Gerald Carlin v. Dairyamerica, Inc. , 688 F.3d 1117 ( 2012 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GERALD CARLIN, JOHN RAHM, PAUL 
ROZWADOWSKI, And BRYAN WOLFE, No. 10-16448
Plaintiffs-Appellants, USDC No.
v.  1:09-CV-00430-
DAIRYAMERICA, INC. and AWI-DLB
CALIFORNIA DAIRIES, INC., OPINION
Defendants-Appellees.

Appeal from the United States District Court
for the Eastern District of California
Anthony W. Ishii, United States District Judge, Presiding
Argued and Submitted
August 31, 2011—San Francisco, California
Filed August 7, 2012
Before: Raymond C. Fisher and Johnnie B. Rawlinson,
Circuit Judges, and George H. Wu, District Judge.*
Opinion by Judge Wu
* The Honorable George H. Wu, United States District Judge for the
Central District of California, sitting by designation.
8727
CARLIN v. DAIRYAMERICA, INC. 8729
COUNSEL
Benjamin D. Brown (argued), Daniel A. Small, Victoria S.
Nugent, George F. Farah and Brent W. Johnson, Cohen Mil-
stein 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
8730 CARLIN v. DAIRYAMERICA, INC.
P.L.C., Seattle, Washington; J. Barton Goplerud, Hudson,
Mallaney, Shindler and Anderson, PC, West Des Moines,
Iowa, for the plaintiffs-appellants.
Allison A. Davis, Davis Wright Tremaine LLP, San Fran-
cisco, 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.
OPINION
WU, District Judge:
This appeal raises two issues: (1) whether the judicially
created “filed rate doctrine,”1 which typically has been uti-
lized in common carrier and public utility litigation, is appli-
cable 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
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 ref-
erence will be to the “filed rate doctrine.”
CARLIN v. DAIRYAMERICA, INC. 8731
though the court found that “[i]t is not disputed that [the]
USDA determined that the rates calculated . . . were errone-
ous and that other rates should have applied based on cor-
rected pricing inputs.”2
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 char-
acteristic of production.
Milk has essentially two end uses: as a fluid staple
of daily consumer diet, and as an ingredient in manu-
factured 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 peri-
ods 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 histori-
cal tendency prior to regulation was for milk distrib-
2
The district court’s dismissal decision is reported at Carlin v.
DairyAmerica, Inc., 690 F. Supp. 2d 1128 (E.D. Cal. 2010).
8732 CARLIN v. DAIRYAMERICA, INC.
utors, “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 ben-
efits and burdens of the milk market are fairly and proportion-
ally 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).
Milk, milk products, and prices paid by handlers to produc-
ers 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:
3
In the context of milk and milk products, “handler” is defined in 7
C.F.R. § 1000.9 (2012).
CARLIN v. DAIRYAMERICA, INC. 8733
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 pro-
vided an opportunity for public hearing and com-
ment. 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 commodi-
ty.” 7 U. S. C. § 608c(4). Moreover, before any mar-
ket 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 with-
hold 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 produc-
ers consenting to its promulgation and upon his mak-
ing an administrative determination that the order is
“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 con-
tain provisions which, inter alia: (1) classify milk in accor-
dance 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 deliv-
ered 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):
8734 CARLIN v. DAIRYAMERICA, INC.
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 scar-
city, 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.
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 admin-
istrator” 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
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. DAIRYAMERICA, INC. 8735
minimum price structure for milk and milk products] is admit-
tedly 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 pay-
ment pooling. The 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 geo-
graphic 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 “manufacturing
allowances,” are intended to represent the costs to
8736 CARLIN v. DAIRYAMERICA, INC.
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 allow-
ance and transfer the balance to producers.
The second major component of dairy market reg-
ulation is payment pooling. Under this system, han-
dlers 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 han-
dlers 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 pro-
ducers 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 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 gov-
erned 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
CARLIN v. DAIRYAMERICA, INC. 8737
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 butter-
fat, 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 fac-
tors 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.
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 allow-
ance 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 fac-
tor represents the amount of a manufactured dairy
product that can be produced per hundredweight
(100 pounds) of milk. USDA accounts for the por-
tion 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
8738 CARLIN v. DAIRYAMERICA, INC.
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 sell-
ing 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 evidentiary portion of the hear-
ing, 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 recom-
mendation details the findings of fact, rationale, and
the legal authority for its decision. See id. § 900.12.
After Dairy Programs has issued its recommenda-
tion, another round of comments follow, and a refer-
endum 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 regard-
ing commercial transactions involving milk and milk prod-
ucts. 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 Enhancement Act of 2000, 7 U.S.C.
5
See also Kenneth Bailey & Peter Tozer, An Evaluation of Federal
Order Reform, 84 J. Dairy Sci. 974, 977 (2001) (indicating that NASS had
CARLIN v. DAIRYAMERICA, INC. 8739
§ 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 promul-
gated until 2008.
The district court summarized NASS’s methods for collect-
ing 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 con-
ducted by the National Agricultural Statistics Service
(“NASS”) to collect wholesale prices for representa-
tive products within each category. The survey infor-
mation is gathered from product manufacturers
(sometimes referred to in pleadings as milk “han-
dlers”) who produce a million pounds or more of
manufactured product per year. The FMMO mini-
mum 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 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
been using such exchanges for pricing information but that they were con-
sidered to be “thin markets” because only a small percent of the commodi-
ties were actually traded on them and, hence, they were subject to
potential price manipulation).
8740 CARLIN v. DAIRYAMERICA, INC.
NFDM [nonfat dry milk]. The DMEA requires han-
dlers 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 sell-
ing price is set more than 30 days before the comple-
tion 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 trans-
action during the time period in question.
690 F. Supp. 2d at 1130-31. NASS required the han-
dlers/reporting firms to fill out “Annual Validation Works-
heets” which included the question “[w]hen reporting nonfat
dry milk sales data to NASS, did you or can you: exclude for-
ward pricing sales (sales in which the selling price is estab-
lished, 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, 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.
CARLIN v. DAIRYAMERICA, INC. 8741
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. Non-
fat 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 pro-
ducers who receive prices for their milk that are lower than
they should be due to inaccurate reporting.6
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 “es-
tablished by a group of nine dairy cooperatives for the pur-
pose of marketing dairy products manufactured by the
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 pro-
ducers could obtain judicial review of the Secretary of Agriculture’s prac-
tice 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
AMAA had given producers “definite personal rights” and “the silence of
Congress as to judicial review is, at any rate in the absence of an adminis-
trative 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 funda-
mental 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).
8742 CARLIN v. DAIRYAMERICA, INC.
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 dispute, that
approximately ninety percent of the contracts exe-
cuted by Dairy America and reported in the weekly
NASS surveys were forward contracts that should
not have been reported in the NASS surveys accord-
ing to DMEA procedures. Plaintiffs contends [sic]
that, because forward contract prices were signifi-
cantly 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 accord-
ing to instructions.
Id. at 1131. On account of DairyAmerica’s market domi-
nance, 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.
CARLIN v. DAIRYAMERICA, INC. 8743
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 report-
ing 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 Gen-
eral (“OIG”) issued a report regarding “the April 2007 discov-
ery 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 Con-
trols 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.
8744 CARLIN v. DAIRYAMERICA, 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 vis-
its, 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.
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
7
As noted by the NASS:
In cases where there had been reporting problems, NASS pro-
CARLIN v. DAIRYAMERICA, INC. 8745
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 fed-
eral 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 prospective
economic advantage, respectively, both under California com-
mon law; the third claim asserted violation of California’s
Unfair Business Practices Law, California Business and Pro-
fessions 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) plain-
tiffs’ state law claims are preempted by the DMEA. The dis-
trict court dismissed the monetary portions of all four claims
solely on the grounds that they were not justiciable pursuant
vided 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 pro-
vided 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
Will Not Issue Special Report on Nonfat Dry Milk Prices (June 19, 2008),
available at http://www.nass.usda.gov/Newsroom/Notices/
06_19_2008.asp (last visited June 19, 2012).
8746 CARLIN v. DAIRYAMERICA, INC.
to the filed rate doctrine. 690 F. Supp. 2d at 1140-41. The dis-
trict court also held that, while the filed rate doctrine purport-
edly 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 complaint] will be dis-
missed with leave to amend.
The court is also mindful that the filed rate doc-
trine consists of a body of law that has been the sub-
ject 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 dis-
missed 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.
CARLIN v. DAIRYAMERICA, INC. 8747
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 dis-
missal 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 Cir.
2002). “Such review is generally limited to the face of the
complaint, materials incorporated into the complaint by refer-
ence, 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 Tel-
labs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322
(2007)). In undertaking this review, we will “accept the plain-
tiffs’ 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 con-
cern the application of the filed rate doctrine and its preclu-
sive effect in the present case and because the district court
did not rule on defendants’ other defenses (such as the pur-
ported 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.”).
8748 CARLIN v. DAIRYAMERICA, INC.
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
[1] 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 inter-
preting 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 rec-
ognized 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 inter-
preting the ICA, stated:
[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 prohibit-
CARLIN v. DAIRYAMERICA, INC. 8749
ing secret departures from such tariffs, and forbid-
ding rebates, preferences and all other forms of
undue discrimination.
Thus, the initial raison d’être for the doctrine concerned sta-
bilizing 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 dis-
crimination and stabilizing rates.” (citations omitted)).
Once it was determined that federal law required the pri-
macy of filed rates and tariffs, there developed two additional
and related justifications for the doctrine, i.e., federal preemp-
tion (or the supremacy of federal law) and deference to fed-
eral agency expertise (or primary 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 Commis-
sion assisted in the enforcement of the supremacy of
federal law:
“The common rationale of these cases is
easily stated: ‘[There] can be no divided
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 discrim-
ination, 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.
8750 CARLIN v. DAIRYAMERICA, INC.
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 com-
merce 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). Allow-
ing 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 con-
flict 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 congressio-
nal scheme of uniform rate regulation”). That conflict would
be prevented by treating the filed rates as 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.
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. DAIRYAMERICA, INC. 8751
AT&T Co., 512 U.S. 218, 234 (1994) (quoting Sec. Servs.,
Inc. v. Kmart Corp., 511 U.S. 431, 440 (1994)) (internal quo-
tation 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 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 fed-
eral and state antitrust actions; it turns away Racketeer Influ-
enced 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.
[2] No Supreme Court or federal appellate court case has
considered whether the filed rate doctrine applies to market-
ing 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
8752 CARLIN v. DAIRYAMERICA, INC.
rate doctrine does apply to challenges to milk pricing set
under an FMMO, it does not apply to a challenge to a defen-
dant’s artificially inflated wholesale milk prices, which are
permitted to be in excess of the minimum rates set under the
FMMOs).
Originally, the filed rate doctrine arose in the context of the
following paradigm. A rate or tariff within an industry regu-
lated by federal statute is filed by a carrier or other ser-
vice/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 ser-
vice/product other than the filed one. Id. (“We have held these
provisions ‘to create strict filed rate requirements and to for-
bid equitable defenses to collection of the filed tariff.’ ” (quot-
ing 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 particu-
lar 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] pur-
pose[s] underlying the filed rate doctrine [are] impli-
cated.
(Citations omitted).
CARLIN v. DAIRYAMERICA, INC. 8753
[3] 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). Fur-
ther, 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. Addition-
ally, 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 situa-
tion generally.
[4] First, milk pricing is the subject of extensive federal
statutory and regulatory control. See, e.g., 7 U.S.C. § 608c(5).
Additionally, under the AMAA, the USDA (via the AMS and
through the FMMOs) sets minimum prices for raw milk pur-
chased from producers by handlers where there can be no
8754 CARLIN v. DAIRYAMERICA, INC.
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 uni-
form minimum pricing which should not generally be the sub-
ject 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 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 subsec-
tion (1) of this section . . . and (b) authorizing no
action under this chapter which has for its purpose
CARLIN v. DAIRYAMERICA, INC. 8755
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 Doc-
trine.
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
We are not persuaded that Brown requires meaningful
review for the filed rate doctrine to apply in all cases, how-
ever. 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.”
10
Plaintiffs also relied on our decision in Wileman Bros., which is read-
ily 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 the Secre-
tary’s authorization) issued and enforced a “well-matured” standard gov-
erning 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 immu-
nity from antitrust claims on the simple basis that the Secretary had “tacit-
ly” approved the higher maturity standards they issued by his failing to
explicitly disapprove them, as he could have done under applicable regula-
tions. See 909 F.2d at 337-38.
8756 CARLIN v. DAIRYAMERICA, INC.
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 essen-
tial 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 Thus, like the district courts
that have addressed the issue, we do not read Brown as mak-
ing meaningful agency review a sine qua non for the applica-
bility 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 character-
ize Brown as an “outlier” decision on the issue).
[5] The proper inquiry, therefore, is whether the FMMO
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 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. We 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 activi-
ties by the courts and bar federal antitrust claims under the Filed Rate
Doctrine.” Id.
CARLIN v. DAIRYAMERICA, INC. 8757
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 preemp-
tion 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 requirements of the statutory scheme. Part
of the methodology includes formulas which are dependent
upon the input of sales prices and volumes supplied by desig-
nated 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, plain-
tiffs do not contend that the Secretary did not have the statu-
tory 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 provi-
sion 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
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.
8758 CARLIN v. DAIRYAMERICA, INC.
Plaintiffs counter that, under the relevant implementing regu-
lations, 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.” 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, pro-
duction differentials, and other factors in creating the formu-
las 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 agen-
cy’s rules. Further, the FMMOs are not effective until the
Secretary obtains the approval of handlers of at least 50 per-
cent 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 ongo-
ing 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 misinforma-
tion, calculated corrective prices for the periods when the
CARLIN v. DAIRYAMERICA, INC. 8759
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. Plain-
tiffs’ 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).
[6] 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 Medicaid 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. Mass. 2003) (holding that filed rate
doctrine did not apply because pharmaceutical companies do not file rates
with any agency). Furthermore, none of these cases address the doctrine
at significant length and they would not therefore be particularly persua-
sive even if they were on point.
8760 CARLIN v. DAIRYAMERICA, INC.
III. Precedent Does Not Require and Policy Consider-
ations Do Not Support Applying the Filed Rate Doc-
trine 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:
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 inev-
itably 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’ misre-
CARLIN v. DAIRYAMERICA, INC. 8761
porting. 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 at1048 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 miscon-
duct of the enriched party.
A. The Filed Rate Doctrine Does Not Bar Plaintiffs’
Claims Given the USDA’s Recognition That Its Pub-
lished FMMO Rates Were Incorrect Due to Defen-
dants’ Misreporting.
[7] 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
agency. Keogh, 260 U.S. at 163.15 Whether an agency has suf-
ficiently rejected a rate for purposes of the filed rate doctrine
analysis, whether that rejection should eliminate the doc-
trine’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
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 sub-
ject to regulation is not subject to antitrust liability to its custom-
ers 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).
8762 CARLIN v. DAIRYAMERICA, INC.
consideration of the underlying statutory scheme in which the
doctrine is being applied and the justifications for the doc-
trine.
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 defen-
dant’s misconduct (a breach of contract) had prevented the
plaintiff seller from filing for a higher rate.16 Id. at 583. How-
ever, 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 dif-
ferent rate than the one approved by the Commis-
sion, 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 retroac-
tively as well as ordering any reparations based on the unlaw-
fulness 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
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.
CARLIN v. DAIRYAMERICA, INC. 8763
would] ‘only accentuate[ ] the danger of conflict.’ . . . [and
constitute a] usurpation of federal authority.” Id. at 584.17
Obviously, where the controlling statute prohibits the fed-
eral 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 seg-
ment 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 retroac-
tively 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
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
had a viable cause of action and a basis for the federal courts to exercise
jurisdiction. Id. at 253-54.
8764 CARLIN v. DAIRYAMERICA, INC.
a matter of law, “[u]nless and until suspended or set aside.”
260 U.S. at 160-63. However, the Court observed that in the
context of the ICA, setting aside or suspending the published
tariff for 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 para-
mount purpose of the ICA (i.e., preventing pricing discrimina-
tion), 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 chal-
lenging 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. at 119-20. In 1986, in
response to a growing trend wherein carriers and shippers pri-
vately 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 unrea-
sonable practice.” Id. at 121. A carrier that had entered into
such a private contract went bankrupt, and its bankruptcy
estate brought an action against the shipper to collect the dif-
ference between the contract rate and the higher filed tariff.
The Court initially held that “The filed rate doctrine . . . con-
tains an important caveat: The filed rate is not enforceable if
CARLIN v. DAIRYAMERICA, INC. 8765
the ICC finds the rate to be unreasonable.” Id. at 128. The
Court went on to quote from Arizona Grocery Co. v. Atchi-
son, 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 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
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 find-
ing that the carrier engaged in an unreasonable practice should,
like a finding that the filed rate is unreasonable, disentitle the car-
rier to collection of the filed rate. We have never held that a carri-
er’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 def-
erence 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 the statute. See Chev-
ron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 843 (1984).
We 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).
8766 CARLIN v. DAIRYAMERICA, INC.
will not bar a plaintiff from seeking reparation from the impo-
sition of the unreasonable rate.
The Supreme Court in ICC v. American Trucking Associa-
tions, 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.” 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 author-
ity “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 Pipe-
line 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 reg-
ulating agency can be held by the courts to operate retroac-
tively.” 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
CARLIN v. DAIRYAMERICA, INC. 8767
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 forth in
FMMOs in question.19 Id. at 1139-40. We disagree with the
first point and conclude that the second was satisfied.
[8] 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
farmers. Those rates are not initially filed and reviewed by the
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 at 1139-
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 infer-
ence in American Trucking, holding that “[t]he guidelines for antitrust
immunity . . . are of such a nature that carriers who submit tariffs in sub-
stantial 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 iden-
tified a precedent which holds that knowledge is determinative of plain-
tiffs’ right to proceed. The district court quotes Cooperative Power
Association v. FERC, which held that American Trucking “approved retro-
active 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 requir-
ing knowledge. And since American Trucking assumed knowledge, it did
not reach the question of whether damages could be recovered without it.
8768 CARLIN v. DAIRYAMERICA, INC.
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 regula-
tions that would appear to require any formal process or par-
ticular 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 statu-
tory 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 dol-
lar losses for dairy farmers.
[9] 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 opportu-
nity to address this issue of when an agency has taken suffi-
cient steps to officially disapprove a rate. We 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.
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.
CARLIN v. DAIRYAMERICA, INC. 8769
[10] The USDA adequately expressed its disapproval of
the FMMO prices.21 While the USDA’s recalculation of mini-
mum 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 repudia-
tion, 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 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 dis-
bursed to the milk producers, and corrective disbursements to
producers were no longer possible.” But the USDA also rec-
ognized that the rates that were filed were incorrect at the
time they were filed. Indeed, when members of Congress, out-
raged by the uncompensated losses suffered by the milk pro-
ducers, asked what plans the agency had to remedy the
situation, the USDA responded by ensuring that, moving for-
21
While the defendants argue that the AMS (which defendants charac-
terize as “the division that the Secretary charged with FMMO 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 FMMO formula, AMS 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, AMS issued a report on “Im-
pacts 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.
8770 CARLIN v. DAIRYAMERICA, INC.
ward, the agency would promulgate regulations providing for
more oversight responsibilities and more effective enforce-
ment mechanisms. See 7 C.F.R. pt. 1170 (2012).
[11] 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
unusual situation where (1) the misreporting is both signifi-
cant 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) per-
mitting 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 pro-
tect.
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’
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).
CARLIN v. DAIRYAMERICA, INC. 8771
that would be furthered by the retroactive ‘rejection’ of the
minimum pricing structures set forth in the FMMO’s in ques-
tion.” 690 F. Supp. 2d at 1139. Yet, as cited by plaintiffs, the
DMEA’s mandate is that the USDA “shall establish a pro-
gram of mandatory dairy product information reporting that
will . . . provide timely, accurate, and reliable market informa-
tion.” 7 U.S.C. § 1637b(a). Their complaint includes numer-
ous 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.
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 poten-
tially 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 miscon-
duct by that party.23 However, the plaintiffs here are proceed-
ing 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.
23
If the acts of misreporting by the handler were considered to be viola-
tions of the FMMO orders themselves, the AMAA provides for civil pen-
alties of up to $1,000 for each such violation. 7 U.S.C. § 608c(14)(B).
8772 CARLIN v. DAIRYAMERICA, INC.
C. The Purposes of the Filed Rate Doctrine Do Not Sup-
port Applying It as a Bar under the Facts of This Case.
Since the cases cited by both plaintiffs and defendants pro-
vide, 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 Moun-
tain Motor Tariff Bureau, Inc., 690 F.2d 1240, 1266-67 (9th
Cir. 1982) (applying Keogh’s policy considerations to deter-
mine that the filed rate doctrine was not a bar). Courts typi-
cally describe the filed rate doctrine as having three purposes:
deference to agencies’ greater expertise in rate-setting, pre-
venting discrimination by ensuring all ratepayers 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 dis-
trict court would have a great deal of trouble calculating dam-
ages. 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 differ-
ence would have given market participants a different set of
24
MS referred to these as “reallocation” effects. Defendants call them a
“dynamic model.” But all parties are referring to the same phenomenon.
CARLIN v. DAIRYAMERICA, INC. 8773
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 without more facts. Given that the dif-
ferences in prices were two cents per pound of NFDM, it
seems likely that any substitution effects would have been rel-
atively 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.
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 contemplated in
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
FMMO 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 FMMO 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 repre-
senting 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 con-
duct. 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 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
8774 CARLIN v. DAIRYAMERICA, INC.
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 dif-
ferent 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 dam-
ages 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 oth-
erwise have prevailed, the amount recovered might, like a
rebate, operate to give him a preference over his trade com-
petitors.” 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
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 suf-
fered.” (Rest.2d Torts, § 912, com. a, at p. 479.)
(Alteration in original).
CARLIN v. DAIRYAMERICA, INC. 8775
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)). Mar-
cus, however, qualified this holding: “We agree that ‘the con-
cerns for discrimination are substantially alleviated in [a]
putative class action’ . . . . However, the Supreme Court has
rejected the suggestion that . . . the nondiscrimination princi-
ple [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 Com-
munications should, therefore, be read as rejecting any blan-
ket 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 ques-
tion, defendants’ arguments that judgment in favor of plain-
tiffs would have a discriminatory effect are weak. Defendants
contend that awarding damages against DairyAmerica would
discriminate against them in comparison with other milk han-
dlers. However, as observed above, the prohibition against
discriminatory pricing under the AMAA is concerned with
discrimination suffered by the dairy producers, not the han-
dlers. In any case, were damages 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 defen-
dants contend, “face higher/non-uniform prices for the rele-
vant 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 com-
petitors (though it is unclear how large that disadvantage
would be given that it controls 75 percent of the NFDM mar-
ket), but it has already profited from the lower prices its mis-
reporting has allowed it to enjoy; damages would at least
partially cancel out this undeserved benefit.
8776 CARLIN v. DAIRYAMERICA, INC.
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 agen-
cy’s authority to set minimum milk prices or to directly con-
test 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 Congres-
sional 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 pur-
chasers in the natural gas market would not further the pur-
pose of the filed rate doctrine.” 503 F.3d at 1045. 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 con-
gressional 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 lia-
bility or calculate damages. To hold otherwise would be an
exercise of mechanical formalism in contravention of the pur-
poses of both the AMAA/DMEA and the filed rate doctrine
itself.
CARLIN v. DAIRYAMERICA, INC. 8777
CONCLUSION
[12] 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.