LITTLE ROCK — Pilgrim’s Pride Corp., the poultry giant in Greeley, Colo., “will appeal accordingly” a $25.8 million court decision that favors a group of poultry growers mostly from south central Arkansas, the chief executive officer said Monday. “We’re disappointed in the court’s findings,” Bill Lovette, Pilgrim’s CEO, wrote in an e-mailed statement referring to Friday’s decision from the U.S. District Court of Eastern Texas.
The poultry firm’s decision in 2009 to shutter an El Dorado processing plant had been “done for the purpose of manipulating or controlling the price of chicken,” the court said, which was a violation of a certain section of the Packer’s and Stockyards Act — legislation that discourages anti-competitive practices between packers and producers and consumers.
Pilgrim’s controlled about a quarter of the national market for all chicken at the time, partially a result of the $1.1 billion hostile takeover of Gold Kist of Atlanta in 2006.
The judgment issued by U.S. Magistrate Judge Charles Everingham IV affects 91 growers from Arkansas and Louisiana. Each grower is expected to collect a settlement payment ranging between $9,763 and $864,967.
Many growers will use the money to pay off debt, said Bob Depper of the Depper Law Firm in El Dorado, which represented local growers.
“For those growers whose debt is more than the payment,” Depper said on Monday, “this is still a significant victory.”
Vince Chadick, an attorney with the Bassett Law Firm in Fayetteville who has represented poultry companies and is familiar with the Packers and Stockyards Act, said because the judge’s order was so circumstance-specific, he doesn’t see the ruling as having any far-reaching effect on the industry.
And in an e-mailed statement Chadick said he didn’t think the purpose of the Packers and Stockyards Act was to make illegal a business’ decisions based upon market conditions and demands.
“I am curious as to whether other courts— including appellate courts — would make a similar finding based upon the same facts,” Chadick wrote.
Pilgrim’s Pride is the second-largest poultry producer of the 42 companies in the United States that produce chicken; Tyson Foods Inc. of Springdale is the country’s largest producer.
Kevin Hux, a grower from El Dorado, said in a phone interview that the settlement payment will help repay some of the $45 million in total debt attributed to poultry growers in the El Dorado Pilgrim’s Pride complex, “but we have a lot of farmers that will lose” out.
In a written statement Hux lamented the plant closure, saying it did not have to happen.
“This is a good day for poultry growers across this state and across this nation,” Hux wrote in the e-mailed statement. “It will reap benefits down the road for other cases and maybe help change this business for the better, for growers everywhere.”
Most poultry growers borrow money to pay for poultry house improvements or to build new ones.
Edward Johnson of Strong, Ark., carries $1.3 million in debt for the six chicken houses he built in 2005, he said Monday.
Each house cost about $180,000 to build.
Johnson was among the local growers who produced thousands of chickens every week for Pilgrim’s Pride, he said, and he hoped to get his houses paid off and then give them to his children.
“I’d grow chickens today if they’d open up the plant,” he said. “But they’re not going to.”
As part of the settlement, Johnson was awarded $320,686, but he said that amount won’t improve his financial circumstances much.
“The bank will get its share, attorneys their share, and we’re still going to get kicked out of our house,” said Johnson, 60, who remains unemployed.
The settlement figure does not include attorney’s fees, which the court left open, Depper said.
He declined to provide an estimate for attorneys’ fees but added that the El Dorado judgment is one part of broader legal action against Pilgrim’s Pride.
“We still have litigation for the rest of the folks in Farmerville, La., De Queen, Hope-Lewisville, Batesville and in east Texas,” said Depper, listing places where Pilgrim’s Pride poultry complexes operated and where his clients sold the birds they raised.
About 200 growers are being represented in similar cases, he said.
But the El Dorado judgment “means that Pilgrim’s Pride is at risk” of having a court decide against it on the Packers and Stockyards Act’s section E, said Depper, who called the judgment precedent-setting.
“There’s been very little litigation under this provision because individuals were not allowed to bring this type of lawsuit until a few years ago,” he said.
Richard Lobb, a spokesman for the commercial industry’s trade group in Washington, D.C., said the National Chicken Council will take a look at the decision to see whether it has any implications for the industry at large.
“But it’s impossible to say that without a careful analysis,” Lobb said Monday.
Before idling the El Dorado processing plant, Pilgrim’s Pride halved its 1,200-person labor union-represented work force in mid-2008 — the year Pilgrim’s filed for bankruptcy protection. A year later, Pilgrim’s received bankruptcy court permission to shutter the Union County plant.
In December 2009, JBS SA, a Brazilian beef and pork company, bought 64 percent of Pilgrim’s Pride, taking the company out of Chapter 11 bankruptcy reorganization.
At that time, the poultry industry reported a challenging operating environment similar to its current circumstances with high grain prices and a glut of supply on the market which, in turn, lowers consumers’ prices.
“We completely reject the idea that we tried to manipulate the market,” Pilgrim’s Lovette said in an e-mailed statement Monday. “We tried to live in the market, not manipulate it.”
Shares of Pilgrim’s Pride Corp. fell 35 cents on Monday, or 8.2 percent, to $3.92 per share on the New York Stock Exchange. Its shares have traded as high as $8.61 and as low as $2.91 over the last year.
Business, Pages 21 on 10/04/2011