Both sides predict long road

February 26, 2004

By David Bowser

Livestock Weekly

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Montgomery, Alabama - Tears streamed down Henry Lee Pickett's face as U.S. District Judge Harold Albritton read the jury's verdict.

Pickett was the only one of the six cattlemen suing IBP, now Tyson Fresh Meats, present in the courtroom last week when the jury returned its verdict in the class-action lawsuit here. The others had gone home at the end of the jury's first week of deliberations.

U.S. Senior District Judge Lyle Strom, who heard the case, was presiding over another proceeding in Omaha, Neb.

Pickett stood at the plaintiffs' table with his lawyers, David Domina of Omaha, Nebraska, and Randy Beard of Guntersville, Alabama, as one by one, the judge ticked off the jury's unanimous answers to the questions they had been presented.

In 1996, 10 cattlemen filed suit against IBP, accusing the world's largest packer of using captive supplies -- cattle committed to IBP more than seven days prior to slaughter without a negotiated price -- to manipulate the cash cattle market in violation of the Packers and Stockyards Act of 1921. That number was later winnowed to six, but in 2001, the suit was granted class action status to include anyone who sold cattle to IBP in the cash market from February 1, 1994, to October 31, 2002.

One by one, Judge Albritton read the jury's answers from their verdict form.

"Is there a nationwide market for fed cattle?"

"Yes."

"Did the defendant's use of captive supply have an anticompetitive effect on the cash cattle market for fed cattle?"

"Yes."

"Did the defendant lack a legitimate business reason or competitive justification for using captive supply?"

"Yes."

"Did the defendant's use of captive supply proximately cause the cash market price to be lower than it otherwise would have been?"

"Yes."

"Did the defendant's use of captive supply injure each and every member of the plaintiff's class?"

"Yes."

Under the judge's instructions to the jury, if they answered each of the five questions in the affirmative, then they were to proceed to questions six and seven on the second page of the verdict form.

"What amount, if any, do you find that the defendant's use of captive supply damaged the cash market price of fed cattle sold to IBP during the period from February 1, 1994, through Oct. 31, 2002?"

The jury's answer: $1,281,690,000.

"Did the defendant's use of captive supply depress the cash market price for fed cattle purchased by IBP by an equal percentage for each year of the class period?"

"No."

The answer to the last question was no, said Michael Stumo, counsel for the Organization for Competitive Markets, which had supported the lawsuit, because it wasn't equal every year.

"Their captive supplies kept going up," Stumo explained.

He termed it a good day for the members of the organization he represents.

"It was the greatest day for the independent American cattleman for a long time," Chris Abbott, one of the plaintiffs in the case, said from his home in Hyannis, Nebraska. "I tell you, it was a great victory."

Abbott said the verdict was a major step in pulling an anti-trust law out of its grave and up on the table for the judicial system to take a hard look at.

Contacted at home, Mike Callicrate, a St. Francis, Kansas, cattle feeder and another of the cattlemen who sued IBP, said he was delighted with the verdict.

"We got what we wanted," Callicrate said. "It turned out really well. I'm so happy I can't stand it."

He admitted, however, that there is still work to do. Although the jury returned a verdict, the next phase of the case will be arguments before the judge concerning injunctive relief. The cattlemen want a ban on captive supplies.

"The judge is going to have to decide what our industry is going to look like," Callicrate said. "He's going to have to decide what we're going to do about captive supplies, and we're going to have to involve these other packers."

Domina has already filed suit against Excel and Swift. Those suits are pending.

"I think they're going to be in a position now to come to the table," Callicrate said. "Let's not make it another eight years. Let's go ahead and get this thing settled. Let's get all the packers back in a competitive market, and get it over with."

In addition, Callicrate argues that having three big packers in the industry is not going to restore competition.

"I would say that, before we get to the end," Callicrate continued, "we're going to have to break them up and probably have a whole lot of new entries into this marketplace. This thing is so big. It is so concentrated with Wal-Mart at the top [which] depends upon big meat packers to do stuff cheap, do it on a large national scale. It's going to be very interesting to see how it all falls out."

Callicrate said the jury apparently decided early on that the cattlemen should prevail in the case.

"Then they were just basically looking for the evidence to support that," Callicrate said.

Callicrate said jury foreman Kyle Glover, a football coach, told the cattlemen's lawyers that the reason the damages were reduced was because of the two years during which Auburn University professor Robert Taylor said the effects were masked by the ramping up of joint venture cattle. Taylor had estimated the damages to cattlemen at $2 billion.

The jurors resumed deliberations about 8:30 a.m. last Tuesday, a week to the day from when they started. About 9:30 a.m., they announced that they had a question.

"It took about an hour to get Judge Strom off the bench in Omaha," Domina said. "He had just started a criminal sentencing there, so he had to finish it."

Judge Albritton of the Middle District of Alabama came to the courtroom for Strom. They got Strom on the phone.

"We discussed the question," Domina said.

Within four or five minutes of receiving the answer, the jury returned a verdict.

"The verdict has been filed," Domina said, "and judgment will be entered -- not immediately, but soon. Then we'll start with the usual round of post-trial motions and importantly, will go to work on the question of what the injunction should look like."

A court date hasn't been set for the injunction hearing, but it is expected to be several months away.

"We'll have to make a decision about whether to ask for a temporary injunction that involves all of the packers," Domina said. "That decision is not yet made."

In the meantime, Domina said he expects a flurry of post-trial motions.

Thomas C. Green, lead attorney for IBP, contended there are a lot of problems with the jury's decision.

"In my view, it's incompatible and inconsistent with the evidence," Green said. "I suspect that there will be a lot more to say about this verdict before it's all over."

IBP's lawyers were expected to file a motion this week to have the jury verdict set aside as a matter of law. The cattlemen's attorneys will have 10 days to reply before Strom rules on the motion.

The cattlemen's lawyers are now working on the injunction that could change the way fed cattle are marketed in this country.

"That will be the next major issue," Domina said. "Tyson, and I should think the other two major packers, now know that use of captive supplies has been declared unlawful by a jury. The jury specifically responded to questions finding [that] that is so."

The different packers, Domina said, are on notice that if they continue to use contract cattle, they're doing it at their risk.

"The injunction proceeding will be a separate major trial event," Domina said. "The evidence will be different there because the focus will not be on liability -- did they violate the law -- but the focus will be on how should the market be changed."

"I haven't hit the ground yet," said Sam Britt, one of the original 10 plaintiffs in the case. "I'm still in a daze."

Speaking from his ranch west of Clayton, New Mexico, Britt indicated that he was surprised by the verdict.

"I wouldn't have given you two cents for our chances," Britt said, "but my wife kept saying, 'Just keep praying.'"

Britt said he thought Judge Strom was awfully tough on the cattlemen.

Domina's wife, Carol, who spent the trial seated behind her husband and taking notes, said she's pleased that the little guy gets a chance again.

"That's what she wanted," Domina said. "That's what we both wanted. We both feel really good about it."

"It was a great day," Carol Domina concurred. "Before the jury came in, of course, it was tense. We were cautiously optimistic, and the last the question the jury asked led us to believe they were moving in our favor."

Lee Pickett's young son Blake was in court the day of closing arguments, Mrs. Domina said.

"He was so hurt by what Mr. Green said about his father that he became ill last week and couldn't go to school," she added. "Lee said, 'I wanted this for the cattlemen, but I wanted this today for my son.'"

After the verdict had been announced, Carol Domina and Lee Pickett walked out into the hall outside the courtroom as the jury left. Some jurors smiled as they went by, Mrs. Domina said.

As the jury foreman, Kyle Glover, and another juror walked by, Mrs. Domina said, "Thank you."

"Don't thank us," Glover said. "We just did our job and did what was right."

Three of the female jurors told Domina that they just knew they had to stand up for what was right for the small person, and if they didn't do it, maybe it would never happen.

"That was really an affirmation to hear that they really did understand what it was truly about," Mrs. Domina said.

The case was the result of some angry cattlemen, recalled Britt, and was apparently touched off by a letter sent out by Stayton C. Weldon of Cuero, Texas, and published in Livestock Weekly almost a decade ago, complaining about poor market conditions and the concentration of the packers.

Weldon's letter was answered by Britt and several others who decided to get together one sale day in Amarillo to discuss the issue.

"I held the original meeting there in Amarillo at the Ambassador Hotel in April of 1996," Britt recalled.

Britt had a friend, Paul Horton, from Hollis, Oklahoma, who put him in touch with Randy Beard, an Alabama attorney who has a place north of Childress, Texas, on the Oklahoma state line.

"We had a big meeting," Britt said. "I imagine there were 200 to 300 people there."

At that time, Britt noted, fed cattle were bringing just 55 cents.

"Everybody was literally going broke," Britt said. "Except, of course, the packer."

Britt invited Beard and a friend of Beard's, Steve Griffith, another Alabama lawyer.

"We were trying to fix the problem," Britt said.

In addition to the big meeting, Britt said they held several smaller meetings.

"We were there for a couple of days," he remembered.

After attending a number of the meetings, Beard said he'd take the case on a contingency.

"I said 'You're hired,'" Britt said.

That's when they formed the Cattlemen's Legal Fund, so they could accept contributions and help defray expenses.

"We didn't raise much money," Britt said, "but it gave people a chance to participate if they wanted to."

Britt said he got involved in the case after talking with a poultry producer at a racetrack in Hot Springs, Ark.

"This guy was sitting in the box next to me," Britt said. "He was a chicken man, and he said, 'You'd better be on your toes.' I asked him what he meant. He said, 'These big corporates will take you over.' He said, 'They've taken the chickens. They're working on the hogs. Then, they'll come after you.'"

"A few of us cowboys didn't want to get put in the chicken house," Britt said.

(Editor's note: NCBA lobbyist Chandler Keys made that organization's position clear in a post-verdict interview with BEEF magazine when he dismissed the decision as the result of "a lot of emotion and predisposition among the jury." Lest there be any doubt of NCBA's displeasure, Keys was quoted as saying, "If you're out there involved or trying to get involved in a value-based marketing system, the plaintiffs in this case are trying to take that opportunity away from you. They want to get the industry back to a commodity-based product." What form injunctive relief might take -- assuming there is any -- remains to be seen, but it appears highly presumptive to us at this point to contend that competitive bidding in and of itself would preclude "value-based marketing." In the "bad old days" of cash trading, packers simply paid more money for better cattle; prices routinely varied by several dollars per hundredweight between pens. It stands to reason they could brush off that dusty old skill again. We doubt that today's buyers are uniformly unable to recognize good cattle, but if they are, a grid system utilizing post-mortem measurements would take the guesswork out of the job. Reasonable rules could simply require that feeders be allowed to dicker over base prices and grid terms. Packers could still reward their more compliant customers with special treatment if they chose; the difference is that everyone would know it. The only casualty would be secrecy and the opportunity for collusion, and what honest party would be harmed by that?)

Copyright 2003 Livestock Weekly

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