Agricultural Law Weekly Review—September 1, 2016

Written by M. Sean High – Staff Attorney

The following information is an update of recent, local, state, national, and international legal developments relevant to agriculture:

Big Data: DOJ Sues to Prevent Deere’s Acquisition of Precision Planting  

On August 31, 2016, the United States Department of Justice (DOJ) brought an anti-trust action in the United States District Court for the Northern District of Illinois Eastern Division to prevent Deere & Company’s (Deere) from acquiring Precision Planting LLC (Precision Planting), a subsidiary of Monsanto Company (U.S.Department of Justice v. Deere & Co., Case No. 1:16-cv-08515).  According to the filed complaint, Deere and Precision Planting currently account for 86% of all high-speed precision planting system sales in the United States and as a result, DOJ asserted “the proposed acquisition likely would lessen competition substantially, and tend to create a monopoly…in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.”

Labor: California Governor Presented with Bill Removing Agricultural Worker Overtime Exemption

On August 30, 2016, California Governor Edmund G. (“Jerry”) Brown was presented with legislation which would require California agricultural producers to pay overtime to agricultural employees (AB 1066).  If signed by the Governor, AB 1066 “would remove the exemption for agricultural employees regarding hours, meal breaks, and other working conditions, including specified wage requirements, and would create a schedule that would phase in overtime requirements for agricultural workers…over the course of 4 years.” The proposed legislation would also allow agricultural producers with 25 or fewer employees an additional 3 years to phase in the overtime requirements.  

HPAI: Avian Influenza Found in Wild Duck in Alaska

On August 26, 2016, the United States Department of Agriculture (USDA) Animal Plant Health Inspection Service (APHIS) “confirmed the presence of highly pathogenic H5N2 avian influenza (HPAI) in a wild mallard duck from a state wildlife refuge near Fairbanks, Alaska.”  According to APHIS, this recent discover is the first reported case of H5N5 HPAI—in either wild or commercial birds—in the United States since June 2015. 

Water: DEP Extends NPDES General Permit for Point Source Discharges to Waters of the Commonwealth of Pennsylvania from the Application of Pesticides

On August 27, 2016, the Pennsylvania Department of Environmental Protection (DEP) published notice in the Pennsylvania Bulletin that the department was “extending for 12 months, the availability of the current [National Pollutant Discharge Elimination System—NPDES] General Permit for Point Source Discharges to Waters of the Commonwealth of Pennsylvania from the Application of Pesticides (PAG-15)” (46 Pa.B. 5640).  According to DEP,  “[t]he existing PAG-15 in effect at this time will expire on October 28, 2016…[and] [p]ersons that are operating under the PAG-15 General Permit may continue to operate until October 28, 2017, or the expiration date of coverage identified on the permit coverage approval page, whichever is later.

Inspection: FSIS Announces Request to Renew Voluntary Interstate Shipment of Meat and Poultry Products Program

On August 26, 2016, the United States Department of Agriculture (USDA) Food Safety and Inspection Service (FSIS) published notice in the Federal Register “announcing its intention to renew the approved information collection regarding the voluntary cooperative interstate shipment program” (81 FR 58903).  According to FSIS, the program in question is a voluntary cooperative inspection program, administered by FSIS, “under which State-inspected establishments with 25 or fewer employees are eligible to ship meat and poultry products in interstate commerce.” The comment period for the published notice ends October 25, 2016. 

Raw Milk: Utah Dept. of Health Links Salmonellosis Outbreak to Raw Milk

On August 30, 2016, the Utah Department of Health issued a news release announcing that State health officials were investigating nine illnesses associated with the consumption of raw milk purchased at Heber Valley Milk in Wasatch County, Utah.  According to the news release, on August 23, 2016, “a raw milk sample collected at the dairy by a Utah Department of Agriculture and Food inspector was positive for Salmonella Saintpaul.” The news release also stated that recent testing of raw milk samples collected from Heber Valley Milk  have not tested positive for salmonella, and as a result, the dairy has been allowed to resume sales.

Beef: AMS Proposes Amendment to the Beef Promotion and Research Rules and Regulations

On August 23, 2016, the United States Department of Agriculture (USDA) Agricultural Marketing Service (AMS) published notice in the Federal Register of a “proposed rule [that] would amend the Beef Promotion and Research Order (Order) established under the Beef Promotion and Research Act of 1985 (Act) to add six Harmonized Tariff System (HTS) codes for imported veal and veal products and update assessment levels for imported veal and veal products based on revised determinations of live animal equivalencies” (81 FR57495).  The comment period for the proposed rule closes October 24, 2016.

Crop Insurance Update: North Carolina Farmer Sentenced to 11 Years for Charges Including Attempt to Defraud Crop Insurance

Written by M. Sean High – Staff Attorney

On January 27, 2016, the United States Department of Justice United States Attorney’s Office for the Eastern District of North Carolina (USAO-EDNC) issued a press release announcing that North Carolina farmer Milton Russ Barnhill had been sentenced to 11 years in a federal prison on charges for: 1) “Conspiracy to Make False Statement in Connection with Federal Crop Insurance;” 2) “Making False Statements in Connection with Federal Crop Insurance;” and 3) “Mail Fraud and Money Laundering.”

According to USAO-EDNC, Barnhill was charged with conspiring to defraud the Federal Crop Insurance Corporation (and the Farm Service Agency) by “produc[ing] crops which he sold in the names of others.” USAO-EDNC stated that Barnhill and his coconspirators “then reported on insurance claims that the crops were lost due to natural disasters.” Additionally, USAO-EDNC asserted that Barnhill “also placed crops and insurance policies into the names of conspirators to boost the amount of money he could collect on the insurance claims.”

USAO-EDNC stated that Barnhill was charged with making (and assisting others to make) false federal crop insurance claims.  According to USAO-EDNC, Barnhill had “received more than $1 Million into his bank account that was derived from hidden crop production, underreported crop production, and overstated crop acreages.”

Additionally, the USAO-EDNC press release stated that: 1) Barnhill was charged with mail fraud after using a fictitious tobacco sales contract as collateral to secure a farm operating loan; and 2) Barnhill was charged with money laundering after a) proceeds from his fraudulent actions were placed in his bank account, and b) those funds were then used to file false crop insurance claims. 

Importantly, the USAO-EDNC press release noted that “Barnhill previously went to trial on these charges on August 4, 2015, but pled guilty following jury selection.”

Vermont Farm Agrees to Settlement with DOJ Regarding Tainted Animals Sold for Human Consumption

M. Sean High – Staff Attorney

One day after the Department of Justice (DOJ) filed a complaint for permanent injunction to prevent a Vermont dairy farm’s use of unauthorized animal drugs in animals sold for human consumption, the parties filed an agreed upon settlement.

On December 7, 2015, on behalf of the United States of America, DOJ filed a complaint in the United States District Court for the District of Vermont requesting a permanent injunction against Correia Farm Limited Partnership for allegedly violating the Federal Food, Drug, and Cosmetic Act (FDCA) by administering unapproved new animal drugs which resulted in unsafe drug residue levels in animals slaughtered for human consumption.   

On December 8, 2015, the parties filed a settlement consent decree for permanent injunction.  As part of the settlement, Correia Farm Limited Partnership agreed to a heightened level of Federal Drug Administration (FDA) oversight and scrutiny of their operation and to cease operations until the implementation of FDA approved “record-keeping and operational protocols designed to ensure consumer safety.” Significantly, Correia Farm Limited Partnership agreed not to resume food production (excluding milk) until an FDA determination that the operation’s manufacturing practices have come into compliance with the law.  

The agreed upon consent decree for permanent injunction now awaits judicial approval from the U.S. District Court for the District of Vermont.

Jail Times for Egg Crimes

Written by Stephen Kenney
On June 3, 2014, Austin “Jack” DeCoster and Peter DeCoster pled guilty in Federal Court to their connection with the “distribution of adulterated eggs in interstate commerce.”  The father and son officially pled guilty to one count of bribery of a public official, one count of introducing a misbranded food into interstate commerce with intent to defraud, and one count of introducing adulterated food into interstate commerce.  They were charged after it was found that a nationwide Salmonella outbreak was linked to their Iowa based company, Quality Egg LLC.  The U.S. Centers for Disease Control and Prevention (CDC) estimated that nearly 2,000 people were sickened by the outbreak that was linked to the company’s eggs. They were sentenced three months in jail and one year of supervised probation along with fines.

The government’s memorandum regarding sentencing noted that Quality Egg had disregarded safety standards and practices for years and had misled major customers, including Walmart, about the LLC’s food safety practices.  On April 13, 2015, U.S. District Court Judge Mark W. Bennett sentenced the father and son to three months in prison and one year of probation. 

The family and LLC paid $7 million in fines in April, but are appealing the prison sentence.  The appeal will be heard by the Eighth Circuit U.S. Court of Appeals in St. Louis.  The Department of Justice filed a 60 pagebrief on September 18, 2015, in support of the prison sentences.  The brief states that Quality Egg was “producing SE positive eggs” at a rate of contamination “approximately 39 times higher than the current national incidence rate.”  The barn facilities were also found to be extremely contaminated with “63 percent of the wash water, feed samples, feed ingredients and pullet houses showing widespread SE contamination.” 

The DeCosters argue that incarceration would be unconstitutional because neither man had any knowledge of the violations.  They argue that the sentences would be based on “strict liability” which would violate the Due Process Clause and the Eighth Amendment of the Constitution.  The Eighth Amendment prohibits the government from imposing cruel and unusual punishments.