Agriculture Law: 06-05

8/14/2019 Agriculture Law: 06-05

1/8 JUNE 2005 AGRICULTURAL LAW UPDATE 1

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VOLUME 22, NUMBER 7, WHOLE NUMBER 260 JUNE 2005

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F UTUREN SSUES

Solicitation of articles: All AALAmembers are invited to submit articlesto the Update. Please include copies of decisions and legislation with the ar-ticle. To avoid duplication of effort, please notify the Editor of your proposed article.

Wisconsin insurancecompany subject to jurisdiction in Arkansas

The Nebraska hog wars

Regulation ofhydrologically-connected groundwater in Nebraska

International trade andthe future of farmprograms

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Cont. on page 2

Cont. on page 2

Federal Register summary from June 11 to July 6, 2005

COTTON. The CCC has issued interim regulations changing the Extra Long Staplecotton price used to calculate the payment rate from the average domestic spot pricequotation for base quality U.S. Pima cotton to the American Pima c.i.f. Northern Europeprice. 70 Fed. Reg. 35367 (June 20, 2005).

The CCC has issued proposed regulations which implement provisions of theMilitary Construction Appropriations and Emergency Hurricane Supplemental Ap-propriations Act, 2005, to provide assistance to producers and first-handlers of the 2004crop of cottonseed in counties declared a disaster by the President due to 2004hurricanes and tropical storms. 70 Fed. Reg. 36536 (June 24, 2005).

CROP INSURANCE. The FCIC has adopted as final regulations amending theNursery Crop Insurance provisions to (1) make container and field grown plantsseparate crops; (2) provide coverage for plants in containers that are equal to orgreater than one inch in diameter; (3) provide separate basic units by share which will

be further divided into basic units by plant type and a basic unit for all liners whenadditional coverage is purchased; (4) offer one coverage level and price election foreach basic unit when additional coverage is purchased; (5) offer optional units by

Peanut farmers claims dismissed for lack of subject matter jurisdictionIn Texas Peanut Farmers v. United States, 409 F.3d 1370 (Fed. Cir. 2005), the United StatesCourt of Appeals for the Federal Circuit dismissed an action brought by several peanutfarmers for lack of subject matter jurisdiction.

Multiple Peril Crop Insurance (MPCI) policies are crop insurance policies that areissued by private insurers and reinsured by the Federal Crop Insurance Corporation(FCIC) for protection against weather-related crop losses. See Texas Peanut Farmers, 409F.3d at 1370. Prior to 2002, MPCI coverage for peanuts was based upon whether lostpeanut crops were considered quota or non-quota. See id. at 1372. Quota peanutswere covered at $0.31 per pound and non-quota peanuts were covered at $0.16 perpound. See id. The Farm Security and Rural Investment Act of 2002, commonly referred

to as the 2002 Farm Bill, repealed the peanut quota and caused all peanuts to becomenon-quota with a per-pound-coverage rate of $0.1775. Id.Several peanut farmers from South Carolina, Georgia, Alabama, Texas, and Florida

purchased MPCI coverage for their 2001 and 2002 peanut crops. See id. After thefarmers peanut crops suffered weather-related damage in 2002, they filed claims fortheir losses in accordance with their MPCI policies, expecting that their losses would

be covered at $0.31 per pound. See id. They were informed, however, that due to therepeal of the peanut quota by the 2002 Farm Bill their losses would only be coveredat $0.1775 per pound. See id.

The farmers brought a breach of contract action against the United States in theUnited States Court of Federal Claims for breach of contract and argued that theirdamages equaled the difference between the $0.31 per-pound and $0.1775 per-pound-coverage rates. See id. The Court of Federal Claims dismissed the farmers claims forlack of jurisdiction, holding that 7 U.S.C. 1508(j) and 1506(d) placed exclusive

jurisdiction in the federal district courts. See id. See also Texas Peanut Farmers v. United

States , 59 Fed. Cl. 70 (Fed. Cl. 2003). The farmers appealed that decision to the FederalCircuit. See id.The farmers argued that 7 U.S.C. 1508(j) and 1506(d) did not apply because they

did not name the FCIC as a defendant. See id. The farmers also argued that the Courtof Federal Claims has concurrent jurisdiction with the federal district courts under theTucker Act, 28 U.S.C. 1491(a)(1), and the Little Tucker Act, 28 U.S.C. 1346(a)(2).


2/82 AGRICULTURAL LAW UPDATE JUNE 2005

VOL. 22, NO. 7, WHOLE NO. 260 June 2005AALA Editor..........................Linda Grim McCormick

2816 C.R. 163, Alvin, TX 77511Phone: (281) 388-0155

E-mail: [email protected]

Contributing Editors: Robert A. Achenbach, Eugene, OR;

Harrison M. Pittman, Fayetteville, AR; Joshua T. Crain,Fayetteville, AR; J. David Aiken, Lincoln, NE.

For AALA membership information, contact RobertAchenbach, Interim Executive Director, AALA, P.O. Box2025, Eugene, OR 97405. Phone 541-485-1090. [email protected].

Agricultural Law Update is published by the AmericanAgricultural Law Association, Publication office: CountyLine Printing 6292 NE 14th Street, Des Moines, IA 50313.All rights reserved. First class postage paid at Des Moines,IA 50313.

This publication is designed to provide accurate andauthoritative information in regard to the subject mattercovered. It is sold with the understanding that thepublisher is not engaged in rendering legal, accounting, orother professional service. If legal advice or other expertassistance is required, the services of a competentprofessional should be sought.

Views expressed herein are those of the individualauthors and should not be interpreted as statements ofpolicy by the American Agricultural Law Association.

Letters and editorial contributions are welcome andshould be directed to Linda Grim McCormick, Editor, 2816C.R. 163, Alvin, TX 77511, 281-388-0155.

Copyright 2005 by American Agricultural LawAssociation. No part of this newsletter may be reproducedor transmitted in any form or by any means, electronic ormechanical, including photocopying, recording, or by anyinformation storage or retrieval system, without permissionin writing from the publisher.

PEANUT FARMER/ CONTINUED FROM PAGE 1

Federal Register/Cont. from page 1location for field grown plants; (6) allowincreases to the plant inventory valuereport if made on or before August 31 ofthe crop year; (7) change the provisionthat precludes acceptance of an applica-

tion for insurance for any current cropyear after May 31 of the crop year; and (8)make other policy changes to improvecoverage of nursery plants. 70 Fed. Reg.37221 (June 28, 2005).

GUARANTEED FARM LOANS. The FSAhas issued proposed regulations whichrevise the Interest Assistance Programas to how a guaranteed loan borrowermay obtain a subsidized interest rate on aguaranteed farm loan. The changes in-clude (1) deletion of annual review re-quirements, (2) limitations on loan sizeand period of assistance, and (3) stream-lining of claim submission. 70 Fed. Reg.36055 (June 22, 2005).

ORGANIC FOODS. The AMS has is-sued advance notice of proposedrulemaking concerning the expiration, onOctober 21, 2007, of the allowed use of 165synthetic and non-synthetic substancesin organic production. On the same datethe prohibition of nine non-synthetic sub-stances will also expire. The AMS seekspublic comment on the changes. 70 Fed.Reg. 35177 (June 17, 2005).

ORGANIC FOODS. The AMS has is-sued a notice pursuant to a consent final

judgment and order issued in the caseHarvey v. Johanns , Civil No. 02-216-P-H (D.

Me. June 9, 2005). The court issued a de-claratory judgment that 7 CFR 205.606shall be interpreted to permit the use of anonorganically produced agriculturalproduct only when the product has been

listed in Section 205.606 pursuant to Na-tional List procedures, and when an ac-credited certifying agent has determinedthat the organic form of the agriculturalproduct is not commercially available.The courts order limited an accreditedcertifying agents commercially availabledeterminations for nonorganic agricul-tural products used in or on processedorganic products to the five substancescontained in 7 CFR 205.606. The productsinvolved are native cornstarch, waterextracted gums, kelp when used as a thick-ener and dietary supplement, unbleachedlecithin, and high methoxy pectin. 70 Fed.Reg. 38090 (July 1, 2005).

TOBACCO. The CCC has issued a re-quest for public comment on the docu-ments to be used by the CCC in the admin-istration of the Tobacco Transition Pay-ment Program with respect to successor-in-interest contracts, which allow a to-

bacco quota holder or a tobacco producerwho is participating in this program totransfer their rights and obligations to athird-party. 70 Fed. Reg. 36919 (June 27,2005).

Robert P. Achenbach, Jr., AALAExecutive Directo

1370, 1372 (Fed. Cir. 2005). The court rejected the farmers argument, stating that[t]his theory does not bear scrutiny. It iswell settled that this court look[s] to thetrue nature of the action in determiningthe existence or not of jurisdiction.Id. (citation omitted). It added that [a]ninspection of the contract and ... pleadingsreveals the true nature of this action: a suitagainst the FCIC for breach of the MPCI.... [The farmers] strategic decision not toname the FCIC as a defendant is merelyan attempt to avoid the strictures of theMPCI and sections 1508(j) and 1506(d).

The court also rejected the farmersarguments that the Court of FederalClaims possessed jurisdiction concurrentwith the federal district courts. See id. at1373. The court explained that Congressis permitted to withdraw any grant ofTucker Act jurisdiction. See id. (citingRuckelshaus v. Monsanto Co., 467 U.S. 986,1016-17 (1984); Wilson v. United States, 405F.3d 1002 (Fed. Cir. 2005); and Massie v.United States, 166 F.3d 1184 (Fed. Cir. 1999)).

The court concluded that because the

farmers are suing the FCIC for breach,sections 1508(j) and 1506(d), by which Con-gress has granted courts exclusive juris-diction over claims against the FCIC, gov-ern. Id.

Harrison M. Pittman, National Agricultural Law Center, Research Assistant

Professor of Law

This material is based on work supported bthe U.S. Department of Agriculture under

Agreement No. 59-8201-9-115. Any opinions findings, conclusions, or recommendations ex pressed in this article are those of the author anddo not necessarily reflect the view of the U.Department of Agriculture.

The National AgLaw Center is a federall funded research institution located at the Uni-versity of Arkansas School of Law, Fayettevill

Web site: www.NationalAgLawCenter.org| Phone: (479)575-7646 | Email:[email protected]

Section 1508(j) provides that if a claim ofloss is denied, an action on the claim may be brought against the Corporation orSecretary only in the United States districtcourt for the district in which the insuredfarm is located. 7 U.S.C. 1508(j). Section1506(d) provides that the FCIC,

subject to the provisions of section 1508(j) ... , may sue and be sued in its corpo-rate name .... The district courts of theUnited States, including the district courtsof the District of Columbia and of anyterritory or possession, shall have ex-clusive original jurisdiction, without re-gard to the amount in controversy, of allsuits brought by or against the Corpora-tion. The Corporation may intervene inany court in any suit, action, or proceed-ing in which it has an interest....

Id. at 1506(d).

The court first considered the farmersargument that 7 U.S.C. 1508(j) and1506(d) did not apply because the FCICwas not named as a defendant in their

complaint. Texas Peanut Farmers, 409 F.3d



In Ferrell v. West Bend Mutual Insurance Com- pany , 393 F.3d 786 (8th Cir. 2005), the UnitedStates Court of Appeals for the EighthCircuit held (1) that a Wisconsin crop in-surer was subject to personal jurisdictionin Arkansas, (2) that the insurance policysright-to-sue-insurer clause was enforce-able in Arkansas, (3) that the action wasnot precluded by a previous declaratory judgment in Wisconsin, (4) that damage toa tomato crop was property damageunder the policy, (5) that damage to thetomato crop constituted an occurrenceunder the policy, (6) that a contractualliability exclusion did not apply, and (7)that Arkansas penalty statute applied.See id.

Arkansas tomato growers Phillip andTommy Ferrell and Clay and Donny Lowry(growers) purchased a plastic film fromHi-Tech Film, Inc. (Hi-Tech) designed toprevent soil from splashing onto toma-

toes and causing blight. See id. Afterplacing the film on their fields, the film began to deteriorate causing holes in partsof the film. See id. Because of these holes,the growers tomatoes were splashed withsoil when it rained, causing blight. See id.As a result, the tomatoes were smallerthan normal and suffered from sunburn,rain damage, and cracking. See id. There-fore, in August of 2000 the growers suedHi-Tech in Arkansas federal district courtand were awarded damages andattorneys fees due to the breach of war-ranties of merchantability and fitness. Seeid. The growers then sought indemnifica-

tion from West Bend Mutual InsuranceCompany, the insurance company thatinsured Hi-Tech. See id. The courtawarded the tomato growers the under-lying judgment, plus attorneys fees andcosts, a penalty, prejudgment interest,and postjudgment interest. Id. at 790.West Bend appealed the decision to theEighth Circuit. See id.

West Bend argued that the district courtdid not have personal jurisdiction over it because it lacked sufficient minimum con-tacts with Arkansas. See id. West Bendasserted that it was a Wisconsin companywith its principal place of business in Wis-consin, that it conducted no business andhad no offices or agents in Arkansas, thatit had no bank accounts or property inArkansas, that it solicited no business inArkansas, and that it was not licensed tooperate in Arkansas. See id. The courtexplained that the policy covering Hi-Techcontained a territory-of-coverage clauseproviding that the policy covered Hi-Techagainst injury or property damage fromoccurrences in [t]he United States ofAmerica . . . Puerto Rico, and Canada. Id.at 790. The court determined that West

Bend chose to extend its coverage intoArkansas and was therefore subject topersonal jurisdiction in Arkansas. See id. Italso determined that the territory-of-coverage clause in the policy satisfiedthe minimum contacts requirement of theDue Process Clause. See id.

West Bend also argued that the grow-ers only cause of action arose out of 23-89-101 of the Arkansas Code, which pro-vides for direct actions against an insurer

based on an insurance policy issued ordelivered in Arkansas. See id. Althoughthe growers abandoned their relianceupon this section because the insurancepolicy at issue was neither issued nordelivered in Arkansas, the court explainedthat the express language of the policyprovided for a cause of action. See id. Thecourt explained that the language of thepolicy providing that [a] person or orga-nization may sue us to recover . . . on a final

judgment against an insured obtainedafter an actual trial. Id. at 792. The courtexplained that 23-89-101 of the ArkansasCode did not preclude a claim based uponthe express language of a policy and thecommon law. See id.

West Bend further argued that the grow-ers claim was foreclosed by a previouslyissued declaratory judgment in Wiscon-sin that West Bend had no duty to defendor indemnify Hi-Tech. Id. at 792. WestBend argued that such judgment should

be given full faith and credit in Arkansas.See id. The court explained that the districtcourt had concluded that the Wisconsin

judgment did not bar the tomato growersaction in Arkansas, because the growerswere not a party to the Wisconsin action,and Hi-Tech had little or no incentive toobtain a full and fair adjudication in thatcase. Id. at 792-93. The court agreed withthe district court that the Wisconsin judg-ment did not bar this action. See id. It statedthat the growers would not have beenprecluded in Wisconsin and that the grow-ers interests cannot be deemed to have

been litigated in the Wisconsin action. Seeid.

West Bend next argued that the breach-of-warranty damages were for economiclosses not covered by the policy and thatthe policys contractual liability exclusionapplied. See id. The court explained thatthe growers did sustain property damageas a result of the defective film purchasedfrom Hi-Tech. See id. It noted that thetomato plants were stunted, undersized,sunburned, or waterlogged, and they werecracked in parts. Id. at 795. The courtstated that measuring the damage in termsof lost profits or diminished gross receiptsdid not alter the fact that property (toma-toes) was damaged. See id. The court also

stated that there was an occurrencewithin the meaning of the policy. See id. Inoted that the plants were accidentallyand unintentionally damaged due to thefaulty film. See id. The court further ex-plained that the plants were exposed to

blight, overwatering, and underwatering.See id. The court further determined that

because there was no agreement or con-tract between the growers and Hi-Techassuming liability for damages, WestBends contention that the policys exclu-sion of coverage for contractual liabilityapplied was erroneous. See id.

West Bend also argued that the grow-ers were not entitled to a penalty andattorneys fees under 23-79-208(a)(1) ofthe Arkansas Code. See id. That sectionprovides that if an insurance companyfails to pay in accordance with the policyafter demand is made, they are liable topay a 12% penalty on the amount of the

loss and reasonable attorneys fees. Seid. The court explained that even wherethe law of another state governs the sub-stantive issues, the award of the 12% pen-alty and attorneys fees is procedural andtherefore governed by Arkansas law. Seid. The court cited USAA Life Ins. Co. vBoyce , 745 S.W.2d 136 (Ark. 1988), an Arkan-sas Supreme Court decision, for thatproposition. See id. The court explainedthat under 23-79-208 of the ArkansasCode, there must be a connection withArkansas for the court to award the pen-alty and attorneys fees on a policy. See idThe court further explained that the in-

surance policy matured in Arkansas, theinjury occurred in Arkansas, the damagedproperty was owned by Arkansas resi-dents, and the Arkansas residents broughtsuit and obtained a judgment in Arkan-sas. Id. at 797. The court concluded that

because of these factors there was a suf-ficient connection to apply 23-79-208.

Joshua T. Crain, National AgLawResearch Center Graduate Assistant

Fayetteville, AR

This material is based on work supported bthe U.S. Department of Agriculture under

Agreement No. 59-8201-9-115. Any opinions findings, conclusions, or recommendations ex pressed in this article are those of the author anddo not necessarily reflect the view of the U.Department of Agriculture.

The National AgLaw Center is a federall funded research institution located at the Uni-versity of Arkansas School of Law, Fayettevill

Web site: www.NationalAgLawCenter.org| Phone: (479)575-7646 | Email:[email protected]

Wisconsin insurance company subject to jurisdiction in Arkansas



By J. David Aiken

Nebraska has always been a major live-stock producing state. Until the 1980s, mostlivestock production was on small to me-dium-sized family operations. Nebraskahas always had some large cattle feed-lots, but most feedlots have been smaller.Swine production traditionally has beenon small and medium-sized operations. Just over one-third of Nebraska countieswere zoned by the late 1970s, with quarter-mile (or smaller) setbacks being a com-mon livestock zoning regulation.

Beginning in the late 1960s, large con-fined swine production facilities were de-veloped in the eastern US, similar to thepoultry industry. Initiative 300s corpo-rate farming restrictions no doubt slowedthe development of large swine confine-ments in Nebraska until the late 1980s andearly 1990s. This development then be-came a high-profile public policy issue.Strident opposition to large swine confine-ment operations from smaller swine pro-ducers and neighbors concerned aboutodors and pollution led to a state morato-rium on processing livestock waste per-mits until regulations could be changed todeal with larger operations. Many fea-tures of the new state livestock wasteregulations were ultimately included inthe 1998 Nebraska Livestock Waste Man-agement Act, Neb. Rev. Stat. 54-2401 to-2435 (2004 Supp).

A major focus of the Nebraska hogwars has been county livestock zoning

regulations. The Nebraska Supreme Courtruled in 2000 that counties could not regu-late livestock facilities except throughcounty zoning regulations. Enterprise Part-ners v. Perkins County , 260 Neb. 650, 619N.W.2d 464 (2000). See County feedlot regu-lations invalidated , 17 Agric. L. Update 12(November, 2000). Thereafter, develop-ing restrictive county AFO (animal feed-ing operation) zoning regulations becamethe principal strategy for limiting the de-velopment of mega-livestock facilities.Many unzoned counties sought to de-velop zoning to give them control over thelocation (and size) of large swine confine-

ment operations. Anti-confinementgroups sought changes in county zoninglaws to allow temporary zoning so thatcounties had time to develop permanentzoning. Temporary zoning legislation was

first proposed in 1998 but was not adopteduntil 1999, as confinement developers lob-

bied hard to have the law delayed. Thisallowed some confinement operations to

be developed before counties could regu-late them through temporary zoning regu-lations. See Neb. Rev. Stat. 23-115 to -115.02 (2004 Supp.). Now most Nebraskacounties are zoned; some regulations arestrict enough to make development ofnew confinements difficult if not eitherimpossible or uneconomical.

In most zoned counties, new livestockfacilities need both (1) a state livestockwaste control permit from the NebraskaDepartment of Environmental Quality and(2) a county zoning permit. Often countieswill require the producer to first obtain theDEQ livestock waste permit before thecounty will issue the zoning permit. Some

livestock producers have received theirstate DEQ livestock permit, only to thenhave their county zoning permit denied. Alivestock producer may spend hundredsor even thousands of dollars to obtain theDEQ permit. Most producers would preferto know whether or not the county willissue the zoning permit before spendingthe money to obtain the DEQ permit, anissue addressed as part of 2003 livestockfriendly legislation.

The Nebraska system of dual livestockfacility regulation is in contrast to Iowas,where counties cannot zone agriculturalland or buildings. In Iowa, the Department

of Natural Resources issues environmen-tal permits for livestock operations withstate setbacks of 750-1,875 feet dependingupon the facility waste handling system.In contrast, most county zoning regula-tions of livestock facilities in Nebraskahave much larger setback requirements(up to four miles), and some have capacitylimits, putting a ceiling on larger facilities.Livestock industry advocates have pro-posed that county zoning of livestock fa-cilities be limited or prohibited, but have

been unsuccessful in implementing re-strictions on county zoning authorities.

County AFO zoning upheldIn Premium Farms v. Holt County , 263 Neb

415, 640 N.W.2d 633 (2002), the NebraskaSupreme Court ruled that a Holt Countyzoning regulation could require a condi-tional use zoning permit before hog pro-duction facilities could be developed. Pre-mium Farms wanted to build a large swinefacility in Holt County. The countys zon-ing regulations required Premium Farmsto obtain a conditional use zoning permit

before constructing the hog confinementfacility. Premium Farms began construc-tion without obtaining the zoning permit,

contending that the county zoning permitrequirement was illegal and unenforce-able. The county then took Premium Farmsto court for beginning construction with-out the zoning permit.

Premium Farms argued that Nebraskazoning statutes prohibited counties fromrequiring permits for farm buildings. Pre-mium Farms argued that because theywere constructing a farm building, theywere not subject to county permit require-ments. The county argued that the farm

buildings statute applied only to buildingpermits and not to zoning permits. Thecounty also argued that Nebraska zoningstatutes clearly authorized counties toregulate agricultural land uses.

The district court ruled that the zoningstatute prohibited counties from regulat-ing farm buildings. The district court con-

cluded that the county could regulate theuse of the land surrounding the farm build-ing but not the farm building itself. Thisruling was overturned by the NebraskaSupreme Court, which ruled that the farm

building statute applied only to buildingpermits and not to zoning permits. TheSupreme Court also ruled that the HoltCounty zoning permit requirements forthe hog buildings were legal.

The Premium Farms decision is a majorlegal decision. The Iowa Supreme Courthad ruled in similar cases that Iowa coun-ties are not authorized to zone agricul-tural land. DeCoster v. Franklin County , 497

N.W.2d 849 (Iowa 1993); Thompson vHancock County , 539 N.W.2d 181 (Iowa 1995);Kuehl v. Cass County , 555 N.W.2d 686 (Iowa1996). A similar decision by the NebraskaSupreme Court would have required mostNebraska counties to rewrite their zoningregulations, and would allow new live-stock facilities to be developed through-out the state if they met DEQ environmen-tal regulations (which contain no setbackrequirement).

County livestock zoning has continuedto generate controversy. Most zoned coun-ties establish zoning setbacks for live-stock operations, and some counties havelarger setbacks (up to 4 miles) for verylarge facilities. These types of zoning regu-lations will make livestock expansion (es-pecially swine expansion) difficult in muchof Nebraska.

Open meetings lawIn Nebraska, as in most other states,

most actions by public officials are subjectto compliance with state public meeting oropen meeting law requirements. Failureto comply with open meeting require-ments can lead to a courts declaring theaction taken by public officials to be in-valid. Such was the case in a zoning deci-

The Nebraska hog wars

J. David Aiken is Professor of AgriculturalEconomics (Water & Agricultural Law Special-ist), University of Nebraska-Lincoln. He is amember of the Nebraska and District of Colum-bia Bar Associations.



Cont. on p. 6

sion involving a dairy expansion in Ante-lope county. Alderman v County of Antelope ,11 Neb. App. 412, 653 N.W.2d 1 (2002).

The teVelde brothers filed an applica-tion with the Antelope County board ofsupervisors for a zoning permit to expandtheir dairy. The dairy is located in thewatershed of East Verdigree Creek, acold-water stream that provides 40% ofthe trout stocked in Nebraska.

On August 10, 1999, before any actionwas taken on the zoning permit applica-tion, the county board approved a $158,000loan to the teVelde brothers for their dairyexpansion. On August 24, 1999, after theloan for the dairy expansion had beenapproved, the Antelope County planningcommission held a public hearing on theproposed zoning permit for the teVeldedairy expansion. (Under Nebraska zoninglaw, the planning commission makes arecommendation to the county board,which makes the final decision on condi-tional use zoning permits such as the onerequested by the teVeldes.) Because the

public notice of the planning commissionmeeting was not legally adequate, thecommission continued (i.e. delayed) itsmeeting to September 7, 1999.

Between these two meetings the plan-ning commission and the teVeldes ar-ranged a tour of the dairy at which aUniversity of Nebraska livestock environ-mental engineer could address issuesconcerning the dairy expansion raised inthe August 24 hearing. The meeting washeld August 31, 1999 and was attended byseven of nine planning commission members, and five of seven county boardmembers. The August 31 meeting was not

advertised as a public meeting pursuantto open meeting requirements.On September 7, 1999, after the unad-

vertised meeting at the dairy, the plan-ning commission voted 6-2 to grant thedairy expansion conditional use permit.On September 14, 1999, the county boardapproved the dairy expansion conditionaluse permit. On October 1, 1999, the plain-tiffs filed a lawsuit to invalidate the dairyexpansion conditional use permit. OnNovember 17, 1999 the district court invali-dated the dairy expansion conditional usepermit because the unadvertised meet-ing at the dairy constituted a violation ofthe open meetings law.

On November 18, 1999 the teVeldesfiled a second application for a dairy ex-pansion conditional use zoning permit. On January 24, 2000 the planning commissionheld a public hearing to consider the sec-ond zoning permit application. After plain-tiffs pointed out fatal deficiencies in thesecond application, the hearing was ad- journed and no action was taken.

On February 3, 2000 the teVeldes filed athird zoning permit application. On Febru-ary 15 and 16, 2000, the planning commis-sion held a public hearing to consider thethird zoning permit application, and voted

7-2 to grant the third application. On March7, 2000 the county board approved thethird zoning application after a public hear-ing.

On June 1, 2000 the plaintiffs filed alawsuit challenging the validity of the grantof the third zoning permit application. Attrial, two planning commission membersindicated that their votes in favor of thethird zoning permit application were influ-enced by information received at the ille-gal dairy meeting. Two county boardmembers indicated that their votes infavor of the dairy expansion applicationwere influenced by the vote of the plan-ning commission. Despite this testimony,the district court ruled that the approval ofthe third zoning permit application waslegal.

This determination was overruled bythe Nebraska Court of Appeals. The Courtof Appeals ruled that the votes on the thirdzoning permit application were tainted byreliance upon information presented atthe illegal dairy meeting, and invalidated

the dairy expansion zoning permit. TheCourt of Appeals noted that in Nebraskathe public meetings laws are to be broadlyinterpreted and liberally construed toobtain the objective of openness in favorof the public. In a sharp rebuke, the courtcontinued:

It is unthinkable that after a court hasvoided a boards action after determin-ing that a meeting was held in violationof the public meetings law, the law wouldstill allow members of that board toconsider information obtained at thatillegal meeting. To do so would com-pletely contradict the stated intent of

the public meetings law, which is toensure that the formation of public policyis public business, not conducted in se-cret, and to allow citizens to exercisetheir democratic privilege of attendingand speaking at meetings of public bod-ies. We simply do not know the contentand extent of the information that waspresented at the illegal meeting. Fur-thermore, official reports of closedmeetings, even if issued, will seldomfurnish a complete summary of the dis-cussion leading to a particular course ofaction.

11 Neb. App. at 422.

The court concluded:To allow board members to considerinformation obtained at a meeting thathas been judicially determined to be inviolation of the public meetings lawwould allow those board members toconsider information that has not been

brought before the public and thus woulddeprive citizens of both hearing saidinformation and speaking either for oragainst it. Thus, we hold that once ameeting has been declared void pursu-ant to Nebraskas public meetings law,

board members are prohibited from

considering any information obtainedat the illegal meeting.

Id. at 422-23.

The teVeldes ultimately filed for bank-ruptcy and abandoned the dairy opera-tion. Part of the controversy in this case isthat the teVeldes has been recruited toNebraska by the Nebraska Department ofEconomic Development dairy expansionprogram. Significant state economic de-velopment grants were made to theteVeldes in addition to county economicdevelopment funding. The case was atrain wreck that the state of Nebraskawould no doubt like to avoid in the future.

Livestock friendly legislationIn 2002, and in response to the Alder-

man decision (as well as more widespreadlivestock developer frustration with in-creasingly restrictive county AFO zoningregulations), livestock and other agricul-tural interests sought a state study of theeconomic importance of the Nebraska

livestock industry. That proposal was de-feated by counties, anti-confinement ad-vocates, and others who saw it as layingthe foundation for a political attack oncounty livestock zoning. Livestock sup-porters returned in 2003 with LB754, a statelivestock-friendly-county program, whichwas enacted. Neb. Rev. Stat. 54-2801 to-2802 (2004). The statute (1) allows theNebraska Department of Agriculture todesignate counties as livestock friendly,and (2) changed procedures for countylivestock zoning permits.

Livestock friendly counties

Nebraska Revised Statute section 54-2801 declares that the growth and vitalityof the states livestock sector are critical tothe continued prosperity of the state andits citizens. Section 54-2802 authorizesthe Nebraska Department of Agriculture(NDA) to establish criteria to recognizeand assist county efforts to maintain orexpand their livestock sector. Countiesmay be designated as livestock friendly ifthey request the NDA designation andmeet the NDA livestock-friendly criteria.Livestock friendly criteria include setbacksof no more than 3/4 mile. 29 Neb. Adm.Code 008.05F (2004). Counties may alsodesignate themselves as being livestockfriendly. The implicit objective of the NDAlivestock friendly designation process isto allow counties to signal to producerswhether or not they are receptive to newand/or expanded livestock operations.Certainly the state would be justified inlimiting the spending state economic de-velopment funds for livestock develop-ment to livestock-friendly counties. Someopponents fear that the NDA livestockfriendly zoning criteria (which would makeit difficult for a recently zoned county toqualify as livestock friendly) may be the



basis for restricting county AFO zoningregulations to those that do not conflictwith the NDA livestock friendly zoningcriteria. However, the NDA has recentlyapproved the first county (which is zoned)as livestock friendly that has setbacksslightly in excess of the NDA livestockfriendly zoning criteria. Counties want to be friendly , Nebraska Farmer (July 2005) at 7.

County livestock zoning permitsNebraska Revised Statutes section 23-

114.01 (2004 Supp.) establishes that a live-stock producer applying for a county AFOzoning permit may request the county tospecify what requirements the producermust meet in order to receive countyzoning approval. The statute also requiresa written statement of the reasons why athe livestock zoning permit was grantedor denied. The implicit objective of the 23-114.01 zoning requirements is to allowapplicants to get an advance written de-

termination of whether or not their permitwill be granted before they seek the moreexpensive DEQ permit. The statute alsomakes the record clearer if county AFOzoning decisions are appealed.

Municipal AFO regulations upheldWhile much of the hog-war battles have

involved county zoning, at least one com-munity has joined the fray. In 1997, thecommunity of Alma (pop. 1,214) learnedthat Furnas County Farms (FCF) and SandLivestock Systems planned to build a largeswine confinement approximately eightmiles northwest of the Alma city limits in

Harlan County. The city hired an environ-mental engineer to prepare a report onthe potential impact of the swine facilityupon Almas water supply. On the basis ofthe consultants report, Alma adopted fivemunicipal ordinances, based upon Neb.Rev. Stat. 17-536 and 17-537. Section 17-536 establishes that the authority of citiesof the second class (including Alma) andvillages to prevent any pollution or injuryto the stream or source of water for thesupply of such [community] waterworks,shall extend fifteen miles beyond its cor-porate limits. The Alma ordinances re-quired livestock producers to obtain per-mits from the city before developing live-stock facilities within 15 miles of Almascity limits. The permit process requiredthe applicant to line waste lagoons with asynthetic liner, to install monitoring wellsto detect ground water pollution, and tosubmit a financial bond for cleanup.

The city notified FCF of the permit re-quirements. FCF informed the city that it believed the city ordinances to be invalid,and stated its intention to proceed withconstruction activities. The city filed suit tostop construction, and constructionstopped when the suit was filed.

FCF contended in court that the 15-mile

municipal water pollution control author-ity was preempted by the Nebraska Envi-ronmental Protection Act (NEPA), andsince FCF had received its state permitsfrom the DEQ, FCF was legally entitled toconstruct its livestock facilities withoutregard to the Alma ordinances. The dis-trict judge ruled in favor of Alma. Anappeal to the Nebraska Supreme Courtresulted in the matter being returned tothe district court in 2001 for further pro-ceedings. The district judge again ruledfor Alma, and this decision was againappealed.

The Nebraska Supreme Court ruled thatthe 15-mile municipal water pollution con-trol authorities were not preempted byNEPA. Normally, the courts will try tosustain both state law and local ordinancesif they are not mutually exclusive. In itsNEPA analysis, the court noted severalNEPA provisions encouraging municipali-ties to establish their own local pollution

control programs. The court did, however,invalidate the Alma cleanup bond require-ment as being inconsistent with NEPA.The court also ruled that FCF could notraise the issue of whether the Alma ordi-nances conflicted with DEQ livestock wastecontrol facility regulations and the 1998Livestock Waste Management Act be-cause such issues had not been raised inthe district court. The Alma decision isanother judicial warning to livestock facil-ity developers that they ignore local regu-lations at their peril.

Failure to establish a non-conforming use

One of the most misunderstood con-cepts in zoning law is that of non-conform-ing uses, or grandfathering. Most zon-ing regulations exempt existing uses thatwould not conform to the new (or revised)zoning regulation. These uses (land usesor buildings) are called non-conforminguses because they do not conform to thenew (or revised) zoning regulation. Theoften mistaken belief is that zoning regula-tions must leave non-conforming usesalone. This is incorrect: Nebraska RevisedStatutes 23-173.01 allows non-conform-ing uses to be terminated, continued, orregulated by a county zoning regulation.As a practical matter, however, most coun-ties will not regulate or terminate non-conforming uses; doing so would oftenmake adoption of the proposed zoningregulation or amendment difficult if notimpossible.

When zoning is being adopted for thefirst time, some property owners mayattempt to establish a non-conforminguse before the zoning regulation is legallyimplemented in order to qualify for thezoning regulations non-conforming useexception. In Nebraska, many county zon-ing regulations have been adopted in re-cent years to restrict the location and

operation of animal feeding operations(AFOs). It is not surprising, then, that afirm attempted to develop two AFOs inRed Willow county before county zoningregulations restricting AFOs wereadopted, seeking to grandfather them.This was the issue before the NebraskaSupreme Court in Hanchera v. Board o

Adjustment , 269 Neb. 623, 694 N.W.2d 641(2005).

In Hanchera , Furnas County Farms wasattempting to develop two swine AFOs inRed Willow County before the countysnew zoning regulation took effect. Mr.Hanchera filed a complaint with the countyzoning administrator that Furnas CountyFarms two AFOs did not meet the newcounty zoning regulations. The zoningadministrator concluded that the twoAFOs qualified as non-conforming usesand were grandfathered. This conclusionwas affirmed by the county zoning boardof adjustment and the county district court,

but was reversed on appeal to the Ne- braska Supreme Court.The court noted that in 2001 the county

was in the process of adopting a compre-hensive development plan and accompa-nying zoning regulations, which wouldhave restricted AFO location. FurnasCounty Farms had participated in thisprocess by attending public hearings andpublic meetings on the proposed zoningregulations. The comprehensive plan andzoning regulations were adopted by theRed Willow Planning Commission andrecommended to the county commission-ers on September 24, 2001. On the next day

the county commissioners adopted thecomprehensive plan and zoning regula-tions, with the effective date of October 16,2001.

Regarding Furnas County Farms at-tempt to grandfather their two new AFOs,the court indicated the following activities:

I. $1,320 spent for easements and stateAFO environmental permit applications,Aug. 1-6, 2001;

II. $93,533 spent as down payments topurchase the two sites, Sep. 30, 2001;

III. $4,000 spent for down payment forone site, October 5, 2001;

IV. $11,480 spent for pouring concrete,October 13, 2001; and

V. $138 spent for electrical inspections,October 15, 2001.

The court also noted that Furnas CountyFarm had not entered into a land purchaseagreement on the two sites until October4, 2001 and did not take title to the land untilDecember 2001. The decision does notindicate whether Furnas County Farmshad received the state AFO permits, but itis not likely that they had in 2001 as it oftentakes several months for the DEQ AFO

Hog wars/Cont. from p. 5

Cont. on p. 7



Hog wars/cont. from page 6

permitting process to be completed.After reviewing these facts, the court

noted that under previous Nebraska courtdecisions, a new zoning regulation will nothave a retroactive effect where a land-owner, in good faith reliance on existingzoning regulations, has spent substan-tially on construction where the new con-struction would not meet the new zoningregulations. The landowner, however, hasthe burden of proving that it did not knowthat the new construction would violatethe new zoning regulations. The courtthen quoted from a North Carolina deci-sion,

Good faith ... is not present when thelandowner, with knowledge that theadoption of the zoning ordinance is im-minent and that, if adopted, will forbidhis proposed construction and use ofthe land, hastens, in a race with the towncommissioners, to make expendituresor incur obligations [such as land pur-

chase agreement or a construction con-tract] before the town can take its con-templated action so as to avoid whatwould otherwise be the effect of theordinance upon him.

269 Neb. at 629.

The court ruled that Furnas CountyFarms was aware that Red Willow Countywas in the process of adopting zoningregulations that would restrict if not pro-hibit its proposed AFOs. All the AFO con-struction activities at the two sites oc-curred after the zoning regulations wereadopted by the county commissioners on

September 25, 2001. The court character-ized these construction activities as anobvious attempt to circumvent the zoningregulations, and therefore were not un-dertaken in good faith. The court ruled thatthe two AFOs were not grandfathered,and that they were required to complywith the new county zoning regulations.The AFOs will likely have to be abandonedas a result of this decision.

What does the future hold? For manyyears Nebraskas corporate farming re-strictions slowed the development ofmega-livestock facilities in the state. How-ever, given the 8th Circuits ruling in SouthDakota Farm Bureau v Hazeltine , 340 F.3d 583(8th Cir. 2003), cert den. 2004 U.S. Lexis3351 (May 3, 2004), the validity of statecorporate farming restrictions is in doubt.If Nebraskas Initiative 300 is invalidated,out-of-state livestock developers may beinterested in locating livestock productionfacilities in Nebraska. This may lead toadditional county AFO zoning challenges.The hog wars are a long way from beingover, at least in Nebraska.

Regulation of hydrologically-connected groundwater in NebraskaNebraska has traditionally kept surfacewater law and ground water law separate.Surface water is subject to the statutorydoctrine of prior appropriation, and groundwater is subject to the common-law doc-trine of reasonable use and correlativerights, supplemented by natural resourcedistrict (NRD) regulation in ground watermanagement areas. See Spear T Ranch v.Knaub , 269 Neb. 177, 691 N.W.2d 116 (2005),noted at 22 Agric. L. Update 6 (May, 2005).This bifurcated approach poses major dif-ficulties when, for example, ground waterpumping interferes with streamflow. Un-der the 1997 Platte River cooperativeagreement, Nebraska must protect PlatteRiver streamflows from inter alia groundwater pumping in order to meet endan-gered species requirements. See Aiken,Balancing Endangered Species Protection andIrrigation Water Rights: the Platte River Co-

operative Agreement , 3 Great Plains Nat.Res. J. 119 (1999). Nebraska must alsoprotect Republican River streamflows intoKansas in order to comply with the settle-ment of Republican River Compact litiga-tion. See Aiken, The Western Common Law of Tributary Ground Water: Implications for Ne-braska , 83 Neb. L. Rev. 541 (2004).

In response to the states Platte andRepublican River legal obligations, Ne-

braska enacted 1996 ground water man-agement legislation authorizing NRDs toprohibit well drilling and limit ground wa-ter withdrawals to protect streamflows.The Nebraska Department of Natural

Resources (DNR) was also authorized toexercise these same authorities if neces-sary to insure compliance with interstatewater obligations. The DNR authoritieswere expanded in 2004, authorizing it todesignate all or parts of river basins state-wide as being fully appropriated, whichtriggered an immediate ban on new wellsand new surface water appropriations.Neb. Rev. Stat. 46-713, -714 (2004). Ar-eas subject to NRD well bans under the1996 statute were designated in the 2004statute as over-appropriated basins andthe temporary NRD well bans were ex-tended. Id. 713(4). Consequently, ap-proximately one third of Nebraska has

been closed to new wells pumping morethan 50 gallons per minute, This is a dra-matic break with Nebraskas traditionallywide-open approach to ground water de-velopment. Furthermore, by January 1,2006 the DNR must decide whether addi-tional areas should be designated as fullyappropriated and closed to new waterrights and wells. Id. 46-713(1). This deter-mination will include a consideration ofthe effects of withdrawing hydrologically-connected ground water (HC groundwater) on streamflow.

Once an area has been designated as

fully appropriated or over-appropriated,the DNR and NRD (or NRDs) must coop-eratively prepare an integrated manage-ment plan (IMP). Id. 46-715. For over-appropriated basins (primarily the Platteand Republican River basins), the goal ofthe IMP is to restore streamflows to their

July 1, 1997 condition (this is the date thePlatte River endangered species coop-erative agreement was signed).Streamflow restoration can be accom-plished by limiting ground water with-drawals and by leasing (and essentiallyretiring) surface water rights. IMPs will beimplemented in 10-year increments.

The 2004 statute puts Nebraska in theforefront in terms of attempting to antici-pate and prevent future conflicts betweenHC ground water users and surface waterusers. However, the statute does nothingto deal with surface water appropriators

who have already been harmed bystreamflow reductions caused by HC wells.Under Spear T , such disputes will be re-solved by 858 of the Second Restatent ofTorts. The late Frank Trelease, the specialALI reporter for the Restatement waterlaw provisions, favored priority (first intime is first in right) as the legal basis forresolving such disputes. See Aiken, Hydro-logically-Connected Ground Water, 858 andthe Spear T Decision , 84(2) Neb. L. Rev(forthcoming). However there is sufficientleeway in 858 to argue that only a narrowrange of ground water users should beliable for interfering with streamflow.

Additional litigation is necessary to morefully define what 858 means for resolvingHC water conflicts in Nebraska.

J. David Aiken, University of NebraskaLincoln. NE

FLAG ExecutiveDirector search

Farmers Legal Action Group, Inc.(FLAG) is searching for an executive di-rector to lead this nineteen-year old na-tional nonprofit public interest law firm,

based in St. Paul, MN. FLAG provides legalservices to protect family farms and theirrural communities. Requirements includea law degree or substantial knowledge ofagriculture issues, foundation fundraisingability, commitment to public interest/so-cial justice work, and senior managementexperience. Experience with agriculturallaw and/or legal services is a plus. Forinformation on FLAG, visit:www.flaginc.org. To discuss the positionor recommend a candidate, call Don Tebbeat (301) 330-4624 or [email protected]



From the Executive Director:Annual Conference: All members should have received or will soon receive the brochure for the 2005 Annual

Agricultural Law Symposium on October 7 & 8, 2005 at the Marriott Country Club Plaza in Kansas City, MO. Becauseof minor changes and updates to the conference schedule, please check the conference brochure posted on the AALAweb site for the latest information. See the link on the main home page.

The conference brochure contains a reminder about the 2005 Membership Recruitment Program and threemembership brochures. If you recruit a non-member to attend the 2005 conference, you will receive four chancesin a drawing to win $345.00, the cost of a member registration to the conference. You can request additional conference brochures from me. Be sure to add your name to the conference registration form for any non-member you recruitfor the conference.

If your firm would like to sponsor one of the food breaks, breakfasts, lunches or the Friday evening reception,please let me know. We also will need to borrow three LCD projectors for both days of the conference. This will savethe association very expensive rental costs.

Nominations for Annual Scholarship Awards. The Scholarship Awards Committee is seeking nominations ofarticles by professionals and students for consideration for the annual scholarship awards presented at the annualconference. Please contact Jesse Richardson, Associate Professor, Urban Affairs and Planning, Virginia Tech,Blacksburg, Virginia 24061-0113,(540) 231-7508 (phone) (540) 231-3367 (fax) email: [email protected]

Robert Achenbach, Exec. Dir., [email protected], 541-485-1090

Agriculture Law: 06-05

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