MR. JUSTICE REED delivered the opinion of the Court.
These appeals involve the validity of Order No. 27 of the Secretary of Agriculture, issued under the Agricultural
On October 27, 1938, the United States of America filed a complaint against the Rock Royal Co-operative, Inc., the Central New York Cooperative Association, Inc., and Schuyler Junction New York Milk Shed Cooperative, Inc., seeking a mandatory injunction requiring the defendants and their representatives to comply with the provisions of the Order. On November 26, 1938, a similar action was filed in the same court against the Jetter Dairy Company, Inc. On December 2 these causes were consolidated. The original proceedings had sought relief not only for violations of the Order of the Secretary of Agriculture but also, if the court should find that the defendants or any of them were not subject to that Order, for violation of Official Order No. 126 issued by the Commissioner of Agriculture and Markets of the State of New York. The two orders are in pari materia, one covering milk moving in or directly burdening, obstructing or affecting interstate commerce and the other
In their answers, the defendants pleaded certain affirmative defenses, setting up the invalidity of Order No. 27 because of improper efforts to secure its adoption.
The answers also challenged the two orders and the Act as contrary to the Fifth and Fourteenth Amendments to the Constitution and the Act as involving improper delegation of legislative power. The Central New York Cooperative Association denied the power of the Congress to enact the legislation under the Commerce Clause and set up as a further defense that it was not subject to either order.
After a hearing upon the merits, the District Court dismissed the complaints. The state order was eliminated from consideration on the understanding, not questioned here, that the milk of all four defendants is covered by the Federal Order, if valid. It was further held that §§ 8c (5) (B) (ii) and 8c (5) (F) of the Act violate the due process clause of the Fifth Amendment, that the Order is discriminatory and takes property without compensation, that approval of the producers was secured by unlawful misrepresentation and coercion and that important provisions of the Order, authorizing payments to cooperative and proprietary handlers, have no basis in the Act. United States v. Rock Royal Co-operative, 26 F.Supp. 534, 548, 550, 544, 545, 553. As the unconstitutionality of certain sections of an Act of Congress was one ground of the decision an appeal was allowed directly to this Court.
By § 1 it is declared that "the disruption of the orderly exchange of commodities in interstate commerce impairs
Under § 2 of the Act, the base period for agricultural commodities, except tobacco and potatoes, is fixed at the pre-war period of August, 1909, to July, 1914. Where the purchasing power during the base period cannot be satisfactorily determined from available statistics within the Department of Agriculture, the Secretary is authorized to take as the base period from August, 1919, to July, 1929, or a portion thereof. § 8e. In prescribing minimum prices for milk the statute authorizes the Secretary to fix minimum prices without restriction to the purchasing power during the base period so as to reflect the prices of available supplies of feed and other economic conditions, if he finds after a hearing that minimum prices with a base period purchasing power are unreasonable. § 8c (18).
Section 8a (6) gives jurisdiction to the district courts of the United States to enforce and to prevent and restrain any person from violating any of the orders, regulations or agreements under its provisions.
Section 8b authorizes the Secretary of Agriculture to enter into marketing agreements with the producers and others engaged in the handling of agricultural commodities in or affecting interstate commerce. These agreements may be for all agricultural commodities and their products, are entirely voluntary and may cover the handling of the commodity by any person engaged in the various operations of processing or distribution. Agreements are involved only incidentally in this proceeding.
Section 8c provides for a use of orders, instead of agreements, in certain situations. These orders apply only to specified commodities, including milk.
Notwithstanding the refusal or failure of handlers to sign a marketing agreement relating to such commodity, the Secretary of Agriculture, with the approval of the President, may issue an order without the adoption of an agreement if he determines that the refusal or failure of the handlers to sign a marketing agreement tends to prevent the effectuation of the declared policy with respect to the commodity and that the issuance of the order is the only practical means of advancing the interest of the producers. In such a case the order must be approved or favored by two-thirds of the producers in number or volume who have been engaged, during a representative period, in the production for market of the
Section 8c (15) provides for administrative review by the Secretary on petition of a handler objecting to any provision as not in accordance with law and seeking a modification or exemption therefrom. By (15) (B) the district courts have jurisdiction to review such ruling.
The Problem. — In accordance with the provisions of the Act the Secretary of Agriculture, before promulgating Order No. 27, conducted public hearings attended by handlers, producers and consumers of milk and their representatives throughout the milkshed. No defendant, however, was represented. These hearings followed the presentation by the Agency to the Secretary and to the Commissioner of a proposed marketing agreement and order regulating the handling of milk in the New York marketing area with a request for action under the federal and New York statutes. The hearings were jointly held by the federal and state governments. The cooperation of the two governments was the culmination of a course of investigation and legislation which had continued over many years. The problem from the standpoint of New York was fully considered and the results set out in the Report of 1933 of the Joint Legislative Committee to Investigate the Milk Industry. This investigation was followed by the creation of the Milk Control Board with broad powers to regulate the dairy business of the state. This board had power to fix prices to
The problems concerned with the maintenance and distribution of an adequate supply of milk in metropolitan centers are well understood by producers and handlers. In the milkshed and marketing area of metropolitan New York these problems are peculiarly acute.
By the Order the marketing area is defined as the City of New York and the counties of Nassau, Suffolk and Westchester. A producer is any person producing milk delivered to a handler at a plant approved by a health authority for the receiving of milk for sale in the marketing area. A handler is a person engaged in the handling of milk or cream received at an approved plant for similar sale. "Handler" includes cooperative associations. The administrative sections of the Order setting up a milk administrator and defining his duties are not attacked. Nor are those which classify milk.
Article IV is important since it establishes minimum prices for milk. There are various differentials based upon use, butter fat content, and distances between the points of production and consumption which it is unnecessary to analyze. For the purposes of this opinion it is sufficient to say, as an example, that the minimum price each handler should pay for milk is fixed by a formula which varies with the butter-price range for 92-score butter at wholesale in the New York market during the 60 days preceding the 25th day of the preceding month. The handlers are required to file reports as to their receipts and utilization of milk of the various classes. It should be understood, however, that this minimum price is not the amount which the producer receives but the price level or so-called "value" from which is calculated the actual amount in dollars and cents which he is to receive.
By Article VI a uniform price is computed and it is this uniform price which the producer is actually paid by
Other provisions of the Order upon which an attack is made will be pointed out in the discussion of the particular objections.
Suspension of Order. — It developed at the argument of the causes in this Court that the Secretary of Agriculture on March 18, 1939,
Adoption of the Order. — Before considering the validity of the Marketing Act and the provisions of the Order under attack, we shall examine the contention of the defendants that the Order was adopted under circumstances which require a court of equity to refuse to enforce it. After dealers had refused or failed to sign the proposed marketing agreement, the Secretary conducted a referendum under § 8c (19) to ascertain whether the issuance of Order No. 27 was approved by two-thirds of the producers, as required by § 8c (9). Vigorous campaigns were waged by both proponents and opponents of the Order. Among the proponents were the League and the Agency. After the vote, the Secretary on August 24, 1938, with the approval of the President, determined that the issuance of the Order was favored by at least two-thirds of the producers, and declared it effective as of September 1, 1938.
The defendants base their appeal to the conscience of the chancellor upon matters connected with the referendum which they claim amount to fraud in its adoption. The alleged fraud is said to consist of widespread public misrepresentations to the effect that all producers would receive the same price for their milk and a conspiracy between the League and others to convert the state and national acts into instruments for the creation of a monopoly in large handlers in the sale of fluid milk in the marketing area.
Supporting evidence beyond the coordinated activities of the Agency, the League and other cooperatives for the charge of conspiracy to monopolize by securing the adoption of the Order was found by the District Court in the provisions of the Order. Competitive advantages to cooperatives in the Order were thought by it to indicate an improper influence by them in its drafting. These will
While considering the manner of the adoption of the Order, the validity of the Act and the provisions of the Order must be assumed. The Order was submitted to the producers for approval after the hearings specified in the statute. The full text of the Order with explanatory pamphlets was mailed each prospective voter. In the face of this fact, erroneous statements cannot be permitted to render the submission futile. There is no evidence that any producer misunderstood. A casual sentence in one of the pamphlets of the Department of Agriculture and a number of other statements in publications of the League and Agency were to the effect that dealers would pay all producers the uniform price for milk. Such assertions need the qualifications given in the Order that they are not applicable to milk sold outside the marketing area or to milk handled by cooperatives. The variation from the facts is not immaterial in view of the value or volume of milk involved. But the Order, Article VII, plainly stated that cooperatives were not covered by the payment requirements and it appeared, also, that milk sold outside the marketing area was not
The coercion by the League and the Agency, exercised upon the handlers after the adoption of the Order to force or induce them to acquiesce in its operation, is of the same indirect character as the alleged misrepresentation. It is the partisan coercion of the producer seeking to compel dealer support of the plan by the threat of the use of his economic power over his own milk. The coercion was ineffective upon these defendants. Producers' organizations urged in their papers and meetings diversion of milk from handlers to influence them to agree to the Order. Such efforts could not have had an effect on the prior vote of the producers. It is quite true that the League which itself cast two-thirds of the favorable votes was in a position to cast more than one-third of the total qualified vote against the Order. This arises from the provision of the Act, authorizing cooperatives to express the approval or disapproval for all of their members or patrons.
Correlation of Order and Act. There is another phase of the argument against the Order which is not affected by the validity of the Act or its application in the Order and therefore is ready for disposition before the constitutional questions need be reached. Defendants contend there is no statutory basis for the sections of the Order exempting cooperatives from the payment of the uniform price
The Government makes the point that none of the defendants, all handlers, can object to these terms of the Order because only producers delivering milk to cooperatives are affected by the exemption of cooperative handlers from the requirement to pay at not less than the uniform price and only producers are affected by the use of the pooled money for §§ 5 and 6 payments to cooperative and other handlers. Although three of the defendants cannot complain of the benefits conferred upon cooperatives, for they are cooperatives, the defendant Jetter Dairy Company has standing to raise the issue of want of statutory authority to except cooperative handlers from the payment of the uniform price. It is a proprietary corporation, a handler of milk, required by the Order
We now consider whether the Act authorizes the exception of the cooperatives from the uniform payment provisions of Article VII, § 1. This authority, if it exists, is in § 8c (5) (F) of the Act. The earlier paragraphs provide for minimum prices to be paid by handlers to producers and associations of producers, subject to usual quality and location differentials not important here. These would require minimum prices to be paid by cooperatives when, as here, they were handlers under the definition of the Order,
I. Terms of the Order.
Certain provisions of the Order were found by the District Court to show unconstitutional discrimination against one or more of the defendants. The discriminations of which complaint is made arise from the application to the New York problem of § 8c (5) of the Act relating to milk.
A. Uniform Price. — The Jetter Dairy Company, a proprietary handler, urges that as milk cooperatives need not pay producers a uniform price, it is unreasonably discriminatory and violative of the due process clause of the Fifth Amendment to require it to pay this uniform price. In § 8c (5) (F) there is a definition of the type of cooperative permitted to settle with its members in accordance with the membership contract. The general characteristics of cooperatives are well understood. The Capper-Volstead Act defines such cooperatives as associations of producers, corporate or otherwise, with or without capital stock, marketing their product for the mutual benefit of the members as producers with equal voting privileges, restricted dividends on capital employed and dealings limited to 50 percent non-member products.
The producer cooperative seeks to return to its members the largest possible portion of the dollar necessarily spent by the consumer for the product with deductions only for modest distribution costs, without profit to the membership cooperative and with limited profit to the stock cooperative. It is organized by producers for their mutual benefit.
B. Unpriced Milk. Another discrimination is said to reside in that part of the Order which limits minimum prices to milk "sold in the marketing area or which passes through a plant in the marketing area." Other milk, though from the same production area, is "unpriced milk" and does not figure in the computation of the uniform price. Where both priced and unpriced milk are dealt in by a handler, he must furnish a statement to the producer showing the percentage of his milk paid for at the uniform price.
The basis of the complaint is that large dealers and cooperative handlers with extensive gathering and distributing facilities are permitted to purchase milk throughout the milk shed at any price they please, if the milk does not pass through a plant in the marketing area, and sell it at any price they please, provided the sale is outside the limited New York marketing area. By reason of the fact that milk sells for more in New Jersey than in New York, a greater profit is made by the handler. If he so desires, the handler can use this profit to replace losses on New York area sales and still be in a position to pay the uniform price to producers on pool milk. This is said to create a discrimination against the defendants.
It is possible for the handlers with unpriced milk to use their profits from the profitable extra area trade in the way suggested. It was equally possible for them to do so before the Order. It is a competitive situation which the Order did not create and with which it does not deal. We are of the view that there is no discrimination by reason of this situation.
The District Court found that handlers of unpriced milk "are permitted to blend prices paid or purported to have been paid for such milk sold in other markets, with the uniform price announced by the Administrator for milk sold in the area, thereby reducing the actual price paid by such handlers, for milk sold in the Metropolitan Area, in competition with milk sold by the defendants." "If the price figured by the handler for unpriced milk, is lower than its actual market value, the handler, by blending, is thereby permitted to pay producers for all milk at less than the Order price, and less than the actual value thereof." It is erroneous to suppose that by buying some milk at less than the minimum, the
C. Nearby Differentials. Provision is made by the Order for special differentials of 20 cents on milk from certain counties located most favorably to the marketing area.
II. Constitutionality of the Act.
A. Minimum Prices. The Act authorizes and the Order undertakes the fixing of minimum prices for the purchase of milk "in the current of interstate or foreign commerce, or which directly burdens, obstructs, or affects, interstate or foreign commerce" in milk.
The challenge is to the regulation "of the price to be paid upon the sale by a dairy farmer who delivers his milk to some country plant." It is urged that the sale, a local transaction, is fully completed before any interstate commerce begins and that the attempt to fix the price or other elements of that incident violates the Tenth Amendment. But where commodities are bought for use beyond state lines, the sale is a part of interstate commerce
This power over commerce when it exists is complete and perfect.
The authority of the Federal Government over interstate commerce does not differ in extent or character from that retained by the states over intrastate commerce.
The power of a state to fix the price of milk has been adjudicated by this Court.
B. Equalization Pool. — In order to equalize the prices received by producers, handlers are required to clear their purchases through the producer settlement fund. Payments into and withdrawals from this fund depend upon the "value" of the milk received which is fixed by the Order at different prices governed by the use made by the handler of the purchased milk and upon whether his obligations to producers are greater or less than the uniform price due the producers under the scheme. The result of the use of the device of an equalization pool is that each producer, dealing with a proprietary handler, gets a uniform or weighted average price for his milk, with differentials for quality, location or other usual market variations, irrespective of the manner of its use. The Act, § 8c (5) (B) (ii) and (C) and the Order, Articles IV, VI and VII, authorize such an adjustment.
The defendants' objection to the equalization pool, here considered, is not to the disbursements from the fund for expenses of standby or marketing services
No such exaggerated equalization of wealth and opportunity is proposed. The pool is only a device reasonably adapted to allow regulation of the interstate market upon terms which minimize the results of the restrictions. It is ancillary to the price regulation designed, as is the price provision, to foster, protect and encourage interstate commerce by smoothing out the difficulties of the surplus and cut-throat competition which burdened this marketing. In Mulford v. Smith,
The defendants rely particularly upon Thompson v. Consolidated Gas Utilities Corp.,
From the earliest days the Congress has been compelled to leave to the administrative officers of the government authority to determine facts which were to put legislation into effect and the details of regulations which would implement the more general enactments. It is well settled, therefore, that it is no argument against the constitutionality of an act to say that it delegates broad powers to executives to determine the details of any legislative scheme. This necessary authority has never been denied.
1. Delegation to the Secretary of Agriculture. — The purpose of the Act is "to establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce as will establish prices to
The Secretary is not permitted freedom of choice as to the commodities which he may attempt to aid by an order. The Act, § 8c (2), limits him to milk, fresh fruits except apples, tobacco, fresh vegetables, soybeans and naval stores. The Act authorizes a marketing agreement and order to be issued for such production or marketing regions or areas as are practicable. A city milkshed seems homogeneous. This standard of practicality is a limit on the power to issue orders. It determines when an order may be promulgated.
It is further to be observed that the Order could not be and was not issued until after the hearing and findings as required by § 8c (4). Public hearings were held at Albany, Malone, Syracuse, Elmira, and New York from May 16 to June 7, 1938, with four days' recess. Nearly three thousand pages of testimony were introduced, eighty-eight documentary exhibits and some twenty briefs by interested parties were filed. On July 23, 1938, the Secretary, in the Federal Register, notified the public of his findings and the terms of the Order and again invited comment. Numerous parties again filed briefs. A right by statute is given handlers to object to the Secretary to any provision of an order as not "in accordance with law," with the privilege of appeal to the courts. § 8c (15) (A) and (B). Even though procedural safeguards cannot validate an unconstitutional delegation, they do furnish protection against an arbitrary use of properly delegated authority.
A further provision of the Act is to be noted as it was employed as a standard to determine the minimum price. This is § 8c (18). Acting under this section, the Secretary fixed a fluctuating minimum price based upon wholesale butter prices in New York. While it is true that the
2. Delegation to Producers. — Under § 8c (9) (B) of the Act it is provided that any order shall become effective notwithstanding the failure of 50 percent of the handlers to approve a similar agreement, if the Secretary of Agriculture with the approval of the President determines, among other things, that the issuance of the order is approved by two-thirds of the producers interested or by interested producers of two-thirds of the volume produced for the market of the specified production area. By subsection 19 it is provided that for the purpose of ascertaining whether the issuance of such order is approved "the Secretary may conduct a referendum among producers." The objection is made that this is an unlawful delegation to producers of the legislative power to put an order into effect in a market. In considering this question, we must assume that the Congress had the power to put this Order into effect without the approval of anyone. Whether producer approval by election is
3. Authorization of Cooperatives to Cast the Votes of Producer Patrons. — This objection, too, falls before the answering argument that inasmuch as Congress could place the Order in effect without any vote, it is permissible for it to provide for approval or disapproval in such way or manner as it may choose.
Cooperatives in the Equalization Fund. — The defendant, Central New York Cooperative Association, denies liability under Articles VI, VII and VIII of the Order on the ground that it is not liable to pay its net pool obligation into the administrative fund or to meet the expenses of administration. The asserted reason for its freedom from liability is that it is a cooperative composed of milk producers and distributes the milk of its members and others as agent.
The cooperative owns no farms. Its members are dairy farmers. By their contract they agree "to deliver . . . all . . . milk produced . . . which said milk is to be marketed and distributed by the [cooperative] . . ." The latter "agrees to pay . . . for the milk . . . a price . . . based upon the amount received . . . less the expenses . . ." Nonmembers' milk is marketed under the same contract. The cooperative leases receiving and distributing facilities from a business corporation. The milk is received by the cooperative at receiving plants and shipped to the city depot. It distributes through other business corporations which are wholly-owned subsidiaries of the cooperative. These distributing subsidiaries use the leased physical facilities under verbal contracts with the cooperative. The cooperative receives the net amount from the sales and distributes to its patrons under license from the Director of the Division of
Section 8c (5) (A) authorizes an order to classify milk and fix minimum prices which all handlers shall pay for milk purchased from producers. Section 8c (5) (C) authorizes the equalization pool and the handlers' payment to this settlement fund. It is urged that cooperatives which merely act as agents for their members are not included in handlers purchasing from producers. This is said to be definitely shown by the provisions of § 8c (5) (F) providing that nothing contained in the subsection shall be construed to prevent a Capper-Volstead cooperative from making distribution to its "producers in accordance with the contract." The Order defines a handler as including a cooperative association "with respect to any milk received from producers at any plant operated by such association or with respect to any milk which it causes to be delivered" to other handlers. Under the provisions of the Order, Article VII, §§ 8 and 9, cooperative handlers as other handlers equalize their purchases by payment into the producer settlement fund, even though they are not required to pay the uniform price to their producers by reason of the exception of Article VII, § 1, and the provisions of § 8c (5) (F), as explained at page 561.
Cooperative contracts are of two general types, sale and agency.
It is obvious that the use of the word "purchased" in the Act, § 8c (5) (A) and (C), would not exclude the "sale" type of cooperative. When § 8c (5) (F) was drawn, however, it was made to apply to both the "sale" and "agency" type without distinction. This would indicate there had been no intention to distinguish between the two types by (A) and (C). The section which authorizes
As a corollary the contention is made also by Central Cooperative that no cooperative may be required to pay its surplus receipts over uniform prices into the equalization fund. This, too, is based upon a construction of § 8c (5) (F) as permitting a cooperative to make settlement with its members in accordance with the terms of its own contract with them. If the cooperative members were freed of the burden of carrying their proportion of milk going to manufacturing use, the discrimination in their favor would be most strongly marked. Such a construction is not required. Cooperatives are covered by § 8c (1) and (5) (A) and (B), and by the provisions of the Order, except as to the payment of the uniform price. Any payments below the uniform price fall on their members. We are of the view that the administrative construction is correct and that the "net proceeds" of (F) refer to the result of the cooperative sales in the marketing area after complying with the equalization requirements.
Inasmuch as all the defendants in these appeals are handling milk in interstate commerce, the petition for the enforcement of Official Order No. 126, issued under c. 383 of the Laws of 1937 of the State of New York, concerning milk not covered by Order No. 27 of the Secretary of Agriculture, should be dismissed.
The order of the District Court in Nos. 771, 827 and 828 is reversed and the causes are remanded to that Court with instructions to enter an order specifically enforcing up to the time of suspension the provisions of Order No. 27, issued by the Secretary of Agriculture August 15, 1938, regulating the handling of milk in the New York marketing area, as to all the defendants and enjoining defendants, their officers, agents and servants, from further violation of the Order.
The order of the District Court in dismissing the petition of Holton V. Noyes, as Commissioner of Agriculture and Markets of the State of New York, is affirmed.
MR. JUSTICE McREYNOLDS and MR. JUSTICE BUTLER, dissenting.
We are of opinion that the decree below should be affirmed.
In our view the challenged order of the Secretary must succumb to two manifest objections. It is unnecessary for us to dissect the record in search of other impediments.
First. Congress possesses the powers delegated by the Constitution — no others. The opinion of this Court in Schechter Poultry Corp. v. United States (1935), 295 U.S. 495 — noteworthy because of modernity and reaffirmation of ancient doctrine — sufficiently demonstrates the absence of Congressional authority to manage private business affairs under the transparent guise of regulating interstate commerce. True, production and distribution of milk are most important enterprises, not easy of wise execution; but so is breeding the cows, authors of the commodity; also, sowing and reaping the fodder which inspires them.
Second. If perchance Congress possesses power to manage the milk business within the various states, authority so to do cannot be committed to another. A cursory examination of the statute shows clearly enough the design to allow a secretary to prescribe according to his own errant will and then to execute. This is not government by law but by caprice. Whimseys may displace deliberate
MR. JUSTICE ROBERTS, dissenting.
In Nos. 772, 809 and 865
This conclusion is based upon findings of fact of the District Court. While the findings in question are the subject of assignments of error, the appellants failed, either in brief or in oral argument, to point out that they lack substantial support in the evidence. Examination of the record discloses that these findings are based on uncontradicted testimony, authentic documentary evidence, and a stipulation of the parties. They should, therefore, be accepted here. They may briefly be recapitulated.
Under the terms of the Act and the order, all of the appellees are handlers and the Dairymen's League Cooperative Association, the appellant in No. 827, is likewise a handler. By Art. VII, § 1, of the order, on or before the 25th day of each month, each handler which is not a cooperative association of producers is required to pay to each producer the uniform price fixed by the order for all milk delivered by the producer during the preceding month which was sold in the marketing area. The cooperative associations which are handlers are not required
"Thus, the handler may multiply the total pounds of milk sold by it in the area by the uniform price; multiply the total pounds of milk sold in other markets and which is called `unpriced milk' by `such prices as it sees fit;' add the totals, and divide by the total pounds of milk, to obtain the average of `blended' price paid producers for all milk. If the price figured by the handler for unpriced milk, is lower than its actual market value, the handler, by blending, is thereby permitted to pay producers for all milk at less than the Order price, and less than the actual value thereof."
Whereas the uniform price for 3.5 milk fixed by the Administrator was, for September, $1.87, October, $1.91, and November, $2.10 per cwt., the Dairymen's League paid its producers a base price for the same milk, in the same zone, for September, $1.75, for October, $1.81, and, for November, $2.01 per cwt. Thus the difference between the value of Class I milk sold by the Dairymen's League in New Jersey, and the prices paid for the same to producers per cwt. was, in September, $1.01, in October,
Sheffield Farms Company, a competitor of the appellees, utilized, in September, 1938, 40,083,075 pounds of Class I milk in New York State and 6,426,443 pounds of milk in New Jersey, as well as milk in other markets. For out of market or unpriced milk the company negotiated with its producers to pay the uniform order price for such out of market milk. The base price paid was, therefore, $1.87, or eighty-nine cents per cwt. less than the price fixed by the New Jersey Control Board. The difference amounted to $57,194.96, or 14.27 cents per cwt. on such milk and the price paid for Class I milk was reduced by that amount. Similar spreads are shown in the company's purchases for October, 1938.
Based upon these facts, the court further finds that prices paid to producers delivering to handlers, whether cooperative or proprietary, which sell fluid milk in the marketing area, and also in the State of New Jersey and other markets, are less than the actual value of the milk delivered, due to the process of blending prices for milk sold outside of the marketing area, which bear no true relation to the actual value thereof, with prices charged for milk sold in the area.
It is evident from the terms of the order, and the Secretary's construction of it, that handlers who use "unpriced" milk may fix any price they choose to fix for it. Thus, contrary to the requirement of § 8c (5) (A), of the statute, all producers do not receive a uniform price for milk. This is a necessary effect of the provision permitting the blending of the price paid producers for milk sold in the marketing area and an arbitrary price fixed for "unpriced" milk. The effect upon a handler whose trade is solely in the marketing area is disastrous. The lower price paid by those who are permitted to blend makes it possible for them to resell the milk in the marketing
The appellants make no answer to the appellees' attack on this feature of the order. The opinion of this court states that the detriment to the smaller handlers who sell milk for use only in the marketing area is the result of competitive conditions which the order does not affect. But it is evident that the order freezes the minimum price which is to be paid by many handlers and leaves the price of other handlers who compete with them open to reduction by the device of blending.
There is nothing in the Act which authorizes the discrimination worked by the order permitting handlers, whether proprietary or cooperative, to blend the prices of unpriced milk with that of milk, sold in the marketing area. Section 8c (5) (F), as I read it, prohibits such a practice by cooperatives. If the order had provided that milk sold in New Jersey should be accounted for to the pool at its actual value and had the milk so sold been accounted into the pool, competitors could not have obtained the advantage which so seriously injures the business of appellees. As the order is drawn and administered it inevitably tends to destroy the business of smaller handlers by placing them at the mercy of their larger competitors. I think no such arrangement was contemplated by the Act, but that, if it was, it operates to deny the appellees due process of law.
I think that the decree should be affirmed.
The CHIEF JUSTICE joins in this opinion so far as it relates to the invalidity of the order on the ground stated; MR. JUSTICE McREYNOLDS and MR. JUSTICE BUTLER also join in this opinion.
Act, § 8c (1). "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. . . ."
(2) "Orders issued pursuant to this section shall be applicable only to the following agricultural commodities and the products thereof (except products of naval stores), or to any regional, or market classification of any such commodity or product: Milk, fruits (including pecans and walnuts but not including apples and not including fruits, other than olives, for canning), tobacco, vegetables (not including vegetables, other than asparagus, for canning), soybeans and naval stores as included in the Naval Stores Act and standards established thereunder (including refined or partially refined oleoresin)."
(3) "Whenever the Secretary of Agriculture has reason to believe that the issuance of an order will tend to effectuate the declared policy of this title 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) "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 title with respect to such commodity."
(5) "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 use 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.
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 time.
"(C) In order to accomplish the purposes set forth in paragraphs (A) and (B) of this subsection (5), providing a method for making adjustments in payments, as among handlers (including producers who are also handlers), to the end that the total sums paid by each handler shall equal the value of the milk purchased by him at the prices fixed in accordance with paragraph (A) hereof.
"(F) Nothing contained in this subsection (5) is intended or shall be construed to prevent a cooperative marketing association qualified under the provisions of the Act of Congress of February 18, 1922, as amended, known as the `Capper-Volstead Act', engaged in making collective sales or marketing of milk or its products for the producers thereof, from blending the net proceeds of all its sales in all markets in all use classifications, and making distribution thereof to its producers in accordance with the contract between the association and its producers: Provided, That it shall not sell milk or its products to any handler for use or consumption in any market at prices less than the prices fixed pursuant to paragraph (A) of this subsection (5) for such milk.
"(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."
[N.B. (6) relates to products other than milk.]
(7) "In the case of the agricultural commodities and the products thereof specified in subsection (2) orders shall contain one or more of the following terms and conditions:
"(A) Prohibiting unfair methods of competition and unfair trade practices in the handling thereof.
"(B) Providing that (except for milk and cream to be sold for consumption in fluid form) such commodity or product thereof, or any grade, size, or quality thereof shall be sold by the handlers thereof only at prices filed by such handlers in the manner provided in such order.
"(C) Providing for the selection by the Secretary of Agriculture, or a method for the selection, of an agency or agencies and defining their powers and duties, which shall include only the powers:
"(i) To administer such order in accordance with its terms and provisions;
"(ii) To make rules and regulations to effectuate the terms and provisions of such order;
"(iii) To receive, investigate, and report to the Secretary of Agriculture complaints of violations of such order; and
"(iv) To recommend to the Secretary of Agriculture amendments to such order.
No person acting as a member of an agency established pursuant to this paragraph (C) shall be deemed to be acting in an official capacity, within the meaning of section 10 (g) of this title, unless such person receives compensation for his personal services from funds of the United States.
"(D) Incidental to, and not inconsistent with, the terms and conditions specified in subsections (5), (6), and (7) and necessary to effectuate the other provisions of such order."
(18) "The Secretary of Agriculture, prior to prescribing any term in any marketing agreement or order, or amendment thereto, relating to milk or its products, if such term is to fix minimum prices to be paid to producers or associations of producers, or prior to modifying the price fixed in any such term, shall ascertain, in accordance with section 2 and section 8e, the prices that will give such commodities a purchasing power equivalent to their purchasing power during the base period. The level of prices which it is declared to be the policy of Congress to establish in section 2 and section 8e shall, for the purposes of such agreement, order, or amendment, be such level as will reflect the price of feeds, the available supplies of feeds, and other economic conditions which affect market supply and demand, for milk or its products in the marketing area to which the contemplated marketing agreement, order, or amendment relates. Whenever the Secretary finds, upon the basis of the evidence adduced at the hearing required by section 8b or 8c, as the case may be, that the prices that will give such commodities a purchasing power equivalent to their purchasing power during the base period as determined pursuant to section 2 and section 8e are not reasonable in view of the price of feeds, the available supplies of feeds, and other economic conditions which affect market supply and demand for milk and its products in the marketing area to which the contemplated agreement, order, or amendment relates, he shall fix such prices as he finds will reflect such factors, insure a sufficient quantity of pure and wholesome milk, and be in the public interest. Thereafter, as the Secretary finds necessary on account of changed circumstances, he shall, after due notice and opportunity for hearing, make adjustments in such prices."
Order, Article VI, § 1. "Net Pool Obligation of Handlers. — The net pool obligation of any handler for milk received from producers during each month shall be a sum of money computed for such month as follows:
"1. Determine the total quantity of milk in each class at each plant;
"2. Subtract from the quantity of milk in each class the quantity of such milk received from other plants or from other handlers;
"3. Subtract pro rata out of each class the quantity of milk received from the handler's own farm;
"4. Subtract from the remaining quantity of milk in each class, the quantity of each to which the prices in section 1 of Article IV do not apply, which result shall be known as the `net pooled milk' in each class.
"5. Multiply the total quantity of net pooled milk in each class, at all plants of the handler combined, by the respective class prices set forth in section 1 of article IV and add together the resulting sums;
"8. Deduct 20 cents per hundredweight for all net pooled milk received from producers at plants in the counties or portions of counties listed below in this section. The result thus obtained shall be known as the `handler's net pool obligation.'"
Counties — New Jersey: Hunterdon, Somerset, Essex, Union, Morris, Warren, Sussex, Passaic. New York: Columbia, Dutchess, Nassau, Orange, Putnam, Suffolk, Westchester. Connecticut: Litchfield. Massachusetts: Berkshire. Towns in Ulster County, New York: Marbletown, Hurley, Kingstown, Ulster, Rosendale, Esopus, New Paltz, Lloyd, Gardiner, Plattekill, Marlborough, Shawangunk.
"SEC. 2. Computation of the Uniform Price. — The market administrator shall on or before the 14th day of each month, audit for mathematical correctness and obvious errors the final report submitted for the preceding month by each handler and, on the 14th day of such month, compute from all of such corrected reports the uniform price in the following manner:
"1. Combine into one total the net pool obligations of all handlers;
"2. Subtract the total of payments required to be made for such month by section 5 of article VII and the total of payments claimed pursuant to section 6 of article VII;
"3. Add the amount of cash in the producer settlement fund;
"4. Divide the result by the total quantity of milk represented in the sum obtained pursuant to paragraph 1 of this section; and
"5. Subtract not less than 4 cents nor more than 5 cents to provide against the contingency of errors in reports and payments or of delinquencies in payments by handlers. This result shall be known as the uniform price for such month for milk containing 3.5 percent butterfat received from producers at plants in the 201-210 mile zone."
Article VII, § 1. "Time of Payment. — On or before the 25th day of each month each handler which is not a cooperative association of producers shall make payment to each producer for all milk delivered by such producer at any plant during the preceding month at not less than the uniform price, subject to differentials set forth in sections 2 and 3 of this article."
Article VII, § 2. "Transportation and Location Differentials. — The uniform price shall be plus or minus the differential shown in column B of the schedule contained in section 3 of article IV for the zone of the plant as established for the purposes of section 3 of article IV, plus 25 cents in the case of plants located in the counties listed in paragraph 8 of section 1 of article VI."
Article VII, § 5. "Payments to Cooperative Associations. — Any cooperative association of producers may apply to the Secretary for a determination of its qualifications to receive payments pursuant to this section by reason of its having and exercising full authority in the sale of the milk of its members, using its best efforts to supply, in times of short supply, Class I milk to the marketing area and to secure utilization of milk, in times of long supply, in a manner to assure the greatest possible returns to all producers, and having its entire activities under the control of its members. . . . Such payments shall be made to each cooperative association of producers under the following conditions and at the following rates:
"1. One cent per hundredweight of net pooled milk at any handler's plant which was caused to be delivered from its members by such association and on which such handler has made the reports and payments required by this order.
"2. Except as set forth in paragraph 3 of this section, 2 1/2 cents per hundredweight of net pooled milk at plants of other handlers which was reported and collected for by such association.
"3. Five cents per hundredweight of net pooled milk at plants operated by such association and, if, in addition to the other qualifications, such association has been determined by the Secretary to have sufficient plant capacity to receive all the milk of producers who are members and to be willing and able to receive milk from producers not members, 5 cents per hundredweight of any net pooled milk which was caused by it to be delivered to any other handler and which is reported and collected for by such association.
"SEC. 6. Market Service Payment. — The market administrator shall pay out of the producer settlement fund to any handler immediately after audit of claim for such payment made on forms supplied by the market administrator:
"1. With respect to milk received from producers at a plant operated by such handler equipped only for the receiving and shipping of milk to the marketing area, which was, during any month except November or December, moved to a plant where it was utilized in Classes II-A, II-B, III-A, III-B, III-C, III-D, or, during the month of October, IV-A, and from which, if operated by such handler, no Class I milk was shipped to the marketing area during such month, 23 cents per hundredweight of milk so moved, plus 4 cents per hundredweight for the first five miles or fraction thereof, plus 1/4 cent per hundredweight per mile for the next 20 miles, and plus 1/10 of 1 cent per hundredweight per additional mile, of the shortest highway distance between the two plants; and
"2. Thirty cents per hundredweight of Class I milk sold during the months of November and December in the marketing area which was received from producers at a plant which is equipped for condensing or drying milk and from which, during the months of May and June preceding, in terms of equivalent of milk received at such plant, no milk in excess of 10 percent and no cream in excess of 50 percent was shipped to the marketing area."
States — See Hanna, The Law of Cooperative Marketing Associations (1931), c. 3.
Wolff Packing Co. v. Industrial Court, 262 U.S. 522; Tyson & Bro. v. Banton, 273 U.S. 418; Fairmont Creamery Co. v. Minnesota, 274 U.S. 1; Ribnik v. McBride, 277 U.S. 350; Williams v. Standard Oil Co., 278 U.S. 235.