Members of the Peanut Quota Holders Ass'n v. United States

60 Fed. Cl. 524, 2004 U.S. Claims LEXIS 99, 2004 WL 944761
CourtUnited States Court of Federal Claims
DecidedApril 30, 2004
DocketNo. 02-1664C
StatusPublished
Cited by4 cases

This text of 60 Fed. Cl. 524 (Members of the Peanut Quota Holders Ass'n 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.

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Members of the Peanut Quota Holders Ass'n v. United States, 60 Fed. Cl. 524, 2004 U.S. Claims LEXIS 99, 2004 WL 944761 (uscfc 2004).

Opinion

OPINION

CHRISTINE O. C. MILLER, Judge.

This case is before the court after argument on defendant’s motion for summary judgment and motion to dismiss plaintiffs’ claim for lack of subject matter jurisdiction, pursuant to RCFC 12(b)(1) or, alternatively, for failure to state a claim upon which relief can be granted, pursuant to RCFC 12(b)(6). Plaintiffs are a group farmers who held peanut production quotas that entitled them to certain benefits. In accordance with then-current regulations, plaintiffs leased their quotas to other farmers who produced peanuts and benefited from the leased quotas. A subsequent act of Congress eliminated plaintiffs’ quotas and awarded benefits to actual growers. The issue before the court is whether the elimination of plaintiffs’ quotas constituted a taking of property through federal regulation for which compensation is due under the Takings Clause of the Fifth Amendment.1

[525]*525FACTS

The parties agree on the dispositive facts. The Peanut Quota Holders Association, Inc., is comprised of four residents of the state of Georgia who owned peanut quota allotments (“plaintiffs”). The peanut quota allotments that plaintiffs held were part of Congress’s regulation of agricultural commodities, until they were eliminated by the Farm Security and Rural Investment Act of 2002, Pub.L. No. 107-171, 116 Stat. 134, codified at 7 U.S.C.A. §§ 7951-7960 (West Supp.2003) (the “2002 Act”), the subject of the present litigation.

In response to a national depression, Congress enacted the Agricultural Adjustment Act of 1938, currently codified at 7 U.S.C. § 1281 (2000) (the “1938 Act”), which terminated the free market production and sale of agricultural commodities within the United States, including peanuts. Or, as plaintiffs more colorfully put it, “Congress dismantled the free market agriculture system of this country, with the passage of ... ‘The 1938 Act.’ ” Pls.’ Br. filed Nov. 20, 2003, at 3 2 In 1949 regulation of the peanut market began to include price supports, under which certain producers received government-inflated prices through direct payments, in addition to existing restrictions on competition. Agricultural Act of 1949, 7 U.S.C. §§ 1421-1471j (the “1949 Act”). Support also took the form of marketing quotas, which allowed the owners to produce peanuts without penalty. See 7 U.S.C. § 1358 (2000). See generally Competitive Enters. Inst. v. United States Dept. of Agrie., 954 F.Supp. 265, 267-69 (D.D.C. 1996) (discussing regulation of peanut production); Carruth v. United States, 224 Ct.Cl. 422, 427-28, 627 F.2d 1068 (1980) (same).

Initially, these quotas were allotted by acre, on which the holder could produce his capacity of peanuts without penalty. The acreage on which quota peanuts could be produced was divided by state, county, and individual farms. Some farmers increased their quota holdings by purchasing them from the farmers to whom they were origiSee Affidavit of Faye Paulk, Nov. 12, 2003, at 118. nally issued.

However, by 1977 technological improvements had increased substantially the yield of peanuts per acre, prompting Congress to enact the Food and Agriculture Act of 1977, Pub.L. No. 95-113, §§ 801-807, 91 Stat. 913 (the “1977 Act”). The 1977 Act instituted poundage quotas based on the weight of peanuts produced. The new poundage quotas applied only to peanuts destined for domestic edible use. Peanuts were not subject to the new quotas if grown for export or for crushing into oil. 7 U.S.C. §§ 1358(v), 1359(m) (1978). Quota peanuts received greater marketing assistance and higher loan amounts than non-quota peanuts.

By 1981 Congress terminated peanut quotas allocated by acre, leaving only the quotas based on poundage. The Agriculture and Food Act of 1981, Pub.L. No. 97-98, §§ 701-707, 95 Stat. 1213, 1248 (the “1981 Act”). The 1981 Act retained the two-tiered system based on poundage. Under the 1977 and 1981 Acts, a farmer who previously held an acreage quota now received a poundage quota. Although producers who did not benefit from holding a quota could produce peanuts, they did not receive the more generous support from the Government that the peanut quota holders received.

Due to the Government’s managing of the peanut market, consumers paid a higher price for peanuts within the United States, and taxpayers absorbed the increasing costs of administering the program. These concerns gestated in Congress until the enactment of the Federal Agriculture Improvement and Reform Act of 1996, Pub.L. No. 104-127, § 155(i)(2), 110 Stat. 888, 928 (the “1996 Act”). The 1996 Act ended direct payments to producers and set loan rates through 2002.

The price support for peanut producers under the program took the form of marketing loans. The U.S. Department of Agriculture (the “USDA”) extends loans to marketing associations, which, in turn, make loans [526]*526to peanut producers. The USDA sets loan rates and the loans are non-recourse, such that the producer is not personally liable for the loan. Instead, producers pledge their peanut crop as collateral for the loan. In the event that profits from the sale of the peanuts do not cover the loan amount, the marketing association, and, by default, the USDA, make up the difference. If the sale of the peanut crop does cover the loan amount, the producer repays the loan and retains any excess profit.

The 1996 Act froze the loan rate for quota peanuts at $610.00 per ton. By comparison, the loan rate for non-quota peanuts in 1997 was $132.00 per ton. 1996 Act, § 155(a)(2). The loan rate differential, combined with restrictions on production and importation, gave quota holders a considerable advantage in the peanut market.

Congressional tinkering with the program was constant from its inception, culminating with the 2002 Act. Pressured by free trade agreements and mounting administrative costs, Congress amended the program by repealing the marketing quota program, establishing a “buyout” of quota holders, and creating a new price support program. See 2002 Act, § 1309.

By repealing the marketing quota program contained in 7 U.S.C. §§ 1357-1359a (1996), plaintiffs lost the ability to receive financial assistance for producing peanuts and no longer enjoyed the benefit of reduced competition. Rather than leave former quota holders with no entitlement, Congress enacted a “buyout” as part of the 2002 Act. The buyout authorized a one-time payment to quota holders of $0.55 per pound, derived from a payment of $0.11 per pound for five years. 2002 Act, § 1309(b)(1).

After the 2002 Act, anyone could now grow and market unlimited quantities of peanuts without penalty or restriction. However, a price support program was retained under the 2002 Act. The new price support program included both direct payments to peanut producers and counter-cyclical payments, which allowed payments to be made to producers when the market price of peanuts was below a “target” set by the USDA. 7 C.F.R.

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60 Fed. Cl. 524, 2004 U.S. Claims LEXIS 99, 2004 WL 944761, Counsel Stack Legal Research, https://law.counselstack.com/opinion/members-of-the-peanut-quota-holders-assn-v-united-states-uscfc-2004.