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COMPETITIVE ENTERPRISES INST. v. USDA

May 30, 1996

COMPETITIVE ENTERPRISES INSTITUTE, et al., Plaintiffs,
v.
UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant.



The opinion of the court was delivered by: LAMBERTH

 This matter comes before the court on plaintiffs' motion for a preliminary injunction. In a nutshell, this dispute concerns the impact of the 1996 Federal Agriculture Improvement and Reform Act ("FAIR Act") on the quotas set by the Secretary of Agriculture ("the Secretary") for domestically-grown peanuts. At a hearing on May 15, 1996, this court denied plaintiffs' motion for a temporary restraining order. After considering the submissions of counsel, briefs of amicus curiae from the National Peanut Growers Group as well as the Chocolate Manufacturers Association and the National Confectioners Association, and the relevant law, the court finds that plaintiffs are not entitled to the extraordinary relief sought and shall accordingly deny the motion for a preliminary injunction. The court finds that plaintiffs have failed to show either a likelihood of success on the merits of their underlying claim or any irreparable injury if the injunction is denied. Further, the court finds that the potential harm to other parties and considerations of the public interest also counsel in favor of denying plaintiffs' motion.

 I

 BACKGROUND

 A. Statutory Background of Peanut Regulation.

 In order to reach the legal issues in this matter, it is necessary to understand the statutory and historical context of peanut regulation in this country. With the passage of the Agriculture Adjustment Act of 1938 ("AAA"), 7 U.S.C. § 1281 et seq., Congress began regulating the supply of a series of agricultural commodities, including peanuts. Part of the Depression-era legislation, the AAA was enacted as a temporary measure designed to provide income support to farmers by limiting supply in order to artificially inflate market prices. With the exception of a brief suspension during World War II, Congress has continuously regulated peanut production through a quota system set by the Secretary. However, the nature and reach of the quotas set by the Secretary have not remained constant since 1938. In fact, the Congressional modifications of the quota system give rise to this dispute.

 1. Regulation Under the AAA.

 Under the AAA, the Secretary controlled peanut production and prices by both limiting the number of acres that could be planted to peanuts and by setting a "marketing quota" which limited the amount of peanuts that could be marketed without penalty. Section 358 of the AAA (7 U.S.C. § 1358) delineates the particulars of the regulation. Significantly, the AAA made no distinction as to the uses for which the peanuts were sold. In other words, one quota was imposed whether the farmers sold the peanuts for edible food usage, export, or crushing. *fn1"

 In 1949, Congress also added provisions for price support to peanut producers in the Agricultural Act of 1949, 7 U.S.C. § 1421 et seq. By 1953, Congress had imposed import quotas designed to prevent foreign producers from flooding the domestic market and undercutting the artificially inflated price set by the quota system.

 In order to ensure that the marketing quota imposed would meet consumer demands, the AAA contained a provision that allowed the Secretary to adjust the marketing quotas if it appeared as though the peanuts produced would be insufficient to meet the demands of the market. Section 371 of the AAA acted as a safety valve to give the Secretary the flexibility to increase or eliminate the quotas after a notice and comment period. See 7 U.S.C. § 1371. In particular, the Secretary can increase or eliminate the marketing quotas "if at any time the Secretary has reason to believe that in the case of . . . peanuts . . . the operation of farm marketing quotas in effect will cause the amount of such commodity which is free of marketing restrictions to be less than the normal supply for the marketing year . . . ." Id. (emphasis added). The AAA defines "normal supply" as the sum of the estimated domestic consumption of peanuts for the prior marketing year, the estimated exports of peanuts for the current year, and a carry-over allowance of fifteen percent of the sum of the first two components. 7 U.S.C. § 1301(10)(A).

 The marketing quota imposed by the AAA did not distinguish between peanuts used for domestic consumption, export, or crushing.

 2. The 1977 and 1981 Modifications.

 In 1977 and 1981, Congress passed the Food and Agriculture Act and the Agriculture and Food Act which temporarily suspended much of the AAA and its subsequent modifications. This new law redefined the quota system to reflect changes in technology and the peanut market. First, the acts eliminated the acreage allotment system found in Section 358 of the AAA. *fn2" Second, the acts imposed a "poundage quota" rather than the former "marketing quota" imposed under the AAA. Unlike the marketing quota of the AAA, the new law placed a poundage quota only on peanuts designated for domestic edible use. *fn3" The statute defines domestic edible use peanuts as "quota peanuts." 7 U.S.C. § 1358-1(e)(3). All other peanuts produced for export or non-food use (for example, crushing) are not subject to a quota. The statute defines the peanuts not subject to a quota as "additional peanuts." Id. § 1358-1(e)(1). Finally, Congress imposed a two-tiered price support system that sets annual loan rates for quota peanuts (i.e. domestic edible use peanuts) and additional peanuts. *fn4"

 Since 1977, Congress has continued to pass temporary laws that suspend the AAA and utilize the two-tiered system of price supports and a poundage quota applicable only to domestic edible use peanuts. Additional peanuts have not been subject to a quota since 1977. In 1981, Congress specifically suspended section 371 in the Agriculture and Food Act. As noted above, Section 371 provided the Secretary with a mechanism by which to increase or eliminate the marketing quota on peanuts if the supply would not equal the normal supply as defined in the AAA. As plaintiffs describe, the 1981 bill ended a four year transition period that began with the 1977 Act. Although the 1977 Act adopted the new poundage quota system, it also retained the acreage allotment system and used it in conjunction with the poundage quota. In the 1981 Act, however, all remnants of the old system were suspended, including section 371. S. Rep. No. 357, 101st Cong., 2d Sess. 118-19 (1990).

 3. The 1996 FAIR Act.

 Congress' most recent temporary peanut production law is the 1996 FAIR Act. The Act in large part continues the system created in 1977 with minor modifications including reducing the quota loan rate and eliminating the minimum national poundage quota that had previously been set at 1,350,000 tons. 7 U.S.C. § 1358-1(a)(1); Federal Agriculture Improvement and Reform Act of 1996, Pub. L. No. 104-127, § 155(i)(2) (1996) [hereinafter 1996 FAIR Act].

 The FAIR Act, like those temporary laws before it, suspends most provisions of the AAA. In 1981, Congress explicitly suspended section 371 of the AAA. Congress continued to list section 371 as a suspended section through the farm bill covering the 1995 crop. However, in the 1996 FAIR Act, Section 371 was not listed among the suspended sections of the AAA. Congress' failure to list Section 371 as a suspended section gives rise to the instant action.

 In December of 1995, in anticipation of the passage of the FAIR Act, the Secretary set the 1996 poundage quota for domestic edible use peanuts at the statutory minimum of 1.35 million tons. On April 27, 1996, after Congress passed the Act, the Secretary adjusted the poundage quota downward to 1.1 million tons. The Secretary did not place a quota on "additional peanuts" as the FAIR Act did not authorize him to do so. Plaintiffs in this action contend that Congress' failure to suspend Section 371 requires the Secretary, pursuant to the terms of that section, to increase or eliminate the poundage quota placed on peanuts. Under plaintiffs' theory, the amount of quota peanuts produced under the poundage quota imposed by the Secretary will be insufficient to equal the normal supply as required by Section 371. Defendant United States Department of Agriculture ("USDA"), on the other hand, contends that Section 371 has no applicability in the two-tiered system with a poundage quota continued by the FAIR Act. Thus, defendant continues, Congress' failure to include it in the list of suspended sections is simply irrelevant. Defendant agrees that the amount of quota peanuts produced under the current poundage quota will not equal the normal supply because that term is defined to include not only peanuts for domestic edible use, but also all additional peanuts. Under the FAIR Act, additional peanuts are not subject to any quota.

 B. The Parties.

 Plaintiff Loyd Hodges is a peanut farmer on two parcels of land straddling the border between Texas and New Mexico. Hodges alleges that he has already planted 250 acres of peanuts on his two farms; however, he seeks to plant an additional 250 acres if the quota is eliminated. Plaintiff Competitive Enterprise Institute ("CEI") is a non-profit, free market advocacy organization that promotes market-based alternatives and solutions to problems traditionally handled by government intervention. In this suit, CEI seeks to help consumers to obtain more peanuts at lower prices. Plaintiff Consumer Alert ("CA") is also a non-profit organization with over 5,000 individual members that works to defend and expand consumer choice in the marketplace. CA represents the interests of its members who desire more and cheaper peanuts and peanut products.

 The defendant in this case, the USDA, is charged with, inter alia, the responsibility of implementing the peanut legislation. The Secretary sets the peanut quotas and support loan rates pursuant to the statutes.

 Plaintiffs filed the instant action on May 1 of this year. In addition to their claim that the Secretary must conform to the requirements of Section 371, plaintiffs allege that defendant set the current quota in violation of the Administrative Procedure Act ("APA"), 5 U.S.C. § 553. The APA requires that an agency follow certain procedures, such as advance notice and solicitation of public comments, prior to issuing a final agency rule. Plaintiffs argue that because the current quota was set without any notice or opportunity for comment, the quota must be set aside. Defendant takes the position that the FAIR Act exempted defendant from the requirements of the APA for setting this year's quota.

 Before the court is plaintiffs' motion for a preliminary injunction requiring the Secretary to increase or eliminate, pursuant to the terms of Section 371 of the AAA, this year's quota announced in December of 1995 and modified on April 17, 1996. Apparently dissatisfied with defendant's proposed briefing schedule on the motion for a preliminary injunction, plaintiffs moved for a temporary restraining order on May 13. At a hearing on plaintiffs' motion on May 15, this court denied the temporary restraining order, finding that plaintiffs had been unable to show irreparable harm, a likelihood of success on the merits, or that the public interest favored granting the immediate relief.

 II

 DISCUSSION

 As this court has often stated, the party seeking injunctive relief bears a substantial burden to show that the party is entitled to such an extraordinary remedy. See, e.g., Herrera v. Riley, 886 F. Supp. 45, 48 (D.D.C. 1995). The court weighs four factors in determining whether preliminary injunctive relief is appropriate: (1) plaintiffs' likelihood of success on the merits; (2) the threat of irreparable injury if injunctive relief is withheld; (3) the effect of the relief sought on other interested parties; and (4) the public interest. Washington Metropolitan Transit Area Comm'n v. Holiday Tours, Inc., 182 U.S. App. D.C. 220, 559 F.2d 841, 843 (D.C. Cir. 1977); Herrera, 886 F. Supp. at 48. In considering this motion for injunctive relief, the court places more weight on plaintiffs' likelihood of success on the merits and the degree of irreparable injury. Plaintiffs need not prove their likelihood of success to a mathematical probability; ...


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