$75M settlement OK’d in egg antitrust litigation
A judge has signed off on a $75 million settlement from Michael Foods, a subsidiary of packaged-foodproducing giant Post, to settle claims against it in the egg antitrust litigation in federal court.
The settlement, reached nearly a year ago, was given final approval on Nov. 17 by U.S. District Judge Gene E.K. Pratter of the Eastern District of Pennsylvania, the presiding judge in the litigation. The class action, brought by direct purchasers and suppliers of eggs, continues against other defendants.
“The proposed settlement agreement is fair, reasonable, and adequate. Accordingly, the court grants plaintiffs’ motion for final approval of the class action settlement with defendant Michael Foods,” Judge Pratter wrote in her opinion.
The class, which Judge Pratter certified in September 2015, claims the nation’s major egg producers were involved in a conspiracy to control and limit the supply of eggs in an effort to increase prices, allegedly through short-term production restrictions, such as slaughtering hens early, a pretextual animal welfare program and a “calculated” series of exports of eggs at below-market prices.
“While we remain confident that our conduct has at all times been lawful and entirely appropriate, we believe this settlement is in the best interest of our shareholders, employees, customers and consumers because it effectively eliminates the distraction, expense and exposure of this complex litigation,” Rob Vitale, Post’s president and CEO, said in a December 2016 statement.
Stephen Neuwirth of Quinn Emanuel Urquhart & Sullivan, an attorney for the class members, said in December that the settlement was a step in the right direction.
“This is a very important step toward ensuring compensation for the direct purchasers of eggs who were victims of this longtime conspiracy,” he said.
The litigation saw settlements from other parties in July 2016.
Defendant Midwest Poultry Services agreed to pay $2.5 million; National Food Corp. agreed to pay $1 million; United Egg Producers and United States Egg Marketers agreed to jointly pay $500,000; NuCal Foods agreed to pay $1.425 million; and Hillandale Farms agreed to pay $3 million, according to an opinion issued by Judge Pratter at the time.
Besides the payments and agreeing to cooperate in the ongoing litigation, the six defendants were released from any and all claims from the direct purchasers.
Earlier in the case, Judge Pratter had denied certification to the indirect purchaser plaintiffs — those who purchased eggs produced by the defendants but sold elsewhere — because their proposed class members were not easily categorized, did not have enough in common and were not manageable.
As for the direct purchasers, Judge Pratter held in a September ruling that the plaintiffs had demonstrated there was commonality between the different proposed class members.
“The court concludes that common issues predominate with respect to whether the alleged conspiracy had an impact on the members of the shell eggs subclass,” Judge Pratter said. “Plaintiffs can use common evidence to demonstrate that (a) defendants made efforts to reduce the supply of eggs and thereby raise the price of eggs; (b) the egg market was structured so that the alleged conspiracy to restrict the supply of eggs, if successful, would have caused all or virtually all direct purchaser plaintiffs to pay higher prices than they would have absent the conspiracy; and (c) the conspiracy was successful in raising prices.”
Those factors showed that the plaintiffs were affected by the defendants’ alleged anti-competitive behavior, Judge Pratter said.
Additionally, Judge Pratter said the direct purchaser plaintiffs have compiled detailed discovery supporting their claim that a class was warranted, relying heavily on the defendants’ documents illustrating the supply reduction initiatives.
The plaintiffs also argued that the lack of substitutes for eggs and high demand played a part in the defendants’ alleged conspiracy, Judge Pratter said.
“Because of the lack of close substitutes for eggs, class members could not have systematically avoided the effects of a lower supply of eggs by obtaining a substitute for eggs, but would instead have had to pay the increased prices of eggs,” she said.