A federal judge will allow one of the country’s leading food service distributors and a group of others balking at the high price of chicken to continue to peck away at a federal antitrust action accusing the country’s largest poultry producers of fixing prices for their birds.
In an opinion issued Nov. 20 in Chicago, U.S. District Judge Thomas M. Durkin weighed in on the complaint initiated by southwestern N.Y.-based Maplevale Farms, which claimed the poultry producers hatched a plan to manipulate supply to keep the price of chicken artificially high at a time costs were falling, especially those related to feed.
New York-based Maplevale filed its complaint Sept. 2, 2016, naming as defendants many of the largest American producers of chicken, including Park Ridge-based Koch Foods, Arkansas-based Tyson Foods, Colorado-based Pilgrim’s Pride, Maryland-based Perdue Farms and Mississippi-based Sanderson Farms, as well as others. In all, 14 primary defendants are named, as well as numerous affiliated companies.
Maplevale has since been joined in the action by a number of additional business and individual plaintiffs leveling similar accusations in suits of their own. The actions have been consolidated by the federal courts.
The chickens at issue are broilers — those to be slaughtered before reaching 13 weeks — which constitute 98 percent of all chicken meat sold in the U.S. The defendants controlled almost 89 percent of broiler production in the country as of 2015. The initial complaint alleged producers used a private publication known as Agri-Stats, available only to the producers and which regularly updates the conditions of the poultry market, to privately share information to artificially constrict the supply of poultry, driving up the price about 50 percent since 2008, even though input costs, like feed, dropped 20 to 23 percent in the same window.
The action includes three putative classes and businesses and individuals who bought chicken, directly or indirectly, for resale, business or personal use.
The defendants moved to dismiss, asserting the plaintiffs failed to state a claim.
Durkin, however, largely sided with the plaintiffs, saying all claims under the Sherman Act should survive, as well as at least one state claim in every jurisdiction except Arkansas. No defendant was dismissed entirely, but all claims under Wisconsin law were dismissed.
Durkin said the plaintiffs plausibly argued the producers acted unusually compared to “the industry’s history of regular production increases,” balking at producers assertions the increase in chicken prices was tied to potential losses of market shares. He further wrote that although the plaintiffs didn’t allege details about how the conspiracy formed, the facts they did present are enough “to plausibly infer formation and communication.”
The bulk of Durkin’s opinion rests on the determination that enough exists in the complaint — notably, public statements from many of the producers — to ward off dismissal before proceeding to discovery. He also cited the producers’ business strategies during the period in question, saying they “engaged in intra-competitor sales to manage production numbers; increased exports to reduce product in the U.S. market; switched from fixed price to variable price contracts to take advantage of price increases; and decreased the number of breeder flocks by unprecedented numbers.”
Plaintiffs are represented in the action by attorneys with the firms of Lockridge Grindal Nauen, of Minneapolis; Kohn, Swift & Graf, of Philadelphia; The Miller Law Firm, P.C., of Rochester, Mich.; Hagens Berman Sobol Shapiro LLP, of Seattle and Chicago; Straus & Boies LLP, of Fairfax, Va.; Cotchett, Pitre & McCarthy LLP of Burlingame, Calif.; Gustafson Gluek PLLC, of Minneapolis; Hart McLaughlin & Eldridge, LLC, of Chicago; and Pearson, Simon & Warshaw LLP, of Sherman Oaks, Calif.
The defendant companies are represented, among others, by attorneys with the firms of Venable LLP, of Washington, D.C.; Kirkland & Ellis LLP, of Chicago; Skadden, Arps, Slate, Meagher & Flom LLP, of New York; Proskauer Rose, of New York; Stinson Leonard Street LLP, of Minneapolis; White & Case LLP, of Washington, D.C.; Mayer Brown LLP, of Washington, D.C.; Shook, Hardy & Bacon LLP, of Chicago; Novack and Macey LLP, of Chicago; Kutak Rock LLP, of Omaha, Neb.; Sidley Austin LLP, of Chicago; and Vedder Price P.C., of Chicago.