Midwest Agricultural Law Guide

Omaha Farming Lawyer & Environmental Attorney | Lamson, Dugan & Murray Law Firm

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Niobrara River irrigators win big hand against NPPD in water rights card game.

By Sean Minahan on Posted in Water Law

Irrigators on the Niobrara River Basin won a big hand recently when the Nebraska Supreme Court found in their favor again.  The ruling does not end the ongoing card game with NPPD, but it may give irrigators a chance to expand their water rights in the basin.   

Last June, I posted this blog regarding the Court’s decision ordering the Department of Natural Resources (DNR) to re-determine whether the basin was “maxed out” for irrigation purposes.   Despite the ruling, the Nebraska Public Power District (NPPD) held the trump card, since NPPD held senior water rights which limited water access to junior appropriators unless the junior appropriators compensated NPPD.   

Two landowners called NPPD’s bluff and argued NPPD abandoned or forfeited its right to claim certain water rights at the expense of junior appropriators.  The DNR initially found that challenges to water appropriations were governed by statute and had to be brought through a cancellation proceeding.  The Court disagreed and held the statutes are not the end-all means for challenging water rights.  Rather, the landowners could rely on ”common law” arguments that NPPD forfeited or abandoned its senior water rights.  

Nebraska has defined abandonment as “the relinquishment of a right by the owner thereof, without any regard to future possession by himself or any other person, but with the intention to forsake or desert the right.”  On the other hand, forfeiture occurs when an appropriator fails to use water rights for a statutorily determined time frame, “resulting in a clear loss of any right of appropriation”.  Simply put, the DNR will now have to decide whether NPPD intentionally relinquished certain appropriation rights or failed to use its water rights thereby losing such water rights to junior appropriators. 

According to this recent World Herald article by Paul Hammel, NPPD is confident that it has not abandoned or forfeited any water rights.  The landowners, however, claim NPPD abandoned or forfeited its water rights by failing to speak up while landowners acquired irrigation rights throughout the past several years.   

Whatever the DNR’s decision, I am sure the Nebraska Supreme Court will have the final say in who holds the winning hand.  Stay tuned.  

Ag’s voice heard: Dept. of Labor withdraws proposed child labor revisions

By Sean Minahan on Posted in Government Regulations

It looks like the thousands of comments opposing the Department of Labors’ (DOL) proposed child labor revisions regarding agriculture has worked.  I summarized the proposed changes in my November 17 blog: Child-labor and Agriculture: Proposed rules restrict youths’ access to agricultural jobs.  Today the DOL issued a statement that the proposals were withdrawn and would not “be pursued for the duration of the Obama administration.”

The last part of the statement indicates that the withdraw may have been some “politican” on the president’s part to please the agriculture lobby and constituents.  Whatever the purpose, the DOL’s decision will be celebrated by rural families across the country who were worried that the proposed regulations would limit and prevent the next generation from acquiring the necessary skills and knowledge to run and operate a farm or ranch.

The DOL has decided the more practical approach for ensuring safety on the farm and ranch was through educational programs and safety promotions rather than an unpopular ban.  Farmers and ranchers are relieved that the regulatory agency has taken into consideration the thoughts and desires of the people regulated.

Nebraska doesn’t allow prenuptial coercion to protect ag interest

By Sean Minahan on Posted in Farm Management

Family farms and ranches are built on generations of hard work, determination and a little bit of luck.  Considering all the sweat that goes into building a successful operation it is imperative for the farmer or rancher to have a plan to keep the operation in the family through situations such as death, divorce or dissolution.  There are several options and your attorney can help you pick out the best options for you and your operation.  

With that said, you must make sure that your plan holds up under legal scrutiny.  Otherwise you basically have no plan.  Recently, one Nebraska farmer had his plan thrown out by the Nebraska Supreme Court.  As reported in this article by Paul Hammel of the Omaha World Herald.      

Kevin Mamot was a part-owner of a feedlot, farm and trucking company in St. Libory, Nebraska.  Kevin had been living with Valara since 2003 and finally decided to get married on June 17,2006.  Kevin suggested they sign a prenuptial agreement and Valara agreed.  However, Kevin presented the agreement over a lunch hour on June 12, 2006; 5  days before the wedding and after invitations had gone out and commitments were made for the reception hall, flowers and DJ.  Although Valara wanted the agreement reviewed by an attorney, Kevin advised that “we’re not getting married Saturday” if she did not sign it immediately.  Surprisingly the marriage did not last. 

The Nebraska Supreme Court found the premarital agreement invalid for a number of reasons: (1) Kevin’s threat of canceling the wedding five days before the wedding date essentially coerced Valara into signing the agreement; (2) the inequality of bargaining power between Kevin, who owned and operated three companies with assets of over 1 million dollars, and Valara who had become a housewife; (3) Valara unknowingly waived her right to accumulate any assets during the marriage given her position as a housewife, which defied ”the basic underpinnings of the marital relationship”; and (4) Valara was denied the opportunity to have independent counsel review the agreement.  You can read the full decision at Mamot v. Mamot.  

Prenups are valid means of protecting the farm or ranch that you have built from the possibility that your marriage does not work out.  However, the lesson to be learned from Kevin is that you have to do it right and give your spouse the time and opportunity to protect his or her self. 

    

Organic Farmers Appeal Monsanto’s Victory Regarding Patent Infringement Claims

By Sean Minahan on Posted in Biotechnology

In mid-March I posted this blog summarizing Monsanto’s victory over a group of farmers and producers.  The farmers were looking to prevent future patent infringment claims by Monsanto for inadvertent planting or harvesting seed contaminated by Monsanto’s genetically modified seed.  The following telephone coversation occurred shortly after the judge ruled in Monsanto’s favor: 

Counsel for farmers: “Good afternoon, congratulations on obtaining the judgment in your favor, but surely you did not think we would let the decision stand withough appealing.”

Monsanto: “Well thank you, and we fully expected there would be an appeal.  Oh, and don’t call me surely.”  

Actually, I don’t know if that conversation occurred and even if there was a conversation, it probably did not include a quote from the movie Airplane.   But the point is the farmers’ appeal was not unexpected.  The farmers’ responses to the court’s decision can be found in this article: Farmers Determined To Defend Right To Grow Food File Appeal In OSGATA Vs. Monsanto.   

Despite the farmers’ strong response, they may not have the legal groundwork to support an appeal.  The court of appeals will have to decide whether the district court’s decision was an “abuse of discretion”, which is legal mumbo jumbo for ”totally screwed up”.  Appellate courts are not generally inclined to overturn a decision for ”abuse of discretion” unless the district court had absolutely no support for the ruling.  In finding for Monsanto, the district court carefully outlined several facts to support it decision.   

From a strictly legal perspective, the farmers’ have some heavy lifting to get the order overturned.  However, it would not be the first or last time I was surprised by a court of appeals decision if the farmers were successful.     

 

Are You Adequately Covered For Ag Environmental Losses?

By Sean Minahan on Posted in Farm Management

(First in a series of Insurance Issues for Agribusiness)

POLLUTION EXPOSURE

All farmers and agribusinesses have a potential pollution exposure.  Some of the largest risks can arise when transporting chemicals, operating heavy equipment or dealing with waste run-off from a hog or cattle operation.  Also fires can erupt that release potential harmful gases.  Smaller risks arise from spilled chemicals or noxious fumes.  Vandalism also can cause a pollution loss.  In fact, a good percentage of pollution coverage lawsuits in the Midwest come from agriculture business of some type or another.

What you think might be covered probably is not.  Make sure you find out from your agent if you are protected from these risks.  All standard CGL policies contain a pollution exclusion clause.  Most recent policies do not cover any environmental losses at all.  Others cover only very limited losses, such as fumes from faulty heating and cooling units, hostile fires (one that you did not create) and escape of operating fluids from your mobile equipment.  These clauses do not cover chemical spills, pathogen claims, or environmental cleanup costs.

What has Nebraska case law deemed to be covered? It depends upon the language of your insurance policy – which always controls.  However in certain cases the courts have denied coverage to the policyholder for such unexpected claims as:

  • Carbon Monoxide from faulty furnace.
  • Mercury present in building.
  • Xylene fumes from cement sealant.
  • Grease from a rendering plant.
  • Herbicide/pesticide applications drift.

Ag Operations Takeaway Tip:  All standard policies have serious coverage gaps for farmers and agribusiness.  Check with your agent to determine the extent of your coverage.  Consider purchasing a policy tailored for agribusiness or adding endorsements to your existing policy if your risk is more limited.  The small cost for coverage to close the gap is worth it.

Anne Marie O’Brien

Anne Marie O’Brien is a partner at Lamson, Dugan and Murray, LLP.  She has over 27 years of experience in litigating insurance coverage claims to victory.  She represents both policyholders and insurance companies.  She writes articles and has routinely lectured to other lawyers on issues such as transportation law, insurance subrogation and environmental coverage. 

Airborne Water Pollution: North Carolina case decides whether Clean Water Act regulates airborne emissions

By Sean Minahan on Posted in Government Regulations

As the old saying goes; what goes up, must come down, which is why celebratory gunfire is not that great of an idea.  With that clever segue, a North Carolina court will have to decide whether the Clean Water Act (CWA) can regulate what goes up before it comes down.

The case involves Rose Acre Farms which is a large egg farm, housing over 3 millions hens near a national wildlife refuge in northeastern North Carolina.  In 2004, Rose Acre obtained a CWA permit through North Carolina’s Division of Water Quality, but not a Clean Air Act permit because airborne emissions were not above federal standards.

In 2010, Rose Acre’s CWA permit was renewed but with conditions to reduce Rose Acre’s ammonia emissions, which the state believed were settling and polluting nearby waterways.  Rose Acre appealed the new conditions to an administrative law judge who ruled that the CWA did not regulate airborne ammonia emissions.

A subsequent hearing by the state Environmental Management Commission (EMC) reversed the judge’s decision and sent the case back to determine whether Rose Acre’s airborne emissions were actually polluting the water.  The EMC’s decision essentially allowed CWA regulation of airborne emissions if such emissions were polluting nearby waterways.  Thereafter, Rose Acre filed suit requesting an injunction on the EMC’s decision and a determination whether the state could regulate air emissions through the CWA.

Environmental groups, including the Pamlico-Tar River Foundation and Friends of Pocosin Lakes National Wildlife Refuge, have joined the lawsuit to defend the Commission’s decision.  Both argue that Rose Acre’s airborne emissions ”have serious public health implications for both the local area and the state of North Carolina.” Jerry Eatman, as quoted by Craig Jarvis at NewsObserver.com

The case is important nationally, as livestock producers and environmentalist will be looking to see whether the Rose Acre case allows Clean Water Act regulations on pollutants going up before they come down.

Stay tuned.

Iowa’s Chief Justice Cady proposes agricultural courts

By Sean Minahan on Posted in Uncategorized

 

Lady Justice outside Iowa Supreme Court

Iowa’s Chief Justice of the Supreme Court recently brought up the idea of developing a specific court system to handle agricultural issues.  As a licensed Iowa attorney with a specific interest in agriculture, I love the idea.  Plus, such a court would be a great asset for Iowa’s number one industry.  

Chief Justice, Mark Cady, brought up the idea during an appearance in Tipton, Iowa while drumming up support for an increase in funding for Iowa’s court system.  Chief Justice Cady emphasized that national agricultural companies would more likely do business in Iowa if Iowa had a specific agricultural court with judges who were experts in the fields of agricultural law. 

I think the Chief Justice is right in promoting the need for additional funding for the court system.  Although Iowa’s court system is currently rated fifth nationally, the Chief Justice pointed out that the courts are taking too long to reach decisions and are failing to help those most in need.  I can personally attest to Justice Cady’s concerns regarding the court’s need for more resources.  

I also like the Judge’s outside-the-box thinking in dealing with legal issues at the forefront of agriculture.  Logistically, however, I question whether you could divvy up jurisdiction between agricultural and non-agricultural courts.  Which issues would be considered agricultural and which would not, especially in the Midwest where agriculture touches almost everything?  Would a trespass claim, or injury claim be handled differently just because the event occurred on a farm or ranch rather than somebody’s backyard?  

I would be interested to hear examples of other states that have created separate courts for specific industries or ideas on how the judge’s proposal could work in Iowa.    

For more information on Chief Justice Cady’s speech check out Mike Ferguson’s article in the Muscatine Journal. 

   

Court Finds Monsanto Not Big Bad Wolf in Patent Infringement Claims

By Sean Minahan on Posted in Biotechnology

We all know the story about the boy who cried wolf, and we all know the lesson learned in the story.  If not, shame on you and ask your kids.  A United States District Court recently found 62 farmer organizations and seed businesses were crying wolf in a recent lawsuit against Monsanto.

The 62 organizations were organic and non-organic crop and seed producers who did not want to buy, plant, harvest, or sell patented and genetically modified (transgenic) seed.  However, the organizations were concerned Monsanto would pursue claims if their non-transgenic seed was unintentionally contaminated by Monsanto’s patent-protected seed.  Therefore, the organizations requested the court to enter an order preventing Monsanto from pursuing such claims in the future.

Monsanto had never filed or threatened to file an infringement case against any of the 62 organizations.  Furthermore, Monsanto had repeatedly stated that it would not exercise its patent rights in cases of inadvertent planting and/or harvesting of patented seed.  Despite these facts, the organizations claimed Monsanto posed an imminent threat of pursing such claims even in slight contamination cases and the court had a duty to prevent potential claims.  The organizations went so far as trying to create a threat by requesting Monsanto sign an all-encompassing waiver of any future infringement claims Monsanto may ever have against the 62 organizations.  Monsanto understandably refused to sign which the organizations claimed evidenced Monsanto’s plan to file future claims.

Treating the organizations like the boy who cried wolf, the court scolded the organizations and found that Monsanto did not pose an imminent threat.  The court emphasized the organizations failure to supply one example of Monsanto pursuing a claim against an individual or entity who unintentionally planted and/or harvested patented seed.  The court further disapproved of the organizations’ trumped up threat based on Monsanto’s refusal to sign a blanket waiver of Monsanto’s rights.

The story ends badly for the sheep in The Boy Who Cried Wolf.  Similarly, the organizations’ lawsuit may be detrimental to farmers and producers if the threat of future patent-infringement claims becomes real.  No matter how legitimate, a court may defer to this case to determine that the threat is simply another false alarm.

The organizations need to be able to prove that Monsanto poses a legitimate threat the next time they call for help.

You can read the full opinion at Organic Producers et al v. Monsanto Co.

 

Water Rights: Landowners’ Win Big in Texas

By Sean Minahan on Posted in Government Regulations

 

Texas State Capital

Government regulation of groundwater just became a lot more precarious in Texas.  The Texas Supreme Court recently ruled that landowners own the groundwater upon which their land sits, which means that the State of Texas has to be extra careful in how it regulates groundwater use.  Specifically, landowners may be entitled to compensation if the state’s groundwater regulations go to far.   Which regulations “go to far”?  At this point, nobody knows and will most likely be decided in future court cases.   

The whole case started back in 1996 when Burrell Day and Joel McDaniel requested a permit from the Edwards Aquifer Authority (EAA) to pump 700 acre feet of water from the Edwards Aquifer which sat directly underneath Day and McDaniel’s 350 acre ranch in Van Ormy, Texas.   The EAA ruled that the ranch had not historically used 700 acre feet of water and therefore, granted them a permit for 14 acre feet.  Day and McDaniel filed a “takings claim” against the EAA alleging that the EAA had violated their constitutional right to use of the groundwater without compensation. 

The Texas Supreme Court ruled that groundwater, like oil and gas, was owned by the landowner under which the groundwater was found.  Furthermore, the court found that the EAA’s “historical use” policy violated the Texas Water Code’s permitting factors.  Although the court agreed that Day and McDaniel had property rights in their groundwater, the court did not decide whether Day and McDaniel were entitled to compensation for the EAA’s restriction of their groundwater use.  That issue was sent back to the trial court to be decided.  The court’s entire decision can be found at Edwards Aquifer Authority v. Day.    

The case has received national recognition with opinions on both sides.  

Environmental groups believe that the decision may create a situation where the Texas water districts have to essentially buy out everyone’s groundwater in order to properly preserve and maintain the state’s aquifers.  Landowners, obviously pleased with the ruling claim the decision ensures reasonable regulation in balance with the property rights of landowners. 

Jesse Richardson Jr., an attorney and professor in the Department of Urban Affairs and Planning at Virginia Tech University and a board member for the American Agricultural Law Association stated ”overall, I think the decision is positive for farmers.  The ruling that a landowner has a right to the groundwater in place – - allowing purchase and sale of those rights, for example — is huge.”

Everybody agrees that the ruling will lead to more litigation. 

For more information check out these articles in the Texas Tribune  and The Eagle. 

    

 

 

   

Pesticide Damage Claims: Nebraska Supreme Court Sets Evidence Standard

By Sean Minahan on Posted in Crop Damage Claims, Farm Management

The recent Nebraska Supreme Court’s decision in Lesiak v. Central Valley Ag Cooperative (CVA) provides an evidence standard for pesticide damage claims against applicators.  In Lesiak, the Nebraska Supreme Court discussed burdens of proof, implied services warranties, the economic loss doctrine, blah, blah, blah, blah……..zzzzzzzzzzzzzzzzzzz.

You are asleep aren’t you?  I get it.  However, those involved in crop damage cases (especially lawyers) need to know what kind of evidence is necessary to get the claim past the judge and to the jury.  Lesiak v. CVA provides that standard, but for the sake of brevity let’s go to the cliff notes.

The Lesiaks owned farm ground in Merrick and Nance Counties and had contracted with Central Valley Ag Cooperative for ag consulting and pesticide application for the 2005 growing season.  CVA sprayed the Lesiaks’ corn crop with Guardsman Max to control weeds at an average rate of 4 pints per acre.  (Guardsman Max Application Instructions) In June, 2005 the Lesiaks noticed the corn crop was stunted which they claimed was caused by chemical damage; specifically over-application of Guardsman Max.  After harvesting the crop the Lesiaks turned in their lower-than-expected yield results to CVA looking for reimbursement.  CVA denied the yield was damaged by Gaurdsman Max and the Lesiaks filed a lawsuit.

The trial court judge dismissed the Lesiaks’ claim because they did not provide the jury with sufficient proof that the corn crop was damaged by Guardsman Max rather than some other variable; such as lack of irrigation.

Overruling the trial court, the Nebraska Supreme Court ruled that the producer does not have to prove damages with mathematical certainty.  Rather, the producer has to provide enough evidence that a judge or jury can reasonably estimate the damages caused by the application of pesticides.

The ruling essentially eliminates the judge automatically kicking a pesticide damage claim if the producer provides some evidence that the pesticide caused some damage.  With that said, a jury can still find against the producer if the evidence is weak. Therefore, it is essential that a producer carefully document any suspicion of crop damage and maintain comprehensive records of yields, applications, and consulting reports.  On the flip side, the applicator needs to compile and maintain similar records and documents to potentially disprove a pesticide damage claim.

With few exceptions, the side with the best evidence wins.  Okay, now if you need to get back to sleep, read the full opinion: Lesiak v. Central Valley Ag Cooperative.