Lamson, Dugan and Murray, LLP, Attorneys at Law

Lightening the Load: New Legislation to Alleviate Regulatory Burdens on Livestock Transportation

Posted in Farm Management, Government Regulations

The following article was authored by Jessica Weborg, Attorney, at Lamson, Dugan & Murray LLP.

On May 23, 2018, the United States Senator from Nebraska, Ben Sasse introduced the “Transporting Livestock Across America Safely Act” (S.2938) (“the Act”) into the United States Senate.  A copy of the bill can be viewed by clicking on this link S.2938.

A comparable bill was also introduced into the United States House of Representatives on June 16, 2018, the “Modernizing Agricultural Transportation Act,” which seeks to address the same concerns and issues with the current Federal Motor Carrier Safety Administration Regulations as they pertain to livestock producers and haulers.

If the bill is passed by both houses of Congress, the Senate and House of Representatives, the bill will lift the heavy restrictions that were in place by easing the burden of the hours of service (HOS) and electronic logging device requirements (ELD) for drivers transporting livestock and agricultural commodities.

Under current regulations, livestock haulers are required to stop driving and rest for 10 consecutive hours after maxing out the time allotted which is 11 consecutive hours in a 14 hour duty window.  As it stands, the current regulation does not allow enough time for a centrally located large cattle-producing state, such as Nebraska, to transport livestock to and from a number of different locations across the country.

The bill was also introduced to address significant issues concerning the welfare of animals and the safety of the drivers during the transportation of livestock.  As Tyler Weborg, a Nebraska cattle-producer with Weborg Cattle Feeding Company located in Pender Nebraska stated, “The safety of the drivers and the livestock on their trucks is of utmost importance.  Drivers need to be able to finish their trip without having to unload and re-load cattle which can be more harmful to them if the driver feels he needs to rest and stops to do so that time should not be counted as in service time and count against the driver.”

The Nebraska Cattlemen Association supports the Act.  The President of the NCBA stated, “Nebraska Cattlemen is extremely appreciative of Senator Sasse’s hard work on behalf of our industry and greatly welcomes this legislation.  Hauling livestock is very different than hauling any other commodity.  Senator Sasse’s bill helps fill the gaps that exist between federal regulation, public safety, the needs of producers, and the well-being of the animals under our care.” In addition, the Nebraska Cattlemen Association’s Director of Legislation and Regulatory Affairs, Jessie Herrmann, stated that “the passage of the Act will address the incompatibilities and differences between transporting livestock verses other commodities.”  According to Ms. Herrmann, the current Federal Regulations do not differentiate between the transport of livestock and other commodities.

As a result of the current allotted HOS, livestock haulers are regularly forced to stop their rigs in conditions that pose significant risk to the health of cattle and other livestock.  Ask any Nebraskan and they will tell you that July and August in Nebraska is extremely hot and humid.  These kinds of weather conditions create dire consequences for the sustainability of livestock during transport.

If the Act becomes federal law, it will accomplish the following:

  • The HOS and ELD requirements will become inapplicable after a driver travels more than 300-air miles from their starting point. HOS drive time will not begin until after the 300-air mile threshold is accomplished.
  • It exempts loading and unloading times and dispatch wait times from the on-duty time or HOS calculation.
  • It extends the HOS on-duty time maximum hour requirement from 11 hours to a minimum of 15 hours and a maximum of 18 hours of on-duty time within a 24 hour period.
  • It provides flexibility for drivers to stop and rest anytime during their trip without counting towards HOS.
  • Allows drivers to complete their trip regardless of HOS requirements if they come within 150-air miles of their delivery point.
  • After the driver completes delivery and unloads the truck, the driver is required to take a break for a period that is 5 hours less than the maximum on-duty time.

Stay tuned for updates as the Bill goes through the process.

Heirs or Errors to the Throne? The Importance of Thoughtful Business Entrance Planning

Posted in Farm Management

The following was authored by attorney, Shannon G. McCoy, Lamson, Dugan & Murray, LLP and written for submission in the National Land Improvement Contractors of America (LICA) newsletter.   

Succession Plan Frustration

One Month before Your Planned Retirement, 2038:

Owner:            Alright Steve, Mike, and Kelsey, the day has finally come, it is time to sell my 100% ownership interest in Family Business, LLC, and each of you gets to purchase an equal share, so I can finally retire!  Wait, where is Steve?

Mike:               Uh, Steve accepted an offer from Competitor Business Inc., he didn’t tell you?  Apparently they pay more than we do.  Also, I think I saw him downloading something from our computer onto a portable hard drive last week, some file called “customer contacts,” probably not that important though…

You:                What?!?  Steve was my best manager for the last 15 years, why did he never say he wasn’t paid enough?  Fine, I’ll just sell you two an equal share, I’ve already got reservations in Cancun next week, and I’m not cancelling them!

Kelsey:            Yeah actually I am looking elsewhere too.  I got tired of having no direction or control of my career. Everyone knew my title of “Vice President” meant nothing.

Owner:                        Seriously?!? Fine, congrats Mike, you’re in charge.

Mike:               Awesome!  Finally, I can sell the company and use the money to support myself while I go back to art school, the world needs my velvet paintings! All I ever got to do around here was sweep floors anyway, soon I’ll be out of here!

Owner:                        On second thought, the deal is off…get out of my office!

Owner:            *inner thoughts* Great, now who will run my company?  Is this the end of Family Business, LLC?  Who will I sell my ownership interests to, and who would even be willing to buy them?  Can I afford to retire?  How can I retire and let my life’s work just end?  How did I get to this point?

             While hopefully an exaggeration, the above scenario represents the consequences that can occur when family business owners neglect to create a thoughtful, proactive business entrance plan.  Business owners often focus on their own exit plan and neglect to think about the significance of entry planning.  The purpose of a business entrance plan is to identify those family members, key employees or “outsiders” who are the best candidates for becoming future owners of your business, and bringing them into the mix before it’s too late.

One of the biggest decisions faced by any business owner is how to develop and retain talented family members and key employees, and prepare these individuals to eventually become owners of the company.  A well-reasoned approach to developing your “heirs to the throne” avoids a scenario where the heirs are unprepared or unwilling to take ownership and guide the company to future success.  On the other end of the timeline, choosing the wrong individuals from the beginning to develop into future owners of the business leads to a tremendous waste of time, money, and effort, leaving the ownership and future of the company in doubt at the important moment when you are prepared to transition away from the business but still depend on the continuity of the business to fund your exit.

Let’s consider what the Owner of Family Business, LLC could have done to avoid the situation presented above:

  • Steve represents the scenario where a skilled family member or key employee working for the business is poached by a competitor. This could have been avoided by Owner if an honest discussion occurred wherein Owner could ensure that Steve was receiving a level of pay and incentives premised upon Steve being a future owner of the business.  The sooner this discussion occurs the better.  While business owners often consider the risks created by their weakest employees, too often their most talented employees are ignored until it is too late.  A dissatisfied star employee may leave the company when he or she is needed the most.  Reasonable negotiating with this employee and an open line of communication can avoid costly surprises.
  • Kelsey represents an employee who may have talent, but who was placed in the wrong role without actual authority or responsibility. Business owners need to evaluate the key skills of their family members and key employees to ensure their job responsibilities reflect their strengths.  In fact, it may be even more important for family businesses to have a firm understanding of the best roles for each employee.  While every job responsibility for every employee won’t be a perfect match, such an approach can avoid a scenario where an employee is clearly placed in the wrong role, harming the company and effectively removing any interest by the family member or employee in promoting the business or gaining an ownership interest in the company.
  • Mike represents the employee that clearly lacks the entrepreneurial drive and ability necessary to run a family business. His heart is elsewhere, and while the role of part time employee may have been perfect, he was never a serious candidate for an ownership role with the company. A discussion years prior would have avoided any expectation by Owner or Mike that he would gain any ownership of the company.
  • If it becomes clear that any of these individuals is not invested in the long term success of the company, determining this early in the process allows the Owner to find an alternative individual to bring into the business and develop. Perhaps Owner had other relatives, skilled employees, or even outside sources he could have chosen to develop years prior, placing the business in a position to succeed moving forward as a result of a wise transition in ownership.

 Making critical decisions regarding the future ownership of your company is often a challenging endeavor.  It is easy to place these considerations on the back burner, focusing instead on the day to day responsibilities of your business.  However, careful contemplation of these issues sooner rather than later will lead to greater peace of mind in knowing that the right individuals are being trained and put in the best position possible to continue the legacy (and cash flow) of the business beyond the days of your active ownership and involvement.  Consider the following questions when deciding whom to select for placement on the path towards future ownership, and considering how to best develop these individuals into responsible owners of the business:

  • Evaluate the educational background, skill sets, and entrepreneurship ability of each potential successor considered for the path to ownership. Choosing a position for each employee that best correlates with these attributes increases the chance of success for both the individual and business.  A properly motivated, entrepreneurial-minded employee is a powerful force of growth for your business.
  • Communicate to the selected individual your desire that he or she eventually gain a position of ownership in the company. However, do not make any promises, at least at first.  Remind the individual that ownership in the company is something to be earned through hard work, consistency, and loyalty to the business.
  • Consider working with your advisors to develop an incentive program for the employee through which ownership in the company is gradually earned over time based on the satisfaction of certain tangible benchmarks, such as sales numbers and new customers gained by the employee.
  • Choose an appropriate leadership title for the individual, reflecting their specific responsibilities. The title of “Vice President” is used with such frequency in certain companies that it has begun to lose meaning.  Instead, consider a role specific title such as Director of Operations or Lead Project Manager.  Granting an appropriate title gives the individual a sense of pride and the means of describing their role to others.
  • Create a mentorship program within your business to ensure the selected individual learns the rights skills from the right people in the years leading up to eventual ownership. Mentorship programs are not just for big companies, and do not need to involve detailed spreadsheets and statistics.  Something as simple as a meeting between owner and employee over coffee or lunch every other week to have a candid discussion can avoid numerous unexpected pitfalls and can address concerns of both parties up front rather than allowing them to simmer.  As an owner you must be proactive, the passing of the torch does not occur on its own, it requires action.
  • Consider choosing an individual who has shown an ability to develop and grow positive relationships with clients. Alternatively, ensure that the selected individual has the ability to develop a strong rapport with clients.  A strong relationship between future owner and clients is vital to the health of the business after your assumption of a minority ownership role or retirement from ownership.
  • Similarly, ensure that the selected individual has a positive relationship with key third parties, such as bankers, insurers, accountants, financial advisors, and attorneys. Being able to work with outside parties and delegate particular tasks is a sign of leadership ability, and is vital for business owners seeking to defend their business from threats and maintain and grow their business when opportunities arise.
  • Use this process as a means of encouraging the retention of key personnel. Your selection of an individual for potential future ownership demonstrates to that person that you believe in their ability to properly operate and promote the business.  It is not simply for your benefit as owner, but should also clearly benefit the selected individual.  Otherwise, more responsibility without high pay, greater benefits, and a clear path to gaining ownership shares will eventually lead to an employee who develops their talents only to join another business that is more willing to properly incentivize his or her entrepreneurial spirit.
  • Do not hesitate too long to begin this process of developing future owners. The sooner the right individuals are committed to the long term success of the business, the more likely they will stay long enough to ensure your smooth transition out of the business or into the role of a smaller ownership interest holder.
  • Lastly, by starting this process early and using a set of well-defined check points, it can be determined whether the individual is meant to be an owner of the company. If the ability or interest is not there, an owner must find a replacement or place greater focus on other selected individuals that have demonstrated the proper skills to run the business.  The importance of being proactive cannot be understated, waiting until your retirement is not a plan, it is a disaster waiting to happen.

As an owner, whether you plan to hold an ownership interest in the company until your death, or desire to transition out of the business in the near future, development of a thoughtful business entrance plan for new owners is vital to the long term success of your company.  According to Forbes, less than one-third of family businesses survive the shift from first generation to second generation.  Of those business that last to the second general, half fail to survive to the third generation.  While the topics and discussion points presented in this article may lead to challenging conversations with family members and key employees, the importance of planning the future ownership of your business cannot be overstated.  Develop the proper heirs, and avoid the unfortunate errors.

 Disclaimer: The content of this article is for informational purposes only.  It is not legal advice, nor is it intended to create, and your receipt of it does not constitute, an attorney-client relationship.  This article may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.  The content of this article is intended to be up-to-date, but may or may not reflect the most current legal developments.  The authors assume no liability or responsibility for any errors or omissions contained within this article.  You should not act or refrain from acting based upon this article without seeking professional legal counsel.  This article only provides a brief overview and an attorney should be consulted if you have questions regarding this topic in relation to your specific situation.

 

$50 Million Nuisance Verdict Against Hog Farm: Bellweather Verdict or Fluke?

Posted in Farm Management, Property Rights

Is this the face of a $50 million nuisance?

In late April, a federal jury in North Carolina awarded $50,000,000 in punitive damages and $750,000 in compensatory damages to 10 neighbors of a hog facility contracted with Murphy-Brown, a subsidiary of the Smithfield Foods system.  The court subsequently reduced the verdict according to North Carolina’s cap on punitive damages and Smithfield will appeal.  However, is the damage already done?

The jury took all of a few hours to hand out the unanimous verdict which will be seen as a bellweather case and possibly spur aggressive claims against livestock operations around the country.  Smithfield is already facing several more similar claims and will have to take into account the North Carolina verdict when deciding whether to litigate or settle the case.  Could the Smithfield verdict lead to an explosion of nuisance cases across the country and the mass Concentrated Animal Feeding Operation (“CAFO”) reform that certain environmental groups seek?

Doubtful.  Before hitting the panic button, please remember that farm nuisance cases are fact-specific.  No two fact scenarios are the same and state regulations governing CAFOs differ.  Furthermore, state courts interpret and apply right to farm laws differently.  Most importantly, no two juries are the same.  The neighbors who presented their specific fact scenario in conjunction with North Carolina regulations and right to farm law to the 12 jurors who were somewhat randomly selected hit a home run.  Another set of neighbors presenting another set of facts in conjunction with another set of regulations to a another randomly selected jury may strike out.  Litigation is never a sure thing.

Although the award may not be a bellweather case, it is also not likely a fluke.  Verdicts such as the one against Smithfield are legitimate risks which farm and ranch operators must minimize, including maintaining a proper manure management system.

Is Equal Always Fair? The Importance of Thoughtful Business Succession Planning

Posted in Farm Management, Uncategorized

Originally submitted by Dan Waters, Attorney & Sean Minahan, Attorneys  Lamson, Dugan and Murray, LLP; Proud members of C2C in the LICA Contractor.  The issues and discussions addressed in the following apply equally to family farm succession planning as they do for succession planning of family owned contracting companies.

 

Christmas Dinner, 2042:

Steve: Mike, pass the sweet potatoes. . . . Mike, I said pass the sweet potatoes!

Mike:  Maybe I would pass the sweet potatoes if you carried your weight around here!

Steve:  Come on, I didn’t ask to be a part of the family business, ok?  Mom and Dad’s estate plan made us equal owners, that wasn’t my choice!  I’m a fitness instructor, not a land developer!

Kelsey: Still Steve, that doesn’t mean you get to take your third of the profits and do nothing to contribute.  Mike is right, you need to start taking your role seriously and . . .

Mike:   How about this for serious, I’m quitting! *stands up* I’ll be taking my third of the business in cash, then you’ll never hear from me again!  *storms out.*

Fast forward several months, or years, and a substantial portion of the family business has been drained paying legal fees.  Disagreements in valuing Mike’s share of the business and resulting litigation continue to put financial and emotional pressure on all the parties involved.  Worse yet, the children and their respective families refuse to speak to one another.  The holidays will never be the same.  What could have led to such a disaster?  A simple oversight on the part of the parents, granting an equal share of the family business to each child pursuant to their estate plan, without considering the children’s future roles within the company.

Most parents want the best for their children.  When it comes to succession planning, parents wish to transition the family business fairly.  To achieve this goal, parents may choose to divide the business among the children equally.  However, an equal division may not create the fair result desired by the parents.  While an equal division is often the easiest approach, it can lead to significant conflict, and even the demise of the business or family relationships, if the children are not equally invested in running the company.  Easy is not always right, and equal is not always fair.  For example, let’s wind back the clock and reconsider the above scenario, except with the parents still alive and running the family business, and try to avoid an unfortunate falling out:

  • Mike works full time for his parents and actively contributes time and effort to the company. He understands the equipment and other details of the business, is a natural manager, and builds great relationships with clients.  Mike shows consistent interest and knowledge regarding the land improvement industry.
  • Kelsey works part time for the business as the book keeper. She acts responsible in this role.  Kelsey prefers this limited position, being largely preoccupied by taking care of her three young children.  Kelsey’s understanding of the day-to-day operations of a land improvement contractor is limited.
  • Steve works for an unrelated business in a different industry. He shows little interest in the company, but is respectful towards his parents and is a good son.
  • The parents work with a team of advisors to develop a succession plan. At first, the parents consider an equal division of the company.  However, it is explained that a fair division of all assets can be achieved without dividing the company equally.  Instead, the parents designate the following ownership structure to take effect at their passing:
    • Mike will receive a 70% ownership interest in the company and become the controlling owner of the business.
    • Kelsey will receive a 20% ownership interest in return for her labor.
    • Steve will receive a 10% ownership interest so he can collect distributions from the company, but not have a controlling say in the direction of the business.
  • Understanding the potential for dissatisfaction and conflict based on this arrangement, and desiring a fair distribution of all assets in the estate, the parents designate that Kelsey and Steve will receive a greater percentage of other assets than Mike.
    • For example, Kelsey may receive the parent’s boat and certain investments while Steve receives the parent’s second home and his father’s classic car.
  • The end result is each child receiving a fair percentage of the estate, considering the total value of the business and all other assets owned by the parents at their passing.
  • Alternatively, the parents may wish to give Mike the entire business and more of the other assets to Kelsey and Steve. It is possible that the value received by each child in this scenario may not be nearly equal, but this could be considered fair given Mike’s contributions to the business and the parents’ objective to preserve the business and family relationships.  Granting Mike sole ownership and control may avoid any potential family dispute later on involving the business.  Mike has demonstrated himself to be capable of operating a successful land improvement contracting business.  However, owning the business is also a risk for Mike.  There is no guarantee the business will grow, while the value of other assets is more certain.

While considering one’s mortality is often uncomfortable, knowing that a tailored succession plan is in place which matches the business skills and future needs of the children is worth the extra effort.  Consider the following questions when beginning to form a succession plan prior to meeting with an advisory team:

  • What are the current and future prospects of the business and the land improvement industry as a whole? If the business is struggling or expecting difficulties, receiving an interest in the business may be more of a burden than a benefit.
  • What is the current and anticipated future role of each child within the business?
  • Which child has shown the greatest ability with regard to the operation and management of the company?
  • Which child has shown the greatest interest and knowledge regarding the land improvement industry?
  • Which child has the best vision for the company moving forward? How should the ownership interests in the company be valued? Is the valuation method established in the governing documents of the business?
  • Which child should have the greatest ownership percentage in the business?
  • Should one child receive a greater than 50% ownership interest in the business, granting authority to have the final say in cases of disagreement among the owners?
  • Should one child receive the entire business?
  • Are there certain individuals working for the business that should receive a percentage of ownership in the company other than the children?
  • Are there assets, such as certain construction equipment or supplies, outside the business which are important to the functioning of the business that need to be passed on to the child who will be the primary owner of the company?
  • Whose name(s) is on the deeds and titles of any machinery registered and used by the business or real estate belonging to the company?
  • What assets do we own that may be passed on to the children other than the business? Generally, how should these additional assets be valued and divided among the children to balance against children receiving different ownership percentages in the company?
  • What team of advisors should we work with in creating a succession plan?

Once a business succession plan is established, the children’s relationship with the company may change.  One child may choose a different career path, while another becomes more invested in the business.  The succession plan should be updated to account for such changes.  It is advisable to reexamine the succession plan in regularly scheduled intervals to ensure it matches the current and anticipated circumstances surrounding the business.  A thoughtful succession plan can protect a lifetime of effort channeled into your business, and create stability for future generations.  Give your family the gift of a more certain future this holiday season.

Disclaimer: The content of this article is for informational purposes only.  It is not legal advice, nor is it intended to create, and your receipt of it does not constitute, an attorney-client relationship.  This article may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.  The content of this article is intended to be up-to-date, but may or may not reflect the most current legal developments.  The authors assume no liability or responsibility for any errors or omissions contained within this article.  You should not act or refrain from acting based upon this article without seeking professional legal counsel.  This article only provides a brief overview and an attorney should be consulted if you have questions regarding this topic in relation to your specific situation.

Turning Friends into Foes: Legal Fallout from Monsanto’s Dicamba

Posted in Biotechnology, Crop Damage Claims, Government Regulations

Monsanto’s dicamba has turned friendly neighbors into legal foes due to crops damaged by dicamba’s inability to stay where it is supposed to be.   With the soybean harvest basically complete, we are seeing more and more claims filed and litigation initiated.  Farmers are calculating the effect that dicamba applied by a neighbor may have had on their fields.

States like Arkansas, Minnesota, North and South Dakota, Tennessee and Indiana are trying to get ahead of potential damage in next year’s soybean crops by implementing increased limitations and training for applying dicamba.  The Arkansas State Plant Board decided to bar dicamba and implemented tougher restrictions on other weed killers for next year after receiving reports of over 900,000 acres damaged by the weed killer.

Although able to control tough weeds when applied to dicamba resistant crops, dicamba also is known for evaporating after application, creating a mist which can spread to neighboring crops that may not be dicamba resistant.  New formulations of dicamba are being introduced and Monsanto has agreed to training applicators on applying dicamba only in the proper conditions to limit the evaporating effect.  However, Arkansas’s Plant Board believes more research and even tighter restrictions may be necessary.

Monsanto and farmers who apply dicamba on dicamba resistant soybeans filed suit against the Arkansas State Plant Board claiming dicamba was being governed by an unfair standard.  Approximately 25 million dicamba resistant crops were planted in 2017 with a two-fold increase expected next year.  Accordingly, dicamba and the dicamba resistant crops are large profit makers for Monsanto who obviously wants to protect and offer to Arkansas farmers.  Farmers who plant the dicamba resistant crops want access to the weed killer to help control weeds that other herbicides fail to control.  Both claim that the Arkansas Plant Board has overstepped their authority and are preventing Arkansas farmers a technological advantage that farmers in other states possess.

On the flip side, farmers who have been damaged by the dicamba drift are left with no alternative but to seek their own legal remedies for yield loss; turning friends into foes.

 

Not So Fast: RMA Continues to Scrutinize New Producer Crop Status

Posted in Crop Insurance, Farm Management, Government Regulations

slow down road sign

If you have received a Notice of Overpayment and Removal of New Producer Status from your crop insurance company, you are not alone.  In 2012 the Risk Management Agency started auditing crop insurance applications wherein the insured had requested “New Producer” status.  The effects of the audit have come to fruition in the last few years.

The notices generally demand immediate payment of any indemnity paid pursuant to the benefits provided under New Producer status.  The producer runs the risk of being placed on the Ineligible Tracking System list; essentially barring the producer from crop insurance until removed from the list.  While an attorney can assist the producer to fight these notices, the best play is to avoid receiving one and paying attorney fees by knowing the eligibility requirements for New Producer status.

The RMA audit came about when RMA started receiving complaints that producers were dumping bad yield history by creating new farming entities to farm the land.  The new entity would then obtain insurance using 100% of the county yield average as a “New Producer” rather than the producer’s prior low yield history.

However, “to be a new producer, the insured must not have produced the crop in the county for more than two APH crop years.”  Crop Insurance Handbook Sec. 15(E)(1).  Furthermore, “formation of a new person (business entity such as a corporation, partnership, trust, etc.) comprised of one or more persons does not automatically qualify the person as a new producer.”  Crop Insurance Handbook Sec. 15(E)(1)(b).

When applying for crop insurance an agent will routinely ask whether the producer has previously farmed in the county.  In the event of a farming entity involving one or more producers, the individual applying for the insurance on behalf of the entity must know whether any member has ever farmed in the county.  If so, the entity is not eligible for New Producer status.

So slow down and take the time to investigate the crop insurance rules that may affect you when buying and farming land in a new county.  Although 100% of the county average may sound good,  repaying an unearned indemnity 2 years later sounds worse.  There are ways to transfer yields from an individual to a new entity or vice versa.  However, you need to let your agent know so the agent can get the proper paperwork submitted before the applicable deadlines.  As always an agent’s help is only as good as the information the producer provides.

Pulled from the Swamp: EPA Wetland Determination Now Judicially Reviewable

Posted in Government Regulations, Water Law

Sunset Over Scenic Everglades National Park Horizon

Landowners and developers bogged in an EPA wetland determination were recently thrown a life line when the United States Supreme Court determined The Army Corps of Engineer’s (Corps) “jurisdictional determinations” (JD) regarding wetland designations are reviewable by the court.  United States Army Corps of Engineers v. Hawkes Co. Inc.

Under the Clean Water Act (CWA) landowners and developers who do not have the proper permits can face severe criminal and civil penalties for releasing any pollutant into “the waters of the United States.”  Anybody stuck wading through the permitting process will tell you it is difficult, time consuming, expensive, and may eventually prohibit the intended use of the property.  Furthermore, there is yet to be a consensus on the definition or scope of the term “waters of the US”.  Consequently, a landowners or developers may never be certain whether a permit is necessary before conducting any activity that may discharge a pollutant into a “water of the United States”.

To solve this dilemma, the Corps will graciously provide a “jurisdictional determination” (“JD”) designating whether a property (1) contains waters of the US; (2) does not contain waters of the US; or (3) “may” contain waters of the US.  Any JD stating the property contains or does not contain waters of the US is binding on the Corps and landowner or developer for 5 years.  The JD is also appealable to the EPA but not to the District Court.

Because the landowner was not allowed to appeal the determination beyond the EPA, the landowner was stuck with the decision unless the landowner decided to discharge the pollutant and argue in a government enforcement action that a permit was not necessary.  The landowner or developer could also complete the permit process and have the determination judicially reviewed after the permit is issued or denied.

The Supreme Court determined that neither was a viable option for the landowner or developer.  Federal law states that any agency decision that (1) concludes the agency’s decision making process and (2) legally affects the rights or obligations of another are appealable to the federal district court.  The Supreme Court found that a Corps’ JD met both obligations.

First, the JD was issued after a fact-finding investigation and was described as a “final agency action” by the Corps.

Second, the JD had a legal binding effect for a period of 5 years which directly affected the legal rights and remedies of the landowner or developer.

Obviously any feelings of joy or celebration have to be tempered by the fact that any court to which the JD is appealed can determine the JD is correct.  However, the life line gives the landowner or developer an opportunity to pull the decision from the very agency which made the original decision.

You can find the entire decision at:United States Army Corps of Engineers v. Hawkes Co.

North Dakota Farmer’s 4 Year Sentence for Insurance Fraud Upheld

Posted in Crop Insurance

Such is the life of a farmer.   Even in times of a good crop, the potential insurance claim may be more valuable than the crop itself.  That may have been the case for Aaron Johnson of Norwood, North Dakota, who in 2014 received a 4 year sentence for receiving crop insurance payments on a potato crop he purposely damaged.

According to court records, Johnson had his hired man spray the potato crop with Rid-X and Flush, add frozen potatoes to the piles, and turning up the heat in the storage facility.  The process caused the potato’s to rot.  Thereafter, Johnson filed an insurance claim.  Unfortunately for Johnson, his hired man became an informant for the government in exchange for cash and leniency on some unrelated criminal charges.  The hired man subsequently turned on the government and informed Johnson of the government’s investigation of Johnson’s fraud.

Despite the hired man’s criminal history and tendency to turn in favor of anybody paying him, the government had enough other evidence to corroborate the hired man’s testimony. The District Court found Johnson guilty of insurance fraud and sentenced him to 4 years under an enhanced sentencing guideline.  Not one to give up without a fight, Johnson appealed the decision to the 8th Circuit Court only to have the decision affirmed on May 4, 2016.

From a legal standpoint, Johnson argued the government’s evidence was insufficient to support the verdict.  Specifically, Johnson claimed no reasonable jury could believe the testimony of the hired man.  However, the 8th Circuit confirmed the credibility of a witness is not an appealable issue.  Furthermore, the government had plenty of other evidence to support the conviction; including Johnson bragging about intentionally destroying his crop.

I’m sure there is a lesson to be learned from all this but I am not sure what it is.  Maybe it is any one of the following;

Be careful who you hire;

Don’t brag about defrauding the government; or maybe

Just don’t commit insurance fraud.

You can find complete details of this almost comical case at U.S. v. Johnson.

Insuring Additional Acres? The Number of Acres Added May Affect Your Coverage

Posted in Crop Insurance, Farm Management, Government Regulations
Added Land: Insurance Options Ahead

Added Land: Insurance Options Ahead

 

Farm land does not change hands very often but when it does the acquiring operator should keep in mind the rules which may affect the operator’s crop insurance benefits covering the newly added land. Failing to understand and abide by the Risk Management Association’s (RMA) rules can cost an operator the maximum guaranteed yields and dramatically reduce the indemnity available under the Multi Peril Crop Insurance (MPCI) policy.

Most types of crop insurance provide some sort of coverage based on projected yields.  The projected yields are generally determined by the operator’s historical yields known as an Actual Production History (APH).  However, the RMA limits the APH on land added as an Optional Unit (OU) or new Basic Unit (BU) as follows:

1.     If the added land is less than 640 acres, RMA will approve APH yield established by the higher of (i) the applicable county average yield for the insured crop (T-Yield) or (ii) the operator’s county average yield for the insured crop (SA T-Yield).

2.     If the added land is 640 acres but less than 2000 acres, RMA will approve APH yield established by (i) the applicable variable T-Yield or (ii) the SA T-Yield if the operator requests and receives approval for the SA T-Yield from RMA.

3.     If the added land is 2000 acres or more, RMA will only approve APH yield established by the applicable variable T-Yield.

The request for RMA approval of the SA T-Yield on 640 acres or more must be submitted on or before the Acreage Reporting Date (ARD).  In the event the request is not made, the operator will be limited to an APH determined by the county average.  Depending on the operator, the county average yield may be substantially less than the operator’s average yields on similar crops in the county.  A lower APH will lower the guaranteed yields under the policy and consequently lower the insured’s indemnity payment in case of a loss.

Many operators rely solely on their agent to lead them through the process and catch issues such as the newly added land acreage limits.  However, an agent is only as good as the information the operator provides.  An operator who has a handle on the crop insurance rules will be better prepared to take advantage of benefits others may not request and prevent mistakes which can occur in the computation of the number of acres and types of crops planted.

Crop insurance can be an important safety net.  Every operator should take ownership of their insurance needs and the rules governing their coverage to ensure the best insurance coverage is provided.

 

 

 

Foregoing Work Comp Coverage? Remember to Provide Notice.

Posted in Farm Management, Government Regulations
Work Comp Claim Form

Work Comp Claim Form

 

Early in my career I had a Nebraska case come across my desk which involved a farm hand falling and striking his head while working on a farm truck.  The farmer had not obtained a workers’ compensation policy to cover such accidents because most farms and ranches are not required to provide workers’ compensation in Nebraska.  Unfortunately, the farmer had failed to have the employee sign the required notice informing the employee workers compensation was not provided.  The employee then had the option to pursue a claim against the farmer under the Nebraska Workers’ Compensation Act (the “Act”), which offered certain benefits to the employee.

Since that early case, I had not seen a similar case come through our firm.  I came to believe most if not all farmers and ranchers were aware of the notice requirement when electing to forego workers’ compensation insurance for their employees.  However, another case recently came across my desk.  So a refresher on Nebraska’s worker compensation laws as applied to farmers and ranchers may be a good idea.

First, the Nebraska Workers’ Compensation Act applies to every resident employer except to employers engaged in an agricultural operation and (1) employs only related employees; or (2) employs less than 10 unrelated full time employees.

Second, every exempt agricultural operation which does not provide workers compensation must have the employee sign the following notice

In this employment you will not be covered by the Nebraska Workers’ Compensation Act and you will not be compensated under the act if you are injured on the job or suffer an occupational disease.  You should plan accordingly.

Third, the agricultural operation will be subject to liability under the Act if the operation fails to provide and have such notice signed by the employee.

In the event the notice is not provided and signed, an injured employee has the option of pursuing a claim against the employer under the Workers’ Compensation Act.  Under the Act, the employee only has to prove he was injured while working for the employer.  The employer cannot generally escape responsibility for the injury even if the employee was at fault for his injuries.  Although the amount of damages the employee can recover are limited by the Act, automatic liability is a sizable advantage for any employee looking for compensation for his injuries.

Therefore, please remember to provide the notice and have it signed if you want a fighting chance to defend an injury claim from your employee.