The California Agricultural Producer\u27s Lien, Processing Company Insolvencies, and Federal Bankruptcy Law: An Evaluation and Alternative Methods of Protecting Farmers

Business failures among agricultural products processing companies have caused financial losses to California farmers. While the California Legislature has provided the producer\u27s lien in an attempt to make unpaid farmers secured creditors of processing companies, section 545(2) of the Bankruptcy Code invalidates such a lien in federal bankruptcy proceedings if the lien is not enforceable against bona fide purchasers under state law. This Note discusses the provisions of the California producer\u27s lien statute, identifies five standards that federal courts have used in applying the bona fide purchaser test of section 545(2), and applies the five standards to the producer\u27s lien. This analysis suggests that the producer\u27s lien is invalid in federal bankruptcy proceedings. Furthermore, although the producer\u27s lien statute could be altered to render it valid in bankruptcy, a valid lien is an undesirably expensive form of protection against processor insolvencies. The Note discusses the legal effect, financial scope, and cost of several alternative methods for protecting farmers and concludes that an enlarged Farm Products Trust Fund is preferable to producer\u27s lien amendments