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From Antitrust Law Daily, October 15, 2014

Mushroom cooperative unable to upset decision on Capper-Volstead Act exemption

By Jeffrey May, J.D.

The federal district court in Philadelphia will not disturb its earlier ruling that the Capper-Volstead Act did not exempt mushroom growers, packagers, sellers, distributors, and other related entities that were either members or affiliates of members of a large mushroom cooperative from buyers' antitrust claims in a putative price fixing class action. The court denied a motion for reconsideration from individual members and affiliates of the former Eastern Mushroom Marketing Cooperative (EMMC), despite the moving defendants' assertion that an intervening change in the law relating to the single entity enterprise defense warranted review (In re Mushroom Direct Purchaser Antitrust Litig., October 14, 2014, O'Neil, T.).

In their consolidated amended class action complaint, the plaintiffs alleged that: (1) certain defendants were members of defendant EMMC but were not engaged in agricultural production; (2) the defendants entered into multiple agreements with persons or entities not engaged in agricultural production; and (3) the defendants engaged in anticompetitive and predatory practices that fell outside of the legitimate objects of an agricultural cooperative. In March 2009, the court decided that that the inclusion of a non-grower distributor in the EMMC’s membership was sufficient to destroy defendants’ Capper-Volstead immunity (621 F. Supp. 2d 274, 2009-1 Trade Cases ¶76,616). Moreover, even if all EMMC members had satisfied the requirements to qualify the cooperative for Capper-Volstead immunity, the court concluded that the Act’s exemption did not extend to protect cooperatives that conspired with entities not engaged in agricultural production. The Third Circuit dismissed an appeal for lack of jurisdiction, holding that a prejudgment order denying the protections of the Capper-Volstead Act was not a collateral order subject to interlocutory appeal (655 F.3d 158, 2011-2 Trade Cases ¶77,573).

The defendants unsuccessfully argued that the district court should reconsider the availability of the Capper-Volstead exemption in light of the U.S. Supreme Court’s decision in American Needle, Inc. v. National Football League, 560 U.S. 183, 2010-1 Trade Cases ¶77,019, and the Third Circuit’s decision inDeutscher Tennis Bund v. ATP Tour, Inc., 610 F.3d 820, 2010-1 Trade Cases ¶77,080. They contended that these decisions created an intervening change in the law relating to the single entity enterprise defense.

The court ruled that the decisions did not change its view that that Kaolin Mushroom Farms, Inc. and South Mill Mushroom Sales Inc. and related distribution entities could not rely on the single entity/enterprise defense for protection under the Act, since these defendants were separate decisionmakers pursuing separate economic interests as evidenced by the lawsuit between them.

With respect to a defendant distributor, the court explained that the single entity defense could not be used to circumvent the Capper-Volstead Act’s requirement that members of the EMMC cooperative must be agricultural producers. “To allow such a reading would defeat the requirements of the Capper-Volstead Act,” the court explained.

Good faith reliance on counsel. The defendants were not entitled to reconsideration on the basis of their argument that summary judgment was warranted in their favor based on the affirmative defense of good faith reliance on the advice of counsel. They contended that the individual members of the EMMC should not lose their Capper-Volstead antitrust exemption when they acted under a good faith belief that the EMMC was properly constituted. The affirmative defense of good faith reliance on counsel is generally warranted only where the offense alleged involves willful and unlawful specific intent, according to the court. However, because a violation of Section 1 of the Sherman Act did not require proof of specific intent, advice of counsel would not be a proper defense to such related claims.

Certification for appeal. Despite its denial of reconsideration, the district court certified its order for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). “A determination by the Court of Appeals with respect to the applicability of the Capper-Volstead immunity may either expedite the resolution of certain of the plaintiffs’ claims or facilitate a settlement, saving the parties the needless expenditure of time and money in litigating issues that the Court of Appeals may vacate or reverse upon ultimate appeal,” the district court explained.

The case is Master File No. 06-0620.

Attorneys: Adam M. Moskowitz (Kozyak Tropin & Throckmorton), Andrew William Kelly (Odom & Des Roches LLP), and Barry L. Refsin (Hangley Aronchick Segal & Pudlin) for Wm. Rosenstein & Sons Co., Associated Grocers, Inc., Diversified Foods & Seasonings, Inc., M. Robert Enterprises, Inc., and M.L. Robert, II, LLC. Donald M. Barnes (Porter Wright Morris & Arthur LLP) and H. Laddie Montague, Jr. (Berger & Montague PC) for Eastern Mushroom Marketing Cooperative, Inc., Kaolin Mushroom Farms, Inc., To-Jo Fresh Mushrooms, Inc., Cardile Mushrooms, Inc., and Monterey Mushrooms, Inc.

Companies: Wm. Rosenstein & Sons Co.; Associated Grocers, Inc.; Diversified Foods & Seasonings, Inc.; M. Robert Enterprises, Inc.; M.L. Robert, II, LLC; Eastern Mushroom Marketing Cooperative, Inc.; Kaolin Mushroom Farms, Inc.; To-Jo Fresh Mushrooms, Inc.; Cardile Mushrooms, Inc.; Monterey Mushrooms, Inc.

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