Gerald Carlin v. Dairyamerica, Inc.

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GERALD CARLIN , JOHN RAHM , PAUL No. 10-16448
ROZWADOWSKI, and BRYAN WOLFE,
Plaintiffs-Appellants, D.C. No.
1:09-CV-00430-
v. AWI-DLB
DAIRY AMERICA , INC. and ORDER AND
CALIFORNIA DAIRIES, INC., AMENDED
Defendants-Appellees. OPINION
Appeal from the United States District Court
for the Eastern District of California
Anthony W. Ishii, Senior District Judge, Presiding
Argued and Submitted
August 31, 2011—San Francisco, California
Filed August 7, 2012
Amended January 11, 2013
Before: Raymond C. Fisher and Johnnie B. Rawlinson,
Circuit Judges, and George H. Wu, District Judge.*
Order;
Opinion by Judge Wu;
Concurrence by Judge Fisher
*
The Honorable George H . W u, United States District Judge for the
Central District of California, sitting by designation.
2 CARLIN V . DAIRY AMERICA , INC.
SUMMARY**
Filed Rate Doctrine / Class Action
The panel issued a published order, amending the opinion
filed August 7, 2012, and published at 688 F.3d 1177, with
the only change that Judge Fisher concurs in the judgment,
rather than joins the majority opinion.
The panel reversed the district court’s Fed. R. Civ. P.
12(b)(6) dismissal of consolidated class actions brought by
plaintiffs, who are non-California dairy farmers, against
California dairy cooperatives. In an issue of first impression,
the panel held that the district court properly determined that
the filed rate doctrine applied to the Agricultural Marketing
Agreement Act of 1937 minimum milk pricing program.
Specifically, the panel held that the judicially created filed
rate doctrine, which typically has been utilized in common
carrier and public utility litigation, is applicable in a class
action lawsuit seeking monetary and injunctive relief under
state law arising from the misreporting of pricing data to the
United States Department of Agriculture, where the data in
turn were used to set a minimum price structure for raw milk
sales. The panel concluded, however, that the district court
erred by concluding that the filed rate doctrine applied to bar
the plaintiffs’ state-law claims in this case.
Judge Fisher concurred in the judgment, and along with
the majority he would vacate the dismissal of the plaintiffs’
claims because the filed rate doctrine did not apply to this
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
CARLIN V . DAIRY AMERICA , INC. 3
case. Judge Fisher parted with the majority’s conclusion that
the plaintiffs have proven the USDA’s rejection of the
Federal Milk Marketing Orders prices, and he would hold
only that the plaintiffs have adequately alleged the USDA’s
rejection of the prices.
COUNSEL
Benjamin D. Brown (argued), Daniel A. Small, Victoria S.
Nugent, George F. Farah, and Brent W. Johnson, Cohen
Milstein Sellers & Toll PLLC, Washington, D.C.; Joseph J.
Tabacco, Jr., Christopher T. Heffelfinger, and Anthony D.
Phillips, Berman DeValerio, San Francisco, California; Ron
Kilgard, Keller Rohrback P.L.C., Phoenix, Arizona; Jon A.
Tostrud, Case Lombardi and Pettit, Honolulu, Hawaii; Lynn
L. Sarko, Mark A. Griffin, Juli E. Farris, Keller Rohrback
P.L.C., Seattle, Washington; J. Barton Goplerud, Hudson,
Mallaney, Shindler and Anderson, PC, West Des Moines,
Iowa, for Plaintiffs-Appellants.
Allison A. Davis, Davis Wright Tremaine LLP, San
Francisco, California; Charles M. English (argued), Wendy
M. Yoviene and E. John Steren, Ober, Kaler, Grimes &
Shriver, Washington, D.C., for Defendant-Appellee
DairyAmerica, Inc.
John J. Vlahos (argued), Lawrence M. Cirelli and S. Anne
Johnson, Hanson Bridgett LLP, San Francisco, California, for
Defendant-Appellee California Dairies, Inc.
4 CARLIN V . DAIRY AMERICA , INC.
ORDER
The opinion filed August 7, 2012 and published at
688 F.3d 1117, is amended as follows:
Rather than joining the opinion, Judge Fisher concurs in
the judgment.
The amended opinion and separate concurrence by Judge
Fisher will be filed concurrently with this order. There are no
changes to the text of the majority opinion.
Judge Rawlinson and Judge Wu have voted to deny the
petition for rehearing. Judge Rawlinson has voted to deny the
petition for rehearing en banc and Judge Wu so recommends.
Judge Fisher has voted to grant the petition for rehearing and
rehearing en banc.
The full court has been advised of the petition for
rehearing en banc, and no judge has requested a vote on
whether to rehear the matter en banc. Fed. R. App. P. 35.
Appellee DairyAmerica Inc.’s petition for rehearing and
rehearing en banc, filed September 20, 2012, and joined in by
appellee California Dairies, Inc., on September 21, 2012, is
DENIED.
No further petitions for rehearing or rehearing en banc
may be filed.
CARLIN V . DAIRY AMERICA , INC. 5
OPINION
WU, District Judge:
This appeal raises two issues: (1) whether the judicially
created “filed rate doctrine,”1 which typically has been
utilized in common carrier and public utility litigation, is
applicable in a class action lawsuit seeking monetary and
injunctive relief under state law arising from the misreporting
of pricing data to the United States Department of Agriculture
(“USDA”), where the data in turn were used to set a
minimum price structure for raw milk sales; and (2) if the
doctrine is applicable in that situation, whether the district
court erred when it dismissed the plaintiffs’ state causes of
action on the ground that the filed rate doctrine barred such
claims, even though the court found that “[i]t is not disputed
that [the] USDA determined that the rates calculated . . . were
erroneous and that other rates should have applied based on
corrected pricing inputs.”2
1
The precept is most often cited as the “filed rate doctrine,” although it
is sometimes referenced as the “filed tariff doctrine” (see, e.g., Davel
Commc’ns, Inc. v. Qwest Corp., 460 F.3d 1075, 1084 (9th Cir. 2006)),
and, on rarer occasions, as the “Keogh doctrine” (see, e.g., Cost Mgmt.
Servs., Inc. v. Wash. Natural Gas Co., 99 F.3d 937, 943 & n.7 (9th Cir.
1996)), after the case where it was purportedly first established (i.e.,
Keogh v. Chi. & Nw. Ry. Co., 260 U.S. 156 (1922)). As used herein
(except where a different term is utilized within a quoted source), the
reference will be to the “filed rate doctrine.”
2
The district court’s dismissal decision is reported at Carlin v.
DairyAmerica, Inc., 690 F. Supp. 2d 1128 (E.D. Cal. 2010).
6 CARLIN V . DAIRY AMERICA , INC.
BACKGROUND
I. Statutory and Regulatory Framework as to Milk
Pricing
As observed in Zuber v. Allen, 396 U.S. 168, 172-73
(1969):
The two distinctive and essential
phenomena of the milk industry are a basic
two-price structure that permits a higher
return for the same product, depending on its
ultimate use, and the cyclical characteristic of
production.
Milk has essentially two end uses: as a
fluid staple of daily consumer diet, and as an
ingredient in manufactured dairy products
such as butter and cheese. Milk used in the
consumer market has traditionally
commanded a premium price, even though it
is of no higher quality than milk used for
manufacture. While cost differences account
for part of the discrepancy in price, they do
not explain the entire gap. At the same time
the milk industry is characterized by periods
of seasonal overproduction. The winter
months are low in yield and conversely the
summer months are fertile. In order to meet
fluid demand which is relatively constant,
sufficiently large herds must be maintained to
supply winter needs. The result is oversupply
in the more fruitful months. The historical
tendency prior to regulation was for milk
CARLIN V . DAIRY AMERICA , INC. 7
distributors, “handlers,” to take advantage of
this surplus to obtain bargains during glut
periods. Milk can be obtained from distant
sources and handlers can afford to absorb
transportation costs and still pay more to
outlying farmers whose traditional outlet is
the manufacturing market. [Footnote omitted.]
To maintain income[,] farmers increase
production and the disequilibrium snowballs.
Congress passed the Agricultural Marketing Agreement
Act of 1937 (7 U.S.C. § 601 et seq.) (“AMAA”) “in order to
establish and maintain orderly marketing conditions and fair
prices for agricultural commodities.” Glickman v. Wileman
Bros. & Elliott, Inc., 521 U.S. 457, 461 (1997). Section 8c of
the AMAA (7 U.S.C. § 608c) authorizes the Secretary of
Agriculture to issue “orders” applicable to “handlers” who
receive, process, package, or redistribute milk or milk
products.3 “Marketing orders promulgated pursuant to the
AMAA are a species of economic regulation that has
displaced competition in a number of discrete markets . . . .”
Glickman, 521 U.S. at 461. As stated in Block v. Cmty.
Nutrition Inst., 467 U.S. 340 (1984), “[t]he ‘essential purpose
[of this milk market order scheme is] to raise producer
prices,’ S. Rep. No. 1011, 74th Cong., 1st Sess., 3 (1935), and
thereby to ensure that the benefits and burdens of the milk
market are fairly and proportionally shared by all dairy
farmers.” Id. at 342 (second alteration in original); see also
Ark. Dairy Coop. Ass’n, v. U.S. Dep’t of Agric., 573 F.3d 815,
818 (D.C. Cir. 2009).
3
In the context of milk and milk products, “handler” is defined in
7 C.F.R. § 1000.9 (2012).
8 CARLIN V . DAIRY AMERICA , INC.
Milk, milk products, and prices paid by handlers to
producers of raw milk (i.e., dairy farmers) are regulated by
what are commonly referred to as Federal Milk Marketing
Orders (“FMMOs”) issued by the USDA pursuant to section
8c(5) of the AMAA. 7 U.S.C. § 608c(5). The promulgation
process is described in Block as follows:
Under the scheme established by
Congress, the Secretary must conduct an
appropriate rulemaking proceeding before
issuing a milk market order. The public must
be notified of these proceedings and provided
an opportunity for public hearing and
comment. See 7 U. S. C. § 608c(3). An order
may be issued only if the evidence adduced at
the hearing shows “that [it] will tend to
effectuate the declared policy of this chapter
with respect to such commodity.” 7 U. S. C.
§ 608c(4). Moreover, before any market order
may become effective, it must be approved by
the handlers of at least 50% of the volume of
milk covered by the proposed order and at
least two-thirds of the affected dairy
producers in the region. 7 U. S. C. §§ 608c(8),
608c(5)(B)(i). If the handlers withhold their
consent, the Secretary may nevertheless
impose the order. But the Secretary’s power to
do so is conditioned upon at least two-thirds
of the producers consenting to its
promulgation and upon his making an
administrative determination that the order is
CARLIN V . DAIRY AMERICA , INC. 9
“the only practical means of advancing the
interests of the producers.” 7 U. S. C.
§ 608c(9)(B).
467 U.S. at 342 (alteration in original).
Section 8c(5) of the AMAA requires that the FMMOs
contain provisions which, inter alia: (1) classify milk in
accordance with the purpose for which it is used, (2) set
minimum prices for each such use that handlers must pay, (3)
require that said prices be uniform except that adjustments
can be made for production differentials, grade or quality of
the milk, and locations of delivery, and (4) provide for the use
of “blended” prices such that all producers of milk subject to
a particular FMMO receive a uniform price for the milk
delivered to handlers regardless of the ultimate use of the
milk. 7 U.S.C. § 608c(5). The AMAA (and hence each
FMMO) only requires a minimum price. As observed in
Farmer Union Milk Mktg. Coop. v. Yeutter, 930 F.2d 466,
468-69 (6th Cir. 1991):
Although the AMAA mandates a minimum
price, it does not mandate a maximum price.
Handlers cannot pay less than the blend price,
but they are allowed to pay as much as they
want. In times of relative scarcity, handlers
can and do negotiate premiums, known as
“over-order” prices, for the sale of the milk.
These premiums are most typically paid for
milk that is intended for Class I use, but they
can apply to any of the three classes. Thus,
market forces are allowed to intrude on this
regime on occasion, though only in one
direction.
10 CARLIN V . DAIRY AMERICA , INC.
FMMOs have been issued which cover some, but not all,
regions of the United States.4 See 7 C.F.R. pts. 1001,
1005-07, 1030, 1032-33, 1124, 1126, 1131, 1135 (2012)
(setting price regulations for each designated region).
The Secretary of Agriculture has delegated his authority
under the AMAA to the Under Secretary for Marketing and
Regulatory Programs, see 7 C.F.R. § 2.22(a)(1)(viii)(G)
(2011), and, in turn, the Under Secretary has delegated it to
the Administrator for the Agricultural Marketing Service
(“AMS”). 7 C.F.R. § 2.79(a)(8)(viii) (2011); see also White
Eagle Coop. Ass’n v. Connor, 553 F.3d 467, 482 (7th Cir.
2009). As to each operative FMMO, there is a “market
administrator” selected by the Secretary who is empowered,
inter alia, to: (1) “[a]dminister the order in accordance with
its terms and provisions”; (2) “[m]ake rules and regulations
to effectuate the terms and provisions of the order”; (3)
“[r]eceive, investigate, and report complaints of violations to
the Secretary”; and (4) announce FMMO prices on designated
days of each month. 7 C.F.R. §§ 1000.25(b), 1000.53 (2012).
The district court correctly observed that “[t]he method by
which [the USDA has] accomplished [the framework for a
minimum price structure for milk and milk products] is
admittedly complex.” 690 F. Supp. 2d at 1130. A
description of part of that methodology is provided in Ark.
Dairy Coop. Ass’n, 573 F.3d at 818–19, as follows:
The AMAA and its implementing
regulations use two regulatory mechanisms:
price fixing and payment pooling. The
4
For example, there is no FMMO covering the state of California. See
Hillside Dairy Inc. v. Lyons, 539 U.S. 59, 61 (2003).
CARLIN V . DAIRY AMERICA , INC. 11
minimum prices that handlers must pay vary
according to the end use of the milk, as
categorized in four classes. See 7 U.S.C.
§ 608c(5)(A); 7 C.F.R. § 1000.40 (Class I
milk is sold in fluid form, Class II milk is
used to make ice cream, soft cheeses, and
related products, Class III milk is used to
produce harder cheeses, and Class IV milk is
used to make butter and related products
[including nonfat dry milk products].).
Instead of setting specific prices to be paid for
each Class, the Secretary has established a
formula by which the price for each Class is
determined monthly based on the average
nationwide wholesale prices from the
previous month. See 7 C.F.R. § 1000.50; Milk
in the Northeast and Other Marketing Areas;
Notice of Proposed Rulemaking and Tentative
Partial Final Decision, 73 Fed. Reg. 35,306,
35,308 (June 20, 2008) (“Tentative
Decision”). The formulas for Class III and IV
milk are based on the nationwide average
prices for butter, nonfat dry milk, cheese, and
dry whey, minus a set dollar amount for each
of those products, multiplied by a “yield
factor.” 7 C.F.R. § 1000.50(l)-(o). Class I
and II prices are derived from the Class III
and IV prices but Class I prices are adjusted
for the location of the handler so that handlers
pay different prices in different geographic
areas. See 7 C.F.R. §§ 1000.50, 1000.52. The
amounts subtracted from the average sale
prices of Class III and IV products, known in
the milk industry as “make allowances” or
12 CARLIN V . DAIRY AMERICA , INC.
“manufacturing allowances,” are intended to
represent the costs to the handlers of making
the end dairy products from raw milk.
Tentative Decision, 73 Fed. Reg. at 35,308.
In essence, handlers retain from the average
wholesale price the amount set by the make
allowance and transfer the balance to
producers.
The second major component of dairy
market regulation is payment pooling. Under
this system, handlers pay prices according to
the end use of milk, but all the producers in a
geographic area receive the same monthly
average or “blended” price per unit of milk
sold, regardless of the use to which their milk
is put. See 7 U.S.C. § 608c(5)(B); 7 C.F.R.
§§ 1000.70, 1000.76. This payment
equalization is accomplished through the
“producer settlement fund” into which
handlers pay, or from which handlers
withdraw, according to whether their
blend-price payments to producers are less or
greater than the end-use-value of the milk
they have purchased. 7 C.F.R. §§ 1000.70,
1000.76. Again, the effect of this regime is
that handlers make payments which vary
according to the market value of the milk they
use (as reflected in minimum prices), while all
producers in an area receive the same average,
or blended, price per unit of milk.
Different geographic areas of the United
States are regulated under slightly different
CARLIN V . DAIRY AMERICA , INC. 13
conditions, although the formulas used to set
prices of Class III and IV milk are the same in
all areas. See 7 C.F.R. § 1000.50. Each of
eleven areas, generally known as a “marketing
area” or “milk marketing area,” is governed
by a different “Order” of the Secretary. See,
e.g., 7 U.S.C. § 608c(5)(A); 7 C.F.R.
§ 1001.2.
The process utilized by the AMS during the relevant
period here to establish the formulas through which minimum
prices were set pursuant to an FMMO is also complicated, but
is adequately summarized in Ark. Dairy Coop., Inc. v. U.S.
Dep’t of Agric., 576 F. Supp. 2d 147, 152 (D.D.C. 2008),
aff’d, 573 F.3d 815 (D.C. Cir. 2009), as follows:
Under the FMMOs, a dairy plant pays,
and a dairy producer receives, minimum
prices in the form of federally established
“component prices” for butterfat, protein,
solids not fat, and other solids, or skim-fat
prices that are derived from those component
prices. See 7 C.F.R. § 1000.50. There are
three factors that are used in the pricing
formulas: (1) prices of certain dairy products
surveyed by the National Agricultural
Statistics Service (“NASS”); (2) a make
allowance; and (3) a yield. See id. The levels
of each of these factors affect the price that
plants pay for raw milk and, ultimately, how
much producers received for their milk.
Adjustments in any of these factors will
impact pricing.
14 CARLIN V . DAIRY AMERICA , INC.
The make allowance and the yield are
fixed by rule; the product prices are
determined weekly by NASS. See id. Every
Friday morning, NASS reports the prices of
certain cheeses, butter, non-fat dry milk, and
dry whey. USDA then announces the
advanced prices based on the weighted
average of two weeks of NASS prices. Id.The make allowances represent the allowance
for manufacturing raw milk into a finished
product. Changes to the make allowance have
an inverse relationship to the resulting
changes in the minimum prices. Producers
benefit from lower make allowances, and
manufacturers benefit from higher make
allowances. The yield factor represents the
amount of a manufactured dairy product that
can be produced per hundredweight (100
pounds) of milk. USDA accounts for the
portion of the price of milk that is attributable
to the costs of the manufacturing process
through the make allowance. When the price
of manufactured goods is raised, however,
USDA recaptures the cost by reporting a
higher price for the wholesale product prices
to NASS. As a result, any increase in the
selling price of manufactured goods used to
produce milk will increase the price
manufacturers must pay producers for raw
milk. Id.The pricing formulas are changed through
formal rule-making hearings. See 7 C.F.R.
§§ 900.3-900.18. After the close of the
CARLIN V . DAIRY AMERICA , INC. 15
evidentiary portion of the hearing, exceptions
and comments are filed by interested parties
and an administrative law judge certifies the
transcript to USDA. See id. §§ 900.9-900.10.
Dairy Programs, a division of USDA, then
prepares and submits a recommendation to
USDA. The recommendation details the
findings of fact, rationale, and the legal
authority for its decision. See id. § 900.12.
After Dairy Programs has issued its
recommendation, another round of comments
follow, and a referendum on the order, as
amended, is held. Producers facing a
referendum must choose between voting out
the entire marketing order or approving the
amended order. There is no vote on the
amendment itself. If the referendum passes,
the order is adopted and becomes a final rule.
See id. §§ 900.300-311.
To actually set the minimum prices, FMMOs require the
collection and input of certain economic information
regarding commercial transactions involving milk and milk
products. See, e.g., 7 C.F.R. § 1000.50 (2012). Prior to 2000,
the USDA’s National Agricultural Statistics Service
(“NASS”) relied on the prices of dairy commodities on
established and specified public exchanges, including the
Chicago and New York Mercantile Exchanges, in the
calculation of FMMO minimum milk prices. See, e.g.,
63 Fed. Reg. 35,564 (June 30, 1998).5 The Dairy Market
5
See also Kenneth Bailey & Peter Tozer, An Evaluation of Federal
Order Reform, 84 J. Dairy Sci. 974, 977 (2001) (indicating that NASS had
been using such exchanges for pricing information but that they were
16 CARLIN V . DAIRY AMERICA , INC.
Enhancement Act of 2000, 7 U.S.C. § 1637 et seq.
(“DMEA”), was enacted in part to give the USDA the
authority to make the reporting of dairy product information
mandatory. See 72 Fed. Reg. 36,341 (July 3, 2007).
However, the regulations implementing the DMEA (now
codified at 7 C.F.R. Part 1170 (2012)) were not promulgated
until 2008.
The district court summarized NASS’s methods for
collecting pricing information during the period of time
relevant to this action (and the parties have not disputed that
summary) as follows:
Pursuant to the DMEA, weekly surveys are
conducted by the National Agricultural
Statistics Service (“NASS”) to collect
wholesale prices for representative products
within each category. The survey information
is gathered from product manufacturers
(sometimes referred to in pleadings as milk
“handlers”) who produce a million pounds or
more of manufactured product per year. The
FMMO minimum prices for milk for class III
(hard cheese) and IV (dry milk and butter)
products are determined by applying the
wholesale prices reported in the weekly
surveys to formulae specified by the FMMO.
The FMMO minimum prices for products in
Classes I and II are derived by mathematic
considered to be “thin markets” because only a small percent of the
commodities were actually traded on them and, hence, they were subject
to potential price manipulation).
CARLIN V . DAIRY AMERICA , INC. 17
formulae from the prices determined in
Classes III and IV.
Of significance to this action, one of the
major wholesale pricing inputs collected by
NASS for computation of the FMMO
minimum price for milk for Class IV products
is the wholesale price for NFDM [nonfat dry
milk]. The DMEA requires handlers to submit
NASS survey information according to
instructions that, among other things, direct
the handler to exclude from the survey
wholesale prices for NFDM for forward sales
contracts. Forward sales contracts are defined
as contracts in which the selling price is set
more than 30 days before the completion of
the transaction. It appears undisputed that
forward sales contracts generally reflected
lower prices for NFDM than were reflected in
contracts that were completed at or near the
time of the transaction during the time period
in question.
690 F. Supp. 2d at 1130–31. NASS required the
handlers/reporting firms to fill out “Annual Validation
Worksheets” which included the question “[w]hen reporting
nonfat dry milk sales data to NASS, did you or can you:
exclude forward pricing sales (sales in which the selling price
is established, and not adjusted, 30 or more days before the
transaction is completed)?”
For enforcement purposes, the DMEA provides that
“[e]ach [reporting firm] . . . shall maintain, and make
available to the Secretary, on request, original contracts,
18 CARLIN V . DAIRY AMERICA , INC.
agreements, receipts, and other records associated with the
sale or storage of any dairy products during the 2-year period
beginning on the date of the creation of the records.”
7 U.S.C. § 1637b(c)(6). The 2000 version of the DMEA also
provided that “[t]he Secretary shall take such actions as the
Secretary considers necessary to verify the accuracy of the
information submitted or reported under this subtitle.” Pub.
L. No. 106-532, § 273(c)(3), 114 Stat. 2541. In 2008, the
DMEA was amended and bolstered with the following
provision:
QUARTERLY AUDITS. — The Secretary
shall quarterly conduct an audit of
information submitted or reported under this
subtitle and compare such information with
other related dairy market statistics.
Food, Conservation, and Energy Act of 2008, Pub. L. No.
110-234, § 1510(b), 122 Stat. 9237 (codified at 7 U.S.C.
§ 1637b(c)(3)(B)).
Once NASS collects price and volume data, the AMS
uses them to calculate the FMMO minimum raw milk prices.
Nonfat dry milk (“NFDM”) prices are one factor used by
AMS to determine FMMO minimum prices. The DMEA
contains no enforcement mechanism or mechanism for
compensating producers who receive prices for their milk that
are lower than they should be due to inaccurate reporting.6
6
The AMAA contains no provision under which milk producers can
challenge a marketing order through administrative review. See United
Dairymen of Ariz. v. Veneman, 279 F.3d 1160, 1164 (9th Cir. 2002). The
Supreme Court in Stark v. Wickard, 321 U.S. 288 (1944), held that
producers could obtain judicial review of the Secretary of Agriculture’s
CARLIN V . DAIRY AMERICA , INC. 19
II. Factual and Procedural Background
Plaintiffs are “dairy farmers located in states other than
California who sold raw milk that was priced according to
[FMMOs] during the time between January 1, 2002 and April
30, 2007.” 690 F. Supp. 2d at 1129–30. Defendants are:
(1) DairyAmerica, Inc. (“DairyAmerica”), a non-profit entity
“established by a group of nine dairy cooperatives for the
purpose of marketing dairy products manufactured by the
cooperatives” and (2) California Dairies, Inc., one of the nine
cooperatives. Id. at 1130. It is alleged that DairyAmerica
sells approximately 75 percent of the NFDM produced in the
United States.
As stated by the district court:
It is not disputed that, during the time in
question, Dairy America submitted pricing
information to the NASS survey that
improperly included wholesale prices for
forward contracts for NFDM. Plaintiffs
allege, and Defendants do not appear to
practice of deducting certain administrative expenses from the settlement
fund before calculating the blended price which resulted in a reduced price
for the producers. The Court found a basis for judicial review because the
AM AA had given producers “definite personal rights” and “the silence of
Congress as to judicial review is, at any rate in the absence of an
administrative remedy, not to be construed as a denial of authority to the
aggrieved person to seek appropriate relief in the federal courts in the
exercise of their general jurisdiction.” Id. at 309. In our consideration of
the holdings in Stark, we concluded that “judicial review of the producers’
complaint was necessary to ‘ensure achievement of the Act’s most
fundamental objectives – to wit, the protection of the producers of milk
and milk products.’” United Dairymen, 279 F.3d at 1165 (quoting Block,
467 U.S. at 352).
20 CARLIN V . DAIRY AMERICA , INC.
dispute, that approximately ninety percent of
the contracts executed by Dairy America and
reported in the weekly NASS surveys were
forward contracts that should not have been
reported in the NASS surveys according to
DMEA procedures. Plaintiffs contends [sic]
that, because forward contract prices were
significantly below spot prices during the time
period in question, the minimum prices set by
the FMMO’s for raw milk were significantly
lower than would have been the case if the
information provided by Dairy America to
NASS had been provided according to
instructions.
Id. at 1131. On account of DairyAmerica’s market
dominance, its erroneous reports had the effect of pushing
FMMO minimum prices paid to milk producers noticeably
lower than they would have been otherwise. Thus, because
of its own transgressions, DairyAmerica obtained significant
financial benefits from the lowered prices, to the detriment of
plaintiff dairy farmers.
In March 2007, DairyAmerica’s misreporting was
revealed by The Milkweed, a dairy industry publication. In
April 2007, DairyAmerica’s CEO confirmed that
misreporting to the NASS.
On or about April 20, 2007, NASS requested that all 39
firms that had reported NFDM data review their weekly price
and sales volume submissions for the period of April 29,
2006 through April 14, 2007, and submit revisions. On June
28, 2007, NASS published “revised prices and sales volume”
for NFDM, and the “AMS calculated that the errors in the
CARLIN V . DAIRY AMERICA , INC. 21
reporting of nonfat dry milk prices for the period April 29,
2006 through April 14, 2007 had increased the average 2-
week price of NFDM by $0.0218 per pound and the average
4–5 week price of NFDM by $0.0193 per pound during a
period of 14 months.”
In February 2008, the USDA Office of the Inspector
General (“OIG”) issued a report regarding “the April 2007
discovery of the error in the reporting of nonfat dry milk
prices.” Office of Inspector Gen., U.S. Dep’t of Agric., No.
26901-01-IR, Inspection Report: Survey and Estimation
Internal Controls for Nonfat Dry Milk and the Dairy Products
Prices Report i (2008), available at http://www.usda.gov/
oig/webdocs/26901-01-IR.pdf (last visited June 19, 2012).
Among its findings were:
A large dairy firm inappropriately included
long-term forward contracted nonfat dry milk
volume and price information in their weekly
submissions to NASS. We found that this
dairy firm has been including data for sales of
this type since 2002.
NASS then aggregated the misreported data
from this large dairy firm with the weekly
data submitted by other dairy firms for the
same reporting period. This caused inaccurate
nonfat dry milk aggregated volume and price
statistics to be published weekly. The internal
controls for the survey and estimation process
used by NASS for the Dairy Products Prices
report were inadequate, as this error went
undetected from 2002 until April 2007.
22 CARLIN V . DAIRY AMERICA , INC.
NASS’ published nonfat dry milk price
statistics are utilized by AMS as a component
of its formula for establishing federal milk
marketing order (FMMO) prices. Given that
incorrect nonfat dry milk prices were factored
into the FMMO formula, the published
FMMO prices were also incorrect. AMS
issued a report on June 28, 2007 stating: “The
total classified value of milk regulated under
the FMMO program for the period covered by
the NASS revision was understated by $50
million . . . ” covering the period between
April 29, 2006, and April 14, 2007.
....
AMS did not have the authority to audit a
reporting firm’s books when the misreporting
occurred. The authority was included in the
Dairy Marketing Act of 2000, but the
rulemaking necessary to implement a program
of audits was not completed until July 2007.
AMS began performing audits on August 6,
2007. Between August 6, 2007, and
September 30, 2007, AMS visited seven
plants reporting nonfat dry milk volume and
price statistics. Based on these visits, AMS
notified NASS of reporting discrepancies at
six of the plants. NASS contacted these plants
and explained the proper reporting criteria.
Id. at i–ii.
CARLIN V . DAIRY AMERICA , INC. 23
Following the release of the Inspection Report, NASS
sent letters to “dairy firms” (i.e., handlers) that reported
NFDM information asking whether they had correctly related
the NFDM data between January 4, 2002 and April 22, 2006,
and, if they had not, to provide corrected data. None of the
dairy firms provided corrected information, and, hence, the
NASS (and consequently the USDA) was unable to publish
revised NFDM data or FMMO prices for that period.7 In
August 2007, AMS instituted a new auditing process which
included in-person inspections of large dairy firms and their
sales records.
Beginning in March 2009, each plaintiff filed a class
action on behalf of a nationwide class of raw milk producers
in federal court based on diversity jurisdiction. See 690 F.
Supp. 2d at 1131. The cases were eventually consolidated.
Id. The Amended Class Action Complaint contains four
causes of action: the first and second claims for relief charged
negligent misrepresentation and negligent interference with
7
As noted by the NASS:
In cases where there had been reporting problems,
NASS provided the firms with their previously reported
data and asked them to review and submit appropriate
corrections.
NASS agreed to summarize results of this process
in a special report to be released on June 19, 2008.
However, no firms provided corrected data, and
therefore NASS will not issue a special report.
News Release, Nat’l Agric. Statistics Serv., U.S. Dep’t of Agric., NASS
W ill Not Issue Special Report on Nonfat Dry Milk Prices (June 19, 2008),
a v a il a b l e a t h t t p : / / w w w . n a s s . u s d a .g o v / N e w s r o o m / N o t i c e s /
06_19_2008.asp (last visited June 19, 2012).
24 CARLIN V . DAIRY AMERICA , INC.
prospective economic advantage, respectively, both under
California common law; the third claim asserted violation of
California’s Unfair Business Practices Law, California
Business and Professions Code § 17200 et seq.; and the
fourth claim alleged unjust enrichment under California
common law.
Defendants filed separate motions seeking dismissal of
the entire lawsuit on five grounds: (1) the filed rate doctrine
barred plaintiffs’ claims, (2) the DMEA confers no right of
private enforcement, (3) the USDA is an indispensable party
but immune from suit herein, (4) the price reporting program
creates no legal obligation on defendants’ part, and (5)
plaintiffs’ state law claims are preempted by the DMEA. The
district court dismissed the monetary portions of all four
claims solely on the grounds that they were not justiciable
pursuant to the filed rate doctrine. 690 F. Supp. 2d at1140–41. The district court also held that, while the filed rate
doctrine purportedly does not bar injunctive relief, the third
cause of action – wherein such relief was requested – was
inadequately pled. Id. at 1140. In so ruling, the district court
noted that:
Because the filed rate doctrine applies
narrowly to bar only claims that are based on
minimum prices paid for raw milk, the court
is not willing at this point to make the
determination that there are no other facts that
Plaintiffs could possibly plead that would cure
the deficiency. Further, as noted, the court
cannot determine at this point that there is no
non-money equitable remedy available to
Plaintiffs. For that reason the [amended
CARLIN V . DAIRY AMERICA , INC. 25
complaint] will be dismissed with leave to
amend.
The court is also mindful that the filed rate
doctrine consists of a body of law that has
been the subject of conflicting interpretations.
The court will therefore give favorable
consideration to the motion of either party for
interlocutory appeal on the issue of whether
the filed rate doctrine bars Plaintiffs’ claims in
this case.
Id. at 1141.
Plaintiffs filed an initial appeal, but their appeal was
dismissed because the district court’s ruling was not a final
order. See WMX Techs., Inc. v. Miller, 104 F.3d 1133, 1136
(9th Cir. 1997) (en banc). Plaintiffs then moved in the district
court to dismiss their complaint with prejudice so that this
court could exercise jurisdiction. The district court granted
that motion. Plaintiffs then filed a timely notice of appeal.
DISCUSSION
I. Standard of Review and Applicable Procedural Law
We review de novo challenges to a dismissal for failure to
state a claim under Federal Civil Rule 12(b)(6). N.M. State
Inv. Council v. Ernst & Young LLP, 641 F.3d 1089, 1094 (9th
Cir. 2011). That standard is applied to a district court’s
dismissal based on the filed rate doctrine. California ex rel.
Lockyer v. Dynegy, Inc., 375 F.3d 831, 849 n.16 (9th Cir.
2004), amended, 387 F.3d 966 (9th Cir. 2004); Brown v. MCI
Worldcom Network Servs., Inc., 277 F.3d 1166, 1169 (9th
26 CARLIN V . DAIRY AMERICA , INC.
Cir. 2002). “Such review is generally limited to the face of
the complaint, materials incorporated into the complaint by
reference, and matters of judicial notice.” N.M. State Inv.
Council, 641 F.3d at 1094; see also Metzler Inv. GMBH v.
Corinthian Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008)
(citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.
308, 322 (2007)). In undertaking this review, we will “accept
the plaintiffs’ allegations as true and construe them in the
light most favorable to plaintiffs,” Gompper v. VISX, Inc.,
298 F.3d 893, 895 (9th Cir. 2002), and will hold a dismissal
inappropriate unless the complaint fails to “state a claim to
relief that is plausible on its face,” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007).
Because the only issues on appeal raised by plaintiffs
concern the application of the filed rate doctrine and its
preclusive effect in the present case and because the district
court did not rule on defendants’ other defenses (such as the
purported lack of a private right of enforcement under the
DMEA, the status of the USDA as an indispensable party,
etc.), our decision is limited to the filed rate doctrine issues.
See Singleton v. Wulff, 428 U.S. 106, 120 (1976) (“[A]
federal appellate court does not consider an issue not passed
upon below.”); U.S. ex rel. Lee v. SmithKline Beecham, Inc.,
245 F.3d 1048, 1050 n.1 (9th Cir. 2001) (“[W]e limit our
review to issues argued in a party’s opening brief.”).
CARLIN V . DAIRY AMERICA , INC. 27
II. The District Court Did Not Err in Concluding that the
Agency-set Minimum Prices for Raw Milk Are
Generally Subject to the Filed Rate Doctrine.
A. The Filed Rate Doctrine
As we observed in E. & J. Gallo Winery v. Encana Corp.,
503 F.3d 1027, 1033 (9th Cir. 2007): “The [filed rate]
doctrine is a judicial creation that arises from decisions
interpreting federal statutes that give federal agencies
exclusive jurisdiction to set rates for specified utilities,
originally through rate-setting procedures involving the filing
of rates with the agencies.” “At its most basic, the filed rate
doctrine provides that state law, and some federal law (e.g.
antitrust law), may not be used to invalidate a filed rate nor to
assume a rate would be charged other than the rate adopted
by the federal agency in question.” Wah Chang v. Duke
Energy Trading & Mktg., LLC, 507 F.3d 1222, 1225 (9th Cir.
2007) (quoting Transmission Agency v. Sierra Pac. Power
Co., 295 F.3d 918, 929–30 (9th Cir. 2002)). It has generally
been recognized that there are three “purposes” or
“governmental interests” which justify or support the filed
rate doctrine.
The origin and justifications for the doctrine can be traced
to the Supreme Court’s early cases involving the Interstate
Commerce Act (“ICA”). Ark. La. Gas Co. v. Hall, 453 U.S.
571, 577 (1981); see Jim Rossi, Lowering the Filed Tariff
Shield: Judicial Enforcement for a Deregulatory Era,
56 Vand. L. Rev. 1591, 1598-99 (2003) (henceforth Lowering
the Filed Tariff Shield). In New York, New Haven &
Hartford R.R. Co. v. ICC, 200 U.S. 361, 391 (1906), the
Court, in interpreting the ICA, stated:
28 CARLIN V . DAIRY AMERICA , INC.
[T]he great purpose of the act to regulate
commerce, whilst seeking to prevent unjust
and unreasonable rates, was to secure equality
of rates as to all, and to destroy favoritism,
these last being accomplished by requiring the
publication of tariffs, and by prohibiting
secret departures from such tariffs, and
forbidding rebates, preferences and all other
forms of undue discrimination.
Thus, the initial raison d’être for the doctrine concerned
stabilizing rates and preventing pricing discrimination
amongst ratepayers.8 See Maislin Indus., U.S., Inc. v.
Primary Steel, Inc., 497 U.S. 116, 126 (1990) (“The duty to
file rates with the Commission and the obligation to charge
only those rates have always been considered essential to
preventing price discrimination and stabilizing rates.”
(citations omitted)).
Once it was determined that federal law required the
primacy of filed rates and tariffs, there developed two
additional and related justifications for the doctrine, i.e.,
federal preemption (or the supremacy of federal law) and
deference to federal agency expertise (or primary
8
As noted in Lowering the Filed Tariff Shield, 56 Vand. L. Rev. at
1599:
In original design, the [filed rate] doctrine was intended
to serve as a sword to protect consumers from
monopolistic price discrimination, such as a railroad
charging different rates to customers of different states,
or charging the shipping companies with whom it
competes exorbitant prices, without justifications based
on the cost of providing service to the customer.
CARLIN V . DAIRY AMERICA , INC. 29
jurisdiction). As observed in Nantahala Power & Light Co.
v. Thornburg, 476 U.S. 953, 964 (1986):
In Chicago & North Western Transp. Co. v.
Kalo Brick & Tile Co., 450 U.S. 311 (1981),
the Court similarly noted that the filed rate
doctrine as applied to the actions of the
Interstate Commerce Commission assisted in
the enforcement of the supremacy of federal
law:
“The common rationale of these cases
is easily stated: ‘[There] can be no
divided authority over interstate
commerce, and . . . the acts of
Congress on that subject are supreme
and exclusive.’ Missouri Pacific R.
Co. v. Stroud, 267 U.S. 404, 408
(1925). Consequently, state efforts to
regulate commerce must fall when
they conflict with or interfere with
federal authority over the same
activity.” Id. at 318-319.
(Alterations in original and parallel citations omitted).
Allowing filed rates to be subject to litigation in state courts
(or in federal courts applying state law) could result in service
rates and conditions varying across jurisdictions, which
would conflict with the federal interest in uniformity. See
Ark. La. Gas Co., 453 U.S. at 578-79 (permitting individual
ratepayers or others to attack a filed rate “would undermine
the congressional scheme of uniform rate regulation”). That
conflict would be prevented by treating the filed rates as
30 CARLIN V . DAIRY AMERICA , INC.
having what amounts to a preclusive effect on state law rate-
based claims.
The third justification concerns the unnecessary
interjection of the courts into the rate-making process where
they have no expertise or valid reason to interfere. See, e.g.,
Montana-Dakota Utils. Co. v. Nw. Pub. Serv. Co., 341 U.S.
246, 251-52 (1951) (“We hold that the right to a reasonable
rate is the right to the rate which the Commission files or
fixes, and that, except for review of the Commission’s orders,
the courts can assume no right to a different one on the
ground that, in its opinion, it is the only or the more
reasonable one.”).
The filed rate doctrine has been given an expansive
reading and application in this Circuit, even in the face of
“debate in other forums about [its] wisdom.”9 MCI
Telecomms. Corp. v. AT&T Co., 512 U.S. 218, 234 (1994)
(quoting Sec. Servs., Inc. v. Kmart Corp., 511 U.S. 431, 440
(1994)) (internal quotation marks omitted); see also Square
D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409,
417–24 (1986); but see Verizon Del., Inc. v. Covad Commc’ns
Co., 377 F.3d 1081, 1089 (9th Cir. 2004) (“[T]he filed rate
doctrine now functions in the telecommunications field as an
anomaly. It is a relic, open to repudiation by the FCC.”). In
E. & J. Gallo Winery, 503 F.3d at 1035, after reviewing the
doctrine and “associated principles” of federal preemption,
we concluded that: “to the extent Congress has given [a
9
For example, California has declined to create a state filed rate doctrine
even where the tariffs are filed with the state regulatory agency having
authority over the subject area and even if the rates have been approved
as reasonable by that agency. See Knevelbaard Dairies v. Kraft Foods,
Inc., 232 F.3d 979, 992–93 (9th Cir. 2000).
CARLIN V . DAIRY AMERICA , INC. 31
federal agency] authority to set rates under [a federal statute]
and [the agency] has exercised that authority, such rates are
just and reasonable as a matter of law and cannot be
collaterally challenged under federal antitrust law or state
law.” See also Wah Chang, 507 F.3d at 1225-26 (“The filed
rate doctrine’s fortification against direct attack is
impenetrable. It turns away both federal and state antitrust
actions; it turns away Racketeer Influenced and Corrupt
Organization Act actions; it turns away state tort actions; and
it even turns away state attempts to assert sovereign power to
commandeer power contracts.” (footnotes omitted)).
B. The Filed Rate Doctrine Applies to the Minimum
Rates for Raw Milk Set under FMMOs pursuant
to the AMAA.
No Supreme Court or federal appellate court case has
considered whether the filed rate doctrine applies to
marketing orders setting the prices for raw milk under the
AMAA. However, a number of trial courts (in addition to the
district court here) have held it does. See, e.g., In re Se. Milk
Antitrust Litig., 801 F. Supp. 2d 705, 732–34 (E.D. Tenn.
2011); In re Dairy Farmers of Am., Inc. Cheese Antitrust
Litig., 767 F. Supp. 2d 880, 894–95 (N.D. Ill. 2011); Servais
v. Kraft Foods, Inc., 631 N.W.2d 629, 633–35 (Wis. Ct. App.
2001); but see Ice Cream Liquidation, Inc. v. Land O’Lakes,
Inc., 253 F. Supp. 2d 262, 276 (D. Conn. 2003) (holding that,
while filed rate doctrine does apply to challenges to milk
pricing set under an FMMO, it does not apply to a challenge
to a defendant’s artificially inflated wholesale milk prices,
which are permitted to be in excess of the minimum rates set
under the FMMOs).
32 CARLIN V . DAIRY AMERICA , INC.
Originally, the filed rate doctrine arose in the context of
the following paradigm. A rate or tariff within an industry
regulated by federal statute is filed by a carrier or other
service/product provider with a federal agency, which in turn
accepts and publishes it. See, e.g., Sec. Servs., Inc., 511 U.S.
at 435. Thereafter, the carrier (and its customer) is not
allowed to charge (or pay) a different rate for that
service/product other than the filed one. Id. (“We have held
these provisions ‘to create strict filed rate requirements and
to forbid equitable defenses to collection of the filed tariff.’”
(quoting Maislin Indus., 497 U.S. at 127)). In turn, the rate
is held not to be subject to challenge on antitrust, state law or
most other grounds. See, e.g., Keogh v. Chi. & Nw. Ry. Co.,
260 U.S. 156, 161–65 (1922); Wegoland Ltd. v. NYNEX
Corp., 27 F.3d 17, 18 (2d Cir. 1994) (“Simply stated, the
doctrine holds that any ‘filed rate’ – that is, one approved by
the governing regulatory agency – is per se reasonable and
unassailable in judicial proceedings brought by ratepayers.”).
As noted in Ice Cream Liquidation, 253 F. Supp. 2d at 275:
Application of the filed rate doctrine in any
particular case is not determined by the
culpability of the defendant’s conduct or the
possibility of inequitable results. Nor does
the doctrine’s application depend on the
nature of the cause of action the plaintiff
seeks to bring. Rather, the courts have held
that the doctrine is to be applied strictly to
prevent a plaintiff from bringing a cause of
action whenever [the] purpose[s] underlying
the filed rate doctrine [are] implicated.
(Citations omitted).
CARLIN V . DAIRY AMERICA , INC. 33
Here, admittedly, the statutory scheme created by AMAA
does not present the typical filed rate scenario. For example,
the handlers do not submit rates or prices to the AMS in order
to create an unwavering price. Rather, various pricing data
are provided to the NASS (some of which are supplied by
handlers such as the defendants) and that data are utilized
along with “make allowances” and “yields” (which are fixed
by the agency’s rules) in pricing formulas which, in turn,
delineate the raw milk rates. See 7 C.F.R. § 1000.50 (2012).
Also, the rates consist of only minimum prices from which the
handlers and producers can deviate, albeit only in an upward
direction (which favors the dairy producers). Further, the set
rates are not uniform across the nation. They can vary
amongst the eleven established milk marketing areas, and
there are also locations without any applicable FMMOs (and
hence no controlling filed rates). See 7 C.F.R. subtit. B, ch.
X (2012); Hillside Dairy Inc., 539 U.S. at 61. Additionally,
the individual handlers make payments which vary according
to the market value of the milk they use as reflected in the
minimum payments, but all the milk producers in the area
covered by the FMMO receive the same average, or blended,
price per unit of milk. Finally, the FMMOs (which contain
the pricing formulas), while promulgated by the USDA and
subject to appropriate rulemaking proceedings including
public hearing and comment, must be approved by the
handlers of at least 50 percent of the volume of milk within
the geographic area covered by the proposed order and at
least two-thirds of the affected dairy producers in the region.
See 7 U.S.C. § 608c(8). Nevertheless, despite those elements,
there are sufficient attributes which justify the application of
the doctrine to the AMAA milk pricing situation generally.
First, milk pricing is the subject of extensive federal
statutory and regulatory control. See, e.g., 7 U.S.C.
34 CARLIN V . DAIRY AMERICA , INC.
§ 608c(5). Additionally, under the AMAA, the USDA (via
the AMS and through the FMMOs) sets minimum prices for
raw milk purchased from producers by handlers where there
can be no downward deviation in the rate. Therefore, to
paraphrase Gallo, the filed rate doctrine is applicable because
Congress has given the USDA authority to set rates under
7 U.S.C. § 608c(5) and the USDA has exercised that authority
to create the FMMOs which, in turn, are utilized to establish
minimum prices for raw milk purchases; and thus “such rates
are just and reasonable as a matter of law.” 503 F.3d at 1035.
Further, the three underlying justifications for the filed
rate doctrine apply to FMMO prices set under the AMAA.
The setting of minimum rates prevents discriminatory pricing
(albeit to a more limited extent than other situations where
the doctrine has been applied) and stabilizes prices by
assuring dairy producers of reasonable payments for raw milk
as fixed by the AMS. Additionally, the setting of minimum
rates by means of formulas established in the FMMOs is a
matter which clearly falls within an area of USDA expertise,
which most courts would not possess. Finally, the AMAA
and its concomitant regulations establish a federal scheme as
to uniform minimum pricing which should not generally be
the subject of attack by ratepayers or others. As stated in
7 U.S.C. § 602:
It is declared to be the policy of Congress –
(1) Through the exercise of the powers
conferred upon the Secretary of Agriculture
under this chapter, to establish and maintain
such orderly marketing conditions for
agricultural commodities in interstate
commerce as will establish, as the prices to
CARLIN V . DAIRY AMERICA , INC. 35
farmers, parity prices as defined by section
1301(a)(1) of this title [7 U.S.C. § 1301(a)].
(2) To protect the interest of the consumer
by (a) approaching the level of prices which it
is declared to be the policy of Congress to
establish in subsection (1) of this section . . .
and (b) authorizing no action under this
chapter which has for its purpose the
maintenance of prices to farmers above the
level which it is declared to be the policy of
Congress to establish in subsection (1) of this
section.
C. Meaningful Review by the Federal Agency Is Not
a Prerequisite to the Application of the Filed Rate
Doctrine.
Plaintiffs challenge application of the filed rate doctrine
here based on the contention that the USDA lacks “any actual
legal authority to meaningfully review the substance of the
pricing.” They rely on Brown v. Ticor Title Ins. Co.,
982 F.2d 386 (9th Cir. 1992), where we held that the filed
rate doctrine did not apply to title insurance rates filed with
state insurance agencies because, although the rates were
filed with the state agencies, they “were not subjected to
meaningful review by the state.” Id. at 394 (citing Wileman
Bros. & Elliott, Inc. v. Giannini, 909 F.2d 332, 337–38 (9th
Cir. 1990)).10
10
Plaintiffs also relied on our decision in Wileman Bros., which is
readily distinguishable from the present case. In Wileman Bros., the
defendants were nectarine and plum growers who served as members of
committees appointed by the Secretary of Agriculture and who (without
36 CARLIN V . DAIRY AMERICA , INC.
We are not persuaded that Brown requires meaningful
review for the filed rate doctrine to apply in all cases,
however. In Square D Co. v. Niagara Frontier Tariff Bureau,
Inc., 476 U.S. 409, 417 n.19 (1986), the Supreme Court held
that the filed rate doctrine applied to rates merely filed with
the Interstate Commerce Commission (“ICC”), even when
those rates had not been “investigated and approved by the
ICC.” Similarly, in Gallo, we held that the filed rate doctrine
applied to market rates for natural gas authorized by the
Federal Energy Regulatory Commission (“FERC”). The
plaintiff argued that the filed rate doctrine applied only to
“only rates that have been literally filed with and approved by
FERC.” 503 F.3d at 1039. We disagreed, emphasizing that
the essential question was whether the market rates were
authorized by the FERC. See id. We explained that the
FERC was not required to use “any particular form of
regulation in its quest to ensure reasonable rates.” Id. It
mattered only that the rates were authorized by the FERC in
the exercise of its statutory authority. See id. at 1040–43.11
the Secretary’s authorization) issued and enforced a “well-matured”
standard governing when those varieties of fruits could be picked.
Wileman Bros. did not involve a tariff or rate submitted to or issued by a
federal agency. Thus, the filed rate doctrine was not applicable to that
situation. Further, the holding of that case was that the defendants could
not establish immunity from antitrust claims on the simple basis that the
Secretary had “tacitly” approved the higher maturity standards they issued
by his failing to explicitly disapprove them, as he could have done under
applicable regulations. See 909 F.2d at 337-38.
11
Gallo relied on an earlier case involving market rates for electricity,
where it was held that the filed rate doctrine applied because the FERC
was “doing enough regulation to justify federal preemption of state laws.”
Gallo, 503 F.3d at 1041 (quoting Pub. Util. Dist. No. 1 of Snohomish
Cnty. v. Dynegy Power Mktg., Inc., 384 F.3d 756, 760 (9th Cir. 2004)).
In Gallo too, we concluded that the FERC was doing enough regulation
CARLIN V . DAIRY AMERICA , INC. 37
Thus, like the district courts that have addressed the issue, we
do not read Brown as making meaningful agency review a
sine qua non for the applicability of the filed rate doctrine.
See In re Hawaiian & Guamanian Cabotage Antitrust Litig.,
754 F. Supp. 2d 1239, 1245–46 (W.D. Wash. 2010)
(collecting cases that characterize Brown as an “outlier”
decision on the issue).
The proper inquiry, therefore, is whether the FMMO
minimum prices were authorized by the USDA pursuant to its
statutory authority, or, to paraphrase Gallo, whether the
USDA was doing enough regulation to justify federal
preemption of state laws. See Gallo, 503 F.3d at 1041. We
conclude that it did.
The applicable statute required the Secretary to issue
orders which provided for a particular, but partial,
methodology for establishing minimum uniform prices for
raw milk. 7 U.S.C. § 608c(5). It is not disputed that the
Secretary exercised his discretion and promulgated
regulations governing that rate setting process and issued
orders in the form of the FMMOs to effectuate those
for the filed rate doctrine to apply. First, the FERC determined that the
best way to ensure just and reasonable rates in the evolving natural gas
market was to allow natural gas sales to proceed at market prices. See id.
at 1041–42. Second, the FERC reviewed the natural gas market and
determined it was competitive. See id. at 1042. Third, although the FERC
did not impose individualized reporting requirements on sellers of natural
gas, it maintained ongoing oversight of the market and took corrective
responses to evidence of market manipulation. See id. W e thus concluded
that, “[b]ecause FERC has not abdicated its responsibilities but has acted,
albeit with a light hand, to authorize just and reasonable rates in the
natural gas arena, the Filed Rate Doctrine continues to preempt any
rate-setting activities by the courts and bar federal antitrust claims under
the Filed Rate Doctrine.” Id.
38 CARLIN V . DAIRY AMERICA , INC.
requirements of the statutory scheme. Part of the
methodology includes formulas which are dependent upon
the input of sales prices and volumes supplied by designated
handlers.
Plaintiffs argue that the prices DairyAmerica reported to
NASS are comparable to market-based rates like those in
Brown because AMS only had the power to take NASS data,
plug them into a predetermined formula, and then publish the
resulting FMMO prices. Once the prices were reported to
NASS, in other words, the rest of the pricing was mechanical
and amounted to silence by AMS. Moreover, as plaintiffs
argue, AMS did not have (at that time) the power to review
the accuracy of data collected by the NASS. However,
plaintiffs do not contend that the Secretary did not have the
statutory authority to review the accuracy of NASS data.12
Instead they argue that the USDA’s implementing regulations
did not, during the applicable time frame, contain any explicit
provision for such a review. In opposition, defendants point
out that the USDA has, in at least 18 instances, used its
discretion to change the price data it used to calculate milk
prices.13 Plaintiffs counter that, under the relevant
implementing regulations, AMS only has the power to do so
“[i]f for any reason a price or pricing constituent required for
computing the prices described in § 1000.50 is not available.”
12
The USDA clearly had statutory authority. Plaintiffs’ Complaint
alleges that the Secretary issued a rule that allowed for such review in
2007. Thus, even if the Secretary did not choose to review the accuracy
of data reported to NASS, he had the power to do so.
13
Defendants’ citations are to the federal register and, hence, judicially
noticeable. See 44 U.S.C. § 1507.
CARLIN V . DAIRY AMERICA , INC. 39
7 C.F.R. § 1000.54 (2012). Section 1000.50 calculates rates
based on NASS pricing data.
Plaintiffs clearly underestimate the extent of the agency’s
authority (and its execution of those powers) in setting the
minimum prices under the FMMOs. Indeed, the USDA here
did far more than the FERC in the Gallo case in this regard.
First, the agency promulgated regulations which created an
intricate system for the setting of the prices. Unlike the
FERC in Gallo which merely “reviewed the natural gas
market and determined it was competitive,” 503 F.3d at 1042,
the USDA not only examined the dairy products market, but
also took into account volume, location, grade/quality of the
milk, production differentials, and other factors in creating
the formulas in the FMMOs. Also, the formulas do not
consider only one or two data points but a large number of
them to arrive at the ultimate price determination.
Additionally, the formulas which generate the rates also
include the consideration of “make allowances” and “yields”
which are fixed by the agency’s rules. Further, the FMMOs
are not effective until the Secretary obtains the approval of
handlers of at least 50 percent of the milk processed and two-
thirds of the affected dairy producers within the geographic
territory subject to the order. 7 U.S.C. § 608c(8). Thus, the
Secretary exercises extensive authority vis-a-vis milk pricing
in establishing the formulas in the FMMOs which in turn set
the parameters for the issued minimum prices.
Additionally, as in Gallo, the USDA here maintained
ongoing oversight of the market and initiated remedial
actions in response to evidence of market manipulation.
Indeed, upon being informed of the misreporting by
DairyAmerica, the agency took steps to determine the effect
of the misinformation, calculated corrective prices for the
40 CARLIN V . DAIRY AMERICA , INC.
periods when the original data were available, and enacted
regulations and amendments to the FMMOs for improved
oversight of the reporting process. Furthermore, plaintiffs’
contention (that AMS did not and could not do anything but
accept the NASS data even if it knew they were unreliable) is
incorrect. Plaintiffs’ argument is essentially that, had
DairyAmerica provided false pricing information to NASS
and then sent a letter to AMS saying “we made this data up,”
AMS would have been obligated to use that data to set prices.
That is, to say the least, a curious interpretation of the
pertinent regulations, i.e., 7 C.F.R. §§ 1000.50 and 1000.54.
Indeed, during the relevant period, the market administrators
(who were empowered to administer the FMMOs) had the
authority to (1) make rules and regulations to effectuate the
terms and provisions of the FMMOs, (2) receive, investigate,
and report violations to the Secretary, and (3) recommend
amendments to the Secretary. See 7 C.F.R. § 1000.25(b)
(2004).
In sum, the USDA did possess the authority and did
exercise it to address problems as to the agency-set minimum
prices for raw milk under the FMMOs, such that the filed rate
doctrine is applicable in the present AMAA situation.14
14
Plaintiffs also cite three cases from the same district court which
declined to apply the filed rate doctrine to M edicaid reimbursement rates
for prescription drugs. Each case, however, rejected the application of the
doctrine at least in part because there were no filed rates. Massachusetts
v. Mylan Labs., 357 F. Supp. 2d 314, 329 (D. Mass. 2005) (holding that
the filed rate doctrine was inapplicable because “[t]he reported data do not
control the rates which Defendants can charge customers, as a tariff
would”); In re Lupron Mktg. and Sales Prac. Litig., 295 F. Supp. 2d 148,
163 n.16 (D. Mass. 2003); In re Pharm. Indus. Average Wholesale Price
Litig., 263 F. Supp. 2d 172, 192 (D. M ass. 2003) (holding that filed rate
doctrine did not apply because pharmaceutical companies do not file rates
CARLIN V . DAIRY AMERICA , INC. 41
III. Precedent Does Not Require and Policy
Considerations Do Not Support Applying the Filed
Rate Doctrine as a Bar under the Facts of This
Case.
Plaintiffs argue that even if the filed rate doctrine applies
to agency-set milk prices in general, it should not serve as a
bar in this case, since the USDA has indicated that it would
have set different prices had DairyAmerica reported its data
correctly. We know that prices would have been different but
for the misreporting, because (1) the NASS issued retroactive
revised prices for part of the relevant period after
DairyAmerica acknowledged its erroneous reporting, and (2)
AMS calculated the increase in the prices of NFDM for the
period between April 29, 2006 and April 14, 2007. We agree
that the filed rate doctrine does not preempt or otherwise pose
a preclusive bar to plaintiffs’ lawsuit, because: (1) the federal
agency itself determined that the FMMO prices were
incorrect and (2) the policy considerations behind the doctrine
do not justify applying the doctrine as a bar in this case.
Plaintiffs initially attempt to avoid the strictures of the
filed rate doctrine by arguing that they are not actually
seeking to challenge a fixed rate at all. However, we have
made it clear that the doctrine precludes remedies which rely
on a court’s recalculation of rates which would have been
charged, even if the plaintiff is not directly challenging the
filed rate:
with any agency). Furthermore, none of these cases address the doctrine
at significant length and they would not therefore be particularly
persuasive even if they were on point.
42 CARLIN V . DAIRY AMERICA , INC.
Wah Chang cannot avoid the fact that it seeks
what amounts to having the courts determine
what rates the Energy Companies should have
charged instead of the rates they did charge.
Wah Chang would inevitably drag the courts
into a determination of what rate would be fair
and proper. That is precisely what Wah
Chang cannot do.
Wah Chang, 507 F.3d at 1226. Establishing damage amounts
for plaintiffs’ claims, similarly, would require calculating
what rates would have been set but for the defendants’
misreporting. For this reason, it would be unavailing for
plaintiffs to rely on Gallo’s dictum that “[w]e are aware of no
basis for holding that the Filed Rate Doctrine bars claims
based on a reference point for pricing transactions (be it a
trade index, the Consumer Price Index, or the New York
Stock Exchange) that is not itself a FERC-approved rate.”
Gallo, 503 F.3d at 1048 n.15. Still, as discussed below, it is
a different situation where the agency itself in the context of
the AMAA/DMEA recognizes that its issued rates are in error
due to the misconduct of the enriched party.
A. The Filed Rate Doctrine Does Not Bar Plaintiffs’
Claims Given the USDA’s Recognition That Its
Published FMMO Rates Were Incorrect Due to
Defendants’ Misreporting.
The Supreme Court has said that the filed rate doctrine
does not apply to bar a private litigant’s rate-related claims if
the rate has been “suspended” or “set aside” by the relevant
CARLIN V . DAIRY AMERICA , INC. 43
agency. Keogh, 260 U.S. at 163.15 Whether an agency has
sufficiently rejected a rate for purposes of the filed rate
doctrine analysis, whether that rejection should eliminate the
doctrine’s preemptive bar, and, even if the bar is so removed,
whether thereafter a plaintiff should be allowed to recover
damages arising from the incorrect prior rates are admittedly
difficult issues. They can only be correctly answered after
consideration of the underlying statutory scheme in which the
doctrine is being applied and the justifications for the
doctrine.
Initially, the defendants contend that the issues disputed
herein were settled by Ark. La. Gas Co., where the Supreme
Court held that the filed rate doctrine prohibited a federally
regulated seller of natural gas from charging higher rates than
those filed with the FERC despite the contention that, had the
seller applied for a higher rate, the FERC would have
approved it. 453 U.S. at 573–76, 584–85. In that case, the
Court did not find compelling the argument that the
defendant’s misconduct (a breach of contract) had prevented
15
Accord City of Groton v. Conn. Light & Power Co., 662 F.2d 921, 929
(2d Cir. 1981):
Under the Keogh or “filed rate” doctrine, . . . a public
utility subject to regulation is not subject to antitrust
liability to its customers for rates or services provided
under tariffs approved by the appropriate regulatory
agency. The rationale is that the regulatory agency
determines the legal rate and the utility must collect it
while it is in effect. The doctrine applies to rates that
have been published but not acted upon by the
regulatory agency, because they are the legal rates until
suspended or set aside.
(Citation omitted).
44 CARLIN V . DAIRY AMERICA , INC.
the plaintiff seller from filing for a higher rate.16 Id. at 583.
However, the Court specifically focused on the controlling
statute (i.e., the Natural Gas Act, 15 U.S.C. § 717 et seq.). It
observed that:
Not only do the courts lack authority to
impose a different rate than the one approved
by the Commission, but the Commission itself
has no power to alter a rate retroactively.
When the Commission finds a rate
unreasonable, it “shall determine the just and
reasonable rate . . . to be thereafter observed
and in force.” § 5 (a), 52 Stat. 823, 15 U. S. C.
§ 717d (a) (emphasis added).
Id. at 578. Based upon the plain text of the statute
specifically precluding the FERC from altering a published
rate retroactively as well as ordering any reparations based on
the unlawfulness of past rates, the Court concluded that a
state court could not be allowed “to award what amounts to
a retroactive right to collect a rate in excess of the filed rate
[because it would] ‘only accentuate[] the danger of conflict.’
. . . [and constitute a] usurpation of federal authority.” Id. at
584.17
16
The Court in Ark. La. Gas Co. also noted that “[w]e save for another
day the question whether the filed rate doctrine applies in the face of
fraudulent conduct.” Id. at 583 n.13.
17
Defendants also cite Montana-Dakota Utilities Co. where the Court
declined to order the lower court to direct an agency to make a retroactive
determination where Congress had not granted such authority to the
agency. 341 U.S. at 254. It was noted that the agency’s decision was
required because the reasonableness of the rate charged, which could only
be assessed by the agency, was determinative as to whether the plaintiff
CARLIN V . DAIRY AMERICA , INC. 45
Obviously, where the controlling statute prohibits the
federal agency from altering a filed rate retroactively or limits
any application of reconsidered rates to prospective
situations, then the agency cannot effectively suspend or set
aside the published rates for purposes of a lawsuit seeking
recovery based on injuries arising from the imposition of
those rates. However, unlike the Natural Gas Act, there is
nothing in the AMAA or the DMEA which specifically bars
the USDA from revising rates where handlers have supplied
incorrect data to the agency.
Turning to the issue of the extent to which the federal
agency must indicate that it is suspending, setting aside or
otherwise rejecting the filed rate, it is noted that a large
segment of the cases dealing with the filed rate doctrine arise
in the context of statutes such as the ICA, the
Communications Act, and legislation involving the FERC,
where an anti-discriminatory policy as to filed rates or tariffs
lies at the very heart of the statutory scheme. See, e.g., New
York, New Haven & Hartford R.R. Co., 200 U.S. at 391;
AT&T Co. v. Central Office Tel., Inc., 524 U.S. 214, 223
(1998). In such situations, a federal agency’s ability to set
aside a published rate retroactively would be extremely
limited and, hence, any attempt to do so would have to be
explicitly executed and thoroughly explained. For example,
in Keogh, it was held that a rate that is filed with the ICC
(and, after hearings, is approved by the Commission) is
deemed reasonable and non-discriminatory as a matter of law,
“[u]nless and until suspended or set aside.” 260 U.S. at160–63. However, the Court observed that in the context of
the ICA, setting aside or suspending the published tariff for
had a viable cause of action and a basis for the federal courts to exercise
jurisdiction. Id. at 253–54.
46 CARLIN V . DAIRY AMERICA , INC.
purposes of a legal action for damages would be extremely
difficult because (1) any such case which led to a damages
award to the plaintiff shipper would operate as “a preference
over his trade competitors” and vitiate the paramount purpose
of the ICA (i.e., preventing pricing discrimination), and (2) in
any such proceeding, “the Commission [would have to]
determine whether a rate is discriminatory . . . . But by no
conceivable proceeding could the question whether a
hypothetical lower rate would under conceivable conditions
have been discriminatory, be submitted to the Commission
for determination.” Id. at 163–64.
Plaintiffs cite to the Supreme Court’s decision in Maislin
for the proposition that the doctrine does not bar claims
challenging prices that were rejected by the relevant agency.
That reading of the case is overbroad. In Maislin, the Court
noted the ICA prohibited both carriers and shippers from
deviating from published tariffs filed with the ICC, but also
required that the carrier’s rates be nondiscriminatory and
reasonable, and charged the ICC, upon determining that a rate
or practice violates the statute, with prescribing the
subsequent rate or practice to be followed. 497 U.S. at119–20. In 1986, in response to a growing trend wherein
carriers and shippers privately negotiated rates lower than
those filed with the agency, the ICC concluded that changes
in the motor carrier industry “clearly warrant[ed] a tempering
of the former harsh rule of adhering to the tariff rate in
virtually all cases,” and so it established a new policy
whereby in referenced cases it would “decid[e] if the
collection of undercharges would be an unreasonable
practice.” Id. at 121. A carrier that had entered into such a
private contract went bankrupt, and its bankruptcy estate
CARLIN V . DAIRY AMERICA , INC. 47
brought an action against the shipper to collect the difference
between the contract rate and the higher filed tariff. The
Court initially held that “The filed rate doctrine . . . contains
an important caveat: The filed rate is not enforceable if the
ICC finds the rate to be unreasonable.” Id. at 128. The Court
went on to quote from Arizona Grocery Co. v. Atchison,
Topeka & Santa Fe Ry. Co., 284 U.S. 370, 384 (1932), that
“Under [the Act] the shipper was bound to pay the legal rate;
but if he could show that it was unreasonable he might
recover reparation.” Id. at 129 (alteration in original).18
18
However, the Court found that the ICC had not found the rates were
unreasonable but rather that the carrier had engaged in an unreasonable
practice. It then held that:
The Commission argues that under the filed rate
doctrine, a finding that the carrier engaged in an
unreasonable practice should, like a finding that the
filed rate is unreasonable, disentitle the carrier to
collection of the filed rate. W e have never held that a
carrier’s unreasonable practice justifies departure from
the filed tariff schedule. But we need not resolve this
issue today because we conclude that the justification
for departure from the filed tariff schedule that the ICC
set forth in its Negotiated Rates policy rests on an
interpretation of the Act that is contrary to the language
and structure of the statute as a whole and the
requirements that make up the filed rate doctrine in
particular.
Under the Negotiated Rates policy, the ICC has
determined that a carrier engages in an unreasonable
practice when it attempts to collect the filed rate after
the parties have negotiated a lower rate. The ICC
argues that its conclusion is entitled to deference
because § 10701 does not specifically address the types
of practices that are to be considered unreasonable and
because its construction is rational and consistent with
48 CARLIN V . DAIRY AMERICA , INC.
Thus, Maislin stands, in part, for the limited proposition that,
where the statute allows the agency to decide that a published
tariff is unreasonable under controlling law, the filed rate
doctrine will not bar a plaintiff from seeking reparation from
the imposition of the unreasonable rate.
The Supreme Court in ICC v. American Trucking
Associations, 467 U.S. 354 (1984), considered the related
issue regarding the extent to which an agency can
retroactively reject a previously filed rate. In the Motor
Carrier Act of 1980, 49 U.S.C. § 10706(b)(3), Congress set
forth specific guidelines to which motor carrier rate bureaus
had to comply in order to receive antitrust immunity. In
response, the ICC issued an interpretive ruling wherein it
proposed to adopt a new remedy wherein it would
retroactively reject “effective” tariffs that had been submitted
in substantial violation of the law. It based its authority to
adopt that remedy on former 49 U.S.C. § 10762(e), which
provided that the “Commission may reject a tariff submitted
to it by a common carrier . . . if that tariff violates this section
or regulation of the Commission carrying out this section.”
the statute. See Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 843
(1984).
W e disagree. For a century, this Court has held that
the Act, as it incorporates the filed rate doctrine, forbids
as discriminatory the secret negotiation and collection
of rates lower than the filed rate. See supra, at 126-128.
By refusing to order collection of the filed rate solely
because the parties had agreed to a lower rate, the ICC
has permitted the very price discrimination that the Act
by its terms seeks to prevent.
497 U.S. at 129–30 (footnote omitted).
CARLIN V . DAIRY AMERICA , INC. 49
Id. at 359–60. The Court held that section 10762(e) did not
authorize the Commission to reject effective tariffs, but
nevertheless found that the ICC’s authority “is not bounded
by the powers expressly enumerated in the Act . . . . [but that]
the Commission also has discretion to take actions that are
‘legitimate, reasonable, and direct[ly] adjunct to the
Commission’s express statutory power.’” Id. at 364–65 (third
alteration in original) (quoting In re Trans Alaska Pipeline
Rate Cases, 436 U.S. 631, 655 (1978)). The Court found the
ICC’s new remedy to be a “justifiable adjunct to its express
statutory mandate.” 467 U.S. at 370.
The district court here considered the issue of whether the
FMMO prices were rejected by the agency such that the filed
rate doctrine would be inapplicable. It found that the USDA
had disapproved of the rates but then stated that “the issue
before the court is whether the disapproval of rates by the
regulating agency can be held by the courts to operate
retroactively.” 690 F. Supp. 2d at 1139. The court relied on
both American Trucking and City of Groton to hold that
“rejection” in the context of filed rate doctrine analysis
necessarily involves (1) the agency’s (presumably formal)
suspension or setting aside of the published rates, and (2) a
finding that a “statutory mandate” would be furthered by the
retroactive rejection of the minimum pricing structures set
50 CARLIN V . DAIRY AMERICA , INC.
forth in FMMOs in question.19 Id. at 1139–40. We disagree
with the first point and conclude that the second was satisfied.
As discussed above, the primary purposes of the AMAA
and DMEA are: (1) “to establish and maintain such orderly
marketing conditions for agricultural commodities in
interstate commerce as will establish, as the prices to farmers,
parity prices,” 7 U.S.C. § 602(1), and (2) “the protection of
the producers of milk and milk products,” Block, 467 U.S. at
352. Additionally, the prices that are set for raw milk under
the applicable statutes are minimum rates which can be (and
are) subject to further negotiation between handlers and dairy
19
The district court also held that the filed rate doctrine should preclude
plaintiffs’ claim for damages because they had not alleged that
DairyAmerica’s actions were willful or knowing. 690 F. Supp. 2d at1139–40. Plaintiffs argue that NASS’s instructions were clear and that the
fact that DairyAmerica’s reporting errors were self-serving suggests that
its misstatements were knowing. The Supreme Court made a similar
inference in American Trucking, holding that “[t]he guidelines for antitrust
immunity . . . are of such a nature that carriers who submit tariffs in
substantial violation of agreements will be aware of their transgressions.”
467 U.S. at 370–71. The regulations in this case were similarly clear
(“don’t report long-term prices” is not a very hard instruction to
understand), yet we need not address the issue of whether DairyAmerica’s
misreporting was intentional because neither the district court nor the
parties have identified a precedent which holds that knowledge is
determinative of plaintiffs’ right to proceed. The district court quotes
Cooperative Power Association v. FERC, which held that American
Trucking “approved retroactive tariff rejection as a sanction for knowing
violations of agreements” but omits its qualification that the Supreme
Court’s decision was premised on the assumption that “any carrier in
substantial violation of a rate-bureau agreement would be aware of the
violation.” 739 F.2d 390, 391 n.3 (8th Cir. 1984) (per curiam).
Cooperative Power contains no language requiring knowledge. And since
American Trucking assumed knowledge, it did not reach the question of
whether damages could be recovered without it.
CARLIN V . DAIRY AMERICA , INC. 51
farmers. Those rates are not initially filed and reviewed by
the agency but rather are the product of formulas established
by the USDA which are, in part, dependent upon the receipt
of pricing data from certain handlers. In such a situation,
there is nothing in the controlling statutes or concomitant
regulations that would appear to require any formal process
or particular expression for the agency’s retroactively setting
aside or rejecting milk prices that have been incorrectly set as
a result of misreporting by certain handlers. Further, the
statutory goals as to an orderly mandate of marketing
conditions and the protection of milk producers would both
be served by imposing consequences on handlers for
misreporting data20 that resulted in incorrect FMMO pricing
and multimillion dollar losses for dairy farmers.
Neither Keogh, Maislin, nor American Trucking addresses
the issue of what specific steps an agency need take before it
can be deemed to have “rejected” a rate. Such a question
cannot be considered in a vacuum; the steps required before
an agency’s rate “rejection” should be recognized will
necessarily vary based on both the statutory framework
within which the agency acts and upon the purposes of the
statute in furtherance of which the agency acts. In American
Trucking, the Court noted that the agency itself had limited its
rejection powers such that “effective tariffs will be nullified
only upon findings of substantial violations of rate-bureau
agreements.” 467 U.S. at 370. Neither Keogh nor Maislin
had the opportunity to address this issue of when an agency
has taken sufficient steps to officially disapprove a rate. We
20
The district court found that about 90 percent of the contracts reported
to the NASS by DairyAmerica were forward contracts, which under
DMEA procedures were not to be included in the data provided to the
NASS. 690 F. Supp. 2d at 1131.
52 CARLIN V . DAIRY AMERICA , INC.
conclude that the USDA’s actions here constitute a sufficient
rejection such that the filed rate doctrine is not a bar. Further,
the statutory mandate of the AMAA and the DMEA, as well
as the policies of the filed rate doctrine more generally, are
furthered by our conclusion that the filed rate doctrine does
not apply to bar plaintiffs’ claims here.
The USDA adequately expressed its disapproval of the
FMMO prices.21 While the USDA’s recalculation of
minimum dairy prices was not explicitly called a rejection,
the agency recognized that earlier filed rates were incorrect
at the time they were filed and imposed significant and
improper costs on producers. These “revisions” were, as
AMS made clear, not necessarily complete since “reallocation
effects [were] not considered.” The USDA also sought to
recalculate prices for the whole class period, but could not do
so because dairy handlers did not supply it with accurate data
on their sales of NFDM for the entire class period. While
plaintiffs seek to characterize these revisions as a wholesale
repudiation, and defendants as a mere speculative exercise,
the reality is that AMS did recognize and attempt to estimate
the impact of DairyAmerica’s misstatements. The Secretary
21
W hile the defendants argue that the AMS (which defendants
characterize as “the division that the Secretary charged with FM M O
minimum price oversight and enforcement”) did not reject or change
previously announced FMMO prices as a result of the discovery of their
misreporting, the USDA OIG has stated: “Given that incorrect nonfat dry
milk prices were factored into the FM MO formula, AM S has stated that
its published FMMO prices were incorrect. According to the AMS, this
caused the total value of milk to be understated by $50 million between
April 29, 2006 and April 14, 2007.” Further, on June 28, 2007, AM S
issued a report on “Impacts of NASS Nonfat Dry Milk Price and Sales
Volume Revisions on Federal Order Prices” which was based on revisions
due to the discovery of the misreporting.
CARLIN V . DAIRY AMERICA , INC. 53
then took actions to revise regulations to prevent such
misreporting from recurring. The USDA took no further
action, noting that “[a]ll of the funds in the FMMO pools for
the 14-month period covered by NASS’ revision had
previously been disbursed to the milk producers, and
corrective disbursements to producers were no longer
possible.” But the USDA also recognized that the rates that
were filed were incorrect at the time they were filed. Indeed,
when members of Congress, outraged by the uncompensated
losses suffered by the milk producers, asked what plans the
agency had to remedy the situation, the USDA responded by
ensuring that, moving forward, the agency would promulgate
regulations providing for more oversight responsibilities and
more effective enforcement mechanisms. See 7 C.F.R. pt.
1170 (2012).
Given that at the time of the misreporting the agency
lacked the authority to sanction DairyAmerica,22 the record
supports the conclusion that the USDA rejected the FMMO
rates at issue. It is in precisely this scenario that Maislin and
Keogh recognized that the filed rate doctrine should not bar
a private litigant from pursuing claims involving those rates.
Our holding will not permit a flood of litigation such that
the filed rate doctrine will be circumvented every time a milk
producer has a quibble with FMMO prices. To the contrary,
this case presents a narrow exception to the general rule that
the filed rate doctrine not only applies but functions so as to
bar FMMO price-related claims. Here, we are faced with the
22
Because the USDA itself had no mechanism for retroactive sanctions,
plaintiffs reason, it could only have attempted to calculate revised rates to
facilitate private litigation (they deny, however, that such an interpretation
of the agency’s actions is necessary for their claims to succeed).
54 CARLIN V . DAIRY AMERICA , INC.
unusual situation where (1) the misreporting is both
significant in scope and undisputed between the parties, (2)
the USDA has recognized that the FMMO rates based on
DairyAmerica’s erroneous reports were incorrect, and (3)
permitting the rate-related claims to move forward is the only
way to remedy the injuries suffered by the milk producers,
the very class of persons the statutory scheme was enacted to
protect.
B. The Purposes of the AMAA and DMEA Would
Not Be Served by Giving the Filed Rate Doctrine
Preemptive Effect Here.
The district court reasoned that “while the DMEA sets
forth procedures for the submission and collection of milk
pricing survey data, there is nothing to indicate a ‘statutory
mandate’ that would be furthered by the retroactive
‘rejection’ of the minimum pricing structures set forth in the
FMMO’s in question.” 690 F. Supp. 2d at 1139. Yet, as
cited by plaintiffs, the DMEA’s mandate is that the USDA
“shall establish a program of mandatory dairy product
information reporting that will . . . provide timely, accurate,
and reliable market information.” 7 U.S.C. § 1637b(a). Their
complaint includes numerous statements from legislators
which suggest that the DMEA, by compelling dairy firms to
provide information to NASS, was intended to help AMS
produce more accurate prices. Retroactive adjustment of
FMMO rates provides a straightforward incentive for
reporting firms to obey the DMEA which would increase the
accuracy and reliability of market information and ensure that
AMS sets correct and accurate prices.
CARLIN V . DAIRY AMERICA , INC. 55
Further, the AMAA (which is the underlying legislation)
was created to stop the “destabilizing competition” among
dairy farmers and the essential purpose of the FMMO scheme
is to raise producer prices. Block, 467 U.S. at 341–42. It
would be contrary to those statutory purposes to hold that a
handler who misreports required data (which results in
potentially millions of dollars in losses to dairy producers and
unjustified monetary benefits to itself) should be able to avoid
liability because of the absence of a specific provision as to
retroactive remedies, even after the agency has found
misconduct by that party.23 However, the plaintiffs here are
proceeding under state law, not federal. Hence, at this point,
it is only the filed rate doctrine that has been utilized as a
barrier to their case.
C. The Purposes of the Filed Rate Doctrine Do Not
Support Applying It as a Bar under the Facts of
This Case.
Since the cases cited by both plaintiffs and defendants
provide, at best, vague guidance on the applicability of the
filed rate doctrine to the facts of this case, this court would
look again to the purposes of the doctrine in the context of the
present statutory scheme. Clipper Exxpress v. Rocky
Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240, 1266–67
(9th Cir. 1982) (applying Keogh’s policy considerations to
determine that the filed rate doctrine was not a bar). Courts
typically describe the filed rate doctrine as having three
purposes: deference to agencies’ greater expertise in rate-
setting, preventing discrimination by ensuring all ratepayers
23
If the acts of misreporting by the handler were considered to be
violations of the FMMO orders themselves, the AMAA provides for civil
penalties of up to $1,000 for each such violation. 7 U.S.C. § 608c(14)(B).
56 CARLIN V . DAIRY AMERICA , INC.
face the same price, and avoiding disruption of a
Congressional scheme for uniform price regulation.
Wegoland Ltd., 27 F.3d at 21. All of these goals would be
implicated by a reversal of the district court’s decision.
1. Assessing damages would not require excessive
speculation or hypothetical considerations of
agency decision making.
Defendants argue that the filed rate doctrine should be
applied because, even with the NASS recalculation, the
district court would have a great deal of trouble calculating
damages. Plaintiffs counter that the formula used to convert
NFDM data to FMMO prices was at all relevant times fixed
by statute and regulation. Defendants concede this, but argue
that a shift in the filed rate would have had substitution
effects24 and hence a simple recalculation of the FMMO rates
would not produce an accurate measure of damages. In other
words, if DairyAmerica had accurately reported NFDM
prices, some FMMO prices would have been different. That
price difference would have given market participants a
different set of relative prices for different classes of milk
which in turn would have produced losses or gains that
cannot be captured by AMS’s mere revision of FMMO
prices. This is certainly true to some extent, but it is
impossible to say how large this effect would have been
24
AMS referred to these as “reallocation” effects. Defendants call them
a “dynamic model.” But all parties are referring to the same phenomenon.
CARLIN V . DAIRY AMERICA , INC. 57
without more facts. Given that the differences in prices were
two cents per pound of NFDM, it seems likely that any
substitution effects would have been relatively small.25 On
the other hand, the aggregate effect of just 14 months of
misstated prices was $50 million, so substitution effects
might still have been significant.
But some uncertainty can arise in any calculations of
damages, but that does not preclude recovery where it is clear
that some damage has occurred.26 Unlike the damages
25
Defendants also note that other firms’ misstatements were included in
the revised figures issues by NASS and then argue that plaintiffs might not
be able to get data from firms besides DairyAmerica in discovery and
hence would not be able to calculate accurate revised prices using the
FM M O formulas. But if plaintiffs seek to recover damages from
DairyAmerica only, damages would be measured by the effect
DairyAmerica’s misstatements alone had on the FM MO prices. Also, as
noted above, DairyAmerica sells about 75 percent of the NFDM produced
in the United States, and approximately 90 percent of its contracts reported
in the weekly NASS surveys were forward contracts which should not
have been included.
26
As stated in Clemente v. State, 707 P.2d 818, 828 (Cal. 1985):
In general, one who has been tortiously injured is
entitled to be compensated for the harm and the injured
party must establish “by proof the extent of the harm
and the amount of money representing adequate
compensation with as much certainty as the nature of
the tort and the circumstances permit.” (Rest.2d Torts,
§ 912, p. 478.) However, “[t]here is no general
requirement that the injured person should prove with
like definiteness the extent of the harm that he has
suffered as a result of the tortfeasor’s conduct. It is
desirable that responsibility for harm should not be
imposed until it has been proved with reasonable
certainty that the harm resulted from the wrongful
58 CARLIN V . DAIRY AMERICA , INC.
contemplated in Keogh, those in the present case are not
“purely speculative” or “supplied by conjecture,” and “proof
of such facts” is not “impossible.” 260 U.S. at 164–65. To
prevail in Keogh, the plaintiffs would have had to show not
only that the rate would have been different had the
defendants’ misconduct not occurred, but that the ICC would
have disapproved of that different rate. Id. at 164. In the
present case, by contrast, the actions the USDA would have
taken had it had correct data from DairyAmerica are clear: the
USDA would have announced different FMMO prices, ones
more favorable to the producers. It is only the specific prices
that would have been set which remain somewhat unclear.
Calculating damages would not, therefore, involve the kind
of “hypothetical” speculation about agency decisions that
Keogh forbids.
2. Plaintiffs’ claims do not pose a significant risk
of price discrimination or destabilization.
Discrimination in the present context relates to the
concern that “[i]f [one party] could recover . . . damages
resulting from the exaction of a rate higher than that which
would otherwise have prevailed, the amount recovered might,
like a rebate, operate to give him a preference over his trade
conduct of the person charged. It is desirable, also, that
there be definiteness of proof of the amount of damage
as far as is reasonably possible. It is even more
desirable, however, that an injured person not be
deprived of substantial compensation merely because
he cannot prove with complete certainty the extent of
harm he has suffered.” (Rest.2d Torts, § 912, com. a, at
p. 479.)
(Alteration in original).
CARLIN V . DAIRY AMERICA , INC. 59
competitors.” Id. at 163. Plaintiffs contend that
discrimination is not an issue because their suit’s class-action
allegations ensure that all affected milk producers will be
treated alike. Defendants counter that the Supreme Court has
ruled that class action status alone is not enough to defeat the
filed rate doctrine. Square D, 476 U.S. at 423. We have
endorsed an opinion of the Second Circuit which interpreted
Square D to hold that the principle of nondiscrimination still
suggests the filed rate doctrine should be applied in class
actions. In re NOS Commc’ns, 495 F.3d 1052, 1059 (9th Cir.
2007) (citing Marcus v. AT&T Corp., 138 F.3d 46, 61 (2d Cir.
1998)). Marcus, however, qualified this holding: “We agree
that ‘the concerns for discrimination are substantially
alleviated in [a] putative class action’ . . . . . However, the
Supreme Court has rejected the suggestion that . . . the
nondiscrimination principle [is] inapplicable to a putative
class action suit.” Marcus, 138 F.3d at 61 (first alteration in
original) (emphasis added) (citations and internal quotation
marks omitted). NOS Communications should, therefore, be
read as rejecting any blanket rule that discrimination is not a
concern in class actions, but still not going so far as holding
that putative class action status is irrelevant to our inquiry
into the discriminatory impact of not applying the filed rate
doctrine.
While putative class action status does not resolve the
question, defendants’ arguments that judgment in favor of
plaintiffs would have a discriminatory effect are weak.
Defendants contend that awarding damages against
DairyAmerica would discriminate against them in
comparison with other milk handlers. However, as observed
above, the prohibition against discriminatory pricing under
the AMAA is concerned with discrimination suffered by the
dairy producers, not the handlers. In any case, were damages
60 CARLIN V . DAIRY AMERICA , INC.
assessed against it, DairyAmerica would not be paying a
higher (discriminatory) rate at all; it would be paying
damages corresponding to the higher rate its own mistakes (or
bad acts) had previously caused producers to pay it. It would
therefore not, as defendants contend, “face higher/non-
uniform prices for the relevant period.” Instead, it would face
the same prices as everyone else and also a separate damage
award. That award might, certainly, put it at a disadvantage
relative to its competitors (though it is unclear how large that
disadvantage would be given that it controls 75 percent of the
NFDM market), but it has already profited from the lower
prices its misreporting has allowed it to enjoy; damages
would at least partially cancel out this undeserved benefit.
3. Allowing Plaintiffs’ claims to go forward would
not unduly disrupt the Congressional pricing
scheme embodied by the AMAA.
Plaintiffs did not initiate this lawsuit to challenge the
agency’s authority to set minimum milk prices or to directly
contest rates which the USDA in its expertise has continued
to treat as being correct and/or valid. Rather, it was only after
the USDA concluded that DairyAmerica’s misreporting had
contaminated the minimum price setting process that this
action was filed. Consequently, this case does not involve a
scenario where a litigant is seeking to have a court substitute
its evaluation of a proper rate for the agency’s determination.
This lawsuit does not constitute a disruption of the
Congressional pricing scheme embodied in the AMAA. As
we observed in Gallo, “[m]isreported rates and rates reported
for fictitious transactions are not [agency]-approved rates,
and barring claims that such fictitious transactions damaged
purchasers in the natural gas market would not further the
purpose of the filed rate doctrine.” 503 F.3d at 1045.
CARLIN V . DAIRY AMERICA , INC. 61
Moreover, the rate scheme here differs from typical filed
rates. While Congress undoubtedly intended the FMMOs’
minimum prices to apply in a uniform way within the
monthly periods and the geographic areas, there is no
indication of an overarching congressional or agency intent
for uniformity on a nationwide scale, for a long period of
time, or even in terms of the actual price paid, given that the
FMMO merely sets a floor price.
The facts of this case, therefore, do not justify applying
the filed rate doctrine preemptively. The district court would
not need to second-guess agency decision-making or
speculate about what the agency would have done in order to
assess liability or calculate damages. To hold otherwise
would be an exercise of mechanical formalism in
contravention of the purposes of both the AMAA/DMEA and
the filed rate doctrine itself.
CONCLUSION
The district court properly determined that the filed rate
doctrine applies to the AMAA minimum milk pricing
program, but erred by concluding that the doctrine applies to
bar the plaintiffs’ state-law claims in this case. The judgment
of the district court dismissing the case is therefore reversed.
REVERSED AND REMANDED.
FISHER, Circuit Judge, concurring in the judgment:
I agree with the majority that the USDA’s minimum
prices for raw milk are subject to the filed rate doctrine. I
62 CARLIN V . DAIRY AMERICA , INC.
also agree with the majority that, based on the allegations in
the complaint and the handful of documents properly
included within the Rule 12(b)(6) record, the plaintiffs have
adequately alleged the USDA’s rejection of the FMMO
prices. I would vacate the dismissal of the plaintiffs’ claims
because, assuming the facts are as alleged, the filed rate
doctrine does not apply in this case.
I part company, however, with the majority’s conclusion
that the plaintiffs have proven the USDA’s rejection of the
FMMO prices. The majority errs by resolving disputed
factual questions and making conclusive factual findings on
a Rule 12(b)(6) motion to dismiss. DairyAmerica contends
in its petition for rehearing that, if given the opportunity to
conduct discovery, it would produce evidence to show that
the USDA did not, in fact, reject the FMMO prices. Pet. 12.
DairyAmerica has the right to make that showing.
Accordingly, I would hold only that the plaintiffs have
adequately alleged the USDA’s rejection of the FMMO
prices. I would not foreclose DairyAmerica from proving, on
a full evidentiary record, that the plaintiffs’ factual allegations
are untrue.