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. Fifth Circuit reverses $25 million chicken price fixing lawsuit under PSA § 192(e) 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

By Jonathan Randles Law360, New York (August 28, 2013, 1:21 PM ET) -- The Fifth Circuit on Tuesday struck down a $25 million judgment against Pilgrim's Pride Corp., ruling the chicken producer's decision to suspend operations at its Arkansas plant — a move intended to increase poultry prices — did not violate U.S. antitrust laws. The ruling overturns a penalty issued in 2011 against Pilgrim's Pride over its decision to cut costs by suspending operations at several of its facilities shortly after the company filed for bankruptcy. Pilgrim's Pride was producing more chicken than the market demanded and “wisely” chose to scale back production to try and save the business, the Fifth Circuit said. “PPC’s conduct was merely the legitimate response of a rational market participant to changes in a dynamic market,” the Fifth Circuit said. “If a firm inadvertently overproduces a good and drives down prices, it does not break the law by cutting production so that prices may recover.” Pilgrim's Pride had been found liable under the Packers and Stockyards Act, which prohibits meat producers from manipulating market prices. The appeal stems from a former Texas federal judge's finding that Pilgrim's Pride had violated the law because the company had hoped by reducing its output it would increase chicken prices. The Fifth Circuit said the lower court's analysis was too simplistic. The PSA, as an antitrust statute, is intended to protect market competition, and not necessarily low prices, the appeals court said. Therefore, Pilgrim's Pride's attempt to raise prices, by itself, is not a violation of the law, the ruling said. The Texas court needed to go deeper and determine whether the decision by Pilgrim's Pride to idle its Arkansas plant was intended