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Puerto Rico Dairy Farmers Association v. Pagan

United States Court of Appeals, First Circuit

April 3, 2014

PUERTO RICO DAIRY FARMERS ASSOCIATION, Intervenor, Appellant,
v.
MYRNA COMAS PAGAN, Secretary of the Department of Agriculture for the Commonwealth of Puerto Rico; EDMUNDO ROSALY, Administrator of the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico, Defendants SUIZA DAIRY, INC.; VAQUERÍA TRES MONJITAS, INC., Plaintiffs, Appellees,

Page 14

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO. Hon. Daniel R. Domí nguez, U.S. District Judge.

William A. Graffam, with whom Alejandro Mendez Roman and Jiménez Graffam & Lausell were on brief, for appellant.

Rafael Escalera Rodríguez, with whom Amelia Caicedo Santiago, Carlos M. Hernández Burgos, and Reichard & Escalera were on brief, for appellee Suiza Dairy, Inc.

Jose R. Lazaro Paoli, Enrique Nassar Rizek and ENR & Associates on brief for appellee Vaquería Tres Monjitas, Inc.

Before Lynch, Chief Judge, Selya and Howard, Circuit Judges.

OPINION

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LYNCH, Chief Judge.

This appeal arises from the settlement of the decade-long litigation concerning the regulation of Puerto Rico's milk industry. The intervenor Puerto Rico Dairy Farmers Association (" PRDFA" ) appeals from the district court's approval of a comprehensive Settlement Agreement (" the Agreement" ) reached by the original parties: the government defendants, including the Office of the Milk Industry Regulatory Administration for the Commonwealth of Puerto Rico (Spanish acronym " ORIL" ), and the plaintiff milk processors, Vaquería Tres Monjitas, Inc. (" VTM" ) and Suiza Dairy, Inc. (" Suiza" ).

PRDFA argues that the district court denied it an appropriate hearing to object to the approval of the Agreement, and attacks the merits of the Agreement itself. Because PRDFA had an adequate hearing to air its grievances while the Agreement was stayed from going into effect, and because the district court held that PRDFA remains free to challenge in its still-pending companion case the constitutionality of the Agreement as implemented, we reject PRDFA's due process arguments. We also find there was no abuse of discretion in the district court's approval of the Agreement, and affirm.

I.

An account of the litigation's origins is found in our previous opinion in this case. See Vaquería Tres Monjitas, Inc. v. Irizarry, 587 F.3d 464 (1st Cir. 2009), reh'g en banc denied, 600 F.3d 1 (1st Cir. 2010), cert. denied, 131 S.Ct. 2441, 179 L.Ed.2d 1235 (2011).

The milk industry is heavily regulated in Puerto Rico, and is under the purview of ORIL, a subdivision of the Department of Agriculture. Id. at 467. Before this case began, ORIL set both a maximum price for milk sold to consumers and a minimum

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price for the processors' purchase of raw milk from the dairy farmers, effectively squeezing the processors' profit margins between the two ends of the market. Id. at 469.

VTM and Suiza are the only private fresh milk processors in Puerto Rico. They purchase " raw milk" from local dairy farmers, convert it to drinkable " fresh milk," and sell it to consumers. Id. at 468. The only other milk processor is Industria Lechera de Puerto Rico, Inc. (" Indulac" ), an entity created by statute to promote the Commonwealth's milk industry. Indulac is currently the only entity authorized to process ultra-high temperature milk (" UHT milk" ), a product that does not need to be refrigerated before it is opened. Id. Appellant PRDFA is an organization that represents Puerto Rico's dairy farmers, who sell their milk to all three processing entities. It initially intervened in 2005 in order to support the government defendants.

A. Procedural Background

In 2004, Suiza and VTM brought a constitutional challenge to the then-existing regulatory structure of the milk industry. Id. at 471. Suiza and VTM contended that ORIL's regulatory structure " precluded them from making a reasonable profit in their milk business" and constituted a confiscation of property in violation of the Takings Clause. Id.; see U.S. Const. amend. V. PRDFA entered the milk litigation in ...


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