U.S. v. Crown Equipment Corp.
| Decision Date | 21 August 1996 |
| Docket Number | No. 95-2035,95-2035 |
| Citation | 86 F.3d 700 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. CROWN EQUIPMENT CORPORATION, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Mark A. Cameli (argued), Office of U.S. Atty., Madison, WI, for plaintiff-appellee.
Donald M. Lieb (argued), Paul J. Pytlik, Otje, Van Ert, Stangle, Lieb & Weir, Milwaukee, WI, for defendant-appellant.
Before CUMMINGS, RIPPLE and MANION, Circuit Judges.
The United States, as the real party in interest, commenced this action on behalf of the Commodity Credit Corporation to recover damages for commodities destroyed in a warehouse fire in Wisconsin. See 15 U.S.C. § 714b(c). The destroyed commodities, including millions of pounds of surplus butter, had been acquired by the United States under a federal price-support program. Crown stipulated to its liability for the fire, and the district court entered a damage award based on the Chicago Mercantile Exchange price of butter on the day of the fire. Crown appeals the district court's determination of damages. For the reasons set forth in the following opinion, we affirm the judgment of the district court.
On May 3, 1991, a fire destroyed most of the Central Storage Warehouse ("CSW"), a privately-owned storage facility in Madison, Wisconsin. At the time, the United States had various surplus commodities, including approximately fifteen million pounds of surplus
butter, in cold storage at the warehouse. The fire resulted in the loss of the following government-owned commodities:
Print Butter
Grade AA .................. 9,204,080 lbs
Grade A .................. 1,603,819 lbs
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Total Print Butter ......... 10,807,899 lbs
Bulk Butter
Grade AA ..................... 44,024 lbs
Grade A ...................... 81,935 lbs
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Total Bulk Butter ............. 125,959 lbs
Frozen Mixed Vegetables ........ 1300 cases.
The United States contributed $240,901.75 for clean-up and salvage efforts related to the fire. Through these efforts, the government was able to convert some of the melted butter into livestock feed and sell it for $42,952.60.
The United States commenced this action against Crown to recover damages for the commodities lost in the fire. The complaint alleged that a forklift, designed and manufactured by Crown, ignited the fire at CSW. Crown stipulated to its liability for the fire and to the fact that ignition of the fire was a proximate cause of the damage to the commodities. Only the issue of damages remained. On this question, the parties disagreed about the appropriate measure of damages for butter purchased by the government through a price-support program.
In order to understand the arguments raised by the parties and the district court's resolution of the issue, it first is necessary to examine the structure of the butter price-support program and the nature of the butter that was destroyed in the fire.
All of the butter destroyed in the CSW fire had been purchased by the Commodity Credit Corporation ("CCC"), a corporation owned by the United States. Originally incorporated under a Delaware charter in 1933, the CCC was reincorporated in 1948 as a federal corporation within the Department of Agriculture. See Commodity Credit Corporation Charter Act, 15 U.S.C. § 714 et seq. The principal function of the CCC is to administer government price-support programs for agricultural commodities. Price support is achieved through purchases of selected commodities at announced levels. 1
The dairy price-support program is authorized by the Agricultural Act of 1949. See Pub.L. No. 81-439, 63 Stat. 1051 (). In order to stabilize the supply and demand for dairy products, the price of milk is supported through purchases by the CCC. Milk is also supported through purchases of butter, cheese, and nonfat dry milk. The purchased milk and milk products are added to the CCC's price-support inventory. Specifically, the price-support program for butter works in the following manner.
The support price for fluid milk is set by Congress. See 7 U.S.C. § 1446e(b). Congress has authorized the USDA to calculate, from this figure, an equivalent support price for dairy products such as butter, cheese, and nonfat dry milk. See 7 U.S.C. § 1446e(c)(3)(A). With respect to butter, this calculation yields the support price for bulk butter; the support price for print butter is determined by adding a fixed per-pound differential to the support price for bulk butter. These figures are known as the "announced support prices." The CCC then stands willing to buy any amount of print or bulk butter at the announced support prices. There is no limitation on the quantity of butter that the CCC is willing to purchase at the support price; it will buy as much as producers and handlers are willing to sell.
Bulk butter and print butter are the same commodity; the only difference lies in the packaging. Bulk butter is packaged in twenty-five kilogram blocks and generally must be processed into some other form prior to commercial use. Print butter is packaged in one-pound "prints" and is ready for use by the customer. Stored at zero degrees Fahrenheit, bulk butter has a shelf life of four years; print butter has a shelf life of two The CCC's inventory, therefore, is comprised of both bulk and print butter. Some of the print butter is "printed" by the producer before it is sold to the CCC. The CCC, therefore, does not know in advance how much print butter it will receive from producers. Because some of the consumption outlets for surplus butter require the CCC to distribute butter in print form, the CCC periodically will "print" some of its stock of bulk butter. Regardless of who prints butter for the price-support program--the producer or the CCC--it is packaged with the words "Not for sale or exchange."
years. As discussed above, the CCC stands willing to purchase both bulk and print butter through the price-support program.
Except in limited circumstances, butter purchased through the price-support program is stored in private warehouse facilities throughout the country. Consistent with USDA policy of using the oldest butter first and taking into account location and program needs, the butter generally is distributed to consumption outlets within six to twelve months of its purchase. In order of priority, the consumption outlets are: (1) domestic sales; (2) domestic donations; (3) export sales; and (4) export donations.
The highest priority use is domestic sales. USDA policy, however, limits the circumstances in which the CCC can sell butter in the domestic market. In order to avoid deterring commercial sales or causing purchasers to rely upon the government as a supplier of butter, the CCC may sell butter only at a price equal to 110 percent of the support price in effect at the time the butter is resold. The purpose of this limitation is to prevent the sale of surplus butter from negating the effect of the price support in the domestic commercial market.
The second priority for surplus butter is domestic donations. These include donations to needy families, school lunch programs, institutions, the United States military, Veterans Hospitals, and the Bureau of Prisons. Because the needs of these recipients are based on individual consumption, these donations usually take the form of print butter.
Export sales is the third priority for price-support butter. Due to refrigeration problems abroad, these sales usually take the form of butter oil, which is acquired by melting down bulk butter. The same is true for the fourth priority for surplus butter, export donations. Export donations are made under section 416 of the Agricultural Act of 1949, see 7 U.S.C. § 1431, and include CCC donations to foreign countries directly or through cooperating sponsors and relief agencies.
The butter destroyed in the CSW fire had been purchased by the CCC during the second half of the 1990 calendar year. During that time period, the support price set by Congress for fluid milk was $10.10 per hundredweight. 7 U.S.C. § 1446e(b), (d)(4). The USDA translated this figure into an announced support price of $0.9825 per pound for bulk butter and $1.01 per pound for print butter. All of the butter damaged in the fire had been purchased at these prices. The butter destroyed in the fire was "uncommitted," meaning that it had not yet been designated for a specific use or program.
The CSW fire occurred at a time of record surplus for government butter. Six weeks after the fire, the CCC had in storage an inventory of 494.5 million pounds of bulk butter, 61.6 million pounds of print butter, and 6.4 million pounds of butter oil. At the end of fiscal year 1991, approximately five months after the fire, the CCC owned 494.2 million pounds of uncommitted butter, the highest end-of-the-year figure on record. 2
The CCC did not purchase additional butter specifically to replace the butter destroyed in the CSW fire. Because the butter destroyed in the fire consisted primarily of print butter, however, the CCC was forced to replenish its stocks of print butter in order to continue to meet program needs. The government paid the cost of converting approximately
eleven million pounds of bulk butter, stored at different facilities, into approximately eleven million pounds of print butter--roughly the amount of print butter lost in the fire. The government had sufficient butter in storage to meet all of its domestic and foreign needs; no program went without butter because of the fire. Nor did the fire cause...
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