Session of 2000
HOUSE BILL No. 2818
By Representatives Larkin and Faber and
Alldritt, Barnes, Crow, Findley,
Flora,
Gilbert, Grant, Henry, Howell, Johnston, Klein, Kuether, P.
Long,
Mayans, McClure, McCreary, McKinney, Merrick, Mollen-
kamp, Jim
Morrison, Myers, O'Brien, Osborne, E. Peterson, Phelps,
Ruff,
Spangler, Tedder, Thimesch, Toelkes and Welshimer
2-2
14 AN ACT
concerning agriculture; enacting the Kansas agricultural pro-
15 duction contract fair
practices act; prescribing penalties for violations
16 thereof.
17
18 Be it enacted by the Legislature of the
State of Kansas:
19 Section
1. The provisions of this act shall be known and may be
cited
20 as the Kansas agricultural production
contract fair practices act.
21 Sec. 2. As
used in this act: (a) "Agricultural commodities" means a
22 material produced for use in or as food,
feed, seed or fiber and includes
23 crops for fiber, food, oilseeds, seeds,
livestock, livestock products, poultry,
24 poultry products or by-products of the farm
for the same or similar use;
25 (b) "integrator"
means a person who in the ordinary course of busi-
26 ness buys agricultural commodities grown or
raised in this state or who
27 contracts with a producer to grow or raise
agricultural commodities in
28 this state;
29 (c) "person"
means any individual, partnership, association or cor-
30 poration or any organized group of persons,
whether incorporated or not,
31 or family farm corporation, authorized farm
corporation, limited liability
32 agricultural company, limited agricultural
partnership, family trust, au-
33 thorized trust or testamentary trust, all
as defined in K.S.A. 17-5903 and
34 amendments thereto, or an agent or employee
of such person;
35 (d) "producer"
means a person who produces or causes to be pro-
36 duced agricultural commodities by
contracting with an integrator to pro-
37 vide management, labor, machinery,
facilities or any other production
38 input for the production of agricultural
commodities; and
39 (e) "secretary"
means the secretary of agriculture.
40 Sec. 3. (a)
No integrator shall engage in any deceptive act or practice
41 as defined in this act in connection with
any agricultural production con-
42 tract involving agricultural
commodities.
43 (b) Deceptive
acts and practices, include, but are not limited to the
44 following, each of which is declared to be
a violation of this act:
2
1 (1) Using
coercion, intimidation, the threat of retaliation or the threat
2 of contract termination, cancellation
or nonrenewal to impose, demand,
3 compel or dictate the terms, payment
or manner of payment or the sign-
4 ing of a contract by a producer;
5 (2) using
coercion, intimidation, the threat of retaliation or the threat
6 of contract termination, cancellation
or nonrenewal in order to require
7 the producer to make capital
improvements such as buildings or
8 equipment;
9 (3) for the
integrator to interfere with, restrain or coerce producers
10 in the exercise of their rights to join,
form and assist associations of
11 producers;
12 (4) subject to
the provisions of section 4, and amendments thereto,
13 for an integrator to terminate, cancel or
fail to renew a contract with a
14 producer as long as the producer is
financially obligated for an investment
15 in buildings and equipment which was made
to meet the minimum
16 requirements of the contract;
17 (5) for an
integrator to refuse to provide to the producer upon request
18 the statistical information and data used
to determine compensation paid
19 to the producer for settlement. This
statistical information and data in-
20 cludes, but is not limited to, feed
conversion rates, feed analyses, averages
21 of other growers, origination and breeder
history;
22 (6) for the
integrator to refuse to allow a producer or the producer's
23 designated representative to observe, by
actual observation at the time of
24 weighing, the weights and measures used to
determine the producer's
25 compensation at settlement; and
26 (7) for an
integrator to use the performance of any other producer
27 to determine the settlement of a
producer.
28 (c) Unfair trade
practices also include those practices prohibited by
29 the perishable agricultural commodities
act, 7 U.S.C. § § 499a-499s and
30 the rules promulgated thereunder at 7
C.F.R. part 46, and those practices
31 prohibited by the packers and stockyards
act, 7 U.S.C. § 181 et seq., and
32 the rules promulgated thereunder at 7
C.F.R. part 201 et seq., all as in
33 effect on July 1, 2000.
34 (d) If federal
and state regulation are identical, federal jurisdiction
35 and enforcement control unless the federal
authority decides not to en-
36 force the regulation.
37 Sec. 4. (a)
An integrator shall not terminate, cancel or fail to renew
38 a contract that required a producer to make
a capital investment secured
39 by financing statement, promissory note,
deed of trust or otherwise in
40 buildings or equipment that cost $25,000 or
more and have a useful life
41 of five or more years until: (1) The
producer has been given written notice
42 of the intention to terminate, cancel or
not renew the contract at least
43 180 days before the effective date of the
termination, cancellation or
3
1 nonrenewal, or as provided in
subsection (c); and
2 (2) the
producer has been reimbursed for damages incurred by an
3 investment in buildings or equipment
that was made for the purpose of
4 meeting minimum requirements of the
contract.
5 (b) Except
as provided in subsection (c), if a producer fails to mate-
6 rially comply with the provisions of
a contract that require a capital in-
7 vestment subject to subsection (a),
an integrator may not terminate, can-
8 cel or fail to renew that contract
until: (1) The integrator has given written
9 notice specifying the reasons for the
termination, cancellation or nonre-
10 newal at least 90 days before termination,
cancellation or nonrenewal, or
11 as provided in subsection (c); and
12 (2) the producer,
as recipient of the notice, fails to correct the reasons
13 stated for termination, cancellation or
nonrenewal in the notice within 60
14 days of receipt of the notice.
15 (c) The 180-day
notice period under subsection (a)(1), the 90-day
16 notice period under subsection (b)(1) and
the 60-day notice period under
17 subsection (b)(2), are waived and the
contract may be canceled, termi-
18 nated or not renewed immediately if the
alleged grounds for termination,
19 cancellation or nonrenewal are: (1)
Voluntary abandonment of the con-
20 tract relationship by the producer; or
21 (2) conviction of
the producer of an offense directly related to the
22 business conducted under the contract.
23 (d) An integrator
may terminate a contract if the integrator secures
24 a bond or irrevocable letter of credit in a
sufficient amount to cover the
25 probable claim if the damages the producer
is entitled to under subsec-
26 tion (a) have not been received within 180
days after notice of the intent
27 to terminate, cancel or not renew has been
received by the producer.
28 (e) If the
180-day or 90-day notice periods expire before the end of
29 a production cycle, the contract will not
terminate until the end of that
30 production cycle, unless the producer
agrees to such termination.
31 (f) If the
integrator terminates, cancels or fails to renew a contract
32 other than as provided above, the
integrator shall assume the outstanding
33 financial obligations and liabilities of
the producer and shall pay the pro-
34 ducer fair market value for equity, if any,
in the buildings and equipment
35 which were acquired as minimum requirements
under the contract. All
36 buildings and equipment which accrue to the
integrator pursuant to this
37 subsection must be removed from the
producer's premises within 90 days
38 of the date of termination, cancellation or
nonrenewal.
39 (g) Notice shall
be effective upon receipt by the producer.
40 Sec. 5. (a)
In all contracts between integrators and producers, there
41 is an implied promise of good faith as
defined in subsection (19) of K.S.A.
42 84-1-201, and amendments thereto, by all
parties.
43 (b) In all
contracts between integrators and producers, there is an
4
1 implied producer's right to refuse
any livestock when delivered if such
2 livestock are in less than normal
condition.
3 Sec.
6. (a) The integrator shall agree to meet and confer with
the
4 producer or the producer's authorized
representative at a time and place
5 mutually agreeable to the parties to
discuss concerns of the producer.
6 (b) The
integrator shall provide a 60-day written notice of intent to
7 modify terms or conditions of the
contract to the producer. The written
8 notice shall state the proposed
changes to the contract. Notice shall be
9 effective upon receipt by the
producer.
10 Sec. 7. (a)
If an integrator is required to obtain a license to purchase
11 agricultural products, the licensing
authority shall require the parent com-
12 pany of a licensee subsidiary to guarantee
payment or contract perform-
13 ance as a condition of licensing.
14 (b) If an
integrator is the subsidiary of another corporation, partner-
15 ship or association, the parent
corporation, partnership or association shall
16 be liable to a producer for the amount of
any unpaid claim or contract
17 performance claim if the integrator fails
to pay or perform according to
18 the terms of the contract or the provisions
of this act.
19 Sec. 8. The
integrator shall reimburse the producer for the costs in-
20 curred by the producer for disposal of dead
livestock.
21 Sec. 9. The
costs of compliance with any state or federal laws or
22 regulations regarding environmental
standards shall be shared equally by
23 the integrator and the producer.
24 Sec.
10. (a) A contract for the production of agricultural
products
25 between an integrator and a producer shall
contain language providing
26 for resolution of contract disputes by
either mediation or arbitration serv-
27 ices as specified in the contract to
facilitate resolution of disputes.
28 (b) Contracts
executed prior to the effective date of this act shall
29 contain an implied provision that all
contract disputes shall be submitted
30 to mediation or arbitration for dispute
resolution.
31 (c) Where a
contract for the production of agricultural products be-
32 tween an integrator and a producer
containing language providing for
33 mediation of matters that are in dispute
and mediation does not resolve
34 the dispute, either the integrator or the
producer may request that the
35 matter be submitted to arbitration.
36 (d) All mediation
proceedings held pursuant to this act shall follow
37 the procedures set forth in K.S.A. 5-501
et seq., and amendments thereto.
38 All arbitration proceedings held pursuant
to this act shall follow the pro-
39 cedures set forth in K.S.A. 5-201 et
seq., and amendments thereto.
40 (e) Neither the
mediator nor the arbitrator shall be an employee or
41 agent of the producer, the integrator or
the intergrator's subsidiaries or
42 parent company.
43 (f) If the
parties cannot agree upon a mediator or arbitrator, either
5
1 party may make a written request to
the secretary of agriculture for me-
2 diation or arbitration services to
facilitate resolution of the dispute.
3 Sec.
11. (a) Notwithstanding the existence or pursuit of any
other
4 remedy at law, any integrator
violating the provisions of this act or any
5 rules and regulations promulgated
pursuant to this act shall be guilty of
6 a nonperson misdemeanor and shall be
fined not less than $200 nor more
7 than $1,000 or be imprisoned for not
more than 60 days, or both, in the
8 discretion of the court.
9 (b) In
addition to the authority in subsection (a), the court, in its
10 discretion, may suspend the integrator's
license to operate in this state
11 for a period not to exceed 30 days or the
court may revoke the integrator's
12 license.
13 (c) In an action
to recover damages or for injunctive relief, if the court
14 finds that there has been a violation of
this act, the court may award up
15 to three times the amount of such damages.
Court costs and attorney fees
16 may be recovered by the producer.
17 Sec.
12. Notwithstanding the existence or pursuit of any other
rem-
18 edy, a person, in the manner provided by
law, may maintain an action for
19 injunctive relief or other process to
prevent violations of this act.
20 Sec.
13. (a) A producer of agricultural products shall have a
pro-
21 ducer's lien for the unpaid contract or, if
there is no contract, the fair
22 market value of the agricultural product
produced and delivered to an
23 integrator.
24 (b) The lien
attaches to the agricultural products and proceeds
25 thereof as well as to all tangible or
intangible assets of the integrator. If
26 the agricultural product becomes commingled
with other agricultural
27 products, the lien continues in the
proportionate share of the other ag-
28 ricultural products. If the agricultural
products become manufactured or
29 processed to become a part of another
product, the lien continues and
30 attaches to the product manufactured or
processed.
31 (c) The lien
claimed by the producer is perfected without filing a
32 statement of nonpayment from the time that
the agricultural product is
33 delivered to the integrator until 30 days
after delivery.
34 (d) The producer
shall file a statement of nonpayment in the office
35 of the clerk of the district court for the
county of the integrator's principal
36 place of business. If the integrator is not
a resident of the state, a filing
37 must be made with the clerk of the district
court for the county in which
38 the integrator's registered office is
located. The clerk shall enter the claim
39 of lien in the same manner as in the case
of other financing statements
40 provided for under the uniform commercial
code and index the same
41 under the name of the integrator at the
time the claim is filed.
42 (e) A statement
of nonpayment must be in writing and notarized by
43 the producer and must contain: (1) The name
and address of the inte-
6
1 grator to whom the agricultural
products were delivered;
2 (2) a
statement of the amount due to the producer after deducting
3 applicable credits and offsets;
4 (3) a
description sufficient to identify the agricultural product
deliv-
5 ered and subject to the lien;
6 (4) the
date and location to which the agricultural product was deliv-
7 ered; and
8 (5) the
date on which payment was due.
9 The producer
shall furnish a copy of the statement of nonpayment as
10 provided by this subsection to the
integrator, which shall constitute a
11 notice of claim of lien. The notice shall
be served personally or by certified
12 mail to the integrator at the place of
business where the producer has
13 conducted business with the integrator. The
lien granted by this section
14 shall be effective as of the time it is
filed with the clerk of the district
15 court. The integrator shall have the right
to contest the validity of such
16 lien by filing, with the clerk of the
district court and serving on the pro-
17 ducer within 10 days after the integrator
receives notice that the producer
18 has filed a claim of lien, a notice that
the integrator contests the amount
19 due. In the event the integrator fails to
contest the lien or is unsuccessful
20 in obtaining a discharge of the lien, the
lien shall be perfected as of the
21 date of filing with the clerk of the
district court.
22 (f) A producer's
lien has priority over all other liens and encum-
23 brances in: (1) The agricultural
products;
24 (2) the proceeds
from the agricultural products;
25 (3) the
proportionate share of the agricultural products with which
26 the agricultural products have been
commingled;
27 (4) the products
manufactured or processed with the agricultural
28 products; and
29 (5) the
integrator's tangible and intangible assets.
30 A producer's lien that
is continuously perfected from the time of de-
31 livery has priority over other liens and
encumbrances whether they are
32 filed before or after the producer's lien.
A producer's lien that is filed
33 after 30 days after delivery of the
agricultural products has priority in the
34 order that it is filed. Priority among
perfected producer's liens is accord-
35 ing to the first lien filed. A producer's
lien that is not filed has the priority
36 of an unperfected security interest under
the uniform commercial code.
37 (g) The lien
created by this section may be discharged in any of the
38 following manners: (1) By filing with the
clerk of the district court a
39 notarized statement by the producer that
the lien has been satisfied; or
40 (2) by depositing
with the clerk of the district court money equal to
41 the amount of the claim, which money shall
be held for the benefit of
42 the producer; or
43 (3) by an entry
in the lien docket that the action on the part of the
7
1 lien claimant to enforce the lien has
been dismissed.
2 A producer must
remove a lien statement from the filing system after
3 the lien is satisfied. If the
producer does not remove the lien statement,
4 the clerk of the district court shall
remove the lien statement upon request
5 of an affected party who has
furnished proof that the lien has been
6 terminated.
7 (h) An
action to enforce the lien created by this section may be in-
8 stituted within 120 days of the date
that payment is due in any court of
9 competent jurisdiction in the county
where the lien was filed or where
10 the property to which the lien attaches is
located or the county where the
11 agricultural products was originally
delivered. The court, in its discretion,
12 shall award costs including attorney fees
to the prevailing party. Nothing
13 in this section shall preclude the parties
from mediating or arbitrating the
14 claim of nonpayment at any time before or
after a lien statement has been
15 filed.
16 Sec.
14. (a) An association seeking accreditation to bargain for
con-
17 tract producers of agricultural products or
services shall submit to the
18 secretary of agriculture a petition for
accreditation.
19 (b) The petition
shall: (1) Specify the agricultural products or services
20 for the contract producers of which the
association seeks accreditation to
21 bargain;
22 (2) designate the
integrators, individually or by production or mar-
23 keting area or by some other appropriate
classification, with whom the
24 association shall be accredited to bargain;
and
25 (3) contain such
other information and documents as may be re-
26 quired by the secretary.
27 (c)
(1) Upon receiving the petition and any supporting material,
the
28 secretary shall give notice of the petition
to all designated integrators as
29 follows: (A) Integrators who have been
designated individually shall re-
30 ceive personal notice, and
31 (B) intergrators
who have been designated by production or market-
32 ing area or by some other general
classification shall be given notice
33 through publication in a legal newspaper
that has countywide distribution
34 within that area.
35 (2) The secretary
shall accredit such association if, based upon the
36 evidence submitted, the secretary finds
that: (A) Under the charter doc-
37 uments or bylaws of the association, it is
owned by contract producers
38 and meets the requirement of the
Capper-Volstead act, 7 U.S.C. § 291-
39 2;
40 (B) the
association has submitted a copy of its bylaws which provide:
41 (i) That each member of the association
shall have one vote in all votes
42 of the membership of the association;
43 (ii) that
officers and directors shall be elected by a majority of the
8
1 members voting or by delegates
representing a majority of the member-
2 ship; and
3 (iii) that
all elections shall be by secret ballot;
4 (C) the
association has contracts that are binding under Kansas law
5 with its members empowering the
association to sell or negotiate terms
6 of sale of the products or services
of its members;
7 (D) the
association represents a sufficient number of contract pro-
8 ducers or that its members produce a
sufficient quantity of agricultural
9 products or services to enable it to
function as an effective agent for
10 contract producers in bargaining with the
designated integrators. In mak-
11 ing this finding, the secretary shall
exclude any quantity of the products
12 or services contracted by contract
producers with contract producer
13 owned and controlled processing
cooperatives and any quantity of such
14 products or services produced by
integrators; and
15 (E) the
association has as one of its functions acting as principal or
16 agent for its members in negotiations with
integrators for prices and other
17 items of trade with respect to the
production, sale and marketing of their
18 products or services.
19 (d) (1) The
secretary shall give notice within 60 days of the filing
20 date of the petition for accreditation by
an association whether the as-
21 sociation shall be accredited. If the
secretary determines that insufficient
22 evidence was filed by the association, the
secretary may permit the as-
23 sociation to file an amended request. The
secretary shall then determine,
24 within 30 days of filing the amended
petition, whether the association
25 shall be accredited.
26 (2) An
association which is denied accreditation after filing of an
27 amended request may not file another
request for accreditation for a
28 period of one year.
29 (3) Within 30
days of a decision by the secretary denying accreditation
30 to an association, the association may
request a hearing before the sec-
31 retary. The secretary shall then conduct a
hearing to determine whether
32 the association shall be accredited. This
hearing and any appeal shall be
33 governed by the provisions of the Kansas
administrative procedures act.
34 (e) If the
secretary believes that an accredited association has ceased
35 to meet the standards for accreditation set
forth in this section, the sec-
36 retary shall notify the association of the
respects in which the secretary
37 believes it has ceased to maintain such
standards and allow it a reasonable
38 time to answer or to correct the
deficiencies noted. Thereafter, if the
39 secretary is not satisfied that the
association is then in compliance with
40 this section, the secretary shall notify
the association and hold a hearing
41 to consider the revocation of
accreditation. If, based upon the evidence
42 submitted at the hearing, the secretary
finds that the association has
43 ceased to maintain the standards for
accreditation, the secretary shall
9
1 revoke the accreditation of such
association.
2 (f) The
secretary may amend the order of accreditation only with
3 respect to the products or services
specified in such order. The secretary
4 shall give notice of any proposed
amendment and the reasons therefor to
5 all accredited associations and
integrators that would be directly affected
6 thereby and shall provide an
opportunity for a public hearing. Thereafter,
7 the secretary may amend the order if
the secretary finds such amendment
8 will be conducive to more effective
bargaining and orderly marketing by
9 the accredited association of the
products or services of its members.
10 Sec.
15. The secretary of agriculture may promulgate rules and
reg-
11 ulations to implement the provisions of
this act.
12 Sec.
16. This act shall take effect and be in force from and after
its
13 publication in the statute book.
14