chapter 12 bankruptcy

By: Evin Bachelor, Monday, September 16th, 2019

Farm Science Review is upon us, and we’re hoping that the low-80s forecast holds true.  In addition to checking the weather report, we’ve been monitoring the news for developments in the agricultural law world, and quizzing each other on agricultural law topics so that we’re ready to answer your questions.  While we hope you come see our presentations (speaking schedule available HERE), we won’t make you wait until you see us at the Molly Caren Agricultural Center in London to learn what we’ve found in the news.

Here’s our latest gathering of agricultural law news you may want to know:

Family Farmer Relief Act of 2019 signed into law.  We’ve talked about this bill on the ag law blog, and now it’s official.  With the President’s signature, the debt limit for family farmers seeking to reorganize under Chapter 12 bankruptcy increases to $10 million from an adjusted $4.4 million.

No vote on community rights in Williams County, yet.  A proposed county charter for Williams County, Ohio containing language similar to the Lake Erie Bill of Rights may not make it on the November ballot.  The Ohio Supreme Court recently refused to compel the Williams County Board of Elections (BOE) to include the charter on the ballot for procedural reasons.

The charter would have declared that the people of Williams County have the right to a healthy environment and sustainable community, and that the Michindoh Aquifer and its ecosystem have the right to exist, flourish, evolve, regenerate.  Further, the aquifer would have the right of restoration, recovery, and preservation, including the right to be free from interferences such as the extraction, sale, lease, transportation, or distribution of water outside of the aquifer’s boundary.

Even though the petition to put the charter on the ballot had enough signatures, the BOE believed that the language of the charter violated Ohio law, and therefore exercised its power to reject the petition and keep it off the ballot.  The petitioners appealed the BOE’s decision to the Williams County Court of Common Pleas, and that court agreed with the BOE.  Instead of going to the Court of Appeals, the petitioners tried to go directly the Ohio Supreme Court because the BOE will soon print the November ballots.  The Ohio Supreme Court said the petitioners should have gone to the Court of Appeals first, and that it will not decide on whether the BOE has to include the charter on the ballot until the petitioners do so.

This doesn’t mean the end for the proposed charter, but rather that more court time is in the proposed charter’s future.  To read the Ohio Supreme Court’s opinion, click HERE.  To read the text of the proposed charter, click HERE.

Hemp, hemp, and more hemp.  Legal and policy updates on hemp continue to trickle down from state and federal officials.  Since our last blog post, when we released our latest law bulletin on the legal status of hemp in Ohio, there have been a couple additional developments.

One of the latest updates we’ve heard from USDA is that industrial hemp growers in states with a USDA-approved hemp production plan may apply for crop insurance to cover hemp grown for fiber, flower, or seeds starting next year.  Ohio is in the process of putting together a hemp program to send to the USDA for approval.  Ohio farmers still cannot legally grow hemp until the Ohio Department of Agriculture creates a hemp program and the USDA approves that program, but we are expecting rules to be released from those agencies in the coming weeks.  For more about the crop insurance update, read the Risk Management Agency’s press release HERE.

Closer to home, we’ve heard that the Ohio Department of Agriculture (ODA) has requested $3.3 million from the Ohio Controlling Board for staffing along with IT equipment and support.  Further, ODA has made statements predicting that it expects to have its rule hemp program rule package ready by the end of the year.

Federal court orders U.S. EPA to reconsider Renewable Fuel Standards waivers and their impact on endangered species.  The U.S. EPA is responsible for creating fuel standards that incorporate and blend renewable sources of energy under the Clean Air Act.  These standards tell refineries how much of their fuel blend must come from renewable sources of energy; however, the U.S. EPA also has the authority to grant waivers to companies that would have difficulty meeting the standard.  The court noted that some industry groups felt that the 2018 rules were too strict, while others argued that they were too lax.  The court ended up dismissing all but one of the claims against the U.S. EPA, saying that Congress gave it discretion in developing the standards.  However, the court sent the rule back to the U.S. EPA due to an argument by environmental groups that the federal agency failed to conduct a thorough review of the risk to endangered animals, plants, and habitats under the Endangered Species Act.  Many farm groups have criticized the Trump administration’s granting of waivers for causing a reduction in demand for their products from energy companies, but it appears that they will have to make their arguments to the administration rather than to the courts.  To read the D.C. Circuit’s opinion, click HERE.

By: Evin Bachelor, Thursday, August 22nd, 2019

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. 

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