Opinion ID: 408097
Heading Depth: 3
Heading Rank: 6

Heading: Other overt acts.

Text: 140 NFO alleges a number of additional incidents or actions as evidence of an unlawful conspiracy, including certain membership and hauler terminations, milk pooling practices and acquisitions and mergers. Most of this conduct would be lawful standing alone or in some other context but, here, we agree with NFO that some of the conduct was unlawfully aimed at eliminating NFO as a competitor. 141 One such action involves Mid-Am's response to members who terminated their relationship with Mid-Am in order to market through NFO. The district court's affirmative findings reveal a pattern of efforts designed to thwart such movements. In one incident, Mid-Am refused to honor termination notices from thirteen NFO members because they were one day late. Midwest Milk, supra, 510 F.Supp. at 495. In other instances, Mid-Am refused to reveal termination dates. Id. at 471, 475. Moreover, after the present litigation was commenced, Mid-Am-virtually as a policy-either refused to acknowledge or to honor termination notices from members known to be related to NFO activities, generally regardless of the producers' right to terminate. This conduct was obviously intended to hamper NFO's ability to secure producers and, in turn, to supply customers. 142 Both the significance and possible mootness of this conduct are reflected in the consent decree entered in the government's antitrust action against Mid-Am. 38 That action was consolidated before the same court which heard the immediate case. One finding from the consent decree proceedings is that Mid-Am's market power is based upon its power to require farmers to become or to remain members, rather than upon ownership of assets. United States v. Mid-Am, Inc., 1977-1 Trade Cases P 61,508 at 71,977 (emphasis added). Under the consent decree, Mid-Am was required, for one year, to permit any terminations upon thirty days notice; thereafter, Mid-Am could adopt one-year contracts, but for a period of five years, such contracts would be subject to certain requirements which facilitate terminations. Id. at 71,978. 143 Another action involves a dairy farmer, Billy Stacey, who shipped through Mid-Am and also was a contract hauler for Mid-Am in Southwest Missouri. Stacey became active in assisting NFO's efforts to establish a reload facility and, as the district court found, was fired by Mid-Am because of his activities in helping NFO. Midwest Milk, supra, 510 F.Supp. at 471-472. 39 144 Perhaps the most egregious conduct revealed in this case relates to suppression and destruction of evidence by AMPI. In connection with this conduct, the district court granted NFO's motion for Rule 37 sanctions, but reserved ruling on the question of which sanctions to impose, apparently indicating that a monetary award may be appropriate. See AMPI Br. at 69. The conduct may be described simply: AMPI engaged in a deliberate pattern of shuffling and hiding documents-to warehouses, homes or other locations-specifically to avoid discovery. Some of this conduct was uncovered during the government's participation in the litigation and most of the suppressed documents appear to have ultimately surfaced. Such conduct required extensive additional proceedings to ascertain the scope of suppression and no doubt also required further review by NFO of virtually every aspect of AMPI's involvement in the case. 145 More serious is the stipulated fact that AMPI ordered the destruction of documents and that some were in fact destroyed. The district court characterized this conduct as involving admitted bonfires. The scope of destruction remains unclear and AMPI disputes the relevancy of the destroyed documents. AMPI was involved in a series of substantial, allegedly unlawful political contributions which became the subject of the Senate Watergate investigation. Before the Senate group, at least one AMPI official who ordered destruction contended that the documents related to NFO and possible antitrust claims against AMPI, not to political matters. Other AMPI officials, on whose testimony AMPI now relies, claim the destruction related to political contributions, not antitrust matters. One of those who actually destroyed documents, Joe Murphy, contends the documents he destroyed related to his efforts to secure a merger and to certain Texas marketing activity, but not to any NFO matter. This individual is also the author of the memo proposing to short-ship Foremost Dairy and others to eliminate independent purchases, a document which managed to survive. 146 We can only describe AMPI's conduct as outrageous. Obviously, the relevance of and resulting prejudice from destruction of documents cannot be clearly ascertained because the documents no longer exist. Under the circumstances, AMPI can hardly assert any presumption of irrelevance as to the destroyed documents. On this record, the district court properly could have imposed the most severe sanctions upon AMPI-dismissal of its claims and default judgment against it on NFO's claim. Nonetheless, we cannot say it was an abuse of discretion not to do so. See Fox v. Studebaker-Worthington, Inc., 516 F.2d 989 (8th Cir. 1975). It was error, however, not to draw factual inferences adverse to AMPI on matters undertaken in or through offices and individuals involved in the destruction of documents. 40 See In Re Grace Line, Inc., 517 F.2d 404, 409 (2d Cir. 1975); Cecil Corley Motor Co., Inc. v. General Motors Corp., 380 F.Supp. 819, 859 (M.D.Tenn.1974). 147 NFO also contends that the acquisition and merger campaigns of Mid-Am and AMPI were intended to eliminate NFO, a finding which the district court rejected. There were so many mergers and acquisitions that it would be impossible to describe, even briefly, the evidence relating to each such transaction. Several overriding conclusions, however, are quite clear. Mid-Am and AMPI engaged in broad efforts to merge with formerly independent co-ops and, during a period of massive consolidation, successfully emerged as tremendously expanded entities. One purpose of these efforts, without doubt the dominant intent, was to consolidate marketing control over sufficient quantities of milk as to set and obtain higher prices for such milk. It is lawful, however, for Capper-Volstead cooperatives to specifically pursue monopoly power and, indeed, NFO itself supported the merger trend until 1969 when it undertook its own direct marketing program. Such mergers are unlawful when achieved through coercive, predatory tactics. See supra, at 1182-1183. Mid-Am and AMPI also acquired a number of independent proprietary dairies. Standing alone, such acquisitions may lawfully be intended to achieve production economies or similarly legitimate aims of a cooperative. Such acquisitions, however, may not lawfully be employed to foreclose competition. 148 Thus, the overriding issue is one of tactics and intent. Here, most of the co-op mergers were clearly voluntary. There is substantial evidence, however, that certain milk pooling practices engaged in by Mid-Am and AMPI were designed to pressure independent co-ops and individual producers to join with Mid-Am or AMPI. Although the pooling practices are quite complicated, the alleged scheme essentially involved manipulating the regulated market price system as follows: pooling additional milk supplies in a given market order so as to depress the blend price, while maintaining higher actual pay prices for the co-op's members through receipt of option payments on the out-of-order milk. In some instances, the so-called pressure pooling or pool loading was alleged simply to have been an intimidation tactic to coerce nonmembers to join; in others, it was alleged to have achieved a spread in the effective price paid to members and nonmembers. Based upon this evidence, the district court could have found that at least some of the mergers were influenced by unlawful coercion. In addition, at least one acquisition of an independent dairy involved an NFO customer which NFO lost after the acquisition. See Midwest Milk, supra, 510 F.Supp. at 489. On the other hand, there is substantial evidence of lawful business purposes behind formation of standby pools, related pooling practices and consolidation of marketing through mergers. 149 Whether the merger and acquisition campaign was an unlawful part of the conspiracy is thus an extremely close question of fact, further complicated by the sometimes hazy line between lawful and unlawful monopolization efforts when undertaken by Capper-Volstead cooperatives. After a careful review of the record, we cannot say it was clearly erroneous for the district court to reject findings that the acquisitions, mergers and related milk pooling practices were part of an unlawful conspiracy. 41 In instances where acquisitions of independent dairies resulted in actual displacement of preexisting NFO sales, however, the district court, on remand, should consider whether such conduct following acquisition reflects an intent to block NFO rather than a legitimate business decision based upon price, quality or similar factors. Where post-acquisition terminations of NFO sales are found to be part of the scheme to eliminate NFO, such lost sales would form a basis for NFO's damage claim. 150 Our view of the milk pooling practices also prompts affirmance of the district court's finding against liability on the part of ARSPC. The principal basis for NFO's claim against ARSPC is the latter's formation and operation of standby milk pools, a practice which in principle at least is important to providing a stable supply of milk. See supra, at 1179-1180, 1180-1181. ARSPC participated in certain of the pooling practices complained of above, but because we find no liability attaches to such practices, none can attach to ARSPC's participation. NFO also contends that the existence of ARSPC's standby pools effectively reduced independent supplies making it easier for CMPC, Mid-Am and AMPI to squeeze out NFO and other independents. ARSPC's pooling, however, served legitimate business purposes and NFO failed to show that it was conspiratorically linked to the unlawful conduct of the other defendants. 151 The foregoing pattern of conduct establishes that Mid-Am, AMPI and CMPC conspired to gain control over milk marketing and to eliminate competition through unlawful practices. It is true that each defendant did not participate in every aspect of the conduct as a whole. CMPC, for example, exists as a federation to sell into the Chicago market and thus had no occasion to act in other markets. Mid-Am, in turn, did not sell into the Chicago market and thus had no occasion to participate in AMPI and CMPC conduct in that market. Each defendant, however, engaged in specific overt acts which on their face were in furtherance of the conspiracy. Moreover, that these acts were in concert is unmistakeable when the record is viewed as a whole. At the outset, the three co-ops engaged in an admittedly concerted attempt to block NFO's qualification as a milk marketer. What followed in approximately the same time frame is a series of unlawful acts by each defendant aimed at eliminating independent sales of milk in general and NFO in particular, including discriminatory pricing and actual or threatened supply cutoffs, litigation and similar harassment. Some of Mid-Am's litigation threats were directed against buyers of NFO milk that had been AMPI customers, not Mid-Am customers. Mid-Am in fact gave AMPI advance notice of the suit it filed against NFO and Beatrice. AMPI and CMPC, of course, are inextricably bound together in the predatory actions undertaken in the Chicago market. The record also reveals that the defendants jointly discussed what they viewed as common problems posed by NFO. 152 Apart from the actual conduct of the defendants, the record reveals straightforward admissions of predatory motive by various AMPI officials and former officials. AMPI argues that such persons were too biased to be credible and we give AMPI the benefit of any such doubt which might support the findings of the district court. Much of the record, however, consists of deposition testimony and over 5,000 documentary exhibits. Included is a substantial paper trail of meeting minutes and contemporaneous memoranda, from Mid-Am and AMPI meetings and from independent dealers, which tend to confirm the conspiratorial and predatory character of the conduct described here as unlawful. In short, the defendants' conduct on its face demonstrates concerted, unlawful tactics and such a conclusion is confirmed, not contradicted, by examination of the underlying record. 153 Piece by piece, the defendants attempt to explain away the record evidence, ultimately characterizing it as equivocal hearsay, speculation and sharply conflicting testimony. As the Supreme Court has noted, however, plaintiffs should be given the full benefit of their proof without tightly compartmentalizing the various factual components and wiping the slate clear after scrutinizing of each. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699, 82 S.Ct. 1404, 1410, 8 L.Ed.2d 777 (1962). Here, the totality of the record leaves no doubt that Mid-Am, CMPC and AMPI conspired to gain control over and eliminate competition in the marketing of Grade A milk, through the unlawful tactics noted above. We reverse the contrary conclusion below because we are left with the definite and firm conviction that a mistake has been committed. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541, 92 L.Ed. 746 (1948). See also United States v. General Motors Corp., 384 U.S. 127, 141-146, n.16, 86 S.Ct. 1321, 1328-1331, n.16, 16 L.Ed.2d 415 (1966). 154