SPOKANE, WA – A 51-year-old Columbia Basin cattle rancher who pled guilty to a multi-million dollar “ghost cattle” scam has again sued Tyson Fresh Meats, a subsidiary of Tyson Foods, Inc., this time claiming “anticompetitive, unfair, abusive, unjustly discriminatory, and deceptive acts and practices.” Cody Easterday was sentenced to 11 years in federal prison for defrauding Tyson and another company out of more than $244 million by charging the companies for the purported costs of purchasing and feeding an estimated 265,000 head of cattle that did not exist.
The false billing case came to light in 2020 and resulted in Easterday’s family businesses filing for bankruptcy. He pled guilty to wire fraud in March 2021 and was sentenced to federal prison in October 2022; he reported to prison in December.
Monday’s antitrust lawsuit is the second federal case filed by Easterday against Tyson.
In December, lawyers for Easterday filed a lawsuit against Tyson for breach of contract over its alleged failure to comply with a separate business deal. They claim a personal branding agreement between Easterday and Japan’s Nippon Ham allowed the company to sell premium “Cody’s Beef” products in a marketing program between 2015 and 2020, but Easterday claims Tyson did not split profits 50-50 with him as they reportedly agreed to. That amount would be approximately $163 million, the lawsuit says. Easterday says he provided at least 65,000 head of cattle to Tyson to sell to Nippon Ham and he was pictured on the packaging with the quote, “I raised it!”
In the most recent federal lawsuit, filed on Monday, Easterday claims Tyson participated in unfair competition through “the wielding of immense market power, resulting from acquisition and consolidation,” court documents say.
“The antitrust complaint continues a series of actions on behalf of Mr. Easterday to recover the damages he sustained as a result of Tyson Fresh Meat’s actions,” Easterday’s attorney – Jeffrey Jacobovitz, Chair of Antitrust Group, Arnall Golden Gregory – told KOZE News.
The lawsuit claims Tyson violated the Packers and Stockyards Act, Sherman Act, and the Washington State Antitrust Statute.
“Defendant has created a monopsony market in the Pacific Northwest region of the U.S. (“Pacific Northwest”) – being Washington, Oregon, and Idaho – whereby cattle feeders in that region have no reasonable choice but to contract with Defendant despite the anti-competitive, unfair, abusive, unjustly discriminatory, and deceptive acts and practices of Defendant, including as to pricing, contract terms, and contract performance. The Defendant has misused its economic power over cattle feeders and contracts, and committed violations of the Packers and Stockyards Act of 1921 (“PSA”), the Sherman Antitrust Act of 1890 (“Sherman Act”), and the Washington State Consumer Protection Act (“WCPA”),” the lawsuit says.
Easterday was a cattle feeder and President of Easterday Ranches, Inc. for over 20 years and during much of that time he worked with Tyson to provide a steady supply of fed cattle for harvest at the company’s plant located near Pasco, Washington. He claims from 2010 through 2020, he and his ranches were financially harmed by Tyson’s alleged business practices, “including being charged erroneous fees, interest, and commissions, in violation of federal and state law, including the PSA.”
During the course of its operation, Easterday Ranches operated and fed cattle, and became one of the largest suppliers to Tyson in the Pacific Northwest.
Prior to 2010, Easterday Ranches and Tyson reportedly operated under a longstanding contractual arrangement whereby Easterday procured and purchased lots (i.e., groups) of feeder cattle in which each party owned 50%. Feeder cattle are young cattle ready to be placed in a feedlot for fattening.
“Under the 50/50 Arrangement, both parties shared equally in the risk of loss – both production and market – or potential profits arising out of feeding cattle to finished weight. Tyson paid Easterday Ranches for custom feeding services on Tyson’s 50% share of the cattle, which provided for a fixed margin on that portion of the cattle on feed and helped to offset any losses on cattle that typically occur as part of the cattle cycle. This arrangement kept each parties’ incentives aligned to assure a supply of cattle to the plant in a manner that was profitable through both the feeding and processing stages of the supply chain,” the lawsuit says.
Sometime in 2009, the lawsuit says Tyson and Easterday had a discussion to increase the capacity of his feedlots, which he reportedly agreed to under the presumption that the long-standing 50/50 arrangement would continue.
“The 50/50 arrangement existed for the majority of the thirteen years since Cody Easterday acquired an interest in Easterday Ranches. The annual throughput was increased to 120,000 head of cattle and under the presumption that the 50/50 agreement would continue Mr. Easterday assumed he would have the full risk of the cattle on half that number (60,000 head),” court documents say.
Following Easterday’s agreement to increase the feedlot capacity, Easterday Ranches obtained a construction/term loan for nearly $6.3 million and reinvested past profits to fund the expansion of feedlot capacity by acquiring property and building the North Feedlot at a total investment cost of over $13 million, court documents say, adding that Easterday personally guaranteed the construction loan.
“The Construction Loan contained provisions that (a) required completion of construction, and (b) allowed the lender to complete construction if Easterday Ranches failed to do so and recover all amounts advanced including construction completion costs from Easterday Ranches and Mr. Easterday regardless of whether or not the feedlot was operational. The loan was also cross-defaulted to loan agreements that various of Mr. Easterday’s other business interests had entered into, such that a default under the Construction Loan would be a default on loans owed by his various other business interests. Once Mr. Easterday and Easterday Ranches entered into the Construction Loan, Mr. Easterday had no practical choice but to complete the project in order to preserve his other business interests,” the lawsuit says.
Easterday says in or around the spring of 2010, after Tyson had “successfully enticed” him to expand Easterday Ranches’ feeding capacity, and only after Easterday Ranches had completed a substantial portion of the new construction necessary to increase feedlot capacity and thus spent proceeds of the Construction Loan, Tyson allegedly informed Easterday that they wanted to change the terms of their longstanding arrangement and that the company no longer wanted to own and feed cattle under the existing 50/50 arrangement.
“Instead, Tyson determined that Easterday Ranches would own and feed the cattle prior to their delivery as finished cattle ready for slaughter under Tyson’s so-called “Pioneer Model” contracting arrangement, i.e., a “Cattle Feeding Agreement.” Under the new terms, Tyson required Mr. Easterday to shoulder 100% of the risk of any profit shortfall or loss associated with purchasing, feeding, and caring for all of the cattle (approximately 120,000 head per year) prior to their delivery to Tyson at the Tyson Pasco plant. After having invested heavily in his relationship with Tyson, particularly the capital invested into the multimillion-dollar feedlot expansion in-progress at the time, and because of a lack of other options for marketing his cattle, Mr. Easterday felt he had no choice but to accept the new “Pioneer Model” arrangement and sign Tyson’s Cattle Feeding Agreement as presented in a take-it-or-leave it fashion by Tyson’s employee,” court documents say.
Beginning in at least 2010 and continuing through 2020, Easterday Ranches reportedly entered into a series of written Cattle Feeding Agreements with Tyson drafting the agreements that represented the “Pioneer Model” arrangement (each, a “Cattle Feeding Agreement”) and presenting them to Easterday for signature.
“Under each Cattle Feeding Agreement, Easterday Ranches agreed to procure feeder cattle (which typically weigh between 600 and 900 pounds) on behalf of Tyson and feed, care, and manage the cattle until they reached a weight of approximately 1,250 to 1,500 pounds, when they were ready to be sent to slaughter as finished cattle at Tyson’s plant located in Pasco, Washington. The Tyson plant has a daily capacity of over 2000 head, and the plant employs approximately 1,200 people in the state of Washington,” the lawsuit says. “More recently, Easterday Ranches and Tyson Fresh Meats entered into a Cattle Feeding Agreement (“2017 CFA”), effective as of February 20, 2017.”
On August 20, 2020, Easterday Ranches and Tyson Fresh Meats signed a purported amendment to the 2017 CFA, effective August 20, 2020, extending the terms of the 2017 CFA through August 20, 2021. Then on December 7, 2020, Easterday Ranches and Tyson signed a Confirmation of Ownership Agreement, effective December 7, 2020, to confirm Tyson’s ownership of feeder cattle under the 2017 CFA and 2020 Amendment, according to the lawsuit.
Easterday claims each of the 2017 CFA, the 2020 Amendment, and 2020 Confirmation were drafted by Tyson and presented to him for signing.
“The absence of Easterday Ranches’ ability to negotiate more reasonable terms was indicative of Tyson’s significant market power,” the lawsuit says. “Mr. Easterday understood at the time he signed each agreement that he did not have the ability to negotiate with Tyson any of the terms or conditions of such agreements. Indeed, in 2018, when he tried to renegotiate pricing terms, he was rejected.”
The lawsuit adds that under the terms of the feeding agreements, Tyson advanced Easterday Ranches funds to purchase, house, and feed the cattle at the Easterday feedlots.
“Easterday Ranches was required to reimburse Tyson all advanced funds, including interest and a $15/per head guaranteed payment upon final settlement. These illegal actions by Tyson contributed to the alleged loss Easterday Ranches and Plaintiff sustained,” according to the lawsuit. “The agreement provided that the scheduling and delivery of cattle would be coordinated between Easterday Ranches and Tyson. However, in practice, Tyson exerted complete control over the timing of delivery. This ability, typically held solely by the feed yard, had a direct impact on the profitability for a particular lot of cattle. Without this autonomy, a feedlot operator cannot choose to sell finished cattle at a time and weight that is most profitable.”
According to the respective CFAs, the lawsuit claims that the price for the cattle was determined by a “grid pricing scheme” using Tyson’s proprietary formula, which was based on a 5-area average weighted price of fed cattle sold by feedlots in Texas/Oklahoma/New Mexico; Kansas; Nebraska; Colorado; and Iowa/Minnesota.
“At the time of delivery of cattle to the Tyson Pasco Plant, Easterday would not be paid the price outright, rather Tyson would calculate a final settlement amount by netting the sales price for the cattle against (a) the amount it paid to Easterday Ranches for the purchase, feed, and care of cattle, (b) interest charged to Easterday Ranches on the amount paid by Tyson to Easterday Ranches for the purchase, feed, and care of cattle and (c) a $15 per head guaranteed profit to Tyson,” the lawsuit says.
In addition to the personal guarantee by Easterday, Easterday Ranches was also allegedly required to assume all of the financial risk of the operation under the 2017 CFA and to indemnify Tyson against cattle deaths. Thus, as a personal guarantor, the lawsuit says he was required to bear the financial risk if Easterday Ranches did not perform.
Easterday also claims that despite statutory requirements, even when Tyson did owe Easterday Ranches for a particular lot of cattle, Tyson allegedly failed to timely pay Easterday Ranches within 48 hours of the sale.
Between approximately 2016 and November 2020, Easterday falsely provided invoices under the Cattle Feeding Agreements to Tyson for which he has been ordered to provide restitution less any offsets. On November 30, 2020, he revealed this activity to Tyson and proceeded to cooperate with, and facilitate, a Tyson audit of Easterday and Easterday Ranches’ books and records.
The lawsuit claims that on December 7, 2020, Tyson “falsely represented to Mr. Easterday that it would not seek criminal charges, and Mr. Easterday agreed to execute an ownership agreement, without counsel present, whereby Mr. Easterday transferred ownership to Tyson of cattle owned by Easterday Ranches that had not been invoiced to Tyson.”
This agreement, the lawsuit says, also reportedly included language affirmatively stating that under the terms of the 2017 CFA, Tyson owned the cattle fed by Easterday Ranches at all times prior to delivery. The lawsuit says this language was contrary to Easterday’s understanding of the 2017 CFA and contrary to the direct representations allegedly made by Tyson to Easterday in at least 2010 and 2014, and onward.
“If Tyson owned the cattle during their time spent in the Easterday feedlot, this implies that Tyson was indirectly paying Mr. Easterday an anticompetitive suppressed price for feeding cattle for Tyson, and that price was anticompetitive due to Tyson’s exertion of monopsony market power. Further, if Tyson owned the cattle prior to their delivery to Tyson, then Tyson was acting in an anticompetitive manner by exerting its monopsony market power to shift the economic risk of the cattle ownership to Mr. Easterday and Easterday Ranches (without the economic benefit of the cattle ownership), as Mr. Easterday and/or Easterday Ranches was (i) providing a personal guarantee under the 2017 CFA, (ii) shouldering 100% of the market and other risks relating to the cattle prior to delivery to Tyson under the 2017 CFA, (iii) paying an interest rate on the advanced funds, (iv) paying a guaranteed $15 per head profit to Tyson and (v) unable to control when cattle were delivered and harvested,” the lawsuit says.
Easterday also alleges that Tyson inconsistently reported the ownership of the cattle to regulatory authorities.
There are only two packers of fed cattle in the Pacific Northwest – Tyson and AgriBeef. AgriBeef is an independent packer, and approximately 70-75% of AgriBeef’s cattle supply comes from the company’s own feedlots. In 2006, Tyson shuttered its packing plant in Boise, Idaho, leaving only one Tyson packing plant in the Northwest, which is located near Pasco. Tyson reportedly accounted for approximately 80-85% of the fed cattle purchased in the Northwest from 2006 to 2020.
Easterday claims that beginning in 2010, Tyson changed its business model in the Northwest to no longer explicitly “own” the cattle.
“Rather, Tyson required cattle feeders to carry all the financial risk in feeding and caring for cattle until they reached market weight under their “Pioneer Model” contracting arrangement. The Pioneer Model contract has been the subject of other litigation by another company.” the lawsuit says. “When Mr. Easterday attempted to seek a change to the terms of this arrangement and renegotiate their contracts, Tyson exercised its market power and threatened to shut down the Pasco packing plant, which was the only remaining Tyson packing plant in the Pacific Northwest and also the only viable offtake arrangement for Easterday given the size of the Easterday feeding operations and the limited additional capacity of AgriBeef – the only other processing plant in the region. As noted above, Agribeef maintained its own supply of approximately 70-75% of its needs. Upon information and belief, Tyson made similar threats to other cattle feeding companies.”
In order for Easterday Ranches to escape the alleged monopsony power that Tyson exerted, the lawsuit claims, Easterday would need to find an alternative processor to purchase its fed cattle within a reasonable shipping radius but there are only two processing operations within the relevant shipping area. A monopsony is a market condition in which there is only one buyer.
“Given that AgriBeef is vertically integrated and did not have sufficient capacity to harvest all of Easterday Ranch’s fed cattle, Easterday was left with only one buyer – Tyson. Due to the lack of available alternative beef processors in the Pacific Northwest region of the U.S., the Defendant possessed sufficient market power to enable them to exercise monopsony power when dictating the pricing and other terms in fed cattle procurement contracts (e.g., CFA) to Easterday and other cattle feeding operations in the Pacific Northwestern U.S.,” the lawsuit says.
Easterday says in the lawsuit that his company was not able to feasibly switch its production systems away from feeding cattle in favor of other alternatives (such as crop production, dairy production, etc.) in order to escape the “price suppression effectuated by Tyson’s alleged monopsony power,” court documents say.
“Cattle feeding operations are capital intensive operations requiring substantial capital investments that are business specific. As such, cattle feeders (including Easterday) will often continue to operate, even when prices are suppressed, in an attempt to cover their loan payments and/or continue to try and cover their fixed costs.” the lawsuit says. “On the procurement side of the market, the Defendant’s processing plant is species-specific, i.e., it is a processing plant that harvests cattle. As such, the Defendant and other cattle processors in the area (i.e., AgriBeef) would not be willing or able to procure other species of animals (e.g., swine, broilers) to fill their processing operations. Likewise, processors for other species of animals (e.g., swine, broilers) would not be willing or able to procure cattle to fill their processing operation. For these reasons, the relevant product market in this case is the market for fed cattle within 200 miles of the Easterday Ranch.”
Easterday claims that through Tyson’s alleged control of the open cattle purchasing market, threatening behavior, and pressure to enter into contracts with anticompetitive terms for Tyson’s benefit, the company exerted significant market power over the supply side of the market for fed cattle in Pacific Northwest.
“Tyson purchased its competitor Iowa Beef Processors, Inc. (“IBP”) in 2001 and throughout the next two decades consolidated its control over the beef open market in the Pacific Northwest. One of the ways Tyson exerted control was through forcing cattle feeders, such as, but not exclusively, Mr. Easterday, to enter into contracts with anticompetitive and unfair terms and pricing and other terms in Tyson’s favor, such as the “Pioneer Model” CFAs,” according to the lawsuit. “Tyson has attempted to retroactively claim that under the 2017 CFA, 2020 Amendment, and 2020 Confirmation, ownership transferred from Easterday Ranches to Tyson prior to Easterday’s delivery of the cattle to the Pasco plant. Tyson’s position on December 2020 regarding the ownership of the cattle under the 2017 CFA is inconsistent with the prior representations that Tyson made to Mr. Easterday. As a result, either Tyson was unfair and deceptive towards Mr. Easterday requiring Easterday Ranches to pay interest and fees it would not have otherwise paid if Tyson in fact owned the cattle, or Tyson was, upon information and belief, deceptive towards Washington state and the U.S. Department of Agriculture in regulatory filings in order to receive an advantage in the market.”
The lawsuit claims that Tyson was aware, or should have been aware, that the contract terms were “unfair and deceptive,” and that its reported control over the regional market “left no viable alternatives for Mr. Easterday but to continue supplying Tyson with cattle. Additionally, Tyson’s threats to close the Pasco plant in response to Mr. Easterday’s attempts to renegotiate the contract terms, [exhibit] Tyson’s knowledge that they were cattle feeders’ only option in the region and indicative of Tyson’s market power.”
Easterday says in the lawsuit that by pushing him to continually increase feedlot capacity, Tyson created a supplier in him whose operations were too large to sell cattle elsewhere. Also, because his resources were so heavily invested in his contract with Tyson, for which he was sustaining losses, he could not acquire alternative means of financing due to insufficient collateral.
As a result, Easterday says not only he has been harmed, but the competition has as well by allegedly being paid less than the competitive price, and meatpackers, specifically in this case Tyson, profiting.
The lawsuit cites a report by Vox Media – “How 4 companies control the beef industry which claims that as of 2019, the top four cattle meatpacking companies, including Tyson, process over 85% of all cattle produced in the United States. This, the lawsuit says, creates a “bottleneck” between cattle feedlot owners and the wholesale market for beef, benefiting the meatpackers.
Prior to 2006, when Tyson operated meatpacking plants in both Pasco and Boise, cattle feeders could solicit competing bids for the purchase of slaughter-ready cattle, the lawsuit claims. However, by shutting down the Boise meatpacking plant in 2006, Tyson allegedly eliminated competition, creating the bottleneck of only one geographically feasible meatpacking plant for cattle feeders and ranchers located in the Pacific Northwest.
“This bottleneck, created by Defendant, provides Tyson with significant market power, which it wielded in [the] negotiation of pricing and other terms with feedlot operators. As described above, in approximately 2019 when Mr. Easterday attempted to renegotiate the terms of the 2017 CFA based on changing market conditions, Tyson refused to negotiate and threatened Mr. Easterday that if he did not accept Tyson’s terms, they would simply shut down the Pasco meatpacking plant,”court documents say. “Additionally, as a result of cattle feeding agreements like the 2017 CFA entered into by Easterday, in his individual capacity and as President of Easterday Ranches, Defendants removed a significant amount of fed cattle from the price discovery process of competitive bid auctions. Because beef packers are bypassing the auction process and offering “take it or leave it” pricing and other terms to feedlot owners directly, this limits market transparency, limits the number of competing bids cattle feeders can solicit, and correspondingly reduces competition.”
Furthermore, Easterday claims that when Tyson needed additional cattle supply for the Pasco plant, the company would ship cattle to Pasco from hundreds of miles away from cattle feeders in the Midwest, “choosing to take a loss on those cattle due to the high shipping costs, to avoid paying Mr. Easterday, and other cattle feeders in the Pacific Northwest, higher competitive prices on the open market. This price maneuvering ensured that the price Tyson paid cattle feeders providing cattle under a Pioneer Model arrangement escaped supply and demand conditions of a competitive fed cattle market,” the lawsuit claims.
The lawsuit says the impact of this market concentration and the use of cattle feeding agreements, rather than open market purchases in the relevant market, and other alleged unfair and deceptive practices have “resulted in Tyson not only receiving its cattle supply on non-negotiated prices and terms, but also enabling Tyson to lower the amounts it pays to cattle feeders, while still collecting the same or increased prices charged to wholesalers.”
Easterday says he knows of at least three other instances where Tyson “entered into cattle feeding agreements with ranchers based on their “Pioneer Model,” and in every instance the rancher that was a party to that CFA struggled to meet its one-sided, Tyson-favored, terms.”
As a result, Easterday says in the lawsuit that he has suffered injuries due to Tyson’s actions, “including but not limited to, the loss of income that he would have received as President and owner of Easterday Ranches absent Defendant’s conduct, as well as, damage to the value and forced liquidation of land comprising of his real estate and improvements, which were owned, in part, in Plaintiff’s personal capacity, and not by Easterday Ranches. Plaintiff has further suffered injury as a result of personal guarantees he was forced to undertake.”
Easterday says those injuries “are caused by the Defendants’ illegal antitrust activities, [and] are the types of injuries that the antitrust laws and PSA were intended to provide redress. They are direct injuries, not speculative, and there is no potential for duplicative recovery.”
The lawsuit adds that Tyson’s business practices have had “a direct, substantial, and reasonably foreseeable effect on domestic commerce in the United States.”
Easterday is seeking a jury trial as well as treble damages (including, without limitation, lost profits), together with legal costs of this action, reasonable attorneys’ fees, and post-judgment interest at the highest legal rate from and after the date of service of this complaint. He also wants the U.S. District Court to “grant permanent injunctive relief against Defendant to remedy the ongoing anticompetitive effects of Defendants’ unlawful conduct.”
Attempts to reach a Tyson Fresh Meats representative for comment were unsuccessful.
