Amicus Curiae Brief — Nelson, Secretary of State of South Dakota v. South Dakota Farm Bureau, Inc.

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FEB 24 9004 (y

Nos. 03-1108 and 03-1111

In the

Supreme Court of the United States

DAKOTA RURAL ACTION, et al,

Petitioners,

Vv.

SOUTH DAKOTA FARM BUREAU, INC., et al.,

Respondents.

CHRIS NELSON, SECRETARY OF STATE

OF SOUTH DAKOTA, et al.,

Petitioners,

Vv.

SOUTH DAKOTA FARM BUREAU, INC., et al.,

Respondents.

ON PETITIONS FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

MOTION FOR LEAVE TO FILE BRIEF OF AMI/C/ CURIAE AND

BRIEF OF AMICI CURIAE NATIONAL FARMERS UNION,

SOUTH DAKOTA FARMERS UNION, NORTH DAKOTA

FARMERS UNION, MINNESOTA FARMERS UNION, IOWA

FARMERS UNION, CAMPAIGN FOR FAMILY FARMS,

WESTERN ORGANIZATION OF RESOURCE COUNCILS,

DAKOTA RESOURCE COUNCIL, NATIONAL FAMILY FARM

COALITION, AND FRIENDS OF THE CONSTITUTION

IN SUPPORT OF PETITIONERS

SUSAN E. STOKES

Counsel of Record

DAVID R. MOELLER

Farmers’ Legal Action Group, Inc.

46 E. 4 Street, Suite 1301

St. Paul, MN 55101

(651) 223-5400

Counsel for Amici Curiae

2004 — Bachman Legal Printing @ (612) 339-9518 @ 1-800-715-3582 @ Fax (612) 337-8053

MOTION FOR LEAVE TO FILE

BRIEF OF AMICI CURIAE

Pursuant to Rule 37.2(b) of the Rules of this Court,

National Farmers Union, South Dakota Farmers Union, North

Dakota Farmers Union, Minnesota Farmers Union, Iowa

Farmers Union, Campaign For Family Farms, Western

Organization of Resource Councils, Dakota Resource

Council, National Family Farm Coalition, and Friends of the

Constitution (collectively, “Amici Curiae’) respectfully move

for leave to file the accompanying brief as Amici Curiae in

support of the Petitions for Writ of Certiorari filed by

Petitioners the South Dakota Secretary of State, et al. and

Dakota Rural Action, et al. Petitioners have consented to the

filing of this brief; their letters of consent have been lodged

with the Clerk of the Court. Counsel for Respondents have

not consented to the filing of this amici curiae brief,

necessitating this motion.

Amici Curiae represent 76 farmer-based organizations

representing several hundred thousand members who have

advocated for many years for the preservation and

strengthening of the family farm system of agriculture and

rural communities across the nation. Amici Curiae support

granting the two petitions in this case. They write separately

in order to emphasize the broad importance of this case by

articulating the concerns of farmers and rural communities in

a multitude of other states with similar laws restricting

corporate participation in agriculture.

Amici Curiae are concerned about the potential

ramifications if this case is left unreviewed by this Court. The

Eighth Circuit Court of Appeals struck down South Dakota’s

constitutional amendment, known as Amendment E,

restricting corporations from farming or having an interest in

farmland. This decision threatens states’ legitimate attempts

to foster the family farm system of agriculture and puts rural

communities at risk. The Eighth Circuit’s decision would -

i

leave vulnerable to dormant Commerce Clause challenge

many other important state laws regulating corporate

engagement in agriculture. Amici Curiae have worked to

enact and protect state laws like Amendment E that support

family farmers; they therefore have an interest in supporting

the Petitions for Writ of Certiorari.

In light of the important issues being raised in this

case, Amici Curiae respectfully request that their Motion for

Leave to File Brief of Amici Curiae be granted.

Respectfully Submitted,

SUSAN E. STOKES

Counsel of Record

DAVID R. MOELLER

Farmers’ Legal Action Group, Inc.

46 E. 4th Street, Suite 1301

St. Paul, MN 55101

(651) 223-5400

Counsel for Amici Curiae

February 24, 2004

il

TABLE OF CONTENTS

- Pages

MOTION FOR LEAVE TO FILE BRIEF OF AMICI

a, | EEN STST SSS al 1

TABLE OF CONTENTS ..00...::.c0seseccccsoscsessoessssasesssoseseoes ili

TABLE OF AUTHORITIES ...0...........cecccccsssecssessesssoeees IV

STATEMENT OF INTEREST OF AMICI CURIAE....... ]

SUMMARY OF THE ARGUMENT ....0.....ccccccccesseseceees 5

IE Piiissines vatdrnticeansickabadinswessiescearerseacenecommnsans 6

I. REVIEW IS WARRANTED BECAUSE THE

DECISION BELOW WEAKENS STATES’

AND CITIZENS’ EFFORTS TO PRESERVE

THE FAMILY FARM SYSTEM

PEEL csc sitinscessinsvsvsssnsecitesssonssvverexovenns 6

I]. THE PETITIONS PRESENT IMPORTANT

QUESTIONS REGARDING THE REACH

OF THE DORMANT COMMERCE

I Beha a Aarcesteeiciiiettcricstenranveansesicisiedoes 12

MRI csncsscvcosevssesncossiasivaninscyesrscasessreesaceeesseveass 20

TABLE OF AUTHORITIES

Cases

Asbury Hospital v. Cass County, 326 U.S. 207

PT sis insesnsssicovuphavaescinailihealiseinialatasmebandaimmmaiiaauinesinbics 16

Bacchus Imports, Ltd. v. Dias 468 U.S. 263

Se crsacctssivtssninhientareinntpubaeksaad clecbuaesinandsisaniconstoniie 18, 19

Brown-Forman Distillers Corp. v. New York State

Liguor Auth., 476 U.S. S73: (U9EG) «.ncecosencssscorsesorsesceessees 13

CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69

Sr iiicnncicsieidicsssandaclin fan avin caniocoiesatuaanagekaaeiehatcanbedn 16

Exxon Corp. v. Governor of Maryland, 437 U.S.

FEF a rE ssnssnah cniakatchosibinlvaamnbanserstamanniaaatainas tiie: 15

Hampton Feedlot v. Nixon, 249 F.3d 814 (8th Cir.

EE so sasicensncinnseiancntdiaediecaetepsdlaiemaeainpaii aii 17

Hughes v. Alexander Scrap Corp., 426 U.S. 794

Rr PUI cosisilcisiclassibanilgnonaevacdincassinuh neinealistaamabenainealentadadsngnes ibn 15

Hughes v. Oklahoma, 441 U.S. 322 (1979) ....cceeeeseeeeeeeees 13

Hunt v. Washington State Apple Advertising

CTR, tie Bi C0 ED wvriisaesesniocnesenizrisnsaicsvionomnschanein 19

Livestock Mktg. Ass'n v. USDA, 335 F.3d 711 (8th

Cir. 2003), petitions for cert. filed, (U.S.

Feb.13, 2004) (Nos. 03-1164 and 03-1165)...........:ceceeee 4

Louis K. Liggett Co. v. Lee, 288 U.S. 517 (1933) ...........ce0ee 7

Maine v. Taylor, 471 U.S. 131 C1 9GG) ....:00sssscccscecvescevecceeers 13

Michigan Pork Producers Ass’n v. Veneman, 348

F.3d 157 (6th Cir. 2003), petition for cert. filed,

(US. FeD. 19, ZOE) (GO. Go 1 BE), nccsscscencnenvcavesscccnsnnnes 3

Minnesota v. Clover Leaf Creamery Co., 449 U.S.

Se CER titiccmninnamnunsnininimarmmmmanasdens 16, 19

1V

MSM Farms, Inc. v. Spire, 927 F.2d 330 (8th Cir.

| nn NNT oN cee aR RNG, ae 17

Northern States Power Co. v. United States,

73 F.3d 764 (8th Cir. 1996)... ecccccccccscssosecseeeecceceescecen. 14

Oregon Waste Sys., Inc. v. Dep’t of Envil.

Quality, 511 U.S. 93 (1994) voccccccccccscscsseseseceeececesecce. ~ 13

Pacific States Box & Basket Co. v. White, 296

Rts A PEN OW OE ccs tpssiiesn ncuaceaisnanedieuaen 17-18

Parker v. Brown, 317 U.S. 341 Le Se 17

Perry v. Commerce Loan Co., 383 U.S. 392

I sini re ackeacees aca naan te 14

Pike v. Bruce Church, Inc., 397 U.S. 137 (1970)......... 13, 14

SDDS, Inc. v. South Dakota, 47 F.3d 263 (8th Cir.

SP iinGemanimak kr 19

Smithfield Foods, Inc. v. Miller, 241 F. Supp. 2d

978 (S.D. Iowa. 2003), appeal pending, No.

PE TI vse copter ee 2

South Carolina Highway Dept. v. Barnwell Bros.,

HUG, TOD AID: TI PEIN csi ei eccssvcolvcsicctbecsadcccosicess: 16

South Dakota Farm Bureau y. Hazeltine, 202

F. Supp. 2d 1020 (D.S.D. 2002) ..e..cecccecececesecececececeees. 18

South Dakota Farm Bureau vy. Hazeltine, 340

FDA ED CN CM, DI bios iswicsnensstateninnscsicreecioneces cece, 18-19

State ex rel. Webster v. Lehndorff Geneva,

Inc., 744 S.W.2d 801 (Mo. 1988)......cccccccccssssosessceeees 16-17

Waste Sys. Corp. v. County of Martin, 985 F.2d

ROWS COMI TIE onscrsics Bedianniecacen can 19

Statutes

I IE Ge UE. 8 OE BON, icssicsnisisncshcninssisorniennioenncmecionnen 7

BGm. Beet. Ass. $6 07 SIGZ 6F 806. asec cerscnvsscrsevenesersovsecsncevonss 7

SN RI: Se SPOUT caisiccsancascxnquinsnisaintmnnniesnnoncennlioninn ye

ec Me. TE, B BORIS tiscccikcistteniecooeranmarmedeinn 7

Neb. Const. Art. XID, §.8.......csssssossassesssesssossnssssensessseorsoassans 7

NLD. Cent. Code $6 10-06.1-01 €f £0......0000sccscssesscossseress 7, 8

ee et ef eee eerie rer nn 7

S.D. Codified Laws §§ 47-9A-1 ef S€q.........eececeeeeeeeesenneeenees 8

We OR, FIR. FV, SEE ccc tenictcesasscsisszeaianniutlieinniants 14

Me OR. S VG GE ivcistonsicimuniamantieamaanamieae 7

Other Authorities

Azzadine M. Azzam & Allen C. Wellman, Packer

Integration into Hog Production: Current Status

and Likely Impacts of Increased Vertical Control

on Hog Prices and Quantities, University of

Nebraska Agriculture Research Bulletin 315-F

Stephen Carpenter & Randi Ilyse Roth, Family

Farmers in Poverty: A Guide to Agricultural Law

for Legal Services Practitioners, 29 Clearinghouse

Be. TORT CAME TOR kcsisinttincciarninnineeenee 12

Osha Gray Davidson, Broken Heartland: The Rise of

America’s Rural Ghetto (1990). .........sssssssssssssssscssssssesees 12

Vi

Walter Goldschmidt, Small Business and the

Community: A Study in the Central Valley of

California on Effects of Scale of Farm Operations,

reprinted by Senate Special Committee to Study

Problems of American Small Business, 79th Cong.,

2d Sess., Report of the Special Committee (Comm.

Pas SUD hnsieciotieseanadaumauee eee 10

Neil E. Harl, The Structural Transformation of

Agriculture, lowa State University (March 20,

it) resblbna de cuaipiaia isasebdaaiMlacetcalacta eect aaa 9-10

Robert A. Hoppe, Structural and Financial

Characteristics of U.S. Farms: 200] Family Farm

Project, ERS Agricultural Informational Bulletin

POs PUM FOE Bicsssictbabcnesecsesisddnisensestuie tenzeduaies 10

Jon Lauck, Toward an Agrarian Antitrust: A New

Direction for Agricultural Law, 75 N. Dak. L. Rev.

OE Aico ieee eer ee 7

William D. McBride & Nigel Key, Economic and

Structural Relationships in U.S. Hog Production-

Report No. 818, USDA Economic Research

ID CE: Dein sisscotehocacsonsirccnccesiseucaanecennl.. 8-9

David R. Moeller, The Problem of Agricultural

Concentration: The Case of the Tyson-IBP Merger,

8 Drake J. Agric. L. 33 (Spring 2003) .....c.ccccccccccosesesesees 16

David J. Peters, Revisiting the Goldschmidt

Hypothesis: The Effect of Economic Structure on

Socioeconomic Conditions in the Rural Midwest,

Missouri Economic Research and Information

Center, P-0702-1 (July 2002) .o....cccccscscecessececsesececeecesee. 11

Marty Strange, Family Farming: A New Economic

PP IIE criss ic tccusssbiadaicauct ace te ae ee 7

Vii

USDA Grain Inspection, Packers and Stockyards

Administration, Assessment of the Cattle and Hog

Industries Calendar Year 2001 (June 2002)............

USDA National Agricultural Statistics Service, Hogs

and Pigs Report (Dec. 30, 2002) ...............sssseeeeeeeees

USDA, A Time to Act: A Report of the USDA

National Commission on Small Farms (Jan. 1998)..

USDA, South Dakota Agric. Statistics Serv., South

Dakota Farms, Land in Farms, and Livestock

PE I Fs a sh nnceicindncedinninsanniianteniaaninis

University of Missouri and National Pork Board, Hog

Marketing Contract Study (Jan. 2002)..............:00006+

Dr. Rick Welsh & Dr. Thomas A. Lyson, Anti-

Corporate Farming Laws, the “Goldschmidt

Hypothesis” and Rural Community Welfare (2002)

Vill

nen 10

STATEMENT OF INTEREST OF AMICI CURIAE'

Amici Curiae have an interest in this case because

these 76 farmer-based organizations and their several hundred

thousand members believe in preserving the family farm

system of agriculture.

National Farmers Union (NFU), officially called the

Farmers Educational and Cooperative Union of America, was

founded in 1902. NFU is a general farm organization with a

membership of nearly 250,000 farm and ranch families

throughout the United States. NFU is a federation, with the

presidents of the 23 state and one regional (covering three

states) Farmers Union organizations serving as its board of

directors. For more than 100 years, NFU’s primary goal has

been to sustain and strengthen family farm and ranch

agriculture. NFU believes that a vibrant agricultural sector is

the foundation for strong farm and ranch families and thriving

rural communities, which are, in turn, vital to the health and

economic well being of the entire U.S. economy.

South Dakota Farmers Union (SDFU) is a grassroots

membership organization that serves the needs of rural South

Dakota. SDFU has been the voice of the family farm in South

Dakota for nearly a century, acting as the farmers’ “hired

hand” in the halls of state and federal government. SDFU’s

mission is to preserve the family farm, ranch, and rural

communities. Building on a foundation of education,

legislation, and cooperation, SDFU has provided guidance

and support for farmers, small businesses, and rural

communities throughout the state. SDFU is a member of

National Farmers Union.

Founded in 1927, North Dakota Farmers Union

No counsel for a party authored this brief in whole or in part, nor

did any person or entity, other than Amici or their counsel, make a

monetary contribution to the preparation or submission of this brief.

]

(NDFU) is a producer-controlled organization dedicated to

serving its 37,000 North Dakota family members. NDFU is

committed to providing effective grassroots leadership in

rural America. NDFU believes that the family farm system of

agriculture is the only way to ensure rural and urban stability,

national prosperity, the preservation of human and natural

resources, and the dignity of the individual and the family.

NDFU is a member of National Farmers Union.

Minnesota Farmers Union (MFU) is a non-profit

membership-based organization with approximately 23,400

members, about 95 percent of whom are Minnesota farmers.

Founded in 1929, MFU works to protect and enhance the

economic interests and quality of life of family farmers and

ranchers in rural communities. MFU has lobbied at the

Minnesota legislature to protect Minnesota’s corporate

farming law, Minn. Stat. § 500.24, which restricts non-family

corporations from farming in Minnesota. This law is

important to MFU’s family farmer members who endeavor to

sustain a strong economy and healthy environment in rural

Minnesota. MFU is a member of National Farmers Union.

Iowa Farmers Union (IFU) is a non-profit advocacy

group representing family farmers across the state of Iowa.

IFU’s mission is to promote a viable system of sustainable

agriculture and a high quality of life in rural communities

through education of farmers, rural residents, and urban

consumers; cooperation among farmers; and community

activism. IFU has worked to preserve Iowa’s restrictions on

corporate ownership of farmland and livestock by, among

other things, joining with other farm organizations in

submitting amici curiae briefs in support of lowa’s corporate

farming law. See Smithfield Foods, Inc. v. Miller, 241 F.

Supp. 2d 978 (S.D. Iowa. 2003), appeal pending, No. 03-

1411 (8th Cir.). IFU is a member of National Farmers Union.

The Campaign for Family Farms (CFF) is an

unincorporated association of family farm and community

cae ME nee eid oS ee, aT ele 9a Dh

PARP de imme oA

membership organizations comprised of the Land

Stewardship Project (Minnesota), Iowa Citizens for

Community Improvement, Missouri Rural Crisis Center,

Illinois Stewardship Alliance, and Citizens Action Coalition

of Indiana. CFF and its member organizations work to foster

an ethic of stewardship for farmland, promote sustainable

agriculture, and develop sustainable communities. They seek

to develop and implement farm policies, farming practices,

and marketing systems that help family farms and rural

communities thrive. CFF works for thousands of family

farmers who raise livestock and crops and who believe family

farming is an important element of the economies and

environment of rural communities. CFF and its organizations

believe anti-corporate farming laws, which prohibit non-

family corporations from farming, are an important part of

state policy supporting family farming and may be put in

question by the ruling in this case. On behalf of independent

hog farmers, CFF has brought a constitutional claim to end

the mandatory pork checkoff program. See Michigan Pork

Producers Ass’n v. Veneman, 348 F.3d 157 (6th Cir. 2003),

petition for cert. filed, (U.S. Feb. 19, 2004) (No. 03-1180).

The Western Organization of Resource Councils

(WORC) is a network of grassroots organizations from seven

states that includes 8,250 members and 49 local community

groups. WORC’s seven state organizations are: the Dakota

Resource Council (North Dakota), Dakota Rural Action?

(South Dakota), the Idaho Rural Council, the Northern Plains

Resource Council (Montana), Oregon Rural Action, the

Powder River Basin Resource Council (Wyoming), and the

Western Colorado Congress. WORC’s mission is to advance

the vision of a democratic, sustainable, and just society

Dakota Rural Action is a Petitioner in this case. Neither Dakota

Rural Action nor its counsel authored in whole or in part this brief, and

Dakota Rural Action did not make a monetary contribution to the

preparation or submission of this brief.

3

through community action. WORC is committed to building

environmentally and economically sustainable communities

that balance economic growth with the health of people

and stewardship of their land, water, and air resources. On

behalf of independent cattle farmers and ranchers, WORC has

brought a constitutional claim to end the mandatory beef

checkoff program. See Livestock Mktg. Ass'n v. USDA, 335

F.3d 711 (8th Cir. 2003), petitions for cert. filed, (U.S. Feb.

13, 2004) (Nos. 03-1164 and 03-1165).

Dakota Resource Council (DRC) is a grassroots

organization formed in 1978 to protect North Dakota’s land,

air, water, rural communities, and agricultural economy. DRC

is working for preservation of family farms, enforcement of

corporate farming laws, protection of groundwater and clean

air, and renewable energy. DRC’s mission is to form

enduring, democratic local groups that empower people to

influence decision-making processes that affect their lives.

‘1 Formed in 1986, the National Family Farm Coalition

(NFFC) represents 30 grassroots farm and rural advocacy

organizations in more than 27 states committed to preserving

and enhancing a family farm food production system in the

United States. NFFC’s work includes education, outreach,

and advocacy for stable rural communities, safe food, and the

preservation of natural resources through family farming.

Friends of the Constitution is a 19—member coalition

of farm, church, and environmental groups concerned about

corporate farming. The groups have joined together to defend

and enforce Initiative 300, the Nebraska constitutional

amendment banning non-family farm corporations, which

was adopted by the citizens of Nebraska in 1982. Friends of

the Constitution’s member groups are: American Corn

Growers Association; Citizens for Air, Resources and

Environment (CARE); Center for Rural Affairs; Custer

County Sustainable Agriculture Society; League of Rural

Voters; Mid-Nebraska PRIDE; Nebraska Appleseed Center

4

for Law in the Public Interest; Nebraska Catholic Conference;

Nebraska Chapter—Sierra Club; Nebraska Grange; Nebraska

Lutheran Advocacy; Nebraska Farmers Organization;

Nebraska Farmers Union, which is a member of National

Farmers Union; Nebraska Wildlife Federation;

Nebraska—Worth Fighting For; Northeast Nebraska Ag

Support Group; Saunders County Livestock; Save Our Rural

Resources (SORR); and Women Involved in Farm Economics

(WIFE).

Amici Curiae have sought to enact and protect state

laws that support family farmers and therefore have an

interest in seeking that this Court grant the Petitions for Writ

of Certiorari and reverse the Eighth Circuit’s decision, which

is incorrect as a matter of law and is inconsistent with

Supreme Court precedent. ‘

SUMMARY OF THE ARGUMENT

Rural America has seen significant changes over the

past several decades. With the rise of concentration and

vertical integration in agriculture, farming has become

increasingly industrialized. While the number of farms has

fallen dramatically, the size of farms has increased. In an

attempt to address the adverse effects this trend has had on

rural communities, states and citizens have enacted laws and

constitutional amendments that, to varying levels, regulate or

restrict corporations from owning farmland or engaging in

farming. South Dakota’s constitutional amendment, known as

“Amendment E,” was passed in 1998 by 59 percent of those

voting in the referendum, and similarly addresses problems

caused by corporate agriculture. In analyzing whether

Amendment E violates the dormant Commerce Clause, the

Eighth Circuit did not consider whether the text of the

amendment discriminated against out-of-state interests, or

whether it had a discriminatory effect, but rather viewed and

weighed evidence of the intent of the proponents of the

amendment. Based only on evidence that the proponents’

purpose in supporting Amendment E was to ensure that rural

South Dakota did not suffer the same environmental,

economic, and sociological problems as other states with

concentrated industrial agriculture, the court reviewed

Amendment E with strict scrutiny. The Eighth Circuit erred

by applying a strict scrutiny standard based solely on

evidence of discriminatory intent when the amendment did

not discriminate on its face or in effect. This Court’s dormant

Commerce Clause decisions have not applied a strict scrutiny

standard based on discriminatory intent alone.

Because Amendment E treats all corporations the

same, whether based in or outside South Dakota, the Eighth

Circuit should have balanced South Dakota’s legitimate

interest in choosing the type of agriculture it wishes to foster

with any incidental burdens on interstate commerce. If the

proper balancing test were applied, Amendment E would fall

in line with a host of other state regulations that have been

upheld as legitimate. The states’ ability to regulate agriculture

and ensure continued viability of rural communities will be

jeopardized unless this Court grants the petitions of the South

Dakota Secretary of State, et al., and Dakota Rural Action, et

al. and reverses the Eighth Circuit’s erroneous decision.

ARGUMENT

I. REVIEW IS WARRANTED BECAUSE THE

DECISION BELOW WEAKENS STATES’ AND

CITIZENS’ EFFORTS TO PRESERVE THE

FAMILY FARM SYSTEM NATIONWIDE

This Court should grant the two petitions in this case

because leaving intact the decision below weakens states’ and

citizens’ efforts to preserve the family farm in South Dakota

and throughout the nation. By striking down South Dakota’s

constitutional amendment restricting corporations from

farming or having an interest in farmland (with certain

exceptions), the Eighth Circuit’s decision undermines the

family farm to the detriment of rural communities.

For-profit corporations are creatures of state laws

designed to allocate capital in what is deemed the most

“efficient” manner without regard to communities,

neighborhoods, and families. See Louis K. Liggett Co. v. Lee,

288 U.S. 517, 565 (1933) (Brandeis, J., dissenting) (“Through

size, Corporations, once merely an efficient tool employed by

individuals in the conduct of private business, have become

an institution—an institution which has brought such

concentration of economic power that so-called private

corporations are sometimes able to dominate the State.”). In

contrast, family farms, and the families that operate them,

strive for different goals: building sustainable rural

communities, promoting responsible stewardship of soil,

water, and other resources, and ensuring through family

ownership that land can be farmed by future generations. See,

e.g., Marty Strange, Family Farming: A New Economic

Vision 32-42 (1988). Amici Curiae believe that allowing

corporations to enter into farming in South Dakota, and

potentially in other states, would undermine family farms and

the rural communities that these organizations have advocated

to preserve and strengthen. See Jon Lauck, Toward an

Agrarian Antitrust: A New Direction for Agricultural Law, 75

N. Dak. L. Rev. 449, 494-95 (1999) (noting state anti-

corporate farming laws enhance farmers’ bargaining power).

If the Eighth Circuit’s decision is not reversed, it

could open the floodgates to challenges of state laws that

restrict, to varying degrees, corporations from engaging in

farming and owning agriculture land in eight other states. See

Iowa Code §§ 9H.1 to 9H.15; Kan. Stat. Ann. §§ 17-5902 to

17.5904; Minn. Stat. § 500.24; Mo. Rev. Stat. § 350.015;

Neb. Const. Art. XII, § 8; N.D. Cent. Code §§ 10-06.1-01 to

10.06.1-27; Okla. Const. Art. XXII, § 2; and Wis. Stat. §

182.001. These laws — or some version of them — have

been in place for decades, including North Dakota’s anti-

corporate farm statute, which was first enacted in 1932, and

South Dakota’s Family Farm Act of 1974. See S.D. Codified

Laws §§ 47-9A-1 to 47-9A-23; N.D. Cent. Code §§ 10-06.1-

01 to 10.06.1-27. These laws are necessary for a number of

reasons, but the overarching reason—the protection of family

farms—was succinctly articulated by the Minnesota

legislature in the purpose section of that state’s anti-corporate

farming law:

The legislature finds that it is in the interests of

the state to encourage and protect the family

farm as a basic economic unit, to insure it as the

most socially desirable mode of agricultural

production, and to enhance and promote the

stability and well-being of rural society in

Minnesota and the nuclear family.

Minn. Stat. § 500.24, subd. 1.

The threat to family farming addressed by these laws

may best be illustrated by considering the dramatic

consequences of concentration and consolidation of corporate

power in the hog industry over the past two decades. USDA

statistics show the steady exit of independent hog farmers

from the hog industry in the past 20 years. In the mid-1980s,

there were approximately 500,000 hog farms in the nation; as

of year-end 2002, the number had shrunk to 75,350 hog

operations. USDA National Agricultural Statistics Service

Quarterly, Hogs and Pigs Report (Dec. 30, 2002), available

at http://jan.mannlib.cornell.edu/reports/nassr/livestock/php

bb/2002/hgpg1202.txt. Large corporate interests are replacing

independent family hog farms. While the number of hog

farms has declined, the total number of hogs produced has

remained relatively stable, resulting in increasingly large hog

operations. William D. McBride & Nigel Key, Economic and

Structural Relationships in U.S. Hog _ Production-

teat Od

Agricultural Economic Report No. 818,5 (Feb. 2003),

available at http://www.ers.usda.gov/publications/aer8 18/

aer818.pdf. Those farmers who do raise hogs are increasingly

raising them not as independent producers but on behalf of

others, usually a packer or packer affiliate. A 2002 study

shows that more than 83 percent of hogs were committed to

packers before slaughter through packer ownership or

contractual arrangements, up from 38 percent in 1994.

University of Missouri and National Pork Board, Hog

Marketing Contract Study (Jan. 2002), available at

http://agebb.missouri.edu/mkt/vertstud.htm.

The shift toward vertical integration and corporate

ownership of livestock has had devastating economic effects

on independent family farmers and their rural communities.

As packer ownership and control of hogs increases and the

number of packers shrinks,’ independent hog farmers find

themselves without a competitive market in which to sell their

hogs. Packers owning or controlling hogs have less need of an

independent farmer’s relatively small number of hogs.

Independent hog farmers are unable to find buyers willing to

pay a competitive price for their hogs, driving them out of

business or into unfavorable contracts with packers.’ See, e. g.,

Neil E. Harl, The Structural Transformation of Agriculture 4-

> In 2000, four firms controlled 56 percent of the nation’s hog

processing industry. USDA Grain Inspection, Packers and Stockyards

Administration, Assessment of the Cattle and Hog Industries Calendar

Year 2001, 18, 38 (June 2002), available at http://www.usda.gov/gipsa

/pubs/0 1 assessment/0 1 assessment.pdf.

* At least one study has shown that prices paid to independent hog

producers decrease as packers’ control of production increases. That study

found that at the “10 percent level of integration, the price paid to

independents declines by six percent. At 50 percent integration, the price

declines by about 26 percent.” Azzadine M. Azzam & Allen C. Wellman,

Packer Integration into Hog Production: Current Status and Likely

Impacts of Increased Vertical Control on Hog Prices and Quantities,

University of Nebraska Agriculture Research Bulletin 315-F (1992).

9

5 (March 20, 2003), available at http://www.econ.iastate

.edu/faculty/harl/Structural TransformationofAg.pdf.

This trend of losing family farms while the size of

farms has expanded extends well beyond the hog industry.

The number of farmers in the United States fell from 6.8

million in 1935 to less than 2 million in 1997, while the

average farm size has more than doubled from 155 acres in

1935 to 487 acres in 1997. Robert A. Hoppe, Structural and

Financial Characteristics of U.S. Farms: 2001 Family Farm

Report, ERS Agriculture Information Bulletin No. 768, 6-7

(May 2001), available at http://www.ers.usda.gov/

publications/aib768/aib768.pdf. Following this trend, South

Dakota lost 14 percent of its farms between 1980 and 2001.

USDA, South Dakota Agric. Statistics Serv., South Dakota

Farms, Land in Farms, and Livestock Farms (Feb. 22,

2002), available at http://www.nass.usda.gov/sd/releases

/farm0202.pdf.

The loss of independent family farmers has a ripple

effect on rural communities. Studies have consistently shown

that independent family farms contribute significantly more to

healthy rural communities than do corporate-owned farms. As

early as the 1940s, at the direction of the U.S. Senate,

anthropologist Dr. Walter Goldschmidt compared two rural

California communities in which the structure and size of

farms were different, but the total value of farm production

was almost identical. Walter Goldschmidt, Small Business

and the Community: A Study in the Central Valley of

California on Effects of Scale of Farm Operations, reprinted

by Senate Special Committee to Study Problems of American

Small Business, 79th Cong., 2d Sess., Report of the Special

Committee 13 (Comm. Print. 1946). Goldschmidt concluded

from his research that residents of the community with larger,

industrialized farms realized a lower standard of living and

quality of life compared to the residents of the community

with smaller farms. /d.

10

Pet HAO ina 10 vio otha alls a pine

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A recent study comparing agriculture-dependent

counties in states with anti-corporate farming laws, such as

South Dakota, to those without such laws, found that

agriculture-dependent counties in states with anti-corporate

farm laws had fewer families in poverty, lower

unemployment, and a higher percentage of farms realizing

cash gains. Dr. Rick Welsh & Dr. Thomas A. Lyson, Anti-

Corporate Farming Laws, The “Goldschmidt Hypothesis”

and Rural Community Welfare 10-12 (2002), available at

http://www.i300.org/I-300%20report.PDF. Another recent

study concluded that areas with greater concentrations of

family farms produce better health and socioeconomic

conditions for children, as compared to areas with greater

concentrations of industrial agriculture, which produce worse

health and socioeconomic conditions for children. David J.

Peters, Revisiting the Goldschmidt Hypothesis: The Effect

of Economic Structure on Socioeconomic Conditions in the

Rural Midwest, Missouri Economic Research and Information

Center, P-0702-1 (July 2002), available at http://

www.missourifarmersunion.org/conf03/goldschmidt03.pdf.

The United States Department of Agriculture (USDA)

similarly has recognized the benefits of family farms:

Small farms contribute more than farm

production to our society. Small farms embody

a diversity of ownership, cropping systems,

landscapes, biological organization, culture, and

traditions. Since the majority of farmland is

managed by a large number of small farm

operators, the responsible management of soil,

water, and wildlife encompassed by these farms

produces significant environmental benefits.

Decentralized land ownership produces more

equitable economic opportunity for people in

rural communities, and offers self-employment

and business management opportunities. Farms,

11

particularly family farms, can be nurturing

places for children to grow up and acquire the

values of responsibility and hard work.

A Time to Act: A Report of the USDA National

Commission on Small Farms 8 (Jan. 1998), available at '

http://www.reeusda.gov/smallfarm/smlfrm 1 .pdf.

The loss of family farms inevitably leaves rural

communities with lower overall incomes and an increase in

poverty. See generally, Stephen Carpenter & Randi Ilyse

Roth, Family Farmers in Poverty: A Guide to Agricultural

Law for Legal Services Practitioners, 29 Clearinghouse Rev.

1087, 1089-91 (April 1996). Rural development experts have

estimated that for every five to seven farms that go out of

business, one business in the rural community closes. Osha

Gray Davidson, Broken Heartland: The Rise of America’s

Rural Ghetto 57 (1990). Loss of competitive markets, lower

incomes, increased unemployment, and an increase in poverty

rates are of significant interest to the state, since they result in

lower state tax revenues and increase a state’s burden to

respond to its citizens living in poverty. Similarly,

degradation of health and socioeconomic conditions for

children is undeniably a matter of interest to the state. South

Dakota thus has a significant interest in ensuring that its rural

communities remain vibrant by preserving the continued

existence of independent family farmers. The means South

Dakota chose to defend those interests, reasonable restrictions

on corporate agriculture, have been shown to be effective.

The Eighth Circuit’s decision wrongly deprives states of an

important tool for fostering healthy rural communities.

Il. THE PETITIONS PRESENT IMPORTANT

QUESTIONS REGARDING THE REACH OF

THE DORMANT COMMERCE CLAUSE

In subjecting Amendment E to strict scrutiny solely

because it found evidence of a discriminatory purpose, the

12

Sr cosine ak aaah eae ober ea

Eighth Circuit failed to follow this Court’s prior decisions,

and extended the dormant Commerce Clause doctrine beyond

the bounds established by this Court’s precedent. This

expansion of the dormant Commerce Clause doctrine, if left

unreviewed by this Court, leaves vulnerable a multitude of

state laws concerning agriculture that hitherto have been

considered well within the penumbra of legitimate state

legislation. Indeed, if the test used by the Eighth Circuit is

allowed to stand, and courts invalidate all state legislation

enacted with any evidence of a “discriminatory” purpose —

i.e€., evidence that the legislation is designed to have local

benefits — without undertaking the traditional balancing of

those benefits with the burden placed on interstate commerce,

the result would be a per se finding of unconstitutionality of

most state legislation. Such a restriction on the states’ domain

elevates the importance of the questions presented and weighs

strongly in favor of granting the present petition.

This Court has long employed a two-step approach in

analyzing state regulation of commerce. If a state regulation

“discriminate[s] against interstate commerce ‘either on its

face or in practical effect,’” the regulation will be invalidated

unless the state demonstrates “both that the Statute ‘serves a

legitimate local purpose,’ and that this purpose could not be

served as well by available nondiscriminatory means.” Maine

v. Taylor, 477 U.S. 131, 138 (1986) (quoting Hughes y.

Oklahoma, 441 U.S. 322, 336 (1979)); see also, Oregon

Waste Sys., Inc. v. Dep’t of Envtl. Quality, 511 U.S. 93, 99

(1994). If, on the other hand, a regulation “regulates

evenhandedly, to effectuate a legitimate local public interest,

and its effects on interstate commerce are only incidental, it

will be upheld unless the burden imposed on such commerce

is clearly excessive in relation to the putative local benefits.”

Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970); see

also, Brown-Forman Distillers Corp. v. New York State

Liquor Auth., 476 U.S. 573, 579 (1986). Whether a state

13

regulation runs afoul of the dormant Commerce Clause

largely depends on whether it falls in the first analytical

“tier,” subjecting the regulation to strict scrutiny, or whether

it will be analyzed under the Pike balancing test.

The Eighth Circuit incorrectly applied first “tier” strict

scrutiny to Amendment E. The language of Amendment E is

neutral on its face. It states in relevant part: “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.” S.D. Const.

Art. XVII, §21.° Amendment E also regulates evenhandedly:

it prohibits a// non-farm corporations, regardless of where

they were formed or currently operate, from farming or

owning farmland in South Dakota. Because Amendment E

discriminates neither on its face nor in effect, the Eighth

Circuit should have reviewed it under the second “tier” Pike

balancing test, as the district court did below.

\

‘ By disregarding the nondiscriminatory language of the

constitutional amendment entirely, the Eighth Circuit also disregarded one

of the most basic tenets of statutory interpretation, namely, that the most

reliable source for determining legislative intent is the language of the

legislation itself. This Court has observed: “There is, of course, no more

persuasive evidence of the purpose of a statute than the words by which

the legislature undertook to give expression to its wishes. Often these

words are sufficient in and of themselves to determine the purpose of the

legislation.” Perry v. Commerce Loan Co., 383 U.S. 392, 400 (1966). The

Eighth Circuit likewise has emphasized this principle, holding that when

“statutes are straightforward and clear, legislative history and policy

arguments are at best interesting, at worst distracting and misleading, and

in neither case authoritative.” Northern States Power Co. v. United States,

73 F.3d 764, 766 (8th Cir. 1996).

14

The Eighth Circuit’s decision directly conflicts with

this Court’s decision in Exxon Corp. v. Governor of

Maryland, 437 U.S. 117 (1978). In an attempt to address

problems resulting from vertical integration in the petroleum

industry within the state, the Maryland legislature prohibited

petroleum producers or refiners from operating retail gas

stations in Maryland. This Court upheld the statute, even

though there were no producers or refiners in the state and the

burden of the prohibition fell solely on out-of-state

companies. /d. at 125. This Court found that the law treated

out-of-state corporations the same as in-state corporations:

While the refiners will no longer enjoy the same

status in the Maryland market, in-state

independent dealers will have no competitive

advantage over out-of-state dealers. The fact

that the burden of a state regulation falls on

some interstate companies does not, by itself,

establish a claim of discrimination against

interstate commerce.

Id. at 126. This Court also rejected the argument that the

regulation impermissibly burdened interstate commerce,

observing that the Commerce Clause “protects the interstate

market, not particular interstate firms, from prohibitive or

burdensome regulations.” Jd. at 127-28, citing Hughes vy.

Alexander Scrap Corp., 426 U.S. 794, 806 (1976).

Maryland’s statute prohibiting producers and refiners from

operating gas stations in Maryland thus was upheld as a valid

exercise of the state’s authority to address problems relating

to its gasoline market.

This Court’s Exxon decision is in line with its other

dormant Commerce Clause cases holding that state laws that

regulate evenhandedly, even though they have some effect on

interstate commerce, must be upheld unless the burden on

interstate commerce “clearly outweighs the State’s legitimate

15

purpose.” See, e.g., Minnesota v. Clover Leaf Creamery Co.,

449 U.S. 456, 474 (1981) (rejecting a dormant Commerce

Clause challenge to a Minnesota statute banning the sale of

retail milk in plastic, nonrefillable containers because the

statute “regulates evenhandedly” by prohibiting all milk

retailers from selling such products, and the state had an

interest in conserving energy and natural resources); CTS

Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 88 (1987)

(upholding an Indiana corporate takeover law that applied to

all hostile tender offers even though its application would fall

most often on out-of-state companies).

By disregarding Amendment E’s neutral language and

its evenhanded application, the Eighth Circuit failed to

properly balance South Dakota’s legitimate interest in

choosing the form of agriculture it wishes to promote,

reversing the tide of decades of precedent. When courts,

including this Court, have considered the states’ legitimate

interests, they have upheld similar state restrictions on

corporate agriculture. See Asbury Hospital v. Cass County,

326 U.S. 207, 214-15 (1945) (rejecting an Equal Protection

challenge to a North Dakota statute barring all corporations,

except cooperatives, from owning farmland, holding the

statute is an appropriate application of a state policy against

the concentration of farming lands in corporate ownership);

State ex rel. Webster v. Lehndorff Geneva, Inc., 744 S.W.2d

° This Court has also noted that the existence of in-state corporations

that would be adversely affected is a “powerful safeguard against

legislative abuse.” Clover Leaf Creamery, 449 U.S. at 473 n. 17, citing

South Carolina Highway Dept. v. Barnwell Bros., Inc. 303 U.S. 177, 187

(1938). South Dakota corporations are just as adversely affected by

Amendment EF as out-of-state corporations. For example, IBP, until it was

acquired by Tyson, was a South Dakota-based company subject to the

restrictions in Amendment E just like any other corporation. - See

generally, David R. Moeller, The Problem of Agricultural Concentration:

The Case of the Tyson-IBP Merger, 8 Drake J. Agric. L. 33 (Spring 2003).

16

801, 805-06 (Mo. 1988) (rejecting an Equal Protection

challenge to Missouri’s restriction on corporate ownership of

farmland, holding it serves a legitimate state interest and that

without the restriction the legislature could not protect

traditional farming communities). The Eighth Circuit itself

denied an Equal Protection challenge to Nebraska Initiative

300 (after which South Dakota’s Amendment E was

patterned) that prohibits non-family farm corporations from

Owning and operating Nebraska farm and ranch land, holding:

The people of Nebraska have made a reasonable

judgment that prohibiting non-family corporate

farming serves the public interest in preserving an

agriculture where families own and farm the land.

It is not for the courts to second-guess the wisdom

of this judgment.

MSM Farms, Inc. v. Spire, 927 F.2d 330, 335 (8th Cir. 1991).

Cases in which courts did balance the state’s interests

in fostering family farms and rural communities when state

regulations were challenged under the dormant Commerce

Clause have found those interests outweigh any burdens

placed on interstate commerce. See, e.g., Parker v. Brown,

317 U.S. 341, 362-63 (1943) (upholding California’s raisin

marketing order “because upon a consideration of all the

relevant facts and circumstances it appears that the matter is

one which may appropriately be regulated in the interest of

the safety, health and well-being of local communities . . é

Hampton Feedlot v. Nixon, 249 F.3d 814, 820 (8th Cir. 2001)

(upholding Missouri’s livestock price discrimination law,

concluding: “The Missouri legislature has the authority to

determine the course of its farming economy, and this

measure is a constitutional means of doing so. We have no

doubt that the state considered the potential harms and

benefits to all stakeholders in creating its price discrimination

law.”); see also, Pacific States Box & Basket Co. vy. White,

17

296 U.S. 176, 181, 184 (1935) (upholding state regulation of

transportation of produce, stating: “The power of a State to

proscribe standard containers in order to facilitate trading, to

preserve the condition of the merchandise, to protect buyers

from deception, or to prevent unfair competition is

conceded.”’) (emphasis added).

As demonstrated in Petitioners’ briefs and recognized

by the district court in this case, South Dakota has legitimate

reasons for enacting Amendment E. See South Dakota Farm

Bureau v. Hazeltine, 202 F. Supp. 2d 1020, 1047 (D.S.D.

2002) (finding the express purpose of Amendment E is “to

retain family farms and to prevent limited liability entities,

regardless of their home base, from gaining control of the

food supply.”); see also, supra, 6-12. The Eighth Circuit erred

by applying first “tier” strict scrutiny to Amendment E, which

is neutral on its face and in effect. If allowed to stand, courts

will begin to apply the test used by the Eighth Circuit in this

case to state regulations that do not discriminate on their face

or in effect based on minimal evidence of discriminatory

intent, rather than balancing the states’ legitimate interests

with the burden imposed on interstate commerce. The result

would be a significant encroachment on states’ interests in

enacting what have long been held to be legitimate and

constitutional regulations for the health and benefit of their

rural communities.

The Eighth Circuit’s holding in this case that strict

scrutiny could be triggered solely by a finding of

discriminatory purpose also expands the reach of the dormant

Commerce Clause beyond the boundaries of dormant

Commerce Clause jurisprudence as applied by this Court.

Citing Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 270

(1984), the court said that if a law “has a discriminatory

purpose,” that is an “indicator of discrimination against out-

of-state interests,” thus triggering strict scrutiny. South

Dakota Farm Bureau v. Hazeltine, 340 F.3d 583, 593 (8th

18

Seah fr a CORE REECE eT eT ee

'

Cir. 2003). Neither Bacchus nor the other cases relied on by

the Eighth Circuit have actually applied a strict scrutiny

standard based solely on a “discriminatory purpose.” In all of

those cases, the regulation at issue either discriminated on its

face or in effect. See Bacchus, 468 U.S. at 271 (regulation

was passed with an undisputed discriminatory purpose, but

also discriminated on its face and in effect); Hunt vy.

Washington State Apple Advertising Comm’n, 432 U.S. 333,

352-53 (1977) (statute had the “practical effect” of

discriminating against Washington apple growers and dealers

while leaving North Carolina apple producers unaffected);

Waste Sys. Corp. v. County of Martin, 985 F.2d 1381, 1386-

87 (8th Cir. 1993) (ordinance discriminated on its face and in

effect); SDDS, Inc. v. South Dakota, 47 F.3d 263 (8th Cir.

1995) (referendum discriminated in effect). Indeed, even

where there existed evidence that a regulation was passed

with discriminatory motives, this Court refused to apply strict

scrutiny where the regulation did not discriminate on its face

and applied equally to in-state and out-of-state interests. See

Clover Leaf Creamery, 449 U.S. at 463 n. 7, 466, 471 n. 15.

The Eighth Circuit decision in this case is inconsistent

with and expands this Court’s dormant Commerce Clause

precedent. If left unreviewed by this Court, the test applied by

the Eighth Circuit could result in the invalidation of numerous

State laws and leave states hamstrung in their attempts to

provide for the well-being of their farming communities.

19

CONCLUSION

For the foregoing reasons, this Court should grant the

petitions for a writ of certiorari.

February 24, 2004

Respectfully Submitted,

SUSAN E. STOKES

Counsel of Record

DAVID R. MOELLER

Farmers’ Legal Action Group, Inc.

46 E. 4th Street, Suite 1301

St. Paul, MN 55101

(651) 223-5400

Counsel for Amici Curiae

20