Judge’s Perspective on Antitrust Lawsuit

Judge Bruce Thompson, from Reno, Nevada, heard the antitrust lawsuit filed by Cheese & Dairy against County Creamery. The judge’s complete post-trial statement is provided below. Some highlights:

“…It is the present and the future that count. Put away your differences and your bitterness….There isn’t a court in the land or a law that can come close to a solution to your problem.”

The judge described the situation as “an unholy mess.” He warned the sides that they were “playing with fire.” He told them that whichever side was ruled against would go out of business. He said that he would not make a ruling for at least two months, and he urged the two sides to reach a settlement in that time period or risk bankruptcy.

Thompson suggested two steps that could be taken:

  1. “Form two cooperatives, one for cheese producers and one for grade-A milk producers.
  2. Do away with the cheese cooperative all together and have all dairy farmers become grade-A milk producers.” (Credit: Headlight-Herald, April 11, 1968)

Then, in recognition of Dixon being the focal point for all of the issues, as well as an impediment to cooperation and healing, Judge Thompson also suggested, “Retire the present manager of Tillamook County Creamery Association – H. S. Dixon.” (Credit: Headlight-Herald, April 11, 1968)

The judge’s final suggestion was to remove Warren McMinimee from the settlement negotiations. “He has been too close to the controversy to be objective. He has been named as a defendant in this very lawsuit. And there are a good many others who are better qualified by disinterest and impartiality effectively to assist you in working out your problems.”

Judge Thompson said, “…we are dealing with an economic civil war in Tillamook County.” He concluded by saying, “I truly entreat you people, you good people, to think about this; get together and solve your problems by mutual accommodation, which is the only way they will ever be solved.”

The judge did not rule on the case before Cheese & Dairy folded and made his decision moot.



THE COURT: I want to waste a few words on the audience. I hope they aren’t wasted. I am afraid they might be, in view of what you have been doing for the past five years.

I think that all of you realize that these cases concern one of the most important industries of Western Oregon. They deal with the product Tillamook Cheese, which I personally like and eat regularly. I don’t know who makes it, whether it is TCCA OR TC&DA, or whether it is the Central Factory or the big factory, but it is good cheese; and it is a product that has earned a very fine reputation for excellence throughout the western part of the United States. I think it deserves considerably better treatment than it has received at the hands of the milk producers of Tillamook County during the past five or six years.

In making any statement today, I am more fully informed than you are about my own limitations. I don’t pretend to know anything about the dairy industry or cheese making. I milked two or three cows when I was a boy, and we used to peddle milk around the neighborhood, but I don’t think that qualifies me as a dairyman in any respect. And I also don’t know an awful lot, and I haven’t had a great deal of experience, with agricultural cooperatives. So it is possible that some of the things I have to say may appear ridiculuous [sic] or absurd to you people whose entire lives have been spent in the cheese and dairy industry.

About all I can say of the position I have, which is certainly one you don’t, is that I have the advantage of perspective, and I am not influenced in any respect by any partisanship or bias or perjudice [sic] resulting from any earlier activities. I am not afflicted with the virus of personal antagonisms and animosities and things of that kind; and even with the nearsightedness which everyone acquires through a lifetime of service to a particular profession, whether it be the law or medicine or a particular business or occupation of any kind. When you do spend all your life in one line of work, you are apt to acquire some sort of tunnel vision so far as your own problems are concerned. And I hope I can say something that will influence you in the future. I don’t have any idea that what I am going to say will be novel in any respect; I am sure the gist of it has been said by many others who are much more knowledgeable about your problems than I am.

In this four weeks of trial, I am sure we have pretty much just scratched the surface as far as the interior workings of the management policy problems of cheese making and dairying are concerned. But I think that it is so obvious that what I am about to say is at least in substance true that it should be repeated again.

Preliminarily I would like to say that I have been very impressed with the people on both sides who have appeared here in court and testified in this case. I am impressed with your very evident sincerity and integrity and honesty.

In the ordinary course of most trials, a Judge doesn’t have much difficulty in getting a feeling of the case as the trial progresses. In most cases it is not too long before you can separate the so-called good guys from the so-called bad guys, and reach a judgment accordingly. But this particular case is certainly not that kind of a case in any respect. And the unholy mess in which you presently find yourselves has developed slowly, and has stemmed from various economic pressures which have developed over the years, and you finally resorted to the law to solve your problems.

One thing I want to say is that your confidence in the law, while I am sure is a compliment to the attorneys you have selected, all of whom have rendered very excellent service in this case – and I am proud to have had the opportunity to preside over a case in which attorneys of this calibre have participated – and which is also some testimony to your confidence in the American system of justice, is unfortunately, in my opinion, sadly misplaced. There isn’t any law, there isn’t any Court, that could even come close to a solution of the prob1ems you have down in Tillamook County. To bring about a solution, you will have to do it yourselves. You are the only ones that can do it.

I have no doubt this isn’t the first time that there have been troubles in the cheese industry, and later the dairy industry, of Tillamook County. Probably forty or fifty years ago there were problems. But there have never been any problems which caused the disruption which you people have been working under during the past four or five years.

And I think, after listening carefully to the evidence and the testimony of your leaders, who have appeared here in court, that the problems that you have now began primarily when the demand for Grade A milk in the Portland market provided a higher return for your product than you could expect to make by manufacturing cheese. Some very wise person eighteen years ago might have realized what would eventually happen when the Grade A Shippers Association was organized and it became attached to the TCCA marketing agent. This was a ready-at-hand marketing agency, with office help, bookkeeping and accounting facilities, selling and marketing experience; and I can understand why those people who started Grade A would think, “Well, why duplicate all this overhead; we will just see if we can’t go into this big cheese cooperative and use their facilities.” And that is a sensible thing to do, and it looked sensible. But the problem is that the bedfellows so established were fundamentally incompatible.

The Grade A Shippers, increasing over the years in numbers and volume of production, have had, and owe, no loyalty whatsoever to the cheese industry. Their primary interest, is in sales of Grade A quota milk at the highest obtainable price; an activity in which the factory shippers have no discernable interest. Throughout the years the Grade A Shippers have enjoyed the best of both possible worlds; quota milk being sold at a premium price when the market demands it, and surplus milk dumped irregularly on the cheese factories, sold for the same return earned by the cheese factory producers, who, by the way, were the only stable source of milk for cheese production; and sold at a price in excess of the return for surplus milk on the Portland market. The loyalties of the factory milk producers were irrevocably with the cheese cooperative. The Grade A producers were loyal only to themselves.

With the growth of the demand for Grade A Production, these strange bedfellows were bound to bring about unrest and discord. In this context the ultimate marriage of Grade A Shippers Association and Tillamook Cheese Association is somewhat difficult to understand. But even if it had not occurred, something like the present situation would eventually have developed, because TCCA, as the marketing agent for both cheese and fluid milk, had bred into it the same virus of discord which ultimately gained the upper hand.

I may be inferring too much from the testimony, hut I think that this basic conflict is something that Mr. H. S. Dixon recognized and thoroughly understood. As the man in the middle, a hired employee, buffeted by both sides, he was in an unenviable position. The natural loyalties of the cheese producers to their local cooperatives, which over the years tend to become like fraternal organizations, created a sensitive situation; an atmosphere in which economic solutions for economic problems could not be discussed free from extraneous passions and prejudices. Whenever Mr. Dixon would send up a trial balloon in private or group discussion, he was certain to arouse distrust or discontent in someone, and his remarks were bound to be misunderstood and distorted on repetition.

As I view it, Mr. Dixon saw as the ultimate solution of the basic difficulty a county cooperative in which all producers would be Grade A, and all would share alike in sales of quota milk and Tillamook Cheese. His first step toward this goal was the merger of TCA, the largest cheese cooperative, and Grade A Shippers, the only Grade A cooperative. The substantial community of interest thus established, and the higher annual returns enjoyed by its members, would, hopefully by example, if in no other manner, have shown the way to others of how to stabilize over-all county production of marketable cheese and fluid milk. Unfortunately the step taken ended in disaster, and when the so-called Milne group in control of TC&DA fired Mr. Dixon from his office in that corporation, and sought his discharge from TCCA, Mr. Dixon found himself aligned with the smaller factory cooperatives, the very people he had been trying, against their will, to lead out of poverty into an economic paradise, relatively speaking.

The reasons for the antagonism to Mr. Dixon on the TC&DA Board of Directors are not discernible from the evidence that has been produced here. The parties have proved the existence of a large boulder of discord, but while we have peeked under it here and there, the real reasons initially supporting the discord are not apparent.

This business about the testimony at the milk stabilization hearing and the supposed contract to sell milk to Carnation at $5.15 are trivialities; excuses, not reasons; the sort of things people in this kind of a dispute latch onto to explain and persuade others why the end they are seeking should be supported. The abstract contention about the Board being the one to set policies and the manager being simply an executive officer is of the same sort. It is heard in every dispute of this kind.

If I may be permitted personal reference, I was on the Board of Regents of the University of Nevada, and we had a dispute over the President of the University, and this same sort of thing developed. Later on I was on the State Planning Board of the State of Nevada, and we had a dispute over our executive manager, and the same sort of thing developed. And in both of those disputes the same contention was made; that we are to set the policies and you are to carry them out. But it is just a lot of language; nobody knows what it means. Somebody has one idea of what a policy is and somebody has a different idea, and another person thinks that the area of a manager is a little broader than somebody else thinks it should be. But when you get into the fight and you are opposing your executive officer, then the things you think he does wrong are policy matters and the things you think he should be permitted to do are executive matters. And that is just the way it works; it is a matter of human nature.

I don’t think there is any future in speculating about the real reasons for your dispute over Mr. Dixon; I think that they are probably personal, to start with, and the result of some real or fancied affront or insult – maybe more than one – or perhaps they are the result of the ambition or desire for power of one or more persons.

I think you realize that it is impossible for someone in Mr. Dixon’s position to please everyone. And as a person becomes older and shorter tempered, with the increased responsibilities and worries, it is not unusual for something to be said in a moment of impatience which does not convey the right idea or is misunderstood. And more often than not the person hired as a managing agent for a long period of years by a disorganized miscellaneous group, such as the people of Tillamook County are – you have every kind of person, I imagine, down there that there is in the world – that person is going to be charged eventually with being too big for his britches. That is just the way things work out.

The next important step that occurred in the developing discord between the parties was the amendment of the TCCA Bylaws to water down the representation of TC&DA on the Board. This poorly conceived maneuver was effective only to accomplish a result which anyone not blinded by his partisan or factional interest should have expected. It completely alienated the majority of the TC&DA membership. The punching and counter-punching continued with more and more vigor. But these tactics are not very revealing in themselves. For me the important revelation is that everyone involved thoroughly realized that a complete dissolution or split-off of the warring factions would invite disaster for the dairy industry of Tillamook County. This is so obvious, because the cheese and marketing contracts with TCCA were terminable. If separation was what all of you really wanted, and thought best for your interests and the interests of your neighbors, it could have been easily accomplished. But you didn’t want it, and you knew in your bones it wouldn’t work. So instead of separating you fall into a clinch and engaged in all styles of in-fighting, including gouging, biting and kicking. The final result was a separation in September of 1963, under very cloudy circumstances, with charges and counter-charges of violations of agreements, posing difficult legal problems for the courts.

You have lived in a condition of separation for four and a half years, with all of the serious consequences which all of you knew would occur if the separation ever took place. Then here we are in Apri1, 1968, still fighting, still appealing to the judiciary to solve your difficulties, and completely ignoring every suggestion that has been made through the years that you, and only you, could ever evolve a sensible and satisfactory solution. I think it is nevertheless important that we try again.

I don’t want to decide this case, because it is very likely that someone will be seriously hurt. And I am not going to decide it for a period of at least two months. During that time I want you to get down to some serious settlement discussions. I have a few suggestions to make for guidelines for those discussions.

I have already told you that I don’t pretend any knowledge of the dairy industry. In many respects what I have said and what I am about to say represent oversimplifications of complex and intricate inter-relationships. The validity of these suggestions, if they have any, is supported only by my complete impartiality and whatever discernment and good judgment I have acquired during a few years of living with people like yourselves. My guidelines are based on a recognition of this diversity of interest between the cheese makers and the Grade A Producers.

So the first possibility which I suggest is this: There has to be a separation of the cheese factories from the Grade A producers. This would contemplate the organization of two independent marketing cooperatives; one for cheese and one for fluid milk on the Grade A market. If these two groups with basically diverse interests are not separated, you will never have a stable operation. But the cheese makers may say, ‘where will we get the milk to produce our cheese?’ And I would answer that that will depend wholly upon the economics of the situation from time to time. If the situation now and in the future is like it was in 1962 and 1963, you won’t have much difficulty in contracting with the Grade marketing cooperative for a stable, regular, minimum supply of their milk on a yearly or longer contract at a price in excess of the price for surplus on the Portland market, but something less than they now realize for non-quota milk by dumping it willy-nilly on the cheese factory. True, whenever the demand for quota milk increases to the point that the blend price to Grade A shippers exceeds the net return to be realized by selling surplus milk to the cheese factories, the cheese factories may be out of business. But that is no change from your present situation. If you think for one minute the present Grade producers, and those in 1962, will deliver milk for cheese at a lower return than they could realize elsewhere, you are just shutting your eyes to the economic facts of life. Whenever there is no good business reason or profit motive for delivering milk to cheese factories, Tillamook Cheese will be a product known only in the history books.

Of course, price isn’t the only business reason. The existence of an established stable market for milk in Tillamook County is an important business reason, too, which gives the cheese factories some bargaining power, because the Grade A market it has been shown is a pretty unreliable market, and you never know exactly what is going to happen. And it is important to all the milk producers of Tillamook County, Grade A or factory producers, that they know that they are at least going to have a place where they can dispose of a substantial part of their milk at a price; which may not be the best price, but it is a price that is going to be one where they can survive in bad times.

The process of separation of the Grade A industry from the cheese industry in terms of settlement of joint accounts and the similar complexities will be difficult, but more entangled relationships have been dissolved; and so with this, if the parties attack the problems in good faith with that end in mind. Now, the second guideline I have to suggest is an alternative to establishment of two cooperatives, one for cheese and one for A milk. It is that every dairyman who wants to stay in a marketing cooperative become a Grade A producer. This, as I see it, is the ultimate solution toward which Mr. Dixon was working. If this should eventuate, you would have one large county-wide marketing cooperative, but there would be no divergence of interest among the producer members or factory members. Each would be a Grade A producer, and each would obtain substantially the same payout for his milk. This may be the most practical solution at this late stage of the game, in view of the evidence that approximately two thirds of the dairymen have now qualified for Grade A production. And it has the advantage of minimizing some of the difficulties of separation of the capital assets.

To accomplish this some ruthlessness is involved. The requirement of Grade A for membership will have to be absolute. I could imagine the reaction of some who have persistently declined to go Grade A, with very good reasons I have no doubt. But the ruthlessness that will have to be shown can be easily tempered with provisions for help and assistance. For example, you could establish reasonable time limits for a person to qualify. And more effectively, the county cooperative can assist in financing with respect to individual cheese dairymen who need help in the conversion, and who may not qualify for conventional loans.

These are just two things that occurred to me, and I know the people who assist you in your negotiations will come up with a good many more and better ideas.

Dissolution of the small factory cooperatives is not at all a necessary or desirable part of this plan. So long as it is an economically functioning unit, any cheese factory should be permitted to continue. And when it loses that status the laws of economics will dictate its closure.

All sorts of arrangements could be worked out by people who are trying to make an agreement. If some of the producers still want to hibernate during two or three months of the wintertime, that could be provided for. And the only Obstacle that you might eventually run into would be a situation which would be wonderful for the industry; that the demand for Grade A milk and the demand for Tillamook Cheese becomes so great that you need steady year-around production from everyone to supply the market.

In that connection, I haven’t heard any evidence here that there is any reason biologically why you can’t dry up a Grade A cow just as well as a cheese cow.

The third guideline that I would like to suggest involves Mr. H. S. Dixon. If you are going to settle this controversy, he has to go. This is an unfortunate but necessary sacrifice under the circumstances. In my opinion, he has served you very well. But the tensions, antipathies and antagonisms which have developed will never be stilled if he remains, because he has become the focal point of your controversy.

Here again you don’t have to be as hard nosed as I sound at the moment. Mr. Dixon has served you for seventeen of his most productive years. The controversy which developed between you people was not of his making, and no reason occurs to me why people involved in an industry, who can spend in excess of a half a million dollars in litigation during a four and a half year period, could not afford to provide a reasonable pension or retirement benefit for a man like Mr. Dixon, who has served you the way he has. He is still a very vigorous man, and I have no doubt he has no desire to retire. It is the sort of disruptive thing that is not easy to do, but in experience I have had with these situations, you are never going to solve your problems so long as he remains the focal point of your controversy in Tillamook.

The fourth suggestion I have is not a very important one so far as the merits of your settlement are concerned, but I think it has practical importance. That is that Mr. Warren McMinimee should not be involved in the settlement negotiations. He has been too close to the controversy to be objective. He has been named as a defendant in this very lawsuit. And there are a good many others who are better qualified by disinterest and impartiality effectively to assist you in working out your problems.

Finally, I want to impress upon you how important it is that you give some thoughtful and receptive attention to working out this controversy yourselves. In this particular lawsuit you are playing with fire. An antitrust action is one that has the power to destroy. Once a Judge determines that antitrust laws have been violated, and computes the actual damages suffered, he has to multiply those damages by three. The Judge has no discretion. I cannot say, ‘These are pretty good people, and I will allow only actual damages in this case.’ The allowance of treble damages is mandatory. And when treble damages are allowed it frequently involves astronomical sums of money in relationship to the financial situation of the parties who are involved.

I can hear some of you now saying to yourselves, saying to your friends later, “Well, that Judge must be crazy. We have been fighting for five years and have invested hundreds of thousands of dollars in this dispute, and a good part of it in this very lawsuit, which he doesn’t want to decide. Instead he wants us to throw away the work and worry and investment of five years.’

I want to say to you that that argument isn’t any good. If all of you agree that a healthy cheese and dairy industry in Tillamook County is an important objective to be obtained, and will be promoted by a settlement, there isn’t any time like the present.

In a good many respects from this aspect it is like the war in Vietnam. Perhaps some of you have sons or daughters who are directly involved in that conflict. Everyone agrees it should be brought to an end. Some want to do it by dropping an atomic bomb on Peking, some by increased action against Hanoi, and others by withdrawal. But the end they seek is the same end; to bring the war to an end.

But there is one argument that you always hear, and it is this: Look at the billions of dollars we have spent over there during the last four years, and look at the hundreds or thousands of lives that have been sacrificed in this conflict, and are we going to throw all that away? Is that just for nothing? I tell you that really has nothing to do with reaching a correct decision. What has been done is past. We have to look at the present situation and proceed accordingly.

In these few remarks I purposely refrained from saying anything about the merits of this litigation, and it will be impossible for you to negotiate a settlement by guessing who you think is going to win or lose this case.

In a jury trial the Judge always tells the jury that nothing he has said during the trial, no ruling he has made on an objection to evidence, no comment he has made to the attorneys, nothing he has said in his instructions about the law is supposed to influence them with respect to their decision as to what the facts should be. Although I am both the Judge and the jury in this case, I tell myself, and I mean it, that there is nothing I have said during this trial, there is no question I have asked either or any of these attorneys, no comment I have made, whether it was jocular or otherwise, that in any way indicates what I think about the merits of this case.

Anyway, you want to think about what is going to happen if you get a judgment in this case. Do you think that that means that you are going to have ‘X’ thousands of dollars in the hip pocket of one cooperative or the other? The next thing you have will be an appeal, and those appeals take a year, eighteen months, two years. And then you ought to give some thought to how you go about collecting a judgment against a cooperative. Who owns those assets that a cooperative has? Is that something that you can levy execution against and take title to, or do those assets belong to the members of the cooperative?

These are just problems that I am suggesting to you that really you are not going to solve much of anything by insisting that this Particular case continue to final judgment. I don’t want you to get the idea that I am at all hesitant to decide the case. If I decide it, I will decide it according to the facts as I see them, and according to the law as I understand it, regardless of who gets hurt.

But this case in which there are antitrust claims by each party against the other is the kind of a case where somebody can be very, very seriously hurt. And in the long run it is not going to accomplish anything.

Most people like to go to quotations to express their ideas, and I do the same, because other people say things so much better than we can. There is a quotation from Abraham Lincoln’s second inaugural address which I know all of you know and have heard many times.

But it came at the end of the Civil War, almost the end of the Civil War in this country, and right now we are dealing with an economic civil war in Tillamook County. I want you to remember what Abraham Lincoln had to say toward the end of the Civil War. He said:

‘With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds, to care for him who shall have borne the battle, and for his widow and his orphan; to do all which we may to achieve and cherish a just and lasting peace among ourselves and with all nations.’

I truly entreat you people, you good people, to think about this; get together and solve your problems by mutual accommodation, which is the only way they will ever be solved.”