In re Pork Antitrust Litig., Civil No. 18-1776 (JRT/LIB)
| Decision Date | 08 August 2019 |
| Docket Number | Civil No. 18-1776 (JRT/LIB) |
| Parties | IN RE PORK ANTITRUST LITIGATION This Document Relates To: All Actions. |
| Court | U.S. District Court — District of Minnesota |
AMENDED MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS PLAINTIFFS' COMPLAINTS
Brian D. Clark and W. Joseph Bruckner, LOCKRIDGE GRINDAL NAUEN PLLP, 100 Washington Avenue South, Suite 2200, Minneapolis, MN 55401; Bruce L. Simon, PEARSON SIMON & WARSHAW LLP, 44 Montgomery Street, Suite 2450, San Francisco, CA 94104; Bobby Pouya and Michael H. Pearson, PEARSON SIMON & WARSHAW LLP, 15165 Ventura Boulevard, Suite 400, Sherman Oaks, CA 91403; Melissa S. Weiner and Joseph C. Bourne, PEARSON SIMON & WARSHAW LLP, 800 LaSalle Avenue, Suite 2150, Minneapolis, MN 55402, for the Direct Purchaser Plaintiffs.
Daniel E. Gustafson, Daniel C. Hedlund, and Brittany N. Resch, GUSTAFSON GLUEK PLLC, 120 South 6th Street, Suite 2600, Minneapolis, MN 55402; Shana E. Scarlett, HAGENS BERMAN SOBOL SHAPIRO LLP, 715 Hearst Ave., Suite 202, Berkeley, CA 94710; David M. Cialkowski, ZIMMERMAN REED, PLLP, 1100 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402; Breanna Van Engelen, HAGENS BERMAN SOBOL SHAPIRO LLP, 1301 Second Avenue, Suite 2000, Seattle, WA 98101, for the Consumer Indirect Purchaser Plaintiffs.
Alec Blain Finley and Jonathan Watson Cuneo, CUNEO GILBERT & LADUCA, LLP, 4725 Wisconsin Avenue NW, Suite 200, Washington, DC 20016; Shawn M. Raiter, LARSON KING, LLP, 30 East Seventh Street Suite 2800, St Paul, MN 55101, for the Commercial Indirect Purchaser Plaintiffs.
Megan A. Scheiderer, HUSCH BLACKWELL, LLP, 4801 Main Street, Suite 1000, Kansas City, MO 64112, for Defendant Triumph Foods, LLC.
Donald G. Heeman and Jessica J. Nelson, SPENCER FANE, 150 South Fifth Street, Suite 1900, Minneapolis, MN 55402; Stephen R Neuwirth and Sami H Rashid, QUINN EMANUEL URQUHART & SULLIVAN, LLP, 51 Madison Avenue, 22nd Floor, New York, NY 10010, for Defendant JBS USA.
John A Cotter and John Anders Kvinge, LARKIN HOFFMAN DALY & LINDGREN, LTD, 8300 Norman Center Drive, Suite 1000, Minneapolis, MN 55437; Richard G. Parker, GIBSON, DUNN & CRUTCHER, 1050 Connecticut Avenue, N.W., Washington, DC 20036; Brian Edward Robison, GIBSON, DUNN & CRUTCHER, LLP, 2100 McKinney Avenue, Suite 1100, Dallas, TX 75201, for Defendant Smithfield Foods, Inc.
Tiffany Rider Rohrbaugh and Rachel Johanna Adcox, AXINN, VELTROP & HARKRIDER LLP, 950 F. Street NW, Washington, DC 20004, for Defendant Tyson Foods.
Christa C. Cottrell, KIRKLAND & ELLIS LLP, 300 North LaSalle, Chicago, IL 60654, for Defendant Clemens Food Group, LLC.
Richard A Duncan, FAEGRE BAKER DANIELS LLP, 90 South Seventh Street Suite 2200, Minneapolis, MN 55402, for Defendant Hormel Foods.
Jaime Stilson, DORSEY & WHITNEY LLP, 50 South Sixth Street, Suite 1500, Minneapolis, MN 55402; Britt M. Miller, MAYER BROWN LLP, 71 South Wacker Drive, Chicago, IL 60606; William Stallings, MAYER BROWN LLP, 1999 K Street NW, Washington, DC 20006, for Defendant Indiana Packers and Mitsubishi Corporation of America.
Plaintiffs (separated into three putative classes) allege that Defendants, some of the nation's leading pork producers and integrators, conspired to limit the supply of pork in order to fix prices in violation of state and federal antitrust laws. Defendants now move todismiss the claims against them. Because Plaintiffs have not adequately pleaded parallel conduct sufficient to support an inference of conspiracy, the Court will grant Defendants' Motions and dismiss Plaintiffs' Complaints without prejudice. The Court will, however, grant Plaintiffs leave to amend their Complaints.
This class action embodies the consolidation of thirteen separately filed actions. The Plaintiffs are grouped into three different classes of pork purchasers: Direct Purchaser Plaintiffs ("DPPs"), Consumer Indirect Purchaser Plaintiffs ("IPPs"), and Commercial and Institutional Indirect Purchaser Plaintiffs (CIPs"). Each group consists of individuals or companies who have either directly or indirectly purchased pork products from one of the Defendants.1 Each class has filed a separate, consolidated complaint, alleging that the Defendants conspired with one another to increase the price of pork products.2 Because the factual allegations in each of the three complaints are nearly identical, the Court will consider them interchangeably.
The pork industry is "horizontally concentrated (only a few companies buy, slaughter, and process the majority of hogs) and vertically integrated." ( The top four participants—Defendants Smithfield, Tyson, JBS USA, and Hormel—control an almost 70 percent market share. (Id. ¶ 77.) Smithfield and JBS USA each control over 20 percent of the market, and Tyson controls 18 percent. (Id. ¶ 80.) Taken together, the top eight participants, all of whom are Defendants in this case, control over 80 percent of the market. ( The top eight participants have maintained their dominant position in the market for most of the last twenty years. (Id. ¶ 118.)
The sustained market concentration inherent in the pork industry is due in part to the significant barriers to entry placed on new competitors. For example, building a new facility can cost hundreds of millions of dollars. (DPP Compl. ¶ 84.) Accruing such capital can be difficult, which works to dissuade potential competitors. (IPP Compl. ¶ 122.) Another barrier to competitor entry is the unique nature of the industry itself. Most of the largest pork integrators do not produce their own pigs but instead enter into contracts with independent farmers who raise the pigs until they are ready to be slaughtered. (DPP Compl. ¶ 70.) Because "[m]ost of the hogs produced in the U.S. are sold under a multi-year contract," it is difficult for any potential competitor to find pigs to purchase. (Id. ¶ 85.)
Plaintiffs allege that this market concentration put the pork industry in "an ideal zone for collusion," as Defendants-through market domination and contractualarrangements-were in a position to "manipulate price through an agreement among the relatively few dominant players." (Id. ¶ 82).
In addition to being highly concentrated, the pork industry is also relatively unique because pork is considered a "commodity product." (Id. ¶ 133.) This means that the pork products produced by the various industry participants are largely indistinguishable from one another. (Id.) Thus, price is the only means by which most consumers distinguish the companies. (IPP Compl. ¶ 124.) Defendants are therefore discouraged from raising their prices individually, because each of their products are largely interchangeable. Pork is also subject to a "highly inelastic" demand, meaning that demand does not typically decrease when pork prices increase. (Id. ¶ 123.)
Accordingly, Plaintiffs allege that not only were Defendants in a position to collude, but also that this unique industry set-up, wherein one company suffers if it unilaterally raises its prices but no companies suffer if they all raise their prices, made such an agreement possible-and necessary-if Defendants wanted to increase prices.
Finally, Plaintiffs allege that Defendants were motivated to enter into such an agreement, because pork product prices were flat between 2000 and 2009, holding at less than $1.40 per pound. (DPP Compl. ¶ 131.) Therefore, Plaintiffs claim that Defendants had the ability to collude, the need to collude, and the motivation to collude.
Plaintiffs allege that, starting in 2009, Defendants began to discretely conspire with one another to decrease pork production and/or to limit production increases in an effort to raise the price of pork. (Id. ¶ 2.) According to Plaintiffs, Defendants carried out thisalleged conspiracy in two synchronized ways. First, Defendants aimed public statements at one another emphasizing the need to cut production, which also served to signal each Defendants' continued adherence to the overall conspiracy. ( Second, as a means of enforcement and oversight, "Defendants exchanged detailed, competitively sensitive, and closely guarded non-public information about prices, capacity, sales volume, and demand through their co-conspirator, Defendant Agri Stats." (Id. ¶ 2.)
Beginning in 2009, several of the Defendants openly acknowledged that price-stagnation inherent in the pork industry was an issue that required an industry wide solution-i.e. a reduction in production. For example, Smithfield's CEO noted that "overproduction and the oversuppl[y] of hogs . . . [were] driving our hog market down." (DPP Compl. ¶ 112.) He acknowledged that Smithfield, in response to that overproduction, had started cutting back on its pig operation, but noted that its production cuts were not enough to "fix" the hog industry and stressed that "somebody else has got to do something." (Id. ¶ 114.) He also stated that Smithfield "had done its 'fair share'" to cut supply, that it had taken a leadership role in doing so, and that further cuts "would probably be needed to 'put this industry back in balance,'" specifically calling for cuts in the Midwest. (Id. ¶ 118.)
Smithfield's CEO also acknowledged that, by September 2009, it had already "had conversations with several sizable, more than sizable large producers, in fact very large producers" and that he was aware that they would be "doing some liquidation." (Id. ¶ 117.)This statement was corroborated by several industry participants within the following year, as many Defendants made similar public acknowledgments. Hormel stated that it was looking at cutting pork supply and that it had noticed a contraction in the market, (id. ¶ 111, 113), Tyson acknowledged that it "expected to see . . . pork...
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