Winters v. Ocean Spray Cranberries, Inc.
Winters v. Ocean Spray Cranberries, Inc.
Opinion of the Court
In this action, some fifty plaintiffs allege that defendant Ocean Spray Cranberries, Inc., ("Ocean Spray"), an agricultural cooperative, has unlawfully manipulated the price of cranberry juice concentrate and discriminated against "B Pool" members of the cooperative. Plaintiffs identify themselves as about four B Pool growers and approximately forty-seven independent cranberry growers located in Oregon, Wisconsin, and Massachusetts.
In their Fourth Amended Complaint, plaintiffs bring three claims: (1) that Ocean Spray engaged in unfair and deceptive acts in violation of Massachusetts General Laws chapter 93A, § 11, thereby injuring the independent growers (Count I); (2) that Ocean Spray engaged in a pattern of anti-competitive conduct in violation of section 2 of the Sherman Act,
I. Background
As relevant to the instant motions, the cranberry industry is composed of three groups: growers, handlers, and consumers. Growers produce raw cranberries. Handlers process raw cranberries into consumer products (such as juice and sweetened dried cranberries) and commodity ingredients (such as cranberry concentrate or frozen cranberries). They then sell the resulting products. Consumers are either households or food processing companies.
*315Ocean Spray, a cooperative comprised of more than 700 grower members,
Growers outside of the Ocean Spray cooperative ("independent growers") deliver cranberries to "independent handlers." These handlers generally purchase the cranberries from the growers for a specific price, though the price may not be agreed at the time the growers deliver the fruit. One independent handler, Cranberries Limited, Inc. ("CLI"), has a Toll Processing Agreement ("TPA") with Ocean Spray. Under the TPA, Ocean Spray processes CLI's cranberries into concentrate at an Ocean Spray facility for a fee. Ocean Spray then returns the concentrate to CLI who markets it. The TPA provides that Ocean Spray will buy back whatever concentrate CLI cannot sell.
Beginning in 2009, Ocean Spray began selling concentrate through auctions. At these auctions, Ocean Spray offers a fixed amount of concentrate at a given price, and buyers submit bids for a given volume at that price. If the total volume of concentrate bids exceed the volume offered at the auction, the auctioneer raises the price, and the buyers submit new bids. This process continues until the aggregate volume of the bids is less than or equal to the volume of concentrate offered at the auction. At this point, each buyer purchases its bid volume at the auction's closing price.
On October 27, 2012, "John Doe Growers 1-7" and "John Doe B Pool Grower 1" filed a putative class action with seven counts against Ocean Spray. Docket # 1. The procedural history of the case since then is lengthy and involved. To summarize, plaintiffs amended their complaint a number of times, adding, inter alia, named plaintiffs and additional counts. See Docket ## 28, 29, 34, 44. Ocean Spray moved to dismiss all counts, Docket # 47, a motion I allowed in part and denied in part, Docket # 78. Subsequently, plaintiffs sought partial summary judgment on two of the remaining counts, Docket # 102, and Ocean Spray moved for summary judgment on all remaining counts, Docket # 115. I denied plaintiffs' motion, and I allowed Ocean Spray's motion in part and denied it in part, allowing three of plaintiffs' claims to go forward. Docket # 143.
Plaintiffs moved to certify a proposed class of "[a]ll domestic independent cranberry farmers and all B-Pool members of Ocean Spray who received payment during the period August 2009 to the present for cranberries delivered to a handler for the purpose of processing the cranberries into *316concentrate." Docket # 195. I denied their motion on May 10, 2016. Docket # 222. Following the denial of class certification, plaintiffs further amended their complaint, ultimately resulting in the current Fourth Amended Complaint. Docket # 253.
II. Standard
Summary judgment is appropriate when the moving party "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "An issue is 'genuine' for purposes of summary judgment if 'the evidence is such that a reasonable jury could return a verdict for the nonmoving party,' and a 'material fact' is one which 'might affect the outcome of the suit under the governing law.' " Poulis-Minott v. Smith,
"Cross-motions for summary judgment do not alter the basic Rule 56 standard, but rather simply require us to determine whether either of the parties deserves judgment as a matter of law on facts that are not disputed." Ferguson v. Gen. Star Indem. Co.,
III. Ocean Spray's Motion for Summary Judgment
Ocean Spray moves for summary judgment on Counts I and II of plaintiffs' Fourth Amended Complaint. I begin with Count II, the federal claim in this case.
A. Count II-Violation of the Sherman Act,
In Count II, plaintiffs allege Ocean Spray violated section 2 of the Sherman Act,
Plaintiffs allege that through this auction, Ocean Spray "creates an artificially low market price" for cranberry juice concentrate.
As to the motivation for such a scheme, plaintiffs claim that Ocean Spray engaged in these "activities in order (1) to prevent its grower members from leaving Ocean Spray's cooperative in search of a fairer price for their crop; and (2) to force independent growers either to go out of business or to become members of Ocean Spray's cooperative."
Plaintiffs bring their claim for damages under section four of the Clayton Act, which allows "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws" to bring suit. See
*318Plaintiffs include B pool growers, non-CLI independent growers, and CLI growers. I discuss each group's standing separately.
1. The B Pool Growers
"Despite the broad language of § 4, the Supreme Court has held that § 4 of the Clayton Act does not 'allow every person tangentially affected by an antitrust violation to maintain an action to recover threefold damages for the injury to his business or property.' " Serpa Corp. v. McWane, Inc.,
When determining "whether a plaintiff has standing to bring an antitrust action," Serpa,
(1) the causal connection between the alleged antitrust violation and harm to the plaintiff; (2) an improper motive; (3) the nature of the plaintiff's alleged injury and whether the injury was of a type that Congress sought to redress with the antitrust laws ("antitrust injury"); (4) the directness with which the alleged market restraint caused the asserted injury; (5) the speculative nature of the damages; and (6) the risk of duplicative recovery or complex apportionment of damages.
"Antitrust injury is 'injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Sterling Merch., Inc. v. Nestlé, S.A.,
*319Ocean Spray maintains that plaintiffs cannot establish an antitrust injury as a matter of law because they are not participants in the market where the alleged manipulation occurred. Specifically, Ocean Spray argues that plaintiffs complain that the manipulation occurred in the handler-consumer concentrate market through the auction, while plaintiffs' alleged injury occurred in the grower-handler market. Accordingly, Ocean Spray claims that any injury plaintiffs suffer "is merely 'collateral damage' flowing out of alleged anticompetitive conduct in a market in which plaintiffs do not participate." Docket # 255, at 13.
To be clear, as I explained in my 2015 decision, the relevant claim here is one for monopsonization, the consolidation of a market into one buyer. See Docket # 143, at 8, 11 n.7. The claim is that Ocean Spray, as a "buyer,"
In Blue Shield of Virginia v. McCready, the Supreme Court addressed the argument that a plaintiff should not have standing when "she was not an economic actor in the market that had been restrained."
The defendants in McCready claimed that the relevant market was "the market in group health care plans," and as such, standing should be "limited to participants in that market-that is, to entities, such as [the plaintiff]'s employer, who were purchasers of group health plans, but not to [the plaintiff] as a beneficiary of the Blue Shield plan."
The First Circuit has suggested that while McCready"may be an instance in which standing was extended to a plaintiff who was only derivatively injured," it "can also be read as a case in which the plaintiff was a purchaser in the very market directly distorted by the antitrust violation." SAS,
Nonetheless, Ocean Spray maintains that because the auction, which is the means by which it allegedly fixed cranberry prices, occurred in the handler-consumer market, the growers cannot show antitrust injury in the grower-handler market. It relies in part on a case from the Second Circuit, In re Aluminum Warehousing Antitrust Litigation, which held that "to suffer antitrust injury, the putative plaintiff must be a participant in the very market that is directly restrained,"
*321I have doubts as to whether Aluminum Warehousing would necessarily resolve the instant inquiry in Ocean Spray's favor. In Aluminum Warehousing, the Second Circuit explained that the defendants in McCready"could not achieve their illegal ends ... without injuring participants in some other market," and as such, "[u]nless the market dynamics force conspirators to corrupt a separate market to achieve their illegal ends, potential McCready plaintiffs do not arise."
Here, as discussed, the allegation seems to be that the auction was necessary to restrain the grower-handler market; the price paid to the B pool is directly tied to the auction price. Plaintiffs allege, "[t]he auction is a sham; it is nothing more than a guise for Ocean Spray to predatorily set cranberry prices below the cost of production." Docket # 253, at 4. Understood this way, Ocean Spray needed "to corrupt [the concentrate] market to achieve [its] illegal ends," Aluminum Warehousing,
The remaining AGC factors weigh in favor of finding the B pool growers have standing. They allege harm directly resulting from the lower returns they received, and the motive for illegally fixing the price, plaintiffs suggest, is to enrich the A pool at the B pool's expense. There exist genuine disputes of material fact with regard to these issues. Further, at least for the B pool, there seems to be little risk for duplicative recovery or complex apportionment of damages. Therefore, Ocean Spray's motion for summary judgment on Count II is DENIED with regard to the B pool growers.
2. The Non-CLI Independent Growers
The independent grower plaintiffs also allege they suffered harm as a result of the auction. These growers claim that by manipulating the price of concentrate, Ocean Spray causes independent handlers to pay independent growers prices below the cost of production for their fruit. The chain of events seems to be that the auction price of Ocean Spray's concentrate sets the price at which independent handlers sell their concentrate. Then, the price at which independent handlers sell their concentrate determines the price independent handlers pay independent growers for their fruit. See Docket # 282-14, at 4-8, 13-17; see also Docket # 282-15, at 5-7, 9-21, Docket # 282-16, at 4.
Assuming for purposes of this motion, these growers did suffer antitrust injury, they must still demonstrate that this injury is sufficiently connected to Ocean Spray's alleged violation. See AGC,
Considering these factors, I conclude that the even if the independent growers' suffered antitrust injury, they cannot establish antitrust standing. First, the harm they allege is indirect: Ocean Spray first influences independent handlers, who in turn, lower the prices they pay independent growers. See AGC,
Further, "[t]he outcome of any attempt to ascertain what price the defendants' competitors would have [paid each independent grower] had there not been [an auction] would at the very least be ... conjectural." Mid-W. Paper Prods. Co. v. Cont'l Grp., Inc.,
Plaintiffs acknowledge that the concentrate auction is one of "[a] variety of factors [that] have influenced the prices that independent handlers have paid independent growers for cranberries." Docket # 283, at ¶ 28. This is particularly so for those growers who sell to handlers that sell products other than concentrate or juice, and thus have even less of a connection to Ocean Spray's auction prices. Plaintiffs *323posit a link between concentrate prices and raw cranberry prices. See Docket # 253, at ¶ 14. However, even if there is a connection between the two, there is still some flexibility with regard to grower payments based on sales of other products and rates paid by other handlers. See Docket # 280-14, at 22.
Finally, under the facts of this case, the B pool growers, and as discussed below, the CLI growers, having allegedly suffered more direct harm from the auction, would be better positioned to bring a claim. See AGC,
3. The CLI Growers
The CLI growers are a specific subset of independent growers, who in some ways are similarly positioned, yet in others are quite distinct. Specifically, under the TPA, Ocean Spray processes CLI's fruit into concentrate and returns it to CLI (a handler). Ocean Spray is then obligated to purchase concentrate that CLI is unable to sell.
At least one CLI-grower plaintiff has a Crop Purchase Agreement with CLI under which the grower "sell[s] and deliver[s] to CLI 100% of the cranberries grown by or for the Grower from the cranberry-producing acreage described [in the agreement], ... except that Grower may retain for its use or sale to third parties up to but no more than 500 Barrels ... curing [sic] any crop year." Docket # 256-33, at 2. In this agreement, the price the CLI grower receives for its fruit is "the weighted average price per gallon paid by Ocean Spray to CLI during the preceding month for concentrate purchased by Ocean Spray under the Tolling Agreement multiplied by 1.66" minus the processing fee CLI pays to Ocean Spray.
The CLI grower plaintiffs maintain that Ocean Spray, as a purchaser of CLI concentrate, harms them because the price Ocean Spray pays CLI for concentrate is essentially the artificially depressed auction price, which then determines the price the growers receive. They further contend there is evidence suggesting Ocean Spray purchases not only concentrate but also raw fruit from CLI. See, e.g., Docket # 280-2. Regardless of the likelihood of the success of the CLI plaintiffs, as indirect sellers to Ocean Spray on their monopsony claim at trial, there is at least enough in the record to create a genuine issue of material fact as to prevent summary judgment for Ocean Spray. See, e.g., *324Docket # 267-38, at 148-49, Docket # 280-1, at 6.
Ocean Spray contends that the CLI grower plaintiffs' claims are barred by Illinois Brick because these plaintiffs do not sell directly to Ocean Spray. See Ill. Brick,
Here, there is evidence suggesting that at least one CLI grower sells nearly 100% of its fruit to CLI, and Ocean Spray commits to buying any excess concentrate from CLI. Further, the price CLI pays for the cranberries is directly determined by the price it receives from Ocean Spray. Thus, there is at least an issue of material fact as to whether "the direct [seller] will bear no portion of the [under]charge and otherwise suffer no injury," Kansas v. UtiliCorp United Inc.,
B. Count I- Massachusetts General Laws chapter 93A, § 11
In Count I, the independent growers allege that Ocean Spray's actions constitute unfair and deceptive acts in violation of Massachusetts General Laws chapter 93A, § 11. Ocean Spray moves for summary judgment on the basis that the independent growers are not in a business relationship with Ocean Spray and that the non-Massachusetts plaintiffs lack a sufficient connection to Massachusetts.
Ocean Spray previously sought summary judgment on the 93A count. See Docket # 128, at 16-24. In my 2015 decision, I rejected its arguments and denied summary judgment with respect to the 93A claims. See Docket # 143, at 16-19, 23. I explained that plaintiffs pleaded their 93A claim broadly, alleging numerous facts in support. Docket # 143, at 16-17. Ocean Spray makes no argument as to how the evidence since my 2015 decision has changed such that I should reconsider it.
Accordingly, Ocean Spray's motion for summary judgment on Count I is denied-with one qualification. In light of the allowance of summary judgment on Count II with respect to the non-CLI independent growers, these growers can no longer bring a 93A claim based on antitrust violations.
For antitrust claims brought under Chapter 93A, § 11, "the court shall ... be guided in its interpretation of unfair methods of competition by those provisions of chapter ninety-three known as the Massachusetts *325Antitrust Act." Mass. Gen. Laws ch. 93A, § 11. And the Massachusetts Antitrust Act provides that it "shall be construed in harmony with judicial interpretations of comparable federal antitrust statutes insofar as practicable." Mass Gen. Laws ch. 93, § 1. As the foregoing analysis of standing under federal law demonstrates, the independent growers do not have standing to bring an antitrust claim. Construing the Massachusetts Antitrust Act harmoniously with federal antitrust law would dictate that these plaintiffs lack standing under Massachusetts antitrust law as well, and so they cannot bring a § 11 claim that is premised on an antitrust violation. Cf. Ciardi v. F. Hoffmann-La Roche, Ltd.,
Accordingly, summary judgment is ALLOWED on Count I only insofar as the non-CLI independent growers' 93A claim is based on Ocean Spray's alleged attempted monopsonization and monopsonization. As to what remains of the independent growers' 93A claim, summary judgment is DENIED.
IV. Plaintiffs' Motion for Partial Summary Judgment
CLI growers Charles V. Goldsworthy, Timothy R. Goldsworthy, ThunderLake-Tomahawk Cranberries, Inc., H.E. Querry, Inc., Timothy R. Goldsworthy and Charles V. Goldsworthy, Trustees of the Elizabeth Goldsworthy Trust, and Hungry Run Cranberry, LLC, K & S Cranberries, Kevin Griffin, and Sue Griffin move for partial summary judgment on their 93A claim.
Plaintiffs previously brought a motion for partial summary judgment, see Docket # 102, which I denied because questions of material fact remained. This included questions as to the fairness of the auction and any causal connection to plaintiffs' harms, Docket # 143, at 21-22. These disputes remain. The CLI plaintiffs' motion is DENIED.
V. Conclusion
Ocean Spray's Motion for Summary Judgment on Counts I and II of Plaintiffs' Fourth Amended Complaint (Docket # 254) is ALLOWED IN PART and DENIED IN PART. Plaintiffs' Motion for Partial Summary Judgment (Docket # 260) is DENIED, and, to that extent, Ocean Spray's Motion to Defer or Deny Plaintiffs' Motion for Partial Summary Judgment (Docket # 268) is ALLOWED.
Plaintiffs shall provide an accurate list of the plaintiffs who remain at this juncture and shall articulate the jurisdictional basis for remaining claims.
The exact number and identity of the plaintiffs in this case is unclear. One hundred three parties are listed on the docket, while eighty-six appear on the Fourth Amended Complaint; not all shown on the Fourth Amended Complaint are on the docket. Within the Fourth Amended Complaint, under "Parties," the plaintiffs identify themselves using fifty-one bullet points, though some of these bullet points contain more than one name. See Docket # 253, at 6-7. For purposes of this motion, I count each of the bullet points in the "Parties" section as a plaintiff, totaling fifty-one plaintiffs.
Plaintiffs contend that Ocean Spray should not be considered an agricultural cooperative because it does not attempt to maximize returns for all of its members. See Docket # 283, at 2. Rather, plaintiffs maintain that Ocean Spray is a "Consumer Products Company."
As explained in my 2015 Memorandum of Decision, monopsonization describes consolidation of a market into one buyer, and like monopolization, is a violation of section 2 of the Sherman Act. Docket # 143, at 8.
Plaintiffs also allege that prior to each auction, Ocean Spray requires bidders to submit an application that includes the amount of concentrate sought. Ocean Spray then tells the individual bidders on how much concentrate they are allowed to bid. After the auction closes, plaintiffs claim, Ocean Spray sells bidders additional concentrate.
In their complaint, plaintiffs allege that "[t]he Board is dominated by A Pool growers-eight of the thirteen member-directors have exclusively A Pool acreage. The five remaining member-directors have acres in the A Pool and the B Pool and all have a sizable majority in the A Pool." Docket # 253, at ¶ 30.
Ocean Spray has previously moved for summary judgment on this basis, see Docket # 115, and I denied its motion with respect to plaintiffs' monopsonization count, Docket # 143, at 13. Ocean Spray maintains that "[s]ince that time, the parties have undertaken discovery that establishes, beyond dispute, that [plaintiffs'] allegations are not true." Docket # 255, at 9. In addition, Ocean Spray relies on recent case law from the Second Circuit, which Ocean Spray claims "makes clear that plaintiffs here lack antitrust injury in addition to alleging injuries that are too remote." Id. at 9-10.
Ocean Spray also moves for summary judgment on the basis that "as a matter of economic reality," it cannot be a monopsonist because it is not a "buyer" of cranberries but rather gives the growers proceeds from the products it sells. Docket # 255, at 22-23. Here, the nature of the alleged conspiracy is that Ocean Spray allegedly artificially depressed concentrate prices at least in part to generate lower returns for B pool growers. That is, it allegedly functioned as a purchaser of cranberries, compensating growers using the proceeds from the auction. Whether plaintiffs will ultimately prevail on their theory at trial, absent case law to support Ocean Spray's contention, Ocean Spray is not entitled to summary judgment on this issue.
At the July 13, 2017, hearing, Ocean Spray maintained that there were no B pool growers left in the case, notwithstanding that plaintiffs' Fourth Amended Complaint includes two B pool growers as plaintiffs. Ocean Spray has provided no evidence that these plaintiffs are not B pool growers or explanation of why their claims are no longer relevant. Accordingly, I analyze whether these B pool growers have standing.
See supra note 6.
Relying on this decision and its reasoning, the district court later held that first level purchasers of aluminum did not suffer an antitrust injury either. In re Aluminum Warehousing Antitrust Litig., No. 13-md-2481 (KBF),
Plaintiffs seem to be making, albeit obliquely, an argument for "a so-called 'umbrella theory' of liability," In re: London Silver Fixing, Ltd.,
In my 2015 decision, I held that these plaintiffs were "well situated to pursue this antitrust claim." Docket # 143, at 12. Since that time, however, the discovery produced, taken most favorably to plaintiffs, has shown that as a matter of law, these plaintiffs do not have antitrust standing.
Reference
- Full Case Name
- Barry K. WINTERS v. OCEAN SPRAY CRANBERRIES, INC.
- Cited By
- 3 cases
- Status
- Published