Highland Farms Dairy v. Agnew

• Decision Date: 03 October 1936
• Docket Number: No. 363.,363.
• Citation: 16 F. Supp. 575
• Court: U.S. District Court — Eastern District of Virginia
• Parties: HIGHLAND FARMS DAIRY, Inc., et al. v. AGNEW et al.

16 F. Supp. 575

HIGHLAND FARMS DAIRY, Inc., et al. v. AGNEW et al.

No. 363.

District Court, E. D. Virginia.

October 3, 1936.

COPYRIGHT MATERIAL OMITTED

Before SOPER, Circuit Judge, and WAY and POLLARD, District Judges.

Hunton, Williams, Anderson, Gay & Moore, of Richmond, Va., and Philip W. Rosenfeld, of Washington, D. C. (E. Randolph Williams, T. Justin Moore, and Stephen H. Simes, all of Richmond, Va., of counsel), for plaintiffs.

Edwin H. Gibson, Asst. Atty. Gen., and John S. Barbour, of Fairfax, Va., for defendants.

SOPER, Circuit Judge.

The plaintiffs in this suit in equity challenged the constitutionality of the Virginia Milk and Cream Act, chapter 357 of the Acts of the General Assembly of Virginia of 1934, and prayed for a temporary and permanent injunction enjoining the members of the State Milk Commission, a body created by the act, from exercising the powers therein conferred upon it. A court of three judges was organized under the provisions of 28 U.S.C.A. § 380 to consider the case.

Material provisions of the statute may be summarized as follows: The preamble declares that the prosperity and health of the people of the state depend to a substantial degree upon the production and distribution of milk and cream; that the present economic emergency is in part the result of the disparity between the prices of milk and cream and other commodities which has broken down the orderly production and marketing of milk and cream; that unhealthful, unfair, unjust, destructive, and demoralizing trade practices have grown up and are carried on in the production, sale, and distribution of milk and cream in the state which impair the constant supply of pure wholesome milk to the inhabitants; and that in order to protect the well-being of the people and to promote the public welfare, public health, and public peace, the production, transportation, processing, storage, distribution, and sale of milk and cream in the state should be supervised and controlled in the exercise of the police power of the state as a business affecting the public peace, health, and welfare.

"Distributor" is defined by section 1 to include, amongst others, persons who sell or market milk at wholesale or retail, or who operate stores for the sale of milk at retail for consumption off the premises, and persons, wherever located or operating, whether within or without the state, who purchase, market, or handle milk for resale in the state. "Market" means one or more cities, towns, or villages of the state and the surrounding territory designated by the Commission as a natural marketing area.

Section 2 of the act creates a State Milk Commission. Section 3 confers upon the Commission the power, amongst others, (b) to investigate all matters pertaining to the production, processing, storage, transportation, distribution, and sale of milk in the state; (c) to supervise, regulate, and control such operations in milk for consumption within the state; (g) to make and enforce rules and regulations necessary to carry out the purposes of the act; (m) to define what shall constitute a natural market area and fix the limits of the area within which milk shall be produced to supply any such market area; (i) to exercise its powers in any market after a public hearing has been held for such market, and after the Commission determines that it would be to the public interest that it shall exercise its powers in such market. The hearing may be had upon its own motion or upon the application of producers supplying a substantial proportion of the milk consumed in the market or of distributors distributing a substantial proportion of the milk consumed in such market. The Commission may withdraw the exercise of its powers from any market after a public hearing has been held and the Commission determines that it will be to the public interest to do so. The Commission shall withdraw the exercise of its powers from any market upon written application of a majority of the producers (measured by volume) of milk produced and a majority of the distributors (measured by volume) of milk distributed in said market acting jointly. (j) The Commission may, after public hearing and investigation, fix the prices to be paid producers by distributors in any market and may fix the minimum and maximum wholesale and retail prices to be charged for milk in any market. In determining the reasonableness of the prices to be charged, the Commission is to be guided by the cost of production and distribution, including compliance with sanitary regulations, operation and delivery charges, and the welfare of the public. The Commission may require all distributors in any market to be licensed by the Commission for the purpose of carrying out the provisions of the act. It may decline to grant any license and suspend or revoke a license upon due notice, and after hearing under section 6 any order of the Commission in refusing to issue a license or suspending or revoking a license may be reviewed on appeal to the Supreme Court of Appeals.

Under section 4, no distributor in any market in which the act is in effect shall buy milk from producers or others for sale within the state, or sell or distribute milk within the state unless such distributor is duly licensed under the act. It is unlawful for a distributor to buy milk from or sell milk to a distributor who is not licensed under the act.

Section 8 provides substantial penalties to be imposed upon any person found guilty of failing or refusing to comply with any subpœna issued by the Commission. Section 9 provides that the Milk Commission shall prepare an annual budget and collect the sums required therefor from the local milk boards in the form of monthly assessments, which will not exceed 2 cents per hundred pounds of milk handled in each market. The local milk boards, provided under section 11, consisting of five members, are to be established by the producers and distributors in a market area to carry out the provisions of the act in conjunction with the State Milk Commission. The expenses of the Milk Board, including the assessment levied by the State Milk Commission, shall be met by an assessment of not over 2 cents per hundred pounds of milk handled by distributors, and not over 2 cents per hundred pounds sold by producers. Section 13 provides that any person violating any provision of the act or of any license issued by the Commission shall be guilty of a misdemeanor and punished by fine of $25 to $100, or imprisonment in jail for not less than thirty days or more than one year, or by both fine and imprisonment. Section 14 provides that no provision of the act shall apply or be construed to apply to foreign or interstate commerce unless the same may be effective pursuant to the Federal Constitution. Section 16 provides that if any part of the act shall be declared unconstitutional for any reason, the remainder of the act shall not be affected thereby. Section 17 provides that the period of public emergency during which the act shall be effective shall be until such date as the Legislature may designate to be the termination thereof, or if the Legislature be not in session, the date so designated by a proclamation of the Governor.

The parties have agreed upon a stipulation of facts from which it appears that the Highland Farms Dairy, Inc., is a Virginia corporation which has its principal place of business in the District of Columbia, where it operates a creamery for the pasteurizing and processing of milk, all of which it sells under contract to the individual plaintiff, Luther W. High, a resident of the District of Columbia. High operates a group of retail stores for the sale of dairy products in Virginia, Maryland, and the District of Columbia, and purchases all of the milk sold by him in Virginia from the Highland Farms Dairy. The latter purchases its milk under contract from farmers and producers in Virginia, Maryland, and the District of Columbia, for delivery to the creameries in Washington. About 20 per cent. of this milk is purchased from Virginia producers, substantially all of which is produced in an area which has been designated by the Milk Commission as the Arlington-Alexandria Production Area. All of this milk, when received at the dairy, is commingled with milk purchased elsewhere, and it is impossible to determine what portion of the milk eventually sold by High in the territory designated by the Milk Commission as the Arlington-Alexandria Sales Area was originally produced in the said production area.

High makes no delivery of milk, but sells it all for cash at retail in bottles to purchasers at his stores. It is therefore essential to his business that there be a differential between the price charged by him and the prices of other distributors who permit charge accounts and make deliveries. The bottled milk distributed by High in Virginia is sold to him in the District of Columbia but is delivered to his Virginia stores by the dairy trucks upon orders received by telephone.

On March 27, 1936, the State Milk Commission established the Arlington-Alexandria Milk Market, and fixed the prices at which milk should be sold therein. This was done after a public hearing at Richmond, Va., on February 20, 1936, which was called by the Commission at the request of the Virginia and Maryland Milk Producers' Association to consider the establishment of such a market. Notice of the meeting was advertised in two newspapers in the area affected from February 6, to February 17, 1936, two notices appearing in one paper and three in another. Consequently producers, consumers, and distributors in the area generally had knowledge that the hearing was to be had. Neither of the plaintiffs, however, was present at the meeting or represented thereat. The Commission gave notice at the hearing that it would consult with any group with regard to the establishment and the regulations to be issued, and this offer was accepted by...