Fifth Circuit Reverses $25 Million Damages Award Against Pilgrim’s Pride

On August 27, 2013, the Court of Appeals for the Fifth Circuit reversed a district court damages award of more than $25 million against Pilgrim's Pride Corporation, a large producer of processed chicken. A group of chicken growers with whom Pilgrim's Pride contracted filed suit against the company alleging that the company violated the Packers and Stockyards Act (PSA) by engaging in a course of business for the purpose of "manipulating or controlling prices." The Eastern District of Texas held that Pilgrim's Pride's conduct of idling or selling its chicken processing plant reduced output to increase prices, and awarded damages over $25 million to plaintiffs.

On appeal, Pilgrim's Pride argued that the PSA section (7 U.S.C. § 192) that prohibits manipulation or control of prices is, in actuality, an antitrust statute. Therefore, the PSA section "is only violated by attempts to affect market prices which are anti-competitive, or 'injurious to competition.'" Pilgrim's Pride argued that because its output reductions were not anti-competitive, it did not violate the PSA. The plaintiffs argued that the PSA should be applied more broadly, not only to conduct that is anticompetitive.

The Fifth Circuit relied on a prior en banc decision addressing the same PSA provision, Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355 (5th Cir. 2009) (en banc) to hold that there was little question that PSA § 192 "proscribes only anti-competitive conduct." The court also reasoned that the use of the terms "manipulation" and "control" meant that Congress intended to prohibit "deceptive, illegitimate, or unnatural—i.e., anti-competitive—attempts to influence prices."

After establishing that PSA § 192 prohibited only anticompetitive manipulation of prices, the court analyzed Pilgrim's Pride's conduct of idling or closing plants under the rule of reason. Quoting Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993), the court stated that the "purpose of [antitrust law] is not to protect businesses from the working of the market; it is to protect the public from the...