Pickett v. Iowa Beef Processors was a lawsuit between cattle producers and a beef processing company. Cattle producers sold their cows in two ways: on the cash market (also known as the "spot market") and using forward contracts. The cash market was riskier, but also potentially more profitable. The forward contracts were safer, but also made less money for the producers. So some of the producers sued Iowa Beef Processors, alleging that their use of forward contracts was a deceptive business practice. (Specifically, they alleged a violation of the Packers & Stockyards Act, an antitrust statute which regulated the meat industry.)
The trial court (in the Middle District of Alabama) originally denied certification, because the plaintiffs had not met the typicality or adequacy requirements. The plaintiffs narrowed their class and sought reconsideration, offering expert testimony that an econometric model could determine most of the liability and damages issues. This time, the court certified the class. At that point, Iowa Beef Processors appealed.
The Eleventh Circuit began by noting that Rule 23(a)(4)’s adequacy requirement exists in part to guard against conflicts within the class.
Thus, a class cannot be certified when its members have opposing interests or when it consists of members who benefit from the same acts alleged to be harmful to other members of the class.
In this case, because the class action sought to prohibit forward contracts, it set up a conflict between those cattle producers who had used the device and those who had relied exclusively on the spot market.
Thus, the class includes those who claim 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.
(Emphases added.) So the Eleventh Circuit reversed the certification, because this conflict among the class would preclude any finding of adequacy.
In addition to being an excellent example of an intra-class conflict, Pickett also provides the first glimpse of a line of logic that shows up later in Pipefitters Local 636 Insurance Fund v Blue Cross Blue Shield of Michigan. It’s always worth looking at the effects of a potential class action. Here, the proposed class action would have meant long-term harm to the producers. In Pipefitters, the class action would have harmed the elderly of Michigan. Class actions are cases large enough to effect massive and long-term changes. Sometimes those changes are for the best. Often, they have harmful effects on some members of the class, or on third parties.