Court Opinion

ID: 9590439
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:54:57.674201+00
Date Added: 2024-06-11T09:18:01.742114
License: Public Domain

BURNETT, Judge,
specially concurring.
I join in holding that Amalgamated improperly deducted antitrust legal expenses from the compensation owed to sugar beet growers under the standard contract. Because my views are not fully reflected in the Court’s opinion, I will outline them briefly here.
At the outset I acknowledge that these deductions, in concept, appeal to an intuitive sense of fairness. The contract provides for Amalgamated and its growers to share certain costs and benefits of marketing sugar. If it were shown that the growers actually had shared benefits derived from the marketing practices challenged in the antitrust litigation, it would not be unjust to require the growers to share the legal costs occasioned by those practices. But the record contains no such showing. Neither does the contract authorize Amalgamated to make all deductions that would be just, nor even to deduct every expense related to marketing sugar. Rather, the contract allows only “regular and customary” deductions.
*116The company’s controller testified at trial that the phrase “regular and customary” refers to “an accounting concept of consistency ----that items are handled, reported, consistently from year to year.” He further testified that if the company encountered a type of expense for which there was no prior history, it would be treated as deductible under the contract only if the parties specifically so agreed or if a generally accepted accounting principle covered the expense. The record discloses that antitrust litigation expenses first arose in 1957, when a relatively small cost was incurred. There is no proof of any agreement concerning deduction of that item. The company simply included it in a “miscellaneous” category of its “chart of accounts,” and unilaterally deducted it. After 1957, the company continued to maintain no “chart of accounts” item for antitrust legal expense nor even for attorney fees in general, which remained “miscellaneous.”
In the instant dispute, the question of antitrust litigation expenses has arisen again. Obviously, the parties have reached no agreement regarding deduction of this item. Although the company asserts that such expenses are regularly and customarily deducted, in fact it has made no deduction for sums paid in settlement of the antitrust claims, and it has based its attorney fee deduction upon 80% — rather than 100% — of the fees incurred for representing the company in the antitrust litigation. The company now explains its failure to deduct any of the settlements, or all of the attorney fees, as a conciliatory gesture toward the growers. Conciliation never is to be condemned. However, the question here is not one of good faith. It is whether the company has shown, on this record, that deductions of antitrust litigation expenses are regular and customary. The district court found that they are not, and I must agree. The record reveals instead a series of ad hoc, albeit perhaps well-intentioned, decisions by the company concerning such expenses. These decisions do not meet the contract test of regular and customary deductions.
Alternatively, the company has contended that the expenses are covered by a general accounting practice of identifying marketing expenses and distinguishing them from other expenses. However, as the district court found, the company failed to establish a nexus between the legal expenses deducted and the marketing of sugar. The record discloses no evidence that the antitrust litigation interfered with ongoing sales of sugar to the company’s customers. Neither did the company undertake to show that the litigation had diminished, or had threatened to diminish, the prices received for the company’s sugar. Indeed, the company maintained in this case the same position it had urged in the antitrust litigation — that past sugar marketing practices had not increased sugar prices above competitive market levels. Absent any showing that the antitrust litigation was related to the level of sugar sales or to the prices received for such sales, the company furnished the district court no basis to find that the legal expenses of defending the antitrust claims represented a cost of selling sugar. Upon this record, I believe the district court was constrained to disallow deduction of the legal expenses.