B-159824, AUG. 31, 1966

B-159824: Aug 31, 1966

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

THE STATE IS ACCOUNTABLE TO YOUR DEPARTMENT FOR THE FAILURE TO PROPERLY PROSECUTE CLAIMS WHICH ARISE IN ITS FAVOR AGAINST CARRIERS. 6 CFR 506 (1). UPON ARRIVAL THE NEXT DAY 19 CASES VALUED AT $604.36 SHOWED EVIDENCE OF THAWING AND WERE PROPERLY CONDEMNED UNDER STATE REGULATIONS REQUIRING FROZEN FOOD TO BE MAINTAINED AT ZERO DEGREES FAHRENHEIT OR LOWER AND CALLING FOR ANY FOOD HELD IN A MANNER IN VIOLATION OF SUCH STANDARD TO BE CONSIDERED UNWHOLESOME. THE TRANSPORTATION COMPANY DRIVER BELIEVING THAT NOTHING WAS WRONG WITH THE MEAT ARRANGED FOR ITS INSPECTION ON JUNE 18. BY A FEDERAL INSPECTOR WHO CERTIFIED THAT THE MEAT WAS FOUND TO BE SATISFACTORY WITH NO PROBLEM ON WHOLESOMENESS. THE STATE RECOMMENDS THAT THE OFFER BE ACCEPTED IN LIGHT OF THE FEDERAL INSPECTOR'S CERTIFICATION THAT THE MEAT WAS WHOLESOME.

B-159824, AUG. 31, 1966

TO THE SECRETARY OF AGRICULTURE:

BY LETTER OF AUGUST 3, 1966, ASSISTANT SECRETARY GEORGE L. MEHREN REQUESTED OUR ADVICE AND RECOMMENDATION CONCERNING FURTHER ACTION BY YOUR DEPARTMENT WITH RESPECT TO A COMPROMISE OFFER RECEIVED BY THE STATE OF MARYLAND ON ACCOUNT OF ITS CLAIM FOR THE VALUE OF FROZEN BEEF DONATED TO THE STATE BY THE FEDERAL GOVERNMENT AND ALLEGEDLY SPOILED IN SHIPMENT. THE ESSENTIAL FACTS AS SET FORTH IN THE ASSISTANT SECRETARY'S LETTER MAY BE BRIEFLY SUMMARIZED AS FOLLOWS.

THE UNITED STATES DEPARTMENT OF AGRICULTURE PROCURED CERTAIN BEEF FROM FUNDS APPROPRIATED PURSUANT TO SECTION 32 OF PUBLIC LAW 320, 74TH CONGRESS, WHICH IT DONATED TO THE STATE OF MARYLAND FOR SCHOOL LUNCHES AND RELIEF PURPOSES. THE STATE DEPARTMENT OF BUDGET AND PROCUREMENT DISTRIBUTES SUCH FEDERALLY DONATED FOODS WITHIN THE STATE UNDER THE TERMS OF AN AGREEMENT AND GOVERNING FEDERAL REGULATIONS, 6 CFR 503 ET SEQ. THE STATE IS ACCOUNTABLE TO YOUR DEPARTMENT FOR THE FAILURE TO PROPERLY PROSECUTE CLAIMS WHICH ARISE IN ITS FAVOR AGAINST CARRIERS. 6 CFR 506 (1).

THE STATE AGENCY SHIPPED THE FROZEN BEEF FROM BALTIMORE TO CAMBRIDGE ON JUNE 11, 1964, WITH MASTEN TRANSPORTATION, INC. UPON ARRIVAL THE NEXT DAY 19 CASES VALUED AT $604.36 SHOWED EVIDENCE OF THAWING AND WERE PROPERLY CONDEMNED UNDER STATE REGULATIONS REQUIRING FROZEN FOOD TO BE MAINTAINED AT ZERO DEGREES FAHRENHEIT OR LOWER AND CALLING FOR ANY FOOD HELD IN A MANNER IN VIOLATION OF SUCH STANDARD TO BE CONSIDERED UNWHOLESOME. THE TRANSPORTATION COMPANY DRIVER BELIEVING THAT NOTHING WAS WRONG WITH THE MEAT ARRANGED FOR ITS INSPECTION ON JUNE 18, 1964, BY A FEDERAL INSPECTOR WHO CERTIFIED THAT THE MEAT WAS FOUND TO BE SATISFACTORY WITH NO PROBLEM ON WHOLESOMENESS. ON THIS BASIS MASTEN REFUSED TO PAY A CLAIM FOR $604.36 WHICH HAD BEEN FILED BY THE STATE WITH YOUR DEPARTMENT'S CONCURRENCE. HOWEVER, UNDER STATE REGULATIONS THE MEAT COULD NOT BE UTILIZED.

WITHOUT DETAILING THE FULL BASIS THEREFOR, THE RECORD SHOWS THAT THE STATE BELIEVES IT CAN SUCCESSFULLY PROSECUTE A CLAIM FOR THE FULL AMOUNT OF $604.36 IN COURT, ALTHOUGH IT CANNOT BE CERTAIN OF THE OUTCOME OF A COURT ACTION. EVENTUALLY, THE TRANSPORTATION COMPANY OFFERED TO SETTLE THE CLAIM FOR $302.18; AND THE STATE RECOMMENDS THAT THE OFFER BE ACCEPTED IN LIGHT OF THE FEDERAL INSPECTOR'S CERTIFICATION THAT THE MEAT WAS WHOLESOME, OF THE UNCERTAINTY OF THE OUTCOME OF ANY LITIGATION AND OF THE SMALL AMOUNT INVOLVED IN RELATION TO THE EXPENSE OF LITIGATION. WHILE THE STATE IS NOT REFUSING TO PURSUE THE CLAIM IN COURT, IT IS RELUCTANT TO DO SO FOR VARIOUS STATED REASONS.

THE ASSISTANT SECRETARY STATES IT IS THE DEPARTMENT'S POSITION THAT THE MASTEN COMPANY WAS CLEARLY NEGLIGENT AND IN BREACH OF MARYLAND LAW IN NOT TRANSPORTING THE FROZEN BEEF IN ACCORDANCE WITH STATE REGULATIONS AND THAT THIS NONCOMPLIANCE DIRECTLY RESULTED IN THE LOSS OF THE BEEF TO THE PROGRAM. HE STATES FURTHER THE DEPARTMENT'S VIEW THAT TO COMPROMISE CLAIMS, EXCEPT THOSE INVOLVING UNIQUE CIRCUMSTANCES, MIGHT RESULT IN A TREND FOR COMPROMISE EACH TIME A CLAIM ARISES. IN VIEW OF THE STATE'S RELUCTANCE TO PROSECUTE THE INSTANT CLAIM FOR THE FULL AMOUNT, WE ARE ASKED WHETHER WE "* * * WOULD HAVE OBJECTIONS TO A COMPROMISE OF THE CLAIM OR WHETHER THE STATE SHOULD BE REQUESTED TO PROCEED WITH LITIGATION NOTWITHSTANDING THE UNCERTAINTY OF THE OUTCOME THEREOF.'

THE GOVERNING REGULATION PROVIDES IN PERTINENT PART, THAT:

"503.6/1) IMPROPER DISTRIBUTION OR LOSS OF OR DAMAGE TO COMMODITIES.

"* * * DISTRIBUTING AGENCIES WHICH FAIL TO PURSUE CLAIMS ARISING IN THEIR FAVOR * * * SHALL BE RESPONSIBLE TO THE DEPARTMENT FOR REPLACING THE COMMODITY OR PAYING THE VALUE THEREOF * * *. HOWEVER, DISTRIBUTING AGENCIES SHALL NOT BE HELD LIABLE FOR ANY FAILURE TO PURSUE CLAIMS IF THE DEPARTMENT DETERMINES THAT THEY ACTED IN GOOD FAITH AND THAT THERE WAS NO FRAUD, GROSS NEGLIGENCE OR CONTINUED INEFFICIENCY ON THEIR PART. * * *"

IN LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, WE WOULD NOT OBJECT TO AN ADMINISTRATIVE DETERMINATION THAT ACCEPTANCE BY THE STATE OF THE COMPROMISE OFFER MADE WOULD CONSTITUTE SUFFICIENT PURSUIT OF THE CLAIM INVOLVED TO RELIEVE THE STATE OF ANY FURTHER LIABILITY UNDER THE QUOTED REGULATION.