Polar Ice Cream Creamery Co v. Andrews, 38

• Decision Date: 06 January 1964
• Docket Number: No. 38,38
• Citation: 375 U.S. 361,11 L.Ed.2d 389,84 S.Ct. 378
• Parties: POLAR ICE CREAM & CREAMERY CO., Appellant, v. Charles O. ANDREWS, Jr., etc., et al
• Court: U.S. Supreme Court

375 U.S. 361

84 S.Ct. 378

11 L.Ed.2d 389

POLAR ICE CREAM & CREAMERY CO., Appellant,

v Charles O. ANDREWS, Jr., etc., et al.

No. 38.

Argued Nov. 20, 1963.

Decided Jan. 6, 1964.

[Syllabus from pages 361-362 intentionally omitted] Joe J. Harrell, Pensacola, Fla., for appellant.

Mallory E. Horne, Tallahassee, Fla., and Johnson S. Savary, Inverness, Fla., for appellees.

Mr. Justice WHITE delivered the opinion of the Court.

We have before us the recurring question of the validity of a State's attempt to regulate the supply and distribution of milk and milk products. Challenged in this case is Florida's system of regulation of the dealings between milk distributors and local producers.

The appellant, Polar Ice Cream & Creamery Company, located in Pensacola, Florida, 16 miles from the Florida-Alabama state line, is a processor and distributor of fluid milk and milk products. It sells fluid milk and milk products for human consumption to consumers and dealers within the State of Florida in competition with nearby Alabama distributors. Pursuant to contracts let after competitive bidding, it also supplies large quantities of milk to military installations, both within and without the State of Folrida. It purchases, processes and sells as fluid milk or milk products approximately 5,000,000 gallons of milk each year.

Prior to the regulations challenged here, Polar purchased approximately 30% of its milk requirements from dairy farm producers located within the State of Florida. The remaining 70% was procured from producers, producer pools or brokers in other States, such as Alabama, Mississippi, Wisconsin, Minnesota, Missouri, Virginia, and Illinois. Its customary arrangement with Florida producers was to pay 61 cents per gallon for a specified quantity of milk from each producer and approximately 35.5 cents per gallon for all milk over that quantity. The price Polar paid its out-of-state sources varied; some milk was purchased for as low as 30—35 cents per gallon from Alabama, Virginia, and Arkansas sources. Polar's Florida producers could at no time supply all of Polar's milk requirements, but at times produced and sold to Polar amounts equal to or greater than Polar's sales of fluid milk for human consumption to consumers and dealers in Florida, excluding sales to the military, sales on reservations, and sales to local schools.

The statute and the orders of the Florida Milk Commission challenged by Polar regulate the dealings between milk distributors and milk producers located within the Pensacola Milk Marketing Area.¹ First, they require that a Pensacola milk distributor pay a minimum price of 61 cents per gallon for all milk purchased from Pensacola producers and sold in Florida as Class I milk, defined as fluid milk or milk products sold in fluid form with exceptions, and substantially lower minimum prices for milk sold as Class II, III, and IV milk, ² consisting chiefly of nonbeverage milk such as cream, sour cream and other dairy products.

Second, the Commission has established a method by which a proportion of a distributor's monthly sales in various classes is allocated to designated Pensacola producers. Each Pensacola producer with whom Polar does business between September 1 and November 30 of each year, called the base-fixing period, is assigned an earned base, representing the ratio of milk delivered by such producer to the total milk delivered by all of Polar's Pensacola producers during the base-fixing period. The resultant percentage is then applied to the number of gallons of milk Polar sells in Class I, II, III, and IV channels monthly, in that order, to determine the number of gallons for which each earned-base producer must be paid the minimum prices assigned to each class or utilization.³ The allocation of a producer's deliveries must first be to Class I utilization, with allocation continued thereafter in descending order through the lower classifications. Only deliveries by Pensacola producers are considered in calculating the ratio of each producer's deliveries to total deliveries to Polar during th base-fixing period and therefore the percentage assigned to these producers totals 100%. The result is that all of Polar's Class I sales must be attributed to its Pensacola earned-base producers. Only then may their milk be used for the less remunerative utilizations, and only if these producers do not fulfill Polar's need for Class I milk may other milk be used for this purpose and thus command a premium price. Moreover, the formula requires that all the milk Polar sells in Florida be first attributed to the purchases that it makes from Pensacola producers.⁴ The earned-base percentages remain the same until the next base-fixing period.

Third, the statute forbids termination of the business relationship between a distributor and producer with whom the distributor has had a continuous course of dealing without just cause and provides that rejection or refusal to accept any milk tendered or offered for delivery by a producer in ordinary continuance of a previous course of dealings is a ground for revocation of the distributor's license.⁵ These statutory provisions have been construed to mean that a Florida distributor in a regulated marketing area must accept from his earned-base producers all the milk tendered by such producers, including milk in excess of Class I needs. A distributor is relieved of the obligation to purchase milk from earned-base producers only upon a showing of just cause, which is not met by a demonstration that the Commission's minimum prices are burdensome or that milk is available elsewhere at a lower price.⁶

It is this three-pronged regulatory structure, requiring Polar to accept its total supply of Class I milk, military milk aside, from designated Pensacola producers at a fixed price, and obligating it to take all milk which these producers offer, which Polar argues imposes an undue burden on interstate commerce.⁷

The Florida Milk Commission also proposed special provisions dealing with milk that is sold to military in- stallations of the United States—military milk. Although challenged by Polar at the outset of this litigation, this plan was not voted into effect. While the present status of military milk under Florida law is not entirely clear from the record or arguments of the parties, we read the testimony of the Commission to mean that Polar is not required to purchase military milk from its Pensacola producers, as it is Class I milk. However, if Polar does utilize milk obtained from its earned-base producers for military sales, it must pay the minimum price applicable to Class I sales. Polar challenges this producer price requirement as inconsistent with the federal procurement policy of competitive bidding, and the Federal Government's exclusive jurisdiction over the installations on which this milk is consumed.

To finance the activities of the Milk Commission, Florida imposes a tax or regulatory fee of 15/100 of 1 cent per gallon of all milk handled by Florida distributors regardless of where purchased or to whom it is sold, including milk that Polar sells to military installations. This tax abates if at any time the revenue exceeds by 25% the total amount of Com ission expenditures as budgeted for that fiscal year.⁸ Polar, which clearly is obliged to pay this fee, contends that the State is without jurisdiction to include milk sold and delivered to military reservations, exclusive jurisdiction to which has been ceded to the United States, in calculating the amount of the tax.

Since Polar's objections to the Florida Milk Control Act posed substantial federal questions, a three-judge District Court was convened, 28 U.S.C. § 2281, and testimony was taken and arguments heard in respect to the above questions. This court found that the Florida Milk Control Act was a reasonable exercise of the State's police power and accordingly rejected Polar's claims that the Act, in fixing producer prices without assuring Polar any rate of return and in compelling Polar to take all the milk of its earned-base producers, denied it due process of law and equal protection. The District Court also found that Florida's fee on milk distributed by Polar to military installations was a regulatory fee based on the privilege of doing business in Florida and not a tax and concluded that this measure therefore did not unduly burden interstate commerce or infringe upon the exclusive jurisdiction of the United States over the military installations Polar serves. The Florida producer price controls were said not to conflict with the Federal Procurement Statutes, 10 U.S.C. § 2301 et seq., since they did not impose any restriction on the price paid by the Federal Government for its purchases from Polar. Although finding that the Florida regulations were intended to protect and favor Florida milk producers, the court upheld these regulations over Commerce Clause objections because there was no showing that the alleged discrimination against out-of-state producers burdened or restricted interstate commerce. The decision in Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511, 55 S.Ct. 497, 79 L.Ed. 1032, invalidating a state restriction imposed on a milk distributor to shield local milk producers from the effects of out-of-state competition, was deemed inapplicable to Florida's regulations. Because of the serious questions raised under the Commerce Clause and previous decisions here dealing with milk regulations, we noted probable jurisdiction. 372 U.S. 939, 83 S.Ct. 932, 9 L.Ed.2d 966. We have determined that under prior cases in this Court dealing with state regulation of the milk industry the Florida law as applied in this case cannot withstand attack based upon the Commerce Clause and that the judgment below must be reversed.

I.

The controlling cases are Baldwin v. Seelig, 294 U.S. 511, 55 S.Ct. 497, 79 L.Ed. 1032; Hood & Sons v. Du Mond, 336 U.S. 525, 69 S.Ct. 657, 93 L.Ed. 865; and ...