Dillon Law PC

The recent stand down by the Labor Department on child agriculture is a good thing, but the fight is not over. I don't think the issue is dead, as nanny state  advocates who wanted increased regulation noted that they lost the battle when it was framed as parents teaching children life lessons and not migrant worker's children picking lettuce. Clearly, they are conducting a post action review and making plans to revisit the issue. This "after action review" is a staple of Army training.

You can use the same concept in your Ag operation. It is a simple concept. Identify what the objective was, what resources where available and the time to complete the objective. Then walk through what the plan was and what actually happened. Identify three areas of strength (aka what when well) and three areas of improvement (what fell apart and didn't work at all).

My concern is that instead of boldly trying to regulate child labor, the Department of Labor will take a page from its regulation happy brothers and sisters at the EPA and use "internal guidance" policy memos to shape how the agency addresses issues. These policy memorandums are not reviewed by the legislature or the people, they just happen. I doubt Thomas Jefferson, George Washington or the other legal beagles who crafted this concept of a republic would endorse such practices. It makes it hard for  your ag lawyer to protect your operation when the rules aren't published anywhere.

In a nod to my friends who say "may the fourth be with  you", I would note that even that great story has its origins in Agriculture. If not for Uncle Owen's desire for new equipment (though likely Sec 179 accelerated deprecation was not available from the Huts) and repairs to existing farm operation, folks in a galaxy far far away would be goose stepping to the beat of the Imperial March.

 Where’s the law that says….

Recently the EPA announced that no new coal plants are going to be allowed in the US. Don’t like it.. don’t vote for the EPA next time er.. wait a minute… the EPA isn’t elected is it? Nope, that’s an administrative agency that can issue rules without elected representatives input or oversight.   No body debated the regulation, no body will lose reelection in most cases when  a regulation is passed.  Sure the regulation has a comment period and parties can weigh in on the impact the regulation has, but that is about the extent of it.  

Don’t think coal fired plants impact ag, think again. Set aside the obvious concerns about access to reasonably priced power on the electric grid and concentrate on the larger implication of the rule. If the EPA can, by fiat, outlaw a type of energy production, telling livestock farmers how they can raise cattle or telling soybean farmers when to combine will be a snap.

Underneath the cuddly, feel good theme of “Save the Environment”, the EPA could just as easily dictate P,N, and K application to grain fields and set levels of acceptable dust emission from combines. It is not science fiction and I am not making this up, it’s a very real possibility. They have already tried to regulate dust and have their fingers in the levels of P, N, and K by the Master Matrix system required under manure management plans for confined animal feed lot operations.  Heaven forbid that mother nature dumps a load of rain on your feed lot and some dirty water spills out, as it will be prosecuted as a criminal act, yet other acts of negligence in chemical industrial settings are routinely considered “a civil matter.”

EPA won’t be the only one regulating ag to death, I am sure the FDA will get its hands involved as well. While they can’t seem to be bothered to regulate dietary supplements, they can in one year demand food safety protocols to avoid salmonella, and in the very next year assist, the media with its public feeding frenzy when the food production protocols include processes designed to reduce risk to salmonella.

Who wins in this environment? Not the consumer. As one farm operator remarked regarding the beef additive drama , let them regulate it all away and run up the price of beef.  If  the trimmings can’t be used then they will have to buy more of the good stuff. Not the farmer, who will face increased regulation and compliance costs along with higher exposure to additional penalties but  the lawyers who are retained to defend the farmers and  members of anti Ag groups like HSUS, PETA, and ALF who desire to see the end of modern agriculture as we know it win.

What they waiting for?

For those who have been wondering why, with this nearly perfect spring, have you not seen planters in the ground during the first half of April, rest assured it isn’t because of a lack of interest on the part of the farmer.  It is a business decision.

A farmer who has federally backed  crop insurance has a planting window, which in Iowa is 11 April for Corn and 21 April for soybeans. Crops planted before these dates void their replant coverage payments. That is a potential loss of $45.44 per acre of corn and $37.65 per acre of soybeans at risk if you plant before the window opens.

I am happy to announce that my book, Field Manual: Iowa Farmer’s Guide to Legal Issues is available on Amazon.com. If you have read my  article here over the years, you will find the same style down to earth take on legal issues impacting Iowa Farm Operators. From burning trash without getting a ticket to what a legal fence is to estate planning considerations, the manual hits a wide variety of issues.

Let them in , but don’t show them around

Iowa has a law that encourages land owners to open up to the public or private groups for recreational purposes free of charge. This includes removing any duty to safe guard from non apparent dangers The concept is that “city folk” could take nature walks, go hunting or fishing and otherwise enjoy the land.  Makes fine sense, as you are not likely to open up the pasture if you are going to be held liable for every bruise and scrape.

However, the Iowa court of appeal has recently thrown all of that good common sense right out the window.  In a recent decision, a farm family, who for years allowed kindergarten classes to tour its farm and become connected with ag, was sued when a visiting teacher fell out of the haymow and broke her ankle.  The court found that the land owner’ s presence as “tour guides” removed the liability shield afforded to them by law.

The take home lesson is that you can let the public on the farm, but don’t  give them a tour. This result is at odds with our traditional notions of hospitality and common sense. The court essentially punishes the land owner who takes pride in the operation and serves as an ambassador of the activity. I hope that land owners appeal this to the Iowa Supreme Court and common sense prevails.

What is a Iowa farmer who wants to comply with the   law to do? Consult an Iowa Farm lawyer and get some risk management practices in place.

Triple Stack: Federal  Government Style

Just in case you are breathing easier because the EPA has backed off on regulating combine dust, three other  from the  areas of the law, regulated by feds, promise to mess with your operation in the near future. Agricultural law has many opportunities for the government to involve itself with your business. 

A few overriding factors need to be remembered about our government in Washington. For every $1.00 it spends, 42 cents of that dollar has to be borrowed. It is an election year, which means that turtles will stick their neck out farther than politicians will prior to November.

The first is the 2012 Farm Bill. More accurately it should be named the Free Food bill with limited farm provisions addressed. The government paid out a record setting amount of food stamps last year (nearly $72 Billion). By the way, food stamps is the old term and SNAP (Supplemental Nutrition Assistance Program) is the new term for the program. That is over 10% of all the food sales in the Unites States.  Those payments get allocated like they are part of the FARM Bill because that’s where the allocation comes from. With the on going budget concerns, where do you think the Farm Bill is going to get cut? Not from urban poor who  vote for urban state legislators. Taking food out of starving kid’s mouths is a great way to not get re elected in the minds of most of our professional politicians.

The last time Congress tired to write a farm bill in Nov 2011 the goal was $23 Billion in cuts without much taken from the Food side. Instead, talk about the beltway seems to b e focused on cutting direct payments, crop insurance backing and conservation reserve programs. Cutting CRP doesn’t make much sense, that puts  more ground back into production, which increases available stocks of grain, which drives down price. Lower prices mean more opportunity to seek support from the government.

As if fighting the food isn’t enough, expect the farm states to fight with one another, as Cotton, Rice, corn and Beans all attempt to pad their programs at the expense of the others. Further, the old food vs. fuel debate with in the corn and bean organizations  can lead to picking winners and losers between commodity growing provisions and bio fuels energy programs.

The next ring in ring the circus is estate tax planning. Right now, a married couple can give away $10 million dollars in value and then have the next $10 million (using the portability rules) exempt from tax at death. After that, they look at an estate tax of 35% on the excess. Wait to die for 10 months and the amounts turn back to $1 million per person, with no portability and 55% tax on the excess. That’s s major switch.  Fear not, Congress has no viable plan in place, so depending how much you have in your pot, it may be a good year to die or absolutely the wrong time. Unfortunately, nobody seems to get an advance notice on when that is coming.

Finally, the depart of labor is slowing up its attack on the farm way of life with new proposed rules on what is considered too dangerous for farm families to allow their children to do. Good to know that bureaucrats in Washington, whose exposure to a modern farm maybe limited Margaret Brown’s The Big Red Barn, Jim Davis’s Orson and the ever popular Old McDonald, are the experts on what tasks farm families can ask their own children to perform. I note they have not withdrawn from the battlefield, only conceding to pressure for now. Much like the EPA and the dust regulation, it may be they are waiting for the storm to blow over and make another push on the issue.

Continued consultation with your Iowa Ag Lawyer is your best defense against the Fed's and the stack they are dealing against you.

No Matter where it comes from  its Still covered

Agricultural  law  covers a lot of territory. Here, the farm law includes elements from  the world of patent law and contracts. A farmer bought soybeans with Round Up technology in seed traits and signed the tech agreement that comes along with the purchase. The agreement required single use and no seed saving. The farmer sold the beans to the local elevator and then proceeded to purchase soybeans from that elevator and replanted them for a second crop soybean planting. Monsanto was not happy and sued. The farmer's legal theory as that he had complied with the seed tech agreement the first time when he sold and it was just his good fortune that the seed's purchase from the Coop included round up ready beans. The court disagreed with the farmer to the tune of $84,456.00.   

I would hope that this farmer didn't run this theory by an Iowa Agriculture Lawyer.  It doesn't pass the "smell test," that is to say, if is smells funny it probably won't be funny to a court. The farm operator was trying to "end run" the seed company's investment in the technology. It is interesting to note that the seed saving was done in 1999, the ruling was issued in 2011. That's a lot of resources and farmer/lawyer time that could have been spent elsewhere, with likely better results.

Farm Divorce

After 18 years, the husband who worked in manufacturing and also cash rented 130 acres to this father (that he owned prior to marriage) was divorced from his wife. The trial court considered the value of the gifts the husband had received from his family  and split their value between the parties. The court was able to do this because the husband wasn't able to prove the gift was just to him , not to  the married couple.  Further, the court went on to determine that the rent, which was low, would be considered an asset available to allocate child support. A pre nuptial agreement, drafted by an Iowa ag lawyer would have served the husband well.

Federal Regulators tell Iowa Regulators how to regulate Iowa Waters

The EPA approved the Iowa DNR's designation of various waterways for recreational and aquatic life uses in over 400 waterways and denied the state's designation in 89 others. This press release bothers me. Two levels of government validating each other's regulation decisions seems like self perpetuating government and I don't see the benefits of having a federal agency available to validate the State's actions. If the state doesn't get it right, the citizens should be able to enforce the law directly against the state, not rely on a federal regulatory agency to approve what the State decides to do with its waters.

Outlook

I listened to a presentation by a pair of economists yesterday. One is a Keynesian and an Austrian Economist. One indicated 2012 is going to be a year of growth and the other indicated dark times ahead. Both make compelling presentations based on statistics and assumptions. I learned long ago the three types of lies in this world are lies, damn lies and statistics. Couple that with the old joke where the shipwrecked economist finds a can of food and says to his friend, "We are saved, we just need to assume we have a can opener" and I was left in exactly the same position as I was before I listened to the both of them. It is hard to make decisions on what world does or may do, I think I will instead make decisions after gathering data and then put a plan in action.

HSUS( Human Society of the United States) has removed United Egg Producers  (representing 87% of egg producers) from the field of battle. United Egg and HSUS have jointly asked the federal government to impose national animal welfare standards for egg production.  Skipping over the state's rights and the concept of a limited federal government,  this national mandate would set the slippery slope for national level regulation of all animal production. Slippery slope is lawyer speak for once it is allowed in one context, it will be the jumping off point for further efforts to erode the previous way things were handled. When I read this, I couldn't help but think of the Wylde Nept song "The Gallows Wait" . The song's title and the lyric "my life was purchased with his lies" fit right in with the HSUS, PETA and other anti production groups methodologies. They lie and mislead the public while using government at all levels to build a structure  that will kill off the animal production industry.

HSUS wants regulations so that they can slowly tighten them to achieve their stated goal of the end of animal production. Iowa Farmers and their lawyers need to be aware, as this slow, insidious campaign will impact them and if left unchecked expose the operators to increased fines and fees, driving small operations bankrupt and slicing margins further for those that can handle the additional regulatory burden. From ballot initiatives in Arizona to local ordnances in Chicago, it is clear that these efforts are not the random acts of fringe operators, but rather a coordinated effort towards a specific goal.

Fighting back against this latest  attack  via  letter to the House Ag Committee include  the American Sheep Industry, the American Farm Bureau , the National Cattlemen’s Beef Association, the National Milk Producers Federation, the National Pork Producers Council  and the National Turkey Federation.  They assert, correctly, that creating national standards is not the appropriate method of regulating agriculture. Local producer groups should be just as concerned . Iowa is a top egg producer and the new standards would hit this state right away.

In a related front, PETA continues its efforts to guide the public’s perception against farmers. In Illinois, they have requested permission to place road side memorials on the highways where cattle haulers had wrecks that resulted in the death of cattle.  Not surprisingly, the markers that they want to erect would be placed in suburban Chicago and northwest of Peoria. Apparently where they die is just as important as dying.

The intent is clear, continue to provide increased costs of production and turn the public against the industry. Food should be a personal experience and modern ag producers need to remember that our end customer is not the cooperative or the dairy, but the end consumer. Keeping them connected to the farm and educated are key battle fronts in the never ending  guerrilla war wages against production ag by anti ag groups. If you don’t pay attention to the ground work being laid by opposing forces ,pretty soon all that  is left to do is put your head in the noose of the custom built gallows. At t hat point, it doesn't' t matter who you have representing you, a farming lawyer  or or some hack off the street.

Time to Grow Up

I would like you to consider buying my manufacturing business with the following facts. It grosses $350,000-$500,000, the price for its product varies upto 50% in a year’s time, your suppliers will not likely sign a long term contract to lock in  your critical raw materials, the industry faces increasing regulation and hefty fines and you will have to serve as the human resources manager, environmental compliance officer, accounting and  legal department, marketing department, facilities manager, and purchasing department and primary equipment operator on the manufacturing floor. Weather and politics halfway around the world will determine the market price of your product on any given day. Oh, and the previous owner is allowed to drop by, be critical your operation methods, choices and marketing and scoff at you if you try anything new. Finally, you will pay full price for every piece of equipment the company has purchased regardless of state of repair or usefulness.

Not interested? Can’t find a bank to lend you the money?  If I tell you it was  farm operation,  suddenly all those factors  don’t seem to matter, but they should. The farm operator of today needs to grow up and face the cold hard truth that the rest of the world considers them a business and act the same.  Farm operators too often rely upon a handshake and a gut feeling that all will go well when interacting with its suppliers. Consider the last building erected on your property.  Did you ask for a performance bond from the contractor, ask for lien waivers before making final payment, or even reduce the agreement to a contract that you understood?  How about your employees,  do you withhold taxes like the government says you should, do you provide training and safety equipment for t hem? When the building starts to lean to the left and the employee loses an eye on the job, it is too late to apply a fix. 

Many farm operators express their disgust for marketing and frustration with the inability to capture a profit for their operations.  The solution is to get smart on the topic and make enough time in your schedule to devote the proper amount of attention to it Or , hire it done. That’s what other businesses do, they focus on what they do well and outsource the rest. Yes,  a charge goes with that outsourcing and if you hire it all away, why are you in the business anyway.

The same principle holds true for legal issues.  Having an Iowa Agricultural Law Attorney  who is aware of the legal pitfalls of contracting, federal and state regulations and debt collection   can make  you money.  On the other hand, attempting to  collect from a farmer who has filed bankruptcy on your own can cost you fines to the federal government for violation of federal bankruptcy law.

When was the last time you evaluated your farm business and determined what departments you are not paying attention to and what can you do about it. This may be the difference between  the operation passing to the next generation and  your farm ground being the nothing more than a farm name on some one else’s  yield monitor.

With the new year, consider the following steps to grow your business and keep  it out of harms way

1.       Pull your annual credit report. Get an identity protection policy.

2.       Check  your insurance policy against what you actually own. Take pictures of valuable items and data plates on equipment.

3.       Update your balance sheet and cash flow statements.

4.       Invest in an off site back up system for your data and photos

5.       Review your contracts and calendar expiration dates on services.

6.       Block out your family vacation time and identify how to cover your operations for planned absences. Block off the county fair, the 4^th of July or what ever major events you know are coming up.

7.       Set a goal for the year’s income and identify what you will do with that achieved goal.

8.       Review your estate plan and life insurance coverage.

9.       Discuss with your parents their estate plan and consider if you have the assets to participate in their plan for you.

10.   Identify capital improvements and develop a plan to fund them

My father told me long ago walk towards where everyone else is running from. Pretty solid observation. It seems like Congress is running from planning past the end of the 2012 election cycle, so maybe walking towards more detailed planning is in order. Maybe it is part of the DNA of being an Iowa Ag Attorney, but the idea of waiting until the last minute does not appeal to me. Some planning that we should all consider include:

1. How much insurance do I need to replace my buildings (house, sheds, bins)… really…. The 1982 Grain bin actual cash value will not pour the cement on a replacement bin if a straight line wind takes it down.

2. How much life insurance do I need to cover my debt and the void in earnings left by my untimely departure. Am an still "sexy" enough to even get term at reasonable rates? The basic idea on term insurance is that insurance companies rent the polices to you for a set period of time. And just like landlords, they prefer young, fit renters with no drama or history of family trouble. The older you get, the higher the rent you are going to have to pay.

3. Are all my assets covered that I want covered? Have I compared what the insurance company  thinks I have with what I know I have? Are they valued correctly?

4. When was the last time I looked at my estate plan, does it reflect what I really want to happen?

5. Agreements with partners. If you signed up for an LLC with your brother five years ago when you were both single and had no kids, have the buy sell agreements you had in place kept up with changes in your life and your partners?

6. If i was disabled, how would I cash flow my life style and the life style of my  kids?

Just some items to think about, failure to plan leaves to bankruptcy, excess taxes and trouble. Run the facts of your operation over with your lawyer, you may find his  professional paranoia can find, fix or prevent problems for you before they start.

But you promised!  Published in NE Iowa Farmer Dec 2011

                How many times do parents hear the clarion call of children demanding justice for a promise made.  The world of agricultural law can take a page from the parent to consider the recent activities of our government.

                First, as a recap, the EPA promised that it would not regulate dust created by  farm operations. Now, the House proposed a bill to  cement that pledge into law. Now the Executive branch is welching and threatening to veto because, essentially, “we already told you that we weren’t going to regulate that.” In the shifting sands of Washington politics, I will take a code section over a promise any day.

                Closer to home we make promises all the time. Some promises are so important, they have to be reduced to writing, like the promise to sell land. With the Des Moines Register reporting  $20,000 per acre land prices in western Iowa, a promise made when the leaves were on the trees now looks like a bad bargain when the snow kisses the ground. A dissatisfied land owner (or perhaps her heirs) may try to wiggle out of  a previous commitment to sell at a set price. The buyer who invests enough in his operation to have an Iowa ag lawyer involved form the get go will be in a better position to fend off the seller’s remorse. No contract is air tight, but when the seller’s options are limited to bankruptcy, being declared incompetent or claiming fraud, it is a far better position to be in than arguing over what the hand written contract on the back of last week’s grocery receipts means.

                Insurance agents also make promises. They often promise to cover your property in the event of a loss. This is why the are agents, meaning they have a special relationship with you as a customer, called a fiduciary duty.  Some times they fail in this duty. The failure can take many forms, such as a failing to tell the bank that the new pick up truck is covered with insurance (which could result in a repossession), falsely certifying a seed type is planted for crop insurance (which can mean non coverage in the event of a crop loss), or even failing to actually insure a piece of property  (which could leave you on your own when your combine head hits the school bus). The best way to ensure an insurance agent’s promises are kept are to review exactly what is written down and what the agent is actually covering. Failing to tell an agent about a new piece of equipment timely (usually with in 30 days) could mean trouble when the brand new grain cart has a tree fall on it.

                Promises happen in estate planning too. I am familiar with a neighbor of a family friend who has promised his farm at his death to at least four young farmers in the area. One night over drinks, they found out about the promise each had been made.  All were in the same boat, and the boat  wasn’t making port anytime soon. Many times, children of farm operators remember promises to parcels of ground long since sold or exchanged by the growing operation.  These promises cannot be enforced,  hurt feelings aside.  Documentation and written estate plans with clear guidance and communications can prevent  misunderstandings and litigation.

Who Says Agricultural Law isn’t important?

The fate of the health care bill passed recently and the subject of a Supreme Court hearing in the future may rest on the antics of an Ohio farmer from the 1930s. A farmer, Wickard, exceeded a production quota for wheat (which was either sold, consumed by livestock and baked  into bread). The USDA levied a fine for exceeding production quota and Wickard resisted.  Wickard lost. It is a case reviewed by every first year law student, as it is cited as the leading edge of the authority of the Federal Congress to regulate interstate commerce. The health care debate is, in court anyway, framed on whether or not the Federal Congress of the republic (which is supposed to be a limited government) is regulating trade between the states in the enactment of this health care legislation. This isn’t the only time the Ohio farmer has shaped a nation, as the interstate commerce clause (bolstered by the Wickard ruling), was used to strike down segregation laws in the 1960s. It remains an open question of the Wickard decision will harvest another  victory for proponents of the use of the interstate commerce clause as a method to club the members states of the republic into line with uniform legislation.

While striking up a conversation with your Iowa Ag Law Attorney about Wickard vs. Filburn may induce post traumatic stress syndrome, its a clear example  of how important the legal system views prior case law and why the selection of judges today can shape the future.