Jury Fines Meat Packers Millions

Jurors in a federal class action trial fined three out of four of the nation’s largest multinational meat packers for ignoring incorrect boxed-beef price reports issued by USDA in the spring of 2001. Compiled by staff 

Published on: Apr 13, 2006

Three of the nation's largest multinational meat packers were found guilty of ignoring incorrect boxed-beef price reports issued by the USDA during a six-week period in the spring of 2001.

Jurors in the federal class action trial underway since April 3 in Aberdeen, S.D., reached a unanimous verdict against the meat companies. Jurors recommended a $4 million fine against Tyson, a $3 million fine against Cargill, and a $2.25 million fine against Swift. The jurors found National Beef not liable.

The lawsuit was filed in July 2002 by three cattle producers: R-CALF USA Co-Founder and Region III Director Herman Schumacher of South Dakota, Michael Callicrate of Kansas, and Roger Koch of Nebraska. Each of these men sold cattle to the defendant-packing companies during the misreporting period.

In June 2004, U.S. District Court Judge Charles Kornmann certified the case as a class action on behalf of all cattle producers who sold fed cattle on the cash market, or a basis affected by it, during the misreporting period to any of the four packer defendants. The packers also filed motions to have the case dismissed, before and during the trial; Kornmann denied each of those requests.

Kornmann is the same judge who ruled against the beef checkoff in 2001.

According to wire reports, Tyson intends to appeal the verdict.

The misreporting of boxed beef prices occurred at the start of mandatory reporting of boxed beef prices, which took effect April 2, 2001. Under the mandatory reporting law, the packers were required to report twice daily to USDA certain information on cattle prices, including prices being received by the packers for boxed-beef cuts.

USDA’s duty was to then release the price information to the public, so cattle producers and other market players would have accurate, up-to-date information on cattle prices for their business operations. During the misreporting period, the prices the packers reported contained substantial errors that actually underreported the price the packers were receiving for boxed beef, which had the effect of depressing the prices cattle producers received for fed cattle sold to the packers during the same time period.

The reporting errors occurred in Choice and Select USDA boxed beef prices, with Choice prices underreported by between $1 per hundredweight (cwt) to more than $6 cwt during the period, and Select prices generally underreported by about $1 cwt for most of the period.

The lawsuit alleged the packer-defendants violated the Packers and Stockyards Act, which prohibits unfair and deceptive practices by packers and stockyards. The suit claimed the packers’ conduct was unlawful because the packers knew from their internal records what prices they were receiving for boxed beef, while the sellers of fed cattle accepted lower prices for their cattle because of the inaccurately reported USDA boxed-beef prices.