Bair v. United States

80 Fed. Cl. 287, 2007 U.S. Claims LEXIS 416, 2007 WL 4886293
CourtUnited States Court of Federal Claims
DecidedJanuary 11, 2007
DocketNo. 04-1689C
StatusPublished

This text of 80 Fed. Cl. 287 (Bair v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bair v. United States, 80 Fed. Cl. 287, 2007 U.S. Claims LEXIS 416, 2007 WL 4886293 (uscfc 2007).

Opinion

OPINION

BASKIR, Judge.

This case involves an alleged taking without compensation in violation of the Fifth Amendment. The Plaintiffs (“Growers”) claim they have state law liens on the crop of sugar beets delivered in 2000 to Pacific Northwest Sugar Company, LLC (“PNSC”). The Commodity Credit Corporation (“CCC”) has a superior interest in the same sugar as a result of PNSC’s utilization of a Federal program that provides loans to beet processors in exchange for a “super-priority” security interest in sugar inventory. The Growers’ state law liens on 2000 crop year sugar attached before PNSC entered into the loan agreements secured by the same sugar. The Growers claim that the application of the super-priority loan provision, 7 U.S.C. § 7284(d), destroys the value of their now subordinated hens and constitutes an uncompensated taking. The Government argues that the provision operated as a pre-existing limitation on the property rights that the Growers could acquire. The case is before us on cross motions for summary judgment.

The Federal statute at issue here speaks directly to the priority of security interests, one of the statutorily defined property rights that make up a hen. We find that the statute altered the nature of the processor hens from their inception. The Plaintiffs’ Motion for Summary Judgment is DENIED, and the Defendant’s Cross Motion is GRANTED.

Background

I. The Sugar Beet Industry

The background provided here represents the Court’s synthesis of information found in the Parties’ submissions and the legislative history of the Agriculture Market Transition Act (Pub.L. No. 104-127, Title I, 110 Stat. 896 (1996)). Although it is helpful to an [288]*288understanding of the context of this case, this information is not material to the holding. A dispute regarding these background facts would not preclude summary judgment.

A. Sugar Beet Farming

The sugar beet “crop year” begins with the harvest in September, October and November. Beets are delivered to processing factories as they are harvested. Sugar beets are perishable, so processing must take place as rapidly as possible. From mid-September until mid-February, factories run full-tilt to convert the beets into refined sugar, or at least into less perishable intermediate stages of syrup. The urgency is reflected in the terminology: this period is called the sugar beet “campaign.”

Storage capacity at sugar processing factories is very limited. Processors do not have the ability to hold onto inventory and wait for favorable market conditions. They must sell the majority of each year’s sugar as it is processed, frequently on 3, 6, or 12 month forward sales contracts that lock in low prices.

B. Federal Sugar Policy

American involvement in the sugar trade predates the Constitution. Some of the best known New England families owe their fortunes to rum smuggling, viewed as a patriotic protest to the British Parliament’s 1733 Molasses Act and 1763 Sugar Act. Rum Trade, Dictionary of American History, Volume VI at 170 (Charles Scriber’s Sons, rev. ed., 1976). The Federal Government has been tinkering with the sugar market since the First Congress imposed a tariff on imported sugar in 1789. 1 Stat. 24, 25. Loans to processors (described below) were first used as a means of supporting the industry in 1977. Food and Agriculture Act of 1977, Pub.L. No. 95-113, Title IX, § 902, 91 Stat. 913, 949. This dispute arises against the background of reforms to the sugar support program made in the Agriculture Market Transition Act (Pub.L. No. 104-127, Title I, 110 Stat. 896 (1996)) in response to concerns about excessive government intervention and inflated prices. See 142 Cong. Ree. 2503-2509 (Senate debate regarding extension of the sugar program); 142 Cong. Rec. 3152-3164 (House debate regarding phase-out of the sugar program).

In the 1996 Act, Congress made several changes to the sugar program that had a destabilizing impact on the market. Historically, the Secretary of Agriculture had two tools to control supply in the sugar industry and keep prices high enough to prevent loan forfeiture: the tariff-rate quota program to control imports and marketing allotments authority to control domestic production. The Secretary’s control over imports is limited because of international treaty obligations. The 1996 reforms eliminated the remaining tool, market allotments. Pub.L. No. 104— 127, Title I, § 171(a)(1)(E), 110 Stat. 937. This led to extensive instability in the sugar market and a glut of supply. The price for wholesale beet sugar dropped to its lowest level in 22 years in late 1999 and early 2000. More than 25% of the beet or cane processing facilities operating in 1996 shut down between 1996 and 2001. Testimony of the American Sugar Alliance to the U.S. Department of Agriculture, March 12, 2003, available at www.fsa.gov/ao/epas/dsa/USDA— Policy—Implemt—Roney—031203.pdf. Congress restored the Secretary’s marketing allotments authority in the 2002 Farm Bill. 7 U.S.C. § 1359bb, Pub.L. No. 107-171, Title I, § 1403,116 Stat. 188.

The 1996 reforms also suspended 7 U.S.C. § 1421, which provided for direct payments from the government to growers in the event of producer default due to insolvency. Pub.L. No. 104-27, Title I, § 171(b)(l)(J), 110 Stat. 937. Prior to 1996, sugar beet producers who were not paid in full by processors were guaranteed payment of at least the price support level established by the Secretary. The Growers argue that before its suspension, § 1421 provided compensation for the taking worked by 7 U.S.C. § 7284(d), the super-priority provision that is the subject of this case. In their brief, the Growers assert that § 1421 was suspended only from 1996-2002. Pis.’ Rep. and Resp. at 2 n. 1. This is not correct. The suspension of § 1421 remains in effect for the 2002-2007 crop years. Pub.L. No. 107-171, Title I, § 1602(b)(10), 116 Stat. 213.

[289]*289C. CCC Loans

A major component of Federal support of the sugar industry (beet and cane) is a loan program made available to processors through the Commodity Credit Corporation. The terms of the loan program in effect for the crop years 1996-2002 are summarized below and are codified at 7 C.F.R. §§ 1435.100-1485.111 (1999).

Sugar loans become available on October 1 of the crop year. Loans mature on the earlier of September 30 or the last day of the ninth month after the loan is made. The average national loan rate is set by Federal statute at $22.90 per hundredweight of sugar (7 U.S.C. § 7272 (1996)) and adjusted for local conditions by state and county offices of the Farm Service Agency. Processors pledge refined sugar from domestically grown and processed beets as security. The CCC’s super-priority interest in the sugar and crops, which the Plaintiffs here allege works a taking, is provided in 7 U.S.C.

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80 Fed. Cl. 287, 2007 U.S. Claims LEXIS 416, 2007 WL 4886293, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bair-v-united-states-uscfc-2007.