Baltimore Bank for Cooperatives v. Farmers Cheese Coop.

• Decision Date: 22 June 1978
• Docket Number: No. 77-2470,77-2470
• Citation: 583 F.2d 104
• Parties: BALTIMORE BANK FOR COOPERATIVES, Appellant, v. FARMERS CHEESE COOPERATIVE and Commonwealth of Pennsylvania Milk Marketing Board. . Submitted under Third Circuit Rule 12(6)
• Court: U.S. Court of Appeals — Third Circuit

Page 104

583 F.2d 104

BALTIMORE BANK FOR COOPERATIVES, Appellant, v. FARMERS CHEESE COOPERATIVE and Commonwealth of Pennsylvania Milk Marketing Board.

No. 77-2470.

United States Court of Appeals Third Circuit.

Submitted under Third Circuit Rule 12(6) June 22, 1978.

Decided Aug. 25, 1978.

Kenneth P. Simon, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for appellant.

H. Woodruff Turner, George M. Cheever, Kirkpatrick, Lockhart, Johnson & Hutchison, Pittsburgh, Pa., for appellee Farmers Cheese Cooperative.

Ronald H. Skubecz, J. Justin Blewitt, Deputy Attys. Gen., Harrisburg, Pa., for appellee Com. of Pa. Milk Marketing Bd.

Before SEITZ, Chief Judge, and ALDISERT and ROSENN, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge.

Baltimore Bank for Cooperatives ("the Bank") challenges on this appeal the propriety of an order of the district court staying further proceedings in a diversity action to recover in excess of $91,000 allegedly due for milk sold and delivered to Farmers Cheese Cooperative ("Farmers Cheese"). The order staying the proceedings directed the parties to proceed at once before the Milk Marketing Board of the Commonwealth of Pennsylvania (MMB or the Board) for full adjudication of the claim.

I.

The Bank is a federal instrumentality created by the Farm Credit Act of 1933, as amended, 12 U.S.C. § 2121, and by virtue of its office in Baltimore, Maryland, is a statutory resident of that state. 12 U.S.C. § 2258. The Bank, during the pendency of a chapter XI proceeding filed by Country Belle Cooperative Farmers ("Country Belle"), advanced funds to Country Belle and with the bankruptcy court's approval obtained an assignment of, Inter alia, accounts receivable from the debtor aggregating $91,657.03. The Bank filed a complaint in the United States District Court for the Western District of Pennsylvania on August 5, 1975, to recover the foregoing sum, which Farmers Cheese timely answered denying the Bank's claim. ¹

The complaint alleged that the Bank obtained a security interest in all of Country Belle's accounts receivable, including the account of Farmers Cheese. It further alleged that during June 1975 Country Belle sold and delivered to defendant 1,106,540 pounds of milk at an agreed price of $79,099.91 and sold and delivered milk to it for the preceding month in the sum of $54,624.03 leaving, after certain specified credits and adjustments, a balance owed by defendant to Country Belle of $91,657.03, which the Bank is entitled to apply to the debt owed it by Country Belle. The defendant entered a general denial to these allegations but also separately alleged that the milk referred to in plaintiff's complaint was purchased by defendant from Farmer's Union Milk Producers Association ("FUMPA") for which defendant has paid FUMPA in full.

Two months after Farmers Cheese filed its answer, the Commonwealth of Pennsylvania, supported in the motion by the defendant, moved to intervene as a party defendant, alleging the interest of MMB as an agency of the Commonwealth vested with the power to supervise, investigate, and regulate the milk industry of Pennsylvania. Pa.Stat.Ann. tit. 31 § 700j-301 (1977-78 Supp.). The court granted the Commonwealth's motion to intervene. The intervention motion asserted that the district court lacked jurisdiction over the matter because MMB's power to supervise and regulate included the power to determine any and all liability incurred by Pennsylvania milk dealers to Pennsylvania milk producers. MMB further claimed that the Bank had waived its right to maintain this action by failing to institute proceedings before the Board and that the Bank was estopped from maintaining the action because the Board, by failing to issue a citation against Farmers Cheese pursuant to its statutory authority, had "in effect determined" : (1) that there was no liability on the part of the defendant to the Bank and (2) under Pennsylvania law such determination of dealer-producer liability constituted conclusive evidence.

Twenty-two months after filing its first motion to dismiss, the defendant on July 20, 1977 filed a second motion to dismiss the complaint asserting that the district court lacked jurisdiction over the subject matter because of the Board's statutory authority. In the alternative, it requested the court to abstain in view of Pennsylvania's statutory scheme empowering the Board to determine the questions presented in this case. Although it recognized the general rule that federal courts are required to hear cases in which subject matter jurisdiction properly has been invoked, the district court nonetheless declined to hear the merits of the case concluding that "abstention is proper, as a matter of sound discretion, in this case." We disagree and we reverse.

II.

The threshold question which confronts us is whether we have jurisdiction to entertain this appeal. On October 3, 1977, the Bank applied to this Court for a writ of mandamus directing the district court to proceed with the adjudication of the Bank's claim. We denied the Bank's mandamus application without prejudice to an application to the district court for leave to file an appeal out of time. The district court granted such leave and the Bank promptly filed its notice of appeal. Farmers Cheese filed a motion to dismiss the appeal on the grounds that the appeal was not from a final order appealable under 28 U.S.C. § 1291, ² that the order appealed from was not an interlocutory order involving an injunction, appealable as of right under 28 U.S.C. § 1292(a)(1), nor was it an order appealable under any other provisions of 28 U.S.C. § 1292(a). The motion panel of this court referred the motion to the merits panel for disposition. We deny the motion.

Farmers Cheese contends that under the principles stated in Allied Air Freight, Inc. v. Pan American World Airways, Inc., 340 F.2d 160 (2d Cir.), Cert. denied, 381 U.S. 924, 85 S.Ct. 1560, 14 L.Ed.2d 683 (1965); Chronicle Publishing Co. v. National Broadcasting Co., 294 F.2d 744 (9th Cir. 1961); and Day v. Pennsylvania R.R., 243 F.2d 485 (3d Cir. 1957), this appeal must be dismissed. In Allied Air Freight, the court of appeals dismissed an appeal from an order staying further proceedings in an antitrust action until the plaintiffs had exhausted their available remedies before the Federal Civil Aeronautics Board. The court held that the stay order until the Civil Aeronautics Board acted was not a final order but merely deferred action for the time being, and it was not an injunctive order as to permit an appeal from the granting or denial of an injunction pursuant to 28 U.S.C. § 1292(a)(1). "Such an order is only a step in the action." Id. at 161.

In Chronicle Publishing Co. v. National Broadcasting Co., the district court stayed two private antitrust actions pending a determination by the Federal Communications Commission ("FCC") of the propriety of the television network's acquisition of a local television station in the San Francisco area. Under the law, the San Francisco station could not be transferred without prior FCC approval. Thus, to avoid "two tremendously complex proceedings," where the same facts involved in the principal issues in the antitrust action would be reviewed by the FCC, the district court stayed the proceedings before it.

Finally, in Day v. Pennsylvania R.R., 243 F.2d 485 (3d Cir. 1957), a locomotive engineer sued the Pennsylvania Railroad for back wages allegedly due him under a collective bargaining agreement. The railroad moved for summary judgment on the ground that the engineer had not exhausted his administrative remedies. In the alternative, it sought an order staying all proceedings in the district court pending a decision by the National Railroad Adjustment Board interpreting the collective bargaining agreement. The district court denied the motion for summary judgment but granted the stay because the Board had Exclusive jurisdiction to decide the question raised in the case.

None of these cases are apposite to the instant case. In each of these cases, the district court merely stayed the proceedings in federal court until matters were determined initially by the appropriate federal agency. Such actions were appropriate applications of the doctrine of primary jurisdiction.

(I)n cases raising issues of fact not within the conventional experience of judges or cases requiring the exercise of administrative discretion, agencies created by Congress for regulating the subject matter should not be passed over.

Far East Conference v. United States, 342 U.S. 570, 574, 72 S.Ct. 492, 494, 96 L.Ed. 576 (1952). These cases are classic illustrations of the exercise of the doctrine of primary jurisdiction, staying the proceedings "to wait the determination of matters pending elsewhere." Day v. Pennsylvania R.R., 243 F.2d at 487. See 9 Moore's Federal Practice par. 110.20(4.-3) at 252-253 (2d ed. 1975). ³

In contrast, in the instant case the district did not stay proceedings to await the determination of matters pending before federal agencies. ⁴ Rather, in deference to the Pennsylvania MMB, the district court, citing Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), invoked a species of administrative abstention in the belief that:

the comprehensive state statutory scheme should be given a "proper respect," and that matters the state desires to have determined administratively, and not in the first instance by its court system, should be determined by the state administrative system. Those matters should not by-pass that system by the fortuitous expedient of federal diversity jurisdiction.

In a Burford -type administrative abstention, the federal courts defer completely to the state courts so that:

administrative abstention does not merely postpone original federal jurisdiction, but actually displaces it, removing entirely from the original federal jurisdiction cases that fall within federal jurisdictional...