Last year, less than 24 months into his poultry experiment, Costco was the target of an undercover investigation by Mercy for Animals, which revealed that a Nebraska barn full of birds, some with open sores, were in their own feces because they were too top- heavy to walk. The investigation led to an op-ed by Nicholas Kristof in the New York Times. It also sparked news in Nebraska, where Costco was building a $450 million poultry complex in Fremont, as well as a petition urging the company to adopt better chicken welfare practices.
What it failed to do, according to a lawsuit filed this month in Seattle, were changes to Costco and its poultry operations, which plaintiffs say still violate animal welfare laws in Nebraska and Iowa. They are suing Costco’s executives and directors for breaches of fiduciary duties, which they claim “could have significant liability to the company.” The plaintiffs are represented by two companies that specialize in animal welfare and cruelty laws.
Plaintiffs Krystil Smith and Tyler Lobdell are shareholders of Costco. They accused Costco’s leaders of being addicted to cheap poultry — at the expense of the company, its shareholders and the animals slaughtered in the name of the hugely popular Kirkland Signature rotisserie chicken, which sells for $4.99 per bird. .
“If Costco continues its illegal mistreatment of chickens, it risks undermining its long-running and successful traffic-generating strategy,” the lawsuit states. “As more consumers learn about the mistreatment of Costco chickens, the benefits have been reaped from using loss-making rotisserie chickens to drive customer traffic and purchases . . . will disappear or decline sharply as consumer preference not to purchase products made illegal or unethical will trump the lure of a ‘cheap’ chicken.”
Richard Galanti, Costco’s chief financial officer and executive vice president, said via email the company would have no comment. Galanti is one of the 17 named defendants, including Ron Vachris, president and chief operating officer; W. Craig Jelinek, General Manager; and Hamilton E. James, a billionaire businessman who is chairman of the board of directors of Costco.
In an interview, Smith said that as a shareholder of Costco, she felt “complicated” in the abuse of farm animals after watching the Mercy for Animals video. She says she has no special affinity with animals, although she has been vegan for 15 years and studied animal law at the law faculty.
“But I don’t think you need to have a special affinity for anything to not harm them, or certainly to defend the law,” Smith, a practicing attorney in Maryland, told The Washington Post.
Lincoln Premium Poultry was formed in 2016 to serve as the management company of Costco’s vertically integrated poultry business with the sole purpose of supplying chicken to the retail giant. The main Fremont complex includes a hatchery, feed mill and a 400,000 square foot processing plant with a controlled atmosphere stunning system, which uses gas to incapacitate birds before slaughter. Animal behaviorist Temple Grandin has endorsed the gas method as being more humane to birds than electric stunning.
The Mercy for Animals investigation did not focus on the Fremont complex, but focused on: an unnamed barn, one of hundreds in Nebraska and Iowa, operated by farmers contracted by Costco to raise chickens for the retailer. According to Smith and Lobdell’s complaint, Costco and Lincoln Premium Poultry recruited about 120 people to become contract growers; their farms sometimes faced fierce opposition from neighbors who didn’t want the operations (expected to be as many as 190,000 chickens every six weeks) polluting their air and water.
“Most of the individuals Costco contracted to keep chickens had never raised chickens before they started working with Costco,” the lawsuit alleges. “As a result, Costco is responsible for training these farmers in raising chickens and caring for animals, and for establishing the animal welfare standards these farmers follow.”
In these contract barns, the plaintiffs argue, farmers raise tens of thousands of chickens “bred to grow unnaturally fast,” leading to health problems such as dead muscle tissue as the birds have trouble circulating blood and oxygen through their enlarged bodies. Chickens can be so heavy that if they fall they can’t get up. Others may be too heavy to move, so they sit in one place, losing feathers and exposing their skin to the dirty barn floor. This can lead to ammonia burn.
According to the complaint, these immobile chickens may not have access to food and water. Others may be too weak or injured to feed themselves. Costco, the plaintiffs argue, is failing to provide individualized veterinary care for the birds.
On these farms, the lawsuit alleges, “disabled birds are slowly dying of hunger, thirst, injury and disease. Costco directors and officers cause and are aware of these illegal practices; and have chosen to ignore red flags that clearly clarify Costco’s illegal behavior.”
These practices, Smith and Lobdell argue, violate the Nebraska Livestock Animal Welfare Act and the Iowa Livestock Neglect Law. The plaintiffs spent a significant portion of their 50-page lawsuit explaining the ways Costco’s officers and directors knew about the alleged animal welfare violations, but they ignored them.
The suit notes that Costco released a statement in September about the welfare of its chickens. The company defended its business, including the practice of breeding fast-growing birds, pointing out that the “minimum standards followed in these houses are based on the standards developed by the National Chicken Council.”
Mercy for Animals wants more from Costco. The organization, which wants to end industrial livestock farming, wants the retailer to join more than 200 companies that have already signed the Better Chicken Commitment, calling for higher animal welfare and processing standards. Popeyes, Chipotle, Subway, Shake Shack, Burger King and other chains have signed up, but according to Consumer Reports, Costco has not.
Smith and Lobdell argue that Costco’s leaders can’t let go of their $4.99 chicken, no matter what it means for the company’s reputation or the welfare of the birds. They claim the retailer sells more than 100 million of those rotisserie birds annually, increasing foot traffic and profits.
Smith said that as a shareholder, she was drawn to Costco’s professed values, including those around animal welfare. She says it doesn’t matter if animal welfare improvements help Costco raise the price of its rotisserie chicken, which has stood at $4.99 for more than a decade. This is about the law.
“Costco knows that the law is being broken in this case. Of course they have to correct,’ she said. “No one is above the law.”