Pender Peanut Corp. v. United States

20 Cl. Ct. 447, 1990 U.S. Claims LEXIS 199, 1990 WL 68165
CourtUnited States Court of Claims
DecidedMay 23, 1990
DocketNo. 616-88 C
StatusPublished
Cited by8 cases

This text of 20 Cl. Ct. 447 (Pender Peanut Corp. 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
Pender Peanut Corp. v. United States, 20 Cl. Ct. 447, 1990 U.S. Claims LEXIS 199, 1990 WL 68165 (cc 1990).

Opinion

OPINION

RADER, Judge.

Pender Peanut Corporation (plaintiff) participated in a price support program administered by the United States Department of Agriculture (USDA). Plaintiff entered into contracts with numerous farmers to buy peanuts. These contracts contained language making plaintiff subject to a monetary penalty for violation of USDA regulations.

Plaintiff did not dispose of its 1981 crop year peanuts in accordance with USDA regulations. USDA consequently assessed [449]*449a penalty of $1,165,736.75 against plaintiff in October 1982. Plaintiff now seeks damages from USDA in the United States Claims Court for levying a penalty assessment without authority. Defendant contends that plaintiff consented to the penalty by contract. Both parties move for summary judgment pursuant to RUSCC 56. This court grants plaintiff’s motion for summary judgment.

FACTS

Plaintiff is a peanut handler who purchased peanuts from growers in Georgia, Florida, and Alabama. Plaintiff processed peanuts for sale to domestic and foreign manufacturers. USDA subsidized plaintiff through a peanut price support system under the Agricultural Adjustment Act of 1938 (the 1938 Act).

Peanut Price Support Program

Under the 1938 Act, Congress regulated peanut production with an acreage allotment system. USDA accordingly provided subsidies to farmers who agreed not to farm a certain amount of acreage. Faced with excessive production, Congress set forth in 1977 a new program based on poundage quotas. USDA accordingly provided subsidies to farmers who agreed to limit or channel production.

The 1977 amendments created two legal categories of peanuts: “quota” and “additional.” Quota peanuts fall within the poundage quota set by USDA. Under the 1938 Act, handlers may sell quota peanuts for domestic consumption. Additional peanuts are the excess above a farmer’s poundage quota. Handlers must export or crush additional peanuts.

The amendments regulating additional and quota peanuts provide:

(g) Upon a finding by the Secretary [of Agriculture] that the peanuts marketed from any crop for domestic edible use by a handler are larger in quantity or higher in grade or quality than the peanuts that could reasonably be produced from the quantity of peanuts having the grade, kernel content, and quality of the quota peanuts acquired by such handler from such crop for such marketing, such handler shall be subject to a penalty equal to 120 per centum of the loan level for quota peanuts on the quantity peanuts which the Secretary determines are in excess of the quantity, grade, or quality of the peanuts that could reasonably have been produced from the peanuts so acquired.
(h) The Secretary shall require that the handling and disposal of additional peanuts be supervised by agents of the Secretary or by area marketing associations designated pursuant to section 1445c-(c) of this title. Quota and additional peanuts of like type and segregation or quality may, under regulations prescribed by the Secretary, be commingled and exchanged on a dollar value basis to facilitate warehousing, handling, and marketing.
(i) Handlers may, under regulations prescribed by the Secretary, contract with producers for the purchase of additional peanuts for crushing, export, or both. All such contracts shall be completed and submitted to the Secretary (or if designated by the Secretary, the area association) for approval prior to June 15 of the year in which the crop is produced.

7 U.S.C. § 1359 (1982). Subsection (g) sets forth the handler’s obligation to market quota peanuts for domestic consumption. Subsections (h) and (i) discuss the handler’s obligation to dispose of additional peanuts.

As the language of § 1359(g) indicates, Congress authorized the Secretary of Agriculture (Secretary) to impose penalties when a peanut handler failed to satisfy production quotas. Under this authority, USDA promulgated regulations for the handling of peanut crops grown between 1979 and 1981. See 7 C.F.R. §§ 1446.8 and 1446.9 (1982). Subsections (h) and (i) did not authorize similar penalties for additional peanuts.

In 1981, USDA required peanut handlers to select one of two methods of supervision to monitor the disposal of peanuts. Under the physical method, a USDA inspector observed the entire processing of a farmer’s products. Under the non-physical method, [450]*450USDA authorized a state’s peanut association to perform spot checks of peanut shipments. The non-physical method checked the quantity, dollar valué, and screen size of additional peanuts.1 Pender Peanut selected the non-physical method of supervision in 7 C.F.R. § 1446.10.

The Commodity Credit Corporation (CCC) determined the amount and type of peanuts that the handler must either export or crush. After CCC determination, the handlers had to furnish irrevocable letters of credit. The face value of the letter of credit had to equal the USDA penalty. If handlers failed to deliver to the association satisfactory evidence that they had exported additional peanuts, CCC extracted the penalty from the letters of credit. Handlers also were subject to penalty for failure to obtain the requisite non-physical supervision from the association. USDA, however, had discretion to reduce these penalties.

Assessment of Penalties on Plaintiff

On October 26, 1982, USDA assessed a penalty of $1,165,736.75 against plaintiff for failure to dispose of additional peanuts in accordance with § 1359(h) and 7 C.F.R. § 1446.10. USDA determined that plaintiff did not export 4,270,098 pounds of additional peanuts.2

Plaintiff later submitted additional export documentation. Thus, as of December 2, 1982, USDA revised the penalty to $1,112,993.70. The reduction of the penalty reflected documentation showing that plaintiff failed to export or crush 4,076,900 pounds of peanuts instead of 4,270,098 pounds. USDA later adjusted the penalty to $1,106,638.26.

Plaintiff immediately challenged the penalty within USDA channels. On November 29, 1982, USDA, through CCC, drew on the letter of credit posted by plaintiff. This assessment in turn forced plaintiff out of the peanut handling business.

On December 22, 1982, USDA affirmed the original penalty assessment. USDA concluded, however, that plaintiff’s marketing errors were unintentional. Consequently, pursuant to 7 C.F.R. § 1446.10(k)(6), USDA reduced the marketing penalty to forty percent of the basic quota price support rate for the 1981 crop, or $368,879.42. This determination exhausted plaintiff’s administrative remedies.

Claims Court Action

Plaintiff instituted this action in the United States Claims Court on October 24, 1988. Both parties have moved for summary judgment.

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Cite This Page — Counsel Stack

Bluebook (online)
20 Cl. Ct. 447, 1990 U.S. Claims LEXIS 199, 1990 WL 68165, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pender-peanut-corp-v-united-states-cc-1990.