Opinion ID: 103227
Heading Depth: 1
Heading Rank: 2

Heading: Constitutionality of the Act.

Text: A. Minimum Prices. The Act authorizes and the Order undertakes the fixing of minimum prices for the purchase of milk in the current of interstate or foreign commerce, or which directly burdens, obstructs, or affects, interstate or foreign commerce in milk. [36] There is no challenge to the fact that the milk of all four defendants reaches the marketing area through the channels of interstate commerce. Nor is any question raised as to the power of the Congress to regulate the distribution in the area of the wholly intrastate milk. It is recognized that the federal authority covers the sales of this milk, as its marketing is inextricably intermingled with and directly affects the marketing in the area of the milk which moves across state lines. [37] The challenge is to the regulation of the price to be paid upon the sale by a dairy farmer who delivers his milk to some country plant. It is urged that the sale, a local transaction, is fully completed before any interstate commerce begins and that the attempt to fix the price or other elements of that incident violates the Tenth Amendment. But where commodities are bought for use beyond state lines, the sale is a part of interstate commerce [38] We have likewise held that where sales for interstate transportation were commingled with intrastate transactions, the existence of the local activity did not interfere with the federal power to regulate inspection of the whole. [39] Activities conducted within state lines do not by this fact alone escape the sweep of the Commerce Clause. Interstate commerce may be dependent upon them. [40] Power to establish quotas for interstate marketing gives power to name quotas for that which is to be left within the state of production. [41] Where local and foreign milk alike are drawn into a general plan for protecting the interstate commerce in the commodity from the interferences, burdens and obstructions, arising from excessive surplus and the social and sanitary evils of low values, the power of the Congress extends also to the local sales. This power over commerce when it exists is complete and perfect. [42] It has been exercised to fix a wage scale for a limited period, [43] railroad tariffs [44] and fees and charges for live-stock exchanges. [45] The authority of the Federal Government over interstate commerce does not differ in extent or character from that retained by the states over intrastate commerce. Since Munn v. Illinois , this Court has had occasion repeatedly to give consideration to the action of states in regulating prices. [46] Recently, upon a reexamination of the grounds of state power over prices, that power was phrased by this Court to mean that upon proper occasion and by appropriate measures the state may regulate a business in any of its aspects, including the prices to be charged for the products or commodities it sells. [47] The power of a state to fix the price of milk has been adjudicated by this Court. [48] The people of great cities depend largely upon an adequate supply of pure fresh milk. So essential is it for health that the consumer has been willing to forego unrestricted competition from low cost territory to be assured of the producer's compliance with sanitary requirements, as enforced by the municipal health authorities. It belongs to that category of commodities that for many years has been subjected to the regulatory power of the state. A thorough exposition of the milk situation in the New York shed was made in the Nebbia case. There is nothing to add to what was there said, save to point out that since that decision, we have held that a state cannot prohibit the sale of imported milk where the extra-state purchase price was below the prescribed minimum [49] and that a Pennsylvania regulatory law, including minimum prices, applied in the absence of federal legislation to milk purchased in Pennsylvania for shipment into the New York marketing area. [50] In Hegeman Farms Corp. v. Baldwin , [51] this Court sustained again the New York Milk Control Statute against the complaint that the price limits were arbitrary. A variation in prices to be charged the consumer between dealers who had and dealers who had not well advertised trade names was upheld. [52] The power enjoyed by the states to regulate the prices for handling and selling commodities within their internal commerce [53] rests with the Congress in the commerce between the states. B. Equalization Pool.  In order to equalize the prices received by producers, handlers are required to clear their purchases through the producer settlement fund. Payments into and withdrawals from this fund depend upon the value of the milk received which is fixed by the Order at different prices governed by the use made by the handler of the purchased milk and upon whether his obligations to producers are greater or less than the uniform price due the producers under the scheme. The result of the use of the device of an equalization pool is that each producer, dealing with a proprietary handler, gets a uniform or weighted average price for his milk, with differentials for quality, location or other usual market variations, irrespective of the manner of its use. The Act, § 8c (5) (B) (ii) and (C) and the Order, Articles IV, VI and VII, authorize such an adjustment. The defendants' objection to the equalization pool, here considered, is not to the disbursements from the fund for expenses of standby or marketing services authorized by Article VII, §§ 5 and 6, concerning which we hold the handler has no standing to complain. It is to the alleged deprivation of liberty and property accomplished by the pooling requirement in taking away from the defendants their right to acquire milk from their patrons at the minimum class price, according to its use, and forcing the handlers to pay their surplus, over the uniform price, to the equalization pool instead of to their patrons. This argument assumes the validity of price regulation, as such, but denies the constitutionality of the pooling arrangement because handlers are not at liberty to pay the producer in accordance with the use of the producer's milk but must distribute the surplus to others whose milk was resold less advantageously. It is urged that to carry this principle of contribution to its logical conclusion would mean that the wages of the employed should be shared with the unemployed; the highly paid, with the underpaid; and the receipts of the able, the fortunate and the diligent, with the incompetent, the unlucky and the drone. No such exaggerated equalization of wealth and opportunity is proposed. The pool is only a device reasonably adapted to allow regulation of the interstate market upon terms which minimize the results of the restrictions. It is ancillary to the price regulation designed, as is the price provision, to foster, protect and encourage interstate commerce by smoothing out the difficulties of the surplus and cut-throat competition which burdened this marketing. In Mulford v. Smith , [54] we made it clear that volume of commodity movement might be controlled or discouraged. As the Congress would have, clearly, the right to permit only limited amounts of milk to move in interstate commerce, we are of the opinion it might permit the movement on terms of pool settlement here provided. Common funds for equalizing risks are not unknown and have not been considered violative of due process. The pooling principle was upheld in workmen's compensation, [55] bank deposit insurance, [56] and distribution of benefits in the Transportation Act. [57] The defendants rely particularly upon Thompson v. Consolidated Gas Utilities Corp., [58] and Railroad Retirement Board v. Alton R. Co. [59] In the Thompson case, the Texas Railroad Commission ordered proration of gas production in the Panhandle. It was assumed that proration to prevent waste and protect correlative rights in a pool was valid but it was held that the proration order in issue was for none of these purposes. It was for the sole purpose . . . to compel those [with market outlets] . . . to purchase gas from potential producers who have no market. This was not deemed to be reasonably related to the conservation of gas or the protection of correlative rights. In the Retirement Board case, the pooling principle was involved but was found to be invalid because the burdens on the roads were not equalized with the benefits. Entry on service was made at different age levels for different roads. Employees seventy or older were required to retire. Some roads had none. Solvent and insolvent roads were liable alike. All carriers were treated as a single employer. It was these provisions, deemed unequal, which led to the conclusion that the manner of pooling of funds denied due process. In this case, the pooling has differentials to cover the variations of quality and location. C. Delegation.  There are three issues of delegation presented: (1) the delegation of authority to the Secretary of Agriculture to establish marketing areas; (2) the delegation of authority to producers to approve a marketing order without an agreement of handlers; and (3) the delegation of authority to cooperatives to cast the votes of producer patrons. From the earliest days the Congress has been compelled to leave to the administrative officers of the government authority to determine facts which were to put legislation into effect and the details of regulations which would implement the more general enactments. It is well settled, therefore, that it is no argument against the constitutionality of an act to say that it delegates broad powers to executives to determine the details of any legislative scheme. This necessary authority has never been denied. [60] In dealing with legislation involving questions of economic adjustment, each enactment must be considered to determine whether it states the purpose which the Congress seeks to accomplish and the standards by which that purpose is to be worked out with sufficient exactness to enable those affected to understand these limits. Within these tests the Congress needs specify only so far as is reasonably practicable. [61] The present Act, we believe, satisfies these tests. 1. Delegation to the Secretary of Agriculture.  The purpose of the Act is to establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce as will establish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period. To accomplish this, the Secretary of Agriculture is directed to issue orders, whenever he has reason to believe the issuance of an order will tend to effectuate the declared policy of the act. Unlike the language of the National Industrial Recovery Act condemned in the Schechter case, page 538, the tests here to determine the purpose and the powers dependent upon that conclusion are defined. In the Recovery Act the Declaration of Policy was couched in most general terms. [62] In this Act it is to restore parity prices, § 2. Under the Recovery Act, general welfare might be sought through codes of any industry, formulated to express standards of fair competition for the businesses covered. Here the terms of orders are limited to the specific provisions, minutely set out in § 8c (5) and (7). While considerable flexibility is provided by § 8c (7) (D), it gives opportunity only to include provisions auxiliary to those definitely specified. The Secretary is not permitted freedom of choice as to the commodities which he may attempt to aid by an order. The Act, § 8c (2), limits him to milk, fresh fruits except apples, tobacco, fresh vegetables, soybeans and naval stores. The Act authorizes a marketing agreement and order to be issued for such production or marketing regions or areas as are practicable. A city milkshed seems homogeneous. This standard of practicality is a limit on the power to issue orders. It determines when an order may be promulgated. It is further to be observed that the Order could not be and was not issued until after the hearing and findings as required by § 8c (4). Public hearings were held at Albany, Malone, Syracuse, Elmira, and New York from May 16 to June 7, 1938, with four days' recess. Nearly three thousand pages of testimony were introduced, eighty-eight documentary exhibits and some twenty briefs by interested parties were filed. On July 23, 1938, the Secretary, in the Federal Register, notified the public of his findings and the terms of the Order and again invited comment. Numerous parties again filed briefs. A right by statute is given handlers to object to the Secretary to any provision of an order as not in accordance with law, with the privilege of appeal to the courts. § 8c (15) (A) and (B). Even though procedural safeguards cannot validate an unconstitutional delegation, they do furnish protection against an arbitrary use of properly delegated authority. [63] A further provision of the Act is to be noted as it was employed as a standard to determine the minimum price. This is § 8c (18). Acting under this section, the Secretary fixed a fluctuating minimum price based upon wholesale butter prices in New York. While it is true that the determination of price under this section has a less definite standard than the parity tests of §§ 2 and 8e, we cannot say that it is beyond the power of the Congress to leave this determination to a designated administrator, with the standards named. The Secretary must have first determined the prices in accordance with § 2 and § 8e, that is, the prices that will give the commodity a purchasing power equivalent to that of the base period, considering the price and supply of feed and other pertinent economic conditions affecting the milk market in the area. If he finds the price so determined unreasonable, it is to be fixed at a level which will reflect such factors, provide adequate quantities of wholesome milk and be in the public interest. This price cannot be determined by mathematical formula but the standards give ample indications of the various factors to be considered by the Secretary. 2. Delegation to Producers.  Under § 8c (9) (B) of the Act it is provided that any order shall become effective notwithstanding the failure of 50 percent of the handlers to approve a similar agreement, if the Secretary of Agriculture with the approval of the President determines, among other things, that the issuance of the order is approved by two-thirds of the producers interested or by interested producers of two-thirds of the volume produced for the market of the specified production area. By subsection 19 it is provided that for the purpose of ascertaining whether the issuance of such order is approved the Secretary may conduct a referendum among producers. The objection is made that this is an unlawful delegation to producers of the legislative power to put an order into effect in a market. In considering this question, we must assume that the Congress had the power to put this Order into effect without the approval of anyone. Whether producer approval by election is necessary or not, a question we reserve, a requirement of such approval would not be an invalid delegation. [64] 3. Authorization of Cooperatives to Cast the Votes of Producer Patrons.  This objection, too, falls before the answering argument that inasmuch as Congress could place the Order in effect without any vote, it is permissible for it to provide for approval or disapproval in such way or manner as it may choose. Cooperatives in the Equalization Fund.  The defendant, Central New York Cooperative Association, denies liability under Articles VI, VII and VIII of the Order on the ground that it is not liable to pay its net pool obligation into the administrative fund or to meet the expenses of administration. The asserted reason for its freedom from liability is that it is a cooperative composed of milk producers and distributes the milk of its members and others as agent. The cooperative owns no farms. Its members are dairy farmers. By their contract they agree to deliver . . . all . . . milk produced . . . which said milk is to be marketed and distributed by the [cooperative] . . . The latter agrees to pay . . . for the milk . . . a price . . . based upon the amount received . . . less the expenses . . . Nonmembers' milk is marketed under the same contract. The cooperative leases receiving and distributing facilities from a business corporation. The milk is received by the cooperative at receiving plants and shipped to the city depot. It distributes through other business corporations which are wholly-owned subsidiaries of the cooperative. These distributing subsidiaries use the leased physical facilities under verbal contracts with the cooperative. The cooperative receives the net amount from the sales and distributes to its patrons under license from the Director of the Division of Milk Control of New York permitting the marketing in the manner described. Section 8c (5) (A) authorizes an order to classify milk and fix minimum prices which all handlers shall pay for milk purchased from producers. Section 8c (5) (C) authorizes the equalization pool and the handlers' payment to this settlement fund. It is urged that cooperatives which merely act as agents for their members are not included in handlers purchasing from producers. This is said to be definitely shown by the provisions of § 8c (5) (F) providing that nothing contained in the subsection shall be construed to prevent a Capper-Volstead cooperative from making distribution to its producers in accordance with the contract. The Order defines a handler as including a cooperative association with respect to any milk received from producers at any plant operated by such association or with respect to any milk which it causes to be delivered to other handlers. Under the provisions of the Order, Article VII, §§ 8 and 9, cooperative handlers as other handlers equalize their purchases by payment into the producer settlement fund, even though they are not required to pay the uniform price to their producers by reason of the exception of Article VII, § 1, and the provisions of § 8c (5) (F), as explained at page 561. Cooperative contracts are of two general types, sale and agency. [65] The Central New York Cooperative operates under the agency type. It is obvious that the use of the word purchased in the Act, § 8c (5) (A) and (C), would not exclude the sale type of cooperative. When § 8c (5) (F) was drawn, however, it was made to apply to both the sale and agency type without distinction. This would indicate there had been no intention to distinguish between the two types by (A) and (C). The section which authorizes all orders, § 8c (1), makes no distinction. The orders are to be applicable to processors, associations of producers, and others engaged in the handling of commodities. The reports on the bill show no effort to differentiate. [66] Neither do the debates in Congress. The statutory provisions for equalization of the burdens of surplus would be rendered nugatory by the exception of agency cooperatives. The administrative construction has been to include such organizations as handlers. [67] With this we agree. As here used the word purchased means acquired for marketing. Subsection (A) cannot be construed as freeing agents, cooperative or proprietary, from the requirement to account at the minimum prices for milk handled. As a corollary the contention is made also by Central Cooperative that no cooperative may be required to pay its surplus receipts over uniform prices into the equalization fund. This, too, is based upon a construction of § 8c (5) (F) as permitting a cooperative to make settlement with its members in accordance with the terms of its own contract with them. If the cooperative members were freed of the burden of carrying their proportion of milk going to manufacturing use, the discrimination in their favor would be most strongly marked. Such a construction is not required. Cooperatives are covered by § 8c (1) and (5) (A) and (B), and by the provisions of the Order, except as to the payment of the uniform price. Any payments below the uniform price fall on their members. We are of the view that the administrative construction is correct and that the net proceeds of (F) refer to the result of the cooperative sales in the marketing area after complying with the equalization requirements. The defendant, Central New York Cooperative Association, raises for itself a final point. In determining the net pool obligation of any handler for milk received from producers, [68] the handler is authorized to subtract pro rata out of each class from the milk involved in the pool the quantity of milk received from the handler's own farm. We have determined that this cooperative, though marketing milk under an agency contract with its members, is a handler subject to the Act and Order. The cooperative argues that as its members, farmers, would not need to account to the pool for their personal sales to consumers, the cooperative, being utilized as an agent to market the farmers' milk, is under no obligation to contribute to equalization. As the cooperative does not have its own farm but is itself a handler under the Act, it must pay into the producer settlement fund. Inasmuch as all the defendants in these appeals are handling milk in interstate commerce, the petition for the enforcement of Official Order No. 126, issued under c. 383 of the Laws of 1937 of the State of New York, concerning milk not covered by Order No. 27 of the Secretary of Agriculture, should be dismissed. The order of the District Court in Nos. 771, 827 and 828 is reversed and the causes are remanded to that Court with instructions to enter an order specifically enforcing up to the time of suspension the provisions of Order No. 27, issued by the Secretary of Agriculture August 15, 1938, regulating the handling of milk in the New York marketing area, as to all the defendants and enjoining defendants, their officers, agents and servants, from further violation of the Order. The order of the District Court in dismissing the petition of Holton V. Noyes, as Commissioner of Agriculture and Markets of the State of New York, is affirmed. MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS concur in the judgment and opinion of the Court except insofar as the opinion appears to imply that power of Congress to enact the marketing law depends upon the use and nature of milk. They do not believe that we are called upon in this case to indicate, as they think we do, that there is such a constitutional limitation on the power of Congress to regulate interstate commerce.