On March 15, 2022,
\u00a0
plaintiffs filed a
\u00a0
second suit against the
\u00a0
Company and several
\u00a0
defendants in Bell et
\u00a0
al. v.
\u00a0
Cal-Maine Foods
et al.,
\u00a0
Case No.
\u00a0
1:22-cv-246, in
\u00a0
the Western
\u00a0
District of
\u00a0
Texas,
\u00a0
Austin Division
\u00a0
alleging the
\u00a0
same assertions
\u00a0
as laid
\u00a0
out in
\u00a0
the
first
\u00a0
complaint.
\u00a0
On
\u00a0
August
\u00a0
12,
\u00a0
2022,
\u00a0
the
\u00a0
Company
\u00a0
and
\u00a0
other
\u00a0
defendants
\u00a0
in
\u00a0
the
\u00a0
case
\u00a0
filed
\u00a0
a
\u00a0
motion
\u00a0
to
\u00a0
dismiss
\u00a0
the
\u00a0
plaintiffs\u2019
class action
\u00a0
complaint. On
\u00a0
January 9,
\u00a0
2023, the
\u00a0
court entered
\u00a0
an order
\u00a0
and final
\u00a0
judgement granting
\u00a0
the Company\u2019s
\u00a0
motion to
On February
\u00a0
8, 2023,
\u00a0
the plaintiffs
\u00a0
appealed
\u00a0
the lower
\u00a0
court\u2019s
\u00a0
judgement
\u00a0
to the
\u00a0
United States
\u00a0
Court of
\u00a0
Appeals for
\u00a0
the Fifth
Circuit, Case No.
\u00a0
23-50112.
\u00a0
The parties filed
\u00a0
their respective appellate
\u00a0
briefs, but the
\u00a0
court has not
\u00a0
ruled on these
\u00a0
submissions.
Management believes the risk of material loss related to both matters to be remote.
Kraft Foods Global, Inc. et al. v.
\u00a0
United Egg Producers, Inc. et al.
\u00a0
As previously
\u00a0
reported, on
\u00a0
September 25,
\u00a0
2008, the
\u00a0
Company
\u00a0
was named
\u00a0
as one
\u00a0
of several
\u00a0
defendants
\u00a0
in numerous
\u00a0
antitrust
cases involving
\u00a0
the United
\u00a0
States shell
\u00a0
egg
\u00a0
industry.
\u00a0
The Company
\u00a0
settled all
\u00a0
of these
\u00a0
cases, except
\u00a0
for
\u00a0
the claims
\u00a0
of certain
plaintiffs who sought substantial
\u00a0
damages allegedly arising from
\u00a0
the purchase of egg products (as
\u00a0
opposed to shell eggs). These
remaining plaintiffs
\u00a0
are Kraft Food
\u00a0
Global, Inc.,
\u00a0
General Mills, Inc.,
\u00a0
and Nestle USA,
\u00a0
Inc. (the
\u00a0
\u201cEgg Products
\u00a0
Plaintiffs\u201d) and,
until a subsequent settlement was reached as described below,
\u00a0
The Kellogg Company.
On September
\u00a0
13, 2019,
\u00a0
the case
\u00a0
with the
\u00a0
Egg Products
\u00a0
Plaintiffs was
\u00a0
remanded from
\u00a0
a multi-district
\u00a0
litigation proceeding
\u00a0
in
the
\u00a0
United
\u00a0
States
\u00a0
District
\u00a0
Court
\u00a0
for
\u00a0
the
\u00a0
Eastern
\u00a0
District
\u00a0
of
\u00a0
Pennsylvania,
\u00a0
In
\u00a0
re
\u00a0
Processed
\u00a0
Egg
\u00a0
Products
\u00a0
Antitrust
\u00a0
Litigation,
MDL No. 2002, to
\u00a0
the United States District Court
\u00a0
for the Northern District
\u00a0
of Illinois, Kraft Foods Global,
\u00a0
Inc. et al. v.
\u00a0
United
Egg
\u00a0
Producers,
\u00a0
Inc.
\u00a0
et
\u00a0
al., Case
\u00a0
No.
\u00a0
1:11-cv-8808,
\u00a0
for
\u00a0
trial. The
\u00a0
Egg
\u00a0
Products
\u00a0
Plaintiffs
\u00a0
alleged
\u00a0
that
\u00a0
the
\u00a0
Company
\u00a0
and
\u00a0
other
defendants
\u00a0
violated
\u00a0
Section
\u00a0
1
\u00a0
of
\u00a0
the
\u00a0
Sherman
\u00a0
Act,
\u00a0
15.
\u00a0
U.S.C.
\u00a0
\u00a7
\u00a0
1,
\u00a0
by
\u00a0
agreeing
\u00a0
to
\u00a0
limit
\u00a0
the
\u00a0
production
\u00a0
of
\u00a0
eggs
\u00a0
and
\u00a0
thereby
illegally
\u00a0
to
\u00a0
raise
\u00a0
the
\u00a0
prices
\u00a0
that
\u00a0
plaintiffs
\u00a0
paid
\u00a0
for
\u00a0
processed
\u00a0
egg
\u00a0
products.
\u00a0
In
\u00a0
particular,
\u00a0
the
\u00a0
Egg
\u00a0
Products
\u00a0
Plaintiffs
\u00a0
attacked
certain features of
\u00a0
the United Egg
\u00a0
Producers animal-welfare guidelines
\u00a0
and program used by
\u00a0
the Company and
\u00a0
many other egg
On October 24, 2019,
\u00a0
the Company entered into
\u00a0
a confidential settlement agreement
\u00a0
with The Kellogg Company
\u00a0
dismissing all
claims against the
\u00a0
Company for an
\u00a0
amount that did
\u00a0
not have a
\u00a0
material impact on
\u00a0
the Company\u2019s
\u00a0
financial condition or
\u00a0
results
of operations.
\u00a0
On November
\u00a0
11,
\u00a0
2019, a
\u00a0
stipulation
\u00a0
for dismissal
\u00a0
was filed
\u00a0
with the
\u00a0
court, and
\u00a0
on March
\u00a0
28, 2022,
\u00a0
the court
dismissed the Company with prejudice.
The trial of this case began
\u00a0
on October 17, 2023. On December
\u00a0
1, 2023, the jury returned a decision
\u00a0
awarding the Egg Products
17.8
\u00a0
million
\u00a0
in damages.
\u00a0
If the
\u00a0
jury\u2019s
\u00a0
decision
\u00a0
is ultimately
\u00a0
upheld,
\u00a0
the defendants
\u00a0
would
\u00a0
be jointly
\u00a0
and
\u00a0
severally
liable
\u00a0
for
\u00a0
treble
\u00a0
damages,
\u00a0
or
\u00a0
$
53.3
\u00a0
million,
\u00a0
subject
\u00a0
to
\u00a0
credit
\u00a0
for
\u00a0
the
\u00a0
Kellogg
\u00a0
settlement
\u00a0
described
\u00a0
above
\u00a0
and
\u00a0
certain
\u00a0
other
settlements with
\u00a0
previous
\u00a0
settling defendants,
\u00a0
plus the
\u00a0
Egg Product
\u00a0
Plaintiffs\u2019
\u00a0
reasonable
\u00a0
attorneys\u2019
\u00a0
fees. This
\u00a0
decision is
\u00a0
not
final and
\u00a0
remains subject
\u00a0
to the
\u00a0
defendants\u2019 motion
\u00a0
for a
\u00a0
directed verdict
\u00a0
noted below
\u00a0
and appeals
\u00a0
by the
\u00a0
parties. During
\u00a0
our
second fiscal quarter
\u00a0
of 2024, we
\u00a0
recorded an accrued
\u00a0
expense of $
19.6
\u00a0
million in
\u00a0
selling, general and
\u00a0
administrative expenses
in
\u00a0
the
\u00a0
Company\u2019s
\u00a0
Condensed
\u00a0
Consolidated
\u00a0
Statements
\u00a0
of
\u00a0
Income
\u00a0
and
\u00a0
classified
\u00a0
as
\u00a0
other
\u00a0
noncurrent
\u00a0
liabilities
\u00a0
in
\u00a0
the
Company\u2019s
\u00a0
Condensed Consolidated
\u00a0
Balance Sheets. The
\u00a0
accrual represents
\u00a0
our estimate of
\u00a0
the Company\u2019s
\u00a0
proportional share
of the reasonably
\u00a0
possible ultimate damages
\u00a0
award, excluding the Egg
\u00a0
Product Plaintiffs\u2019 attorneys\u2019
\u00a0
fees that we believe
\u00a0
would
be approximately offset
\u00a0
by the credits noted
\u00a0
above. We
\u00a0
and the other
\u00a0
defendants are discussing
\u00a0
apportionment, and our
\u00a0
accrual
may change in
\u00a0
the future based on
\u00a0
the outcome of
\u00a0
those discussions. Our
\u00a0
accrual may also
\u00a0
be revised in
\u00a0
whole or in
\u00a0
part in the
future to the extent we
\u00a0
are successful in further proceedings
\u00a0
in the litigation.
\u00a0
On November 29, 2023, the
\u00a0
defendants, including
the Company,
\u00a0
filed a
\u00a0
motion for
\u00a0
judgment as
\u00a0
a matter
\u00a0
of law
\u00a0
in their
\u00a0
favor,
\u00a0
known as
\u00a0
a directed
\u00a0
verdict, notwithstanding
\u00a0
the
jury\u2019s decision. The Company intends
\u00a0
to continue to vigorously defend the claims asserted by the Egg Products Plaintiffs.
State of Oklahoma Watershed Pollution
\u00a0
Litigation
On June
\u00a0
18, 2005,
\u00a0
the State
\u00a0
of Oklahoma
\u00a0
filed suit,
\u00a0
in the
\u00a0
United States
\u00a0
District Court
\u00a0
for the
\u00a0
Northern District
\u00a0
of Oklahoma,
against Cal-Maine
\u00a0
Foods,
\u00a0
Inc. and
\u00a0
Tyson
\u00a0
Foods,
\u00a0
Inc., Cobb-Vantress,
\u00a0
Inc., Cargill,
\u00a0
Inc., George\u2019s,
\u00a0
Inc., Peterson
\u00a0
Farms, Inc.
and
\u00a0
Simmons
\u00a0
Foods,
\u00a0
Inc.,
\u00a0
and
\u00a0
certain
\u00a0
of
\u00a0
their
\u00a0
affiliates.
\u00a0
The
\u00a0
State
\u00a0
of
\u00a0
Oklahoma
\u00a0
claims
\u00a0
that
\u00a0
through
\u00a0
the
\u00a0
disposal
\u00a0
of
\u00a0
chicken
litter the
\u00a0
defendants polluted
\u00a0
the Illinois
\u00a0
River Watershed.
\u00a0
This watershed
\u00a0
provides water
\u00a0
to eastern
\u00a0
Oklahoma. The
\u00a0
complaint
sought
\u00a0
injunctive
\u00a0
relief
\u00a0
and
\u00a0
monetary
\u00a0
damages,
\u00a0
but
\u00a0
the
\u00a0
claim
\u00a0
for
\u00a0
monetary
\u00a0
damages
\u00a0
was dismissed
\u00a0
by
\u00a0
the
\u00a0
court.
\u00a0
Cal-Maine
Foods,
\u00a0
Inc.
\u00a0
discontinued
\u00a0
operations
\u00a0
in
\u00a0
the
\u00a0
watershed
\u00a0
in
\u00a0
or
\u00a0
around
\u00a0
2005.
\u00a0
Since
\u00a0
the
\u00a0
litigation
\u00a0
began,
\u00a0
Cal-Maine
\u00a0
Foods,
\u00a0
Inc.
purchased
100
%
\u00a0
of
\u00a0
the
\u00a0
membership
\u00a0
interests
\u00a0
of
\u00a0
Benton
\u00a0
County
\u00a0
Foods,
\u00a0
LLC,
\u00a0
which
\u00a0
is
\u00a0
an
\u00a0
ongoing
\u00a0
commercial
\u00a0
shell
\u00a0
egg
operation within
\u00a0
the Illinois
\u00a0
River Watershed.
\u00a0
Benton County
\u00a0
Foods, LLC
\u00a0
is not
\u00a0
a defendant
\u00a0
in the
\u00a0
litigation. We
\u00a0
also have
\u00a0
a
number of small contract producers that operate in the area.