Seventh Circuit skewers broiler chicken antitrust deal brokered by email

(CN) — A Seventh Circuit on Thursday appeared to doubt whether a complex broiler chicken antitrust settlement negotiated over email could be enforced without a signed final draft.

The broiler chicken antitrust saga began in 2016 when a New York food service distributer called Maplevale Farms filed a federal class action in Chicago against a swath of poultry farms and chicken product producers, claiming they aligned their prices in order to artificially inflate the wholesale price of chickens.

Eventually, other bulk purchasers of the broiler chicken product — which is a chicken bred to gain lots of weight very fast — like Walmart, Kraft Heinze and Nestle joined the suit and the case ballooned into multidistrict litigation with over 100 associated lawsuits and more than 7,400 individual filings.

Sysco joined the litigation in January 2018 by suing Pilgrim’s Pride. The pair negotiated a settlement for almost three years before coming to a $50 million agreement that was abruptly halted by multibillion-dollar Chicago-based finance firm Buford Capital, which won ownership of Sysco’s claims.

Buford appointed its affiliate Carina Ventures to replace Sysco as plaintiff, which refused to sign the settlement that Sysco had agreed to via email.

Pilgrim’s Pride moved to enforce the settlement. A federal judge in Chicago granted the motion in September 2023, finding there was “no question as to the terms of the agreement” based on the drafts and emails.

On Thursday, a Seventh Circuit panel heard oral arguments in Carina Venture’s appeal of that order and considered whether the unsigned contract is indeed enforceable.

Arguments were succinct considering the extensive and accusatory briefs in the appellate record, each side lamenting the other’s apparently nefarious intentions.

Carina’s attorney Derek Ho argued that the parties had a clear understanding that a signed agreement would be required to complete the settlement.

“This was a large, complex, multicase settlement — the kind that sophisticated commercial parties consummate by signing agreements,’ Ho said. “Not by emails between counsel. As this court said in Abbott Labs, the magnitude of the deal requires careful scrutiny of any claim that informal letters constitute a binding agreement.”

Ho argued the signature requirement was evidenced by Pilgrim’s’ repeated and forceful attempts to convince Sysco to sign.

U.S. Circuit Judge David Hamilton, a Barack Obama appointee, asked most of the panel’s questions Thursday. He agreed with Ho that the reach of the suit required a close look and wondered whether there were material issues of fact that the enforcement order ignored.

The global settlement enforcement order from U.S. District Judge Thomas Durkin applied to the Illinois broiler chicken claims as well as beef and pork claims that had been consolidated in the District of Minnesota. He found the email exchanges ultimately reflected the “heart” of the agreement, which is enough evidence to enforce it.

Hamilton appeared to disagree, questioning whether the purported settlement established how the $50 million would be divided between chicken, pork and beef claims. Carina agreed and argued it hadn’t yet been hammered out.

Attorney Christopher Michel, representing Pilgrim’s Pride, countered that it was an “important but largely mechanical” part of the process that could be settled later.

The broiler chicken antitrust litigation has led to several multimillion-dollar settlements between producers and consumers, including one totaling $41.5 million against Pilgrim’s Pride. In that case, the plaintiffs were shareholders in the company who claimed it lied to investors about the price-fixing scheme in press releases intended to drive up profits.

Pilgrim’s Pride was required by an agreement, in which dozens of protein producers involved in the broiler chicken antitrust litigation would share liability and costs, to notify other broiler chicken defendants of the settlement within seven days.

Ho argued Pilgrim’s Pride did not do so, suggesting that it did not believe it had a final settlement agreement after all. Hamilton pressed Michel on the issue, pointing out that the producer needed a signed agreement to share with the other defendants.

Michel said only that the policy was not so cut and dry.

Since enforcement, the Minnesota court ruled that Sysco — and therefore Carina Ventures — settled its claims with Pilgrim’s Pride in Illinois and issued summary judgment to Pilgrim’s Pride, according to Carina Ventures. If the Seventh Circuit reverses the enforcement order, Sysco and Carina can file a letter for reconsideration of the Minnesota summary judgment order and the whole thing begins again.

Hamilton was joined on the panel by U.S. Circuit Judges Frank Easterbrook and Nancy Maldonado, Ronald Reagan and Joe Biden appointees, respectively. Neither party could be reached for comment by press time.

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