Tyson Victory Streak Continues in Courts

Tyson Foods Inc. won round one of its legal superbout with ConAgra Inc. of Omaha, Neb. It’s the third in a recent series of court victories for the Springdale poultry producer following U.S. Judge James Robertson’s Dec. 3 grant-ing of a new trial for Tyson governmental affairs director Archie Schaffer III.

Schaffer was previously convicted of giving illegal gifts to former Agriculture Secretary Mike Espy. A federal court also recently acquitted Tyson’s Hudson Foods division and former executives Michael Gregory and Brent Wolke of charges they lied to government inspectors during Hudson’s 1997 nationwide meat recall.

The latest win came Jan. 4 when Washington County Chancellor John Lineberger ruled that Tyson’s “pricing, pricing programs, cost of goods sold, profit margins on individual products and marketing plans and strategies” are protectable trade secrets under the Arkansas Trade Secrets Act.

ConAgra previously contended that this information, possessed by four executives who left Tyson for ConAgra and its wholly owned subsidiary, ConAgra Poultry Co., did not qualify as “trade secrets.” Despite the fact Lineberger says there is no evidence trade secrets had been shared by former Tyson employees, the judge believes the conflict is inevitable.

ConAgra spokesman Tim McMahon called the ruling “peculiar” but says because his company “is involved in a more diverse business environment than Tyson,” it will be able to find other positions for the employees.

“If Tyson thought these employees were so valuable,” McMahon says, “they should have done something to keep them in the first place. But we’ll appeal and move on. It’s disruptive, but that’s how Tyson chooses to play the game.”

Lineberger’s decision included an injunction that prevents two of the four former Tyson employees — former senior vice president of food service distribution Jerry Dowd and former senior vice president and general manager of retail fresh products John Curran — from working for one year at ConAgra or ConAgra Poultry in positions similar to those they held at Tyson. Michael Hamblin, formerly Tyson’s division manager of food service national accounts, is barred from having contact with Tyson poultry customers Burger King and Kentucky Fried Chicken for one year.

Involvement of the fourth employee, former senior vice president of fresh consumer products David Purtle, will be taken up during a separate trial scheduled for Feb. 1. At that time, Tyson will seek damages from what it claims is the “misappropriation of certain trade secrets” including some of its feed formulas.

Tyson’s legal dream team — made up of general counsel Les Baledge and outside counsel Ken Shemin, John Elrod and Ruth Ann Wisener, all of Fay-etteville, and Jim Blair of Springdale — characterized the decision as “an Arkansas court protecting Arkansas trade secrets.”

“This is a very significant case for interpreting Arkansas law,” Baledge says. “The legal concepts surrounding trade secrets have been more fully developed in other jurisdictions. But I believe this is an important case for our state.”

Jim Crouch of Springdale, the defendants’ local counsel, had no comment other than to say he was disappointed in the ruling.

In a prepared statement to the media, Tyson CEO Wayne Britt said the lawsuit was “always about safeguarding our company, our team members and our shareholders from ConAgra’s improper acquisition and the use of this confidential information.”

Industry analyst John McMillin of Prudential Securities in New York says even if the decision is later reversed, Tyson has hobbled ConAgra’s poultry division.

“This is a relationship business, and keeping those guys away for a year is a positive for Tyson,” McMillin says. “It’s a serious blow to ConAgra’s hopes of quickly building up their food service business. The reason they hired these guys is because they bought Seaboard Foods, which has a lot of production but not enough homes for some of its production.

“ConAgra and Tyson are really like the Hatfields and McCoys and this has been going on since they both tried to buy Holly Farms in 1989.”