On February 17, 2004, a federal jury in Alabama returned a $1.28 billion verdict against Tyson Fresh Meats, Inc. (Tyson) in a nation-wide class-action lawsuit alleging that Tyson manipulated the price for fed cattle that it purchased through the use of long-term contracts (known as captive supply cattle) in violation of the Packers and Stockyards Act (PSA). The PSA prohibits meat packers from engaging in any unfair, unjustly discriminatory or deceptive practice, or engaging in any course of business or doing any act for the purpose or with the effect of manipulating or controlling prices or creating a monopoly in the acquisition of, buying, selling, or dealing in, any article, or of restraining commerce. The plaintiff class of cattlemen claimed that Tyson's store of livestock (via captive supply) allowed Tyson to avoid reliance on auction-price purchases in the open market for most of its supply. Tyson then uses that leverage, the claim is, to depress the market prices for independent producers on the cash and forward markets in violation of the PSA. The trial court jury unanimously found that
1) there was a single national market for fed cattle;
2) Tyson's use of captive supply had an anticompetitive effect on the cash market for fed cattle;
3) Tyson had no legitimate business reason or competitive justification for using captive supply;
4) Tyson's use of captive supply proximately caused the cash market price for fed cattle to be lower than it otherwise would have been; and
5) Tyson's use of captive supply injured each member of the class. The jury then found that Tyson's use of captive supplies from February 1, 1994, through October 31, 2002, damaged the cash market for fed cattle in the amount of $1,281,690,000.
In March, Tyson filed a motion for Judgment as a Matter of Law or for a New Trial, and on April 23, the trial court judge granted Tyson's motion, thereby invalidating the jury verdict. While the trial court judge did not disturb any of the jury's findings, particularly the finding that Tyson's use of captive supply cattle manipulated the cash market price for fed cattle, the judge ruled that Tyson was entitled to use captive supplies to "meet competition" and assure themselves of a reliable supply of cattle. The cattlemen appealed.
On December 17, oral arguments in the case were heard by the United States Court of Appeals for the Eleventh Circuit. During oral arguments, Tyson's counsel admitted that if the PSA prohibits the use of captive supplies, then the "meeting competition" defense was inapplicable. Tyson's counsel was also questioned as to Tyson's claim that the company could not control when captive cattle were delivered, but yet maintained that the use of captive supplies was necessary to achieve a consistent supply of cattle. Tyson's counsel also admitted that the jury was free to believe the cattlemen's expert economist and disbelieve Tyson's expert. In the end, however, the primary appellate issue is the appropriate legal standard for evaluating a claim of price manipulation under the PSA. The trial court judge adopted a Sherman Act "rule of reason" standard, thereby allowing Tyson to defend its actions by showing a legitimate business justification for using captive supplies (such as the assuring a reliable supply of cattle). The question is whether the Sherman Act's rule of reason is applicable under the PSA. An opinion is expected in 2005 by the appellate court. Pickett. v. Tyson Fresh Meats, Inc., 315 F. Supp. 2d 1172 (M.D. Ala. 2004).
