Will a Raleigh Jury’s $50 Million Verdict Against Murphy-Brown LLC Force Big Pork to Clean Up Its Act? | North Carolina | Indy Week
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Will a Raleigh Jury’s $50 Million Verdict Against Murphy-Brown LLC Force Big Pork to Clean Up Its Act? 

click to enlarge 170602_ab_hogfarms_0074.jpg

Photo by Alex Boerner

Last Tuesday, as the first of twenty-six scheduled nuisance trials against pork giant Murphy-Brown LLC came to a close, U.S. District Court Judge Earl Britt slowly turned his chair and gazed at the ten-person jury. Britt, an octogenarian Jimmy Carter appointee with a soft drawl, had just finished reading jurors their instructions, a task that took more than twenty minutes. He leaned back and left the courtroom with a parting thought.

"My only comment is that I am tired of looking at that dirty hog," he said, glancing at the life-size, faux-waste-coated hog replica that had been sitting inside the courtroom for the past three weeks. Spectators reacted with surprised laughter, as they had throughout the trial when the normally no-nonsense Britt made an unexpected quip.

But the coat of "filth" painted onto that pink plastic hog was more than a punch line. It represented the root of a dramatic case that had played out in court over the month of April. The trial, at its core, was about pig feces—and whether the world's largest pork producer should be held accountable for the way that it manages the tons and tons of waste its hog farms produce.

This case marked the beginning of a series of landmark trials in lawsuits filed by more than five hundred neighbors of hog farms against Murphy-Brown, a subsidiary of Smithfield Foods. The plaintiffs in this and the other lawsuits argue that the farms' method of disposing of hog waste produces unbearable stenches that adversely affect their quality of life. That waste-management system, common in large hog farms in North Carolina, functions by storing pig excrement in open-air lagoons and then liquefying and spraying the waste onto nearby fields.

Among other things, the plaintiffs allege that the odors and mist from the spray drift onto their property; the hogs attract swarms of flies, buzzards, and gnats; boxes filled with rotting dead hogs produce an especially noxious stink; and the stench has prevented them from spending time outside, having barbeques, and even opening their windows.

With twenty-five more lawsuits pending, this first trial's outcome was closely watched as a potential bellwether. Whom would the jury believe? The corporate giant, whose Chinese parent company was worth nearly $13 billion as of 2017 and whose attorneys claimed these lawsuits were ginned up by money-grabbing out-of-state lawyers, or the farms' mostly working-class and largely African-American neighbors who say the corporation's greed has made their lives miserable?

Indeed, the vast majority of the plaintiffs involved in these cases have lived on their land for generations, and two UNC researchers found that the state's industrial hog farms disproportionately affect minorities—a phenomenon they concluded is "generally recognized as environmental racism."

To remedy the problems alleged in the lawsuits, Mike Kaeske, an attorney representing the ten plaintiffs involved in the first trial, argued in his closing statement that, in the absence of strict state regulations, a major financial penalty could force the industry to change. When dealing with multibillion-dollar corporations, he said, money talks. A hefty payout could prevent Murphy-Brown from "committing similar wrongful acts."

As he made his case to the jurors, who had patiently absorbed the technical details of hog-waste management for weeks, he motioned to the plaintiffs sitting quietly in the courtroom's hard wooden chairs.

"We're asking you to fight for these people," he said. "You ten are able to do it. Today, you are more powerful than the governor of North Carolina and the attorney general."

Two days later, the jury gave Murphy-Brown a spanking probably more severe than even Kaeske had dreamed. Its verdict: an eye-popping $50.75 million judgment. Alone, that sum was harsh. But should the next twenty-five juries follow suit, the results could be calamitous for the company, perhaps as much as $2.5 billion. If money does talk, as Kaeske implored the jury, Murphy-Brown now had a hell of an incentive to invest in proven alternative waste-disposal technologies that can ameliorate many of these complaints.

As Michelle Nowlin, the supervising attorney for the Environmental Law and Policy Clinic at Duke Law, told the INDY in an email, "This verdict forces the industry to internalize and reckon with those costs. I'm hopeful this decisive victory will be a game-changer in North Carolina and force the industry to modernize its waste treatment to the benefit of rural communities, the environment, and the farmers themselves."

If the judgment stands, that may very well happen. But, thanks to a North Carolina law passed two decades ago, it probably won't. Instead, Murphy-Brown will more likely get a slap on the wrist and go back to business as usual. And that's exactly the outcome the state's corporate interests—and the lawmakers who did their bidding—had in mind.

This first lawsuit—McKinley v. Murphy-Brown LLC—was brought by neighbors of Kinlaw Farm, a Bladen County operation that contracts with Murphy-Brown to raise about fifteen thousand hogs. During the trial, Murphy-Brown attorney Mark Anderson likened the farm to a peaceful slice of pastoral heaven, displaying a series of picturesque photos for the court. The farm is "gorgeous," "beautiful," and "well-maintained," he told the jury. When the operator of the farm has a party, he added, "they do it right there on the property."

The plaintiffs' lawyers countered that pigs produce five times as much waste as humans, and concentrated animal feeding operations—CAFOs for short—in North Carolina often contain thousands of hogs in confinement. The hogs on Kinlaw Farm produce about 153,000 pounds of waste a day, Kaeske told the jury. The lagoon-to-sprayfield model of waste disposal, critics have long argued, has been put in place to cut costs.

The attorneys suing Murphy-Brown say the company has refused to invest in alternative technologies that would minimize the odor, such as covering the lagoons and converting the sequestered methane into electricity. But those and other alternatives are expensive to implement. According to Kaeske, the cost of covering all the lagoons in North Carolina would total about $500 million, about half of what Smithfield Foods makes each year after taxes. Between 2010 and 2015, he told the jury, four Smithfield executives earned a total of $245 million.

"The industry built these operations this way because it was the cheapest," he said. "They won't change now because they don't want to spend the money."

Anderson chafed at the implication that the industry's waste-disposal system is motivated by avarice. Instead, he pointed out that the lawyers suing Murphy-Brown were asking for money, not a fix to the waste problem. He added that he was "frustrated, listening to all this talk about big corporations, big money"—rhetoric he called "anti-corporation and anti-agriculture."

The jury didn't buy it. On Thursday, jurors awarded each plaintiff $75,000 in compensatory damages and—after finding that Murphy-Brown "committed fraud, or acted with malice, or engaged in willful or wanton conduct"—$5 million in punitive damages.

The outcome enraged the industry. In a statement, the North American Meat Institute said it represented "a blow to jobs and the state's economy fueled by anti-animal-agriculture rhetoric." According to the Food and Environmental Reporting Network, U.S. Agriculture Secretary Sonny Perdue called the verdict "despicable. It's horrible if that's the kind of money that people are awarding."

Republican state representative Jimmy Dixon of Duplin County, an outspoken industry ally, bemoaned what he described as the attack on family farmers by "greedy out-of-state lawyers," telling the INDY that the verdict marked "a very sad day for consumers who have enjoyed an abundant supply of safe and economical pork products."

Last year, Dixon sponsored House Bill 467, which aimed to head off just this eventuality. The bill—which passed over Governor Cooper's veto—limits the amount of damages property owners can collect in nuisance lawsuits filed against agricultural operations, including hog farms.

Had Dixon gotten his way, it would have also essentially negated the twenty-six pending lawsuits against Murphy-Brown, including this one; however, that provision was stripped from the bill before it passed the House.

click to enlarge Butler Farms in Lillington uses alternative waste-management technologies that reduce odors. - PHOTO BY ALEX BOERNER
  • Photo by Alex Boerner
  • Butler Farms in Lillington uses alternative waste-management technologies that reduce odors.

The most noteworthy response came from Smithfield, which immediately—and unsurprisingly—promised to appeal.

Much of its statement was predictable. The company called the lawsuits "an outrageous attack on animal agriculture, rural North Carolina, and thousands of independent family farmers who own and operate contract farms. These farmers are apparently not safe from attack even if they fully comply with all federal, state, and local laws and regulations. The lawsuits are a serious threat to a major industry, to North Carolina's entire economy, and to the jobs and livelihoods of tens of thousands of North Carolinians."

But in a separate email, Smithfield spokeswoman Joyce Fitzpatrick brought up what is likely to be a central point of contention. Even if the company's appeal fails, she points out that, under North Carolina law, punitive damages are capped at three times the amount of compensatory damages or $250,000, whichever is greater.

In this case, that means each plaintiff would be limited to an award of $325,000, bringing the total judgment down from $50.75 million to $3.25 million. To a company as large as Smithfield Foods, that's chump change—the cost of doing business, not an incentive to alter behavior.

The bill—sponsored by Republican state representative Charles Neely, now a lobbyist and attorney at the Raleigh law firm Williams Mullen—passed amid a wave of tort-reform legislation that followed the so-called Republican Revolution of 1994. Pushed by the N.C. Citizens for Business and Industry, a coalition of the state's largest companies, the legislation aimed to, in the words of its lobbyist, "prevent frivolous lawsuits that are intended to frighten businesses" into settling.

Neely, who was out of the country Monday and could not be reached for comment, explained at the time, "We shouldn't wait for a crisis to fix the problem."

According to Nowlin and two outside legal experts consulted by the INDY (the plaintiffs' lawyers declined to discuss their strategy after the verdict), Smithfield's interpretation of the law is likely to hold up. Even though this trial took place in federal court, they said, the state's cap still applies; the lawsuit was fought over a state statute and was only heard in federal court because Murphy-Brown is incorporated in Delaware. (For the same reason, Dixon's HB 467 can restrict future nuisance lawsuits, even ones filed in federal court.)

"The short answer is, I don't think there's any grounds to challenge the punitive-damage law," says one expert, a longtime North Carolina trial attorney who spoke on background because he's not directly involved in the case. In 2004, the N.C. Supreme Court upheld the law.

Not only does North Carolina law limit punitive damages, but it also forbids a judge from informing the jury about that cap. The theory, it seems, is that if jurors wanted to punish a company for bad behavior but knew that the amount of punitive damages was tied to the amount of compensatory damages, they would simply jack up the compensatory-damage award. By keeping jurors in the dark, the law works to further shield large corporations from big verdicts.

In addition, the cap hasn't been adjusted for inflation since 1995; if it had been, according to the U.S. Department of Labor's online inflation calculator, the $250,000 maximum would now be set at more than $415,000.

The other legal expert, also a longtime trial lawyer who knows and thinks highly of attorneys on both sides of the case, says that if the plaintiffs want to get around the cap, they'll have to develop a novel legal theory.

The attorney floats one such possibility: "Can you count each day as a separate offense?" In other words, if a court were to find that each day that the plaintiffs suffered because of Murphy-Brown's "willful or wanton conduct," as the punitive-damages statute puts it, was worth $250,000, that could add up to $5 million.

In the end, Judge Britt has to apply the cap, and this attorney cautions against assuming that he'll do so. Instead, that decision might fall to an appellate court.

As of press time, neither the plaintiffs nor the defendant had filed any post-verdict motions.

Even assuming the cap stands, a string of difficult verdicts could take its toll on Murphy-Brown. If each of the more than five hundred plaintiffs in all twenty-six lawsuits is awarded $325,000—the amount the first ten seem likely to receive—the company would end up forking over more than $160 million, plus attorneys' fees.

For that reason, the second attorney wouldn't be surprised to see Smithfield settle the remaining cases. Its lawyers, after all, saw how the first jury reacted to their case; there's little reason to think subsequent juries will react differently.

"This has not hurt the plaintiffs' bargaining position," the attorney says.

But the bigger question is whether the verdict—and any settlement that follows—will lead to meaningful change.

By their very definition, punitive damages are designed to punish bad behavior so as to compel reform. But here, because the corporation being punished is so large, the punishment meted out might not be sufficient to obtain the jury's desired result—especially considering that the legislature has already cracked down on future nuisance lawsuits, and, with the cap in place, any settlement is likely to be far less than what it would cost the company to cover its CAFOs' lagoons.

As the first trial attorney laments, "We have these laws that protect the man behind the curtain. It's very frustrating."

In the background is this: although the industry claims that it is among the most regulated sectors in the state, critics say the regulations in place are insufficient and have become less comprehensive in recent years. The number of annual inspections of the state's hog farms was slashed from two to one in 2011 following budget cuts under former governor Pat McCrory.

Tom Butler, a Lillington hog farmer who testified for the plaintiffs during the trial, told the INDY last year that the hog farm inspections have become increasingly relaxed over the past two decades and now essentially consist of a paper audit. (The N.C. Department of Environmental Quality denies that claim.)

Butler also pointed out that farmers are given up to a week's notice before their farms are inspected—"If we do have any issues, we can get those cleared away because we know the inspector is coming," he said—and the inspection process itself relies on self-regulation, as the inspections draw from a farmer's own records.

If the state won't rein in bad actors, the attorney says, then "the only other recourse is the civil justice system." But if the civil justice system "restricts jurors' ability to determine what's fair and what's not fair," then what check is there on corporate misdeeds?

"Horrendously bad behavior," he says, "deserves horrendously bad punishment."

But, in North Carolina, the law says otherwise.

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