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.
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.
Written by Evin Bachelor, Law Fellow and Sr. Research Associate
We’re back from another successful Farm Science Review! Thank you to everyone who stopped by our booth to ask us questions and pick up law bulletins. We received some great suggestions on new topics affecting agricultural law, so stay tuned as we post more to our Ag Law Blog and Law Library in the near future.
Here’s our gathering of ag law news you may want to know:
ODA reviews meat inspection rules. Ohio’s meat inspection rules are up for review under the state’s Five-Year Review requirement. The Ohio Department of Agriculture (ODA) recently posted the proposed changes to Ohio Administrative Code 901:2-1; 901:2-3; 901:2-6; and 901:2-7 for stakeholder comment on its website. The primary changes to the substance of the rules are meant to bring them into compliance with new federal requirements that took effect earlier this year. ODA also proposes to merge the interstate and intrastate regulations, which could change some rule numbers, but not necessarily their substance. ODA will be accepting comments until Monday, October 1, 2018, which stakeholders may submit to AGReComments@agri.ohio.gov.
OSU explains tariff relief program and impacts. Our good friend and economist Ben Brown and other policy experts in OSU's College of Food, Agricultural, and Environmental Sciences recently published information that explains and analyzes the USDA’s response to the tariffs. View a brief brochure that explains the Market Facilitation Program here. View a longer report on the Market Facilitation Program and the impacts on farm income in Ohio here .
U.S. EPA petitions for new hearing on Chlorpyrifos registrations. A panel of three judges on the U.S. Court of Appeals for the Ninth Circuit in San Francisco ordered the U.S. Environmental Protection Agency (EPA) to cancel chlorpyrifos registrations in August. The judges cited scientific evidence that the chemical insecticide causes developmental defects in children. The U.S. Department of Justice (DOJ), on behalf of the U.S. EPA, filed a petition on Monday, September 24th, requesting an en banc hearing on the decision. If granted, an en banc hearing would involve all the judges who serve on the Ninth Circuit, rather than only the three judges who initially ordered the cancellation of the registrations. The U.S. DOJ argues that the August decision was incorrect and that the court should allow the U.S. EPA to reconsider the insecticide’s registration. For more details, check out The Progressive Farmer’s post here.
License needed to broker oil and gas leases in Ohio. On Tuesday, September 25th, the Ohio Supreme Court decided that oil and gas leases fall within the statutory definition of “real estate.” As such, a person who offers and negotiates an oil and gas lease must have a real estate broker’s license under Ohio Revised Code § 4735.01(A) and § 4735.02(A). Check out Court News Ohio’s webpage for more details.
No "bill of rights" vote for Lake Erie. The group Toledoans for Safe Water sought to put a “Lake Erie Bill of Rights” on the ballot this November as an amendment to the Toledo City Charter. The amendment would have stated that Lake Erie and its watershed “possess the right to exist, flourish, and naturally evolve,” and that the citizens of Toledo have a right to a clean and healthy environment. Enforcement would have been through a mix of revoking corporate licenses and privileges or criminal penalties if violated. Despite having enough signatures, the Lucas County Board of Elections refused to place the issue on the ballot, saying that the amendment contained provisions beyond the City of Toledo’s authority. The dispute made it up to the Ohio Supreme Court, which on Friday, September 21st, decided that Toledoans for Safe Water failed to prove that the Lucas County Board of Elections improperly denied their petition to place the issue on the ballot. The court’s decision is here.
Iowa court makes owner liable for corporate liabilities. An Iowa Court of Appeals decision recently allowed a plaintiff who was suing a biosolids management corporation to “pierce the corporate veil” and collect directly from the sole owner of the corporation. The plaintiff obtained a judgment of $410,067 against the corporation for breach of contract after the corporation stopped performing its work. However, the plaintiff could not collect against the corporation, and an Iowa Court of Appeals decided that the sole owner must pay the judgement. The court said that the owner did not conduct the business or maintain its finances in a manner that demonstrates the existence of a separate legal entity from himself or his other businesses. The owner co-mingled corporate and personal assets and accounts, failed to keep records, and had no bylaws or meeting records. For more on the case, visit the Iowa State University’s Center for Agricultural Law and Taxation website here, or view the case opinion here.
California passes "home cooked food" law. California's governor signed a bill into law last Friday that allows cities and counties to authorize and permit residents to operate “microenterprise home kitchens.” Assembly Bill 626 exempts qualifying businesses from some food service facility regulations to allow residents to sell prepared food from their home, while also recognizing the differences between a home kitchen and a commercial kitchen. To qualify, among other things, the operation can have no more than one full-time non-family employee, the food must be sold direct to the customer, and no more than 60 individual meals can be prepared per week. The bill’s full text and legislative analysis are here.
Barn wedding popularity continues to grow. Fifteen percent of weddings in the United States took place in a barn last year, according to a survey published by the wedding planning site The Knot. In comparison, only two percent of weddings took place in a barn as recently as 2009. The popularity of wedding barns has become a point of contention in many states, including Ohio, because statutory zoning exemptions for agriculture have been used to exempt wedding barns from zoning requirements. We explain Ohio's zoning exemption for "agritourism" in this law bulletin.
Ohio legislation on the move:
- Ohio Senate refers township bill to committee. The Ohio House of Representatives passed House Bill 500 earlier this summer, and the bill has recently been referred to the Ohio Senate’s Local Government, Public Safety, and Veterans Affairs Committee. House Bill 500 proposes to make a number of changes to Ohio’s township statutes, including a change to agricultural zoning regulations. If passed as-is, the bill would allow a township to use zoning to regulate agricultural activities within any platted subdivision. Under current law, townships are limited to a specified list of platted subdivisions that townships may regulate; however, the new law clarifies that the specified list is not intended to be exclusive. For more information on the bill, view the bill analysis produced by the Ohio Legislative Service Commission, or visit the Ohio General Assembly’s website here.