No. 09-1499

IN THE

FEESERS, INC.,

pVom

Petitioner,

MICHAEL FOODS, INC., and SODEXHO, INC.,Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATESCOURT OF APPEALS FOR THE THIRD CIRCUIT

REPLY BRIEF FOR THE PETITIONER

JEFFREY L. KESSLERCounsel of Record

JOHN F. COLLINSEAMON O’KELLYSUSANNAH P. TORPEYDEWEY & LEBOEUF LLP1301 Avenue of the AmericasNew York, New York 10019(212) 259-8000jkessler@dl.com

KANNON K. SHANMUGAMWILLIAMS ~ CONNOLLY LLP725 Twelfth Street, N.W.Washington, D.C. 20005(202) 434-5000

August23,2010

Counsel for Petitioner

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TABLE OF CONTENTSPAGE

TABLE OF AUTHORITIES .................. ii

REPLY BRIEF FOR THE PETITIONER ... 1

I. Respondents Mischaracterize TheCourt of Appeals’ Holding ......... 2

II. The Court of Appeals’ DecisionCreates a Conflict With TheDecisions Of Other Circuits ....... 7

III. The Court of Appeals’ DecisionIs Contrary To This Court’sDecisions ............................ 10

IV. This Case Is An Ideal Vehicle ForResolving The Circuit Conflict .... 12

CONCLUSION ................................ 13

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TABLE OF AUTHORITIESCases: PAGE

Am. Needle, Inc. v. NFL,130 S. Ct. 2201 (2010) ................... 5

DeLong Equip. Co. v. Washingtor,, MillsElectro Minerals Corp.,990 F.2d 1186 (11th Cir. 1993) ..........5, 7-8

FTC v. Morton Salt Co., 334 U.S. 37(1948) ....................................... 8, Ii

Hartley & Parker, Inc. v. Fl. Bew~rage Corp.,307 F.2d 916 (5th Cir. 1962) ............ 7

M.C. Mfg. Co. v. Tex. Foundries,517 F.2d 1059 (5th Cir. 1975}. .......... 9

NCAA v. Bd. of Regents of Univ. of Okla.,468 US 85 (1984) .......................... 12

Texaco Inc. v. Hasbrouck,496 U.S. 543 (1990) ...................... 11

Toledo Mack Sales & Serv., Inc. v. MackTrucks, Inc., 530 F.3d 204 (3,/l Cir.2008) ..................................... 6, 9, 10

Volvo Trucks N. Am., Inc. v. Reeder-SimcoGMC, Inc., 546 U.S. 164 (20(~6) .......... 6, 10

Statutes

Robinson-Patman Act, 15 U.S.C. § 13 ......passim

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Other Authorities

Scott P. Perlman, Whither the Robinson-Patman Act? The Impact of the Third-Circuit’s Feesers Decision, The PricePoint (A.B.A. Sec. of Antitrust LawSummer 2010) ............................ 2,6

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REPLY BRIEF FOR THE PETITIONER

In an attempt to dissuade this Court from grant-ing certiorari, Respondents mischaracterize thedecision below. They cannot--and do not--disputethat if the decision created a new timing require-ment that would effectively repeal the Robinson-Patman Act ("RPA") for the food distribution andother non-retail industries, then there is a conflictin the circuits and with this Court’s precedents.Instead, they claim that the court of appeals’ hold-ing is confined to its purportedly "unusual" facts.This is incorrect.

As shown below, and in the petition, the court ofappeals created a new, far-reaching exemption toRPA liability that will nullify the Act in anyindustry in which a power buyer can manipulatethe timing of discriminatory rebates. This casethus cries out for this Court’s intervention toresolve the circuit conflict and to correct the courtof appeals’ mistaken view that this Court hasmandated the judicial repeal of the RPA becauseof disagreement with the congressional policyunderlying the statute.

Respondents may not dispute the suitability ofthis case for certiorari by rearguing factual issuesthat were resolved against them at trial andaccepted by the court of appeals. Specifically, thelower courts found as a matter of fact, andRespondents thus cannot contend otherwise, thatFeesers and Sodexho were in actual competitionand the price discrimination in favor of Sodexhowas substantial enough to injure competition.There are thus no factual obstacles to this Court’sconsideration. In short, this is an ideal case inwhich to grant certiorari.

RESPONDENTS MISCHARACTERIZE THECOURT OF APPEALS’ HOLDING

1. The court of appeals held that "in a sec-ondary-line [or tertiary-line] price discriminationcase, parties competing in a bid market cannot becompeting purchasers where the competition forsales to prospective customers occurs before thesale of the product for which the RPA violation isalleged." Pet.App. 156a-157a. This new "timing"requirement has far-reaching implications for fooddistribution and other non-retail businesses,amounting to a judicial repeal of 1;he RPA in suchindustries. See Pet. 13-14, 29-31.

The broad effect of the court of appeals’ decisionhas been widely acknowledged both within thefood industry and by legal commentators. Forexample, the Chair of the American Bar Associa-tion Antitrust Section’s Price Discrimination Com-mittee called the decision "yet another blowagainst the continued viability of the RPA." ScottP. Perlman, Whither the Robinson-Patman Act?The Impact of the Third-Circuit’s Feesers Decision,The Price Point 5 (A.B.A. Sec. of Antitrust LawSummer 2010). In its amicus brief in this case, theInternational Foodservice Distribution Association("IFDA") (whose members include both indepen-dent distributors and national di~tributors, suchas Sysco) stated that the court of appeals "effec-tively exempt[ed] the foodservice distributionindustry--and all other industries where inter-mediate distributors may be selected through abid-type process for selling products and servicesto end users--from the reach of the [RPA]." IFDABr. 2; see id. 3, 6, 14, 15.

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2. Respondents do not dispute that if the courtof appeals indeed imposed a timing requirement ofgeneral application to the food-distribution andother non-retail industries, then there would be acircuit conflict. Br. in Opp. 14-15. In an effort todeter the Court from resolving that conflict here,Respondents mischaracterize the court of appeals’holding, contending that it imposed no timingrequirement except in the "unusual" or "peculiar"circumstances where two specific criteria are met:(a) there is one-off bidding to supply "special-order" products on an exclusive basis, and (b) thediscriminatory prices are not offered to thefavored purchaser until after the competition hasended. Br. in Opp. 10 n.2, 12-13, 15-16. This isfalse.

As the district court found and the court ofappeals left undisturbed, the facts of this case donot satisfy either of the criteria that Respondentssuggest were adopted by the court of appeals. Thedistrict court found that: (a) Feesers and Sodexhocompeted continuously to sell commodity productsto the same institutions on a non-exclusive basis,and (b) Michael Foods’ sales at discriminatoryprices took place before, during, and after the com-petition between Feesers and Sodexho to resellthose products. Pet.App. 43a-66a, 67a-88a, 91a,146a.

A single example conclusively rebuts Respon-dents’ assertion that Sodexho becomes the "exclu-sive" supplier of food to an institution after it winsthat institution’s food management business. Thedistrict court found that "Daniel Boone [SchoolDistrict] solicited proposals in a formal RFP pro-cess, and ultimately chose Sodexho," but "[f]or a

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time, Daniel Boone continued to utilize Feesers for[some of its food product] purchasing." Pet.App.91a. This fact-finding was based on undisputedtestimony that Daniel Boone "dealt with several[distributors] that were still our w~ndors and closeto us after Sodexho took us over," and that"Feesers was one" of those distributors, C.A. App.1989:

Q. So even while Sodexho is your man-agement company, you still[ choose topurchase some food products from dis-tributors, correct?A. Yes.

Q. At the same time?A. Yes.

Id.Similarly, the facts found belo’~ belie Respon-

dents’ contention that, unlike the usual RPA casewhere "distributors are constantly competing toresell wholesale inventory that wa,,; previously pur-chased at discriminatory prices," here "no MFIproduct is ever sold at a discriminatory priceunless and until Sodexo has won the earlier ’com-petition’ for that product’s resale." Br. in Opp. 17.The district court found that: (a)Michael Foodscontinuously sells the same products to Feesersand to Sysco (on behalf of Sodexho), Pet.App. 43a-66a, 146a; (b) the discriminatory prices at whichMichael Foods sells the products to Sysco are pre-viously negotiated between Mic:~ael Foods andSodexho, Pet.App. 67a-88a, 91a; and (3) thoseproducts are not purchased as Sl:,ecial orders forspecific institutional customers but are taken into

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the distributors’ general inventory and laterresold out of inventory. Pet.App. 146a. Moreover,contrary to Respondents’ assertion (Br. in Opp. 9,17-18, 28), the discriminatory prices are not spe-cific to any Sodexho customer, but are provided byMichael Foods to Sodexho on an unrestricted basisto be used when competing for any customer.Pet.App. 69a.

In essence, Respondents argue that becauseMichael Foods first invoices Sysco at its standardlist prices and subsequently adjusts the invoicesto account for food sold to Sodexho customers atthe discriminatory "deviated" prices, the price dis-crimination is not complete until this accountingis complete. Br. in Opp. 10 n.2, 17-18. If that weretrue, however, all that a power buyer in a non-retail industry would need do to avoid RPAliability is to manipulate the timing of theaccounting for its discriminatory purchases.1 Thatcannot be the law. As this Court has repeatedlyheld, "substance, not form, should determinewhether" the antitrust laws have been violated.Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2211(2010). Here, the court of appeals violated thismandate, explicitly admitting that it was "ele-vat[ing] form over substance." Pet.App. 168a.

3. Respondents repeatedly seize upon languagein a footnote in the court of appeals’ decision, inwhich it stated that it was "not hold[ing] that thesales of products by [a] manufacturer to two pur-

~ This is exactly what the defendants did in DeLongEquipment Co. v. Washington Mills Electro Minerals Corp.,990 Fo2d 1186, 1202 (11th Cir. 1993), but the Eleventh Cir-cuit affirmed an RPA violation because the RPA has no "tim-ing" requirement.

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chasers must always occur prior to the competi-tion between the two purchasers" Br. in Opp. 3,14, 16 (citing Pet.App. 185a n.18). But, as onecommentator has observed, that language "is dif-ficult to reconcile with the rationale for theCourt’s decision, and may result in those trying tointerpret the case being ’flummoxed’ as to themeaning of that statement." Perlman 4-5.

Similarly misplaced is Respondents’ repeatedcitation to the same footnote to support theirassertion that "[e]ven where the competition con-cludes before the discriminatory sale, the ThirdCircuit’s holding would apply on!y if the compe-tition occurred in a ’bid market[] that closelyresemble[s] the markets in this case, Volvo Trucksand Toledo Mack.’" Br. in Opp. 3, 14, 15-16, 18, 20(citing Pet.App. 185a n.18). Whatever the court ofappeals may have meant by the term "bid market"in that footnote, the district court expressly foundthat there is no resemblance between the compe-tition to distribute commodity food products inthis case and the bid markets for customizedtrucks in Volvo Trucks North America, Inc. v.Reeder-Simco GMC, Inc., 546 U.S. 164 (2006), andToledo Mack Sales & Service, Inc. v. Mack Trucks,Inc., 530 F.3d 204 (3d Cir. 2008). Pet.App. 66a,144a-46a. Because that factual f’inding was notdisturbed by the court of appeals, it is impossibleto limit the court of appeals’ holding to "cus-tomized bid markets."

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II. THE COURT OF APPEALS’ DECISIONCREATES A CONFLICT WITH THE DECI-SIONS OF OTHER CIRCUITS

Respondents argue that because this case haspurportedly unique or unusual facts, there is no"genuine conflict" with the decisions of other cir-cuits. Br. in Opp. 14. Respondents are mistaken.

1. Respondents attempt to distinguish DeLongEquipment Co. v. Washington Mills Electro Min-erals Corp., 990 F.2d 1186 (llth Cir. 1993), andHartley & Parker, Inc. v. Florida Beverage Corp.,307 F.2d 916 (5th Cir. 1962), asserting that they"say[] nothing about whether the discounted saleof a product must occur before the competition toresell that product." Br. in Opp. 19. Specifically,Respondents assert that here, Michael Foods didnot make any sales at discriminatory prices untilafter the resale competition was over, while inDeLong and Hartley, favored and disfavored pur-chasers competed to resell out of inventory prod-ucts that had been purchased "before the resalecompetition." Br. in Opp. 20-21.

Respondents are wrong on the facts and law. Asan initial matter, the district court found thatMichael Foods sold to the favored and disfavoredpurchasers continuously, both before and after thecompetition to resell those products to specificinstitutional customers. Pet.App. 146a; see also43a-66a. Further, both the DeLong and Hartleycourts refused to draw any distinction based onwhether the sales at discriminatory prices hadoccurred before or after the competition to resellspecific products. Pet. 16-18. Indeed, DeLongimposed RPA liability for discriminatory sales to

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the favored purchaser made after the resale com-petition had ended--a result that conflicts directlywith the court of appeals’ holding !.n this case, andwhich Respondents ignore. DeLong, 990 F.2d at1202.

2. Respondents summarily dismiss the "myriad"other cases cited by Feesers to support the propo-sition that "circuits have routinely upheld findingsof competitive injury under the Morton Salt testwithout imposing a timing requirement." Br. inOpp. 18, 21. Respondents contend that none ofthese cases "expressly holds that a temporal con-nection is not required." Id. at ~’,1. But the keypoint is that, until the court of appeals’ decisionbelow, no court had ever accepted such a timingrequirement.

Each of the circuit court cases cited in the peti-tion applied the standard Morton Salt test forproving secondary-line price discrimination. Pet.15-16, 18-19. Respondents admit 1;hat, under thisCourt’s precedent, a plaintiff (a) has only to estab-lish the four Morton Salt elements to prove lia-bility under the RPA, and (b) may establish thefourth element, competitive injury, by proving (1)actual competition between the plaintiff and thebeneficiary of the price discrimiaation, and (2)substantial price discrimination over time. Br. inOpp. 4-6. By contrast, as Respondents cannotdeny, the court of appeals created a new, fifth ele-ment, which is derived from the ~,urported "com-bined effect of the RPA’s two purchaser andcompetitive injury requirements" and which was"grounded in the ’nature’ and ’timing’ of the ’com-petition’ identified by the district court." Id. at 13,21. It is this new timing requirement that creates

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an inconsistency with Morton Salt and the accom-panying conflict between the Third Circuit and allother circuits.

3. Respondents also perfunctorily dismiss thecases cited by Feesers that confirm the RPAapplies to non-retail industries, arguing that thecourt of appeals did not hold otherwise. Br. inOpp. 23. But that ignores the broad effect of thecourt’s decision. As IFDA explained in its amicusbrief: "[T]he inequitable marketplace that theThird Circuit’s decision creates is not limited tothe foodservice distribution industry .... [T]heconcerns raised here apply equally to the widerange of other industries in which distributorscompete for end purchasers through the use of’bid’-type processes." IFDA Br. 14.

4. Respondents contend, erroneously, that "twopast cases have presented similar facts, and bothrejected RPA liability." Br. in Opp. 23-25 (citingM.C. Manufacturing Co. v. Texas Foundries, 517F.2d 1059 (5th Cir. 1975) and Toledo Mack). Bothof these cases, however, simply applied traditionalRPA standards to facts that were materially dif-ferent from the facts of this case.

In M.C. Manufacturing, having noted that theexistence of competitive injury "is normally a factquestion," the Fifth Circuit held that the favoredand disfavored purchasers were not in actual com-petition because the government, the sole cus-tomer, awarded "mutually exclusive" contractseach of which "represented a separate, distinctmarket open only to a single producer." 517 F.2dat 1066-67. Here, by contrast, the district courtfound that (a) Feesers and Sodexho were in actualcompetition and (b) competition for the business

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of, and sales by Feesers to, Sodexb.o-managed cus-tomers continued even after Sodexho convertedthem to food management. Pet.App. 43a-66a, 91a.

Similarly, in Toledo Mack, the Third Circuit heldthat the RPA does not apply to cases that"involve[] a single sale of a customized good via acompetitive bidding process." 530 F.3d at 228(emphasis added). Because "only o~e sale, not two,actually results," id., the plaintiff could not satisfythe RPA two-purchaser requirement. Here, by con-trast, both the district court and court of appealsfound that there were actual and continuous salesto two different purchasers. Pet.App. 9a-10a, 146a.

III. THE COURT OF APPEAI,S’ DECISIONIS CONTRARY TO THIS COURT’S DECI-SIONS

1. Respondents argue that this Jour~ s decisionin Volvo Trucks supports--indeed, compels--thecourt of appeals’ holding. Br. in ()pp. 25. That isnot correct. In Volvo Trucks, the Court held thatthe plaintiff had failed to provide sufficient evi-dence of competitive injury in a customized bidmarket in which only one competitor would makethe purchases as the winning bidder. 546 U.S. at178-80. Here, the district court e:xpressly foundthat the food distribution industry is not a cus-tomized bid market like that in Volvo Trucks, and"competition for the sale of Michael Foods egg andpotato products to institutional food service cus-tomers was ongoing and not limited to the formalRFP [bid] process." Pet.App. 66a.

2. Respondents also contend that because thisCourt has never expressly rejected the court ofappeals’ new timing requirement, there is no con-

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flict between the Court’s precedents and the deci-sion below. But as Respondents concede, thisCourt never had occasion to expressly "pass on thetiming issue." Br. in Opp. 27. That was simplybecause no court had ever accepted such a require-ment until the court of appeals’ decision here.However, this Court has consistently held that inorder to prove price discrimination under theRPA, a plaintiff need only satisfy the four-partMorton Salt test. Pet. 15, 21-28. The court ofappeals’ imposition of an additional, unprece-dented timing requirement is therefore contrary tothis Court’s precedents.

3. Respondents assert that Feesers errs inclaiming that, because the court of appeals ignoresthe role of Sysco (the RPA "second purchaser"),the timing requirement is irreconcilable with Tex-aco Inc. v. Hasbrouck, 496 U.S. 543 (1990), andthe Court’s tertiary-line cases. They contend thatthe court of appeals simply "recognized" that salesto Sysco were not discriminatory because the pricediscrimination was not complete until the prod-ucts had been resold to Sodexho customers. Br. inOpp. 27-28.

It is Respondents who are in error. In its analysis,the court of appeals consistently treated Sodexho,not Sysco, as the second purchaser. Pet.App. 159a,178a, 179a, 181a-182a. Moreover, the court ofappeals could not have "recognized" that MichaelFoods’ sales to Sysco were not discriminatorybecause the undisputed facts are that Syscoreceived the discriminatory rebates negotiated bySodexho on a continuous basis, before, during, andafter its competition with Feesers to supply a par-ticular customer. Pet.App. 67a-88a; 91a.

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IV. THIS CASE IS AN IDEAL VEHICLE FORRESOLVING THE CIRCUIT CONFLICT

1. Respondents contend that thl.s case is a poorvehicle for resolving the circuit split as to thepurported need for a temporal relationshipbetween discriminatory sales and resale compe-tition because, they argue, the court of appeals’decision is narrow and based on "unusual" facts.Respondents’ argument, however, rests on a mis-characterization of the district c,~urt’s findings,which were accepted by the court of appeals.Respondents reargue already d.ecided factualquestions in order to make it appear that there isa dispute as to whether (a) there was actual com-petition between Feesers and Sodexho, and (b) theprice discrimination by Michael :Foods was sub-stantial enough to harm competit:ion. Br. in Opp.29-35. Both of these issues were conclusivelydetermined as a matter of fact by the districtcourt, and those findings were accepted by thecourt of appeals. Pet. 9-12; Pet.App. 43a-66a, 67a-88a, 159a-161a. This Court is t[.us required toaccord great weight to those fin~[ings. See, e.g.,NCAA v. Bd. of Regents of Univ. of Okla., 468 US85, 98 n.15 (1984). Respondents’ efforts to disputethose findings at this late hour p covide no basisfor denying review.

In fact, this case is an ideal vehicle for resolvingthe circuit conflict and deciding the purely legalquestion presented in the petition for certiorari.Only this Court can prevent the decision belowfrom causing confusion in the circ~its and under-mining the policies that Congress declared shouldbe effectuated through the RPA.

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CONCLUSION

The petition for a writ of certiorari should begranted. In the alternative, in light of the FederalTrade Commission’s regulatory expertise in thisarea, the Court may wish to call for the views ofthe Acting Solicitor General.

Respectfully submitted,

August 23, 2010

JEFFREY L. KESSLERCounsel of Record

JOHN F. COLLINSEAMON O’KELLYSUSANNAH P. TORPEYDEWEY 8: LEBOEUF LLP1301 Avenue of the AmericasNew York, New York 10019(212) 259-8000jkessler@dl.com

KANNON K. SHANMUGAMWILLIAMS ~ CONNOLLY LLP725 Twelfth Street, N.W.Washington, D.C. 20005(202) 434-5000Counsel for Petitioner

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