Antitrust Law Daily Disputed co-conspirator statements may be heard at egg products antitrust trial
Friday, November 1, 2019

Disputed co-conspirator statements may be heard at egg products antitrust trial

By Nicole D. Prysby, J.D.

Egg buyer plaintiffs demonstrated that defendants conspired to reduce the supply of eggs through three different tactics and that each defendant participated in the scheme through at least one of the tactics.

Egg buyers demonstrated the existence of a conspiracy to reduce the supply of eggs and that individual egg suppliers participated in the alleged conspiracy. Therefore, certain statements made by the defendants in furtherance of the alleged conspiracy were admissible at trial as non-hearsay co-conspirator statements. The buyers demonstrated three specific prongs of the conspiracy (short term reduction measures, a certified program to reduce the number of hens, and a scheme to export eggs to increase domestic prices) and that each defendant knowingly agreed to join the alleged overarching conspiratorial scheme, by participating in one, two, or all three of the prongs (In Re Processed Egg Products Antitrust Litigation, October 31, 2019, Pratter, G.).

The direct-action plaintiffs (which include a number of grocery stores and manufacturers) alleged that Rose Acre Farms, United Egg Producers, Inc. (UEP), and United States Egg Marketers (USEM) participated in the conspiracy. Specific measures taken in furtherance of the alleged conspiracy included: UEP’s implementation of short-term reduction measures to reduce flock size ("short-term measures"); UEP’s creation of a certified animal welfare program to increase cage space per hen ("certified program"); and a scheme implemented by USEM members to export eggs into foreign markets to drive up the domestic price of eggs ("export scheme"). The direct-action plaintiffs sought to admit hundreds of co-conspirator statements against defendants UEP, USEM, and Rose Acre Farms.

Plaintiffs established conspiracy and participation. The federal district court in Philadelphia held that the plaintiffs demonstrated each individual defendant knowingly agreed to join the alleged overarching conspiratorial scheme and that the statements were made in the course of and in furtherance of the overarching conspiracy. UEP implored its members to do their part and adopt the short-term measures and maintain those supply reduction programs over time. UEP’s communications suggested that the measures would only be successful if the members worked together. Because joint actions taken by competing members of a trade association can be evidence of a conspiracy, the plaintiffs have shown by a preponderance of the evidence that the UEP-led short-term measures (such as early molt and slaughter efforts) were methods employed to advance a broader agreement to reduce the supply of eggs. Regarding the certified program, the defendants argued that it was not evidence of the alleged conspiracy, because UEP developed the program to meet its customers' demands for a humane egg product. But the court rejected that argument, because the plaintiffs presented evidence that the program was created to reduce egg supply. For example, the UEP sent an email to its members asking if it should attempt to reduce egg supply and suggesting that requiring larger cage space per hen would be one method of accomplishing that goal. And the fact that so many producers voluntarily joined the certified program—after receiving blatant solicitations that doing so would reduce supply—demonstrates that the producers knowingly joined in on the plan. As for the exporting of eggs as a loss, UEP urged USEM members to participate in the export orders and directly stated that removing the eggs from the domestic market would improve the domestic price for eggs.

Rose Acre Farms executives attended many UEP meetings and spoke in favor of the certified program both at meetings and in writing. Rose Acre argued that its facilities actually grew during the period of the alleged conspiracy, which was evidence that it did not join the certified program to reduce supply. But the court concluded that it also could be that Rose Acre's expansion efforts could have been an attempt to cheat the conspiracy it joined in on. Rose Acre also participated in the export scheme. Although Rose Acre did not participate in the short-term measures, a co-conspirator need not participate in every action taken in favor of the conspiracy.

USEM’s participation in the alleged conspiracy was demonstrated through evidence showing that USEM communicated with USEM members, congratulating them for improving domestic process through accepting an export order. The newsletters from the USEM referenced supply reduction and its effect on prices, and urged more members to accept the export orders. The court rejected USEM’s argument that USEM suggests that its role in the export prong of the conspiracy cannot be foreseeable linked to the other two prongs of the conspiracy, the short-term measures and animal welfare program. Those actions of the other co-conspirators fell inside the scope of the overarching conspiratorial goal and the three alleged prongs of the supply-reducing conspiracy seek to achieve the very same goal, albeit through differing means.

Co-conspirator statements are admissible. The court found that the statements the plaintiffs sought to admit were made during the period of the alleged conspiracy (from May 2000 to the present). The statements were made in furtherance of the conspiracy, as documented in the court’s appendix to the ruling, in which it analyzed the statements sentence-by-sentence. In addition, the court held that the bi-weekly UEP newsletters were a form of communication to and among, and between co-conspirators. Although not all UEP members were necessarily members of the conspiracy, the plaintiffs have established that at least some were and the fact that the newsletter was widely distributed does not prevent a finding that the newsletters furthered the conspiracy.

The case is No. 2:08-md-02002-GEKP.

Attorneys: Michael T. Brody (Jenner & Block LLP) for Kraft Foods Global, Kellogg Co., RP and General Mills Inc. Jan P. Levine (Pepper Hamilton LLP) for United Egg Producers and United States Egg Marketers, Inc. Brian E. Robison (Gibson, Dunn & Crutcher LLP) for Cal-Maine Foods, Inc. Donald M. Barnes (Porter Wright Morris & Arthur LLP) for Rose Acre Farms Inc. Joseph M. Callow, Jr. (Keating Muething & Klekamp PLL) for Ohio Fresh Eggs LLC. Jennings F. Durand (Dechert LLP) for R. W. Sauder Inc. Carrie M. Anderson (Weil Gotshal & Manges LLP) for Michael Foods, Inc.

Companies: Kraft Foods Global; Kellogg Co., RP; General Mills Inc.; United Egg Producers; United States Egg Marketers, Inc.; Cal-Maine Foods, Inc.; Rose Acre Farms Inc.; Ohio Fresh Eggs LLC; R. W. Sauder Inc.; Michael Foods, Inc.

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