Free Amended Answer to Complaint - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS AG-INNOVATIONS, INC., LARRY FAILLACE, LINDA FAILLACE, and HOUGHTON FREEMAN, Plaintiffs, v. UNITED STATES, Defendant. ) ) ) ) ) ) ) ) ) )

No. 05-776C (Judge Sweeney)

DEFENDANT'S AMENDED ANSWER AND AFFIRMATIVE DEFENSE Pursuant to the Court's order dated January 24, 2007, defendant hereby amends its answer and asserts an affirmative defense. For its answer to plaintiffs' complaint and assertion of its affirmative defense, defendant admits, denies, and alleges as follows: The allegations contained in the introductory paragraph to plaintiffs' complaint are plaintiffs' characterization of this action, their request for relief and their cause of action, to which no response is required; to the extent that they may be deemed allegations of fact, they are denied. 1. The allegations contained in paragraph 1 are plaintiffs' characterization of their

action and conclusions of law to which no response is required; to the extent they may be deemed allegations of fact, they are denied. 2. The allegations contained in paragraph 2 are conclusions of law to which no

response is required; to the extent they may be deemed allegations of fact, they are denied. 3. The allegations contained in paragraph 3 are conclusions of law to which no

response is required; to the extent they may be deemed allegations of fact, they are denied. 4. Admits the allegations contained in paragraph 4 that Ag-Innovations is a Vermont

corporation engaged in the business of selling sheep genetic stock and producing and distributing

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cheeses derived from sheep's milk. The remainder of the allegations contained in paragraph 4 are plaintiffs' characterization of their sheep and sheep products to which no response is required; to the extent they may be deemed allegations of fact, they are denied. 5. Denies the allegations contained in the first sentence of paragraph 5 for lack of

knowledge or information sufficient to form a belief as to the truth of the matters asserted. Admits the allegations contained in the second sentence of paragraph 5 that Larry Faillace and Linda Faillace are shepherds who owned and bred varieties of sheep, East Friesian, Beltex, East Friesian-Beltex Crosses, and Charollai, and raised the sheep for their genetic material and their production of cheeses; denies the remainder of the allegations contained in the second sentence of paragraph 5. Admits the allegations contained in the third sentence of paragraph 5 that the Faillaces and Ag-Innovations jointly owned the sheep that were seized and destroyed. Admits the allegations contained in the fourth sentence of paragraph 5 that the Faillaces are owners of Ag-Innovations; denies the remainder of the allegations contained in the third and fourth sentences of paragraph 5. Defendant avers that the Faillaces leased the real property identified in the fourth sentence of paragraph 5. 6. Admits the allegations contained in the first sentence of paragraph 6. Admits the

allegations contained in the second sentence of paragraph 6 that Mr. Freeman was in the business of breeding and raising purebred East Friesian Sheep for their genetic material, their milk, and the production of cheese; denies the remainder of the allegations contained in the second sentence of paragraph 6. Admits the allegations contained in the third and fourth sentences of paragraph 6. 7. Admits the allegations contained in paragraph 7 that the Department of

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Agriculture (USDA) is a Federal agency of the United States and that the Animal and Plant Health Inspection Service (APHIS) is a part of USDA; denies the remainder of the allegations contained in paragraph 7. 8. Admits the allegations contained in paragraph 8 that USDA declared an

Extraordinary Emergency pursuant to 21 U.S.C. § 134a(b) because of the presence of an atypical transmissible spongiform encephalopathy of foreign origin on premises in Vermont and, as a result, seized and destroyed European-imported sheep and destroyed their genetic material; denies the remainder of the allegations contained in paragraph 8. Defendant avers that, pursuant to section 134a of title 21 of the United States Code, the USDA possesses the authority to declare an Extraordinary Emergency, seize, quarantine and dispose of, in such manner as it deems necessary, any animals found to be affected with or exposed to an atypical transmissible spongiform encephalopathy (Prion Disease) of a foreign origin, and their germ plasm, and otherwise to carry out the provisions of and purposes of the Act of July 2, 1962 (21 U.S.C. §§ 134-134(h)). 9. Admits the allegations contained in the first and second sentences of paragraph 9

that the Government concluded it was necessary to declare an extraordinary emergency, that no single diagnostic test can distinguish between "an atypical [transmissible spongiform encephalopathy (TSE)] of foreign origin," scrapie, and/or Bovine Spongiform Encephalopathy (BSE), and no sheep have been confirmed to have naturally contracted BSE; denies the remainder of the allegations contained in the first and second sentences of paragraph 9. Defendant further avers that, although plaintiffs' sheep were required to be enrolled in the Scrapie Certification Program, they did not reach certified status ("pass"). Moreover, defendant

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avers that even though no single diagnostic test can definitively distinguish between BSE and scrapie, the mouse bioassay system in conjunction with other diagnostic tests is a method currently used to differentiate among the various TSE agents. Defendant further avers that the disease was called an "atypical TSE," because, although testing demonstrated evidence of an abnormal form of prion protein, the lesion pattern seen on histopathology did not have the distinctive cellular changes or degenerative changes seen in scrapie cases and the testing was unable to distinguish between the scrapie agent and the BSE agent. In addition, even though defendant is not aware of any sheep that have been confirmed to have naturally contracted BSE, goats have been confirmed to have natural cases of BSE, and samples from other sheep and goats are undergoing extensive testing to determine whether BSE is present, and results are pending. Finally, defendant avers that, although the United States first became aware of the "atypical TSE of foreign origin" in 2000, subsequently, the "atypical" classification has been used to describe scrapie in the scientific community. Denies the allegations contained in the third sentence of paragraph 9. 10. Denies the allegations contained in the first sentence of paragraph 10. The

allegations contained in the second sentence of paragraph 10 are plaintiffs' characterization of their action and conclusions of law to which no response is required; to the extent they may be deemed allegations of fact, they are denied. 11. Denies. Defendant avers that TSE is a class of neurological diseases that is not

only associated with the accumulation of abnormal prion in the brain, but that it is also associated with the accumulation of abnormal prion in other tissues throughout the body of sheep infected with both scrapie and BSE, for example, in lymphoid tissues, such as tonsils.

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12.

Admits the allegations contained in the first, second, fourth and fifth sentences of

paragraph 12. Denies the allegations contained in the third sentence of paragraph 12. Defendant avers that TSE diseases are not always species specific. For example, BSE has been diagnosed in small ruminants other than cattle. 13. Admits. Defendant further avers that scientific studies suggest that Great Britons

who developed the variant Creutzfeldt-Jacob Disease (vCJD) ate sheep meat contaminated with the BSE prion, rather than beef products. 14. Denies the allegations contained in the first sentence of paragraph 14. Defendant

avers that, between May and December 1996, the Faillaces imported sheep in two shipments. Although the sheep were identified by the Faillaces as having participated in a scrapie program for four years in Belgium, documentation subsequently received by USDA revealed that some of the sheep were from the Netherlands and, thus, were ineligible to be imported into the United States. In addition, information provided by officials from the Belgian government indicated that one of the flocks of origin had only been enrolled in a scrapie monitoring program from June 26, 1996, to July 2, 1996. Therefore, these sheep were not in full compliance with the thenprevailing laws of the United States. Denies the allegations contained in the second sentence of paragraph 14. Defendant further avers that, after the sheep were released from quarantine at the New York Animal Import quarantine facility, they were transported to two premises in Vermont and one premise in New York, where they were to be placed with a United States flock that was enrolled in the Voluntary Scrapie Flock Certification Program, a program administered cooperatively by the USDA, the states, and industry for the purpose of controlling and eventually eradicating scrapie. Denies the allegations contained in the third sentence of paragraph 14.

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Defendant avers that, in 1996, the USDA required the sheep to be quarantined at the import quarantine facility for not less than 30 days from the date of arrival at the port of entry. In 1998, the sheep were again quarantined by the State of Vermont. USDA quarantined the premises in 2001. Denies the allegations contained in the fourth sentence of paragraph 14. Defendant avers that, with the granting of "A" status, the sheep were required to be inspected at least every six months, and USDA monitored the sheep for the presence of disease any time that an animal on the farm died or presented certain clinical evidence of a TSE. Admits the allegations contained in the fifth sentence of paragraph 14 that plaintiffs' sheep were granted an "A" status from the Scrapie Surveillance Program; denies the remainder of the allegations contained in the fifth sentence of paragraph 14. Defendant avers that flocks of sheep are not permitted to be transported and sold throughout the United States without restriction until they obtain a "certified" status, which plaintiffs' sheep did not achieve. Denies the allegations contained in the sixth sentence of paragraph 6. Defendant avers that the flock was not eligible to obtain "certified" status until June 2001. However, in 1998, the State of Vermont quarantined the sheep, so they did not receive "certified" status. 15. Denies the allegations contained in the first sentence of paragraph 15 for lack of

knowledge or information sufficient to form a belief as to the truth of the matters asserted. Denies the allegations contained in the second, third, and fourth sentences of paragraph 15. Defendant avers that the sheep could have been exposed to meal and bone meal. Moreover, defendant avers that the health certificate from the Belgian government did not certify the feeding practices related to the sheep and, in fact, could not certify such practices in many instances because the sheep were from the Netherlands.

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16.

Admits the allegations contained in the first sentence of paragraph 16 that USDA

personnel were fearful that the disease in the imported sheep could be spread throughout the United States herd; denies the remainder of the allegations contained in the first sentence of paragraph 16. Defendant avers that the available records indicate that the sheep had been exposed to meal and bone meal, that there were no health certificates certifying the feeding practices of the sheep, and that the sheep had not "successfully passed the Scrapie Surveillance Program." Defendant further avers that BSE is no longer a cattle-specific TSE, but that it has been detected in small ruminants, such as goats. Admits the allegations contained in the second sentence of paragraph 16 that APHIS personnel met with the plaintiffs in mid-July 1998 and on several other occasions to express concern that plaintiffs' sheep were putting the United States livestock industry at risk for BSE. Admits the allegations contained in the third sentence of paragraph 16 that, in the July 1998 meetings, the Government stated that it was willing to purchase the sheep; denies the remainder of the allegations contained in the third sentence of paragraph 16. Defendant avers that the plaintiffs did not decline the Government's offer to purchase plaintiffs' sheep until September 1998. Defendant admits the allegations contained in the fourth sentence of paragraph 16 that APHIS supplied plaintiffs with additional scientific information to demonstrate the disease potential of their sheep; denies the remainder of the allegations contained in the fourth sentence of paragraph 16. Defendant avers that plaintiffs agreed to voluntarily comply with a protocol that was designed to keep the original imported sheep and their progeny out of the animal and food chains. Defendant further avers that this action was voluntary until October 1998, when the state of Vermont imposed a quarantine upon the movement of the animals.

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17.

Admits the allegations contained in the first sentence of paragraph 17 that, on

September 18, 1998, the Administrator for Veterinary Services of APHIS approved the release of contingency funds to purchase plaintiffs' flock because of USDA's fear that plaintiffs' sheep might be infected with BSE; denies the remainder of the allegations contained in paragraph 17. 18. Denies the allegations contained in the first sentence of paragraph 18. Admits the

allegations contained in the second sentence of paragraph 18. 19. Admits the allegations contained in paragraph 19 that USDA would purchase the

animals at fair market value and use them for diagnostic purposes; denies the remainder of the allegations contained in paragraph 19. 20. 21. Denies. Denies the allegations contained in the first and second sentences of paragraph

21. Admits the allegations contained in the third sentence of paragraph 21 that the sheep were between 13 and 14 months of age at the time the samples were taken. Denies the remainder of the allegations contained in paragraph 21. Defendant avers that the sheep were seized and destroyed in March 2001 and that samples were taken at that time for testing purposes. Defendant further avers that TSEs are detectable in sheep at ages less than 18 months. Moreover, defendant avers that the tests conducted through the Scrapie Surveillance Program were not identical to the tests that were conducted on plaintiffs' sheep to determine whether it contained TSEs because plaintiffs requested that additional tests which were under development through research be conducted on its sheep. Once the research tests proved to be positive for TSE, USDA determined that additional western blot tests were necessary. 22. Denies. Defendant avers that USDA does not have any additional samples to

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release to plaintiffs for independent testing. 23. Admits the allegations contained in the first, second and third sentences of

paragraph 23 to the extent supported by the Secretary of Agriculture's Declaration of Extraordinary Emergency issued on July 14, 2000, which is the best evidence of its contents; otherwise denies the allegations contained in the first, second, and third sentences of paragraph 23. The allegations contained in the fourth sentence of paragraph 23 are conclusions of law to which no response is required; to the extent that they may be deemed allegations of fact, they are denied. 24. Admits the allegations contained in the first sentence of paragraph 24 that

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; denies the remainder of the allegations contained in the first sentence of paragraph 24. Denies the allegations contained in the second sentence of paragraph 24. Admits the allegations contained in the third sentence of paragraph 24. 25. Admits the allegations contained in the first sentence of paragraph 25 that, on

March 21, 2001, USDA officials seized the sheep housed on Skunk Hollow Farm which belonged to plaintiff Freeman; denies the remainder of the allegations contained in the first sentence of paragraph 25. Admits the allegations contained in the second sentence of paragraph 25. Admits the allegations contained in the third sentence of paragraph 25 that defendant seized 138 semen straws, a variety of cheeses, and cheesemaking equipment; denies the remainder of the allegations contained in the third sentence of paragraph 25. Defendant avers that, for the most part, it did not seize the semen straw, cheese, and other farm and cheesemaking equipment

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until months after March 21, 2001. 26. Admits the allegations contained in the first sentence of paragraph 26 that, on

March 23, 2001, USDA officials seized the sheep which belonged to the plaintiffs Faillaces and to Ag-Innovations and that they later seized equipment; denies the remainder of the allegations contained in the first sentence of paragraph 26. Admits the allegations contained in the second sentence of paragraph 26 that USDA officials seized semen straws which belonged to plaintiffs Faillaces and Ag-Innovations; denies the remainder of the allegations contained in the second sentence of paragraph 26. Admits the allegations contained in the third sentence of paragraph 26. 27. 28. Denies. Admits the allegations contained in paragraph 28 to the extent supported by the

decision of the Second Circuit referred to in paragraph 28, which is the best evidence of its contents; otherwise denies the allegations contained in paragraph 28. 29. Admits the allegations contained in the first sentence of paragraph 29 that the

USDA issued a quarantine order over the entire pasture leased by the Faillaces and AgInnovations; denies the remainder of the allegations contained in the first sentence of paragraph 29. Admits the allegations contained in the second sentence of paragraph 29 to the extent supported by the quarantine order, which is the best evidence of its contents; otherwise denies the allegations contained in the second sentence of paragraph 29. Denies the allegations contained in the third sentence of paragraph 29. 30. Admits the allegations contained in the first sentence of paragraph 30 that, on

September 16, 2002, USDA issued a quarantine order on Mr. Freeman's barn, paddock area, and

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pastures; denies the remainder of the allegations contained in the first sentence of paragraph 30. Admits the allegations contained in the second sentence of paragraph 30 to the extent supported by the quarantine order, which is the best evidence of its contents; otherwise denies the allegations contained in the second sentence of paragraph 30. Denies the allegations contained in the third sentence of paragraph 30. 31. Admits the allegations contained in the first sentence of paragraph 31 to the

extent supported by the plaintiffs' Faillace and Ag-Innovations complaint in Civil Action No. 1:02-CV-003332-JGM, which is the best evidence of its contents; otherwise denies the allegations contained in the first sentence of paragraph 31. Admits the allegations contained in the second sentence of paragraph 31 to the extent supported by the Court's order issued on March 10, 2005, which is the best evidence of its contents; otherwise denies the allegations contained in the second sentence of paragraph 31. Defendant avers that the Court did not direct plaintiffs to seek compensation in the Court of Federal Claims; it simply dismissed plaintiffs' claims. 32. Denies the allegations contained in the first sentence of paragraph 32. Admits the

allegations contained in the second, third, and fourth sentences of paragraph 32 to the extent supported by a letter dated November 3, 2000,1 which is the best evidence of its contents; otherwise denies the allegations contained in the second, third, and fourth sentences of paragraph 32. Admits the allegations contained in the fifth sentence of paragraph 32 that the plaintiffs rejected the defendant's offer; denies the remainder of the allegations contained in the fifth

Defendant is unable to locate a letter dated November 2, 2000, in its files, but it does have a letter dated November 3, 2000, which confirms the statements plaintiffs make in the second, third, and fourth sentences of paragraph 32. -11-

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sentence of paragraph 32. 33. Admits the allegations contained in the first, second, and third sentences of

paragraph 33 to the extent supported by a letter dated the November 1, 2001,2 which is the best evidence of its contents; otherwise denies the allegations contained in the first, second, and third sentences of paragraph 33. Admits the allegations contained in the fourth sentence of paragraph 33 that the plaintiffs rejected the defendant's offer; denies the remainder of the allegations contained in the fourth sentence of paragraph 33. 34. Admits the allegations contained in the first sentence of paragraph 34 that the

USDA sent the plaintiff Freeman a check for $407,820.00 on or about April 8, 2002; admits the remainder of the allegations contained in the first sentence of paragraph 34 to the extent supported by the November 1, 2001, and the April 8, 2002 letters referred to in paragraph 34, which are the best evidence of their contents; otherwise denies the allegations contained in the first sentence of paragraph 34. Admits the allegations contained in the second, third and fourth sentences of paragraph 34 to the extent supported by the June 18, 2002 letter cited, which is the best evidence of its contents; otherwise denies the allegations contained in the second, third, and fourth sentences of paragraph 34. Defendant denies the allegations contained in the June 18, 2002 letter that the compensation package was not full, fair, and adequate compensation. 35. 36. 37. Admits. Denies. Admits the allegations that, on July 19, 2000, Larry and Linda Faillaces' and Ag-

Defendant is unable to locate a letter dated November 11, 2001, in its files, but it does have a letter dated November 1, 2001, which confirms the statements plaintiffs make in the first, second, and third sentences of paragraph 33. -12-

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Innovations' sheep were appraised at $193,650.00 contained in the first sentence of paragraph 37; denies the remainder of the allegations contained in the first sentence of paragraph 37. Defendant avers that another appraisal of the plaintiffs' sheep (the Faillaces' and AgInnovations' sheep) was performed by an independent contractor and the appraised value was $198,400. Admits the allegations contained in the second and third sentences of paragraph 37; defendant avers that the check was mailed on April 8, 2002. Denies the allegations contained in the fourth sentence of paragraph 37. 38. Admits the allegations contained in the first sentence of paragraph 38 that the

initial appraisals did not include other property taken and destroyed; defendant avers that subsequent to the seizure and destruction of the sheep, plaintiffs were compensated for other property taken and destroyed. Admits the allegations contained in the second sentence of

paragraph that the 2000 independent appraisals did not include economic losses or importation and start-up costs, but they did examine the milking and breeding potential of the animals; denies the remainder of the allegations contained in the second sentence of paragraph 38. Denies the allegations contained in the third sentence of paragraph 38 of the complaint. 39. Admits. CAUSES OF ACTION Count I (Constitutional Compensation for Taking of Sheep) 40. Defendant re-alleges and incorporates by reference defendant's responses to the

allegations plaintiffs made in numbered paragraphs 1 through 39. 41. Denies.

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42.

Denies the allegations contained in paragraph 42 that the defendant seized and

destroyed "gourmet" cheese stock; denies the allegations contained in paragraph 42 that the defendant seized and destroyed other "crops" and "business-related business assets" for lack of knowledge or information sufficient to form a belief as to the truth of the matters asserted; admits the remainder of the allegations contained in paragraph 42. 43. 44. Denies. Denies. Count II (Statutory Compensation for Quarantined Properties) 45. Defendant re-alleges and incorporates by reference defendant's responses to the

allegations plaintiffs made in numbered paragraphs 1 through 44. 46. Admits the allegations contained in the first sentence of paragraph 46 that the

United States imposed a quarantine upon plaintiffs' property since August and September 2002 and that it will continue in effect until March 23, 2006; denies the remainder of the allegations contained in paragraph 46. 47. Admits the allegations contained in paragraph 47 that the United States has not

provided any compensation for the quarantine imposed upon plaintiffs' property; denies the remainder of the allegations contained in paragraph 47. Count III (Statutory Compensation for Taking of Sheep) 48. Defendant re-alleges and incorporates by reference defendant's responses to the

allegations plaintiffs made in numbered paragraphs 1 through 47.

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49. 50. 51.

Denies. Denies. Denies that the plaintiff is entitled to the relief set forth in paragraphs (a), (b), and

(c), or to any relief whatsoever. 52. Denies each and every allegation not previously admitted or otherwise qualified. DEFENDANT'S AFFIRMATIVE DEFENSE 53. 54. Plaintiffs' Fifth Amendment takings claims are barred by nuisance.3 Plaintiffs should be denied recovery under their Fifth Amendment takings claims.

WHEREFORE, defendant requests that the Court enter judgment in its favor, order that the complaint be dismissed, and grant defendant such other and further relief as the Court may deem just and proper.

Respectfully submitted,

PETER D. KEISLER Assistant Attorney General

/s/ Jeanne E. Davidson by Bryant G. Snee JEANNE E. DAVIDSON Acting Director

By asserting an affirmative defense that plaintiffs are barred by nuisance, we are not thereby conceding that plaintiffs may state a categorical Fifth Amendment takings claim for the seizure of their sheep under Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). -15-

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OF COUNSEL: DARLENE BOLINGER United States Department of Agriculture Office of General Counsel 1400 Independence Ave., S.W. Washington, D.C. 20250

/s/ Sheryl L. Floyd SHERYL L. FLOYD Senior Trial Counsel Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tele: (202) 307-0282 Facsimile: (202) 514-8624 Attorneys for Defendant

FEBRUARY 13, 2007

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CERTIFICATE OF FILING I hereby certify under penalty of perjury that on this 13th of February, 2007, a copy of this "DEFENDANT'S AMENDED ANSWER AND AFFIRMATIVE DEFENSE" was filed electronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing through the Court's system.

/s/ Sheryl L. Floyd