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For immediate release Friday, September 11, 2009.
Contact Bob Brammer, 515-281-6699, or Steve Moline, 515-281-6634.

State Reaches Hog Production Agreement with Tyson

Des Moines, Iowa, Friday, Sept. 11, 2009 -- Iowa Attorney General Tom Miller announced that United States District Court Judge Robert W. Pratt approved a Consent Decree Friday jointly submitted by the State of Iowa and Tyson Fresh Meats, a subsidiary of Tyson Foods, Inc. (“Tyson”). The Consent Decree sets out the terms of a settlement reached between the State and Tyson resolving a dispute over the constitutionality of Iowa’s prohibitions against processors vertically integrating into pork production in Iowa.

“This agreement enables Tyson to pursue its stated plans to maintain its business operations in Iowa,” Miller said, “and it protects the rights and interests of Tyson’s contract producers.”

Miller said: “I am pleased we have reached an agreement with Tyson that is very beneficial for Iowa’s pork industry, especially since the likely alternative was lengthy and costly litigation with uncertain results. In the agreement, Tyson states a desire to maintain its business operations in Iowa, including maintaining its swine procurement in Iowa, maintaining the volume of pork processed at its Iowa plants, and taking advantage of the opportunity to engage in hog production contracting. The agreement will allow Tyson’s business in Iowa to proceed, which is important for economic development and competition in the pork business,” Miller said.

Jim Lochner, Tyson's Senior Group Vice President of Fresh Meats said: “Our company has historically depended on independent pork operations of all sizes to supply us with a large majority of the high quality hogs we process. We want to continue to rely on independent producers and do not intend to become a vertically integrated processor. We believe this agreement will provide greater flexibility in our marketing relationships with pork producers, helping ensure the producers have a competitive outlet for their livestock and we have a steady supply of hogs to run our plants. This is especially important in today’s economic environment,” he said.

“The decree also puts Tyson on equal footing with other pork processors who already have similar agreements with the state,” Lochner added.

Miller said: “Tyson has agreed that when it deals with Iowa contract growers it will be bound by rules guaranteeing fairness. Tyson contract growers 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,” he said.

“The agreement also has strong protections that will allow Tyson 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 Tyson’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 Tyson, Miller said. The agreement expires on September 16, 2015.

“There is no allegation here that Tyson violated Iowa law,” Miller said. “On the contrary: Tyson 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 Tyson to move ahead with its stated intention of maintaining its business operations in Iowa and gives Tyson the opportunity to engage in hog production contracting -- in a manner that reasonably protects the economic and legal interests of contract producers.”

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Background Information

Specific provisions of the Tyson agreement include:

Contract Producers’ Rights. Tyson 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.

Tyson’s Obligations. Tyson has agreed to refrain from a list of activities, including:

1. Coercion. Tyson 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. Tyson 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. Tyson must not require producers to use binding arbitration to resolve disputes under the settlement agreement.

4. Company-owned facilities. Tyson must not finish hogs in company-owned facilities until September 16, 2010.

Iowa Producers’ Ability to Organize. Tyson has agreed that if its Iowa producers organize or adopt a collective bargaining association, Tyson will not retaliate against such producers and will negotiate in good faith with such an association.

Enforcement. Tyson has agreed that if any Iowa producer suffers damages as a result of Tyson’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. Tyson has agreed that for two years 25% of the swine slaughtered at its plants in Columbus Junction, Perry, Storm Lake, and Waterloo will be purchased on the open market from sellers other than Tyson affiliates.

Continued Operation of Iowa Plants. Tyson has informed the Attorney General that it currently intends to keep its Columbus Junction, Perry, Storm Lake, and Waterloo plants in operation. If those intentions change, Tyson has agreed to provide 90-day advance notice of any plant closure to the Attorney General.

The Tyson litigation:

The Consent Decree signed today settles a lawsuit also filed today by Tyson in the United States District Court for the Southern District of Iowa. [Go to Consent Decree. Go to lawsuit Complaint.] In its lawsuit, Tyson 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.

The Smithfield Foods, Cargill and Hormel litigation:

The agreement with Tyson announced today is very similar to the resolution of litigation between the State of Iowa and Hormel announced April 6, 2006, between the State of Iowa and Cargill announced January 19, 2006, and between the State of Iowa and Smithfield Foods announced Sept. 16, 2005.

Summary of the Smithfield litigation:

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.

Summary of the Cargill litigation:

On January 18, 2006, Cargill, Incorporated, Cargill Meat Solutions Corporation, and Cargill Pork, LLC (collectively “Cargill”) filed suit against the Attorney General in the United States District Court for the Southern District of Iowa, Cargill, Incorporated, Cargill Meat Solutions Corporation, and Cargill Pork, LLC v. Miller, No. 4:06-CV-20.

The Cargill lawsuit asserted that Iowa Code section 202B.201 violated the United States Constitution.

By agreement with Cargill dated January 19, 2006, 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 against Cargill by the State of Iowa.

Summary of the Hormel litigation:

On April 6, 2006, Hormel Foods Corporation (“Hormell”) filed suit against the Attorney General in the United States District Court for the Southern District of Iowa, Hormel Foods Corporation v. Miller, No. 4:06-CV-00161.

The Hormel lawsuit asserted that Iowa Code section 202B.201 violated the United States Constitution.

By agreement with Hormel dated April 6, 2006, 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 against Hormel by the State of Iowa.

END