By Kira Lerner
NEW YORK – The South Dakota Supreme Court on Thursday denied American Broadcasting Cos. Inc. and journalist Diane Sawyer’s attempt to dismiss a $1.2 billion suit alleging they defamed a beef trimmings maker by referring to its product as “pink slime,” clearing the way for the court to consider the claims.
The state’s high court refused to dismiss Beef Products Inc.’s suit accusing ABC of making nearly 200 false and disparaging statements about BPI and its lean finely textured beef, or LFTB, product during 11 news segments, resulting in the loss of business. The Supreme Court’s order leaves in place the circuit court’s March 28 order upholding the suit.
Thursday’s decision also lifted an April stay on discovery, but did not address the merits of the litigation. J. Erik Connolly, counsel for BPI, said he is pleased with the court’s decision and looks forward to starting discovery.
In its petition for dismissal, ABC and others argued that the court should take up the case to decide if the Agricultural Food Products Disparagement Act preempts all of BPI’s disparagement claims. The circuit court found that the act only preempts claims related to the product’s safety.
“Whether, as petitioners contend, that statute forecloses common law claims that do not meet the standards of the AFPDA is an important question in its own right: It determines whether not only news organizations, but also producers who seek to promote their own products over those of their competitors, will enjoy the full freedom to speak that the legislature guaranteed them,” the petition, filed April 23, said.
BPI’s suit was filed in September 2012, removed to federal court by ABC the following month and then remanded back to state court following BPI’s request in June 2013. The suit alleges that the ABC segments repeatedly referred to the LFTB as “pink slime,” a phrase that is now synonymous with the product, BPI said. The word “slime” conjures “a noxious, repulsive and filthy fluid not safe for human consumption,” according to BPI’s suit.
The complaint also alleges that McDonald’s Corp. and grocery chains such as The Kroger Co. stopped buying beef with LFTB after the spate of negative media coverage the product received. BPI’s sales fell from 5 million pounds per week to 2 million, and it lost more than $20 million per month in revenue because of the ABC reports, according to the complaint.
BPI is seeking actual and consequential damages of more than $400 million, as well as punitive and statutory damages, including treble damages.
In addition to ABC and Sawyer, the anchor of the program on which some of the segments aired, BPI’s suit targets ABC News Inc., ABC reporters Jim Avila and David Kerley, a former BPI employee quoted by the network and two former USDA employees also quoted by the network.
In its March order, Circuit Court Judge Cheryle Gering largely upheld BPI’s suit, but dismissed several of its claims for disparagement, finding that they are preempted by a separate claim.
A representative for ABC declined to comment Friday.
The defendants are represented by Carl R. Metz, Dane H. Butswinkas and Kevin T. Baine of Williams & Connolly LLP and by Ronald A. Parsons Jr., Scott N. Heidepriem and Shannon Falon of Johnson Heidepriem & Abdallah LLP.
The case is Beef Products Inc. et al. v. American Broadcasting Cos. Inc. et al., case number 27059, in the Supreme Court of the State of South Dakota.