Chicken Antitrust Litigation American Poultry, In re

• Decision Date: 01 March 1982
• Docket Number: No. 80-7808,80-7808
• Citation: 669 F.2d 228
• Parties: 1982-1 Trade Cases 64,573 In re CHICKEN ANTITRUST LITIGATION AMERICAN POULTRY, et al., Appellants. . Unit B *
• Court: U.S. Court of Appeals — Fifth Circuit

Page 228

669 F.2d 228

1982-1 Trade Cases 64,573

In re CHICKEN ANTITRUST LITIGATION AMERICAN POULTRY, et al Appellants.

No. 80-7808.

United States Court of Appeals, Fifth Circuit.

Unit B ^*

March 1, 1982.

Solly Robins, St. Paul, Minn., Stanford Robins, David E. Bland, Minneapolis, Minn., for appellants.

Edward H. Lee, Savannah, Ga., for The Bd. of Pub. Ed. for City of Savannah and County of Chatham.

Emmet J. Bondurant, Atlanta, Ga., Jerrold E. Salzman, Chicago, Ill., John R. Flowers, Jr., Dept. of Justice, New Orleans, La., Arthur Galligan, James vanR.Springer, Washington, D.C., James M. Landis, Tampa, Fla., Granvil I. Specks, Chicago, Ill., Jeffrey T. Morris, Harrisburg, Pa., Alan L. Kovacs, Asst. Atty. Gen., Boston, Mass., for appellees.

Appeals from the United States District Court for the Northern District of Georgia.

Before HILL and VANCE, Circuit Judges, and LYNNE, ^**District Judge.

VANCE, Circuit Judge:

In this appeal, we are called upon to review the interclass allocation of a settlement in an antitrust class action.Sixty direct purchasers of chickens have objected to the interclass sharing agreement that was reached by the representatives of the different plaintiff classes in this suit prior to substantial negotiations with any of the defendants.The objectors challenge the allocation plan on three grounds.First, they allege it was the result of bargaining by attorneys whose representation of the various classes was tainted by a conflict of interest.Second, objectors contend that the allocation is unfair in light of available market data and the landmark Supreme Court decision in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707(1977).Finally, objectors argue that their due process rights were violated because there was insufficient information before the district court to enable it to judge the ultimate fairness of the allocation agreement.After carefully reviewing the record in light of these objections, we affirm the district court's approval of the interclass sharing proposal.

I.

In April 1973 the United States Department of Justice filed a civil antitrust action against the National Broiler Marketing Association(NBMA) in the United States District Court for the Northern District of Georgia.The complaint alleged that the NBMA, its members, and other chicken producers had conspired to fix broiler prices and restrict broiler production in violation of section one of the Sherman Act,15 U.S.C. § 1.¹In particular, the Justice Department sought an injunction ² against the continuation of a conference call program by which the NBMA allegedly coordinated the pricing and production decision of its members and some participating nonmember chicken producers.

The government's lawsuit spawned a rash of private civil actions against the NBMA and the participants in the conference call program, ³ beginning with the March 1974 filing of a class action on behalf of all state and local governmental entities.⁴Ultimately, thirty-three individual or class suits were filed against the NBMA and forty-two individual defendants.These actions were consolidated ⁵ in the Northern District of Georgia.⁶

On February 20, 1975plaintiffs filed a joint motion seeking class certification of five classes based upon functional distinctions among the plaintiffs: governmental entities; supermarkets; hotels, restaurants, and contract institutional feeders; fast food establishments; and wholesale distributors.⁷In arguing against certification, defendants raised a variety of objections relating to individual damage issues and class manageability.The district court refused to certify the classes at that time, and directed that the parties begin discovery.Discovery continued throughout much of the next two years, during which time the district court twice noted its reservations about the manageability of classes containing both direct and indirect broiler purchasers.

Although two of the defendants reached a settlement with the plaintiffs in April 1975, no serious settlement negotiations occurred until 1977.This inaction was due in large part to the NBMA's reluctance to negotiate while it tested a defense in the parallel action by the Justice Department that it was an agricultural cooperative and therefore immunized from liability for antitrust violations by the Capper-Volstead Act, 7 U.S.C. §§ 291-292.It was also partially the result of the demand by plaintiffs that each defendant stipulate to class certification.

In an effort to solidify their negotiating posture and improve the chances for class certification, counsel for the class representatives met on November 17, 1976 to negotiate an interclass allocation of the expected settlement or judgment proceeds.At that meeting the liaison counsel advised the attorneys present of the need to reach an allocation agreement, but otherwise did not participate in the negotiations.After the liaison counsel had spoken, an attorney who represented the supermarket class as well as several members of the governmental entities class took the lead.He stated that he could not represent all of his clients at that point, and that he elected to represent only the supermarket class.Another lawyer was to represent the governmental entities class, although he also was the attorney for the fast food class.Yet another attorney was designated to represent the fast food class in the allocation negotiations.Despite this shifting representation, one lawyer represented the wholesale distributor class exclusively during these negotiations and throughout all of the subsequent proceedings.The following agreement resulted from the negotiations, subject to ratification by the state attorneys general who did not participate in the negotiations:

Class    I  Governmental Entities   15%
                Class   II  Supermarkets            50%
                CLass  III  Hotels, Restaurants
                            Institutional Feeders   11%
                Class   IV  Fast Food Distributors  14%
                CLass    V  Wholesale Distributors  10%
                

While market share of purchases was the starting point of the negotiations, other factors, such as actual damages, ease of proof, and responsibility in the lawsuit, were taken into account to reach the final agreement.⁸

The allocation plan had not yet been approved by all of the plaintiffs when on June 9, 1977the Supreme Court decided Illinois Brick Co. v. Illinois, 431 U.S. at 720, 97 S.Ct. at 2061.At that point the attorney for the wholesale distributor class insisted on a greater share of the settlement proceeds because his class was composed almost entirely of direct purchasers who had obtained an enhanced position in the lawsuit after Illinois Brick.The other class representatives agreed and negotiations resumed to increase the share of the wholesale distributor class.These negotiations led to the consolidation of classes three and four into one class of food preparers and a large increase in the wholesale distributor class' share of the settlement proceeds at the expense of the food preparers and governmental entities classes.The supermarket class share remained the same because this class was also comprised primarily of direct purchasers.The new allocation scheme provided for the following distribution:

Class    I  Governmental Entities    9.4%
                Class   II  Supermarkets            50.0%
                Class  III  Food Preparers          15.6%
                Class   IV  Wholesale Distributors  25.0%
                

The allocation scheme was presented to the district court for approval on July 13, 1977, but the court did not rule on it.

Prior to the decision in Illinois Brick, this court ruled adversely to the NBMA on its claim of antitrust immunity under the Capper-Volstead Act.In United States v. National Broiler Marketing Association, 550 F.2d 1380(5th Cir.1977), aff'd436 U.S. 816, 98 S.Ct. 2122, 56 L.Ed.2d 728(1978), we held that the NBMA was not an agricultural cooperative whose actions were immune from antitrust scrutiny.This decision spurred defendants to begin serious settlement negotiations because it effectively eliminated their defense from liability in the private civil suits.Over the next five months settlement negotiations proceeded rapidly and plaintiffs reached agreement with all but three defendants.Defendants would not agree to any settlement, however, unless they were assured of "total peace" in the future.Accordingly, they insisted upon a settlement that included all potential plaintiffs in any state or federal antitrust action, and they demanded the creation of a fifth, catchall class of other direct purchasers.This demand necessitated the negotiation of a third interclass sharing proposal, the one that is before us now.Counsel for the class representatives decided that they would fix the share of the governmental entities class without regard to the new class.They also determined that members of the new class should receive the same return on purchases as the average return for classes two, three, and four.The negotiations led to the following allocation proposal:

Class    I  Governmental Entities   9.40%
                Class    V  Other Purchasers        That proportion of
                                                    90.60% equal to
                                                    class five's
                                                    proportion of
                                                    overall claims
                                                    filed by
                                                    nongovernmental
                                                    classes
                Class   II  Supermarkets            55.19% of balance
                Class  III  Food Preparers          17.22% of balance
                CLass   IV  Wholesale Distributors  27.59% of balance
                

Subsequent to these negotiations, class notice was sent to over 200,000 broiler purchasers describing the settlement and allocation plan.

Agreement was reached with the three remaining defendants⁹ and plaintiffs moved to have the classes certified and the entire settlement and allocation agreement approved.Class...