`
`Nos. 20-1045 & 20-1127
`
`UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
`
`IN RE: PROCESSED EGG PRODUCTS ANTITRUST LITIGATION
`THE KROGER CO., SAFEWAY, INC., ROUNDY’S SUPERMARKETS,
`INC., WALGREEN CO., HY-VEE, INC., ALBERTSONS LLC, THE
`GREAT ATLANTIC & PACIFIC TEA COMPANY, H.E. BUTT
`GROCERY COMPANY, SUPERVALU INC., PUBLIX SUPER
`MARKETS, INC., GIANT EAGLE, INC., AND
`WINN-DIXIE STORES, INC.
`v.
`ROSE ACRE FARMS, INC., UNITED EGG PRODUCERS, INC. AND
`UNITED STATES EGG MARKETERS, INC.
`
`Appeal from the judgment entered on December 16, 2019, as
`amended on January 6, 2020, in the United States District
`Court for the Eastern District of Pennsylvania
`(No. 08-md-2002)
`
`
`
`OPENING BRIEF OF APPELLEE/CROSS-APPELLANT
`ROSE ACRE FARMS, INC.
`
`James A. King
`Eric B. Gallon
`PORTER, WRIGHT,
`MORRIS & ARTHUR LLP
`41 S. High Street
`Suite 3100
`Columbus OH 43215
`(614) 227-2000
`
`
`Donald M. Barnes
`Jay L. Levine
`PORTER, WRIGHT,
`MORRIS & ARTHUR LLP
`2020 K Street, NW
`Suite 600
`Washington DC 20006
`(202) 778-3021
`
`
`Counsel for Rose Acre Farms, Inc.
`(Additional counsel listed on next page)
`
`
`
`Case: 20-1045 Document: 67 Page: 2 Date Filed: 07/01/2020
`
`Robert M. Palumbos
`Leah A. Mintz
`DUANE MORRIS LLP
`30 South 17th Street
`Philadelphia PA 19103
`(215) 979-1111
`
`Counsel for Rose Acre Farms, Inc.
`
`
`
`
`
`Case: 20-1045 Document: 67 Page: 3 Date Filed: 07/01/2020
`
`United States Court of Appeals for the Third Circuit
`
`CORPORATE DISCLOSURE STATEMENT AND
`STATEMENT OF FINANCIAL INTEREST
`
`
`Pursuant to Rule 26.1 and Third Circuit LAR 26.1,
`Appellee/Cross-Appellant Rose Acre Farms, Inc. makes the
`following disclosure:
`
`
`For non-governmental corporate parties please list all
`1)
`parent corporations:
`None.
`For non-governmental corporate parties please list all
`2)
`publicly held companies that hold 10% or more of the party’s
`stock:
`
`None.
`If there is a publicly held corporation which is not a
`3)
`party to the proceeding before this Court but which has a financial
`interest in the outcome of the proceeding, please identify all such
`parties and specify the nature of the financial interest or interests:
`None.
`In all bankruptcy appeals counsel for the debtor or
`4)
`trustee of the bankruptcy estate must list: 1) the debtor, if not
`identified in the case caption; 2) the members of the creditors’
`committee or the top 20 unsecured creditors; and, 3) any entity not
`named in the caption which is an active participant in the
`bankruptcy proceeding. If the debtor or trustee is not participating
`in the appeal, this information must be provided by appellant.
`Not applicable.
`
`July 1, 2020
`
`
`
`
`/s/ Jay L. Levine
`Counsel for Rose Acre Farms, Inc.
`
`
`i
`
`
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`Case: 20-1045 Document: 67 Page: 4 Date Filed: 07/01/2020
`
`TABLE OF CONTENTS
`
`Page(s)
`Introduction ..................................................................................... 1
`Jurisdictional Statement ................................................................. 4
`Counter-Statement of Issues Presented for Review by
`Appellants ............................................................................... 4
`Statement of Issues Presented for Review by Cross-
`Appellant Rose Acre ............................................................... 5
`Statement of Related Case .............................................................. 7
`Statement of the Case...................................................................... 8
`I.
`The Alleged Conspiracy .......................................................... 8
`A.
`The Certified Program ................................................... 9
`1.
`Development of the Certified Program in
`response to customer requests ............................. 9
`The implementation and evolution of the
`Certified Program ............................................... 13
`The Certified Program never restricted
`production ........................................................... 15
`DAPs’ continued demand for Certified eggs ...... 16
`4.
`B. UEP’s Supply Management Recommendations .......... 17
`C. USEM’s Egg Exports ................................................... 18
`II. DAPs Repeatedly Described the Alleged Conspiracy as
`Containing Three Components ............................................ 19
`A. DAPs defeated Rose Acre’s counterclaims based
`on their allegation of a three-part conspiracy ............. 19
`
`2.
`
`3.
`
`
`
`ii
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`Case: 20-1045 Document: 67 Page: 5 Date Filed: 07/01/2020
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`D.
`
`B. DAPs relied on their allegation of a single
`conspiracy with multiple components at summary
`judgment ...................................................................... 21
`C. Before trial, DAPs specifically represented to the
`District Court that they were prosecuting a three-
`component conspiracy .................................................. 22
`D. DAPs succeeded in admitting evidence at trial
`based on their allegation of a single conspiracy
`with three components ................................................ 25
`III. The Jury Instructions ........................................................... 27
`Scope and Standard of Review ...................................................... 28
`Summary of Argument .................................................................. 29
`Argument ....................................................................................... 34
`I.
`The Verdict Form and Jury Instructions Properly
`Instructed the Jury to Determine Whether DAPs Had
`Proved The Conspiracy They Alleged. ................................. 34
`A.
`The District Court described the conspiracy in the
`same way DAPs consistently described it before
`trial. ............................................................................. 35
`B. DAPs presented a single conspiracy with three
`components to the jury. ............................................... 39
`C. DAPs’ theory of liability necessitated that the
`conspiracy included all three components. ................. 41
`It was appropriate to reference the conspiracy’s
`components in Question 1. .......................................... 44
`The description of the conspiracy in DAPs’
`contention instruction did not confuse the jury. ......... 47
`The District Court did not require the jury to find
`that the Defendants carried out all three
`components of the conspiracy. ..................................... 50
`
`E.
`
`F.
`
`
`
`iii
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`Case: 20-1045 Document: 67 Page: 6 Date Filed: 07/01/2020
`
`B.
`
`C.
`
`II. The District Court Properly Applied the Rule of Reason
`to DAPs’ Claims. ................................................................... 53
`A.
`The District Court properly analyzed the
`conspiracy’s substance, rather than the label
`DAPs gave it. ............................................................... 56
`The evidence established that the conduct at
`issue is not within the limited category of
`restraints that are subject to the per se rule............... 58
`The District Court correctly ruled that the mode
`of analysis is a question of law and properly
`rejected DAPs’ attempt to apply the wrong test
`for application of the per se rule. ................................. 64
`III. The Court Can Affirm for the Additional Reason that
`Rose Acre Was Entitled to Judgment as a Matter of
`Law. ....................................................................................... 69
`A. DAPs presented no direct evidence concerning the
`existence of an overarching conspiracy, as
`required by Monsanto and Matsushita. ...................... 70
`B. At best, DAPs’ evidence that Rose Acre conspired
`with others is circumstantial and ambiguous............. 73
`The plausibility of the underlying economic
`theory does not preclude application of
`Matsushita. .................................................................. 76
`IV. The District Court Should Have Allowed a Good-Faith
`Defense Under the Capper-Volstead Act. ............................ 79
`Conclusion ...................................................................................... 84
`Combined Certifications ................................................................ 86
`Certificate of Service ...................................................................... 88
`
`
`
`C.
`
`
`
`iv
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`Case: 20-1045 Document: 67 Page: 7 Date Filed: 07/01/2020
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`CASES
`Adaptive Power Sols., LLC v. Hughes Missile Sys. Co.
`141 F.3d 947 (9th Cir. 1998) ..................................................... 62
`Arizona v. Maricopa Cty. Med. Soc’y
`457 U.S. 332 (1982) ..............................................................29, 64
`Armstrong v. Dwyer
`155 F.3d 211 (3d Cir. 1998) ............................................ 28, 40, 46
`Bell Atl. Corp. v. Twombly
`550 U.S. 544 (2007) ................................................................... 35
`Black & Yates v. Mahogany Ass’n, Inc.
`129 F.2d 227 (3d Cir. 1941) ....................................................... 35
`Broad. Music, Inc. v. Columbia Broad. Sys., Inc.
`441 U.S. 1 (1979) ....................................................................... 57
`Chicago Bd. of Trade v. United States
`246 U.S. 231 (1918) ................................................................... 68
`City of Long Beach v. Standard Oil Co. of Cal.
`46 F.3d 929 (9th Cir. 1995) ............................................ 35, 38, 41
`Combs v. Associated Elec. Coop., Inc.
`752 F. Supp. 1131 (D.D.C. 1990) ............................................... 82
`Consol. Express, Inc. v. N.Y. Shipping Ass’n
`602 F.2d 494 (3d Cir. 1979), vacated on other
`grounds, 448 U.S. 902 (1980) .................................................... 81
`Cooper Distrib. Co., Inc. v. Amana Refrigeration, Inc.
`63 F.3d 262 (3d Cir. 1995) ......................................................... 47
`Craftsmen Limousine, Inc. v. Ford Motor Co.
`363 F.3d 761 (8th Cir. 2004) ..................................................... 65
`
`
`
`v
`
`
`
`Case: 20-1045 Document: 67 Page: 8 Date Filed: 07/01/2020
`
`Deutscher Tennis Bund v. ATP Tour, Inc.
`610 F.3d 820 (3d Cir. 2010) ............................................ 29, 64-65
`DiFiore v. CSL Behring, LLC
`879 F.3d 71 (3d Cir. 2018) ......................................................... 47
`Donlin v. Philips Lighting N. Am. Corp.
`581 F.3d 73 (3d Cir. 2009) ......................................................... 40
`Ely v. Reading Co.
`424 F.2d 758 (3d Cir. 1970) ....................................................... 38
`Fadiga v. Att’y Gen.
`488 F.3d 142 (3d Cir. 2007) ....................................................... 29
`Fairdale Farms, Inc. v. Yankee Milk, Inc.
`635 F.2d 1037 (2d Cir. 1980) ..................................................... 82
`Farley v. Nationwide Mut. Ins. Co.
`197 F.3d 1322 (11th Cir. 1999) ................................................. 46
`Feather v. United Mine Workers of America
`711 F.2d 530 (3d Cir. 1983) .................................................. 81-82
`FTC v. Ind. Fed’n of Dentists
`476 U.S. 447 (1986) ................................................................... 65
`Fuentes v. South Hills Cardiology
`946 F.2d 196 (3d Cir. 1991) ....................................................... 35
`GVF Cannery, Inc. v. Cal. Tomato Growers Ass’n
`511 F. Supp. 711 (N.D. Cal. 1981) ............................................ 82
`Hammes v. AAMCO Transmissions, Inc.
`33 F.3d 774 (7th Cir. 1994) ....................................................... 67
`Hyland v. HomeServices of Am., Inc.
`771 F.3d 310 (6th Cir. 2014) ..................................................... 73
`IDT Corp. v. Bldg. Owners & Managers Ass’n Int’l
`No. 03-4113, 2005 WL 3447615
`(D.N.J. Dec. 15, 2005) ................................................................ 57
`
`
`
`vi
`
`
`
`Case: 20-1045 Document: 67 Page: 9 Date Filed: 07/01/2020
`
`In re Baby Food Antitrust Litig.
`166 F.3d 112 (3d Cir. 1999) ....................................................... 73
`In re Chocolate Confectionary Antitrust Litig.
`801 F.3d 383 (3d Cir. 2015) ....................................................... 77
`In re Processed Egg Prod. Antitrust Litig.
`Nos. 19-1088 & 19-1188, __ F.3d __, 2020 WL
`3407761 (3d Cir. June 22, 2020) ..... 7, 32, 53-54, 56-61, 64-65, 74
`In re Sulfuric Acid Antitrust Litig.
`703 F.3d 1004 (7th Cir. 2012) ........................................ 57, 64-65
`In re Wholesale Grocery Products Antitrust Litigation
`752 F.3d 728 (8th Cir. 2014) ................................................ 66-67
`James v. Continental Ins. Co.
`424 F.2d 1064 (3d Cir. 1970) (per curiam) ................................ 45
`Kearney v. Auto-Owners Ins. Co.
`422 F. App’x 812 (11th Cir. 2011) (per curiam) ............. 34, 38, 41
`Krystal Cadillac-Oldsmobile GMC Truck, Inc. v.
`Gen. Motors Corp.
`337 F.3d 314 (3d Cir. 2003) ....................................................... 39
`L&L Howell, Inc. v. Cincinnati Coop. Milk Sales Ass’n
`No. 81-3491, 1983 WL 162169
`(6th Cir. July 20, 1983) ............................................................. 82
`Larry V. Muko, Inc. v. Sw. Pa. Bldg. & Constr.
`Trades Council
`670 F.2d 421 (3d Cir. 1982) ....................................................... 69
`Leegin Creative Leather Prods., v. PSKS, Inc.
`551 U.S. 877 (2007) ........................................................ 54, 57-59
`Matsushita Electric Industrial Co., Ltd. v. Zenith
`Radio Corp.
`475 U.S. 574 (1986) ............................................... 5, 70-72, 76-77
`
`
`
`vii
`
`
`
`Case: 20-1045 Document: 67 Page: 10 Date Filed: 07/01/2020
`
`Md. & Va. Milk Producers Ass’n v. United States
`362 U.S. 458 (1960) ................................................................... 80
`Med. Ctr. at Elizabeth Place, LLC v. Atrium
`Health Sys.
`922 F.3d 713 (6th Cir. 2019) ..................................................... 65
`Monsanto Co. v. Spray-Rite Serv. Corp.
`465 U.S. 752 (1984) .............................................................. 70-71
`N. Am. Soccer League, LLC v. U.S. Soccer Fed’n
`883 F.3d 32 (2d Cir. 2018) ......................................................... 74
`N. Pac. Ry. Co. v. United States
`356 U.S. 1 (1958) ....................................................................... 69
`Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of
`Univ. of Okla.
`468 U.S. 85 (1984) ..................................................................... 57
`Procaps S.A. v. Patheon Inc.
`141 F. Supp. 3d 1246 (S.D. Fla. 2015), aff’d, 845
`F.3d 1072 (11th Cir. 2016) ........................................................ 62
`Ryan Operations G.P. v. Santiam-Midwest Lumber Co.
`81 F.3d 355 (3d Cir. 1996) ......................................................... 39
`Savarese v. Agriss
`883 F.2d 1194 (3d Cir. 1989) ..................................................... 29
`Scarano v. Central R. Co. of New Jersey
`203 F.2d 510 (3d Cir. 1953) ....................................................... 38
`Sprinkle v. AMZ Mfg. Corp.
`567 F. App’x 163 (3d Cir. 2014) ................................................. 46
`Tigg Corp. v. Dow Corning Corp.
`962 F.2d 1119 (3d Cir. 1992) ..................................................... 47
`United States v. Am. Radiator & Standard
`Sanitary Corp.
`433 F.2d 174 (3d Cir. 1970) ....................................................... 53
`viii
`
`
`
`
`
`Case: 20-1045 Document: 67 Page: 11 Date Filed: 07/01/2020
`
`United States v. Brown Univ.
`5 F.3d 658 (3d Cir. 1993) ........................................................... 57
`United States v. Nat’l Ass’n of Broads.
`536 F. Supp. 149 (D.D.C. 1982) ................................................. 57
`United States v. Socony-Vacuum Oil Co.
`310 U.S. 150 (1940) ................................................................... 64
`Valspar Corp. v. E. I. du Pont de Nemours & Co.
`873 F.3d 185 (3d Cir. 2017) ....................................................... 77
`Waldorf v. Shuta
`896 F.2d 723 (3d Cir. 1990) ....................................................... 28
`Weit v. Cont’l Ill. Nat’l Bank & Trust Co.
`641 F.2d 457 (7th Cir. 1981) ..................................................... 71
`Woodson v. Scott Paper Co.
`109 F.3d 913 (3d Cir. 1997) .................................................. 28-29
`STATUTES
`28 U.S.C. § 1291 ............................................................................... 4
`28 U.S.C. § 1331 ............................................................................... 4
`Agricultural Fair Practices Act, 7 U.S.C. § 2301, et seq. .............. 84
`Capper-Volstead Act, 7 U.S.C. §§ 291-92 ...................................... 80
`Clayton Act, 15 U.S.C. § 17 ........................................................... 80
`Cooperative Marketing Act of 1926,
`7 U.S.C. § 451, et seq. ................................................................ 80
`Sherman Act, 15 U.S.C. § 1 .................................................... passim
`RULES
`Federal Rule of Evidence 801(d)(2)(E) .....................................25, 27
`Federal Rule of Civil Procedure 50 ...................................... 6, 69, 79
`
`
`
`ix
`
`
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`Case: 20-1045 Document: 67 Page: 12 Date Filed: 07/01/2020
`
`OTHER AUTHORITIES
`3A Kevin F. O’Malley et al., Federal Jury Practice and
`Instructions §§ 150.20-150.22 (6th ed. 2012) ............................ 58
`Phillip E. Areeda & Herbert Hovenkamp, Antitrust
`Law (2d ed. 2005) .................................................................65, 68
`H.R. Rep. No. 67-24 (1921) ............................................................ 83
`
`
`
`
`
`x
`
`
`
`Case: 20-1045 Document: 67 Page: 13 Date Filed: 07/01/2020
`
`INTRODUCTION
`
`For the better part of a decade, the Direct Action Plaintiffs
`
`(“DAPs”) have alleged that Rose Acre Farms, Inc. (“Rose Acre”)
`
`engaged in a conspiracy with other egg producers and two egg
`
`farmer cooperatives, United Egg Producers (“UEP) and United
`
`States Egg Marketers (“USEM”), to reduce the American egg
`
`supply. DAPs alleged a single conspiracy comprised of short-term
`
`supply measures recommended by UEP, an animal welfare
`
`program called the “Certified Program,” and USEM-organized egg
`
`exports.
`
`DAPs repeatedly assured Defendants and the District Court
`
`that the conspiracy they sought to prove comprised all three
`
`components. Among the times DAPs made this position clear was
`
`shortly before trial began, in response to a motion to clarify
`
`precisely that issue. DAPs also relied on the alleged three-part
`
`conspiracy in numerous filings, including their successful motions
`
`to dismiss Defendants’ state-law counterclaims and for the
`
`admission of evidence.
`
`
`
`
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`Case: 20-1045 Document: 67 Page: 14 Date Filed: 07/01/2020
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`At trial, DAPs spent six weeks trying to convince a jury that
`
`the conspiracy they alleged actually existed. After only a day of
`
`deliberation, the jury found that it did not.
`
`DAPs now argue that the verdict form asked the wrong
`
`question. According to DAPs, the District Court should have never
`
`required them to prove a conspiracy that involved all three
`
`components. Instead, they argue that the District Court should
`
`have permitted the jury to find a narrower conspiracy that
`
`included only one or two components, even though the conspiracy
`
`DAPs were prosecuting involved all three. But DAPs themselves
`
`argue that jury instructions should reflect the plaintiffs’ theory of
`
`the case. (DAP Br. at 31-32.) It was no error for the District Court
`
`to prepare jury instructions and a verdict form that fairly
`
`characterized the theory of the case that DAPs repeatedly
`
`represented they were pursuing and actually did pursue.
`
`DAPs further assert that the verdict form required DAPs to
`
`prove that all three components were actually carried out, and not
`
`just part of the conspiracy. DAPs misread the jury instructions
`
`and verdict form. Question 1 of the verdict form (the only question
`
`
`
`2
`
`
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`Case: 20-1045 Document: 67 Page: 15 Date Filed: 07/01/2020
`
`the jury answered) did not ask whether DAPs had proven that the
`
`alleged conspirators carried out each component of the conspiracy.
`
`It asked whether “there was a conspiracy to reduce the supply of
`
`eggs comprised of” the three components DAPs alleged. (Appx2.)
`
`The District Court explicitly instructed the jury that DAPs did not
`
`need to prove that “all the means or methods that were agreed
`
`upon were actually used or put into operation” (Appx48), exactly
`
`as DAPs argue it should have (see DAP Br. at 28).
`
`DAPs also attack the District Court’s application of the
`
`default “Rule of Reason” standard to their Sherman Act claims.
`
`That issue is moot as the jury ruled that a conspiracy never
`
`existed. Moreover, the direct purchaser class from which DAPs
`
`opted out asserted this same argument in a companion appeal,
`
`and the Court rejected it in a precedential opinion. In that
`
`opinion, this Court upheld application of the Rule of Reason to the
`
`identical conduct involved in this appeal. The Court’s decision in
`
`the companion case is controlling and establishes that the District
`
`Court properly held that the conduct challenged by the DAPs
`
`must be judged under the Rule of Reason, given its clear
`
`
`
`3
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`
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`Case: 20-1045 Document: 67 Page: 16 Date Filed: 07/01/2020
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`procompetitive benefits and the lack of manifestly anticompetitive
`
`effects.
`
`The Court should affirm the judgment on the jury’s
`
`unanimous verdict.
`
`JURISDICTIONAL STATEMENT
`
`The District Court had jurisdiction under 28 U.S.C. § 1331.
`
`DAPs appealed the judgment on January 3, 2020, and filed an
`
`amended notice of appeal on January 9, 2020. Rose Acre filed a
`
`timely cross-appeal on January 17, 2020, and an amended notice
`
`of cross-appeal on January 21, 2020. This Court has jurisdiction
`
`under 28 U.S.C. § 1291.
`
`COUNTER-STATEMENT OF ISSUES PRESENTED FOR
`REVIEW BY APPELLANTS
`In pleadings, discovery responses, motions, briefs, oral
`
`1.
`
`arguments, and at trial, DAPs described the Defendants’ alleged
`
`conspiracy as comprising short-term supply recommendations,
`
`certain aspects of UEP’s Certified Program, and egg exports
`
`through USEM. Did the District Court err in instructing the jury
`
`
`
`4
`
`
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`Case: 20-1045 Document: 67 Page: 17 Date Filed: 07/01/2020
`
`that the conspiracy DAPs alleged comprised those three
`
`components?
`
`2. Conduct alleged to be unlawful under Sherman Act
`
`Section 1 is judged under the Rule of Reason unless it has obvious
`
`anticompetitive effects and lacks any redeeming virtue. In the
`
`companion class case, this Court affirmed the District Court’s
`
`ruling that the Certified Program is correctly judged under the
`
`Rule of Reason. DAPs did not argue or produce evidence that the
`
`other restraints at issue satisfied the requirements for application
`
`of the per se rule. Did the District Court err in instructing the jury
`
`to apply the Rule of Reason at trial?
`
`STATEMENT OF ISSUES PRESENTED FOR
`REVIEW BY CROSS-APPELLANT ROSE ACRE
`If this Court overturns the District Court’s judgment in any
`
`part, the Court should also address the following issues:
`
`1. Under Matsushita Electric Industrial Co., Ltd. v.
`
`Zenith Radio Corp., 475 U.S. 574, 588 (1986), when an antitrust
`
`plaintiff attempts to prove the existence of a conspiracy using
`
`circumstantial evidence, that evidence must “tend[] to exclude the
`
`possibility” that the defendant acted independently. Should the
`5
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`
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`Case: 20-1045 Document: 67 Page: 18 Date Filed: 07/01/2020
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`District Court have granted Rose Acre’s motion for summary
`
`judgment or, at trial, its motion for judgment as a matter of law
`
`because DAPs could not adduce evidence that tended to exclude
`
`the possibility that Rose Acre acted independently?
`
`Rose Acre raised this issue in its motion for summary
`
`judgment (Rose Acre’s Mot. Summ. J. (ECF No. 1238); Mem. Law
`
`Supp. Rose Acre’s Mot. Summ. J. at 3-4, 9-10 (ECF No. 1242)) and
`
`its motion for judgment as a matter of law under Rule 50(a)
`
`(Appx1633-1647). The District Court denied Rose Acre’s motion for
`
`summary judgment in an opinion (Appx1108-1123) and order
`
`(ECF No. 1445) dated September 28, 2016, and issued an order
`
`dated February 5, 2020, deeming Rose Acre’s motion for judgment
`
`as a matter of law moot in light of the jury verdict (ECF No. 2130).
`
`2. Congress has exempted both
`
`labor unions and
`
`agricultural cooperatives from antitrust liability for certain
`
`conduct. Based on that congressional exemption, this Court has
`
`recognized a “good-faith exception” to antitrust liability for labor
`
`unions, where the union honestly believes its conduct is protected
`
`
`
`6
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`
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`Case: 20-1045 Document: 67 Page: 19 Date Filed: 07/01/2020
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`by the exemption. Should the District Court have recognized the
`
`same good-faith defense in this case?
`
`Rose Acre argued this point in its motion for summary
`
`judgment. (Rose Acre’s Mot. Summ. J. (ECF No. 1238); Mem. Law
`
`Supp. Rose Acre’s Mot. Summ. J. at 23-29 (ECF No. 1242).) The
`
`District Court held there is no good-faith defense under the
`
`Capper-Volstead Act. (Appx1123-1125.)
`
`STATEMENT OF RELATED CASE
`
`This action arises from an MDL that consolidated numerous
`
`complaints against Rose Acre, other egg producers, UEP, and
`
`USEM. DAPs “opted-out” of the direct purchaser certified class.
`
`Rose Acre went to trial against the class in May 2018, and the jury
`
`rendered a defense verdict in June 2018. The class took an appeal
`
`to this Court (19-1088) and Rose Acre conditionally cross-appealed
`
`(19-1188). The Court recently affirmed the jury verdict in favor of
`
`Rose Acre in a precedential opinion. See In re Processed Egg Prod.
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`Antitrust Litig., Nos. 19-1088 & 19-1188, __ F.3d __, 2020 WL
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`3407761 (3d Cir. June 22, 2020).
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`Case: 20-1045 Document: 67 Page: 20 Date Filed: 07/01/2020
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`STATEMENT OF THE CASE
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`I.
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`The Alleged Conspiracy
`DAPs are some of the largest supermarket chains in the
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`United States. They include Kroger, Albertsons, Safeway, Publix,
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`Supervalu, Hy-Vee, Great Atlantic & Pacific Tea Company
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`(“A&P”), H.E. Butt, and Walgreen.
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`(Appx1928, Appx2099,
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`Appx2191-2192.)
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`DAPs’ amended
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`complaints uniformly alleged
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`that,
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`beginning in 2000, Rose Acre, nineteen other egg producers, and
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`UEP and USEM, two egg farmer cooperatives, “engaged in an
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`overarching conspiracy . . . to reduce egg supply and artificially
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`raise the prices of eggs.” (Appx726, Appx734; see also Appx636,
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`Appx555, Appx739, Appx741, Appx907-908.) DAPs claimed that
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`this overarching, multi-faceted conspiracy included: (i) an animal
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`welfare program established by UEP, called the “Certified
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`Program,” that contained several allegedly supply-reducing
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`provisions; (ii) recommendations by UEP to undertake short-term
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`supply measures; and (iii) egg exports coordinated through USEM.
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`Case: 20-1045 Document: 67 Page: 21 Date Filed: 07/01/2020
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`(Appx727-728, Appx556, Appx637.) We describe each of the
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`components of the alleged conspiracy below.
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`A. The Certified Program
`1. Development of the Certified Program in
`response to customer requests
`UEP’s animal welfare program, known as the “Certified
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`Program,” was based on animal welfare guidelines developed by a
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`team of animal welfare scientists at the urging of, and with the
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`help and support of, several DAPs and their trade association. The
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`momentum to create the Certified Program began in the late
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`1990s, when animal rights groups, such as People for the Ethical
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`Treatment of Animals
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`(“PETA”), started demanding that
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`McDonald’s and Burger King ensure greater cage space for the
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`hens that produced the food products they sold. (Appx1949-1950.)
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`McDonald’s responded in 2000 by requiring its egg suppliers to
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`give each hen at least 72 square inches of space. (Appx1762.)
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`Burger King followed suit, requiring even more space per hen.
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`(Appx1104, Appx2066, Appx3455.)
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`PETA also demanded that the largest supermarket chains,
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`including DAPs Albertsons, Kroger, Publix, Safeway, Supervalu
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`and Winn-Dixie, commit to requiring their egg suppliers to
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`provide extra space to their egg-laying hens.
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`(Appx3413,
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`Appx3491, Appx3499, Appx3524.) PETA threatened boycotts and
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`litigation. (Id.) It also launched a well-publicized boycott and
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`public demonstrations against Safeway, called “Shameway.”
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`(Appx3524.)
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`Egg producers were also targeted. In 2000, for example, a
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`Rose Acre feed truck was fire-bombed and a pump house was
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`burned down. (Appx1873, Appx1845-1846, Appx4750.) Animal
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`rights activists also “shot out” Rose Acre’s electric transformer.
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`(Appx1846.) The FBI warned Rose Acre of other planned attacks
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`against it. (Appx1844.)
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`In response to public pressure, UEP approached Dr. Jeffrey
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`Armstrong, then head of animal science at Purdue University, to
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`“constitute and chair” the Scientific Committee on Animal
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`Welfare. (Appx2311.) The purpose of the Committee was “to look
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`at science-based animal welfare for the [egg] laying hen industry.”
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`(Id.) Dr. Armstrong selected the Committee’s other professional
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`Case: 20-1045 Document: 67 Page: 23 Date Filed: 07/01/2020
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`members.
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`(Appx2316-2320.) UEP placed no
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`limitations or
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`restrictions on the Committee’s work. (See Appx2320-2321.)
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`The Committee presented its recommendations to UEP’s
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`Producer Committee for Animal Welfare (“Producer Committee”)
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`in May and September 2000. (Appx3351-3375, Appx3384-3403.)
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`Those recommendations covered topics such as beak trimming,
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`which helps stop hens from pecking each other to death; greater
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`cage space, which reduces hen deaths and maximizes per-hen egg
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`production;
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`increased
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`feeding
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`space;
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`lower
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`ammonia
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`concentrations in hen houses; prohibiting the use of feed
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`withdrawal to force molting, which can suppress the hens’
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`immune systems; and humane transportation and slaughter of
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`spent hens. (Id.) The Producer Committee immediately adopted
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`almost
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`all
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`of
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`the
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`Scientific Advisory Committee’s
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`recommendations. (Appx1071, Appx1759-1760.)
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`Meanwhile, the supermarkets, which were concerned about
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`PETA’s public relations campaign, asked their trade organization,
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`the Food Marketing Institute (“FMI”), to “get ahead of the issue.”
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`(Appx4704, Appx5491.) FMI formed its own Animal Welfare
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`Group to achieve “consistency across the [US] retail sector” and
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`science.”
`on
`based
`guidelines
`“implement[] . . . attainable
`(Appx2092.) FMI members sought to confront the animal welfare
`issue in a “single industry approach” that would free retailers
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`from “having any company singled out specifically by activist
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`groups,” save “individual companies [from] duplicat[ing] efforts,
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`and . . . apply to the producer community.” (Appx2272.)
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`FMI approached UEP in 2001 to understand UEP’s plans for
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`developing animal welfare guidelines for egg-laying hens. (See
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`Appx2271.) FMI pushed UEP to implement the Certified Program
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`even faster than UEP had originally planned. To minimize
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`industry disruption, UEP had intended to phase-in its guidelines
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`over ten to twelve years. FMI rejected that period as too lengthy,
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`and the parties compromised at six years. (Appx1528, Appx1803.)
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`FMI also made clear that it expected UEP to have an
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`independent third-party audit as part of the Certified Program,
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`because FMI’s expert panel believed
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`“the only effective
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`welfare . . . standards are those that have a quantitative scoring
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`system and monitoring.” (Appx3448.) The audits were also
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`important to PETA. (Appx3501.) As a result, UEP required each
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`company participating in the Certified Program to “be examined
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`annually by independent auditors.” (Appx3599.)
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`2. The implementation and evolution of the
`Certified Program
`In 2002, UEP’s Producer Committee published the first
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`official Animal Welfare Guidelines, a set of rules to which a
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`producer must agree in return for the right to license the UEP
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`Certified trademark and place it on its egg