With just over a week left until echoes of “Hang on Sloopy” and chants of “O-H” and “I-O” can be heard from Buckeye faithful across the nation, we thought we would provide you with some light reading to hold you over until that long awaited 3:30 kick off. In this edition of our Ag Law Harvest, we focus on three recent Ohio Supreme Court cases that could potentially impact business owners, Northern Ohio landowners, and Ohio taxpayers.
Assault and Battery: Is it Covered Under an Insurance Policy?
A victim of a stabbing at an Ohio adult care facility is unable to collect judgment from the facility’s insurance company after a recent decision by the Ohio Supreme Court. The victim was living at the facility when another resident stabbed him. The perpetrator was later indicted on criminal charges but found not guilty by reason of insanity.
The victim then filed a civil lawsuit against the perpetrator and the facility to recover for damages resulting from the stabbing injuries. The victim ultimately dropped his lawsuit against the perpetrator and entered into a settlement agreement with the facility. As part of the settlement agreement, the victim agreed not to pursue the judgment against the facility, and instead, sought to collect his judgment from the facility’s insurance company.
At the time of the stabbing, the adult care facility had a commercial general liability policy. When the victim sought judgment from the facility’s insurance company, the insurance company refused to provide coverage. The insurance company explained that the insurance policy contained a provision that specifically excluded coverage for any bodily injury resulting from an assault or battery. The specific provision at issue stated:
The victim argued that because the perpetrator was found to be not guilty by reason of insanity in the criminal trial, the exclusion provision was nullified because the perpetrator lacked the subjective intent to commit any assault or battery.
The Ohio Supreme Court disagreed. The Court explained that the plain language of the exclusion provision of the insurance policy at issue is clear – there is no intent requirement included in the exclusion language. Therefore, the Court held that coverage did not exist for the willful assault on the victim. The Court sympathized with the victim but ultimately could not interpret the insurance policy language to include a subjective intent requirement where none existed.
This case demonstrates the importance of reading and understanding your business insurance policy. Insurance policies are, at the core, contracts between two parties and the language contained within the policy will usually govern that contractual relationship. What you assume is covered under your policy may not necessarily be the case. Furthermore, not all insurance policies are the same. We have seen Ohio cases where an insurance policy does require the presence of some subjective intent in order for an assault and battery exclusion to apply. Speak with your insurance agent and/or attorney to make sure you understand when and where coverage exists, knowing this can be critical to protecting you, your farm, and/or your business.
Ohio Supreme Court Approves Northern Ohio Wind Farm.
Residents of Huron and Erie Counties along with Black Swamp Bird Conservatory (the “Plaintiffs”) recently lost their battle in court to prevent the construction of a new wind farm in Northern Ohio. The Plaintiffs argued that the Ohio Power Siting Board (the “Board”) failed to satisfy Ohio law before granting the new wind farm its certificate of environmental compatibility and public need. Specifically, the Plaintiffs assert that the wind farm could “disrupt the area’s water supply, create excessive noise and ‘shadow flicker’ for residents near the wind farm, and kill bald eagles and migrating birds.”
The Ohio Supreme Court found otherwise. The Court concluded that the Plaintiffs failed to establish that the Board’s granting of the certificate was unlawful or unreasonable. As approved, the new wind farm will consist of up to 71 turbines and cover 32,000 acres of leased land. To read more about the Ohio Supreme Court’s decision visit: In re Application of Firelands Winds, L.L.C.
Ohio Supreme Court Sets New Precedent on Interpreting Ohio Tax Law.
In Ohio, most retail sales are subject to sales tax unless a certain exemption applies. Ohio law does have a sales tax exemption for equipment used directly in the production of oil and gas. A fracking business recently challenged a decision by Ohio’s Tax Commissioner and Board of Tax Appeals that levied the sales tax on certain equipment purchased by the business. The fracking equipment at issue included: a data van, blenders, sand kings, t-belts, hydration units, and chemical-additive units.
The Tax Commissioner concluded that the fracking equipment was not used directly in the extraction of oil and gas, only indirectly, and therefore, did not qualify for the tax exemption. The Ohio Supreme Court felt differently.
The Court found that all the equipment, except the data van, is used in unison to expose the oil and gas. Because the equipment is used to expose the oil and gas – a necessary part of fracking – the Court had little difficulty concluding that the equipment is being used directly in the production of oil and gas.
In addition to the equipment’s direct use in the production of oil and gas, the Court also recognized that the fracking equipment may also have a storage or delivery function/purpose. However, the Court reasoned that a piece of equipment’s function must be viewed through the “primary purpose” lens. For example, the Court held that although the blender equipment in this case performs a holding function, the primary use of the blender is to mix “the critical ingredients in the fracking recipe seconds before the mixture is inserted into the well.” Therefore, the Court found that the blender’s holding function did not disqualify it from Ohio’s sales tax exemption.
Additionally, in this case, the Court also issued an opinion on how Ohio courts should interpret tax law moving forward. Normally, courts use the ever-important legal principal of stare decisis to help it decide on new cases. Stare decisis is the principal that courts and judges should honor the decisions, rulings, and opinions from prior cases when ruling on new cases. Here, the Court took its opportunity to acknowledge that in the past the Court interpreted tax exemptions against the taxpayer, favoring tax collection. But the Court made clear that from here on out, the Court “will apply the same rules of construction to tax statutes that [it applies] to all other statutes” without a slant toward one side or the other. The Court concluded that its task “is not to make tax policy but to provide a fair reading of what the legislature has enacted: one that is based on the plain language of the [law].”
To read the Ohio Supreme Court’s decision visit: Stingray Pressure Pumping, L.L.C. v. Harris
Happy last day of June! We close out the month with another Ag Law Harvest, which brings you two interesting court cases, one about an Ohio man asserting his right to give away free gravel, and another which could decide the constitutionality of “Ag-Gag” laws once and for all. We also provide a few federal policy updates and announcements.
Ohio Department of Agriculture Prohibited from Fining a Landowner for Charging to Load Free Gravel. In May of 2020, Paul Gross began selling gravel and topsoil (collectively “gravel”) that he had accumulated from excavating a pond on his property. Gross charged $5 per ton of gravel, which was weighed at a scale three miles from his property. After receiving a complaint of the gravel sales, the Madison County Auditor sent a Weights and Measures Inspector to investigate Gross’s gravel sales. The Inspector informed Gross that the gravel sales violated Ohio Administrative Code 901:6-7-03(BB) (the “Rule”) because the gravel was not being weighed at the loading site. Under the Rule, “[s]and, rock, gravel, stone, paving stone, and similar materials kept, offered, or exposed for sale in bulk must be sold . . . by cubic meter or cubic yard or by weight.” As explained by the Inspector, Gross’s problem was that he was selling gravel by inaccurate weight measurements because the trucks hauling the gravel lose fuel weight when traveling the three miles to the scale.
Instead of installing scales on his property, Gross decided to start giving away the gravel for free. However, Gross did charge a flat rate fee of $50 to any customer that requested Gross’s help in loading the gravel. According to Gross, this $50 fee was to cover the cost of his equipment, employees, and other resources used to help customers load the gravel. Unsatisfied with the structure of this transaction, the Ohio Department of Agriculture (“ODA”) decided to investigate further and eventually determined that even though Gross was giving away the gravel for free, the flat fee for Gross’s services represented a commercial sale of the gravel and, therefore, Gross was in continued violation of the Rule.
For the alleged violation, the ODA intended to impose a $500 civil penalty on Gross, who requested an administrative hearing. The hearing officer recommended imposing the penalty and the Franklin County Court of Common Pleas agreed. Gross appealed the decision to the Tenth District Court of Appeals, which found that Gross was not in violation of the Rule.
The Tenth District reasoned that customers were paying for the service of moving the gravel, not for the gravel itself. The court explained that the purpose of the Rule is to protect consumers by ensuring transparent pricing of materials like gravel. Since Gross was not in the business of selling gravel and the transaction was primarily for services, the court concluded that the ODA’s fine was impermissible.
North Carolina Asks U.S. Supreme Court to Review “Ag-Gag Law.” In 2015, the North Carolina Legislature passed the North Carolina Property Protection Act, allowing employers to sue any employee who “without authorization records images or sound occurring within” nonpublic areas of the employer’s property “and uses the recording to breach the [employee’s] duty of loyalty to the employer.” After the act’s passage several food-safety and animal-welfare groups, including the People for the Ethical Treatment of Animals (“PETA”), challenged the Property Protection Act in an effort to prevent North Carolina from enforcing the law.
A federal district court in North Carolina struck down the law, finding it to be a content-based restriction on speech in violation of the First Amendment of the United States Constitution. The 4th Circuit Court of Appeals upheld the district court’s ruling also reasoning that the law’s broad prohibitions restrict speech in a manner inconsistent with the First Amendment. Now, the North Carolina Attorney General, Josh Stein, has petitioned the Supreme Court of the United States (“SCOTUS”), asking the Court to reverse the 4th Circuit’s decision. If SCOTUS decides to hear the case, the justices will be tasked with determining “[w]hether the First Amendment prohibits applying state tort law against double-agent employees who gather information, including by secretly recording, in the nonpublic areas of an employer’s property and who use that information to breach their duty of loyalty to the employer.”
We have reported on several Ag-Gag laws and the court challenges that have followed. If SCOTUS decides to take up the case, we may finally have a definitive answer as to whether Ag-Gag laws are constitutional or not.
Lab-grown Chicken Given the Green Light by the USDA. The United States Department of Agriculture’s (“USDA”) Food Safety and Inspection Service granted its first approvals to produce and sell lab-grown chicken to consumers. Upside Foods and Good Meat, the two entities given the green light by the USDA, plan on initially providing their “cell-cultivated” or “cultured” chicken to patrons of restaurants in the San Francisco and Washington D.C. areas. However, the timeline for such products showing up in your local grocery store has yet to be determined.
USDA Suspends Livestock Risk Protection 60-Day Ownership Requirement. The USDA’s Risk Management Agency issued a bulletin suspending the 60-day ownership requirement for the Livestock Risk Protection (“LRP”) program. Normally under the LRP, covered livestock must be owned by the producer within the last 60 days of the specified coverage endorsement period for coverage to apply. According to the bulletin, “[d]ue to the continuing severe drought conditions impacting many parts of the nation, producers are struggling to find adequate supplies of feed or forage, causing them to market their livestock sooner than anticipated.” In response, the USDA is allowing producers to apply to waive the 60-day ownership requirement, subject to verification of proof of ownership of the livestock. The USDA hopes this waiver will allow producers to market their livestock as necessary while dealing with the current drought effects. Producers will be able to apply for the waiver until December 31, 2024.
USDA Announces Tool to Help Small Businesses and Individuals Identify Contracting Opportunities. Earlier this month, the USDA announced a new tool “to assist industry and small disadvantaged entities in identifying potential opportunities for selling their products and services to USDA.” USDA’s Procurement Forecast tool lists potential contracting or subcontracting opportunities with the USDA. Until now, businesses could only access procurement opportunities through the federal-wide System for Award Management (“SAM”). The USDA hopes the Procurement Forecast tool will provide greater transparency and maximize opportunity for small and underserved businesses.
We’ve heard from many concerned pork producers since the U.S. Supreme Court recently ruled on California's controversial animal housing law, Proposition 12 (“Prop 12”). Enacted as a ballot measure by California voters, the law sets minimum space requirements for sows and prohibits the sale of pork derived from a sow raised in conditions that don't meet the housing standards. But the California law has yet to go into effect due to a score of lawsuits challenging California's authority to make a state law that negatively affects hog producers in other states. On May 11, the Supreme Court made its decision on one such challenge--National Pork Producers Council v. Ross (“NPPC”). The 5-4 ruling upholding Prop 12 was not the decision desired by agricultural interests, leading to the questions we've been receiving: is there still a way to prohibit the law? When and how will California enforce the law? Will pork producers now begin complying with Prop 12?
An understanding of the court’s reasoning in NPPC is necessary before we can answer these questions. Let’s begin with the following excellent explanation of the case by my colleague Elizabeth Rumley at the National Agricultural Law Center.
The Supreme Court's decision
After considering a constitutional challenge to a California ballot initiative regulating space requirements for farm animals, the Supreme Court of the United States (“SCOTUS”) ruled on May 11th in favor of the state of California, allowing the law to stand. The proposal, known as “Prop 12,” set conditions on the sale of pork meat in California- regardless of where it was produced. It required, among other things, that all products be from pigs born to a sow housed in at least 24 square feet of space. This effectively imposed Prop 12’s animal housing standards on any producer, no matter the location, who wished to sell products to residents of California. This part of the law was promptly challenged and eventually heard by the Supreme Court.
The case, National Pork Producers Council v. Ross (“NPPC”) considered whether Prop 12’s regulation of the out-of-state production of products to be sold within state boundaries is a permitted action under a legal doctrine known as the dormant Commerce Clause. In other words, under what circumstances can a state government pass laws that primarily affect the actions of people in other states? SCOTUS agreed to consider the case, and oral arguments were heard last October. Many of the arguments centered on whether the law met the provisions of the “Pike balancing test,” which compares local benefits of a law to the burden that it places on out-of-state commerce to determine if the burden is clearly excessive.
While parts of this ruling were agreed upon by all justices, the foundational legal analysis was a split decision, with several justices agreeing and disagreeing as to various parts. Ultimately, a plurality of the court held that Prop 12 was constitutional and enforceable by California. A minority of justices would have sent the case back to the district court for further consideration. The opinion of the Court (joined by the largest number of justices), was written by Justice Gorsuch.
In the initial, unanimously agreed upon, sections of the opinion, Gorsuch focuses on the “antidiscrimination principle” that “lies at the ‘very core’” of dormant commerce clause jurisprudence. In the clearest situations, this happens if a state set different standards for out-of-state businesses vs in-state businesses (for example, if Prop 12 had required Kansas producers to give pigs more space, but allowed California producers to confine animals in smaller pens). However, Gorsuch does not apply this principle, instead pointing to a concession by the Pork Producers Council that producers are treated similarly regardless of geography. Gorsuch then moves on to consider the constitutionality of a law that is not facially discriminatory (as in the hypothetical example above), but has a disproportionate effect on out-of-state businesses. While the court did not specify whether Prop 12 would fall into this category, it would have ultimately made no difference. Gorsuch refused to find such a law unconstitutional, writing that “[i]n our interconnected national marketplace, many (maybe most) state laws have the ‘practical effect of controlling’ extraterritorial; behavior.”
Next, Gorsuch considers the Pike balancing test in a series of sections where some justices join in his analysis while others do not. Pike asks the court to weigh local benefits of a law against the burden it places on out-of-state commerce. Again, Gorsuch returns to what he sees as an underlying requirement of discriminatory intent, even in the cases decided using the Pike analysis. He rules, in a section joined by Justice Thomas and Justice Barrett, that the cost/benefit analysis that Plaintiffs argued was not an integral part of the original Pike analysis, and that Pike does not authorize judges to “strike down duly enacted state laws… based on nothing more than their own assessment of the relevant law’s ‘costs’ and ‘benefits’”. He further highlights the perceived difficulty in doing so as a judicial body; “[h]ow is a court supposed to compare or weigh economic costs (to some) against noneconomic benefits (to others)? No neutral legal rule guides the way. The competing goods before us are insusceptible to resolution by reference to any judicial principle.” Instead, he disclaims that cost/benefit role, arguing that the responsibility is better given to those with “the power to adopt federal legislation that may preempt conflicting state laws.”
Gorsuch also considers a framing of Pike that “requires a plaintiff to plead facts plausibly showing that the challenged law imposes ‘substantial burdens’ on interstate commerce before a court may assess the law’s competing benefits or weigh the two sides against each other.” In a section joined by Justices Thomas, Sotomayor and Kagan, Gorsuch finds that under the facts presented in the complaint, a “substantial harm to interstate commerce remains nothing more than a speculative possibility.”
It’s important to note that the sections of the opinion addressing the Pike test were not adopted by the majority. While Gorsuch wrote the opinion of the court, his reasoning was not adopted by the entire bench. In fact, several justices (Sotomayor, joined by Kagan and Roberts, joined by Alito, Kavanaugh & Jackson) also wrote or signed onto dissents outlining their disagreements with specific elements of Gorsuch’s reasoning. These justices agree that courts can still consider Pike claims and balance a law’s economic burdens against its noneconomic benefits, even if the challengers do not argue that the law has a discriminatory purpose. Much like the Rapanos case of WOTUS fame, this case did not result in clearly defined legal doctrine.
Justice Kavanaugh wrote as well, concurring in part and dissenting in part. He highlighted concerns about the constitutionality of statutes like Prop 12, “not only under the Commerce Clause, but also under the Import-Export Clause, the Privileges and Immunities Clause, and the Full Faith and Credit Clause.”
NPPC: What Happens Next?
At least theoretically, other challenges to Prop 12 might be filed on dormant Commerce Clause grounds with more facts presented in the complaint. This would be possible because a plurality of Justices agreed that the Plaintiffs did not allege facts that would constitute a “substantial harm”. New complaints, however, might allege facts sufficient to meet that burden. Those hypothetical challenges may or may not also include some of the additional legal grounds identified in Kavanaugh’s opinion. But as of right now- and for the foreseeable future- Prop 12 is constitutional. However, there are other court cases pending that impact the immediate enforceability of Prop 12 and similar laws.
In California Hispanic Chamber of Commerce v. Ross, retailers asked for an extension of time to come into compliance with Prop 12 regulations for the sale of pork, which was granted by the court. For retailers selling “whole pork meat,” the regulations may not be enforced until July 1, 2023. For retailers selling veal and egg products, the regulations are currently effective.
Massachusetts Restaurant Association v. Healey addresses a 2016 Massachusetts law, similar to Prop 12. The language of the statute is available here, and the regulations are available here. The MA law was challenged on dormant Commerce Clause grounds, and the parties agreed to prevent enforcement of the portions of the law relevant to the sale of pork products until 30 days after the NPPC decision was issued by the USSC. The portions relevant to the sale of egg and veal products are currently effective.
Is there still a possibility of stopping Prop 12 and other efforts to establish farm animal housing standards?
Continued lawsuits against Proposition 12 and other state laws that require certain production standards is a strategy that will likely continue. As Elizabeth Rumley explained above, the recent NPPC opinion itself lays out two additional options for challenging Proposition 12: alleging facts sufficient to meet the “substantial harm” requirement and raising the additional constitutional arguments highlighted by Justice Kavanaugh, such as the Import-Export Clause, the Privileges and Immunities Clause, and the Full Faith and Credit Clause.
Federal lawmaking is another option. Justice Gorsuch, in the NPPC decision, highlighted the constitutional power Congress possesses to “regulate Commerce … among the several States.” The Justice suggested that Congress could displace Prop 12 by exercising its commerce power and enacting legislation that regulates the interstate trade of pork. Some members of Congress have expressed willingness to include interstate commerce language in the upcoming Farm Bill.
Others in Congress advocate a different strategy—legislation that restricts states from interfering with animal production practices. A proposal raised unsuccessfully last year by Sen. Marshall (R-Kan) and Rep. Hinson (R-Iowa) may surface again in the wake of the NPPC. But even with several options for federal legislation that would prevent Prop 12, many question whether there is sufficient congressional support. Congress has a long history of unwillingness to overturn any type of state ballot initiative enacted by “the will of the people.”
When and how will California enforce Prop 12?
With the NPPC decision by the Supreme Court, the California Department of Food and Agriculture’s Animal Care Program has issued guidance on how it will enforce Prop 12. The agency had already developed Prop 12 regulations, which require distributors and producers of pork to register and obtain a third-party certification of compliance by January 1, 2024. For pork producers, certification involves passing an on-site inspection showing compliance with the housing standards and maintaining compliance records and requires an annual renewal process. The agency offers a Sow Housing Guide that illustrates Prop 12’s requirements that a sow’s enclosure be at least 24 square feet and does not prevent the sow from lying down, standing up, fulling extending all limbs without touching the side of the enclosure, or turning around freely. The agency is also presenting several webinars, including a webinar for pork producers on June 27.
Will pork producers now begin complying with Prop 12?
That’s a question without a legal answer. Those who do comply with the housing standards will certainly incur economic costs, and some producers had already done so prior to NPPC. The National Pork Producers Council estimates that converting existing sow housing to meet the Prop 12 standards will run a producer about $3,500 per sow and national costs could total between $1.9 and $3.2 billion. We can guess that some producers will not or cannot make the new investment, which in turn raises many more questions about the economic and social impacts of Prop 12. As is often the case with controversial laws like Prop 12, we might always have more questions than answers.
We’re back! We are excited to bring back our regular Ag Law Harvest posts, where we bring you interesting, timely, and important agricultural and environmental legal issues from across Ohio and the country. This month’s post provides you with a look into Ohio’s ongoing legal battle of some provisions in the recently enacted “Chicken Bill”, a brief dive into the U.S. Department of Labor’s new H-2A wage rules, a warning about conservation easement fraud, and an explanation of a court’s recent decision to release an insurance company from its duty to defend its insured in a lawsuit.
Battle of “Chicken Bill.”
Ohio House Bill 507 (“HB 507”), sometimes referred to as “the Chicken Bill” went into effect last month and was widely known for reducing the number of poultry chicks that can be sold in lots (from six to three). However, HB 507 contained other non-poultry related provisions that have caused quite a stir. Environmental groups have sued the State, seeking a temporary restraining order, a preliminary and permanent injunction to prevent HB 507 from going into effect, and a declaratory judgement that HB 507 violates Ohio’s Constitution. Two provisions within HB 507 have specifically caught the attention of the Plaintiffs in this case: (1) a revision to Ohio Revised Code § 155.33 that requires state agencies to lease public lands for oil and gas development (the “Mandatory Leasing Provision”); and (2) a revision to Ohio Revised Code § 4928.01 that defines “green energy” to include energy generated by using natural gas, so long as the energy generated meets certain emissions and sustainability requirements (the “Green Energy Provision”).
Plaintiffs argue that the Mandatory Leasing Provision will cause irreparable harm to their members’ “environmental, aesthetic, social, and recreational interests” in Ohio’s public lands. Additionally, Plaintiffs assert that the Mandatory Leasing Provision and Green Energy Provision violate Ohio’s Constitution by not following the “One-Subject Rule” and the “Three-Consideration Rule” both of which require transparency when creating and passing legislation in Ohio. The Franklin County Court of Common Pleas recently denied Plaintiffs’ request for a temporary restraining order, reasoning that no new leases would likely be granted until the Oil and Gas Land Management Commission adopts its rules (as required by Ohio law) and that there is “no likelihood of any immediate and irreparable injury, loss, or damage to the plaintiffs.” Since the hearing on Plaintiffs’ request for a temporary restraining order, the State of Ohio has filed its answer denying Plaintiffs’ claims and currently all parties are in the process of briefing the court on the merits of Plaintiffs’ request for a preliminary injunction.
New H-2A Wage Rules: Harvesting Prosperity or Sowing Seeds of Despair?
On February 28, 2023, the U.S. Department of Labor (the “DOL”) published a final rule establishing a new methodology for determining hourly Adverse Effect Wage Rates (“AEWR”) for non-range farm occupations (i.e. all farm occupations other than herding and production of livestock on the range) for H-2A workers. The new methodology has been in effect since March 30th. Late last month Rep. Ralph Norman and the Chairman of the House Committee on Agriculture, Rep. Glenn “GT” Thompson, introduced a resolution of disapproval under the Congressional Review Act, seeking to invalidate the DOL’s final rule. Similarly, the National Council of Agricultural Employers (“NCAE”) released a statement declaring that it has filed a Motion for Preliminary Injunction against the DOL’s new methodology.
Opponents of the new rule argue that the increased wages that farmers and ranchers will be required to pay will put family operations out of business. On the other hand, the DOL believes “this methodology strikes a reasonable balance between the [law’s] competing goals of providing employers with adequate supply of legal agricultural labor and protecting the wages and working conditions of workers in the United States similarly employed.” Producers can visit the DOL’s frequently asked questions publication to learn more about the new H-2A wage rule. As it stands, the new H-2A regulations remain in effect and producers should be taking all possible steps to follow the new rules. Make sure to speak with your attorney if you have any questions about compliance with H-2A regulations.
Conservation Easement Fraud – Protecting Land or Preying on Profits?
For a while now, conservation easements have been utilized by farmers and landowners to preserve their land while also obtaining a substantial tax benefit. But not all actors in the conservation easement sphere are good ones. Earlier this month, a land appraiser in North Carolina pled guilty to conspiring to defraud the United States as part of a syndicated conservation easement tax shelter scheme. According to a press release by the U.S. Department of Justice (“DOJ”), Walter “Terry” Douglas Roberts II of Shelby, North Carolina conspired with others to defraud the United States by inflating the value of conservation easements which led to $1.3 billion in fraudulent tax deductions. Roberts is guilty of inflating the value at least 18 conservation easements by failing to follow normal appraisal methods, making false statements, and manipulating or relying on knowingly manipulated data to achieve a desired tax deduction amount. Roberts faces a maximum penalty of five years in prison and could be forced to pay back a specified amount to the U.S. Government.
Conservation easement fraud is not new, however. The Internal Revenue Service (“IRS”) has been monitoring the abuse of the conservation easement tax deductions for some time. The IRS has included these fraudulent transactions on its annual “Dirty Dozen” list of tax avoidance scams. The IRS has seen taxpayers, often encouraged by promoters armed with questionable appraisals, take inappropriately large deductions for these types of easements. These promoters twist the law to develop abusive tax shelters that do nothing more than “game the tax system with grossly inflated tax deductions and generate high fees for promoters.” The IRS urges taxpayers to avoid becoming entangled by these dishonest promoters and that “[i]f something sounds too good to be true, then it probably is.” If you have questions about the tax benefits of a conservation easement, make sure to speak with your attorney and/or tax professional.
Alleged Intentional Acts Not Covered by Insurance.
An animal feed manufacturer is in hot water, literally. A city in Mississippi has accused Gold Coast Commodities, Inc. (“Gold Coast”), an animal feed manufacturer, of intentionally dumping hot, greasy wastewater into the City’s sewer system. Prior to the City’s investigation into Gold Coast’s alleged toxic dumping, Gold Coast purchased a pollution liability insurance policy from Crum & Forster Specialty Insurance Company (“Crum & Forster”). After an investigation conducted by the City and the Mississippi Department of Environmental Quality, the City filed a lawsuit against the feed manufacturer alleging that it intentionally dumped toxic waste into the City’s sewer system. Gold Coast then notified its insurance company of the potential claim. However, Crum & Forster denied coverage for Gold Coast’s alleged toxic dumping. According to the insurance policy, coverage exists for an “occurrence” defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Crum & Forster refused to provide a defense or coverage for Gold Coast in the City’s toxic dumping lawsuit because the City alleges multiple times that Gold Coast acted intentionally, and therefore, Gold Coast’s actions were not an accident and not covered by the policy.
In response, Gold Coast filed a lawsuit against Crum & Forster asking a federal district court in Mississippi to declare that Crum & Forster is required to defend and provide coverage for Gold Coast under the terms of the insurance policy. On a motion to dismiss, the federal district court in Mississippi dismissed Gold Coast’s lawsuit against the insurance company. The district court reasoned that in the underlying toxic dumping lawsuit, the City is not alleging an accident, rather the City asserts that Gold Coast intentionally dumped the toxic waste. Thus, Crum & Forster is not obligated to provide a defense or coverage for Gold Coast, under the terms of the policy. Gold Coast appealed to the Fifth Circuit Court of Appeals (which has jurisdiction over federal cases arising in Texas, Louisiana, and Mississippi).
The Fifth Circuit affirmed the decision of the federal district court, rejecting Gold Coast’s claim that Crum & Forster is obligated to provide a defense and coverage for Gold Coast in the City’s toxic dumping lawsuit. Gold Coast argued that the City seeks to recover under the legal theory of negligence in the toxic dumping case, therefore Gold Coast’s actions are accidental in nature. The Fifth Circuit was unconvinced. The Fifth Circuit explained that when reading a complaint, the court must look at the factual allegations, not the legal conclusions. The Fifth Circuit found that the factual allegations in the City’s lawsuit all referred to Gold Coast’s intentional or knowing misconduct and any recovery sought under the theory of negligence is not a factual allegation, instead it is a legal conclusion. The Fifth Circuit concluded that using terms like “negligence” do not “transform the character of the factual allegations of intentional conduct against [Gold Coast] into allegations of accidental conduct constituting an ‘occurrence.’” Thus, the Fifth Circuit affirmed the federal district court’s decision to dismiss Gold Coast’s lawsuit against its insurer. Unless the Supreme Court of the United States decides to take up the case, it looks like Gold Coast is all on its own in its fight against the City. The lesson here is that although insurance is important to have, its equally as important to speak with your insurance agent to understand what types of incidents are covered under your insurance policy.
The Supreme Court of the United States takes on a second important case for agriculture next week when it hears arguments in National Pork Producers v Ross. The Court opened its new term yesterday with a well-known case about the Clean Water Act and EPA authority over wetlands, Sackett v EPA. In National Pork Producers, the Court will hear challenges to California’s Proposition 12, a livestock housing standards law.
Proposition 12. Voters in California approved the Proposition 12 ballot measure in 2018, but the law’s impact spreads beyond California’s borders. The law sets living space standards for sows, egg-layers, and veal calves—sows must have 24 square feet or more of space, egg-laying hens require at least 144 square inches, and veal calves must have at least 43 square feet. Commonly used gestation crates for sows and battery cages for hens would not meet California’s space standards. And Proposition 12 also prohibits the sale of products from any animal whose housing does not comply with the living space requirements. That prohibition doesn’t apply just to products of animals raised in California, but to products of animals raised anywhere and sold in California. Selling pork, eggs, or veal from animals not raised according to the standards is a crime that could result in fines, jail sentences, and civil actions.
Challenges to Proposition 12. The out-of-state application of Proposition 12 immediately raised concerns across the United States. Several lawsuits followed, with the primary argument being that Proposition 12 violates the Commerce Clause of the U.S. Constitution, which grants Congress the authority “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” The Supreme Court has long determined that implicit in the Commerce Clause is a restriction on the ability of states to pass legislation that discriminates against or excessively burdens interstate commerce, referred to as the “dormant Commerce Clause.” Opponents of Proposition 12 argue that California has burdened interstate commerce by prohibiting sales of products within the state from out-of-state livestock producers who do not comply with the California state law for animal housing.
Federal courts disagreed with the commerce clause argument in an earlier challenge to Proposition 12, North American Meat Institute v Becerra, for which the Supreme Court of the U.S. (SCOTUS) declined review. Another case, Iowa Pork Producers v Bonta, also alleged Commerce Clause violations along with several other constitutional challenges, and that case is now on appeal after being dismissed by a federal district court in California.
A federal district court also dismissed the current National Pork Producers case, presented again on a Commerce Clause claim. The Ninth Circuit Court of Appeals upheld that dismissal while agreeing that the law would “require pervasive changes to the pork production nationwide.” The court concluded, however, that National Pork Producers had not stated a constitutional claim by alleging that Proposition 12 discriminates against out-of-state interests. Absent a showing of discrimination, “a state law may require out-of-state producers to meet burdensome requirements in order to sell their products in the state without violating the dormant Commerce Clause.” As long as the only conduct regulated by the law is conduct within California, the court explained, significant upstream effects beyond California would not violate the Commerce Clause. Last April, the Supreme Court accepted the request to review the Ninth Circuit’s decision.
The SCOTUS review. National Pork Producers, joined by the American Farm Bureau Federation, raises two questions in the current case before SCOTUS. The first is whether the economic effects outside of California that require pervasive changes to an integrated nationwide industry state a violation of the dormant Commerce Clause. The second question is whether Proposition 12 states a Commerce Clause claim according to an earlier SCOTUS decision in Pike v. Bruce Church, which held that even when a law doesn’t discriminate on its face against interstate commerce, the law is not permissible if its burdens greatly exceed the benefits to local commerce.
The petitioners argue that Proposition 12 is “impermissibly extraterritorial” because 99.87% of all pork sold in California comes from producers outside of the state. They claim that the practical effect of Proposition 12 is to regulate out-of-state commerce and require significant and costly changes to sow housing across the country. Proposition 12 also fails the Pike v Bruce Church balancing test because its "false human health rationale and philosophical preferences about conduct outside of California are outweighed by the “wrenching effect” the law has on interstate commerce."
On the opposite side, California describes the law's impact as having only a “ripple effect” both within and outside of California rather than creating an impermissible extraterritorial effect. An upstream, practical effect, California argues, is not sufficient to render a state law invalid under the Commerce Clause. Claiming that the petitioners overstate the economic effects of the law, the State argues that it would not be impossible to segregate animals to meet California requirements while continuing housing requirements for other markets. California argues that “there is nothing illegitimate or insubstantial about the voters’ expressed purpose of addressing extreme methods of farm animal confinement and potential threats to the health and safety of California consumers.”
Implications: who should control farm animal welfare standards? National Pork Producers and California’s Proposition 12 raise a critical question about the future of farm animal welfare standards. Should such standards be determined on a state-by-state basis, or should there be a uniform federal standard? While the federal Animal Welfare Act does establish animal care standards, it does not apply to farm animal care. In the absence of a federal law for farm animals, eight states have joined California in addressing farm animal housing standards. Ohio is one of them. Ohio’s Livestock Care Standards for swine housing will prohibit the use of sow gestation crates after December 31, 2025, except in special circumstances. Unlike California, however, Ohio’s law does not prohibit retail sales from animals that aren’t housed according to the state standards. Only California and Massachusetts tie housing standards compliance to retail product sales and criminal penalties, raising the issue of controlling producers beyond the state’s borders. A federal law, on the other hand, would equally affect all producers across the country and could preempt restrictions on sales such as in Proposition 12, but would place control over farm animal care practices in the hands of the federal government. Perhaps we’ll more carefully analyze the federal-state question after SCOTUS issues its decision in National Pork Producers, expected early next year.
The Supreme Court will hear the oral arguments in National Pork Producers v Ross at 10:00 a.m. on Thursday, October 11. Live audio will be available at https://www.supremecourt.gov/oral_arguments/.
It's time for another roundup of legal questions we've been receiving in the Agricultural & Resource Law Program. Our sampling this month includes registering a business, starting a butchery, noxious weed liability in a farm lease situation, promoting local craft beer at a farmers market, herd share agreements, and agritourism's exemption from zoning. Read on to hear the answers to these questions from across the state.
I want to name my farm business but am not an LLC or corporation. Do I have to register the name I want to use for the business?
Yes, if your business name won’t be your personal name and even if the business is not a formally organized entity such as an LLC. You must register the business with the Ohio Secretary of State. First, make sure the name you want to use is not already registered by another business. Check the name availability using the Secretary of State’s business name search tool at https://businesssearch.ohiosos.gov/. If the name is available, register the name with the Secretary of State using the form at https://www.sos.state.oh.us/businesses/filing-forms--fee-schedule/#name. If there is already a business registered with the name you want to use, you might be able to register a similar name if your proposed name is “distinguishable” from the registered name. The Secretary of State reviews names to make sure they are not already registered and are distinguishable from similar names. See the Guide to Name Availability page for examples of when names are or are not distinguishable from one another.
I am interested in starting a small butchery. What resources and information are helpful for beginning this endeavor?
There are legal issues associated with beginning a meat processing operation, and there are also feasibility issues to first consider. A good resource for initial considerations to make for starting a meat processing business is this toolkit from OSU at https://meatsci.osu.edu/programs/meat-processing-business-toolkit. A similar resource that targets niche meat marketers is at https://www.nichemeatprocessing.org/get-started/. On the legal side, requirements vary depending on whether you will only process meat as a custom operator or fully inspected operator, and if you also want to sell the meat through your own meat market. The Ohio Department of Agriculture’s Division of Meat Inspection has licensing information for different types of processors here: https://agri.ohio.gov/divisions/meat-inspection/home. If you also want to have a retail meat market, you’ll need a retail food establishment (RFE) license from your local health department. To help you with that process, it’s likely that your health department will have a food facility plan review resource like this one from the Putnam County Health Department.
Is Ohio’s noxious weeds law enforceable against the tenant operator of my farm, or just against me as the landowner?
Ohio’s noxious weed law states that the township trustees, upon receiving written information that noxious weeds are on land in their township, must notify the “owner, lessee, agent, or tenant having charge of the land.” This language means that the trustees are to notify a tenant operator if the operator is the one who is in charge of the land where the noxious weeds exist. The law then requires the notified party –which should be the tenant operator—to cut or destroy the noxious weeds within five days or show why there is no need to do so. The concern with a rental situation like yours is that if the tenant does not destroy the weeds in five days, the law requires the township to hire someone to do so and assess the costs of removal as a lien on the land. This puts you as the landowner at risk of financial responsibility for the lien and would require you to seek recourse against the tenant operator if you want to recover those costs. Another option is to take care of removing the noxious weeds yourself, but that could possibly expose you to a claim of crop damages from the tenant operator. A written farm lease can address this situation by clearing shifting the responsibility for noxious weeds in the crop to the tenant operator and stating how to deal with crop damages if the landowner must step in and destroy the noxious weeds.
Can we promote local craft beers at our farmers market?
Ohio established a new “F-11” permit in H.B. 674 last year. The F-11 is a temporary permit that allows a qualifying non-profit organization to organize and conduct an event that introduces, showcases, or promotes Ohio craft beers that are sold at the event. There are restrictions on how long the event can last, how much beer can be sold, who can participate in the event, and requirements that food must also be sold at the event. The permit is $60 per day for up to 3 days. Learn more about the permit on the Department of Commerce website at https://com.ohio.gov/divisions-and-programs/liquor-control/new-permit-info/guides-and-resources/permit-class-types.
Can a goat herdsman legally provide goat milk through a herd share agreement program?
Herd share agreements raise the raw milk controversy and whether it’s legal or safe to sell or consume raw milk. Ohio statutory law does clearly prohibit the sales of raw milk to an “ultimate consumer” in ORC 971.04, on the basis that raw milk poses a food safety risk to consumers. But the law does not prohibit animal owners from consuming raw milk from their own animals. A herd share agreement sells ownership in an animal, rather than selling the raw milk from the animal. Under the agreement, a person who pays the producer for a share of ownership in the animal may take their share of milk from the animal. The Ohio Department of Agriculture challenged the use of herd share agreements as illegal in the 2006 case of Schitmeyer v. ODA, but the court did not uphold the ODA’s attempt to revoke the license of the dairy that was using herd share agreements. As a result, it appears that the herd share agreement approach for raw milk sales is currently legally acceptable. But many still claim that raw milk consumption is risky because the lack of pasteurization can allow harmful bacteria to exist in the milk.
Can the township prohibit me from having a farm animal petting zoo on my hay farm?
It depends whether you qualify for the “agritourism exemption” granted in Ohio law. The agritourism exemption states that a county or township can’t use its zoning authority to prohibit “agritourism,” although it may have same zoning regulations that affect agritourism buildings, parking lots, and access to and from the property. “Agritourism” is an agriculturally related entertainment, recreational, cultural, educational or historical activity that takes place on a working farm where a certain amount of commercial agricultural production is also taking place. If you have more than ten acres in commercial production, like growing and selling your alfalfa, or you have less than ten acres but averaged more than $2,500 in gross sales from your alfalfa, you qualify under the agritourism exemption and the township zoning authorities cannot prohibit you from having your petting zoo. However, any zoning regulations the township has for ingress and egress on your property, buildings used primarily for your petting zoo, or necessary parking areas would apply to your petting zoo activity. If you don't qualify as "agritourism," the township zoning regulations could apply to the petting zoo activity, and you must determine whether a petting zoo is a permitted use according to your zoning district, which could depend upon whether or not you want to operate the petting zoo as a commercial business.
Did you know that the loudest land animal is the howler monkey? The howler monkey can produce sounds that reach 140 decibels. For reference, that is about as loud as a jet engine at take-off, which can rupture your eardrums.
Like the howler monkey, we are here to make some noise about recent agricultural and resource law updates from across the country. This edition of the Ag Law Harvest brings you court cases dealing with zoning ordinances, food labeling issues, and even the criminal prosecution of a dairy farm. We then look at a couple states proposing, or disposing, of legislation related to agriculture.
A zoning ordinance has Michigan landowners hogtied. The Michigan Supreme Court recently ruled that Michigan’s 6-year statute of limitations does not prevent a township from suing a landowner for alleged ongoing zoning violations, even if the start of landowner’s alleged wrongdoing occurred outside the statute of limitations period.
Harvey and Ruth Ann Haney (“Defendants”) own property in a Michigan township that is zoned for commercial use. Defendants began raising hogs on their property in 2006. Defendants started with one hog and allegedly grew their herd to about 20 hogs in 2016. In 2016, Fraser Township (“Plaintiff”) filed suit against Defendants seeking a permanent injunction to enforce its zoning ordinance and to prevent Defendants from raising hogs and other animals that would violate the zoning ordinance on their commercially zoned property. Defendants filed a motion to dismiss and argued that Plaintiff’s claims were barred because of Michigan’s 6-year statute of limitations. A statute of limitations is a law that prevents certain lawsuits from being filed against individuals after a certain amount of time has passed. In Ohio, for example, if someone were to be injured in a car accident, they would only have 2 years to bring a personal injury claim against the person who caused the accident. That’s because Ohio has passed a law that mandates most personal injury claims to be brought within 2 years of the date of injury.
In the Michigan case, Defendants argued that because their first alleged wrongdoing occurred in 2006, Plaintiff could not file their lawsuit against the Defendants in 2016. A trial court disagreed with Defendants and denied their motion to dismiss. Defendants took the motion up to the Michigan Court of Appeals, and the Court of Appeals found that Plaintiff’s claim was barred because of the 6-year statute of limitations. Plaintiff appealed to the Michigan Supreme Court, which overturned the Court of Appeals’ decision and held that Plaintiff’s claim was not barred. The Michigan Supreme Court reasoned that the presence of the hogs constitutes the alleged unlawful conduct of the Defendants, and that unlawful conduct occurred in 2006 and has occurred almost every day thereafter. The court concluded that because Defendants unlawful conduct was ongoing after 2006, Plaintiff’s claims were not barred by the statute of limitations. The case now goes back to the trial court to be tried on the merits of Plaintiff’s claims against Defendants.
Where there’s smoke, there’s fire. Family Dollar Stores, Inc. (“Family Dollar”) has found itself in a bit of nutty situation. Plaintiff, Heather Rudy, has filed a class action lawsuit against Family Dollar, alleging that Family Dollar has misled her and other consumers by marketing its Eatz brand Smoked Almonds as “smoked.” Plaintiff asserts that Family Dollar is being deceptive because its Smoked Almonds are not smoked over an open fire, but instead flavored with a natural smoke flavoring. Plaintiff’s claims against Family Dollar include violating the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”); breaches of express warranty and implied warranty of merchantability; violation of the Magnuson-Moss Warranty Act; negligent misrepresentation; fraud; and unjust enrichment.
Family Dollar filed an early motion to dismiss, arguing that Plaintiff has not stated a claim for which relief can be granted. A federal district court in Illinois dismissed some of Plaintiff’s claims but ruled that some claims against Family Dollar should be allowed to continue. Plaintiff’s claims for breaches of warranty, violation of the Magnuson-Moss Warranty Act, negligent misrepresentation, and fraud were all dismissed by the court. The court did decide that Plaintiff’s claims under ICFA unjust enrichment should stay. The court reasoned that Plaintiff’s interpretation that Family Dollar’s almonds would be smoked over an open fire are not unreasonable. Moreover, the court recognized that nothing on the front label of Family Dollar’s Smoked Almonds would suggest, to consumers, that the term “smoked” refers to a flavoring rather than the process by which the almonds are produced. The court even pointed out that competitors’ products contain the word “flavored” on the front of similar “smoked” products. Therefore, the court concluded that Plaintiff’s interpretation of Family Dollar’s Smoked Almonds was not irrational and her claims for violating the ICFA should continue into the discovery phase of litigation, and possibly to trial.
Undercover investigation leads to criminal prosecution of Pennsylvania dairy farm. A Pennsylvania Court of Appeals (“Court of Appeals”) recently decided on Animal Outlook’s (“AO”) appeal from a Pennsylvania trial court’s order dismissing AO’s petition to review the decision of the Franklin County District Attorney’s Office (“DA”) to not prosecute a Pennsylvania dairy farm (the “Dairy Farm”) for animal cruelty and neglect. An undercover agent for AO held employment at the Dairy Farm and captured video of the condition and treatment of animals on the farm, which AO claims constitutes criminal activity under Pennsylvania’s animal cruelty laws.
AO compiled a report containing evidence and expert reports documenting the Dairy Farm’s alleged animal cruelty and neglect. AO submitted its report to the Pennsylvania State Police (“PSP”) in 2019. The PSP conducted its own investigation which lasted for over a year, and in March 2020, issued a press release indicating that the DA would not prosecute the Dairy Farm.
In response, AO drafted private criminal complaints against the Dairy Farm and submitted those to the local Magisterial District Judge. The local Magisterial Judge disapproved all of AO’s complaints and concluded that the complaints “lacked merit.” AO then filed a petition in a Pennsylvania trial court to review the Magisterial Judge’s decision. The trial court dismissed AO’s petition and concluded that the DA correctly determined “that there was not enough evidence, based upon the law, to initiate prosecution against any of the Defendants alleged in the private criminal complaints.” AO appealed the trial court’s decision to the Court of Appeals which ended up reversing the trial court’s decision.
The Court of Appeals concluded that the trial court failed to view the presented evidence through a lens that is favorable to moving forward with prosecution and the trial court failed to consider all reasonable inferences that could be made on the evidence. The Court of Appeals observed that the trial court made credibility determinations of the evidence by favoring the evidence gathered by PSP over the evidence presented by AO. The Court of Appeals noted that a trial court’s duty is to determine “whether there was evidence proffered to satisfy each element of an offense, not to make credibility determinations and conduct fact-finding.” Additionally, the Court of Appeals found that the trial court did not do a complete review of all the evidence and favored the evidenced obtained by PSP over the evidence presented by AO. The Court of Appeals determined that had the trial court reviewed all the evidence, it would have found that AO provided sufficient evidence to establish prima facie cases of neglect and animal cruelty, which would have provided the legal basis for the DA’s office to prosecute the claims.
Lastly, the DA argued that no legal basis for prosecution exists because the Dairy Farm is protected by the normal agricultural operations exemption to Pennsylvania’s animal cruelty laws. However, the Court of Appeals found that the conduct of the Dairy Farm, as alleged, would fall outside the normal agricultural operations exemption because AO’s report demonstrates that the Dairy Farm’s practices were not the dairy industry norm.
Ultimately the Court of Appeals found that AO’s private criminal complaints did have merit and that the DA had enough evidence and a legal basis to prosecute AO's claims. The Court of Appeals remanded the trial court’s decision and ordered that the DA to go ahead and prosecute the Dairy Farm on its alleged animal cruelty violations.
Wyoming fails to pass legislation limiting what can be considered agricultural land. The Wyoming House of Representatives struck down a recent piece of legislation looking to increase the threshold requirement to allow landowners the ability to classify their land as agricultural, have their land appraised at an agricultural value, and receive the lower tax rate for agricultural land. Current Wyoming law classifies land as agricultural if: (1) the land is currently being used for an agricultural purpose; (2) the land is not part of a patted subdivision; and (3) the owner of the land derived annual gross revenue of $500 or more from the marketing of agricultural products, or if the land is leased, the lessee derived annual gross revenues of $1,000 or more from the marketing of agricultural products.
Wyoming House Bill 23 sought to increase the threshold amount of gross revenues derived from the marketing of agricultural products to $5,000 for all producers. The Wyoming Farm Bureau Federation and Wyoming Stock Growers associations supported the bill. Proponents of the bill argued that the intent of agricultural land appraisals is to support commercial agriculture, not wealthy landowners taking advantage of Wyoming’s tax laws. Opponents of the bill argued that House Bill 23 hurt small agricultural landowners and that the benefits of the bill did not outweigh the harms. House Bill 23 died with a vote of 34-25, failing to reach the 2/3 approval for bills to advance.
Oregon introduces legislation relating to overtime for agricultural workers. Oregon House Bill 4002 proposes to require agricultural employers to pay all agricultural employees an overtime wage for time worked over 40-hours in a workweek. House Bill 4002 does propose a gradual phase-in of the overtime pay requirements for agricultural employees. For the years 2023 and 2024, agricultural employees would be entitled to overtime pay for any time worked over 55 hours in a workweek. For 2025 and 2026, the overtime pay requirement kicks in after 48 hours. Then in 2027, and beyond, agricultural employers would be required to pay an overtime pay rate to employees that work more than 40 hours in a workweek.
Did you know that ants are the only creatures besides humans that will farm other creatures? It’s true. Just like we raise cows, sheep, pigs, and chickens in order to obtain a food source, ants will do the same with other insects. This is particularly true with aphids. Ants will protect aphids from natural predators and shelter them during heavy rain showers in order to gain a constant supply of honeydew.
Like an ant, we have done some heavy lifting to bring you the latest agricultural and resource law updates. We start with some federal cases that deal with the definition of navigable waters under the Clean Water Act, mislabeling honey products, and indigenous hunting rights. We then finish with some state law developments from across the country that include Georgia’s right to farm law and California’s Proposition 12.
Supreme Court to review navigable waters definition under the Clean Water Act. The Supreme Court announced that it would hear the case of an Idaho couple who have been battling the federal government over plans to build their home. Chantell and Mike Sackett (“Plaintiffs”) began construction on their new home near Priest Lake, Idaho but were halted by the Environmental Protection Agency (“EPA”). The EPA issued an administrative compliance order alleging that Plaintiffs’ construction violates the Clean Water Act. The EPA claims that the lot, on which the Plaintiffs are constructing their new home, contains wetlands that qualify as federally regulated “navigable waters.” Plaintiffs are asking the Court to revisit its 2006 opinion in Rapanos v. United States and help clarify how to determine when a wetland should be classified as “navigable waters.” In Rapanos, the Court found that the Clean Water Act regulates only certain wetlands, those that are determined to be “navigable waters.” However, two different tests were laid out in the Court’s opinions. The Court issued a plurality opinion which stated that the government can only regulate wetlands that have a continuous surface water connection to other regulated waters. A concurring opinion, authored by Justice Kennedy, put forth a more relaxed test that allows for regulation of wetlands that bear a “significant nexus” with traditional navigable waters. Justice Kennedy’s test did not take into consideration whether there was any surface water connection between the wetland and the traditional navigable waters. In the lower appellate court, the Ninth Circuit Court of Appeals used Justice Kennedy’s “significant nexus” test to uphold the EPA’s authority to halt Plaintiffs’ construction. Now, Plaintiffs hope the Supreme Court will adopt a clear rule that brings “fairness, consistency, and a respect for private property rights to the Clean Water Act’s administration.”
SueBee sued for “bee”ing deceptive. Sioux Honey Association Cooperative (“Defendant”) finds itself in a sticky situation after Jason Scholder (“Plaintiff”) brought a class action lawsuit against the honey maker for violating New York’s consumer protection laws by misrepresenting the company’s honey products marketed under the SueBee brand. Plaintiff claims that the words “Pure” or “100% Pure” on the Defendant’s honey products are misleading and deceptive because the honey contains glyphosate. Defendant filed a motion to dismiss the class action lawsuit and a federal district court in New York granted Defendant’s motion in part and denied it in part. Defendant asked the court to find that its labels could not be misleading as a matter of law because any trace amounts of glyphosate in the honey is a result of the natural behavior of bees interacting with agriculture and not a result of Defendant’s production process. However, the court declined to dismiss Plaintiff’s mislabeling claims. The court concluded that a reasonable consumer might not actually understand that the terms “Pure” or “100% Pure” means that trace amounts of glyphosate could end up in honey from the bees’ foraging process. The court also declined the Defendant’s request to dismiss Plaintiff’s unjust enrichment claim because of the alleged misrepresentations of the honey. However, the court did dismiss Plaintiff’s breach of express warranty claim and request for injunctive relief. The court dismissed Plaintiff’s breach of express warranty claim because Plaintiff failed to notify Defendant of its alleged breach of warranty, as required by New York law. Plaintiff’s request for injunctive relief was also dismissed because the court could not find any imminent threat of continued injury to Plaintiff since he has now learned that the honey contains trace amounts of glyphosate. The court ordered the parties to proceed with discovery on Plaintiff’s remaining claims, keeping the case abuzz.
Indigenous Hunting Rights. Recently, two members of the Northwestern Band of the Shoshone Nation (“Northwestern Band”) were cited for hunting on Idaho lands without tags issued by the state. The Northwestern Band filed suit against the state of Idaho declaring that its members possessed hunting rights pursuant to the Fort Bridger Treaty of 1868 (the “1868 Treaty”). The 1868 Treaty provided that the Shoshone Nation agreed to permanently settle on either Fort Hall Reservation, located in Southeastern Idaho, or Wind River Reservation, located in Western Wyoming. By agreeing to settle on one of the two reservations, the Shoshone Nation was granted hunting rights on unoccupied lands of the United states. However, the Northwestern Band ended up settling in Northern Utah and not on one of the two named reservations. After considering the 1868 Treaty, the Federal District Court of Idaho dismissed Northwestern Band’s lawsuit. The court held that the hunting rights contained in the 1868 Treaty were tied to the promise to live on one of the reservations, and that a tribe cannot receive those hunting rights without living on one of the appropriate reservations. Thus, the court found that because the Northwestern Band settled in Northern Utah and not on one of the reservations, the hunting rights of the 1868 Treaty did not extend to the Northwestern Band of the Shoshone Nation.
Tensions rise over Georgia’s Freedom to Farm Act. A few days ago, Georgia lawmakers introduced legislation that seeks to further protect Georgia farmers from nusiance lawsuits. House Bill 1150 (“HB 1150”) proposes to change current Georgia law to protect farmers and other agricultural operations from being sued for emitting smells, noises, and other activities that may be found offensive by neighboring landowners. Georgia’s current law, which became effective in 1980, does provide some protection for Georgia farmers, but only from neighboring landowners that have moved near the farm or agricultural operation after the current law went into effect. All neighboring landowners that lived near the farming operation prior to the current law going into effect have retained their right to sue. HB 1150, on the other hand, will prevent these nuisance lawsuits by all neighboring landowners, as long as the farm or agricultural operation have been operating for a year or more. Passing a right to farm law has proven to be difficult in Georgia. In 2020, House Bill 545, also known as the “Right to Farm bill” failed to pass before the final day of the 2019-2020 legislative session. Private landowners, farmers, and their supporters, are divided on the issue and seek to protect their respective property rights. It doesn't look like HB 1150 will have the easiest of times in the Georgia legislature.
Confining California's Proposition 12. Meat processors and businesses that sell whole pork meat in California (collectively the “Petitioners”) have delayed the enforcement of California’s Proposition 12 (“Prop 12”), for now. Prop 12 is California’s animal confinement law that has sent shockwaves across the nation as it pertains to raising and selling pork, eggs, and veal. Last week, the Superior Court for Sacramento County granted Petitioners’ writ of mandate to delay the enforcement of Prop 12 on sales of whole pork meat. Petitioners argue that Prop 12 cannot be enforced until California has implemented its final regulations on Prop 12. To date, California has yet to implement those final regulations. California, on the other hand, suggests that final regulations are not a precondition to enforcement of Prop 12 and the civil and criminal penalties that can be brought against any farmer or business that violates Prop 12. The court disagreed. The court found that the language of Prop 12, as voted on by California residents, explicitly states that California voters wanted regulations in place before the square-footage requirements of Prop 12 took effect. Therefore, the court granted Petitioners’ writ of mandate to prevent the enforcement of Prop 12 until final regulations have been implemented. The court’s writ will remain in effect until 180 days after final regulations go into effect. This will allow producers and businesses to prepare themselves to comply with the final regulations. Opponents of Prop 12 believe this is another reason why the Supreme Court of the United States should review California’s Proposition 12 for its constitutionality.
We’ve quickly reached the end of January, and several of the legal issues I’ve talked about in OSU’s “Agricultural Outlook” meetings have surfaced this month. If the current pace keeps up, 2022 promises to be a busy year for agricultural law. Here’s a review of three legal issues I predict we’ll see that have already begun to emerge in 2022.
Water, water. From defining WOTUS to addressing Lake Erie water quality, water law will continue to be everywhere this year. The U.S. Supreme Court just announced on January 24 that it will hear the well-known case of Sackett v EPA to review whether the Ninth Circuit Court of Appeals used the proper test to determine whether wetlands are “waters of the United States” (WOTUS). The case is one example of the ongoing push-pull in the WOTUS definition, which establishes waters that are subject to the federal Clean Water Act. The Biden administration proposed a new WOTUS rule last December that would replace the Trump-era rule, and comments remain open on that definition until February 7. Ohio has wrangled with its own water issues, particularly with agricultural nutrient impacts on water quality. We’ll see this year if the state will continue to rely on H2Ohio and similar incentive-based programs and whether the Ohio EPA will face additional litigation over its development of a Total Maximum Daily Load for Lake Erie.
Pesticide challenges. The EPA announced a new policy on January 11 to more closely evaluate potential effects of pesticide active ingredients on endangered species and critical habitats. That was the same day the agency re-registered Enlist One and Enlist Duo pesticides, but with new label restrictions and prohibited use in hundreds of counties across the U.S., including a dozen Ohio counties. An EPA report documenting dicamba damage in 2021 could form the basis for yet another lawsuit this year demanding that EPA vacate dicamba’s registration. Meanwhile, we await a decision by the U.S. Supreme Court on whether it will review Hardeman v. Monsanto, one of dozens of cases awarding damages against Monsanto (now Bayer) for personal injury harms caused by glyphosate.
Opposition to livestock production practices. Ohio pork producers watching California’s Proposition 12 will be happy with a recent California court decision prohibiting enforcement of one part of the law that went into effect on January 1. The provision requires any pork and eggs sold in the state to be from breeding pigs and laying hens that are not raised in a “cruel manner,” meaning that the animals have a certain amount of usable pen space. The California court agreed with grocers and other retailers that the law could not be enforced on sales of pork meat because the state hasn’t yet finalized its regulations. The law could be subject to further scrutiny from a higher court. Several agricultural organizations have unsuccessfully challenged the law as a violation of the Constitution’s Commerce Clause, but one of those cases currently awaits a decision from the U.S. Supreme Court on whether it will review the case. Other livestock production issues we’ll see this year include continued battles over Right to Farm laws that limit nuisance lawsuits against farms, and challenges to “ag gag” laws that aim to prevent or punish undercover investigations on farms.
There’s more to come. Watch for more of our predictions on what 2022 may bring to the agricultural law arena in upcoming posts. Or drop into one of our Agricultural Outlook and Policy meetings to hear my Ag Law Outlook. As quickly as the year is moving, we’ll soon know how many of those predictions are correct.
Did you know that Hippopotamuses cannot swim? It’s true. When hippos submerge themselves underwater, they don’t swim back up to the surface, instead they walk along the bottom until they reach shallow water. That is unless the hippo decides to chase you out of its territory, then it will gladly run, jump, and charge right at you.
Like the hippo, this week’s Ag Law Harvest is a little territorial. We bring you recent Ohio court decisions, a federal order allowing Colombian hippos to take the testimony of Ohio residents, and the Ohio Department of Agriculture’s directives as it ramps up its fight against Ohio’s newest pest.
Well, well, well. A recent Ohio case demonstrated the complex issues a landowner can run into when dealing with an oil and gas lease. The Plaintiff in this case owns land in Hebron, Ohio and brought suit against his neighbors and the Ohio Department of Taxation claiming that he was not the owner of a gas well located on his property or that he was responsible for paying taxes and maintaining the well under Ohio law. The Hebron, Ohio property at issue in this case passed through many hands before becoming the property of the Plaintiff. One of the prior owners was a man named William Taggart (“Taggart”). As mentioned earlier, the property also has a gas well which was subject to an oil and gas lease. The oil and gas lease passed to multiple parties and ended up with Taggart while he owned the Hebron property. After having both the property and the oil and gas lease, Taggart deeded the property to Plaintiff’s parents which eventually passed onto Plaintiff. Plaintiff argued that he is not the rightful owner of the well because the last person that was assigned the oil and gas lease was Taggart, making him the owner of the well. The Fifth District Court of Appeals disagreed. The court found that Plaintiff’s parents registered as owners of the well under Ohio Revised Code § 1509.31 which requires a person to register a well before they can operate it. Further, the court determined that when the oil and gas lease was assigned to Taggart the rights of the landowner and the lessee merged, essentially making Taggart the only individual with any property interest in the well. Relying on § 1509.31, the court found that when the entire interest of an oil and gas lease is assigned to the landowner, the landowner then becomes responsible for compliance with Chapter 1509 of the Ohio Revised Code. Therefore, when the property passed to Plaintiff’s parents, they became the owners of the well and were responsible for making sure the well was in compliance with Chapter 1509. Because this responsibility passed onto Plaintiff, the court found Plaintiff to be liable for the taxes and ensuring that the well is compliant with Ohio law. The court also denied Plaintiff’s attempt to argue that Taggart was the responsible party because the oil and gas lease was still in effect due to the fact that Plaintiff’s neighbors use the gas well for domestic purposes. The court found that the oil and gas lease had expired by its own terms, pursuant to the habendum clause contained within the lease. A habendum clause essentially defines the property interests and rights that a lessee has. The specific habendum clause in this case stated that the lease would terminate either within three years or when the well no longer produced oil and gas for commercial purposes. The lease at issue was well beyond the three-year term and, as the court found, the lease expired under Taggart because the well no longer produced oil or gas for commercial purposes. The use of the well for domestic purposes did not matter. The Fifth District ultimately held that because Plaintiff could not produce any evidence to show that another party had an interest in the well, Plaintiff is ultimately responsible for the well.
Amending a contract doesn’t always erase the past. Two companies (“Plaintiffs”) recently filed suit against a former managing member (“Defendant”) for allegedly using business funds and assets for personal use during his time as managing member. The primary issue in this case was whether or not an arbitration clause in the original operating agreement is enforceable after the operating agreement was amended to remove the arbitration clause. Defendant’s alleged misconduct occurred while the original operating agreement was in effect. The original operating agreement would require the parties to settle any disputes through the arbitration process and not through the court system. However, shortly before filing suit, the original operating agreement was amended to remove the arbitration provision. Plaintiffs filed suit against the Defendant arguing that the arbitration provision no longer applied because the operating agreement had been amended. Defendant, however, argued that his alleged misconduct occurred while the original operating agreement was in effect and that the amended operating agreement could not apply retroactively forcing him to settle the dispute in a court rather than through arbitration. The trial court, however, sided with the Plaintiffs and allowed the case to move forward. Defendant appealed the trial court’s decision and the Ninth District Court of Appeals agreed with him. The District Court found that the amended operating agreement did not expressly state any intention for the terms and conditions of the amended operating agreement to apply retroactively. Further, the court held that Ohio law favors enforcing arbitration provisions within contracts and any doubts as to whether an arbitration clause applies should be resolved in favor of enforcing the arbitration clause. The Ninth District reversed the trial court and found that the dispute of Defendant’s alleged misconduct should be resolved through arbitration.
Animal advocates claim victory in pursuit of recognizing animals as legal persons. A recent order issued by a federal district court in Ohio allows an attorney for Colombian Hippopotamuses to take the testimony of two expert witnesses residing in Ohio. According to U.S. law, a witness may be compelled to give testimony in a foreign lawsuit if an “interested person” applies to a U.S. court asking that the testimony be taken. The Animal Legal Defense Fund (“ALDF”) applied to the federal court on behalf of the plaintiffs, roughly 100 hippopotamuses, from a lawsuit currently pending in Colombia. According to the ALDF, the lawsuit seeks to prevent the Colombian government from killing the hippos. The interesting thing about this case is that hippos are not native to Colombia and were illegally imported into the country by drug kingpin Pablo Escobar. After Escobar’s death the hippos escaped his property and relocated to Colombia’s Magdalena River and have reproduced at a rate that some say is unsustainable. In Colombia, animals are able to sue to protect their rights and because the plaintiffs in the Colombian lawsuit are the hippos themselves, the ALDF argued that the hippos qualify as an “interested person” under U.S. law. After applying for the authorization, the federal court signed off on ALDF’s application and issued an order authorizing the attorney for the hippos to issue subpoenas for the testimony of the Ohio experts. After the federal court’s order, the ALDF issued a press release titled “Animals Recognized as Legal Persons for the First Time in U.S. Court.” The ALDF claims the federal court ruling is a “critical milestone in the broader animal status fight to recognize that animals have enforceable rights.” However, critics of ALDF’s assertions point out that ALDF’s claims are a bit embellished. According to critics, the order is a result of an ex parte application to the court, meaning only one side petitioned the court for the subpoenas and the other side was not present to argue against the subpoenas. Further, critics claim that all the federal court did was sign an order allowing the attorney for the hippos to take expert testimony, the court did not hold that hippos are “legal persons” under the law.
Ohio Department of Agriculture announces quarantine to combat the spread of the Spotted Lanternfly. According to the Ohio Department of Agriculture (“ODA”) the Spotted Lanternfly (“SLF”) has taken hold in Jefferson and Cuyahoga counties. The ODA announced that the SLF is now designated as a destructive plant pest under Ohio law and that the ODA was issuing quarantine procedures and restricting the movement of certain items from infested counties into non-infested areas of Ohio. The ODA warns that the SLF can travel across county lines in items like tree branches, nursery stock, firewood, logs, and other outdoor items. The ODA has created a checklist of things to look for before traveling within or out of infested counties. Nurseries, arborists, loggers, and other businesses within those infested counties should contact the ODA to see what their obligations and rights are under the ODA's new quarantine instructions. Under Ohio law, those individuals or businesses that fail to follow the ODA’s quarantine instructions could be found guilty of a misdemeanor of the third degree on their first offense and a misdemeanor of the second degree for each subsequent offense. For more information visit the ODA’s website about the SLF.