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VOLUME 21, NUMBER 9, WHOLE NUMBER 250 AUGUST 2004

The right to farm law in California
The article in the June issue of the Agricultural Law Update entitled Iowa’s Right to Farm
Law Declared Unconstitutional questions the constitutionality and enforceability of the
right to farm laws across the country. The article cites a law review for the finding that
“[w]hen the defendants raised a right to farm as an affirmative defense, plaintiffs
prevailed three quarters of the time.” Perhaps right to farm laws have been unsuccessful
in fulfilling their intent in Iowa and other states, but that is certainly not the case in
California.

INSIDE California has the seventh largest economy in the world, and agriculture is its single
largest component. It also endures one of the fastest growing populations in America,
with huge swaths of farmland regularly converted into housing. To protect established
agricultural enterprises from claims by newcomers who become unhappy with the
smells, sounds, and runoffs of farming, the legislature enacted the California right to
• Agricultural law farm law in 1981, which is set forth in California Civil Code Section 3482.5:
bibliography (a) (1) No agricultural activity, operation, or facility, or appurtenances thereof,
conducted or maintained for commercial purposes, and in a manner consistent with
• The problem of buyer- proper and accepted customs and standards, as established and followed by similar
power in agricultural agricultural operations in the same locality, shall be or become a nuisance, private or
markets public, due to any changed condition in or about the locality, after it has been in
operation for more than three years if it was not a nuisance at the time it began.
****
(d) This section shall prevail over any contrary provision of any ordinance or regulation
of any city, county, city and county, or other political subdivision of the state. ***

The California courts have not only upheld the right to farm law, they have broadly
interpreted and expanded the statute’s immunities to protect agriculture. Recent
examples of this include Souza v. Lauppe, 59 Cal.App.4th 685 (1997), and Rancho Viejo LLC
v. Tres Amigos LLC, 100 Cal.App.4th 550 (2002). Both cases upheld immunity for farmers
and affirmed summary judgment in their favor.
Solicitation of articles: All AALA In Souza, a farmer who had irrigated rice for nearly 20 years was sued by an adjoining
members are invited to submit ar- neighbor who claimed that seepage from the rice farm made his property too wet to plant
ticles to the Update. Please include Cont. on p. 2
copies of decisions and legislation with
the article. To avoid duplication of
effort, please notify the Editor of your Vermont’s revised right to farm law
proposed article. The Vermont General Assembly amended the state’s 22-year-old “right to farm” law
during the 2004 legislative session.1 The amendments to Vermont’s right to farm law
were introduced by members of the House Committee on Agriculture following the
Vermont Supreme Court’s recent decision in the case of Trickett v. Ochs, 2003 Vt. 91, 838

IN FUTURE
A.2d 66 (2003).
The Trickett case involved a nuisance and trespass suit brought against an apple
orchard and packing operation by neighbors who lived directly across the road from the

ISSUES
orchard and the packing sheds. The neighbors had purchased the house in 1992. The apple
orchard had been in existence for many years prior to the neighbors’ purchase of the
home. The home had at one time in the past been the farmhouse for the apple orchard.
When the neighbors bought the farmhouse, the apple operation had little impact on them
as most of the apples were shipped to the local apple cooperative for storage and sale.
• Tax exempt financing In the mid-1990s the orchard owners began to change their practices and began packing,
of agriculture storing, and shipping many of their apples directly from the farm. The neighbors began
to complain that noise, lights, and fumes were resulting from the construction of apple
storage bins, the running of refrigeration trucks and the activity of trucks transporting
• Cramdown interest the apples to market.2 The relations between the neighbors and the apple farmers began
rate determinations to sour, and in November, 2000, the neighbors sued the orchard for injunctive relief and
after Till v. SCS Credit damages based on legal claims of nuisance and trespass.
Corp. The trial court ruled, after hearing, that the provisions of Vermont’s then existing right
to farm law3 barred the plaintiff’s complaint as the orchard operation had pre-existed the
Cont. on page 6

AUGUST 2004 AGRICULTURAL LAW UPDATE 1
CALIFORNIA RIGHT TO FARM/ FROM PAGE 1

row crops. The neighbor pled causes of irrigation runoff, which required the con- phasis original by Court) as long as the
action for negligence, unlawful business struction of hundreds of thousands of dol- other conditions of the statute are met
practices, and unfair competition in viola- lars in drains. The developer sued the Rancho Viejo, at 559, 560.
tion of California Business and Professions avocado farmer, alleging causes of action
Code sections 17200, et seq., and argued for trespass, failure to contain irrigation The California right to farm law con-
Civil Code Section 3482.5 was inapplicable waters, and nuisance. The court of appeal trasts with the one found unconstitutional
because it only provided immunity against held that the right to farm law provided in Iowa because California Civil Code Sec-
causes of action for nuisance. The Court of immunity even though the escaping irriga- tion 3482.5 only protects established agri-
Appeal rejected this argument, explaining tion waters also constituted a trespass. cultural operations (a three year operation
a plaintiff cannot avoid the immunity pro- Both the Souza and Rancho Viejo courts that was not a nuisance when it began) from
vided by the statute by simply went to great lengths to expressly hold that the claims of newcomers who change the
recharacterizing or relabeling the conduct the right to farm law should be broadly status quo. Indeed, this is the stated ratio-
in the guise of non-nuisance causes of ac- interpreted. Souza extended immunities to nale for right to farm statutes in the first
tions to bring it outside the ambit of the farmers from claims by other farmers. place.
statute. Souza, supra, 59 Cal.App.4th 865. Rancho Viejo extended immunity to farmers Perhaps the right to farm laws are losing
In Rancho Viejo, a farmer had raised avo- who bought their property from other farm- their teeth in various states. In California,
cado trees on 96 acres on the side of a ers. In each instance the court rejected any the nation’s most populous state, the right
mountain for 25 years. The trees required argument that would frustrate the intent of to farm law is alive and well. The courts in
extensive weekly irrigation, which flowed the statute. This was based on public policy the Golden State are quite willing to invoke
downhill to an adjoining 30-year-old or- as expressed by the legislative intent that the statute to protect California’s biggest
ange grove. A residential developer bought prompted the right to farm law. As ex- industry, agriculture.
the orange grove, cut down its trees, and plained in Rancho Viejo: —Stephen V. Lopardo, Fallbrook,
excavated building pads for a large hous- [The Right to Farm Law] is an important California, was attorney of record for the
ing tract. During the excavation, the devel- step toward eliminating suits by indi- avocado farmers in
oper encountered an extensive amount of viduals who have moved to a new hous- Rancho Viejo v. Tres Amigos
ing development ‘in the country’ and
find the long-established farm bordering
their back fence offends their senses.
Suits against agricultural operations for Dairy checkoff
dust, wind machine or tractor noise, live- The Bush administration has blocked a law
stock or poultry smells and other things that would have required dairy importers
commonly associated with the operation to pay fees to support dairy promotions
of an agricultural enterprise are becom- such as “Got Milk?”. The administration
ing more prevalent as urban develop- concluded that the legislation could subject
ment reaches out to meet agricultural the United States to international trade
VOL. 21, NO. 9, WHOLE NO. 250 AUGUST 2004
AALA Editor..........................Linda Grim McCormick areas. [The Right to Farm Law] will stop challenges. Because the U.S. dairy promo-
this dangerous cycle by allowing agricul- tion program assesses fees only on dairy
2816 C.R. 163, Alvin, TX 77511
Phone: (281) 388-0155
ture to operate without undue pressure farmers in the 48 contiguous United States,
E-mail: from urbanization. Keeping agricultural charging those same fees to all imports
lgmccormick@academicplanet.com land in agricultural use is the goal. could create the appearance of favorable
Contributing Editors: Stephen V. Lopardo, Fallbrook, CA; Rancho Viejo, at 563, 564. treatment for the domestic industry, the
Drew L. Kershen, Norman, OK; Roger A. McEowen, Ames, Department of Agriculture says. The De-
IA; Michael O. Duane, Vermont; Gaby Jabbour,
Fayetteville, AR. Quoting the statute, the court in Rancho partment acted on guidance provided by
Viejo explained that the California right to the U.S. Trade Representative’s office, and
For AALA membership information, contact Robert
Achenbach, Interim Executive Director, AALA, P.O. Box
farm law provided immunity for virtually both agencies propose that Congress re-
2025, Eugene, OR 97405. Phone 541-485-1090. E-mail any activity incident to agriculture: write the law so farmers in all 50 states (as
RobertA@aglaw-assn.org. Section 3482.5 broadly defines an agri- well as the territories) pay the assessment.
Agricultural Law Update is published by the American cultural activity, operation, or facility, or Rep. Tammy Baldwin, D-Wisconsin, plans
Agricultural Law Association, Publication office: County appurtenances thereof as used in subdi- to introduce legislation to do that this year.
Line Printing, 6292 NE 14th Street., Des Moines, IA 50313.
All rights reserved. First class postage paid at Des Moines, vision (a)(1). Such matters “shall in- —The Associated Press, reprinted with
IA 50313. clude, but not be limited to, the cultivation permission from the Agricultural Law
This publication is designed to provide accurate and
and tillage of the soil, dairying, the pro- Digest, Volume 15, No. 17,
authoritative information in regard to the subject matter duction, cultivation, growing, and har- August 27, 2004.
covered. It is sold with the understanding that the publisher vesting of any agricultural commodity
is not engaged in rendering legal, accounting, or other
professional service. If legal advice or other expert including timber, viticulture, apiculture,
assistance is required, the services of a competent or horticulture, the raising of livestock, Vermont/Cont. from page 6
professional should be sought. 3
fur bearing animals, fish, or poultry, and 12 V.S.A. §5753
4
Views expressed herein are those of the individual any practices performed by a farmer or on a Trickett at 5-6.
authors and should not be interpreted as statements of 5
policy by the American Agricultural Law Association.
farm as incident to or in conjunction with Id. at 15-16.
6
those farming operations, including prepa- See 12 V.S.A. §5751
Letters and editorial contributions are welcome and ration for market, delivery to storage or 7
Vermont law at 1 V.S.A. §213 provides
should be directed to Linda Grim McCormick, Editor, 2816
C.R. 163, Alvin, TX 77511. to market, or delivery to carriers for that legislative changes shall not affect
transportation to market.” (§ 3482.5, subd. pending suits.
Copyright 2004 by American Agricultural Law 8
Association. No part of this newsletter may be reproduced (e), emphasis added.) [FN4] By its plain Borman v. Board of Supervisors, 584
or transmitted in any form or by any means, electronic or language, section 3482.5 was intended to N.W.2d 309 (Iowa 1989)
mechanical, including photocopying, recording, or by any 9
information storage or retrieval system, without
immunize farmers from nuisance liabil- See, Powell on Real Property, Ch.9 §64.05
10
permission in writing from the publisher. ity for “any practices performed by a Coty v. Ramsey, 149 Vt. 451, 457 (1988).
11
farmer or on a farm incident to … farm- Robert Frost “The Need of Being Versed
ing operations,” (§ 3482.5, subd. (e), em- in Country Things”, Washington Square
Press, 1971

2 AGRICULTURAL LAW UPDATE AUGUST 2004
Agricultural law bibliography: second quarter 2004
Aquaculture zation Rules to the Labeling of Genetically fied Organisms in International Trade, 43
Note, Aquaculture and Pollutants Under Modified Foods, 15 Pace Int’l L. Rev. 359- Washburn L. J. 681-723 (2004).
the Clean Water Act: A Case for Regulation, 89 409 (2003). Recent Development, Classic Protection-
Iowa L. Rev. 1011-1049 (2004). Note, Food for the Twenty-First Century: ism–Thin Ham Provides Thick Protection for
An Analysis of Regulations for Genetically Member State Domestic Goods at the Expense
Biotechnology Engineered Food in the United States, Canada, of the European Common Market (Case C-108/
McEowen, Legal Issues Related to the Use and the European Union, 14 Ind. Int’l & 01, Consorzio del Prosciutto di Parma &
and Ownership of Genetically Modified Or- Comp. L. Rev. 375- 407 (2003). Salumifico S. Rita SpA v. Asda Stores Ltd. &
ganisms, 43 Washburn L. J. 611-659 (2004). Sigman, Kosher Without Law: The Role of Hygrade Foods Ltd., [2003] 2 C.M.L.R. 369,
Wadley, Understanding a Context for the Nonlegal Sanctions in Overcoming Fraud 2003), 12 Tul. J. Int’l & Comp. L. 545-564
Conflict: A Response to Roger McEowen, 43 Within the Kosher Food Industry, 31 Fla. St. (2004).
Washburn L. J. 661-667 (2004) . U. L. Rev. 509-601 (2004). Stewart & Schenewerk, The Conflict Be-
Student Article, The National School Lunch tween Facilitating International Trade and
Corporate farming (restrictions on corpo- Program and USDA Dietary Guidelines: Is Protecting U.S. Agriculture from Invasive
rate farming/family farm preservation) There Room for Reconciliation?, 33 J. L. & Species: APHIS, the U.S. Plant Protection
Case Note, Buying the Farm: The Eight Educ. 181-212 (2004). Laws, and the Argentine Citrus Dispute, 13 J.
Circuit Declares South Dakota’s Anti-Corpo- Student Article, The Birth Place of Food Transnat’l L. & Pol’y 305-346 (2004).
rate Farming Amendment Violates the Dor- Products: Do You Know Where Your Food Student article, The European
mant Commerce Clause (South Dakota Farm Comes From?, 16 Loy. Consumer L. Rev. Commission’s Regulations for Genetically
Bureau v. Hazeltine, 340 F.3d 583, 8th Cir. 285-294 (2004). Modified Organisms and the Current WTO
2003), 11 Mo. Envtl. L. & Pol’y Rev. 184-196 Dispute--Human Health or Environmental
(2004). Forestry Measures? Why the Deliberate Release Direc-
McEowen & Harl, South Dakota Amend- Comment, Crisis in the Forest: The Envi- tive Is More Appropriately Adjudicated in the
ment E Ruled Unconstitutional–Is There a ronmental Impact of Illegal Logging under the WTO under the TBT Agreement, 15 Colo. J.
Future for Legislative Involvement in Shaping New Russian Economy, 15 Colo. J. Int’l Envtl. Int’l Envtl. L. & Pol’y 209-244 (2004).
the Structure of Agriculture? 37 Creighton L. L. & Pol’y 245-269 (2004).
Rev. 285-303 (2004). Land use regulation
Hunger & food issues Land use planning and farmland pres-
Environmental issues Student Article, The Meaning and Rel- ervation techniques
Case Note, The Expanding Definition of a evance of Food Security in the Context of Student article, Misconstrued Entitlement:
Point Source under the Clean Water Act (Com- Current Globalization Trends, 19 J. Land Use The Extent of Local Power in Regulating the
munity Ass’n Restoration v. Henry Bosma & Envtl. L. 435-450 (2004). Land Application of Biosolids in Virginia, 2
Dairy, 65 F. Supp. 2d 1129, E.D. Wash. Appalachian J.L. 37-59 (2003).
1999), 8 Great Plains Nat. Resources J. 56- Hunting, recreation & wildlife
63 (2003). Case Note, The Catch of the Day is a Livestock and Packers & Stockyards
Case Note, The State’s 303(d) List Is Not a Violation of Your Fourth Amendment Protec- Case note, Constitutional Law—First
“Rule”: Good for Missouri’s Waters, Good for tions Against Unreasonable Searches and Sei- Amendment Review of Beef Checkoff Assess-
Agriculture, or Not Good at All? (Missouri zures (State v. Larsen, 650 N.W.2d 144, Minn. ments; Beef May Be for Dinner, but May
Soybean Association v. The Missouri Clean 2002), 8 Great Plains Nat. Resources J. 78- Producers Be Compelled to Say So? (Livestock
Water Commission, 102 S.W.3d 10, Mo. 2003, 88 (2003). Marketing Association v. United States De-
en banc), 11 Mo. Envtl. L. & Pol’y Rev. 171- Note, It’s Good to Be the Game Warden: partment of Agriculture, 335 F.3d 711, 8th
183 (2004). State v. Boyer and the Erosion of Privacy Cir. 2003) 4 Wyo. L. Rev. 397-438 (2004).
Comment, Will the Takings Clause Eclipse Protection for Montana Sportsmen (State v. Walker & Lawrence, American Meat: A
Idaho’s Right- to-Burn Act?, 40 Idaho L. Rev. Boyer, 2002 MT 33, 308 Mont. 276, 42 P.3d Threat to Your Health and to the Environ-
723-756 (2004). 771), 65 Mont. L. Rev. 187-216 (2004). ment, (Reviewing Donald D. Stull and Michael
Jerger, EPA’s New CAFO Land Applica- J. Broadway, Slaughterhouse Blues: The Meat
tion Requirements: An Exercise in Unsuper- International trade and Poultry Industry in North America), 4
vised Self-Monitoring, 23 Stan. Envtl. L.J. 91- Comment, The European Union’s Efforts Yale J. Health Pol’y L. & Ethics 173-182
128 (2004). to Sidestep the WTO through its Ban on GMOs: (2004).
Note, Pesticides and Permits: Clean Water A Response to Sarah Lively’s Paper, “The
Act v. Federal Insecticide, Fungicide, and Ro- ABCs and NTBs of GMOs”, 24 Nw. J. Int’l L. Patents, trademarks & trade secrets
denticide Act, 8 Great Plains Nat. Resources & Bus. 173-198 (2003). Epp, Four-Wheeling Through the Soybean
J. 35-43 (2003). Comment, Catfish Wars: Vietnam’s Fight Fields of Intellectual Property Law: A
Ruppert, Water Quality Trading and Agri- for Free Trade in the U.S. Court of Interna- Practitioner’s Perspective, 43 Washburn L. J.
cultural Nonpoint Source Pollution: An Analy- tional Trade, 13 Pac. Rim L. & Pol’y J. 471- 669-679 (2004).
sis of the Effectiveness and Fairness of EPA’s 502 (2004). Kershen, Of Straying Crops and Patent
Policy on Water Quality Trading, 15 Vill. Development, Tension Between the Rights, 43 Washburn L. J. 575-610 (2004).
Envtl. L.J. 1-39 (2004). Cartagena Protocol and the WTO: The Signifi- Roberts, J.E.M. Ag Supply, Inc. v. Pioneer
cance of Recent WTO Developments in an Hi-Bred International, Inc.: Its Meaning and
Equine law Ongoing Debate, 5 Chi. J. Int’l L. 369-378 Significance for the Agricultural Community,
Howland, Let’s Not “Spit the Bit” in De- (2004). 28 S. Ill. U. L. J. 91-129 (2003).
fense of “the Law of the Horse”: The Historical Mansour & Key, From Farm to Fork: the Shim, Intellectual Property Protection of
and Legal Development of American Thor- Impact on Global Commerce of the New Euro- Biotechnology and Sustainable Development
oughbred Racing, 14 Marq. Sports L. Rev. pean Union Biotechnology Regulatory Scheme, in International Law, 29 N.C. J. Int’l L. &
473-507 (2004). 38 Int’l Law. 55-69 (2004). Com. Reg. 157-247 (2003).
Note, Waiting on the River: The United Siebrasse, A Remedial Benefit-Based Ap-
Food and drug law States and the European Union, Heads Up and proach to the Innocent User Problem in the
Compton, Applying World Trade Organi- High Stakes in the WTO—Genetically Modi- Cont. on p. 7

AUGUST 2004 AGRICULTURAL LAW UPDATE 3
The problem of buyer-power (monopsony) in agricultural markets
By Roger A. McEowen

Farmers and ranchers have long faced the conclusion with which the appellate court direct evidence to show monopoly power
persistent problem of the power of buyers agreed.5 In another case, the court struck in any market. We decline to adopt such a
of agricultural commodities. When a mar- down an agreement among pulp compa- rule now.”14 While Microsoft15 addresses
ket is characterized by a limited number of nies to depress the prices paid to loggers in the problem of seller-power, the control of
buyers and many sellers, there is a great Alaska.6 The pulp companies had created an output market, the case is very instruc-
potential for strategic conduct by buyers to a network of captive loggers heavily in- tive on the converse problem of buyer-
manipulate prices paid to sellers. In an debted to the defendants. Unilaterally, the power (monopsony). Whereas monopoly
agricultural context, the basic manipula- defendants could cut off a logger’s financ- represents control of an output market,
tion involves buyers of agricultural prod- ing, force the logger out of business, and monopsony represents the ability to con-
ucts utilizing various means to reduce the acquire the company or its assets. The trol or affect price paid for inputs. Thus,
price paid for agricultural products below defendants also used their control of timber under the Microsoft16 rationale, once it is
that which would have prevailed if the supplies to prevent the entry of new pulp shown that the defendant has profited from
market had operated in a fair, open, and mills into the market. More recently, the lowering prices for products it purchases
transparent manner.1 United States Court of Appeals for the below the competitive level, the existence
In some instances, the results of price Second Circuit determined that buying of monopsony power is clear, and no fur-
manipulation in a market characterized by power practices of oil companies in the ther direct evidence of monopsony power
few buyers would readily be recognized by labor market may have unlawfully de- is necessary.17
antitrust law as harmful to competition. In pressed salaries for employees in the in-
other instances, however, the antitrust dustry.7 The relevance of market share in
analysis might classify the harms as being monopsony cases
injurious to individual market participants The relevance of market power in It is important to also note that buyer-
but not necessarily harmful to the competi- monopsony cases power can arise from a much lower market
tive process. Traditional antitrust analysis Antitrust legal opinions have long recog- share than is required in seller-power (mo-
is typically limited to harms to competi- nized two methods for proving market nopoly) cases. Effective market power is a
tion. That has been understood generally power. The more common approach is to function of the market context. In an anti-
as the process of competition focused on infer power as an indirect inference from trust context, firms with modest market
the overall output and price in the market. the share of an appropriately defined mar- shares under conventional criteria are able
However, in situations where buyer-power ket.8 The logic is that if a firm has a substan- to exercise seriously anticompetitive mar-
results in the price of the input being de- tial share of such a market and if there are ket power. For instance, cheese represents
pressed in discriminatory ways without barriers to entry, then the firm is likely to approximately one-third of total milk use
necessarily affecting the price in the down- have power in that market to affect both in the dairy industry. Nevertheless, in
stream markets, conventional antitrust is price and output. This method is used to Knevelbaard Dairies v. Kraft Foods, Inc.,18
likely to label the resulting harms as losses determine the probable market power of Kraft purchased approximately one-third
to individuals, but not harms to competi- firms in merger, monopoly, and restraint of of all cheese sold in the United States and
tion. trade cases. But, the case law recognizes found it to be in its economic self-interest to
that this method is problematic because it manipulate the market for cheese prices to
Case law on monopsony seeks to infer power from structural condi- drive down the public price in order to get
While the focus of antitrust regulators tions. lower contract prices for the bulk of its
and courts has usually centered on harms The alternative method for determining purchases. The result was a negative effect
to competition, some courts have recog- whether a firm has market power is to on the price of milk nationally that harmed
nized potential abuses by powerful buyers. examine its actual market conduct. When a all dairy farmers. Because the harm Kraft
For example, in the 1940s, California sugar firm can raise or lower prices at will with- inflicted on dairy farmers was indirect, the
beet farmers sued three sugar refiners for out significantly affecting the quantity that farmers had antitrust claims only in those
fixing the price paid for sugar beets.2 The it buys and sells or engages in other acts states that gave standing to indirect pur-
court specifically noted that the Sherman that are consistent only with the presence chasers.19 In upholding the resulting anti-
Act protects sellers (when there is no other of market power, such as price discrimina- trust claim under California law, the U.S.
trade regulation law applicable to the mat- tion or economically unjustified refusals to Court of Appeals for the Ninth Circuit
ter), and highlighted the market dominance deal, courts will draw the inference of mar- pointed out that Kraft’s market position
of the refiners.3 Similarly, the Federal Trade ket power without asking for market defi- was such that it was able to inflict harm on
Commission (FTC) brought a cease-and- nition.9 As a matter of both legal and eco- the market for milk.20
desist order against manufacturers of spa- nomic logic, this alternative method is to be Similarly, in Toys “R” Us, Inc. v. Federal
ghetti and macaroni who were fixing prices preferred whenever available because it Trade Commission,21 the plaintiff sold about
for durum wheat, semolina, and durum represents direct proof of the issue rather 20 percent of all toys sold in the United
flour.4 The FTC concluded that by fixing the than creating a debatable inference.10 In- States, but this position gave it substantial
composition of their most important raw deed, in United States v. Microsoft Corp.,11 power over its suppliers. The plaintiff used
material, macaroni manufacturers substan- the court stated that: “…a firm is a mo- that power to compel its suppliers to refuse
tially affected the price of durum wheat, a nopolist if it can profitably raise prices to sell popular toys to the plaintiff’s low-
substantially above the competitive level.12 price competitors. The court found that the
Where evidence indicates that a firm has in manipulative conduct of the plaintiff was
Roger A. McEowen is Associate Professor of fact profitably done so, the existence of sufficient evidence of market power de-
Agricultural Law, Iowa State University, monopoly power is clear.”13 The Microsoft spite the relatively small market share.
Ames, Iowa. Member of Kansas and Nebraska court also stated that, “Microsoft cites no These cases provide strong support for
Bars. case, nor are we aware of one, requiring the proposition that buyer-power must be

4 AGRICULTURAL LAW UPDATE AUGUST 2004
21
measured in terms of the potential for buy- tion of Dentists, 476 U.S. 447, 460-461 (1986). 221 F.3d 928 (7th Cir. 2000).
14 22
ers to affect the market. This is particularly Id. at p. 57. That is certainly the case in the market
15
true when a market is characterized by few 253 F.3d 34 (D.C. Cir. 2001). for fed cattle. As a result, the major
16
buyers and many sellers who face signifi- Id. meatpackers have very substantial power
17
cant costs in switching their production to In Pickett, et al. v. Tyson Fresh Meats, to affect price. Relatedly, in the economic
other markets.22 Inc., No. 96-A-1103-N (M.D. Ala., certified sense, the sale of fed cattle is very inelastic
as class action on Dec. 26, 2001), the jury in terms of quality. A seller of fed cattle
Conclusion returned a verdict of $1.28 billion against does not have the option of withholding
Continued concentration among firms the defendant on a claim of price manipula- cattle from the market for any extended
that purchase agricultural commodities in- tion in violation of the Packers and Stock- length of time in the hopes of higher prices
creases the potential for the exercise of yards Act by acquiring feeder cattle through in the future. This makes the market for fed
manipulative buying practices by those the use of captive-supply cattle rather than cattle particularly susceptible to manipula-
firms. Antitrust law has a significant role the cash market. The plaintiffs established tion by a market characterized by a few
in ensuring that the markets into which at trial that the economic effect of the major buyers or, in some regions, a single
farmers and ranchers sell their products defendant’s use of captive supplies was a buyer.
remain competitive. Perhaps future anti- reduction in the cash market price for fed
trust analysis will demonstrate that “buyer cattle of 5.62 cents per cwt live weight per
power” can be just as offensive (in the 1,000 head of captive supply for a given
antitrust sense) as “seller power.” week. The PSA prohibits buying practices
that have the effect of manipulating price. Position
See 7 U.S.C. §192(d). In essence, the PSA
1
See, e.g., Knevelbaard Dairies v. Kraft was structured by the Congress as a monop- announcement
Foods, Inc., 232 F.3d 979 (9th Cir. 2000)(domi- sony statute, designed, in part, to address
nant cheese buyer manipulated the price of the pernicious buying practices of the ma- FLAG’s Executive Director position is
cheese to lower its overall prices and thereby jor meatpackers that existing antitrust law available. FLAG (Farmers’ Legal Action
injured milk producers whose milk prices did not address adequately. In accord with Group, Inc.) is a public interest law firm
were directly determined by the price of Microsoft, once price manipulation is found dedicated to providing legal services to
cheese). For a thorough discussion of the to have occurred, no further inquiry into family farmers and their rural commu-
problem, see Peter C. Carstensen, “The market power is required. Importantly, nities in order to help keep family farm-
Content of the Hollow Core of Antitrust: under the PSA, price manipulation is pro- ers on the land.
The Chicago Board of Trade Case and the hibited without any requirement that the
Meaning of the “Rule of Reason” in Re- defendant possess a requisite level of mar- Qualifications: Applicants should have
straint of Trade Analysis,” 15 Research in ket power. However, utilizing a Sherman (1) a law degree or substantive knowl-
Law and Economics 1-88 (1992). Act “rule of reason” analysis, the trial court edge of agriculture issues; (2) a demon-
2
Mandeville Island Farms, Inc. v. Ameri- judge in Pickett, on April 23, 2004, nullified strated fund-raising ability; (3) a dem-
can Crystal Sugar Co., 334 U.S. 219 (1948). the jury’s verdict by granting the onstrated commitment to public inter-
3
Id. defendant’s motion for judgment as a mat- est/social justice work; (4) experience
4
National Macaroni Manufacturers Asso- ter of law. While the judge did not dispute running a non-profit organization; and
ciation v. Federal Trade Commission, 345 F.2d the jury’s finding of $1.28 billion in damage (5) good listening skills and ability to
421 (7th Cir. 1965). to the cash market for fed cattle, the judge coordinate work of dedicated and tal-
5
Id. held that the defendant had legitimate busi- ented staff. Experience with agricultural
6
Reid Brothers Logging Co. v. Ketchikan ness reasons for utilizing captive supplies law and/or legal services is a plus.
Pulp Co., 699 F.2d 1292 (9th Cir. 1983). for acquiring fed cattle. The court refer-
7
Todd v. Exxon Corporation et al., 275 F.3d enced the defendant’s need to “meet com- Compensation: Depends on experience.
191 (2d Cir. 2001). petition” and obtain a reliable and consis-
8
See United States v. Aluminum Co. of tent supply of fed cattle. Pickett, et al. v. Benefits: FLAG offers excellent benefits,
America, 148 F.2d 416 (2d Cir. 1945). Tyson Fresh Meats, Inc., 315 F. Supp. 2d including health coverage, SEP plan, flex-
9
Indeed, this latter approach has been 1172 (M.D. Ala. 2004). The “legitimate ible working hours, transportation sub-
utilized in both monopoly and restraint of business reason” test of the trial court, sidy, etc.
trade cases. See United States v. Microsoft however, is the standard for monopoly
Corp., 253 F.3d 34 (D.C. Cir. 2001)(mo- cases tried under the Sherman Act’s rule of EOE: FLAG is an equal opportunity em-
nopoly case); Toys “R” Us, Inc. v. Federal reason. Such a standard appears to be ployer and encourages applications from
Trade Commission, 221 F.3d 928 (7th Cir. inappropriate in a monopsony case brought women and people of color.
2000)(restraint of trade case). under the PSA. The Pickett case is presently
10
See, e.g., Metronet Communication Ser- on appeal to the United States Court of Applications: E-mail or mail (1) a cover
vices v. U.S. West Communications, 329 F.3d Appeals for the Eleventh Circuit. letter explaining qualifications for and
18
983 (9th Cir. 2003)(market power provable 232 F.3d 979 (9th Cir. 2000). interest in position; (2) résumé; and (3)
19
by either direct or circumstantial evidence). This is the rule of Illinois Brick Co. v. list of three references to:
11
253 F.3d 34 (D.C. Cir. 2001). Illinois, 431 U.S. 720 (1977), in which the
12
Id. at p. 51, citing 2A Phillip E. Areeda, Court established a direct purchaser limi- Farmers’ Legal Action Group, Inc.
et al., Antitrust Law, ¶501 at 85 (1995), and tation on standing to sue. Several states 46 East 4th Street, Suite 1301
Ball Memorial Hospital, Inc. v. Mutual Hos- have amended their state antitrust statutes St. Paul, MN 551-1
pital Insurance, Inc., 784 F.2d 1325, 1335 (7th explicitly to grant antitrust actions to direct hiring1@flaginc.org
Cir. 1986). purchasers.
13 20
Id. at p. 51, citing FTC v. Indiana Federa- 232 F.3d 979 (9th Cir. 2000).

AUGUST 2004 AGRICULTURAL LAW UPDATE 5
Vermont/Cont. from page 1
neighbors’ purchase of the home.4 The trial Agriculture Committee, the House Judi- There was also considerable debate on
court granted the orchard’s motion to dis- ciary Committee, the House of Representa- what standard of proof should be required
miss the neighbors’ case. tives, the Senate Agriculture Committee, in order for a plaintiff-neighbor to rebut the
The neighbors appealed the dismissal to the Senate Judiciary Committee, the Sen- presumption that the agricultural activity
the Vermont Supreme Court. The Vermont ate, and by a House and Senate Conference did not constitute a nuisance. In Vermont a
Supreme Court reversed the trial court and Committee. The Governor signed the bill common law nuisance is established when
remanded the matter for further consider- into law on June 3, 2004. a plaintiff can prove that the defendant’s
ation. In its case of first impression the The 2004 amendments to Vermont’s right activity is creating a substantial and unrea-
Vermont Supreme Court held that the right- to farm law 2004 enacted the following sonable interference with the use and en-
to-farm law did not apply to the circum- provisions in order to address some of the joyment of the plaintiff’s property.10 Under
stances of this case.5 The court ruled that concerns noted above: the law was amended the 2004 amendments to the right to farm
the complained of activities at the orchard to remove from the list of legislative find- law, the Vermont legislature changed the
commenced after the plaintiffs had bought ings the potential of lawsuits because of standard of proof in right to farm nuisance
their home, that the plaintiffs’ home had “urbanization” in light of Vermont’s tradi- cases from requiring a showing that the
always been used as a residence, that the tional land settlement patterns; it included activity has a “substantial adverse effect on
case did not involve the problem of “urban- a legislative finding that farms will likely the public health and safety” to a showing
ization” which was a then stated legislative change, adopt new technologies, diversify, that the activity has a “substantial adverse
intent of the right to farm law,6 and that the and increase in size in order to survive; it effect on health, safety or welfare, or has a
“prior” protected farm activity did not in- kept codified the doctrine of “coming to noxious and significant interference with
clude the expanded orchard operation. The the nuisance” and included a provision that the use and enjoyment of the neighboring
case was remanded for trial on the plain- the doctrine will apply to agricultural ac- property.” Once the right to farm law re-
tiff-neighbors’ common law nuisance and tivities that have “not significantly buttable presumption attaches, the law re-
trespass claims without the benefit to the changed” since the commencement of the quires a neighboring plaintiff to make a
orchard of any of the statutory protections nonagricultural activity; and it continued showing that is higher than is required in a
of the right to farm law. to require that the agricultural activity be standard common law nuisance case.
Although questions were raised by conducted in conformity with applicable The Vermont right to farm law creates a
policymakers regarding whether the result laws and good agricultural practices in rebuttable presumption that agricultural
in the Trickett case was the proper one order to receive the benefit of the law. activities that are conducted in conform-
under the facts and circumstances of that One important aspect of Vermont’s origi- ance with applicable laws and regulations,
particular case, the larger concern was what nal right to farm law was the extent to and are consistent with good agricultural
effect the court’s decision would have on which it codified the doctrine of “coming to practices, and that were established prior
any future nuisance suits against Vermont the nuisance”. The Vermont Supreme Court to surrounding non-agricultural activities
farms. has not had occasion to rule on the applica- and which have not significantly changed
During the course of the legislative de- bility of this doctrine in a nuisance case. since the commencement of the surround-
bate on the implications of theVermont And although the “coming to the nuisance” ing non-agricultural activities, are not a
Supreme Court’s Trickett decision for fu- doctrine has been accepted to differing de- nuisance. However, the presumption that
ture cases involving the right to farm law,7 grees by many courts, it has not been ac- the farming activity is not a nuisance may
a number of concerns were expressed. These cepted universally and the extent of its be rebutted by a showing that the farming
concerns included, among other things: did application as a defense varies as well.9 activity has a substantial adverse effect on
the right to farm law need to be amended in Unlike the right to farm laws in some health, safety or welfare, or has a noxious
response to the Trickett decision; did the states, the Vermont right to farm law does and significant interference with the
decision “freeze” a farming operation in not create an immunity from nuisance law- neighbor’s use and enjoyment of their prop-
time so that any expansion or change of a suits for farmers. Most importantly from a erty.
farm would fall outside the right to farm legal and procedural point of view, the law The Vermont right to farm law has pro-
law; did the decision effect the parameters continued to provide that the right to farm vided Vermont farmers with a degree of
of the “coming to the nuisance” doctrine” law created a “rebuttable presumption” protection from nuisance lawsuits brought
expressed in the statute; should a right to that the agricultural activity did not consti- by neighbors who may not be versed in
farm law apply only in suits brought by tute a nuisance. country things.11 The new law codifies the
non-farmers; how far, in light of the Iowa During the course of the legislative de- doctrine of “coming to the nuisance,” al-
Supreme Court’s decision in Borman8, can a bate there was also considerable discussion lows that protection to also include reason-
state right to farm law go before running of the role that the Vermont Agency of able changes in farming practices, creates a
afoul of the Takings Clause; and to what Agriculture should play in the implemen- presumption that good farming is not a
extent would any changes to Vermont’s tation of the right to farm law. Some legis- nuisance, but allows a plaintiff neighbor to
right to farm law encourage or protect “fac- lators proposed that the agency should act rebut the presumption by a showing that is
tory” farming to the detriment of “family as a mediator between farmers and neigh- not so burdensome that it runs afoul of the
farms”? Ultimately, the question at the bors when there were ”nuisance” concerns, Takings Clause. The Vermont Legislature
center of the legislative debate was how can and others proposed that the agency should has attempted to strike a workable balance
typical Vermont farms be allowed to rea- investigate “nuisance” complaints and between the rights and needs of farmers
sonably change their operations, be offered make determinations as to the validity of and their neighbors.
some protection by a right to farm law from those complaints. One concern about these —Michael O. Duane, Assistant Attorney
suits by neighbors who may not be accus- approaches was whether they would create General for the State of Vermont, and
tomed to normal farming activities, yet an ”exhaustion of administrative remedies” General Counsel to the Vermont Agency of
balance the rights and interest of neighbor- requirement. In the end the legislature de- Agriculture, Food and Markets
ing property owners including those who termined that the right to farm law should
have recently moved to an area where farm- not be a regulatory scheme but that the law
ing activity is occurring? should only provide general guidance to
1
The amendments to Vermont right to the trial courts in what are purely private Act No. 149, 2004 (H.778)
2
farm law were reviewed at various stages lawsuits whose facts will significantly dif- Trickett v. Ochs, slip op. at 2-3.
of the 2004 legislative process by the House fer on a case-by-case basis. Continued on page 2

6 AGRICULTURAL LAW UPDATE AUGUST 2004
Cooperative member not allowed to defer value-added payments
In Scherbart v. C.I.R., No. 3345-00, 2004 WL cotton gins were the sellers’ agents for the This material is based on work supported by the
1354120 (U.S. Tax Ct. June 17, 2004), the sale of cotton where the sellers could autho- U.S. Department of Agriculture under Agree-
United States Tax Court held that a mem- rize the gins to defer sale proceeds to the ment No. 59-8201-9-115. Any opinions, find-
ber of an agricultural cooperative was not next year. See id. The Fifth Circuit also held ings, conclusions, or recommendations ex-
entitled to defer the year-end value-added that “[t]he sellers decision ‘to have the gins pressed in this article are those of the author
payments issued to him by the cooperative. hold the sales proceeds until the following and do not necessarily reflect the view of the
Petitioner Keith Scherbart was a member year was a self-imposed limitation. . . . Such U.S. Department of Agriculture.
of the Minnesota Corn Processors (MCP), a . . . limitation does not serve to change the
an agricultural cooperative owned by corn general rule that receipt by an agent is The National AgLaw Center is a federally
producers for the purpose of marketing receipt by the principal.’” Id. (citation funded research institution located at the Uni-
and processing corn. See id. In his market- omitted). versity of Arkansas School of Law, Fayetteville.
ing agreement with the MCP, Scherbart The court stated that, in accordance with Web site: www.NationalAgLawCenter.org
designated MCP as his agent for selling his the terms of the marketing agreement be- | Phone: (479)575-7646 | Email:
corn. See id. tween Scherbart and the MCP, MCP was NatAgLaw@uark.edu
MCP’s processing added value to the the agent of Scherbart for the sale of his
corn delivered by its members, and as a corn. See id. It added that because MCP
result, it issued “value-added” payments was Scherbart’s agent “for making the sales
to its members. See id. On August 30, and receiving the sales income, the only
1995,Scherbart received a letter from MCP limitations placed on . . . [Scherbart’s] re- Federal farm loans
stating that “the yearend value-added pay- ceipt of that income were self-imposed and The FSA has adopted as final regulations
ment for 1995 would ‘be determined after therefore ineffective to achieve a deferral revising the regulations governing the guar-
MCP’s annual audit and paid out by mid- for tax purposes.” Id. The court thus anteed farm loan program to allow guaran-
November’” and that Scherbart could defer concluded that Scherbart “constructively teed loans to be rescheduled with a balloon
his 1995 yearend value-added payment until received the yearend value-added pay- payment under certain circumstances. The
January of 1996. See id. Scherbart exercised ments during the respective taxable years regulations also (1) allow low-risk subordi-
his option to defer payment until January of in issue” and, as such, the payments were nations to be approved the by the appropri-
1996. See id. In the previous year, Scherbart not deferrable. Id. See also id. (quoting 26 ate agency personnel at the field level rather
deferred his 1994 value added payment C.F.R. §§ 1.451-2(a)) (stating, in relevant than the national office, (2) allow lenders to
until 1995. See id. The Commissioner of part, that “income although not actually make debt installation payments in accor-
Internal Revenue determined deficiencies reduced to a taxpayer’s possession is con- dance with lien priorities, payment due
of $3,791 and $2,582 in the Scherbart’s 1994 structively received by him . . . so that he dates, and cash flow projections, (3) clarify
and 1995 Federal income taxes, respec- may draw upon it at any time, or so that he that packager and consultant fees for ser-
tively. See id. Scherbart challenged the could have drawn upon it during the tax- vicing of guaranteed loans are not covered
Commissioner’s determination, arguing able year if notice of the intention to with- by the guarantee, and (4) clarify the amount
that he was entitled to defer the income. See draw had been given.”). a lender can bid at a foreclosure sale. 69
id. Fed. Reg. 44576 (July 27, 2004).
The court stated that there was a “direct —Gaby R. Jabbour, National AgLaw —Reprinted with permission from the
parallel” between this case and Warren v. Center Research Assistant Volume 15, No. 16 Agricultural Law Digest
United States, 613 F.2d 591 (5th Cir. 1980). (August 13, 2004).
See id. In Warren, the Fifth Circuit held that

Bibliography/Cont. from page 3
Patenting of Higher Lifer Forms, 20 Canadian Examination for Insights into the Historical Veterinary law
Intell. Prop. Rev. 79-134 (2003). Genesis of this Dilemma, 26 N.C. Cent. L.J. Huss, Valuation in Veterinary Malprac-
Siebrasse, The Innocent Bystander Prob- 21-37 (2003). tice, 35 Loy. U. Chi. L.J. 479-553 (2004).
lem in the Patenting of Higher Life Forms, 49
McGill L .J. 349-392 (2004). Sustainable & organic farming Water rights: Agriculturally related
Student article, Shade-Grown Coffee Plan- Peck, Protecting the Ogallala Aquifer in
Public lands tations in Northern Latin America: A Refuge Kansas from Depletion: The Teaching Perspec-
Blumm, The Bush Administration’s Sweet- for More than just Birds & Biodiversity, 22 tive, 24 J. Land, Res. & Envtl. L. 349-354
heart Settlement Policy: A Trojan Horse Strat- UCLA J. Envtl. L. & Pol’y 131-153 (2003). (2004).
egy for Advancing Commodity Production on
Public Lands, 34 Envtl. L. Rep. News & Torts and insurance If you desire a copy of any article or further
Analysis 10397-10420 (2004). Glenn, Footloose: Civil Responsibility for information, please contact the Law School
Feller, The BLM’s Proposed New Grazing GMO Gene Wandering in Canada, 43 Library nearest your office. The National
Regulations: Serving the Most Special Inter- Washburn L. J. 547-573 (2004). AgLaw Center website < http://
est, 24 J. Land, Res. & Envtl. L. 241-248 Mayerson, Insurance Recovery for Losses www.nationalaglawcenter.org > http://
(2004). from Contaminated or Genetically Modified www.aglaw-assn.orghas a very extensive Ag-
Note, The Once and Future Federal Graz- Foods, 39 Tort Trial & Ins. Prac. L.J. 837-868 ricultural Law Bibliography. If you are looking
ing Lands, 45 Wm. & Mary L. Rev. 1803- (2004). for agricultural law articles, please consult this
1838 (2004). Note, A Liability and Redress Regime for bibliographic resource on the National AgLaw
Rasband, Buying Back the West, 24 J. Land, Genetically Modified Organisms under the Center website.
Res. & Envtl. L. 179-186 (2004). Cartagena Protocol, 36 Geo. Wash. Int’l Rev.
173-201 (2004). —Drew L. Kershen, Professor of Law, The
Rural development Rogers, Iowa’s Right to Farm Law Declared University of Oklahoma, Norman, OK
Craig-Taylor, African-American Farmers Unconstitutional, 21 Agric. L. Update 4-5 6-
and the Fight for Survival: The Continuing (2004).

AUGUST 2004 AGRICULTURAL LAW UPDATE 7
The 25th Annual Educational Symposium of the American Agricultural Law Association is
quickly approaching on October 1 and 2, 2004 in Des Moines, Iowa. Guest rooms are still
available at the conference hotel. Registration brochures have been mailed and you should
have already received one. If you have not received a conference brochure, please contact
me by phone, fax or e-mail and I will get one to you immediately. Registration materials
are also available online at www.aglaw-assn.org. Click on the 2004 conference link on the
home page. The registration form may be filled out on your computer if you have Adobe
Acrobat Reader. A special dinner for students attending the conference has been planned
for the evening of Oct. 1, 2004 sponsored by the Drake Ag. Law Student Ass’n.
Robert Achenbach
Interim Executive Director, AALA
P.O. Box 2025, Eugene, OR 97405
Ph 541-485-1090 Fax 541-302-1958
E-mail: RobertA@aglaw-assn.org

8 AGRICULTURAL LAW UPDATE AUGUST 2004