512 U.S. 186 (1994), 93-141, West Lynn Creamery, Inc. v. Healy

Docket Nº:Case No. 93-141
Citation:512 U.S. 186, 114 S.Ct. 2205, 129 L.Ed.2d 157, 62 U.S.L.W. 4518
Party Name:WEST LYNN CREAMERY, INC., et al. v. HEALY, COMMISSIONER OF MASSACHUSETTS DEPARTMENT OF FOOD AND AGRICULTURE
Case Date:June 17, 1994
Court:United States Supreme Court
 
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Page 186

512 U.S. 186 (1994)

114 S.Ct. 2205, 129 L.Ed.2d 157, 62 U.S.L.W. 4518

WEST LYNN CREAMERY, INC., et al.

v.

HEALY, COMMISSIONER OF MASSACHUSETTS DEPARTMENT OF FOOD AND AGRICULTURE

Case No. 93-141

United States Supreme Court

June 17, 1994

Argued March 2, 1994

CERTIORARI TO THE SUPREME JUDICIAL COURT OF MASSACHUSETTS

Syllabus

A Massachusetts pricing order subjects all fluid milk sold by dealers to Massachusetts retailers to an assessment. Although most of that milk is produced out of State, the entire assessment is distributed to Massachusetts dairy farmers. Petitioners—licensed dealers who purchase milk produced by out-of-state farmers and sell it within Massachusetts—sued to enjoin enforcement of the order on the ground that it violated the Federal Commerce Clause, but the state court denied relief. The Supreme Judicial Court of Massachusetts affirmed, concluding that the order was not facially discriminatory, applied evenhandedly, and only incidentally burdened interstate commerce, and that such burden was outweighed by the "local benefits" to the dairy industry.

Held:

The pricing order unconstitutionally discriminates against interstate commerce. Pp. 192-207.

(a) The order is clearly unconstitutional under this Court's decisions invalidating state laws designed to benefit local producers of goods by creating tariff-like barriers that neutralized the competitive and economic advantages possessed by lower cost out-of-state producers. See, e. g., Bacchus Imports, Ltd. v. Dias, 468 U.S. 263. The "premium payments" are effectively a tax making milk produced out of State more expensive. Although that tax also applies to milk produced in Massachusetts, its effect on Massachusetts producers is entirely (indeed more than) offset by the subsidy provided exclusively to Massachusetts dairy farmers, who are thereby empowered to sell at or below the price charged by lower cost out-of-state producers. Pp. 192-197.

(b) Respondent's principal argument—that, because both the local subsidy and nondiscriminatory-tax components of the order are valid, the combination of the two is equally valid—is rejected. Even granting respondent's assertion that both components of the pricing order would be constitutional standing alone, the order must still fall because it is funded principally from taxes on the sale of milk produced in other States and therefore burdens interstate commerce. More fundamentally, the argument is logically flawed in its assumption that the lawfulness of each of two acts establishes the legality of their combination.

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Indeed, by conjoining a tax and a subsidy, Massachusetts has created a program more dangerous to interstate commerce than either part alone: The Commonwealth's political processes cannot be relied on to prevent legislative abuse where dairy farmers, one of the powerful in-state interests that would ordinarily be expected to lobby against the order premium as a tax raising milk prices, have been mollified by the subsidy. Pp. 198-202.

(c) Respondent's second argument—that the order is not discriminatory because the dealers who pay premiums are not competitors of the farmers who receive disbursements—cannot withstand scrutiny. The imposition of a differential burden on any part of the stream of commerce—from wholesaler to retailer to consumer—is invalid because a burden placed at any point will result in a disadvantage to the out-of state producer. Pp. 202-203.

(d) If accepted, respondent's third argument—that the order is not protectionist because the program's costs are borne only by Massachusetts dealers and consumers and its benefits are distributed exclusively to Massachusetts farmers—would undermine almost every discriminatory tax case. State taxes are ordinarily paid by in-state businesses and consumers, yet if they discriminate against out-of-state products they are unconstitutional. More fundamentally, the argument ignores the fact that Massachusetts dairy farmers are part of an integrated interstate market. The obvious impact of the order on out-of-state production demonstrates that it is simply wrong to assume that it burdens only in-state consumers and dealers. Pp. 203-204.

(e) Acceptance of respondent's final argument—that the order's incidental burden on commerce is justified by the local benefit of saving the financially distressed dairy industry—would make a virtue of the vice that the rule against discrimination condemns. Preservation of local industry by protecting it from the rigors of interstate competition is the hallmark of the economic protectionism that the Commerce Clause prohibits. Pp. 204-207.

415 Mass. 8, 611 N.E.2d 239, reversed.

Stevens, J., delivered the opinion of the Court, in which O'Connor, Kennedy, Souter, and Ginsburg, JJ., joined. Scalia, J., filed an opinion concurring in the judgment, in which Thomas, J., joined, post, p. 207. Rehnquist, C. J., filed a dissenting opinion, in which Blackmun, J., joined, post, p. 212.

Steven J. Rosenbaum argued the cause for petitioners. With him on the briefs were Michael L. Altman and RobertA. Long, Jr.

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Douglas H. Wilkins, Assistant Attorney General of Massachusetts, argued the cause for respondent. With him on the brief were Scott Harshbarger, Attorney General, and Eric E. Smith, Assistant Attorney General.[*]

Justice Stevens delivered the opinion of the Court.

A Massachusetts pricing order imposes an assessment on all fluid milk sold by dealers to Massachusetts retailers. About two-thirds of that milk is produced out of State. The entire assessment, however, is distributed to Massachusetts dairy farmers. The question presented is whether the pricing order unconstitutionally discriminates against interstate commerce. We hold that it does.

I

Petitioner West Lynn Creamery, Inc., is a milk dealer licensed to do business in Massachusetts. It purchases raw milk, which it processes, packages, and sells to wholesalers, retailers, and other milk dealers. About 97% of the raw milk it purchases is produced by out-of-state farmers. Petitioner LeComte's Dairy, Inc., is also a licensed Massachusetts milk dealer. It purchases all of its milk from West Lynn and distributes it to retail outlets in Massachusetts.

Since 1937, the Agricultural Marketing Agreement Act, 50 Stat. 246, as amended, 7 U.S.C. § 601 et seq., has authorized the Secretary of Agriculture to regulate the minimum prices

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paid to producers of raw milk by issuing marketing orders for particular geographic areas.[1] While the Federal Government sets minimum prices based on local conditions, those prices have not been so high as to prevent substantial competition among producers in different States. In the 1980's and early 1990's, Massachusetts dairy farmers began to lose market share to lower cost producers in neighboring States. In response, the Governor of Massachusetts appointed a Special Commission to study the dairy industry. The commission found that many producers had sold their dairy farms during the past decade and that if prices paid to farmers for their milk were not significantly increased, a majority of the remaining farmers in Massachusetts would be "forced out of business within the year." App. 13. On January 28, 1992, relying on the commission's report, the Commissioner of the Massachusetts Department of Food and Agriculture (respondent) declared a State of Emergency.

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In his declaration he noted that the average federal blend price[2] had declined from $14.67 per hundred pounds (cwt) of raw milk in 1990 to $12.64/cwt in 1991, while costs of production for Massachusetts farmers had risen to an estimated average of $15.50/cwt. Id., at 27. He concluded:

"Regionally, the industry is in serious trouble and ultimately, a federal solution will be required. In the meantime, we must act on the state level to preserve our local industry, maintain reasonable minimum prices for the dairy farmers, thereby ensure a continuous and adequate supply of fresh milk for our market, and protect the public health." Id., at 31.

Promptly after his declaration of emergency, respondent issued the pricing order that is challenged in this proceeding.[3]

The order requires every "dealer"[4 ] in Massachusetts to make a monthly "premium payment" into the "Massachusetts Dairy Equalization Fund." The amount of those payments is computed in two steps. First, the monthly "order premium" is determined by subtracting the federal blend price for that month from $15 and dividing the difference by three; thus if the federal price is $12/cwt, the order premium is $1/cwt.[5] Second, the premium is multiplied by the amount

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(in pounds) of the dealer's Class I[ 6] sales in Massachusetts. Each month the fund is distributed to Massachusetts producers.[7] Each Massachusetts producer receives a share of the total fund equal to his proportionate contribution to the State's total production of raw milk.[8]

Petitioners West Lynn and LeComte's complied with the pricing order for two months, paying almost $200,000 into the Massachusetts Dairy Equalization Fund. Id., at 100,105. Starting in July 1992, however, petitioners refused to make the premium payments, and respondent commenced license revocation proceedings. Petitioners then filed an action in state court seeking an injunction against enforcement of the order on the ground that it violated the Commerce Clause of the Federal Constitution. The state court denied relief and respondent conditionally revoked their licenses.

The parties agreed to an expedited appellate procedure, and the Supreme Judicial Court of Massachusetts transferred the cases to its own docket. It affirmed, because it concluded that "the pricing order does not discriminate on its face, is...

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