Foremost Dairies, Inc. v. Thomason

• Decision Date: 14 December 1964
• Docket Number: No. 50046,50046
• Citation: 384 S.W.2d 651
• Parties: FOREMOST DAIRIES, INC., a Corporation, and National Dairy Products Corporation, a Corporation, Respondents, v. Don THOMASON, Commissioner of Agriculture of Missouri, and Thomas, F. Eagleton, Attorney General of Missouri, Appellants. NATIONAL DAIRY PRODUCTS CORPORATION, a Corporation, Respondent, v. Don THOMASON, Commissioner of Agriculture of Missouri, and Thomas F. Eagleton, Attorney General of Missouri, Appellants.
• Court: Missouri Supreme Court

Page 651

384 S.W.2d 651

FOREMOST DAIRIES, INC., a Corporation, and National Dairy

Products Corporation, a Corporation, Respondents, v. Don THOMASON, Commissioner of Agriculture of Missouri, and Thomas, F. Eagleton, Attorney General of Missouri,

Appellants.

NATIONAL DAIRY PRODUCTS CORPORATION, a Corporation, Respondent, v. Don THOMASON, Commissioner of Agriculture of Missouri, and Thomas F. Eagleton, Attorney General of Missouri,

Appellants.

No. 50046.

Supreme Court of Missouri, En Banc.

Dec. 14, 1964.

Kuraner, Freeman, Kuraner, Oberlander & Lamkin, and Charles F. Lamkin, Jr., Kansas City, Wayne D. Hudson, General Counsel, Foremost Dairies, Inc., San Francisco, Cal., of counsel, for Foremost Dairies, Inc.

Morrison, Hecker, Cozad & Morrison and Martin J. Purcell, Kansas City, Richard L. Johnston, Chicago, Ill., of counsel, for National Dairy Products.

Rozier, Carson, Inglish, Nacy & Monaco, John W. Inglish, Jefferson City, of counsel for both respondents.

Thomas F. Eagleton, Atty. Gen., John H. Denman, Asst. Atty. Gen., Jefferson City, for appellants.

Gray L. Dorsey, Chesterfield, Veryl L. Riddle, Riddle, O'Herin & Newberry, Malden, amici curiae.

HOLMAN, Judge.

The respondents, Foremost Dairies, Inc., and National Dairy Products Corporation, instituted this action for a declaratory judgment to determine the validity of rules promulgated by the appellant, Don Thomason, Commissioner of Agriculture of Missouri, under the Unfair Milk Sales Practices Act, §§ 416.410-416.560, ¹ and for a determination of the validity, under the Act, of pricing systems for milk products employed or proposed to be employed by respondents. The trial court held the rules invalid and issued an injunction against their enforcement. The Commissioner of Agriculture and the Attorney General, who was also a party to the cause, have appealed from such judgment.

We have appellate jurisdiction because state officers, as such, are parties. Mo. Const. (1945), Art. V, § 3, V.A.M.S.

The appeal was originally heard in Division One. An opinion was prepared but failed of adoption and the case was transferred to Court en Banc. Additional briefs were filed and the cause was reargued and resubmitted. Portions of the aforementioned opinion are here adopted without the use of quotation marks.

The Unfair Milk Sales Practices Act prohibits the sale of milk or milk products at less than cost by various handlers in the milk distribution system 'with the intent or with the effect of unfairly diverting trade from a competitor, * * * or of destroying competition, or of creating a monopoly.' §§ 416.415, 416.425, and 416.430. Discrimination in prices between any of the cities, towns, municipalities or counties in the state by processors or distributors, with similar intent or effect, in the sale of any milk product furnished from the same plant is prohibited. Differences in prices which reflect differences in transportation costs are not in violation of the prohibition. § 416.420. Combination sales of milk products with other products, at a combined price which is less than the aggregate of the prices for which each is offered for sale, are prohibited when done with the intent or effect above mentioned. § 416.435.

The sections of the Act primarily involved herein provide, in part, as follows:

Section 416.420. '1. No processor or distributor shall, with the intent or with the effect of unfairly diverting trade from a competitor, or of otherwise injuring a competitor, or of destroying competition, discriminate in price in the sale of any milk product furnished from the same plant between any of the towns, cities, municipalities or counties of this state; except that no violation results from different prices which reflect, in the case of a processor, the actual transportation cost from point of processing to point of sale, and, in the case of a distributor, the actual transportation cost from point of purchase to point of resale.'

Section 416.440. '1. No milk processor or distributor shall, with the intent or with the effect of unfairly diverting trade from a competitor, or of otherwise injuring a competitor, or of destroying competition, or of creating a monopoly, give or offer to give any milk product purchaser any rebate, discount, free service or services, advertising allowance, pay for advertising space used jointly, donation, free merchandise, rent on space used by the retailer for storing or displaying the milk processor's or distributor's merchandise, financial aid, free equipment, or any other thing of value; except the bona fide return by a cooperative association to its members on a patronage basis of the savings realized on products sold and distributed to the members or patrons.

'2. Proof of the giving or offer to give anything of value is prima facie evidence of a violation of this section.

* * *

* * * '6. This section does not prevent a discount of two per cent or less for payment on or before a certain date.'

Licenses are required of milk products manufacturers, processors and distributors. The licenses are issued by the Commissioner of Agriculture and violation of the Act is the basis for action by the commissioner to suspend or revoke such licenses. § 416.490. In addition, the commissioner is authorized to obtain injunctive relief against violations. § 416.450. A person injured by violation of the Act is authorized to sue to enjoin the violator and is given a right of action for triple damages. § 416.455.

Section 416.460 authorizes the Commissioner of Agriculture to promulgate rules and regulations to carry out the purposes of the Act. Pursuant to this authority the commissioner promulgated the rules here challenged. They are as follows:

'10. In determining cost to the processor or distributor for retail sales, all retail stops and routes in a given area should be combined and averaged to obtain a uniform cost for such area.

'In determining cost to the processor or distributor for wholesale sales, all wholesale stops and routes in a given area should be combined and averaged to obtain a uniform cost for such area.

'11. Volume pricing is a discount in price and results in a discrimination in price between localities and is therefore prohibited under the Act.

'12. Public school districts, agencies and institutions of the State of Missouri and its political subdivisions are not within the purview of Sections 416.410 to 416.560, RSMo 1959, and sales of milk products to them are not regulated by the Unfair Milk Sales Practices Act.'

Insofar as Rules 10 and 11 are concerned, respondents' petition charges essentially that such regulations prevented them from establishing volume price differentials; that, as applied to such pricing practice, those regulations are unreasonable, capricious, an abuse of discretion, beyond the powers of the commissioner and, therefore, void. The petition further charged that, if the Act is construed to authorize such regulations, the Act (for reasons therein specifically alleged) is to that extent unconstitutional. They also charge that, insofar as such regulations would be authorized by the Missouri Act, the Missouri law is in conflict with the Robinson-Patman Act (15 U.S.C. § 13) and is to that extent void. Rule 12 was attacked as unreasonable, arbitrary, capricious and beyond the authority of the commissioner.

Respondents are licensed under the Act as processors of milk products. This litigation is based primarily upon their operation in the Kansas City vicinity. Respondents' evidence showed that in their operations various methods of distribution of milk and milk products are employed. They sell such products directly to consumers on home delivery routes. They deliver the products on wholesale routes to grocery stores, restaurants, and similar customers who purchase for resale. Some wholesale customers purchase the products at respondents' plants and provide their own distribution system. Some wholesale customers purchase on a 'drop shipment' basis whereby the customers purchase on a reduced delivery basis with deliveries less frequent than to other customers. The size of the customer's purchase may vary from one quart of milk by a single retail customer to hundreds of quarts by wholesale customers.

Prior to the passage of the Unfair Milk Sales Law respondents and others similarly engaged sold milk and milk products at prices which varied according to the volume purchased and the method of delivery. The law became effective on August 29, 1959. On October 8, 1959, Mr. J. S. Williamson, then Commissioner of Agriculture, issued a communication addressed to all milk processing plants distributing milk in Missouri, which was received by the respondents. In this communication the commissioner stated: 'Volume pricing is not prohibited provided it reflects the actual savings or efficiencies in relation to other volumes.'

Subsequently, on January 31, 1962, the present Commissioner of Agriculture, Mr. Thomason, issued a bulletin in which he stated that changes in the interpretation expressed on October 8, 1959, 'might be proper at the present time.' The policy of the commissioner was expressed by Mr. Thomason as follows:

'4. Volume pricing is not prohibited provided it is not a discount in price and reflects the actual savings or efficiencies in relation to other volumes.

'5. All retail stops and routes in a given area should be combined and averaged to obtain a uniform retail cost for such area. All wholesale stops and routes in a given area should be combined and averaged to obtain a uniform wholesale cost for such area.'

In November 1961, National, operating through its Sealtest Division in Kansas City, placed in effect a system of pricing for sales on its home delivery routes of milk products under which all customers would be charged the same price for its products. However, a service charge was added, depending upon the volume of the customer's purchase, per deliver. On the purchase of the...