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Jul 15, 2013 6:47 PM by Connie Murphy

Iowa egg farms settle suit over salmonella recalls

IOWA CITY, Iowa (AP) - The Iowa egg producers blamed for a 2010 salmonella outbreak have settled a lawsuit brought by a California distributor that lost profits from the foodborne illnesses and the resulting product recalls, court records show.

Quality Egg and Hillandale Farms reached the settlement Thursday with NuCal Foods Inc., ending three years of litigation in federal court in Sacramento that shed light on the outbreak and its aftermath. Financial terms were not immediately released.

Quality Egg was based in Galt, Iowa, and owned by Jack DeCoster, who built one of the nation's largest egg production empires while amassing a long history of violating food safety, labor and environmental rules. Hillandale Farms had ties to DeCoster's operations, processing and marketing shell eggs from some Quality Egg plants.

The companies issued recalls covering 550 million eggs in 2010, after scientists traced illnesses back to their farms in northern Iowa, which were described by investigators as having filthy conditions. The government has estimated that up to 62,000 people were sickened in the outbreak.

An attorney representing NuCal, Jason Takenouchi, declined to comment Monday on the settlement, which was reached during a conference in the chambers of U.S. Magistrate Judge Edmund Brennan. Attorneys for Quality Egg and Hillandale Farms did not return messages. Hillandale Farms had filed counterclaims against DeCoster, blaming his operations for the outbreak.

Ripon, Calif.-based NuCal sued the companies and DeCoster, contending they were aware their farms were contaminated with salmonella but continued marketing their eggs as safe.

Citing documents that its lawyers obtained, NuCal alleged that testing by an Iowa State University lab had found salmonella in up to 43 percent of DeCoster's poultry houses and in the internal organs of their birds, which were dying at high rates and likely laying tainted eggs. A consultant had proposed steps to clean up the conditions, warning, "We have to get this level of (salmonella) knocked down!"

NuCal said it purchased millions of eggs in 2010 from the Iowa egg producers, then distributed those eggs to retail customers. After the companies announced the recalls in August 2010, NuCal had to recall the eggs it bought, which led to demands for refunds and lawsuits from those who fell sick. The outbreak also led to a reduced demand for eggs, which hurt NuCal's sales, the lawsuit contended.

The case exposed the existence of a federal grand jury investigation in Iowa examining the outbreak, which remains active. Lawyers for Jack DeCoster and his son, Peter, said in court documents they were targets of the criminal investigation and therefore could not be deposed in the civil case. Quality Egg's attorneys said in a court filing July 5 that the DeCosters remained under investigation.

One DeCoster supervisor who played a key role in responding to the outbreak, Tony Wasmund, has pleaded guilty to bribing a federal inspector and is facing sentencing next month. He is the only person charged so far.

Jack DeCoster and Peter DeCoster, who ran day-to-day operations, were blasted for the outbreak when they testified in front of a congressional panel. Jack DeCoster said he was horrified to learn of the tainted products and apologized. Hilldandale's chief executive, Orland Bethel, cited his Fifth Amendment right against self-incrimination and remained silent.

A judge had ordered DeCoster and Bethel to attend Thursday's settlement conference, but it's unclear whether they did.

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