Zuber v. Allen Hardin v. Allen

• Decision Date: 09 December 1969
• Docket Number: 52,Nos. 25,s. 25
• Citation: 24 L.Ed.2d 345,90 S.Ct. 314,396 U.S. 168
• Parties: Frederick T. ZUBER et al., Petitioners, v. Russell ALLEN et al. Clifford M. HARDIN, Secretary of Agriculture, Petitioner, v. Russell ALLEN et al
• Court: U.S. Supreme Court

396 U.S. 168

90 S.Ct. 314

24 L.Ed.2d 345

Frederick T. ZUBER et al., Petitioners,

v Russell ALLEN et al.

Clifford M. HARDIN, Secretary of Agriculture, Petitioner,

v. Russell ALLEN et al.

Nos. 25, 52.

Argued Oct. 16, 1969.

Decided Dec. 9, 1969.

[Syllabus from pages 168-170 intentionally omitted]

Daniel M. Friedman and Lawrence D. Hollman, Washington, D.C., for petitioners.

Charles Patrick Ryan, Washington, D.C., for respondents.

Edwin H. Amidon, Jr., Boston, Mass., for State of Vermont, as amicus curiae.

Mr. Justice HARLAN delivered the opinion of the Court.

This action was brought by respondent Vermont dairy farmers, 'country' milk producers, seeking a judgment invalidating as contrary to the Agricultural Marketing Agreement Act of 1937, as amended, 50 Stat. 246, 7 U.S.C. § 601 et seq. (1964 ed. and Supp. IV) the so-called farm location differential provided for by order of the Secretary of Agriculture.¹ The effect of that order is to require milk distributors to pay to milk producers situated at certain distances from milk marketing areas, 'nearby' farmers, higher prices than are paid to producers located at greater distances from such areas. The District Court issued a preliminary injunction on January 16, 1967, against further payments and on respondents' motion for summary judgment transformed its decree into a permanent injunction on June 15, 1967. The Court of Appeals for the District of Columbia Circuit affirmed. 131 U.S.App.D.C. 109, 402 F.2d 660 (1968). We granted certiorari to resolve the important issue of statutory construction involved in this aspect of the administration of the federal milk regulation program. 394 U.S. 958, 89 S.Ct. 1302, 22 L.Ed.2d 559 (1969).

I BACKGROUND

Once again this Court must traverse the labyrinth of the federal milk marketing regulation provisions.² While previous decisions have outlined the operation of the statute and the pertinent regulations, a brief odyssey through the economic and regulatory background is essential perspective for focusing the issue now before the Court.

A. THE ECONOMICS OF THE MILK INDUSTRY

The two distinctive and essential phenomena of the milk industry are a basic two-price structure that permits a higher return for the same product, depending on its ultimate use, and the cyclical characteristic of production.

Milk has essentially two end uses: as a fluid staple of daily consumer diet, and as an ingredient in manufactured dairy products such as butter and cheese. Milk used in the consumer market has traditionally commanded a premium price, even though it is of no higher quality than milk used for manufacture. While cost differences account for part of the discrepancy in price, they do not explain the entire gap. At the same time the milk industry is characterized by periods of seasonal overproduction. The winter months are low in yield and conversely the summer months are fertile. In order to meet fluid demand which is relatively constant, sufficiently large herds must be maintained to supply winter needs. The result is oversupply in the more fruitful months. The historical tendency prior to regulation was for milk distributors, 'handlers,' to take advantage of this surplus to obtain bargains during glut periods. Milk can be obtained from distant sources and handlers can afford to absorb transportation costs and still pay more to outlying farmers whose traditional outlet is the manufacturing market.³ To maintain income farmers increase production and the disequilibrium snowballs.

To protect against market vicissitudes, farmers in the early 1920's formed co-operatives. These cooperatives were effective in eliminating the self- defeating overproduction by pooling the milk supply and refusing to deal with handlers except on a collective basis.⁴ During the 1920's era of relative market stability the nearby farmers enjoyed premium prices for their product. These favorable prices were apparently attributable to reduced transportation costs and also the nearby farmer's historic position as a fluid supplier.⁵

B. THE FIRST FEDERAL PROGRAM

The drop in commodity prices during the depression years destroyed the equilibrium of the 1920's and utter chaos ensued. Congress, in an effort to restore order to the market and boost the purchasing power of farmers, enacted the licensing provisions of the Agricultural Adjustment Act, 48 Stat. 31, 35. Under § 8(3) the Secretary of Agriculture was empowered

'(t)o issue licenses permitting processors, associations of producers, and other to engage in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof, or any competing commodity or product thereof. Such licenses shall be subject to such terms and conditions, not in conflict with existing Acts of Congress or regulations pursuant thereto, as may be necessary to eliminate unfair practices or charges that prevent or tend to prevent the effectuation of the declared policy and the restoration of normal economic conditions in the marketing of such commodities or products and the financing thereof. The Secretary of Agriculture may suspend or revoke any such license, after due notice and opportunity for hearing, for violations of the terms or conditions thereof. * * *'

Under the licensing system base-rating plans not unlike the private arrangements that obtained in the 1920's were adopted.⁶ Producers were assigned bases which fixed the percent of their output that they would be permitted to sell at the Class I price that was paid for fluid milk.⁷ The viability of the licensing scheme was jeopardized, however, by judicial decisions disapproving a similarly broad delegation of power under the National Industrial Recovery Act provisions, 48 Stat. 195. A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570 (1935). With its agricultural marketing program resting on quicksand, Congress moved swiftly to eliminate the defect of overbroad delegation and to shore up the void in the agricultural marketing provisions. Section 8(3) of the 1933 Act was amended in 1935 and the pertinent language has been carried forward without significant change into § 8c of the present Act. Agricultural Marketing Agreement Act of 1937, 50 Stat. 246, as amended, 7 U.S.C. § 608c (1964 ed. and Supp. IV).⁸

C. THE PRESENT REGULATORY SCHEME

The present system, which differs little in substance from the shceme conceived in 1937 for regulating the Boston market,⁹ provides for a uniform market price payable to all producers by all handlers.¹⁰ Prices are established for Class I and Class II uses. The total volume of milk channeled into the market in each category is multiplied by the appropriate coefficient price and the two results are totaled and then divided by the total number of pounds sold. The result represents the average value of milk sold in the marketing area and is the basic 'uniform' price. Were all producers to receive this price they would share on an equal basis the profits of Class I marketing and assume equally the costs of disposting of the economic surplus in the Class II market. The actual price to the producer is, however, the 'blended' price which is computed by adding and subtracting certain special differentials provided for by statute and order. See 7 CFR § 1001.64 (1969). The deduction for differential payments withheld for the benefit of nearby producers reduces the uniform 'blended' price to those producers ineligible to collect this particular adjustment.¹¹ The provision is contained in § 1001.72 of the order and provides:

'In making the payments to producers * * * each handler shall add any applicable farm location differential specified in this section.

'(a) With respect to milk received from a producer whose farm is located within any of the places specified in this paragraph, the differential shall be 46 cents per hundredweight, unless the addition of 46 cents gives a result greater than the Class I price determined under §§ 1001.60, 1001.62, and 1001.63 which is effective at the plant at which the milk is received. In that event there shall be added a rate which will produce that price.'

A differential of 23¢ is provided for deliveries from farms in intermediate nearby zones. § 1001.72(b).

The foregoing provisions appear in the so-called 1964 Massachusetts-Rhode Island Order, which consolidated into one region the four sub-markets which were pre- viously regulated separately under the so-called four 'New England' orders: the 1951 Boston order which carried forward the order adopted for the Boston area in 1937; the Springfield order promulgated in 1949; and the Southeastern New England order of 1958. Each order included a provision for a nearby differential payment to farmers within a stated radius of a designated market center. For example the differential under the Boston order was payable to farmers located within a 40-mile radius of the State House in Boston; a slightly lower differential was paid to farmers within an 80-mile radius. Under the 1964 order there is no central point for the computation of the radius for payment of the differential; the Secretary has retained the differential provisions as they appeared in the previous four orders. Farmers who would have been entitled to the differential under any one of the previous four marketing regulations continue to receive those payments under the present order. These nearby farmers are eligible for the differential on any shipments within the New England Marketing area, even though their milk may actually be used outside the radius of their particular nearby zone.

II THE STATUTORY SCHEME

The foundation of the statutory scheme is to provide uniform prices to all producers in the marketing area, subject only to specifically enumerated adjustments. The question before the Court, stated most simply, is whether payment of farm location differentials, set forth above, is a permissible adjustment under § 8c(...