In re Processed Egg Prods. Antitrust Litig., MDL No. 2002

CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
Writing for the CourtGENE E.K. PRATTER
Docket Number08-md-02002,MDL No. 2002
Decision Date16 July 2012


MDL No. 2002


Dated: July 16, 2012



Direct Purchaser Plaintiffs move the Court for final approval of a proposed settlement agreement between the Plaintiffs and Defendant Sparboe Farms, Inc. ("Sparboe").1 Under the proposed Sparboe Settlement, Plaintiffs will release Sparboe from all pending claims in exchange for cooperation in prosecuting the Plaintiffs' claims against the remaining Defendants, such cooperation being in the form of documents and witness testimony. For the reasons set forth below, the Court grants the motion for final approval of the Sparboe Settlement.

I. Factual and Procedural Background 2

This litigation embraces numerous consolidated and coordinated actions based upon allegations of a conspiracy in violation of the Sherman Act among egg producers and trade groups to manipulate the supply of eggs and egg products and thereby affect the domestic prices

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of those goods. See In re Processed Egg Prods. Antitrust Litig., 588 F. Supp. 2d 1366, 1367 (J.P.M.L. 2008). The plaintiffs are direct purchasers (such as grocery stores, commercial food manufacturers, restaurants, other food service providers, and other entities who purchase directly from Defendants or other egg producers) and indirect purchasers (individual consumers who purchased from other parties along the distribution chain) of shell eggs, egg products, or both. The direct purchaser plaintiffs are categorized as "Direct Purchaser Plaintiffs" who have brought a consolidated class action against Defendants, and "Direct Action Plaintiffs" who are pursuing individual actions against Defendants.

A. Direct Purchaser Plaintiffs' Suit

The moving Plaintiffs are Direct Purchaser Plaintiffs who accuse defendant egg producers, including Sparboe, and certain trade groups, of violating Section 1 of the Sherman Act and seek injunctive relief, treble damages, attorneys' fees and costs. They have demanded a jury trial. These Plaintiffs filed a consolidated class action complaint, which they have amended. The allegations of the consolidated complaint superseded or replaced all of the previously-filed individual and consolidated complaints.

The most recent iteration of the Plaintiffs' claim is the Second Consolidated Amended Class Action Complaint (Doc. No. 291) which prompted extensive motion practice. The culmination of this motion activity resulted in the Court dismissing without prejudice claims brought against individual Defendants Hillandale-Gettysburg, L.P., Hillandale Farms, Inc., and Hillandale Farms East, Inc. and United Egg Association. See Sept. 26, 2011 Mem. and Order, 821 F. Supp. 2d 709 (Doc. Nos. 562 and 563). The Court also dismissed without prejudice

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claims against all Defendants for damages barred by the four-year statute of limitations. See Nov. 30, 2011 Opinion and Order, 2011 WL 5980001 (Doc. Nos. 593 and 594).3

As a result of these rulings, Plaintiffs presently proceed on the core of their Section 1 Sherman Act claims against Defendants. At the time the parties' filed their motions to dismiss, the Court partially lifted the stay of discovery previously entered at the outset of this litigation. Lifting the stay permitted the parties to exchange requests for production of documents and confer as to various aspects of a discovery plan. See Order (Doc. No. 320); Pls.' Mot. for an Award of Attorneys' Fees and for Reimbursement of Expenses (Doc. No. 493) (hereinafter, "Fees Mot."), Ex. 1, Asher Decl. ¶¶ 21-22 (Doc. No. 493-2) (hereinafter, "Asher Decl."). Following the Court's rulings on the motions to dismiss the Second Consolidated Amended Class Action Complaint, the parties requested a further partial lifting of the discovery stay. The Court entered Orders further partially lifting the discovery stay, commencing the discovery period, and setting forth various discovery deadlines and parameters concerning, inter alia, document production, interrogatories, depositions, non-party discovery, class certification, and class certification experts. See Case Mgmt. Orders Nos. 18 and 19 (Doc. Nos. 656 and 676).

B. Sparboe Settlement Negotiations

Sparboe was named as a Defendant in the Consolidated Amended Class Action Complaint (Doc. No. 41). Less than two months after the Consolidated Amended Class Action

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Complaint was filed, Interim Co-Lead Counsel4 and Sparboe's counsel began engaging in settlement negotiations. Mot., Ex. A, Hausfeld Decl. ¶ 8 (Doc. No. 443-2) (hereinafter, "Hausfeld Decl."). Spanning three months, these negotiations included numerous telephone conferences and four in-person meetings. Id. ¶¶ 6, 7. The negotiations centered upon Sparboe cooperating with Plaintiffs in the prosecution of the claims against the other Defendants by providing to Plaintiffs information in the form of documents and witness testimony. Id. ¶¶ 8-9.

Sparboe made an initial proffer to Interim Co-Lead Counsel in Washington, D.C. "regarding what Sparboe's information would show and how it would assist Plaintiffs' in the prosecution of their case." Id. ¶ 9. A month later, Sparboe "proffered both hundreds of pages of documents and live witness testimony from Sparboe employee Wayne Carlson in Minneapolis" to Plaintiffs. Id. ¶ 10. Plaintiffs have represented that Interim Co-Lead Counsel was "not initially convinced that they should enter into a settlement agreement" at that time, and Interim Co-Lead Counsel and Sparboe's counsel held several telephone conferences concerning the nature of Sparboe's cooperation. Id. ¶ 11.

Following these conferences, Sparboe then proffered "hundreds of pages of additional documents, as well as identifying several executives and current and former Sparboe employees who could offer testimony in the case that may corroborate the information contained in the documents, as well as provide additional information." Id. ¶ 12. Shortly thereafter, Sparboe's

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counsel proffered documents and "additional descriptions of expected witness testimony." Id. ¶ 13.

In addition to the proffers concerning documents and witness testimony, at some point during negotiations Interim Co-Lead Counsel made a demand for monetary compensation that "was based on what an econometric analysis would have produced with regard to the production of transaction data and then an analysis of the market and the transaction data as it related to Sparboe with the traditional approach as well of having Sparboe, if it were the first [party to settle], have a discount off its actual damages." Prelim. Hr'g Tr. at 7:16-21. (Doc. No. 198). Sparboe consistently maintained the position that it would not agree to a settlement that provided direct monetary compensation to the Class Members. See Prelim. Hr'g Tr. at 7:12-14; id. at 7:22-23.

Based upon the conferences and proffers, Interim Co-Lead Counsel concluded that Sparboe's cooperation in advance of discovery would provide information that would supplement and enhance the information that Interim Co-Lead Counsel previously had uncovered through their own independent investigation prior to filing the First Consolidated Amended Complaint. See Hausfeld Decl.¶ 14; Mot. at 3. Thereafter, the parties reached an agreement and executed the Sparboe Settlement Agreement. Hausfeld Decl. ¶ 15.

The day after the parties executed the Agreement, Sparboe produced documents to Interim Co-Lead Counsel for inspection and review in Minneapolis, Minnesota. Id. ¶ 16. In the next months, Sparboe made available for interviews four witnesses, who, according to Interim Co-Lead Counsel, "provided invaluable information about Defendants' conspiracy." Id. ¶ 17. Based upon the information that Interim Co-Lead Counsel obtained from Sparboe, they prepared

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the Second Consolidated Amended Class Action Complaint. Id. ¶ 18. Sparboe is not presently named in this Complaint. See Second Consol. Am. Class Action Compl. ¶ 3.5 Presumably, Sparboe's absence is the result of the pending settlement. The following discussion of the nature of the case presupposes Sparboe would indeed occupy in the claims going forward the role it was assigned in the claims initially if the settlement had not been achieved.

The Court preliminarily approved the Sparboe Settlement and certified the Class and Subclasses for settlement purposes following a hearing. See Order on Preliminary Approval of Sparboe Settlement (Doc. No. 214). In the same Order, the Court stayed the Plaintiffs' suit against Sparboe pending further Order of the Court. See id. at ¶ E.1. In a separate Order, the Court also approved the form of notice of the Sparboe Settlement. See Order Approving Dissemination of Notice of Settlements Between Direct Purchaser Plaintiffs and (i) Defendant Sparboe Farms, Inc. and (ii) Defendants Moark, LLC, Norco Ranch, Inc. and Land O'Lakes, Inc. (Doc. No. 388) (hereinafter, "Notice Approval Order").

Following the notice period established by the Court, Plaintiffs filed the motion sub judice, and the Court held the final...

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