In Re Mushroom Direct Purchaser Antitrust Litigation

514 F. Supp. 2d 683, 2007 U.S. Dist. LEXIS 30427, 2007 WL 1221143
CourtDistrict Court, E.D. Pennsylvania
DecidedApril 25, 2007
DocketMaster File No. 06-0620. Nos. 06-0638, 06-0657, 06-0677, 06-0861, 06-0932, 06-1464, 06-1854
StatusPublished
Cited by10 cases

This text of 514 F. Supp. 2d 683 (In Re Mushroom Direct Purchaser Antitrust Litigation) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Mushroom Direct Purchaser Antitrust Litigation, 514 F. Supp. 2d 683, 2007 U.S. Dist. LEXIS 30427, 2007 WL 1221143 (E.D. Pa. 2007).

Opinion

MEMORANDUM

THOMAS N. O’NEILL, JR., District Judge.

On June 26, 2006, plaintiffs, direct purchasers of mushrooms, filed a consolidated amended antitrust class action 1 under federal law against defendants, Eastern Mushroom Marketing Cooperative, Inc. (“EMMC”), thirty-seven members, officers and affiliates of members, and unidentified members and/or co-conspirators during the class period (collectively, “member defendants”), alleging that defendants engaged in an illegal scheme and conspiracy to cause plaintiffs to pay artificially inflated prices for mushrooms from January 2001 to date of filing. Specifically, plaintiffs bring this action to recover treble damages, equitable relief, costs of suit and reasonable attorneys’ fees pursuant to the Clayton Act, 15 U.S.C. §§ 15(a) and 26 (2007), for defendants’ alleged violations of the anti-competitive conspiracy, monopolization and attempted monopolization provi *689 sions of the Sherman Act, 15 U.S.C. §§ 1 and 1px solid var(--green-border)">2, and the unlawful acquisition provision of the Clayton Act, 15 U.S.C. § 18. Presently before me are the motion to dismiss filed by defendants collectively, the motion to dismiss filed by M.D. Basciani & Sons, Inc., the motion to dismiss filed by Creekside Mushrooms Ltd., JM Farms, Inc., Kitchen Pride Mushrooms, and Mushroom Alliance, Inc., plaintiffs’ response, defendants’ replies, and plaintiffs’ sur-reply.

BACKGROUND

According to plaintiffs, defendant EMMC is the largest mushroom cooperative in the United States, controlling over sixty percent of all Agaricus mushrooms grown in the United States and approximately ninety percent of all Agaricus mushrooms grown in the eastern United States. 2 Incorporated in the Commonwealth of Pennsylvania and headquartered in Kennett Square, Pennsylvania, EMMC is made of entities that grow, buy, package and ship mushrooms to retail and food service outlets across the United States. As a cooperative, EMMC sets and regularly publishes the minimum prices at which its members sell their mushrooms to customers in various geographic regions throughout the United States. The list of defendants includes mushroom growers, packagers, sellers, distributors, and other related entities that were either members or affiliates of members of EMMC.

Plaintiffs allege that starting in January 2001 defendants undertook a "wide-ranging scheme to inflate the average prices for Agaricus mushrooms. First, defendants allegedly agreed to set prices at which fresh Agaricus mushrooms would be sold in six different geographic regions covering the entire continental United States. 3 Then, in order to support and maintain artificial price increases, defendants allegedly launched a “supply control” campaign by using membership funds collected during 2001 and 2002 to acquire and subsequently dismantle non-EMMC mushroom growing operations. Plaintiffs allege that EMMC repeatedly would purchase a mushroom farm or a parcel of farmland and then sell or exchange that farm or parcel at a loss, attaching a permanent or long-term deed restriction to the land prohibiting the conduct of any business related to the growing of mushrooms. Plaintiffs cite several specific examples of this practice.

In May 2001, EMMC purchased a farm in Dublin, Georgia, outbidding a non-EMMC mushroom grower based in Colorado/ and three months later exchanged it for two parcels in Evansville, Pennsylvania. As a part of that exchange, EMMC placed a permanent deed restriction on the Dublin farm prohibiting the conduct of any business related to the growing of mushrooms. EMMC then sold separately the two parcels in Evansville, incorporating permanent deed restrictions prohibiting the conduct of any business related to the growing of mushrooms into each sale. EMMC lost approximately $525,000 as a result of the Dublin farm transactions and $137,000 as a result of the transactions involving the two parcels in Evansville.

In January 2002, EMMC purchased Gallo’s Mushroom Farm in Berks County, Pennsylvania, which had an annual mushroom growing capacity of two million pounds. Less than four months later, *690 EMMC sold Gallo’s at a loss of $77,500 with a permanent deed restriction prohibiting the conduct of any business related to the growing of mushrooms.

In February 2002, EMMC agreed to pay $1 million to the owners of Ohio Valley Mushroom Farms for, among other things, a non-compete agreement, a right of first refusal to lease the mushroom growing operations, a right of first refusal to purchase the properties, and the right to record a deed restriction prohibiting the conduct of any business related to mushroom growing on the property for ten years. Though it did not lease or purchase the property, EMMC filed the deed restriction on the Ohio Valley Farm, which had operated as a mushroom growing concern with annual capacity of nine million pounds.

In March 2002, EMMC purchased the La Conca D’Oro mushroom farm in Berks County, Pennsylvania, which had an annual mushroom production capacity of apr proximately five million pounds. Three months later, EMMC sold La Conca D’Oro and the mushroom-growing equipment on the farm at a loss of $500,000, again attaching a deed restriction prohibiting the conduct of any business related to mushroom growing on the property.

In August 2002, EMMC purchased for $230,000 a ten-year lease option on the Amadio Farm in Berks County, Pennsylvania, which had an annual mushroom production capacity of approximately five million pounds. Though EMMC never entered into a lease on the property, the property owner agreed to file a deed restriction prohibiting anyone other than EMMC from conducting any business related to the growing of mushrooms on the property for ten years.

In addition to the above allegations, plaintiffs allege that defendants engaged in similar practices in other states. As a result of the supply control campaign, plaintiffs allege that EMMC annually eliminated at least fifty million pounds of mushrooms from production. Plaintiffs allege that these land purchases and lease option agreements were not intended to promote the growing or marketing of defendants’ mushrooms but rather were designed to improve defendants’ ability to maintain the artificially-inflated prices which they had set for Agaricus mushrooms.

Plaintiffs further allege that defendants collectively interfered with non-EMMC growers that sought to sell at prices below those set by EMMC and pressured independent growers to join EMMC.

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Bluebook (online)
514 F. Supp. 2d 683, 2007 U.S. Dist. LEXIS 30427, 2007 WL 1221143, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-mushroom-direct-purchaser-antitrust-litigation-paed-2007.