Members of Peanut Quota Holders Ass'n v. U.S., 04-5099.

• Decision Date: 25 August 2005
• Docket Number: No. 04-5099.,04-5099.
• Citation: 421 F.3d 1323
• Parties: MEMBERS OF THE PEANUT QUOTA HOLDERS ASSOCIATION, INC., Augustus Garrett, Jerome Paulk, Faye Paulk, and D.U. Pullum, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

421 F.3d 1323

MEMBERS OF THE PEANUT QUOTA HOLDERS ASSOCIATION, INC., Augustus Garrett, Jerome Paulk, Faye Paulk, and D.U. Pullum, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee.

No. 04-5099.

United States Court of Appeals, Federal Circuit.

August 25, 2005.

David Wm. Boone, Boone & Stone, of Atlanta, Georgia, argued for plaintiff-appellants.

Jane W. Vanneman, Senior Trial Counsel, Commercial Litigation Branch, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Peter D. Keisler, Assistant Attorney General and David M. Cohen, Director.

Before LOURIE, BRYSON, and GAJARSA, Circuit Judges.

GAJARSA, Circuit Judge.

Augustus Garrett, Jerome Paulk, Faye Paulk, and D.U. Pullum (collectively "the Members") are individual members of the Peanut Quota Holders Association, Inc. The Members individually appeal the final decision of the United States Court of Federal Claims (the "trial court") awarding summary judgment to the United States ("the government") on the ground that the Members possessed no compensable property interest in the peanut quota allocated to them under the Federal Agriculture Improvement and Reform Act of 1996, Pub.L. No. 104-127, § 155, 110 Stat. 888, 922-30 (the "1996 FAIR Act"). Members of the Peanut Quota Holders Ass'n v. United States, 60 Fed.Cl. 524 (2004) ("Peanut Quota Holders Ass'n").

The Members are all individuals who owned farms to which peanut quotas had been allocated under the former statutory provisions and who had leased their quotas to other farmers since at least 1998. The peanut quotas allowed the Members to obtain favorable loan rates¹ for their peanut crop. The loan rates effectively maintained an artificial minimum price for a quota holder's peanut crop. Under the former statutory provisions, the loan rates could also be sold or leased.²

The statute granting the peanut quotas was amended in 2002. Farm Security and Rural Investment Act of 2002, Pub.L. No. 107-171, §§ 1301-1310, 116 Stat. 134, 166-83 (the "2002 Act"). The 2002 Act made peanut quotas available only to those who actually farm peanuts and thereby share in the risk of production. Since the Members had leased their quotas, they were not eligible to receive a peanut quota under the new statutory provisions. The Members claim that the loss of price support for the 2002 crop and their loss of eligibility for future peanut quotas have led to financial losses. The gravamen of their complaint is that the new statute effectuated a regulatory taking of the loan rate they would have received in 2002 as well as their eligibility to obtain future peanut quotas.

Upon review, we conclude that the trial court erred in determining that the statutorily created peanut quota is not a property interest. Nonetheless, we agree with the trial court that this property right is not compensable under the Fifth Amendment. Consequently, the judgment of the trial court is affirmed.

BACKGROUND

A. The History of the Peanut Quota

In order to assess whether the Members have a property interest in the peanut quota, it is necessary to understand the statutory evolution of the peanut quota program. In the 1930s the United States' economic depression particularly affected the agricultural community. Congress, in an attempt to mitigate the effects of the depression on agricultural products, enacted the Agricultural Adjustment Act of 1938 ("AAA"), ch. 30 tit. III, § 301 et seq., 52 Stat. 31, 38, which regulated the production and sale of tobacco and wheat within the United States. The statute instituted acreage allotments to prevent oversupply of the targeted agricultural commodities. In 1941, the AAA was amended to include farm acreage allotments for peanuts. The Agricultural Adjustment Act of 1938, as amended, ch. 39, tit. III, §§ 357-359, 55 Stat. 88, 88-91 (the "1941 Act"). The 1941 Act sought to regulate the production of peanuts to avoid severe fluctuations in price caused by rapid changes in market demand and the year-long lag in response to that demand caused by crop growing cycles. 1941 Act, 55 Stat. at 88. Since 1941, Congress has regulated peanut production primarily through quotas set by the Secretary of Agriculture ("Secretary"), but the nature and reach of the quota system has not remained constant.

Under the 1941 Act, the Secretary was required to proclaim annually the total quantity of peanuts that would be made available for marketing the following year; this was known as the "national marketing quota." This quota was to be equal to the average amount of peanuts harvested during the five years prior to the year of the proclamation, adjusted for trends in production and prospective demand. To apportion the national marketing quota among the producing peanut farms, it was converted to a national acreage allotment. This allotment was derived by dividing the national marketing quota by the normal yield per acre.³

The national acreage allotment was divided proportionally among states based on the average relative peanut production per state for the five years immediately preceding the proclamation year, adjusted for trends in yields and abnormal conditions of production. Each state acreage allotment was subsequently apportioned among farms in that state. The farms that obtained allotments were farms on which peanuts were grown in any of the three years immediately preceding the year for which the allotment was determined. The state allotments were apportioned on the basis of the tillable acreage available for the production of peanuts and the past acreage of peanuts grown on the farm. The actual amount of peanuts produced on the acreage allotment equaled the marketing quota for the farm. 1941 Act, 55 Stat. at 89-90.

A farmer with an allotment was subject to financial penalties⁴ if he marketed peanuts in excess of his farm's marketing quota. Any farmer who grew peanuts without an allotment was also subject to financial penalties.⁵

Under the 1941 Act, the Secretary of Agriculture was directed to make loans available to farmers with marketing quotas for peanuts. The Secretary of Agriculture provided the loans through the Commodity Credit Corporation ("CCC"). The CCC offered loans to farmers at rates between fifty and seventy-five percent of the parity price⁶ of peanuts. 1941 Act, 55 Stat. at 91. These loans provided farmers with operating capital. The loans were non-recourse, such that if the farmer was unable to sell his crop at a profit and repay the loan with interest before it matured, the CCC accepted the actual peanut crop sales revenue as full repayment of the loan.

The Agricultural Act of 1949, ch. 792, tit. I, § 101, 63 Stat. 1051-52 (the "1949 Act"), instituted the price support program. The 1949 Act increased loan rates overall. It also tied the loan rates into an inverse relationship with the amount of overproduction of peanuts for the year.

The AAA was amended again in 1967 to allow peanut farm owners and operators "to sell or lease all or any part of the right to all or any part of their peanut acreage allotment." Pub.L. No. 90-211, § 358a, 81 Stat. 658 (the "1967 Act"). The 1967 Act also permitted an owner of a farm with an acreage allotment to transfer the allotment to his other farms. Transfers were restricted such that they were only permitted between farms within the county in which the peanut acreage allotment was apportioned. Other restrictions further limited the transferability of the allotments.

By 1977, the introduction of new seed varieties, new fertilizers, and new farm management techniques had substantially increased the yield of peanuts per acre. As a result, there was an oversupply of peanuts. These conditions prompted Congress to revamp the peanut program in the Food and Agriculture Act of 1977, Pub.L. No. 95-113, §§ 801-807, 91 Stat. 913, 944-49 (the "1977 Act"). The 1977 Act temporarily suspended much of the AAA and its subsequent amendments and, in its place, instituted poundage quotas based on the weight of peanuts produced by the quota holders. The new poundage quotas applied only to peanuts destined for domestic edible use.⁷ The poundage quota system was used in conjunction with the acreage allotment system; a poundage quota was established for each farm that possessed an acreage allotment under the AAA.

The 1977 Act also amended the price support program to provide different support levels for "quota peanuts" and "additional peanuts." Quota peanuts were any peanuts that were eligible for domestic edible use and that did not exceed the poundage quota of the farm. Additional peanuts were any peanuts that were in excess of a farm's poundage quota but not in excess of the actual production of the acreage allotment. This differentiation continued to discourage overproduction because the price support provided for additional peanuts was substantially lower than that provided for quota peanuts.⁸

In 1981, Congress passed yet another law that temporarily suspended the AAA. The Agriculture and Food Act of 1981, Pub.L. No. 97-98, §§ 701-707, 95 Stat. 1213, 1248-56 (the "1981 Act"). The 1981 Act terminated acreage allocations and marked the end of a four year transition to the poundage quota system that began with the 1977 Act. The 1981 Act retained the two-tiered system (of quota peanuts and additional peanuts) based on poundage. It also enlarged the definition of additional peanuts to include any peanuts that were not covered by a poundage quota, irrespective of whether the peanuts were grown by a farm that possessed a poundage quota. Thus, under the 1981 Act, the peanut quota no longer restricted the production of peanuts. Poundage quota holders simply received more generous support from the government than non-quota holders.

In 1996, to mitigate the ever increasing costs to the public of maintaining the price support programs, Congress enacted the 1996 FAIR Act. The 1996 FAIR Act, like the 1977, 1981, 1985, and 1990...