Conspiracy Claims Against Egg Producers Laid to Rest by Jury

After a 26-day trial and over a decade of litigation, a federal jury in the Eastern District of Pennsylvania rejected claims by a group of grocery store chains that Rose Acre Farms, United Egg Producers, and United States Egg Marketers conspired to reduce the supply of egg-laying hens and inflate egg prices. This was the second trial in sprawling litigation involving several groups of plaintiffs asserting similar claims of anticompetitive conduct against the defendants.

Background

The plaintiff retailers and supermarkets alleged that agriculture cooperatives United Egg Producers and United States Egg Marketers, in conjunction with egg producers, adopted a new set of animal welfare standards in 2002 as a pretext for reducing the number of egg-laying hens. Specifically, the standards increased the amount of cage space required for each hen, leading to fewer hens and fewer eggs such that demand would drive egg prices higher.

But the defendants argued that the policies were actually the direct result of retailers, including plaintiffs, insisting on only selling eggs that were produced in accordance with the animal welfare standards. They further argued that even with the new standards, the overall egg-producing flock had continued to grow since 2002, and egg prices actually hit historic lows in 2006 and 2007.

After a day and a half of deliberations, the jury found in favor of the defendants. The plaintiffs have notified the district court that they are appealing the judgment to the United States Court of Appeals for the Third Circuit.

While Rose Acre Farms may have been the sole egg producer that remained as a defendant at the time of trial, nine other egg producers were named as defendants in the plaintiffs’ amended complaint filed in February 2012. These other egg producers settled with plaintiffs prior to the trial.

Takeaway

This case serves a quintessential example of the calculus that a defendant must undertake in deciding whether to settle prior to trial. While a settlement provides certainty of exposure, avoids the treble damages available in antitrust cases, and can avoid years of legal fees, it also removes the possibility that the jury may in fact find that the plaintiff did not prove its case. This analysis is further complicated where different groups of plaintiffs are pursuing similar claims against the defendants and a defendant may not be able to settle with all plaintiff groups, or where a plaintiff’s settlements with co-defendants may offset any damages awarded by the jury.

Consider Cal-Maine Foods, Inc., one of the nine egg producers that settled before trial. In 2013, Cal-Maine settled with a different group of plaintiffs for $28 million. That case went to trial in 2018, and while those plaintiffs were seeking more than $1 billion in damages, the jury awarded none. Cal-Maine continued to litigate against the plaintiffs listed above for five more years until it settled in 2018 for $80.75 million. But again, this jury awarded no damages.

The decision of when to settle—and for much—is always informed by the particular circumstances of the case and the parties. And while hindsight may make certain settlements seem too high or too low, the particular party’s risk tolerance and potential exposure should always guide the decision. Every trial and jury decision is uncertain, so while Rose Acre Farms, United Egg Producers, and United States Egg Marketers were rewarded for litigating through this trial, settling other similar cases may still be an optimal strategy.