First Impressions Salon, Inc. v. Nat'l Milk Producers Fed'n

214 F.Supp.3d 723

FIRST IMPRESSIONS SALON, INC., Roy Mattson, Belle Foods Trust, Gerry Whiting, KPH Healthcare Services d/b/a Kinney Drugs, Inc., and Piggly Wiggly Midwest, LLC, Plaintiffs,

v.NATIONAL MILK PRODUCERS FEDERATION, Cooperatives Working Together, Dairy Farmers of America, Inc., Land O'Lakes, Inc., and Agri–Mark, Inc., Defendants.

Case No. 13–CV–454–NJR–SCW

United States District Court, S.D. Illinois.

Signed October 5, 2016

John W. Barrett, Barrett Law Group, Lexington, MS, Linda P. Nussbaum, Nussbaum Law Group, P.C., New York, NY, Charles F. Barrett, Neal & Harwell, PLC, Nashville, TN, Debra Gaw Josephson, Jana K. Law, Michael L. Roberts, Stephanie Egner Smith, Roberts Law Firm, P.A., Mark Randy Rice, Rice & Associates, P.A., Little Rock, AR, Dianne M. Nast, Erin C. Burns, Nastlaw LLC, Michael D. Fishbein, Levin, Fishbein et al., William E. Hoese, Kohn, Swift & Graf, P.C., Philadelphia, PA, Joseph Michael Vanek, Vanek, Vickers & Masini, P.C., Chicago, IL, D. Christopher Carson, Burr & Forman LLP, Birmingham, AL, for Plaintiffs.

John J. Kavanagh, Kenneth P. Ewing, Steptoe & Johnson, Steven R. Kuney, Carl Rowan Metz, Williams & Connolly LLP, W. Todd Miller, Amber L. McDonald, Ishai Mooreville, Lucy S. Clippinger, Baker & Miller, PLLC, Washington, DC, Christopher W. Byron, Byron Carlson Petri & Kalb, LLC, Edwardsville, IL, Daniel D. Birk, Sarah Elizabeth Malkerson, Scott C. Solberg, Vanessa G. Jacobsen, Nathan P. Eimer, Benjamin E. Waldin, Eimer, Stahl et al., Chicago, IL, Bart C. Sullivan, John E. Galvin, Fox Galvin, LLC, St. Louis, MO, Diane C. Polletta, Shipman & Goodwin, LLP, Stamford, CT, Jill M. O'Toole, Christopher J. Cahill, Eric Goldstein, Shipman & Goodwin LLP, Hartford, CT, for Defendants.

MEMORANDUM AND ORDER

ROSENSTENGEL, District Judge:

This matter is currently before the Court on the motion filed jointly by all Defendants seeking to dismiss the Third Amended Consolidated Class Action Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) and to strike certain class allegations pursuant to Federal Rule of Civil Procedure 23(d)(1)(D) (Doc. 166).¹ For the reasons explained below, the motion is granted in part and denied in part.

BACKGROUND

These background facts were derived from the Third Amended Consolidated Class Action Complaint filed by Plaintiffs First Impressions Salon, Roy Mattson, Belle Foods Trust, Gerry Whiting,² KPH Healthcare Services, and Piggly Wiggly Midwest (Doc. 182). Plaintiffs allege that Defendants National Milk Producers Federation, Cooperatives Working Together, Dairy Farmers of America, Land O'Lakes, and Agri–Mark engaged in a nationwide conspiracy to prematurely slaughter dairy cows thereby limiting the production of raw milk and driving up prices for milk and milk products. More specifically, it is alleged that the National Milk Producers Federation is a trade association of dairy cooperatives that created Cooperatives Working Together ("CWT") in order to "strengthen and stabilize milk prices." Dairy Farmers of America, Land O'Lakes, and Agri–Mark, along with over 30 other dairy cooperatives and over 130 independent dairy farmers, joined CWT. CWT's members collectively produce almost 70% of the nation's milk. It is alleged that CWT used fees collected from its members to finance "herd retirement programs." These programs consisted of paying strategically chosen members to prematurely slaughter their dairy herds in order 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. Plaintiffs directly purchased raw milk, cheese, and/or butter at these inflated prices from one or more CWT members or their subsidiaries. Plaintiffs bring this putative class action on behalf of themselves and all other direct purchasers of raw milk, cheese, and butter, against Defendants for violations of § 1 of the Sherman Antitrust Act.

DISCUSSION

DEFENDANTS' MOTION TO STRIKE

Defendants argue that Belle Foods Trust and the Bankruptcy Estate of Yarnell's Ice Cream Company are not adequate class representatives under Rule 23(d)(1)(D) and therefore allegations to that effect in the complaint should be stricken (Doc. 188–1, pp. 17–18). More specifically, Belle Foods Trust and Yarnell's are both involved in bankruptcy proceedings, which Defendants contend creates an inherent conflict of interest between these two Plaintiffs and the other potential class members (Doc. 188–1, p. 17). Because of the purported conflict of interest, Defendants contend they are not adequate class representatives (Id. ). After this motion was briefed, Magistrate Judge Williams allowed Gerry Whiting to be substituted for Yarnell's as a Plaintiff in this matter (Doc. 216), however, Defendants believe that Whiting has the same conflicts of interest as Yarnell's (Doc. 192).

A motion to strike portions of a pleading is properly brought under Rule 12(f). See FED. R. CIV. P. 12(f). It is well-established, however, that a disputed issue of law should not be decided on a Rule 12(f) motion. See, e.g., Riemer v. Chase Bank, N.A. , 275 F.R.D. 492, 494 (N.D. Ill. 2011) ("A motion to strike under Rule 12(f) is not a mechanism for deciding disputed issues of law or fact...."); Van Schouwen v. Connaught Corp. , 782 F.Supp. 1240, 1245 (N.D. Ill. 1991) (citing United States v. 416.81 Acres of Land , 514 F.2d 627 (7th Cir. 1975) ) ("[C]ourts are typically reluctant to decide disputed or substantial issues of law on a motion to strike."); Garza v. Chicago Health Clubs, Inc. , 347 F.Supp. 955, 963 (N.D. Ill. 1972) ("The Court is not unmindful that motions to strike under Federal Rule 12(f) are not a favored means for disposition of substantial questions of law.") See also 5C CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1380 (3d ed.) ("A motion to strike under Federal Rule 12(f) is the appropriate remedy for the elimination of redundant, immaterial, impertinent, or scandalous matter in any pleading[.]")

Whether Belle Foods Trust and Yarnell's/Whiting are adequate class representatives is an issue of law that goes to the propriety of certifying a class; it cannot be decided on a motion to strike under Rule 12(f). To the extent Defendants are attempting to bring their motion to strike under Rule 23(d)(1)(D),³ they are jumping the gun. The issue of adequacy, along with all of the other requirements of Rule 23, should be decided in the context of the motion for class certification, not a motion to dismiss.

DEFENDANTS' MOTION TO DISMISS

A majority of the arguments in the motion to dismiss relate to Plaintiffs' standing to assert their claims. In particular, Defendants argue that Plaintiffs Belle Foods Trust and KPH Healthcare Services, Inc. lack antitrust standing because they failed to sufficiently allege that they are direct purchasers. Defendants also argue that Plaintiffs lack antitrust standing to pursue claims for products they did not purchase, i.e. , Yarnell's cannot pursue claims based on the prices of butter and cheese, and all other Plaintiffs cannot pursue claims based on the price of raw milk. Finally, Defendants argue that Plaintiffs lack standing to sue for injunctive relief, or in the alternative, fail to state a claim for injunctive relief. Beyond the threshold issue of standing, Defendants argue that the entire complaint should be dismissed under the filed-rate doctrine. They also argue that certain claims are barred by the statute of limitations.

Almost all of Defendants' arguments seek dismissal under Federal Rule of Rule 12(b)(6) (Doc. 188). The purpose of a motion to dismiss under Rule 12(b)(6) is to address the legal sufficiency of a plaintiff's claim for relief, not the merits of the case or whether the plaintiff will ultimately prevail. Camasta v. Jos. A. Bank Clothiers, Inc. , 761 F.3d 732, 736 (7th Cir. 2014) ; Gibson v. City of Chicago , 910 F.2d 1510, 1520 (7th Cir. 1990). In reviewing a motion to dismiss under Rule 12(b)(6), the court must construe the complaint in the light most favorable to the plaintiff, accept as true all well-pleaded facts, and draw all possible inferences in the plaintiff's favor. See, e.g., Hecker v. Deere & Co. , 556 F.3d 575, 580 (7th Cir. 2009) (quoting Tamayo v. Blagojevich , 526 F.3d 1074, 1081 (7th Cir. 2008) ). To survive a motion to dismiss, the complaint must allege facts sufficient to " ‘state a claim to relief that is plausible on its face’ and ‘raise a right to relief above the speculative level’ " Camasta , 761 F.3d at 736 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "Determining whether a complaint states a claim upon which relief may be granted is dependent upon the context of the case and ‘requires the reviewing court to draw on its judicial experience and common sense’ " Camasta , 761 F.3d at 736 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ).

Only one argument regarding Plaintiffs' standing to seek injunctive relief invokes Rule 12(b)(1) as the basis for dismissal (Doc. 188). This argument is properly understood as a facial challenge because Defendants contend that the complaint lacks sufficient allegations to suggest that any injury Plaintiffs suffered as a result of Defendants' conduct is still ongoing and likely to continue (Doc. 188–1, p. 29). Apex Digital, Inc. v. Sears, Roebuck & Co. , 572 F.3d 440, 443 (7th Cir. 2009) ("Facial challenges require only that the court look to the complaint and see if the plaintiff has sufficiently alleged a basis of subject matter jurisdiction.") "When evaluating a facial challenge to subject matter jurisdiction under Rule 12(b)(1), a court should use Twombly –Iqbal's ‘plausibility’ requirement, which is the same standard used to evaluate facial challenges to claims under Rule 12(b)(6)." Silha v. ACT, Inc. , 807 F.3d 169, 174 (7th Cir. 2015).

1. Antitrust Standing of Belle Foods Trust, Inc. and...