`
`NITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
`
`
`
`IN RE CATTLE ANTITRUST LITIGATION
`
`This Document Relates To:
`
`All Actions.
`
`
`Civil No. 19-1222
`
`
`
`
`Civil No. 19-1129 (JRT/HB)
`
`
`
`
`
`
`
`
`KENNETH PETERSON, RICHARD KIMBLE,
`WILLIAM GEE, BRENDA KING, ANDREW
`COHEN, CHONG LOR, KAREN CARTER,
`MARCELO LOPEZ, APRIL
`O’CONNOR,CINDY ABERNATHY, TANYA
`LEWS, BRENT, RASMUSSEN, CHARLIE
`MORGAN, SHARON DAWSON-GREEN,
`KENT WINCHESTER, SHARON KILLMON,
`LISA MELEGARI, NICOLE GUTIERREZ, and
`MICHELLE OVERSEN,
`
`
`v.
`
`JBS USA FOOD COMPANY HOLDINGS,
`CARGILL, INC., NATIONAL BEEF PACKING
`COMPANY, and TYSON FOODS, INC.,
`
`
`
`
`Defendants.
`
`Plaintiffs,
`
`
`
`
`
`
`
`AMENDED MEMORANDUM OPINION AND ORDER GRANTING
`DEFENDANTS’ MOTIONS TO DISMISS
`
`Thomas J. Undlin, ROBINS KAPLAN LLP, 800 LaSalle Avenue, Suite 2800,
`Minneapolis, Minnesota 55402; Amanda F. Lawrence, SCOTT & SCOTT,
`ATTORNEYS AT LAW, LLP, 156 South Main Street, P.O. Box 192, Colchester,
`Connecticut 06415; Anthony F. Fata, CAFFERTY CLOBES MERIWETHER &
`
`
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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 2 of 21
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`SPRENGEL LLP, 150 South Wacker Drive, Suite 3000, Chicago, Illinois 60606
`for Direct Purchaser Plaintiffs.
`
`Brian D. Clark and W. Joseph Bruckner, LOCKRIDGE GRINDAL NAUEN PLLP,
`100 Washington Avenue South, Suite 2200, Minneapolis, Minnesota 55401;
`Steve W. Berman, HAGENS BERMAN SOBOL SHAPIRO LLP, 1301 2nd
`Avenue, Suite 2000, Seattle, Washington 98101; Shana Scarlett, HAGENS
`BERMAN SOBOL SHAPIRO LLP, 715 Hearst Avenue, Suite 202, Berkeley,
`California 94710, for Indirect Purchaser Plaintiffs.
`
`Kathryn N. Hibbard, GREENE ESPEL PLLP, 222 South Ninth Street, Suite
`2200, Minneapolis, Minnesota 55402; Nicole A. Saharsky, MAYER BROWN
`LLP, 1999 K Street N.W., Washington, District of Columbia 20006, for
`Defendants Cargill, Inc., and Cargill Meat Solutions Corp.
`
`Benjamin L. Ellison, JONES DAY, 90 South Seventh Street, Suite 4950,
`Minneapolis, Minnesota 55402 for Defendant National Beef Packing Co.,
`LLC.
`
`Jon B. Jacobs, PERKINS COIE, 700 13th Street N.W., Suite 600, Washington,
`District of Columbia, 20005 for Defendants Tyson Foods, Inc., and Tyson
`Fresh Meats, Inc.
`
`Sami H. Rashid, QUINN EMANUEL URQUHART & SULLIVAN LLP, 51 Madison
`Avenue, New York, New York 10010; Patrick E. Brookhouser, Jr., MCGRATH
`NORTH, 1601 Dodge Street, Suite 3700, Omaha, Nebraska 68102 for
`Defendants JBS S.A., JBS USA Food Company, Swift Beef Co., and JBS
`Packerland, Inc.
`
`
`
`Plaintiffs allege that Defendants, the nation’s largest meat-packers, conspired to
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`fix and suppress the price of fed cattle in violation of federal and state antitrust laws.
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`Defendants now move to dismiss the claims against them. Because Plaintiffs have not
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`pleaded their direct evidence with sufficient detail and because they have not pleaded
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`parallel conduct sufficient to support an inference of a price-fixing conspiracy, the Court
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`-2-
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`will grant Defendants’ Motions to Dismiss. The Court will also grant Plaintiffs leave to
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`amend their Complaints.
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`BACKGROUND
`
`This case represents the consolidation of several separately filed putative class
`
`actions.1 There are two sets of Plaintiffs. First, there are institutional/organizational
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`plaintiffs (1) Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (“R-
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`CALF USA”), a Montana nonprofit public benefit corporation; and (2) Farmers Educational
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`and Cooperative Union of America (“Farmers Union” or “NFU”), a “national federation of
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`state Farmers Union organizations existing under the laws of the State of Texas[.]” (Civil
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`No. 19-1222, Second Cons. Am. Compl. (“SCAC”) ¶¶ 26–27, Oct. 4, 2019, Docket No. 125.)
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`R-CALF USA and NFU seek “declaratory and injunctive relief in a representative capacity”
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`and “damages in their personal capacity,” because the alleged anticompetitive behavior
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`“frustrated their respective missions . . . and diverted their resources to help their
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`members mitigate damages and prevent further breaches of the law[.]” (Id. ¶ 28.)
`
`
`1 The consolidated cases are all direct purchaser plaintiffs. In addition, the Court is
`hearing jointly the Motions to Dismiss in the as-of-yet unconsolidated case, Civil No. 19-
`1129 Peterson et al. v. JBS USA Food Co. et al., in which the plaintiffs are indirect
`purchasers bringing an equitable claim under federal law and related state-law damage
`claims.
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`-3-
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`Second, there are individual and business plaintiffs who “each sold fed cattle directly to
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`one or more of the” four meat-packing Defendants.2 (Id. ¶ 36.)
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`Together, the four meat-packing Defendants purchase 83 percent of the slaughter-
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`weight fed cattle in the United States. (Id. ¶¶ 5, 84, App’x 3.) After purchasing the cattle,
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`Defendants process them into beef for sale to other processors, wholesalers, and retail
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`outlets. (Id. ¶ 4.) Plaintiffs allege that from at least January 1, 2015 and continuing to the
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`present day, Defendants conspired to fix and suppress the price of fed cattle in the United
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`States. (Id. ¶ 1.)
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`This alleged conspiracy was facilitated in part by a significant shift in how
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`Defendants purchase fed cattle. In 2005, “almost all” fed-cattle purchases were cash
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`sales, meaning that meat packers sent agents “to feedlots and auctions” and those agents
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`paid a “price set each day at the dollar mark where supply and demand met.” (Id. ¶ 79.)
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`Over the following decade the proportion of all fed-cattle purchases made by cash sale
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`dropped to approximately 21%. (Id. ¶ 80.) In 2015, more than 60% of all fed-cattle
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`purchases were made via so-called formula contracts. (Id., fig. 7)
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`Under formula contracts, fed-cattle producers agree to supply cattle to a packer
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`once it reaches slaughter weight. (Id.) The contract price for the cattle is set by a formula
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`that is driven by average cash-sale prices prevailing at, or just before, delivery, as reported
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`2 Cargill, Inc., and Cargill Meat Solutions Corp., (together “Cargill”); JBS S.A., JBS USA Food
`Company, Swift Beef Company, JBS Packerland, Inc. (together, “JBS” ); National Beef
`Packing Co., LLC; and Tyson Foods, Inc., and Tyson Fresh Meats, Inc. (together, “Tyson”).
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`-4-
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`by the USDA Agricultural Marketing Service’s (“AMS”) Livestock Mandatory Reporting
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`(“LMR”).3 (Id. ¶ 81.) So, even though actual cash sales make up less than a quarter of
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`Defendants fed-cattle purchases, the average cash-sale price affects approximately 85%
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`of those purchases. (Id.)
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`Defendants’ profits are driven by the difference between the price paid for fed
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`cattle and the price of beef—what is known as the “meat margin.” (Id. ¶ 83.) In
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`November 2014, fed-cattle prices peaked at $170 per hundredweight (“CWT”).4 (Id.
`
`¶ 86.) Although Defendants “initially benefited from the rise” in fed-cattle prices
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`“because wholesale beef prices rose in parallel,” the meat margin eventually “fell to a low
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`of approximately $50 in the months leading up to 2015” which sent Defendants’ “margins
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`into the red.” (Id. ¶ 87.)
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`Plaintiffs allege that Defendants engaged in a conspiracy to artificially drive down
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`the price of fed cattle in order to maximize the meat margin. This goal was accomplished,
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`according to Plaintiffs, by an agreement to:
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`(1) periodically restrain or reduce slaughter numbers so as to
`reduce demand for fed cattle; (2) curtail their purchases of
`cash cattle during these periods; (3) coordinate their
`procurement practices with respect to the cash cattle they did
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`3 The purchases made by the four Defendants “provide over 90% of reported
`transactions” in the AMS LMR. (SCAC ¶ 161.)
`
`4 “A hundredweight (cwt) is a unit of measurement used in certain commodities trading
`contracts. . . . In the United States, a hundredweight is a unit of mass equal to 100
`pounds.” James Chen, Hundredweight (Cwt), Investopedia, https://www.investopedia
`.com/terms/h/hundredweight.asp
`
`-5-
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`in fact purchase; (4) import foreign cattle to depress demand
`for cheaper domestic cattle; and (5) close or idle slaughter
`plants and
`refrain
`from expanding
`their
`remaining
`slaughtering capacity.
`
`(Id. ¶ 88.) In 2015, JBS reduced its annual slaughter volume by 17%, National Beef by 6%,
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`and Tyson by 4%. (Id. ¶ 163.) Cargill “remained flat year-on-year, [but] it was significantly
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`below historic levels.” (Id.) Plaintiffs also allege that Defendants were at the same time
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`importing cattle from abroad when domestic prices were low and failing to expand
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`slaughter operations when the price of cattle dropped. (Id. ¶¶ 141–54.) In the years that
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`followed, Defendants increased their slaughter volumes but never returned to pre-2015
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`levels. (Id. ¶ 106, Fig. 3.) These rates contrast with independent packers, which represent
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`the remaining 17% of purchases of fed cattle, whose average slaughter increased in 2015
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`and every year thereafter. (Id.) By the end of 2015 the price of fed cattle fell from $170
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`CWT to $120 CWT. (Id. ¶¶ 86, 155–60.) The shift equated to approximately a loss of $560
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`per 1400-pound steer inflicting historic losses on Plaintiffs. (Id. ¶¶ 171–72, fig. 24.)
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`Plaintiffs allege Defendants then took advantage of this glut and increased their
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`respective purchase and slaughter volumes in the final quarter of 2015, an atypical time
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`of year to do so. (Id. ¶ 162.) A similar pattern followed in 2016, with the final year’s price
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`“hover[ing] between $110 [and] $117 through December.” (Id. ¶ 175.) Plaintiffs allege
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`-6-
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`that Defendants continued to keep prices artificially low in 2018 and 2019, in part by
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`sounding an alarm about the glut of cattle reaching slaughter weight.5 (Id. ¶ 177–78.)
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`Plaintiffs also offer the testimony of two confidential witnesses. (Id. ¶¶ 89–104,
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`111–21.) Witness 1 was a quality-assurance officer at a Defendant’s “slaughter plants
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`located within the Texas Panhandle/Western Kansas region . . . for over 10 years until his
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`employment ceased in 2018.” (Id. ¶ 90.) Plaintiffs recount details of “multiple
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`discussions” that Witness 1 had with the head of fabrication (“Fabrication Manager”) at
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`their plant, where “the Fabrication Manager explained that all of the Packing Defendants
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`reduced their purchase and slaughter volume in order to reduce fed-cattle prices when
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`Packing Defendants viewed fed-cattle prices as being ‘too high’ for their liking.” (Id. ¶ 93.)
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`Plaintiffs further allege that the Witness 1 and the Fabrication Manager had a discussion
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`sometime in 2015 or early 2016 where the Fabrication Manager “specifically admitted
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`that the Packing Defendants had an ‘agreement’ to reduce their purchase and slaughter
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`volumes in response to what they perceived to be high cattle prices.” (Id.)
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`Witness 2 was a feedlot manager, “who managed a 35,000 head commercial
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`feedlot in the Panhandle region from 2012 until early 2016.” (Id. ¶ 111.) Witness 2
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`described an anticompetitive “queuing convention,” in which the price for cash sales are
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`5 On August 28, 2019, U.S. Secretary of Agriculture Perdue announced he had “directed
`USDA’s Packers and Stockyards Division to launch an investigation into recent beef pricing
`margins to determine if there is any evidence of price manipulation, collusion, restrictions
`of competition or other unfair practices.” (SCAC ¶ 179, n.92.) The investigation is
`ongoing.
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`-7-
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`set not by competitive bidding but instead by a complicated system requiring producers
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`to either agree to a bid or reject it but then requiring the producer to accept only a bid
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`greater than the original price. (Id. ¶ 115.) If no buyer offers a higher price, the producer
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`must return to the first bidder and offer a right-of-first refusal because that packer
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`remains “on the cattle.” (Id.) Witness 2 described the negative consequences of a failure
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`to adhere to this convention; producers could be blackballed or boycotted for breaking
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`with it. (Id. ¶ 119–20.) Additionally, the four Defendants would allocate who made the
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`first bid each week by “draw[ing] cards in his office.” (Id. ¶ 124.)
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`Based on the facts above, Plaintiffs allege that Defendants engaged in a price-fixing
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`conspiracy to artificially depress the price of fed cattle, a per se violation of § 1 of the
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`Sherman Act, 15. U.S.C. § 1. The Direct Purchaser Plaintiffs bring a claim for treble
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`damages under § 4 of the Clayton Act, 15 U.S.C. § 15(a); Indirect Plaintiffs in Peterson
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`bring a claim for injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26.6 The
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`Indirect Plaintiffs also bring claims for damages under (1) the antitrust laws of 26
`
`
`6 Concluding that allowing otherwise “would transform treble-damages actions into
`massive efforts to apportion the recovery among all potential plaintiffs that could have
`absorbed part of the overcharge,” the Supreme Court has held that only direct purchasers
`may sue for damages in Sherman Act price-fixing cases. Ill. Brick Co. v. Illinois, 431 U.S.
`720, 737 (1977). However, “the [Illinois Brick] direct-purchaser doctrine does not
`foreclose equitable relief.” U.S. Gypsum Co. v. Ind. Gas Co., 350 F.3d 623, 627 (7th Cir.
`2003).
`
`-8-
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`jurisdictions;7 (2) the consumer-protection laws of 20 jurisdictions;8 and (3) the unjust-
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`enrichment law of 28 jurisdictions.9 Finally, Plaintiffs also bring claims under the
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`Commodities and Exchange Act (“CEA”), 7 U.S.C § 1 et seq., and its related regulations,
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`and the Packers and Stockyard Act (“PSA”), 7. U.S.C. § 181 et seq.
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`I.
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`STANDARD OF REVIEW
`
`DISCUSSION
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`When reviewing a motion to dismiss brought under Rule 12(b)(6), the Court
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`considers all facts alleged in the complaint as true to determine if the complaint states a
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`claim for “relief that is plausible on its face.” Braden v. Wal-Mart Stores, Inc., 588 F.3d
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`585, 594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has
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`facial plausibility when the plaintiff pleads factual content that allows the court to draw
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`the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal,
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`556 U.S. at 678. Although the Court accepts the complaint’s factual allegations as true, it
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`7 Arizona, California, the District of Columbia, Illinois, Iowa, Kansas, Maine, Michigan,
`Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, New
`York, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee,
`Utah, Vermont, West Virginia, and Wisconsin.
`
`8 California, the District of Columbia, Florida, Hawaii, Illinois, Massachusetts, Michigan,
`Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina,
`North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, and Utah.
`
`9 Arizona, California, District of Columbia, Florida, Hawaii, Illinois, Iowa, Kansas, Maine,
`Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada,
`New Hampshire, New Mexico, North Carolina, Oregon, Rhode Island, South Carolina,
`South Dakota, Tennessee, Utah, West Virginia, and Wisconsin.
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`-9-
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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 10 of 21
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`is “not bound to accept as true a legal conclusion couched as a factual allegation.” Bell
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`Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
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`Historically, courts were somewhat hesitant to dismiss antitrust claims. See Hosp.
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`Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 746 (1976) (noting that “in antitrust cases,
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`where the proof is largely in the hands of the alleged conspirators, dismissals prior to
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`giving the plaintiff ample opportunity for discovery should be granted very sparingly.”)
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`(cleaned up). However, the Supreme Court appeared to implicitly move away from that
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`standard in Twombly, which was itself a Sherman Act case. The Eighth Circuit has also
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`recently taken a somewhat stricter view:
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`Given the unusually high cost of discovery in antitrust cases,
`the
`limited success of
`judicial supervision
`in checking
`discovery abuse, and the threat that discovery expense will
`push cost-conscious defendants to settle even anemic cases[,]
`the federal courts have been reasonably aggressive in
`weeding out meritless antitrust claims at the pleading stage.
`
`Insulate SB, Inc. v. Advanced Finishing Sys., Inc., 797 F.3d 538, 543 (8th Cir. 2015) (cleaned
`
`up).
`
`II.
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`THE SHERMAN ACT
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`Section 1 of the Sherman Act provides that “[e]very contract, combination in the
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`form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the
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`several States, or with foreign nations, is declared to be illegal.” 15 U.S.C. § 1. To establish
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`a claim under § 1 “a plaintiff must demonstrate ‘(1) that there was a contract,
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`combination, or conspiracy; (2) that the agreement unreasonably restrained trade under
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`-10-
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`either a per se rule of illegality or a rule of reason analysis; and (3) that the restraint
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`affected interstate commerce.’” Insignia Sys., Inc. v. News Am. Mktg. In-Store, Inc., 661 F.
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`Supp. 2d 1039, 1062 (D. Minn. 2009) (quoting Minn. Ass’n of Nurse Anesthetists v. Unity
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`Hosp., 5 F. Supp. 2d 694, 703 (D. Minn. 1998)). Because § 1 “does not prohibit all
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`unreasonable restraints of trade. but only restraints effected by a contract, combination,
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`or conspiracy, the crucial question is whether the challenged anticompetitive conduct
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`stems from independent decision or from an agreement, tacit or express.” Twombly, 550
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`U.S. at 553 (cleaned up).
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`“Certain agreements, such as horizontal price fixing . . . are thought so inherently
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`anticompetitive that each is illegal per se without inquiry into the harm it has actually
`
`caused.” Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 768 (1984). Thus, where
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`plaintiffs allege horizontal price fixing or agreements between competing retailers to limit
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`output in order to increase price, the only thing that must be alleged at the motion-to-
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`dismiss stage is that defendants acted collectively or with concerted action.
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`“To satisfy the concerted action requirement, the plaintiff must demonstrate that
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`the defendants shared a unity of purpose or a common design and understanding, or a
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`meeting of the minds.” Insulate, 797 F.3d at 543 (cleaned up). “Allegations of direct
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`evidence of an agreement, if sufficiently detailed, are independently adequate.” In re Ins.
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`Brokerage Antitrust Litig., 618 F.3d 300, 323–24 (3rd Cir. 2010) (citing Twombly, 550 U.S.
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`at 564). However, direct evidence of an agreement is rare, particularly at the pleading
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`stage. ES Dev., Inc. v. RWM Enters., Inc., 939 F.2d 547, 553–54 (8th Cir. 1991) (“[I]t is
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`axiomatic that the typical conspiracy is rarely evidenced by explicit agreements, but must
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`almost always be proved by inferences that may be drawn from the behavior of the
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`alleged conspirators.”).
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`Concerted action may also be demonstrated via circumstantial evidence through a
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`showing of parallel conduct among defendants showing that their similar behavior
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`“would probably not result from chance, coincidence, independent responses to common
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`stimuli, or mere interdependence unaided by an advance understanding among the
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`parties.” Twombly, 550 U.S at 557, n.4 (cleaned up).
`
`The Eighth Circuit has adopted a rule that to survive a motion to dismiss when the
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`allegations point to parallel conduct, antitrust plaintiffs must also plead plus factors.10
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`See, e.g., Blomkest Fertilizer, Inc. v. Potash Corp. of Sask., 203 F.3d 1028, 1033 (8th Cir.
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`2000) (en banc) (“An agreement is properly inferred from conscious parallelism only when
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`certain ‘plus factors’ exist.”). These plus factors might include (1) a shared motive to
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`conspire; (2) action against self-interest; (3) market concentration; and (4) a substantial
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`amount of interfirm communication in conjunction with the parallel conduct. See, e.g.,
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`In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186, 1194–95 (9th Cir. 2015).
`
`
`10 “A plus factor refers to ‘the additional facts or factors required to be proved as a
`prerequisite to finding that parallel [price] action amounts to a conspiracy.’” Blomkest
`Fertilizer, Inc. v. Potash Corp. of Sask., 203 F.3d 1028, 1033 (8th Cir. 2000) (quoting In re
`Baby Food Antitrust Litig., 166 F.3d 112, 122 (3rd Cir. 1999)).
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`-12-
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`Thus, in order to survive a defendant’s 12(b)(6) motion, plaintiffs alleging a price-
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`fixing conspiracy must plausibly allege either (1) direct evidence of a conspiracy or (2)
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`both concerted action (including parallel conduct) and at least one plus factor.
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`A.
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`Direct Evidence
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`Defendants argue that the Confidential Witnesses are insufficiently identified to
`
`allow the Court to credit their testimony. Defendants point to securities-litigation cases
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`in which a heightened pleading standard is required by statute. Defendants point to no
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`authority in which such a heightened standard has been imported into the antitrust
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`context. The Court is not persuaded that such a heightened standard is required—as
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`Twombly makes clear.
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`The question, then, is simply whether the Confidential Witnesses and their claims
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`are “sufficiently detailed.” In re Ins. Brokerage Antitrust Litig., 618 F.3d at 323. Plaintiffs
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`do not provide the employer of the Witness 1 or the name of the feedlot at which
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`Witness 2 worked. Because of the lack of detail regarding the firms by which the
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`Confidential Witnesses were employed, Plaintiffs do not adequately explain their jobs and
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`how their interactions in those jobs would lead to them acquiring the knowledge they
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`allegedly possess. Cf. Hinds Cty. v. Wachovia Bank N.A., 700 F. Supp. 2d 378, 396 n.5
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`(S.D.N.Y. 2010) (describing the particularity with which plaintiffs had pleaded how their
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`confidential witnesses would have known what they were alleged to know). The “queuing
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`convention” alleged by Witness 2—which the Court could broadly view as a concerted
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`refusal to deal, which is itself a violation of the Sherman Act—is not the same
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`anticompetitve behavior alleged by Witness 1, artificially limiting demand for fed cattle—
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`which is the main thrust of Plaintiffs’ alleged price-fixing conspiracy. In all, the lack of
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`detail about the Confidential Witnesses, combined with the mismatched nature of what
`
`they allege, lead the Court to conclude their claims are not sufficiently detailed to survive
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`Defendants’ Motion to Dismiss.
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`B.
`
`Indirect Evidence
`
`1. Plus Factors
`
`Many of the same plus factors that the Court recently credited in In re Pork
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`Antitrust Litigation, No. 18-1776, 2019 WL 3752497, at *7 (D. Minn. Aug. 8, 2019), are
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`present in here. The fed-cattle market is highly concentrated; indeed, the four
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`Defendants make up 83% of the market, compared to eight firms controlling a similar
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`share of the pork-processing market. In re Pork, 2019 WL 3752497, at *1. Demand for
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`fed cattle, as a commodity, is similarly inelastic. The Defendants belong to trade
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`associations and regularly communicate through them, along with attending conferences
`
`together. Plaintiffs also allege that Defendants engaged in actions against self-interest,
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`such as importing cattle from abroad when domestic prices were low. The market-wide
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`change in pricing practices from cash sales to formula contracts also serve as a plus factor.
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`The Court concludes that “[t]he plus factors identified and discussed by Plaintiff[s] are
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`-14-
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`undoubtedly strong and are of the type often used to support an inference of an
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`agreement.” In re Pork, 2019 WL 3752497, at *7.
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`2. Parallel Conduct
`
`As in In re Pork, the Court concludes that although “Plaintiffs’ cited plus factors are
`
`strong, the allegations at this point regarding parallel conduct are sparse and conclusory.”
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`Id. They do little to allege how the individual Defendants acted and instead resort to
`
`group pleading, arguing that the market did this or that. “Without specific information
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`regarding each Defendant, the Court has no basis to analyze which, how many, or when
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`any of the individual Defendants may have affirmatively acted[.]” Id. at *8. The most
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`specific allegations relate to a single year, 2015, where JBS reduced its annual slaughter
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`volume by 17%, National Beef by 6%, and Tyson by 4%. Plaintiffs then go on to say little
`
`about the individual Defendants in the years that follow when slaughter volumes actually
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`increase. As for the other allegations, such as a reduction in the amount of purchased
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`cash cattle, Plaintiffs “rely almost exclusively on industry-wide data and ask the Court to
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`infer that the individual Defendants all contributed to the decrease[] . . . simply because
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`they make up the majority of the industry.” Id. The Court declined to do so in In re Pork
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`and it declines to do so here.
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`One important reason for the requirement of specific pleading when it comes to
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`parallel conduct is that it allows the Court to conclude whether the allegations are
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`plausible in the face of an “obvious alternative explanation.” Twombly, 550 U.S. at 567–
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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 16 of 21
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`68 (noting that there was “a natural explanation” for the noncompetition alleged by
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`plaintiffs). Here, Defendants marshal alternative economic explanations for the
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`aggregate data on which Plaintiffs rely; in the absence of individualized, specific
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`allegations, the Court sees nothing more than “a sheer possibility that a defendant has
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`acted unlawfully.” Iqbal, 556 U.S. at 687 (citing Twombly, 550 U.S. at 556).
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`The Court finds that Plaintiffs have not adequately pleaded parallel conduct, which
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`is an essential part of their Sherman Act claim. For that reason, the Court will grant
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`Defendants’ Motion to Dismiss.
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`III.
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`STATE CLAIMS
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`In addition to their Sherman Act claims, the Indirect Plaintiffs in Peterson allege a
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`variety of state-law antitrust, consumer-protection, and unjust-enrichment claims.
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`Because these claims all rely on the same alleged price-fixing conspiracy creating the
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`Sherman Act claim, which the Court finds deficient, the Court will grant Defendants’
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`Motion to Dismiss these state claims as well.
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`IV.
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`COMMODITY AND EXCHANGE ACT CLAIMS
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`The parties agree that the CEA claims rely on the same conspiracy alleged for the
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`Sherman Act claims, but Plaintiffs oppose Defendants’ assertion that the CEA claims
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`should be dismissed in tandem with the Sherman Act claims.
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`It is possible for a CEA claim to continue when a Sherman Act claim fails. See In re
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`LIBOR-Based Fin. Instruments Antitrust Litig., 935 F.Supp.2d 666, 695 (S.D.N.Y 2013)
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`(dismissing plaintiffs’ antitrust claim but considering the merits of their CEA claim when
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`claims are based on differing issues). However, when the deficiencies in a Sherman Act
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`claim are the allegations of Defendants’ conspiracy and that conspiracy is the basis for a
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`CEA claim, the CEA claim cannot continue. See In re Platinum & Palladium Commodities
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`Litig., 828 F. Supp. 2d 588, 597–98 (S.D.N.Y. 2011) (noting that when the scienter
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`allegations of the CEA claim are based on the same allegations that fail to allege a
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`Sherman Act conspiracy, the CEA claim must fail). The Court has concluded that Plaintiffs
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`fail to allege a Sherman Act conspiracy; therefore, those allegations cannot adequately
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`plead a CEA claim. The Court will grant Defendants’ Motion to Dismiss.
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`V.
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`PACKERS & STOCKYARDS ACT CLAIMS
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`“[T]he ‘chief evil’ at which [the PSA] was aimed was ‘the monopoly of the packers,
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`enabling them unduly and arbitrarily to lower prices to the shipper who sells, and unduly
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`and arbitrarily to increase the price to the consumer who buys.’” Mahon v. Stowers,
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`416 U.S. 100, 106 (1974) (quoting Stafford v. Wallace, 258 U.S. 495, 514–15 (1922)).
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`Plaintiffs concede that §§ 202(e), (f), and (g) of the PSA require the pleading of an antitrust
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`conspiracy to survive dismissal. Because the Court has found Plaintiffs’ conspiracy claims
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`insufficient, Plaintiffs claims under 7 U.S.C. §§ 192(e), (f), and (g) must also be dismissed.
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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 18 of 21
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`This finding alone does not end the inquiry, however, because § 202(a) of the PSA
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`is meant to be broader in scope than the Sherman Act.11 Therefore, Plaintiffs’ failure to
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`allege conspiracy under the Sherman Act is not necessarily fatal to their claim under
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`§ 202(a) of the PSA, and this portion of their complaint must be analyzed on its own
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`merits.
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`Section 202(a) of the PSA reads: “It shall be unlawful for any packer . . . with respect
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`to livestock . . . to . . . [e]ngage in or use any unfair, unjustly discriminatory, or deceptive
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`practice or device.” 7 U.S.C. § 192(a). The Eighth Circuit has held that unlawful actions
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`under § 202(a) of the PSA must have at least the potential to suppress or reduce
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`competition. IBP, Inc. v. Glickman, 187 F.3d 974, 977 (8th Cir. 1999); Farrow v. U.S. Dep't
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`of Agr., 760 F.2d 211, 214 (8th Cir. 1985).
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`The question here, then, is whether Plaintiffs successfully allege behavior by
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`Defendants that could potentially suppress or reduce competition. The two main
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`allegations of anticompetitive behavior are the reduced slaughter volume in 2015 and the
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`11 Farrow v. U.S. Dep’t of Agr., 760 F.2d 211 (8th Cir. 1985) (“[T]he Packers and Stockyards
`Act ‘should be broadly construed to give the Secretary of Agriculture the authority to deal
`with any practices that inhibit the fair trading of livestock by stockyards, market agencies,
`and dealers.’” (quoting Rice v. Wilcox, 630 F.2d 586, 590 (8th Cir.1980)); Swift & Co. v.
`United States, 393 F.2d 247, 253 (7th Cir. 1968) (finding that two meatpackers violated
`§192(a) despite the fact that their behavior, which could be characterized as a “simple
`refusal to deal,” was permissible under the Sherman Act); Swift & Co. v. United States, 308
`F.2d 849, 853 (7th Cir. 1962) (“[L]egislative history showed Congress understood the
`sections of the Packers and Stockyards Act under consideration were broader in scope
`than antecedent legislation such as the Sherman Antitrust Act”).
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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 19 of 21
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`queuing convention. For the former, Defendants rely on In re Pilgrim’s Pride Corp.,
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`728 F.3d 457, 463 (5th Cir. 2013), but that case is doubly inapposite: first, it was an appeal
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`decided after a bench trial, meaning there were findings of fact on which to base a
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`decision about anticompetitive behavior, and second, the court was considering the
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`question of the defendant’s liability under § 202(e), rather than § 202(a). However, even
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`at the more forgiving motion-to-dismiss stage, Plaintiffs fail to allege actions by
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`Defendants that could suppress or reduce competition. Merely cutting back slaughter
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`volume in a single year cannot itself serve as the anticompetitive basis for a claim under
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`§ 202(a). Plaintiffs’ queuing-convention allegations are also insufficient to independently
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`support a § 202(a) PSA claim. Indeed, the Eighth Circuit explicitly held that right-of-first-
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`refusal agreements do not violate the PSA. Glickman, 187 F.3d at 977. Therefore, the
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`Court concludes that Plaintiffs have not alleged anticompetitive behavior as required by
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`the Eighth Circuit to maintain a PSA § 202(a) claim. The Court will therefore grant
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`Defendants’ Motion to Dismiss.
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`VI.
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`LEAVE TO AMEND
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`Plaintiffs seek leave to amend their Complaints. Lea