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The Ugly Underbelly of Zealous Regulation (Part 2)

Columnist: Bob Andrews
May, 2014 Issue
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Bob Andrews
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The recent plight of Rancho Feeding Corp., the North Bay’s only beef slaughterhouse, which resulted in a year’s worth of meat production being recalled at the encouragement of the U.S. Department of Agriculture, has raised both questions and ire in the North Bay’s food-centric communities. Following the recall and shutdown, it was purchased by Marin Sun Farms (see “Organically Grown,” Only in Marin), but the circumstances surrounding the controversy harken back to a similar situation.
 
A gourmet meat processor began business in Sonoma County in 1980. It developed a reputation for quality and dependability and, ultimately, had more than 600 customers. Unfortunately, relations between it and the USDA/FSIS became contentious. The owners alleged that this led to retaliation by individual inspectors and USDA administrators, expressed in numerous erroneous deficiency reports and plant closures, the threat of a criminal complaint against the company for supposedly mislabeling products, a search warrant raid in 1995, allegations of producing tainted food, a total recall of company products in 1996 and allegations of cross-species (two meats in one product) contamination. The owners alleged the closures and terrible publicity cost them most of their customers and more than $9 million. They were emphatic in protesting enforcement actions taken by the USDA and FSIS, contacting numerous higher-ranking officials and many elected officials throughout the government. This didn’t improve their situation.
 
So they took the bold steps of suing the USDA and 12 inspectors and administrators. They sought to establish—for the first time—personal liability of USDA/FSIS employees for enforcement actions they thought were violations of their constitutional rights. Seven years later, they finally got a verdict in their favor from a nine-person jury. The jury was instructed by the judge to answer a series of extraordinary questions, paraphrased here. The paraphrased answers, which were part of a March 2003 verdict, are equally extraordinary.
 
1. Was one USDA/FSIS employee’s delay in authorizing the reopening of the meat facility after a closure in 1995 done in retaliation for complaints made by the facility’s owners to government officials? Jury answer: Yes.
 
2. Would this employee have taken this action in the absence of complaints by the owners? Jury answer: No.
 
3. Did another USDA/FSIS employee cause the issuance of deficiency reports to the facility, in January 1996, in retaliation for complaints made by the owners to government officials? Jury answer: Yes.
 
4. Would this employee have taken this action in the absence of complaints by the owners? Jury answer: No.
 
5. Was yet another USDA/FSIS employee responsible for withholding inspection services (thus closing the plant) from January 31, 1996, to April 4, 1996? Jury answer: Yes.
 
6. Did this employee take the action described in #5 in retaliation for complaints made by the owners to government officials? Jury answer: Yes.
 
7. Would this employee have taken the same action in the absence of owners’ complaints? Jury answer: No.
 
8. Do you find that one or more of the defendants participated in a conspiracy to violate the owners’ constitutional rights? Jury answer: Yes, as to three defendants.
 
9. Did the owners suffer any loss of earnings, earning capacity or business opportunities as a result of the deprivation of its constitutional rights? Jury answer: Yes.
 
10. What amount of money is necessary to compensate the owners for its loss of earnings, earning capacity and business opportunities as a result of the deprivation of their constitutional rights? Jury answer: $1.75 million.
 
11. Do you find that one or more of the defendants participated in a conspiracy to violate the owners’ constitutional rights because he was motivated by evil intent or because he acted with reckless or callous indifference to the owners’ rights? Jury answer: Yes, as to two defendants.
 
Nothing is as simple as this summary. USDA/FSIS employees were found to be personally liable for their enforcement actions. But the plant owners’ legal fees were already more than $1.7 million, a sum barely covered by the jury’s award of damages. The defendants, which included part of the U.S. government, planned to appeal, perhaps all the way to the Supreme Court. Several members of the plant owners' legal team urged them not to take on the emotional and financial burden of a long appeals process. As a result, the owners settled the lawsuit for considerably less than the $1.75 million jury award. Obviously, this represents a costly “victory.”
 
The owners clearly thought protecting their good names was worth it. Now the question becomes: Are the owners of Rancho Feeding Corp. willing or able to take on the USDA and its inspectors in a similar battle? Time will tell.


 

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