produced. The testing employees submit information gathered to the State DHIAs. The State DHIAs in turn forward the information to dairy records processing centers ("DRPCs") that are recognized by defendant Nat'l DHIA and operated in accordance with its rules and regulations. Furthermore, the milk samples collected by the State DHIA supervisors are submitted to laboratories certified by Nat'l DHIA and operated under its rules and regulations. These laboratories test and analyze the milk and report the results to the applicable DRPC. The DRPCs then generate reports concerning the information and milk samples submitted.
The State DHIA-generated records are known as the "official" records and are used by farmer members for herd management and to make decisions concerning cost effective herd improvement. In addition, because the value of a dairy animal is determined by its productivity, the State DHIA-generated records are relied upon by third parties, such as artificial insemination companies ("IAs") to determine the value of dairy animals and their reproductive products. Given this fact, it is essential that the "official" information reported by the State DHIAs be as accurate as possible. Defendants have adopted and implemented a wide range of controls designed to assure that the milk production records furnished through them have been generated without fraud, mistake, or any other circumstance that would render their reports inaccurate and unfairly affect the value of a member's dairy animals. One of the many things that State DHIAs have done to help assure the accuracy of the information in the reports has been to rely exclusively on their own employees to visit member farms and collect raw data that is used to make the DHIA record on each cow submitted for test.
Plaintiffs Agritronics Corporation and Farm Dairy Records are private, for-profit corporations that recently have entered what they describe as "the milk testing and farm dairy record-keeping business." On January 19, 1994, plaintiffs filed the present action in this Court complaining that defendants "refused plaintiffs both the opportunity to provide DHIA services and full voting membership in National DHIA" and "refused to permit anyone other than their employees . . . to perform dairy records processing services that result in the generation of 'official' DHIA milk production records." Plaintiffs complain that, as a result, they are not able to provide records for existing and potential clients that have the same market acceptance as the records generated by defendants.
Plaintiffs assert four distinct legal theories upon which they claim a right to relief. In Count I of their Complaint, plaintiffs allege that defendants' conduct constitutes a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. In Count II, plaintiffs assert that defendants' conduct constitutes either a conspiracy to monopolize, an attempt to monopolize, or outright monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C § 2. In Count III of the Complaint, plaintiffs claim that defendants have violated the provisions of the Donnelly Act, N.Y. General Business Law § 340.1. Finally, in Count IV, plaintiffs posit that defendants' alleged activities amount to "tortious interference with prospective business advantage" under the common law of the State of New York. Plaintiffs seek treble damages, injunctive relief, attorneys' fees and costs.
Four defendants, Nat'l DHIA, Ohio DHIC, Vt DHIA, and NE DHIA, now move for summary judgment pursuant to Fed. R. Civ. P. 56, alleging that (1) defendants are immune from antitrust liability for their participation in the NCDHIP because the program is authorized by federal law; (2) defendants are immune from liability here under the Noerr-Pennington doctrine; (3) defendants are immune from liability under the "state action" doctrine; (4) defendants are immune from liability under the Capper-Volstead Act because they are covered by the "agricultural exemptions;" (5) defendant Nat'l DHIA is immune from liability under the Donnelly Act; and (6) defendants have not engaged in activity that violates any antitrust laws. Plaintiffs cross-move for summary judgement in regard to several of defendants' affirmative defenses and in regard to their Sherman Act claims.
A. SUMMARY JUDGMENT STANDARDS
Rule 56(c) provides that the court may grant summary judgment where there are no genuine issues of material fact for trial. Fed.R.Civ.P. 56(c). If there are no genuine issues, the movant is entitled to judgment as a matter of law. An issue is genuine if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Thus the moving party must establish that there is no genuine issue of material fact remaining for trial, as any doubt as to the existence of a genuine issue for trial is to be resolved in favor of the non-moving party. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970). See also Lopez v. S.B. Thomas, Inc., 831 F.2d 1184, 1187 (2d Cir. 1987) (the court must view the evidence in light most favorable to the party opposing the motion).
When the movant meets this standard, the opposing party must present sufficient facts to demonstrate that some genuine issues of material fact still exist in order to defeat the movant's motion for summary judgment. The non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts;" he must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). In the context of antitrust litigation "the non-moving party must set forth facts that tend to preclude an inference of permissible conduct." Id. at 587-88; Capital Imaging Assocs., P.C. v. Mohawk Valley Medical Assocs., Inc., 996 F.2d 537, 542 (2d Cir.), cert. denied, 126 L. Ed. 2d 337, 114 S. Ct. 388 (1993).
Several courts have noted that summary disposition of antitrust cases is difficult because of their inherent factual complexity, and because motive and intent are paramount considerations. See, e.g., Poller v. Columbia Broadcasting Sys., Inc., 368 U.S. 464, 473, 7 L. Ed. 2d 458, 82 S. Ct. 486 (1962); Hayden Publishing Co. v. Cox Broadcasting Corp., 730 F.2d 64, 68 (2d Cir. 1984). However, complexity does not mean that summary disposition is thereby precluded or even disfavored in antitrust law. Capital Imaging, 996 F.2d at 541. Rather, summary judgment may be particularly important in antitrust cases to prevent lengthy and drawn-out litigation that has a chilling effect on competitive market forces. Id. The present motions are now considered in light of these standards.
B. DEFENSES AGAINST MONOPOLY LIABILITY
1. Federal Law Immunity
Defendants note that 7 U.S.C. § 3318 expressly authorizes the United States Department of Agriculture ("USDA") "to enter into cooperative agreements with governmental and private entities to further its research, extension, and teaching programs in food and agricultural sciences." (Defs' Reply Mem. Supp. Summ. J. at 20-21.) Defendants also claim that NCDHIP has in fact been implemented by a cooperative agreement between the USDA, Nat'l DHIA, and the Cooperative Extension Service in each state. As a result, according to defendants, neither Nat'l DHIA nor its state affiliates can be held liable under the Sherman Act for plaintiffs' alleged exclusion from the NCDHIP, "because the DHIA system is clearly authorized by 7 U.S.C. § 3318." (Def. Nat'l DHIA's Mem. Supp. Summ. J. at 12.)
Defendants are correct that the Sherman Act's prohibition against anticompetitive behavior is not applicable to the federal government and its officials acting in their official capacity. See, e.g., Rex Sys., Inc. v. Holiday, 814 F.2d 994, 997 (4th Cir. 1987). Moreover, defendants are correct that "private parties, to the extent they are acting at the direction or with the consent of federal agencies, also fall outside the pale of the act's prohibition." Greensboro Lumber Co. v. Georgia Power Co., 643 F. Supp. 1345, 1365 (N.D. Ga. 1986), aff'd, 844 F.2d 1538 (11th Cir. 1988). The issue here, therefore, is whether the acts of which plaintiffs complain were, without question, authorized by the federal government through the USDA.
To cut to the heart of the matter, the Court finds that, even assuming defendants possess federal law immunity for some of their NCDHIP activities, a genuine issue of material fact exists in regard to whether Nat'l DHIA or the State DHIAs have acted beyond the scope of the NCDHIP program as intended by the federal government. In other words, the Court believes that questions remain as to whether the USDA directed or consented to the DHIAs' exclusionary treatment of private testers such as plaintiffs. Some evidence actually indicates that, rather than dictate who could produce "official" records and who could not, the USDA left the determination up to the DHIAs. In a letter to the California DHIA, the Acting Administrator of the USDA Agricultural Research Service ("ARS") indicated that the ARS "lacks the resources to conduct a quality certification program." Moreover, "assurance of integrity of records appears to be primarily an industry responsibility." (Pls' App. Vol. II Ex. 31.) On another occasion, the USDA's Acting Assistant Secretary for Science and Education notified the Wisconsin DHIA that he "would accept data from contributors that meet quality certification standards equivalent to the National DHIA Quality Certification Standards." (Id.)
Despite this and other evidence offered by plaintiffs, the Court also is not willing to grant their cross-motion for summary judgment striking defendants' federal law defense. The Court believes that, based on all the circumstances, a reasonable jury could still find for either party on the federal law issue through different interpretation of conflicting evidence. The USDA's true intent is a factual issue that should remain within the realm of a jury at this point. Summary judgment on this issue is DENIED for both plaintiffs and defendants.
2. State Action Immunity
The Supreme Court has clearly established the requirements for antitrust immunity under the "state action" doctrine. In Parker v. Brown, 317 U.S. 341, 350-51, 87 L. Ed. 315, 63 S. Ct. 307 (1943), the Court held that the Sherman Act did not apply to anti-competitive private or government action if the action was taken pursuant to a state policy intended to supplant competition in that industry. The Court has since ruled that there are two requirements for antitrust immunity under Parker. First, the challenged restraint must be "one clearly articulated and affirmatively expressed as state policy." Second, the policy must be "actively supervised" by the state itself. California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105, 63 L. Ed. 2d 233, 100 S. Ct. 937 (1980).
The Supreme Court recently reaffirmed that "while a State may not confer antitrust immunity on private persons by fiat, it may displace competition with active state supervision if the displacement is both intended by the State and implemented in its specific details." FTC v. Ticor Title Ins. Co., 504 U.S. 621, 633, 119 L. Ed. 2d 410, 112 S. Ct. 2169 (1992). However, the Court has further developed the Midcal test, particularly regarding the second requirement. For example,
the mere presence of some state involvement or monitoring does not suffice. . . . The active supervision prong of the Midcal test requires that state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy. Absent such a program of supervision, there is no realistic assurance that a private party's anticompetitive conduct promotes state policy, rather than merely the party's individual interests.