1.1                          A bill for an act 
  1.2             relating to agriculture; establishing standards for 
  1.3             fair dealings between agricultural contractors and 
  1.4             producers; imposing a penalty; amending Minnesota 
  1.5             Statutes 1998, section 116.07, by adding a 
  1.6             subdivision; proposing coding for new law in Minnesota 
  1.7             Statutes, chapter 17. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  [17.871] [MINNESOTA AGRICULTURAL PRODUCTION 
  1.10  CONTRACT FAIR PRACTICES ACT; SCOPE.] 
  1.11     Sections 17.871 to 17.882 are supplemental to other law and 
  1.12  rule concerning contracts between agricultural producers and 
  1.13  contractors. 
  1.14     Sec. 2.  [17.872] [DEFINITIONS.] 
  1.15     (a) "Agricultural commodity" means a material produced for 
  1.16  use in or as food, feed, seed, or fiber, and includes crops for 
  1.17  fiber, food, oilseeds, seeds, livestock, livestock products, 
  1.18  poultry, poultry products, or by-products of the farm for the 
  1.19  same or similar use. 
  1.20     (b) "Integrator" means a person who in the ordinary course 
  1.21  of business has control, through title, ownership, ownership in 
  1.22  common, or otherwise, of agricultural commodities produced by a 
  1.23  contract producer. 
  1.24     (c) "Person" means an individual, partnership, association, 
  1.25  or corporation, an organized group of persons, whether 
  1.26  incorporated or not, or a family farm corporation, authorized 
  2.1   farm corporation, limited liability company, limited 
  2.2   partnership, or beneficial trust, as those terms are defined in 
  2.3   section 500.24, subdivision 2, or an authorized agent or 
  2.4   employee.  
  2.5      (d) "Contract producer" means a person who produces or 
  2.6   causes to be produced agricultural commodities by contracting 
  2.7   with an integrator to provide management, labor, machinery, 
  2.8   facilities, or any other production input for the production of 
  2.9   the agricultural commodities. 
  2.10     (e) "Commissioner" means the commissioner of agriculture. 
  2.11     Sec. 3.  [17.873] [DECEPTIVE PRACTICES PROHIBITED.] 
  2.12     (a) An integrator must not engage in a deceptive act or 
  2.13  practice in connection with an agricultural production contract 
  2.14  involving agricultural commodities. 
  2.15     (b) Deceptive acts and practices, include, but are not 
  2.16  limited to, the following: 
  2.17     (1) using coercion, intimidation, the threat of 
  2.18  retaliation, or the threat of contract termination, 
  2.19  cancellation, or nonrenewal to impose, demand, compel, or 
  2.20  dictate the terms, payment, or manner of payment or the signing 
  2.21  of a contract by a contract producer; 
  2.22     (2) using coercion, intimidation, the threat of 
  2.23  retaliation, or the threat of contract termination, 
  2.24  cancellation, or nonrenewal in order to require the contract 
  2.25  producer to make capital improvements such as buildings or 
  2.26  equipment; 
  2.27     (3) for an integrator to interfere with, restrain, or 
  2.28  coerce contract producers in the exercise of their rights to 
  2.29  join, form, and assist associations of producers; 
  2.30     (4) subject to section 17.874, for an integrator to 
  2.31  terminate, cancel, or fail to renew a contract with a contract 
  2.32  producer as long as the producer is financially obligated for an 
  2.33  investment in buildings and equipment which was made to meet the 
  2.34  minimum requirements of the contract; 
  2.35     (5) for an integrator to refuse to provide to the contract 
  2.36  producer, upon request, the statistical information and data 
  3.1   used to determine compensation paid to the contract producer for 
  3.2   settlement.  This statistical information and data includes, but 
  3.3   is not limited to, feed conversion rates, feed analyses, carcass 
  3.4   grade and yield, carcass quality, averages of other growers, 
  3.5   origination, and breeder history; 
  3.6      (6) for the integrator to refuse to allow a contract 
  3.7   producer or the contract producer's designated representative to 
  3.8   observe, by actual observation at the time of weighing, the 
  3.9   weights and measures used to determine the contract producer's 
  3.10  compensation at settlement; and 
  3.11     (7) for an integrator to use the performance of any other 
  3.12  producer to determine the settlement of a contract producer. 
  3.13     (c) Unfair trade practices also include those practices 
  3.14  prohibited by the Perishable Agricultural Commodities Act, 
  3.15  United States Code, title 7, sections 499a to 499s, and the 
  3.16  rules adopted under that act, at Code of Federal Regulations, 
  3.17  title 7, part 46, and those practices prohibited by the Packers 
  3.18  and Stockyards Act, United States Code, title 7, section 181, et 
  3.19  seq., and the rules adopted under that act at Code of Federal 
  3.20  Regulations, title 7, part 201, et seq., all as in effect on 
  3.21  July 1, 2000. 
  3.22     (d) If federal and state regulations are identical, federal 
  3.23  jurisdiction and enforcement control unless the federal 
  3.24  authority decides not to enforce the regulation. 
  3.25     Sec. 4.  [17.874] [PROTECTION FOR INVESTMENTS MADE.] 
  3.26     (a) An integrator shall not terminate, cancel, or fail to 
  3.27  renew a contract that required a contract producer to make a 
  3.28  capital investment secured by financing statement, promissory 
  3.29  note, deed of trust, or otherwise in buildings or equipment that 
  3.30  cost $25,000 or more and have a useful life of five or more 
  3.31  years until: 
  3.32     (1) the contract producer has been given written notice of 
  3.33  the intention to terminate, cancel, or not renew the contract at 
  3.34  least 180 days before the effective date of the termination, 
  3.35  cancellation, or nonrenewal, or as provided in paragraph (c); 
  3.36  and 
  4.1      (2) the contract producer has been reimbursed for damages 
  4.2   incurred by an investment in buildings or equipment that was 
  4.3   made for the purpose of meeting minimum requirements of the 
  4.4   contract.  
  4.5      (b) Except as provided in paragraph (c), if a contract 
  4.6   producer fails to materially comply with the provisions of a 
  4.7   contract that require a capital investment subject to paragraph 
  4.8   (a), an integrator may not terminate, cancel, or fail to renew 
  4.9   that contract until: 
  4.10     (1) the integrator has given written notice specifying the 
  4.11  reasons for the termination, cancellation, or nonrenewal at 
  4.12  least 90 days before termination, cancellation, or nonrenewal, 
  4.13  or as provided in paragraph (c); and 
  4.14     (2) the contract producer, as recipient of the notice, 
  4.15  fails to correct the reasons stated for termination, 
  4.16  cancellation, or nonrenewal in the notice within 60 days of 
  4.17  receipt of the notice. 
  4.18     (c) An integrator may terminate a contract if the 
  4.19  integrator secures a bond or irrevocable letter of credit in a 
  4.20  sufficient amount to cover the probable claim if the damages the 
  4.21  contract producer is entitled to under paragraph (a) have not 
  4.22  been received within 180 days after notice of the intent to 
  4.23  terminate, cancel, or not renew has been received by the 
  4.24  contract producer. 
  4.25     (d) If the 180-day or 90-day notice periods expire before 
  4.26  the end of a production cycle, the contract does not terminate 
  4.27  until the end of that production cycle, unless the contract 
  4.28  producer agrees to an earlier termination. 
  4.29     (e) An integrator who terminates, cancels, or fails to 
  4.30  renew a contract without complying with paragraphs (a) to (d) 
  4.31  shall assume the outstanding financial obligations and 
  4.32  liabilities of the contract producer and pay the contract 
  4.33  producer fair market value for equity, if any, in buildings and 
  4.34  equipment acquired as minimum requirements under the contract.  
  4.35  Buildings and equipment that accrue to the integrator under this 
  4.36  paragraph must be removed from the contract producer's premises 
  5.1   within 90 days of the date of termination, cancellation, or 
  5.2   nonrenewal. 
  5.3      (f) Notice is effective upon receipt by the producer. 
  5.4      Sec. 5.  [17.875] [GOOD FAITH.] 
  5.5      (a) In all contracts between integrators and contract 
  5.6   producers, there is an implied promise of good faith by all 
  5.7   parties. 
  5.8      (b) In all contracts between integrators and contract 
  5.9   producers, there is an implied producer's right to refuse any 
  5.10  livestock when delivered if the livestock are in less than 
  5.11  normal condition. 
  5.12     Sec. 6.  [17.876] [CONFERENCE ON CONCERNS; TERMS MODIFIED.] 
  5.13     (a) The integrator shall agree to meet and confer with the 
  5.14  contract producer or the contract producer's authorized 
  5.15  representative at a time and place mutually agreeable to the 
  5.16  parties to discuss concerns of the contract producer. 
  5.17     (b) The integrator shall provide a 60-day written notice of 
  5.18  intent to modify terms or conditions of the contract to the 
  5.19  contract producer.  The written notice must state the proposed 
  5.20  changes to the contract.  Notice is effective upon receipt by 
  5.21  the producer.  
  5.22     Sec. 7.  [17.877] [DISPOSAL OF DEAD LIVESTOCK.] 
  5.23     An integrator shall reimburse a producer for costs incurred 
  5.24  by the producer for disposal of dead livestock. 
  5.25     Sec. 8.  [17.878] [LIABILITY OF ANIMAL OWNERS.] 
  5.26     (a) If the contract producer operating an animal feedlot is 
  5.27  liable with respect to a violation of any law or rule applicable 
  5.28  to animal feedlots or is liable for a violation under any 
  5.29  condition of a permit to operate an animal feedlot, each owner 
  5.30  of an animal kept at the feedlot during the period of violation 
  5.31  is jointly and severally liable for any penalty imposed and for 
  5.32  any environmental damages that may result from the violation.  
  5.33  Environmental damages include damages arising from contamination 
  5.34  or pollution of air, water, real or personal property, 
  5.35  livestock, wild animals, birds, fish, or aquatic life or injury 
  5.36  to human beings.  Ownership interest includes any partial, 
  6.1   fractional, or complete ownership of an interest in livestock, 
  6.2   but does not include any lien or security interest attaching to 
  6.3   the livestock. 
  6.4      (b) No provision of a contract or other agreement between 
  6.5   an animal owner and a contract producer operating an animal 
  6.6   feedlot may transfer responsibility or liability under this 
  6.7   section from the animal owner to the contract producer. 
  6.8      Sec. 9.  [17.879] [ENVIRONMENTAL COSTS.] 
  6.9      The costs of compliance with state or federal laws or 
  6.10  regulations regarding environmental standards must be shared 
  6.11  equally by the integrator and the contract producer. 
  6.12     Sec. 10.  [17.88] [CONFLICT RESOLUTION.] 
  6.13     (a) A contract for the production of agricultural products 
  6.14  between an integrator and a contract producer must contain 
  6.15  language providing for resolution of contract disputes by either 
  6.16  mediation or arbitration services. 
  6.17     (b) Contracts executed before August 1, 2000, contain an 
  6.18  implied provision that all contract disputes must be submitted 
  6.19  to mediation or arbitration for dispute resolution. 
  6.20     (c) If a contract for the production of agricultural 
  6.21  products between an integrator and a contract producer contain 
  6.22  language providing for mediation of matters that are in dispute 
  6.23  and mediation does not resolve the dispute, either the 
  6.24  integrator or the producer may request that the matter be 
  6.25  submitted to arbitration. 
  6.26     (d) Mediation proceedings held under sections 17.871 to 
  6.27  17.882 must follow the procedures in chapter 583. 
  6.28     Sec. 11.  [17.881] [PENALTY.] 
  6.29     (a) Notwithstanding the existence or pursuit of any other 
  6.30  remedy at law, any integrator violating sections 17.871 to 
  6.31  17.882 or rules adopted under those sections is guilty of a 
  6.32  misdemeanor and must be fined not less than $200 nor more than 
  6.33  $1,000 or be imprisoned for not more than 60 days, or both, in 
  6.34  the discretion of the court. 
  6.35     (b) In an action to recover damages or for injunctive 
  6.36  relief, if the court finds that there has been a violation of 
  7.1   sections 17.871 to 17.882 the court may award up to three times 
  7.2   the amount of the damages.  Court costs and attorney fees may be 
  7.3   recovered by the contract producer. 
  7.4      (c) Notwithstanding the existence or pursuit of any other 
  7.5   remedy, a person may maintain an action for injunctive relief or 
  7.6   other applicable legal process to prevent violations of sections 
  7.7   17.871 to 17.882. 
  7.8      Sec. 12.  [17.882] [LIEN PRIORITY.] 
  7.9      (a) A contract producer of agricultural products has a 
  7.10  contract producer's priority lien for the unpaid contract or, if 
  7.11  there is no contract, the fair market value of the agricultural 
  7.12  product produced and delivered to an integrator. 
  7.13     (b) The lien attaches to the agricultural products and 
  7.14  their proceeds as well as to all tangible or intangible assets 
  7.15  of the integrator.  If the agricultural product becomes 
  7.16  commingled with other agricultural products, the lien continues 
  7.17  in the proportionate share of the other agricultural products.  
  7.18  If the agricultural products become manufactured or processed to 
  7.19  become a part of another product, the lien continues and 
  7.20  attaches to the product manufactured or processed. 
  7.21     (c) The lien claimed by the producer is perfected without 
  7.22  filing a statement of nonpayment from the time that the 
  7.23  agricultural product is delivered to the integrator until 30 
  7.24  days after delivery.  
  7.25     (d) The contract producer shall file a statement of 
  7.26  nonpayment in the office of the clerk of the court for the 
  7.27  county of the integrator's principal place of business.  If the 
  7.28  integrator is not a resident of the state, a filing must be made 
  7.29  with the clerk of the superior court for the county in which the 
  7.30  integrator's registered office is located.  The clerk shall note 
  7.31  the claim of lien on the judgment docket and index the same 
  7.32  under the name of the integrator at the time the claim is filed. 
  7.33     (e) A statement of nonpayment must be in writing and 
  7.34  notarized by the contract producer and must contain: 
  7.35     (1) the name and address of the integrator to whom the 
  7.36  agricultural products were delivered; 
  8.1      (2) a statement of the amount due to the producer after 
  8.2   deducting applicable credits and offsets; 
  8.3      (3) a description sufficient to identify the agricultural 
  8.4   product delivered and subject to the lien; 
  8.5      (4) the date and location to which the agricultural product 
  8.6   was delivered; and 
  8.7      (5) the date on which payment was due. 
  8.8      (f) The contract producer shall furnish a copy of the 
  8.9   statement of nonpayment as required in paragraph (e) to the 
  8.10  integrator, which constitutes a notice of claim of lien.  The 
  8.11  notice must be served personally or by certified mail to the 
  8.12  integrator at the place of business where the producer has 
  8.13  conducted business with the integrator.  The lien granted by 
  8.14  this section is effective as of the time it is filed with the 
  8.15  clerk of the court.  The integrator may contest the validity of 
  8.16  the lien by filing with the clerk of the court and serving on 
  8.17  the producer within ten days after the integrator receives 
  8.18  notice that the producer has filed a claim of lien, a notice 
  8.19  that the integrator contests the amount due.  If the integrator 
  8.20  does not contest the lien or is unsuccessful in obtaining a 
  8.21  discharge of the lien, the lien is perfected as of the date of 
  8.22  filing with the clerk of court. 
  8.23     (g) A contract producer's lien has priority over all other 
  8.24  liens and encumbrances in the: 
  8.25     (1) agricultural products; 
  8.26     (2) proceeds from the agricultural products; 
  8.27     (3) proportionate share of the agricultural products with 
  8.28  which the agricultural products have been commingled; 
  8.29     (4) products manufactured or processed with the 
  8.30  agricultural products; and 
  8.31     (5) integrator's tangible and intangible assets.  
  8.32     (h) A producer's lien that is continuously perfected from 
  8.33  the time of delivery has priority over other liens and 
  8.34  encumbrances whether they are filed before or after the 
  8.35  producer's lien.  A producer's lien that is filed more than 30 
  8.36  days after delivery of the agricultural products has priority in 
  9.1   the order that it is filed.  Priority among perfected producer's 
  9.2   liens is according to the first lien filed.  A producer's lien 
  9.3   that is not filed has the priority of an unperfected security 
  9.4   interest under the Uniform Commercial Code. 
  9.5      (i) The lien created by this section may be discharged by: 
  9.6      (1) filing with the clerk of the court a notarized 
  9.7   statement by the producer that the lien has been satisfied; 
  9.8      (2) depositing with the clerk of the court money equal to 
  9.9   the amount of the claim to be held for the benefit of the 
  9.10  producer; or 
  9.11     (3) an entry in the line docket that the action on the part 
  9.12  of the lien claimant to enforce the lien has been dismissed. 
  9.13     (j) A producer must remove a lien statement from the filing 
  9.14  system after the lien is satisfied.  If the producer does not 
  9.15  remove the lien statement, the clerk of the court shall remove 
  9.16  the lien statement upon request of an affected party who has 
  9.17  furnished proof that the lien has been terminated.  
  9.18     (k) An action to enforce the lien created by this section 
  9.19  may be instituted within 120 days of the date that payment is 
  9.20  due in any court of competent jurisdiction in the county where 
  9.21  the lien was filed, where the property to which the lien 
  9.22  attaches is located, or where the agricultural products were 
  9.23  originally delivered.  The court may award costs including 
  9.24  attorney fees to the prevailing party.  Nothing in this section 
  9.25  precludes the parties from mediating or arbitrating the claim of 
  9.26  nonpayment at any time before or after a lien statement has been 
  9.27  filed. 
  9.28     Sec. 13.  Minnesota Statutes 1998, section 116.07, is 
  9.29  amended by adding a subdivision to read: 
  9.30     Subd. 7d.  [DISCLOSURE; OWNERSHIP OF FEEDLOTS AND 
  9.31  LIVESTOCK.] (a) For purposes of this subdivision, "ownership 
  9.32  interest" means any partial, fractional, or complete interest in 
  9.33  an animal feedlot or the livestock housed at an animal feedlot. 
  9.34     (b) For purposes of this subdivision, "person" means any 
  9.35  natural person, corporation, partnership, cooperative, or other 
  9.36  entity holding the power or authority to manage, direct, 
 10.1   restrict, regulate, control, or oversee the operation, or has a 
 10.2   financial interest in the operation of a feedlot. 
 10.3      (c) By October 1, 2000, any person with an ownership 
 10.4   interest in an animal feedlot or livestock housed at an animal 
 10.5   feedlot with a capacity of 500 animal units or more shall file a 
 10.6   statement of ownership with the commissioner and, in a delegated 
 10.7   county, with the county feedlot officer.  The statement must 
 10.8   contain the following information appropriate to the business 
 10.9   structure: 
 10.10     (1) if the person is a partnership, the name and address of 
 10.11  each member of the partnership; 
 10.12     (2) if the person is a corporation, the name and business 
 10.13  address of the corporation and the name and address of each 
 10.14  officer and shareholder of the corporation; and 
 10.15     (3) if the person is a cooperative or other legal entity, 
 10.16  the name and address of each partner or stockholder with an 
 10.17  ownership interest. 
 10.18     (d) Information reported to the commissioner under 
 10.19  paragraph (c) is public information and must be released upon 
 10.20  request by the commissioner or the county feedlot officer. 
 10.21     (e) Not later than October 1, 2001, and on October 1 each 
 10.22  year thereafter, any person required to file a statement under 
 10.23  paragraph (c) shall file an updated statement with the 
 10.24  commissioner.