Summary of a Recent
Judicial Development in
Production Contracts

Court Denies Class Action Certification in Antitrust Suit
for Lack of Commonality Among Chicken Growers

Eric H. Foy
National AgLaw Center Research Associate

Summary of Decision

In Wheeler v. Pilgrim's Pride Corp., 246 F.R.D. 532 (E.D. Tex. 2007), the United States District Court for the Eastern District of Texas denied a motion for class certification brought by plaintiff chicken growers. Plaintiffs alleged that defendants, poultry integrators, violated antitrust laws by compensating growers through a tournament system, thereby suppressing the base price of chickens.

Background

Several chicken growers filed a class action complaint against Tyson Foods, Inc. and Pilgrim's Pride Corp. (defendants), two leading poultry producers in the United States, alleging that defendants violated the Sherman Act by conspiring to suppress their compensation through exchanging confidential price information and agreeing to split the grower market between them. Id. at 536. Defendants compensated chicken growers through a tournament system, which ranked growers against other growers based on quality and efficiency of bird production. Id. A grower's base pay was increased or decreased according to its ranking against its peers. Id. The proposed class consisted of growers located throughout northeastern Texas and Arkansas. Id. The growers sought to establish defendants' liability using section four of the Clayton Antitrust Act. Id.

Arguments

Defendants argued that the growers lacked individual standing and could not pursue class certification because none of the named class representatives had ever worked for Tyson, the growers lacked proof of their allegations, and the class representatives' circumstances were not typical of the overall class. Id. at 537. Plaintiffs argued that the antitrust statutes created a private cause of action, which gave them standing to pursue their claims. Id. Additionally, plaintiffs argued they could adequately represent the entire class of growers because the scope of the alleged conspiracy concerned all of the growers named in the class, and defendants were jointly and severally liable for the alleged conspiracy. Id.

In support of their prayer for class certification, the growers argued that Federal Rule of Civil Procedure 23(b)(3) gave the court the authority to certify the class because common questions to all similarly situated chicken growers predominated over questions affecting individual members. Id. at 540. Defendants argued that proof of injury and the amount of damages were so individualized that common issues did not predominate. Id.

Analysis and Holdings

To have standing, a plaintiff must demonstrate an injury in fact, the alleged injury must be traceable to the defendant's conduct, and the injuries must be redressed by a favorable decision. Id. at 536. Additionally, the plaintiff must have his or her own standing as opposed to asserting third party standing. Id. In the instant action, the court held that plaintiffs were members of the proposed class because plaintiffs alleged a single conspiracy between Pilgrim's Pride and Tyson. Id. at 537. Even though plaintiffs were contract growers for Pilgrim's Pride, while other named members of the class were growers for Tyson, the court held that it would be improper to separate the allegations according to each named chicken processor. Id. Although plaintiffs had never worked for Tyson, they nonetheless were members of the proposed class and possessed constitutional standing. Id. Furthermore, the court held that plaintiffs provided sufficient evidence to support their allegations, and a favorable decision by the court would redress plaintiffs' injuries. Id.

The court also examined the "well-settled principles which govern antitrust damages" to determine whether the growers had satisfied the class action certification rigors of Federal Rule of Civil Procedure (FRCP) 23(b)(3). Id. at 540. For a class to be properly certified, the FRCP requires that questions common to class members must predominate over questions affecting only individual members. Id. A plaintiff must prove some common element of actual damages caused by the violation of antitrust laws, as well as the amount of damages. Id. Because the tournament system differed from complex to complex and individualized evidence of damages would predominate over collective damages, the court held that plaintiffs did not establish a common element of actual damages. Id. at 540-41. Additionally, the court held that plaintiffs had not met their burden as to the amount of damages because in the case at bar, "adequate estimation of actual damages suffered [was] not possible without consideration of varied and individualized proof related to each complex at issue." Id. at 541. As a result, the court denied plaintiffs' motion for class certification. Id. at 543.

The case was decided on September 28, 2007.