The owners of a California slaughterhouse agreed last year to pay $3.1 million to settle claims that they defrauded the government by selling beef from mistreated cattle. That ended a long-running lawsuit that previously served up an attention-getting – if symbolic – $500 million judgment. The lawsuit, initially filed by the Humane Society of the United States, accused Hallmark Meat Packing and its sibling company Westland Meat Co. of breaching their contracts with the U.S. Department of Agriculture requiring the animals be handled humanely, and of defrauding the government by continuing to bill for meat while in breach of their contracts. Whistleblower videos showed slaughterhouse employees kicking, beating and dragging disabled cattle, electrocuting them, and slamming them with forklifts to move them toward slaughter. Eventually, this prompted the largest beef recall in U.S. history. Peter Petersan, HSUS director for animal protection litigation, had this to say:
This judgment sends a strong message to those who profit from the abuse of farm animals. Although numerous line workers have been prosecuted for farm animal cruelty over the last decade, this is the first time the consequences of animal cruelty have been felt by those sitting in the corner office as well.
The principal owners and investors in Westland will forfeit $3,116,802, virtually all of their remaining assets, according to the Humane Society. The final judgment against Westland reduced the bankrupt company’s liability to $155,684,827, from a previous treble-damages judgment of nearly $497.3 million. Most of the earlier judgment, handed down in November 2012, represented a future claim against Hallmark Meat Packing Co. Owners Donald Hallmark, Sr., and Donald Hallmark, Jr., agreed to pay approximately $304,000. Since the company has no assets, the $155 million judgment is symbolic, the Humane Society said.
The earlier $500 million verdict was seen as a symbol of the government’s willingness to embrace aggressive legal theories to maximize fraud liability under the False Claims Act. The case involved two hotly disputed topics in False Claims Act case law: implied certification and the calculation of damages. The implied certification theory allows the government or a whistleblower to sue for punitive damages under the FCA if a contractor submits claims for payment while in violation of a contract condition that is necessary for payment.
The Humane Society launched its suit in 2008 against 11 defendants, after the organization sent undercover operatives to film suspected abuse of cattle at a slaughterhouse in Chino, Calif. The lawsuit, undercover videos, and the resultant beef recall led to the bankruptcy of several of the accused companies.
According to the Humane Society’s complaint, it was standard practice for the slaughterhouse to kick, beat or drag cattle — often with heavy chains — electrocute them, or slam or maim them with forklifts to get the animals to walk or crawl into the so-called “kill box” for slaughter. The Humane Society is represented by David S. Cohen, Aaron Renenger and Alisa Cassel Schlesinger of Milbank Tweed Hadley & McCloy and in-house counsel Jonathan R. Lovvorn, Peter J. Petersan and Leana E. Stormont.
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