Case Summaries
The 2018 Farm Bill permits the growing of “industrial hemp” if a state chooses to allow the crop. The Farm Bill explicitly states that it does not preempt any state or triable law that regulates the production of hemp, but does not allow a state to prevent the transportation of hemp products through the state. In 2023, the Arkansas passed Act 629, a law that bans “the growth . . . transfer, or possession of industrial hemp that contains certain Delta THC substances[,]” and criminalized hemp products that were derived “from a synthetic chemical process.” However, the bill did try to address the interstate transportation issue by allowing the “continuous transportation” of the hemp derived Delta substances through Arkansas.
The plaintiff sued officials in Arkansas claiming the state law was preempted by the 2018 Farm Bill, violates the Commerce Clause, and is a regulatory taking under the 5th amendment. They asked the court for a preliminary injunction against the enforcement of the Arkansas law.
The court issued the preliminary injunction on multiple grounds. The court found there is a conflict preemption based on the differing definitions of hemp between the two laws. Specifically, the court found that the federal definition allows for downstream hemp-derived products as long as they do not contain more than 0.3 percent delta-9 THC while the Act 629 does not.
The court also found there was express preemption on the transportation issue. Act 629 does not further define “continuous transportation” and plaintiff successfully argued that the law would not allow a truck driver to stop for gas or rest in Arkansas. The court found that this conflicted with federal allowance of hemp transportation through a state.
Bio Gen, LLC et al. v Sanders, et al.4:23-CV-00718-BRW (E.D. Ark. Sept. 07, 2023).
The Texas Legislature enacted three bills amending the state’s Right to Farm statute during the 2023 legislative session. The new law modifies several definitions, changes when a lawsuit can be brought, and imposes a higher burden of proof for potential plaintiffs. These changes went into effect September 1, 2023.
The Texas Right to Farm statute prohibits nuisance lawsuits against farms that have been in operation and substantially unchanged for one year. Texas Agric. Code § 251.004. Previously, a physical expansion was considered a separate date of establishment. The new law provides that a farm operation has only one date of establishment and that date is when the farm commenced agricultural operations. The law includes a definition for “substantial change” which means “a material alteration to the operation of or type of production at an agricultural operation that is substantially inconsistent with the operational practices since the established date of operation.”
In addition to providing immunity from nuisance lawsuits, HB 2308 expanded the protection offered to farm operations to include any “other action to restrain an agricultural operation.” This could likely include claims of trespass or negligence. In addition, the law requires that a plaintiff prove each element of their claim by “clear and convincing evidence.” This burden of proof is stricter than the “preponderance of the evidence” standard, but less strict than the “beyond a reasonable doubt” standard used in criminal cases.
A group of 18 plaintiffs live near hog farm facilities in North Carolina. Defendants Murphy-Brown and Smithfield Foods owned the hogs on the facilities. The plaintiffs brought nuisance and trespass claims alleging that the defendants' farming activities caused flies, dust, and manure to come onto their property. The defendants petitioned the court for summary judgment.
Under North Carolina law, a trespass claim requires proof that a detectable substance not only crossed over but actually landed on the plaintiff’s property. Wall v. Trogdon, 107 S.E.2d 757, 762 (N.C. 1959). Several defendants claimed that they saw manure from trucks spill onto the highway next to their homes. Yet, they did not offer evidence that the waste came onto their property. Additionally, the plaintiffs failed to prove that the defendants caused the alleged dust or manure to enter the properties instead of other neighboring farms or passing vehicles.
Similarly, the plaintiffs failed to provide a link between their negligence claim and the defendants’ actions. A negligence claim requires a showing that “the negligent breach of [the defendant’s] duty was the proximate cause of the injury.” Whisnant v. Carolina Farm Credit,693 S.E.2d 149, 156 (2010). As a result, the district court granted the defendants’ motion for summary judgment.
Barden v. Murphy-Brown LLC, 2023 WL 5282376 (E.D. N.C. Aug. 16, 2023).
A group of cow-calf ranchers indirectly sold their cattle to the defendants, the four largest meat packing companies in the country. The ranchers raised and sold weaned calves to feedlots and stockers. Once the animals reached market weight, the feedlots would then sell the cattle to the meat packing companies under forward contracts or through the cash market. The ranchers brought this lawsuit alleging that the defendants conspired to suppress the price of fed cattle which “led to a parallel collapse of prices of cows and calves.” The plaintiffs claimed this violated the Sherman Act and the Packers and Stockyards Act.
Defendants argued that the plaintiffs did not adequately plead antitrust standing and moved to dismiss the lawsuit. To prove antitrust standing, the plaintiff must show, among other factors, a causal connection between the alleged antitrust violation and the plaintiff’s injury. Midwest Commc'ns v. Minn. Twins, Inc., 779 F.2d 444, 450 n.6 (8th Cir. 1985). The district court found that the plaintiffs failed to show how the defendants’ alleged actions caused a collapse in the fed cattle market and resulted in a downturn in the cow-calf market.
The plaintiffs did not show that they were the direct target of an anticompetitive activity or that their injury is traceable to defendants’ actions. Many years pass and multiple players are involved between the ranchers selling their livestock and the defendants purchasing the animals. Thus, the district court granted the defendants’ motion to dismiss.
In re: Cattle and Beef Antitrust Litigation, 2023 WL 5310905 (D. Minn. Aug. 17, 2023).
A food manufacturer sold a “Stoneground Wheat Cracker” which stated “ORGANIC WHOLE WHEAT FLOUR” on the bottom of the package. Plaintiffs brought a class action lawsuit claiming that the label misled them to believe that the product primarily contained whole wheat flour as opposed to enriched wheat flour. The plaintiffs alleged this violated New York law prohibiting deceptive practices and false advertising. N.Y. Gen. Bus. §§ 349-350. The manufacturer filed a motion to dismiss.
To succeed on a claim for deceptive practices and false advertising, the plaintiff must show that product’s label is “likely to mislead a reasonable consumer acting reasonably under the circumstances.” Bynum v. Fam. Dollar Stores, Inc., 592 F. Supp. 3d 304, 310 (S.D.N.Y. 2022). If a label is ambiguous, but any uncertainty can be answered on the ingredient label, then a reasonable consumer would not be misled. Here, the phrase “ORGANIC WHOLE WHEAT FLOUR” was in small letters next to the phrase “ORGANIC WHOLE BROWN FLAX SEED & SEA SALT.” Compare Mantikas v. Kellogg Co., 910 F.3d 633, 636 (2d Cir. 2018). This ambiguity of whether the product contained whole wheat rather than enriched wheat flour could have been resolved by reading the nutrition label. Because a reasonable consumer would not have been misled, the court granted the manufacturer’s motion to dismiss.
Venticinque v. Back to Nature Foods Co. LLC, 2023 WL 5055034 (S.D. New York, Aug. 8, 2023).
After experiencing financial difficulties, a farm debtor applied for Chapter 12 bankruptcy. If a secured creditor does not agree to the debtor’s proposed plan and the debtor does not surrender the secured property, the court will provide the creditor with a lien and a promise of future payments. To ensure that a secured creditor receives at least “the value, as of the effective date of the plan” an interest rate may be charged on these payments. 11 U.S.C. § 1225(a).
The appropriate market rate “should consist of a risk-free rate, plus additional interest to compensate a creditor for risks posed by the plan.” United States v. Doud, 869 F.2d 1144, 1146 (8th Cir. 1989). The bankruptcy court used the 20-year treasury bond rate, rounded up to two percent, as a starting point plus added a two percent risk adjustment for a final rate of four percent. Farm Credit Services, a secured creditor, agreed with the two percent risk adjustment, but appealed the use of the treasury rate instead of the national prime rate (3.25 percent).
Treasury rates do not account for risk while prime rates do account for “the relatively slight risk of default.” Till v. SCS Credit Corp., 541 U.S. 465, 479 (2004). The Eighth Circuit determined that the final rate matters, not which risk-free rate is used as a starting point. Nevertheless, the starting rate must first be determined because it influences the risk adjustment. In determining the risk adjustment, the bankruptcy court considered how Farm Credit was over secured and the overall risk of default. As a result, the Eighth Circuit affirmed that the bankruptcy court applied the correct rate.
In re Topp, 2023 WL 4921241 (8th Cir. 2023).
The defendant operated a business converting raw manure from feedlots into organic fertilizer. Two employees brought a lawsuit claiming that the defendant and his business violated the Fair Labor Standards Act (FLSA) by failing to pay them overtime wages for time worked in excess of 40 hours during a given week. 29 U.S.C. § 207(a)(1). The defendants moved for summary judgment arguing that the plaintiffs were engaged in “agricultural employment” and thus exempt from FLSA’s overtime payment requirement. Id. at § 213(b)(12).
Agricultural employment includes farming in both the traditional and secondary sense. To show that the plaintiff’s work falls with the secondary sense, the defendant has the burden of showing that the plaintiff’s work was “(1) performed by a farmer or on a farm, and (2) incident to or in conjunction with such farming operations.” Pacheco v. Whiting Farms, Inc., 365 F.3d 1199, 1205 (10th Cir. 2004).
In their motion, the defendants claimed that the business raised livestock and that the plaintiffs prepared “a by-product for market of that farming operation.” The court found that this was a conclusion and did not establish the type of work the plaintiffs performed. Similarly, the motion did not address whether the defendants’ operations were incidental to the farming operation. Because the defendants failed to meet their burden, the court denied the motion for summary judgment.
Porter v. T.J. Crowder and Sons, LLC, 2023 WL 4899551 (D. Col. July 31, 2023).
A couple obtained a loan from Farm Service Agency (FSA) to purchase a farm. Despite some concerns about the property, the buyers went through with the purchase. The morning after the closing, the buyers tried to rescind the sale. The seller initially agreed to rescind the sale, then refused. The buyers brought several tort claims against FSA under the Federal Tort Claims Act and argued that the loan officer breached her fiduciary duty. See 28 U.S.C. § 2674.
Although a lender does not typically have a fiduciary relationship with a borrower, a lender may owe a fiduciary duty to a subservient borrower. The courts will consider the borrower's age, mental capacity, education, and business experience to determine whether the borrower is subservient. Here, the borrowers did not have any physical or mental impairments. They both had post-secondary degrees and many years of farm experience. Because the borrowers failed to show that FSA acted a fiduciary, the district court granted FSA’s motion for summary judgment.
Karl v. United States, 2023 WL 4762827 (W.D. Wis. July 26, 2023).
Plaintiffs are Colorado farmers who own the surface rights above a large oil and gas deposit and defendants hold the mineral rights below. Between 2004-2007, the defendants’ lessees drilled seven vertical wells. Plaintiffs requested that defendants drill directional wells, which would have reduced the number of well site to two. The lessees did not drill directional wells, and the plaintiffs and similarly situated neighbors sued the mineral rights holders for trespass in a class action lawsuit. The crux of their argument is that only using vertical wells when directional wells would have sufficed caused the mineral right holders to exceed their right to drill and the excess wells are a trespass based on unreasonable surface use.
The court used a “three-step burden-shifting approach” examine a trespass claim based on unreasonable surface use. The surface owner must first prove that the mineral right holder “material interfered with surface uses.” Material interference is a high standard. It requires that the surface rights holder prove their use of the land is “completely precluded or substantially impaired” and that there is “no reasonable alternative” to the current use. The court found that the plaintiffs failed to prove material interference since the land was still used for agricultural purposes. The court acknowledged the plaintiffs were inconvenienced by the presence of the wells, but that alone is not enough to establish material interference.
Bay v. Anadarko E&P Onshore, LLC, No. 21-1361 (10th Cir. July 18, 2023).
Plaintiffs own 63 acres which are leased to a winery. On the property there is a “toolshed parcel” and “warehouse parcel.” The toolshed stores a wine press, wine processing sometimes occurs, and is storage for 40-60 barrels of wine. The space also sometimes serves as an event venue. The warehouse stores empty wine bottles and wine bottles awaiting pickup for distribution.
In 2018, the county auditor determined that the toolshed and warehouse do not qualify as agriculture, and instead should be taxed as commercial property. The plaintiffs appealed this determination to the Board of Revision, who ultimately determined the properties should be taxed as industrial property. The plaintiffs appealed the Board of Revision’s determination to the Board of Tax Appeals. The Board of Tax Appeals affirmed that the property was industrial. The plaintiffs appealed the Board of Tax Appeals, arguing that both parcels should be taxed as agricultural property.
The Ohio Court of Appeals found that both the toolshed and the warehouse were agricultural property. The court, using the definition of agriculture found in Ohio Revised Code § 1.61, found that the primary use of both facilities was agricultural. Although the regulations defining agriculture for property taxation does not include the storage of wine, the statute trumps the administrative code’s definition of agriculture. Since Ohio Revised Code § 1.61 specifically states that “viticulture, winemaking, and related activities . . . [and] the processing, drying, storage and marketing of agricultural products” is agriculture, the property taxation schemed is required to use this definition over the definition within the regulations.
Dalton G. Bixler 2016 Trust v. Tuscarawas Cty. Bd. of Revision, 2023-Ohio-2455 (Ohio Ct. App. 5th July 18, 2023).
Quay Road AI runs south along tracts owned by the Ambercrombies and plaintiffs. In 1954, a flood washed out a bridge along Quay Road and the rerouted crossing occurred 100 feet west, onto plaintiffs’ land. In 2005, the Ambercrombies leased their property for a solar farm, and access to the leased lands required use of the crossing. When construction began, plaintiffs demanded payment from the solar lease company to use the crossing. Negotiations between the solar company and plaintiffs failed, and plaintiffs sued for an injunction to prevent the solar company from using the crossing. The county intervened claiming the crossing was within a public prescriptive easement.
A public prescriptive easement requires the claiming party to establish that the public used the property, open or notorious adverse use of land, and the use continued without interruption for the prescriptive period. Trial court found that there were maps showing the crossing as a public road, neighbors never asked permission for use, and the local title company identified the road as public. The trial court found that crossing was a public prescriptive easement. On appeal, the court of appeals overturned the trial court and held that establishing a public prescriptive easement requires evidence showing the public’s frequency of use or number of users.
The supreme court found that crux of the issue lies with proving the public nature of the road, not the number of individuals who used. Ultimately, the court held that to establish a prescriptive easement “frequency of use or number of users is unimportant, it being enough if use of the road in question was free and common to all who had occasion to use it as a public highway[.]” It held the crossing on plaintiffs’ land was subject to a public prescriptive easement.
McFarland Land and Cattle, Inc. v. Caprock Solar 1, LLC, No. S-1-SC-38934 (N.M. July 13, 2023).
The plaintiffs own land directly east of the defendants, and use the north 60 feet of defendants’ land to access a two-acre tract separated from the rest of plaintiffs’ parcel by a creek. A disagreement arose over the location of the boundary line, and resulted in plaintiffs bringing an action for a prescriptive easement to access the two-acre field.
In Kansas, the elements necessary to prove a prescriptive easement are very similar to adverse possession. The elements are: (1) open, (2) exclusive, (3) continuous, (4) for a set prescriptive period; and (5) adverse. The controversy of this case rested on whether plaintiffs met the exclusive element since others would use the north 60 feet to hunt or fish.
The court held that the exclusive element to establish a prescriptive easement meant that the plaintiffs’ use was unique compared to others. This is different than the exclusive element for adverse possession, where exclusive means the person claiming ownership must keep all others out. The court made it clear that multiple parties could have prescriptive easements over the same land, as long as their easement was for their unique purpose. Ultimately, the court found that the plaintiffs had established a prescriptive easement over the north 60 feet of defendants’ land for purposes of “a corridor” to the two-acre field.
Pyle v. Gall, No. 123,823 (Kan. July 7, 2023).
Defendant was the landowner of a parcel that was the servient estate for an ingress egress easement. The easement was called Whippoorwill Lane by locals and was established in 1937. There was various easement language on earlier deeds that conveyed land that would eventually become the plaintiffs' parcel and the defendant’s parcel. However, the plaintiffs’ deed made no mention of the easement, and the defendant’s deed only stated that the conveyance was “subject to . . . easements . . . of record, if any.” Eventually, the defendant wanted to move the location of the easement. He wanted the plaintiffs to use an alternative road that he constructed. Plaintiffs were not amicable to using the new road.
Plaintiffs sued defendant for a declaratory judgment of an express easement along Whippoorwill Lane. Defendant counterclaimed for trespass and asked the court to relocate the easement by “judicial fiat,” arguing a balancing test weighing the burdens and benefits of the two roads was the appropriate standard for the court to use to determine whether to relocate the easement. Trial court found in Whippoorwill Lane was an express easement. Defendant appealed the trial court’s determination.
On appeal, the appellate court affirmed the trial court. The easement was an appurtenant easement that was properly recorded in earlier deeds. The omission of the specific easement on plaintiffs’ and defendant’s deed was irrelevant. The court also held that the location “cannot be changed by either party without the other’s consent[.]” Therefore, the trial court used the correct approach when it did not use the balancing test to determine if the easement should be moved to defendant’s new road.
Wallace v. Byrne, No. ED110783 (Mo. E. App. Ct. June 27, 2023).
Kathleen, Linda, and Glen were three owners of two farm parcels. They held the land as tenants in common. They all signed a “restriction agreement” when the Glen bought into the property in 2001. The restriction agreement prevented any one party from selling or transferring to an outside party without first offering to the other two owners. This also included transfers that occurred due to the death of an owner. If the procedure was not followed, then that transfer of property would be “null and void and have no effect whatsoever.” The agreement would terminate when there is one original interest holder.
In 2016, Kathleen transferred her property interest to herself and her husband, Virgil. This was contrary to the restriction agreement terms since no notice was given to the other two owners. Kathleen died in 2017 with her interest going to Virgil. Virgil died in January 2021.
Glen filed a petition asking the court to compel sale of the land pursuant to the restriction agreement. The respondent replied by arguing that the restriction agreement was an illegal restrain on alienation and therefore Glen had no purchase right.
The trial court determined that the restriction agreement was not illegal restraint on alienation. The appellate court affirmed the trial court and found that the restrictive agreement was not a restraint on alienation. There was a termination date, the time to decide to buy after a proposed transfer is reasonable, range and frequency of options is reasonable, and has a reasonable pricing scheme.
In re Estate of Hoppert, No. 362694 (Mich. Ct. App. June 29, 2023).
The County of Kaua‘i authorized the opening of a drainage system outfall several times in 2020 and 2021. The water, containing pollutants, would flow from a ditch through the outfall and into the Pacific Ocean. The County did not have a National Pollutant Discharge Elimination System (NPDES) permit during that time. Plaintiffs brought this lawsuit claiming that the County violated the Clean Water Act (CWA) by discharging a pollutant into navigable waters from a point source without a NPDES permit.
The defendant claimed that the drain was not a point source because there are other nonpoint sources within the plain where the drain is located. However, the CWA defines a point source as “any discernible, confined and discrete conveyance, including but not limited to any ... ditch....” 33 U.S.C. § 1362. Thus, the district court granted the plaintiffs’ motion for summary judgment on the issue of liability.
The case is Na Kia'i Kai v. County of Kaua'i, 2023 WL 3981422 (D. Haw. June 13, 2023)
Murfam Enterprises, LLC is the privately held company of a multi-generation hog farming family in North Carolina and taxed as a partnership. In 2000, the company obtained a 6,171-acre parcel of land named the “Rose Tract.” Subsequently, the State of North Carolina granted hog-farming certificates that were attached to Rose Tract. The certificates authorized a “feeder-to-finish” facility, but could be converted into authorization for a “farrow-to-wean” facility. In 2007, North Carolina imposed a moratorium on issuing new hog-farming certificates. In 2010, Murfam donated a conservation on the whole of Rose Tract to North American Land Trust. The easement specified that Rose Tract could not be used to hog farm, and claimed a charitable deduction of $5,744,600 for the donation of the easement.
In 2015, the IRS challenged the value of easement. They claimed the value was $446,000. Murfam contested this determination. Prior to the tax court trial, both parties agreed that the value of the easement “is in effect the value of the hog-farming certificates.”
The court utlitized the “highest and best use” method to determine the value of easement. In doing so, it relied heavily on the calculations of Murfam’s expert, who determined that a farrow-to-wean facility was the most profitable use for the property before the easement. The IRS expert only examined the financials of building a feeder-to-finish facility and found that operation to be “financially unfeasible.”
In calculating the value of the easement, the court first took the value of the hog-farming facility plus the stipulated value of the remaining acreage to determine the initial value of the tract prior to the easement donation. It then subtracted the stipulated value of the land after the donation to determine that the value of the easement was $5,637,207.
Murfam Enterprises, LLC v. IRS, T.C. Memo 2023-73 (June 15, 2023).
Defendant was a sales agronomist in South Dakota for the plaintiff until March 23, 2023, and then began working for a competitor of the plaintiff. The plaintiff is Wilbur-Ellis, a company that sells agricultural products including seed, fertilizer, and pesticides. The parties entered into an employment agreement signed in March 2015. There were three relevant paragraphs within the agreement: (1) the auto renewal of the contract, (2) restrictive covenants that included a non-compete and non-solicitation for two years and within 100 miles, and (3) a survival clause. The survival clause did not expressly state that restrictive covenants survived the termination of employment agreement.
On April 19, the plaintiff brought suit against defendant for violating the restrict covenants in the employment agreement and asked the court for an injunction. The court will grant the injunction if the plaintiff can prove they have “a fair chance of prevailing.” The court found that the existence of the survival clause shows the parties intended certain terms to continue after termination. There were no provisions within the contract that expressly stated the survival clause applied to that term, and rules of interpretation require a court to prefer an interpretation that gives effect to all clauses within a contract. Therefore, the restrictive covenants continued to be in effect after defendant’s employment ended and the employment agreement was terminated. The court ordered that the defendant abide by the parameters found in the employment agreement’s restrictive covenants.
Federal court rules require that a bond is posted when an injunction is ordered. This is to protect the financial interests of the party enjoined, especially if later proceedings determine they were wrongful enjoined from income producing activity. The court ordered the plaintiff to post a $350,000 bond based on loss revenue and lost customers to defendant’s new employer while awaiting trial. The new employer will only receive this money if defendant is found to be successful at trial.
Willbur-Ellis Co. v Erickson, No. 4:23-CV-04058-LLP (D.S.D. June 13, 2023).
In 2018 Mr. Keenan received $70,966 from Rancho Santa Fe Association pursuant to a settlement agreement. Keenan was employed as a ranch manager by the company. The settlement agreement stated the payout was for “emotional stress damages” and continued to pay Keenan’s healthcare premiums. In return, Keenan dropped his employment discrimination lawsuit. The IRS audited Keenan’s tax return, arguing that the payment was taxable non-employee compensation. Keenan argued the payment should be characterized as “damages received on account of personal physical injuries or physical sickness” which under IRC § 104(a)(2) are excludable from income.
When damages are received pursuant to a settlement agreement, the nature of the claim that was settled determines whether the proceeds are taxable. Even though the settlement agreement referenced emotional distress damages, the court found that the settlement payment was made to settle an employment dispute and was not payment that went towards medical care for emotional distress. The IRS’s determination was correct, and the payment was taxable income.
Keenan v. IRS, T.C. Memo 29299-21S (June 12, 2023).
Lawsuits alleging that paraquat exposure led to Parkinson’s disease are currently part of multi-district litigation being litigated in the Southern District of Illinois. In February 2022 the court dismissed public nuisance claims in 316 individual cases involved in the litigation. There have been over 150 more public nuisance claims brought since that time from around the nation against Syngenta and Chevron for their sale of paraquat. The defendants brought a motion to dismiss all public nuisance claims, in all pending cases involved in the multi-district litigation. The court, attempting to balance judicial economy with the rights of each plaintiff, decided to analyze the public nuisance claim in one of the four trial selection cases. The court dismissed the public nuisance claim in the trial selection case and deferred ruling on the public nuisance claims with regard to other plaintiffs.
The court analyzed public nuisance under Illinois law. A public nuisance claim in Illinois requires the plaintiff to have a “special injury” compared to “injury sustained by the general public.” The court found that the injury sustained by the plaintiff, specifically Parkinson’s disease, was not a different kind of injury compared to other farmers and rural residents who were exposed to Paraquat. Since the plaintiff could not show a special injury to himself associated to the Paraquat exposure, he does not have standing and his public nuisance claim was dismissed.
On the issue of the remaining public nuisance claims for other plaintiffs, the court ordered Plaintiff’s leadership counsel to confer with the other plaintiffs and determine whether they will continue to pursue public nuisance claims.
In re Paraquat Products Liability Litigation, No. 3:21-md-3004-NJR (S.D. Ill. June 12, 2023).
A Washington marijuana grower brought a lawsuit against an Idaho corporation that fumigated potatoes on an adjacent parcel. The plaintiff alleged trespass, nuisance, and other related claims after the plaintiff's plants were seized by the State of Washington for having levels of chlorpropham (a herbicide) in excess of levels allowed by regulations. Plaintiff filed its lawsuit in Washington State Court. The defendant responded by removing the case to federal court using diversity jurisdiction.
The Western District Court of Washington abstained from presiding over the lawsuit and remanded the case back to state court. The Court reasoned that a Buford abstention was appropriate. A Buford abstention occurs when federal review would intrude upon a state’s ability to create a comprehensive policy in a particular subject. Since the defendants planned to have the federal court dismiss the lawsuit based on the illegality of the plaintiff’s operations under federal law, having the federal court review the tort-based case would disrupt Washington’s ability to regulate its marijuana market and deny the plaintiff relief from legal harms they suffered.
Stirling Hort, LLC v Industrial Ventilation, Inc., No. C22-1155-JCC (W.D. Wash. June 7, 2023).
An Oklahoma couple was audited by the IRS for filing a Schedule F in 2017 and 2018 that reported $128,990 and $133,929 in deductions, respectively. Several years earlier, the couple entered into a business arrangement in which the taxpayers would contribute financially to the wife’s mother’s ranch. The couple reported the expenses on their tax return while the cattle sales and income from ranching were reported on the mother’s tax return. The reported income listed on taxpayers’ Schedule F came primarily from the rodeo winnings of the taxpayers’ children, and was minimal in comparison to the expenses of the ranch.
During the audit and before the tax court, the IRS argued that the Schedule F activity was not a business activity. They determined the activity reported on the Schedule F was rodeoing, not ranching. As a result, the IRS determined that all deductions on the Schedule F should be disallowed.
The tax court disagreed with the IRS. The tax court found that the deductions were associated with the ranching activities, and the IRS failed to directly challenge the profit motive of the ranching. Further, the IRS did not challenge the substantiation of expenses behind the Schedule F deductions. Therefore, the court held that the IRS waived their right to refocus the audit to only rodeo expenses. As a result, the court found that the Schedule F activities were correctly reported as “for profit” activities.
Carson v. Commissioner, T.C. Memo 23086-21S (May 18, 2023).
In 2004, the National Resources Conservation Service (NRCS) certified a small portion of a farmer’s property as a wetland. The farmer requested a review of the certification several times, most recently in 2017 and 2020. The NRCS denied both requests. The farmer brought suit claiming, among other things, that the NRCS violated the Administrative Procedure Act (APA) by denying his review requests. See 5 U.S.C. § 706(2)(A).
A farmer may request a review of a wetland certification “only if a natural event alters the topography or hydrology of the subject land . . . or if NRCS concurs with an affected person that an error exists in the current wetland determination.” 7 C.F.R. § 12.30(c)(6). The farmer did not argue that he complied with the regulation in 2017. For the 2020 request, the farmer did provide new information through an engineering report. However, when NRCS asked to provide evidence that the NRCS failed to consider specific information topographic information, the farmer failed to respond. As a result, the Eighth Circuit affirmed the grant of summary judgment in favor of the NRCS.
Foster v. Vilsack, 68 F.4th 37 (8th Cir. 2023).
Several non-profit organizations “dedicated to reforming industrial agriculture” through undercover investigations challenged Arkansas Code § 16-118-113. This law grants owners a civil remedy against those who knowingly access their property without authority. The plaintiffs claimed that the statute violated the First Amendment and sought an injunction preventing Peco Foods, Inc., a chicken farm the plaintiffs intended to investigate, from bringing an enforcement action under the law. On appeal, the Eighth Circuit found that the plaintiffs had Article III standing and remanded the case to the district court.
The district court granted the defendant’s Rule 12(b)(6) motion to dismiss. The First Amendment prohibits the government from restricting speech. It does not prohibit private parties from restricting speech. Manhattan Cmty. Access Corp. v. Halleck, 139 S. Ct. 1921, 1928 (2019). The district court concluded the Eighth Circuit’s Article III determination did not equate to state action. Additionally, the defendant had not filed an action to enforce the law. Because there is no state action, the First Amendment did not apply.
The case is Animal Legal Defense Fund v. Peco Foods Inc., 2023 WL 2743238 (E.D. Ark. March 31, 2023).
A “commercial vendor of agricultural data” requested farm numbers, tract numbers, and customer numbers from the USDA. The USDA assigns these numbers to administer its farm subsidy programs. The USDA refused to release this information under Exemptions 3 and 6 of the Freedom of Information Act (FOIA). 5 U.S.C. § 522(b)(3), (6). The ag tech company then brought this lawsuit challenging the USDA’s refusal. The USDA moved for summary judgment which the district court granted. The ag tech company appealed.
The USDA withheld the farm numbers and tract numbers under Exemption 3. This exemption applies to records “specifically exempted from disclosure” by a statute. The 2008 Farm Bill prohibited the USDA from disclosing “geospatial information…about agricultural land or operations….” 7 U.S.C. § 8791(b)(2).
The ag tech company argued that “geospatial information” does not include the farm and tract numbers. Geospatial is defined as “relating to information that identifies where particular features are on earth’s surface, such as oceans or mountains.” Geospatial, Cambridge Business English Dictionary (2011). In the same way, the USDA uses farm and tract numbers to identify the specific location of a farm. The court noted that the Eighth Circuit had also concluded that farm and tract numbers fell within § 8791(b)(2)(B). Cent. Platte Nat. Res. Dist. V. USDA, 643 F.3d 1142 (8th Cir. 2011).
The USDA withheld the customer numbers under Exemption 6 of FOIA. A federal agency is not required to release requested records if the records are “similar” to “personnel” or “medical” files and if their disclosure “would constitute a clearly unwarranted invasion of personal privacy.” 5 U.S.C. § 552(b)(6). Because the customer numbers can be used to identify specific farm owners, the court concluded that they are “similar” files.
The court determined that releasing customer numbers would implicate a privacy interest because it would “allow for an inference to be drawn about the financial situation of an individual farmer.” If disclosure will harm a substantial privacy interest, the court must determine whether the privacy interest outweighs a significant public interest. Although there is a significant public interest in monitoring the USDA’s activity, § 8791 clearly shows the legislative intent to protect this information. Therefore, the D.C. Circuit Court of Appeals affirmed the grant of summary judgment in favor of the USDA.
Telematch v. USDA, 2022 WL 3330101 (D.C. Aug. 12, 2022).
Traditional dicamba herbicide is highly volatile and can easily damage non-targeted, non-tolerant crops. Before the EPA registered low volatility dicamba for certain over-the-top use, it was illegal to use dicamba during the growing season. 7 U.S.C. § 136j(a)(2)(G). Monsanto and BASF agreed to work together to develop a dicamba-resistant seed. Although the EPA had not approved a lower-volatility dicamba, Monsanto began selling a dicamba-tolerant cotton seed (Xtend) in 2015. Each bag of seed warned farmers that applying dicamba over the top of Xtend plants was illegal. The EPA approved Monsanto’s lower-volatility dicamba in 2016 and BASF’s in 2017.
Bader Farms, Inc. sued both companies for negligent design and failure to warn alleging that its peach trees were damaged by dicamba drift. A jury found in favor of Bader Farms and awarded $15 million in compensatory damages and $250 million in punitive damages. The district court reduced the punitive damages to $60 million and held both defendants jointly and severally liable. The district court also denied the defendants’ motion for a new trial.
Causation
On appeal, the defendants claimed that Bader failed to prove both cause in fact and proximate cause. They argued that Bader did not prove which company’s dicamba injured the trees and that misuse of the product by a third party was an intervening cause. The Eighth Circuit explained that the jury believed Xtend, not dicamba, caused Bader’s injury. Bader had argued that but-for the dicamba resistant seed, neighboring farmers would not have applied the herbicide.
The court also held that misuse by third-party farmers did not break the chain of proximate causation. Monsanto controlled the third-party farmers through growers’ licenses and technology-use terms. Additionally, the primary benefit of Xtend is its dicamba-resistance. Xtend consumers could only obtain this benefit by misusing dicamba.
Damages
The defendants also argued that the district court erred in instructing the jury to measure compensatory damages by lost profits rather than reduction in land value. The court stated that, under Missouri law, if a tree owner does not own the land, damages should not be measured by the loss of land value. Cooley v. Kansas City, P. & G.R. Co., 51 S.W. 101, 104 (1899). Here, Bader only owned the peach trees. The land was owned by an individual. Therefore, the court determined there was no error.
Punitive Damages
Lastly, the court considered whether the district court erred in holding Monsanto and BASF jointly and severally liable for punitive damages. Under Missouri law, unless the defendants had established a joint venture, they are only “liable for the percentage of punitive damages for which fault is attributed to such defendant by the trier of fact.” See Mo. St. § 537.067.2. The jury was only instructed to consider Monsanto’s liability for punitive damages. BASF was not mentioned.
The court found that Monsanto and BASF had not established a joint venture because BASF did not have equal control in the agreement to develop a dicamba-resistant seed. Additionally, there was sufficient evidence to establish “different degrees of culpability.” As a result, the Eighth Circuit vacated the $60 million punitive damage award and remanded the case for a new trial to determine punitive damages.
Hahn v. Monsanto Co., F.4th 954 (8th Cir. 2022).
In 2019, the USDA announced the optional New Swine Slaughter Inspection System (NSIS). Modernization of Swine Slaughter Inspection, 84 Fed. Reg. 52,300, 52,315 (Oct. 1, 2019). Among other things, the rule revoked maximum line speeds for swine slaughterhouses which opted into NSIS. The rule also ended the HACCP-Based Inspections Models program (HIMP) which granted line-speed waivers for some plants.
A group of labor unions at pork processing plants challenged the rule under the Administrative Procedure Act (APA). A federal district court held that the rule was arbitrary and capricious because it failed to consider worker safety. United Food and Comm. Workers Union, Local No. 663 v. USDA, 532 F.Supp.3d 741 (D. Minn. 2021). The district court only vacated the portion of the rule eliminating line speed limits. Two months later, three pork processing companies which had participated in HIMP moved to intervene and sought clarification that the district court’s order reinstated the prior HIMP waivers. The district court found the motion untimely and, thus, denied it. United Food and Comm. Workers Union, Local No. 663 v. USDA, 2021 WL 2010779 (D. Minn. May, 20, 2021). The companies appealed.
When assessing timeliness, the court will consider the litigation’s progression, the proposed intervener’s knowledge of the litigation, the reason for the delay, and any prejudice to the existing parties. Smith v. SEECO, Inc., 922 F.3d 398, 405 (8th Cir. 2019). The Eighth Circuit found that all four factors weighed in favor of denying the intervention. The litigation had concluded with the district court’s grant of summary judgment and the companies were well aware of the litigation as they had filed amicus briefs with the district court.
The companies alleged that they had a “divergence of interests” with the USDA after the district court vacated the line speed limit portion of the rule. The court found this unpersuasive as the USDA, in defending the rule, never sought a return to the HIMP waiver system. Lastly, the court determined that allowing the companies to intervene would hinder the USDA’s ability to implement the remaining rule provisions and manage the national food system. Therefore, the Eight Circuit affirmed the denial of the companies’ motions to intervene.
United Food and Comm.. Workers Union, Local No. 663 v. USDA, 36 F.4th 777 (8th Cir. 2022).
Section 1005 of the American Rescue Plan Act (ARPA) authorizes the USDA to pay up to 120 percent of certain eligible loans balances to “socially disadvantaged farmers and ranchers” (SDFR). SDFR includes producers who are a member of socially disadvantaged groups such as “Black, American Indian/Alaskan Native, Hispanic, Asian, and Pacific Islander.” See 7 U.S.C. § 2279(a)(6).
A white farmer, who did not qualify for the SDFR designation, filed a class action lawsuit against the USDA claiming that the law violated the Civil Rights Act of 1964 and the U.S. Constitution. The district court certified the class and granted a preliminary injunction to enjoin the Secretary from administering § 1005. An advocate organization “of Black farmers, landowners, and cooperatives” filed a motion to intervene. The district court denied the motion and the advocate organization appealed. Miller v. Vilsack, 2021 WL 6129207 (N.D. Tex. Dec. 8, 2021).
To prevail on a motion to intervene as a matter of right, the applicant must show that their interest is inadequately represented by the existing parties to the suit. Fed. R. Civ. P. 24(a)(2). In this case, the court considered whether the advocate organization demonstrated that its interest diverged from the USDA’s “in a manner germane to the case.” See Texas v. U.S., 805 F.3d 653, 662 (5th Cir. 2015).
The court found that the two parties’ interests clearly diverged. Both the advocate organization and the USDA seek to uphold the constitutionality of § 1005. However, the advocate organization argued that the USDA continues to discriminate against minority farmers while the USDA argues that past USDA discrimination still has a lingering effect. Additionally, the advocate organization’s interest was germane to the case. Race-based governmental actions must be narrowly tailored to meet a compelling government interest. Here, evidence of continued discrimination may be crucial to proving a compelling government interest. Accordingly, the Fifth Circuit reversed the district court’s denial of intervention.
Miller v. Vilsack, 2022 WL 851782 (5th Cir. March 22, 2022).
A hotel owned the .49-acre wetland adjacent to it. The hotel applied for a permit under the Clean Water Act to fill the wetland claiming it intended to build a commercial building. See 33 U.S.C. §§ 1311(a), 1341(a)(1), 1344(a), (e). The hotel received a general permit from the Army Corps of Engineers for the construction of commercial buildings.
A member of an environmental non-profit sought declaratory judgment and the restoration of the wetland. She alleged that the hotel always intended to fill the wetland for landscape purposes; therefore, she claimed that the authorization was null and void because the hotel “intentionally and maliciously misled the Corps.” The hotel moved to dismiss the complaint. The district court granted the motion holding that the individual member did not have standing because she did not allege injury in fact. The member appealed to the Eleventh Circuit.
To have standing, a plaintiff must have suffered an injury due to the actions of the defendant. Here, the member claimed that she suffered an aesthetic injury. Such an injury occurs when a person who uses the affected area will experience diminished aesthetic value due to the challenged activity. Friends of the Earth, Inc. v. Laidlaw Env't Servs. (TOC), Inc., 528 U.S. 167, 183 (2000). The member alleged she gained aesthetic pleasure from viewing the hotel’s wetland.
The court rejected the hotel’s argument that the member must have “actually visited” the wetland before it was filled. Even if the individual member never visited the wetland, the court found that she nevertheless experienced an injury in fact because she could no longer could enjoy viewing the wetland. Additionally, the individual member did not need to have physically occupied the wetland to have an aesthetic interest. While the plaintiff must have an interest in the specific area, the court noted the limitations of this requirement. Otherwise, a plaintiff must “step[] on the Old Faithful geyser at Yellowstone National Park to challenge its destruction.” Lastly, the court found it irrelevant that the wetland was private property. While the member had no right to occupy the wetland, she still had an aesthetic interest in it. Because the individual member sufficiently alleged injury, the court vacated the lower court’s dismissal.
The case is Glynn Env't Coal. v_Sea Island Acquisition LLC, 2022 WL 620284 (11th Cir. March 3, 2022).
In 2017 and 2018, the North Carolina General Assembly amended the state’s Right to Farm law in response to several nuisance lawsuits against pork producer Murphy-Brown. The lawsuits resulted in five large jury verdicts against the company. S.B. 711 created additional requirements a plaintiff must meet to bring a nuisance lawsuit while H.B. 467 provides limitations on the amount of compensatory and punitive damages a plaintiff can receive.
In June 2019, a group of nonprofits brought this lawsuit claiming that S.B. 711 and H.B. 467 violated the North Carolina Constitution’s Law of the Land Clause. The North Carolina Supreme Court has held this clause to be the equivalent of the Fourteenth Amendment Due Process Clause. State v. Collins, 84 S.E. 1049, 1050 (1915). After the superior court granted the defendants’ motion to dismiss under Rule 12(b)(6), the plaintiffs appealed.
Law of the Land Clause and Due Process Clause
To survive a due process challenge, the purpose of the law must be within the scope of police power, the law must be reasonably necessary to promote public good, and the interference with the landowner’s right to use his property must be reasonable. Here, the court found that promoting agricultural activities clearly falls within the state’s police powers. Additionally, both S.B. 711 and H.B. 467 promote the public good by reasonably limiting nuisance claims against agricultural operations. Any interference with the use and enjoyment of property is reasonable.
Right to Trial by Jury
The plaintiffs also claimed that H.B. 467 violated Article I, Section 25 of the North Carolina Constitution by limiting the plaintiffs’ right to a trial by jury. The court disagreed finding that H.B. 467 limited remedies and damages available to a plaintiff, but “did not impair nor abolish the right to a jury trial.”
The case is Rural Empowerment Association for Cmty. Help v. North Carolina, 2021 WL 6014722 (N.C. App. Dec. 21, 2021).
Two environmental organizations brought a lawsuit against a dairy farm under the Clean Water Act (CWA). Intending to build a concentrated animal feeding operation (CAFO) on the property, the dairy farm filled two ditches and installed drainage tiles. The plaintiffs allege that the dairy farm site consists of farmed wetlands and that, through the construction activities, the dairy farm violated the CWA. The CWA prohibits the “discharge of dredged or fill material” into waters of the United States. 33 U.S.C. § 1344(a). This includes farmed wetlands. The dairy farm moved to dismiss the lawsuit claiming that there were no wetlands on the property.
The dairy farm sits on a drained lakebed that has been used as farmland since the 1900s. The dairy farm asserts that the plaintiffs’ petition shows that the land is prior converted cropland. Unlike farmed wetland, prior converted cropland does not have hydrologic signs of wetlands and is not subject to CWA jurisdiction. 7 C.F.R. § 12.2. Farmed wetland includes land that was used to produce an agricultural commodity before December 23, 1985, and experiences inundation for at least 15 consecutive days or 10 percent of the growing season. The court found that the complaint alleged wetland factors including evidence of hydrophytic vegetation, hydric soil, and wetland hydrology. Additionally, the complaint alleged that these wetlands have a significant nexus to jurisdictional waters. Because of this, the court denied the motion to dismiss.
Hoosier En't Council v. Nat. Prairie Indiana Farmland Holdings, LLC, 2021 WL 4459509 (N.D. Ind. Sept. 29, 2021).
In this case, two environmental advocacy organizations allege that the U.S. Army Corps of Engineers (Corps) violated the Administrative Procedure Act (APA) by failing to adhere to technical guidance manuals when making a wetland determination. After filling and tiling drainage ditches, a dairy farm contacted the Corps to determine if the farmland and adjacent ditches were subject to the Clean Water Act (CWA). The Corps determined that, unlike the ditches, the farmland did not have signs of a wetland, but was a prior converted cropland not regulated by the CWA.
Congress directs the Corps to use the Wetlands Delineation Manual to identify jurisdictional wetlands. The plaintiffs argue that the Corps did not rely on relevant factors set forth in the Wetlands Delineation Manual concerning an atypical situation. An atypical situation exists when there are significant alterations to one of the three wetland parameters. A significant alteration includes the construction of drainage systems.
If there is an atypical situation on farmland, the Wetlands Delineation Manual directs the Corps to assess whether the land could have wetland hydrology. The court found that the Corps did not follow the required technical guidance. For example, it did not consider the relevant factors listed in the guidance manuals to determine the hydrology of the land before the alterations or the impact of the dairy farm’s alterations. Additionally, there was no sufficient reason why the Corps deviated from its own guidance. The court held that the Corps determination was arbitrary and capricious and remanded the case for further consideration of the Corps jurisdiction over the farmland.
Hoosier Env't Council v. Nat. Prairie Indiana Farmland Holdings LLC, 2021 WL 4477152 (N.D. Ind. Sept. 29, 2021).
In 2016, the Ranchers-Cattlemen Action Legal Fund (R-CALF) brought a lawsuit against the USDA for allowing mandatory assessments from the Beef Checkoff program to fund Qualified State Beef Councils’ (QSBCs) promotional activities. In response the USDA began to enter into memoranda of understandings (MOUs) with the QSBCs. These MOUs granted the USDA pre-approval authority over “any and all promotion, advertising, research, and consumer information plans and projects.” On July 27, 2021, the Ninth Circuit held that the USDA “effectively controlled” the advertising and, therefore, the Beef Checkoff program did not violate the First Amendment.
In this current lawsuit, R-CALF claims that the USDA violated the Administrative Procedure Act (APA) by entering into MOUs rather than engaging in formal notice-and-comment rulemaking. See 5 U.S.C. § 553. Because of this, R-CALF alleged that its members would suffer financial injury as the Beef Checkoff funds will go towards speech which threatens the livelihoods of independent, domestic ranchers. The USDA filed a motion to dismiss, claiming that R-CALF lacked standing because it did not identify a specific member who was injured by the MOUs.
Although R-CALF did not identify specific members who had standing to sue in their own right, the district court found that the organization did provide general allegations that its members, “independent, domestic producers,” would be harmed by QSBC advertising “promot[ing] corporate consolidation in the beef industry.” Additionally, R-CALF sufficiently alleged causation to survive the motion to dismiss. R-CALF claimed that if its members had the opportunity to participate in the rulemaking process, the MOUs may have contained more favorable provisions or even a complete prohibition of using checkoff funds for speech. Therefore, the court denied the motion to dismiss, but with the disclaimer that R-CALF must next prove actual members have suffered harm due to the MOUs.
R-CALF v. USDA, 2021 WL 442723 (D.D.C. Sept. 29, 2021).
Two plaintiffs brought this Clean Water Act (CWA) citizen’s suit against their neighbors who owned 191 acres of agricultural land. The defendants had installed drainage tile several times in recent years, most recently in 2014. The defendants did not obtain a CWA section 404 permit to discharge dredged materials into a navigable water. In 2015, after a heavy rain, the plaintiffs’ property began to experience unprecedented flooding that destroyed their home and other property. The plaintiffs claimed in their citizen’s suit that the previous tiling activity was an unauthorized discharge of a pollutant in violation of Sections 301 and 404 of the CWA. The defendants moved for summary judgment, asserting that the plaintiffs sought to impose liability for a “wholly past violation.”
To have standing in a citizen suit, the proponent must prove that the alleged violation is continuous or intermittent, but still ongoing. Tamaska v. City of Bluff City, Tenn., 26 F. App'x 482, 485 (6th Cir. 2002). Here, there was insufficient evidence that there was either a continuing discharge of a pollutant or a likelihood of a continuing discharge of a pollutant when the plaintiffs filed this lawsuit in 2018. The defendants had not conducted any tiling activities since the lawsuit was filed, nor was there evidence that they intended to do so.
Additionally, any ongoing discharge from the drainage system only consisted of water. While that may be causing flooding on the plaintiffs’ property, water is not a pollutant. Therefore, the plaintiffs asserted a wholly past violation and their “remedy, if any, [was] not grounded in the Clean Water Act in federal court.” See Bettis v. Town of Ontario, N.Y., 800 F. Supp. 1113, 1120 (W.D.N.Y. 1992). The court declined to exercise supplemental jurisdiction over the plaintiffs’ remaining nuisance and negligence claims and granted the defendants’ motion for summary judgment.
The case is Ward v. Stucke, 2021 WL 4033166 (S.D. Ohio, Sept. 3, 2021).
In 2016, the Ranchers-Cattlemen Action Legal Fund (R-CALF) challenged the beef checkoff program, claiming it violated the First Amendment by compelling producers to subsidize private speech through funding of Qualified State Beef Councils’ (QSBCs) promotional activities. While the litigation made its way through the courts, the USDA began to enter into memoranda of understanding (MOUs) with QSBCs, granting the USDA pre-approval authority over “any and all promotion, advertising, research, and consumer information plans and projects.”
In 2018, the Ninth Circuit affirmed R-CALF’s request for a preliminary injunction to prevent a QSBC from using the checkoff to fund advertising campaigns. On remand, the District of Montana found that the recently executed MOUs effectively controlled the QSBCs advertising and therefore constituted government speech immune from First Amendment scrutiny. R-CALF v. Perdue, 449 F.Supp.3d 944 (D. Mont. 2020). R-CALF appealed.
If speech is “effectively controlled” by the government, it is government speech not subject to First Amendment scrutiny. Johanns v. Livestock Marketing Ass’n, 544 U.S. 550, 559-60 (2005). In this case, R-CALF asserted that the advertising generated by hired third parties constituted private speech. The Ninth Circuit disagreed and held that the MOUs gave the USDA the authority to control the content of the advertising by requiring pre-approval of any and all advertising or contracts entered into by the QSCBs. Under the MOUs, the USDA had final authority over the promotional campaign as it may decertify a noncompliant QSCB. Thus, the court affirmed that promotional activities subject to pre-approval are government speech.
R-CALF v. Vilsack, 2021 WL 3161201 (9th Cir. July 27, 2021).
Section 1005 of the American Rescue Plan Act (ARPA) authorizes the USDA to pay up to 120 percent of certain eligible loans balances to “socially disadvantaged farmers and ranchers” (SDFR). SDFR includes producers who are a member of socially disadvantaged groups such as “Black, American Indian/Alaskan Native, Hispanic, Asian, and Pacific Islander.” See 7 U.S.C. § 2279(a)(6). A Caucasian farmer from Florida brought this lawsuit claiming that Section 1005 of the ARPA violated both the equal protection component of U.S. Const. amend. V’s Due Process clause and that it should thus be prohibited by the Administrative Procedure Act (APA). The plaintiff petitioned the court for a preliminary injunction.
To obtain a preliminary injunction, the proponent, among other factors, must show that he is likely to succeed on the merits. The plaintiff in this case must prove Section 1005 is unconstitutional. Race-based governmental actions are subject to strict scrutiny review and must be narrowly tailored to meet a compelling government interest. The court will consider factors such as the necessity of relief and effectiveness of alternative remedies; the flexibility of the relief or availability of waiver provisions; and whether the law is over-inclusive or under-inclusive. While remedying past government discrimination is usually a compelling interest, the solution must attempt to remedy a past wrong.
Here, the court held that the law was not narrowly tailored. Neither party contests the USDA’s past discrimination against SDFRs which resulted in lower approval rates among minority farmers or loans with less favorable terms. However, Section 1005 only benefits SDFRs who actually received an eligible USDA loan. Additionally, there was no evidence that Congress attempted to first consider race-neutral alternative remedies.
While the defendant argued that Section 1005 is narrowly tailored to quickly provide monetary assistance to producers near foreclosure, the court disagreed, finding it to be inflexible. Section 1005 does not base qualification upon profitability—or the lack thereof—but only on race. Similarly, it did not provide a waiver provision for a non-SDFR to qualify.
Next, the court held that Section 1005 is both over-inclusive and under-inclusive. It does not require a past showing of USDA discrimination, which is the past wrong Congress intended to remedy. It also provided relief to certain groups for which there was little evidence of USDA farm loan discrimination. Alternatively, the court found Section 1005 was under-inclusive because it failed to provide relief for producers who specifically experienced USDA discrimination. Therefore, the court found that the plaintiff was likely to succeed on the merits of the case and granted the motion for a preliminary injunction.
Wynn v. Vilsack, 2021 WL 2580678 (M.D. Fla. June 23, 2021).
To build a natural gas pipeline, Alliance Pipeline obtained easements from agricultural landowners in North Dakota, Minnesota, Iowa, and Illinois. As a condition for the easement, Alliance agreed to pay for any crop losses the pipeline caused. Alliance terminated this crop loss payment program in 2015. Ten landowners in Iowa and Minnesota brought this lawsuit alleging breach of contract and sought class certification to include other landowners and farm tenants.
To establish a class action, the court will first consider the numerosity, commonality, and typicality of the class as well as the ability of the proposed representative to adequately protect the interests of the class. Fed R. Civ. Pro. R. 23(a). Additionally, the class must be clearly ascertainable. McKeage v. TMBC, LLC, 847 F.3d 992, 998 (8th Cir. 2017). In granting the motion for class certification, the court ruled that all factors were met. For example, questions common to the class existed, including whether Alliance had a contractual obligation to compensate landowners for crop loss and, if so, whether Alliance breached that obligation. The court did, however, find that several of the proposed representatives could not adequately protect the interests of the class because they did not have direct knowledge of the agricultural operations on their property. As such, the court declined to certify those five landowners as class representatives.
H & T Fair Hills, Ltd. v. Alliance Pipeline L.P, 2021 WL 2526737 (D. Minn. June 21, 2021).
A recent case from the District Court of Colorado demonstrates problems that can arise without a written agreement. Similar to a contract, partnership agreements should include the name of the parties involved, the terms of partnership, and each partners’ duties. In this “he said, he said” case, a written agreement might have averted some problems, or at least made them easier to resolve.
Background
The plaintiff was a farmer and producer of specialty hemp seeds. The farmer alleged that he and the partner entered into an oral partnership agreement for the purpose of growing, selling, and distributing specialized hemp starts (young plants) across the United States using the farmer’s expertise and nationwide distribution network for the benefit of the partnership. The two agreed that the partner would pay the farmer a 10 percent management fee for overseeing the growing of the starts. The farmer soon determined that this was a “very bad choice” and brought this lawsuit claiming that the partner breached the agreement. The partner filed a motion to dismiss claiming that the farmer failed to join necessary parties and failed to state a claim.
At this early stage of litigation, the district court, without a written agreement, relied on the farmer’s verified complaint to determine whether the lawsuit must be dismissed. In the complaint, the farmer stated that after he entered into the agreement with the partner personally, the partner ordered for himself, for distribution to related entities, nearly $4.6 million worth of the partnership’s hemp starts and then did not pay for those plants. Additionally, the farmer alleged that the partner failed to pay the $406,621.45 management fee.
Failure to Join Indispensable Parties
The partner claimed that he was not liable for these debts because his LLC had entered into the partnership. Because of that, he argued that the LLC must be joined as a necessary party under Rule 19. Despite the farmer’s original complaint alleging that the starts were sold to both the partner and his LLC, there was no reason to believe the LLC was a necessary party. Accepting the farmer’s verified complaint as true, the court found that the partnership was solely between the farmer and the partner, not the LLC.
Failure to State a Claim
The partner claimed that the farmer failed to state a claim for breach of the partnership agreement, breach of fiduciary duties, and for promissory estoppel. Under Colorado law, a plaintiff cannot sue for breach of a partnership without first providing an accounting. Because the verified complaint claimed an accounting was provided, this claim was adequately pled. The court determined that, at this early stage, the allegations were to be taken as true and the claims should survive the motion to dismiss.
Leago v. Ricks, 2021 WL 1192939 (D. Colo. March 30, 2021).
Additional Hemp Resources
For an update on current hemp regulations, read Iowa Outdoor Hemp License Applications Due May 1.
Potential growers should also carefully consider whether there is a profitable market for hemp. For further reading, see Iowa State Extension article “The Opportunities and Challenges with Hemp” by Dr. Chad Hart.
For more information on the federal regulation of hemp, visit: https://www.usda.gov/topics/hemp.
For more information on growing hemp in Iowa, applying for a state license, and hemp in animal food, visit https://iowaagriculture.gov/hemp. All questions about applying for a hemp license or seed permit should be directed to hemp@iowaagriculture.gov or (515) 725-1470.
For questions about consumable hemp products, contact the Department of Inspection and Appeals at hemp-registration@dia.iowa.gov or 515.829.8899.
A farmer filed for Chapter 7 bankruptcy in 2019. Eighteen months later he filed a motion to convert to a Chapter 12 case. A Chapter 7 debtor may convert his case to a Chapter 12 case provided that he meets the requirements of that chapter. See 11 U.S.C. § 706(a), (d).
The court in this case did not discuss whether the debtor met the debt limits and income requirements of Chapter 12, but rather discussed the debtor’s behavior since filing for Chapter 7 liquidation. The United States Supreme Court has determined that 11 U.S.C. section 706(d) allows a court to deny a motion to convert when the debtor has engaged in bad faith conduct. Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 374 (2007).
After filing for bankruptcy, the debtor attempted to hide valuable assets from the bankruptcy trustee, used the bankruptcy estate assets to continue to farm, and gave false information regarding his salary from his farm LLC as well as the amount of his liabilities. The court concluded that the debtor consistently acted in bad faith and allowing the debtor to convert to a Chapter 12 case without a trustee would be like “putting the fox in charge of the henhouse.” Thus, the court denied the debtor’s motion.
In re Steven Keith Jenkins, Debtor, 2021 WL 1845572 (Bankr. N.D. Miss. May 7, 2021)
After a wildfire occurred, the plaintiff claimed that hundreds of wild horses drank water from his Nevada land covered by a Bureau of Land Management (BLM) grazing permit. The United States owns and manages these horses. The plaintiff brought this lawsuit in the United States Court of Federal Claims alleging an illegal Fifth Amendment Taking for failing to manage the wild horses. At the time of the filing, the plaintiff claimed to have suffered over $800,000 in damages. The Claims Court dismissed the complaint for lack of subject-matter jurisdiction finding that government inaction cannot support a takings claim. The plaintiff appealed to the Court of Appeals for the Federal Circuit.
The Tucker Act gives the Claims Court jurisdiction to hear “any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.” 28 U.S.C. § 1491(a)(1). Agreeing with the Claims Court, the Federal Circuit concluded that a takings claim must be based on an affirmative action and cannot be based on government inaction. See St. Bernard Parish Gov. v. United States, 887 F.3d 1354, 1360–61 (Fed. Cir. 2018). The plaintiff’s allegations included the government’s failure to manage the horses and its denial to the plaintiff’s requests to remedy the situation. Additionally, the Tucker Act does not give the Claims Court jurisdiction for tort claims.
Bench Creek Ranch, LLC, v. United States, 2021 WL 1828065 (Fed. Cir. May 7, 2021).
In this case, the IRS disallowed tens of millions of dollars in exclusions for cost of goods sold and business expense deductions claimed by one of the largest medical marijuana dispensaries in the country. Taxpayers cannot claim a deduction for ordinary and necessary expenses if the taxpayer is engaged in an unlawful business such as selling a controlled substance like marijuana. I.R.C. § 280E, 21 U.S.C. § 812(c). While acknowledging it was subject to section 280E, the dispensary, which operated a legal business under California law, petitioned the United States Tax Court for a redetermination of the IRS decision. The Tax Court affirmed the multi-million-dollar deficiency judgment resulting from the dispensary’s corporate income tax liabilities from tax years 2007 to 2012.
Appeal
On appeal to the United States Court of Appeals for the Ninth Circuit, the dispensary argued that section 280E was unconstitutional or, alternatively, that the denied deductions should qualify as cost of goods sold and therefore be excluded from its gross income. Historically, challenges to the constitutionality of section 280E have been unsuccessful. N. Cal. Small Bus. Assistants Inc. v. Comm'r, 153 T.C. 65, 72 (2019); Alpenglow Botanicals, LLC v. United States, 894 F.3d 1187, 1201 (10th Cir. 2018). Here, the court declined to consider the dispensary’s 16th Amendment argument because it was not raised before the Tax Court.
Excludible Inventory Costs
The dispensary alternatively claimed that the approximately $7 million it incurred by purchasing and processing marijuana qualified as excludible inventory costs. The costs, for example, included employee compensation relating to the negotiation of bud purchases and the cost of laboratory testing of marijuana.
The Tax Court found that the dispensary “purchased” rather than “produced” the products it sold and that taxpayers reselling products that they “purchased” are entitled to include as cost only “the invoice price,” less certain discounts not relevant here, as well as “transportation or other necessary charges incurred.” See Treas. Reg § 1.471-3(b). The dispensary did not appeal the Tax Court’s purchaser determination, but rather claimed that because its inventory method satisfied I.R.C. § 471 by meeting the general requirements for best accounting practice and clear reflection of income, the IRS could not force the dispensary into a particular cost method under Treas. Reg. § 1.471-3. The Ninth Circuit disagreed, stating that § 471 requires taxpayers to take inventory as set forth by the IRS. I.R.C. § 471(a). Therefore, taxpayers must follow the detailed regulations on how to compute their inventories. See Treas. Reg. §§ 1.471-1 to -11.
The dispensary next claimed that because the IRS did not challenge whether the dispensary’s inventory method failed to clearly reflect its income, the IRS could not require a particular accounting method. In rejecting this argument, the court explained that the IRS did not attempt to compel a particular accounting method, but rather disallowed an accounting method that was not in conformance with the applicable regulations.
Lastly, the dispensary argued that under Treas. Reg. § 1.471-3(d), it could include both its production and purchasing costs in the inventory costs. The court stated that § 1.471-3(d) only applies to industries “in which the usual rules for computation of cost of production are inapplicable.” Such industries include famers, some miners and manufacturers, and retail merchants that use the retail method of accounting. The court noted that while the normal inventory accounting rules may be unfavorable to the dispensary, it was still subject to those rules and regulations.
Patients Mutal Assistance Collect Corp. v. Comm'r, 2021 WL 1570288 (9th Cir. April 22, 2021).
In 2018, 62 landowners along the Mississippi River filed a lawsuit against the United States in the United States Court of Federal Claims. The plaintiffs claimed that the Army Corps of Engineers (Corps) committed an illegal taking by making improvements for navigability on the Middle Mississippi River which caused recurrent flooding on the plaintiffs’ property. The court of claims dismissed the complaint, finding that it was barred by the six-year statute of limitations governing actions under the Tucker Act. See 28 U.S.C. § 2501, 28 U.S.C. § 1491(a)(1).
On appeal, the United States Court of Appeals for the Federal Circuit affirmed. A claim accrues when the alleged event causing the damage occurs and the plaintiff is aware, or should be aware, of the event. Under the stabilization doctrine, when a taking happens gradually, the claim does not accrue until the plaintiff is injured. The court found that 91 percent of the river improvements were in place by 2000, well outside of the six-year statute of limitations. The area had experienced recurrent flooding since the nineteenth century and there was no evidence any Corps action within the statutory six-year period exacerbated the flooding. Additionally, the court found that the plaintiffs should have known about the defendant’s potential liability because there was easily accessible public information dating back to the 1970s on the impact of river training structures.
Jackson-Greenly Farm, Inc. v. United States, 2021 WL 1546034 (Fed. Cir. April 20, 2021).
In 2020, the U.S. Supreme Court issued a ruling in a Clean Water Act (CWA) citizens’ suit against the County of Maui. County of Maui v. Hawai’i Wildlife Fund, 140 S. Ct. 1462 (2020). The plaintiffs claimed that the County of Maui’s wastewater reclamation facility discharged pollutants through groundwater into a navigable water in violation of the CWA. The Court ruled that a permit is required when there is “the functional equivalent of a direct discharge” and remanded the case for further proceedings.
On remand, the plaintiffs moved for summary judgment. The County of Maui claimed that the plaintiffs’ motion relied on a flawed 2013 groundwater tracer study. Arguing that the study was unreliable, the County of Maui petitioned for a pretrial evidentiary hearing. In denying the motion, the court ruled that there was no reason to decide the issue in advance of considering the pending summary judgment motion. The plaintiffs asserted that they did not rely on the study in their motion for summary judgment. The court stated that while it must perform a gatekeeping function to ensure that admitted scientific evidence is relevant and reliable, a pretrial evidentiary hearing was not necessary. The court noted that it might turn out that the court could perform its gatekeeping function when the disputed evidence is offered during the bench trial, which is scheduled for the fall. The case could also be decided on summary judgment without a trial.
Hawaii_Wildlife_Fund_v._County_of_Maui, 2021 WL 1299192 (D. Haw. April 7, 2021).
The plaintiffs in this case market products such as “tofurky,” “vegetarian ham roast,” and “vegan jerky.” In 2018, the Missouri Legislature amended its meat advertising regulation to criminalize plant-based and lab-grown meats from being misrepresented as a meat. See Mo. Rev. Stat. § 265.494(7). The plaintiffs brought this lawsuit challenging the constitutionality of the new statute, as it applied to them, and asked for a preliminary injunction. The district court denied the request finding that the plaintiffs’ marketing clearly indicated that the products do not contain meat; therefore, the statute did not prohibit their speech and the plaintiffs were not likely to succeed on their First Amendment claim.
On appeal, the plaintiffs claimed the district court applied the wrong legal standard and too narrowly interpreted the statute. After determining that the commercial speech standard applied to the plaintiffs’ claim, the Eighth Circuit next considered whether the plaintiffs’ products misrepresented meat and was therefore prohibited by the statute. The Missouri Department of Agriculture had issued guidance explaining that the new law did not prohibit packages which both contained a prominent disclosures that the product is “plant-based” and “made from plants” because the product did not misrepresent meat. The State did not claim that the plaintiffs’ products misrepresented meat. Additionally, the plaintiffs claimed that their products are “clearly labeled as plant based, vegan, or vegetarian.” Because it was unlikely the statute would be applied to their speech, the plaintiffs are unlikely to succeed on their merits of their as-applied First Amendment Claim. Therefore, the court affirmed the district court’s ruling denying the preliminary injunction.
Turtle Island Foods_v. Thompson, 2021 WL 1165406 (8th Cir. March 29, 2021).
Plaintiffs brought this citizen suit under the Clean Water Act (CWA) and against a coal company for discharging selenium and ionic pollutants from two mines. The plaintiffs claimed that the defendant exceeded its 402 permit limitations and its 401 certification as well as violated the Surface Mining Control and Reclamation Act (SMCRA). The West Virginia Department of Environmental Protection (DEP) issued two Orders of Compliance for exceeding selenium discharge limitations and a Proposed Consent Order to come into compliance. The defendant claimed these orders precluded the plaintiffs’ claims under section 309(g) of the CWA, which bars a citizen suit if a state has already begun prosecution under comparable state law or the state has already issued a final order imposing a monetary penalty. See 33 U.S.C. § 1319(g).
In rejecting the defendant’s claim, the court found that these orders did not cover the entire scope of the plaintiffs’ allegations, such as those involving ionic pollutants or the SMCRA. Additionally, the allegations that the Proposed Consent Order did address did not meet section 309(g) criteria. First, because the plaintiffs filed the citizen suit more than a year before the DEP sent the Proposed Order, the enforcement action did not predate the citizen suit. Moreover, the court had previously found that the state law was not comparable to the CWA because it “does not provide for the assessment of administrative penalties without the violator's consent.” Sierra Club v. Powellton Coal Co., LLC 662 F. Supp. 2d 514, 530 (S.D. W. Va. 2009). Alleged violators may terminate DEP enforcement action at any time and for any reason. Finally, none of the orders penalized the defendant, but instead gave the defendant the option to not enter into the proposed order at all. Because of this, the court found that the state enforcement did not preclude the plaintiffs’ suit.
Ohio Valley Environmental Coalition v. Lexington Coal Co., 2021 WL 1093631 (S.D.W. Va. March 22, 2021).
Plaintiffs claimed that several egg-producer trade groups and a large egg producer violated the Sherman Act, 15 U.S.C. § 1, by price-fixing the cost of eggs. After trial, the jury instructions and verdict form asked if the defendants agreed to conspire to reduce the supply of eggs by 1) taking several short-term steps to reduce the supply of hens and chicks, 2) requiring producers to follow certain guidelines to become United Egg Producer (UEP) certified, and 3) coordinating an export program to decrease the domestic supply of eggs. The jury found that the defendants did not conspire to reduce the supply of eggs.
On appeal, the plaintiffs claimed the use of the word “and” in the jury instructions and verdict form did not allow the jury to find a conspiracy occurred unless the plaintiffs proved all three of the aforementioned allegations. However, the district court consistently instructed the jury on the correct components of a conspiracy. Therefore, any error on a jury form did not affect the outcome and was harmless.
The plaintiffs also claimed that the district court erred by failing to instruct the jury that defendants’ conduct was a per se violation of the Sherman Act. The court disagreed, however, ruling that the per se rule is “appropriate only after courts have had considerable experience with the type of restraint at issue, and only if courts can predict with confidence that it would be invalidated in all or almost all instances under the rule of reason.
In Re: Processed Egg Products Antitrust Litigation, 2021 WL 960730 (3rd Cir. March 15, 2021)
As part of the ongoing litigation against Murphy-Brown and its parent company, Smithfield Foods, 20 plaintiffs brought this lawsuit against the hog integrator seeking compensatory and punitive damages for trespass, negligence, civil conspiracy, and unjust enrichment. The plaintiffs claimed that the swine owned by the defendants at the nearby Vestal Farm caused unreasonable odor, dust, flies, and noise. The defendant filed a motion to dismiss, claiming that the plaintiffs failed to join an indispensable party and for failure to state a claim.
The defendants claimed that the owner/operator of Vestal Farm is a necessary and indispensable party under Federal Rule of Civil Procedure 12(b)(7). In its own motion, the Vestal Farm operator claimed that it cannot protect its farm and financial interests unless allowed to join in the lawsuit. The court found that the operator’s interests were not directly related because the plaintiffs did not challenge the operator’s actions or swine production agreement, but only sought financial compensation from the defendants. Therefore, the operator was not a necessary party.
The defendants also argued that the plaintiffs’ claim should be dismissed under Rule 12(b)(6) because they failed to state a claim. The North Carolina Right to Farm Act (RTFA) bars nuisance lawsuits against agricultural operators if the action is not brought within one year of the operation’s establishment. N.C. Gen. Stat. § 106-701(a)(3). A hog operation has existed at Vestal Farm for decades. The defendants claim that the plaintiffs’ claims “are merely disguised nuisance claims” and should be dismissed under the RTFA. The court found that torts such as nuisance and trespass can share the same elements. Additionally, the RTFA specifically excludes claims of “negligence, trespass, personal injury, strict liability, or other cause of action for tort liability other than nuisance.” Id. at § 106-702(d). Therefore, the plaintiff adequately stated a claim.
Barden v. Murphy Brown, LLC, 2021 WL 965915 (E.D.N.C. March 15, 2021)
Plaintiffs filed this citizen suit under the Clean Water Act (CWA) against a poultry rendering facility for discharging pollutants in excess of its NPDES permit. The defendant, admitting that it had been in continuance noncompliance since the permit took effect, filed for summary judgment claiming that the citizen suit was precluded by an ongoing state enforcement action.
A citizen suit is barred when a state has begun enforcement under a state law “comparable” to the CWA. 33 U.S.C. § 1319(g)(6)(A). The defendant claimed that the Pennsylvania Department of Environmental Protection (PADEP), through two Consent Order and Agreements, had commenced prosecution against the defendant under the Clean Streams Law and that law was comparable to the CWA.
The court acknowledged that there is a circuit split on what findings a court must make to determine comparability. The “overall comparability” standard takes a holistic approach while the “rough comparability” standard requires the state law to be comparable to each of the three provisions found in 33 U.S.C. § 1319(g)(6) regarding penalty assessment, public participation, and judicial review. The court found the “rough comparability” standard more appropriate because it provides uniformity, reduces uncertainty for litigants, and is the most logical interpretation of § 1319(g)(6) requiring that the state law be comparable to that subsection.
After analyzing the two laws, the court ruled that because the Clean Streams Law does not allow adequate public participation, the law is not comparable to the Clean Water Act. Therefore, the court denied the defendant’s motion for summary judgment, and the citizen suit was allowed to continue.
Lower Susquehanna_Riverkeeper v. Keystone Protein Co., 2021 WL 632734 (M.D. Penn. February 18, 2021).
During a Chapter 12 bankruptcy proceeding, debtors petitioned the court to use cash collateral to pay for the post-petition expenses they had incurred. They also requested to use the cash for ongoing farm expenses and family bills until a bankruptcy plan was implemented. A court must consider whether allowing a debtor to use cash collateral creates inadequate protection for the creditors. 11 U.S.C. § 363(e). A substantial equity cushion between the value of the collateral and the total amount of the liens can demonstrate that adequate protection exists. The creditors in this case had a $196,830 equity cushion or 5.69% of the total debt.
In the petition, the debtor claimed to have over $382,000 of cash collateral. However, the debtor’s Chapter 12 plan claimed that the debtors had $457,000 in cash collateral. The debtors could not explain this discrepancy or why they could not use the missing $75,000. Additionally, the debtors did not apply for 2021 financing for the farming operation. They would continue to need to use the cash collateral which would further erode the equity cushion. Therefore, because the proposed use of the cash collateral created substantial risk for the creditors, the court denied the motion. However, the court was willing to consider a two-month use of cash collateral if the debtors could show certain prerequisites.
A debtor filed a Chapter 13 bankruptcy proceeding. His sister filed a claim asserting that she had a $42,433 lien under Montana law against the debtor’s brand and branded livestock. The claim arose from a state district court order against the debtor for breaching a settlement agreement after he allegedly misappropriated cattle sale proceeds from the siblings’ ranching operating. The bankruptcy court, finding that the sister had a general unsecured lien, affirmed the debtor’s Chapter 13 plan which omitted the sister as a secured creditor. The sister appealed claiming the bankruptcy court erred in finding she lacked a secured lien.
A bankruptcy court will determine whether a creditor has a secured claim based on applicable state law. Bankruptcy laws will then determine the treatment of secured claims. See 11 U.S.C. § 506(a). Under Montana law, a judgment lien is not created in personal property until the debtor either seizes the property or leaves notice of attachment with the debtor. The sister did neither of these. She did, however, obtain a writ of execution from the state district court which directed the Montana Department of Livestock to satisfy the judgment using brands owned or maintained by the debtor. However, there is no Montana law that creates a lien on a brand or on livestock by doing so. Because the sister lacked a secured claim, the court affirmed the debtor’s Chapter 13 plan.
Schweigert_v._Schweigert, 2021 WL 505633 (D Mont. Feb. 11, 2021)
Ranchers-Cattlemen Action Legal Fund (R-CALF) brought this lawsuit claiming that the beef checkoff assessment program violated the First Amendment by requiring R-CALF members to subsidize speech with which they disagreed. The court granted a preliminary injunction while it determined the amount of control the USDA exerted over state beef councils (SBC). The USDA then entered into Memoranda of Understanding (MOUs) with several SBCs. Because the MOUs gave the USDA a level of control so that the SBCs’ advertising qualified as government speech, the court later granted the USDA’s motion for summary judgment. R-CALF petitioned the court seeking attorney fees and costs for obtaining the preliminary injunction under the Equal Access to Justice Act (EAJA). See 28 U.S.C. §2412.
The EAJA is a fee-shifting statute awarding attorney fees, costs, and other expenses for parties which prevail against the United States. The party must show that it is the prevailing party and that the Government’s position was not substantially justified. Even though the court vacated the injunction after the USDA voluntarily chose to enter into the MOUs, the court found R-CALF was the prevailing party because the injunction caused the USDA’s change of action which directly benefited R-CALF. The court also found that the USDA’s litigation position was not substantially justified. The USDA claimed it had sufficient control over the SBCs for the promotions to be considered government speech not subject to First Amendment protections. However, the court did not grant the USDA’s motion for summary judgment, but instead granted R-CALF’s motion for a preliminary injunction, because the USDA did not establish it had sufficient control. The court awarded $145,428.08 in attorney fees and $5,344.17 in costs.
Ranchers-Cattlemen Action Legal Fund v. Vilsack, 2021 WL 4611 (D. Mont. Feb. 9, 2021)