Sixth Circuit Spoils Milk Processor’s Win By Reinstating Class Action Alleging Conspiracy To Restrict Milk Supply

The Sixth Circuit recently revived an antitrust class action alleging a conspiracy between a processed milk bottler, a raw milk supplier and a raw milk processor to restrict milk supply in violation of Section 1 of the Sherman Act. Food Lion, LLC v. Dean Foods Co., No. 12-5457 (6th Cir. Jan. 3, 2014) (In re Southeastern Milk Antitrust Litig.). The Court of Appeals ruled that the lower court erred when it found that the Plaintiff class of milk retailers could not establish the relevant geographic antitrust market or proof of their injuries and thus granted summary judgment for Defendants. The case is remanded to the district court for further proceedings.

The 28-page opinion is interesting in several dimensions. As discussed below, unlike the district court, the Sixth Circuit decided to engage in a "quick look" analysis instead of considering summary judgment against a rule of reason standard. The quick look approach had implications for two other issues — whether any of Plaintiffs' claims could survive summary judgment on the question of a geographic market, which the district court found Plaintiffs had failed to establish; and how to treat Plaintiffs' expert testimony on geographic markets and antitrust injury, which the district court had excluded.

The case has its roots in the 2001 creation of Dean Foods through the merger of Dean Foods Company with Suiza Foods Corporation (Suiza), the two largest processed milk bottlers at the time. Approved by the Department of Justice, the merger was subject to the divestment of certain milk processing plants to Dairy Farmers of America (DFA), Suiza's primary supplier of raw milk, followed shortly thereafter by the transfer of those processing plants to National Dairy Holdings (NDH), a newly formed partnership and the largest competitor to the new Dean Foods. As described by the Sixth Circuit, DFA served as the keystone to the alleged conspiracy as it retained a 50% ownership in NDH and obtained a contractual commitment from Dean Foods for the opportunity to act as the supplier of raw milk to the merged entity.

Summing up Plaintiffs' case, the Sixth Circuit noted that "[a]lthough DFA's ownership stake provides an obvious incentive to fully support NDH's fledgling enterprise, DFA's raw milk supply agreements with the merged company create fertile soil for the development of a conflict of interest."

The Sixth Circuit's Decision

To successfully bring a Section 1 claim, a plaintiff must establish that...