Opinion
Master File No. C 99-3491 CRB, MDL No. 1311
June 11, 2001
CLASS ACTION
MEMORANDUM AND ORDER
Plaintiffs make claims under Wisconsin's antitrust statutes on behalf of all Wisconsin indirect purchasers of methionine. Defendants move to dismiss the complaint on the ground that Wisconsin's antitrust statute is limited to intrastate conspiracies and does not reach conspiracies, such as the one alleged here, that are interstate in nature. After carefully considering the papers submitted by the parties, and having had the benefit of oral argument, defendants' motion to dismiss is DENIED.
DISCUSSION
Defendants rely primarily on the Wisconsin Supreme Court's 1914 decision in Pulp Wood Co. v. Green Bay Paper Fiber Co., 147 N.W. 1058 (1914), to support their contention that Wisconsin's antitrust laws are limited to anti-competitive conduct that involves wholly intrastate commerce.
A. Pulp Wood and its Progeny
In Pulp Wood, plaintiff sued for breach of a contract to pay for wood delivered to various paper mills. Defendant defended on the ground that the contract it had entered into with plaintiff was void under federal and Wisconsin antitrust statutes and therefore unenforceable. The Wisconsin Supreme Court applied federal law:
The complaint shows that the wood supply furnished [by] the plaintiff came from the states of Wisconsin, Minnesota, and Michigan, and the Dominion of Canada. The contract we think involved interstate commerce and if so the federal statute is applicable and the case will be treated on that basis. So far as this particular case goes, we observe very little difference whether the state or Federal statutes or both apply.
Id. at 1062 (citations omitted). The Supreme Court ultimately held that the contract did not violate the federal antitrust laws. It also held that the Wisconsin antitrust statute is a copy of the federal statute, "except that it applies to attempts to monopolize trade and commerce within the state and prescribes a lesser penalty for its violation than is provided for in the act of Congress." Id. at 1065.
Since Pulp Wood the Wisconsin Supreme Court has repeatedly summarily stated that the Wisconsin antitrust statute applies to intrastate as distinguished from interstate commerce. See Pulp Wood Co. v. Green Bay Paper Fiber Co., 170 N.W. 230, 232 (1919) (summarizing the holding of Pulpwood I and commenting that "the contract in question involved interstate commerce, and hence the federal statute is the statute to be applied to the case, although little, if any, difference is to be observed in the result in the present case whether the state or the federal statutes, or both, apply"); Reese v. Associated Hospital Service. Inc., 173 N.W.2d 661, 664 (1970) (Wisconsin's antitrust statute "has been held by this court to be a re-enactment of the first two sections of the federal Sherman Anti-trust Act, with application to intrastate as distinguished from interstate transactions, with its construction to be ruled by federal decisions construing the federal statute"); John Mohr Sons. Inc. v. Jahnke, 198 N.W.2d 363, 367-68 (1972) ("The parts of this section making a conspiracy in restraint of trade a crime and illegal is taken from the Sherman Anti-Trust Act of 1890. It applies to intrastate instead of interstate transactions and the question of what amounts to a conspiracy in restraint of trade is controlled by federal court decisions under the Sherman Act."); State v. Waste Management of Wisconsin, Inc., 261 N.W.2d 147, 155 (1978) ("Except for the fact that the state act applies to intrastate commerce while the federal act applies to interstate commerce, what amounts to a conspiracy in restraint of trade under the Sherman Act amounts to a conspiracy in restraint of trade under the Wisconsin antitrust act."); Grams v. Boss, 294 N.W.2d 473, 480 (1980) ("We have repeatedly stated that sec. 133.01, Stats., was intended as a re-enactment of the first two sections of the federal Sherman Antitrust Act of 1890, 15 U.S.C. § 1 and 2, with application to intrastate as distinguished from interstate transactions and that the question of what acts constitute a combination or conspiracy in restraint of trade is controlled by federal court decisions under the Sherman Act."); Independent Milk Producers Co-op v. Stoffel, 298 N.W.2d 102, 104 (1980) ("Chapter 133 of the Wisconsin Statutes is drawn largely from federal antitrust law. Interpretation of sec. 133.01(1), Stats., prohibiting conspiracies in restraint of trade or commerce, is controlled by federal case law. The federal antitrust law, the Sherman Act, applies to interstate commerce, while the state law applies to intrastate commerce. Wisconsin case law being scarce on this issue, state courts look to the federal courts for guidance.") (citation omitted)).
Defendants argue that these cases hold that Wisconsin's statute is limited to intrastate commerce; it does not apply to anti-competitive conspiracies involving interstate commerce. At least one federal district court in Wisconsin agrees. See Maryland Staffing Services, Inc. v. Manpower, Inc., 936 F. Supp. 1494, 1504 (E.D. Wis. 1996) (dismissing complaint brought under Wisconsin antitrust law on the ground that the complaint alleged an interstate injury).
B. Emergency One, Inc. v. Waterous Co.
In Emergency One, Inc. v. Waterous Co., 23 F. Supp.2d 959 (E.D. Wis. 1998) — a case involving alleged horizontal and vertical conspiracies to choke the market for fire pumps used on fire trucks — the defendants made the same argument as defendants here, namely, that Wisconsin's antitrust laws do not reach interstate conspiracies regardless of their impact on Wisconsin residents. The Wisconsin federal district court carefully reviewed all of the above decisions and concluded that
these decisions reflexively restate the intrastate/interstate distinction as a mere preface to the courts' reliance on federal cases in interpreting Wisconsin antitrust law. With the possible exception of Pulp Wood, none of the above cases purports to examine the scope of state antitrust law with respect to specific allegations of interstate commerce, and thus none sheds much light on where or how the line should be drawn in a case like the one before [the court].
Id. at 962. The court noted that Pulp Wood did not unequivocally bar the simultaneous application of federal and state law, and that subsequent decisions that comment that state law applies to intrastate conspiracies and federal law to interstate conspiracies do so while explaining why federal caselaw is relevant to determinations under the state statute. Id. at 965.
The Emergency One court wemit on to examine two other Wisconsin Supreme Court decisions which suggest that Wisconsin's law does reach anti-competitive conspiracies involving interstate commerce. In State v. Allied Chem. Dye Corp., 101 N.W.2d 133 (1960), plaintiffs alleged a conspiracy to fix the price of calcium chloride by, among others, three out-of-state manufacturers. Defendants moved for summary judgment on the ground that they were involved exclusively in interstate commerce; the FTC had investigated and found that they had fixed the price of calcium chloride; the FTC had ordered defendants to cease fixing prices; and that since the FTC issued the order the defendants had in fact ceased fixing prices. The trial court concluded that the FTC had taken jurisdiction over the practices which the state sought to regulate amid that as a result the state was precluded from enforcing its antitrust statute against the defendants. Id. at 135.
The Wisconsin Supreme Court reversed. The court held that
[t]he public interest and welfare of the people of Wisconsin are substantially affected if princes of a product are fixed or supplies thereof are restricted as the result of an illegal combination or conspiracy. The people of Wisconsin are entitled to the advantages that flow from free competition in the purchase of calcium chloride amid other products, and if the state is able to prove the allegations made in its complaint it is apparent that the acts of the defendants deny to them those advantages.
Id. at 295. The Emergency One court observed that while Allied Chemical was facially about preemption, the Supreme Court's decision assumes that Wisconsin's statute reaches the defendants' conduct, that is, conduct that involves interstate commerce. Emergency One, 23 F. Supp.2d at 966.
A few years later, in State v. Milwaukee Braves. Inc., 144 N.W.2d 1 (1966), Wisconsin sued the National League for moving the Braves baseball franchise from Milwaukee to Atlanta. A divided Wisconsin Supreme Court dismissed the action on the basis of the federal exemption of organized baseball from antitrust scrutiny. Id. at 12-18. The court concluded that because of the federal exemption, Wisconsin's law conflicted with federal law and therefore was preempted by the federal law. Id. As the Emergency One district court pointed out, however, "the majority left little doubt that, in the absence of the unique exemption afforded to professional baseball, acts such as those alleged in the complaint were within the purview of Chapter 133." 23 F. Supp.2d at 966. The Supreme Court noted, for example, that "[t]he state may, ordinarily, protect the interests of its people by enforcing its antitrust act against persons doing business in interstate commerce." 144 N.W.2d at 12 (emphasis added).
Based on these two cases the Emergency One court concluded that
the Wisconsin Supreme Court has for some time interpreted the state antitrust statutes to reach interstate activities in certain circumstances and has rejected a mutually exclusive vision of state/federal antitrust enforcement. Rote reliance on the "intrastate as distinguished from interstate," Pulp Wood to Grams line of precedent to dismiss state antitrust claims with any interstate aspect is therefore misplaced and inconsistent with Wisconsin precedent.23 F. Supp.2d at 966. The district court recognized, however, that the Supreme Court has never expressly ruled whether application of the Wisconsin statute to anti-competitive conduct involving interstate commerce is appropriate. Id. Accordingly, the court stated that its role is to evaluate the issue as it believes the Wisconsin Supreme Court would if required to do so.
After surveying various approaches, the court concluded that the Wisconsin Supreme Court would adopt an "adverse effects" standard to determine the jurisdictional scope of the Wisconsin statute. Under such a standard, Wisconsin's statute applies to conduct with "any significant adverse effects on trade and economic competition within Wisconsin." Id. at 970. Such a standard, the court reasoned, is consistent with the purpose of Wisconsin's antitrust laws and the scope of federal antitrust laws. With respect to the scope of the federal laws, the court noted that "`it is well-established by now that the Sherman Act applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States'" id. at 970 (quoting Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796 (1993)), and that federal court decisions construing the Sherman Act control application of Wisconsin antitrust law. Id.
C. Emergency One Is Persuasive
The district court's reasoning in Emergency One is persuasive. First, and most significantly, the Allied Chemical and Milwaukee Braves Wisconsin Supreme Court decisions simply make no sense if Wisconsin's antitrust laws do not reach interstate commerce. The holding of Milwaukee Braves — that federal law (and, in particular, baseball's antitrust exemption) preempts Wisconsin's antitrust law — is mere dicta if Wisconsin's statute is in fact limited to wholly intrastate commerce. In other words, there can only be preemption if Wisconsin's statute creates a conflict, and there can only be a conflict if the Wisconsin statute prohibits the National League's conduct in the first place; if the statute does not apply there is no conflict. Milwaukee Braves, 44 N.W.2d at 12 ("the question readily arises whether there is a conflict between state and federal policy, so that the state policy must yield"). The preemption discussion in Allied Chemical is similarly perplexing if, as defendants contend, state law does not apply in any event.
Second, the Pulp Wood court did not expressly hold that Wisconsin's antitrust laws do not reach interstate commerce. The plaintiffs had brought their claims under federal and state law. The Supreme Court merely held that since the allegedly illegal contract involved interstate commerce, federal law was applicable and it would treat the case on that basis. Pulp Wood, 147 N.W. at 1062. The court next commented that there is, essentially, no difference between state and federal law. Id. It did not hold that state law did not apply; there was no need for it to do so since federal law clearly applied and the result would be the same under either federal or state law. Thus, Pulp Wood is not inconsistent with Emergency One's common sense holding that Wisconsin law reaches interstate commerce with a substantial adverse effect in Wisconsin, just as the Sherman Act reaches foreign conduct with a substantial adverse effect in the United States.
Third, the other cited Supreme Court cases are also not inconsistent with Emergency One's holding. Each case simply routinely recites that Wisconsin law addresses intrastate conduct while federal law addresses interstate conduct any order to explain why federal case law controls. This statement is no doubt correct as a general matter; Wisconsin passed its statute, in part, to cover conduct that is not covered by federal antitrust statutes. It does not mean, however, that Wisconsin law does not cover any conduct that is also covered by the federal statutes.
Fourth, the Wisconsin legislature's 1980 amendment to its antitrust laws to permit actions by indirect purchasers is effectively meaningless if Wisconsin's antitrust laws are limited to intrastate commerce. Moreover, the fact that the amendment was added in response to the Supreme Court's restrictive interpretation of federal law see Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (holding that indirect purchasers are not entitled to recover treble damages for injuries caused by price-fixing in violation of the Sherman Act), suggests the legislature intended to permit actions that could not be brought under federal law. Defendants emphasize that the legislative history of the amendment does not mention interstate versus intrastate commerce. The legislature's silence, however, equally supports the Court's interpretation of the statute; there was no need to discuss whether the statute extends to interstate commerce because the legislature assumed that it does.
Accordingly, the Court concludes, as did the Emergency One court, that Wisconsin s antittrust statutes reach interstate conspiracies with significant adverse effects in Wisconsin.
D. Application of The Adverse Effects Test To The Complaint
Defendants also argue that plaintiffs have not alleged that defendants' alleged conspiracy had a significant adverse effect on Wisconsin residents. In Emergency One, for example, the district court ultimately dismissed the complaint because it did not allege that the horizontal and vertical conspiracies had an adverse effect in Wisconsin. In particular, the court noted that plaintiffs did not allege the number of fire trucks sold to Wisconsin purchasers with prices artificially inflated by the fire pump conspiracy. Id. at 971. The plaintiffs were residents of Florida.
Here, in contrast, the lawsuit is brought on behalf of all Wisconsin indirect purchasers of methionine. First Amended Comnplaint ("FAC") ¶ 1. The FAC alleges further that the class members indirectly purchased millions of dollars of methionine from defendants, and that because of defendants' conspiracy, the class paid inflated prices for the methionine. These allegations sufficiently allege an anti-competitive conspiracy with a substantial adverse effect in Wisconsin; indeed, the lawsuit is all about Wisconsin — all of the class members are Wisconsin indirect purchasers of methionine.
CONCLUSION
For the foregoing reasons, defendants' motion to dismiss is DENIED.
IT IS SO ORDERED.