Opinion ID: 187230
Heading Depth: 2
Heading Rank: 3

Heading: Creekstone's Response to Market Loss

Text: Creekstone claims to have suffered $200,000 per day in lost revenue as a result of the diminished export market. Stewart Decl. ¶ 17. Moreover, in markets where U.S. beef is available, Creekstone contends that consumer fears about BSE have diminished its sales. See Id. ¶¶ 4, 5 (discussing market surveys in Japan and U.S.). To allay the concerns of consumers and importers, in 2004 Creekstone made a business decision to perform the rapid BSE test on each cow it slaughters. Compl. ¶ 20. Creekstone sought to purchase rapid BSE test kits from Bio-Rad Laboratories, Inc. (Bio-Rad). [4] Bio-Rad informed Creekstone, however, that it could not sell Creekstone the kits without USDA authorization. On February 19, 2004, and in several later communications, Creekstone requested USDA permission to purchase the test kits. Id. ¶ 21. USDA denied Creekstone's requests. On March 17, 2004, USDA's Center for Veterinary Biologics issued Notice No. 04-08, ordering that the [s]ale and use of all BSE test kits be restricted to USDA-approved laboratories only. See USDA, Ctr. For Veterinary Biologics Notice No. 04-08 (Mar. 17, 2004). The Notice also declared that the distribution and use of all BSE test kits was to be under the supervision or control of USDA. Id. [5] Accordingly, Bio-Rad's import permit authorizes it to sell BSE test kits to USDA-approved laboratories only. U.S. Veterinary Prod. Permit No. 624, Bio-Rad Labs., at 2 (Mar. 4, 2005). USDA memorialized its decision to deny Creekstone permission to purchase rapid BSE test kits from Bio-Rad in a June 1, 2004 letter, concluding that allowing a company to use a BSE test in a private marketing program is inconsistent with USDA's mandate to ensure effective, scientifically sound testing for significant animal diseases and maintain domestic and international confidence in U.S. cattle and beef products. Letter from Bill Hawkes, USDA, to John D. Stewart, Creekstone Farms (June 1, 2004). [6] On March 23, 2006, Creekstone filed a three-count complaint in the district court. Count I claimed, inter alia, that because VSTA provides no authorization at all for restrictions on the use of products, USDA's regulation purporting to regulate the use of biological products is ultra vires. Compl. ¶ 32 (emphasis added). Count I also claimed that USDA's definition of treatment contained in regulation section 101.2 goes beyond the scope of the rulemaking authority granted to USDA in the VSTA. Id. ¶ 31. Count II challenged USDA's regulation of BSE testing because it [is] not used in the treatment of domestic animals and do[es] not `act primarily through the direct stimulation, supplementation, enhancement or modulation of the immune system or immune response,' as required by 9 C.F.R. § 101.2. Compl. ¶ 40. Finally, Count III alleged that USDA's denial of Creekstone's request to perform BSE testing is arbitrary and capricious in violation of the Administrative Procedure Act, 5 U.S.C. § 706(2)(A). Compl. ¶¶ 42-51. The parties filed cross-motions for summary judgment on Counts I and II of Creekstone's complaint. On March 29, 2007, the district court granted summary judgment to USDA on Count I and to Creekstone on Count II. The court first rejected Creekstone's argument that USDA lacked the authority to regulate the use of products under section 154 of the Act. 517 F.Supp.2d at 13 (Creekstone contends that USDA's `use' regulation exceeds its authority to regulate `preparation, sale, barter, exchange, or shipment,' but Creekstone's reading of the statute is too narrow.). The court also upheld USDA's broad interpretation of treatment in sections 151-155 of the Act. Id. at 15-16. On Count II, however, the court concluded that USDA cannot regulate BSE testing because it cannot be used in the treatment of domestic animals. Id. at 16. The court reasoned that, because there is no known cure for BSE and because testing can be done only post-mortem, rapid BSE test kits are not used for treatment as that term is defined in 9 C.F.R. § 101.2(3). Id. at 16. Neither party moved for summary judgment on Count III. See 517 F.Supp.2d at 12 n. 5. [7] Both parties timely appealed.