Opinion ID: 451538
Heading Depth: 2
Heading Rank: 2

Heading: The 1982 and 1983 Amendments

Text: 9 On March 10, 1982 the Secretary published notice of a hearing to consider amendments to nine regional milk marketing orders, including the Middle Atlantic order, proposed by appellee Dairymen, Inc. (DI), 47 Fed.Reg. 10,23 0. DI is a cooperative association of milk producers. Cooperatives, which process and market the milk of their member producers (and therefore are handlers under the Act), are the dominant forces in the dairy industry, with independent producers and proprietary handlers accounting for only a small portion of the market. DI anticipated an extraordinary surplus of milk in these nine markets during the 1982 Spring flush, due to an increase in production and decrease in the number of milk processing plants, and as a result of this surplus an extraordinary expense in transporting milk to processing plants in other markets in order to relieve the glut. DI contended that this movement of surplus milk would benefit all participants in the market, but that major handlers would bear a disproportionate share of the cost of clearing the glutted markets. DI proposed that handlers be given a transportation credit against their pool obligation for the cost of shipping surplus milk outside of designated geographic areas during the months of April-June, 1982. The result of such a credit would be that all producers would share the cost through a reduction in the blended price. 10 A hearing on DI's proposed amendments was held on March 16-17, 1982 in East Point, Georgia. Most of the testimony, primarily by representatives of other cooperatives and proprietary handlers, opposed the credits. A representative of appellees Pennmarva Dairymen's Federation, Inc. (Pennmarva), made up of five cooperatives including the Middle Atlantic Division of DI, and the Valley of Virginia Cooperative Milk Producers Association, which together market over 85 percent of the milk pooled under the Middle Atlantic order, opposed DI's proposal and suggested instead the temporary elimination of location adjustments to the uniform price for Class II milk that, they contended, were resulting in uneconomic movements of milk. In a statement on behalf of the same group, excluding the Middle Atlantic Division of DI, it was contended that some cooperatives had expanded their capacity for handling in anticipation of increased production, and that it would be unfair for their producers to share the costs incurred by others who were not prepared. Other witnesses expressed similar concerns, and also noted that the movement of milk subsidized by the credits might cause displacements in neighboring markets. A number of proprietary handlers argued that cooperatives that transported surplus milk to their processing plants would recoup their transportation costs through the premium over-order charges (i.e., prices in excess of minimums set by the orders) already in effect. 11 The Secretary's findings generally supported DI's position: 12 Under normal conditions of supply and demand for fluid milk, the Federal order marketwide pools serve to assure that all producers supplying each market share in both the Class I and surplus values of the milk that is pooled in their market. Such pooling is normally adequate to achieve reasonable equity among all the market's producers. However, in the unusual circumstances that currently exist in much of the Southeast and the Middle Atlantic area, the orders do not provide a mechanism for ensuring that unusually high costs incurred in handling a market's surplus milk are shared equitably by all producers on that market. In those markets where the record indicates that such movements of milk most likely will occur in substantial quantities, the orders should be amended along the lines proposed to maintain the degree of producer equity that otherwise is obtained through the operation of marketwide pools. 13 Emergency Decision on Proposed Amendments to Marketing Agreements and Orders, 47 Fed.Reg. 17,530, 17,536 (1982). Amendments providing for temporary transportation credits, in substantially the form proposed by DI, were added to six orders, including the Middle Atlantic order. The Secretary found statutory authority for the amendments in 7 U.S.C. Sec. 608c(7)(D): 14 [S]uch credits represent an additional mechanism in the order for maintaining a reasonable degree of equity among all producers whose milk is pooled and priced under the order. The authority for such a provision is section 608c(7)(D) of the Act, which provides that an order may contain terms and conditions incidental to, and not inconsistent with, other provisions of the Act if such terms and conditions are necessary to effectuate the other provisions of the order. 15 One of the underlying purposes of the Act is to establish orderly marketing conditions for dairy farmers. The Act authorizes a number of specific means for achieving this, including the pooling of milk on a marketwide basis.... 16 The pool credits adopted herein are an extension of this marketwide sharing concept. As already described, unusual supply-demand conditions are resulting in certain producers bearing an inequitable share of the costs of handling excess milk supplies associated with the fluid markets. The pool credits represent a reasonable means of maintaining orderly marketing conditions for producers. 17 47 Fed.Reg. at 17,538. 18 This final decision was issued without affording interested parties an opportunity to file exceptions to a recommended decision. The Secretary deemed this emergency expedited procedure necessary in order to have the amendments in place in time for the Spring flush. The Middle Atlantic credits were applicable to shipments made from May 21, 1982 through the end of June, 1982. In 1983, after another expedited hearing and decision procedure that appellants aptly describe as an instant replay of 1982, the Secretary adopted virtually identical amendments to four marketing orders, including the Middle Atlantic order, providing transportation credits for shipments made between April 15, 1983 and June 30, 1983. Emergency Decision on Proposed Amendments to Marketing Agreements and Orders, 48 Fed.Reg. 14,604 (1983). The 1983 amendment to the Middle Atlantic order, identical in all material respects to the 1982 amendment, provided as follows: 19 The net pool obligation of each pool handler for each pool plant, and of each cooperative association handler pursuant to Sec. 1004.9(b) and (c) with respect to milk which was not received at a pool plant, shall be a sum of money computed by the market administrator as follows: 20 .... 21 (f) With respect to milk marketed on and after the effective date hereof through June 1983, subtract the amount obtained by multiplying the pounds of bulk fluid milk products that were transferred or diverted from a pool plant to a nonpool plant and classified as Class II milk pursuant to Sec. 1004.42(d) or Sec. 1004.42(e)(3) by a rate for each truckload of milk so moved that is equal to 3.6 cents per hundredweight for each 10 miles or fraction thereof that the nonpool plant is located more than 200 miles (as determined by the market administrator) from the nearest of the following locations: the city hall in Philadelphia, Pennsylvania; the zero milestone in Washington, D.C.; the city hall in Baltimore, Maryland; the transferor plant; or, for diversions, the pool plant of last receipt for the major portion of the milk on the load or the courthouse of the county where the major portion of the milk so diverted was produced. No credit shall apply to the total quantity of milk so moved to a given nonpool plant by a handler during the month if any portion of the milk is assigned to Class I. 7 C.F.R. Sec. 1004.60 22 Appellants, independent producers under the Middle Atlantic order, filed suit against the Secretary and the Department of Agriculture on April 27, 1983, seeking a declaratory judgment that the 1982 and 1983 amendments were void and injunctive relief that would enable them to recover monies they lost due to the reduction in the blended price that resulted from issuance of the transportation credits. Appellees DI and Pennmarva intervened as defendants. Appellees stipulated that the transportation credits would be repaid if found to be invalid. Appellants sought to proceed as a class consisting of all producers under the Middle Atlantic Georgia (7 C.F.R. Sec. 1007), Tennessee Valley (7 C.F.R. Sec. 1011), and Louisville-Lexington-Evansville (7 C.F.R. Sec. 1046) marketing orders, all of which were amended to provide transportation credits in both 1982 and 1983. The district court deferred action on the motion for class certification pending its resolution of cross-motions for summary judgment. The district court has not ruled on class certification, and the opinion accompanying its order entering summary judgment for appellees referred only to the Middle Atlantic order. Smyser v. Block, 580 F.Supp. 1397 (M.D.Pa.1984). The record indicates that approximately $450,000 in transportation credits were issued under the challenged 1982 and 1983 amendments to the four marketing orders, resulting in an equivalent reduction in the revenues of the more than 13,000 producers in the class appellants here seek to represent.