B-175838, AUG 16, 1972, 52 COMP GEN 94

B-175838, AUG 16, 1972, 52 COMP GEN 94

AGRICULTURE DEPARTMENT - INDEMNITY PAYMENTS - CONTAMINATION OF CHEESE - REMOVAL FROM COMMERCIAL MARKET CHEESE THAT CONTAINED DIELDRIN WHICH WAS REMOVED FROM THE COMMERCIAL MARKET AT THE DIRECTION OF THE STATE OF WISCONSIN DEPARTMENT OF AGRICULTURE UNDER 14-DAY HOLD ORDERS BEGINNING APRIL 11, 1967, BUT THE FINAL DETERMINATION THAT THE CHEESE WAS ADULTERATED PURSUANT TO BOTH STATE AND FEDERAL LAW AND SHOULD NOT MOVE IN INTERSTATE OR FOREIGN COMMERCE WAS NOT MADE UNTIL MAY 14, 1971, AS CONSIDERED TO HAVE BEEN REMOVED FROM THE COMMERCIAL MARKET AFTER NOVEMBER 30, 1970, THUS PERMITTING INDEMNITY PAYMENTS UNDER SECTION 204(B) OF THE AGRICULTURAL ACT OF 1970, APPROVED NOVEMBER 30, 1970, IN VIEW OF THE FACT THE LEGAL EFFECTIVENESS OF THE HOLD ORDERS TO REMOVE THE CHEESE FROM THE COMMERCIAL MARKET PRIOR TO MAY 14, 1971, IS DOUBTFUL. HOWEVER, BEFORE MAKING THE INDEMNITY PAYMENT ACTION SHOULD BE TAKEN TO INSURE THE CLAIMANT WILL NOT ALSO COLLECT OR BENEFIT UNDER ITS JUDGMENT AGAINST THE FARMER RESPONSIBLE FOR THE CONTAMINATION.

TO THE SECRETARY OF AGRICULTURE, AUGUST 16, 1972:

BY LETTER OF MAY 1, 1972, WITH ENCLOSURES, THE HONORABLE CLARENCE D, PALMBY, ASSISTANT SECRETARY OF AGRICULTURE, FORWARDED FOR OUR CONSIDERATION THE CLAIM OF THE LIBERTY POLE CHEESE COMPANY, INC., OF VIROQUA, WISCONSIN, FOR AN INDEMNITY PAYMENT ON 163,364 POUNDS OF ROMANO CHEESE WHICH LIBERTY POLE MANUFACTURED AND WHICH HAD BEEN REMOVED FROM THE COMMERCIAL MARKET BY DIRECTION OF THE STATE OF WISCONSIN DEPARTMENT OF AGRICULTURE BECAUSE SUCH CHEESE CONTAINED RESIDUES OF THE ECONOMIC POISON DIELDRIN. THE LETTER STATES THAT INDEMNITY PAYMENTS IN SUCH INSTANCES ARE AUTHORIZED BY SECTION 204(B) OF THE AGRICULTURAL ACT OF 1970, APPROVED NOVEMBER 30, 1970, 84 STAT. 1362(CODIFIED AS 7 U.S.C.A. 450J-450L), FOR DAIRY PRODUCTS WHICH MANUFACTURERS WERE DIRECTED TO REMOVE FROM THE COMMERCIAL MARKET AFTER THE DATE OF ENACTMENT OF THE ACT. THE LETTER FURTHER STATES THAT YOUR DEPARTMENT HAS DETERMINED THAT LIBERTY POLE MEETS THE ELIGIBILITY REQUIREMENTS OF THE STATUTE AND THE PROGRAM REGULATIONS (7 CFR 760), EXCEPT THAT THERE IS A QUESTION AS TO WHETHER LIBERTY POLE WAS DIRECTED TO REMOVE THE CHEESE FROM COMMERCIAL MARKET BEFORE OR AFTER NOVEMBER 30, 1970, AND REQUESTS OUR ADVICE AS TO WHETHER, ASSUMING ALL OTHER REQUIREMENTS OF THE STATUTE AND REGULATIONS HAVE BEEN MET, AN INDEMNITY PAYMENT MAY BE MADE TO LIBERTY POLE ON THE BASIS THAT IS WAS DIRECTED TO REMOVE ITS CHEESE FROM THE COMMERCIAL MARKET AFTER NOVEMBER 30, 1970.

THE RECORD TRANSMITTED TO OUR OFFICE INDICATES THAT THE CHEESE WAS THE SUBJECT OF A "HOLD ORDER" ISSUED BY THE WISCONSIN DEPARTMENT OF AGRICULTURE ON APRIL 11, 1969, PROHIBITING THE SALE OR MOVEMENT OF THE CHEESE FOR ANY PURPOSE UNTIL AN ANALYSIS OR EXAMINATION THEREOF HAD BEEN COMPLETED, INASMUCH AS IT WAS BELIEVED THAT THE CHEESE WAS ADULTERATED WITH A PESTICIDE RESIDUE. UNDER WISCONSIN LAW (WISCONSIN STATUTES, CHAPTER 97, SECTION 97.12), SUCH ORDER WAS EFFECTIVE ONLY FOR A 14-DAY PERIOD, AND WAS REQUIRED TO BE CONFIRMED OR RELEASED WITHIN THAT PERIOD. THIS ORDER WAS RELEASED ON APRIL 16, 1969, AND A NEW 14 DAY HOLDING ORDER ISSUED ON THAT DATE. THIS LATTER ORDER WAS NOT FORMALLY CONFIRMED UNTIL MAY 12, 1969, MORE THAN 14 DAYS AFTER ISSUANCE OF THE HOLD ORDER. SEPTEMBER 11, 1969, ALL PRIOR HOLDING ORDERS WERE CONSOLIDATED INTO ONE FINAL HOLD ORDER. HOWEVER, THE WISCONSIN DEPARTMENT OF AGRICULTURE DID NOT MAKE ANY FINAL DECISION AS TO THE SALABILITY OR ULTIMATE DISPOSITION OF THE CHEESE PENDING FURTHER STUDY AND REVIEW OF THE MATTER AND INVESTIGATION OF POSSIBLE MARKET OUTLETS FOR THE CHEESE OUTSIDE THE STATE OF WISCONSIN. ON MAY 14, 1971, THE WISCONSIN DEPARTMENT OF AGRICULTURE ADVISED HALE, SKEMP, HANSON, SCHNURRER & SKEMP, ATTORNEYS FOR LIBERTY POLE, THAT IT HAD BEEN DETERMINED THAT THE CHEESE WAS ADULTERATED UNDER BOTH STATE AND FEDERAL LAW AND HENCE COULD NOT BE MOVED IN INTERSTATE OR FOREIGN COMMERCE AS FOOD FOR HUMAN CONSUMPTION; AND THAT SINCE ALL POSSIBILITIES FOR SALE OF THE CHEESE AS A FOOD IN OTHER STATES OR COUNTRIES NOT HAVING RESTRICTIONS ON PESTICIDE RESIDUES IN FOODS HAD PROVED FRUITLESS, IT HAD NO FURTHER RECOURSE BUT TO ORDER FINAL DISPOSITION OF THE CHEESE AND ITS DIVERSION FROM HUMAN FOOD CHANNELS.

THE RECORD ALSO SHOWS THAT LIBERTY POLE OBTAINED A DEFAULT JUDGMENT ON MARCH 9, 1970, AGAINST THE DAIRY FARMER WHOSE DIELDRIN-CONTAMINATED MILK CAUSED THE CONTAMINATION OF THE CHEESE HERE INVOLVED. LIBERTY POLE'S CIVIL ACTION WAS BASED UPON ALLEGED BREACH OF WARRANTY BY THE DAIRY FARMER WITH RESPECT TO THE MILK WHICH HE SOLD TO LIBERTY POLE. IT IS INDICATED THAT, INSOFAR AS YOUR DEPARTMENT IS AWARE, LIBERTY POLE HAS NEVER RECOVERED ANYTHING ON THIS JUDGMENT. NEVERTHELESS, THERE IS AN IMPLICATION THAT THIS JUDGMENT MAY BE CONSTRUED AS AN ADMISSION BY LIBERTY POLE THAT THE CHEESE HAD BEEN REMOVED FROM THE COMMERCIAL MARKET PRIOR TO NOVEMBER 30, 1970.

LIBERTY POLE CONTENDS THAT, SINCE IT AND THE WISCONSIN DEPARTMENT OF AGRICULTURE HAD BEEN ATTEMPTING TO DISPOSE OF THE CHEESE OUTSIDE OF THE STATE OF WISCONSIN, IT WAS NOT DIRECTED TO REMOVE THE CHEESE FROM THE COMMERCIAL MARKET UNTIL MAY 14, 1971, THE DATE OF THE LETTER FROM THE WISCONSIN DEPARTMENT OF AGRICULTURE ADVISING THAT SUCH EFFORTS HAD PROVED FRUITLESS AND ORDERING FINAL DISPOSITION OF THE CHEESE. THE STATUTE (7 U.S.C.A. 450J-450L) AUTHORIZES INDEMNITY FOR MANUFACTURERS OF DAIRY PRODUCTS WHO HAVE BEEN DIRECTED SINCE NOVEMBER 30, 1970, TO REMOVE THEIR DAIRY PRODUCTS FROM THE COMMERCIAL MARKETS. "COMMERCIAL MARKET" IS DEFINED BY 7 CFR 760.2(O)(2) AS:

THE MARKET TO WHICH THE AFFECTED MANUFACTURER NORMALLY DELIVERS HIS DAIRY PRODUCTS AND FROM WHICH THEY WERE REMOVED BECAUSE OF DETECTION THEREIN OF PESTICIDE RESIDUE.

LIKEWISE, 7 CFR 760.2(P) DEFINES "REMOVED FROM THE COMMERCIAL MARKET" AS MEANING:

(1) PRODUCED AND DESTROYED OR FED TO LIVESTOCK, (2) PRODUCED AND DELIVERED TO A HANDLER WHO DESTROYED IT OR DISPOSED OF IT AS SALVAGE (SUCH AS SEPARATING WHOLE MILK, DESTROYING THE FAT, AND DRYING THE SKIM MILK), OR (3) PRODUCED AND OTHERWISE DIVERTED TO OTHER THAN THE COMMERCIAL MARKET.

THE RECORD BEFORE OUR OFFICE CLEARLY SHOWS THAT LIBERTY POLE NORMALLY SOLD AND DELIVERED ITS CHEESE TO THE WISCONSIN LOCATIONS OF MAJOR CHEESE DISTRIBUTORS, SUCH DISTRIBUTORS TAKING TITLE AT THE TIME LIBERTY POLE SOLD THE CHEESE TO THEM. HENCE, THE STATE OF WISCONSIN WOULD APPEAR TO CONSTITUTE THE "COMMERCIAL MARKET" FOR LIBERTY POLE UNDER THE QUOTED REGULATIONS. SINCE THE HOLD ORDERS ISSUED TO LIBERTY POLE BY THE WISCONSIN DEPARTMENT OF AGRICULTURE, FROM THEIR INCEPTION IN 1969, PURPORTED TO PROHIBIT THE SALE OR MOVEMENT OF THE CHEESE WITHIN THE STATE OF WISCONSIN, LIBERTY POLE'S "COMMERCIAL MARKET," SUCH ORDERS, IF LEGAL AND PROPER, WOULD CONSTITUTE A DIRECTION TO LIBERTY POLE TO REMOVE THE CHEESE FROM THE COMMERCIAL MARKET IN 1969, LONG PRIOR TO THE ENACTMENT OF THE ACT.

HOWEVER, THERE APPEAR TO BE GRAVE DOUBTS AS TO THE PROPRIETY AND LEGALITY OF THE HOLD ORDERS ISSUED BY THE WISCONSIN DEPARTMENT OF AGRICULTURE. THAT DEPARTMENT ITSELF, IN ITS LETTER OF DECEMBER 9, 1971, TO THE ASSISTANT DEPUTY ADMINISTRATOR OF ASCS, QUESTIONS THE LEGALITY OF ITS ACTIONS AND THE LEGAL SUFFICIENCY AND EFFECTIVENESS OF ITS HOLD ORDERS IN THIS CASE TO REMOVE THE CHEESE FROM THE COMMERCIAL MARKET. THE LETTER OF MARCH 3, 1972, FROM HALE, SKEMP, HANSON, SCHNURRER & SKEMP TO THE ASSISTANT DEPUTY ADMINISTRATOR IS TO THE SAME EFFECT. SECTION 97.12 OF THE WISCONSIN STATUTES SPECIFICALLY PROVIDES THAT "SUCH HOLDING ORDER SHALL NOT BE EFFECTIVE FOR A PERIOD LONGER THAN 14 DAYS FROM THE TIME OF DELIVERY THEREOF," AND THAT AN ANALYSIS OR EXAMINATION OF THE PRODUCT IN QUESTION MUST BE COMPLETED AND THE ORDER BE CONFIRMED OR RELEASED WITHIN THAT TIME. APPARENTLY THIS WAS NOT DONE IN THE PRESENT CASE. MOREOVER, IN THE CASE OF THE CENTRAL CHEESE COMPANY, INC. V. DEPARTMENT OF AGRICULTURE, STATE OF WISCONSIN, CASE #119-480 IN THE CIRCUIT COURT OF DANE COUNTY, STATE OF WISCONSIN, WHEREIN THE WISCONSIN DEPARTMENT OF AGRICULTURE, AFTER ISSUING A HOLD ORDER ON CERTAIN CHEESE, FAILED TO MAKE A FINAL FINDING OF ADULTERATION WITHIN THE 14-DAY PERIOD AS REQUIRED BY THE WISCONSIN LAW - AS IS THE SITUATION IN THE PRESENT CASE - THE COURT ORDERED THAT THE CHEESE BE RELEASED FROM THE HOLD ORDER AND POSSESSION OF THE SAME BE TURNED OVER TO THE OWNER.

IN VIEW OF THE ABOVE, THERE IS SUFFICIENT DOUBT AS TO THE LEGAL EFFECTIVENESS OF THE HOLD ORDERS IN THIS CASE TO CONSTITUTE A DIRECTION TO REMOVE THE CHEESE FROM THE COMMERCIAL MARKET PRIOR TO THE LETTER OF MAY 14, 1971(ALTHOUGH THE CHEESE OBVIOUSLY WAS, IN FACT, WITHHELD FROM SUCH MARKET PRIOR TO SUCH DATE), THAT, ASSUMING ALL OTHER REQUIREMENTS OF THE STATUTE AND REGULATIONS HAVE BEEN MET, OUR OFFICE WILL NOT BE REQUIRED TO OBJECT TO THE MAKING OF AN INDEMNITY PAYMENT TO LIBERTY POLE ON THE BASIS THAT IT WAS DIRECTED TO REMOVE THE CHEESE FROM THE COMMERCIAL MARKET AFTER NOVEMBER 30, 1970. HOWEVER, BEFORE MAKING THE INDEMNITY PAYMENT YOUR DEPARTMENT SHOULD TAKE APPROPRIATE ACTION TO INSURE THAT LIBERTY POLE WILL NOT ALSO COLLECT OR BENEFIT UNDER ITS JUDGMENT AGAINST MR. TRAASTAD.