In Agricultural Regulation, A 'Flawed Rate' Is Not A 'Filed Rate' For Damage Purposes

Notwithstanding the general applicability of the Filed Rate Doctrine, the Ninth Circuit recently held that it does not necessarily bar producer class actions for overcharges. Whether a given rating authority has "rejected" a rate under its regulatory jurisdiction, albeit after the fact, is a creature of its statutory framework. Gerald Carlin, et al. v. DairyAmerica, Inc., et al., No. 10-16448 (9th Cir. August 7, 2012).

The United States Department of Agriculture ("USDA"), pursuant to the Agricultural Marketing Agreement Act of 1937 ("AMAA"), is authorized to issue Federal Milk Marketing Orders ("FMMO's") to regulate minimum prices to be paid by "handlers" to "producers" of various milk products. Under the statutory scheme, the Secretary of Agriculture must conduct an appropriate rule making proceeding in order to issue an FMMO. An FMMO may be issued only if the evidence produced at the hearing shows that it will tend to effectuate the policy of the legislation, in displacing competition to enhance producer prices. Before an FMMO may become effective, it is subject to approval by 50% of the handlers subject to the proposed order, and at least two-thirds of the affected dairy milk producers.

An FMMO sets forth the minimum price to be paid to producers, and is subject to a complicated formula depending on the blend price of the milk ingredients covered. In addition, an FMMO merely covers some, but not all regions of the United States.

In Carlin v. DairyAmerica, Inc., the Ninth Circuit upheld a ruling by the Eastern District of California that the Filed Rate Doctrine was applicable to the FMMO involved. However, the Court of Appeals also held that the District Court had erred in concluding that the Filed Rate Doctrine barred the maintenance of plaintiffs' claims, including claims under California's Unfair Competition Law, Business and Professions Code § 17200.

The Court of Appeals noted that, notwithstanding that the minimum prices established by the FMMO in question were "market prices", the Filed Rate Doctrine was nevertheless applicable. This was because the statutory framework of the AMAA evidenced an intent to regulate the commercial activity covered. If the USDA determines that market prices are "fair and reasonable", they are so determined, as a matter of law.

The plaintiffs are "dairy farmers" who sold raw milk, priced in accordance with the FMMOs, during the period from January 2002 to April 30, 2007. Defendant DairyAmerica Inc...

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