Rose Acre Farms, Inc. v. Madigan

• Decision Date: 26 February 1992
• Docket Number: 91-2514,Nos. 91-2358,s. 91-2358
• Citation: 956 F.2d 670
• Parties: ROSE ACRE FARMS, INC., Plaintiff-Appellee, Cross-Appellant, v. Edward MADIGAN, Secretary of Agriculture, et al., Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 670

956 F.2d 670

60 USLW 2529

ROSE ACRE FARMS, INC., Plaintiff-Appellee, Cross-Appellant, v. Edward MADIGAN, Secretary of Agriculture, et al Defendants-Appellants, Cross-Appellees.

Nos. 91-2358, 91-2514.

United States Court of Appeals Seventh Circuit.

Argued Dec. 6, 1991.

Decided Feb. 10, 1992.

Rehearing Denied Feb. 26, 1992.

Bradley M. Thompson, Brian K. Burke (argued), David A. Given, Baker & Daniels, Indianapolis, Ind., for plaintiff-appellee, cross-appellant.

Gerald A. Coraz, Asst. U.S. Atty., Deborah J. Daniels, U.S. Atty., Indianapolis, Ind., Stuart M. Gerson, Office of the U.S. Atty. Gen., Douglas Letter, Matthew M. Collette, Jeffrey Clair (argued), Dept. of Justice, Civ. Div., Appellate Section, Thomas W. Millet, Stephen G. Harvey, Dept. of Justice, Federal Programs Branch-Civ. Div., Washington, D.C., for defendants-appellants, cross-appellees.

Before BAUER, Chief Judge, and EASTERBROOK and KANNE, Circuit Judges.

EASTERBROOK, Circuit Judge.

The bacterium Salmonella enteritidis serotype enteritidis produces a violent illness, accompanied by fever, diarrhea, and vomiting, often requiring hospitalization. In the young, the old, and those weak for other reasons, salmonella can be fatal. (For convenience we call both the bacterium and the disease "salmonella.") Milk and poultry products provide nutrients for the bacterium, and improperly handled food is its principal vector. An upsurge in reported instances of salmonella transmitted through food led federal officials to inquire why. One distressing possibility: a mutated form of the bacterium passes from chicken to egg before the shell forms, lying in wait to cause disease whenever the eggs are not cooked. As some persons use raw eggs to make hollandaise sauce and Caesar salads, and others do not store or cook eggs properly, the presence of bacteria poses a danger to public health. Hotels, nursing homes, and restaurants may use hundreds of eggs to produce batches of food. If even one egg contains salmonella, the batch will be contaminated; if the mixture sits at room temperature between steps in the preparation, the bacteria multiply rapidly.

The Department of Agriculture issued regulations that it believes will reduce the risk of salmonella transmitted in eggs. 56 Fed.Reg. 3730 (Jan. 30, 1991), to be codified at 9 C.F.R. §§ 82.30-82.38. (Amendments at 57 Fed.Reg. 776 (Jan. 9, 1992), do not affect our case.) After salmonella strikes, federal officials try to find the source of the food that the victims ate. When eggs are involved, the Department tests both the chickens and their surroundings for the bacterium. While the testing is underway--and afterward, if salmonella is found in either the birds or their environment--the producer may not sell eggs from that flock for consumption as table eggs. Until the flock has been certified salmonella-free, the owner may sell the birds for meat or may sell the eggs to "breakers" (firms that incorporate the eggs into other products, such as cake mixes, after pasteurization that eliminates all risk of salmonella), but may not sell whole eggs in cartons.

Under this approach risk to consumers falls close to zero. The producer pays for the consumers' gain. Whole table eggs fetch a higher price than eggs sold to breakers, and layer hens are worth much more when producing eggs than when slaughtered. A ban on the sale of whole eggs can turn a profitable operation into a losing one--and the loss may be substantial when the producer is specialized to the production of table eggs, as Rose Acre Farms is. See A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396, 1407-08 (7th Cir.1989). Salmonella has been traced to three of Rose Acre's flocks, and the firm filed this suit under the Administrative Procedure Act seeking an end to interference with its sale of whole eggs.

Rose Acre advanced three principal challenges to the regulations: first that they are beyond the power of the Department of Agriculture because they protect consumers rather than animals; second that any belief that salmonella in chickens poses a risk to consumers (or that these regulations would alleviate the problem) is arbitrary; third that the Department's unwillingness to offer compensation for the loss created by the ban invalidates the rules. The district court rejected the first two lines of argument but accepted the third. 1991 U.S. Dist. LEXIS 8691 (S.D.Ind.). The court went on to hold that the testing provisions in one rule are independently invalid. The Department of Agriculture has appealed. So has Rose Acre--a puzzling step, as it won in the district court. A prevailing party is entitled to advance in support of its judgment all arguments it presented to the district court. It need not and should not file a cross-appeal just because the district judge rejected one of its arguments on the way to deciding in its favor. Massachusetts Mutual Life Insurance Co. v. Ludwig, 426 U.S. 479, 96 S.Ct. 2158, 48 L.Ed.2d 784 (1976); Jordan v. Duff and Phelps, Inc., 815 F.2d 429, 439 (7th Cir.1987).

I

We start with the reason the district judge gave for annulling the regulations--that Rose Acre is entitled to compensation. There are three potential sources of obligation to compensate: the takings clause of the fifth amendment and two statutes, 21 U.S.C. §§ 114a and 134a(d). The Secretary of Agriculture believes that none of these requires compensation, not only because he has not ordered the destruction of any animal but also because the owners may make productive use of their birds by selling the eggs to breakers. To this Rose Acre replies that it is impossible to eliminate the bacterium from the environment without "depopulating" the chicken coops (a euphemism for killing the hens). Allowing farmers to sell the eggs or hens diminishes the loss but does not remove the directive from the category of takings.

Although the Secretary draws a bright line between ordering the destruction of the birds and ordering their owners to take other actions that lead to loss, we suppose that even the Department of Agriculture would concede that giving the owner a choice between killing the birds and lofting them into orbit (in pressure suits, so they do not die) is the equivalent of an order to destroy the birds. An "alternative" that is less attractive financially than slaughter is the functional equivalent of a command to destroy the animals. And after United States v. Causby, 328 U.S. 256, 66 S.Ct. 1062, 90 L.Ed. 1206 (1946), it is hardly possible to say that only the transfer or physical destruction of property is a "taking." Airplanes flying low over a chicken farm caused some birds to die from fright; surviving birds laid fewer eggs. The diminution in the value of the farm was a "taking," the Court held. Perhaps an order justified by the need to prevent the spread of disease does not call for compensation under the Constitution, see Miller v. Schoene, 276 U.S. 272, 48 S.Ct. 246, 72 L.Ed. 568 (1928), but Rose Acre observes that § 134a requires payment even when the destruction is justified by contagion.

Before issuing the regulations, the Secretary concluded that neither the Constitution nor a statute requires compensation. The preamble to the regulations states that the Department "does not intend to authorize payments of claims for chickens voluntarily destroyed, to order mandatory depopulation of infected chicken flocks and pay indemnities to the owners of destroyed chickens, or to make indemnity payments for eggs sold for pasteurization." 56 Fed.Reg. at 3731-32. The district judge thought otherwise. Holding that compensation is due under § 134a if not directly under the fifth amendment, the district court set aside the regulations themselves. No compensation, no regulation.

If either a statute or the Constitution requires compensation, one would suppose, the right way to proceed is to order payment, not to permit the sale of eggs that may kill people. What induced the district court to scratch out the regulations rather than to order payments is the Tucker Act's allocation of jurisdiction between district courts and the claims court. Only the claims court may award more than $10,000 against the United States on account of claims under the Constitution or statutes such as § 134a. Compare 28 U.S.C. § 1346(a)(2) with 28 U.S.C. § 1491(a)(1). Because the district court could not give Rose Acre the money to which that court believed it entitled, the court instead ordered the Secretary to cease the acts that gave rise to the need for compensation.

The Secretary contends that the district court lacks such power because the United States has not surrendered its immunity from suit, but this argument is unavailing. The APA allows judicial review of agency actions, and Congress has terminated sovereign immunity when the suit does not involve "money damages." 5 U.S.C. § 702. Rose Acre did not obtain money damages, did not even obtain an order that will lead to damages. Instead the judge issued an order that eliminates the need for damages. Such an order is within the court's subject-matter jurisdiction. See Bowen v. Massachusetts, 487 U.S. 879, 108 S.Ct. 2722, 101 L.Ed.2d 749 (1988).

Jurisdiction to enjoin enforcement of the regulations is not the problem. Instead the difficulty lies in the choice of remedy. If indeed the Constitution or a statute calls for compensation--a question on which we express no view--then setting aside the regulation is the wrong remedy. Compensation is the right one. The district court held the regulations invalid only because it could not award compensation. Yet Rose Acre's decision to file this suit in a court that cannot award the proper remedy hardly entitles it to some substitute and inappropriate remedy.

Rose Acre asked the district court to forbid acts that it believes "take" its eggs, and the court obliged. But the takings clause does not forbid takings; it requires compensation for takings. It reads: "nor...