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Tuesday, June 25, 2024 | Back issues
Courthouse News Service Courthouse News Service

Chicken Plant Isn’t Liable for City’s Money Woes

(CN) - The 5th Circuit ruled that a city in Arkansas experiencing "economic distress" cannot hold a now-defunct poultry plant responsible for the city's inability to repay debts from a water-purification project.

Nearly 20 years before chicken processor Pilgrim's Pride acquired a plant from ConAgra Foods in 2004, the city of Clinton, Ark., expanded its water-treatment facilities to meet the plant's needs. Clinton officials claim ConAgra promised in 1985 to keep the plant open until the city had paid off 40-year bonds issued for the project, and Pilgrim's Pride vowed long-term commitment to the city when it acquired the plant.

When Pilgrim's Pride closed up shop and filed for bankruptcy in 2008, Clinton sued it for fraud. ConAgra was not named as a defendant. A Texas federal judge dismissed the complaint, and the New Orleans-based federal appeals court affirmed.

Clinton had claimed Pilgrim's Pride closed its poultry processing plant "for the purpose" and with the "effect" of manipulating the price of commodity chicken.

Bob Hendrix, senior vice president of Pilgrim's Pride, allegedly made assurances at a chamber of commerce meeting in 2004 that Pilgrim's would "have a long-term commitment to the city of Clinton" as its "community partner," Clinton claimed.

The city's complaint alleges that Pilgrim's was actually planning to close the plant when Hendrix made that statement.

The three-judge appellate panel rejected Clinton's allegations, with Judge William Garwood noting in the court's ruling that "Hendrix's alleged statement is so vague as to be essentially meaningless."

As to ConAgra's alleged statements, the court proposed an alternate theory.

"An equally plausible meaning to the one the city urges is that ConAgra was promising not to close the plant right away after the city issued the bonds; indeed, the plant did not close for over 23 years after the statement was allegedly made," Garwood wrote. "Hendrix's January 2004 statement that Pilgrim's would 'have a long-term commitment to the city of Clinton' as its 'community partner' is even more vague - it not only contains no facts on its face, but is devoid of context that would link it to the water system expansion in any way."

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