1.1                          A bill for an act 
  1.2             relating to agriculture; creating a rural dispute 
  1.3             resolution procedure; amending Laws 1986, chapter 398, 
  1.4             article 1, section 18, as amended; proposing coding 
  1.5             for new law as Minnesota Statutes, chapter 40B. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  [CITATION.] 
  1.8      Sections 1 to 20 may be cited as the "Rural Dispute 
  1.9   Resolution Act." 
  1.10     Sec. 2.  [LEGISLATIVE FINDINGS.] 
  1.11     The legislature finds that mediation between agricultural 
  1.12  debtors and creditors has been a positive force in the 
  1.13  maintenance of the quality of life in rural Minnesota, and that 
  1.14  alternative forms of dispute resolution serve the best interests 
  1.15  of the parties and their communities.  The optimum use of 
  1.16  dispute resolution procedures requires establishment of orderly 
  1.17  procedures to conduct mediation, arbitration, and other 
  1.18  alternative dispute resolution processes and to establish 
  1.19  incentives and a framework for parties to agricultural or rural 
  1.20  disputes to resolve their differences without resorting to 
  1.21  litigation. 
  1.22     Sec. 3.  [40B.01] [DEFINITIONS.] 
  1.23     Subdivision 1.  [APPLICABILITY.] The definitions in this 
  1.24  section apply to this chapter. 
  1.25     Subd. 2.  [ADMINISTRATOR.] "Administrator" 
  2.1   means....................... or the administrator's designee. 
  2.2      Subd. 3.  [AGRICULTURAL PROPERTY.] "Agricultural property" 
  2.3   means real property that is or has been principally used for 
  2.4   farming and personal property that is used as security to 
  2.5   finance a farm operation or used as part of a farm operation, 
  2.6   including equipment, crops, livestock, proceeds of the security, 
  2.7   and removable agricultural structures under lease with option to 
  2.8   purchase.  "Agricultural property" does not include personal 
  2.9   property that is subject to a possessory lien under sections 
  2.10  514.18 to 514.22, property that is leased to the debtor other 
  2.11  than removable agricultural structures under lease with option 
  2.12  to purchase, or farm machinery that is primarily used for custom 
  2.13  field work. 
  2.14     Subd. 4.  [ARBITRATION.] "Arbitration" means the use of a 
  2.15  neutral to recommend or decide the outcome of a dispute. 
  2.16     Subd. 5.  [CREDITOR.] "Creditor" means the holder of a 
  2.17  mortgage on agricultural property, a vendor of a contract for 
  2.18  deed of agricultural property, a person with a lien or security 
  2.19  interest in agricultural property, or a judgment creditor with a 
  2.20  judgment against a debtor with agricultural property. 
  2.21     Subd. 6.  [MEDIATION.] "Mediation" means the use of a 
  2.22  neutral to facilitate the negotiations of parties in dispute. 
  2.23     Subd. 7.  [NECESSARY FARM OPERATING EXPENSES.] "Necessary 
  2.24  farm operating expenses" means sums adequate to continue, during 
  2.25  the mediation period, farm operations that began before the 
  2.26  notice of default.  "Necessary farm operating expenses" do not 
  2.27  include expenses for increasing the scale of an ongoing farming 
  2.28  operation or planting additional crops. 
  2.29     Subd. 8.  [SERVE.] "Serve" means: 
  2.30     (1) personal service as in a district court civil action; 
  2.31     (2) service by certified mail using return receipt signed 
  2.32  by addressee only; 
  2.33     (3) actual delivery of required documents with signed 
  2.34  receipt; or 
  2.35     (4) if an unsuccessful attempt is made to serve under 
  2.36  clause (1) or (2), service may be made by mail with a 
  3.1   certificate of mailing to the last known address of the debtor.  
  3.2   For purposes of serving under this clause, the addressee is 
  3.3   considered to have been served the documents five days after the 
  3.4   date on the certificate of mailing. 
  3.5      Sec. 4.  [40B.02] [ELIGIBILITY FOR MANDATORY MEDIATION.] 
  3.6      Subdivision 1.  [DEBTORS.] Mandatory mediation is available 
  3.7   to a debtor who is operating a family farm as defined in section 
  3.8   500.24, subdivision 2, except for a debtor who owns and leases 
  3.9   less than 60 acres if the debtor had less than $20,000 in gross 
  3.10  sales of agricultural products the preceding year. 
  3.11     Subd. 2.  [DEBTS.] This chapter does not apply to a debt: 
  3.12     (1) for which a proof of claim form has been filed in 
  3.13  bankruptcy by a creditor or that was listed as a scheduled debt 
  3.14  of a debtor who has filed a petition in bankruptcy after July 1, 
  3.15  1987, under United States Code, title 11, chapter 7, 11, 12, or 
  3.16  13; 
  3.17     (2) if the debt was in default when the creditor received a 
  3.18  mediation proceeding notice under the former Farmer-Lender 
  3.19  Mediation Act and the creditor filed a certificate of 
  3.20  nonattendance, the debt was mediated, and a termination 
  3.21  statement with respect to that debt was signed; 
  3.22     (3) for which there is a lien for rental value of farm 
  3.23  machinery under section 514.661 or a lien for rental value 
  3.24  relating to a contract for deed subject to the Farmer-Lender 
  3.25  Mediation Act under section 559.209; or 
  3.26     (4) for which the creditor has served a mediation notice, 
  3.27  the debtor has failed to make a timely request for mediation, 
  3.28  and within 60 days after the debtor failed to make a timely 
  3.29  request, the creditor began a proceeding to enforce the debt 
  3.30  against the agricultural property of the debtor. 
  3.31     Sec. 5.  [40B.03] [MANDATORY MEDIATION PROCEDURES.] 
  3.32     Subdivision 1.  [MEDIATION NOTICE.] (a) A creditor desiring 
  3.33  to commence a proceeding to enforce a debt against agricultural 
  3.34  property must serve a mediation notice on the debtor before 
  3.35  commencing enforcement proceedings.  The mediation notice must 
  3.36  be prepared on forms provided by the administrator and set forth 
  4.1   the creditor's enforcement intentions, describe the debtor's 
  4.2   rights under this chapter, and include a mediation request form 
  4.3   provided by the administrator. 
  4.4      (b) For purposes of this chapter, commencing a proceeding 
  4.5   to enforce debt means initiate a proceeding under chapter 550, 
  4.6   580, 581, sections 336.9-501 to 336.9-508, or 559.21. 
  4.7      (c) Each creditor must maintain records sufficient to 
  4.8   demonstrate that its collection proceedings have complied with 
  4.9   this chapter. 
  4.10     Subd. 2.  [MEDIATION REQUEST.] (a) If a debtor wishes to 
  4.11  engage in mediation, the debtor must file a mediation request 
  4.12  form with the administrator within 14 days after receiving a 
  4.13  mediation notice.  The request form must be accompanied by a 
  4.14  filing fee of $100 payable to the administrator.  The debtor 
  4.15  must list all known creditors with debts secured for 
  4.16  agricultural property and unsecured creditors that are necessary 
  4.17  for the farm operation or living expenses of the debtor and 
  4.18  state the date that the notice was served on the debtor.  The 
  4.19  debtor must serve a copy of the mediation request upon the 
  4.20  creditor at the same time the request is filed with the 
  4.21  administrator. 
  4.22     (b) A debtor who fails to file a timely mediation request 
  4.23  waives the right to mediation for that debt under this chapter. 
  4.24     (c) A creditor may commence enforcement of a debt when 30 
  4.25  days have elapsed following service of a mediation notice upon 
  4.26  the debtor and the debtor has not requested mediation. 
  4.27     (d) If a creditor commences enforcement of a debt subject 
  4.28  to this chapter without providing the required notice required 
  4.29  under this chapter, the debtor must be granted the right to 
  4.30  mediation under this chapter, and the proceedings commenced 
  4.31  without notice shall be nullity. 
  4.32     Subd. 3.  [FINANCIAL ANALYST AND FARM ADVOCATE.] (a) Upon 
  4.33  receiving a mediation request, the administrator must, within 
  4.34  five business days, provide the debtor: 
  4.35     (1) a list of persons qualified to review and, if 
  4.36  necessary, prepare the debtor's financial records before the 
  5.1   initial mediation meeting; and 
  5.2      (2) a list of farm advocates available to assist the debtor.
  5.3      Subd. 4.  [MEDIATION PROCEEDING NOTICE.] (a) Within 14 days 
  5.4   after receiving a mediation request, the administrator shall 
  5.5   send a mediation proceeding notice to the debtor and to all 
  5.6   creditors listed by the debtor in the mediation request. 
  5.7      (b) The mediation proceeding notice must state: 
  5.8      (1) the name and address of the debtor; 
  5.9      (2) the time and place for the initial mediation meeting; 
  5.10     (3) the name of the mediator assigned to the matter, along 
  5.11  with a summary of experience for that mediator; 
  5.12     (4) that the debtor and the initiating creditor may each 
  5.13  request the administrator to exclude the mediator by notifying 
  5.14  the administrator within three days after receiving the notice 
  5.15  and that the administrator will appoint a different mediator; 
  5.16     (5) that in lieu of having a mediator assigned by the 
  5.17  administrator, the debtor and the initiating creditor may agree 
  5.18  to select and pay for a professional mediator agreed upon by the 
  5.19  parties; 
  5.20     (6) that, subject to the exceptions in this chapter, this 
  5.21  chapter prohibits the creditor from commencing or continuing a 
  5.22  proceeding to enforce the debt against agricultural property for 
  5.23  60 days from the initial mediation meeting; and 
  5.24     (7) that the creditor must provide the debtor at least five 
  5.25  days before the initial mediation meeting with copies of notes 
  5.26  and contracts for debts subject to this chapter, along with a 
  5.27  statement of interest rates on the debts, delinquent payments, 
  5.28  unpaid principal and interest balances, and the creditor's value 
  5.29  of the collateral.  If the creditor has adopted a debt 
  5.30  restructuring policy, a copy of the policy must be enclosed.  
  5.31  The administrator shall arrange facilities for, and take steps 
  5.32  to ensure that, the debtor is familiar with the mediation 
  5.33  process and has an opportunity to work with the financial 
  5.34  analyst before the initial mediation meeting. 
  5.35     (c) An initial mediation meeting must be held between 15 to 
  5.36  25 days of the notice. 
  6.1      (d) After receiving a mediation proceeding notice, a 
  6.2   secured creditor must return a certificate of nonattendance if 
  6.3   the debt is not subject to mediation and must specify why the 
  6.4   debt is not subject to mediation. 
  6.5      Subd. 5.  [EFFECT OF MEDIATION PROCEEDING NOTICE.] (a) 
  6.6   Except as provided elsewhere, if a creditor receives a mediation 
  6.7   proceeding notice under subdivision 4, the creditor and the 
  6.8   creditor's successors in interest may not commence or continue 
  6.9   proceedings to enforce a debt subject to this chapter against 
  6.10  agricultural property of the debtor under chapter 580 or 581 or 
  6.11  sections 336.9-501 to 336.9-508, to terminate a contract for 
  6.12  deed to purchase agricultural property under section 559.21, or 
  6.13  to garnish, levy on, execute on, seize, or attach agricultural 
  6.14  property until the mediation period has terminated. 
  6.15     (b) Notwithstanding the provisions of this chapter, a 
  6.16  creditor receiving a mediation proceeding notice may commence 
  6.17  proceedings to enforce a debt against agricultural property of 
  6.18  the debtor: 
  6.19     (1) if a court grants relief from the stay on collections 
  6.20  under the procedures in section 40B.04; or 
  6.21     (2) five days after the date the debtor and creditor sign 
  6.22  an agreement allowing the creditor to proceed to enforce the 
  6.23  debt against agricultural property if the debtor has not 
  6.24  rescinded the agreement within the five days. 
  6.25     Subd. 6.  [MEDIATION PERIOD.] The parties may participate 
  6.26  in mediation meetings at any time during the period for which 
  6.27  collection is stayed, up to 60 days after the initial mediation 
  6.28  meeting.  The mediation period and accompanying stay may be 
  6.29  extended by agreement of the parties. 
  6.30     Subd. 7.  [MEDIATION AGREEMENT.] If an agreement is reached 
  6.31  among the debtor and creditors, it may be set down in writing 
  6.32  and signed by the parties.  The debtor and creditors who are 
  6.33  parties to the approved mediation agreement and creditors who 
  6.34  have filed certificates of nonattendance and have not objected 
  6.35  to the mediation agreement: 
  6.36     (1) are bound by the terms of the agreement; 
  7.1      (2) may enforce the mediation agreement as a legal contract 
  7.2   in a district court; and 
  7.3      (3) may use the mediation agreement as a defense against an 
  7.4   action in district court contrary to the mediation agreement. 
  7.5      Subd. 8.  [END OF MEDIATION.] (a) The mediator shall sign 
  7.6   and serve to the parties and the administrator a termination 
  7.7   statement by the end of the time period specified in subdivision 
  7.8   6. 
  7.9      (b) The mediator shall prepare a termination statement that:
  7.10     (1) acknowledges mediation has ended; and 
  7.11     (2) acknowledges whether an agreement was reached and 
  7.12  whether the agreement was reduced to writing. 
  7.13     Sec. 6.  [40B.04] [COURT RELIEF.] 
  7.14     Subdivision 1.  [OBLIGATION OF GOOD FAITH.] The parties 
  7.15  must engage in mediation in good faith.  If a party alleges that 
  7.16  another party has not engaged in good faith mediation, the party 
  7.17  may request relief by filing an affidavit with the district 
  7.18  court of the county of the debtor's residence.  The party must 
  7.19  serve a copy of the affidavit on the other parties to 
  7.20  mediation.  If the court finds that a lack of good faith has 
  7.21  been shown, it may extend the stay on collection activities up 
  7.22  to 180 days, shorten the stay of collection activities, or take 
  7.23  whatever action it deems necessary. 
  7.24     Subd. 2.  [NECESSARY EXPENSES.] If the debtor and creditor 
  7.25  do not agree on the amount of necessary operating or living 
  7.26  expenses to be released from proceeds held from the sale of farm 
  7.27  products, the debtor or a creditor may petition the district 
  7.28  court in the county of the debtor's residence to make a 
  7.29  determination of the amount to be released.  The court shall 
  7.30  hear the dispute and must make a determination of the amount of 
  7.31  living and operating expenses to be released within ten days 
  7.32  after receiving the petition.  The amount that the creditor is 
  7.33  required to release for necessary living expenses under this 
  7.34  section is limited to $1,600 per month less debtor's off-farm 
  7.35  income. 
  7.36     Subd. 3.  [APPRAISAL IF VALUE DISPUTED.] In case of a 
  8.1   dispute between the debtor and creditors concerning the market 
  8.2   value of real property involved in mediation, the true and 
  8.3   acceptable market value must be determined by appraisal as 
  8.4   provided in this subdivision.  If the parties cannot agree upon 
  8.5   an accredited appraiser, either party may petition the district 
  8.6   court in the county in which the debtor resides to appoint an 
  8.7   appraiser in the same manner as a petition to have a party found 
  8.8   in bad faith.  The appraisal to determine true market value must 
  8.9   be performed by an accredited appraiser and made within ten days 
  8.10  of the date of the dispute.  The cost of appraisal must be 
  8.11  divided equally between the initiating creditor or the creditor 
  8.12  for whom the appraisal is relevant and the debtor. 
  8.13     Subd. 4.  [APPLICABILITY OF ACT.] If a creditor disputes 
  8.14  the eligibility of a debtor or debt to participate in mediation, 
  8.15  the creditor must bring an action in district court in the same 
  8.16  manner as provided in subdivision 1.  If the court finds that 
  8.17  the debtor or debt is eligible to participate, the mediation 
  8.18  period and the accompanying stay on collection shall not 
  8.19  commence running until the final court decision. 
  8.20     Subd. 5.  [DISTRICT COURT PROCEDURES.] The district court 
  8.21  shall hear the disputes brought under subdivisions 1 to 4 and 
  8.22  make a decision within ten days after receiving the petition.  
  8.23  The court may add to or subtract from the mediation period up to 
  8.24  ten days to reflect its decision.  If the court rules for the 
  8.25  debtor in a case brought under this chapter, the creditor shall 
  8.26  pay attorney's fees and costs of the debtor.  If the court rules 
  8.27  against the debtor, the court shall assess the debtor's ability 
  8.28  to pay and may order that the debtor make similar payments to 
  8.29  the creditor. 
  8.30     Sec. 7.  [40B.05] [AUTHORITY TO COMMIT.] 
  8.31     A creditor or debtor not participating in person at 
  8.32  mediation meetings must designate a representative with 
  8.33  authority to make binding commitments within five business days 
  8.34  to fully settle, compromise, or otherwise mediate the matter.  
  8.35  Creditors must designate a representative to participate in 
  8.36  mediation with the authority to make binding commitments within 
  9.1   one business day to release funds from the sale of farm products 
  9.2   to the debtor for necessary living and farm operating expenses. 
  9.3      Sec. 8.  [40B.06] [CREDITOR NOT ATTENDING MEDIATION 
  9.4   MEETING.] 
  9.5      Subdivision 1.  [FILING AND EFFECT OF CLAIM FORM.] A 
  9.6   creditor that is notified of the initial mediation meeting is 
  9.7   subject to and bound by a mediation agreement if the creditor 
  9.8   does not attend mediation meetings unless the creditor files a 
  9.9   certificate of nonattendance.  In lieu of attending a mediation 
  9.10  meeting, a creditor may file a certificate of nonattendance with 
  9.11  the mediator before the scheduled meeting.  By filing a 
  9.12  certificate of nonattendance, the creditor agrees to be bound by 
  9.13  a mediation agreement reached at the mediation meeting unless an 
  9.14  objection is filed within the time specified.  The mediator must 
  9.15  notify the creditors who have filed certificates of 
  9.16  nonattendance of the terms of any agreement. 
  9.17     Subd. 2.  [OBJECTION TO AGREEMENTS.] A creditor who has 
  9.18  filed a certificate of nonattendance may serve a written 
  9.19  objection to the terms of the agreement on the mediator and the 
  9.20  debtor within ten days after receiving notice of the agreement.  
  9.21  If a creditor files an objection to the terms of an agreement, 
  9.22  the mediator shall meet again with the debtor and those 
  9.23  creditors who so desire within ten days after receiving the 
  9.24  objection to mediate the objections.  Agreements among 
  9.25  nonobjecting parties may stand. 
  9.26     Sec. 9.  [40B.07] [PROHIBITED WAIVERS.] 
  9.27     A waiver of mediation rights under this chapter is void 
  9.28  except as expressly allowed under this chapter. 
  9.29     Sec. 10.  [40B.08] [RETENTION OF PURCHASE MONEY SECURITY 
  9.30  INTEREST.] 
  9.31     If a creditor has a purchase money security interest as 
  9.32  defined in section 336.9-101 and renegotiates the debt under 
  9.33  this chapter to reduce the principal balance or the interest 
  9.34  rate or to extend the repayment period, the creditor retains the 
  9.35  purchase money security interest for the renegotiated debt. 
  9.36     Sec. 11.  [40B.09] [VOLUNTARY ALTERNATIVE DISPUTE 
 10.1   RESOLUTION.] 
 10.2      The administrator shall establish procedures and measures 
 10.3   to assure maximum use of alternative dispute resolution under 
 10.4   this chapter for disputes in rural areas.  Referrals can be 
 10.5   accepted from courts, state agencies, local units of government, 
 10.6   or any party to a dispute involving rural land, regulation, 
 10.7   rural individuals, businesses, or property, or any matter 
 10.8   affecting rural quality of life.  The legislature encourages 
 10.9   state and federal agencies and governmental subdivisions to use 
 10.10  the services provided by the administrator under this chapter 
 10.11  and to cooperate fully when matters under this jurisdiction are 
 10.12  subjected to alternative dispute resolution methods.  The 
 10.13  administrator may set fees for participation in voluntary 
 10.14  procedures to pay all or part of the costs of providing such 
 10.15  services. 
 10.16     Sec. 12.  [40B.10] [ALTERNATIVE DISPUTE RESOLUTION RULES.] 
 10.17     The administrator shall make rules under chapter 14, to 
 10.18  implement this chapter.  Until rules are promulgated, the 
 10.19  administrator must administer the program under the rules 
 10.20  adopted by the department of agriculture pursuant to the former 
 10.21  Farmer-Lender Mediation Act, insofar as applicable to the 
 10.22  mandatory mediation sections. 
 10.23     Sec. 13.  [40B.11] [NEUTRALS.] 
 10.24     The administrator shall appoint, train, and support 
 10.25  neutrals to provide dispute resolution services under this 
 10.26  chapter. 
 10.27     Sec. 14.  [40B.12] [NEUTRAL LIABILITY AND IMMUNITY.] 
 10.28     (a) A neutral is immune from civil liability for actions 
 10.29  within the scope of the position as a neutral.  A neutral does 
 10.30  not have a duty to advise a creditor or debtor about the law or 
 10.31  to encourage or assist a debtor or creditor in reserving or 
 10.32  establishing legal rights.  This subdivision is an addition to 
 10.33  and not a limitation of immunity otherwise accorded to a neutral 
 10.34  under law. 
 10.35     (b) Neutrals under this chapter are subject to section 
 10.36  595.02, subdivision 1a, relating to testimonial immunity for 
 11.1   neutrals. 
 11.2      Sec. 15.  [40B.13] [INDEMNIFICATION AND REPRESENTATION.] 
 11.3      A neutral acting pursuant to this chapter is a volunteer 
 11.4   and not an independent contractor for purposes of 
 11.5   indemnification and representation. 
 11.6      Sec. 16.  [40B.14] [PRIVATE DATA.] 
 11.7      All data regarding the identity and finances of individual 
 11.8   debtors and creditors created, collected, and maintained by the 
 11.9   mediators or the administrator are classified as private data on 
 11.10  individuals under section 13.02, subdivision 12, or nonpublic 
 11.11  data under section 13.02, subdivision 9. 
 11.12     Sec. 17.  [40B.15] [FORMS AND COMPENSATION.] 
 11.13     Subdivision 1.  [COMPENSATION.] The administrator shall set 
 11.14  the compensation of mediators. 
 11.15     Subd. 2.  [FORMS.] The administrator shall adopt voluntary 
 11.16  mediation application and request forms and a form for 
 11.17  certificates of nonattendance. 
 11.18     Sec. 18.  [40B.16] [INCONSISTENT LAWS.] 
 11.19     This chapter has precedence over any inconsistent or 
 11.20  conflicting law and statutes, including chapters 336, 580, and 
 11.21  581, and section 559.21. 
 11.22     Sec. 19.  Laws 1986, chapter 398, article 1, section 18, as 
 11.23  amended by Laws 1987, chapter 292, section 37; Laws 1989, 
 11.24  chapter 350, article 16, section 8; Laws 1990, chapter 525, 
 11.25  section 1; Laws 1991, chapter 208, section 2; Laws 1993, First 
 11.26  Special Session chapter 2, article 6, section 2; and Laws 1995, 
 11.27  chapter 212, article 2, section 11, is amended to read: 
 11.28     Sec. 18.  [REPEALER.] 
 11.29     Sections 1 to 17 and Minnesota Statutes, section 336.9-501, 
 11.30  subsections (6) and (7), and sections 583.284, 583.285, 583.286, 
 11.31  and 583.305, are repealed on ~~July 1, 1997~~ January 1, 1998. 
 11.32     Sec. 20.  [APPROPRIATION.] 
 11.33     $....... is appropriated from the general fund to the 
 11.34  administrator for purposes of sections 1 to 18 to be available 
 11.35  until June 30, 1999.  
 11.36     Sec. 21.  [EFFECTIVE DATE.] 
 12.1      Sections 1 to 18 and 20 are effective January 1, 1998.  
 12.2   Section 19 is effective the day following final enactment.