United States v. Seven Oaks Dairy Co.

• Citation: 10 F. Supp. 995
• Decision Date: 17 May 1935
• Docket Number: No. 4068,4069.,4068
• Parties: UNITED STATES et al. v. SEVEN OAKS DAIRY CO. UNITED STATES et al. v. WESTWOOD FARM MILK CO., Inc.
• Court: U.S. District Court — District of Massachusetts

10 F. Supp. 995

UNITED STATES et al. v. SEVEN OAKS DAIRY CO.

UNITED STATES et al. v. WESTWOOD FARM MILK CO., Inc.

Nos. 4068, 4069.

District Court, D. Massachusetts.

May 17, 1935.

Harold M. Stephens, Asst. Atty. Gen., and Francis J. W. Ford, U. S. Atty., and Joseph J. Hurley, Asst. U. S. Atty., both of Boston, Mass., and Mac Asbill and A. H. Feller, Sp. Assts. to Atty. Gen., and Jerome N. Frank, Gen. Counsel, Agricultural Adjustment Administration, John J. Abt, Chief of Litigation Section, Agricultural Adjustment Administration, and Thomas J. Flavin and Alexander M. Wilding-White, Attys., Agricultural Adjustment Administration, all of Washington, D. C., for plaintiff.

David Greer, of Boston, Mass., for defendant.

BREWSTER, District Judge.

The above suits in equity are brought against two defendants who have refused to comply with a federal milk license. The Secretary of Agriculture would restrain them from carrying on the milk business in which they are respectively engaged. The proceedings were heard on the merits upon substantially identical stipulations. In each case the stipulation, entitled "Stipulation of Evidence," contained certain agreements as to facts and statements of testimony which witnesses would have given if called upon to testify. These statements of evidence were not contradicted and the stipulations, so far as material, may be taken as findings of fact by the court and, by reference, may be incorporated as part of my statement of facts. In order to understand the issues of law involved, it will be necessary to summarize the essential facts which appear in the following:

Statement of Facts.

1. Each defendant is a Massachusetts corporation with a principal place of business within the area covered by the license hereinafter referred to, and each is engaged in the business of distributing milk within that area.

2. On March 15, 1934, acting under the authority conferred upon him by section 8 (3) of the Act of May 12, 1933, 7 USCA § 608 (3), the Secretary issued license No. 38, being a license for milk for the Greater Boston Market, which included within its territory the city of Boston and other cities and towns in the Metropolitan District.

In the license it is recited that, "Whereas, the Secretary finds that the marketing of milk for distribution in the Greater Boston Market and the distribution thereof are entirely in the current of interstate commerce because the said marketing and distribution are partly interstate and partly intrastate commerce and so inextricably intermingled that the said interstate commerce portion cannot be effectively regulated or licensed without licensing that portion which is intrastate commerce. * * *"

The Secretary licensed each and every distributor to engage in the business of distributing, marketing, or handling milk or cream as a distributor in the Greater Boston Market, subject to the terms and conditions set forth in the license, the marketing plan and the rules for the establishment of bases. These terms and conditions are elaborate and complicated. However, it is not necessary to more than outline the plan of regulating the milk industry and to state the purposes of the license. Because of the daily fluctuation in the quantities of milk sold as fluid or whole milk, and the quantities used for other purposes, and because the price received by distributors for milk sold in fluid form is materially in excess of the price received for milk applied to other purposes, the Secretary has seen fit to divide milk, for the purposes of the regulation, into two classes: Class 1 milk being milk distributed as whole milk, and class 2 milk being milk sold for other purposes, and he has established a price for each class. In order to prevent inequalities, which would arise among producers whose income would otherwise depend upon the quantities of milk sold by the distributor as class 1 milk, there has been incorporated in the license a somewhat elaborate scheme for equalizing, or stabilizing, the price which the producer is to receive, called the "blended price." There is also an attempt to regulate quantities of milk to be produced by establishing base quantities. There are provisions whereby a distributor who sells class 1 milk in excess of the base quantity shall distribute the gain among those distributors who sell less quantity of class 1 milk, and to that end such distributor is required to pay to the market administrator balances on adjusted accounts, which sums are paid out pro rata among the distributors entitled to receive adjustments. It is also provided that each distributor shall deduct 2 cents per 100 pounds of milk from the payments to be made by him to the producer and shall pay the amount so deducted to the market administrator to be used in paying the expenses of administering the license.

The tenth paragraph of the license reads as follows: "10. If any provision of this license is declared invalid, or the applicability thereof to any person, circumstance, or thing is held invalid, the validity of the remainder of this License and/or the applicability of any provision of this License to any other person, circumstance, or thing, shall not be affected thereby."

The license has been amended several times since it was first issued, but none of the amendments are material to any issue in this case.

3. Each of the defendants at all times since the issuing of the license has been continuously engaged in the business of purchasing milk from the producers thereof in the state of Vermont, transporting the milk into the commonwealth of Massachusetts, and distributing it in the Greater Boston Market. Each defendant buys all of its milk in Vermont with the intention of shipping it into Massachusetts for sale in the Greater Boston Market. The milk produced in Vermont is delivered, except in a small number of cases, to its receiving station in Newport, Vt., in cans belonging to the producer. This milk is then dumped, tested, weighed, and cooled. Some of the milk is separated, and the cream obtained therefrom, together with the remainder of the milk, is placed in cans belonging to the defendants and shipped by them in interstate commerce into Massachusetts within forty-eight hours after its receipt by the defendants.

The defendant Seven Oaks Dairy Company distributed daily approximately 1.32 per cent. of the total distribution of milk and cream in the Greater Boston Market, and the defendant Westwood Farm Milk Company, Inc., distributed .248 per cent. of the total distribution of such milk and cream. It has appeared in evidence that 90 per cent. of all milk distributed in the Greater Boston Market originates outside of the commonwealth of Massachusetts.

4. Each of the defendants, after due notices and hearing held in compliance with regulations issued by the Secretary of Agriculture, has been found to have violated the terms and conditions of the license, whereupon the Secretary of Agriculture issued an order revoking the license as to each defendant. Since the revocation of the license, the defendants have continued to engage in the business of distributing milk in the Greater Boston Market, but since December 6, 1934, each has been conducting its business in accordance with the terms of a temporary restraining order issued by this court in these proceedings.

5. The testimony of the economic adviser to the Agricultural Adjustment Administration, which was not altogether material to the legal issues involved, may be briefly summarized as follows: It showed that the price of milk to producers had steadily declined from 1929 to 1934; that a wide disparity existed between the price received by the farmer for his product and the price paid for commodities which he purchased; that in New England the dairy industry produces a substantial part of the total income for farmers. It also appeared from this testimony that the plan embodied in the license, namely, the classified price plan and the base surplus plan, had been in operation for some period of time prior to the enactment of the Agricultural Adjustment Act (7 USCA § 601 et seq.), not only in the Greater Boston Market but in other parts of the United States.

Conclusions of Law.

At the outset it may be well to dispose of the defendants' argument that the Agricultural Adjustment Act is unconstitutional, as unlawfully delegating legislative powers to the Secretary of Agriculture.

The question of the constitutionality of the enactment was considered in the case of Franklin Process Co. v. Hoosac Mills Corporation (D. C.) 8 F. Supp. 552. In that case the conclusion was reached that, while Congress had approached the limits of its power to regulate matters of local concern, the unconstitutionality was not so clear as to warrant a District Court in declaring the act void. The issue was so recently considered in the opinion in the Hoosac Mills Corporation Case that it is not necessary to repeat here the reasons upon which the conclusion was based or the authority cited in its support. It is to be noted, however, that in the opinion it was observed that the court was considering the law as it was written, and that it did not undertake to pass upon the validity of the law as it might be interpreted, or applied, by administrative officers acting under color of its provisions. It was there said, 8 F. Supp. 552, page 561: "It is conceivable that the power to license may be exercised through the imposition of conditions in such a way that the regulation would be beyond the scope of the legitimate powers of Congress under the commerce clause."

It must be assumed, I take it, that the plaintiff may not prevail in these proceedings to enjoin the defendants from continuing in the business of milk distributors in the Greater Boston area if the plaintiff has imposed upon the defendants a license, the conditions of which do not fall within the authority conferred upon the Secretary of Agriculture by the Agricultural...