Updated: Jun 20, 2021
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As the hemp industry continues to grow, we are seeing several contractual disputes arise. A federal district court has recently highlighted that federal and state seed laws may not create a private right of action when improperly labeled hemp seed is sold to a grower. This view is similar to a view used with other seeds falling under the jurisdiction of federal and state seed laws. The recent decision, Hempchain Farms, LLC v. Sack, included other claims based on contract law that we will not discuss today.
Hempchain Farms, LLC contacted Organic Growers, LLC and Eagle Springs Organic, LLC in 2019 to purchase specific hemp seed. Hempchain was looking for feminized hemp seed which did not contain hermaphrodites or male plant seeds. The two companies each told Hempchain that they could supply those seeds and that all seeds met both the industry standards for feminized seeds and the requirements of the Federal Seed Act (FSA) and Colorado Seed Act. Organic Growers also assured Hempchain Farms that seeds would have a 90-percent or greater germination rate. Hempchain Farms ordered 200,000 feminized seeds from Organic Growers.
Seeds arrived at Hempchain Farms with labels claiming an 84-percent germination rate, and Colorado Seed Laboratory, a seed laboratory through Colorado State University which tests for purity and germination, also told Hempchain that the seeds had an 84-percent germination rate. In reality, the seeds actually only provided a germination rate at or below 30 percent. Organic Growers provided 90,000 replacement seeds at the original quality agreed upon. The replacement seeds were also found to be contaminated and provided germination rates well below 90 percent.
Hempchain Farms brought a lawsuit in federal district court against Organic Growers for losses due to the poor quality seeds and increased manpower costs. Hempchain Farms alleged, among other claims, that Organic Growers and Eagle Springs Organic had violated the FSA and Colorado Seed Act.
Federal and state seed laws are designed to prevent the spread of poor quality seeds which could result in low-yielding crops or cause the spread of noxious weeds. The FSA is a federal law regulating the interstate shipment of seeds. The FSA requires that all seeds shipped through interstate commerce contain accurate labels and prohibits the importation and movement of adulterated or misbranded seeds. The Act is enforced by USDA’s Agricultural Marketing Service (AMS), which provides seed testing services through the Agricultural Marketing Act. Amendments to the FSA in 2000 now require USDA’s Animal and Plant Health Inspection Service to regulate the importation of field crop, pasture, forage, and vegetable seeds which may contain noxious weed seeds.
State seed laws, such as the Colorado Seed Act, require truthful labeling in all seeds offered for sale in the state. Similar to the FSA, state seed laws are designed to prevent the distribution of poor quality seeds which may result in low crop yields, poor crop quality, and the spread of noxious weeds.
In reviewing the two claims involving the FSA and the state seed law, the ultimate issue for the court is whether those two laws create private remedies. It is important to note that not every violation of a federal or state law creates a private cause of action that a person can use. In looking at the language in the FSA, the court determined there is no implied or expressed right of private action. The FSA contains language saying that the federal government would pursue any legal action brought to enforce the FSA.
The court also looked at the language in the Colorado Seed Act. Similar to the FSA, the language of the Colorado law does not provide for private action. The Act allows the state commissioner of agriculture to enforce the law but no option for a private person to enforce the law. The court dismissed the claims involving the FSA and the state seed law.
Seed acts protect consumers to ensure that seed labels are accurate and improperly labeled seeds are not sold to growers. That said, they do not create private rights of actions for growers who have received poor-quality seeds, although contract laws would still provide a remedy for growers. In a future post, I’ll cover the contract law claims in this lawsuit.
This is material is based upon work supported by USDA/NIFA under Award Number 2018-70027-28588.