ALLIANCE, Neb. — A Box Butte County District Court Judge has denied a motion by the Nebraska Brand Committee to dismiss a lawsuit against it by the state’s largest cattle feeder.

The Brand Committee, represented by Assistant Attorney General Joshua Dethlefsen, had moved to dismiss the lawsuit on grounds that the plaintiffs, Broken Bow-based Adams Land and Cattle Co., had failed to state a claim upon which relief could be granted.

In an order filed on Dec. 23, Judge Travis O’Gorman wrote that under the Nebraska court rules of pleading in civil cases, “to prevail on a motion to dismiss for failure to state a claim, a plaintiff must allege sufficient facts to state a claim for relief that is plausible on its face.”

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The lawsuit centers on a decade old agreement Adams negotiated with the Nebraska Brand Committee which modifies an existing statute, 54-1,122, regarding exemptions for cattle moving into its registered feedlot (RFL). Under section 54-1,122 of the Nebraska Brand Act, cattle are exempt from a brand inspection so long as 1) their point of origin 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 the agreement with the brand committee, Adams was granted a special exemption to move cattle to a growyard first. It could then move the cattle to its RFL without undergoing re-inspection, so long as those cattle were accompanied by the original brand inspection documents from the point of origin. To the public’s knowledge, Adams was the only RFL owner in the state to be granted this special exemption.

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O’Gorman wrote that when analyzing a motion to dismiss, a court accepts the factual allegations contained in the lawsuit as true, and then draws all reasonable inferences in favor of the nonmoving party (in this case, Adams).

Under the court rules for a motion involving statutory interpretation, “[dismissal] should be granted only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief.”

“Accepting as true the allegations in the amended complaint and drawing all reasonable inference in favor of the plaintiff, the plaintiff has pled facts sufficient for relief against the defendants that are plausible on their face,” O’Gorman wrote. “The plaintiff has alleged a reasonable interpretation of the statute which the defendants themselves agreed with as evidenced by the August 2008 agreement between the parties that was actually drafted by the brand committee.”

The Brand Committee has 20 days to answer O’Gorman’s order.

HEARING

The written briefs and replies submitted by the respective parties are for O’Gorman’s consideration, are not public, and are usually discarded after the judge issues his order, Box Butte County Clerk of District Court Kevin Horn said.

However, during a Dec. 16, hearing, attorneys for the plaintiffs and defendants were each given about 10 minutes to give brief oral summaries of their briefs in support of — and opposition to — the motion to dismiss.

BRAND COMMITTEES’ ARGUMENT

In his defense of the motion to dismiss, Dethlefsen argued that Adams has fundamentally misread the Nebraska Livestock Brand Law.

The Adams’ complaint pleads two causes of action, one for declaratory judgement, and one for injunctive relief, both asking the same question: When do cattle have to be inspected when they arrive at a registered feedlot under the RFL program contained in the brand law?

Dethlefsen said that that question is already answered in statute 54-1,122. Dethlefsen said that the plaintiffs have misread the statute to also include indirect movement, such as movement from a point of origin to a background lot or other location, then on into the registered feedlot.

“The misreading of the statute underpins all of the cause of action for which they seek to get relief,” he said, adding that with the proper interpretation of that statute, the state believes that all of the issues in the complaint could be resolved.

ADAMS’ ARGUMENT

Gregory C. Scaglione of Omaha firm Coley Jessen said that the issue was limited to facts Adams has alleged in the lawsuit, rather than outside evidence.

Scaglione said that the State of Nebraska had brought up “evidentiary statements” in its reply brief, (statements of what’s reasonable and unreasonable — fact questions which would require supporting evidence in order to determine whether they are true or not).

Scaglione asked the judge to ignore those evidentiary statements at this time and focus on the pleadings contained in the “four corners” of the lawsuit’s amended complaint. He pointed to the agreement Adams signed with the brand committee in 2009 has been in effect for 10 years, and alleged that the brand committee is now trying to break that agreement.

“We actually have action statements by the committee of a decade of interpreting this,” he said. “We’re not asking for something new, we’re asking to stay the course.”

ANALYSIS

For now, it appears that O’Gorman has at least found merit for the lawsuit to proceed on to the discovery phase, in which depositions, supporting documents, and evidence will be exchanged by attorneys. It remains unclear whether the matter will go to trial, but it’s possible that the brand committee can discover and submit evidence to the court that its current interpretation of the statute is the correct interpretation.

Scaglione argued that the brand committee has two interpretations of the Section 54-1,122: one that was enforced under its agreement with Adams, and another interpretation which it’s trying to enforce today. In law, multiple interpretations of a statute constitute what’s known as an “ambiguity.”

Several U.S. Supreme Court cases have held that courts must defer to an administrative agency’s interpretation of a statute, so long as the statute is “ambiguous” and the agency’s reading is “permissible,” and that when a court interprets ambiguous regulations, the controlling weight is given to how that administrative agency interprets the statute, unless there’s something glaringly wrong with how it’s being interpreted.

From the layman’s perspective, the brand committee doesn’t have the authority to enter into an agreement that modifies the language of an existing law, (that’s the legislature’s job). The brand committee said as much in its 2018 and 2020 letters to Adams, which makes the ambiguity question kind of moot.

To the public’s knowledge, Adams was the only RFL in Nebraska which benefited under the specific interpretation contained in the agreement that granted them an exemption. All of the rest of the RFLs in the state had to have their cattle inspected under the brand committee’s current interpretation of the statute as written.

It would appear then that the interpretation of the statute being applied to 99 percent of the RFLs in the state would indicate that the majority interpretation is the correct interpretation, and consequently the interpretation that has controlling weight.

But that also raises another interesting question: What is the legislature’s role in the matter?

During Ag Committee Chairman Sen. Steve Halloran’s LR 378 interim study to look at the Nebraska Brand Law, The Nebraska Beef Producers Committee, a group of feedlot owners that includes Adams in its ranks, has proposed that the exemption granted to Adams through the agreement at the heart of its lawsuit be permanently enshrined in Nebraska’s brand law. An exemption might seem harmless, but it could potentially cripple the integrity of Nebraska’s Brand Law.

Several sources in the Unicameral have indicated that the Nebraska Legislature will convene in January for bill introduction, and then postpone the rest of the session until after a COVID-19 vaccine is widely available to the public. If Adam’s legal challenge fails, Adams and the Beef Producers would have the time to aggressively lobby the legislature to make an exemption permanent; conversely, Adams could keep the litigation tied up and then dismiss the lawsuit as moot once a proposed exemption is signed into law.

However, if O’Gorman rules in favor of Adams, then the interpretation that grants the exemption would apply to every registered feedlot in the state, creating a gaping hole where cattle are moving from place to place, potentially comingling with cattle in growyards where there are no permanent fencing requirements, then winding up in Registered feedlots where brand inspectors and investigators have slim hopes of tracking down, recovering, and returning strays before they’re shipped off to become steaks and hamburgers.

The reason for physical inspections at an RFL has been discussed at length during the LR 378 study. Since brand inspection is mandatory within the brand area, the entry inspection at an RFL is likely the last opportunity for a stray or stolen animal to be identified and returned to its rightful owner.

But it goes further than that. A rigid inspection regime deters the potential for theft or fraud. Without inspection, a less-than-honest growyard operator could substitute a few head of stolen or stray cattle that belong to someone else in order to make the numbers match before shipping the cattle on for finishing at an RFL. While such occurrences are rare, they do happen, and the potential for that kind of theft and fraud only increases in the absence of inspection.

And with recent news, maybe it would be wise to stop and consider this: when each animal has to undergo a physical inspection prior to entering an RFL, there’s an associated paper trail generated by a third party that verifies proof of ownership and provides actual title to a physical animal.

It doesn’t take a rocket scientist to understand that those inspections make it a heck of a lot more difficult for someone to “misrepresent” $285 million-worth of non-existent live cattle.