      Case: 12-40085          Document: 00512355307            Page: 1   Date Filed: 08/27/2013




            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                                FILED
                                                                              August 27, 2013

                                                No. 12-40085                   Lyle W. Cayce
                                                                                    Clerk

In the Matter of: PILGRIM’S PRIDE CORPORATION,

                                                        Debtor

---------------------------------------------

GARY HEATH AGERTON; JACOB WILSON AGERTON; JERRY
AGERTON; SANDRA AGERTON; DANIEL ALBRITTON, ET AL.,

                                                        Appellees
v.

PILGRIM’S PRIDE CORPORATION,

                                                        Appellant



                      Appeal from the United States District Court
                            for the Eastern District of Texas


Before DAVIS and SMITH, Circuit Judges.*
PER CURIAM:
        Appellant Pilgrim’s Pride Corporation (“PPC”), a large producer of
processed chicken, idled a number of its chicken processing facilities with the
alleged goal of reducing the excess chicken supply and increasing prices.
Appellee chicken growers filed suit and obtained a money judgment against PPC


        *
            This matter is being decided by a quorum. 28 U.S.C. § 46(d).
    Case: 12-40085     Document: 00512355307     Page: 2    Date Filed: 08/27/2013



                                  No. 12-40085

for damages the district court found arose from PPC’s unlawful attempt to
manipulate or control poultry prices. Because PPC’s unilateral decision to reduce
production was neither illegitimate nor anti-competitive, we REVERSE and
RENDER judgment in favor of PPC.
                                        I.
      PPC, a Delaware corporation, is one of the world’s largest suppliers of
chicken and processed chicken products. The heart of PPC’s operations is its
network of chicken processing facilities located in the Southeast United States,
from which it produces chicken for four primary product markets: (1) prepared
chicken foods, (2) fresh food service, (3) retail or case-ready chicken, and (4)
commodity chicken. PPC does not actually raise the chickens processed by these
facilities, instead relying upon the husbandry services of dozens of local chicken
growers. Under its Poultry Grower Agreements with chicken growers, PPC
provides the chicks, feed, and other supplies, and the chicken growers provide
the facilities and labor necessary to raise the chickens.
      Facing severe economic difficulties in 2008, PPC ceased profitability and
began losing substantial amounts of money. The primary reason for PPC’s
mounting financial problems appeared to be the company’s over-extension into
the commodity chicken market, of which PPC held an estimated 50% market
share. When PPC evaluated its operations, it concluded that it was
unnecessarily producing a surplus of commodity chicken at great cost to itself.
In an effort to stem its losses and streamline operations, PPC closed or idled
several processing and distribution facilities, divested assets, restructured
supply contracts, and laid off a number of employees. However, these measures
proved ineffective and PPC ultimately filed for Chapter 11 bankruptcy relief in
December 2008.
      One of the PPC facilities most affected by the company’s financial
challenges was its El Dorado, Arkansas, processing complex. Identified as a

                                        2
    Case: 12-40085       Document: 00512355307     Page: 3   Date Filed: 08/27/2013



                                    No. 12-40085

potential candidate for strategic decommission, the El Dorado facility struggled
with high operating costs, poor performance, and low-margin operations focused
on commodity chicken. PPC hoped that by divesting itself of underperforming
and unprofitable assets producing commodity chicken, it could increase
profitability while de-emphasizing its position in a riskier market. By reducing
PPC’s output and the surplus supply of commodity chicken, it is also alleged that
PPC hoped commodity chicken prices would stabilize at a higher equilibrium
price.
         After PPC filed for bankruptcy, it received approval from both the
bankruptcy court and the unsecured creditors committee to idle or sell three of
its processing complexes, including the El Dorado facility. PPC was unable to
solicit an offer that even approached the El Dorado facility’s appraised value,
and the facility was officially idled in May 2009. As a result of the facility’s
closure, the husbandry services of some 163 contract chicken growers were no
longer needed, and PPC rejected all related Poultry Grower Agreements.
         In response to the termination of their growing agreements, a group of the
affected chicken growers filed suit under the Packers and Stockyards Act of 1921
(“PSA”). 7 U.S.C. §§ 181 et seq. Specifically, the growers alleged that PPC had
engaged in a course of business for the purpose of “manipulating or controlling
prices” in violation of PSA § 192(e). The growers originally filed suit in
bankruptcy court in the Northern District of Texas. A district judge then
withdrew the reference to bankruptcy court and transferred the case to the
Eastern District of Texas, where it was referred by consent to a magistrate judge
under 28 U.S.C. § 636(c). At a trial before a magistrate judge, the judge found
that one of PPC’s goals in the idling of the El Dorado facility was to reduce the
supply of commodity chicken and thereby pressure prices upward. Reasoning
that the magnitude of PPC’s operations and actions was likely to lead to a
competitive injury, the magistrate judge concluded that PPC’s actions violated

                                          3
    Case: 12-40085         Document: 00512355307      Page: 4   Date Filed: 08/27/2013



                                    No. 12-40085

PSA § 192(e). To remedy PPC’s violation, the magistrate judge awarded over $25
million to the chicken growers as part of the final judgment. The magistrate
judge resigned soon after issuing the judgment, and a district judge ruled on the
post-judgment motions. PPC now appeals.
                                          II.
      We review a district court’s findings of fact for clear error and its
conclusions   of     law    de   novo.   City    of   New   Orleans    v.   BellSouth
Telecommunications, Inc., 690 F.3d 312, 322 (5th Cir. 2012).
                                          III.
      PPC first argues that the district court erred in its conclusion that PPC’s
deliberate reduction in commodity chicken output constitutes an illegal
manipulation of poultry prices under the PSA.
      Under the relevant provision of the PSA,

      It shall be unlawful for . . . any live poultry dealer with respect to
      live poultry, to:
      ....
      (e) Engage in any course of business or do any act for the purpose or
      with the effect of manipulating or controlling prices . . . .

7 U.S.C. § 192(e). In finding a violation of § 192(e), the district court’s analysis
was simple: If PPC hoped to increase chicken prices by reducing the quantity of
chicken offered on the market, then it had attempted to manipulate chicken
prices and thereby violated the PSA. However, PPC contends that the district
court’s simplistic interpretation of § 192(e) is flawed. Specifically, PPC argues
that § 192(e) is an antitrust statute, and therefore is only violated by attempts
to affect market prices which are anti-competitive, or “injurious to competition.”
Because its output reductions were not anti-competitive, PPC asserts, it has not
violated § 192(e).




                                           4
     Case: 12-40085       Document: 00512355307         Page: 5     Date Filed: 08/27/2013



                                       No. 12-40085

       In response, the growers emphasize that violations of the PSA are not
strictly limited to the traditional antitrust realms of price-fixing conspiracies and
monopolization. Rather, the history of the PSA supports a “wider power to
prohibit unfair methods of competition than did antecedent anti-trust
legislation.” Wheeler v. Pilgrim’s Pride Corp., 591 F.3d 355, 357 (5th Cir. 2009)
(en banc).
       In Wheeler v. Pilgrim’s Pride, the en banc court considered whether PPC
had violated PSA §§ 192(a) or (b) by providing preferential terms of dealing to
certain chicken growers. Id. Of particular concern to the Wheeler court was the
broad prohibition of § 192(a), which makes it unlawful to “[e]ngage in or use any
unfair . . . or deceptive practice.” We first observed that “the object of the PSA
was to secure the flow of livestock from the farms and ranges to the slaughtering
center and into meat products unburdened by collusion that unduly lowered the
prices to the shipper and unduly increased the price to the consumer.” Id. at 358
(emphasis added). We next reviewed the decisions of our sister circuits, which
unanimously agreed that the PSA’s proscription of unfair practices is aimed only
at anti-competitive conduct. See id. at 358–60.1 Despite the lack of any explicit
language in § 192(a) requiring an anti-competitive effect, we concluded that “an
anti-competitive effect is necessary for an actionable claim under the PSA in
light of the Act’s history in Congress and its consistent interpretation by the
other circuits.” Id. at 362.
       Our decision in Wheeler leaves little doubt that § 192(e) proscribes only
anti-competitive conduct. Moreover, unlike the broad language of § 192(a), §
192(e) explicitly requires a purpose or effect of “manipulating or controlling



       1
         See also Terry v. Tyson Farms, Inc., 604 F.3d 272, 277 (6th Cir. 2010) (“The tide has
now become a tidal wave . . . . All told, seven circuits—the Fourth, Fifth, Seventh, Eighth,
Ninth, Tenth, and Eleventh Circuits—have now weighed in on this issue, with unanimous
results.”) (citing cases).

                                              5
     Case: 12-40085        Document: 00512355307           Page: 6      Date Filed: 08/27/2013



                                         No. 12-40085

prices.” Because the protection of natural price levels is the object of prohibitions
against anti-competitive conduct, § 192(e) is clearly directed at conduct that is
anti-competitive.2 See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223
(1940).
       The express wording of § 192(e) bolsters this conclusion. Section 192(e)
does not forbid all conduct which might affect prices, but only conduct that is
designed to manipulate or control prices. In the absence of statutory definitions,
“manipulation” ordinarily requires the use of deceptive or unfair means to
accomplish something;3 “control” connotes the exercise of power or force to
accomplish something that would not happen in the absence of interference.4 By
using the words “manipulate” and “control” in § 192(e), Congress thus prohibited




       2
          Even the dissent in Wheeler conceded a requirement of anti-competitive effect in §
192(e): “Subsections (c)–(e) [of § 192], unlike subsections (a) and (b), prohibit only those acts[]
which have the effect of ‘restraining commerce’ or which produce another common antitrust
injury, such as ‘creating a monopoly.’” See Wheeler, 591 F.3d at 374 (Garza, J., dissenting).
Although divided as to the meaning of § 192 (a)–(b), the Wheeler en banc court was thus
unanimous that § 192(e) is not violated absent a showing of anti-competitive conduct.
       3
         See, e.g., Schreiber v. Burlington Northern, Inc., 472 U.S. 1, 12 (1985) (“We hold that
the term ‘manipulative’ as used in [Securities Exchange Act] § 14(e) requires
misrepresentation or nondisclosure. It connotes ‘conduct designed to deceive or defraud
investors by controlling or artificially affecting the price of securities.’” (citation omitted));
Ernst & Ernst v. Hochfelder, 425 U.S. 185, 199 (1976) (“[‘Manipulative’] connotes intentional
or willful conduct designed to deceive or defraud investors by controlling or artificially
affecting the price of securities.”); OXFORD ENGLISH DICTIONARY (defining “manipulate” to
mean “to manage, control, or influence in a subtle, devious, or underhand manner;” “to cause
(stocks, currency, a commodity, etc.) to rise or fall in value by affecting the market illicitly,
improperly, or by contrived methods”).
       4
          See, e.g., In re ATM Fee Antitrust Litig., 686 F.3d 741, 757 (9th Cir. 2012) (“Control
means ‘to exercise restraint or direction over; dominate, regulate, or command.’” (citation
omitted)), petition for cert. Filed (July 11, 2013) (No. 13-63); Marcus & Millichap Inv. Servs.
of Chicago, Inc., v. Sekulovski, 639 F.3d 301 (7th Cir. 2011) (“‘[C]ontrol means that the
employer has the right to control and direct the worker . . .’” (citation omitted)); OXFORD
ENGLISH DICTIONARY (defining “control” to mean “to exercise restraint or direction upon the
free action of; to hold sway over, exercise power or authority over; to dominate, command”).

                                                6
     Case: 12-40085       Document: 00512355307         Page: 7    Date Filed: 08/27/2013



                                      No. 12-40085

only deceptive, illegitimate, or unnatural—i.e., anti-competitive—attempts to
influence prices.
       The relevant question thus becomes whether PPC’s decision to reduce its
chicken output was improper and anti-competitive. When evaluating competitive
injury, we ordinarily rely upon a “rule of reason” analysis: in light of all the
relevant facts, an action is unlawful only if it is likely to suppress or destroy
competition. See Am. Needle, Inc. v. NFL, 130 S.Ct. 2201, 2216–17 (2010).5
       The growers’ alleged injury to competition stems entirely from PPC’s
alleged intent to influence prices. However, we remain conscious of the fact that
laws against anti-competitive conduct seek to protect competition, not low prices.
Competition, of course, is merely the existence of genuine commercial rivalry.
While we agree that a goal of competition is lower price levels, a unilateral
attempt to raise prices, without more, is not inherently illicit or anti-
competitive.6 As the Supreme Court explained in Spectrum Sports, Inc. v.
McQuillan,
       The purpose of [antitrust law] is not to protect businesses from the
       working of the market; it is to protect the public from the failure of
       the market. The law directs itself not against conduct which is
       competitive, even severely so, but against conduct which unfairly
       tends to destroy competition itself. It does so not out of solicitude for
       private concerns but out of concern for the public interest.

506 U.S. 447, 458 (1993). Moreover, because healthy competition depends on
individual firms aggressively pursuing their own interests, we are particularly




       5
        See Pickett v. Tyson Fresh Markets, Inc., 420 F.3d 1272, 1280–85 (11th Cir. 2005)
(applying de facto rule of reason analysis in PSA case); IBP, Inc. v. Glickman, 187 F.3d 974,
977–78 (8th Cir. 1999) (same).
       6
        See OXFORD ENGLISH DICTIONARY (defining competition as “the action of endeavouring
to gain what another endeavours to gain at the same time; the striving of two or more for the
same object; rivalry”).

                                             7
     Case: 12-40085        Document: 00512355307           Page: 8     Date Filed: 08/27/2013



                                        No. 12-40085

hesitant to condemn the unilateral act of a single firm.7 See also Armour & Co.
v. United States, 402 F.2d 712, 717 (7th Cir. 1968) (finding that absent
“predatory intent” or “the likelihood of injury to competition,” the PSA is not
violated).
       In the instant case, PPC had overextended itself into the commodity
chicken market, was producing more chicken than the market appeared to need,
and was thereby driving the market price of chicken down at great cost to itself.
Recognizing the damage inflicted by its own excess production, PPC wisely
decided to stop flooding the market with unprofitable chicken.8 Not surprisingly,
we have located no case finding such conduct to be unfair, illegal, or injurious to
competition; in truth, PPC’s unilateral conduct had nothing to do with
competition. Even if PPC hoped that chicken prices would respond to the output
reduction by settling at a higher equilibrium price, that would not alter our
conclusion.9 Far from being a nefarious goal, higher prices are the natural
consequence of a reduction in supply.10 If it is lawful for a business to
independently control its own output, then it is also lawful for the business to
hope for the natural consequences of its actions.11

       7
           See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767–69 (1984).
       8
        This is not the type of pro-competitive business justification which arguably must be
properly pled as an affirmative defense to a prima facie showing of anti-competitive conduct.
See NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 113 (1984). This is merely evidence
relevant to whether there was any underlying anti-competitive conduct to begin with. See
American Needle, 130 S.Ct. at 2216–17.
       9
          See American Needle, 130 S.Ct. at 2216 n.10 (recognizing that even a devious
intention will not necessarily de-legitimize an otherwise permissible act, “‘because knowledge
of intent [is to] help the court to interpret facts and to predict consequences.’” (quoting Bd. of
Trade of Chicago v. United States, 246 U.S. 231, 238 (1918)).
       10
            See PAUL A. SAMUELSON, ECONOMICS 56–60 (11th ed. 1980).
       11
          We separately note that the district court found that PPC did not violate PSA §
192(a) because it did not engage in any “unfair” or “deceptive” practices. As some courts have
described this provision as the PSA’s “catchall,” it would be anomalous to conclude that PPC

                                                8
     Case: 12-40085       Document: 00512355307          Page: 9     Date Filed: 08/27/2013



                                       No. 12-40085

       PPC’s conduct was merely the legitimate response of a rational market
participant to changes in a dynamic market. If a firm inadvertently over-
produces a good and drives down prices, it does not break the law by cutting
production so that prices may recover. We therefore hold that PPC did not
violate PSA § 192(e) by reducing its commodity chicken output.
                                             IV.
       For the reasons stated above, the judgment of the district court is
REVERSED, and judgment is RENDERED in favor of PPC.
       REVERSED and RENDERED.




did not do anything unfair or deceptive, but that it did illegitimately attempt to manipulate
or control prices. See Been v. O.K. Indus., Inc., 495 F.3d 1217, 1229 (10th Cir. 2007).
       While a better argument could be made that PPC violated the PSA by intentionally
creating a chicken supply shortage, nothing in the record supports that assertion. Moreover,
in the months following the El Dorado facility’s idling, the total domestic supply of commodity
chicken actually increased. Thus, the chicken processing industry either had enough new
entrants or enough unused capacity to immediately compensate for any supply shortage
created by PPC.

                                              9
