© 2015 The Texas Lawbook.
By Natalie Posgate
(Sept. 22) – A Pennsylvania federal judge has denied class certification for a massive lawsuit brought by consumers that alleges 12 U.S. egg producers and two agricultural cooperatives conspired to reduce the supply of eggs in the U.S. to drive up prices for their own benefit.
Friday’s opinion, issued by U.S. District Judge Gene E.K. Pratter in the Eastern District of Pennsylvania, is a significant win for Dallas lawyers at Gibson, Dunn & Crutcher, who represent defendant Jackson, Mississippi-based Cal-Maine Foods, the nation’s largest fresh shell egg producer.
Brian Robison, who led the Gibson Dunn team’s class certification efforts, said Friday’s ruling is important because the size of the class alone – which experts said would be more than 140 million people – would have likely produced an enormous class damages claim had it received certification.
The damages amount now at stake is confidential, but Robison said it is much lower than it could have been since it now boils down to the individual claims of the 21 named plaintiffs in the lawsuit.
The consumer case is one of three separate strings of antitrust litigation that Cal-Maine and other egg producers have faced in the past decade. The first was brought by a group of direct purchasers, which consisted of retailers, wholesalers, distributors and other large buyers that purchase eggs directly from egg producers. Robison said Cal-Maine settled that case in 2013 for $28 million. Those plaintiffs received class certification after Cal-Main reached settlement terms, Robison said.
As a result, the second string of litigation formed, consisting of six cases involving a group of grocery store chain plaintiffs that opted out of the settlement, Robison said. Though none of the cases are taking place in Texas, plaintiffs include stores with a significant presence in Texas, such as Kroger, Albertson’s, H-E-B, Walgreen’s and Winn-Dixie. According to Robison, one of the cases settled on confidential terms in December 2014 and the other five are still pending.
Plaintiffs in this case are called putative indirect purchasers, which are ordinary people who purchase eggs from the grocery store. Because of the 1977 U.S. Supreme Court precedent-setting decision in Illinois Brick Co. v. Illinois, the indirect purchasers were unable to attempt a recovery of damages under the Sherman Antitrust Act. But they were still able to attempt class certification under state antitrust statutes.
Plaintiffs sought class certification to recover damages under 21 state antitrust statutes, the consumer protection laws of seven states and the unjust enrichment laws of 17 states – a daunting class size nevertheless for Cal-Maine and others to fight if class certification had succeeded, Robison said.
“This is a critically important win for our client,” said Robison, who has been involved in the litigation for seven years and has billed “well over” 4,000 hours. “Talking about a class of 147 million people dating back to a nine-year damages period would be dangerous. It’s also an important decision for other defendants who will be facing indirect purchaser cases like this.”
Memphis-based Straus & Boies attorney Mark Schirmer, who represents the plaintiffs, declined to comment on the case.
In her 85-page opinion, Judge Pratter found a multitude of reasons to deny class-certification, including plaintiffs’ failure to demonstrate that their proposed class is “clearly defined and ascertainable, that common issues predominate as to their claims” and that “their proposed class action is manageable.”
Judge Pratter, who issued her opinion after a two-day evidentiary hearing in April, described the plaintiffs’ desire to recover damages under various state statutes as “attempting to place 21 square pegs into a single round hole.
“Plaintiffs leave too much to the imagination, failing to adequately demonstrate that common questions predominate as to the claims plaintiffs seek to bring in each of their proposed classes, and failing to demonstrate that the proposed approach would be manageable.”
The indirect purchaser plaintiffs allege that Cal-Maine and others conspired to reduce egg supplies in three ways from Oct. 1, 2006 to present day: 1) a series of explicit, short-term production-restrict ion programs, such as slaughtering hens prematurely; 2) a pretextual animal-welfare program; and 3) a calculated series of exports of eggs at below-market prices.
Robison said the three-prong litigation surfaced after a September 2008 front-page article the Wall Street Journal published that revealed a grand jury investigation into three companies in the egg products market, which entails liquid eggs, dried eggs powdered eggs, beater eggs, etc. The article mention’s Cal-Maine’s sharply higher share prices and profits from 2006 to 2008, which the company attributed to higher egg prices.
The grand jury later ceased its investigation without taking any action against the companies. Robison said there was never an investigation in the shell egg market – the market Cal-Maine falls under.
In addition to Robison, the Gibson Dunn trial team included partners Veronica S. Lewis and associates Jason McKenney and Oilvia Adendorff. Local counsel for Cal-Maine is Robin Locke Nagele of Post & Schell in Philadelphia.
The two agricultural co-op defendants, United Egg Producers and United State Egg Marketers, are represented by Philadelphia lawyers Jan Levine and Robin Sumner of Pepper Hamilton.
The trial team for Michael Foods, another egg producer defendant in the case, is led by Carrie Mahan Anderson of Weil, Gotshal & Manges in Washington, D.C.
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