Seventh Circuit sits on squabble over chicken price-fixing settlement

CHICAGO (CN) — After nearly a decade, a legal saga over a conspiracy to fix domestic chicken prices added a new page on Tuesday.

The Seventh Circuit heard arguments relating to one branch of the sprawling tree of parties in the class action — fast-casual restaurants and other direct purchasers of chicken products — and how they were displeased with a partial resolution to the dispute that a lower court in Chicago oversaw late last year.

“There was no indication from the district court or the class that they were intending to settle a claim that had never been certified and had never been subject to an analysis under [federal procedure] Rule 23,” Lori Lustrin, an attorney with Miami law firm Bilzin Sumberg, told the appellate court on behalf of the restaurants.

The underlying case goes back to September 2016, when a New York food service distributor called Maplevale Farms filed a federal class action in Chicago against dozens of poultry farms and chicken product producers. Maplevale — later joined by other bulk chicken purchasers like Walmart, Kraft Heinz and Nestle — claimed the defendants, who control a large share of the wholesale market for broiler chicken products, worked together from 2008 through at least 2012 to inflate the price of those products by throttling domestic supply.

They did this, Maplevale says, by earmarking increasing numbers of chicken products for export, killing breeder hens and destroying clutches of viable eggs, and coordinating their financial strategies. As a result broiler wholesale prices have increased by nearly 50% since 2008, even though input costs like corn and soybeans fell more than 20% in the same time, according to the 2016 complaint.

From there the case ballooned into multidistrict litigation with over 100 associated lawsuits and more than 7,400 individual filings. The Justice Department also pressed felony charges against 10 executives and managers with the poultry producers in 2020 and took them to trial in October 2021. After two mistrials, a federal judge in Colorado dismissed five of the defendants from the indictment and a jury acquitted the remaining half in July 2022.

Civil claims against defendants associated with one of the country’s largest poultry producers, Sanderson Farms, went to trial in September 2023. A Chicago jury cleared Sanderson of involvement with the alleged price-fixing conspiracy a month later, while settlement discussions between other parties in the suit were already underway.

In December the court approved a $28.7 million settlement between a class of direct purchasers of chicken products and defendants associated with Mountaire Farms, O.K. Foods and Simmons Foods. But several restaurant chains opposed the deal because its terms would prevent them from pursuing further action on their claims that the company had engaged in “bid-rigging” — rigging the bid process for sale contracts with restaurants, further inflating chicken prices.

The restaurant chains argued that a number of procedural violations over the issue ought to invalidate the settlement agreement.

U.S. District Judge Thomas Durkin disagreed with the assessment, however, and denied the restaurants’ objections a day before he approved the Simmons settlement. The Barack Obama appointee found the restaurants lacked evidence to support their claims around the value of the purported bid-rigging — a concern echoed by the Seventh Circuit judges on Tuesday.

“You can make all the allegations you want in a complaint but that’s not evidence,” U.S. Circuit Judge Frank Easterbrook, a Ronald Reagan appointee, told Lustrin at one point.

The other judges on the appellate panel, U.S. Circuit Judges Nancy Maldonado and David Hamilton, Joe Biden and Barack Obama appointees respectively, also pushed Lustrin for evidence to support her clients’ objections. Under pressure, she conceded that the bid-rigging claim is “in its infancy” at court and still needed time to develop an evidentiary body.

“The evidence on the record, judge, on the bid-rigging that we provided to the district court understands that the bid-rigging claim is in its infancy in the case. OK? It’s pre-discovery,” Lustrin told the panel.

The panel nevertheless took the restaurants’ claims under advisement. They did not say when they would return a ruling.

Other food antitrust cases have also moved through the Chicago federal court in the last several years. Last December a jury awarded Kraft, Kellogg’s, General Mills and Nestle $17.7 million in damages stemming from a then-12 year-old price-fixing case against the nation’s largest egg producers.

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