Dixie Dairy Co. v. City of Chicago, 75-1932

• Decision Date: 02 September 1976
• Docket Number: No. 75-1932,75-1932
• Parties: DIXIE DAIRY COMPANY, a corporation, Plaintiff-Appellee, v. CITY OF CHICAGO, a Municipal Corporation, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1303

538 F.2d 1303

DIXIE DAIRY COMPANY, a corporation, Plaintiff-Appellee, v. CITY OF CHICAGO, a Municipal Corporation, et al Defendants-Appellants.

No. 75-1932.

United States Court of Appeals Seventh Circuit.

Argued Jan. 19, 1976.

Decided Aug. 6, 1976.

Rehearing and Rehearing En Banc Denied Sept. 2, 1976.

William R. Quinlan, Corp. Counsel, Edmund Hatfield, Asst. Corp. Counsel, Chicago, Ill., for defendants-appellants.

Francis J. McConnell, Chicago, Ill., for plaintiff-appellee.

Before SWYGERT, SPRECHER and TONE, Circuit Judges.

TONE, Circuit Judge.

The issue in this case is whether a Chicago milk inspection ordinance imposes an unreasonable burden on interstate commerce, thereby violating the Commerce Clause, article I, section 8, of the Constitution. The District Court, after trial, entered a judgment holding the ordinance unconstitutional. We affirm that judgment.

Plaintiff Dixie Dairy Company operates a milk processing plant in Gary, Indiana, and sells the milk and milk products processed there to buyers in Indiana and Illinois. Dixie purchases its milk from 204 dairy farms, of which about half are in Illinois and half in Indiana.

In 1955 Dixie applied for a permit to sell milk in the City of Chicago. Forms were submitted on behalf of all of Dixie's producers and milk haulers, but no action was taken by the city. The company next inquired about the possibility of obtaining a permit in May of 1969. A Dixie representative was informed at that time by the city's chief sanitary officer that the city was in the process of updating its milk inspection ordinance, and that it would be "futile" to apply then.

Two years before Dixie's most recent inquiry, the State of Indiana enacted the Grade "A" Pasteurized Milk Ordinance (PMO) recommended by the United States Public Health Service (USPHS). Ind. Code § 16-6-6-1, et seq. (Burns Stat. 1973). The PMO has been voluntarily adopted by 45 states and many counties and municipalities in the United States. The Indiana statute embodying the ordinance requires all vendors of milk within the state to obtain a permit from the Indiana State Board of Health. As a condition to obtaining and maintaining a permit, a distributor's processing plant, such as Dixie's, and all farms shipping milk to that plant are subject to inspection at least twice a year by the Indiana health authorities. Ind. Code §§ 16-6-6-3, -5. The District Court found that farms are actually inspected by the state three or four times a year, and that plants are inspected every week. In addition, the statute requires that each dairy farmer's milk be laboratory tested for bacteria a minimum of four times every six months. Ind. Code § 16-6-6-6. Bulk milk haulers, who transport milk from the farms to the processing plants, are also inspected three times a year, according to the District Court.

State rating officers certified by USPHS survey and rate milk producers and processors in every state which has adopted the PMO pursuant to the procedures and criteria set forth in a pamphlet entitled "Methods of Making Sanitation Ratings of Milksheds," USPHS Publication No. 678 (1966). Compliance with those criteria is determined according to a point system, with any compliance rating above 90 per cent being considered acceptable for interstate transport and consumption. Dixie's farmer suppliers are thus subject to two further inspections, one by USPHS-certified state rating officers, who inspect a random sample of each processor's farms to derive the USPHS rating, and another by USPHS agents, who check the results of the survey for accuracy on a sample selection basis. Processing plants are also surveyed by state survey officers, whose results are audited by USPHS.

Section 11 of the PMO, adopted in substance as Ind. Code § 16-6-6-11, provides that milk "from points beyond the limits of routine inspection" may be sold within the enacting authority's jurisdiction if the milk has been produced and pasteurized under regulations substantially equivalent to the PMO and has been awarded an acceptable rating by a state milk sanitation rating officer certified by USPHS. ¹ Thus duplicative inspections are avoided.

The State of Illinois, by regulation, has also adopted the PMO, including section 11. Ill. Dep't of Pub. Health, Grade A Pasteurized Milk and Milk Products Rules and Regulations, art. XI, rule 11.01. Dixie has a permit, issued pursuant to these regulations, to sell milk in Illinois. That permit, however, does not authorize Dixie to sell in Chicago, which, under the authority of Ill.Rev.Stat. ch. 24, § 11-16-1 (1975), maintains its own milk regulations and has not adopted the PMO. ² Since 1934 the Chicago milk ordinance has required that all milk vendors obtain a permit from the Chicago Board of Health and that they and their suppliers submit to periodic inspections by the board's own inspectors. Chicago Municipal Code §§ 154-8, -17, -22. Because no effective provision is made for reliance upon inspections by out-of-state authorities, ³ an out-of-state processor seeking a Chicago permit is in effect required by the ordinance to submit itself and its dairy-farmer suppliers to duplicative inspections by Chicago inspectors.

The record is silent on the question of whether Illinois processors who wish to sell milk both in Chicago and elsewhere in Illinois are, with their suppliers, subjected to duplicative inspections. At oral argument the question was disputed by assertions outside the record, which we must of course disregard. It would seem incongruous and unlikely that Illinois which, by adopting section 11 of the PMO, accepts inspections made by other states, would not do the same for Chicago, to whose inspectors it has entrusted the health of Chicago's 3.4 million people. ⁴ We shall, however, treat this point as unresolved by the record.

Dixie brought this suit in 1970, alleging in count 1 of its amended complaint that the city's refusal to issue a permit in the face of Indiana inspections and of the company's high USPHS ratings imposed an unconstitutional burden on interstate commerce. In count 2 Dixie alleged that the inspection and permit policy discriminated against interstate commerce, since the city refused not only to issue the permit but also to take the prerequisite step of inspecting Dixie's facilities. The city moved for summary judgment, which was granted as to count 1, in March 1973. While the suit was pending, Chicago Board of Health inspectors twice inspected Dixie's plant and producer farms. After the second inspection tour, the city offered to issue a permit on the condition that it be entitled to make continuing inspections, at no charge to Dixie or its producers. As a result of this offer, the District Court granted the city's motion as to count 2 in June 1974. Dixie, adhering to its view that duplicative Chicago inspections were unnecessary, rejected the offer and appealed the count 1 ruling. This court reversed in an unpublished order and sent the case back to the District Court for resolution of disputed factual issues. ⁵

On remand, the District Court found that at all times relevant to this action Dixie has received USPHS ratings of above 90 per cent for its plant and producers, that Dixie's milk is wholesome, and that "Chicago can rely upon Indiana and USPHS inspection to fully protect Chicago's health interests." The court noted that city officials had acknowledged as much, and the city had not contended otherwise. The court also found, in findings discussed in greater detail below, that the result of the duplicative inspection requirement of the ordinance was that no out-of-state processor has obtained a Chicago milk permit, and this result constituted an unreasonable burden on interstate commerce. ⁶ It therefore concluded that the city's refusal to grant milk permits except when conditioned upon Chicago Board of Health inspections was unconstitutional.

I.

The count of the complaint in which discrimination against interstate commerce was alleged (count 2) having been dismissed and no appeal having been taken from that dismissal, the issue of discrimination was removed from the case and is not before us. ⁷ As we have noted, the record does not disclose whether Illinois processors and their suppliers are also subjected to duplicative inspections as a result of the ordinance. We therefore assume the ordinance to be nondiscriminatory and must decide only whether "(t)his is one of those cases few in number where local safety measures that are nondiscriminatory place an unconstitutional burden on interstate commerce." Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520, 529, 79 S.Ct. 962, 967, 3 L.Ed.2d 1003 (1959).

Before the formulation of the balancing test in Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), and the reaffirmation of that test in Great Atlantic and Pacific Tea Co. v. Cottrell, --- U.S. ----, 96 S.Ct. 923, 47 L.Ed.2d 55 (1976), the argument in favor of the constitutionality of the Chicago milk ordinance would have been more persuasive. The ordinance does not purport to discriminate against interstate commerce. Cf. South Carolina Highway Department v. Barnwell Bros., Inc., 303 U.S. 177, 189, 58 S.Ct. 510, 82 L.Ed. 734 (1938). The policy decision and legislative judgment underlying a state regulation designed to protect the public's health or safety are not subject to review by a federal court. Brotherhood of Locomotive Firemen & Enginemen v. Chicago, R. I. & P. R. Co., 393 U.S. 129, 136, 138-139, 89 S.Ct. 323, 21 L.Ed.2d 289 (1968). The burden the ordinance lays on commerce is "incidental," see e. g., Milk Control Board v. Eisenberg Farm Products, 306 U.S. 346, 352, 59 S.Ct. 528, 83 L.Ed. 752 (1939), and not "direct," Shafer v. Farmers Grain Co., 268 U.S. 189, 199, 45 S.Ct. 481, 69 L.Ed. 909 (1925). The ordinance is not inconsistent with regulations of other states in a field in which uniformity is important to the national...