In re Processed Egg Prods. Antitrust Litig.

392 F. Supp. 3d 498
CourtDistrict Court, E.D. Pennsylvania
DecidedJune 11, 2019
DocketMULTIDISTRICT LITIGATION No. 08-md-2002
StatusPublished
Cited by6 cases

This text of 392 F. Supp. 3d 498 (In re Processed Egg Prods. Antitrust Litig.) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Processed Egg Prods. Antitrust Litig., 392 F. Supp. 3d 498 (E.D. Pa. 2019).

Opinion

Pratter, J.

INTRODUCTION

In 2016, the Court granted the defense motion for summary judgment on Direct Action Plaintiffs' egg product-related claims on the grounds that they lacked standing. The DAPs successfully appealed that ruling and the Court of Appeals for the Third Circuit remanded the case for further disposition. The defendants then filed joint and individual motions for summary judgment on the DAPs' egg product-related claims. This Memorandum addresses those motions.

The defendants jointly argue that the DAPs failed to demonstrate that any alleged antitrust violation caused injuries. The Court must deny this motion because the DAPs have proffered enough evidence that a reasonable jury could arguably rule in their favor.

Certain defendants also filed individual motions for summary judgment on the grounds that, given the opinion from Court of Appeals for the Third Circuit, some or all of the DAPs lack standing. The Court denies these motions because under the theory being pursued by the DAPs (a theory that is permitted by current applications of antitrust law) the defendants can be jointly and severally liable for damages even if certain DAPs did not directly purchase egg products from them.

BACKGROUND 1

This motion focuses on egg products as opposed to shell eggs. The DAPs2 are *502purchasers of egg products who claim that they paid more for those egg products than they should have because of the defendants' alleged conspiracy. The discussion of the facts relevant to the pending motions proceeds in three parts: (1) information about egg products during the alleged conspiracy; (2) a review of each of the remaining defendants, and; (3) a brief summary of the expert report by Dr. Michael R. Baye as it relates to the DAPs' egg products claims.

I. Egg Products

For the most part, the facts regarding egg products are undisputed. Shell eggs are eggs that are processed by being cleaned, packaged, and sold in their shells. Egg products are eggs, either whole or separated, that have been removed from their shells and are then processed into dried, frozen, or liquid forms. The primary purchasers of egg products are food manufacturers that use the egg products as ingredients in goods ranging from frozen waffles to salad dressing to mayonnaise. During the alleged conspiracy period, at least 18 companies, including 15 non-defendants, sold processed egg products. At least some of these companies do not themselves own any egg-laying hens.

Some facilities produce shell eggs, which leave the facility still in the shell and can be used for either shell eggs or be broken "off-line" for use in egg products. Other facilities, called "in-line" facilities, break the eggs in the facility and then transport the raw unpasteurized liquid egg via produce tankers. The defendants allege that eggs from in-line facilities are better for egg products because they have a lower bacterial count than liquid eggs broken off-line. This raw unpasteurized liquid egg is unfit for human consumption and cannot legally be sold to anyone in that form other than egg products manufacturers, who then process the raw egg. Not every egg products company both produces and processes raw liquid egg-some companies only produce the raw liquid egg and others only process it The latter companies have no layers of their own and must purchase the raw liquid egg they then process.

During the alleged conspiracy, the DAPs contend that overall egg production increased at a slower rate than it would have had the conspiracy not been in place. However, as is allegedly important for understanding the dynamics of this case, egg production in Iowa increased at a much higher rate than it did in other parts of the country. Between 2000 and 2008, the U.S. flock size increased by about 3%, from 328 million layers to 339 million layers. During that same period, the flock size in Iowa increased by about 88%, from 28 million layers to 53 million layers. The defendants contend that this rapid growth in Iowa was particularly important for egg products because Iowa producers are well-positioned to supply eggs to egg products companies. For example, Iowa producers are advantaged by low feed costs but are at a disadvantage in supplying shell eggs to urban areas because of increased transportation costs relative to other egg-producing states such as California, Ohio, Georgia, and Pennsylvania. This leads Iowa producers to break eggs near production locations and sell liquid egg to egg products companies, such as Michael Foods.

II. Defendants

The defendants remaining in this portion of the case are Michael Foods, Rose Acre, Cal-Maine, R.W. Sauder, United Egg Producers, Inc. (UEP), and United *503States Egg Marketers (USEM).3 Each of these defendants, with the exception of Michael Foods, also filed an individual motion for summary judgment.

A. Michael Foods4

Sales of egg products by Michael Foods make up the majority of sales for most of the DAPs' damages. Most of the eggs used in Michael Foods' egg products come from outside suppliers, and of those eggs, the great majority were supplied by non-Defendants. Seventy-two percent (72%) of the eggs purchased by Michael Foods were from companies that are not UEP certified. And Michael Foods paid very different prices for eggs from different suppliers because it negotiated prices based on grain prices (in some cases) and egg market prices (in other cases). Michael Foods contends that it entered into long-term contracts based on grain prices because grain prices are historically more stable than egg prices. Michael Foods also entered into such long-term contracts with suppliers from Iowa to take advantage of the inherent advantages of that market.

B. Rose Acre

Certain DAPs also purchased egg products from Rose Acre Farms. Rose Acre produces both shell eggs and eggs for breaking into egg products, and the company can move eggs between shell eggs and eggs for breaking with some ease. With that being said, Rose Acre purchased as much as 21.6% of its eggs for egg products from outside suppliers, including from non-Defendants.

Rose Acre contends that the following DAPs did not purchase any egg products directly from it: Giant Eagle, Hy-Vee, Publix, and Safeway. Although the DAPs admit that Safeway did not purchase egg products directly from Rose Acre, they dispute whether Hy-Vee, Publix, and Giant Eagle did. All parties agree that the remaining DAPs made egg product purchases from entities other than Rose Acre.

C. Cal-Maine Foods, Inc.

Cal-Maine has resolved disputes related to both shell eggs and egg products with all DAPs other than Conopco, Inc. and the four DAPs in the Kraft case (Kraft Foods Global, Inc., Nestle USA, Inc., General Mills, Inc., and the Kellogg Company). It is undisputed that the five DAPs with remaining claims against Cal-Maine did not purchase egg products directly from Cal-Maine.

D. R.W. Sauder

R.W. Sauder alleges that none of the DAPs purchased egg products directly from the company.

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392 F. Supp. 3d 498, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-processed-egg-prods-antitrust-litig-paed-2019.