Bailey Farm Dairy Co. v. Jones (61 F. Supp. 209, 1945)

HULEN, District Judge.

This is a statutory proceeding by twenty-three milk “handlers” in the St. Louis “area,” against the Secretary of Agriculture and War Food Administrator, under Section 608c(15) (A, B) of the Agricultural Adjustment Act (1933) as amended by the Agricultural Marketing Agreement Act of 1937, June 3, 1937, 50 Stat. 246, as amended, 7 U.S.C.A. § 601 et seq., to review a milk order made by the War Food Administrator (who by Executive Order No. 9322, 50 U.S.C.A.Appendix § 601 note, now performs functions of the Secretary of Agriculture in connection with milk orders under the Act) under the provisions of the Act, affecting the plaintiffs who are subject to the Act in the St. Louis “area” in their business as milk “handlers.” The case is now before the Court on motion by defendants for summary judgment, based on the pleadings and certified transcript of the record made before the War Food Administrator in connection with the promulgation of the milk order and hearing ,on plaintiffs’ “petition” for review there filed. Defendants include with their answer a counter claim asking for a mandatory injunction against plaintiffs to enforce the order under Section 608a (6), 7 U.S.C.A. § 608a(6).

Since 1936, there has been in effect in the St. Louis marketing area a Federal marketing agreement or order, first under the Agricultural Adjustment Act (as amended 1935) and then under the Agricultural Marketing Agreement Act of 1937, as amended. The order in general may be said to regulate the marketing of inspected fluid milk and fix the minimum prices which St. Louis handlers shall pay to producers for their milk. The order,, known as Order Number Three, has been amended from time to time.

Pursuant to statutory notice, the War Food Administrator conducted a hearing in St. Louis, Missouri, on September 3, 1943, with respect to proposed amendments to the then existing marketing agreement, regulating the handling of milk in the St. Louis, Missouri, marketing area. All interested parties, including representatives of plaintiffs, participated in this hearing. As a result of this hearing, and based upon the record there made, in October, 1943, an amendment to the marketing agreement was proposed, in the form of an amended order. To the proposed amendment plaintiffs filed exceptions.

As a result of the exceptions filed, there were some modifications made in the proposed amendments to the marketing agreement, and as - thus changed, the amended order was issued on December 27, 1943, by the Acting War Food Administrator, to become effective January 1, 1944.

On January 1, 1944, plaintiffs, pursuant to Section 608c(15) (A) (see footnote 2) of the Act, filed their petition, to the War Food Administrator, excepting to the amendments. A hearing on plaintiffs’ exceptions was held on March 27, 28, 1944.. On June 10, 1944, plaintiffs’ exceptions were overruled by the hearing officer. To-this ruling plaintiffs again excepted. Oral arguments were heard in support thereof, and on September 27, 1944, on behalf of the War Food Administrator, the assistant to the War Food Administrator filed his decision and order denying the relief prayed for in the exception filed by plaintiffs. This action was then filed under Sec. 608c(15) (B) of the Act (see footnote 2).

Plaintiffs now attack the legality of the amended order, as to its substantive terms and as to the procedure before the Administrator upon which the amended order is based. Broadly classified, the particulars upon which plaintiffs base their complaint are directed:

First, to the classification of milk provided in Section 903.3(e) of the amended order. The order classifies milk into Class One and Class Two. “Class One Milk shall be all milk the utilization of which is not established as Class Two Milk.” Class Two Milk “shall be all milk the skim milk and butterfat of which is established (i) as having been used or disposed of in any form other than as milk, and (ii) as actual plant shrinkage, but not to exceed 3 percent of the total receipts of milk from producers.” There seems to be agreement among the parties to this case that Section 903.3(e) of the Amended Order provides that the “handlers” use, and if not used, to consider as used, the inspected or approved milk delivered to them by the “producers” in Class One, up to 95% of the Class One uses of the handler before imported milk (meaning milk brought in from out of the marketing area) is considered as used in Class One. The plaintiffs object to this method or formula of classification under the amended order, for numerous reasons.

Second, plaintiffs except to the provisions of Section 903.3(a) of the amended order, which provides that “in establishing the classification of milk received by handlers from producers, the burden rests upon such handlers to account for such milk and to prove to the Marketing Administrator that such milk should not be classed as Class One Milk.”

Third, plaintiffs question the legality of the butter fat differential, as contained in the amended order.

Fourth, plaintiffs assert that the amended order provides for increases in price to be paid to producers for milk, which are confiscatory and in violation of the Stabilization Act of 1942, 50 U.S.C.A.Appendix § 961 et seq.

Plaintiffs’ complaint also presents questions with respect to procedure followed preceding issuance of the amended order.

The provisions of the Act with which the Court is now concerned, under the issues as presented, read as follows:

Title 7 U.S.C.A. § 608c, Orders Regulating handling of commodity—

“(1) Issuance by Secretary.

“The Secretary of Agriculture shall, subject to the provisions of this section, issue, and from time to time amend, orders applicable to processors, associations of producers, and others engaged in the handling of any agricultural commodity or product thereof specified in subsection (2) of this section. Such persons are referred to in this chapter as ‘handlers.’ Such orders shall regulate, in the manner hereinafter in this section provided, only such handling of such agricultural commodity, or product thereof, as is in the current of interstate or foreign commerce, or which directly burdens, obstructs, or affects, interstate or foreign commerce in such commodity or product thereof.

* * * * *

“(3) Notice and hearing.

“Whenever the Secretary of Agriculture has reason to believe that the issuance of an order will tend to effectuate the declared policy of this chapter with respect to any commodity or product thereof specified in subsection (2) of this section, he shall give due notice of and an opportunity for a hearing upon a proposed order.

“(4) Finding and issuance of order.

“After such notice and opportunity for hearing, the Secretary of Agriculture shall issue an order if he finds, and sets forth in such order, upon the evidence introduced at such hearing (in addition to such other findings as may be specifically required by this section) that the issuance of such order and all of the terms and conditions thereof will tend to effectuate the declared policy of this chapter with respect to such commodity.

“(5) Milk and its products; terms and conditions of orders.

“In the case of milk and its products, orders issued pursuant to this section shall contain one or more of the following terms and conditions, and (except as provided in subsection (7) ) no others:

“(A) Classifying milk in accordance with the form in which or the purpose for which it is used, and fixing, or providing a method! for fixing, minimum prices for each such classification which all handlers shall pay, and the time when payments shall be made, for milk purchased from producers or associations of producers. Such prices shall be uniform as to all handlers, subject only to adjustments for (1) volume, market, and production differentials customarily applied by the handlers subject to such order, (2) the grade or quality of the milk purchased, and (3) the locations at which delivery of such milk, or any use classification thereof, is made to such handlers.

“(B) Providing:

“(i) for the payment to all producers and associations of producers delivering milk to the same handler of uniform prices for all milk delivered by them * * *.

“(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, in either case, 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, and (d) a further adjustment, equitably to apportion, the total value of' the milk purchased by any handler, or by all handlers, among producers and associations of producers, on the basis of their marketings of milk during a representative period of timé.

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“(G) No marketing agreement or order applicable to milk and its products in any marketing area shall prohibit or in any manner limit, in the case of the products of milk, the marketing in that area of any milk or product thereof produced in any production area in the United States.”

In considering die legality of the amended order, the character of this Court’s review is limited. New York State Guernsey Breeders Co-op. v. Wickard, 2 Cir., 141 F.2d 805. We are called upon to determine if the findings by the Administrative body are in accordance with the law. Vogt’s Dairies, Inc. v. Wickard, D.C., 45 F.Supp. 94; M. H. Renken Dairy Co. v. Wickard, D.C., 45 F.Supp. 332; Queensboro Farm Products, Inc. v. Wickard, D.C., 47 F.Supp. 206.

As was stated by the Court in Queens-boro Farm Products, Inc. v. Wickard, 2 Cir., 137 F.2d 969, 974 (affirming Queens-boro Farm Products, Inc. v. Wickard, supra), we should approach a determination of the questions presented, with certain important background facts in mind.

“The Act was originally enacted in 1933 and was amended in 1935 and again in 1937, 7 U.S.C.A. § 601 et seq. Its original provisions relating to milk were the result of nation-wide distress of milk farmers, a distress which had culminated in a milk farmers’ ‘strike’ — accompanied by violence •and constituting an incipient agrarian revolution — that threatened to cut off a vital part of the nation’s food supply. Experience before and since the passage