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When Dairy Meets the Law

Nebraska Dairy Lawyers Weigh In

The goal is always to increase production and profits. Every dairy farmer knows it. Daily management, long hours, careful planning, and attention to detail, all have a singular pride-generating reward: More profit.

Sometimes, the profit goal is tied to an expansion plan. New facilities, more cows, perhaps a different feeding system. All these things cost money and take effort. Once implemented, they must work or the results can be a financial disaster.

What then should a farmer do when a change has been made, but rather than improve, the dairy embarks on a devastating decline?

A case study involving a lawsuit by a dairy farmer against a feed company, recently tried in federal court in Nebraska, might provide a suitable example.* [The case, tried in January 1999, is now under appeal. Names have been changed as a result.]

The Facts

Ronny and Callie Hodding have farmed in rural Nebraska for all their married lives – more than 25 years. They started with a dozen cows, and now have 200. The boys are in college, and Tim, the oldest, would like to return home. He wants to milk, and herd expansion looks like the way to do it. A strong breeding program with good genetics supplies good replacement heifers, and creates an opportunity to expand. The Hoddings’ herd has been closed for a long time in an effort to improve genetics, control disease, and avoid health issues that could have herd-wide impact.

Milk production has been flat for the past couple lactations. Feed intake does not seem to be quite as good as it was, and the Hoddings decided to try the local elevator’s parent company’s nutrition program. After contact by the elevator, and introduction to a dairy specialist with advanced college degrees in dairy nutrition, the Hoddings have looked over the proposed ration and decide to try it. A change is made to a new nutrition program, a new nutritionist, and feeds are ordered from the elevator.

Some differences in the feeds received are apparent. The fine grind and new "least cost" products give the feed a different look, and a different smell. But the cows seem to transition into it nicely over a couple weeks.

As expected, for a few days, the Hoddings’ milk production goes up. But then, just as things seem to be going well, many cows seem to suffer an appetite loss. Feed intake drops, milk production tails off. Then, breeding problems set in. Cows that give birth after eating the old ration and beginning the new one, have trouble settling. The calving interval begins to stretch out, and repeat artificial insemination attempts become necessary.

The feed company’s nutritionist checks over the feeds, performs tests, and tells the Hoddings their hay is ground too finely. Yet, the hay grinder is the same one the Hoddings have always used, and the screen settings on the grinder have not changed. But, the Hoddings and the hay grinder do change the settings, first significantly enlarging, then removing, the grinder screens in an effort to make the hay courser. This helps the grind of the hay, but it does not change the cows’ health, or the milk production.

The herd slips even more. Individual cows are listless, hair coats become course, and the animals look unthrifty. The veterinarian, a specialist conducting monthly herd checks, identifies acidosis. Several displaced abomasums ("DAs") appear, and a few cows abort after having ingested the new ration for a few months.

Finally, at the fourth visit after the new ration, the Hoddings’ herd veterinarian suggests there is a serious nutrition problem. He believes the grain is ground too fine, and a mistake has been made in calculating rations. The vet says the forage-to-concentrate ratio is out of whack, and too much concentrate is being fed. A review of the rations indicate that the feed company is treating 100% of the corn silage as forage even though half the silage weight is grain. Water is being added to the ration, too.

By now, occasionally, an individual cow has a runny nose. The bill for bicarbonate and other buffer products has skyrocketed. A few of the animals have been seen eating dirt. Obviously, their digestive systems are upset. Weight loss is now apparent, and milk production has dropped significantly. Animals are dying.

Mr. and Mrs. Hodding are in danger of going out of business. Their veterinarian, after trying to contact the feed company’s nutritionist and getting no satisfaction, finally suggests they call a lawyer. He thinks the feed company has made a serious mistake, but he is not sure what it is.

What are the Hoddings to do? Their cash flow is down, their cows are sick, and their calf crop is dwindling with the breeding problems and abortions. They are suffering, they have already incurred extra veterinarian expense, time demands of dealing with sick animals have given them less time to think, and now they are told to hire a lawyer. What are they to do?

The Lawyer

The first problem with choosing a lawyer is basic: Who to hire? Few lawyers have agricultural backgrounds, and very few know anything about dairy farming. But, with the help of their veterinarian, the Hoddings are fortunate. They are able to identify a lawyer who grew up on a dairy farm, and has handled a number of dairy cases previously. A telephone contact – in which they catch the lawyer in a motel at night while he is trying another case – leads to a lengthy discussion. The lawyer reviews all the Hoddings’ herd’s history, nutritional background, production background, and symptoms. The Hoddings are impressed the lawyer at least knows enough to ask the right questions about dairy farming to have a basic understanding.

A visit to the farm is scheduled. The farm visit is vital in order for the Hoddings to become confident in the lawyer, and for the lawyer to get a picture of their operation. A visit to the lawyer’s office will disclose little – the evidence is at the farm.

The lawyer’s visit to the Hoddings’ is timed to coincide with milking. The lawyer observes, inspects the entire farm, looks at the feed stuffs, and generally becomes familiar with the operation. Cropping procedures, silage making, hay making, storage, and similar systems are reviewed. Feed samples are taken - not to be tested - but to be frozen and protected as exhibits. Pictures of the herd are taken, and the possibility of a videotape is considered. DHI records are obtained, and authorization to download records directly from the DHI computer to the lawyer’s office is discussed.

Then, attention turns to damages. As this conversation unfolds, the Hoddings realize that their losses are even greater than they had admitted to themselves. Abortions, DAs, vet bills, labor expense, culled cows, dead animals, lack of replacements, milk loss, and the prospect for more loss continuing into the future, all add up to a difficult, substantial loss. The Hoddings knew their cash flow was poor, but they had no idea how poor – or why. Now, they are beginning to know.

Feed discussions follow the gathering of evidence, the lawyer’s assessment of the case, and consideration of the damages. Already strapped, but having seen that their losses are even greater than they had expected, the Hoddings and the lawyer quickly recognize that the case involves trial risks, could lead to a defeat, but could also yield a significant recovery.

A contingent fee arrangement is agreed upon. The lawyer will not be paid unless his efforts lead to a recovery. Then, his firm will get a percentage of the judgment. Along the way toward trial, the Hoddings will have to pay out-of-pocket expenses. These will include filing fees, subpoenas, fees for expert witnesses, including the veterinarian and an independent nutritionist who must be engaged, some travel expenses to obtain the potential Defendant’s records, and miscellaneous related amounts. The lawyer estimates these costs, spread out over a year until trial, could be $5,000-7,500. If the Hoddings lose, they will lose this additional amount. If they win, the lawyer estimates their recovery could be between $250,000 and $350,000.

A period of record gathering and witness interviews follow. With help from the Hoddings to identify knowledgeable persons, the lawyer interviews the former nutritionist, veterinarian, employees of the Hoddings, the milk truck driver, neighbors, and others. Many of these interviews are conducted by telephone. The lawyer’s staff quickly and efficiently undertakes and accomplishes these goals.

Data and potential exhibits are gathered. Court papers are then prepared.

The Hoddings and the lawyer review the court papers, agree that they are accurate, and suit is filed in federal court. A federal court filing is chosen because the elevator’s connection with its out-of-state parent creates diversity of citizenship between the Hoddings and the elevator’s nonresident parent company. The federal filing also gets the case away from the Hoddings’ home town and county, and to a location where persons with more neutrality might be able to make a more objective decision than is sometimes possible when neighbors are called upon to sit in judgment.

The Trial

The Court Proceedings Progress. Preparation for trial, procurement of a trial date, and the "discovery" process, in which the Hoddings obtain information from the Defendant and the feed company obtains information from the Hoddings, takes about a year. Depositions are given, and the Hoddings discover that these depositions are not as bad as they had feared. In fact, they turn into a rather interesting experience.

The lawyers attend a pretrial conference, and the Hoddings learn, afterwards, that the feed company has made a nominal settlement offer – $30,000. The Hoddings’ lawyer has countered with an offer of $195,000, indicating that the Hoddings will not consider less without trial. No more settlement discussion occurs.

Finally, trial arrives. A jury is selected. None of the jurors have significant dairy farming background, and only one has a background in agriculture. None are acquainted with either party, except that some of the jurors have heard of the feed company. The Hoddings, and their lawyer, seem satisfied with the jury.

Opening statements are given. The Hoddings listen as their lawyer confidently describes their background, experience, success in dairy farming, contact with the feed company, and the disastrous results that followed. They are pleased with the opening statement, and, as the Defense lawyer gets up, feel confident.

The Defense lawyer’s description of the Hoddings presents a picture far different. The feed company says the Hoddings have caused their own financial problems through poor management, failure to follow the feed company’s directions or recommendations, and poor record-keeping. In effect, despite more than a quarter of a century of successful dairy farming, and recognition from DHI as award-winning dairy farmers for most of those years, the Hoddings hear the feed company say that they (not the feed program) caused the Hoddings’ cows to become ill, milk production to drop off, and profits to plummet. They can hardly believe their ears.

Trial progresses. A veterinarian from a neighboring state university testifies for the Hoddings and explains the physiology and anatomy of the cow. This interesting testimony peaks the interest of the jurors as they see a model of a cow’s rumen, heard how differently a cow digests its food, and listen, with amazement, to descriptions of the numbers of calories required for a 1,300-pound dairy cow to maintain its body weight, live through a day, and produce an acceptable quantity of milk. Obviously, the witness has engaged the jurors.

The Hoddings’ treating veterinarian, previous nutritionist, and herdsmen testify. All describe successful past operations, and circumstances that suggest, through process of elimination, that the new feeding regime created the problem.

During cross-examination, the feed company’s lawyer hints at record-keeping problems, or suggests that cows were culled too aggressively, while, at the same time, attempting to use DHI records to suggest there has been little change in the herd. Does the feed company not understand that DHI records illustrate an evolutional picture, and that summaries showing yearly averages change only in increments by the month? Or is this an attempt to confuse the jury? Slowly, a feeling of concern settles over the Hoddings. Their concern is not about their evidence, their lawyer, or their own presentation. Instead, they begin to worry that a jury inexperienced in dairy farming may be misled by the big city lawyer’s representation of a big company, his accusations against the Hoddings, and his efforts to confuse the facts.

First, Mr. Hodding testifies. Little difficulty is encountered during his testimony about his herd, its history, or the change to the feeding regime recommended by the Defendant. Then the discussion turns to damages. Mr. Hodding’s testimony about his milk loss, death loss, and culled cows seems to go fine, but on cross-examination, Mr. Hodding has a little trouble, himself, trying to explain how the DHI records help to show, but do not obviously display, all of his problems. He finds himself a bit frustrated that, in the end, he must simply ask the jury to believe him, and have confidence that it will, as there is no single record, and no single page, that makes his point simply.

More witnesses, including a neighbor, the Hoddings’ banker, a veterinarian engaged by the Defendant to look at their herd but called by the Hoddings’ lawyer, and Mrs. Hodding testify. When the Hoddings rest their case, they feel optimistic. Defense motions for dismissal are overruled. These motions sound frightening and intimidating to the Hoddings, but their lawyer is calm, and the judge’s ruling is decisive and quick. At a recess, the Hoddings’ lawyer explains that this ruling means the case will proceed to the jury for its decision, and will not be dismissed against them short of a jury verdict.

The Defense evidence is presented. First, a highly published professor, with strong academic credentials from a university several states away, testifies. The professor’s testimony is based entirely on DHI records and deposition transcripts. He is very complimentary of the Defendant, its research and research programs, the feeding recommendations it made for the Hoddings, and he testifies the Defendant did nothing wrong. When asked whether the Hoddings sustained losses, the professor says he does not believe the records, and especially the DHI records, show that losses occurred. Until cross-examination, the professor seems perfectly content to ignore the fact that as the Hoddings culled cows, they attempted to hold up their herd numbers with retained animals that should have been culled, or heifers used as replacements.

However, on cross-examination, the Hoddings observe their lawyer score a number of points with the professor. First, an article written by the professor is used against him, and he seems embarrassed by it. Then, the professor is caught with an inconsistent statement that contradicts National Research Council scientific data about dairy rations. Finally, the lawyer is able to illustrate a practical difference between the professor’s description of the manner in which forages and concentrates are factored into a ration, and the Defendant’s treatment of corn silage as 100% forage. It seems clear that the lawyer has forced the witness to concede that corn silage must be no more than half forage and half grain if, in fact, half the corn silage weight comes from the grain, after moisture is discounted.

All the talk about dairy cow digestion, feeding programs, animal nutrition, forages and concentrates, the National Research Council, etc., are clearly new topics to the jury. The Hoddings worry that their predominantly city jury simply will not understand the dairy farm, and will believe the big city lawyer, and the big company Defendant. The Hoddings’ lawyer seems comfortable – the case is going as he expected. He reassures the Hoddings that they should be calm about the result. Of course, trial practice involves risk, and juries do not always decide cases as they should, nor do they always understand the evidence. But, the Hoddings’ lawyer reassures them that usually the system works. He thinks it will for them.

The Defense evidence continues with employees, including research scientists, from the feed company. They describe their research as state-of-the-art, their rations as properly formulated, and they ascribe fault to the Hoddings. At the same time, they seem to deliver a double message, saying the Hoddings’ records do not show that they sustained losses. How could the Hoddings cause losses, if no losses occurred? The Hoddings’ lawyer seems sensitive to this inconsistency, and brings it out on cross-examination.

The Defense rests. The evidence is over. The Hoddings are told by their lawyer that he must meet with the judge and the defense lawyer to review jury instructions. The Hoddings understand these instructions will be debated in a professional manner in the judge’s chambers, and that a conference will then be held in open court about them. They are told their lawyer must, at this point, discuss the law strictly, in an effort to arrive, with the court, at a set of jury instructions that will properly reflect the law, correctly submit the case to the jury, and guide its deliberations.

The Verdict

The Jury Returns. The next morning, the jury is set to be instructed and awaits closing arguments. The Hoddings arrive at the courthouse, and are present during a formal jury instruction conference. Both lawyers register some disagreements with the instructions offered by the court, but this respectful process occurs without rancor.

Before closing arguments, the jury instructions are delivered. Each juror is given a copy, and the Hoddings note how carefully the jurors follow as the judge reads the law for approximately 20 minutes.

Then, closing arguments are presented by both lawyers. The case has been well tried. The Hoddings have noted that the lawyers have both presented their positions effectively, and that it is clear both sides have devoted considerable effort to understanding the facts in a way that would permit a strong presentation of their respective positions.

First, the Hoddings’ lawyer’s argument is presented. A careful review of the evidence leads to a discussion of the Hoddings’ damages, and a request for the jury’s verdict. The feed company’s lawyer then presents a different version of his impressions of the evidence, and requests that the jury refuse the Hoddings’ request. The Hoddings’ lawyer gets the final word, presents a rebuttal argument, and then the court’s voice is heard again. The jury is told to retire to the jury room, take with them the exhibits and their memory of the testimony, and decide the case.

After the jury retires, the judge, who has been well focused and a strong presence throughout the case, compliments the attorneys on their professionalism and presentations, wishes both sides well, and adjourns the proceedings until the jury’s verdict is returned.

The Hoddings then confer with their lawyer and learn that they need not stay at the courthouse until the jury comes back. They are told that they may remain if they wish, but this is not necessary, and they are free to depart if they prefer. The Hoddings know that staying may mean they will miss chores again, so they decide to depart, recognizing they will learn the outcome in a telephone call.

The call comes four hours later. After about three hours of deliberations and an hour for lunch, the jury’s verdict is returned for the Hoddings for $305,000 – an amount that is about what the Hoddings’ lawyer had told them he expected the verdict would be if they won. They are pleased.

They know, however, that it will be another year before they are paid, as the feed company is likely to appeal. Nonetheless, calls are made to the banker, neighbors and friends, and the Hoddings know they have achieved a milestone event. Now, they have a chance to get their farming operation back to where it should have been.

Observations

The Hoddings’ story illustrates a number of "right" decisions. Their success inevitably involves some good fortune, too. But, one with a concern about a supplier or advisor can make effective decisions that help insure a more even-handed chance of successful resort to litigation, or arbitration where it applies. For example, these decisions by the Hoddings proved helpful to them:

  1. The Hoddings followed their own instincts that something was wrong. They did not rely too long on the feed company’s employees for help.
  2. When the Hoddings were concerned they needed help, they turned to someone they knew, trusted, and someone with expertise. Their outside veterinarian was invaluable.
  3. The Hoddings took care of the evidence. They kept reasonable records, had their feeds tested, allowed a sufficient number of outsiders to observe their herd so they could report on conditions, and, without knowing they were doing so, helped build their own case before contacting a lawyer.
  4. The Hoddings were truthful with their banker. They shared the problems they were having early, solicited the banker’s support, and, as their decision to seek legal advice unfolded, kept him informed.
  5. The Hoddings did not take the easy course when seeking legal help. They worked, with knowledgeable persons, to identify a knowledgeable, experienced lawyer. They sought and obtained counsel from a lawyer with extensive experience in farming, dairying, the practice of law, and, specifically, trials.
  6. They did not lose faith. During the delays, the waiting periods, and the anxiety of trial, the Hoddings remained true to the decisions they and their advisors had made earlier. Since the feed company would not pay an amount equal to the Hoddings’ bottom line settlement demand – which they worked out through consultation with their lawyer – they proceeded to trial. The Hoddings were willing to, and did, bear the risk of getting nothing, instead of accepting an inadequate settlement.
  7. The Hoddings supported their lawyer in the litigation effort, but did not attempt to usurp the function. They did not let their lawsuit become, and control, their lives. They dealt with it simply as another factor temporarily involved in their operation.
  8. The Hoddings did not bank on the outcome of their case, change their financial circumstances in reliance upon it, or otherwise increase their risks through dependence on their lawsuit’s outcome.
  9. The Hoddings did not commit or spend any possible recovery before they got it – and have not done so yet since the case is still on appeal.

These observations about what the Hoddings did "right" can yield a very simple, specific list of recommendations. If a possible problem with a supplier exists, it is important that a producer observe these steps:

  1. Believe what you see in your own operation, and listen to your own sense of assessment. Do not have your head turned by an outside expert – especially one working for the party that may be responsible for the mistake or problem.
  2. Get competent, intelligent, respected independent advice from a professional person early.
  3. Do not lightly discard the independent professional’s advice.
  4. Preserve the evidence. Carefully retain and file letters, feed tests, labels, brochures, and photographs. Take photographs of circumstances in transition.
  5. Where appropriate, collect samples of feed (or in some cases blood or tissue) and save them. Do not just test them, but actually save a sample – generally by freezing it.
  6. Invest in the claim. If evidence can best be captured by a professional photographer, hire the local photographer who has the right lights, cameras, and expertise – to get exceptional pictures, and not just fuzzy ones. Do the same with laboratory analysis and other professional consultation. Remember that a dispute in court will require extraordinary displays of evidence. Extraordinary effort is necessary, therefore.
  7. Choose a competent lawyer – not a braggart, not a slick lawyer with a good line, but someone with a seasoned, proven track record and expertise in your area. Do not assume all lawyers are trial lawyers. Most are not. Find out who really handles cases in court.
  8. Negotiate terms for professional engagements that minimize downside where possible.
  9. Make early "marketing" decisions about your lawsuit. Without emotion, and without a need-based analysis, assess realistically, the total potential recoverable damages. Discount this amount for a factor that builds in some recognition that your lawsuit might not succeed. Using this approach, calculate what will be an acceptable settlement.
  10. Stick with your case and your assessment of it. Do not stubbornly resist bad news indicating changes in its circumstances, but do not put yourself on an emotional roller coaster about it.
  11. Think of any potential problem with legal overtones as a tour through the dispute resolution system – and consider its time commitments and controlled expenses as tuition to a new semester in the process of life. With this attitude, you cannot truly "lose" as a recovery is sought for a perceived wrong.

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