Garden State Farms, Inc. v. Mathis

• Decision Date: 08 September 1972
• Citation: 294 A.2d 713,61 N.J. 406
• Parties: GARDEN STATE FARMS, INC., a corporation of New Jersey, Appellant, v. Joseph C. MATHIS, Jr., Acting Director of Division of Dairy Industry, Respondent. CUMBERLAND FARMS OF NEW JERSEY, INC., a New Jersey corporation and Burlington Food Store, Inc., a New Jersey Corporation, Appellants, v. Phillip ALAMPI, Secretary, New Jersey Department of Agriculture, and Joseph C. Mathis, Jr., Acting Director, Division of Dairy Industry, New Jersey Department of Agriculture, Respondents.
• Court: New Jersey Supreme Court

Page 406

61 N.J. 406

294 A.2d 713

GARDEN STATE FARMS, INC., a corporation of New Jersey, Appellant, v. Joseph C. MATHIS, Jr., Acting Director of Division of Dairy

Industry, Respondent.

CUMBERLAND FARMS OF NEW JERSEY, INC., a New Jersey

corporation and Burlington Food Store, Inc., a New

Jersey Corporation, Appellants, v. Phillip ALAMPI, Secretary, New Jersey Department of

Agriculture, and Joseph C. Mathis, Jr., Acting

Director, Division of Dairy Industry,

New Jersey Department of

Agriculture, Respondents.

Supreme Court of New Jersey.

Argued March 2, 1970.

Reargued after remand May 22 and 23, 1972.

Decided Sept. 8, 1972.

Nicholas Martini, Passaic, for appellant Garden State Farms, inc.

Sheldon A. Weiss, Jersey City, for appellants Cumberland Farms of New Jersey, Inc. and Burlington Food Store, Inc. (Glauberman & Weiss, Jersey City, attorneys; Sheldon A. Weiss, Jersey City, on the brief).

Richard S. Cohen, New Brunswick, on reargument for intervenor-appellant Dairy Stores, Inc. (Cohen, Hoagland, Cohen & Keefe, New Brunswick, attorneys; Richard S. Cohen, New Brunswick, on the brief).

Herbert K. Glickman, Deputy Atty. Gen., for respondents (George F. Kugler, Jr. Atty. Gen., attorney; Stephen Skillman, Asst. Atty. Gen., of counsel; Herbert K. Glickman, Trenton, on the brief).

Roland Morris, Philadelphia, Pa., of the Pennsylvania bar, on reargument for intervenor-respondent New Jersey Milk Institute, Inc. (McCarter & English, Newark, attorneys; Duane, Morris & Heckscher, Philadelphia, Pa., of the Pennsylvania bar, of counsel).

Donald F. Copeland, Philadelphia, Pa., of the Pennsylvania bar, on reargument for intervenor-respondent Inter-State Milk Producers' Cooperative. (Backes & Backes, Trenton, attorneys; Donald F. Copeland, Philadelphia, Pa., of counsel).

Stryker, Tams & Dill, Newark, filed a brief on reargument on behalf of amicus curiae Dairylea Cooperative, Inc. (Walter F. Waldau, Newark, and Edmund E. Winterbottom, New York City, of the New York bar, of counsel).

The opinion of the Court was delivered by

HALL, J.

This case derives from two consolidated appeals of Order 69--1, fixing minimum prices for the sale of milk at retail, promulgated by the Director of the Division of Dairy Industry (Director), of the New Jersey Department of Agriculture under the milk control law of 1941, N.J.S.A. 4:12A--1, et seq., particularly N.J.S.A. 4:12A--21 to 23. The appellants are two vertically integrated 'jug store' milk dealers, ¹ Garden State Farms, Inc. (Garden State) and Cumberland Farms of New Jersey, Inc. (Cumberland) together with its subsidiary Burlington Food Store, Inc. (Burlington). The appeals were taken to the Appellate Division, R. 2:2--3(a)(2), N.J.S.A. 4:12A--12, but certified on our own motion before argument there. R. 2:12--1.

The principal issues raised concern the current legal viability of the authority to fix prices at all and, if there is, the validity of the minimums fixed by Order 69--1. The latter contention amounts to a claim that the prescribed prices are too high in the light of the appellants' method of operation and asserted lower costs and that any regulation of prices should not go beyond prohibition of sales below the particular seller's costs or, if prices are to be fixed, that the minimum should be based upon the costs of the lowest cost seller, Viz., the lowest cost vertically integrated 'jug store' dealer. Appellants' contentions are not exactly the same. Both rely primarily upon the first issue noted above. The second contention is advanced by Cumberland, but Garden State's analogous points actually boil down to substantially the same proposition, I.e., that vertically integrated 'jug store' dealers should, in effect, be treated separately and differently as far as resale price regulation is concerned.

Promulgation of the order was preceded by the required public hearings. N.J.S.A. 4:12A--23. They were called by the then Director at the instigation of certain segments of the industry (not appellants) who sought higher minimum prices than those prescribed by the price order (Order 64--1) then in effect. Various interested parties made proposals for consideration. Appellants submitted proposals which amounted in substance to the issues they now raise. The consequence was exceedingly lengthy hearings, producing some 7000 pages of testimony and more than 150 exhibits. Evidence of many points of view as to price regulation was presented by those involved in the milk industry, as well as expert testimony by leading agricultural economists, some called by the Director and others by parties in interest, going deeply into the economics and functioning of milk marketing and into very intricate cost figures.

When the matter first came on for argument before us in March 1970, we determined, in the light of the sweep and fundamental nature of the contentions advanced by appellants, that neither the record nor the findings of fact and determination of the then Director were adequate to properly consider and decide the issues. We, therefore, after consultation with the parties, ordered a remand for a further record to be made before the Director, to be returned to us with additional findings on specific questions, which we propounded, directly related to the issues which had been advanced. Further lengthy hearings were held, very protracted by reason of the appointment of a new Director and other causes beyond our control, which resulted in about 5500 more pages of testimony and 125 additional exhibits. The testimony included experiences with various kinds of milk price control, or the absence of it, in other states. The present Director has submitted additional findings based on the entire record and the case has been fully reargued.

I Order 69--1 and Its Background

The order under review fixed minimum prices at only the one point of retail sale of fluid milk to the consumer. The same minimum was established whether the milk was sold through stores (without regard to the type of store or method of distribution) and vending machines for off-premises consumption or by home delivery routes. Contrary to earlier price-fixing orders, no minimums were prescribed for wholesale sales to dealers, subdealers, stores or at other points in the producing, processing or distributing chain. Separate minimums were set forth with respect to consumer sales in quarts, half-gallon, gallon and larger containers, but without variation as to whether the container was glass, paper or plastic or whether the quantities above a quart were packaged in a single-wall container or by banding together smaller sized containers.

In prescribing only minimum resale prices at the single point of the retail sale and in arriving at those prices, the Director adopted the 'single minimum margin' concept. The 'single' aspect of this concept has reference to fixing a minimum price only at one point, here that of retail sale. The 'minimum margin' aspect involves the fixing of a floor price by adding to the federal producer price a margin determined from the evidence to represent the composite costs of a number of low-cost, efficient operators (including vertically integrated 'jug store' dealers) capable of supplying a substantial portion of the market. These costs consisted of two main segments--unit costs of processing, handling and delivery to the retail seller and a percentage of the retail price to cover in-store costs. Nothing was allowed for a return on capital investment.

The design of the scheme was intended to best achieve the statutory purpose of milk pricing regulations as the Director viewed it, Viz., to protect the public interest by assuring an adequate supply of fresh wholesome milk to the consumer at fair and reasonable prices through the various methods of retail distribution and sale which might be available at the choice of consumers. The theory was that most milk would sell at retail above the minimum at prices to be fixed by competitive market conditions. The Director conceived the minimum as only a floor to prevent the downward spiraling of milk prices to unreasonably low levels which he said would adversely affect the stability of the market and the industry and ultimately redound to the detriment of producers, processors and wholesale dealers, retail sellers and consumers.

These minimum prices were set forth in two different schedules--one applying to North Jersey and one to South Jersey. The reason for this is found in the method by which New Jersey milk producers are now paid for their milk. Producer prices are fixed, not at the state level, but by federal marketing administrators under federal milk marketing orders pursuant to federal statutes. New Jersey is subject to two differing federal marketing orders. North Jersey is included, since 1957, in Order No. 2 covering the entire New York area; South Jersey is, since 1963, under Order No. 4 covering it and areas in adjacent states to the south and west. (Before these dates New Jersey producer prices were fixed by the state milk control agency.) Producer prices per cwt, are fixed by the federal administrators, monthly, ² according to formulae on the basis that all producers in the marketing area receive a iniform blend price for their milk regardless of the kind of utilization by the particular processor-handler, I.e., without differentation as to the proportion of that handler's milk used for fluid consumption (Class I, commanding a higher price in the market) or for manufacturing purposes (Class II, ice cream, butter, cheese, powder and the like). The formula differs as between the two federal orders affecting New Jersey by reason of a variance in the allocation of transportation charges from farm to processing plant as between producer and processor, so that the producer price is not the same in the two regions of the State. Since the minimum prices fixed by Order 69--1 are composed, as we have said, of an additive to the producer...