North Dakota’s two largest farm groups have been on opposite sides of a two-year legal battle over the state’s Depression-era anti-corporate farming law, but both are finding at least partial victory in a judge’s decision to uphold the law but order changes in how it’s applied.
Meanwhile, state officials who enforce the law say the ruling won’t change the status quo because they’re already doing what the judge ordered. Some existing farm operations confirm that.
U.S. District Judge Daniel Hovland on Sept. 21 upheld the law that state voters approved in 1932 to protect the state’s family farming heritage by barring corporations from owning or operating farms. However, he also said a change made by state lawmakers in 1981 to allow exceptions for small “domestic” family farm corporations — primarily as a tax- and estate-planning tool — violates the Commerce Clause of the U.S. Constitution if it is applied only to in-state operations.
“The court finds that such a requirement would clearly discriminate against out-of-state interests,” Hovland wrote in ordering North Dakota to extend the exception beyond state borders.
Challenging states’ corporate farming laws by arguing they violate interstate commerce became a popular choice for opponents after the 8th U.S. Circuit Court of Appeals in 2003 ruled that South Dakota’s law violated the Commerce Clause, according to the National Agricultural Law Center.
North Dakota Farm Bureau and others sued in 2016 to do away with North Dakota’s law, making the interstate commerce claim and also arguing the law limits farmers’ business options. North Dakota Farmers Union helped the state defend the law.
Hovland refused to strike it down but did rule that the state must “permit corporations and limited liability companies organized under the laws of other states to utilize the family farm exception” — as long as they meet all of the law’s requirements. Those include that family corporations involve no more than 15 people who all have certain degrees of kinship.
Farm Bureau applauded that part of the ruling.
“This removes the (state’s) ability to discriminate on that non-resident family to engage (in farming) here, President Daryl Lies said.
State officials hailed Hovland’s upholding of the law as a victory. They also said that his order on the family farm exception doesn’t change anything because it “is consistent with the way the Office of Attorney General and the Office of the Secretary of State have historically interpreted and implemented” the law.
Trish Buxbaum of Fairview, Montana, said she and her husband, Brian, had no problems getting permission from the North Dakota Secretary of State’s office for B n’ T Farms, which is incorporated in Montana and operates in North Dakota.
“We have a good working relationship with them,” she said.
Edwin Jonas III, who with his wife, Connie, operates Nevada-incorporated Red River Valley Ranch Co. in North Dakota, said the same. The former Montanan also believes North Dakota is fixated too much on a perceived threat from large companies.
“I don’t think they should worry about out-of-state corporations,” he said. “They should be more worried about farmers who buy up all the land they can.”
Statistics from the most recent federal Census of Agriculture show that farms in North Dakota have become fewer and larger. The number of farms with annual sales of less than $100,000 dropped by about 22 percent over a 15-year period from 1997 to 2012, while farms with sales greater than $100,000 increased 44 percent.
Farmers Union, which has supported the law for nearly a century and applauded Hovland’s decision to uphold it, believes that small family farms are still viable and still worth protecting even if larger operations are more economical.
“It’s not so much of a size thing as it is someone a little more tied to the land, having ownership of the land, wanting to keep that stewardship going,” President Mark Watne said. “I think we have the model. I think it works. Obviously we’ve got to have sustainable prices, which is always a challenge. But when it comes down to it, I really don’t see where a corporate structure is any more efficient than what we have.”