Green Valley Creamery v. United States, 3461-3465.

• Citation: 108 F.2d 342
• Decision Date: 15 December 1939
• Docket Number: No. 3461-3465.,3461-3465.
• Parties: GREEN VALLEY CREAMERY, Inc., v. UNITED STATES et al., and four other cases.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

108 F.2d 342 (1939)

GREEN VALLEY CREAMERY, Inc., v. UNITED STATES et al., and four other cases.

Nos. 3461-3465.

Circuit Court of Appeals, First Circuit.

December 15, 1939.

David Greer, of Boston, Mass. (Greer, Dalton & Crane, of Boston, Mass., on the brief), for appellants.

John A. Canavan, Asst. U. S. Atty., of Boston, Mass. (Thurman Arnold, Asst. Atty. Gen., and Hugh B. Cox and James C. Wilson, Sp. Assts. to Atty. Gen., on the brief), for appellees.

Before WILSON and MAGRUDER, Circuit Judges, and McLELLAN, District Judge.

MAGRUDER, Circuit Judge.

These were suits in equity brought by the United States of America and the Secretary of Agriculture seeking mandatory injunctions requiring the defendants to comply with the provisions of Order No. 4 as amended, issued by the Secretary under the authority of the Agricultural Marketing Agreement Act of 1937. 50 Stat. 246, 7 U.S.C. § 608c, 7 U.S.C.A., § 608c. The Order regulates the marketing of milk in the Greater Boston Marketing Area. Defendants are dealers in or handlers of milk in that area. Temporary injunctions were issued by the District Court. United States v. Whiting Milk Co., D.C., 21 F.Supp. 321. Upon appeal, these injunctions were stayed in part by an order of supersedeas pending final determination on the merits. H. P. Hood & Sons, Inc. v. United States, 1 Cir., 97 F.2d 677. The District Court referred these cases together with twenty-five others of the same sort to a Master for hearing and findings of fact. The Master's report came in and was duly confirmed by the court, which issued final decrees permanently restraining the numerous defendants from violating any of the terms of Order No. 4 as amended. United States v. H. P. Hood & Sons, Inc., D.C., 26 F. Supp. 672. Thereafter, two of this group of thirty cases, the Hood and Whiting Milk cases, after being docketed on appeal in the Circuit Court of Appeals, went up on certiorari to the Supreme Court, which affirmed the decrees of the District Court. H. P. Hood & Sons, Inc. v. United States, 307 U.S. 588, 59 S.Ct. 1019, 83 L.Ed. 1478. See also United States v. Rock Royal Cooperative, Inc., 307 U.S. 533, 59 S.Ct. 993, 83 L.Ed. 1446. In view of the sweeping nature of the Supreme Court's opinions in these cases, this court, upon motion by the Government in the cases now before us, entered an order vacating the supersedeas which the District Court had issued staying in part the operation of its final decrees pending decision on appeal. Green Valley Creamery, Inc. v. United States, 1 Cir., 105 F.2d 754.

Detailed quotations from the Act and the Order are set forth in the opinions of the Supreme Court in the Hood and Rock Royal cases, supra, and need not be repeated here. Article III of the Order sets up classifications of milk according to the use to which it is put, because such use primarily determines the market value of the milk. Class I embraces fluid milk disposed of for consumption in that form as an article of diet. Class II embraces milk disposed of for non-fluid purposes, such as the manufacture of butter or ice cream. Article IV establishes minimum prices to be paid by handlers of Class I and Class II milk, respectively. While in the net result these prices are paid by handlers for the milk that they buy and dispose of, the individual producers do not receive payment on this basis. The Order creates a market-wide pool as an equalization device under which the individual producer is paid a uniform composite price for the milk which he sells, based upon the use made of all the milk sold in the Greater Boston Marketing Area. A Market Administrator computes for each delivery period the use value of the milk sold or used by each handler, multiplying the quantity of such milk in each class by the applicable class price and adding together the two sums (Art. VII, Sec. 1). Then the Administrator combines into one grand total the respective values of the milk sold or used by each handler, and after adjustments for various differentials the adjusted total is divided by the total quantity of milk. The result is a "blended" or uniform price which all producers are to receive for milk delivered by them during the period, regardless of the use to which any particular milk is devoted.

The blended price is less than the Class I price and more than the Class II price as fixed by Article IV of the Order. A handler who has more than the market average of Class II milk sales during a particular delivery period will have to pay to his producers at the blended price an amount greater than the total amount charged to him as the use value of the milk he has received from producers during that period. Such a handler will therefore be credited with the difference in his producer settlement account on the books of the Market Administrator and becomes entitled to receive from the Administrator an equalization payment out of the pool. On the other hand, a handler who has more than the market average of Class I fluid milk sales during the same delivery period will pay to his producers at the blended price an amount less than the total amount charged to him as the use value of the milk he has received from producers during the period. Such a handler will therefore be debited with the difference in his producer settlement account, and is required by Article VIII, Section 1, of the Order to pay this amount into the pool. Omitting refinements, the debits and credits in the pool should normally balance out in each delivery period.

This market-wide equalization pool is the core of the regulatory scheme set up by Order No. 4 as amended.

Appellants may no longer question the constitutionality of the Act nor the validity of most of the terms of Order No. 4 as amended. H. P. Hood & Sons, Inc. v. United States, 307 U.S. 588, 59 S.Ct. 1019, 83 L.Ed. 1478. Argument was addressed to us on three provisions of the Order which are asserted to be unauthorized by the Act. These points were raised in the District Court in the Hood and Whiting Milk cases but were not pressed before the Supreme Court. Hence, they are still open for consideration here. The portions of the Act now relevant are set forth in the footnote.¹

Article IV of the Order provides for two sets of minimum prices, one to be applicable if the purchase is from an association of producers, and the other if the purchase is from producers not members of an association. It is contended that under Section 8c (5) (A) of the Act the minimum price must be uniform, subject only to certain adjustments therein set forth, none of which is dependent upon the class of producers from which the milk is received. In promulgating the Order the Secretary of Agriculture found as a fact, upon evidence introduced at the administrative hearings, "that the differential in prices to associations of producers, and producers, is justified as a reasonable allowance for services actually performed by associations of producers." It is not denied that there was evidence before the Secretary warranting a finding that such a differential had customarily been applied in the market area, for the reason that milk purchased from associations of producers has an enhanced value due to the fact that many marketing services have already been performed by such associations. In view of these facts, we think that the Government is right in its contention that this differential in prices applicable to milk received from producers and milk received from associations of producers is authorized by Section 8c (5) (A) (1) of the Act as a market differential customarily applied by handlers. The phrase "market differential," undefined as it is in the Act, is reasonably susceptible of such an interpretation. If further support for this conclusion were needed, it would be found in the fact that the Secretary in promulgating the original Order No. 4 on February 9, 1936, construed Section 8c (5) (A) of the Agricultural Adjustment Act of 1933, as amended (49 Stat. 754), as authorizing such a differential in price as between producers and associations of producers, and Congress subsequently re-enacted without amendment this portion of that Act in the Agricultural Marketing Agreement Act of 1937. 50 Stat. 246. It is hardly significant that this particular price differential is not specifically called a market differential in the Order.

Next, the appellants take exception to a provision of Article VII, Section 2 of the Order, specifying the method of computing the blended or uniform price. This section excludes from such computation the milk of handlers who are in default in the required equalization payments "for milk received during the delivery period next preceding but one." Each month is divided into two delivery periods. By Article VII, Section 7, the Administrator is required to compute and announce on or before the twelfth day after the end of each delivery period the blended price applicable for that period. Handlers are not required to make the payments required by Article VIII until the twenty-fifth day after the end of each delivery period. Therefore, at the time the Administrator computes the blended price for the preceding delivery period, handlers are not yet in default in respect to that period. For this reason the Order requires the Administrator to ascertain whether a particular handler is in default on payments required for milk received during the delivery period next preceding but one. If such delinquency exists, the milk of that handler is excluded from the current computation of the blended price. The purpose of this provision seems to be to minimize the risk that the equalization pool will fail to be self-liquidating for a particular delivery period on account of defaults by handlers obligated to the pool in the manner previously described in this opinion. "If a handler has so failed in one delivery period it is reasonable to expect that he may repeat his failure in the next."

The Act does not...