Farm Legal Series #9: Buyer’s Clubs or Herd Shares?
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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James Maiocco: 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.
This is the ninth episode in a series of podcasts we've done with the Farm to Consumer legal defense. Each of which have been highlighting a different farm legal challenge. Today we're gonna be discussing buyers clubs and herd [00:01:00] shares and a number of legal nuances that can be associated with them.
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, and we're obviously delighted to welcome back again Alexia Kulwiec, who is the executive director of the Farm to Consumer Legal Defense Fund. 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 US agriculture, promoting small scale farmers, and sustainable farming that protect the rights of independent producers across America.
Welcome back, Alexia. It's great to 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, uh, farm to Consumer Legal Defense Fund does day-to-day.
Alexia Kulwiec: Sure. Yeah. So first, it's great to see you again, James, and thanks for having me on the podcast again. [00:02:00] It's always a pleasure. We really enjoy the work with Barn2Door, so Farm to Consumer Legal Defense Fund is a nonprofit organization that provides direct legal services to 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.
James Maiocco: And for farmers, who might be interested in learning more about their work, you can go to farm to consumer.org and on their website it's an amazing site.
And I can say this cuz I am an attorney as well. They have assembled incredible resources that are freely available to anyone, including like maps that, you know, kind of breakdown state by state, you know, general parameters and requirements. 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 [00:03:00] 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 in entails general guidance. Is that correct Alexia? Obviously if there was 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?
Alexia Kulwiec: Yeah. So for the $125 a year, farmers can get legal counsel, 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. 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. [00:04:00] And then particularly if members are facing a potential conflict, such as an allegation of a violation, some.
Inspection or investigation by a state agency. We will almost always provide that representation for a direct, investigation like that. 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 council, if there's any. Action before an agency is a vast majority of what we are doing directly for our members.
James Maiocco: Well, I have to say thank you so much for all your great work and also all the benefactors who are out there, contributing to the Farm to Consumer Legal Defense fund cuz they're the ones who are helping to subsidize your cost 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.
All right, well, let's dive. To [00:05:00] today's topic, cuz 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 gonna be diving into buyer's 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.
Alexia Kulwiec: 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 talking about buyer's 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, it, the thing about buyer's clubs, they can be extraordinarily useful, I think, [00:06:00] 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 buyer's club, that means we're stepping outside of the regulatory scheme and that's not really true. Herd share agreements are a way of providing legally our 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. So there, 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 [00:07:00] you're protected by the regulatory process.
James Maiocco: So, big distinction, just for simplicity's sake, a buyer's club would be like, Hey, I joined Sam's Club so I can buy products at a lower price. Mm-hmm. , right? In which case there's a fee to join 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. 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?
Alexia Kulwiec: Yeah. I think that's a fair description. And I think buyers clubs, even when 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, 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, to [00:08:00] understand it's not ownership interest, and it has, it doesn't protect, producers or those consumers necessarily from a regulatory scheme.
James Maiocco: So some states require that you must enter into a her share agreement in order to sell direct to consumers, uh, 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? Cause I know you guys had 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.
Alexia Kulwiec: Yeah, absolutely. So I'm gonna, for my comments, I'm thinking specifically about dairy for now.
Cause that's, when I say hercher, that's typically what we are doing. And I wanna say even, I'll take a, take a step back, I suppose and say that, you know, you cannot sell raw milk, across state lines. And, but each state then has its own regulatory system, right? So some states allow the sale of raw milk, some states place conditions on.
Some [00:09:00] states prohibit it and then some states, you might have herd share arrangements as a way to obtain realm milk. So before I even get into the details of what you said, 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 you're 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 great distinction. Some states. 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 if there's no [00:10:00] prohibition, 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.
James Maiocco: 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, directly from a farm or whatever livestock that they sell.
However, in some states, you cannot actually purchase the product. You're actually, you're purchasing an interest in the herd, a k a herd share, right? And then you're just a, effectively a beneficiary or whatever that herd produces, whether it be milk or proteins. Right. Is that correct?
Alexia Kulwiec: Mm-hmm. Right.
James Maiocco: So back to the question I was asking, which is between those two you guys have on your website today@thefarmconsumer.org, there's, I think you guys have a map that's laid out under the resources page, right? That gives mm-hmm. a little bit of some guidance around it. Where these lines are drawn, right? Effectively, state by state. Is that correct?
Alexia Kulwiec: Correct.[00:11:00] Below the map in a chart will tell you if a lot of times you can have sales that are on-farm only. 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
James Maiocco: about raw milk. . Great. So you brought up another point earlier too, which was talking a little bit about like, Hey look, we all wanna be very specific. This is for sales intrastate 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, cuz as you said earlier, raw milk cannot be sold across state lines. But if, let's say I'm a producer of proteins and I'm in a state where buyers are permitted, consumers 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, you know, necessarily set up to support those types of buyers, that type of buying arrangement. Right. Can you, for instance, [00:12:00] have a cross, cross state line herd share agreement?
Is that possible? If I'm in an a state adjacent to a state that doesn't permit selling direct to consumer.
Alexia Kulwiec: Yeah. 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 U S D A or state inspected facility. Typically state inspection facilities are only for in-state sales. And you would need a U S D A facility to go across the state lines. There is a program, for interstate shipment that a couple of states have. State facilities that allow you to ship across state lines.
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 to, when you [00:13:00] sell a portion of a live animal, say a quarter of a live animal, 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 your, the producer's state, right? And pick up their share from a processor and bring it to wherever they want. That's now their product, that from their animal, and that's perfectly legitimate.
James Maiocco: Now, these are two really important distinctions that I just heard from you. Number one. If I'm in a state and I wanna sell across state lines a protein I need to be going to a U S D A 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.
You're going to need to, most do not, you're gonna need to be going to U S D A processor. So any farmer listening, thinking about, if you're in an area, let's say you're in like Maryland, Virginia, Delaware, where you might [00:14:00] have a high density people that could be selling very tight vicinity.
The safest pathway there would be obviously using a U S D A processor, number one, right?
Alexia Kulwiec: Correct, yeah.
James Maiocco: So then the second thing I heard from you, 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 across state lines, from purchasing it, provided they come into your state to pick it up, right? Is that correct?
Alexia Kulwiec: Correct. Yeah. Yeah. So you can't ship to them out of state, but if they wanna come and pick up their own product from that producer, which in some of those states that you've talked about, right.
James Maiocco: Let's say you, you live in Maryland and you purchase from a producer in Pennsylvania or Virginia. You could readily drive from Maryland into Pennsylvania. Pick it up from that Pennsylvania producer. From a State Waterhouse and go home facility and then go back home. Right. Okay. Yeah, that's great. That's good. Absolutely, because
Alexia Kulwiec: Cause that's yours at that point. For your personal use in your household, you cannot resell it. That has to be for the [00:15:00] consumers household use? Yeah.
James Maiocco: Got it. What, what about raw milk in that scenario? Is it possible to go across state lines? Cuz great example in Pennsylvania there's a lot of great dairy farmers there who do produce raw milk, and I could very well imagine I used to live right?
Nice drive up into the countryside outside of Lancaster and go, 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's that work?
Alexia Kulwiec: No, as long as they're, they're producing it and selling it within their own state, they're fine.
Right. Okay. So in Pennsylvania, you can get a rom dairy permit, sell directly from your farm. Consumer can cross the state and just purchase it. You don't have to have a herd chair and bring wherever they want. Cuz once you've purchased it, it belongs to you and it's for your personal use.
James Maiocco: That's fantastic. Well, that's a good news for farmers, right? So on-farm pickup works quite well. Sounds like that'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 [00:16:00] where I'm required to have a herd share for my dairy or for my livestock. Is it possible for that, for a, an individual to be, again, across the state line, can they purchase into a her share across state line and then still go pick up the product that be a beneficiary of products that they happen to pick up, on farm and then drive back across state lines?
Is that permissible?
Alexia Kulwiec: Sure. I think the same would be true because the herd is with the production of the milk and the herd belong in one, are 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 or of a herd, living across the state line as long as you're coming into that state, to obtain the product. and the, it's not a transaction cuz it's your product, but the delivery so to speak, takes place within that, the state you should be fine the same way.
I also just wanna mention, when you're look specific to dairy is that even in states that may look like they permit raw [00:17:00] 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 that 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 her share arrangement just based on the requirements. That's all.
James Maiocco: So you're bring, you're bringing up some elements of language, right? So this is really interesting, right? So 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. Americans today certainly are well aware of the concept of a subscription.
On average, American has nine subscriptions. Sure. Whether it be Netflix or Spotify or what have you. Right? We have a lot of food producers around the country who are selling subscriptions to food. Right? Because clearly, we're all gonna keep eating every week, and most of our grocery lists look the same 90% of the time, week over week.
What's, what are some [00:18:00] of these language requirements when thinking about selling a product or a beneficial interest in a herd, do they have to be explicit cuz I'm just kind of curious is if, if this might be a little bit of a barrier in terms of attracting buyers as well, or I should say, or shareholders.
So can Sure. Give a little clarity on that?
Alexia Kulwiec: Yeah, so again, using raw dairy, herd shares or sale of raw dairy, certainly there are labeling requirements, that will require, in 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.
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 in official advice has been, and they're making their own decision as to what kind of food they [00:19:00] want to consume.
James Maiocco: I did not know that they actually require a declaration That it is unhealthy or does it say may be unhealthy?
I'm just kinda curious cause I find that, personally, I don't know about you, but I'm sure many of our listeners like me, I find that offensive, like 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's the only way I can go. And I love raw milk. It's fantastic for your skin, for your body. All those microbes in my stomach. I digest food better. It's just fantastic. But kind of, kind of sad to see that it's been so politicized, as to be labeled unhealthy by our regulatory agencies.
It's too bad.
Alexia Kulwiec: Yeah, it is too bad. And I'm trying to... I guess the language I'd have to pull up, so like I say, varies state by state, but typically it is, you know, may be harmful to your health or that the CDC takes the position that pasteurized milk can contain harmful pathogens, that kind of [00:20:00] language.
I don't have the exact language in front of me. I probably should. So some states 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 it, it, 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 your LA language from state to state.
James Maiocco: 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, cuz they have lawyers that represent folks in every state across the country.
Again, so you can go to farmtoconsumer.org if you want to sign up as a member and learn more. Their organization and perhaps become a beneficiary of this.
All right, [00:21:00] 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. I 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 that I get, cuz I know what I'm gonna 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, will say, Hey, like, why don't you just pay up upfront for 12 months and I'll give you a discount at 10% type of thing. And it's based on some sort of value over that 12 months that, that they give me a promo or I can pay monthly as I go type of thing.
I can just pay each time the box is delivered. How does that work with her chair agreements? How does a financial arrangement, do they have to buy in? Are they expected to pay annually, every month. How does that work?
Alexia Kulwiec: So, I mean, the main distinction here again, is that in your subscription idea, for your buyer's clubs ideas, it's still.
[00:22:00] A direct purchase of food from the farm, right? And the use of these, they just, of a buyer's club arrangement, for example, and a her chair 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. 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, most 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, which would be a one-time, it's like I'm buying a share of stock in anything, right?
So I'm buying one share of that herd. And you [00:23:00] 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 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 for that room and board.
So you, there's really no reason you couldn't do that a number of ways, whatever. Seems to work best for everyone. Monthly does seem to be the most common for our members. Yeah.
James Maiocco: Yeah. I sure love that idea of a monthly maintenance subscription, right? Like, Hey, look, I, [00:24:00] maybe there's a one-time payment to purchase again, my interest in the herd share.
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, ongoing costs. Just the revenue of that is a really nice, I think, beneficial, aspect of that, that arrangement, right?
Because obviously farmers have lots of ongoing costs, feed cost, obviously maintenance or, there's a lot of things that are gonna come up. from time to time. So the more that they can have as recurring and come the better in terms of financial solvency and sleeping better at night, that's for sure.
What if, like today, with my meat box subscription, now 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.
What 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 it ends at the end of the month. I can do the same thing with my beat buyer subscription here in Washington. How does that [00:25:00] work with herd shares? Am I selling my interest back?
I cancel my maintenance subscription. And then is there or am I out the money? Like how does that work?
Alexia Kulwiec: It can happen another, a couple of different ways. Right? But the bottom line is that yes, when that per 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. And what we do is typically our arrangements, our contracts between the producers and the, 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 purchased 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 [00:26:00] stop paying the monthly maintenance fee, the share might revert back to the producer.
Or it might be something where, the producer would have repurchase that share and I mo 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.
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 I, I, you know, producers don't love that , right? Because they don't wanna have to buy back shares. But the reality is it's different than a subscription because these consumers now own an actual, you know, 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 arrange. understand it. And a lot of times they just will forfeit that share right when they're, when they move or they wanna stop getting milk on a weekly basis. But sometimes we have to see the reach of purchasing for that to make, for that [00:27:00] to work.
James Maiocco: So, so I heard a couple things there. First off, is that obviously having controls that make the interest in the herd share non-transferable, right? So the farmer right, can rest assured that somebody's not gonna go transfer this to, somebody else on their block if they decide to move.
That type of thing. It's gonna be. specific to that individual or revert back to the producer. 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 repurchase. 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 and then paid a monthly maintenance fee, and then we had unlimited use of the boats in that membership as part of that membership. But then when we decided to cancel and stop paying that monthly maintenance, we no longer got access to the boats.
But more importantly, we forfeited. That upfront fee. I had no love loss. We got our benefit [00:28:00] out of it. We were members of it for five years. We had lots of good memories with our kids on those boats. So it is what it is. Right? But I can very well imagine, like I, I would love to see farmers not have to be in that position, as you said.
Yeah. Of, of having to repurchase those shares. It seems unfair to the farmer in many ways. Do some states actually compel that? Would they consider it 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 be revert back to them?
Alexia Kulwiec: Yeah. To be honest, I haven't really seen that kind of detail here. You know, they'll just say that people have to actually have an ownership share. But how exactly that works, except that there are, 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 herd shares
you can make [00:29:00] it so that the producer has the right to purchase it, like a writer first refusal. But you cannot outright just say, that's not transferable, because that, that would take away from it being a true ownership of that share. But you can, 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 I just, I, that distinction is important. And I wanna say, so anybody that's listening, I'd wanna 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 then the big distinction between, the herd shares in your boat scenario is, you know, you didn't purchase a portion of. Boat club, right? It was like more like an initiation or a startup fee. And so with the HD shares, it's like, I purchased a share of stock in,[00:30:00] you know, ADM or whatever, and I own that, so that's worth value.
I purchased it. And so just under regular securities law, 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, I, you, 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 is a practical matter, I think most consumers work with the producers and 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 the owner out, right? Like that you could decrease that amount over time, for example. But that gets even more complicated than these documents. And then people are upset that the document kind of complicated, but it, it's to protect the [00:31:00] producer.
James Maiocco: Well, I am a corporate securities attorney, so interestingly enough that's why I did practice.
So yeah, it does vary quite a bit. So I've probably mis-spoken. No, no, you, you, you got it. Pretty, pretty spot on. Right? Uh, for those listening right now, it's obviously just like, 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 Alexia is referring to is, a area of law called corporate securities. 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, this could be, you know, governed differently at each state. Cuz there is different state securities law.
Some states may require certain types of filings. Again, I think it just underscores to, Alexia's earlier point. Very wise to get good counsel, and make sure that any her share 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 could very well imagine that because it is an ownership interest. I do know [00:32:00] that sometimes with stock you can have things set up where again, you can, as a private stockholder, can put restrictions on first rights of refusal limitations on transfer of ownership, except for like certain in test state transfers like for inter-family.
Okay. Like I could pass on my children and those types of things or move it into a trust for the benefit of my family. Then the other things oftentimes too is you can revert a securities back for repurchase, many time on our first write of refusal at par, value of that interest, right? Which can be a very low dollar amount.
Oftentimes it might be a penny or a fraction of a penny to repurchase it. So I know that many private companies do this. I, I can very well imagine in agreement structured in that manner, cuz again, I get back to wanting to protect the farmer to make sure that if their, her share agreement's drawn. That whatever that initial buy-in is by a beneficiary or a shareholder, that hopefully the farmer's not gonna have to pay much of that back, if any at all, except for right.
Phenomenal amount, for somebody who chooses to cancel [00:33:00] or stop paying their maintenance fees. Right. So, well, these we're getting a lot of nuances. Well, I wanna be respectful of your time and our listeners as well as you can hear from the conversation between Alexia and I, we can geek out on this as attorneys.
Maybe Alexia you just talk a little bit about like, if again, I would encourage folks to take advantage of getting counsel in your state, or a, 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.
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 farmtoconsumer.org? Are there you guys, do you guys have a podcast, a blog or things as well where people can go read and learn more about these topics?
Alexia Kulwiec: 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 [00:34:00] 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 firms that sometimes don't wanna be, want, wanna be part of this internet world. And you can always contact us that way. One thing I'm, Actually, 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 phar two consumer.org. And in addition to our resources there, we do have, emails that go out to readers every other week. 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 email, 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 Raw Mill. Right? [00:35:00] So those kind of things you would be, uh oh. I said tomorrow it's gonna be over. By the time this stairs it's okay. 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 wanna say, Two. I don't think, we got into it, but 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. So 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 [00:36:00] it's a reasonable fee we think for folks to join as a farmer member and get that consultation.
James Maiocco: Well, Alexia, just so, um, 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 gonna be, specific to an issue that is gonna 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, so that you're not running a foul and don't have people knocking down your doors or inspectors coming to, to shut you down. Right?
You really wanna have people like Alexia and her team on your side. Again, 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.
So thank you again Alexia. And to learn more about [00:37:00] Barn2Door, 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 barn2door.com/resources. Thank you for tuning into the Direct Farm podcast and we look forward to seeing you next time. Cheers. Bye-bye.