Farming has always been an unpredictable way to make a living, and that unpredictability can lead to financial stress. Whether caused by down markets, weather impacts, rising input costs, high land values, poor decision making, medical issues or a host of other unforeseen circumstances, serious financial stress can be a reality a farmer must face.
Filing bankruptcy can be one way to address farm financial stress. But because of its consequences, bankruptcy is not a decision to take lightly and might not be the best option. Our newest resources target farmers who are dealing with financial challenges and considering bankruptcy. Facing Farm Financial Stress: An Overview of the Bankruptcy Option offers a seven part series of law bulletins and infographics focused on bankruptcy issues for farmers. The series covers:
- Assessing the bankruptcy option. Steps to take and considerations to make when dealing with financial stress, including alternatives to bankruptcy and farmer to farmer advice from families that have been through the bankruptcy process.
- An overview of bankruptcy law. We explain and visualize the legal process, people, institutions and legal terms involved in bankrptcy with a focus on Chapter 12, the law reserved for qualifying farmers and fishermen.
- Thriving after a farm bankruptcy. Ideas for setting a course to attain farm financial stability and reestablish relationships after filing bankruptcy, including farmer to farmer advice from those who've survived bankruptcy.
Our team of authors, which included myself along with OSU's David Marrison, Hannah Scott and Chris Zoller--created the resources with support from the USDA's National Agriculture Library and in partnership with the National Agricultural Law Center (NALC). The series is available on our Farm Office site here or on NALC's site here.
Congress must be concerned about the financial state of farmers. A bill to increase the Chapter 12 debt limit to $10 million has languished in Congress since March, but recently gained traction and passed through both houses quickly. Congress forwarded the bill, known as the Family Farmer Relief Act of 2019, to the President after the Senate approved it late last week. The House passed the change to Chapter 12 on July 25.
Chapter 12 allows eligible family farmers and fishermen to stay in business and reorganize their debts through a repayment plan. The recent action by Congress more than doubles the debt limit for Chapter 12 eligibility from its current amount of $4.4 million, adjusted for inflation from the original $1.5 million limit established when Congress created Chapter 12 in 1986. If the President signs the current bill, a family farmer or fisherman with an aggregate debt of no more than $10 million will be eligible to use the special protections of the Chapter 12 bankruptcy process.
The bill’s sponsor, Rep. Antonio Delgado (D-NY), explained that the increase to the debt limit reflects higher land values and the growth over time in the average size of U.S. farming operations. He stressed that the changes are necessary so that farmers have additional options to manage the current farm economy because farmers are “currently facing a fifth year of declining net farm income…. [p]rices are low, inputs are high, and current trade policies make the future unknown.”
According to the U.S. Bankruptcy Courts, farmers and fishermen filed a total of 535 Chapter 12 bankruptcies from June 2018 to June 2019, up from 475 in the previous year and 482 in the 2017 period. Ohio had nine of those cases in each of the past two years and six in 2017. These numbers will likely continue to grow with the recent change made by Congress, as more farmers will qualify for the special protections of Chapter 12.
Here’s our latest gathering of agricultural law news that you may want to know:
Congress considers bankruptcy code changes with Family Farmer Relief Act of 2019. Senator Grassley and Representative Delgado introduced companion bills in their respective chambers of Congress that would modify the definition of “family farmer” in the federal bankruptcy code. The change would raise the operating debt limit for a family farmer from $3.2 million as listed in the U.S. Code to $10 million. Sometimes a small change can make a big difference. In chapter 12 of the bankruptcy code, a “family farmer” has special options that other chapters do not offer, such as the power to determine a long-term payment schedule and pay the present market value of the asset instead of the amount due on the loan. Many farmers had not been able to take advantage of the special bankruptcy provisions because of the low debt limit, but that may change. For more information on the bills, click HERE for S.897 and HERE for H.R. 2336.
Congress also considers changing the number of daily hours a driver may transport livestock. The Transporting Livestock Across America Safely Act would instruct the Secretary of Transportation to amend the rules governing drivers who transport certain animals. The changes would loosen restrictions on the number of hours that drivers may drive, and increase the types of activities that are exempt from counting toward the maximum time. Travel under 300 miles would be exempt from the hours of service (HOS) and electronic logging (ELD) requirements. Both chambers of Congress are considering this bill, and both companion bills are currently in committee. For more information on the bills and to learn about the changes proposed, click HERE for S.1255 and HERE for H.R. 487.
It’s not too late to submit comments to the FDA about its potential cannabidiol rulemaking. Electronic or written comments can be sent to the FDA until July 2nd, although the deadline to request to make an oral presentation or comment at tomorrow’s hearing has passed. Click HERE for more information from the Federal Register about the May 31st hearing and submitting comments.
Meatpackers face second class-action lawsuit, and R-CALF refiles. In our last edition of The Harvest, we talked about a new class-action lawsuit filed in Illinois federal court by a number of cattle ranchers, including R-CALF, against the nation’s largest meatpacking companies. Now, another lawsuit has been filed in Minnesota federal court also alleging a price fixing conspiracy by the meatpackers. The second lawsuit is being brought by a cattle futures trader, rather than a rancher. After the second suit was filed, R-CALF voluntarily dismissed its case in Illinois to refile it in Minnesota. This refiling allows the lawsuits to be heard by the same court.
Tyson sues the USDA’s Food Safety and Inspection Service. Tyson, which is named as a defendant in the class action suits we just mentioned, is a plaintiff in a case against the USDA’s Food Safety and Inspection Service. The company alleges that a FSIS inspector falsified an inspection of 4,622 hogs, which were intermingled with another 8,000 carcasses, at one of its Iowa facilities in 2018. The company claims that the false inspection required it to destroy all of the carcasses, and cost nearly $2.5 million in total losses and expenses. The complaint, which is available HERE, alleges four counts: negligence, negligent inspection, negligent retention, and negligent supervision. The lawsuit is based on the legal principle that an employer is liable for the actions of its employee.
Ohio Case Law Update
Plaintiff must prove that a defendant wedding barn operator’s breach of a duty caused her harm. Conrad Botzum Farmstead is a privately operated wedding and event barn located in the Cuyahoga Valley National Recreation Area and on lease from the National Park Service. The plaintiff in the case was attending a wedding at the barn, where she broke her ankle while dancing on a wooden deck. The jury trial found that the barn operator was 51% at fault for her injuries, and awarded the plaintiff compensation. However, the barn operator appealed the decision and won. The Ohio Ninth District Court of Appeals found that the plaintiff did not introduce sufficient evidence to prove that any act or breach of duty by the barn operator actually or proximately caused the plaintiff to fall and break her ankle. The case raises standard questions of negligence, but it is worth noting in the Ag Law Blog because the court did not base its decision on Ohio’s agritourism immunity statute. The case is cited as Tyrrell v. Conrad Botzum Farmstead, 2019-Ohio-1874 (9th Dist.), and the decision is available HERE.
Ohio History Connection can use eminent domain to cancel Moundbuilders Country Club’s lease. A Licking County judge ruled in early May that the Ohio History Connection, formerly the Ohio Historical Society, can reclaim full ownership of land that it had leased to a country club. The Moundbuilders County Club has operated a golf course around prehistoric Native American earthworks for decades under a long-term lease with the state. The Ohio History Connection sought to have the lease terminated in order to give the public full access to the earthworks as part of a World Heritage List nomination. The judge viewed the request as sufficiently in the public interest to apply Ohio’s eminent domain laws.