Tyson Loses Court Battle, Sees Shares Get Volatile

The Arkansas Supreme Court on June 27 denied Tyson Foods Inc. the $20.09 million it had originally been awarded in a trade-secret lawsuit against rival ConAgra Inc.

Former Tyson executive David Purtle was hired by ConAgra as president of retail poultry in 1999 and admitted to Washington County Chancery Judge John Lineberger in January of 2000 that he had taken Tyson’s nutrient feed profile to ConAgra. The Omaha, Neb.-based ConAgra admitted that the feed formula had helped save it $1.3 million.

Less than a month after Purtle had left Tyson Foods, ConAgra began using the formula.

Four former Tyson employees — Purtle, Jerry Dowd, Michael Hamblin and John Curran — had left for ConAgra. Tyson had asked for $70 million in damages, but Lineberger awarded $20.09 million and said that three of the former Tyson employees could not work in similar positions at ConAgra for one year.

The Supreme Court reversed that decision in November of 2000.

On June 27, the high court said it agreed with Lineberger’s original decision. But, it said Lineberger had erred in his terminology for awarding the damages.

The Supreme Court said the Tyson formula was not a trade secret and that Tyson didn’t have to have a post-employment agreement with employees to protect its secrets.

Tyson officials claim Purtle knew the formula was “confidential.”

But the Supreme Court said Tyson did not take the proper steps to protect the formula.

“There was no proof that Tyson took any steps to swear them [Tyson workers] to secrecy or warn them of the confidential nature of the [nutrient] profile,” the high court said.

Despite the ruling, Associate Justice Ray Thornton disagreed, saying he thought Tyson had indeed taken appropriate measures. In his dissent, Thornton said Tyson had in place a code of conduct that required workers to protect confidential information. Thornton also noted that even ConAgra officials had asked Lineberger to reduce his original ruling for damages to $1.3 million for the money it had saved by using the formula the Tyson employees had brought to their company.

The reaction from the Tyson and ConAgra offices were obviously much different following the June 27 ruling.

Tyson released a statement that said, “If you put your car in the garage but fail to lock it, is it against the law for someone to steal it? To Tyson Foods, this is an appropriate analogy for what happened in our trade secrets case against ConAgra.”

A ConAgra spokesman said, “This is a case where the ruling speaks for itself.”

Tyson Foods

Shares Plummet

Prudential Securities downgraded shares of Tyson Foods Inc. from a “buy” to a “hold” July 2, sending the Springdale company’s shares falling hard.

Tyson shares closed the market July 1 trading at $15.18, but fell almost two dollars July 2 before recovering to close at $13.79 (down $1.39 for the day).

Another potential ban on poultry in Russia, rising feed costs and less favorable hog and cattle prices were cited by Prudential analyst John McMillin in his evaluation.

“I’m a little surprised [Tyson’s shares are] down this much,” McMillin said. “I still like the company. It’s just down a little more than I would have thought.”

Russia imposed a one-month ban on chicken imports in the spring due to a dispute over antibiotics used by United States poultry companies and concerns of salmonella contamination.

Also, another lawsuit filed July 1 alleging Tyson and other companies of manipulating cattle prices may have played a role in the shares falling. The suit also accuses Cargill Inc.’s meat unit Excel Corp., Farmland Industries Inc., and Tyson rival ConAgra with manipulating the price of live cattle for more than a month last year, costing ranchers millions of dollars.

ConAgra shares closed July 2 at $26.80, down 13 cents from the previous day.