* 5th Circuit overturns $25 million damages award
* Plant closure deemed legitimate response to overproduction
By Jonathan Stempel
Aug 27 (Reuters) - Pilgrim's Pride Corp, one of the world's largest chicken producers, persuaded a federal appeals court to overturn a damages award of more than $25 million to several dozen contract poultry growers that accused it of violating antitrust law by trying to manipulate poultry prices.
A panel of the 5th U.S. Circuit Court of Appeals in New Orleans said on Tuesday a federal magistrate judge erred in finding that Pilgrim's Pride's decision to idle a chicken processing plant in El Dorado, Arkansas, in May 2009 and end contracts with the growers was motivated by a desire to control prices.
The two-judge panel said the closure was "neither illegitimate nor anti-competitive" given that Pilgrim's Pride had been driving down prices by producing too much, and "wisely" decided to stop flooding the market with unprofitable chicken.
It also said a unilateral attempt to raise prices is not in itself inherently anti-competitive.
"PPC's conduct was merely the legitimate response of a rational market participant to changes in a dynamic market," the panel said in an unsigned decision. "If a firm inadvertently overproduces a good and drives down prices, it does not break the law by cutting production so that prices may recover."
Mark Brodeur, a lawyer for the growers, did not immediately respond to requests for comment. A Pilgrim's Pride spokeswoman, Rosemary Geelan, did not immediately respond to similar requests.
Pilgrim's Pride shut the plant five months after filing for bankruptcy protection in December 2008, amid rising feed costs and low meat prices. The Greeley, Colorado-based company emerged from Chapter 11 in December 2009, and is now majority-owned by Brazilian meat company JBS SA.
Tuesday's decision overturned a December 2011 ruling by U.S. District Judge David Folsom in the Eastern District of Texas, which largely upheld a ruling on damages three months earlier by U.S. Magistrate Judge Charles Everingham.
The case is Pilgrim's Pride Corp v. Agerton et al, 5th U.S. Circuit Court of Appeals, No. 12-40085.