Adams v. Pilgrim's Pride Corp.

• Decision Date: 22 April 2016
• Docket Number: Case No. 2:09-CV-397-RSP
• Citation: 182 F.Supp.3d 679
• Parties: Sheila Adams, et al. v. Pilgrim's Pride Corporation.
• Court: U.S. District Court — Eastern District of Texas

182 F.Supp.3d 679

Sheila Adams, et al.

v.Pilgrim's Pride Corporation.

Case No. 2:09-CV-397-RSP

United States District Court, E.D. Texas, Marshall Division.

Signed April 22, 2016

Mark C. Brodeur, The Brodeur Law Firm, Dallas, TX, Johnny E. Dollar, Dollar Laird LLP, Monroe, LA, Michael Aaron Benefield, Benefield Law, William Ellsworth Davis, III, The Davis Firm, PC, Longview, TX, Robert Lamar Depper, Jr., Depper Law Firm, Inc., El Dorado, AR, for Sheila Adams, et al.

Clayton Edward Bailey, Alexander Max Douglas Brauer, Benjamin Leon Stewart, Paul Edward Green, Bailey Brauer PLLC, Adam Thomas Dougherty, Ogletree, Deakins, Nash, Smoak & Stewart, PC, David W. Parham, Akerman LLP, Jennifer Dee McCollum, Kimberly Fahrenbrook Rich, Matthew T. McCrary, Baker & McKenzie LLP, Mark C. Brodeur, The Brodeur Law Firm, Dallas, TX, Jennifer Parker Ainsworth, Wilson Robertson & Cornelius PC, Tyler, TX, Michael A. Pollard, Baker & McKenzie, Chicago, IL, William V. Roppolo, Baker & McKenzie, Miami, FL, for Pilgrim's Pride Corporation.

MEMORANDUM RULING

ROY S. PAYNE, UNITED STATES MAGISTRATE JUDGE

Currently before the Court is the Motion for Summary Judgment (Dkt. No. 159) filed by Defendant Pilgrim's Pride Corporation on April 15, 2011. The Motion comes back before the Court to consider the effect of the August 27, 2013 decision of the Court of Appeals (the Agerton decision) reversing the Judgment rendered in favor of some of the Plaintiffs ("the El Dorado growers") on September 30, 2011. For the reasons expressed below, the Court finds that the Agerton decision applies with equal force to the claims of all of the Plaintiffs.

Background

Defendant Pilgrim's Pride Corporation ("PPC") is one of the largest producers of processed chicken. PPC operates a network of chicken processing facilities throughout the Southeast United States. These processing facilities are supplied with chicken by poultry growers who raise the chickens on their own farms and sell them to PPC pursuant to Poultry Grower Agreements. The Plaintiffs are more than 200 poultry growers, most of whom were selling their chickens to two PPC processing facilities that were closed or idled by PPC in early 2009. Plaintiffs allege that the closure of these processing facilities was in violation of the Packers and Stockyards Act of 1921, ("PSA"), 7 U.S.C. § 192(e).

The closed processing facilities were in El Dorado, Arkansas and Farmerville, Louisiana. There are also growers in Nacogdoches, Texas, and DeQueen, Arkansas (actually the Nashville, Hope and Batesville facilities collectively) who complain of certain discriminatory practices alleged to be in violation of the PSA. The first bench trial involved the roughly 90 poultry growers surrounding the El Dorado processing facility. The 2011 Judgment and the Agerton appeal involved those growers. The trial of the more than 40 growers in the Farmerville complex had been largely completed at the time the Agerton decision was rendered.

In the Agerton decision the Fifth Circuit summarized the record as follows:

Facing severe economic difficulties in 2008, PPC ceased profitability and began losing substantial amounts of money. The primary reason for PPC's mounting financial problems appeared to be the company's over-extension into the commodity chicken market, of which PPC held an estimated 50% market share. When PPC evaluated its operations, it concluded that it was unnecessarily producing a surplus of commodity chicken at great cost to itself. In an effort to stem its losses and streamline operations, PPC closed or idled several processing and distribution facilities, divested assets, restructured supply contracts, and laid off a number of employees. However, these measures proved ineffective and PPC ultimately filed for Chapter 11 bankruptcy relief in December 2008.

Agerton v. Pilgrim's Pride Corp ., 728 F.3d 457, 459 (5th Cir.2013). With the approval of the Bankruptcy Court, PPC moved forward with a plan to close some of their processing facilities in 2009. In its findings of fact after the El Dorado growers' trial, this Court found that " PPC's overriding motive was to curtail supply to force prices to rise on the national chicken market." (Dkt. No. 321 at 8). The Court also found although PPC's conduct was unilateral, it was done "for the purpose of manipulating or controlling the price of chicken," and was "likely to lead to a competitive injury" because of PPC's substantial national market share. Id. at 9. The Court rejected the claims under §§ 192(a) and (b) of the PSA, as well as the claims under the Arkansas and Louisiana Deceptive Trade Practices Acts. Judgment was rendered in favor of each grower for lost profits through 2015.

The Court of Appeals held that § 192(e) of the PSA "proscribes only anti-competitive conduct" and that, in the context of the PSA, is conduct that is "likely to suppress or destroy competition" under a "rule of reason" analysis. Agerton, 728 F.3d at 462. The Court noted that "healthy competition depends on individual firms aggressively pursuing their own interests" and stated that it was "particularly hesitant to condemn the unilateral act of a single firm." It characterized PPC's conduct as "wisely decid[ing] to stop flooding the market with unprofitable chicken." The Court concluded by holding:

PPC's conduct was merely the legitimate response of a rational market participant to changes in a dynamic market. If a firm inadvertently over-produces a good and drives down prices, it does not break the law by cutting production so that prices may recover. We therefore hold that PPC did not violate PSA § 192(e) by reducing its commodity chicken output.

Id. at 462–63.

At the time of the trial of the Farmerville growers, before the Agerton decision, Plaintiffs contended that there was no material difference in the liability case presented by the El Dorado and Farmerville growers. See, e.g. Dkt. No. 365 at 6, 13-14; Dkt. No. 372. In their current briefing, Plaintiffs contend that the evidence presented on behalf of the Farmerville growers satisfies the standards set forth in Agerton in the following ways:

(a) PPC's plan was to keep as much chicken off the market as possible, whether or not it was their own product, in order to increase prices;

(b) PPC officials lied to the public by saying PPC was just trying to save cost by closing underperforming plants;

(c) PPC threatened Louisiana Governor Bobby Jindal that PPC would close its Natchitoches processing plant if the Governor forced PPC to sell the Farmerville facility instead of just closing it;

(d) PPC was trying to increase the market price rather than just its own "internal pricing;"

(e) PPC committed the "unnatural" act of killing pullet flocks to stop production;

(f) a manager of House of Raeford (a competitor of PPC) told some growers that it would not accept their birds at its facility unless the growers got a release from PPC;

(g) even though the Court determined that PPC lacked monopsony power in El Dorado, PPC had such power in Farmerville.

With respect to issues (a) through (e), above, the Court finds that they are all facts which, even if established, would not result in a violation of § 192(e) of the PSA under the analysis provided by Agerton . With respect to issue (f), the Court finds that no credible evidence was produced that PPC caused anyone with House of Raeford to make such statements, and no plaintiffs established that they were injured thereby. Finally, with respect to issue (g), Defendant argues persuasively that PPC had even less opportunity at monopsony power in Farmerville, where the plant was sold to Foster Farms, and where House of Raeford was clearly competing nearby, than it did in El Dorado. There is no persuasive evidence of monopsony power.

Plaintiffs also assert a claim under the Louisiana Unfair Trade Practices Act ("LUPTA"), La. R.S. 51:1405. To succeed on a LUTPA claim, a plaintiff must show that the defendant engaged in conduct that "offends established public policy and...is immoral, unethical, oppressive, unscrupulous, or substantially injurious." Cheramie Services, Inc. v. Shell Deepwater Production, Inc., 35 So.3d 1053, 1059 (La.2010). What constitutes an unfair trade violation is determined on a case-by-case basis. Id. "The range...