Hiatt Grain & Feed, Inc. v. Bergland
| Decision Date | 18 January 1978 |
| Docket Number | No. 77-4161.,77-4161. |
| Citation | 446 F. Supp. 457 |
| Parties | HIATT GRAIN & FEED, INC., on behalf of itself and all others similarly situated, Plaintiff, v. Hon. Bob BERGLAND, Secretary of Agriculture, United States of America, Defendant, Ralph Ball, Benjamin Duell, Ray Madden, Kaye Morison, Godfrey Strasburg, Bill Turrentine, Maurice Foster, Gregory Blick, Stanley Schmitt, Robert Bowman, Howard A. Young, Larry Yost, Leo Paulsen, Andy Plett and Dwight A. Klinger, and Farmers Cooperative Union of Sterling, Kansas, an agricultural cooperative, and Far-Mar-Co., Inc., an agricultural cooperative, Intervenors. |
| Court | U.S. District Court — District of Kansas |
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William H. Curtis, P. John Owen, Morrison, Hecker, Curtis, Kuder & Parrish, Kansas City, Mo., John Q. Royce, Tom W. Hampton, Hampton, Royce, Engleman & Nelson, Salina, Kan., for plaintiff.
James P. Buchele, U. S. Atty., D. Kan., Topeka, Kan., Griffin B. Bell, Atty. Gen., Washington, D. C., Barbara Allen Babcock, Asst. Atty. Gen., Dennis G. Linder, William Z. Elliott, Dept. of Justice, Washington, D. C., Mary K. Briscoe, Asst. U. S. Atty., Topeka, Kan., for defendant.
Robert L. Gowdy, Kansas City, Mo., for Ralph Ball, Duell, Madden Morrison, Strasburg, Turrentine, Foster, Blick, Schmitt, Bowman, Young, Yost, Paulsen, Plett, Klinger, Farmers Cooperative Union of Sterling, Ks. and Far-Mar-Co., Inc.
Leonard O. Thomas, Weeks, Thomas, Lysaught, Bingham & Mustain, Kansas City, Kan., Donald E. Graham, Washington, D. C., for National Council of Farmer Cooperatives.
Charles D. McAtee, Topeka, Kan., for National Council et al.
On July 14, and August 9, 1977, the Secretary of Agriculture, Bob Bergland, published amendments to 7 C.F.R. ?? 1421 and 1425. 42 Fed.Reg. 36234, et seq., and 40175, et seq. (1977). The basic purpose of the amendments was to add barley, corn, grain sorghum, oats, rye, and wheat to the list of commodities for which approved cooperative marketing associations may obtain price support loans (referred to in this litigation as "Form G" loans) for their producer-members. The final publication of the amendments occurred on August 9, 1977, 42 Fed.Reg. 40175-40188. (PX # 10). By this action, filed on August 9, 1977, plaintiff Hiatt Grain & Feed, Inc., on behalf of itself and all others similarly situated, challenged the promulgation and implementation of the amended regulations.
By order of September 1, 1977, this litigation was certified as appropriate for class action treatment pursuant to F.R.Civ.P. 23, 28 U.S.C. The plaintiff class is composed of grain dealers (hereinafter referred to as "independents" or "privates") which are not cooperative organizations. The scope of the class was described in the certification order as follows:
The scope of the class should cover that group defined by plaintiff in its complaint, that is, all persons, firms, partnerships, corporations, and other business entities who own or operate facilities for the storage, purchase, sale, handling, processing, merchandising, or marketing of barley, corn, grain sorghum, oats, rye, and wheat, or any one or more of said commodities, but who do not and cannot meet the eligibility requirements to participate in the price support program under the regulations issued by the Secretary of Agriculture, and who are not cooperative marketing associations.
The interest of the plaintiff class of independent or private grain dealers is counter-pointed by the intervenors, who were allowed to intervene in this action by order of September 6, 1977. The intervenors represent the interests of the cooperative grain dealers of the United States. The intervenors are a regional cooperative (FAR-MAR-CO), a local cooperative (Farmer's Cooperative Union of Sterling, Kansas), and several individual wheat growers.
A motion for a temporary restraining order was filed along with the complaint. By agreement of the parties, a temporary restraining order was entered and remained effective until September 9, 1977, when this Court, after two days of hearings, entered an order denying plaintiff's motion for a preliminary injunction. The order expressed no opinion on the merits of the litigation, but denied preliminary relief upon the grounds that plaintiff had failed to prove that immediate irreparable injury would result to the class in the absence of such relief. Despite the Court's dissolution of the temporary restraining order, it is our information that defendant has voluntarily refrained from fully implementing the challenged regulations pending the resolution of this case. (Robbins Depo., p. 11)
A trial on the merits of this action was held November 7-14, 1977. All post-trial memoranda were submitted by the parties by January 6, 1978.
A brief factual background concerning the case was contained in the order denying the motion for a preliminary injunction. We shall now restate that factual summary, with some alteration.
A price support loan works generally like this: When a farmer delivers his grain to an elevator (private or cooperative), he may wish to sell it at that time. If he does not, he will store it with the elevator pending his decision to sell. If the farmer is not ready to sell, but needs money to carry on his farming operation, he may as one option take out a government price support loan. This involves paying advance storage charges to the elevator, receiving a receipt for the grain, and obtaining the price support loan from the county A.S.C.S. office. The loan is non-recourse and the present interest rate is 6%. If the price of the grain is significantly higher than the price support level (presently about $2.25/bushel for wheat), there is less reason to obtain such a loan than if the price of wheat is near or below the loan rate. If a loan is taken out while the price of wheat is near the loan rate, then the farmer may sell the wheat and use the proceeds to pay off the loan. However, if the price of wheat does not go up, the farmer may fare better by keeping the proceeds of the loan and allowing the government to "takeover" the grain. This is the farmer's option and illustrates the non-recourse nature of the loan. Only if the farmer elects to sell the wheat and pay off the loan need he pay the interest charge.
Price support loans to farmers are administered by the Commodity Credit Corporation (C.C.C.), and the Agricultural Stabilization and Conservation Service (A.S.C.S.). Both the C.C.C. and the A.S.C.S. are under the general supervision of defendant Bergland in his capacity as Secretary of the United States Department of Agriculture (U.S.D.A.). As early as the 1930's, price supports for cotton were administered through cooperative marketing associations to their producer-members. Over the years, the list of crops for which cooperatives could receive (and pass on to their producer-members) price support loans was expanded by various Secretaries of Agriculture to include such commodities as rice, honey, soybeans, tung oil, and dry edible beans.
By the challenged regulations, defendant seeks to expand the list of crops for which approved cooperatives may receive (and pass on to their producer-members) price support loans to include barley, corn, grain sorghum, oats, rye, and wheat. Insofar as the interests of the parties before the Court are concerned, wheat is the crop which is of immediate and primary concern. Plaintiff's concern is prompted largely by the formation of a marketing program by intervenor FAR-MAR-CO. In the 1976 crop year FAR-MAR-CO initiated a marketing program called Pro-Mark, which was designed to allow FAR-MAR-CO, a large regional cooperative, to effectively enter the field of exporting grain (traditionally dominated by non-cooperative multinational corporations) by utilization of large "pools" of grain which would be supplied by producer-members.
The concept of pooling is defined in PX # 28, a treatise by the Department of Agriculture entitled Improving the Export Capability of Grain Cooperatives, p. 40 (1976):
Another method by which producers commit grain to local elevators is through pooling. This method is unique to cooperatives. Under such an arrangement, each producer commits a specified volume or acreage to the cooperative. He receives a cash advance at harvest, progress payments as the grain is sold, and a final payment once the pool is liquidated. The total of all payments equals the average price received by the cooperative for grain sold out of the pool, less cost of pool operation. Adjustments are made for quality differences.
This description fairly applies to FAR-MAR-CO's Pro-Mark program, under which farmer-producers voluntarily commit large amounts of grain to the local cooperatives, and ultimately FAR-MAR-CO. The producer-members voluntarily surrender the marketing decision to the co-op. Armed with a large pool of grain, FAR-MAR-CO endeavors to enter the grain export market and receive optimum prices for the producers who had committed their grain. In 1976, FAR-MAR-CO, through the Pro-Mark program, obtained a pool of about 33 million bushels of wheat. By October 31, 1976, producer-members of cooperatives had committed to the Pro-Mark program 1977 crops which, after harvest, approximated 38 million bushels.
Until fairly recently, price support loans were pegged at about $1.25 a bushel, while wheat prices were significantly higher. Therefore, farmers who committed part or all of their wheat crop to Pro-Mark were not disadvantaged by the fact that such an action rendered them ineligible to receive price support loans. However, at the time defendant initiated the process of promulgating the challenged regulations, the support loan price had been raised to around $2.25 per bushel while the market price of wheat had plummetted to a level at or below the support price. Therefore, a farmer...
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