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Judge expands potential claim pool for egg price-fixing case

 

 

By JIM RUTLEDGE

D.C. Correspondent

 

PHILIDELPHIA, Penn. — Two of the nation’s largest egg producers face possible settlement costs of $100 million or more following a federal judge’s ruling, which extended class action status in an antitrust lawsuit brought by the victims of an elaborate egg price-fixing scheme.

The judge is expanding the number of victims to include thousands of neighborhood grocery stores. In September 2008, four of the nation’s top egg sellers filed suit against an egg cartel that consisted of 10 egg producers and an industry trade group in a price-fixing conspiracy that cut the number of eggs sold in stores and pumped up egg prices as much as 40 percent over the wholesale price from 2003 to 2009.

The lawsuit was brought by a group of egg buyers, Associated Wholesale Grocers, Inc., Four B Corp., Cosentino Enterprises, Inc., Mid Am Food Enterprises, Inc. and CNW Foods, Inc. The companies represent direct egg buyers; the T.K. Ribbing’s Family Restaurant in Falconer, N.Y.; Lisciandro’s Restaurant of Jamestown, N.Y.; food processing companies Solovy Foods, Inc. and Karetas Foods, Inc.; Nussbaum-SF, Inc.; Somerset Industries, Inc.; Wixon, Inc.; SensoryEffects Flavor Co.; and Eby-Brown Co. LLC.

Of the 10 defendants, the court previously dismissed claims against United Egg Assoc. and several entities associated with Hillandale Farms, (Hillandale Farms of Pa., Hillandale-Gettysburg, L.P.; and Hillandale Farms East, Inc.), granting a motion that the firms were not part of the conspiracy.

Over the past couple of years, six of the egg-producing defendants have settled claims totaling $61 million:

•Land O’Lakes, with its egg-producing subsidiaries Moark and Moar’s Norco Ranch, settled for $25 million, or 12 percent of its 2009 profit of $209.1 million

•Cal-Maine Foods, the largest egg producer in the country, paid $28 million

•Four trade groups, United Egg Producers and United States Egg Marketers, two egg cooperatives and the Missouri Egg Council, Inc.; and the National Food Corp., as part of their settlement, agreed to provide evidence in the case to support the claims in the lawsuit

In 2009, the court agreed to a settlement with Sparboe Farms, Inc., of Minnesota after the company provided evidence that led to the multimillion-dollar settlements from Moark and Land O’Lakes.

The remaining four defending companies include the country’s two largest egg producers: Rose Acre Farms, Inc. of Indiana and its chief competitor, Michael Foods, Inc., of Minnesota; Ohio Fresh Eggs, Inc.; and the R.W. Sauder’s Egg Co. of Pennsylvania.

The lawsuit claims the cartel conspired to cut egg production by killing off hens under the guise of treating the remaining hens more humanely by keeping them in larger cages. The lawsuit charges the price-fixing scheme pumped up wholesale egg prices by as much as 40 percent, thus producing the price-fixing conspiracy.

James J. Pizzirusso, of the Washington, D.C., law firm, Hausfeld LLP, lead plaintiff’s co-counsel, explained because of the judge’s ruling the court has expanded the number of victims in the case to include thousands of food stores. The defending egg sellers, he said, could face hundreds of million dollars in settlement costs, or even more, if the court decides to expand the conspiracy timetable beyond 2009.

Donald Barnes, a partner in the law firm Porter Wright Morris & Arthur of Washington, D.C., which represents Rose Acre Farms, said, "As in major litigation of this type, one day it’s a ‘thrill of victory" – the next, ‘the agony of defeat.’ We believe our defense on the merits is sound and look forward to a favorable, and final, resolution of this litigation."

U.S. District Judge Gene E.K. Pratter of the Eastern District of Pennsylvania issued a 61-pape decision on Sept. 21, saying it was her opinion the egg producers group was alleged to have fixed egg prices through short-term production restriction by killing hens early in a bogus animal welfare program in a "calculated series of egg sales at below market price."

Pratter ruled that the discovered facts in the lawsuit proved the egg producers were affected directly by the price fixing scheme. She is awaiting further filings by both sides before moving ahead with a trial or the possibility of a settlement.

Copies of her opinion, "Processed Egg Products Antitrust Litigation," PICS No. 15-1470, can be obtained by calling the Pennsylvania Instant Case Service at 800-276-PICS.

9/30/2015