Supreme Beef Processors v. U.S.D.A.

• Decision Date: 06 December 2001
• Docket Number: No. 00-11008,00-11008
• Citation: 275 F.3d 432
• Parties: (5th Cir. 2001) SUPREME BEEF PROCESSORS, INC, Plaintiff-Appellee, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

Page 432

275 F.3d 432 (5th Cir. 2001)

SUPREME BEEF PROCESSORS, INC, Plaintiff-Appellee, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant-Appellant.

No. 00-11008

UNITED STATES COURT OF APPEALS FIFTH CIRCUIT

December 6, 2001

REVISED DECEMBER 17, 2001

[Copyrighted Material Omitted] Appeal from the United States District Court For the Northern District of Texas

Before REAVLEY, HIGGINBOTHAM, and PARKER, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Certain meat inspection regulations promulgated by the Secretary of Agriculture, which deal with the levels of Salmonella in raw meat product, were challenged as beyond the statutory authority granted to the Secretary by the Federal Meat Inspection Act. The district court struck down the regulations. We hold that the regulations fall outside of the statutory grant of rulemaking authority and affirm.

I

The Federal Meat Inspection Act authorizes the Secretary of Agriculture to "prescribe the rules and regulations of sanitation" covering

slaughtering, meat canning, salting, packing, rendering, or similar establishments in which cattle, sheep, swine, goats, horses, mules and other equines are slaughtered and the meat and meat food products thereof are prepared for commerce....¹

Further, the Secretary is commanded to,

where the sanitary conditions of any such establishment are such that the meat or meat food products are rendered adulterated, ... refuse to allow said meat or meat food products to be labeled, marked, stamped, or tagged as "inspected and passed."²

In sum, the FMIA instructs the Secretary to ensure that no adulterated meat products pass USDA inspection, which they must in order to be legally sold to consumers.³

The FMIA contains several definitions of "adulterated," including 21 U.S.C. § 601(m)(4), which classifies a meat product as adulterated if "it has been prepared, packed, or held under insanitary conditions whereby it may have become contaminated with filth, or whereby it may have been rendered injurious to health."⁴ Thus, the FMIA gives the Secretary the power to create sanitation regulations and commands him to withhold meat approval where the meat is processed under insanitary conditions. The Secretary has delegated the authority under the FMIA to the Food Safety and Inspection Service.

In 1996, FSIS, after informal notice and comment rulemaking, adopted regulations requiring all meat and poultry establishments to adopt preventative controls to assure product safety. These are known as Pathogen Reduction, Hazard Analysis and Critical Control Point Systems or "HACCP."⁵ HACCP requires, inter alia, that meat and poultry establishments institute a hazard control plan for reducing and controlling harmful bacteria on raw meat and poultry products. In order to enforce HACCP, FSIS performs tests for the presence of Salmonella in a plant's finished meat products.

The Salmonella performance standards set out a regime under which inspection services will be denied to an establishment if it fails to meet the standard on three consecutive series of tests.⁶ The regulations declare that the third failure of the performance standard "constitutes failure to maintain sanitary conditions and failure to maintain an adequate HACCP plan ... for that product, and will cause FSIS to suspend inspection services."⁷ The performance standard, or "passing mark," is determined based on FSIS's "calculation of the national prevalence of Salmonella on the indicated raw product."⁸

In June, 1998, plaintiff-appellee Supreme Beef Processors, Inc., a meat processor and grinder, implemented an HACCP pathogen control plan, and on November 2, 1998, FSIS began its evaluation of that plan by testing Supreme's finished product for Salmonella. After four weeks of testing, FSIS notified Supreme that it would likely fail the Salmonella tests. Pursuant to the final test results, which found 47 percent of the samples taken from Supreme contaminated with Salmonella,⁹ FSIS issued a Noncompliance Report, advising Supreme that it had not met the performance standard. Included in the report was FSIS's warning to Supreme to take "immediate action to meet the performance standards." Supreme responded to FSIS's directive on March 5, 1999, summarizing the measures it had taken to meet the performance standard and requesting that the second round of testing be postponed until mid-April to afford the company sufficient time to evaluate its laboratory data. FSIS agreed to the request and began its second round of tests on April 12, 1999.

On June 2, 1999, FSIS again informed Supreme that it would likely fail the Salmonella tests and, on July 20, issued another Noncompliance Report--this time informing Supreme that 20.8 percent of its samples had tested positive for Salmonella. Supreme appealed the Noncompliance Report, citing differences between the results obtained by FSIS and Supreme's own tests conducted on "companion parallel samples." Those private tests, Supreme asserted, had produced only a 7.5 percent Salmonella infection level, satisfying the performance standard. FSIS denied the appeal; but based on Supreme's commitment to install 180 degree water source on all boning and trimming lines, granted the company's request to postpone the next round of Salmonella testing for 60 days. FSIS later withdrew the extension, however, after learning that Supreme was merely considering installation of the water source.

The third set of tests began on August 27, 1999, and after only five weeks, FSIS advised Supreme that it would again fall short of the ground beef performance standard. On October 19, 1999, FSIS issued a Notice of Intended Enforcement Action, which notified Supreme of the agency's intention to suspend inspection activities. The Notice gave Supreme Beef until October 25, 1999 to demonstrate that its HACCP pathogen controls were adequate or to show that it had achieved regulatory compliance. Although Supreme Beef promised to achieve the 7.5 percent performance standard in 180 days, it failed to provide any specific information explaining how it would accomplish that goal, and FSIS decided to suspend inspection of Supreme's plant.

On the day FSIS planned to withdraw its inspectors, Supreme brought this suit against FSIS's parent agency, the USDA, alleging that in creating the Salmonella tests, FSIS had overstepped the authority given to it by the FMIA. Along with its complaint, Supreme moved to temporarily restrain the USDA from withdrawing its inspectors. The district court granted Supreme's motion and, after a subsequent hearing, also granted Supreme's motion for a preliminary injunction.

The National Meat Association filed a motion to intervene as a plaintiff in the district court. The district court denied the motion on the grounds that NMA was adequately represented by Supreme in this litigation. The district court allowed NMA and other industry groups, as well as various consumer advocacy groups, to file briefs.

On cross-motions for summary judgment, the district court granted summary judgment in favor of Supreme, finding that the Salmonella performance standard exceeded the USDA's statutory authority and entering a permanent injunction against enforcement of that standard against Supreme. The USDA now appeals.

II

We first must address the USDA's suggestion of mootness. In September, 2000, during the pendency of this appeal, Supreme filed for Chapter 11 bankruptcy. The USDA moved to lift the stay on the appeal and filed a suggestion of mootness with this Court. Supreme argued that it intended to resume operations after reorganization and that the injunction against enforcement of the Salmonella performance standard was critical to that reorganization. A motions panel of this Court denied the motion to remand the case with instructions to dismiss as moot on January 2, 2000. On May 9, 2001, the Bankruptcy Court converted Supreme's case into a Chapter 7 liquidation.

The USDA has again raised the question of mootness. While we are not bound by the earlier determination of the motions panel, which in any event was made while Supreme was still in Chapter 11, rather than Chapter 7, proceedings,¹⁰ Supreme asserts that it has substantial assets and could emerge solvent from the Chapter 7 liquidation proceeding. "In general a matter is moot for Article III purposes if the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome."¹¹ The possibility that Supreme may continue to function as a meat processor even after its Chapter 7 proceeding satisfies Article III.¹²

The USDA argues that this case is moot because even if Supreme reopens "it is conceivable that it will not open at the same establishment where the violations of the Salmonella standard occurred and will not use the same suppliers." However, the district court's order is not specific to Supreme's place of business nor its suppliers. The Amended Final Judgment provides in part:

1. 9 C.F.R. 310.25(b) is hereby declared to be outside the statutory authority of the United States Secretary of Agriculture (the "Secretary") and the United States Department of Agriculture (the "USDA")....

This injunction issued because the district court determined that the USDA was without statutory authority to promulgate the Salmonella performance standards--it cannot be logically restricted to a particular facility.

Furthermore, NMA, having submitted a brief as an amicus curiae supporter of Supreme, again moved to intervene as an appellee, arguing that were we to find that the case was moot with respect to Supreme, NMA's interests were no longer adequately represented by Supreme and this inadequacy only arose during the pendency of the appeal.

We granted NMA's motion to intervene. "A party is entitled to an intervention of right if (1) the motion to intervene is timely; (2) the potential intervener asserts an interest that is related to the property or transaction that forms the...