Zuber v. Allen, 21141

• Decision Date: 23 September 1968
• Docket Number: No. 21141,21308.,21141
• Citation: 131 US App. DC 109,402 F.2d 660
• Parties: Frederick T. ZUBER et al., Appellants, v. Russell ALLEN et al., Appellees. Orville FREEMAN, Secretary of Agriculture, Appellant, v. Russell ALLEN et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

131 US App. DC 109, 402 F.2d 660 (1968)

Frederick T. ZUBER et al., Appellants, v. Russell ALLEN et al., Appellees.

Orville FREEMAN, Secretary of Agriculture, Appellant, v. Russell ALLEN et al., Appellees.

Nos. 21141, 21308.

United States Court of Appeals District of Columbia Circuit.

Argued November 7, 1967.

Decided September 23, 1968.

Mr. Lawrence D. Hollman, Washington, D. C., with whom Mr. Carlyle C. Ring, Jr., Washington, D. C., was on the brief, for appellants in No. 21,141.

Mr. Walter H. Fleischer, Attorney, Department of Justice, with whom Asst. Atty. Gen., Edwin L. Weisl, Jr., Messrs. David G. Bress, U. S. Atty., and Alan S. Rosenthal, Attorney, Department of Justice, were on the brief, for appellant in No. 21,308. Mr. Frank Q. Nebeker, Asst. U. S. Atty., also entered an appearance for appellant in No. 21,308.

Mr. Charles Patrick Ryan, Washington, D. C., for appellees.

Mr. Edward J. Ryan, Washington, D. C., filed a brief on behalf of the State of Vermont, as amicus curiae in No. 21,141. Mr. Charles P. Ryan, Washington, D. C., also entered an appearance for the State of Vermont as amicus curiae in No. 21,141.

Mr. Franklin M. Schultz, Washington, D. C., filed a brief on behalf of the State of Connecticut, as amicus curiae in No. 21,141.

Mr. James R. Worsley, Jr., Washington, D. C., filed a brief on behalf of the Commonwealth of Massachusetts as amicus curiae in No. 21,141.

Before BURGER, WRIGHT and McGOWAN, Circuit Judges.

McGOWAN, Circuit Judge.

These are appeals by the Secretary of Agriculture and a group of dairy farmers from a judgment of the District Court declaring illegal and enjoining further enforcement of the "farm location differential" provision¹ in the 1964 federal milk marketing order for the Massachusetts-Rhode Island area. We recently invalidated a like provision of the 1957 New York-New Jersey milk marketing order on grounds of its incompatibility with the Agricultural Marketing Agreement Act of 1937.² Blair v. Freeman, 125 U.S.App.D.C. 207, 370 F.2d 229 (1966). Since we find that the farm location differential of the Massachusetts-Rhode Island order is no less irreconcilable with the statute, we affirm the judgment and order of the District Court.

I

The rationale and mechanics of federal regulation of the marketing of milk and other dairy products have been fully described in Blair and elsewhere.³ Briefly, the marketing order is designed to eliminate the destructive competition which grew out of the surplus conditions which characterized the milk industry before federal regulation. The device chosen to this end is a uniform, "blended" price to be paid by handlers to each producer in the marketing area, regardless of whether his milk is ultimately disposed of by the handler at the high Class I price for fluid use, or at the lower Class II price paid for milk to be used in the manufacture of various milk products (butter, cheese, ice cream, and so on). An equalization pool, called the "producer settlement fund," is administered by the agent of the Secretary of Agriculture to maintain the blended price; and handlers make payments to or withdrawals from the pool in the amounts by which the use value of milk which they handle exceeds or is less than the blended price.

The Act specifies several limited exceptions which the marketing order may make to the requirement that each producer receive a uniform price. Thus, Section 8c(5) permits the inclusion in the order of provisions

(B) Providing:

* * * * * *

(ii) for the payment to all producers and associations of producers delivering milk to all handlers of uniform prices for all milk so delivered, irrespective of the uses made of such milk by the individual handler to whom it is delivered; subject * * * only to adjustments for (a) volume, market, and production differentials customarily applied by the handlers subject to such order, (b) the grade or quality of the milk delivered, (c) the locations at which delivery of such milk is made * * *.

Purportedly acting pursuant to the authority of this section, the Secretary included in the 1964 Massachusetts-Rhode Island order several differentials which operate to vary the payments to producers. These are (1) a "butterfat differential," based on the quality of the farmer's milk;⁴ (2) "zone differentials," which vary inversely with the distance from Boston of the handler's plant to which the producer delivers his milk;⁵ and (3) the "farm location differentials," which are paid to producers whose farms are located near the principal consumption centers. This last form of differential, commonly known as the "nearby differential," is forty-six cents per hundredweight for farmers located in certain designated towns and twenty-three cents per hundredweight for those in more distant towns.

The plaintiffs, 168 dairy farmers who are ineligible for any farm location differential, brought this action against the Secretary of Agriculture seeking a halt to these allegedly discriminatory and unauthorized payments.⁶ They are aggrieved in that the differential is paid out of the equalization pool, rather than the handler's own pocket, and consequently reduces the blended price received by all producers. The District Court granted the plaintiffs' motion for a preliminary injunction which provided for the escrowing of the challenged differential, and thereafter, relying wholly on our decision in Blair v. Freeman, granted their motion for summary judgment. The escrowing, though later amended to release amounts attributable to nearby producers, was continued pending a decision by this court. When it appeared that the Secretary might not appeal,⁷ we granted Zuber and seven other nearby farmers, whose motion to intervene had been denied by the District Court, leave to intervene for the sole purpose of protecting their rights by appeal. The Secretary subsequently perfected an appeal, which we heard together with that of Zuber.

Appellants have pressed upon us several distinct positions. They argue, first, that the farm location differential is valid because it is founded not upon the factor of fluid milk utilization condemned in Blair but on other considerations which are authorized by the Act. Secondly, they contend that, whatever might be the fate of another farm location differential under Section 8c(5), this particular provision was explicitly ratified and validated both by Congress in 1937 and by the United States Court of Appeals for the First Circuit in 1939. Thirdly, appellants assert that, if the legality of the provision is not clear, neither is its illegality; and that the case should be remanded to the Secretary to afford him an opportunity to elucidate the legal and factual premises of the nearby differential, or to determine whether, if the differential must fall, the marketing order should be continued, with or without other changes. Finally, it is argued that, even if the District Court is affirmed, considerations of equity dictate that its judgment be wholly prospective from the date of our decision, and that the escrowed monies should be distributed to the nearby farmers who have relied on the farm location differential for so many years. We deal with these points in order.

II

As we held in Blair:

The Act forbids consideration of the use to which the milk of a particular producer or class of producers is put, historically or potentially, in adjusting the uniform minimum price to be paid to such producers.⁸

In adopting the New York-New Jersey order in 1957, the Secretary was explicit in his reliance upon this outlawed consideration.⁹ He is certainly less so in his justification of the 1964 Massachusetts-Rhode Island order:

Such farm location differentials have been in effect under the several New England orders since the inception of the orders. The differentials were adopted to reflect in the pricing structure of the orders historical price relationships by location which prevailed in these markets. It was found that customarily somewhat higher values, above those which normally reflected transportation costs, attached to milk produced near the principal consumption centers as compared to the market value of milk produced in the more distant areas of the milkshed.

* * * * * *

* * * We believe there are adequate reasons on this record for continuing the farm location differentials at their present rates.¹⁰

But we do not think it can be said, as appellants now do, that this explanation does not reflect any reliance whatsoever upon the prohibited factor of fluid use patterns. To say, of the order under review, that milk produced in locations close to principal consumption centers has enjoyed "customarily somewhat higher values" above transportation costs, and that the differential is provided to reflect "these historical price relationships by location," may be only a less direct way of saying, as in the case of the New York-New Jersey order, that the differential was designed "to reflect the fact that under competitive conditions" nearby producers got a higher price because they had a bigger share of the fluid use market. If examination is made of the "record" to which the Secretary adverted in his 1964 statement — the various New England marketing orders which preceded the 1964 order and the administrative records on which they were based — it is revealed inexorably that, as in the case of New York-New Jersey, those "historical price relationships by location" were the fluid use advantages which the Act expressly condemns.

The 1964 order consolidated the former federal orders regulating the handling of milk in four separate marketing areas: Greater Boston, Worcester, Springfield, and Southeastern New England. The oldest and most prominent of these was the Greater Boston marketing order. Under federal "licenses" pursuant to the 1933 Agricultural Adjustment Act,¹¹ milk in the Boston area was marketed, as it had sometimes been by cooperative associations before federal regulation,...