Drafting Embryo Transfer Contracts for Livestock Producers

Drafting Embryo Transfer Contracts for Livestock Producers

Texas Bar Agriculture Law Conference

May 23, 2013By Cari B. Rincker, Esq.

Who I Am• Grew up on a beef cattle farm

in Central Illinois– Seedstock cattle– Use of Artificial Insemination &

Embryo Transfer (“ET”)– Emphasis on “show cattle”

• B.S. in Animal Science from Texas A & M University

• M.S. in Ruminant Nutrition from the University of Illinois with Dr. Larry Berger– Thesis on DNA markers for

marbling with early-weaned feedlot cattle

Who I Am• Food and agriculture lawyer in

NYC• Actively involved in the

livestock industry– National Cattlemen’s Beef

Association’s Young Producers’ Council Leadership Board (2009-2012)

– Past-President and Founding Member of New York Agri-Women

– Director of New York Simmental Association

ET Contracts

• Background– What is “ET”?– Why is it used?– Costs– Applicability

• Types of ET Contracts– Recipient Agreement– Breeder Agreement– Flush Agreement

• General Considerations

What Is “ET”?• Important to understand some of the “Animal Science”

Behind the Transaction• Embryo Transfer Requires Several Steps– Selection of the Donor Cow– Superovulation of the Donor Cow– Insemination of the Donor Cow– Flushing of Embryos– Evaluation of the Embryos– Selection of Recipient Cow– Preparation of Recipient Cow– Transfer of Embryos

Photo of Brent Rincker’s Champion Cow-Calf Pair

Selection of the Donor Cow• Characteristics vary

among cattle operations– Showring presence– Genetic strength – Carcass characteristics– Qualitative characteristics – Reproductive Soundness– Health– Body Condition Score– Breed registration

Photo from the Illinois State Fair

Superovulation of the Donor Cow

• Donor Cow must be “superovulated”– Follicle Stimulating

Hormone (“FSH”) injected twice a day for 4 days

– Estrus occurs 48-60 hours afterwards

• Cow will produce approximately 7-20 eggs– Around 5-15 will be

transferable

Insemination of the Donor Cow

• Artificial Insemination is typically used on the Donor Cow

• Bred at 8, 16 and 24 hour intervals (or 12, 24 and 36 hours) after standing heat

Flushing of Embryos

• Embryos are collected 7-8 days after breeding date from the Donor Cow

• Embryos are put into cylinder or petri dish with flushing fluid

Evaluation of the Embryos

Embryos are evaluated for Grade and Stage under a microscope

Evaluation of the Embryos

Grades: The embryos are classified numerically as to the potential likelihood of success if transferred to a Recipient Cow. • Grade 1 (Excellent or Good), • Grade 2 (Fair), • Grade 3 (Poor), • Grade 4 (Dead or Degenerating).

Typically, only Grade 1 embryos are used for freezing.

Evaluation of the EmbryosStages: Embryos are also evaluated for their state of development: • Stage 1 (Unfertilized egg) • Stage 2 (2 to 12 cell) • Stage 3 (Early morula) • Stage 4 (Morula) • Stage 5 (Early Blastocyst) • Stage 6 (Blastocyst) • Stage 7 (Expanded Blastocyst)• Stage 8 (Hatched Blastocyst) • Stage 9 (Expanded Hatched

Blastocyst)

Stage 4, 5, and 6 embryos are best with the freezing and thawing procedures.

Selection of the Recipient Cow• The “Recip” should be

reproductively sound, have good milking ability and maternal characteristics, adequate calving ease, good body condition score, and be in good health.– Stay away from heifers if

possible– Docility may also be a factor

University of Illinois Orr Beef Center

Preparation of the Recipient Cow

• Recipient Cow should be synched to the Donor Cow with the use of prostaglandon & CIDR

• Timing of Recipient Cow’s estrus should match the Donor Cow so that the uterine environment is similar approximately 7 days later

CIDR

Transfer of Embryos

• A trained ET technician loads the embryo into an insemination straw with an aid of a syringe

• Ovaries are palpated- embryo placed in the uterine horn on the same side as ovary with an active corpus luteum (“CL”)

Westwood Embryo

Why Use “ET”?

• Increases the number of progeny that superior females can propagate during their lifespan

• Recipient Cows are more affordable than genetically superior cows– Way to enhance quality of

calf crop without buying more superior quality cows

Photo from Rincker Simmentals

Costs• Cost can vary significantly• For cattle, a minimum cost of $250 has been

reported, excluding costs for– Pharmaceuticals used for superovulation and

synchronization– Registration– ET Certificates verifying grade and stage of embryo– Semen ($25-$300/straw)– Board for maintaining cow-calf

Photo from Lautner Cattle

International Sales

• International sales are possible with frozen embryos

• Pay attention to special regulations from importing country that may affect the transaction

ET Contracts for Cattle Producers

• 3 Types of ET Contracts– Recipient Agreement– Breeder Agreement– Flush Agreement

• Client may not use these terms- this is my classification– Client may just ask for an

“ET Contract”

Photo from Rincker Simmentals

Recipient Agreement

• Applicability:– Where a cattle

producer is selling a bred embryo transfer recipient cow and/or ET calf to another cattle producer

Photo from Dixon Springs Beef Center

Example Transaction

• Farmer Rincker enters into a contract with Farmer Smith. Farmer Smith is either: – Non-certified embryologist

and therefore takes the recipient to an embryologist (e.g., Transova)

– Certified embryologist and then conducts the ET themself.

Example Transaction

• The embryogist needs embryos to transfer into the Recipient Cow.– Frozen embryos can be shipped from a cattle

operation of choice (e.g., Hudson Pines Simmental cattle operation) or a donor female is at the embryolist site where she was recently flushed (7 day embryos) (could be from Rincker’s Donor Cow).

– Fresh embryos or frozen embryos are transferred into the recipient cow.

Example Transaction

• Recipient Owner must now confirm the pregnancy– He/she takes the

recipient cow home and waits 2-3 weeks to see if she is bred (waits to see if she has an estrus cycle and is in standing heat).

Example Transaction

• Recipient Owner must now confirm the pregnancy– Performs a pregnancy

check at 45 days. If pregnant, then Farmer Smith notifies Farmer Rincker.

Example Transaction

• Recipient Owner must now confirm the pregnancy– Farmer Smith performs

another pregnancy check (either by palpation or ultrasound) at 60 days. Ultrasound necessary to determine the sex. At this point, the pregnancy is confirmed.

Example Transaction• Farmer Smith typically pays for labor and costs associated with

prognosticating; however, Farmer Smith could charge Farmer Rincker $5-10 per cow.

• During this holding pattern Farmer Rincker does not typically owe money during this time. Payment not due until pregnancy is confirmed at 60 days.

• Farmer Rincker will pay Farmer Smith $X per cow that is confirmed pregnant. Not every Recipient Cow will be pregnant.

– In this hypothetical, Farmer Smith informs Farmer Rincker that he has 5 confirmed pregnant cows.

Example Transaction• Pick-up Recipient Cow and Calf or ET Calf Only-

What kind of agreement is it?– Option One: Farmer Rincker will pickup the 5

pregnant Recipient Cows within 70 days and pay $X for the cow who is confirmed pregnant ($1800-$2200). • If Farmer Rincker does not pickup the cow-calf on time

then late fees pay apply. • Could be assessed a late fee plus daily boarding and

maintenance fees (feed and/or pasture).

Example Transaction• Pick-up Recipient Cow and Calf or ET Calf Only-

What kind of agreement is it?– Option Two: Alternatively, Farmer Smith will care

for the pregnant Recipient Cow through weaning (paying for feed and labor). • Weaning is typically done between 4-6 months of age

(could be specified in the ET Contract). • Typically, Farmer Rincker will only get the ET calf (no

cow) and will pay upon receipt of the calf ($1100-$1500).

Example Transaction• Farmer Rincker takes the ET (Cow and) Calf

home to the Rincker Ranch– If Farmer Rincker uses an embryo that he does not

own (i.e, purchased from another producer with the use Flush Agreement), then most cattle breed associations require verification of the parentage of both the dam and sire before registration will be allowed (e.g., genetic test on hair sample).

– Farmer Rincker is the person applying for the registration- not Farmer Smith.

Example Transaction

If Farmer Rincker does not pay his fee to Farmer Smith then the ET Contract may ask for Farmer Rincker to assign the ET calf’s registration paper to Farmer Smith as security.

Recipient Agreement

What is Currently Done in the Cattle Industry

– Recipient owner will sometimes have an agreement drafted to give to the breeder

– This typically is not drafted by an attorney (although it should be)

– Breeder rarely given a chance to negotiate the terms of the Recipient Agreement

Photo from Rincker Simmentals

Recipient Agreement• Provisions to consider:

– Purchase/lease price of the Recipient Cow, her management and her ET calf

– Payment terms – Instructions for the receipt or

shipment of frozen embryos– Embryo transfer fees for “open

cows”– Dates, procedures and costs

associated with pregnancy checks • Palpation and/or ultrasound

Photo from University of Illinois Dixon Springs Beef Center

Recipient Agreement• Provisions to consider:– Embryo transfer fees for “open

cows”– Dates, procedures and costs

associated with pregnancy checks • Palpation and/or ultrasound

Photo from University of Illinois Dixon Springs Beef Center

Recipient Agreement• Provisions to consider:– Duration that the

Recipient Cow will stay under the care of the owner

– Daily boarding/maintenance fees for Recipient Cow• Feed and/or Pasture

Photo from University of Illinois Dixon Springs Beef Center

Recipient Agreement• Provisions to consider:– Reimbursement for

routine veterinary care and transportation

– Limitation of congenital birth defects

– Limitation of reasonable birthing difficulties (dystocia)

Photo from University of Illinois Dixon Springs Beef Center

Recipient Agreement• Provisions to consider:– Security on the embryo

transfer progeny if bill unpaid• Assignment of registration

papers

– Additional fees for genetic testing

– Marketing services

Photo from University of Illinois Dixon Springs Beef Center

Picture of me taking a blood sampleduring graduate school

Breeder Agreement

• Applicability:– If the cattle breeder can

negotiate the terms of the Recipient Agreement, these provisions can be inserted into a master “Embryo Transfer Contract”

– Alternatively, the cattle breeder could have a standard agreement that he/she will give the recipient owner for each transaction

Breeder Agreement

• From a practical standpoint, these are rarely used in the cattle industry

• Should be used more often than they are– Especially important in the

situation where the Recipient Owner is managing the cow-calf pair through weaning plus

Breeder Agreement• Breeders should make sure that the recipient

owner agrees to bear the burden that the Recipient Cow is – in good health – obtains necessary vaccinations; – within the appropriate age range; – has an acceptable body condition score; – if appropriate, a certain breed or color pattern (e.g.,

solid black/red hided); and, – is structurally sound (enough).

Breeder AgreementTort Liability: The cattle breeder may want to hold the recipient owner liable for gross negligence or intentional misconduct relating to the care of the Recipient Cow and the progeny, including but not limited to birthing complications.

Breeder Agreement

Should require that the recipient owner use best management practices. – Can list these

management practices as an exhibit to the contract

Cattle branding at Crim Bros. nearCasper, Wyoming

Flush Agreement

• Applicability– Used if the cattle

producer is purchasing an embryo transfer flush from another cattle owner

Flush Agreement• Side of the Purchaser

– Minimum number of transferable embryos from the flush (e.g., five embryos)

– Grade of the embryos– Date/procedures for the

receipt of frozen embryos– Guarantee that the flush is

what was ordered (e.g., use of particular bull’s semen) • note liquidated damages in

case of an error

Flush Agreement

• Side of the Seller– Enumerate the payment

terms, including shipping expenses

– Ensure that he/she is not responsible for the transfer of the embryos to the Recipient Cow or birthing problems that may occur

– Seller would benefit from a split above a guaranteed minimum

General Contract Provisions• Legal name of parties (including

D/B/A’s or state where incorporated)– DBA’s are regularly used in the

livestock industry• Has a Certificate of Assumed Name

(or DBA) been correctly filed?• In some states, cannot sue for

breach of contract if DBA has not filed a Certificate of Assumed Name

– Certification that corporation or LLC is in good standing

General Contract Provisions

• Contact information of the parties (and attorneys)

• Choice of Law (especially important if across state lines or international transaction)

General Contract Provisions

• Alternative Dispute Resolution (e.g., mediation or arbitration) or forum selection clause– Most states have a free

mediation program for agriculture producers funded by the USDA (e.g., New York Agriculture Mediation Program)

• Attorneys’ fees for the prevailing party in a dispute

General Contract Provisions• Confidentiality (or mutual non-disclosure agreement)

– Very rare (but should be encouraged)– Term (e.g., 1-3 yrs)– What is confidential?

• price/financial information• conversations about breeding/feeding/marketing strategies• identification of ET technician• discussion about potential buyers or sale price • trade secrets

– Exceptions to confidentiality (e.g., public record, court ordered disclosure)

– Maintenance of confidential information

General Contract Provisions• Binding to heirs,

successors, and assigns • Payment instructions– Whether credit card

information is accepted (or used as security for late payment)

– Other forms of payment such as PayPal or Google Checkout

University of Illinois Beef Center

General Contract Provisions

• Stating the relationship between the parties (i.e., not forming a partnership or joint venture)

• Severability (i.e., if a provision in the contract was not enforceable that the other provisions of a contract will be enforceable)

General Contract Provisions

Compliance with all federal, state, and local laws including but not limited to livestock animal cruelty laws.– Proper animal handling

techniques

General Contract Provisions

• Use of smartphones by employees on the Recipient Owner’s property– Undercover video

surveillance– Only if believe there

might be a potential issue

Practical Pointers for Attorneys

Remember that you’re working with a conservative culture where it is widely accepted to do business with a “handshake” and not involve attorneys

– Need to sell the fact that you add value into the transaction

– Don’t overcomplicate things and use too much “legalese”

Rincker Family Circa 2000

Practical Pointers for Attorneys

• Recommend to use “flat fee” bids for these transactions– Hourly rate if more than

minor negotiation needs to take place

– Create an ET Contract form that can be used by the farmer for similar transactions

My brother and I at the Illinois State Fair

Please Stay in Touch• Send Me Snail Mail: 535 Fifth Avenue, 4th Floor, New

York, NY 10017• Call Me: (212) 427-2049 (office)• Email Me: [email protected]• Visit My Website: www.rinckerlaw.com • Read My Food & Ag Law Blog: www.rinckerlaw.com/blog• Tweet Me: @CariRincker @RinckerLaw• Facebook Me: www.facebook.com/rinckerlaw • Link to Me: http://www.linkedin.com/in/caririncker • Skype Me: Cari.Rincker