Ninth Circuit Allows Dairy Farmers to Pursue Damages for Misreported Milk Pricing Data

The Ninth Circuit Court of Appeals has determined that the “filed rate doctrine” does not bar the state law-based claims of dairy farmers alleging that milk marketing cooperatives (handlers) provided erroneous reports to the federal government which relied on them to set a minimum price structure for raw milk sales; as a result, the farmers purportedly lost millions of dollars. Carlin v. DairyAmerica, Inc., No. 10-16448 (9th Cir., decided August 7, 2012). Each of the four named plaintiffs in this consolidated proceeding filed claims on behalf of a nationwide class alleging (i) negligent misrepresentation, negligent interference with prospective economic advantage and unjust enrichment, all under California common law; and (ii) violation of California’s Unfair Business Practices Law.

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.’”

Detailing the complex milk-pricing system in the United States and how the
federal government learned about the defendants’ alleged erroneous reports
at a time when it could not recalculate the prices, the court concluded that
(i) the filed rate doctrine could be applied in the dairy-pricing context, but (ii)
it would not preempt this litigation. According to the court, it will not have
to second-guess a federal agency or substitute its evaluation of a proper
rate for the agency’s determination because the agency already concluded
that the misreporting “contaminated the minimum price setting process.”
The court also concluded that “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 data
that resulted in incorrect . . . pricing and multimillion dollar losses for dairy
farmers,” particularly given that allowing the claims to move forward “is the
only way to remedy the injuries suffered by the milk producers.”