• Fifth Circuit Ruling on Challenged Practices among Poultry Growers Creates Circuit Split
  • August 9, 2008 | Authors: Richard A. Duncan; Jacob D. Bylund
  • Law Firms: Faegre & Benson LLP - Minneapolis Office; Faegre & Benson LLP - Des Moines Office
  • In a surprising decision, the U.S. Court of Appeals for the Fifth Circuit ruled on July 21 that a grower-plaintiff alleging a violation of the Packers & Stockyards Act of 1921's (PSA) prohibitions against "unfair, unjustly discriminatory, or deceptive practice[s]" and "undue or unreasonable preferences or advantages" among growers (7 U.S.C. Section 192(a)-(b)) need not show that the challenged practice has any adverse effect on competition. In so holding, the Fifth Circuit (covering the states of Texas, Louisiana and Mississippi) acknowledged that it was creating a circuit split with all five of the other circuit courts of appeal which have addressed this issue.

    The PSA has long been viewed as Congress's response to concerns over monopolistic practices in the meatpacking industry, and complementary to the more generally applicable antitrust laws that preceded it, the 1890 Sherman Act and the 1914 Clayton Act. Because of that background, other circuit courts have applied general antitrust principles requiring plaintiffs to show an adverse effect on competition from challenged practices (outside of a narrow realm of per se illegal conduct such as horizontal price fixing).

    The Fifth Circuit, in a majority opinion by the generally conservative jurist Emilio Garza, declined to read a requirement of anti-competitive impact into the plain language of Section 192(a)-(b), and reinstated poultry growers' complaint that Pilgrim's Pride Corp. was offering better terms to its grower-owner than it offered them. The court held that because other sections of the PSA prohibiting schemes to control prices or create a monopoly did contain an explicit requirement that such conduct be found to "restrain[] commerce," the lack of such language in Section 192(a)-(b) showed Congress's intent not to have anti-competitive effect be a prerequisite for a claim under them. The Fifth Circuit criticized its sister circuits for relying on congressional reports and policy considerations that it regarded as creating "more confusion than clarity," and relied on what it considered to be a plain reading of the statutory language. However, the "plain language" of the antitrust laws, notably the Sherman Act's broad proscription against "contracts . . . in restraint of trade," has long been held by the Supreme Court and lower courts to require a gloss of adverse market impacts in order to meet the statutes' public policy purposes.

    One circuit judge filed a dissenting opinion, so a rehearing by the full Fifth Circuit may occur. Otherwise, look for a cert. petition to be granted on this case, as the Supreme Court has regularly adjudicated circuit splits in the antitrust field in recent years.