Appeals court ruling favors chicken firm

A New Orleans federal appeals court overturned a decision of a lower court against Pilgrim’s Pride Corp. to award $25 million to chicken growers who accused the Greeley based chicken processor of price fixing.

Pilgrim’s Pride (Nasdaq: PPC) closed a chicken-processing facility in El Dorado, Ark., in 2009 after it filed for bankruptcy protection. When the facility closed, more than 160 contract chicken growers who raised chickens for processing at the Pilgrim’s Pride facility were no longer needed, according to court documents.

A group of chicken growers sued Pilgrim’s Pride accusing the company of manipulating and controlling prices. Pilgrim’s Pride had closed the facility to reduce chicken supply and increase prices, in violation of the Packers and Stockyards Act of 1921. A Texas magistrate judge agreed and awarded more than $25 million to the chicken growers. Pilgrim’s Pride appealed the decision.

Pilgrim’s Pride argued that the Packers and Stockyards Act only is violated by anti-competitive attempts to affect market prices. The company argued that its output reductions did not harm competitors, so it had followed the law.

The appeals court agreed, adding that the company had overextended itself by producing more chicken than the market appeared to need, driving down chicken prices.

“While we agree that a goal of competition is lower price levels, a unilateral attempt to raise prices… is not inherently illicit or anticompetitive,” read a decision from the U.S. Court of Appeals for the Fifth Circuit.

The ruling affirmed that Pilgrim’s Pride’s decision to reduce production in May 2009 was a legitimate, rational response to market conditions at the time, chief executive Bill Lovette said in an email statement from a spokesman.

“We in no way made any attempt to illegally manipulate or control poultry prices and we are pleased the court agreed with our position,” Lovette said. “Pilgrim’s takes great pride in the relationship we enjoy with the family farmers who raise and provide care for our chickens.”

An attorney for the chicken growers said the group plans to ask the appeals court to rehear the case.

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