Philadelphia, PALooks like the fox got into the henhouse in the American Egg industry according to a 71-page complaint filed in a Pennsylvania District Court by the law firm of Cohen, Milstein, Hausfeld & Toll. The documents allege that 13 of the country's largest egg producers and 3 egg trade groups bilked direct customers of billions and billions of dollars in an egg price fixing conspiracy that violated antitrust laws.
An individual with detailed information about a near industry-wide plan to cook the cost of eggs approached the Philadelphia office of Cohen, Milstein, Hausfeld & Toll in March 2008. "This confidential source had access to a lot of internal documents and discussion," says associate attorney James Pizzirusso. "We started investigating and what we learned was that the industry, through the offices of their trade group--the United Egg Producers--was working to restrict the supply of egg-laying hens and in particular the supply of eggs."
Investigators looked at newsletters, documents and industry statements, many of which had never been released to the public. "The documents we have are not highly confidential business secrets," says Pizzirusso. "Their newsletter, as an example, is full of relevant information where they are talking about how they have all gotten together and they all to agree to reduce the output. We have been able to access the newsletters for the last 7 or 8 years."
The egg industry is extremely sensitive to the laws of supply and demand.
"Egg producers realized that just by reducing supply by a couple of percent they could see a dramatic increase in the price of eggs that would more than offset the reduced supply to the farmers."
The results of reducing supply had a dramatic impact on the bottom-line for egg producers at the expense of their customers. "From some of their own internal documents it shows that in one year they had generated excess profits of $1 billion and that was just one year," says attorney Pizzirusso. "The egg industry itself is a multibillion dollar industry and we are talking 8 years that this conspiracy has been going on, so we believe the damages would result in billions of dollars."
The class action lawsuit is filed on behalf of direct customers such as restaurants, bakeries and retailers that bought eggs directly from egg producers. "There would be tens of thousands of companies like this," says Pizzirusso. "There are many businesses in the food products sector that use shell eggs and egg products that purchase them from the defendants. There are obviously some that are rather large. Wal-Mart for example buys eggs directly from the defendants and then sells them to consumers."
Consumers who were impacted cannot make a claim under federal antitrust laws.
The egg producers and egg trade groups have said they believe their actions
were well within legal boundaries. However, Pizzirusso says, "We have some very strong evidence in the complaint we filed," says Pizzirusso. "We are very confident."
Cohen, Milstein, Hausfeld & Toll is one of the largest plaintiff class action firms in the US. Its practices areas include antitrust, consumer fraud, securities, ERISA, mass torts and environmental work.
James Pizzirusso is an associate at the firm of Cohen, Milstein, Hausfeld & Toll. He graduated from the University of Tennessee-Knoxville (summa cum laude) with a B.A. in Environmental Policy. In 2001, Mr. Pizzirusso obtained his law degree from George Washington University Law School (with honors).