Wainwright v. National Dairy Products Corp.

• Citation: 304 F. Supp. 567
• Decision Date: 30 September 1969
• Docket Number: Civ. A. No. 12278.
• Parties: Bill C. WAINWRIGHT, Ed S. Cook, Mrs. LeRoy Woodward, Dr. Asa G. Yancey, Fred M. Shell, T. Charles Allen, Robinson W. Schilling, Dr. Horace E. Tate and Mrs. Sara P. Mitchell, in their representative capacities as Members of the Atlanta Board of Education v. NATIONAL DAIRY PRODUCTS CORP.; Foremost Foods, Inc.; Pet Incorporated; Irvindale Dairies, Inc.; Atlanta Dairies Cooperative; R. L. Mathis Certified Dairy Co.; Better Maid Dairy Products, Inc.; Home Town Foods, Inc., d/b/a Foremost Dairies of the South and Foremost Farmbest; and Foremost-McKesson, Inc.
• Court: U.S. District Court — Northern District of Georgia

304 F. Supp. 567

Bill C. WAINWRIGHT, Ed S. Cook, Mrs. LeRoy Woodward, Dr. Asa G. Yancey, Fred M. Shell, T. Charles Allen, Robinson W. Schilling, Dr. Horace E. Tate and Mrs. Sara P. Mitchell, in their representative capacities as Members of the Atlanta Board of Education v. NATIONAL DAIRY PRODUCTS CORP.; Foremost Foods, Inc.; Pet Incorporated; Irvindale Dairies, Inc.; Atlanta Dairies Cooperative; R. L. Mathis Certified Dairy Co.; Better Maid Dairy Products, Inc.; Home Town Foods, Inc., d/b/a Foremost Dairies of the South and Foremost Farmbest; and Foremost-McKesson, Inc.

Civ. A. No. 12278.

United States District Court N. D. Georgia, Atlanta Division.

September 30, 1969.

COPYRIGHT MATERIAL OMITTED

Kilpatrick, Cody, Rogers, McClatchey & Regenstein, Latimer, Haddon & Stanfield, Atlanta, Ga., for plaintiff.

King & Spalding, Atlanta, Ga., for National Dairy Products Corp.

Heyman & Sizemore, Atlanta, Ga., for Irvindale Dairies, Inc.

Webb, Parker & Ferguson, Paul Webb, Jr., Atlanta, Ga., for Atlanta Dairies Co-op.

Fortson, Bentley & Griffin, Athens, Ga., for Better Maid Dairy Products, Inc.

Wallace, Wallace & Driebe, Jonesboro, Ga., for R. L. Mathis Certified Dairy Co.

Sanders, Hester, Holley, Ashmore & Boozer, Atlanta, Ga., for Pet, Inc.

Fisher & Phillips, Atlanta, Ga., for Home Town Foods, Inc. and Foremost-McKesson, Inc.

ORDER

EDENFIELD, District Judge.

To facilitate the ultimate disposition of this multi-faceted antitrust action, the court asked each party to discuss the effect of the Georgia Milk Control Act on the plaintiff's case. The court will herein treat those suing as "the Board of Education of the City of Atlanta."

Plaintiff in its complaint urges that the defendants joined in a conspiracy, contract, or combination restraining trade, fixing prices, and dividing territory and customers, in violation of the Sherman Act with respect to it and other school systems in the State of Georgia. The defendants contend that the Georgia Milk Control Act, as amended in 1952, is an absolute bar to liability, or is at the very least persuasive evidence that no conspiracy in fact existed. The thrust of the defendants' argument is that milk prices were fixed for schools by the Georgia Milk Commission, established under the Milk Control Act, thereby immunizing them from federal antitrust violations.

The Milk Control Act, as originally passed in 1937, permitted the Milk Control Board to fix prices on milk sold within the state. The Act withstood several constitutional challenges, Bohannon v. Duncan, 185 Ga. 840, 196 S.E. 897 (1938); Gibbs v. Milk Control Board of Georgia, 185 Ga. 844, 196 S.E. 791 (1938); Holcombe v. Georgia Milk Producers Confederation, 188 Ga. 358, 3 S.E.2d 705 (1939), before it succumbed in Harris v. Duncan, 208 Ga. 561, 67 S.E.2d 692 (1951). The Supreme Court of Georgia, in a full bench decision, held the Act violative of state due process in its restriction on the freedom of contract. The Court found that since the milk industry was not, under its rigid definition, "affected with a public interest", price fixing was impermissible. Contra, see, Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940 (1934); Highland Farms Dairy v. Agnew, 300 U.S. 608, 57 S.Ct. 549, 81 L.Ed. 835 (1937).

In an effort to avoid the pitfalls cited in Harris v. Duncan, supra, the General Assembly of Georgia amended the Milk Control Act. The amended law attempted to assure a degree of price stability in the milk industry and at the same time preserve freedom of contract. Under the methods selected, the Georgia Milk Commission was authorized to establish "recommended prices" as "a guide to licensees buying or selling milk." As Georgia Code § 42-554 provides, in pertinent part:

"As a guide to licensees buying or selling milk, the commission shall determine, from its knowledge of the milk industry and investigations of economic and other conditions therein, what prices for milk handled or sold in each milk shed within which this law is applicable, adequately will protect the milk industry and insure a sufficient quantity of pure and wholesome milk to adults and minors, having special regard to the health and welfare of children, and be most in the public interest."

Under the Act the parties were subject to the prices recommended by the Commission, Georgia Code § 42-555.1,¹ if they failed to voluntarily remove themselves from the recommended prices by entering into and properly filing contracts meeting certain requirements. Georgia Code § 42-551.

Defendants argue that the contractual requirements of § 42-551 were so onerous they amounted to no more than a charade for price-fixing, under § 42-554. Under § 42-551, each contract must contain, among other matters, the following, which defendants consider particularly burdensome:

"(ii) The quantity of milk bought and sold or to be bought and sold.

"(iii) The identity by name and address of each person producing such milk or any part thereof.

"(iv) The exact location or locations where such milk or any part thereof was or is to be produced.

"(v) The breed or breeds of herd or herds from which such milk or any part thereof was or is to be produced, with the approximate percentage of total of any blend expressed as to each breed."

Defendants urge that these requirements realistically precluded the use of contracts to avoid the Commission's recommendations. They note that each of them dealt with up to 200 or more producers, "each producer having herds of different breeds, all of which may be subject to variance from time to time." They further state that their sources of supply often depended upon producers outside the state, when normal sources in Georgia were exhausted, yet these sources would be unknown and therefore unspecified in the contract. Defendants state that they rarely knew whose milk was sold to whom, since the milk of various producers was commingled — often before it reached the distributor's plant. Additionally, they argue that they could not set out the quantity of milk sold to the instant plaintiff, as required by § 42-551(a) (ii), since their contract with the Atlanta Board of Education is on a "needs" basis. Defendants support their argument by citation to the opinion of Fulton County Superior Court Judge Etheridge in Ward v. Big Apple Super Markets, No. B-26538, May 5, 1967, and the Supreme Court of Georgia affirmance of that case in Ward v. Big Apple Super Markets, 223 Ga. 756, 158 S.E.2d 396 (1967), holding the Milk Control Act unconstitutional. The Ward case involved the sale of milk by defendant below retail prices suggested by the Georgia Milk Commission. To escape the Commission's recommendation at the retail level — as opposed to the distribution level in the instant action — the defendant would have been required to comply with § 42-553:

"When a completed sale of a quantity of milk is made in a single transaction for cash upon delivery thereof the typical retail sale, in lieu of the execution and filing of an agreement in writing with respect to such sale as above prescribed, the seller shall obtain a written receipt signed by the buyer at the time of sale showing * * *. herein follow various facts about the sale."

Judge Etheridge found that § 42-553 did not provide a reasonable alternative to acceptance—at the retail level — of the Commission's recommended prices. As he put it:

"Indeed a reading of the Act discloses that the principal business of the Milk Commission is the establishment of so-called `recommended' prices. The Act would be practically destroyed without the features in it dealing with that subject * * *

"While there were added certain provisions of the Act such as found in Ga.Laws 1952, pp. 55, 62 (Ga.Code Ann. Title 42-553) which provide for alternative action by the retailer if it chooses not to abide by the `recommended' price, they constitute no reasonable alternative to conformance. Indeed, the provision in the Act available to the retailer in the event of non-compliance, purporting to offer a reasonable alternative, are so administratively burdensome as to be impossible, or at least to force the retailer into compliance. Insofar as any alternative to the sale of milk at the `recommended' price is concerned, therefore, the Court is of the opinion that none exists that is reasonable."

In appealing Judge Etheridge's decision, the Milk Commission did not argue the question of reasonable alternatives under § 42-553, but attacked the Harris v. Duncan decision four-square, by arguing that milk was a product affected with a public interest. At pages 42-43 of their brief before the Georgia Supreme Court, the Commission stated that:

"In all candor, the appellant feels, that it is unnecessary to test the sufficiency of the 1952 amendments in and of themselves. It is the position of the appellant that this case will and should be decided on the basis of whether or not price regulation is constitutionally permissible when applied to the milk industry."

The Georgia Supreme Court, in its holding, stated that:

"This court in the full bench decision of Harris v. Duncan, 208 Ga. 561, 67 S.E.2d 692, held that the Act * * * conferring upon the Milk Control Board the authority to fix prices violates * * * the due process clause of the Georgia Constitution in that it restricts the freedom of contract. * * * This full bench decision can be reversed only by the concurrence of all seven Justices of this court, unless there has been some material amendment or facts that would make the question of law different from that existing in the older decisions.

"In 1952 (Ga.L.1952, pp. 55-70) the General Assembly amended the 1937 Act (Ga.L.1937, pp. 247-264), as previously amended, which amendment, as the commission contends in its brief, is an `attempt to provide and maintain freedom of contract by providing a procedure through which contracting parties might go in order to arrive at a price of their choosing * * *' However, the commission

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