307 U.S. 533 (1939), 771, United States v. Rock Royal Cooperative, Inc.

Docket Nº:No. 771
Citation:307 U.S. 533, 59 S.Ct. 993, 83 L.Ed. 1446
Party Name:United States v. Rock Royal Cooperative, Inc.
Case Date:June 05, 1939
Court:United States Supreme Court

Page 533

307 U.S. 533 (1939)

59 S.Ct. 993, 83 L.Ed. 1446

United States


Rock Royal Cooperative, Inc.

No. 771

United States Supreme Court

June 5, 1939

Argued April 24, 25, 1939




Under the Agricultural Marketing Agreement Act of 1937, the Secretary of Agriculture, after notice and hearings, made an order for fixing and equalizing minimum prices to be paid producers for milk sold to dealers ("handlers") and disposed of by the latter either in liquid form or as milk products within a "marketing area" comprising the City of New York and adjacent counties.

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Efforts to secure the consent of dealers to a marketing agreement having failed, the order, before its promulgation, was submitted by referendum to producers, the vote resulting, as determined by the Secretary with the approval of the President, in acceptance of the order by at least two-thirds of those producers who, during a representative period, had been engaged in production of milk for the marketing area. The Secretary had found that two-thirds of the milk comes to this area from other States where it is produced, or from the New York through other States, and that the other one-third, produced in New York, becomes "physically and inextricably intermingled" with this "interstate" milk, and that all is handled either in the current of interstate commerce or so as to affect, burden, and obstruct interstate commerce in milk and its products. The Secretary had determined also that prices calculated to give milk a purchasing power for producers equivalent to that enjoyed in the base periods selected by §§ 2 and 8e of the Act would not be reasonable, in view of prices for feed and "other economic conditions," and resorted to the authority granted by § 8c(18), to fix prices so as to "reflect" those factors and "insure a sufficient quantity of pure and wholesome milk and be in the public interest." The order provides a method for computing "minimum prices" or values for the milk received by "handlers' during the computation period, varying according to the class of use to which the milk is put, the butter-fat content, distance of transportation, etc. It then provides for fixing the "uniform price" which producers are actually paid by the proprietary (non-cooperative) "handlers," and which, in substance, is determined by multiplying the amount of milk of each class received by all "handlers' during the period, less certain deductions, by the respective "minimum price," making certain deductions, and dividing the total of the remainders by the total amount of the milk received. For the purpose of equalization, the order requires "handlers' to pay into a "Producer Settlement Fund" the amount by which their purchases at the "minimum prices" exceeds the amount of their purchased milk multiplied by the "uniform price." When the value of a "handler's" purchased milk at the "minimum prices" is less than if bought at the "uniform price," the Fund pays him the difference for distribution to his producers. By the terms of the order, cooperative associations of producers which are also "handlers' need not pay the "uniform price," but may settle with their patrons according to their contracts. The order, by these and other means, sought to bring

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about a fair division among producers of the fluid milk market and utilization of the rest of the supply in other dairy staples, and thus to correct evils arising from overproduction of the fluid milk, price-cutting, etc. Cf. Nebbia v. N.Y., 291 U.S. 502. In a suit by the Government to enforce the order against a proprietary producer of milk and cooperative associations of producers, in which other cooperative associations intervened on the side of the plaintiff, the District Court adjudged the order invalid and dismissed the bill.


1. Suspension of the order by the Secretary under §8c(16)(A) of the Act because of the effect of the decree on its administration and enforcement did not render the proceedings moot, since rights accrued under the order were preserved, and reports, accountings and payments under it were sought from the defendants. P. 555.

2. Contentions that the adoption of the order was influenced by false representations and coercive tactics practiced by certain cooperative associations which intervened in this case are immaterial, as there is no authority in the courts to go behind the conclusion of the Secretary to inquire into the influences which caused the producers to favor the resolution. P. 556.

3. The provision of the Act, § 8(12), authorizing cooperatives to express their approval or disapproval of such orders for all their members or patrons is not unreasonable. P. 559.

4. If the order and Act are otherwise valid, the fact that their effect would be to give cooperatives a monopoly of the market, would not violate the Sherman Act or justify a refusal of an injunction enforcing the order. P. 560.

5. The objection that the Act does not authorize the provision of the order exempting cooperatives from payment of "uniform prices" required to be paid by proprietary "handlers" cannot be taken by defendants who are themselves cooperatives, but can be taken by a defendant proprietary. P. 560.

6. This exemption for cooperatives is authorized by § 8c(F) of the Act, which provides that

Nothing . . . shall . . . prevent a cooperative . . . from . . . making distribution [of net proceeds] . . . in accordance with the contract between the association and its producers.

P. 561.

7. The objection that, in authorizing payments to cooperatives and certain other "handlers" from the Producer Settlement Fund, the order is without statutory basis cannot be raised by "handlers,"

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whether proprietary or cooperative, since "handlers " have no financial interest in that fund. P. 561.

8. Section 8e(5) of the Act, in sanctioning exemptions of producer cooperative associations from the duty imposed by the order on other "handlers" of paying a uniform price to producers is not unconstitutionally discriminative. P. 562.

This results from the nature of cooperatives, the policy of Congress in their regard, their relations to their members, and to price-cutting, as compared with ordinary business corporations.

9. No unconstitutional discrimination is produced by provisions of the order, sanctioned by the Act, which limit minimum prices to milk sold in the marketing area or which passes through a plant in the marketing area, thereby permitting "handlers" to purchase other milk from the same production area at any price they may please. P. 565.

If such "unpriced" milk be sold by the "handler" outside of the market area designated by the order for a price greater than can be obtained within the area, thus enabling the "handler" to replace losses on sales within the area and still be in a position to pay the "uniform price" for milk supplied to the area, this is a competitive situation which the order did not create, and with which it does not deal.

10. Special differentials on milk coming from certain counties located most favorably to the marketing area, allowed by the order under § 8e(5)(A) of the Act, are not shown to discriminate unduly between producers. The Secretary's determination of their propriety, made on substantial evidence, is supported by a strong presumption. P. 567.

11. Where milk sold by the dairy farmer locally and milk from other States 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 created by low prices, the power of Congress extends also to the local sales. P. 568.

12. The federal commerce power, where it exists, is complete and perfect. P. 569.

13. Congress has power over the prices of milk in interstate commerce of the same nature and extent as the power retained by the States over their internal commerce in milk. Nebbia v. New York, 291 U.S. 502. P. 569.

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14. The provisions of the Act and the order which require a "handler" whose purchases at the "minimum price" exceed their value at the "uniform price" to pay the surplus into the Producer Settlement Fund, instead of paying it to his patrons, do not deprive him of liberty and property without due process. P. 571.

This pooling device is ancillary to the price regulation; both are designed to foster and protect interstate commerce by smoothing out the difficulties of milk surplus and cut-throat competition which burdened the marketing. P. 572.

As Congress would have the right to limit the quantities of milk in interstate commerce, it may permit its movement on these terms of pool settlement.

15. The Act declares a definite policy to restore parity prices for farmers; directs the Secretary to issue orders to that end whenever he has reason to believe they will tend to effectuate that policy; limits the terms of such orders specifically, while allowing flexible auxiliary administrative discretion; confines its application to specified farm products and the orders to such areas as are "practicable;" and requires preliminary hearings and findings, with right to object to the Secretary and appeal to the courts. In these respects, it sets up sufficient standards, and does not delegate legislative power in violation of the Constitution. P. 574.

Even though procedural safeguards in the Act cannot validate an unconstitutional delegation, they do protect against arbitrary abuse of properly delegated authority. P. 576.

16. Section 8c(18) of the Act, which provides that, whenever he finds upon hearing and evidence that...

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