Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Articles Posted in Agriculture Law

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In the 1990s, Boucher cut down nine trees on his family farm in Indiana. The U.S. Department of Agriculture (USDA) claimed that the tree removal converted several acres of wetlands into croplands, rendering the Bouchers’ entire farm ineligible for USDA benefits that would otherwise be available under the “Swampbuster” provisions in the Food Security Act of 1985, 16 U.S.C. 3801, 3821–24. The Seventh Circuit reversed the district court. The USDA repeatedly failed to follow applicable law and agency standards. It disregarded compelling evidence showing that the acreage in question never qualified as wetlands that could have been converted illegally into croplands and has shifted its explanations for treating the acreage as converted wetlands, so its actions qualify as arbitrary, capricious, and an abuse of discretion. The agency experts did not attribute the alteration of hydrology to the removal of the nine trees; the agency presented no evidence that the tree removal altered the wetland hydrology. The USDA failed to engage meaningfully with this point, ignoring a crucial factor under the agency’s interpretation of its regulation. View "Boucher v. United States Department of Agriculture" on Justia Law

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Until recently, Sexing Tech held a monopoly on the market for sexed cattle semen in the United States. Sperm‐sorting technology separates bull semen into X‐chromosome bearing and Y‐chromosome bearing sperm cells; the resulting “sexed semen” is used to inseminate cows artificially so that dairy farmers can breed only milk‐producing cows. ABS, a bull‐stud operation, sued, alleging that Sexing Tech had unlawfully monopolized the domestic sexed‐semen market in violation of section 2 of the Sherman Act by using its market power to impose coercive contract terms. ABS sought a declaratory judgment proclaiming those contracts invalid, to permit its own entry into that market. Sexing Tech counterclaimed that ABS infringed its patents and breached the contract by misappropriating trade secrets in developing ABS’s competing technology. Three claims went to trial: ABS’s antitrust claim and Sexing Tech’s patent infringement and breach of contract counterclaims. The Seventh Circuit affirmed the district court, holding that ABS violated a confidentiality agreement it had with Sexing Tech and that Sexing Tech’s patent was not invalid on obviousness grounds. The jury’s assessments of two of the three patent claims still at issue cannot be reconciled under the rules governing dependent claims and enablement, and so a new trial is necessary on them. View "ABS Global, Inc. v. Inguran, LLC" on Justia Law

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Mittelstadt’s Richland County, Wisconsin land was enrolled in the Conservation Reserve Program (CRP), administered by the Department of Agriculture (USDA), from 1987-2006. CRP participants agree to remove environmentally sensitive land from agricultural production in return for annual rental payments from the USDA. In 2006, the agency denied Mittelstadt’s application to re-enroll. After exhausting his administrative appeals, he sued under the Administrative Procedure Act, 5 U.S.C. 701, and asserting a breach of contract. The district court entered judgment in favor of the agency. The Seventh Circuit affirmed. Under the regulations governing the CRP, the USDA has broad discretion to evaluate offers of enrollment in the program on a competitive basis by considering the environmental benefits of a producer’s land relative to its costs. Given the agency’s wide latitude, the Farm Services Agency did not abuse its discretion when it denied re-enrollment of Mittelstadt’s land under a new definition of “mixed hardwoods.” Because he never entered a new contract with the agency, there was no breach of contract. View "Mittelstadt v. Perdue" on Justia Law

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Minerva, an Ohio‐based, family‐owned dairy company, produces Amish‐style butters in small, slow‐churned batches using fresh milk supplied by pasture‐raised cows. Minerva challenged Wisconsin’s butter‐grading requirement under the Due Process Clause, the Equal Protection Clause, and the dormant Commerce Clause. Wisconsin’s law applies to butter manufactured in‐state and out‐of‐state and provides that butter may be graded by either a Wisconsin‐licensed butter grader or by the USDA. Wisconsin’s standards are materially identical to the USDA’s standards. The district court rejected the challenges on summary judgment, holding that the statute is rationally related to Wisconsin’s legitimate interest in consumer protection and does not discriminate against out‐of‐state businesses. The Seventh Circuit affirmed. Consumer protection is a legitimate state interest; the butter‐grading requirement is rationally related to the state’s legitimate interest in “protect[ing] the integrity of interstate products so as not to depress the demand for goods that must travel across state lines.” The state presented some evidence that the statute effectively conveys consumer preferences. The statute does not violate the Equal Protection Clause simply because Wisconsin failed to implement mandatory grading for other commodities. Wisconsin’s butter‐grading law confers a competitive advantage on prospective butter-graders who live closer to testing locations but this geographical fact of life does not constitute discrimination against out‐of‐state applicants. View "Minerva Dairy, Inc. v. Harsdorf" on Justia Law

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Arla, a Denmark-based global dairy conglomerate, launched a $30 million advertising campaign aimed at expanding its U.S. cheese sales, branded “Live Unprocessed.” The ads assure consumers that Arla cheese contains no “weird stuff” or “ingredients that you can’t pronounce,” particularly, no milk from cows treated with recombinant bovine somatotropin (“rbST”), an artificial growth hormone. The flagship ad implies that milk from rbST-treated cows is unwholesome. Narrated by a seven-year-old girl, the ad depicts rbST as a cartoon monster with razor-sharp horns. Elanco makes the only FDA-approved rbST supplement. Elanco sued, alleging that the ads contain false and misleading statements in violation of the Lanham Act. Elanco provided scientific literature documenting rbST’s safety, and evidence that a major cheese producer had decreased its demand for rbST in response to the ads. The Seventh Circuit affirmed the issuance of a preliminary injunction, rejecting arguments that Elanco failed to produce consumer surveys or other reliable evidence of actual consumer confusion and did not submit adequate evidence linking the ad campaign to decreased demand for its rbST. Consumer surveys or other “hard” evidence of actual consumer confusion are unnecessary at the preliminary-injunction stage. The evidence of causation is sufficient at this stage: the harm is easily traced because Elanco manufactures the only FDA-approved rbST. The injunction is sufficiently definite and adequately supported by the record and the judge’s findings. View "Eli Lilly and Co. v. Arla Foods USA, Inc." on Justia Law

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The National Organic Standards Board, an advisory committee, has 15 members, all appointed by the Secretary of Agriculture, 7 U.S.C.6518(b), (c); its principal task is advising the Secretary what belongs on the “National List of approved and prohibited substances that shall be included in the standards for organic production and handling” Plaintiffs, who operate organic farms, asked the Secretary to appoint them to the Board, but the Secretary appointed Beck and Swaffar. Plaintiffs contend that Beck and Swaffar are ineligible to fill the seats to which they were appointed. The Seventh Circuit affirmed the dismissal of the suit for lack of standing. Beck and Swaffer, appointed to seats reserved for “individuals who own or operate an organic farming operation,” were office employees of agribusinesses that produce some organic products and some non-organic products. Plaintiffs argued that by deflecting the Board from making recommendations most likely to promote organic farmers’ interests, Beck and Swaffar have called organic-farming into disrepute and reduced organic sales; that is not the kind of person-specific loss needed to show standing. Any injury plaintiffs assert could not be redressed by a favorable decision. The Secretary has a statutory right to appoint Board members but no corresponding duty to evaluate any particular applicant. View "Cornucopia Institute v. United States Department of Agriculture" on Justia Law

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From 2006-2012 Packerland deceived at least one of its customers about the protein content of its Whey Protein Concentrate. Land O’Lakes purchased Packerland’s protein concentrate for use in making foods for calves and other young animals. Buyers infer protein levels from measuring nitrogen: a seller can add another nitrogen-rich substance to produce higher scores. The Ratajczaks, who owned Packerland, started adding urea to its protein concentrate. in 2006. Land O’Lakes suspected that the concentrate was high in nonprotein nitrogen but could not learn why; the Ratajczaks made excuses that Land O’Lakes accepted. The Ratajczaks sold Packerland in 2012. The new owner kept them as employees; they kept adding urea until the buyer learned what the truth. The Ratajczaks lost their jobs and settled for about $10 million before the buyer filed a complaint. Land O’Lakes stopped buying Packerland’s product and asserted claims of breach of contract, fraud, and violation of the Racketeer Influenced and Corrupt Organizations Act. Packerland’s insurers refused to defend or indemnify it or the Ratajczaks; the Ratajczaks’ personal insurer refused to indemnify them for their settlement with Packerland’s buyer. The district court dismissed Land O’Lakes’s suit and ruled in favor of the insurers. The Seventh Circuit affirmed, rejecting Land O’Lakes’ claim to treble damages under RICO and state-law and the Ratajczaks’ claims that Packerland’s insurers and their own insurers had to defend and indemnify them. View "Land O'Lakes, Inc. v. Ratajczak" on Justia Law

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The Fergusons proposed to repay their farm debts under Bankruptcy Code Chapter 12, including a $300,000 loan from First Community Bank, secured by a mortgage plus a lien on farm equipment and crops, and a $176,000 loan from FS, secured by a junior lien on equipment and crops. The bankruptcy judge approved a sale of equipment and crops, which yielded $238,000. The Bank, as senior creditor, demanded those proceeds. FS argued that the Bank should be required to recoup through the mortgage, allowing FS to be repaid from the equipment sale; "marshaling" is not mentioned in the Code, but available under state law. The Fergusons wanted reorganization, to keep their farm. The judge awarded the Bank $238,000. The parties could not agree on a repayment plan. The judge converted the case to a Chapter 7 liquidation. The trustee sold the farm for $411,000, paying the Bank the balance of its claim. About $261,000 remains. FS wanted to be treated as a secured creditor and repeated its request for marshaling. The equipment sale generated federal and state tax bills, with priority among unsecured creditors, 11 U.S.C. 507(a)(8). FS’s status—as a secured creditor with marshaling, or a general unsecured creditor without it—determines whether the taxes will be paid during the bankruptcy. Tax debts are not dischargeable; the Fergusons opposed marshaling. The bankruptcy judge approved FS’s request, stating that he would have approved the original request had he known that the farm would be sold. The district court remanded, stating that marshaling is proper only if two funds exist simultaneously. One fund (equipment and crop proceeds) is gone, only the land sale fund still exists. The Seventh Circuit dismissed an appeal for lack of jurisdiction; the remand was not a final order. View "Ferguson v. West Central FS, Inc." on Justia Law

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In 2014 the Tax Court held that Roberts had deducted expenses from his horse‐racing enterprise on his federal income tax returns for 2005 and 2006 erroneously because the enterprise was a hobby rather than a business, 26 U.S.C. 183(a), (b)(2)..The court assessed tax deficiencies of $89,710 for 2005 and $116,475 for 2006, but ruled that his business had ceased to be a hobby, and had become a bona fide business, in 2007. The IRS has not challenged Roberts’ deductions since then and Roberts continues to operate his horse‐racing business. The Seventh Circuit reversed the Tax Court’s judgment upholding the deficiencies assessed for 2005 and 2006. A business is not transformed into a hobby “merely because the owner finds it pleasurable; suffering has never been made a prerequisite to deductibility.” The court noted instances demonstrating Roberts’ intent to make a profit. View "Roberts v. Comm'r of Internal Revenue" on Justia Law

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Wilma Stuller and her late husband bred Tennessee Walking Horses. They incorporated the operation and claimed its substantial losses as deductions on their tax returns. The IRS determined that the horse-breeding was not an activity engaged in for profit, assessed taxes and penalties, and penalized them for failing to timely file their 2003 return. After paying, the Stullers and LSA, sued the government for a refund. The district court excluded the Stullers’ proposed expert. It determined that his expertise did not extend to the financial or business aspects of horse-breeding and he lacked a reliable methodology to opine on the Stullers’ intent. The court found that the corporation was not run as a for-profit business under 26 U.S.C. 183, and determined that the Stullers lacked reasonable cause for failing to timely file their 2003 tax return. The court also denied a request to amend the judgment and effectively refund taxes paid by the Stullers on rental income received from the corporation. The Seventh Circuit affirmed. The district court followed Daubert in excluding the expert and applied each factor of the regulations to the facts. Only the expectation of asset appreciation weighed in the Stullers’ favor; almost every other consideration pointed to horse-breeding as a hobby or personal pleasure. View "Estate of Stuller v. United States" on Justia Law