Anti-Competitive Effects Suit Against Tyson Chicken To Proceed To Trial
On October 27, 2020, Judge Joseph McKinley Jr. of the United States District Court for the Western District of Kentucky granted in part and denied in part Tyson’s motion for summary judgment. Charles Morris, et al v. Tyson Chicken Inc., et al., 4:15-cv-00077 (W.D. Ky. Oct. 27, 2020). Plaintiffs, growers of chicken broilers who contract with Tyson for the supply of chicken, sued alleging a number of violations under the Packers and Stockyards Act (“PSA”), as well as numerous contract claims.
Plaintiffs’ primary allegation is that Tyson uses monopsony power to reduce the growers’ revenue and control the supply of chicken. Central to the Motion for Summary Judgment was the proper standard of harm plaintiffs are required to meet. Under the Packers and Stockyards Act, Tyson’s argued that plaintiffs were required to “show the anti-competitive effects stemming from the exercise of monopsony power.” However, the Court rejected this standard of proof. The Court said the required standard is lower, and plaintiffs “may show either an actual or likely adverse impact on competition.”
To meet this burden, plaintiffs relied on an expert report from an economics professor at the University of Wisconsin-Madison. The report concluded that Tyson used its monopsony power to artificially lower base pay for growers and depress the supply of chicken. Tyson countered with an expert report of its own that argued plaintiffs had not presented sufficient evidence that Tyson’s actions preferenced any particular grower. After considering the dueling expert reports and arguments presented by Tyson, the Court determined that there was a dispute of material fact as to whether Tyson is a monopsonist that has exercised its power in a way that will or is likely to adversely affect competition. The Court thus denied Tyson’s motion for summary judgment on the Packers and Stockyards Act claims.
With regard to the contractual claims, the Court denied the motion for summary judgment on one of the breach claims, finding that it was inextricably linked to the Packers and Stockyards Act claims. The question for the Court was what evidence is required in Kentucky to show damages in a breach of contract claim. Tyson argued that the PSA expert’s damages calculations were not appropriate to show contract damages. The Court disagreed, holding that the PSA experts’ damage calculations as a result of violations of the PSA are proper for consideration under Kentucky contract law.
The Court did grant summary judgment on plaintiffs’ second breach of contract claim based on an implied covenant of good faith and fair dealing. Under Tyson’s contract with the growers, chicken broilers determined to be unfit for human consumption by the USDA would be condemned and charged back to the growers. Plaintiffs argued that this practice denied them compensation for the flock they grew. Here, the Court found that there was no evidence that Tyson had engaged in conduct that would deny the benefit of the bargain the parties intended. Plaintiffs also claimed that Tyson had breached the implied covenant by denying Plaintiffs the opportunity to earn increased revenue from the flock between processing. However, the Court determined that Tyson had acted in accordance with the contract. Accordingly, the Court granted in part and denied in part the motion for summary judgment.
The decision clarifies the proper standard of review under the Packers and Stockyards Act and highlights the challenge a court can face at the motion for summary judgment stage when competing expert reports are presented.