Business and Financial

By: Peggy Kirk Hall, Thursday, December 07th, 2017

Decisions announced today by the Ohio Supreme Court will allow landowners to challenge Current Agricultural Use Valuation (CAUV) land values established by Ohio’s tax commissioner by appealing the values to the Board of Tax Appeals.

Twin rulings in cases filed by a group of owners of woodland enrolled in CAUV, Adams v. Testa, clarify that when the tax commissioner develops tables that propose CAUV values for different types of farmland, holds a public hearing on the values and adopts the final values by journal entry, the tax commissioner’s actions constitute a “final determination” that a landowner may immediately appeal to the Board of Tax Appeals. The Board of Tax Appeals had argued that the adoption of values is not a final determination and therefore is not one that a landowner may appeal to the Board.

The tax commissioner forwards the CAUV tables to the county auditors, who must use the values for a three year period. An inability to appeal the values when established by the tax commissioner would mean that a landowner must wait until individual CAUV tax values are calculated by the county auditor, who relies upon the tax commissioner’s values to calculate the county values. As a result of today’s decision, landowners may appeal the values as soon as the tax commissioner releases them.

The landowners also claimed that the process and rules for establishing the CAUV values are unreasonable and not legal. However, the Court rejected those claims.

For an excellent summary of the Adams v. Testa cases by Court News Ohio, follow this link.

By: Peggy Kirk Hall, Friday, December 01st, 2017

The first hearing for a bill that would limit legal liability for Ohio beekeepers took place this week before the House Economic Development, Commerce and Labor Committee. The bill’s sponsor, Rep. Dick Stein (R-Norwalk), offered several reasons for the proposal, including that beekeeping has recently grown in popularity along with increased demand for honey products, bees play an important role in pollinating plants and contribute to the agricultural economy, and beekeepers have incurred expenses defending themselves against lawsuits that are typically unsuccessful.

House Bill 392 aims to provide immunity from liability for any personal injury or property damage that occurs in connection with keeping and maintaining bees, bee equipment, queen breeding equipment, apiaries, and appliances, as long as the beekeeper does all of the following:

  1. Registers the apiary with the Ohio Department of Agriculture, as is currently required by Ohio law;
  2. Operates according to Ohio Revised Code Chapter 909, which contains provisions for apiaries;
  3. Implements and complies with the best management practices for beekeeping as established by the Ohio State Beekeepers Association; and
  4. Complies with local zoning ordinance provisions for apiaries. Note that zoning ordinances for apiaries would likely exist only in incorporated areas, as Ohio’s “agricultural exemption from zoning” prohibits townships and counties from using zoning to regulate agricultural activities like beekeeping in most situations.

A beekeeper would not have immunity from liability resulting from intentional tortious conduct or gross negligence, however.

The second hearing for the bill will take place on December 5, 2017. Information about the proposal is available here.

By: Peggy Kirk Hall, Monday, August 14th, 2017

Written by Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program

The Agricultural and Food Law Consortium is holding a webinar regarding Using LLCs in Agriculture: Beyond Liability Protection this Wednesday, August 16th at 12:00 (EST).

The Limited Liability Company (LLC) is a relatively new type of business entity. The first LLC statute passed in Wyoming in 1977. Since then, all fifty states passed legislation permitting LLCs as an operating entity. Many Ohio farmers use the LLC as their preferred operating entity.

In Ohio, an LLC is a legal entity created by Ohio statute. An LLC is considered to be separate and distinct from its owners. An LLC may have a single owner in Ohio, or it may have numerous owners. LLCs combine the best attributes of a corporation and a partnership. Individuals, corporations, other LLCs, trusts, and estates may be members in a single LLC. There is no limit on maximum members.

The Importance of an Operating Agreement

When an agricultural operation chooses to operate as an LLC, that operation must consider drafting an operating agreement. An operating agreement specifies the financial responsibilities of the parties, how profits and losses are shared among members within the LLC, limitations on transfers of membership, and other basic principles of operation.

If an LLC does not choose to draft an operating agreement, Ohio’s default rules apply. Ohio law prescribes default rules of operation for LLCs in R.C. Chapter 1705. However, LLC members often wish to modify state rules to tailor an LLC to their business. Ideally, agricultural operators should draft an operating agreement with the assistance of an attorney.

Single Member LLCs

Every state in the Midwest permits single-member Limited Liability Companies (SMLLCs). A single member LLC is an LLC which has one member or manager; that means that there are no other owners or managers of that LLC. In 2016, Ohio enacted R.C. 1705.031 which states that Ohio LLC laws apply to all LLCs, including those with only one member. Therefore, small agribusinesses that have only one member are not prevented from forming an LLC. 

Will a Personal Guaranty on a Loan Affect Limited Liability Protection?

Ohio farmers operating as an LLC enjoy the benefits of limited liability protection. Usually, that means that the debts and obligations of a farm LLC operation are solely those of the LLC. That means that a farmer is not personally liable for any debts or obligations incurred by the LLC.

However, lenders, implement dealers, financial institutions, and others are finding ways around an LLC’s personal liability protection. Those parties are increasingly requiring that the members and managers of LLCs provide personal guarantees. That is, a member or manager of an LLC agrees to be personally liable for a debt or obligation, if an LLC is not able to pay.

A full discussion of personal guarantees and LLCs in an earlier blog post is here

LLCs are not Invincible

Limited Liability Companies are extremely popular among Ohio farmers. However, LLCs merely limit liability. LLCs don’t create a perfect liability shield, they are subject to a concept known as “veil piercing” where the owners of a company are held personally liable for the actions of the company.

Generally, a person cannot use a corporation to commit fraud on others or to use a corporation as an alter ego for a member’s own personal gain. Plainly speaking, Ohio courts may hold an owner of an LLC liable in certain cases of fraud committed by the LLC or where an LLC is undercapitalized and is not treated as a separate entity from a member (i.e. the LLC is used as an “alter ego”). While this is not a common scenario among farm business LLCs, LLC members should be aware that a business’s status as an LLC will not shield it from liability in all instances.

Carrying Liability Insurance

Many LLC owners consider the protections under Ohio’s LLC laws to be sufficient. Some LLC members are satisfied that their personal assets are sufficiently protected and separated from LLC assets and LLC liabilities. However, every business should have liability insurance. Liability insurance is a relatively inexpensive means of managing liability exposure for injuries and physical damage to a third party. While insurance doesn’t lower liability, it gives the business a way to pay for damages in the event of an incident.

The question of “how much liability insurance should a farm operation have?” is a difficult one. The amount of insurance that a farm should have must be determined on a case-by-case basis. Factors such as farm size, type of operation, location, and other factors impact the insurance needs of a farm operation.

More information on LLCs and other alternative business organizations through the National Agricultural Law Center is here.

 

By: Peggy Kirk Hall, Thursday, May 04th, 2017

Written by: Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program

The Grain Inspection, Packers and Stockyards Administration (GIPSA) is delaying the implementation of the Farmer Fair Practices rules. GIPSA is a USDA agency that facilitates the marketing of livestock, poultry, meat, cereals, oilseeds, and related agricultural products. One purpose of GIPSA is to promote fair and competitive trading practices for the benefit of consumers and agriculture.

On April 11, 2017, the USDA announced that GIPSA delayed the implementation of the Farmer Fair Practices rules until October 19, 2017. The delayed Farmer Fair Practices rules were originally set to be effective on December 20, 2016. According to the USDA, the delayed rules would protect chicken growers from retaliation by processors when growers explore opportunities with other processors, discuss quality concerns with processors, or when refusing to make expensive upgrades to facilities. GIPSA concludes that the Farmer Fair Practices rules alleviates these issues. However, several livestock groups argue that the delayed rules would have adverse economic effects on the livestock industry.

Opportunity for Public Comment

During the delay, the USDA is seeking public comment on the Farmer Fair Practices rules. The comment period offers the agricultural community an opportunity to suggest what action the USDA should take in regard to the Farmer Fair Practices rules. The USDA asked the public to suggest one of four actions that the USDA should take:

  1. Let the delayed rules become effective
  2. Suspend the delayed rules indefinitely
  3. Delay the effective date of the delayed rules further, or
  4. Withdraw the delayed rules

After receiving public comments, the USDA will consider the comments and make an informed decision regarding the delayed Farmer Fair Practices rules. According to Drovers, Secretary of Agriculture Sonny Perdue recently visited Kansas City, Missouri to speak with farmers, ranchers, and industry members. During the event, Secretary Perdue responded to a question about the GIPSA rule. “We’re going to look at it very closely,” said Perdue. The full Drovers article is here.

More information on the delayed GISPA rules is here. Leave a public comment on the delayed rules here by clicking “Comment Now.”

By: Peggy Kirk Hall, Wednesday, March 01st, 2017

Farmers are receiving a lot of attention from law firms these days, from video mailers to offers of free consultations, dinners, hats and more.  The purpose of these marketing efforts is to entice farmers away from participating in the current class action lawsuit against Syngenta.  Law firms want farmers to exclude themselves from the class action litigation and participate in individual lawsuits their firms would bring against Syngenta.  With a deadline of April 1 looming, farmers must decide whether to remain in or step away from the class action lawsuit.

The class action lawsuit, known as “In re Syngenta AG MIR162 Corn Litigation,” is pending before the U.S. District Court in Kansas.  It is one of two major lawsuits regarding corn rejected by China in 2013 because China had not yet approved Syngenta’s Duracade and Viptera brands of genetically-modified corn.  The lawsuit consolidated hundreds of similar federal court cases that all claimed that Syngenta should be liable for the drop in corn prices that followed China’s rejections because Syngenta stated that it had obtained all necessary regulatory approvals for Duracade and Viptera, but instead released the seed before receiving China’s approval.

Class Certification

Last September, the court certified the litigation as a class action lawsuit, which allows the case to commence on behalf of all class members.  Any farmer that fits within the class definitions is automatically included in the lawsuit and does not have to pursue individual litigation against Syngenta.  The court established a nationwide class of “producers,” defined as any person or entity listed as a producer on an FSA-578 form filed with the USDA who priced corn for sale after November 18, 2013 and who did not purchase Viptera or Duracade corn seed (farmers who used Syngenta’s seed have different legal claims).  The nationwide class is for producers bringing claims under federal law.  The court also certified eight state classes for producers bringing claims under state laws, including Ohio.  Syngenta appealed the class certification, but the Tenth District Court of Appeals denied the appeal.

Ohio farmers who fit the definition of “producers” are now automatically members of both the nationwide and Ohio classes.  This means that every Ohio producer can receive a share of any award or settlement that results from the litigation, with required documentation.  However, Ohio producers may choose to exclude themselves from or “opt out” of their classes and bring their own individual actions against Syngenta.  The district court required attorneys for the class action suit to notify all potential producers of the lawsuit and of a producer’s right to be excluded from the litigation.   A producer must send an exclusion request by April 1, 2017, following the process for exclusion stated in the court’s order, available here.

Pros and Cons of Staying in the Class

A major benefit of remaining in the class action lawsuit is convenience.  Class members in the lawsuit have no responsibility for the proceedings, which falls upon the attorneys who represent the entire class.  However, convenience comes at the cost of deferring decision making authority and losing a share of the award or settlement to court-ordered attorney fees, although class members may file objections to such decisions.  Exclusion from the class gives producers freedom to pursue their own actions, which will likely lead to a stronger role in decision making and the ability to negotiate attorney fees.  Exclusion also allows a farmer who may not agree with the litigation on principal to dissociate from the lawsuit.

What’s Next?

The court has scheduled “bellwether” cases in the lawsuit, which will go to trial in June.  Bellwether cases are chosen to be representative of the class.  Allowing these cases to go to trial gives an indication of how the litigation will play out—the strength of each side, how juries react and how the law applies to the situation.   Upon completion of the bellwether cases, both sides should be better able to decide whether to settle the lawsuit or continue with litigation.

The U.S. District Court’s website for the Syngenta class action lawsuit is http://www.ksd.uscourts.gov/syngenta-ag-mir162-corn-litigation/

By: Peggy Kirk Hall, Wednesday, January 11th, 2017

Written by:  Ellen Essman and Chris Hogan, Law Fellows, OSU Agricultural & Resource Law Program

Part Two

Below is the second of our two-part series regarding bills related to agriculture that failed to pass during Ohio’s 2015-2016 legislative session.

Animal Welfare

Requirements for Humane Society Agents and House Bill 45

House Bill 45 was introduced February 10, 2015 and would have amended existing law to impose additional requirements upon those people hoping to be appointed as humane society agents.  A number of changes and additions would have been implemented through the passage of HB 45.  The bulk of the proposed legislation concerned training for humane society agents and filing evidence of completing that training with the county recorder.  HB 45 would have required county recorders to record “[p]roof of successful completion of training by humane society agents,” as well as “notices of revocation of agents’ appointment” in the official records (emphasis added).  According to the bill, proof of completion of training would have had to been signed by the CEO of the organization that provided training, the chief officer of the county humane society, and either the mayor or probate judge in the county.

House Bill 45 was referred to the Local Government Committee on February 11, 2015.  No further action was taken, rendering the proposed legislation dead when the 131st General Assembly ended.  

To read HB 45, visit this page. The Ohio Legislative Service Commission’s analysis of HB 45 is available here.

Tethering Animals and House Bill 94

House Bill 94 was introduced March 2, 2015 and would have enacted language that would have made it illegal to negligently tether an animal outside in certain situations. The bill would have imposed time limits on tethering and a prohibition on tethering animals in certain weather conditions.  Furthermore, a prohibition on tethering would have been imposed if the tethers were unsafe, under a certain length, allowed the animal to touch fences or cross property lines, or were inappropriate for the animal’s size.  HB 94 also would have prohibited tethering if the surrounding area was unsanitary, or if the owner of the premises was not present.  Finally, the bill would have amended the current law to include punishment for violating the proposed tethering language.  The bill, however, was referred to the House Agriculture and Rural Development Committee and afterwards, no action was taken on it. 

To read HB 94, visit this page. The Ohio Legislative Service Commission’s analysis of HB 94 is available here.

Animal Abusers and House Bill 177

 House Bill 177 was introduced on April 28, 2015.  HB 177 would have required people who either were “convicted of or pleaded guilty to” a number of animal abuse violations to submit certain information, along with a fee, to the Attorney General within 30 days of “being convicted or pleading guilty.” HB 177 also tasked the Attorney General with creating and keeping a registry of animal abuse violators.

Law enforcement officers, humane society agents, and dog wardens would have been responsible for notifying the Attorney General of animal abuse violations. Animal shelters would have been prohibited from allowing a person on the registry from adopting a dog, cat, or any animal kept in a home. 

The bill was referred to the Agriculture and Rural Development Committee on May 5, 2015, where no further action was taken.

To read HB 177, visit this page.

Sale of Dogs and House Bill 573

House Bill 573 was introduced on May 17, 2016.  This bill focused on the sale of dogs both from pet stores and from other entities.   The bill would have added or changed a number of definitions in the Ohio Revised Code.  Most notably, the law would have made it illegal for a pet store to “negligently…offer for sale” or otherwise “transfer” a dog unless it came from an animal rescue, an animal shelter, a humane society, a dog retailer, or a qualified breeder, all of which were defined elsewhere in the bill. 

Additionally, according to HB 573, both dog retailers and pet stores would have been forbidden from selling or otherwise transferring a dog under a number of conditions.  Under the bill, they could not have sold dogs less than eight weeks old, dogs that had not been inspected by a veterinarian, and dogs without a microchip, among other conditions. However, none of these requirements would have been applicable to a dog sold or otherwise “transferred from the premises where the dog was bred and reared.” Finally, the bill included language stating that it would preempt local laws regulating the sale of dogs.  House Bill 573 was referred to the Finance Committee on May 23, 2016 and no further action was taken. 

To read HB 573, visit this page. The Ohio Legislative Service Commission’s analysis of HB 573 is available here.

Natural Resources

Invasive Species and House Bill 396

House Bill 396 was introduced on November 16, 2015.  This bill dealt with restricting and prohibiting certain species in Ohio.  HB 396 would have added a number of definitions to the Ohio Revised Code, including a lengthy list of “prohibited species.”  Species of birds, crayfish, fish, insects, and mollusks were included in the list.  Additionally, “restricted species” was defined as including the quagga mussel, the zebra mussel, and their eggs.  In addition, HB 396 would have given the Chief of the Division of Wildlife, with advice from Ohio Director of Agriculture, the power to designate other restricted and prohibited species subject to a number of considerations.  One of these considerations would have been whether or not the species could cause severe harm to agricultural resources. The bill would have made it illegal to possess, introduce, sell, or offer to sell restricted and prohibited species.

The bill was referred to the Agricultural and Rural Development Committee on January 20, 2016 and ultimately did not leave the Committee.

To read HB 396, visit this page. The Ohio Legislative Service Commission’s analysis of HB 396 is available here.

Deer Rehabilitation and House Bill 267

House Bill 267 was introduced on June 22, 2015 and would have changed the Ohio Revised Code to allow licenses to run deer sanctuaries, permits to rehabilitate deer, and training for law enforcement.  During the training, law enforcement officers were supposed to learn how to determine whether they needed to humanely euthanize injured deer or transfer them to someone permitted to rehabilitate the deer.

The bill was referred to the House Committee on Energy and Natural Resources on October 1, 2015, and was ultimately stranded there. 

To read HB 267, visit this page. The Ohio Legislative Service Commission’s analysis of HB 267 is available here.

Labeling Nursery Stock and House Bill 566

 House Bill 566 was introduced on May 12, 2016 and would have made it illegal for a person to “recklessly label or advertise nursery stock as beneficial to pollinators” if the nursery stock had been “treated with a systemic insecticide.”  It would also have been illegal for a person to “recklessly label” stock as beneficial if the stock included the U.S. EPA warnings of “pollinator protection box[es]” and “pollinator, bee, or honey bee precautionary statement[s] in the environmental hazard section of an insecticide product label” on its packaging. 

The bill was referred to the Agriculture and Rural Development Committee on November 11, 2016 and never made it any further.

To read HB 566, visit this page. The Ohio Legislative Service Commission’s analysis of HB 566 is available here.

Taxation

Adjusting Current Agricultural Use Value formulas: Senate Bill 246 and House Bill 398

During the 131st General Assembly, the Senate considered Senate Bill 246. SB 246 addressed how current agricultural use value, otherwise known as CAUV, is calculated. CAUV permits land to be valued at its agricultural value rather than the land’s market or “highest and best use” value. SB 246 was a companion bill. That means that a version of the bill was introduced in both the Ohio House and the Ohio Senate. The companion house bill to SB 246 was House Bill 398.

Both bills were intended to alter the current formula used to calculate CAUV values across Ohio. According to the Ohio Legislative Service Commission, the changes proposed by the bill would “have a uniformly downward effect on the taxable value of CAUV farmland.” Thus, the likely effect would have been a lower tax bill for farmers who are taxed on a CAUV basis.

The Senate referred its bill, SB 246, to the Senate Ways and Means Committee on December 9, 2015 and HB 398 was referred to the House Government Accountability and Oversight Committee on January 20, 2016. Neither committee acted on its bill. Therefore, neither bill was passed into law during the 131st General Assembly.

To read SB 246, visit this page. The Ohio Legislative Service Commission’s analysis of SB 246 is available here. To read HB 398, visit this page. The Ohio Legislative Service Commission’s analysis of HB 398 is available here.

Nonrefundable Tax Credits for Rural Businesses and Senate Bill 209

The 131st General Assembly considered a nonrefundable tax credit for insurance companies that invest in certain rural business growth funds. According to the Ohio Legislative Service Commission, qualifying rural business growth funds include special purpose rural businesses that contribute capital to certain kinds of businesses with substantial operations in rural areas of Ohio.

SB 209 passed in the Ohio Senate. But, the bill did not pass the Ohio House. Therefore, the bill was not passed into law during the 131st General Assembly.

To read SB 209, visit this page. The Ohio Legislative Service Commission’s analysis of SB 209 is available here.

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By: Peggy Kirk Hall, Tuesday, January 10th, 2017

Written by:  Ellen Essman and Chris Hogan, Law Fellows, OSU Agricultural & Resource Law Program

Part One

Ohio’s 131st General Assembly came to a close in December of 2016. In Ohio, a legislative session (also known as a General Assembly) lasts for two years. A bill fails to become law if that bill was introduced during a legislative session but did not pass by the end of the session. Below is a summary of bills related to agriculture that failed to pass during Ohio’s 2015-2016 legislative session. Time will tell whether our legislators will revive and reintroduce any of these proposals in the new 2017-2018 legislative session.  

Nutrient Management

Application of Fertilizer and Manure and Senate Bill 16

Nutrient management remained a topic of discussion in Ohio throughout 2015 and 2016. Most notably, in July of 2015, SB 1 passed and became law. SB 1 placed restrictions on the application of nutrients in the Lake Erie Basin. For example, SB 1 placed restrictions on the application of manure under certain weather conditions.

The 131st assembly considered a similar bill, Senate Bill 16, in February of 2015. SB 16 sought to regulate many of the issues that SB 1 now regulates.  SB 16 failed to pass and did not become law. Notwithstanding SB 16’s failure to pass, nutrient management was a popular topic for the 131st General Assembly.

To read SB 16, visit this page. The Ohio Legislative Service Commission’s analysis of SB 16 is available here.

House Bill 101 and the Response to Algal Blooms

House Bill 101 was introduced on March 4, 2015.  The bill would have enacted a number of sections into the Ohio Revised Code that would have addressed algal blooms in Ohio waterways. First of all, under the language of HB 101, owners or operators of public water systems in areas at risk for harmful algal blooms, together with the directors of the Ohio EPA and ODNR, would have had the ability to develop emergency plans to combat the algal blooms.  Secondly, the Directors of the Ohio EPA and the Department of Natural Resources were tasked with developing and circulating an early warning system for harmful algal blooms. Thirdly, the Ohio EPA would have had the responsibility to provide training to publicly owned treatment works and public water systems relating to monitoring and testing for “harmful algae and cyanotoxins in the water.”  Finally, under HB 101, the Director of the Ohio Department of Natural resources would have had to study and report on the economic and environmental impacts of Canada geese and zebra mussels on Lake Erie. 

The bill was referred to the House Committee on Agriculture and Rural Development on March 4, 2015 and was never acted upon.

To read HB 101, visit this page. The Ohio Legislative Service Commission’s analysis of HB 101 is available here.

Agricultural Operation and Management Plans and Senate Bill 224

Currently, operation and management plans are a voluntary measure for Ohio farmers. In Ohio, an owner or operator of agricultural land or an animal feeding operation may implement a plan which incorporates pollution abatement practices and best management practices for the operation. But, the 131st General Assembly considered a bill which would make such plans mandatory for operators who operate farms of 50 acres or more.

The proposed bill, otherwise known as Senate Bill 224, would have required operation and management plans to include certain standards for applying fertilizer or manure. The bill also gave the Ohio Director of Agriculture authority to enforce corrective actions against farm operations and to assess civil penalties for non-compliance. However, SB 224 did not pass in the Senate and was not signed into law.

To read SB 224, visit this page. The Ohio Legislative Service Commission’s analysis of SB 224 is available here.

Business

Series LLCs and House Bill 581

Ohio permits the formation of Limited Liability Companies, otherwise known as LLCs. LLCs offer many attractive benefits for a farming operation. Namely, LLCs provide liability protection to the members or owners of that LLC.

Some LLC farming operations have become more complex in recent years. As a result, some farming operations choose to have multiple LLCs across an entire farming operation. For example, a farm operation may have one LLC which owns only farm property and a second and entirely separate LLC that owns only farm machinery. But, multiple LLCs create additional complexity which may complicate a farming operation.

One proposed solution is the series LLC. The 131st General Assembly proposed the introduction of series LLCs in House Bill 581. A series LLC would allow a single LLC to create multiple series within the LLC without the need to create an entirely new LLC for each series. Under HB 581, a LLC organized as a series LLC would be able to limit the power of managers or members in different series within the series LLC. A series LLC would also be able to place different assets and obligations into different series within the LLC.

Under HB 581, the debts and obligations of a particular series within an LLC would have been limited to that series only. But, HB 581 did not pass during the 131st General Assembly. Therefore, series LLCs remain non-existent in Ohio.

To read HB 581, visit this page. The Ohio Legislative Service Commission’s analysis of HB 581 is available here.

Food

Donation of Food and House Bill 111

House Bill 111 was introduced on March 10, 2015.  This bill would have allowed food service operations to apply for a rebate from the Director of Health if they donated the food to a nonprofit organization.  The rebate would have been ten cents per pound of perishable food donated. HB 111 was referred to the House Ways and Means Committee on March 16, 2015 and no further action was taken.

To read HB 111, visit this page. The Ohio Legislative Service Commission’s analysis of HB 111 is available here.

By: Peggy Kirk Hall, Wednesday, July 20th, 2016

Update:  For a full explanation of the rule, refer to our new Law Bulletin, The New FAA Rule for Using Drones on the Farm  

Part 2:  Rules for Operating Drones

The FAA’s long awaited rule for drones or “small unmanned aircraft systems” (sUAS) weighing less than 55 pounds will be effective on August 29, 2016.  Our previous post explained the rule’s process for obtaining certification as a Remote Pilot in Command (Remote PIC) that will apply to those who operate a sUAS for commercial uses or incidental to a business, such as for farming purposes.  In this post, we focus on the new rule's operational requirements and limitations.   Farmers who want to use a drone in the farm operation need to understand and comply with these provisions.

Pre-flight requirements

  • Registration.  A person may not operate a sUAS over 0.55 pounds unless it is registered with FAA.  An online registration is available at https://registermyuas.faa.gov/
  • Pre-flight inspection.  The Remote PIC must inspect the sUAS prior to a flight to ensure that it is in a condition for safe operation, which includes inspecting for equipment damage or malfunctions.  The FAA advises operators to conduct the pre-flight inspection in accordance with the sUAS manufacturer’s inspection procedures and provides a list of the elements to address in a pre-flight inspection in section 7.3.4 of this guideline.
  • Pre-flight information.  The Remote PIC must make sure that all persons directly involved in the flight are informed about roles and responsibilities, operating conditions, emergency and contingency procedures and potential hazards.
  • Flight operators.  Only a Remote PIC may fly the sUAS, or someone under the direct supervision of a Remote PIC if the PIC is easily able to gain control of the sUAS.  A Remote PIC may only operate or observe one drone at a time.
  • Airspace.  Flights of sUAS are allowed in Class G airspace, the airspace that is not controlled by Air Traffic Control (ATC) communications, which encompasses a majority of agricultural lands.  A flight in Class, B, C, D and E controlled airspace requires permission from the appropriate ATC prior to flight.  The FAA will establish a web portal that will allow an operator to apply for ATC permission online.
  • Waiver process.  The operator may apply for a “certificate of waiver” that allows deviation from some of the operational requirements if the FAA determines that the flight would be safe.  The operator must receive the waiver prior to the flight, so should file the request about 90 days in advance of the proposed flight.   The FAA will post the waiver applications, which are not yet available, at http://www.faa.gov/uas/.

Operating rules during flight

  • Weather visibility.  There must be a minimum visibility of three miles from the sUAS control station.
  • Visual line of sight.  The Remote PIC or the authorized person operating the drone must maintain a constant visual line of sight with the sUAS, without the aid of a device other than glasses or contact lenses.   The operator may use a visual observer to help maintain the line of sight, but using an observer cannot extend the line of sight.
  • See and avoid.  The operator must yield the right of way and avoid collision with another use of the national air space.
  • Height.  The sUAS may not fly more than 400 feet above ground level.
  • Time of day.  Flights may occur only during daylight hours or no more than 30 minutes before official sunrise or after official sunset if the sUAS has anti-collision lighting.
  • Speed.  The sUAS speed may not exceed 100 miles per hour.
  • People.  A flight may not occur over persons who are not involved in the flight or are not under a covered structure or inside a covered stationary vehicle.
  • Base of operation.  Operation of the sUAs may not occur from a moving aircraft.  Operation from a moving land or water vehicle is permissible if in a sparsely populated area and not transporting property for hire.
  • External load and towing.  A sUAS may carry or tow an external load if the load is securely attached, does not affect control of the aircraft, is not a hazardous substance and the combined weight of the sUAS and its load does not exceed the 55 pound weight limit.
  • Aerial applications.  Use of a sUAS for dispensing herbicides, pesticides and similar substances must also comply with the “agricultural aircraft operation” regulations in 14 CFR 137.3.
  • Dropping objects.   An operator may not create an undue hazard that poses a risk of injury to persons or property when dropping an object from a sUAS.
  • Careless or reckless operation.  A person must not operate a sUAS carelessly or recklessly.  The FAA provides the example of failing to consider weather conditions when flying near structures, trees or rolling terrain in a densely populated area as an example of careless or reckless operation.

After-flight requirements

  • Production of records and vehicle.  If requested by FAA, a person must make the sUAS or its records available for testing or inspection.
  • Accident reporting.   Within 10 days of occurrence, a Remote PIC must report to the FAA a flight operation that results in loss of consciousness or serious injury to a person or creates property damage of at least $500.  Reporting can occur online at www.faa.gov/uas or by telephone to the appropriate FAA field office or regional center.

Penalties for noncompliance with the rule

The FAA will have enforcement authority over the new regulations.  Depending upon the type and violation, civil penalties could be up to $27,500.  An operator could also be subject to criminal penalties for violations that are reckless, destroy property or threaten public safety; those penalties could be up to $250,000.

Learn more about the sUAS rule at http://www.faa.gov/uas/

Posted In: Business and Financial, Crop Issues, Drones
Tags: drones, sUAS, FAA, part 107
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By: Peggy Kirk Hall, Friday, July 08th, 2016

The Ohio General Assembly has enacted a law that raises the monetary limit for cases handled through Ohio's small claims court system.  The new maximum amount of $6,000 for a small claims case will replace the current limit of $3,000 when House Bill 387 becomes effective in late September.  Under the new law, a defendant in the case may also file a counterclaim for up to $6,000.  Governor Kasich signed the bill on June 28, 2016.

Ohio law requires every county and municipal court in Ohio to establish a small claims division to handle minor disputes involving only the recovery of money.  A small claims court cannot hear cases for slander, libel, malicious prosecution, abuse of process, return of personal property, punitive damages or other cases seeking remedies other than money.  A person may file a small claims complaint and present the case in court without the assistance of an attorney, but may have legal representation if desired.   The court may appoint a magistrate, who must be an attorney, to oversee the case and render a decision.   The court also has the authority to enforce a monetary judgment against a party.  Because small claims cases tend to be simple, they are resolved in less time and with less expense than cases heard by other courts.

The increased monetary limit for small claims cases will allow farmers and agribusinesses to address more disputes quickly and without the expense of an attorney.  Operators and landowners owed money for products or services in excess of the current $3,000 small claims maximum often express frustration that it could be too costly and time consuming to address the matter through municipal or county courts.  The new higher limit of $6,000 should capture many of these cases and offer an opportunity to recover such losses through the small claims process.  According to the bill's sponsor, Rep. Lou Terhar (R-Cincinnati), the change will "bring Ohio in line with surrounding states and make Ohio a better place to do business and generate jobs."

To learn more about using the Ohio small claims court process, visit this webpage.  House Bill 387 is available here, and Ohio's laws on small claims courts are  here.  

 

By: Peggy Kirk Hall, Thursday, July 07th, 2016

Governor Kasich has signed legislation to create a new “Ohio Farm Winery Liquor Permit.”  While wine makers in Ohio may currently obtain a general liquor permit to make and sell wine on a farm, the general permit does not distinguish the source of the wine. The new Ohio Farm Winery Permit legally designates the wine as being made from grapes grown on the wine maker’s farm.  Sponsors and supporters of the legislation claim that the special designation will help consumers know a wine’s localized nature, bring recognition to Ohio’s wine growing regions, keep Ohio competitive with other states that designate farm-produced wines, and ensure that farm wineries continue to receive property tax treatment as agricultural operations.  Wineries that qualify for the new permit would "be able to present themselves as true farming operations," according to sponsor Ron Young (R-Leroy Township).

Ohio’s Division of Liquor Control may issue an Ohio Farm Winery Permit only to wine makers who meet two requirements:  the manufacturer produces wine from grapes, fruit or other agricultural products grown on the manufacturer’s property, and the property qualifies as “land devoted exclusively to agricultural use” under Ohio’s Current Agricultural Use Valuation (CAUV) program, which requires that the land be used for commercial agricultural production and be at least 10 acres in size or, if less than 10 acres, generates a minimum average of $2500 in gross income.

Under the new law, an Ohio Farm Winery Permit holder may sell its wine products for consumption on the premises where manufactured, for consumption off the premises in sealed containers, or to a wholesale permit holder. An Ohio Farm Winery Permit holder may also manufacture, purchase and import brandy for fortifying wine and may import and purchase wine for blending purposes, but the total amount of wine used for blending cannot exceed 40% of all wine manufactured by the wine maker.   

H.B. 342, which will be effective in late September, is available here.  

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