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In re Processed Egg Products Antitrust Litigation

United States District Court, E.D. Pennsylvania

June 1, 2018

IN RE: PROCESSED EGG PRODUCTS ANTITRUST LITIGATION THIS DOCUMENT APPLIES TO: ALL DIRECT PURCHASER ACTIONS

         MULTIDISTRICT LITIGATION

          MEMORANDUM

          GENE E. K. PRATTER United States District Judge

         Introduction[1]

         This is a straightforward case of statutory interpretation where the plain language dictates the result. After ten years of incubating, and on the eve of closing arguments of a month-long trial, the parties suggest that the outcome of the case hinges on the meaning of one word in a little-used 1922 statute partially protecting farmers from antitrust laws. The Court is called upon to answer the deceptively simple question: how should one calculate the "value" of something?

         In a certain sense, value is ephemeral. There are many types of value. Black's Law Dictionary lists 54 different types of value, 53 of which contain an adjective preceding it. But there is only one definition of "value" that can be used here: the amount a good can demand in exchange. The Court finds that "value" must mean the price for which it is purchased by the cooperative, and therefore concludes that, on the basis of the evidence, volume cannot serve as an adequate substitute for value. For this reason, the Court finds that there is insufficient evidence to grant a directed verdict at this time in favor of the defense. However, because the defendants have not rested their case, the Court also declines to grant the motion for a directed verdict to the plaintiffs. The defendants may still attempt to present evidence of the value of goods to the jury that would otherwise satisfy the statutory requirements as outlined below.

         Background

         In 1922, as the effects of the Sherman and Clayton Acts were coming into greater focus, Congress passed the Capper-Volstead Act to "remove the threat of antitrust restrictions on certain kinds of collective activity." National Broiler Marketing Ass 'n v. United States, 436 U.S. 816, 824 (1978). The grant was not absolute. Among the limitations imposed was a requirement that "the association shall not deal in the products of nonmembers to an amount greater in value than such as are handled by it for members." 7 U.S.C. § 291. In other words, the immunity only applies to agricultural cooperatives that have the majority of their products handled by members. This is the so-called "50% rule." The 50% is determined by the value of the products handled by the cooperative.

         There is scant case law on the rule. Few courts have even addressed this provision, and none have done so with such a novel fact pattern as presented here. In most agricultural commodity businesses, volume and price paid are directly proportional-economic laws dictate that market forces command relatively similar prices for similar goods in a market. But here, the United States Egg Marketers (USEM) was expressly designed (or, if not designed, then operated) to bridge two different markets by allowing USEM to export eggs from the U.S. market to the foreign market. USEM coordinated bulk shipments to sell eggs overseas for less than the prices eggs demanded domestically, while sharing the losses pro rata amongst members. The plaintiffs allege that this "dumping" scheme was done to raise prices domestically so that, even though so that, even though there was (or could be) a short-term loss for all members on a specific export, the resulting buoyed egg prices would nevertheless increase domestic profits to justify the export losses.

         USEM members were obligated to supply eggs for the export in accordance with their pro rata size, and were paid the foreign price of export.[2] Usually, not all USEM members would have enough domestic eggs to cover USEM's export commitments. When this happened, members could ask USEM to go into the open market to purchase eggs and would then be invoiced for the loss in the market purchase. This provision meant that non-members were paid a higher price by USEM than members were paid to export their eggs. As an example, in a given export, USEM members who had eggs could sell their eggs overseas for $0.50, but to fulfill the export requirement, USEM would go into the market and buy eggs from non-members at the going domestic rate of $1.50. USEM would then turn around and export these "$1.50 eggs" at $0.50 and bill the $1.00 loss to the members.

         Thus, even when USEM would ensure that the volume of each egg shipment from members made up more than 50% of the total, the price paid for the eggs could be drastically different. This means that the precise question presented to the Court is binary. If the Court concludes that "value" means "volume, " the defendants have presented sufficient evidence for their affirmative defense to go to the jury. But if the Court concludes that "value" means "price paid for the goods" then there is insufficient evidence on the record (as currently constituted at the moment of the issuance of this memorandum) to support the defense.

         Discussion

          The Court concludes that the word "value" in the statute must mean the price the buyer pays for it domestically. Such a reading is compelled by the statute.

         I. Definition of Value

         As in any question of statutory interpretation, the Court must start with the text of the statute. The Capper-Volstead Act requires that "the association shall not deal in the products of nonmembers to an amount greater in value than such as are handled by it for members." 7 U.S.C. § 291. At the time Capper-Volstead was drafted, value, when "applied without qualification to property of any description, " which is how the statute used the word, "necessarily means the price which it will command in the market." Bouvier's Law Dictionary and Concise Encyclopedia, Value (8th Ed. 1914); accord ...


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