P.R. Dairy Farmers Ass'n v. Pagan

• Decision Date: 08 August 2014
• Docket Number: Civil No. 08–2191 DRD.
• Citation: 35 F.Supp.3d 210
• Court: U.S. District Court — District of Puerto Rico
• Parties: PUERTO RICO DAIRY FARMERS ASSOCIATION, Plaintiff(s), v. Myrna Comas PAGAN, in her official capacity, as the Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico; and Edmundo Rosaly, Esq., in his official capacity, as the Interim Administrator of the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico; Defendant(s).

35 F.Supp.3d 210

PUERTO RICO DAIRY FARMERS ASSOCIATION, Plaintiff(s)

v.Myrna Comas PAGAN, in her official capacity, as the Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico; and Edmundo Rosaly, Esq., in his official capacity, as the Interim Administrator of the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico; Defendant(s).

Civil No. 08–2191 DRD.

United States District Court, D. Puerto Rico.

Signed Aug. 8, 2014.

Jorge F. Blasini–Gonzalez, Juan Carlos Deliz, William A. Graffam, Jimenez, Graffam & Lausell, Juan M. Frontera–Suau, Ufret & Frontera Law Firm, San Juan, PR, for Plaintiff(s).

Yassmin Gonzalez–Velez, Gonzales Velez Law Offices, Edward W. Hill–Tollinche, Hill & Gonzalez, PSC, Gerardo A. De–Jesus–Annoni, Joseph G. Feldstein–Del Valle, Department of Justice, San Juan, PR, for Defendant(s).

OPINION AND ORDER

RE: INJUNCTION AND DECLARATORY RELIEF

DANIEL R. DOMINGUEZ, District Judge.

Pending before the Court are: (a) Defendants' Motion to Dismiss Counts One, Two and Three of the Puerto Rico Diary Farmers Association's Second Amended Complaint for Lack of Standing Pursuant to Fed.R.Civ.P. 12(b), Docket No. 35; and (b) Plaintiff's Opposition to Government Defendant's Motion to Dismiss for Lack of Standing Filed at Docket No. 35, Docket No. 38. For the reasons set forth below, the motion to dismiss is DENIED.¹

Jurisdiction

This Court has subject matter jurisdiction to entertain actions filed under 28 U.S.C. § 1331 and 28 U.S.C. § 1343, as well as claims under 42 U.S.C. § 1983 and the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. Docket No. 34, page 3. Plaintiff is also asserting Defendants violated their members' rights under the United States Constitution's Fifth Amendment's Takings Clause and the Fourteenth Amendment's Due Process and Equal Protection Clauses. Id. Finally, Plaintiff moves this Court to exercise supplemental jurisdiction over the claims based on the laws of the Commonwealth of Puerto Rico pursuant to 28 U.S.C. § 1367 as they are related to the claims upon which this Court has original jurisdiction. Id.

In addition to requesting compensation for alleged constitutional violations that began in 2005, Plaintiff is also requesting injunctive and declaratory relief. Docket No. 34, page 21, ¶ 123 and page 29. Plaintiff requests this Court to issue an order forcing Defendants to refrain from enforcing Price Orders and Regulations that: (1) do not allow the dairy farmers to recover their costs for producing raw milk; (2) do not allow the dairy farmers to recover a reasonable rate of return; (3) deprive the dairy farmers of their property; (4) violate the clear mandates of the Court's Amended Opinion and Order issued on July 13, 2007 in the lead case; (5) violate the clear mandate of Act 34 of June 11, 1957, 5 L.P.R.A. §§ 1092 –1125 (2005 & Supp.2008); and (6) are highly discriminatory, not rational and not scientifically based. Docket No. 34, page 29, ¶ (i)-(vi). Lastly, Plaintiff requests this Court to order Defendants to “create a mechanism for the dairy farmers to recover the losses they have experienced on account of [Defendants'] unconstitutional actions and decisions herein challenged.” Docket No. 34, page 29, ¶ vii.

Introduction

Puerto Rico Dairy Farmers Association (“PRDFA”), filed its Second Amended Complaint on December 26, 2013 which contained six causes of action. Docket No. 34. Essentially, PRDFA alleged that the Final Settlement Agreement and Memorandum of Understanding Between the Parties in the lead case (“Settlement Agreement”)² violated the United States Constitution, the Court's Amended Opinion and Order³ issued on July 13, 2007, and Act 34.⁴ Docket No. 34, page 2. PRDFA alleged that the price set in the Settlement Agreement for the raw milk it produces caused a decrease in the diary farmers' compensation that was “not based on any scientific, rational, or non-discriminatory standard.” Id. at page 18, ¶ 97.

Procedural Background

A. Parties

Plaintiff PRDFA is an association that “comprises all licensed diary farmers in Puerto Rico and the one who represents their rights and interests.” Docket No. 38, page 6. Amicus Curiae Vaquería Tres Monjitas, Inc. (“VTM”) and Intervenor Suiza Dairy Inc. (“Suiza”) are the only two fresh milk processors in Puerto Rico (collectively “the Processors”), plaintiffs in the lead case. Their business consists of purchasing raw milk from local dairy farmers and converting it into drinkable fresh milk for sale to consumers. Vaquería Tres Monjitas v. Irizarry, 587 F.3d 464, 468 (1st Cir.2009). PRDFA represents the producers of the raw milk processed by the Processors and Indulac, albeit Indulac was not a plaintiff in the lead case. Id.

Edmundo Rosaly, Esq. is being sued in his official capacity as the current Interim Administrator of the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico (“ORIL” by its Spanish acronym). ORIL is a subdivision of Puerto Rico's Department of Agriculture whose current secretary, Myrna Comas–Pagan, is also a named defendant in her official capacity. ORIL is a regulatory agency which oversees the milk industry in Puerto Rico and sets both a maximum price for the sale of milk to consumers and a minimum price for the purchase of raw milk from dairy farmers by the Processors. Irizarry, 587 F.3d at 469.

B. Background of this Litigation

This action is a member case of a highly-litigated suit between the Processors and different government entities which regulate the milk industry in Puerto Rico. While the lead case has settled and the matter is final, it is imperative to provide some information on it to provide context for the current suit.

1. Lead Case

The Processors sued the regulating government entities and challenged the constitutionality of the laws and regulations that governed the milk industry in Puerto Rico. Vaquería Tres Monjitas, Inc. v. Laboy, No. 04–1840, 2007 WL 7733665 at *1 (D.P.R. July 13, 2007). PRDFA was joined as a defendant for appeal purposes only.⁵ Irizarry, 587 F.3d at 468. Another of the defendants was the Industria Lechera de Puerto Rico, Inc. (“Indulac”). Id. Indulac purchases the raw milk left over from the Processors after they meet the demand for fresh milk (“surplus milk”). Id. at 469. Indulac was brought into the suit because ORIL required the Processors to purchase all of their milk from the dairy farmers at a price significantly higher than ORIL allowed the Processors to sell the surplus milk to Indulac. Id. “Indulac is the sole entity in Puerto Rico authorized to process ultra high temperature milk (‘UHT milk’), a type of milk that does not require refrigeration prior to opening and competes directly with the fresh milk produced by [the Processors].” Id. at 468. “Essentially, by mandating that [the Processors] pay a high price for raw milk and then requiring them to sell the surplus ... to Indulac at a substantially lower price, ORIL created a scheme where [the Processors] were forced to subsidize Indulac, their competitor.” Id. at 469.

After a long litigation, the Processors, ORIL, and the Puerto Rico Secretary of Agriculture reached an agreement that resulted in the Settlement Agreement. However, neither PRDFA nor Indulac were a part of the settlement negotiations. Docket No. 34, page 17, ¶ 90. The Settlement Agreement contained a new Price Order and Regulation No. 12 which “[took] more than sixteen cents per quart from the dairy farmers, and redistribute[d] it to the [Processors].” Id. at ¶ 93–94. “The Regulation forces the surplus milk to be sold at the same price as fresh and Indulac's UHT milk.” Id. at page 18, ¶ 95. PRDFA filed a Motion to Reject the Settlement Agreement because of the effects the Settlement Agreement would have on the dairy farmers. Id. at ¶ 99.

The Court approved and incorporated all of the covenants in the Settlement Agreement in its Amended Order and Judgment dated November 7, 2013.⁶ Docket No. 34, page 17, ¶ 100. The Court then issued a partial stay pending appeal and ordered the parties of the Settlement Agreement to show cause why the stay should not continue beyond November 22, 2013. Id. at ¶ 101–02. During an argumentative hearing on the continuation of the stay, Suiza stated to the Court that the dairy farmers would not lose the amounts that PRDFA alleged. Id. at page 19 ¶ 106–07. Suiza's argument was based on the proposition that the Settlement Agreement guarantees 80 cents per quart to the dairy farmers. Id. at ¶ 107.⁷ Thus, the Court dissolved the stay. Id. at ¶ 108. PRDFA then filed a Renewed Motion to Stay. Id. at ¶ 110. In response, the Court issued an Order requiring ORIL and the Secretary of Agriculture to confirm to the Court that the net payment of 80 cents per quart that was to be paid to the dairy farmers was on a year-to-year basis based on the final milk liquidation calculated by ORIL every 15 days. Id. at ¶ 111. ORIL and the Secretary of Agriculture filed a motion in compliance with the Court order. Id. at ¶ 112. See also Vaquería Tres Monjitas, Inc. v. Comas, 992 F.Supp.2d 39 (D.P.R.2013) ; Vaquería Tres Monjitas, Inc. v. Comas, 5 F.Supp.3d 179, 2014 WL 1202150 (D.P.R. February 28, 2014).

2. Procedural History

As stated above, PRDFA filed its Second Amended Complaint on December 26, 2013 that contained six causes of action. In the section titled “Factual Background Leading to ORIL's Price Order and Regulation,” PRDFA alleged that ORIL and the Secretary of Agriculture did not comply with the Court's order dated November 27, 2013,⁸ wherein the Court ordered ORIL and the Secretary of Agriculture for confirmation that the dairy farmers would receive the 80 cents per quart described above. Docket 34, page 19, ¶ 111. Although ORIL and the Secretary of Agriculture filed a motion titled “motion in compliance with the Court order,” PRDFA alleged they did not in fact comply in confirming the farmers would receive no less than 80 cents per quart. Id.⁹

PRDFA further...