Cumberland Farms Northern, Inc. v. Maine Milk Commission

• Citation: 377 A.2d 84
• Parties: CUMBERLAND FARMS NORTHERN, INC. v. MAINE MILK COMMISSION and Maine Milk Dealers Association et al. and Yankee Milk, Inc., et al.
• Decision Date: 23 August 1977
• Court: Maine Supreme Court

Page 84

377 A.2d 84

CUMBERLAND FARMS NORTHERN, INC. v. MAINE MILK COMMISSION and Maine Milk Dealers Association et al. and Yankee Milk, Inc., et al.

Supreme Judicial Court of Maine.

Aug. 23, 1977.

Preti & Flaherty by David M. Cohen, Harold C. Pachios, Portland, for plaintiff.

Donald G. Alexander, Deputy Atty. Gen., Augusta, for Maine Milk Comn.

Murray, Plumb & Murray by Peter L. Murray, John C. Lightbody, Portland, for Maine Milk Dealers Association.

Lipman, Parks, Livingston & Lipman by John M. Parks, Sumner H. Lipman, Augusta, for Yankee Milk, Inc.

Before DUFRESNE, C. J., and POMEROY, ARCHIBALD, DELAHANTY and GODFREY, JJ.

GODFREY, Justice.

These appeals arise from a decision of the Superior Court holding parts of two minimum pricing orders of the Maine Milk Commission invalid on two grounds; first, that the orders were issued without such an investigation as is required by the 1975 revision of the Maine Milk Commission Law, and second, that the Commission, in establishing minimum prices to be paid to milk dealers, incorrectly applied the pricing standards set forth in that law. The two orders, known as Orders 76-1 and 76-2, purported to establish minimum prices to be paid to producers, dealers and retailers for milk produced, distributed, or sold in Maine.

The Superior Court upheld those provisions of the Commission's orders that adopted as minimum prices to be paid to Maine producers the federally established minimum prices for the Boston Regional Marketing Area. It refused to issue any injunction against the Commission, assuming, without deciding, that the Commission would, pending a new, adequate investigation, "pass through" the valid minimum producer prices under Orders 76-1 and 76-2 and arrive at dealer and retailer minimums by adding the dealer and retailer margins established by the Commission's last valid order preceding 76-1 and 76-2. In that way, the minimum price of milk would remain under control at all levels awaiting the outcome of this appeal.

All parties and intervenors have appealed. The Commission appeals from the Court's invalidation of the dealer and retailer minimums announced in Orders 76-1 and 76-2. The Commission thinks its investigation met statutory requirements and that it applied the statutory pricing standards correctly. The Commission agrees with the court on "passing through" the producer minimums set in those orders if the dealer and retailer minimums must be deemed invalid.

Maine Milk Dealers Association, an intervenor-defendant, agrees with the Commission except that it disapproves "passing through" producer minimums without any hearing if the dealer margins are held invalid.

Cumberland Farms, the plaintiff in Superior Court, agrees with the court's decision that the dealer and retailer minimums are invalid, but argues further that the entire statute is unconstitutional, either on its face or as applied to Cumberland Farms, as a violation of the Commerce and Equal Protection Clauses. It also contends the court erred in denying an injunction.

Yankee Milk, Inc., intervenor-defendant, a producer cooperative, takes essentially the same position as the Commission. It insists strongly that the producer minimums set in Orders 76-1 and 76-2 are valid and should stand unaffected by any illegality of the wholesale and retail minimums.

The Milk Commission Statute dp

The purpose of the original Maine Milk Commission Law, enacted in 1935, was said to be to prevent the disruption of the sale and distribution of milk through unfair, destructive and uneconomic practices. Maine Milk Comm'n v. Cumberland Farms Northern, Inc., 160 Me. 366, 380, 205 A.2d 146, 153 (1964). In the midst of the Great Depression, it was the perception of the legislatures of several states, including Maine, that financially powerful dealers were forcing down the price paid to farmers for milk and were tending to monopolize milk distribution by cutting wholesale prices to drive financially weaker competitors out of business. The 1935 act gave the Maine Commission authority, after investigation and hearing, to set minimum prices to be charged for fluid milk sold within the state by producers, dealers, and retailers. From the beginning of milk price regulation in Maine, sanctions for violation of the Commission's orders have included loss of license, fine, and imprisonment. From the beginning, the Commission has had the power to subpoena witnesses and records in order to administer the act.

Although the Milk Commission Act has been amended repeatedly in minor respect since 1935, the revisions adopted in 1975 must be regarded as of special importance. 1975 Me.P.L. ch. 517, effective October 1, 1975. The most significant changes in 1975 included the following:

1. The composition of the Commission itself was changed. Formerly, representatives of producers, dealers, and retailers were to be appointed as members of the Commission. Since 1975, no member or employee of the Commission may have any business or professional connection with a producer, dealer, or retailer except as a consumer buying at retail. 7 M.R.S.A. § 2952 (Supp.1976).

2. The Commission was given broad powers to inquire into the management of the businesses of producers, dealers and stores, to obtain necessary information. It may require accounts of all milk business, including income, expense, assets and liabilities, to assist it in making its determination of minimum prices, and it must establish by rules and regulations procedures for inspection of records, books, and accounts of producers, dealers and retailers. 7 M.R.S.A. § 2953 (Supp.1976).

3. Not less than once every three years, the Commission must conduct independent studies of the economics and practices of the milk industry to assist the Commission in establishing minimum prices. 7 M.R.S.A. § 2953 (Supp.1976).

4. New criteria were enacted on the basis of which the Commission is to fix minimum prices. Before the 1975 amendments became effective, the Commission established prices on the basis of certain general statutory criteria: the prices were to be just and reasonable "taking into due consideration the public health and welfare and the insuring of an adequate supply of pure and wholesome milk to the inhabitants of this State under varying conditions in various marketing areas, seasonal production and other conditions affecting the costs of production, transportation and marketing in the milk industry, including a reasonable return to the producer and dealer." 7 M.R.S.A. § 2954 (1964). To those general criteria, the 1975 amendment added two others: the Commission must now also take into due consideration prevailing prices in neighboring states and the public need for the establishment of retail milk prices at the lowest practicable levels.

Besides adding the new general criteria to be considered by the Commission in setting minimum prices, the 1975 amendments gave the Commission specific directions in the setting of prices for producers, dealers and stores. The producer price, the price paid to the dairy farmer, must be based on the prevailing price in the southern New England, federally regulated market and must "reflect as accurately as possible the increased costs of production." § 2954.2.A. The so-called dealer margin, the amount added to the producer price to arrive at the wholesale or dealer price, is to "reflect the lowest prices at which milk purchased from Maine producers at Maine minimum prices can be received, processed, packaged and distributed within the State of Maine at a just and reasonable return." § 2954.2.B. The meaning of the quoted language and the necessity and scope of investigation required to arrive at the dealer margin are at issue on this appeal. The retail margin is the third element in the minimum retail price. It is to be "based on the minimum wholesale price paid to dealers and a rate of return deemed just and reasonable by the Maine Milk Commission." § 2954.2.C. The justice and reasonableness of the retailers' rate of return established by the Commission in Orders 76-1 and 76-2 are not at issue here. The minimum retail price established by the Commission's orders has been challenged, rather, on the ground that the dealer margin, to which the retailer's rate of return has been applied, was itself improperly set by the Commission. It is the Commission's method of setting the dealer margin, rather than the retailer's rate of return as such, that was challenged in the proceeding in Superior Court and which presents the crucial issue on this appeal.

The Procedure

After several days of hearings in October, November and December, 1975, the Commission promulgated its first order under the revised law on December 30, 1975, effective January 1, 1976. That order, Order 76-1, set minimums in the three categories described above. The Maine milk dealers petitioned for reconsideration, alleging that the minimum prices set in Order 76-1 would result in losses to them, and, after two days of hearings in February, the Commission issued Order 76-2 on February 4, 1976, to be effective February 9, 1976, setting higher minimum dealer and retailer prices.

Cumberland Farms Northern, Inc. (hereinafter "Cumberland Farms") appealed each order to the Superior Court under M.R.Civ.P., Rule 80B. The Maine Milk Dealers Association and Yankee Milk, Inc. joined in both appeals as intervenor-defendants. After a hearing, the court reversed both orders to the extent they set minimum dealer and retail prices, on the ground that the Commission had made an insufficient investigation and had applied an incorrect standard in arriving at the minimum prices. The Superior Court declined to address the issues of the constitutionality of the Commission's application of the statute and the sufficiency of the evidence to support the orders, but it sanctioned the Commission's action of automatically "passing through" producer price changes, based on changes in the federally...