CASE 0:20-cv-01319-NEB-KMM Document 1 Filed 06/06/20 Page 1 of 53
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
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`CASE NO.
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`CLASS ACTION COMPLAINT
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`HOWARD B. SAMUELS, solely as chapter 7
`trustee of the estates of CENTRAL GROCERS,
`INC., STRACK AND VAN TIL SUPER MARKET,
`INC. and SVT, LLC,
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`v.
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`CARGILL, INC., JBS USA FOOD COMPANY
`HOLDINGS, NATIONAL BEEF PACKING
`COMPANY, TYSON FOODS, INC.,
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`Plaintiffs,
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`CASE 0:20-cv-01319-NEB-KMM Document 1 Filed 06/06/20 Page 2 of 53
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`Howard B. Samuels (“Plaintiff”), solely in his capacity as Chapter 7 trustee for the
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`bankruptcy estates of Central Grocers, Inc., Strack and Van Til Super Market, Inc., and SVT,
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`LLC (collectively, “Central Grocers”), hereby brings this action on behalf of Central Grocers and
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`all persons and entities similarly situated, against Defendants Cargill, Inc. (“Cargill”), JBS USA
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`Food Company Holdings (“JBS”), National Beef Packing Company (“National Beef”) and Tyson
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`Foods, Inc. (“Tyson”) (when discussed collectively, “Defendants”) and unnamed co-conspirators.
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`Plaintiff alleges, based on information and belief and investigation by counsel except where
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`specifically alleged on the basis of personal knowledge, as follows:
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`I.
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`NATURE OF THIS ACTION
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`1.
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`This class action is brought on behalf of Central Grocers and all persons and
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`entities who purchased beef1 in the United States directly from one or more of the Defendants
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`from at least January 1, 2015, until the present (the “Class Period”). Plaintiff alleges that
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`Defendants violated Section 1 of the Sherman Act by conspiring to constrain beef supplies in the
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`United States, thereby artificially inflating domestic beef prices paid by direct purchasers. As a
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`direct result of Defendants’ unlawful conduct, Central Grocers and the other Class members
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`suffered antitrust injury for which Plaintiff seeks treble damages and injunctive relief and
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`demands a jury trial.
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`2.
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`Defendants are the world’s largest meat processing and packing companies, known
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`in the industry as “meatpackers” or “packers.” In 2018, they sold approximately 80% of the more
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`than 25 million pounds of fresh and frozen beef supplied to the United States market.
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`1 In this Complaint, “beef” means boxed and case-ready meat that has been processed from fed
`cattle by Defendants and other smaller, non-defendant producers. It excludes ground beef made
`from culled cows. “Cattle” means fed cattle before they are processed into beef and excludes
`culled cows. “Fed” cattle means steers and heifers raised in feedlots on a concentrated diet
`for the production and sale of beef.
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`Collectively, they controlled approximately 81–85% of the domestic cattle processed (or
`slaughtered) in the market throughout the Class Period. The next largest meatpacker had only a 2–
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`3% market share.
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`3.
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`Since at least the start of 2015, Defendants have exploited their market power in
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`this highly concentrated market by conspiring to limit the supply of, and to fix the prices of, beef
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`sold to Central Grocers and others in the U.S. wholesale market (the “Conspiracy”). The
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`principal, but not exclusive, means Defendants have used to effectuate their Conspiracy is a
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`concerted scheme to artificially constrain the supply of beef entering the domestic supply chain.
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`Defendants’ collusive restriction of the beef supply has had the intended effect of artificially
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`inflating beef prices. As a result, Central Grocers and other Class members paid higher prices than
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`they would have paid in a competitive market.
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`4.
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`Both the U.S. Department of Justice (“DOJ”) and the U.S. Department of
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`Agriculture (“USDA”) recently launched investigations into whether Defendants unlawfully fixed
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`beef prices in the United States. Although the DOJ has not yet publicly confirmed its
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`investigation, news sources reported on June 4, 2020, that the Department’s Antitrust Division
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`sent a civil investigative demand to each of the Defendants seeking information about their
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`pricing practices. While these investigations apparently were triggered most immediately by a
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`spike in beef prices since the COVID-19 outbreak in the U.S., this spike is only one manifestation
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`of Defendants’ conspiracy.
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`5.
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`In testimony before the Senate Subcommittee on Agriculture, Rural Development,
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`Food and Drug Administration, and Related Agencies on March 12, 2020, Secretary of
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`Agriculture Sonny Perdue announced that the USDA had begun an investigation into suspiciously
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`high beef prices. Secretary Perdue expressed serious concern that meatpackers were paying lower
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`prices for live cattle without passing that cost savings to Plaintiffs and other beef purchasers. In
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`his words, the difference between prices for live cattle and prices for wholesale boxed beef was
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`“historically high.”
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`6.
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`The existence of a conspiracy among the Defendants was confirmed by at least
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`one account by a confidential witness (“Witness 1”). Witness 1, who was previously employed
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`by one of the Defendants, has confirmed that each of the Defendants expressly agreed to reduce
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`its cattle purchase and slaughter volumes with the purpose and effect of increasing their margins.
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`Transactional data and slaughter volume records reported by Defendants, information published
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`by the U.S. Department of Agriculture, and Defendants’ public calls for industrywide slaughter
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`and capacity reductions corroborate Witness 1’s account.
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`7.
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`In addition to the high concentration in the wholesale beef industry, other
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`structural characteristics of the domestic beef market also facilitate the Conspiracy. Defendants sit
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`atop the supply and distribution chain that ultimately delivers beef to the market. Their vital role
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`is to purchase cattle from the nation’s farmers and ranchers, slaughter and pack cattle into beef,
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`and sell beef to Central Grocers and other Class members. Defendants’ gatekeeping role has
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`enabled them to collusively control both upstream and downstream beef pricing throughout the
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`Class Period.
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`8.
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`Other market characteristics also serve as “plus factors” supporting the inference
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`of collusion among Defendants during the Class Period. These characteristics include high
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`barriers to entry, inelastic demand, and the commodity nature of beef. Collectively, these
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`economic factors encouraged formation of the Conspiracy and continue to foster its
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`successful operation.
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`9.
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` Capitalizing on the fundamental mechanism of supply and demand operating in a
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`beef market vulnerable to successful cartel formation and operation, Defendants illegally
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`collaborated to reduce beef supplies in the United States. To do so, Defendants engaged in tactics
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`including purchasing fewer cattle than a competitive market would otherwise demand and
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`running their processing plants at less than available capacity. These practices created surpluses in
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`the cattle market and shortages in the wholesale beef market. These artificial conditions, in turn,
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`drove down the prices Defendants pay for cattle and boosted the prices Defendants command for
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`beef. The result intended and achieved by Defendants has been higher profit margins (or “meat
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`margins”).
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`10.
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`This growth of Defendants’ margins was aided by the way supply and demand
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`operate in the beef industry. The supply of cattle is insensitive to short-term price changes because
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`of the long lifecycle of livestock, livestock’s perishable nature, and the lack of any alternative use
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`for livestock. Beef demand is also relatively insensitive to price fluctuations. As a result,
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`Defendants’ margins are very responsive to changes in the aggregate volume of slaughtered cattle.
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`11. Defendants furthered the Conspiracy by routinely exchanging supply, pricing, and
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`other competitively sensitive information in several ways. One method was routinely selling beef
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`to each other. In these buyer-seller relationships, Defendants were each other’s competitors and
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`customers, thus allowing Defendants to share information that competitive businesses would
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`conceal from each other.
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`12. Another form of interaction conducive to Defendants’ collusion was frequent
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`meetings between each other’s executives and key employees. Trade association conferences and
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`other industry events offer convenient opportunities to exchange information, plans and strategies,
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`and build relationships. As described throughout this Complaint, Defendants seized these
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`opportunities to further their collusive supply restrictions.
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`13.
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`By the beginning of 2015, Defendants began exploiting these favorable market
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`conditions to launch the Conspiracy. At that time, they undertook a campaign of throttling the
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`beef supply that persists today. Publicly available industry data documents Defendants’ abrupt
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`transition from competition to collusion.
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`14.
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`Figure 1 below compares the average annual beef cattle slaughter by each
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`Defendant and the smaller, non-defendant beef producers in the market collectively before the
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`Class Period (from 2007 through 2014) to the same average during the first three years of the
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`Class Period (from 2015 through 2017, the years for which data is available).
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`Figure 1: Average Annual Commercial Slaughter of Cattle
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`15. As this graph demonstrates, each of the Defendants curtailed its annual slaughter
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`volumes during the Class Period, while the smaller beef processors collectively increased their
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`slaughter volumes during the same period (without making up the shortfall of beef created by the
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`Conspiracy).
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`16. As an immediate consequence of Defendants’ reduced supply, the beef market
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`experienced a dramatic change of price behavior. Before 2015, prices of cattle and beef
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`predictably moved in tandem. That correlation was the natural economic relationship in a
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`competitive market because beef is simply processed cattle.
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`17.
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`But at the start of the Class Period, when Defendants together began to cut
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`production, this fundamental economic relationship between cattle and beef prices abruptly
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`changed. The degree of correlation of cattle and beef prices diverged (to Defendants’ benefit)
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`without any credible innocent explanation. The relevant supply and demand factors in the
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`industry no longer explained the prices charged to direct purchasers.
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`18.
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`Starting in 2015, wholesale beef prices showed unusual trends. The per-pound
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`price of cattle had historically stayed within 20 to 40 cents of the per-pound average wholesale
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`price of beef. But in 2015, the spread between those prices increased dramatically, as Figures 2
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`and 3 demonstrate.
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`Figure 2
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`Figure 3
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`19. According to USDA Economic Research Service data, the average spread between
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`the average farm value of cattle and wholesale value of beef was substantially higher from
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`January 2015 to the present than it was in the preceding five years. From 2010 through 2014, the
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`average farm-to-wholesale spread was about $34, but from 2015 through 2018 it was about $54, a
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`59% increase.
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`20. Defendants’ ability to cut beef production while maintaining inflated beef
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`prices during the Class Period is strong circumstantial evidence of the Conspiracy. In a beef
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`market free of collusion, if a competitor reduces its purchase of cattle, other competitors
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`quickly pick up the slack to boost their sales and increase their market shares. In that
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`environment, a competitor would not cut its purchases and suffer lost sales with any hope of
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`increasing its profit margin. Only colluding meatpackers would expect to benefit by reducing
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`their purchases and slaughter of cattle. By concertedly slashing their supply output,
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`Defendants have been able to expand their profit margins, confident that none of them would
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`grab volume surrendered by another.
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`21. United by the Conspiracy, each Defendant is confident that none of the others
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`would break rank by expanding their beef production to satisfy unmet demand. Armed with
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`this assurance, Defendants steadfastly improved their meat margins by achieving and
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`sustaining an unprecedented gap between cattle and beef prices.
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`22. Aided by Defendants’ collective market power in the upstream (cattle) and
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`downstream (beef) markets, the Conspiracy allowed Defendants to steadily enlarge their
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`operating margins throughout the Class Period. By the end of 2018, the two publicly traded
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`Defendants, Tyson and JBS, were reporting record margins in their beef business. Tyson
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`reported an operating margin of nearly 7%, almost double its 2014 operating margin; JBS
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`reported a higher beef business margin of 10.2%. Given these swollen margins, it is no
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`surprise that a leading industry reporter remarked that Defendants “no longer compete against
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`each other,” enabling them to reap “gangbuster profits.”2
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`23.
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`In summary, Defendants have colluded during the Class Period to reduce supplies
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`of beef, thereby raising and fixing beef prices at levels higher than those that would have
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`prevailed had the beef market been competitive. As a direct result, Central Grocers and the Class
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`members have suffered antitrust injury by paying artificially inflated prices for beef they
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`purchased from Defendants.
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`II.
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`JURISDICTION AND VENUE
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`23.
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`Plaintiff brings this action on behalf of Central Grocers and all similarly situated
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`persons and entities under Section 16 of the Clayton Act, 15 U.S.C. § 26, to secure injunctive
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`relief and damages in excess of $5,000,000 for Defendants’ violations of Section 1 of the
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`Sherman Act, 15 U.S.C. § 1.
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`24.
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`This Court has subject matter jurisdiction under 28 U.S.C. §§ 1331, 1337 and
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`Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15(a) and 26.
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`25. Venue is proper in this District under Sections 4, 12, and 16 of the Clayton Act, 15
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`U.S.C. §§ 15, 22 and 26 and 28 U.S.C. § 1391(b), (c) and (d) because one or more Defendants
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`reside in, are found in, or have an agent or transacted business in this District, and because a
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`substantial portion of the affected interstate commerce was carried out in this District.
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`26.
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`This Court has personal jurisdiction over each of the Defendants because, among
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`other reasons, each one has (a) transacted business throughout the United States, including in this
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`District; (b) manufactured, sold, shipped, and delivered substantial quantities of beef throughout
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`the United States, including in this District; (c) had substantial contacts with the United States,
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`2 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/
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`including in this District; and (d) engaged in an antitrust conspiracy that was directed at and had a
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`direct, foreseeable, and intended effect of causing injury to the business or property of persons
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`residing in, located in, or doing business throughout the United States, including in this District.
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`27.
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`The activities of Defendants and all co-conspirators alleged in this Complaint were
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`within the flow of, were intended to, and had direct, substantial, and reasonably foreseeable
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`effects on, the foreign and interstate commerce of the United States.
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`III.
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`PARTIES
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`A.
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`28.
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`Plaintiff
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`The Trustee, Howard B. Samuels, acting solely in his capacity as Chapter 7
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`trustee for the bankruptcy estates of Central Grocers, brings this action on behalf of Central
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`Grocers. Central Grocers is a privately owned Illinois corporation with its principal place of
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`business at 2600 Haven Avenue, Joliet, Illinois 60453. Central Grocers directly purchased
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`beef that was processed and sold at prices artificially inflated by one or more of the
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`Defendants, their co-conspirators during the Class Period. Central Grocers has therefore
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`suffered antitrust injury as a direct result of the antitrust violations alleged in this Complaint.
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`B.
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`Defendants
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`29.
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`Cargill is a privately held Delaware corporation with its principal place of
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`business at 15407 McGinty Road, Wayzata, Minnesota 55391. During the Class Period,
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`Cargill sold beef in interstate commerce directly to members of the Class in the United
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`States.
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`30.
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`JBS is a Delaware corporation with its principal place of business located at 1770
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`Promontory Circle, Greeley, Colorado 80634. During the Class Period, JBS sold beef in
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`interstate commerce directly to members of the Class in the United States.
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`31.
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`Tyson is a publicly traded Delaware corporation headquartered in Springdale,
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`Arkansas. During the Class Period, Tyson sold beef in interstate commerce directly to
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`members of the Class in the United States.
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`32. National Beef is a privately owned Delaware limited liability company with its
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`principal place of business located at 12200 North Ambassador Drive, Suite 500, Kansas
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`City, Missouri 64163. National Beef sold beef in interstate commerce directly to members of
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`the Class in the United States.
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`C.
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`Co-Conspirators
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`33. Various other unknown persons, firms, and corporations, not named as
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`Defendants, have participated as co-conspirators with Defendants and have performed acts
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`and made statements in furtherance of the Conspiracy. Defendants are jointly and severally
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`liable for the acts of their co-conspirators, whether named as Defendants or not.
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`D.
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`34.
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`Reciprocal Agency of Defendants and Co-Conspirators
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`Each Defendant and co-conspirator acted by or through its officers, directors,
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`agents, employees or representatives while they were actively engaged in the management,
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`direction, control or transaction of the corporation’s business or affairs.
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`35.
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`Each Defendant and co-conspirator acted as the agent or joint-venturer of the
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`other Defendants and co-conspirators with respect to the acts, violations and common course
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`of conduct alleged by Plaintiff.
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`IV. THE STRUCTURE OF THE BEEF INDUSTRY IS HIGHLY CONDUCIVE TO
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`COLLUSION.
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`A. The Journey of Beef to Consumers.
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`Figure 4
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`36. As illustrated in Figure 4 above, the beef value chain comprises several stages.
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`First, calves are raised by their mothers for six to ten months. When they weigh about 500
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`pounds, the calves are weaned and sold to the stocker-yearling sector, where they are fed a
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`diet of forage, wheat pasture, and sileage. When a steer or heifer reaches 600–800 pounds, it
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`is sold to a feedlot where it is fed corn and protein supplements in addition to roughage.
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`37. Once cattle reach 950–1,300 pounds, they are sold as fed cattle to the beef-
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`packing stage. There, Defendants and other beef producers slaughter and process the animals
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`into edible boxed beef and smaller case-ready consumer cuts. A steer weighing 1,000 pounds
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`typically yields about 450 pounds of edible beef.
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`38.
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`Cattle are sold to beef processors through two channels. About 70% of cattle
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`are sold through supply contracts, known in the industry as captive-cattle agreements, with
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`feedlots or, to a lesser extent, ranching operations. The rest of the cattle are sold on the spot
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`market, which is typically the benchmark for prices under the captive-cattle agreements.
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`Because Defendants and other beef producers ordinarily have a steady supply of cattle
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`through these agreements, they are not forced to buy in the spot market. This affords them
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`power to suppress the price of captive cattle and cattle purchased in the spot market.
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`39. Next, Defendants and other meatpackers sell the boxed beef and cuts in the
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`wholesale market to businesses like Central Grocers, who distribute the beef to retailers, or
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`directly to grocery chains, restaurants, and other large retailers.
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`B.
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`40.
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`Numerous Factors in the Beef Meatpacking Industry Are Conducive to
`Conspiracies.
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`The beef meatpacking industry bears all of the characteristics of a highly
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`cartelized market: (1) producer concentration; (2) high barriers to entry; (3) commodity
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`product; and (4) inelastic demand. These characteristics supported Defendants’ collusion to
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`constrain the number of cattle entering the supply chain, throttle the volume of processed
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`beef they sold, raise and fix the wholesale price of beef, and maximize Defendants’ margins.
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`1.
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`The Beef Market Is Highly Concentrated.
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`41. Market concentration facilitates collusion. Conspiracies are easier to organize and
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`sustain when just a few firms collectively control a large share of the market. Practical matters,
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`such as coordinating cartel meetings and exchanging information, are much simpler with a small
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`number of players. A high degree of control simplifies coordination because little outside
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`competitive presence exists to undermine the cartel, and cartel participants can more easily
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`monitor each other’s actions related to supply and pricing. Moreover, in a highly concentrated
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`market, higher, long-term profits secured by the cartel’s artificially elevated prices outweigh
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`transitory gains in profits and market share that producers might achieved by undercutting their
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`cartel price.
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`42.
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`The beef industry experienced significant consolidation leading up to and during
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`the Class Period. In 2001, Tyson purchased IBP, Inc., then the nation’s largest beef packer. In
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`2002, Cargill purchased Taylor Packing Co. In 2007 and 2008, JBS acquired Swift & Co. and
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`Smithfield Beef Group, Inc., respectively, the third- and fifth-largest U.S. beef packers.
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`43.
`Through these purchases, Defendants collectively controlled about 81–85% of the
`cattle slaughter market throughout the Class Period, while the next largest meatpacker had only a
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`2–3% market share. Defendants’ control of the market enabled the Conspiracy to launch in 2015
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`and prosper since.
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`44.
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`2.
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`The Market Has High Barriers to Entry.
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`Barriers to entry are obstacles that prevent new competitors from easily entering a
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`market. They restrict competition in a market and may make it easier for incumbents to collude.
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`45.
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`A collusive arrangement that raises product prices above competitive levels would,
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`under basic economic principles, attract new entrants seeking to benefit from the profits to be
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`reaped from supra-competitive pricing. But where significant barriers to entry exist, new entrants
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`are less likely to enter the market. Thus, barriers to entry help to facilitate the formation and
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`maintenance of a cartel.
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`46.
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`Barriers to entry kept would-be competitors out of the beef-packing industry. The
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`construction of a large packing plant requires an investment of at least $250 million. It normally
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`takes two years or longer to obtain the necessary permits and plan, design, and build the facility.
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`And new entrants must also comply with numerous regulations, recruit and train a large
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`workforce, and develop and execute a successful marketing plan.
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`47.
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`These barriers have caused new entrants to file for bankruptcy shortly after
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`attempting to enter the market. These casualties include substantial enterprises such as Northern
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`Beef Packers, LP, and Sam Kane Beef Processing, LLC.3 Relative insulation from the threat of
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`new competitors has enabled Defendants to maintain the Conspiracy with impunity.
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`3.
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`Beef is a Commodity Product.
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`48.
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`A commodity is a basic item or good used in commerce that is interchangeable
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`with other goods of the same type. Commodities are most often used as inputs in the production
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`of other goods or services.
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`49.
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`Beef is a commodity. For example, beef roasts from Tyson and Cargill are
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`virtually indistinguishable and have nearly identical nutritional content. The USDA recognizes
`boxed beef as a commodity, and posts daily boxed beef prices. Options and futures for the
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`cattle from which boxed beef is produced are traded as commodities on the Chicago
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`Mercantile Exchange.
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`50. Markets for commodity products are susceptible to for collusion. Demand for a
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`commodity depends primarily, if not exclusively, on price, as opposed to other attributes such as
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`3 Northern Beef Packers LP filed under Chapter 11 in July 2013 and ceased operations
`before selling off its assets in December of that year. “Northern Beef Packers sold to White Oak
`for $44.3 million,” The National Provisioner, Dec. 9, 2013. Sam Kane Beef Processing filed under
`Chapter 11 in January 2019 and was acquired by STX Beef Co. in February. “Kane Beef plant sale
`closes, new owner pledges to restart operations,” Daily Adviser, Mar. 1, 2019.
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`product quality or customer service. As a result, cartel members can more easily monitor
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`compliance and detect defectors. Any observed prices discrepancies for commodities are more
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`likely to expose cheating, because they can’t as readily be attributed to other factors, such as
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`special product features, quality, reliability and durability, or other terms of a transaction.
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`4.
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`The Demand for Beef Is Inelastic.
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`51.
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`“Price elasticity” is a term used to describe the sensitivity of supplier or consumers
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`to changes in the price of a good or service. For example, demand is said to be inelastic if an
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`increase in the price of a product results in only a small decline in the quantity sold of that
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`product, if any. Under conditions of inelastic demand, customers have nowhere to turn for
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`alternative, cheaper products of similar quality and continue to purchase despite a price increase.
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`52.
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`For a cartel to profit from raising prices above competitive levels, demand must be
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`relatively inelastic at competitive prices. Otherwise, increased prices would result in declining
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`sales, revenues, and profits, as customers purchased substitute products or declined to buy
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`altogether. Inelastic demand is a market characteristic that facilitates collusion, allowing
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`producers to raise their prices without triggering customer substitution and lost sales revenue.
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`53.
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`Beef demand is relatively insensitive to price changes. According to a recent
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`study of beef demand, industry total revenue increases when prices rise because they have
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`little effect on the volume purchased. The same study concluded that the relative impact of
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`pork and chicken prices on beef demand is economically small. Therefore, supracompetitive
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`prices to Defendants’ direct purchasers do not significantly reduce beef sales or lead
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`purchasers to seek protein from other meat sources.
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`V.
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`DEFENDANTS’ ANTITRUST VIOLATIONS
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`54.
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`By the beginning of 2015, Defendants were forced to confront shrinking
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`profit margins for their beef sales. The earnings calls of the two publicly traded Defendants,
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`CASE 0:20-cv-01319-NEB-KMM Document 1 Filed 06/06/20 Page 18 of 53
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`Tyson and JBS, reported the slumping profitability of their beef operations. In a November 7,
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`2014, earnings call, Tyson reported a quarterly operating margin that was less than half the
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`margin enjoyed by its poultry division. A week later, on a November 13, 2014, earnings call,
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`JBS also announced a badly underperforming beef segment. Its quarterly margin reached only
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`about a third of its pork segment’s margin.
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`55.
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`Rather than act independently in their individual business interests to restore
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`profitability, Defendants agreed to collectively reduce their purchases of fed cattle and slow
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`beef production to the downstream market, including direct purchasers. The consequent beef
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`shortage ushered in a new era of supra-competitive prices paid by Central Grocers and other
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`direct purchasers in the wholesale beef market.
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`Direct Evidence of the Conspiracy.
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`A.
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`56. According to Witness 1, Defendants periodically agreed to reduce their
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`slaughter volumes, resulting in wholesale prices above competitive levels.
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`57. Witness 1 is a former employee of one of the Defendants (“Defendant 1”). He
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`worked for this Defendant as quality assurance officer (“QA”) at its slaughter plants in the
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`Texas Panhandle/Western Kansas region for over ten years until his employment ended in
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`2018.
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`58. During the Class Period, Witness 1 acted as a head QA with primary
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`responsibility for plant kill floor, hotboxes, and coolers. The kill floor is where cattle are
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`slaughtered and dressed—i.e., the head, hide, and internal organs are removed. The
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`carcasses are then moved to the hotboxes to cool down before being stored in the coolers
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`ahead of fabrication, where they are broken down into smaller cuts.
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`59. Witness 1 learned of Defendants’ agreement to reduce cattle slaughter from
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`Slaughter Plant 1’s fabrication manager who knew about Defendants’ conspiracy.
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`CASE 0:20-cv-01319-NEB-KMM Document 1 Filed 06/06/20 Page 19 of 53
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`60. During multiple discussions at Slaughter Plant 1 during the Class period, the
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`fabrication manager explained to Witness 1 that all of the Defendants had agreed to reduce
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`their purchase of fed cattle and slaughter volume. In particular, the fabrication manager, during
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`one conversation, even described Defendants’ arrangement as an agreement to reduce their
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`purchase and slaughter volumes.
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`61.
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`Even more specifically, Witness 1 was once in the fabrication manager’s
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`office when the fabrication manager received an angry phone call from the manager’s
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`immediate supervisor who worked at Defendant 1’s central office.
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`62. After the call, Witness 1 asked the fabrication manager how many head of
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`cattle Slaughter Plant 1 would be cutting—i.e., fabricating—that day. The fabrication
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`manager explained that the cut was going to be steady that day but that the number of cattle
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`kills would be reduced because the cattle price was getting too high.
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`63. Witness 1 then asked the fabrication manager whether the number of kills was
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`also being reduced in other Defendants’ plants. He answered Witness 1’s question in words
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`close to the following: “Yes, they are. We have had that agreement that we don’t kill while
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`prices are up for a while.”
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`64. Witness 1 remembers that the fabrication manager used the word “agreement”
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`in his answer and that he was referring to all of Defendants’ plants in the Panhandle
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`Region—in particular, Tyson’s in Amarillo, Texas; JBS’s in Cactus, Texas; Cargill’s in
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`Friona, Texas; and National Beef’s in Liberal, Kansas. Each of these plants provides at least
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`20% of each Defendant’s cattle slaughter capacity.
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`65. According to Witness 1, the fabrication manager had first-hand knowledge of
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`Defendants’ anticompetitive agreement. He had been fabrication manager at Slaughter Plant
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`1 for over 15 years. As fabrication manager, he needed knowledge of Defendant 1’s cattle
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`CASE 0:20-cv-01319-NEB-KMM Document 1 Filed 06/06/20 Page 20 of 53
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`buying, cattle slaughter, and beef-sales operations. In performing his duties for Defendant 1,
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`the fabrication manager regularly interacts with personnel involved in all aspects of
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`Defendant 1’s beef business, thus allowing him access to Defendants’ conspiratorial
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`conversations.
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`66. According to Witness 1, the fabrication manager, before working for
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`Defendant 1, worked for several years for another Defendant (“Defendant 2”). While at
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`Defendant 2, the fabrication manager was the head of fabrication for Defendant 2’s
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`slaughter plant in the Panhandle Region (“Slaughter Plant 2”).
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`67.
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`The fabrication