May 04, 2011

Supreme Court Declines To Hear Poultry Producer's Packers and Stockyards Act Appeal

On May 2, 2011, the U.S. Supreme Court declined to consider an appeal raised by poultry producer O.K. Industries Inc. of a $14.5 million judgment entered against it and in favor of a group of more than 300 poultry growers who claimed their contracts with O.K. Industries violated the Packers and Stockyards Act (PSA).

The growers claimed that their standard, non-negotiable contracts with O.K. Industries, which contained provisions that restricted their ability to sell to other poultry integrators and required them to raise chickens provided by O.K. Industries in chicken houses financed and built to its specifications, injured competition and violated the PSA.

At trial the growers presented evidence demonstrating that O.K. Industries exercised complete control over the production process and the pay received by the growers.  The growers' expert testified that the restrictions imposed on the growers by O.K. Industries reduced the number of chickens raised by the growers and increased prices paid by consumers.  The jury returned a verdict finding that O.K. Industries violated Section 202(a) of the PSA and awarded them $21.1 million.  The award was later reduced to $14.5 million by the trial court and affirmed by the Tenth Circuit in October of 2010.

By denying O.K. Industries' petition for certiorari, the U.S. Supreme Court once again declined to weigh in on the proper interpretation of the PSA – a topic that has generated substantial debate in recent years throughout the federal circuits.  As the jury verdict against O.K. Industries shows, however, if a PSA plaintiff can present some evidence that an agricultural producer's conduct injured competition, producers may be subject to significant financial exposure under the PSA.

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