holding that a letter statement and warning sent out by the FDA, whose duty was to protect the public from consuming adulterated food, was admissible under Rule 803(8)
How later courts described this case
- holding that a letter statement and warning sent out by the FDA, whose duty was to protect the public from consuming adulterated food, was admissible under Rule 803(8)
- referring to “[a] confidential or special relationship between parties [that] gives rise to a duty to speak and clarify information upon which others might rely”
- affirming a circuit courts finding that a special relationship arose between hog farmer and feed supplier based on past dealings
Written by the judges who cited it.
The opinion
Tom Glaze, Justice, dissenting. The majority finds that the reason for IBP’s rejection of the shipment of hogs is of no consequence to Beadles’s claim. The court explains its position as follows:
We need not determine whether the circuit court abused its discretion in admitting evidence concerning the reason why IBP rejected the shipment because the reason for rejection is not essential to Beadles’s claim. Beadles contended that had it known that the soybean meal was allegedly contaminated with dioxin, it either would not have shipped the hogs, or it would have tested the shipment prior to sending it out. Thus, it is immaterial why IBP rejected the shipment.
The basis for the majority’s decision is both ambiguous and illogical; therefore, I disagree and respectfully dissent.
In order to establish a valid cause of action for fraud or constructive fraud, a plaintiff must show — among the other elements 1 — that the alleged damages would not have occurred but for the conduct of the defendant. See Tyson Foods, Inc. v. Davis, 347 Ark. 566 , 66 S.W.3d 568 (2002). Here, Beadles claims that ADM’s failure to warn of the potential dioxin contamination put into motion a chain of events that resulted in the loss of 2600 hogs. According to Beadles’s allegations, the causal chain progressed as follows:
• ADM failed to warn Beadles of the potential dioxin contamination;
• Beadles, assuming that nothing was wrong, shipped its hogs to IBP, a hog buyer located in Iowa;
• IBP rejected the hogs, en route, because IBP believed that ADM has possibly sold Beadles contaminated soybean meal;
• Beadles was forced to store its hogs at a holding facility in Missouri;
• while in the holding facility, the hogs contracted salmonella and other diseases;
• the infected hogs were then transported back to Beadles’s facility, where they infected other hogs;
• Beadles suffered the loss of 2600 hogs as a result.
Each of these allegations provides a link in a causal chain that logically proves that Beadles’s damages were caused by ADM’s failure to warn. The failure to substantiate any one of these allegations will result in the removal of a link and a break in the causal chain.
According to the majority, Beadles is entitled to damages, regardless of the reason IBP rejected the hog shipment. This reasoning is incorrect. Let us assume, for argument’s sake, that IBP rejected the hogs for an unrelated reason, such as a too-high price for the hogs. Under this hypothetical, Beadles would have lost its 2600 hogs regardless of ADM’s failure to warn. Given this situation, it would be impossible for Beadles to prove that ADM was the cause-in-fact of Beadles’s alleged damages. This example illustrates that, in order to prove damages, Beadles had to show that IBP rejected the hog shipment because IBP feared that the hogs were contaminated. 2 Only then can Beadles establish a causal chain and show that ADM’s actions caused Beadles’s damages.
The court of appeals addressed this issue and correctly held that, at trial, Beadles relied on inadmissible hearsay to prove why IBP rejected the shipment. See Archer-Daniels-Midland Co. v. Beadles Enters., Inc, 92 Ark. App. 462 , 215 S.W.3d 675 (2005). 3 Once the inadmissible hearsay is set aside, there is no evidence to substantiate Beadles’s claim as to why IBP rejected the hog shipment. Consequently, Beadles failed to prove that ADM’s actions were the cause-in-fact of Beadles’s alleged damages. In short, Beadles’s claim should not succeed, due to Beadles’s failure to prove damages. For this reason, I dissent.
The tort of fraud or deceit consists of five elements that the plaintiff must prove by a preponderance of the evidence: (1) a false representation of a material fact; (2) knowledge that the representation is false or that there is insufficient evidence upon which to make the representation; (3) intent to induce action or inaction in reliance upon the representation; (4) justifiable reliance on the representation; and (5) damage suffered as a result of the reliance. See Tyson Foods, Inc., infra (emphasis added). Constructive fraud can exist in cases of breaches of fiduciary duties, but a plaintiff must show a material representation of fact. See Scollard v. Scollard, 329 Ark. 83 , 947 S.W.2d 345 (1997). Constructive fraud, while requiring proof of all the necessary elements of actual fraud, misrepresentation, and deceit, may be proven even when there is a complete absence of any moral wrong or evil intention. See Roach v. Concord Boat Corp., 317 Ark. 474 , 880 S.W.2d 305 (1994).
The reasoning follows that, if ADM had warned Beadles of the alleged contamination, then Beadles would not have shipped its hogs, or it would have tested the hogs prior to shipment. Either way, the hogs would not have been rejected mid-transit, would not have contracted salmonella, and would not have contaminated Beadles’s facility.
Beadles presented the following evidence to prove why IBP rejected the hog shipment:
(1) Exhibit Z, a memo to Beadles, datedjanuary 15,1998, from Larry Betrand, IBP’s Area Procurement Supervisor. In this memo, Bertrand states that IBP stopped the shipment of hogs “based on an official notification that Beadles Enterprises may have received feed for their hogs that contained contaminated ball clay”;
(2) Wayne Beadles, Sr., testified that his son,Wayne Beadles, Jr., told him about a telephone conversation with someone at IBP who informed Wayne Jr. that the shipment was being rejected for the same reason;
(3) Wayne Beadles, Jr., also testified as to the substance of his telephone conversation with the IBP representative; and
(4) Exhibit BB, a list labeled “Soybean Meal Consignees.” Wayne Beadles, Sr., testified that this list was faxed to him after IBP informed him that Beadles was on a list of purchasers who had possibly bought contaminated feed.
Each of these pieces of evidence qualifies as inadmissible hearsay; that is, they are “out-of-court statement[s] made by someone other than the declarant that [are] offered to prove the truth of the matter asserted.” See Ark. R. Evid. 801(c).