Land O'Lakes Creameries v. McNutt

• Decision Date: 21 January 1943
• Docket Number: No. 12115.,12115.
• Parties: LAND O'LAKES CREAMERIES, Inc., et al. v. McNUTT, Federal Security Adm'r (NATIONAL CO-OP. MILK PRODUCERS' FEDERATION et al., Interveners).
• Court: U.S. Court of Appeals — Eighth Circuit

132 F.2d 653 (1943)

LAND O'LAKES CREAMERIES, Inc., et al. v. McNUTT, Federal Security Adm'r (NATIONAL CO-OP. MILK PRODUCERS' FEDERATION et al., Interveners).

No. 12115.

Circuit Court of Appeals, Eighth Circuit.

January 21, 1943.

Charles W. Wilson, of Washington, D. C., and W. E. Rumble, of St. Paul, Minn. (M. J. Doherty, of St. Paul, Minn., John B. Gage, of Kansas City, Mo., Donald W. Kane, of Washington, D. C., Addison M. Parker and Addison M. Parker, Jr., both of Des Moines, Iowa, Doherty, Rumble, Butler, Sullivan & Mitchell, of St. Paul, Minn., and Gage, Hillix, Hodges & Cowherd, of Kansas City, Mo., on the brief), for petitioners and interveners.

Louis B. Schwartz, Sp. Asst. to Atty. Gen. (Wendell Berge, Asst. Atty. Gen., and James W. Knapp, Atty., Department of Justice, and Sidney Zagri, Atty., Federal Security Agency, both of Washington, D. C., on the brief), for respondent.

Phillip Tocker, of Fort Worth, Tex., for National Cotton Council of America, amicus curiae in support of respondent.

Before STONE, SANBORN, and RIDDICK, Circuit Judges.

SANBORN, Circuit Judge.

This is a petition to review an order of the respondent¹ made on June 5, 1941, promulgating regulations fixing and establishing a definition and standard of identity for oleomargarine under the Federal Food, Drug, and Cosmetic Act of 1938. (§ 401, 52 Stat. 1046, 21 U.S.C.A. § 341; § 701, 52 Stat. 1055, 21 U.S.C.A. § 371; Reorganization Act of 1939, 53 Stat. 561, 5 U.S.C. Supp. V, § 133 et seq., see note, 5 U.S.C.A. following § 132, concerning §§ 133-133r; Reorganization Plan No. IV,² 5 Fed.Reg. 2421, 54 Stat. 1234, 5 U.S.C.A. following section 133t; 54 Stat. 231, 5 U. S.C.A. § 133u.)

The petitioners are cooperative corporations engaged in the marketing of butter and milk. The interveners are similar organizations engaged in furthering the interests of the dairy and butter industry. Since the petitioners and the interveners seek the same relief, they will be collectively referred to as "petitioners."

The petitioners assert that the order is invalid because it contravenes §§ 403(c) and 402(b) (4) of the Federal Food, Drug, and Cosmetic Act, §§ 343(c) and 342(b) (4), 21 U.S.C.A., which sections relate to the misbranding and to the adulteration of foods, and because there is no substantial evidentiary support for the respondent's determination that his order promotes honesty and fair dealing in the interest of consumers.

By a motion to dismiss the petition and the intervening petitions, the respondent has challenged the right of the petitioners to maintain this proceeding.

The questions to be determined are, broadly, whether the petitioners can invoke a review by this Court of the challenged order, and whether, if they are entitled to a review, the order is invalid for any of the reasons advanced by them.

Section 401 of the Federal Food, Drug, and Cosmetic Act provides that: "Whenever in the judgment of the Secretary Administrator such action will promote honesty and fair dealing in the interest of consumers, he shall promulgate regulations fixing and establishing for any food, under its common or usual name so far as practicable, a reasonable definition and standard of identity, a reasonable standard of quality, and/or reasonable standards of fill of container * * *.³ In prescribing a definition and standard of identity for any food or class of foods in which optional ingredients are permitted, the Secretary Administrator shall, for the purpose of promoting honesty and fair dealing in the interests of consumers, designate the optional ingredients which shall be named on the label. * * *"

Section 701(e) of the Act provides that the Administrator "shall hold a public hearing upon a proposal to issue, amend, or repeal any regulation contemplated by" Section 401 of the Act; that at the hearing "any interested person" may be heard in person or by his representative; that, as soon as practicable after completion of the hearing, the Administrator shall by order make public his action or his decision not to act; and that his order shall be based only on substantial evidence of record at the hearing and shall set forth the detailed findings of fact on which the order is based.

Subsection (f) of Section 701 of the Act provides that "in a case of actual controversy as to the validity of any order" under subsection (e) of Section 701, "any person who will be adversely affected by such order if placed in effect" may, within ninety days after its issuance, file a petition with the Circuit Court of Appeals of the United States for the Circuit in which he resides or has his principal place of business "for a judicial review of such order;" that "the court shall have jurisdiction to affirm the order, or to set it aside in whole or in part, temporarily or permanently;" that "if the order of the Secretary Administrator refuses to issue, amend, or repeal a regulation and such order is not in accordance with law the court shall by its judgment order the Secretary Administrator to take action, with respect to such regulation, in accordance with law;" and that "the findings of the Secretary Administrator as to the facts, if supported by substantial evidence, shall be conclusive." Subsection (f) of Section 701 also provides that "the remedies provided for in this subsection shall be in addition to and not in substitution for any other remedies provided by law."

The challenged order establishing a definition and standard of identity for oleomargarine was made after a hearing held upon due notice. The order contains detailed findings of fact and a determination that the standard "would promote honesty and fair dealing in the interest of consumers." The standard of identity established by the order states that oleomargarine is a plastic food prepared from animal fat or vegetable fat or oil, or a combination of both animal and vegetable fat, which is intimately mixed with milk ingredients. The standard includes as optional ingredients:

"(5) Artificial coloring.

"(6) Sodium benzoate, or benzoic acid, or a combination of these, in a quantity not to exceed 0.1 per cent of the weight of the finished product.

"(7) Vitamin A * * * in such quantity that the finished oleomargarine contains not less than 9,000 United States Pharmacopoeia Units of Vitamin A per pound.

"(8) The artificial flavoring diacetyl added as such, or as starter distillate, or produced during the preparation of the product as a result of the addition of citric acid or harmless citrates."

The standard requires that if artificial coloring or diacetyl, or benzoate of soda, or Vitamin A is used in oleomargarine, the label must disclose the fact.

The findings of fact of the respondent show that diacetyl is an artificial flavoring produced in oleomargarine by the action of certain harmless bacterial starters, and that diacetyl is also added to oleomargarine as an additional ingredient to enhance the flavor of the finished product; that some consumers use oleomargarine for the same purposes as butter, and that the addition of 9,000 Units of Vitamin A per pound will give a Vitamin A content comparable to that of butter; that present conditions of retail distribution of oleomargarine do not afford adequate refrigeration for the product, and that sodium benzoate or benzoic acid, or both, are sometimes added to aid in retarding deterioration; and that butter, salt and artificial flavoring are sometimes used in the preparation of oleomargarine.

Our examination of the evidence adduced at the hearing before the respondent convinces us that all of the findings of fact upon which the respondent's order is based are sustained by substantial evidence. The evidence at the hearing was directed at ascertaining what ingredients had been and were being used in the preparation of oleomargarine and what ingredients consumers understood were contained in that product. The testimony amounted to a quantitative and qualitative analysis of that food product. The only substantial dispute which arose during the hearing was as to the propriety of the use of diacetyl as an optional ingredient of oleomargarine. Henry A. Lepper, a chemist in the Food and Drug Administration of the Federal Security Agency, who, for many years, had been concerned with regulatory problems in the enforcement of the Federal food laws and in the analysis of foods, testified, in substance, that in his opinion the permitted use of diacetyl in the manufacture of oleomargarine was not in the interest of honesty and fair dealing, because diacetyl produces or enhances the butter flavor and would lead uninformed consumers to believe that there were substantial quantities of butter present in oleomargarine. Mr. Lepper had previously, at the hearing, testified that the standard of identity proposed by the respondent in his notice of hearing "would promote honesty and fair dealing in the interests of consumers because it would fulfill the consumers' conception of what the product should be, and would assure the consumer a minimum of fat commensurate with that understanding;" and that "it would also assure the consumer that dairy products in the nature of skim milk or reconstituted milk had been used in its preparation, because the consumer generally believes that to be a fact." The proposed standard of identity to which Mr. Lepper was then referring was substantially similar to that finally adopted by the respondent, except that diacetyl was not an optional ingredient in the standard originally proposed, nor was benzoate of soda or benzoic acid. Mr. Lepper testified that bacterial starters are generally used to promote the growth of lactic acid bacteria in the milk ingredient; that in that way the best flavor is developed, a "flavor that is associated with dairy products," and that consumer understanding is that dairy products are present in oleomargarine, and this flavor is developed by the bacteria that ordinarily develop flavor in dairy products....