Safeway Stores v. BD. OF AGR. OF STATE OF HAWAII

Decision Date03 July 1984
Docket NumberCiv. No. 84-0166.
Citation590 F. Supp. 778
PartiesSAFEWAY STORES, INCORPORATED, Plaintiff, v. BOARD OF AGRICULTURE OF the STATE OF HAWAII, Hawaii Department of Agriculture, Division of Milk Control, Jack K. Suwa, as Chairman of the Board of Agriculture, Alex Napier, Jr., Richard Caldito, David Oshiro, Shoichi Nagamine, Sidney Good, Federick Galdones, Susumu Ono and Noel Kefford, individually and as members of the Board of Agriculture of the State of Hawaii, Robert T. Yara, individually and as Assistant Milk Commissioner, 50th State Dairy Farmers' Cooperative, George Freitas Dairy, Inc., Clifford Freitas, Maunawili Dairy, Ltd., Antonio Salcedo, Steven Olbrich and Janice Olbrich, co-partners doing business under the trade name and style of Huanui Dairy, a Hawaii general partnership, Louis G. Costa, dba Louis Costa Dairy, Bruce Costa, dba Five Star Dairy, Wayne Salcedo, dba Kaimi Farm; Ernest Souza, dba Lucky S. Dairy, Wayne Costa, dba Wayne's Dairy, Oahu Dairy Cooperative, Ferreira Dairy, Inc., Gertrude K. Toledo, Special Administratrix of the Estate of Robert V. Toledo, deceased, dba Toledo Twin Pine Dairy, John S. Toledo, dba Keoua Dairy, Carl Meier, dba Carl Meier Dairy, Mountain View Dairy Inc., David Wong, Jr., Richard Brazil, Fresh Milk Industry of Hawaii and James H. Koshi, Defendants.
CourtU.S. District Court — District of Hawaii

Cooper, Kirkham & McKinney, P.C., Josef D. Cooper, Kirk A. McKinney, Martin J. O'Leary, San Francisco, Cal., Wendell H. Marumoto, Honolulu, Hawaii, for plaintiff.

John Peter Uehara, Gerald Y.Y. Chang, Coral Wong Pietsch, Deputy Atty. Gen., Honolulu, Hawaii, for state defendants.

Walter G. Chuck, Steven K.S. Chung, Honolulu, Hawaii, for Gertrude K. Toledo, Special Administratrix of the Estate of Robert Toledo.

Paul Devens, Ann Kurihara, Honolulu, Hawaii, for 50th State Dairy Farmers' Co-op., George Freitas Dairy, Inc., Clifford Freitas, Maunawili Dairy, Ltd., Antonio Salcedo, Steven Olbrich and Janice Olbrich, co-partners doing business under the trade name and style of Huanui Dairy, Louis G. Costa, dba Louis Costa Dairy, Bruce Costa, dba Five Star Dairy, Wayne Salcedo, dba Kaimi Farm, Ernest Souza, dba Lucky S. Dairy, Wayne Costa, dba Wayne's Dairy, Oahu Dairy Co-op., Ferreira Dairy, Inc., John S. Toledo, dba Keoua Dairy, Carl Meier, dba Carl Meier Dairy, Mountain View Dairy Inc., David Wong, Jr., Richard Brazil, Fresh Milk Industry of Hawaii and James H. Koshi.

OPINION AND ORDER

PENCE, District Judge.

FACTS

Plaintiff Safeway Stores, Inc., owns and operates retail grocery stores throughout the country. Safeway also operates a number of plants in the mainland United States for processing and packaging dairy products, including fresh milk, cottage cheese and yogurt. Safeway routinely processes raw milk into fresh milk products, and then transports those products across state lines to its retail grocery stores.

Safeway has operated retail grocery stores in Honolulu, Hawaii, for over twenty years. Safeway has been able to sell some of its own dairy products, including yogurt, butter, cottage cheese, sour cream, and ice cream, in its Honolulu stores. Due to the Hawaii Milk Control Act, Hawaii Rev.Stat. § 157-1 et seq. (1976 & Supp.1983), however, Safeway has been prohibited from selling its fresh fluid milk products in Hawaii and has been able to obtain milk supplies only from the two Honolulu processors, Foremost and Meadow Gold.

Safeway now wants to sell at its Honolulu stores its own fresh milk products which it processes in California. In order for it to do so, state law requires that it obtain a Hawaii milk distributor's license. Section 157-21 of the Hawaii Milk Control Act prohibits distribution of fresh milk products in Honolulu without a milk distributor's license, and distribution without a license is punishable by fine or by imprisonment.

The Hawaii Milk Control Act gives power over milk distributors' licensing to the Board of Agriculture. The Act also requires that the Board of Agriculture must make affirmative findings in order to deny a license. Section 157-24(a) of the Act provides that no license shall be denied unless the Board finds that the applicant is not qualified to conduct the business properly, that the issuance of the license will tend to promote destructive or demoralizing competition in a market already adequately served, or that the issuance of the license is otherwise not in the public interest.

On December 17, 1982, Safeway filed an application with the Board of Agriculture for a license to distribute its fresh milk products in its Hawaii stores. The license application indicated that the milk would be transported to Hawaii in refrigerated containers aboard ocean-going cargo ships from Safeway's processing facility in San Leandro, California.

At the same time, Safeway also applied to the Hawaii Department of Health, Environmental Protection and Health Services Division, Sanitation Branch, for a milk distributor's permit. Chapter 3 of the Department of Health's Public Health Regulations requires that a health department permit be obtained in addition to a license from the Board of Agriculture. The Department of Health issued Safeway's permit on February 8, 1983. The basis for the health department's permit was an inspection of Safeway's San Leandro plant and its raw milk supplies conducted by the Interstate Milk Shippers. The Interstate Milk Shippers operates in conjunction with the United States Public Health Service, the United States Food and Drug Administration, and some state regulatory agencies.

On March 30, 1983, the Board of Agriculture approved a motion to "intend to deny" Safeway's application. Safeway was notified of the intent to deny on April 14, 1983. The reasons for the intent to deny were that granting the license would tend to promote destructive or demoralizing competition in a market already adequately served, and that granting the license would not be in the public interest.

Safeway timely requested a public hearing on the intent to deny. The hearing began on September 29, 1983, and lasted for nine days, with testimony from seventeen witnesses. Members of the local dairy industry were allowed to intervene. On December 2, 1983, the hearing officer issued a Recommended Decision setting out his opinion that the Safeway license application should be granted. The Recommended Decision contained express findings that granting the license would not promote destructive or demoralizing competition in a market already adequately served, and that issuance of the license would be in the public interest.

On February 9, 1984, the full Board of Agriculture voted to reopen the Safeway hearing to consider evidence on two new issues: first, the effect of the new federal dairy legislation passed in 1983, and second, the effect that issuing a license to Safeway might have on others who wish to import mainland milk to Hawaii.

Safeway filed this action in federal court on February 23, 1984. Safeway named the state and various of its agencies as defendants, and requested a determination that Section 157-24(a) and Article XI, section 3 of the Hawaii State Constitution (the so-called "self-sufficiency provision"), violate the Commerce Clause of the United States Constitution as they were being applied to deny Safeway a license to import milk to Hawaii. Safeway also named some Hawaii milk producers as defendants, alleging antitrust violations. Finally, Safeway made a claim for deprivation of constitutional rights under 42 U.S.C. § 1983.

The parties came before the court on May 10, 1984, for hearing on defendants' Motion to Dismiss and plaintiff's Motion for Partial Summary Judgment (on the constitutionality issue only).

I. DEFENDANTS' MOTION TO DISMISS

The defendants ask this court to dismiss Safeway's action on the ground of justiciability. Defendants contend that because the Board of Agriculture has not yet finally ruled on Safeway's application for a milk distributor's license, Safeway's complaint is premature and presents no "case or controversy," as is required by Article III, section 2, of the United States Constitution. Therefore, defendants urge, this court has no subject matter jurisdiction over this case.1

Defendants rely heavily upon two recent cases from the Ninth Circuit. In Pacific Legal Foundation v. State Energy Resources Conservation and Development Comm'n, 659 F.2d 903 (9th Cir.1981), aff'd, 461 U.S. 190, 103 S.Ct. 1713, 75 L.Ed.2d 752 (1983), California utilities challenged the validity of California's statutory scheme regulating nuclear power plants. The utilities argued that the energy commission created by the regulatory scheme lacked the power to collect information and to determine whether nuclear plants should be certified.

In deciding whether the issues presented in the suit could be decided, even though the challenged statute had not yet been applied, the Ninth Circuit applied the standard laid out in Abbott Laboratories, Inc. v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 1515, 18 L.Ed.2d 681 (1967). There, the Supreme Court decided that if an issue is "purely legal," a challenge to an as yet unapplied statute may be heard; if further factual development is necessary to sharpen the issues, the challenge must be rejected as premature. The Ninth Circuit then rejected the utilities' suit on the ground that the issue was not "purely legal" and more facts were necessary. The court pointed out that the utilities had not even begun to invoke the certification process. They had not filed applications for certification, so the court had no way of knowing what kind of information the newly-created commission might require. "We cannot tell whether the Energy Commission will ever deny certification, or whether such a denial might be based upon impermissible reasons." 659 F.2d at 916. The court held that the case was not yet ripe, and that adjudication was neither necessary nor desirable. Further, the Ninth Circuit noted,...

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    ...that a federal court should not paint with too broad a brush on the canvas of state [highway] regulation." Safeway Stores, Inc. v. Bd. of Agric., 590 F.Supp. 778, 786 (D.Haw.1984). H.R.S. §§ 290-811 and 290-912 allow for the immediate disposition of derelict vehicles without complying with ......
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