Registered feedlot lawsuit set for April bench trial

News News | Dec 17, 2021

By Spike Jordan  For Tri-State Livestock News

ALLIANCE, Neb. — A lawsuit involving the Nebraska Brand Committee and the state’s largest registered feedlot will head to a bench trial before Judge Travis O’Gorman on April 6-8, 2022, according to documents filed in Box Butte County District Court on Nov. 19.

Broken Bow’s Adams Land and Cattle Co. sued the Nebraska Brand Committee in August 2020, in an attempt to maintain a more than decade-old agreement it brokered to exempt cattle from being brand inspected when moving from background facilities into its registered feedlot (RFL). The lawsuit was previously reported at length by TSLN.

Section 54-1,122 of the Nebraska Brand Act, states that cattle entering an RFL are exempt from brand inspection so long as 1) the point of origin of the cattle is in a state with a brand inspection agency, 2) those cattle are accompanied by a brand inspection certificate or brand clearance to prove ownership, and 3) the cattle are move directly from a point of origin to the RFL.  However, under an agreement brokered with the Brand Committee in 2009, Adams was granted a special exemption of the Section 54-1,122 requirements and could move cattle from a growyard to its RFL without undergoing re-inspection so long as said cattle arriving at the RFL were accompanied by the original brand inspection or proof of ownership documents from the point of origin (such as a brand clearance obtained from the salebarn where the cattle were purchased).   Adams was the only RFL in Nebraska to be granted such a special exemption. The brand committee argues in court documents that it did not have the statutory authority to grant the exemption, and that the terms of the agreement expired in 2010.

Since January 2021, an injunction in Box Butte County District Court has prevented the Brand Committee from collecting inspection fees and inspecting tens of thousands of cattle which have arrived at the Adams RFL from its associated backgrounding lots since the lawsuit was filed in August.

BACKGROUND ON THE RFL PROGRAM

Current Nebraska law requires cattle arriving at a registered feedlot to be inspected for brands in order to prove ownership. The “entry inspection” is potentially the last time a stray will be caught and identified before it winds up at a slaughterhouse. After this initial entry inspection, feedlots participating in the RFL program are not permitted to remove the inspected cattle from the confines of a permanently fenced lot unless they are shipping finished cattle directly to a slaughter facility.

The trade-off of having cattle brand inspection on entry is that allows for the brand committee to verify proof of ownership for all the cattle in a given RFL while allowing the feeder to ship finished cattle to slaughter at-will, on any day, at any hour. Feeders also avoid the risk of shrink or risk of injury associated with running cattle down an alley in front of a brand inspector.  Registered feedlots pay an annual fee based on the per-head inspection rate equal to the max one-time capacity of the RFL. For example, under the current $0.85 per head fee, a 10,000 head capacity feedlot would pay $8,500 annually for the convenience of shipping cattle without a brand inspection. Given that most feedlots “turn” roughly 2.5 times annually, the RFL in the example pays a per-head rate of roughly $0.34 — a significant discount, compared to non-RFL feedlots, which must pay $0.85 per head for a brand inspection prior to shipping.

The 54-1,122 rule provides convenience in commerce and further savings on the costs of brand inspection for the RFL when there are no breaks in custody. If there are breaks in the chain of custody, mandatory brand inspection helps catch any potentially commingled strays on arrival, which provides protection for both the receiving feedlot and recovery by the rightful owners of any strays. This rigid regime of mandatory brand inspection provides integrity to the industry and security to cattle producers of all sizes.

BOARD VOTE

Executive Director John Widdowson raised a question about Section 54-1,122 to the committee’s board of directors at its Dec. 1 quarterly meeting in Kearney.

“I’m looking for clarification on the committee’s stance on where we are with the inspection requirements for the RFL program,” Widdowson said. “There’s some confusion out there in the public. The staff and myself get asked questions, and I’d like some clarification from the committee.”

The question about the agency’s interpretation of Section 54-1,122 has turned up in court filings and oral arguments. McQuiston v. Griffith, 128 Neb. 260, 258 N.W. 553, 554-55 (1935) – in so few words – states that how an agency interprets a statute is how that statute ought to be interpreted, unless a judge can decide that something is clearly wrong with how the agency is interpreting it. It’s basically the same thing as a Chevron deference on the Federal level.

In response to Widdowson’s question, a motion was made by chairman Adam Sawyer and seconded by vice-chair Terry Cone.  “Formally rescind any prior interpretation by (the brand committee) of the Nebraska Revised Statute Section 54-1,122 purported to allow the movement of cattle from backgrounding lots to registered feedlots under certain conditions without inspections, and reiterate the agency’s position that under Section 54-1,122, all cattle that are not moved directly from the point of origin into a registered feedlot with documentation required by the statute are subject to inspection upon arrival at the registered feedlot – provided that nothing about this vote affects how Adams Land and Cattle is being regulated, because (the brand committee) are under an injunction from Box Butte County District court that (the committee) must comply with until it is resolved.”

The committee voted 5-0 in favor of Sawyer’s motion, setting the stage for the trial in April. The committee has stated multiple times in public meetings that the statute is fundamental to the integrity of Nebraska’s brand law, and the vote further affirms that.

2016 AG OPINION 

Apart from statutory interpretation questions, Adams has invoked a Jan. 22, 2016 Nebraska Attorney General Opinion as grounds for its injunction. That 2016 opinion, requested by then-executive director Shawn Harvey, asked if under Nebraska law, the brand committee had the authority to reduce the brand inspection fees for cattle being “checked-in” at a registered feedlot.

However, Adams, by omission of details, mischaracterizes what the attorney general opinion letter actually says, arguing in court documents that “…cattle arriving at a Nebraska registered feedlot . . . is NOT subject to physical animal inspection…,” (*which is false, there are plenty of scenarios under the law where physical brand inspections are required at an RFL). Adams further argues that, “The Attorney General declared that the only method of brand inspection of cattle arriving at a Nebraska registered feedlot is an audit of the records to verify ownership,” (**which is also false; the attorney general made no such “declaration”).  Here’s what the attorney general actually said in his letter:  “It should also be noted that this auditing method of inspection for registered feedlots is precisely one of the main benefits of the registered feedlot program. Such method gives the registered feedlots flexibility in how they do business because they are not required to submit to a physical brand inspection before selling the cattle and can, therefore, move cattle more efficiently, at any time of day, without inspection.”

ANALYSIS

 In Nebraska’s brand inspection area, any change-of-ownership triggers a brand inspection, be it at a salebarn, at a private treaty sale on a ranch, or sale of cattle to a packing house for slaughter. Adams left out the “before selling the cattle…” part of the AG’s letter, which is the requirement for non-RFL producers to undergo a physical brand inspection before selling or shipping cattle to slaughter. The “main benefit” that the Attorney General’s office is alluding to in its letter is flexibility to avoid shrink while waiting for a brand inspector to arrive, and also avoiding the risk of injury that could result from working those animals before shipping them to slaughter.

That’s the whole reason the feeder segment lobbied for the creation of the RFL program in the 1970s. At that time, most registered feedlots were not as large as they are today, but as they’ve grown in head-capacity overtime, the feedlot owners were not naive. They no doubt understood that the cost of business increases when you feed more cattle. It’s foolish to think that they could not anticipate this.

Yet, in court filings, Adams seeks to “maintain the status quo” and ensure it has “…freedom from unlawful physical animal inspections…”

The rub is that there’s no such thing as an “unlawful physical animal inspection.”

Under Section 54-1120 of the Nebraska Brand Act, subsection (3) gives the brand committee the authority to physically inspect cattle at an RFL to make sure everyone is complying with the law.  “Registered feedlots are subject to inspection at any reasonable time at the discretion of the brand committee and its authorized agents, and the operator shall show cattle purchase records or certificates of inspection to cover all cattle in his or her feedlot. Cattle having originated from such registered feedlots may from time to time, at the discretion of the committee, be subject to a spot-check inspection and audit at destination to enable the brand committee to assure satisfactory compliance with the brand laws by the registered feedlot operator.”

Subsection (5) of 54-1120 also provides a path to boot RFLs from the program for failing to comply.  “The brand committee may rescind the registration of any registered feedlot operator who fails to cooperate or violates the laws or rules and regulations of the brand committee covering registered feedlots.”

Investigators can now issue a $200/hd waiverable citation for brand law violations, so complying with an $0.85 per head brand inspection fee when moving cattle from background lots to an RFL is significantly cheaper given the alternative.

And in the terms of “status quo,” every other registered feedlot in the inspection area operates under the rules contained in 54-1,122. Every other registered feedlot in Nebraska is subject to the same “spot-check” inspections – however frequent or infrequent – in order to verify proper ownership for the cattle in their lot. Every other registered feedlot carries the risk of having their permits revoked if they can’t follow the rules.

Mandatory brand inspection is a power and authority granted to the brand committee by the Nebraska legislature. The Nebraska legislature never gave the brand committee the authority to waive or extend the entry inspection requirements under Section 54-1,122. The Brand Committee acknowledges that, and they’re trying to fix it.

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