Sitts v. Dairy Farmers of Am., Inc.
| Decision Date | 27 September 2019 |
| Docket Number | Case No. 2:16-cv-287 |
| Citation | 417 F.Supp.3d 433 |
| Parties | Garrett and Ralph SITTS, Leon Atwell, Victor Barrick, Daniel Baumgarder, William Board, George Bolles, Roger Bolles, Andy Bollinger, Thomas Bollinger, Logan Bower, Dwight Brandenburg, Bernard Brouillette, Thomas Brouillette, Aaron Button, Hester Chase, Thomas Clark, Thomas Clatterbuck, Paul Currier, Gerry Delong, Pete and Alice Diehl, Mark Doring, Mark and Barbara Dulkis, Glen Eaves, Mike Eby, William Eckland, Doug Elliot, James Elliot, Wendall Elliott, Michael Faucher, David and Robin Fitch, Duane and Susan Flint, Joseph Fults, Richard Gantner, Stefan and Cindy Geiger, William Gloss, John Gwozdz, David and Laurie Grant, Jim and Joyce Gray, Dennis Hall, Roger and John Hamilton, Nevin and Marlin Hildebrand, Jake and Harlen Hillyerd, Richard and Terri Holdridge, Paul Horning, Terry and Robert Huyck, Donald Scott Hymers, Terry Inch, Randy and Lynette Inman, Theodore Jayko, Jack Kahler, James and Teresa Keator, Jim and Sharon Keilholtz, George Keith, Lee and Ellen Klock, Mike and Lisa Kraeger, Fred Laclair, Tim Lalyer, Frank and John Lamport, Corrine Lull, Charles and Gretchen Maine, Thomas and Debora Manos, Fred Matthews, Russell Maxwell, Gerry McIntosh, Stephen Mellott, John and David Mitchell, Thomas Monteith, Walt Moore, Richard and Sheila Morrow, Dean Moser, Melissa Murray and Sean Quinn, Thomas Nauman, Charles Neff, David Nichols, Michael Nissley, Lou Ann Parish, Daniel Peters, Marsha Perry, Carolyn and Dave Post, Judy Lee Post, Scott Rasmuseu, Brian Reape, David and Lynette Robinson, Brian and Lisa Robinson, Calvin Roes, Bradley Rohrer, Paul and Sarah Rohrbaugh, Roberta Ryan, Scott and Lin Sawyer, S. Robert Sensenig, Thomas and Dale Smith, Dale and Susan Smith, Dennis Smith, Donald T. and Donald M. Smith, Roger and Tammy, Smith, Todd Snyder, Richard Sourwine, Danny Sourwine, Randy Sowers, Shane Stalter, George and Shirley Stambaugh, Tracy Stanko, Stephen Sourwine, Richard Swantak, George and Patricia Thompson, Jeremy Thompson, Ken and Judy Tompkins, Daniel Vaughn, Mark Vissar, Eric Walts, Edward Walldroff, Gerald Wetterhahn, Jr., Eugene Wilczewski, Steve Wilson, Plaintiffs, v. DAIRY FARMERS OF AMERICA, INC. and Dairy Marketing Services, LLC, Defendants. |
| Court | U.S. District Court — District of Vermont |
Dana A. Zakarian, Esq., Pro Hac Vice, Elizabeth A. Reidy, Esq., Pro Hac Vice, Joel G. Beckman, Esq., Pro Hac Vice, Michael Paris, Esq., Pro Hac Vice, William C. Nystrom, Esq., Pro Hac Vice, Nystrom Beckman & Paris LLP, Boston, MA, Gary L. Franklin, Esq., Primmer Piper Eggleston & Cramer PC, Burlington, VT, for Plaintiffs.
Alfred C. Pfeiffer, Jr., Esq., Pro Hac Vice, Latham & Watkins LLP, San Francisco, CA, Elyse M. Greenwald, Esq., Latham & Watkins LLP, Boston, MA, Ian P. Carleton, Esq., Sheehey Furlong & Behm P.C., Burlington, VT, Jennifer L. Giordano, Esq., Margaret M. Zwisler, Esq., Pro Hac Vice, W. Todd Miller, Esq., Pro Hac Vice, Baker & Miller PLLC, Washington, DC, for Defendants.
Plaintiffs are dairy farmers who opted out of a settlement approved by this court in a class action styled Allen v. Dairy Farmers of America, Inc. , No. 5:09-cv-230 (the "Allen settlement"). They seek relief pursuant to the Sherman Act, 15 U.S.C. §§ 1 - 2, for alleged antitrust violations committed by Defendants Dairy Farmers of America, Inc. ("DFA") and Dairy Marketing Services, LLC ("DMS") (collectively, "Defendants"). Because of their corporate structure, Defendants are considered a single entity for purposes of Plaintiffs' claims. In their Revised First Amended Complaint ("RFAC"), Plaintiffs assert that Defendants and their alleged co-conspirators engaged in a conspiracy to monopsonize in violation of 15 U.S.C. § 2 (Count I); attempted to monopsonize in violation of 15 U.S.C. § 2 (Count II); engaged in monopsonization in violation of 15 U.S.C. § 2 (Count III); and participated in a conspiracy to restrain trade in violation of 15 U.S.C. § 1 (Count IV).
Pending before the court is Defendants' motion for summary judgment (Doc. 91) seeking judgment as matter of law in their favor because: (1) Plaintiffs cannot establish a single conspiracy among Defendants and their alleged co-conspirators; (2) Plaintiffs cannot establish the alleged conspiracy impacted each Plaintiff individually; and (3) Plaintiffs cannot establish that Defendants possess monopsony power or a dangerous possibility of achieving monopsony power. Plaintiffs oppose the motion. On April 9, 2019, the court heard oral argument, at which time it took the pending motion under advisement.
Plaintiffs are represented by Dana A. Zakarian, Esq., Elizabeth A. Reidy, Esq., Gary L. Franklin, Esq., Joel G. Beckman, Esq., and William C. Nystrom, Esq. Defendants are represented by Alfred C. Pfeiffer, Jr., Esq., Elyse M. Greenwald, Esq., Ian P. Carleton, Esq., Jennifer L. Giordano, Esq., Margaret M. Zwisler, Esq., and W. Todd Miller, Esq.
For each of their claims, Plaintiffs allege a relevant product market of raw Grade A milk, a fungible, homogenous, and perishable commodity. As a relevant geographic market, Plaintiffs allege Federal Milk Marketing Order ("FMMO") 1 ("Order 1"), which covers all or portions of Vermont, New Hampshire, New York, Massachusetts, Rhode Island, Connecticut, New Jersey, Delaware, Maryland, and Virginia. Certain rudimentary uncontested facts regarding the production of milk, some of which may be obvious, are helpful in describing the proposed product and geographic markets.
Because raw Grade A milk is homogenous, perishable, and fungible and because it is generally hauled from more than one dairy farm at a time, a dairy farmer's milk typically must be inspected, tested, and weighed at the time of pickup. Individual dairy farms that do not have the ability to test, haul, weigh, or market their own milk must contract for these services.
Dairy cows produce milk seven days a week, a schedule that cannot be immediately adjusted for demand short of throwing away milk. As a result, dairy farmers must find a processor that will take their milk regardless of demand. Balancing is a process whereby a balancing plant accepts the excess milk supply so that it may be converted into other dairy products that are less perishable than drinking milk such as butter, cheese, ice cream, sour cream, and yogurt.
A FMMO is a geographically defined fluid milk demand area subject to FMMO laws and regulations in which the U.S. Department of Agriculture establishes a minimum milk price so that those who buy milk from producers are required to pay no less than the established price. Each FMMO sets the price of raw Grade A milk based at least in part on its regulated components: butterfat, protein, non-fat milk solids, and others (non-fat and non-protein solids). In Order 1, this is known as "component pricing." An FMMO also sets standards for milk quality. Milk that is "pooled" in a FMMO must comply with these standards.
The price paid to dairy farmers for their milk is based not only on the volume of milk produced but also reflects its quality. Dairy farmers receive "over-order premiums" for their milk in addition to component pricing and other premiums. Over-order premiums are the difference between the actual price paid to a dairy farmer producer by a processor or cooperative and the FMMO's minimum price.
For purposes of their pending motion, Defendants do not contest Plaintiffs' proposed product and geographic markets.
DFA is a member-owned milk marketing cooperative based in Kansas City, Kansas. It is the largest dairy cooperative in the United States and the fourth largest dairy cooperative in the world based on sales. DFA's members, all of which are producers of raw milk, include both individual dairy farmers and other member-owned milk marketing cooperatives.
DFA is also one of the largest milk handlers in the United States. It owns or controls forty-two manufacturing facilities with over 6,000 employees and exports its products worldwide. In 2017, DFA's annual sales substantially exceeded a billion dollars. DFA divides its business into two business segments: "Milk Marketing" and "Commercial Investments." "Milk Marketing" directs the marketing of DFA member milk. "Commercial Investments" consists of a nationwide network of owned and affiliated dairy product manufacturers that process DFA members' milk into value-added dairy products. In addition, DFA's "Commercial Investments" segment participates in joint-venture partnerships and affiliate relationships with leading food manufacturing and marketing companies.
Until April 1, 2014, Dairylea Cooperative Inc. ("Dairylea") was a member-owned dairy cooperative based in Syracuse, New York. In 1999, DFA and Dairylea jointly formed DMS, a milk marketing entity that provides services to its customers such as hauling, testing, marketing, balancing, pricing, and invoicing. From 1999 until 2003, DFA and Dairylea each owned 50% of DMS. In 2003, St. Albans Cooperative Creamery ("St. Albans"), a member-owned dairy cooperative based in St. Albans, Vermont, became a part owner of DMS. Until April 2014, St. Albans owned one third of DMS with DFA and Dairylea each owning a remaining third. Since April 2014, DFA has owned 90% of DMS and St. Albans has owned 10%.
In May 2002, Dairylea became a member cooperative of DFA and on April 1, 2014, it merged with DFA. St. Albans became a DFA member in March 2003. In April 2014, Mount Joy Farmers' Cooperative Association ("Mt. Joy"), a former member cooperative of Dairylea, became a member cooperative of DFA.
From 2005 through the present, in addition to DFA's ownership of milk processing facilities in Order 1, Defendants entered into a series of supply agreements...
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