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Tyson Foods settles suit over ‘Raised Without Antibiotics’ ads

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 be shared by the four named plaintiffs — including one woman who bought Tyson’s Raised Without Antibiotics chicken because her husband had had a heart transplant, according to Ulwick — 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.  “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 Tyson says it is undisputed that they 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 its action.

Notice to consumers

In the consumer litigation, the potential class members likely number in the tens of thousands, Pizzirusso said, but there is no way to know for sure.

They include people who bought fresh or frozen Tyson chickens, Cornish hens and deli meat,  or prepared products between specified dates in 2007 and 2009 (see box, below).

To get the word out, the parties have proposed to put 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,” said Pizzirusso, who was chosen by the plaintiffs’ lawyers as the media’s contact. “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 “cy-pres” or contingency mechanism that also was 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.

Nicholas M. Pace, a researcher at the Rand Institute for Civil Justice who studies class actions, said he is always curious about how a class action settlement’s proceeds will be distributed because oftentimes “only a tiny fraction of the fund ever gets sent out,” he said, as little as 10 percent.

“In that sense, the [Tyson] settlement is better than many I have looked at,” Pace said.

As for the attorneys’ fees component, Pace said the proportion of the fees to the overall settlement amount is “within the upper bounds of what you typically see in these cases.”

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, which also use ionophores in their feed, accused Tyson of unfair competition for making a false “implied superiority” claim.

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,  accusing it of consumer fraud, breach of express warranty and unjust enrichment.

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

Those suits also were consolidated in Bennett’s court but had not yet been certified as a class action prior to the settlement.

After volumes of paperwork were exchanged — 450,000 pages of internal Tyson documents alone — and months of depositions of the plaintiffs and Tyson employees, 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. Pace, of the Rand Institute, said settlement before class certification is “pretty common.”

The settlement divides the plaintiffs into three tiers, depending on the level of detail they are willing and able to provide about their purchases (see box). The payouts range from $50 cash to a $5 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., which lost $537 million in fiscal year 2009 or $1.44 per share, closed Wednesday at $13.31 a share on the New York Stock Exchange. That was up from the day’s opening of $13.00 and Tuesday’s close of $12.97.

Tyson settlement at a glance

Who can recover:

* Purchasers of Tyson’s “Raised Without Antibiotics” fresh or frozen chickens, Cornish hens and deli meat between June 19, 2007, and April 30, 2009.

* Purchasers of Tyson’s “Raised Without Antibiotics” prepared chicken products between Nov. 1, 2007, and April 30, 2009.

Proof and payments:

* Tier 1: Those with receipts or valid proofs of purchase will receive up to $50 cash per household.

* Tier 2: Those without documentation who will swear, under the penalty of perjury, that they bought covered Tyson products — as well as how often and where — will receive up to $10 cash per household.

* Tier 3: Those who testify that they bought a Tyson “Raised Without Antibiotics” chicken at least once will receive a $5 Tyson coupon.