Summary of a Recent
Judicial
Development in
Packers and Stockyards Act
Packers Not Protected by USDA Pricing Error
Eric PendergrassNational AgLaw Center Graduate Assistant
In the case of Schumacher v. Tyson Fresh Meats, Inc., 434 F.Supp. 2d 748 (D.S.D., 2005), the District Court of South Dakota denied summary judgment to four beef packers because material issues of fact still existed once plaintiff cattle producers established that the producers were not required to show that the packers' deceptive practices adversely affected competition under the Packers and Stockyards Act (PSA).
In a class action lawsuit, cattle producers sought damages for alleged violations of the PSA and unjust enrichment on the part of four major meat packers after the producers negotiated the purchase of slaughter cattle using incorrectly reported prices for boxed beef published by USDA. Id. at 749-50. The producers alleged the packers knew the prices were incorrect and that the use of such known incorrect prices constituted an unfair trade practice. Id. at 750. The United States District Court for the District of South Dakota rejected the packers' contention that the producers could recover under the PSA only if their actions had an adverse effect on competition. See id. at 750-53.
The Court reasoned that the terms "unfair, unjustly discriminatory, or deceptive practice or device" are not clearly defined by the PSA and should be given a construction consistent with one of the Act's stated purposes, which is to prohibit deceptive practices with respect to the price paid to the producer for livestock. Id. at 753-54. The constructions of the terms are made on a case-by-case basis in order to give effect to the stated intent of the act by protecting the producer from non-market forces that affect price, so the terms are read in the more broad sense and do not limit their application to those practices that only adversely affect competition. Id.
The packers also sought to dispose of the producers' claims on three other grounds: 1) the PSA claim would affect thousands of contracts, 2) there was no distinction between producers who mitigated their damages in the futures market and those who did not, and 3) unjust enrichment could not exist under state law because there was an express contract. Id. at 754-55. The court summarily rejected all of these arguments. Id. First, no case has held that the PSA is inapplicable where the parties have entered into a contract. Id. at 754. Second, it is the packers' responsibility to plead and prove the affirmative defense of mitigation. Id. Finally, the packers were in fact unjustly enriched because no meeting of the minds occurred to create the contract due to the mutual mistake of fact associated with the errors in the USDA prices. Id. at 754-755.
The case was decided on March 30, 2006; this summary was posted October 24, 2006.