A federal judge in Chicago refused to strike expert testimony bolstering the case of Kraft Foods and other processors suing egg producers over an alleged pricing conspiracy.
U.S. District Judge Steven Seeger issued an opinion Aug. 21, ruling in favor of Kraft along with The Kellogg Company, General Mills and Nestle. The processors, “big egg buyers,” per Seeger, specifically “egg products,” which are either whole or separated eggs, removed from shells and processed as liquid, dried or frozen.
The companies are suing United Egg Producers, United States Egg Marketers, Cal-Maine Foods and Rose Acre Farms in an antitrust action alleging the egg suppliers agreed to cut domestic supply by increasing export quantities, a strategy that included selling the exported eggs for less than the current American market price. The original lawsuit dates to December 2011, and the second amended complaint alleges the conspiracy spanned at least 1999 through 2008.
“Exporting eggs at lower prices, instead of selling the eggs domestically at higher prices, does not sound like a winning business strategy,” Seeger wrote. “But as plaintiffs tell it, the egg exports were a back-door way to decrease domestic supply.”
The defendants sought to strike the testimony of economist Michael Baye, arguing he conceded at an earlier multidistrict litigation trial that the food producers never suffered any harm as a result of the alleged scheme.
Other aspects of the litigation are that the producers agreed to adopt animal welfare standards as “a ruse to reduce the total space available to house egg-laying hens,” Seeger wrote while also using other supply control measures, such as an agreement to “reduce the national flock by seven million hens in an effort to increase prices,” according to the complaint.
After filing, the Judicial Panel on Multidistrict Litigation transferred the case to the Eastern District of Pennsylvania for discovery and pretrial motions. A judge in Pennsylvania denied the producers’ second motion for summary judgment, and the case headed back to Chicago. But other plaintiffs in cases still in Pennsylvania, including wholesale egg purchasers who optioned out of the class, retained Baye as an expert.
Since Baye was working for producers and grocers, he produced a report applying to both, Seeger explained, then testified for the grocers in December 2019. The jury in that trial ruled in favor of the egg producers, which they said meant Baye had already failed to show exports had a sustained impact on egg prices.
“Plaintiffs have tried — and failed — to prove that exports were part of any conspiracy,” according to the motion to exclude testimony. “Plaintiffs have not and cannot prove that exports increased egg products prices, or that they suffered antitrust injury or damages as a result of exports.”
Seeger said that taking the producers’ angle on Baye’s testimony — specifically that a small number of exports might affect prices for about a month — is too narrow in context of the processors’ larger allegations, which included claims the producers agreed to share revenue losses by reimbursing the companies that physically exported at a time when international prices dipped below domestic levels. They also said exporting was required for United States Egg Manufacturers membership.
“The second amended complaint cites five instances when defendants exported eggs to limit domestic supply,” Seeger wrote, from August 2002 through March 2008. “Manipulating egg exports was only one prong of a three-pronged strategy to ‘control supply and artificially maintain and increase the price of eggs.’ ”
Jury instructions in the grocers’ trial, from U.S. District Judge Gene Pratter, directed that panel to consider the conspiracy allegations in total, not the validity of individual methods.
“Unlike the cheese, the (exported) egg does not stand alone,” Seeger wrote, noting the producers’ attempt to exclude Baye’s testimony from the processors’ lawsuit is an attempt to divide and conquer a “theory of uncompetitive behavior” with several strands, each of which can contribute something even if one “was not strong enough to hold the conspiracy together.”
Further, Seeger wrote, Baye did testify that exporting affected domestic prices, albeit briefly, and the processors are trying to argue the producers deployed that strategy several times over several years.
“And based on Judge Pratter’s instructions to the jury, the exports’ effects need to be considered in conjunction with the Defendants’ other allegedly anticompetitive practices,” Seeger wrote, although he noted it is premature to consider jury instructions in the processors’ litigation.
The egg producers said Pratter had agreed to exclude evidence regarding egg exports, but Seeger said that decision was based on a motion of a changed theory, not because the evidence didn’t prove an antitrust injury.
“A failure to prove a case in a previous trial does not make the evidence irrelevant or a waste of time,” Seeger wrote. “The evidence supports one of plaintiffs’ core theories of liability supporting a single conspiracy to restrain trade. The jury will decide who to believe.”
Kraft, General Mills and Nestle are represented by attorney Brandon Fox and others with the firm of Jenner & Block, of Chicago and Los Angeles.
Cal-Maine Foods is represented by attorney Patrick Collins and others with the firm of King & Spalding, of Chicago and Atlanta.
United Egg Producers are represented by attorney Robin P. Sumner and others with the firm of Troutman Pepper Hamilton Sanders, of Pittsburgh, Philadelphia and Chicago.
And Rose Acre Farms is represented by attorney Donald M. Barnes and others with the firm of Porter Wright Morris & Arthur, of Washington, D.C., and Columbus, Ohio.