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Written by:\u00a0 <\/span> Brook Duer\u2014Staff Attorney<\/span> Want to listen to this Weekly Review? Check out the<\/span> <\/span>Penn State Agricultural Law Podcast<\/span><\/a>.\u00a0<\/span><\/p>\n Dean Foods Bankruptcy: Dean Foods Bankruptcy Estate Threatens Dairy Producers with Lawsuits to Recoup Alleged \u201cPreference\u201d Payments\u00a0<\/span><\/p>\n On November 24, 2020, a commercial collections law firm named ASK LLP, headquartered in St. Paul, Minnesota and hired to represent the Southern Foods Group, LLC formerly d\/b\/a Dean Foods (\u201cDean\u201d) Chapter 11 bankruptcy estate, mailed <\/span>demand letters asserting legal claims for the repayment of milk check proceeds<\/span><\/a> against thousands of dairy producers (including cooperatives) throughout the United States.\u00a0 The claims seek the recovery of milk checks received from Dean within ninety days preceding Dean\u2019s filing of bankruptcy (i.e. between August 14, 2019 and November 12, 2019).\u00a0 The payments are alleged to be so-called \u201cpreference payments\u201d recoverable under Section 547 of the U.S. Bankruptcy Code.\u00a0 Section 547 states, among other things, that a person or entity that receives payment (in this case for milk delivered) from a bankrupt entity within ninety days prior to a bankruptcy filing may be compelled to return that money to the bankruptcy estate under certain conditions. This provision is designed to allow the bankruptcy trustee the discretion to recoup payments that may have been made outside the normal course of business which result in some unsecured creditors receiving preferential treatment by the debtor in the 90 days leading to bankruptcy, thereby receiving an unfair advantage over other unsecured creditors. The amount claimed against each dairy producer in the demand letters varies depending upon the history of deliveries and payments in the subject 90-day window. The claims asserted range from thousands of dollars to hundreds of thousands of dollars in claims against a dairy producer cooperative for repayment. The demand letters state that if a \u201ccompromise\u201d amount of 90% of the amount claimed to be due is not paid by December 24, 2020, or the dairy producer does not respond with certain requested information by December 15, 2020, a lawsuit (called an \u201cavoidance action\u201d) to collect the amount claimed to be due will be filed during the week of December 28, 2020, against the dairy producer in the United States Bankruptcy Court for the\u00a0 Southern District of Texas located in Houston, Texas.\u00a0 A Disclosure Statement for Dean\u2019s Chapter 11 Plan filed with the Bankruptcy Court on November 30, 2020, states that as of that date, 2,500 demands for the return of alleged preference payments were mailed, but only a portion of those would have been directed to dairy producers.\u00a0 Excluding non-dairy producers, and excluding the demand letters sent to a cooperative (treated as one producer), it is estimated that nationwide somewhere between 1000-1500 demand letters would have been directed to independent producers selling to Dean plants.\u00a0 In Pennsylvania, approximately 50-75 independent producers sold to Dean plants.\u00a0 This is the only known usage of Bankruptcy Code Section 547 to try to recover milk check payments from dairy producers as the result of a dairy processor bankruptcy in recent times. There are multiple complete legal defenses to the claims for repayment and the <\/span>American Farm Bureau Federation has issued a public letter to legal counsel for Dean Bankruptcy Estate on December 4, 2020<\/span><\/a> demanding that all demands be withdrawn within ten (10) days and stating that \u201cAFBF will consider all remedies that it can seek as an advocate of the Producers, including asking the Court to enjoin any litigation against the Producers and to hold any funds received by the Debtor in settlement in escrow.\u201d<\/span><\/p>\n Dairy Pricing: PMMB Enters Order Requiring Milk Dealers to Pay Cooperatives\u2019 Milk Procurement Costs for PA-produced, PA-processed and PA-retailed Class I Milk\u00a0<\/span><\/p>\n On December 2, 2020, the Pennsylvania Milk Marketing Board (PMMB) issued <\/span>Official General Order No. A-1010 and and accompanying decision<\/span><\/a>, titled \u201cCooperative Procurement Cost,\u201d concluding a multi-year administrative proceeding commenced by petition of the Pennsylvania Association of Dairy Cooperatives to include in the PMMB\u2019s producer\/wholesale pricing structure an obligation for milk dealers to reimburse dairy cooperatives for certain procurement costs avoided when buying cooperative milk.\u00a0 The cost for things such as field, laboratory and calibration services, producer payroll, sales invoicing, and dispatch and logistics are incurred by milk dealers when buying milk from independent producers but not when buying from dairy producer cooperatives who provide those services.\u00a0 For background on the lengthy proceedings, see <\/span>ALWR-December 12, 2019<\/span><\/a>, \u2018Dairy Policy: PMMB Enters Order Mandating Cooperative Costs Recovery.\u201d\u00a0 Effective January 1, 2021, the price of milk utilized in Pennsylvania as Class I, and which is produced and sold to a milk dealer by a cooperative in Pennsylvania, shall include $0.24 per hundredweight (cwt) as reimbursement of cooperative procurement costs.\u00a0 That amount shall be recoverable by dealers in the minimum wholesale price obtained from retailers.\u00a0 This is believed to be the first instance of government-mandated producer and wholesale pricing including a specific amount for, and recovery of, cooperative procurement costs which are avoided when milk dealers buy from cooperatives.\u00a0\u00a0<\/span><\/p>\n Pesticides\/Herbicides: EPA Releases Draft Biological Evaluation for Glyphosate<\/span><\/p>\n On November 25, 2020, the U.S. Environmental Protection Agency (EPA) <\/span>announced<\/span><\/a> and released its <\/span>draft Biological Evaluation (BE) for glyphosate<\/span><\/a>, which evaluates risks to listed endangered and threatened species from approved label uses of the herbicide.\u00a0 According to EPA, glyphosate is used on approximately 298 million acres of farmland each year and \u201cis likely to adversely affect a significant percent of endangered species and critical habitats.\u201d\u00a0 EPA will next coordinate efforts with the U.S. Fish and Wildlife Service and the National Marine Fisheries Service to develop protection measures, such as use limitations and registration modifications, if it determines that glyphosate threatens the survival or habitat of a species.\u00a0 EPA is accepting comments on the draft BE until January 26, 2020, at docket <\/span>EPA-HQ-OPP-2020-0585<\/span><\/a>, after which EPA may finalize its evaluation.<\/span><\/p>\n Nutrition Programs: USDA Proposes New School Lunch Rule After Court Ruling<\/span><\/p>\n On November 25, 2020, the U.S. Department of Agriculture (USDA) Food and Nutrition Service (FNS) published in the Federal Register a proposed rule titled, \u201cRestoration of Milk, Whole Grains, and Sodium Flexibilities\u201d (<\/span>85 FR 75241<\/span><\/a>), accompanied by a <\/span>notice to stakeholders<\/span><\/a>.\u00a0 For schools seeking meal reimbursement under the national school lunch and breakfast programs, the proposed rule: (a) requires only half of the weekly grains to be whole grain-rich; (b) extends the sodium reduction timeline while eliminating the final reduction target; and (c) permanently allows the offering of flavored, low-fat milk.\u00a0 The proposed rule carries a 30-day comment period, which is open until December 28, 2020.\u00a0 Additionally, this proposed rule follows a November 24, 2020 final rule withdrawing the service\u2019s December 12, 2018 rule titled \u201cChild Nutrition Programs: Flexibilities for Milk, Whole Grains, and Sodium Requirements,\u201d (<\/span>85 FR 74847<\/span><\/a>), which was vacated and remanded by the U.S. District Court for the District of Maryland in April 2020.\u00a0 <\/span>See<\/span> <\/span>ALWR\u2014April 23, 2020<\/span><\/a>, \u201cFederal Court Invalidates 2018 School Lunch Nutrition Rule.\u201d<\/span><\/p>\n \u00a0<\/p>\n Agricultural Data:\u00a0 Federal Court Dismisses FOIA Claim Seeking USDA Farm and Tract Numbers<\/span><\/p>\n On November 27, 2020, the U.S. District Court for the District of Columbia issued an <\/span>opinion<\/span><\/a> granting summary judgment in favor of the U.S. Department of Agriculture (USDA) in a suit seeking USDA-issued Customer Numbers, Farm Numbers, and Tract Numbers under the Freedom of Information Act (FOIA).\u00a0 <\/span>Telematch, Inc. v. Dept. of Agriculture,<\/span> No. <\/span>1:19-cv-02372-TJK<\/span><\/a>.\u00a0 The <\/span>complaint<\/span><\/a>, filed by Farm Market iD (FMID), sought declaratory and injunctive relief against the USDA for its refusal to provide the numbers which are used by USDA to administer loans, insurance, and assistance payments.\u00a0 The court held that because Farm and Tract Numbers constitute geospatial information they are \u201cprohibited from disclosure.\u201d\u00a0 Disregarding FMID\u2019s argument that the numbers were needed to help the public determine USDA\u2019s efficacy in administering farm programs, the Court stated that \u201c[t]he purpose of FOIA is to shed light on what the <\/span>government<\/span> is up to,\u201d and that \u201c[k]nowing how \u2018farmers are using their land,\u2019 or whether they are \u2018accurately reporting data to qualify\u2019 for benefits does not directly shed light on USDA\u2019s operations or activities.\u201d\u00a0<\/span><\/p>\n Agricultural Labor: United Farm Workers File Suit to Enjoin DOL H-2A Minimum Wage Rule<\/span><\/p>\n On November 30, 2020, United Farm Workers (UFW) filed a <\/span>complaint<\/span><\/a> in the U.S. District Court for the Eastern District of California seeking injunctive relief against the U.S. Department of Labor\u2019s (DOL) November 5, 2020 final rule changing the calculation of the H-2A agricultural guest worker minimum wage. <\/span>United Farm Workers v. United States Department of Labor<\/span>, No. <\/span>1:20-cv-01690-DAD-JLT<\/span><\/a>. <\/span>See<\/span> <\/span>ALWR\u2014week ending November 6, 2020<\/span><\/a>, \u201cDepartment of Labor Modifies H2A Minimum Wage Calculation.\u201d\u00a0 The complaint states that the rule will result in a 4% average reduction in farmworker pay and alleges that the rule violates the Immigration and Nationality Act (INA) by failing \u201cto protect U.S. farmworkers from the adverse effects caused by wage stagnation or depression due to an influx of foreign guestworkers.\u201d\u00a0 According to an <\/span>order<\/span><\/a> issued by the court, DOL\u2019s opposition is due December 7, 2020, the plaintiffs\u2019 response is due December 11, 2020, and a hearing on injunctive relief will be held on December 14, 2020.\u00a0<\/span><\/p>\n Industrial Hemp: USDA Announces Hemp Crop Insurance Expansion<\/span><\/p>\n On November 30, 2020, the U.S. Department of Agriculture (USDA) Risk Management Agency (RMA) <\/span>announced<\/span><\/a> its expansion and modification of the pilot <\/span>Multi-Peril Crop Insurance Plan for hemp<\/span><\/a>.\u00a0 The modifications expand the program to include select counties in Arizona, Arkansas, Nevada, and Texas and changes the premium billing date to August 15 for all states.\u00a0 Additionally, beginning in the 2021 crop year, federally-compliant hemp grown in containers will be insurable under the <\/span>Nursery Crop Insurance<\/span><\/a> program and the <\/span>Nursery Value Select<\/span><\/a> pilot crop insurance program.\u00a0 Producers with a contract for the sale of their hemp may purchase insurance coverage.\u00a0 However, hemp does not qualify for prevented plant or replant payments, and loss due to plants exceeding the 0.3 THC compliance level is considered an uninsurable loss.\u00a0<\/span><\/p>\n Farm Bill Programs: Definitions Corrected for Actively Engaged in Farming Eligibility Criteria<\/span><\/p>\n On November 19, 2020, the Commodity Credit Corporation (CCC) and the U.S. Department of Agriculture (USDA) Farm Service Agency (FSA) published in the Federal Register an immediately effective \u201ccorrecting amendment\u201d titled \u201cPayment Limitation and Payment Eligibility,\u201d (<\/span>85 FR 73601<\/span><\/a>) which restores the definitions of the terms \u201cactive personal management\u201d and \u201csignificant contribution\u201d to their previous definitions before the publication of a August 24, 2020 final rule which amended them.\u00a0 <\/span>See <\/span>ALWR\u2014week ending August 28, 2020<\/span><\/a>, \u201cUSDA Amends Ag Subsidy Payment Eligibility and Limitations.\u201d\u00a0 The August 24, 2020, amendment inadvertently restricted the number of non-family members who could qualify for being actively engaged in farming based on a contribution of active personal management alone when a farming operation is composed entirely of family members.\u00a0 That restriction was intended to only apply to farming operations composed of non-family members.\u00a0<\/span><\/p>\n Pennsylvania Farm Bill: 2020 Pennsylvania Farm Bill Funded at $16 Million Despite COVID-19\u00a0<\/span><\/p>\n On November 23, 2020, Pennsylvania Governor Wolf signed into law <\/span>Act 17A of 2020<\/span><\/a>, an appropriations act which, along with <\/span>Act 114 of 2020<\/span><\/a> amending the Pennsylvania Fiscal Code, completed the budget appropriation process for the entirety of state fiscal year 2020-21.\u00a0 Contained within that budget, is $16 million in appropriations collectively referred to by Pennsylvania Executive and Legislative Branch officials as the <\/span>2020 Pennsylvania Farm Bill<\/span><\/a>.\u00a0 A collection of appropriations benefitting Pennsylvania agriculture was first enacted in July 2019 as the <\/span>2019 Pennsylvania Farm Bill<\/span><\/a> for state fiscal year 2019-20 in the amount of $23 million.\u00a0\u00a0<\/span><\/p>\n \u00a0<\/p>\n COVID-19: Pennsylvania\u2019s CARES Act-funded Dairy Indemnity Program Uses $7.6 Million of $15 Million and Unused Balance is Re-appropriated\u00a0<\/span><\/p>\n On November 24, 2020, Pennsylvania Agriculture Secretary Redding <\/span>announced<\/span><\/a> that the state\u2019s Dairy Indemnity Program, created by the Pennsylvania General Assembly and funded by an appropriation of\u00a0 federal CARES Act funds, has paid $7.6 million, out of the appropriated $15 million, to 1,550 Pennsylvania dairy producers.\u00a0 Under the program, producers who experienced enumerated losses between March 6, 2020 and September 30, 2020 were eligible for an initial $1,500 payment, followed by a subsequent payment depending on remaining program funds and proof of loss.\u00a0 According to the enabling legislation, all payments were to be made by November 30, 2020.\u00a0 As a result of legislation enacted on November 23, 2020 as <\/span>Act 114 of 2020<\/span><\/a>, all unused funds from the initial $15 million appropriation will be transferred and appropriated to the Department of Corrections to meet payroll expenses for public safety and health care or similarly employees substantially dedicated to mitigating or responding to the COVID-19 public health emergency.\u00a0 For background, <\/span>see<\/span> <\/span>ALWR\u2014week ending June 19, 2020<\/span><\/a>, \u201cPennsylvania\u2019s CARES Act Funding Establishes $15 Million PA Dairy Indemnity Program.\u201d\u00a0<\/span><\/p>\n Agritourism: Pennsylvania Governor Vetoes Bill Limiting Agritourism Liability<\/span><\/p>\n On November 30, 2020 Pennsylvania Governor Wolf vetoed <\/span>HB 1737<\/span><\/a>, which, among several actions, would have provided some limitation on civil liability for enumerated activities within the definition of agritourism.\u00a0 <\/span>See<\/span> <\/span>ALWR\u2014week ending November 20, 2020<\/span><\/a>, \u201cLimitation on Agritourism Liability Included In Bill Sent to PA Governor.\u201d\u00a0 According to Governor Wolf\u2019s <\/span>veto message<\/span><\/a>, the significant expansion of liability protections for numerous entities contained in the bill \u201cinvites the potential for carelessness and a disregard for public safety.\u201d The majority of the bill was devoted to various COVID-19-related limitations of liability for multiple other non-agricultural activities and businesses.\u00a0<\/span><\/p>\n Farmland Preservation:\u00a0 Report on Pennsylvania Conservation Easement Litigation Released<\/span><\/p>\n On November 30, 2020, <\/span>WeConservePA<\/span><\/a>, formerly known as the Pennsylvania Land Trust Association, a Section 501(c)(3) non-profit corporation advocating for land conservation organizations, released an 11-page report titled <\/span>Conservation Easements in Court: A Review of Easement Violation and Enforcement Litigation in Pennsylvania<\/span><\/a>. The report compiles information on eleven Pennsylvania court cases where the interpretation or enforcement of a conservation easement was litigated.\u00a0\u00a0<\/span><\/p>\n Animal Health:\u00a0 Two Pennsylvania Animal Health Projects Federally Funded\u00a0<\/span><\/p>\n On December 1, 2020, the United States Department of Agriculture, Animal and Plant Inspection Service (APHIS), <\/span>announced<\/span><\/a> the award of $14.4 million for federal FY 2020-21 to fund seventy-six project proposals relating to animal health topics through the National Animal Disease Preparedness and Response Program (<\/span>NADPRP<\/span><\/a> – link to full list of projects) and the National Animal Health Laboratory Network (<\/span>NAHLN<\/span><\/a> – link to full list of projects).\u00a0 The projects being funded in Pennsylvania are: (1) Emergency Grinding and Compost Training and Education for Regional Industry Stakeholders, Pennsylvania State University, $171,784; and (2) Validation of a high-throughput method for the detection of African Swine Fever virus, Pennsylvania Veterinary Laboratory, $55,000.\u00a0<\/span><\/p>\n Agricultural Law\/Policy Resources of Interest:\u00a0<\/span><\/p>\n Agricultural Economic Insights, LLC, <\/span>Escaping 1980 (Podcast)<\/span><\/a> Episode 5: USDA Steps In (Dec. 2, 2020).<\/span><\/p>\n Tiffany Lashmet, <\/span>Case Addressing Open Space Valuation of Property with Cattle Grazing & Quarry Activity<\/span><\/a> (Nov. 30, 2020).<\/span><\/p>\n Sarah Catherine Copper, <\/span>Sesame Allergen Labeling \u2013 The Big-9?<\/span><\/a> (Dec. 1, 2020).<\/span><\/p>\n Roger A. McEowen, <\/span>Bankruptcy and the Preferential Payment Rule<\/span><\/a> (Dec. 3, 2020).<\/span><\/p>\n Brigit Rollins, <\/span>Registration Review: EPA Finds Endangered Species May Be Harmed By Glyphosate<\/span><\/a> (Dec. 3, 2020).<\/span><\/p>\n U.S. Government Accountability Office (GAO), <\/span>FARM PROGRAMS: USDA Has Improved Its Completion of Eligibility Compliance Reviews, but Additional Oversight Is Needed<\/span><\/a> (November 16, 2020)\u00a0<\/span><\/p>\n Penn State Research & News:<\/span><\/p>\n Warbler Coloration Shaped by Evolution Via Distinct Paths<\/span><\/a> (Nov. 30, 2020).<\/span><\/p>\n
<\/span>Audry Thompson\u2014Research Assistant<\/span><\/p>\n
<\/span>The Agricultural Law Weekly Review provides an update of recent agricultural law developments from local, state, national, and international levels.\u00a0 Subscribe at <\/span>pennstateaglaw.com<\/span><\/a>.\u00a0<\/span><\/p>\n