Maxwell's lawsuit with Smithfield can proceed to trialMaxwell's lawsuit with Smithfield can proceed to trial
Dispute centers on better pricing to major swine suppliers, buying fewer hogs during the COVID-19 pandemic, and underpaying using a live-weight formula.

A North Carolina Business Court has granted Maxwell Foods permission to proceed to trial with some of its breach of contract claims against Smithfield Foods. A hog supplier to Smithfield for more than 25 years, Maxwell filed the lawsuit in 2021, citing the firm failed to provide Maxwell with most favored nation pricing and gave other “major swine suppliers” better pricing. Maxwell also claimed Smithfield breached the Production Sales Agreement’s output provision by buying less than Maxwell’s entire output during the COVID-19 pandemic and underpaid based on live weight instead of carcass weight.
Maxwell contends these actions all harmed the company greatly and moreover ran it out of the hog business.
In a decision released earlier this month, Judge Adam M. Conrad ruled, “The court enters summary judgment in Maxwell’s favor as to Smithfield’s counterclaims and affirmative defenses of force majeure and anticipatory breach. The counterclaims and these affirmative defenses are dismissed with prejudice. The court also enters summary judgment in Maxwell’s favor as to Smithfield’s liability on the claim for breach of the PSA’s output provision. This claim shall proceed to trial for a determination of Maxwell’s damages.”
With regards to the MFN clause, Maxwell alleged that Smithfield breached it by offering more beneficial pricing terms— primarily index or cutout pricing— to six other suppliers. Judge Conrad declared the phrase “major swine suppliers” should only refer to those suppliers in existence at the time the contract was executed. Thus, Smithfield was granted partial summary judgment on the claim as to four of the six suppliers.
“Had Maxwell wanted the right to be offered the pricing that Smithfield gave to new suppliers during the PSA’s term, it could have negotiated for a more comprehensive most-favored-nation clause. But it didn’t. In simple terms, Maxwell bargained for an assurance that Smithfield was treating it as well as existing major suppliers and a promise that Smithfield would continue to treat it as well as those suppliers, and only those suppliers, in the future,” Judge Conrad wrote.
As for the fifth and sixth major swine supplier, the court noted the statute of limitations comes into play regarding Maxwell’s claim to Murphy-Brown’s MFN pricing. Judge Conrad ruled Smithfield is entitled to summary judgment as to those alleged breaches but not to the claim that it breached the clause by failing to offer Maxwell changes in pricing given to Prestage Farms. That claim shall proceed to trial.
Maxwell also asserted that Smithfield broke its output provision in April 2020 and for several months afterward by buying less than its entire output during the COVID-19 pandemic.
“The bottom line is that Smithfield had the ability to accept and process Maxwell’s entire output throughout the pandemic,” Judge Conrad writes. “And no physical, contractual or legal limitation made it impracticable to process Maxwell’s output. Because Smithfield has not marshalled evidence sufficient to permit a jury to conclude that the Covid-19 pandemic prevented it from performing its duties under the PSA, the court grants summary judgment in favor of Maxwell as to the affirmative defense of force majeure.”
However, Smithfield claimed that Maxwell ended the PSA early. Rather than complying with the required six-year notice period, the company asserts Maxwell closed its business in February 2020 and delivered its last hog about a year later. The firm sees Maxwell’s closure as a wrongful repudiation of the PSA and a termination without notice.
Since the PSA has no minimum output requirement, Maxwell says its decision to not produce any more hogs is not a breach so long as the company acted in good faith.
“By closing its business in good faith, Maxwell did not repudiate the PSA or terminate it without notice. The PSA required Maxwell to sell and deliver the hogs that it actually produced, nothing more. Maxwell has not produced any hogs since June 2021 and has therefore had no hogs to sell to Smithfield,” Judge Conrad ruled. “This is not a breach of the PSA. It is compliance.”
Finally, Maxwell contended that Smithfield breached the PSA by underpaying for certain hog deliveries, by paying for hogs based on their live weight, not their carcass weight. Smithfield countered that the PSA doesn’t say anything about whether to use live weight or carcass weight, meaning that it was free to pay Maxwell either way.
The court determined that Smithfield was entitled to summary judgment on Maxwell’s breach of contract claim to the extent that Maxwell alleged that a price based on live weight constituted a breach, but the court further concluded that Smithfield was not entitled to summary judgment to the extent Maxwell alleged Smithfield failed to pay full price based on live weight for particular deliveries.
“Smithfield offers no argument or evidence concerning the allegation that it sometimes underpaid Maxwell when using the live-weight formula. The failure to pay what is due, if true, is surely a breach of contract. Having made no attempt to show that it paid the appropriate live-weight price for the deliveries at issue, Smithfield has not carried its ‘initial burden of demonstrating the absence of a genuine issue of material fact,’" Judge Conrad concluded.
About the Author
You May Also Like