State of S.C. ex rel. Tindal v. Block, s. 83-1426

• Citation: 717 F.2d 874
• Decision Date: 09 September 1983
• Docket Number: 83-1511,Nos. 83-1426,s. 83-1426
• Parties: STATE OF SOUTH CAROLINA ex rel. Leslie E. TINDAL, Commissioner of Agriculture; Steven W. Hamm, as South Carolina Consumer Advocate; South Carolina Farm Bureau; Frank Flowers; W. Charles McGinnis; Lawrence Weathers; Suncoast Milk Producers Cooperative; Independent Dairy Farmers Association, Inc.; Tampa Independent Dairy Farmers' Association, Inc.; Upper Florida Milk Producers Association; Georgia Milk Producers, Inc.; Coble Dairy Products Cooperative, Inc.; Inter-State Milk Producers Cooperative; Dairymen, Inc.; Associated Milk Producers, Inc., Appellees, v. John R. BLOCK, Secretary of the United States Department of Agriculture, United States Department of Agriculture and Commodity Credit Corporation, Appellants. State of Minnesota, Amicus Curiae. Pennsylvania Farmers Union, Amicus Curiae. Dairy Farmer Distributors of America and Gustafson, Amicus Curiae. State of New York and Upstate Milk Cooperatives, Inc., Amicus Curiae.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 874

717 F.2d 874

STATE OF SOUTH CAROLINA ex rel. Leslie E. TINDAL,

Commissioner of Agriculture; Steven W. Hamm, as South

Carolina Consumer Advocate; South Carolina Farm Bureau;

Frank Flowers; W. Charles McGinnis; Lawrence Weathers;

Suncoast Milk Producers Cooperative; Independent Dairy

Farmers Association, Inc.; Tampa Independent Dairy Farmers'

Association, Inc.; Upper Florida Milk Producers

Association; Georgia Milk Producers, Inc.; Coble Dairy

Products Cooperative, Inc.; Inter-State Milk Producers

Cooperative; Dairymen, Inc.; Associated Milk Producers, Inc., Appellees, v. John R. BLOCK, Secretary of the United States Department of

Agriculture, United States Department of

Agriculture and Commodity Credit

Corporation, Appellants.

State of Minnesota, Amicus Curiae.

Pennsylvania Farmers Union, Amicus Curiae.

Dairy Farmer Distributors of America and Gustafson, Amicus Curiae.

State of New York and Upstate Milk Cooperatives, Inc., Amicus Curiae.

Nos. 83-1426, 83-1511.

United States Court of Appeals,

Fourth Circuit.

Argued July 12, 1983.

Decided Sept. 9, 1983.

Douglas Letter, Washington, D.C. (Leonard Schaitman, Nicholas Zeppos, Sarah Greenberg, Appellate Staff, Civ. Div., Dept. of Justice, J. Paul McGrath, Asst. Atty. Gen., Washington, D.C., Henry Dargan McMaster, U.S. Atty., Columbia, S.C., on brief), for appellants.

Morton Hollander, Washington, D.C., (D. Paul Alagia, Jr., Richard A. Gladstone, Sydney J. Butler, Paul S. Davidson, Barnett & Alagia, Washington, D.C., Donald M. Barnes, Salvatore A. Romano, Joyce L. Bartoo, Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., T. Travis Medlock, Atty. Gen., Clifford O. Koon, Jr., Asst. Atty. Gen., Columbia, S.C., Russell H. Putnam, Jr., Charleston, S.C., Russell W. Templeton, Columbia, S.C., Hubert E. Long, Long, Bouknight, Nicholson & Davis, Lexington, S.C., Venable Vermont, Columbia, S.C., on brief), for appellees.

Hubert H. Humphrey, III, Atty. Gen., Jon K. Murphy, Catharine F. Haukedahl, Sp. Asst. Attys. Gen., St. Paul, Minn., on brief, for amicus curiae.

Before PHILLIPS, SPROUSE and ERVIN, Circuit Judges.

SPROUSE, Circuit Judge:

John R. Block, the Secretary of the United States Department of Agriculture (the Secretary), appeals from the judgment of the district court enjoining him from implementing his decision to impose a 50-cent deduction on the proceeds of all milk sold commercially. The Secretary officially announced his decision by issuing a "notice of determination," which incorporated, among other things, regulations for implementing the decision. ¹ This action was taken pursuant to a recent congressional amendment to section 201 of the Agriculture Act of 1949, ² which generally established the present structure of the milk price support program. The purposes of the deduction, as described by both Congress and the Secretary, are to encourage dairy farmers to reduce milk production and to offset a portion of the cost of the milk price support program. ³ The Secretary is not required by law to impose the deduction, but is authorized by Congress to take that action in his discretion if he believes it will encourage a reduction in milk production. It is conceded that the deduction will reduce the gross income of farmers by approximately 4 percent. ⁴

The State of South Carolina, several dairy farmers and a number of intervening agricultural groups (hereinafter collectively referred to as "dairy parties") filed this suit in district court alleging administrative law and constitutional violations, and seeking injunctive relief preventing implementation of the deduction program. Following an evidentiary hearing, the court found that the Secretary had violated the Administrative Procedure Act (APA) in its rulemaking proceedings. ⁵ It then issued a preliminary injunction on June 3, 1983, enjoining further collections of the deduction and ordering the return of all monies collected pursuant to the regulation. ⁶ We hold that the Secretary complied with the APA and that the legislation granting him discretion to act does not violate any provision of the Constitution, and vacate the district court's order.

I.

Congress, in section 201 of the Agriculture Act, authorizes and directs the Secretary to support the price of milk. 7 U.S.C. Sec. 1446. The express purposes of the dairy price support legislation are "to assure an adequate supply of pure and wholesome milk to meet current needs, reflect changes in the cost of production, and assure a level of farm income adequate to maintain productive capacity sufficient to meet anticipated future needs." Id. Sec. 1446(c). The Secretary is not authorized to pay direct subsidies to producers, but supports the price of milk by standing ready to purchase unlimited quantities of milk products at announced prices. Id.; 48 Fed.Reg. 11,253. The Commodity Credit Corporation (CCC), a federal corporate entity within the United States Department of Agriculture, ⁷ removes excess milk from the market through purchases of surplus butter, cheese, and nonfat dry milk. This program effectively creates a floor for the prices of the products purchased and, indirectly, a floor for the price of all milk and milk products.

In recent years, milk production has greatly exceeded consumer demand. In each of the past two dairy marketing years, the CCC purchased the equivalent of 10 percent of all milk produced in the United States. See 48 Fed.Reg. at 3766. This has created massive inventories of hundreds of millions of pounds each of butter, cheese, and dry milk, with current annual storage costs of around $50 million. In 1982, the federal government spent approximately $2.3 billion on the milk price support program. ⁸ Id. at 3785.

Congress, responding to the problems of milk overproduction and the increasing cost of the dairy support program, ⁹ enacted the amendment in issue as part of the Omnibus Budget Reconciliation Act of 1982 ¹⁰ (the 1982 amendment). The amendment modifies the price support statute in three respects. First, it established the price at which milk shall be supported at not less than $13.10 per hundredweight during the period October 1, 1982, until September 30, 1984, and mandated that this price level be maintained at a comparable percentage of parity ¹¹ for the fiscal year 1984. ¹² Second, Congress authorized the 50-cent deduction challenged in this suit. That portion of the amendment provides:

Effective for the period beginning October 1, 1982, and ending September 30, 1985, the Secretary may provide for a deduction of 50 cents per hundredweight from the proceeds of sale of all milk marketed commercially by producers to be remitted to the Commodity Credit Corporation to offset a portion of the cost of the milk price support program. Authority for requiring such deductions shall not apply for any fiscal year for which the Secretary estimates that net price support purchases of milk or the products of milk would be less than 5 billion pounds milk equivalent.

7 U.S.C. Sec. 1446(d)(2). Third, Congress authorized the Secretary to impose an additional 50-cent deduction effective April 1, 1983, that would be refundable to producers who reduce their commercial marketings. ¹³

The Secretary, on September 22, 1982, projected that for the fiscal year beginning October 1, 1982, the net price support purchases of milk products would be 12.6 billion pounds. The Secretary then published a "notice of determination" in the federal register establishing the price support level at $13.10 for fiscal year October 1, 1982, and imposing the first 50-cent deduction beginning on December 1, 1982. He also published a proposed procedure for implementing the deduction program, and invited public comments on "whether the dairy collection plan should be implemented in the manner set forth in this proposed rule...." 47 Fed.Reg. 42,112 (Sept. 24, 1982). The final rule detailing the collection plan was published on November 30, 1982, and was essentially the same as the proposed rule.

The plaintiffs in the district court challenged the Secretary's imposition of the deduction on two grounds: that the legislation was unconstitutional and that the Secretary did not comply with the Administrative Procedure Act in issuing the determination. The district court entered its first preliminary injunction against the deduction on January 11, 1983. The court, considering only the administrative law challenges, found that the Secretary failed to comply with the Administrative Procedure Act, and that his action imposing the deduction was therefore illegal. State of South Carolina v. Block, 558 F.Supp. 1004 (D.S.C.1983) (Block I ). The court specifically found, among other things, that: (1) the appellants' determination of September 24, 1982, constituted substantive rulemaking under the Administrative Procedure Act, 5 U.S.C. Sec. 551(4); (2) the 1982 amendment vested in the appellants the discretion to impose the 50-cent deduction, but did not require the imposition of the assessment; (3) the Secretary had acted to impose the assessment without complying with the notice and comment provisions of the Administrative Procedure Act; (4) dairy farmers would be irreparably harmed by the Secretary's action, while the government would not suffer undue harm due to issuance of an injunction; and (5) that issuance of a preliminary injunction was in the public interest. Id.

The Secretary did not appeal the January 11 district court order. Instead, he published another notice designed to remedy the notice and comment defects found by the district court. ¹⁴ 48 Fed.Reg. 3764 (Jan. 27, 1983). The notice included a "Summary of Preliminary Regulatory Impact Analysis" and an "Initial Regulatory Flexibility Impact Analysis." Id. at 3765-66. The notice further invited the submission of comments, and stated that the comments submitted in response to the September 24 "notice of determination" ¹⁵ would be considered in determining whether to impose the new deduction...