A jury in the U. S. District Court for the Northern District of Illinois rendered a verdict in favor of Plaintiffs in Kraft Foods Global, Inc. v United Egg Producers, Inc. et al. Plaintiffs included General Mills, Inc., a subsidiary of Kraft-Heinz Company, the Kellogg Company and Nestle SA. The most recent verdict relates to egg products as used by manufacturers. It was alleged that welfare standards for hens introduced by United Egg Producers in 1998 represented collusion among the major egg producers intended to reduce the size of the national flock thereby disturbing the supply to demand equilibrium resulting in overpayment for eggs over the period 2004 through 2008.
The Defendants in the case filed in 2018, included Cal-Maine Foods, Rose Acre Foods and industry associations United Egg Producers (UEP) and U.S. Egg Marketers, Inc. With the introduction of enhanced welfare standards, stocking density in cage systems was reduced over successive years, back filling was abandoned along with starvation molting that resulted in a transitory decline in national flock size. Two previous cases alleging conspiracy to reduce supply with plaintiffs representing direct consumers and retailers respectively were unsuccessful although many of the Defendants settled out of court for substantial damages without admitting liability.
The verdict will obviously be appealed with the Defendants’ legal teams reviewing procedural aspects of the case. U.S. District Judge, Steven Seeger, complimented the level of advocacy by lawyers representing both Plaintiffs and Defendants questioning possible grounds for an appeal.
The case will create problems for all food producers and for that matter, manufacturers of products and their trade associations. Legal fees, based on a percentage of generous assessment of damages assigned by juries, are an incentive for legal firms to initiate class action suits that are difficult to defend and inevitably drive up the price of products. This is especially the case with pharmaceuticals and medical procedures that include provisions for high insurance premiums that are in turn linked to the prevalence of malpractice claims of dubious authenticity.
It must be remembered that the industry was under considerable pressure to introduce an acceptable welfare program in response to consumer and customer demands. The egg industry was in a situation of being damned if they did and damned if they didn’t. There was obviously no obvious intent to reduce production and hence, increase prices for eggs. It is regrettable that certain injudicious memoranda were discovered that created the impression that there was collusion obviously influencing the jury. The sole saving grace was the discharge of many of the Defendants and the period covering the allegations of collusion was reduced to four years, eliminating the period 2009 through 2012.
The case demonstrates the vulnerability of food producers necessitating careful evaluation of the potential legal perils resulting from any joint initiative taken by producers.
The verdict rendered in Kraft Foods Global v United Egg Producers was unfair and hopefully will be reversed. At best, Plaintiffs will be hard pressed to justify damages given the dynamic state of the market.