Category: Ag Law

On February 1, 2024, the U.S. Court of Appeals for the Eleventh Circuit granted a partial injunction in favor of two individuals challenging a Florida law that restricts certain foreign investments in real property. In May 2023, a group of Chinese citizens living in Florida and a real estate brokerage firm filed a lawsuit (Shen v. Simpson, No. 4:23-cv-208 (N.D. Fla. 2023)) against the state of Florida alleging that the state’s newly enacted foreign ownership law violates the United States Constitution. Florida’s law restricts certain foreign investments in real property located within the boundaries of the state, particularly investments by individuals and entities “domiciled” in China. After the district court denied the plaintiff’s motion to prevent the state from implementing and enforcing their foreign ownership law, the plaintiffs appealed to the Eleventh Circuit which granted a partial preliminary injunction.

Although the Shen plaintiffs claim that the Florida law is unconstitutional for several reasons, the court’s order granting the partial injunction rests solely on the plaintiffs’ preemption argument. The plaintiffs argue Florida’s foreign ownership law violates the Supremacy Clause of the U.S. Constitution by conflicting with the federal government’s system of regulating land purchases by foreign investors. 

According to the Eleventh Circuit’s order, two of the Shen plaintiffs have shown a substantial likelihood that the federal government’s role in monitoring certain foreign acquisitions of real property located within the U.S. preempts Florida’s foreign ownership law. As a result, the state is currently restrained from prohibiting these two individual plaintiffs from completing their real property transactions within the state of Florida.

Importantly, this is merely a decision on the preliminary injunction.  The court did not rule on the merits of the case. Oral arguments for the Shen case are expected to be set for April 2024, at which time the appellate court will hear arguments on the merits of the case.

Brown, Micah. “Foreign Ownership Law violates the U.S. Constitution???” Southern Ag Today 4(12.5). March 22, 2024. Permalink

In August 2023, the United States Environmental Protection Agency (EPA) publicly disclosed an ambitious and extensive internal plan to conduct a potentially transformative reform process of NPDES permitting confined animal feeding operations (“CAFO”) under the Clean Water Act. The commencement of this process can best be described as a “soft launch” in that it was first revealed in a relatively obscure agency decision denying an administrative petition pending since 2017.  National attention to this undertaking will certainly grow as it progresses due to its potential, at least on paper, to be the seeds of significant changes to the CAFO permitting and regulatory scheme which has become an integral part of the national agricultural lexicon. 

On March 8, 2017, a group of environmental groups led by Food & Water Watch filed a petition with EPA seeking a complete re-write of the Clean Water Act CAFO permitting system embodied in federal regulations. Petitions seeking changes to federal executive agency regulations are quite common. While very rarely producing the requested relief, they create an agency decision-making process the results of which can be appealed to federal court. This serves to place a particular objective of the petitioners in play with an agency and, most importantly, provides a chance to appeal the results to a federal court which may be more sympathetic than the agency to some portion of the petitioners’ arguments. Generally, those arguments are that a regulation, on its face or as applied, fails to comply with the authorizing legislation’s text. Such was the case in this instance. 

The 2017 Food and Water Watch petition’s first paragraph summarized its contents as follows: “[T]he agricultural sector, including CAFOs, remains largely unregulated and is now the nation’s leading source of water quality impairments. The Agency’s current CAFO regulations are plainly not up to the task of protecting our waterways from industrial livestock operations.” On August 15, 2023, after six years pending and a subsequent October 2022 petition seeking similar relief, the EPA denied both the 2017 and 2022 petitions.   

Within the agency denials, the EPA announced it reform undertaking, which its website currently describes as “a comprehensive evaluation of the CAFO program” which will include “a detailed study of the CAFO effluent limitations guidelines [ELGs] as well as establishing a Federal Advisory Committee, the [Animal Agriculture and Water Quality Subcommittee (AAWQ)], . . . through which a diverse array of stakeholders will help inform EPA’s efforts to improve its CAFO program.” 

Noteworthy text within the EPA decisions included the following:

• “EPA also shares your concern that CAFOs can be a significant source of pollutants into waters of the United States. The Agency recognizes that there may be opportunities to do more to address these pollutants.”

• “Federal and state agency staff, have experienced challenges effectively implementing and assuring compliance with the current CWA CAFO regulatory requirements.”

The EPA’s statements do not read like an agency entirely confident that all is well with the status quo of its enforcement efforts of the Clean Water Act concerning CAFOs. 

Following the August 2023 decisions, the EPA published a Federal Register Notice on November 16, 2023, soliciting nominations to the AAWQ subcommittee by a deadline of January 24, 2024.  Thus far, there has been no further word on appointments.  EPA’s “detailed study” of the CAFO ELGs was in fact previously announced in January 2023.  However, there has been no public evidence of that undertaking being conducted over one year later.   

Meanwhile, the federal courts are now also involved. On September 8, 2023, the EPA’s denials were appealed through the filing of a petition for review with the U.S. Court of Appeals for the Ninth Circuit, docketed at Food & Water Watch, et al. v. EPA, No. 23-2146. American Farm Bureau Federation, National Pork Producers’ Council, U.S. Poultry & Egg Association and United Egg Producers have become intervening parties to that case. Presently, briefing by the parties is slated to conclude by June 1, 2024. A decision could take anywhere from a few months to a few years, and the outcome at the Ninth Circuit (perceived as potentially more sympathetic to the petitioners than the other eleven Circuit Courts of Appeals) remains uncertain. The same could be said about the prospects of any attempt by a dissatisfied party to appeal an adverse outcome to the U.S. Supreme Court (perceived as not sympathetic to the petitioners).  

The coming months or years will tell us how diligently EPA pursues unilateral changes of its own accord in its Clean Water Act enforcement regarding CAFOs, either as presently defined or under a new regulatory design. Over that time, we will also learn whether decisions about the future of EPA’s CAFO regulatory and permitting scheme will be dictated by the federal courts. This effort could alter not only the federal definition of a CAFO itself and how potential surface water discharges of animal production operations are regulated and permitted, but also may include new tools like monitoring or drastically overhauled effluent standards. Any changes at the federal level will assuredly impact each states’ undertakings, where applicable, of NPDES and non-NDPES water quality programs and, most importantly, state budgeting for the same.  

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Duer, Brook, and Paul Goeringer. “EPA Made 2023 Commitment To CAFO Permitting Reform But No Action Evident to Date.” Southern Ag Today 4(10.5). March 8, 2024. Permalink

On January 1^st of this year a program silently went into effect that could impact millions of business owners throughout the United States. The program, Corporate Transparency Act (CTA), is based off of a statute enacted through a defense appropriations bill passed in 2021 and the purpose of the law is to make many small business owners register their business entities and ownership structures with the United States Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). This is not related to the annual filings that business owners across the southeast U.S. do on an annual basis with their respective Secretary of States’ offices. This new program is aimed at preventing tax fraud and money laundering through the use of “shell companies.” Shell companies are often described as businesses with little to no assets and unknown ownership interests which makes them an ideal way to hide the flow of money through the entity. The CTA, or sometimes referred to as Beneficial Ownership Interest reporting, requires that most small, registered business entities (Limited Liability Companies, Subchapter S Corporations, C Corporations, Limited Partnerships, Limited Liability Partnerships, etc.) disclose to FinCEN any owners that control more than 25% of the entity and anyone that exercises substantial control over the entity such as corporate officers or managers. There is no exemption for agricultural business entities.

For existing entities, owners have until the end of 2024 to submit the report through FinCEN’s online portal or they may be subject to monetary penalties (up to $500 per day for failure to report after the first of the year) or criminal penalties (of up to $10,000 in fines and 2 years imprisonment.) Information about the new reporting requirements is slowly being disseminated; however, another wrinkle has appeared. On March 1, 2024, a federal trial court in Alabama ruled in a motion for summary judgment that the CTA was unconstitutional because “it exceeds the Constitution’s limits on the legislative branch.” This ruling currently only applies to the plaintiff (the National Small Business Association) and not to the country as a whole. This is likely to be the beginning of legal proceedings across the country on the issue. Still, in the meantime, small, state-registered business owners across the country need to be aware of their current reporting requirements. 

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Rumley, Rusty. “The Corporate Transparency Act and Your (Potential) Duty to Register Your Business.” Southern Ag Today 4(10.5). March 8, 2024. Permalink

In November 2022, Texas, New Mexico, and Colorado reached an agreement to resolve the long-standing dispute between the states over whether New Mexico delivers appropriate amounts of water to Texas under the Rio Grande Compact. However, the United States objects to the agreement and asserts that the federal government must agree before any agreement is implemented. The Special Master recommended that the United States Supreme Court approve the agreement over the objections of the federal government. The Court recently agreed to hear oral arguments on the issue on March 20. The decision raises important questions about the role of the federal government in water allocation agreements between states, which have traditionally held absolute authority with respect to water rights. 

The decision will be important to agriculture since agricultural water withdrawals generally constitute the leading use of water. Agricultural withdrawals also form the focus of many interstate water disputes. Several producer groups and agricultural irrigation organizations have filed friend-of-court briefs supporting approval of the agreement.

Texas filed a complaint in 2013, alleging that New Mexico was not delivering the amount of water to Texas required under the Rio Grande Compact. In 2014, the Court allowed the federal government to intervene in the case, and the federal government filed its own complaint, noting that the United States has an obligation to deliver water from the Rio Grande to Mexico under a treaty between the nations, and the federal government manages a large water project on the river. In 2018 the Court denied New Mexico’s motion to dismiss both complaints. 

After years of negotiation, the states reached an agreement that bases water allocations on a hydrologic formula and provides penalties against New Mexico for annual or cumulative departures from that allocation that exceed certain amounts. The penalties are in the form of allocated water transfers from New Mexico to Texas.

The agreement is unique and may provide a model for future agreements. A decision by the Court that allows the federal government to exert control over agreements between the states on water allocation would interject even more uncertainty. The federal government could conceivably regulate the use of surface water and groundwater for agricultural production within the states, a role that states jealously guard. Twenty-three states have filed a friend-of-court brief urging the Court to approve the agreement.

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Richards, Jesse, and Tiffany Lashmet. “United States Supreme Court to Hear Oral Arguments in Texas v. New Mexico Water Dispute.” Southern Ag Today 4(6.5). February 9, 2024. Permalink

2023 was a landmark year for Clean Water Act (“CWA”) regulation with a new definition of the key term “waters of the United States” (“WOTUS”) issued by the Environmental Protection Agency (“EPA”) at the start of the year, a Supreme Court decision released in May, and an updated WOTUS definition from EPA in August. While 2024 is unlikely to be as dynamic as the previous year, on-going lawsuits challenging EPA’s updated WOTUS definition will continue to impact how the CWA is implemented throughout the country.

By the end of 2023, the current WOTUS definition that EPA released last August was enjoined in twenty-seven states. These states initially filed three separate lawsuits against EPA to challenge the WOTUS definition the agency released in early 2023. They have since updated those lawsuits to address the updated WOTUS rule EPA released following the Supreme Court’s ruling in Sackett v. EPA to conform the definition to the Court’s decision. 

The arguments raised by the plaintiff states in all three lawsuits are largely similar. In their initial filings challenging the first of EPA’s 2023 WOTUS definitions, plaintiffs in State of Texas v. EPA, No. 3:23-cv-00017 (S.D. Tex.), State of West Virginia v. EPA, No. 3:23-cv-00032 (D. N.D.), and Commonwealth of Kentucky v. EPA, No. 23-5343 (6th Cir.) raised three primary claims. First, that the 2023 WOTUS definition exceeded the authority granted to EPA by the CWA. Second, that the definition violates the Tenth Amendment of the United States Constitution which delegates the power to regulate land and water resources to the states. Finally, the definition violates the Major Questions Doctrine because Congress did not give EPA clear authorization to adopt the 2023 WOTUS rule.

After the Supreme Court issued its decision in Sackett v. EPA, all three of the lawsuits challenging EPA’s WOTUS rule were stayed while EPA revised the definition to bring it in line with the Court’s ruling. EPA released its updated WOTUS definition in August, removing references to wetlands that did not share a continuous surface connection with jurisdictional waters, and references to any waters that were not “relatively permanent.” Shortly afterwards, the plaintiff states revived their lawsuits, pivoting to challenge EPA’s updated WOTUS rule.

The amended lawsuits make largely the same arguments against the updated 2023 WOTUS rule as they did against the initial 2023 WOTUS rule. Once again, the states argue that the WOTUS definition exceeds the authority granted under the CWA, claiming that the updated definition incorporates waters that are outside of the relatively permanent test the Supreme Court articulated in the Sackett ruling. Similarly, the states claim that updated definition continues to violate both the Tenth Amendment and the Major Questions Doctrine by regulating an area of vast economic importance without clear Congressional authorization. Additionally, the states claim that the updated WOTUS definition was issued without an opportunity for public comment in violation of federal law.

The National Agricultural Law Center will continue to provide updates as these cases progress. For more information on WOTUS, check out the resources available on our website.

Rollins, Brigit. “WOTUS Update.” Southern Ag Today 4(5.5). February 2, 2024. Permalink