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Tyson Heads for Trial on Claims It Depressed Prices for Farmers

Oct. 28, 2020, 6:45 PM

Tyson Chicken Inc. must face a trial on claims that it leveraged its buying power to drive down the cost of chickens it purchased for processing at a Kentucky plant, a federal judge ruled.

“Contrary to Tyson’s assertions, there is evidence that” it has “a monopsony in the relevant regional market and that Tyson’s alleged practices” have “an adverse impact on competition,” Judge Joseph H. McKinley Jr. wrote. “Likewise, there is evidence to the contrary,” creating an issue for a jury to resolve, the judge said.

The lawsuit, filed in the U.S. District Court for the Western District of Kentucky, resembles but predates a wave of cases alleging a broad range of anti-competitive tactics by top poultry processors leading an industrywide scheme.

In addition to the main civil suit—which includes a consolidated class action and individual claims by large retailers—the industry is facing a parallel Justice Department investigation that has already led to 10 arrests, including charges against the CEO of Pilgrim’s Pride.

The poultry processors have also been hit with antitrust claims over alleged schemes to fix the wages of their mostly immigrant workforce and, most recently, to drive down compensation for the permanently indebted “modern-day sharecroppers” who raise chickens for them.

The last group of antitrust suits, being brought by chicken growers across the country, is broadly similar to the Kentucky case, although the earlier dispute involves only contract-style allegations and claims under the Packers and Stockyards Act.

In his ruling Tuesday, McKinley trimmed that case slightly but gave its core claims a green light.

To resolve the PSA count, a jury will have to weigh the testimony of expert witnesses who disagree over whether Tyson has enough buying power to “lower grower pay without concern that it will switch to another” processor, the judge said.

That will also answer the breach of contract question, which turns on allegations that Tyson broke its promise to follow all applicable laws, McKinley noted.

But he dismissed a claim for breach of the implied covenant of good faith and fair dealing, saying there was no evidence that Tyson acted to deny “the benefit of the bargain originally intended by the parties.”

The growers are represented by Whitfield Bryson LLP, Butler Farm & Ranch Law Group PLLC, and Public Justice PC. Tyson is represented by Wells & Wetzel and Shook, Hardy & Bacon LLP.

The case is Morris v. Tyson Chicken Inc., W.D. Ky., No. 15-cv-77, 10/27/20.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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