The Seventh Circuit rejected a claim by an antitrust defendant that its liability insurance covers the defense of class action suits for price fixing. Rose Acre Farms, Inc. v. Columbia Casualty Co., 2011 WL 5313818 (7th Cir. Nov. 1, 2011).
Rose Acre, the nation's second-largest egg producer, is a defendant in multiple class action suits alleging that it and other egg producers conspired to fix the price of eggs. Rose Acre sought a defense from its liability carrier, and when that was refused, sued to enforce the insurance policy. The district court granted summary judgment for the carrier, and Rose Acre appealed. The Seventh Circuit affirmed.
The policy covered "personal and advertising injury," but not antitrust suits. Rose Acre argued that there could have been advertising injury because its advertising emphasized the extra effort, and by implication, the extra cost, involved in free-range egg production. That advertising could have, Rose Acre posited, hindered consumers suspicious of high egg prices from discovering the true reason. Judge Posner, writing for the court, noted the "convoluted" nature of this argument.
Nowhere in the complaint, he noted, is there any allegation that the advertising threw the plaintiffs off the scent. Nor does the complaint allege price fixing of free-range eggs; it dealt only with price-fixing of eggs from caged hens.
Significantly, even if the advertising could be alleged as furthering the conspiracy, the liability alleged in the complaint did not arise from the advertising. The alleged liability arose from the conspiracy to fix prices, and the advertising, if anything, merely disguised the conspiracy.
Judge Posner then pointed out the common sense rejoinder to Rose Acre's argument. Antitrust is a major business risk, especially for a business that is one of the largest competitors in a major market. He had earlier noted that Rose Acre had previously been an antitrust defendant, citing A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396 (7th Cir. 1989) (in which the Seventh Circuit affirmed a decision absolving Rose Acres of monopolization and Robinson-Patman Act challenges). It is unlikely that an insurance contract would cover such a major risk indirectly under a provision relating to advertising injury without mentioning it directly.
As a final bonus, Judge Posner judicially resolved the question that has bedeviled philosophers for centuries - the chicken came before the egg. As support, he cited the Rose Acre website which answered the question by quoting Genesis, that on the fourth day, God created the fowl that fly above the earth.
