In re Dairy Farmers of America, Inc. Cheese Antitrust Litigation
2015 U.S. App. LEXIS 15454
7th Cir.2015Background
- Appellants (Indriolo Distributors, Knutson’s, Valley Gold) filed a long-running class action alleging a 2004 scheme to inflate milk-futures and spot-cheese prices; earlier defendants (DFA, Keller’s, and others) settled and that settlement was approved in 2014.
- Appellants amended to add Schreiber Foods, alleging § 1 Sherman Act conspiracy, Commodity Exchange Act (CEA) manipulation, California Cartwright Act violation, and unjust enrichment based on coordinated CME cheese purchases from May 24–June 23, 2004.
- Schreiber purchased significant quantities of cheese in 2004 and communicated repeatedly with DFA executives; Schreiber says its CME purchases aimed to correct an abnormal block–barrel cheese "spread," not to manipulate milk futures.
- The district court dismissed Sherman § 2 claims earlier, then granted summary judgment to Schreiber on the remaining § 1/Cartwright, CEA, and unjust enrichment claims; Appellants appealed and challenged discovery and Schreiber’s inclusion in the DFA settlement.
- The Seventh Circuit reviewed summary judgment de novo, found the evidence of agreement ambiguous and susceptible to legitimate independent explanation, held Class III futures are settled by USDA Class III milk prices (not cheese), and affirmed summary judgment and the discovery limits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sherman Act § 1 / Cartwright Act conspiracy | Communications and parallel, "unusual" CME buying by Schreiber and DFA show concerted action to inflate milk futures | Schreiber acted independently to protect cheese/process margins by correcting the block–barrel spread; interactions explained by supplier/customer relationship | Summary judgment for Schreiber: evidence ambiguous and consistent with independent business motives, no meeting-of-minds shown |
| Commodity Exchange Act manipulation | Spot-cheese manipulation that affected CME prices can support a CEA claim tied to Class III milk futures | Class III futures are settled by USDA Class III milk price; plaintiffs must show intent to manipulate milk (the underlying commodity) | Summary judgment for Schreiber: underlying commodity is milk, not cheese, and plaintiffs failed to show intent to manipulate milk prices |
| Unjust enrichment | Plaintiffs argue enrichment flowed from Schreiber’s unlawful conspiracy/manipulation | Schreiber says no unlawful conduct occurred; unjust enrichment requires an underlying statutory violation | Summary judgment for Schreiber: without proven statutory violation, unjust enrichment claim fails |
| Discovery scope / depositions | Plaintiffs sought broad depositions of multiple Schreiber employees to find direct evidence of conspiracy | Schreiber sought protective order; district court limited discovery to high-level personnel and denied six depositions as speculative | Affirmed: district court did not abuse discretion; additional depositions would be a fishing expedition given age of events |
| Inclusion in DFA settlement | Plaintiffs object to Schreiber’s being part of the previously approved DFA settlement | Schreiber included by agreement; settlement allows reconsideration only if summary judgment is reversed | Affirmed: Schreiber remains included in the DFA settlement alongside summary judgment ruling |
Key Cases Cited
- Sojka v. Bovis Lend Lease, Inc., 686 F.3d 394 (7th Cir. 2012) (standard for reviewing summary judgment in favor of moving party)
- Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697 (7th Cir. 2011) (elements and concerted-action standard for § 1 Sherman Act claims)
- Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (U.S. 1984) (conscious commitment to common scheme required to prove conspiracy)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (U.S. 1986) (parallel conduct consistent with permissible competition does not, standing alone, support inference of conspiracy)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plaintiff must allege facts tending to exclude independent action for § 1 conspiracy)
- Hershey v. Energy Transfer Partners, L.P., 610 F.3d 239 (5th Cir. 2010) (look to contract/exchange rules to identify the commodity underlying a futures contract)
- Frey v. Commodity Futures Trading Comm’n, 931 F.2d 1171 (7th Cir. 1991) (elements of a CEA manipulation claim)
- Damato v. Hermanson, 153 F.3d 464 (7th Cir. 1998) (aiding-and-abetting standards under CEA require knowledge and intent to further the violation)
- Davis v. G.N. Mortg. Corp., 396 F.3d 869 (7th Cir. 2006) (district court may deny discovery that is speculative and a fishing expedition)
- In re Copper Antitrust Litigation, 436 F.3d 782 (7th Cir. 2006) (Cartwright Act interpreted alongside Sherman Act authorities)
- Ass’n Ben. Servs., Inc. v. Caremark Rx, Inc., 493 F.3d 841 (7th Cir. 2007) (unjust enrichment theory based on alleged fraudulent dealings fails if underlying fraud claims are rejected)