604 F.3d 272 (6th Cir. 2010), 08-5577, Terry v. Tyson Farms, Inc.

Docket Nº:08-5577.
Citation:604 F.3d 272
Opinion Judge:GRIFFIN, Circuit Judge.
Party Name:Alton T. TERRY, Plaintiff-Appellant, v. TYSON FARMS, INC., Defendant-Appellee.
Attorney:Cynthia Noles Johnson, Johnson Law, P.C., Cohutta, Georgia, for Appellant. Jay T. Jorgensen, Sidley Austin LLP, Washington, D.C., for Appellee. Jonathan H. Levy, United States Department of Justice, Washington, DC, for Amicus Curiae. Cynthia Noles Johnson, Johnson Law, P.C., Cohutta, Georgia, Rus...
Judge Panel:Before: NORRIS, COOK, and GRIFFIN, Circuit Judges.
Case Date:May 10, 2010
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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604 F.3d 272 (6th Cir. 2010)

Alton T. TERRY, Plaintiff-Appellant,

v.

TYSON FARMS, INC., Defendant-Appellee.

No. 08-5577.

United States Court of Appeals, Sixth Circuit.

May 10, 2010

Argued: March 4, 2009.

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ARGUED:

Cynthia Noles Johnson, Johnson Law, P.C., Cohutta, Georgia, for Appellant.

Jay T. Jorgensen, Sidley Austin LLP, Washington, D.C., for Appellee. Jonathan H. Levy, United States Department of Justice, Washington, DC, for Amicus Curiae.

ON BRIEF:

Cynthia Noles Johnson, Johnson Law, P.C., Cohutta, Georgia, Russell D. Hedges, Moore & Hedges, Tullahoma, Tennessee, for Appellant.

Jay T. Jorgensen, Carter G. Phillips, Sidley Austin LLP, Washington, D.C., Travis R. McDonough, Roger W. Dickson, Zachary H. Greene, Miller & Martin PLLC, Chattanooga, Tennessee, for Appellee.

Jonathan H. Levy, Michael S. Raab, United States Department of Justice, Washington, DC, for Amicus Curiae.

Before: NORRIS, COOK, and GRIFFIN, Circuit Judges.

OPINION

GRIFFIN, Circuit Judge.

Plaintiff Alton T. Terry, a Tennessee poultry farmer, entered into a contract with defendant Tyson Farms, Inc., the nation's largest poultry processing firm, to raise chickens. The present action evolved from purportedly unlawful retaliatory actions taken by Tyson against Terry in response to his affiliation with, and leadership role in, a newly organized regional growers' association. Terry brought suit under the Agricultural Fair Practices Act of 1967 (" AFPA" ), 7 U.S.C. § 2303, alleging unlawful interference and discrimination based on his membership in the growers' association; and the Packers and Stockyards Act (" PSA" ),

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7 U.S.C. §§ 192(a) and (b), alleging that Tyson engaged in unfair, discriminatory or deceptive practices, and subjected him to undue or unreasonable prejudice or disadvantage.

Tyson moved to dismiss Terry's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court granted the motion as to both claims and entered judgment in favor of Tyson. In doing so, the court determined that Terry failed to allege his involvement with an " association of producers," as defined and required by the AFPA, 7 U.S.C. § 2302(c) (2008). The district court also awarded Tyson attorney's fees incurred in defending against Terry's AFPA claim, pursuant to 7 U.S.C. § 2305(a). With respect to Terry's PSA claim, the district court held that proof of injury to competition is a necessary element of a claim under 7 U.S.C. §§ 192(a) and (b) and, because Terry failed to plead that Tyson's actions had an adverse effect on competition, this count likewise must be dismissed for failure to state a claim.

Terry now appeals the dismissal of his complaint and the district court's award of attorney's fees to Tyson. For the following reasons, we affirm.

I.

In our de novo review of the district court's grant of Tyson's motion to dismiss under Rule 12(b)(6), we construe Terry's complaint in the light most favorable to him and accept his well-pled factual allegations as true. Jones v. City of Cincinnati, 521 F.3d 555, 559 (6th Cir.2008).

In 2001, Terry bought a poultry farm in Tennessee and entered into an agreement with Tyson, which contracts with independent growers to raise broiler chickens owned and provided by the company. Tyson provides the chicks, feed, and technical advice; the responsibility of the grower is to raise the chickens to a target processing weight and then return the mature birds to Tyson. Tyson pays its growers according to a formula that measures the relative productivity of the growers by comparing the amount of feed provided and the weight of the chickens upon their return to the processing plant. Consequently, the weight of the chickens at the end of the grow-out period is an important factor in the compensation equation, and federal regulations provide that weighing is to occur immediately upon arrival at the processor's plant. See 9 C.F.R. § 201.82(b).1 A grower is entitled to watch his birds being weighed. See 9 C.F.R. § 201.108-1(e)(4).2 Tyson's alleged failure to promptly weigh Terry's chickens and allow Terry access to the weighing of his birds began the chain of events that culminated in this lawsuit.

Before he purchased the farm, Terry researched the poultry business, reviewed the seller's production records, and spoke with Tyson's production manager at its Shelbyville, Tennessee, complex about Tyson's intent to continue its placement of chickens at the farm following the sale. The production manager assured Terry that the farm and equipment were in excellent condition and that it was a top-

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producing farm. These assurances lead Terry to believe that the farm would need no substantial improvements in the near future. In the summer of 2001, Terry and his family moved to the farm, and he took over management of the poultry flock.

Terry thereafter became aware of numerous problems that poultry growers were experiencing with Tyson and other poultry processors. In 2002, Terry attended a conference in North Carolina with other contract growers, attorneys representing growers, and representatives of farmers' organizations. The purpose of the conference was to address the problems faced by growers in their dealings with processors and to provide guidelines for the organization of grower associations. After the conference, Terry became actively involved in organizing the poultry growers in his area into what ultimately became the Tennessee Poultry Growers Association (" TPGA" ). In 2004, he was elected chairman of the directors for the TPGA. In his capacity as a TPGA officer, Terry educated poultry growers about their rights under federal law and reported complaints about Tyson to officials at the Packers and Stockyards Administration in Washington, D.C.

Meanwhile, Terry became concerned that his poultry was not being weighed promptly upon arrival at the Tyson plant, as required by his contract and federal regulations. In August and December of 2004, he went to Tyson's plant to watch his birds being weighed, but he was denied access. He complained to a federal official and requested that a letter be sent to Tyson. On February 13, 2005, Terry followed a truck loaded with his poultry to Tyson's processing plant. When he arrived at the plant at 2:00 a.m., he was told that his chickens would not be weighed until after 4:00 a.m. When Terry returned at 4:00 a.m., he was once again denied access to the plant. Plaintiff called an agent with the Grain Inspection Division of the Packers and Stockyards Administration, who told Terry that he was in route to the plant and would find out why Terry was not allowed to observe the weighing of his poultry.

Later that same week, Terry met with Tyson's local managers. Following the meeting, Tyson delayed its placement of birds on Terry's farm for a full flock rotation, costing Terry $30,000 in lost compensation. When Terry met with Tyson's managers again on March 28, 2005, they informed him that Tyson made a " company decision" to discontinue the placement of birds at his farm after he made the weighing complaint. Terry asked for, but was refused, compensation for the damages he sustained as a result of the missed flock.

On January 11, 2006, Tyson notified Terry that his contract would not be renewed, allegedly because of his confrontational behavior toward Tyson's representatives and his failure to make " costly and unnecessary" changes to his poultry operation, despite the fact that Terry was a successful poultry producer and was " well above average" in the grower rankings. Terry avers that " [t]he reasons provided by Tyson for termination of [his] contract were false and pretextual to disguise Tyson's real reason, which was to thwart [his] efforts to organize growers, and in retaliation for [his] complaints to the Packers [and] Stockyards Administration." Terry subsequently advertised his farm for sale, but claims that he has been unable to sell it due to Tyson's demands for costly upgrades as a condition to the continued placement of poultry at the farm. This lawsuit followed.

II.

" [T]o survive a motion to dismiss, the complaint must contain either direct or

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inferential allegations respecting all material elements to sustain a recovery under some viable legal theory." Tam Travel, Inc. v. Delta Airlines, Inc., 583 F.3d 896, 903 (6th Cir.2009) (citation omitted). " We need not accept as true legal conclusions or unwarranted factual inferences, and conclusory allegations or legal conclusions masquerading as factual allegations will not suffice." Id. (citations and internal quotation marks omitted). " [T]he complaint's ‘ [f]actual allegations must be enough to raise a right to relief above the speculative level,’ and ‘ state a claim to relief that is plausible on its face.’ " Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

The parties to this appeal do not dispute the factual specificity of Terry's allegations. Rather, at issue is whether Terry's complaint contains adequate " direct or inferential allegations respecting all material elements to sustain a recovery" under the AFPA and PSA. Tam Travel, Inc., 583 F.3d at 903. With regard to the latter statute, however, we must first settle the question whether a showing of injury to competition is a necessary element of a claim under the PSA.

III.

This case poses a matter of first impression in this circuit: whether a plaintiff asserting unfair discriminatory practices or undue preference under §§ 202(a) and (b) of the PSA must allege an adverse effect on competition in order to state a claim. This issue is not novel to other courts; it...

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