Potato growers, groups maintain innocence in antitrust cases - The Packer

Potato growers, groups maintain innocence in antitrust cases

04/25/2013 01:45:00 PM
Coral Beach

For additional details on the lawsuit filed by Associated Wholesale Grocers, please see "UPDATED: AWG files antitrust case against potato groups"

Associated Wholesale Grocers recently joined the antitrust price-fixing fray in federal court that pits potato purchasers against potato companies and cooperatives.

In a lawsuit filed in mid-April in federal court in Kansas, Associated Wholesale Grocers, Kansas City, Kan., claims the United Potato Growers of America, United Potato state groups and many potato grower-shippers, have been illegally setting potato prices since 2004.

The AWG suit claims the potato groups are not protected by the Capper-Volstead Act of 1922, which allows agricultural producers to form cooperatives to stabilize markets and prices.

“Defendants suggested that they should ‘study’ the OPEC model and their organization was referred to as the ‘OPEC of Potatoes,’ ” the AWG complaint states.

“As a direct and proximate result of defendants’ conduct, plaintiff directly purchased potatoes at prices higher than it would have paid and on terms that are less favorable than would have been available in a competitive market,” according to the AWG lawsuit.

Almost identical claims were made in federal cases against the potato groups and companies in 2010. Those plaintiffs and AWG don’t state specific dollar amounts. They merely state that they want triple the amount that they allegedly overpaid.

AWG supplies more than 2,000 retailers, according to the complaint, which contends the defendants violated the federal Sherman Act (antitrust) and the Kansas Restraint of Trade Act.

Officers from United Potato Growers of America, Salt Lake City, maintain the group was set up within the law and operates legally.

“We have always acted openly and within the bounds of the law. We are confident in our legal position and look forward to a favorable outcome in court,” said Jerry Wright, president and chief executive officer of UPGA.

Judge partially denied Capper-Volstead defense

Capper-Volstead provisions are key to the 2010 cases. Those cases, filed in California, Wisconsin and Idaho, are now consolidated. The potato defendants requested antitrust claims in the cases be dismissed because they contend their activities are protected under Capper-Volstead.

Chief U.S. District Court Judge B. Lynn Winmill in Idaho denied dismissal on those grounds in December 2011. The judge’s order states Capper-Volstead does not “immunize cooperatives and their members who seek to collectively implement production controls in order to raise prices.”

Plaintiffs in the consolidated cases want a jury trial, as does AWG, but Winmill has not yet set a trial date. Winmill has, however, set a long-term schedule for pre-trial activities. Both sides have until March 2014 to complete the discovery phase, which the judge’s order said is crucial to determining whether Capper-Volstead applies.

Chief U.S. District Court Judge B. Lynn Winmill, IdahoWinmill“Resolving these allegations … requires a fact intensive inquiry which should be completed by the court only after proper discovery has been conducted,” Winmill wrote.

“… the Supreme Court has made clear that the exemption only applies if all participants in the organization qualify under the Act.”

It is unknown whether the new AWG case will be consolidated into the cases pending before Winmill. Attorneys representing AWG did not respond to questions about why the company filed a separate suit instead of joining the class action case already in progress.

Common complaints

AWG’s lawsuit is very similar to the 2010 cases in that it repeatedly names Albert Wada of Wada Farms. The cases detail his work in the mid-2000s to bring together potato growers under Capper-Volstead to agree on prices and practices to stabilize their market. Wada was one of 23 founders of United Fresh Potato Growers of Idaho.

Other individuals who AWG alleges helped Wada form what became the United Potato Growers of Idaho and who are named as defendants are Michael Cranney, owner of Cranney Farms, Oakley, Idaho; Lance Funk, chief executive officer for Funk Farms, American Falls, Idaho; and Ronald D. Offutt Jr., chairman and founder of R.D. Offutt Co., Fargo, N.D.

A statement by Wada Farms on April 24 said the company operates within the law.

“Since 1943 our goal has always been to put quality potatoes on the American table with integrity and respect,” the statement said. “We have consistently worked within the boundaries of the law to keep farming healthy and Americans happy for 70 years. That’s a real success story, and one we always look forward to telling.”

Individuals named as defendants in the consolidated cases, include Albert Wada, Lance Funk, Michael Cranney and Kim Wahlen. Companies named as defendants include Larsen Farms, Michael Cranney Farms, Rigby Produce, Snake River Farms, Cornelison Farms, Driscoll Potatoes Inc., KCW Farms Inc., Raybould Brothers Farms and Kim Whalen Farms, all in Idaho.

The AWG case and the consolidated cases contend the potato growers, shippers and processors decided to fix prices and control plantings and then organized what they thought would be legal cooperatives to achieve those goals.

After organizing the original United Potato group in Idaho in 2004, the defendants decreased fresh potato plantings by 70,000 acres in 2005, according to the lawsuits. The suits state that the defendants’ actions by 2005-06 had increased the price of fresh potatoes by 48%.

The complaints quote the 2011 annual report from United Potato Growers of America as stating the “total shipments of fresh potatoes had fallen from 107.37 million cwt. in 2004-05 to 95.36 million cwt. in 2010-11. Correspondingly, the growers’ average return had more than tripled, rising from $3.11 per cwt. in 2004-05 to $11.42 per cwt. in 2010-11.”

The plaintiffs contend the potato growers and companies are not protected by the Capper-Volstead Act because it does not apply to processors or others that do not actually produce agricultural products.

“As an initial matter, Capper-Volstead does not protect pre-planting acreage reductions — one of the central agreements at issue in this case,” the complaint also states.

Judge Winmill somewhat agreed with that legal philosophy in his order of Dec. 2, 2011.

“Plaintiffs contend that the list of activities protected by the Capper-Volstead Act excludes acreage reductions, production restrictions, or collusive crop planning. The court agrees,” Winmill wrote.

“… the language of the Capper-Volstead Act itself indicates that it does not apply to production limitations. … under the plain language of the statute, coordinating and reducing acreage for planting is not allowed.”



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