Opinion ID: 757355
Heading Depth: 2
Heading Rank: 2

Heading: The Lawfulness of the Secretary's Decision

Text: 40 We believe that the Secretary's decision to maintain the existing Class I differentials was not arbitrary and capricious. The record indicates that the Secretary based his decision on numerous factors relevant to the statute's goals of insur[ing] 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, and be in the public interest, 7 U.S.C. § 608c(18), and further that his decision was not a clear error of judgment. See Citizens to Preserve Overton Park v. Volpe, 401 U.S. at 416, 91 S.Ct. 814 (in deciding whether agency action was arbitrary and capricious, the court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment). 41 The Secretary's 1990 rulemaking hearings, which were held at various locations throughout the country and lasted 43 days in all, encompassed careful consideration of the Class I differential system. Thirty-five proposals for amendment were considered, 42 portray[ing] a wide range of views regarding how Federal orders should be changed or not changed. Altogether, nearly 200 persons, including dairy farmers, cooperative association representatives, members of other general farm organizations, proprietary handlers, state officials, members of the United States Congress, and others, testified at the hearing. Thus, the record contains the views and testimony of a broad cross-section of the dairy industry and other interested parties. 43 Secretary's Decision I at 12645. 44 The Secretary considered the proposals of the Midwest producers, as well as opposing testimony from other hearing participants. He noted that Midwestern producers held markedly different views from the country's other producers: 45 In general, the testimony reflects one of two basic views. The first is one of basic support for the order program as is. This point of view was expressed by virtually all parties from areas of the country other than the Midwest.... The second point of view reflected in the testimony of most parties from the Midwest also expressed strong support for the Federal order program, but was critical of the system of Class I prices that now operates in all the orders. 46 Secretary's Decision I at 12645. The relative unpopularity of the Midwest's views was relevant, in light of the statute's requirement that no amending order be effective without the approval of at least two-thirds of the producers who supply the marketing area, or of producers who produce at least two-thirds of the milk in the marketing area. 7 U.S.C. § 608c(8), (9). 47 The hearings included analysis of the supplies and utilization of producer milk ... order by order and region by region. Id. at 12646. This analysis showed that: 48 (1) The orders in the Southeast ... have very high levels of Class I use ... [,] low levels of Class II ... and very low Class III utilizations. Some of these markets are deficit markets, that is, they do not produce enough milk to supply the Class I needs, including reserves on a year-round basis. (2) [Seven] Midwest and Far West and Northwest markets ... have far more milk available than is needed for Class I and Class II use, plus reserves.... (3) The remaining markets exhibit essentially a balance between supply and demand.... 49 Id. at 12647. These findings were relevant to whether the statute was achieving its goal of ensuring an adequate supply in each marketing area. The meaning of these findings is contested by the parties. In particular, MMPA contends that there is an inherent contradiction in using differentials to encourage the movement of milk into balanced or surplus marketing orders. However, the Secretary articulated a rational connection between the facts found and the choice made, Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) (citation omitted): that the Class I differentials were at least partially responsible for keeping those markets out of deficit. We therefore defer to the Secretary's interpretation of the marketing data. 50 The Secretary's decision also addressed more technical aspects of the Class I differential system, including those now raised by the MMPA on appeal. For example--in response to exceptions filed by the UMFOC, representing the MMPA--it discussed the measurement of reserve, supply, and demand, as well as the marketing efficiency of the Class I pricing system. Id. at 12647-49. This discussion showed consideration of further relevant factors. We believe that it was not then clear error for the Secretary to conclude: 51 [T]he present Class I differential should remain in place. The underlying basis for the level of Class I prices under the order program is the statutory pricing standard which requires that prices reflect the supply and demand for milk. Within this context, the present Class I differentials appear to be set at a reasonably satisfactory level. Although there might be a basis for some downward adjustments in certain markets, such as in the heavy production areas of the Midwest, it is difficult to determine from this record what the adjustments should be. This is particularly so when the industry has strongly supported over the years a coordinated set of differentials based on fairly constant rates of change from market to market. 52 Id. at 12646. 53 We recognize that the current Class I differential system is imperfect. Its heavy-handed reliance on a marketing area's distance from the Upper Midwest probably justifies characterizing it as a single-basing-point system, as the District Court, the MMPA, and several hearing witnesses did. Even so, it is not so rough an approximation that, under our deferential standard of review, we could find that the Secretary was compelled to undertake amendment. However, as the Secretary himself states, [t]his is not to say that the Secretary lacks a continuing duty to investigate and respond to changed circumstances that warrant modification of the existing orders. Appellant's Br. at 37 (footnote omitted) (emphasis added). We hold only that the Secretary's conclusion in this case, that circumstances had not changed to that critical extent, was not arbitrary and capricious. 54