Adams v. Pilgrim’s Pride Corp. (E.D. Tex.)

       On September 30, 2011, the U.S. District Court for the Eastern District of Texas concluded that Pilgrim’s Pride Corporation (PPC) violated Section 192(e) of the Packers and Stockyards Act, 7 U.S.C. § 202(e) (PSA), and awarded a total of $25.8 million in damages to more than 90 former poultry growers for PPC near its El Dorado, Arkansas plant.

          The Court found that aconsultant had advised PPC, shortly beforeitsChapter 11 bankruptcy filing, to close certain plants to curtail the supply of chicken and stimulate the market to raise prices.  Shortly after its 12/1/2008 Chapter 11 filing, PPC decided to idle the plants, ostensibly to improve PPC’s product mix and reduce costs.  Plaintiffs claimed, however, that PPC’s true reason for idling the plants — rather than selling them — was to increase the price of chicken. 

      The Court found that PPC idled the El Dorado plant “for the purpose of manipulating or controlling the price of chicken.”  (Slip Op. at 9)  Among the evidence cited by the Court was an internal email by PPC’s Chief Restructuring Officer recommending against sale of a plant to Foster Farms, assisted by the State of Louisiana, “because it would enable them to flood the market with cheap chicken and foil our plans to restrict the chicken in the area and allow prices to rise.  (Slip Op. at 8, emphasis in original)  The Court found that PPC did not possess monopsony power in the market for grower services in the El Dorado market, but that considering PPC’s control of 25% of the national market for all chicken and 50% of the national market for commodity chicken, and the length of time it would take for competitors to replace capacity, “PPC’s actions were likely to lead to competitive injury,” and thus violated Section 192(e) of the PSA.   Damages were awarded based on the independent growers’ lost sales.

      The Court concluded, however, that PPC did not violate Sections 192(a) or 192(b) of the PSA, the Arkansas Deceptive Trade Practices Act, or the Louisiana Unfair Trade Practices Act.  The decision is reported at Adams v. Pilgrim’s Pride Corp., Civil Action No. 2:09-CV-397 (E.D. Tex. Sept. 30, 2011) (ECF No. 321), and is available through Comp Law360.

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