Several days after confirming it was shutting down its hog production arm, Goldsboro Milling Co., Maxwell Foods, LLC, filed a lawsuit against pork giant Smithfield Foods Inc. — claiming that the Chinese-owned company is “unlawfully running Maxwell out of the hog business.”
The complaint, which was filed Thursday, alleges that Smithfield breached a decades-old contract with the Wayne County pork producer by failing to pay a fair price for hogs and breaching its obligation to purchase all of Maxwell’s hogs as “required” under the Production Sales Agreement signed in 1994.
Here are some of the highlights:
• When the agreement was signed, Smithfield’s “major suppliers” included Carroll’s Foods Inc., Murphy Family Farms Inc. and Prestage Farms Inc.
According to the lawsuit, Maxwell was contractually guaranteed at least the same price per hog as the other suppliers, known as “most favored nation” pricing. But in 1999, Smithfield purchased Carroll’s and Murphy, decreasing the volume of hogs traded in spot markets and increasing consolidation of the industry, which, according to the lawsuit, “undermined the stability and reliability of the daily spot market price as a basis for valuing U.S. hogs.”
“Given these changes in the structure of the U.S. hog market, the (agreement’s) pricing formula, which is spot market-based as opposed to cutout-based, no longer yields pricing that allows Maxwell to operate at a profit,” the lawsuit reads. “In addition, consolidation of the industry and Smithfield’s aggressive vertical integration … has left Maxwell with no bargaining strength in its dealings with Smithfield.”
• Maxwell claims it recently learned that Smithfield was paying more for hogs to other suppliers than it was paying Maxwell, which the Wayne County company characterized as a “violation of Smithfield’s (most favored nation pricing) obligations to Maxwell under the (agreement).”
“Maxwell recently learned that during this time period when Maxwell was asking Smithfield to improve Maxwell’s pricing, Smithfield hid from Maxwell the fact that Smithfield was already providing pricing to one or more of its other major swine suppliers that exceeded that provided to Maxwell,” the lawsuit reads.
• Maxwell claims that Smithfield violated its agreement by refusing to purchase all of Maxwell’s hogs. Since April, the company claims, Smithfield has only purchased half of Maxwell’s output.
“Smithfield’s failure to purchase all of Maxwell’s output of hogs, in violation of the (agreement), has caused, and continues to cause, Maxwell to suffer substantial economic harm,” the lawsuit reads, before dismissing the notion that COVID-19 has disrupted Smithfield’s ability to do so. “Smithfield has had the ability to, and has in fact, continued to operate its three East Coast plants. At all relevant times, Smithfield has had sufficient capacity to perform its obligations under the (agreement).”
• Maxwell claims that Smithfield has entered into contracts with other major swine suppliers based “in whole or in part on ‘cutout’ pricing, which is more economically beneficial for that supplier or those suppliers than is the pricing Smithfield has provided to Maxwell.”
“Smithfield has not denied that it has agreements with other major swine suppliers that are on economic terms better than what it has offered Maxwell, thus breaching the (agreement),” the lawsuit reads.
• Maxwell blames shuttering its hog operation on Smithfield.
“Maxwell has been forced to curtail operations and start the wind down of its swine production because of the unlawful, unfair, and predatory actions by Smithfield. Maxwell therefore has notified its contract growers that it will not extend or renew their contracts and has stopped the breeding of its sows,” the lawsuit reads before noting that Smithfield’s “wrongful conduct” has cost Maxwell “tens of millions of dollars already and is causing Maxwell to incur additional substantial losses every day.”
Maxwell has demanded a trial by jury.
The GOP has gutted anti trust. This is the natural consequence of that having happened.
THATS WHAT HAPPENS WHEN THE USA DEALS WITH THESE FOREIGN COUNTRIES RICH PEOPLE LETS THEM COME OVER HERE AND BUY THE USA OUT THEN THEY RUN OUR AMERICAN COUNTRY ,GOOD LUCK WITH UR LAWSUIT’S ITS A DAM SHAME
The china deal biying smithfeild company & alot of land came anout through the obama presidency so there lies the blame wake up America vote Trump 2020
Smithfield’s hardball businesses approach was not introduced to NC agribusinesses by the Chinese investment firm. Look close, you may very well find a trail of financially comfortable families that had relationship with Smithfield. Doubtful they all feel they were treated fair. My boss use to tell me that the fair comes once a year and it’s in Raleigh.
Smithfield’s hardball businesses approach was not introduced to NC agribusinesses by the Chinese investment firm. Look close, you may very well find a trail of financially comfortable families that had relationship with Smithfield. Doubtful they all feel they were treated fair. My boss use to tell me that the fair comes once a year and it’s in Raleigh.