throbber
CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 1 of 226
`
`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
`
`IN RE CATTLE ANTITRUST LITIGATION Civil No. 19-cv-1222 (JRT/HB)
`
`This document relates to:
`
`ALL CASES
`
`THIRD CONSOLIDATED
`AMENDED CLASS ACTION
`COMPLAINT
`
`

`

`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 2 of 226
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`I.
`II.
`
`III.
`IV.
`V.
`
`VI.
`
`B.
`C.
`
`B.
`
`C.
`
`D.
`
`TABLE OF CONTENTS
`INTRODUCTION............................................................................................................. 1
`PARTIES ......................................................................................................................... 15
`A.
`Plaintiffs ................................................................................................................ 15
`B.
`The Tyson Defendants .......................................................................................... 18
`C.
`The JBS Defendants .............................................................................................. 20
`D.
`The Cargill Defendants ......................................................................................... 22
`E.
`National Beef ........................................................................................................ 24
`F.
`Packing Defendants .............................................................................................. 25
`G.
`John Doe Defendants ............................................................................................ 25
`H.
`Agents and Affiliates ............................................................................................ 26
`JURISDICTION, VENUE AND COMMERCE .......................................................... 26
`OVERVIEW OF THE FED CATTLE MARKET ...................................................... 29
`PACKING DEFENDANTS CONSPIRED TO DEPRESS FED
`CATTLE PRICES .......................................................................................................... 40
`A.
`Packing Defendants Agreed to Reduce and Restrain Their Collective
`Slaughter Volumes and to Pressure Cash Cattle Sellers ....................................... 42
`1.
`Mr. Hooker Was Well Positioned to Know About Defendants’
`Agreement ................................................................................................. 44
`Witness 1 Learns of an Agreement Among Defendants ........................... 47
`The Available Data Corroborates Witness 1’s Account ........................... 49
`Packing Defendants Agreed to Slash Cash Cattle Purchases During
`Slaughter Reductions ................................................................................ 55
`Packing Defendants Coordinated Their Procurement Practices for Cash Cattle .. 61
`Packing Defendants Uneconomically Imported Extra-Territorial Cattle to
`Depress Demand for Fed Cattle ............................................................................ 79
`Packing Defendants Agreed to Restrict Their Slaughtering Capacity .................. 83
`D.
`PACKING DEFENDANTS’ CONSPIRACY CAUSED THE 2015 PRICE
`COLLAPSE AND SUPPRESSED PRICES THEREAFTER .................................... 87
`A.
`Packing Defendants’ Conduct Precipitated the Collapse in Fed Cattle
`Prices in 2015 ........................................................................................................ 87
`Packing Defendants’ Ongoing Conduct Continues to Depress Fed Cattle
` Prices Throughout 2016 ..................................................................................... 101
`Packing Defendants Continue Their Scheme in 2017 and 2018 Despite
`Increased Cattle Availability ............................................................................... 108
`The Years of 2019 and 2020 Bring Continued Parallel Slaughter and
`Pricing Behavior, a Fire at a Plant, and Regulatory Investigations .................... 111
`1.
`Packing Defendants React to a Processing Plant Fire by Dropping
`Cattle Prices and Raising Beef Prices ..................................................... 121
`USDA Continues to Investigate Packing Defendants’ Price
`Manipulation Following the Holcomb Fire and During the COVID Crisis
`................................................................................................................. 126
`
`2.
`3.
`4.
`
`2.
`
`i
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`E.
`
`2.
`
`3.
`
`C.
`D.
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`Economic Analysis Supports the Existence of the Alleged Conspiracy ............. 128
`1.
`Supply and Demand Principles Do Not Explain the 2015 Price
`Collapse or Subsequent Low Prices ........................................................ 129
`Econometric Analysis Shows Artificially Depressed Fed Cattle
`Prices ....................................................................................................... 140
`Explanations Proffered for the Drop in Fed Cattle Prices Do Not
`Withstand Scrutiny.................................................................................. 144
`VII. THE FED CATTLE MARKET IS CONDUCIVE TO COLLUSION .................... 147
`A.
`The Fed Cattle Packing Industry Has Experienced High Consolidation
`and Is Highly Concentrated ................................................................................ 147
`The Supply of Fed Cattle and Demand for Beef Are Relatively Insensitive
`to Short-Term Changes in Price .......................................................................... 148
`Fed Cattle Producers Face Significant Market Access Risk ............................... 149
`There Are Numerous Trade Organizations and Opportunities for Packing
`Defendants to Meet and Collude......................................................................... 150
`Packing Defendants Benefit from High Barriers to Entry .................................. 156
`Packing Defendants Have Similar Cost Structures and Have Significant
`Oversight Over Each Other’s Price and Production Decisions .......................... 158
`VIII. PACKING DEFENDANTS’ CONDUCT IS THE SUBJECT OF ONGOING
`INVESTIGATIONS IN THIS AND RELATED INDUSTRIES .............................. 160
`A.
`The DOJ Is Investigating Packing Defendants for Price-Fixing, Market
`Manipulation, and Unfair Practices in the Cattle and Beef Markets .................. 160
`The USDA Is Investigating Defendants’ Activities in Light of the Fire at
`Tyson’s Holcomb Plant and COVID-19-Related Market Disruptions ............... 163
`IX. MANIPULATION OF LIVE CATTLE FUTURES AND OPTIONS ..................... 169
`A.
`Futures and Options Generally ........................................................................... 171
`1.
`CME Live Cattle Futures ........................................................................ 174
`2.
`Options on Live Cattle Futures Contracts ............................................... 177
`Packing Defendants Traded in Live Cattle Futures and Controlled the
`Delivery Process ................................................................................................. 179
`Live Cattle Futures and Cattle Spot (Cash) Prices are Highly Correlated
`and Inextricably Linked ...................................................................................... 183
`Packing Defendants’ Conspiracy to Suppress Physical Cattle Prices
`Created Artificial Live Cattle Futures Prices ...................................................... 190
`Packing Defendants Established Net Short Positions ......................................... 191
`1.
`Packing Defendants Established Net Short Positions in the Live
`Cattle Futures Markets to Suppress Cash Cattle ..................................... 196
`Packing Defendants Established Net Short Positions in the Live
`Cattle Futures Markets to Suppress the Price of Cattle Purchased
`Under Forward Contracts ........................................................................ 197
`The Futures Trading Defendants Lacked the Commercial Need to
`Establish Short Positions..................................................................................... 197
`Allegations Derived from CFTC Whistleblower ................................................ 199
`
`B.
`
`E.
`F.
`
`B.
`
`B.
`
`C.
`
`D.
`
`E.
`
`F.
`
`G.
`
`2.
`
`ii
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`

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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 4 of 226
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`X.
`XI.
`
`CLASS ACTION ALLEGATIONS ............................................................................ 200
`STATUTE OF LIMITATIONS AND TOLLING ..................................................... 204
`A.
`Continuing Violation .......................................................................................... 204
`B.
`Inquiry Notice and Due Diligence ...................................................................... 205
`C.
`Fraudulent Concealment ..................................................................................... 207
`XII. CLAIMS FOR RELIEF ............................................................................................... 210
`XIII. PRAYER FOR RELIEF............................................................................................... 218
`XIV. JURY DEMAND ........................................................................................................... 219
`
`iii
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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 5 of 226
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`Plaintiffs Ranchers Cattlemen Action Legal Fund United Stockgrowers of America,
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`Farmers Educational and Cooperative Union of America, Weinreis Brothers Partnership,
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`Minatare Feedlot, Inc., Charles Weinreis, Eric Nelson, James Jensen d/b/a Lucky 7 Angus,
`
`Richard Chambers as trustee of the Richard C. Chambers Living Trust, Steven Graham,
`
`and Nathan Graham (“Plaintiffs”), on behalf of themselves and all other similarly situated
`
`persons and entities, bring claims against the following for their violations of law from at
`
`least January 1, 2015, through the present (the “Class Period”): Tyson Foods, Inc., Tyson
`
`Fresh Meats, Inc. (“Tyson Fresh”) (collectively, “Tyson”), JBS S.A., JBS USA Food
`
`Company, Swift Beef Company, JBS Packerland, Inc. (collectively, “JBS”), Cargill,
`
`Incorporated, Cargill Meat Solutions Corporation (collectively, “Cargill”), and National
`
`Beef Packing Company, LLC (“National Beef,” and all collectively, the “Packing
`
`Defendants”), and John Does 1-10 (who traded in cattle futures and options on the Chicago
`
`Mercantile Exchange (“CME”), which is owned by the CME Group Inc.) (the “John Doe
`
`Defendants”) (collectively with the Packing Defendants, the “Defendants”).1 Based upon
`
`personal knowledge, information and belief, and investigation of counsel, Plaintiffs allege
`
`as follows:
`
`I.
`
`INTRODUCTION
`
`1.
`
`From at least January 1, 2015, through the present, Packing Defendants
`
`conspired to fix and suppress – and did, in fact, fix and suppress – the price of fed cattle in
`
`the United States. Leveraging their consistent control of the purchase of nearly 85% of fed
`
`Plaintiffs reserve the right to amend their complaint once the identities of any further
`1
`alleged conspirators are established.
`
`1
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`

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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 6 of 226
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`cattle in the United States during the Class Period, these meatpacking conglomerates each
`
`caused substantial damages to Plaintiffs and members of the Producer Class (as defined
`
`below), whose livelihoods depend on getting competitive prices for the cattle they sell,
`
`inevitably, to Packing Defendants. Witness accounts, Packing Defendants’ trade records,
`
`and economic evidence confirm this anticompetitive conduct.
`
`2.
`
`As a direct and proximate result of Packing Defendants’ conspiracy and overt
`
`acts taken in furtherance thereof, Packing Defendants paid lower prices for fed cattle
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`directly to Producer Plaintiffs (as defined below) and members of the Producer Class than
`
`they would have in a competitive market. At the same time, those transacting in live cattle
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`futures and options (the “Exchange Class,” as defined below), including certain Plaintiffs,
`
`suffered significant harm as a result of Defendants’ conduct.
`
`3.
`
`As background, fed cattle are steers and heifers raised and fed for the
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`production and sale of high quality beef products. Packing Defendants are beef packers
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`who purchase fed cattle from Plaintiffs and other producers of fed cattle (the “Producer
`
`Class”) for slaughter. Packing Defendants then process the resulting carcasses into beef
`
`for sale to other processers, wholesalers, and retail outlets. Live Cattle Futures contracts
`
`are standardized contracts traded on the CME in which the contract buyer agrees to take
`
`delivery, from the contract seller, of a standardized quantity of fed cattle, at a
`
`predetermined price on a future delivery date.2
`
`For purposes of this complaint, references to “Live Cattle Futures” include live
`2
`cattle futures and options on Live Cattle futures traded on the CME.
`
`2
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`

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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 7 of 226
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`4.
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`Packing Defendants control the U.S. market for the purchase of slaughter-
`
`weight fed cattle. Following a series of mergers and acquisitions beginning in the 1980s
`
`and culminating in 2013, Packing Defendants, through their operating subsidiaries, Tyson
`
`Fresh, Swift/Packerland, CMS, and National Beef (defined below in Section II) have
`
`purchased and slaughtered between 82% and 87% of all fed cattle sold within the United
`
`States on an annual basis.3 Figure 1 demonstrates Packing Defendants’ overwhelming
`
`dominance of the market for the purchase of fed cattle:
`
`Figure 1. Packing Defendants’ Share of Annual U.S. Fed Cattle Slaughter Volumes4
`
`100.0%
`
`90.0%
`
`80.0%
`
`70.0%
`
`60.0%
`
`50.0%
`
`40.0%
`
`30.0%
`
`20.0%
`
`10.0%
`
`0.0%
`
`2007
`
`2008
`
`2009
`
`2010
`
`2011
`
`2012
`
`2013
`
`2014
`
`2015
`
`2016
`
`2017
`
`2018
`
`2019
`
`Tyson Fresh
`
`JBS USA
`
`CMS
`
`National Beef
`
`Cattle Buyers Weekly, “Top 30 Beef Packers” Annual Reports, 2008-2019,
`3
`http://www.cattlebuyersweekly.com/users/rankings/index.php (“CBW Top 30 Beef
`Packers”); 2018 Meat & Poultry Facts, 47th Ed., NORTH AMERICAN MEAT INSTITUTE,
`2019, at 12 (“2018 Meat & Poultry Facts”); USDA Market News Service Report: Actual
`Slaughter Under Federal Inspection (SJ_LS711). (Unless otherwise indicated, all websites
`cited in this Complaint were last accessed on December 22, 2020.)
`Id. The same sources were used to compile Figures 3 and 4.
`4
`
`3
`
`

`

`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 8 of 226
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`5.
`
`Packing Defendants’ profitability is driven by the “meat margin,” which is
`
`the spread between the price packers pay for fed cattle and the price they charge for beef.
`
`As the supply of fed cattle is insensitive to short-term changes of price – owing to the long
`
`life cycle of fed cattle, their perishable nature, and their lack of any alternative use – and
`
`as beef demand is also relatively insensitive to changes in price, the meat margin is very
`
`sensitive to changes in aggregate industry slaughter levels. Consequently, Packing
`
`Defendants can increase the meat margin, and thus their profitability, by working
`
`cooperatively to reduce their respective slaughter volumes, thereby depressing the price of
`
`fed cattle.
`
`6.
`
`Packing Defendants each procure about 70% of their fed cattle though
`
`alternative marketing agreements (“AMAs”), such as “formula” and “forward” contracts.
`
`Under these contracts, the producer agrees to deliver its cattle to a Packing Defendant once
`
`they have reached slaughter-weight at a price to be determined at or around the time of
`
`delivery. The price formulas used by formula contracts typically incorporate reported
`
`prices of fed cattle sold in the weekly cash cattle trade, the industry’s spot market. The
`
`price formulas used by forward contracts incorporate Live Cattle futures prices, which, in
`
`turn, are directly impacted by reported cash cattle prices. As a result, the prices paid for
`
`fed cattle in the cash cattle trade – which constitutes a mere 20%-25% of all fed cattle sold
`
`in the United States – determines the price of almost all fed cattle sold to Packing
`
`Defendants by Plaintiffs and members of the Producer Class.
`
`7.
`
`In 2009-2014, the years leading up to the Class Period, fed cattle prices
`
`increased steadily in response to strong beef demand and a shortage of fed cattle following
`
`4
`
`

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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 9 of 226
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`the droughts of late 2010 through 2013. After prices peaked in November 2014, the
`
`industry expected the price of fed cattle to stabilize in 2015 and to continue at or around
`
`the $150 per hundredweight (“cwt”) mark for a number of years before experiencing a
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`gradual decline.
`
`8.
`
`Packing Defendants colluded to make sure, notwithstanding growing beef
`
`demand, that this widely predicted period of price stability would never happen. Packing
`
`Defendants used their market power and the relatively small cash cattle trade to their
`
`advantage and embarked upon a conspiracy to depress fed cattle prices that began no later
`
`than January 2015 and continues through to this day.
`
`9.
`
`Packing Defendants carried out their conspiracy to reduce fed cattle prices,
`
`and thereby increase the meat margin, through at least the following coordinated conduct,
`
`implemented by their operating subsidiaries:
`
`•
`
`Jointly managing their fed cattle purchases below the available supply of fed
`
`cattle, including by simultaneously and periodically reducing purchase and
`
`slaughter volumes of fed cattle, and in particular, cash cattle;
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`• Orchestrating, monitoring, and enforcing anticompetitive procurement
`
`practices;
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`• Continuing to import foreign cattle after it became uneconomical for them to
`
`do so; and
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`• Closing and idling plants.
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`10. Most egregiously, Packing Defendants all engaged in periodic and parallel
`
`slaughter reductions throughout the Class Period. As explained by Tyson Fresh’s
`
`5
`
`

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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 10 of 226
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`President, Stephen Stouffer, on the eve of the Class Period, because Packing Defendants’
`
`beef packing business was “a margin spread game,” Tyson and its competitors could be
`
`profitable notwithstanding the shortage of fed cattle they faced in the coming years:
`
`By rationing that supply, by lowering that volume coming into the market
`we are able to generate that margin spread. And that is not going to change
`anytime soon. As we continue on in these tightened supply periods we're
`going to continue to manage margin.5
`
`11.
`
`Packing Defendants’ joint management of their respective slaughter volumes
`
`during the Class Period is immediately apparent from Figure 2 below, which tracks their
`
`quarterly slaughter volumes and shows them moving in tandem:
`
`Figure 2: Packing Defendants’ Quarterly Fed Cattle Slaughter Volume
`
`Stephen Stouffer, President, Tyson Fresh, Presentation at Tyson Foods Investor Day
`5
`(December 10, 2014).
`
`6
`
`

`

`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 11 of 226
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`12.
`
`In particular, Figure 2 shows the reduction in each Packing Defendant’s
`
`slaughter volumes across 2015, precipitating the collapse in fed cattle prices discussed
`
`below. It also shows the consistent reductions made by Packing Defendants in the late
`
`winter/spring and fall of each year – highlighted in their Q1 and Q4 slaughter figures. And
`
`while the quarterly reporting period obscures certain shorter reductions described below in
`
`Section VI, it also highlights the remarkable extent to which Packing Defendants’ quarter-
`
`to-quarter slaughter changes move in lockstep, consistent with an agreement to jointly
`
`manage their collective demand below the available cattle supply. Remarkably,
`
`notwithstanding that Packing Defendants’ benefitted from record margins throughout the
`
`Class Period, none sought to increase their profits by increasing their market share of the
`
`available cattle.
`
`13.
`
`Packing Defendants’ agreement to manage their demand below the available
`
`cattle supply directly impacted their annual slaughter volumes, as is illustrated in Figures
`
`3 and 4 below. Figure 3 compares the average annual slaughter volume of the Packing
`
`Defendants during the pre-Class Period and the portion of the Class Period for which data
`
`exists against that of the other U.S. beef packers. It shows that each Packing Defendant
`
`reduced its annual slaughter volumes relative to the pre-Class Period, while independent
`
`regional packing businesses (“Independent Packers”) increased their slaughter volume as
`
`a whole.
`
`7
`
`

`

`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 12 of 226
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`Figure 3. Average Pre- & Post-Class Period Fed Cattle Slaughter – Packing
`Defendants vs. Independent Packers
`
`JBS USA
`
`Tyson Fresh
`2007-14 Ave.
`
`CMS
`2015-19 Ave.
`
`National Beef
`
`Ind. Packers
`
` 8,000
`
` 7,000
`
` 6,000
`
` 5,000
`
` 4,000
`
` 3,000
`
` 2,000
`
` 1,000
`
` -
`
`Average Annual Fed Cattle Slaughter (1,000 head)
`
`14.
`
`Figure 4 also compares Packing Defendants’ and Independent Packers’
`
`annual slaughter volumes during the Class Period and the pre-Class Period, but breaks out
`
`the slaughter volume for each year of the Class Period for which data is available. It
`
`confirms that Tyson, JBS, Cargill, and National Beef each slaughtered less fed cattle in
`
`every year in the Class Period compared to their pre-Class Period averages. It also shows
`
`that while each Packing Defendant gradually increased its slaughter volume from 2016 as
`
`the supply of fed cattle increased, each Packing Defendant’s rate of increase was vastly
`
`outpaced by the slaughter volume increases of Independent Packers during the same period.
`
`Packing Defendants thus used periodic slaughter reductions and underutilized plant
`
`capacity to ensure their collective demand for fed cattle never outstripped the available
`
`8
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`

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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 13 of 226
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`supply of slaughter-weight fed cattle, thereby ensuring the continued suppression of fed
`
`cattle prices.
`
`Figure 4. Average Pre- & Post-Class Period Fed Cattle Slaughter – Packing
`Defendants vs Independent Packers6
`
`15.
`
`The figures above thus clearly show that each Packing Defendant slaughtered
`
`significantly less fed cattle in 2015 than its respective pre-Class Period averages, and then
`
`maintained artificially low slaughter levels throughout the remainder of the Class Period.
`
`16.
`
`Packing Defendants’ agreement to “ration” the available fed cattle rather
`
`than compete for the available supply worked to their advantage as it precipitated an
`
`unprecedented collapse in fed cattle prices in 2015, and continued to suppress fed cattle
`
`prices thereafter:
`
`National Beef acquired Iowa Premium in June 2019, adding 300,000 head to its
`6
`annual fed cattle slaughter volume. Absent that acquisition, its year-over-year slaughter
`volume was flat against 2018, while Independent Packers’ collective slaughter volume rose
`by approximately 100,000 head (netting out National Beef’s acquisition of Iowa Premium).
`
`9
`
`

`

`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 14 of 226
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`Figure 5. Fed Cattle Prices vs. Retail Beef Prices
`
`17.
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`Even with the drastic collapse in fed cattle prices caused by Packing
`
`Defendants’ conspiracy, Packing Defendants continued to benefit from record beef prices.
`
`This disconnect allowed Packing Defendants to post record per-head meat margins
`
`continually throughout the Class Period at the expense of fed cattle producers (Class
`
`Members), as illustrated in Figure 6 below:
`
`10
`
`

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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 15 of 226
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`Figure 6. Weekly Packer Per-Head Meat Margin (1,403 lb. Avg. Live Steer 65-80%
`Choice; 877 lb. Avg. Dressed Carcass)7
`
`18.
`
`Confidential witness accounts confirm the existence of Packing Defendants’
`
`conspiracy to suppress fed cattle prices. To begin with, a witness previously employed by
`
`Swift (JBS) at its Cactus, Texas slaughter plant confirmed that each Packing Defendant
`
`Table prepared using USDA Market News Service Reports: 5-Area Weekly Live
`7
`Steer Price per CWT (LM_CT150), National Weekly Boxed Beef Cutout and Boxed Beef
`Cuts - Negotiated Sales (LM_XB459) and By-Product Drop Value data available here:
`https://marketnews.usda.gov/mnp/ls-report-config. During the COVID-19 pandemic, the
`meat margin rose above $800 per head in the week of April 17, 2020, peaking at
`approximately $2,600 per head in the week of May 15, 2020, before falling below $800
`per head again in the week of June 12, 2020.
`
`11
`
`

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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 16 of 226
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`expressly agreed to periodically reduce its respective purchase and slaughter volumes in
`
`order to reduce the prices it would otherwise pay for fed cattle during the Class Period.
`
`19.
`
`Additionally, available transaction data and slaughter volume, both
`
`Defendant-specific and the aggregated data published by the United States Department of
`
`Agriculture (“USDA”), corroborate the witness’s account.
`
`20.
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`This data also demonstrates that Packing Defendants drastically reduced their
`
`purchases of cash cattle during these periods of slaughter restraint. Packing Defendants
`
`did so in an attempt to “back-up” (that is, create a glut in) the number of slaughter-ready
`
`cash cattle and encourage producers to accept lower prices for their highly perishable
`
`product. Doing so not only dropped cash cattle prices, but also the prices paid under
`
`Packing Defendants’ formula and forward contracts.
`
`21.
`
` Once Packing Defendants cratered the cash cattle trade and created a relative
`
`supply glut, they each ramped up their cash cattle purchases and forced other producers to
`
`accept formula and forward contracts, reaping supra-competitive profits at the expense of
`
`the producers who were left with no competitive marketing outlet for their cattle.
`
`22.
`
`In addition, Packing Defendants engaged in various collusive bidding
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`practices that further suppressed prices. In particular, they coordinated the timing of their
`
`purchases, the prices they would bid, the means of negotiating those bids, and the regions
`
`and feedlots where they would make those bids. For example, available data suggests that
`
`Packing Defendants bought all or substantially all of their cash cattle in a short window on
`
`Friday in 36% of the trading weeks during the Class Period. Packing Defendants’ use of a
`
`12
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`

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`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 17 of 226
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`parallel purchasing window differed from the practices of regional Independent Packers,
`
`which bid on and purchased cash cattle throughout the entire week during the Class Period.
`
`23.
`
`Packing Defendants’ coordinated procurement practices further pressured
`
`producers to sell their fed cattle cheaply or risk being left without a marketing outlet for
`
`their perishable commodity. As a result, throughout the Class Period, producers had no
`
`ability to negotiate higher prices with the Packing Defendants, and were compelled to
`
`accept whatever low bid for their cattle they did actually receive.
`
`24.
`
`Packing Defendants employed other procurement methods to depress the
`
`cash cattle price reports incorporated directly into their formula contracts and also into their
`
`forward contracts. In particular, import data show that Packing Defendants continued
`
`importing large numbers of live cattle for slaughter from Canada, even after it became
`
`uneconomical for them to do so. Such conduct would not have been economically rational
`
`but for Packing Defendants’ agreement to curtail their domestic cash cattle purchases.
`
`25.
`
`Finally, Packing Defendants’ closure and
`
`idling of certain plants
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`immediately prior to and during the Class Period is strongly suggestive of an agreement
`
`among Packing Defendants to reduce or restrain their respective slaughter capacities and
`
`to limit competition for the available supply of fed cattle.
`
`26.
`
`All of this conduct occurred in a market that is highly conducive to collusion
`
`for numerous reasons, including: the small number of big market beef packers, the high
`
`barriers to entry, and frequent, easily accessible means of communications among Packing
`
`Defendants. Packing Defendants’ field buyers had ample opportunity to meet and
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`exchange commercially sensitive information with each other each week as they inspected
`
`13
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`

`

`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 18 of 226
`
`feedlots within their respective territories.8 Field buyers routinely communicated “market
`
`color” obtained from the field – including reports of their competitors’ activities obtained
`
`from producers – back to their head offices and their firms’ other field buyers through daily
`
`conference calls. Packing Defendants were also members of various trade and industry
`
`organizations, which provided additional opportunities to conspire.
`
`27.
`
`Economic analysis further supports the existence of the alleged conspiracy.
`
`Plaintiffs’ economic analysis shows that:
`
`a.
`
`Supply and demand drivers of fed cattle prices, and other commonly
`
`proffered explanations, do not explain the 2015 collapse in fed cattle
`
`prices or the low prices that have prevailed since then; and
`
`b.
`
`Fed cattle prices have been artificially depressed since January 2015.
`
`28.
`
`Plaintiffs seek relief under the Sherman Antitrust Act, the Clayton Antitrust
`
`Act, the Packers and Stockyards Act, and the Commodity Exchange Act for the injuries
`
`and damages they and other members of the Classes suffered during the Class Period. In
`
`support of their allegations, Plaintiffs put forth (1) direct evidence of a conspiracy through
`
`the eye witness recollections of Witness 1 and Witness 2; (2) parallel conduct involving
`
`periodic slaughter restraint and coordinated fed cattle procurement practices; (3) plus
`
`factors showing the market is susceptible to collusion; and (4) economic analysis
`
`demonstrating anticompetitive effects including both the suppression of fed cattle prices
`
`A feedlot is a plot of land on which cattle are fed intensively so as to reach slaughter
`8
`weight.
`
`14
`
`

`

`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 19 of 226
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`and the historical margins enjoyed by Packing Defendants at the expense of the Classes.
`
`In addition, regulators are actively investigating the very same conduct.
`
`II.
`
`PARTIES
`
`A.
`
`29.
`
`Plaintiffs
`
`Plaintiff Ranchers Cattlemen Action Legal Fund United Stockgrowers of
`
`America (“R-CALF USA”) is a non-profit public benefit corporation existing under the
`
`laws of the State of Montana, and has its principal place of business in Billings, Montana.
`
`It is the largest cattle producer-only based membership trade organization, and works to
`
`“address the market interest of U.S. cattle producers with the primary purpose of addressing
`
`the threats posed to the domestic live cattle industry by unfair and illegal trade practices
`
`and imports.”9 Its members include fed cattle producers who sold fed cattle to Packing
`
`Defendants and individuals who transacted cattle futures and options on the CME during
`
`the Class Period.
`
`30.
`
`Plaintiff Farmers Educational and Cooperative Union of America,
`
`commonly known as National Farmers Union (“NFU”), is a national federation of state
`
`Farmers Union organizations existing under the laws of Texas, and has its principal place
`
`of business in Washington, the District of Columbia. Founded in 1902, NFU is the oldest
`
`and second largest general farm organization in the United States and represents nearly
`
`200,000 U.S. family farmers and ranchers, with organized chapters across 33 different
`
`states. NFU works to protect and enhance the economic well-being and quality of life for
`
`9
`
`R-CALF USA Amended Articles of Incorporation dated April 21, 2009, Art. VI.
`
`15
`
`

`

`CASE 0:19-cv-01222-JRT-HB Doc. 313 Filed 12/28/20 Page 20 of 226
`
`family farmers, fishers, ranchers, and rural communities through educational efforts and
`
`by advocating for policy positions that are developed by the grassroots membership.
`
`Nineteen of the NFU’s state divisions are recognized by the USDA as Certified Nominating
`
`Organizations (CNOs) for the Cattlemen's Beef Promotion and Research Board and, as
`
`such, have certified to the Secretary of Agriculture that “a primary or overriding purpose
`
`of this organization or association is to promote the economic welfare of cattle producers.”
`
`NFU members include fed cattle producers who sold fed cattle to Packing Defendants and
`
`individuals who transacted cattle futures and options on the CME during the Class Period.
`
`3

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