Antitrust Law Daily Wrap Up, ANTITRUST—EDPa: Egg Purchasers Entitled to File Third Amended Complaint Against Producers, (Dec 17, 2012)

By Jeffrey May, J.D.

In a price fixing class action against egg producers and industry trade groups brought on behalf of grocery stores, commercial food manufacturers, restaurants, and other food service providers that purchased egg products directly from the defending producers, the direct purchasers were partially successful in their attempts to revive claims against certain defendants previously dismissed from the litigation. The federal district court in Philadelphia granted in part and denied in part with prejudice the plaintiffs’ motion to file a third amended complaint (In Re: Processed Egg Products Antitrust Litigation, December 17, 2012, Pratter, G.).

The court had previously dismissed the plaintiffs’ claims against four related entities—Hillandale-Gettysburg, L.P., Hillandale Farms of Pa., Inc., Hillandale Farms, Inc., and Hillandale Farms East, Inc. The second amended complaint lacked sufficient allegations specific to these defendants to support an “inference that they each were a party to the agreement to restrict the supply of eggs” (821 F.Supp. 2d 709, 2011-2 Trade Cases ¶77,659). In response to the plaintiffs’ third amendment complaint, these entities challenged the motion to amend on prejudice and futility grounds.

The defendants failed to demonstrate how the proposed amendment was prejudicial to them, or inequitable. The defendants’ commitment of resources to dismissal motions for prior pleadings did not equate to the nature and extent of the prejudice that was required to deny a motion under Rule 15 of the Federal Rules of Civil Procedure, the court reasoned.

The defendants’ claims of undue delay also failed in light of the procedural posture of the case. The case had not advanced greatly beyond the pleading stage, and discovery had only recently commenced in earnest after considerable preliminary negotiations by the parties. Moreover, the plaintiffs complied with an agreed upon deadline for filing the motion for leave to amend, the court explained.

Futility of Amendment

Permitting amendment would not be futile with respect to egg producers Hillandale Gettysburg and Hillandale Farms of Pa., Inc., the court ruled. The plaintiffs set forth sufficient facts to plausibly suggest that Hillandale Gettysburg directly participated in or joined the conspiracy to reduce the supply of eggs. Hillandale Gettysburg was a member of an egg producer trade group. The court had previously ruled that a defendant's agreement to join and participate in the alleged conspiracy was plausibly suggested by allegations that the defendant was involved with trade group associations and attended trade group meetings. At these meetings, the plaintiffs had alleged that decisions fundamental to the alleged conspiracy were made.

For similar reasons, the court found that the amended complaint set forth allegations that plausibly suggested that Hillandale Farms of Pa. directly agreed to join and participate in the alleged conspiracy. While that defendant was not alleged to be a member of the egg producer trade group, it complied with the group's guidelines to reduce chick hatch.

The plaintiffs, however, could not pursue claims against Hillandale Farms, Inc. and Hillandale East. The allegations as to these defendants did not exclude the possibility that they were undertaking legitimate business decisions independent of an agreement to conspire.

These defendants were “non-producer marketers” that marketed and distributed shell eggs and egg products produced by Hillandale Gettysburg and/or Ohio Fresh Eggs. Neither entity was a member of the egg producer trade group, nor participated in the trade group’s certification program. Although they marketed eggs that were certified by the trade group, “the conspiracy as alleged simply ha[d] not been framed such that conduct relating to the marketing and sale of eggs could advance the anti-competitive aspects of the [egg producer trade group’s] Certification Program.”

The case is 08-md-2002.

Steven A. Asher (Weinstein Kitchenoff & Asher LLC) for plaintiffs.

Cases: Antitrust PennsylvaniaNews