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P & M Distributors, Inc. v. Prairie Farms Dairy, Incorporated

United States District Court, Seventh Circuit

October 4, 2013

P & M DISTRIBUTORS, INC., Plaintiff,
v.
PRAIRIE FARMS DAIRY, INCORPORATED, P.F.D. SUPPLY CORPORATION, MULLER-PINEHURST DAIRY, INC., and SCHURING & SCHURING, INC., Defendants.

OPINION

RICHARD MILLS, District Judge.

Plaintiff P & M Distributors, Inc. has filed an Amended Complaint, wherein it asserts various Antitrust Violations, pursuant to the Sherman Act 15 U.S.C. § 1, et seq., and the Clayton Act, 15 U.S.C. § 13 et seq. Pending before the Court is the Motion to Dismiss filed by Defendants Prairie Farms Dairy, Incorporated, P.F.D. Supply Corporation, and Muller-Pinehurst Dairy, Inc.

I. FACTUAL ALLEGATIONS[1]

In its Amended Complaint, Plaintiff P & M Distributors, Inc. alleges that Defendants Prairie Farms Dairy ("Prairie Farms") and P.F.D. Supply Corporation ("Prairie Supply") operate a dairy product production and supply business in Illinois. These Defendants obtain milk from farmers and produce consumable dairy products and sell milk to the public through distributors such as Defendant Muller-Pinehurst, Lockwood Dairy, Hawthorn Mellody, Inc. and Cary Dairy, among others. The distributors sell the products to intermediate customers including schools, nursing homes, hospitals and retailers, through direct sales and also through sub-distributors. These intermediate customers, including supermarkets and convenience stores, then sell the dairy products to the consuming public.

From the fall of 1998 until the fall of 2007, the Plaintiff purchased Prairie Farms dairy products from one of its own distributors, Hawthorn Mellody, Inc., and resold those dairy products to schools, hospitals, nursing homes, retailers and other customers as a sub-distributor of Hawthorn Mellody, Inc., which in turn obtained the products from Prairie Farms and Prairie Supply.

Neal Rosinsky is the President of Muller-Pinehurst. Prairie Farms owns fifty percent of Muller-Pinehurst. The other fifty percent of Muller-Pinehurst is owned by Mid-West Dairymen's Association.

During the period from before 2004 through and after 2007, Prairie Farms controlled between 60 percent and 80 percent of the market for liquid milk and related products for elementary schools and high schools, both public and Catholic, within Cook, Lake, Will and Dupage Counties.

During the same period, Prairie Farms controlled 100 percent of the liquid milk and related products market for a group of 30 nursing homes which received management services from EKS Management and Marketing services from IIT SourceTech. The 30 nursing homes are located within Cook, Lake, Will and Dupage Counties, Illinois.

From before 2004 through and after 2007, Prairie Farms and Prairie Supply, through William Wilberding and other agents, and Muller-Pinehurst through Neal Rosinsky and other agents and Lockwood Enterprises, Inc.[2], through Jerry Lockwood and other agents, and Schuring & Schuring, Inc., through Duane Schuring and other agents, via a series of agreements and concerted actions conspired to maintain higher, anti-competitive milk prices for the liquid milk and related dairy product markets that Prairie Farms controlled, including but not limited to the school district market for Cook, Lake, Dupage and Will Counties and the 30 nursing home EKS Management/IIT SourceTech market described above, by prohibiting other Prairie Farms Distributors and sub-distributors from bidding on milk supply contracts for those two markets, and by requiring that any bids submitted by other distributors or sub-distributors, such as the Plaintiff, be at or above minimum, inflated price levels determined by Prairie Farms, causing the consumers in those two markets to pay higher than market prices for liquid milk and related dairy products.

At all relevant times, Schuring & Schuring, Inc. was a Prairie Farms distributor and Lockwood Enterprises was also a Prairie Farms distributor, which sold Prairie Farm milk and related dairy products to the schools and nursing homes in the markets described above, or as sub-distributors of Muller-Pinehurst.

During this time period, and within the school district and nursing home markets described above, the Defendants agreed and conspired to inflate milk prices in the markets in which Prairie Farms had a dominant market power, by requiring that milk products be sold at prices higher than Prairie Farms milk products were being sold generally.

The Plaintiff alleges that Defendants violated the antitrust laws by conspiring to fix anti-competitive prices in the school district and nursing home markets, causing the consumers to pay inflated, higher than market prices, and by prohibiting the Plaintiff from competing to provide Prairie Farms milk products to those markets at lower prices. The Plaintiff asserts it has sustained damages based on lost sales, contracts and lost profits.

II. DISCUSSION

A. Legal standard

In Bell Atlantic v. Twombly, 550 U.S. 544 (2007), the Supreme Court addressed the pleading requirements for antitrust claims: "[A] formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level." Id. at 555 (citations omitted). Regarding the Sherman Act, "[t]he crucial question is whether the challenged anticompetitive conduct stems from independent decision or from an agreement, tacit or express." Id. at 553 (internal quotation marks and citation omitted). Based on these standards, a complaint alleging an antitrust claim must include "enough factual matter (taken as true) to suggest that an agreement was made." Id. at 556.

Additionally, the complaint must plausibly allege the existence of an antitrust injury. See Tamburo v. Dworkin, 601 F.3d 693, 699 (7th Cir. 2010). "[T]his requires factual allegations suggesting that the claimed injuries are of the type the antitrust laws were intended to prevent and reflect the anticompetitive effect of either the violation or of anticompetitive acts made possible by the violation." Id.

On behalf of the Seventh Circuit, Judge Posner further elaborated on the pleading standard for antitrust cases:

The Court said in Iqbal that the "plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." This is a little unclear because plausibility, probability, and possibility overlap. Probability runs the gamut from a zero likelihood to a certainty. What is impossible has a zero likelihood of occurring and what is plausible has a moderately high likelihood of occurring. The fact that the allegations undergirding a claim could be true is no longer enough to save a complaint from being dismissed; the complaint must ...


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