Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca4-07-01146/USCOURTS-ca4-07-01146-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: PEANUT CROP INSURANCE 

LITIGATION, MDL-1634

MARVIN TAYLOR BARNHILL; JOEY

WATFORD; TOM CLEMENTS; FLORIDA

PEANUT FARMERS, and others

similarly situated; TERRY E.

BEASLEY; WALLACE A. BERRY, South

Carolina Peanut Farmer and others

similarly situated; TEXAS PEANUT

FARMERS, in the Southwest Growing

Region; GEORGIA PEANUT FARMERS;

CHARLES E. SMITH, JR.,

Plaintiffs-Appellees,  No. 07-1145

v.

ANN VENEMAN, Secretary of

Agriculture for the United States of

America; ROSS J. DAVIDSON,

Administrator for Risk Management

Agency; RISK MANAGEMENT AGENCY;

UNITED STATES DEPARTMENT OF

AGRICULTURE; UNITED STATES OF

AMERICA; FEDERAL CROP INSURANCE

CORPORATION; MIKE MOORE, RMA

Regional Office Director Valdosta;

RON BERRYHILL, RMA Regional

Office Director, Oklahoma City,

Oklahoma,

Defendants-Appellants. 

Appeal: 07-1146 Doc: 59 Filed: 05/08/2008 Pg: 1 of 30
In Re: PEANUT CROP INSURANCE 

LITIGATION, MDL-1634

MARVIN TAYLOR BARNHILL; JOEY

WATFORD; TOM CLEMENTS; FLORIDA

PEANUT FARMERS, and others

similarly situated; TERRY E.

BEASLEY; WALLACE A. BERRY, South

Carolina Peanut Farmer and others

similarly situated; TEXAS PEANUT

FARMERS, in the Southwest Growing

Region; GEORGIA PEANUT FARMERS;

CHARLES E. SMITH, JR.,

Plaintiffs-Appellants,  No. 07-1146

v.

ANN VENEMAN, Secretary of

Agriculture for the United States of

America; ROSS J. DAVIDSON,

Administrator for Risk Management

Agency; RISK MANAGEMENT AGENCY;

UNITED STATES DEPARTMENT OF

AGRICULTURE; UNITED STATES OF

AMERICA; FEDERAL CROP INSURANCE

CORPORATION; MIKE MOORE, RMA

Regional Office Director Valdosta;

RON BERRYHILL, RMA Regional

Office Director, Oklahoma City,

Oklahoma,

Defendants-Appellees. 

2 IN RE: PEANUT CROP INSURANCE LITIGATION

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Appeals from the United States District Court

for the Eastern District of North Carolina, at Greenville.

Malcolm J. Howard, Senior District Judge.

(4:05-cv-00008-H; 4:02-cv-00159-H; 4:05-cv-00002-H;

4:04-cv-00191-H; 4:04-cv-00189-H; 4:04-cv-00188-H;

4:04-cv-00187-H; 4:04-cv-00186-H; 4:06-cv-00164-H;

4:06-cv-00163-H; 4:06-cv-00129-H)

Argued: December 5, 2007

Decided: May 8, 2008

Before WILKINSON and KING, Circuit Judges, and

Henry F. FLOYD, United States District Judge for the

District of South Carolina, sitting by designation.

Vacated and remanded by published opinion. Judge King wrote the

opinion, in which Judge Wilkinson and Judge Floyd joined. 

COUNSEL

ARGUED: Jeffrey A. Clair, UNITED STATES DEPARTMENT OF

JUSTICE, Washington, D.C., for Appellants/Cross-Appellees. Robert

Daniel Boyce, BOYCE & ISLEY, P.L.L.C., Raleigh, North Carolina,

for Appellees/Cross-Appellants. ON BRIEF: Peter D. Keisler, Assistant Attorney General, George E. B. Holding, United States Attorney,

Rudolf A. Renfer, Jr., Assistant United States Attorney, Eric Goulian,

Assistant United States Attorney, Scott R. McIntosh, UNITED

STATES DEPARTMENT OF JUSTICE, Washington, D.C., for

Appellants/Cross-Appellees. Gordon E. Boyce, BOYCE & ISLEY,

P.L.L.C., Raleigh, North Carolina, for Appellees/Cross-Appellants. 

IN RE: PEANUT CROP INSURANCE LITIGATION 3

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OPINION

KING, Circuit Judge:

These appeals relate to lawsuits being pursued by several classes

of peanut farmers (the "Farmers") who insured their 2002 peanut

crops under a Multiple Peril Crop Insurance Policy (the "MPCI Policy") that, under federal law, was issued by private insurers and reinsured by the Government.1

 After suffering heavy losses to their 2002

peanut crops, due primarily to a severe drought during the growing

season, the Farmers filed claims under the MPCI Policy. They were

indemnified for their losses at a "non-quota" rate of 17.75 cents per

pound — rather than at the claimed "quota" rate of 31 cents. The

Farmers’ expectations of indemnity at the 31 cent quota rate were

premised largely on the Government’s allocations of peanut poundage

quotas in previous years. However, federal farm legislation enacted

in May 2002 eliminated the peanut quota program that had been in

effect in some form since 1941. See Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-171, §§ 1301-1310, 116 Stat. 134,

166-83 (2002) (the "2002 Farm Bill"). 

After the Farmers were indemnified at the 17.75 cent non-quota

rate for their 2002 crop losses, they initiated a series of civil actions

against the Government in several federal jurisdictions, alleging, inter

alia, that the MPCI Policy had been breached and that their due process rights had been violated.2

 The district court eventually had before

it a district-wide class action on behalf of the Farmers situated in the

Eastern District of North Carolina, as well as several other districtwide class actions first initiated in other jurisdictions and then transferred to the Eastern District of North Carolina by the Multi-District

Litigation Panel (the "MDL Panel"). In disposing of the Farmers’

1A copy of the MPCI Policy is found at J.A. 40-59. (Citations herein

to "J.A. ___" refer to the contents of the Joint Appendix filed by the parties in this appeal.) 

2The Farmers initiated their lawsuits against multiple defendants,

including the Secretary of Agriculture, the Administrator of the Risk

Management Agency, the Department of Agriculture, the United States,

the Federal Crop Insurance Corporation, and others. We refer to the

defendants collectively as the "Government." 

4 IN RE: PEANUT CROP INSURANCE LITIGATION

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contentions, the court, on July 22, 2004, certified a district-wide class

action on behalf of the Farmers in the Eastern District of North Carolina (the "North Carolina case"). The court then awarded summary

judgment to those Farmers on their breach of contract claims. See

Barnhill v. Davidson, No. 4:02-cv-00159-H (E.D.N.C. July 22, 2004)

(the "SJ Opinion").3 On March 31, 2005, the court entered an order

establishing a formula to be used in computing damage awards. See

In re Peanut Crop Insurance Litigation, No. 4:05-cv-00008-H

(E.D.N.C. Mar. 31, 2005) (the "Damages Order").4 On March 31,

2005, and again on December 20, 2006, the court extended its SJ

Opinion (including the class certification ruling), as well as its Damages Order, to the lawsuits brought by the Farmers in other jurisdictions (the "MDL cases"). See In re Peanut Crop Insurance Litigation,

No. 4:05-cv-00008-H (E.D.N.C. Mar. 31, 2005) ("MDL Order I"); In

re Peanut Crop Insurance Litigation, No. 4:05-cv-00008-H2

(E.D.N.C. Dec. 20, 2006) ("MDL Order II").5

On December 20, 2006, the district court entered Final Judgment

on the Farmers’ breach of contract claims, pursuant to Rule 54(b) of

the Federal Rules of Civil Procedure.6 The Government has appealed,

contending, inter alia, that the court erred by (1) concluding that the

MPCI Policy obligated the insurers to indemnify the Farmers at the

31 cent quota rate in the absence of 2002 peanut poundage quota allocations having been made to individual farms; and (2) determining

that the Government’s failure to allocate such quotas breached the

MPCI Policy, based on the court’s conclusion that the enactment of

the 2002 Farm Bill hindered the performance of the Government’s

statutory duty to allocate such quotas. The Government also contends

that the court erroneously premised its SJ Opinion, in part, on the

Farmers’ alternative theory of detrimental reliance. The Farmers have

cross-appealed, asserting that the district court erred in failing to certify a nationwide class of farmer-plaintiffs, and also in denying the

requests of certain plaintiffs for transfers of venue. As explained

3The SJ Opinion can be found at J.A. 237-85. 

4The Damages Order can be found at J.A. 295-302. 

5The MDL Order I can be found at J.A. 303-07, and the MDL Order

II can be found at J.A. 362-67. 

6The Final Judgment can be found at J.A. 368. 

IN RE: PEANUT CROP INSURANCE LITIGATION 5

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below, we disagree with the district court’s breach of contract ruling,

and thus vacate its SJ Opinion and remand. 

I.

In order to properly assess these appeals, we first review the background of the federal crop insurance and peanut quota programs.7

 We

then examine the relevant provisions of the MPCI Policy and the

2002 Farm Bill. Finally, we relate the procedural history of this litigation, as well as the appellate contentions of the parties. 

A.

Although crop insurance under the MPCI Policy is provided by private insurers, it is reinsured by a governmental entity called the Federal Crop Insurance Corporation (the "FCIC"), pursuant to the Federal

Crop Insurance Act, 7 U.S.C. §§ 1501 et seq.8 The FCIC is a wholly

owned government corporation that operates under the umbrella of

the Department of Agriculture (the "USDA"), and it is statutorily

responsible for regulating the crop insurance industry. See Tex. Peanut Farmers v. United States, 409 F.3d 1370, 1372 (Fed. Cir. 2005).

The FCIC is itself regulated by the USDA’s Risk Management

Agency (the "RMA"). Id. As specified by Congress, the FCIC’s pur7Although various terms have been used in the record, sometimes

interchangeably, we refer to the components of the peanut price support

program as follows. First, we refer to the general price support program

at issue as the "peanut quota program." We use the term "national poundage quota" to describe the total peanut poundage quota set by the United

States Department of Agriculture for the entire country, and we refer to

the peanut quota allocations made to individual farms as the "farm

poundage quota." 

8Section 1508(j) of Title 7 provides that, if a "claim for indemnity is

denied by the [FCIC] or an approved provider, an action on the claim

may be brought against the [FCIC] or Secretary [of Agriculture] only in

the United States district court for the district in which the insured farm

is located." 7 U.S.C. § 1508(j)(2). The various public officials and entities named as defendants in this litigation are apparently proper parties

thereto, pursuant to the MPCI Policy and § 1508(j) — and the parties

have made no contention to the contrary. 

6 IN RE: PEANUT CROP INSURANCE LITIGATION

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pose is "to promote the national welfare by improving the economic

stability of agriculture through a sound system of crop insurance." 7

U.S.C. § 1502(a). The crop insurance program implements the public

policy of protecting farmers from the risks associated with drought,

flood, and other natural disasters. 7 U.S.C. § 1508(b). The basic coverage provisions of crop insurance protect insured farmers against catastrophic risk, and serve to indemnify those farmers on losses in

excess of 50% of the crop’s normal yield, indemnified at 55% of the

crop’s expected market price. 7 U.S.C. § 1508(b); 7 C.F.R. § 402.1.

Pursuant to the governing provisions of the crop insurance program,

insured farmers are also entitled to purchase additional insurance coverage at a greater percentage of their expected yields. 7 U.S.C.

§ 1508(c). 

Prior to 2002, the extent to which the MPCI Policy indemnified

lost or damaged peanut crops varied, depending on whether the

insured crops were designated as "quota" or "non-quota" peanuts, as

defined by the peanut quota program. This peanut quota program was

recently addressed and described by the Federal Circuit in Members

of the Peanut Quota Holders Ass’n v. United States, 421 F.3d 1323

(Fed. Cir. 2005) (concluding that 2002 Farm Bill’s changes in quota

program did not result in compensable taking under Fifth Amendment). That court’s description of the background of the program is

helpful, and was spelled out, in part, as follows:

In the 1930s the United States’ economic depression particularly affected the agricultural community. Congress, in an

attempt to mitigate the effects of the depression on agricultural products, enacted the Agricultural Adjustment Act of

1938 ("AAA"), ch. 30 tit. III, § 301 et seq., 52 Stat. 31, 38,

which regulated the production and sale of tobacco and

wheat within the United States. The statute instituted acreage allotments to prevent oversupply of the targeted agricultural commodities. In 1941, the AAA was amended to

include farm acreage allotments for peanuts. The Agricultural Adjustment Act of 1938, as amended, ch. 39, tit. III,

§§ 357-359, 55 Stat. 88, 88-91 (the "1941 Act"). The 1941

Act sought to regulate the production of peanuts to avoid

severe fluctuations in price caused by rapid changes in market demand and the year-long lag in response to that demand

IN RE: PEANUT CROP INSURANCE LITIGATION 7

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caused by crop growing cycles. 1941 Act, 55 Stat. at 88.

Since 1941, Congress has regulated peanut production primarily through quotas set by the Secretary of Agriculture

. . . but the nature and reach of the quota system has not

remained constant. 

Peanut Quota Holders Ass’n, 421 F.3d at 1325-26. The peanut quota

program was, prior to 2002, a price support system for each year’s

peanut crop. "Quota" peanuts were peanuts used for domestic edible

consumption, whereas "non-quota" peanuts (a/k/a "additional peanuts" or "excess peanuts") were either crushed or exported. Non-quota

peanuts had a lower value than quota peanuts, and, in the crop years

preceding 2002, the vast majority of peanuts grown by the Farmers

were quota peanuts. 

The value of quota peanuts and the related national poundage quota

for such peanuts in a specific crop year were determined by the USDA.9

Farm poundage quota allocations to individual farms were made by

the Farm Service Agency (the "FSA"), which administers the price

support programs of the USDA. During the crop years immediately

preceding 2002, quota peanuts lost due to covered occurrences were

indemnified at the rate of 31 cents per pound, and non-quota peanuts

lost due to such occurrences were indemnified at a 16 cent rate. The

peanut quota program thus supplied the MPCI Policy with the value

per pound of both quota and non-quota peanuts, and those values

were used for determining the applicable coverage and indemnification rates. Based on whether — and to what extent — farm poundage

quotas were allocated to individual peanut farms, these rates were

used to calculate the allowable indemnification for peanut crop losses

under the Policy.

B.

1.

The coverage provisions of the MPCI Policy were published in the

Federal Register and are codified in Title 7 of the Code of Federal

9Because the peanut quota program was repealed by the 2002 Farm

Bill, we refer to it in the past tense. 

8 IN RE: PEANUT CROP INSURANCE LITIGATION

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Regulations. See 7 C.F.R. §§ 457.1 et seq. The USDA, acting through

the RMA and the FCIC, is responsible for satisfying certain deadlines

and for general oversight of the MPCI Policy. See 7 U.S.C. §§ 1501

et seq. The MPCI Policy also imposes certain obligations on insured

farmers. The following MPCI Policy terms relate to dates and deadlines that are pertinent to these appeals: 

• All changes to the MPCI Policy’s coverage provisions,

price elections, coverage limits, premium rates, and program dates must generally be made prior to a "contract

change date." The Policy defines the "contract change

date" as the "calendar date by which we make any policy

changes available for inspection in the agent’s office."

MPCI Basic Policy ¶ 1. For the 2002 crop year, the contract change date was November 30, 2001. 

• Price elections can be offered after the contract change

date, so long as they are offered no later than fifteen days

prior to the "sales closing date," and are not less than

those available on the contract change date. MPCI Basic

Policy ¶¶ 3(e) & 4(b). The MPCI Policy defines the

"sales closing date" as "a date contained in the Special

Provisions by which an application must be filed. The

latest date by which you may change your crop insurance

coverage for a crop year." Id. ¶ 1. The sales closing date,

which varied from state to state, was February 28, 2002,

for the Farmers in the North Carolina case.10

• The "cancellation date," or the date on which coverage

would automatically renew unless cancelled in writing,

was also February 28, 2002, in North Carolina.11 After

10The sales closing dates for the MPCI Policy in the various districts

outside North Carolina were in or about February 2002. For example, the

sales closing date in Virginia was March 15, 2002. 

11The cancellation dates provided by the MPCI Policy were as follows:

January 15, 2002, for certain counties in Texas; February 28, 2002, for

certain other counties in Texas and all states not otherwise mentioned;

and, March 15, 2002, for New Mexico, Oklahoma, Virginia, and the

remaining Texas counties. 

IN RE: PEANUT CROP INSURANCE LITIGATION 9

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the cancellation date, the Farmers were bound by the

MPCI Policy and could neither rescind nor alter it. 

• The "earliest planting date" for North Carolina Farmers

was April 16, 2002. The MPCI Policy defines the "earliest planting date" as the "earliest date established for

planting the insured crop." MPCI Basic Policy ¶ 1.

• The North Carolina Farmers had until the "final planting

date" of May 31, 2002, to plant their peanut crops. The

"final planting date" is the "date contained in the Special

Provisions for the insured crop by which the crop must

initially be planted in order to be insured for the full production guarantee or amount of insurance per acre."

MPCI Basic Policy ¶ 1.12

2.

The MPCI Policy includes several other provisions and definitions

that are pertinent to an understanding of these proceedings, including:

• The MPCI Policy defines "price election" as the

"amounts contained in the Special Provisions or an

addendum thereto, to be used for computing the value

per pound . . . for the purposes of determining premium

and indemnity under the policy." MPCI Basic Policy ¶ 1.

The price election is generally based on the FCIC’s projection of market prices for a given commodity. 7 U.S.C.

§ 1508 (c)(5) & (6).

• The MPCI Policy required each insured Farmer to file an

annual "acreage report" detailing the peanut crop acreage

to be planted by the farm and the "effective poundage

marketing quota, if any, that is applicable" to an individ12Farmers outside North Carolina were also required to plant their peanut crops in the Spring of 2002. For example, Virginia Farmers had an

initial planting date of April 11, 2002, and a final planting date of June

10, 2002. 

10 IN RE: PEANUT CROP INSURANCE LITIGATION

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ual farm for the current crop year. MPCI Policy Peanut

Provision ¶ 6. 

• The term "effective poundage marketing quota" is

important with respect to this litigation and federal crop

insurance, and is defined by the MPCI Policy as the

"number of pounds reported on the acreage report as eligible for the average support price per pound . . . not to

exceed the Marketing Quota established by [the FSA] for

the farm serial number." MPCI Policy Peanut Provision

¶ 1. 

• The MPCI Policy defines "quota peanuts" as "[p]eanuts

that are eligible to be valued at the average support price

per pound." MPCI Policy Peanut Provision ¶ 1. "Nonquota peanuts," in turn, are simply defined as "[p]eanuts

other than quota peanuts." Id.

• The "production guarantee" is defined in the MPCI Policy as the "number of pounds . . . determined by multiplying the approved yield per acre by the coverage level

percentage you elect." MPCI Basic Policy ¶ 1.

The MPCI Policy provides that "[t]he maximum pounds that may

be insured at the quota price election" are the lesser of "the effective

poundage marketing quota," or the "insured acreage multiplied by the

production guarantee" — but, to the extent that the resulting figure

"exceeds the effective poundage marketing quota, the difference will

be insured at the non-quota peanut price election." MPCI Policy Peanut Provision ¶ 3(b). Although the MPCI Policy explains how quota

peanuts are insured, it also authorizes and provides for coverage

where lost or damaged crops do not involve quota peanuts. For example, the MPCI Policy makes reference to the "effective poundage marketing quota, if any." Id. ¶ 6. In calculating the maximum poundage

that may be insured as quota peanuts, the MPCI Policy looks to the

lesser of the effective poundage marketing quota, on the one hand, or

the insured acreage multiplied by the production guarantee, on the

other. If, with respect to an insured farm, the insured acreage multiplied by the production guarantee exceeds the effective poundage

marketing quota, the difference is insured and indemnified at the nonIN RE: PEANUT CROP INSURANCE LITIGATION 11

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quota rate only. If an insured farm has not been allocated an effective

poundage marketing quota, its entire insured acreage, multiplied by

the production guarantee, would exceed a quota allocation of zero and

the entire production would be insured at the non-quota rate. Thus,

when an annual farm poundage quota allocation for an insured farm

is "zero," none of that farm’s peanut production is insured at the quota

rate. 

The MPCI Policy similarly provides for the calculation of indemnity in the event that part or all of a Farmer’s lost crops are non-quota

peanuts. Specifically, the indemnity formula provides that the value

of lost or damaged peanuts is computed by first multiplying the

insured acreage by the production guarantee per acre. MPCI Policy

Peanut Provision ¶ 14(c). The second step of this indemnity formula

requires the effective poundage marketing quota of the farm to be

subtracted from the resulting sum, to determine the amount of insured

quota and non-quota peanuts (the amount in excess of the effective

poundage marketing quota is the amount of non-quota peanuts). Id.

After determining the amount of insured quota and non-quota peanuts, those amounts are multiplied by their respective price elections.

Thus, in the event a farm poundage quota allocation is not made to

a farm with an insured crop, the MPCI Policy provides that the loss

to be indemnified must be determined on the basis of the price election for non-quota peanuts. Id.

C.

On November 30, 2001 (the contract change date), an addendum

to the MPCI Policy was issued and made effective. The addendum

provided that losses suffered by 2002 crop year peanuts would be

indemnified at 31 cents per pound for quota peanuts and 16 cents per

pound for non-quota peanuts (as they had been indemnified for the

previous several years). Two weeks later, on December 14, 2001, the

USDA announced a national poundage quota for peanuts for the 2002

crop year, at the same level as the 2001 national poundage quota. The

USDA announcement stated that the "2002-crop national poundage

quota will be allocated to each state based on the state’s share of the

2001-crop national poundage quota." J.A. 75. This announcement,

however, also alerted the Farmers to the possibility that the peanut

12 IN RE: PEANUT CROP INSURANCE LITIGATION

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quota program for the 2002 crop year could be altered or eliminated

by statute. Specifically, it advised that:

The Farm Bill currently being considered by Congress

would dramatically change the peanut program. Poundage

quotas would be eliminated and price support would be

replaced with a target price and deficiency payment plan. If

pending legislation is enacted as law, the 2002 poundage

quota and price support announced by this release may be

altered or rescinded.

J.A. 75 (emphasis added). As noted, this USDA announcement was

made two weeks after the contract change date of November 30,

2001. On January 15, 2002, the USDA announced that the national

poundage quota for peanuts would remain the same in 2002 and "will

be allocated to eligible quota and non-quota farms." J.A. 77. This

announcement again warned, however, that:

The Farm Bill currently being considered by Congress

would change the peanut program. Poundage quotas would

be eliminated and price support would be replaced with a

target price and deficiency payment plan. If pending legislation is enacted as Law for 2002, the 2002 poundage quota

announced according to this notice will be altered or

rescinded.

J.A. 78 (emphasis added). As these USDA announcements forecast

and warned, the FSA did not allocate farm poundage quotas to individual farms in 2002. Instead, on May 3, 2002, the FSA directed its

county offices not to allocate any such quotas to individual peanut

farms for 2002. Ten days later, on May 13, 2002, the President signed

into law the 2002 Farm Bill, which, inter alia, repealed the FSA’s

statutory authority to allocate farm poundage quotas to peanut farms

and substantially and materially altered the federal crop assistance

program for peanut farmers. 

In the place and stead of the peanut quota system, the 2002 Farm

Bill provided for several programs: continued price supports through

non-recourse loans at rates substantially below the quota rates; a program of direct payments to farmers; a new price support program of

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payments triggered by the rise and fall of market prices; a marketing

quota buy-out program; and a mandated increase — from 16 cents to

17.75 cents per pound — in the price election for non-quota peanuts,

to be used to compute premiums and indemnity payments under the

2002 MPCI Policy. 2002 Farm Bill § 1310(c).13

On May 28, 2002, in response to the major statutory revisions

made by the 2002 Farm Bill to the peanut quota program, the USDA

sent a bulletin to the crop insurance companies, advising them that all

2002 peanuts were to be treated as non-quota peanuts for purposes of

the MPCI Policy in the 2002 crop year. Accordingly, all indemnities

made pursuant to the MPCI Policy for 2002 peanut crops were made

at the non-quota rate of 17.75 cents.14

D.

Unfortunately, the Farmers’ 2002 peanut crops suffered heavy

losses and damages, primarily due to a severe drought during the

growing season. When they filed their claims for indemnification

under the MPCI Policy, the Farmers were informed that their losses

13Section 1310(c) of the Farm Bill provides, in pertinent part, that: 

(c) Treatment of crop insurance policies for 2002 crop year —

(1) Applicability — This subsection shall apply for the 2002

crop year only notwithstanding any other provision of law or

crop insurance policy. 

(2) Price Election — the non-quota price election . . . shall be

17.75 cents per pound and shall be used for all aspects of the policy relating to the calculations of premium, liability and indemnities. 

14Thus, while the Farmers were bound to the MPCI Policy on February

28, 2002, and were obligated to plant their peanut crops between April

16 and May 31, 2002, the 2002 Farm Bill repealed the peanut quota program on May 13, 2002. This enactment occurred subsequent to the date

when the Farmers were entitled to withdraw from the MPCI Policy or

able to reevaluate the planting of their 2002 peanut crops — although the

Farmers had twice been placed on notice by the USDA (on December

14, 2001, and, again on January 15, 2002) of likely changes to the peanut

quota program. 

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would only be indemnified at the non-quota rate of 17.75 cents per

pound, although they had been expecting indemnification at the 31

cent quota rate. Indeed, quota peanuts had usually constituted a

majority of the Farmers’ annual crops. When their claims for indemnification at the 31 cent rate were denied, the Farmers initiated this

series of lawsuits, alleging that the MPCI Policy had been breached

and that the Government had violated their due process rights.

1.

The North Carolina case was filed on November 19, 2002, "on

behalf of all peanut farmers in North Carolina and Virginia who are

eligible for the Multiple Peril Crop Insurance Policy for crop year

2002 and are similarly situated to the named Plaintiffs." J.A. 11. Put

succinctly, the complaint sought declaratory, injunctive, and compensatory relief, and requested that the proceeding be certified as a class

action. It alleged that the Government had breached the MPCI Policy

by the unilateral and untimely modification of its coverage terms, and

asserted that the Government had violated the Farmers’ due process

rights by, inter alia, arbitrarily and capriciously altering the Policy by

unilateral and retroactive action. 

In ruling on the class certification issue in its SJ Opinion, the district court certified a class of insured Farmers whose farms were situated within the Eastern District of North Carolina and who had been

assigned farm poundage quotas for the 2001 crop year. See SJ Opinion 11-23. The court concluded, however, pursuant to § 1508(j) of

Title 7, that it lacked jurisdiction over insured Farmers whose farms

were situated outside the Eastern District of North Carolina, and thus

excluded them from the certified class. Id. at 12, 19.15

The district court then proceeded to address the parties’ crossmotions for summary judgment, and ruled in favor of the Farmers on

15As noted above, § 1508(j) of Title 7, as relied upon in the SJ Opinion, provides that if a "claim for indemnity is denied by the [FCIC] or

an approved provider, an action on the claim may be brought against the

[FCIC] or Secretary [of Agriculture] only in the United States district

court for the district in which the insured farm is located." See supra note

8. 

IN RE: PEANUT CROP INSURANCE LITIGATION 15

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the merits of their breach of contract claims. See SJ Opinion 32-46.

In so ruling, the court concluded that the Government had breached

its contractual obligation under the MPCI Policy to indemnify the

Farmers’ 2002 lost peanut crops at the 31 cent quota rate. The court

reasoned that the Government, by the 2002 Farm Bill’s repeal of the

FSA’s authority to allocate farm poundage quotas, had hindered the

occurrence of a condition that would have given rise to coverage and

indemnity at the 31 cent rate, and that the Government was thus

barred from denying liability under the MPCI Policy. Id. at 35-38.

The court also determined that neither the "sovereign acts doctrine"

nor the "unmistakability doctrine" afforded the Government a valid

defense to liability. Id. at 39-47. 

With respect to the "sovereign acts doctrine," the court recognized

that the Government would possess a valid defense to the Farmers’

breach of contract claims if a "public and general" law prevented the

occurrence of a condition giving rise to liability. SJ Opinion 39-42.

It concluded, however, that the 2002 Farm Bill, in repealing the

poundage marketing quota program, included a provision that "obviously and specifically targeted the contractual obligations under the

peanut farmers’ pre-existing crop insurance policies for the 2002 crop

year." Id. at 44. The court concluded that "the reduction of insurance

coverage was direct, not merely incidental to the accomplishment of

a broader governmental objective." Id. (internal quotation marks

omitted). It thus determined that the sovereign acts doctrine did not

authorize the Government to escape liability for the Farmers’ breach

of contract claims. Id. at 46. 

The court next concluded that, "because the [2002 Farm Bill] was

not ‘public and general,’ the unmistakability doctrine does not apply."

SJ Opinion 46. With respect to the due process claims, the court

determined that the "plaintiffs’ due process arguments are primarily

based on their contract claims." Id. at 47-48. Concluding that it had

"already discussed the plaintiffs’ contract claim at length and found

for the plaintiffs as to this claim," the court found it unnecessary to

resolve the plaintiffs’ due process claims. Id.16

16The district court also appears to have based its SJ Opinion, at least

in part, on a theory of detrimental reliance. In its breach of contract anal16 IN RE: PEANUT CROP INSURANCE LITIGATION

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2.

When the district court made its rulings in the SJ Opinion, several

similar lawsuits were being pursued in other federal courts. One such

proceeding, filed in the Court of Federal Claims on behalf of Farmers

in Texas, Georgia, Alabama, Florida, and South Carolina, was dismissed on December 16, 2003, for lack of jurisdiction. On appeal, the

Federal Circuit concurred in the jurisdictional ruling, but vacated the

dismissal and remanded to the Court of Federal Claims for transfers

of the lawsuits to the appropriate district courts. Tex. Peanut Farmers

Ass’n v. United States, 409 F.3d 1370 (Fed. Cir. 2005). The Farmers

in those cases then requested the MDL Panel to transfer their claims

to the Eastern District of North Carolina, pursuant to 28 U.S.C.

§ 1407. The MDL Panel agreed, and transferred these and other cases

to the district court "for coordinated or consolidated pretrial proceedings." J.A. 292 (citing 28 U.S.C. § 1407).17

On March 31, 2005, and December 20, 2006, the district court certified several additional district-wide classes in the MDL cases.18 The

class certification orders entered with respect to the MDL cases

ysis, the court concluded that "it was fundamentally wrong for the government to tell the farmers that they would have insurance coverage at

$0.31 per pound for as many peanuts as the FSA declared to be quota

peanuts, and then, after the farmers had planted their crops, to tell the

FSA not to declare any quota peanuts." SJ Opinion 38. 

17On October 26, 2004, the MDL Panel first transferred six MDL cases

to the Eastern District of North Carolina for coordinated or consolidated

pretrial proceedings. Thereafter, on June 21, 2006, the Panel transferred

several additional MDL cases to the Eastern District of North Carolina.

These lawsuits were consolidated in the Eastern District of North Carolina pursuant to 28 U.S.C. § 1407, which authorizes the judicial panel on

multidistrict litigation to transfer civil actions involving one or more

common questions of fact to a single district for "coordinated or consolidated pretrial proceedings." 28 U.S.C. § 1407(a). 

18The ten additional district-wide classes certified by the district court

in the MDL cases include Farmers in the Middle District of Alabama, the

Northern District of Florida, the Southern and Middle Districts of Georgia, the District of South Carolina, the Northern, Southern, Eastern, and

Western Districts of Texas, and the Eastern District of Virginia. 

IN RE: PEANUT CROP INSURANCE LITIGATION 17

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tracked the court’s class certification ruling in the SJ Opinion in the

North Carolina case — certifying district-wide classes of Farmers

whose insured peanut crops were located within the district in which

their cases had originally been pending. See MDL Order I at 3; MDL

Order II at 5. The court also ruled that its SJ Opinion, rendering the

Government liable on the Farmers’ breach of contract claims,

extended to each of the certified classes of Farmers in the MDL cases.

See MDL Order I at 2; MDL Order II at 4.

On March 31, 2005, after receiving recommendations from the

Farmers and the Government, the district court entered its Damages

Order, explaining the formula it would apply to the calculation of the

Farmers’ damages. The formula first provided for the calculation of

the Farmers’ hypothetical 2002 farm poundage quota and non-quota

amounts. This initial calculation was a necessary starting point

because there had been no 2002 farm poundage quota allocations

made to individual peanut farms. The Damages Order called for these

hypothetical farm poundage quota and non-quota amounts to be determined by multiplying each individual Farmer’s 2002 production guarantee by the district-specific percentage of quota liability for 2001 to

arrive at a quota amount. See Damages Order 2. The amount of lost

"quota" production for each Farmer was then multiplied by the difference between the 2002 rate for non-quota peanuts (17.75 cents) and

the 31 cent quota rate that had been announced prior to the 2002 Farm

Bill. Id. at 2-3.19 After calculating the damage awards under this formula, the court, on December 20, 2006, entered Final Judgment for

the Farmers in the aggregate sum of approximately $ 30.1 million. 

3.

The district court’s Final Judgment made its rulings appealable

19Although the court authorized reductions in this formula to account

for unpaid premiums, it rejected the Government’s contention that the

damage awards should be further reduced by disaster relief payments the

Farmers received to compensate for their 2002 peanut crop losses. The

court also declined to deduct benefits received by the Farmers from the

commodity assistance program that the 2002 Farm Bill authorized to

replace the peanut quota program. 

18 IN RE: PEANUT CROP INSURANCE LITIGATION

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under Rule 54(b) of the Federal Rules of Civil Procedure, ordering as

follows:

[P]ursuant to Rule 54(b), . . . more than one claim for relief

has been presented and multiple parties are involved, the

Court hereby enters Final Judgment in favor of all plaintiffs

and class members who presently have cases pending before

this Court as to the breach of contract claim. The Court further finds that there is no just reason for delay.

The court thus determined that its judgment was final with respect to

the breach of contract claims, and also found that there was no just

reason for delay. The Government filed its notice of appeal on February 16, 2007, and the Farmers have cross-appealed. We possess jurisdiction pursuant to 28 U.S.C. § 1291. See Sears, Roebuck & Co. v.

Mackey, 351 U.S. 427, 428-29 (1956). 

II.

We review de novo a district court’s award of summary judgment,

viewing the facts and inferences drawn therefrom in the light most

favorable to the non-moving party. Seabulk Offshore, Ltd. v. Am.

Home Assurance Co., 377 F.3d 408, 418 (4th Cir. 2004). An award

of summary judgment is appropriate only "if . . . there is no genuine

issue as to any material fact and . . . the moving party is entitled to

a judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue

of material fact is one "that might affect the outcome of the suit under

the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1986). We also review de novo a district court’s assessment of

an insurance policy, in that issues of contract interpretation constitute

questions of law. See Hendricks v. Central Reserve Life Ins. Co., 39

F.3d 507, 512 (4th Cir. 1994). 

III.

The Government’s contention that the district court erred in awarding summary judgment to the Farmers on their breach of contract

claims is premised on two basic propositions: (1) that the court erred

by concluding that the MPCI Policy obligated the insurers to indemIN RE: PEANUT CROP INSURANCE LITIGATION 19

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nify the Farmers at the 31 cent quota rate in the absence of 2002 farm

poundage quota allocations having been made to individual farms;

and (2) that the court incorrectly determined that the Government’s

failure to allocate such 2002 farm poundage quotas breached the

MPCI Policy, based on its conclusion that the enactment of the 2002

Farm Bill hindered the performance of the Government’s statutory

duty to allocate such quotas. The Government also maintains that the

court erroneously premised its SJ Opinion, in part, on the Farmers’

alternative theory of detrimental reliance. As explained below, we

agree with the Government that the district court erred in awarding

summary judgment to the Farmers on their breach of contract claims.

A.

Before turning to the Government’s contentions of error, we must

first ascertain the body of law that applies to our analysis of these

contract issues. As an initial proposition, "[w]hen the United States

enters into contract relations, its rights and duties therein are governed

generally by the law applicable to contracts between private individuals." United States v. Winstar Corp., 518 U.S. 839, 895 (1996) (internal quotation marks omitted). And, as the Federal Circuit recently

observed, "[i]t is customary, where Congress has not adopted a different standard, to apply to the construction of government contracts the

principles of general contract law, which become federal common

law." Long Island Sav. Bank, FSB v. United States, 503 F.3d 1234,

1245 (Fed. Cir. 2007) (internal quotation marks omitted). The Federal

Circuit further concluded that "[t]he Restatement of Contracts reflects

many of the contract principles of federal common law." Id.; see also

Mobil Oil Exploration & Producing Se., Inc. v. United States, 530

U.S. 604, 608 (2000) (relying on Restatement of Contracts for principles of repudiation and restitution); Franconia Assocs. v. United

States, 536 U.S. 129, 141-43 (2002) (applying principles of general

contract law by relying in part on Restatement (Second) of Contracts).

Both the district court and the parties in this litigation, through their

reliance on the Restatement of Contracts and other general principles

of contract law, have impliedly agreed that the contract principles of

federal common law should govern this dispute. Because neither the

Government nor the Farmers contend that Congress promulgated or

mandated a different standard, we will apply such principles in our

assessment of the breach of contract issues. Cf. Battle v. Seibels Bruce

20 IN RE: PEANUT CROP INSURANCE LITIGATION

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Ins. Co., 288 F.3d 596, 607 (4th Cir. 2002) (concluding that "the law

is well settled that federal common law alone governs the interpretation of insurance policies issued pursuant to the [National Flood

Insurance Program]"). We now turn to the Government’s contentions

of error on the district court’s breach of contract rulings.

B.

First, we agree with the Government that the MPCI Policy did not

create any contractual obligation for the insurers to indemnify the

Farmers for lost peanuts in 2002 at the 31 cent quota rate. Instead, the

indemnity obligation at the quota rate was contingent on 2002 farm

poundage quota allocations being made to individual peanut farms.

Absent such 2002 allocations, there was no obligation under the

MPCI Policy for the Farmers to be indemnified at the 31 cent quota

rate. Put simply, to be indemnified at the 31 cent rate, an insured farm

had to be assigned a 2002 farm poundage quota by the FSA. Because

the FSA did not assign farm poundage quotas for the 2002 crop season, the Farmers were never insured at the 31 cent quota rate, and

their claims were properly indemnified at the 17.75 cent non-quota

rate. See Studio Frames, Ltd. v. Std. Fire Ins. Co., 483 F.3d 239, 245

(4th Cir. 2007) (applying federal common law to interpretation of federal insurance policy and determining that "if the policy language in

issue is clear and unambiguous, we apply it directly"). 

This interpretation is supported by the express terms of the MPCI

Policy, which required each Farmer to file an "acreage report," detailing the farm’s peanut acreage and the "effective poundage marketing

quota, if any, that is applicable" to the farm for the current crop year.

MPCI Policy Peanut Provision ¶ 6 (emphasis added). The MPCI Policy provides that "the effective poundage marketing quota, if any, for

each unit" is not to exceed the farm poundage quota allotment — a

provision that specifically contemplates the contingency of no quota

allocations being made to an insured farm. Id. ¶¶ 1, 6 (emphasis

added). As the Government asserts, the MPCI Policy was applicable

to all insured peanut farms, including those that had not previously

been allocated any farm poundage quotas. Thus, the MPCI Policy

makes no promise to provide coverage and indemnification at the 31

cent quota rate in the absence of the FSA’s allocation of 2002 poundage quotas to individual farms. 

IN RE: PEANUT CROP INSURANCE LITIGATION 21

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This point is further supported by the fact that, absent the 2002

farm poundage quota allocations, it would be impossible to insure the

Farmers at the 31 cent quota rate. This is so because the MPCI Policy

provides that "[t]he maximum pounds that may be insured at the

quota price election" may not exceed "the effective poundage marketing quota" — defined in turn as a quantity of peanuts "not to exceed

the Marketing Quota established by FSA for the farm serial number."

MPCI Policy Peanut Provision ¶¶ 1, 3. As a result, if the FSA farm

poundage quota for an insured farm is "zero," none of that farm’s peanut crop is insured at the 31 cent quota rate. 

The MPCI Policy’s indemnity formula also supports the interpretation that, absent 2002 farm poundage quota allocations, the insurers

have no obligation to indemnify the Farmers at the 31 cent quota rate.

As noted above, the Policy’s indemnity formula provides that the

value of insured peanuts must first be computed by determining an

insured farm’s amounts of quota and non-quota peanuts (by subtracting the effective poundage marketing quota from the production guarantee), and then multiplying these amounts by their respective price

elections. Thus, the MPCI Policy does not, absent the allocation of

2002 farm poundage quotas, authorize indemnification at the 31 cent

quota rate. See MPCI Policy Peanut Provision ¶ 14. This point is illustrated by the fact that the district court was unable to calculate the

Farmers’ damages at the 31 cent quota rate without resorting to an

extrinsic source, i.e., 2001 poundage quota amounts, in the formula

provided by its Damages Order. See Damages Order 2-3. 

The Farmers, on the other hand, maintain that the Government’s

announcements, as well as the MPCI Policy, contain both express and

implied promises that the Farmers would be indemnified at the 31

cent quota rate for what should have been their lost 2002 farm poundage quota peanuts, and that enactment of the 2002 Farm Bill and the

Government’s handling of their indemnity claims breached those

promises. In particular, the Farmers point to the MPCI Policy provision that coverage will not be reduced: 

In addition to the price election or amount of insurance

available on the contract change date, we may provide an

additional price election or amount of insurance no later

than 15 days prior to the sales closing date . . . . These addi22 IN RE: PEANUT CROP INSURANCE LITIGATION

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tional price elections . . . will not be less than those available

on the contract change date.

MPCI Basic Policy ¶ 3(e); see also id. ¶ 4 (providing that any changes

in policy provisions, including price elections, will be provided no

later than the contract change date, except that price elections may be

offered after that time in accordance with paragraph 3). As noted

above, the 2002 Farm Bill specifically altered the price election

(although expressly for non-quota peanuts only), by providing that 

the non-quota price election . . . shall be 17.75 cents per

pound and shall be used for all aspects of the policy relating

to the calculations of premium, liability and indemnities.

2002 Farm Bill § 1310(c)(2). Put succinctly, under the 2002 Farm

Bill, all peanuts were "non-quota peanuts." The Farmers, however,

contend that the alteration to the price election for non-quota peanuts

made by the 2002 Farm Bill was in fact a change to the price election

for quota peanuts — reducing overall coverage and directly contravening the MPCI Policy Peanut Provisions. See MPCI Policy Peanut

Provision ¶ 3 (providing that "additional price elections . . . will not

be less than those available on the contract change date"). Because the

price election of 17.75 cents, as specified in the 2002 Farm Bill, actually raises the price election for non-quota peanuts, we disagree with

the Farmers on this point. This aspect of the 2002 Farm Bill thus does

not constitute a breach of the MPCI Policy. 

The Farmers nevertheless contend that section 1310(c) of the 2002

Farm Bill not only altered the price election, it did so after the date

specified for such alterations in the MPCI Policy. Even if the terms

of the MPCI Policy were somehow violated when the 2002 Farm Bill

raised the price election for non-quota peanuts after the Policy’s deadlines, we would decline to award relief on that basis. Put simply, the

Farmers cannot demonstrate that the increase made by the 2002 Farm

Bill to their indemnity for non-quota peanuts (to 17.75 cents), even

if made after the change date specified in the Policy, resulted in an

injury to them. See, e.g., Santana, Inc. v. Levi Strauss & Co., 674 F.2d

269, 275 (4th Cir. 1982) (concluding that, in order to maintain action

for breach of contract, plaintiff must show that alleged breach caused

IN RE: PEANUT CROP INSURANCE LITIGATION 23

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injury, and finding no injury occurred when alleged breach benefited

plaintiff). 

The Farmers’ primary contention, of course, is not that the 2002

Farm Bill raised the indemnity rate for non-quota peanuts, but that the

Government was able to avoid indemnifying them at the 31 cent

quota by enactment of the 2002 Farm Bill. Although the MPCI Policy

provides that "additional" price elections may be offered after the

contract change date, the Farmers’ contention that the 2002 Farm Bill

replaced the price elections available under the MPCI Policy (rather

than offering additional ones) is unpersuasive. In the absence of farm

poundage quotas being allotted to individual farms, the Farmers were

unable to avail themselves of the 31 cent quota rate, regardless of

whether the 2002 Farm Bill replaced that rate or simply provided

price elections in addition to it. 

We are similarly unpersuaded by the Farmers’ contention that the

two USDA announcements of December 14, 2001, and January 15,

2002, made express or implied warranties to them with respect to the

2002 farm poundage quotas for peanuts. Although the USDA

announcements indicated that the 2002 national poundage quotas

would remain the same as in the previous year, and that such quotas

would be allocated to eligible farms in the future, the announcements

explicitly warned the Farmers that Congress was considering a Farm

Bill that would change the peanut price support program by eliminating poundage quotas. Importantly, these announcements specified

that, if the 2002 Farm Bill was enacted, the national poundage quotas

for peanuts would be either altered or rescinded. 

In these circumstances, we agree with the Government’s contentions, and reject those of the Farmers’. Although we have great sympathy for the hard-working peanut farmers of this country, our

obligation is to rule on the basis of the factual underpinnings and the

applicable legal principles. The MPCI Policy and the USDA’s

announcements neither expressly nor impliedly promised to indemnify the Farmers at the 31 cent quota rate, absent farm poundage

quota allocations being made by the FSA for the 2002 crop year. The

MPCI Policy thus did not, absent 2002 farm poundage quota allocations being made to individual farms, create a contractual obligation

on the part of either the Government or the insurers to indemnify the

24 IN RE: PEANUT CROP INSURANCE LITIGATION

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Farmers for their 2002 peanut crop losses at the 31 cent quota rate.

See Studio Frames, Ltd. v. Std. Fire Ins. Co., 483 F.3d 239, 245 (4th

Cir. 2007) (applying federal common law to interpretation of federal

insurance policy and determining that "if the policy language in issue

is clear and unambiguous, we apply it directly").

C.

Our analysis of the Farmers’ breach of contract claims does not end

here, however. The district court, in part, premised its finding of a

breach on the legal principle that, in the proper circumstances, a contract condition (here, the allocation of 2002 farm poundage quotas)

may be excused if the promisor prevents or hinders the occurrence of

the condition and it would have otherwise occurred. Accordingly,

although the court appears to have concluded that, under the terms of

the MPCI Policy, the Government was not obligated to indemnify the

Farmers at the 31 cent quota rate, the court nevertheless found a

breach by the Government, concluding that it had prevented the FSA

from allocating farm poundage quotas to individual farms for the

2002 crop year. In its ruling, the court relied for this conclusion on

section 295 of the Restatement (First) of Contracts, which provides:

If a promisor prevents or hinders the occurrence of a condition, . . . and the condition would have occurred . . . except

for such prevention or hindrance, the condition is excused,

and the actual or threatened nonperformance of the return

promise does not discharge the promisor’s duty, unless . . .

(a) the prevention or hindrance by the promisor is caused or

justified by the conduct or pecuniary circumstances of the

other party. 

SJ Opinion 35-36 (citing Restatement (First) of Contracts § 295

(1932) as quoted in Powers v. Sims & Levin, 542 F.2d 1216, 1226

(4th Cir. 1976) (Winter, J., concurring and dissenting)). Based on this

Restatement provision, the court concluded that such a hindrance had

occurred when the 2002 Farm Bill, enacted on May 13, 2002, eliminated the statutory directive to the FSA to allocate farm poundage

quotas to individual farms for each crop year. Id. at 36-38 (citing 7

U.S.C. § 1358-1(b)(1)(A) (2001)). The court further concluded that,

as "the FSA would have assigned the farm poundage quotas had the

IN RE: PEANUT CROP INSURANCE LITIGATION 25

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[2002 Farm Bill] not prevented or hindered it from doing so, the

[requirements] of § 295 [are] met." Id. at 35-36. 

Although Judge Parker recognized years ago, in Fuller Co. v.

Brown, that "[i]t is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance . . . of a condition upon which his own liability depends, he cannot take advantage

of the failure," see 15 F.2d 672, 678 (4th Cir. 1926) (quoting 2 Williston on Contracts § 677), that legal principle is inapplicable to this

appeal. The indemnification of the Farmers under the MPCI Policy

did not "depend" on FSA’s allocation of 2002 farm poundage quotas.

The district court thus erred in excusing what it viewed as the "condition" of 2002 farm poundage allocations. A "condition," as defined by

the Restatement (Second) of Contracts, is "an event, not certain to

occur, which must occur, unless its non-occurrence is excused, before

performance under a contract becomes due." Restatement (Second) of

Contracts § 224 (emphasis added); see also 13 Williston on Contracts

§ 38:7 (4th ed. 2006) ("A condition precedent is either an act of a

party that must be performed or a certain event that must happen

before a contractual right accrues or contractual duty arises."); Moore

Bros. Co. v. Brown & Root, Inc., 207 F.3d 717, 725 (4th Cir. 2000)

("The prevention doctrine is a generally recognized principle of contract law according to which if a promisor prevents or hinders fulfillment of a condition to his performance, the condition may be waived

or excused." (emphasis added)).20

The only condition to the indemnification of the Farmers under the

MPCI Policy was the occurrence of a natural cause of covered loss.

See MPCI Policy Peanut Provision ¶ 11 (providing coverage for loss

caused by, inter alia, adverse weather conditions, fire, insects, plant

disease, wildlife). When a covered loss occurs, the obligation of the

insurer to indemnify under the MPCI Policy is triggered. There is,

20In addition to not being a "condition" to its performance under the

MPCI Policy, the Farmers failed to demonstrate that the Government

made an enforceable promise to allocate poundage quotas to individual

peanut farms. As the Restatement (Second) of Contracts provides,

"[n]on-occurrence of a condition is not a breach by a party unless he is

under a duty that the condition occur." Restatement (Second) of Contracts § 225. 

26 IN RE: PEANUT CROP INSURANCE LITIGATION

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however, no Policy provision that conditions such indemnification on

whether farm poundage quotas are allocated to an individual farm for

a particular crop year. Instead, the farm poundage quota allocations

simply play a role in the computation of the indemnification to be

paid to the Farmers for their covered losses. Thus, the Government is

also correct on this point — performance under the MPCI Policy is

not conditioned on the allocation of farm poundage quotas by the

FSA. 

Importantly, our conclusion on this contention is supported by the

fact that the Farmers have already been indemnified for their 2002

crop losses under the MPCI Policy — although they were indemnified

at the non-quota rate of 17.75 cents, rather than at the 31 cent quota

rate they seek in this litigation. Thus, the Government did not hinder

the occurrence of any condition that had to occur before an indemnification obligation under the MPCI Policy was triggered. Indemnification was due when the Farmers presented their claims for covered

losses under the MPCI Policy, and the insurers performed under the

Policy by indemnifying those losses at the non-quota rate of 17.75

cents. 

Because the allocation of the 2002 crop year farm poundage quotas

was not a "condition" of performance under the MPCI Policy, we disagree with the SJ Opinion on this issue. Although the 2002 farm

poundage quota allocations were an essential precursor to the Farmers

being indemnified at the 31 cent quota rate, they were not a condition

to the insurers’ performance under the coverage and indemnification

provisions of the MPCI Policy. As a result, the district court erred in

concluding in its SJ Opinion that a breach of the MPCI Policy

occurred, and in awarding summary judgment to the Farmers on their

breach of contract claims. We must therefore vacate the court’s ruling

in this regard.21

21The Government also argues that the district court erred in its application of the unmistakability and sovereign acts doctrines. These doctrines create exceptions from government liability when a breach is

caused by an act of the government. Because, as explained herein, the

Government is not liable for any breach of the MPCI Policy, we need not

assess assertions in this regard. 

IN RE: PEANUT CROP INSURANCE LITIGATION 27

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D.

Finally, the Government disagrees with the Farmers’ alternative

contention that they are entitled to indemnification for their crop

losses at the 31 cent rate because they had expended substantial sums

of money and resources in reliance on the MPCI Policy and on the

USDA announcements (which had forecast allocations of poundage

quotas in 2002 at the same rates and percentages as in earlier years).

Such reliance by the Farmers included, inter alia, planting their peanut

crops, entering into leases and bank loans, foregoing other farming

options, and cancelling other insurance coverage. Because the peanut

quota program was not repealed by the 2002 Farm Bill until after the

announcement of the national poundage quota for the 2002 crop year

— when the MPCI Policy was already final and after the beginning

of the 2002 planting season — the Farmers contend that they are entitled to recover their damages. The elements of such a detrimental reliance claim are: (1) a promise, (2) which the promisor should

reasonably expect to cause action by the promisee, (3) which does

cause such action, and (4) which should be enforced to prevent injustice to the promisee. C & K Petrol. Prods., Inc. v. Equibank, 839 F.2d

188, 192 (3d Cir. 1988) (citing Restatement (Second) of Contracts

§ 90). 

The Government asserts, on the other hand, that the Farmers’ unilateral expectation that farm poundage quota authority would remain

in effect for the 2002 crop year does not afford them any basis for

imputing to the MPCI Policy an implied promise to indemnify at the

31 cent quota rate. See Maccaferri Gabions, Inc. v. Dynateria Inc., 91

F.3d 1431, 1444 (11th Cir. 1996) (looking to Restatement (Second)

of Contracts § 90 and concluding that "[i]t is axiomatic that a plaintiff

cannot recover for reasonable, detrimental reliance on a promise without proving that the defendant made the promise"). Furthermore, the

Government contends that the Farmers could not reasonably rely on

the fact that poundage quota allocations were made in previous years,

because earlier amendments to farm support programs clearly indicated that the peanut quota program was subject to congressional

modification. 

Modifications to government programs by congressional action are

not at all out of the ordinary, and had indeed occurred recently in the

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context of the peanut quota program. For example, in 1996, Congress

barred the allocation of such quotas to farms controlled by public

entities or non-producers residing out of state. See Federal Agriculture

Improvement and Reform Act, Pub. L. No. 104-127,

§ 155(i)(1)(A)(v), 110 Stat. 888, 927 (1996) (adding 7 U.S.C. § 1358-

1(b)(1)(D)). Similarly, Congress eliminated statutory provisions

establishing specific minimums on the national poundage quota, an

amendment that substantially reduced the peanut quota allocations to

individual farms. Id. § 155(i)(2) (amending 7 U.S.C. § 1358-1(a)(1)).

Accordingly, as the Government asserts, there has been a "‘persistent

congressional refinement of the peanut quota program.’" Br. of

Appellants 29 (quoting Members of the Peanut Quota Holders Assoc.

v. United States, 60 Fed. Cl. 524, 530 (Ct. Fed. Cl. 2004)). 

Finally, the USDA’s warnings of forthcoming alterations or revisions to the peanut quota program, received by the Farmers in late

2001 and early 2002, substantially undermine their reliance contentions. As detailed above, the events immediately preceding the 2002

crop year made clear to the Farmers that congressional action on the

peanut quota program was likely to occur. For example, in its December 14, 2001 announcement of the national poundage quota for peanuts, the USDA warned: 

The Farm Bill currently being considered by Congress

would dramatically change the peanut program. Poundage

quotas would be eliminated and price support would be

replaced with a target price and deficiency payment plan. If

pending legislation is enacted as law, the 2002 poundage

quota and price support announced by this release may be

altered or rescinded.

J.A. 75 (emphasis added). Similarly, in its January 15, 2002

announcement, the USDA again warned that "[t]he Farm Bill currently being considered by Congress would change the peanut program . . . . If pending legislation is enacted as Law for 2002, the 2002

poundage quota announced according to this notice will be altered or

rescinded." J.A. 78 (emphasis added). Significantly, legislation

repealing the peanut quota program had passed the House of Representatives in October 2001, well before the MPCI Policy for the 2002

crop year became final. See 147 Cong. Rec. H6407 (Oct. 5, 2001). 

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In these circumstances, the Farmers were on ample notice in late

2001 and early 2002 of the possibility — indeed, the likelihood — of

major changes (i.e., alteration or rescission) being made to the peanut

quota program. Although the timing of the 2002 Farm Bill was unfortunate for the Farmers, their assertions of reliance on the 2002 farm

poundage quota allocations being made to individual peanut farms are

misplaced, particularly when viewed in the context of the specific

announcements of the USDA.22

IV.

Pursuant to the foregoing, we vacate the district court’s award of

summary judgment to the Farmers and remand for such further proceedings as may be appropriate. 

VACATED AND REMANDED

22In light of our disposition of these appeals, we need not reach the

Government’s assertions of error concerning the Damages Order. To the

extent the Farmers seek to pursue the class and venue contentions they

have raised on cross-appeal, the district court may revisit these issues in

light of this opinion. 

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