Cal-Maine Foods Inc. announced that it has reached an agreement in principle to settle all direct purchaser class claims against the company. Pursuant to the agreement, reached in the In re Processed Egg Products Antitrust Litigation matter pending in Pennsylvania federal court, Cal-Maine will settle all direct purchaser class claims with a single $28 million payment.
“We remain confident that our conduct has at all times been lawful, appropriate and fair to our customers. The largest retailers and egg buyers in the country, including many of our customers, in fact, were fully aware of, and explicitly supported, the industry-wide animal welfare guidelines challenged in this litigation. And, the USDA was fully aware of, and explicitly supported, these animal welfare guidelines as well as all the other conduct the plaintiffs challenged,” said Dolph Baker, chairman, president and CEO of Cal-Maine Foods Inc. “We were able to negotiate a settlement, which would eliminate most of our exposure in the antitrust litigation against the company for an amount that we believe is in the best interest of the shareholders, employees, customers and consumers. It significantly reduces the distraction, expense, exposure and inconvenience of protracted litigation and potentially multiple appeals, and allows us to focus on executing the long-term strategy of our business.”
The terms of the settlement must be formally documented and are subject to approval by the court following notice to all class members. Cal-Maine will record a pre-tax charge in the fourth quarter of fiscal 2013 of approximately $28 million with respect to the settlement, which amounts to $17 million, $0.71 per basic share, after tax. Cal-Maine does not expect other provisions associated with the settlement to have a material impact on its results of operations. While the company expects the settlement will receive the needed approval, there can be no assurance that the court will approve the agreement as proposed by the parties.
The plaintiffs in the non-class cases that direct purchasers have filed against the company may elect to participate in the settlement or to opt out and pursue their individual claims. The settlement does not affect the class actions filed on behalf of indirect purchasers. These non-class cases and the indirect purchaser class actions also allege that the company and certain other large domestic egg producers conspired to reduce the domestic supply of eggs in an effort to raise egg prices. Cal-Maine announced that it intends to continue to vigorously defend the remaining cases and believes it has strong defenses.