Court Ruffles EPA’s Feathers: Poultry Producer Suit Permitted to Proceed Despite Withdrawal of Administrative Compliance Order

By Stewart D. Fried and John G. Dillard

A District Court judge in West Virginia is forcing EPA to defend a challenge to a now-withdrawn Administrative Compliance Order (“ACO”) related to “dust and feather” discharges from a broiler facility.  In one of the first post-Sackett challenges to an EPA ACO under the Clean Water Act (“CWA”), a West Virginia poultry producer sued EPA after she was ordered to obtain a CWA permit based upon alleged discharges of dust and feathers from several chicken barns into ditches on her property.  After the American Farm Bureau (“Farm Bureau”) and others intervened, EPA withdrew its order directing the owner of the facility, Lois Alt, to obtain a National Pollution Discharge Elimination System (“NPDES”) permit.

The case, Alt v. EPA, contests EPA’s authority to require Concentrated Animal Feeding Operations (CAFOs) to obtain NPDES permits on the basis that a “discharge” occurs when dust, feathers, and dander released through ventilation fans comes into contact with precipitation.  The lawsuit has national implications for livestock producers and has attracted other high profile intervenors, including Waterkeeper Alliance and the Center for Food Safety.

After it dropped its administrative order on the highly tenuous factual grounds that Ms. Alt had taken steps to “remedy and prevent environmental harm caused by her operation,”  EPA sought to dismiss the case on the basis that the lawsuit was moot, arguing that a live controversy no longer existed and that further litigation would be merely academic. American Farm Bureau opposed the dismissal motion, contending that although EPA changed course with respect to the specific order it had issued to Alt, its national policy regarding whether small accumulations of dust, feathers, and dander outside CAFO ventilation fans constitute a discharge under the CWA remained unchanged.  American Farm Bureau argued that dismissing the Alt case would essentially allow EPA to improperly avoid defending its national policy regarding CAFO regulation.

On April 22, 2013, the District Court soundly rejected EPA’s arguments, reasoning that EPA could not avoid litigating the dust-and-feathers issue in this case while, at the same time, it continued enforcing the same policy in contested actions against other farmers.  The upshot of the Court’s decision is that EPA’s feet will be held to the fire as the agency will now be forced to defend its policy of requiring NPDES permits for CAFOs on the basis of airborne emissions that come into contact with precipitation.

Much is at stake for the animal agriculture industry.  An unfavorable decision for agriculture interests would support requiring livestock producers to obtain NPDES permits even where no discharges to waters of the United States were occurring.  Moreover, the costs associated with obtaining and complying with NPDES permits are frequently high.  More importantly, requiring producers to obtain NPDES permits — even when facilities do not discharge into rivers, streams, wetlands or even drainage ditches – will grant EPA (and delegated state environmental agencies) substantial regulatory control over livestock facilities under the CWA.

EPA’s track record before the Federal Courts on CAFO issues during the past decade has been abysmal.  EPA’s efforts to regulate facilities that were not discharging into waters of the United States were challenged and partially struck down.  Regardless of the outcome, an appeal to the Fourth Circuit is likely.

A copy of the order denying dismissal can be found here.

BPA Removed from Prop 65 List After Brief Appearance

By Mark L. Itzkoff

On April 11, 2013, California’s Office of Environmental Health Hazard Assessment (OEHHA) announced that it was adding bisphenol A (BPA) to the list of chemicals known to the state to cause reproductive toxicity under California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65).  However, BPA’s time on the list was very short; on April 19, OEHHA announced that it had removed BPA from the Prop 65 list.

Why the sudden reversal?  OEHHA was required to delist BPA under a preliminary injunction issued on April 19 by the Superior Court for Sacramento County due, in part, to the limited scientific evidence that BPA is a reproductive toxin.  The court noted that OEHHA had based the listing on a 2008 report published by the National Toxicology Program (NTP), NTP-CERHR Monograph on the Potential Human Reproductive and Developmental Effects of Bisphenol A” (NTP-CERHR, 2008).  The court also noted however that the NTP report had been reviewed earlier by the State’s qualified panel of experts, the Developmental and Reproductive Toxicant Identification Committee (“DART-IC”).  In 2009, DART-IC determined the data in the study did not provide a sufficient basis to conclude that BPA is a reproductive toxin and declined to add BPA to the Proposition 65 List.  The court agreed with the ACC contention that the report did not identify BPA as a reproductive toxin and noted that OEHHA had never added a chemical to the Prop 65 list after DART-IC had rejected the listing based on the same report.  For these reasons, the court found that ACC was likely to prevail on the merits and issued the injunction.

In addition to removing BPA from the Prop 65 list, OEHHA announced that it is withdrawing the original proposal to list BPA published on January 25, 2013.  Thus, any new attempt by OEHHA to list BPA as a reproductive toxin under Prop 65 would require publication of a new notice and an opportunity for public comment.

It should be noted, however, that the injunction is a preliminary injunction and may be lifted on appeal or following a full trial.  Moreover, there are indications that OEHHA intends to continue its efforts to list BPA.  Specifically, on April 23, OEHHA posted the agency’s responses to comments received by OEHHA as a result of its January 25 Notice of Intent to List BPA.  In this document, OEHHA refutes the findings in ACC v OEHHA.  While not addressing the decision directly, OEHHA argues that the NTP formally identified BPA as a reproductive toxin in the NTP report and that BPA is therefore known to the state to cause reproductive toxicity.

BPA is the controversial chemical present in some hard plastic bottles and some food and beverage can linings.  If BPA were added to the Prop 65 list, products that expose consumers to the chemical could be required to carry a Prop 65 warning statement.

We will continue to monitor any efforts by California to add BPA to the Prop 65 list.

FDA Extends Comment Period for FSMA Proposed Rules on Preventive Controls and Produce Safety

By Robert A. Hahn

FDA has announced that it will extend for an additional 120 days the comment periods for two major proposed rules implementing the Food Safety Modernization Act (FSMA): preventive controls for human food (Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Human Food) and produce safety standards (Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption).  The extended comment period will close September 16, 2013.

The comment period extensions apply to the proposed rules, their information collection provisions, as well as the draft risk assessment FDA prepared for on-farm activity/food combinations deemed to be low-risk (Draft Qualitative Risk Assessment of Risk of Activity/Food Combinations for Activities (Outside of the Farm Definition) Conducted in a Facility Co-Located on a Farm).

Many companies and trade associations that are only beginning to get their arms around these complex and inter-related proposed regulations will breathe a sigh of relief.  The reactions of consumer groups and certain members of Congress, such as Rep. Rosa DeLauro (D-CT), who have been pushing for speedy implementation of FSMA, are likely to be less enthusiastic.

The FDA announcement comes just two days after a federal court held that FDA had violated the Administrative Procedures Act by failing to meet the statutory deadlines set forth in FSMA.  In a lawsuit in the Northern District of California, the district court ordered FDA to develop, in consultation with the two consumer groups that brought the suit, a new timetable for implementation of FSMA.  FDA has not yet issued a public comment on the court order or indicated whether it intends to appeal.  However, the comment period extension indicates that FDA leadership believes the foundational regulations implementing FSMA cannot be rushed.

Court Orders FDA to Set a Timeline for Issuing Regulations Implementing FSMA

By Robert A. Hahn

Yesterday, the U.S. District Court for the Northern District of California issued an order requiring FDA to propose new deadlines for issuance of regulations implementing the Food Safety Modernization Act (FSMA).  Center for Food Safety v. Hamburg, 4:12-cv-04529 (N.D. Cal. Apr. 22, 2013).

In a lawsuit brought by two consumer groups, the court held that FDA’s failure to meet the statutory deadlines in FSMA constitutes a violation of the Administrative Procedures Act and FSMA’s statutory mandate.  While acknowledging the complexity of FDA’s task and agreeing that “FDA is correct that the purpose of ensuring food safety will not be served by the issuance of regulations that are insufficiently considered,” the court nevertheless ordered the parties to the lawsuit to mutually agree on a new timetable for FSMA implementation:

The parties are hereby ORDERED to meet and confer, and prepare a joint written statement setting forth proposed deadlines, in detail sufficient to form the basis of an injunction.  The joint statement shall be submitted no later than May 20, 2013.  After reviewing the statement, the court will determine whether any further written submissions would be helpful or necessary.

FDA must now either appeal the trial court’s decision or submit to court-ordered deadlines for its regulations implementing FSMA.

The court’s decision presents immediate challenges for the agency.  Just last week, FDA Commissioner Margaret Hamburg, testifying before the Senate Agriculture Appropriations Subcommittee, signaled FDA’s intent to extend the comment periods of the two already published proposed rules, Preventive Controls for Human Food and Produce Standards, into September 2013.  See Commissioner Hamburg’s testimony here.

The agency has not publicly commented on the ruling or whether it will appeal.  We will update this post as new information emerges.

DMAA Dietary Ingredient Withdrawn from Market

By Michael J. O’Flaherty

FDA’s publication last week, on April 11th, of a warning to consumers about dietary supplements containing dimethylamylamine (DMAA) (a/k/a 1,3-dimethylamylamine, methylhexanamine or geranium extract) followed up on Warning Letters issued on April 24, 2012, by FDA’s Center for Food Safety and Applied Nutrition (CFSAN) to 10 company purveyors (i.e., Exclusive Supplements, Inc., Fahrenheit Nutrition, Gaspari Nutrition, Inc., iSatori Global Technologies, LLC, Muscle Warfare Inc., MuscleMeds Performance Technologies, Nutrex Research, Inc.,  SEI Pharmaceuticals, Inc., SNI LLC, and USP Labs, LLC) and a Warning Letter issued on August 28, 2012, by FDA’s Los Angeles District Office to another company purveyor (i.e., Regeneca, Inc.).  FDA has safety concerns about DMAA and, as a result, was taking additional action to preclude its use as a dietary ingredient in dietary supplements.

This is not a novel regulatory phenomenon.  FDA historically has taken analogous action with regard to other dietary ingredients, including silver (Oct. 2009), red yeast rice products promoted on the Internet as treatments for high cholesterol (Aug. 2007), kava (Mar. 2002), comfrey (July 2001), aristolochic acid (Apr. 2001), St. John’s wort interacting with Indinavir and other drugs (Feb. 2000), and ephedra/Ma huang (Sept. 1994).

In February 2004, FDA promulgated a regulation prohibiting dietary supplements containing ephedrine alkaloids.  The Agency reasonably might be moving in this direction with regard to DMAA; however, as was seen with ephedra/Ma huang, it can take considerable time.

As the warning to consumers notes, most company purveyors agreed to accede to FDA’s Warning Letter.  However, USPLabs, maker of OxyELITE Pro and Jack3d dietary supplements, which were the subject of the company’s Warning Letter, responded by submitting published studies to challenge FDA’s conclusion.  After reviewing the studies, FDA found the information insufficient to defend the use of DMAA as a dietary ingredient in dietary supplements, and was finalizing a formal response to USPLabs to reflect this determination.  Following FDA’s warning to consumers, the Council for Responsible Nutrition (CRN), a leading trade association for the dietary supplement industry, on April 12th issued a statement calling for manufacturers to stop making products with DMAA and for consumers to stop using such products.  Thereafter, USPLabs reportedly in an April 16th press release announced the company’s plan to remove DMAA from both its OxyELITE Pro and Jack3d dietary supplements.

New Obama Budget Includes Cuts for Federal Crop Insurance

By Kenneth D. Ackerman

Few Washington government programs escape un-cut in the new 2014 budget unveiled today by President Obama’s administration, and Federal crop insurance is no exception.

2012 saw Federal crop insurance emerge as the premier Federal backstop for American farm producers against natural disaster, paying over $16 billion in indemnities as farmers virtually nationwide faced historic drought conditions.  This is why almost every discussion of a proposed new 2013 Farm Bill starts with crop insurance.   Nevertheless, the new Obama budget contains five separate proposals to cut crop insurance spending, totaling $11.7 billion over ten years.  Three of these (numbers 3, 4, and 5 below) aim directly at farmers, sharply raising out-of-pocket costs for buying protection.

Congress will have to agree before any of these crop insurance cuts can go forward, and the issue likely will become enmeshed in the larger Farm Bill debate.   Congress has shown little taste so far for reducing crop insurance outlays.  In fact, most Farm Bill proposals have tended to favor crop insurance as a more efficient, management-oriented, and farmer friendly alternative to traditional subsidies and price supports.

Below are the five cuts, as described by USDA in its 2014 Budget Summary released today:

  1. Establish a reasonable rate of return to participating crop insurance  companies:

A USDA commissioned study found that when compared to other private companies, crop insurance companies rate of return (ROR) should be around 12 percent, but that it is currently expected to be 14 percent. The Administration is proposing to lower the crop insurance companies’ ROR to meet the 12 percent target. This proposal is expected to save about $1.2 billion over 10 years.

  1. Reduce the reimbursable rate of administrative and operating expenses:

The current cap on administrative expenses to be paid to participating crop insurance companies is based on the 2010 premiums, which were among the highest ever. A more appropriate level for the cap would be based on 2006 premiums, neutralizing the spike in commodity prices over the last few years, but not harming the delivery system. The Administration, therefore, proposes setting the cap at $0.9 billion adjusted annually for inflation. This proposal is expected to save about $2.8 billion over 10 years.

  1. Decrease the premium subsidy paid on behalf of producers by 3 percentage points:

The proposal would reduce the premium subsidy levels by 3 percentage points for those policies that are currently subsidized by more than 50 percent. This proposal is expected to save about $4.2 billion over 10 years.

  1. Decrease the premium subsidy paid on behalf of producers by 2 percentage points on policies where the producer elects policies that provide protection against price increase:

This reduction is in addition to the 3 percentage point reduction on policies currently subsidized by more than 50 percent. These policies provide upward price protection which provides a higher indemnity if the commodity prices are higher at harvest time than when the policy was purchased. This proposal is expected to save about $3.2 billion over 10 years.

  1. Reduce the premium rate on catastrophic coverage to better reflect historical performance:

This proposal would require that USDA reset premium rates to more accurately reflect the performance of the catastrophic portfolio. The proposal is expected to save about $292 million over 10 years.

Animal Activist Groups Saddled With Attorney’s Fees for “Groundless” Lawsuit

By Stewart D. Fried & John G. Dillard

In an important ruling that will almost certainly be appealed, the U.S. District Court for the District of Columbia recently held that several animal rights activists groups are jointly and severally liable for the attorney’s fees Feld Entertainment, the producer of Ringling Bros. & Barnum & Bailey Circus (“Ringling”), spent defending an Endangered Species Act (ESA) case targeted at its treatment of Ringling’s circus elephants.

The attorney’s fees issue is the latest chapter in this lengthy dispute.  During July 2000, the ASPCA, Animal Protection Institute, Animal Welfare Institute and several other “animal rights” groups objected to Ringling’s use of bullhooks and chains in connection with its training of Asian elephants.

The groups filed suit under the ESA, arguing that Feld’s elephant training and handling techniques violated the Act.  Standing to sue is a procedural hurdle which associations and other groups must meet in order to establish federal court jurisdiction; in animal rights suits, this is a difficult burden to meet as association members rarely suffer a legal injury based upon the alleged maltreatment of animals.  In a novel attempt to meet the standing requirement, the plaintiffs recruited and paid a former Feld employee, Tom Rider, to serve as a co-plaintiff based on his purported personal and emotional attachment with the Ringling elephants.

The groups’ use of a paid plaintiff to establish standing ultimately backfired.  During pre-trial discovery, Feld learned that Mr. Rider was paid approximately $200,000 by the animal rights groups to serve as a plaintiff.  In 2009, after a six-week non-jury trial, the federal district court in Washington ruled in Feld’s favor, holding Tom Rider and the animal rights groups did not have standing to sue.  The D.C. Circuit affirmed this decision in 2011.

Armed with a judgment holding that the animal activists’ lawsuit was groundless, Feld sought to recoup some of the attorney’s fees and costs it spent fighting the decade-long lawsuit under the fee-shifting provision of the ESA.  On March 29th, the District Court held that the plaintiffs are jointly and severally liable for Feld’s attorney’s fees on the basis that the ESA claim was “frivolous, unreasonable, and groundless.”  Although Ringling will have to wait for a decision regarding the amount it will be entitled to recover, the Court’s determination that the animal rights groups’ lawsuit was meritless ensures that they will be on the hook for at least some of $20 million dollars in attorney’s fees and costs that Ringling was forced to spend.

Feld also sought to hold the Humane Society of the United States (HSUS), which was not a party in the lawsuit, liable for its attorney fees on the basis that HSUS was one of the organizations that paid Tom Rider to participate as a plaintiff in the frivolous litigation.  The court denied Feld’s request to hold HSUS liable on procedural grounds, but have left the door open for it to re-file a claim against HSUS for attorney’s fees.

In a related matter, Feld’s lawsuit against the plaintiffs, their attorneys, and HSUS under the Racketeer Influenced and Corrupt Organizations Act (RICO) remains pending.  ASPCA has already agreed to pay $9.3 million to Feld to settle the attorney’s fees and RICO claims.  Although racketeering claims are notoriously difficult to prove, a judgment against HSUS will have profound implications for animal rights and other associations that improperly attempt to use the courts to accomplish their policy goals.

You may view the opinion regarding attorney’s fees here.

2012 Federal Crop Insurance Saved 20,900 Local Jobs in Four States

By Kenneth D. Ackerman

If anyone doubted the huge role that the U.S. Department of Agriculture’s (USDA) Federal crop insurance program is playing this year in protecting rural America from economic disaster following last summer’s historic drought, a new study from two economists at the University of Nebraska-Lincoln should settle the issue.

USDA Federal crop insurance has paid over $16 billion so far in indemnities to American farmers for crop losses in 2012.  This faraway single-year record reflects both the sheer size of last year’s disaster as well as today’s wide use of insurance by American producers.  But this lifeline did not simply save farms.  Instead, the new analysis by Nebraska economists Brad Lubben and Eric Thompson (underwritten by lender Farm Credit Services of America) shows that most of the money went directly to saving off-farm jobs.

According to the analysis, in Nebraska, Iowa, South Dakota, and Wyoming, farmers spent a full $2.2 billion out of the total $3.6 billion in net crop insurance indemnities received to support local businesses like retailers, restaurants, health care providers, farm equipment dealers, and others.   The net effect was to save 20,900 local jobs – in addition to keeping the farmers themselves afloat.

No wonder that every discussion of a new Farm Bill for 2013 starts with crop insurance.  Here’s the link to the study: http://www.omaha.com/article/20130313/MONEY/703139980