Lehigh Valley Cooperative Farmers, Inc. v. United States

PETITIONER:Lehigh Valley Cooperative Farmers, Inc., et al.
RESPONDENT:United States, et al.
LOCATION: Lehigh Valley, Pennsylvania

DOCKET NO.: 79
DECIDED BY: Warren Court (1962)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 370 US 76 (1962)
ARGUED: Jan 17, 1962 / Jan 18, 1962
DECIDED: Jun 04, 1962
GRANTED: Jun 19, 1961

ADVOCATES:
Alan S. Rosenthal – for the respondents
Willis F. Daniels – for the petitioners

Facts of the case

In accordance with the Agricultural Marketing Agreement Act of 1937, the Secretary of Agriculture promoted milk-marketing orders in the New York/New Jersey region that included compensatory payment provisions. The provisions in question required those who buy milk elsewhere and bring it into the region to pay the farmers who supply that region a “compensatory payment.” The petitioners were milk processing plant operators in Pennsylvania who challenged the validity of the “compensatory payment” provisions by arguing that they failed notice requirements and conflicted with other provisions of the Act that required uniform prices. The district court held these provisions to be invalid, but the U.S. Court of Appeals for the Third Circuit reversed and upheld the validity of the provisions as authorized by the Act.

Question

Were the “compensatory payment” provisions that the Secretary of Agriculture enacted valid under the Agricultural Market Agreement Act of 1937?

Earl Warren:

Number 79, Lehigh Valley Cooperative Farmers, Incorporated, et al., Petitioners versus United States et al.

Mr. Daniels.

Willis F. Daniels:

Mr. Chief Justice, Justices, may it please the Court.

This litigation which has extended over a long period of time starting on August 1, 1957, now comes before this Court and the statute involved is the Agricultural Marketing Agreement Act of 1937, which is the successor to the Agricultural Adjustment Act as amended in 1935 following the Schechter and the Panama Oil case.

Also involved is Order 27.

Now, Order 27 is an order issued by the Secretary of Agriculture, establishing a marketing area and as it was amended on August 1 or as of August 1, 1957, it includes Metropolitan New York, some upstate areas and 11 North Jersey areas.

I deem it appropriate this time to outline the facts surrounding these two particular petitioners before I go into the act in detail and the order in detail.

But I might say at the outset that it is in the minds of a lot of people that milk is a very complex situation.

I — in my years, pardon the first pronoun, do not find it as complex but this particular situation is not going to be very complex as I see it.

The facts that I’m going to recite if the Court please, are facts that were not disputed in the promulgation hearing or in the review hearing.

Now, the review hearing is under Section 15A and it means that we must, if we are to agree, we must go to the administrative agency for relief before we can go the Court.

We did that on the very first day at 9 o’clock when the order became effective, as soon as the door is open and we asked for — for interim relief, but before the 15A was acted upon or even heard, the Government moved against us in an enforcement proceeding and Judge Corey of the United States District Court of the Eastern District of Pennsylvania granted the injunction which required us to file reports, but made this exception of we need not pay the money into the administrator or to be distributed among the producers which I’ll explain later, but we should pay it into the registry of the Court, that’s what we have done.

As of July 31 when our briefs were filed, Lehigh Valley had paid into the registry of the Court $617,454 and Suncrest Dairy $108,767.

Now, how do these petitioners operate and what is their situation?

Number one, the Lehigh Valley is a cooperative.

It has 3,400 members, 900 of whom are milk producers.

Lehigh Valley accepts all the milk that their producers produce.

They sell in fluid form, they manufacture cottage cheese, they manufacture butter and they manufacture ice cream.

At no time and the record does not dispute it, at no time has Lehigh Valley, since it was organized in 1935, diverted any of its milk into the marketing area of Order 27 except the milk it itself sells in that area.

Lehigh Valley had been doing business in Philipsburg which is right across the river on Eastern Pennsylvania, Philipsburg, New Jersey a short bridge of less than a half a mile I believe since 1935.

It built its business there and has been there continuously ever since.

Lehigh Valley and Suncrest, if the Court please, are not strangers to regulations, nor are we opposed to regulations per se, but we do insist at heart that the statute be followed and the standards be complied with and the chartered course followed, and we do resist discrimination.

William O. Douglas:

What is the meaning of the — of a non-pool plant as distinguished from a pool plant?

Willis F. Daniels:

Mr. Justice Douglas that I was going to explain when I come to the order that we don’t —

William O. Douglas:

Right, right, in your own time.

Willis F. Daniels:

Thank you.

Now —

Charles E. Whittaker:

As I understand, Philipsburg is within the area placed in Order 27.

Willis F. Daniels:

Yes.

Northern New Jersey as of August on 1957, North Jersey — the marketing area of 27 which was previously Metropolitan New York since 1938 was extended to take in the 11 counties of Northern New Jersey, and Philipsburg is one of those counties.

Charles E. Whittaker:

(Inaudible) you say?

Willis F. Daniels:

It goes just on — just North of Trenton, it’s the 11 northern counties and comes completely over in to the Pennsylvania —

William J. Brennan, Jr.:

(Inaudible)

Willis F. Daniels:

4,000,000 people.

Charles E. Whittaker:

Is there a question involved here, if I may ask, about how to extend the area?

Willis F. Daniels:

No sir.

I have not raised that question.

Philipsburg, New Jersey has been considered by the United States Census Bureau and rightly so as part of the commercial and metropolitan area of Allentown, Bethlehem in Eastern Pennsylvania because we have Allentown, a few miles away from Bethlehem, a few miles away Easton, across the bridge, we have Philipsburg and we’ve been in there 25 years.

I just want to establish that fact or over 25 years since 1935.

Suncrest is a company that is organized by combining two or three smaller companies, and it has sold milk in Philipsburg ever since or for the last 12 years.

Now then, how do these two petitioners operate?

I said they were not strangers to regulation.

The testimony shows this fact that we pay more for fluid milk which is called Class 1 throughout this argument and that we pay more for fluid milk that we sell in Pennsylvania and sell in New Jersey than the Order 27 of Class 1 prices, fixed by the secretary and why do we pay more because the Pennsylvania Milk Control Commission which is in existence as long as the First Agricultural Adjustment Act in 1933 fixes the prices that we pay for that milk even though we sell it out of state.

In other words, if we bottle the milk in Pennsylvania and sell it out of state, we pay the price they fix which is historically and presently higher than the Class 1 price fixed of Order 27.

Milk Control Commission of Pennsylvania is acting under the authority of the Eisenberg case with which this Court is well acquainted, and quoted in the Dumont case, Wood versus Dumont with approval both by the majority and the two minority opinions so that we pay more, I want to fix that.

We do not divert any of our milk into Order number 27.

Those are the salient facts concerning our operations.

Earl Warren:

What was the last statement you’ve just made that you do not divert milk to what —

Willis F. Daniels:

To any other areas.

Earl Warren:

Any other — any area other than (Voice Overlap)

Willis F. Daniels:

The ones that we cover ourselves.

Earl Warren:

Yes, that’s in 27?

Willis F. Daniels:

Yes sir.

Well Philipsburg is — the reason that will come up is this.

An argument has been made and I’m going to answer it, that what the provisions Order 27 or what they are, because Order 27 producers to have a surplus and I am now establishing as a fact that we handle our own surplus and the record does not dispute it nor does the Government.

No fact that I have mentioned has the Government disputed.

The hearing examiner has found this to be a fact.

That was the first tribunal we appeared before.

(Inaudible)

Willis F. Daniels:

Alright.

Willis F. Daniels:

Now here’s why they can’t be, here’s what the order does.

I think I will skip to the order, everybody knows the act, here’s what the order does.

Well, Order 27 was promulgated to become effective August 1, 1957 to cover Northern New Jersey and in a nutshell, here’s what it does.

It classifies milk, Section 5A says it can.

It fixes the price for milk that — and Section 5A says it can do that for milk in the various classes, minimum prices.

If the order in answer now to Mr. Justice Douglas’ question, then define the word “handler” and then set a pool handler — is one — so far as this case is concerned, who has 55% of his milk sold in fluid form either within the area or without the area, provided he elects to be a pool handler.

If he does not elect to be a pool handler, then he is not a pool handler.

Charles E. Whittaker:

Even though he sells as much within — and without this —

Willis F. Daniels:

Yes, even though he sells the same amount.

That was the situation until August 1 — September 1, 1958.

Then on September 1, 1958, they turned the coin over, the Government did and tried to say it was 25 cent a quart.

When heads were up, when they turned it over and tails are up, it’s no longer a 25 cent quart.

Now, if you have 55% in Class 1 either in or out of the area, you’re the pool plant unless you were like not to be.

Now, from August 1, 1957 to September 1, 1958, Lehigh Valley, because it sold more milk under official order 61 regulating Philadelphia could not elect to be a pool plant, Mr. Justice Douglas, under 27 no matter what percentage of its milk is sold in fluid form.

Felix Frankfurter:

Would you mind restating that?

Willis F. Daniels:

From August 1, 1957 to September 1, 1958, the Lehigh Valley selling more milk under Order 61, the Philadelphia order than it was selling under Order 27, could not elect to be a pool plant under 57 — 27 no matter if all of its milk has been sold in fluid form.

Now, Mr. Justice Brennan, in answer to your question, what can’t we do? We are non-pool plants.

We have not elected in first place for 13 months on — “I couldn’t be a pool plant” and since that time, we have not elected to be a pool plant or in other words we elect not to be.

Now, for all the fluid milk that we sell in Philipsburg, New Jersey, we have to pay for distribution among other producers, not our producers, the difference between the Class 3 27 price which is the lowest price and the Class 1 Order 27 price which is the highest price, and it ranges from $2.50 to $2.80 to $2.90 or 5 cents a quart so that we can’t go in there without paying this internal tariff, tribute or whatever term you might apply to it.

Felix Frankfurter:

That in effect makes you a pool plant?

Willis F. Daniels:

No sir.

That in effect makes us pay $9 for our milk because they give no consideration to what we do pay for and the money we pay, this $700,000 to July 1st is distributed among the producers who ship to pool plants, not our producers, and they’d never had the market.

That’s what we can’t do.

Now, that’s —

Felix Frankfurter:

What (Voice Overlap) that it forces you to have it more subsidized — the producers and distributors would risk — with whom you have no relation —

Willis F. Daniels:

Exactly sir.

And the —

William O. Douglas:

You could avoid that by not selling milk in that area but selling it all in Philadelphia.

Willis F. Daniels:

Of course, I could avoid any reg — I can — yes, yes Your Honor.

I don’t — if I didn’t sell it there, I wouldn’t be regulated.

William O. Douglas:

Is that the purpose — purpose of it, to keep you out of the Philipsburg market?

Willis F. Daniels:

Definitely.

They say this that the compensatory payment provision is to compensate, compensate for what?

What do they say?

Compensate for the business for the Class 1 business that the producers shipping to pool handlers would have had, had we not been there?

Felix Frankfurter:

Now, would —

Willis F. Daniels:

But this — but here, we didn’t go in the market, we didn’t invade the market, we were there long before the order came, 25 years before the order was extended, we were there.

You can’t compensate someone for something they have never had.

It was like pushing you out —

Willis F. Daniels:

If they push us out then of course the pool handlers will pick up that business.

The pool handlers are service funded (Inaudible)

Willis F. Daniels:

That’s shipped to the pool handlers — oh, when they ship as far as 20 or 400 miles away, we’re only 25 miles away or 27 miles away.

Felix Frankfurter:

Would you mind now stating the statutory provision on which the Secretary have acted —

Willis F. Daniels:

Yes sir.

Section 5A of the statute says this; the Secretary may fix prices, minimum prices for each classification after he classified them.

They must be uniform and each handler must pay those prices.

The prices are to be uniform to all handlers.

Well, they don’t try to stand on 5A except the lower court said that 5A didn’t apply to us, so nobody tries to stand on 5A, it’s Section 7 (D).

Now 7 (D) was passed upon by this Court in the Rock Royal case and in the Bernard versus Stark speaking through Mr. Justice Clark.

And both courts have said and the only time that this Court has spoken on 7 (D), they have said, “It is an incident” and the word says so.

Felix Frankfurter:

Would you mind stating what’s 7 (A) is?

Willis F. Daniels:

It’s 7 (D).

Felix Frankfurter:

I joined Justice Brennan, don’t make an assumption.

I remembered it, even the little ones knew.

Willis F. Daniels:

7 (D).

7 (D) is the one they rely on, and it reads as follows, you’ll find it on the Government’s brief page 62.

Incidental to that these terms and conditions, incidental to and not inconsistent with the terms and conditions specified in subsections (5) through (7) of this section, and necessary to effectuate the other provisions of such an order that might be read.

Now in Bernard versus Stark and in Rock Royal, it was pointed out by Mr. Justice —

Felix Frankfurter:

May I — may I break in on you?

Willis F. Daniels:

Yes sir.

Felix Frankfurter:

Incidental to it and I think consistent with the terms and conditions specified in (5) and (7), you’ve just said that everybody agrees, they couldn’t do this under (5), is that right?

Willis F. Daniels:

I have seen no one — none of the litigation yet do they claim that this brings about uniformity?

Felix Frankfurter:

What about the 6?

Willis F. Daniels:

Well, 6 nothing to do with milk.

Felix Frankfurter:

Well then — are you saying that they issued an order according to the incident which you’re not inconsistent with — that it isn’t incidental — that it’s either incidental to and it is inconsistent with because it is not authorized by those other sections.

Willis F. Daniels:

I say is — the United States District Court said and as the hearing examiner said that it is inconsistent with Section 5A because it does not bring about uniformity.

Uniformity was a cornerstone of this whole statute.

That was the cornerstone of this whole statute because we all know, the disruption of interstate commerce, the various prices paid as the Congress has said, any old prices paid to get milk at that time depending on what the cash flow that a particular producer needed.

Felix Frankfurter:

You got to say more than that I think Mr. Daniels, when you get around this tomorrow.

Not only you got to say that it is not incidental to, but I think you have to say that the Secretary of Agriculture couldn’t find that it was incidental to.

Willis F. Daniels:

Well, I think I will say that.

Felix Frankfurter:

Don’t you have to say that, namely that it was not within the area of this lawful exercise of judgment you’ll find its incidental.

That is that we —

Willis F. Daniels:

Well —

Felix Frankfurter:

(Voice Overlap) don’t have to find.

Willis F. Daniels:

This Court — this Court sir said this in the Bernard versus Stark case through Mr. Justice Clark.

He struck down a provision which — which disturbed uniformity with this expression.

We cannot find that it is not — not inconsistent.

Now, these are conjunctives and it must satisfy all three of them sir.

Felix Frankfurter:

That — I think that’s just the same thing with (Voice Overlap)

Willis F. Daniels:

Yes, I think so, yes sir.

Felix Frankfurter:

If a person who knows about these things can say it is incidental to or not inconsistent with, and one person knows about these things, can fairly say is, although another person might say it isn’t, this Court can’t overrule the judgment of the Secretary, isn’t that right?

Anyhow, you deal with it tomorrow.

Willis F. Daniels:

If there is authority in the statute to do it.