White Eagle Co-Op. Ass'n v. Johanns
| Decision Date | 28 October 2005 |
| Docket Number | Case No. 3:05-CV-0620-AS. |
| Citation | 396 F.Supp.2d 954 |
| Parties | WHITE EAGLE COOPERATIVE ASSOCIATION, et al., Plaintiffs, v. Mike JOHANNS, Secretary of Agriculture, United States Department of Agriculture, Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
J. Thomas Vetne, Timothy W. Woods, Jones Obenchain Llp, South Bend, IN, for Plaintiffs.
Justin M. Sandberg, U.S. Department of Justice, Mas/Was/DC, Washington, DC, Clifford D. Johnson, U.S. Attorney's Office, Sb/IN, John H. Lloyd, Plews Shadley Racher & Braun, Sb/IN, South Bend, IN, Marvin Beshore Phv, Law Offices of Marvin Beshore, Harrisburg, PA, for Defendants.
Now before the Court is Plaintiffs' motion for preliminary injunction or, in the alternative, for stay of final action of the U.S. Department of Agriculture ("USDA"). The plaintiffs contend that USDA issued a final decision and final rule on an "emergency" basis without following proper administrative procedures. They now ask the Court to enjoin the enforcement of that rule or to postpone the effective date of the final rule. The Court heard oral arguments on this matter on October 20, 2005. The issues have been fully briefed by the parties.
Dairy producers and dairy producer associations brought this suit to enjoin an interim amendment to the federal rules regulating the price of milk. These rules, called milk marketing orders, are part of a program enacted through the Agricultural Marketing Agreement Act of 1937 ("AMAA"), 7 U.S.C. 601 et seq. The program and its history are described in several judicial opinions, e.g., Zuber v. Allen, 396 U.S. 168, 183, 90 S.Ct. 314, 24 L.Ed.2d 345 (1969) and Alto Dairy v. Veneman, 336 F.3d 560 (7th Cir.2003). Basically, milk sold for fluid consumption is more valuable than when it is sold for other ends, such as to make cheese or butter.1 The program involves a regulatory scheme which fixes minimum prices that handlers must pay for raw milk from producers and provides for market-wide pooling of milk money among eligible producers. This uniform minimum price is known as the "blend" or "pool" price. Each farmer is entitled to receive this price, regardless of the use to which the milk is put. The ultimate result is to reduce competition and raise producer prices. See Block v. Community Nutrition Institute, 467 U.S. 340, 342, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984).
Pursuant to the AMAA, the Secretary of Agriculture has issued different milk-marketing orders for different regions of the country. See Lamers Dairy, Inc. v. U.S. Dep't of Agriculture, 379 F.3d 466, 469 (7th Cir.2004). This case involves the Mideast Order, which regulates milk-marketing in portions of Indiana, Ohio, Michigan, West Virginia, Kentucky, and Pennsylvania. 7 C.F.R. § 1033.2.
Generally, amendments to the provisions of a milk marketing order must be made through formal, on-the-record rulemaking. 7 U.S.C. §§ 608c(1) & (17); 7 C.F.R. §§ 900.3 & 900.1(j). This process is to include public notice, an on-the-record hearing, a recommended decision by the Administrator, opportunity to comment on the proposed amendments, and a final decision by the Secretary. 7 C.F.R. §§ 900.1-13. The final decision becomes effective only after two-thirds of the affected producers consent to its adoption as a rule through a referendum. 7 U.S.C. §§ 608c(8) & (9). A recommended decision may be omitted "only if the Secretary finds on the basis of the record that due and timely execution of his functions imperatively and unavoidably requires such omission." 7 C.F.R. § 900.12(d).
In this case, several amendments to the Mideast Order were proposed in late 2004 and early 2005. The proposals included amendments (1) to forbid so-called "double-dipping," pooling milk on both the Mideast Order and a market order implemented by a state, (2) to tighten performance standards for supply plants, and (3) most relevant to this case, to lower "diversion" limits. See Milk in the Mideast Marketing Area; Notice of Hearing on Proposed Amendments, 70 Fed. 8043, 8044 (proposed February 17, 2005). A diversion limit is the maximum percentage of a producer's milk that can be sold to non-pool plants rather than to handler pool plants without being disqualified from the pool and thus from entitlement to the minimum blend price. See 7 C.F.R. § 1033.13). According to the defendants, the diversion amendment was proposed because the "excessive diversions of milk by a few produces to non-pool plants tends to lower the blend price available to all producers, inasmuch as non-pool plants are more likely to lower value uses." Def. Mem. in Opp. at 7.
USDA conducted a four-day evidentiary hearing on the proposals at which interested parties, including White Eagle Cooperative Association and others, submitted both testimony and documentary evidence. Milk in the Mideast Marketing Area, 70 Fed.Reg. at 43337-43338; Hearing Ex. 11, Plaintiffs' App. Doc. 16. Afterward, USDA received post-hearing briefs from interested parties, including White Eagle. Milk in the Mideast Marketing Area, 70 Fed.Reg. at 43340. The Administrator then issued a tentative decision adopting the producers' proposals. He stated that "[a]ssociating more milk [with the pool] than is actually part of the legitimate reserve supply of the pooling handler unnecessarily reduces the potential blend price paid to dairy farmers who regularly and consistently service the market's Class I needs." Milk in the Mideast Marketing Area, 70 Fed.Reg. at 43341.
The Administrator omitted the issuance of a recommended decision for additional comments, and instead issued a tentative decision for immediate submission to a referendum. He stated that an "emergency marketing condition []" existed. Milk in the Mideast Marketing Area, 70 Fed.Reg. at 43341. That condition was purportedly the "unwarranted erosion" of the blend prices "received by producers who are regularly and consistently serving the Class I needs of the Mideast marketing area" as a result of the "the lack of appropriate limits on the diversion of milk." Id.
At the same time, the Administrator invited public comment on the tentative decision, 70 Fed.Reg. at 43335, 43335, and USDA has since received those documents. Declaration of David Z. Walker, ¶ 4.
USDA announced that the amended milk order was approved by producers in the referendum and published the final rule to take effect beginning October 1, 2005. Interim Order Amending the Order, 70 Fed.Reg. 56113 (2005). White Eagle Cooperative Federation, et al., and National All-Jersey, filed exception to the interim decision. Pl. Mem. Appendix, Tabs 18-20. The terms of the Interim Final Rule carry the weight of law and govern the marketing of milk in the Mideast Order today.
USDA may still determine that those comments warrant changes to the interim rule before it is issued in final form, then it will issue a final decision reflecting those changes, and will submit that decision to another producer referendum before the rule is issued in final form. Declaration of David Z. Walker, ¶ 5.
"A preliminary injunction is an extraordinary remedy intended to preserve the status quo until the merits of a case may be resolved." Indiana Civil Liberties Union v. O'Bannon, 259 F.3d 766, 770 (7th Cir.2001). To obtain a preliminary injunction, the plaintiffs must show that: (1) they are reasonably likely to succeed on the merits; (2) no adequate remedy at law exists; (3) absent injunctive relief, they will suffer irreparable harm; and (4) the injunction will not harm the public interest. Joelner v. Washington Park, Illinois, 378 F.3d 613, 619 (7th Cir.2004). "If the movant can meet this threshold burden, then the inquiry becomes a "sliding scale" analysis where these factors are weighed against one another." Id. (citations omitted). Under this sliding scale analysis, the greater the plaintiff's likelihood of success on the merits, the less the balance of harms must weigh in his favor. See AM General Corp. v. DaimlerChrysler Corp., 311 F.3d 796, 804 (7th Cir.2002). If, however, the movant cannot show at least a "greater than negligible chance of winning," no injunction may be issued. Id. (citing Washington v. Indiana High Sch. Athletic Ass'n, 181 F.3d 840, 845 (7th Cir.1999)). Applying these standards, the court will address the plaintiffs' motion.
Two issues must be evaluated to determine the plaintiffs' likelihood of success on the merits: (1) whether USDA improperly issued the final decision by omitting the recommended decision; and (2) whether the agency employee who issued the decision had authority to do so. The Court addresses both arguments in turn.
The plaintiffs' first claim is that there were no "emergency circumstances" which justified the omission of the recommended decision. A rule may be finalized without a recommended decision "only if the Secretary finds on the basis of the record that due and timely execution of [the Secretary's] functions imperatively and unavoidably requires such an omission." 7 C.F.R. § 900.12(d). A careful examination of the language of this regulation is necessary to evaluate the plaintiffs' claim.
There is no real dispute about the first two elements of the regulation: 1) that the Secretary made a finding that an omission was required and 2) that the Secretary's finding was made "on the basis of the record."2 The real dispute is over whether "due and timely execution of [the Secretary's] functions imperatively and unavoidably requires such an omission." The plaintiffs essentially ask the court to find that no "emergency" existed.
The parties disagree on the standard this Court should use when reviewing the Secretary's omission of the recommended decision. The plaintiffs, citing Zhang v. Slattery, 55 F.3d 732, 744 (2nd Cir.1995), state that exceptions to ordinary APA...
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