Independent Meat Packers Ass'n v. Butz

• Decision Date: 22 March 1976
• Docket Number: Nos. 75--1486,75--1541,s. 75--1486
• Citation: 526 F.2d 228
• Parties: INDEPENDENT MEAT PACKERS ASSOCIATION et al., Appellees, v. Earl L. BUTZ, Secretary of Agriculture, et al., Appellants. INDEPENDENT MEAT PACKERS ASSOCIATION et al., Appellees. v. AMERICAN NATIONAL CATTLEMEN'S ASSOCIATION, etc., Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 228

526 F.2d 228

INDEPENDENT MEAT PACKERS ASSOCIATION et al., Appellees, v. Earl L. BUTZ, Secretary of Agriculture, et al., Appellants.

INDEPENDENT MEAT PACKERS ASSOCIATION et al., Appellees. v. AMERICAN NATIONAL CATTLEMEN'S ASSOCIATION, etc., Appellants.

Nos. 75--1486, 75--1541.

United States Court of Appeals,

Eighth Circuit.

Submitted Sept. 11, 1975.

Decided Nov. 14, 1975.

Rehearing and Rehearing En Banc Denied Dec. 15, 1975.

Certiorari Denied March 22, 1976.

See 96 S.Ct. 1461.

Neil Koslowe, Appellate Sec., Civil Div., Dept. of Justice, Washington, D.C., for appellants.

D.C. Bradford, III, Omaha, Neb., for Meat Purveyors and National Restaurant Ass'n.

Girardeau A. Spann, Washington, D.C., for Consumers Groups.

James T. Gleason, Omaha, Neb., for National Livestock Feeders.

Frank F. Pospishil, Omaha, Neb., for Independent Meat Packers.

Richard J. Wegener, of Swarr, May, Smith & Andersen, of Omaha, Neb., and J. Evan Goulding, Denver, Colo., for ANCA.

Before MATTHES, Senior Circuit Judge, and HEANEY and STEPHENSON, Circuit Judges.

MATTHES, Senior Circuit Judge.

These are appeals from an order of the district court ^* permanently enjoining the implementation and enforcement of regulations promulgated by the United States Department of Agriculture (USDA) pursuant to § 203 of Agricultural Marketing Act of 1946, 7 U.S.C. § 1622. ^** The regulations revise official USDA standards for the grades of carcass beef, 7 C.F.R. §§ 53.102, 53.104--.105 (1975), and related standards for the grades of slaughter cattle, 7 C.F.R. §§ 53.203--.206 (1975). Appellee Independent Meat Packers Association (Packers) initiated this action on April 1, 1975 by filing a complaint seeking declaratory and injunctive relief from that part of the revised regulations providing that beef carcasses submitted for quality grading would be automatically graded for yield; in the alternative, the Packers sought declaratory and injunctive relief from the regulations in their entirety. The named defendants were Earl L. Butz, Secretary of Agriculture, Erwin L. Peterson, Administrator of the Agricultural Marketing Service, USDA, and Andrew Rot, Supervisor of the USDA Meat Grading Branch at Omaha, Nebraska (federal defendants). The Packers claimed that the compulsory yield provision of the new regulations, ¹ which were to have taken effect on April 14, 1975, was arbitrary, capricious, 'not supported by substantial evidence,' and 'in excess of the power' of the USDA. They further alleged that the revised regulations were issued in violation of Executive Order No. 11821, which requires an evaluation of the inflationary impact of all major legislative proposals, rules, and regulations emanating from the executive branch. ² The complaint alleged jurisdiction under 28 U.S.C. §§ 1331, 1337 and 5 U.S.C. §§ 702, 706.

After a hearing on the application for a preliminary injunction, the district court, being persuaded that there was a reasonable likelihood of success, issued a preliminary injunction on April 11 enjoining implementation of the revised regulations in their entirety upon the posting of a $5,000 bond. ³ The federal defendants then appealed to this court, which affirmed the district court's order granting the preliminary injunction, but remanded the cause for 'a plenary hearing on the request for a permanent injunction' and an expedited decision. Independent Meat Packers Ass'n v. Butz, 514 F.2d 1119, 1120 (8th Cir. 1975) (per curiam). The district court subsequently permitted the American National Cattlemen's Association (ANCA) to intervene as a party-defendant and four groups, the Purveyors, Feeders, Restaurants, and Consumers, to intervene as party-plaintiffs. ⁴ The allegations of plaintiff-intervenors were substantially the same, except that the Consumers contested principally the new standards for identifying beef quality.

Prior to trial the Packers, Consumers, and all defendants filed motions for summary judgment. The federal defendants also moved for an order limiting the scope of the court's inquiry to a review of the administrative record. ⁵ After a full trial, ⁶ the district court on May 29, 1975, filed a memorandum opinion incorporating its findings of fact and conclusions of law and an order denying all motions for summary judgment and permanently enjoining enforcement of the revised regulations. Independent Meat Packers Ass'n v. Butz, 395 F.Supp. 923 (D.Neb.1975).

I.

Resolution of the issues raised in this appeal requires a brief review of the history of the beef grading program currently in force. The USDA inaugurated its voluntary beef grading program in May 1927 without express congressional authorization. ⁷ To promote a scientific approach to the problems of marketing, transporting and distributing agricultural products, ⁸ Congress in 1946 passed the Agricultural Marketing Act. Under § 203 of the Act, 7 U.S.C. § 1622(h), the Secretary of Agriculture is authorized to 'inspect, certify, and identify the class, quality, quantity, and condition of agricultural products . . ., under such rules and regulations as (he) may prescribe . . ..' ⁹ Under the beef grading regulations presently in force, 7 C.F.R. §§ 53.100 et seq., the USDA grades beef carcasses on a voluntary fee-for-service basis. Federal graders evaluate beef carcasses for their quality grade and yield grade, but packers may request either one or both of these services. 7 C.F.R. § 53.102(a). The quality grading system presently in effect combines both quantitative and qualitative factors, which are combined to form a final grade. Eight quality grade designations--Prime, Choice, Good, Standard, Commercial, Utility, Cutter, and Canner--are applicable to steer and heifer carcasses. The degree of marbling of intramuscular fat ¹⁰ and the physiological maturity ¹¹ of the slaughtered cattle are the palatability-indicating characteristics of the beef. Conformation involves the proportion of meat to bone and of high to low value cuts. ¹² To some extent, increased marbling compensates for greater physiological maturity, 7 C.F.R. § 53.102(r), and superior conformation compensates for marbling except in the Prime, Choice, and Commercial grades, 7 C.F.R. § 53.102(s).

The yield grade of a beef carcass is determined by considering four factors: the thickness of the external fat, the amount of kidney, pelvic, and heart fat; the area of the ribeye; and the hot carcass weight. 7 C.F.R. § 53.102(u). ¹³ USDA yield grade designation represents the percentage of the carcass weight that is made up of boneless, closely trimmed retail cuts from the round, loin, rib, and chuck. ¹⁴ When the USDA introduced yield grading on a voluntary basis in 1965, only 3 1/2 percent of beef submitted for quality grading was also yield graded. Under the voluntary program presently in force, approximately 70 percent is graded for yield. ¹⁵.

Acting under the rulemaking power vested in the Secretary of Agriculture by § 203 of the Agricultural Marketing Act of 1946, 7 U.S.C. § 1622(h), the USDA followed the notice and comment procedure outlined by § 4(b) of the Administrative Procedure Act, 5 U.S.C. § 553(c), in promulgating the challenged regulations. First, on September 11, 1974, the USDA filed notice in the Federal Register of proposed changes in standards for grades of carcass beef, 7 C.F.R. §§ 53.102, 53.104--.105, and the standard for slaughter cattle, 7 C.F.R. §§ 53.201--.206. Interested persons were given an opportunity to present written comments, views, and arguments during a ninety-day period ending December 10, 1974. ¹⁶ Over 4,000 comments and five petitions containing 7,618 signatures were received from a wide cross-section of the public. After minor modifications, the final draft accompanied by a Statement of Considerations was published in the Federal Register on March 12, 1975 with an effective date of April 14, 1975. 40 Fed.Reg. 11535 (1975).

The revised regulations contained four major changes in the standards for grades of carcass beef. First, conformation was eliminated as a factor for determining quality grade. Secondly, all carcasses submitted for grading would be identified for both quality grade and yield grade. Thirdly, having determined that increasing physiological maturity does not affect palatability within the youngest maturity group (cattle nine through thirty months old), the marbling requirements for this group were set at the lowest level previously acceptable in the Prime, Choice, and Standard grades. For the more mature beef in these grades increased marbling is still required to compensate for advancing age, but the minimum degree of marbling required was lowered by one degree. Lastly, to make the Good grade more uniform and restrictive, the Secretary limited this grade to carcasses in the A and B maturity groups and raised the minimum degree of marbling required by one-half degree.

The changes in the relationship between marbling-maturity and quality grades were opposed by most consumers, representatives of restaurants, institutions, their suppliers, and some feeders. Their opposition was based on the belief that the changes would impair the palatability of Prime and Choice beef and that consumers would have to pay 'Choice grade prices for Good grade beef.' The requirement that all beef graded be graded for both quality and yield was opposed most strongly by meat packers. They voiced the belief that compulsory yield grading would increase grading costs, ¹⁷ impede their ability to market carcasses from which exterior fat had been trimmed, require a complete restructuring of their buying practices, and preclude the grading of certain carcasses. The packers also questioned the accuracy of the USDA yield grade equation, especially its subjective application by federal graders.

The cattlemen endorsed the objectives and principal provisions of the regulations. Their studies and experience convinced them that it would be possible to produce fed beef more economically,...