On January 15, Texas Attorney General (AG) Ken Paxton announced that the state had settled its long-running lawsuit against Cal-Maine Foods, Inc. over the prices that the company charged for eggs in the first months of the COVID-19 pandemic. Notably, Cal-Maine avoided making any monetary payment as part of the settlement, instead agreeing to donate more than two million eggs to Texas food banks.
The Lawsuit
Texas sued Cal-Maine and its Texas subsidiary in April 2020. The complaint alleged that Cal-Maine — the state’s dominant egg supplier — had been charging around $1 for a dozen generic eggs in the months leading up to the governor’s declaration of a pandemic-related disaster. The company then allegedly increased its price to $3 when the pandemic caused a surge in demand. According to the complaint, Cal-Maine violated the Texas Deceptive Trade Practices — Consumer Protection Act (DTPA) by (1) charging an exorbitant or excessive price during a declared disaster, and (2) misrepresenting that egg prices were outside of its control.
Cal-Maine moved to dismiss the complaint, asserting that the state had not adequately pleaded facts to support either of its theories of liability. The company also argued that the DTPA is unconstitutionally vague and violates the U.S. Constitution’s Commerce and Takings clauses, at least as applied by the AG to Cal-Maine. The Harris County district court granted Cal-Maine’s motion in August 2020, but the Court of Appeals reversed the dismissal two years later. Acknowledging that Cal-Maine had raised colorable arguments, the Court of Appeals nevertheless concluded that further discovery was warranted and that the case could proceed “because it cannot be said that the State’s claims are completely baseless in fact or in law.”
The Settlement
Texas and Cal-Maine ultimately resolved the litigation one month before the scheduled trial. The settlement agreement provides no monetary relief to Texas but includes notable nonmonetary terms.
Most interestingly, Cal-Maine has agreed to donate a total of 180,000 dozen large brown and/or white eggs to Texas food banks within 120 days of the effective date. The agreement identifies 17 food banks across Texas and specifies how many eggs will be donated to each. Cal-Maine is required to coordinate the logistics of the egg donations with each food bank and to finance the shipping, storage, and other tasks and costs associated with the donations. If any food bank wants to redirect all or part of its share to another of the listed food banks or to another local nonprofit entity, Cal-Maine must arrange for delivery to the designated recipient as long as the company receives three weeks’ notice from the originally intended recipient.
Cal-Maine must provide the Texas AG’s office with monthly status updates until the egg donations have been completed. By the 120-day deadline, the company must certify that it has completed the donations, along with the date, recipient, and egg count for each donation. If Cal-Maine determines that it may not be able to meet the deadline, it must provide documentation to the attorney general’s office to substantiate its reasons for failing to complete the donations, and the parties must negotiate in good faith over a potential extension.
The agreement also includes injunctive relief. For a 10-year period, Cal-Maine is enjoined from selling eggs or demanding prices for eggs during a designated disaster period at levels that would violate the DTPA’s prohibition on exorbitant or excessive prices during declared disasters. For the same period, the company must keep exemplar copies of documents reflecting any official internal notice that it provides regarding the injunction as well as records of all notices and written communications with the state of Texas.
Finally, for 10 years, Cal-Maine must (a) respond to any request by the AG’s office within 20 business days of receipt of a written request, and (b) promptly make available copies of records reasonably requested by the AG’s office to demonstrate compliance with the requirements of the settlement agreement.
The settlement agreement includes no finding or admission of wrongdoing by Cal-Maine.
Why It Matters
Paxton’s egg donation agreement serves as a reminder that AGs are sometimes open to creative settlements to enforcement actions. Outside-the-box solutions like this one may be less costly to companies than either continuing to litigate or making a cash payment — particularly when the settlement offers the AG an opportunity to show that they are delivering tangible results for their constituents and/or local nonprofits that serve their communities.
