Case 2:19-cv-00463-RAJ-LRL Document 135 Filed 05/14/20 Page 1 of 8 PageID# 1378
`Case 2:19-cv-00463-RAJ-LRL Document 135 Filed 05/14/20 Page 1 of 8 PageID# 1378
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE EASTERN DISTRICT OF VIRGINIA
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`Norfolk Division
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`CLERK, U.S. DISTREC
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`nonioLK. _.__ i T
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`6617a
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`D-vJ
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`D&M FARMS, MARK HASTY, and
`DUSTIN LAND, individually and on behalf
`of all others similarly situated;
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`Plaintiffs,
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`v.
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`CIVIL ACTION N0. 2:19-cv-463
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`BIRDSONG CORPORATION,
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`and
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`GOLDEN PEANUT COMPANY, LLC,
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`Defendants.
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`MEMORANDUM OPINION AND ORDER
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`Before the Court are Birdsong Corporation and Golden Peanut Company’s (collectively
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`“Defendants”) Motions to Dismiss. ECF Nos. 47—50; see also ECF No.
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`l (Plaintiffs’ Complaint),
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`ECF Nos. 65, 67 (Defendants' requests for a hearing on their Motions to Dismiss). After
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`reviewing the relevant filings, the Court finds that a hearing on the Defendants’ Motions to
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`Dismiss is not necessary. Accordingly, Defendants’ requests for a hearing on their Motions to
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`Dismiss are DENIED. Further, Defendants’ Motions to Dismiss are DENIED.
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`I. FACTUAL AND PROCEDURAL HISTORY
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`The Plaintiffs in the instant matter are a group of peanut farmers who sell raw, harvested
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`Runner peanuts to the Defendants to be processed and sold to food companies or other
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`manufacturers. ECF No.
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`l at 1. Plaintiffs filed their Complaint on September 5, 2019. 1d. The
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`Complaint accuses Defendants using their 80—90% market share in the peanut selling industry to
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`facilitate a price fixing conspiracy to depress the price of Runner peanuts. Id. Plaintiffs seek a
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`single claim for relief on behalf of a nationwide class under Section 1 of the Sherman Antitrust
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`Act. Id. at 33.
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`Defendants Birdsong Corporation and Golden Peanut Company filed separate Motions to
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`Dismiss on October 21, 2019. ECF Nos. 4?—50. Plaintiffs received leave to file a single omnibus
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`memorandum of law in response to Defendants“ Motions to Dismiss on November 6, 2019. ECF
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`No. 58. Plaintiffs filed their response in opposition to Defendants’ Motions to Dismiss on
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`November 1 l, 2019. ECF N0. 59. Defendants Birdsong Corporation and Golden Peanut Company
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`replied separately to Plaintiffs’ response and requested a hearing on the Motions to Dismiss on
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`November 19, 2019. ECF Nos. 64—67. The Court finds that a hearing is unnecessary to resolve
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`Defendants' Motions to Dismiss. Accordingly, the matter is ripe for disposition.
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`II. LEGAL STANDARD
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`Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of actions that fail to state
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`a claim upon which relief can be granted. The United States Supreme Court (“Supreme Court")
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`has stated that in order “[t]o survive a motion to dismiss,'a complaint must contain sufficient
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`factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.” Ashcroft v.
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`Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Ail. Corp. v. Twombly, 550 U.S. 544, 570 (200'?)).
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`Specifically, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows
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`the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."
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`Iqbal, 556 U.S. at 678. Moreover, at the motion to dismiss stage, the court is bound to accept all
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`of the factual allegations in the complaint as true, but is “not bound to accept as true a legal
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`conclusion couched as a factual allegation." Id. However, “[t]hreadbare recitals of the elements of
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`a cause of action, supported by mere conclusory statements, do not suffice." Id. Assessing the
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`claim is a “context-specific task that requires the reviewing court to draw on its judicial experience
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`and common sense.” Id. at 679.
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`A. Claims Under Section 1 of the Sherman Act
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`III. DISCUSSION
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`To state a claim under Section 1 of the Sherman Act, plaintiffs must allege facts supporting
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`the following: (1) a contract, combination, or conSpiracy; (2) that imposed an unreasonable
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`restraint on trade. Dickson v. Microsofi Corp, 309 F.3d 193, 202 (4th Cir. 2002) citing 0ksanen
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`v. Page Mem '1 Hosp, 945 F.2d 696, 702 (4th Cir. 1991) (en banc). Concerted action to set prices,
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`or price fixing, has been per se illegal for over a century and is prohibited by Section 1 of the
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`Sherman Act. See Monsanto Co. v. Spray-Rite Serv. Corp, 465 U.S. 752, 761 (1984). Plaintiffs‘
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`Complaint advances a single claim for relief against the Defendants, alleging that they engaged in
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`a conspiracy to restrain trade by fixing prices for Runner peanuts in the United States, in violation
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`of Section 1 of the Sherman Act. ECF No. l at W 116—21; see 15 U.S.C. § 1. Because price fixing
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`constitutes a per se violation of the Sherman Act, the only question is whether the Complaint
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`contains sufficient facts to support the inference that a price-fixing conspiracy existed between the
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`Defendants.
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`In general, pleading a Section 1 conspiracy requires enough factual matter so that an
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`agreement to violate the Sherman Act may be plausibly inferred, rather than a mere conceivable
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`possibility. Beii Ali. Corp. v. Twombly, 550 U.S. 544, 556, 570 (2007). Moreover, district courts
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`retain the power to insist on some specificity in pleading before allowing an antitrust complaint to
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`proceed. Id. at 558 quotingAssociaied Gen. Contractors ofCal, Inc. v. Carpenters, 459 U.S. 519,
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`528 n. l? (1983). Parallel conduct, or similar actions undertaken by entities in related industries
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`during the same time period, is not sufficient to support an allegation of an unlawful conspiracy.
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`Twombly, 550 US. at 556-57. Such parallel conduct may be a product of the defendants’ lawful
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`and independent goals, which is not suggestive of unlawful activity without some other indication
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`of an antitrust conspiracy. Id. Instead, such an allegation must be placed in a context that raises the
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`plausible suggestion of an agreement to engage in unlawful activity before the parallel conduct by
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`the relevant entities occurred. Id. at 557. As a practical matter, a complaint must contain enough
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`factual material to form the “reasonably founded hope that the discovery process will reveal
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`relevant evidence" of the alleged antitrust conspiracy. Id. at 520.
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`B. Adequacy of the Complaint
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`1. Sufiiciency ofthe Factual Allegations Supporting a Section 1 Conspiracy in the Complaint
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`Defendants argue that the price of Runner peanuts from 2014 to 2018 was a result of natural
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`market forces and subsidies in the 2014 Farm Bill. See generally ECF Nos. 48, 50 (discussing
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`Defendants‘ views on the forces impacting the Runner peanut market). Defendants further argue
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`that their exhibits may be considered because the underlying facts are derived from official
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`government reports and statistics and are discussed, quoted, and copied in the Complaint. See e. g.
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`ECF No. 50 at 4 tn. 4 (discussing the Plaintiffs’ utilization of National Agricultural Statistics
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`Service (“NASS”) data in the Complaint to support Defendant Golden Peanut's factual contentions
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`on Runner peanut prices); ECF No. 48 at 19 (referencing agency fact sheets and the 2014 Farm
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`Bill legislative history to support Defendant Birdsong’s factual counterargument regarding Runner
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`peanut prices); see also id. at Ex. A (attaching an option contract for Defendant Birdsong to
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`purchase Runner peanuts from Plaintiff D&M Farms in 2019). These exhibits and references
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`contain material that purportedly supports the “obvious alternative explanation" for the depressed
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`prices of Runner peanuts during the time of the alleged conspiracy. See ECF No. 48 at 18-20
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`(discussing the “fundamentals ofoversupply” and the growing incentives created by the 2014 Farm
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`Bill); ECF No. 50 at 13—14 (same); see also Twombly, 550 U.S. at 557 (finding dismissal of
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`antitrust claims to be appropriate when an obvious alternative explanation for the defendants’
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`conduct can be identified). The sum of Defendants’ contentions is that once their preferred
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`interpretation of the economic data (including the material not directly associated with the
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`Complaint) is applied, it will be obvious that the low prices of Runner peanuts from 2014 to 2018
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`were a response to natural market forces and the subsidy-based incentives created by the 2014
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`Farm Bill, not the price fixing conspiracy. ECF No. 48 at 8—13; ECF No. 50 at 13—14.
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`In contrast, the Plaintiffs accuse the Defendants of manipulating and coordinating their
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`inventory reports to overstate the supply of Runner peanuts, making the NASS price and inventory
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`data unreliably distorted by the alleged conspiracy between Birdsong and Golden Peanut. ECF No.
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`1 at1|1l 84—9 1. Plaintiffs also accuse Defendants of using the trade associations as their conduit for
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`facilitating the alleged price fixing conspiracy. Id. at 11'“ 63—?1. Clearly, the parties do not agree on
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`the efficacy of the economic and peanut inventory data and the Defendants’ role in influencing
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`that data as a factual matter. In evaluating the sufficiency of the Complaint, the Court will not
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`consider any material outside its scope in response to Defendants’ Motions to Dismiss. See supra
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`Part II (discussing pleading standards); ECF No. 48, Ex. 1—3; ECF No. 50, Ex. 1—4; see also ECF
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`No. 59 at 27—28 (listing interpretive material outside the Complaint submitted by the Defendants,
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`including hyperlinks within their Motions to Dismiss). In other words, the Court’s examination of
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`the Complaint is limited to the sufficiency of the factual allegations supporting the inference of a
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`price fixing conspiracy, not the effectiveness of the alleged conspiracy, the price of Runner
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`peanuts, or the parties‘ factual interpretations of peanut price and inventory data considered alone.
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`Instead, the Court will examine the totality of the factual allegations the Complaint presents in
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`order to make a determination on its sufficiency.
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`The Court finds that the Complaint contains sufficient factual allegations to state a claim
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`under 15 U.S.C. § 1. Taken in context,
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`the Complaint alleges that Defendants used their
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`supermajority market share and control over the peanut shelling trade associations to overstate
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`Runner peanut inventory data that was submitted to the USDA and to coordinate the terms of the
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`Option contracts offered to farmers. See ECF No. l at 1H] 48, 63-71, 86—91. The Complaint points
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`out that the Defendants had numerous opportunities to make such an arrangement by virtue of
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`geographic proximity and the social and professional associations of the Defendants’ leadership
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`structure. Id. at {[1] 61—71. Critically, the Complaint alleges that Defendants released identical
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`shelling contract price offers on the same day, year after year to take advantage of the Plaintiffs’
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`need to offload their harvested peanuts in the spring of each growing cycle. 1d. at 11 89.
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`Plaintiffs have not simply alleged that the prices of runner Peanuts were depressed because
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`a conspiracy between the Defendants existed or that the Defendants engaged in parallel conduct.
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`Instead,
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`the Complaint outlines facts that support the plausible inference of a price fixing
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`conspiracy by (1) providing a motive of the stabilization of Runner peanut prices, (2) connecting
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`Defendants‘ simultaneously issued price offers to the broader context of the Runner peanut market,
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`and (3) alleging efforts by the Defendants to coordinate price offers and conceal their actual peanut
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`inventory using peanut shelling trade associations. In Sum, while none of the Complaint’s
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`allegations are sufficient to state a Section 1 claim when considered in isolation, the totality of the
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`factual assertions within the Complaint give rise to the plausible inference of a price fixing
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`conspiracy. Additionally,
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`the Runner peanut price and inventory data Plaintiffs offer in the
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`Complaint to support
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`their Section 1 claim is not definitively contradicted by an “obvious
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`alternative explanation” for the depressed price of Runner peanuts.
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`In fact, Plaintiffs are
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`challenging the accuracy of much of the data that illuminates the dispute between the parties. See
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`eg. ECF No. 59 at 15—16 (alleging that Defendants controlled Runner peanut market data,
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`including pricing and inventory numbers reported to the USDA). Accordingly, Plaintiffs’ pleading
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`is sufficient and Defendants‘ Motions to Dismiss are denied.
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`2. The Statute ofLimitations of15 US. C. 59 15b and Active Concealment
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`Defendants further contend that Plaintiffs' claims are undercut by the limitations periods
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`for Title 15 antitrust actions, while Plaintiffs argue that Defendants concealed their antitrust
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`collusion until after Hurricane Michael in 2018. See 15 U.S.C. § 15b; ECF No.
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`l at1|1| 86, 107—
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`115 (Plaintiff's allegations of Defendants’ active concealment, including manipulation of peanut
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`inventory reporting to the USDA); ECF No. 48 at 26—30 (Defendant Birdsong’s discussion of the
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`limitations period); ECF No. 50 at 20—24 (Defendant Golden Peanut’s discussion of the limitations
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`period).
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`To toll the statute of limitations, a claimant must establish the following: (1) the party
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`pleading the statute fraudulently concealed facts which are the basis of the claim; (2) the claimant
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`failed to discover those facts within the statutory period; and (3) the claimant exercised due
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`diligence. Pocahontas Supreme Coat Co, Inc. v. Bethlehem Steel Corp, 828 F.2d 211, 218 (4th
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`Cir. 1987) citing Weinberger v. Retail Credit Ca, 498 F.2d 552, 555 (4th Cir. 1974). Although
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`price fixing is not inevitably deceptive or concealing, the statute of limitations may be tolled if
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`affirmative acts to conceal are contained within any antitrust conspiracy. See generally
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`Supermarket of Martinton, Inc. v. Meadow Gold Dairies, Inc, 71 F.3d 119 (4th Cir. 1995)
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`(adopting the intermediate, affirmative acts standard for fraudulent concealment for all federal
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`statutes, including price fixing conspiracies and other antitrust violations).
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`Here, Plaintiffs allege that Defendants underreported their inventory of Runner peanuts to
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`the USDA beginning in 2014, which obscured the alleged price fixing by producing flawed peanut
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`price data that was endorsed by a government agency. ECF No.
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`I at fill] 42, 54. The Plaintiffs then
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`relied on that flawed USDA data in their exercise of due diligence in evaluating the runner Peanut
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`market and the prices that could be commanded from Defendants. Id. at 111] 48, 54, 55. The
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`Complaint proffers that the alleged price fixing was only discovered because of the anticipated
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`shortage of Runner peanuts that did not occur in the aftermath of Hurricane Michael in 2018. 1d.
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`at 111] 111—113. These allegations satisfy the requirements to toll the statute of limitations by
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`alleging that Defendants concealed their price fixing by underreporting their inventory to the
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`USDA, frustrating any attempts at due diligence by the Plaintiffs from 2014 to 2018. Therefore,
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`the Complaint contains enough factual material to toll the limitations period.
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`IV. CONCLUSION
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`For the foregoing reasons, Defendants’ requests for a hearing on their Motions to Dismiss
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`are DENIED. Further, Defendants’ Motions to Dismiss are DENIED.
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`The Court DIRECTS the Clerk to provide a copy ofthis Order to the parties.
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`IT IS SO ORDERED.
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`Norfolk, Virginia
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`May[5, 2020
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`Raymondnlacéson
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`United States District Judge
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