666 F.2d 158 (5th Cir. 1982), 80-2101, Suntex Dairy v. Block

Docket Nº:80-2101.
Citation:666 F.2d 158
Party Name:SUNTEX DAIRY, et al., Plaintiffs-Appellants, v. John R. BLOCK, Secretary of Agriculture of the United States, Defendant-Appellee.
Case Date:January 21, 1982
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 158

666 F.2d 158 (5th Cir. 1982)

SUNTEX DAIRY, et al., Plaintiffs-Appellants,

v.

John R. BLOCK, Secretary of Agriculture of the United

States, Defendant-Appellee.

No. 80-2101.

United States Court of Appeals, Fifth Circuit

January 21, 1982

Page 159

[Copyrighted Material Omitted]

Page 160

Atlas & Hall, Gary Gurwitz, Ballard Bennett, McAllen, Tex., for plaintiffs-appellants.

Raymond W. Fullerton, Terrence G. Jackson, U. S. Dept. of Agriculture, Washington, D. C., M. Angela Flores, Asst. U. S. Atty., Houston, Tex., John H. Sandor, Aaron Baer Kahn, Irene Marietta Solet, Dept. of Agriculture, Washington, D. C., for defendant-appellee.

Sydney Berde, St. Paul, Minn., for amicus Associated Milk Producers.

Appeal from the United States District Court for the Southern District of Texas.

Before TATE and WILLIAMS, Circuit Judges. [*]

TATE, Circuit Judge:

The plaintiff milk producers brought this action to challenge an order by the Secretary of Agriculture, which merged six milk marketing orders in Texas into a single new order regulating the former six-market area and additional previously unregulated counties. The district court held that substantial evidence supported the Secretary's determinations that (a) the merged order tends to effectuate the policy of the Act, (b) the failure of the milk handlers to approve the agreement tends to prevent the effectuation of the policy of the Act, and (c) issuance of the order is the only practical means of advancing the interests of the producers in the area. On appeal, the plaintiffs argue that all three determinations were unsupported by substantial evidence, and were arbitrary, capricious, and an abuse of the Secretary's discretion. We find that the Secretary's determination that the merged order tends to effectuate the policy of the Act was supported by substantial evidence, and was not arbitrary, capricious, or an abuse of discretion, and that his further determinations concerning the effect of handler failure to approve the marketing arrangement and the necessity of the order were discretionary acts not subject to review by the courts except for procedural irregularity or fraud. We therefore affirm.

The Merger of the Texas Milk Marketing Orders

The federal milk marketing regulation provisions embodied in the Agricultural Marketing Agreement Act of 1937, 7 U.S.C. § 601 et seq. ("the Act") and various federal regulations present a highly complex scheme. Its purposes are to establish and maintain orderly marketing conditions for the covered commodities that will result in parity prices to farmers, to protect consumers in approaching the parity prices, to establish and maintain standards for commodities, to insure an orderly flow of the supply of commodities to market, and to avoid the disruption of orderly marketing through continued regulation. 1 Regulation is accomplished, in part, by the issuance of orders by the Secretary of Agriculture ("the Secretary") that establish a uniform minimum price to be paid to "producers" by "handlers," (i. e., those dairy farmers who manufacture raw milk into bottled milk and other products). 2

The Act provides that the Secretary shall issue a proposed order if, after notice and a hearing, he finds, and sets forth in the order, that the issuance of such order "will

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tend to effectuate the declared policy" of the Act. 3 An order may become effective if it is approved by a requisite proportion of the affected producers, 4 and if at least 50 percent of the affected handlers enter into a marketing agreement. If, however, the handlers fail or refuse to enter into a marketing agreement, the order may nevertheless become effective if the Secretary determines that lack of handler approval "tends to prevent the effectuation of the declared policy of the Act," 5 that the order is "the only practical means of advancing the interests of the producers," 6 and that the requisite number of affected producers approve the order. 7 Under the statutory scheme, a hearing is specifically required for the determination as to whether the issuance of the proposed order will tend to effectuate the purposes of the Act (the "tendency" hearing), 7 U.S.C. § 608c(3) and (4); however, the statute does not require an additional hearing for the Secretary's further determinations about refusal of handler approval and about the necessity of the order (the "necessity" determination), 7 U.S.C. § 608c(9)(A) and (B).

Prior to the issuance of the merged order challenged here, Texas was regulated by six separate milk marketing orders. 8 The plaintiffs are independent milk producers who were regulated under the former Corpus Christi Federal Milk Marketing Order. After a nine-day hearing, the Secretary promulgated a proposed order in which he found, on "the basis of evidence introduced at the hearing and the record thereof" that the issuance of an order that merged the six Texas orders, together with several previously unregulated areas, "will tend to effectuate the declared policy of the Act." 9 A final order was then issued in which the Secretary determined that:

(1) The refusal or failure of handlers ... of more than 50 percent of the milk, which is marketed within the Texas marketing area, to sign a proposed marketing agreement, tends to prevent the effectuation of the declared policy of the Act;

(2) The issuance of the Texas order, which amends and merges the aforesaid orders, is the only practical means pursuant to the declared policy of the Act of advancing the interests of producers as defined in the Texas order;

(3) The issuance of the Texas order ... is approved or favored by at least two-thirds of the producers who participated in a referendum and who during the determined representative period were engaged in the production of milk for sale in the Texas marketing area. 10

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The practical effect of this merged order is that the Corpus Christi producers will receive a lower minimum price for their milk than they received under the separate order that formerly regulated them.

The plaintiffs then brought an action in district court in which they alleged that the merged order was invalid because it was not supported by substantial evidence. 11 The district court held that the plaintiffs lacked standing to challenge the substantive merits of the milk marketing order. We reversed and remanded, Suntex Dairy v. Bergland, 591 F.2d 1063 (5th Cir. 1979). On remand, the district court found that all determinations by the Secretary were supported by substantial evidence, which ruling is the subject of the present appeal.

The Secretary's Determination that the Merged Order Tends to Effectuate the Policy of the Act

The plaintiffs contend first that the Secretary's determination that the merged order would tend to effectuate the purposes of the Act was unsupported by substantial evidence and was arbitrary, capricious, and an abuse of discretion. 12 We find this contention without merit.

Our inquiry into the Secretary's decision that the merged order tends to effectuate the policy of the Act is limited, as in the case of judicial review of other agency decisions involving an adjudicatory hearing, to determining whether the agency's findings and conclusions were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," 5 U.S.C. § 706(2)(A), or "unsupported by substantial evidence," 5 U.S.C. § 706(2)(E). See, e. g., Refrigerated Transport Co., Inc. v. I.C.C., 616 F.2d 748, 751 (5th Cir. 1980). The "arbitrary and capricious" standard is narrow and permits a reviewing court merely to consider whether the agency decision "was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823-24, 28 L.Ed.2d 136 (1971). The "substantial evidence" standard requires a determination that agency findings are supported by "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. v. N.L.R.B., 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938). If the evidence of record is such that it supports inconsistent inferences and conclusions, the courts must defer to administrative choice. Illinois Central Railroad Co. v. Norfolk & Western Railway Co., 385 U.S. 57, 69, 87 S.Ct. 255, 262, 17 L.Ed.2d 162 (1966). The Secretary's decision that the proposed order tended to effectuate the policy of the Act clearly survives judicial review under both the "arbitrary and capricious" standard and the "substantial evidence" standard.

After notice and a hearing required under 7 U.S.C. § 608c(3) were provided, the Secretary found that although the six orders were distinguishable when originally promulgated, "changes in marketing practice since that time ... have caused these separately regulated areas to become substantially interrelated in both the distribution and procurement of milk." 13 There was abundant evidence presented at the hearing from which the Secretary could conclude that the former six-market area was characterized by intermarket competition in distribution, common production areas,

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and common reserve supply. 14 In addition, the evidence also revealed that...

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