Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: ‘Umbrella’ theory bars damages claims of egg product purchasers, (Sep 7, 2016)

By Jeffrey May, J.D.

In an action alleging a conspiracy to restrict the supply of eggs and consequently to fix the prices of eggs and egg products, all claims based on direct purchases of egg products were dismissed by the federal district court in Philadelphia. The court ruled that recovery for damages relating to egg products made from eggs supplied by non-conspirators was barred by the prohibition on "umbrella" damages. Because the egg product purchasers could not differentiate between egg products made with eggs supplied by alleged conspirators and eggs supplied by non-conspirators, all claims regarding egg products failed (In re: Processed Egg Products Antitrust Litigation, September 6, 2016, Pratter, G.).

The defendants moved for summary judgment on the ground that the purchasers of egg products could not recover overcharges for egg products made from eggs produced by non-conspirators. Linking damages from egg product purchases to the conspiracy that took place in the shell egg market would be speculative, according to the defendants.

The plaintiffs contended that the prohibition of umbrella damages was inapplicable because the defendants intended their conspiracy to raise the prices of both shell eggs and egg products and because the doctrine relied on the principle that it would be unfair to seek damages for purchases from non-defendants when the defendants did not reap the benefits of those sales. But, according to the plaintiffs, in this instance, the defendants did reap the benefits because they were the ones selling the egg products at inflated prices.

The court held that the plaintiffs relied on a "quintessential restatement of the umbrella theory"—that the conspiracy raised prices for all eggs, even those produced by non-conspirators. The plaintiffs did not and could not isolate the effects of the conspiracy on the prices of egg products without detailed analysis of the non-conspirator egg producers’ pricing decisions and knowledge of which eggs went into which egg products, and in what proportion. Because no discovery had been delineated to assist in a determination as to which egg products used which eggs, it appeared that the plaintiffs did not even have the tools necessary to perform the necessary analysis, according to the court.

The case is No. 08-md-2002.

Attorneys: Mindee J. Reuben (Weinstein Kitchenoff & Asher LLC) and Michael D. Hausfeld (Hausfeld LLP) for Direct Purchaser Plaintiffs. Stephen M. Rummage (Davis Wright Tremaine LLP) for National Food Corp. Jan P. Levine (Pepper Hamilton LLP) for United Egg Producers, Inc. William M. Goodman (Kasowitz, Benson, Torres & Friedman LLP) for NuCal Foods, Inc. Samantha L. Southall (Buchanan Ingersoll & Rooney PC) for Hillandale Gettysburg LP.

Companies: National Food Corp.; United Egg Producers, Inc.; NuCal Foods, Inc.; Hillandale Gettysburg LP

Cases: Antitrust PennsylvaniaNews