Article 13. Bonding And Payment For Market Milk of California Food And Agricultural Code >> Division 21. >> Part 3. >> Chapter 2. >> Article 13.

The bonds provided for in this article are required for each handler and apply to all purchases of milk by that handler. A handler bonded under this article is not required to be separately bonded under Section 61405.

(a) Every handler that operates only one plant within the state, before purchasing any market 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 minimum amount of the bond shall be based upon the average daily quantity of market 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 ($5,000) for any handler that purchases an average daily quantity of less than 1,000 gallons.
  (2) Ten thousand dollars ($10,000) 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 ($15,000) 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 ($20,000) for any handler that purchases an average daily quantity of 8,000 gallons or more.
  (b) Every handler that operates more than one plant within the state, before purchasing any market 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 ($20,000) 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 additional surety bonds, guarantees, or other forms of security in addition to the bonding requirements in this article.

If any handler so increases his purchases of market milk during the license year that such purchases exceed the amount for which the handler is bonded, such handler shall forthwith post such additional bond as may be required to comply with this article.

The bonds required by Sections 62182 and 62183 shall be upon a form approved by the director, and shall be conditioned upon the payment in the manner that is required by this chapter, of all amounts due to producers for market milk purchased by such licensee or applicant during the license year. It shall be to the state in favor of every producer of market milk.

If a handler fails to pay any producer or producers for market milk 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 such handler, and shall request all such producers to file a verified statement of their respective claims with the director. The producer need only verify that he is owed an amount by the handler. The actual amount in such case may be ascertained by the director.

After determining the claims of such producers, the director shall bring an action on the bond on behalf of such producers. Any producer not satisfied with the amount of such producer's claim as determined by the director, or with the ratio such producer' s claim bears to all claims against the bond as determined by the director, may intervene in such an action so that the correct amount of his claim and the ratio it bears to all the claims may be adjudicated.

(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 the department's court costs, and reasonable attorney's fees.

If a 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 an amount determined by the director that will be sufficient to satisfy claims for the payment of producers thereafter supplying market milk to the handler. The failure of a handler to have filed a new bond within 10 days after notice from the director constitutes grounds for the revocation or suspension of the license of the handler.

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

The failure of any handler that purchases market 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 such handler to post any additional bond as may be required to comply with any provision of this chapter is also a violation of this chapter.

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

(a) Except as otherwise provided in Section 62193 or 62194, the purchase of any market milk in excess of 1,000 gallons monthly from any producer is an unlawful trade practice unless a written contract, which complies with all of the requirements which are prescribed by this section, has been entered into with the producer.
  (b) The contract shall include all of the following:
  (1) The amount of market milk which is to be purchased for any period.
  (2) The minimum quantity of the market milk which is to be paid for as class 1, if any is to be purchased for this purpose. The quantity shall be stated in pounds of market milk, pounds of market milk fat, or gallons of market milk, unless the price which is to be paid for the class 1 market milk is established separately for the market milk fat and market skim milk, in which case the quantity may, in the alternative, be stated in both pounds of market milk fat and pounds of market skim milk separately. The minimum quantity of market milk to be paid for as class 1 shall not be less than 70 percent of the total quantity provided in the contract to be purchased at a milk products plant, and not less than 60 percent of the total quantity of market milk fat, or the total quantity of market skim milk components, but not necessarily both, provided in the contract to be purchased at a country plant, as defined by the director in stabilization and marketing plans.
  (3) The price to be paid for all market milk received.
  (4) The date and method of payment for the market milk. Payment shall be made for the amount of the market 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 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.
  (5) The charges for transportation if hauled by the handler.
  (6) A provision that market milk received within the total quantity provided by the contract to be purchased for any period shall not be paid for at less than the minimum price for market milk used for class 2.
  (c) The contract may contain 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 from the date of its execution.
  (d) Paragraphs (2) and (6) of subdivision (b) shall not be applicable if an equalization pool, as provided pursuant to Chapter 3 (commencing with Section 62700), is in effect for the area in which the purchase of the market milk occurs.

The production of market milk in excess of amounts provided to be purchased under contracts executed pursuant to Section 62191 shall be voluntary on the part of the producer and shall not be a condition, oral or written, of execution or renewal of any of those contracts.

Section 62191 does not apply to the purchase of market milk which is necessary to meet an unanticipated increase in demand or an unanticipated shortage in the supply of a handler if both of the following occur:
  (a) The quantity of market milk 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.
  (b) A complete record of all of these purchases is kept by the handler, and the price paid for the milk by the handler is not less than the price which is established in the applicable stabilization and marketing plan for the usage to which the milk is applied. 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.

Section 62191 does not apply to market milk purchased under cash-on-delivery terms.

The payment by a handler to any producer, including any nonprofit cooperative association acting as a producer, or the receipt from a handler by a producer, including any nonprofit cooperative association acting as a producer, of a lesser price for any market milk distributed to any person, including any agency of federal, state, or local government, for less than the minimum prices established by the director to be paid by handlers to producers for market milk for the marketing area is an unlawful trade practice.

The failure of any handler to pay for market milk delivered to him or her at the time and in the manner specified in the contract with the producer is an unlawful trade practice, except as provided for in Section 62079.

This article applies regardless of the form in which market milk is received by the handler and regardless of the area of origin of the market milk.

Any contract between a producer and handler is voidable by the producer for a 45-day period following the occurrence of either of the following events:
  (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 paragraph (4) of subdivision (b) of Section 62191, 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 paragraph (4) of subdivision (b) of Section 62191. The 45-day period shall commence on the day after the third occurrence.

If a notice has been issued by the director that the future deliveries to the handler will 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.

(a) Handlers shall pay producers either by check or cash. Handlers electing to pay producers by cash shall, in all cases, obtain a dated, signed receipt from each producer. The 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.

(a) If a handler does not pay for market 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. This 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.

If a handler fails to pay for market 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 producers were not fully paid. Any penalty assessed shall be a minimum of one hundred dollars ($100) for each payment date. If the amount not properly paid is in excess of forty thousand dollars ($40,000), the penalty assessed will be five thousand dollars ($5,000) or one-fourth of 1 percent of the amount not properly paid for, whichever is less.