Tyson settles consumer class action for $5 million 

Posted: 5:02 pm Wed, January 13, 2010
By Brendan Kearney
Daily Record Legal Affairs Writer

Chicken-processing giant Tyson Foods Inc. has settled a consumer class action brought over its controversial “Raised Without Antibiotics” advertising campaign.

Under the agreement filed Tuesday night in U.S. District Court in Baltimore, individual consumers will receive as much as $50 each. The cost to Tyson is $5 million, with $600,000 of that amount set aside to cover administrative costs.

An attorney for the class called the agreement a “meaningful settlement that has real value” and “not just a 50-cent-off coupon placed in the Sunday paper.”

“It’s about getting money in the hands of consumers and deterring this kind of conduct in the future,” said the lawyer, James J. Pizzirusso, a partner at Hausfeld LLP in Washington, D.C.

He and other attorneys for the class, led by James P. Ulwick of Kramon & Graham P.A. in Baltimore, are expected to recover fees of up to $3 million, which is separate from the class members’ recovery.

The $5 million to the class includes up to $20,000 in incentive awards to the four named plaintiffs — including one woman who bought Tyson’s Raised Without Antibiotics chicken because her husband had had a heart transplant — and four more class members who were deposed in the case last year.

Judge Richard D. Bennett will conduct a preliminary fairness hearing on Friday morning. A spokesman for Tyson said the company hopes the judge will approve the settlement.

“Our Raised Without Antibiotics chicken initiative, which we started in 2007, was suspended in 2008 due to labeling challenges,” the spokesman, Gary Mickelson, said in an e-mailed statement Wednesday morning.  “While we believe our company acted appropriately, we also believe it makes sense for us to resolve this legal matter and move on.”

Tyson’s chickens are given feed laced with ionophores, which the U.S. Department of Agriculture classifies as antibiotics. Ionophores fight a widespread intestinal disease in poultry but, according to Tyson, do not affect human resistance to antibiotics.

Tyson added that limitation to its product labels after a battle with the USDA, which controls what can go on its labels. In June 2008, though, the USDA ordered Tyson to quit using even the narrower claim on the labels. Tyson sued the agency, but soon withdrew the action.

Notice to consumers

In the consumer litigation, the class members are expected to number in the tens of thousands.

They include people who bought fresh or frozen Tyson chickens, Cornish hens and deli meat between June 19, 2007, and April 30, 2009. The class also includes buyers of prepared chicken products, such as chicken tenders, between Nov. 1, 2007, and April 30, 2009.

To get the word out, the parties have proposed to notify the class by ads in Parade and People magazines and on Weather.com, CNN.com, and Parenting.com, as well as more than 400 local news and entertainment Web sites nationwide.

“In these types of small value consumer claims, there really is no good sort of tracking system to identify people,” Pizzirusso said. “On the other hand, you don’t want to let a company get away with this kind of fraud.”

If the total dollar amount of valid claims, costs and incentive awards is less than $5 million, Tyson must contribute products to food banks to make up the difference (a contingency also employed in an Illinois lawsuit over claims that Tyson inflated the weight of its chickens).

“In this economy and this day and age, that will be a very good value to people in need,” said Pizzirusso.

From competitors to consumers

Based in Springdale, Ark., Tyson is a Fortune 500 company that claims to be the world’s biggest processor and marketer of chicken, beef and pork.

The consumer suits were spurred by a successful false-advertising suit brought by two of Tyson’s competitors, including Perdue Farms of Salisbury, in January 2008. They were consolidated before Judge Bennett in October 2008.

Perdue and Mississippi-based Sanderson Farms accused Tyson of unfair competition for making a false “implied superiority” claim. Perdue and Sanderson, like Tyson, use ionophores in their chicken feed.

Perdue said it lost $10 million in contracts with retail chains across the country, while Sanderson put its losses at $4 million.

In April 2008, Bennett ordered Tyson to remove the claims from its advertising while the suit was pending. Tyson then settled that dispute— only to be hit by eight consumer suits, mostly in Arkansas and Maryland. Those also were consolidated in Bennett’s court but had not yet been certified as a class action.

“Consumers reacted and relied on this campaign in buying chicken,” paying a premium for an antibiotic-free product, the one of the class actions claimed.

The wave of suits accused Tyson of consumer fraud, breach of express warranty and unjust enrichment. After exchanging volumes of documentation — 450,000 pages of internal Tyson documents as well as USDA documents — and 15 depositions of plaintiffs and Tyson employees through last summer and fall, the parties wrote to the judge on Dec. 8 that they were going to settle.

“A settlement in principle was reached only after approximately four months of give-and-take, during which the parties had to iron out differences over virtually every material issue,” according to the motion for preliminary approval. It was filed with the 167-page settlement agreement around 9 p.m. Tuesday.

“It was a long, hard fight,” Pizzirusso said Wednesday. “We were certainly facing barriers. There was no guarantee that the court would certify the case as a class action.”

If the class had not been certified, each plaintiff would have had to show individual damages.

The settlement divides the plaintiffs into three tiers. Tier 1 consists of those with receipts or valid proofs of purchase, who will receive up to $50 cash.

Tier 2 consists of people who don’t have documentation but who will swear, under the penalty of perjury, that they bought covered Tyson products. They will receive up to $10 cash per household.

Tier 3 class members must testify that they bought a Tyson “Raised Without Antibiotics” chicken at least once. They will receive a $5 Tyson coupon.

Further details about the settlement will be posted on a Web site, www.chickensettlement.com, if Judge Bennett grants preliminary approval of the deal.

Tyson Foods Inc. (TSN) closed Wednesday at 13.31, up from the day’s opening of 13.00 and Tuesday’s close of 12.97.