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CASE-SWAYNE CO., INC. V. SUNKIST GROWERS, INC., 389 U. S. 384 (1967)
US Supreme Court Decisions On-Line> Volume 389 > CASE-SWAYNE CO., INC. V. SUNKIST GROWERS, INC., 389 U. S. 384 (1967)
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369 F.2d 449, reversed and remanded. chanrobles.com-red
This is a treble damage action under § 4 of the Clayton Act, 38 Stat. 731, 15 U.S.C. § 15, for alleged violations of both § 1 and § 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1, 2. The District Court granted a directed verdict, at the close of plaintiff' case, for the defendant, Sunkist Growers, Inc. The Court of Appeals for the Ninth Circuit reversed as to that portion of the complaint predicated on § 2 of the Sherman Act, holding that sufficient evidence was presented that Sunkist monopolized or attempted to monopolize trade in the relevant market; [Footnote 1] it affirmed a to the dismissal of the Sherman Act § 1 charge, holding that Sunkist qualified as a cooperative organization under the Capper-Volstead Act, 42 Stat. 388, 7 U.S.C. § 291, [Footnote 2] and therefore could chanrobles.com-red
The organizational structure of the Sunkist system is as follows. At the base are some 12,000 growers of citrus fruit in Arizona and California. The growers are organized into "local associations," as they are designated in Sunkist's bylaws, numbering approximately 160, each of which operates a packing house for the preparation of the fruit for market. The vast majority of these local associations -- about 80% by number and 82% by volume of fruit marketed in the Sunkist system -- are, it is stipulated, cooperative associations in which all members are fruit growers. [Footnote 3] A few of the local associations chanrobles.com-red
Sunkist itself, since 1958, [Footnote 4] has two classes of "members": the district exchanges, whose principal membership chanrobles.com-red
Each of the local associations, including the private packing house agency associations, contracts with its chanrobles.com-red
Section 1 of the Capper-Volstead Act (see n 2, supra) privileges collective activity in processing and marketing on the part of "[p]ersons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers. . . ." 42 Stat. 388, 7 U.S.C. § 291. Despite that specific language, Sunkist chanrobles.com-red
Congress enacted § 6 of the Clayton Act in response to the urgings of those who felt the Sherman Act's prohibition against combinations in restraint of trade might be applied to imperil the development of cooperative endeavors, chanrobles.com-red
(Emphasis added.) H.R.Rep. No. 24, 67th Cong., 1st Sess., 1 (1921); H.R.Rep. No. 939, 66th Cong., 2d Sess., 1 (1920). That it was intended that only actual producers of agricultural products be covered by the legislation is demonstrated in the debates on the two bills, e.g., the following chanrobles.com-red
Nor does the proviso in § 1 -- "[t]hat such associations are operated for the mutual benefit of the members thereof" -- broaden the earlier language. That provision, in conjunction with the other prerequisites for qualification under the Act -- either that each member be limited to one vote without regard to the capital he furnished or chanrobles.com-red
that dividends on capital be limited to 8%, and that dealings in products of nonmembers be limited -- was designed to insure that qualifying associations be truly organized and controlled by, and for, producers. In short, Congress was aware that even organizations of producers could serve a purpose other than the mutual obtaining of a fair return to their members, as producers, or be controlled by persons other than producers, and the proviso adds a measure of insurance that such organizations do not gain the Act's benefits. [Footnote 11] Moreover, virtually the only mention in the legislative history of possible participation in a Capper-Volstead cooperative by nonproducers occurs with respect to cooperatives issuing capital stock. [Footnote 12] Whatever may be the effect and significance of that recognition of the financial stake of nonproducers in an otherwise solely producer organization, their participation and role being narrowly restricted by the voting and dividend prerequisites of the Act, they are unpersuasive here. Capital participation by nonproducers -- and that is the extent to which the debate can fairly be read as contemplating their participation chanrobles.com-red
United States v. Borden Co., 308 U. S. 188, 308 U. S. 204-205 (1939); accord, Maryland & Virginia Milk Producers Assn. v. United States, 362 U. S. 458, 362 U. S. 466 467 (1960). Moreover, the agency associations participate in the control and policy making of Sunkist, even though they may be private profit-making operations. [Footnote 14] We think Congress did not intend to allow chanrobles.com-red
There is nothing in the record to indicate that Sunkist intended to evade the mandate of the Capper-Volstead Act when it allowed privately owned "agency association" packing houses to become members of the Sunkist system. Sunkist's only apparent motive in including the agency associations as members was to provide a greater range of packing facilities for citrus growers who desired to market through Sunkist. The agency associations have been an integral part of the Sunkist system for many years. [Footnote 2/1] Until the bringing of the present action, chanrobles.com-red
I would hold that Sunkist is not liable under § 1 of the Sherman Act for past acts merely because the agency associations participated in its government by virtue of their membership. It seems to me that this result is not only more equitable, but accords better with the basic purpose of Congress, which was to aid producers, than does the Court's holding, which burdens the growers with heavy potential liabilities. This belief is supported by the frequent reference in the congressional debates to the forerunner of this very organization as one which Congress intended by the Act to protect. [Footnote 2/2] chanrobles.com-red
The Court holds, and, for the future, I agree, that even those organizations in which all gains are channeled to the producers may not qualify under Capper-Volstead § 1 if they have nonproducer members. Congress may have excluded nonproducers simply because it felt that the benefits to producers from nonproducer membership were outweighed by the dangers of admitting nonproducer foxes into the cooperative hen roost. However, as the Court recognizes, see ante at 389 U. S. 394-395, the evident congressional concern about the possibility of monopoly by organizations immunized from antitrust prosecution by Capper-Volstead [Footnote 2/3] indicate that, in restricting membership to producers, Congress chanrobles.com-red
In accord with this opinion, I would remand the case to the District Court so that Case-Swayne may show what, if any, of the damage allegedly suffered by it resulted from actions taken by the agency associations for their own benefit, as distinguished from that of the growers. I need hardly say that, for the future, Sunkist chanrobles.com-red
But it does not follow that Sunkist has lost its antitrust immunity completely. The bulk of its members are grower cooperatives or marketing agencies, and the great majority of its transactions are dealings with and for the account of these agricultural cooperatives which Congress clearly intended to exempt from the antitrust laws. An chanrobles.com-red
Membership in Sunkist is made up of the local associations and the district exchanges. The agency associations make up about 15% of the membership. They chanrobles.com-red
Neither the agency associations themselves nor their arrangements with growers are claimed by Sunkist to be Capper-Volstead cooperatives exempt because of that status from examination under the Sherman Act. Also, the contracts and arrangements between the agency associations, nonexempt entities, and the exchanges and chanrobles.com-red