Summary of a Recent
Judicial Development in
Packers and Stockyards Act

Proof of Adverse Affect on Competition Required
to Establish Deceptive Practice Claim

Harrison M. Pittman
Research Assistant Professor of Law & Staff Attorney

Summary of Decision

In London v. Fieldale Farms Corp., 410 F.3d 1295 (11th Cir. 2005), the United States Court of Appeals for the Eleventh Circuit held in a matter of first impression that § 202 of the Packers and Stockyards Act, 7 U.S.C. §§ 181-229, required a plaintiff who alleged that a live poultry dealer had violated § 202 was required to prove that the alleged violation "adversely affects competition or is likely to adversely affect competition" in order to prevail under the PSA. London, 410 F.3d at 1303. Section 202 provides in relevant part that a live poultry dealer is prohibited from engaging in or using "any unfair, unjustly discriminatory, or deceptive practice or device," a phrase that is not defined in the PSA. 7 U.S.C. § 202(a).

Background

Plaintiffs Harold and Christine London grew poultry under production contracts with defendant Fieldale Farms Corporation. See id. at 1298. The defendant terminated the production contracts, which by their terms remained in effect indefinitely or until either party provided thirty days' notice of termination. See id. Soon thereafter, the plaintiffs brought an action against the defendant that alleged, inter alia, that the defendant violated § 202 of the PSA because the contract termination occurred without economic justification. See id. at 1299. The jury ruled in favor of the plaintiffs on their termination claim and awarded them monetary damages. See id. The district court set aside the jury's verdict, including the award of monetary damages. See id. The plaintiffs appealed the district court's decision to the Eleventh Circuit. See id.

Arguments

The plaintiffs and the USDA Secretary through an amicus curiae brief argued that "the plain language of the statute, the purpose of the PSA, and the . . . [Secretary's] interpretation all indicate that in order to prove that any practice is 'unfair' under § 202(a), it is not necessary to prove predatory intent, competitive injury, or likelihood of injury." Id. at 1302. The defendant argued that the district court correctly ruled that the plaintiffs must establish that "the unfair, discriminatory or deceptive practice adversely affected competition in order to prevail under the PSA." Id.

Analysis and Holdings

The issue before the Eleventh Circuit was "[w]hether the district court properly granted Fieldale's motion for judgment as a matter of law on the London's PSA termination claim because the Londons did not show that the termination had an adverse effect on competition." Id. at 1301. The court explained that "several courts have held that only those unfair, discriminatory or deceptive practices adversely affecting competition are prohibited by the PSA." Id. at 1303. The court reviewed several of these decisions and concluded that it agreed with the view of "those circuits that hold that in order to succeed on a claim under the PSA, a plaintiff must show that the defendant's unfair, discriminatory or deceptive practice adversely affects or is likely to adversely affect competition." Id. The court added that elimination of the "competitive impact requirement" would undermine the policy justifications for enactment of the PSA. See id. In this regard the court stated that

"Congress gave the Secretary no mandate to ignore the general outline of long-time antitrust policy by condemning practices which are neither deceptive nor injurious to competition nor intended to be so by the party charged." . . . Failure to require a competitive impact showing would subject dealers to liability under the PSA for simple breach of contact or for justifiably terminating a contract with a grower who has failed to perform as promised.

Id. at 1304.

The court also determined that it would not give Chevron deference to the interpretation of § 202 forwarded by the Secretary. It stated that

This court gives Chevron deference to agency interpretations of regulations promulgated pursuant to congressional authority. The PSA does not delegate authority to the Secretary to adjudicate alleged violations of Section 202 by live poultry dealers. Congress left that task exclusively to the federal courts. The absence of such delegation compels courts to afford no Chevron deference to the Secretary's construction of Section 202(a).

Id. (citations omitted).

The case was decided on June 1, 2005; this summary was posted Aug. 25, 2005.