Friday, January 17, 2020

Principles of Agricultural Law

Overview

Principles2020springedition400x533The fields of agricultural law and agricultural taxation are dynamic.  Law and tax impacts the daily life of a farmer, rancher, agribusiness and rural landowner practically on a daily basis.  Whether that is good or bad is not really the question.  The point is that it’s the reality.  Lack of familiarity with the basic fundamental and applicable rules and principles can turn out to be very costly.  As a result of these numerous intersections, and the fact that the rules applicable to those engaged in farming are often different from non-farmers, I started out just over 25 years ago to develop a textbook that addressed the major issues that a farmer or rancher and their legal and tax counsel should be aware of.  After three years, the book was complete – Principles of Agricultural Law - and it’s been updated twice annually since that time. 

The 46th edition is now complete, and it’s the topic of today’s post – Principles of Agricultural Law.

Subject Areas

The text is designed to be useful to farmers and ranchers; agribusiness professionals; ag lenders; educational professionals; laywers, CPAs and other tax preparers; undergraduate and law students; and those that simply want to learn more about legal and tax issues.  The text covers a wide range of topics.  Here’s just a sample of what is covered:

Ag contracts.  Farmers and ranchers engage in many contractual situations, including ag leases, to purchase contracts.  The potential perils of verbal contracts are numerous as one recent bankruptcy case points out.  See, e.g., In re Kurtz, 604 B.R. 549 (Bankr. D. Neb. 2019).  What if a commodity is sold under forward contract and a weather event destroys the crop before it is harvested?  When does the law require a contract to be in writing?  For purchases of goods, do any warranties apply?  What remedies are available upon breach? If a lawsuit needs to be brought to enforce a contract, how soon must it be filed?

Ag financing.  Farmers and ranchers are often quite dependent on borrowing money for keeping their operations running.  What are the rules surrounding ag finance?  This is a big issue for lenders also?  For instance, in one recent Kansas case, the lender failed to get the debtor’s name exactly correct on the filed financing statement.  The result was that the lender’s interest in the collateral (a combine and header) securing the loan was discharged in bankruptcy.   In re Preston, No. 18-41253, 2019 Bankr. LEXIS 3864 (Bankr. D. Kan. Dec. 20, 2019). 

Ag bankruptcy.  A unique set of rules can apply to farmers that file bankruptcy.  Chapter 12 bankruptcy allows farmers to de-prioritize taxes.  That can be a huge benefit.  Knowing how best to utilize those rules is very beneficial.

Income tax.  Tax and tax planning permeate daily life.  Deferral contracts; depreciation; installment sales; like-kind exchanges; credits; losses; income averaging; reporting government payments; etc.  The list could go on and on.  Having a basic understanding of the rules and the opportunities available can add a lot to the bottom line of the farming or ranching operation. 

Real property.  Of course, land is typically the biggest asset in terms of value for a farming and ranching operation.  But, land ownership brings with it many potential legal issues.  Where is the property line?  How is a dispute over a boundary resolved?  Who is responsible for building and maintaining a fence?  What if there is an easement over part of the farm?  Does an abandoned rail line create an issue?  What if land is bought or sold under an installment contract? 

Estate planning.  While the federal estate tax is not a concern for most people and the vast majority of farming and ranching operations, when it does apply it’s a major issue that requires planning.  What are the rules governing property passage at death?  Should property be gifted during life?  What happens to property passage at death if there is no will?  How can family conflicts be minimized post-death?  Does the manner in which property is owned matter?  What are the applicable tax rules?  These are all important questions.

Business planning.  One of the biggest issues for many farm and ranch families is how to properly structure the business so that it can be passed on to subsequent generations and remain viable economically.  What’s the best entity choice?  What are the options?  Of course, tax planning is part and parcel of the business organization question. 

Cooperatives.  Many ag producers are patrons of cooperatives.  That relationship creates unique legal and tax issues.  Of course, the tax law enacted near the end of 2017 modified an existing deduction for patrons of ag cooperatives.  Those rules are very complex.  What are the responsibilities of cooperative board members? 

Civil liabilities.  The legal issues are enormous in this category.  Nuisance law; liability to trespassers and others on the property; rules governing conduct in a multitude of situations; liability for the spread of noxious weeds; liability for an employee’s on-the-job injuries; livestock trespass; and on and on the issues go.  It’s useful to know how the courts handle these various situations.

Criminal liabilities.  This topic is not one that is often thought of, but the implications can be monstrous.  Often, for a farmer or rancher or rural landowner, the possibility of criminal allegations can arise upon (sometimes) inadvertent violation of environmental laws.  Even protecting livestock from predators can give rise to unexpected criminal liability.  Mail fraud can also arise with respect to the participation in federal farm programs.  The areas of life potentially impacted with criminal penalties are worth knowing, as well as knowing how to avoid tripping into them.

Water law.  Of course, water is essential to agricultural production.  Water issues vary across the country, but they tend to focus around being able to have rights to water in the time of shortage and moving the diversion point of water.  Also, water quality issues are important.  In essence, knowing whether a tract of land has a water right associated with it, how to acquire a water right, and the relative strength of that water rights are critical to understand.

Environmental law.  It seems that agricultural and the environment are constantly in the news.  The Clean Water Act, Endangered Species Act and other federal (and state) laws and regulations can have a big impact on a farming or ranching operation.  Just think of the issues with the USDA’s Swampbuster rules that have arisen over the past 30-plus years.  It’s good to know where the lines are drawn and how to stay out of (expensive) trouble.

Regulatory law.  Agriculture is a very heavily regulated industry.  Animals and plants, commodities and food products are all subject to a great deal of regulation at both the federal and state level.  Antitrust laws are also important to agriculture because of the highly concentrated markets that farmers buy inputs from and sell commodities into.  Where are the lines drawn?  How can an ag operation best position itself to negotiate the myriad of rules?   

Conclusion

The academic semesters at K-State and Washburn Law are about to begin for me.  It is always encouraging to me to see students getting interested in the subject matter and starting to understand the relevance of the class discussions to reality.  The Principles text is one that can be very helpful to not only those engaged in agriculture, but also for those advising agricultural producers.  It’s also a great reference tool for Extension educators. 

If you are interested in obtaining a copy, you can visit the link here:  http://washburnlaw.edu/practicalexperience/agriculturallaw/waltr/principlesofagriculturallaw/index.html

January 17, 2020 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Wednesday, January 15, 2020

Ag Law in the Courts – Feedlots; Dicamba Drift; and Inadvertent Disinheritance

Overview

It’s been over two months since I last did a post surveying court action of interest to farmers and ranchers.  I owe readers a couple of those types of posts to catch up.  It’s not that the courts have been quiet.  They haven’t.  I have just been writing about other things – including top legal and tax developments of 2019.  So, for today’s post I take a look at a few recent developments in the courts – this time two court opinions each from Iowa and Missouri.  The issues involve livestock feeding facilities, Dicamba drift and disinheritance.

Ag law in the courts – that’s the topic of today’s post.

Time Limit for Suing a Livestock Facility on Nuisance Claims

Dvorak v. Oak Grove Cattle, L.L.C., No. 18-1624, 2019 Iowa App. LEXIS 743 (Iowa Ct. App. Aug. 7, 2019).

The plaintiffs owned property adjacent to the defendant’s cattle feedlot. The feedlot began operating in 2006 and was investigated in 2009 and 2013 by the Iowa Department of Natural Resources (IDNR) due to manure run-off issues. The IDNR required that the defendants take remedial action. In 2016 the plaintiffs sued for negligence, trespass, and nuisance. The plaintiffs claimed, "from approximately 2009 to the present there have been multiple occasions when manure from [the defendant’s] cattle lot has entered upon, and traversed over, [the plaintiffs’] property." The defendant countered with a claim for defamation, arguing that the plaintiffs made false statements about the feedlot and published it to third parties. The defendant moved for summary judgment arguing that the nuisance cause of action was barred by the five-year statute of limitations. The trial court granted the motion for summary judgment on the basis that the plaintiffs were claiming that the feedlot was a permanent nuisance from its inception in 2006.  Thus, the nuisance suit should have been brought within five years of that time, according to the defendant.  The plaintiffs did not make separate nuisance claims for each instance of runoff which would make their claims an intermittent nuisance.

On further review, the appellate court reversed and remanded. The only issue on appeal concerned the statute of limitations. The parties agreed that a five-year statute of limitations applied.  But, did it start to run from the time the feedlot was established, or upon each occurrence of manure runoff?  In other words, was the manure runoff a permanent nuisance or a continuing nuisance?  If the manure runoff constituted a permanent nuisance, the statute of limitations began to run in 2006 and would have expired in 2011. Conversely, If the manure runoff amounted to an intermittent nuisance, the statute of limitations would start upon each occurrence. The appellate court determined that the defendant failed to meet the burden of proof that the runoff was a permanent nuisance in order to sustain the motion for summary judgment. Permanence of a nuisance, the appellate court held, goes to the injury itself and the defendant did not show that the damage to the plaintiffs’ property could not be cleaned up or abated. Instead, the defendant relied upon the contention that the runoff from the feed lot was not temporary. The appellate court determined that he feedlot itself is a permanent nuisance but the runoff itself is a temporary nuisance. Thus, the plaintiffs’ suit was not time barred. 

CAFO Permit Properly Granted 

K Tre Holdings, LP v. Missouri Department of Natural Resources, No. SD35512, 2019 Mo. App. LEXIS 1146 (Ct. App. Jul. 26, 2019)

In early 2016, a farm applied for a "General Operating Permit" to operate a Class 1C poultry Confined Feeding Operation “CAFO” in southwest Missouri.  Later that year, the farm was issued a “State No-Discharge" CAFO operating permit. The plaintiff challenged the issuance before the Administrative Hearing Commission (ACH), and the ACH determined that the CAFO permit was issued in accordance with the applicable state law and regulations. In late 2017, the defendant (state Dept. of Natural Resources) affirmed. The plaintiff sued and that state appellate court affirmed. The appellate court noted that the farm provided a 2014 google map image with labels and setback distances marked. Other maps were also presented during the agency hearings and submitted as evidence. The appellate court determined that the defendant’s decision was supported by sufficient evidence. The maps provided the necessary information to determine whether the setback distance requirements had been satisfied. The appellate court also determined that the farm did not have to provide a copy of proposed building plans to obtain a building permit, and that the plaintiff could not challenge the ACH appointment of commissioners. 

Some Dicamba Drift Claims Proceed

Bader Farms, Inc. v. Monsanto Co., No. MDL No. 1:18md2820-SNLJ, 2019 U.S. Dist. LEXIS 114302 (E.D. Mo. Jul. 10, 2019)

Dicamba drift issues have been in the news and the courts over the past couple of years.  In this case, the plaintiff claimed that his peach orchard was destroyed after the defendants (Monsanto and BASF) conspired to develop and market dicamba-tolerant seeds and dicamba-based herbicides. The plaintiff claimed that the damage to the peaches occurred when dicamba drifted to his peach orchard after being applied to neighboring fields. The plaintiff claimed that the defendants released the dicamba-tolerant seed with no corresponding dicamba herbicide that could be safely applied. As a result, farmers illegally sprayed an old formulation of dicamba herbicide that was unapproved for in-crop, over-the-top, use and was "volatile"  - meaning that it was highly likely to drift. While many cases had previously been filed on the dicamba drift issue, the plaintiff did not join the other litigation because it focused on damages to soybean crops.

Monsanto moved to dismiss the plaintiff’s claims that were based on failure to warn; negligent training; violation of the Missouri Crop Protection Act; civil conspiracy; and joint liability for punitive damages. BASF moved to dismiss those same claims except those for failure to warn. Monsanto argued that the failure to warn claims were preempted by the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), but the plaintiff claimed that no warning would have prevented the damage to the peaches. The trial court determined that the plaintiff had adequately plead the claim and denied the motion to dismiss this claim. Both Monsanto and BASF moved to dismiss the negligent training claim, but the trial court refused to do so. However, the trial court did dismiss the claims based on the Missouri Crop Protection Act, noting that civil actions under this act are limited to “field crops” which did not include peaches. The trial court did not dismiss the civil conspiracy claim based on concerted action by agreement, but did dismiss the aiding and abetting portion of the claim because that cause of action is not recognized under Missouri tort law. The parties agreed to a separate jury determination of punitive damages for each defendant.

The saga continues. 

Inadvertent Disinheritance – Words Means Things

In re Trust Under the Will of Daubendiek, 929 N.W.2d 723 (Iowa Ct. App. 2019)

This case has an unfortunate (and, I believe, incorrect result).  It points out that sometimes courts are willing to strictly apply the law even in light of a potentially absurd result.  It also points out that lawyers drafting wills and trusts have to carefully consider the words that they use and how those words might be applied years later.  

Here, the testator created a will in 1942 which contained a trust. The trust had nine beneficiaries and specified that in the event of a named beneficiary’s death, the beneficiary’s interest would pass to the beneficiary’s “lawful bodily issue.” The testator died in 1948, and in 1956 one of the named beneficiaries (a grandson of the testator) adopted a child. The grandson died in 2016, and the adopted child (great-grandson of the testator) sought court confirmation that he and his descendants were the “lawful bodily issue” of the beneficiary for purposes of the trust. The trial court disagreed and granted summary judgment for the trustee, effectively disinheriting the great-grandson.

On further review, the appellate court affirmed. While the appellate court noted that Iowa law presumes that a testator intends to treat an adopted child in the same manner as a natural born child, this presumption does not apply when an intent to exclude the adopted child is shown in the will. The appellate court held that intent to exclude was present by the testator’s repeated use of “lawful bodily issue” after denoting every named trust beneficiary to describe who received that share of the trust upon a particular beneficiary’s death. The appellate court cited a 1983 Iowa Supreme Court opinion where that Court said that a similar phrase, “heirs of the body,” did not include adopted children. The appellate court concluded that there was no reasonable interpretation of the will/trust that allowed for an adopted child who is not a beneficiary’s “lawful bodily issue” to receive a share of the trust.

An expert on wills and trusts (and my law school professor on the same subject) testified that lawyers often use “legalisms” without the client providing express direction for such terminology.  As such, in his view, the phraseology of the will was ambiguous and created a genuine issue of material fact.  That would have bearing on the issue of the testator’s intent – the “polestar” or directing principle of construing a will.  But, the court refused to consider the professor’s point as being a legal argument concerning a legal issue – an opinion as to a legal standard.  As such, the court said it would not be considered.  But with that said, the court did consider it and still concluded that the will was clear and the great-grandson was to be disinherited. 

I take issue with the appellate court’s opinion.   The court read "lawful bodily issue" in a way that disinherited the great grandson without the testator specifically saying that is what he wanted to do.  Normally, disinheriting someone requires the testator’s clearly expressed intention.  Did the attorney in 1942 explain what the phrase “lawful bodily issue” meant to the testator and the effect that it possibly could have 74 years later?  Highly unlikely.  At a minimum the phrase created an ambiguity.   Also, the appellate court made no mention of the fact that under Iowa law, a legally adopted child is treated as blood relation (“lawful bodily issue”) of the adoptive parent(s) for purposes of intestacy. Thus, had the grandson involved died intestate, Iowa law would have treated the great grandchild as “lawful bodily issue.” The appellate court did not address this potentially absurd result of its opinion – making disinheritance of a great grandson dependent on whether the great grandson’s father died without a will.

Words mean things – sometimes unintended things. 

Conclusion

I will do another post on more developments in the courts soon. 

January 15, 2020 in Civil Liabilities, Estate Planning | Permalink | Comments (0)

Wednesday, January 1, 2020

Top Ten Agricultural Law and Tax Developments from 2019 (Numbers 10 and 9)

Overview

2019 contained many legal and tax developments that were of importance to agricultural producers, rural landowners, agribusinesses and others tied to the business of agriculture.  The legal and tax systems impact agriculture in many ways.  From environmental and water issues to income tax and estate/business planning issues, to bankruptcy and contract issues, to financing and liability issues as well as others, there are many ways that legal and tax issues impact agriculture.    

On Monday’s post, I highlighted what I viewed as significant developments but not significant enough to make my “Top 10” list for 2019.  In today’s post, I start the journey through the ten biggest legal and tax developments of 2019 in terms of their impact (or potential impact) on the agricultural sector.

The “Top Ten” of 2019 – developments 10 and nine.  It’s the topic of today’s post.

  1. The Relevance of Roundup Jury Verdicts

2019 saw more juries render verdicts in cases involving alleged damages by Roundup.  The jury verdicts have been in the multi-millions of dollars.  Presently, over 11,000 cases involving Roundup have been filed and are awaiting trial and adjudication.  The basic claim in each case is that the use of Roundup caused some sort of physical injury to the plaintiff.  In many of the cases, the claim is that physical injury occurred after usage (usually over a long period of time) of Roundup.  While the temptation may be great to dismiss the recent verdicts as the result of raw emotion and passion by juries that don’t have much, if any, relation to agriculture, that temptation should be resisted.  It is true that juries tend to react based on emotion to a greater degree than do judges (indeed, the judge in the 2018 case significantly reduced the jury verdict), but that doesn’t mean that there aren’t some “take-home” implications for farming and ranching operations at this early stage of the litigation.

Farming and ranching operations should at least begin to think about the possible implications of the Roundup litigation. 

  • What about lease agreements? Farmers and ranchers that lease out farmland and pasture may want to reexamine the lease terms. Consideration should be given as to whether the lease should incorporate language that specifies that the tenant assumes the risk of claims arising from the use of Roundup or products containing glyphosate.  Relatedly, perhaps language should be included that either involves the tenant waiving potential legal claims against the landlord or provides for the landlord to be indemnified by the tenant for any and all glyphosate-related claims.  Should language be included specifying that the tenant has the sole discretion to select chemicals to be used on the farm and that any such chemicals shall be used in accordance with label directions and any applicable regulatory guidance?  How should the economics of the lease be adjusted to reflect this type of lease language?  The tenant is giving up some rights and will want compensation for the loss of those rights.  If the lease isn’t in writing, perhaps this is a good time to reduce it to writing. 
  • Is the comprehensive liability policy for the farm/ranch sufficient to cover glyphosate-related claims? Many farm comprehensive general liability policies contain “pollution exclusion” clauses.  Do those clauses exclude coverage for glyphosate-related claims?  How is “pollution” defined under the policy?  Does it include pesticides and herbicides and associated claims?  Does it cover loss to livestock that consume corn and/or soybeans that were grown with the usage of chemicals containing glyphosate?  Can a rider be obtained to provide coverage, if necessary?  These are all important questions to ask the insurance agent and an ag lawyer trained in reading farm comprehensive liability policies. 
  • If the farm employs workers, should that arrangement be modified from employer/employee to independent contractor status? If employee status remains and an employee sues the employer for alleged glyphosate-related damages, what can be done?  Will enrolling the farm in the state workers’ compensation program provide sufficient liability protection for the farming/ranching operation?      

What About Food Products?

To date, the cases have all involved the use of Roundup directly over a long period of time.  At some point will there be cases where consumers of food products claim they were harmed by the presence of glyphosate in the food they ate?  If those cases arise, given the use of production contracts in agriculture and the possibility of tracing back to the farm from which the grain in the allegedly contaminated food product was grown, does the farmer have liability?  If you think this is far-fetched, remember that there is presently a member of the U.S. House that is proposing the regulation (if not elimination) of cows with flatulence.  Relatedly, there are certain segments of the population that are opposed to the manner in which modern, conventional agriculture is conducted.  These persons/groups would not hesitate in trying to pin liability all the way back down the chain to the farmer. 

The Roundup litigation shouldn’t be ignored.  It may be time to start thinking through possible implications and modifying certain aspects of the way the typical farm or ranch does business in order to provide the greatest liability protection possible. 

  1. Ag Antitrust – The Ability of a Farmer To Sue For Anticompetitive Conduct

The markets for the major ag products in the U.S. are highly concentrated.  This raises economic and legal questions as to whether the conduct that such concentration makes possible improperly denies farmers a proper share of the retail food dollar and simultaneously increase prices to consumers.  In other words, does the conduct associated with market concentration at these various levels negatively impact commodity prices, and result in producers receiving less of the retail food dollar while consumers simultaneously pay more for food?  If so, what can a farmer or rancher do about it?  Does antitrust law provide a remedy? Does it matter that a farmer/rancher is not a directly injured party?  In 2019, the U.S. Supreme Court decided a case involving the Apple Co. and IPhone users that involves some of these concepts.  The Court’s decision has implications for agriculture. 

In 1977, the U.S. Supreme Court held in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), that a plaintiff cannot claim damages when the plaintiff is not the party that was directly injured.  In other words, even if an antitrust violation can be established that results, for example, in ag product prices being lower than a competitive market would produce, Illinois Brick bars the farmer/rancher from suing for damages due to lack of standing because they haven’t been directly injured – there is a processor in-between.

Note:   Since 1977, most states have enacted laws or have judicial opinions that reject the Illinois Brick decision (which are not preempted by federal law – see California v. ARC America, 490 U.S. 93 (1989)).  In these states, indirect purchasers can seek recovery under state antitrust laws. 

In Apple Inc. v. Pepper, et al., 139 S. Ct. 1514 (2019), IPhone users sued Apple Inc. over its operations of the App Store.  The trial court held that the consumers in the case were indirect purchasers that lacked standing due to Illinois Brick.  The Ninth Circuit reversed (Pepper v. Apple Inc., 846 F.3d 313 (9th Cir. 2017)) and the U.S. Supreme Court agreed to hear the case (Apple Inc. v. Pepper, 138 S. Ct. 2647 (2018)On May 13, the Supreme Court affirmed the Ninth Circuit decision by a 5 to 4 vote.  Thus, the plaintiffs could pursue their claims against Apple for allegedly monopolizing access to apps for Apple’s iPhones and imposing monopoly prices.  Apple had constructed its arrangement with the app developers so that formally the developers set the prices charged to buyers and Apple took a 30 percent commission from that price before remitting the remainder to the developer.  Thus, as a formal contract matter, Apple was only the agent of the developer although the customers could only deal with Apple to get apps.  The majority took the view that Apple was a retailer of apps with an alleged monopoly over the supply.  In this view the formal contract relationship between the developer and Apple was irrelevant to the question of whether the buyers were the first victim to Apple’s alleged monopoly. 

Thus, the court was unanimous that the Illinois Brick rule should remain.  However, the decision appears to reject the use of formal contracts to determine who is the first buyer.  This is consistent with historic practice in antitrust where courts have looked to the substance and not the form of the conduct.  However, to determine who is the first seller, the majority focused on transactional characteristics that seem very formal. But it repeatedly characterized Apple as a classic retailer that selected the goods it would sell, and generally controlled the marketing of the goods.  In contrast, there are real “agents” who function as independent contractors to deliver goods for others and remit the payments.  The decision does not make this distinction explicitly but its repeated characterization of Apple as a retailer suggests that the majority was taking a realistic, functional view of the relationship. A more nuanced analysis of this point would have been very helpful.

Peter Carstensen, antitrust expert and Professor Emeritus of the Wisconsin School of Law commented to me that because the decision leaves the Illinois Brick rule in place, it fails to give farmers any direct expansion of their right to damages under federal law.  Of greater significance for agriculture where the concern is exploitation of monopsony or oligopsony power, Prof. Carstensen noted that the majority opinion is clear that both downstream customers and upstream suppliers (e.g., farmers) can sue the buyer/seller engaged in anticompetitive conduct causing harm.  This is helpful with respect to poultry and (potentially) hog cases brought on behalf of farmers providing growing services. It confirms their independent right to claim damages.  This declaration is also relevant to the continuing disputes over the interpretation of the Packers and Stockyards Act (PSA) condemnation of unfair and discriminatory conduct. 7 U.S.C. §§182 et seq. The courts have imposed an interpretation that holds that the PSA is an antitrust statute which requires competitive injury before there can be a violation.  In addition, the decisions have required that there be an adverse effect on consumers and not just producers.  Prof. Carstensen noted that the Pepper decision re-emphasizes the well-established antitrust principle that both upstream and downstream harms are independent antitrust injuries.  In future PSA cases proof of harm to producers should establish “harm to competition.” 

Another implicit but important underlying assumption of the case is that Illinois Brick applies to exploitive conduct (i.e., either excessive prices imposed on buyers, or under payment to sellers).  The implication is that this rule has no bearing on cases involving exclusion or predation where the illegal conduct harms the victims but does not create a direct gain to the wrongdoer.  Unlike the exploitation cases, the predatory wrongdoer is not sitting on a “pot of money” resulting from its illegal deeds; rather it has expended resources to exclude rivals or entrench its market position in some way.  In such cases the measure of harm is the loss to the victim and not the gain to the wrongdoer.  This is important because usually the harm results from some market manipulation or exclusionary practice in which the wrongdoer causes the harms without directly dealing with the victim. Where farmers are victims of such exclusionary practices even if the harm is inflicted indirectly, they would still have standing to seek damages as well as injunctions in federal court.

On the whole, Prof. Carstensen concluded that the Supreme Court reaffirmed the Illinois Brick rule.  However, it employs a functional analysis to identify the first buyer (seller).  This may improve slightly the chances of farmers getting damages in federal court when buyers engaged in unlawful exploitation have used agents or other specious means to avoid direct dealings.  But the rule remains a major barrier to getting damages for farmers harmed indirectly by exploitive practices by downstream buyers.  Where the farmers’ harm stems from exclusionary or predatory conduct, the decision reinforces the position that the rule does not apply to such damages.  But, it also provides a further correction to the misinterpretations of competitive harm invoked in PSA cases.  The Court’s opinion is a helpful one for agriculture.

Conclusion

In Friday’s post, I will continue the trek through the Top Ten of 2019. 

January 1, 2020 in Civil Liabilities, Regulatory Law | Permalink | Comments (0)

Tuesday, November 19, 2019

Fence Law Basics

Overview

Robert Frost once said that, “Good Fences make good neighbors.”  To paraphrase G.K. Chesterton, “Whenever you remove any fence, pause long enough to consider why it was put up there in the first place.”  Both quotes are sound advice.  Of all the areas of agricultural law that I field questions concerning, outside of farm income tax and farm estate and business planning, perhaps questions concerning fences (and leases) are the most abundant.    

Most states have numerous laws concerning partition fences. Those laws involve such issues as the construction of fences; what is deemed to be a “legal” fence; liability for damages caused by livestock that escape their enclosure; the maintenance of partition fences; the role of the county officials serving as fence viewers in settling fence disputes; and rules for handling stray animals.

Fences and the legal issues for farmers, ranchers and rural landowners – it’s the topic of today’s post.

Partition Fences and Location Issues

State law commonly specifies that a partition fence is to be placed on the line between tracts of land owned by different persons, but also does allow for a partition fence to be located entirely on side of the boundary.  See, e.g., Kan. Stat. Ann. §§29-316; 317. 2 Kan. Stat. Ann. §60-503.  Having a fence located on one side of the actual property boundary may not raise an issue concerning ownership of the land that is fenced, but if such a fence has been in place for long-enough time and the adjacent landowners have, over time, come to believe that the fence marks the boundary then the fence may become the actual boundary regardless of what a deed or survey says. So, in an agricultural setting, usage of property may determine property boundaries more often than do surveys. On this point, there are two different, but related theories that may apply to determine the amount of land owned by the adjacent landowners.

Adverse possession. Under the adverse possession theory, a landowner may acquire title to property by making an open and notorious use of the property for a statutorily-prescribed timeframe that varies among the states from two to 21 years.    In general, this theory can be utilized if the adjacent parties know that the fence between their properties is not on the boundary but do know where the actual boundary is located (thus, the possession is knowingly adverse) and one party is benefited by the misplaced fence, but the other party doesn’t take any action to remedy the problem within the statutory timeframe.

Doctrine of practical location.  The doctrine of practical location can be used in situations where the parties know that the fence is not on the boundary, but don’t know where the actual boundary is located. Thus, one party has a good faith belief of ownership. Similarly, after the statutorily-prescribed timeframe of usage of a fence as the boundary, the fence can become the actual boundary between the tracts.

Building and Maintenance Issues

In general, the owners of adjoining lands are required to build and maintain in good repair all partition fences in equal shares, unless the parties agree otherwise.  The duty to maintain a partition fence confers on the landowner the privilege to lawfully enter onto the adjoining landowner’s property at reasonable times and in a reasonable manner to maintain the fence.  In practice, many adjoining landowners adopt the “right-hand” or “left-hand” rule — they face each other at the mid-point of their fence and agree to build and/or maintain the portion of the fence to either their respective right or left. Of course, adjacent landowners can execute a written fence agreement specifying the part of the fence that each party is responsible for building or maintaining. Such an agreement can be recorded and thereby become part of the land records that will bind subsequent owners of the properties.

Fence-in or fence-out?  States that are not in the western part of the United States follow the “fence-in” rule.  That means that livestock owners are required to fence their animals in.  But, as stated above, state law in these states also requires that the owners of adjoining lands build and maintain in good repair all partition fences in equal shares.  That sometimes creates problems when a livestock owner shares a partition fence with a crop farmer or other landowner who does not graze livestock and, hence, has no need for a fence. But, if an adjacent non-livestock owner does not participate in the maintenance of their share of the partition fence, and injury results to them because of the defective fence that they were required to maintain, they cannot recover for damages caused by the adjacent landowner’s stock.  Also, a non-livestock owner will be held liable to others who are damaged by the neighbor’s livestock escaping through the defective partition fence that the non-livestock owner is required to maintain.  However, there can be special rules in a particular state that might also apply in this situation.  See, e.g., Kan. Stat. Ann. §29-309. 

Procedure for Handling Fence Disputes

In some instances, adjoining landowners may come to an agreement as to how to allocate the responsibility between themselves for the building and/or maintenance of a partition fence. If an agreement is reached, it may be wise to put the agreement in writing and record it in the county Register of Deeds office in the county where the fence is located. However, if the adjoining landowners cannot reach an agreement concerning fence building and/or maintenance, most states require that the fence be called.  The fence viewers are some governmental body of elected officials (who sometimes don’t know that they have a statutory obligation to view partition fences). 

Under Kansas law, for example, the county commissioners (or their designees) in the county where the fence in question is located are the fence viewers.  Kan.Stat. Ann. § 29-201.  For partition fences that are on the boundary between counties, state law should specify the procedure to be followed to determine who is responsible for viewing the fence.  Detailed rules often apply in determining how the view is to be conducted, whether a majority vote is required for determinations, and the appeal procedure if a landowner objects to the conclusions of the viewers.  Ultimately, state law (or caselaw) will provide a mechanism to get a partition fence repaired and the proper party compensated for any work done.

What Is a Legal Fence?

State law specifies what a legal fence is in that particular state.  Sometimes, a statewide requirement applies.  In other jurisdictions, an individual county can set the legal fence requirements.  Generally, the fence viewers can require the parties to build only what is a legal fence in the county. They cannot require a higher-quality fence.   In many states, a legal fence is a barbed wire fence that meets certain specifications, but a legal fence may also be of another type such as posts and rails; post and palings; posts and planks; palisades; stone; post and wires; turf; and electric wire.  State (and/or local) law can be rather detailed on the requirements for a legal fence. 

Escaped Animals – Liability

In general.  In fence-in jurisdictions, if livestock escape through an owner’s faulty fence, the owner is liable for any resulting damages.  However, if the fence is in good shape, the livestock owner is generally not liable absent a showing of negligence.  Evidence of negligence includes such things as gates having been left open, the fence being improperly constructed or maintained, knowledge that the animals were in heat requiring a stronger enclosure or a closer watch, or knowledge that the animals were outside their enclosure and the owner made no attempt to return them. 

The same rules apply when livestock wander onto a public roadway and cause injury to a motorist. In most fence-in jurisdictions, the animal’s owner must be shown to have been negligent.  However, some fence-in jurisdictions apply the doctrine of res ipsa loquitor in livestock/automobile collision cases. The doctrine is a procedural technique that can be used to shift the burden of proof to the livestock owner. In other words, if the doctrine were applied and its elements satisfied, the animal owner would have to prove that owner was not negligent for failing to keep the animal enclosed.

Distraint. If a neighbor’s animals trespass onto an adjoining property owner’s land and the adjoining property owner’s land is lawfully fenced, the adjoining owner may have a right to distrain the animals.  State law often allows a landowner that has been damaged by trespassing livestock to retain the trespassing animals until payment has been made for the damages and the reasonable cost of distraint.  The livestock owner must be notified within a certain timeframe of distraint being utilized.  If the owner can’t be found, a common requirement is that the local sheriff is to be notified.  Once notice is given, the animals can only be held for a few days without bringing legal action against the livestock owner to recover the damages incurred.  As an alternative, many states will allow for the sheriff to be summoned to retrieve the livestock, hold them in custody and dispose of them in accordance with state law procedures.  

What About Railroad Fences?

Typically, landowners do not have any responsibility to build or maintain railroad fences. Instead, railroads are responsible for damages caused to animals that are hit by a train regardless of whether they were negligent or not.  Livestock owners do not have to establish that the railroad was negligent.  However, the liability of a railroad can be waived by the adjacent owner by contract.  But, railroads can avoid liability if they enclose their tracks with a lawful fence. Adjacent landowners can require the railroad to enclose its right-of-way with either a lawful fence or a hog-tight fence, but cannot require the railroad to maintain an electric fence.  If the railroad fails to fence-off its right-of-way, state law often provides a procedure for landowners to follow in getting such a fence built.  Issues can also arise, however, when railroads abandon lines.

Public Roads Through Private Pastures

In states from the Great Plains to points further west, it is possible that a public road may exist through a privately-owned pasture by authorization of the public officials.  In other words, a gate and fence could be authorized to be placed over and across certain public roads, but it couldn’t be authorized to be locked to prohibit general public access to the road.  In these situations, the road can be either auto-gated or cattle-guarded. If a gate is used and is left open, criminal penalties can apply. 

Responsibility for Highway Fences

In some states, it is conventional to expect landowners to build highway fences. Other states have resolved the issue by placing a common law duty on the state highway commission or department of transportation the non-delegable responsibility to keep the highways in a reasonably safe condition.

Conclusion

Fences can create numerous legal issues for farmers, ranchers and rural landowners.  Unfortunately, some of those issues can escalate such that a lawyer trained in agricultural fence law issues becomes necessary. 

November 19, 2019 in Civil Liabilities | Permalink | Comments (1)

Friday, November 8, 2019

Ag Law In The Courts

Overview

This month’s installment of legal developments in the courts involving agriculture features odors, estate planning and a farm program regulation. Farmers, ranchers, rural landowners and agribusinesses sometimes find themselves in disputes with other private parties or state or federal government agencies.  Once a month I try to feature a several developments that illustrate the problems that can arise and how they are resolved.

The November installment of ag law in the courts – that’s the focus of today’s post.

The Case of the Obnoxious Odors

Agricultural production operations and ag businesses sometimes produce offensive odors (at least to some).  While neighbors might complain and state and local governments may try to regulate, the question is really one of the relative degree of offensiveness.

In Chemsol, LLC, et al. v. City of Sibley, 386 F. Supp. 3d 1000 (N.D. Iowa 2019), the plaintiffs owned and operated a milk drying facility. Allegations arose that the facility made the local town, the defendant in the case, smell like “rotten eggs, dried blood, rotten animal carcasses (boiling, burning and decomposing), vomit, human waste and dead bodies.” The defendant enacted an odor ordinance in 2013 which prohibited the creation or maintenance of a nuisance," and defined nuisance to include "offensive smells.”  The ordinance barred the following:  “The erecting, continuing or using of any building or other place for the exercise of any trade, employment or manufacture which, by occasioning noxious exhalations, offensive smells or other annoyances, becomes injurious and dangerous to the health, comfort or property of individuals or the public.” In 2015 the town increased the penalties for violating the ordinance from $100 per offense to $750 for a "first offense," and $1,000 for repeated violations. In 2016, the ordinance was amended to clarify that: "[N]uisance" shall mean whatever is injurious to health, indecent, or unreasonably offensive to the senses, or an obstruction to the free use of property, so as essentially to interfere unreasonably with the comfortable enjoyment of life or property. *** Offensive Smells: The erecting, continuing or using of any building or other place for the exercise of any trade, employment or manufacture which, by occasioning unreasonably noxious exhalations, unreasonably offensive smells or other unreasonable annoyances, becomes injurious and dangerous to the health, comfort or property of individuals or the public.” (emphasis added).

From 2012 to 2016 the plaintiffs did not receive any citations under the odor ordinance. In 2016 the plaintiffs began receiving citations but didn’t pay or appeal the associated fines. Abatement of the nuisance was negotiated, but the odors problems persisted. The plaintiffs received 36 citations in 2016 (16 before the abatement hearing and 20 after), four citations in 2017 and one citation in 2018. The plaintiffs chose to reduce odors by drying less product. The plaintiffs sued on the basis that the ordinance violated their due process by causing them to lose business and become unable to sell the business due to bad publicity. The plaintiffs also alleged a constitutional taking had occurred and that the town had tortuously interfered with business operations. The defendant moved for summary judgment and the court agreed.

The court noted that the plaintiffs did not build the plant on any promise or assurance that the defendant would not be enact such an ordinance, and it was within the defendant’s jurisdiction to enact such an ordinance for a facility within the defendant’s limits. The court also determined that the ordinance did not rise to a regulatory taking because economic use of the plaintiffs’ property remained. The court also concluded that the defendant did not act improperly in enforcing the ordinance or in speaking to potential buyers. 

The Case of Crop Insurance Coverage Computation

Under the crop insurance program of the 2014 Farm Bill, crop insurance coverage for low yield losses was to be determined based on actual production history (APH). However, APH is determined by excluding abnormally low-yield years in the computation.  In this case, JL Farms v. Vilsack, No. 2:16-cv-02548-CM-GEB, 2019 U.S. Dist. LEXIS 106789 (D. Kan. Jun. 26, 2019), the Risk Management Agency (RMA) determined that the 2015 winter wheat crop was not excludible from the APH. Thus, the insurer did not exclude the 2015 yield data from the plaintiff’s insurance pay-out computation.

On review by the National Appeals Division ("NAD") of the United States Department of Agriculture. The NAD hearing officer determined that the NAD lacked jurisdiction. On further review the NAD Director again determined that the NAD did not have jurisdiction, but that the RMA had discretion to implement the exclusion. The plaintiff then sought judicial review of the RMA’s decision and the NAD Director’s decision of lack of jurisdiction. The trial court determined that the NAD did have jurisdiction over the matter and remanded the matter to the NAD Director for reconsideration of the exclusion of the 2015 wheat crop from the plaintiff’s APH. The trial court also referenced a recent decision by the U.S. Court of Appeals for the 10th Circuit holding that the Congress intended the exclusion to be available for the 2015 crop year (winter wheat planted in 2014). 

The Ruling on the Reformed Trust

Trusts are very popular tools that are used in estate planning.  One of the key benefits is that they provide a great deal of flexibility to adjust to unknown events that might occur in the future.  One way in which that is done is by including a power of appointment in a trust.  A power of appointment gives the holder of the power the ability to direct the assets of the trust in a certain manner and in a certain amount.  Essentially, the power of appointment gives the person that creates the power in someone else the ability to determine how the property will be distributed at some point in the future.  Basically, the power creates the ability to defer deciding the ultimate distribution of trust assets.  For example, assume that a husband dies and leaves property in trust for his surviving wife and their children.  When the surviving spouse dies, the trust specifies that the remaining trust assets are to pass equally to the children, unless the surviving spouse exercises the power of appointment that was included in the husband’s trust.  At the time of the husband’s death, $2 million worth of assets was included in the trust and the couple had two children, each equally situated in life.  However, when the surviving spouse dies years later, perhaps the children aren’t so equally positioned anymore – one is rather well off and the other is struggling.  The exercise of the power of appointment can give the surviving spouse the ability to “unbalance” the disposition of the trust assets and leave more assets to the child with greater needs. 

A general power of appointment is one that is exercisable in favor of the decedent, his estate, his creditors or the creditors of his estate.  I.R.C. §2041(b)(1). It also means a power that is exercisable in favor of the individual possessing the power, his estate, his creditors, or the creditors of his estate.  I.R.C. §2514(c). Generally, the lapse of a power of appointment during the life of the individual who has the power of appointment is a release of the power.  I.R.C. §2041(b)(2)But, this rule only applies to a lapse of powers during any calendar year to the extent that the property which could have been appointed by exercise of such lapsed powers exceeded the greater of $5,000 or 5% of the aggregate value of the assets out of which the exercise of the lapsed powers could have been satisfied.  I.R.C. §§2041(b)(2); 2514(e).  In addition, generally the exercise or release of a general power of appointment is a transfer of property by the individual possessing such power.  I.R.C. §2514(c).  When that occurs, it can result in a taxable gift to the trust and/or inclusion of the assets in the power holder’s estate.  If large dollar values are involved, that can be a disastrous result.

A recent IRS ruling involved a trust that contained a general power of appointment that had been drafted incorrectly.  The question was whether that error could be corrected without triggering gift tax or causing the property to be included in the power holder’s estate.  In Priv. Ltr. Rul. 201941023 (May 29, 2019), the settlor created an irrevocable trust for the benefit of his six children. The purpose of the trust was to provide for his descendants and reduce transfer taxes by keeping trust assets from being included in a primary beneficiary’s gross estate. Under the trust terms, each child had his or her own separate trust (collectively, Children’s Trusts; individually, Child’s Trust). Each child was the primary beneficiary of his or her Child’s Trust.

Unfortunately, the trust had a drafting error pertaining to the withdrawal provision – it didn’t limit the general power of withdrawal right of a primary beneficiary over assets contributed to the trust to the greater of $5,000 or five percent of the value of the trust assets as I.R.C. §2041(b)(2) required. Thus, any lapse of a primary beneficiary’s withdrawal right would be a taxable transfer by that particular primary beneficiary under I.R.C. §2514 to the extent that the property that could have been withdrawn exceeded the greater of $5,000 or five percent of the aggregate value of the assets. Also, the portion of each child’s trust relating to the lapsed withdrawal right that exceeded the greater of $5,000 or five percent of trust asset value would be included in the primary beneficiary’s estate.

A subsequent estate planning attorney discovered the error in the original drafting upon review of the estate plan. Consequently, the trustee sought judicial reformation to correct the drafting error on a retroactive basis, and the court issued such an order contingent on the IRS favorably ruling. The IRS did favorably rule that the reformation didn’t cause the release of a general power of appointment with respect to any primary beneficiary. The purpose of the reformation, the IRS determined, was to correct a scrivenor’s error and did not alter or modify the trust in any other manner.  That meant that none of the children would be deemed to have released a general power of appointment by reason of the lapse of a withdrawal right that they held with respect to any transfer to their trust.  Thus, no child would be deemed to have made a taxable gift to their trust and no part of any child’s trust would be included in any child’s estate. 

Perhaps there is a “kindler and gentler” IRS after all – at least on this point. 

Conclusion

These are just a small snippet of what’s been going on in the courts and IRS recently that can impact agricultural producers and others involved in agriculture.  Each day brings something new. 

November 8, 2019 in Civil Liabilities, Estate Planning, Insurance | Permalink | Comments (0)

Wednesday, June 5, 2019

Public Trust vs. Private Rights – Where’s the Line?

Overview

Centuries ago, the seas were viewed as the common property of everyone -  they weren’t subject to private use and ownership.  This concept was later adopted in English law, the Magna Carta, and became part of the common (non-statutory) law in the United States.  Over the years, the doctrine has been primarily applied to access to the seashore and intertidal waters, but it can also be applied with respect to natural resources.  A recent case involving seaweed involved the application of the public trust doctrine.

The public trust doctrine and the right to harvest seaweed – that’s the topic of today’s post.

In General

The U.S. Supreme Court’s first application of the public trust doctrine was in 1842 in Martin v. Lessee of Waddell, 41 U.S.367 (1842). In the case, the issue was who had the right to submerged land and oyster harvesting off the coast of New Jersey.  The Court, largely based on the language in the charter granted by the King to a Duke to establish a colony and for policy and economic reasons, determined that the land area in issue belonged to the state of New Jersey for the benefit of the people of the state.  The Court dealt with the issue again in 1892 in a case involving a railroad that had been granted a large amount of the Chicago harbor. Illinois Central Railroad Company v. Illinois, 146 U.S. 387 (1892).  The Court determined that the government cannot alienate (interfere with) the public’s right to access land under waters that are navigable in fact except for situations where the land involved wouldn’t interfere with the public’s ability to access the water or impair navigation. 

As generally applied in the United States (although there are differences among the states), an oceanfront property owner can exclude the public below the mean high tide (water) line.  See e.g., Gunderson v. State, 90 N.E. 3d 1171 (Ind. 2018)That’s the line of intersection of the land with the water's surface at the maximum height reached by a rising tide (e.g., high water mark).  Basically, it’s the debris line or the line where you would find fine shells.  However, traceable to the mid-1600s, Massachusetts and Maine recognize private property rights to the mean low tide line even though they do allow the public to have access to the shore between the low and high tide lines for "fishing, fowling and navigation.  In addition, in Maine, the public can cross private shoreline property for scuba diving purposes.  McGarvey v. Whittredge, 28 A.3d 620 (Me. 2011). 

Other applications of the public trust doctrine involve the preservation of oil resources, fish stocks and crustacean beds.  Also, many lakes and navigable streams are maintained via the public trust doctrine for purposes of drinking water and recreation. 

Recent Case

The public trust doctrine was invoked recently in a Maine case.  In Ross v. Acadian Seaplants, Ltd., 2019 ME 45 (2019), the defendants harvest rockweed with skiffs in the intertidal zones of Maine. Rockweed is a perennial plant that attaches to the rocks in the intertidal zones. Rockweed regulates the temperature of the area where it is located and is home to many organisms. Commercially, rockweed is used for fertilizer and feed. To harvest Rockweed, the defendant uses skiffs, rakes, and watercraft without physically stepping foot on the intertidal zone. The defendant annually harvests the statutory maximum 17 percent of eligible harvestable rockweed biomass in Cobscook Bay. The plaintiff, an intertidal landowner, sued seeking (1) a declaratory judgment that the plaintiff is the exclusive owner of the rockweed growing on and affixed to his intertidal property; and (2) injunctive relief that would prohibit the defendant from harvesting rockweed from the plaintiff’s intertidal land without his permission. The defendant sought a judgment declaring that harvesting rockweed from the intertidal water is a public right as a form of "fishing" and "navigation" within the meaning of the Colonial Ordinance. The trial court granted summary judgment for the plaintiff on the declaratory judgment claim, and on the defendants’ counterclaim. The trial court denied the defendant’s counterclaim.

On appeal, the state Supreme Court affirmed, holding that rockweed that is attached to and growing on rocks in the intertidal zone is private property owned by the adjacent landowner.  The Court noted that the English common law tradition vested both “title” to and “dominion” over the intertidal zone in the crown.  While title belonged to the crown, however, it was held subject to the public’s rights of “navigation,” “commerce,” and “fishing.”  After the American colonies gained independence, the ownership of intertidal land devolved to the particular state where the intertidal area was located.  See, e.g., Phillips Petroleum Co. v. Mississippi, 484 U.S. 469 (1988)But, the Court noted the uniqueness of rockweed.  It takes specialized equipment and skills to harvest it, and harvesting didn’t “look like” the usual activities in the water of fishing and navigation. Instead, it was more like the other uses in the intertidal zone that have been held to be outside the public trust doctrine.  Thus, the Court concluded that the harvesting of rockweed was not within the collection of rights held by the State for use by its citizens – the public couldn’t engage in rockweed harvest as a matter of right.  The Court stated that, "rockweed in the intertidal zone belongs to the upland property owner and therefore is not public property, is not held in trust by the State for public use, and cannot be harvested by members of the public as a matter of right."

Conclusion

The application of the public trust doctrine has the potential to be quite broad.  Environmental activists and others opposed to various agricultural activities often attempt to get courts to apply the doctrine in an expansive manner well beyond public access to that of preservation in general.  The potential application of the doctrine can be rather expansive – nonpoint source pollution from farm field runoff; wetlands; dry sand areas; cattle ranching in areas of the West, etc.  See, e.g., Mathews v. Bay Head Improvement Association, 471 A.2d 355 (N.J. 1984).  The issue is acute in California where a private party can bring an independent action against a state agency under the public trust doctrine when that agency allegedly doesn’t follow the public trust in the conduct of its duties.  See Citizens for Biological Diversity, Inc. v. FPL Group, Inc., 83 Cal. Rptr. 3d 588 (Cal Ct. App. 2008); San Francisco Baykeeper, Inc. v. State Lands Commission, 29 Cal. App. 5th 562, 240 Cal. Rptr. 3d 510 (2018)

In the recent Maine case, the public trust doctrine was not used to unnecessarily erode private property rights.  The Court balanced the public’s rights against those of private property owners.  It wasn’t enough for the plaintiff to simply assert the public trust doctrine. 

Maybe there’s hope that the public trust doctrine will be properly balanced against the rights of private landowners.  The recent Maine case weighs in on that side of the scale. 

June 5, 2019 in Civil Liabilities, Environmental Law, Real Property | Permalink | Comments (0)

Friday, May 10, 2019

More Ag Law and Tax Developments

Overview

It’s been a while since I have devoted a post to recent developments, so that’s what today’s post is devoted to.  There are always many significant developments in ag law and tax.  I was pleased recently when one of my law students, near the conclusion of the course, commented on how many areas of the law that agricultural law touches and how often the rules as applied to farmers and ranchers are different.  That is so true.  Ag law is daily life for a farmer, rancher, rural landowner, and agribusiness in action.

Recent development in ag law and tax – that’s the topic of today’s post.

Chapter 12 Plan Not Feasible

As I have written in other posts, when a farmer files Chapter 12 bankruptcy, the reorganization plan that is proposed must be feasible.  That means that the farmer must estimate reasonable crop yields and revenue based on historical data, and also provide reasonable estimates of expenses.  Courts also examine other factors to determine whether a reorganization plan is feasible.

In, In re Jubilee Farms, 595 B.R. 546, 2018 Bankr. LEXIS 4080 (Bankr. E.D. Ky. Dec. 28, 2018), the debtor, a farm partnership operated by two brothers, farmed primarily corn and soybeans. The Debtors filed Chapter 12 bankruptcy in early 2018. In May of 2018, the Debtors filed a joint Chapter 12 plan, but the secured creditors, FCMA and FCS, objected. The debtors filed an amended Chapter 12 plan providing FCMA with a fully secured claim of roughly $2.7 million and FCS with a fully secured claim of roughly $180,000. The plan provided for periodic payments funded primarily by the debtor’s farming income and supplemented by custom trucking and combining revenue. Additional funding in the first year would come from crop insurance and anticipated federal aid for farmers affected by political activity upsetting foreign crop sales.

The creditors and the Trustee objected to the confirmation of the amended plan on various grounds, but the main argument raised was that the amended plan was not feasible, because the debtor’s one-year income and expense projections were limited and unrealistic compared to the debtor’s historical income and expenses. An evidentiary hearing was held to present projected revenue and expenses for the farm and thus determine the feasibility (whether the debtor could make all plan payments and comply with the plan) of the amended plan.

The court analyzed the projected revenues and expenses for the coming year, and the concluded that the plan was not feasible because the debtors had failed to prove that the plan was feasible beyond March 2019. The court stated that if the debtors only had to prove they could make the payments required up to March 2019, the debtors would prevail because the testimony created a reasonable belief that the receipts necessary to make payments up to that time either had or would soon occur. However, beyond March 2019 that was not the case. The court compared the debtors’ projections to calculations using the yield and price per acre that was supported by the record. The record showed that the debtors could only pay anticipated operating expenses and plan payments after March 2019 if the debtor’s unsupported projections were used. The projections using the bushels per acre and price per bushel only showed revenue of $592,000 to $736,000 with expenses of $872,000. Given this lack of ability to pay combined with the debtor’s projections overstating revenue from soybean production during the 2019 crop year the court found that the debtors anticipated receipts simply did not cover the debtors’ obligations to pay operating expenses and plan payments beyond March 2019. Thus, the plan was not feasible and the court denied confirmation of the amended plan.

Grazing Scam Results in Fraud Convictions

There are various scams that one can get caught up in, but they don’t often involve cattle grazing.  However, a recent case did involve a cattle grazing scam.  In United States v. Hagen, No. 17-3279, 2019 U.S. App. LEXIS 6109 (8th Cir. Feb. 28, 2019), the defendant and his ex-wife set up a company to provide custom grazing in 2004. The ex-wife obtained grazing leases on tribal land from the Bureau of Indian Affairs ("BIA"). The defendant worked with ranchers to set up custom grazing contracts. In 2011, the BIA issued letters to the defendants for non-compliance with leasing procedures. In 2012, the defendants had leased enough pasture to sustain 57.92 cow-calf pairs but contracted to graze with three cattle producers for the lease of 100 cow-calf pairs and 200 heifers. That summer, 70 pairs were grazed for the full term of the grazing contract, and 33 pairs belonging to another rancher were grazed for a day. A third rancher was forced to find other pasture for his heifers. In 2013, the defendants had leased pasture for 91.26 pairs and had contracted with six different producers to graze a total of 380 pairs. A total of $126,500 was paid upfront by the producers. Not a single pair was grazed that summer and no rancher was reimbursed.

In 2014, the defendants had leased pasture for 6.67 pairs and again over-contracted with three ranchers for 300 pairs, who paid $102,500 up front. No pairs grazed during the summer of 2014 and the ranchers were not reimbursed. The defendants were charged with three counts of wire fraud, four counts of mail fraud, and one count of conspiracy to commit mail and wire fraud for their fraudulent contracting/leasing practices. The ex-wife plead guilty to the conspiracy count and testified against the her ex-spouse at trial. He was convicted by a jury on all eight counts. Sentencing included 46 months imprisonment and 3 years of supervised release on each count, restitution in the amount of $236,000, and a $100 special assessment on each count. The defendant appealed on the basis that the evidence was insufficient to prove he had the requisite intent to defraud, and that the two mailings were not in furtherance of any fraud.

The appellate court affirmed the defendant’s conviction of conspiracy to commit mail and wire fraud, but vacated the conviction and special assessments on the other five substantive counts. The appellate court determined that sufficient evidence supported the jury verdict that the ex-husband had conspired to commit fraud by contracting with twelve different cattle producers to graze cattle. Only one of those contracts had been filled, and the defendants failed to issue refunds on the other contracts for the the 2012-2014 grazing seasons. The appellate court also found sufficient evidence to support the jury’s verdict of use of mail and wire to defraud. One of the ranchers had mailed the defendant a $35,000 check, as full payment for the grazing contract and the defendant had cashed the check using a wire transmission a week later. There was a pasture visit where a rancher was assured that the pasture could support 200 pairs. Another contract was signed by the rancher’s son, and another $35,000 check was written to the defendant. This second contract brought the total contracted to graze with the defendant to 200 pairs for $70,000. It later became evident that the defendant only had 40 acres leased, enough to sustain 6.67 pairs. When it came time for delivery, the defendant did not return any calls. The ranch did not graze any cattle that season nor issued refunds for their payments. The appellate court determined that the evidence was sufficient for the jury to conclude that the defendant knowingly only had enough pasture to graze 6 pairs but nonetheless contracted to graze 200 pairs with this rancher. However, the appellate court vacated the convictions and special assessments tied to specific instance of fraud against different ranchers. The dry conditions that limited the length of the grazing season likely lead to a breach of contract for early termination, rather than an intent to defraud. Other mailings by the defendants containing offers to graze cattle were not in furtherance of fraud, and the convictions and special assessments related to these mailings were vacated.

Fences, Boundary Lines and Adverse Possession

Fences and boundary issues present many court cases.  It is certainly true that good fences make good neighbors.  Bad fences and boundary disputes tend to bring out the worst in neighbors.  A recent Alabama case illustrates the issues that can arise when fences and boundary issues are involved.  In Littleton v. Wells, No. 2170948, 2019 Ala. Civ. App. LEXIS 20 (Civ. App. Feb. 22, 2019), a predecessor sold 82 acers to the defendants in 2015. This land had been in the same family for generations, however the seller had only been on the property “maybe twice” since 1989. The plaintiffs received title to their property from their parents, who had been there since 1964. There were three fences between the party’s properties. The defendant relied on a 1964 survey when making his purchase, thinking the property line was the middle fence.  No survey was completed at that time.

In 2000, the mapping office notified the parties of a “conflict.” The office determined the actual boundary to be closer to the fence on the defendant’s property rather than the middle fence. However, this determination was for tax purposes and was not a substitute for a survey. The plaintiffs also treated the third fence line, like the map office, as the boundary line.

The plaintiffs grazed cattle up to the furthest fence and maintained all the ground between the fences as their own. The plaintiff also testified as to working on the furthest fence as a child in the 1960’s. The plaintiffs also showed that they held annual gatherings and the kids would play in the creek on the disputed ground. There was also evidence that the plaintiffs leased the disputed ground to others. The plaintiffs did not present all the witnesses as to the family’s use of the property up to the furthest fence. Nor was the employee of the map office testimony heard in court.

The trial court determined that the property line was to be the closer center fence, not the third fence as the plaintiffs claimed. The court ordered an official survey to their findings and entered that survey as the final order. The plaintiffs appealed. The appellate court reversed and remanded. The plaintiffs’ challenged the trial court’s denial of their adverse possession claim and determination of the location of the boundary line. The court looked at all the evidence on record from trial, when analyzing the plaintiff’s adverse possession claim. The appellate court held that the record showed that the plaintiffs had been in actual, hostile, open, notorious, exclusive, and continuous possession of the disputed property for more than ten years (the statutory timeframe). The plaintiffs had presented evidence to support every one of those elements and the defendants have not rebutted any element. The only evidence the defendant presented to rebut the plaintiffs’ evidence was a “belief” that he owned up to the second fence. Since the lower court was erroneous in determining the adverse possession claim, the appellate court did not need to analyze the boundary line determination. The court remanded to create a new boundary line that included the property that the plaintiffs had adversely possessed.

Conclusion

There’s never a dull moment in agricultural law.  It’s everyday reality in the life of a farmer, rancher, rural landowner and agribusiness.

May 10, 2019 in Bankruptcy, Civil Liabilities, Criminal Liabilities | Permalink | Comments (0)

Monday, May 6, 2019

Coming-To-The-Nuisance By Staying Put – Or, When 200 Equals 8,000

Overview

Nuisance lawsuits in agriculture are often triggered by offensive odors that migrate to neighboring rural residential landowners.  While there aren’t any common law defenses that an agricultural operation may use to shield itself from liability arising from a nuisance action, courts do consider a variety of factors to determine if the conduct of a particular farm or ranch operation is a nuisance.  See, e.g., Valasek v. Baer, 401 N.W.2d 33 (Iowa 1987); Spur Industries, Inc. v. Del E. Webb Development Co., 108 Ariz. 178, 494 P.2d 700 (1972).  Of primary importance are priority of location and reasonableness of the operation.  Together, these two factors have led courts to develop a “coming to the nuisance” defense.  This means that if people move to an area they know is not suited for their intended use, they should be prohibited from claiming that the existing uses are nuisances.  But, what if the ag nuisance comes to you?  Is the ag operation similarly protected in that situation?

The coming-to-the-nuisance defense in reverse – that’s the topic of today’s post.

Right-To-Farm Laws

In general.  Every state has enacted a right-to-farm law that is designed to protect existing agricultural operations by giving farmers and ranchers who meet the legal requirements a defense in nuisance suits. It may not be only traditional row crop or livestock operations that are protected.  For example, the Washington statute also applies to “forest practices” which has been held to not be limited to logging activity, but include the growing of trees.  Alpental Community Club, Inc., v. Seattle Gymnastics Society, 86 P.3d 784 (Wash. Ct. App. 2004).   

The basic thrust of a particular state's right-to-farm law is that it is unfair for a person to move to an agricultural area knowing the conditions which might be present and then ask a court to declare a neighboring farm a nuisance.  Thus, the basic purpose of a right-to-farm law is to create a legal and economic climate in which farm operations can be continued.  Right-to-farm laws can be an important protection for agricultural operations.  But, to be protected, an agricultural operation must satisfy the law's requirements. To be granted the protection of a statute, the activity at issue must be a farming activity.  For example, in Hood River County v. Mazzara, 89 P.3d 1195 (Or. Ct. App. 2004), the state statute that protected farms against nuisance actions was held to bar a lawsuit against a farmer for noise from barking dogs. The use of dogs to protect livestock was held to be farming practice.

Types.  Right-to-farm laws are of three basic types: (1) nuisance related; (2) restrictions on local regulations of agricultural operations; and (3) zoning related.  While these categories provide a method for identifying and discussing the major features of right-to-farm laws, any particular state's right-to-farm law may contain elements of each category.

The most common type of right-to-farm law is nuisance related.  This type of statute requires that an agricultural operation will be protected only if it has been in existence for a specified period of time (usually at least one year) before the change in the surrounding area that gives rise to a nuisance claim.  See, e.g., Vicwood Meridian Partnership, et al. v. Skagit Sand and Gravel, 98 P. 3d 1277 (Wash. Ct. App. 2004).  This type of statute essentially codifies the “coming to the nuisance defense,” but does not protect agricultural operations which were a nuisance from the beginning or which are negligently or improperly run.  For example, if any state or federal permits are required to properly conduct the agricultural operation, they must be acquired as a prerequisite for protection under the statute.

Subsequent changes – what’s going on in Indiana?  While right-to-farm laws try to assure the continuation of farming operations, they do not protect subsequent changes in a farming operation that constitute a nuisance after local development occurs nearby. See, e.g., Davis, et al. v. Taylor, et al., 132 P.3d 783 (Wash. Ct. App. 2006); Trickett v. Ochs, 838 A.2d 66 (Vt. 2003); Flansburgh v. Coffey, 370 N.W.2d 127 (Neb. 1985)If a nuisance cannot be established, a right-to-farm law can operate to bar an action when the agricultural activity on land changes in nature.  For instance, in Dalzell, et al. v. Country View Family Farms, LLC, No. 1:09-cv-1567-WTL-MJD, 2012 U.S. Dist. LEXIS 130773 (S.D. Ind. Sept. 13, 2012), the land near the plaintiffs changed hands.  The prior owner had conducted a row-crop operation on the property.  The new owner continued to raise row crops, but then got approval for a 2800-head sow confinement facility.  The defendant claimed the state (IN) right-to-farm law as a defense and sought summary judgment.  The court held that state law only allows nuisance claims when “significant change” occurs and that transition from row crops to a hog confinement facility did not meet the test because both are agricultural uses.  The court noted that an exception existed if the plaintiffs could prove that the hog confinement operation was being operated in a negligent manner which causes a nuisance, but the plaintiffs failed to prove that the alleged negligence was the proximate cause of the claimed nuisance.  Thus, the exception did not apply and the defendant’s motion for summary judgment was granted.  The court’s decision was affirmed on appeal.  Dalzell, et al. v. Country View Family Farms, LLC, et al., No. 12-3339, 2013 U.S. App. LEXIS 13621 (7th Cir. Jul. 3, 2013).

Similarly, in Parker v. Obert’s Legacy Dairy, LLC, No. 26A05-1209-PL-450, 2013 Ind. App. LEXIS 203 (Ind. Ct. App. Apr. 30, 2013), the defendant had expanded an existing dairy operation from 100 cows to 760 cows by building a new milking parlor and free-stall barn on a tract adjacent to the farmstead where the plaintiff’s family had farmed since the early 1800s.  The plaintiff sued for nuisance and the defendant asserted the state (IN) right-to-farm statute as a defense.  The court determined that the statute barred the suit.  Importantly, the court determined that the expansion of the farm did not necessarily result in the loss of the statute’s protection.  The expanded farm remained covered under the same Confined Animal Feeding Operation permit as the original farm.  In addition, the conversion of a crop field to a dairy facility was protected by the statute because both uses simply involved different forms of agriculture.  The court also noted that the Indiana statute at issue protected one farmer from suit by another farmer for nuisance if the claim involves odor and loss of property value.  Not all state statutes apply to protect farmers from nuisance suits brought by other farmers.

The coming-to-the-nuisance defense in reverse – recent case.  A recent case again involving the Indiana right-to-farm statute was decided.  In Himsel v. Himsel, No. 18A-PL-645, 2019 Ind. App. LEXIS 181 (Ind. Ct. App. Apr. 22, 2019), the defendants were three individuals, their farming operation and a hog supplier.  In 2013, the individual defendants petitioned the County Area Plan Commission to rezone a 58.42-acre tract from agricultural/residential to agricultural/intense.  The land had been in the family for over 20 years and had been used for ag purposes since at least 1941. From 1994-2013, the property was cropland.  The zoning change would allow for the operation of a Concentrated Animal Feeding Operation (CAFO). The plaintiffs were two married couples, one of whom built their non-farm residence in 1971 and the other who started using their home as a non-farming residence in 2000 after deciding to retire from farming and sell most of the farmland that the husband had grown up on and lived on since the early 1940s.  The plaintiffs attended the hearing and opposed the petition.  The retired farmer plaintiff had raised about 200 head of hogs and 200 head of cattle in an area directly adjacent to his home.  There also was a confinement building about 700 feet from the plaintiff’s home that contained up to 400 hogs that was used for two years until it burnt down.  The area around the plaintiffs’ homes is predominated by agriculture uses, and there are other hog barns near the plaintiff’s property.  The Commission approved the zoning change and the defendant obtained the necessary permits to build an 8,000-head CAFO one quarter of a mile from the retired farmer plaintiff’s home.  The plaintiffs did not appeal.

In late 2015, the plaintiff sued the defendant (the retired farmer plaintiff’s cousin and two nephews) for nuisance and negligence and challenged the state’s Right-to-Farm Act (RTFA) as unconstitutional. The plaintiff also claimed that another part of state law (known as the “Agricultural Canon”) which requires state law to be construed to “protect the rights of farmers to choose among all generally accepted farming and livestock production practices, including the use of ever-changing technology,” was unconstitutional. The defendant asserted the RTFA as a defense, and the state joined the suit to defend the constitutionality of the Agricultural Canon. 

The trial court granted the defendant summary judgment.  On appeal, the appellate court affirmed, holding that the plaintiffs’ nuisance, negligence, and trespass claims were barred by the RTFA. The appellate court also determined that the plaintiffs’ various claims that the RTFA was unconstitutional were futile.  As to the RTFA, the appellate court determined that the retired farmer plaintiff essentially “came to the nuisance” when they retired and switched their farming and livestock operation to purely residential with full knowledge of the surrounding ag uses.  This plaintiff came to the nuisance by not moving away before the CAFO was built.

As to the rural residential plaintiff (as well as the retired farmer plaintiff), the court noted that a 2005 amendment to the RTFA meant that the change in the nature of the individual defendants’ farming operation from crops to a large-scale confinement hog operation was not a significant change that would make the RTFA inapplicable. 

The appellate court also determined that the defendant was not operating the confinement facility negligently which would have eliminated the RTFA as a defense.  In addition, the defendant also had obtained all necessary permits to operate the CAFO.  The appellate court also upheld the constitutionality of the RTFA, finding that it was within the legislature's legitimate constitutional authority, and determined that the RTFA had not “taken” the plaintiffs property.  While the plaintiff may have experienced a reduction in value due to the presence of the nearby CAFO, existing caselaw did not indicate that this amounted to a taking.  On this point, the court noted that the plaintiff continued to live in his home and alleged no distinct, investment-backed expectations that the CAFO had frustrated.  The plaintiff also claimed that the RTFA unconstitutionally separated rural dwellers into those engaged in ag operations on land that has been consistently farmed for at least the prior year, and those living in rural areas that don’t farm.  Under the RTFA, farmers can sue either other farmers or non-farmers for nuisance, but non-farmers can only sue other non-farmers for nuisance.  The appellate court determined that the distinction was not unconstitutional because the state had a rational basis for the distinction in terms of conserving, protecting, and encouraging the development and improvement of agricultural land for the production of food and other agricultural products, and that the distinction was applied uniformly.  The appellate court did not rule on the constitutionality of the Agricultural Canon for lack of jurisdiction.  

Several observations about the case can be made.

  • The appellate court in Himsel, determined that the RTFA applied because the change in the nature of the defendant’s hog operation from row crop farming to a CAFO operation involving 8,000 hogs was “not a significant change” that would make the RTFA inapplicable. In other words, 8,000 hogs in a confinement building raised by a contracting party that likely doesn’t make management decisions concerning the hogs, may or may not report the associated contract income as farm income on Schedule F, doesn't report building rent as farm income, and cannot pledge the hogs as loan collateral, was somehow not significantly different from 200 hogs and 200 head of cattle raised by a farmer with associated crop ground who managed the diversified operation.  Just the sheer number of hogs alone stands out in stark contrast.
  • Unlike the Obert’s Legacy Dairy case where the expansion of the dairy farm did not require a new permit, the hog operation in Himsel required a change in the existing zoning of the tract.
  • The plaintiffs in Himsel were found to have essentially come to the nuisance because one of them chose to retire from farming and remain on the land that he had lived on for nearly 80 years, and the other didn’t move from the rural home they built in 1971. In reaching this conclusion the court determined that an 8,000-head hog confinement operation and the presence of 3.9 million gallons of untreated hog manure was comparable to farming in this area in 1941.
  • The Himsel court determined that a “taking” had not occurred because the plaintiff had not sold his home and moved away from the place where he grew up and lived all of his life. The court did not address the implications of whether its opinion essentially granted the CAFO an easement to produce odors across the plaintiffs’ property.

Conclusion

It is possible that the Himsel decision could be transferred to the Indiana Supreme Court for review.  It’s also possible that the Indiana legislature could revisit the RTFA and the 2005 amendment that appears to have resulted in a construction that allows a CAFO of any size to be built in any place with a history of agricultural activity at any time in the past that predates the plaintiff’s use.  While the original idea behind right-to-farm legislation in general was to protect and incentivize multi-generation farming operations that are often significantly tied to the land and the local communities, the Himsel decision is difficult to square with those ideals.  That’s the case even though the court may be right in its construction of the statutory language at issue.  If that’s correct, the policy of the Indiana RTFA and the future of the Hoosier rural countryside is up to the legislature. 

May 6, 2019 in Civil Liabilities | Permalink | Comments (0)

Thursday, May 2, 2019

Product Liability Down on the Farm – Modifications

Overview

If a farmer or rancher buys a product and the product turns out to be defective, can the manufacturer be held liable on a product liability claim for defective product?  In general, the answer is “yes.”  However, there are some exceptions to that general rule.  One of those may involve an acetylene tank and a torch. 

A limitation on the ability to sue a manufacturer on a product liability claim – that’s the topic of today’s post.

Manufacturer’s Liability – In General

Historically, a manufacturer or seller of defective chattels was not liable to persons injured using the product unless a contractual relationship existed.  This rule limited a manufacturer's liability to immediate purchasers if a product turned out to be defective, dangerous or hazardous to health.   This rule, known as the “privity limitation,” dates back to the 1843 English case of Winterbottom v. Wright, 10 M. & W. 109, 152 Eng. Rep. 402 (Ex. 1842). In Winterbottom, the plaintiff purchased a ticket to ride the stage and as the stage was being driven, a wheel with rotten spokes collapsed.  The ensuing crash injured the plaintiff.  The plaintiff sued the defendant who had undertaken to provide a mail coach to carry the mail bags.  The English court ruled that the plaintiff could not sue the defendant because the plaintiff did not have a contract with the defendant.

Winterbottom became a leading case, not only in England, but also in the United States.  The requirement of privity of contract in product liability cases continued in the United States until 1916.  In a 1916 case, MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (1916), the plaintiff bought a Buick from a retail dealer.  The plaintiff was injured while driving the car when the wooden spokes on one of the wheels crumbled into fragments.  The defective wheel had been supplied to Buick Motor Co. by a parts manufacturer.  There was evidence tending to show that a reasonable inspection by Buick would have disclosed the defective wheel, but that Buick failed to make such an inspection.  Buick defended on the basis that the plaintiff purchased the car from a retail dealer and, therefore, did not have privity of contract with Buick.  The New York Court of Appeals upheld the trial court and rejected Winterbottom v. Wright.  The Court held that Buick owed a duty of care to the plaintiff as the ultimate purchaser of the automobile from an independent distributor.   Precedent drawn from the days of stagecoach travel no longer squared with the needs of a modern commercial society.

The MacPherson decision marked the beginning of the consumer movement.  Consumers could now sue manufacturers and hold them accountable for negligence in manufacturing faulty products as well as negligence in design.  For the first several years after MacPherson, the question was limited to negligence in manufacturing.  More recently, the focus has expanded to include negligence in design.  Both come within the rule.  No longer is privity of contract required before a manufacturer can be sued.

MacPherson spawned a great deal of products liability litigation.  Much of the early litigation dealt with food and beverage products.  See, e.g., Pillars v. R.J. Reynolds Tobacco Company, 117 Miss. 490 (1918); Coca-Cola Bottling Company v. Burgess, 195 S.W.2d 392 (Tex. Ct. Civ. App. 1946). 

Since the early 1960s, manufacturer's liability law has changed greatly.  The recent trend is away from a negligence approach and toward strict liability.  In many instances, an injured party is not required to show that the manufacturer was negligent.  While a strict liability approach is not the same as absolute liability, in many instances, manufacturer's liability has become so favorable for plaintiffs that many manufacturers have complained of the inability to afford liability insurance coverage.

Under the modern approach, the injured party is required to prove five elements in order to recover from a manufacturer on a product liability claim. 

  • First, the injured party must show that the defendant sold the product and was engaged in the business of selling the product. This requirement is typically easy to satisfy. 
  • Second, the injured party must show that the product was in a defective condition. See, e.g., Russell v. Deere & Co., 61 P.3d 955 (Or. Ct. App. 2003). This, likewise, is not usually very difficult to establish.
  • Third, the injured party must show that the defective condition was unreasonably dangerous to an ordinary user during normal use. Normal use includes all intended uses and foreseeable misuses of the product. See, e.g., Ellis v. Weasler Engineering, Inc., 258 F.3d 326 (5th Cir. 2001)This requirement is somewhat more difficult to satisfy than the first two, and a few courts do not require this element.  If this element is required, a product may be deemed to be unreasonably dangerous if the manufacturer fails to warn of dangers inherent in the product's normal use that is not obvious to an ordinary user. If the product bears an adequate warning, the product is deemed not to be in defective condition in those states whose product liability act follows Comment j of the Restatement (Second) of Torts § 402A.  However, some states follow Comment i of the Restatement (Third) of Torts § 2, which provides that an adequate warning does not foreclose a finding that a product is defectively designed.  See, e.g., Delaney v. Deere and Company, 268 Kan. 769, 999 P.2d 930 (2000), rev’d, 219 F.3d 1195 (10th Cir. 2000).  In these states, a manufacturer cannot simply warn of open and obvious dangers. The belief in these states is that Comment j allows an adequate warning to absolve the manufacturer of its duty to design against dangers when a reasonably safer design could have been adopted that would have reduced or eliminated the risk remaining after a warning is provided.  But, under either approach, foreseeable misuse of the product remains an issue.  See, e.g., Mallery v. International Harvester Company, 690 So. 2d 765 (La. Ct. App. 1996). 
  • The fourth element that an injured party must prove to recover from a manufacturer on a product liability claim is that the product was expected to reach the user without substantial change in condition and, in fact, did so.
  • The fifth requirement is that the product defect was the proximate cause of the plaintiff's injury or damage. This requirement is the most difficult to show and involves proving one of the elements of negligence.

Preemption Possibilities

There are at least three situations that a particular farmer or rancher may face in which they will be limited in their ability to sue a manufacturer on a product liability claim.  One involves the situation when purchased equipment is altered or when multiple component parts are purchased individually, but are then later combined to make a complete system.  If the component parts are not defective, but when combined produce a defective system, the manufacturers of the component parts do not have a duty to warn or properly instruct about the use of the system. See,e.g., Shaffer v. A.O. Smith Harvestore Products, Inc., 74 F.3d 722 (6th Cir. 1996).  When purchased equipment is altered, the manufacturer is generally released from liability unless the manufacturer could have reasonably foreseen that purchasers would alter the equipment in the manner that resulted in injury.  For example, in Hiner v. Deere & Co., 340 F.3d 1190 (10th Cir. 2003), rev’g, 161 F. Supp. 2d 1279 (D. Kan. 2001), the farmer altered a front-end loader resulting in injury.  The court determined that the farmer’s alterations presented a fact issue for the jury to sort out on the plaintiff’s strict liability claim as to whether the defendant could have reasonably foreseen the alteration.  See, also, Brinkman v. International Truck and Engine Corp., 351 F. Supp. 2d 880 (W.D. Wisc. 2004). 

Conclusion

So, when you buy a product and take it home to the farm or ranch, or have it delivered, sometimes the tendency is to modify the item to fit the specs of the situation.  But, once an alteration is made (perhaps by cutting and welding) and the product fails to operate as expected, that alteration can remove the ability to recover from the manufacturer on a defective product claim. 

Just something else to think about on the farm or ranch from the world of agricultural law.

May 2, 2019 in Civil Liabilities | Permalink | Comments (0)

Friday, April 12, 2019

What Does A “Reasonable Farmer” Know?

Overview

The negligence concept is the great workhorse of tort law.  To be liable for a negligent tort, the defendant's conduct must have fallen below that of a “reasonable and prudent person” under the circumstances.  A reasonable and prudent person is what a jury has in mind when they measure an individual's conduct in retrospect - after the fact, when the case is in court.

But, what is a reasonable and prudent farmer?  What is a farmer presumed to have knowledge of?   These are important questions when the issue is negligence.   

The reasonably prudent farmer – it’s the topic of today’s post.

Negligence – In General

More than 90 percent of all civil liability problems relate to negligence.  The negligence system is a system designed to provide compensation to those who suffer personal injury or property damage.  The negligence system is a fault system.  For a person to be deemed legally negligent, certain conditions must exist. These conditions can be thought of as links in a chain. Each condition must be present before a finding of negligence can be obtained. 

The first condition is that of a legal duty giving rise to a standard of care.  If a legal duty exists, it is necessary to determine whether the defendant's conduct fell short of the conduct of a “reasonable and prudent person (or professional) under the circumstances.”  This is called a breach, and is the second element of a negligent tort case.  Once a legal duty and breach of that duty are shown to exist, a causal connection (the third element) must be established between the defendant's act and (the fourth element) the plaintiff's injuries (whether to person or property). In other words, the resulting harm to the plaintiff must have been a reasonably foreseeable result of the defendant's conduct at the time the conduct occurred. Reasonable foreseeability is the essence of causality (also known as proximate cause).  For a plaintiff to prevail in a negligence-type tort case, the plaintiff bears the burden of proof to all four elements by a preponderance of the evidence (just over 50 percent).

The “Reasonably Prudent” Standard

The conduct of a particular tortfeasor (the one causing the tort) who is not held out as a professional is compared with the mythical standard of conduct of the reasonable and prudent person in terms of judgment, knowledge, perception, experience, skill, physical, mental and emotional characteristics as well as age and sanity. For those held out as having the knowledge, skill, experience or education of a professional, the standard of care reflects those factors. For example, the standard applicable to a professional veterinarian in diagnosing or treating animals is what a reasonable and prudent veterinarian would have done under the circumstances, not what a reasonable and prudent person would do.

Recent Case

The issue of what a farmer is presumed to know was at issue in a recent case.  In Perkins v. Fillio, No. 18A-PL-2278, 2019 Ind. App. LEXIS 73 (Ind. Ct. App. Feb. 19, 2019), the defendant owned a small farm where she kept various animals including sheep and goats. The defendant spent roughly half her time at the farm and half her time in Florida. In 2016, the defendant was in Florida and left her half-brother (Slate) in charge of caring for her animals while she was gone, including feeding and watering them. While the defendant was in Florida, one of the goats (a ram) got sick, and because Slate had little experience with farm animals, he contacted a neighbor, the plaintiff, to come and help with the sick goat.

As the plaintiff bent over the ill goat head-butted her, causing her to fall and break her arm/wrist. The plaintiff then sued the defendant on three theories of negligence; premises liability, negligent entrustment and/or supervision, and vicarious liability. Under Indiana law, tort liability based on negligence requires that the defendant owe a plaintiff a duty; that the duty was breached; and that the plaintiff was injured as a result of the breach of the duty.  At issue were whether a duty existed and whether the defendant had violated that duty. The plaintiff presented expert testimony to show that rams are generally territorial and tend to defend themselves, their territory, and the females that they perceive to be in their herd by headbutting unfamiliar animals or persons, and that tendency is generally known by farmers. The plaintiff claimed that when she went into the pen to care for the sick goat, she did not realize it was a ram because it had no horns, and she had never been warned that a ram might be protective and territorial.

Both parties moved for summary judgment on the liability question, and the trial court found in favor of the defendant because, in part, there was a lack of evidence indicating that the defendant knew the plaintiff would be on her real estate and, in particular, be inside the pen where the defendant kept the ram. There was also no evidence that the ram had been aggressive toward anyone in the past. Accordingly, the trial court found that the defendant had not violated a duty of care to the plaintiff. The plaintiff appealed.

On the premises liability question, the appellate court found that a duty to protect against harm caused by domestic animals could be established by either (1) a defendant’s knowledge that a particular animal has a propensity for violence and/or (2) a defendant’s ownership of a member of a class of animals that are known to have dangerous propensities, as the owner of such an animal is bound to have knowledge of that potential danger. The appellate court held that the plaintiff had presented sufficient evidence to establish that rams have dangerous tendencies as a class of animals, and the defendant was bound to have knowledge of that propensity. This evidence was enough to create a genuine issue of fact as to whether the defendant took reasonable measures to prevent the ram from causing harm to invitees, such as the plaintiff. Based on this standard, the appellate court held that the trial court had erred in granting summary judgment on the premise liability issue.

However, the plaintiff did not present sufficient evidence to create a genuine issue of material fact as to the remaining theories of negligence, and therefore the appellate court did not reverse on those rulings. Accordingly, the appellate court remanded to the trial court for further proceedings on the issue of premises liability. 

Conclusion

Farmers have a great deal of skill and knowledge in many matters.  For conduct that falls below the standard or reasonableness for a prudent farmer, tort liability may apply.  That standard is difficult to determine and depends on the facts of each particular case.  In the recent Indiana case, the farmer, even though part-time but as a keeper of animals (including sheep and goats) was presumed to know of the tendency of rams to butt. 

 

Think through how the reasonably prudent person standard might apply in your situation. 

April 12, 2019 in Civil Liabilities | Permalink | Comments (0)

Thursday, April 4, 2019

Do the Roundup Jury Verdicts Have Meaning For My Farming Operation?

Overview

Last month, another jury has determined that Bayer-Monsanto was liable for damages caused by its Roundup weed killer.  Roundup contains glyphosate, the most heavily used herbicide worldwide.  According to the USDA, about 240 million pounds of glyphosate were sprayed in the U.S. in 2014, and traces of it can be found in air, water, soil and food products. 

The most recent jury verdict awarding $81 million in damages to a plaintiff who developed non-Hodgkin lymphoma came about eight months after a different jury (also in California) awarded a different plaintiff almost $300 million for his claim that Roundup caused his cancer.  In that 2018 case, however, the judge reduced the damages to about a third of what the jury awarded. 

Do these verdicts and the thousands of other cases that have been filed in the Roundup litigation mean anything to a farming or ranching operation? 

The implications of the Roundup litigation on a farming or ranching operation– that’s the topic of today’s post.

The Roundup Litigation

The Roundup litigation is an important matter for agriculture.  Roundup is used heavily on genetically modified corn and soybeans as well as oats.  It is presently sold in more than 160 countries.  The patent on glyphosate expired in 2001 with generic versions being sold virtually worldwide.  Presently, over 11,000 cases involving Roundup have been filed and are waiting trial and adjudication.  The basic claim in each case is that the use of Roundup caused some sort of physical injury to the plaintiff.  In many of the cases, the claim is that physical injury occurred after usage (usually over a long period of time) of Roundup.  Indeed, both of the cases involving plaintiff jury verdicts involved the spraying of Roundup over many years.   

Studies have reached differing conclusions on the safety of glyphosate.  The Environmental Working Group (EWG) claims that glyphosate is present in many oat-based cereals and breakfast bars.  The EWG believes that there is a causal connection between glyphosate and cancer, but others differ.  In 2015, the International Agency for Research on Cancer classified glyphosate as a “probable human carcinogen.”  That classification spurred lawsuits against Monsanto.  But, the U.S. Environmental Protection Agency asserts that glyphosate is safe for humans when used in accordance with label directions.  In addition, the World Health Organization has stated that glyphosate is “unlikely to pose a carcinogenic risk to humans from exposure through the diet.” 

Vince Chhabria has been selected to oversee the Roundup lawsuits and has deemed the case resulting in last month’s jury verdict as one of the “bellweather” (test) cases.  Judge Chhabria is a judge on the bench at the U.S. District Court for the Northern District of California.  He was nominated to the bench by the President in 2013. 

What Does the Litigation Mean For My Farm/Ranch?

While the temptation may be great to dismiss the recent verdicts as the result of raw emotion and passion by juries that don’t have much, if any, relation to or understanding of agriculture, that temptation should be resisted.  It is true that juries tend to react based on emotion to a greater degree than do judges (indeed, the judge in the 2018 case significantly reduced the jury verdict), but that doesn’t mean that there aren’t some “take-home” implications for farming and ranching operations at this early stage of the litigation.

Things to ponder.  Farming and ranching operations should at least begin to think about the possible implications of the Roundup litigation. 

  • What about lease agreements? Farmers and ranchers that lease out farmland and pasture may want to reexamine the lease terms. Consideration should be given as to whether the lease should incorporate language that specifies that the tenant assumes the risk of claims arising from the use of Roundup or products containing glyphosate.  Relatedly, perhaps language should be included that either involves the tenant waiving potential legal claims against the landlord or provides for the landlord to be indemnified by the tenant for any and all glyphosate-related claims.  Should language be included specifying that the tenant has the sole discretion to select chemicals to be used on the farm and that any such chemicals shall be used in accordance with label directions and any applicable regulatory guidance?  How should the economics of the lease be adjusted to reflect this type of lease language?  The tenant is giving up some rights and will want compensation for the loss of those rights.  If the lease isn’t in writing, perhaps this is a good time to reduce it to writing. 
  • Is the comprehensive liability policy for the farm/ranch sufficient to cover glyphosate-related claims? Many farm comprehensive general liability policies contain “pollution exclusion” clauses.  Do those clauses exclude coverage for glyphosate-related claims?  How is “pollution” defined under the policy?  Does it include pesticides and herbicides and associated claims?  Does it cover loss to livestock that consume corn and/or soybeans that were grown with the usage of chemicals containing glyphosate?  Can a rider be obtained to provide coverage, if necessary?  These are all important questions to ask the insurance agent and an ag lawyer trained in reading farm comprehensive liability policies. 
  • If the farm employs workers, should that arrangement be modified from employer/employee to independent contractor status? If employee status remains and an employee sues the employer for alleged glyphosate-related damages, what can be done?  Will enrolling the farm in the state workers’ compensation program provide sufficient liability protection for the farming/ranching operation?       

What About Food Products?

To date, the cases have all involved the use of Roundup directly over a long period of time.  At some point will there be cases where consumers of food products claim they were harmed by the presence of glyphosate in the food they ate?  If those cases arise, given the use of production contracts in agriculture and the possibility of tracing back to the farm from which the grain in the allegedly contaminated food product was grown, does the farmer have liability?  If you think this is far-fetched, remember that there is presently a member of the U.S. House that is proposing the regulation (if not elimination) of cows with flatulence.  Relatedly, there are certain segments of the population that are opposed to the manner in which modern, conventional agriculture is conducted.  These persons/groups would not hesitate in trying to pin liability all the way back down the chain to the farmer. 

Conclusion

The Roundup litigation shouldn’t be ignored.  It may be time to start thinking through possible implications and modifying certain aspects of the way the typical farm or ranch does business in order to provide the greatest liability protection possible. 

Just some additional things to think about as you deal with low crop and livestock prices, flooding in the Midwest and Plains, and tax season!  Also, a special “hat tip” to Jeremy Cohen, a lawyer in the Denver, Colorado area who put the bug in my ear about writing on this issue.  Jeremy and I started our legal careers together in North Platte, NE nearly 30 years ago with Don Kelley – an iconic name in farm and ranch estate and business planning circles.

April 4, 2019 in Civil Liabilities | Permalink | Comments (0)

Wednesday, February 27, 2019

Ag Nuisances – Basic Principles

Overview

Land use conflicts are often present in urban, residential and commercial areas.  However, they also occur in rural areas.  Large-scale livestock agricultural operations, wind “farms” and similar rural land uses present many of the same issues.

How does the law handle rural land-use conflicts?  How can these conflict situations with adjoining landowners best be minimized or avoided? 

Land use conflicts in rural areas, ag nuisances and pointers for minimizes conflict among landowners – this is the discussion of today’s post.

What’s An Ag Nuisance?

A nuisance is an invasion of an individual's interest in the use and enjoyment of land rather than an interference with the exclusive possession or ownership of the land.  See, e.g., Peters, et al. v. Contigroup, et al., 292 S.W.3d 380 (Mo. Ct. App. 2009).  Nuisance law prohibits land uses that unreasonably and substantially interfere with another individual's quiet use and enjoyment.  The doctrine is based on two interrelated concepts: (1) landowners have the right to use and enjoy property free of unreasonable interferences by others; and (2) landowners must use property so as not to injure adjacent owners. In a nuisance action, proof of general damages (diminished quality of life) may be sufficient evidence to support a monetary award.  See, e.g., Stephens, et al. v. Pillen, 681 N.W.2d 59, 12 Neb. App. 600 (2004).

The two primary issues at stake in any agricultural nuisance dispute are whether the use alleged to be a nuisance is reasonable for the area and whether the use alleged to be a nuisance substantially interferes with the use and enjoyment of neighboring land.  See, e.g., Bower v. Hog Builders, Inc., 461 S.W.2d 784 (Mo. 1970)

Are Nuisance and Negligence the Same?

“Nuisance” and “negligence” are not the same thing.  Operating a farming or ranching activity properly and having all requisite permits may still constitute a nuisance if a court or jury determines the activity is “unreasonable” and causes a “substantial interference” with another person's use and enjoyment of property.  Whether a complained of activity, such as spreading manure, results in a “substantial” and “unreasonable” interference with another's property will depend on the facts of each case and the legal rules used in the particular jurisdiction.  See, e.g., Penland v. Redwood Sanitary Sewer Service District, 156 Or. App. 311, 965 P.2d 433 (1998).

Because each claim of nuisance depends on the fact of the case, there are no easy rules to determine when an activity will be considered a nuisance.  In general, a court faced with a particular nuisance claim will consider several factors.  Primary among these factors is whether the use complained of is a reasonable use that is common to the area or whether it is not suitable. See, e.g., May v. Brueshaber, 265 Ga. 889, 466 S.E.2d 196 (1995).  Also important is whether the use complained of is a minor inconvenience which happens very infrequently or whether it is a regular and continuous activity.  The nature of the property use being disturbed is also an important consideration.  If the interference has a significant impact on the complaining party's use of their own property, such as the prevention of living in the complaining party's home, a nuisance will likely be found.  Similarly, if the complained of use is preventing another landowner's use of their property that is a vital part of the local economy, the court will balance the economics of the situation and most likely conclude that the complained of use constituted a nuisance.  An additional important factor, but not conclusive in and of itself of the issue is whether the complained of use was in existence prior to the complaining party's use of their property which is now claimed to be interfered with.  A related concern, if the activity generating the alleged nuisance was in existence prior to the complaining party moving into the vicinity, is whether the nuisance activity was obvious at the time the complaining party moved in.  Many courts also attempt to balance the economic value to society of the uses in question.  If the complained of use adds jobs and income to the local economy, the value to society of continuing the alleged nuisance may outweigh the negative impact it causes.

If A Nuisance Exists, What Then?

If a court determines that a nuisance (just one that is anticipated to occur in the future) exists, it has much discretion in establishing an appropriate remedy for a nuisance.  The most common remedy is for the court to stop (enjoin) the nuisance activity. See, e.g., Moody, et al. v. Wiza, 2007 Ohio 5356 (Ohio Ct. App. 2007); Simpson, et.al. v. Kollasch, et. al., 749 N.W.2d 671 (Iowa 2008); Walker, et al. v. Kingfisher Wind, LLC, No. CIV-14-D, 2016 U.S. Dist. LEXIS 141710 (W.D. Okla. Oct. 13, 2016).  However, most courts try to fashion a remedy to fit the particular situation. See, e.g., Valasek v. Baer, 401 N.W.2d 33 (Iowa 1987); Spur Industries, Inc. v. Del E. Webb Development Co., 108 Ariz. 178, 494 P.2d 700 (1972)

Potential Defenses

Priority of location.  If a farmer gets sued for the alleged creation of a nuisance, how does the farmer mount a defense?  While there are no common law defenses that an agricultural operation may use to shield itself from liability arising from a nuisance action, as noted above, the courts do consider a variety of factors to determine if the conduct of a particular farm or ranch operation is a nuisance.  Of primary importance are priority of location and reasonableness of the operation.  Together, these two factors have led courts to develop a “coming to the nuisance” defense.  This means that if people move to an area they know is not suited for their intended use, they should be prohibited from claiming that the existing uses are nuisances.

Right-to-farm laws.  Every state has enacted a right-to-farm law that is designed to protect existing agricultural operations by giving farmers and ranchers who meet the legal requirements a defense in nuisance suits.  The basic thrust of a particular state's right-to-farm law is that it is unfair for a person to move to an agricultural area knowing the conditions which might be present and then ask a court to declare a neighboring farm a nuisance.  Thus, the basic purpose of a right-to-farm law is to create a legal and economic climate in which farm operations can be continued.  Right-to-farm laws can be an important protection for agricultural operations, but, to be protected, an agricultural operation must satisfy the law's requirements.  See, e.g., Alpental Community Club, Inc., v. Seattle Gymnastics Society, 86 P.3d 784 (Wash. Ct. App. 2004); Hood River County v. Mazzara, 89 P.3d 1195 (Or. Ct. App. 2004). 

The most common type of right-to-farm law is nuisance related.  This type of statute requires that an agricultural operation will be protected only if it has been in existence for a specified period of time (usually at least one year) before the change in the surrounding area that gives rise to a nuisance claim. See, e.g., Vicwood Meridian Partnership, et al. v. Skagit Sand and Gravel, 98 P. 3d 1277 (Wash. Ct. App. 2004).  These types of statute essentially codify the “coming to the nuisance defense,” but do not protect agricultural operations which were a nuisance from the beginning or which are negligently or improperly run.  For example, if any state or federal permits are required to properly conduct the agricultural operation, they must be acquired as a prerequisite for protection under the statute.  Another type of right-to-farm statute may be structured to bar local and county governments from enacting regulations or ordinances that impose restrictions on normal agricultural practices.  Still another type exempts (at least in part) agricultural uses from county zoning ordinances.  The major legal issue involving this type of statute is whether a particular activity is an agricultural use or a commercial activity.  In general, “agricultural use” is defined broadly.  See, e.g., Knox County v. The Highlands, L.L.C., 302 Ill. App. 3d 342, 705 N.E.2d 128 (1998), aff’d, 723 N.E.2d 256 (Ill. 1999).

An important point is that while right-to-farm laws try to assure the continuation of farming operations, they do not protect subsequent changes in a farming operation that constitute a nuisance after local development occurs nearby.  See, e.g., Davis, et al. v. Taylor, et al., 132 P.3d 783 (Wash. Ct. App. 2006); Flansburgh v. Coffey, 370 N.W.2d 127 (Neb. 1985).   While a right-to-farm law may not bar an action for a change in operations when a nuisance is present, if a nuisance cannot be established a right-to-farm law can operate to bar an action when the agricultural activity on land changes in nature. See, e.g., Dalzell, et al. v. Country View Family Farms, LLC, No. 1:09-cv-1567-WTL-MJD, 2012 U.S. Dist. LEXIS 130773 (S.D. Ind. Sept. 13, 2012), aff’d., No. 12-3339, 2013 U.S. App. LEXIS 13621 (7th Cir. Jul. 3, 2013). See also Parker v. Obert’s Legacy Dairy, 988 N.E.2d 319 (Ind. Ct. App. 2013).

Conclusion

Land use conflicts in rural areas are not uncommon and have become more prevalent in recent decades as the structure of agriculture had changed and new types of rural land uses have appeared.  To minimize conflict with neighbors and stay out of court defending a nuisance case, attention should be paid to certain key points.  Location of any facility that could give rise to a nuisance claim is key.  Related to location, particularly with respect to odor-related issues is wind direction.  For confinement livestock facilities, proper ventilation is key as is manure storage and field injection practices.  Of course, the overall appearance of farm structures is important - perhaps almost as important as are manure disposal practices. 

Keeping these points in mind just might keep the farming operation out of court.

February 27, 2019 in Civil Liabilities | Permalink | Comments (0)

Monday, January 28, 2019

Selected Recent Cases Involving Agricultural Law

Overview

Last fall, I wrote a blog post where I took a look at a handful of recent court developments involving agricultural law.  Since then I have received numerous requests to do another post surveying more court developments involving legal issues that farmers, ranchers, rural landowners and agribusinesses face. 

Recent court opinions involving ag law issues – that’s the topic of today’s post. 

Adverse Possession

Each state, even though differences exist in state law, recognize that if an individual possesses someone else's land in an open and notorious fashion with an intent to take it away from them, such person (known as an adverse possessor) becomes the true property owner after the statutory time-period (anywhere from 10 to 21 years) has expired.  If use is by permission, the adverse possession statute is never tolled.  See, e.g., Engel v. Carlson, No. A-07-016, 2008 Neb. App. LEXIS 94 (Neb. Ct. App. May 13, 2008).

The requirements that the use of the land must be “adverse” and under a “claim of right” are sometimes combined under the requirement that the use of the land be “hostile” to the true owner’s use.  For example, in Cannon v. Day, 165 N.C. App. 302, 598 S.E.2d 207 (2004), rev. den., 604 S.E.2d 309 (N.C. 2004), the original owners never granted permission to use a lane, and the neighbor had used the lane for more than 20 years adverse to the true owners. The court determined that the neighbor had adversely possessed the lane and the ownership of it passed to the neighbor’s successors in interest. 

The hostility requirement is designed to put the true owner on notice that another party is using the land adversely to the true owner.  See, e.g., Groves v. Applen, No. 31241-7-II, 2005 Wash. App. LEXIS 1460 (Wash. Ct. App. Jun. 14, 2005). However, in Kansas, the adverse possession statute does not contain a “hostility” requirement, and the doctrine can be asserted against an undisclosed co-tenant.  Buchanan v. Rediger, 26 Kan. App.2d 59, 975 P.2d 1235 (1999)

Recent case.  In Collier v. Gilmore, 2018 Ark. App. 549 (Ark. Ct. App. 2018), the Arkansas Court of Appeals held that farming to a cultivation line constituted adverse possession.  The parties each gained title to their respective tracts from the same predecessor. In 1972, the plaintiff purchased his tract and believed that he purchased up to the fence where his predecessor had farmed. However, the deed did not include a strip of land up to the fence. Since the 1980’s, the plaintiff farmed up to where the fence was in 1972 believing that to be the property line. Sometime during the 1980’s the defendant received title to the other portion of the predecessor’s original property. The plaintiff sued claiming adverse possession of the strip of land not in the 1972 deed. The trial court agreed.

On appeal, the appellate court affirmed. The appellate court held that the plaintiff’s farming of the disputed strip for several decades was sufficient to establish an intent to hold against the true owner’s rights. The appellate court also determined that the plaintiff’s possession was also hostile because it was greater than the deed anticipated and was without permission of the true owner. While the strip had never been enclosed by a fence or other enclosure, the property line was the cultivation line which had been clearly identified for decades via the plaintiff’s conduct. 

Vicarious Liability

In certain situations, one person may be held liable for the tortious acts of another person based on a special relationship between the two.  Such liability (called vicarious liability) exists even though the person held liable not have personally committed the act.  Often this issue arises in employment situations.  An employer may be held vicariously liable for the tortious acts (usually negligent ones) committed by an employee.  Thus, if an employee commits a tort during the “scope of employment”, the employer will (jointly with the employee) be liable. 

This rule is often described as the doctrine of “respondeat superior”, which means “let the person higher up answer.”  Vicarious liability applies to torts committed by employees and generally not to those committed by independent contractors.  Therefore, it is critical to determine whether a particular individual was an employee or an independent contractor.  While no single factor is dispositive in all cases, an employee is generally one who works subject to the control of the employer concerning the manner and means of performance. 

Recent case.  In Moreno v. Visser Ranch, Inc., No. F075822, 2018 Cal. App. LEXIS 1194 (Cal. Ct. App. Dec. 20, 2018), at issue was a dairy farm’s liability for a worker involving in an accident.  The dairy employed a worker to be on call around the clock to repair equipment at the dairy.  The worker was involved in his work vehicle when he was involved in a single vehicle accident. The plaintiff was riding with the worker at the time of the accident. The plaintiff was employed by a third party to perform various services at the dairy and other local farms. On the night of the accident, the worker and plaintiff attended a family function (they were related) not located on the dairy’s property. On the way home after the function, the vehicle they were in left the road and rolled over. The plaintiff was not wearing a seat belt and was seriously injured. The plaintiff sued the driver, dairy farm and the auto manufacturer for negligence. The plaintiff also sued the State and the County based on the dangerous condition of the road where the accident occurred (the road was under construction). The dairy moved for summary judgment on the plaintiff’s respondeat superior claim on the basis that the driver was not acting within the scope of employment when the accident occurred. The trial court granted the motion. The trial court also granted summary judgment for the diary on the issue of liability arising from ownership of the vehicle. The plaintiff was, however, able to recover statutory damages from the driver.

On appeal, the appellate court determined that fact issues remained on the respondeat superior claim. Though the worker and the plaintiff were returning from a family function, the driver was on call 24/7 to respond to issues at the dairy farm. In addition, the appellate court determined that a fact issue remained as to whether the worker was acting within the scope of his employment and benefiting the dairy farm at the time of the accident. The appellate court remanded the case. 

Inherently Dangerous Activities

Another aspect of respondeat superior involves activities that the law deems to be inherently dangerous. In this instance, the person making the hire can be held vicariously liable even if the person hired is an independent contractor.  For example, in some states, aerial crop spraying is considered evidence of negligence.  In these situations, a plaintiff only needs to establish that aerial spraying occurred and damage resulted.  A showing of negligence on the part of the individual spraying the crops is not necessary.  However, the majority of states still require a showing of negligence before damages can be recovered.  In the states not requiring a showing of negligence, the practical effect is to apply a strict liability rule.  In these jurisdictions, delegation of the spraying task to an independent contractor does not eliminate a farmer's liability.  This problem is so severe that most farm liability policies do not cover the aerial spraying or dusting of crops.  The damage award in a crop dusting case is calculated on the basis of the difference between the crop yield that would have normally resulted and the yield actually obtained after the damage, adjusted for any reduction in costs, such as drying or hauling costs.  Yield is based on the best evidence available.

Recent case.  In Keller Farms, Inc. v. Stewart, No. 1:16 CV 265 ACL, 2018 U.S. Dist. LEXIS 210209 (E.D. Mo. Dec. 13, 2018), the court held that the aerial application of ag chemicals is not an inherently dangerous activity.  The case involved a dispute involving damage to the plaintiffs’ trees caused by chemicals that allegedly drifted during aerial application. The plaintiffs attempted to hold both the aerial applicator and the landowner that hired the applicator. The plaintiffs claimed the landowner was vicariously liable for the applicator’s actions because aerial spraying of burndown chemicals is an "inherently dangerous activity."

The trial court granted the defendants’ motion for judgment as a matter of law on the plaintiff's trespass claim, but the remaining issues were left for the jury to resolve.  The jury returned a verdict in favor of the defendants on the negligence and negligence per se claims. The plaintiffs filed a motion for a new trial, arguing the verdict was against the weight of the evidence; that the trial court erred in excluding evidence; and that the trial court erred in granting the defendants’ motion for judgment as a matter of law. The trial court, however, denied the plaintiff’s motion for a new trial.

On appeal, the appellate court affirmed. The appellate court determined that the jury’s verdict was not against the weight of the evidence, and that the aerial application of herbicides was commonplace and not inherently dangerous. In addition, the appellate court noted that the defendants’ evidence was that the herbicides did not actually drift onto the plaintiff’s property and that the applicator complied with all label requirements and sprayed during optimal conditions. The appellate court also determined that the trial court had ruled properly on evidentiary matters and that the plaintiff had not proven the alleged monetary damages to the trees properly. The appellate court also upheld the trial court’s denial of the plaintiff’s motion for a new trial. 

Conclusion

The legal issues that farmers and ranchers deal with are potentially very large.  Today’s post examined just a small slice.  It’s always helpful to know what the rules are when the issue arises. 

January 28, 2019 in Civil Liabilities, Real Property | Permalink | Comments (0)

Wednesday, January 16, 2019

When Is An Employer Liable For The Conduct of Workers?

Overview

An important issue for many farmers and ranchers concerns potential liability for injury or damage caused by persons that work on behalf of the farming or ranching business.  This is a real concern because of the many potentially dangerous situations that farming or ranching can present with respect to, for example, machinery and equipment, livestock, and a work environment that is subject to weather conditions that can often be less than favorable. 

Farm/ranch businesses and liability for the acts of workers – that’s the topic of today’s post.

Employee or Independent Contractor?

In certain situations, one person may be held liable for the tortious acts of another person based on a special relationship between the two even without having personally committed the act that caused liability.  This is known as “vicarious liability,” and it can mean that an employer can be liable for the acts of an employee. But, for the employer to be jointly liable with the employee, the employee must have committed the act leading to liability while acting in the “scope of employment.”  This rule is often described as the doctrine of “respondeat superior,” which means “let the person higher up answer.”  It’s the control by the employer over an employee that justifies joint liability.

Factors for making the distinction.  The control issue is a key point.  Vicarious liability generally does not apply to conduct of independent contractors.  How is that determination made?  While no single factor is dispositive in all cases, an employee is generally one who works subject to the control of the employer. See, e.g., Coates v. Anderson, 84 P.3d 953 (Wyo. 2004).   This usually requires control both with respect to the manner and means of performing the particular job task.  In these situations, the employer is responsible for the acts of the employee committed in the scope of the employee's employment.  The “control” required to make a person an employee rather than an independent contractor is usually held to be control over the physical details of the work.  It is not enough that the employer exercise control over the general manner in which the work is carried out, there must be control over the physical details of the work in order for an employer-employee relationship to be established. Therefore, if the employer retains control over the manner of performance by specifying how the work is to be accomplished, the time the individual will start working, the lunch break and other breaks, the employer is retaining control over the manner of performance.  Likewise, the employer retains control over the means of performance if the employer provides the tools and equipment necessary to complete the job.  An employer may also be directly liable to a customer for breaching a duty of care owed to the customer to supervise its employees involved in service for hire or to supply its employees with safe and proper equipment.  See, e.g., Eischen, et al. v. Crystal Valley Cooperative, 835 N.W.2d 629 (Minn. Ct. App. 2013). An independent contractor, on the other hand, although hired to produce a certain result, is not subject to the control of the employer while the work is performed.

In any given situation, there may not be any control over the manner of performance, but there may be control over the means of performance.  Thus, individuals hiring other persons to accomplish certain tasks should clearly specify whether an employer-employee relationship is to result.  This clarity is often lacking in ag settings.

If the subordinate is free to execute the work without being subject to the direction of the principal as to details, that person is usually an independent contractor.  A person engaging an independent contractor is generally not liable to third persons for the independent contractor's acts.  However, if the work is such that, unless special precautions are taken, there will be a high degree of danger to others, the person hiring the independent contractor will be liable.  This is an exception for “inherently dangerous”activities.  This rule first applied principally to work which was highly dangerous even if every possible precaution was taken such as might occur with the use of dynamite.  More recently, employer liability has been applied where the work to be done by the independent contractor is not “ultra-hazardous” if it is performed without adequate precautions.  In this situation, if the independent contractor omits the precautions, the independent contractor's negligence is attributed to the employer.  An example could be aerial crop spraying in some states. 

“Scope of employment.”  A difficult question in the area of respondeat superior is whether, in a particular case, the employee was acting “within the scope of his employment” when the tort occurred.  In general, the tort is within the scope of employment if the individual acted with the intent to further the employer's business, even if the means chosen were indirect, unwise, and perhaps even forbidden.  Most courts hold that an employee will be deemed to be within the scope of employment even though the employee's intent to serve the employer is coupled with a separate personal purpose. 

Most courts hold that if an accident occurs when the employee is traveling from home to work, the employee is not acting within the scope of employment.  This seems correct because the employer usually has no “control” over the employee at that time.  The result should be the same even if the employer pays the employee a mileage allowance for the trip, and also agrees to pay the employee's hotel expenses for an overnight stay.  Likewise, where the employee is returning home after the day's business activities, most courts do not hold an employer liable if the employee commits a negligent act.  In one case, the defendant was not liable for the plaintiff's injuries sustained in an auto accident with the defendant's farm tenant while the tenant traveling from the farm to the defendant's home to help mow the defendant's law.  The tenant not acting within scope of his job duties as a farm tenant at the time of accident and no evidence was presented that the defendant was in partnership or acting in a joint enterprise with the tenant.  Granillo, et al. v. McKinzie, No. 11-07-00241-CV, 2009 Tex. App. LEXIS 728 (Tex. Ct. App. Feb. 5, 2009).

Interesting cases arise in situations involving an employee on a business trip who makes a short “side trip”, or “detour”, for the employee's own purposes. The traditional view has been that while the employee is on the first leg of a side trip, the employee is engaging in what is often called a “frolic and detour” and is thus not within the scope of employment.  But, as soon as the employee begins to return towards the path of the original business trip, the employee is once again within the scope of employment, no matter how far afield the employee may be at that point.  The recent trend, however, has been to take a less “mechanical” view of the “frolic and detour” problem.  Most courts today hold that the employee is within the scope of business if the deviation is “reasonably foreseeable”.  Under this approach, the employee might be within the scope of employment even while heading toward the object of a personal errand, if the deviation was slight in terms of distance.  But, if the deviation was large and unforeseeable, in terms of miles, then the employee is not within the scope of business even while heading back towards the business goal, at least until returning reasonably near to the original route the employee was supposed to take.

Recent case.  In Moreno v. Visser Ranch, Inc., No. F075822, 2018 Cal. App. LEXIS 1194 (Cal. Ct. App. Dec. 20, 2018), the defendant dairy employed a worker to be on call around the clock to repair equipment on the defendant’s various farms as needed. The worker was in his work vehicle when he was involved in a single vehicle accident. The plaintiff was riding with the worker at the time of the accident. The plaintiff was employed by a third party to perform various services at the dairy and other local farms. On the night of the accident, the worker and third party attended a family function (they were related) not located on farm property. On the way home after the function, the vehicle they were in left the road and rolled over. The plaintiff was not wearing a seat belt and was seriously injured. The plaintiff sued the driver, dairy farm and the auto manufacturer for negligence. The plaintiff also sued the State and the County based on the dangerous condition of the road where the accident occurred (the road was under construction). The dairy moved for summary judgment on the plaintiff’s respondeat superior claim on the basis that the driver was not acting within the scope of employment when the accident occurred. The trial court granted the motion. The trial court also granted summary judgment for the dairy on the issue of liability arising from ownership of the vehicle. The plaintiff was, however, able to recover statutory damages from the driver. On appeal, the appellate court determined that fact issues remained on the respondeat superior claim. Though the worker and the plaintiff were returning from a family function, the driver was on call 24/7 to respond to issues at the dairy farm. In addition, the appellate court determined that a fact issue remained as to whether the worker, was acting within the scope of his employment and benefiting the dairy farm at the time of the accident. The appellate court remanded the case. 

Conclusion

The potential liability of a farm or ranch business for the conduct of persons working for it is an important issue.  Liability often turns on how much control the business exercises over the job tasks.  The liability issue and the ways it can occur for any particular farm or ranch business is a good conversation to have with legal counsel. 

January 16, 2019 in Civil Liabilities | Permalink | Comments (0)

Monday, December 31, 2018

The "Almost Top Ten" Ag Law and Tax Developments of 2018

Overview

2018 was a big year for developments in law and tax that impact farmers, ranchers, agribusinesses and the professionals that provide professional services to them.  It was also a big year in other key areas which are important to agricultural production and the provision of food and energy to the public.  For example, carbon emissions in the U.S. fell to the lowest point since WWII while they rose in the European Union.  Poverty in the U.S. dropped to the lowest point in the past decade, and the unemployment rate became the lowest since 1969 with some sectors reporting the lowest unemployment rate ever.  The Tax Cuts and Jobs Act (TCJA) doubles the standard deduction in 2018 compared to 2017, which will result additional persons having no federal income tax liability and other taxpayers (those without a Schedule C or F business, in particular) having a simplified return.  Wages continued to rise through 2018, increasing over three percent during the third quarter of 2018.  This all bodes well for the ability of more people to buy food products and, in turn, increase demand for agricultural crop and livestock products.  That’s good  news to U.S. agriculture after another difficult year for many commodity prices.

On the worldwide front, China made trade concessions and pledged to eliminate its “Made in China 2025” program that was intended to put China in a position of dominating world economic production.  The North-Korea/South Korea relationship also appears to be improving, and during 2018 the U.S. became a net exporter of oil for the first time since WWII.  While trade issues with China remain, they did appear to improve as 2018 progressed, and the USDA issued market facilitation payments (yes, they are taxed in the year of receipt and, no, they are not deferable as is crop insurance) to producers to provide relief from commodity price drops as a result of the tariff battle. 

So, on an economic and policy front, 2019 appears to bode well for agriculture.  But, looking back on 2018, of the many ag law and tax developments of 2018, which ones were important to the ag sector but just not quite of big enough significance nationally to make the “Top Ten”?  The almost Top Ten – that’s the topic of today’s post.

The “Almost Top Ten” - No Particular Order

Syngenta litigation settles.  Of importance to many corn farmers, during 2018 the class action litigation that had been filed a few years ago against Syngenta settled.  The litigation generally related to Syngenta's commercialization of genetically-modified corn seed products known as Viptera and Duracade (containing the trait MIR 162) without approval of such corn by China, an export market. The farmer plaintiffs (corn producers), who did not use Syngenta's products, claimed that Syngenta's commercialization of its products caused the genetically-modified corn to be commingled throughout the corn supply in the United States; that China rejected imports of all corn from the United States because of the presence of MIR 162; that the rejection caused corn prices to drop in the United States; and that corn farmers were harmed by that market effect.  In April of 2018, the Kansas federal judge handling the multi-district litigation preliminarily approved a nationwide settlement of claims for farmers, grain elevators and ethanol plants.  The proposed settlement involved Syngenta paying $1.5 billion to the class.  The class included, in addition to corn farmers selling corn between September of 2013 and April of 2018, grain elevators and ethanol plants that met certain definition requirements.  Those not opting out of the class at that point are barred from filing any future claims against Syngenta arising from the presence of the MIR 162 trait in the corn supply.  Parties opting out of the class can't receive any settlement proceeds, but can still file private actions against Syngenta.  Parties remaining in the class had to file claim forms by October of 2018.   The court approved the settlement in December of 2018, and payments to the class members could begin as early as April of 2019. 

Checkoff programs.  In 2018, legal challenges to ag “checkoff” programs continued.  In 2017, a federal court in Montana enjoined the Montana Beef Checkoff.  In that case, Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America v. Perdue, No. CV-16-41-GF-BMM, 2017 U.S. Dist. LEXIS 95861 (D. Mont. Jun. 21, 2017), the plaintiff claimed that the federal law requiring funding of the Montana Beef Council (MBC) via funds from the federal beef checkoff was unconstitutional.  The Beef Checkoff imposes a $1.00/head fee at the time cattle are sold. The money generated funds promotional campaigns and research, and state beef councils can collect the funds and retain half of the collected amount with the balance going to the Cattleman’s Beef Production and Research Board (Beef Board). But, a producer can direct that all of the producer’s assessment go to the Beef Board. The plaintiff claimed that the use of the collected funds violated their First Amendment rights by forcing them to pay for “speech” with which they did not agree. The defendant (USDA) motioned to dismiss, but the Magistrate Judge denied the motion. The court determined that the plaintiffs had standing, and that the U.S. Supreme Court had held in prior cases that forcing an individual to fund a private message that they did not agree with violated the First Amendment. Any legal effect of an existing “opt-out” provision was not evaluated. The court also rejected the defendant’s claim that the case should be delayed until federal regulations with respect to the opt-out provision was finalized because the defendant was needlessly dragging its heels on developing those rules and had no timeline for finalization. The court entered a preliminary injunction barring the MBC from spending funds received from the checkoff. On further review by the federal trial court, the court adopted the magistrate judge’s decision in full. The trial court determined that the plaintiff had standing on the basis that the plaintiff would have a viable First Amendment claim if the Montana Beef Council’s advertising involves private speech, and the plaintiff did not have the ability to influence the advertising of the Montana Beef Council. The trial court rejected the defendant’s motion to dismiss for failure to state a claim on the basis that the court could not conclude, as a matter of law, that the Montana Beef Council’s advertisements qualify as government speech. The trial court also determined that the plaintiff satisfied its burden to show that a preliminary injunction would be appropriate. 

The USDA appealed the trial court’s decision, but the U.S. Court of Appeals for the Ninth Circuit affirmed the trial court in 2018.  Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America v. Perdue, 718 Fed. Appx. 541 (9th Cir. 2018).  Later in 2018, as part of the 2018 Farm Bill debate, a provision was proposed that would have changed the structure of federal ag checkoff programs.  It did not pass, but did receive forty percent favorable votes.    

GIPSA rules withdrawn.  In the fall of 2016, the USDA sent to the Office of Management and Budget (OMB) an interim final rule and two proposed regulations setting forth the agency’s interpretation of certain aspects of the Packers and Stockyards Act (PSA) involving the buying and selling of livestock and poultry. The proposals generated thousands of comments, with ag groups and producers split in their support. The proposals concern Section 202 of the PSA (7 U.S.C. §§ 192 (a) and (e)) which makes it unlawful for any packer who inspects livestock, meat products or livestock products to engage in or use any unfair, unjustly discriminatory or deceptive practice or device, or engage in any course of business or do any act for the purpose or with the effect of manipulating or controlling prices or creating a monopoly in the buying, selling or dealing any article in restraint of commerce. The “effect” language of the statute would seem to eliminate any requirement that the producer show that the packer acted with the intent to control or manipulate prices. However, the federal courts have largely interpreted the provision to require a plaintiff to show an anti-competitive effect in order to have an actionable claim. 

The interim final rule and the two proposed regulations stemmed from 2010.  In that year, the Obama administration’s USDA issued proposed regulations providing guidance on the handling of antitrust-related issues under the PSA. 75 Fed. Reg. No. 119, 75 FR 35338 (Jun. 22, 2010).  Under the proposed regulations, "likelihood of competitive injury" was defined as "a reasonable basis to believe that a competitive injury is likely to occur in the market channel or marketplace.” It included, but was not limited to, situations in which a packer, swine contractor, or live poultry dealer raises rivals' costs, improperly forecloses competition in a large share of the market through exclusive dealing, restrains competition, or represents a misuse of market power to distort competition among other packers, swine contractors, or live poultry dealers. It also includes situations “in which a packer, swine contractor, or live poultry dealer wrongfully depresses prices paid to a producer or grower below market value, or impairs a producer's or grower's ability to compete with other producers or growers or to impair a producer's or grower's ability to receive the reasonably expected full economic value from a transaction in the market channel or marketplace." According to the proposed regulations, a “competitive injury” under the PSA occurs when conduct distorts competition in the market channel or marketplace. The scope of PSA §202(a) and (b) was stated to depend on the nature and circumstances of the challenged conduct. The proposed regulations specifically noted that a finding that a challenged act or practice adversely affects or is likely to affect competition is not necessary in all cases. The proposed regulations also specified that a PSA violation could occur without a finding of harm or likely harm to competition, contrary to numerous court opinions on the issue.

On April 11, 2017, the USDA announced that it was delaying the effective date of the interim final rule for 180 days, until October 19, 2017, with the due date for public comment set at June 12, 2017.  However, on October 17, 2017, the USDA withdrew the interim rule.  The withdrawal of the interim final rule and two proposed regulations was challenged in court.  On December 21, 2018, the U.S. Court of Appeals for the Eighth Circuit denied review of the USDA decision.  In Organization for Competitive Markets v. United States Department of Agriculture, No. 17-3723, 2018 U.S. App. LEXIS 36093 (8th Cir. Dec. 21, 2018), the court noted that the USDA had declined to withdraw the rule and regulations because the proposal would have generated protracted litigation, adopted vague and ambiguous terms, and potentially bar innovation and stimulate vertical integration in the livestock industry that would disincentivize market entrants.  Those concerns, the court determined, were legitimate and substantive.  The court also rejected the plaintiff’s argument that the court had to compel agency action.  The matter, the court concluded, was not an extraordinary situation.  Thus, the USDA did not unlawfully withhold action. 

No ”clawback.”   In a notice of proposed rulemaking, the U.S Treasury Department eliminated concerns about the imposition of an increase in federal estate tax for decedents dying in the future at a time when the unified credit applicable exclusion amount is lower than its present level and some (or all) of the higher exclusion amount had been previously used. The Treasury addressed four primary questions. On the question of whether pre-2018 gifts on which gift tax was paid will absorb some or all of the 2018-2025 increase in the applicable exclusion amount (and thereby decrease the amount of the credit available for offsetting gift taxes on 2018-2025 gifts), the Treasury indicated that it does not. As such, the Treasury indicated that no regulations were necessary to address the issue. Similarly, the Treasury said that pre-2018 gift taxes will not reduce the applicable exclusion amount for estates of decedents dying in years 2018-2025.

The Treasury also stated that federal gift tax on gifts made after 2025 will not be increased by inclusion in the tax computation a tax on gifts made between 2018 and 2015 that were sheltered from tax by the increased applicable exclusion amount under the TCJA.  The Treasury concluded that this is the outcome under current law and needed no regulatory “fix.” As for gifts that are made between 2018-2025 that are sheltered by the applicable exclusion amount, the Treasury said that those amounts will not be subject to federal estate tax in estates of decedents dying in 2026 and later if the applicable exclusion amount is lower than the level it was at when the gifts were made. To accomplish this result, the Treasury will amend Treas. Reg. §20.2010-1 to allow for a basic exclusion amount at death that can be applied against the hypothetical gift tax portion of the estate tax computation that is equal to the higher of the otherwise applicable basic exclusion amount and the basic exclusion amount applied against prior gifts.

The Treasury stated that it had the authority to draft regulations governing these questions based on I.R.C. §2001(g)(2). The Treasury, in the Notice, did not address the generation-skipping tax exemption and its temporary increase under the TCJA through 2025 and whether there would be any adverse consequences from a possible small exemption post-2025. Written and electronic comments must be received by February 21, 2019. A public hearing on the proposed regulations is scheduled for March 13, 2019. IRS Notice of Proposed Rulemaking, REG-106706-18, 83 FR 59343 (Nov. 23, 2018).

Conclusion

These were significant developments in the ag law and tax arena in 2018, but just not quite big enough in terms of their impact sector-wide to make the “Top Ten” list.  Wednesday’s post this week will examine the “bottom five” of the “Top Ten” developments for 2018. 

December 31, 2018 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Friday, November 9, 2018

Developments in Ag Law and Tax

Overview

Legal developments impacting rural landowners, producers and agribusinesses continue to occur.  The same can be said for tax developments that impact practitioners and their client base.  It’s a never-ending stream.

In today’s post, I examine just a few of the recent developments from the courts of relevance.

Debtor Can Convert Chapter 12 Case to Chapter 11 

Can a Chapter 12 bankruptcy case be converted to Chapter 11?  That was the issue in In re Cardwell, No. 17-50307-rlj12, 2018 Bankr. LEXIS 3089 (Bankr. N.D. Tex. Oct. 3, 2018).  The debtor, an elderly widowed woman, owned three tracts of farmland that she leased out for farming purposes.  The tracts served as collateral for loans taken out by her children and grandchildren. The debtor sued a bank and the spouse of a granddaughter for “improprieties on the loans and liens.” The debtor filed Chapter 12, but the bank moved to dismiss the case on the basis that the debtor was not a ‘family farmer.” The debtor then moved to convert the case to Chapter 11. The bank objected, claiming that a Chapter 12 case cannot be converted to a Chapter 11.

While the court noted that there is some authority for that proposition, the court also noted that there is no explicit statutory language that bars a Chapter 12 from being converted to a Chapter 11 and that the courts are split on the issue. Ultimately, the court concluded that 11 U.S.C. §1208(e) allowed for conversion if the proceeding was in good faith and conversion would not be inequitable or prejudicial to creditors. The court also noted that if it dismissed the debtor’s Chapter 12 case, the debtor could simply refile the matter as a Chapter 11 case. The court saw no point in requiring that procedural step as there was no explicit statutory language requiring dismissal and refiling. The court also noted that upon conversion the automatic stay would remain in place, and that the debtor would actually have a more difficult time getting her reorganization plan confirmed as part of a Chapter 11 case as compared to a Chapter 12 case. 

Federal Law Preempts Kansas Train Roadway Blockage Law

Burlington Northern Santa Fe Railway (BNSF) operates trains through the town of Bazaar in Chase County, Kansas. At issue State of Kansas v. Burlington Northern Santa Fe Railway Company, No. 118,095, 2018 Kan. App. LEXIS 63 (Kan. Ct. App. Nov. 2, 2018), were two railroad crossings where the main line and the side tracks crossed county and town roads. The side track is used to change crews or let other trains by on the main line. Early one morning, the Chase County Sheriff received a call that a train was blocking both intersections. The Sheriff arrived on scene two hours later and spoke with a BNSF employee. This employee said that he was checking the train but did not state when the train would move. The Sheriff then called BNSF three times. The train remained stopped on both crossings for approximately four hours. The Sheriff issued two citations (one for each engine) under K.S.A. 66-273 for blocking the crossings for four hours and six minutes. K.S.A. 66-273 prohibits railroad companies and corporations operating a railroad in Kansas from allowing trains to stand upon any public roadway near any incorporated or unincorporated city or town in excess of 10 minutes at any one time without leaving an opening on the roadway of at least 30 feet in width. BNSF moved to dismiss the citation, but the trial court rejected the motion.

During the trial, many citizens presented evidence that they could not get to work that day, and a service technician could not reach a home that did not have hot water and was having heating problems. BNSF presented train logs for one of the engines. These logs showed that one engine was stopped in Bazaar for only 8 minutes to change crews and was not in Bazaar at 9:54 a.m. The Sheriff later conceded that he might have been mistaken about the numbers on the engines for the citations. There were no train logs for the other engine. BNSF also stated there could be other alternatives from blocking the crossings but uncoupling the middle of the train would be time consuming and unsafe.

The trial court ruled against BNSF and entered a fine of $4,200 plus court costs. On appeal, BNSF claimed that the Interstate Commerce Commission Termination Act (ICCTA) and Federal Railroad Safety Act (FRSA) preempted Kansas law, and that the evidence presented was not sufficient to prove a violation of Kansas law. The appellate court agreed, holding that the ICCTA, by its express terms contained in 49 U.S.C. 10501(b), preempted Kansas law. While the appellate court noted that the Kansas statute served an “admirable purpose,” it was too specific in that it applied only to railroad companies rather than the public at large. Also, the statute had more than a remote or incidental effect on railway transportation. As a result, the Kansas law infringed on the Surface Transportation Board’s exclusive jurisdiction to regulate the railways in the United States. The appellate court noted that the Surface Transportation Board was created by the ICCTA and given exclusive jurisdiction over the construction, acquisition, operation, abandonment, or discontinuance of railroad tracks and facilities. In addition, the appellate court noted that the Congress expressly stated that the remedies with respect to regulation of rail transportation set forth in the ICCTA are exclusive and preempt other remedies provided under federal or state law. The appellate court did not consider BNSF’s other arguments. 

Groundwater Is Not a “Point Source” of Pollution Under the CWA

The defendant in Tennessee Clean Water Network v. Tennessee Valley Authority, No. 17-6155, 2018 U.S. App. LEXIS 27237 (6th Cir. Sept. 24, 2018), is a utility that burns coal to produce energy.  It also produces coal ash as a byproduct. The coal ash is discharged into man-made ponds. The plaintiffs, environmental activist groups, claimed that the chemicals from the coal ash in the ponds leaked into surrounding groundwater where it was then carried to a nearby lake that was subject to regulation under the Clean Water Act (CWA). The plaintiffs claimed that the contamination of the lake without a discharge permit violated the CWA and the Resource Conservation and Recovery Act (RCRA).

The trial court had dismissed the RCRA claim, but the appellate court reversed that determination and remanded the case on that issue. On the CWA claim, the trial court ruled as a matter of law that the CWA applies to discharges of pollutants from a point source through hydrologically connected groundwater to navigable waters where the connection is "direct, immediate, and can generally be traced." The trial court held that the defendant’s facility was a point source because it "channel[s] the flow of pollutants . . . by forming a discrete, unlined concentration of coal ash," and that the Complex is also a point source because it is "a series of discernible, confined, and discrete ponds that receive wastewater, treat that wastewater, and ultimately convey it to the Cumberland River." The trial court also determined that the defendant’s facility and the ponds were hydrologically connected to the Cumberland River by groundwater. As for the defendant’s facility, the trial court held that "[f]aced with an impoundment that has leaked in the past and no evidence of any reason that it would have stopped leaking, the Court has no choice but to conclude that the [defendant’s facility] has continued to and will continue to leak coal ash waste into the Cumberland River, through rainwater vertically penetrating the Site, groundwater laterally penetrating the Site, or both." The trial court determined that the physical properties of the terrain made the area “prone to the continued development of ever newer sinkholes or other karst features." Thus, based on the contaminants flowing from the ponds, the court found defendant to be in violation of the CWA. The trial court also determined that the leakage was in violation of the defendant “removed-substances” and “sanitary-sewer” overflow provisions. The trial court ordered the defendant to "fully excavate" the coal ash in the ponds (13.8 million cubic yards in total) and relocate it to a lined facility.

On further review, the appellate court reversed. The appellate court held that the CWA does not apply to point source pollution that reaches surface water by means of groundwater movement. The appellate court rejected the plaintiffs’ assertion that mere groundwater is equivalent to a discernable point source through which pollutants travel to a CWA-regulated body of water. The appellate court noted that, to constitute a “conveyance” of groundwater governed by the CWA, the conveyance must be discernible, confined and discrete. While groundwater may constitute a conveyance, the appellate court reasoned that it is neither discernible, confined, nor discrete. Rather, the court noted that groundwater is a “diffuse” medium that “travels in all directions, guided only by the general pull of gravity.” In addition, the appellate court noted that the CWA regulates only “the discharge of pollutants ‘to navigable waters from any point source.’” In so holding, the court rejected the holdings in Hawai’i Wildlife Fund v. County of Maui, 881 F.3d 754 (9th Cir. 2018) and Upstate Forever, et al. v. Kinder Morgan Energy Partners, LP, et al., 887 F.3d 637 (4th Cir. 2018). 

Cash Gifts to Pastor Constituted Taxable Income

In Felton v. Comr., T.C. Memo. 2018-168, the petitioner was the pastor of a church and the head of various church related ministries in the U.S. and abroad, got behind on his tax filings and IRS audited years 2008 and 2009. While most issues were resolved, the IRS took the position that cash and checks that parishioners put in blue envelopes were taxable income to the petitioner rather than gifts. The amounts the petitioner received in blue envelopes were $258,001 in 2008 and $234,826 in 2009. There was no question that the church was run in a businesslike manner. While the church board served in a mere advisory role, the petitioner did follow church bylaws and never overrode the board on business matters. As for contributions to the church, donated funds were allocated based on an envelope system with white envelopes used for tithes and offerings for the church. The white envelopes also included a line marked “pastoral” which would be given directly to the petitioner. The amounts in white envelopes were tracked and annual giving statements provided for those amounts.

The petitioner reported as income the amounts provided in white envelopes that were designated as “pastoral.” Amount in gold envelopes were used for special programs and retreats, and were included in a donor’s annual giving statement. Amounts in blue envelopes (which were given out when asked for) were treated as pastoral gifts and the amounts given in blue envelopes were not included in the donor’s annual giving statement and the donor did not receive any tax deduction for the gifted amounts. Likewise, the petitioner did not include the amounts given in blue envelopes in income. The IRS took the position that the amounts given by means of the blue envelopes were taxable income to the petitioner. The Tax Court agreed, noting that the petitioner was not retiring or disabled. The court also noted that the petitioner received a non-taxable parsonage allowance of $78,000 and received only $40,000 in white envelope donations. The court also upheld the imposition of a penalty because the petitioner, who self-prepared his returns, made no attempt to determine the proper tax reporting of the donations. 

Conclusion

The developments keep rolling in.  There will be more to write about in a subsequent post.

November 9, 2018 in Bankruptcy, Civil Liabilities, Environmental Law, Income Tax | Permalink | Comments (0)

Thursday, October 18, 2018

Agricultural Law Online!

Overview

For the Spring 2019 academic semester, Kansas State University will be offering my Agricultural Law and Economics course online. No matter where you are located, you can enroll in the course and participate in it as if you were present with the students in the on-campus classroom.
Details of next spring’s online Ag Law course – that’s the topic of today’s post.

Course Coverage

The course provides a broad overview of many of the issues that a farmer, rancher, rural landowner, ag lender or other agribusiness will encounter on a daily basis. As a result, the course looks at contract issues for the purchase and sale of agricultural goods; the peril of oral contracts; the distinction between a lease and a contract (and why the distinction matters); and the key components of a farm lease, hunting lease, wind energy lease, oil and gas lease, and other types of common agricultural contractual matters. What are the rules surrounding ag goods purchased at auction?

Ag financing situations are also covered – what it takes to provide security to a lender when financing the purchase of personal property to be used in the farming business. In addition, the unique rules surrounding farm bankruptcy is covered, including the unique tax treatment provided to a farmer in Chapter 12 bankruptcy.

Of course, farm income tax is an important part of the course. Tax planning is perhaps the most important aspect of the farming business that every day decisions have an impact on and are influenced by. As readers of this blog know well, farm tax issues are numerous and special rules apply in many instances. The new tax law impacts many areas of farm income tax.

Real property legal issues are also prevalent and are addressed in the course. The key elements of an installment land contract are covered, as well as legal issues associated with farm leases. Various types of interests in real estate are explained – easements; licenses; profits, fee simples, remainders, etc. Like-kind exchange rules are also covered as are the special tax rules (at the state level) that apply to farm real estate. A big issue for some farmers and ranchers concerns abandoned railways, and those issues are covered in the course. What if an existing fence is not on the property line?
Farm estate and business planning is also a significant emphasis of the course. What’s the appropriate estate plan for a farm and ranch family? How should the farming business be structured? Should multiple entities be used? Why does it matter? These questions, and more, are addressed.

Agricultural cooperatives are important for the marketing of agricultural commodities. How a cooperative is structured and works and the special rules that apply are also discussed.

Because much agricultural property is out in the open, that means that personal liability rules come into play with respect to people that come onto the property or use farm property in the scope of their employment. What are the rules that apply in those situations? What about liability rules associated with genetically modified products? Ag chemicals also pose potential liability issues, as do improperly maintained fences? What about defective ag seed or purchased livestock that turns out to not live up to representations? These issues, and more, are covered in the scope of discussing civil liabilities.

Sometimes farmers and ranchers find themselves in violation of criminal laws. What are those common situations? What are the rules that apply? We will get into those issue too.

Water law is a very big issue, especially in the western two-thirds of the United States. We will survey the rules surrounding the allocation of surface water and ground water to agricultural operations.

Ag seems to always be in the midst of many environmental laws – the “Clean Water Rule” is just one of those that has been high-profile in recent years. We will talk about the environmental rules governing air, land, and water quality as they apply to farmers, ranchers and rural landowners.
Finally, we will address the federal (and state) administrative state and its rules that apply to farming operations. Not only will federal farm programs be addressed, but we will also look at other major federal regulations that apply to farmers and ranchers.

Further Information and How to Register

Information about the course is available here:
https://eis.global.ksu.edu/CreditReg/CourseSearch/Course.do?open=true&sectionId=127126

You can also find information about the text for the course at the following link (including the Table of Contents and the Index):
https://washburnlaw.edu/practicalexperience/agriculturallaw/waltr/principlesofagriculturallaw/index.html

If you are an undergraduate student at an institution other than Kansas State, you should be able to enroll in this course and have it count as credit towards your degree at your institution.  Consult with your academic advisor to see how Ag Law and Economics will transfer and align with your degree completion goals.

If you have questions, you can contact me directly, or submit your questions to the KSU Global Campus staff at the link provided above.

I hope to see you in January!

Checkout the postcard (401 KB PDF) containing more information about the course and instructor.

KStateAgriculturalLawandEconomicsPostcard

October 18, 2018 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Tuesday, October 16, 2018

Liability For Injuries Associated With Horses

Overview

In recent years, all states except California and Maryland have enacted Equine Activity Liability Acts designed to encourage the continued existence of equine-related activities, facilities and programs, and provide the equine industry limited protection against lawsuits.  The laws vary from state-to-state, but generally require special language in written contracts and liability releases or waivers, require the posting of warning signs and attempt to educate the public about inherent risks in horse-related activities and immunities designed to limit liability.  The basic idea of these laws is to provide a legal framework to incentivize horse-related activities by creating liability protection for horse owners and event operators. 

Equine activity laws – that’s the topic of today’s post.

State Law Variations

The typical statute covers an “equine activity sponsor,” “equine professional,” or other person (such as an employer in an employment setting involving livestock) and specifies that such "covered" person can only be sued in tort for damages related to the knowing provision of faulty tack, failure to determine the plaintiff’s ability to safely manage a horse, or failure to post warning signs concerning dangerous latent conditions.  See, e.g., Baker v. Shields, 767 N.W.2d 404 (Iowa 2009)Pinto v. Revere Saugus Riding Academy, No. 08-P-318, 2009 Mass. App. LEXIS 746 (Mass. Ct. App. Jun. 8, 2009).  For example, in Germer v. Churchill Downs Management, No. 3D14-2695, 2016 Fla. App. LEXIS 13398 (Fla. Ct. Ap. Sept. 7, 2016), state law “immunized” (among other things) an equine activity sponsor from liability to a “participant” from the inherent risks of equine activities.  The plaintiff, a former jockey visited a race course that the defendant managed.  It was a spur-of-the-moment decision, but he was required to get a guest pass to enter the stables.  He was injured by a horse in the stables and the court upheld the immunity provisions of the statute on the basis that the requirement to get a guest pass before entering the stables was sufficient protocol to amount to “organization” which made the plaintiff’s visit to the stables “an organized activity” under the statute. 

While many state equine activity laws require the postage of warning signs and liability waivers, not every state does.  For example, the statutes in CT, HI, ID, MT, NH, ND, UT, WA and WY require neither signage nor particular contract language.

Recovery for damages resulting from inherent risks associated with horses is barred, and some state statutes require the plaintiff to establish that the defendant’s conduct constituted “gross negligence,” “willful and wanton misconduct,” or “intentional wrongdoing.”  For example, in  Snider v. Fort Madison Rodeo Corp., No. 1-669/00-2065, 2002 Iowa App. LEXIS 327 (Iowa Ct. App. Feb. 20, 2002), the plaintiff sued a parade sponsor and a pony owner for injuries sustained in crossing the street during a parade.  The court determined that the omission of a lead rope was not reckless conduct and that the plaintiff assumed the risk of crossing the street during the parade.  Similarly, in Markowitz v. Bainbridge Equestrian Center, Inc., No. 2006-P-0016, 2007 Ohio App. LEXIS 1411 (Ohio Ct. App. Mar. 30, 2007), the court held that there was no evidence present that the plaintiff’s injuries sustained in the fall from a horse was a result of the defendant’s willful or wanton conduct or reckless indifference.  In addition, the signed liability release form complied with statutory requirements.  However, in Teles v. Big Rock Stables, L.P., 419 F. Supp. 2d 1003 (E.D. Tenn. 2006), the provision of a saddle with stirrups that could not be shortened enough to reach plaintiff’s feet which then caused the plaintiff to fall from a horse raised jury question as to whether faulty tack provided, whether the fall was the result of the inherent risk of horseback riding, and whether the defendant’s conduct was willful or grossly negligent and, thus, not covered by the signed liability release form.

What constitutes an “inherent risk” from horse riding is a fact issue in many states due to the lack of any precise definition of “inherent risk” in the particular state statute.  For example, under the Texas Equine Activity Liability Act, the phrase “inherent risk of equine activity” refers to risks associated with the activity rather than simply those risks associated with innate animal behavior.  See, e.g., Loftin v. Lee, No. 09-0313, 2011 Tex. LEXIS 326 (Tex. Sup. Ct. Apr. 29, 2011).  The Ohio equine activities immunity statute has been held to bar recovery for an injury incurred while assisting an employer unload a horse from a trailer during a day off, because the person deliberately exposed themselves to an inherent risk associated with horses and viewed the activity as a spectator.  Smith v. Landfair, No. 2011-1708, 2012 Ohio LEXIS 3095 (Ohio Sup. Ct. Dec. 6, 2012).  Also, in Einhorn v. Johnson, et al., No. 50A03-1303-CT-93, 2013 Ind. App. LEXIS 495 (Ind. Ct. App. Oct. 10, 2013), the Indiana Equine Activity Act barred a negligence action after a volunteer at a county fair was injured by a horse.  The plaintiff’s injuries were determined to result from the inherent risk of equine activities.  Likewise, in Holcomb v. Long, No. A14A0815, 2014 Ga. App. LEXIS 726 (Ga. Ct. App. Nov. 10, 2014), the Georgia Equine Activities Act barred recovery for injuries sustained as a result of slipping saddle during horseback ride; slipping saddle inherent risk of horseback riding.  See also, Fishman v. GRBR, Inc., No. DA 17-0214, 2017 Mont. LEXIS 602 (Mont. Sup. Ct. Oct. 5, 2017).

Recent Case

In Franciosa v. Hidden Pond Farm, Inc., No. 2017-0153 2018 N.H. LEXIS 174 (N. H. Sup. Ct. Sept. 21, 2018), the plaintiff was severely injured in a horseback riding accident. At the time of the accident, she was thirteen years old, had been riding horses for eight years, and had been taking weekly riding lessons from the defendant, an expert equestrian, for almost two years. Approximately once each seek, the plaintiff went for a “free ride”—a ride that did not involve a lesson. On those occasions the defendant was not always present, and no one was assigned to supervise the plaintiff. The day before the accident the plaintiff texted the defendant to arrange a lesson for the following day. The defendant texted the plaintiff that, although she would not be present at the farm on the following day, the plaintiff had permission to take a free ride on a horse that the plaintiff had ridden without incident on at least two occasions.

The next day after riding the horse for about 30 minutes the plaintiff fell to the ground as she tried to dismount and was seriously injured when the horse subsequently stepped on her. The plaintiff sued, and the defendant moved for summary judgment on the basis that the equine immunity provisions set forth N.H. Rev. Stat. §508:19 barred the plaintiff’s negligence claim. The plaintiff then filed a cross-motion for partial summary judgment, arguing that the plaintiff’s injuries were not caused by an “inherent risk” of horseback riding and, therefore, the defendant was not immune from liability. Alternatively, the plaintiff argued that even if the statute applied, a jury trial was necessary to resolve issues of material fact regarding the statutory exceptions in N.H. Rev. Stat. §508:19.  The trial court entered summary judgment for the defendant, denied the plaintiff’s cross motion, and also denied the plaintiff’s motion for reconsideration.

On further review, the appellate court held that the statute clearly operated “to shield persons involved in an equine activity from liability for negligence claims related to a participant’s injuries resulting from the inherent risks of equine circumstances.” The appellate court also determined that it didn’t have to decide whether the defendant’s physical absence and inability to supervise the plaintiff at the time of the accident placed the accident outside of the risks inherent in equine activities, because under RSA 508:19, I(f)(5) a failure to take “corrective measures” was relevant only when the participant was negligent and that negligence can be reasonably foreseen, which was not present in the case. The court also determined that there was no evidence to support the plaintiff’s argument that the defendant’s failure to supervise the plaintiff amounted to willful or wanton disregard for the plaintiff’s safety. Consequently, the appellate court held that the trial court did not err in holding that the defendant was entitled to immunity under N.H. Rev. Stat. §508:19. As such, the decisions of the trial court were affirmed. 

Conclusion

State Equine Activity Liability laws are designed to provide liability protection for injuries arising from horse-related activities.  If you have horses or are involved in horse-related activities, it might be a good idea to determine what rules your particular state has.

October 16, 2018 in Civil Liabilities | Permalink | Comments (0)

Friday, September 14, 2018

What Difference Does It Make If I Post My Property “No Trespassing”?

Overview

A great deal of farm personal property is out in the open.  From time to time, machinery and equipment may sit outside, and farm tools and supplies may also be out in the open.  Of course, grazing livestock may be outside along with other farm property.  Farm real estate may contain farm ponds, stock water tanks and other potential hazards.  All of this raises concerns about public access to the premises and possible theft of property and potential liability issues.  Similarly, livestock confinement operations have their own unique concerns about who has access to the property.

Does the posting of the property as “No Trespassing” have any legal consequence?  It might.  That’s the topic of today’s post.

Benefits of Posting

Criminal trespass.  One potential benefit of posting property “No Trespassing” is that, in some states, what is otherwise a civil trespass can be converted to a criminal trespass.  A criminal trespass gets the state involved in prosecuting the trespasser, and it might be viewed as having a greater disincentive to trespass than would a civil trespass.  A civil trespass is prosecuted by the landowner personally against the alleged trespasser. 

Search warrant.  Another possible benefit of posting property “No Trespassing” is that it may cause a search warrant to be obtained before the property can be search for potential criminal conduct.  Under the Fourth Amendment to the Constitution, unreasonable searches and seizures are prohibited absent a search warrant that is judicially-approved and supported by probable cause. 

The search warrant issue and the posting of “No Trespassing” signs was the subject of a recent case from Vermont.  In State v. Dupuis, 2018 VT 86 (Vt. Sup. Ct. 2018), a fish and game warden entered the defendant’s property via an adjoining property. The warden found a blind with a salt block and apples nearby.  A rather precarious path through tough timber was used by the warden to avoid detection. The defendant was charged with baiting and taking big game by illegal means. At trial, the defendant and many others testified that there are “no trespassing” and “keep out” signs all around the property and on the gate to the public road. The warden stated that he did not see any of these signs. The defendant motioned to exclude the evidence because the warden never obtained a search warrant.  The defendant claimed that he had a reasonable expectation of privacy throughout his property particularly because of the “No Trespassing” signs. 

The trial court reasoned that the warden’s access to the property was abnormal and did not diminish the defendant’s intent to exclude people from coming onto the property. The trial court granted the defendant’s motion to suppress evidence obtained by the warden during the warrantless search. On appeal, the state Supreme Court affirmed. The State claimed that the defendant did not properly exclude the public and, therefore, did not have an expectation of privacy relating to the regulation of hunting. However, the Supreme Court held that when a landowner objectively demonstrates an intent to maintain privacy of open fields, a search warrant is required. Game wardens must obtain a search warrant, the court determined, whenever a warden seeks to enter property and gather evidence. The defendant’s posting of “No Trespassing” signs created an expectation of privacy. Accordingly, the evidenced obtained in the warrantless search was properly suppressed. 

Conclusion

The Vermont case points out that posting property as “No Trespassing” can, indeed, have its benefits. Also, it’s important to check state law requirements for the type, size, placement and content of signs.  State rules vary and they must be complied with to properly post your property.  Just another thing to think about in the world of agricultural law. 

September 14, 2018 in Civil Liabilities, Criminal Liabilities | Permalink | Comments (0)

Tuesday, September 4, 2018

Roadkill – It’s What’s For Dinner

Overview

On occasion I get a question about whether it is permissible to pick up roadkill.  Often, the question is in relation to big game such as deer or bear or moose.  But, other times the question may involve various types of furbearing animals such as coyotes, racoons or badgers.  I don’t get too many roadkill questions involving small game.  That’s probably because when small game is killed on the road, it is either not wanted or the party hitting it simply assumes that there is no question that it can be possessed.

There are many collisions involving wildlife and automobiles every year.  One estimate by a major insurance company projects that one out of every 169 motorists in the U.S. will hit a deer during 2018.  That’s a projected increase of three percent over 2017, with an estimated 1.3 million deer being hit. 

If a wild animal is hit by a vehicle, the meat from the animal is the same as that from animal meat obtained by hunting – assuming that the animal is not diseased.  So, in that instance, harvesting roadkill is a way to get free food – either for personal consumption or to donate to charity.  

What are the rules and regulations governing roadkill?  That’s the topic of today’s post.

State Rules

Many states have rules on the books concerning roadkill.  Often, the approach is for the state statutes and the regulatory body (often the state Department of Game and Fish (or something comparable)) to distinguish between "big game," "furbearing animals" and "small game."  This appears to be the approach of Kansas and a few other states.  Often a salvage tag (e.g., “permit”) is needed to pick up big game and turkey roadkill.  This is the approach utilized in Iowa and some other states.  If a salvage tag is possessed, a hunting license is not required.  For furbearing animals such as opossums and coyotes that are roadkill, the typical state approach is that these animals can only be possessed during the furbearing season with a valid fur harvester license.  As for small game, the typical state approach is that these roadkill animals can be possessed with a valid hunting license in-season.  But variations exist from state-to-state. 

An approach of several states is to allow the collection of roadkill with a valid permit.  That appears to be the approach in Colorado, Georgia, Idaho, Illinois, Indiana, Maryland, New Hampshire, North Dakota, New York, Ohio, Pennsylvania and Tennessee.  Other states require the party hitting wildlife and collecting the roadkill to report the incident and collection within 24 hours.  Other states may limit roadkill harvesting to licensed fur dealers.  In these states (and some others), the general public doesn’t have a right to collect roadkill.  In Texas, roadkill-eating is not allowed (although a legislative attempt to remove the ban was attempted in 2014).  South Dakota has legislatively attempted to make roadkill public property.  Wyoming requires a tag be received from the game warden for possessing big game roadkill.  Oregon allows drivers to get permits to recover, possess, use or transport roadkill. 

Other states (such as Alabama) may limit roadkill harvesting to non-protected animals and game animals, and then only during open season.  The Alaska approach is to only allow roadkill to be distributed via volunteer organizations.  A special rule for black bear roadkill exists in Georgia.  Illinois, in certain situations requires licenses and a habitat stamp.  Massachusetts requires that roadkill be submitted for state inspection, and New Jersey limits salvaging roadkill to deer for persons with a proper permit. 

In all states, federally-protected species cannot be possessed.  If a question exists about the protected status of roadkill, the safest approach is to leave it alone.  Criminal penalties can apply for mere possession of federally protected animals and birds.  Similarly, if a vehicle does significant enough damage to wildlife that the animal’s carcass cannot be properly identified to determine if the season is open for that particular animal (in those states that tie roadkill possession to doing so in-season) the recommended conduct is to not possess the roadkill.   

In the states that have considered roadkill legislation in recent years, proponents often claim that allowing licensed hunters to take (subject to legal limits) a fur-bearing animal from the roadside would be a cost-saving measure for the state.  The logic is that fewer state employees would be required to clean-up dead animal carcasses.  Opponents of roadkill bills tend to focus their arguments on safety-related concerns – that having persons stopped alongside the roadway to collect dead animals would constitute a safety hazard for other drivers.  That’s an interesting argument inasmuch as those making this claim would also appear to be asserting that a dead animal on a roadway at night is not a safety hazard.  Others simply appear to argue that collecting roadkill for human consumption is disgusting. 

Conclusion

There is significant variation among state approaches with respect to possession of roadkill.  That means that for persons interested in picking up roadkill, researching applicable state law and governing regulations in advance would be a good idea.  For roadkill that is gleaned from a roadway that is used for human consumption, care should be taken in preparation and cooking.  The present younger generation typically doesn’t have much experience dining on racoon (they tend to be greasy), opossum shanks and gravy, as well as squirrel.  But, prepared properly, some view them as a delicacy. 

To date, the USDA hasn’t issued guidelines on the proper preparation of roadkill or where roadkill fits in its food pyramid (that was revised in recent years).  That’s sounds like a good project for some USDA Undersecretary for Food Safety to occupy their time with.

September 4, 2018 in Civil Liabilities, Regulatory Law | Permalink | Comments (0)