Antitrust Law Daily Wage suppression claims move forward against poultry processors
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Thursday, September 17, 2020

Wage suppression claims move forward against poultry processors

By Nicole D. Prysby, J.D.

Poultry processing plant employees sufficiently alleged conspiracies to fix compensation and exchange compensation information as to three poultry processors and two data consulting companies.

Poultry processing plant employees sufficiently alleged that some processors conspired to fix compensation and conspired to exchange compensation information, held the federal district court in Baltimore, Maryland. Employees of poultry processing plants sued the processors and two data consulting companies, alleging a conspiracy among the defendants to fix and depress poultry workers’ compensation, and an unlawful exchange of compensation data. The claims failed against some defendants because the plaintiffs’ group pleadings lumped subsidiaries of many of the processors together. As to the five individually-named defendants, the plaintiffs stated sufficient factual allegations to support a plausible per se wage fixing conspiracy as to three of the defendants. The conspiracy to exchange compensation information claim went forward against all five. The plaintiffs plausibly alleged defendants’ market power within the continental U.S. poultry processing labor market, as well as anticompetitive effects resulting from the compensation-depressing information exchange in which defendants engaged. The claims were not time-barred, based on the fraudulent concealment and continuing violation doctrines (Jien v. Perdue Farms, Inc., Septmeber 14, 2020, Gallagher, S.).

Employees of poultry processing plants sued the processors and two data consulting companies, alleging a conspiracy among the defendants to fix and depress poultry workers’ compensation, and an unlawful exchange of compensation data. The defendants were alleged to have held secret compensation meetings, provided detailed compensation data to a data consulting company that then distributed the data to other producers, and conducted informal plant-to-plant conversations to share wage and benefit information. The defendants motioned to dismiss all claims.

Group pleadings. The court noted a group pleading problem common to both of the plaintiffs’ counts. The complaint lumped the various subsidiaries of many of the defendant processors together, without alleging any facts specific to each entity or each corporate family. For example, unspecified "Tyson executives" were alleged to have attended secret compensation meetings, without specifying which of the ten Tyson entities employed them. Therefore, both counts were dismissed as to the grouped defendants. However, five Defendants—Fieldale Farms Corp., Butterball LLC, Peco Foods, Inc., Agri Stats, Inc., and Webber, Meng, Sahl and Co., Inc. (WMS)—were named individually and were not subject to dismissal on this basis.

Conspiracy to fix compensation. The plaintiffs stated sufficient factual allegations to support a plausible per se wage fixing conspiracy as to some of the remaining five defendants. They provided some direct evidence of the alleged conspiracy, including a statement by a senior Tyson executive, fretting about the propriety of wage discussions at the secret meetings and stating that he planned to withdraw from the meetings. The plaintiffs also provided evidence from a former HR worker that the processors collaborated with regard to wages. However, the plaintiffs failed to link their direct evidence to each of the five defendants. Only Fieldale and Butterball were mentioned in the direct evidence; Peco Foods was not. WMS was alleged to have attended the secret meetings, but Agri Stats was not linked to the meetings or other acts. The plaintiffs also failed to offer circumstantial evidence of collusion for either Agri Stats or Peco Foods. They alleged parallel alignment of compensation, but cited no facts beyond their conclusory group pleadings. The fact that the defendants exchanged information also fell short; the mere existence of available competitor information, without more, does not plausibly support an inference of collusion. Therefore, the claim failed as to Peco Foods and Agri Stats.

Conspiracy to exchange compensation information. The plaintiffs alleged a plausible geographic market, the continental U.S. The defendants argued that the proposed market is overly broad, but the court rejected that argument, and pointed out that by alleging a broad geographic market spanning the entire country, the plaintiffs are making it harder to prove their case, because the level of market power necessary to control wages across the entire country is much greater. The plaintiffs’ proposed product market, the market for employment at poultry processing plants, is plausible, because they pleaded facts suggesting the defendant processors’ employees are reasonably limited to poultry jobs. The plaintiffs also sufficiently alleged market power, through allegations that defendant processors and their co-conspirators control more than 90 percent of the poultry processing jobs in the U.S.. And the plaintiffs sufficiently alleged an anticompetitive effect. They alleged key mechanics of the conspiratorial information sharing scheme as well as the specific way the scheme was designed to restrain competition in the market. In particular, they alleged specific, secret meetings between poultry executives in which extensive poultry processing wage data were exchanged via WMS, and in which industry compensation was agreed upon and artificially suppressed. Moreover, defendant processors were alleged to have used Agri Stats to monitor competitors’ adherence to this plan. Therefore, this claim went forward against all five remaining defendants.

Limitations issues. The court held that the claims were not time-barred. For the conspiracy to fix compensation claim, the plaintiffs sufficiently alleged fraudulent concealment, based on the secret compensation meetings. The secretive nature of the meetings, the lack of publicly available information, and the apparent investigation plaintiffs’ counsel undertook to uncover the existence of the meetings suggests that they exercised due diligence to investigate the alleged collusion. For the conspiracy to exchange compensation information claim, the plaintiffs were on notice of the defendants’ conduct, because unions representing the workers were aware of the information exchange. However, the plaintiffs sufficiently alleged a continuing violation, because they alleged that Agri Stats and Peco Foods have continuously shared information until the filing of the complaint.

Thiscaseis No. 1:19-cv-02521-SAG.

Attorneys: Matthew Keith Handley (Handley Farah & Anderson PLLC) and Alison Deich (Cohen Milstein Sellers and Toll PLLC) for Judy Jien. J. Douglas Baldridge (Venable LLP) for Perdue Farms, Inc., Perdue Foods LLC, Tyson Foods, Inc., Tyson Prepared Foods, Inc. and The Hillshire Brands Co.

Companies: Perdue Farms, Inc.; Perdue Foods LLC; Tyson Foods, Inc.; Tyson Prepared Foods, Inc.; The Hillshire Brands Co.

MainStory: TopStory Antitrust GCNNews MarylandNews

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