Category Archives: Agriculture

Trial Brief in Adams v. Pilgrim’s Pride Corp.

On July 16, 2012, defendant Pilgrim’s Pride Corp. argued in its trial brief in Adams v. Pilgrim’s Pride Corp. (E.D. Tex.), that Louisiana chicken growers have no standing to sue Pilgrim’s Pride for alleged antitrust violations under Louisiana’s Unfair Trade Practices and Consumer Protection Law (LUTPA).  The LUTPA claims in the Adams case are asserted by former chicken growers for Pilgrim’s Pride’s former Farmerville, Louisiana plant.  They claim that Pilgrim’s Pride idled the plant for the purpose of raising the price of chicken produced by Pilgrim’s Pride at other plants, allegedly in violation of Section 192(e) of the Packers and Stockyards Act and the LUTPA.

In its trial brief, Pilgrim’s Pride argues that the LUTPA claims are not viable, since under Fifth Circuit authority only direct consumers or business competitors have standing to assert LUTPA claims, and the Farmerville contract growers were neither consumers nor competitors, but suppliers of services.  The brief acknowledges that in Cheramie Services, Inc. v. Shell Deepwater Prod., Inc., 35 So. 3d 1053 (La. 2010), three of seven justices of the Louisiana Supreme Court concluded that the LUTPA does not clearly limit private rights of action to consumers or business competitors.  Pilgrim’s Pride argues, however, that since this was not the holding of a majority of the Court, it is not binding on lower courts under Louisiana law, and thus does not abrogate the referenced Fifth Circuit interpretation of the LUTPA.

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Minn-Chem, Inc. v. Agrium, Inc. (7th Cir., en banc, June 27, 2012)

On June 27, 2012, the  U.S. Court of Appeals for the Seventh Circuit Court provided fresh guidance on the Foreign Trade Antitrust Improvements Act (FTAIA) in its much-anticipated en banc opinion in Minn-Chem, Inc. v. Agrium, Inc.  A panel of the Seventh Circuit had held in September 2011, that a class-action complaint alleging a global price-fixing cartel among Canadian, Russian and Belarusian producers of potash, a mineral used primarily in agricultural fertilizer, failed to plead enough facts to satisfy either of the two import-related exceptions to the FTAIA, and on that ground reversed a decision of the district court which had denied a motion to dismiss the complaint for failure to state a claim.  The Seventh Circuit in October 2011, vacated the original panel’s opinion and granted the en banc review that led to its June 27, 2012 opinion.        

Before reaching the FTAIA exceptions, the Court in Part II of its opinion overruled its previous en banc decision in United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942 (7th Cir. 2003) — and held that the FTAIA does not limit the subject matter jurisdiction of the federal courts, but merely spells out an element of an antitrust claim.  

In Part III of its opinion, the Court interpreted the two “import” related exceptions to the FTAIA.  The Court concluded that the exception for “pure import commerce — that is the kind of commerce that is not subject to the special rules created by the FTAIA” — applies to “trade involving only foreign sellers and domestic buyers,” in this case, direct purchases of potash by U.S. entities from members of the alleged cartel located outside the United States.  It was clear, the Court stated, that some, but not all, of the transactions alleged in the Complaint were pure import transactions outside the scope of the FTAIA.

Regarding the second FTAIA import-related exception — foreign trade or commerce that has “direct, substantial, and reasonably foreseeable” effects on U.S.domestic or import commerce — the Court held that, “for FTAIA purposes, the term ‘direct’ means only a ‘reasonably proximate causal nexus.'”  In so holding, the Court explicitly adopted the position of the U.S. Department of Justice’s Antitrust Division and rejected a more restricted definition in United States v. LSL Biotechs., 379 F.3d 672 (9th Cir. 2004). 

Applying these standards, the Court concluded that the allegations of the Complaint state a claim for violation of the Sherman Act and affirmed the order of the district court denying the defendants’ motion to dismiss for failure to state a claim.

DOJ issues its report on DOJ/USDA Joint Public Workshops on Antitrust in Agriculture

On May 16, 2012, the Antitrust Division of the U.S. Department of Justice (DOJ) issued a 24-page report on the five public competition-in-agriculture workshops that the DOJ co-sponsored with the U.S. Department of Agriculture in 2010.  The report, “Competition and Agriculture: Voices from the Workshops on Agriculture and Antitrust Enforcement in Our 21st Century Economy and Thoughts on the Way Forward,” is available at the following DOJ link: www.justice.gov/atr/public/reports/283291.pdf

In Section II of the Report, “What We Heard at the Workshops,” the DOJ summarizes and discusses themes that were heard repeatedly at the workshops, including anticompetitive mergers, high market concentration, monopsony power, price levels, lack of capital, contracting, market transparency and captive supply, market manipulation and genetically modified seeds.

Section III of the report assesses which of the concerns raised during the workshops fall within the scope of the DOJ’s antitrust enforcement powers, and which do not.  The report states at p. 16, for example, that as a result of the workshops, “the Division has redoubled its efforts to prevent anticompetitive agricultural mergers and conduct,” but observes elsewhere that the antitrust laws do not empower courts to engineer an idealized economic landscape of small farms and ranches, and modest-sized local grain elevators and packers, or to control price volatility that results from market forces and not from anticompetitive practices.  (Report, at 18, 20.)

In re Southeastern Milk Antitrust Litigation, 2:08-MD-1000 (E.D. Tenn.)

On March 27, 2012, the federal district court granted the defendants’ motion for summary judgment in Food Lion, et al. v. Dean Foods Co., et al., No. 2:07-CV-188, one of the cases in the above-referenced MDL, and dismissed the Plaintiffs’ two remaining Sherman Act section 1 and 2 claims.  Those claims alleged respectively a horizontal agreement not to compete among defendants Dean Foods (Dean), Dairy Farmers of America (DFA) and National Dairy Holdings (NDH) and a conspiracy to monopolize among Dean, DFA and NDH.  Food Lion and the other Plaintiffs are retail sellers of processed milk who purchase milk directly from Dean and/or DFA.

The district court’s ruling rested on two ultimate conclusions.  First, since the court found the Plaintiffs’ economic damages model flawed, they could not establish the required element of antitrust injury.  According to the court, the model measured at least in part price increases from a 2001 merger between Dean and Suiza — not challenged in this case — rather than the anticompetitive conduct alleged in this case.  (Slip op. 10)

Second, the court concluded that both remaining Sherman Act claims required proof of a relevant geographic market.  This conclusion independently required summary judgment on both claims, since the Court had ruled previously that the Plaintiffs could not prove a relevant geographic market.

The court ruled on several interesting legal issues in its 21-page opinion.  These included: (1) how Monsanto Co. v. Spray Rite Service Corp., 465 U.S. 752, 764 (1984)  — requiring “evidence that tends to exclude the possibility” that challenged conduct resulted from independent action — applies on a motion for summary judgment; (2) whether a court may properly consider the “cumulative effect” of evidence in deciding whether a genuine issue of fact is presented; (3) whether Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) and Sixth Circuit precedent require proof of a relevant geographic market in an action under Sherman Act s. 2 for conspiracy to monopolize; and (4) whether the proper Sherman Act s. 1 characterization of an agreement as vertical (rule of reason analysis) or horizontal (per se analysis) is a question of law for the court or a question of fact for the jury.

The court concluded, after surveying authorities, that the horizontal/vertical characterization is a question of law for the court, but found the proper characterization of the challenged agreement in this case “difficult.”  According to the opinion, “the essence of Plaintiffs’ conspiracy claim is a quid pro quo agreement beween competitors at the same level of the distribution chain (Dean and NDH) almost totally carried out through the use of agreements involving the supply of raw milk among a group of firms at other levels of the distribution chain (Dean and DFA, NDH and DFA). . . .  Plaintiffs suggest that two horizontal competitors, Dean and NDH, ‘are central to the argument’ while at the same time arguing that it is the full supply agreements for raw milk between vertical actors that are ‘at the heart’ of their claims.”  Distinguishing In re Pressure Sensitive Label Stock Antitrust Litigation, 2007 WL 4150666 (M.D. Pa. 2007), relied on by the Plaintiffs, the Court decided that “the essence of the agreement alleged by the Plaintiffs is one between Dean in its role as a processor of bottled milk and DFA in its role as a supplier of raw milk and that the milk supply agreements for raw milk are central to the completion of the alleged conspiracy.”  (Slip op. 21)  Since this agreement has “substantial vertical elements,” the Court concluded that it was subject to rule of reason analysis, thus requiring the Plaintiffs to establish a relevant geographic market.  Since as mentioned above, the court had already concluded that the Plaintiffs could not establish such a market, summary judgment dismissing the remaining Sherman Act s. 1 claim was required.

Del Monte Fresh Pineapple Cases, A126638 (Cal. Ct. App., Unpublished)

On March 7, 2012, in the Del Monte Fresh Pineapple Cases, the California Court of Appeal affirmed a trial court decision that refused to certify a class of indirect purchasers [consumers] of pineapples. The class-action complaint alleged monopolizing conduct by Del Monte in connection with its allegedly improper prosecution and enforcement of an extra-sweet pineapple patent, in violation of the California Unfair Competition Law.

In the appeal, the plaintiffs challenged the trial court’s conclusion that substantial individual questions would have to be resolved to establish injury to class members who purchased pineapples from different direct purchasers in different competitive markets. They also challenged the trial court’s conclusion that it would be “difficult, if not impossible, to identify the specific persons who purchased Del Monte extra sweet pineapples during the class period,” and that even if they could be identified, “the administrative costs of identifying the class members and returning a few dollars to each would significantly outweigh the value of the distribution itself.” (Slip op. at 5, 8.)

The appellate court found no error in the trial court’s conclusion that “a class of indirect purchasers would be neither manageable nor superior to alternative methods.” (Slip op. at 7.) The appellate court also rejected the plaintiffs’ arguments that the trial court misinterpreted the concept of a “cy pres” distribution, impermissibly treated the class certification motion as a motion for summary judgment, and improperly relied on the pendency of a federal court direct purchasers’ antitrust class action against Del Monte (later dismissed on its merits) based on the same alleged patent-related misconduct.

Pioneer v. Monsanto; In re Southeastern Milk Antitrust Litigation

Pioneer v. Monsanto.  On February 28, 2012, the U.S. Court of Appeals for the Federal Circuit held that the Board of Patent Appeals and Interferences (“Board”) properly entered judgment for Monsanto in a patent interference proceeding over competing transgenic corn claims in Monsanto’s ‘700 patent application and Pioneer Hi-Bred’s ‘999 patent.  The Court held first that the Board correctly decided that, even though Monsanto’s ‘700 patent application of June 2005 was filed more than one year after Pioneer’s ‘999 patent issued in July 2001, the key independent and dependent claims in Monsanto’s ‘700 application “related back” to claims made by Monsanto in its ‘983 patent application filing of January 22, 1990, before Pioneer’s ‘999 patent issued.  Thus, those claims in Monsanto’s ‘700 patent application were not barred by section 135(b) of the Patent Act, which precludes an applicant from presenting a claim already made in an issued patent (in this case, Pioneer’s ‘999 patent) after a one-year “critical date.”  Second, the Court held that the Board properly concluded that Pioneer’s ‘999 patent could not benefit from the June 10, 1988 filing date of Pioneer’s ‘155 patent application, and thus properly denied Pioneer’s interference priority claim, because the ‘155 patent application did not contain sufficient disclosure to support interference priority for the later claims in Pioneer’s ‘999 patent.

 

In re Southeastern Milk Antitrust Litigation.  In an unrelated development, on February 24, 2012, Dairy Farmers of America (“DFA”) members who are plaintiffs in the Southeastern Milk Antitrust Litigation, filed a motion asking the district court in Tennessee to re-certify the DFA farmer subclass for litigation purposes, appoint new counsel for this litigation subclass and appoint subclass representatives.  Although previously certified, the DFA farmer subclass was decertified on July 28, 2011, because according to the movants, the court concluded that there was a conflict of interest between the DFA farmer subclass and the independent farmer subclass (since DFA is a defendant), and thus the same counsel could not represent both plaintiff subclasses.  The movants argue that this issue will be cured by the requested appointment of separate litigation counsel (whom they note was appointed by the court on 2/14/12 as separate counsel for the DFA farmer settlement subclass in connection with settlement with defendant Dean Foods).  They argue that the court’s previous findings and conclusions on the DFA farmer subclass’s satisfaction of Fed. R. Civ. P. Rule 23 requirements “remain intact” (Motion, 3) and that the court needs toconsider only the requirements of Rule 23(a)(4) to recertify the DFA farmer subclass for litigation.


Limited GIPSA Rule Escapes from Washington Gridlock

Read an update in the Committee’s Winter 2012 Newsletter on the result of USDA’s controversial rulemaking attempt to expand liability under the Packers and Stockyards Act and to reform livestock and poultry markets.