Lawyer questions company’s claim of a bird flu outbreak
BY: CLARK KAUFFMAN
A group of Midwest egg suppliers are embroiled in litigation over egg prices, with an Iowa company arguing it shouldn’t be forced to disclose its pricing information.
A central element of the case is whether a fabricated claim of a bird flu outbreak is to blame for one supplier raising its egg prices and canceling orders.
Grand Prairie Foods of South Dakota, which supplies hotels and convenience stores with breakfast sandwiches, is suing Echo Lake Foods, a Wisconsin company that manufactures precooked egg entrees, for breach of contract and unjust enrichment.
At the same time, a third company, Oskaloosa Food Products in Iowa, is attempting to quash a subpoena for company records related to its pricing.
Court records indicate Grand Prairie has purchased egg patties and other products from Echo Lake since at least 2005. In early 2022, Echo Lake’s supplier of raw eggs experienced an outbreak of avian influenza, commonly known as the bird flu, resulting in the destruction of more than 6 million laying hens.
Echo Lake then notified its customers, including Grand Prairie, that existing purchase orders for egg patties and other egg products would have to be revised to reflect increased pricing.
According to Grand Prairie’s lawsuit, Echo Lake Foods then doubled the price of its egg patties, and while the nationwide market price of eggs eventually decreased, Echo Lake allegedly refused to reduce the price of its egg patties.
Court exhibits show that on July 12, 2022, Grand Prairie’s president, Kurt Loudenback, e-mailed Echo Lake’s director of national sales, Justin Milbradt, writing, “Justin – I don’t understand why we continue to see these high prices,” noting that Grand Prairie could purchase eggs from other suppliers at a significantly lower price. “I’m sure you buy WAY more eggs than we do,” Loudenback added.
The next day, Loudenback emailed Echo Lake again, proposing that his company sell tankers of whole eggs to Echo Lake for $1.28 per pound — significantly less than the $3.60 per pound Echo Lake was charging Grand Prairie for its finished egg products.
“Just trying to get your eggs at (a) lower price to lower my cost,” Loudenback explained in his email. “$3.60 seems pretty high for a $1.28 input cost.”
The two companies eventually agreed on an arrangement whereby Grand Prairie would sell two truckloads of raw eggs each week to Echo Lake. Court records show Echo Lake agreed to pay a “premium price,” $1.70 per pound, for the raw eggs from Grand Prairie. In return, the records show, Echo Lake would sell the finished, processed eggs back to Grand Prairie for $3.60 per pound — the same price Grand Prairie had previously objected to as being out of line with market prices.
Within a few months, however, Grand Prairie told Echo Lake that an avian flu outbreak had affected its egg supplier, Oskaloosa Food Products, and so Grand Prairie would have to raise its prices. A few weeks later, Grand Prairie said it was unable to find a new supplier and wouldn’t be able to fulfill Echo Lake’s orders.
Echo Lake then began acquiring eggs elsewhere — but at a higher price. In court documents, Echo Lake says Grand Prairie’s failure to deliver eggs at the promised price cost Echo Lake more than $1.1 million.
Court exhibits show that in an effort to offset the added expense, Echo Lake withheld payments to Grand Prairie totaling $567,460. Grand Prairie then sued Echo Lake to recover the $567,460 it was owed, alleging breach of contract and unjust enrichment.
Echo Lake countersued, claiming Grand Prairie had breached the contract.
Was company’s bird-flu claim false?
Recently filed court records show that attorneys for Echo Lake are questioning Grand Prairie’s stated rationale for its price hike and the eventual cancellation of orders — an avian flu outbreak that affected the Oskaloosa plant.
In July, an Echo Lake attorney wrote to a lawyer for Oskaloosa Food Products, stating that while “Grand Prairie claims it had no choice other than to cancel the remaining purchase orders because of an outbreak of avian influenza among its suppliers, including Oskaloosa,” an independent investigation had concluded Oskaloosa reported no such outbreak at that time, despite legal requirements for such reporting.
In addition, the lawyer wrote, the chief operating officer of the Oskaloosa plant had confirmed for Echo Lake that “Oskaloosa did not experience the Al outbreak described by Grand Prairie.”
In late May, Echo Lake subpoenaed Oskaloosa Food Products to obtain access to the contract between Grand Prairie and the Oskaloosa company.
Oskaloosa has since filed a motion to quash that subpoena, arguing the agreement includes trade secrets. Echo Lake has responded in court by arguing that the price of eggs is not a trade secret.
That issue is now before a judge in the U.S. District Court for Southern Iowa, while the underlying lawsuit between Grand Prairie and Echo Lake continues to move forward in South Dakota federal court.
Iowa Capital Dispatch, a States Newsroom affiliate, produced this story.