Barron Coop. Creamery v. Wickard

• Court: U.S. Court of Appeals — Seventh Circuit
• Writing for the Court: SPARKS, MAJOR, and MINTON, Circuit
• Citation: Barron Coop. Creamery v. Wickard, 140 F.2d 485 (7th Cir. 1944)
• Decision Date: 16 February 1944
• Docket Number: No. 8355.,8355.
• Parties: BARRON COOP. CREAMERY et al. v. WICKARD, Secretary of Agriculture.

140 F.2d 485 (1944)

BARRON COOP. CREAMERY et al. v. WICKARD, Secretary of Agriculture.

No. 8355.

Circuit Court of Appeals, Seventh Circuit.

February 16, 1944.

Grover D. Rose and Louis E. Hart, all of Chicago, Ill., for appellants.

J. Stephen Doyle, Jr., and W. Carroll Hunter, Sp. Assts. to Atty. Gen., David P. Gordon, Atty., Department of Agriculture, of Washington, D. C., Wendell Berge, Asst. Atty. Gen., and John J. Boyle, U. S. Atty., of Madison, Wis., for appellee.

Before SPARKS, MAJOR, and MINTON, Circuit Judges.

MINTON, Circuit Judge.

The plaintiffs-appellants have appealed from a judgment of the District Court upholding the decision of the Secretary of Agriculture which denied them relief from a ruling of the Federal Milk Market Administrator for the Chicago Area reclassifying and repricing certain milk under Federal Milk Order No. 41.

Pursuant to the Agricultural Marketing Agreement Act of 1937, 50 Stat. 246, 7 U.S. C.A. § 601 et seq., the Secretary established the Chicago Milk Marketing Area. After public hearings, the Secretary promulgated Order 41, effective September 1, 1939, regulating the handling of milk in the Area. Section 941.4 of the order provided for the classification of milk sold in the Area as follows:

"Sec. 941.4. Classification of milk. (a) Basis of Classification. All milk purchased or received by a handler from producers, associations of producers, and other handlers, including milk produced by him, if any, shall be classified by the market administrator in the classes set forth in paragraph (b) of this section.

"(b) Classes of Utilization. The classes of utilization of milk shall be as follows:

"(1) Class I milk shall be all milk disposed of in the form of fluid milk, and all milk not accounted for as Class II milk or Class III milk.

"(2) Class II milk shall be all milk, except skimmed milk, disposed of in the form of flavored milk and flavored milk drinks, all milk used to produce cottage cheese, and all milk used to produce cream which is disposed of in the form of cream (for consumption as cream), ice cream, and ice cream mix.

"(3) Class III milk shall be all milk used to produce a milk product other than one of those specified in Class II, and all milk accounted for as actual plant shrinkage, but not to exceed 2 percent of the total receipts of milk from producers."

Class I is the highest priced milk, Class II is next highest, and Class III is next. It will be seen from this classification that milk used to make ice cream is in Class II, while milk used to make butter is in Class III. The purpose of this classification according to utilization is to guide the Administrator in periodically setting the uniform minimum price to be paid producers for all milk purchased during the period. All producers receive the same price. Adjustments are then made with the first handlers through the producer-settlement fund. If a first handler has disposed of milk in a use which has been assigned a higher price than the uniform minimum price, he must pay the difference into the settlement fund. On the other hand, if a first handler has disposed of milk in a use which has been assigned a lower price than the uniform minimum price, he is paid the difference out of the settlement fund. The prices assigned to each use classification, as well as the uniform minimum price, are revised each period.

Order 41 remained in force until July 1, 1940, when there became effective an amended order specifically providing for the reclassification of milk used to produce butter where subsequently such butter was used to make ice cream or ice cream mix.¹

During May and June, 1940, while the original order was still in effect, the plaintiffs, who were cooperative associations in Wisconsin, purchased milk from producers which they manufactured into unsalted butter. They sold this unsalted butter to the Bowman Dairy Company of Chicago, who in turn sold it to the Goldenrod Ice Cream Company of the same city for use in making ice cream. There is no intimation that these transactions were not bona fide or that they were part of a scheme to avoid a higher classification under Order 41. The plaintiffs reported the milk thus used to the Administrator of the Chicago Area as Class III milk, the classification for milk used to make butter. The Administrator, however, claimed that the proper classification was Class II, because the butter had ultimately been used by the Goldenrod Company to make ice cream. The difference in price between Class II and Class III for the two months amounted to a total for both plaintiffs of over $11,000.

The plaintiffs petitioned the Secretary of Agriculture for relief from this claim of the Administrator. After a hearing, the Secretary sustained the Administrator. The plaintiffs then filed a petition for review with the District Court for the Western District of Wisconsin. The Secretary of Agriculture filed an answer and a motion for summary judgment which incorporated the transcript of the proceedings on the plaintiffs' petition before the Secretary. The District Court sustained the Secretary's motion for summary judgment and entered judgment that the Secretary's action was in accordance with law.

There is no dispute as to the facts. The question is whether Order 41 authorized the rescaling upward of the classification of milk used to manufacture butter, where the purchaser of that butter twice removed used it to make ice cream?

Paragraph (c) of Section 941.4 of the original Order 41 provided:

"(c) Interhandler and Nonhandler Sales. Milk disposed of by a handler to another handler, and milk disposed of by a handler to a person who is not a handler but who distributes milk or manufactures milk products shall be classified as Class I milk: Provided, That if the selling handler on or before the 7th day after the end of the delivery period furnishes to the market administrator a statement which is signed by the buyer and seller that such milk was disposed of as Class II milk or Class III milk, such milk shall be classified accordingly, subject to...