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Sitts v. Dairy Farmers of America, Inc.

United States District Court, D. Vermont

August 21, 2017

GARRETT AND RALPH SITTS, LEON ATWELL, VICTOR BARRICK, DANIEL BAUMGARDER, WILLIAM BOARD, GEORGE BOLLES, ROGER BOLLES, ANDY BOLLINGER, THOMAS BOLLINGER, LOGAN BOWER, DWIGHT BRANDENBURG, BERNARD BROUILLETTE, THOMAS BROUILLETTE, AARON BUTTON, HESTER CHASE, THOMAS CLARK, THOMAS CLATTERBUCK, PAUL CURRIER, GERRY DELONG, PETE AND ALICE DIEHL, MARK DORING, MARK AND BARBARA DULKIS, GLEN EAVES, MIKE EBY, WILLIAM ECKLAND, DOUG ELLIOT, JAMES ELLIOT, WEND ALL ELLIOTT, MICHAEL FAUCHER, DAVID AND ROBIN FITCH, DUANE AND SUSAN FLINT, JOSEPH FULTS, RICHARD GANTNER, STEFAN AND CINDY GEIGER, WILLIAM GLOSS, JOHN GWOZDZ, DAVID AND LAURIE GRANT, JIM AND JOYCE GRAY, DENNIS HALL, ROGER AND JOHN HAMILTON, NEVIN AND MARLIN HILDEBRAND, JAKE AND HARLEN HILLYERD, RICHARD AND TERRI HOLDRIDGE, PAUL HORNING, TERRY AND ROBERT HUYCK, DONALD SCOTT HYMERS, TERRY INCH, RANDY AND LYNETTE INMAN, THEODORE JAYKO, JACK KAHLER, JAMES AND TERESA KEATOR, JIM AND SHARON KEILHOLTZ, GEORGE KEITH, LEE AND ELLEN KLOCK, MIKE AND LISA KRAEGER, FRED LACLAIR, TIM LALYER, FRANK AND JOHN LAMPORT, CORRINE LULL, CHARLES AND GRETCHEN MAINE, THOMAS AND DEBORA MANOS, FRED MATTHEWS, RUSSELL MAXWELL, GERRY MCINTOSH, STEPHEN MELLOTT, JOHN AND DAVID MITCHELL, THOMAS MONTEITH, WALT MOORE, RICHARD AND SHEILA MORROW, DEAN MOSER, MELISSA MURRAY AND SEAN QUINN, THOMAS NAUMAN, CHARLES NEFF, DAVID NICHOLS, MICHAEL NISSLEY, LOU ANN PARISH, DANIEL PETERS, MARSHA PERRY, CAROLYN AND DAVE POST, JUDY LEE POST, SCOTT RASMUSEU, BRIAN REAPE, DAVID AND LYNETTE ROBINSON, BRIAN AND LISA ROBINSON, CALVIN ROES, BRADLEY ROHRER, PAUL AND SARAH ROHRBAUGH, ROBERTA RYAN, SCOTT AND LIN SAWYER, S. ROBERT SENSENIG, THOMAS AND DALE SMITH, DALE AND SUSAN SMITH, DENNIS SMITH, DONALD T. AND DONALD M. SMITH, ROGER AND TAMMY, SMITH, TODD SNYDER, RICHARD SOURWINE, DANNY SOUR WINE, RANDY SOWERS, SHANE STALTER, GEORGE AND SHIRLEY STAMBAUGH, TRACY STANKO, STEPHEN SOURWINE, RICHARD SWANTAK, GEORGE AND PATRICIA THOMPSON, JEREMY THOMPSON, KEN AND JUDY TOMPKINS, DANIEL VAUGHN, MARK VISSAR, ERIC WALTS, EDWARD WALLDROFF, GERALD WETTERHAHN, JR., EUGENE WILCZEWSKI, STEVE WILSON, Plaintiffs,
v.
DAIRY FARMERS OF AMERICA, INC. and DAIRY MARKETING SERVICES, LLC, Defendants.

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS (DOC. 16)

          CHRISTINA REISS, CHIEF JUDGE.

         Plaintiffs filed this action seeking relief pursuant to the Sherman Act, 15 U.S.C. §§ 1-2, for alleged antitrust violations committed by Defendants Dairy Farmers of America, Inc. ("DFA") and Dairy Marketing Services, LLC ("DMS"). Plaintiffs, who refer to themselves as "Farmers United, " are more than 115 dairy farmers who opted out of a settlement approved by the court in a class action styled Allen v. Dairy Farmers of America, inc., No. 5:09-cv-230 (the "Class Action").

         Pending before the court is Defendants' motion to dismiss Plaintiffs' First Amended Complaint for Lack of Antitrust Standing (Doc. 16). Following oral argument on May 2, 2017, the court granted Plaintiffs leave to file a Revised First Amended Complaint ("RFAC") (Doc. 29), which they timely filed on May 23, 2017. Defendants filed a post-hearing memorandum renewing their motion to dismiss on June 13, 2017, whereupon the court took the motion under advisement.

         Defendants contend they are entitled to dismissal because Plaintiffs have failed to allege antitrust injury as a matter of law under the Second Circuit's recent decision in In re Aluminum Warehousing Antitrust Litigation, 833 F.3d 151 (2d Cir. 2016) ('Aluminum Warehousing"). In the alternative, Defendants assert that each Plaintiff fails to plausibly allege antitrust standing with respect to their monopolization and monopsonization claims, and that four Plaintiffs, who have not supplied milk either to DMS or to any alleged co-conspirator, have failed to establish antitrust standing to assert any claims.

         Plaintiffs oppose dismissal, asserting that they have plausibly alleged antitrust standing, Aluminum Warehousing is easily distinguished, and they have only asserted claims that survived summary judgment in the Class Action.[1] Plaintiffs further point out that Defendants urged the Second Circuit to approve the settlement of the Class Action, arguing that dissatisfied dairy farmers could opt out of the settlement and had, in fact, already filed this separate lawsuit. In this respect, Plaintiffs appear to ask the court to consider Defendants' representation to the Second Circuit as judicial admissions that this lawsuit could survive a motion to dismiss.[2]

         Plaintiffs are represented by Dana A. Zakarian, Esq., Elizabeth A. Reidy, Esq., Gary L. Franklin, Esq., Joel G. Beckman, Esq., and William C. Nystrom, Esq. Defendants are represented by Alfred C. Pfeiffer, Jr., Esq., Elyse M. Greenwald, Esq., Ian P. Carleton, Esq., Jennifer L. Giordano, Esq., Margaret M. Zwisler, Esq., and W. Todd Miller, Esq.

         I. Factual and Procedural Background.

         The following factual allegations are derived from the RFAC. Plaintiffs operate in Federal Milk Marketing Order 1 ("Order 1"), which covers areas in Delaware, the District of Columbia, Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and Virginia. Each Plaintiff is "either:"

i. A current or former supplier to and/or member of DFA;
ii. A current or former supplier to DMS;
iii. A current or former supplier to one or more of the [c]o-conspirators;
iv. A current or former competitor of DFA; or
v. A current or former competitor of DMS.

(RFAC ¶ Ha.)

         Exhibit A to the RFAC includes the following information regarding each Plaintiff, for all or part of the years 2005 to the present: (1) their name and address; (2) farm name; (3) the cooperative(s) of which they are or were a member; and (4) the processors buying their milk. Exhibit A also purports to identify the factual basis for each Plaintiffs antitrust standing by designating whether they are: (1) current or former members of DFA; (2) current or former suppliers to DMS; (3) current or former suppliers to a co-conspirator (and the name of the co-conspirator); and/or (4) current or former competitors of DFA/DMS.

         Although Defendants criticize the lack of detail set forth in Exhibit A, they neither claim it prevents them from having sufficient notice to respond to Plaintiffs' claims, nor seek a more definite statement. See Salahuddin v. Cuomo, 861 F.2d 40, 42 (2d Cir. 1988) (explaining that "the principal function of pleadings under the Federal Rules is to give the adverse party fair notice of the claim asserted so as to enable him to answer and prepare for trial"); see also Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001) ("No heightened pleading requirements apply in antitrust cases."); Dayton Superior Corp. v. Marjam Supply Co., 2011 WL 710450, at *8 (E.D.N.Y. Feb. 22, 2011) (stating that "antitrust allegations are governed by the notice pleading requirements contained in Federal Rule of Civil Procedure 8(a)") (alterations and internal quotation marks omitted).

         Plaintiffs allege that DFA, a vertically integrated not-for-profit cooperative, is the largest dairy cooperative in the United States, with over 14, 000 dairy producers, including 2, 446 member farms in the Northeast United States. It is also allegedly the largest milk processor in the world and hauls, processes, bottles, and distributes raw Grade A milk. DMS is a limited liability company which was established in 1999 through an agreement between DFA and Dairylea Cooperative Inc. ("Dairylea") and is currently owned by DFA and St. Albans Cooperative Creamery, Inc. As a milk-marketing agency, it markets milk for over 5, 500 farms throughout the Northeast "even though DMS received no authorization from independent dairy farmers to do so." (RFAC ¶ 16.) "Upon information and belief, " DMS markets approximately 50% of the raw Grade A milk in the Northeast. Id.

         Plaintiffs allege that Defendants, in concert with Dairylea, Agri-Mark Family Dairy Farms ("Agri-Mark"), members of the Greater Northeast Milk Marketing Agency ("GNEMMA"), Farmland Dairies LLC, National Dairy Holdings LLC ("NDH"), HP Hood LLC ("Hood"), and other known and unknown co-conspirators, "have engaged in an illegal conspiracy to restrain competition, fix and suppress prices paid to farmers and monopolize/monopsonize the raw Grade A milk market in the Northeast." Id. ¶ 81. Plaintiffs' RFAC asserts the following claims against Defendants:

Count I: Sherman Act § 2 violation (Conspiracy to Monopolize/Monopsonize);
Count II: Sherman Act § 2 violation (Attempt to Monopolize/Monopsonize);
Count III: Sherman Act § 2 violation (Unlawful Monopolization/ Monopsonization);
Count IV: Sherman Act § 1 violation (Conspiracy to Restrain Trade).

         II. Conclusions of Law and Analysis.

         A. Standard of Review.

         In adjudicating a motion pursuant to Fed.R.Civ.P. 12(b)(6), the court is "guided by '[t]wo working principles[.]'" Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (alteration in original). First, "a court must accept as true all of the [factual] allegations contained in a complaint[, ]" a "tenet" that is, however, "inapplicable to legal conclusions." Iqbal, 556 U.S. at 678. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. Second, "only a complaint that states a plausible claim for relief survives a motion to dismiss" and a claim "has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678-79.

         "The plausibility standard is not akin to a 'probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. at 678 (quoting Bell Ail. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). "Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. (internal quotation marks omitted). "Determining whether a complaint states a plausible claim for relief will[]. . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.

         To maintain an action, "[a]n antitrust plaintiff must show both constitutional standing and antitrust standing." Gelboim v. Bank of Am. Corp., 823 F.3d 759, 770 (2d Cir. 2016). Antitrust standing is "a threshold, pleading-stage inquiry and when a complaint by its terms fails to establish this requirement [the court] must dismiss it as a matter of law." Gatt Commc'ns, Inc. v. PMC Assocs., L.L.C., 711 F.3d 68, 75 (2d Cir. 2013) (internal quotation marks omitted). To establish antitrust standing, a plaintiff must satisfy "two imperatives[.]" Id. at 76.

         First, the plaintiff must allege antitrust injury, which is "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). To determine whether Plaintiffs plausibly allege antitrust injury, the court must "evaluate the plaintiffs harm, the alleged wrongdoing by the defendants, and the relationship between them." Associated Gen. Contractors of Cal, Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 535 (1983) ("AGC); Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 122 (2d Cir. 2007) (stating that "[t]he necessary 'antitrust injury' is an injury attributable to the anticompetitive aspect of the practice under scrutiny").

         Second, each plaintiff must allege that he or she is an "efficient enforcer" of the antitrust laws. See Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 443 (2d Cir. 2005) (stating that antitrust injury "would not necessarily establish [plaintiffs'] standing to sue" because other considerations "may sometimes indicate that a party who states an antitrust injury is nevertheless not a proper antitrust plaintiff); see also Pearson Educ, Inc. v. Allen Air Conditioning Co., 2014 WL 2154099, at *6 (S.D.N.Y. May 22, 2014) ("Every plaintiff asserting a claim arising under the antitrust laws must allege a sufficient basis for antitrust standing"). An efficient enforcer of the antitrust laws is one who is a "proper party to perform the office of a private attorney general and thereby vindicate the public interest in antitrust enforcement." Gelboim, 823 F.3d at 780 (internal quotation marks omitted).

         B. Whether Plaintiffs Have Alleged Antitrust Injury Under ...


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