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Tyson, Cargill, Hormel, Butterball to Face Turkey Cartel Claims

Oct. 27, 2020, 4:57 PM

Tyson Foods Inc., Cargill Inc., Hormel Foods Corp., Butterball LLC, and other top poultry processors must face retailer claims that they schemed to inflate the price of turkey, but Kraft Heinz Food Co. is off the hook, a federal judge in Chicago ruled, a week after a parallel decision in a case brought by wholesalers.

Greenlighting the antitrust lawsuit, Judge Virginia M. Kendall said it plausibly alleged a “hub and spoke” conspiracy involving illegal exchanges of sensitive information through Agri Stats Inc., an Eli Lilly & Co. subsidiary that runs agricultural industry databases.

She rejected the argument that the suit failed to satisfy the heightened specificity requirements covering fraud cases, saying its “language about deception” clearly “pertains to unfair business practices and not fraud.”

“Merely including allegations” of “secretive and deceptive behavior does not convert” an “antitrust claim into one sounding in fraud,” the judge wrote. “Many antitrust cases contain an element of concealment due to the very nature of the claims, but heightened pleading is not required.”

Kendall also let most of the suit’s state law claims move forward, though she did trim that part of the case, finding the unjust enrichment allegations too vaguely pleaded.

But Kraft “is not a turkey producer and as such cannot be a member of the alleged conspiracy,” she said.

Most of the ruling Monday, which concerned claims by “indirect” commercial and institutional purchasers, explicitly echoed Kendall’s Aug. 19 decision in the “direct purchaser” case that’s also proceeding in the U.S. District Court for the Northern District of Illinois.

In addition to Tyson, Cargill, Hormel, Butterball, Kraft, and various subsidiaries, the suits targeted affiliates of Perdue Farms Inc., Farbest Foods Inc., Cooper Farms Inc., Foster Farms LLC, and House of Raeford Farms Inc.

They’re part of a wave of price-fixing cases involving livestock and protein—including chicken, beef, pork, tuna, salmon, and eggs—amid calls from top Democrats to break up “big ag.”

Tuna and chicken executives are also facing actual or potential prison time for their roles in the alleged schemes, and JBS SA subsidiary Pilgrim’s Pride—which saw its CEO hit with criminal charges in June—agreed Oct. 14 to resolve a Justice Department probe for $110 million.

The beef industry, meanwhile, is contending with two separate federal investigations into its prices.

The indirect purchasers are represented by Clifford Law Offices PC and Cuneo Gilbert & LaDuca LLP. The direct purchasers are represented by Hagens Berman Sobol Shaprio LLP and Lockridge Grindal Nauen PLLP.

Kraft was represented by Foley & Lardner LLP. Agri Stats is represented by Miller, Canfield, Paddock & Stone PLC and Hogan Lovells US LLP.

Butterball is represented by Proskauer Rose LLP. Cargill is represented by Mayer Brown LLP, which also represents Foster Farms, and Greene Espel PLLP. Hormel is represented by Faegre Drinker Biddle & Reath LLP. Perdue is represented by Falkenberg Ives LLP and Venable LLP. Tyson is represented by Lipe Lyons Murphy Nahrstadt & Pontikis Ltd. and Axinn, Veltrop & Harkrider LLP.

Cooper Farms is represented by Eimer Stahl LLP and Carpenter, Lipps & Leland LLP. Farbest is represented by Dentons US LLP. House of Raeford is represented by Vedder Price PC and Jordan Price Wall Gray Jones & Carlton PLLC.

The case is Sandee’s Catering v. Agri Stats, Inc., N.D. Ill., No. 20-cv-2295, 10/26/20.

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

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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