Southern Milk Sales, Inc. v. Martin

• Decision Date: 22 January 1991
• Docket Number: Nos. 89-2139,90-1029,s. 89-2139
• Citation: 924 F.2d 98
• Parties: SOUTHERN MILK SALES, INC., Plaintiff-Appellant, v. Don MARTIN, T.C. Jacoby & Company, Inc., and Northshore Milk Producers Association, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 98

924 F.2d 98

18 Fed.R.Serv.3d 1425

SOUTHERN MILK SALES, INC., Plaintiff-Appellant, v. Don MARTIN, T.C. Jacoby & Company, Inc., and Northshore Milk Producers Association, Defendants-Appellees.

Nos. 89-2139, 90-1029.

United States Court of Appeals Sixth Circuit.

Argued Aug. 14, 1990.

Decided Jan. 22, 1991.

James K. Robinson, Mark R. Werder, Honigman, Miller, Schwartz & Cohn, Detroit, Mich., Mark A. Smedal, John J. McLaughlin, III (argued), D. Paul Alagia, Jr., Alagia, Day, Marshall, Mintmire & Chauvin, Louisville, Ky., for Southern Milk Sales, Inc.

Benjamin F. Yale (argued), Waynesfield, Ohio, David C. Devendorf, Port Huron, Mich., for Don Martin and Northshore Milk Producers Ass'n.

Robert D. Brignall, Michael M. Hathaway, Vandeveer, Garzia, Tonkin, Kerr, Heaphy, Moore & Sills, Detroit, Mich., for T.C. Jacoby & Co., Inc.

Before MARTIN, Circuit Judge, WELLFORD, Senior Circuit Judge ^*, and

SILER, Chief District Judge. ^**

SILER, Chief District Judge.

Southern Milk Sales, Inc. (Southern) appeals from the district court's denial of a motion for a preliminary injunction and subsequent denial of a motion for reconsideration. Southern sought equitable relief pursuant to Michigan law, Mich.Comp. Laws Sec. 450.109, and the federal Agricultural Fair Practices Act of 1967 (AFPA), 7 U.S.C. Secs. 2301-06. The district court held that Southern would not be entitled to preliminary injunctive relief under Michigan law, as it applies only to permanent injunctions; nor under Fed.R.Civ.P. 65, as there was no irreparable injury to Southern; nor under the AFPA, as Southern did not have standing. We now affirm.

I.

Southern is a nonprofit agricultural cooperative association whose membership consists of approximately 1,700 dairy farmers nationwide, including 50 farmers in the state of Michigan. Southern markets the milk produced by its members pursuant to individual membership and marketing agreements providing that Southern will be the "sole and exclusive agent for the purpose of marketing all milk of marketable quality ... save and except that used for home consumption...." In Michigan, Southern had an agreement with a dairy hauler, defendant Don Martin (Martin), to deliver its members' milk to the Borden, Inc. dairy processing plant.

On August 11, 1989, Martin diverted the bulk of his daily Southern milk pickup from the Borden plant to Sunshine Biscuits, Inc. The district court found that this diversion was arranged by a milk broker, defendant T.C. Jacoby & Company, Inc. (Jacoby), at the request of Martin, for the benefit of one of Southern's competitors, defendant Northshore Milk Producers Association (Northshore). Southern responded by sending a letter to its Michigan membership, informing them that their milk was not being shipped to Borden's and that it would arrange for a new hauler. Moreover, Southern indicated that if the milk was not picked up in a timely manner the members could dump their milk and receive compensation from Southern. Only three of the fifty Michigan members ceased their relationship with Martin. ¹

At the time of the preliminary injunction hearing, August 23, 1989, 47 of Southern's fifty Michigan members were continuing to deal with Martin. To fulfill its oral agreement with Borden, Southern relied on a temporary supply agreement it had with the Michigan Milk Producers Association (MMPA).

II.

As a preliminary matter, we note our concern about whether the requisite controversy required by article III of the United States Constitution still exists in this case. We do not have jurisdiction where there is no "real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41, 57 S.Ct. 461, 464, 81 L.Ed. 617 (1937).

Southern demands that the defendants be enjoined from wrongfully interfering with the contractual relationships that Southern allegedly had with its member milk producers. This request for relief is contingent on the existence of valid contracts. If the cooperative members no longer have a contractual obligation to provide milk to Southern, then the defendants are free to do business with them.

There has been no attempt in this action to enjoin the recalcitrant members. Indeed, 47 out of 50 have chosen to ignore their alleged agreements even in light of an offer by Southern to pay for dumped milk. Moreover, each of the members signed agreements with Southern that expressly provide for termination upon written notice after one year. That these contractual obligations may have expired during the pendency of this action is of no moment in our determination of jurisdiction. United States v. Munsingwear, 340 U.S. 36, 39, 71 S.Ct. 104, 106, 95 L.Ed. 36 (1950). Thus, it may very well be that this case is moot in that we are asked to resolve a conflict without a remedy to offer and consequently without power to decide.

Mootness, however, is a constitutional limitation of judicial power as well as a rule of self-restraint which the Supreme Court has sometimes relaxed. See Wirts v. Glass Blowers Ass'n, Local 153, 389 U.S. 463, 474, 88 S.Ct. 643, 649, 19 L.Ed.2d 705 (1968); Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911). In Southern Pacific, for example, the Court established the doctrine of deciding otherwise moot cases because they are capable of repetition yet evade review. See also Weinstein v. Bradford, 423 U.S. 147, 148-49, 96 S.Ct. 347, 348, 46 L.Ed.2d 350 (1975). At oral argument, Southern asserted that this is such a case.

Southern maintains that it will continue to do business in Michigan, as will the defendants. Furthermore, we agree that the business decisions and relationships that led to the present controversy are capable of being repeated. Southern argues, however, that the controversy is also of the type that will escape review since in the normal course of events judicial resolution as to the appropriateness of equitable relief cannot be obtained before the expiration of the member agreements. Southern's contention is that even if it receives all the damages to which it is entitled, it can never be adequately compensated, absent a preliminary injunction, for its loss of marketing position.

While we are not indifferent to Southern's argument, see United Food & Commercial Workers Union v. Kroger Co., 778 F.2d 1171, 1175-76 (6th Cir.1985) (holding that issue presented by the denial of preliminary injunction would escape review if not addressed until appeal of the case after disposition on the merits), we will reach the substantive issues in this case on other grounds. Specifically, there is an absence of facts to show definitively that a live controversy does not exist.

III.

This case presents a classic choice of law problem as governed by Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny. The choice presented is between applying Michigan or federal law to Southern's request for a preliminary injunction.

Article III, Sec. 2 of the United States Constitution grants Congress the power to establish a federal court system. As an incident of this power, the federal government derives a legitimate interest in fashioning a body of procedural law. Chief Justice Warren noted the breadth of this mandate in Hanna v. Plumer, 380 U.S. 460, 472, 85 S.Ct. 1136, 1144, 14 L.Ed.2d 8 (1965), observing that "the constitutional provision for a federal court system (augmented by the Necessary and Proper Clause) carries with it congressional power to make rules governing the practice and pleadings in those courts, which in turn includes power to regulate matters which, although falling within the uncertain area between substance and procedure, are rationally capable of classification as either." Thus, Congress enacted the Rules Enabling Act, 28 U.S.C. Sec. 2072, which authorizes the Supreme Court to promulgate federal procedural rules.

The choice of law question in this case is not settled, however, merely by the existence of a federal procedural rule governing preliminary injunctions, Fed.R.Civ.P. 65. Indeed, the Supreme Court has framed the threshold inquiry as "whether the scope of the Federal Rule in fact is sufficiently broad to control the issue before the Court." Walker v. Armco Steel Corp, 446 U.S. 740, 749-50, 100 S.Ct. 1978, 1985, 64 L.Ed.2d 659 (1980).

Rule 65 does not provide explicit guidance as to the factors to be considered when making a preliminary injunction decision. We have looked, therefore, to general equitable principles in establishing the standards used to measure the appropriateness of granting a preliminary injunction under Rule 65. See In Re DeLorean Motor Co., 755 F.2d 1223 (6th Cir.1985); Mason County Medical Ass'n v. Knebel, 563 F.2d 256 (6th Cir.1977). Consequently, we have filled the interstices of Rule 65 in such a way as to address the question involved in this case: whether the facts compel the granting of a preliminary injunction. To determine whether we are bound to apply state law under these circumstances we turn to the methodology adopted in Hanna v. Plumer.

In Hanna, the Supreme Court reversed the district court's ruling that service of process should be governed by state law rather than Fed.R.Civ.P. 4(d)(1). In doing so, the Court made clear that these determinations should be made with reference to the policies underlying the Erie doctrine. See Hanna v. Plumer, 380 U.S. at 468, 85 S.Ct. at 1142; Ringrose v. Engelberg Huller Co., 692 F.2d 403, 405 (6th Cir.1982); Miller v. Davis, 507 F.2d 308 (6th Cir.1974). In essence, this requires us to defer to the states unless some important federal interest is involved. Id. This would be the situation, for example, where the matter is one of procedure rather than substance. See Guaranty Trust Co. v. York, 326 U.S. 99, 65...