After three failed attempts at convicting poultry executives — and other recent court failures — one would be forgiven for thinking a more lax DOJ posture could be in the offing. Rick Kornfeld, one of the defense attorneys in the poultry price-fixing case, gives his insights into why a cocksure stance by the antitrust division is the new norm.
If nothing else, the DOJ’s antitrust division under Assistant Attorney General Jonathan Kanter and Attorney General Merrick Garland is persistent. Despite a series of stinging rebukes by juries in Texas and Colorado, where the DOJ failed to convict various companies and executives in the poultry, dialysis and staffing industries, the division is nonetheless plowing forward with prosecutions of another group of chicken industry executives and two chicken producers in separate trials in federal court in Denver. The first of those trials, against two former executives of Pilgrim’s Pride, begins in late October.
I had a front-row seat to the DOJ’s stubborn insistence and its intransigence regarding antitrust enforcement. Along with my law partners, David Beller and Kelly Page, I represent one of the chicken executives acquitted of price-fixing and bid-rigging by a Denver jury in July.
Our case, U.S. v. Penn, et al. (20-cr-152 D. Colo.) originally involved 10 veterans of the chicken industry, including CEOs and sales executives who worked for some of the largest chicken producers in the United States. After two juries failed to reach verdicts against any of the defendants and mistrials were declared, the DOJ dropped the charges against five of them and proceeded to trial, for a third time, against the five remaining men, three of whom were either current or former CEOs. Five weeks later, the jury acquitted all five men after deliberating for about a day.
In addition to the DOJ’s failures in the Penn case, juries have rejected the antitrust division’s attempts to police employment agreements with criminal prosecutions. In United States v. Jindal, a Texas jury rejected the government’s allegations of price fixing by a therapist staffing company after the government charged the company with conspiring with its competitors to keep wages low.
A few months later, a federal jury in Denver rejected the antitrust division’s criminal Sherman Act case against Davita Healthcare and its former CEO, Kent Thiry. In that case, the DOJ alleged that Davita and Thiry conspired with other healthcare companies not to poach each other’s employees. After the jury acquitted Davita and Thiry, Judge Brooke Jackson offered his congratulations to the defendants, and his “condolences” to the DOJ.
Political pressures drive prosecutions
The Penn case was unusual for a number of reasons, not the least of which was the DOJ’s decision to try it three times, importing large teams of DOJ lawyers and paralegals to Denver, and taking up about 21 weeks of total trial time.
While retrying a white-collar criminal case may not be unprecedented, it certainly is unusual. Our trial is believed to be the first criminal case in the District of Colorado to be tried three times. More importantly, the DOJ insisted on doing so even after the presiding judge, Philip A. Brimmer, summoned Kanter to Denver last spring to explain how and why the DOJ believed a third trial would somehow result in a different result. Despite Brimmer’s overt skepticism regarding the DOJ’s chances of success in a third trial, the Antitrust Division insisted on trying the case again.
Brimmer, a former state and federal prosecutor, questioned Kanter for half an hour, pressing the assistant AG to explain the logic and fairness of trying a case a third time after the DOJ failed to obtain a single conviction. Kanter expressed confidence in the evidence and his trial team, emphasizing the case involved a “kitchen table issue,” the price of chicken, the most popular consumer protein in the U.S.
Kanter’s discussion of chicken prices, in light of decades-high inflation gripping the U.S. and befuddling the Biden Administration, was telling. Indeed, the DOJ’s antitrust focus appears to be informed as much by political considerations as legal ones.
The breadth and depth of antitrust enforcement continues to expand
The Biden DOJ has requested an increase of more than $80 million in the antitrust division’s budget for fiscal year 2023. Kanter explained that the DOJ plans to utilize all its resources to bring antitrust cases. He also has hired two heads of litigation, Kevin Hart and Hetal Doshi, the first time the division has had two people in that position.
So, despite five juries in two jurisdictions failing to buy the DOJ’s aggressive antitrust theories, the division continues to pursue the chicken industry in two cases where the evidence is similar to that in the Penn case.
To be sure, political considerations and current economic conditions are part of the DOJ’s calculus, but the government’s aggressive enforcement efforts cannot be solely attributed to politics. Indeed, numerous state attorneys general, particularly Democrats, are aggressively pursuing consumer protection and antitrust enforcement on the state level. Collectively, these efforts must be viewed by industry and business, big and small, as warning signs to identify and minimize antitrust litigation exposure.
The government’s enforcement efforts are not limited to publicly traded companies and large industries. Our client in the chicken case was the president of a privately held company that controls less than 1% of the broiler chicken market. And just a few weeks ago, the DOJ settled a civil matter related to the price of ADA-compliant concert seats at Colorado’s iconic Red Rocks concert venue. Thus, the breadth and depth of the antitrust division’s enforcement efforts are significant.
Healthcare, protein and technology companies are squarely within the DOJ’s target sights. But so are other consolidated industries, such as the concrete business. In addition to compliance programs around communications with customers and competitors about pricing, companies should focus on their hiring practices and implement procedures to fend off any allegations of anti-competitive behavior. And at the risk of stating the obvious, companies, individuals and their counsel must aggressively and quickly respond to any indication of an investigation by the DOJ.
Potential subjects of these investigations must be careful to refrain from any behavior that the DOJ may construe as obstruction of justice. Perhaps taking a page from its history in the mob prosecution era when it charged Al Capone with tax evasion, the DOJ recently added an obstruction charge against one of the former Pilgrim’s Pride employees in the upcoming October trial. Apparently, the DOJ is hoping to obtain some sort of conviction for all its enforcement efforts, even if that conviction has nothing to do with the Sherman Act.
As someone once said, “Insanity is doing the same thing over and over again but expecting different results.” By this definition, the antitrust division is pursuing its enforcement of the Sherman Act in an insane manner. But companies and their counsel would be equally crazy if they think the DOJ’s use of their prosecutorial discretion in the antitrust arena is going to change anytime soon. The antitrust laws have not changed; the DOJ’s aggressive use of them has.
Rick Kornfeld is a shareholder at Recht Kornfeld PC in Denver. He is a seasoned litigator and former federal prosecutor specializing in white collar criminal defense, corporate compliance and internal investigations. His clients include numerous Fortune 500 and publicly traded companies, responsible corporate officers, licensed professionals and individuals.
