The NC Chamber Legal Institute is pleased to introduce its new publication, the Legal Institute Sidebar. This monthly analysis will dive into court cases and legal threats impacting North Carolina’s legal climate and overall competitiveness.

There is little doubt that components of our competitive business climate are under attack, whether it’s the nuisance litigation threatening our farmers, challenges to the contributory negligence system, or anti-growth groups using every state and federal law and regulation at their disposal to re-debate issues they failed to advance legislatively. That’s why it is imperative that our business community understands the threats facing North Carolina’s competitive business climate and the work the NC Chamber Legal Institute is doing to stop them.

In this first issue of the Legal Institute Sidebar, Ray Starling, president of the NC Chamber Legal Institute, discusses the nuisance lawsuit verdicts that threaten all North Carolina businesses. The commentary below is an excerpt from Ray’s recent Executive Memo.

Nuisance Lawsuit Verdicts Threaten All of Us

$473 million. $25 million. $50 million.

Imagine that you’re a business on the receiving end of jury awards of this size, notwithstanding that you and your contract suppliers have complied fully with the most strenuous regulatory requirements imposed on your sector by state law anywhere in the country.

Imagine awards of this size against your company, despite the fact that facilities which generated these verdicts have been subject to regular inspection, and have never been the subject of prior complaints, environmental citations, permit suspensions or revocations, lawsuits, or any other form of warning or litigation threat notice.

If this sounds outrageous, understand that at least one octogenarian North Carolina federal district court judge disagrees. The collective hope of the business community should be that three appellate judges hearing the appeal in this case today in Richmond take their jobs more seriously.

Hog farmers in eastern North Carolina are the latest targets of well-armed, out-of-state lawyers with novel liability and litigation theories. Between April of 2018 and March of 2019, five cases went to trial. In each case, the farms were deemed a nuisance, and cumulatively more than $500 million in punitive damages were awarded to plaintiffs. State limits on punitive damages ultimately capped these awards at $98 million. But that’s little comfort given that punitive damages should have never even been considered.

One of these cases is now making its way through the appeals process. The $50 million verdict in Joyce McKiver v. Murphy-Brown, LLC is the subject of oral argument in the U.S. Court of Appeals for the Fourth Circuit in Richmond, Virginia today. It should be overturned. As should the judgements in the other cases when their appeals are resolved.

Murphy-Brown, a subsidiary of Smithfield Foods, is the defendant in these cases, and has defended the farmers and their production practices valiantly. Before you conclude these cases present no threat to our legal climate, be aware the out-of-state trial lawyers haven’t come just for Smithfield Foods – they are coming to cripple an entire industry. And then to find their next victim.

For more than 40 years, North Carolina’s farmers have been protected by the N.C. Right to Farm Act, which generally states that normal farming practices do not constitute a nuisance. The trial court judge waved the statute off, adopting a tortured and narrow reading that eviscerated the plain intentions of the Legislature. Moreover, state law is clear that punitive damages should only be awarded if a defendant has acted with “fraud, malice, or willful or wanton conduct.” The statute further clarifies that willful or wanton conduct is a “conscious and intentional disregard of and indifference to the rights and safety of others, which the defendant knows or should know is reasonably likely to result in injury, damage, or other harm,” and “is more than gross negligence.” In other words, punitive damages aren’t designed to punish farmers who carefully manage their business, pass repeated inspections, and who have never been the subject of complaints.

The American Farm Bureau Federation, National Pork Producers Council, N.C. Farm Bureau Federation, and the N.C. Pork Council filed an amicus brief in this appeal, which poignantly makes clear that the harm inflicted here reverberates far beyond the eastern NC farmsteads of my childhood:

Nor are growers and processors the only victims. Enormous judgments against the producers of our food drive up costs and undermine one of our Nation’s greatest strengths—its abundant supply of domestically-grown, affordable, and high-quality food, and the food security that comes with it. The only winners from this litigation are plaintiffs and their entrepreneurial lawyers, who walk away with windfall damages and enormous fees unrelated to any plausible measure of harm. The losers are rural communities that stand to shed dollars, jobs, and economic and social stability, and consumers who lose the benefits of reliable and efficient methods of agricultural production.

I couldn’t have said it better myself. It’s not just our hog farmers. If this can happen to an industry that has muscled our state to the rank of being the second largest exporter of pork and poultry in the country, wonder which sector is next?

The NC Chamber team has worked diligently through the years to strengthen protections against nuisance lawsuits, especially for our farmers. Now, it’s time for the Fourth Circuit to reimpose some sanity of its own.

Sincerely,

Ray Starling
General Counsel, NC Chamber
President, NC Chamber Legal Institute