Gudgel v. Iverson

• Decision Date: 01 August 1949
• Docket Number: Civ. No. 1494.
• Citation: 87 F. Supp. 834
• Parties: GUDGEL v. IVERSON.
• Court: U.S. District Court — Western District of Kentucky

87 F. Supp. 834

GUDGEL v. IVERSON.

Civ. No. 1494.

United States District Court W. D. Kentucky, at Louisville.

August 1, 1949.

C. Maxwell Brown, Louisville, Kentucky, for plaintiff.

David C. Walls, United States Attorney, Ben T. Cooper, Assistant United States Attorney, Louisville, Kentucky, Clarence H. Girard, Office of the Solicitor, U. S. Department of Agriculture, Washington, D. C., for defendant.

SHELBOURNE, Chief Judge.

The plaintiff is a dairy farmer who produces milk which he delivers to the plant of Von Allmen Brothers Dairy, hereinafter sometimes referred to as "Von Allmen". He receives from the Von Allmen plant a quantity of bottled milk and cream which he distributes to retail customers on a route in the Louisville milk marketing area.

The defendant is the market administrator of Federal Order No. 46, which regulates the handling of milk in the Louisville, Kentucky, marketing area. On March 23, 1948, the defendant notified Von Allmen that beginning with the month of April 1948, the receipts of milk from the plaintiff "will be treated as receipts from a producer, and the payment for such receipts shall be based upon the payment provisions provided for in Section 946.8 of Federal Order No. 46."

Previous to that time, and since December 1944, Von Allmen was permitted to report the receipts of milk from the plaintiff as receipts from a "handler", resulting in the plaintiff's milk being unpriced and excluded from the computation of Von Allmen's obligations to the producer-settlement fund which is maintained under the order.

During the time that Von Allmen reported plaintiff's milk as a receipt from a handler, Von Allmen paid plaintiff the Class 1 price for his milk. Subsequent to April 1948, Von Allmen paid the plaintiff the uniform or blend price, which, under the order, is the minimum price which all handlers are required to pay producers for milk received from them.

Since the uniform price is usually less than the Class 1 price, the plaintiff receives a slightly lesser amount for his milk than would be the case if Von Allmen paid him the Class 1 price.

Plaintiff contends, in substance, that the only reason Von Allmen refuses to pay him the Class 1 price for his milk is because Von Allmen is required to account to the producer-settlement fund for the milk of the plaintiff utilized in Class 1 at the Class 1 price. The plaintiff claims, therefore, that the defendant's action of March 23, 1948, in classifying him as a producer was "arbitrary, unreasonable, and the strict application of the Defendant's action will cause and bring about an irreparable injury and damage to the Complainant's business." Wherefore, the plaintiff prays for a preliminary and permanent injunction restraining and enjoining the defendant from directing Von Allmen or any other handler "to consider the receipt of milk from complainant as a producer only, or the inclusion of said receipts in a pool of milk receipts for which the Complainant would receive blend price only * * *. The plaintiff prays in the alternative that, if this relief is not granted, the defendant be temporarily restrained from changing the plaintiff's status for a "reasonable period not to exceed twelve (12) months time to afford Complainant an opportunity to reequip the Complainant's dairy plant."

Defendant filed a motion to dismiss the complaint, contending that —

(a) The court lacks jurisdiction to grant the relief prayed for in the complaint;

(b) The complaint fails to state a claim against the defendant upon which relief can be granted; and

(c) The plaintiff has failed to join the Secretary of Agriculture who is a necessary and indispensable party.

A hearing was held June 7, 1948, on the motion for preliminary injunction and the motion to dismiss, at which hearing evidence was adduced. Thereafter, each of the parties filed briefs. On March 10, 1949, at a conference before the Court, counsel agreed to submit the case for final determination upon the basis of a complaint, the motion to dismiss, the argument and record of the hearing of June 7, 1948, and proposed findings of fact and conclusions to be submitted by the parties.

Findings of Fact.

1. This proceeding arises under the Agricultural Marketing Agreement Act of 1937, which reenacted with amendments the marketing provisions of the Agricultural Adjustment Act of 1933, as amended from time to time, 7 U.S.C.A. § 601 et seq.

The Act directs the Secretary of Agriculture to issue an order applicable to the handlers of specified agricultural commodities, or the products thereof, whenever he finds on the basis of evidence at a public hearing that the issuance of an order will tend to effectuate the declared policy of the act. Sec. 8c(1), (3), and (4), 7 U.S.C.A. § 608c (1), (3), and (4).

One of the specified commodities is milk Sec. 8c(2), 7 U.S.C.A. § 608c (2). The declared policy of the act is to maintain "such orderly marketing conditions for agricultural commodities in interstate commerce as will establish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to the articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period", defined in the act. Section 2, 7 U.S.C.A. § 602. In the case of milk, the declared policy is also to fix minimum prices to be paid to producers that will reflect the cost of producing milk and other economic factors, and will insure a sufficient quantity of pure and wholesome milk. Section 8c (18), 7 U.S.C.A. § 608c (18). An order may regulate, in the manner specified in the act, such handling of the agricultural commodity, or product thereof, as is in the current of interstate commerce, or as directly affects interstate commerce in the commodity or product thereof. Section 8c(1), U.S.C.A. 7, § 608c (1).

2. The order involved in this proceeding is Order No. 46, as amended effective October 1, 1947, 12 F.R. 6567, which regulates the handling of milk in the Louisville, Kentucky, marketing area. (The order has since been amended effective September 1, 1948, 13 F.R. 5112, and December 1, 1948, 13 F.R. 7294; however, neither of these amendments affect the issues involved in this case.)

The order of October 1, 1947, defines the Louisville, Kentucky marketing area, and fixes minimum prices that "handlers" must pay for all milk received from "producers", as those terms are defined in the order.

The order classifies milk into three classes according to its use, and establishes the use value for the milk in each class. The use value applied to Class 1 (which includes generally all skim milk and butterfat disposed of in fluid form as milk, buttermilk and milk drinks) is the highest. The use values applied to Class 11 (fluid cream and cream products disposed of in fluid form) and Class 111 (milk, the component parts of which are used to make ice cream, condensed milk, butter, cheese, or other milk products) are progressively lower. Each handler, as defined in the order, is required to report to the market administrator appointed to administer the order, the quantity of milk received and the quantity of milk used in each class during the preceding monthly delivery period. Upon the basis of these reports, the total value of the milk priced by the order that was received by all handlers from all producers is determined. After making adjustments to reflect butterfat or other differentials, the total use value is divided by the total quantity of priced milk. The result is a uniform minimum price that all handlers must pay their producers regardless of the use that may have been made of the milk by a particular producer. The variance among handlers in the percentage of milk used in a given class will normally mean that the use value of the milk received by a handler will be either greater or less than the total payments at the uniform minimum price that the handler is required to make to his producer. Any handler for whom there is a plus difference is required to pay the difference due to the producer-settlement fund, which is an equalization pool, while any handler for whom there is a minus difference is entitled to withdraw the difference from the fund. In this manner, all handlers can pay their producers the uniform minimum price regardless of the use they make of the milk of a particular producer.

3. Section 946.1(e) of the order defines a "producer" as "any person who produces, under a dairy farm inspection permit issued by the appropriate health authority in the marketing area, milk which is: (1) Received at a plant from which milk or cream is disposed of in the marketing area for human consumption as fluid milk or cream: * * *".

4. The plaintiff produces, under a dairy farm inspection permit issued by the City of Louisville, milk which is received at the plant of the Von Allmen Brothers Dairy, from which plant milk or cream is disposed of in the marketing area for human consumption as fluid milk or cream. The plaintiff is, therefore, a "producer" as such term is defined in the order.

5. Section 946.1(f) (1) of the order defines a "handler" as "any person who receives milk, produced under a dairy farm inspection permit issued by the appropriate health authority in the marketing area, at a plant described in paragraphs (e) (1) * * *," i.e., at a "plant from which milk or cream is disposed of in the marketing area for human consumption as fluid milk or fluid cream."

6. Plaintiff is neither the operator nor the owner of a milk plant; nor does he receive any milk at a milk plant. The milk received from Von Allmen is furnished as any other wholesale milk dealer would purchase milk. Plaintiff does not deliver milk to Von Allmen as a handler. The milk plaintiff receives from Von Allmen has been accounted for in the pool, thus the purposes of the Act are not frustrated. Hence the sale of the milk to plaintiff by Von Allmen is not the question here presented. The sale of the milk to...