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United States v. Crown Equipment Corp.

June 13, 1996




Appeal from the United States District Court for the Western District of Wisconsin. No. 94 C 337 John C. Shabaz, Chief Judge.

Before CUMMINGS, RIPPLE and MANION, Circuit Judges.

RIPPLE, Circuit Judge.



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. sec. 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.



A. Facts

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. Total Print Butter 10,807,899 lbs.

Bulk Butter

Grade AA 44,024 lbs. Grade A 81,935 lbs. 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.

B. Butter 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. sec. 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. *fn1

The dairy price-support program is authorized by the Agricultural Act of 1949. See Pub. L. No. 81-439, 63 Stat. 1051 (codified as amended principally at 7 U.S.C. sec. 1421 et seq.). 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. sec. 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. sec. 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 years. As ...

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