HP Hood, Inc. v. COM'R OF AGRICULTURE, Civ. No. 90-0193-B.

• Court: United States District Courts. 1st Circuit. United States District Court (Maine)
• Writing for the Court: HORNBY
• Citation: 764 F. Supp. 662
• Parties: H.P. HOOD, INC., Plaintiff, v. COMMISSIONER OF AGRICULTURE, FOOD AND RURAL RESOURCES, et al., Defendants.
• Docket Number: Civ. No. 90-0193-B.
• Decision Date: 06 May 1991

764 F. Supp. 662

H.P. HOOD, INC., Plaintiff,
v.
COMMISSIONER OF AGRICULTURE, FOOD AND RURAL RESOURCES, et al., Defendants.

Civ. No. 90-0193-B.

United States District Court, D. Maine.

May 6, 1991.

764 F. Supp. 663

Carl E. Kandutsch, Michael T. Healy, Verrill & Dana, Portland, Me., John Vetne, Blodgett, Makechnie & Vetner, Peterborough, N.H., for plaintiff.

Eric Bryant, Asst. Atty. Gen., Augusta, Me., for defendants.

ORDER AFFIRMING THE RECOMMENDED DISPOSITION OF THE MAGISTRATE JUDGE

HORNBY, District Judge.

The United States Magistrate Judge filed with the Court on March 21, 1991, with copies to counsel, his Recommended Disposition of Defendants' Motion for Judgment on the Pleadings, attached hereto and made part hereof as Exhibit A. Plaintiff filed Objections to the Magistrate Judge's Recommended Disposition on April 5, 1991 and defendants responded to Plaintiff's Objections on the Magistrate Judge's Recommended Decision on April 24, 1991. I have reviewed and considered the Magistrate Judge's Recommended Disposition, together with the entire record; I have made a de novo determination of all matters adjudicated by the Magistrate Judge's Recommended Disposition; and I concur with the recommendations of the United States Magistrate Judge for the reasons set forth in his Recommended Disposition, and determine that no further proceeding is necessary.

It is therefore ORDERED as follows:

1. The Recommended Disposition of the Magistrate Judge is hereby ADOPTED;

2. The Defendants' Motion for Judgment on the Pleadings is GRANTED and the Complaint is DISMISSED, without prejudice.

EXHIBIT A

RECOMMENDED DISPOSITION OF DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS

EDWARD H. KEITH, United States Magistrate Judge.

This case involves the application, interpretation, and interaction of state and federal

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statutes and regulations affecting the regulation of prices in the milk industry. Milk prices are regulated at both the state and federal levels. The governing state statutes are the Maine Milk Commission law 7 M.R.S.A. §§ 2951-2963 (1964 & Supp.1990) and the Maine Milk Pool law 7 M.R.S.A. §§ 3151-3156 (1964 & Supp. 1990) (collectively, the Maine milk laws, or state regulation). At the federal level prices are regulated under the New England Milk Marketing Order (7 C.F.R. Part 1001, promulgated pursuant to the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C. § 601 et seq.) (federal milk laws, or federal regulation)

The function of the Maine Milk Commission is "to establish and change the minimum wholesale and retail prices for the sale of milk within the State...." 7 M.R. S.A. § 2953. See also, Maine Milk Commission v. Cumberland Farms Northern, Inc., 160 Me. 366, 368-70, 379-84, 205 A.2d 146, 147-48, 152-53 (1964) court discusses purposes of what is now 7 M.R.S.A. §§ 2951-2963 (1964 & Supp.1990); Cumberland Farms Northern, Inc. v. Maine Milk Commission, 377 A.2d 84, 86-87, 92-93 (Me.1977) (same).

Under the state and federal price regulations, milk is categorized into two classifications. Class I milk, which is fluid milk for bottling; and Class II milk, which is milk not used for bottling, but rather is used in such products as butter and cheese. Class I milk is higher priced than Class II milk. There are two categories of Maine dairy farmers, depending upon the market to which they sell their milk: those that sell to the so called Boston market, and those that sell to the Maine market. The Boston market is federally regulated under the Federal Milk Order No. 1, 7 C.F.R. Part 1001, promulgated under the Agricultural Adjustment Act, 7 U.S.C.A. § 601 et seq. (1980 & Supp.1990). Because of the price differences between the two types of milk, and because of the historically greater demand, or utilization rate, for Class I milk in the Maine market, Maine dairy farmers who sold to the Maine market received a higher price for their milk than those Maine dairy farmers who sold to the federally controlled Boston market.

Maine adopted the Maine Milk Pool law (7 M.R.S.A. § 3151 et seq.) to eliminate the disparity in returns that existed between the two markets, thereby equalizing the milk prices received by all Maine dairy farmers. The Maine Milk Pool is a common fund administered by the State. When milk is sold to a Maine market dealer, the dealer deducts a computed sum from the producer and pays it into the pool. The funds in the pool are periodically allocated among all Maine dairy farmers, including those selling to the federally controlled Boston market. This is designed to effect an equalization of the prices received for their milk by the Maine market producers and the Boston market producers. A more detailed explanation of the function and purpose of the Maine Milk Pool law is found in Maine Milk Producers, Inc. v. Commissioner of Agriculture, Food and Rural Resources, 483 A.2d 1213, 1215-19 (Me.1984) (court discusses purposes of 7 M.R.S.A. § 3151 et seq.); See also 7 M.R. S.A. § 3151 (purposes).

In addition to the Maine Milk Pool, there is a federal milk pool, which serves a similar purpose. The federal milk pool is called the "producer settlement fund," the operation and function of which is discussed in 7 C.F.R. § 1001.70. Basically, as for the Maine Milk Pool, the purpose of the federal milk pool is to eliminate the disparity in income returns to milk producers caused by differences in utilization rates, between the two classes of milk, among the milk dealers. See 7 C.F.R. § 1001.70 and 7 C.F.R. Part 1000 generally (federal regulations involving the producer settlement fund). See also Maine Milk Producers, 483 A.2d at 1216 (discussing purpose of the federal producer settlement fund); United States v. Rock Royal Co-operative, Inc., 307 U.S. 533, 59 S.Ct. 993, 83 L.Ed. 1446 (1939) (purposes and constitutionality of the Agricultural Marketing Agreement Act of 1937).

This dispute arose when H.P. Hood, Inc. (Hood) paid $103,793.85 into the Maine Milk

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Pool for the months of November, 1989 through January, 1990 (the "disputed period"). Hood made those payments under the mistaken belief that it was under state regulation for the disputed period. The Federal Market Administrator, however, later determined that Hood was subject to the federal regulations for the disputed period, requiring Hood to pay $215,913.16 to the federal milk pool. Hood paid that amount to the federal milk pool, and then set off the amount it had paid to the Maine Milk Pool for the disputed period against future amounts owed to the Maine Milk Pool. The Commissioner of Agriculture, Food & Rural Resources, for the State of Maine, and the Maine Milk Commission (collectively, "Maine") objected to the offset, and consequently initiated a state enforcement action in Maine Superior Court, Kennebec County (Commissioner of Agriculture v. H.P. Hood, Inc., No. CV-90-308) ("state action") on June 14, 1990 seeking $80,035.04 that Hood allegedly owed the Maine Milk Pool for the months of March and April, 1990

Hood filed the instant action ("federal action") on July 10, 1990 naming as defendants the plaintiffs in the state action. Hood asserts that Maine failed to consider the interaction of its milk pooling and pricing laws with those of the federal government. In this action, Hood seeks a declaration that Maine misinterpreted the Maine Milk Pool law 7 M.R.S.A. §§ 3151-3156 (1964 & Supp.1990) and the Maine Milk Commission law 7 M.R.S.A. §§ 2951-2963 (1964 & Supp.1990); or that these laws as applied to Hood violate the Supremacy Clause, the Commerce Clause, and the Equal Protection Clause of the United States Constitution; and violate the equal protection requirements of the Maine Constitution. Hood seeks also to enjoin Maine from making any demand or assessment, or from bringing an enforcement action for payment into the Maine Milk Pool for any period that Hood is subject to regulation under the New England Milk Marketing order. Hood also seeks to enjoin Maine from otherwise administering the Maine Milk Pool Act or the Maine Milk Commission Act in any manner in conflict with the Agricultural Marketing Agreement Act and the New England Marketing Order. Hood bases jurisdiction on 28 U.S.C. §§ 1331, 1337, and 2201. The issue is whether Hood can be subject to state regulation at the same time it is subject to federal regulation.¹

Maine responded to Hood's initiation of the instant federal action with a motion for judgment on the pleadings, with arguments based on the abstention doctrine. Hood filed a timely objection to the motion.

In a line of cases commencing with Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), the Supreme Court counsels that a federal court should abstain from hearing certain types of cases under certain circumstances when there is a pending state proceeding. Younger held that a federal court should abstain from enjoining a state court criminal proceeding that was pending at the time the federal suit was begun. Younger, 401 U.S. at 43-54, 91 S.Ct. at 750-755. The Younger court premised the holding on the well established notions of equity and federalism. See Younger, 401 U.S. at 43-44, 91 S.Ct. at 750-51. See also Bettencourt v. Board of Registration In Medicine of the Commonwealth of Massachusetts, 904 F.2d 772, 776 (1st Cir.1990) (same).

The Supreme Court, however, admonishes that "abstention from the exercise

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of federal jurisdiction is the exception, not the rule." Colorado River Water Conservation District v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976). Colorado went on to explain that the abstention doctrine "`is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it....'" Colorado, 424 U.S. at 813, 96 S.Ct. at 1244 quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S.Ct. 1060, 1062-63, 3 L.Ed.2d 1163 (1959). The...