On May 16, 2018, we blogged about California’s compulsory arbitration requirements for unionized agricultural workers, the California Supreme Court’s rejection of constitutional challenges to that statute, and the petition for certiorari filed by the employer, Gerawan Farms. A majority of Gerawan’s employees signed a petition seeking an election on whether to decertify the union.  The California Agricultural Labor Relations Board (ALRB ) allowed the election but it refused to count the ballots.  The ALRB found that Gerawan had committed unfair labor practices that tainted the reliability of the petition.  The remedy the ALRB imposed was to ignore the results of the election.

On May 30, 2018, the California Court of Appeal, Fifth Appellate District, vacated the ALRB’s order and remanded for further proceedings consistent with its opinion. The appellate court first held that it had jurisdiction to hear the appeal.  Most ALRB orders dealing with elections are not immediately reviewable because they are not final.  Rather, the employer must refuse to bargain with the union and then appeal from the ALRB order finding that the refusal was an unfair labor practice.

For three reasons, the court held that this “technical refusal to bargain” process did not apply to Gerawan’s petition for review. First, the ALRB’s refusal to count the ballots meant that the technical refusal to bargain process was an inadequate remedy.  If Gerawan refused to bargain, but the union won the election, Gerawan would be guilty of an unfair labor practice.  Second, the court did have jurisdiction to review the unfair labor practice findings and the election remedy was an integral part of those findings.  Third, the rationale for the technical refusal to bargain process is to avoid disrupting the status quo by lengthy, possibly frivolous, litigation.  Here, the status quo remains in effect unless and until the union is decertified.

On the merits, the court sustained some of the ALRB’s factual findings and overturned others. The findings the court sustained were technical and relatively trivial.  For example, Gerawan allowed two workers to devote parts of the regular work day to campaign for signatures on the petition.  On one day, in the face of numerous absences by employees objecting to the union, Gerawan raised the unit price for a packed box of grapes by 25 cents; the court held that this finding was “marginally sustainable.”

The principal legal issue in the opinion is the standard of proof required to set aside an election. The NLRB inquires whether unfair labor practices have violated the “laboratory conditions necessary for a fair election” – a quite lenient standard.  The California court adopted a much more demanding “outcome-determinative” standard – i.e., the employer’s misconduct was sufficiently severe that it “affected the outcome of the election.”

The Court reasoned that, under federal law, a rerun election is usually possible within a relatively short period of time and by essentially the same employees. By contrast, in California, the statute requires at least 50% of peak employment at the time a petition is filed.  Given the seasonal nature of agricultural employment, a year might elapse before a rerun election could legally be held; given the high rate of turnover in agricultural employment, the electorate might be very different.  The court was concerned that this lengthy delay would intrude on employees’ rights not to join a union if they do not want one.

The court also held that, in assessing the impact of employer misconduct, the ALRB must consider the margin of the election. If the vote is close, a lesser level of misconduct might require a rerun; if the vote is 90-10 in favor of decertification, it would require much more egregious misconduct.  On remand, therefore, the ALRB was required to count the ballots.  Given the intensity with which the employees oppose the union, it seems likely that the vote will not be close.

In its initial ruling, the ALRB did not apply the outcome-determinative standard. It held that that standard applied to elections.  Here, though, the ALRB found that Gerawan’s unfair labor practices had “tainted” the petition and, since the petition was therefore invalid, so was the election.  The court thought that the taint standard all but ignored employees’ interest in filing a petition seeking decertification.

Following a dissent in an earlier ALRB case, the court held that the petition was not a jurisdictional requirement for a decertification election, but merely an administrative tool to assist the ALRB in determining whether there was sufficient support for decertification to warrant an election. Moreover, the taint standard assumed widespread dissemination of improper efforts to coerce employees, without either direct or circumstantial evidence to support it.  Finally, the taint standard focuses on the petition rather than the election, but California law strongly favors elections.  So the proper legal standard is whether Gerawan’s alleged misconduct had an outcome-determinative effect on the election.

The court remanded the case to the ALRB for reconsideration based on the unfair labor practices actually supported by the evidence; the proper standard of review; and the vote tally. But it is hard to believe that the ALRB on remand can do anything other than uphold the election.  The court held that the relatively minor unfair labor practices Gerawan actually committed “plainly did not rise to the level or character of employer interference in the decertification process to permit the Board to pronounce the entire worker petition void.”

“Real food that matters for life’s moments.”  That’s Campbell’s stated purpose, and it’s commitment to increasing shelf space for plant-based options was further evidenced by its decision to join the Plant Based Food Association (PBFA) on October 30. The press release may be read here.

Campbell may be the first major food company to join PBFA, but we expect others to follow. The plant based food sector has grown by 8.1% this past year while total food sales within the same channels have experienced a slight decline, according to Nielsen (the retail research company).

Will Kellogg’s be next given its offerings under the MorningStar Farms® and Gardenburger® brands? It recognizes on its website that plant-based proteins are “more than just a fad” and “are fast becoming a larger part of everyday meal choices.” Tyson, General Mills and Danone are also each invested in the future of plant-based proteins (Beyond Meat, Kite Hill, and DanoneWave, respectively).

Even if membership in PBFA isn’t on the horizon for other majors, their continued investment in and develop of plant-based food products will undoubtedly continue – at least for so long as consumers increase their daily intake of such products.

Joe Thompson is a partner at Husch Blackwell and is a member of the Food & Agribusiness group.

At the end of 2016, the U.S. Department of Agriculture’s (USDA) Grain Inspection, Packers and Stockyards Administration (GIPSA) proposed a rule to “clarify the conduct or action . . . that GIPSA considers unfair, unjustly discriminatory, or deceptive and a violation of section 202(a) of the [Packers and Stockyards] Act” (the P&S Act, codified at 7 U.S.C. § 192(a)). 81 Fed. Reg. 92,703 (Dec. 20, 2016).  The proposed rule also included criteria to be used to determine “whether conduct or action by packers, swine contractors, or live poultry dealers constitutes an undue or unreasonable preference or advantage in violation of section 202(b) of the P&S Act” (codified at 7 U.S.C. § 192(b)).  Id. Finally, the proposed rule also included various examples of conduct that, notably, did not require likelihood of harm to competition to establish a violation of sections 202(a) or (b) of the P&S Act. See id. at 92,722-723.

While the proposed rule drew support from agricultural producers as providing greater protection against potential inequities in bargaining with packers, swine contractors, and live poultry dealers (e.g., an imbalance in bargaining power), others noted that “the breadth of the proposed regulation would suppress innovative contracting because regulated entities would fear the increased risk of litigation presented by ambiguous terms in the proposed rule” as “producers and growers might be emboldened to sue for any perceived slight.”  82 Fed. Reg. 48,603 (Oct. 18, 2017) (emphasis added).

In abandoning the proposed rulemaking, GIPSA explained that “the proposed rule could have the unintended consequence of preventing future market innovations that might better accommodate rapidly evolving social and industry norms,” id. at 48,604, which is at odds with the federal regulatory policy pronounced in an Obama era executive order directing agencies to “identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends.” Executive Order 13,563 § 1(a) (Jan. 18, 2011).

Finally, it is worth noting that GIPSA also withdrew the interim final rule promulgated contemporaneously with the aforementioned proposed rule. The interim final rule (IFR) was intended to amend the P&S Act implementing regulations “to state that a finding of harm or likely harm to competition was not needed to find a violation of sections 202(a) or (b)” of the P&S Act.  82 Fed. Reg. 48,594 (Oct. 18, 2017) (emphasis added).  GIPSA explained that the IFR was withdrawn “because of serious legal and policy concerns related to its promulgation and implementation” – primarily: the fact that GIPSA’s interpretation “embodied in the IFR is inconsistent with court decisions in several U.S. Courts of Appeals, and those circuits are unlikely to give GIPSA’s proposed interpretation deference.” Id. at 48,596.

Thus, the status quo remains and GIPSA will continue to evaluate whether certain practices or conduct are unfair or deceptive on a case-by-case basis.

In April 2017, the D.C. Circuit issued a decision in Waterkeeper Alliance v. EPA, 853 F.3d 527, which, if upheld, will require approximately 63,000 small- and medium-sized farms that were previously exempt from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and Emergency Planning and Community Right-to-Know Act (EPCRA) reporting requirements to come into compliance. Read Husch Blackwell’s analysis of the decision and its implications here.

Earlier this week, the U.S. Environmental Protection Agency (EPA) filed a motion to stay the mandate for six months. If the stay is issued, farms will have until January to come into compliance with the reporting requirements. It will also give the farming industry more time to file a petition for certiorari with the US Supreme Court and challenge the D.C. Circuit decision.   Otherwise, October 1 will be the deadline for filing a petition for certiorari as the mandate will be issued on that date and the reporting requirement will then take immediate effect.

According to EPA, farmers from all over the country have asked EPA for help in calculating their emissions. A stay is needed so the agency can develop guidance on how to measure emissions from animal waste and comply with the new reporting requirements. A stay would also provide farms relief from enforcement actions while they come into compliance. EPCRA and CERCLA contain citizen suit provisions and noncompliance carries the risk of administrative, civil, or even criminal penalties. A stay of the issuance of the mandate would allow farms temporary relief from these risks and enable them to focus on coming into compliance.

We had previously posted about the State of Missouri’s petition for certiorari to review California’s requirement that all eggs sold in the State conform to California’s minimum cage requirement for hens.  The Supreme Court has denied the petition.

The basis for the District Court’s and the Ninth Circuit’s dismissal of the case was that Missouri had not suffered any concrete harm to its sovereign interest, not the merits.  So it is likely that either Missouri or a Missouri egg producer will refile the lawsuit.

In 2008, California voters approved Proposition 2, which banned the sale of eggs in California unless the laying hens had a minimum amount of space in which to lay their eggs. Regulations that became effective January 1, 2015, required a minimum of 116 square inches for each hen, approximately twice the space that was standard in the industry.  California egg producers generally complied with the regulations by reducing the number of hens in each cage rather than building expensive new cages.  Since their fixed costs remained the same, the net result was a substantial increase in the unit cost per egg.

In 2010, under pressure from California egg growers, the legislature enacted a statute applying Proposition 2 to all eggs sold in the State of California, regardless of where they were laid. Thus, if a Missouri egg grower wanted to sell into the California market, it would have to comply with the minimum cage size requirement.  It could do so either by doubling the number of cages or accepting a 50% reduction in egg production.  Either alternative would impose substantial financial costs on the grower.

The California legislature attempted to justify the statute on the ground that larger cages meant less stress on the hens, thus reducing the likelihood of salmonella infection. It had to acknowledge, however, that there is little scientific evidence supporting a link between stress and salmonella.  Other parts of the legislative history suggested that the real purpose of the statute was to avoid placing California egg growers at a competitive disadvantage.

About one third of the eggs laid in Missouri are sold in California, making up about 13% of the latter state’s total consumption. Fluctuations in supply and demand during the course of the year make it impossible for growers to set up one operation for California and another operation for everywhere else.  Missouri growers therefore had a choice:  become California compliant by incurring considerable costs which would make their eggs uncompetitive elsewhere; or abandon the California market. Continue Reading Missouri Challenges California Egg Rule

The eighth annual Ag Innovation Showcase took place on September 12th through 14th and was organized by the Larta Institute, the Donald Danforth Plant Science Center, and the Bio Research & Development Grown (BRDG) Park.  The annual event brings together innovators, researchers, investors, and other thought leaders from across the globe to focus on the use of agricultural technology to further enhance productivity and sustainability and address other issues of significant interest to the agricultural community.

This year’s 20+ presenting companies offered innovative business platforms to address and assist with Precision Ag, Ag inputs, alternative food and feedstocks, and developing economies.

Husch Blackwell was proud to return as a sponsor for this event. Our firm sponsored the mid-day session on September 14th titled: Disruptive Dialogue: Zero Waste Across the Food Value Chain? The panel included Christine Moseley, Founder & CEO of Full Harvest, Dan Morash, Founder of California Safe Soil, and Joanie Taylor, Director of Consumer Affairs and Community Relations at Schnuck Markets, Inc., and Stephanie Potter, Vice President of Sustainable Business Development at Rabbobank North America Wholesale served as the panel moderator.  The panel explored the context and causes for food waste in the United States and highlighted innovations across the food value chain that enable more complete utilization of food production.  As with the other sessions at this annual event, attendance was significant and attendee participation was vast.

The dates for the 2017 showcase have already been announced as September 11-13, 2017.  For more information about the showcase, click here.

Earlier this week, the Donald Danforth Plant Science Center and Larta Institute hosted this year’s Ag Innovation Showcase. Husch Blackwell LLP was proud to sponsor and have several of our attorneys attend this event. This year’s attendance surpassed 400 and registration was closed due to excess demand.

The Ag Innovation Showcase is an annual event that features the latest developments that will impact the future of agribusiness. This year’s presenters included a Husch Blackwell client and other start-up companies with inventions and ideas ranging from a mobile-to-cloud platform for storing and analyzing farm data to the use of new biological solutions. Another session focused on the high demand area of sustainable solutions in the agricultural field

The Showcase serves as an opportunity for industry members to not only learn about emerging technologies, but it also provides an opportunity for startups to present their companies to venture capital and other funding sources eager to invest in the next generation of successful agricultural companies.

On October 3rd, corn growers in Illinois, Iowa, Missouri, Kansas, and Nebraska filed multiple class action lawsuits against Syngenta related to MIR162, the Agrisure Viptera trait.  The class actions come on the heels of similar lawsuits filed by Cargill and Trans Coastal Supply Company in mid-September based on Syngenta’s commercialization of MIR162 in the United States prior to obtaining import approval from China, a major export market for U.S. corn and an ethanol byproduct called dried distillers grain with solubles (DDGS). 

Syngenta initially sought importation and cultivation approval from China’s Ministry of Agriculture in 2010, but China never approved MIR162 for importation or cultivation.  In the United States, however, commercial production of MIR162 began after the U.S. Department of Agriculture deregulated MIR162 in April 2010. 

In November 2013, China began enforcement of a zero-tolerance policy for the presence of MIR162 in corn and DDGS imports by rejecting shipments of corn and DDGS from the United States that contained trace amounts of MIR162.  In the following months, U.S. corn exports to China remained significantly curbed, while trade of DDGS temporarily resumed after the initial disruption.  In June 2014, however, China announced that new import permits would not be issued for DDGS from the United States.  The loss of China as a major export market, in conjunction with record production, caused a drop in U.S. corn prices that set the stage for the lawsuits brought against Syngenta.

In the recently filed class actions, the growers allege that Syngenta’s sale of MIR162 in the United States without import approval from China detrimentally impacted domestic corn prices by causing U.S. corn to be effectively excluded from China.  The growers further allege that Syngenta misrepresented its progress in obtaining approval of MIR162 from China’s Ministry of Agriculture and downplayed the importance of China as an export market.  Cargill and Trans Coastal have raised similar questions about liability for the commingling of commodity crops in the grain handling system in separate lawsuits.  Cargill and Trans Coastal allege that Syngenta’s contamination of the corn and DDGS supply with MIR162 has caused the companies to incur losses of $90 million and $41 million, respectively.  

In response, Syngenta has asserted that it fully complied with all of its regulatory obligations in the commercialization of MIR162 in the United States.  Syngenta has also reiterated that it believes that growers have a right to access approved new technologies that may increase productivity and profitability.