For immediate release - January 19, 2006.
Contact Bob Brammer, 515-281-6699, or
Eric Tabor, 515-281-5191.
State Reaches Hog Production Agreement with Cargill
Iowa Attorney General Tom Miller announced that United States District
Court Judge Robert W. Pratt approved a Consent Decree today jointly submitted
by the State of Iowa and Cargill, Inc., Cargill Meat Solutions Corporation,
and Cargill Pork LLC (collectively "Cargill"). The Consent Decree sets
out the terms of a settlement reached between the State and Cargill resolving
a dispute over the constitutionality of Iowa's prohibitions against processors
vertically integrating into pork production in Iowa. Click
here for a copy of the Consent Decree.
"This agreement enables Cargill to pursue its stated plans to significantly expand its hog production contracting in Iowa,"
Miller said, "and it protects the rights and interests of Cargill's contract producers."
"I am pleased we have reached an agreement with Cargill that is very beneficial for Iowa's pork industry, especiallys since
the likely alternative was lengthy and costly litigation with uncertain results. In the agreement, Cargill states a desire to
significantly expand its business operations in Iowa, including hog production contracting. The agreement will allow this
expansion to proceed, which is important for economic development and competition in the pork business," he said.
"At the same time, Cargill has agreed that when it contracts with Iowa pork producers it will be bound by rules
guaranteeing fairness. Cargill producers will be given a 'contract producer's bill of rights' and the ability to enforce the
safeguards in court, including the prospect of receiving attorney fees if they are successful. This is an important
enforcement tool," Miller said.
"The agreement also has strong protections that will allow Cargill producers to organize and use bargaining associations.
This will increase the economic bargaining power of Iowa contract producers and give them the opportunity to negotiate
for their fair share of the returns in swine production," Miller said.
In return for Cargill's compliance with its commitments under the settlement, the State will not pursue enforcement of the
ban on packer involvement in swine production with respect to Cargill, Miller said. The agreement has a term of ten years.
"There is no allegation here that Cargill violated Iowa law," Miller said. "On the contrary: Cargill approached our office
to begin negotiations prior to engaging in production contracting. The agreement settles a dispute about the
constitutionality of Iowa law and avoids litigation. It permits Cargill to move ahead with its stated intention of
significantly expanding its business operations in Iowa by engaging in hog production contracting -- in a manner that
reasonably protects the economic and legal interests of contract producers."
Specific provisions of the agreement include the following:
Contract Producers' Rights. Cargill has agreed that its Iowa contract producers will have a set of identified producer
rights, including the right to be a "whistle-blower," the right to join an association, the right to use a contract producer lien,
and the right to publicly discuss and disclose the terms of their contracts.
Cargill's Obligations. Cargill has agreed to refrain from a list of activities, including:
1. Coercion. Cargill must not take actions to coerce, retaliate against, or discriminate against a contract producer who
exercises producer rights. This would include actions that would affect the execution, termination, or renewal of the
producer's contract, or alter the quality, quantity, or delivery times of contract inputs to the producer.
2. Capital investment. Cargill must not require a contract producer to make a capital investment in addition to the capital
investment required by the producer's contract, unless fair compensation is paid to the producer.
3. Arbitration. Cargill must not require producers to use binding arbitration to resolve disputes under the settlement
4. Company-owned facilities. Cargill must not finish hogs in company-owned facilities for a period of 5 years.
Iowa Producers' Ability to Organize. Cargill has agreed that if its Iowa producers organize or adopt a collective
bargaining association, Cargill will not retaliate against such producers and will negotiate in good faith with such an
Enforcement. Cargill has agreed that if any Iowa producer suffers damages as a result of Cargill's breach of the
producer's contract or the provisions of the agreement, the producer may bring a civil action, and, if successful, may
recover damages and be awarded attorneys fees.
Market Access/Transparency. Cargill has agreed that for two years 25% of the swine slaughtered at its plant in
Ottumwa, Iowa, will be purchased on the open market from sellers other than Cargill affiliates.
Continued Operation of Iowa Plants. Cargill has informed the Attorney General that it currently intends to keep its
Ottumwa plant in operation. If those intentions change, Cargill has agreed to provide 90-day advance notice of any plant
closure to the Attorney General.
Miller was joined at a State Capitol news conference by Tom Hayes, President of Cargill Meat Solutions Corporation.
Background Information on Cargill Litigation
The Consent Decree signed today settles a lawsuit filed late yesterday by Cargill in the United States District Court for the
Southern District of Iowa. In its lawsuit, Cargill asserted that Iowa Code section 202B.201 violates the United States
Constitution. The Attorney General denies that Iowa Code section 202B.201 violates the United States Constitution.
Background Information on Smithfield Foods Litigation
The agreement with Cargill announced today is very similar to the resolution of litigation between the State of Iowa and
Smithfield Foods announced Sept. 16, 2005. A summary of the Smithfield litigation follows:
On July 22, 2002, Smithfield Foods, Inc., Murphy Farms, LLC, and Prestage-Stoecker Farms, Inc. ("Smithfield
Producers") filed suit against the Attorney General in the United States District Court for the Southern District of Iowa,
Smithfield Foods, Inc., Murphy Farms, LLC, and Prestage-Stoecker Farms, Inc. v. Miller, No. 4:02-CV-90324.
The lawsuit asserted that Iowa Code section 9H.2, the predecessor to current Iowa Code section 202B.201, violated the
United States Constitution.
On January 22, 2003, the United States District Court for the Southern District of Iowa permanently enjoined the Attorney
General from enforcing Iowa Code section 9H.2.
Iowa Code section 9H.2 was amended by the Iowa Legislature in 2003 during the pendency of the appeal of the District
Court's ruling by the Attorney General, and recodified at Iowa Code section 202B.201.
The United States Court of Appeals for the Eighth Circuit vacated the District Court's January 22, 2003, ruling and
remanded the Lawsuit for further proceedings in light of the 2003 amendment.
On December 30, 2004, the United States District Court for the Southern District of Iowa issued an order scheduling trial
for the case to begin on March 13, 2006.
By agreement dated September 16, 2005, and with the approval of the United States District Court for the Southern District
of Iowa, the Attorney General consented to an injunction prohibiting the enforcement of Iowa Code section 202B.201 by
the State of Iowa with respect to the Smithfield Producers.
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