Egg Buyers Scramble to Save Lawsuit

     PHILADELPHIA (CN) — Plaintiffs in an eight-year-old antitrust lawsuit alleging an egg-price conspiracy can’t recover damages for sales of products containing eggs made by non-defendants, a federal judge ruled this week.
     Minnesota-based Michael Foods, whose annual net sales top $1.5 billion, sold the plaintiffs most of the egg products at issue, according to the complaint.
     But most of the eggs in its products came from outside suppliers — primarily non-defendants — and 72 percent were from companies not certified by United Egg Producers, whose member farmers own about 95 percent of the nation’s egg-laying hens.
     Michael Foods paid different prices for eggs from different suppliers, depending at times on grain prices, or on egg market prices. And another firm that sold the plaintiffs egg products, Indiana-based Rose Acre Farms, bought as many as 21.6 percent of its eggs from outside suppliers, including non-defendants.
     Though the plaintiffs claim that egg product prices rose as shell egg prices did, and that the two are mutually interchangeable, a Philadelphia federal judge rejected their expert’s opinion on that last year.
     The direct purchasers’ expert failed to show that egg products are substitutable for shell eggs, that the market is integrated nationally, or that egg products are commoditized, the judge said.
     The defendants sought summary judgment, saying the plaintiffs failed to distinguish egg products made with defendant-produced eggs from those made with eggs produced by the 15 non-defendants.
     U.S. District Judge Gene E. K. Pratter granted the motion Tuesday, finding that the plaintiffs cannot recover “umbrella” damages for non-defendant-produced eggs.
     “Plaintiffs have not shown that it was the defendants who reaped ill-gotten gains from the egg products sales, nor can they show this, at least without more data,” Pratter wrote. “Plaintiffs’ theory of the case is that defendants conspired to reduce the supply of eggs. This, in turn, raised the price of eggs, and, consequently, the price of egg products. A significant portion of the egg products at issue here is made with eggs purchased from non-conspirators. Thus, without analyzing, for example, the prices that defendants paid for those non-conspirators’ eggs, the proportion of those eggs used in specific egg products, and the resulting egg products’ price, it is impossible to tell whether the defendants profited unduly from these egg products, given that the overcharge could have been paid by defendants to their egg suppliers.” (Emphasis in original).
     The judge added: “At the end of the day, plaintiffs are relying on the theory that the conspiracy raised prices for all eggs, even those produced by non-conspirators, which is a quintessential restatement of the umbrella theory.”
     The direct action plaintiffs’ expert, who said he isolated overcharges for each egg product purchased, “cannot have done so without any analysis whatsoever of the non-conspirator egg producers’ pricing decisions and without any knowledge of which eggs went into which egg products, and in what proportion,” the ruling states.
     The other plaintiffs have failed to show they can separate damages resulting from egg products made with certified eggs from damages resulting from products made with non-certified eggs, Pratter ruled.
     “No discovery has been delineated for the court’s consideration that would assist in a determination as to which egg products used which eggs, so it appears that plaintiffs do not even have the tools necessary to perform the necessary analysis,” the judge wrote.
     Rose Acre Farms attorney Donald Barnes, with Porter Wright Morris & Arthur in Washington, D.C., said the farm is “pleased with this important decision.”
     Michael Foods did not return requests for comment Thursday.

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