South Dakota Farm Bureau, Inc. v. Hazeltine

340 F.3d 583, 2003 WL 21961138
CourtCourt of Appeals for the Eighth Circuit
DecidedAugust 19, 2003
Docket02-2366, 02-2588, 02-2644, 02-2646
StatusPublished
Cited by20 cases

This text of 340 F.3d 583 (South Dakota Farm Bureau, Inc. v. Hazeltine) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
South Dakota Farm Bureau, Inc. v. Hazeltine, 340 F.3d 583, 2003 WL 21961138 (8th Cir. 2003).

Opinion

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 Defendants Joyce 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). Hazel-tine 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 *588 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-today 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. 1 Id. 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.

Plaintiffs Donald 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 nonexempt 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.

*589 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 Mar-ston Holben individually. Spear H, the Holben Trust, and Holben claim that Amendment E prohibits Spear H from acquiring additional land in South Dakota and farming it because, aside from the grandfather clause, Spear H does not fit into any of § 22’s exemptions. Specifically, the family farm exemption of § 22(1) cannot apply because the Holbens do not reside or work on the ranch.

Plaintiff Frank Brost is the majority or sole stakeholder in three entities, none of which are Plaintiffs, that own ranch land and livestock in South Dakota. The grandfather clause of Amendment E permits these entities to continue using the land they owned as of Amendment E’s effective date, but Brost reads § 21 to prohibit them from owning additional land and from engaging in additional farming. Because Brost does not live on the ranch land, nor do any of his family members, he believes that the family farm corporation exemption of § 22(1) would not apply to his three businesses. In addition, Brost individually owns ranch land, and he claims that Amendment E has diminished the value of the land because its most likely purchasers are corporations that cannot acquire the land under Amendment E.

Two interest groups, on behalf of their members, have also joined as Plaintiffs.

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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 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, Dakota Rural Action South Dakota Resources Coalition, Intervenors State of Nebraska Everett Holstein Rudy Meduna Dan Hodges, Amicus on Behalf of 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 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 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, Dakota Rural Action South Dakota Resources Coalition, Intervenors Everett Holstein Rudy Meduna Dan Hodges, Amicus on Behalf of 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 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, Dakota Rural Action South Dakota Resources Coalition, Intervenors 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 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, Dakota Rural Action South Dakota Resources Coalition, Intervenors
340 F.3d 583 (Eighth Circuit, 2003)

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Bluebook (online)
340 F.3d 583, 2003 WL 21961138, Counsel Stack Legal Research, https://law.counselstack.com/opinion/south-dakota-farm-bureau-inc-v-hazeltine-ca8-2003.