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Appeals court rules against Rose Acres

The Tribune
July 1, 2004
Aubrey Woods

A Seymour egg producer may have lost $8 million or more Wednesday after a United States Court of Appeals decision to vacate a 2003 lower court ruling.

The decision came against Rose Acre Farms Inc. and its request that the government repay revenue lost because of regulations restricting egg sales from farms testing positive for salmonella. Salmonella is a bacteria that causes various diseases in people and domestic animals, including typhoid fever and food poisoning.

Tony Wesner, a company executive vice president, said this morning that he was not free to comment about the decision, which he described as disappointing.

"I don't know what our next step will be," Wesner said. The appeals court did remand the lawsuit back to the U.S. Court of Federal Claims. The appeals court decision, however, didn't upset at least one organization.

"Corporations should never be paid simply for complying with laws necessary to protect the health of American consumers," said Jason Rylander, litigation and policy counsel for the Community Rights Counsel. The organization is a public interest law firm that defends environmental, health and safety protections in the courts. It filed a friend-of-the-court brief in August 2003 in support of the government after the Court of Federal Claims ruled in favor of the company in its lawsuit against the government.

Rose Acre Farms contended the U.S. Department of Agriculture placed restrictions on the company's industrial chicken farms after salmonella outbreaks were traced back to the company's eggs.

The company contended USDA requirements to pasteurize eggs, clean barns and test hens forced it to sell eggs at a lower price than it otherwise would have received.

The company also contended that the "taking" of private property required compensation from the government under the Fifth Amendment to the Constitution. The company had originally sought $22.8 million, an amount lowered to $6.1 million (as well as $2.1 million in fees) by the claims court in 2003, when it agreed with the company's claims that the salmonella-control regulations by the USDA were excessive.

The original lawsuit stems from salmonella outbreaks at a wedding party in Versailles, Ky., a hardware convention in Chicago and an incident in Tennessee where seven people became ill after eating banana pudding with meringue. The outbreaks, traced back to Rose Acre's egg farms, sickened 450 people. The USDA then designated hen houses on three of the plaintiff's farms, Cort Acres (Jackson County), Jen Acres (Jennings County) and White Acres (White County) as "test flocks."

After tests came back positive, the agency forbade the company from selling eggs from those houses in interstate commerce. Rose Acre was allowed, however, to sell those eggs in the pasteurization market (pasteurization kills bacteria), where eggs sold for 41 cents per dozen rather than 59 cents per dozen for table eggs. Rose Acre said it was forced to sell at a loss 700 million eggs that were diverted into low-priced markets for eggs.

In addition, the USDA removed, killed and tested 6,741 hens, of which about 2 percent tested positive for salmonellosis. The government relaxed its oversight on Rose Acre after 21 months of quarantine.

Rylander said the appeals court decision was definitely a victory for the government and public health.

"We were delighted to see the lower court ruling wiped off the books," he said.

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