2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-24-2002

Cloverland Green v. PA Milk Marketing Bd

Precedential or Non-Precedential: Precedential

Docket No. 01-2210

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PRECEDENTIAL 

 Filed July 24, 2002 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

Nos. 01-2210 / 01-2219 

CLOVERLAND-GREEN SPRING DAIRIES, INC. 

v. 

PENNSYLVANIA MILK MARKETING BOARD; 

BEVERLY R. MINOR, Individually 

and as members of the Board; 

LUKE F. BRUBAKER; J. ROBERT DERRY, 

Individually and as members of the Board 

THOMAS E. MCGLINCHEY; GERTRUDE GIORGINI; 

SUE A. SPIGLER, ("Milk Consumers"), 

 Intervenor-Plaintiffs 

 Cloverland-Green Spring Dairies, Inc., 

 Appellant (No. 00-2210) 

(D.C. No. 99-cv-00487) 

*(Amended per Clerk’s Order filed 10/3/01) 

CLOVERLAND-GREEN SPRING DAIRIES, INC.; 

v. 

PENNSYLVANIA MILK MARKETING BOARD; 

BEVERLY R. MINOR, Individually and 

as chairperson of the Board; 

LUKE F. BRUBAKER; J. ROBERT DERRY, 

Individually and as members of the Board 

THOMAS E. MCGLINCHEY; GERTRUDE GIORGINI; 

SUE A. SPIGLER, ("Milk Consumers"), 

 Intervenor-Plaintiffs 

 

 Thomas E. McGlinchey, Gertrude Giorgini, 

 Sue A. Spigler, Individually, and on behalf of 

 milk consumers in PMMB Areas #1 and #4, 

 Appellants (No. 01-2219) 

*(Amended per Clerk’s Order filed 10/3/01) 

Appeal from the United States District Court 

for the Middle District of Pennsylvania 

(D.C. Civil Action No. 99-cv-00487) 

District Judge: Honorable Sylvia H. Rambo 

Argued February 5, 2002 
Before: SLOVITER, and AMBRO, Circuit Judges 

POLLAK,** District Judge 

(Opinion filed: July 24, 2002) 

 Kevin J. McKeon, Esquire 

 Malatesta, Hawke & McKeon 

 100 North Tenth Street 

 Harrisburg, PA 17101 

 Sheldon A. Weiss, Esquire (Argued) 

 125 Knightsbridge Road 

 Mountainside, NJ 07092 

 Attorneys for Appellant/ 

 Cross Appellee Cloverland-Green 

 Spring Dairies, Inc. 

 Thomas J. Finucane, Esquire 

 (Argued) 

 14 North Main Street, Suite 500 

 Chambersburg, PA 17201 

_________________________________________________________________ 

 ** Honorable Louis H. Pollak, United States District Judge for the 

 Eastern District of Pennsylvania, sitting by designation. 

 2 

 

 D. Michael Fisher 

 Attorney General of Pennsylvania 

 Gwendolyn T. Mosley (Argued) 

 Senior Deputy Attorney General 

 Calvin R. Koons 

 Senior Deputy Attorney General 

 John G. Knorr, III 

 Chief Deputy Attorney General 

 Chief Appellate Litigation Section 

 Office of Attorney General of 

 Pennsylvania 

 Strawberry Square, 15th Floor 

 Harrisburg, PA 17120 

 Attorneys for Appellees/ 

 Cross Appellants 

 Allen C. Warshaw, Esquire (Argued) 

 Duane, Morris & Heckscher 

 305 North Front Street 

 P.O. Box 1003, 5th Floor 

 Harrisburg, PA 17108-1003 

 Attorney for Appellee 

 Pennsylvania Association of Milk 

 Dealers 

OPINION OF THE COURT 

AMBRO, Circuit Judge: 
The primary issue in this case is whether the dormant 

Commerce Clause allows a state to impose wholesale price 

floors that shield in-state businesses from more efficient 

out-of-state competitors. Under the circumstances 

presented here, we hold that it does not. 

Federal milk marketing orders fix minimum prices (or 

price floors) for milk producers’ sales in most of the United 

States. Pennsylvania, the fourth-largest milk-producing 

state in the nation, sets minimum producer prices above 

the federal floors. To compensate its dealers1 and retailers 

_________________________________________________________________ 

1. Milk dealers (i.e., processors) buy raw milk from producers (i.e., dairy 

farmers), process it, and sell it at wholesale prices to retailers (e.g., 

supermarkets, convenience stores). 

 3 

 

for paying higher raw milk costs, Pennsylvania enforces 

minimum prices for wholesale and retail milk sales. The 

wholesale and retail price floors, which are designed to 

"best protect the milk industry of the Commonwealth," are 

fixed according to in-state milk dealers’ and retailers’ costs 

to guarantee them desirable profits. As a consequence, 

wholesale and retail milk prices in Pennsylvania are 

considerably higher than the prevailing prices in 

neighboring states, none of which imposes price controls. 

Out-of-state milk dealers want to compete in the 

Pennsylvania market by offering prices below the wholesale 

floors, but face criminal penalties for doing so. 

Cloverland-Green Spring Dairies, Inc. ("Cloverland"), a 

Maryland milk dealer, sued the Pennsylvania Milk 

Marketing Board (the "Board") under 42 U.S.C.S 1983, 

seeking declaratory and injunctive relief with respect to the 

minimum wholesale prices.2 Three milk consumers who live 

in Pennsylvania (Thomas McGlinchey, Gertrude Giorgini, 

and Sue Spigler) intervened to challenge Pennsylvania’s 

minimum retail prices. The Pennsylvania Association of 

Milk Dealers (the "Pennsylvania Milk Dealers"), which 

represents milk dealers within the Commonwealth, 

intervened to help defend the minimum wholesale prices. 

The District Court granted summary judgment for the 

defendants with respect to both the wholesale and retail 

price floors, prompting this appeal. We affirm the Court’s 

ruling on the minimum retail prices, but reverse its ruling 

on the minimum wholesale prices and remand for further 

proceedings. 

I. Background 

Because we are at the summary judgment stage, we 

describe the facts in the light most favorable to Cloverland, 

_________________________________________________________________ 

2. As a state agency, the Board is immune from suit under the Eleventh 

Amendment. See Fla. Dep’t of Health & Rehabilitative Servs. v. Fla. 
Nursing Home Ass’n, 450 U.S. 147, 150 (1981) (per curiam). But its 

three members, whom Cloverland also sued, are not. See Ex parte 

Young, 209 U.S. 123, 159-60 (1908). For simplicity, we use the "Board" 

to refer to its members. 

 4 

 

the non-moving party. See Schnall v. Amboy Nat’l Bank, 

279 F.3d 205, 209 n.1 (3d Cir. 2002). 

In most parts of the United States, producer-to-dealer 

milk sales are subject to price floors imposed by the federal 

government. Under the federal regulatory scheme, see 7 

U.S.C. S 608c; 7 C.F.R. S 1001.1 et seq., the Secretary of 

Agriculture divides the country into geographic regions and 

issues milk marketing orders that set minimum producer 

prices for each region. Prices are set at levels that "insure 

a sufficient quantity of pure and wholesome milk to meet 

current needs and further to assure a level of farm income 

adequate to maintain productive capacity sufficient to meet 

anticipated future needs." 7 U.S.C. S 608c(18).3 Congress 

first authorized the Secretary to set minimum producer 

prices in 1937, amidst widespread fear of a milk shortage. 

Today, more than six decades later, dairy farmers across 

the United States produce far more milk than our country 

consumes. 

Pennsylvania’s dairy industry is among our nation’s most 

productive. Milk production in the Commonwealth outpaces 

consumption by roughly 350%. Annual production percapita is around 900 pounds; consumption per-capita is 

merely 200 pounds. Only three states (California, 

Wisconsin, and New York) produce more milk than 

Pennsylvania.4 

_________________________________________________________________ 

3. Beyond inflating prices, the federal floors protect milk producers by 

eliminating revenue disparities unrelated to efficiency. Milk producers 

are paid different prices according to the use to which their milk is put. 

Fluid milk (for example, milk sold in containers) commands the highest 

price; milk used to make other dairy products, such as cheese and 

butter, sells for less. To encourage producers to sell milk without regard 

to its use, the federal scheme pays each milk producer a "blend price" 

based on the aggregate uses of raw milk within his region. See West 

Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 189 n.1 (1994); Grant’s 

Dairy-Me., LLC v. Comm’r of Me. Dep’t of Agric., Food & Rural Resources, 

232 F.3d 8, 12 (1st Cir. 2000). 

4. See USDA, Federal Milk Market Administrator, Marketing Service 

Bulletin: 2001 Milk Production (Feb. 2002), http://fmmacentral.com/ 

PDFdata/msb0202.pdf (visited July 16, 2002). In addition, the 

Commonwealth ranks eleventh in both production per capita and 

production per cow. Id. 

 5 

 

Nonetheless, to "best protect the milk industry of the 

Commonwealth and insure a sufficient quantity of pure and 
wholesome milk to [its] inhabitants," Pennsylvania forces its 

milk producers to sell at "over-order" prices--meaning 

prices above those required by federal milk marketing 

orders--and, unlike any other state in the region, sets 

minimum prices for wholesale and retail milk sales. 31 Pa. 

Cons. Stat. Ann. S 700j-801 (2002). The animating statute 

is the Pennsylvania Milk Marketing Law (the "Milk Law"), 

originally enacted in 1934, before the federal government 

began regulating dairy farmers’ prices. See Finucane v. Pa. 

Milk Mktg. Bd., 582 A.2d 1152, 1153 n.1 (Pa. Commw. Ct. 

1990). Pursuant to the Milk Law, the Board divides 

Pennsylvania into six "milk marketing areas" and sets 

minimum prices therein, based on "conditions affecting the 

milk industry in each milk marketing area," i.e., the 

respective costs of "producers, dealers and stores in the 

area." S 700j-801. The Board fixes "over-order" producer 

prices at levels that guarantee Pennsylvania milk producers 

"a reasonable return." Id. Neighboring states, in contrast, 

do not impose minimum producer prices, apparently 

deeming the federal price floors sufficiently protective of 

their milk supplies. 

To compensate dealers (and, in turn, retailers) for paying 

higher raw milk prices, the Commonwealth fixes wholesale 

and retail price floors at levels that guarantee them, also, "a 

reasonable return," which the Milk Law defines as"not less 

than a two and one-half percent (2 %) nor more than a 

three and one-half percent (3 %) rate of return based on net 

sales." Id. As a result, Pennsylvania dealers currently reap 

profits of around 3.3% of net sales, whereas net resale 

margins for dealers’ sales in other states are typically 

around 1-2%. Persons who sell (or offer to sell) milk at 

prices below those dictated by the Board are subject to 

criminal penalties, including imprisonment. 31 Pa. Cons. 

Stat. Ann. SS 700j-1001, -1002 (2002). 

Pennsylvania’s price control regime is virtually without 

peer. Only two other states (North Dakota and Maine) 

impose resale price floors. But unlike Pennsylvania, North 

Dakota and Maine do not require their milk control 

agencies to set price floors, instead giving them the option 

 6 

 

to do so.5 Everywhere else in the United States, wholesale 

and retail milk prices are determined by market forces, not 

government fiat. 

The five southeastern and ten south-central counties in 

Pennsylvania (Areas 1 and 4, respectively, under the 

Board’s regime) are part of the Northeast federal milk 

marketing region,6 which meanders from northern Virginia 

through New Hampshire and Vermont.7 7 C.F.R. S 1001.2 

(2002). Evidence indicates that milk dealers in the states 

bordering Pennsylvania have the ability to sell fluid milk to 

retailers located as far as 150 miles away from their 

processing plants. According to a study the Board 

conducted in 1992, when the Pennsylvania Milk Dealers 

asked it to assess the threats posed by out-of-state dealers, 
at least seventeen out-of-state dealers are capable of selling 

milk to Pennsylvania retailers. However, while substantial 

interstate movement of milk occurs within other parts of 

the Northeast region, out-of-state dealers do little business 

in Pennsylvania. 

Cloverland, which is based in Baltimore, profitably sells 

wholesale milk in Maryland at prices well below the 

minimum prices applicable to sales in Areas 1 and 4. In the 

absence of the wholesale price floors, Cloverland would 

offer similarly low prices to retailers in those areas. It has 

tried to gain customers in Areas 1 and 4 by competing 

based on non-price criteria, such as packaging, quality, 

and service, but has been unsuccessful. Cloverland 

maintains that the only way it can attract business in 

Pennsylvania is by offering lower prices. It offered evidence 

that it is almost impossible for dealers to acquire business 

in Pennsylvania without offering milk at lower prices 

because there is little (if any) difference among dealers with 

respect to factors other than price. 

_________________________________________________________________ 

5. Both states’ agencies exercise the option. 

6. Other areas within the Commonwealth are not subject to federal 

producer price floors. Only the minimum prices for Areas 1 and 4 are at 

issue in this case. 

7. Cloverland challenges not only the Milk Law, but also two orders 

issued pursuant thereto (Orders A-890A and A-900) that set minimum 

prices for Areas 1 and 4, respectively. For convenience, we also refer to 

the statute and the orders collectively as the "Milk Law." 

 7 

 

It is unclear why Cloverland is able to offer prices well 

below Pennsylvania’s wholesale floors. Perhaps out-of-state 

dealers can acquire raw milk at lower prices because their 

home states do not impose "over-order" prices, as one of the 

defendants’ affiants indicated. On the other hand, 

Cloverland suggests that "large producer cooperatives" may 

render raw milk prices in neighboring states nearly as high 

as those dictated by law in Pennsylvania. So perhaps outof-state dealers process milk more efficiently than their 

Pennsylvania counterparts, as Cloverland contends. 

Whatever the reason, it is apparent that the minimum 

wholesale prices prevent Cloverland from using its 

competitive advantage in price to attract business in 

Pennsylvania. At the same time, there is no evidence that 

any in-state dealer wants to sell milk in Pennsylvania at 

lower prices; indeed, the Pennsylvania Milk Dealers 

intervened in this case to help defend the price floors. 

In an effort to justify the wholesale price floors, the 

defendants offered evidence, in the form of affidavits from 

representatives of the Pennsylvania milk industry, that the 

Commonwealth’s "over-order" producer prices are needed to 

prevent "predatory pricing" that could cause a milk 

shortage, and that the minimum wholesale prices are 
necessary to compensate dealers for paying higher raw milk 

prices. Cloverland countered with evidence that"for many 

decades" the federal producer price floors have yielded an 

ample milk supply in other states within the Northeast milk 

marketing region, none of which has wholesale or retail 

price floors. Further, Cloverland offered evidence that 

Pennsylvania’s minimum wholesale prices are much higher 

than is necessary to keep reasonably efficient dealers in 

business. For instance, Cloverland presented evidence, 

which the defendants did not dispute, that efficient milk 

dealers can profitably sell milk for thirty cents per gallon 

less than the minimum wholesale prices.8 

_________________________________________________________________ 

8. This evidence showed that while dealers spend around twenty-six 

cents per gallon to process raw milk and transport it for sale, 

Pennsylvania’s price floors inflate dealers’ margins (the difference 

between raw milk costs and wholesale milk prices) to fifty-seven cents 

per gallon. 

 8 

 

To put this in perspective, in May 2002, the minimum 

wholesale prices in Areas 1 and 4 were $2.66 and $2.64 per 

gallon, respectively.9 The defendants maintain that the 

wholesale price floors appear excessively high only because 

the Board bases them on dealers’ average total costs, which 

include both average variable costs (such as raw milk, 

processing, labor, and transportation) and average fixed 

costs (such as equipment, office space, and other 

"overhead" expenses).10 However, this practice of fixing 

prices based on average total costs significantly increases 

dealers’ profits because it will be in their economic interest 

to sell additional units of milk at any price above their 

average variable costs, even if below their average total 

costs. Outside Pennsylvania, in contrast, milk dealers 

generally offer prices based on their average variable costs. 

With the record in this state, the parties filed crossmotions for summary judgment, and the District Court 

issued the first of two opinions. After reviewing the record, 

the Court determined that, because of the minimum 

wholesale prices, "[m]ore efficient out-of-state firms with 

lower costs are prohibited from utilizing their competitive 

advantage and attracting new customers by offering milk at 

lower prices." 138 F. Supp. 2d 593, 610 (2001). Further, 

"the clear effect produced on interstate commerce is that 

less out-of-state milk passes across the Pennsylvania 

border to be sold in Pennsylvania than would in the 

absence of the [Milk Law]." Id. Nevertheless, the Court 

deemed the burden on interstate commerce merely 

"incidental," reasoning that the minimum prices do not 

burden out-of-state dealers, but instead burden more 

efficient dealers without regard to location. Id. at 607. 

_________________________________________________________________ 

9. See Pennsylvania Milk Marketing Board, Minimum Wholesale/Retail 

Prices - May 2002, http://sites.state.pa.us/PA_Exec/Milk/wr200205.pdf 

(visited July 16, 2002). 
10. See Philip Areeda & Donald F. Turner, Predatory Pricing and Related 

Practices Under Section 2 of the Sherman Act, 88 Harv. L. Rev. 697, 700 

(1975) (explaining that "[f]ixed costs are costs that do not vary with 

changes in output," whereas variable costs "are costs that vary with 

changes in output"). Average total cost is calculated by dividing total 

production expenses (both fixed costs and variable costs) by units of 

output. Id. 

 9 

 

Therefore, the Court applied the balancing test formulated 

in Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970), viz., 

"[w]here [a] statute regulates even-handedly to effectuate a 

legitimate local public interest, and its effects on interstate 

commerce are only incidental, it will be upheld unless the 

burden imposed on such commerce is clearly excessive in 

relation to the putative local benefits." 

The District Court appeared ready to invalidate the price 

floors under Pike, stating that while the burden on 

interstate commerce was "clear," no legitimate local benefits 

were evident. 138 F. Supp. 2d at 610-12. It noted that "the 

federal minimum pricing is ensuring an adequate supply of 

milk." Id. at 611. Further, the defendants offered no 

evidence that the wholesale price floors were necessary to 

avoid a milk shortage, especially since "much more milk is 

produced in Pennsylvania than is consumed in 

Pennsylvania." Id. However, the Court put off deciding 

whether the price floors fail the Pike test to give the parties 

thirty additional days to supplement the record. 11 Id. at 

612. 

Based on evidence subsequently introduced into the 

record, the District Court concluded that the wholesale 

price floors had some legitimate local benefits and that they 

burden interstate commerce less than it previously thought. 

Id. at 622. Relying on Pennsylvania milk industry 

representatives’ statements that the wholesale price floors 

are necessary to compensate dealers for paying "over-order" 

producer prices, the Court determined that the minimum 

wholesale prices advance the legitimate local interest in 

averting a milk shortage. Id. at 621-22. Although there was 

considerable evidence that "Pennsylvania produces more 

milk than its inhabitants drink and neighboring states have 

been able to maintain adequate supplies of milk without 

state-mandated prices," this did not prove "that the 

putative local benefits are non-existent or that the 

legislature could not have believed in the purported 

purpose of the statute." Id. at 622. 

_________________________________________________________________ 

11. Having just granted the Pennsylvania Milk Dealers’ motion to 

intervene, the District Court wanted to give them an opportunity to 

introduce evidence regarding the price floors’ legitimate local benefits. 

 10 

 
On the burdens side of the scale, the Court reasoned that 

out-of-state dealers’ ability to compete based on non-price 

criteria rendered the burden on interstate commerce 

"minimal," and that Cloverland "offer[ed] no conclusive 

evidence" that the minimum wholesale prices 

"substantial[ly]" reduce the flow of milk into Pennsylvania. 

Id. at 623. The Court relied heavily on statements by four 

Pennsylvania dealers and twenty-two Pennsylvania retailers 

that dealers compete based on non-price criteria, such as 

quality, service, and packaging. Id. It did not mention that 

many of the retailers listed price as an important factor-- 

indeed, a number called it the most important--in deciding 

whether to switch dealers. Nor did it mention that several 

retailers explicitly said that, were it not for the minimum 

wholesale prices, they would buy milk from out-of-state 

dealers if they offered lower prices. In addition to 

underscoring out-of-state dealers’ ability to compete based 

on factors other than price, the Court emphasized that 

thirty-three percent of the milk sold by dealers in the 

Commonwealth was marketed pursuant to state-approved 

service contracts dubbed "tolling agreements," which allow 

dealers to sell at prices below the wholesale floors, and that 

approximately seven percent of overall fluid milk sales in 

Pennsylvania are made by out-of-state dealers participating 

in tolling agreements. Id. With this analytical context, the 

Court concluded that no reasonable jury could find the 

price floors failed the Pike test. Id. at 624. 

II. Jurisdiction and Standard of Review 

The District Court had jurisdiction under 28 U.S.C. 

SS 1331, 1332, and 1343. We have jurisdiction under 28 

U.S.C. S 1291. 

We review the District Court’s grant of summary 

judgment de novo. Fogleman v. Mercy Hosp., Inc., 283 F.3d 

561, 566 n.3 (3d Cir. 2002). Summary judgment was 

proper if, viewing the record in the light most favorable to 

Cloverland, there is no genuine issue of material fact and 

the Board is entitled to judgment as a matter of law.12 Fed. 

_________________________________________________________________ 

12. The standard for granting summary judgment on a request for a 

declaratory judgment is the same as for any other type of relief. See Fed. 

R. Civ. P. 57; Simler v. Conner, 372 U.S. 221, 222 (1963); Gen. Comm. 

of Adjustment, United Transp. Union v. CSX R.R., 893 F.2d 584, 586, 589 

(3d Cir. 1990). 

 11 

 

R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322- 

23 (1986); Bailey v. United Airlines, 279 F.3d 194, 198 (3d 

Cir. 2002). A factual dispute is material if it"bear[s] on an 

essential element of the plaintiff ’s claim," and is genuine if 

"a reasonable jury could find in favor of the nonmoving 

party." Abraham v. Raso, 183 F.3d 279, 287 (3d Cir. 1999) 

(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248- 

251 (1986)). 
III. Minimum Wholesale Prices 

A. The Basic Analytical Framework 

In addition to granting Congress the power "to regulate 

Commerce . . . among the several States," U.S. Const. art. 

I, S 8, cl. 3, the Commerce Clause has a negative aspect 

(commonly called "the dormant Commerce Clause") that 

limits the states’ power to regulate interstate commerce. 

The dormant Commerce Clause prohibits the states from 

imposing restrictions that benefit in-state economic 

interests at out-of-state interests’ expense, thus reinforcing 

"the principle of the unitary national market."13 West Lynn 

Creamery, Inc. v. Healy, 512 U.S. 186, 192-93 (1994). 

Axiomatic in dormant Commerce Clause jurisprudence is 

the principle that a state cannot impede free market forces 

to shield in-state businesses from out-of-state competition. 

See, e.g., Polar Ice Cream & Creamery Co. v. Andrews, 375 

U.S. 361, 377 (1964) ("[T]he State may not, in the sole 

interest of promoting the economic welfare of its dairy 

farmers, insulate [its] milk industry from competition from 

other States."); H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 

525, 532 (1949). Thus state laws that discriminate against 

out-of-state businesses by forcing them to "surrender 

_________________________________________________________________ 

13. Congress can authorize states to impose restrictions that the 

dormant Commerce Clause would otherwise forbid. See, e.g., Shamrock 

Farms Co. v. Veneman, 146 F.3d 1177, 1180, 1182 (9th Cir. 1998) 

(upholding California’s milk composition standards and pooled minimum 

producer price scheme because Congress expressly immunized the 

State’s milk regulations from dormant Commerce Clause scrutiny); see 

also Norfolk S. Corp. v. Oberly, 822 F.2d 388, 392-93 (3d Cir. 1987). The 

Board does not maintain that Congress authorized Pennsylvania to 

impose wholesale price floors. 

 12 

 

whatever competitive advantages they may possess" are 

especially suspect. Brown-Forman Distillers Corp. v. New 

York State Liquor Auth., 476 U.S. 573, 580 (1986). 

The initial question in a dormant Commerce Clause case 

is whether the state regulation at issue discriminates 

against interstate commerce "either on its face or in 

practical effect." Maine v. Taylor, 477 U.S. 131, 138 (1986); 

Harvey & Harvey, Inc. v. County of Chester, 68 F.3d 788, 

797 (3d Cir. 1995). If so, heightened scrutiny applies. 

"Discrimination against interstate commerce in favor of 

local business or investment is per se invalid, save in a 

narrow class of cases in which the [State] can demonstrate, 

under rigorous scrutiny, that it has no other means to 

advance a legitimate local interest." C & A Carbone, Inc. v. 

Town of Clarkstown, 511 U.S. 383, 392 (1994); Juzwin v. 

Asbestos Corp., 900 F.2d 686, 689 (3d Cir. 1990). On the 

other hand, if the state regulation does not discriminate 

against interstate commerce, but "regulates even-handedly" 

and merely "incidentally" burdens it, the regulation will be 

upheld unless the burden is "clearly excessive in relation to 
the putative local benefits." Pike, 397 U.S. at 142; Harvey 

& Harvey, 68 F.3d at 797. 

When a facially neutral law has the effect of 

disproportionately burdening out-of-state interests, it can 

be difficult to determine whether the burden rises to the 

level of discrimination against interstate commerce. See 

Brown-Forman Distillers Corp. v. New York State Liquor 

Auth., 476 U.S. 573, 579 (1986); General Motors Corp. v. 

Tracy, 519 U.S. 278, 298 n.12 (1997). Indeed, sometimes 

the distinction between state laws subject only to Pike 

balancing and those that are nearly per se invalid is "hazy." 

Norfolk S. Corp. v. Oberly, 822 F.2d 388, 400 n.18 (3d Cir. 

1987). However, as explained in more detail below, it is 

clear that state laws that are facially neutral but have the 

effect of eliminating a competitive advantage possessed by 

out-of-state firms trigger heightened scrutiny. See Hunt v. 

Wash. State Apple Adver. Comm’n, 432 U.S. 333 (1977); 

Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935). 

In this case, Cloverland argues for heightened scrutiny, 

but disclaims any contention that the Milk Law is facially 

discriminatory. Thus we must consider whether a 

 13 

 

reasonable jury could find that the minimum wholesale 

prices have the effect of discriminating against out-of-state 

dealers. 

B. Heightened Scrutiny 

Two Supreme Court decisions guide our discussion. In 

the leading case of Baldwin, the Supreme Court struck 

down a New York law prohibiting in-state dealers from 

selling milk purchased outside the State at a price below 

the New York minimum. 294 U.S. at 521. The law was 

challenged by a company that bought lower-cost milk in 

Vermont and shipped it by rail to New York for sale there. 

Id. at 518, 520. The Court said the law was the functional 

equivalent of a tariff. Id. at 521. It eliminated Vermont 

farmers’ competitive advantage of producing milk at lower 

costs, id. at 522, and thus "neutralize[d] the economic 

consequences of free trade among the states." Id. at 526. 

Further, if imitated by other states, it could spark a 

destructive interstate trade war. Id. at 521-22. "If New York, 

in order to promote the economic welfare of her farmers, 

may guard them against competition with the cheaper 

prices of Vermont, the door has been opened to rivalries 

and reprisals that were meant to be averted by subjecting 

commerce between the states to the power of the nation." 

Id. at 522. While New York contended that the law was an 

innocuous effort to ensure an adequate supply of 

wholesome milk, the Court explained that any protectionist 

law can be couched in non-protectionist terms, and that 

upholding state-imposed trade barriers simply because they 

save suppliers from market forces would render the 

dormant Commerce Clause a nullity.14 Id. at 523. 
Four decades later, the Supreme Court invalidated a 

_________________________________________________________________ 

14. The defendants claim that Baldwin does not apply because New 

York’s law effectively regulated transactions that occurred outside the 

State’s jurisdiction, whereas the Milk Law applies only to in-state 

transactions. But the problem with the law invalidated in Baldwin was 

not merely its extraterritorial reach, but that it had the practical effect 

of discriminating against out-of-state milk producers by eliminating their 

competitive advantage. See Donald H. Regan, The Supreme Court and 

State Protectionism: Making Sense of the Dormant Commerce Clause, 84 

Mich. L. Rev. 1091, 1247-50 (1986). 

 14 

 

North Carolina statute that prohibited closed containers of 

apples sold in the State, regardless of their origin, from 

displaying any grade other than that of the United States 

Department of Agriculture ("USDA"). Wash. State Apple, 

432 U.S. at 349-54. The statute prevented apple growers 

from the State of Washington, which imposed especially 

strict inspection and quality standards, from using the 

superior Washington grade to market their product. Id. at 

336-39. The Supreme Court determined that the labeling 

rule was subject to heightened scrutiny because it had the 

"practical effect" of discriminating against Washington 

apples in three ways. Id. at 350-51. First, it forced 

Washington apple growers and dealers--but not their North 

Carolina counterparts--to change their marketing practices. 

Id. at 351. Second, it eliminated the competitive advantage 

that the Washington grade gave that State’s apples by 

requiring them to be marketed under the "inferior" USDA 

grade. Id. at 351-52. Third, it had "a leveling effect which 

insidiously operate[d] to the advantage of local apple 

producers," giving "the North Carolina apple industry the 

very sort of protection against competing out-of-state 

products that the Commerce Clause was designed to 

prohibit." Id. The Court rejected North Carolina’s claim that 

the statute was necessary to avoid the "deception and 

confusion" ostensibly resulting from different states’ 

grading systems, noting, inter alia, that it increased these 

dangers by allowing apples to be marketed without any 

grade, thereby depriving purchasers of information about 

the quality of apples concealed from view by closed 

containers.15 Id. at 353-54. 

The Supreme Court’s opinions in Baldwin and 

Washington State Apple show that if a state regulation has 

the effect of protecting in-state businesses by eliminating a 

_________________________________________________________________ 

15. Before Washington State Apple, a three-judge district court concluded 

that minimum wholesale prices for in-state sales do not offend the 

dormant Commerce Clause, but did not consider whether the result 

would be different if out-of-state dealers were disproportionately 

burdened. See Baxley v. Ala. Dairy Comm’n, 360 F. Supp. 1159, 1165 

(M.D. Ala. 1973); see also Schwegmann Bros. Giant Super Mkts. v. La. 

Milk Comm’n, 365 F. Supp. 1144, 1156 (M.D. La. 1973) (same in dicta), 

aff ’d, 416 U.S. 922 (1974) (mem.). 
 15 

 

competitive advantage possessed by their out-of-state 

counterparts, heightened scrutiny applies. See Laurence H. 

Tribe, American Constitutional Law S 6-8, at 1076 (3d ed. 

2000) ("[J]ust as it was impermissible in Baldwin v. Seelig 

for New York to eliminate the price advantage of Vermont 

milk by mandating a minimum price, so, too, in Hunt v. 

Washington State Apple Advertising Commission, was it 

impermissible for North Carolina to eliminate the quality 

advantage of apples from Washington by proscribing 

Washington’s use of a quality grading system that 

distinguished its apples from the local product."). 

We believe that a reasonable trier of fact could find that 

Pennsylvania’s minimum wholesale prices eliminate a 

competitive advantage enjoyed by out-of-state dealers like 

Cloverland, and thus have an effect indistinguishable from 

the protectionist effects deemed fatal in Baldwin and 

Washington State Apple. We therefore hold that the District 

Court erred by declining to subject the wholesale price 

floors to heightened scrutiny. 

As noted above, there is a factual dispute over why 

Cloverland can profitably sell milk at prices well below 

Pennsylvania’s wholesale floors. One conclusion that a 

reasonable trier of fact could reach is that out-of-state 

dealers have a competitive advantage over their in-state 

counterparts. Higher raw milk costs necessitate higher 

wholesale prices. Because dealers buy milk from local dairy 

farmers, dealers from a state that imposes "over-order" 

prices are at a disadvantage when exposed to competition 

from dealers whose home states do not prop up milk 

producers’ prices above the federal floors. Unlike 

neighboring states such as Maryland, where Cloverland is 

based, Pennsylvania forces its dealers to pay "over-order" 

prices for raw milk. A reasonable trier of fact could find 

that out-of-state dealers’ ability to acquire raw milk at lower 

costs gives them a competitive edge over Pennsylvania 

dealers.16 

_________________________________________________________________ 

16. Quite different considerations were involved in Milk Control Board of 

Pennsylvania v. Eisenberg Farm Products, 306 U.S. 346 (1939), where a 

Pennsylvania dealer who bought milk from farmers in his neighborhood 

and sold it in New York challenged the Commonwealth’s minimum 

 16 

 

The District Court acknowledged that a reasonable trier 

of fact could find that the minimum wholesale prices 

reduce the flow of out-of-state milk into Pennsylvania by 

preventing "[m]ore efficient out of state firms with lower 

costs . . . from utilizing their competitive advantage and 

attracting new customers by offering milk at lower prices." 

138 F. Supp. 2d at 610. Nonetheless the Court determined 

that heightened scrutiny did not apply because the same 
burden applies to all non-incumbent dealers, including 

more efficient in-state dealers. Id. at 607; see also Sch. Dist. 

of Philadelphia v. Pa. Milk Mktg. Bd., 683 A.2d 972, 977 

(Pa. Commw. Ct. 1996) (relying on this rationale to uphold 

minimum wholesale prices as applied to public schools’ 

milk purchases). However, it is not clear that the more 

efficient in-state dealers postulated by the District Court 

actually exist. The Pennsylvania Milk Dealers fervently 

support the minimum wholesale prices, and there is no 

indication that any Pennsylvania dealer objects to them. In 

any event, even if there were evidence that some in-state 

dealers would like to compete for business in Pennsylvania 

by offering prices below the wholesale floors, a reasonable 

trier of fact could find that out-of-state dealers’ ability to 

acquire cheaper raw milk gives them a competitive 

_________________________________________________________________ 

producer prices. Id. at 349-50. The Supreme Court upheld the price 

floors, emphasizing that they affected only "essentially local" transactions 

between in-state producers and dealers, and did not attempt to regulate 

the prices at which out-of-state businesses bought or sold milk. Id. at 

352. Further, the minimum prices had virtually no effect on interstate 

commerce because "[o]nly a small fraction of the milk produced by 

farmers in Pennsylvania [was] shipped out of the Commonwealth." Id. at 

353. Unlike the wholesale price floors at issue in our case, the law in 

Eisenberg imposed only an "indirect" burden on interstate commerce, 

Polar Ice Cream, 375 U.S. at 378, affected "an essentially local activity," 

id., and did not have "the practical effect of curtailing the volume of 

interstate commerce to aid local economic interests." H.P. Hood & Sons, 

336 U.S. at 530-31; cf. Highland Farms Dairy v. Agnew, 300 U.S. 608, 

614-16 (1937) (rejecting dormant Commerce Clause challenge to 

Virginia’s milk and cream price floors because they expressly exempted 

interstate commerce); Grant’s Dairy-Me., LLC v. Comm’r of Me. Dep’t of 

Agric., Food & Rural Resources, 232 F.3d 8, 21 (1st Cir. 2000) (holding 

that Maine may impose minimum producer prices that apply only to instate dealers’ purchases). 

 17 

 

advantage over the most efficient in-state dealers, and that 

the price floors eliminate this advantage. 

But the flaw in the District Court’s reasoning is more 

fundamental. The Court believed that a state may remove a 

competitive advantage possessed by out-of-state firms if 

some in-state firms are also adversely affected. As we noted 

several years ago, however, the Supreme Court’s decision in 

C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 

(1994), "explicitly rejected the argument that a disputed 

statute would have to favor all in-state businesses as a 

group--a statute may be invalid if it favors only a single or 

finite set of businesses." Harvey & Harvey , 68 F.3d at 798. 

In Carbone, a town claimed that its flow control ordinance, 

which mandated that all solid waste produced within its 

borders be processed by a designated local facility, did not 

discriminate against out-of-state facilities because it 

burdened all in-state facilities save the favored one. 

Carbone, 511 U.S. at 390-91. The Supreme Court 

disagreed, explaining that "[t]he ordinance is no less 
discriminatory because in-state or in-town processors are 

also covered." Id. at 391. Indeed, "that the flow control 

ordinance favor[ed] a single local proprietor," rather than 

local interests generally, "just ma[de] the protectionist effect 

of the ordinance more acute." Id. at 392. Similarly, if the 

wholesale price floors protect incumbent in-state dealers 

not only from out-of-state competitors, but also from instate ones (as the District Court conjectured), that simply 

exacerbates their protectionist effect. 

In sum, a reasonable jury could find that Pennsylvania’s 

price floors "neutralize advantages belonging to the place of 

origin," Baldwin, 294 U.S. at 527, and"violate[ ] the 

principle of the unitary national market by handicapping 

out-of-state competitors, thus artificially encouraging instate production even when the same goods could be 

produced at lower cost in other States." West Lynn 

Creamery, 512 U.S. at 193. If out-of-state dealers like 

Cloverland are able to sell milk at lower prices than the 

Pennsylvania dealers that currently dominate the wholesale 

market in Pennsylvania, a reasonable trier of fact could 

conclude that, by eliminating out-of-state dealers’ 

competitive advantage, the Commonwealth’s minimum 

 18 

 

wholesale prices " ‘cause local goods to constitute a larger 

share, and goods with an out-of-state source to constitute 

a smaller share, of the total sales in the market.’ " Id. at 

196 (quoting Exxon Corp. v. Governor of Md., 437 U.S. 117, 

126 n.16 (1978)). This finding would trigger heightened 

scrutiny under Baldwin and Washington State Apple. 

Therefore, the District Court erred in applying the Pike 

balancing test at the summary judgment stage.17 

If they are subject to heightened scrutiny, the wholesale 

price floors cannot satisfy the dormant Commerce Clause. 

Assuming that Pennsylvania has a legitimate interest in 

providing special protection for its milk supply beyond that 

afforded by the federal producer price floors, it can achieve 

its objective through alternative measures that do not 

discriminate against interstate commerce. For instance, the 

Commonwealth could encourage production by purchasing 

large quantities of wholesale milk from its dealers, or large 

quantities of raw milk from its dairy farmers. Neither action 

would impede out-of-state dealers’ ability to compete for 

retailers’ business, and both might be exempt from 

_________________________________________________________________ 

17. Though not necessary to our decision, we note that the minimum 

wholesale prices’ discriminatory effect on out-of-state dealers is 

compounded by the fact that they "are set by reference to operations of 

in-state milk dealers only." Sch. Dist. of Philadelphia v. Pa. Milk Mktg. 

Bd., 877 F. Supp. 245, 252-53 (E.D. Pa. 1995) (holding that the plaintiffs 

could establish a dormant Commerce Clause violation by showing that 

the Board sets minimum prices according to in-state dealers’ costs); cf. 

New York v. Brown, 721 F. Supp. 629, 641 (D.N.J. 1989) (finding that 

New Jersey statute prohibiting dealers from selling milk at prices below 

their average total costs did not discriminate against interstate 
commerce because it "set an out-of-state dealer’s minimum allowable 

price with respect to the dealer’s own costs and not with respect to those 

of New Jersey dealers"). By calibrating wholesale price floors for a 

particular milk marketing area to the operating costs of average dealers 

in that area, the Commonwealth enables Pennsylvania dealers to operate 

less efficiently without fearing losses to lower-cost competitors like 

Cloverland. This aspect of Pennsylvania’s scheme appears to run further 

afoul of the cardinal rule that states may not shield in-state businesses 

from out-of-state competitors. See, e.g., West Lynn Creamery, 512 U.S. 

at 205 ("Preservation of local industry by protecting it from the rigors of 

interstate competition is the hallmark of the economic protectionism that 

the Commerce Clause prohibits."). 

 19 

 

dormant Commerce Clause scrutiny under the market 

participant exception. See South-Central Timber Dev., Inc. v. 

Wunnicke, 467 U.S. 82, 93 (1984) ("Our cases make clear 

that if a State is acting as a market participant, rather than 

as a market regulator, the dormant Commerce Clause 

places no limitation on its activities."). 

C. Pike Balancing 

As explained in the preceding section, a reasonable trier 

of fact could find that the minimum wholesale prices have 

an impermissible "leveling effect" that eliminates out-ofstate dealers’ competitive advantage over in-state dealers. 

Wash. State Apple, 432 U.S. at 351. Even if no such effect 

is found, the record nonetheless amply supports a finding 

that the wholesale price floors regulate evenhandedly, but 

incidentally burden interstate commerce by making it more 

difficult for out-of-state dealers to attract new business in 

a market dominated by in-state dealers. Such a finding 

would require application of the Pike balancing test, under 

which the minimum wholesale prices violate the dormant 

Commerce Clause if the burden they impose on interstate 

commerce clearly outweighs their local benefits. Pike, 397 

U.S. at 142. Contrary to the District Court’s view, a 

reasonable trier of fact could conclude that the wholesale 

price floors fail the Pike test. 

We begin with the price floors’ putative benefits. The 

defendants insist that we must accept the Pennsylvania 

General Assembly’s empirical judgment, expressed in the 

Milk Law’s text, that the minimum wholesale prices help 

avert a milk shortage that would harm the public health. 

Some deference to a state legislature’s asserted purpose 

may be appropriate when the burden of a state regulation 

falls on in-state as well as out-of-state interests, because in 

that context the state legislature’s incentive to protect instate interests "will serve as a check against unduly 

burdensome regulations." Kassel v. Consol. Freightways 

Corp. of Del., 450 U.S. 662, 675 (1981) (plurality opinion); 

see also Minnesota v. Clover Leaf Creamery Co., 449 U.S. 

456, 473 & n.17 (1981) (stating that the "major in-state 

interests" harmed by the challenged statute provided "a 

powerful safeguard against legislative abuse"). 18 "Less 

_________________________________________________________________ 
18. Clover Leaf Creamery illustrates the importance of adversely affected 

in-state interests in dormant Commerce Clause analysis. Applying the 

 20 

 

deference to the legislative judgment is due, however, where 

the local regulation bears disproportionately on out-of-state 

residents and businesses." Kassel, 450 U.S. at 675-76 

(striking down Iowa truck-length limitations, which the 

State claimed promoted highway safety, under Pike); see 

also Tribe, supra, S 6-5, at 1053-55 (stating that courts 

should be more skeptical of state legislators’ ostensible 

objectives "where a restrictive regulation affects only those 

from other states"). There is no evidence that any 

Pennsylvania dealers object to the minimum wholesale 

prices. Because their burden thus appears to fall only on 

out-of-state dealers, the purpose asserted in the Milk Law’s 

text deserves little deference. 

In any event, "the incantation of a purpose to promote 

the public health or safety does not insulate a state law 

from Commerce Clause attack. Regulations designed 

for that salutary purpose nevertheless may further the 

purpose so marginally, and interfere with commerce so 

_________________________________________________________________ 

Pike balancing test, the Supreme Court upheld a Minnesota statute that 

banned the retail sale of milk in plastic non-returnable, non-refillable 

containers, but allowed such sales in non-returnable, non-refillable 

containers made of other materials. Clover Leaf Creamery, 449 U.S. at 

458, 473. The statute was facially neutral, and, in contrast to the law 

invalidated in Washington State Apple, did not eliminate a competitive 

advantage possessed by out-of-state firms. Id. at 472. Nor did it 

otherwise discriminate against interstate commerce. Id. However, the 

statute incidentally benefitted some in-state firms at the expense of some 

out-of-state firms. Containers made of pulpwood,"a major Minnesota 

product," would likely be used in place of some of the banned 

containers, the plastic resin in which was "produced entirely by nonMinnesota firms." Id. at 473. But in the aggregate, "there [was] no reason 

to suspect that the gainers [would] be Minnesota firms, or the losers outof-state firms." Id. at 472-73. Increased sales of reusable plastic bottles 

would offset out-of-state plastic producers’ losses, and out-of-state 

pulpwood producers would increase their sales in Minnesota. Id. at 472- 

73. Further, the statute harmed "major in-state interests"--several of the 

plaintiffs challenging the statute were in-state firms. Id. at 473 & n.17. 

Finally, the "relatively minor" impediments to interstate commerce 

imposed by the statute were justified because it was the least 

burdensome means of promoting the State’s "substantial" interests in 

conserving natural resources and alleviating solid waste disposal 

problems. Id. at 472-73. 

 21 

 

substantially, as to be invalid under the Commerce 

Clause." Kassel, 450 U.S. at 670. Hence the inquiry is not, 

as the District Court thought, whether "the legislature could 

not have believed in the purported purpose of the statute." 
138 F. Supp. 2d at 622 (emphasis added). Assuming that 

the General Assembly’s belief was rational, the defendants 

cannot simply rely on the Milk Law’s stated purpose. They 

must provide evidence that the wholesale price floors have 

the benefits contemplated by the General Assembly. 

Only meager evidence to this effect appears in the record. 

The defendants offer nothing more than speculation by 

representatives of the Pennsylvania dairy industry that instate milk producers would engage in predatory pricing if 

the Commonwealth did not impose "over-order" prices, 

along with the representatives’ claims that the minimum 

wholesale prices are needed to compensate dealers for 

purchasing raw milk at "over-order" prices. However, a 

reasonable trier of fact could find that the federal producer 

price floors provide ample protection against predatory 

pricing. As the District Court said in its first opinion, the 

record shows that "the federal minimum pricing is ensuring 

an adequate supply of milk." Id. at 611. Pennsylvania is the 

only state in the Northeast milk marketing region that 

enforces wholesale price floors, yet none of the others has 

suffered a milk shortage in recent decades. 

Moreover, the current success of the Commonwealth’s 

dairy industry belies the defendants’ claims that the 

minimum wholesale prices do more than artificially inflate 

in-state dealers’ profits. At oral argument, counsel for the 

Pennsylvania Milk Dealers accurately noted that 

"Pennsylvania is one of the top, I think, top five producers 

of raw milk in the country. It is an exporter." As already 

noted, the Commonwealth ranks fourth among all states in 

aggregate milk production. Per-capita milk production is 

even more impressive--Pennsylvania produces four-and-ahalf times as much milk as its residents consume. Unless 

eliminating the minimum wholesale prices would cause 

Pennsylvania’s milk production to decrease so dramatically 

that the Commonwealth would be forced to import milk to 

satisfy its residents’ needs--and there is no evidence that it 

would--a reasonable trier of fact could find that the 

wholesale price floors are superfluous. 

 22 

 

On the burdens side of the scale, a reasonable trier of 

fact could find that the wholesale price floors substantially 

impede the flow of out-of-state milk into Pennsylvania by 

protecting incumbent in-state dealers from price 

competition. Because in-state dealers dominate the 

wholesale milk market in Pennsylvania, barriers to 

competition burden out-of-state interests more heavily than 

in-state ones. Price floors are a barrier especially likely to 

safeguard existing suppliers’ market shares; a number of 

the retailers who provided affidavits in this case said they 

would switch dealers if offered prices below the floors. 

Preventing dealers from attracting customers by offering 

lower prices thus helps in-state dealers maintain their 

traditional hegemony. 

The District Court recognized that the wholesale price 
floors disproportionately burden out-of-state dealers, but 

concluded that there is "no conclusive evidence" of a 

substantial burden on interstate commerce because dealers 

can compete based on other criteria, such as packaging, 

quality, and service. 138 F. Supp. 2d at 623 (emphasis 

added). At the summary judgment stage, however, the nonmoving party is not required to produce "conclusive" 

evidence. Instead, it need only offer sufficient evidence for 

a reasonable jury to find the facts necessary for a decision 

in its favor. See, e.g., Celotex, 477 U.S. at 322-23. 

Cloverland did that. 

There is evidence that it is virtually impossible to displace 

incumbent dealers in Pennsylvania without offering prices 

below the Board-mandated floors. Not surprisingly, price 

seems to be an especially important factor--if not the most 

important factor--in retailers’ decisions to find new dealers 

or retain their existing suppliers. Several retailers expressly 

ranked price as their most important criterion in deciding 

whether to seek new wholesale milk suppliers, and said 

they would switch to out-of-state dealers if they offered 

prices below the current minimums. Therefore, because the 

vast majority of incumbent dealers are in-state firms, and 

because there is no evidence that any in-state dealer-- 

incumbent or not--wants to sell at lower prices, a 

reasonable trier of fact could find that the minimum 

wholesale prices place a substantial, disproportionate 

 23 

 

burden on out-of-state dealers, and that the ability to 

compete based on non-price criteria does not noticeably 

alleviate the burden.19 

Nor can we agree with the District Court that out-of-state 

dealers’ ability to enter into tolling agreements meaningfully 

mitigates the burden on interstate commerce. Tolling 

agreements can be arranged only with the largest retailers, 

such as major supermarket chains. For that reason, only 

thirty-three percent of the milk purchased by Pennsylvania 

retailers is sold under a tolling agreement. The dormant 

Commerce Clause does not allow Pennsylvania to hamper 

out-of-state dealers in two-thirds of its wholesale market on 

the ground that they may compete freely in the remaining 

third. Cf. Wyoming v. Oklahoma, 502 U.S. 437, 455 (1992) 

(rejecting Oklahoma’s claim that it could set aside a "small 

portion" of its coal market for in-state producers because 

"[t]he volume of commerce affected measures only the 

extent of the discrimination; it is of no relevance to the 

determination whether a State has discriminated against 

interstate commerce").20 

_________________________________________________________________ 

19. Contrast Exxon Corp. v. Governor of Md. , 437 U.S. 117 (1978), which 

upheld a Maryland statute prohibiting petroleum producers and refiners, 

none of which were based in Maryland, from operating retail gasoline 

stations within the State. Though the burden fell entirely on out-of-state 

companies, it appeared that the statute would not reduce the volume of 

out-of-state petroleum products sold in Maryland because producer- and 
refiner-owned stations would likely be replaced by stations owned by 

independent out-of-state dealers. Id. at 123, 127. Unlike the Maryland 

statute in Exxon, which merely caused business to shift from some outof-state suppliers to others, id. at 127-28, Pennsylvania’s minimum 

wholesale prices protect in-state dealers from losing sales to their out-ofstate counterparts. 

20. Moreover, the burden on out-of-state dealers may extend to their 

ability to compete in their own states’ wholesale markets. Cloverland 

introduced evidence that the minimum wholesale prices enable 

Pennsylvania dealers not only to maintain their in-state market shares 

without facing price competition from more efficient out-of-state dealers, 

but also to leverage their artificially inflated profits from in-state sales to 

undercut more efficient dealers’ prices in other states. For instance, 

Pennsylvania dealers located in Areas 1 and 4 have offered to sell milk 

to Maryland retailers, including many of Cloverland’s customers, at 

prices as much as fifteen to twenty cents per gallon less than the 

 24 

 

Because the record indicates that the minimum 

wholesale prices may substantially burden Cloverland and 

other out-of-state dealers, and because there is scant 

evidence that the price floors advance a legitimate local 

interest, summary judgment would be inappropriate even if 

a reasonable trier of fact could not find facts sufficient to 

trigger heightened scrutiny. 

IV. Minimum Retail Prices 

We can dispense quickly with the milk consumers’ 

challenge to the retail price floors. The dormant Commerce 

Clause does not prevent a state from forcing its residents to 

pay more for a product if no out-of-state interests are 

affected. The intervenor-plaintiffs presented evidence that 

the retail price floors harm Pennsylvania milk consumers 

because lower prices are available in Maryland. But they 

failed to present any evidence that the retail price floors 

burden interstate commerce by harming out-of-state 

interests, and thus their dormant Commerce Clause 

argument fails. See United Dairy Farmers Coop. Ass’n v. 

Milk Control Comm’n, 335 F. Supp. 1008, 1014 (M.D. Pa.) 

(rejecting attack on Pennsylvania’s minimum retail prices 

where the plaintiff failed to introduce evidence that the 

retail price floors obstructed interstate commerce), aff ’d, 

404 U.S. 930 (1971) (mem.). We note, however, that had 

the intevenor-plaintiffs introduced evidence that the 

minimum retail prices, for instance, impede out-of-state 

retailers’ ability to compete in the Pennsylvania milk 

market or artificially inflate retail prices in other states (by 

reducing price competition among retailers within the 

region), the result might be different. 

_________________________________________________________________ 

minimum wholesale prices in Pennsylvania. Cloverland says it has lost 

hundreds of thousands of dollars in sales as a result. 

The District Court refused to consider testimony by Cloverland 

employees regarding the offers made by Pennsylvania dealers, deeming it 
inadmissible hearsay. However, a statement offering to sell a product at 

a particular price is a "verbal act," not hearsay, because the statement 

itself has legal effect. See Fed. R. Evid. 801 advisory committee’s note; 

United States v. Montana, 199 F.3d 947, 950 (7th Cir. 1999); Trepel v. 

Roadway Express, Inc., 194 F.3d 708, 717 (6th Cir. 1999). 

 25 

 

V. Conclusion 

Genuine issues of material fact exist with respect to 

whether Pennsylvania’s minimum wholesale milk prices 

interfere with "the Commerce Clause’s overriding 

requirement of a national common market." Wash. State 

Apple, 432 U.S. at 350 (internal quotation marks omitted). 

A reasonable trier of fact could find that the wholesale price 

floors eliminate out-of-state dealers’ competitive advantage, 

and that Pennsylvania could achieve its stated objectives 

through alternative nondiscriminatory measures. The 

record also supports a finding that the minimum wholesale 

prices’ burdens on interstate commerce clearly outweigh 

their local benefits. Therefore, summary judgment should 

not have been granted with respect to the wholesale price 

floors, and we reverse and remand for further proceedings 

on that issue. We affirm the District Court’s ruling with 

respect to the retail price floors, however, because there is 

no evidence that they burden interstate commerce. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 26