2007 California Food and Agricultural Code Article 5. Bonding And Payment For Manufacturing Milk

CA Codes (fac:61400-61419)

61400.  It is recognized by the Legislature that unfair and
disruptive practices have developed concerning the purchasing of
manufacturing milk, as defined in Section 32509, including the
failure to pay, or the making of late payments, to producers of
manufacturing milk.  Such practices tend to disrupt and interfere
with the purposes of this chapter by, among other things, creating an
unfair advantage to purchasers of manufacturing milk used for
manufacturing purposes over purchasers of market milk used for
manufacturing purposes.  It is necessary, in order to more fully
achieve the purposes of this chapter, to provide for the requirement
of a payment bond and a schedule for payment concerning purchases of
manufacturing milk in certain circumstances.



61404.  The bond provided for in this article is required for each
manufacturing milk handler.



61405.  (a) Every manufacturing milk handler that operates only one
plant within the state, before purchasing any manufacturing milk from
a producer, shall execute and deliver to the secretary a surety
bond, executed by the applicant as principal and by a surety company
qualified and authorized to do business in this state as surety.
The amount of the bond shall be based upon the average daily quantity
of manufacturing milk purchased by the handler during any calendar
month during a calendar year.  The minimum amount of the bond shall
be as follows:
   (1) Five thousand dollars (,000) for any handler that purchases
an average daily quantity of less than 1,000 gallons.
   (2) Ten thousand dollars (,000) for any handler that purchases
an average daily quantity of at least 1,000 gallons but less than
4,000 gallons.
   (3) Fifteen thousand dollars (,000) for any handler that
purchases an average daily quantity of at least 4,000 gallons but
less than 8,000 gallons.
   (4) Twenty thousand dollars (,000) for any handler that
purchases an average daily quantity of 8,000 gallons or more.
   (b) Every manufacturing milk handler that operates more than one
plant within the state, before purchasing any manufacturing milk from
a producer, shall execute and deliver to the secretary a surety
bond, executed by the applicant as principal and by a surety company
qualified and authorized to do business in this state as surety.  The
bond shall be a single bond covering all plants within the state and
shall be in an amount determined by multiplying twenty thousand
dollars (,000) by the number of plants operated by the handler in
the state.
   (c) Any milk purchase agreement between a handler and a producer
may provide for surety bonds, guarantees, or other forms of security
in addition to the bonding requirements in this article.



61405.1.  If any handler increases his or her purchases of
manufacturing milk during the license year so that the purchases
exceed the amount for which the handler is bonded, the handler shall
immediately post an additional bond as may be required to comply with
this article.



61406.  The bond required by Section 61405  shall be in a form
approved by the director, and shall be conditioned upon the payment
in the manner that is required by the terms of purchase between the
manufacturing milk handler and the producer of all amounts due to
producers for manufacturing milk purchased by the licensee or
applicant during the license year.  The bond shall be to the state in
favor of every producer of manufacturing milk.



61407.  If a handler fails to pay any producer or producers in the
manner that is required by this chapter, the director shall proceed
forthwith to ascertain the names and addresses of all the producers
that the handler has failed to pay, together with the amounts due and
owing to them and each of them by the handler, and shall request all
of those producers to file a verified statement of their respective
claims with the director.  The producer need only verify that he or
she is owed an amount by the handler.  The actual amount in that case
may be ascertained by the director.



61407.1.  (a) After determining the claims of the producers pursuant
to Section 61407, the director shall bring an action on the bond on
behalf of the producers.
   (b) Any producer not satisfied with the amount of the producer's
claim as determined by the director, or with the ratio the producer's
claim bears to all claims against the bond as determined by the
director, may intervene in an action commenced upon the bond so that
the correct amount of his or her claim and the ratio it bears to all
the claims may be adjudicated.



61407.2.  If the recovery upon the bond is not sufficient to pay all
of the claims as finally determined and adjudged by the court, the
amount recovered shall be divided pro rata among the
producer-creditors.



61407.3.  Payments by a handler to a producer, for the purposes of
any action on a handler's bond for any year, shall be credited first
to interest and then to principal due, owed, and unpaid.  Amounts to
be applied to the principal shall be applied first to the amount owed
for the most recent deliveries and then successively, in descending
order, to the amounts owed to the next most recent deliveries.




61407.4.  (a) The director may bring an action against a surety bond
company if the company fails to do any of the following:
   (1)  Acknowledge promptly and act reasonably upon receiving a bond
demand from the director.
   (2)  Promptly investigate and process claims.
   (3)  Make fair and equitable settlement of claims.
   (4)  Pay the bond amount to the director.
   (b) The authority provided in subdivision (a) is in addition to
the authority provided for in subdivision (h) of Section 790.03 of
the Insurance Code.
   (c) In addition to the bond proceeds, the surety bond company may
be ordered to pay interest at the prevailing prime rate on the
amounts owed from the date the claim was filed, all of the department'
s court costs, and reasonable attorney's fees.



61408.  If a manufacturing milk handler fails to pay any producer in
the manner that is required by this chapter, the director may
require the filing of a new or additional bond in the amount
determined by the director to be sufficient to satisfy claims for the
payment of producers thereafter supplying manufacturing milk to the
manufacturing milk handler.  The failure of a manufacturing milk
handler to have filed a new bond within 10 days after notice from the
director constitutes grounds for the revocation or suspension of the
manufacturing milk handler's license of the manufacturing milk
handler.


61409.  The failure of any manufacturing milk handler that purchases
manufacturing milk from producers to execute and deliver the bond as
provided and required in this article is a violation of this
chapter.  The failure of any handler to post any additional bond as
may be required is also a violation of this chapter.




61410.  The failure of any manufacturing milk handler that purchases
manufacturing milk from producers to execute and deliver the bond as
provided and required in this article shall constitute grounds for
suspension, revocation, or refusal of the manufacturing milk handler'
s license.  The failure of any handler to post any additional bond as
may be required to comply with this article shall also be grounds
for suspension, revocation, or refusal of the license pursuant to
these procedures.



61411.  Except as otherwise provided in Section 61411.2 or 61411.3,
the purchase of any manufacturing milk in excess of 1,000 gallons
monthly from any manufacturing milk producer without a written
contract that has been executed and complies with all the
requirements of this article is an unlawful practice.  The contract
shall include all of the following:
   (a) The amount of manufacturing milk which is to be purchased for
any period.
   (b) The price to be paid for all manufacturing milk received.
   (c) The date and method of payment for the manufacturing milk.
Payment shall be made for the amount of the manufacturing milk
delivered during the first 15 days of any calendar month not later
than the first day of the next following month and for the amount
delivered during the remainder of the month not later than the 15th
day of the next following month.
   (d) The charges for transportation, if hauled by the handler,
which shall be the lower of either of the following:
   (1) A rate not in excess of the rate charged for actual or
reasonably similar services by highway carriers, as the term "highway
carrier" is defined in Section 3511 of the Public Utilities Code.
   (2) The actual amount paid by a handler for that transportation.
   The contract may contain any other provisions that are not in
conflict with this chapter.  A signed copy of the contract shall be
filed by the producer with the director within five days of the date
of its execution.
   This section does not apply to the purchase of milk which does not
meet market milk standards in Chapter 2 (commencing with Section
35751) of Part 2 of Division 15, when the milk has been processed on
a dairy farm that held a valid market milk permit during the 30-day
period preceding the purchase.



61411.1.  The production of manufacturing milk in excess of amounts
to be purchased under contracts executed pursuant to Section 61411
shall be voluntary on the part of the producer and shall not be a
condition, oral or written, of the execution or renewal of any
contract.



61411.2.  Section 61411 does not apply to the purchase of
manufacturing milk which is necessary to meet an unanticipated
increase in demand or an unanticipated shortage in the supply of a
handler if the quantity purchased from any one producer does not
exceed 5,000 gallons in any one month.  However, if the producer is a
cooperative association acting as a producer, the total quantity
purchased shall not exceed 30,000 gallons per month.
   For a single transaction between a producer and handler, payment
shall be made for the amount of milk delivered during the first 15
days of any calendar month not later than the first day of the next
following month and payment shall be made for the amount of milk
delivered during the remainder of the month not later than the 15th
day of the next following month, unless the milk is subject to a
pooling plan as authorized in Chapter 3 (commencing with Section
62700) and the pooling plan provides for different dates and methods
of payment, in which case the date and method of payment for the milk
shall be as provided for in the pooling plan.



61411.3.  Section 61411 does not apply to manufacturing milk
purchased under cash-on-delivery terms.



61411.4.  Any contract between a producer and a handler shall be
voidable by the producer for a 45-day period following the occurrence
of either of the following:
   (a) The handler has failed to pay the producer the full price
specified in the contract or has failed to comply with the terms
specified in subdivision (c) of Section 61411, and the failure has
not been corrected by the handler within one business day after
notification by the producer or director.  The 45-day period shall
commence on the day after the payment was due.
   (b) The handler has failed on three separate occasions within a
12-month period to pay the producer the full price specified in the
contract or has failed to comply with the terms specified in
subdivision (c) of Section 61411. The 45-day period shall commence on
the day after the third occurrence.



61411.5.  If a notice has been issued by the director that the
future deliveries to the handler shall not be covered under the Milk
Producers Security Trust Fund created pursuant to Chapter 2.5
(commencing with Section 62500), all contracts between producers and
the handler are voidable by the producers.  Producers shall have the
option to void their contracts for a 45-day period from the date the
notice is issued or until the date the director establishes for
reinstatement of the handler's eligibility under the trust fund,
whichever is later.


61412.  Every milk handler who receives manufacturing milk subject
to the provisions of this article shall deduct as an assessment from
payments made to producers for manufacturing milk the sum of one and
two-tenths cents (.012) per hundredweight of manufacturing milk.
   The amount of the assessments so deducted shall be paid to the
director on or before the 45th day following the last day of the
month during which the manufacturing milk was received.
   Every milk handler who receives manufacturing milk subject to the
provisions of this article that purchases or handles manufacturing
milk from producers shall pay a fee of six-tenths of one cent
(.006) per hundredweight of manufacturing milk.
   The amount of the fee shall be paid to the director on or before
the 45th day following the last day of the month in which the
manufacturing milk was received.


61413.  The director may fix the rates of assessments or fees
required by Section 61412 at lesser amounts, and may adjust the rates
of assessments or fees from time to time, whenever he or she finds
that the cost of administering this article can be defrayed from
revenues derived from the lower rates, provided that the rate of
assessments deducted from payments to producers for manufacturing
milk and the rate of fees paid by manufacturing milk handlers shall
at all times be in the ratio of two to one.



61414.  (a) Any assessment or fee or either of them payable pursuant
to any provision of this article is a debt of the person by whom the
assessment or fee or either of them is payable and shall be due and
payable to the director upon the date set forth in Section 61412.  If
the person does not pay the assessment or fee or either of them upon
the required date, the director may file a complaint against that
person in a state court of competent jurisdiction for the collection
of the assessment or fee or either of them.
   (b) If any such person does not pay to the director the
assessments or fees or either of them provided for in this article,
on or before the date specified in Section 61412, the director may
add to the unpaid assessments or fees or either of them an amount not
exceeding 10 percent of the unpaid assessment or fees or either of
them to defray the cost of enforcing the collection of the unpaid
assessments or fees or either of them.



61415.  The failure of any handler to pay for manufacturing milk
delivered to the handler at the time and in the manner specified in
the contract with the producer is an unlawful trade practice.



61415.1.  (a) Handlers shall pay producers either by check or cash.
Handlers  electing to pay producers in cash shall, in all cases,
obtain a dated, signed receipt from each producer.  These receipts
shall be made a part of the permanent records of the handler.
Handlers paying by check shall issue checks which are reduceable to
cash by the producer in no more than one business day.
   (b) The giving of a promissory note is not payment within the
meaning of this chapter.


61415.2.  (a) If a handler does not pay for manufacturing milk
delivered to him or her at the time and in the manner specified in
the contract, the handler shall pay the producer interest on the
unpaid amount from the time the payment was due until paid at the
rate of 12 percent per annum.  The interest is in addition to any
other penalties provided in this chapter.
   (b) If there is no contract for the delivery of milk to the
handler or the delivery was made as a single transaction between the
producer or handler, the handler shall pay the department interest on
the unpaid amount from the time the payment was due until paid at
the interest rate specified in subdivision (a).  The interest is in
addition to any other penalties provided in this chapter.



61415.3.  If a handler fails to pay for manufacturing milk delivered
to him or her at the time and in the manner specified in this
chapter, the director may assess a penalty for each payment date that
the producers were not fully paid.  Any penalty assessed shall be a
minimum of one hundred dollars (0) for each payment date.  If the
amount not properly paid is more than forty thousand dollars
(,000), the penalty assessed shall be five thousand dollars
(,000) or one-fourth of 1 percent of the amount not properly paid,
whichever is less.


61416.  The director may revoke or suspend any license of a handler
if the director finds as a result of a noticed hearing that the
handler has not paid for any manufacturing milk delivered to him or
her at the time and in the manner specified in the contract with the
producer.



61416.1.  The director, pursuant  to the procedure in Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code, may also refuse to grant or renew any license
to a handler if the director is satisfied that the handler has failed
to pay for any manufacturing milk delivered to him or her at the
time and in the manner specified in the contract with the producer.




61417.  In lieu of revoking or suspending a handler's license under
Section 61416, the director may impose any other conditional and
probationary orders, pursuant to a noticed hearing, that may be
proper for the enforcement of this chapter or to enforce any
provision of any regulation adopted by the director pursuant to
Section 61341.



61418.  If the respondent does not comply with any conditional or
probationary orders, the director may suspend or revoke the license
in accordance with the procedure provided in Chapter 5 (commencing
with Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code.



61419.  (a) Whenever the director is satisfied, either by
investigation or after a hearing, that a handler is unable to pay for
any manufacturing milk purchased from any producer, and is further
satisfied that to permit the handler to continue to purchase and
receive any manufacturing milk from producers would be likely to
cause serious and irreparable loss to producer-creditors and other
producers, the director may thereupon and forthwith shorten the time
for hearing that is provided for in Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code, and thereupon may issue an order to show cause why the license
of the handler should not be forthwith suspended or revoked.  The
time of notice of the hearing shall not, however, be less than five
days.  At the hearing the handler that is proceeded against shall be
ordered to show cause why the license should not be suspended or
revoked, or continued under conditions and provisions, if any, that
the director may consider just and proper and for the protection of
the best interests of the producer-creditors and producers from whom
the handler has been and is receiving any manufacturing milk.
Following the hearing, the decision of the director shall become
effective at the director's discretion.
   (b) The hearing, in the case of an emergency, may be called upon
written notice which is served personally or by mail on the handler
that is involved. If the notice is sent by mail, the hearing date
shall be no sooner than 10 days after the notice is sent.  It may be
held at the nearest office of the director or at any place that may
be most convenient in the discretion of the director for the
attendance of all of the parties that are involved.