American Dairy of Evansville, Inc. v. Bergland

• Decision Date: 01 July 1980
• Docket Number: No. 77-1926,77-1926
• Citation: 201 U.S.App.D.C. 266,627 F.2d 1252
• Parties: AMERICAN DAIRY OF EVANSVILLE, INC., et al., Appellants, v. Robert BERGLAND, Secretary of Agriculture, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1252

627 F.2d 1252

201 U.S.App.D.C. 266

AMERICAN DAIRY OF EVANSVILLE, INC., et al., Appellants, v. Robert BERGLAND, Secretary of Agriculture, et al.

No. 77-1926.

United States Court of Appeals District of Columbia Circuit.

Argued 3 Oct. 1978.

Decided 24 March 1980.

Rehearing Denied July 1, 1980.

Appeal from the United States District Court for the District of Columbia (D.C. Civil 76-0806).

Robert N. Sayler, Washington, D. C., with whom Joanne B. Grossman, Washington, D. C., was on brief, for appellants.

Kenneth M. Raisler, Asst. U. S. Atty., Washington, D. C., with whom Earl J. Silbert, U. S. Atty. ^*, John A. Terry, Michael W. Farrell, Nathan Dodell, Asst. U. S. Attys., and Garrett B. Stevens, Atty., Dept. of Agriculture, Washington, D. C., were on brief, for appellees.

Before ROBINSON and WILKEY, Circuit Judges and GREENE, ^** United States District Judge for the District of Columbia.

Opinion for the Court filed by Circuit Judge WILKEY.

Dissenting opinion filed by Circuit Judge SPOTTSWOOD W. ROBINSON, III.

WILKEY, Circuit Judge:

This appeal involves a provision in certain milk marketing orders whereby retroactive notice is given of Class II prices that milk handlers must pay producers. Appellant handlers and two dairy associations filed suit in the district court seeking judicial review of the retroactive notice provision. The district court granted in part the motion of appellees Department of Agriculture and various officials to dismiss the suit on grounds of mootness and failure to exhaust administrative remedies, and granted their motion for summary judgment as to those issues over which the court found it had jurisdiction. For reasons to be discussed, we reverse the decision of the district court and remand the case with instructions to return it to the Secretary of Agriculture for further proceedings consistent with this opinion.

I. BACKGROUND

A. Statutory Framework

The Agriculture Marketing Agreement Act of 1937 ¹ authorizes the Secretary of Agriculture to regulate milk marketing and the relations between producers and handlers of milk. 7 U.S.C. § 608c(5) authorizes the Secretary to classify milk received by handlers according to its use and to establish minimum prices that handlers shall pay for each such class of milk and the time when payments shall be made. The methods for determining prices for the different classes of milk and time of announcement are set out in approximately fifty federal milk marketing orders currently in effect. ²

Such milk marketing orders are issued in formal rulemaking proceedings with prior notice and hearing. The Act provides that any handler may petition the Secretary for relief from any provision of an order believed to be "not in accordance with law." ³ By regulation, administrative review of the orders is first made by an Administrative Law Judge, subject to review by the Secretary. ⁴ The Secretary has delegated his statutory review authority to the Judicial Officer of the Department of Agriculture. ⁵ The district court has jurisdiction to review the ruling of the judicial officer on a petition for review. ⁶

B. The Course of These Proceedings

The relevant marketing orders classify milk into two and sometimes three classes. Class I is the largest class, and includes milk that is put to a fluid use. Class II is used to produce soft products such as yogurt, ice cream, and cottage cheese. Class III milk is used to produce hard products such as butter, powder, and cheese. ⁷ This appeal concerns the price announcement scheme for Class II milk.

The uniform price for Class II milk in any given month is the so-called Minnesota-Wisconsin (M-W) price for that month plus ten cents per hundred weight. ⁸ The price is announced on the 5th day of each month and applies to producer milk delivered to handlers during the preceding month. ⁹ Appellants object to this retroactive notice provision for Class II milk.

1. The 1970-1974 Rulemaking Proceedings

(a) Docket No. AO 361-A3, et al.

On 1 July 1970 the Department published notice of a rulemaking proceeding (Docket No. AO 361-A3, et al.) to consider proposed amendments to seven marketing orders regulating milk handling in the Chicago regional and other marketing areas. ¹⁰ On request of two dairy associations, advance notice or advanced pricing of Class II and Class III milk was designated as one of many hearing issues. ¹¹ A substantial amount of evidence was taken in support of the proposal. ¹² On 11 June 1971 the Department published a Notice of Recommended Decision and Opportunity To File Written Exceptions in connection with the rulemaking proceeding. ¹³ The deputy administrator found in the recommended decision that the advanced notice proposal "should not be adopted." ¹⁴ The decision noted the claims of handlers that the retroactive procedure disadvantaged them by preventing them from knowing the cost of producer milk until after the end of the month in which the milk was processed. The decision observed that the principal milk cooperatives opposed advance notice for Class III milk. It found that because of peculiarities in the Class III milk market that "the prices paid by regulated handlers for Class III milk should correspond very closely with the pay prices for manufacturing grade milk if these handlers are to be competitive in the sale of the principal surplus products. Basing the Class III price for a particular month on the prices paid for manufacturing grade milk in the preceding month would not result in the price coordination necessary for those regulated handlers heavily engaged in the production of cheddar cheese, non-fat dry milk, or butter." ¹⁵

Thus the advance notice provision was rejected for Class III milk to protect handlers, the very parties who claimed to be disadvantaged by the existing retroactive provision. The decision found that "(t)he same considerations are involved in the case of an advance announcement of prices for milk used in the proposed Class II products." It concluded, therefore, that "the prices for Class II milk should be announced on the same basis as the prices for Class III milk." ¹⁶

Following the recommended decision, exceptions were filed to the proposed denial of advanced notice for Class II milk by large numbers of handlers and associations of handlers. Significantly, the record discloses that the principal producer cooperatives in the seven marketing areas covered by the orders also took exception to the proposed decision. They wrote that "(t)he principal cooperatives supported at the hearing handlers' proposal to announce order prices for Class II milk at the beginning of the month rather than at the end of the month in which the price applies. It is not necessary for the proposed Class II prices to correspond closely with prices being paid for manufactured grade milk in the same month." ¹⁷ While the producers opposed advance notice for Class III milk, they were in favor of advanced notice for Class II milk. ¹⁸ The recommended decision did not take note of this distinction. ¹⁹

On 14 September 1973 a Notice of Revised Recommended Decision was issued by the Administrator of the Agricultural Marketing Service of the Department. ²⁰ The revised recommended decision failed even to mention the exceptions taken to the recommended decision with respect to advance notice of Class II prices. It simply reproduced word for word the language of the recommended decision regarding advance notice. Exceptions were filed to the revised recommended decision.

On 4 March 1974 the final decision on the proposals was issued by the Assistant Secretary of Agriculture. ²¹ The language of the findings respecting advance notice of Class II prices was identical with that of the recommended decision, except the final decision acknowledged that both handler and producer groups had urged the adoption of advanced notice for Class II prices. No specific ruling on these exceptions was made nor any further comment or additional basis for denial given. ²²

(b) Docket No. AO 366-A8, et al.

On 8 October 1971 the Department published a notice of a hearing on proposed amendments to thirty-three orders regulating milk handling in thirty-three market areas. ²³ Again one of the proposals was to adopt advance notice for Class II and Class III prices. The advance notice proposal was supported by a significant amount of evidence at the hearing. ²⁴ On 16, 19 and 20 September 1972 the Recommended Decision and Opportunity to File Written Exceptions on the Proposed Amendments ²⁵ rejected the advance notice amendment for substantially the same reasons it was rejected in the rulemaking in Docket No. AO 361-A3, et al. ²⁶ The exceptions filed by the proponents and handlers argued that a distinction should prevail between the new Class II products and the new Class III products respecting advance notice, and requested that the decision be amended to provide for advance notice of Class II prices. ²⁷

The Revised Recommended Decision and Opportunity To File Written Exceptions ²⁸ published on 11, 12 and 13 September 1973 made no mention of the many exceptions made to the recommended decision as to Class II notice. Exceptions were made to the revised recommended decision by a large number of handlers and by the two principal cooperatives in the areas covered by all the orders. ²⁹ A final decision on the proposed amendments was published on 5, 6 and 7 March 1974. ³⁰ The findings on the advance notice proposal were identical to those in the revised recommended decision and recommended decision, except that the exceptions to the decision were acknowledged. No further mention or disposition of the exceptions was made. ³¹

2. The ALJ's Decision

On 15 July 1974 appellants filed a petition pursuant to 7 U.S.C. § 608c(15)(A) seeking to have the Class II milk notice provision invalidated on substantive and procedural grounds. An Administrative Law Judge ruled on 20 January 1976 that the retroactive notice provisions of...