Egg Producer Tied to Massive Recall Fought USDA for 20 Years

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By Steven M. Sellers

The egg producer at the center of one of the nation’s largest salmonella-related recalls has a history of prior problems with the potentially deadly foodborne bacteria, one that led to a 20-year court fight over federal food safety and related regulations.

Rose Acre Farms Inc., a top U.S. egg producer and Seymour, Ind.-based company, voluntarily recalled 206 million eggs in April after the Food and Drug Administration traced the nine-state outbreak to its massive North Carolina farming operation.

The company, through the 1990s and up until 2010, fought the Department of Agriculture in court over regulations that restricted its egg production after salmonella was traced to three of its Indiana flocks.

That litigation, which Rose Acre ultimately lost, produced three federal appeals on the company’s claims that certain USDA regulations were an unconstitutional, expensive, and unnecessary way to keep salmonella out of eggs that are safe when properly cooked.

“Rose Acre protests that the regulatory scheme is silly” because “properly cooked eggs are safe” and “bacteria in the eggs therefore are harmless,” Judge Frank H. Easterbrook, of the U.S. Court of Appeals for the Seventh Circuit, said in 1992, when the court first rejected the company’s challenges.

The company argued in court that it was “absurd to expend large sums keeping harmless substances out of eggs,” Easterbrook also said.

The egg producer declined to comment on its prior salmonella-related litigation against USDA. “Rose Acre is focused on the current recall” and “cannot elaborate on previous USDA action,” a company spokesman told Bloomberg Law.

Rodent Infestation

The company did comment, however, on an April 11 FDA inspection report that found an “ongoing rodent infestation” and other shortcomings at the producer’s farm in Pantego, N.C.

FDA inspectors at the farm from March 26 to April 11 reported unsanitary conditions, including multiple live and dead rodents, filth in some food processing areas, and employees who failed to follow cleaning protocols—factors that could contribute to a salmonella outbreak.

Rose Acre, which operates 17 farms in eight states, initially challenged that report as “based on raw observations” and lacking “proper context” for the sprawling facility that has “a USDA inspector on-site daily.”

But the company, in a formal response to the report issued May 2, said that “while in many respects we remain in compliance of these regulations and laws, we also fell short in several areas.”

The company detailed “numerous corrective actions” it has taken since the FDA inspection, and said it would continue to not sell its eggs for table use until compliance is achieved.

Tony Wesner, Rose Acre’s chief operating officer, took both a critical and apologetic tone in a separate statement sent to Bloomberg Law May 2. He said the company was “disappointed by the sensationalism” of the FDA inspection, known as a Form 483 report.

“We also would have appreciated the FDA waiting until we had an opportunity to address the 483 report’s findings before publishing them without a formal response,” he said.

Wesner added though that the company accepted responsibility for the shortcomings inspectors found at the farm and that it will “strive to correct any problems and institute safeguards that ensure those problems won’t occur again.”

Nine-State Outbreak

The company said it agreed to the massive recall of potentially tainted shell eggs out of “an abundance of caution” after federal investigators linked the North Carolina farm to a dangerous strain of salmonella in sickened consumers.

The nine-state outbreak sickened 23 people, six of whom required hospitalization, with Salmonella Braenderup, a bacteria that can cause life-threatening infections in children and the elderly, according to the U.S. Centers for Disease Control and Prevention.

Illnesses cropped up in November 2017 and continued through March 22 in Colorado, Florida, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Virginia, and West Virginia.

FDA is currently focused on Rose Acre’s 12-building North Carolina facility, where more than 3 million chickens produce an average of 2.3 million eggs a day in a high-rise hen complex.

Rose Acre’s current voluntary recall of millions of eggs stands in contrast to its objections to a government-imposed, two-year diversion of 43 percent of its shell eggs in 1990 because of salmonella-related problems. The higher-valued shell eggs could only be sold as USDA-regulated “breaker eggs” sold in liquid form at reduced prices.

Regulations Challenged

The action, taken because of salmonella in three Rose Acre flocks, triggered two federal lawsuits by the egg producer over some USDA regulations.

It argued the agency acted unreasonably and violated the company’s rights in providing no compensation for interference with farm operations, including the seizure of hens, according to court records.

The cases spawned a series of appeals in which the U.S. Supreme Court denied review in 1992, 2005, and 2010.

Rose Acre’s compensation claim was initially a winner in the district court, which agreed USDA’s actions were an unconstitutional taking of the farm’s property.

But the Seventh Circuit wasn’t persuaded the agency exceeded its authority, or that it had jurisdiction over the takings claim.

USDA was within its authority to conclude that “the costs of carelessness in the preparation of food can be reduced by more care elsewhere in the food chain—with net savings,” Easterbrook determined in 1992.

The farm’s compensation claim was dismissed as a matter for the federal claims court, which decides such cases against the government.

Rose Acre went on to win in that court, which awarded $6.1 million in damages for the diversion of eggs and the seizure of 60 hens for testing, according to court records.

But the award was overturned in 2004 by the U.S. Court of Appeals for the Federal Circuit, which ruled the claims court erred in assessing the constitutional claim.

A second appeal followed in which the Federal Circuit ruled in 2009 that USDA “did not commit a compensable taking” against the farm.

The regulations “properly placed the burden on Rose Acre to bear the costs associated with ensuring that their eggs did not injure the public,” the court said.

To contact the reporter on this story: Steven M. Sellers in Washington at ssellers@bloomberglaw.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bloomberglaw.com

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