Mushroom Court Ruling Sprouts Controversy On Whether Reliance On Lawyer Advice Maintains Affirmative Defense To Antitrust Claims

A federal district court recently ruled that claims of "good faith reliance on counsel" were not sufficient to maintain a Capper-Volstead affirmative defense to the antitrust laws - a result that may soon collide with rulings by other courts considering the same issue.

Several years ago, a Pennsylvania mushroom cooperative, its members, and various other entities, were sued for allegedly violating Sherman Act § 1 by launching a "supply control" campaign that used member funds to acquire and then dismantle other mushroom operations in order to maintain artificially high mushroom prices. See In re Mushroom Direct Purchaser Antitrust Litigation, MDL 0620 (E.D. Pa.).

In response to the suit, mushroom cooperative defendants claimed Capper-Volstead exemption based, among other reasons, on their good faith reliance on counsel's advice that the cooperative was organized and operating in a manner compatible with the Capper-Volstead Act. The Act provides certain agricultural cooperatives with a limited exemption from the Sherman Act. The trend, reviewed here, is for courts to treat the Capper-Volstead exemption as an affirmative defense - meaning the party asserting the defense must prove that they are eligible for Capper-Volstead's protection. The defense of "good faith reliance on counsel" can shield defendants from liability to the extent they were acting willfully and in good faith reliance on advice of counsel. See Rhone-Poulenc Rorer Inc. v. Home Indem. Co., 32 F. 3d 851 (3d Cir. 1994).

The Mushroom court rejected the mushroom cooperative defendants' claims as "problematic." The court explained: "The affirmative defense of good faith reliance on counsel is generally warranted only where the offense alleged involves willful and unlawful specific intent," but because "proof of specific intent is not required" for § 1 claims, the "advice of counsel would not be a proper defense." As a result, the mushroom cooperative defendants could not establish or maintain the Capper-Volstead affirmative defense based on a good faith reliance on counsel's advice that the cooperative was compliant with the Act.

Other courts...