Farmland Dairies v. COMMISSIONER OF NEW YORK STATE

Decision Date08 January 1987
Docket NumberNo. CV 86-1933.,CV 86-1933.
Citation650 F. Supp. 939
PartiesFARMLAND DAIRIES and Fair Lawn Dairies, Inc., Plaintiffs, v. COMMISSIONER OF the NEW YORK STATE DEPARTMENT OF AGRICULTURE AND MARKETS, and Joseph Gerace, Former Commissioner of New York State Department of Agriculture and Markets, Defendants.
CourtU.S. District Court — Eastern District of New York

COPYRIGHT MATERIAL OMITTED

Friedman & Wittenstein by Andrew A. Wittenstein, New York City, for plaintiffs.

Robert Abrams, New York State Atty. Gen. by Barrie L. Goldstein, Dept. of Law, New York City, for defendants.

MEMORANDUM AND ORDER

WEXLER, District Judge.

The founding fathers of this nation recognized the importance of maintaining a federal watch over the flow of interstate commerce, lest the desire of each state to further itself economically without regard to the consequences suffered by a sister state lead inevitably to destructive divisiveness between the several states. This concern overrode even the fear that individual states would lose their power and independence to the strong federal union. It was apparent at the time the United States Constitution was adopted that the states' surrender of power to regulate interstate commerce was essential for the development of this country as a viable, enduring entity capable of taking its place as a great force among the other nations. To avoid the outbreak of economic warfare between the states and ensure this nation's ability to function as a united sovereign, the power to regulate matters of interstate commerce was vested in congress through the commerce clause of the Constitution. The significance and necessity of the protections provided by the commerce clause remain equally apparent today, as this nation prepares to celebrate the bicentennial of the Constitution's adoption. The commerce clause continues to be one of the most plenary sources of federal power, as well as the cause of a multitude of state and federal litigation.

New York dairy legislation has been a familiar player in commerce clause litigation. In the present case, Farmland Dairies and Fairlawn Dairies, Inc. (collectively "Farmland"), two New Jersey companies, are challenging the application of § 258-c of the New York Agriculture and Markets Law to plaintiffs' request for an extension of their licenses to distribute milk in New York State to include New York, Bronx, Kings, and Queens Counties.1 Farmland originally commenced this lawsuit against Joseph Gerace, individually and in his official capacity as the Commissioner of the New York State Department of Agriculture and Markets, seeking damages, and equitable and declaratory relief for actions allegedly in violation of the commerce clause. On January 2, 1987, however, Gerace resigned from his post as Commissioner. Farmland has indicated its desire to pursue its action for damages against Gerace in his individual capacity, but any claims brought against Gerace in his official capacity as Commissioner must now run against his successor, since upon a public official's resignation, his successor is automatically substituted as a party. Fed. R.Civ.P. 25(d).2

Defendants now move, by way of a summary judgment motion, for a declaration that Farmland's commerce clause claim is moot, and that its claim for damages is barred by the eleventh amendment to the Constitution or, alternatively, by the doctrine of official immunity. Farmland crossmoves for summary judgment in the form of an order declaring Gerace's application of § 258-c to Farmland's license request to be in violation of the commerce clause of the Constitution and for a preliminary and permanent injunction against the Commissioner from so applying the statute.

I. FARMLAND'S COMMERCE CLAUSE CLAIM

Section 258-c provides in pertinent part:

No license shall be denied to a person not now engaged in business as a milk dealer, or for the continuation of a now existing business ... unless the commissioner finds by a preponderance of the evidence ... that the issuance of the license will tend to a destructive competition in a market already adequately served; or ... that the issuance of the license is not in the public interest.

N.Y.Agric. & Mkts.Law § 258-c (McKinney 1972 and Supp.1987). Farmland contends that Gerace used § 258-c as a vehicle to delay and ultimately prevent Farmland from becoming a market participant in the four New York State counties to which its applications pertain. As the material facts concerning Farmland's commerce cause claim are not in dispute, this issue is ripe for a final adjudication on the merits. Fed. R.Civ.P. 56.

The commerce clause states, "The Congress shall have the power ... to regulate Commerce with foreign Nations, and among the several States, and with Indian Tribes." U.S.CONST. art. I, § 8, cl. 3. In considering whether state legislation is violative of the commerce clause, a court must determine if the state law constitutes "economic protectionism." Minnesota v. Clover Leaf Creamery, 449 U.S. 456, 471 n. 15, 101 S.Ct. 715, 727 n. 15, 66 L.Ed.2d 659, reh'g denied, 450 U.S. 1027, 101 S.Ct. 1735, 68 L.Ed.2d 222 (1981) (citing City of Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S.Ct. 2531, 2535, 57 L.Ed.2d 475 (1978)). Economic protectionism exists where the challenged state legislation was promulgated for the purpose of discriminating against articles that travel in interstate commerce, Hunt v. Washington Apple Advertising Commission, 432 U.S. 333, 352-53, 97 S.Ct. 2434, 2446, 53 L.Ed.2d 383 (1977), or where the legislation, although valid in its purpose, has a discriminatory effect on interstate commerce, City of Philadelphia, 437 U.S. at 624, 98 S.Ct. at 2535. Where either mode of discrimination is found, there is a "virtually per se rule of invalidity." Id. Even a statute that is designed to effectuate "even handedly" a legitimate state policy and has only an "incidental" effect on the flow of commerce may not withstand challenge "if the burden imposed on commerce is clearly excessive in relation to the putative local benefits." Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174 (1970).

A. PURPOSE

The Court's first inquiry is whether the purpose of § 258-c, or more precisely, the purpose of Gerace's actions that Farmland now challenges, was to discriminate against articles that travel in interstate commerce.3 A decision by a commissioner to deny an applicant entry into the New York milk market is obviously designed, at least in part, to regulate the inflow of milk into the state. However, although the commerce clause vests in congress the power to regulate interstate commerce, it does not place an absolute prohibition on states from promulgating or enforcing laws that do the same. H.P. Hood & Sons v. DuMond, 336 U.S. 525, 535, 69 S.Ct. 657, 663, 93 L.Ed. 865 (1949). The Supreme Court has recognized the health and safety of state inhabitants as a legitimate concern upon which laws regulating interstate commerce may be based. Id., 336 U.S. at 532, 69 S.Ct. at 662. See also, e.g., Raymond Motor Transportation Inc. v. Rice, 434 U.S. 429, 440, 98 S.Ct. 787, 793, 54 L.Ed.2d 664 (1978); Great A & P Tea Co. v. Cottrell, 424 U.S. 366, 371, 96 S.Ct. 923, 927, 47 L.Ed.2d 55 (1976). The Court has consistently made clear, nonetheless, that state action designed to place one state in a position of economic isolation from or economic advantage over other states is violative of the commerce clause. Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 36, 100 S.Ct. 2009, 2015, 64 L.Ed.2d 702 (1980); Hunt, 432 U.S. at 350, 97 S.Ct. at 2445.

In denying Farmland an extension of its license to allow it to sell milk in New York, Bronx, Kings, and Queens Counties, Gerace found, in a determination handed down on December 11, 1986, that Farmland's entry into the market would "tend to a destructive competition in markets already adequately served and would not be in the public interest." Commissioner's Determination, State of New York Department of Agriculture and Markets 21 (Dec. 11, 1986). In reaching this decision, Gerace found that substantial competition between New York milk dealers already exists and that Farmland's presence in the market would intensify competition such that processors and distributors would weaken financially. The former Commissioner concluded that the New York market is at present adequately served and that the addition of yet another competitor would result in prior dealers being pushed out of the market.

It is clear from Gerace's report that his decision to deny Farmland's license applications was based on economic protectionism. Regardless of whether it be to prevent the New York milk dealers from losing revenue to a New Jersey dealer or rooted in concern that an adequate supply of milk be available for New York consumers, the purpose underlying the Commissioner's determination is discriminatory. Economic protectionism is not restricted to governmental decisions designed to advance the interests of in-state producers but extends as well to actions that favor the needs of in-state consumers for an adequate supply of goods over those of out-of-state consumers. Hood, 336 U.S. at 535-36, 69 S.Ct. at 664. A state statute, regulation, or other governmental decision can withstand commerce clause challenge only if it is properly grounded on a legitimate health or safety concern. Id. Any relationship between the purpose espoused by Gerace, i.e., controlling competition, and a health or safety concern, such as ensuring the quality and wholesomeness of milk sold in New York, is tenuous at best, and does not warrant the burden that denying Farmland entry into the New York market places on interstate commerce. See Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 523, 55 S.Ct. 497, 500, 79 L.Ed. 1032 (1935).

The Court's conclusion that the purpose underlying Gerace's denial of Farmland's license was discriminatory and runs afoul of the commerce clause is supported by the...

To continue reading

Request your trial
9 cases
  • Tetra Technologies, Inc. v. Harter, 92 Civ. 7988 (VLB).
    • United States
    • U.S. District Court — Southern District of New York
    • June 15, 1993
    ...legitimate local need. See Hunt, supra; Toomer v. Witsell, 334 U.S. 385, 68 S.Ct. 1156, 92 L.Ed. 1460 (1948); Farmland Dairies v. Commissioner, 650 F.Supp. 939 (E.D.N.Y.1987); see Underhill Associates v. Coleman, 504 F.Supp. 1147 (E.D.Va.1981), aff'd 674 F.2d 293 (4th Cir.1982). Where a see......
  • Ideal Dairy Farms, Inc. v. Farmland Dairy Farms, Inc.
    • United States
    • New Jersey Superior Court — Appellate Division
    • February 27, 1995
    ...attempt to gain entry into the markets of New York, Bronx, Kings, and Queens counties. Farmland Dairies v. Comm'r of New York State Dep't of Agriculture and Markets, 650 F.Supp. 939 (E.D.N.Y.1987), appeal by proposed interveners dismissed, 847 F.2d 1038 (2d Cir.1988). The federal court gran......
  • STATE OF NEW YORK BY ABRAMS v. Brown
    • United States
    • U.S. District Court — District of New Jersey
    • October 11, 1989
    ...York to open its milk market to out-of-state (particularly, New Jersey) dealers, Farmland Dairies v. Commissioner of New York State Department of Agriculture and Markets, 650 F.Supp. 939, 951 (E.D.N.Y.1987)5; this decision has allegedly resulted in reduced profits for New York milk DISCUSSI......
  • Carpenter v. American Excelsior Co.
    • United States
    • U.S. District Court — Western District of Michigan
    • January 8, 1987
    ... ... Dahlberg state that he liked his salesmen "young, lean and mean." ... ...
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT