Bailey Brauer’s Clayton Bailey analyzes recent Fifth Circuit win for the Agriculture and Food Committee of the American Bar Association Section of Antitrust Law.
On August 27, 2013, the U.S. Fifth Circuit Court of Appeals issued an opinion reversing a judgment in excess of $25 million in favor of more than 90 contract poultry growers who alleged that Pilgrim’s Pride Corporation attempted to manipulate chicken prices in violation of Section 192(e) of the Packers and Stockyards Act, 1921 (“PSA”) by idling certain chicken processing plants and terminating the growers’ poultry grower agreements. The Fifth Circuit’s decision, styled Agerton, et al. v. Pilgrim’s Pride Corporation, No. 12-40085, 2013 WL 4523500 (5th Cir. Aug. 27, 2013), reverses and renders judgment in Pilgrim’s Pride’s favor nearly two years after a magistrate judge issued findings of fact and conclusions of law imposing liability on the company because the plant idlings and concomitant termination of the growers’ contracts presented the likelihood of an anticompetitive effect.
The growers’ Section 192(e) claims stem from Pilgrim’s Pride’s restructuring efforts after seeking voluntary bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in December 2008. According to the Agerton opinion, “[t]he primary reason” for the company’s weak financial condition “appeared to be the company’s over-extension into the commodity chicken market,” of which Pilgrim’s Pride apparently “held an estimated 50% market share.” Id. at *1. Pilgrim’s Pride targeted for idling operations “unnecessarily producing a surplus of commodity chicken at great cost to itself.” Id. As Pilgrim’s Pride idled the facilities, it also terminated the poultry grower agreements of local poultry growers who raised poultry for processing at the plants. Id. Despite evidence demonstrating that “the total domestic supply of commodity chicken actually increased” after the idlings (id. at *4 n. 11), liability was imposed under Section 192(e) on the grounds of a likelihood of harm to competition. Id. at *2.