Crave v. Tracy

• Decision Date: 07 October 1996
• Docket Number: No. 96-C-0321.,96-C-0321.
• Citation: 955 F.Supp. 1047
• Parties: George CRAVE, Crave Brothers and Weichert, Katzman Farms, Inc., John Rosenow, Rosenholm Farms, Jeffery C. Opitz, Opitz Brothers, Dennis Neumann, Carl Joseph Pagel, Fetzer Farms, Inc., Jon-De Farm, Inc., O'Harrow's, Inc., and Robert R. Spitzer, Plaintiffs, v. Alan T. TRACY, Secretary of Wisconsin Department of Agriculture, Trade, and Consumer Protection, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

955 F.Supp. 1047

George CRAVE, Crave Brothers and Weichert, Katzman Farms, Inc., John Rosenow, Rosenholm Farms, Jeffery C. Opitz, Opitz Brothers, Dennis Neumann, Carl Joseph Pagel, Fetzer Farms, Inc., Jon-De Farm, Inc., O'Harrow's, Inc., and Robert R. Spitzer, Plaintiffs, v. Alan T. TRACY, Secretary of Wisconsin Department of Agriculture, Trade, and Consumer Protection, Defendant.

No. 96-C-0321.

United States District Court, E.D. Wisconsin.

October 7, 1996.

Michael R. Docherty, Doherty, Rumble & Butler, St. Paul, MN, Kevin E. Martens, Foley & Lardner, Milwaukee, WI, for Plaintiff.

Bruce A. Craig, Susan K. Ullman, Assistant Attorney Generals, Wisconsin Department of Justice, Office of the Attorney General, Madison, WI, for Defendant.

MEMORANDUM AND ORDER RE: PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION

GORENCE, United States Magistrate Judge.

The plaintiffs, who are farmers and dairy farms in Wisconsin that produce raw milk for sale to dairy plants, commenced this action on March 19, 1996, against defendant Alan T. Tracy, Secretary of the Wisconsin Department of Agriculture, Trade, and Consumer Protection (DATCP). The plaintiffs are challenging the constitutionality of Wis.Stat. §§ 100.20 and 100.22, anti-price discrimination statutes, and an Emergency Order effective January 1, 1996, which amended Wis.Admin.Code Ch. ATCP 100 (note) and created ATCP 100.76(3m) and subchapter VI of chapter ATCP 100, relating to price discrimination. (See Exh. 19 admitted at preliminary injunction hearing).

The plaintiffs seek to prevent the defendant from interpreting and enforcing the statutes and the Emergency Order to restrict the payment of milk volume premiums in the State of Wisconsin. Volume premiums are payments made by milk processors (dairy plant operators) to producers (dairy farms) for milk in excess of the base price. These volume premiums, which are determined by the processors, are paid in increasing amounts for increasing volumes of milk purchased.

The plaintiffs seek a declaratory judgment pursuant to 28 U.S.C. § 2201, that the challenged statutes and order are unconstitutional. They also seek preliminary and permanent injunctive relief restraining the defendant and his agents from the use, operation, enforcement, execution, and application of Wis.Stat. § 100.22¹ and Wis.Stat. § 100.20² and any orders promulgated thereunder to prohibit or restrict payment of volume premiums. The plaintiffs also seek to recover their costs, disbursements, expert witness fees, and attorney's fees and expenses pursuant to 42 U.S.C. § 1983 and § 1988.

This action was assigned to this court according to the random assignment of civil cases pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 13.03 (E.D.Wis.). The parties have consented to United States magistrate judge jurisdiction. Therefore, this court has jurisdiction over the action pursuant to 28 U.S.C. § 636(c) and Local Rule 13.05(a) (E.D.Wis.). Jurisdiction in this case is based on 28 U.S.C. § 1331 and 28 U.S.C. § 1367. The parties agree that venue is appropriate in this district pursuant to 28 U.S.C. § 1391.

A hearing on the plaintiffs' motion for preliminary injunction was conducted on May 14, 15, and 16, 1996. The parties subsequently submitted post-hearing briefs. In light of subsequent developments, particularly this court's review of the June 17, 1996, final draft rule, which modified the Emergency Order "in response to hearing testimony" and in light of enforcement experience under the "emergency rule"³, at the court's request, the parties submitted supplemental briefs to address the impact of the expiration of the January 1, 1996, Emergency Order on this case. The parties also addressed whether the plaintiffs' challenges to the various versions of the January 1, 1996, Emergency Order are moot and, therefore, no longer present a justiciable case or controversy. The parties also addressed the implications if any, presented in this action by the final draft rule of June 17, 1996. The plaintiffs' final brief was filed on September 30, 1996, pursuant to the court's order. Having considered the evidence, the applicable law and the arguments of the parties, the court now sets forth its findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.

Findings of Fact

Plaintiff George Crave is the owner and operator of plaintiff Crave Brothers and Weichert (Crave Brothers) dairy farm, a Wisconsin general partnership in Waterloo, Wisconsin. (Plaintiffs' Exh. 28, ¶ 2). The farm has been in its current location for 15 years. Plaintiff Crave Brothers has a herd size of 530 cows, with an annual milk production of 12,000,000 pounds. Plaintiff Crave Brothers is a member of Alto Cooperative (Alto) and has received volume premiums since approximately 1987 from Alto. The farm was to receive $.65/cwt in 1996 from Alto⁴. Effective January 1, 1996, in an attempt to comply with the Wisconsin's "restriction" of volume milk premiums, Alto issued a revised volume premium schedule. (Plaintiffs' Exh. 28, ¶ 6 & Exh. A attached thereto). As a result, plaintiff Crave Brothers will only receive a volume premium of $.48/cwt from Alto.

Plaintiff George Crave estimates that if volume milk premiums are restricted to $.483/cwt in 1996, the farm will lose $20,040.00 in gross annual income. (Plaintiffs' Exh. 28, ¶ 7). He avers that if volume premiums are restricted to $.30/cwt, the farm will lose $42,000.00 in gross annual income in 1996. (Plaintiffs' Exh. 28, ¶ 7). He also avers that if volume premiums are limited to $.30/cwt or $.48/cwt, the loss of income would reduce plaintiff Crave Brothers' cash flow significantly, preventing it from staying current on loan repayment schedules for loans obtained for real estate, purchases of property, and buildings and improvements. (Plaintiffs' Exh. 28, ¶ 14). The financial stability of Crave Brothers would be put in serious jeopardy. (Id.). Plaintiff Crave also avers that if volume premiums are limited to $.30/cwt or $.48/cwt, the farm will attempt to sell, or consider selling, its milk to out-of-state processors. (See Plaintiffs' Exh. 28, ¶¶ 8 & 12).

Plaintiff Katzman Farms, Inc. (Katzman Farms) is a dairy farm located in Whitewater, Wisconsin, which was established in 1983. (Plaintiffs' Exh. 32, ¶ 2). Plaintiff Katzman Farms has a herd size of 500 head, with an annual milk production of approximately 10,950,000 pounds. In 1993, plaintiff Katzman Farms began receiving volume premiums from Dean Foods in Chemung, Illinois. Between August 1, 1995, and February 29, 1996, the farm sold its milk to Grande Cheese in Brownsville, Wisconsin and was paid volume premiums of $.90/cwt. As of March 1, 1996, the farm resumed selling its milk to Dean Foods which offered to pay a $.90/cwt volume premium.

Thomas Katzman, president of plaintiff Katzman Farms, avers that if volume premiums above $.30/cwt are prohibited, the farm would lose approximately $65,700.00 in annual gross income in 1996. (Plaintiffs' Exh. 32, ¶ 8). If volume premiums above $.483/cwt are prohibited, the farm will lose in excess of approximately $45,661.50 in 1996. (Id.). He avers that if volume premiums are limited to $.30 to $.48/cwt, the financial stability of Katzman Farms will be put at serious risk. (Plaintiffs' Exh. 32, ¶ 9). He also avers that if Dean Foods is prohibited from paying volume premiums in excess of $.30 to $.48/cwt, the farm will attempt to sell its milk to other processors either within or outside of Wisconsin who are offering volume milk premiums in the $.90/cwt range. (Plaintiffs' Exh. 32, ¶ 10).

Plaintiff John Rosenow is a partner in plaintiff Rosenholm Farms, a dairy farm located in Waumandee, Wisconsin. (Plaintiffs' Exh. 31, ¶ 2). The farm was established in 1858 by plaintiff John Rosenow's great-great-grandparents. Plaintiff Rosenholm Farms has a current herd size of 300 milking cows, with a milk production of approximately 7,089,000 pounds in 1995. Plaintiff Rosenholm Farms has received volume premiums since 1988, primarily from Foremost Farms USA Cooperative (Foremost). As of January 1, 1996, the farm received volume premiums of approximately $.61/cwt from Foremost. The volume premiums received by the farm constitute approximately 30% of its net profit.

Plaintiff Rosenow avers that if volume premiums above $.30/cwt are discontinued, the farm would lose approximately $21,000.00 in annual gross income in 1996. (Plaintiffs' Exh. 31, ¶ 8). If volume premiums above $.483/cwt were discontinued, the farm will lose in excess of approximately $9,100.00 in 1996. (Id.). He avers that such reductions in volume premiums would place the financial stability of the farm at serious risk. (Id.). He further avers that, if those reductions in volume premiums were to occur, he would be forced to reduce his personal income to the extent that he and his wife might be forced to default on loans they have obtained from his mother. (Id.). His mother uses the payments on the loans to pay for the nursing home care of plaintiff John Rosenow's father. (Id.).

Plaintiff Jeffery C. Opitz is the owner and operator of plaintiff Opitz Brothers Farm (Opitz Brothers), which has been located in Saukville, Wisconsin for 94 years. (Plaintiffs' Exh. 29, ¶ 2). Plaintiff Opitz Brothers has a herd size of 625 cows with an annual milk production of 12,500,000 pounds. The farm began receiving volume premiums in 1985. In 1995, the farm received volume premiums from Mid-Am Dairy of approximately $.75/cwt. In 1996, the farm will receive a volume premium of $.65/cwt from Alto. Volume premiums represent an estimated $81,250.00 gross annual income to plaintiff Opitz Brothers.

Plaintiff Opitz avers that if volume premiums above $.30/cwt are prohibited, the farm's net income will be reduced by at least 25%. (Plaintiffs' Exh. 29, ¶ 7). If volume premiums above $.483/cwt are prohibited, the farm's net income will be reduced by at 12%. (Id.). If volume premiums are limited...