American Meat Institute v. Barnett
| Decision Date | 31 August 1999 |
| Docket Number | No. 99-3017.,99-3017. |
| Citation | 64 F.Supp.2d 906 |
| Parties | AMERICAN MEAT INSTITUTE and John Morrell & Company, Plaintiffs, v. Mark W. BARNETT, Attorney General of the State of South Dakota and Darrell Cruea Secretary of Agriculture of the State of South Dakota, Defendants, Prairieland Pork Producers, Inc., Intervenor. |
| Court | U.S. District Court — District of South Dakota |
Jeremiah D. Murphy, Boyce, Murphy, McDowell & Greenfield, Sioux Falls, South Dakota, Michael H. Wetmore, Husch & Eppenberger, St. Louis, Missouri, for plaintiffs.
Charles D. McGuigan, Diane M. Best, Lawrence E. Long, Jeffrey P. Hallem, Assistant Attorney Generals, Pierre, South Dakota, for defendants.
Jeffrey T. Sveen, Siegel, Barnett & Schutz, Aberdeen, South Dakota, for intervenor.
[¶ 1] Plaintiffs instituted this declaratory judgment action, seeking a declaration that portions of Senate Bill 95, enacted by the 74th Session of the South Dakota Legislature, now codified as SDCL 40-15B, are unconstitutional. Governor Janklow signed the measure on March 3, 1999, and the statute (hereinafter, "the pricing statute") became effective July 1, 1999. The specific claims are that the provisions of the law dealing with price discrimination are in violation of the Commerce Clause, Article I, Section 8, Clause 3, of the United States Constitution () and that such provisions are void for vagueness. Plaintiffs also seek a preliminary injunction enjoining enforcement of the pricing statute pending a decision as to the constitutionality of that statute. Pursuant to Fed. R.Civ.P. 65(a)(2), the trial of this action on the merits was advanced and consolidated with the hearing on the application for a preliminary injunction.
[¶ 2] Prairieland Pork Producers, Inc. ("Prairieland"), with leave of court, intervened, seeking a declaratory judgment that portions of the pricing statute are unconstitutional as in violation of the Commerce Clause. Prairieland moved to amend its pleading in intervention to add claims that portions of the pricing statute are unconstitutional as in violation of the Contracts Clause, Article I, Section 10, of the United States Constitution and that portions of the pricing stature are void for vagueness. The motion to amend was granted.
[¶ 3] Findings of fact and conclusions of law have been entered and form the basis of this memorandum opinion.
[¶ 4] South Dakota farmers and ranchers, like their colleagues in other states, are at great financial risk today. Prices being received are often less than the costs of production. Federal policies and laws are sometimes misguided and cause harm to producers. World markets have been lost or greatly diminished. An oversupply of farm and ranch products further reduces prices paid to producers. These producers are often victims of their own increasing productivity, unlike other segments of the economy. Like any other person who produces wealth from the ground, they are unable to set their prices but must rely on what buyers will pay. Producers in South Dakota also face an unfair system of taxation where land is virtually the only wealth which is taxed for the support of our public schools. Independent and smaller producers face, as do small businesspeople, increasing competition from large corporations.
[¶ 5] There is increasing and sometimes alarming concentration occurring in the agricultural industry. There are very few buyers for livestock today and producers face an "oligopsony". That is particularly the case in South Dakota with only three packers. Since the 1970's, the meatpacking industry has become increasingly concentrated. The current market share of the four largest packers is approximately 80% for steer and heifer slaughter, 80% for boxed beef, 73% for sheep and 54% for hogs.
[¶ 6] Packers have the market power in each livestock market to influence or determine prices paid to producers for livestock. Packers sometimes enter into contracts with producers conditioned upon the contract price for livestock not being disclosed. Requirements of confidentiality are imposed. As in any buyer-seller arrangement, packers seek to pay as low prices as possible.
[¶ 7] Presently, only packers have complete knowledge of livestock purchases and pricing. Only a relatively small portion of livestock purchasing and pricing information is available to the public, including producers, through the U.S. Department of Agriculture market news reports or other sources. Information regarding contract purchases and captive livestock supplies is largely unreported. This results in published purchasing and pricing information that understates actual purchases and actual prices paid for livestock.
[¶ 8] The South Dakota Legislature and Governor William Janklow reacted to the great frustrations of South Dakota farmers and ranchers, including livestock producers, and their families and friends by enacting Senate Bill 95, which became effective July 1, 1999, becoming chapter 204 of the Session Laws of 1999. This chapter, together with chapter 205 of the Session Laws of 1999, was codified as SDCL 40-15B. Chapter 205 was the result of another legislative Act and was codified at SDCL 40-15B-8. No challenge is presented as to SDCL 40-15B-8.
[¶ 9] SDCL 40-15B provides:
40-15B-1. Definitions. Terms used in §§ 40-15B-1 to 40-15B-8, inclusive, mean:
(1) "Livestock," live cattle, swine, or sheep;
(2) "Packer," a person who is engaged in the business of slaughtering livestock or receiving, purchasing, or soliciting livestock for slaughtering, the meat products of which are directly or indirectly to be offered for resale or for public consumption. Packer includes an agent of the packer engaged in buying or soliciting livestock for slaughter on behalf of a packer. Packer does not include a cold storage plant or frozen food locker plant.
40-15B-2. Price discrimination by packer prohibited — Exemption. A packer purchasing or soliciting livestock for slaughter in this state may not discriminate in prices paid or offered to be paid to sellers of that livestock. This section does not apply to the sale and purchase of livestock if the following requirements are met:
(1) The price differential is based on the quality of the livestock, if the packer purchases or solicits the livestock based upon a payment method specifying prices paid for criteria relating to carcass merit; actual and quantifiable costs related to transporting and acquiring the livestock by the packer; or an agreement for the delivery of livestock at a specified date or time; and
(2) After making a differential payment to a seller, the packer publishes information relating to the differential pricing, including the payment method for carcass merit, transportation and acquisition pricing, and an offer to enter into an agreement for the delivery of livestock at a specified date or time according to the same terms and conditions offered to other sellers.
40-15B-3. Terms and conditions to be uniform. A packer shall provide all sellers with the same terms and conditions offered to a seller who receives a differential price based on any of the criteria described in § 40-15B-2.
40-15B-4. Packer to report prices paid. A packer shall, at the end of each day during which livestock are purchased or contracted, provide to the United States Department of Agriculture, agricultural market service livestock market news branch, and the South Dakota Department of Agriculture, all prices paid for livestock, both contract and direct purchased, that day.
40-15B-5. Agreements in violation of provisions voidable — Violation as fraudulent. Any agreement made by a packer in violation of §§ 40-15B-1 to 40-15B-8, inclusive, is voidable. Any packer acting in violation of this section is guilty of a fraudulent practice.
40-15B-6. Attorney general to enforce provisions — Action to restrain violation — Civil action — Treble damages. The attorney general shall enforce the provisions of §§ 40-15B-1 to 40- 15B-8, inclusive, and the Department of Agriculture shall refer any violations of these provisions to the attorney general. The attorney general or any person injured by a violation of these provisions may bring an action in circuit court to restrain a packer from violating these provisions. A seller who receives a discriminatory price or who is offered only a discriminatory price for livestock based upon a violation of these provisions by a packer has a civil cause of action against the packer and, if successful, shall be awarded treble damages.
40-15B-7. Packer to make available daily report of prices paid — Forms — Seller's identity not to be revealed — Penalties for violation. Any packer shall make available for publication and to the Department of Agriculture, a daily report setting forth information regarding prices paid for livestock, under each contract in force, in which the packer and a South Dakota resident are parties for the purchase of the livestock by the packer, and which sets a date for delivery more than twenty days after the making of the contract.
The reports shall be completed on forms prepared by the department for comparison with cash market prices for livestock according to procedures required by the department in rules promulgated pursuant to chapter 1-26. The report may not include information regarding the identity of a seller.
A failure of a packer to report as required by this section is punishable by a civil penalty not to exceed one thousand dollars for each day that a timely or truthful report is not published. The department shall refer to the attorney general any packer or packer's agent who the department believes is in violation of the provisions of §§ 40-15B-1 to 40-15B-8. The attorney general may, upon referral from the department, file an action in circuit court...
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