South Dakota Farm Bureau, Inc. v. Hazeltine

• Decision Date: 17 May 2002
• Docket Number: No. CIV. 99-3018.,CIV. 99-3018.
• Citation: 202 F.Supp.2d 1020
• Parties: SOUTH DAKOTA FARM BUREAU, INC., South Dakota Sheep Growers Association, Inc., Haverhals Feedlot, Inc., Sjovall Feedyard, Inc., Frank D. Brost, Donald Tesch, William A. Aeschlimann, Spear H Ranch, Inc., Marston Holben, Marston and Marion Holben Family Trust, Montana-Dakota Utilities Co., Northwestern Public Service, and Otter Tail Power Company, Plaintiffs, v. Joyce HAZELTINE, in her official capacity as Secretary of State of South Dakota and Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants. Dakota Rural Action and South Dakota Resources Coalition, Defendant-Intervenors.
• Court: U.S. District Court — District of South Dakota

202 F.Supp.2d 1020

SOUTH DAKOTA FARM BUREAU, INC., South Dakota Sheep Growers Association, Inc., Haverhals Feedlot, Inc., Sjovall Feedyard, Inc., Frank D. Brost, Donald Tesch, William A. Aeschlimann, Spear H Ranch, Inc., Marston Holben, Marston and Marion Holben Family Trust, Montana-Dakota Utilities Co., Northwestern Public Service, and Otter Tail Power Company, Plaintiffs, v. Joyce HAZELTINE, in her official capacity as Secretary of State of South Dakota and Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants.

Dakota Rural Action and South Dakota Resources Coalition, Defendant-Intervenors.

No. CIV. 99-3018.

United States District Court, D. South Dakota, Central Division.

May 17, 2002.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Richard O. Gregerson, Susan M. Sabers, Woods, Fuller, Shultz & Smith, Sioux Falls, SD, Tomas P. Tonner, Tonner, Tobin & King, Aberdeen, SD, David S. Day, U.S.D. School of Law, Vermillion, SD, David A. Gerdes, Neil K. Fulton, May, Adam, Gerdes & Thompson, Pierre, SD, for Plaintiffs.

Mark W. Barnett, Roxanne Giedd, Lawrence E. Long, Diane M. Best, Attorney General's Office, Pierre, SD, for Defendants.

John H. Davidson, Jr., U.S.D. School of Law, Vermillion, SD, James Jay Tutchton, University of Denver, Denver, CO, Randy Canney, Denver, CO, for Defendant-Intervenors.

MEMORANDUM OPINION

KORNMANN, District Judge.

INTRODUCTION

[¶ 1] Plaintiffs seek declaratory and injunctive relief, challenging the constitutionality of the 1998 initiated amendments to Article XVII of the South Dakota Constitution, specifically Sections 21 through 24 (known as and hereinafter referred to as "Amendment E" because of its placement on the general election ballot when enacted by the voters of South Dakota). Amendment E in general prohibits limited liability business enterprises from acquiring real estate used for farming and from engaging in farming in South Dakota. Farming includes for the purposes of this action ranching as well. The specific claims are that the amendments are in violation of the United States Constitution, namely the Commerce Clause (more particularly the dormant Commerce Clause), the Equal Protection Clause, the Contracts Clause, the Supremacy Clause, and the Americans With Disabilities Act ("ADA"). This Court has jurisdiction over the subject matter and over the parties. See 28 U.S.C. § 1331.

[¶ 2] Being called upon to decide whether certain provisions of the South Dakota Constitution violate the United States Constitution is a heavy burden and one the court does not relish or take lightly. Certain general principles of law must be applied in the necessary analysis. There is a strong presumption of constitutionality as to these provisions. Unless unconstitutional on its face, there must be a clear showing of arbitrariness and irrationality or clear conflict with the United States Constitution. Plaintiffs bear a heavy burden. There are legitimate state interests or purposes in seeking to prevent further concentrations of agricultural land and the production of food and animals from such land, seeking to prevent in the future agricultural land and production of animals and crops from passing into the hands of limited liability entities to the detriment of traditional family farm units and family farm limited liability entities primarily engaged in farming or ranching, and seeking to protect family life and values. South Dakota may make reasonable distinctions between business entities. Limited liability entities exist, if at all, by virtue of state laws permitting the use of such entities. States may decide legitimately to permit no limited liability entities. If Amendment E is susceptible of a reasonable interpretation which supports the constitutionality, the court must accord the measure that meaning. The court is not to adopt a strained, impractical, or absurd result, if possible. Federal judges are not, of course, "super legislatures." Some of these general principles will be discussed later with appropriate references to legal authority.

[¶ 3] § 21 of Article XVII of the South Dakota Constitution provides:

No corporation or syndicate may acquire, or otherwise obtain an interest, whether legal, beneficial, or otherwise, in any real estate used for farming in this state, or engage in farming. The term, corporation, means any corporation organized under the laws of any state of the United States or any country. The term, syndicate, includes any limited partnership, limited liability partnership, business trust, or limited liability company organized under the laws of any state of the United States or any country. A syndicate does not include general partnerships, except general partnerships in which nonfamily (sic) farm syndicates or nonfamily (sic) farm corporations are partners. The term, farming, means the cultivation of land for the production of agricultural crops, fruit, or other horticultural products, or the ownership, keeping, or feeding of animals for the production of livestock or livestock products.

[¶ 4] § 22 of Article XVII of the South Dakota Constitution provides:

The restrictions in § 21 of Article XVII do not apply to:

(1) A family farm corporation or syndicate. A family farm corporation or syndicate is a corporation or syndicate engaged in farming or the ownership of agricultural land, in which a majority of the partnership interests, shares, stock, or other ownership interests are held by members of a family or a trust created for the benefit of a member of that family. The term, family, means natural persons related to one another within the fourth degree of kinship according to civil law, or their spouses. At least one of the family members in a family farm corporation or syndicate shall reside on or be actively engaged in the day-to-day labor and management of the farm. Day-to-day labor and management shall require both daily or routine substantial physical exertion and administration. None of the corporation's or syndicate's partners, members, or stockholders may be nonresident aliens, or other corporations or syndicates, unless all of the stockholders, members, or partners of such entities are persons related within the fourth degree of kinship to the majority of partners, members, or stockholders in the family farm corporation or syndicate; (emphasis supplied)

(2) Agricultural land acquired or leased, or livestock kept, fed or owned, by a cooperative organized under the laws of any state, if a majority of the shares or other interests of ownership in the cooperative are held by members in the cooperative who are natural persons actively engaged in the day-to-day labor and management of a farm, or family farm corporations or syndicates, and who either acquire from the cooperative, through purchase or otherwise, such livestock, or crops produced on such land, or deliver to the cooperative, through sale or otherwise, crops to be used in the keeping or feeding of such livestock; So a corporation may own real estate which is used for the keeping and feeding of livestock if the livestock so fed and kept on that real estate is owned by a qualified cooperative.

(3) Nonprofit corporations organized under state nonprofit corporation law;

(4) Agricultural land, which, as of the approval date of this amendment, is being farmed, or which is owned or leased, or in which there is a legal or beneficial interest, directly or indirectly owned, acquired, or obtained by a corporation or syndicate, if such land or other interest is held in continuous ownership or under continuous lease by the same such corporation or syndicate. For the purposes of this exemption, land purchased on a contract signed as of the approval date of this amendment is considered as owned on that date;

(5) Livestock, which as of the approval date of this amendment, is owned by a corporation or syndicate. For the purposes of this exemption, livestock to be produced under contract for a corporation or syndicate are considered as owned, if the contract is for the keeping or feeding of livestock and is signed as of the approval date of this amendment, and if the contract remains in effect and is not terminated by either party to the contract. This exemption does not extend beyond the term of any contract signed as of the approval date of this amendment;

(6) A farm operated for research or experimental purposes, if any commercial sales from the farm are only incidental to the research or experimental objectives of the corporation or syndicate;

(7) Land leases by alfalfa processors for the production of alfalfa;

(8) Agricultural land operated for the purpose of growing seed, nursery plants, or sod;

(9) Mineral rights on agricultural land;

(10) Agricultural land acquired or leased by a corporation or syndicate for immediate or potential nonfarming (sic) purposes, for a period of five years from the date of purchase. A corporation or syndicate may hold such agricultural land in such acreage as may be necessary to its nonfarm (sic) business operation, but pending the development of the agricultural land for nonfarm (sic) purposes, such land may not be used for farming except under lease to a family farm corporation or family farm syndicate or a non syndicate or noncorporate (sic) farm;

(11) Agricultural lands or livestock acquired by a corporation or syndicate by process of law in the collection of debts, or by any procedures for the enforcement of a lien, encumbrance, or claim thereon, whether created by mortgage or otherwise. Any lands so acquired shall be disposed of within a period of five years and may not be used for farming before being disposed of, except under a lease to a family farm corporation or syndicate, or a nonsyndicate (sic) or noncorporate (sic) farm. Any livestock so acquired shall be disposed of within six months;

(12) Agricultural lands held by a state or nationally chartered bank as trustee for a person, corporation or...