By Nicole D. Prysby, J.D.
Egg purchasers failed to demonstrate that claims that egg producers conspired to limit egg supply should be evaluated using a per se analysis.
Egg purchasers failed to demonstrate that claims that egg producers participated in a conspiracy to reduce the supply of eggs should be evaluated using a per se analysis, held the U.S. Court of Appeals in Philadelphia. The plaintiffs alleged that egg producers conspired with trade groups to take certain actions (including participating in a certification program for animal welfare) that were intended to reduce the supply of in-shell eggs. The district court held that a rule of reason analysis applied to the claims related to the certification program. After a jury concluded that there was a single overarching conspiracy to reduce supply, but that the conspiracy did not impose an unreasonable restraint on trade, the plaintiffs motioned to amend the judgment and then appealed after their motion was denied. The Third Circuit upheld the lower court’s decision. Although the plaintiffs alleged a single, overarching conspiracy, it did not follow that each specific aspect of the defendants’ conduct must be evaluated under a single standard. As to the certification program, the plaintiffs failed to demonstrate the economic impact of the program with any certainty, which was a prerequisite for application of the per se standard. And the fact that the jury found an overarching conspiracy was not "new evidence" that mandated the application of the per se rule (In re Processed Egg Products Antitrust Litigation, June 25, 2020, Jordan, K.).
Purchasers brought antitrust claims against egg producers, alleging that they participated in a conspiracy to reduce the supply of eggs with trade groups United Egg Producers (UEP) and the United States Egg Marketers (USEM). The plaintiffs alleged that UEP told its members to follow short-term supply-reducing recommendations such as slaughtering hens earlier than had previously been done, promoting a certification program for animal welfare (for example, by putting fewer chickens in each cage) that was actually intended to reduce the supply of eggs, and conspiring through USEM to collectively export eggs at below-market prices in order to inflate domestic egg prices.
The district court held that each individual component of the alleged conspiracy could be considered separately and that the rule of reason should apply to the certification program. The jury concluded that there was a single overarching conspiracy to reduce supply, but that the conspiracy did not impose an unreasonable restraint on trade. Following the verdict, the plaintiffs filed a motion to amend the judgment, arguing that the jury’s finding of the existence of an overarching conspiracy to reduce supply was "new evidence" and that it mandated the application of the per se rule and entry of judgment for them. The district court denied the motion and the plaintiffs appealed.
The Third Circuit affirmed the lower court’s ruling and rejected the plaintiffs’ argument that because they alleged the defendants engaged in a single, overarching conspiracy, all of the defendants’ conduct must be evaluated under a single standard and, given their allegations, it must be the per se standard. Because different aspects of an alleged conspiracy can have very different economic consequences, different standards should apply when assessing whether each has an unlawful anticompetitive effect. Otherwise, a plaintiff with a bucket full of allegations about behavior rightly subject to the rule of reason could easily, by adding a single allegation of behavior that is anticompetitive per se, demand per se analysis of the whole.
As to the certification program, the court rejected the plaintiffs’ argument that the defendants participated in a horizontal agreement to reduce supply and fix prices. The plaintiffs argued that the supply reducing effects of the conspiracy were undisputable, but the record included evidence that egg supply actually increased during the conspiracy period. Although the plaintiffs asserted that the egg supply would have increased even more if not for the certification program, the economic impact of the actions at issue could not be predicted with a high degree of certainty, which is a prerequisite for application of the per se standard.
Finally, the court held that the jury’s verdict was not new evidence that superseded the district court’s determination that the rule of reason was the proper mode for analyzing the conspiracy. If the plaintiffs’ argument was that the the jury’s verdict was somehow internally inconsistent, they waived any such argument by failing to object to the verdict before the jury was discharged. Moreover, the whole point of the rule of reason was to recognize that there are agreements that restrain trade but do not do so unreasonably. That was the very conclusion the jury reached in this matter, after hearing five weeks of evidence and argument. It should also be obvious that the jury’s verdict did not constitute "new evidence." It was not evidence of any sort. And the plaintiffs fared no better with their assertion that the district court’s decision to apply the rule of reason was a clear error of law. The record painted a far more complex picture than the black and white caricature drawn by the plaintiffs’ argument. Indeed, the jury’s finding that the restraints on competition at issue in this case were reasonable was a good indicator that the plaintiffs’ demand for per se liability was off base and that the defendants’ actions were actually reasonable, rather than an effort to drive up prices. That the jury also found the defendants had some agreement to reduce supply did not mean, either as a matter of logic or law, that the district court erred in saying that the rule of reason was the proper mode of analysis.
This case is No. 19-1088.
Attorneys: Ronald J. Aranoff (Wollmuth Maher & Deutsch LLP) and Stanley D. Bernstein (Bernstein Liebhard LLP) for T.K. Ribbings Family Restaurant, LLC, John A. Lisciandro d/b/a Lisciandro’s Restaurant, Eby-Brown Co. LLC and Karetas Foods Inc. Donald M. Barnes (Porter Wright Morris & Arthur LLP) and Leah Mintz (Duane Morris LLP) for Rose Acre Farms, Inc. Michael A. Lindsay (Dorsey & Whitney LLP) for National Council of Farmer Cooperatives.
Companies: T.K. Ribbings Family Restaurant; Karetas Foods Inc.; Michael Foods, Inc.; Hillandale Farms of PA Inc.; Midwest Poultry Services LP; Ohio Fresh Eggs LLC; Rose Acre Farms Inc.
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