Egg producers liable for inflating prices

Antitrust

Brandon D. Fox, Sati Harutyunyan and Amy M. Gallegos, Jenner & Block LLP

The protracted litigation over price-fixing in the U.S. egg industry dragged on for more than a decade before Brandon D. Fox and his colleagues at Jenner & Block LLP persuaded an Illinois federal jury to award their major food company clients $17.7 million for conspiring to inflate prices.

Two Jenner & Block attorneys who, like Fox, work from Los Angeles, Sati Harutyunyan and Amy M. Gallegos, were co-leads on the team. They were assisted by four from the Chicago office: Annie Kastanek, Angela M. Allen, Michael T. Brody and Joel T. Pelz.

The damages they won, assessed against top egg producers and distributors, automatically trebled under the Sherman Act to $53.1 million. And the plaintiffs are entitled to fees and costs, which given the years in court will be substantial, Fox said.

"This was complicated multidistrict litigation that went up on appeal at least once before I began my involvement in 2021," Fox added. He said that by the time the jury delivered its verdict and damages award, no one on the trial team had been with the matter from the start. Post-trial motions remain in progress. Kraft Foods Global Inc. et al. v. United Egg Producers Inc. et al., 1:11-cv-08808 (N.D. Ill., filed Dec. 12, 2011).

The plaintiff group included Kraft Heinz Co., Kellogg Co., General Mills Inc. and Nestle USA Inc. On the defense were United States Egg Marketers, Rose Acre Farm, Cal-Maine Foods and United Egg Producers Inc. The defense firms involved included King & Spaulding LLP; Gibson, Dunn & Crutcher LLP; Weil, Gotshal & Manges LLP and others.

Concerning to the plaintiffs was a defense strategy of disguising much of their conspiracy as an animal welfare program, introducing a potential jury appeal factor. "They brought in outside people who tried to give it a gloss of concern for the hens," Fox said. "We tried to frame the case around their true motivations."

Harutyunyan managed the team's trial presentation and witness strategy.

"The jury saw past the defendants' complicated cover story and recognized their scheme for what was at its core: a conspiracy by competitors to artificially inflate prices," she said.

In 2018, Gallegos led the successful opposition to the defendants' summary judgment motion, which set the case on course for trial. During the trial, she oversaw the economics and expert side of the case and put on the plaintiffs' economist.

"This was a challenging case and our team had to overcome a number of hurdles, including dealing with conduct that took place a long time ago," Gallegos said. "While it is notoriously difficult to win a rule of reason antitrust case in front of a jury, our case shows it is possible with the right approach. The win was a team effort and would not have been possible without our colleagues in Chicago, our clients, and our experts."

The verdict is the first holding the defendants liable for their antitrust violations. Two other sets of plaintiffs in a larger multi-district litigation failed to convince juries that industry groups and egg producers unlawfully conspired to restrain trade.

"Two other plaintiff firms tried and lost," Fox said. "That made it a big deal for us."

--John Roemer