Opinion ID: 296620
Heading Depth: 2
Heading Rank: 2

Heading: Contention of Relationship to Colorado Milk Order

Text: 33 This brings us to the second ground of the Secretary's decision, that price differences, when prices are compared to those set in orders for adjacent regions, necessitate the imposition of price differentials in the Nebraska order in order to avoid serious disruptions in the markets of adjoining regions. As contrasted with his first ground of decision, the Secretary here is focusing not on the distribution of raw milk to the handler, but rather the marketing of the finished product by the handler. 34 At the outset we observe that even if we were to uphold the Secretary's findings on the second ground, we cannot say that his error as to the first would necessarily be immaterial. It is not clear that the Secretary would have 'made the same ultimate finding with the erroneous findings or inferences removed from the picture.' NLRB v. Reed & Prince Mfg. Co., 205 F.2d 131, 139 (1st Cir.), cert. denied, 346 U.S. 887, 74 S.Ct. 139, 98 L.Ed. 391 (1953). See also Braniff Airways, Inc. v. CAB, 126 U.S.App.D.C. 399, 379 F.2d 453 (1967). The Secretary's decision to remedy the market situation in Eastern Colorado through price differentials in Nebraska, may have been materially influenced by the arguments and his conclusion that these differentials would serve at the same time to remedy the milk deficit he had concluded existed in the western zones. Had the latter problem been removed from consideration the Secretary might well have chosen to solve the former by using the more refined technique of compensatory payments within the Eastern Colorado Order itself. That possibility would have had to be explored on remand. 35 We need not pause long over the problem, since we find that the Secretary's second ground, like the first, is unsupported by the record. The requirement of substantial evidence supporting salient findings is particularly important here, where the Secretary has chosen a broad rather than refined remedy as a means of solving the alleged problem of market disruptions in Eastern Colorado. In seeking to handle this problem through the Nebraska-Western Iowa Order, the Secretary has imposed the burden of higher prices on all handlers receiving milk within the Central and Western Zones, whether or not they intend to market that milk in Colorado. As an alternative, the Secretary could have added to the Eastern Colorado Order a requirement that handlers pay a compensatory charge on all milk purchased from producers outside the area and marketed within it. In that case the handlers would have had to bear the burden only if and when they entered the Colorado markets. 32 36 Such a change in the Colorado Order, reflecting the handler's competitive advantage from the purchase of 'outside' milk, would be valid. 37 In Lehigh Valley Coop. Farmers v. United States 33 the Supreme Court invalidated a provision in the New York-New Jersey Order for compensatory parments, payable to the pool's producers by a handler who brought outside milk into the area for fluid consumption. The Court did not say that compensatory charges are incalid per se, but only that the charge at issue bore no relation to the handler's competitive advantage. 34 The Court was careful to say: 'As has been pointed out (note 13, supra), there are other means available (to put handlers of pool and non-pool milk on a competitive par), while affording protection to pool producers, whthout imposing almost insuperable trade restrictions on the entry of nonpool milk into a marketing area.' 35 Note 13, referred to by the Court, listed several means of calculating the compensatory payment, including the difference between the Class I Order price and the actual cost to the handler of the nonpool milk. We conclude that the Third Circuit was sound in concluding that Lehigh Valley 'did not strike down all compensatory payments, rather it found that the particular rate of payment involved therein was invalid.' 36 38 We are not required to consider whether, as one court seems to have held, 37 the Secretary is forbidden from preventing market disruptions in one market by inserting differentials in the order governing another market. But we do think that his use of a requirement that is more burdensome and less refined than an available alternative requires very careful scrutiny of the evidence relied on as a basis for his findings. 'The use of a sweeping rather than a more refined administrative remedy may, at least in some instances, represent an improvident use of administrative discretion, in the absence of stated justification. Burlington Truck Lines v. United States, 371 U.S. 156, 173-174, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962).' Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. , at , 444 F.2d 841, at 861 (November 13, 1970). 39 Assuming that the Nebraska-Western Iowa Order is a proper vehicle for remedying market disruptions in the Eastern Colorado market, there must be substantial evidence of such disruption in order to justify the imposition of such price differentials for this purpose . Mere speculation is no warrant for deviating from a principle as paramount as that of uniform price structure within a single order, particularly where the Secretary has other techniques available. 40 We can find no basis for the Secretary's findings beyond mere speculation, and therefore conclude that his second ground of decision, like the first, must fail. The crucial fact emerging from the testimony at the promulgation hearing is that while there was very little milk sold by Nebraska handlers in Colorado, Colorado handlers accounted for a substantial share of milk marketing in western Nebraska. Mr. Grant, for example, testified that he knew of no sales by any Nebraska handlers in Colorado, except for Fairmont's small contract with the Sterling, Colorado, public schools. (Tr. 232-33). On the other hand, Mr. Grant estimated that 3 out of 10 handlers operating in the Western Zone of Nebraska, were regulated under the Eastern Colorado Order. (Tr. 52-3). Mr. Davidson, who also testified in favor of the Order, stated that Colorado handlers, specifically Beatrice, Safeway, and Borden were selling in western Nebraska. In fact he admitted that the 'only area of competition    between eastern Colorado handlers and those regulated under the present Nebraska-Western Iowa order would be in the (Nebraska) panhandle area.' (Tr. 269). 41 The Secretary does not deny these facts, and attempts to cope with them by arguing that he should be allowed to prevent market disruption before it actually occurs. Administrative and executive expertise certainly encompasses some powers of prediction not shared by those less familiar with the intricacies of the particular field, but such powers, like any others, must be justified by reference to objective evidence. There must be a rational basis of record for invoking the concept of a preventative remedy. We think that the Secretary failed to meet that standard. The record offers nothing but generalizations of broad westward movements, and these do not support the inference that there will be specific movements of processed milk from western Nebraska to eastern Colorado when these have not taken place in the past, and indeed the movement has gone from Colorado to western Nebraska. Assuming that intra-Order differentials may consitute a proper means of dealing with dislocations between western Nebraska and eastern Colorado, there was insufficient need in this case for their application.