In Dimare Fresh, Inc. v. United States, No. 15-5006 (Oct. 28, 2015), the Federal Circuit held that the FDA wasn't liable for a taking when it issued an incorrect food safety warning that hurt the tomato market, because it was just a warning and didn't come with coercive action like a quarantine or a recall. In other words, just sayin.
The FDA thought that certain types of tomatoes from certain growing areas might be responsible for a salmonella outbreak. So it "went loud," which in today's internet-fueled media environment meant that over the course of the next few days, it issued two press releases, the first which identified the type of tomatoes it believed were involved ("raw red plum, red Roma, or round red" -- a pretty wide net), and a second which let certain geographic areas off the hook. The FDA also briefed the media, narrowing the suspected area of its investigation and noting that it had not asked for a voluntary recall or instituted a quarantine, and it was only warning customers. Just sayin.
Turned out it was wrong, and it wasn't tomatoes that were responsible. It lifted the warning.
But it was too late. According to a complaint filed by tomato growers in the Court of Federal Claims alleging a taking, the damage had been done. The market for our tomatoes was wiped out by the false alarm, and since tomatoes don't last all that long, they were "effectively rendered valueless by the FDA's actions." The CFC dismissed the complaint for failure to state a claim because the regulatory takings claims are not plausible." The reason? "A regulatory takings claim is not plausible and cannot proceed when the government action at issue has no legal effect on the plaintiff's property interest." Dimare Fresh, Inc. v. United States, 118 Fed. Cl. 455 (2014).
Say what?
That was our first reaction when we read that because it left us scratching our heads. What the heck does Iqubal "plausibility" and causation have to do with takings? Just sayin.
Well, we feel better now because the Federal Circuit thought the same: it affirmed the dismissal, but for what appears to us to be the right reasons.
After a short summary of takings doctrine (see pages 8 - 10), the opinion correctly noted that the "character of the government action" test from Penn Central isn't concerned with whether the government action has "legal effect" on the property -- indeed, in order to state a regulatory takings claim, the plaintiff must allege or admit the taking is the result of authorized government action:
When agencies possess congressional authority to regulate, we have recognized that agencies may engage in actions suitable for a regulatory takings claim irrespective of the fact that the action does not have any legal effect or impose a direct legal obligation on any party. See A & D Auto Sales, Inc. v. United States, 748 F.3d 1142, 1154 (Fed. Cir. 2014) (stating that government action absent a "statute, regulation, or direct order" may support a regulatory takings claim).Slip op. at 12. "Therefore, we reject the general principle proffered by the Claims Court because it contravenes this court’s prevailing precedent and unduly narrows the regulatory takings jurisprudence." Id. at 13. Just sayin.
But the tomato growers were not out of the woods, because the Federal Circuit concluded their claim failed because the fact that the FDA media activity fouled up the tomato market wasn't a regulatory taking. Pretty much everything a regulatory agency has authority to do can mess up a market. Slip op. at 15 ("However, any government action such as a warning or report which provides information about a good or service is bound to impact consumer demand in the relevant market.").
So it wasn't the FDA that killed tomato sales, according to the court, it was consumers who killed tomato sales. Id. at 16 ("The fact that the market chooses to incorporate all available information, without more, cannot form the basis of a regulatory takings claim."). Indeed, it seems to us that entire "GMO labeling" push by so-called food safety groups is premised on just this concept: kill the marketability of products by scaring the crap out of people. Just sayin.
Since there was no prohibition or any coercive government action that went along with the FDA warning, there was no taking. The producers could have sold their tomatoes, or done something else with them (how about this?). Besides, the FDA was acting in the interest of public health, an area where the courts give government "the greatest leeway." Id. at 17.
The court was "not unsympathetic" to the plight of the tomato producers, but it told them to go to Congress is they want a mechanism to hold agencies that do things like this responsible.
Just sayin.
Dimare Fresh, Inc. v. United States, No. 15-5006 (Fed. Cir. Oct. 28, 2015)
