12 Mar 2009 Cases

Rose Acre Farms, Inc. v. United States

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On March 12, 2009, the United States Court of Appeals for the Federal Circuit issued its decision in favor of the Federal Government in Rose Acre Farms, Inc. v. United States. Rose Acre Farms is a large egg producer seeking compensation for Federal Government regulations of eggs that were believed to be tainted with salmonella bacteria. Rose Acre claims that the Government regulations, which caused it to divert table eggs to be processed and sold as pasteurized liquid eggs, constitutes a takings under the 5th Amendment. Bradley Reiff of Compass Lexecon testified on behalf of the Federal Government on economic impact and damages. After the initial trial in 2002, the United States Court of Federal Claims ruled in favor of Rose Acre, but specified damages based on Dr. Reiff’s calculations. In 2004, the Federal Circuit vacated and remanded the case for reconsideration, holding that the trial court failed to account for economic impact, among other things, under the standards of Penn Central Transportation Co. v. New York City (Penn Central factors). In a second trial in 2006, Dr. Reiff testified that economic impact is best measured through diminution in the value of the taken property. Rose Acre contended that economic impact should be measured through diminution in profit based on an allocation of average total cost. Dr. Reiff demonstrated that Rose Acre’s approach to economic impact using diminution in profit can lead to non-sensical results when profits, based on an allocation of average total cost, are near zero or negative. In this latest decision, the Federal Circuit relied heavily on Dr. Reiff’s analysis and ruled that Dr. Reiff’s diminution in value approach is appropriate in this case. Accordingly, the Federal Circuit determined that Rose Acre did not suffer severe economic harm. The Federal Circuit reversed the trial court’s decision, effectively ending the litigation in favor of the Federal Government. Lynette Neumann and Margaret Bennett assisted in the analysis. Compass Lexecon was retained by the Department of Justice, whose lead attorney at trial was Sheryl L. Floyd.

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