Antitrust Law Daily Wrap Up, ANTITRUST NEWS: U.S. Supreme Court Asked to Consider Denial of Application of Filed Rate Doctrine in Milk Pricing Case, (May 30, 2013)

By Jeffrey May, J.D.

DairyAmerica, Inc., a milk marketing cooperative, and California Dairies, Inc., a producer-owned dairy cooperative with a quarter interest in DairyAmerica, have asked the U.S. Supreme Court to review a decision of the U.S. Court of Appeals in San Francisco, which held that state law claims asserted against them by a group of dairy farmers were not barred by the filed rate doctrine (DairyAmerica, Inc. v. Carlin, Dkt. 12-1385).

The underlying case involves a putative class action brought by dairy farmers seeking damages for an alleged misreporting of pricing data to the USDA. According to the dairy farmers, the misrepresentations caused the USDA to establish inappropriately low prices paid to the farmers for certain milk products. The farmers advanced four causes of action: (1) negligent misrepresentation; (2) negligent interference with prospective business operations; (3) violation of California's Unfair Business Practices Law; and (4) unjust enrichment. The district court ruled that the filed rate doctrine, which precludes a state law cause of action seeking damages based on a rate filed with an appropriate regulatory body, barred the claims. The Ninth Circuit reversed (705 F3d. 856; 2012-2 Trade Cases ¶78,004).

While the filed rate doctrine did apply to prices set under federal milk marketing orders pursuant to the Agricultural Marketing Agreement Act (AMAA) minimum milk pricing program, precedent and policy considerations did not support applying the doctrine as a bar to the state law claims at issue in the case because the USDA had indicated that it would have set different prices had the defending marketer reported its data correctly, the appellate court held. That prices would have been different but for the misreporting was shown by (1) the National Agricultural Statistics Service’s (NASS) issuance of retroactive revised prices for part of the relevant period after the defending milk marketer acknowledged its erroneous reporting and (2) the Agricultural Marketing Service’s calculation of an increase in the prices of nonfat dry milk for a similar period.

The purposes of the AMAA, the Dairy Marketing Enhancement Act of 2000 (DMEA)—which set forth procedures for the submission and collection of milk pricing survey data—and the filed rate doctrine itself would not have been served by giving the doctrine preemptive effect under the facts of the case, the appellate court added. In light of the NASS recalculation, assessing damages would not require excessive speculation or hypothetical considerations of agency decision making. While some uncertainty could arise in any calculations of damages, that did not preclude recovery where it was clear that some damage had occurred.

In addition, the plaintiffs’ claims did not pose a significant risk of price discrimination or destabilization, the appellate court added. The prohibition against discriminatory pricing under the AMAA was concerned with discrimination suffered by dairy producers, not handlers, observed the court. Furthermore, were damages assessed against the defending marketer, it would not be paying a discriminatory rate at all, but the same prices as everyone else, along with a separate damage award.

Lastly, allowing the claims to go forward would not have unduly disrupted the Congressional pricing scheme embodied by the AMAA. The plaintiffs did not initiate the lawsuit to challenge the USDA’s authority to set prices or to directly contest rates treated as correct and/or valid by the agency, the appellate court noted. Rather, they filed the action only after the USDA concluded that the misreporting had contaminated the minimum price setting process.

DairyAmerica and California Dairies filed their petition for certiorari on May 24. In their petition, they asked the Supreme Court “whether the Ninth Circuit erred in holding that the U.S. Department of Agriculture (USDA) retroactively rejected USDA's previously announced milk minimum prices—thus rendering inapplicable the filed rate doctrine—even though the USDA report upon which the Ninth Circuit relied stated that ‘[t]he previously announced [] prices remain unchanged,’ and USDA has clarified since the Ninth Circuit issued its decision that ‘[t]he report was not issued in order to reject or change any of the minimum handler prices previously announced.’”

There is a narrow exception to the filed rate doctrine where an agency retroactively rejects a rate that it files. However, according to the petitioners, the USDA's new pronouncement made clear that the Ninth Circuit erred in holding that the agency retroactively rejected the filed rates at issue. The petitioners contend that it was imperative for the Supreme Court to correct the Ninth Circuit's decision because, among other reasons, the USDA would no longer be the ultimate arbiter of what constitutes federally mandated minimum prices for milk and milk products.

Attorneys: Charles M. English Jr. (Davis Wright Tremaine LLP) for DairyAmerica, Inc.

Companies: DairyAmerica, Inc.; California Dairies, Inc.

News: Antitrust