Taking On Tyson

Pat Goggins can't believe it. As a lead plaintiff in Pickett v. IBP, the Billings, MT, cattleman is astounded that a judge could so badly mismanage a trial and that an appellate court could so badly miss a case's point. In August, a three-judge panel from Atlanta's 11th U.S. Circuit Court of Appeals issued its ruling in Pickett v. IBP an appeal that asked for reinstatement of the case's 2004 district

Pat Goggins can't believe it. As a lead plaintiff in Pickett v. IBP, the Billings, MT, cattleman is astounded that a judge could so badly mismanage a trial and that an appellate court could so badly miss a case's point.

In August, a three-judge panel from Atlanta's 11th U.S. Circuit Court of Appeals issued its ruling in Pickett v. IBP — an appeal that asked for reinstatement of the case's 2004 district court jury decision. The jury originally found that Tyson's (formerly IBP's) procurement methods damaged nationwide cash cattle prices over an eight-year period. The jury subsequently ordered Tyson to return $1.28 billion to “a class” of the nation's cattle producers it believed was harmed.

Following the jury verdict, however, U.S. District Court Judge Lyle Strom, on a set of technicalities, granted Tyson's motion for “judgment as a matter of law” and entered final judgment in Tyson's favor. The ruling prompted the appeal to the 11th Circuit Court, which to the plaintiffs' chagrin unanimously affirmed Strom's decision.

“The Court missed the point by a country mile,” Goggins says after the latest turn in the now decade-old case. “It was clearly shown that marketing agreements and captive supplies take the competition right out of the fed-cattle business.”

He says the decision paves the way for a company like Tyson to use marketing agreements and captive supplies to illegally stake out its economic territory and drive independent ranchers and feeders out of business. Goggins says the only economic hope for the average cattle rancher is a climate of open market competition.

“The packers and their affiliates — the large, large cattle feeders — are all in the buggy together,” he says. “They want to take competitiveness in the markets away from the average cowman. It's scary. It sends chills up and down my spine.”

Beyond the effects of the decision at hand, though, Goggins worries there was a precedent set in this case — a precedent that could rock the underpinnings of our nation's judicial system.Goggins notes the 7th Amendment to the U.S. Constitution says, “In suits at common law, where the value in controversy shall exceed $20, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise re-examined in any court of the United States, than according to the rules of the common law.”

“This ruling sends a dangerous signal that a presiding judge in a federal case can throw out a jury's ruling,” Goggins explains. “Are we, in one fell swoop, not only going to wipe out competition in the marketplace, but wash out our jury system and go to a Fascist-style judicial system that eliminates the right to a trial before our peers?”

Adding insult to injury, the Circuit Court panel last month unanimously supported another district court decision ordering Goggins and the other plaintiffs to pay Tyson more than $70,000 in expenses related to the Montgomery trial.

The history of Pickett

Goggins' involvement in Pickett goes back to Day One of the case. In what's been hailed as the cattle industry's biggest trial in more than a century, Montgomery, AL, cattleman Henry Lee Pickett launched a lawsuit (originally filed against IBP) representing cattle producers who sell their fed cattle to meat-packing plants on the cash market. The suit, brought under the Packers and Stockyards Act (PSA), claimed Tyson used unfair and anticompetitive marketing agreements to deflate cash fed-cattle prices — and the market as a whole — in order to reap the benefits of lower prices.

The aim was to stop Tyson from using marketing agreements forever — and to recover losses incurred from resulting lower cash market prices.

In February 2004, after a four-week trial, a Montgomery jury found Tyson illegally used captive supplies to manipulate cattle markets and drive down prices. The jury found Tyson liable for $1.28 billion in damages incurred from February 1994 through October 2002.

Following the verdict, Tyson's counsel asked Strom to set aside the jury's decision. The following April, Strom did so — ruling the plaintiffs' proof of damages wasn't sufficient and they couldn't disprove Tyson's claimed justifications for use of captive supplies or long-term contracts to acquire cattle.

While observing Pickett had presented “a very thin case,” Strom said there was no proof sellers of cattle in 1999 and 2000 were harmed. He said if the evidence the plaintiff presented at trial is insufficient for the jury to reasonably return a verdict for the plaintiff, “the defendant is entitled to judgment regardless of whether the jury did return a verdict.”

Strom also worried about how damages would be distributed and how the members of the class would be defined.

“No matter what verdict this jury comes back with, I'm not going to enter a judgment on that number if they bring one in because what we're talking about here includes people who are not members of the class,” Strom wrote in his ruling. His point was that the amount of reduction in the cash market price of cattle was too broad a measure of damages because it included those who sold some cattle outside the cash market.

Attorneys for Pickett immediately filed for an appeal claiming the jury, in fact, did base its decision on a reasonable review of the evidence. They argued that where the harm of captive supply outweighs any claimed benefits, the court should find the practice unlawful.

The Circuit Court felt there was evidence at trial to support the jury's finding that the use of marketing agreements resulted in lower prices for cattle both on the cash market and the market as a whole, but the plaintiffs couldn't prove Tyson was at fault.

And the Court agreed with Tyson's position that Pickett must establish more than that the use of marketing agreements have decreased cattle prices. “He must establish that their use has adversely affected competition,” the Court said.

“Unromantic” markets

Goggins isn't buying any of it and says there's no way a court panel can, in an hour-long hearing, grasp the enormity of the issues in a six-week long case.

“It's terribly unfair the Court was so one-sided and very discouraging to cattlemen across America,” he says. “They didn't hear the witnesses or the arguments. They didn't even consider testimony of the plaintiffs.”

The Circuit Court counters in its subsequent ruling on trial costs that, although it took a long time to try, “the case was not especially complicated,” nor the legal issues “particularly novel or difficult.”

In its 33-page ruling, the Court consistently maintains the PSA exists solely to prevent unfair marketing practices, price fixing, manipulation and monopolization.

In two classic statements, the panel maintains, “The PSA was enacted to ensure the market worked, and markets are notoriously unromantic… While talk about the independence of cattle farmers has emotional appeal, the PSA was not enacted to protect the independence of producers from market forces.”

In issuing the ruling, the Court also claims the jury may have been swayed more by emotion than the evidence relating to competition and markets. And the panel referred directly to opening remarks made by the plaintiff's lead counsel, David Domina, Omaha, NE.

“We're talking here about a part of America's economy that is perhaps in some ways the most romanticized part,” Domina said. “And over the years, the one thing the cattle business has stood for during the growth and the development of our country has been independence, fierce independence, meaningful and forceful independence.”

The price of independence

Goggins thinks the Court's insinuation that Domina unduly influenced the Strom jury with his passion rings of “blasphemy” to independent cattlemen.

“How can passion be a bad thing?” Goggins asks. “Domina did a masterful job — he had them nailed.”

Still, the Court implies, passion aside, that some cattlemen place a higher premium on economic independence than others. It granted that with marketing agreements, producers do lose some independence because meat packers dictate delivery date and adjust the price to cattle's actual yield.

“Some producers find the advantages of marketing agreements worth any loss of independence; it was, after all, producers who came up with the idea of marketing agreements,” the Court says. “Other producers, like Pickett, place a higher premium on independence and prefer the cash market.”

The Circuit Court contends another district court got it right in Griffin v. Smithfield Food Inc., when pork producers argued against pork packers' procurement methods. Producers who didn't want to sell their hogs through marketing agreements sued under the PSA, contending the packer's conduct was unfair and manipulated or controlled prices.

In that case, however, the District Court ruled, “The [producers'] evidence demonstrates economic developments in their industry have overtaken them; their evidence does not demonstrate their economic woes were caused by any actionable wrongdoing of Smithfield under the PSA or any other theory.”

“Exactly the same is true here,” the 11th Circuit Court panel says. “Pickett and his fellow class members could have entered into marketing agreements with Tyson.”

The Court further explains that producers, in their economic pursuits, are “entitled to their marketing preferences, but they're not entitled to force those preferences on others and on the packers.”

Goggins allows that packers need to manage their cattle supplies; and he points out he's not asking that packers be forbidden to use forward contacts for procurement.

“If they want to forward contract with your feedlot, establish a price they'll give when the cattle are delivered and give a down payment — beautiful,” he says. “It's open, above board — it's competitive.”

The fear factor

Now, the obvious question Goggins is trying to answer is, “What's next?” He says the $1.28 billion is not the issue.

“We were never in this fight for the money,” he says on behalf of the Pickett plaintiffs. “All we're trying to do is get the packer out of the marketing business so the average rancher can get a fair shake.”

Domina agrees the plaintiffs have suffered a crucial setback, but it doesn't mean the case is over.

“We expect to ask for review by the entire 11th Circuit and the U.S. Supreme Court,” he explains. “Certainly, the three-judge panel's decision is a major disappointment. I'm especially disappointed with this ruling in view of the attentive efforts of the jury.”

Beyond the courtroom, he and others are pinning some hope on a proposal introduced in Congress (S. 960, “Captive Supply Reform Act)” by Sen. Mike Enzi (R-WY). S. 960 would amend the PSA with respect to producer-packer forward contracts. The bill, referred to the Senate Committee on Agriculture, Nutrition, and Forestry, would:

  • require the inclusion of fixed dollar amount base pricing and public bidding;

  • prohibit formula pricing;

  • limit individual contract size; and

  • exclude from the definition of “formula price,” futures-based prices and base adjustments resulting from factors outside packer control.

Goggins isn't holding his breath. He says the clock is ticking for the future of independent cattlemen — and 1,200 cattle auctions across the country.

“If packers are allowed to run amok, they'll ruin our industry as we know it,” Goggins says. “Without competition, the fear factor takes over; and baby, do the packers know how to create fear.”

To view the entire opinion from the 11th Circuit Court of Appeals, go to www.ca11.uscourts.gov/opinions/weekops.php.