Chiglades Farm, Ltd. v. Butz

• Decision Date: 10 October 1973
• Docket Number: No. 72-3451.,72-3451.
• Citation: 485 F.2d 1125
• Parties: CHIGLADES FARM, LTD., et al., Plaintiffs-Appellants, v. Earl L. BUTZ, Secretary of Agriculture of the United States of America, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

485 F.2d 1125 (1973)

CHIGLADES FARM, LTD., et al., Plaintiffs-Appellants, v. Earl L. BUTZ, Secretary of Agriculture of the United States of America, et al., Defendants-Appellees.

No. 72-3451.

United States Court of Appeals, Fifth Circuit.

October 10, 1973.

COPYRIGHT MATERIAL OMITTED

Nathan Lewin, Washington, D. C., Michael R. Storace, Miami, Fla., for plaintiffs-appellants.

Robert W. Rust, U. S. Atty., Robert Silverstein, Miami, Fla., M. W. Wells, Orlando, Fla., L. Patrick Gray, III, Asst. Atty. Gen., Judith S. Feigin, Walter H. Fleischer, Dept. of Justice, Washington. D. C., for defendants-appellees.

Before GOLDBERG, CLARK and RONEY, Circuit Judges.

RONEY, Circuit Judge:

Appellants have been trying since mid-1967 to do nothing more remarkable than grow and market celery in Florida, and this case concerns their heretofore unsuccessful efforts to achieve this modest goal.

This wailful preface to plaintiffs' brief would have bewildered the founders of this country. But so far are we now from the freedom of enterprise envisioned by those noble souls that the District Court's decision denying plaintiffs the right to sow, reap and sell must be affirmed. More precisely, plaintiffs may sow and reap all the celery they wish, but they cannot sell, because the market is regulated by federal law and they have been regulated out. We agree with the District Court that the federal administrative order which denied plaintiffs a share of the celery market is both lawful and constitutional.

To regulate the marketing of celery grown in Florida, the United States Secretary of Agriculture issues "base quantities," or market shares, to eligible producers. Plaintiffs, having been denied a market quota, brought this action to compel the Secretary to issue Chiglades Farm, Ltd., a base quantity. Alternatively, plaintiffs challenge the marketing system as exceeding the Secretary's statutory authority, as being unconstitutional, and as violating the antitrust laws. Jurisdiction was invoked under 28 U.S.C.A. § 1331(a) federal question; 28 U.S.C.A. § 1361 to compel a federal officer to perform his duty; 5 U.S.C.A. § 701 et seq. judicial review of administrative rulings; and 15 U.S.C.A. § 4 antitrust. The District Court, by summary judgment, held that Chiglades is not entitled to a base quantity and that the Marketing Order is both lawful and constitutional. We affirm.

The Statutory Program

The Agricultural Marketing Agreement Act, 7 U.S.C.A. § 601 et seq., is designed to establish and maintain orderly marketing conditions for agricultural commodities in interstate commerce. Both to prevent unreasonable price fluctuations and to maintain parity prices, the Act authorizes the Secretary of Agriculture to promulgate marketing orders regulating "handlers" of specified agricultural commodities, including celery. 7 U.S.C.A. § 608c(3), (4).¹ Such orders may provide methods for the limitation of a commodity. Market shares are required to be determined subsequently by a "uniform rule" embracing the production history of each producer.

Pursuant to this Act, the Secretary issued Marketing Order No. 967, 30 Fed. Reg. 14266 (1965), to stabilize the Florida celery market through annual allotments establishing the maximum amount of celery each handler might purchase. For its administration, Marketing Order 967 created the Florida Celery Committee, composed of producers, handlers, and their employees, nominated by groups from different regions of the State. 9 C.F.R. §§ 967.25, 967.26, 967.28. Each season, the Committee recommends the total amount of celery to be handled, and the Secretary, if necessary, may impose marketing limits to insure the season's "marketable quantity." 7 C.F.R. §§ 967.35(a), 967.36(a), 967.13.

Following promulgation of the Order in 1965, each producer was required to register with the Committee and to furnish its sales history since 1958. Producers with no sales during this period were entitled to inclusion if they made "firm and substantial" commitments to produce celery and were engaged in its production prior to September 30, 1965. 7 C.F.R. § 967.37(b). From this data, a "base quantity" was determined.

Marketing Order No. 967 was the result of the Florida Supreme Court's holding in Rabin v. Conner, 174 So.2d 721 (Fla.1965), that a state celery marketing order was violative of the State and federal constitutions. Utilizing his rule-making power under the Agricultural Marketing Agreement Act, the Secretary of Agriculture adopted Marketing Order No. 967, similar in many respects to the State order.

The Facts

Chiglades Farm, Ltd. is a limited partnership, of which Leo Bramson and Marvin Welfeld are general partners, organized in 1962 to grow celery in a joint venture with A. J. Sullivan of Florida, Inc., a Florida corporation. Ansel J. Sullivan, one of the principals in the corporation bearing his name, was a long-time Florida celery producer and was allocated in 1962 a "base quantity" under the state marketing system. The Joint Venture Agreement provided that the quota held personally by Sullivan would be transferred to the Sullivan corporation, which would receive twenty percent of the net profits and bear no losses. Chiglades was to lease the land, contribute $75,000 for the production of celery, bear any losses, and be entitled to eighty percent of the net profits.

Eugene McCabe, a veteran of the Florida produce business and a member of the Florida Celery Committee, initiated the business venture and was an organizer of the Sullivan corporation. He was also the principal officer of Pioneer Land Company, which leased the farm land to the joint venture, and Pioneer Growers Corporation, which marketed the joint venture's celery. All records and payments involving the cooperative were in the name of the Sullivan corporation, despite the Joint Venture Agreement's requirement that the operating bank account be in the joint venture's name.

In 1965, Ansel Sullivan died, the Florida Supreme Court ruled the state marketing system unconstitutional, and the federal plan was initiated. Pursuant to the new marketing order's registration requirements, the Sullivan corporation, not Chiglades, applied for and received a quota based on its past production history. Chiglades and Sullivan, Inc. then entered into a new Joint Venture Agreement, reciting that the Sullivan corporation had applied for a federal quota under which the joint venture would operate.

The joint venture was terminated in June, 1967.² Chiglades filed with the Florida Celery Committee an application for a new base quantity to be awarded from any reserve established by the Secretary of Agriculture. The application, on the form designed for producers who have no record of celery sales during the base period, listed the joint venture's production history as its own, and no reference was made to the Sullivan corporation. The following month, the application was denied, and similar efforts seeking a "reserve" base quantity in May, 1969 and 1970, proved unsuccessful after the Secretary determined that no marketing reserve would be established in those years.

In May, 1969, Chiglades filed a quota application based on its alleged production history during the joint venture. After a hearing, both the Department of Agriculture examiner and the Florida Celery Committee concluded that Chiglades was not entitled to credit for the base quantity issued to the Sullivan corporation. The Secretary of Agriculture upheld this decision on the ground that the limited partnership never produced celery in its own capacity and that the Marketing Order, both as promulgated and as applied, is within the purposes of the Act and is constitutional.

The District Court held that the Secretary's award of a base quantity to Sullivan, Inc., rather than to Chiglades, was supported by substantial evidence and that, in view of market demands, the Secretary was justified in refusing to issue Chiglades a new quota. The Court held that the Marketing Order was both a proper exercise of the Secretary's statutory authority and constitutional and that the antitrust laws had not been violated since 7 U.S.C.A. § 608b specifically provides that marketing agreements shall not be held violative of any antitrust laws.

The Base Quantity Assignment

Plaintiffs contend that between 1962 and 1965, Chiglades was the sole "producer" of celery under the joint venture, that it is therefore entitled to the Sullivan corporation's base quantity or the allocation of a new quota, and that the District Court erred in concluding that the Secretary's refusal to issue a quota was based on substantial evidence.

Review of administrative proceedings under the Agricultural Marketing Agreement Act is limited by 5 U.S.C.A. § 706.³ The District Court properly confined itself to a determination of whether the decision rendered by the Secretary was supported by substantial evidence. See 5 U.S.C.A. § 706(2)(E); Watson v. Gulf Stevedore Corp., 400 F.2d 649, reh. denied, 404 F.2d 1059 (5th Cir.), cert. denied, 394 U.S. 976, 89 S.Ct. 1471, 22 L.Ed.2d 755 (1968); Lewes Dairy v. Freeman, 401 F.2d 308 (3rd Cir.), cert. denied, 394 U.S. 929, 89 S.Ct. 1187, 22 L.Ed.2d 455 (1968). The District Court observed that the following facts tended to substantiate the Sullivan corporation's claim to the base quantity:

1. Sullivan, Inc. possessed a base quantity under the Florida regulation which was subsequently held unconstitutional.

2. A. J. Sullivan had a long history as a producer of celery in Florida.

3. The payroll bank account of the joint venture was in Sullivan, Inc.\'s name, but all money deposited in it came from the account maintained by the joint venture.

4. Pioneer Growers Cooperative, which was the handler for the celery grown by the joint venture maintained its accounts only in the name of Sullivan, Inc., and made payments directly to Sullivan, Inc. It should be borne in mind, however, that Pioneer Growers Cooperative was aware

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