CHICAGO — A $155 million settlement will end a class action antitrust lawsuit against chicken purveyors Tyson and Pilgrim’s Pride, who have been accused of playing leading roles in a poultry price fixing scheme.
On Feb. 23, U.S. District Judge Thomas Durkin gave preliminary approval of a settlement that would end litigation that began Sept. 2, 2016, against the chicken producers. In that original filing, southwestern N.Y.-based Maplevale Farms claimed the producers hatched a plan to manipulate supply, keeping prices artificially high at a time costs were falling, especially those related to feed.
A host of other retailers, restaurants and others have since joined their names to the antitrust litigation.
The plaintiffs’ lawyers — Lockridge Grindal Nauen, of Minneapolis; Pearson Simon & Washaw, of San Francisco and Sherman Oaks, Calif.; and Hart McLaughlin & Eldridge of Chicago — filed a memorandum on Feb. 2 in Chicago federal court, explaining the settlement terms. According to the filing, Pilgrim’s would pay $75 million into a settlement fund, while Tyson would chip in $80 million. They said two earlier settlements with other producers accounted for more than $15 million recovered for their clients, and that “both Pilgrim’s and Tyson have agreed to provide meaningful cooperation, which may assist” prosecuting claims against 14 remaining defendants.
At this stage the terms call for plaintiffs’ attorneys to collect up to a third of the settlement proceeds, roughly $51 million, as well as reimbursement for expenses up to $4.5 million. Class representatives would get up to $25,000 each. These amounts, and a plan for distribution of awards to class members, will be formalized in future filings.
The lawsuit concerns chickens known as broilers — those to be slaughtered before reaching 13 weeks — which constitute 98 percent of all chicken meat sold in the U.S. 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. That allegedly drove up the price about 50% since 2008, even though input costs, like feed, dropped 20-23% in the same window.
According to the Feb. 2 filing, the earlier settlements with smaller producers worked out to $1 million per market share point, from Fieldale, and $2 million per point from Peco Foods, George’s Farms and Amick Farms. But Tyson and Pilgrim’s account for 37.5% of broilers sold to direct purchasers, so their payments equate to about $4 million per point.
While the civil litigation was proceeding, the U.S. Department of Justice filed criminal charges agains three Pilgrim’s executives. The company admitted to price fixing in 2020 and will pay $110.5 million in criminal penalties. Tyson, also indicted, is applying for leniency and cooperating with DOJ officials, according to a corporate statement.
According to the plaintiffs’ filing, the meaningful cooperation from Pilgrim’s and Tyson going forward includes “attorney proffers, depositions, live witnesses at trial and the authentication and production of documents.” Remaining defendants include Park Ridge-based Koch Foods, Maryland-based Perdue Farms and Mississippi-based Sanderson Farms.
The proposed settlement class would include “thousands of persons and entities” who purchased broilers between Jan. 1, 2008, and Dec. 20, 2019.
In November 2017, Durkin rejected a move to dismiss the complaint, saying the plaintiffs plausibly argued 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.”
Neither Tyson nor Pilgrim’s are admitting liability and continue to deny the underlying allegations, according to the filing.
Tyson is represented in the action by attorneys Rachel J Adcox, Denise Lynne Plunkett, Kail J. Jethmalani, John M. Tanski and Nicholas Gaglio, of Axinn, Veltrop & Harkrider LLP, of Washington, D.C. and New York; and Jordan M. Tank, of Lipe Lyons Murphy Nahrstadt & Pontikis, of Chicago.
Pilgrim's Pride is represented by attorneys Alli G. Katzen, and others with the firm of Weil, Gotshal & Manges, of Miami; and Michael L. McCluggage, of Eimer Stahl LLP, among others.
Plaintiffs are represented by attorneys Steven Hart, Robert J. McLaughlin and Kyle Porzan, of Hart McLaughlin & Eldridge, of Chicago; W. Joseph Bruckner, Brian D. Clark and Simeon A. Morbey, of Lockridge Grindal Nauen, of Minneapolis; and Clifford H. Pearson, Daniel L. Warshaw, Thomas J. Nolan, Bobby Pouya, Michael H. Pearson and Bruce L. Simon, of Pearson Simon & Warshaw, of Sherman Oaks, Calif., and San Francisco.