Suburban-based poultry wholesaler Koch Foods has laid an egg in Chicago federal court, with its failed motion to dismiss a suit brought against it by former chicken handlers, who claim the company failed to pay them minimum wage and overtime.
In a May 15 ruling, U.S. District Judge Amy St. Eve decided Park Ridge-based Koch Foods cannot distance itself from a prospective class action suit by using its corporate structure to claim a Mississippi subsidiary, not Koch Foods or other subsidiaries, is the correct defendant in the suit.
Koch Foods is owned by 55-year-old Chicago man Joseph Grendys, whom Forbes magazine listed in 2016 as the 335th richest American.
In June 2016, Mississippi men Jimmy R. Nicks and James R. Patrick filed for a class action against Koch Foods and its subsidiaries operating in Mississippi, Tennessee, Georgia and Alabama. Nicks and Patrick formerly worked for Koch, through a contracting company, catching and caging chickens at a Koch poultry processing farm in Mississippi.
Plaintiffs alleged Koch violated the U.S. Fair Labor Standards Act by failing to pay contracting companies enough to be able to then pay minimum wage and overtime to workers such as Nicks and Patrick. One of these contractors, Jet Poultry Services, of Summit, Miss., was named as a defendant in the suit; Jet settled with plaintiffs Jan. 11.
Plaintiffs said a worker puts in 10 to 12 hours per day, five to six days per week, caging tens of thousands of chickens each day. They are paid on a piece-rate basis per 1,000 chickens, rather than by hour, with the result workers labor more than 40 hours per week, but are not paid minimum wage or overtime.
Plaintiffs argued court decisions and U.S. Labor Department inquiries into Koch operations in Mississippi should mean defendants have “long been on notice” they must pay overtime and minimum wage. Koch has allegedly failed to tell contractors they must make these payments to workers, and Koch’s payments to contractors do not take these requirements into account.
Koch is organized into several separate companies, but plaintiffs alleged this organization creates a “fictitious corporate structure,” because these “sham” subsidiaries fall under the same ownership, with the same officers, directors, products, funds and logo. Koch is a joint employer, with the contractors, of the chicken catchers, in plaintiffs’ view. Furthermore, Koch makes many of the key decisions that govern the work, such as scheduling, with profits flowing into all the Koch companies.
Defendants have said the corporate divisions are genuine, with certain companies designated the “Farms” entities, which raise chickens, and other marked the “Foods” entities, which process chickens into consumables.
The status of Koch’s corporate house figured in a motion Koch filed to dismiss its Alabama, Tennessee and Georgia companies from the suit, on grounds these companies did not run operations in Mississippi, where plaintiffs’ injuries allegedly occurred.
However, St. Eve found the Koch companies “exist and operate as a single entity,” adding plaintiffs have plausibly alleged Koch uses a “fictional corporate structure” to “limit their liability.”
St. Eve also said plaintiffs have the right to sue all the Koch companies, based on alleged harm suffered at one Koch “outpost.”
Defendants also filed a motion, arguing the suit doesn’t belong in Chicago federal court, because the Koch operations in question took place in Mississippi. Defendants said they would accept a ruling that moves the matter to the U.S. District Court for Southern Mississippi.
Again, Judge St. Eve found Koch’s offices in Park Ridge rule the roost. She said either Illinois or Mississippi would be appropriate, but “decisions Koch employees made at Koch corporate headquarters in Illinois are vital to this case,” tipping the scale to Illinois. St. Eve kept the suit in Illinois.
Plaintiffs are represented by the Philadelphia firm of Berger & Montague and Hardin & Hughes, of Tuscaloosa, Ala., as well as by the Chicago firm of Lite DePalma Greenberg.
Koch Foods is defended by the Chicago firm of Novack and Macey, as well as by Baker, Donelson, Bearman, Caldwell & Berowitz, of Jackson, Miss.