NSAC's Blog

U.S. Supreme Court Declines to Review Jury Award to Poultry Growers

May 6, 2011

On Monday, May 2, the U.S. Supreme Court declined, without comment, a petition of certiorari to review a 10th Circuit Court of Appeals decision in the case O.K. Industries v. Been.  The Appeals Court upheld a federal jury award of $14.5 million to poultry growers from a poultry processor because of the processor’s violations of Section 202(a) of the Packers & Stockyards Act (PSA).

PSA Section 202(a) provides that it is unlawful for live poultry dealers, packers or swine contractors to engage in or use any unfair, unjustly discriminatory, or deceptive practice or device.  The poultry growers filed their complaint in the case in 2002, contending that a poultry dealer had used its power as the only poultry processor in the region to manipulate and deceive poultry growers who raised broiler chickens under contract with the poultry dealer.

The growers pointed to specific practices of the processor, testifying that the processor increased the number of days between flocks that it placed with the growers and reduced the number of chickens per square foot of housing space. These practices lowered the amount paid to growers under the contract.  The growers also offered expert testimony that the processor used this power over growers to depress the price it paid growers for raising the chickens and increased the price charged when it sold the chickens into the retail market for consumers.  This price manipulation was found by the jury to cause a competitive injury to the consumer market for broiler chickens.

The Tenth Circuit Court of Appeals upheld the judgment of the lower court that the growers had proved that O.K. Industries had engaged in unfair practices and that the unfair practices had ultimately caused a competitive injury to the consumer market.  The U.S. Supreme Court decision not to review the Tenth Circuit’s decision leaves the award to the growers in place.

This is the second PSA case that the U.S. Supreme Court has declined to review this year.  In January, the Court declined to hear, without comment, a petition to review a Sixth Circuit Court of Appeals ruling in the case Terry v. Tyson Farms, Inc. The Sixth Circuit found that even if a court finds that a poultry dealer has violated PSA Section 202(a) by engaging in an unfair, unjustly discriminatory, or deceptive practice against a poultry grower, the poultry grower also has to show that the practice of the poultry dealer caused a competitive injury to consumers in the poultry market.

While these cases have moved through the federal courts, USDA’s Grain Inspection, Packers & Stockyards Administration (GIPSA) issued a proposed rule to clarify and strengthen the protections for farmers and ranchers under the Packers and Stockyards Act.  The proposed rule offers increased protections for livestock and poultry farmers and ranchers in the markets for their products and specific protections for poultry growers in their contract relations with large-scale poultry processors.  Among other things, the proposed rule makes clear that farmers and ranchers are not required to meet the extraordinary burden imposed by some courts, but not in the included in the PSA, of showing a competitive injury to the consumer markets for their products.  This judge-fashioned requirement can block farmers and ranchers from receiving justice under the PSA, even when they have met the requirement of the PSA statute of showing that they were subject to unfair, discriminatory or deceptive practices by a packer or processor.

The protections in the GIPSA proposed rule are critically needed as farmers and ranchers face fewer and larger processing and packing corporations that can control and manipulate prices and markets for livestock and poultry.

NSAC has joined with 144 organizations on a letter to Congress in support of the GIPSA proposed rule.

In addition, this week we issued an action alert urging people who care about fair markets for farmers and ranchers to ask their congressional Representatives to stay off a letter to USDA being circulated by Representative Jim Costa (D-CA).  The letter asks USDA Secretary Tom Vilsack to delay release of the final GIPSA rule.  This delay is totally uncalled for, especially since USDA provided a 150-day public comment period on the proposed rule and received over 60,000 public comments.  A delay would continue to subject our farmers and ranchers to livestock and poultry markets that can be manipulated and controlled by packers and processors.

Categories: Competition & Anti-trust

Comments are closed.