Borden Farm Products Co v. Baldwin

• Decision Date: 03 December 1934
• Docket Number: No. 296,296
• Parties: BORDEN'S FARM PRODUCTS CO., Inc., v. BALDWIN, Com'r of Agriculture, et al
• Court: U.S. Supreme Court

293 U.S. 194

55 S.Ct. 187

79 L.Ed. 281

BORDEN'S FARM PRODUCTS CO., Inc.,

v BALDWIN, Com'r of Agriculture, et al.

No. 296.

Argued Nov. 6, 7, 1934.

Decided Dec. 3, 1934.

Appeal from the District Court of the United States for the Southern District of New York.

[Syllabus from pages 194-196 intentionally omitted] Messrs. Walter E. Hope and Timothy N. Pfeiffer, both of New York City, for appellant.

[Argument of Counsel from pages 196-197 intentionally omitted] Mr. Henry S. Manley, of Albany, N.Y., for appellees.

[Argument of Counsel from pages 197-200 intentionally omitted] Mr. Chief Justice HUGHES delivered the opinion of the Court.

The New York milk control law of April 10, 1933,¹ in authorizing the Milk Control Board to fix minimum prices for sales of fluid milk in bottles by milk dealers to stores in a city of more than one million inhabitants, established a differential of one cent a quart in favor of dealers not having a 'well advertised trade name.'² The Milk Control Board determined that the phrase 'well advertised trade name' referred to four dealers, of which the complainant, Borden's Farm Products Company, Inc., is one.³ The authority of the Board terminated on March 31, 1934. An amended act was passed to take effect April 1, 1934,⁴ which placed the milk control in a division of the Department of Agriculture and Markets. This act continues the differential of one cent a quart in sales of fluid milk in bottles by dealers to stores, in favor of dealers not hav- ing a well advertised trade name, and provides that the lower price shall also apply on sales from stores to consumers.⁵

Complaining that the fixing of this differential, in respect to sales of the same commodity, was an invasion of rights guaranteed by the Fourteenth Amendment, plaintiff brought this suit to enjoin enforcement. An interlocutory injunction was sought and a court of three judges was convened. Defendants moved to dismiss the complaint upon the grounds that it failed to state a cause of action in equity and that the provision of the statute was constitutional. Affidavits were presented on both sides and the case was heard on the motion for injunction and the motion to dismiss. In view of the cumulative penalties provided, the court had no doubt of its jurisdiction to pass upon the question of constitutionality. Dealing with the case in that aspect, the court held that the complaint did not state a cause of suit and dismissed it for that reason. The court regarded the application for an interlocutory injunction as necessarily falling with the complaint and hence made no findings of fact. (D.C.) 7 F.Supp. 352, 354. The plaintiff appeals.

We turn to the allegations of the complaint. Plaintiff sets forth the full text of the acts of 1933 and 1934 and of the applicable orders. By the order of the Commissioner of Agriculture and Markets the minimum prices for the sale of fluid milk in bottles by dealers to consumers and to stores, and by stores to consumers, are fixed for the city of New York. The order determining the four dealers who have a 'well advertised trade name' is continued in effect. Plaintiff alleges that for many years it has been continuously engaged in purchasing and selling milk in bottles in the city of New York and has built up a large business under its trade name 'Borden's' for sales both to consumers and to the stores described in the statute;⁶ that it operates nine retail stores in the city at which it has an extensive business in the sale of bottled milk to consumers under its trade name; that it has obtained from the Board of Health of the city all the necessary licenses and permits and has observed all the regulations of the Sanitary Code; that it has expended large sums in advertising its trade name and has thus created a valuable good will. Plaintiff alleges that it is in direct and active competition with numerous individuals, corporations and associations which are selling bottled milk to stores in the city but are not within the official determination of those having a 'well advertised trade name'; that these competitors are permitted to sell to stores bottled milk at a price one cent per quart below the minimum price at which plaintiff is permitted to sell its bottled milk to stores under its trade name; and that stores are permitted to sell to consumers the bottled milk of these competitors with the same differential as compared with the minimum price at which plaintiff's milk may be sold by stores, and thus plaintiff is deprived of a large part of the market for its milk and the value of its property and good will are seriously impaired. Plaintiff states that the loss in trade it thus suffers amounts to not less than 25,000 quarts of bottled milk daily.

Plaintiff alleges that the maintenance of this differential, with the consequent privilege to its competitors and restraint upon itself, is 'arbitrary, oppressive and discriminatory' and has 'no relation to the protection of the public health or the public welfare or to any of the objects or purposes' for which the statute was enacted, and upon this ground plaintiff charges that the statutory provision violates the due process and equal protection clauses of the Fourteenth Amendment. Inability to obtain a license, unless plaintiff agrees in writing to comply with the statute and orders, and the prohibitive character of the penalties prescribed, are assigned as affording the basis of equitable jurisdiction.

We have frequently said, especially in confiscation cases, that a mere general allegation of repugnance to the Fourteenth Amendment is not enough to state a cause of action to restrain the enforcement of a statute or administrative order. See AEtna Insurance Co. v. Hyde, 275 U.S. 440, 447, 48 S.Ct. 174, 72 L.Ed. 357; Public Service Commission v. Great Northern Utilities Co., 289 U.S. 130, 136, 137, 53 S.Ct. 546, 77 L.Ed. 1080; Hegeman Farms Corporation v. Baldwin, 293 U.S. 163, 55 S.Ct. 7, 79 L.Ed. 259, decided November 5, 1934. But in determining the sufficiency of the allegations of the complaint we cannot fail to take note of the nature and effect of the legislative action which is assailed. Both nature and effect are apparent. We have here a novel, if not a unique, provision. The legislature does not purport to exercise an authority merely to fix prices, or minimum prices, or to make different prices for different grades of milk, but attempts to establish for the respective dealers different minimum prices for the same grade of milk, bought and sold at the same time and place and under precisely the same conditions aside from the use of a well advertised trade name. There is no uncertainty as to the effect of the discrimination. As the court below said, the statute seeks to take away from dealers, who have well advertised trade names, 'economic advantages which were not only theretofore lawful, but which have generally been commended and fostered.' It strikes at the advantage acquired by dealers through the reputation of their brands and the consequent disposition of the public to buy them. In view of the peculiar nature and effect of this provision, and of the novel and important constitutional question that it presents, we think that the complaint should not have been dismissed for insufficiency upon its face and that the plaintiff is entitled to have the case heard and decided with appropriate findings by the trial court, unless it satisfactorily appears, upon facts of common knowledge or otherwise plainly subject to judicial notice, that the provision should be sustained as resting upon a rational basis consistent with constitutional right. Accordingly, we pass to the consideration of the various grounds that are suggested as adequate support for the legislative action.

In this inquiry, we again observe the limited operation of the provision. It is restricted to the city of New York, and to sales of bottled milk to and by stores. It does not apply to retail delivery direct to consumers and not through stores. It relates solely to minimum prices. It is not addressed to any practice in the industry, or trade in relation to production, handling or selling, apart from the trade name employed. As to all such matters, a dealer with a well advertised trade name is subject to the same strict requirements as are all other dealers. The price to the producer, the farmer, is not affected by the differential. He receives the same price for his milk whether it is sold by dealers with well advertised trade names or otherwise. We have had occasion to note that 'Save the conduct of railroads, no business has been so thoroughly regimented and regulated by the State of New York as the milk industry.' For many years, it has been 'progressively subjected to a larger measure of control.' Nebbia v. New York, supra, pages 521, 522 of 291 U.S., 54 S.Ct. 505, 509. This control has been in the interest of sanitary precautions and proper methods of production and trade. But because of the serious condition of the industry by reason of decline in prices and demoralizing practices, as reported by a legislative committee after an elaborate examination, and upon the committee's recommendations, the legislature has now proceeded to price control. The legislative committee did not, however, recommend the fixing of the differential here in question, and hence did not state grounds in support of such a discrimination.⁷ But in considering possible grounds, we are aided by the suggestions which the Attorney General of the State and the counsel for the Department of Agriculture and Markets, with their special experience, have been able to bring forward.

The ground chiefly urged is that the provision is intended as a precaution against monopoly. We turn to the expressed criterion of the statute. That criterion does not refer to restraint of trade in any of its connotations, or to any coercive action or unfair practice, or to any combination or concert. The provision...