Session of 2000
By Committee on Agriculture

  9             AN  ACT concerning agriculture; enacting the Kansas agricultural pro-
10             duction contract fair practices act; prescribing penalties for violations
11             thereof.
13       Be it enacted by the Legislature of the State of Kansas:
14             Section  1. The provisions of this act shall be known and may be cited
15       as the Kansas agricultural production contract fair practices act.
16             Sec.  2. As used in this act: (a) "Agricultural commodities" means a
17       material produced for use in or as food, feed, seed or fiber and includes
18       crops for fiber, food, oilseeds, seeds, livestock, livestock products, poultry,
19       poultry products or by-products of the farm for the same or similar use;
20             (b) "integrator" means a person who in the ordinary course of busi-
21       ness buys agricultural commodities grown or raised in this state or who
22       contracts with a producer to grow or raise agricultural commodities in
23       this state;
24             (c) "person" means any individual, partnership, association or cor-
25       poration or any organized group of persons, whether incorporated or not,
26       or family farm corporation, authorized farm corporation, limited liability
27       agricultural company, limited agricultural partnership, family trust, au-
28       thorized trust or testamentary trust, all as defined in K.S.A. 17-5903 and
29       amendments thereto, or an agent or employee of such person;
30             (d) "producer" means a person who produces or causes to be pro-
31       duced agricultural commodities by contracting with an integrator to pro-
32       vide management, labor, machinery, facilities or any other production
33       input for the production of agricultural commodities; and
34             (e) "secretary" means the secretary of agriculture.
35             Sec.  3. (a) No integrator shall engage in any deceptive act or practice
36       as defined in this act in connection with any agricultural production con-
37       tract involving agricultural commodities.
38             (b) Deceptive acts and practices, include, but are not limited to the
39       following, each of which is declared to be a violation of this act:
40             (1) Using coercion, intimidation, the threat of retaliation or the threat
41       of contract termination, cancellation or nonrenewal to impose, demand,
42       compel or dictate the terms, payment or manner of payment or the sign-
43       ing of a contract by a producer;


  1             (2) using coercion, intimidation, the threat of retaliation or the threat
  2       of contract termination, cancellation or nonrenewal in order to require
  3       the producer to make capital improvements such as buildings or
  4       equipment;
  5             (3) for the integrator to interfere with, restrain or coerce producers
  6       in the exercise of their rights to join, form and assist associations of
  7       producers;
  8             (4) subject to the provisions of section 4, and amendments thereto,
  9       for an integrator to terminate, cancel or fail to renew a contract with a
10       producer as long as the producer is financially obligated for an investment
11       in buildings and equipment which was made to meet the minimum
12       requirements of the contract;
13             (5) for an integrator to refuse to provide to the producer upon request
14       the statistical information and data used to determine compensation paid
15       to the producer for settlement. This statistical information and data in-
16       cludes, but is not limited to, feed conversion rates, feed analyses, averages
17       of other growers, origination and breeder history;
18             (6) for the integrator to refuse to allow a producer or the producer's
19       designated representative to observe, by actual observation at the time of
20       weighing, the weights and measures used to determine the producer's
21       compensation at settlement; and
22             (7) for an integrator to use the performance of any other producer
23       to determine the settlement of a producer.
24             (c) Unfair trade practices also include those practices prohibited by
25       the perishable agricultural commodities act, 7 U.S.C. § § 499a-499s and
26       the rules promulgated thereunder at 7 C.F.R. part 46, and those practices
27       prohibited by the packers and stockyards act, 7 U.S.C. § 181 et seq., and
28       the rules promulgated thereunder at 7 C.F.R. part 201 et seq., all as in
29       effect on July 1, 2000.
30             (d) If federal and state regulation are identical, federal jurisdiction
31       and enforcement control unless the federal authority decides not to en-
32       force the regulation.
33             Sec.  4. (a) An integrator shall not terminate, cancel or fail to renew
34       a contract that required a producer to make a capital investment secured
35       by financing statement, promissory note, deed of trust or otherwise in
36       buildings or equipment that cost $25,000 or more and have a useful life
37       of five or more years until: (1) The producer has been given written notice
38       of the intention to terminate, cancel or not renew the contract at least
39       180 days before the effective date of the termination, cancellation or
40       nonrenewal, or as provided in subsection (c); and
41             (2) the producer has been reimbursed for damages incurred by an
42       investment in buildings or equipment that was made for the purpose of
43       meeting minimum requirements of the contract.


  1             (b) Except as provided in subsection (c), if a producer fails to mate-
  2       rially comply with the provisions of a contract that require a capital in-
  3       vestment subject to subsection (a), an integrator may not terminate, can-
  4       cel or fail to renew that contract until: (1) The integrator has given written
  5       notice specifying the reasons for the termination, cancellation or nonre-
  6       newal at least 90 days before termination, cancellation or nonrenewal, or
  7       as provided in subsection (c); and
  8             (2) the producer, as recipient of the notice, fails to correct the reasons
  9       stated for termination, cancellation or nonrenewal in the notice within 60
10       days of receipt of the notice.
11             (c) The 180-day notice period under subsection (a)(1), the 90-day
12       notice period under subsection (b)(1) and the 60-day notice period under
13       subsection (b)(2), are waived and the contract may be canceled, termi-
14       nated or not renewed immediately if the alleged grounds for termination,
15       cancellation or nonrenewal are: (1) Voluntary abandonment of the con-
16       tract relationship by the producer; or
17             (2) conviction of the producer of an offense directly related to the
18       business conducted under the contract.
19             (d) An integrator may terminate a contract if the integrator secures
20       a bond or irrevocable letter of credit in a sufficient amount to cover the
21       probable claim if the damages the producer is entitled to under subsec-
22       tion (a) have not been received within 180 days after notice of the intent
23       to terminate, cancel or not renew has been received by the producer.
24             (e) If the 180-day or 90-day notice periods expire before the end of
25       a production cycle, the contract will not terminate until the end of that
26       production cycle, unless the producer agrees to such termination.
27             (f) If the integrator terminates, cancels or fails to renew a contract
28       other than as provided above, the integrator shall assume the outstanding
29       financial obligations and liabilities of the producer and shall pay the pro-
30       ducer fair market value for equity, if any, in the buildings and equipment
31       which were acquired as minimum requirements under the contract. All
32       buildings and equipment which accrue to the integrator pursuant to this
33       subsection must be removed from the producer's premises within 90 days
34       of the date of termination, cancellation or nonrenewal.
35             (g) Notice shall be effective upon receipt by the producer.
36             Sec.  5. (a) In all contracts between integrators and producers, there
37       is an implied promise of good faith as defined in subsection (19) of K.S.A.
38       84-1-201, and amendments thereto, by all parties.
39             (b) In all contracts between integrators and producers, there is an
40       implied producer's right to refuse any livestock when delivered if such
41       livestock are in less than normal condition.
42             Sec.  6. (a) The integrator shall agree to meet and confer with the
43       producer or the producer's authorized representative at a time and place


  1       mutually agreeable to the parties to discuss concerns of the producer.
  2             (b) The integrator shall provide a 60-day written notice of intent to
  3       modify terms or conditions of the contract to the producer. The written
  4       notice shall state the proposed changes to the contract. Notice shall be
  5       effective upon receipt by the producer.
  6             Sec.  7. (a) If an integrator is required to obtain a license to purchase
  7       agricultural products, the licensing authority shall require the parent com-
  8       pany of a licensee subsidiary to guarantee payment or contract perform-
  9       ance as a condition of licensing.
10             (b) If an integrator is the subsidiary of another corporation, partner-
11       ship or association, the parent corporation, partnership or association shall
12       be liable to a producer for the amount of any unpaid claim or contract
13       performance claim if the integrator fails to pay or perform according to
14       the terms of the contract or the provisions of this act.
15             Sec.  8. The integrator shall reimburse the producer for the costs in-
16       curred by the producer for disposal of dead livestock.
17             Sec.  9. The costs of compliance with any state or federal laws or
18       regulations regarding environmental standards shall be shared equally by
19       the integrator and the producer.
20             Sec.  10. (a) A contract for the production of agricultural products
21       between an integrator and a producer shall contain language providing
22       for resolution of contract disputes by either mediation or arbitration serv-
23       ices as specified in the contract to facilitate resolution of disputes.
24             (b) Contracts executed prior to the effective date of this act shall
25       contain an implied provision that all contract disputes shall be submitted
26       to mediation or arbitration for dispute resolution.
27             (c) Where a contract for the production of agricultural products be-
28       tween an integrator and a producer containing language providing for
29       mediation of matters that are in dispute and mediation does not resolve
30       the dispute, either the integrator or the producer may request that the
31       matter be submitted to arbitration.
32             (d) All mediation proceedings held pursuant to this act shall follow
33       the procedures set forth in K.S.A. 5-501 et seq., and amendments thereto.
34       All arbitration proceedings held pursuant to this act shall follow the pro-
35       cedures set forth in K.S.A. 5-201 et seq., and amendments thereto.
36             (e) Neither the mediator nor the arbitrator shall be an employee or
37       agent of the producer, the integrator or the intergrator's subsidiaries or
38       parent company.
39             (f) If the parties cannot agree upon a mediator or arbitrator, either
40       party may make a written request to the secretary of agriculture for me-
41       diation or arbitration services to facilitate resolution of the dispute.
42             Sec.  11. (a) Notwithstanding the existence or pursuit of any other
43       remedy at law, any integrator violating the provisions of this act or any


  1       rules and regulations promulgated pursuant to this act shall be guilty of
  2       a nonperson misdemeanor and shall be fined not less than $200 nor more
  3       than $1,000 or be imprisoned for not more than 60 days, or both, in the
  4       discretion of the court.
  5             (b) In addition to the authority in subsection (a), the court, in its
  6       discretion, may suspend the integrator's license to operate in this state
  7       for a period not to exceed 30 days or the court may revoke the integrator's
  8       license.
  9             (c) In an action to recover damages or for injunctive relief, if the court
10       finds that there has been a violation of this act, the court may award up
11       to three times the amount of such damages. Court costs and attorney fees
12       may be recovered by the producer.
13             Sec.  12. Notwithstanding the existence or pursuit of any other rem-
14       edy, a person, in the manner provided by law, may maintain an action for
15       injunctive relief or other process to prevent violations of this act.
16             Sec.  13. (a) A producer of agricultural products shall have a pro-
17       ducer's lien for the unpaid contract or, if there is no contract, the fair
18       market value of the agricultural product produced and delivered to an
19       integrator.
20             (b) The lien attaches to the agricultural products and proceeds
21       thereof as well as to all tangible or intangible assets of the integrator. If
22       the agricultural product becomes commingled with other agricultural
23       products, the lien continues in the proportionate share of the other ag-
24       ricultural products. If the agricultural products become manufactured or
25       processed to become a part of another product, the lien continues and
26       attaches to the product manufactured or processed.
27             (c) The lien claimed by the producer is perfected without filing a
28       statement of nonpayment from the time that the agricultural product is
29       delivered to the integrator until 30 days after delivery.
30             (d) The producer shall file a statement of nonpayment in the office
31       of the clerk of the district court for the county of the integrator's principal
32       place of business. If the integrator is not a resident of the state, a filing
33       must be made with the clerk of the district court for the county in which
34       the integrator's registered office is located. The clerk shall enter the claim
35       of lien in the same manner as in the case of other financing statements
36       provided for under the uniform commercial code and index the same
37       under the name of the integrator at the time the claim is filed.
38             (e) A statement of nonpayment must be in writing and notarized by
39       the producer and must contain: (1) The name and address of the inte-
40       grator to whom the agricultural products were delivered;
41             (2) a statement of the amount due to the producer after deducting
42       applicable credits and offsets;
43             (3) a description sufficient to identify the agricultural product deliv-


  1       ered and subject to the lien;
  2             (4) the date and location to which the agricultural product was deliv-
  3       ered; and
  4             (5) the date on which payment was due.
  5             The producer shall furnish a copy of the statement of nonpayment as
  6       provided by this subsection to the integrator, which shall constitute a
  7       notice of claim of lien. The notice shall be served personally or by certified
  8       mail to the integrator at the place of business where the producer has
  9       conducted business with the integrator. The lien granted by this section
10       shall be effective as of the time it is filed with the clerk of the district
11       court. The integrator shall have the right to contest the validity of such
12       lien by filing, with the clerk of the district court and serving on the pro-
13       ducer within 10 days after the integrator receives notice that the producer
14       has filed a claim of lien, a notice that the integrator contests the amount
15       due. In the event the integrator fails to contest the lien or is unsuccessful
16       in obtaining a discharge of the lien, the lien shall be perfected as of the
17       date of filing with the clerk of the district court.
18             (f) A producer's lien has priority over all other liens and encum-
19       brances in: (1) The agricultural products;
20             (2) the proceeds from the agricultural products;
21             (3) the proportionate share of the agricultural products with which
22       the agricultural products have been commingled;
23             (4) the products manufactured or processed with the agricultural
24       products; and
25             (5) the integrator's tangible and intangible assets.
26             A producer's lien that is continuously perfected from the time of de-
27       livery has priority over other liens and encumbrances whether they are
28       filed before or after the producer's lien. A producer's lien that is filed
29       after 30 days after delivery of the agricultural products has priority in the
30       order that it is filed. Priority among perfected producer's liens is accord-
31       ing to the first lien filed. A producer's lien that is not filed has the priority
32       of an unperfected security interest under the uniform commercial code.
33             (g) The lien created by this section may be discharged in any of the
34       following manners: (1) By filing with the clerk of the district court a
35       notarized statement by the producer that the lien has been satisfied; or
36             (2) by depositing with the clerk of the district court money equal to
37       the amount of the claim, which money shall be held for the benefit of
38       the producer; or
39             (3) by an entry in the lien docket that the action on the part of the
40       lien claimant to enforce the lien has been dismissed.
41             A producer must remove a lien statement from the filing system after
42       the lien is satisfied. If the producer does not remove the lien statement,
43       the clerk of the district court shall remove the lien statement upon request


  1       of an affected party who has furnished proof that the lien has been
  2       terminated.
  3             (h) An action to enforce the lien created by this section may be in-
  4       stituted within 120 days of the date that payment is due in any court of
  5       competent jurisdiction in the county where the lien was filed or where
  6       the property to which the lien attaches is located or the county where the
  7       agricultural products was originally delivered. The court, in its discretion,
  8       shall award costs including attorney fees to the prevailing party. Nothing
  9       in this section shall preclude the parties from mediating or arbitrating the
10       claim of nonpayment at any time before or after a lien statement has been
11       filed.
12             Sec.  14. (a) An association seeking accreditation to bargain for con-
13       tract producers of agricultural products or services shall submit to the
14       secretary of agriculture a petition for accreditation.
15             (b) The petition shall: (1) Specify the agricultural products or services
16       for the contract producers of which the association seeks accreditation to
17       bargain;
18             (2) designate the integrators, individually or by production or mar-
19       keting area or by some other appropriate classification, with whom the
20       association shall be accredited to bargain; and
21             (3) contain such other information and documents as may be re-
22       quired by the secretary.
23             (c)  (1) Upon receiving the petition and any supporting material, the
24       secretary shall give notice of the petition to all designated integrators as
25       follows: (A) Integrators who have been designated individually shall re-
26       ceive personal notice, and
27             (B) intergrators who have been designated by production or market-
28       ing area or by some other general classification shall be given notice
29       through publication in a legal newspaper that has countywide distribution
30       within that area.
31             (2) The secretary shall accredit such association if, based upon the
32       evidence submitted, the secretary finds that: (A) Under the charter doc-
33       uments or bylaws of the association, it is owned by contract producers
34       and meets the requirement of the Capper-Volstead act, 7 U.S.C. § 291-
35       2;
36             (B) the association has submitted a copy of its bylaws which provide:
37       (i) That each member of the association shall have one vote in all votes
38       of the membership of the association;
39             (ii) that officers and directors shall be elected by a majority of the
40       members voting or by delegates representing a majority of the member-
41       ship; and
42             (iii) that all elections shall be by secret ballot;
43             (C) the association has contracts that are binding under Kansas law


  1       with its members empowering the association to sell or negotiate terms
  2       of sale of the products or services of its members;
  3             (D) the association represents a sufficient number of contract pro-
  4       ducers or that its members produce a sufficient quantity of agricultural
  5       products or services to enable it to function as an effective agent for
  6       contract producers in bargaining with the designated integrators. In mak-
  7       ing this finding, the secretary shall exclude any quantity of the products
  8       or services contracted by contract producers with contract producer
  9       owned and controlled processing cooperatives and any quantity of such
10       products or services produced by integrators; and
11             (E) the association has as one of its functions acting as principal or
12       agent for its members in negotiations with integrators for prices and other
13       items of trade with respect to the production, sale and marketing of their
14       products or services.
15             (d)  (1) The secretary shall give notice within 60 days of the filing
16       date of the petition for accreditation by an association whether the as-
17       sociation shall be accredited. If the secretary determines that insufficient
18       evidence was filed by the association, the secretary may permit the as-
19       sociation to file an amended request. The secretary shall then determine,
20       within 30 days of filing the amended petition, whether the association
21       shall be accredited.
22             (2) An association which is denied accreditation after filing of an
23       amended request may not file another request for accreditation for a
24       period of one year.
25             (3) Within 30 days of a decision by the secretary denying accreditation
26       to an association, the association may request a hearing before the sec-
27       retary. The secretary shall then conduct a hearing to determine whether
28       the association shall be accredited. This hearing and any appeal shall be
29       governed by the provisions of the Kansas administrative procedures act.
30             (e) If the secretary believes that an accredited association has ceased
31       to meet the standards for accreditation set forth in this section, the sec-
32       retary shall notify the association of the respects in which the secretary
33       believes it has ceased to maintain such standards and allow it a reasonable
34       time to answer or to correct the deficiencies noted. Thereafter, if the
35       secretary is not satisfied that the association is then in compliance with
36       this section, the secretary shall notify the association and hold a hearing
37       to consider the revocation of accreditation. If, based upon the evidence
38       submitted at the hearing, the secretary finds that the association has
39       ceased to maintain the standards for accreditation, the secretary shall
40       revoke the accreditation of such association.
41             (f) The secretary may amend the order of accreditation only with
42       respect to the products or services specified in such order. The secretary
43       shall give notice of any proposed amendment and the reasons therefor to


  1       all accredited associations and integrators that would be directly affected
  2       thereby and shall provide an opportunity for a public hearing. Thereafter,
  3       the secretary may amend the order if the secretary finds such amendment
  4       will be conducive to more effective bargaining and orderly marketing by
  5       the accredited association of the products or services of its members.
  6             Sec.  15. The secretary of agriculture may promulgate rules and reg-
  7       ulations to implement the provisions of this act. 
  8        Sec.  16. This act shall take effect and be in force from and after its
  9       publication in the statute book.