Carruth v. United States

• Decision Date: 02 July 1980
• Docket Number: No. 20-78,485-78.,20-78
• Citation: 627 F.2d 1068
• Parties: William L. CARRUTH v. The UNITED STATES. Frank BARBEE et al. v. The UNITED STATES.
• Court: U.S. Claims Court

627 F.2d 1068

William L. CARRUTH v. The UNITED STATES.

Frank BARBEE et al. v. The UNITED STATES.

Nos. 20-78, 485-78.

United States Court of Claims.

July 2, 1980.

COPYRIGHT MATERIAL OMITTED

Harold E. Vanberg, Jr., Dallas, Tex., attorney of record for plaintiffs. Jeffrey M. Glosser, Washington, D.C., and Goins & Underkofler, Dallas, Tex., of counsel.

Frank M. Rapoport, Washington, D.C., with whom was Asst. Atty. Gen. Alice Daniel, Washington, D.C., for defendant. James R. Walczak, Washington, D.C., of counsel.

Before FRIEDMAN, Chief Judge, COWEN, Senior Judge, and NICHOLS, Judge.

OPINION

COWEN, Senior Judge:

The Texas peanut farmers who are the plaintiffs in these two consolidated cases broadly challenge the authority of the Secretary of Agriculture (the Secretary) to reduce or withhold price supports from peanuts containing the mold Aspergillus flavus (A. flavus). As alternative grounds for recovery, plaintiffs allege that by withholding the price supports for such peanuts, the Government breached an implied contract with plaintiffs. They also assert that a United States Department of Agriculture (USDA) marketing regulation (known as the "24-hour rule") operated to deny them due process of law, as well as equal protection of the laws, and constituted a taking of their property without just compensation—all in violation of the Fifth Amendment of the Constitution. Additionally, plaintiffs attack as arbitrary and capricious procedures used by USDA to identify the presence of the mold on the peanuts. The cases are before us on cross-motions for summary judgment. We reject plaintiffs' challenge to the authority of the Secretary to reduce or withhold price supports from peanuts containing the A. flavus mold; hold that, with one exception, plaintiffs are not entitled to recover on any of the alternative grounds alleged, and grant defendant's motion for summary judgment on these aspects of the cases. The exception is plaintiffs' claim based on the procedures used to identify the A. flavus mold, with respect to which we find there exist disputed, material issues of fact which make summary judgment inappropriate and require a remand to the Trial Division.

I.

As is the case with many agricultural commodities, the production and marketing of peanuts is pervasively regulated by Congress and USDA.¹ This regulatory scheme is intended to benefit different groups with sometimes conflicting interests: producers, handlers, processors, and consumers. 7 U.S.C. § 1357 (1976). The principal benefits intended to be achieved by the regulatory scheme are the establishment and the maintenance of parity prices,² the establishment and maintenance of orderly marketing conditions, and the avoidance of unreasonable fluctuations in supply and price. 7 U.S.C. §§ 601-602, 1357 (1976).

The regulatory scheme established by Congress for peanuts contains the basic elements of most agricultural support programs: restrictions on production and marketing, and supported prices.³ See 7 U.S.C. §§ 1357-1359, 1421-1441 (1976). Between July 1 and December 1 of each year the Secretary establishes a national marketing quota for peanuts. 7 U.S.C. § 1358(a) (1976). When this quota is expressed in terms of acres it is known as the national acreage allotment. Id. The national acreage allotment is apportioned among the peanut producing states and each state's allotment is in turn apportioned among the peanut farmers within the state 7 U.S.C. § 1358(c)-(d) (1976). A farmer who does not plant peanuts on an acreage in excess of his allotment is known as a "cooperator", 7 U.S.C. § 1428(b) (1976), and is eligible for price supports on his peanut crop. 7 U.S.C. § 1421(c) (1976). Peanuts marketed by a farmer without an acreage allotment or in excess of his allotment are not only ineligible for price supports, but are also subject to marketing penalties. 7 U.S.C. §§ 1359, 1421(c) (1976).

The Secretary provides price supports for peanuts through the Commodity Credit Corporation (CCC).⁴ 7 U.S.C. § 1421(a) (1976). The CCC makes warehouse storage loans to cooperative peanut marketing associations which contract with it. 7 C.F.R. § 1446.10 (1979). (Plaintiffs here dealt with the Southwest Peanut Growers Association (SWPGA)). The cooperative marketing association stores and handles the peanuts of cooperating farmers and makes nonrecourse loans to the farmers, using the peanuts as collateral.⁵ 7 U.S.C. § 1425 (1976), 7 C.F.R. § 1446.10 (1979). The amount of the loan made to a producer is determined by the price support level for peanuts in a particular year. 7 C.F.R. § 1446.10 (1979). The price support level is a percentage of the parity price for peanuts. 7 U.S.C. § 1441 (1976). The parity price is computed annually pursuant to a statutory formula, 7 U.S.C. § 1301(a) (1976), and the percentage of parity paid as the support price is based upon the available supply of peanuts. 7 U.S.C. §§ 1428(e), 1441(b) (1976). From 1973 to 1977 the minimum price support level for peanuts was statutorily mandated at 75 percent of parity. 7 U.S.C. § 1441(b) (1976 & Supp. I 1977).

A. flavus mold is a principal source of aflatoxin in agricultural commodities such as peanuts, barley, oats, wheat, and corn. Aflatoxin is a powerful carcinogen. The potential danger of aflatoxin as a carcinogen in peanuts first became known to the officials of USDA in the mid-1960's. No decision was then made to reduce or eliminate price supports for peanuts contaminated with the mold, because this was a new and critical problem which faced the growers and other segments of the industry. Also, at that time, USDA officials felt that there was no rapid and reliable method of indicating the presence of mold in farmers' stock peanuts. However, USDA took strict measures to prevent products made from contaminated peanuts from reaching the edible market. It was determined that these measures were necessary both to protect the health of the nation and the farmers by preserving consumer confidence in the peanut industry.

On February 14, 1973, USDA published in the Federal Register a notice of proposed rule making for the 1973 peanut crop. 38 Fed.Reg. 4408 (1973). The notice stated, inter alia, that USDA was considering "making peanuts with visible A. flavus mold of the type that produces aflatoxin ineligible for price supports." Id. at 4409. Peanuts containing the visible mold are classified as segregation 3 (seg. 3) peanuts. 7 C.F.R. § 1446.3(p) (1974). The final regulations for the 1973 peanut crop, published on July 11, 1973, did not make the seg. 3 peanuts ineligible for price supports, but they did reduce the price support level for such peanuts by $50 a ton. 38 Fed.Reg. 18453 (1973). The $50 discount was considered by USDA as an interim measure for the 1973 crop; it was felt that an order making such peanuts ineligible for the support program should be delayed another year in order to give producers and the industry some time to make adjustments.

For the 1974 crop of peanuts, USDA completely withdrew price supports for peanuts classified as seg. 3 by regulation published on July 15, 1974. 39 Fed.Reg. 25949 (1974), 7 C.F.R. § 1446.7 (1975). Seg. 3 peanuts remained ineligible for price supports through 1977. 7 C.F.R. § 1446.7(a)(7) (1978).

As a farmer harvests peanuts, he brings them by truckload to a buying point, where they are tested and graded by a representative of the Federal-State Inspection Service. This representative conducts a microscopic examination of a sample of each load in order to determine whether the A. flavus mold is present on any of the peanuts. As previously stated, peanuts which are found to contain the mold are classified as seg. 3 peanuts. Seg. 1 peanuts are farmer stock peanuts which are free of the mold and contain no more than 2 percent damaged kernels, nor more than 1 percent concealed damage caused by rancidity, mold and decay. 7 C.F.R. § 1446.3(p) (1974). Seg. 2 peanuts are those which are free from visible mold, but they may possess more than 2 percent damaged kernels or more than 1 percent concealed damage. Id.

At the buying point, the farmer either sells his peanuts to a sheller/handler, or pledges them to the local cooperative marketing association and receives his nonrecourse CCC loan.

Peanuts have three principal uses other than for seed. Cleaned in shell peanuts are, as the name suggests, still in the shell when sold to the public and are commonly referred to as "ball park" peanuts. Shelled peanuts are those which have been removed from their shells and are used principally for peanut butter, candy and cocktail nuts. Crushed peanuts are used for cooking oil and salad oil. Seg. 3 peanuts are not suitable for either of the first two uses mentioned, because of the dangers presented by aflatoxin. Seg. 3 peanuts may, however, be crushed for salad and cooking oil which is safe for human consumption.

As a practical matter, prior to 1973, when seg. 1, seg. 2 and seg. 3 peanuts were eligible for full price supports, the market price for all three classes of peanuts was the same as the price support level. Beginning with the $50 reduction in the price support level for seg. 3 peanuts in 1973, the market price for peanuts to be crushed for oil dropped considerably below the price support level.⁶ Since shellers/handlers were prohibited by the terms of the Peanut Marketing Agreement⁷ from acquiring seg. 3 peanuts except for the purpose of crushing for oil, farmers whose peanuts were classified as seg. 3 received a price below the price support level during the years 1973-77 even if they sold the peanuts rather than pledging them to the CCC for a price support loan.

II.

Plaintiffs make a five-pronged attack on the Secretary's actions pertaining to seg. 3 peanuts in the years 1973-77. They charge that:

(1) The reduction of the price support level for seg. 3 peanuts in 1973 and the denial of price supports for seg. 3 peanuts from 1974-77, violated 7 U.S.C. §§ 1357, 1421(a), 1

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