Opinion ID: 795612
Heading Depth: 5
Heading Rank: 1

Heading: Nexus Between the Challenged State Law and Cloverland's Advantage

Text: 53 We are unpersuaded by the District Court's reasoning that because Cloverland's exemption arises from Pennsylvania law, any cost advantage it has is ephemeral — the argument being that if the minimum wholesale prices were invalidated (as Cloverland desires), its purported raw milk cost advantage would disappear because the over-order premium would no longer be viable. We assume, without deciding, that if the minimum wholesale prices themselves conferred an advantage on Cloverland due to its out-of-state status, it could not rely on that advantage to challenge those prices because invalidating the prices would necessarily nullify the advantage (though, of course, Cloverland would have no incentive to challenge the prices in that event). Here, however, Cloverland's purported cost advantage arises from the operation of a different aspect of the regulatory scheme — the over-order premium — that is not challenged in this suit. 54 The District Court concluded, based on the Board's evidence, that if the minimum wholesale prices were invalidated, the over-order premium would fall. But this is not a question susceptible to definitive proof by the Board's experts. It may well be that invalidating the minimum wholesale prices would place pressure on the Commonwealth's legislature to repeal the over-order premium or extend it to out-of-state purchasers (both of which would nullify Cloverland's supposed advantage). The cost disadvantage to Pennsylvania handlers of paying the over-order premium and then competing against out-of-state handlers without the protection of minimum wholesale prices might make the over-order premium less feasible or encourage them to purchase out-of-state milk to avoid the premium. But we note that, under the current system, Pennsylvania handlers already have an incentive to purchase out-of-state milk to maximize their profit margins, yet the over-order premium remains strong. Moreover, even assuming Pennsylvania could constitutionally impose over-order premiums on sales of milk to out-of-state purchasers (an issue we do not decide here), doing so would presumably damage the Commonwealth's ability to export milk by essentially adding a surcharge on exports. And the Board has gone to great lengths (as explained below) to demonstrate several legal options handlers use to sell milk at below minimum wholesale prices in Pennsylvania, which suggests that invalidating the minimum wholesale prices would not necessarily harm the handlers' ability to pay the over-order premium to producers. 55 If the minimum wholesale prices were invalidated, the Pennsylvania legislature would be faced with these thorny policy questions and would have to weigh the competing considerations to determine whether the over-order premium provisions of 31 Pa. Stat. § 700j remain viable. There is simply no way to determine, at this stage, whether the over-order premium would necessarily be repealed or extended to out-of-state purchasers of Pennsylvania milk. At best, the Board's evidence and the District Court's opinion establish that such an event would be likely. We hold, though, that the possible removal of Cloverland's purported out-of-state advantage if it is successful on this appeal is insufficient to render that advantage irrelevant to our heightened scrutiny analysis. 56