Judge Corrals Award in Beef Cattle Dispute

VICTORIA, Texas (CN) - A Texas supplier can buy back 500 specially bred "Kobe" cattle after a jury found it was duped into approving the deal, a federal judge ruled.

Akaushi cattle are a Japanese breed prized for their rich and flavorful Kobe-style beef that is sold at pricey steakhouses and sushi restaurants. A 4-ounce filet mignon goes for $50.

The animals are also valuable before they reach the slaughterhouse. Full-blood bulls sell for up to $50,000 and full-blood cows can fetch $35,000, according to expert testimony in the long-running federal court case.

Bear Ranch LLC sued HeartBrand Beef, its chairman Ronald Beeman and the American Akaushi Association in March 2012.

HeartBrand runs a ranch and butcher shop in Flatonia, Texas, halfway between Houston and San Antonio.

Bear Ranch, a Colorado business, bought 424 Akaushi cattle from HeartBrand in July 2010 under a written contract that forbid it from selling them without HeartBrand's permission, prohibited it from selling semen collected from the cattle or their offspring, banned it from selling the beef under the "Akaushi" name for 50 years after the contract ends and required it to register all progeny with the American Akaushi Association.

Bear Ranch filled out its Akaushi herd in 2011 when it bought another 500 from Beeman in a deal done with a handshake and no paper trail.

Bear Ranch went to court seeking to invalidate HeartBrand's restrictions on its cattle. It claimed the noncompete terms were bogus because HeartBrand had falsely claimed it controlled all Akaushi cattle and genetics outside Japan.

HeartBrand and Beeman made counterclaims of fraud and breach of contract. HeartBrand alleged that Bear Ranch said it intended to produce beef only for personal use despite ambitions of becoming a rival dealer.

Beeman said he sold Bear Ranch the 500 head with the understanding the restrictions that governed HeartBrand's deal would apply to his deal, and that Bear Ranch would sell 30 percent of the full-blood Akaushi calves its herd produced to HeartBrand.

A jury sided with HeartBrand and Beeman after an eight-day trial. The jury determined Bear Ranch was unjustly enriched by $23.1 million for the cattle it bought from Beeman and that HeartBrand should be awarded $1.8 million in punitive damages.

Visiting federal judge Gregg Costa, who sits on the Fifth Circuit Court of Appeals, declined to award HeartBrand the $23.1 million following a post-trial hearing.

"HeartBrand and Bear Ranch have debated the proper equitable remedy-and the court has considered the issue-until the cows come home. And finally, they are about to do just that," Costa wrote on Sept. 4.

The judge ordered Bear Ranch to hold the cattle it bought from Beeman in a constructive trust for HeartBrand, which can buy them back for $6.8 million, the amount the jury determined Bear Ranch paid to acquire, breed and care for the cattle.

Costa affirmed the jury's recommendation of $1.8 million in punitive damages against Bear Ranch.

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