Marigold Foods, Inc. v. Redalen
| Decision Date | 20 October 1993 |
| Docket Number | Civ. No. 4-92-1084. |
| Parties | MARIGOLD FOODS, INC., Schroeder Milk Company, Inc., George Benz & Sons d/b/a Oak Grove Dairy, Ellsworth Cooperative Creamery, Inc., Plaintiffs, v. Elton REDALEN, Commissioner of the Minnesota Department of Agriculture, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Steven J. Rosenbaum, Andrew I. Schoenholtz, and Covington & Burling, Washington, DC, Michael A. Stern, and Fredrikson & Byron, Minneapolis, MN, for plaintiffs.
Hubert H. Humphrey III, Atty. Gen., and Scott R. Strand, Asst. Atty. Gen., St. Paul, MN, for defendant.
This matter is before the court on plaintiffs' renewed motion for a preliminary injunction. Based on a review of the file, record and proceedings herein, the court grants plaintiffs' motion.
Plaintiffs are dairy processors located in Minnesota and Wisconsin. Defendant is the Minnesota Commissioner of Agriculture ("the Commissioner") in his official capacity. These parties were before the court in 1992 on plaintiffs' original motion for a preliminary injunction enjoining the enforcement of Section 4 of Chapter 602 of the Laws of Minnesota (Minnesota Statutes Section 32A.071), which established a minimum price to be paid for Class I milk in Minnesota, irrespective of whether that milk was produced in Minnesota or out-of-state. Marigold v. Redalen, 809 F.Supp. 714, 717 (D.Minn.1992). That statute required milk processors to pay the difference between $13.20 and the federal minimum price1 into a special fund to be distributed to Minnesota milk producers, whenever the federal minimum price for milk fell below $13.20 per hundred weight. That "Minnesota premium" was to be paid both on milk produced and processed in Minnesota and on milk which was produced out-of-state but sold in Minnesota. Plaintiffs then argued that the Minnesota premium was a constitutionally impermissible burden on interstate commerce and the court agreed.
Because plaintiffs had sought a preliminary injunction, the court considered the four factors set forth in Dataphase Sys., Inc. v. CL Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc). Marigold, 809 F.Supp. at 719. The court found that three of the four factors favored granting plaintiffs their requested injunction. There was a substantial threat that the plaintiffs would suffer irreparable harm if relief was not granted. There was a substantial probability that the plaintiffs would prevail on the merits. The public interest favored granting the injunction. Id. at 720-25. The court found that one Dataphase factor, the balance of harm between the parties, favored neither party. Id. at 720-21.
In considering the likelihood of plaintiffs' success on the merits, the court found that the Minnesota premium was a direct regulation of interstate commerce which effectively set a minimum price for milk sold in Minnesota, thus negating the economic advantage of out-of-state dairy farmers who sell their milk to Minnesota processors. Id. at 722. The court found that the plaintiffs were likely to prevail in their argument that this minimum price violates the Commerce Clause of the United States Constitution. Id. at 723. The court held that, because the Commissioner was being sued in his official capacity, injunctive relief was available under 42 U.S.C. § 1983. Id. at 724. Therefore, the court granted plaintiffs the requested injunction.
The Commissioner did not appeal the court's order enjoining the enforcement of the premium law to the extent that it affected milk purchased from out-of-state. Rather, the Minnesota legislature repealed the affected statute and simultaneously enacted a new "milk over-order premium2" statute ("new premium") which could overcome the constitutional infirmities of the enjoined law ("old premium"). The new law, Section 9 of Chapter 65 of the Laws of Minnesota (Minnesota Statutes Section 32.73), will assess a charge from dairy processors, in their role as wholesalers, whenever the federal minimum price of Class I milk falls below $13.20 per hundred weight. The assessment is calculated by multiplying the difference between the federal minimum price and $13.20 by 2.25. Thus, if the federal minimum price were set at $12.20 per hundred weight, the assessment would be $2.25 per hundred weight. The assessments are to be collected by the Commissioner from the first wholesaler, that is the dairy processor, and paid into the "Minnesota over-order premium account" which is administered by the Commissioner. The assessments are to be collected at the wholesale level and thus will apply to all milk, no matter where it was produced and processed. The assessments collected are to be distributed only to Minnesota dairy producers.
Plaintiffs' renewed motion for a preliminary injunction challenges the constitutionality this new statute. They argue that the changes in the law are primarily linguistic and that the constitutional problems with the old law have been exacerbated, rather than cured. They contend that, if the constitutional infirmities remain, enforcement of the new law should be enjoined. The Commissioner argues that the new law creates a tax which, under 28 U.S.C. § 1341, the Tax Injunction Act, is outside of the subject matter jurisdiction of a federal district court. The Commissioner also argues that under the new law non-Minnesota producers retain whatever competitive advantage they would have in the absence of the law and, therefore, that no constitutional problems exist.
The Commissioner contends that the court cannot consider the plaintiffs' claims because the new statute establishes a tax and the Tax Injunction Act bars a federal district court from enjoining the collection of a state tax. Burris v. City of Little Rock, 941 F.2d 717, 720 (8th Cir.1991). The Tax Injunction Act provides that:
The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such state.
28 U.S.C. § 1341. This prohibition extends to suits for injunctive relief and to § 1983 claims in which a plaintiff seeks an injunction. Burris, 941 F.2d at 720 (citations omitted).
Whether the new Minnesota premium is a tax is a federal question and the label given by the state is not dispositive of the court's inquiry. Wright v. McClain, 835 F.2d 143, 144 (6th Cir.1987) (citing Robinson Protective Alarm, Co. v. City of Philadelphia, 581 F.2d 371, 374-76 (3rd Cir.1978)). To determine whether the Minnesota premium is a tax, the court must look to the purpose underlying the premium. Id. at 145 (citations omitted); Miami Herald Publishing Co. v. City of Hallandale, 734 F.2d 666, 670 (11th Cir.1984) (citations omitted). Premiums imposed primarily for revenue-raising purposes are considered to be taxes. Wright, 835 F.2d at 145; Miami Herald, 734 F.2d at 670. Premiums primarily imposed for regulatory or punitive purposes, even though they may also raise revenue, generally are not considered to be taxes. Miami Herald, 734 F.2d at 670; see also American Petrofina Co. of Texas v. Nance, 859 F.2d 840, 841 (10th Cir.1988) .
In examining the 1992 Minnesota premium the court held that the law was primarily regulatory in nature because it regulated the price processors paid for Class I milk. Marigold, 809 F.Supp. at 719. The new premium is regulatory in nearly the same manner. Although the base price processors pay for milk will be set by the United States Department of Agriculture when it announces the federal minimum price, any difference between that federal minimum price and $13.20 per hundred weight will be negated by the premium. In reality, a minimum price for milk sold at wholesale in Minnesota is established. The Commissioner does not contest plaintiffs' claim in this regard. The principal difference between the old premium and the new premium is that the old premium fixed the Minnesota minimum price at $13.20 per hundred weight, whereas the more complex formula of the new premium would adjust the price to some amount over $13.20 per hundred weight, depending on the level at which the federal minimum price is set. The new premium, like the old premium, is thus primarily regulatory in nature. The fact that the new premium also raises revenue is not dispositive of the issue of whether it is a tax. See American Petrofina, 859 F.2d at 841. The court thus concludes that the Minnesota premium is not a tax and that the Tax Injunction Act, therefore, does not prevent the court from exercising subject matter jurisdiction over the plaintiffs' claims.
The Commissioner renews his argument that the court should decline to consider plaintiffs' claims under the principle of comity. The Commissioner again relies on Fair Assessment in Real Estate Ass'n, Inc. v. McNary, 454 U.S. 100, 102 S.Ct. 177, 70 L.Ed.2d 271 (1981). The court rejected this argument previously, holding that the old premium was not a tax, thus rendering Fair Assessment inapplicable. Marigold, 809 F.Supp. at 719. Because the court finds that the new premium is also a regulation, rather than a tax, the Commissioner's present reliance on Fair Assessment is similarly misplaced. The court therefore concludes that it can exercise jurisdiction over the plaintiffs' claims and consider the merits of their motion for injunctive relief.
The court considers four factors in determining whether to grant the plaintiffs' motion for a preliminary injunction:
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