In the latest deal to resolve claims that U.S. egg producers stifled supply and gouged customers, Cal-Maine Foods Inc. announced Tuesday that it will pay $28 million to a putative class of direct egg purchasers. The settlement — which must be approved by U.S. District Judge Gene Pratter of the Eastern District of Pennsylvania — still leaves Cal-Maine and its lawyers at Gibson, Dunn & Crutcher fighting price-fixing claims from indirect purchasers and opt-out direct action plaintiffs.
Jackson, Miss.-based Cal-Maine, the country's largest producer and distributor of fresh eggs, is one of about a dozen companies targeted by class-action antitrust lawyers after big spikes in egg prices in 2007 and 2008. Most of the claims were brought on behalf of direct purchasers, including food distributors and large retailers. They alleged that egg producers adopted anti-competitive methods for limiting egg supply, like culling hen populations and adopting mandatory cage-space programs. The dozen or so original defendants included Michael Foods Inc., Daybreak Foods Inc. and Sparboe Foods LLC.
In 2009, plaintiffs lawyers in the egg price-fixing cases agreed to drop claims against Sparboe in exchange for the company's cooperation. Defendant Land O'Lakes Inc. and two subsidiaries settled direct purchaser claims for $25 million in 2010.
Pratter has been overseeing the multidistrict litigation since late 2008, issuing a steady stream of rulings and cracking more than her fair share of egg jokes. (She even referenced Green Eggs and Ham in one of her opinions, becoming at least the second federal judge to cite the Dr. Seuss classic.)
Both sides in the litigation have had their ups and downs. Most of the defendants lost dismissal bids. But they're poised to prevail on a key procedural issue. Pratter has indicated in several rulings that the standard four-year statute of limitations should apply. Plaintiffs counsel had sought to extend the class period by an extra four years on the grounds that the defendants hid their alleged wrongdoing.
A quartet of law firms — Susman Godfrey, Hausfeld LLP, Bernstein Liebhard and Weinstein Kitchenoff & Asher — are serving as co-lead counsel for the direct purchaser plaintiffs. The proposed class is also represented by Quinn Emanuel Urquhart & Sullivan. Discovery closes later this year, at which time the lead plaintiffs are expected to move for class certification.
Cal-Maine's lead lawyer, Veronica Lewis of Gibson Dunn, told Legal affiliate The American Lawyer her client is pleased with the outcome. By winning on the statute of limitations issue, Cal-Maine was able to reduce its potential liability, she said.
Lewis added that the remaining defendants may yet prevail under a 1922 federal statute known as the Capper-Volstead Act, which exempts certain agricultural activities from U.S. antitrust laws. The defendants have all moved to dismiss on Capper-Volstead grounds, Lewis said, arguing that their activities fall within the exception. Pratter ruled that she can't make that determination until discovery closes. "It's a very fact-based inquiry," Lewis said.
Steven Asher of Weinstein Kitchenoff declined to comment.