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ISALY DAIRY CO. v. UNITED DAIRY FARMERS

January 28, 1966

The Isaly Dairy Company Of Pittsburgh, a corporation, Plaintiff,
v.
United Dairy Farmers, an association, and Ernest Hayes, Stanley Yagla and Luther Elkin, individually and as officers of such association, Defendants.


Dumbauld, District Judge.


The opinion of the court was delivered by: DUMBAULD

Before us is an application for a preliminary injunction. Testimony has been taken during several days, and transcribed. Subsequently elaborate requests for findings and briefs have been submitted by the parties.

 In the guise of antitrust actions the parties are endeavoring to conduct collective bargaining regarding the price of milk in the Pittsburgh area. This method of negotiation evinces all the inadequacies pungently described by the late Justice Robert H. Jackson as inherent in "government by lawsuit". Jackson, The Struggle for Judicial Supremacy, 287-88 (1941).

 The "embattled farmers" of the Western Pennsylvania region on October 4, 1965, filed suit at No. 65-1072 under the Sherman Act (15 U.S.C. § 1 et seq.) against Isaly Dairy Company (hereinafter called Isaly) and three other dairy companies alleging a conspiracy to restrain trade in fluid milk, apparently by price-fixing arrangements effected through Dairyman's Co-operative Sales Association, Inc. (hereinafter called DCSA), at prices lower than producing members of said association feel to be in their best interests. Named as co-defendants are directors of said association, but the association itself is not named as a defendant. Apparently the gist of the grievance is that the association is operated as an instrumentality subservient to the interests of the dairies rather than as a faithful bargaining agent fighting for the welfare of its constituent farmer members.

 On October 25, 1965, Isaly Dairy Company filed the instant action (No. 65-1140) against United Dairy Farmers (hereinafter called UDF) and certain individual dairy farmers who were active in forming United Dairy Farmers, at first as a loose association claiming a membership of 2,000 farmers, but subsequently incorporated, and having apparently only fifteen stockholder members at the date of hearing (Tr. 90). This complaint alleges conspiracy to monopolize the Pittsburgh milk market, and to fix the prices of milk there sold.

 Although cast in the form of an antitrust case, it would appear that what Isaly is actually complaining of could more properly be described as the tort sometimes called "inducing breach of contract". Sayre, Inducing Breach of Contract, 36 Harv. L. Rev. 663 (1923); Restatement, Torts, § 766. The classical example is Lumley v. Gye, 2 Ell. & Bl. 216 (1853), where a singer was enticed to break a contract with plaintiff and sing at a rival theatre.

 In the case at bar, Isaly has always obtained its entire milk supply under a contract with DCSA.

 Defendants in the case at bar are farmers who supply milk to Isaly. Hence under Isaly's scheme of purchasing all requirements from DCSA, defendants are required to become members of DCSA in order to continue to supply Isaly.

 The "embattled farmers" feel that DCSA is not acting loyally in the interests of its farmer members but is a tool of the dairies who purchase from it; that the DCSA price is diluted by its out-of-state purchases of low-cost milk; and that in any event it would be more advantageous for the members to sell directly to the dairies they supply, without losing the commission or selling costs now deducted by DCSA from the return to the farmer members of DCSA. However, even if DCSA were replaced by UDF as a selling agency for the milk produced by the farmers involved, there would probably be just as high administrative costs as now; the chief gain to the farmers would be obtained only if the new agency were a more vigorous bargainer and won for its constituents a higher price for milk.

 The tort of "inducing breach of contract" would be governed by State law, and is not before us, there being no diversity of citizenship.

 Insofar as the antitrust laws are concerned, it would seem that the method of selling and buying milk, and the price thereof, are matters entirely within the discretion of the parties, and the proper subject of bargaining between them.

 It would seem that Isaly is entirely free to buy all its requirements from DCSA if it so chooses; likewise that defendant farmers are entirely free to sell their production through UDF rather than DCSA if they so choose. U.S. v. Colgate & Co., 250 U.S. 300, 307, 63 L. Ed. 992, 39 S. Ct. 465 (1919); Sunkist v. Winckler & Smith Co., 370 U.S. 19, 29, 8 L. Ed. 2d 305, 82 S. Ct. 1130 (1962); Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327, 5 L. Ed. 2d 580, 81 S. Ct. 623 (1961); Perkins v. Lukens Steel Co., 310 U.S. 113, 127, 84 L. Ed. 1108, 60 S. Ct. 869 (1940); Patterson v. United States, 222 F. 599, 621-22 (C.C.A., 1915).

 Insofar as the fluctuations of a free market are to be considered incompatible with the public need for an adequate supply of healthful milk, or with the preservation of farming as a cherished way of life rather than as a mere means of earning a livelihood, the remedy is to be found in other legislative enactments than the Antitrust Laws.

 Following the dramatic overthrow of the first farm relief program in U.S. v. Butler, 297 U.S. 1, 68, 80 L. Ed. 477, 56 S. Ct. 312 (1936), the "New Deal" philosophy prevailed in subsequent decisions. Nebbia v. N.Y., 291 U.S. 502, 538, 78 L. Ed. 940, 54 S. Ct. 505 (1934); Milk Control Board of Pennsylvania v. Eisenberg Farm Products, 306 U.S. 346, 350, 83 L. Ed. 752, 59 S. Ct. 528 (1939); U.S. v. Rock Royal Co-operative, Inc., 307 U.S. 533, 560, 569-71, 83 L. Ed. 1446, 59 S. Ct. 993 (1939); H. P. Hood & Sons v. Du Mond, 336 ...


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