Contracts

As April comes to a close, we bring you another edition of the Ag Law Harvest. This month’s harvest brings you laws and regulations from across the country regarding a national drinking water standard, the Endangered Species Act, Ag-Gag laws, noncompete agreements, and pollution. 

EPA Finalizes First-Ever PFAS Drinking Water Standards
Earlier this month, the U.S. Environmental Protection Agency (“EPA”) announced a final rule, issuing the “first-ever national, legally enforceable drinking water standard to protect communities from exposure to harmful per-and polyfluoroalkyl substances (PFAS), also known as ‘forever chemicals’”. The final rule sets legally enforceable maximum contaminant levels for six PFAS chemicals in public water systems. The EPA also announced nearly $1 billion in new funding to “help states and territories implement PFAS testing and treatment at public water systems and to help owners of private wells address PFAS contamination.” The EPA suggests that this final rule “will reduce PFAS exposure for approximately 100 million people, prevent thousands of deaths, and reduce tens of thousands of serious illnesses.” 

Interior Deptartment Finalizes Rule to Strengthen Endangered Species Act
The Department of the Interior has announced that the U.S. Fish and Wildlife Service finalized revisions to the Endangered Species Act (ESA). These revisions aim to enhance participation in voluntary conservation programs by promoting native species conservation. They achieve this by clarifying and simplifying permitting processes under Section 10(a) of the ESA, encouraging greater involvement from resource managers and landowners in these voluntary initiatives. For more information about Section 10 of the ESA visit the U.S. Fish and Wildlife Service’s website.

Kentucky Passes Ag-Gag Statute
On April 12, 2024, the Kentucky legislature overrode the governor’s veto to pass Senate Bill 16 into law. The new law, titled “An Act Relating to Agricultural Key Infrastructure Assets,” expands the definition of “key infrastructure assets” to include commercial food manufacturing or processing facilities, animal feeding operations, and concentrated animal feeding operations. It criminalizes trespassing on such properties with unmanned aircraft systems, recording devices, or photography equipment without the owner's consent. The first offense is a Class B misdemeanor with up to 90 days imprisonment and a $250 fine, while subsequent offenses are Class A misdemeanors with up to 12 months imprisonment and a $500 fine.

Federal Trade Commission Bans Non-Compete Agreements
The Federal Trade Commission (“FTC”) announced a final rule banning noncompete agreements and clauses nationwide. This move aims to promote competition by safeguarding workers’ freedom to change jobs, increasing innovation and the formation of new businesses. Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. However, existing noncompetes for senior executives – those earning more than $151,164 annually and in policy making positions – remain enforceable under the new rule. Employers will have to notify workers bound to an existing noncompete that the noncompete agreement will not be enforced against the worker in the future. The final rule will become effective 120 days after publication in the Federal Register.  

EPA Announces New Rules to Reduce Pollution from Fossil Fuel-Fired Power Plants 
The U.S. Environmental Protection Agency (“EPA”) unveiled a set of final rules designed to decrease pollution from fossil fuel-fired power plants. These rules, developed under various laws such as the Clean Air Act, Clean Water Act, and Resource Conservation and Recovery Act, aim to protect communities from pollution and improve public health while maintaining reliable electricity supply. They are expected to substantially reduce climate, air, water, and land pollution from the power industry, aligning with the Biden-Harris Administration's goals of promoting public health, advancing environmental justice, and addressing climate change.

In this rendition of the Ag Law Harvest, we bring you some contracts! Over the course of February, there were three Ohio cases that demonstrate the importance of having a written contract, the ability to form a contract through your actions, and the need to make sure specific terms within a contract can be enforceable. 

Handshake Agreements Can Be a Double-Edged Sword.
In this case we are introduced to two brothers (the “Plaintiffs”), who were equal partners in a farming business that included buying and selling livestock. As part of their business, Plaintiffs sold cattle to Defendants between 2009 and 2017. The parties did not have a formal contract in place and conducted business on a “handshake agreement.” 

The Plaintiffs claim that the Defendants acted as intermediaries, purchasing heifers from them, and reselling them to other dairy farmers or at market. According to Plaintiffs, it was customary for the Defendants to pay for the cattle immediately upon delivery or within 30 days. However, around 2016, Defendants allegedly wrote checks for seven transactions but asked Plaintiffs not to cash them due to insufficient funds. Plaintiffs assert that Defendants never honored these checks, resulting in an outstanding amount of $128,950. Despite Plaintiffs' attempts to collect, Defendants denied owing any money, arguing that Plaintiffs were fully paid through later payments or third-party transactions. This disagreement led to the filing of Plaintiffs' lawsuit.

In February of last year, the trial court granted Plaintiffs summary judgment and awarded them $120,150. Defendants appealed the trial court’s decision arguing that summary judgment was inappropriate because whether or not Defendants owed Plaintiffs any money was in dispute. The appellate court agreed. 

In its opinion, the appellate court stated that it was clear that “the trial court weighed the credibility of the parties. . .” The appellate court also made it clear that “[s]ince resolution of the factual dispute will depend, at least in part, upon the credibility of the parties or their witnesses, summary judgment in such a case is inappropriate.” Furthermore, the court noted that because there was no written contract between the parties, the only evidence to demonstrate the particulars and common practices of the handshake agreement comes from the personal knowledge of the Plaintiffs and Defendants. Therefore, because both parties disagree as to whether Defendants owe any money to Plaintiffs, the trial court should not have ruled in favor of Plaintiffs on summary judgment. Consequently, the case is remanded to the trial court for further proceedings, potentially including a trial.

This case shows us two things, the importance of having a written contract and the importance of recordkeeping. The parties to this lawsuit must now argue that their recollection of events is the true and accurate recollection. Both parties will likely be judged by a group of jurors and one party is bound to be out a large sum of money. A written contract could have avoided much of the dispute by including language about the process for payment, record keeping requirements, and other terms and conditions that would have governed the relationship of the parties. Now, because there is no written contract, this case becomes a case of “he said-he said.”  

Implied Contracts Can Be Formed Based on a Tacit Understanding.
The second case demonstrates that the surrounding facts and circumstances can create an implied contract even when no signed contract exists. In this case Plaintiff, a residential construction company, provided the Defendant-homeowners with two written quotes for roofing and other work at their home. The quotes included various services and specified a 30% upfront payment with the remainder due upon completion of the work. Although the Defendants did not sign or date the quotes, they paid Plaintiff $6,815, which was stated to be a 30% prepayment for the total quoted amount of $22,717. 

After completing the roof, Plaintiff submitted a bill to the Defendants for the balance due on the roof. The Defendants took issue with the invoice for two reasons: (1) the price did not match the quotes, and (2) Defendants believed that payment would not be due until all items on both quotes were completed. Ultimately, the parties parted ways and Defendants asked Plaintiff to not return to their home leaving the remainder of the work listed on the two quotes uncompleted. 

Plaintiff sued the Defendants alleging breach of contract, seeking payment for the finished roof. The matter proceeded to a bench trial where the trial court found that the two quotes and the 30% payment operated as an implied contract and not an express one. The trial court also held that Plaintiff did partially perform the agreement and should be paid for the roof installation. 

The Defendants appealed, arguing that Plaintiff could not recover in this case because Plaintiff only alleged a breach of an express contract and did not seek recovery for breach of an implied contract. The appellate court disagreed. The court noted that under Ohio law there are three types of contracts: (1) express contracts, (2) implied in fact contracts, and (3) implied in law contracts. 

The court went on further to explain when the three different kinds of contracts are created. An express contract is created when there is an offer and acceptance of written terms. An implied in fact contract requires a “meeting of the minds” and that “is shown by the surrounding circumstances which [make] it inferable that [a] contract exists as a matter of tacit understanding.” Lastly, with an implied in law contract “there is no meeting of the minds” but the law will create civil liability for a person in receipt of benefits which they are not justly entitled to retain.   

The appellate court held that the trial court correctly found there was no express contract between the parties, rather there was an implied in fact contract. The court reasoned that the two written quotes and the 30% prepayment created a tacit understanding amongst the parties. Furthermore, the court concluded that because an implied contract existed amongst the parties, Plaintiff is entitled to recover for the work they did do. Lastly, the trial court noted that Defendants should have been aware that Plaintiff’s breach of contract claim would not only apply to express contracts but also to implied contracts. 

Noncompetition Agreement Found to be Unenforceable. 
In our final case we are introduced to a salesman that was being sued by his former employer for breach of a non-competition agreement (the “NCA”) after going to work for a direct competitor. Plaintiff, Kross Acquisition Co., LLC (“Kross”), is a basement waterproofing contractor. Kross provides service in southwestern Ohio, southeastern Indiana, and northern and eastern Kentucky. Kross’s former employee Roger Kief left to work for Groundworks Ohio, LLC (“Groundworks”). Groundworks is engaged in substantially the same business as Kross and serves the entire state of Ohio as well as Kentucky, Indiana, and many other states. 

Kief began working for Kross in 2017 and signed the NCA. The NCA prohibits Kief from disclosing confidential information and from working anywhere in Ohio or Kentucky for any competing company for a period of two years after leaving Kross. In February of 2022, Groundworks offered Kief an identical position with a start date of March 2022. 

Kross filed lawsuit against Kief for failing to adhere to the NCA. The trial court found the NCA unenforceable and granted summary judgment in favor of Kief. Kross filed an appeal arguing that the trial court erred when it found the NCA unenforceable. The appellate court disagreed. The court noted that the following factors are used to analyze whether a noncompetition agreement can be enforceable: 

1. Time and space limitations: Whether the agreement specifies a reasonable duration and geographic scope for its restrictions.

2. Sole contact with the customer: Whether the employee is the primary or sole contact with the employer's customers.

3. Confidential information or trade secrets: Whether the employee has access to and possesses confidential information or trade secrets of the employer.

4. Limitation of unfair competition: Whether the covenant aims to prevent unfair competition or if it overly restricts ordinary competition.

5. Stifling of inherent skill and experience: Whether the agreement unreasonably stifles the employee's inherent skill and experience in the industry.

6. Disproportionate benefit to the employer: Whether the benefit gained by the employer from the agreement outweighs the detriment imposed on the employee.

7. Bar on sole means of support: Whether the agreement bars the employee's only means of earning a livelihood.

8. Development of restrained skills during employment: Whether the skills restricted by the agreement were actually developed during the employee's tenure with the employer.

9. Incidental nature of forbidden employment: Whether the forbidden employment is merely incidental to the employee's primary employment with the employer.

Based on the foregoing factors, the court found that the geographic and time limitations “exceeded what is necessary to protect Kross’s legitimate business interests.” Therefore, the appellate court found the NCA unenforceable.   

Happy Fall Y’all! We are back with another monthly edition of The Ag Law Harvest. This month’s edition brings you an Ohio Supreme Court case that clarifies a party’s obligations under express indemnification provisions in a contract, an Ohio woman’s fight against a local zoning ordinance that sought to remove her pet ducks, and agricultural labor updates. 

Common Law Notice Requirements May No Longer Exist Under Express Indemnification. 
The Ohio Supreme Court recently made a significant decision regarding indemnification clauses in contracts. Indemnification is the right of one party to be fully reimbursed for payments they made on behalf of another party who should have made those payments. There are two types of indemnity: express and implied. Express indemnity is when a written contract explicitly states that one party will reimburse the other under certain circumstances. Implied indemnity is a common law principle where each party is responsible for their own wrongdoing, and the wrongdoer should reimburse the injured party.

In this case, Discovery Oil and Gas contracted with Wildcat Drilling, which included an express indemnification provision. Wildcat was supposed to indemnify Discovery for any fines related to pollution or contamination from drilling. When Wildcat violated Ohio law by using brine improperly, Discovery settled with the Ohio Department of Natural Resources for $50,000 without notifying Wildcat and requested reimbursement. Wildcat refused, arguing that Discovery didn't follow Ohio common law, which requires notice before settling a claim.

The Ohio Supreme Court sided with Discovery, stating that the express clause in the contract indicated the parties' intent to deviate from common law principles. The court clarified that notice requirements for indemnification are determined by the contract terms. Depending on the contract, parties may not need to provide notice before settling a claim and seeking reimbursement. This ruling emphasizes the importance of contract language in determining indemnification obligations.

Medina County Woman Has All Her Ducks in a Row. 
A Medina County woman is able to keep her pet ducks after a battle with the Village of Seville and an interpretation of its zoning ordinances. Ms. Carlson, the owner of the ducks at issue, fought to keep her pet ducks after being ordered to remove them from her property by Wadsworth Municipal Court. Ms. Carlson appealed the municipal court’s ruling, arguing that Seville’s zoning ordinance against “poultry and livestock” is unconstitutionally vague. The appellate court agreed with Ms. Carlson. The appellate court found that Seville’s ordinance against poultry focused on hens, roosters, coop hygiene, and the sale of poultry byproducts such as meat and eggs. The court held that an ordinary person would not be able to understand that keeping other birds, such as ducks, as companion animals would violate Seville’s ordinances. Therefore, Ms. Carlson could not be found to have committed an unclassified misdemeanor by owning pet ducks. However, had Ms. Carlson been keeping the ducks and selling their byproducts such as duck eggs and meat, there might have been a different outcome.  

Farm Labor Stabilization and Protection Pilot Program. 
The U.S. Department of Agriculture (“USDA”) has announced the opening of the Farm Labor Stabilization and Protection Pilot Program (“FLSP”). The FLSP will award up to $65 million in grant funding to provide support for agricultural employers to implement new hearty labor standards/procedures and update existing workplace infrastructure to help promote a healthy and safe work environment. The USDA states that the purpose of the FLSP program is “to improve food and agricultural supply chain resiliency by addressing challenges agricultural employers face with labor shortages and instability.” The FLSP has three goals: (1) drive U.S. economic recovery and safeguard domestic food supply by addressing current labor shortages in agriculture; (2) reduce irregular migration from Northern Central America through the expansion of regular pathways; (3) improve working conditions for all farmworkers. Qualified applicants can receive grants ranging from $25,000 - $2,000,000. The application window closes on November 28, 2023. For more information, view the USDA’s fact sheet on the FLSP. 

Department of Labor Publishes Proposed Rule to Amend H-2A Regulations. 
The U.S. Department of Labor (“DOL”) Employment and Training Administration (“ETA”) has published a proposed rule titled “Improving Protections for Workers in Temporary Agricultural Employment in the United States.” The proposed rule seeks to amend several H-2A program regulations by: 

• Adding new protections for worker self-advocacy. 
• Clarifying when a termination is “for cause.” 
• Making foreign labor recruitment more transparent. 
• Making wages more predictable. 
• Improving workers’ access to safe transportation. 
• Enhancing enforcement to improve program integrity. 

Read more about the proposed rule by visiting the DOL’s news release. The comment period on the proposed rule ends November 14, 2023. 

Department of Homeland Security Publishes Proposed Rule Amending H-2 Program.  
The U.S. Department of Homeland Security (“DHS”) has published a proposed rule titled “Modernizing the H-2 Program Requirements, Oversight, and Worker Protections.” The DHS announced its intent to strengthen protections for temporary workers through the H-2A and H-2B worker programs by providing greater flexibility and protections for participating workers, and improving the programs’ efficiency. The proposed rule would: 

• Provide whistleblower protection to H-2A and H-2B workers who report their employers for program violations. 
• Extend grace periods for workers seeking new employment, preparing for departure from the United States, or seeking a change of immigration status. 
• Establish permanent H-2 portability, allowing employers to hire H-2 workers who are already lawfully in the United States while the employer’s H-2 petition for the worker is pending. 

The comment period for the proposed rule ends on November 20, 2023. 

It’s getting hot! And we are here to bring you even more heat. This month’s Ag Law Harvest takes you across the country and even across our northern border as we highlight some interesting court cases, a petition to the USDA, and some legislation coming across the desks of Governors from Maine to Oregon.

Ohio Court Determines That Dairy Farm Did Not Intentionally Harm Employee. 
In 2019, a dairy farm employee sustained serious injuries after getting caught in a PTO shaft while operating a sand spreader. After his injury, the employee filed a lawsuit against his employer for failing to repair or replace the missing safety guards on the PTO shaft and sand spreader. In his lawsuit, the employee alleged that the dairy farm’s failure to repair or replace the missing safety guards amounted to a “deliberate removal” of the equipment’s safety features making the dairy farm liable for an intentional tort. In other words, the employee was accusing his employer of intentionally causing him harm. Normally, workplace injuries are adjudicated under Ohio’s workers’ compensation laws, unless an employee can prove that an employer acted intentionally to cause the employee harm. 

For an employer to be held liable for an intentional tort under Ohio law, an employee must prove that the employer acted with the specific intent to injure an employee. An employee can prove an employer’s intent in one of two ways: (1) with direct evidence of the employer’s intent; or (2) by proving that the employer “deliberately removed” equipment safety guards and/or deliberately misrepresented a toxic or hazardous substance. Because there was no direct evidence to prove the dairy farm’s intent, the employee could only try his case under the theory that the dairy farm deliberately removed the safety guards, intentionally causing him harm. 

The case went to trial and the jury found the dairy farm liable and ordered it to pay over $1.9 million in damages. The dairy farm appealed to the Twelfth District Court of Appeals arguing that its failure to repair or replace does not amount to a “deliberate removal” of the safety guards from the PTO shaft and sand spreader. The appellate court agreed. 

The Twelfth District decided to apply a narrow interpretation of the term “deliberate removal.” The court held that a “deliberate removal” is defined as the “deliberate decision to lift, push aside, take off, or otherwise eliminate.” The evidence presented at trial showed that the shaft guard may have simply broken off because of ordinary wear and tear. Additionally, the evidence could not establish who removed the connector guard or if the connector guard did not also break off due to ordinary wear and tear. Thus, the Twelfth District found that the evidence presented at trial did not support a finding that the dairy farm made “a careful and thorough decision to get rid of or eliminate” the safety guards. Furthermore, the Twelfth District reasoned that an employer’s “failure to repair or replace a safety guard is akin to permitting a hazardous condition to exist” and that the “mere knowledge of a hazardous condition is insufficient to show intent to injure. . .” The Twelfth District vacated and reversed the $1.9 million judgment and entered summary judgment on the dairy farm’s behalf.  

USDA Receives Petition Over “Climate-friendly” Claims. 
The Environmental Working Group (EWG) has petitioned the U.S. Department of Agriculture (“USDA”), asking the USDA to: (1) prohibit “climate-friendly” claims or similar claims on beef products; (2) require third-party verification for “climate-friendly” and similar claims; and (3) require a numerical on-pack carbon disclosure when such claims are made. The core legal issue is whether such “climate-friendly” labels and numerical carbon disclosures are protected and/or prohibited by the legal doctrine of commercial speech, which is protected under the First Amendment of the U.S. Constitution. EWG argues that the USDA has the authority to regulate such speech because commercial speech is only protected if it is not misleading. Additionally, EWG claims that requiring numerical carbon disclosures advances a substantial governmental interest by protecting consumers from fraud and deception. Although EWG has the legal right to petition the USDA, the USDA does not have to grant EWG’s petition, it must only consider the petition and respond within a reasonable time. 

Maine Governor Vetoes Ag Wage Bill.
Earlier this month Maine Governor, Janet Mills, vetoed Legislative Document 398 (“LD 398”) which required agricultural employers to pay their employees a minimum wage of $13.80 and overtime pay. Governor Mills stated that she supports the concept of LD 398 but was concerned about some of the bill’s language. The Maine legislature had the opportunity to override the Governor’s veto but failed to do so. After the legislature sustained her veto, Governor Mills signed an executive order establishing a formal stakeholder group to develop legislation that will establish a minimum wage for agricultural workers while also addressing the impacts the future legislation will have on Maine’s agriculture industry. 

A Big Thumbs Up! 
A Canadian judge recently found that a “thumbs-up” emoji is just as valid as a signature to a contract. In a recent case, a grain buyer, South West Terminal Ltd. (“SWT”), sent through text message, a deferred grain contract to a farming corporation owned and operated by Chris Achter (“Achter”). The contract stated that Achter was to sell 86 metric tonnes of flax to SWT at a price of $17 per bushel. SWT signed the contract, took a picture of the contract, and sent the picture to Achter along with a text message: “Please confirm flax contract”. Achter texted back a “thumbs-up” emoji. When the delivery date came and passed, Achter failed to deliver the flax to SWT which prompted SWT to file a lawsuit for breach of contract. SWT argued that Achter’s “thumbs-up” meant acceptance of the contract. Achter, on the other hand, claimed that the use of the emoji only conveyed his receipt of the contract. 

The Canadian court ultimately ruled in favor of SWT. The court relied on evidence that Achter and SWT had a pattern of entering into binding contracts through text message. In all previous occurrences, SWT would text the terms of the contract to Achter and Achter would usually respond with a “looks good”, “ok”, or “yup”. This time, Achter only responded with a “thumbs-up” emoji and the court concluded that an objective person would take that emoji to mean acceptance of the contract terms. Achter was ordered to pay over C$82,000 ($61,442) for the unfulfilled flax delivery. As the old saying goes: “a picture is worth a thousand words or tens of thousands of dollars.”  

Oregon Governor Signs Agriculture Worker Suicide Prevention Bill into Law. 
Earlier this month, Oregon Governor Tina Kotek signed a bill that creates a new suicide prevention hotline for agricultural producers and workers into law. Senate Bill 955 (“SB 955”) provides $300,000 to establish an endowment to fund an AgriStress Helpline in Oregon. Proponents of the bill believe the AgriStress Helpline will be able to specifically address the needs of agricultural producers and workers which “[s]tatistically . . . have one of the highest suicide rates of any occupation.” Oregon becomes the 7^th state to establish an AgriStress Hotline joining Connecticut, Missouri, Pennsylvania, Texas, Virginia, and Wyoming.