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Knuth v. Erie-Crawford Dairy Cooperative Assn.

filed: May 3, 1968.

ROBERT M. KNUTH, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED
v.
ERIE-CRAWFORD DAIRY COOPERATIVE ASSN., DAIRYMEN'S COOPERATIVE SALES ASSN., INC., WILLIAM COLTERYAHN & SONS, INC., KLEIN DAIRY, LINGERLIGHT DAIRY CO., SCHNEIDER'S DAIRY, INC., SNEE DAIRY CO., CALVIN DAIRY CO., ERIE DAIRY LAND, INC., GOLDEN CROWN DAIRY, SCHRUER'S DAIRY, YAPLE'S DAIRY, INC., GOLDEN GLOW DAIRY, STERLING MILK, INC., SEALTEST FOODS, DIVISION OF NATIONAL DAIRY PRODUCTS CORP., OHIO-ERIE MILK CO., CLEVELAND SALES CO., BLUE MOUNTAIN DAIRY, LENKERBROOK DAIRY, BROOKFIELD CREAMERY, FARM MAID MILK CO., HOME DAIRY, HILGENDORF DAIRY, AKRON MILK PRODUCERS COOPERATIVE, JOHN BARNEY, HOWARD YOST, LEE PORT, JOHN HANAS, RUSSELL RAYBUCK, MILTON CULBERTSON, DONALD TRISCUIT, RAYMOND BOYD, CALVIN HENRY, ROY BLACK, LOREN MITCHELL, CHARLES SPAID, BERLE HAYES, KARL O. NEUBERGER, K. ROBERT FISHER [FISCHER], ADEN BOYD AND DANA MOON



Biggs, Kalodner and Seitz, Circuit Judges. Kalodner, Circuit Judge, dissenting.

Author: Seitz

Opinion of the Court

By SEITZ, Circuit Judge:

This is an appeal from a judgment dismissing an amended complaint with prejudice for failure to state a claim.*fn1

Plaintiff's class action claim (Count I) asserted under Section 4 of the Clayton Act,*fn2 alleged violations of Sections 1 and 2 of the Sherman Act.*fn3 The class represented by appellant allegedly consisted of approximately 1,200 Pennsylvania farmer-producers ("producers") who furnished milk for the period designated to one of the defendants Erie-Crawford,*fn4 a Pennsylvania cooperative marketing organization. Erie-Crawford in turn sold the milk to certain of the other defendants ("processors") who processed it and sold it to retailers as bottled milk or dairy products.

The appellant and the other Pennsylvania producers he purports to represent furnished raw milk to their marketing cooperative, Erie-Crawford, under a contract by which the net proceeds of all money received by Erie-Crawford was to be paid to them as their interests appeared. This milk was sold to the processors at prices per hundredweight fixed by the Pennsylvania Milk Control Commission under statutory authority.*fn5 Erie-Crawford also received milk from producers outside of Pennsylvania. This milk was shipped into Pennsylvania and sold to the processors at prices per hundredweight which were less than the fixed selling price of the Pennsylvania produced milk. All proceeds received by Erie-Crawford from the sale of milk were placed in a market-wide milk price pool. From this pool, all farmer-producers were paid an equal net amount per hundredweight of milk supplied regardless of the amounts received for any particular farmer-producer's milk.

The best analysis we can make of Count I of plaintiff's amended complaint reveals that three courses of conduct involving defendants are alleged to constitute violations of Sections 1 and 2 of the Sherman Act. We first state them in summary fashion and then treat them seriatim.

Plaintiff alleges a conspiracy by all appellees:

I. to fix the price of milk shipped into Pennsylvania by granting rebates to the processors on the milk produced in Pennsylvania and purchased by them from Erie-Crawford;

II. to suppress and eliminate competition in the sale of milk and other dairy products as evidenced by the Erie-Crawford directors' action in causing Pennsylvania milk to be shipped into Ohio and other states and then reshipped to Pennsylvania so that it can be sold to the processors at a price below the minimum price fixed by the Pennsylvania Milk Control Commission;

III. to suppress and eliminate competition in the sale of milk and other dairy products by the processors' concerted refusal to deal directly with the producers, and also by their refusal to buy milk from any source other than those sources approved by Erie-Crawford.

The damages from the foreging conduct are alleged to be an amount equal to the rebates plus other specific economic loss.

Since Count I was dismissed with prejudice for failure to state a claim, we must take the material allegations of the complaint to be true. Doubts should be resolved in favor of the position which will uphold the pleading as such. Decisions of the United States Supreme Court indicate that we should be extremely liberal in construing antitrust complaints. See Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656, 660, 5 L. Ed. 2d 358, 81 S. Ct. 365 (1961); Radovich v. National Football League, 352 U.S. 445, 453-454, 1 L. Ed. 2d 456, 77 S. Ct. 390 (1957); and United States v. Employing Plasterers' Ass'n., 347 U.S. 186, 188-189, 98 L. Ed. 618, 74 S. Ct. 452 (1954). Indeed, in the Employing Plasterers' case, the Supreme Court made it clear that, "whether [the] charges be called 'allegations of fact' or 'mere conclusions of the pleader,' * * * they must be taken into account in deciding" whether a claim for relief is stated. Above at p. 188, 74 S. Ct. at p. 454. And they further said that,

"* * * Where a bona fide complaint is filed that charges every element necessary to recover, summary dismissal of a civil case for failure to set out evidential facts can seldom be justified. If a party needs more facts, it has a right to call for them under Rule 12(e) of the Federal Rules of Civil Procedure. And any time a claim is frivolous an expensive full dress trial can be avoided by invoking the summary judgment procedure under Rule 56." Above at p. 189, 74 S. Ct. at p. 454.

The "liberal" approach to the consideration of antitrust complaints is important because inherent in such an action is the fact that all the details and specific facts relied upon cannot properly be set forth as part of the pleadings. See Noerr Motor Freight, Inc. v. Eastern R.R. Presidents Conference, 113 F. Supp. 737 (E.D. Pa. 1953).*fn6 In the use of Section 4 of the Clayton Act, the courts have attributed to a private litigant the role of an ancillary force to supplement governmental enforcement of the antitrust laws. See United States v. Borden Co., 347 U.S. 514, 98 L. Ed. 903, 74 S. Ct. 703 (1954). All the law requires to state a private treble damage action claim are allegations adequate to show a violation of the antitrust acts and that plaintiff has been damaged thereby. Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., above.

We also take occasion to note that Section 1 of the Capper-Volstead Act*fn7 does not authorize combinations or conspiracies between cooperatives and others in restraint of trade. United States v. Borden Co., 308 U.S. 188, 84 L. Ed. 181, 60 S. Ct. 182 (1939). Indeed, such a cooperative may even be liable under the Sherman Act without proof of involvement of non-cooperatives if the activity under attack is predatory. Maryland and Virginia Milk Producers Ass'n., Inc. v. United States, 362 U.S. 458, 4 L. Ed. 2d 880, 80 S. Ct. 847 (1960).

We turn now, with the aforementioned principles in mind, to a seriatim analysis of the three courses of conduct which we infer from the amended complaint are the alleged violations of the Sherman Act.

I. Rebates

Plaintiff claims that the defendants conspired to fix the price of milk shipped into Pennsylvania by the use of rebates to the processors on milk produced in Pennsylvania and purchased by them from Erie-Crawford. The date of the conspiracy is alleged, plus an allegation concerning defendants' knowledge of the price set for milk by the Pennsylvania Milk Control Commission. Rebates given solely on Pennsylvania milk allegedly result in the suppression and elimination of competition by preventing the free flow of milk in interstate commerce from sources outside the State of Pennsylvania into the State of Pennsylvania. The object of this alleged ...


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