PRIOR PRINTER'S NOS. 2646, 2839 PRINTER'S NO. 2975
No. 1969 Session of 1984
INTRODUCED BY MORRIS, GRIECO, MADIGAN, BALDWIN, LLOYD, BROUJOS, SHOWERS, PHILLIPS, W. W. FOSTER, BOWSER, WASS, RUDY, STUBAN, CALTAGIRONE, DeVERTER, COLE, FARGO, COY, HALUSKA, HONAMAN, LUCYK, JOHNSON, SALOOM, SEVENTY, BATTISTO, ROBBINS, KUKOVICH, J. L. WRIGHT, SIRIANNI, PISTELLA, PRATT, PETRARCA, CLYMER, LESCOVITZ, FISCHER, SPENCER, GODSHALL, G. M. SNYDER, HERMAN, WACHOB, DORR, AFFLERBACH, PRESTON, D. R. WRIGHT, MERRY, SEMMEL, SCHEETZ, D. W. SNYDER, ITKIN, DeLUCA, STEIGHNER, BURD, DIETZ AND LIVENGOOD, MARCH 13, 1984
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES, MAY 15, 1984
AN ACT 1 Requiring prompt payment to milk producers; providing for the 2 establishment of a security fund; providing for a procedure 3 to process claims against the security fund; providing for 4 alternative methods of security on behalf of milk producers; 5 and providing for certain prohibitions, repeals and 6 penalties. 7 The General Assembly of the Commonwealth of Pennsylvania 8 hereby enacts as follows: 9 Section 1. Short title. 10 This act shall be known and may be cited as the Milk 11 Producers' Security Act. 12 Section 2. Declaration of policy. 13 It is hereby declared that the dairy industry is a paramount 14 agricultural industry of this Commonwealth and that the normal 15 processes of producing and marketing milk are enterprises of 16 vast economic importance to the Commonwealth and of vital
1 importance to the consuming public which ought to be safeguarded 2 and protected in the public interest. The General Assembly finds 3 that the marketing of milk requires dairy farmers and 4 cooperatives to receive prompt payment from dealers and 5 handlers. It has been, and continues to be, the policy of this 6 Commonwealth to protect producers and cooperatives against loss 7 of payment for milk because of defaults by purchasers. The 8 public interest requires the establishment of an act to provide 9 security for dairy farmers and cooperatives. 10 Section 3. Scope of coverage. 11 (a) For purposes of this act, a cooperative corporation or 12 association of producers shall be deemed to be a producer and 13 not a dealer with respect to the milk of its producer members or 14 of its producer patrons under specific nonmember marketing 15 agreements, or of other qualified (Capper-Volstead) cooperatives 16 under agreement with such cooperative provided that written 17 documentation concerning such transactions is on file with and 18 approved by the Milk Marketing Board, together with a written 19 waiver signed by the seller cooperative of any claim against the 20 board or purchaser cooperative under this act. All members of 21 the seller cooperative shall be notified by mail of such waiver. 22 A cooperative corporation or association of producers shall be 23 deemed to be a dealer with respect to milk purchased or received 24 from producers other than those specified above. 25 (b) It shall be unlawful for a milk dealer or handler to 26 purchase, acquire or receive on consignment or otherwise milk 27 from producers unless the milk dealer or handler shall be in 28 good standing with regard to requirements of this act. The Milk 29 Marketing Board, at its discretion, may require licensed dealers 30 or handlers to purchase, acquire or receive milk from producers 19840H1969B2975 - 2 -
1 on a cash-on-delivery basis. 2 (c) Pursuant to the purposes of this act, any member of the 3 board or any designated employee thereof shall have the power, 4 at all reasonable hours, to inspect, photograph, photostat, mark 5 or stamp for identification, audit and copy all books, papers, 6 records or documents of all licensees for the purpose of 7 ascertaining facts to enable the board to administer this act. 8 The information obtained shall be for the confidential use of 9 the board and the various administrative departments, boards and 10 commissions of the State government, and shall not be disclosed 11 to any person except as may be required in the enforcement of 12 the law or by order of the court. Failure to comply with such 13 rights of inspection as noted above may result in revocation of 14 the license of the dealer or handler at which time no producer 15 shall legally ship milk to the dealer or handler. 16 Section 4. Definitions. 17 The following words and phrases when used in this act shall 18 have the meanings given to them in this section unless the 19 context clearly indicates otherwise: 20 "Blend price." The actual price due or paid to producers 21 after computation of the licensed dealer's or handler's producer 22 obligation pursuant to the applicable rules, regulations or 23 orders of the board or applicable orders established by the 24 United States Department of Agriculture. 25 "Board." The Milk Marketing Board. 26 "Cooperative." A cooperative agricultural association or 27 corporation of producers organized under the laws of this 28 Commonwealth or of any other state, which qualifies as such 29 under the provisions of the Federal Capper-Volstead Act, and 30 engaged in making collective sales or in the marketing of milk 19840H1969B2975 - 3 -
1 for its own members. A cooperative shall not be deemed a milk 2 dealer or handler but shall be deemed a producer, except as 3 provided in section 3(a). 4 "Handle" or "to handle." The doing of any one or several or 5 all of the following acts: to buy, sell, barter, acquire, store, 6 process, consign, receive, transport or control as owner, buyer, 7 seller, consignee, consignor, bailee, bailor, broker or factor. 8 "Milk." Fluid milk and cream, fresh, sour or storage, 9 skimmed milk, flavored milk or milk drink, buttermilk, ice cream 10 mix and condensed or concentrated whole or skimmed milk, except 11 when contained in hermetically sealed cans. 12 "Milk dealer" or "handler." Any person who purchases or 13 receives or handles on consignment or otherwise milk within the 14 Commonwealth, for sale, shipment, storage, processing or 15 manufacture, within or without the Commonwealth, whether on 16 behalf of the person or others, or both. This definition shall 17 not include cooperatives as provided for in section 3(a). 18 "Pay period." The dates and terms of payment as required 19 under section 5 and under rules, regulations and orders of the 20 board promulgated pursuant to section 5. 21 "Producer." A person producing milk. 22 Section 5. Prompt payment of milk. 23 (a) All milk dealers shall pay for milk purchased or 24 received from producers with final payments to be made no later 25 than the fiftieth day from which the milk was received or 26 purchased. The board may, in its sole discretion after a public 27 hearing, shorten the time period in which final payments for 28 milk are made. It is the specific intent of the General Assembly 29 that final milk payments be made in as short a time period as 30 practical from the date milk was received or purchased. 19840H1969B2975 - 4 -
1 Therefore, the board is empowered to hold public hearings to 2 consider the time period for final milk payments and to shorten 3 the time period whenever appropriate. 4 (b) On or before July 1 of each year, each licensee shall 5 notify all of his producers by first-class mail of the financial 6 basis on which the producer security is based. 7 Section 6. Cooperative licensing requirements. 8 A cooperative which is deemed to be a dealer or handler under 9 the provisions of section 3(a) shall, in regard to milk 10 purchased or received from producers other than its own members, 11 be required to be licensed as a dealer with respect to milk so 12 received or purchased, and shall be required to the extent of 13 such milk purchased, received or handled to comply with the 14 provisions of this act regarding the filing of bonds and 15 contributions to a security fund for the protection of nonmember 16 producers. 17 Section 7. Security bonds. 18 (a) Each milk dealer, as required by this act, shall file 19 with the board a corporate surety bond or collateral bond. The 20 bond shall be on a form prescribed by the board conditioned for 21 the payment by the milk dealer or handler of all amounts due 22 under this act and all other applicable Federal laws in addition 23 to the orders of the board for milk purchased or otherwise 24 acquired from producers by the milk dealer or handler during the 25 license year, which payments shall be made within the time 26 limits specified in this act or the regulations of the board and 27 shall be upon such other terms and conditions as the board may 28 prescribe. 29 (b) A corporate surety bond shall be executed to the 30 Commonwealth by the milk dealer as principal and by a corporate 19840H1969B2975 - 5 -
1 surety company authorized and regulated by the Commonwealth as 2 surety. The board shall have no power to reject any corporate 3 surety bond which is so executed by a corporate surety company 4 authorized to do business in this Commonwealth as surety, so 5 long as the amount of the bond is equal to or less than the 6 amount the surety company is authorized by the Pennsylvania 7 Insurance Commissioner to execute on a single bond without 8 obtaining collateral security from the principal. The board may 9 reject any bond which exceeds that amount. A collateral bond 10 shall be executed to the Commonwealth by the milk dealer as 11 principal, shall set forth the collateral posted with the bond 12 and shall have attached thereto the collateral properly assigned 13 and transferred to this Commonwealth. The collateral posted with 14 the bond shall be cash in an equal amount of the bond or the 15 bond shall be secured by an actual deposit with a bank, bank and 16 trust company or national bank within the Commonwealth of money 17 to the full amount of the bond or securities to the amount of 18 the bond consisting of interest-bearing obligations of the 19 Federal Government or an irrevocable letter or letters of credit 20 for the account of the milk dealer authorizing the board to draw 21 on a bank or a trust company or banks or trust companies located 22 within and authorized to do business in this Commonwealth. 23 (c) The bond shall be in a sum equal to a minimum of 30% of 24 the highest aggregate amount owed by the dealer to producers for 25 a 40-day period during the preceding 12 months. Such bond may 26 exceed the 30% minimum and be equal to the full amount of the 27 money owed, at the discretion of the dealer. 28 (d) Milk purchased, acquired or received by a milk dealer or 29 handler from producers outside this Commonwealth and sold or 30 distributed by the dealer or handler as fluid milk within this 19840H1969B2975 - 6 -
1 Commonwealth shall be included in computing the amount of the
2 dealer's or handler's bond, except where the dealer or handler
3 has filed a bond or other security for the protection of the
4 producers with the state wherein the milk is purchased, acquired
5 or received.
6 Section 8. Bonds.
7 Surety bonds or securities for the license year shall be
8 filed with the board on an annual basis not later than the 15th
9 of the month before the beginning of such license year. Where a
10 dealer elects to participate under the minimum bond requirement
11 as outlined in section 9 7, in lieu of filing a bond equivalent <--
12 to 75% or more of the greatest amount owed in a 40-day period,
13 he shall notify the board not later than two months prior to the
14 date on which such change is to be made, and shall make the
15 initial payment as required under section 9 not later than one
16 month before such change is to be made.
17 Section 9. Security fund.
18 (a) Each milk dealer shall in addition to a bond, when less
19 than 75% of the maximum amount owed also be required to pay
20 monthly 2¢ per hundredweight to the board on all milk purchased
21 from producers during the prior month. The board shall maintain
22 the moneys received in an interest-bearing account and the
23 moneys, including interest, shall be credited to the account of
24 each individual paying dealer. In the event a dealer defaults in
25 payment to producers, the moneys submitted by the defaulting
26 dealer, including interest, shall be made available to the
27 producers shipping to the defaulting dealer.
28 (b) At the time the value of the bond and the security fund
29 moneys credited to each dealer shall equal the total amount owed
30 for the above mentioned 40-day payment period, the payments to
19840H1969B2975 - 7 -
1 the fund shall cease or may, with the approval of the board, be 2 used to decrease the value of the bond at the end of the license 3 year. Should the dealer agree to post a bond for a minimum of 4 75% of the highest aggregate amount owed for the 40-day pay 5 period, payment to the security fund shall not be required. 6 (c) Nothing shall prevent any dealer from increasing the 7 dealer's bond beyond the 30% nor increasing the amount paid into 8 the security fund credited to the dealer to provide additional 9 protection for the dealer's producers. 10 (d) At the time a dealer discontinues purchasing milk from 11 producers, after all the producers are paid in full, the moneys, 12 including interest and minus the administrative fee, as provided 13 for in subsection (e), shall be returned to the dealer. 14 (e) The board may impose an administrative fee on the 15 security fund moneys on an annual basis at not more than .5% of 16 the total fund. 17 Section 10. New licensees. 18 A milk dealer or handler purchasing or acquiring or receiving 19 or intending to purchase or receive milk from producers, but not 20 so engaged during the preceding 12 months, shall file a bond in 21 a sum to be fixed by the board in accordance with the handler's 22 anticipated purchases from producers and the handler's 23 obligation to a producer settlement or equalization fund, but 24 not less than the total amount expected to be owed during the 25 full 40-day pay period. The board shall review the operations of 26 the dealer or handler every two months and the bond shall be 27 modified by the board at the time the board is satisfied that 28 the producers are adequately secured. At the end of six months 29 of operation, upon approval by the board, the new dealer or 30 handler may file the amount of the bond and pay into the 19840H1969B2975 - 8 -
1 security fund as required in sections 7 and 9. 2 Section 11. Trusteeship. 3 (a) In such cases where it appears that the financial 4 condition of the applicant for a license or the licensee is not 5 adequate to reasonably assure payment to producers, the board 6 may require in lieu of other security or payments to the 7 security fund and, where it is practical from an operating 8 standpoint, the licensee to file an agreement providing for the 9 complete control over all processed or manufactured milk and 10 dairy products by a trustee to be selected at least annually by 11 the involved producers. Such trustee shall make and file a 12 trustee's fidelity bond and contracts signed by the operator and 13 the purchasers of the dairy products requiring that payment for 14 such products sold be made to him as trustee. Such trustee shall 15 maintain a separate bank account for that purpose and shall at 16 least twice annually render a true and correct account of his 17 dealings to the board and to the producers. Producers shall have 18 a first lien on assets of trusteeship to assure payment in case 19 of default. 20 (b) The operation of the trustee arrangement, requirements 21 dealing with payments, reports and other operations shall be 22 handled according to regulations established by the board. 23 Section 12. Procedure for disbursing proceeds. 24 (a) The board or an affected producer shall have the power 25 to sue on the bond and security fund on behalf of producers. 26 (b) The board shall, after hearing with notice to all 27 interested parties, issue findings of fact and an order setting 28 forth the amounts due producers. The findings and order shall be 29 conclusive evidence for collecting from the bond and security 30 fund for payments to producers. The board's order may be 19840H1969B2975 - 9 -
1 appealed to the Commonwealth Court. 2 (c) In the event the moneys available from the bond and 3 security fund are not sufficient to pay producers 75% of the 40- 4 day purchases, the moneys available shall be divided pro rata 5 among producers. 6 Section 13. Prohibitions and violations. 7 (a) No milk dealers license shall be issued to any person or 8 organization not in compliance with the provisions of this act. 9 (b) It shall be unlawful for a milk dealer to purchase or 10 receive milk from producers unless the milk dealer has complied 11 with the provisions of this act. 12 (c) In addition to other penalties provided by law, the 13 board may commence a proceeding in court to seek temporary or 14 injunctive relief against any person violating the provisions of 15 this act. 16 (d) Producers who do not receive payments from licensees in 17 accordance with provisions of this act shall immediately notify 18 the board or its representatives. At no time shall the holder or 19 provider of the bond or security, nor the trustee be responsible 20 for payments to producers beyond the 40-day pay period when 21 payments are in default after the producer has been notified by 22 certified mail. 23 (e) If any dealer who purchases or receives milk from 24 producers has not filed a surety bond or securities in lieu 25 thereof, in accordance with this act by the 15th day of the 26 month prior to the beginning of the license year, the board 27 shall notify such producers by certified mail that such milk 28 dealer has not filed any security or made other provisions for 29 assuring payments for milk purchased, for the license year 30 commencing the 1st day of the next month. The board then may 19840H1969B2975 - 10 -
1 require a trustee to be selected under the provisions of this 2 act or shall have the right to revoke the license of said 3 dealer. 4 Section 14. Rules and regulations. 5 The board, after due notice and public hearing, may 6 promulgate rules and regulations to carry out the provisions and 7 intent of this act. 8 Section 15. Penalties. 9 A violation of this act shall subject a milk dealer or a 10 participating cooperative to a penalty of $50 for each day that 11 it is late in making payment into the security fund of the 12 assessment required by this act, for each day it sells milk to a 13 milk dealer after being notified by the board of the milk 14 dealer's failure to provide security as provided herein or for 15 each day a milk dealer or participating cooperative who has 16 failed to make payments for milk purchased as provided pursuant 17 to section 5. Any person who buys or sells in violation of the 18 credit period provided in section 5 shall be liable for 19 suspension or revocation of his milk dealer's license in 20 pursuance of the act of April 28, 1937 (P.L.417, No.105), known 21 as the Milk Marketing Law, or the board may accept from the 22 licensee an offer in compromise, a penalty at the rate of $50 23 for each day of violation. 24 Section 16. Repeals. 25 The act of July 10, 1980 (P.L.481, No.104), known as the Milk 26 Producers' and Cooperative Security Funds Act, is repealed. 27 Section 17. Effective date. 28 This act shall take effect on July 1, 1984 or, if enacted 29 subsequent to that date, then immediately. B8L03JLW/19840H1969B2975 - 11 -