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10th Circuit takes up timeliness debate in chicken investor suit

Pilgrim's Pride pleaded guilty in 2021 to fixing prices and rigging bids for broiler chickens, paying out a $107 million fine to the feds.

DENVER (CN) — The 10th Circuit on Tuesday considered whether time limits mean a complaint filed by investors against a chicken producer engaged in a price-fixing scheme is overcooked.

Chicken producer Pilgrim’s Pride aligned the prices of its broiler chickens with competitors Tyson and Sanderson Farms in 2008. Collectively the three companies sell about half the chickens consumed in the United States. Rather than competing, they conspired to inflate prices together.

Investor Patrick Hogan filed a class action against Pilgrim’s Pride in 2016, accusing the company of lying to investors about the scheme in press releases and solicitations that instead praised the company’s competitive skills for its record profits.

In the years since Hogan sued, Pilgrim’s Pride and its executive suite faced criminal charges. The company pleaded guilty in 2021 of fixing prices and rigging bids for broiler chickens, paying out a $107 million fine to the Department of Justice.

A class of workers also sued the company in 2020 over the scandal's effects on pension funds.

Senior U.S. District Judge R. Brooke Jackson, appointed by Barack Obama, initially dismissed Hogan's case without prejudice in March 2018. Jackson then granted Hogan’s motion to submit an amended complaint. When Jackson didn’t set an explicit deadline, Hogan’s attorneys read that as a signal to follow the pending investigation by the U.S. Securities and Exchange Commission.

“Judge Jackson did something very peculiar — he told us our case was premature and told us to follow the securities docket,” recalled Ryan Lopatka of firm Kahn Swick and Foti, appealing on behalf of Hogan.

Hogan submitted the amended complaint more than a year later, on June 8, 2020. Pilgrim's Pride moved to dismiss the case on Aug. 31, 2020. Judge Jackson amended his original judgment on April 19, 2021, finding the five-year repose has been exhausted.

Lopatka argued Judge Jackson miscalculated the deadline.

“The defense could have moved to dismiss for failure to prosecute after seven years,” Lopatka said, prompting laughter from the panel.

U.S. Circuit Judge Harris Hartz, appointed by George W. Bush, noted that it came down to the timing. Lopatka argued the SEC’s five-year repose reset at the defendant’s last stated misrepresentation.

Attorney Caroline Zalka of Weil Gotshal & Manges countered that the repose only applied to the most recent statements, and a recent instance of misrepresentation did not reset the clock on earlier statements. Zalka further argued Jackson’s dismissal meant Hogan needed to file a new complaint.

“When the first case was dismissed without prejudice, the case is treated as a new action, as if the first case didn’t exist,” Zalka said.

Senior U.S. Circuit Judge David Ebel, a Ronald Reagan appointee, asked whether the amended complaint was assigned a new case number. It was not.

“Someone thought it was the same case,” Ebel, sporting a red bowtie, said.

Although the first complaint had been dismissed without prejudice, Judge Hartz thought it important the final judgment did not address Hogan’s amended complaint.

“Not that I’m the expert here,” Hartz said, prompting laughter in the court. “I don’t think you can have any vested rights until you’ve got a final judgment.”

On rebuttal, Lopatka looked to the courtroom for inspiration, reading aloud the phrase engraved in gold over the panel, “reason is the soul of all law.”

“What happens if the repose period ends before the court dismisses the case, but the court leaves room for an amended complaint. How can you amend? If ‘reason is the soul of all law, there’s no soul in that," Lopatka said.

Obama-appointed U.S. Circuit Judge Scott Matheson rounded out the panel. The court did not indicate when or how it would decide the case.

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