SIOUX FALLS, SD – A federal judge returned Beef Product Inc.'s $1.2 billion defamation lawsuit against ABC News to state court, and denied the news organization’s motion to dismiss the case.

In November 2012, BPI's attorneys filed a motion to return the lawsuit to state court in South Dakota. They also filed a motion opposing ABC's request to drop the case. BPI has accused ABC of making hundreds of defamatory statements about its lean finely textured beef (LFTB), which resulted in consumers wrongly believing its product was unsafe and unhealthy.

Federal courts have the power to hear a civil case where defendants and plaintiffs are citizens from different states. Lawyers for ABC News argued that two of BPI's sister companies, BPI Technology and Freezing Machines Inc., were incorporated in Delaware, where ABC also is incorporated. BPI lawyers argued that all three companies were involved in producing and selling LFTB.

In her ruling, US District Judge Karen Schreier said ABC's arguments not only “go against Eighth Circuit precedent, it also goes against reason.”

Judge Schreier wrote: “Here, the court needs to determine whether BPI Tech is a real party in interest to determine whether it has authority to hear this case, i.e., whether diversity jurisdiction exists. Defendants’ argument, however, proposes that the court first entangle itself with the facts of the case in order to make a legal determination about whether BPI Tech’s claim has merit. Put simply, defendants are suggesting that the court make a determination about the merits of BPI Tech’s claim before even deciding whether it has the authority to make such a determination. This is putting the cart before the horse.”

Ultimately, Judge Schreier ruled that BPI Tech is a real party in interest, and she granted BPI's motion to remand the case to the Circuit Court of Union County.

In May 2012, BPI permanently closed three manufacturing facilities citing decreased demand for its products. The company kept its facility in South Sioux City, Neb., open but at reduced capacity. BPI said 650 people lost their jobs as a result of the plant closings, while the company shed an additional 85 jobs at the company’s headquarters in North Sioux City. BPI blames the plant closures and lost business on the ABC News reports.

ABC News claims it did not knowingly disparage LFTB.