In Re: Processed Egg Products Antitrust Litigation: a Panel Discussion With Trial Counsel

• Jurisdiction: United States,Federal
• Citation: Vol. 29 No. 1
• Publication year: 2019
• Author: By Lee F. Berger
• topic: Antitrust and Competition,Business of Law,Commercial Litigation,Civil Procedure

IN RE: PROCESSED EGG PRODUCTS ANTITRUST LITIGATION: A PANEL DISCUSSION WITH TRIAL COUNSEL

By Lee F. Berger¹

In the In re: Processed Eggs Products Antitrust Litigation², often referred to as the Eggs litigation, direct and indirect purchasers of eggs accused major egg producers of conspiring to control and limit the nation's egg supply, thereby increasing egg prices through a number of allegedly interrelated anticompetitive practices. Specifically, plaintiffs allege that defendant egg producers violated Section 1 of the Sherman Act by developing and implementing a sham animal welfare program, exporting eggs at a loss, and reducing egg production in periods of oversupply through coordinated actions. Those alleged coordinated actions included reducing chick hatches, promoting early molting and slaughtering hens early. The defendants denied these allegations.

Ten defendants settled, but after more than a decade of litigation three egg producers— Rose Acre Farms, R.W. Sauder and Ohio Fresh Eggs—went to trial against the direct purchaser class. Plaintiffs sought more than a billion dollars in damages before trebling.

Trial started May 2, 2018, in the Eastern District of Pennsylvania, before Judge Gene Pratter. Judge Pratter rejected the application of the per se rule to the alleged conspiracy, meaning that the plaintiffs had to prove under the rule-of-reason that the conspiracy had an anticompetitive effect.

After a six week trial and six days of deliberations, the jury concluded that two of the defendants, R.W. Sauder and Ohio Fresh Eggs, were not involved in an alleged conspiracy. While the jury found that defendant Rose Acre was involved in the alleged conspiracy, it rejected liability by finding the conspiracy did not have an anticompetitive effect. An appeal is pending. Litigation between opt-out plaintiffs and defendants continues with a trial scheduled to begin on October 28, 2019.

The panel discussed this major antitrust trial and the path it took to verdict. Each side made a short opening statement: one from plaintiffs and one from defendants. Then, there was a question and answer discussion about some of the more interesting developments that led to the verdict in the case.

The Panelists

• Mindee Reuben is co-lead and liaison counsel for direct purchaser plaintiffs in the Eggs litigation. Ms. Reuben is counsel at Lite, DePalma, Greenberg in Philadelphia and represents plaintiffs across the country in a broad range of antitrust and complex consumer case class action matters. She regularly serves as lead, co-lead or liaison counsel. For example, Ms. Reuben has held leadership roles in the Generic Pharmaceuticals Pricing Antitrust Litigation, the Blue Cross/Blue Shield Antitrust Litigation, the Broiler Chicken Antitrust Litigation, the Lithium Ion
• Batteries Antitrust Litigation and the Polyurethane Foam Antitrust Litigation. Ms. Reuben is a lecturer of law at the University Of Pennsylvania School Of Law, where she teaches legal writing to LL.M. students. Ms. Reuben is also one of the founding members of the Women Antitrust Plaintiffs' Attorneys, a national organization of women who focus their practices on cartel and other antitrust practices. Ms. Reuben writes and speaks frequently on matters regarding antitrust cases and class action litigation.
• Steve Bizar is the lead trial counsel for defendant, R.W. Sauder, in the Eggs litigation. Mr. Bizar is co-chair of Dechert's global Antitrust and Competition practice. He is an experienced trial lawyer. Mr. Bizar has served as liaison counsel for defendants and lead trial counsel for defendant National Gypsum Company in the Domestic Drywall Antitrust Litigation, and served as lead trial counsel for defendant Dean Foods in the Southeastern Milk Antitrust Litigation. Mr. Bizar is a Fellow of the International Academy of Trial Lawyers and the American Bar Foundation. Mr. Bizar sits on the Philadelphia City Council Subcommittee of Criminal Judicial Reform and is a past president of the Philadelphia Bar Foundation. He writes and speaks frequently on antitrust topics, trial practice, and class certification.

[Page 45]

Plaintiffs' Opening Statement

MS. REUBEN: Good morning, everyone. My name is Mindee Reuben. Thank you for the introduction very much. I was one of many lawyers who represented the direct purchaser plaintiffs in this case.

I will tell you before I begin that the case was actually bifurcated between liability and damages, so the opening statements, at least from my perspective, are mostly about the liability piece, and the only part that we talked about was not about damages, but just about the percentage overcharge for the first part of the case. Much of which I will talk about are things that actually were said or talked about as they were presented in our opening statement.

The question that was presented to the jury by the plaintiffs was whether or not major U.S. egg producers conspired to limit the supply of eggs in order to raise the price of eggs. You cannot have an egg without a hen to lay it. So, if you want to raise the price of eggs by limiting the supply of eggs, what do you do? You limit the supply of hens that are laying those eggs, because the fewer hens you have, the fewer eggs you have. And the fewer eggs that you have, the more money that you are going to make as a producer. And what the evidence will show here is that is exactly what happened.

Who was involved in limiting the supply of eggs? The plaintiffs allege that there were a variety of egg producers and companies from across the United States that were involved in these actions to reduce the supply of hens and increase the price of eggs. For the purposes of trial we were focused on three entities, Rose Acre Farms, Ohio Fresh Eggs and RW Sauder.

Let me just say, you should not be fooled. These are not small companies. These companies are big. They have giant hen houses and hundreds of thousands of hens that lay millions of dozens of eggs over the year. This is agribusiness. This is not your local farm store.

[Page 46]

In addition to these companies there were a couple of other key players. One was the UEP—United Egg Producers—which was a trade association of the producers in the United States, and it had about ninety percent of the egg producers in the U.S. as members, and it was run by and controlled by those same producers. And, all of those companies were all members of the UEP during the relevant time period.

The other key player here was the USEM. It was originally part of UEP and then spun off, but the evidence will show that the real purpose of the USEM was to export eggs out of the United States in order to reduce supply and increase price in the United States.

Who are the plaintiffs that have brought this case? The plaintiffs who have brought this case are TK Ribbings Family Restaurant, Lisciandro's Restaurant and Eby-Brown Company, which is a wholesale distributor to convenience stores. They are both large and small, and they represented all of the plaintiffs in this case because they are a part of a class action, and each of these plaintiffs purchased directly from the producers that were involved in the litigation.

Now, the big question: How did they do it? How did the defendants reduce the supply of eggs in order to raise prices? The evidence will show that the producers engaged in both short and long term supply reduction strategies, and that these strategies were actually recommended by an economic advisor to the UEP and its members as a way of reducing supply. And, what did the economic advisor say? More eggs, less price; fewer eggs, more price.

Starting around 1999, and continuing throughout the relevant time period, there were both short and long term strategies. The short term strategies—early molting, slaughtering hens, limiting new hens, and exports—were all designed to get eggs out of the U.S. market. The only one you might not be familiar with is early molting. When a hen lays eggs, it goes through a natural period where it stops laying eggs for a little bit because it is tired, and then it goes back to laying eggs. Early molting means you stop them from producing eggs earlier than usual, and you do that by withholding their food. So, if you want to take eggs out of the market on a short term basis, you stop feeding your hens, and they stop laying eggs.

It became apparent quickly that these short term adjustments were simply not cutting it. They were not cutting it because they were not enough to control the supply over the long term and increase profitability over the long term. So according to, again, the producers' economic advisor, in order to control supply over the long term you have to remove extra hens from the nation's flock on a permanent basis. One of the ways he said you could do that was by giving the birds more space. Specifically, he said that if the industry adopted a policy of 48 square inches—which, by the way, is smaller than this piece of paper—as a minimum floor space allowance for birds, millions of extra birds would be eliminated. Because the more space that a bird has, the less space that there is for another bird. Fewer hens means fewer eggs, and that means more money. This precise idea was communicated to the producers.

[Page 47]

As this is all going on there is this emerging issue which relates to animal welfare of the hens laying eggs. And, you will likely hear evidence that big companies, companies like McDonald's, were looking for ways to deal with the animal welfare concerns that were in the industry. But what the evidence will show is that the United Egg Producers and its members, in response to that, latched on to this animal welfare issue as a way of achieving long term control over supply. You will hear that even though the Producers did take some steps to address animal welfare predominantly through a long term program called "The Certified Program," the process was really dominated by focus on controlling supply.

The Certified Program was designed as...