Antitrust Law Daily Wrap Up, TOP STORY—N.D. Ill.: Inference of conspiracy involving cheese distributor was unreasonable, (Aug 19, 2014)

By Jeffrey May, J.D.

The federal district court in Chicago has decided that reasonable jurors would not be able to infer that Schreiber Foods, Inc.—one of the largest cheese manufacturers and distributors in the world—conspired with Dairy Farmers of America, Inc. (DFA)—a cooperative group of dairy farmers—and a producer of dairy products—to inflate the price of milk and milk futures by manipulating transactions for cheese and/or milk futures on the Chicago Mercantile Exchange (CME). Because complaining direct purchasers of the defendants' products, whose prices were purportedly based on the CME spot cheese market price or milk futures contract price, failed to undermine Schreiber’s position that its conduct was consistent with its independent business interests, the court granted summary judgment in favor of Schreiber. The plaintiffs' Commodities Exchange Act and unjust enrichment claims also were rejected (In Re: Dairy Farmers of America, Inc. Cheese Antitrust Litigation, August 18, 2014, Dow, R.).

The plaintiffs initially sued DFA, Keller’s Creamery LP—a butter manufacturer wholly owned by DFA—and related individuals. Schreiber was added as a defendant in a second amended class action complaint. DFA was Schreiber’s second largest supplier in 2004, and Schreiber was one of DFA’s largest customers.

All of the parties named in the initial complaint had reached a settlement with the plaintiffs. That settlement had already been granted preliminary approval. Schreiber moved for summary judgment, seeking a determination prior to the fairness hearing on the settlement of whether it was an alleged conspirator or an absent class member.

The plaintiffs were granted leave to conduct limited discovery regarding communications between high-level Schreiber and DFA employees that might corroborate allegations of an agreement to coordinate their purchases of spot cheese on the CME. Despite the protests of the plaintiffs, the court concluded that they had more than enough time and access to conduct the discovery needed to support their allegations in response to Schreiber’s summary judgment motion. The plaintiffs also had the benefit of documents and deposition testimony from a related Commodity Futures Trading Commission (CFTC) investigation, the court noted.

The plaintiffs could not prove their price fixing conspiracy case through either direct or circumstantial evidence, according to the court. The plaintiffs failed to come forward with any direct evidence that Schreiber agreed to join the alleged conspiracy. The court noted that the CFTC investigation did not provide any direct evidence of a conspiracy between Schreiber and the other defendants. The CFTC did not implicate Schreiber in the alleged scheme or even mention Schreiber as a potential participant or relevant actor, the court explained.

Although the plaintiffs referenced “frequent and regular” communications involving DFA and Schreiber that took place at or near the time of the CME activity at issue, they offered nothing other than speculation about the substance of these talks, the court noted. The plaintiffs’ theory rested predominately on parallel conduct; however, evidence of mere parallel conduct was not sufficient to avoid summary judgment.

Expert evidence. The plaintiffs, through their experts, also pointed to economic evidence that they contended suggested that DFA and Schreiber had an agreement to manipulate prices. Although the experts’ reports presented impressive breakdowns of the CME market and the conduct of Schreiber and DFA relative to that market, the court concluded that the analysis did not tend to exclude the possibility that Schreiber’s actions were independently motivated.

Even reviewing the evidence in the aggregate, no reasonable jury could conclude that Schreiber conspired to manipulate the price of milk futures by purchasing spot cheese on the CME, the court ruled.

The case is No. 09 CV 3690, MDL No. 2031.

Attorneys: Anne Kristin Fornecker (Milberg LLP) for Adam Properties, Inc. and Stew Leonard's Inc. Mary Jane Fait (Wolf Haldenstein Adler Freeman & Herz LLP) for Knutson's, Inc. Amanda Nicole Miller (Lovell Stewart Halebian Jacobson LLP) for Indriolo Distributors, Inc. Caroline Fabend Bartlett (Carella, Byrne, Cecchi, Olstein, Brody & Agnello) for Valley Gold LLC. William M. Hannay (Schiff Hardin LLP) for Gerald Bos. Joel Gerald Chefitz (McDermott Will & Emery LLP) for Keller's Creamery, LP., Dairy Farmers of America, Inc., and Keller's Creamery, LLC. Nathan P. Eimer (Eimer Stahl LLP) for Schreiber Foods Inc.

Companies: Adam Properties, Inc.; Stew Leonard's Inc.; Knutson's, Inc.; Indriolo Distributors, Inc.; Valley Gold LLC; Keller's Creamery, LP; Dairy Farmers of America, Inc.; Keller's Creamery, LLC; Schreiber Foods Inc.

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