Minnesota Small Farms

Introduction

Lake Elmo, Minn., forbids farmers from selling agricultural products from their own land unless the products are grown within the city limits.  If a Lake Elmo farmer grows some of his crops in another town or another state, he cannot sell them from his Lake Elmo farm.  Products grown in town are allowed; products from elsewhere are not.

This prohibition is a violation of the Commerce Clause of the U.S. Constitution.  One of the primary reasons the Framers gave us a Constitution was to stop trade wars between the states that prevailed under the previous Articles of Confederation.  The Commerce Clause gave Congress the authority to regulate interstate trade in order to stop these protectionist battles.  Our national economic union now allows every individual and business in this nation to reap the many benefits of free trade across state lines.

Yet more than 220 years later, the city of Lake Elmo is violating that founding ideal.  It is now threatening to prosecute the Bergmann family, who operate a small farm in Lake Elmo, because the Bergmanns sell pumpkins and Christmas trees grown outside of the city.  This includes the pumpkins the Bergmanns grow on land they own in Wisconsin, property that is about 30 miles from Lake Elmo.  The Bergmanns have sold these products from their farm for decades.  The family also buys pumpkins and Christmas trees from other small farmers in other states, from North Carolina to Nebraska.  By trading with farmers across the country, the Bergmanns’ farm and those farms they have done business with have been able to prosper, and consumers who shop in Lake Elmo have enjoyed a greater choice than they would otherwise.

On December 1, 2009, however, the Lake Elmo City Council told the Bergmanns and others like them to cease and desist.  The Council ordered farmers within the city to discontinue selling products from their farms that are not grown within the city limits.  The city has thus jeopardized the economic future of small farmers not only in Lake Elmo but across the country.  This ill-conceived protectionism is precisely what the Constitution was meant to prevent.  That is why the Institute for Justice is representing the Bergmanns and three of their out-of-state farming partners in protecting their right to economic liberty—the right to earn an honest living in the occupation of one’s choice free from arbitrary and excessive government regulation.

Small Farmers: Thriving Through Free Trade

Lake Elmo is a rural community within commuting distance of the Twin Cities of St. Paul and Minneapolis, and only a few miles from the Minnesota-Wisconsin border.  Richard and Eileen Bergmann exemplify Lake Elmo’s proud farming heritage.  Both have farmed in the area all their lives and come from local farming families.  They have farmed at the site of what is now known as “Country Sun Farm” in Lake Elmo since 1972.  Along the way, they raised three boys, Chad, Keith and Troy.  Now grown, all three work for the farm, aided by some of their own children.  Chad plans to open a farm stand from his own home in Lake Elmo so he can sell other crops grown on the Bergmanns’ Wisconsin farm.

Hard work and wise business decisions have served the Bergmanns well for nearly four decades.  But like most farmers, they have also benefitted enormously from free trade with farmers and businesses in other states.

In addition to selling plants and flowers Country Sun Farm grows in its greenhouses, each October the farm sells pumpkins grown on land the Bergmanns own just a few miles away in Wisconsin.  In addition, the farm offers fall activities, such as hay rides, a corn maze, a petting zoo and even a haunted house.  When bad weather and disease harm their pumpkin crop, the Bergmanns buy pumpkins from other farmers, often in other states.  And every December, they sell Christmas trees grown in North Carolina.

Free trade between farmers in different cities and states benefits not only farmers that buy goods, such as the Bergmanns, but the farmers that sell the goods, including Lynn Smith from North Carolina, Andy Daniels from Nebraska and Dan Fitzgerald from Wisconsin, each of whom have joined the Bergmanns and the Institute for Justice in filing suit against the city of Lake Elmo to strike down its protectionist ordinance.

Lynn Smith, a fourth-generation farmer in the Appalachian Mountains of North Carolina, built a thriving Christmas-tree business.  He began selling Christmas trees nationally to farmers like the Bergmanns in the 1970s and has never looked back.

Andy Daniels, his wife Tannie and all their adult children run a farm outside Columbus, Neb.  Andy and Tannie have run the farm since 1974, making it four generations of Daniels who have farmed there.  In the early years Andy and Tannie tried raising soybeans and corn, but after the farm crisis of the 1980s, they converted to produce.  They now sell produce locally, across Nebraska and nationally by selling to farmers like the Bergmanns.

Dan Fitzgerald and his father have managed land in Mondovi, Wisconsin for years.  In the early 1990s, hoping to one day start a Christmas tree farm, they planted fir trees on the property.  Seven years later, they harvested the first batch of full-grown Christmas trees.  When selling them from lots in Minnesota proved uneconomical, Dan found a niche selling his trees to farmers such as the Bergmanns.

The benefits of free trade have flowed to each of these farmers and countless more like them.  Unfortunately, Lake Elmo’s politicians do not see it this way.  They, like so many other misguided government officials, believe that ruinous trade barriers are the path to prosperity.

Lake Elmo’s Protectionist Scheme

On December 1, 2009, just as Christmas tree season was getting started, the Lake Elmo City Council declared that it would begin enforcing a restriction on sales of goods from farms like the Bergmanns’ simply because they are produced outside Lake Elmo.

Under the city code, owners of land zoned as agricultural may not sell seasonal agricultural products—such as pumpkins and Christmas trees—unless they are grown “on site or on other property in Lake Elmo.”[1]  As a result, while the Bergmanns may sell pumpkins and Christmas trees grown on their land or on land across town, they are prohibited from growing the exact same goods if those goods are grown just a few miles away in Wisconsin.  Violations of this law carry fines of up to $1,000 and the possibility of up to 90 days in jail.[2]

The enforcement of these restrictions harms not only the Bergmanns and other Lake Elmo farmers; it also has a seriously detrimental effect on the city’s markets in goods—like pumpkins and Christmas trees—that are typically grown outside Lake Elmo.  Virtually all pumpkins and Christmas trees sold in the city are sold from farms like the Bergmanns’.  The Bergmanns have sold items from outside Lake Elmo from their farm since the 1970s, and other farmers in the town sell products grown elsewhere as well.

The Lake Elmo pumpkin and Christmas tree markets are so reliant on farms that the city’s restrictions threaten to destroy the existing market in those products within the city limits.  The ban thus hurts Lake Elmo’s consumers as well by limiting their choices of goods they want to buy.  Instead of free trade helping everyone better themselves, Lake Elmo’s trade barrier will make everyone poorer.

The Commerce Clause:  Freeing Trade

The U.S. Constitution established one economic union in which citizens in all states are entitled to reap the benefits of trade throughout the nation.  Indeed, one of the Framers’ primary goals in creating the Constitution was to eliminate trade barriers that had prevailed under the Articles of Confederation.  They included the Commerce Clause of Article I, section 8 for precisely that purpose.  The clause gives Congress the power to “regulate”—that is, make regular—interstate commerce in order to prevent the states from passing provincial laws that impede trade.

Many of the U.S. Supreme Court’s most famous cases striking down trade barriers under the Commerce Clause have involved restrictions on the sale of agricultural goods.[3]  As Justice Robert H. Jackson once said, “Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation, that no home embargoes will withhold his exports, and no foreign state will by customs duties or regulations exclude them. Likewise, every consumer may look to the free competition from every producing area in the Nation to protect him from exploitation by any. Such was the vision of the Founders; such has been the doctrine of this Court which has given it reality”[4]

Trade restrictions can be unconstitutional in two circumstances:  (1) where they facially discriminate against out-of-state trade—by, for example, explicitly banning sales of goods that originate in other states; or (2) where they discriminate in their purpose or effects—where, for example, a law appears neutral on its face but the legislature created it with a discriminatory purpose or it has a discriminatory effect.[5]

For example, in Hunt v. Washington State Apple Advertising Commission the U.S. Supreme Court struck down a North Carolina law that banned any apples from being sold in the state if they did not have a quality stamp issued by the U.S. Department of Agriculture.  Growers in Washington State, who wanted to sell their apples in North Carolina, had their own perfectly adequate grading system, so they claimed that North Carolina unconstitutionally discriminated against their apples.  The Supreme Court agreed, holding that the effect of the law alone—the barring of Washington apples from the North Carolina market—made it unconstitutional.[6]

The U.S. Supreme Court has held that the Commerce Clause prevents protectionism by cities and counties just as it prevents the statewide variety.[7]  And, as Lake Elmo’s protectionist scheme shows, local ordinances can discriminate against interstate trade just as North Carolina’s apple-grading system did.

Modernizing the Family Farm

To be competitive and thrive in a world dominated by large farms, small farms must offer customers something they cannot get at the local supermarket.  That means innovating, which the Bergmanns do by offering customers not only the ability to buy fresh pumpkins and other seasonal goods like Christmas trees, but to enjoy a small farm experience as well.[8]

This sort of innovation has come to be known as “direct farm marketing.”[9]  It can include services such as hay rides and corn mazes, as the Bergmanns provide, but is typified by farmers selling agricultural items directly to consumers.[10]    In 2005, the U.S. Supreme Court struck down state laws that prevented wineries from selling their products directly to consumers in other states.[11]    Spurred by decisions like this and the Internet and other innovations, the practice of direct marketing has become very popular in all industries.

Direct farm marketing is particularly important to farmers like the Bergmanns, who farm in relatively suburban areas, where land is relatively scarce, but customers are plentiful.  For example, in Washington County, Minn., where Lake Elmo lies, the U.S. Department of Agriculture’s latest census stated that 20 percent of all farms sell directly to the consumer.[12]  Statewide, however, only five percent of farms do.[13]  Further, in Washington County, four percent of all farm income is derived from direct sales.[14]  Statewide, that number drops to less than one percent.[15]  Among the 50 states, relatively urban Rhode Island leads the pack in the percentage of farm income made from direct sales at 9.5 percent.[16]

Direct farm marketing also gives farmers the ability to better and more efficiently deal with changed conditions within a given market.  If the crops fail during one season—because of disease or adverse weather—farmers will need to purchase goods from elsewhere to meet customer demand. [17]  If their own land can be better used for other purposes during one season, a farmer can take advantage of land in other areas. [18]

In short, farmers like the Bergmanns will find a way to innovate and engage in the business practices that benefit both them and their customers under any market conditions or circumstances—if the law allows them the freedom to do so.  Saddled with senseless restrictions like those in Lake Elmo, however, farmers like the Bergmanns will be unable to operate effectively.  Unconstitutional trade restrictions like Lake Elmo’s harm Lake Elmo farmers, businesses or consumers by stifling free trade and reducing consumer choice.

Litigation Team

Lead counsel for the Institute for Justice are Anthony Sanders and Jason Adkins, both staff attorneys with the Minneapolis-based Institute for Justice Minnesota Chapter (IJ-MN).

The IJ Minnesota Chapter has litigated a number of cases to protect the right to earn a living.  For example, IJ-MN sued the State of Minnesota to deregulate its licensing of African hairbraiders and forced the State to stop requiring hairbraiders to obtain a cosmetology license, something irrelevant to the hairbraiding trade.  Similarly, IJ-MN successfully challenged the city of Minneapolis, Minn., to reform its arbitrary licensing regime of sign hangers.

Founded in 1991, the Institute for Justice has vindicated the rights of entrepreneurs nationwide in their fights against arbitrary government regulation:

Swedenburg v. Kelly—In another Commerce Clause challenge to state protectionism, the Institute for Justice successfully waged the nation’s leading legal battle to reestablish the American ideal of economic liberty when, on May 16, 2005, the U.S. Supreme Court struck down discriminatory laws that existed only to protect the monopoly power of large, politically connected liquor wholesalers. Vintner entrepreneurs Juanita Swedenburg and David Lucas joined wine consumers and IJ in filing this federal lawsuit as a challenge to the ban on direct interstate wine shipments in New York. The case raised issues of Internet commerce, free trade among the states and regulations that hamper small businesses and the consumers they seek to serve.

Diaw v. Washington State Cosmetology, Barbering, Esthetics, and Manicuring Advisory Board—In March 2005, after being sued by the Institute for Justice Washington Chapter just seven months earlier, state bureaucrats exempted hairbraiders from discriminatory cosmetology licensing requirements.

Armstrong v. Lunsford—The Institute for Justice opened the hairbraiding profession in Mississippi in 2005 when the state legislature responded to this lawsuit, filed in federal court in 2004, by allowing IJ’s clients to continue their entrepreneurship without obtaining a needless government license.

Clutter v. Transportation Services Authority—In 2001, the Institute for Justice defeated Nevada’s Transportation Services Authority and its entrenched limousine cartel that had stifled competition in the Las Vegas limousine market.

Ricketts v. City of New York—The Institute for Justice successfully defended commuter van entrepreneurs in 1999 in a fight against the government bus monopoly that would not allow any jitney entrepreneurs to provide service to consumers in underserved metropolitan neighborhoods in New York City.

Jones v. Temmer—In 1995, the Institute for Justice helped three entrepreneurs overcome Colorado’s anti-competitive taxicab monopoly to open Denver’s first new cab company in nearly 50 years. IJ used this victory to help break open government-sanctioned taxicab monopolies in Indianapolis and Cincinnati.

For more information, contact:

Bob Ewing

Assistant Director of Communications

Institute for Justice

901 N. Glebe Road, Suite 900

Arlington, VA 22203

(703) 682-9320 ext. 206

[email protected]

[1] Lake Elmo City Code, § 11.01.

[2] Lake Elmo City Code, § 154.999; § 10.99(A).

[3] See, e.g., Dean Milk Co. v. City of Madison, 340 U.S. 349 (1951), Hunt v. Washington State Apple Advertising Commission. 432 U.S. 333 (1978).

[4] H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 539 (1949) (Jackson, J., concurring).

[5] Hunt. 432 U.S. at 352-53.

[6] Hunt, 432 U.S. at 352-53.

[7] See, e.g., Assoc. Indus. v. Lohman, 511 U.S. 641, 650-51 (1994).

[8] Monika Roth, Overview of Farm Direct Marketing Industry Trends, United States Department of Agriculture Agricultural Outlook Forum No. 32905 (1999).

[9] Robert Andrew Branan, The National Agricultural Law Center, Zoning Limitations & Opportunities for Farm Enterprise Diversification: Searching for New Meaning in Old Definitions, p. 6 (2004), available at http://www.nationalaglawcenter.org/assets/articles/branan_zoninglimitations.pdf.

[10] Roth, supra

[11] Granholm v. Heald, 544 U.S. 460 (2005).  The Institute for Justice litigated the companion case, Swedenburg v. Kelly, to the Supreme Court.  IJ-Minnesota also won an important victory in Crockett v. Campion on behalf of Minnesota vineyards who were prohibited from selling their wines over the internet. See Crockett v. Campion, 05-Cv-2386 (D. Minn. 2006) (consent judgment).

[12] United States Department of Agriculture, 2007 Census of Agriculture Report.

[13] Id.

[14] Id.

[15] Id.

[16] Talia Buford, Growing Market Boosts Farms, Providence Journal-Bulletin, Local, Sept. 2, 2009, at 1.

[17] See American Farmland Trust & Connecticut Conference of Municipalities, Planning for Agriculture: A Guide for Connecticut Municipalities, p. 33-34 available at http://www.ctplanningforagriculture.com/guide/AFT_guide_web9-29.pdf.  Although this guide only suggests that Connecticut farms be allowed to sell products from other Connecticut farms, the additional benefit that can be gained from farmers trading across state lines is obvious.

[18] Joy Harwood, et al., Managing Risk in Farming: Concepts, Research, & Analysis, USDA Agricultural Economic Report No. 774, p. 17 (1999).