Willow Farms Dairy, Inc. v. Freeman

• Decision Date: 13 June 1962
• Docket Number: Civ. No. 13305,13147.
• Parties: WILLOW FARMS DAIRY, INC. v. Orville L. FREEMAN, Secretary of Agriculture. Howeth M. MILLS and Crawford Mills, individually and as co-partners, d/b/a Mills Dairy Products Company, a copartnership, Nesbitt C. Murphy, an individual, d/b/a Shiloh Dairy Farms, and Bruce G. Twilley, an individual d/b/a Twilley's City Dairy v. Orville L. FREEMAN, Secretary of Agriculture.
• Court: U.S. District Court — District of Maryland

206 F. Supp. 239

WILLOW FARMS DAIRY, INC. v. Orville L. FREEMAN, Secretary of Agriculture.

Howeth M. MILLS and Crawford Mills, individually and as co-partners, d/b/a Mills Dairy Products Company, a copartnership, Nesbitt C. Murphy, an individual, d/b/a Shiloh Dairy Farms, and Bruce G. Twilley, an individual d/b/a Twilley's City Dairy v. Orville L. FREEMAN, Secretary of Agriculture.

Civ. Nos. 13305, 13147.

United States District Court D. Maryland.

June 13, 1962.

Charles G. Page, Baltimore, Md., for Willow Farms Dairy, Inc.

James K. Knudson, Ben Ivan Melnicoff, Washington, D. C., Robert F. Skutch, Jr., and Weinberg & Green, Baltimore, Md., for Howeth M. Mills and others.

Joseph D. Tydings, U. S. Atty., Baltimore, Md., and Donald B. MacGuineas and Irwin Goldbloom, Attys., Dept. of Justice, and Joseph A. Walsh, Atty., Dept. of Agriculture, Washington, D. C., for defendant.

THOMSEN, Chief Judge.

This opinion deals with two statutory actions brought under sec. 8c(15) (B) of the Agricultural Adjustment Act (1933), as reenacted and amended by the Agricultural Marketing Agreement Act of 1937 and subsequent amendments (the Act), 7 U.S.C.A. § 601 et seq. All future references herein will be to sections of Title 7 U.S.C.A., unless otherwise indicated.

The complaints seek review of two rulings made by a Judicial Officer of the Department of Agriculture, acting for the Secretary of Agriculture (Secretary)¹, on petitions filed by plaintiffs under 608c(15) (A)², challenging the validity of Order No. 127, Regulating the Handling of Milk in the Upper Chesapeake Bay Marketing Area, 7 C.F.R. sec. 1016 (rev. 1962), 24 F.R. 11071. See also 24 F.R. 9441 and 9456.

Plaintiff in one action, Willow Farms Dairy, Inc. (Willow Farms), is a "handler" as referred to in 608c(1) and as defined in the Order,³ located in Carroll County, Maryland, a rural county northwest of Baltimore. Plaintiffs in the other action, Mills et al., are three separate handlers located in Dorchester County, on the Eastern Shore of Maryland. The term "plaintiffs" will be used to refer to plaintiffs in both cases collectively.

The Issues

Willow Farms contended in the 608c (15) (A) proceeding and contends here that Order No. 127 (the Order) is invalid in its entirety because the Secretary failed to comply with certain statutory prerequisites relating (A) to the determination of parity prices and (B) to producer approval; (C) that the pooling of County handlers with Baltimore City handlers is arbitrary and illegal; and (D) that other provisions of the Order establish prices which are not uniform as to all handlers, in violation of 608c (5), including a provision for "compensatory payments" similar to the provision recently held invalid by the Supreme Court in Lehigh Valley Coop. Farmers, Inc. et al. v. United States et al. (June 4, 1962), 82 S.Ct. 1168.

In their original petition in the 608c (15) (A) proceeding Mills et al. raised the point that the Secretary did not make findings of facts as to prices, but their principal contention was that including eight Eastern Shore Counties in the marketing area⁴ was not in accordance with law because not supported by evidence in the promulgation record, and that they should have been allowed to offer additional evidence in the 608c(15) (A) proceeding to support their contention that the Eastern Shore counties should not have been included.⁵ In this 608c(15) (B) proceeding, Mills et al. press these points, and adopt the arguments made by Willow Farms against the validity of the Order as a whole.⁶

The Act

The principal purposes of the Act, as set out in 602(1) and (2) are "to establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce as will establish, as the prices to farmers, parity prices * * *" and to protect the interest of the consumer by placing certain limits on the action which the Secretary may take. One of the commodities included in the Act is milk, as to which supplemental criteria are provided in 608c(18), discussed at length in Section A of this opinion under the heading "Parity Prices". The problems with respect to milk at the time the Act was adopted were discussed in United States v. Rock Royal Co-op., 307 U.S. 533, at 548 et seq., 59 S.Ct. 993, at 1001, 83 L.Ed. 1446. In recent years such problems have arisen largely out of an increasing surplus and the competition among farmers (called "producers" in the milk industry) to secure as large a share as possible of the most lucrative market, which is for milk disposed of in the form of "fluid milk" (see note 9 below) as distinguished from milk disposed of for other uses. To alleviate the effects of that competition on producers, the Act authorizes the Secretary — subject to certain limitations and conditions⁷ — to promulgate marketing orders based on a system of pooling, intended to yield to each producer in the specified marketing area a uniform price for all milk delivered by him for processing, irrespective of the particular use to which it is ultimately put. 608c(5) (A) and (B) (ii).

A thorough discussion of the operation and effect of such orders is contained in the Report to the Secretary of Agriculture by the Federal Milk Order Study Committee, April 1962, which will be referred to herein as the Report.⁸

The Order

The Order with which we are concerned was summarized by the Judicial Officer as follows: "Order No. 127 contains such a scheme whereby each handler pays for milk subject to regulation under the order at class values or prices, differing according to the use he makes of such milk, while producers receive a uniform or blend price based upon the total value of all milk used by all handlers under the order. Each handler pays his own producers at the uniform price and then, through adjustments with the producer-settlement fund kept by the market administrator, brings the total he has paid to producers up to (by paying into the producer-settlement fund) or down to (by receiving money from such fund) the total he is required to pay at class prices. In effect, a handler receives from the producer-settlement fund the amount by which the value of his milk at the class price is less than the value at the blend price and pays into the producer-settlement fund the amount by which the value of his milk at the class price exceeds the value at the blend price."⁹ 20 A.D. at 816.

The Record

The procedures under the Act are such that it is very difficult to attack an order of the Secretary with any hope of success. The facts are buried in a voluminous promulgation record, the essential findings are usually made in the language of the statute, and it is hard to overcome the presumption that the Secretary must have done what he was required by law to do. In this instance, however, counsel for Willow Farms has been able to obtain, by discovery in the earlier proceedings, certain admissions as to what the Secretary and his aides did and did not do before the Order was issued. The facts have been marshalled in the complaint filed by Willow Farms in this 608c (15) (B) proceeding. In his answer, the Secretary denied most of those allegations except such as were "borne out by the record in the Section 8c (15) (A) proceeding". However, before the hearing the court required the Secretary to answer the complaint in detail, marking those allegations he disputed, those which he admitted, and those which he did not dispute but considered irrelevant or immaterial. It developed that few of the facts alleged in the complaint were disputed, and most of those disputes were resolved during the oral argument. It has therefore been possible for Willow Farms to show in this proceeding the real basis upon which the Secretary acted, and to overcome the argument that the Secretary must be presumed to have done what he should have done.

The disputed facts in the Mills case have been narrowed in a similar fashion. Most of the material facts are not disputed, although as to some of them the record is quite vague.

The Plaintiffs, the Cooperative and the Large Baltimore Handlers

Willow Farms has its plant at Frizellburg, Carroll County, 36 miles from Baltimore, where it pasteurizes and bottles milk, produces cottage cheese and buttermilk, and manufactures ice cream. It serves 16 routes in Carroll County, 4 in Frederick County and 10 in Baltimore County, only 4 of which enter the suburban area surrounding Baltimore City. It has a plant permit from the State Health Department and is eligible to ship milk anywhere in the State except in Baltimore City.

Willow Farms cannot sell milk in Baltimore City because of the City's health regulations¹⁰, which prohibit the sale of milk in Baltimore from any plant which is not located in the City itself.

Willow Farms buys milk from 37 farmers, who have producer permits issued by the State Health Department. It takes all the milk its farmers produce, and uses 90% thereof as Class I milk (for fluid purposes). Its farmers cooperate to avoid season surpluses; about 92% of their total milk deliveries are base milk, i. e. the amount produced during the short supply season.

The Mills and Twilley dairies are located in Cambridge, the Shiloh Dairy in Hurlock, Dorchester County. They sell only in Dorchester, Caroline and Wicomico Counties, all on the lower Eastern Shore of Maryland. They are small operations, Twilley and Shiloh very small; the three of them buy most of their milk from some 25 farmers located in the area, taking the full production of those farmers. They buy whatever additional milk they need from various sources, some outside the State. Practically all of their milk is sold as fluid milk.

The Maryland Cooperative Milk Producers, Inc. (the Cooperative) had about 1,800 members in 1959. It sold most of its milk to five handlers in Baltimore City, and made spot sales to the other five handlers in Baltimore City, who purchase most of their milk from other producers. In 1959 the...