Lansing Dairy, Inc. v. Espy, s. 92-2231
| Citation | 39 F.3d 1339 |
| Decision Date | 23 January 1995 |
| Docket Number | 92-2232,Nos. 92-2231,92-2233,92-2448,92-2449,s. 92-2231 |
| Parties | LANSING DAIRY, INC.; Liberty Dairy Company; Frigo Cheese Corporation (92-2231); Farmers Union Milk Marketing Cooperative; Gerald Piche; Peter J. Kleiman; Edward O. Kleiman; Art J. Corey, Jr.; Raymond J. Marsicek; Ralph Brock; Ed E. Hanchek; Robert S. Hanchek; Raymond S. Huber; Benjamin C. Huber; George A. Huber, on behalf of themselves and all members of Farmers Union Milk Marketing Cooperative pooled under Federal Order 40 (92-2232), Plaintiffs-Appellants, Cross-Appellees, Manitowoc Milk Producers Association (92-2232), Intervenor Plaintiff-Appellant, Cross-Appellee, v. Mike ESPY, successor to Edward R. Madigan, Secretary of Agriculture (92-2448/2449), Defendant-Appellee, Cross-Appellant, Producers Equalization Committee (92-2233), Intervenor Defendant-Appellee, Cross-Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
John H. Vetne (argued and briefed), Blodgett, Makechnie & Vetne, Newburyport, MA, Howard D. Cline, Cline, Cline & Griffin, Grand Blanc, MI, for Lansing Dairy, Inc., Liberty Dairy Co. and Frigo Cheese Corp.
Edward R. Cohen (argued and briefed), Barbara C. Biddle, U.S. Dept. of Justice, Appellate Staff, Civil Div., Washington, DC, John A. Smietanka, U.S. Atty., Edith A. Landman, Office of the U.S. Atty., Grand Rapids, MI, Gregory Cooper, U.S. Dept. of Agriculture, Washington, DC, for Edward R. Madigan.
David VanderHaagen (argued), Stephen J. Rhodes (briefed), Foster, Swift, Collins & Coey, Lansing, MI, for Producers Equalization Committee.
Mark W. Reinke (briefed), Guth & Coughlin, Chicago, IL, Benjamin F. Yale (argued and briefed), Waynesfield, OH, for Farmers Union Milk Marketing Co-op., Gerald Piche, Peter J. Kleiman, Edward O. Kleiman, Art J. Corey, Jr., Raymond J. Marsicek, Ralph Brock, Ed E. Hanchek, Robert S. Hanchek, Raymond S. Huber, Benjamin C. Huber, George A. Huber and Manitowoc Milk Producers Ass'n.
Before: CELEBREZZE, MARTIN, and BATCHELDER, Circuit Judges.
This case concerns a dispute between groups of milk handlers, milk producers, and the Secretary of Agriculture (the "Secretary") over how certain benefits of federal milk price regulations should be distributed. This is a consolidated appeal from a decision of the United States District Court for the Western District of Michigan arising under the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C. Secs. 601-74 (AMAA or the "Act").
The AMAA authorizes the Secretary to issue, and to amend, marketing orders for a wide variety of agricultural products, including milk. Milk marketing orders set the minimum prices which those who process dairy products, designated as handlers (as defined in 7 C.F.R. Sec. 1040.9 (1994)), must pay to dairy farmers, designated as producers (as defined in 7 C.F.R. Sec. 1040.12 (1994)). Specifically at issue in this appeal are the 1989 amendments to 7 C.F.R. Part 1040 Secs. 1040.1-.86 (1994) ("Order 40"). The contested amendments changed plant location adjustments, 7 C.F.R. Sec. 1040.52(a)(1) (1994), and increased mileage rates, 7 C.F.R. Sec. 1040.52(a)(2) (1994), in Order 40; the net effect of these changes was to decrease revenues for some producers and handlers outside of the Southern Michigan milk marketing area. Groups of producers and handlers, upon whom the 1989 amendments have a negative financial impact, challenged the validity of these amendments on a number of grounds.
The district court, on cross-motions for summary judgment in these consolidated actions, held that the location adjustments promulgated by the Secretary pursuant to 7 U.S.C. Sec. 608c(5) were invalid for failure to consider the economic factors outlined in 7 U.S.C. Sec. 608c(18). Therefore, the district court ordered the Secretary to promulgate new location adjustments, specifically considering the economic factors in 7 U.S.C Sec. 608c(18). The determinative issue before the court in this appeal is whether the Secretary's power to order location adjustments is founded solely on the grant of authority in 7 U.S.C. Sec. 608c(5), as urged by the Secretary; or whether, as argued by the plaintiffs and held by the district court, this power is conditioned on consideration of the economic criteria found in 7 U.S.C. Sec. 608c(18). Because we find that the language of the relevant statutory provisions is ambiguous and that the Secretary's interpretation of those provisions is reasonable, we now reverse.
In order to understand this case, it is necessary to examine the mechanism used for the establishment of milk prices. This Court has addressed the circumstances surrounding the enactment of the AMAA in two prior cases. See Farmers Union Milk Mktg. Coop. v. Yeutter, 930 F.2d 466 (6th Cir.1991); Defiance Milk Prods. Co. v. Lyng, 857 F.2d 1065 (6th Cir.1988). In Defiance Milk Products, this Court explained the underlying basis and structure of the price regulatory system set out in the AMAA:
Two conditions peculiar to the milk industry led to the establishment of a federally regulated milk price structure. The first is that raw milk has essentially two end uses: as fluid milk and as an ingredient in manufactured dairy products such as butter or cheese. The second condition is seasonality. Dairy cows produce more milk in the spring "flush" season than they do during the fall and winter.
The confluence of these two conditions created problems which Congress decided necessitated regulation. Raw milk to be used as fluid milk commands a higher price than milk to be used in manufactured products. Fluid milk is highly perishable, and if it cannot be marketed quickly it must be manufactured into other dairy products.
Defiance Milk Prods., 857 F.2d at 1066.
Absent regulation, dairy farmers would obviously prefer to sell milk exclusively for fluid use since it commands the highest price; however, the seasonal nature of the dairy industry prevents this. A dairy herd sufficient to produce a supply of fluid milk adequate for consumer needs in the fall and winter will produce a glut in the spring. Before regulation, handlers would obtain bargains during glut periods engendering aggressive and arguably destructive competition among producers. To maintain income, producers would increase production even more. In the 1920's, equilibrium was restored to the market by the formation of producer "cooperatives" which pooled their milk supplies and refused to deal with handlers except on a collective basis. However, the drop in commodity prices during the Depression destroyed the market equilibrium attained during the 1920's era of relative stability.
In 1933, in an effort to restore order to the various agricultural markets and boost the purchasing power of farmers, Congress decided to take the matter out of the hands of the free market. To that end, Congress enacted the licensing provisions of the Agricultural Adjustment Act, which resulted in the adoption of "base-rating plans not unlike the private arrangements that obtained in the 1920's...." Zuber v. Allen, 396 U.S. 168, 175, 90 S.Ct. 314, 318, 24 L.Ed.2d 345 (1969). However, in response to judicial decisions disapproving congressional economic initiatives which enacted Id. Accordingly, in 1935, Congress, by amendment to the Agricultural Adjustment Act, adopted the AMAA, which is essentially the current agricultural marketing agreement structure.
Under the AMAA, the Secretary is given the authority, and the responsibility, to formulate and administer federal milk marketing regulations in various regions throughout the United States. See 7 U.S.C. Sec. 608c(5). Each of these regions is referred to as a "marketing area" and the regulations concerning the marketing of milk in the area are commonly referred to as "orders." There are presently forty-four such milk marketing orders being administered by the Secretary throughout the United States. These are described at 7 C.F.R. Parts 1001-1139 (1994), and these marketing areas encompass virtually all major metropolitan areas in the United States.
Although the system established by the AMAA to regulate the sale of milk is of labyrinthine complexity, the first step is relatively simple: Handlers purchase milk from producers. However, the means by which this transaction is handled are quite complex due to the unique market for milk products. Milk which is alike in all other respects varies in price according to the use to which the milk is put. See 7 C.F.R. Sec. 1040.40 (1994). Some milk is distributed in fluid form. This milk, called Class I, commands the highest price. 7 C.F.R. Sec. 1040.50(a) (1994). Class II milk is milk that is made into "soft products" such as yogurt and cottage cheese. It is priced lower than Class I milk. 7 C.F.R. Sec. 1040.50(b) (1994). Other products with a longer shelf life (such as butter, cheese, and powdered milk) are considered to be Class III; the milk used to produce these products commands the lowest price. 7 C.F.R. Sec. 1040.50(c) (1994). The Class I price only is further adjusted based on the location of the plant within the marketing area. See 7 C.F.R. Sec. 1040.52(a) (1994).
Through a device known as the producer settlement fund, the current system ensures that while producers receive a uniform price, handlers pay different rates depending on the ultimate end to which the milk is put. Handlers pay (directly to the producers) a minimum price that is set by regulation and computed by a complex formula that is basically an "average" price for milk that is used for all three classes. 7 C.F.R. Sec. 1040.61 (1994). Because the price is an average price, some handlers end up paying too much and...
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