Suntex Dairy v. Bergland

• Decision Date: 22 March 1979
• Docket Number: No. 77-1632,77-1632
• Parties: SUNTEX DAIRY et al., Plaintiffs-Appellants, v. Robert BERGLAND, Secretary of Agriculture of the United States, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1063

591 F.2d 1063

SUNTEX DAIRY et al., Plaintiffs-Appellants, v. Robert BERGLAND, Secretary of Agriculture of the United States, Defendant-Appellee.

No. 77-1632.

United States Court of Appeals Fifth Circuit.

March 22, 1979.

Gary Gurwitz, Charles C. Murray, McAllen, Tex., for plaintiffs-appellants.

James R. Gough, U. S. Atty., Mary L. Sinderson, James S. Dougherty, Asst. U. S. Attys., Houston, Tex., John H. Sandor, Atty., U. S. Dept. of Agriculture, Washington, D. C., for defendant-appellee.

Appeal From the United States District Court for the Southern District of Texas.

Before JONES, CLARK and GEE, Circuit Judges.

CHARLES CLARK, Circuit Judge:

This appeal concerns whether producers of milk have standing under the Agricultural Marketing Agreement Act of 1937, 7 U.S.C. § 601 Et seq., to seek judicial review of the imposition of a federal milk marketing order. The appellants are independent milk producers operating in the Rio Grande Valley and the area surrounding Corpus Christi, Texas. They allege that the Secretary of Agriculture's promulgation of a Texas-wide milk marketing order was invalid because not supported by substantial evidence, and because a large dairy cooperative, Associated Milk Producers, Inc. ("AMPI"), allegedly violated a Missouri district court antitrust injunction by bloc voting its members during the referendum conducted to ratify the order. ¹ The district court held that the milk producers did not have standing to bring a substantive attack on the milk marketing order, but that the producers did have standing to challenge the referendum procedures. The court ruled on the merits of that issue that the actions of AMPI were not violative of the Missouri district court injunction.

Holding that Milk producers do have standing to launch a substantive attack on a federal milk marketing order, we reverse the district court and remand for a determination of the merits of the producer's substantive claims. Although we believe that AMPI's conduct may well be held to have violated the Missouri district court injunction, we hold that the producers may not attack the federal milk marketing on that ground.

I.

Prior to 1975, the sale of milk in the area encompassing the Rio Grande Valley and Corpus Christi, Texas was regulated under the Corpus Christi Federal Milk Marketing Order. The Corpus Christi Order was one of six separate federal milk marketing orders regulating different geographic regions within Texas. On May 2, 1975, the Secretary of Agriculture promulgated an order eliminating the six separate milk marketing orders in Texas and instituting a new Texas Marketing Area Milk Market Order, an order comprising all the area previously regulated by the six separate orders and some additional areas.

The effect of the new Texas-wide order was to lower the minimum price paid to milk producers in the former Corpus Christi Marketing Order area. Although a federal milk marketing order does not literally set the price for milk sales, it does set the minimum price which must be paid producers for their milk. Milk producers dairy farmers receive a "blend price" from the "handlers" who purchase and distribute their milk. The blend price is the uniform price paid to producers for all milk they sell to handlers no matter how it is eventually used. The blend price is arrived at by averaging under a weighted formula the prices of Class I milk primarily fluid milk and the prices of Class II milk milk used for the production of cheese and other dairy products. Fluid milk brings higher prices than milk sold for cheese or other by-products, but it must be sold soon after its production to avoid spoilage.

The blend price mechanism established by a milk marketing order acts as a stabilizing influence that insulates farmers from the buffeting of prices that would otherwise accompany differences in consumer demand. Handlers basically sell all that the market will absorb as Class I milk, with the surplus going to Class II usages. Any handler who receives more income from the sale of his purchased milk supply (after certain subtractions and additions) than he paid his producers under the blend price deposits the difference in a producer-settlement fund. This excess would reflect a strong consumer demand for fluid milk and thus relatively higher overall milk sale income. Any handler who receives less income than he paid producers under the blend price may subtract the difference from the producer settlement fund. By incorporating the former Corpus Christi order into a larger Texas-wide order, the Secretary of Agriculture forced the Corpus Christi area producers to share in a much larger marketing pool than they had under the prior order. Because the Corpus Christi area Class I utilization was higher than the Texas-wide average Class I utilization, the effect was redistributive; the Corpus Christi area producers received a lower minimum price for their milk, while producers in other areas of Texas saw their income rise.

The process leading to the promulgation of a federal milk marketing order is set forth in section 8c of the Agricultural Marketing Agreement Act, 7 U.S.C. § 608c. The Secretary of Agriculture initiates the process of establishing a marketing order by proposing an order whenever he has "reason to believe" that an order is warranted. 7 U.S.C. § 608c(3). Following the proposal, there must be notice of an opportunity for a hearing. 7 U.S.C. § 608c(3). After conducting a hearing, the Secretary is to issue the order if "upon the evidence introduced at such hearing" the Secretary finds that issuance of the order "will tend to effectuate the declared policy" of the Act. 7 U.S.C. § 608c(4). After promulgation of the order under section 608c(4), an order still may not become effective until two-thirds of the producers in the market area or producers accounting for two-thirds of the total volume of milk produced in the area ratify the order by referendum. 7 U.S.C. § 608c(8). Section 608c(9) provides that handlers also have some ratification rights; no marketing agreement adopting the terms of an order can become effective if handlers accounting for 50 percent of the volume in an area fail to sign it. The 50 percent handler approval requirement can be overcome, however, if the Secretary finds that the order tends to effectuate the Act's policy and "the issuance of (an) order is the only practical means of advancing the interests of the producers." 7 U.S.C. § 608c(9)(B). Finally, section 608c(15) gives handlers the right to petition the Secretary any time any obligation imposed by the market order is deemed to be "not in accordance with law" and modification or exemption from the order is sought. 7 U.S.C. § 608c(15). Upon such petition the handler is entitled to a hearing, and the section specifically provides for judicial review of the Secretary's determination. Although handlers are the only group that the statute specifically mentions as having a right to seek judicial review, the statute nowhere explicitly excludes producers from seeking such review.

The district court ruled that milk producers did not have standing to seek judicial review on the substantive merits of the Secretary's determination that a new Texas-wide order should be promulgated. The court ruled that only handlers, and not producers, have standing under the statutory scheme to bring substantive challenges to market orders. It reasoned that since the statute specifically grants handlers the right of judicial review, the implication is that producers are excluded from seeking such review. The court further supported its position by arguing that in lieu of judicial review producers are protected by the provisions of the Act which grant them an opportunity for a hearing at the initial stages of the process, and by the requirement of two-thirds producer ratification before an order may become effective.

II.

The milk producers have standing to contest the substantive legality of orders promulgated pursuant to the Agricultural Marketing Agreement Act of 1937 if they can meet the three-part test established in Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970) and Association of Data Processing Serv. Organ., Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970). That test is: (1) the challenged action must result in injury-in-fact to the plaintiffs; (2) the interest invaded must be arguably within the zone of interest to be protected by the statute; and (3) there must be no statutory prohibition of judicial review.

All parties concede that the new Texas-wide marketing order results in injury-in-fact to the producers in the former Corpus Christi marketing order area by reducing the "blend price" they receive for milk. The crucial issues thus are whether the producer's interests are arguably within the zone of interest to be protected by the statute and whether the statute prohibits judicial review. Resolution of those two issues is controlled by Stark v. Wickard, 321 U.S. 288, 64 S.Ct. 559, 88 L.Ed. 733 (1964) and Consolidated-Tomoka Land Company v. Butz, 498 F.2d 1208 (5th Cir. 1974).

Stark was a suit brought by milk producers challenging certain deductions that were being made from the adjustment fund. The producers involved, like the plaintiffs here, were "not members of a cooperative association (and) as producers, many of them voted against the challenged amendment on the producer's referendum." 321 U.S. at 301, 64 S.Ct. at 567. The Supreme Court held that the producers had a legal right to receive payments in accordance with the Act and could judicially challenge the marketing order on the grounds that the order did not comply with the Act. Id. at 303-11, 64 S.Ct. at 568-571. As part of its discussion the Court noted that the only opportunity that the producers had to challenge the marketing order "was to appear at hearings and to vote for or against the proposed order." Id. at 307, 64 S.Ct. at...