Lawsuit claims Easterday sons intentionally over fertilized fields by 800,000 pounds
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Easterday Farms and Ranch legal issues
The Easterday Family’s businesses have been embroiled in a bankruptcy case with debtors trying to recover more than $250 million after Cody Easterday was charged with wire fraud in a “ghost cattle” scheme.
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New court documents allege that the Easterday family attempts to bring an Oregon megadairy back online have been plagued by poor decisions by Cody Easterday’s inexperienced sons.
The filings claim the young men neglected to practice erosion control, causing damage to the land, and knowingly over used nitrogen fertilizer, furthering contaminating an area already under a state-mandated correction plan.
The documents were filed in response to a lawsuit brought by Easterday Dairy against the landsellers Fall Line Capital and Canyon Farm, which bought the property when Lost Valley Farms dairy went bankrupt after water contamination issues.
Lawsuit response
In the initial lawsuit filing, Easterday Dairy claimed Fall Line and its tenants were intentionally keeping them from properly managing the nitrate decontamination on the property, which would result in Easterday being unable to get the permits needed to reopen the dairy plant.
Fall Line has filed a response to their claims, and is asking the court to foreclose on Easterday or force them to immediately repay the remaining balance owed on a $16 million loan for the property.
The response, filed in the U.S. District Court of Oregon in Pendleton, details a series of issues Fall Line says it had with the Easterday family. Cody Easterday’s sons — Cole, Cutter and Clay — are now running the dairy portion of the business under 3C Farms.
Cole Easterday, 25, is the current head of operations for Easterday Dairy after his father’s arrest on federal wire fraud charges in what was dubbed the “ghost cattle” scam.
Cody Easterday took over the family’s Tri-Cities, Wash., based companies in late 2020 after his father and the company’s longtime head, Gale Easterday, died in a wrong-way wreck in Pasco near the company’s offices.
Cody Easterday is currently awaiting sentencing in the wire fraud scheme. The sentencing has been delayed several times to allow his cooperation in the federal bankruptcy lawsuit for Easterday Farms and Ranches.
Water quality issues
At the crux of the conflict in Oregon is a permit to allow Easterday Dairy to reopen the dairy facility.
A Concentrated Animal Feeding Operations, or CAFO, permit was suspended during Lost Valley’s bankruptcy because the water source for the dairy is an aquifer that is at particularly high risk for contamination.
The aquifer was classified as protected in 1976 due to dwindling water levels, according to a 2018 Statesman Journal story.
The Oregon Department of Agriculture has so far refused to issue Easterday Dairy a permit for an animal feeding operation until the nitrate levels in the groundwater are brought back into compliance and a plan for maintaining safe levels is approved.
That means the company cannot resume dairy operations until then.
According to the National Institutes for Health, nitrate contamination in groundwater has been linked to increased risk of cancer, thyroid disease and birth defects.
Boiling water does not make nitrate-contaminated water safer to drink, in fact it does the opposite by increasing the nitrate concentrations in the water.
Failed inspections
The Tri-City Herald reported in July that documents showed the state had repeatedly inspected the site and recommended courses of action, which Easterday Dairy failed to implement quickly enough.
That led to inspections showing they were in violation of nitrate levels monthly from November 2020 through November 2021.
The Oregon Department of Agriculture documents show they were finally able to bring the nitrate levels within acceptable range by December 2021.
In a February 2022 letter, the department ordered Easterday to continue to submit water samples until they can show the nitrate levels are within acceptable range for nine consecutive months.
Cody Easterday’s plan
In 2019, Cody Easterday launched Easterday Dairy Farms in a bid to resurrect the Lost Valley Farms megadairy in Boardman.
Before they could get operations back up and running though, the Easterdays would need to complete the process of decontamination because of the excessive nitrate levels found on the property caused by manure spills by Lost Valley.
Those restrictions from the Oregon Department of Agriculture meant that no cattle could be on the property until the process was complete and nitrates were shown to be kept at an acceptable level.
The nearly 7,300-acre site was partitioned into two parcels — 736 acres for the dairy and the remaining 6,542 for farm land.
In January 2019, Easterday Dairy entered into a $16 million self-financed agreement to buy the dairy facility portion. Later that year they signed a commercial lease for the farm portion, but did not buy it.
Cody Easterday’s plan was to bring the dairy plant and farm back online with more than 28,000 head of beef and dairy cattle and 5,700 acres of irrigated farmland, according to the proposal submitted to the state of Oregon.
‘Ghost cattle’ scam
The first major issue for both sides came when Cody Easterday was arrested for wire fraud charges in March 2020, after defrauding Tyson Foods out of nearly a quarter billion dollars in a “ghost cattle” scheme. For years Easterday had been charging Tyson for the care cattle that never actually existed.
He faces up to 20 years in prison after pleading guilty to the charges. His sentencing has been delayed several times in order to allow him to cooperate with the bankruptcy settlement. His next court date is set for Sept. 19.
Fall Line said they soon learned through the criminal case and Easterday Farms and Ranches bankruptcy proceedings that Cody Easterday, who they had previously regarded as “one of the most successful farmers and ranchers in the Pacific Northwest,” had intentionally and seriously misrepresented his finances to obtain the $16 million loan for the dairy portion of the land and lease of the neighboring farm.
Bankruptcy
That bankruptcy lawsuit is nearing a resolution for the smaller claimants, with a proposed claims schedule discussed in July for 65 businesses with claims ranging from $300 to $4 million.
In all, the claims add up to $10.76 million and represent the bulk of the debts for the Easterday Farms portion of the lawsuit.
The Easterday Ranches portion is still ongoing and includes more than $260 million in claims by Tyson Foods and Segale Properties.
So far, the Easterday family has managed to keep Easterday Dairy and 3C Farms out of the bankruptcy settlement.
Sons take over
Fall Line said that 3C Farms, the company formed by Cody Easterday’s sons, tried to take over the dairy deal, but it soon became apparent the three young men had little experience beyond working for their father, and didn’t have capital of their own.
They were able to negotiate a $12.5 million line of credit with Fall Line to work the 6,500 acres of farm land, with each providing their own assurances to back the loan, according to court documents.
After the 2021 crop season, Fall Line and Canyon Farm chose not to renew their lease for the farm portion.
Walther Farms took over the lease and management of that parcel. An easement that had previously allowed representatives from Easterday onto the farms was thrown out earlier this year. Cole Easterday appears to be at the head of the operation, according to the filings.
Lawsuit filed
Last month the Easterday family sued Fall Line and Canyon Farm, which could result in a negotiated exit from the dairy.
In their initial filing Easterday Dairy claims Fall Line was trying to prevent their attempts at remediating the nitrate contamination on the property in order to force them off the land.
They claimed the loss of the easement keeps them from being able to meet the legal obligations necessary to ever obtain a new permit for cattle at the dairy.
Fall Line is now firing back, saying they did not renew the lease for the farmable portion of the land because of the Easterdays’ mismanagement and intentional disregard of the nitrate remediation plan.
They said they have continued to monitor nitrate levels, and Easterday has access to this information through the state should they need it.
Fertilizer overuse claim
Despite a January 2021 warning about nitrate levels, the landowners say Easterday Dairy applied almost three times the allowable amount of nitrogen fertilizer on the property during the 2021 crop season.
They were within acceptable limits in only a dozen of the 46 fields on the farm. Altogether, 34 fields saw nitrogen fertilizer use above restricted levels while farmed by Easterday Dairy, according to the documents from Fall Line.
In some fields where nitrate levels should have been the most restricted, they were found to have applied thousands of times more fertilizer than they should have, according to data provided by Fall Line.
For example, in one 112-acre field limited to 4 pounds of nitrogen fertilizer per acre, Fall Line says Easterday applied 331 pounds per acre.
That’s nearly 40,000 pounds of fertilizer in a field that should have been limited to less than 500 pounds total, the documents show. In another with the same limit, they applied 255 pounds per acre.
In total, the amount of nitrogen fertilizer used across those 34 fields should not have exceeded 506,000 pounds. According to information in the lawsuit, they applied 1.3 million pounds of nitrogen fertilizer in those fields.
Soil erosion
The response also claims that despite Canyon Farm providing an expert to train tenants on best practices for soil erosion, Easterday did not plant adequate cover crops or do enough to prevent erosion, causing significant damage to the land.
These factors led Fall Line and Canyon Farm to determine that 3C Farms had breached its contract. Fall Line said the breach of contract and better offers from groups more experienced with sustainable farming led them to not renew the farm portion of the lease.
After accepting Walther Farms offers, Fall Line claims the Easterdays began what they described as a pattern of intimidation and interference.
‘Intimidation’ allegation
Fall Line said Easterday falsely asserted that the CAFO permit application and remediation plan meant Easterday had a right to “govern management of all fertilizer applications, irrigation practices, crop rotation, runoff control and management practices, and emergency action plans for nutrient spills (including commercial fertilizer) or irrigation leaks ... “ on the farm parcel.
That is in line with the claims Easterday made in its initial lawsuit filing.
Fall Line said Easterday also claimed that Walther Farms and any subtenants must have their express consent before applying any nutrients to crops, and threatened Walther Farms and subtenants with legal actions.
Fall Line claims that at least one potential farmer backed out of subleasing a portion of the land after that.
The company claims Easterday has no right to manage the farm land, access it or demand proprietary business information from tenants.
Any data Easterday might need for remediation on the dairy parcel would already be available through the state because Walther Farms was complying with the remediation plans, according to Fall Line’s response.
Easterday demands
In Easterday’s lawsuit, they asked the court to:
- Reinstate the easement and access requirements that guarantees that Easterday will have access and authority over any irrigation or nutrients used at the farm.
- Declare the easement termination was made in bad faith and pay them for damages for both slander and the delays.
In the event the judge does not agree to those terms, Easterday is asking to be paid out of the dairy purchase agreement.
Easterday Dairy wants payment for the money paid so far toward the purchase and the improvements and work done on the land.
Easterday is asking for the $10.5 million paid to be returned and up to $4 million in addition to offset their investment. That path would ultimately result in Easterday abandoning plans to bring the dairy back online.
Fall Line demands
In response, Fall Line is asking for Easterday to be foreclosed on from the dairy portion or to pay the $8.2 million Fall Line is still owed.
It also are asking for a jury to determine damages for breach of contract for the 3C Farms Loan, it is unclear how much of that loan was ever repaid.
Fall Line also wants a jury to determine damages for Cody Easterday misrepresenting his finances to obtain the dairy loan and for alleged intimidation and interference in operations of current farm tenants and for lawyers’ fees.
This story was originally published August 25, 2022 at 12:44 PM with the headline "Lawsuit claims Easterday sons intentionally over fertilized fields by 800,000 pounds."
