Cloverland-Green Spring Dairies v. Penn. Milk

• Decision Date: 02 February 2001
• Docket Number: No. CIV 1:CV-99-0487.,CIV 1:CV-99-0487.
• Citation: 138 F.Supp.2d 593
• Parties: CLOVERLAND—GREEN SPRING DAIRIES, INC., Plaintiff and Thomas E. McGlinchey, et al., Plaintiffs/Intervenors v. PENNSYLVANIA MILK MARKETING BOARD, Beverly R. Minor, Individually and as Chairperson of the Board, Luke F. Brubaker and J. Robert Derry, Individually and as Members of the Board, Defendants
• Court: U.S. District Court — Middle District of Pennsylvania

138 F.Supp.2d 593

CLOVERLAND—GREEN SPRING DAIRIES, INC., Plaintiff and Thomas E. McGlinchey, et al., Plaintiffs/Intervenors v. PENNSYLVANIA MILK MARKETING BOARD, Beverly R. Minor, Individually and as Chairperson of the Board, Luke F. Brubaker and J. Robert Derry, Individually and as Members of the Board, Defendants

No. CIV 1:CV-99-0487.

United States District Court, M.D. Pennsylvania.

February 2, 2001.

COPYRIGHT MATERIAL OMITTED

Scott Thomas Wyland, Kevin J. McKeon, Malatesta, Hawke & McKeon, Harrisburg, PA, Sheldon A. Weiss, Mountainside, NJ, for plaintiff.

Gwendolyn T. Mosley, Office of Atty. Gen., Harrisburg, PA, for defendants.

Allen C. Warshaw, Duane, Morris & Heckscher, Harrisburg, PA, for Pennsylvania, Ass'n of Milk Dealers.

Thomas J. Finucane, Finucane Law Office LLP, Chambersburg, PA, for intervenor-plaintiffs.

MEMORANDUM

RAMBO, District Judge.

Before the court are three separate motions for summary judgment submitted by Plaintiff, Intervenor Plaintiffs, and Defendants.¹ The parties have briefed the issues, the court has conducted oral argument, and the motions are ripe for disposition.

I. Background

The instant action seeks a declaratory judgment that certain provisions of Pennsylvania's Milk Marketing Law, 31 Pa. Stat. Ann. §§ 700j-101, et seq. ("PMML"), and certain provisions of Official General Orders A-890A and A-900, (i) violate the Commerce Clause of the United States Constitution, and (ii) deprive Plaintiff of rights guaranteed pursuant to 42 U.S.C. § 1983. Additionally Plaintiff seeks to enjoin Defendants from enforcing the minimum milk prices fixed pursuant to Orders A-890A and A-900.

A. Factual Background

Unless otherwise indicated, the following facts are undisputed by the parties. Plaintiff, Cloverland-Green Spring Dairies, Inc. ("Cloverland"), is a Maryland corporation that engages in the business of processing and selling milk to various wholesale accounts, primarily stores, within and around Baltimore, Maryland. Plaintiff-Intervenors are Pennsylvania milk consumers residing in Pennsylvania Milk Marketing Area # 4 ("Area # 4"), Sue A. Spigler and Gertrude Giorgini, and in Pennsylvania Milk Marketing Area # 1 ("Area # 1"), Thomas E. McGlinchey (collectively referred to as the "Milk Consumers," or together with Cloverland as "Plaintiffs"). Defendant Pennsylvania Milk Marketing Board (the "Board") is the Pennsylvania state administrative agency charged by state law with the task of promulgating orders designating milk marketing areas within the Commonwealth and fixing minimum wholesale and retail prices to be charged within such milk marketing areas. Defendant Beverly Minor is the present Chairperson, and Defendants Luke Brubaker and J. Robert Derry are the two other members of the Board. Acting in their official capacities, Defendants promulgated Official General Orders A-890A and A-900, including the minimum wholesale milk prices established thereby.

Southeastern and South Central Pennsylvania comprise part of a much larger interstate milk market which includes, in addition to the five Southeastern and ten South Central Counties of Pennsylvania, Southern New Jersey, Delaware, Maryland, Washington, D.C., and portions of Northern Virginia. The milk industry in that area is characterized by substantial interstate movement of fluid milk, both from the dairy farm to the processing/bottling plant, and from the plant to the retailer and ultimate consumer. Throughout most of the Northeast, including South-eastern and South Central Pennsylvania, the minimum prices that fluid milk processors ("handlers") must pay to dairy farmers ("producers") or associations of dairy farmers ("cooperatives"), are established by "regional" Federal Milk Marketing Orders, promulgated by the United States Secretary of Agriculture ("Secretary"), pursuant to the Agriculture Marketing Agreement Act of 1937 ("AMAA"), 7 U.S.C. § 601, et seq., as amended.

The Secretary has issued and enforced the "Middle Atlantic Marketing Order, Order # 4," which regulates the minimum prices that processing plants pay to producers for raw milk which is processed and packaged for sale to consumers. Among other things, the Secretary has promulgated and enforces provisions that: (a) establish the minimum prices that fluid milk handlers must pay producers for milk which is used for bottling as packaged fluid milk ("Class I" milk) or manufactured into soft or hard dairy products, such as cottage cheese, cream cheese, hard cheese, butter, or powdered milk ("Class II" or "Class III" milk); and (b) establish a mechanism for the "pooling" of all revenue received for raw milk among all producers regulated by the Order. In determining said minimum producer prices, the Secretary is required by law to fix, among other things, such prices as he finds will "ensure a sufficient quantity of pure and wholesome milk to meet current needs and further assure a level of farm income adequate to maintain productive capacity sufficient to meet anticipated future needs, and be in the public interest." 7 U.S.C. § 608c(18).

There has been more than an adequate supply of milk available to consumers throughout Pennsylvania and all of the Middle Atlantic region. Currently, and for the past several years, approximately half, or even less, of producer milk regulated by Federal Order # 4 has been used for fluid purposes. The remainder is used to manufacture Class II and Class III products, which are marketed in competition with the Class II and III milk products from elsewhere in the United States. Much more milk is produced in Pennsylvania than is consumed in Pennsylvania. According to statistics published by the Agriculture Marketing Service of the United States Department of Agriculture, in 1997 and 1998 Pennsylvania dairy farmers in the aggregate produced and marketed approximately 900 pounds of milk per year for each inhabitant of the Commonwealth, whereas per capita fluid milk consumption nationwide was about 200 pounds per year.

Federal Milk Marketing Orders do not in any way establish or fix "resale" prices, that is, prices paid for the finished product, whether sold by the milk processor to nonprocessing milk dealers ("distributors"), or to other "wholesale" customers (e.g., stores, schools, hospitals, and other institutions); or the prices received by processors, distributors, or stores from the ultimate consumers. Throughout virtually all of the United States, those "resale" or wholesale and retail milk prices are determined by competitive market forces, not by state regulation. (Pl.'s Mot. for Sum. Jud.App. A, Webster Aff. ("Webster") ¶ 4; Pl.'s Mot. for Sum. Jud.App. B, Harris Aff. ("Harris") ¶ 9.)

The Commonwealth of Pennsylvania, through the Defendant Board, establishes and enforces "minimum" wholesale and retail milk prices which stores, schools, and consumers must pay for the milk they purchase. The state statute pursuant to which the Board sets said minimum prices is the PMML, Pennsylvania's Milk Marketing Law, 31 Pa. Cons.Stat. Ann. §§ 700j-101, et seq. The PMML was first enacted in 1933 during the Great Depression, several years before an effective federal milk marketing program was in place. The PMML mandates the state agency, the Board, to establish "milk marketing areas" within the Commonwealth, and to fix minimum "wholesale and retail" milk prices applicable to every level of transaction.

Pennsylvania is the only state that by law requires that a state agency set mandatory minimum wholesale and retail milk prices. Today, the only other states that impose minimum resale prices are Maine and North Dakota; however unlike Pennsylvania, whether to set mandatory prices in those states is at the discretion of the states' milk control agencies.² (Webster ¶ 5; Harris ¶¶ 9, 12, 13.) Throughout the rest of the country, grocery stores, and all other wholesale customers acquire their milk pursuant to competitive forces, primarily price competition, unhampered by state-imposed "minimum" prices.

The operative provisions of the PMML with respect to the criteria to be employed by the Board in fixing minimum wholesale and retail prices are contained in PMML § 801. Among other things, that section requires that after a hearing, the Board shall "ascertain and maintain such prices ... for milk in the respective milk marketing areas as will ... best protect the milk industry of the Commonwealth and insure a sufficient quantity of pure and wholesome milk to the inhabitants of the Commonwealth ..." 31 Pa. Stat. Ann. § 700j-801. Plaintiffs assert that Pennsylvania inhabitants would have a "sufficient quantity of pure and wholesome milk" without the fixing of minimum resale prices by the Board. (Harris ¶¶ 6-12, 23, 24, 26; Webster ¶ 4.)

Pursuant to the mandate of § 801 of the PMML, the Board has established six milk marketing areas within the Commonwealth. Milk Marketing Area # 1 ("Area # 1"), the "Southeastern" consists of the five Southeastern Counties of Pennsylvania (Philadelphia, Delaware, Bucks, Montgomery, and Chester). Milk Marketing Area # 4 (Area # 4), the "South Central" is comprised of ten counties in South Central Pennsylvania (Fulton, Franklin, Adams, York, Lancaster, Juniata, Perry, Cumberland, Dauphin, and Lebanon), five of which abut the State of Maryland. The minimum price orders promulgated by the Board in effect for those two areas when the complaint in the captioned action was filed were Order A-890A, effective November 1, 1998 (Area # 1), and Order A-898, effective June 1, 1998 (Area # 4). Effective May 1, 1999 Order A-898 was superseded by Order A-900, which thereafter governed minimum milk prices in Area # 4.

In fixing milk prices, § 801 mandates that the Board shall include:

the amount necessary to yield a reasonable return to the producer, which return shall not be less than the cost of production and a reasonable profit to the producer ... and a reasonable return on aggregate milk sales by milk dealers or handlers and...