United States District Court, D. North Dakota
North Dakota Farm Bureau, Inc., Galegher Farms, Inc., Brian Gerrits, Breeze Dairy Group, LLC, North Dakota Pork Council, and Bill Price, Plaintiffs,
Wayne Stenehjem, in his official capacity as Attorney General of North Dakota, Defendant, Farmers' Educational and Cooperative Union of America North Dakota Division, d/b/a North Dakota Farmers Union, Intervenor-Defendant, Dakota Resource Council, a North Dakota Nonprofit Corporation, Intervenor-Defendant.
ORDER ON MOTIONS
L. HOVLAND, CHIEF JUDGE.
the Court is Defendant North Dakota Attorney General Wayne
Stenehjem's (“State”) motion for partial
summary judgment filed on June 21, 2017, and the
Plaintiffs' motion for summary judgment filed on July 12,
2017. See Docket Nos. 64 and 71. Also before the
Court is Defendant Dakota Resource Council's
(“DRC”) motion to strike filed on September 6,
2017, and Defendant Farmers' Educational and Cooperative
Union of America North Dakota Division's (“Farmers
Union”) motion to dismiss and, in the alternative,
motion for judgment on the pleadings filed on October 4,
2017. See Docket Nos. 93, 104, and 113. The motions
have been fully briefed. See Docket Nos. 65, 72, 76,
78, 79, 80, 91, 92, 93-1, 95, 96, 100, 102, 105, 109, and
110. For the reasons set forth below, the motions for summary
judgment are granted in part and denied in part. The motion
to strike, motion to dismiss, and motion for judgment on the
pleadings are denied.
2, 2016, the Plaintiffs initiated this declaratory judgment
action challenging the constitutionality of Chapter 10-06.1
of the North Dakota Century Code. See Docket No. 1.
The Plaintiffs filed an amended complaint on August 17, 2016.
See Docket No. 19. On January 1, 2017, the Court
entered an order allowing Farmers Union and the DRC to
intervene as Defendants. See Docket No. 56.
10-06.1 is officially known as the Corporate or Limited
Liability Company Farming law (“Corporate Farming
Law”). The Corporate Farming Law was originally enacted
in 1932 as an initiated measure. See Stenehjem ex rel.
State v. Nat'l Audubon Soc'y, Inc., 844 N.W.2d
892, 897 (N.D. 2014). In its original form, the Corporate
Farming Law prohibited corporations from owning farm or ranch
land or engaging in the business of farming or agriculture.
Id. Since 1932, the law has been amended a number of
times and it now permits a number of exceptions to the
general rule prohibiting corporate farming. Chapter 10-06.1
“is rooted in the desire to preserve rural agricultural
land for use by family farmers” by making unlawful,
with some exceptions, corporate farming and corporate
ownership of farms as well as farming and ownership of farms
by limited liability companies.
Plaintiffs specifically challenge N.D.C.C. § 10-06.1-12
(“the family farm exception”) which provides an
exception for family farms to the general ban on corporate
farming if the shareholders or members do not exceed fifteen
in number, are family members within a specified degree of
kinship, and meet other specified requirements. The family
farm exception was added to the Corporate Farming Law in
1981. See State v. J.P. Lamb Land Co., 401 N.W.2d
713, 715 (N.D. 1987). The Plaintiffs contend the family farm
exception is facially discriminatory and violates the
Commerce Clause, the Privileges and Immunities Clause, and
the Equal Protection Clause of the United States
Constitution, and 42 U.S.C. § 1983. The Plaintiffs seek
a declaration that the entirety of Chapter 10-06.1 is
unconstitutional and an injunction prohibiting its
The relevant provisions of Chapter 10-06.1 provide as
All corporations and limited liability companies, except as
otherwise provided in this chapter, are prohibited from
owning or leasing land used for farming or ranching and from
engaging in the business of farming or ranching. A
corporation or a limited liability company may be a partner
in a partnership that is in the business of farming or
ranching only if that corporation or limited liability
company complies with this chapter.
N.D.C.C. § 10-06.1-02.
This chapter does not prohibit a
domestic corporation or a
domestic limited liability company
from owning real estate and engaging in the business of
farming or ranching, if the corporation meets all the
requirements of chapter 10-19.1 or the limited liability
company meets all the requirements of chapter 10-32.1 which
are not inconsistent with this chapter. The following
requirements also apply:
1. If a corporation, the corporation must not have more than
fifteen shareholders. If a limited liability company, the
limited liability company must not have more than fifteen
2. Each shareholder or member must be related to each of the
other shareholders or members within one of the following
degrees of kinship or affinity: parent, son, daughter,
stepson, stepdaughter, grandparent, grandson, granddaughter,
brother, sister, uncle, aunt, nephew, niece,
great-grandparent, great-grandchild, first cousin, or the
spouse of a person so related.
3. Each shareholder or member must be an individual or one of
a. A trust for the benefit of an individual or a class of
individuals who are related to every shareholder of the
corporation or member of the limited liability company within
the degrees of kinship or affinity specified in this section.
b. An estate of a decedent who was related to every
shareholder of the corporation or member of the limited
liability company within the degrees of kinship or affinity
specified in this section.
4. A trust or an estate may not be a shareholder or member if
the beneficiaries of the trust or the estate together with
the other shareholders or members are more than fifteen in
5. Each individual who is a shareholder or member must be a
citizen of the United States or a permanent resident alien of
the United States.
6. If a corporation, the officers and directors of the
corporation must be shareholders who are actively
engaged in operating the farm or ranch and at
least one of the corporation's shareholders must be an
individual residing on or operating the farm or
ranch. If a limited liability company, the
governors and managers of the limited liability company must
be members who are actively engaged in operating
the farm or ranch and at least one of its
members must be an individual residing on or
operating the farm or ranch.
7. An annual average of at least sixty-five percent of the
gross income of the corporation or limited liability company
over the previous five years, or for each year of its
existence, if less than five years, must have been derived
from farming or ranching operations.
8. The income of the corporation or limited liability company
from nonfarm rent, nonfarm royalties, dividends, interest,
and annuities cannot exceed twenty percent of the gross
income of the corporation or limited liability company.
N.D.C.C. § 10-06.1-12 (emphasis added). The dispute
between the parties largely centers on the meaning of the
word “domestic” and the phrases “actively
engaged in operating the farm or ranch” and
“residing on or operating the farm or ranch” in
North Dakota Farm Bureau (“Farm Bureau”) is a
non-profit corporation organized under the laws of North
Dakota, with its principal place of business in Fargo, North
Dakota. The Farm Bureau's voluntary membership consists
of more than 26, 000 farm, ranch, and rural families residing
in North Dakota. The mission of the Farm Bureau is to
advocate for agriculture and enhance the economic
opportunities of its membership while promoting individual
freedoms and self-reliance. The Farm Bureau contends the
Corporate Farming Law interferes with its ability to fulfill
its organizational purpose and injures it members because the
law prohibits farmers from utilizing beneficial business
structures and limits the value of their farms and ranches.
Galegher Farms, Inc., is a farming corporation organized
under the laws of North Dakota, with its principal place of
business in Thompson, North Dakota. Galegher Farms leases
approximately 3, 100 acres of North Dakota farmland for crop
farming purposes. The president and vice-president of
Galegher Farms are first cousins and currently meet the
kinship requirements of Chapter 10-06.1-12. However, the
president's son and the vice-president's nephew have
expressed interest in becoming shareholders in the
corporation but cannot as they do not meet the kinship
requirements of Section 10-06.1-12. Galegher Farms contends
it is harmed by the Corporate Farming Law's kinship
Brian Gerrits is an individual who resides in De Pere,
Wisconsin. Gerrits is a member of a Wisconsin limited
liability company, Breeze Dairy Group, LLC, that engages in
dairy farming in Wisconsin. Gerrits contends Chapter 10-06.1
prohibits him and Breeze Dairy from expanding into North
Dakota which limits his ability to earn a living in his
Breeze Dairy Group, LLC (“Breeze Dairy”) is an
LLC incorporated in the State of Wisconsin. Breeze Dairy was
founded in 2003 in response to the changing farming economy.
Breeze Dairy was formed in 2003 by five families who merged
their dairy operations into a single limited liability
company. Breeze Dairy contends it is not a
“domestic” LLC as defined by North Dakota's
Corporate Farming Law. For these reasons, Breeze Dairy
contends it cannot expand into North Dakota and thus is
harmed by Chapter 10-06.1.
North Dakota Pork Council (“Pork Council”) is a
non-profit corporation organized under the laws of North
Dakota. The Pork Council promotes the interests of pork
producers and provides them with educational resources and
services which enhance profitability. The Pork Council
contends Chapter 10-06.1 interferes with its ability to
fulfill its mission to help pork producers enhance profitably
as it precludes them from utilizing beneficial business
structures and limits the value of the pork production
operations located within the state; causes them harm by
limiting the number of pork producers in North Dakota, which
in turn reduces its membership; and limits its members access
to capital and thus limits the number of pork producers
within North Dakota, which negatively impacts the Pork
Bill Price is an individual who resides in Center, North
Dakota. Price is a farmer and rancher involved in multiple
farming and ranching operations in North Dakota, including
the Price Cattle Ranch which is organized as a limited
liability partnership. Several of the operations in which
Price is involved in have been unable to utilize the
corporate business structure due to their inability to meet
the requirements in Chapter 10-06.1, and they have also been
unable to bring in capital through corporate investments.
Price is the managing partner of Price Cattle Ranch. Price
contends he would prefer to operate Price Cattle Ranch as a
corporation or limited liability company but is prohibited by
Chapter 10-06.1 from doing so. Price also contends the next
generation of the Price family will not be able to continue
the Price Cattle Ranch as they do not meet the kinship
requirements of Section 10-06.1-12.
Wayne Stenehjem is the Attorney General for the State of
North Dakota. As Attorney General, Stenehjem is charged with
enforcing Chapter 10-06.1. The enforcement provisions include
court-ordered divestment and civil penalties. See
N.D.C.C. § 10-06.1-24.
Farmers Union is a non-profit organization founded in 1927 to
provide assistance to farm families. Farmers Union is the
largest general farm organization in North Dakota, with 45,
500 member families. Farmers Union works to advance family
farms and ranches and the quality of life for North Dakotans
through member advocacy, educational programs, cooperative
initiatives, and insurance services. In the early 1930s,
Farmers Union drafted the language for what would ultimately
become North Dakota's Corporate Farming Law. Farmers
Union has long been committed to preserving and has actively
defended North Dakota's Corporate Farming Law which it
sees as the foundation of family farms, rural communities,
the State's agrarian heritage, and stewardship of natural
DRC is a nonprofit organization formed in 1978 with the
purpose of protecting North Dakota's rural communities,
family farms, agricultural economy, soil, land, and water.
The DRC consists of approximately 1, 000 members, more than
half of whom are farmers and ranchers
MOTION TO STRIKE
moves to strike portions of the declarations of John L.
Galegher, Jr. (Docket No. 81), Brian Gerrits (Docket. No.
82), Tamra Heins (Docket No. 84), and Bill Price (Docket No.
85) filed by the Plaintiffs in support of their motion for
summary judgment. See Docket No. 93. The DRC
contends the declarations do not comply with Rule 56(c) of
the Federal Rules of Civil Procedure. The Plaintiffs maintain
they have complied with the requirements of Rule 56(c).
56(c) requires that an affidavit or declaration used to
support a summary judgment motion must be made upon personal
knowledge and that the content of the affidavit consists of
facts that would be admissible at trial. A careful review of
the declarations to which the DRC has objected reveals the
Plaintiffs have complied with the rule. In this case, the
Court is faced with cross-motions for summary judgment in a
declaratory judgment action challenging the constitutionality
of a state law. The declarations in question relate to the
issue of standing and whether the Plaintiffs have suffered an
injury. In this context, the witnesses are competent to give
their lay opinions as to the impact of the Corporate Farming
Law on themselves, their farming operations, their
membership, and the organizations they operate. The Court
would permit such testimony at trial. As such, the Court
finds the DRC's contentions meritless and the motion is
State contends the Plaintiffs lack standing to bring their
Commerce Clause claim. Farmers Union contends the Plaintiffs
lack standing to bring their claims for violation of the
Commerce Clause (Count I), the Privileges and Immunities
Clause (Count II), and the Equal Protection Clause (Count
III) and 42 U.S.C. § 1983 (Count IV). The Plaintiffs
concede their Privileges and Immunities Clause claim (Count
II) should be dismissed as it is foreclosed by case law from
the Eighth Circuit Court of Appeals. Upon careful review of
the entire record, the Court concludes, for the reasons set
forth below, that the Plaintiffs have standing.
Rule of Criminal Procedure 12(b)(1) governs motions to
dismiss for lack of subject matter jurisdiction.
“Subject matter jurisdiction defines the court's
authority to hear a given type of case.” Carlsbad
Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635, 639 (2009).
Jurisdictional issues are a matter for the Court to resolve
prior to trial. Osborn v. United States, 918 F.2d
724, 729 (8th Cir. 1990).
federal district court's diversity jurisdiction is
limited to civil actions where the matter in controversy
exceeds $75, 000 and is between citizens of different states.
28 U.S.C. § 1332(a)(1). It is well-established that
diversity of citizenship is determined at the time the action
is filed, and complete diversity among all parties is
required under 28 U.S.C. § 1332 to invoke federal
jurisdiction. Associated Ins. Mgmt. Corp. v. Ark. Gen.
Agency, Inc., 149 F.3d 794, 796 (8th Cir. 1998).
“Complete diversity of citizenship exists where no
defendant holds citizenship in the same state where any
plaintiff holds citizenship.” OnePoint Solutions,
LLC v. Borchert, 486 F.3d 342, 346 (8th Cir. 2007). An
LLC's citizenship is the citizenship of each of its
court deciding a motion under Rule 12(b)(1) must distinguish
between a ‘facial attack' and a ‘factual
attack'” on jurisdiction. Osborn, 918 F.2d
at 729 n.6. In a facial attack, “the court restricts
itself to the face of the pleadings, and the non-moving party
receives the same protections as it would defending against a
motion brought under Rule 12(b)(6).” Id.
(internal citations omitted). “In a factual attack, the
court considers matters outside the pleadings, and the
non-moving party does not have the benefit of 12(b)(6)
safeguards.” Id. (internal citation omitted).
In this case, the facts are disputed, numerous affidavits
have been submitted, and cross-motions for summary judgment
are also pending. Thus, the Court will treat the motion as a
factual attack, consider material outside the pleadings, and
not assume the facts asserted in the complaint are true in
ruling on the motion. See Branson Label, Inc. v. City of
Branson, 793 F.3d 910, 915 (8th Cir. 2015).
III of the United States Constitution limits the subject
matter jurisdiction of federal courts to “cases”
and “controversies.” U.S. Const. art. III, §
2. This jurisdictional limitation requires every plaintiff to
demonstrate it has standing when bringing an action in
federal court. Lujan v. Defenders of Wildlife, 504
U.S. 555, 560-61 (1992). “It is the responsibility of
the complainant clearly to allege facts demonstrating that he
is a proper party to invoke judicial resolution of the
dispute and the exercise of the court's remedial
powers.” Warth v. Seldin, 422 U.S. 490, 518
(1975). The essence of standing is whether the party invoking
federal jurisdiction is entitled to have the court decide the
merits of the ...