Pearce v. Freeman, Civ. A. No. 2717.

• Citation: 238 F. Supp. 947
• Decision Date: 16 February 1965
• Docket Number: Civ. A. No. 2717.
• Parties: Dave L. PEARCE, Commissioner of Agriculture and Immigration of the State of Louisiana, v. Orville FREEMAN, Secretary of Agriculture of the United States of America.
• Court: U.S. District Court — Eastern District of Louisiana

238 F. Supp. 947

Dave L. PEARCE, Commissioner of Agriculture and Immigration of the State of Louisiana, v. Orville FREEMAN, Secretary of Agriculture of the United States of America.

Civ. A. No. 2717.

United States District Court E. D. Louisiana, Baton Rouge Division.

February 16, 1965.

Joel B. Dickinson, Baton Rouge, La., Ellis C. Magee, Franklinton, La., for plaintiff.

Louis C. LaCour, U. S. Atty., Eastern Dist. of Louisiana, Norton L. Wisdom, Sp. Asst. U. S. Atty., Frederick W. Vetters, Asst. U. S. Atty., New Orleans, La., John G. Liebert, U. S. Dept. of Agriculture, Washington, D. C., Harland F. Leathers, Irwin Goldbloom, Dept. of Justice, Washington, D. C., of counsel, for defendant.

WEST, District Judge.

This is an action brought by the Commissioner of Agriculture and Immigration for the State of Louisiana, hereinafter referred to as "Commissioner," against the Secretary of Agriculture for the United States of America, hereinafter referred to as "Secretary," seeking an injunction restraining the Secretary from enforcing Federal Milk Marketing Order #96, 7 C.F.R. 1096. Plaintiff contends that the order exceeds the authority granted by Congress to the Secretary of Agriculture by the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C.A. § 601 et seq., which authority, plaintiff contends, is specifically limited by the provisions of 7 U.S.C.A. § 610(i), and that thus, the order is null, void and unenforceable. The Secretary defends on the grounds that (1) the complaint fails to state a claim upon which relief may be granted in that 7 U.S.C.A. § 610(i) does not limit the authority otherwise granted by the Agricultural Marketing Agreement Act to the Secretary of Agriculture insofar as the issuance of marketing orders is concerned and that (2) plaintiff has failed to show that the Secretary of Agriculture has in any way violated the provisions of 7 U.S.C.A. § 610(i) by issuing Federal Milk Marketing Order #96. Several pretrial conferences have been held in this matter and the parties were ordered by the Court to hold further conferences in an effort to resolve this dispute between the State of Louisiana and the Federal Government. Counsel for both sides have labored long and hard in an effort to amicably settle this dispute, but to no avail. After all attempts at settlement were exhausted, the matter came on for hearing before this Court, and thereafter the Court was furnished with scholarly briefs by both sides. Now, after due consideration of the record herein, the arguments and briefs of counsel, and the law applicable hereto, it is concluded that the Secretary of Agriculture for the United States of America, in issuing Federal Milk Marketing Order #96, 7 C.F.R. 1096, did not exceed the authority delegated to him by Congress when it enacted the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C.A. § 601 et seq. The sole issue involved here is whether or not marketing orders, regulating the handling of milk in interstate commerce, issued by the United States Secretary of Agriculture, must, pursuant to the provisions of 7 U.S.C.A. § 601 et seq., be "complementary" to similar orders issued by the state involved, as might be indicated by Section 610(i).

In 1955, the United States Secretary of Agriculture promulgated Federal Milk Marketing Order #96, 7 C.F.R. 1096, pursuant to authority granted by the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C.A. § 601 et seq. This order regulated, in various respects, the handling and marketing of milk in the ten parishes of Louisiana designated in the order as the "Northern Louisiana Marketing Area," and being the Parishes of Bossier, Caddo, Claiborne, DeSoto, Lincoln, Morehouse, Ouachita, Red River, Union, and Webster. This order was very comprehensive and regulated just about every aspect of milk marketing in that area, including, among other things, the classification of milk produced by the producer, its utilization by the handler, and the price to be paid by the handler to the producer for his milk. The price to be paid a producer for his milk is determined by the use to which a handler puts the milk, with milk for fluid use, called Class I utilization, bring a higher price than milk used in the manufacture of other products such as butter, cheese, and ice cream, called Class II utilization. Order #96, as originally promulgated in 1955, provided for payments by the handler, or user of the milk, to the producer or dairyman by the use of what is known as an individual handler pool arrangement. Under this arrangement a producer is paid for his milk by the handler to whom he sells it on the basis of the utilization by that particular handler of the milk purchased from that producer. For example, if Producer A sells all of his milk to Handler B, who uses all of Producer A's milk in fluid form, i. e., Class I utilization, and the price set for Class I utilized milk is $6.00 per cwt., Handler B must pay Producer A $6.00 per cwt. for all milk he purchases from Producer A. If Producer C sells his milk to Handler D and Handler D uses 80 per cent of the milk in fluid form (Class I utilization) and uses the other 20 per cent for manufacturing butter, cheese, etc. (Class II utilization), and if the price set for milk used as Class II utilization is $3.00 per cwt., Producer C would receive only $5.40 per cwt. for all of the milk he sells to Handler D. This is called the "Blend Price" and is arrived at by applying the percentage of Class I utilization of Producer C's milk to the price of that milk, and applying the percentage of Class II utilization of Producer C's milk to the price of that milk, and adding the two results together. This, of course, means a producer who sells milk to a handler who has a higher Class I utilization receives more for his milk than does a producer who sells to a handler with a lower Class I utilization, even though the milk sold by the two producers is of equal grade and quality. In other words, the amount received by a producer for his milk is entirely dependent upon the utilization of the milk by the particular handler to whom it is sold.

This method of determining the price to be paid a producer remained in effect under Federal Milk Marketing Order #96 until it was amended in June of 1962. But in the meantime, the Legislature of Louisiana, in 1958, passed Act 193 of 1958, known as the "Orderly Milk Marketing Act," which act authorized, inter alia, the Commissioner of Agriculture and Immigration of Louisiana to regulate the prices to be paid the dairymen, or producers, by the handlers for their milk. In December, 1960, pursuant to the authority granted by this act, the Commissioner promulgated State Orders #2 and #3, which orders covered the marketing of milk in all of its ramifications in 57 parishes of Louisiana, including the ten parishes covered by the Federal Order #96. All of the provisions of the State Order were essentially the same as those of the Federal Order, including the use of a Handler Pool Arrangement, except that the minimum prices provided for in the State Order were higher than those provided for in the Federal Order. This difference in prices caused no difficulty as both were minimum rather than maximum prices.

The producers and handlers operated without apparent difficulty under both of these orders until June of 1962. At that time, the Secretary amended Federal Order #96 to provide that in the ten parishes covered by that order, the use of what is known as a Market Wide Pool Arrangement would be substituted for the Individual Handler Pool Arrangement originally provided for in the order. Under a Market Wide Pool Arrangement, the average utilization by all handlers in the market area is determined. Then, a market wide blend price is determined by the same means used to determine an individual handler's blend price. Thus, when the market wide blend price is determined, some handlers will actually have a higher Class I utilization than the market average and some will actually have a lower Class I utilization than the market average. The same, of course, is true as to Class II utilization. Under this arrangement, the handler pays to the producer only the market average blend price for his milk. Then if the handler actually has a higher Class I utilization than the market average, he must pay the surplus over the market blend price into a pool called the producers' settlement fund. If, on the other hand, the handler actually has a lower Class I utilization than the market average, he still pays the market blend price to the producer, but withdraws from the producers' settlement fund the difference between the market blend price which he has paid the producer and the blend price figured on his own individual utilization. The purpose of the market wide pool arrangement is to distribute the market for Class I utilization of milk more evenly among all of the producers in the area involved. Since the price received for milk by the producer is determined not by its quality, but by its utilization, all producers are supposed to share more equally in the fluid milk market by the use of the Market Wide Pool Arrangement than is the case where an Individual Handler Pool Arrangement is used. But, as is apparent, the two systems are inconsistent one with the other, and consequently, since after June of 1962, the Federal Order provided for a Market Wide Pool Arrangement and the State Order provided for an Individual Handler Pool Arrangement, a handler in the area affected cannot obey one order without disobeying the other. Hence, the present controversy.

This suit was filed by the Commissioner against the Secretary asking that this Court enjoin the Secretary from enforcing Federal Order #96, as amended, in the ten parishes involved, especially insofar as it requires the use of the Market Wide Pool Arrangement on the grounds that that order is inconsistent with, and not complementary...