Session of 2000
By Committee on Federal and State Affairs

10             AN  ACT concerning agriculture; enacting the Kansas agricultural pro-
11             duction contract fair practices act; prescribing penalties for violations
12             thereof.
14       Be it enacted by the Legislature of the State of Kansas:
15             Section  1. The provisions of this act shall be known and may be cited
16       as the Kansas agricultural production contract fair practices act.
17             Sec.  2. As used in this act: (a) ``Farm products'' shall have the mean-
18       ing ascribed to such term under K.S.A. 84-9-109, and amendments
19       thereto;
20             (b) ``integrator'' means a processor who contracts with a producer to
21       grow or raise farm products in this state;
22             (c) ``person'' means any individual, partnership, association or cor-
23       poration or any organized group of persons, whether incorporated or not,
24       or family farm corporation, authorized farm corporation, limited liability
25       agricultural company, limited agricultural partnership, family trust, au-
26       thorized trust or testamentary trust, all as defined in K.S.A. 17-5903 and
27       amendments thereto, or an agent or employee of such person;
28             (d) ``producer'' means a person who produces or causes to be pro-
29       duced farm products by contracting with an integrator to provide man-
30       agement, labor, machinery, facilities or any other production input for
31       the production of farm products; and
32             (e) ``processor'' means a person, which alone or in conjunction with
33       others, directly or indirectly, controls the manufacturing, processing or
34       preparation for sale of farm products having a total annual wholesale value
35       of $20,000,000 or more. Any person with a 10% or greater interest in
36       another person involved in the manufacturing, processing or preparation
37       for sale of farm products having a total annual wholesale value of
38       $20,000,000 or more shall also be considered a processor. The term ``pro-
39       cessor'' shall not include collective bargaining units or farmer-owned
40       cooperatives.
41             Sec.  3. (a) No integrator shall engage in any deceptive act or practice
42       as defined in this act in connection with any agricultural production con-
43       tract involving farm products.


  1             (b) Deceptive acts and practices, include, but are not limited to the
  2       following, each of which is declared to be a violation of this act:
  3             (1) Using coercion, intimidation, the threat of retaliation or the threat
  4       of contract termination, cancellation or nonrenewal to impose, demand,
  5       compel or dictate the terms, payment or manner of payment or the sign-
  6       ing of a contract by a producer;
  7             (2) using coercion, intimidation, the threat of retaliation or the threat
  8       of contract termination, cancellation or nonrenewal in order to require
  9       the producer to make capital improvements such as facilities or
10       equipment;
11             (3) for the integrator to interfere with, restrain or coerce producers
12       in the exercise of their rights to join, form and assist associations of
13       producers;
14             (4) subject to the provisions of section 4, and amendments thereto,
15       for an integrator to terminate, cancel or fail to renew a contract with a
16       producer as long as the producer is financially obligated for an investment
17       in facilities and equipment which was made to meet the minimum
18       requirements of the contract;
19             (5) for an integrator to refuse to provide to the producer upon request
20       the statistical information and data used to determine compensation paid
21       to the producer for settlement. This statistical information and data in-
22       cludes, but is not limited to, feed conversion rates, feed analyses, averages
23       of other growers, origination and breeder history;
24             (6) for the integrator to refuse to allow a producer or the producer's
25       designated representative to observe, by actual observation at the time of
26       weighing, the weights and measures used to determine the producer's
27       compensation at settlement; and
28             (7) for an integrator to use the performance of any other producer
29       to determine the settlement of a producer.
30             (c) Unfair trade practices also include those practices prohibited by
31       the perishable agricultural commodities act, 7 U.S.C. § § 499a-499s and
32       the rules promulgated thereunder at 7 C.F.R. part 46, and those practices
33       prohibited by the packers and stockyards act, 7 U.S.C. § 181 et seq., and
34       the rules promulgated thereunder at 7 C.F.R. part 201 et seq., all as in
35       effect on July 1, 2000.
36             (d) If federal and state regulation are identical, federal jurisdiction
37       and enforcement control unless the federal authority decides not to en-
38       force the regulation.
39             Sec.  4. (a) An integrator shall not terminate, cancel or fail to renew
40       a contract that required a producer to make a capital investment secured
41       by financing statement, promissory note, deed of trust or otherwise in
42       facilities or equipment that cost $25,000 or more and have a useful life
43       of five or more years until: (1) The producer has been given written notice


  1       of the intention to terminate, cancel or not renew the contract at least 90
  2       days before the effective date of the termination, cancellation or nonre-
  3       newal, or as provided in subsection (c); and
  4             (2) the producer has been reimbursed for damages incurred by an
  5       investment in facilities or equipment that was made for the purpose of
  6       meeting minimum requirements of the contract. Damages shall be based
  7       upon the debt remaining on the facilities and equipment.
  8             (b) Except as provided in subsection (c), if a producer fails to mate-
  9       rially comply with the provisions of a contract that require a capital in-
10       vestment subject to subsection (a), an integrator may not terminate, can-
11       cel or fail to renew that contract until: (1) The integrator has given written
12       notice specifying the reasons for the termination, cancellation or nonre-
13       newal at least 45 days before termination, cancellation or nonrenewal, or
14       as provided in subsection (c); and
15             (2) the producer, as recipient of the notice, fails to correct the reasons
16       stated for termination, cancellation or nonrenewal in the notice within 30
17       days of receipt of the notice.
18             (c) The 90-day notice period under subsection (a)(1), the 45-day no-
19       tice period under subsection (b)(1) and the 30-day notice period under
20       subsection (b)(2), are waived and the contract may be canceled, termi-
21       nated or not renewed immediately if the alleged grounds for termination,
22       cancellation or nonrenewal are: (1) Voluntary abandonment of the con-
23       tract relationship by the producer; or
24             (2) conviction of the producer of an offense directly related to the
25       business conducted under the contract.
26             (d) An integrator may terminate a contract if the integrator secures
27       a bond or irrevocable letter of credit in a sufficient amount to cover the
28       probable claim if the damages the producer is entitled to under subsec-
29       tion (a) have not been received within 90 days after notice of the intent
30       to terminate, cancel or not renew has been received by the producer.
31             (e) If the 90-day or 45-day notice periods expire before the end of a
32       production cycle, the contract will not terminate until the end of that
33       production cycle, unless the producer agrees to such termination.
34             (f) If the integrator terminates, cancels or fails to renew a contract
35       other than as provided above, the integrator shall assume the outstanding
36       financial obligations and liabilities of the producer and shall pay the pro-
37       ducer fair market value for equity, if any, in the facilities and equipment
38       which were acquired as minimum requirements under the contract. All
39       facilities and equipment which accrue to the integrator pursuant to this
40       subsection must be removed from the producer's premises within 90 days
41       of the date of termination, cancellation or nonrenewal.
42             (g) Notice shall be effective upon receipt by the producer.
43             Sec.  5. (a) In all contracts between integrators and producers, there


  1       is an implied promise of good faith as defined in subsection (19) of K.S.A.
  2       84-1-201, and amendments thereto, by all parties.
  3             (b) In all contracts between integrators and producers, there is an
  4       implied producer's right to refuse any livestock when delivered if such
  5       livestock are in less than normal condition.
  6             Sec.  6. The integrator shall agree to meet and confer with the pro-
  7       ducer or the producer's authorized representative at a time and place
  8       mutually agreeable to the parties to discuss concerns of the producer.
  9             Sec.  7.  Notwithstanding the existence or pursuit of any other rem-
10       edy at law, any integrator violating the provisions of this act shall be guilty
11       of a nonperson misdemeanor and shall be fined not less than $200 nor
12       more than $10,000 or be imprisoned for not more than 60 days, or both,
13       in the discretion of the court.
14             Sec.  8. (a) The attorney general or any county or district attorney
15       may bring an action:
16             (1) To obtain a declaratory judgment that an act or practice violates
17       this act;
18             (2) to enjoin, or to obtain a restraining order against an integrator
19       who has violated, is violating or is otherwise likely to violate this act; or
20             (3) to recover damages on behalf of a producer by reason of violations
21       of this act; and
22             (4) to recover reasonable expenses and investigation fees.
23             (b) In lieu of instigating or continuing an action or proceeding, the
24       attorney general may accept a consent judgment with respect to any act
25       or practice declared to be a violation of this act. Such a consent judgment
26       shall provide for the discontinuance by the integrator of any act or practice
27       declared to be a violation of this act, and it may include a stipulation for
28       the payment by such integrator of reasonable expenses and investigation
29       fees incurred by the attorney general. Any consent judgment entered into
30       pursuant to this section shall not be deemed to admit the violation, unless
31       it does so by its terms. Before any consent judgment entered into pur-
32       suant to this section shall be effective, it must be approved by the district
33       court and an entry made thereof in the manner required for making an
34       entry of judgment. Once such approval is received, any breach of the
35       conditions of such consent judgment shall be treated as a violation of a
36       court order, and shall be subject to all the penalties provided by law
37       therefor.
38             (c) In any action brought by the attorney general or the county or
39       district attorney, the court, without requiring bond of the attorney general
40       or the county or district attorney may:
41             (1) Make such orders of judgments as may be necessary to prevent
42       the use or employment by an integrator of any practices declared to be
43       a violation of this act;


  1             (2) make such orders or judgments as may be necessary to compen-
  2       sate any producer for damages sustained;
  3             (3) revoke any license or certificate authorizing that integrator to en-
  4       gage in business in this state;
  5             (4) issue a temporary restraining order or enjoin any integrator from
  6       engaging in business in this state;
  7             (5) award reasonable expenses and investigation fees, civil penalties
  8       and costs; and
  9             (6) grant other appropriate relief.
10             Sec.  9. (a) Whether a producer seeks or is entitled to damages or
11       otherwise has an adequate remedy at law or in equity, a producer ag-
12       grieved by an alleged violation of this act may bring an action to:
13             (1) Obtain a declaratory judgment that an act or practice violates this
14       act; or
15             (2) enjoin or obtain a restraining order against an integrator who has
16       violated, is violating or is likely to violate this act.
17             (b) A producer who suffers loss as a result of a violation of this act
18       may bring an individual or a class action for the damages caused by any
19       violation of this act together with reasonable attorney fees.
20        Sec.  10. This act shall take effect and be in force from and after its
21       publication in the statute book.