Animal Identification

WEMC FS#6-04 • Fall 2004

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Animal Identification: Liability Exposureand Risk Management

Michael Roberts,Michael Roberts,Michael Roberts,Michael Roberts,Michael Roberts,DirDirDirDirDirectorectorectorectorectormtrob@uark.edu

Doug O’Brien,Doug O’Brien,Doug O’Brien,Doug O’Brien,Doug O’Brien,Senior StaffSenior StaffSenior StaffSenior StaffSenior StaffAttorneyAttorneyAttorneyAttorneyAttorneydobrien@uark.edu

National AgriculturalLaw Center

University of ArkansasLaw School

OverviewAs the livestock industry considers implementation of the National Animal Identifica-

tion System (NAIS), one of the chief concerns focuses on the possibility of increasedliability for livestock producers. This concern arises from the recognition that a keycomponent of a lawsuit is knowing who caused the harm. The fear is that the NAIS willallow people to find out who owned an animal at the time that the animal acquired thecondition that caused the harm.

At the outset, it is worth noting that most discussions of the NAIS do not includerequirements that the meat be traced through the meatpacking plant. Another point torecognize is that packers currently know the identity of the owner of the animal when theanimal arrives at the packing plant. It follows, then, that the NAIS may not affect theliability concerns of feeders as those concerns relate to consumers because these twofactors, the identity of the seller and the ability to trace meat through the packing plant,are not affected by the NAIS. That is, if packers currently have the ability to trace meatthrough the plant, it is likely that they can already determine the owners of the problemcattle at the feedlot level. Nevertheless, the movement toward animal ID may nudge theindustry to fuller traceability throughout the supply chain. Also, cow/calf operations,backgrounders, and others near the beginning of the supply chain may no longer beanonymous to others further down the chain.

Some confuse the two distinct ideas of liability and confidentiality. But even if theinformation is confidential, that is, not available to the public, a court considering alawsuit may subpoena the information in court. The court may decide to keep thatinformation sealed from public view; those involved with the trial, however, would beable to use the information in the trial.

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General Liability and the NAISRegardless of the existence of the NAIS,

livestock producers are and always have beenliable for the livestock they produce. NAISdoes not create new duties of care or warran-ties. If practices are employed that eventuallyinjure someone else, the livestock producerresponsible for creating that threat alwayscould have been liable. Practices that createliability risks for livestock producers includetreating animals with illegal drugs, ignoringwithdrawal times, creating safety hazards suchas a broken syringe needle left in the muscle,or using other poor management practices.

The NAIS helps identify a livestock pro-ducer in the chain of custody for a particularanimal. Such identification increases theaccountability of a livestock producer and mayincrease his or her liability exposure. Live-stock producers have traditionally been anony-mous in the chain of custody. Once cattle leftthe livestock producer’s operations, identitywas lost. Depending on whether the meat istraceable through the packing plant, the NAISmay remove this anonymity. Although theNAIS does not automatically make livestockproducers liable, it may increase their liabilityexposure by making it easier to determine whomismanaged the animal.

Tort law governs the liability exposure oflivestock producers for the mismanagement ofanimals. Tort law deals with cases where aplaintiff has suffered a loss and is trying toshift the responsibility for that loss to one ormore defendants. The plaintiff must firstprove that a defendant’s conduct was of a typethat entitles the plaintiff to be compensated.The two most common forms of conduct on

the defendant’s part that may justify suchshifting of loss are negligence and strictliability.

In the livestock and meat industry, theplaintiff could be anyone harmed by someoneelse’s conduct. The plaintiff could be aconsumer harmed by food poisoning or afeeder injured by something the cow/calfoperator did. A case could include any combi-nation of the different actors in the livestockindustry. For a plaintiff to prove his case, hewill need to know who caused the injury; inother words, the meat and/or animal must betraceable. NAIS, however, does not affect thetraceability of meat through a packing plant,so if the plant does not trace the origins ofmeat, a producer cannot be found liable forinjury caused by meat consumed from thatplant. For instance, if a cow/calf producerleaves a broken needle in a calf that eventuallyinjures a consumer, but that calf is processedin a plant that does not trace the meat, theproducer cannot be found liable because theinjured person would have no way of identify-ing the producer. In another example, thecow/calf producer could again break off aneedle, but this time the packer catches theproblem and severely docks the feeder whosold the fat steer. The feeder may be able touse data in NAIS to trace that animal back tothe cow/calf producer and seek damages.Before NAIS, the feeder may not have beenable to determine who the cow/calf producerwas because the calf may have been mingledwith other calves by a livestock broker or in anauction market.

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NAIS and NegligenceNegligence is the failure to exercise rea-

sonable care. Reasonable care is what areasonably prudent person would do in thesame or similar circumstances. Thus, in anegligence action, a livestock producer mustshow that he exercised the kind of care in themanagement of his animals that a reasonableand prudent livestock producer would haveexercised under similar circumstances. This isa fact-specific question usually determined by ajury on a case-by-case basis. If the livestockproducer fails to exercise reasonable care, theplaintiff must also show that the livestockproducer’s breach was a proximate cause ofthe plaintiff ’s injury and that the plaintiffsuffered legally compensable damages.

For example, in a case where a consumersuffers from E. coli O157:H7 (E. coli) poison-ing, the consumer may initially sue the retailerand packer for negligent handling of the meat.If the packer has a traceability system in itsplant, the packer may bring in the feeder whofed the steer as another defendant. For theproducer to be liable in this situation, thepacker would have to show that the feederfailed to exercise reasonable care in taking careof the steer and that this failure caused themeat to carry E. coli. Although it is impos-sible to predict what a court might find as“reasonable care,” it might mean the usuallevel of cleanliness by other feeders.

NAIS and Strict LiabilityStrict liability is imposed when one has

introduced a defective product that is unrea-sonably dangerous into the stream of com-merce. Unlike negligence, strict liability paysno attention to whether someone employed aduty of care. If strict liability applies, thelivestock producer could be liable even if heused the best management practices in goodfaith. Although the law is not well developedto answer whether animals can be defined as“unreasonably dangerous products” forpurposes of strict liability, it is probable that atleast some courts would apply the strictliability analysis to cases where an injury iscaused by a characteristic of an animal.1 Forexample, if a plaintiff alleges that he is harmedbecause he consumed beef from an animal thathad BSE (also commonly referred to as Mad-Cow Disease), it is likely that the feeder couldbe liable under strict liability because a courtwould find that the cow was unreasonablydangerous when it entered the stream ofcommerce. Under a negligence analysis, onthe other hand, the feeder may not be liablebecause the feeder may have engaged in thebest management practices and raised thecattle as any reasonable person would have atthe time. In this circumstance the producerhad no way of suspecting that the feed he usedeven had a chance of causing BSE.

The critical issue for strict liability iswhether the plaintiff establishes that thedefendant caused the harm. Under strict

1 In general, animals that served as pets have sometimes been found as “products” for strictliability purposes. The court in Beyer v. Aquarium Supply Co., 404 NYS2d 778 (1977) defineddiseased hamsters as products. Some courts have refused to define farm animals as products. SeeChristopher H. Hall, Annotation, Live Animal as “Product” for Purposes of Strict ProductsLiability, 63 A.L.R.4th 127 (1988-2004). For example, in Anderson v. Farmers Hybrid Cos., 408N.E.2d 1194 (Ill. App. Ct. 1980), the court refused to define hogs as products, even though thehogs spread the contagious and infectious disease “bloody dysentery” to other hogs.

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liability, a livestock producer can be liable onlyif the plaintiff can trace a defect or infectiousanimal disease to the producer’s operation. Ifa third party altered the animal product in thetime between when the livestock producer hadcontrol of the animal and the plaintiff con-sumed the meat, then the livestock producer isnot liable. For example, where an E. coliO157:H7 (E. coli) outbreak occurs at or afterslaughter, the livestock producer should notbe found liable. In contrast, where drugresidues in meat are caused by improperwithdrawal periods and harm results, thelivestock producer may be found liable. Justas in the negligence analysis, it is sometimesdifficult to predict exactly when an action“causes” injury. Ultimately, these are ques-tions of fact left to the jury.

A court will likely focus on the conditionof the animal at the time of the purchase,rather than concentrating on the ability of theanimal to contract an illness subsequent to thetransaction. For liability to attach to thelivestock producer, the diseased animal musthave been infected at the time of the transac-tion. Thus, in the case of meat contaminatedwith E. coli during the grinding process, evenif the meat can be traced back to the ranch,the producer will not be liable if it was soldwithout E. coli in the muscle.

Practical Litigation ConcernsA plaintiff may attempt to bring everyone

in the stream of commerce into the action,including the livestock producer. If the meatis traceable through the packing plant, animalidentification will help the plaintiff trace backto the livestock producer. Even if a livestock

producer is found not liable, going to court isexpensive and can damage a producer’s repu-tation. As a practical matter, however, it maynot be worth it to the plaintiff. Plaintiffsgenerally go for the “deep pockets” such asthe retailer, restaurant, or packer. Plaintiffsshould realize that many producers do nothave the resources to pay out a large claim,even if they are found liable.

While plaintiffs may decide to recoverdamages caused by their injuries from thestore or restaurant they dealt with directly, thesame store or restaurant may bring the live-stock producer into the lawsuit as a third-partydefendant in order to reduce the store’sliability exposure. In other words, NAIScould allow a retailer to reduce its penalties bypassing the blame back to a livestock producer.

It is nearly impossible to find a case of alivestock producer being party to a suit involv-ing consumer injury because of somethingthat the producer did. Beyond the fact thatproducers tend not to have deep pockets,other reasons for the lack of cases on thissubject may be that producers’ actions rarelycause consumer harm and that packers havenot traditionally traced the meat through theplant. Given that NAIS does not directlyaffect any of these factors, NAIS may notresult in very much increased liability expo-sure.

On a different note, the ability to identifya particular animal may shield a livestockproducer from being unnecessarily included ina lawsuit. Here, animal identification mayenable a livestock producer to prove that hisanimals did not cause the problem, protectinghim from liability exposure.

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Ways to Limit Risk of LiabilityIf a producer believes that he carries too

much risk of liability, he may choose a numberof ways to deal with that risk. Liability insur-ance can provide protection against anyincrease in liability exposure for the livestockproducer. At this time it is unclear howcommon this type of insurance is, but thesetypes of packages may develop in the future.In a way, the possible risk of liability for injurycaused by raising animals is a perfect candidatefor liability insurance because the risk ofoccurrence is very, very low, but the size of thedamages if there were an incident could bevery high.

Another way to limit the risk of liability isto keep good records. A livestock producerwho uses best management practices can usehis own records to shield him from liabilitybecause the records could prove that theproducer employs reasonable and prudent careor could not have caused the harm. Docu-mentation supporting best managementpractices includes treatment records, animalhealth programs, inputs, and other qualityassurance records. These records help thelivestock producer defend himself.

A livestock producer may want to considerstructuring his business in a way that contem-plates increased exposure to liability. Forexample, forming a Limited Liability Com-pany (LLC) to own the livestock separatelymay be beneficial because it may insulate theproducer’s other assets. The livestock pro-ducer should know that each business struc-

ture has its own advantages and disadvantages,and that there are many modifications andvariations within these forms. Selecting theoptimal business structure usually revolvesaround the concept of liability and taxation.2

In choosing a business structure, the livestockproducer should consult with a qualifiedaccountant and an attorney who are familiarwith his resources and objectives.

Some states limit liability exposure byexempting livestock production from impliedwarranty laws. Strict liability and impliedwarranty laws are two sides of the same coin.An implied warranty law essentially requiresthat merchants who place an unreasonablydangerous product into the stream of com-merce are liable for injuries that the productcauses. When a merchant does so, he is liableunder a strict liability or breach of impliedwarranty claim. Livestock producers longenjoyed some legal protection from commer-cial implied-warranty laws partly becausefarmers were not considered not to be “mer-chants.” In general, merchants are held to ahigher standard of responsibility because it isassumed that they have specialized knowledgeof the products or business practices of aparticular market.

As farms become more commercializedand buyers more litigious, this protection hasbecome less secure. To determine whether afarmer is “merchant” for these purposes, acourt might look to the length of time thefarmer has been engaged in the sale of com-modities, the degree of business acumen the

2 For a thorough discussion on business organizations available to farmers and ranchers, seeCarol R. Goforth, An Overview of Organizational and Ownership Options Available toAgricultural Enterprises, National Agricultural Law Center, available at http://www.nationalaglawcenter.org/research/ articles/#ownership (2002).

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farmer shows, and the farmer’s awareness offarm markets.3 In any event, in response tosome courts finding that a farmer lost theliability protection because it found the farmerto be a merchant, some states have passedspecific exemptions for livestock sales fromimplied warranty statutes, usually stating thatthere is no implied warranty that livestock aresold free from disease.4 This exemptionprotects farmers and ranchers in those statesfrom strict liability claims. It does not, how-ever, protect farmers from negligence claims.This is because negligence claims rise out of areasonable duty of care, where strict liabilityclaims rise out of the implied warranty not tointroduce unreasonably dangerous productsinto the stream of commerce, even if someoneproduced that product with the greatest care.

In a variation on the statutory waiver fromimplied warranty, at least one livestock organi-zation has publicly called for limits on liabilitythat may arise from animal identification. Theeffectiveness of this legislation, however, maybe limited, given that increased liability isunlikely to come from NAIS; rather, the mainfactor currently protecting feeders fromliability is the lack of traceability through thepacking plant, a factor not affected by NAIS.

References and Sources ofAdditional Information onLiability and NAISA further explanation of strict liability, with

links to short explanations of negligence,proximate cause, and intervening cause:http://law.freeadvice.com/general_practice/ legal_remedies/strict_liabilty.htm.

Typical statutory language of the impliedwarranty of merchantability. http://www.law.cornell.edu/ucc/2/article2.htm#s2-314

Disclaimer: The information provided hereshould not be taken as legal advice. Individuallegal situations may require the services ofqualified legal counsel. This material is basedon work supported by the U.S. Department ofAgriculture under Agreement No. 59-8201-9-115. Any opinions, findings, conclusions, orrecommendations expressed in this article donot necessarily reflect the view of the U.S.Department of Agriculture.

3 See Colarado-Kansas Grain Co. v. Reifschneider, 817 P.2d 637, 640 (Colo. Ct. App. 1991).Whether a farmer is a merchant or not depends on the particular facts, and states are split on thequestion.4 Many, if not most, states that include animal agriculture as an important part of their economy havepassed versions of this exemption, including Arkansas (Ark. Code Ann. § 4-3-316 (2003)), Illinois(810 Ill. Comp. Stat. Ann. 5/2-316 (2004)), Iowa (Iowa Code Ann. § 554.1 (2004)), Kansas (Kan.Stat. Ann. §84-2-316 (2003)) Montana (Mont. Code Ann § 30-2-316 (2003), Nebraska (Neb. Rev.Stat. 2-316), South Dakota (S.D. Laws 57A-2-316.1 (2004)), Utah (Utah Code Ann. § 70-A-2-316(2004)) and Wyoming (Wyo. Stat. Ann. § 34.1-2-316 (2003)).