PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
APR 20 2000
THOMAS K. KAHN
No. 99-11694 CLERK
________________________
D. C. Docket No. 96-01103-CV-A-N
HENRY LEE “LEROY” PICKETT,
SAM BRITT,
PAUL HORTON,
MIKE CALLICRATE,
JIM BOWER,
PAT GOGGINS,
JOHNNY SMITH, ET AL.,
Plaintiffs-Appellees,
versus
IOWA BEEF PROCESSORS,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Middle District of Alabama
_________________________
(April 20, 2000)
Before CARNES, BARKETT and WILSON, Circuit Judges.
BARKETT, Circuit Judge:
Iowa Beef Processers, inc. (“IBP”) brings this interlocutory appeal from the
district court’s decision to grant the Plaintiffs’ motion to certify this case as a class
action under Federal Rule of Civil Procedure 23(b)(3). Henry Lee Picket, Sam
Britt, Paul Horton, Mike Callicrate, Jim Bower, Pat Coggins, Johnny Smith,
Stayton Weldon, Lovel Blain and David Smith (collectively the “Plaintiffs”) are
cattle producers alleging that IBP’s practices violate the Packers and Stockyards
Act, 7 U.S.C. § 181 et seq. (1999) (“the Act”) and seeking to sue IBP on behalf of
themselves and others similarly situated for damages and injunctive relief. The
class certified consists of “all cattle producers who had sold fed cattle directly to
IBP” since February 1994.
BACKGROUND
Plaintiffs are cattle producers who sell “fed cattle,” i.e., cattle raised at
feedyards for slaughter, to IBP.1 Such producers have a narrow window of
opportunity in which to sell their fattened cattle while they are at optimum weight.
The standard method for purchasing cattle is for packers to inspect pens of cattle at
the feedyards and to bid on the cattle for sale. This practice is known as the “spot
market,” and sales on the spot market are referred to as “cash sales.” As an
1
In industry parlance, IBP is known as a “packer,” and it purchases its cattle from owners of
feedyards, who are known as “producers.”
2
alternative to the spot market, producers can also sell their cattle by entering into
“forward contracts” or “marketing agreements” with packers. Under a forward
contract, the packer and the producer agree on the price to be paid for the cattle
weeks or months before the animals are ready for slaughter. Forward contracts
offer producers the advantage of locked-in prices and protect them against market
fluctuations. Marketing agreements are a more extended version of forward
contracts. Under such agreements, a producer promises to sell most of its cattle to
a packer at prices determined by a negotiated formula, which can be adjusted after
slaughter according to the quality of the beef.
The United States Department of Agriculture defines the cattle that are
controlled by or committed to a packer more than two weeks prior to slaughter as
“captive supply.” Plaintiffs allege that engaging in forward contracts and
marketing agreements in order to establish a captive supply enables IBP to depress
the market at strategic times in order to force producers to accept artificially low
prices for their fattened cattle. Plaintiffs contend that, because IBP controls a large
quantity of cattle through these means, it can slaughter the cattle it controls, or
threaten to do so, in order to force producers to choose between selling their cattle
at an unacceptably low price or being left without a buyer for their cattle.
3
Plaintiffs allege that, in the context of the highly concentrated market for
beef cattle, IBP’s captive supply practices violate § 202 of the Packers and
Stockyards Act, 7 U.S.C. § 192, which provides in relevant part:
It shall be unlawful for any packer . . . to:
(a) Engage in or use any unfair, unjustly discriminatory, or
deceptive practice or device; or
(b) Make or give any undue or unreasonable preference or
advantage to any particular person or locality in any respect
whatsoever, or subject any particular person or locality to any undue
or unreasonable prejudice or disadvantage in any respect whatsoever. .
..
Plaintiffs argue that forward contracts and marketing agreements are preferential to
the producers who sell under such agreements and thus are unjustly discriminatory
because they can be used to coerce producers who choose to sell on the spot
market into accepting lower prices for their cattle.
Plaintiffs first attempted to bring these claims on behalf of a class consisting
of all cattle producers in the country who had “raised, handled, fed and produced
livestock and/or cattle for sale on the open market” since January 1994. The
district court declined to certify such a class. The district court first noted that,
because the proposed class included members who had been disadvantaged by
IBP’s captive supply practices as well as those who had derived an advantage from
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those practices, it could not meet Federal Rule of Civil Procedure 23(a)’s
requirements that the named plaintiffs be typical of the class and that they
adequately represent the interests of the class. Pickett v. Iowa Beef Processers,
inc., 182 F.R.D. 647, 651-55 (M.D. Ala. 1998), citing Fed. R. Civ. P. 23(a)(3) and
(4). Furthermore, the district court found that Plaintiffs had not met their burden
under Rule 23(b)(3) to show that common questions of law or fact predominate
and that the class action provides a superior means of adjudicating the controversy,
as the court would be unable to establish a violation of the Act without
consideration of individual transactions. Id. at 658-61.
Plaintiffs moved for reconsideration,2 narrowing the class to include only all
cattle producers “who had sold fed cattle directly to IBP” since February 1994. At
the hearing on the proposed narrowed class, Plaintiffs presented the testimony of
Professor Catherine Durham to demonstrate that the class action procedure could
efficiently address the damages claims of each individual producer. Professor
Durham testified that an econometric model could be developed that would be
capable of demonstrating that IBP’s captive supply practices have a downward
effect on prices for fed cattle and could specify the effect of IBP’s captive supply
practices on the members of the plaintiff class. However, Professor Durham
2
The case was reassigned to a different judge prior to Plaintiffs’ motion for reconsideration.
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offered no such model, and she acknowledged that no such model currently exists
because no researcher has yet been able to assemble the requisite data. The district
court granted the motion for reconsideration and certified the proposed class
consisting of “[a]ll cattle producers who sold fed cattle directly to IBP from
February 1994 through and including the date of certification,” a class with at least
15,000 members. IPB appeals this determination.
We review a district court’s certification of a class under Rule 23 for abuse
of discretion. Jackson v. Motel 6 Mutipurpose, Inc., 130 F.3d 999, 1003-1004
(11th Cir. 1997). However, to the extent that the issue involves the interpretation
of the Federal Rules of Civil Procedure, we review de novo. Armstrong v. Martin
Marietta Corp., 138 F.3d 1374, 1388 n.30 (11th Cir.) (en banc), cert. denied, 119 S.
Ct. 545 (1998). Rule 23(f) provides for our jurisdiction over interlocutory appeals
from a district court’s order granting class certification, and we limit our discussion
to that issue. We do not address the merits of Plaintiffs’ claims.
DISCUSSION
In order to maintain a class action, the proposed class must satisfy all the
requirements of Rule 23(a) and at least one of the alternative requirements of Rule
23(b). Jackson, 130 F.3d at 1005. Rule 23(a) provides that a class may be certified
if the following requirements are met: (1) numerosity: the class is not so numerous
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that joinder of all members is impracticable; (2) commonality: questions of law or
fact are common to the class; (3) typicality: the representatives of the class present
claims or defenses that are typical of the class; and (4) adequacy: the
representatives of the class will fairly and adequately protect the interests of the
class. Fed. R. Civ. P. 23(a). In this case, the district court certified the class,
finding that it satisfied all of the requirements of Rule 23(a) as well as Rule
23(b)(3), which requires that “the questions of law or fact common to the members
of the class predominate over any questions affecting only individual members,
and . . . a class action is superior to other available methods for the fair and
efficient adjudication of the controversy.”3
IBP does not dispute that the plaintiff class satisfied the numerosity and
commonality requirements provided in Rule 23(a)(1) and (2). IBP argues that the
class should not have been certified because the district court erred in: (1)
concluding that Plaintiffs could “fairly and adequately protect the interest of the
class,” as required under Rule 23(a)(4), since class members have antagonistic
interests regarding the outcome of this suit, and several of its members would
3
“The matters pertinent to the findings include: (A) the interest of members of the class in
individually controlling the prosecution or defense of separate actions; (B) the extent and nature of
any litigation concerning the controversy already commenced by or against members of the class;
(C) the desirability or undesirability of concentrating the litigation of the claims in the particular
forum; (D) the difficulties likely to be encountered in the management of a class action.” Fed. R.
Civ. P. 23(b)(3).
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actively oppose the remedy that Plaintiffs seek; (2) finding that issues common to
the class predominate, as required under Rule 23(b)(3), because it failed to
consider that the Act requires that a “rule of reason” be applied in order to assess
whether contracts and agreements are discriminatory or unfair and that such an
inquiry cannot be undertaken on a class-wide basis; and (3) certifying a class based
on a proposed expert study without first requiring that the viability of that study be
demonstrated. Because we agree that this plaintiff class cannot satisfy the
adequacy requirement of Rule 23(a)(4), we do not address IBP’s additional
arguments.
Rule 23(a)(4) requires that parties representing a class fairly and adequately
protect the interests of class members. “It is axiomatic that a putative
representative cannot adequately protect the class if his interests are antagonistic to
or in conflict with the objectives of those he purports to represent.” 7A Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1768 at 326 (2d
ed. 1986). However, a party’s claim to representative status is defeated only if the
conflict between the representative and the class is a fundamental one, going to the
specific issues in controversy. Id. at 326-27; 1 Herbert Newberg & Alba Conte,
Newberg on Class Actions § 3.25 at 3-139 to 141; § 3.26 at 3-143 to 144 (3rd ed.
1992). Thus, a class cannot be certified when its members have opposing interests
8
or when it consists of members who benefit from the same acts alleged to be
harmful to other members of the class. See e.g., Bieneman v. City of Chicago, 864
F.2d 463 (7th Cir. 1988) (denying certification of a class of all landowners in the
vicinity of an airport because, while plaintiffs claimed that the airport decreased
the value of their land, other landowners tremendously benefitted from the
proximity of the airport); Auto Ventures, Inc. v. Moran, 1997-1 Trade Cas. (CCH)
¶ 71,779, 1997 WL 306895 (S.D. Fla. 1997) (refusing to certify a class of Toyota
dealers because “the class collapses into distinct groups of winners and losers”). In
a case involving claims very similar to those at issue here, a district court refused
to certify a class of cotton farmers who had entered into forward contracts. Bolin
Farms v. American Cotton Shippers Ass’n, 370 F. Supp. 1353, 1357 (W.D. La.),
aff'd without op. sub nom. Jones v. Allenberg Cotton Co., 505 F.2d 732 (5th Cir.
1974). The court ruled that class certification was improper because many farmers
benefitted from the forward contracts being challenged. Id.
Notwithstanding that Plaintiffs are challenging as discriminatory the forward
contracts and marketing agreements between IBP and producers, the class certified
in this case includes not only all cattle producers who have sold fed cattle to IBP
on the spot market but also all cattle producers who have or had forward contracts
and marketing agreements with IBP. Thus, the class includes those who claim
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harm from the very same acts from which other members of the class have
benefitted. Moreover, in addition to damages, Plaintiffs seek an injunction that
would prohibit IBP from using such purchasing arrangements in the future. Such
an injunction would impose a significant restriction on the way these producers do
business.
We conclude that, under these circumstances, the Plaintiffs could not
possibly provide adequate representation to a class that includes producers who
willingly entered into forward contracts and marketing agreements with IBP as
well as those who complain of and claim harm from the practice. We conclude
that the district court erred in certifying the class. Accordingly, the District Court’s
order certifying the plaintiff class is REVERSED and the case is remanded to the
District Court for further proceedings.
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