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Geoff Greenwood, Communications Director
515-281-6699, geoff.greenwood@iowa.gov
FOR IMMEDIATE RELEASE, September 15, 2011

State Reaches Hog Production Agreement with AgFeed Industries, Inc.

 

(DES MOINES, Iowa)  Attorney General Tom Miller announced that United States District Court Judge Robert W. Pratt approved a consent decree Thursday jointly submitted by the State of Iowa and AgFeed Industries, Inc., headquartered in Grand Junction, Colorado, which owns and operates hog production facilities and feed mills throughout the Unites States, including in Iowa.

The consent decree sets out the terms of a settlement reached between the State and AgFeed Industries resolving a dispute over the constitutionality of Iowa’s prohibitions against processors vertically integrating into pork production in Iowa.

“This agreement allows the company to continue doing business here in Iowa and to expand its operations, while still protecting the rights and interests of Iowa’s contract growers,” Miller said.

AgFeed Industries plans to increase its pork processing capacity by acquiring Pine Ridge, LLC, and also expand its hog contracting business.  Iowa law prohibits a processor from directly or indirectly operating, financing or controlling a swine operation within the state or contracting with Iowa producers for the care and feeding of swine in Iowa.  This formal agreement, which also institutes contract grower rights, addresses the state’s legal concerns.

In return for AgFeed’s compliance with its commitments under the settlement, the State will not pursue enforcement of the ban on packer involvement in swine production with respect to AgFeed.  The agreement expires on September 16, 2015.

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Background Information

Specific provisions of the AgFeed Industries, Inc. agreement include:

Contract Grower Rights.  AgFeed has agreed that its Iowa contract growers will have a set of identified grower rights, including the right to be a “whistleblower,” the right to join an association, the right to use a contract grower’s lien, the right to review production contracts and the right to disclose contractual terms.

AgFeed’s Obligations.  AgFeed has agreed to certain terms, including:

  • AgFeed will not impose less favorable terms and conditions in contract grower agreements on the basis of a contract grower or prospective contract grower’s membership or activities in a contract grower’s association;

  • AgFeed will not take actions to coerce, retaliate, or discriminate against any contract grower or prospective contract grower because that contract grower or prospective contract grower exercises, or attempts to exercise, any contract grower right;

  • AgFeed will not provide false material factual information to contract growers or prospective contract growers regarding other contract growers, associations and organizations and their rights;

  • AgFeed will provide statistical information and data used to determine payment to the contract grower;

  • AgFeed will allow a contract grower or representative to observe weights, measures and weighing used to determine compensation;

  • AgFeed will not require a contract grower to make capital investments associated with an existing contract grower agreement that are in addition to the investment requirements of the contract grower agreement without fair and equitable compensation;  AgFeed can require contract growers to make necessary capital improvements at contract growers’ expense to meet statutory or regulatory standards and requirements;

  • AgFeed agrees that contract growers or prospective contract growers may form and operate an association of agricultural product producers, and that such an association may negotiate contract grower agreements.  AgFeed agrees not to retaliate or discriminate against such contract growers or prospective growers and to negotiate in good faith with any such association;

  • AgFeed agrees that it will not assert that any of the protections and/or benefits provided by this consent decree are preempted by any existing federal law;

  • AgFeed will provide the Attorney General 90-day written notice of the closure of any permanent swine slaughter facility which it owns, constructs, or acquires;

  • For two years, AgFeed agrees to purchase at least 25-percent of the swine slaughtered at the qualified processor to which AgFeed delivers market hogs from sellers other than AgFeed-owned facilities.

The AgFeed litigation:

The consent decree, signed today, settles a lawsuit filed Wednesday by AgFeed in the United States District Court for the Southern District of Iowa.  In its lawsuit, AgFeed asserted that Iowa Code section 202B.201 violates the United States Constitution.  The Attorney General denies that Iowa Code section 202B.201 violates the United States Constitution.
Summary of the Christensen Farms litigation:
The agreement with AgFeed announced today is similar to the resolution of litigation between the State of Iowa and Christensen Farms Midwest, LLC, announced March 30, 2011; between the State of Iowa and Hormel announced April 6, 2006; between the State of Iowa and Cargill announced January 19, 2006; and between the State of Iowa and Smithfield Foods announced Sept. 16, 2005.
On March 29, 2011, Christensen Farms Midwest LLC filed suit against the Attorney General in the United States District Court for the Southern District of Iowa, Christensen Farms Midwest, LLC v. Miller, No. 4:11-CV-145.

The Smithfield Foods, Cargill and Hormel litigation:

The agreement with AgFeed announced today is also similar to the resolution of litigation between the State of Iowa and Tyson announced September  11, 2009; between the State of Iowa and Hormel announced April 6, 2006; between the State of Iowa and Cargill announced January 19, 2006; and between the State of Iowa and Smithfield Foods announced Sept. 16, 2005.

Summary of the Smithfield litigation:

On July 22, 2002, Smithfield Foods, Inc., Murphy Farms, LLC, and Prestage-Stoecker Farms, Inc. (“Smithfield Producers”) filed suit against the Attorney General in the United States District Court for the Southern District of Iowa, Smithfield Foods, Inc., Murphy Farms, LLC, and Prestage-Stoecker Farms, Inc. v. Miller, No. 4:02-CV-90324.

The lawsuit asserted that Iowa Code section 9H.2, the predecessor to current Iowa Code section 202B.201, violated the United States Constitution.

On January 22, 2003, the United States District Court for the Southern District of Iowa permanently enjoined the Attorney General from enforcing Iowa Code section 9H.2.

Iowa Code section 9H.2 was amended by the Iowa Legislature in 2003 during the pendency of the appeal of the District Court’s ruling by the Attorney General, and recodified at Iowa Code section 202B.201.

The United States Court of Appeals for the Eighth Circuit vacated the District Court’s January 22, 2003, ruling and remanded the lawsuit for further proceedings in light of the 2003 amendment.

On December 30, 2004, the United States District Court for the Southern District of Iowa issued an order scheduling trial for the case to begin on March 13, 2006.

By agreement dated September 16, 2005, and with the approval of the United States District Court for the Southern District of Iowa, the Attorney General consented to an injunction prohibiting the enforcement of Iowa Code section 202B.201 by the State of Iowa with respect to the Smithfield Producers.

Summary of the Cargill litigation:

On January 18, 2006, Cargill, Incorporated, Cargill Meat Solutions Corporation, and Cargill Pork, LLC (collectively “Cargill”) filed suit against the Attorney General in the United States District Court for the Southern District of Iowa, Cargill, Incorporated, Cargill Meat Solutions Corporation, and Cargill Pork, LLC v. Miller, No. 4:06-CV-20.

The Cargill lawsuit asserted that Iowa Code section 202B.201 violated the United States Constitution.
By agreement with Cargill dated January 19, 2006, and with the approval of the United States District Court for the Southern District of Iowa, the Attorney General consented to an injunction prohibiting the enforcement of Iowa Code section 202B.201 against Cargill by the State of Iowa.

Summary of the Hormel litigation:

On April 6, 2006, Hormel Foods Corporation (“Hormel”) filed suit against the Attorney General in the United States District Court for the Southern District of Iowa, Hormel Foods Corporation v. Miller, No. 4:06-CV-00161.

The Hormel lawsuit asserted that Iowa Code section 202B.201 violated the United States Constitution.

By agreement with Hormel dated April 6, 2006, and with the approval of the United States District Court for the Southern District of Iowa, the Attorney General consented to an injunction prohibiting the enforcement of Iowa Code section 202B.201 against Hormel by the State of Iowa.

Summary of the Tyson litigation:

On September 11, 2009, Tyson Foods, Inc. (“Tyson”) filed suit against the Attorney General in the United States District Court for the Southern District of Iowa, Tyson Fresh Meats, Inc. v. Miller, No. 4:09-CV-00351.

The Tyson lawsuit asserted that Iowa Code section 202B.201 violated the United States Constitution.

By agreement with Tyson dated September 11, 2009, and with the approval of the United States District Court for the Southern District of Iowa, the Attorney General consented to an injunction prohibiting the enforcement of Iowa Code section 202B.201 against Tyson by the State of Iowa.

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