IN RE: PROCESSED EGG PRODUCTS ANTITRUST LITIGATION: A PANEL DISCUSSION WITH TRIAL COUNSEL

By Lee F. Berger¹

In the In re: Processed Eggs Products Antitrust Litigation², often referred to as the Eggs litigation, direct and indirect purchasers of eggs accused major egg producers of conspiring to control and limit the nation’s egg supply, thereby increasing egg prices through a number of allegedly interrelated anticompetitive practices. Specifically, plaintiffs allege that defendant egg producers violated Section 1 of the Sherman Act by developing and implementing a sham animal welfare program, exporting eggs at a loss, and reducing egg production in periods of oversupply through coordinated actions. Those alleged coordinated actions included reducing chick hatches, promoting early molting and slaughtering hens early. The defendants denied these allegations.

Ten defendants settled, but after more than a decade of litigation three egg producers— Rose Acre Farms, R.W. Sauder and Ohio Fresh Eggs—went to trial against the direct purchaser class. Plaintiffs sought more than a billion dollars in damages before trebling.

Trial started May 2, 2018, in the Eastern District of Pennsylvania, before Judge Gene Pratter. Judge Pratter rejected the application of the per se rule to the alleged conspiracy, meaning that the plaintiffs had to prove under the rule-of-reason that the conspiracy had an anticompetitive effect.

After a six week trial and six days of deliberations, the jury concluded that two of the defendants, R.W. Sauder and Ohio Fresh Eggs, were not involved in an alleged conspiracy. While the jury found that defendant Rose Acre was involved in the alleged conspiracy, it rejected liability by finding the conspiracy did not have an anticompetitive effect. An appeal is pending. Litigation between opt-out plaintiffs and defendants continues with a trial scheduled to begin on October 28, 2019.

The panel discussed this major antitrust trial and the path it took to verdict. Each side made a short opening statement: one from plaintiffs and one from defendants. Then, there was a question and answer discussion about some of the more interesting developments that led to the verdict in the case.

The Panelists

• Mindee Reuben is co-lead and liaison counsel for direct purchaser plaintiffs in the Eggs litigation. Ms. Reuben is counsel at Lite, DePalma, Greenberg in Philadelphia and represents plaintiffs across the country in a broad range of antitrust and complex consumer case class action matters. She regularly serves as lead, co-lead or liaison counsel. For example, Ms. Reuben has held leadership roles in the Generic Pharmaceuticals Pricing Antitrust Litigation, the Blue Cross/Blue Shield Antitrust Litigation, the Broiler Chicken Antitrust Litigation, the Lithium Ion
• Batteries Antitrust Litigation and the Polyurethane Foam Antitrust Litigation. Ms. Reuben is a lecturer of law at the University Of Pennsylvania School Of Law, where she teaches legal writing to LL.M. students. Ms. Reuben is also one of the founding members of the Women Antitrust Plaintiffs’ Attorneys, a national organization of women who focus their practices on cartel and other antitrust practices. Ms. Reuben writes and speaks frequently on matters regarding antitrust cases and class action litigation.
• Steve Bizar is the lead trial counsel for defendant, R.W. Sauder, in the Eggs litigation. Mr. Bizar is co-chair of Dechert’s global Antitrust and Competition practice. He is an experienced trial lawyer. Mr. Bizar has served as liaison counsel for defendants and lead trial counsel for defendant National Gypsum Company in the Domestic Drywall Antitrust Litigation, and served as lead trial counsel for defendant Dean Foods in the Southeastern Milk Antitrust Litigation. Mr. Bizar is a Fellow of the International Academy of Trial Lawyers and the American Bar Foundation. Mr. Bizar sits on the Philadelphia City Council Subcommittee of Criminal Judicial Reform and is a past president of the Philadelphia Bar Foundation. He writes and speaks frequently on antitrust topics, trial practice, and class certification.

[Page 45]

Plaintiffs’ Opening Statement

MS. REUBEN: Good morning, everyone. My name is Mindee Reuben. Thank you for the introduction very much. I was one of many lawyers who represented the direct purchaser plaintiffs in this case.

I will tell you before I begin that the case was actually bifurcated between liability and damages, so the opening statements, at least from my perspective, are mostly about the liability piece, and the only part that we talked about was not about damages, but just about the percentage overcharge for the first part of the case. Much of which I will talk about are things that actually were said or talked about as they were presented in our opening statement.

The question that was presented to the jury by the plaintiffs was whether or not major U.S. egg producers conspired to limit the supply of eggs in order to raise the price of eggs. You cannot have an egg without a hen to lay it. So, if you want to raise the price of eggs by limiting the supply of eggs, what do you do? You limit the supply of hens that are laying those eggs, because the fewer hens you have, the fewer eggs you have. And the fewer eggs that you have, the more money that you are going to make as a producer. And what the evidence will show here is that is exactly what happened.

Who was involved in limiting the supply of eggs? The plaintiffs allege that there were a variety of egg producers and companies from across the United States that were involved in these actions to reduce the supply of hens and increase the price of eggs. For the purposes of trial we were focused on three entities, Rose Acre Farms, Ohio Fresh Eggs and RW Sauder.

Let me just say, you should not be fooled. These are not small companies. These companies are big. They have giant hen houses and hundreds of thousands of hens that lay millions of dozens of eggs over the year. This is agribusiness. This is not your local farm store.

[Page 46]

In addition to these companies there were a couple of other key players. One was the UEP—United Egg Producers—which was a trade association of the producers in the United States, and it had about ninety percent of the egg producers in the U.S. as members, and it was run by and controlled by those same producers. And, all of those companies were all members of the UEP during the relevant time period.

The other key player here was the USEM. It was originally part of UEP and then spun off, but the evidence will show that the real purpose of the USEM was to export eggs out of the United States in order to reduce supply and increase price in the United States.

Who are the plaintiffs that have brought this case? The plaintiffs who have brought this case are TK Ribbings Family Restaurant, Lisciandro’s Restaurant and Eby-Brown Company, which is a wholesale distributor to convenience stores. They are both large and small, and they represented all of the plaintiffs in this case because they are a part of a class action, and each of these plaintiffs purchased directly from the producers that were involved in the litigation.

Now, the big question: How did they do it? How did the defendants reduce the supply of eggs in order to raise prices? The evidence will show that the producers engaged in both short and long term supply reduction strategies, and that these strategies were actually recommended by an economic advisor to the UEP and its members as a way of reducing supply. And, what did the economic advisor say? More eggs, less price; fewer eggs, more price.

Starting around 1999, and continuing throughout the relevant time period, there were both short and long term strategies. The short term strategies—early molting, slaughtering hens, limiting new hens, and exports—were all designed to get eggs out of the U.S. market. The only one you might not be familiar with is early molting. When a hen lays eggs, it goes through a natural period where it stops laying eggs for a little bit because it is tired, and then it goes back to laying eggs. Early molting means you stop them from producing eggs earlier than usual, and you do that by withholding their food. So, if you want to take eggs out of the market on a short term basis, you stop feeding your hens, and they stop laying eggs.

It became apparent quickly that these short term adjustments were simply not cutting it. They were not cutting it because they were not enough to control the supply over the long term and increase profitability over the long term. So according to, again, the producers’ economic advisor, in order to control supply over the long term you have to remove extra hens from the nation’s flock on a permanent basis. One of the ways he said you could do that was by giving the birds more space. Specifically, he said that if the industry adopted a policy of 48 square inches—which, by the way, is smaller than this piece of paper—as a minimum floor space allowance for birds, millions of extra birds would be eliminated. Because the more space that a bird has, the less space that there is for another bird. Fewer hens means fewer eggs, and that means more money. This precise idea was communicated to the producers.

[Page 47]

As this is all going on there is this emerging issue which relates to animal welfare of the hens laying eggs. And, you will likely hear evidence that big companies, companies like McDonald’s, were looking for ways to deal with the animal welfare concerns that were in the industry. But what the evidence will show is that the United Egg Producers and its members, in response to that, latched on to this animal welfare issue as a way of achieving long term control over supply. You will hear that even though the Producers did take some steps to address animal welfare predominantly through a long term program called "The Certified Program," the process was really dominated by focus on controlling supply.

The Certified Program was designed as a way for egg producers to market their eggs as animal welfare certified. ‘We took good care of our hens. Don’t worry about it, McDonald’s.’ So, in late 1990s, early 2000s, the UEP decides, ‘let’s get a committee together to come up with a bunch of really good ideas about how to help the animals.’ It was supposed to be an independent committee, but it was not because one of the members was the UEP economic advisor who was telling the producers the ways to come up with long term solutions to increase profitability in the industry.

The Scientific Advisory Committee issued its recommendations in 2000. Those recommendations included minimum cage space requirements, but that was not the end of the process, because it is the UEP producer committee made up of producers and not scientists that really developed the Certified Program. Once those terms and conditions came out, the Scientific Advisory Committee did not want to have anything to do with the Certified Program.

One of the terms of the Certified Program that the producers committee came up with was the 100 Percent Rule. The 100 Percent Rule required that in order to be animal care certified under the UEP program, 100 percent of the producers’ facilities had to be in compliance with the rules and regulations of the certified program. It did not matter that your clients may not have wanted certified eggs, because some did not. And it did not matter that as a producer you could actually say ‘I will produce certified eggs over here, and I will produce non-certified eggs over there, so there is no chance of commingling,’ which producers could do.

Why did they insist on it? Because, as the evidence will show, the 100 Percent Rule had nothing to do with animal welfare and everything to do with wanting to maximize the impact of control of supply. Because if you want to sell certified eggs and you have to have 100 percent of your facilities comply with the cage space requirements, you are going to have more cage space per bird, which means fewer hens. And, again, fewer hens, fewer eggs, more money. Do not forget, ninety percent of the industry was a member of UEP.

Another aspect of the Certified Program that demonstrates that supply control was the primary focus of the Certified Program was the audit program. Under the audit program, people went out to the farms and said, ‘are you doing all the things you should be doing under the Certified Program?’ Included among that were a whole number of animal welfare questions: ‘Can your birds stand upright? Do they have enough water? When you decide to slaughter them, are you doing it humanely?’ All these things. What the evidence shows is that you could fail every single one of the animal welfare components of this audit you can still pass the Certified Program and still be UEP certified. In fact, as the evidence will show, the only way to automatically fail the Certified Program audit had nothing to do with animal welfare and had everything to do with management and supply.

[Page 48]

Was the Certified Program a cover story for supply reduction? Consider this: There is a newsletter called "United Voices" which was sent out by the UEP to all of its members. It is on a bi-weekly basis or so. You will see that throughout the time period, it was basically used as a vehicle to communicate the short term supply recommendations and adjustments and to tell how successful these short and long term programs were doing. For example, in March 2002, shortly after the Certified Program was adopted, the UEP predicts that the adoption of the Certified Program will result in the reduction of 13 million hens. A little bit more than a year later, the UEP is now telling everybody that they are having the best prices that they have had. The May 2003 prices were the best that they had in many years, and they attribute it to the Certified Program and short term supply management.

Fast forward to June 2008, towards the end of the class period, and it is the same story. They are again touting record egg prices, except now it is not just for a month, it is for a year. And, again, it is the Certified Program and the short term supply recommendations that they are talking about. There is no mention about the animal welfare part of this.

So, now you have short term supply recommendations and long term strategies all working together to reduce the supply of the eggs in the U.S. But where are the three defendants in all this? Each of the three defendants, Rose Acre, Sauder and Ohio Fresh were all members of the UEP and the Certified Program. About that, there is no dispute. In fact, all of the companies participating in this agreement were UEP members and members of the UEP certified program.

Rose Acre, who is the second largest producer of eggs in the United States, joined the UEP and adopted the program in 2002. It adopted the program, even though you will hear evidence about the fact that some of the senior management was a little bit concerned about the true purpose of the program. Rose Acre told its customers that it was reducing its hen population to comply with the Certified Program, and explained that prices were going up because the supply was going down. It even approved an early molt and slaughter program as part of this. With regard to exports, as Rose Acre was a member of the USEM, it decided to let USEM leadership know that any time they discussed issues that stabilize and possibly influence the market, those conversations should be kept a little bit confidential.

RW Sauder became UEP certified in 2002, and officially joined the UEP in 2004, although it had been involved with UEP for many years before that. The evidence is going to show that RW Sauder admitted that UEP made recommendations to manage supply, including early molt and early slaughter. And, although RW Sauder did not buy the short term recommendations, it did become certified and did reduce its flock size in regard to the Certified Program. The evidence will also show that when explaining the cost of why eggs went up to a customer, it pointed to the Certified Program and the reduction in hen supply.

Ohio Fresh joined the UEP and became a certified member in 2004. It signed a written commitment to reduce hen supply by slaughtering its hens early and otherwise complying with all of the requirements of the Certified Program.

[Page 49]

The plaintiffs retained an expert, a leading agricultural economist named Dr. Gordon Rausser to look at the defendants’ transactions. What did the data show? The data showed that supply reduction efforts worked. The short term and supply reduction efforts taken by the producers caused there to be fewer eggs on the market than there otherwise would have been had these suppliers not gotten together and engaged in this behavior. As we know from the producers themselves, because fewer hens mean fewer eggs, mean more money in the producers’ pockets. The prices actually went up.

You may hear that some of the producers claimed that their flock size did not actually decrease, but increased. But, you will also hear those same producers testify about the fact that they were reducing flock size and telling their customers that they were reducing flock size, for example, because of the Certified Program and because of these short term management principles.

Economically, what did all of that mean? Economically, that meant that the overcharge to the purchasers, like Lusciandro’s Restaurant, TK Ribbing and Eby-Brown, and the rest of the class, was that there was 19.81 percent. The fewer the hens, the fewer the eggs, and the more money.

Thank you.

Defendant’s Opening Statement

MR. BIZAR: Thank you, Judge Berger.

Ladies and gentlemen, my name is Steve Bizar. I represent RW Sauder. RW Sauder is a commercial egg farmer based right outside of Lancaster, Pennsylvania. From 2000 through 2008, which is the period that is relevant for this case, the business was owned and operated by Paul Sauder, who is the third generation of his family to work in the egg business. Mr. Sauder’s grandfather founded the business in the 1930s. Mr. Sauder’s father expanded the business, and Mr. Paul Sauder himself expanded it further. RW Sauder employs 400 people, 60 percent of whom work in the Lancaster area. It is the only business he’s ever known.

Paul Sauder began in the business when he was old enough to go out to the hen house and collect eggs by hand. He has now passed it on to his son, Mark, who is the fourth generation of the family to be in the egg business. So, all told, the Sauders have been in the commercial egg business for 80 years. They know egg laying hens, and they know eggs. They’re independent-minded business people.

So the plaintiffs, Ms. Reuben, they make a very serious claim here. They claim that RW Sauder conspired with other egg producers to reduce the supply of eggs in the United States so that they could raise prices. Sauder did no such thing, not ever. Sauder never conspired or agreed with any other commercial egg farmers to reduce the supply of eggs in the United States. Paul Sauder will testify at this trial, and you will hear it from him directly.

Let’s look at the plaintiffs’ charges. They are specific charges. One of them is what Ms. Reuben referred to as short term supply recommendations, or what UEP—United Egg Producers—calls temporary flock management measures. Those are measures that plaintiffs claim were illegal because they reflected an agreement to reduce supply, and they consisted of reducing the hatch of chicks, putting hens into molt early, or slaughtering hens early.

[Page 50]

Sauder did no such things. Sauder never participated in any of those temporary flock management measures, not ever. In fact, UEP, in its own internal documents which the plaintiffs will show you, referred to Sauder as one of the egg farmers that was not participating in the temporary flock management measures. They left Sauder off the list of those farmers that were participating.

There is a really good reason for this. Sauder made its decisions about how to manage its flocks two years before it put those flocks into the hen houses, when it ordered the flocks from the breeders. And those decisions, which hens would molt when, which hens would go to slaughter at which time, those were never changed. Mr. Sauder never once followed the UEP’s temporary flock management recommendations, and you are not going to see any documents that suggest otherwise. Sauder had invested his hens, and he did what he thought was best for his business and for his flocks.

Let’s look at the second charge, the charge about exports. Plaintiffs claim that members of another trade organization, United States Egg Marketers—or, USEM—agreed to export U.S. eggs and send them abroad so they could raise prices in the United States. We will show you that this charge against Sauder is also totally false. The charge is that members of the USEM agreed to export eggs to get the domestic price of eggs up. Sauder was not a member of the USEM, not ever. Not ever. Sauder did not conspire or agree with any members of USEM to export eggs at a loss. Sauder was not a member of the USEM.

Sauder, at one point in time, filled out an application to join USEM, but he never paid the fee and he never became a member. And because Sauder was not a member of USEM, he could not vote on when USEM would take an export or the terms at which the export would take place. He had no role with respect to when, whether, how, how much, or at what price USEM would be exporting eggs. He never once voted in support of an export. He will testify to that. And Ms. Linda Reichert, who is a USEM employee, and who is on plaintiffs’ witness list and who will be coming to this trial, she will testify to that as well.

Why did Sauder not join USEM? Sauder is an independent-minded, Lancaster area business man. He did not want to give up the power to another company, to another organization to tell him what to do with his eggs. It is that simple. He did not want anyone else to tell him how to handle his eggs.

Plaintiffs will show you, and we do not dispute this, that Sauder sold eggs to USEM that were going into exports. And because Sauder chose to sell eggs to USEM, USEM sometimes called him a "supporter" or a "contributor," in their documents. All that means is that when Sauder had extra eggs, when he had surplus eggs, he sold those eggs to USEM or to other export customers. There is a very good reason for that, by the way. Egg demand in the United States is seasonal. Demand is highest from Thanksgiving through Christmas and then around Easter, and during other periods of the year it is flat. You cannot adjust your flocks just for the periods when demand is high, so you have eggs hatching, then you have chickens laying eggs every day, six out of seven days a week, and sometimes in a year, January, February, sometimes early March and the summer months, you have excess eggs, and so you need to have outlets for those eggs. Sometimes Sauder sold his excess or surplus eggs for export, and sometimes he sold them to USEM for export, but he never controlled the price at which USEM sold its eggs. He never voted on those exports. He had no role with respect to how USEM exported eggs. In fact, USEM actually complained to Mr. Sauder that he was selling the eggs to them at a price higher than the price they wanted to pay. He was actually making money by treating them at arms’ length, just like any other customer.

[Page 51]

Let us go back to the other trade organization, not USEM, but UEP. This is a group that, as Ms. Reuben pointed out, Sauder joined in 2004. And even before Sauder joined UEP, he attended UEP meetings. They were open. It was the trade organization, the industry organization for the egg industry, and RW Sauder is in the egg industry. He attended those meetings to find out what was happening in the industry, what government regulations to expect. Sometimes officials from the United States Department of Agriculture or other government officials were there as well.

In 2000, UEP developed a program that Ms. Reuben called the Certified Program. It is the Certified Program. It was entirely voluntary. Nobody forced anybody to join the program, and some very large producers did not. But, the Certified Program was designed to improve living conditions for egg-laying hens in a commercial environment, to produce uniform, science-based, guidelines for the humane treatment of hens across the industry. It was developed as pressure mounted in Europe and the United States in the late 1990s from animal rights activists and from customers, companies like McDonald’s or Walmart, to ensure the more humane treatment of egg-laying hens. And, the UEP relied on independent animal welfare experts, animal welfare scientists. You will hear from Dr. Jeffrey Armstrong, who at the time was a professor at Purdue University. He is now a president at California Polytechnic State University in San Luis Obispo, the most beautiful town in the world, and he is passionate about the work he did steering the UEP Scientific Advisory Committee. Dr. Armstrong assembled a dream team of animal welfare scientists, and they developed what they believed were humane, science-based recommendations for the treatment of egg-laying hens in commercial settings. That became the basis for the UEP’s certified program.

Sauder implemented the Certified Program, make no mistake about it. Mr. Sauder was proud of that when he did it, and he is proud of it today. Mr. Sauder’s company was one of the first egg farming companies to implement the Certified Program. In fact, he tested it on one of his farms to see how the hens did, and they did better than the hens that were not in that setting, so he implemented the program at all of his farms. He was very proud of it. He was so proud of it that he spoke about it to the Lancaster paper in 2003. After joining the UEP in 2004, he joined their public affairs committee, and he went around the country touting the benefits of the program. He invited CBS News’ "60 Minutes," into one of his hen houses so he and Dr. Armstrong could answer questions about the program. These are hardly the actions of somebody involved in illegal antitrust conspiracy.

Against people who spent their entire lives around egg-laying hens, people like Paul Sauder or Dr. Armstrong, plaintiffs and their lawyers bring their third, and really most offensive charge, which is that the entire Certified Program is really just a sham. And, while they take shots at every aspect of the program—and ladies and gentlemen we are going to be spending some time talk about hen poop, how the hens go to the bathroom and what happens with that poop—they really challenged three distinct aspects of the program, and you heard Ms. Reuben speak about them.

[Page 52]

The first is the cage space, the requirement that the hen’s cage space be increased from 48 square inches to 67 square inches. Second, the 100 Percent Rule: the requirement that if you participate in the program you do it for all your hen houses, for all your farms. Third, the prohibition against backfilling, which is the restriction on adding hens from other flocks to supplement the hens who died from natural causes.

I want to just briefly address these three challenges. Cage space: Sauder never agreed to participate in the Certified Program to reduce the size of its flocks. The Certified Program was, and is, a legitimate animal welfare program that gave customers a new product. They wanted certified eggs, eggs coming from hens raised in more humane living conditions. Eggs that farmers wanted to have to sell and that customers wanted to be able to buy so they could compete with other kinds of eggs, organic eggs, free range eggs. The fact is that Sauder and every other company that participated in the Certified Program remained totally free to add hens, to add cages, to build barns, to increase the size of their flocks. There is nothing in any of the Certified Program guidelines—and you will have these in the jury room with you, they will be admitted into evidence. There is nothing in any of the Certified Program guidelines for any year that says anything about the number of hens that you can have, or the number of hen houses, or the number of cages. So, as you increase the cage space, you can add, you can reconfigure your cages to add hens. And people did, and Sauder did, despite what Ms. Reuben says.

Mr. Sauder will also testify that managing hens more humanely is good for production. They got about 20 more eggs per year by giving the hens more room. And the eggs were a better quality, there were fewer breaks, there were fewer defects. They decreased mortality and they increased productivity. Mr. Sauder, and the other companies that joined the Certified Program, sided with the hens, and they got more eggs from each hen as a result. And the overall supply of eggs in the United States increased. It increased by 20 million egg-laying hens during the period from 2000 to 2008, the period that is relevant to this case, 20 million more.

100 Percent Rule. We will show you that the plaintiffs’ claims about the 100 Percent Rule are totally baseless. Mr. Sauder, the Animal Welfare Committee of the UEP, the Scientific Advisory Committee, they felt that the 100 Percent Rule was necessary for the integrity of the program. You couldn’t say that you were for humane living conditions for your hens if you treated the hens in this hen house humanely but you discriminated against the hens in this hen house and treated them inhumanely. You put these hens in 67 square inches and kept these hens in 48 square inches. You needed to treat all of your hens humanely to be a certified producer. That gave the program integrity. Ms. Reuben mentioned audit failures. You will not see a single audit failure for adding more hens, for adding more cages, for building more barns. There is nothing about the 100 Percent Rule that prevented or prohibited egg farmers from ramping up their supply.

Finally, the backfilling ban. Mr. Sauder will explain to you, Dr. Armstrong will explain to you that you expect to lose about 2 to 2.5 percent of all your hens through natural causes. So, imagine 100,000 hens in a hen house, 2000 to 2500 of them will die just of natural causes during the life cycle of that flock. Backfilling is the practice of taking hens from other flocks and putting them into the hen house.

[Page 53]

There are two really good reasons why the UEP’s Scientific Advisory Committee came out against backfilling. The first has to do with pecking orders. Turns out that the pecking order is not just something that happens on a schoolyard. Pecking order applies to what happens to hens inside a cage. There is a dominant hen, and there are subservient or submissive hens, and when you add hens from other flocks to that cage, you disrupt the pecking order. Ladies and gentlemen, when hens peck each other to death, that’s really not good for animal welfare. Fighting in the cages is not good for animal welfare.

The second reason has to do with diseases, something called immunocompetency. And, we all have had experience with this. We know about this from our families or from our children. When your children go back to school in the fall, a lot of times they get exposed to new germs. When your family gets together at the holidays, you may get exposed to new germs. When you fly on a plane from Philadelphia to San Francisco, you may get exposed to new germs. The same thing is true for hens. These hens were all born the same day. They were all raised together, 80-to-100,000 of them in any hen house. And, when you inject new hens with different immunocompetencies into that hen house, you run the risk of disease. And, ladies and gentlemen, there are diseases that you cannot vaccinate against, exotic diseases like Avian Newcastle, Avian Flu. When one hen gets that disease, the FDA or the USDA requires the farmer to depopulate—to kill, to slaughter all of the hens. That only has to happen once for an egg farmer to understand that it’s really not worth the risk.

But, none of that matters for RW Sauder, because RW Sauder has never backfilled. The ban on backfilling in the Certified Program did not apply to RW Sauder. Mr. Sauder’s father did not do it, his grandfather did not do it, he did not do it, and his son is not doing it. The plaintiffs claim that they know better than a guy who is part of a family that has been egg farming for 80 years.

Now, you saw some slides from plaintiffs. We do not have any fancy slides. We are just a farmer from Lancaster. You will see a bunch of documents. There are a lot of lawyers sitting on their side of the courtroom, there are not a lot of lawyers on our side of the courtroom.

Ladies and gentlemen, you are not going to see documents and you are not going to see slides that really pertain to Paul Sauder or Mr. Sauder’s company, RW Sauder, because they did not conspire or agree with anyone to reduce the egg supply.

Thank you very much.

Question and Answer

MR. BERGER. Thank you both. I wanted to start with a question for both of you. No one likes surprises during or right before trial, but in April of this year, shortly before the Eggs trial began on May 2nd, the largest defendant, Rose Acre Farms, suffered a salmonella outbreak which sickened 45 people, causing 11 hospitalizations, and the recall of 206,000,000 eggs. That is not welcome news for defendants, and a potential opportunity for plaintiffs. How do you believe that the outbreak would have influenced the jury? Do you think it was relevant to issues that were at hand? Did the outbreak affect jury selection? How was the issue dealt with at trial?

[Page 54]

MR. BIZAR: First of all, the relevant period for the case was 2000 to 2008. The outbreak was in 2017-2018, so, it was outside the relevant period.

I had a pretty good sense that the judge was not going to allow it to be an issue in the case. It was very prejudicial, obviously, and it was outside the relevant period, so I felt pretty comfortable. And Judge Prater really called balls and strikes the entire case. Even when she was ruling against us, I felt very much like her strike zone was fair. So, I did not think it was going to come in unless somebody implicated it in their direct examination testimony and somehow opened the door to it, and then it was fair game on cross.

It never came up in jury selection. She exercised a very tight control over that in jury selection. I do not think it came up in jury selection.

I felt confident we would be okay, but I was sure glad it was not my client, because the facility that Rose Acre had this outbreak at was one of the facilities that they touted during the trial where they had expanded their production—it was in North Carolina, and one of their answers, as Sauder’s answer, was that we expanded, and that this is one of the facilities that was integral to that.

MS. REUBEN: The case was tried under the rule-of-reason, and as a result the defendants were permitted to put on procompetitive justifications for what they did. And some of those procompetitive justifications were better quality, safer eggs, and safer process, more humanely raised. Our perspective, at least, was that we have to try. You have a giant outbreak, you have the same company operating on almost the identical guidelines that were in effect during the relevant time period is now facing the biggest salmonella outbreak.

How do you not go to the judge and say that is relevant? If defendants will get up and say this is a better, safer, cleaner egg, we should get to come back and say, ‘ehh, not so much.’ And what is interesting here is, it sort of goes back to this whole audit thing I was talking about. When you read the reports about what was going on at this facility, there were dead rodents, there were insects flying everywhere, the clerks were not using proper processes, they were skipping steps in the watching process. All these things are on those audit reports. Rose Acre was still certified.

Rose Acre filed a motion to preclude it, and they won. The Court essentially said that this was 10 years after the fact, but if something came up during trial as Mr. Bizar said, that we could revisit it. Correct me if I’m wrong, but Rose Acre had an animal welfare expert that did talk at some point in his report or his testimony about these being a better, safer, cleaner process, and that expert was not presented at trial, which was probably a good decision.

MR. BIZAR: It was all the defendants that had the animal welfare—

MS. REUBEN: It was a shared one.

MR. BIZAR: I was going to put him on, and we decided not to present him.

[Page 55]

MR. BERGER: You decided not to present him, in part, because of this?

MR. BIZAR: No. It was a long trial. You have to really be mindful of the jury. And, we felt that we had covered the animal welfare story so extensively with Dr. Armstrong, who had come in from California to testify, and testified very favorably for us, and we felt like other people had echoed it. It just seemed like it would be too much. I felt terrible not calling him because I had opened promising him to the jury as one of the witnesses who would testify about the Certified Program, but they seemed relieved when I said I decided not to call him because we were conscious of their time. That they had enough, although it took them six and half days to reach their verdict.

MR. BERGER: Right up to and during trial important issues arose for both parties regarding admissibility. I would like you to talk about how your decisions on when and how to raise document admissibility issues may have shaped the outcome of the trial.

MS. REUBEN: In all of your cases you probably enter into stipulations about business records, and what will be business records, what will be admissible, what will be authentic, those type of things, right? You have all these stipulations, and then you get closer to trial, you have to exchange not just your exhibit list, but you have to lodge objections to the exhibit list as well and exchange them. In a perfect world, some of those objections actually get resolved in advance of trial.

But we were about a week before trial, and we did not have resolution on any of our exhibits, including ones that we might want to use in our opening. That put us a little bit between a rock and a hard place because you do not want to be talking about things that you know are clearly not admissible or a little bit fuzzy during your opening statement.

So, it was about a week or so before trial we filed a motion, and it was something called a motion to confirm admissibility of exhibits. We filed a motion. The Court was not happy with us about our timing, to put it mildly, and so we revisited the motion and we shortened our list of documents. The long and the short of it is that the Court said okay for some, no for others, and everything at the end of it could get revisited during the course of the trial. Even if she had said no about an exhibit for your opening statement, depending on how things developed at trial, you could revisit it.

It was an interesting lesson in that if we had perhaps known earlier the answers to some of these questions or had tried to resolve them earlier in advance of trial, and I imagine if I was on the other side of the aisle it would have been helpful for me to know too, what I could use, not use. It would have saved a lot of time and energy for all of the parties, and probably shorten the trial somewhat.

For us probably the biggest impact was how it affected our opening. We had a lot to talk about. We were there for a long time talking in our opening statement about all kinds of evidence. But there were things we really would have liked to have used and could not. So, the moral of the story is plan ahead as much as you can, try to get these things resolved as much as you can. Over the long term it did not make much of a difference because the Court did allow us to raise some of these documents again, but I think the opening, it really did have some impact on how the case was presented at the outset.

[Page 56]

MR. BIZAR: I will add a couple of different observations. I have tried a lot of cases, and only three or four antitrust cases, but the one thing I noticed that is a common for the antitrust cases is you get these multi-defendant cases or multi-plaintiff lawyer cases where there are different firms working together, and different lawyers in those cases on both sides take differing approaches to admissibility during the discovery phase. If you have only thought about admissibility at trial, you have already waited too long. You have huge, huge problems with admissibility if you have not figured out a way to use the discovery that you have gotten in admissible format when you take the depositions in the discovery phase of the trial. Not just because you need them to get past summary judgment if you are the plaintiff, or you need them to preserve your rights to effectively cross examine some witness for some defendant who is not appearing at the trial because they have settled, but you really cannot go back and fix it after the fact. Here I think the plaintiffs’ presentation, and even to some degree the defense presentation, were somewhat affected by those kinds of issues going into the trial.

I think one interesting thing that we learned was that when the judge made instructions to the jury about the admissibility of documents for notice but not for the truth, and there were a large number of trade association newsletters and other kinds of trade association documents I think that the plaintiffs had wanted to get in as business records but which were not allowed in as business records because they were not really business records, but which the judge allowed them to admit for a limited purpose and to publish for notice, not for the truth. Those documents went back with all the documents to the jury room. Maybe that is why it took them six days! But they separated out all the exhibits and they put the exhibits that were just for a limited purpose in a separate binder, separate and distinct from the other exhibits, and they did not look at them, so they told us after the trial, which I thought was an incredibly interesting piece of news.

Let me give you another little tidbit or war story. In talking about the 100 Percent Rule, there is evidence that that rule was important not just to the integrity of the program, for the program sponsors for the UEP, but also the customers, the Food Marketing Institute, a big trade organization for supermarkets, including some of the supermarkets that were in the plaintiffs’ class. The Food Marketing Institute wanted the 100 Percent Rule, they supported it, so too did a lot of other producers and customers.

One company that opposed it violently was a company called Sparboe Farms, which was a featured part of the plaintiff’s case. They had been a defendant. They settled and they entered into a cooperation agreement. There were four Sparboe witnesses on the plaintiffs’ trial list. Two of them they dropped and never brought, and two of them had really relevant testimony that we wanted to use, and then they cancelled their appearance during the trial. So, they only brought the witness that had never been deposed. We had this fantastic video with information about Sparboe. Sparboe had not been a part of the Certified Program, they had done their own thing. They had been attacked by an animal rights group in an undercover operation to get footage of their commercial egg farming practices, which were horrendous. That had become the basis for an ABC news exposé that was broadcast very broadly that led to the loss of half their biggest customers, including McDonald’s and Target. Just incredible damage to their business. Then they came back to the UEP Certified Program and embraced the 100 Percent Rule as a result of that.

[Page 57]

We had this video. We had both the undercover video and we had the ABC news video. We wanted to use it. And, in fact, a couple of the Sparboe witnesses that the plaintiffs pulled from their witness list had testified about it at their deposition. So, even though it was after the relevant period, we had a basis for using it. I alluded to it in my opening argument. As the jury went out for their lunch break, the plaintiffs’ lead trial lawyer went bat shit crazy, yelling to the judge about what I had done, mentioning this exhibit that I had not told them I was going to use in advance. I did not show an exhibit. I had no slides, no video, nothing. I went in bare. (Very uncomfortable for a Dechert lawyer.) The judge said, "Well, there is nothing I can do about it. He mentioned it, and if he does not somehow deliver on his promise, you will be able to bring it to the jury’s attention and punish him for it." That was, I think, the right result.

Then the first Sparboe witness testified, Garth Sparboe, and he walked right into it. I mean he testified about it on direct, and then that opened the door for me to cross-examine him about it, and I did not have to show the video. I did not have to establish authenticity for this TV program, which is very hard to do. And I did not have to run the risk of a rule-of-completeness objection that would allow them to play other parts of it as well. So, it just worked out beautifully, but by surprise.

MS. REUBEN: It is funny how your perspective about how things happened, like you thought Steve went crazy. From our perspective, we had been talking about this exhibit with the defendants and whether or not they were planning to use it. We asked defendants, "You guys going to use it?" They said, "We don’t know because we don’t know what your witnesses are going to say, but if we’re going to use it, we’ll let you know." Because we had said we want to object to it; we want to take it up with the Court. So, defendants clearly knew that we were going to object to the admissibility of the document. And then it pops up in opening argument?

MR. BIZAR: It didn’t "pop up," I just mentioned it.

MS. REUBEN: It was a little more than just a "mention."

MR. BIZAR: I "mentioned" it three times.

MS. REUBEN: So the cat is out of the bag at that point. But the reason that we were so upset about it, about how it happened is, we sort of felt like we had clearly said it’s not admissible, we are going to fight you on it, and then it came up in the opening argument.

MR. BIZAR: And then the witness, I actually—

MS. REUBEN: The witness did walk into it.

MR. BIZAR: The witness I actually did want to use it with, Ken Klippen, and they pulled from the trial.

MS. REUBEN: Right. It would be unusual for us to point out the fact that you did not use it, because I do not think we wanted to draw more attention to.

MR. BERGER: I have loads more questions, but I do want to give folks a chance. If anyone has questions they would like to ask, here is your opportunity.

[Page 58]

QUESTION BY KENNETH O’ROURKE: Yes, I have one. Hi, I am Ken O’Rourke. I have a question. This is a trial in the agricultural industry, alleged anticompetitive activity and so forth. Two words I have not heard from the panelists are Capper-Volstead [Act], the statutory exemption for that industry to price fix.

MR. BIZAR: It is on Judge Berger’s list, by the way.

MR. O’ROURKE: I AM just curious if it played out in your trial, and how.

MR. BIZAR: Let me respond quickly. Capper-Volstead is an act that gives antitrust immunity for agricultural cooperatives. It is really hard to establish Capper-Volstead immunity. You have to be operating a farm, basically. It is sort of an outdated statutory exemption. If I have another agricultural case, you will see me somehow use it, notwithstanding that.

There were two ways it was raised. One was with respect to the UEP, the initial trade organization. The second one was with respect to the USEM. My client destroyed the Capper-Volstead exemption for UEP because it was difficult to explain relationship where they do not actually operate the farms, but they take all the output of more than 100 family farms and they have a right to those farms’ eggs. And, so, that was sufficient. Capper-Volstead was blown out long before I got in the case. I was only involved in the trial as to the defense because of RW Sauder.

We still wanted it to be applicable to USEM, which RW Sauder was not a member of. So, it fell to Rose Acre or other defendants to try to establish it, and it was the longest, most tortured, part of the trial, from my perspective.

MS. REUBEN: Not just yours.

MR. BIZAR: If they had gotten it, it would have been a nice defense for us on exports, but getting to it was like the Bataan Death march of trial experiences. And they, were not going to get there. So, I was advocating the whole time to just drop it. And Mindee and her colleagues, very graciously, moved for a directed verdict on our affirmative defense. . . .

MS. REUBEN: We wanted to put Steve out of his misery.

MR. BIZAR: And they got it, and I was happy.

MS. REUBEN: Yeah. Capper-Volstead started all the way back with the answers and affirmative defenses. All the defendants asserted Capper-Volstead, and then we moved for summary judgment affirmatively and we won on UEP. But we did not win on USEM because we did not put up enough evidence. It was torturous. I will not even bore you or confuse you with it. We did not prove it. But then we get to trial and we file our motion for directed verdict on this 50 percent rule with regard to USEM. And, I think we also made a similar challenge that we did to Sauder as well, but with other members of the USEM, to try to get it bounced.

The long and the short of it is, it came down to this language in the statute of, what does the term "value" mean? The statute says, "The Association shall not deal in products of non-members to amount greater in value than such are handled by the members." And Rose Acre, in its defense, really focused on volume and some way to translate volume into value. We focused on value. We said you can figure out the value, you just did not do it. But, talk about torturous. We filed a motion for directed verdict. We have a conference inside the courtroom. The judge comes back and says, "I need you to answer these three questions, like how would you actually calculate it?" We are all trying to do the math. Then we submit those papers.

[Page 59]

The judge decides finally that "value" actually means the price that the buyer pays for the eggs and not the volume, but she does not grant our motion for directed verdict because the defendants had not yet closed the case. So we go back into trial, and it turns out they do not put on any more evidence. That might have been a witness issue, frankly. There was a witness that had been there and then left, and they may not have been able to get back—

MR. BIZAR: Linda Reichart.

MS. REUBEN: Yeah, Linda Reichart. Then we renewed our motion for directed verdict, and then it was finally granted because the Court found that defendants had not provided enough information on that issue. It may be one of the few times that plaintiffs have actually moved for a directed verdict and gotten it. I have to give a shout out here because Jeannine Kenney, from the Hausfeld firm, was the one who really took the laboring oar on that motion and did really a fabulous job on it.

MR. BIZAR: We should send her a Christmas gift.

MS. REUBEN: You should.

MR. BERGER: I saw another question in the middle back there.

QUESTION BY SUSAN SAYLOR: Hi. I’m Susan Saylor, with the Attorney

General’s office. I observed really different styles between the two parties, and it made me curious about who your jurors were and whether or not you got feedback on which arguments were effective with them.

MS. REUBEN: I am not going to answer this question just because we have post-trial motions going on we are probably taking up on appeal, so it is a little bit of an uncomfortable place for me to be right now.

MR. BERGER: Steve?

MR. BIZAR: First of all, we had a jury of 12 which is, I think, important in a long trial, and we lost a couple along the way, and so I think it was ten at the end of the day that deliberated; is that right?

MS. REUBEN: Yes.

MR. BIZAR: They were a mix of people. We talked to them extensively after the trial. At least with respect to my client, they were very comfortable with him. They trusted him as a farmer, and viewed him as an honest broker. That was an important piece of news.

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QUESTION BY PETER HUSTON: I think everyone is always interested in jury research, mock jury. If you could each address that, I think that would be interesting.

MR. BIZAR: RW Sauder did no mock jury exercises. We had a jury profile. In a case like this you are dealing with commercial egg farming. Commercial agriculture is not necessarily perceived well by millennials, so you want to be mindful of that. It is actually better in some ways for the hens than when they run around. It is easier to care for them and keep them out of things they should not be in. But the reality is, we were concerned about millennials on the jury.

MS. REUBEN: Both sides actually had jury consultants in the room when they were picking a jury. Rose Acre had one and the plaintiff had one that was there when they were picking the jury. It was a mix. It was about 50/50 men and women.

MR. BIZAR: It was seven—

MS. REUBEN: Seven men.

MR. BIZAR: Seven women.

MS. REUBEN: I cannot remember what was left at the end of the day. It is like I blocked it out of my mind.

MR. BIZAR: At the end, we lost one of each.

MS. REUBEN: Yes.

MR. BERGER: Thank you.

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Notes:

^1. Mr. Berger is Chair of the Executive Committee of the Antitrust, UCL and Privacy Section and a Trial Attorney as the United States Department of Justice. Any views expressed in this panel by Mr. Berger are his own and not those of the United States Department of Justice.

^2. Case No. 2:08-md-02002-GP (E.D. Penn.)