Cattle feeders representing all cash sellers of fed cattle through ConAgra,
and its successor Swift, and against Excel, a Cargill subsidiary, await
court ruling on important class action motions. Two suits, filed by David
Domina and Nora Kane of Domina Law Group, Herbert Schwartz of Houston,
Joe Whatley and Peter Burke of Whatley Drake, Birmingham, Alabama, challenge
America’s second and third largest cattle slaughterhouses.
The suits allege that ConAgra and Excel used market power, and their role
in the highly concentrated beef slaughter industry, to forward contract
cattle, reduce cash markets to thin trading, and downwardly depress cash
prices paid to feeders. The suit alleges that this practice violates 7
USC § 192, a provision of the little used, but very important Packers
& Stockyards Act of 1921. The 1921 act was passed to protect meat
producers from anti-competitive actions by slaughter companies.
The suits against ConAgra (Swift) and Excel are not Domina Law’s
and Whatley Drake’s first involvement in this area. These lawyers,
now joined by Schwartz of Houston in the ConAgra and Excel cases, have
won certification of a national class action for sellers of fed cattle
against IBP, inc. Picket v. IBP, inc. is set for trial in January 2004.
“These three cases all challenge the problem of forwarding contracting
for commodity products in highly concentrated agricultural markets,”
said David Domina. As a number of foods processors have rapidly diminished
through consolidation, the nation’s meat and fiber producers –
from cattlemen to grape growers – find themselves with virtually
no market alternatives, and almost no ability to negotiate a price. For
many of America’s foods producers, the markets have become “take
it or leave it” propositions, Domina explains.
All three suits against the beef slaughter companies are assigned to Hon.
Lyle Strom, Senior U.S. District Judge, Omaha. The Pickett case will be
tried in Alabama. The ConAgra and Excel suits are filed in Nebraska.
“Nebraska is, perhaps, the least overtaken area in the country by
the contracting phenomenon,” Domina said. Here, cattlemen seemed
to have resisted committing their cattle to slaughterhouses longer than
in other places.
In some areas of the country, huge fractions of overall cattle procurement
now occurs strictly through use of “captive supplies.” These
are arrangements in which cattle feeders commit their cattle for sale
to a particular slaughterhouse long before they are ready for delivery.
The effect of these captive supply arrangements tends to be lowered cash
prices, lower margins, and a significant reduction in the number of cattle
producers for the region. “Captive supplies drive out smaller producers,”