United States v. Beatrice Foods Co.
Decision Date | 16 June 1972 |
Docket Number | No. 4-70 Civ. 459.,4-70 Civ. 459. |
Parties | UNITED STATES of America, Plaintiff, v. BEATRICE FOODS CO., Defendant. |
Court | U.S. District Court — District of Minnesota |
COPYRIGHT MATERIAL OMITTED
Robert G. Renner, U. S. Atty., by Neal J. Shapiro, Asst. U. S. Atty., Minneapolis, Minn., together with H. Robert Field, and James E. Corkey, Dept. of Justice, Washington, D. C., appeared for plaintiff.
Winston, Strawn, Smith & Patterson, by Ronald Butler, Chicago, Ill., appeared for defendant.
The government has brought this civil enforcement action at the instance of the Federal Trade Commission (FTC), seeking monetary penalties and other relief from the defendant Beatrice Foods Co. (Beatrice) for alleged violations of a Federal Trade Commission order which was the product of negotiations between the parties during the pendency of an appeal by defendant from an earlier adverse FTC order. The government moved for summary judgment on the issue of as to whether violations occurred, with the thought that if the motion be granted, the parties and the court should contemplate further proceedings relative to penalties to be imposed or other relief to be granted. Penalties for violation of FTC orders are provided in the Federal Trade Commission Act, 15 U.S.C. § 45 (l); and in the Clayton Act, 15 U.S.C. § 21(l). Jurisdiction is found under 28 U.S.C. §§ 1337 and 1345; venue under 28 U.S.C. § 1395 and 15 U.S.C. § 22. For the reasons stated below, the motion of the government should be granted on both counts of the complaint.
The case arises from a protracted proceeding before the FTC, In the Matter of Beatrice Foods Co., FTC Docket 6653. A complaint filed in 1956 there charged that Beatrice, a distributor and processor of milk and allied products among other things, had violated Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, by acquiring numerous companies engaged in various facets of the dairy industry. The hearing examiner filed an initial decision and order on March 2, 1964, wherein he found that five of the acquisitions complained of constituted violations of the Clayton Act. He recommended divestiture of four of those companies and a ten-year prohibition on future similar acquisitions.
Beatrice appealed the examiner's order. The FTC confirmed his findings on April 26, 1965 and entered a substantially similar final order on December 10, 1965.1 Beatrice then sought review in the United States Court of Appeals for the Ninth Circuit. While the appeal was pending, negotiations between the parties resulted in a joint motion to the Circuit Court recommending entry of an agreed order by that court. The appeals court granted the motion on May 23, 1967, some 11 years after initiation of the original proceeding and on June 7, 1967, the FTC issued a modified order identical with that of that court.2
Two sections of the final order are the focus of the instant case, parts I and III which read in pertinent part as follows:
Count I of the complaint here charges that during the 10 year operative period of the order, Beatrice entered into a group of transactions involving a certain Maple Island Dairies, Inc. of Minnesota, which resulted in an acquisition or acquisitions violative of Part III of that order.
By Count II the government charges that Beatrice's failure to divest itself of its corporate stock interest in the Valley Gold Dairy of Albuquerque, N.M. within 18 months from the date the order became final was a violation of the order. Although the Valley Gold Stock eventually was sold, the government claims the divestiture was not timely.
Resisting the government's motion, Beatrice claims essentially that, as to Count I, there are numerous disputed issues of material fact both as to the nature of the transactions involved— whether or not anything prohibited was "acquired"—and as to the meaning of the term "interest" in the consent order (quoted above). As to Count II, Beatrice claims there were de facto extensions granted by the FTC and good faith substantial compliance with the divestiture order, and that in any event whether or not there was substantial compliance is an issue of fact requiring a jury decision. In summary, thus, the issues are:
On a summary judgment motion, where there are disputes as to material fact, the question must be viewed in the light most favorable to the party opposing the motion. As defendant points out there is authority which holds that summary judgment is inappropriate in certain complex antitrust cases where motive and intent are important and credibility is a factor.3 However, the more apposite line of authority is that which holds that where the gist of the case turns on documentary evidence and involves conclusions of law, summary judgment is proper.4 Here the evidence is substantial in volume and the transactions were intricate, but there is no dispute over the factual events which are represented by documents produced from or by Beatrice itself, only over their characterization within the meaning of this FTC order. The issue it seems to the court is not, for example, did Beatrice intend to acquire an interest in another company, but rather was an interest acquired.
The undisputed facts of the transactions underlying Count I are as follows:
In the Spring of 1968 Maple Island Dairies, Inc., a milk distributor, concluded to dispose of an unprofitable segment of its business which it called the northern division. That division consisted of four company-owned and operated dairy stores, 11 company owned branch distributors with established routes and 11 independent distributors also with established routes. Maple Island had had prior business dealings with two wholly owned Beatrice subsidiaries, competitors of Maple Island, Russell Creamery Company of Superior, Wisconsin and Russell Creamery Co. of Brainerd, Minnesota, both milk processors and distributors. In a series of meetings to discuss the disposition of Maple Island's northern division, the president of Maple Island, met with the president of Russell Creamery of Superior. A set of transactions resulted, after oral approval in principle by Russells' Beatrice superiors on July 11, 1968, whereby Russell would supply all but a few of the former Maple Island routes. The changeover began September 1, 1968, and a set of transactions was worked out for each distribution point.
The company owned routes were converted into independent distributorships. In all but two cases, the new distributors were the former operating employees of Maple Island or an existing independent Russell distributor. In each such case, a meeting was held where the new distributor purchased the assets at the location, including any inventory and accounts receivable. The purchaser made a modest down payment with the remainder being financed by Beatrice.5 Present at each meeting were the purchaser and representatives of Maple Island and Beatrice. The exhibits attached to the government brief produced from Beatrice show that, typically, at each meeting the former Maple Island employee or existing Russell distributor first executed an "Agreement to purchase", distributorship contract, factor's lien, conditional sales contract and note bearing 7% interest. Contemporaneously, a Beatrice subsidiary executed a check for the balance due after the down payment.6 Also at each meeting Maple Island assigned all its rights under the distributorship contracts to Beatrice. The assignment was accomplished in each case by a document, signed by Maple Island, Russell and the new distributor, which contained the following recital:
"For value received, I hereby assign the attached conditional Sales Contract, Factor's Lien, Note, Franchise Agreement of ________ to Russell Creamery Co. . . . ."
As to the 11 independent Maple Island distributors in the northern division, the only assets transferred were 30 day trade accounts owed by them to Maple Island. In six cases, the Beatrice subsidiary issued a check to the distributor who in turn, by prior agreement with Beatrice, endorsed it to Maple Island in payment of outstanding accounts. Four distributors financed their own transfers. One in Amery, Wisconsin, was dropped from the arrangement by mutual agreement.
Also included in the arrangements between Maple Island and Beatrice was a five-year license for...
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