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PAG LIN 1 1 Section 1. Section 202.1, Code Supplement 1999, is amended 1 2 by adding the following new subsections: 1 3 NEW SUBSECTION. 1A. "Agricultural producer" means a 1 4 person who produces a commodity, including but not limited to 1 5 a contract producer. 1 6 NEW SUBSECTION. 1B. "Capital investment" means an 1 7 investment in any the following: 1 8 a. Farmland. 1 9 b. A structure, such as a building or manure storage 1 10 structure as defined in section 455B.161 associated with 1 11 producing a commodity. 1 12 c. Machinery or equipment associated with producing a 1 13 commodity which has a useful life in excess of one year. 1 14 NEW SUBSECTION. 2A. "Contract" means an oral or written 1 15 agreement, including but not limited to a production contract. 1 16 NEW SUBSECTION. 3A. "Contract input" means a commodity or 1 17 an organic or synthetic substance or compound that is used to 1 18 produce a commodity including but not limited to any of the 1 19 following: 1 20 a. Livestock or plants. 1 21 b. Agricultural seed as regulated pursuant to chapter 199. 1 22 c. Semen or eggs for breeding livestock. 1 23 d. A fertilizer as regulated pursuant to chapter 200 or 1 24 pesticide as regulated pursuant to chapter 206. 1 25 NEW SUBSECTION. 8A. "Entity" includes a corporation, 1 26 cooperative association, limited liability company, 1 27 partnership, limited partnership, or limited liability 1 28 partnership. It also includes a business trust, 1 29 unincorporated association, or any other domestic or foreign 1 30 entity organized under law and formed on a profit or nonprofit 1 31 basis. An entity does not include a natural person or 1 32 governmental body. 1 33 NEW SUBSECTION. 8B. "Equity interest" means a voting 1 34 interest in an entity which includes any of the following: 1 35 a. The issued shares in a corporation or cooperative 2 1 association, including common stock or preferred stock, 2 2 regardless of a right to receive dividends or earning 2 3 distributions. A security such as a warrant or option that 2 4 may be converted to voting stock shall be considered as issued 2 5 shares. 2 6 b. The membership interests held in a limited liability 2 7 company. 2 8 c. The partnership interests in a partnership, limited 2 9 partnership, or limited liability partnership. 2 10 NEW SUBSECTION. 9A. "Investment requirements" means 2 11 provisions in a contract which require the contract producer 2 12 to make capital investments associated with producing a 2 13 commodity subject to a production contract. The provisions 2 14 may be included as part of one or more contracts, and may be 2 15 included as part of a production contract. 2 16 NEW SUBSECTION. 11A. "Parent entity" means an entity that 2 17 controls a subsidiary entity as evidenced by the entity's 2 18 ownership of a majority of the equity interest in the 2 19 subsidiary entity. 2 20 NEW SUBSECTION. 15. "Subsidiary entity" means an entity 2 21 that is controlled by a parent entity as evidenced by the 2 22 parent entity's ownership of a majority of the equity interest 2 23 in the entity. 2 24 Sec. 2. Section 202.1, subsections 6 and 14, Code 2 25 Supplement 1999, are amended to read as follows: 2 26 6. "Contract producer" meansa personan agricultural 2 27 producer who holds a legal interest in a contract operation 2 28 and who produces a commodity at the contract producer's 2 29 contract operation under a production contract executed 2 30 pursuant to section 202.2. 2 31 14. "Production contract" meansan oral or written2 32agreementa contract executed pursuant to section 202.2 that 2 33 provides for the production of a commodity or the provision of 2 34 management services relating to the production of a commodity 2 35 by a contract producer. 3 1 Sec. 3. NEW SECTION. 202.2A IMPLIED PROMISE OF GOOD 3 2 FAITH. 3 3 A production contract entered into subject to this chapter 3 4 imposes an obligation of good faith as defined in section 3 5 554.1201, on all parties with respect to the performance and 3 6 enforcement of the production contract. 3 7 Sec. 4. NEW SECTION. 202.3A CONTRACTS INVOLVING 3 8 INVESTMENT REQUIREMENTS. 3 9 This section governs a production contract executed by a 3 10 contract producer and a contractor, if the contract producer 3 11 must make capital investments of twenty-five thousand dollars 3 12 or more according to investment requirements provided in all 3 13 production contracts in which the contract producer and the 3 14 contractor are parties. The value of the capital investments 3 15 shall be deemed to be the total dollar amount spent by the 3 16 contract producer in satisfying the investment requirements, 3 17 if that amount is ascertainable. 3 18 1. Unless a contractor terminates a production contract 3 19 without notice and remedy as authorized in subsection 2, the 3 20 contractor shall not terminate a production contract until the 3 21 contractor complies and provides notice and remedy to the 3 22 contract producer and otherwise complies with this subsection. 3 23 The notice shall be printed in at least twelve point type and 3 24 delivered to the contract producer by restricted certified 3 25 mail. In addition, the following shall apply: 3 26 a. If the contractor is not claiming a breach of contract, 3 27 including a breach based on the failure to comply with 3 28 investment requirements, all of the following apply: 3 29 (1) The contractor must provide a notice of termination to 3 30 the contract producer at least one hundred eighty days prior 3 31 to the effective date of the termination. 3 32 (2) The contractor must pay the contract producer for the 3 33 amount of damages incurred by the contract producer, including 3 34 but not limited to the cost of the required capital 3 35 investments made by the contract producer. 4 1 b. If the contractor is claiming a breach of contract, 4 2 including a breach based on the failure to comply with 4 3 investment requirements, all of the following apply: 4 4 (1) The contractor must provide notice of the termination 4 5 to the contract producer at least ninety days prior to the 4 6 effective date of the termination. The notice must provide a 4 7 list of complaints alleging causes for the breach. 4 8 (2) The contract producer must fail to remedy each cause 4 9 of the breach as alleged in the list of complaints provided in 4 10 the notice of termination within sixty days following receipt 4 11 of the termination notice. An effort by a contract producer 4 12 to remedy a cause of an alleged breach shall not be construed 4 13 as an admission of a breach in a civil cause of action. 4 14 2. A contractor may terminate a contract without notice or 4 15 remedy if the basis for the termination is any of the 4 16 following: 4 17 a. A voluntary abandonment of the contractual relationship 4 18 by the contract producer. A complete failure of a contract 4 19 producer's performance under a contract shall be deemed to be 4 20 abandonment. 4 21 b. The conviction of a contract producer of an offense of 4 22 fraud or theft committed against the contractor. 4 23 Sec. 5. NEW SECTION. 202.3B UNFAIR INFLUENCE PROHIBITED. 4 24 1. As used in this section, "unfair influence" means to 4 25 influence a contract producer to do any of the following: 4 26 a. Alter associations or affiliations which provide that a 4 27 contract producer must do any of the following: 4 28 (1) Associate or refrain from associating with 4 29 agricultural producers. 4 30 (2) Affiliate with, refrain from affiliating with, or quit 4 31 an affiliation with an organization representing agricultural 4 32 producers. 4 33 b. Alter the manner in which the contract producer uses 4 34 liens provided in chapter 579A or 579B, including but not 4 35 limited to any of the following: 5 1 (1) Refraining from filing, continuing, or terminating 5 2 such lien. 5 3 (2) Refraining from enforcing such lien. 5 4 c. Alter the manner in which the contract producer may 5 5 utilize the contract producer's rights and protections as 5 6 provided in 1999 Iowa Acts, chapter 88, or this chapter. 5 7 2. A contractor, or its employees or agents, shall not 5 8 unfairly influence or attempt to unfairly influence a contract 5 9 producer or conspire, agree, or arrange with another person to 5 10 unfairly influence another person to take an action which 5 11 affects any of the following: 5 12 a. The execution, termination, extension, or renewal of a 5 13 production contract. 5 14 b. The treatment of a contract producer, which may include 5 15 providing discriminatory or preferential terms in a production 5 16 contract or interpreting terms of an existing production 5 17 contract in a discriminatory or preferential manner. The 5 18 terms may relate to the price paid for a commodity; the 5 19 quality or quantity of a commodity demanded; or financing, 5 20 including investment requirements. 5 21 c. The grant of a reward or imposition of a penalty, 5 22 including the denial of a reward. The reward or penalty may 5 23 be in any form, including but not limited to financial rewards 5 24 or penalties. Financial rewards or penalties may relate to 5 25 loans, bonuses, or inducements. 5 26 d. Alter the quality, quantity, or delivery times of 5 27 contract inputs provided to the contract producer. 5 28 3. A contractor shall not unfairly influence a contract 5 29 producer by providing false information to the contract 5 30 producer, which may include false information relating to any 5 31 of the following: 5 32 a. An agricultural producer with whom the contract 5 33 producer associates or an agricultural organization with which 5 34 the contract producer is affiliated, including but not limited 5 35 to any of the following: 6 1 (1) The character of the agricultural producer. 6 2 (2) The condition of the finances or the management of the 6 3 agricultural organization. 6 4 b. The legal requirements or effect of filing or 6 5 terminating a lien as provided in chapter 579A or 579B. 6 6 c. The rights and protections provided under 1999 Iowa 6 7 Acts, chapter 88, or this chapter. 6 8 Sec. 6. NEW SECTION. 202.3C PARENTAL AND SUBSIDIARY 6 9 ENTITIES – LIABILITY. 6 10 If a contractor is a subsidiary entity, and fails to 6 11 perform according to the terms of a production contract, the 6 12 parent entity shall be liable to the contract producer to 6 13 perform under the production contract as if the parent entity 6 14 were the subsidiary entity. The parent entity shall 6 15 immediately pay the contract producer amounts necessary in 6 16 order to preserve the commodities produced under the 6 17 production contract, if commodities being produced under the 6 18 production contract may perish because of the subsidiary 6 19 entity's nonperformance. 6 20 Sec. 7. NEW SECTION. 202.3D CIVIL ACTIONS. 6 21 A contract producer who suffers damages because of a 6 22 contractor's violation of this chapter may obtain appropriate 6 23 legal and equitable relief, including damages, as a suit in 6 24 common law pursuant to Iowa rules of civil procedure. 6 25 1. In such a civil action against the contractor, the 6 26 court shall award the contract producer who is the prevailing 6 27 party reasonable attorney fees and other litigation expenses. 6 28 2. In order to obtain injunctive relief, the contract 6 29 producer is not required to post a bond, prove the absence of 6 30 an adequate remedy at law, or show the existence of special 6 31 circumstances, unless the court for good cause otherwise 6 32 orders. The court may order any form of prohibitory or 6 33 mandatory relief that is appropriate under principles of 6 34 equity, including but not limited to issuing a temporary or 6 35 permanent restraining order. 7 1 Sec. 8. NEW SECTION. 202.3E WAIVERS UNENFORCEABLE. 7 2 A waiver of a right created by this chapter is void and 7 3 unenforceable. This section does not affect other provisions 7 4 of a production contract, including a production contract or 7 5 related document, policy, or agreement which can be given 7 6 effect without the voided provision. 7 7 Sec. 9. NEW SECTION. 202.3F RULES. 7 8 The attorney general may adopt rules pursuant to chapter 7 9 17A as is necessary in order to administer and enforce this 7 10 chapter. 7 11 Sec. 10. DIRECTIONS TO CODE EDITOR. The Code editor may 7 12 renumber provisions in chapter 202 in order to enhance its 7 13 readability. 7 14 EXPLANATION 7 15 In 1999, the general assembly enacted House File 322 (1999 7 16 Iowa Acts, chapter 169) which provides for the production and 7 17 purchasing of agricultural commodities, by regulating the 7 18 contracting for the production of agricultural commodities. 7 19 Specifically, the Act regulates the relationship between a 7 20 contractor and contract producer under new Code chapter 202. 7 21 A contractor is a person who contracts with an agricultural 7 22 producer to produce a commodity on a property held by the 7 23 agricultural producer. The contract is referred to as a 7 24 production contract. A "commodity" means crops, raw milk, or 7 25 livestock. 7 26 This bill amends Code chapter 202, by further regulating 7 27 the relationship between a contractor and contract producer. 7 28 The bill provides that there is an implied promise of good 7 29 faith by all parties to a production contract. It regulates 7 30 for production contracts which require a contract producer to 7 31 make capital investments in farmland, structures, or equipment 7 32 or machinery. Specifically, it provides that where a contract 7 33 producer has made capital investments, a contractor is 7 34 prohibited from terminating a contract without notice and 7 35 remedy. The bill requires that the contractor provide notice 8 1 delivered to the contract producer, informing the contract 8 2 producer of a termination, and providing damages. If the 8 3 termination is due to an alleged breach by the contract 8 4 producer, the contractor must provide an opportunity for the 8 5 contract producer to cure the breach. 8 6 The bill prohibits a contractor from using unfair influence 8 7 to alter associations or affiliations of a contract producer, 8 8 alter the manner in which the contract producer uses liens 8 9 provided in Code chapter 579A or 579B, or alter the manner in 8 10 which the contract producer may utilize the contract 8 11 producer's rights and protections as provided in 1999 Iowa 8 12 Acts, chapter 88, or Code chapter 202. The bill prohibits a 8 13 contractor from providing false information to a contract 8 14 producer. 8 15 The bill provides that if a contractor is a subsidiary of a 8 16 another corporation or entity, and fails to perform according 8 17 to the terms of a production contract, the parent entity is 8 18 liable to the contract producer to perform under the 8 19 production contract. 8 20 The bill provides that a contract producer, who suffers 8 21 damages because of a contractor's violation of Code chapter 8 22 202, may obtain appropriate legal and equitable relief, 8 23 including damages, as a suit in common law pursuant to Iowa 8 24 rules of civil procedure. The bill provides that the court 8 25 shall award the contract producer who is the prevailing party 8 26 reasonable attorney fees and other litigation expenses. 8 27 The bill provides that any waiver of a right created by 8 28 Code chapter 202 is void and unenforceable. 8 29 The bill authorizes the attorney general to adopt rules as 8 30 necessary in order to administer and enforce Code chapter 202. 8 31 LSB 5340DP 78 8 32 da/cls/14
Text: HSB00720 Text: HSB00722 Text: HSB00700 - HSB00799 Text: HSB Index Bills and Amendments: General Index Bill History: General Index
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