The Biden administration recently announced a proposed regulation to revise the Packers and Stockyards Act to require more disclosures to contract poultry growers. These regulations would fully replace the proposed regulations announced by the Trump administration. The regulations being proposed by USDA are to combat a concern by USDA that poultry growers are not fully aware of the financial risks associated with flock placements and the tournament system. At the same time, there is a concern that growers potentially are making financial decisions involving improvements to houses without fully understanding the financial risks. The proposed rules would assist in combating that. The current administration’s proposed regulations are similar to efforts made at the end of the Obama administration to create transparency in the tournament system.
The Court of Special Appeals of Maryland recently reversed the Circuit Court for Howard County’s granting of summary judgment involving how to interpret a conservation easement. At issue in the decision is whether the easement allowed for additional residences to be built on the preserved farmland beyond the existing four residences when the easement was granted. The easement permitted additional structures supporting continued agricultural use of the land to be built. The new owners argued that the new house was an “additional structure” and should be allowed. The decision is in Roxbury View, LLC v. McCauley.
In 1978, the Chases conveyed a conservation easement over 285 acres in Howard County to the Maryland Environmental Trust (MET). When the easement was conveyed, the property included the main residence, guest house, a swimming pool near the main residence, a farmhouse, a tenant house, a large barn with two silos, a loafing shed, a large herringbone milking parlor, and two storage sheds.
Within the easement, the Chases and future owners of the farmland would be unable to construct new buildings, facilities, or structures, unless one of four conditions were met: 1) if the new construction replaces a preexisting structure on the property and is the same size, bulk, and height or floor area as the structure it is replacing; 2) if the new construction is an addition to an existing structure; 3) if the construction is necessary for and directly related to the continued agricultural use of the property; or 4) if the construction was designed or utilized to support the residents of one of the existing residences on the property, such as a pool, tennis court, tool shed, garage, or gazebo.
In 1979, subdividing the Chase property began, with the Chases conveying 261 acres to the Zepps and retaining the remaining 28 acres. The Zepps property became Lot 1 and Chase property Lot 2. Lot 2 contained the Chase main residence and guest house. Lot 1 contained the farmhouse and the tenant house. In 1994, the Sharps, who requested and obtained MET approval to rebuild the tenant house (which was no longer standing), purchased Lot 1. The Sharps never rebuilt the tenant’s house, however. In 1996, the Sharps subdivided Lot 1 into Lots 3, 4, and 5, so that Lot 1 no longer exists. In 2012, the Sharps subdivided Lots 3 and 5 into Lots 6, 7, and 8, and Lots 3 and 5 no longer existed. In 2018, Lots 4, 7, and 8 were sold to Roxbury View, LLC. Roxbury View entered into agricultural leases on the property and hired a farm manager to support the operations leasing the lots. Lot 4 contains the site of the farmhouse and the former tenant house.
In 1995, the Kleins bought Lot 2 and sought and received approval to rebuild the guest house destroyed by a fire on the lot. At no time, however, did the Kleins rebuild the guest house. Lot 2 currently contains only the main residence; and the guest house was not rebuilt.
In 2018, Roxbury View sought MET approval to construct three replacement dwellings on Lots 4, 7, and 8. Roxbury wanted to replace the farmhouse on Lot 4, the tenant house on Lot 4 but move it to Lot 8, and rebuild the guest house on Lot 7 that was originally on Lot 2. Roxbury argued that replacement dwellings according to the easement were not required to be in the exact location. Roxbury later withdrew its request to replace the guest house on Lot 7. MET approved a replacement farmhouse on Lot 4 and a tenant house on Lot 8. MET stated in the approval the total number of dwellings allowed on Lots 4, 7, and 8 is two.
Although Roxbury had withdrawn approval to build a house on Lot 7, they began construction of a new dwelling on Lot 7. Roxbury View argued that the residence would be allowed under the terms of the conservation easement in paragraph 3 which allowed for the construction of necessary new structures directly related to the continued agricultural use of the property. MET sent a notice of violations of the easement for the construction to Roxbury View, but the building continued. Finally, the house was completed and leased to the farm manager. The lease required the farm manager to watch the property, routinely inspect it, and make repairs as needed.
The current owner of Lot 2 filed a lawsuit against Roxbury View and MET for the new construction. MET countersued Roxbury View for violating the terms of the easement and requesting a declaration that Roxbury View violated the easement terms by constructing a house on Lot 7. The circuit court granted MET’s motion for summary judgment, declaring that Roxbury View violated the easement terms. The new residence had to be removed and demolished within six months of the court order. Roxbury appealed the court order.
Court of Special Appeals Decision
The main focus of the court’s opinion is on a procedural issue not of much interest to us. We will focus more on the circuit court’s decision to grant summary judgment in favor of MET. In reviewing the lower court’s decision, the court must determine if the easement is unambiguous and not susceptible to two reasonable interpretations. In reviewing the record, the court finds the easement to be ambiguous because a reasonable jury could find that easement does not prohibit the construction of a house on Lot 7.
In looking at Paragraph 3 of the easement, the terms limit structures to those existing in 1978 and any necessary structure to support continued agricultural use of the property. In reviewing Paragraph 3, residences are included in the definition structure. A reasonable person could interpret Paragraph 3 to allow an owner to construct a new residence necessary to support the continued agricultural use of the property. Within the record, the court could point to evidence from the tenants leasing farmland from Roxbury that the farm manager living on the property helped deter equipment theft and assist in knowing about issues with livestock on the property. There was also evidence to suggest that Roxbury was on the record of wanting three houses on each of the lots. Either way, a jury should be allowed to hear the evidence and weigh the credibility of the evidence in making a decision. For those reasons, the court reverses the lower court’s decision.
The Court of Special Appeals decision could still be appealed to the Court of Appeals. At the time of this overview, that had not happened. We know the motion for summary judgment has been reversed, and the circuit court will have to start working through this case again.
A recent decision by Maryland’s Court of Special Appeals highlights the differences that proposed power generation facilities can bring before the Public Service Commission (PSC). For example, a proposed power generation facility can consider applying for a Certificate of Public Convenience and Necessity (CPCN) or for an exemption from the CPCN process. The recent decision in Dan’s Mountain WindForce, LLC v. Shawhighlights the differences between these two processes, which will be vital to understand as renewable energy development in the state increases.
For over a decade, Dan’s Mountain Wind Force, LLC (Wind Force) has been trying to construct 17 wind turbines and a substation on Dan’s Mountain in Allegany County, Maryland. In 2016, the PSC rejected the Wind Force application for a CPCN for not being in the public interest. In 2020, Wind Force applied to the PSC, seeking an exemption from the CPCN process, which was granted. Concerned neighbors, however, challenged granting this exemption in the circuit court for Baltimore City. The circuit court reversed the PSC’s decision, denying the CPCN exemption. Wind Force appealed to the Court of Special Appeals.
CPCN Permit and Exemption
The court’s opinion highlights the differences between the two processes. To obtain a CPCN, an applicant must provide a detailed description of the proposed power generation facility, and a statement detailing how the facility will comply with all environmental laws, potential impacts the facility will have on the State’s natural resources, socioeconomic effects of the proposed facility, description of environmental justice issues affected by the facility, explanation of efforts to engage the public and encourage public participation, and any condemnation required. Condemnation would be a legal process of eminent domain exercised by a governmental entity or a utility to take over the property and the owner paid reasonable compensation for the property. The CPCN process allows the State to approve the construction of a power generating facility.
If a proposed facility seeks a CPCN exemption, that removes the State from overseeing construction and requires the facility to go through the county for approval. The CPCN exemption process is simplified for certain facilities, including small wind-powered generating facilities. The PSC must determine if the proposed CPCN process:
Ensures the safety and reliability of the electric system;
Requires the owners of the facility to notify PSC within two weeks before exporting power; and
Confirms that PSC can conduct the review and approval expeditiously.
If the PSC agrees that the facility meets the exemption requirements, then that transfers the responsibility for regulatory approval to the county the facility will be located.
Court of Special Appeals Decision
On appeal, the neighbors argued that the CPCN application in 2016 precluded the PSC from granting the 2020 CPCN exemption. The neighbors argue that either res judicata or collateral estoppel prevents granting the application. Res judicata prevents the same parties from litigating a second lawsuit on the same claim or any claims arising from the series of transactions lead to the first lawsuit. It is based on the principle that parties should not relitigate the same issues once a judgment has been issued. A res judicata defense requires of the parties to show:
The parties to the second action are the same as the parties from the first action,
Both the first and second actions present the same claim or cause of action, and
There was a final judgment rendered on the merits by a court of competent jurisdiction in the first action.
The court, on appeal, has to determine if the 2020 CPCN exemption is the same “claim” as the 2016 CPCN application.
On appeal, Wind Force argued that the claims are not the same since each follows a different process. The neighbors argue that the CPCN exemption process is essentially the same but an abbreviated process as the CPCN application process. To the neighbors, both processes required the same evidence and involved Wind Force’s continued efforts to get the proposed project approved. As discussed earlier, with the CPCN process, the PSC preempts a local government and regulates the siting and construction of a power-generating facility. During that process, the PSC will consider siting and additional regulatory decisions needed to construct and complete the project; the PSC is just determining if the project qualifies for the exemption. If approved, the local government takes over siting and other requirements to construct the project. To the court, these are two separate processes with separate claims, and each process has different requirements. Therefore, the court rules that res judicata does not apply.
The court next turns to the neighbors’ claims that the exemption should be barred by collateral estoppel. Collateral estoppel prevents parties from relitigating an issue of fact or law in a different legal action. Collateral estoppel is a defense requiring the raising party (in this case, the neighbors) to show:
The issue is identical to a previously litigated one,
The prior proceeding determined the issue,
With the issue, the current determination was a critical and necessary part of the prior decision,
The prior decision was a final and valid judgment, and
The party whom estoppel is asserted against had a full and fair opportunity to litigate the issue during the original case.
In this case, the parties are only focused on the first element.
Wind Force argues that the issues in the CPCN exemption are different from those in the original application. Neighbors argue that PSC found the project would have no public benefit, so the PSC cannot reverse course and grant the CPCN exemption. The issue is that the public benefit is not required in the exemption process.
The neighbors argued that the PSC did not have sufficient evidence to grant the CPCN exemption based on the denying the CPCN application. In reviewing the record, however, the court found that PSC had demonstrated Wind Force’s exemption request met statutory requirements. Therefore, PSC was not required to overcome a prior finding that the CPCN application was not in the public interest. Accordingly, the court reverses the lower court’s decision.
As mentioned earlier, Wind Force has been working to develop this site as a wind farm for over a decade. This decision will allow Wind Force to continue to work through the county permitting process to build this facility.
An interesting potential class action was recently filed in U.S. district court in South Carolina involving a broiler grower and Amick Farms. In this class action suit, the grower argues that they and other similarly situated growers for Amick Farms are Amick employees and not independent contractors as their contracts state. This action is currently in the early stages and will be worth watching for those in the industry going forward. It is important to note that, however, as of right now, the action only involves Amick Farms and no other integrated poultry operations. The action in question is Diaz v. Amick Farms, LLC, No. 5:22-CV-01246.
What Is a Class Action Lawsuit?
Many of us have received that random check in the mail for a small amount as our payout on a class action lawsuit. But many people may not understand what a class action lawsuit is. Class action lawsuits allow the judicial system to manage lawsuits that potentially could be unmanageable. Cases would become unmanageable if each potential class member were to bring a lawsuit. In class actions, the class members must share common questions of law or fact, with proposed claims or defenses being typical for each class member. At the same time, class actions require that the size of the potential class makes it impractical for all the members to join in and that the class representatives can adequately protect the interests of the entire class.
That definition can be confusing, but let’s look at a few recent examples that many in agriculture might be familiar with: the recent Syngenta corn seed settlement or the settlement reached with Bayer over the off-target dicamba applications. For a grower who experienced loss in either of those cases, there were other growers also experiencing the same loss with very similar fact patterns. By consolidating all these cases with similar fact patterns, losses, and other commonalities, we can reduce the burden on the court system and allow cases to proceed more quickly.
Diazes and the Diaz Family Farms, LLC, operating a broiler farm in South Carolina, are bringing claims against Amick Farms, LLC, an integrated poultry company that contracts with growers to raise broilers. Amick Farms processes these birds and markets the final products.
Diaz Farms was one of these contractors, an independent contractor to Amick Farms as standard in the industry. An independent contractor is a self-employed person or entity with the right to control or direct the result of work, what will not be done, and how work will be done. For example, if you pay a mechanic to fix your vehicle, the mechanic would be an independent contractor since the mechanic has control over the vehicle, how the work will be done, and what will not be done. Independent contractors are responsible for paying their social security taxes and Medicare taxes.
Claims Being Pursued
Diaz Family Farms’ claims are centered on arguments that broiler growers for Amick Farms are not independent contractors but employees, that Amick Farms controls every aspect of raising the broilers, and that the growers are employees of the company. As employees, Diaz Family Farms argues that the company has not been paying the federal minimum wage ($7.25/hour) for growers’ work.
Diaz also argues that Amick has violated South Carolina state law requiring employers to notify employees in writing when hired of regular hours agreed to, wages agreed to, the time and place of work, and any deductions from wages. The claims are that Amick often requires growers to make costly improvements to their poultry houses, or the grower might lose their contract. The Diazes argue that these expensive improvements and the tournament system pay system violate South Carolina state law.
At the same time, the Diazes claim that other employees of Amick Farms are offered benefits including health insurance, life insurance, disability insurance, and 401(k) plans. A federal law, Employee Retirement Income Security Act (ERISA), sets minimum standards for employers’ voluntary retirement and health plans. The Diazes argue they were eligible for these benefits as employees, and Amick failed to extend these benefits to them.
Finally, the Diazes include in their suit state law claims of violating South Carolina’s Unfair Trade Practices Act (UTPA), breach of the grower contract by a fraudulent act, and breach of the contract by violating the implied covenant of good faith and fair dealing. Violating the UTPA is the only claim brought just on behalf of the Diazes and not the entire class. This claim is based on Amick using contractual language leading the Diazes to believe they were independent contractors when their experience with Amick meant they are employees. Based on their arguments, the other two claims are also based on Amick using the contractual language to lead the plaintiffs to believe they are independent contractors when they are employees.
Amick Farms has yet to answer this complaint. Since the suit is currently only in the pleading stages, we will have to wait and see whether the case will be certified as a class action lawsuit and how much further it may proceed through the court system.
Recently, the 9th Circuit Court of Appeals vacated Idaho’s Concentrated Animal Feeding Operation (CAFO) National Pollutant Discharge Elimination System (NPDES) permit for lack of monitoring underground discharges and potential discharges from dry weather applications. Food and Water Watch (FWW) and the Snake River Waterkeepers (SRW) brought the lawsuit. The decision vacates the permit back to EPA to determine its next steps. The decision is in Food & Water Watch v. EPA.
The Ninth Circuit Court of Appeals recently affirmed a U.S. District Court of the District of Montana decision holding that the Montana Beef Council’s and other qualified state beef councils’ (QSBCs) advertisements are exempt from First Amendment scrutiny. The decision is in Ranchers Cattlemen Action Legal Fund United Stockgrowers of America v. Vilsack, No. 20-35453 (9th Cir. July 27, 2021).
Back in 2018, I posted on a federal district court decision involving a challenge to a USDA loan guarantee granted to a new Maryland poultry farm in Caroline County. Food & Water Watch (FWW) had challenged the environmental assessment required at the time to comply with the National Environmental Policy Act (NEPA); see that information here. In 2018, the federal district held that FWW had standing to bring the challenge. Still, a federal court of appeals recently reversed this decision. A two-judge panel of the U.S. Court of Appeals, District of Columbia, agreed that FWW did not have standing.
The Supreme Court of Iowa recently found that a dispute brought by two groups against the state of Iowa lacked standing and was not an issue the courts could decide. The two groups claim that excessive nitrate levels from agricultural runoff into the Raccoon River had impaired recreational uses of the river and increased costs to purify the water for drinking. The decision, Iowa Citizens for Community Improvement v. State of Iowa, can be found here.
I am back again, highlighting another court decision covering a state’s right-to-farm law and the use of scare guns. In Mississippi, two producers began using propane cannon scare guns to prevent deer from eating their cotton and soybean crops during the summer months. The propane cannons created loud noises, and the neighbors’ ensuing lawsuit tried to prevent the two producers from using the cannons, claiming nuisance. The trial court agreed with the two producers that the state’s right-to-farm law barred the nuisance claim, and the Supreme Court of Mississippi recently upheld the trial court’s ruling, in Briggs v. Hughes.
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Late in 2020, we had a North Carolina Hog Farm Litigation settlement that ended several lawsuits filed against Murphy-Brown, LLC and Smithfield Foods. In May 2020, neighboring landowners filed a new set of federal lawsuits against Murphy-Brown and Smithfield, the same defendants in the prior lawsuits. Similar to the previous lawsuits, neighbors sued the companies that the farms grow for, not the actual hog farms themselves. In these lawsuits, the neighbors used legal theories based on trespass and negligence and not around nuisance. Recently, the federal judge hearing the lawsuit allowed it to continue and ruled the state’s right-to-farm law did not apply, though providing a defense in this case to the trespass and negligence claims. The judge also dismissed two other claims brought by the neighbors.