United Dairy Farm. Coop. Ass'n v. Milk Con. Com'n of Pa.

• Decision Date: 13 April 1971
• Docket Number: Civ. No. 69-235.
• Citation: 335 F. Supp. 1008
• Parties: UNITED DAIRY FARMERS COOPERATIVE ASSOCIATION, Plaintiff, v. MILK CONTROL COMMISSION OF the COMMONWEALTH OF PENNSYLVANIA and its chairman, J. Lin Huber, et al., Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

335 F. Supp. 1008

UNITED DAIRY FARMERS COOPERATIVE ASSOCIATION, Plaintiff, v. MILK CONTROL COMMISSION OF the COMMONWEALTH OF PENNSYLVANIA and its chairman, J. Lin Huber, et al., Defendants.

Civ. No. 69-235.

United States District Court, M. D. Pennsylvania.

April 13, 1971.

Tempest & Simmons, Monongahela, Pa., for plaintiff.

William C. Sennett, Atty. Gen., and Charles M. Guthrie, Asst. Atty. Gen. of Pennsylvania, Harrisburg, Pa., for defendants.

Daniels & Swope, Harrisburg, Pa., for Aupke's Dairy, Pittsburgh, Pa., and others (37 firms engaged in the processing and distribution of milk products in the Com. of Pa.), as amici curiae.

Before HASTIE, Chief Judge, and SHERIDAN and NEALON, District Judges.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND OPINION

PER CURIAM.

The plaintiff, United Dairy Farmers Cooperative Association, has instituted this action to enjoin the defendants, The Pennsylvania Milk Control Commission,¹ and its members, and the Attorney General of Pennsylvania,² from imposing certain sanctions by reason of plaintiff's sale of milk at retail prices which are allegedly lower than those established by General Order No. A-687 issued by the Commission pursuant to the Pennsylvania Milk Control Law,³ 31 P.S. § 700j-101ff.

The complaint alleges that prior to November 15, 1967, and up to the time that the complaint was filed,⁴ the Commission set the minimum retail price for each one gallon of Class I fluid milk (3.5 butterfat) at $1.06 per gallon and at $.54 per half gallon in accordance with General Order No. A-687; that plaintiff, through the use of profit dividends,⁵ enabled consumers to purchase milk at retail prices which were $.15 per gallon and $.08 per half gallon less than the prices prescribed by General Order No. A-687; that this is in keeping with the preamble to the Milk Control Law which states that the law was promulgated to protect consumers from paying excessive prices for milk; that as a result, the Commission did not renew plaintiff's milk dealer's license for the period May 1, 1968, to April 30, 1969, but instead issued a citation on plaintiff to show cause why the Commission should not refuse to grant plaintiff a license for selling milk at prices less than mandated by General Order No. A-687; and that General Order No. A-687 violates the fourteenth amendment of the United States Constitution as applied to plaintiff because it serves only to protect milk dealers from lawful competition from plaintiff, thereby being detrimental to the public welfare and not in keeping with the purpose of the law, since the public is compelled to pay excessive prices for milk. Plaintiff prays that General Order No. A-687 be declared null and void and that defendants be enjoined from further enforcement of it,⁶ and requested that a three judge court be convened pursuant to 28 U.S.C.A. §§ 2281 and 2284.

After the court was convened, defendants filed a motion to dismiss the complaint or for summary judgment. Plaintiff then filed a motion, which was allowed, to supplement its complaint to allege (1) that effective July 1, 1968, and August 1, 1968, the United States Department of Agriculture promulgated Federal Order No. 36 which totally and completely preempted Pennsylvania's right to fix wholesale and/or minimum or maximun retail prices of milk in the area where plaintiff operates, and that the purported action of the Pennsylvania Milk Marketing Board which attempts to fix wholesale and/or retail milk prices is unconstitutional; and (2) that Pennsylvania, in setting retail prices for milk which are in excess of prices paid for milk in Ohio and West Virginia where there are no minimum retail prices fixed, results in a situation where out-of-state dealers have no economic incentive to ship milk into Pennsylvania because they cannot compete, and, therefore, there is a burden on interstate commerce. After defendants' motion to dismiss or for summary judgment was denied, defendants filed an answer in which they denied various allegations of unconstitutionality related to General Order No. A-687.

At the evidentiary hearing, the parties presented evidence with respect to the reasonableness of the method used to arrive at minimum retail resale prices, an issue not raised in the pleadings. In addition, evidence was also received with respect to other Commission general orders which have superseded General Order No. A-687 in establishing milk prices.

Prior to the hearing, some 37 firms engaged in the processing and distribution of milk products in the Commonwealth of Pennsylvania moved for leave to intervene as parties defendants. This motion was denied, but leave was granted the firms which had moved to intervene to file briefs as amici curiae. After hearing, and upon consideration of the briefs and proposed findings of fact and conclusions of law submitted by the parties, the court finds and concludes as follows:

1. The plaintiff is United Dairy Farms Cooperative Association, a cooperative organized under the laws of the Commonwealth of Pennsylvania.

2. Defendants are Milk Marketing Board of the Commonwealth of Pennsylvania, J. Lin Huber and Mary T. Denman, Chairman and Member of the Board, an administrative agency created by the Milk Marketing Act No. 294, July 31, 1968, amending the Milk Control Law, Act of April 28, 1937, P.L. 417, and J. Shane Creamer, Attorney General, Commonwealth of Pennsylvania.

3. Section 401 of the Pennsylvania Milk Control Law requires all milk dealers such as United Dairy Farmers Cooperative Association must have milk dealers' licenses in order to buy, sell or otherwise handle milk pursuant thereto.

4. The plaintiff is primarily engaged in the retail sale of milk in the Pittsburgh Milk Marketing Area, Milk Marketing Area No. 2, as designated by the Pennsylvania Milk Control Commission and its successor, Pennsylvania Milk Marketing Board.

5. Plaintiff has a processing plant and 24 retail stores selling milk directly to consumers.

6. Prior to November 15, 1967, and up to April 30, 1968, the plaintiff was a licensed milk dealer under Pennsylvania Milk Control Commission, but said license expired April 30, 1968.

7. Prior to April 30, 1968, and within the time prescribed by the Pennsylvania Milk Control Commission, plaintiff applied for the renewal of its milk dealer's license for the period May 1, 1968, to and including April 30, 1969.

8. On May 4, 1968, the Pennsylvania Milk Control Commission, now the Pennsylvania Milk Marketing Board, issued a citation on the plaintiff to show cause why the Commission should not refuse to grant plaintiff a milk dealer's license citing a violation of Section 807 of the Milk Control Law and Pennsylvania Milk Control Commission General Order No. A-687, during the period November 15, 1967, to February 29, 1968, by giving rebates on the sale of Class I fluid milk.

9. Since November 15, 1967, and continuing until the present time, the plaintiff has continuously returned to consumers purchasing Class I fluid milk at plaintiff's stores 15 cents per gallon and 8 cents per half gallon, and later 15 percent of the retail price of said fluid milk.

10. These payments of 15 cents per gallon and 8 cents per half gallon or 15 percent were paid to the consumer of Class I fluid milk by presentation on the part of the consumers of a cash register tape slip at the several stores of the plaintiff.

11. No ownership of stock, scripts, bond or any other security or membership in the plaintiff cooperative association was necessary in order to receive such cash rebate or refund.

12. The amount of the cash refund was based upon and deducted from the prevailing retail out-of-store price established by Official General Orders of the Pennsylvania Milk Control Commission and Pennsylvania Milk Marketing Board, being Official General Orders Nos. A-687 and A-746.

13. The plaintiff has not appeared at any price hearings held by the Pennsylvania Milk Marketing Board in connection with the issuance of Official General Orders Nos. A-687 and A-746, applicable to these proceedings, nor has it petitioned for a hearing to amend, change or revise resale prices in Milk Marketing Area No. 2 since the issuance of the aforesaid Official General Orders.

14. The refund or distribution by plaintiff to its customers deducted from the established retail price of Class I fluid milk, amounted to a rebate in violation of Section 807 of the Pennsylvania Milk Control Act, and Section 807 of the Pennsylvania Milk Marketing Law, and Pennsylvania Milk Control Commission Official General Order No. A-687 and Pennsylvania Milk Marketing Board Official General Order No. A-746.

15. Since April 30, 1968, the plaintiff has operated its business under a temporary license issued pending the outcome of this litigation.

16. Since the issuance of Official General Orders Nos. A-687 and A-746 of the Pennsylvania Milk Marketing Board, the plaintiff has increased its number of retail stores in the Pittsburgh Milk Marketing Area, Area No. 2.

17. Plaintiff has an adequate remedy at law under the provisions of the Pennsylvania Milk Control Law and the Pennsylvania Milk Marketing Law, specifically Sections 801, 901 and 902 thereof.

18. The aforesaid Pittsburgh Milk Marketing Area, Area No. 2, lies within the area covered by Federal Marketing Order No. 36, promulgated by the Secretary of Agriculture under the provisions of the Federal Agricultural Agreement Act of 1937, as amended.

19. Under the provisions of the Federal Agricultural Marketing Agreement Act of 1937, the Secretary of Agriculture is empowered to establish producer prices, (prices to be paid by handlers of milk to producers (farmers) of fluid milk), and said Act specifically precludes the Secretary from establishing minimum prices for milk at the resale (wholesale and retail) level.

20. The Pennsylvania Milk Marketing Board (and its predecessor, Commission) was established by the Pennsylvania State Legislature for the purpose of...