AgDM newsletter article, August 1998
by Marvin Hayenga, Emeritus Professor
Editor’s Note: The author was a consultant and expert witness for the defense during the trial.
Thirteen states passed legislation prohibiting food product disparagement after the Alar (a chemical applied to apples) scare profoundly affected apple growers' sales and incomes in 1989. These are the so-called veggie libel laws.
Two large Texas cattle feeders and some business associates charged that false statements about the risks of mad cow disease (BSE) were made on the Oprah Winfrey syndicated television talk show on April 16, 1996. They claimed the statements disparaged the American cattle industry and the safety of American beef, causing millions of dollars in losses for themselves, and in some cases permanent loss of consumer confidence in beef products.
The trial took place January and February 1998 in Amarillo, Texas. The celebrity status of the defendant Oprah Winfrey and the first amendment issues in this case attracted national media coverage.
The food disparagement law
The food disparagement law in Texas requires that the person making the statement "knows the information is false," and "the information states or implies that the perishable food product is not safe for consumption by the public". Further, in determining whether the information is false, the judge or jury is to consider "whether the information was based on reasonable and reliable scientific inquiry, facts, or data". The tort of product disparagement generally requires harmful intent or malice, and that the defendant knew the statement was false but expressed it anyway.
A statement by Lyman that drew particular criticism was "this disease could make AIDS look like the common cold".
Besides claiming product disparagement under this law; business disparagement, libel, slander, and negligence also were charged by the cattle feeders.
The April 16, 1996 Oprah Show
In a ten-minute segment about mad cow disease, the Oprah show guests and audience focused on the question could it happen here? The discussion focused on the mad cow disease in the United Kingdom and the possibility that it could be present in the United States.
The guests included:
1) Howard Lyman of the
American Humane Society,
2) Dr. Gary Weber, National Cattlemen's Beef Association spokesperson, and
3) Dr. William Hueston, a USDA expert on BSE.
Both Weber and Hueston argued that U.S. beef was safe, reported on the steps taken to ensure that BSE would not occur in the United States, and said that BSE had never been found in the United States.
The defendants (Oprah Winfrey, Harpo Productions, Inc., Howard Lyman and King World Productions, Inc.) were charged with making false statements during the show. A statement by Lyman that drew particular criticism was "this disease could make AIDS look like the common cold".
Oprah Winfrey spontaneously said, "It has just stopped me cold from eating another burger."
In addition, Oprah Winfrey spontaneously said, "It has just stopped me cold from eating another burger."
The charges undoubtedly were also prompted by the $1.50 per cwt. (limit move) drop in the April live cattle futures contract on the day that the Oprah show was broadcast. In addition, cash prices for fed cattle dropped during the two weeks after the show.
The plaintiffs’ claimed significant losses because of lower cattle prices and hedging position losses that they attributed to the show. They testified that beef consumption and cattle prices dropped because of the statements made by Lyman and the very influential Oprah Winfrey. Plaintiffs also testified that live cattle were perishable, as their economic value and profitability deteriorated quickly if fed longer than their usual practice.
Cross examination focused on whether:
a) the statements in dispute
were facts or opinions,
b) others had made similar statements, and
c) the defendants had the right to state that opinion.
The National Cattlemens' Beef Association consumer surveys done before and after the Oprah show were entered in evidence; the surveys showed that no significant changes in consumer confidence in beef occurred, though plaintiffs claimed otherwise.
Scientists – Plaintiffs called three USDA experts to testify. They essentially testified that U.S. beef was free of BSE, and asserted that the safeguards put in place by the government were adequate.
Traders – Two futures traders in the live cattle pit testified that the Oprah show caused or exacerbated the live cattle futures price drop on April 16 and the following two weeks. They testified that many traders were watching the show in Chicago that morning. One futures trader called this the Oprah crash.
One futures trader called this the Oprah crash.
Economist – Wayne Purcell, a noted livestock economist from Virginia Tech, testified that he had analyzed the supply and demand factors in the market, and found nothing to explain the price declines except the Oprah show. He argued that all the other supply and demand factors were already reflected in the market price.
The cross examination of Purcell focused on:
1) calculation errors
in his table of residuals (which he explained were typing errors)
2) his commodity newsletters during April 1996 that mentioned several factors influencing cattle prices but did not mention Oprah, and
3) many other supply and demand factors potentially influencing price during that period of which Purcell said were already reflected in market prices.
Damage experts – Total damage claims were in the $10-$12 million range. In their damage calculations, accountants simply relied on the cattle feeders' assertions that the lower live cattle prices which occurred from the week before the show until the time when prices returned to that level ($61.90 or $62 per cwt) eleven weeks later were all attributable to the Oprah show. The difference in sale prices and the should-have-been price for all sales in the damage period were considered damages by plaintiffs, with reimbursement requested from Oprah Winfrey and her fellow defendants.
After four weeks, the plaintiffs concluded their case. The defendants asked the judge to dismiss all charges against them. Judge Robinson ruled that sufficient evidence to prove the slander, libel, negligence, and statutory product defamation claims had not been presented, so those charges were dismissed.
While the economic value of fed cattle may drop if not marketed at the optimum time, the judge found that live cattle in a feedlot were not sufficiently perishable for the law to apply to this case. Thus, the food disparagement charge was thrown out because cattle in feedlots were not perishable, and because it had not been established that defendants knowingly made false statements.
Only the common law business disparagement claim remained for defense to refute and the jury to consider. To prove business disparagement involves fairly high standards of proof. The judge's charge to the jury subsequently indicated that the law requires proof that a false, disparaging statement was made with:
1) knowledge of or serious
doubts as to its falsity,
2) harmful intent or malice against plaintiffs' businesses, and
3) subsequent damages to the plaintiffs.
Defendants essentially countered the remaining business disparagement charge by showing that the statements in question had a factual basis or were substantially true, or by arguing that they were opinions, rhetoric, or hyperbole which anyone should be free to express in a talk show format where different opinions and debate were desired.
A simple way of rebutting that claim was to point out those supply and demand factors which adversely impacted prices immediately after the show.
Executive producer – The executive producer of the Oprah Show addressed the intent-to-harm issue. She testified that their intent was to deal with important and topical consumer safety issues. A week after the original show, because of the concerns raised by the cattlemen, a follow-up Oprah Show segment with Dr. Weber augmented his message that beef was safe in the United States; Oprah subsequently received a letter of appreciation from the National Cattlemen's Beef Association Board of Directors.
Economists – A simple way of rebutting that claim was to point out those supply and demand factors which adversely impacted prices immediately after the show. I analyzed factors affecting cattle prices in the days and weeks immediately following the Oprah show. The plaintiffs had the burden of showing that there was a causal relationship between the show and cattle prices and the extent and duration of lower prices which were reasonably attributable to the Oprah show. The intent of the defense was to bring out the other factors influencing cattle prices during this time period, and in so doing raise doubt that the cause of lower prices was the Oprah show.
During the two-week period when prices dropped sharply, it was shown that:
a) the number of cattle
marketed increased sharply,
b) there were increased "captive supplies" (cattle owned or previously forward contracted by packers) slaughtered,
c) export market demand in Southeast Asia was dropping and cancellations or renegotiations of previous sales began about the time of the Oprah show, and
d) packer profit margins increased.
Since each of these supply and demand changes was reasonably expected to negatively affect cattle prices, claiming the price drop was due solely to the Oprah show was not reasonable.
In addition, there was a clear downtrend in futures and cash prices in the months and weeks before the show, which continued for two weeks after the show, before prices began a long, steady uptrend. The typical seasonal pattern of lower cash prices for fed cattle during the spring and early summer was offered as one factor to explain that price declines during April were not unusual.
Judge Mary Lou Robinson asked the jury a series of questions to determine whether the defendants were guilty of business disparagement based on a preponderance of the evidence, and, if so, what damages should be paid. The first question was, "Did a below-named Defendant publish a false, disparaging statement that was of and concerning the cattle of a below-named Plaintiff as those terms have been defined for you?" The twelve-person Amarillo jury unanimously responded no. With that response, no other questions posed to the jury (dealing with defendant's knowledge of falsity or reckless disregard, harmful intent or malice, or damages) needed to be considered. That response was a victory for the defense.
The judge's decisions are being appealed. Plaintiffs' attorneys indicate the appeal is likely to focus on the "perishability" issue and the exclusion of some witnesses who may have testified regarding defendants' knowledge of the falsity of some statements made. In addition, 130 cattle feeders who fed cattle in Cactus feedlots are initiating a new case based on the Texas food disparagement law. If the appeal is successful, or the new case goes forward through the judicial system, the Oprah "mad cow" show could still become a more complete test of the food disparagement law.
Since the Texas ("veggie libel") law requires that products be perishable within a limited period of time, the situation in this case didn't meet that requirement in Judge Robinson's opinion. Is that provision one that makes sense? The legislative rationale might have been that temporary dips in a market for something not immediately perishable may not be enough of a problem to warrant protective legislation and more litigation in the courts.
In addition, even if false and disparaging statements had been found, was the causal link between the show and the amount and duration of lower actual prices received by plaintiffs established with reasonable certainty? The judge's instructions said that damages had to be a direct, monetary loss realized in their cattle business naturally and solely attributable to the false communications.
What did the trail accomplish?
Certainly it made food disparagement, free speech, Oprah, cattlemen, mad cow disease, and Amarillo national headline news for five weeks. A few cattle feeders lost an expensive lawsuit, and many people questioned whether cattlemen ever should have pursued this lawsuit. Even Amarillo residents, in a local informal poll, heavily favored Oprah Winfrey. Despite their loss and the high costs incurred pursuing the case, the cattlemen claimed that the trial clearly established that U.S. beef is safe.
Even Amarillo residents, in a local informal poll, heavily favored Oprah Winfrey.
Perhaps the trial raised television, radio, and print media consciousness and concern about the possibility of being sued. That might make people in the media more careful about the messages they or their guests offer about agricultural products or businesses. If so, perhaps the plaintiffs' goal was at least partially achieved.
However, the ability to speak freely about concerns or issues regarding the safety of our food supply is very important, and many would be reluctant to see that freedom abridged because of such concerns. The constitutionality of the food disparagement laws remains untested.
* Reprinted with permission of the publisher of Choices -- the magazine of food, farm, and resource issues: American Agricultural Economics Association (2nd Quarter, 1998).