$177m payout in beef defamation case

Beef defamation case settles for $177m

Markets
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Ken Wilcock examines the Beef Products Inc defamation case.

IT started around 15 years ago when a  USDA Food Safety and Inspection Service (FSIS) microbiologist coined the term ‘pink slime’ in an internal FSIS email to describe what the manufacturer of a product developed some 20 years earlier called lean, finely textured beef (LFTB).

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Beef Products Inc (BPI) founder Eldon Roth developed techniques in the 1970s for recovering the remaining beef component of small pieces of carcass trim that could not be economically processed any further by hand.

Beef trimmings were heated to 42-43 degrees then spun in a centrifuge to remove melted fat and flash frozen in a roller press developed by Roth.

The resultant finely textured product at 94-97pc lean began to be used in the 1980s as an additive or filler in the production of ground beef and associated products.

Motivation for Gerald Zirnstein and FSIS co-worker Carl Custer to argue against LFTB’s approval for human consumption may have stemmed from the 2001 decision by FSIS to approve a disinfection system involving gaseous ammonia as part of BPI’s production process. Competitor Cargill Meat Solutions used citric acid in its production of LFTB rather than gaseous ammonia to kill bacteria.

Zirnstein and Custer were alleged to have made defamatory and disparaging statements on their own behalf and to other publications and news media in relation to LFTB.

By 2011 a smattering of disparaging stories appeared in articles and on television but then in 2012 the American Broadcasting Company (ABC) decided to run hard on the issue with BPI’s product clearly in its sights.

BPI claimed that ABC aired 11 broadcasts between March 7 and April 3, 2012 in which the defendants knowingly or recklessly made nearly 200 false, defamatory and disparaging statements against BPI’s LFTB product.

As a consequence, BPI sales fell to such an extent that three of its four production plants had to close putting 700 employees out of work.

Losses amounted to US$400m and a defamation lawsuit was launched.

The action ended up in the state jurisdiction of South Dakota and because of prevailing food disparagement laws, BPI was able to sue for three times their actual loss.

At US$1.2 billion, this made it possibly the largest product defamation case in US history.

The action effectively ended in June this year with a confidential settlement.

ABC was unrepentant.

They issued a statement maintaining that their reports accurately presented the facts and views of knowledgeable people about this product. They had agreed to the settlement because continued litigation of this case was not in the company’s interests.

Their reporter Jim Avila who was included in the defamation lawsuit and covered by the settlement went further.

According to US media sources at the time, he claimed that the company was not retracting his stories or apologizing and 2012 ‘pink slime’ reports remained on the ABC News website.

And that is where it all would have ended as far as the public is concerned had it not been for a footnote in the financial results posted by ABC’s parent The Walt Disney Co in August this year.

The financial report minimally revealed that $177m had been paid in connection with a litigation case.

Other US media networks and overseas meat-industry news organisations quickly joined the dots and linked the Disney payout to the BPI lawsuit.

BPI has finally received some monetary compensation for the debilitating consequence of what it called “biased and baseless reporting”.

But the business itself, its workers and the communities affected by the plant closures may never fully recover.

The Roth family has put aside $10m from the settlement into a fund to help former workers.

Five years on those three plants remain closed.

Re-opening will depend on re-establishment of markets and that would seem to hinge on whether the market shares Eldon Roth’s view that the litigation process has been restorative in declaring LFTB as beef; safe, wholesome and nutritious.

Great rain but what does it mean

SEPTEMBER was not looking good.

A dry winter followed by heat and blustery winds in the first weeks of spring had created conditions for a number of worrying, early-season fires so Sunday and Monday’s rain was a great relief.

From the Central Highlands south to the border, it seems most places to the east of that line received something useful.

The better falls were in the north of the footprint with reports of 70-100mm through Theodore, Moura and Emerald and isolated higher registrations in places.

To the south around Surat and Goondiwindi it seemed generally to be in the 50-75mm range and further east across the Downs and southern border region 20-30mm was common.

With no sales on Monday the first indication of what the break might mean for the market was Tuesday’s Warwick sale.

However there were only 383 head yarded, not enough really to draw any distinct trends.

MLA reporter Trevor Hess said cows were back a touch on last week and of the handful of bullocks the best made 273c/kg, no change on the week before.

In the stores, medium weight yearling steers 330-400kg showed some spark with a kick of 13c taking the best to 295c for an average of 288.

Better indications will come to hand during the week from Roma and Dalby and likely confirm a surge in interest from feeders and restockers.

No doubt those with slaughter cattle in the pipeline will be expecting to see some price movement in grids but it may take a little time for that to play out.

Usually the first response to falling supply is extra money on the table and when that does not bring any more cattle out of the woodwork the only thing left is to make adjustments to capacity.

The extent of losses already racked up by processors in recent months and the state of overseas markets will no doubt influence how those options are played out.

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