Free Joint Preliminary Status Report - District Court of Federal Claims - federal

Case 1:05-cv-00776-MMS

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

No. 05-776C (Judge Sweeney)

THE UNITED STATES OF AMERICA,

Defendant.

JOINT PRELIMINARY STATUS REPORT Pursuant to the Rules of the United States Court of Federal Claims ("RCFC"), Appendix A, Paragraph 4, the parties hereby submit this joint preliminary status report. a. Does the Court have jurisdiction over the action? It is plaintiffs' position that the Court possesses jurisdiction over this matter. As of this time, defendant does not anticipate that it will challenge the Court's jurisdiction to entertain plaintiffs' complaint. b. Should the case be consolidated with any other case? The parties agree that this case should not be consolidated with any other case. c. Should trial of liability and damages be bifurcated? The parties agree that trial of liability and damages should not be bifurcated. d. Should further proceedings in this case be deferred pending consideration of another case before this Court or any other tribunal? In accordance with the Court's order dated January 18, 2006, this case should not be deferred pending consideration of another case before another tribunal.

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e. In cases other than tax refund actions, will a remand or suspension be sought and the reasons therefor and the proposed duration? The parties do not believe that a remand or suspension will be sought. f. Will additional parties be joined? The parties agree that no additional parties will be joined. g. Does either party intend to file a dispositive motion pursuant to RCFC 12(b), 12(c), or 56? As of this time, neither party intends to file a dispositive motion pursuant to RCFC 12(b) or 12(c). After the parties have conducted discovery, they will be in a better position to determine whether they will file dispositive motion(s) for summary judgment or partial summary judgment pursuant to Rule 56. h. What are the relevant factual and legal issues? Plaintiffs' statement of the issues 1. What was the fair market value of plaintiffs' seized and slaughtered sheep, germ

plasm, gourmet cheese stock, crops, buildings, cheesemaking equipment, and other businessrelated assets, and what other compensation is due, under the Just Compensation Clause of the Fifth Amendment, former 21 U.S.C. 134a, 9 C.F.R. § 53, and/or the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, 84 Stat. 1894, 42 U.S.C. § 4601 et seq.? 2. Did the USDA act arbitrarily and capriciously, or abuse its discretion, in assessing

the fair market value of the sheep? 3. Did the USDA evaluator have a bias or conflict of interest in assessing the fair

market value of the sheep?

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4. property?

What compensation is due for the USDA's quarantine over plaintiffs' real

Defendant's statement of the issues 1. Whether the Government deprived plaintiffs of their sheep without just

compensation in violation of the Fifth Amendment of the Constitution when the USDA seized and slaughtered the sheep and seized and destroyed the sheep products, such as germ plasm and cheese, as a result of its determination that the sheep were infected with or affected by an "atypical TSE [transmissible spongiform encephalopathy] of foreign origin." 2. Whether the Government deprived plaintiffs of their farm premises without just

compensation in violation of the Fifth Amendment of the Constitution when (1) the USDA imposed a quarantine upon plaintiffs' premises, as a result of its determination that the premises could be contaminated with or by an "atypical TSE of foreign origin," and (2) prevented plaintiffs from raising other susceptible ruminant animals on their farms from August and September 2002 until March 23, 2006, in order to eliminate the potential spread of the "atypical TSE of foreign origin." 3. Whether the Government correctly determined the fair market value of plaintiffs'

sheep and sheep products in accordance with 21 U.S.C. § 134a,1 and applicable regulations, when the USDA awarded plaintiffs the value of the sheep and the sheep products it seized and destroyed.

1

In May 2002, 21 U.S.C. § 134a was superseded by 7 U.S.C. § 8306(d). -3-

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i. What is the likelihood of settlement? Is alternative dispute resolution contemplated? The parties are unable to determine the likelihood of the settlement of this case at this time. The parties will be in a better position to determine whether settlement is possible once they have had an opportunity to engage in discovery. j. Do the parties anticipate proceeding to trial? Does any party, or do the parties jointly, request expedited trial scheduling and, if so, the reasons why the case is appropriate therefor? If settlement discussions are not successful, the parties expect to proceed to trial. The parties agree that expedited trial scheduling is not appropriate. k. Are there special issues regarding electronic case management needs? The parties are not aware of any special issues regarding electronic case management needs. l. Is there other information of which the Court should be aware of at this time? Plaintiffs Plaintiffs do not believe there is additional information to provide to the Court that is not already detailed in the Complaint or in Plaintiffs' Opposition to the Government's Motion to Suspend Proceedings. The Court denied the Government's Motion on January 18, 2006. Plaintiffs are ready to proceed to discovery. Defendant On July 14, 2000, the USDA issued an order under the animal quarantine and related laws requiring the plaintiffs to allow USDA to seize and destroy sheep and the associated germ plasm. The plaintiffs challenged USDA's order in the United States District Court for the

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District of Vermont. On February 6, 2001, the district court rejected those challenges and ordered the owners to comply with the seizure orders and rejected the plaintiffs' request for stay of compliance. Freeman v. Department of Agriculture, No. 1:00CV255, Ag-Innovations, Inc., et al. v. Department of Agriculture, No. 1:00CV257 (Feb. 6, 2001). The plaintiffs appealed and requested the United States Court of Appeals for the Second Circuit Court of appeals to stay compliance. On March 6, 2001, the Second Circuit denied the stay request and set forth an expedited briefing schedule. On March 23, 2001, the USDA began seizing sheep and germ plasm. By April 4, 2001, all of the sheep and all of the germ plasm had been destroyed. On April 20, 2001, the court of appeals vacated the judgment of the district court and the cause was remanded with direction to dismiss the case as moot. Ag-Innovations, Inc., et al. v. Department of Agriculture, __ F.3d ___, 6 Fed. Appx. 97 (2d Cir. 2001); Freeman v. Department of Agriculture, ___ F.3d ___, 6 Fed. Appx. 95 (2d Cir. 2001). In August and September 2002, USDA, under the authority of the Animal Health Protection Act, 7 U.S.C. §§ 8306, 8315, issued a quarantine order for the real property on which the sheep were housed and lambed. The quarantine is scheduled to expire on March 23, 2006. Plaintiffs, Ag-Innovations and Larry and Linda Faillace, filed a new civil action in the United States District Court for the District of Vermont alleging the Second Circuit's decision was obtained through fraud. The District Court dismissed the action for failure to state a claim. AgInnovations, Inc., et al. v. Department of Agriculture, No. 1:02-CV-332 (June 2, 2003). Plaintiffs, Ag-Innovations and Larry and Linda Faillace, appealed the decision to the United States Court of Appeals for the Second Circuit. The Second Circuit affirmed the district court's

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decision and, on April 22, 2004, remanded the case to the district court to allow the amendment of the complaint to attack the quarantine order itself. Ag-Innovations, Inc., et al. v. Department of Agriculture, ___ F.3d ___, 95 Fed. Appx. 384 (2d Cir. 2004). On May 25, 2004, plaintiffs, Ag-Innovations and Larry and Linda Faillace, filed their amended complaint. In their amended complaint, the plaintiffs requested the court (1) to declare invalid the USDA's initial orders, as well as its quarantine order; (2) to declare the quarantine order unconstitutional under the due process clause of the Fifth Amendment; and (3) to award monetary damages for past, present and future loss of profits, business opportunities and earnings. In an order issued on March 10, 2005, the district court dismissed all of plaintiffs' claims, with the exception of their request for declaratory relief from the quarantine order based upon the fifth amendment equal protection clause. Ag-Innovations, Inc., et al. v. Department of Agriculture, No. 1:02-CV-332 (March 10, 2005). In orders issued on February 24, 2006, the district court ruled that the USDA did not act arbitrarily or capriciously in issuing the quarantine order and it entered judgment in the Government's favor. m. Joint Proposed Scheduling Plan Plaintiffs and defendant currently cannot agree on a mutual discovery schedule. Each party's separate proposed schedule is set forth below. Plaintiffs The parties will commence discovery and exchange their initial disclosures on March 14, 2006. At that time, they will begin exchanging documents and engage in written and fact discovery. Written and fact discovery will close on July 14, 2006. The parties will identify their respective expert witness(es) on or before August 18, 2006, at which time expert discovery will

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commence. By September 15, 2006, the parties will submit their respective expert reports in the manner and form required by Rule 26(a)(2), including supporting documentation, spreadsheets, calculations, and formulas supporting damages calculations and spreadsheets, in hard copy and electronically; iterations of prior drafts need not be submitted. Rebuttal expert reports (if necessary) will be submitted by October 13, 2006. Expert discovery will continue through October 27, 2006, at which point all discovery will close. By November 10, 2006, the parties will submit to the Court a joint status report which sets forth the parties' suggested proceedings in the case.2 Defendant The parties will exchange their initial disclosures on March 14, 2006. They will voluntarily exchange documents until April 14, 2006, at which time they will engage in written discovery and the discovery of fact witnesses through December 15, 2006.3 Plaintiffs will

First, the Government sought to put this case on hold pending the Vermont litigation. Now, it seeks to expand a simple case into over a year of discovery. Plaintiffs have proposed a discovery schedule that ends with a status report on November 10, 2006. Defendant would tack on another four months, not ending until March 17, 2007. The seizure of plaintiffs' property occurred some five years ago. As justification for a discovery plan of over a year, the Government claims that it needs eight months of fact discovery then a time-consuming, staged expert process. There are no surprises here. Both parties have identified the issues, and both sides will be easily able to prepare this case under our proposed discovery schedule ­ four months of fact discovery and a several-month expert report and rebuttal process. There is no need for the additional delay requested by the Government. Plaintiffs suggest in footnote 2 that the Government is attempting to delay these proceedings in its proposed discovery schedule. Nothing can be further from the truth. As the Government's counsel has told plaintiffs' counsel, the Government has identified more than 20 potential witnesses in this case. They reside in 11 different states and in two foreign countries. Both parties will have to make extraordinary efforts, which will include significant travel, in order to learn the facts in the case from these witnesses. In addition, as we discuss further below, given that plaintiffs have alleged that the Government has taken not only its sheep, but also its premises and its sheep products, both parties will be most likely be required to engage -73

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identify their expert witness(es) on or before September 1, 2006, at which time expert discovery will commence.4 By October 13, 2006, plaintiffs will submit to defendant all expert reports in the manner and form required by Rule 26(a)(2), including all supporting documentation, spreadsheets, calculations, and formulas supporting damages calculations and spreadsheets, in hard copy and electronically; iterations of prior drafts need not be submitted. The Government will identify its expert witness(es) on or before November 15, 2006. By January 12, 2007,

several different experts to address the value of what was taken. Moreover, in a case which is very similar to this one, Rose Acre Farms, Inc. v. United States, No. 92-710C (Fed. Cl.), the parties took two full years to complete fact and expert discovery after the parties had exchanged all relevant documents; fact and expert discovery proceeded concurrently in that case. Government counsel's time in Rose Acre was dedicated almost exclusively to that case; in this case, counsel for the Government is handling eight different Court of Federal Claims cases in addition to this one, four of which are in the midst of discovery. Based upon the Government's experience in the Rose Acre case, the Government believes that plaintiffs' approach to expert discovery is not feasible. First, since it is the Government's position that plaintiffs have been paid all the compensation to which they are entitled, it makes no sense for the Government to identify its expert(s) and to submit its initial expert report(s) at the same time that the plaintiffs identify their expert(s) and submit their expert report(s). In addition, since there are many methods by which damages can be calculated in a takings case such as this one, it makes more sense for plaintiffs to present their damages theories first and, then, for the Government to address plaintiffs' damages theories in a rebuttal report. Plaintiffs have the option of utilizing a number of different approaches ­ including, but not limited to, an economic approach, an appraisal approach, or an accounting approach ­ and, depending upon the method(s) plaintiffs utilize, the Government would be in a better position to determine which approach it should use to rebut plaintiffs' approach(es). Moreover, because the Government will be unable to assess which type(s) of expert(s) to hire (be it an economist, appraiser, or accountant) until plaintiffs' experts present their damages report(s), (1) the Government should not be required to identify its expert until at least one month following the submission of plaintiffs' expert report(s), and (2) the Government should be permitted to engage in fact discovery which is incidental to the preparation of the Government's expert report(s) for at least 32 days after the Government has identified and hired its expert witness(es). For these reasons, the Government believes that its approach is the best method to enable the Government to adequately present its damages position and to permit the parties to properly join the legal and damages issues. The Government has no objection to plaintiffs' submitting a rebuttal report to the Government's expert report, so long as the Government is permitted an opportunity to submit a sur-rebuttal report if the Government determines that it is appropriate to do so. -84

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defendant will submit to the plaintiffs all expert report(s) in the manner and form required by Rule 26(a)(2), including all supporting documentation, spreadsheets, calculations, and formulas supporting damages calculations and spreadsheets, in hard copy and electronically; iterations of prior drafts need not be submitted. Expert discovery will continue through February 28, 2007. On March 17, 2007, the parties will submit to the Court a joint status report which sets forth the parties' suggested proceedings in the case.

Respectfully submitted, /s/ Jonathan L. Abram JONATHAN L. ABRAM Hogan & Hartson, L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004 Tele: (202) 637-5681 Facsimile: (202) 637-5910 OF COUNSEL: RAYMOND S. CALAMARO KEVIN S. WILLEN Hogan & Hartson, L.L.P. 555 Thirteenth Street, N.W. 20004 Tele: (202) 637-5600 Facsimile: (202) 637-5910 Attorneys for Plaintiffs DATE: 2/28/06 /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

PETER D. KEISLER Assistant Attorney General

/s/ David M. Cohen by James M. Kinsella DAVID M. COHEN Director

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OF COUNSEL: DARLENE M. BOLINGER U.S. Department of Agriculture 1400 Independence Ave. SW Washington, DC 20250 Attorneys for Defendant DATE: 2/28/06

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CERTIFICATE OF FILING I hereby certify that on February 28, 2006, a copy of the "JOINT PRELIMINARY STATUS REPORT" 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