CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 1 of 78
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
`
`PACIFIC AGRI-PRODUCTS, INC.,
`
`
`
`Case No.
`
`Plaintiff,
`
`v.
`
`CLASS ACTION COMPLAINT
`
`DEMAND FOR JURY TRIAL
`
`JBS USA FOOD COMPANY
`HOLDINGS, JBS S.A., SWIFT BEEF
`COMPANY, JBS PACKERLAND, INC.,
`TYSON FOODS, INC., TYSON FRESH
`MEATS, INC., CARGILL, INC.,
`CARGILL MEAT SOLUTIONS
`CORPORATION, NATIONAL BEEF
`PACKING COMPANY, AND MARFRIG
`GLOBAL FOODS S.A.
`
`Defendants.
`
`

`

`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 2 of 78
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`TABLE OF CONTENTS
`
`Page
`
`I.
`
`II.
`
`NATURE OF ACTION ........................................................................................ 1
`
`JURISDICTION AND VENUE ............................................................................ 8
`
`III.
`
`PARTIES .............................................................................................................. 8
`
`A.
`B.
`C.
`D.
`
`Plaintiff ...................................................................................................... 8
`Defendants ................................................................................................. 9
`Co-Conspirators ....................................................................................... 13
`Unity of Purpose Between Tyson, JBS, and Cargill’s Respective Parent and
`Subsidiary Companies .............................................................................. 14
`
`IV.
`
`TRADE AND COMMERCE .............................................................................. 24
`
`A.
`B.
`
`Beef Distribution Chain............................................................................ 24
`Structure of Beef Industry ........................................................................ 26
`1.
`The Beef Meatpacking Industry is Highly Concentrated ................ 27
`
`2.
`
`3.
`
`4.
`
`The Meat-Packing Market Features High Barriers to Entry ........... 28
`
`Beef is a Commodity Product ........................................................ 29
`
`The Demand for Beef is Inelastic................................................... 29
`
`V.
`
`VIOLATIONS ALLEGED ................................................................................. 30
`
`A.
`B.
`
`C.
`
`D.
`
`E.
`
`Defendants Agreed to Reduce Slaughter Volumes ................................... 30
`The Agreement Resulted in Significantly Reduced Slaughter Volumes by
`the Defendants during the Class Period .................................................... 34
`Defendants Closed or Idled Plants, and Refrained from Expanding Capacity
` ................................................................................................................. 36
`Defendant Publicly Signaled Each Other to Keep Slaughter and Capacity
`Restrained ................................................................................................ 41
`The Collusive Agreement to Reduce Resulted in an Increased Spread
`Between the Fed Cattle and Beef Prices ................................................... 44
`
`ii
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`

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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 3 of 78
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`F.
`
`Tyson and JBS Attribute Their Record 2017 & 2018 Profits to “Visibility”
`into the Beef Supply Chain....................................................................... 46
`
`VI.
`
`ADDITIONAL FACTORS SUPPORTING THE EXISTENCE OF
`DEFENDANTS’ CONSPIRACY ....................................................................... 48
`
`A.
`B.
`
`Defendants Took Advantage of Numerous Opportunities to Collude........ 48
`The Defendants Supply Restraints Were Not Offset and Were Further
`Exacerbated by Reductions in Imports ..................................................... 51
`VII. ANTITRUST INJURY ....................................................................................... 52
`
`VIII. THE DEFENDANTS ACTIVELY CONCEALED THE CONSPIRACY ........... 56
`
`A.
`
`Fraudulent Concealment........................................................................... 56
`1.
`The Tyson Defendants ................................................................... 57
`
`2.
`
`3.
`
`4.
`
`The JBS Defendants ...................................................................... 58
`
`The Cargill Defendants .................................................................. 59
`
`National Beef ................................................................................ 60
`
`Continuing Violations .............................................................................. 65
`B.
`CLASS ACTION ALLEGATIONS .................................................................... 66
`
`VIOLATIONS OF SECTION 1 OF THE SHERMAN ACT (15 U.S.C. § 1) ...... 69
`
`REQUEST FOR RELIEF ................................................................................... 71
`
`IX.
`
`X.
`
`XI.
`
`XII.
`
`JURY TRIAL DEMANDED .............................................................................. 72
`
`iii
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`

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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 4 of 78
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`Plaintiff Pacific Agri-Products, Inc., individually and on behalf of a class of all
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`persons and entities that purchased Beef, as that product is defined herein, directly from
`
`JBS S.A., JBS USA Food Company Holdings, Swift Beef Company, JBS Packerland, Inc.,
`
`Tyson Foods, Inc., Tyson Fresh Meats, Inc., Cargill, Inc., Cargill Meat Solutions
`
`Corporation (a/k/a Cargill Protein), National Beef Packing Company, and/or Marfrig
`
`Global Foods S.A. (collectively, the “Defendants”) from at least as early as January 1, 2015
`
`until the present (the “Class Period”), brings this action under the antitrust laws of the
`
`United States against Defendants, and demands a trial by jury.
`
`I.
`
`NATURE OF ACTION
`
`1.
`
`This is an antitrust class action for injuries sustained to the business and
`
`property of Plaintiff and the members of the Plaintiff Class from Defendants’ violations of
`
`Section 1 of the Sherman Act, 15 U.S.C. § 1.
`
`2.
`
`From at least as early as 2015 through the present, the Defendants entered
`
`into a combination, contract or conspiracy to fix, maintain and raise the price of Beef to
`
`supracompetitive levels. They engaged in their scheme using mechanisms that included
`
`suppressing throughput of fed cattle1 thereby creating artificial Beef supply restraints. The
`
`conspiracy to suppress the throughput of fed cattle led to Beef prices paid by Plaintiff and
`
`direct purchaser class members being higher than they otherwise would have been in a
`
`competitive market.
`
`1Fed cattle are steers and heifers raised and fed for the production and sale of high-quality
`beef products. Fed-cattle does not include culled cows, which are primary used for dairy
`production, and then at the end of their dairy producing life, are slaughtered for lower
`quality ground beef.
`
`1
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`

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`3.
`
`Beef is meat from full-grown cattle that is approximately 2 years old. “Boxed
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`beef” is a combination of cuts subject to USDA grading. Price is the primary competitive
`
`factor. “Beef” for purposes of this complaint is defined as “boxed beef” and case ready
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`cuts, and does not include ground beef from culled cows.
`
`4.
`
`The four Defendant families are the largest meatpacking companies in the
`
`world and the leading processors of the approximately 26,868 million pounds of boxed
`
`beef produced in the U.S. in 2018.
`
`5.
`
`Defendants’ scheme succeeded, in part, due to the structure of the Beef
`
`industry. The Defendants purchase fed cattle from farmers, process it into Beef, and sell
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`the Beef to Plaintiff and other direct purchasers. Slaughter and packing are essential parts
`
`of the Beef supply chain.
`
`6.
`
`The Defendants account for over 80% of the Beef supplied to the wholesale
`
`market, thus collectively controlling a crucial component of the distribution chain. The
`
`meatpacking industry, therefore, is highly concentrated. This high industry concentration
`
`affords the Defendants market power with respect to both upstream fed cattle purchases
`
`and downstream Beef sales. As the “big four” players in this highly concentrated industry,
`
`the Defendants interact frequently at industry events and trade association meetings, and
`
`their respective executives are well-acquainted. The market is therefore highly conducive
`
`to collusion. The existence of the Defendants’ conspiracy is confirmed by at least one
`
`confidential witness account. A confidential witness previously employed by a Packing
`
`Defendant (“Witness 1”), has confirmed that each of the Defendants expressly agreed to
`
`reduce their respective purchase and slaughter volumes, which would have the effect of
`
`2
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`

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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 6 of 78
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`artificially raising the price of Beef. Witness 1’s account is corroborated by transactional
`
`data and slaughter volume records reported by Defendants and published by the United
`
`States Department of Agriculture (“USDA”), as well as Defendants’ public calls for
`
`industry-wide slaughter and capacity reductions.
`
`7.
`
`Defendants engaged in periodic and parallel slaughter reductions throughout
`
`the Class Period. The impact of Defendants’ respective slaughter reductions upon their
`
`annual slaughter volumes is illustrated in the below figure. This figure compares the
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`average annual slaughter volume of the Defendants during the pre-Class Period and the
`
`portion of the Class Period for which data exists against that of the other US beef packers.
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`It shows that Defendants all reduced their annual slaughter volumes relative to the pre-
`
`Class Period, while independent regional packing businesses (“Independent Packers”)
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`increased their slaughter volume.
`
`3
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`

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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 7 of 78
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`Average Pre- and Post-Class Period Fed Cattle Slaughter – Defendants vs.
`Smaller/Independents
`
`8.
`
`The 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 relatively insensitive to changes in price, the meat margin is very sensitive
`
`to changes in aggregate industry slaughter levels. A collusive restraint on the volume of
`
`the purchase of fed cattle naturally creates an artificial restraint on the supply of Beef. This
`
`decrease in purchase and throughput has the effect of artificially suppressing the prices
`
`paid for fed cattle and artificially raising the price of Beef above the levels which would
`
`prevail in a freely competitive market. The Defendants, in this way, increased the meat
`
`4
`
`

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`margin, and thus their profitability, by working cooperatively to reduce their respective
`
`slaughter volumes.
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`9.
`
`The Beef market first saw a marked change in pricing practices in 2015.
`
`Before 2015, the prices of fed cattle and Beef moved in tandem: as one would expect, lower
`
`cattle prices usually led to correspondingly lower wholesale Beef prices. After 2015 when
`
`Defendants collusively cut production, however, this fundamental economic relationship
`
`was altered. Suddenly, the degree of correlation of cattle and Beef prices diverged to the
`
`benefit of the Defendants, and without credible explanation. The relevant supply and
`
`demand factors in the industry no longer explained the prices being seen by direct
`
`purchasers. Wholesale Beef prices showed unusual trends starting in 2015. The per pound
`
`price of cattle had historically stayed within 20 to 40 cents of the per pound wholesale price
`
`of Beef on average, but in 2015, the spread between those prices increased dramatically,
`
`as seen on the chart below.
`
`5
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`

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`10. There was a steep decline in the price of fed cattle starting in 2015 where
`
`meatpackers did not purchase as much of the farmers’ fed cattle inventory. But wholesale
`
`and retail prices remained high relative to the price of fed cattle. This incongruous pricing
`
`trend continued into 2016: although cattle prices had fallen to pre-2014/2015 levels,
`
`6
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`

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`wholesale and retail Beef prices remained high relative to cattle prices. Defendants’
`
`burgeoning meatpacker cartel had realized that if no meatpacker “broke rank” to increase
`
`throughput of fed cattle to the unmet demand for beef, the “big four” could increase their
`
`profitability by achieving and maintaining unprecedented high wholesale prices relative to
`
`fed cattle prices.
`
`11.
`
`The Defendants’ conspiracy and exercise of their market power in both the
`
`upstream and downstream markets allowed them to grow their operating margins steadily
`
`from 2015 through 2018. By the end of 2018, Tyson and JBS, the two publicly traded Beef
`
`packers, were reporting record operating margins in their beef business. That year, Tyson
`
`reported beef business operating margins of nearly 7 percent,2 almost double its 2014
`
`operating margins, and JBS reported beef business margins of 10.2 percent.3 As industry
`
`reporter Cassandra Fish noted at the time, the Defendants “no longer compete[d]” and were
`
`enjoying “gangbuster profits.”4
`
`12.
`
`Aside from the information provided by Witness 1, numerous “plus factors”
`
`support the inference of collusion by the meatpackers during the Class Period, including
`
`high barriers to entry, high industry consolidation and concentration, inelastic supply and
`
`demand, unusual market share stability, economic factors that are consistent with the
`
`existence of a horizontal conspiracy, a homogenous product, and ample opportunities to
`
`conspire.
`
`2 Tyson November 13, 2018 Q4 Earnings Call.
`3 JBS August 15, 2018 Q2 Earnings Call.
`4 Cassandra Fish, “Whatever Happened to a Fair Fight,” The Beef (Nov. 10, 2015),
`https://www.thebeefread.com/2015/11/10/whatever-happened-to-a-fair-fight/
`
`7
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`13.
`
`Because of Defendants’ unlawful conduct, Plaintiff and the direct purchaser
`
`class paid artificially inflated prices for Beef during the Class Period, and Beef prices
`
`during the Class Period were greater than they otherwise would have been in a competitive
`
`market. Plaintiff and class members therefore suffered antitrust injury and injury to their
`
`business or property because of Defendants’ illegal conduct.
`
`II.
`
`JURISDICTION AND VENUE
`
`14.
`
`This Court has subject matter jurisdiction under 28 U.S.C. §§ 1331, 1337,
`
`and Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15(a) and 26.
`
`15.
`
`Venue is appropriate in this District under Sections 4, 12, and 16 of the
`
`Clayton Act, 15 U.S.C. §§15, 22 and 26 and 28 U.S.C. § 1391(b), (c) and (d) because one
`
`or more Defendants resides, is found, has an agent or transacted business in this District,
`
`and because a substantial portion of the affected interstate commerce was carried out in
`
`this District.
`
`16.
`
`The activities of the Defendants and all co-conspirators were within the flow
`
`of, were intended to, and had direct, substantial, and reasonably foreseeable effects on, the
`
`foreign and interstate commerce of the United States.
`
`III.
`
`PARTIES
`A.
`Plaintiff
`
`19.
`
`Plaintiff Pacific Agri-Products, Inc. (“Pac-Agri”) is a California company
`
`with its principal place of business in South San Francisco, California. Pac-Agri directly
`
`purchased beef that was processed and sold by one or more Defendants or their co-
`
`8
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`

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`conspirators during the Class Period. Pac-Agri suffered injury as a result of the antitrust
`
`violations alleged herein.
`
`20.
`
`Plaintiff Pac-Agri seeks to represent all persons and entities who, during the
`
`period from January 1, 2015 through present, or such time as the anticompetitive effects of
`
`Defendants’ conduct ceased, purchased Beef directly from a Defendant or co-conspirator
`
`in the United States.
`
`B.
`
`Defendants
`
`1.
`
`The Cargill Defendants
`
`21.
`
`Cargill, Incorporated (“Cargill”) is a privately held Delaware corporation
`
`with its principal place of business at 15407 McGinty Road, Wayzata, Minnesota 55391.
`
`During the Class Period, Cargill and/or its predecessors, wholly owned or controlled
`
`subsidiaries, or affiliates sold Beef in interstate commerce, directly or through its wholly
`
`owned or controlled affiliates, to purchasers in the United States. Cargill, Incorporated is
`
`the parent company of the Cargill group.
`
`22.
`
`Defendant Cargill Meat Solutions Corporation (a/k/a Cargill Protein)
`
`(“Cargill Meat”), a subsidiary of Cargill, is a Delaware corporation with its principal place
`
`of business at 825 East Douglas Avenue, Wichita, Kansas 67202. Cargill Meat is the
`
`principal operating entity within Cargill’s U.S. cattle and beef business and a wholly owned
`
`subsidiary of Cargill. On information and belief, Cargill Meat owns directly, or indirectly
`
`through its subsidiaries, Cargill’s U.S. fed cattle slaughter plants, and contracts for the
`
`purchase of cattle slaughtered there.
`
`9
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`23.
`
` During the Class Period, the Cargill Defendants shared a unity of corporate
`
`interest and operated as part of a single enterprise in furtherance of the conspiracy that
`
`purposefully directed conduct causing injury to and derived direct benefit from members
`
`of the class in the United States and in this District.
`
`24.
`
`Defendants Cargill and Cargill Meat are referred to collectively herein as
`
`“Cargill.”
`
`2.
`
`The JBS Defendants
`
`25.
`
`Defendant JBS S.A. is a Brazilian corporation with its principal place of
`
`business located at Av. Marginal Direta do Tiete, 500 Bloco 3-3o. andar, Vila Jaguara, Sao
`
`Paulo 05.118-100, Brazil. JBS S.A. is the parent company of the JBS group.
`
`26.
`
`JBS USA Food Company Holdings (“JBS USA”) is a Delaware corporation
`
`with its principal place of business located at 1770 Promontory Circle, Greeley, Colorado
`
`80634. JBS USA is the principal operating entity of JBS’s U.S. cattle/beef business. On
`
`information and belief, it is the principal operating entity within JBS’s U.S. cattle and beef
`
`business, and the contracting entity for certain of JBS’s purchases of fed cattle in the USA.
`
`27.
`
`Defendant Swift Beef Company (“Swift”) is a Delaware corporation with its
`
`principal place of business located at 1770 Promontory Circle, Greeley, Colorado 80634.
`
`Swift owns directly, or indirectly through its subsidiaries, certain of JBS’s U.S. fed cattle
`
`slaughter plants including the Cactus, Texas; Greeley, Colorado; Grand Island, Nebraska;
`
`and Hyrum, Utah plants.
`
`26.
`
`Defendant JBS Packerland, Inc. (“JBS Packerland”) is a Delaware
`
`corporation with its principal place of business located at 1770 Promontory Circle, Greeley,
`
`10
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`

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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 14 of 78
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`Colorado 80634. On information and belief JBS Packerland owns directly, or indirectly
`
`through its subsidiaries, certain of JBS’s U.S. fed and dairy cattle slaughter plants,
`
`including the Packerland packing plants in Green Bay, Wisconsin and Plainwell, Michigan;
`
`the Sun Land Beef plant in Tolleson, Arizona; and the Moyer Packing plant in Souderton,
`
`Pennsylvania.
`
`27.
`
`Defendants JBS USA, Swift, and JBS Packerland were, throughout the Class
`
`Period, wholly owned, direct or indirect subsidiaries of JBS S.A.
`
`28.
`
`Defendants JBS S.A., JBS USA, Swift, and JBS Packerland are referred to
`
`collectively herein as “JBS.”
`
`29.
`
` During the Class Period, JBS and/or its predecessors, wholly owned or
`
`controlled subsidiaries, or affiliates sold Beef in interstate commerce, directly or through
`
`its wholly owned or controlled affiliates, to purchasers in the United States.
`
`30.
`
`During the Class Period, the JBS Defendants shared a unity of corporate
`
`interest and operated as part of a single enterprise in furtherance of the conspiracy that
`
`purposefully directed conduct causing injury to and derived direct benefit from members
`
`of the class in the United States and in this District.
`
`3.
`
`The Tyson Defendants
`
`31.
`
`Tyson Foods, Inc. is a publicly traded Delaware corporation headquartered
`
`in Springdale, Arkansas. During the Class Period, Tyson and/or its predecessors, wholly
`
`owned or controlled subsidiaries, or affiliates sold Beef in interstate commerce, directly or
`
`through its wholly owned or controlled affiliates, to purchasers in the United States.
`
`32.
`
`Defendant Tyson Fresh Meats, Inc. (“Tyson Fresh Meats”) is a wholly owned
`
`11
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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 15 of 78
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`subsidiary of Tyson Foods. Tyson Fresh Meats is a Delaware corporation with its principal
`
`place of business located at 800 Stevens Port Drive, Dakota Dunes, South Dakota 57049.
`
`Tyson Fresh Meats is the principal operating entity within Tyson’s U.S. cattle and beef
`
`business. On information and belief, Tyson Fresh Meats owns directly, or indirectly
`
`through its subsidiaries, Tyson’s U.S. fed cattle slaughter plants and contracts for the
`
`purchase of cattle slaughtered there.
`
`33.
`
`During the Class Period, the Tyson Defendants shared a unity of corporate
`
`interest and operated as part of a single enterprise in furtherance of the conspiracy that
`
`purposefully directed conduct causing injury to and derived direct benefit from members
`
`of the class in the United States and in this District.
`
`34.
`
`Defendants Tyson Foods and Tyson Fresh Meats are referred to collectively
`
`herein as “Tyson.”
`
`4.
`
`The National Beef Defendants
`
`35.
`
`National Beef Packing Company (“National Beef”) is a privately-owned
`
`Delaware limited liability company with its principal place of business located at 12200
`
`North Ambassador Drive, Suite 500, Kansas City, Missouri 64163. National Beef and/or
`
`its predecessors, wholly owned or controlled subsidiaries, or affiliates sold Beef in
`
`interstate commerce, directly or through its wholly owned or controlled affiliates, to
`
`purchasers in the United States. On information and belief, National Beef owns directly, or
`
`indirectly through its subsidiaries, National Beef’s U.S. fed cattle slaughter plants, and
`
`contracts for the purchase of cattle slaughtered there.
`
`12
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`36. Marfrig Global Foods S.A. (“Marfrig”) is a Brazilian meatpacking
`
`conglomerate with operations around the world and, since June 2018, owns a controlling
`
`interest in National Beef Packing Company, LLC.5 Prior to this sale, Jefferies Financial
`
`Group, Inc. (“Jefferies Financial Group”) was National Beef’s controlling shareholder.6
`
`37.
`
`“Defendant” or “Defendants” includes all of the named Defendants’
`
`predecessors, including beef meatpackers merged with or acquired by the named
`
`Defendants and each named Defendants’ wholly owned or controlled subsidiaries or
`
`affiliates that sold Beef in interstate commerce directly to purchasers in the United States
`
`during the Class Period.
`
`38.
`
`Defendants sold or distributed Beef to direct purchasers or played a material
`
`role in the coordinated and collusive behavior alleged. All such entities were active,
`
`knowing participants in the conspiracy alleged, and their conduct was known to and
`
`approved by their respective corporate parent named as a Defendant.
`
`C.
`
`39.
`
`Co-Conspirators
`
`Various other unknown persons, firms and corporations, not named as
`
`Defendants, have participated as co-conspirators with Defendants and have performed acts
`
`and made statements in furtherance of the conspiracy. The Defendants are jointly and
`
`severally liable for the acts of their co-conspirators whether named as Defendants or not.
`
`5 Marfrig Concludes Acquisition of National Beef, Marfrig (Jun. 6, 2018),
`http://www.marfrig.com.br/en/documentos?id=780.
`6 Jefferies Financial Group Inc., Annual Report, (Form 10-K) at 6 (Jan. 10, 2019)
`(“Jefferies 2018 Annual Report”). After the acquisition, Jefferies Financial Group,
`retained a 31% interest in National Beef.
`
`13
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`40.
`
`Each corporation referred to acted by or through its officers, directors,
`
`agents, employees or representatives while they were actively engaged in the management,
`
`direction, control or transaction of the corporation’s business or affairs.
`
`41.
`
`Each Defendant acted as the agent or joint-venturer of or for the other
`
`Defendants regarding the acts, violations and common course of conduct alleged.
`
`D.
`
`Unity of Purpose Between Tyson, JBS, and Cargill’s Respective Parent
`and Subsidiary Companies
`1.
`The Tyson Defendants
`
`42.
`
`Tyson Foods established subsidiaries, including Tyson Fresh Meats, to act as
`
`representatives of Tyson Foods and to engage in activities that Tyson Foods would
`
`otherwise engage in. In the case of Tyson Fresh Meats, those activities include the purchase
`
`and slaughter of cattle as well as the sale of beef. Tyson Foods is not a mere holding
`
`company whose business is restricted to investments in operating subsidiaries.
`
`43.
`
`Tyson Foods presents itself to the public as a single unified enterprise,
`
`describing its beef business through Tyson Fresh Meats as a mere “business unit.”7
`
`Similarly, Tyson Foods describes its current CEO, Noel White, as having previously
`
`worked for the company, even though he was previously employed as one of Tyson Fresh
`
`Meats’ Senior Group Vice Presidents.
`
`44.
`
`Tyson Foods likewise conducts quarterly earnings calls, on which its
`
`corporate representatives discuss the operations and profits of Tyson Foods, including
`
`7 https://www.tysonfoods.com/who-we-are/our-people/leadership/noel-white. All
`websites cited in Section III(D) were last accessed on October 14, 2019.
`
`14
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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 18 of 78
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`Tyson Fresh Meats. During a January 31, 2014 earnings call, for example, Tyson Foods’
`
`corporate representatives informed investors that Tyson Foods had generated $58 million
`
`in operating income and a 1.6% return on sales from its beef segment business, despite that
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`Tyson Fresh Meats directly operated that business. On the same call, Tyson Foods’
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`corporate representatives warned that “as the calf crop declines . . . we’ll probably have to
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`curtail production.” Tyson Fresh Meats undertakes production of the beef from the calf
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`crop.
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`45.
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`On the May 2014 earnings call, Tyson Foods’ then-CEO Donnie Smith
`
`informed investors that Tyson Foods managed to realize a positive return on sales in the
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`beef segment, in part, by “run[ning] fewer head” while the company “controlled cost
`
`through continuous attention to detail and execution of the fundamentals.” Tyson Fresh
`
`Meats took these actions.
`
`46.
`
`On the July 2014 earnings call, Mr. Smith notified investors that beef market
`
`changes meant that “it makes sense to have plants close to the feed lines, as we do.” Four
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`months later, Mr. Smith reported to investors that “as a positive for Tyson, the cattle
`
`population continues to move closer to our plants in the Midwest.” Tyson Fresh Meats
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`owns and operates those plants.
`
`47.
`
`Tyson Foods continued reporting the acts of Tyson Fresh Meats as its own
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`on earnings calls in 2015. For example, on the August 3, 2015 earnings call, Mr. Smith
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`attributed losses incurred in Tyson Food’s beef segment to “the West Coast port situation.
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`There was a significant amount of meat in the pipeline and we sold it at lower values in
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`alternative markets rather than building inventory and tighten up our working capital. This
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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 19 of 78
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`cost us about $84 million in the third quarter.” On the same call, Mr. Smith explained
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`Tyson Foods’ strategy for cattle purchasing as implemented by Tyson Fresh Meats: “we
`
`run for margin and not for market share, we're not willing to overpay for cattle and we've
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`had to cut back on our hours at our plants resulting in inefficiencies and added costs.”
`
`48.
`
`On the May 7, 2018 earnings call, Mr. Smith’s successor, then-CEO of Tyson
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`Foods Thomas Hayes, informed investors that, with regard to beef production, “we have
`
`to stop production, we have closed plants, several times in the quarter, not every plant, but
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`several plants in the quarter.” Tyson Fresh Meats owned and operated those plants to which
`
`Mr. Hayes referred.
`
`49.
`
`Tyson Foods and Tyson Fresh Meats guarantee each other’s debts,
`
`confirming their close, synergistic relationship. Tyson Fresh Meats has issued multiple
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`debt securities guaranteed by Tyson Foods. In a registration statement filed with the SEC,8
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`Tyson Foods notified investors that Tyson Fresh Meats pledged not only its own assets to
`
`guarantee debt instruments but also those of Tyson Foods and certain “other domestic
`
`operation subsidiaries of Tyson [Foods].”
`
`50.
`
`Similarly, Tyson Foods reported that Tyson Fresh Meats would be the
`
`guarantor to Tyson Foods’ debt securities, including debentures, notes, and all other types
`
`8 Tyson Foods, Inc., Form S-4 Registration Statement (June 26, 2009), at 4, 21
`https://www.sec.gov/Archives/edgar/data/100493/000119312509139474/ds4.htm.
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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 20 of 78
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`of debt in a prospectus filed with the SEC in 2014.9 Tyson Foods has issued multiple Senior
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`Notes pursuant to this arrangement, many of which do not mature until 2034 and some of
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`which do not mature until 2044. Some of these debt instruments have been called before
`
`their maturity date.
`
`51.
`
`Furthermore, Tyson Fresh Meats slaughter plants in Dakota City, NE,
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`Lexington, NE, Amarillo, TX, and Wallula, WA each list Tyson Foods, Inc. as a DBA in
`
`their registration with the U.S. Department of Agriculture’s Food Safety Inspection Service
`
`(“USDA FSIS”).10
`
`52.
`
`As a result, Tyson Foods does not merely provide long-term strategy
`
`guidance to Tyson Fresh Meats. Instead, Tyson Fresh Meats’ entire purpose is to execute
`
`Tyson Foods’s directives within the greater Tyson enterprise and to serve as an
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`instrumentality of Tyson Foods. Tyson Fresh Meats is only “independent” to the extent
`
`Tyson Foods permits. Tyson Foods was and remains capable of exerting total control over
`
`Tyson Fresh Meats at any time.
`
`2.
`
`The JBS Defendants
`
`53.
`
`JBS S.A. established subsidiaries, including JBS USA, Swift, and JBS
`
`Packerland, to act as representatives of JBS S.A. JBS USA, Swift, and JBS Packerland’s
`
`9 Tyson Foods, Inc., Prospectus (July 28, 2014), in between S-81 and i,
`https://www.sec.gov/Archives/edgar/data/100493/000119312514281360/d764243d424b5
`.htm.
`
`10 USDA Food Safety and Inspections “Meat, Poultry and Egg Product Inspection
`Directory”, https://www.fsis.usda.gov/wps/wcm/connect/bf8d9766-9767-4e0c-a9f1-
`efea0b2a42bc/MPI_Directory_Establishment_Name.pdf?MOD=AJPERES.
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`CASE 0:19-cv-02720-SRN-KMM Document 1 Filed 10/16/19 Page 21 of 78
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`activities include the purchase and slaughter of cattle and the sale of beef. Absent its
`
`creation or acquisition of JBS USA, Swift, and JBS Packerland, JBS S.A. would have itself
`
`performed the same functions that these subsidiaries currently perform. JBS S.A. is not a
`
`mere holding company whose business is restricted to investments in operating
`
`subsidiaries.
`
`54.
`
`JBS presents itself as a unified enterprise11 and conducts consolidated
`
`earnings calls on which JBS’s corporate representatives discuss the operations and profits
`
`of JBS S.A., including JBS USA. On these earnings calls, JBS S.A. executives who self-
`
`identify using the modifier “Global”12 describe its beef business through JBS USA as a
`
`“division” or “business unit” to investors.13
`
`11 JBS S.A,’s website, which functions as the entire groups’ website, refers to its beef
`business as “JBS Beef.” See, e.g., JBS S.A. “Beef,” https://jbssa.com/our-business/beef/
`(“JBS® Beef offers a wide range of premium brands . . . At JBS Beef, we know that
`quality beef comes from quality cattle.”).
`
`12 For example, on its second quarter earnings call for the fiscal year 2016, JBS S.A.
`Investor Relations manager Jeremiah O’Callaghan stated:
`
`With us here today, we’ve got the Global President of our
`company, Wesley Batista. . . . With us also is Mr. Gilberto
`Tomazoni who is the President of our Global Operations; Mr.
`Tarek Farahat, who is our Global President for Marketing; and
`also with us today is Russ Colaco who is our new Global CFO.
`
`13 On a March 2015 earnings call, O’Callaghan stated: “Moving onto JBS USA, where
`we have three business units, our beef business, our pork business and our poultry
`business....”
`
`18
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`CASE 0:19