Borden Company v. Liddy

• Decision Date: 15 February 1965
• Docket Number: Civ. No. 4-1158.
• Citation: 239 F. Supp. 289
• Parties: The BORDEN COMPANY, Plaintiff, v. L. B. LIDDY, Secretary of Agriculture of the State of Iowa, Defendant.
• Court: U.S. District Court — Southern District of Iowa

239 F. Supp. 289

The BORDEN COMPANY, Plaintiff, v. L. B. LIDDY, Secretary of Agriculture of the State of Iowa, Defendant.

Civ. No. 4-1158.

United States District Court S. D. Iowa, Central Division.

February 15, 1965.

Maxwell A. O'Brien and Samuel G. O'Brien, Des Moines, Iowa, for plaintiff.

Evan Hultman, Atty. Gen. of Iowa, Des Moines, Iowa, for defendant.

Before JOHNSEN, Circuit Judge, and McMANUS and HANSON, District Judges.

PER CURIAM.

Because of a slight variance in views on some aspects of this case, individual Memorandums have been prepared and are attached hereto and made a part hereof. The Memorandum of Judge Hanson, which was prepared first, sets out the facts of the situation and these are adopted as the Court's statement.

1. As the several Memorandums indicate, the Court is unanimous in its view that the defendant cannot prohibit the sale in commerce of the plaintiff's 10% milkfat product within the State of Iowa upon the basis that the branding of it as "ice cream" constitutes a labeling violation under §§ 189.9, 189.14, and 190.1(34) of the Iowa Code, I.C.A.

2. The Court is also unanimous in its view that there appears to be no need to issue an injunction against the defendant to insure that he will not engage in further threats or acts of enforcement against the plaintiff in this respect.

3. A majority of the Court (Judges Johnsen and McManus) are of the view that the adulteration provisions of the Iowa Code, § 190.3, I.C.A., are facially applicable to the plaintiff's 10% milkfat food product in its failure to meet the Iowa 12% milkfat quality standard for ice cream, but that the plaintiff has legally failed to demonstrate that, in prescribing a 12% milkfat standard of quality for ice cream, the State has acted arbitrarily, as having gone beyond legitimate state interest, or beyond rational relationship to appropriate local food, health or fraud purpose, or as having imposed an undue burden upon or an unwarranted exclusion against the sale of ice cream generally in commerce. Judge Hanson is of the view that the provisions of § 190.3 should be regarded and construed as not intended by the Iowa legislature to prohibit the sale of 10% milkfat ice cream on the basis of adulteration. He agrees, however, that if the Supreme Court of Iowa should refuse to adopt this construction, the plaintiff would not, on the showing which has been made here, be entitled to have the Iowa 12% milkfat standard declared unconstitutional.

4. The Court is unanimous in its view that no injunction can be granted against the adulteration statute for unconstitutionality as the case stands here.

5. A majority of the Court (Judges Johnsen and Hanson) are of the view that the plaintiff has had its day in court and that as a matter of orderly judicial administration and termination, the case should be disposed of on the basis and posture in which it has been submitted to us. Judge McManus is of the view that, as a matter of justice and in avoidance of multiplicity of actions, the Court should on its own motion request and permit the parties to introduce evidence on the question of whether Iowa's 2% requirement in excess of the federal has a legitimate constitutional purpose.

6. The views indicated herein, on the expressions contained in the Memorandums, as to the consensus reflected by them, shall constitute the findings and conclusions of the Court for purposes of disposing of the case.

ORDER

On all of the foregoing (with reservation by Judge McManus of his view as to the desirability of reopening the case and in this respect dissenting)

It is ordered by the Court that the requests for injunction be denied and that on this basis the complaint be and hereby is dismissed.

HANSON, District Judge.

This action is for Declaratory Judgment and Injunction and is brought under the provisions of the Federal Declaratory Judgments Act. It involves an actual controversy between the plaintiff and the defendant, and arises under the Constitution and laws of the United States. For the previous history of the case see Borden Co. v. Liddy, D.C.S.D.I. 200 F.Supp. 221 and 8 Cir. 309 F.2d 871.

This case was tried upon a Stipulation of Facts in part as follows:

"The plaintiff is a corporation organized under the laws of the State of New Jersey with its principal place of business in New York City, New York, and duly authorized to do business in the State of Iowa.

"That the defendant, L. B. Liddy, is the duly qualified and acting Secretary of Agriculture of the State of Iowa and as such Secretary is charged with the duty of administering and enforcing the provisions of Chapters 189 and 190 of the 1958 Code of Iowa, as amended, with respect to the standards for ice cream and flavored ice cream, as defined in said Chapters.

"That Section 20.1 of the Regulations of the Federal Food and Drug Administration with reference to ice cream in part reads as follows:

"* * * The kind and quantity of optional dairy ingredients used, as specified in paragraph (e) of said section and the content of milkfat and non-milkfat solids therein, are such that the weights of milkfat and total milk solids are not less that 10 percent and 20 percent, respectively, of the weight of the finished ice cream; * * *."

"That Chapter 190 Code of Iowa 1958, with reference to adulteration, specifies certain standards for ice cream that are contrary to the federal standards above set out. The Iowa Law with reference to adulteration of foods as contained in Section 190.1(34) Code of Iowa 1958 provides in part as follows:

"34. Ice cream. Ice cream is a pure clean frozen product made of ice cream mix and a harmless flavoring. It shall contain not less than 12 percent by weight of milkfat and not less than 20 percent by weight of total milk solids, except * * *."

"That Section 189.19 Code of Iowa 1958 provides penalties for violation of the aforesaid Section 190.1(34) of the Code of Iowa and the rules and regulations of the Iowa Department of Agriculture.

"That the defendant, L. B. Liddy, as Secretary of Agriculture, in his official capacity, has made demand upon the plaintiff that it comply with the aforesaid provisions of the Statutes of Iowa, specifically Section 190.1(34) Code of Iowa 1958, and threatens to enforce the provisions of Section 189.19 Code of Iowa 1958 against the plaintiff, its officers and employees unless the plaintiff immediately complies with Section 190.1(34) of the Iowa Statutes.

"That the ice cream manufactured and shipped into Iowa and from Iowa into other states by The Borden Company complies with the federal standards hereinbefore referred to and is labeled in compliance with the provisions of the Federal Food Drug and Cosmetic Act.

"That prior to July 1, 1961, the ice cream manufactured by The Borden Company for sale in Iowa contained 12 percent butterfat content, and before that date the ice cream manufactured in the Iowa plant for interstate shipment also contained 12 percent butterfat content.

"That the items of expense if The Borden Company is required to comply with the Iowa 12 percent butterfat law in its ice cream would amount to approximately $364,000.00 a year additional cost to The Borden Company and not the $250,000.00 referred to in the Complaint."

The Iowa statute makes any product labeled in conformance with federal law deemed to be labeled in conformance with federal law and it is, therefore, properly labeled in Iowa.¹ It is quite clear that the proper interpretation of Section 189.11 is that it applies to Section 190.1(34) as set out in the stipulation. It is noted that Section 189.11 is expressly inapplicable to the ice milk standard and several other standards. This leaves the clear indication that it is applicable to the ice cream standard insofar as it constitutes a labeling standard.²

The next question is whether Borden's product is adulterated under Iowa law. Section 190.3 defines what is deemed to be adulterated. Subsections (1), (2), (3), and (10) are argued here as reasons why Borden's product is adulterated.³ Sections 189.15 and 189.26 prohibit the product if adulterated under Section 190.3. See Lever Bros. Co. v. Erbe, 249 Iowa 454, 87 N.W.2d 469.

There are two usual types of adulteration. One type of adulteration is when the product is unwholesome. Borden's product is unquestionably not adulterated by reason of being unwholesome. The other type of adulteration is sometimes called economic adulteration. Economic adulteration is the manipulation of the ingredients to confuse or deceive the consumer, although not making the product itself deleterious or unwholesome and although the product is properly and truthfully labeled.⁴

Adulteration based on economic adulteration is a question of fact although it may be established by the legislature or administrative agency so as to preclude contrary findings by the courts. This conclusion is supported by the many federal cases interpreting statutes similar to Section 190.3(1), (2), (3) I.C.A.⁵

It might be argued that Iowa never intended that a product not itself deleterious or improperly labeled would be prohibited by Section 190.3(1), (2), (3), or (10) and State v. Hutchinson Ice Cream Co., 168 Iowa 1, 147 N.W. 195, L.R.A.1917B, 198 would be support for that position. However, I assume without deciding that Section 190.3(1), (2), (3), or (10) would prohibit a food, properly labeled and not deleterious, if there was an economic adulteration. The burden of proof to establish this fact of economic adulteration is upon the State. This conclusion is also based on the interpretation of similar federal statutes. There is no controlling Iowa case.⁶

Liddy has not carried its burden to prove that Borden's product has a tendency to deceive or confuse customers. Accordingly, I cannot find that Borden's product does tend to confuse or deceive customers. I conclude that there is no economic adulteration established as a fact in this case.⁷ "That the dispute turns upon...