Royal Farms Dairy v. Wallace

• Decision Date: 16 November 1934
• Docket Number: No. 2265.,2265.
• Citation: 8 F. Supp. 975
• Parties: ROYAL FARMS DAIRY, Inc., et al. v. WALLACE, Secretary of Agriculture, et al.
• Court: U.S. District Court — District of Maryland

8 F. Supp. 975

ROYAL FARMS DAIRY, Inc., et al. v. WALLACE, Secretary of Agriculture, et al.

No. 2265.

District Court, D. Maryland.

November 16, 1934.

Charles G. Page and George M. White, both of Baltimore, Md., for complainants.

Mac Asbill, Sp. Asst. to Atty. Gen., and Bernard J. Flynn, U. S. Atty., and C. Ross McKenrick, Asst. U. S. Atty., both of Baltimore, Md., for the United States.

Wm. L. Marbury, Jr., of Baltimore, Md. (Marbury, Gosnell & Williams, of Baltimore, Md.), for defendants.

CHESNUT, District Judge.

The question in this case is whether the "license for milk — Baltimore Sales Area" issued by the Secretary of Agriculture under the Agricultural Adjustment Act of Congress, effective May 12, 1933 (USCA, title 7, § 608 (3), is valid and applicable to the plaintiff, a Maryland corporation, which is a distributor of milk in the Baltimore Area. The defendants are the Secretary of Agriculture and certain individual citizens of Maryland, who constituted the "Adjustment Fund Committee" provided for in the license acting in some measure as local representatives of the Secretary.

The pleadings in the case have become very numerous but for the purposes of this opinion they may be succinctly summarized by saying that the plaintiff is seeking an injunction against the defendants and particularly against the Secretary, to enjoin the enforcement of the provisions of the license against it; while the defendants by counterclaims or cross-bills are seeking affirmatively to specifically enforce the license provisions against the plaintiff. The original bill was filed by the plaintiff on May 7th, 1934, and a preliminary injunction was then sought. The local defendants who were summoned moved to dismiss the bill on procedural grounds based largely on the consideration that at that time the Secretary of Agriculture had not effectively been made a party to the suit. The injunction was refused but the bill was retained. See (D. C.) 7 F. Supp. 560. Subsequently the Secretary was summoned while in Maryland and thereafter appeared and filed an answer in the case. The original license which by its terms was made effective September 29, 1933, was subsequently superseded by a new license making substantial changes which took effect August 1, 1934. This led to a supplemental bill filed by the plaintiffs without objection by the defendants and cross-bills thereafter were filed by the defendants. The case has now been submitted for final decision after hearing on the facts and arguments of counsel.

In its most general aspect the license imposes on the plaintiff the obligation to conduct its business in accordance with a highly complex co-operative marketing plan for the purchase and sale of milk, and the most conspicuous feature of the plan is the requirement that the plaintiff shall pay a fixed minimum price for milk purchased, determined by a so-called "three-price schedule." The plaintiff has admittedly not complied with nor in any way assented to the license.

The plaintiff's principal contentions are (1) that the license is invalid because the Agricultural Adjustment Act (USCA, title 7, §§ 601 to 619) is unconstitutional for various reasons; and (2) that if the Act is generally constitutional the license issued by the Secretary exceeds the scope of his authority under section 608 (3) as properly construed; and (3) even if the license is valid as to milk dealers engaged in interstate commerce, it is inapplicable to the plaintiff which is not engaged in interstate commerce. I will consider these contentions in their inverse order.

Section 608 (3) reads as follows: "(3) Licensing processors; revocation of licenses; penalty for handling without license. To issue licenses permitting processors, associations of producers, and others to engage in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof, or any competing commodity or product thereof. Such licenses shall be subject to such terms and conditions, not in conflict with existing Acts of Congress or regulations pursuant thereto, as may be necessary to eliminate unfair practices or charges that prevent or tend to prevent the effectuation of the declared policy and the restoration or normal economic conditions in the marketing of such commodities or products and the financing thereof. The Secretary of Agriculture may suspend or revoke any such license, after due notice and opportunity for hearing, for violations of the terms or conditions thereof. Any order of the Secretary suspending or revoking any such license shall be final if in accordance with law. Any such person engaged in such handling without a license as required by the Secretary under this section shall be subject to a fine of not more than $1,000 for each day during which the violation continues."

It will be noted that the authority of the Secretary of Agriculture to issue licenses is limited to those persons who are engaged "in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof, or any competing commodity or product thereof." It is perfectly clear on the facts that the plaintiff is not engaged in handling milk in interstate or foreign commerce. The plaintiff buys its milk exclusively from Maryland dairy farmers who produce their milk from dairy herds in Maryland within the Baltimore Sales Area; the milk is delivered to the plaintiff in Baltimore and distributed and sold by it to consumers, chiefly householders, in Baltimore and the immediate vicinity. The plaintiff does not deal in milk or any product of milk shipped into or out of the state of Maryland. The plaintiff's business is, therefore, typically intrastate and not interstate commerce. Nevertheless the defendants contend that the plaintiff's business is subject to regulation under the license for several reasons.

First, it is said that the plaintiff's milk distribution is handled in "the current or stream of interstate commerce" and it is pointed out that the license contains the recital that "the Secretary finds that the marketing of milk for distribution in the Baltimore Sales Area and the distribution thereof are entirely in the current of interstate commerce because the said marketing and distribution are partly interstate and partly intrastate commerce and so inextricably intermingled that said interstate commerce portion cannot be effectively regulated or licensed without licensing that portion which is intrastate commerce." The evidence on which the finding was based has not been specifically stated but presumably is to be found in the testimony in the case offered on behalf of the defendants. The finding of the Secretary is, of course, not conclusive because the question is clearly one for final judicial determination. The facts developed in this case in my opinion do not support the finding. So far as the plaintiff's business is concerned, it is not controverted that it handles exclusively Maryland produced milk, all of which is finally sold to consumers in Maryland and at no time in any way physically intermingled with milk brought into Maryland from other states. The defendant's position seems to be that the plaintiff's business may be regulated by Congress as interstate commerce because some other distributors in the Baltimore Sales Area do purchase milk and agricultural products manufactured from milk transported in interstate commerce from other states which thus come into competition in the sale in the Baltimore Area with the plaintiff's milk; and further that some part of the fluid milk so imported by other distributors is manufactured into butter, cheese, ice cream and other products manufactured from milk, and in turn some part of the manufactured product is shipped from Maryland into other states; and also a considerable quantity of butter, cheese and other products manufactured from milk are shipped into Maryland from other states. Thus it is said that there is a constant stream of interstate commerce into and out of Maryland in products manufactured from milk. On the facts I find that for some time prior to July 1, 1934, a small percentage of milk consumed as whole milk or fluid milk or cream in the Baltimore Area was originally produced in the southern part of Pennsylvania within the fifty mile area from Baltimore, but since July 1st, the amount of fluid milk and cream coming to Baltimore from Pennsylvania is practically negligible. Butter, cheese and other manufactured products coming from outside the state constitute a substantial portion of such products consumed in Maryland and it is also true that a substantial portion of milk products manufactured in Maryland are shipped out of the state. But so far as the plaintiff is concerned, it is clearly established that it does not deal at all in butter, cheese, ice cream and other products manufactured from milk but is engaged solely in the purchase and distribution of fluid milk and cream. I find therefore that the plaintiff's business is purely intrastate and is not in any way in the current or stream of interstate commerce.

It will be noted that the Act in terms authorizes the licensing of persons engaged in handling agricultural commodities "or any competing commodity or product thereof," and in one sense it might be argued that to the extent that fluid milk and cream are imported from other states and sold in the Baltimore Area the plaintiff's business could be said to be the handling of a competing commodity. But it is unnecessary to pursue this theory because counsel for the Government as well as for the plaintiff agree that the phrase in the Act "competing commodity or product thereof" does not mean milk handled in intrastate commerce as competing with milk transported in interstate commerce; but that the phrase has reference to such commodities as oleomargarine (assumed not to be an agricultural commodity), as a sales competitor of butter,...