In re Fresh & Process Potatoes Antitrust Litig.

834 F.Supp.2d 1141

2011-2 Trade Cases P 77,739

In re: FRESH AND PROCESS POTATOES ANTITRUST LITIGATION. This Document Relates To: All Actions.

Case No. 4:10–MD–2186–BLW.

United States District Court, D. Idaho.

Dec. 2, 2011.

MEMORANDUM DECISION AND ORDER

B. LYNN WINMILL, Chief Judge.

INTRODUCTION

The Court has before it several pending motions (Dkts. 72, 73, 75, 76, 77, 78, 79, 82, 85, 88, 120 and 122). The Court heard oral argument on the motions on June 20, 2011,¹ and now issues the following memorandum decision and order.

BACKGROUND

Plaintiffs are a company who claims to have purchased potatoes directly from one or more of the defendants, and a series of persons or entities who allege they have indirectly purchased potatoes from one or more of the defendants. The former is referred to as direct purchaser plaintiffs and the latter as indirect purchaser plaintiffs.² All plaintiffs contend that defendants illegally agreed to reduce the supply of potatoes in order to raise prices. Plaintiffs assert that the alleged scheme started when potato growers in Idaho formed a cooperative called United Potato Growers of Idaho (“UPGI”). The Idaho potato growers, along with potato farmers in several other states, then established United Potato Growers of America (“UPGA”) as an umbrella cooperative.

Plaintiffs assert that the cooperatives were created for the purpose of increasing the price of potatoes through supply management. They further allege that defendants implemented their plan by agreeing to limit potato planting acreages, and by paying farmers to either destroy existing stocks or refrain from growing additional potatoes in order to reduce the overall number of potatoes available for sale to direct purchasers. Plaintiffs contend that defendants' supply reduction program caused potato prices to be fixed, raised, maintained, and/or stabilized. This, it is argued, violated the antitrust laws.

Defendants filed motions to dismiss on several grounds. Some of their arguments apply to all defendants (or large groups of defendants), while some are specific to individual defendants. After laying out the general legal standard for motions to dismiss, the Court will address motions that apply to each large groups of defendants, and then address individual defendant motions. ³

LEGAL STANDARD

Federal Rule of Civil Procedure 8(a)(2) requires only “ ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ ” in order to “give the defendant fair notice of what the ... claim is and the grounds upon which it rests, ...” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). While a complaint attacked by a Rule 12(b)(6) motion to dismiss “does not need detailed factual allegations,” it must set forth “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id. at 570, 127 S.Ct. 1955. 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 556, 127 S.Ct. 1955. 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. 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. at 557, 127 S.Ct. 1955.

In a more recent case, the Supreme Court identified two “working principles” that underlie Twombly.See Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Id. “Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Id. at 1950. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id. “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.

A dismissal without leave to amend is improper unless it is beyond doubt that the complaint “could not be saved by any amendment.” Harris v. Amgen, Inc., 573 F.3d 728, 737 (9th Cir.2009) (issued two months after Iqbal ).⁴ The Ninth Circuit has held that “in dismissals for failure to state a claim, a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.” Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 247 (9th Cir.1990). The issue is not whether plaintiff will prevail but whether he “is entitled to offer evidence to support the claims.” See Hydrick v. Hunter, 466 F.3d 676, 685 (9th Cir.2006).

These familiar principles guide the Court's analysis of any 12(b)(6) motion, but they bear repeating here. The Court will consider the Supreme Court's landmark decision, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), in more detail later, along with Ninth Circuit authority interpreting that decision. Twombly is of particular importance here—not only because it announced the plausibility standard in the first place, but because it did so in the context of a Sherman Act § 1 claim.

ANALYSIS

Plaintiffs allege that defendants violated § 1 of the Sherman Act, which prohibits “any contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.” 15 U.S.C. § 1. To state a claim under § 1, plaintiffs must plead facts that plausibly suggest “(1) an agreement or conspiracy among two or more persons or distinct business entities, (2) by which the persons or entities intend to harm or restrain competition, and (3) which actually injures competition.” Les Shockley Racing, Inc. v. Nat'l Hot Rod Ass'n, 884 F.2d 504, 507 (9th Cir.1989). Additionally, for each individual defendant, plaintiffs must allege that that defendant had “ ‘a conscious commitment to a common scheme designed to achieve an unlawful object.’ ” Monsanto Co. v. Spray–Rite Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984) (citation omitted).

Defendants' motions to dismiss fall into four basic categories. First, a large group of defendants assert that the Capper–Volstead Act immunizes them from Sherman Act liability. Second, these defendants, along with several others, argue that plaintiffs have failed to plausibly allege that each individual defendant joined the conspiracy. Third, several defendants argue that the indirect-purchaser plaintiffs' claims should be dismissed based on standing and preemption doctrines. Fourth, defendant United Potato Growers of Canada (“UPGC”) asserts unique arguments for dismissal based upon, among other things, the act of state doctrine.

1. MOTIONS TO DISMISS BASED ON THE CAPPER–VOLSTEAD ACTA. The Capper–Volstead Act and Related Statutes

Congress enacted the Capper–Volstead Act in the early 1900's. It provides agricultural cooperatives with a limited exemption from antitrust laws. It states that:

Persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers may act together in associations, corporate or otherwise, with or without capital stock, in collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of persons so engaged. Such associations may have marketing agencies in common; and such associations and their members may make the necessary contracts and agreements to effect such purposes: Provided, however, That such associations are operated for the mutual benefit of the members thereof....

7 U.S.C. § 291. The Capper–Volstead Act clarified and expanded the antitrust exemption for cooperatives found in Section 6 of the Clayton Act, which provided that:

Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural or horticultural organizations instituted for the purposes of mutual help ... or forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade under the antitrust laws.

15 U.S.C. § 17.

Congress had enacted Section 6 of the Clayton Act to counter the possibility that the Sherman Act's prohibition against combinations in restraint of trade would be applied to imperil the development of cooperative endeavors such as unions. Case–Swayne Co. v. Sunkist Growers, Inc., 389 U.S. 384, 390–91, 88 S.Ct. 528, 19 L.Ed.2d 621 (1967). But Section 6 of the Clayton Act “shows no more than a purpose to allow farmers to act together in cooperative associations without the associations as such being held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws, as they otherwise might have been.” Maryland & Virginia Milk Producers Ass'n v. U.S., 362 U.S. 458, 465, 80 S.Ct. 847, 4 L.Ed.2d 880 (1960) (Internal quotations omitted). Thus, “a group of farmers acting together as a single entity in an association cannot be restrained from lawfully carrying out the legitimate objects thereof, but ... it [does not] give[ ] such an entity full freedom to engage in predatory trade practices at will.” Id. (Internal...