proceedings. On October 31, 2022, the Company and WCF appealed the First District Court\u2019s
\u00a0
decision to the Supreme Court 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 court
\u00a0
for further
\u00a0
proceedings. The
\u00a0
district court
\u00a0
entered a
\u00a0
pre-trial order
\u00a0
scheduling pre-trial
\u00a0
proceedings and
\u00a0
tentatively
setting
\u00a0
a
\u00a0
trial
\u00a0
date
\u00a0
for
\u00a0
August
\u00a0
11,
\u00a0
2025.
\u00a0
On
\u00a0
November 30,
\u00a0
2024,
\u00a0
the
\u00a0
State
\u00a0
filed
\u00a0
an
\u00a0
amended petition,
\u00a0
primarily
\u00a0
to
\u00a0
address
\u00a0
a
procedural
\u00a0
deficiency
\u00a0
that
\u00a0
required
\u00a0
the
\u00a0
State
\u00a0
to
\u00a0
generally
\u00a0
plead
\u00a0
it
\u00a0
was
\u00a0
seeking
\u00a0
monetary
\u00a0
relief
\u00a0
over
\u00a0
$
1.0
\u00a0
million
\u00a0
including
restitution, civil
\u00a0
penalties, attorney\u2019s
\u00a0
fees and
\u00a0
costs. Management
\u00a0
believes the
\u00a0
risk of
\u00a0
material loss
\u00a0
related to
\u00a0
this matter
\u00a0
to be
Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al.
\u00a0
As previously
\u00a0
reported, on
\u00a0
September 25,
\u00a0
2008, the
\u00a0
Company was
\u00a0
named as
\u00a0
one of
\u00a0
several defendants
\u00a0
in numerous
\u00a0
antitrust
cases involving
\u00a0
the United
\u00a0
States shell
\u00a0
egg industry.
\u00a0
The Company
\u00a0
settled all
\u00a0
of these
\u00a0
cases, except
\u00a0
for the
\u00a0
claims of
\u00a0
certain
plaintiffs who sought substantial damages allegedly arising from the purchase of egg products
\u00a0
(as opposed to shell eggs). These
remaining plaintiffs are
\u00a0
Kraft Food Global,
\u00a0
Inc., General Mills, Inc.,
\u00a0
and Nestle USA, Inc.
\u00a0
(the \u201cEgg Products Plaintiffs\u201d)
\u00a0
and,
until a subsequent settlement was reached as described below, 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 the United States District Court for
\u00a0
the Northern District of Illinois, Kraft Foods Global, Inc. et
\u00a0
al. v. United
Egg Producers,
\u00a0
Inc. et
\u00a0
al., Case
\u00a0
No. 1:11
\u00a0
-cv-8808, for
\u00a0
trial. The
\u00a0
Egg Products
\u00a0
Plaintiffs
\u00a0
alleged that
\u00a0
the Company
\u00a0
and 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 plaintiffs
\u00a0
paid
\u00a0
for processed
\u00a0
egg products.
\u00a0
In
\u00a0
particular,
\u00a0
the
\u00a0
Egg Products
\u00a0
Plaintiffs
\u00a0
attacked
certain features of the United
\u00a0
Egg Producers animal-welfare guidelines and program
\u00a0
used by the Company and many
\u00a0
other egg
On October 24, 2019, the Company entered into a
\u00a0
confidential settlement agreement with The Kellogg Company dismissing all
claims against the Company
\u00a0
for an amount that
\u00a0
did not have
\u00a0
a material impact on
\u00a0
the Company\u2019s
\u00a0
financial condition or results
of operations.
\u00a0
On November
\u00a0
11,
\u00a0
2019, a
\u00a0
stipulation for
\u00a0
dismissal was
\u00a0
filed with
\u00a0
the court,
\u00a0
and on
\u00a0
March 28,
\u00a0
2022, the
\u00a0
court
dismissed the Company with prejudice.
The trial of this case began on October 17, 2023. On December 1, 2023, the jury returned a decision awarding the
\u00a0
Egg Products
Plaintiffs $
17.8
\u00a0
million in damages. On
\u00a0
November 6, 2024, the
\u00a0
court entered a final
\u00a0
judgement against the Company and
\u00a0
other
defendants,
\u00a0
jointly
\u00a0
and
\u00a0
severally,
\u00a0
totaling
\u00a0
$
43.6
\u00a0
million
\u00a0
after
\u00a0
trebling.
\u00a0
On
\u00a0
December
\u00a0
4,
\u00a0
2024,
\u00a0
the
\u00a0
Company
\u00a0
filed
\u00a0
a
\u00a0
renewed
motion for judgment as a matter of law or for a new trial, and a motion to alter or amend the judgment.
\u00a0
On December 13, 2024,
the
\u00a0
court
\u00a0
granted
\u00a0
defendants\u2019
\u00a0
November
\u00a0
20,
\u00a0
2024
\u00a0
motion
\u00a0
to
\u00a0
stay
\u00a0
enforcement
\u00a0
of
\u00a0
the
\u00a0
judgment
\u00a0
and
\u00a0
entered
\u00a0
an
\u00a0
agreed
\u00a0
order
requiring the
\u00a0
defendants to
\u00a0
post security
\u00a0
during post-judgment
\u00a0
proceedings and
\u00a0
appeal, and
\u00a0
stayed proceedings
\u00a0
to enforce
\u00a0
the
judgment until the disposition of the post-judgment motions and ultimate appeals. On
\u00a0
December 17, 2024, the Company posted
a bond
\u00a0
in the
\u00a0
approximate amount
\u00a0
of $
23.9
\u00a0
million, representing
\u00a0
a portion
\u00a0
of the
\u00a0
total bond
\u00a0
required to
\u00a0
preserve the
\u00a0
right to
appeal the trial court\u2019s
\u00a0
decision. Another defendant posted a
\u00a0
bond for the remaining amount,
\u00a0
The Company intends to continue
to vigorously defend the claims asserted by the Egg Products Plaintiffs.
If the
\u00a0
jury\u2019s
\u00a0
decision is
\u00a0
ultimately upheld,
\u00a0
the Company
\u00a0
would be
\u00a0
jointly and
\u00a0
severally liable
\u00a0
with other
\u00a0
defendants for
\u00a0
treble
43.6
\u00a0
million,
\u00a0
subject
\u00a0
to
\u00a0
credit
\u00a0
for
\u00a0
certain
\u00a0
settlements
\u00a0
with
\u00a0
previous
\u00a0
settling
\u00a0
defendants,
\u00a0
plus
\u00a0
the
\u00a0
Egg
\u00a0
Product
Plaintiffs\u2019
\u00a0
reasonable
\u00a0
attorneys\u2019
\u00a0
fees.
\u00a0
During
\u00a0
our
\u00a0
second
\u00a0
fiscal
\u00a0
quarter
\u00a0
of
\u00a0
2024,
\u00a0
we
\u00a0
recorded
\u00a0
an
\u00a0
accrued
\u00a0
expense
\u00a0
of
\u00a0
$
19.6
million in
\u00a0
selling, general
\u00a0
and administrative
\u00a0
expenses in
\u00a0
the Company\u2019s
\u00a0
Condensed Consolidated
\u00a0
Statements of
\u00a0
Income and
classified
\u00a0
as
\u00a0
other
\u00a0
noncurrent
\u00a0
liabilities
\u00a0
in
\u00a0
the
\u00a0
Company\u2019s
\u00a0
Condensed
\u00a0
Consolidated
\u00a0
Balance
\u00a0
Sheets.
\u00a0
Although
\u00a0
less
\u00a0
than
\u00a0
the
bond
\u00a0
posted
\u00a0
by
\u00a0
the
\u00a0
Company,
\u00a0
the
\u00a0
accrual
\u00a0
represents
\u00a0
our
\u00a0
estimate
\u00a0
of
\u00a0
the
\u00a0
Company\u2019s
\u00a0
proportional
\u00a0
share
\u00a0
of
\u00a0
the
\u00a0
reasonably
possible ultimate damages award, excluding the Egg Product Plaintiffs\u2019
\u00a0
attorneys\u2019 fees that we believe would be approximately
offset by the credits noted
\u00a0
above. We
\u00a0
have entered into a judgment allocation
\u00a0
and joint defense agreement with the
\u00a0
other major
producer
\u00a0
defendant
\u00a0
remaining
\u00a0
in
\u00a0
the
\u00a0
case
\u00a0
and
\u00a0
are
\u00a0
in
\u00a0
discussions
\u00a0
with
\u00a0
other
\u00a0
defendants
\u00a0
regarding
\u00a0
their
\u00a0
contributions.
\u00a0
Our
accrual may change
\u00a0
in the future
\u00a0
based on the
\u00a0
outcome of those
\u00a0
discussions and may
\u00a0
also be revised
\u00a0
in whole or
\u00a0
in part in
\u00a0
the
future to the extent we are successful in further proceedings in the litigation.
\u00a0
State of Oklahoma Watershed Pollution Litigation
On June
\u00a0
18, 2005, the
\u00a0
State of Oklahoma
\u00a0
filed suit, in
\u00a0
the United States
\u00a0
District Court for
\u00a0
the Northern District
\u00a0
of Oklahoma,
against Cal-Maine
\u00a0
Foods, Inc.
\u00a0
and Tyson
\u00a0
Foods, Inc.,
\u00a0
Cobb-Vantress,
\u00a0
Inc., Cargill,
\u00a0
Inc., George\u2019s,
\u00a0
Inc., Peterson
\u00a0
Farms, Inc.
and
\u00a0
Simmons Foods,
\u00a0
Inc.,
\u00a0
and
\u00a0
certain
\u00a0
of
\u00a0
their affiliates.
\u00a0
The
\u00a0
State of
\u00a0
Oklahoma claims
\u00a0
that
\u00a0
through
\u00a0
the disposal
\u00a0
of
\u00a0
chicken
litter the defendants
\u00a0
polluted the Illinois
\u00a0
River Watershed.
\u00a0
This watershed provides
\u00a0
water to eastern
\u00a0
Oklahoma. The complaint
sought
\u00a0
injunctive relief
\u00a0
and
\u00a0
monetary damages,
\u00a0
but
\u00a0
the
\u00a0
claim for
\u00a0
monetary damages
\u00a0
was
\u00a0
dismissed by
\u00a0
the
\u00a0
court. 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.