August turned out to be a very busy month for food law. We’re again reading headlines about the definition of meat and debates over cage-free egg laws. We’ve also come across some interesting criminal actions involving organic labeling fraud and undocumented workers at poultry processing plants. And yet again we have a Roundup update, but fortunately for Bayer, the target of the latest lawsuits are Home Depot and Lowe’s. So without further ado, here’s our latest gathering of agricultural law news you may want to know:
Tofurkey cries foul against state definitions of meat. The maker of edible vegetarian products designed to replicate the taste and texture of meats is fighting back against state labeling and advertising laws that require products labeled as “meat” to be made of meat. Tofurky filed a lawsuit in federal court in Arkansas to stop the state from enforcing such laws, which is similar to a lawsuit it filed in Missouri and yet another company filed in Mississippi. Livestock advocacy groups succeeded in having 12 states pass laws restricting the ability of food producers to refer to their products as meats if those products contain no meat. Livestock advocacy groups argue that the labeling practices are confusing and misleading to consumers, while companies like Tofurky argue that they have a constitutional right to describe their products with meat terminology. On its website, Tofurky lists beer brats, jumbo hot dogs, “slow roasted chick’n,” “ham style roast,” and more. None of the products contain meat.
Organic food fraud puts farmers in jail. A federal judge sentenced a 60-year-old Missouri farmer to serve 10 years and 2 months in prison after being convicted of wire fraud, which is the federal crime of committing financial fraud through the use of a telecommunications wire across state lines. This includes placing a phone call, sending an email, or advertising online in the furtherance of the fraudulent scheme. Another three farmers were also sentenced to prison for terms ranging from 3 months to 2 years for their participation. The fraud involved a decade-long scheme to mix traditional corn and soybeans with a small amount of organic grains and then label everything as certified organic. The grains were mostly sold as animal feed to producers and companies selling organic meat. Organic products generally are sold at a high premium, and the volume of goods in this scheme resulted in the farmers receiving millions of dollars from consumers that was fraudulently obtained. The lengthy prison sentences reflect the farmers’ intentional misrepresentation and mislabeling. In other words, it was not an accident.
Oregon joins California and Washington to make the west coast cage-free. States continue to battle over whether eggs should come from cage-free hens or caged hens. When we last discussed the topic HERE in May, the governor of the state of Washington had just signed his state’s cage-free requirement into law. Iowa, the nation’s leading egg producing state, has gone the other way in trying to limit cage-free egg production. Now, Oregon is set to ban the purchase or sale of eggs and egg products from caged hens starting in 2024. However, Oregon’s law exempts eggs and egg products from caged hens if the sale occurs at a federally inspected plant under the Egg Products Inspection Act or if the caged hens were at a commercial farm with a flock of fewer than 3,000 hens. You can read the text of the bill HERE.
Immigration and Customs Enforcement raids poultry processing plants. Federal immigration officials have alleged that managers at five Mississippi poultry processing plants knowingly hired undocumented aliens who are not authorized to work in the United States. Fines for individuals or companies proven to have actual knowledge that they hired undocumented workers can reach up to $3,000 per undocumented worker. Individuals may also face prison time. According to news reports, ICE arrested 680 possibly undocumented workers during its August 7th raids in Mississippi. In their applications for the search warrants, the investigators alleged that the companies hired undocumented workers who were wearing GPS ankle monitors as they await deportation hearings, reported Social Security numbers of deceased persons, and used different names at different times.
Latest Roundup lawsuit targets retailers Home Depot and Lowe’s. You’ve heard us talk before about the thousands of lawsuits against Monsanto (now owned by Bayer) based on the allegation that the glyphosate in products like Roundup has caused cancer. If you’d like a refresher, you can review our last post HERE. Now, instead of going after the manufacturer, a new plaintiff is going after retailers. Plaintiff James Weeks filed two class action complaints in federal court in California against Home Depot and Lowe’s, alleging that the home improvement giants failed to adequately warn customers about the safety risks posed by using the popular weed killer. Mr. Weeks argues that the labeling leaves the average consumer with the impression that the greatest risk of harm is eye irritation, when in fact the retailers know of the product’s potential carcinogenic properties. As these complaints are class action complaints, Mr. Weeks seeks to claim representative status over all consumers who purchased Roundup products from these retailers, and thereby lead the case against the retailers. It will be interesting to see whether the court certifies these cases as class actions, or if this strategy falls short for the plaintiff. You can read the complaint against Home Depot HERE.
Food giants seek silence from U.S. Commodity Futures Trading Commission. In 2015, the U.S. Commodity Futures Tradition Commission initiated a lawsuit against Mondelez International Inc. and Kraft Heinz Co. for allegedly manipulating the wheat futures market. All parties recently agreed to an undisclosed settlement, and entered into a consent order with the court to close the matter. The agreement apparently included a provision that all parties would refrain from publically commenting about the settlement. However, the federal agency ended up commenting on the settlement by the end of the week in which the agreement was finalized. Mondelez and Kraft Heinz believe that such statements violated the terms of the consent order, although the federal agency contests the allegation. Nonetheless, the confidentiality restrictions make it difficult to know the full details of the settlement. All we know for certain is that there was one.
Federal courts report that Chapter 12 family farm bankruptcies are on the rise. The federal court system releases data every quarter on the number of bankruptcies filed each month in that quarter. The latest numbers for April to June 2019 showed a slight increase in the number of Chapter 12 bankruptcies filed when compared to the same time period in 2018. Nationwide, there were 164 new filings, compared to 135 in the second quarter of 2018. The numbers show a gradual increase in the use of Chapter 12 bankruptcy since 2013, but the numbers are starting to tick up to levels not seen since the Great Recession. Chapter 12 bankruptcy is a special form of bankruptcy that can only be used by family farmers and family fishermen whose total debts do not exceed a certain dollar limit. The current dollar limit is $4.4 million, but there is legislation awaiting President Trump’s signature to increase the limit to $10 million. In large part because of these restrictions, Chapter 12 is one of the least commonly used forms of bankruptcy.
We might be in the middle of planting season, but it’s time for another harvest! Here’s our latest gathering of agricultural law news that you may want to know:
Hemp bill completes third hearing in Ohio House committee. The Agriculture and Rural Development Committee in the Ohio House of Representatives completed its third hearing regarding Senate Bill 57 on Tuesday. The bill would decriminalize hemp produced under the regulatory system proposed in the bill. The committee heard testimony from nearly two dozen individuals and organization representatives. None of the witnesses gave testimony in opposition to the bill. Nearly all of the testimony, including the testimony given on behalf of the Ohio Farm Bureau Federation and Ohio Chamber of Commerce, was offered in support of the bill. The Ohio Farmers Union submitted testimony only as an “interested party” rather than as a “proponent,” saying that it supports the principle of hemp decriminalization, but does not believe that the hemp marketing program established in the current version of the bill would be necessary. Click HERE to view the witness testimony regarding Senate Bill 57 on the Ohio General Assembly’s webpage.
Food and Drug Administration sets public hearing on cannabis in food and drinks. The U.S. Food and Drug Administration has set May 31, 2019 as the date of its first hearing on whether to legalize the use of cannabis derived compounds like CBD in foods and drinks. According to the Federal Register, the hearing is open to the public, and intended for the FDA to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds. The hearing will be held in Maryland on May 31st, but those wishing to submit written or electronic comments may do so until July 2nd. Click HERE for more information from the Federal Register about the hearing.
Cattle ranchers file class action suit against major meatpacking companies. The Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA) and six other named parties brought suit against major meatpackers, including Tyson Foods, JBS USA, Cargill, and National Beef Packing Company. Filed in federal court in the Northern District of Illinois, the plaintiffs’ complaint alleges that these meatpackers colluded to suppress the price of fed cattle since at least 2015, and that as a result, the plaintiffs suffered significant economic harm from the deflated prices. When companies agree to set prices for an industry, they engage in collusion, which could violate U.S. antitrust laws. The 121 page complaint includes a number of charts, graphs, and visuals that explain the alleged economic manipulation, along with a thorough history of an alleged pattern of collusion. If the federal judge certifies the class as requested, other cattle ranchers will have the choice of whether to be included in the class or not. This is important in determining whether the unnamed members of the class are bound by a final decision or able to participate in any settlement or final award. Click HERE to view the complaint and learn more about this lawsuit.
Indiana Right-to-Farm law upheld by Court of Appeals of Indiana. When a federal court in North Carolina decided that that state’s right-to-farm law did not protect hog barns operated by Smithfield Foods in lawsuits alleging agricultural nuisance, there was concern that right-to-farm laws in the United States may be in trouble. However, those fears have begun to subside in other states. As we explained in a previous blog post, Ohio’s right-to-farm law provides greater protections from a nuisance lawsuit than North Carolina’s law. Further, the Court of Appeals of Indiana recently upheld the use of Indiana’s Right to Farm Act. In doing so, it upheld a lower court decision that granted summary judgment in favor of the defendant livestock operators. At the start of the case, the plaintiffs alleged that the defendants created a nuisance, acted negligently, and caused a trespass when the defendants constructed and began to operate a new concentrated animal feeding operation in 2013. However, the defendants cited Indiana’s Right to Farm Act as a defense and won. The plaintiffs sought to challenge the constitutionality of the Indiana’s Right to Farm Act, but the appellate court found that the law was within the legislature’s proper authority, did not constitute a taking, and did not improperly set farmers apart for preferential treatment. The original plaintiffs have a few more days to file an appeal with the Indiana Supreme Court. Click HERE to read the appellate court’s opinion.
State of Washington passes cage-free egg production law. Washington is set to join states like Massachusetts and California in requiring egg-laying hens to live free of cages. Once signed into law by the governor, Substitute House Bill 2049 would require poultry operators to use a cage-free housing system that would allow hens to roam within the confined area by 2023. Further, hens must be “provided enrichments that allow them to exhibit natural behaviors including, at minimum, scratch areas, perches, nest boxes, and dust bathing areas.” Farm employees must be able to provide care while standing in the hens’ usable floor space. The bill would also make it illegal to buy, sell, or transport eggs and egg products that were not produced in compliance with the state’s cage free egg production law. The Humane Society of the United States spearheaded the legislative effort on this bill, which initially passed the Washington House of Representatives 90-6 and the Senate 40-6. Click HERE for more information about the bill’s status, and HERE to read the final text of the bill.
Missouri legislature considers ending local regulation of CAFOs. The Missouri General Assembly is considering a pair of bills that would 1) limit the ability of county commissions and health boards from imposing restrictions on confined animal feeding operations that are more stringent than state law, and 2) eliminate the authority of county commissions and health boards from inspecting livestock operations. So far, each bill has passed one chamber of the Missouri General Assembly, and is being considered in the other chamber. Supporters argue that the bills would provide for regulatory consistency across the state in light of varying local regulations. Opponents argue that the bills would harm local jurisdictions from enacting restrictions that better protect the environment than current state law. This debate is similar to recent and ongoing debates in states like Tennessee and Wisconsin over which entities can regulate confined animal feeding operations, and how much. Click HERE for more information about Missouri’s Senate Bill 391, and HERE for more information about Missouri’s House Bill 951.
Every year, we hear fascinating legal updates at the American Agricultural Law Association’s annual conference. Thanks to presentations by Todd Janzen and Brianna Schroeder of Janzen Ag Law in Indianapolis, we were inspired to learn a little more about trends in meat law. For readers with a livestock operation, these legal issues can present great challenges, and keeping up to date on legal trends helps farmers stay prepared.
Veal, pork, and eggs: states battle each other on minimum confinement space regulations.
California voters passed Proposition 12 in the November 2018 election, which will require producers to comply with minimum confinement space regulations in order to sell certain products in California. The Prevent Cruelty California Coalition placed the proposition on the ballot, expanding a previous regulation on in-state suppliers, but the new law would apply to any producer trying to sell veal, pork, or eggs in California. By 2020, veal calves must be housed with at least 43 square feet of usable floor space, breeding pigs must be housed with at least 24 square feet of usable floor space, and egg-laying hens must have at least 1 square foot of floor space. However, by 2022, egg-laying hens must be cage free. Proposition 12 strengthens requirements approved by California voters in 2008’s Proposition 2 by imposing the requirements on out-of-state producers who want to sell their products in California.
In 2016, Massachusetts voters approved a ballot measure that would require eggs sold within the state to be cage free by 2022. Thirteen states, led by Indiana, have sued Massachusetts in the United States Supreme Court in an attempt to stop Massachusetts from enforcing the requirement. These states allege that the restriction is an attempt to regulate how farmers in other states operate, which violates the rights of other states to create their own regulations. This would be a constitutional question under what is known as the Dormant Commerce Clause, which prohibits states from unfairly regulating business activities that have impacts beyond a state’s border. Status updates on the lawsuit are available here.
Trying a legislative solution to slow the trend of cage-free restrictions, Iowa passed a law earlier this year that requires grocers that sell cage-free eggs to also sell conventional eggs if they want to receive benefits from the USDA WIC program. Supporters of the law argued that cage-free eggs are often more expensive and excluded from the WIC program. They argue that as a result, when grocers make commitments to sell only cage-free eggs, they make it more difficult for low-income families to purchase eggs.
Beef: non-meat proteins continue to target beef.
The “Impossible Burger” wants to convince consumers that a non-meat burger patty that tastes just like meat is just around the corner. Veggie burgers are not new to the grocery store shelves, but recent innovations that have allowed non-meat proteins to improve in taste and texture have raised concerns among meat producers that these products are becoming a serious threat. Given that many of these innovations have taken aim at the burger market, beef producers in particular have felt a target on their backs. As we reported in a previous edition of The Harvest, Missouri became the first state this year to regulate labeling of non-animal products as being derived from an animal, and the U.S. Cattlemen’s Association has petitioned the USDA to consider regulating labels involving animal terms like “meat.” Other speakers at the AALA conference indicated that the USDA is currently debating how to regulate labels, but has yet to develop a comprehensive rule package.
Dairy contracts: always know what you are signing.
The market has been very tough for dairy producers. Having a long term supply contract in place is certainly preferable to no contract, but depending upon the terms of the contract, unfortunate surprises may be in store.
Purchasers often write the contracts, and include terms that favor them. For example, many contracts contain termination provisions that allow either party to end the agreement for essentially any reason with prior notice, often 30 days. When producers invest in their operations under the expectation that the contract will stand throughout the term specified, these termination provisions can result in devastating surprises. As another example, many contracts contain confidentiality agreements that make it difficult for a producer to determine whether the deal they are offered is great, average, or actually bad. Equally concerning for producers are provisions that shift liability for problems with the milk to the producer, and away from the purchaser who sells the milk on the market. With modern technology, tracking where milk originated makes this possible. Courts are likely to enforce these agreements because the law of contracts favors enforcement of private agreements.
Given the current market, many dairy producers felt that they are not in a position to negotiate better terms, for fear that another dairy close by will accept the terms as-is. This position is made worse by the inability of producers to talk about their contracts with one another because of confidentiality provisions.
What a producer can do is to read the contract carefully and make sure that he or she understands the terms of the contract. It may be wise to speak with an attorney to verify that the producer’s understanding of the contract matches how the contract is likely to be read by a court.