A Texas federal judge has dismissed with prejudice a decade-long litigation brought by chicken growers seeking a $500 million judgment against Pilgrim’s Pride Corporation for allegedly violating federal law by manipulating chicken prices when it closed several plants in 2009.
U.S. Magistrate Judge Roy Payne ruled that Pilgrim’s did not violate the Federal Packers and Stockyards Act. Hundreds of growers in Arkansas, Louisiana and Texas had sued Pilgrim’s Pride, claiming that the company required them to spend millions of dollars to upgrade their facilities, only to close processing operations a short time later in order to reduce chicken supplies and increase prices. Each chicken grower, sought $1 million is damages.
Pilgrims’ Pride filed for Chapter 11 bankruptcy in 2009 and closed its El Dorado, Arkansas and the Farmerville, Louisiana plants as a result of what the company said was overextension in the commodity chicken market, which caused the company significant financial losses. A parallel lawsuit involved plants in Nacogdoches, Texas and DeQueen Arkansas.
The cases were heard in Texas because Pilgrim’s was headquartered in Pittsburg, Texas. Pilgrim’s is now a subsidiary of Brazilian food giant JBS. JBS USA is based in Greely, Colorado.
Judge Payne disagreed with the growers, ruling that there was insufficient evidence that the company encouraged the chicken growers to invest in their farms with the intent to cause financial losses to the growers. “If was only when Pilgrim’s ran into financial difficulties, whether caused by extrinsic market forces, such as increased cost of chicken feed or the decreased demand brought on by the recession, or by bad investments and imprudent acquisitions, that Pilgrim’s decided to try to improve its bottom line by closing some of its processing facilities,” Payne wrote in dismissing the lawsuits.
The court concluded that Pilgrim’s “conduct was merely the legitimate response of a rational market participant to changes in a dynamic market. If a firm inadvertently over-produces a good and drives down prices, it does not break the law by cutting production so that prices may recover.”
A court’s dismissal with prejudice bars the plaintiffs from filing another case on the same claims.
