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RED APPLE SUPERMARKETS, INC. v. DELTOWN FOODS

September 27, 1976

RED APPLE SUPERMARKETS, INC., Plaintiff,
v.
DELTOWN FOODS, INC. and KRAFTCO CORP., Defendants



The opinion of the court was delivered by: CONNER

CONNER, D.J.:

 Plaintiff, Red Apple Supermarkets, Inc., is a retail supermarket chain with stores in Queens and New York Counties in the State of New York. It has brought this action against defendants Kraftco Corporation and Deltown Foods, Inc., a licensee of Kraftco authorized to manufacture and distribute Light n' Lively low-fat milk in the New York City area, and has made a motion for class certification. Defendants have made motions to dismiss both counts of the Complaint. Because it is more readily disposable, we turn first to Count II.

 I.

 Count II of the Complaint charges defendants with tying arrangements in violation of Section 3 of the Clayton Act, 15 U.S.C. § 14. Defendant Deltown Foods, Inc., has moved, pursuant to Rule 12(b)(6) F.R.Civ.P., to dismiss this count for failure to state a claim upon which relief can be granted. Deltown asserts, and plaintiff does not deny, that an officer of plaintiff has expressed, in a deposition, plaintiff's intention to drop Count II. In any event, plaintiff has not opposed the motion as to that count. The motion to dismiss Count II is therefore granted.

 II.

 In Count I, defendants are charged with price discrimination in violation of Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Anti-Discrimination Act, 15 U.S.C. § 13(a). This is a claim of price discrimination in "secondary-line competition," i.e., an interference with competition between customers of defendant sellers. Both defendants have moved, pursuant to Rule 12(b)(1) F.R.Civ.P., to dismiss this count for lack of subject matter jurisdiction, on the ground that the challenged sales were not made "in" interstate commerce within the meaning of the Robinson-Patman Anti-Discrimination Act ("the Act").

 On a motion to dismiss, the factual allegations of the Complaint must be accepted as true, Cruz v. Beto, 405 U.S. 319, 31 L. Ed. 2d 263, 92 S. Ct. 1079 (1972), and they "should be construed favorably to the pleader." Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974). Thus, dismissal of this claim would be unwarranted if any reasonable interpretation of the facts alleged would support plaintiff's claim for relief. Kurzweg v. Hotel St. Regis Corp., 309 F.2d 746 (2d Cir. 1962). Examination of the instant claim reveals that it does not pass muster under even this very liberal test.

 Section 2(a) of the Act provides, in pertinent part:

 
"It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States * * * and where the effect of such discrimination may be substantially to lessen competition * * * or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them * * *."

 Thus, to maintain an action for price discrimination in secondary line competition under the Act, and thereby invoke this Court's federal question and anti-trust jurisdiction under 28 U.S.C. §§ 1331, 1337, a plaintiff must allege that

 
1. defendants are engaged in "interstate commerce";
 
2. defendants have "discriminate[d] in price" in a manner proscribed by the Act; and
 
3. one or more of the "purchases involved in such discrimination are in [interstate] commerce" within the meaning of the Act.

 Plaintiff here has clearly made the first two of these allegations. Both defendants have admitted allegation (1) in their answers, and allegation (2) must be accepted as true for purposes of this motion. As for requirement (3), the Complaint simply alleges, in general and conclusory fashion, that "price discriminatory sales made by Deltown to members of the class were made in interstate commerce and within this District." (Compl. para. 11). Plaintiff's memorandum in opposition to the present motion states, " for purposes of this motion, we assume that the Light n' Lively milk purchased by plaintiff and its competitors is distributed within the State of New York." Since plaintiff is unable to demonstrate, or even assert, the existence of an actual purchase that crosses state lines, it attempts to satisfy requirement (3) by employing a "stream of commerce" theory. *fn1" It bases this theory upon facts that are not alleged in the Complaint, namely, that some of the raw, whole milk used in Light n' Lively moved in a "continuous stream" from cows on Pennsylvania farms through defendants' New York processing plants, to plaintiff's retail stores in New York. Plaintiff argues that early cases such as Olympia Food Market, Inc. v. Sheffield Farms Co., Inc., 1955 Trade Cas. para. 68,064 (S.D.N.Y. 1955); Foremost Dairies, Inc. v. Federal Trade Commission, 348 ...


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