proceedings. On October 31, 2022,
\u00a0
the Company and WCF appealed
\u00a0
the First District Court\u2019s
\u00a0
decision to the Supreme Court
\u00a0
of
Texas.
\u00a0
On September
\u00a0
29, 2023,
\u00a0
the Supreme
\u00a0
Court of
\u00a0
Texas
\u00a0
denied the
\u00a0
Company\u2019s
\u00a0
Petition for
\u00a0
Review and
\u00a0
remanded to
\u00a0
the
trial
\u00a0
court
\u00a0
for
\u00a0
further
\u00a0
proceedings.
\u00a0
The district
\u00a0
court
\u00a0
entered a
\u00a0
pre-trial
\u00a0
order
\u00a0
scheduling
\u00a0
pre-trial
\u00a0
proceedings
\u00a0
and
\u00a0
tentatively
setting a trial date for August 11, 2025. Management
\u00a0
believes the risk of material loss related to this matter 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 remains subject to appeals by the parties. During
\u00a0
our second fiscal quarter of 2024, we recorded an accrued expense
\u00a0
of
$
19.6
\u00a0
million in selling,
\u00a0
general and administrative
\u00a0
expenses in the
\u00a0
Company\u2019s
\u00a0
Condensed Consolidated Statements
\u00a0
of Income
and classified as
\u00a0
other noncurrent liabilities
\u00a0
in the Company\u2019s
\u00a0
Condensed Consolidated
\u00a0
Balance Sheets. The
\u00a0
accrual represents
our
\u00a0
estimate
\u00a0
of
\u00a0
the
\u00a0
Company\u2019s
\u00a0
proportional
\u00a0
share
\u00a0
of
\u00a0
the
\u00a0
reasonably
\u00a0
possible
\u00a0
ultimate
\u00a0
damages
\u00a0
award,
\u00a0
excluding
\u00a0
the
\u00a0
Egg
Product Plaintiffs\u2019
\u00a0
attorneys\u2019 fees
\u00a0
that we
\u00a0
believe would
\u00a0
be approximately
\u00a0
offset by
\u00a0
the credits
\u00a0
noted above.
\u00a0
We
\u00a0
have entered
into a judgment
\u00a0
allocation and joint
\u00a0
defense agreement
\u00a0
with the other
\u00a0
major producer
\u00a0
defendant remaining
\u00a0
in the case,
\u00a0
and are
in discussions
\u00a0
with other
\u00a0
defendants regarding
\u00a0
their contributions.
\u00a0
Our accrual
\u00a0
may change
\u00a0
in the future
\u00a0
based on
\u00a0
the outcome
of those discussions.
\u00a0
Our accrual may
\u00a0
also be revised
\u00a0
in whole or
\u00a0
in part in
\u00a0
the future to
\u00a0
the extent we
\u00a0
are successful in
\u00a0
further
proceedings in the
\u00a0
litigation.
\u00a0
On November 29, 2023,
\u00a0
the defendants, including
\u00a0
the Company,
\u00a0
filed a motion for
\u00a0
judgment as a
matter of
\u00a0
law in
\u00a0
their favor,
\u00a0
known as
\u00a0
a directed
\u00a0
verdict, notwithstanding
\u00a0
the jury\u2019s
\u00a0
decision. The
\u00a0
court denied
\u00a0
this motion
\u00a0
on
September
\u00a0
30, 2024.
\u00a0
The Company
\u00a0
is evaluating
\u00a0
the court\u2019s
\u00a0
September
\u00a0
30, 2024
\u00a0
order and
\u00a0
intends to
\u00a0
continue
\u00a0
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.
The non-jury trial in the case began in September 2009
\u00a0
and concluded in February 2010. On January 18, 2023, the court entered
findings of
\u00a0
fact and
\u00a0
conclusions of
\u00a0
law in favor
\u00a0
of the
\u00a0
State of
\u00a0
Oklahoma, but
\u00a0
no penalties
\u00a0
were assessed.
\u00a0
The court
\u00a0
found the
defendants
\u00a0
liable
\u00a0
for
\u00a0
state
\u00a0
law
\u00a0
nuisance,
\u00a0
federal
\u00a0
common
\u00a0
law
\u00a0
nuisance,
\u00a0
and
\u00a0
state
\u00a0
law
\u00a0
trespass.
\u00a0
The
\u00a0
court
\u00a0
also
\u00a0
found
\u00a0
the
producers
\u00a0
vicariously
\u00a0
liable
\u00a0
for
\u00a0
the
\u00a0
actions
\u00a0
of
\u00a0
their
\u00a0
contract
\u00a0
producers.
\u00a0
The
\u00a0
court
\u00a0
directed
\u00a0
the
\u00a0
parties
\u00a0
to
\u00a0
confer
\u00a0
in
\u00a0
attempt
\u00a0
to
reach
\u00a0
agreement
\u00a0
on
\u00a0
appropriate
\u00a0
remedies.
\u00a0
On
\u00a0
June
\u00a0
12,
\u00a0
2023,
\u00a0
the
\u00a0
court
\u00a0
ordered
\u00a0
the
\u00a0
parties
\u00a0
to
\u00a0
mediate
\u00a0
before
\u00a0
retired
\u00a0
Tenth