Icon (Close Menu)

Logout

Lawsuit Alleges Companies Attempted To Break Egg Farmers

3 min read

An Oklahoma farmer of pasture-raised eggs has filed a lawsuit in district court in Adair County against two egg companies, including Arkansas Egg Co. of Summers (Washington County).

Dakota Vaughn of Westville is one of several egg producers in eastern Oklahoma and northwest Arkansas who had integrated contracts with Arkansas Egg. Arkansas Egg sold about 35 of those contracts in November 2014 to Vital Farms of Austin, Texas.

Vital Farms, its founder and CEO Matt O’Hayer and President Russell Diez-Canseco were also named defendants in Vaughn’s suit, as was Arkansas Egg President Michael Cox.

The lawsuit alleges that Cox and Diez-Canseco were part of an “overall conspiracy” to help Vital Farms force integrated contract holders out and replace them with more profitable contracts. It also says Vital Farms wanted to eliminate growers in Arkansas and Oklahoma so the company could expand in Missouri, where a processing plant is under construction in Springfield.

Vaughn is asking the court to nullify an arbitration clause in the contract; he is also asking for millions of dollars in damages from the two companies.

Vaughn alleges the two companies breached their contracts and that he is owed $12,000 by Arkansas Egg and more than $1.6 million by Vital Farms. Vaughn is also alleging that Cox, Diez-Canseco and O’Hayer engaged in racketeering. Vaughn is asking that damages from the three be tripled because of RICO violations.

Get It in Writing
In the suit, filed by Fayetteville attorney William Mayo, Vaughn said he originally signed a three-flock contract for 85 cents per dozen eggs with Heartland Egg Co. in October 2013.

Heartland Egg, run by Cox, later became Arkansas Egg.

Vaughn said he borrowed more than $300,000 from the Farm Services Agency to build chicken houses and equipment for the egg-raising operation, and he received the first flock of chickens in March 2014. Vaughn said Heartland began to miss payments in the summer of 2014.

Vaughn said Cox “falsely represented” that Heartland was being acquired by Vital Farms and asked if he would allow his integrated contract to be transferred to Vital Farms. Vaughn also said Cox falsely told him if he built six more chicken houses, Vital Farms would extend his original contract for five flocks and give him an additional five-flock contract for 65 cents per dozen eggs.

In the lawsuit, Vaughn said Diez-Canseco repeated those promises to him and his lender. Vaughn then borrowed more than $1.3 million from Live Oak Bank of Wilmington, North Carolina, to build and equip six more chicken houses to handle the extra flocks.

Vaughn said that when he received chickens from Vital Farms in June 2015, after he completed construction on the six new houses, his original contract was not updated and the new five-flock contract did not correspond with what he had been promised. Vaughn said Diez-Canseco told him if he didn’t have the promises in writing, there was nothing that could be done.

Vaughn said he went ahead with his farming because of the financial commitment he had made. In September 2016, Vital Farms told Vaughn that the flocks he had been given in July would be turned outdestroyed so their eggs would not go to market — and he would receive 7 cents per chicken for the 12 weeks they were in Vaughn’s care.

The lawsuit alleged that Vital Farms delivered two new flocks in December 2016 only to remove one of them in January 2017.

Send this to a friend