Paul v. Allied Dairymen, Inc.

• Decision Date: 29 October 1962
• Citation: 209 Cal.App.2d 112,25 Cal.Rptr. 595
• Parties: Charles PAUL, as Director of Agriculture, Plaintiff and Appellant, v. ALLIED DAIRYMEN, INC., Defendant and Respondent. Civ. 147.
• Court: California Court of Appeals Court of Appeals

Page 595

25 Cal.Rptr. 595

209 Cal.App.2d 112

Charles PAUL, as Director of Agriculture, Plaintiff and Appellant, v. ALLIED DAIRYMEN, INC., Defendant and Respondent.

Civ. 147.

District Court of Appeal, Fifth District, California.

Oct. 29, 1962.

Stanley Mosk, Atty. Gen., John Fourt, Sanford N. Gruskin, Lawrence C. Doxsee, Deputies Atty. Gen., Sacramento, for plaintiff-appellant.

Emil Steck, Jr., Pasadena, for Dairy Institute of Cal., amicus curiae, on behalf of plaintiff-appellant.

Walch, Griswold, Braden & Dittmar, S. C. Dittmar, Jr., Hanford, for defendant-respondent.

CONLEY, Presiding Justice.

Involved on this appeal is the basic question whether the trial court committed prejudicial error in finally ruling on the merits of the suit on a preliminary injunction hearing and dismissing the case on the alleged ground of lack of jurisdiction.

The suit was brought by the Director of Agriculture of the State of California, Charles Paul, to restrain Allied Dairymen, Inc., defendant and respondent, from violating the applicable minimum producer price regulations concerning fluid milk and other dairy products. Allied Dairymen, Inc., is an association of producers whose farms are located in the southerly part of the San Joaquin Valley in the vicinity of the city of Tulare; it is organized under chapter 4 of division 6 of the Agricultural Code, and the nonprofit association is licensed by the state as a milk distributor.

On July 12, 1961, the Director of Agriculture (hereinafter referred to as Director) notified all milk distributors that California's minimum producer price regulations would be enforced without exception, noting that the United States District Court, Northern District of California, had previously enjoined him from enforcing minimum wholesale and minimum producer price regulations with respect to milk sold to agencies of the United States but that on July 3, 1961, the United States Supreme Court had stayed that portion of the district court's order which enjoined the enforcement of minimum producer price regulations (United States v. Warne (1960), D.C., 190 F.Supp. 645, review granted sub. nom., Paul v. United States (1962), 368 U.S. 965, 82 S.Ct. 437, 7 L.Ed.2d 394).

Under the California Milk Stabilization Act (Agr. Code, div. 6, ch. 17), originally enacted in 1935 to regulate California's dairy industry in order to place it upon a solid economic basis and to insure the payment to the producer of compensation sufficient to permit him successfully to carry on his farming venture, the Director established minimum producer prices (the prices at which distributors may purchase milk from producers) and minimum wholesale prices (the prices at which distributors may sell milk to retailers and others). In 1960 the United States brought two suits in the United States District Court, Northern District of California, to enjoin the Director and the Attorney General of California from enforcing the minimum wholesale price regulations with respect to milk purchased by the federal government at Oakland Army Terminal, Travis Air Force Base and Castle Air Force Base. A three-judge district court issued the requested injunction on two grounds: it concluded that the United States had acquired exclusive jurisdiction over these military bases, and it also found that the milk stabilization act conflicts with the Armed Services Procurement Act of 1947 (62 Stat. 21, 10 U.S.C.A. §§ 2301-2314). The Director and the Attorney General of California have appealed the district court's decision directly to the United States Supreme Court; the case is on the current calendar of the Supreme Court. An application for a stay on appeal of that portion of the district court's order which enjoined the enforcement of minimum producer price regulations was made to the Supreme Court in July of 1961, the requested stay was unopposed, and, as already stated, it was granted by that court and became effective on July 3, 1961. The memorandum filed by the United States in response to the jurisdictional statement in that case contains the following significant language:

'There is no longer any necessity for the Court to consider whether appellants can constitutionally enforce the established California minimum producer prices with respect to milk farmers selling to distributors for processing and ultimate resale to the United States. The federal government, while not conceding that California can regulate producer prices, over the objection of the federal government, where the milk is to be resold to the United States, has concluded as a matter of procurement policy not to assert immunity from these minimum prices but to accede to full compliance with those requirements. Accordingly, the United States now suggests that, without further briefing or argument, the Court remand the cause to the district court for a deletion of that part of the final order enjoining enforcement of the minimum producer price regulations as to milk sold to distributors for resale to the federal government.

'The United States continues, however to oppose any attempt by California to regulate the price at which distributors may sell milk or milk products to the military installations involved. In our view, the district court was clearly correct in enjoining enforcement of the minimum distributor prices because the sales between the distributors and the United States are consummated on territories under exclusive federal jurisdiction; so far as we are aware, all of these distributor sales take place on the federal enclaves. As to this aspect of the case, we submit, therefore, that the judgment below should be summarily affirmed.'

On July 20, 1961, Allied Dairymen, Inc. (hereinafter referred to as Allied), from its office in Tulare sent a formal written offer to the Military Subsistence Supply Agency of the federal government in Los Angeles to supply milk and milk products to the government at Vandenberg Air Force Base, commencing September 1, 1961; this offer was accepted by the Military Subsistence Supply Agency a week later in Los Angeles, and Allied began performance of its sales contract on September 1, 1961. The contract provided for the delivery of milk and milk products to Vandenberg Air Force Base's commissary, dining hall no. 1, dining hall no. 2, hospital dining hall, in-flight kitchen and cold storage plant, on parcels of land acquired by the United States in about 1942 for military purposes. The air force base is located in the Ventura-Santa Barbara marketing area.

On August 31, 1961, the Director filed the complaint in this suit against Allied for a temporary restraining order, preliminary injunction and permanent injunction, alleging that Allied is a non-profit cooperative marketing association organized for the purpose of marketing milk, cream, and other dairy products, and licensed to engage in business as a distributor thereof and seeking to restrain it from doing business in California '* * * except in full compliance with the minimum producer price regulations promulgated by the Director of Agriculture * * *.' Attention is called in the complaint to section 4280, subdivision (g), of the Agricultural Code, which requires that any stabilization and marketing plan shall contain provisions for prohibiting any distributor from engaging in what is specified as one of the unfair practices denounced therein, to wit:

'The payment by a distributor to any producer, including any association of producers, or the receipt by a producer, including any association of producers, from a distributor, of a lesser price for any fluid milk or fluid cream or fluid skim milk which is distributed to any person, including agencies of the federal, state or local government, located upon property within the geographical limits of any marketing area for less than the minimum prices established by the director to be paid by distributors to producers for fluid milk, or the milk fat and skim milk contained therein, or fluid cream or fluid skim milk for said marketing area. The provisions of this section with respect to fluid milk shall apply whether or not such fluid milk is received by the distributor as whole milk, or as skim milk and fluid cream, or either, or as any other derivatives of such fluid milk which are reconstituted into such fluid milk, or fluid cream or fluid skim milk for market usage, and whether or not a fluid cream plan has been established for the marketing area.'

The complaint alleges that said provision was contained in the applicable stabilization and marketing plan for fluid milk, Kings-Tulare marketing area, promulgated by the Director and initially effective September 16, 1960; that in July of 1961, the defendant submitted a formal bid accepted by the United States for the sale at the Vandenberg Air Force Base in Santa Barbara County of fluid milk in the following quantities at these specified prices:

                                              Size
                         Quantity           Container    Offering Price
                --------------------------  ---------  ------------------
                300,000 gals.               Six gal.   .  5350 per gal
                480,000 1/2 gal. container  1/2 gal.   .  2700 per 1/2 gal
                  9,000 qt. container       qt.        .  1400 per qt
                300,000 1/2 pt. container   1/2 pt.    .  0430 per 1/2 pt.
                

Paragraph IX of the complaint is as follows:

'That the prices at which defendants have offered to sell the aforementioned fluid milk are so low that, when received by defendants, will be insufficient to pay the California producers of such milk the minimum prices for such fluid milk established by the Director of Agriculture in the Stabilization And Marketing Plan For Fluid Milk Kings-Tulare Marketing Area; that defendants are financially unable to make payment of the said minimum prices from sosurces [sic] other than the proceeds of the milk sales to Vandenberg Air Force Base, and as a result, said producers will receive from defendants for their fluid milk less than...