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Farm Legal Series #9: Buyer’s Clubs or Herd Shares?
746 Plays3 years ago
What’s the difference between a Buyers Club and a Herd Share?
Listen to the latest episode in the Direct Farm Podcast-- Farm Legal Series as Alexia from the Farm to Consumer Legal Defense Fund (FTCLDF) and James, Barn2Door COO discuss the legal nuances of selling though Buyers Clubs and Herd Share formats.
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Transcript
Introduction to Direct Farm Podcast
00:00:03
Speaker
Welcome to the Direct Farm podcast, the go to resource for farms across the US looking to grow and manage their business. Tune in weekly to hear tips and tactics from our most successful farmers on how to increase sales, access more customers and save time and money. We'll also speak with industry experts, business leaders and partners to share the latest farm business trends selling direct to market.
Collaboration with FTCLDF and Legal Challenges
00:00:27
Speaker
Hello and welcome to the Direct Farm podcast. We've got a great conversation for you today with the Farm to Consumer Legal Defense Fund, or FTCLDF. They are a nonprofit organization made up of lawyers serving farmers by protecting, defending, and broadening the rights and viability of independent farmers, artisanal food producers, and their consumers.
00:00:47
Speaker
This is the ninth episode in a series of podcasts we've done with the Farm to Consumer Legal Defense Fund, each of which have been highlighting a different farm legal challenge.
Legal Nuances of Buyers Clubs and Herd Shares
00:00:56
Speaker
Today, we're going to be discussing buyers clubs and herd shares and a number of legal nuances that can be associated with them.
00:01:03
Speaker
I also highly recommend checking out some of the previous episodes we've done, including things discussed regarding raw milk, meat processing, subscriptions, et cetera. So very popular podcast. We're obviously delighted to welcome back again, Alexia Kulwick, who is the executive director of the Farm to Consumer Legal Defense Fund.
00:01:21
Speaker
She's a licensed attorney in Illinois and Wisconsin, where she can also become an avid cross-country skier, from what I understand. She's practiced law for over 20 years, and she's got great experience that has inspired her interest in U.S. agriculture, promoting small-scale farmers, and sustainable farming that protect the rights of independent producers across America.
00:01:42
Speaker
Welcome back, Alex. It's great to
FTCLDF's Membership and Services Model
00:01:44
Speaker
see you. For those who are new to this series, maybe this is our first time listening. Can you introduce yourself and give people, I would say colloquial understanding of what Farm to Consumer Legal Defense Fund does day to day? Sure. Yeah. So first, it's great to see you again, James. And thanks for having me on the podcast again. It's always a pleasure. We really enjoy the work of Barn to Door. So Farm to Consumer Legal Defense Fund is a nonprofit organization that provides direct legal services to
00:02:11
Speaker
independent farms and food producers. We also try to do a bit of policy work in changing. Potential state law seems to be where we can have most impact, but we do educational services, direct legal representation, and some policy work for small producers.
00:02:28
Speaker
And for farmers who might be interested in learning more about their work, you can go to farmtoconsumer.org. And on their website, it's an amazing site. And I can say this because I am an attorney as well. They have assembled incredible resources that are freely available to anyone, including maps that kind of break down state by state, general parameters and requirements.
00:02:50
Speaker
But probably the greatest thing I really enjoy about the work that Alexia, that you and your team are doing there, is the fact that farmers can join for just $125 a year. And that will give you for a flat fee, access to have conversations with lawyers on topics that are germane to your business and specific to your state. Obviously, that just entails general guidance. Is that correct, Alexia? Obviously, if there's litigation, those other things, that's a total different fee for service. But just in terms of general business guidance, that $125, what else does that cover?
00:03:22
Speaker
Yes, over the $125 a year farmers can get legal counts unlimited legal consultation after they've been a member for six months. And so that might be things like what your local state regulations are safe for raw milk or poultry processing or meat processing or needing to have a food establishment license to sell directly from the farm. Right. So very much we're focused on the regulatory aspect.
00:03:46
Speaker
We have members only webinars. We have resources that only members have access to. There are in fact, lots of public facing resources on the website, but we also have member only resources as well as the consultations. And
Regulatory Issues and Consumer Protections
00:04:00
Speaker
then particularly if members are facing a potential conflict, such as an allegation of a violation, some kind of inspection or investigation by a state agency, we will almost always provide that representation for a direct investigation like that.
00:04:15
Speaker
If there is court litigation, you know, we make no guarantees if it's directly on point with our mission and it's something that we feel strongly about. We may provide the representation. We may ask for a cost share. We may not take it on, depending on what it is, but the consultation and access to counsel. If there's any kind of action before an agency.
00:04:34
Speaker
is a vast majority of what we are doing directly for our members. Well, I have to say thank you so much for all your great work and also all the benefactors who are out there meeting the Farm to Consumer Legal Defense Fund because they're the ones who are helping to subsidize your costs and the cost of the lawyers who are members of your organization so that we can provide this type of valuable service to farmers. Right, absolutely. Again, a flat fee.
Buyers Clubs vs Herd Shares: Compliance
00:04:58
Speaker
All right, well, let's dive into today's topic because this raises a lot of interesting questions and some examples where farmers might be able to work with you on certain types of agreements. So first off, we're going to be diving into buyers clubs and herd shares. So let's just start right at the top to understand what's the difference between a buyer's club versus a herd share, right? Because these are two things we hear a lot of conversation, a lot of farms talk about doing, but there's a big distinction between the two.
00:05:27
Speaker
Right. And so I'll give sort of my definition, but in my mind, I'll start with the huge distinction is, you know, buyers clubs are a method by which a producer can provide products directly to consumers. It's when they first really started and people first started to talk about buyers clubs, it was very much from the consumer point of view, like buying wholesale and then splitting it up so that people can buy food for lesser prices, right?
00:05:55
Speaker
The thing about buyers clubs, they can be extraordinarily useful, I think, to the producers, but they do not provide some kind of protection from the otherwise legal requirements that come into play in producing and selling food. And I think there's a misconception that somehow, particularly when we're labeling things as a private buyers club, that means we're stepping outside of the regulatory scheme and that's not really true.
00:06:22
Speaker
Herdshare agreements are a way of providing, legally are a way of providing certain products that may otherwise have more burdensome regulation. And they operate in such a way that consumers actually purchase into say a dairy herd or a livestock herd. And we will draw up agreements so that the ownership is reflected appropriately and individuals can then get products from their own herd, whether it be, you know, milk from a live animal or what have you.
00:06:50
Speaker
So sometimes you could use both, right? You could still have a buying club with your consumers, but you still need to take actions to make sure that you're protected by the regulatory process.
00:07:02
Speaker
So big distinction just for simplicity sake, a buyer's club would be like, hey, I joined Sam's club so I can buy products at a lower price, right? In which case there's a fee on Sam's club or Costco or something of that nature. But otherwise you're just buying products and you don't have actually any ownership interest in Sam's club or Costco.
00:07:23
Speaker
Whereas a herd agreement, you're actually as a farmer, you're saying, Hey, you are selling an interest in the herd, whether that be, like you said, livestock or dairy herd. Is that correct? Is that a fair distinction for people the first time? Yeah, I think that's a fair description. And I think buyers clubs, even one run by the producer can be useful because now they know how many customers are looking for what kind of product and how much of a product on a monthly basis. They don't have an ownership interest.
00:07:51
Speaker
but they've got a dedicated group of consumers and they can plan their production better, right? So I still find them extremely useful. It's just important to understand it's not ownership interest and it doesn't protect users or those consumers necessarily from a regulatory scheme.
00:08:07
Speaker
So some states require that you must enter into a herd share agreement in order to sell direct to consumers. Others states you might be able to have a buyer's club and you don't have to worry about this type of thing, correct? So can you give a little bit of guidance on that? Because I know you guys have some nice resources on your website that provide some distinction at the state level, like kind of where people would need to pick up the phone and have a conversation with you guys.
Interstate Sales and Legal Clarifications
00:08:32
Speaker
Yeah, absolutely. So I'm gonna, for my comments, I'm thinking specifically about dairy for now, because that's when I say hurture, that's typically what we are doing. And I want to say even
00:08:44
Speaker
I'll take a step back, I suppose, and say that you cannot sell raw milk across state lines, but each state then has its own regulatory system, right? So some states allow the sale of raw milk, some states place conditions on that, some states prohibit it, and then some states, you might have herd share arrangements as a way to obtain raw milk. So before I even get into the details of what you said,
00:09:10
Speaker
the terminology you need a herd share agreement to sell raw dairy, not to be too nitpicky here, but really does, that's not the appropriate legal description because not selling raw milk and as a consumer, you're not purchasing raw milk under a herd share arrangement. Rather, you're purchasing a share in that dairy herd and then when the herd is milked, you get a proportional share of that product for yourself. And some states,
00:09:38
Speaker
Yeah. And so some states will certainly explicitly permit that and have particular requirements for those agreements. Some states will prohibit those arrangements because they think they're just a way around the sale of raw milk and some are silent on whether you can do herd shares or not. And we take the position that there's no prohibition.
00:10:00
Speaker
These folks that are members of the herd share arrangement are owners of the herd and so have every right to use the product for their personal use.
00:10:09
Speaker
Correct, so if you're a buyer and you're looking to purchase something, some states will allow you to purchase raw milk from a farm or beef from a farm or whatever livestock that they sell. However, in some
State-Specific Raw Milk Regulations
00:10:23
Speaker
states, you cannot actually purchase a product. You're actually, you're purchasing an interest in the herd, AKA a herd share, and then you're just effectively a beneficiary of whatever that herd produces, whether it be milk or proteins, right? Is that correct?
00:10:37
Speaker
Sure. Right. So back to the question I was asking, which is between those two, you guys have on your website today at the farm consumer.org. There is, I think you guys have a map that's laid out under the resources page, right? That gives a little bit of some guidance around where these lines are drawn, right? Effectively state by state. Is that correct? Correct. Yeah. Below the map in a chart will tell you if a lot of times you can have sales that are on-farm only.
00:11:05
Speaker
Sometimes you can't have any sales. Sometimes it specifically allows herd shares. And we lay that out in the chart underneath the map that talks about raw milk.
00:11:14
Speaker
Great. So you brought up another point earlier too, which was talking a little bit about like, Hey, look, I want to be very specific. This is for sales interest state inside the state. So let's talk about a couple of these nuances. So just because I'm a producer, whether it be from raw milk or let's say, let's take proteins. Cause as you said earlier, raw milk cannot be sold across state lines.
00:11:37
Speaker
But let's say I'm a producer of proteins and I'm in a state where buyers are permitted, consumers are allowed to purchase my product, quarter half whole or what have you, however I package it. What are some of the nuances I need to be aware of if I'm in an area where I might have some states around me that aren't necessarily set up to support those types of buyers, that type of buying arrangement? Can you, for instance, have a cross
00:12:01
Speaker
cross state line herd share agreement, is that possible if I'm in a state adjacent to a state that doesn't permit selling direct to consumer? Yes, so we're talking about proteins at this point. So anytime you are selling, say a quarter share, half share in an animal, if you want to sell that across state lines, then the livestock has to be inspected, it has to be brought to a USDA or state inspected facility.
00:12:28
Speaker
Typically, state inspection facilities are only for in-state sales and you would need a USDA facility to go across the state lines. There is a program for interstate shipments that a couple of states have some state facilities that allow you to ship across state lines.
00:12:45
Speaker
So you could have a buyer's club, for instance, for proteins, but then you still have to have that livestock inspected in order for it to be a sale of meat products. The only way around that is when you sell a portion of a live animal, say a quarter of a live animal,
00:13:04
Speaker
And then that animal can be brought to a custom slaughter facility. You can certainly do that, but that's still all going to be within those state lines. Now, a customer, say, can cross into the producer state and pick up their share from a processor and bring it to wherever they want. That's now their product from their animal, and that's perfectly legitimate. Now, these are two really important distinctions that I just heard from you. Number one is,
00:13:33
Speaker
If I'm in a state and I want to sell across state lines, a protein would be going to a USDA processor number one, right? Because otherwise, unless they're in one of these exception states that has this kind of interstate agreement for a state processor, which most don't,
00:13:48
Speaker
you're going to need to be going to USDA processor. So any farmer listening, thinking about if you're in an area, let's say you're in like Maryland, Virginia, Delaware area where you might have high density people that could be selling very tight vicinity.
00:14:04
Speaker
the safest pathway there would be obviously using a USDA processor number one, right? So then the second thing I heard from you was that doesn't prohibit though, however, if you are a farmer and you're using a state or custom slaughterhouse, doesn't prohibit somebody from state lines from purchasing it, provided they come into your state to pick it up, right? Is that correct?
00:14:28
Speaker
Correct. Yeah, yeah. So you can't ship to them out of state. But if they want to come and pick up their own product from that producer, which in some of those states that you've talked about, right, like, let's say you live in Maryland, and you purchase from a producer in Pennsylvania, Virginia, you could read my from Maryland into Pennsylvania, pick it up from that Pennsylvania producer from a state water. Yeah, and then go back home. Right. Okay. Yeah, that's great. That's
Herd Share Agreements and Legal Language
00:14:53
Speaker
good. Because
00:14:53
Speaker
Because that's yours at that point. For your personal use in your household, you cannot resell it. That has to be for the consumer's household use. Got it. What about raw milk in that scenario? Is it possible to go across state lines? Because a great example, in Pennsylvania, there's a lot of great dairy farmers there who do produce raw milk. And I can very well imagine. I used to live in a nice drive up into the countryside outside of Lancaster and go visit a farm. Are they allowed to sell me raw milk? Or do they have to ask me, are you from the state of Pennsylvania? How does that work?
00:15:25
Speaker
No, as long as they're producing it and selling it within their own state, they're fine, right? So in Pennsylvania, you can get a raw dairy permit, sell directly from your farm, consumer can cross the state and just purchase it. You don't have to have a herd share and bring it wherever they want. Because once you've purchased it, it belongs to you and it's for your personal use.
00:15:44
Speaker
That's fantastic. Well, that's a good news for farmers, right? So on-farm pickup works quite well. Sounds like it's a pretty good avenue, provided you're in a state where you don't have to have herd share agreements specifically. How would that work in the case of a herd share? So if I'm in a state where I have a herd, where I'm required to have a herd share for my dairy or for my livestock.
00:16:04
Speaker
Is it possible for an individual to be, again, across the state line? Can they purchase into her chair across state line and then still go pick up the product, be a beneficiary of products that they happen to pick up on farm and drive back across state lines? Is that permissible?
00:16:22
Speaker
Sure. I think the same would be true because the herd is with the production of the milk and the herd belong in one hour in one particular state. When a part owner comes to get their product that takes place on farm and in the same state and the same concept really applies. So you could be a part owner of a herd living across the state line, as long as you're coming into that state to obtain the product.
00:16:45
Speaker
And it's not a transaction because it's your product, but the delivery, so to speak, takes place within that of the state. You should be fine the same way. I also just want to mention when you're looking specific to dairy is that even in states that may look like they permit raw milk, say like looking at our raw milk map, people may still choose to do her chair arrangements. And it may be that you're in a state where the requirements to be able to sell the raw dairy are so high.
00:17:11
Speaker
if you've just got one or two Jersey cows, it's very difficult to meet that. So it's not always, anyway, I just wanted to clarify that even if you can buy raw milk, you may want to look at a herd share arrangement just based on the requirements. That's all. You're bringing up some elements of language, right? So this is really interesting, right? This is, I know we as lawyers like to geek out on this stuff, but sometimes it can be confusing to a beneficiary or a buyer, right? So I think
00:17:38
Speaker
Americans today certainly are well aware of the concept of a subscription. On average, American has nine subscriptions, whether it be Netflix or Spotify. We have a lot of food producers around the country who are selling subscriptions to food. Because clearly, we're all going to keep eating every week, and most of our grocery lists look the same 90% of the time, week over week.
00:17:58
Speaker
What are some of these language requirements when thinking about selling a product or a beneficial interest in a herd? Do they have to be explicit? Because I'm just kind of curious if this might be a little bit of a barrier in terms of attracting buyers as well, or I should say, or shareholders. So give a little clarity on that. Yeah. So again, using raw dairy herd shares or sale of raw dairy,
00:18:23
Speaker
Certainly there are labeling requirements that will require information about the producer on the label, just like in cottage food, for example, but also typically requiring some kind of a warning label that the CDC and that the State Department of Ag or Health does not believe that unpasteurized milk is a healthy product.
00:18:44
Speaker
So a lot of states do have that kind of warning label that you need and our herd share agreements contain that language so that the individuals buying into the herd share understand what certain official advice has been and they're making their own decision as to what kind of food they want to consume. I did not know that they actually require a declaration that it is unhealthy or does it say maybe unhealthy?
00:19:08
Speaker
I find that personally, I don't know about you, but I'm sure many of our listeners like me, I find that offensive. But given that for millennia, people have been drinking raw milk and it's been quite healthy. And myself as somebody who's lactose intolerant, candidly, raw milk is the only way I can go. And I love raw milk. It's fantastic for your skin, your body, all those microbes in my stomach. I digest food better. It's just fantastic.
00:19:32
Speaker
Kind of sad to see that it's been so politicized as to be labeled unhealthy by our regulatory agencies. It's too bad. Yeah, it is too bad. I guess the language I have to pull up, so like I say, very state by state, but typically it may be harmful to your health or that the CDC takes the position that pasteurized milk can contain harmful pathogens, that kind of language. I don't have the exact language in front of me. I probably should.
00:20:02
Speaker
So some states
Financial Arrangements in Herd Shares
00:20:03
Speaker
will require that for sales of raw dairy on the farm, or maybe it's not on the package, but you might have to have a sign along those lines. In the states that have a pretty comprehensive permitting and licensing system for raw dairy, that's not necessarily the case, although sometimes it is. So again, it's another state by state issue as to exactly how those labels are going to be. So when we do agreements, for example, we do have some differences amongst our language from state to state.
00:20:32
Speaker
Well, this is again, I think another great example of a call out for any listener today who might have questions about this, why it's so important to get good legal counsel from somebody like Alexia or someone on the Farm to Consumer Legal Defense Funds team, because they have lawyers that represent folks in every state across the country. Again, you can go to farmtoconsumer.org if you want to sign up as a member and learn more about their organization and perhaps become a beneficiary of this.
00:20:59
Speaker
All right. Let's shift over and talk a little bit more, perhaps payments related to purchasing a herd share versus buying into buyer's club, right? So buyer's clubs, you know, many of our farms today sign up for a subscription, get your meat box subscription monthly. I myself am a beneficiary of that. I love our pork box that I get. I love our meat box because I know what I'm going to eat every month. How does that work with herd shares, right? Because you're, if you're a beneficiary, I know like many of the folks who do subscriptions in states where it's allowed,
00:21:28
Speaker
We'll say, hey, like, why don't you just pay up front for 12 months and I'll give you a discounted 10% type of thing. And it's based on some sort of value over that 12 months that they give me a promo, or I can pay monthly as I go type of thing each time the box is delivered. How does that work with her chair agreements? How does the financial arrangement do they have to buy in? Are they expected to pay annually every month? How does that work?
00:21:51
Speaker
So, I mean, the main distinction here again is that in your subscription idea or your buyers clubs ideas, it's still.
00:21:59
Speaker
a direct purchase of food from the farm right and the use of these they just have a buyer's club arrangement for example in a herd share are not mutually exclusive i will often tell people you may want both things in place because then in maybe the subscription or the buyer's club includes products other than say dairy right and the farmer still knows what kind of production to expect and what kind of sales to expect when it comes to paying for herd shares
00:22:23
Speaker
I almost don't even like the word beneficiaries. Really a consumer becomes a part owner in this dairy herd. So now it might be a very small slice of ownership, right? It's not to say that it's any kind of majority share, but when you are purchasing into a herd, the way we do it and what I think is most legally, gives you the most legal protection is to actually purchase a share in the herd and there will be an exchange of payment for that.
00:22:51
Speaker
which would be a one-time, it's like I'm buying a share of stock and anything, right? So I'm buying one share of that herd and you get a bill of sale for that share in the herd. Well, just because you own part of the herd, there's a lot of other expenses that obviously come with that over time. So once you have that share, then typically what we recommend is that a producer then
00:23:14
Speaker
charge the shareholder for room and board, essentially, for maintenance of the animals, for feeding the animals, for sheltering the animals, for engaging in the labor of milking the animals for those owners. And that's a separate charge. How you do that charge really can be decided upon by the, by the share owner and the producer. So most of our folks do it on a monthly basis, but I have heard of folks just paying a year upfront or paying twice a year.
00:23:44
Speaker
for that room and board. So there's really no reason you couldn't do that in a number of ways, whatever seems to work best for everyone. Monthly does seem to be the most common for our members, yeah. Yeah, I sure love that idea of a monthly maintenance subscription, right? Like, hey, look, maybe there's a one-time payment to purchase, again, my interest in the herd share.
00:24:05
Speaker
this idea of having a monthly maintenance subscription where that farmer again is just having recurring income coming in so that they can cover those costs not going off just the recurring revenue of that is a really nice I think beneficial aspect of
00:24:20
Speaker
that arrangement, right? Because obviously farmers have lots of ongoing costs, feed cost, obviously maintenance, there's a lot of things are going to come up from time to time. So the more that they can have as a recurring income, the better in terms of financial solvency and sleeping better at night. That's for sure.
00:24:36
Speaker
But if like today with my Meetbox subscription, I'm in Washington, so I'm allowed to just sign up and have that go and I can just cancel at any time and walk away from it. So that's a common expectation as a buyer or as a consumer, I would have that expectation. If I don't want my Netflix subscription anymore, I can just cancel it and ends at the end of the month. I can do the same thing with my Meetbox subscription here in Washington.
00:24:59
Speaker
How does that work with herd shares? Am I selling my interest back? Cancel my maintenance subscription? And then is there, or am I out the money? Like, how does that work? It can happen another, a couple of different ways, right? But the bottom line is that yes, when that person, the part owner still has that share in the herd. So you can just say, I'm canceling the subscription, but you still have that share.
00:25:24
Speaker
And what
Herd Shares and Corporate Securities Law
00:25:25
Speaker
we do is typically our arrangements, our contracts between the producers and the partial owners of the herd now, I'll call them, has a mechanism for when they want to walk away that the producer may have to repurchase that interest or have like a right of first refusal to purchase that share back. And a lot of times it may be at a small, smaller percentage of what the original shareholder
00:25:52
Speaker
purchase the share for. So in other words, like if they returned it within a year, it might be one percentage. If they just default and stop paying the monthly maintenance fee, the share might revert back to the producer, or it might be something where the producer would have to repurchase that share. And in our agreements also have, usually have right of first refusal so that the share owner can't just go sell their share to some other person, that the producer still contains
00:26:22
Speaker
some kind of control over the whole process and who's in their herd, who's a part owner of their herd. And I know producers don't love that, right? Because they don't want to have to buy back shares. But the reality is it's different than a subscription because these consumers now own an actual portion of the herd. I haven't seen as a practical matter, I think most consumers that are willing to enter into this kind of arrangement understand it. And a lot of times they just
00:26:49
Speaker
will forfeit that share when they move or they want to stop getting milk on a weekly basis. But sometimes we have to see the reach of purchasing for that to work.
00:27:00
Speaker
So I heard a couple of things there. First off is that obviously having controls that make the interest in the herd sure non-transferable, right? So the farmer can rest assured that it's not going to go transfer this to somebody else on their block if they decide to move that type of thing. It's going to be specific to that individual or revert back to the producer.
00:27:22
Speaker
And then the second thing I heard from you is I love this idea of like, Hey, if you stop paying that maintenance subscription, perhaps that triggers forfeiture or a discounted report. I know personally, my wife and I, we used to belong to a boat share. I won't name the boat club, but it's a large national boat club where we had to pay to join into the boat club.
00:27:41
Speaker
and then paid a monthly maintenance fee and then we had unlimited use of the boats in that membership as part of that membership. Then we decided to cancel and stop paying that monthly maintenance. We no longer got access to the boats, but more importantly, we forfeited
00:27:56
Speaker
that upfront fee. I had no love loss. We got our benefits out of it. We were members of it for five years. We had lots of good memories with our kids on those boats. It is what it is. I can very well imagine. I would love to see farmers not have to be in that position, as you said, of having to repurchase those shares. It seems unfair to the farmer in many ways.
00:28:17
Speaker
Do some states actually compel that? Would they consider unjust enrichment if the farmer just sold shares and then people, or do they require that it must be some consideration exchange in order for the shares to revert back to them? Yeah, to be honest, I haven't really seen that kind of detail here. They'll just say that people have to actually have an ownership share, but how exactly that works, except that there are
00:28:44
Speaker
I mean, I think it's important when I say when you say it's non transferable my understanding, and this may just be based on sort of security law, as opposed to straight up state law on her chairs is.
00:28:59
Speaker
You can make it so that the producer has the right to purchase it, like a right of first refusal, but you cannot outright just say that's not transferable because that would take away from it being a true ownership of that share. But you can include details about sort of how the producer can ultimately get that share back or control who owns the shares within their herd. So that distinction is important. And I wanna say
00:29:28
Speaker
So anybody that's listening, I'd want to double check, but I think it's Montana that also has some securities regulations that like, you know, technically you should be filing something with the state as you're purchasing a share of something, right? So the big distinction between the herd shares in your boat scenario is, you know, you didn't purchase a portion of that boat club, right? It was like more like an initiation or a startup fee. And so with the herd shares, it's like,
00:29:57
Speaker
I purchased a share of stock in, you know, ADM or whatever. And I own that. So that's worth value. I purchased it. And so just under regular securities law,
00:30:10
Speaker
the producer can't just say, you don't have that anymore, right? Like we're ending your subscription and that gets forfeited. So I think, yes, as you said, we're both attorneys and I get sort of wonky on some of these details, but that's why we do these agreements is that there's ways that producers can protect themselves, but understand that this is an actual ownership share. Like I say, it's a practical matter. I think most consumers work with the producers and
00:30:37
Speaker
You are pretty fair to these producers and like I say I've seen it done in ways that give the producers a little bit more assurance based on how much they'll have to pay if they have to buy the owner outright like that you could decrease that amount over time, for example.
00:30:51
Speaker
But that gets even more complicated than these documents and people are accepted. The documents are kind of complicated, but it's to protect the producer. Yeah. I am a corporate securities attorney. So interestingly enough, that's what I did practice. So yeah, it does vary quite a bit state to state.
00:31:07
Speaker
No, no, you got a pretty spot on, right? For those listening right now, it's obviously just like any profession, like if you go to see a doctor, there's obviously tons of nuances between different types of doctors, radiologists, cardiologists, those types of things. What Alexi is referring to
FTCLDF's Resources and Advocacy
00:31:24
Speaker
is an area of law called corporate securities, which is what I am. I'm a corporate securities attorney, which deals with transfers of ownership and stock and those types of things. And to her point,
00:31:34
Speaker
This could be, you know, governed differently at each state because there is different state securities law. Some states may require certain types of filings. Again, I think it just underscores to Alexei's earlier point, very wise to get good counsel and make sure that any hardship agreement you draw up is going to be compliant with your given state. And I think you mentioned Montana may actually require security filing. I can very well imagine that because it is an ownership interest.
00:31:58
Speaker
I do know that sometimes with stock, you can have things set up where, again, you can, as a private stockholder, can put restrictions on first rights or refusal, limitation transfer of ownership, except for like certain intestate transfers, like for inter-family, like I could pass it on to my children, those types of things, or move it into a trust for the benefit of my family.
00:32:19
Speaker
And then the other things oftentimes too is you can revert a security back for repurchase many times on our first right of refusal at par value of that interest, right? Which can be a very low dollar amount. Oftentimes it might be a penny or fraction of a penny to repurchase it. So I know that many private companies do this. I can very well imagine an agreement structured in that manner. Because again, I get back to wanting to protect the farmer to make sure that if their herd share agreement is drawn up,
00:32:46
Speaker
that whatever that initial buy-in is by a beneficiary or shareholder, that hopefully the farmer's not going to have to pay much of that back, if any at all, except for a nominal amount for somebody who chooses to cancel or stop paying their maintenance fees, right? Well, we're getting a lot of nuances. Well, I want to be respectful of your time and our listeners as well, as you can hear from the conversation between Alexei and I, we can geek out on this as attorneys,
00:33:13
Speaker
Maybe, Alexia, just talk a little bit about if, again, I would encourage folks to take advantage of getting counsel in your state or an attorney who's licensed to practice in your state to give you wise counsel and make sure you have the right paperwork drawn up if you need to enter into a herd share agreement for your dairy or for your protein operation.
00:33:35
Speaker
Lexi, where can farmers go learn more? We talked a little bit about your website. Is there anything else that you guys are producing, et cetera, other than the farm to consumer.org? Do you guys have a podcast, a blog or things as well where people can go read and learn more about these topics?
00:33:49
Speaker
Yeah. Well, we're certainly on social media, right? So we've got Facebook, Instagram, YouTube, I think. And so folks can follow us there. We're starting to do a lot more on those sites. Obviously I'm not the one in charge of our social media, but we also have the website of course. And we have some folks that are members that don't want to be on the website and you can certainly just call us and we have really small farms that sometimes don't want to be, want to be part of this internet world. And you can always contact us that way.
00:34:16
Speaker
One thing I should probably read that phone number since I'm talking about calling us. So you could call us at 703-208-3276 or go to farm2consumer.org. And in addition to our resources there, we do have emails that go out to readers every other week.
00:34:36
Speaker
We have member resources and member communications that go out to folks. I also strongly encourage folks to take a look at our action alerts. And once you are in our system through emails, if there is pending policy work going on, you will get an email informing you of some current public policy that's being debated somewhere like tomorrow. There's a hearing in North Dakota on
00:34:58
Speaker
raw milk, right? So those kinds of things you would be, uh-oh, I said tomorrow, it's going to be over by the time this airs. But in any case, those sorts of examples may come up where folks will get notified by that. And so, yeah, I do encourage folks to take a look and to consider joining for any listeners that aren't producers. We do have consumer memberships also that support your small farms. That's really helpful. And I just want to say too, I don't think we got into it, but
00:35:27
Speaker
It's, I find it really important to draw these agreements up individually for people like we don't just offer these template forms, and a lot of it is because it has to do with your state law, you might have a municipal or county thing going on, you might need a permit for something that's completely separate from
00:35:46
Speaker
the agreements that we're drawing up, right? That might be very local. And so we wanna pay attention to that. And then there might be different rules depending on what your products are. And so that can be really important as well. It gets really nuanced really quickly, but it's a reasonable fee we think for folks to join as a farmer member and get that consultation.
00:36:05
Speaker
Well, Alexia, just so thankful for your time and all the work that the Farm to Consumer Legal Defense Fund is doing on behalf of farmers across all 50 states in America. And I encourage folks to tune in next time to hear from Alexia when we'll dive into a number of other topics that are going to be to another issue that is going to be germane to farmers, right? Like for us, we're always trying to dive in on topics to help you feel more informed. And again, make sure you're in compliance with your state regulatory requirements.
00:36:35
Speaker
so that you're not running afoul and don't have people knocking down your doors or inspectors to shut you down. You really want to have people like Alexi and her team on your side. Again, I encourage you to go to farmtoconsumer.org. You can also give them a call, as she said, at 703-208-3276. That's 703-208-FARM.
00:36:57
Speaker
So, thank you again, Alexia. And to learn more about Barnadore, including access to a number of other resources, including prior podcasts that I have done with Alexia on, again, a range of different topics, you can go to barnadore.com backslash resources. Thank you for tuning into the Direct Farm podcast, and we look forward to seeing you next time. Cheers. Bye-bye.
00:37:21
Speaker
Thanks for tuning in. For more free farm resources, tips, and tactics that are most successful farms used to grow and manage their business, visit barnadore.com slash resources. Also don't forget to subscribe to the Direct Farm podcast to automatically download our weekly episodes. Thanks for listening and we'll see you next week.