History of Initiative 300

A History Of Initiative 300 Beginning in 1972, several bills were introduced in the Nebraska Legislature to limit the ability of corporations to own farmland and livestock in the state. Other states in the region were also considering "anti-corporate farming" legislation, and by 1975 Oklahoma, Kansas, Minnesota, Wisconsin, South Dakota, Iowa, North Dakota, and Missouri had all adopted statutory restrictions on corporate farming (some of them had adopted broad restrictions much earlier in the century). In Nebraska, each of the proposed bills failed, largely because the state Attorney General claimed they were unconstitutional. A Corporate Reporting Act was adopted in Nebraska in 1975 but no funds were allocated to the Secretary of State’s office to help it enforce the law and compliance with the reporting requirement was low.

After ten years of battling the legislature and the Attorney General over corporate farming restrictions, a broad coalition of farm and church groups began gathering signatures to place on the 1982 ballot a proposed constitutional amendment [I-300] banning all corporations and syndicates from owning farmland and livestock in Nebraska unless they were exempted by the amendment. In early March of 1982 the coalition submitted 56,636 signatures from all ninety-three counties in the state, 7,000 more names than were necessary to have the amendment considered. The "Committee to Preserve the Family Farm" (the predecessor of Friends of the Constitution) mounted an aggressive education and organizing campaign [I-300 rationale] to win the ballot issue, labeled Initiative 300 by the Secretary of State. The coalition had only a fraction of the money being spent by the opponents of I-300, which included the state Chamber of Commerce, the Nebraska Bankers Association, and other big business supporters. Opponents of the Initiative argued the law would depress land prices and drive cattle feeding from the state and they ran several television ads around the state urging voters to defeat the proposal. In the end, however, the expensive "vote no" campaign failed and I-300 was adopted by a 56% to 44% margin. And contrary to some claims that urban voters provided the winning vote, the amendment was adopted by a 62% to 38% margin in the state’s 45 most rural counties. The measure actually lost in the Omaha area but won by a 56% to 44% margin in the state’s western congressional district.

Opponents of the law moved quickly. As soon as the 1983 legislative session began, the Nebraska legislature, rather than trying to help enforce the new law, repealed the Corporate Reporting Act so that there would be no official mechanism to identify possible violators. The legislature also considered bills in 1986, 1987, 1988, and 1995 that would have repealed or amended I-300, but each time citizens led by Friends of the Constitution organized to defeat the measures. Because of the work of Friends of the Constitution, I-300 opponents have never been able to muster the votes or the petition signatures needed to weaken the law.

Opponents have also tried to get the courts to strike down or weaken the constitutional provisions. All attempts thus far have failed. The first case brought was Omaha National Bank v. Robert Spire (389 N.W. 2d 269). The Bank argued that the law violated the federal constitution’s guarantee of equal protection and that the content of the law was not the kind to be put into a constitution. In 1986, the Nebraska Supreme Court ruled that as long as the different treatment for certain corporations was "rationally related to a legitimate state interest" it would not violate equal protection. The Court found that an attempt to restrict the concentration of farmland by corporations was such a legitimate interest. As for the argument about the nature of the amendment not being suitable for a constitution, the Court said:

"The ultimate source of power in any democratic form of government is the people. Our Nebraska Constitution is a document belonging to the people. Subject only to the supremacy clause of the United States Constitution, the people may put in their document what they will. Even to the shock and dismay of constitutional theoreticians, the people may add provisions dealing with "non-fundamental" rights, as well as provisions bearing the most tenuous of relationships to the notion of what constitutes the basic framework of government. The people may add provisions which legal scholars might decry as legislative or statutory in nature. But the people may do it nonetheless."

The second case challenging Initiative 300 was Sunrise Ventures v. Robert Spire in 1988. A non-family farm corporation custom feeding 76 cows challenged I-300, but the case was dismissed when Attorney General Spire said he didn’t intend to enforce I-300 against the corporation because he felt they fell under I-300’s exemption for livestock "purchased for slaughter." The judge ruled that since there would be no enforcement by the state there was no case or controversy for him to decide. He did not issue an opinion about whether the Attorney General was correct about the "purchase for slaughter" rule. Friends of the Constitution disagrees with this interpretation of the exemption. The "purchase for slaughter" exemption is only to allow processors the ability to purchase livestock. We have been told by the current Attorney General’s office that they too do not agree with the earlier Attorney General opinion in Sunrise Ventures.

The third case was MSM Farms v. Robert Spire. In this case the challenge was again that I-300 violated the federal constitution’s guarantees of equal protection and due process. The plaintiffs argued that the law wrongly protects family farm corporations while restricting other types of corporations. I-300 was upheld by both the U.S. District Court in 1990 and the Eighth Circuit Court of Appeals (927 F2d 330) in 1991. Friends of the Constitution intervened in this case on behalf of the state and participated in the arguments before the Court of Appeals. The United States Supreme Court refused to hear an appeal, thereby letting the Court of Appeals decision stand. In the Court of Appeals decision, the Court said:

"It is up to the people of the State of Nebraska, not the courts, to weigh the evidence and decide on the wisdom and utility of measures adopted through the initiative and referendum process. Whether in fact the law will meet its objectives is not the question: the equal protection clause is satisfied if the people of Nebraska could rationally have decided that prohibiting non-family farm corporations might protect an agriculture where families own and work the land…The people of Nebraska have made a reasonable judgment that prohibiting non-family corporate farming serves the public interest in preserving an agriculture where families own and farm the land. It is not for the courts to second-guess the wisdom of this judgment."

The fourth case was brought by a group of farmers wanting to form a "non-stock marketing cooperative" and claim exemption as a nonprofit corporation. They intended to build a hog confinement from which cooperative members would obtain pigs. The district court ruled this type of cooperative was a nonprofit corporation but the Nebraska Supreme Court overruled in Pig Pro Nonstock Cooperative v. Moore, 568 NW2d 217, (1997). The Supreme Court said the intended operation was the "type of absentee ownership and operation of farm and ranch land by a corporate entity which the plain language of [I-300] prohibits." Friends of the Constitution filed an amicus brief in support of the state in this case and participated in the argument before the Supreme Court.

The fifth case, Hall v. Progress Pig, was brought by four leaders of Friends of the Constitution to enforce I-300 after the Attorney General refused to do so. The issue involves whether a farm qualifies as a family farm corporation even though the farmer rarely goes to the hog operation, never provides any labor, and only occasionally gets involved in managing the farm. I-300 requires that one of the family members either reside on the farm or be actively engaged in the day-to-day labor and management of the farm. As a counterclaim, the defendant argued that I-300 violates the equal protection clause by exempting poultry but not other types of livestock. The District Court first ruled that the citizens did not have standing to bring the private enforcement action but the Nebraska Supreme Court overturned this decision, 254 Neb. 150 (1998). The district court later ruled that Progress Pig did violate I-300 because the principal owner does not provide day-to-day labor and management. Progress Pig appealed this ruling but the Nebraska Supreme Court agreed with the district court. The Supreme Court said "to be actively engaged in the day-to-day labor and management of the farm or ranch requires that [a] person be involved on a daily or routine basis in all aspects of the farm ... activities, be it labor or management." The Court said that in this case, the principal owner was engaged almost entirely in the management of the operation and only minimally involved in actually raising the hogs.

At the time Initiative 300 was adopted, state law did not authorize the creation of limited liability companies or limited liability partnerships. In fact, limited liability companies did not even exist in the United States prior to 1977, and only two states permitted them before 1988. The first state to create limited liability partnerships did so in 1991. Both of these types of new business structures are just hybrids or modifications of the corporations and limited partnerships already restricted by Initiative 300. When the Nebraska legislature created limited liability companies in 1993 and limited liability partnerships in 1996 they included language saying that the business structures would be considered syndicates for purposes of I-300. They recognized that the legislature can not authorize what the constitution prohibits. While the legislative language was probably not necessary to make sure that these new forms of business entities would be considered syndicates, the language does clarify that only family farm limited liability companies and limited liability partnerships may own farmland and livestock in the state.

Finally, after three previous attempts to once again adopt a requirement that corporations and other limited liability entities report their activities in the state, the Legislature passed LB 1193 in 1998. Not only does the law require all limited liability entities to report their ownership of farmland and livestock in Nebraska, it also gives the Secretary of State and Attorney General subpoena powers to enforce both the reporting law and I-300.

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