Summary of a Recent
Judicial Development in
Production Contracts

"Consumer" Status under Deceptive Trade Practices Act

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In White v. Pilgrim's Pride Corp, No. 2-07-CV-522 (TJW), 2008 WL 4471656 (E.D. Tex. Sept. 29, 2008), the United States District Court for the Eastern District of Texas denied a defendant poultry integrator's motions to dismiss claims brought by its growers under the Texas Deceptive Trade Practices Act (DTPA) and the Packers and Stockyards Act of 1921 (PSA), because the PSA no longer required plaintiffs to plead that a defendant's conduct adversely affected competition and because the plaintiffs had sufficiently pleaded their "consumer" status under the DTPA.

Background

Poultry growers brought suit against Pilgrim's Pride and its founder and CEO, Mr. Pride, alleging unfair dealing under the PSA, 7 U.S.C. §§ 181 et seq., as well as violations of the DTPA and conspiracy to commit deceptive trade practices, and sought damages from breach of contract, fraud, deceptive trade practices, and conspiracy. Id. at *1. The plaintiffs, who raised broilers for Pilgrim's Pride, were supplied with chicks and the supplies and feed needed to raise them, and in return they cared for the birds until they reached maturity, at which point they were returned to Pilgrim's Pride. Id. They were compensated under a "tournament system" in which they were ranked against other growers in their complex. Id. Mr. Pilgrim also raised chickens, but operated under a different system. Id. He purchased his own chicks, supplies, and feed from Pilgrim's Pride at market value, and rather than being ranked in a "tournament system," he was paid the lesser of a weekly quoted market price or 102% of his costs, a deal which was not available to the plaintiffs. Id. Defendants moved to dismiss the claims. Id.

Arguments

Defendants argued that the plaintiffs' PSA claim should fail because they did not assert that Pilgrim's Pride's conduct adversely affected competition, and that the plaintiffs' DTPA claims should be dismissed under Federal Rule of Civil Procedure 12(b)(1) or 12(b)(6), because the plaintiffs were not "consumers" under the DTPA and did not have standing to bring this action. Id. at *2.

Plaintiffs argued that they were "consumers" under the DTPA, because Pilgrim's Pride deducted feed costs from the value of their mature birds, which was a sale of goods (i.e. a consumer transaction). Id. at *3.

Mr. Pilgrim separately argued that because the plaintiffs did not allege that they were involved in any transaction with him, their DTPA claims against him should be dismissed for lack of standing. Id. at *4.

Analysis and Holdings

The court noted that a decision handed down subsequent to the defendants' filing of their motions had held that PSA provisions did not require a plaintiff to prove an adverse effect on competition to prevail, and therefore the court denied the defendants' motion to dismiss the PSA claim. Id. at *2. Turning to the DTPA claim, the court explained that plaintiffs must qualify as "consumers" under the Act to maintain a private cause of action, with a "consumer" defined as "an individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks or acquires by purchase or lease, any goods or services . . . ." Id. Texas has interpreted this to include two requirements: the plaintiffs must have sought or acquired goods or services by purchase or lease, and the goods or services purchased or leased must form the basis of the complaint. Id. The court held that the plaintiffs had sufficiently pleaded their consumer status under the DTPA, and denied the defendant's motion to dismiss that claim. Id. at *3. Regarding the DTPA claims against Mr. Pilgrim individually, the court gave the plaintiffs leave to amend their complaint to show cause as to why the claim against him should not be dismissed. Id.

The case was decided on September 29, 2008.