The neighbors of a Bladen County hog farm have reportedly reached a deal with the company that owns the farm after the 4th U.S. Court of Appeals upheld a jury verdict holding the owners liable for compensatory and punitive damages for violating the state’s nuisance law but remanded a large punitive damages award because evidence about the finances and nationality of the owners’ parent company may have improperly prejudiced the jury.
In 2014, a group of 10 residents who own properties near the farm filed suit against Murphy-Brown, the owner of Kinlaw Farms and a wholly owned subsidiary of Smithfield Foods, which is in turn owned by WH Group Limited, a publicly-traded company based in Hong Kong.
The residents alleged that the odors, pests, and noises from the farm—which annually maintained nearly 15,000 hogs that generated roughly 153,000 pounds of feces and urines daily—violated state nuisance law.
A jury sided with the residents and returned a verdict in their favor, totaling $75,000 in compensatory damages and $5 million in punitive damages—an amount reduced to $2.5 million per the state’s punitive damages cap. The verdict was one of several large verdicts handed down against hog feeding facilities owned by Smithfield in 2018.
Judge Stephanie D. Thacker, writing for a divided 4th Circuit panel in a Nov. 19 opinion, affirmed the verdict but found problems with the evidence presented as to the punitive damages award.
“A limited remand so that the amount of the punitive damages award can be reconsidered with constraints on the parent financial information will ensure that the award is based solely on appellant’s own conduct and ability to pay, and not on any unfair prejudice against its status as the subsidiary of a wealthy parent,” Thacker wrote. “We therefore vacate the jury’s judgment as to the amount of punitive damages, and remand for rehearing with omission of the inflammatory parent company financial evidence.”
Punitive award remanded
Murphy-Brown argued that the question of punitive damages shouldn’t have been submitted to the jury, and that improper financial evidence about the wealth of its parent companies had been presented.
Thacker had little difficulty finding “abundant evidence” of Murphy-Brown’s knowledge of harms and intentional disregard of those harms—from scientific studies and news reports in the company’s own collection to awareness of a number of available waste management technologies as alternatives to the “lagoon-and-sprayfield” method used—as well as efforts to deny the existence of the harms and keep them from coming to light.
The residents presented clear and convincing evidence that Murphy-Brown was fully aware of the nuisance efforts of its prescribed farming practices “yet did nothing or worse,” Thacker wrote.
“From the evidence here, a jury could reasonably conclude [Murphy-Brown] and its officers ‘knew—because they were repeatedly told—that [their currently prescribed remediation of odors, noise, and pests] was reasonably likely to result in [injury to neighboring properties].’”
As for the financial evidence, Thacker said the finances and executive compensation expenditures of Smithfield and WH Group were relevant to the question of actual damages for nuisance liability because they were probative of the feasibility or impracticality of Murphy-Brown’s adoption of mitigation measures to avoid the harm to neighbors’ land.
But the appeals court reached a different conclusion as to whether that evidence was relevant for calculating the amount of punitive damage.
“We fail to see what value the parent company financial evidence would have that could possibly outweigh the substantial risk of prejudice it carries in that delicate context,” Thacker wrote. “Without a more specific jury instruction, a jury exposed to the high-dollar values of [Murphy-Brown’s] parent companies and the parents’ executive compensation could understandably—but inappropriately—apply that information when it came time to decide how much money would be required for [Murphy-Brown] to ‘feel’ the effect of the damages award.”
While the district court correctly submitted the availability of punitive damages to the jury, and the jury fairly determined that punitive damages were appropriate, Thacker remanded for a new calculation of punitive damages, omitting the parent company’s financial evidence.
Liability determination stands
But the majority rejected Murphy-Brown’s other challenges, first by finding that Kinlaw Farms wasn’t a necessary or indispensable party to the suit, since it didn’t seek to join the action or otherwise claim an interest in it, and neither party asserted a claim against it.
Murphy-Brown’s argument that the suit fell outside the three-year statute of limitations was also unavailing because the allegations constituted an ongoing nuisance, Thacker said, rejecting the position that a 2017 amendment to the state’s Right to Farm Act limits recovery of compensatory damages in nuisance suits other than for reduction in the harmed properties’ fair market or rental value.
That statute was enacted after the lawsuit was filed and represented “a substantive, forward-looking change in the law,” Thacker wrote.
Thacker also disagreed with Murphy-Brown’s challenges to the admission of expert testimony on behalf of the neighbors and the exclusion of certain opinions of its own expert, as well as a jury instruction as to vicarious liability for nuisance.
Harms caused by a corporation’s acts or policies constitute a theory of direct liability in in the punitive damages context, Thacker said, so “the jury’s finding in favor of punitive damages could rest on appellant’s acts itself, in making and enforcing the problematic policies and decisions, not merely on its direction of Kinlaw Farms.”
Judge J. Harvie Wilkinson III filed a concurring opinion, referencing Charlotte’s Web and noting that it “is past time to acknowledge the full harms that the unreformed practices of hog farming are inflicting,” particularly on poorer communities of color.
In a partial concurrence and partial dissent, Judge G. Steven Agee took the position that a full new trial was necessary, citing concerns about improper xenophobic appeals to the jury (quoting tweets from President Donald Trump critical of United States-China economic relations) and the district court’s rulings on expert testimony.
Stuart Alan Raphael of Hunton Andrew Kurth in Richmond, Virginia, who argued the appeal for Murphy-Brown, did not respond to a request for comment. In a statement, Smithfield Foods Chief Administrative Officer Keira Lombardo said the parties have reached a deal, the terms of which are confidential.
“We have resolved these cases through a settlement that will take into account the divided decision of the court,” she said.
Tillman J. Breckenridge of Breckenridge PLLC in Washington, D.C., who argued the case on behalf of the residents before the 4th Circuit, said in a statement that he was pleased that the court “recognized that the jury was right—Smithfield willfully and wantonly interfered with our clients’ ability to live comfortably in their own homes.”
Mona Lisa Wallace of Wallace and Graham in Salisbury, which represented the residents at trial, added that “we are thrilled at the positive outcome for our clients and the environment. We are especially glad that the 4th Circuit recognized that the North Carolina jury got it right.”
The attorneys representing the residents neither confirmed nor denied the settlement.
The 144-page decision is McKiver v. Murphy-Brown LLC (Lawyers Weekly No. 001-128-20). The full text of the opinion is available online at nclawyersweekly.com.