Defendants Cannot Crack Peanut Farmers’ Class Certification Motion
On December 1, 2020, Judge Raymond A. Jackson of the United States District Court for the Eastern District of Virginia granted plaintiff peanut farmers’ motion for class certification against defendant peanut shelling companies. D&M Farms, et al. v. Birdsong Corp., et al., No. 2:19-cv-463 (E. D. Va. 2020). Plaintiffs alleged that defendants conspired to lower the price of peanuts since as early as January 2014 in violation of Sherman Act § 1. The court certified plaintiffs’ proposed class after finding the facts submitted by plaintiffs and plaintiffs’ expert analysis satisfied the class certification requirements.
Plaintiffs’ proposed class includes almost 12,000 peanut farmers across the Southern and Southeastern United States who sell raw, harvested runner peanuts to defendants who then process and sell the peanuts in bulk to other companies. Both parties agreed that the proposed class satisfied the numerosity, commonality and typicality, and adequacy requirements for certification found under the Federal Rules of Civil Procedure. As such, the court focused on the remaining certification requirements of superiority and predominance. On superiority, the court cited the high number of farmers in the class and reasoned that the avoidance of hundreds of minitrials made a class action the superior means of adjudication.
For the remaining certification requirement of predominance, common questions of law or fact must “predominate over any questions affecting only individual members.” Fed. R. Civ. P. 23(b)(3). The Court found that this question turned on whether plaintiffs could show that each element of their legal claim (antitrust violation, antitrust injury, and measurable damages) could be proven through evidence common to the class, particularly the two elements of antitrust injury and measurable damages. To do so, plaintiffs relied on a mix of qualitative and quantitative evidence to support a finding of collusion, including email communications between executives at defendant companies about competitive pricing information as well as market structure analysis from their expert, Dr. Michael Williams. Plaintiffs’ expert identified six factors that supported a finding of collusion: (1) high buyer concentration, (2) barriers to entry, (3) the commodity-like nature of runner peanuts, (4) large numbers of repeat sales to the same customers, (5) relatively low elasticity of supply, and (6) various industry trade associations. Defendants did not challenge the validity of the email communications, and the Court accepted them as true for the purposes of the class certification analysis. While defendants challenged the market structure analysis as lacking any empirical analysis, the Court found the expert’s evidence to be “trustworthy” in suggesting potential antitrust conspiracy and held that findings (1), (2), and (4) were “supported by the mere fact that defendants occupy 80-90% of the market share,” and noted that the expert relied on “seemingly trustworthy sources” for the other factors.
Plaintiffs’ expert also used a multi-variable regression model to show a general deflation of peanut prices during the period of the alleged conspiracy that harmed 99.8% of the proposed class. Defendants argued that plaintiffs’ expert’s analysis was inaccurate because the regression model over-included alternative factors that would impact price other than a conspiracy and incorrectly used market-wide “averages” that artificially suggested antitrust injury in common among the plaintiffs. Despite these critiques, the Court deferred further analysis of defendants’ criticisms of plaintiffs’ regression model. In reaching its decision, the Court held that the strength of plaintiffs’ regression model should be an issue for the fact finder at a later stage of litigation and cited other circuits’ acceptance of economic regression models and, specifically, the use of “averages” as data inputs in running assessments for antitrust injury impact. The Court ruled that plaintiffs had met their burden of showing at the class certification stage that common issues predominated.
This case serves as a reminder of the continued importance of gathering a fact record and robust market analysis at the class certification stage. Parties to complex antitrust claims should be aware of courts’ treatment and acceptance of evolving analysis methodology.