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Cohen Milstein Files Class Action Against Major Egg Producers for Conspiring to Fix Prices

PHILADELPHIA-(Business Wire)-September 26, 2008 - Cohen, Milstein, Hausfeld & Toll, P.L.L.C. filed a class action lawsuit late yesterday against three egg trade groups and thirteen of the country’s largest egg producers, alleging that these entities unlawfully conspired to fix the prices of shell eggs and egg products in violation of antitrust laws. The lawsuit was filed in United States District Court for the Eastern District of Pennsylvania against United Egg Producers, Inc. (“UEP”); United Egg Association (“UEA”); United States Egg Marketers, Inc. (“USEM”); Cal-Maine Foods, Inc.; Hillandale Farms of PA., Inc.; Daybreak Foods, Inc.; Golden Oval Eggs, LLC; Michael Foods, Inc.; Michael Foods Egg Products Co.; Midwest Poultry Services, L.P; Moark LLC; Norco Ranch, Inc.; National Food; NuCal Foods, Inc.; Rose Acre Farms, Inc.; and Pilgrim’s Pride Corp.

The 71-page legal complaint alleges that the defendants have engaged in an unlawful scheme to artificially fix and inflate prices through restricting the supply of eggs. The cartel’s horizontal agreement to reduce output has dramatically increased costs for purchasers of shell eggs and egg products and driven prices to historic highs throughout 2007 and 2008. Meanwhile, during this same time period, the main perpetrators of the scheme have enjoyed record profits.

The lawsuit alleges that the conspiracy has been undertaken primarily through a near industry-wide agreement to reduce the number of laying hens (and thus, eggs) at various egg farms. A key component of this program was to marginally increase cage space for laying hens under the auspices of animal husbandry. However, as detailed in numerous internal industry documents, the true goal of the program was to act as a “roadmap” for an illegal supply restriction scheme. As fewer hens were kept per cage, UEP and its members agreed not to replace the lost chickens by adding more cages or increasing capacity. As a result, egg supplies began to drop and prices soared in 2007 to the present.

Furthermore, cartel members agreed to manipulate molting practices and to cull chickens sooner (but not replace them) once their egg production had started to decline. The conspirators also implemented several below-cost export schemes to deflate supply and raise domestic prices.

The lawsuit is based on a six month investigation of internal newsletters, documents, and industry statements - many of which have never been released to the public. It also follows recent pronouncements that the U.S. Department of Justice has been investigating price collusion by at least three of the defendants in the lawsuit: Michael Foods Inc.; Golden Oval Eggs LLC; and Moark LLC. All three companies issued statements indicating that they are cooperating with federal authorities.

“After an intensive investigation with numerous confidential sources, we learned that the industry was using animal welfare as a pretext for a naked price fixing scheme and attempting to reduce the output of eggs,” said Michael Lehmann, a partner at Cohen Milstein who is representing the plaintiffs. “As a result of the industry’s scheme, in 2008 alone, wholesale egg prices averaged 40% higher than last year. Through this lawsuit, we intend to recover the overcharges that direct purchasers were forced to spend.”

Cohen, Milstein, Hausfeld & Toll, P.L.L.C. (Washington, D.C.) has represented individuals, small businesses, institutional investors, and employees in many of the major class action cases litigated in the U.S. for violations of antitrust, securities, environmental, consumer protection, civil rights/discrimination, ERISA and human rights laws.

Copies of the complaint and related materials are available at www.cmht.com.

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