In re Processed Egg Products Antitrust Litigation

312 F.R.D. 124, 2015 U.S. Dist. LEXIS 177172, 2015 WL 6964281
District Court, E.D. Pennsylvania·Decided November 10, 2015·No. No. 08-md-2002·Published·Cited by 13 cases

Opinion

[129]*129AMENDED MEMORANDUM1

GENE E.K. PRATTER, United States District Judge

This case involves an alleged conspiracy by the nation’s major egg producers to control and limit the supply of eggs and thereby increase the prices of eggs. The defendant egg producers allegedly accomplished this objective through three principal means: (1) a series of explicit, short-term production-restriction programs, such as slaughtering hens prematurely; (2) a pretextual animal-welfare program; and (3) a calculated series of exports of eggs at below-market prices. There are three categories of Plaintiffs seeking to hold Defendants liable for these actions: a putative class of direct purchasers of eggs (“Direct Purchaser Plaintiffs”) (i.e. those who bought eggs or egg products directly from Defendants); a putative class of indirect purchasers of eggs (“Indirect Purchaser Plaintiffs” — referred to as “Plaintiffs” in this Memorandum) (i.e. those who bought eggs at retail and not directly from Defendants); and plaintiffs who are bringing their own individual actions (“Direct Action Plaintiffs”). The Indirect Purchaser Plaintiffs ask the Court to certify their proposed classes. They seek [130]*130damages under the antitrust laws of 21 states, the consumer protection laws of seven states, and the unjust enrichment laws of 17 states, and seek an injunction under Section 16 of the Clayton Act, 15 U.S.C. § 26. Because these Plaintiffs have failed to demonstrate (a) that their proposed class is clearly defined and ascertainable; (b) that common issues predominate as to them claims; and (c) that their proposed class action is manageable, the Motion for Class Certification will be denied as to the proposed state law classes. The Motion for Class Certification will likewise be denied as to the proposed injunction class, albeit without prejudice should Plaintiffs choose to seek to revise and renew their Motion for Class Certification of the injunc-tive class, because to date Plaintiffs have failed to demonstrate that a class action under Rule 23(b)(2) is proper.

I. FACTUAL BACKGROUND

a. Allegations of Fact

As stated above, this alleged conspiracy consisted of three general tactics: (1) a series of short-term egg-supply reduction programs, (2) a long-term plan to reduce the supply of eggs under the pretext of an “animal-welfare program,” and (3) exporting eggs at a loss. These tactics allegedly reduced the supply of eggs and resulted in higher prices paid by the putative class of indirect purchasers.

1. Short-term Supply-Reduction Programs

Beginning in 1999, members of the United Egg Producers (“UEP”) agreed to a series of programs designed to immediately reduce the supply of eggs. These programs were implemented by a committee within UEP known as the “Marketing Committee.” Members of UEP were then to commit to implementing the programs. These programs included inducing hens to molt earlier2, slaughtering flocks of hens earlier, and reducing the hatching of chicks. UEP members were also encouraged to stop backfilling cages (that is, replacing dead hens with younger hens). These egg supply reduction programs succeeded in reducing flock size and driving the price of eggs up, and were implemented on a number of occasions between 1999 and 2006.

2. The Scheme to Reduce the Supply of Eggs Under the Pretext of a Certified Animal-Welfare Program

The alleged conspiracy to reduce the supply of eggs went beyond these short-term strategies and included the creation and implementation of a certified program purporting to improve the welfare of the hens. In fact, according to Plaintiffs, this program was a scheme to reduce the supply of eggs. The program’s goal of reducing the egg supply primarily relied upon requirements for increased cage space per hen. Compliance with this program was monitored by monthly reporting requirements and periodic audits. The cage-space requirement was supplemented by three additional requirements that ensured the certified program would have its intended effect: (1) the 100% rule, which required that all of a producer’s facilities, including those of its affiliates, comply with the Certified Program’s cage-space requirements in order for any egg from that producer to be “certified;” (2) a prohibition on backfilling within the certified program; and (3) a rule that failing to comply with the cage-space or backfilling requirements would result in an “automatic fail” of an audit under the certified program — even though other shortcomings under the program (such as improper lighting or handling) did not result in an “automatic fail.” The certified program was promoted as an animal-welfare program, with labels on egg packaging certifying that the eggs were “Animal Care Certified.” But the accusation is that this was merely a pretextual justification for this supply-reduction program. In fact, following a Federal Trade Commission investigation concerning whether the “Animal Care Certified” label was misleading, UEP agreed in 2005 to change the name of its certified label from “Animal Care Certified” to “UEP certified.”

[131]*1313. Egg Exports at a Loss

The final component of the alleged supply-restriction program was a series of egg exports at a loss (essentially “dumping” eggs in foreign markets so as to drive the domestic price of eggs up). The scheme, implemented by members of the United States Egg Marketers (“USEM”) and managed through the UEP Export Committee, required all USEM members to either export their own eggs at a loss or sell their eggs to UEP at domestic prices and later receive a bill for the difference between the domestic price and the export price. USEM members who did not contribute eggs to the scheme contributed money to help fellow members bear the burden of the export losses. These exports, which were also supported by some non-USEM-members, occurred periodically between 2000 and 2003, and from 2006 to 2008.

b. Proposed Classes

Plaintiffs seek certification of the following classes:

INJUNCTION CLASS

All individuals and entities in the Class Jurisdictions3 that purchased shell eggs during the Class Period from October 1, 2006 through the present from a retailer for their own use and not for resale and that intend to purchase shell eggs in the future. Specifically excluded from this class are Defendants’ subsidiaries and affiliates, as well as individuals whose only purchases of shell eggs were purchases of “specialty” shell eggs, such as “organic,” “free range,” “nutritionally enhaneed,” “cage-free” and hatching eggs.

INDIRECT PURCHASER STATE LAW CLASSES

[One per each Class Jurisdiction]:

Ml individuals and entities that purchased shell eggs from a retailer, for their own use and not for resale, during the Class Period from October 1, 2006 through the present and while residing in [the respective Class Jurisdiction]. Specifically excluded from this class are Defendants’ subsidiaries and affiliates, as well as individuals whose only purchases of shell eggs were purchases of “specialty” shell eggs, such as “organic,” “free-range,” “nutritionally enhanced',” “cage-free,” and hatching eggs.

II. LEGAL BACKGROUND

a. Indirect Purchaser Claims Generally

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In re Processed Egg Products Antitrust Litigation, 312 F.R.D. 124, 2015 U.S. Dist. LEXIS 177172, 2015 WL 6964281 (E.D. Pa. 2015).

312 F.R.D. 124 (In re Processed Egg Products Antitrust Litigation) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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