DOJ Tactics Come Under Scrutiny After Chicken Price-Fixing Loss

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Source: Bloomberg

The Justice Department’s defeat in its lawsuit against chicken-industry executives adds to a string of antitrust losses that casts a shadow on its scrutiny of the meat industry and broader enforcement goals.

Five former and current executives from Pilgrim’s Pride Corp. and Georgia-based Claxton Poultry Farms were found not guilty of price-fixing in the trial, which ended July 7 in the US District Court for the District of Colorado. Two previous trials brought by the DOJ’s antitrust division in the same case ended with deadlocked juries.

The defeat follows the division’s first-ever attempts to bring criminal charges over alleged labor market antitrust violations, including no-poach agreements, which mostly ended in acquittals.

In the near term, the latest loss will intensify attention directed at the division’s two remaining chicken price-fixing criminal cases against four individuals, Koch Foods, and Claxton Poultry. Both are pending in the same Denver court and are likely to involve many of the same allegations and witnesses.

The DOJ’s heightened antitrust scrutiny reflects the Biden administration’s call for a more robust antitrust crackdown across federal agencies. But missteps that contributed to the spate of antitrust defeats also point to cracks in the broader government strategy, attorneys say.

“If I think my client has the better of it after this string of DOJ losses, I’m going to say maybe we should go to trial,” said Ann O’Brien, a BakerHostetler partner and former antitrust division official. “If it’s a close call, we can’t assume the DOJ will win.”

The recent losses should drive the antitrust division chief, Jonathan Kanter, and his team of lawyers to reevaluate trial tactics, focus on bringing more and stronger witnesses, and revive pre-indictment meetings with defense counsel, former division officials told Bloomberg Law.

Meanwhile, the latest defeat adds to a growing interest on the part of defense attorneys in encouraging their clients to go to trial against the DOJ instead of seeking leniency in certain cases, they said.

“All other things being equal, this makes me more willing to roll the dice” in future trials against the DOJ, said Michael Tubach, an O’Melveny partner who represented one of the defendants.

The Justice Department declined to comment.

Building House

One of the DOJ’s missteps in the trio of chicken price-fixing trials was a lack of strong witnesses and evidence, former DOJ officials said.

“You’re able to be more aggressive if you build the house first: come out with plea agreements, get people to realize they’re in trouble and plead guilty,” said Lisa Phelan, a Morrison Foerster partner who led the division’s national criminal enforcement section for 16 years.

Unlike with most other white collar crime, documents can only tell part of the story. For the rest, “You need an insider witness, a co-conspirator that can say ‘yes we did this,’” Phelan said.

But the defendants and their attorneys weren’t given the opportunity to speak with prosecutors before they were indicted, said defense attorneys Tubach, David Beller, and Anna Pletcher, who represented two of the defendants. Beller works at Recht Kornfeld P.C. and Pletcher is at O’Melveny.

Although the antitrust division isn’t required to offer such meetings, O’Brien and other former division staff said such meetings, during their tenures, were an important part of the investigative process and often served to clarify details for both sides.

“As a prosecutor, we were able to do better when we had those meetings,” O’Brien said. “That lack of engagement—it means DOJ isn’t hearing the arguments until they get to the courtroom.”

Witness testimony is vital in antitrust trials—but that dependence can backfire if the jury doesn’t trust the star witness, said Andre Geverola, an Arnold & Porter partner and former criminal litigation director at the division.

For instance, Robert Bryant, the central government witness in the case and a Pilgrim’s Pride employee, testified about the competitors’ agreement to share price data to promote profits and reduce losses. But he admitted under cross examination that he’d lied to the FBI “multiple times” on unrelated matters, according to Bloomberg News.

“It’s always tough when you have to rely on a single immunized witness to tell the story of a case,” Geverola said. “Juries are skeptical of immunized witnesses, and having only one makes it more tough.”

Roll the Dice

Kanter has been clear in his intention to focus on indictments and bring tough cases in the interest of expanding antitrust law via the courts.

But those indictments and losses can affect future cases, said Andrew Ewalt, a Freshfields partner and former division attorney.

“DOJ needs to be careful not to dismiss a loss as having an effect only on circumstances of the case, because it can create a precedent that limits their ability to win cases in the future,” Ewalt said.

Trial losses are also likely to have a chilling effect on the willingness of witnesses to come forward in search of plea deals or leniency.

Justice’s leniency program is a pillar of antitrust enforcement that allows companies and individuals to avoid punishment if they come forward with evidence of a conspiracy and assist in the investigation. But recent DOJ moves signal an interest in raising the bar for companies to qualify, Phelan said.

“These cases historically are built by obtaining plea agreements first from companies and individuals, then bringing indictments, so you have the insider testimony you need to succeed at trial,” Phelan said. “It’s like a chicken and egg—show that if you don’t cooperate, we’ll bring you to trial. The more that fails, the less likely executives are to take the plea agreement in the next case down the line.”

The case is USA v. Penn et al, D. Colo., no. 1:20-cr-00152, 7/7/22.