Free Motion for Joinder - District Court of Federal Claims - federal

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 1 of 16

Tab 2 To Plaintiffs' Motion To Join Additional Party Plaintiffs And For Leave To File An Amended Complaint

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 2 of 16

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

AG-INNOVATIONS, INC., LARRY FAILLACE, LINDA FAILLACE, HOUGHTON FREEMAN, DOREEN FREEMAN, SKUNK HOLLOW FARM, INC., & FREEMAN FAMILY LLC, Plaintiffs, v. THE UNITED STATES OF AMERICA, Defendant.

) ) ) ) ) ) ) ) ) ) ) ) ) )

No. 05-776C (Judge Sweeney)

AMENDED COMPLAINT This case arises from the seizure and destruction of hundreds of healthy, valuable, purebred sheep and related business assets worth millions of dollars. The United States improperly seized the chattels, and also issued a quarantine over the real property on which the they were raised and kept, on account of the faulty and scientifically-unsupported belief that the sheep were infected with a communicable disease. Plaintiffs Ag-Innovations, Inc. ("Ag-Innovations"), Larry Faillace, Linda Faillace, and Houghton Freeman, Doreen Freeman, Skunk Hollow Farm, Inc., and Freeman Family LLC (collectively "Plaintiffs"), who owned the sheep and related business equipment, now seek compensation pursuant to the Takings Clause of the Fifth Amendment to the United States Constitution. In the alternative, if the sheep are determined to be have been "affected or exposed" to scrapie or some other similar communicable disease, Plaintiffs seek statutory and regulatory compensation for such takings and destruction.

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 3 of 16

JURISDICTION AND VENUE 1. Plaintiffs base their claims upon the Fifth Amendment to the United States

Constitution; the Animal Health Protection Act, Title X, § 10407 (2002), 7 U.S.C. § 8306 (Supp. 2002); the Act of May 29, 1884, ch. 60, § 11, as added Sept. 21, 1944, Pub. L. No. 78-425, ch. 412, Title I, § 101(a), 58 Stat. 734, 734 (as amended), formerly codified at 21 U.S.C. § 114a and repealed by Pub. L. No. 107-171, Title X, § 10418(a)(8), 116 Stat. 494, 508 (2002); the Act of July 2, 1962, Pub. L. No. 87-518, § 2, 76 Stat. 129, 129-30, formerly codified at 21 U.S.C. § 134a and repealed by Pub. L. No. 107-171, Title X, § 10418(a)(17), 116 Stat. 494, 508 (2002); 9 C.F.R. § 53.3(b); and 9 C.F.R. § 54.6. 2. This Court has subject matter jurisdiction over the claims for relief in this action

pursuant to 28 U.S.C. § 1491(a)(1). 3. Venue is proper in this Court pursuant to 28 U.S.C. § 1491. PARTIES 4. Plaintiff Ag-Innovations is a Vermont corporation engaged in the business of

selling purebred sheep genetic stock, and producing and distributing sheep's milk and gourmet cheeses derived therefrom. 5. Plaintiffs Larry Faillace and Linda Faillace are each individual citizens of Warren,

Vermont. They are shepherds who bred and raised several varieties of sheep, including East Friesian, Beltex, East Friesian-Beltex Crosses, and Charollais, for their genetic material, their milk, and the production of specialty cheeses. At all relevant times, they jointly owned thecertain chattels referred to herein before their seizure and destruction by the United States. They are owners of Ag-Innovations and lessees of the Three Shepherds' of the Mad River Valley, a piece of real property located at 108 Roxbury Mountain Road, Warren, Vermont.

-2-

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 4 of 16

6.

Plaintiff Freeman Family LLC is a New York limited liability corporation

jointly owned by Plaintiffs Houghton Freeman and Doreen Freeman. Plaintiff Freeman Family LLC has held the real property known as Skunk Hollow Farm, located at RR1, Box 1430, Greensboro, Vermont, since October 2003. 7. Plaintiff Skunk Hollow Farm, Inc. is a Vermont corporation that was engaged

in the business of selling purebred sheep genetic stock and producing and distributing sheep's milk and gourmet cheeses derived therefrom. At all relevant times, Plaintiff Skunk Hollow Farm, Inc., which is wholly-owned by Plaintiff Houghton Freeman, owned certain chattels referred to herein prior to and at the time of their seizure and destruction by the United States. 8. 6. PlaintiffPlaintiffs Houghton Freeman is a citizenand Doreen Freeman are

citizens of Stowe, Vermont. HePlaintiff Houghton Freeman bred and raised purebred East Friesian sheep for their genetic material, for their milk, and for the production of specialty cheeses. At all relevant times, he owned the chattels referred to herein before their seizure and destruction by the United States. He also owns prior to October 2003, Plaintiff Houghton Freeman owned the property known as Skunk Hollow Farm, located at RR1, Box 1430, Greensboro, Vermont. At all relevant times including and subsequent to October 2003, Plaintiffs Houghton Freeman and Doreen Freeman jointly owned the Freeman Family LLC. 9. 7. Defendant United States includes the federal agencies and departments whose

actions have given rise to the claims for relief set forth in this Complaint, including but not limited to the United States Department of Agriculture (USDA) and the Animal and Plant Health Inspection Service (APHIS).

-3-

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 5 of 16

FACTUAL ALLEGATIONS 10. 8. In 2001, after declaring an "extraordinary emergency" pursuant to former 21

U.S.C. § 134a(b), the USDA slaughtered hundreds of healthy, valuable, European-imported and domestically bred milking sheep, and destroyed their genetic stock material, on the premise that the sheep were infected with what the Government termed "an atypical [transmissible spongiform encephalopathy (TSE)] of foreign origin." 11. 9. The USDA came to this conclusion even though (1) the sheep had passed a

governmentally-mandated scrapie certification program; (2) scientific testing could not--and still cannot--distinguish among "an atypical TSE of foreign origin," scrapie, and/or Bovine Spongiform Encephalopathy (BSE); and (3) no sheep has ever naturally contracted BSE or "an atypical TSE of foreign origin." Indeed, before the events that give rise to this case, "atypical TSE of foreign origin" had never even been previously diagnosed or determined to exist. In fact, no East Friesian sheep has ever been found to have contracted scrapie or any TSE. 12. 10. After slaughtering the sheep, the USDA improperly, arbitrarily, capriciously,

and in abuse of its discretion, calculated the sheep's fair market value by failing to account for the sheep's superior quality and economic purpose as a business asset and by making unsupported assumptions regarding their use as meat and feed and their conformation. Plaintiffs now seek compensation at fair market value for the seized property and for the continued quarantine imposed on Plaintiffs' real property. Transmissible Spongiform Encephalopathy 13. 11. TSEs are a class of neurological diseases associated with the accumulation of

abnormal prion (or protease resistant) protein in the brain.

-4-

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 6 of 16

14.

12. TSEs come in different forms and affect different types of mammals, including

humans. Scrapie is the type specific to sheep and goats. Other animal susceptible to species-specific forms of TSE include cattle (BSE), deer and elk (Chronic Wasting Disease (CWD)), mink (Transmissible Mink Encephalopathy (TME)), and cats (Feline Spongiform Encephalopathy (FSE)). Creutzfeldt-Jacob Disease (CJD) and the variant Creutzfeldt-Jacob Disease (vCJD) are two of the several human versions of TSE. Generally accepted scientific opinion concludes that scrapie is not harmful to humans. 15. 13. In the mid-1990's, scientists in the United Kingdom discovered a possible

connection between the cattle-specific BSE and vCJD, believing that certain individuals may have become infected with vCJD as a result of consuming food products contaminated with central nervous system tissue of BSE-infected cattle. Although during the times and dates in question some scientific testing suggested that cattle infectivity of BSE could arise from ingestion of infected sheep tissue, there were (and still are to date) no natural occurrences of sheep being infected with BSE, even after ingestion of contaminated cattle tissue. In addition, no scientific test has revealed the spread of BSE (or any TSE) through animal milk. Importation and Seizure 16. 14. Between May and December 1996, in full compliance with the then-prevailing

laws of the United States and applicable jurisdictions, Plaintiffs Larry and Linda Faillace, with the assistance of Plaintiff Houghton Freeman, imported sixty-four East Friesian, Beltex, and Charollais sheep into the United States from Belgium. Upon importation and after moving in interstate commerce, the sheep were enrolled in the Federal Scrapie Surveillance Flock Certification Program (Scrapie Surveillance Program), a program administered by the USDA for the purpose of controlling and eradicating scrapie. The animals were kept under quarantine both

-5-

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 7 of 16

prior and subsequent to their importation for a duration determined by the USDA. From 1996, the animals were monitored annually by the USDA for the presence of the disease. Following the sheep's arrival on the farms, the plaintiffs requested and were granted an "A" status from the Scrapie Surveillance Program, which allowed the animals to be transported and sold throughout the United States without restriction. And yet, in 1998, when Plaintiffs should have received a scrapie certificate, they instead were informed that the USDA had decided to impose a quarantine on their property. 17. 15. Plaintiffs had carefully selected each of their sheep based on its superior genetic

quality, its pure pedigree, and its exceptional milking and breeding value. Moreover, they diligently ensured that each sheep had never been fed meat or bone meal. They obtained records certified by the Belgium government to that effect. Plaintiffs wanted to ensure the sheep were (and remained) disease-free. 18. 16. Despite these records and the sheep's successful passage through the Scrapie

Surveillance Program, USDA personnel apparently became fearful that BSE ­ the cattle-specific TSE ­ could spread to the United States through animals imported from Europe, including through Plaintiffs' sheep. APHIS personnel met with Plaintiffs on July 13, 1998, and July 14, 1998, expressing concern that Plaintiffs' flocks could be infected with BSE. APHIS asked if the United States could purchase the sheep, and Plaintiffs declined. But, after explaining their willingness to cooperate, Plaintiffs agreed to a voluntary quarantine over the sheep until September 1998, when APHIS claimed it would have more information to justify its actions. 19. 17. On September 18, 1998, without performing any additional testing on the sheep,

or providing any additional information to Plaintiffs, the Administrator for Veterinary Services of APHIS approved the release of contingency funds to purchase Plaintiffs' flocks in order to conduct

-6-

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 8 of 16

additional testing and to submit the samples for diagnostics purposes, again out of fear that Plaintiffs' sheep might be infected with BSE. APHIS indicated it would not destroy the sheep but rather purchase them in lieu of slaughter. 20. 18. At the USDA's direction, on October 8, 1998, the Vermont Department of

Agriculture ("VTGA") placed Skunk Hollow Farm and Ag-Innovations' farm under quarantine. The quarantine prohibited the sheep's slaughter for sale or their sale for breeding purposes. 21. 19. Thereafter, however, the USDA made a determination that it would destroy

Plaintiffs' flocks of sheep, including any remaining imported sheep, their progeny, and other contact animals. The animals were to be purchased at fair market value and used for diagnostic purposes. 22. 20. The sheep remained in quarantine until July 2000. On or about July 10, 2000,

the USDA claimed that several sheep from the Freeman flock had not contracted BSE but rather had "preliminarily" tested positive for "an atypical TSE of foreign origin," a disease never previously detected in the United States or anywhere else in the world. The testing could not, and did not, designate whether the "atypical" prion was scrapie or BSE or some other prion protein. 23. 21. Furthermore, the results rested on scientifically unsound and highly

questionable testing procedures. The sheep on which the tests were performed had been dead for over a year. Moreover, the animals that the USDA claimed were positive were thirteen months of age, too young to test positive since the prion protein cannot accumulate in the brain until at least eighteen months of age and usually does not accumulate in detectable amounts until around twenty-four months of age. Most suspicious, these same sheep had previously tested negative under identical testing administered through the Scrapie Surveillance Program (e.g.,

-7-

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 9 of 16

histopathologies and the USDA's "gold standard" test, the immunohistochemical assay (IHC)), tests which are used to determine if sheep have scrapie or cattle have BSE. 24. 22. In addition, the USDA improperly and unscientifically performed the tests,

failing to use control groups, molecular weight markers, or other proper, scientifically-acceptable methodology in conducting its tests. The USDA also has refused to release any tissue sample for independent testing, despite offers by Plaintiffs to have rigorous scientific testing conducted at no cost to the USDA. 25. 23. Effective July 14, 2000, the Secretary of Agriculture issued a Declaration of

Extraordinary Emergency pursuant to 21 U.S.C. § 134a(b) over Plaintiffs' sheep and related chattels. The order authorized the USDA to seize and destroy the flocks and associated germ plasm, which were contained in semen straws. The order also authorized the USDA to expend funds to seize and dispose of the sheep. Pursuant to this order, the USDA promised to pay fair market value for the seized property. 26. 24. Thereafter, Plaintiffs Faillace and Ag-Innovations filed an action in the United

States District Court for the District of Vermont, Civil Action No. 1:00-CV-257-JGM, seeking to save their sheep from slaughter by challenging the validity of the USDA's declaration of extraordinary emergency and seeking to enjoin the USDA from seizing the sheep and germ plasm. Despite testimony from the USDA's own expert that the USDA could not diagnose "an atypical TSE," the district court entered judgment in favor of the USDA. Plaintiffs appealed to the United States Court of Appeals for the Second Circuit. 27. 25. On March 21, 2001, just days prior to the scheduled appellate argument in the

Second Circuit, USDA officials and their armed federal agents entered Skunk Hollow Farm and seized 234 of Plaintiff Freeman's sheep. The sheep were shipped to the National Veterinary

-8-

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 10 of 16

Services Laboratory in Ames, Iowa, where they were euthanized. The agents also seized and confiscated 138 semen straws, as well as multiple stocks of specialty cheese and other related cheesemaking equipment. 28. 26. Two days later, on March 23, 2001, USDA officials and their armed federal

agents seized 125 of Larry and Linda Faillace's and Ag-Innovations' sheep and subsequently seized other equipment. The USDA also later seized 424 semen straws. These animals and assets, likewise, were eventually destroyed. 29. 27. The sheep seized and destroyed by the USDA were healthy and were not

infected or exposed to BSE. 30. 28. On appeal, the Second Circuit ultimately found the claims moot, as the sheep

had been destroyed, and remanded the case back to the district court to dismiss the action. See 6 Fed. Appx. 97, 2001 WL 409509 (2d Cir. Apr. 20, 2001). 31. 29. On August 26, 2002, after all the sheep had been seized and slaughtered and

despite its own findings that they were not infected with BSE, the USDA issued a quarantine order over the barn, paddock area, and pastures owned by Ag-Innovations and the Faillace's and over the land leased by them. The order provided that no ruminant animals could be raised or kept in the quarantined areas until March 23, 2006. The quarantine prevents and has prevented the property from having any economically viable use, rendering it unproductive. 32. 30. On or about September 16, 2002, the USDA issued an identical quarantine

order over the barn, paddock area, and pastures of Skunk Hollow Farm. The order also provided that no ruminant animals could be raised or kept in the quarantined areas until March 23, 2006. The quarantine prevents and has prevented the property from having any economically viable use, rendering it unproductive.

-9-

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 11 of 16

33.

31. Plaintiffs Faillace and Ag-Innovations thereafter instituted a second action

against the USDA in the same court, Civil Action No. 1:02-CV-00332-JGM, seeking relief from the underlying judgment in the first action and seeking compensation. The district court ultimately dismissed the claims for monetary relief, directing the Plaintiffs to seek compensation in the Court of Federal Claims. Compensation--Plaintiff Freeman 34. 32. Despite its promise, the Secretary of Agriculture has failed to pay or offer to

pay the fair market value of the seized sheep and other property taken from Plaintiffs. In a letter dated November 2, 2000, the USDA informed Mr. Freeman that the USDA would pay fair market value for the sheep that would be seized and destroyed pursuant to the July 2000 disposal orders. However, the USDA claimed it did not have sufficient information to make a formal monetary offer for fair market value. The USDA also notified Mr. Freeman that through the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2001, Pub. L. No. 106-387, Title VIII, § 809, 114 Stat. 1549, 1549A-52 (2000), Congress had appropriated additional funds up to $2.4 million to compensate Plaintiffs for economic losses incurred for the seizure and destruction of the sheep, so long as they were destroyed on or before November 17, 2000. This offer was significantly below the fair market value of the sheep and related property, and Plaintiffs rejected it. 35. 33. On or about November 11, 2001, the USDA offered Freeman the following

compensation package: 144 milking ewes valued at $1,682.00/each; twenty-one rams valued at $1,966.00/each; thirty-eight lambs valued at $150.00/each; forty-five dry ewes valued at $1,078.00/each; and thirty-eight lambs valued at $850.00/each. The compensation also included 138 semen straws valued at $35.00/each and cheese inventories totaling $32,876.00. In sum, the

- 10 -

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 12 of 16

offer for the seized property totaled $407,820.00. This offer also grossly undervalued the true market value of the seized sheep and other assets, and it was rejected. 36. 34. On or about April 8, 2002, the USDA presented the same compensation

package to Plaintiff Freeman as it did in November 2001, along with a check in the amount of $407,820.00. In a letter dated June 18, 2002, Plaintiff Freeman's counsel informed the USDA that he had received the USDA's check. He explained that he believed the compensation package again did not represent full, fair, and adequate compensation because the value of the property and assets seized were substantially greater than the offered amount. Freeman further explained he was depositing the USDA's check under reservation of rights, and that the negotiation of the draft would not foreclose future claims for compensation. 37. 35. PlaintiffPlaintiffs Houghton Freeman has, Doreen Freeman, and Freeman

Family LLC have received no compensation for the quarantine currently imposed over Skunk Hollow Farm. Compensation--Plaintiffs Larry and Linda Faillace and Ag-Innovations 38. 36. The Secretary of Agriculture also has failed to pay the fair market value of the

seized sheep and other property taken from Plaintiffs Larry and Linda Faillace and Ag-Innovations. 39. 37. On July 19, 2000, the USDA appraised Plaintiffs Larry and Linda Faillace's

and Ag-Innovations' sheep for $193,650.00. The appraisal grossly undervalued the true market value of the seized sheep. Thereafter, a check in the amount of $215,005.00 was mailed to their attorney. The Faillaces and Ag-Innovations received no coherent breakdown or animal-by-animal analysis of what value the check represented.

- 11 -

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 13 of 16

40.

38. In addition, the USDA's appraisal also failed to include other property taken

and destroyed by the United States. Specifically, it did not include compensation for destruction of Plaintiffs' business and related assets, including importation and start-up costs, and economic losses. The Faillaces and Ag-Innovations have not received compensation from the United States. 41. 39. Plaintiffs Larry and Linda Faillace and Ag-Innovations have received no

compensation for the quarantine currently imposed over the Ag-Innovations' farm. CAUSES OF ACTION Count I (Constitutional Compensation for Taking of Sheep) 42. 40. Plaintiffs re-allege and incorporate herein by reference the allegations set forth

above in numbered Paragraphs 1 through 39.41. 43. 41. Defendant United States seized Plaintiffs' private property without just

compensation in violation of the Fifth Amendment to the United States Constitution. Defendant United States seized and slaughtered healthy sheep and other animals owned by Plaintiffs based on an unreasonable and scientifically baseless fear that Plaintiffs' animals had contracted "an atypical TSE of foreign origin." 44. 42. Defendant United States also seized and destroyed germ plasm, gourmet cheese

stock, crops, buildings, cheesemaking equipment, and other business-related assets. 45. 43. The compensation provided by Defendant United States fails to compensate

Plaintiffs for the fair market value of the property taken from them. 46. 44. Defendant United States also improperly selected appraisers with a true bias

and conflict of interest, preventing a proper, accurate assessment of the sheep's fair market value. Count II

- 12 -

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 14 of 16

(StatutoryConstitutional Compensation for Quarantined Properties) 47. 45. Plaintiffs re-allege and incorporate herein by reference the allegations set forth

above in numbered Paragraphs 1 through 44.46. 48. 46. Defendant United States' continued quarantine over Plaintiffs' property,

imposed since August and September 2002 and continuing in effect until March 23, 2006, constitutes a taking of private property without just compensation in violation of the Fifth Amendment to the United States Constitution. During the time period they remain effective, the quarantine orders destroy all economically viable use of Plaintiffs' from putting their respective real property and effect a taking of that property. 49. 47. Defendant United States has provided Plaintiffs no compensation whatsoever

for the continued quarantine and resulting taking of their property. Count III (Statutory Compensation for Taking of Sheep) 50. 48. Plaintiffs re-allege and incorporate herein by reference the allegations set forth

above in numbered Paragraphs 1 through 47.49. 51. 49. In the alternative to Counts I and II, if the sheep are found to have been

"affected or exposed" to any communicable disease, whether scrapie or otherwise, Defendant United States acted arbitrarily and capriciously and in abuse of its discretion in calculating the sheep's fair market value in accordance with former 21 U.S.C. § 134a, as well as applicable regulations. If the sheep had a communicable disease other than scrapie, Defendant United States failed to account for the superior breeding quality of Plaintiffs' flock when calculating fair market value, as provided in 9 C.F.R. § 53.3(b). If the sheep, in fact, had scrapie, Defendant United States failed to account fully for the impact of destruction of the sheep, as required as part of the Scrapie

- 13 -

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 15 of 16

Surveillance Program pursuant to 9 C.F.R. § 54.6. Under either scenario, the United States in making these assessments took into account irrelevant factors and unsupported assumptions. Plaintiff's sheep were primarily used for purebred genetic stock, milking and breeding, not for meat or feed. 52. 50. Defendant United States acted arbitrarily and capriciously and in abuse of its

discretion by selecting appraisers with a bias and conflict of interest, preventing a proper, accurate assessment of the sheep's fair market value. PRAYER FOR RELIEF WHEREFORE, Plaintiffs pray for judgment against Defendant: (a) For just compensation, in an amount to be determined at trial (including compound

interest on the value of the properties from the date of the taking until paid); (b) For Plaintiffs' reasonable expenses, including reasonable attorney and appraisal

fees, as provided for by 42 U.S.C. § 4654(c); and (c) For such other and further relief as this Court may deem just and proper.

Respectfully submitted, By: /s s/ Jonathan L. Abram Jonathan L. Abram HOGAN & HARTSON, L.L.P. 555 Thirteenth Street, N.W. Washington, DC 20004 (202) 637-5681 (direct) (202) 637-5910 (facsimile) Attorney of Record for Plaintiffs Ag-Innovations, Inc., Larry Faillace, Linda Faillace and Houghton Freeman OF COUNSEL:

- 14 -

Case 1:05-cv-00776-MMS

Document 59-3

Filed 11/12/2007

Page 16 of 16

Raymond S. Calamaro Kevin S. Willen HOGAN & HARTSON, L.L.P. 555 Thirteenth Street, N.W. Washington, DC 20004 (202) 637-5600 (202) 637-5910 (facsimile)

Dated: July 22, 2005 November 12, 2007

- 15 -