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Otto Milk Co. v. United Dairy Farmers Cooperative Association

decided: December 26, 1967.


McLaughlin, Hastie and Forman, Circuit Judges.

Author: Mclaughlin


McLAUGHLIN, Circuit Judge.

Appellee sued defendants under sections 1 and 2 of the Sherman Act (15 U.S.C. Sections 1 and 2) for engaging in an unlawful conspiracy in restraint of trade and for endeavoring to monopolize the marketing of milk in the particular southwestern area of Pennsylvania involved. The third count of the complaint, urged under the pendent jurisdiction of the district court, was for unlawfully interfering with plaintiff's relations with its customers. The case was heard on the merits of all three of plaintiff's charges on June 14 and 22, 1966. The three counts were sustained by the trial judge. A decree was issued which permanently enjoined the defendants.

"* * * from inducing, or attempting to induce, directly or indirectly, any present or potential customer of plaintiff to refuse to purchase products from plaintiff and, in connection therewith, from picketing or demonstrating, or threatening to picket or demonstrate, before or about any retail store in and around Western Pennsylvania, or in any other place which is, or may become, a purchaser of the bottled milk or dairy products of plaintiff."

Appellee buys raw milk, then processes, bottles and sells it to retail stores. The milk comes from Western Pennsylvania farms, is handled at appellee's receiving plants in Pennsylvania and Ohio and sold as bottled milk and other dairy products in Pennsylvania, Ohio and West Virginia. Plaintiff's milk supplier during the critical period was Dairymen's Co-Operative Sales Association (DCSA). Plaintiff's president, Thomas P. Otto, as a witness, testified that there are in the neighborhood of 4,000 members of the DCSA with approximately 700 of these having furnished milk to plaintiff. Defendant-appellant United Dairy Farmers Cooperative Association (Association) is an incorporated association under the laws of Pennsylvania. Defendant United Dairy Farmers (UDF) admittedly was an unincorporated association. Defendant-appellant Hayes was sued individually and is designated in the complaint as currently president of the Association and of UDF. He admits being president of the Association. Defendants-appellants Smouse, Piper, Yagla and Babiarz were all sued as individuals and were stated to be currently respectively Vice President, Treasurer, Secretary and Assistant Secretary of the Association and UDF. An answer was filed on behalf of all defendants. The individual defendants admitted they were officers of the Association. They denied they were then officers of UDF. The trial court found as a fact that the individual defendants are officers of said organization.

Plaintiff Otto Milk Company sought a permanent injunction against the defendants from inducing or attempting to induce customers of plaintiff to refuse to purchase products from plaintiff and in connection therewith, from picketing or demonstrating before any retail store which was a purchaser of plaintiff's products. Defendants agreed voluntarily to stop the complained of conduct pending the outcome of this case.

So that the entire situation appears in its true perspective it is necessary to set out at some length highlights of the hearing testimony. As stated the president of plaintiff company was a witness. He said that on April 29, 1966 at the last contact he had with defendant Hayes the latter "asked that we discontinue the purchase of our milk supplies from the Dairymen's Cooperative Sales Association and buy the Class I needs from the United Dairy Farmers. He also at that time indicated that he couldn't be responsible for what might happen if we did not do so." Otto said that by May 26, 1966 "in various areas, pickets appeared before the stores of our very good customers." With reference to an article in the Pittsburgh Post Gazette titled "Dairymen to picket Otto outlets" in which defendant Hayes was purportedly quoted (Pltf's Ex. 2) the latter was called to the witness stand by the plaintiff. He was asked how many members the UDFCA had. He said that the last tally made probably two months previously, showed in the neighborhood of 600 members. He stated they were taking in new members all the time. After some back and forth he was asked "All right now, I will get back to you later, sir, but are we agreed that you did tell the reporter from the Pittsburgh Post Gazette that you were going to tell your story and 'this', meaning walking around with cards or signs was the only way to do it? A. I didn't say the only way, I said this was a way that we would inform the public." Hayes, shown a sign by his lawyer, identified it as "a sign that our members was carrying, * * *." He agreed with his attorney that it was the typical sign that was carried by the persons who were telling their story. A little later plaintiff's attorney referring to the same sign asked Hayes "Incidentally on the back, it says 'UDF and DSCA'. What's that?" Hayes answered saying "This is an old sign." and went on to explain that they "just turned it over and used the side that there was nothing printed on it."

Otto, returning to the stand, stated that his company since that May had been obtaining all their dairy products from Western Pennsylvania farms. A letter from the Pennsylvania Milk Control Commission to plaintiff company advised "that the audit recently completed by our auditors reveals that your company purchased its entire milk supply for the month of May, 1966 from 740 Pennsylvania producers." The witness testified that because of the pickets the numbers of stores that discontinued the Otto product totaled a weekly purchase from Otto of some $3,670. In addition leaflets or pamphlets which the defense attorney said were printed by UDFCA were distributed by persons wearing the alluded to signs and walking up and down in front of stores belonging to Otto customers. Hayes, as a witness, said United Dairy Farmers paid for the printing and that " it was written back when we negotiated the contract with Beverly Farms." (Emphasis supplied). The leaflet or pamphlet was marked in evidence as plaintiff's exhibit 5. It was read into the record as follows:

"A. The heading in bold type, 'Help your local farmer help you. When you buy milk today, please buy Beverly Farms United Dairy Farmers milk. When you do this you are actually helping your local farmers stay in business and you are getting better milk. The only carton of milk guaranteed to have local farmers' milk in it, is the one which has the black "United Dairy Farmers" handle. We local farmers need your help and support. When you buy Beverly Farms United Dairy Farmers milk you help us help you keep the price down. If your dealer does not have the milk with the United Dairy Farmers label from Beverly Farms -- ask him for it. Thanks and God bless you for helping us stay in business to better serve you and your children. United Dairy Farmers Cooperative Association.'" (Emphasis supplied).

Otto denied that Beverly milk was better than his. He was asked one other way customers could be sure of obtaining local milk and answered. "They can buy it from Otto Milk and they can buy from other dairies." Otto went on to say that their customers had been reporting to them that they had been asked and in some cases demanding that they take Otto milk off sale. "In addition to this," he said, "the good will of the Otto Milk Company is definitely in jeopardy when our customers feel that when they handle our product, which is all from Pennsylvania and all from Western Pennsylvania and all paid for at the Pennsylvania Milk Control prices, they are incurring the wrath of a group of producers, farmers." Plaintiff's ex. 6 in evidence was a statement over Radio Station KQV, June 10, 1966 by Mr. MacIlvane one of the two attorneys who tried this suit on behalf of defendants. It was read into the record by the witness. It appears in Footnote.*fn1 It flatly accused the Pennsylvania Milk Control Commission of "approving the conniving and carrying-ons between Otto and the DCSA to water down the price the farmer actually receives for his milk."

Mr. DiGuglielmo, a storekeeper, testified he had handled Otto products over two years, since he had owned the store. On June 1st a man and a woman came to his store, told him they were from United Farmers Dairy Association and that if he wouldn't quit handling the Otto product, they would put a picket line at his doors. They told him they would allow him to get rid of his stock and would be back to check. He answered "O.K. I would not,". He then talked to the Otto company and, as he testified, "I told them what happened so I told them I didn't want their drivers to stop until this thing was settled." He has not had any Otto products since that time.

Otto, recalled, testified that twenty-three stores had turned out their Otto milk in the last three weeks and he named them all.

Mr. Marcinek, another storekeeper, told of being visited on May 31, 1966 by four ladies who said they represented United Dairies and United Dairy Farmers. They told him if he didn't take Otto milk out of the case, they would demonstrate in front of his store. They admitted Otto milk was paying the full price but said they were not getting it. Marcinek refused and stated that they picketed in front of the store with a card that had the name "United Dairy Farmers" printed on top of it. The pickets were later increased from the four ladies to around twenty-two people. This was a store in an industrial section, a strong union labor center. Marcinek said he lost business because of the picketing. In addition, an attempt was made by one of the pickets to persuade a person delivering non related merchandise to the store, not to make the delivery, as unfair to union labor.

Hayes, recalled, under cross-examination for the plaintiff, admitted that possibly all Ott's milk in the immediately preceding month of May came from Pennsylvania. Later he said that he never told the newspaper reporter above referred to "that Otto was buying milk out of the state." He also said "At the present time, I would say that this is correct, that they are buying all their milk in Pennsylvania." He agreed that the Otto Milk Company pays the applicable Pennsylvania prices.

Louis E. Milks, Jr., a driver salesman for Otto, on May 25, 1966 in calling on a Sligo Market customer found eight to ten pickets walking in a tight little circle in front of the store. They carried signs saying Otto was unfair to the farmers. The signs at least had the letters "UDF". Shortly after that the market owner left a note for the witness' relief driver that due to circumstances beyond his control he was going to discontinue Otto milk at the present time. That market had been a customer of Otto for at least three years. After leaving the above noted market, Milks visited another Sligo store right up the street from the first one. Coming out of the second store he saw that his gas cap was missing from his car. The pickets from the first store had followed him to the second place. Going on to the town of Clarion to the A & P store there, he found men pickets in front of the premises with the same sort of signs having UDF on them. He left less than half his normal delivery at that store. The pickets told him that when they got Otto signed up they would go after another dairy. On his next trip to that store he found that all Otto milk had been removed from the service ...

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