Foster v. Freeman

Decision Date26 June 1967
Docket NumberNo. 65 Civ. 1207.,65 Civ. 1207.
Citation271 F. Supp. 33
PartiesWillard P. FOSTER, J. Riker Robinson, Everett Dence, Paul Doran, Howard Makela, Morris Fluker and Murray Grodman, Plaintiffs, v. Orville L. FREEMAN, Secretary of Agriculture, and Anson J. Pollard, Market Administrator, Defendants, Dairymen's League Cooperative Association, Inc., Northeast Dairy Cooperative Federation, Inc., and Inter-State-Milk Producers' Cooperative, Intervenors.
CourtU.S. District Court — Southern District of New York

Harry Polikoff, New York City, for plaintiffs.

Robert M. Morgenthau, U. S. Atty. for Southern District of New York, New York City, for defendants; Alan G. Blumberg, Asst. U. S. Atty., J. C. Krause, Acting Asst. Gen. Counsel, Department of Agriculture, John C. Chernauskas, Atty., Department of Agriculture, of counsel.

A. Evans Kephart, Philadelphia, Pa., for intervening-plaintiff, Inter-State Milk Producers' Cooperative.

Bond, Schoeneck & King, Syracuse, N. Y., for intervening-defendants, Dairymen's League Cooperative Ass'n, Inc. and Northeast Dairy Cooperative Federation, Inc.


FRANKEL, District Judge.

Before the Agricultural Marketing Agreement Act of 1937 (as amended, 7 U.S.C. § 601 et seq.), the economic conflict between milk producers allied in cooperatives and those outside such associations erupted from time to time "in bitter warfare and bloodshed on the nation's highways." Brannan v. Stark, 342 U.S. 451, 470, 72 S.Ct. 433, 443, 96 L.Ed. 497 (1952) (Black, J., dissenting). The war has gone on since 1937 in the courts, with the assaults on the cooperatives commonly financed by milk handlers who are themselves without standing to assail the payments to cooperatives on which much controversy has centered. Id. at 469, 72 S.Ct. 433; and see United States v. Rock Royal Co-op., 307 U.S. 533, 571-572, 59 S.Ct. 993, 83 L.Ed. 1446 (1939). This case is another battle in that war.

The plaintiffs, who have made similar efforts in other forms and other forums before this, sue to enjoin payments to cooperative associations1 under Milk Marketing Order No. 2, 7 C.F.R. § 1002 et seq., which governs the New York-New Jersey milk marketing area. Briefly but sufficiently stated, their thesis is that the payments under the governing provisions of the 1937 Act may not exceed the cost to the cooperatives of marketwide services, beneficial to cooperative members and non-members alike; that this limitation is an inescapable corollary of the statutory purpose to assure uniform minimum prices to milk producers; that the payments actually made to the cooperatives, now and for some years, have been substantially greater than the cost of marketwide services performed by them; and that the Order, as it is thus administered, must therefore be held invalid. Asserting that the voluminous papers demonstrate their factual premises without dispute, plaintiffs have moved for summary judgment. In addition, pending the hearing of that motion, they seek a preliminary injunction requiring payment of the disputed sums into escrow until the case is finally decided. Defendants, in what amounts to a cross-motion for summary judgment, seek dismissal of the complaint.2 For reasons outlined below, all three motions will be denied.


The Marketing Order in issue has been adequately described elsewhere, e. g., Grant v. Benson, 97 U.S.App.D.C. 191, 229 F.2d 765, 767-769 (1955), cert. denied, 350 U.S. 1015, 76 S.Ct. 658, 100 L.Ed. 875 (1956); Queensboro Farms Products v. Wickard, 137 F.2d 969, 972-973 (2d Cir. 1943). It was characterized in the latter case (p. 974) as dealing with a problem that is "exquisitely complicated." However, the aspects of present concern may be sketched in a few words:

(1) The Order specifies classes of milk, based upon varying uses, and minimum prices for each class.
(2) It provides for payment by milk handlers into a producer-settlement fund administered by the Market Administrator.
(3) By means of an "equalization formula," it operates to give each producer the same average or "blended" price for his milk, regardless of the use for which he sold it.
(4) It provides for deductions of stated amounts from the producer-settlement fund for payment to cooperatives which are required to perform prescribed types of "marketwide services" determined to benefit all producers in various ways, including the maintenance of a stable and orderly market.

The provision for such payments to cooperatives was sustained a dozen years ago in Grant v. Benson, supra, against attack by a group of non-member producers like the present plaintiffs.3 After some initial ambiguities, the plaintiffs here have conceded that Grant v. Benson should be followed, making it unnecessary to rule whether that class suit is conclusive for this one on grounds of res judicata. Cf. Gart v. Cole, 166 F.Supp. 129 (S.D.N.Y.1958), aff'd, 263 F.2d 244 (2d Cir.), cert. denied, 359 U.S. 978, 79 S.Ct. 898, 3 L.Ed.2d 929 (1959). Accepting what Grant v. Benson held, plaintiffs urge that it not only leaves open, but actually supports, their argument against payments to cooperatives exceeding their costs of providing marketwide services. It is appropriate, then, to start here by recalling what was settled for us by the Court of Appeals for the District of Columbia Circuit.

The Court in Grant v. Benson reviewed and sustained the Secretary's findings that the 50,000 producers then governed by the Marketing Order were unable individually to protect their interests in a complex market under a complex scheme of government regulation; that cooperative associations could and did supply the technical personnel and other resources needed for effective representation of such producer interests; that these activities and other "marketwide services" supplied by cooperatives "advance the interests of producers generally throughout the milkshed"; and that without the questioned payments, the cost of such services would have to be borne solely by cooperative members, "engendering an unfair disparity between members and nonmembers." 229 F.2d at 768. Furthermore, the Court noted (p. 769):

"The cooperatives incur expenses in the performance of marketwide services at least equal to the amounts received as payments from the equalization or producer-settlement fund. Approximately 70 per cent of the producers are members of cooperative associations, and the value of the marketwide services is worth more to each producer than the small sum paid to the cooperatives."

Having sustained the Secretary's findings, the Court rejected the contention that the payments to cooperatives were outside the authority given by the statute. In reaching this conclusion, it stressed again the value of the services to all producers and—the point upon which plaintiffs here place their reliance —the relationship between the cost of the services and the payments. It said (p. 770):

"Uniformity in the price received by producers is not destroyed by such payments. On the contrary, the findings are that the services for which they are made are of a marketwide character, and are of greater value to each producer than the small amount paid by him as his contribution to the cost. Further, it is found that the cooperatives incur expenses in the performance of these marketwide services at least equal to the amount received from the fund. If the payments were for services beneficial only to members of the associations the case would be different. But they are for the benefit of nonmembers as well, and they are shown by massive evidence which we cannot ignore, followed by findings which we have no authority, rightfully exercised, to overturn, to be reasonably necessary to accomplish the purposes of the statute through the method adopted."

Stressing the quoted observations in Grant v. Benson, the plaintiffs began some time ago to complain to the Secretary that the cooperatives were receiving unlawfully excessive payments—and, what amounts to the same thing, that the requirement of uniform minimum prices was being breached—because the marketwide services were costing the cooperatives substantially less than the amounts they were receiving from the equalization pool. To consider this and a variety of other questions that had arisen since the last of many amendments to the Order,4 the Secretary determined in April 1965 that a public hearing should be held to consider the need for additional amendments. The hearing —actually a joint Federal-State proceeding with the States of New York and New Jersey, which have concurrent provisions duplicating Order No. 2 for application to intrastate marketing— went forward on July 19-23 and August 3-27, 1965. The record thus produced comprises 4,506 pages of transcript and 177 exhibits.

Some sixteen months later, on January 19, 1967, the Deputy Administrator for Regulatory Programs issued a Recommended Decision, which occupies some 15 of the Federal Register's brutal three-column pages. 32 Fed.Reg. 807-822. Reviewing the extensive testimony from partisans and relatively disinterested academicians, he concluded that the payments to cooperatives continued to serve vital objectives under the statute. He reviewed in this connection the highly complex character of the marketing problem; the inability of the lone producer to acquire the technical knowledge or give the time necessary for defense of his interests; the indispensability of experts skilled in law and economics as well as the technology of dairy farming; and the key role performed by cooperatives in supplying representation for the concerns of non-members as well as members. He noted other marketwide services of importance—for example, in providing information and education, in legislative efforts, and in consultations with the Market Administrator. He recommended that the preservation of such benefits required and justified continuation of the payments to cooperatives.

The Deputy Administrator also proposed, however, that the amount of the payments be...

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