Windham v. American Brands, Inc.

• Decision Date: 16 July 1976
• Docket Number: No. 75-2315,75-2315
• Citation: 539 F.2d 1016
• Parties: 1976-2 Trade Cases 60,976 Roy P. WINDHAM et al., on behalf of themselves and all others similarly situated, Appellants, v. AMERICAN BRANDS, INC., et al., Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1016

539 F.2d 1016

1976-2 Trade Cases 60,976

Roy P. WINDHAM et al., on behalf of themselves and all

others similarly situated, Appellants, v. AMERICAN BRANDS, INC., et al., Appellees.

No. 75-2315.

United States Court of Appeals, Fourth Circuit.

Argued May 6, 1976.

Decided July 16, 1976.

E. N. Zeigler, Florence, S. C., (H. Page Dees, Florence, S. C., John A. Cochrane, John E. Thomas, St. Paul, Minn., J. Nat Hamrick, Rutherfordton, N. C., Robert C. Howison, Jr., Raleigh, N. C. and Frank M. Wooten, Jr., Greenville, N. C., on brief), for appellants.

Murray H. Bring, Atty., Arnold & Porter, Washington, D. C., (Willcox, Hardee, Palmer, O'Farrell, McLeod & Buyck, Florence, S. C., on brief), for Philip Morris Inc., appellees.

William Reynolds Williams, Asst. U. S. Atty., Columbia, S. C., and Edward M. Silverstein, Atty., Marketing Div., Office of Gen. Counsel, U. S. Dept. of Agriculture, Washington, D. C. (Mark W. Buyck, U. S. Atty., Columbia, S. C., James D. Keast, Gen. Counsel, J. Michael Kelly, Harold N. Carter, Asst. Gen. Counsels, John C. Chernauskas, Director, Marketing Div., Washington, D. C., on brief), for appellees.

Before BRYAN, Senior Circuit Judge, CRAVEN, Circuit Judge, and WYZANSKI, Senior District Judge. ^*

WYZANSKI, Senior District Judge*.

The issue before us is whether in this private action alleging violation of Sections 1 and 2 of the Sherman Anti-Trust Act, 15 U.S.C. §§ 1 and 2, the District Court abused its discretion in denying, with respect to all aspects of the case, class action certification under Fed.R.Civ.P. 23(b)(3).

July 29, 1974, six named plaintiffs, growers of flue-cured tobacco in South Carolina, complained that seven defendant tobacco companies and the Secretary of Agriculture of the United States conspired, in violation of the Sherman Act, (1) to rig bids and fix prices to force, at prices lower than would have been the situation in a free market, the sale of tobacco by tobacco farmers, including owners of land with tobacco allotments lessees of allotments, sharecroppers, and tenants, (2) to monopolize the warehouse auction markets for flue-cured tobacco by parallel bidding, collusive bidding, and percentage purchase agreements, and (3) to restrict arbitrarily the amount of flue-cured tobacco which could be sold per day and per week in the auction warehouses and to apportion the available government tobacco inspectors inequitably between South Carolina and Georgia.

October 17, 1974, the District Court, responding to a class action allegation in the complaint, issued a rule to show cause why an order should not be entered determining, pursuant to Fed.R.Civ.P. 23(a) and (b)(3), that this action be maintained on behalf of a purported class of more than 20,000 South Carolinians who from 1970 through 1974 sold, or had an economic interest in the sale of, flue-cured tobacco in South Carolina, and whose total claims aggregated, according to plaintiffs, more than $335,000,000.

The District Judge permitted the parties to engage in full discovery on the class action issues, presided at the deposition of more than 20 witnesses, admitted extensive documentary materials, and on September 26, 1975, filed a 29-page opinion containing full, precise, and apposite findings which, after careful analysis, led him to conclude that the case should not proceed as a class action because individual issues would predominate over common ones and because the case would be unmanageable as a class action.

Mindful of the weight which Fed.R.Civ.P. 52(a) demands be accorded to a District Court's findings "unless clearly erroneous," we first summarize what District Judge Chapman found on the basis of substantial evidence.

Flue-cured tobacco is a non-standardized product grown in South Carolina, Alabama, Florida, Georgia, North Carolina, and Virginia. It is sold almost exclusively at auctions at independent warehouses in each of those states except Alabama. It is sold in individual piles weighing about 200 pounds each.

In South Carolina there were at the time of the trial 36 tobacco warehouses in 11 different geographic markets. The number of warehouses conducting auctions in each geographic market varied from 2 to 7. Most of the flue-cured tobacco grown in South Carolina was sold there, but South Carolina growers also had sold large amounts of tobacco in other states.

The quality of tobacco is affected by moisture content, sand content, degree of ripeness, spoilage, disease, method of picking, method of curing, and other factors. The quality may reflect the skill of the farmer, the area of production, and other aspects of production. Quality obviously affects price. Each tobacco company has its own grading system, and, in addition, the government has a system of 161 grades, which it uses in establishing levels of price support.

Other findings of the judge relate to topics such as whether defendants increased their bids on low quality tobacco to affect prices on high quality tobacco, whether tobacco producers when dissatisfied with market bids sell to government-sponsored stabilization programs, and whether despite an alleged conspiracy covering all 11 markets some defendants bought at only some of those markets, or did not make always the same percentage of their purchases in the same markets, or paid for the same grade of tobacco different prices at different times in different places.

The judge, in the light of Eisen v. Carlisle and Jacquelin, 479 F.2d 1005 (C.A.2, 1973), vacated on other grounds, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) (which held that it would be improper to allow a class as such to have a "fluid recovery" assessing gross damages to the class as a whole), also made findings that relate to the vast amount of evidence which probably would be required to prove the fact of impact of the alleged conspiracy upon each of the 20,000 proposed members of the class, and the facts with respect to the specific damage each of the 20,000 had individually sustained. But the findings do not address the question whether, if the sole issue before a court and jury were the existence of alleged conspiracies which constituted violations of the anti-trust laws, there would be a substantial difference in the quantum or character of the requisite proof if the plaintiffs included all 20,000 in a class action or only the 6 named plaintiffs.

The findings indicate that there may be among the potential members of the proposed class some, as the District Judges denominated them, "antagonisms" of interest, in the sense that, because of the quality of their tobacco, or their roles in the market, different individuals may have been differently affected by the alleged conspiracies. Obviously, however, these supposed antagonisms would not prove that defendants did or did not conspire; they would bear chiefly upon the measure of the impacts of the conspiracies, if any existed.

Moreover, with respect to impact and damages, the trial court took note of other problems. Plaintiffs had offered no proof that there is, and the judge did not believe that there was, any theoretical or practical over-all workable formula or method to aid in the computation of damages sustained by different individuals. The judge added that no expert could qualify to give opinions concerning the competitive prices of 161 different grades of flue-cured tobacco on each sales day, at each warehouse for each of the four years embraced by the complaint. In short, each of the 20,000 probable members of the class, in order to secure a favorable judgment for him, would require different, and perhaps voluminous, documentary evidence with respect to his individual transactions.

Against these findings of fact and comments thereon, and after concluding that the complaint stated claims within the jurisdiction of the court, upon which relief could be granted, and after considering plaintiffs' suggestion "in briefs and oral argument . . . that it would be helpful to try the issue of liability separate from the issue of damages," the District Judge addressed himself to the applicability to this case of Fed.R.Civ.P. 23(a) and (b)(3), the text of which provides:

(a) Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:

(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.

With respect to the just quoted Rule 23(a), the District Court decided that (1) the proposed class was necessarily (apart from other factors) so numerous that joinder of all members would be impractical, (2) there are questions of law and fact common to the proposed class, (3) the claims of the representative parties are typical of the claims of the proposed class, and (4) the representative parties would...