Summary of a Recent
Judicial Development in
Packers and Stockyards Act

Failure to Disclose Change in Grading Methods
Violates Packers & Stockyards Act

Alison E. Peck
National AgLaw Center Graduate Assistant

In Excel Corp. v. USDA, 397 F.3d 1285 (10th Cir. 2005), the Tenth Circuit Court of Appeals affirmed an order of the USDA Judicial Officer finding a packer violated the Packers & Stockyards Act (PSA) and accompanying regulations when it failed to disclose to hog producers a change in its method of grading and pricing hogs. The packer, Excel, priced hogs based on a "carcass merit system" that estimated the lean percentage of particular carcasses and used that estimate in a formula to determine premiums and discounts. Id. at 1288. Excel changed the formula it used to determine the premiums and discounts and failed to inform producers of the change. The court upheld the USDA Judicial Officer's decision that Excel's non-disclosure violated Section 202(a) of the PSA, id. at 1291-94, and the requirements of 9 C.F.R. § 201.99(a) and (e) that slaughterers disclose changes in "grading to be used" (§ 201.99(a)) and make written disclosures of non-USDA grades used in pricing (§ 201.99(e)). Id. at 1294-97. The court deferred to the USDA's interpretation of the regulation, finding the interpretation "entirely reasonable." Id. at 1295-96. The Court did narrow the USDA's cease-and-desist order to apply only to hog purchases and any changes in grading formulas. Id. at 1299.

The case was decided on February 15, 2005; this summary was posted Sept. 23, 2005.