defendants conspired to monopolize the output of Latin American frozen vegetables imported to the United States. Being in the frozen vegetable business, Quality Foods had standing; however, Duroparts, in the business of selling reconditioned auto parts, was deemed to be without standing. The antitrust counts were dismissed for being overly broad, for failing to inform defendants which acts violated which of the antitrust statutes randomly alluded to throughout the complaint, and for failing "to properly plead the elements of the various antitrust claims." The court also noted that plaintiffs were unlikely to state a claim for relief under any conspiracy in light of Nelson Radio & Supply Co. v. Motorola, Inc., 200 F.2d 911 (5th Cir.1952), cert. denied, 345 U.S. 925, 73 S.Ct. 783, 97 L.Ed. 1356 (1953). The court further dismissed plaintiffs' pendent claims because "the twenty common law counts will require proof of facts, additional to those required to prove the antitrust claim."

In October 1981, Quality Foods filed its third amended complaint. The pendent claims were omitted and Duroparts was dropped as a party. Once again, however, the antitrust allegations remained unchanged. Hence defendants' motion to dismiss the third amended complaint for failure to comply with the court's order of August 11, 1981, and for failure to correct the defects of the second amended complaint was granted.

II.

A.

Our most difficult task on appeal is weeding through plaintiffs' third amended complaint to determine if it states a legitimate antitrust cause of action. Like its predecessors, the third amended complaint is laden with irrelevant allegations, and allegations which suggest possible breach of contract and fraud claims, but which nevertheless fail to constitute a claim for antitrust relief.

The core antitrust allegations appear in paragraph five of the complaint which begins by alleging a general conspiracy among LAAD, its shareholders, LAAD-CA, LAAD-M, Ross, Dreer and Marketing Services. The alleged conspiracy involved inter alia "the direct and indirect acquisition of stock and other share capital of various corporations in competition with each other and the employment of interlocking directorates and officers." Paragraph five contains twenty-three often unrelated and incongruous subparts. Those ostensibly related to the above charges include the following loans allegedly made by LAAD and LAAD-CA:

(1) $300,000 conventional loan (seven years at nine percent) to Industrias Amolonca, a Latin American frozen vegetable producer;

(2) $200,000 convertible loan to Frigorificos Tecnicos, a Latin American frozen vegetable producer;

(3) $200,000 conventional loan to Taylor & Associates, a holding company which owns Frigorificos Tecnicos, and a purchase of $200,000 worth of equity shares of Taylor & Associates;

(4) $60,000 convertible loan to Alimentos Congerados Montebello ("ALCOSA"), a Latin American frozen vegetable producer;

(5) $60,000 convertible loan to Promotora Agricola Basico de Guatemala ("BASICO"), a Latin American fresh vegetable producer; and

(6) $240,000 convertible loan to plaintiff--Quality Foods.

Through these loans, plaintiffs allege that LAAD effectuated a takeover of Industrias Amolonca and Frigorificos Tecnicos, and that all of the named producers are "competitors in foreign commerce" and market "all or most of their production in the United States." Furthermore, "[e]ach of above listed frozen vegetable processors has the potential capacity to produce the total requirements of the United States for certain vegetables." Finally, paragraph five alleges that LAAD and LAAD-CA made numerous loans to Latin American banks, apparently in an effort to foreclose the vegetable producers from obtaining loans other than those controlled by defendants.

Plaintiffs' allegations next turn to the formation of LAAD-M. Indeed, the primary focus of the complaint concerns the alleged misdeeds and misrepresentations of LAAD-M and its primary consultant Dreer during the course of LAAD-M's marketing representation of Quality Foods. ² During its brief existence, LAAD-M entered into marketing agreements with Quality Foods, Industrias Amolonca, Frigorificos Tecnicos and Taylor & Associates. ³ Accordingly, plaintiffs...