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NEW AMSTERDAM CHEESE CORP. v. KRAFTCO CORP.

August 13, 1973

The New Amsterdam Cheese Corp., Dynamic Food Distributors, Inc., A. Rubin, Inc., Marzin Dairy Foods, Inc., East County Foods Corp., and Merchants Food Distributors Co-Op, Inc.
v.
Kraftco Corp.


Duffy, D.J.


The opinion of the court was delivered by: DUFFY

DUFFY, D.J.

This case was placed on the Ready Reserve Calendar, all discovery and inspection having been completed and the parties having agreed to a Pretrial Order. The defendant now moves for summary judgment on the basis of the stipulation of facts contained in the Pretrial Order.

 This action is for damages for alleged violations by the defendant of the anti-trust laws, more particularly Section 1 of the Sherman Antitrust Act (15 U.S.C.A. § 1); Section 3 of the Clayton Act (15 U.S.C.A. § 14); and Section 2(e) of the Clayton Act, as amended by the Robinson-Patman Act (15 U.S.C.A. § 13(e)).

 The defendant Kraftco Corporation is a Delaware corporation engaged in the purchase, manufacture, processing and distribution of dairy and other food products in the United States and foreign countries. It operates through various unincorporated divisions. Two of these divisions are involved in this action: the Breakstone Sugar Creek Foods Division and the Kraft Foods Division, both of which are engaged in the manufacture and distribution of various processed dairy products, including cheeses. Breakstone distributes mostly the soft white cheeses while Kraft distributes the hard and yellow cheeses. The only point in the spectrum of processed dairy foods where the two divisions "compete" is with cream cheese; Kraft selling "Philadelphia Brand Cream Cheese", while Breakstone distributes cream cheese under the Breakstone name.

 The plaintiff Merchants Food Distributors Co-op, Inc. (hereinafter referred to as "Merchants") is a New York corporation organized under the Cooperative Corporations Law. All of the other plaintiffs are New York corporations except East County Foods Co., which is a partnership, and all are shareholders and members of Merchants. Merchants basically runs a warehousing facility for dairy and other food products at the Bronx Terminal Market. The other plaintiffs distribute the foodstuffs from Merchants to various wholesale and retail outlets in New York City and a small part of Westchester County.

 The plaintiffs not only distribute the products of the defendant but also competing brands, including Borden's, Inc., which has a significant part of the relevant market.

 Prior to the fall of 1964, the plaintiffs distributed both the Breakstone and Kraft lines of products sold by the defendant. At about that time, Lawrence Becker, then President of the Breakstone Division of defendant Kraftco, told plaintiffs that thereafter they would be permitted to deal in either the products of Breakstone or of the Kraft Division, but not both. In December 1964, the plaintiffs opted to handle the Breakstone line of goods and so advised the Kraft Division that they were no longer handling the Kraft line. Since that time plaintiffs have sought to purchase products from the Kraft Division of the defendant but such offers to purchase have been rejected.

 The motive behind Becker's ultimatum to the plaintiff is in sharp dispute. The plaintiffs assert that its purpose was to put them out of business, while the defendant maintains that its purpose was to allow the plaintiffs to concentrate more fully on one product line. However, the defendant, for purposes of this motion, claims that the motive or intent, no matter how heinous it may have been, has no bearing on the resolution of this case.

 According to the Pretrial Order, under the caption "Plaintiffs' Contentions", the plaintiffs indicate that they will:

 
". . . introduce evidence to support their argument that the discontinuance of the handling of the Kraft line by them was brought about by undue pressures exerted upon them by the President of the Breakstone Division. Evidence will be introduced to prove that this forced discontinuance of the Kraft line was a result of a conspiracy that was agreed upon between the officials of the Breakstone Division. The plaintiffs withdraw their allegations that conspiracies existed between the Breakstone Division and the Kraft Division or between the Breakstone Division and the Kraftco Corporation. The plaintiffs will introduce evidence to prove that the practices of the defendants (sic) in the forced discontinuance of the Kraft line, followed up by the continued refusal to deal with them by Kraft, amounted to such discrimination as to cause them severe loss of business profits and business good will."

 The defendant bases its motion for summary judgment on the stipulated facts and particularly on the above paragraph of the Pretrial Order.

 The first count of the Complaint alleging violation of Section 1 of the Sherman Act must fail, the defendant maintains, because there is not alleged the concert of action between or among two or more persons or entities capable of entering an unlawful "contract, combination . . . or conspiracy" prohibited by that section. The defendant contends that unnamed *fn1" "officials of the Breakstone Division" acting in their corporate capacity cannot be said to have unlawfully acted in concert within the meaning of Section 1. I agree.

 As Judge Gurfein of this Court stated in GAF Corp. v. Circle Floor Co., 329 F. Supp. 823, 827 (1971) aff'd, 463 F.2d 752 (2d Cir. 1972):

 
"A statutory conspiracy laid under Section 1 of the Sherman Act requires the participation of at least two 'independent business entities . . .' That is the very nature of the conspiracy charge in the context of the Sherman Act -- a concert of action between persons in trade."

 Agents of the same corporation cannot be considered "independent business entities" and therefore are not capable of ...


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