Associated Milk Producers, Inc. v. United States

22 Cl. Ct. 682, 1991 U.S. Claims LEXIS 80, 1991 WL 34792
CourtUnited States Court of Claims
DecidedMarch 15, 1991
DocketNo. 718-88C
StatusPublished
Cited by2 cases

This text of 22 Cl. Ct. 682 (Associated Milk Producers, Inc. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Associated Milk Producers, Inc. v. United States, 22 Cl. Ct. 682, 1991 U.S. Claims LEXIS 80, 1991 WL 34792 (cc 1991).

Opinion

OPINION

YOCK, Judge.

This case, involving the validity and applicability of the regulations implementing the milk price reduction provisions of the Food Security Act of 1985, is currently before the Court on the parties’ cross-motions for summary judgment after oral argument. For the reasons discussed herein, the Government’s cross-motion for summary judgment is granted, the plaintiff’s motion for summary judgment is denied, and the complaint will be dismissed.

Facts

This case concerns implementation of the milk price reduction regulations issued by [683]*683the Secretary of Agriculture as part of the statutory program to support the price of milk. See 7 U.S.C. § 1446(d)(2) (1982 & Supp. IV 1986);1 7 C.F.R. § 1430.340 et seq. (1987).2 In carrying out this program, the Commodities Credit Corporation (CCC) is required to purchase all surplus milk produced in the United States. However, in the early 1980’s, this price support program led to high milk production and a milk surplus. Consequently, Congress attempted to reduce the surplus by providing for milk assessments to be taken from the proceeds received by the country’s milk producers. Thus, the Dairy Collection Program (DCP) was designed to drive down the production of milk by reducing the effective price received by the producers for their milk. In 1982, the Secretary of Agriculture first established regulations implementing the DCP. The heart of the instant dispute is the application of 7 C.F.R. § 1430.341 (1987) to the facts of this case, since that regulation defines exactly who is the “responsible person” who must pay the price reduction to the CCC.

The plaintiff in this lawsuit is the Associated Milk Producers, Inc. (AMPI), an association of dairy farmers that formed a cooperative for marketing their milk. The farmers are milk producers as well as members of the cooperative. In the usual course of events, AMPI acts as a sales agent to market the milk for its producer/members to a milk handler who purchases the raw milk and converts the milk into commercial dairy products. AMPI submits monthly reports to the CCC indicating the amount of milk it has marketed on behalf of its producer/members and the payments due to CCC under the DCP. AMPI then pays the CCC out of the proceeds it receives from the milk handler.

On April 15, 1986, the Director of the Dairy Division of the Agricultural Marketing Service (AMS), who is the Secretary of Agriculture’s delegatee for collecting the milk price reduction funds, issued a notice concerning payment of the price reduction. That notice, entitled “Notice to Persons Who Pay Dairy Farmers For Milk and to Dairy Farmers Who Market Milk of Their Own Production Directly to Consumers,” indicated that:

Under the law, the responsibility for sending the money to the CCC is imposed on each person paying individual dairy farmers for milk. This includes, for example, plant operators who make payments to individual dairy farmers, and cooperative associations who receive a lump-sum payment from a plant operator and then distribute the proceeds to their individual members.

During the relevant time period at issue, the assessment was $.52 per hundred weight of milk.

In the instant case, the cooperative marketing system failed to function as planned. In June and July of 1986, AMPI’s producer/members delivered a total of 61,462,065 pounds of raw milk to several plants of Foremost Dairy, Inc. (Foremost), in and around the State of Texas. Unfortunately, Foremost never paid either AMPI or AMPI’s producer/members for the milk. Sometime between the date of receipt of the milk by Foremost and the point when it was to pay for it, Foremost sought protection under the federal bankruptcy laws.3

As had been the practice, AMPI filed monthly reports for June and July of 1986 with the CCC that indicated the amount of milk marketed during that period, which included the over 61 million pounds of raw milk that had been delivered to Foremost. It also paid to the CCC the appropriate milk deduction money (i.e., some $319,601.95) that was due from the producers for that period for the milk that was marketed to Foremost. Sometime after the middle of July, 1986, AMPI became aware that Foremost had not paid its June to July 15,1986, milk bill and had come under the protection of the federal bankruptcy laws. Therefore, [684]*684on its next monthly report, it deducted the $319,601.95 that it had earlier paid to the CCC for the Foremost marketings, on the theory that it was only liable to pay to the CCC the milk deduction payments on the amounts of money it actually collected from its customers/handlers.

During this same period of time, AMPI decided to make payments to its member/producers that had actually delivered the milk to Foremost, notwithstanding the lack of payment by Foremost for the milk. Thus, all the producer/members of the association received their monthly payments for the months of June and July, 1986, reduced somewhat because of the lack of payments by Foremost. AMPI paid its producer/members for the months of June and July, 1986, using proceeds from other milk sales as the source of the funds for the payment.

After AMPI reduced the payments it made to CCC by $319,601.95 in view of Foremost’s failure to pay AMPI for the milk, the CCC determined that AMPI had underpaid its obligation to the CCC. The Director of the Dairy Division of CCC so notified AMPI on January 5, 1987. AMPI initiated a timely request for reconsideration of the Director’s decision on January 20, 1987, and the request was denied by letter dated May 15, 1987. AMPI filed a timely notice of appeal from the Director’s decision with the AMS by letter dated May 28, 1987, seeking a reversal of the Director’s denial of AMPI’s request for reconsideration of the January 5, 1987 decision. A hearing on the appeal was held on June 25, 1987, in Washington, D.C. Thereafter, an agreement was reached in September, 1987, whereby AMPI would tender to the CCC the principal sum owed, without waiving its right to pursue an administrative appeal and to seek judicial review of the agency’s action.4

By letter dated February 1, 1988, the AMS denied AMPI’s administrative appeal. In pertinent part, the denial letter stated:

After reviewing the available information, we conclude that the Dairy Division Director’s determination was appropriate. Section 1430.341(j)(l) of the Regulations Governing Reductions in the Price of Milk Marketed by Producers, April 1, 1986, to September 30, 1987, defines a “responsible person” as “[a]ny person who pays, or who is contractually or otherwise required to pay, a producer or a producer’s successor for milk marketed by a producer for commercial use____” The milk in question that was delivered to Foremost in June and July 1986 was marketed by producers through AMPI for commercial use. Although Foremost failed to pay for the milk, AMPI paid the producers for such marketings. This action made AMPI the “responsible person” for this milk.

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Bluebook (online)
22 Cl. Ct. 682, 1991 U.S. Claims LEXIS 80, 1991 WL 34792, Counsel Stack Legal Research, https://law.counselstack.com/opinion/associated-milk-producers-inc-v-united-states-cc-1991.