As previously reported in A House Divided, Des Moines claims its water supply has been polluted by excessive nitrogen from farm runoff drained through the rural tiling systems. Des Moines’ threat to sue neighboring rural drainage districts for failing to prevent the pollution of Des Moines water supply is no longer idle.
On March 16, 2015 Des Moines filed suit against the board of supervisors of Sac County, Calhoun County and Buena Vista County for allegedly violating the Clean Water Act, which regulates point source pollutants.
The lawsuit claims the drainage districts’ actions violated provisions of the Clean Water Act, the Iowa Code, was a public and private nuisance, and constituted negligence, trespass and a taking of Des Moines water rights. Des Moines seeks compensation for the alleged discharge of nitrates into Des Moines water supply plus a permanent injunction requiring the counties to “take all steps reasonably necessary within a reasonable period of time to reduce the discharge of nitrate to the Raccoon River to concentrations that do not exceed 10 mg/L”.
The house has been officially divided. The question is whether it can be repaired.
A copy of the complaint can be found at: Des Moines Board-of-Water-Works-Trustees Complaint
Dividing the House
“A house divided against itself cannot stand.” Abraham Lincoln quoted this indisputable truth in reference to the issue of slavery. Although unlikely to lead to civil war, the debate between urban water use and rural land use is an ever increasing concern.
The issue has come to head in Iowa and may be fought in court. The city of Des Moines plans to file a federal lawsuit against three upstream neighboring counties for failure to regulate and prevent agricultural products from polluting Des Moines’ water supply. Specifically, Des Moines seeks an order requiring the county drainage districts to regulate agricultural runoff like other wastewater under the Clean Water Act (CWA).
Agriculture is generally exempt from the CWA because agricultural runoff is considered a “non-point source” of pollution. A “point source” of pollution is basically pollution that comes from a pipe. Des Moines claims that water and pollutants that drain from agricultural land through a farmer’s subsurface tiling system qualifies as a “point source” since the pollution flows and exits from a “pipe”.
Des Moines also claims it has recently incurred $4,000 per day in increased costs and expenses to remove agricultural pollutants, such as nitrogen, from the Des Moines water supply. Des Moines fears the city may be required to build another denitrification facility if the increase in agricultural pollution continues.
Des Moines will have the tough job of persuading a judge the agricultural runoff that flows through the subsurface tile system does not fall under the “agricultural storm water” or irrigation “return flows” exemptions. Considering agriculture’s economic impact in Iowa, Des Moines will also have a difficult time finding support outside the metro area. Siding with agriculture, Governor Terry Branstad commented Des Moines has “declared war on rural Iowa.”
Eventually urban and rural Iowa are going to have to solve the water and land use divide. Otherwise, Iowa’s house will not stand.
For more information on Des Moines proposed lawsuit see Brett Walton’s article in Circle of Blue
According to the Seinfeld character George Costanza; “If you consider the other choices “manure” is actually pretty refreshing.” Seinfeld – My Boyfriend – YouTube. Well, a Washington Federal Court disagrees; meaning dairy and other livestock operations may have to re-analyze their manure management practices. In Community Association for Restoration of the Environment (CARE) v. Cow Palace, LLC, et al, the United States District Court for the Eastern District of Washington ruled a dairy’s management of manure was governed by the Resource Conservation and Recovery Act (RCRA). Essentially, manure which is not properly managed can be considered a solid waste subject and subject to citizen suits under the RCRA.
“It’s actually pretty refreshing”
The RCRA, designed to regulate issues of hazardous waste disposed at landfills, governs the management of solid and hazardous waste from the time the waste is generated through the time the waste is disposed. Generally, manure is excluded from the definition of solid waste if the manure is applied as a beneficial use such as fertilizer or soil conditioner. However, the Washington Court found defendants failed to properly manage the manure, thereby removing it from the exclusion.
Specifically, the Court found:
Defendants applied the manure above the agronomic rate violating their Dairy Nutrient Management Plan and over application was not a beneficial use;
Defendants’ manure lagoons leaked into the subsurface, converting the manure from a beneficial product to a discarded product;
Defendants composted manure in an unlined composting area allowing manure to leach into the ground and shallow water converting the product from a beneficial use to a discarded product; and
Defendants’ manure management resulted in contaminated groundwater beyond the dairy with nitrates above the Maximum Contaminant Level.
In sum, Defendants’ manure management constituted a open dumping of solid waste in violation of RCRA. Many environmental groups also disagree with Costanza and will certainly model future claims on the success CARE had in Washington. Livestock operations will be under an additional microscope if the Washington case withstands appeal and other federal judges fall in line.
For more information check out CALT’s article: Court Says Application of Manure To Farmland In Manner Inconsistent With Good Husbandry Agricultural Practices is Subject to Federal Regulation as Solid Waste | Center for Agricultural Law and Taxation
China finally opens up to Viptera
On December 17, 2014 China finally ended its import ban on Syngenta’s Viptera corn and two varieties of GMO soybeans produced by DuPont Pioneer and Bayer Crop Sciences.
The announcement is cause for great relief to the seed companies and U.S. grain exporters considering U.S. grain trading with China was shut down for all intents and purposes during the ban. Secretary of Agriculture, Tom Vilsack, cautioned the approval was not a change in China’s regulatory review process of GMO crops. Via Reuters.com. Rather, the delayed approval is another example of China’s consistently inconsistent approval bureaucracy.
Syngenta is not out of the Viptera woods yet. Numerous lawsuits have been filed against Syngenta in the last year with plaintiffs alleging Sygenta’s release of Viptera before China’s approval caused a dramatic drop in corn prices. Syngenta Under Pile of Lawsuits China’s approval will open the trade going forward but will obviously not affect any alleged issues caused by the ban in the past. Consequently, Syngenta still has a fight on its hands with grain exporters and farmers who were allegedly damaged by the ban.
As a follow up to Syngenta Under Pile of Lawsuits, the United States 8th Circuit Court of Appeals recently broke up Syngenta Seeds, Inc.’s attempt to pass the Viptera problem to Bunge North America, Inc.
In 2013 Syngenta tried to get ahead of the problems caused by China’s ban of Viptera corn by suing Bunge for refusing to accept corn which contained the Viptera trait. Knowing Bunge would not accept Viptera corn, farmers subsequently refused to purchase Syngenta products resulting in lost profits, market share and goodwill.
Syngenta alleged Bunge’s refusal to accept Viptera corn breached Bunge’s obligations under the United States Warehouse Act (USWA), breached a duty to third-party beneficiaries of Bunge’s licensing agreement with the federal government, and Bunge engaged in false advertising in violation of the Lanham Act.
Under the USWA, Bunge is required to treat depositors of grain in a fair and reasonable manner. Syngenta claims Bunge violated its obligation to treat all grain depositors equally by refusing to accept Viptera corn. However, the 8th Circuit Court found the USWA did not allow seed producers to sue for a breach of the Act nor did it provide a private right of action against the warehouse operator.
Syngenta also claimed it was a “third party beneficiary” of Bunge’s Licensing Agreement with the federal government which also requires Bunge to treat all depositors fairly and reasonably. The 8th Circuit disagreed and found the Licensing Agreement did not intend to benefit seed producers. Consequently, Syngenta was not a third-party beneficiary to the agreement and had no claim under the agreement for Bunge’s refusal to accept Viptera corn.
Finally, Syngenta claimed Bunge posted signs falsely advertising Viptera was not approved in major export destinations and Bunge, therefore, could not accept corn with the Viptera trait. The District Court had dismissed Syngenta’s false advertisement claim finding (1) Syngenta could not bring a false advertisement claim because Syngenta was not Bunge’s competitor; and (s) Bunge’s signs were not considered commercial speech. Giving Syngenta a glimmer of hope, the 8th Circuit returned Syngenta’s false advertisement claim back to the District Court.
The 8th Circuit did not determine Syngenta had standing or Bunge’s signs constituted commercial speech. Rather, the 8th Circuit instructed the District Court to determine whether Syngenta had standing under the “zone of interest” and “proximate causality” tests recently developed by the Supreme Court in Lexmark Int’l, Inc. v. Static Control Components.
The Viptera problem is multi-faceted and has effected the entire chain of grain distribution in the U.S. Syngenta will do what it can to make sure it is not holding the ball for the problems caused by China’s ban of Viptera. Per the 8th Circuit, Syngenta gets another down to prove it has standing under the Lanham Act to complete a pass of the Viptera problem onto Bunge.
For the full opinion see: Syngenta Seeds, Inc. v. Bunge North America.
The lawsuits against Syngenta for alleged losses due to China’s ban of Viptera corn are starting to pile up. Nine such lawsuits were filed in the United States District Court for the Southern District of Iowa in October with more expected as producers jump on the pile started by Cargill in September.
In 2011 Syngenta launched the Agrisure Viptera trait to producers after being deregulated by the United States Department of Agriculture (USDA). The Viptera trait acts as a biological insecticide targeting certain pests without harming non-target organisms. ISU Integrated Crop Management News While approved in the U.S., Canada, Mexico and several other export nations, the trait was not and has not been approved in China; the number 3 export market for U.S. corn.
Some believe China is using the GMO angle to get out of U.S. corn contracts in light of China’s recent record crops.
Whatever China’s motives, Cargill filed suit claiming Syngenta should have never marketed or released the Viptera trait without China’s approval. The claimants allege the rejection of corn with even trace amount of Viptera added supply to the domestic market, thereby driving down the price of corn by approximately 11 cents per bushel. via Wall Street Journal Cargill claims the U.S. grain industry lost approximately $2.9 billion due to the loss of the Chinese market. &Newsobserver.com
The claimants face some legal hurdles including proving China’s rejection of Viptera corn was a proximate cause in the drop in corn value. Furthermore, the claimants will have to prove that Syngenta has a duty to ensure the availability of foreign markets before releasing a given trait. Finally, the claimants will have to get over the issue that the producers voluntarily planted the crop with the restrictions in place.
China may eventually approve Viptera, thereby saving Syngenta’s investment in the technology. In the meantime, Syngenta will have to try to dig out of the current pile of lawsuits which is expected to turn into a class action. Whether or not Cargill and the producers are successful, the litigation may have an impact on how and when genetically modified seed is released in the future.
In 2013 the Iowa Supreme Court evaluated “fairness” among minority and majority shareholders of a family farming corporation in the context of disagreements between second-generation cousin shareholders. The case is Baur v. Baur Farms, Inc. In Baur Farms, one of the cousins, who was not involved in operating the farm and received all of his stock by way of inheritance or gift, decided he wanted to be bought out. The corporate bylaws included a buy-out provision where the value of the shareholders’ stock was set at a value of equity interest determined by the Board of Directors at the end of the most recent fiscal year. That value apparently did not reflect the fair market value of the corporation’s underlying assets – the farm and negotiations to settle were unsuccessful.
The disgruntled cousin filed suit alleging the majority owners committed oppressive, malicious and fraudulent acts resulting in waste of the corporation’s assets. He sought dissolution of the corporation, payment of previously unpaid dividends or a buy-out of his stock at a fair value. The district court originally dismissed the case in favor of the majority owners and corporation. However, the Supreme Court reversed, holding that majority shareholders act oppressively when they fail to satisfy the reasonable expectations for a return on investment of a minority shareholder; specifically by refusing to buy out minority shareholder at fair value. The case was sent back to the district court for trial.
The Baur Farms opinion appeared to give great power to minority shareholders and became the subject of criticism among many farmers and professionals – particularly since the disgruntled cousin made no investment in the farm and appeared to have no reasonable expectations for a return under the corporation’s structure.
The July 2014 district court opinion, took the air out of the minority shareholder’s balloon. The court the corporation and majority owner did not engage in oppressive conduct because the minority shareholder had no reasonable expectations that could be violated. Expectations are only reasonable if they are made known to the other shareholders, and the only expectation in this instance was to be bought out under the bylaw valuation.
Further, the disgruntled shareholder remained quiet for many years following the adoption of the bylaws. He made no actual “investment” in the corporation because he received his stock by inheritance or gift. The court also noted the value established by the Board of Directors would be appropriate for the shareholder’s minority interest and for the built-in taxable gain in the corporation’s assets, which would have materialized if the corporation was liquidated. Thus, a fair price should be viewed as fair market value after accounting for applicable discounts (including tax).
Essentially, the district court found the Supreme Court’s opinion was not applicable because the facts presented to it were not those considered by the Supreme Court. The Supreme Court simply didn’t get the facts right.
There are still lessons to be learned from the Baur Farms saga. Corporations and majority owners cannot run roughshod of the business to the detriment of minority owners. However, appropriate buy-sell agreement planning, business succession planning and corporate governance can resolve many of these issues before they result in litigation.
The Environmental Protection Agency (“EPA”) has decided not to appeal the Northern District of West Virginia’s ruling in favor of poultry farmer, Lois Alt. The court ruled the Clean Water Act (“CWA”) did not regulate storm water runoff from the non-production areas of a farmyard. A great outcome for Lois Alt which may impact concentrated animal feeding operations (“CAFOs”) across the country.
In 2012 the EPA handed Lois Alt an Administrative Compliance Order requiring Lois obtain a CWA discharge permit for storm water running off the area outside of her eight poultry houses. Generally, “agricultural storm water” is exempt under the CWA and Lois Alt refused to obtain the permit. In court, the EPA argued the exemption only applied to the crop production areas of a CAFO. The EPA also alleged the runoff was “industrial storm water” because it contained trace amounts of feathers, manure and dust. Essentially, the EPA was attempting to extend its authority over storm water runoff to areas beyond where animals, manure and feed are maintained and stored.
The court rejected both arguments finding runoff from non-producing areas are exempt as “agricultural storm water” even if it contains trace amounts of pollutants. The EPA initially filed a notice of appeal but has now dismissed the appeal.
The EPA claims it voluntarily decided to turn its attention to other issues. The American Farm Bureau Federation (who joined the lawsuit) believes the EPA withdrew out of fear of losing an appeal, thereby, establishing a legal precedent for future actions. Via The Voice of Agriculture.
Waving the white flag to Lois Alt does not mean the EPA will stop trying to extend its authority over storm water runoff. However, it gives CAFO owners some good ammunition to fight future attempts.
Many have heard the quote attributed to Mark Twain over a 100 years ago: “Whiskey is for drinking; water is for fighting over.” Those words are as true today as they were a century ago.
Four South Central Nebraska farmers have decided to take their fight over water to court. The farmers allege they lost yields because the State diverted water away from the farmers’ irrigation supply to comply with the Republican River Compact.
Under the 1943 Compact, Kansas is to receive 40% of the water from the Republican River which starts in Colorado and flows through Nebraska before entering the Kansas. Nebraska is allocated 49% of the water but was using more than its share according to a 1998 lawsuit filed by Kansas. To comply with the original Compact and a subsequent 2002 Settlement, the State has been releasing water once used for irrigation by south central Nebraska farmers downstream to Kansas.
The farmers allege the diversion is a compensable “taking” of their water rights resulting in reduced yields of corn, soybeans, wheat and alfalfa the past few years. Some of the farmers allege they were disqualified from crop insurance as a result of the lack of irrigation water while others contend they had to resort to dry-land farming. The damages alleged may exceed tens of millions of dollars according to their attorney. Via Agweb.com
Takings claims are never easy and this one may be an especially tough row to hoe. The farmers will have to prove they had a proprietary right to the water and the State’s actions resulted in a complete taking of that proprietary right to recover compensation.
Interestingly, other farmers of South Central Nebraska lost a previous lawsuit wherein they alleged a proposed underground water diversion project would deprive them of their water rights. While not necessarily conclusive of the current lawsuit, the prior decision is evidence of how difficult the current claim may be.
On August 6, Missouri narrowly passed the “Right-to-Farm” amendment by 2,500 votes.
Section 35 Article 1 of the Missouri Constitution will soon read:
That agriculture which provides food, energy, health benefits, and security is the foundation and stabilizing force of Missouri’s economy. To protect this vital section of Missouri’s economy, the right of farmers and ranchers to engage in farming and ranching practices shall be forever guaranteed in this state, subject to duly authorized powers, if any, conferred by article VI of the Constitution of Missouri.
Right-to-farm measures have been generally used to protect agricultural operations from nuisance suits filed by neighbors due to unavoidable noise, dust, and odors. Missouri farmers and ranchers were already protected to a degree from nuisance suits by Missouri statute Section 537.295, which led many to wonder why a constitutional amendment was necessary.
Proponents of the amendment rightfully argue the amendment makes farming a constitutional right on par with other constitutional protections. Therefore, future legislation and local initiatives limiting agriculture would be more difficult to adopt and apply.
A win for agriculture for sure, but a limited victory. A farmer’s right-to-farm is still subject to local and state authority as conferred by Article VI of the constitution. Furthermore, the amendment is unlikely to reduce the number of nuisance claims since the amendment does not increase the protections already provided under Section 537.295.