In nuisance case, profit on trial

In nuisance case, profit on trial

There was a telling exchange in the federal hog farm trial in Raleigh.

It had to do with money – which is what this trial is all about.

First, a bit of background.

On one side of the courtroom are Joey Carter, a Duplin County hog farmer, and Murphy Brown LLC, which is the division of Smithfield Foods that produces pigs and hogs for market. When they reach market weight, the hogs are sold by Murphy Brown LLC to a processing division of Smithfield Foods to become pork.

On the other side is a Texas lawyer, Michael Kaeske. He is bringing a nuisance lawsuit against the Joey Carter farm on behalf of a husband and wife who moved in next to the farm.

Make no mistake, the lawyer wants money from Smithfield Foods. In the lawsuit, he’s expressly dismissed asking the jury or judge to order any fixes to the Joey Carter farm. In legal mumbo jumbo, going for a fix is known as seeking “injunctive relief.” And that’s what you’d expect in a nuisance case. The lawyer isn’t doing that. He just wants money.

And so at the courthouse in Raleigh the lawyer was there for hours drilling Joey Carter about his farm finances and drilling an executive from Murphy Brown about money.

The lawyer threw out lots of numbers and focused plenty on revenues in broad brush questioning, so much that the judge at one point stepped in and sought to clarify for the jury some basics of how a business runs.

That is to say, there are considerable expenses involved in producing products or providing services that then generate revenues. Certainly, that is the case for a worldwide pork producing company, which includes feed mills and veterinarians, truck fleets and pension plans, and lots and lots of people to make it all go.

In North Carolina, there are 10,000 employees and partnerships with more than 1,000 family farms that are a part of those expenses.

And when it all gets sorted out there are profits. Hopefully!

As it turns out, the records show that Murphy Brown LLC has not been profitable on the production of hogs in North Carolina. This is due to grain prices, mostly.

But Smithfield Foods and its parent company, which has a worldwide footprint in making pork products, has been profitable. Last year, the net profit was about $1 billion – and, importantly, this was on about $22 billion in revenue.

That is, the company spent $21 billion to bring in $22 billion.

Thankfully, some of that economic activity occurs in North Carolina.

What does a company do with profits?

Well, that’s how Smithfield can continue to invest in North Carolina and the other places it does business. The company last year announced a $100 million project at its processing plant in Tar Heel, which is in Bladen County. This means 250 new jobs in a county that needs them. Profits are necessary for that kind of investment.

The revenues also pay the taxes – and Smithfield entities are significant taxpayers across eastern North Carolina.

And profits are how companies provide raises, fund pension plans, invest in infrastructure projects, fund research and development (some of which doesn’t pan out), keep the 401K plan going, share the load on rising health care costs for employees and so much more.

It seems odd, after sitting in a courtroom, to have to write out in a sentence that a profitable company is a good company.

But that’s where we are.

In both his tone and tenor, the Texas lawyer wanted everyone in the courtroom in Raleigh to think badly about profits. But we need profitable companies to ensure a safe and affordable food supply.

At one point, the lawyer was bearing down on a Murphy Brown executive about alternative technologies for farms, including whether something could be done on the Joey Carter farm. There had in fact been testimony about years of efforts across the state and at the Carter farm, efforts that continue despite failures.

In the exchange, the Murphy Brown executive voiced concern about the efforts and their impact on the bottom line – for Joey Carter and for Smithfield.

In an even tone, the executive explained that you can spend all the money in the world on fancy technology but that, in the end, somebody has to be paid a return or the farm won’t survive if added costs go with the technology. There has to be that consideration for expenses and revenues, he explained.

“Well,” the Texas lawyer boomed, “does Smithfield Foods have a God-given right to $1 billion in profit?”

At that point, the judge cut it all off.

And so the trial went on, with the lawyer from Texas chasing the money and Joey Carter hoping to keep his Duplin County farm in business.

– Andy Curliss, CEO