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In re Southeastern Milk Antitrust Litigation

May 28, 2008


The opinion of the court was delivered by: Judge J. Ronnie Greer


MDL No. 1899

Magistrate Judge Dennis H. Inman


In this multidistrict antitrust case, defendant National Dairy Holdings, L.P. ("NDH") moves, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, to dismiss the complaint for lack of in personam jurisdiction. After reviewing the record, the Court concludes that the motions are not well taken and will be DENIED.

I. Standard of Review

Plaintiffs bear the burden of demonstrating that personal jurisdiction exists. Youn v. Track, Inc., 324 F.3d 409, 417 (6th Cir. 2003); Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002); Third National Bank v. WEDGE Group, Inc., 882 F.2d 1087, 1089 (6th Cir. 1989). A district court may decide whether to rule on the jurisdictional issue upon a full trial record, after an evidentiary hearing, or merely on the basis of a written record. Welsh v. Gibbs, 631 F.2d 436, 438-39 (6th Cir. 1980). This matter has been fully briefed by the parties and voluminous affidavits and exhibits have been filed. There is no need for an evidentiary hearing in this matter and the motion will be decided upon the record.

When a court decides the issue on the basis of affidavits alone, plaintiff need only make a prima facie case of jurisdiction. To survive a motion to dismiss, thus, plaintiffs need only "demonstrate facts which support a finding of jurisdiction." Welsh, 631 F.2d at 438 (quoting Data Disc, Inc. v. Systems Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir. 1977)). The burden on plaintiffs is relatively slight. The court considers the pleadings and affidavits in the light most favorable to the plaintiffs. Dismissal under Rule 12(b)(2) is proper only if the specific facts alleged by plaintiffs, taken as a whole, fail to state a prima facie case for personal jurisdiction. Bridgeport Music, Inc. v. Still N The Water Pub., 327 F.3d 472, 478 (6th Cir. 2003); Neogen, 282 F.3d at 887; Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir. 2000); Kerry Steele, Inc. v. Paragon Indus., 106 F.3d 147, 149 (6th Cir. 1997); Theunissen v. Matthews, 935 F.2d 1454, 1458-59 (6th Cir. 1991); Serras v. First Tennessee Bank Nat. Ass'n., 875 F.2d 1212, 1214-15 (6th Cir. 1989); American Greetings Corp. v. Cohn, 839 F.2d 1164, 1168-69 (6th Cir. 1988).

II. Facts

NDH has submitted the affidavit of Kathy Turner ("Turner") in support of its motion. Turner, the Executive Vice President and Chief Financial Officer of NDH, has also been deposed pursuant to Rule 30(b)(6) as the corporate representative of NDH. The following facts come from the affidavit of Turner: NDH is a limited partnership organized in 2001 under the laws of the State of Delaware. NDH's principal place of business is in Dallas, Texas. Dairy Farmers of America, Inc.("DFA") owns fifty percent of NDH and NDH management(Allen Meyer) owns the remaining fifty percent. The general partner of NDH is Dairy Management, LLC, a Delaware limited liability company.

NDH owns subsidiary limited liability companies which own and operate dairy processing plants. Two of these wholly-owned subsidiaries of NDH conduct some business in Tennessee. UC Milk Company, d/b/a Goldenrod Dairy ("Goldenrod") is a Kentucky limited liability corporation with its principal place of business in Madisonville, Kentucky. Flav-O-Rich Dairies, LLC ("Flav-O-Rich") is a Delaware limited liability company with its principal place of business in London, Kentucky. Goldenrod and Flav-O-Rich each own and operate milk processing plants located outside of Tennessee; however, they each sell dairy products to local customers in Tennessee. NDH is the member manager of Goldenrod and Flav-O-Rich. Goldenrod and Flav-O-Rich maintain separate books from NDH and have separate marketing images from NDH. Goldenrod and Flav-O-Rich select the customers to whom they will sell in Tennessee, they determine the prices they will charge customers in Tennessee, they determine the frequency of delivery of milk or other products they sell to customers in Tennessee and they determine the route structure of delivery trucks serving customers in Tennessee.

NDH does not manufacture, advertise or sell products in Tennessee; does not maintain a facility or office in Tennessee; is not qualified, authorized, licensed, or chartered to do business in Tennessee; does not have agents, servants, or employees living or working in Tennessee, has never had agents, servants, or employees regularly going into Tennessee to conduct business; has never maintained a bank account, telephone listing, post office box or mailing address in Tennessee; does not pay taxes to the State of Tennessee; does not own, lease or have interest in real property in Tennessee; does not act as a director, manager, trustee or other officer of any corporation organized under the laws of Tennessee or having a place of business within the state; and does not have an agent for service of process in Tennessee. Although NDH is the member manager of Goldenrod and Flav-O-Rich, NDH does not control the day-to-day operations of these subsidiaries. In conclusory fashion, NDH asserts that it does not conduct business in Tennessee.

Not surprisingly, plaintiffs paint an entirely different picture. Accusing NDH of "deliberate omissions"*fn1 of fact in its original motion, plaintiffs assert that the facts show: NDH buys milk from Tennessee farms and takes title to this milk pursuant to NDH's full supply agreement with DFA; NDH's milk was processed at Chattanooga Dairy, LLC, NDH's wholly-owned subsidiary bottling plant in Tennessee, from October 2003 through May 2006; NDH's milk has been processed at Flav-O-Rich and UC Milk Company, NDH's wholly-owned subsidiary bottling plants in Kentucky, from 2001 to the present; and NDH sells dairy products produced by all three subsidiary dairies (Chattanooga Dairy, Flav-O-Rich and UC Milk) to stores in Tennessee, including the Pantry's stores, pursuant to its sales agreement with NDH.

In September, 2001, NDH negotiated and entered into a full supply agreement for milk marketed by DFA. All of the milk processed by Chattanooga Dairy, Flav-O-Rich and UC Milk is procured by NDH pursuant to the full supply agreement. The agreement, on its face, establishes that all rights and obligations under the agreement run between NDH and DFA. None of the dairies, including Chattanooga Dairy, have ever negotiated agreements for the supply of milk. All negotiations are handled by NDH.

On October 3, 2003, NDH acquired Golden Gallon, LLC, a milk bottling plant in Chattanooga, Tennessee. On October 6, 2003, NDH assigned Golden Gallon's assets to Chattanooga Dairy, a limited liability company NDH formed. A limited liability agreement with Chattanooga Dairy designated NDH as ...

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