Source: https://law.justia.com/cases/federal/appellate-courts/F2/857/1065/114745/
Timestamp: 2019-10-16 05:18:00
Document Index: 767603931

Matched Legal Cases: ['art 1033', '§ 608', '§ 608', '§ 608', '§ 608', '§ 608', '§ 608']

Defiance Milk Products Company, a Division of Diehl, Inc.,plaintiff-appellant, v. Richard Lyng, Secretary of the United States Department Ofagriculture, Defendant-appellee, 857 F.2d 1065 (6th Cir. 1988) :: Justia
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Defiance Milk Products Company, a Division of Diehl, Inc.,plaintiff-appellant, v. Richard Lyng, Secretary of the United States Department Ofagriculture, Defendant-appellee, 857 F.2d 1065 (6th Cir. 1988)
US Court of Appeals for the Sixth Circuit - 857 F.2d 1065 (6th Cir. 1988) Jan. 4, 1988. Decided Sept. 27, 1988
The issue in this case is the validity of a temporary amendment to a Department of Agriculture order regulating the marketing of milk in the Ohio Valley Area, 7 C.F.R. part 1033 (1987), pursuant to subsection 8c of the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C. § 608c (1982). The District Court granted the Secretary's motion for summary judgment. We hold that the amendment, though questionable, was supported by substantial evidence of a temporary glut of milk in the marketplace requiring action to alleviate the burden on certain milk handlers and is not in violation of the regulatory scheme created by Congress; therefore, we affirm the judgment of the District Court.
This case requires us to "traverse the labyrinth of the federal milk marketing regulation provisions." Zuber v. Allen, 396 U.S. 168, 172, 90 S. Ct. 314, 317, 24 L. Ed. 2d 345 (1969) (footnote omitted). In order to review the administrative action presently before us, a brief description of the history and mechanics of the federal milk regulatory program is needed.
Before regulation, milk distributors ("handlers") would obtain bargains during glut periods, engendering cutthroat competition among dairy farmers ("producers"). To maintain income, farmers would increase production even more. In the 1920's, producers restored equilibrium to the market by forming cooperatives. Cooperatives pooled their milk supplies and refused to deal with handlers except on a collective basis. This arrangement held until the drop in commodity prices during the Depression destroyed the market equilibrium. Congress responded by passing the Agricultural Adjustment Act of 1933, which gave the Department of Agriculture broad authority to regulate the marketing of commodities. After the Supreme Court's decision in Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed. 1570 (1935), which disapproved a similarly broad delegation of power under the National Industrial Recovery Act, the agriculture act was amended by the Agricultural Adjustment Act of 1935, which authorized the substitution of a system of marketing orders for the system of agreements and licenses authorized by the 1933 Act.
The 1935 Act was amended by the Agricultural Marketing Agreement Act of 1937, codified as amended at 7 U.S.C. § 608c, which created the milk regulatory scheme that is in effect today. This act separated milk regulation from the regulation of other agricultural commodities. The Act seeks to raise the general level of producer prices by authorizing the Secretary of Agriculture, after notice and opportunity for hearing, to issue orders that regulate milk prices in given geographical market areas, thereby ensuring that the benefits and burdens of a particular market are shared by all producers serving the market.
All wholesalers of milk, so-called "handlers," pay a uniform minimum price for each use class, subject only to adjustment for "(1) volume, market, and production differentials customarily applied by the handlers subject to such order, (2) the grade or quality of the milk purchased, and (3) the locations at which delivery of such milk, or any use classification thereof, is made to such handlers." 7 U.S.C. § 608c(5) (A).
On the other hand, dairymen or "producers" of milk who supply the handlers in a market receive a uniform "blend" price for their milk, regardless of its end use. The blend price is roughly the weighted average uniform price of all milk sold under the order during a given period. Competition among farmers to sell as much of their milk as possible for fluid use is thus eliminated. 7 U.S.C. § 608c(5) (C). See, e.g., 7 C.F.R. 1033.72 (payments to producers in Order 33).
The Secretary of Agriculture agreed that some price reduction was necessary as a result of the glut of milk in the market. Because of the emergency marketing conditions, an amendment was adopted without the issuance of a recommended decision and the opportunity to file exceptions. See Decision on Proposed Amendment to Marketing Agreements and to Orders, 48 Fed.Reg. 22,313 (1983) (amendment codified at 7 C.F.R. 1033.60(h), 7 C.F.R. 1036.60(f)) . The amendment, which was effective in June and July 1983, granted pool handlers a $0.40 per hundredweight reduction in their pool obligation for milk used in processing butter, dry milk powder, and cheese. The Secretary stated that the price reduction did not apply to "some storable products such as canned milk and blends of margarine and butter, for which there was no demonstration on the record that handlers incur losses in marketing milk for such uses." 48 Fed.Reg. at 22,316.
In September 1983, acting pursuant to 7 U.S.C. § 608c(15) (A), Defiance filed a petition with the Secretary stating that the amendment was not in accordance with law and praying for either a modification of or exemption from the amendment. The petition requested a refund, with interest, of the extra $0.40 per hundredweight Defiance had paid for producer milk during the period that the amendment was effective.
Acting pursuant to 7 U.S.C. § 608c(15) (B), Defiance filed a complaint in the District Court for the Northern District of Ohio. The complaint alleged that the amendment is not in accordance with law, is unsupported by substantial record evidence, is arbitrary, capricious, and an abuse of discretion, and is not authorized by the Act. After discovery, the case was submitted to the District Court on cross motions for summary judgment. The District Court granted the Secretary's motion and denied Defiance's motion. This appeal followed.
Our review of the Secretary's decision is limited to whether the decision is in accordance with law and whether the decision is supported by substantial evidence. See Lehigh Valley Farmers v. Block, 829 F.2d 409, 412 (3rd Cir. 1987); Suntex Dairy v. Block, 666 F.2d 158, 162 (5th Cir.), cert. denied, 459 U.S. 826, 103 S. Ct. 59, 74 L. Ed. 2d 62 (1982). The Secretary's decision satisfies both of these standards.
United States v. Mills, 315 F.2d 828, 838 (4th Cir.), cert. denied, 375 U.S. 819, 84 S. Ct. 57, 11 L. Ed. 2d 54 (1963) (citations omitted). In this case, the Secretary attempted to provide relief for emergency conditions by adopting the amendment. Even if our hindsight led us to a different conclusion about the proper scope of the amendment, we would not disturb the Secretary's conclusions because they are based on substantial evidence in the record.
Defiance also argues that the amendment violates the price uniformity requirement of Sec. 608c(5) (A). The amendment that was originally proposed by MMI would have created a new Class III(A), and prices within that class would have been uniform. The amendment adopted by the Secretary, however, did not explicitly create a new class. Instead, the amendment merely modified the procedure by which the minimum price for some, but not all, of the products within Class III was computed. Thus, Defiance argues, the prices within Class III were not uniform as to each other and the amendment was unlawful.
The Secretary argues that the effect of the amendment was the creation of a new class and that to argue that price uniformity has been violated is "dead wrong" and a "meritless and lackluster elevation of form over substance." Gov't Brief at 36. Although we agree with the Secretary that uniformity was not violated in this particular case, we think that Defiance's argument is neither "meritless" nor "lackluster." The Secretary's argument seeks to augment his powers beyond those contemplated by the Act and misperceives the limited extent of his administrative powers under the Act. It insists on judicial deference to administrative discretion where deference is not due. The argument apparently is that because the Secretary could have created a new Class III(A), he could amend the regulations in any way that had the same effect on pricing. However, " [t]he statute before us does not contain a mandate phrased in broad and permissive terms." Zuber v. Allen, 396 U.S. at 183, 90 S. Ct. at 323. In fact, the "very purpose" of the Act
Id. at 185, 90 S. Ct. at 324 (footnote omitted).
The efficacy of government regulation of milk markets has been criticized. See Ippolito & Masson, The Social Cost of Government Regulation of Milk, 21 J.L. & Econ. 33, 60-61 (1978) (estimating annual cost of regulation at $60 million; expressing doubt as to continuing validity of alleged benefits of regulation). As an Article III court, however, we sit in judgment of a regulation's lawfulness, not its economic efficiency. No question is raised concerning the validity of the regulatory scheme administered by the Secretary. See United States v. Rock Royal Co-op, Inc., 307 U.S. 533, 59 S. Ct. 993, 83 L. Ed. 1446 (1939). We do note, however, that the Secretary's action in this case was an attempt to make the regulatory structure responsive to the vicissitudes of the marketplace. We are dealing with agency actions taken in response to unusual market conditions. If a system of market regulation is going to exist, we should not discourage the Secretary's reasonable attempt to make market demand catch up with supply through lower prices, although Defiance may be correct that it would have been wiser to lower prices more generally.
See generally United States v. Rock Royal Co-op, Inc., 307 U.S. 533, 542-50, 59 S. Ct. 993, 998-1002, 83 L. Ed. 1446 (1939); Zuber v. Allen, 396 U.S. 168, 172-79, 90 S. Ct. 314, 316-20, 24 L. Ed. 2d 345 (1969); Block v. Community Nutrition Institute, 467 U.S. 340, 341-43, 104 S. Ct. 2450, 2451-52, 81 L. Ed. 2d 270 (1984); Smyser v. Block, 760 F.2d 514, 515-17 (3d Cir. 1985). See also Kessel, Economic Effects of Federal Regulation of Milk Markets, 10 J.L. & Econ. 51 (1967); Brooks, The Pricing of Milk Under Federal Marketing Orders, 26 Geo. Wash. L. Rev. 181 (1958); Note, Milk Orders: Selected Topics, 31 S.D.L.Rev. 406 (1986)
Queensboro Farm Products, Inc. v. Wickard, 137 F.2d 969, 974 (2d Cir. 1943) (Frank, J.)