South Dakota Farm Bureau Inc. v. Hazeltine

• Decision Date: 19 August 2003
• Docket Number: No. 02-2644.,No. 02-2646.,No. 02-2366.,No. 02-2588.,02-2366.,02-2588.,02-2644.,02-2646.
• Citation: South Dakota Farm Bureau Inc. v. Hazeltine, 340 F.3d 583 (8th Cir. 2003)
• 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 Marian Holben Family Trust; Montana-Dakota Utilities Company; Northwestern Public Service; Otter Tail Power Company, Plaintiffs-Appellees, v. Joyce HAZELTINE, in her official capacity as Secretary of State of South Dakota; Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants-Appellants, Dakota Rural Action; South Dakota Resources Coalition, Intervenors Defendants, State of Nebraska; Everett Holstein; Rudy Meduna; Dan Hodges, Amicus on Behalf of Appellants, The American Farm Bureau Federation; Alabama Farm Bureau Federation; Arkansas Farm Bureau Federation; Kansas Farm Bureau Federation; Kentucky Farm Bureau Federation; Minnesota Farm Bureau Federation; North Dakota Farm Bureau Federation; Utah Farm Bureau Federation, Amicus on Behalf of Appellees. 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 Marian Holben Family Trust; Montana-Dakota Utilities Company; Northwestern Public Service; Otter Tail Power Company, Plaintiffs-Appellees, v. Joyce Hazeltine, in her official capacity as Secretary of State of South Dakota; Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants, Dakota Rural Action; South Dakota Resources Coalition, Intervenors Defendants-Appellants, Everett Holstein; Rudy Meduna; Dan Hodges, Amicus on Behalf of Appellants. 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, Plaintiffs, Spear H. Ranch, Inc.; Marston Holben; Marston and Marian Holben Family Trust, Plaintiffs-Appellants, Montana-Dakota Utilities Company; Northwestern Public Service; Otter Tail Power Company, Plaintiffs, v. Joyce Hazeltine, in her official capacity as Secretary of State of South Dakota; Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants-Appellees, Dakota Rural Action; South Dakota Resources Coalition, Intervenors Defendants-Appellees. 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, Plaintiffs-Appellants, Spear H. Ranch, Inc.; Marston Holben; Marston and Marian Holben Family Trust; Montana-Dakota Utilities Company; Northwestern Public Service; Otter Tail Power Company, Plaintiffs, v. Joyce Hazeltine, in her official capacity as Secretary of State of South Dakota; Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants-Appellees, Dakota Rural Action; South Dakota Resources Coalition, Intervenors Defendants-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

340 F.3d 583

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 Marian Holben Family Trust; Montana-Dakota Utilities Company; Northwestern Public Service; Otter Tail Power Company, Plaintiffs-Appellees, v.Joyce HAZELTINE, in her official capacity as Secretary of State of South Dakota; Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants-AppellantsDakota Rural Action; South Dakota Resources Coalition, IntervenorsDefendants,State of Nebraska; Everett Holstein; Rudy Meduna; Dan Hodges, Amicus on Behalf of Appellants,The American Farm Bureau Federation; Alabama Farm Bureau Federation; Arkansas Farm Bureau Federation; Kansas Farm Bureau Federation; Kentucky Farm Bureau Federation; Minnesota Farm Bureau Federation; North Dakota Farm Bureau Federation; Utah Farm Bureau Federation, Amicus on Behalf of Appellees.

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 Marian Holben Family Trust; Montana-Dakota Utilities Company; Northwestern Public Service; Otter Tail Power Company, Plaintiffs-Appellees, v.Joyce Hazeltine, in her official capacity as Secretary of State of South Dakota; Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants,Dakota Rural Action; South Dakota Resources Coalition, IntervenorsDefendants-Appellants,Everett Holstein; Rudy Meduna; Dan Hodges, Amicus on Behalf of Appellants.

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, Plaintiffs,Spear H. Ranch, Inc.; Marston Holben; Marston and Marian Holben Family Trust, Plaintiffs-Appellants,Montana-Dakota Utilities Company; Northwestern Public Service; Otter Tail Power Company, Plaintiffs, v.Joyce Hazeltine, in her official capacity as Secretary of State of South Dakota; Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants-Appellees,Dakota Rural Action; South Dakota Resources Coalition, IntervenorsDefendants-Appellees.

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, Plaintiffs-Appellants,Spear H. Ranch, Inc.; Marston Holben; Marston and Marian Holben Family Trust; Montana-Dakota Utilities Company; Northwestern Public Service; Otter Tail Power Company, Plaintiffs, v.Joyce Hazeltine, in her official capacity as Secretary of State of South Dakota; Mark W. Barnett, in his official capacity as Attorney General of South Dakota, Defendants-Appellees,Dakota Rural Action; South Dakota Resources Coalition, IntervenorsDefendants-Appellees.

No. 02-2366.

No. 02-2588.

No. 02-2644.

No. 02-2646.

United States Court of Appeals, Eighth Circuit.

Submitted: February 10, 2003.

Filed: August 19, 2003.

Order Denying Petition for Rehearing and for Rehearing En Banc October 31, 2003.

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Diane M. Best, argued, Pierre, SD (Roxanne Giedd, on the brief), for appellants Barnett and Hazeltine in 02-2366, 02-2644 and 02-2646.

Randy C. Canney, argued, Denver, CO, for intervenors South Dakota Resources and Dakota Rural Action in all cases.

David S. Day, argued, Vermillion, SD (Richard O. Gregerson, on the brief), for appellees Aeschlimann, Tesch, Brost, Sjovall Feedyard, Haverhals Feedlot, South Dakota Sheep Growers and South Dakota Farm Bureau in all cases.

David A. Gerdes, argued, Pierre, SD (Neil Fulton, on the brief), for appelleesOtter Tail Power Co., Northwestern Public Service and Montana-Dakota Utilities Co. in all cases.

Before BOWMAN, FAGG, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

BOWMAN, Circuit Judge.

The South Dakota Constitution prohibits corporations and syndicates, subject to certain exemptions, from acquiring or obtaining an interest in land used for farming and from otherwise engaging in farming in South Dakota.This restriction, known as Amendment E, was added to the South Dakota Constitution as the result of a 1998 referendum.The thirteen Plaintiffs in this case allege that Amendment E violates the dormant Commerce Clause of the United States Constitution, and a smaller group of these Plaintiffs also claims that it violates the Americans with Disabilities Act (ADA).

Prior to trial, the District Court dismissed the ADA claim, and the Plaintiffs amended their complaint to delete that claim.After a bench trial, but prior to issuing its opinion, the District Court sent a memorandum to all parties stating that it erred in dismissing the ADA claim before trial.In its opinion, the District Court concluded that Amendment E violates both the ADA and the dormant Commerce Clause, and it enjoined DefendantsJoyce Hazeltine, the South Dakota secretary of state, and Mark Barnett, the State's attorney general, from enforcing Amendment E. S.D. Farm Bureau, Inc. v. Hazeltine, 202 F.Supp.2d 1020(D.S.D.2002).Hazeltine and Barnett appeal, as do two parties that intervened on the side of the Defendants, Dakota Rural Action and South Dakota Resources Council.

We conclude that the District Court improperly considered the ADA claim, but we affirm its judgment by concluding that Amendment E contravenes the dormant Commerce Clause.

I.

Amendment E was codified as four sections of Article XVII of the South Dakota Constitution.Section 21, the prohibitory provision, states that "[n]o 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."S.D. Const. art. XVII, § 21.A corporation or syndicate can avoid the prohibition of § 21 if it fits within one of fifteen exempted categories listed in § 22, five of which are relevant to the issues raised on appeal.

The first of these relevant exemptions is for a "family farm corporation or syndicate," which is defined as

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.

Id.§ 22, cl. 1.The ADA claim in this case is based on the inability of physically disabled farmers and ranchers to qualify for this exemption.

The second relevant exemption in § 22 applies to land and livestock in which a cooperative has a legal interest, so long as the cooperative fulfills certain prerequisites related to family ownership.¹Id.cl. 2.As the District Court noted, this is a curious exemption because § 21, by its own terms, applies only to "corporations and syndicates" and not specifically to cooperatives.

Amendment E also contains an exemption known as a "grandfather clause" that applies to interests in agricultural land owned by corporations and syndicates as of the effective date of Amendment E. Id.cl. 4.Section 22 has a similar provision for livestock that corporations and syndicates owned as of the effective date of Amendment E. Id.cl. 5.The final exemption of note is for corporations or syndicates that acquire or lease agricultural land for immediate or potential non-farming purposes.Id.cl. 10.

II.

Thirteen parties, to whom we will refer collectively as "the Plaintiffs," challenge the legality of Amendment E. Two of the Plaintiffs are South Dakota corporations: Haverhals Feedlot, Inc.(HFI), and Sjovall Feedyard, Inc.(SFI).Each owns a custom cattle feedlot, which means that they raise cattle owned by third parties.The third parties deliver cattle to the feedlots but retain ownership of the cattle.The feedlots then raise the cattle in preparation for slaughter.HFI and SFI claim that § 21 prohibits corporations who own cattle from contracting with South Dakota feedlots because the corporations would be engaging in farming in South Dakota.In short, these two Plaintiffs claim that Amendment E—if enforced—would put them out of business because they earn their revenue from feeding cattle owned by non-exempt entities.

PlaintiffsDonald Tesch and William Aeschlimann engage in unincorporated livestock feeding businesses in South Dakota.Tesch is in the seventh year of a ten-year contract to raise hogs for Harvest States Cooperative, which is based in Minnesota.Although the hogs Tesch is raising under this contract are exempted by Amendment E's grandfather clause for livestock, Tesch claims that § 21 bars Harvest States from engaging in farming in South Dakota and, therefore, from entering into a subsequent contract with him.As for Aeschlimann, he feeds lambs owned by third parties, many of whom are non-exempt corporations pursuant to Amendment E.He thus claims that Amendment E will drastically reduce his income because it prohibits the non-exempt entities from contracting with him.

Spear H Ranch (Spear H), another corporate Plaintiff, is an Arizona corporation that does business in South Dakota, operating a cattle ranch.Its sole shareholder is the Marston and Marian Holben Family Trust, which is also a Plaintiff, as is Marston Holben individually.Spear H, the Holben Trust,...