United States v. Adler's Creamery

• Decision Date: 13 November 1939
• Docket Number: No. 168.,168.
• Citation: 107 F.2d 987
• Parties: UNITED STATES (NOYES, Commissioner of Agriculture and Markets of State of New York, Intervener) v. ADLER'S CREAMERY, Inc.
• Court: U.S. Court of Appeals — Second Circuit

107 F.2d 987 (1939)

UNITED STATES (NOYES, Commissioner of Agriculture and Markets of State of New York, Intervener) v. ADLER'S CREAMERY, Inc.

No. 168.

Circuit Court of Appeals, Second Circuit.

November 13, 1939.

Samuel Rubin, of New York City, for defendant-appellant.

John S. L. Yost and Robert M. Cooper, Sp. Assts. to Atty. Gen., and Margaret H. Brass, Sp. Atty., of Washington, D. C., for the United States.

Before SWAN, CHASE, and CLARK, Circuit Judges.

CHASE, Circuit Judge.

This suit was brought by the United States pursuant to the provisions of the Agricultural Marketing Agreement Act of 1937, 7 U.S.C.A. Sec. 601 et seq., to enforce an order, known as Order No. 27, which was issued by the Secretary of Agriculture by virtue of authority conferred upon him by the above mentioned statute. The appellee Noyes, as Commissioner of Agriculture and Markets of the State of New York, was duly permitted to intervene as a party plaintiff. The order first became effective on September 1, 1938; it was later suspended as of January 31, 1939; and still later on July 1, 1939, it was reinstated and since has been in effect.

The order undertook to regulate the handling of milk in the New York Metropolitan Marketing Area in so far as to cover such milk which is in the current of interstate commerce or which directly burdens, obstructs or affects such commerce and was applicable to all who were handlers of such milk as defined therein. The validity of the order was upheld in United States v. Rock Royal Co-operative, Inc., 59 S.Ct. 993, 83 L.Ed. 1446, and is no longer disputed.

The appellant during the period covered by the complaint operated two receiving plants in the State of New York where it received milk which was produced wholly within the State of New York and was transported within that state to the City of New York where it was sold to a distributor who prepared it for market and sold it either for use or resale, all within the City of New York. This milk was not physically commingled with any other milk before sale for consumption. The appellant complied with the provisions of Order No. 27 for the months of September and October, 1938. Competitors, however, questioned the validity of the order; refused to comply; and in November, 1938, in a suit brought in the District Court for the Northern District of New York, United States v. Rock Royal Co-op., 26 F.Supp. 534, the court declined to grant a preliminary injunction to compel compliance. Final decision in the district court was a dismissal of the bill and that resulted in holding further attempts to enforce the order in abeyance until that decision was reversed by the Supreme Court in United States v. Rock Royal Co-operative, Inc., supra. Meanwhile the operation of Order No. 27 was suspended and later reinstated as noted above. The appellant did not make the payments as provided by the order for the period beginning with the month of November, 1938, and continuing to January 31, 1939, the effective date of the suspension. Since the order was re-instated, effective on July 1, 1939, the appellant has complied with it in so far as it covered the period since the effective date of its reinstatement.

The first question is whether or not the appellant is a handler subject to the provisions of Order No. 27. If so, we do not understand that there is any dispute as to the amounts for which it is liable for the three months it has failed and refused to comply with the order. Handler, as defined generally in the order, "means any person who engages in the handling of milk, or cream therefrom, which is received at a plant approved by any health authority for the receiving of milk to be sold in the marketing area, which handling is in the current of interstate commerce or directly burdens, obstructs, or affects interstate commerce." The appellant's primary contention that it was not such a handler during the period of its non-compliance is based on the fact that it was engaged solely in handling intrastate milk together with its claim that its handling of such milk did not directly burden, obstruct or affect interstate commerce. It also points out that Order No. 27 was expressly made effective only "* * * after the issuance by the Commissioner of Agriculture and Markets of the State of New York of an order containing provisions similar to the provisions of this order and to which the order shall be complementary * * *" and insists that if it is subject to any order, it is only to the state order which was duly issued and made effective as of September 1, 1938. Its other grounds for reversal are that the present enforcement of the order for the period from November 1, 1938, to January 1, 1939, violates the due process clause of the Fifth Amendment, U.S.C.A.Const., and that in any event a preliminary mandatory injunction in effect decided the whole cause before it had an adequate opportunity to be heard on the merits and was improper.

There was sufficient support for findings of fact which the court made to the effect that about one-third of the milk produced for sale in the New York Metropolitan Marketing Area comes from states other than New York and about one-sixth of the milk produced in the State of New York for sale in that marketing area crosses state lines on its way to that market. About one-half of all the milk produced for sale in that marketing area is actually moved in interstate commerce while being brought to market; such milk as that which the appellant handled, and now handles, is sold in that market in active competition with milk brought there in interstate commerce and the latter cannot compete with unregulated milk in the marketing area. These facts are, therefore, to be taken as established on this appeal. Guilford Const. Co. et al. v. Biggs, 4 Cir., 102 F.2d 46.

Accepting them, accordingly, we believe the appellant is a handler as defined in Order No. 27 in that its business involves dealing in milk in a way which directly burdens, obstructs and affects interstate commerce within the scope of the decision of the Supreme Court in United States v. Rock Royal Co-operative, Inc., supra. It is true that the milk with which the court was immediately concerned in that case had been moved in interstate commerce. But the power of Congress to protect interstate commerce from being burdened or obstructed is not confined to the regulation of actual movement across state lines. It extends to whatever action becomes necessary to free, or keep free, from obstruction the lawful passage of commodities from state to state. National Labor Relations Board v. Jones & Laughlin, 301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893, 108 A.L.R. 1352; Consolidated Edison Co. v. National Labor Relations Board, 305 U.S. 197, 59 S. Ct. 206, 83 L.Ed. 126. And the recognition that this may involve the incidental regulation of intrastate commerce is by no means new. Wisconsin R. R. Commission v. Chicago, B. & Q. R. R. Co., 257 U.S. 563, 42 S. Ct. 232, 66 L.Ed. 371, 22 A.L.R. 1086; Houston, E. & W. Texas R. Co. v. United States, 234 U.S. 342, 34 S.Ct. 833, 58 L.Ed. 1341.

We interpret the decision in United States v. Rock Royal Co-operative, Inc., supra, to mean that milk which has not crossed a state line but which is distributed in a marketing area in such a way that its marketing is merely part of what is from the public standpoint one marketing operation which includes interstate milk may be the subject of federal regulation whenever that is necessary to prevent a direct burden upon or obstruction to the coming of interstate milk into the marketing area. While due regard is to be given to maintain purely intrastate affairs free from federal encroachment, Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570, 97 A.L.R. 947, and Carter v. Carter Coal Co., 298 U.S. 238, 56 S.Ct. 855, 80 L.Ed. 1160, the regulation of interstate commerce through marketing control is lawful and, being so, the incidental power to protect interstate commerce so regulated from direct burdens or obstructions extends to what has become, or is reasonably sure to become, such a burden or obstruction because of the fact that interstate commodities can move in commerce only subject to marketing control. What is, or is likely to be, such a burden or obstruction must be determined from the nature of the need for protection and where that need has been created by lawful marketing control of interstate commodities the scope of such protection covers the field, when necessary, of the similar marketing control of intrastate commodities. Currin v. Wallace, 306 U.S. 1, 59 S.Ct. 379, 83 L.Ed. 441; Mulford v. Smith, 307 U.S. 38, 59 S.Ct. 648, 83 L.Ed. 1092. Accordingly, the facts justifiably found below are sufficient to require us to hold that the appellant is a handler of milk who is bound to comply with the provisions of Order No. 27.

Nor is the order invalid under the due process clause of the Fifth Amendment, U.S.C.A.Const., because it may be economically burdensome upon the appellant in respect to payments to be made for past months during which the market in which it sold was upset by the then prevailing conditions. The order was then in effect to the extent that it had been duly made and, though it may have been a hard choice under the circumstances, the appellant was free to conduct its business in compliance with the order; to cease doing business if it was unwilling to comply; or to keep on without compliance and run the risk of the consequences. It chose the latter course and must bear whatever loss that choice entails. Hegeman Farms Corp. v. Baldwin, 293 U. S. 163, 55 S.Ct. 7, 79 L.Ed. 259. True enough, the appellant is obliged to pay what its failure to pay on time has made a past obligation but there is nothing retroactive about the order which makes the enforcement of payment a taking, without due process, of the property of the appellant. Mulford v. Smith, supra.

Yet a majority...