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From Antitrust Law Daily, October 6, 2016

Price fixing claims against milk producers clear standing, time limit, filed rate hurdles

By E. Darius Sturmer, J.D.

Claims that a trade association and several of its member dairy cooperatives violated federal antitrust law by engaging in a nationwide conspiracy to prematurely slaughter dairy cows in order to drive up prices for milk and milk products were not barred on standing, statute of limitations, or filed rate doctrine grounds, the federal district court in East St. Louis, Illinois, has ruled. Although one of the plaintiffs lacked standing to sue as an indirect purchaser, necessitating a partial granting of the defendants’ joint motion to dismiss, the motion was in all other respects denied (First Impressions Salon, Inc. v. National Milk Producers Federation, October 5, 2016, Rosenstengel, N.).

The plaintiffs, bringing the suit on behalf of themselves and all other direct purchasers of raw milk, cheese, and butter, asserted that the defendants’ "herd retirement programs" were a deliberate effort to limit the supply of raw milk, thereby artificially inflating the price of butter and cheese and the over-order price for raw milk to supracompetitive levels. Aside from challenging the direct purchaser status of one of the plaintiffs, the defendants contended that none of the purchasers could pursue claims for products they did not purchase or for injunctive relief.

Standing issues. Addressing the standing of particular plaintiffs, the court agreed with the defendants that indirect purchaser Belle Foods Trust had to be dismissed from the suit. The plaintiffs’ argument that Belle Foods had standing by virtue of the cost-plus exception to the Illinois Brick indirect purchaser rule was rejected. Simply looking at the contract between Belle Foods and its wholesale supplier did not permit the court to determine with any certainty that the supplier bore no portion of the overcharge and passed 100 percent of it onto Belle Foods, or that the supplier’s sales and profits were unaffected. Therefore, the exception did not apply, in the court’s view.

Rejecting a contention by the defendants that the plaintiffs lacked standing to bring claims for products they did not buy, the court scolded the defendants for "overanalyzing and unnecessarily complicating" a highlighted allegation that included the verbiage "…they have paid more for raw milk, butter, milk, and cheese…" In the context of the whole complaint, the allegation simply reflected that the plaintiffs and putative class members were seeking to recover damages for their collective purchases of raw milk, butter, and cheese at inflated prices. "It cannot fairly be read to allege that each plaintiff is trying to recover damages for purchases they never actually made," the court chided.

The purchasers’ claims for injunctive relief could not be dismissed for lack of standing or entitlement to an injunction, the court also decided. Although the herd retirement programs were stopped in 2010, the plaintiffs put forth enough allegations of residual effects and potential resumption to plausibly suggest that they may continue to suffer injuries in the future and therefore may be entitled to injunctive relief, the court said.

Filed rate doctrine. The purchasers’ antitrust claims also were not barred by the filed rate doctrine, according to the court. The doctrine was not implicated because it does not apply to any aspect of milk pricing aside from the minimum rates. The purchasers instead alleged that prices beyond the regulated minimum price of milk were inflated and unfair. Their complaint made clear that the they were not seeking damages based on the increases to the regulated minimum prices, but based on increases to the over-order price of raw milk, the price of butter, and the price of cheese. None of those prices was set, approved, or otherwise regulated by the Secretary of Agriculture; each was determined by market forces, the court observed.

The conclusion that the doctrine did not apply was only bolstered by the plaintiffs’ claim that their damages could be determined without requiring the court to recalculate the federally regulated minimum price of raw milk.

Statute of limitations. In closing, the court addressed the defendants’ assertion of the statute of limitations as an affirmative defense to claims for damages occurring more than four years prior to the suit’s May 10, 2013, filing. The plaintiffs contended that the class period in the suit could reach back to December 2008 because the limitations period was tolled during the pendency of another putative class action alleging similar conduct with respect to fluid milk products. The court could not determine, however, whether the purchases for which the plaintiffs sought to recover would have been part of that other class. Thus, it was unable to determine the applicable statute of limitations for the claims, and dismissal on such grounds would have been inappropriate.

The case is No. 13-CV-454-NJR-SCW.

Attorneys: John W. Barrett (Barrett Law Group) for First Impressions Salon, Inc. Charles F. Barrett (Neal & Harwell, PLC) for KPH Healthcare Services. John J. Kavanagh (Steptoe & Johnson) for National Milk Producers Federation. Steven R. Kuney (Williams & Connolly LLP) for Dairy Farmers of America, Inc.

Companies: First Impressions Salon, Inc.; KPH Healthcare Services; Dairy Farmers of America, Inc.

MainStory: TopStory Antitrust IllinoisNews

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