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CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 1 of 21
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`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
`
`fix and suppress the price of fed cattle in violation of federal and state antitrust laws.
`
`Defendants now move to dismiss the claims against them. Because Plaintiffs have not
`
`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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`

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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 3 of 21
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`will grant Defendants’ Motions to Dismiss. The Court will also grant Plaintiffs leave to
`
`amend their Complaints.
`
`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
`
`plaintiffs (1) Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (“R-
`
`CALF USA”), a Montana nonprofit public benefit corporation; and (2) Farmers Educational
`
`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.)
`
`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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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 4 of 21
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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
`
`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.)
`
`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
`
`
`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”).
`
`-4-
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`

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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 5 of 21
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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%
`
`of those purchases. (Id.)
`
`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.)
`
`Plaintiffs allege that Defendants engaged in a conspiracy to artificially drive down
`
`the price of fed cattle in order to maximize the meat margin. This goal was accomplished,
`
`according to Plaintiffs, by an agreement to:
`
`(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
`
`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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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 6 of 21
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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%,
`
`and Tyson by 4%. (Id. ¶ 163.) Cargill “remained flat year-on-year, [but] it was significantly
`
`below historic levels.” (Id.) Plaintiffs also allege that Defendants were at the same time
`
`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
`
`per 1400-pound steer inflicting historic losses on Plaintiffs. (Id. ¶¶ 171–72, fig. 24.)
`
`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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`

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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 7 of 21
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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,
`
`111–21.) Witness 1 was a quality-assurance officer at a Defendant’s “slaughter plants
`
`located within the Texas Panhandle/Western Kansas region . . . for over 10 years until his
`
`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.)
`
`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
`
`
`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.
`
`-7-
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`

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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 8 of 21
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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
`
`greater than the original price. (Id. ¶ 115.) If no buyer offers a higher price, the producer
`
`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
`
`to adhere to this convention; producers could be blackballed or boycotted for breaking
`
`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
`
`conspiracy to artificially depress the price of fed cattle, a per se violation of § 1 of the
`
`Sherman Act, 15. U.S.C. § 1. The Direct Purchaser Plaintiffs bring a claim for treble
`
`damages under § 4 of the Clayton Act, 15 U.S.C. § 15(a); Indirect Plaintiffs in Peterson
`
`bring a claim for injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26.6 The
`
`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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`

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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 9 of 21
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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,
`
`and the Packers and Stockyard Act (“PSA”), 7. U.S.C. § 181 et seq.
`
`I.
`
`STANDARD OF REVIEW
`
`DISCUSSION
`
`When reviewing a motion to dismiss brought under Rule 12(b)(6), the Court
`
`considers all facts alleged in the complaint as true to determine if the complaint states a
`
`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
`
`facial plausibility when the plaintiff pleads factual content that allows the court to draw
`
`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
`
`
`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.
`
`-9-
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`

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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).
`
`Historically, courts were somewhat hesitant to dismiss antitrust claims. See Hosp.
`
`Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 746 (1976) (noting that “in antitrust cases,
`
`where the proof is largely in the hands of the alleged conspirators, dismissals prior to
`
`giving the plaintiff ample opportunity for discovery should be granted very sparingly.”)
`
`(cleaned up). However, the Supreme Court appeared to implicitly move away from that
`
`standard in Twombly, which was itself a Sherman Act case. The Eighth Circuit has also
`
`recently taken a somewhat stricter view:
`
`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.
`
`THE SHERMAN ACT
`
`Section 1 of the Sherman Act provides that “[e]very contract, combination in the
`
`form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the
`
`several States, or with foreign nations, is declared to be illegal.” 15 U.S.C. § 1. To establish
`
`a claim under § 1 “a plaintiff must demonstrate ‘(1) that there was a contract,
`
`combination, or conspiracy; (2) that the agreement unreasonably restrained trade under
`
`-10-
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`

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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 11 of 21
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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.
`
`Supp. 2d 1039, 1062 (D. Minn. 2009) (quoting Minn. Ass’n of Nurse Anesthetists v. Unity
`
`Hosp., 5 F. Supp. 2d 694, 703 (D. Minn. 1998)). Because § 1 “does not prohibit all
`
`unreasonable restraints of trade. but only restraints effected by a contract, combination,
`
`or conspiracy, the crucial question is whether the challenged anticompetitive conduct
`
`stems from independent decision or from an agreement, tacit or express.” Twombly, 550
`
`U.S. at 553 (cleaned up).
`
`“Certain agreements, such as horizontal price fixing . . . are thought so inherently
`
`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
`
`plaintiffs allege horizontal price fixing or agreements between competing retailers to limit
`
`output in order to increase price, the only thing that must be alleged at the motion-to-
`
`dismiss stage is that defendants acted collectively or with concerted action.
`
`“To satisfy the concerted action requirement, the plaintiff must demonstrate that
`
`the defendants shared a unity of purpose or a common design and understanding, or a
`
`meeting of the minds.” Insulate, 797 F.3d at 543 (cleaned up). “Allegations of direct
`
`evidence of an agreement, if sufficiently detailed, are independently adequate.” In re Ins.
`
`Brokerage Antitrust Litig., 618 F.3d 300, 323–24 (3rd Cir. 2010) (citing Twombly, 550 U.S.
`
`at 564). However, direct evidence of an agreement is rare, particularly at the pleading
`
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`

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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 12 of 21
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`stage. ES Dev., Inc. v. RWM Enters., Inc., 939 F.2d 547, 553–54 (8th Cir. 1991) (“[I]t is
`
`axiomatic that the typical conspiracy is rarely evidenced by explicit agreements, but must
`
`almost always be proved by inferences that may be drawn from the behavior of the
`
`alleged conspirators.”).
`
`Concerted action may also be demonstrated via circumstantial evidence through a
`
`showing of parallel conduct among defendants showing that their similar behavior
`
`“would probably not result from chance, coincidence, independent responses to common
`
`stimuli, or mere interdependence unaided by an advance understanding among the
`
`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
`
`allegations point to parallel conduct, antitrust plaintiffs must also plead plus factors.10
`
`See, e.g., Blomkest Fertilizer, Inc. v. Potash Corp. of Sask., 203 F.3d 1028, 1033 (8th Cir.
`
`2000) (en banc) (“An agreement is properly inferred from conscious parallelism only when
`
`certain ‘plus factors’ exist.”). These plus factors might include (1) a shared motive to
`
`conspire; (2) action against self-interest; (3) market concentration; and (4) a substantial
`
`amount of interfirm communication in conjunction with the parallel conduct. See, e.g.,
`
`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)).
`
`-12-
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`Thus, in order to survive a defendant’s 12(b)(6) motion, plaintiffs alleging a price-
`
`fixing conspiracy must plausibly allege either (1) direct evidence of a conspiracy or (2)
`
`both concerted action (including parallel conduct) and at least one plus factor.
`
`A.
`
`Direct Evidence
`
`Defendants argue that the Confidential Witnesses are insufficiently identified to
`
`allow the Court to credit their testimony. Defendants point to securities-litigation cases
`
`in which a heightened pleading standard is required by statute. Defendants point to no
`
`authority in which such a heightened standard has been imported into the antitrust
`
`context. The Court is not persuaded that such a heightened standard is required—as
`
`Twombly makes clear.
`
`The question, then, is simply whether the Confidential Witnesses and their claims
`
`are “sufficiently detailed.” In re Ins. Brokerage Antitrust Litig., 618 F.3d at 323. Plaintiffs
`
`do not provide the employer of the Witness 1 or the name of the feedlot at which
`
`Witness 2 worked. Because of the lack of detail regarding the firms by which the
`
`Confidential Witnesses were employed, Plaintiffs do not adequately explain their jobs and
`
`how their interactions in those jobs would lead to them acquiring the knowledge they
`
`allegedly possess. Cf. Hinds Cty. v. Wachovia Bank N.A., 700 F. Supp. 2d 378, 396 n.5
`
`(S.D.N.Y. 2010) (describing the particularity with which plaintiffs had pleaded how their
`
`confidential witnesses would have known what they were alleged to know). The “queuing
`
`convention” alleged by Witness 2—which the Court could broadly view as a concerted
`
`-13-
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`

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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 14 of 21
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`refusal to deal, which is itself a violation of the Sherman Act—is not the same
`
`anticompetitve behavior alleged by Witness 1, artificially limiting demand for fed cattle—
`
`which is the main thrust of Plaintiffs’ alleged price-fixing conspiracy. In all, the lack of
`
`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
`
`Defendants’ Motion to Dismiss.
`
`B.
`
`Indirect Evidence
`
`1. Plus Factors
`
`Many of the same plus factors that the Court recently credited in In re Pork
`
`Antitrust Litigation, No. 18-1776, 2019 WL 3752497, at *7 (D. Minn. Aug. 8, 2019), are
`
`present in here. The fed-cattle market is highly concentrated; indeed, the four
`
`Defendants make up 83% of the market, compared to eight firms controlling a similar
`
`share of the pork-processing market. In re Pork, 2019 WL 3752497, at *1. Demand for
`
`fed cattle, as a commodity, is similarly inelastic. The Defendants belong to trade
`
`associations and regularly communicate through them, along with attending conferences
`
`together. Plaintiffs also allege that Defendants engaged in actions against self-interest,
`
`such as importing cattle from abroad when domestic prices were low. The market-wide
`
`change in pricing practices from cash sales to formula contracts also serve as a plus factor.
`
`The Court concludes that “[t]he plus factors identified and discussed by Plaintiff[s] are
`
`-14-
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`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 15 of 21
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`undoubtedly strong and are of the type often used to support an inference of an
`
`agreement.” In re Pork, 2019 WL 3752497, at *7.
`
`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.”
`
`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
`
`regarding each Defendant, the Court has no basis to analyze which, how many, or when
`
`any of the individual Defendants may have affirmatively acted[.]” Id. at *8. The most
`
`specific allegations relate to a single year, 2015, where JBS reduced its annual slaughter
`
`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
`
`increase. As for the other allegations, such as a reduction in the amount of purchased
`
`cash cattle, Plaintiffs “rely almost exclusively on industry-wide data and ask the Court to
`
`infer that the individual Defendants all contributed to the decrease[] . . . simply because
`
`they make up the majority of the industry.” Id. The Court declined to do so in In re Pork
`
`and it declines to do so here.
`
`One important reason for the requirement of specific pleading when it comes to
`
`parallel conduct is that it allows the Court to conclude whether the allegations are
`
`plausible in the face of an “obvious alternative explanation.” Twombly, 550 U.S. at 567–
`
`-15-
`
`

`

`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 16 of 21
`
`68 (noting that there was “a natural explanation” for the noncompetition alleged by
`
`plaintiffs). Here, Defendants marshal alternative economic explanations for the
`
`aggregate data on which Plaintiffs rely; in the absence of individualized, specific
`
`allegations, the Court sees nothing more than “a sheer possibility that a defendant has
`
`acted unlawfully.” Iqbal, 556 U.S. at 687 (citing Twombly, 550 U.S. at 556).
`
`The Court finds that Plaintiffs have not adequately pleaded parallel conduct, which
`
`is an essential part of their Sherman Act claim. For that reason, the Court will grant
`
`Defendants’ Motion to Dismiss.
`
`III.
`
`STATE CLAIMS
`
`In addition to their Sherman Act claims, the Indirect Plaintiffs in Peterson allege a
`
`variety of state-law antitrust, consumer-protection, and unjust-enrichment claims.
`
`Because these claims all rely on the same alleged price-fixing conspiracy creating the
`
`Sherman Act claim, which the Court finds deficient, the Court will grant Defendants’
`
`Motion to Dismiss these state claims as well.
`
`IV.
`
`COMMODITY AND EXCHANGE ACT CLAIMS
`
`The parties agree that the CEA claims rely on the same conspiracy alleged for the
`
`Sherman Act claims, but Plaintiffs oppose Defendants’ assertion that the CEA claims
`
`should be dismissed in tandem with the Sherman Act claims.
`
`It is possible for a CEA claim to continue when a Sherman Act claim fails. See In re
`
`LIBOR-Based Fin. Instruments Antitrust Litig., 935 F.Supp.2d 666, 695 (S.D.N.Y 2013)
`
`-16-
`
`

`

`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 17 of 21
`
`(dismissing plaintiffs’ antitrust claim but considering the merits of their CEA claim when
`
`claims are based on differing issues). However, when the deficiencies in a Sherman Act
`
`claim are the allegations of Defendants’ conspiracy and that conspiracy is the basis for a
`
`CEA claim, the CEA claim cannot continue. See In re Platinum & Palladium Commodities
`
`Litig., 828 F. Supp. 2d 588, 597–98 (S.D.N.Y. 2011) (noting that when the scienter
`
`allegations of the CEA claim are based on the same allegations that fail to allege a
`
`Sherman Act conspiracy, the CEA claim must fail). The Court has concluded that Plaintiffs
`
`fail to allege a Sherman Act conspiracy; therefore, those allegations cannot adequately
`
`plead a CEA claim. The Court will grant Defendants’ Motion to Dismiss.
`
`V.
`
`PACKERS & STOCKYARDS ACT CLAIMS
`
`“[T]he ‘chief evil’ at which [the PSA] was aimed was ‘the monopoly of the packers,
`
`enabling them unduly and arbitrarily to lower prices to the shipper who sells, and unduly
`
`and arbitrarily to increase the price to the consumer who buys.’” Mahon v. Stowers,
`
`416 U.S. 100, 106 (1974) (quoting Stafford v. Wallace, 258 U.S. 495, 514–15 (1922)).
`
`Plaintiffs concede that §§ 202(e), (f), and (g) of the PSA require the pleading of an antitrust
`
`conspiracy to survive dismissal. Because the Court has found Plaintiffs’ conspiracy claims
`
`insufficient, Plaintiffs claims under 7 U.S.C. §§ 192(e), (f), and (g) must also be dismissed.
`
`-17-
`
`

`

`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 18 of 21
`
`This finding alone does not end the inquiry, however, because § 202(a) of the PSA
`
`is meant to be broader in scope than the Sherman Act.11 Therefore, Plaintiffs’ failure to
`
`allege conspiracy under the Sherman Act is not necessarily fatal to their claim under
`
`§ 202(a) of the PSA, and this portion of their complaint must be analyzed on its own
`
`merits.
`
`Section 202(a) of the PSA reads: “It shall be unlawful for any packer . . . with respect
`
`to livestock . . . to . . . [e]ngage in or use any unfair, unjustly discriminatory, or deceptive
`
`practice or device.” 7 U.S.C. § 192(a). The Eighth Circuit has held that unlawful actions
`
`under § 202(a) of the PSA must have at least the potential to suppress or reduce
`
`competition. IBP, Inc. v. Glickman, 187 F.3d 974, 977 (8th Cir. 1999); Farrow v. U.S. Dep't
`
`of Agr., 760 F.2d 211, 214 (8th Cir. 1985).
`
`The question here, then, is whether Plaintiffs successfully allege behavior by
`
`Defendants that could potentially suppress or reduce competition. The two main
`
`allegations of anticompetitive behavior are the reduced slaughter volume in 2015 and the
`
`
`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”).
`
`-18-
`
`

`

`CASE 0:19-cv-01129-JRT-HB Doc. 205 Filed 09/29/20 Page 19 of 21
`
`queuing convention. For the former, Defendants rely on In re Pilgrim’s Pride Corp.,
`
`728 F.3d 457, 463 (5th Cir. 2013), but that case is doubly inapposite: first, it was an appeal
`
`decided after a bench trial, meaning there were findings of fact on which to base a
`
`decision about anticompetitive behavior, and second, the court was considering the
`
`question of the defendant’s liability under § 202(e), rather than § 202(a). However, even
`
`at the more forgiving motion-to-dismiss stage, Plaintiffs fail to allege actions by
`
`Defendants that could suppress or reduce competition. Merely cutting back slaughter
`
`volume in a single year cannot itself serve as the anticompetitive basis for a claim under
`
`§ 202(a). Plaintiffs’ queuing-convention allegations are also insufficient to independently
`
`support a § 202(a) PSA claim. Indeed, the Eighth Circuit explicitly held that right-of-first-
`
`refusal agreements do not violate the PSA. Glickman, 187 F.3d at 977. Therefore, the
`
`Court concludes that Plaintiffs have not alleged anticompetitive behavior as required by
`
`the Eighth Circuit to maintain a PSA § 202(a) claim. The Court will therefore grant
`
`Defendants’ Motion to Dismiss.
`
`VI.
`
`LEAVE TO AMEND
`
`Plaintiffs seek leave to amend their Complaints. Lea

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