Pennsylvania Act 2004-66 — MILK PRODUCERS' SECURITY ACT - PASSAGE OF TITLE TO MILK, SECURITY BONDS, NEW LICENSES, TRUSTEESHIP, PROHIBITIONS AND VIOLATIONS, ETC.

Act text

MILK PRODUCERS' SECURITY ACT - PASSAGE OF TITLE TO MILK, SECURITY BONDS,
       NEW LICENSES, TRUSTEESHIP, PROHIBITIONS AND VIOLATIONS, ETC.
                  Act of Jul. 4, 2004, P.L. 509, No. 66               Cl. 31
                             Session of 2004
                               No. 2004-66

     HB 2512

                                  AN ACT

     Amending the act of July 6, 1984 (P.L.652, No.136), entitled "An
        act requiring prompt payment to milk producers; providing for
        the establishment of a security fund; providing for a
        procedure to process claims against the security fund;
        providing for alternative methods of security on behalf of
        milk producers; and providing for certain prohibitions,
        repeals and penalties," further providing for definitions;
        providing for passage of title to milk; further providing for
        security bonds, for bonds, for the security fund and for new
        licenses; providing for review of security; and further
        providing for trusteeship, for prohibitions and violations
        and for penalties.

        The General Assembly of the Commonwealth of Pennsylvania
     hereby enacts as follows:

        Section 1.  Section 4 of the act of July 6, 1984 (P.L.652,
     No.136), known as the Milk Producers' Security Act, is amended
     to read:
      Section 4.  Definitions.
        The following words and phrases when used in this act shall
     have the meanings given to them in this section unless the
     context clearly indicates otherwise:
        "Blend price."  The actual price due or paid to producers
     after computation of the licensed dealer's or handler's producer
     obligation pursuant to the applicable rules, regulations or
     orders of the board or applicable orders established by the
     United States Department of Agriculture.
        "Board."  The Milk Marketing Board.
        "Cooperative."  A cooperative agricultural association or
     corporation of producers organized under the laws of this
     Commonwealth or of any other state, which qualifies as such
     under the provisions of the Federal Capper-Volstead Act, and
     engaged in making collective sales or in the marketing of milk
     for its own members. A cooperative shall not be deemed a milk
     dealer or handler but shall be deemed a producer, except as
     provided in section 3(a).
        "Handle" or "to handle."  The doing of any one or several or
     all of the following acts: to buy, sell, barter, acquire, store,
     process, consign, receive, transport or control as owner, buyer,
     seller, consignee, consignor, bailee, bailor, broker or factor.
        "Handler."  A milk dealer.
        "Milk."  Fluid milk sold to a dealer from a producer.
        "Milk [dealer" or "handler."] dealer."  Any person who
     purchases or receives or handles on consignment or otherwise
     milk within the Commonwealth, for sale, shipment, storage,
     processing or manufacture, within or without the Commonwealth,
     whether on behalf of the person or others, or both. This
     definition shall not include cooperatives as provided for in
     section 3(a). The term includes a vested milk dealer.
        "Pay period."  The dates and terms of payment as required
     under section 5 and under rules, regulations and orders of the
     board promulgated pursuant to section 5.
        "Producer."  A person producing milk.
        "Vested milk dealer."  A handler or milk dealer that, on the
     effective date of this definition, is participating in the
     security fund under section 9. The term does not include a
     handler or milk dealer participating in the security fund as of
     the effective date of this definition that at any time
     discontinues such participation in the security fund.
        Section 2.  The act is amended by adding a section to read:
      Section 4.1.  Title to milk.
        (a)  The scope of this section is as follows:
            (1)  This section shall apply only to the administration
        of this act.
            (2)  This section shall have no effect on any provision
        of the act of April 28, 1937 (P.L.417, No.105), known as the
        Milk Marketing Law.
            (3)  This section shall not supersede an order of a
        Federal administrative agency or of the board which requires
        the cost of shipment of milk to be free on board the place of
        destination.
        (b)  Notwithstanding 13 Pa.C.S. § 2401(2)(ii) (relating to
     passing of title; reservation for security; limited application
     of section), title to milk shall be transferred from the
     producer to the milk dealer at the point of shipment of the
     milk.
        Section 3.  Sections 7, 8, 9 and 10 of the act are amended to
     read:
      Section 7.  Security bonds.
        (a)  Each milk dealer, as required by this act, shall file
     with the board a corporate surety bond or collateral bond. The
     bond shall be on a form prescribed by the board conditioned for
     the payment by the milk dealer or handler of all amounts due
     under this act and all other applicable Federal laws in addition
     to the orders of the board for milk purchased or otherwise
     acquired from producers by the milk dealer or handler during the
     license year, which payments shall be made within the time
     limits specified in this act or the regulations of the board and
     shall be upon such other terms and conditions as the board may
     prescribe.
        (b)  A corporate surety bond shall be executed to the
     Commonwealth by the milk dealer as principal and by a corporate
     surety company authorized and regulated by the Commonwealth as
     surety. The board shall have no power to reject any corporate
     surety bond which is so executed by a corporate surety company
     authorized to do business in this Commonwealth as surety, so
     long as the amount of the bond is equal to or less than the
     amount the surety company is authorized by the Pennsylvania
     Insurance Commissioner to execute on a single bond without
     obtaining collateral security from the principal. The board may
     reject any bond which exceeds that amount. A collateral bond
     shall be executed to the Commonwealth by the milk dealer as
     principal, shall set forth the collateral posted with the bond
     and shall have attached thereto the collateral properly assigned
     and transferred to this Commonwealth. The collateral posted with
     the bond shall be cash in an equal amount of the bond or the
     bond shall be secured by an actual deposit with a bank, bank and
     trust company or national bank within the Commonwealth of money
     to the full amount of the bond or securities to the amount of
     the bond consisting of interest-bearing obligations of the
     Federal Government or an irrevocable letter or letters of credit
     for the account of the milk dealer authorizing the board to draw
     on a bank or a trust company or banks or trust companies located
     within and authorized to do business in this Commonwealth.
        (c)  The bond shall be filed in accordance with the
     following:
            (1)  Except as set forth in paragraph (2), a milk dealer
        shall file with the board a bond equal to a minimum of 75% of
        the highest aggregate amount owed by the milk dealer to all
        producers for a 40-day period during the preceding 12 months.
            (2)  A vested milk dealer shall file with the board a
        bond in a sum equal to a minimum of 30% of the highest
        aggregate amount owed by the vested milk dealer to all
        producers for a 40-day period during the preceding 12 months.
        [Such bond may exceed the 30% minimum and be equal to the
        full amount of the money owed, at the discretion of the
        dealer.]
            (3)  A milk dealer licensed on the effective date of this
        paragraph, other than a vested milk dealer, may petition the
        board to file a bond in an amount less than that required by
        paragraph (1) and to participate in the security fund as a
        vested milk dealer under section 9. The board shall act upon
        the petition within 60 days of the date of filing the
        petition. When considering the petition, the board shall
        require that the milk dealer provide adequate reason and
        documentation for the request and may hear testimony from all
        interested persons potentially affected by the request. To
        ensure the level of protection for producers contemplated by
        this act, the board shall impose such conditions as it deems
        appropriate, including, but not limited to, the following
        minimum conditions:
                (i)  Higher per hundredweight contributions to the
            security fund.
                (ii)  More frequent payments to producers.
                (iii)  The filing of a bond greater than 30% of the
            highest aggregate amount owed to producers for a 40-day
            period during the preceding 12 months.
            (4)  A milk dealer filing a petition under paragraph (3)
        may request that the board enter an order requiring that
        confidential financial information only be disclosed to the
        board. Such confidential financial information shall be
        deemed to have been provided to the board pursuant to section
        310 of the act of April 28, 1937 (P.L.417, No.105), known as
        the Milk Marketing Law.
        (d)  Milk purchased, acquired or received by a milk dealer or
     handler from producers outside this Commonwealth and sold or
     distributed by the dealer or handler as fluid milk within this
     Commonwealth shall be included in computing the amount of the
     dealer's or handler's bond, except where the dealer or handler
     has filed a bond or other security for the protection of the
     producers with the state wherein the milk is purchased, acquired
     or received.
        (e)  The obligation of a surety on a bond is a separate and
     distinct obligation independent of any obligation incurred by
     the debtor.
      Section 8.  Bonds.
        Surety bonds or securities for the license year shall be
     filed with the board on an annual basis not later than the 15th
     of the month before the beginning of such license year. [Where a
     dealer elects to participate under the minimum bond requirement
     as outlined in section 7, in lieu of filing a bond equivalent to
     75% or more of the greatest amount owed in a 40-day period, he
     shall notify the board not later than two months prior to the
     date on which such change is to be made, and shall make the
     initial payment as required under section 9 not later than one
     month before such change is to be made.]
      Section 9.  Security fund.
        (a)  Each vested milk dealer shall, in addition to a bond,
     when less than 75% of the maximum amount owed, also be required
     to pay monthly 2¢ per hundredweight to the board on all milk
     purchased from producers during the prior month. The board shall
     maintain the moneys received in an interest-bearing account and
     the moneys, including interest, shall be credited to the account
     of each individual paying vested milk dealer. In the event a
     vested milk dealer defaults in payment to producers, the moneys
     submitted by the defaulting vested milk dealer, including
     interest, shall be made available to the producers shipping to
     the defaulting vested milk dealer.
        (b)  At the time the value of the bond and the security fund
     moneys credited to each vested milk dealer shall equal the total
     amount owed for the above mentioned 40-day payment period, the
     payments to the fund shall cease or may, with the approval of
     the board, be used to decrease the value of the bond at the end
     of the license year. Should the vested milk dealer agree to post
     a bond for a minimum of 75% of the highest aggregate amount owed
     for the 40-day pay period, payment to the security fund shall
     not be required.
        (c)  Nothing shall prevent any vested milk dealer from
     increasing the vested milk dealer's bond beyond the 30% nor
     increasing the amount paid into the security fund credited to
     the vested milk dealer to provide additional protection for the
     vested milk dealer's producers.
        (d)  At the time a vested milk dealer discontinues purchasing
     milk from producers, after all the producers are paid in full,
     the moneys, including interest and minus the administrative fee,
     as provided for in subsection (e), shall be returned to the
     vested milk dealer.
        (e)  The board may impose an administrative fee on the
     security fund moneys on an annual basis at not more than .5% of
     the total fund.
        (f)  Any security fund established and maintained under this
     section shall be considered a security trust fund for the
     exclusive benefit of producers supplying milk to the vested milk
     dealer paying into the fund. No claims of the Commonwealth or
     any other person may be made against the fund until all amounts
     due to producers for supplying milk to the vested milk dealer
     have been paid. Amounts paid into the security trust fund shall
     be considered an expense to the vested milk dealer necessary for
     maintaining [the dealer's] a license and shall not be considered
     an asset of the vested milk dealer.
      Section 10.  New licensees.
        (a)  Except as set forth in subsection (b), the following
     apply:
            (1)  A milk dealer or handler purchasing or acquiring or
        receiving or intending to purchase or receive milk from
        producers, but not so engaged during the preceding 12 months,
        shall file a bond in a sum to be fixed by the board in
        accordance with the handler's anticipated purchases from
        producers and the handler's obligation to a producer
        settlement or equalization fund, but not less than the total
        amount expected to be owed during the full 40-day pay period.
            (2)  The board shall review the operations of the milk
        dealer or handler every two months and the bond shall be
        modified by the board at the time the board is satisfied that
        the producers are adequately secured.
            (3)  At the end of six months of operation, upon approval
        by the board, the [new] milk dealer or handler [may file the
        amount of the bond and pay into the security fund as required
        in sections 7 and 9.] shall file a bond in a sum equal to a
        minimum of 75% of the highest aggregate amount owed or
        expected to be owed by the milk dealer or handler to all
        producers for a 40-day period.
        (b)  Subsection (a) does not apply to a vested milk dealer.
        Section 4.  The act is amended by adding a section to read:
      Section 10.1.  Review of security.
        (a)  If the board determines that the financial condition of
     a milk dealer that purchases milk from a producer is not
     adequate to reasonably assure prompt payment to producers, the
     board may require that milk dealer to furnish additional
     security to afford producers the protection intended by this
     act.
        (b)  If the board determines that the value of milk purchased
     or received from a producer by a milk dealer has increased or
     may reasonably be anticipated to increase so that the amount of
     security furnished by the milk dealer does not comply with
     section 7 as applied to any consecutive two-month period during
     the current year, the board may require that milk dealer to
     furnish additional security to afford producers the protection
     intended by this act.
        Section 5.  Section 11 of the act is amended to read:
      [Section 11.  Trusteeship.
        (a)  In such cases where it appears that the financial
     condition of the applicant for a license or the licensee is not
     adequate to reasonably assure payment to producers, the board
     may require in lieu of other security or payments to the
     security fund and, where it is practical from an operating
     standpoint, the licensee to file an agreement providing for the
     complete control over all processed or manufactured milk and
     dairy products by a trustee to be selected at least annually by
     the involved producers. Such trustee shall make and file a
     trustee's fidelity bond and contracts signed by the operator and
     the purchasers of the dairy products requiring that payment for
     such products sold be made to him as trustee. Such trustee shall
     maintain a separate bank account for that purpose and shall at
     least twice annually render a true and correct account of his
     dealings to the board and to the producers. Producers shall have
     a first lien on assets of trusteeship to assure payment in case
     of default.
        (b)  The operation of the trustee arrangement, requirements
     dealing with payments, reports and other operations shall be
     handled according to regulations established by the board.]
        Section 6.  Section 13 of the act, repealed in part December
     21, 1984 (P.L.1278, No.243), is amended to read:
      Section 13.  Prohibitions and violations.
        (a)  No milk dealers license shall be issued to any person or
     organization not in compliance with the provisions of this act.
        (b)  It shall be unlawful for a milk dealer to purchase or
     receive milk from producers unless the milk dealer has complied
     with the provisions of this act.
        (c)  In addition to other penalties provided by law, the
     board may commence a proceeding in court to seek temporary or
     injunctive relief against any person violating the provisions of
     this act.
        (d)  Producers who do not receive payments from licensees in
     accordance with provisions of this act shall immediately notify
     the board or its representatives. [At no time shall the holder
     or provider of the bond or security, nor the trustee be
     responsible for payments to producers beyond the 40-day pay
     period when payments are in default after the producer has been
     notified by certified mail.]
        (e)  If any dealer who purchases or receives milk from
     producers has not filed a surety bond or securities in lieu
     thereof, in accordance with this act by the 15th day of the
     month prior to the beginning of the license year, the board
     shall notify such producers by certified mail that such milk
     dealer has not filed any security or made other provisions for
     assuring payments for milk purchased, for the license year
     commencing the first day of the next month. The board [then may
     require a trustee to be selected under the provisions of this
     act or] shall have the right to revoke the license of said
     dealer.
        (f)  Each milk dealer shall report to the board any increase
     or anticipated increase in the value of milk purchased or
     received from producers.
        Section 7.  Section 15 of the act is amended to read:
      Section 15.  Penalties.
        A violation of this act shall subject a milk dealer or a
     participating cooperative to a penalty of [$50] $150 for each
     day that it is late in making payment into the security fund of
     the assessment required by this act, for each day it sells milk
     to a milk dealer after being notified by the board of the milk
     dealer's failure to provide security as provided herein or for
     each day a milk dealer or participating cooperative has failed
     to make payments for milk purchased as provided pursuant to
     section 5. Any person who buys or sells in violation of the
     credit period provided in section 5 shall be liable for
     suspension or revocation of his milk dealer's license in
     pursuance of the act of April 28, 1937 (P.L.417, No.105), known
     as the Milk Marketing Law, or the board may accept from the
     licensee an offer in compromise, a penalty at the rate of [$50]
     $150 for each day of violation. A milk dealer that violates
     section 13(f) shall be liable for suspension or revocation of
     the milk dealer's license pursuant to the Milk Marketing Law.
        Section 8.  This act shall take effect immediately.

     APPROVED--The 4th day of July, A. D. 2004.

     EDWARD G. RENDELL