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Seventh Circuit Affirms in Favor of Cheese Maker in Milk Price Fixing Case

This past Tuesday, the Seventh Circuit upheld the decision of Judge Robert M. Dow Jr. of the U.S. District Court for the Northern District of Illinois granting cheese manufacturer Schreiber Foods Inc.’s motion for summary judgment in an antitrust class action.  The Seventh Circuit agreed with the District Court that the plaintiffs, led by a cheese distributor and a dairy farmer and milk futures trader, lacked evidence to support their claims that Schreiber conspired with Dairy Farmers of America, a dairy marketing cooperative, to increase the price of raw milk.

The plaintiffs relied on Schreiber’s communications with DFA to support their claims, but the Seventh Circuit held that those communications were insufficient to prove a conspiracy.  The Court stated in its opinion, “Although the two companies were competitors, DFA was also one of Schreiber’s main suppliers, and Schreiber was one of DFA’s largest customers, giving them a number of legitimate reasons to communicate with each other.”  The Court also noted that the plaintiffs failed to identify a single communication that suggested a meeting of the minds to fix prices.

Once the Court determined that evidence of the alleged agreement was ambiguous, it turned to examining whether any evidence could exclude the possibility that Schreiber was protecting its independent interests.  In that regard, the plaintiffs argued that a conspiracy existed based on Schreiber’s “unusual” purchases made on the Chicago Mercantile Exchange.  Schreiber purchased all of the barrel cheese sold through the exchange while DFA purchased all of the block cheese over the period of a month in the summer of 2004.  The plaintiffs asserted that Schreiber’s and DFA’s parallel purchases caused cheese prices, and as a result milk futures, to jump and then subsequently fall by record amounts.  However, the Seventh Circuit found it plausible that Schreiber was merely protecting its own interests through those purchases by controlling the price spread between block and barrel cheeses, both of which Schreiber produces.  Thus, the Court concluded that the plaintiffs’ claims under Section 1 of the Sherman Act and California’s Cartwright Act failed.