Hegeman Farms Corporation v. Baldwin

• Decision Date: 16 March 1934
• Citation: 6 F. Supp. 297
• Parties: HEGEMAN FARMS CORPORATION v. BALDWIN et al.
• Court: U.S. District Court — Southern District of New York

6 F. Supp. 297

HEGEMAN FARMS CORPORATION v. BALDWIN et al.

District Court, S. D. New York.

March 16, 1934.

Samuel Rubinton, of Brooklyn, N. Y., for plaintiff.

Henry S. Manley, of Albany, N. Y., for defendants.

Before L. HAND, Circuit Judge, and BONDY and PATTERSON, District Judges.

L. HAND, Circuit Judge.

The decision of the Supreme Court on March 5, 1934 (Nebbia v. People of State of New York, 54 S. Ct. 505, 78 L. Ed. ___) declaring constitutional the "Milk Control Law" of New York (chapter 158 of the Laws of 1933, Agriculture and Markets Law Consol. Laws, c. 69 § 300 et seq.), has answered the first cause of suit alleged in this bill of complaint. The court there held that the regulation of the price of milk by the "Milk Control Board" was lawful, and that its orders could be enforced. The second cause of suit remains, which is that the Board has in administering this law deprived the plaintiff of its property without due process of law, because its license will be revoked unless it repays to those who sold it milk the difference between the price fixed by the Board and lower prices at which it bought. The Board had fixed minimum prices not only for the purchase of milk, but for the plaintiff's sales to its customers — shops and restaurants in New York. And it alleges that, though in form only a minimum, this selling price was in effect a maximum price, due to the keenness of the competition between wholesalers. The result has been that the "spread" between what the plaintiff must pay and what it can get, is so small that it can earn nothing upon its very substantial capital invested in the business. This takes away its property under the Fourteenth Amendment. The prayer of the bill is to enjoin the execution of two orders of the Board; one, dated December 29, 1933, which revoked its license under section 308 (3), and which was to become effective January 31, 1934; the other, dated December 30, 1933, which suspended this revocation provided that before January 31, 1934, the plaintiff paid to those of whom it bought milk the difference above mentioned. Since proceedings by certiorari in the Supreme Court of New York are wholly judicial in character, People v. Willcox, 194 N. Y. 383, 87 N. E. 517, this court, constituted under section 266 of the Judicial Code (28 USCA § 380), has jurisdiction over the suit, regardless of the completeness of that proceeding as a remedy. Bacon v. Rutland R. R. Co., 232 U. S. 134, 34 S. Ct. 283, 58 L. Ed. 538; Prendergast v. N Y. Telephone Co., 262 U. S. 43, 43 S. Ct. 466, 67 L. Ed. 853; R. R. & Warehouse Commission v. Duluth St. Ry. Co., 273 U. S. 625, 47 S. Ct. 489, 71 L. Ed. 807. There is moreover ground for equitable intervention, because the money which the plaintiff is required to pay will be distributed among numerous milk farmers from whom recovery will probably be impossible, and certainly impracticable at any cost which would justify the effort. We are therefore obliged to decide the merits of the second cause of suit.

Although during the period in question, there had been, as we have said, a minimum selling price, the plaintiff cannot complain of that. If it wished to sell at a higher price, it always could, so far as any order of the Board went. If in practice the price could be pushed no higher than the minimum, the order was not responsible for that; it was the competition in the trade which kept down the price. We are not wholly clear whether the plaintiff means further to lay as a grievance the fixing of a purchase price for milk, regardless of any order touching its selling price, but we shall assume that the bill so alleges. That is the inverse of the usual situation, where the costs are left free but the sales price is fixed; the usual "rate case" of a "utility company," of which Smyth v. Ames, 169 U. S. 466, 18 S. Ct. 418, 42 L. Ed. 819, is the progenitor. In such situations it is impossible to change the costs, because they are not controlled by the company, and the regulation of the selling price puts it in a strait jacket. But when the cost of a prime raw material is fixed, unregulated manufacturers who must buy at that cost, will collectively try to impose the increase on the buyers. It is impossible a priori to foretell how far they...