Anticipating Your Needs, Exceeding Your Expectations
by Anne G. Brown, Esq. | Sjoberg & Tebelius, P.A.
The July/August 2009 issue of MVMA News featured an article on Veterinary Liens that warrants additional comments. The author, Mr. Henri Minette, outlined three potential types of liens for veterinarians to pursue: a personal property lien under Minnesota Statutes sections 514.18 and 514.19; a summary sale lien under sections 514.93 and 514.94; and a Veterinarian’s lien under sections 514.965 and 514.966. He correctly notes that the latter is the least cumbersome type of lien in terms of recovery and satisfaction and that the Veterinarian’s lien under section 514.966 is specifically for “emergency services.” But what if the veterinary service wasn’t an emergency? Is the veterinarian stuck with the more cumbersome enforcement provisions of 514.19?
It is worth noting that section 514.966 actually enumerates four types of agricultural liens: (1) Veterinarian’s, (2) Feeder’s, (3) Breeder’s, and (4) Livestock Production Input liens. Under the right circumstances, any one of these four liens could be available to a veterinarian.
Feeder’s Liens: A veterinarian has a Feeder’s lien on livestock if the veterinarian “contributes to the care of livestock, including medical or surgical treatment” and “does so in the ordinary course of business” and “at the request of the owner or legal possessor of the livestock.” Minn. Stat. 514.966, subd. 4(a). The definition does not require the service or treatment to be an emergency.
The name “feeder” can be misleading. The most common Feeder’s lien holders are those who actually feed and tend the livestock on a daily basis, e.g., herdsmen. But the term “feed” is broadly defined within the statute to include “drugs.” MINN. STAT. § 514.965, subd. 6. For veterinarians, a Feeder’s lien could arguably be based on a doctor-patient/client relationship 1 , a hands-on diagnostic evaluation of a herd, and regular visits to check on the health and recovery of the infected group.
Breeder’s Liens: A veterinarian has a Breeder’s lien on the livestock bred, as well as the resulting offspring, if the veterinarian provided the collected semen or ova used in the fertilization, artificial insemination, or any other artificial means of impregnating the livestock, and did so in the ordinary course of the veterinarian’s business.
Livestock Production Input Liens: A veterinarian has a Livestock Production Input (“LPI”) lien if the veterinarian provides feed (read “drugs”) and labor used in raising livestock. An LPI lien holder is, essentially, a mere supplier and does not have the hands-on relationship with the livestock as, say, a feeder or a breeder would have. Because of this more removed relationship to the livestock, when it comes to priority, LPI lien holders take a back seat to the other three agricultural liens defined above, as well as many other security interests.
Priority: It is this notion of priority that is the real sticking point. The distinction between the four agricultural liens is a heady one because of how the statute dictates priority and, therefore, the order in which the various liens are satisfied. Certain types of liens have priority over others and then, within each type of lien, priority is determined according to the date on which the lien was effective 2 Veterinarian’s liens have priority over Feeder’s, which have priority over Breeder’s, which have priority over LPI liens and all other security interests. Between LPI liens and other security interests, an LPI lien only gains priority over a competing security interest if the food or labor was provided to the livestock before the secured party gave value to the debtor. 3
It does not take much imagination to see that disputes can arise among competing lenders and agricultural lien holders as they each try to get the upper hand in the priority game.
Going Forward: When Mr. Minette stated that Minnesota law on the subject is not known for being a “paragon of clarity,” he was not kidding. For example, while the general understanding in the industry is that “feeders” have a hands-on relationship with the livestock, neither the statutes nor the case law give practitioners any definitions or examples with which to work when applying the term to a veterinarian providing non-emergency medical treatment to livestock, even on a regular basis. The difficulty for attorneys and their clients arises from this lack of a case-law beacon to interpret the murky statutes and guide the way. For now, veterinarians who want to pursue an agricultural lien based on non-emergency services are faced with a business decision:
- Option One: Argue that the veterinarian has a Feeder’s lien to avoid the pitfalls of the LPI vs. Lender priority war; or
- Option Two: Acquiesce to the LPI slot and pick up the scraps from the lender’s table.
A vie for the first option will send lenders kicking and screaming and will necessarily result in a more expensive process in terms of attorneys’ fees with no guaranteed outcome. However, a successful bid should create larger settlements and/or long-overdue case law to secure a solid foundation for the future of veterinary liens.
* Updated 9/2012
In light of recent case law, the purpose of this article is to provide an updated analysis.
To summarize the four livestock liens previously discussed, the highest priority is the “veterinarian’s lien,” which is for “emergency services” provided by a licensed veterinarian in the ordinary course of business. Emergency services include “surgical procedures, administering vaccines, antisera, and antibiotics, and other veterinary medicines, treatments, and services performed, primarily to protect human health, prevent the spread of animal diseases, or preserve the health of the animal or animals treated.” Minn. Stat. 514.965, subd. 4 (emphasis added). The lien on the livestock is for the “value of [those] services.” Minn. Stat. 514.966, subd. 1.
The next highest priority is the “feeder’s lien” which is for the storing, caring for, and contributing to the keeping, feeding, pasturing, or other care of livestock, including medical or surgical treatment. The feeder’s lien is for the “price or value” of the storage, care, or contribution, including legal charges. The definition of “feed” includes drugs and animal health products.
The next highest priority is the “breeder’s lien,” which, because of its limited applicability, is not discussed here.
A bank’s security interest falls into line next, followed by the lowest priority livestock lien: the “production input lien,” which is for the “unpaid retail value” of production inputs such as feed, drugs, and other health products supplied.
NOW CONSIDER THIS SCENARIO: A veterinarian examines a livestock producer’s livestock. He/she diagnoses disease, prescribes certain drug treatments, and administers the first vaccines. Subsequently, the veterinarian supplies the livestock producer with additional vaccines and provides the livestock producer with drug treatment education and instructions on how to administer the vaccines. The veterinarian later makes periodic visits to the farm to monitor the health of the herd.
If the account becomes delinquent, what kind of lien should the veterinarian file?
Clearly, the veterinarian can get a veterinarian’s lien for the value of the services he/she administered and performed 4. Furthermore, although the statute simply states “value of the service,” there is some case law to suggest it would include the value of the supplies administered and used to perform the medical treatment. See New Concept Confinement Tech. Feeders, Inc. v. Kuecker, 364 N.W.2d 450, 452 (Minn. Ct. App. 1985), review denied (Minn. May 31, 1985) (stating that the veterinarian filed a proper lien statement, specifying the value of the services and supplies provided).
But what about the value of the vaccines supplied to the livestock producer that the veterinarian him/herself did not directly administer? Is the veterinarian a “feeder,” having contributed to the medicating of the livestock, or is he/she now a mere supplier, and therefore relegated to the low-priority, production-input lien?
In my earlier article, I suggested that, to get above a bank’s security interest, a veterinarian might pursue a feeder’s lien for the price or value of the contribution not directly administered. This lien would be “based on a doctor-patient/client relationship, a hands-on diagnostic evaluation of a herd, and regular visits to check on the health and recovery of the infected group.” However, at the time, I issued a caveat that the outcome was murky given that there was no Minnesota law interpreting the statutory lien.
Flash forward three years.
On September 4, 2012, the Minnesota Court of Appeals issued a published opinion that finally began to shed some light on what the court will require for a feeder’s lien. The case, First National Bank vs. Profit Pork, LLC et al., considered a claim by Wilmont-Adrian Cooperative that it had a “feeder’s lien,” which was statutorily superior to the bank’s security interest. No. A11-1732, 2012 WL 3792175 (Minn. Ct. App. Sept. 4, 2012) 5
Wilmont-Adrian 6 argued that it was not the typical feed supplier because it also (1) specially mixed the grain with antibiotics, (2) provided information and education on the product, (3) recorded hog performance, and (4) recommended a stage-feeding program based on its hog-growth findings. Because Wilmont-Adrian was not merely supplying feed, it argued that its lien was properly defined as a feeder’s lien, and not the low-priority, production-input lien applicable to mere suppliers.
The court held that, despite Wilmont-Adrian’s specialty mixing of grain, educating the producer, and monitoring of the livestock, its involvement with the animals was still insufficient to form the basis for the higher-priority feeder’s lien. In short, the court held that for a person or entity to have a feeder’s lien on the livestock, that person or entity must show that he/she/it has a “direct connection” with the livestock itself.
The court did not go into specifics as to what degree of contact an entity who provides drugs to livestock would have to have (daily, weekly?) with the animals to qualify as a “feeder.” However, the Court was clear that it is looking for regular, direct, hands-on
to satisfy the feeder’s lien requirements. In other words, educating the livestock producer on proper administration of vaccines will not suffice. Most likely, a doctor-patient relationship that exists primarily on paper will be similarly insufficient. Still in question is whether a veterinarian can successfully argue that the subsequent supply of vaccines is sufficiently tied to the original hands-on labor, thereby constituting an ongoing, direct connection.
What is clear is that First National Bank vs. Profit Pork, LLC makes the feeder’s lien an even bigger gamble for veterinarians than it was originally. With that in mind, it will be important for veterinarians to (1) focus on the timing requirements to perfect a Veterinarian’s Lien (180 days after the last service is performed); and (2) file a statutory Lien Notification Statement for the value of product supplied but not directly administered. Only if the Lien Notification Statement goes unanswered by the bank, can the veterinarian raise its production-input lien above the bank’s security interest.
Of course, best practice (and this really goes without saying) is to pay close attention to outstanding accounts for products supplied, and not to allow them to fall into significant arrears.
1See, e.g., Berres v. Anderson, 561 N.W.2d 919, 923 (Minn. Ct. App. 1997), review denied (Minn. June 11, 1997); Rehn v. Fischley, No. C0-95-813, 1995 WL 731306, at *3 (Minn. Ct. App. 1995), review granted (Minn. Feb. 12, 1996) (equating physician-patient relationships veterinarian-patient/client relationships).
2Veterinarian, Feeder’s, and Breeder’s liens are “effective” when the services are provided to the obligor; LPI liens are effective when the inputs are furnished by the supplier to the purchaser.
3An LPI lien holder must also protect its interest by providing the lender with a lien-notification. If the lender provides the lien holder with a letter of commitment, that letter takes the place of the lien. If the notification is refused, which is arguably the more likely result, the rights of the lender and lien holder remain the same under the rules of priority. If the lender fails to respond within the time allotted by statute, only then can the LPI lien holder trump the lender. MINN. STAT. § 514.966, subd. 3; Underwood Grain Co. v. Harthun, 563 N.W.2d 278, 280-81 (Minn. Ct. App. 1997) (citing former section 514.952); Meadowland Farmers Coop v. Behrendt, No. C1-02-548, 2002 WL 31370468, at *2 (Minn. Ct. App. 2002).
4Assuming the strict timing requirements are followed
5 An actual N.W.2d cite will be forthcoming; however, at the time of this posting it is not yet available.
6Notably Wilmont-Adrian is not a veterinarian; however, the arguments are similar to those that a veterinarian pursuing a feeders lien might make, and the conclusions of the court are applicable to veterinarians.