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Welsh Farms Inc. v. Bergsma

Decided: November 16, 1951.

WELSH FARMS, INC., ET AL., DAIRYMEN'S LEAGUE COOPERATIVE ASSOCIATION, INC., AND DAIRY DALE MILK, INC., ET AL., PETITIONERS-APPELLANTS,
v.
DANIEL BERGSMA, M.D., M.P.H., STATE COMMISSIONER OF HEALTH, ET AL., DEFENDANTS-RESPONDENTS



McGeehan, Jayne, and Wm. J. Brennan, Jr. The opinion of the court was delivered by Jayne, J.A.D.

Jayne

The declaration of our conclusions in these consolidated actions may well begin with a prefatory statement more informative of the subject matter of our deliberations than merely to say that the proceedings implicate the validity of certain administrative regulations promulgated by the State Department of Health and filed with the Secretary of State on July 5 and July 10, 1950. An account of some antecedent events and of the conditions comprising the environment in which the regulations were ordained will add illumination to the factual picture exhibited to us for consideration.

New Jersey is characterized as a milk deficiency state in that the resident producers supply less than 50 per cent of the State's requirements. The deficit is satisfied by the importation of milk into New Jersey through the channels of interstate commerce from sources in the states of New York, Pennsylvania, Maryland, and others.

The plaintiffs, who seek our declaratory judgment (Rule 3:81-10), some of whom have also sought a review pursuant to Rule 3:81-8, all hold temporary permits or creamery licenses issued to them by the State Department of Health enabling them to receive, ship, store, process and vend milk within this State.

The interest of the parties in this litigation is manifested by the disclosure that the Milk Dealers' Association of Northern New Jersey, consisting of 32 members, distributes approximately 75 per cent of all milk supplied in the nine northern counties. The South Jersey Milk Dealers Association, Inc., composed of 55 members, distributes approximately 80 per cent of all of the milk sold in the southern New Jersey area. The 30 members of the Trenton Milk Dealers'

Association, Inc., supply about 80 per cent of the milk consumed in the Trenton territory. The New Jersey Milk Industry Association, Inc., with a membership of 82, and the Dairymen's League Cooperative Association, Inc., with a membership of about 27,000 milk producers, distribute throughout the State. The plaintiffs comprise groups of dealers of milk, of whom some are located within and others without New Jersey.

It is exceedingly significant to recognize that the milk which is transported into New Jersey from the surrounding states is exposed to the same sanitary regulations and must meet the same standards of identity and quality as that produced in New Jersey.

The regulation and control of the production, processing, distribution and sale of milk have engaged studious legislative and administrative consideration in recent years. Witness the eloquent diction of the excerpt taken from the preamble of L. 1941, c. 274, p. 713:

"that it is made necessary by the conditions of unfair, unjust, destructive and demoralizing practices, heretofore existing or threatened and presently threatening, in the production, sale and distribution of milk which are likely to result in the demoralization of the agricultural interests of this State engaged in the production of milk and the creation of conditions inimical to the health of the public of this State; that it is the policy and intent of this act to prevent these unfair, unjust, destructive and demoralizing practices by providing a reasonable return for the milk producer, so as to prevent possible curtailment of a sufficient supply of fresh, wholesome, sanitary milk for our citizens."

Following the Milk Control Act of 1941 (L. 1941, c. 274), came the Reorganization Act of 1948 (L. 1948, c. 447), which constituted the Department of Agriculture a principal department in the executive branch of the State Government and transferred the functions of milk control within that department to the Office of Milk Industry. Vide, Common Farms, Inc., v. Foran , 6 N.J. Super. 306 (App. Div. 1950). Pursuant to the legislative authority so conferred upon it,

the Office of Milk Industry has assumed the regulation of producer, dealer, and retail minimum prices of milk within our State.

The realities of the situation did not, however, fade away as gently as a winter sunset. The New Jersey producers cannot, it is said, adequately supply the demands of the New Jersey consumers. The Office of Milk Industry has no legal authority to regulate the minimum prices in the surrounding milk markets which often have an available supply of milk of equal quality at a less price. See, State Board of Milk Control v. Newark Milk Co. , 118 N.J. Eq. 504, 508 (E. & A. 1935). Hence it is asserted by the plaintiffs that the only subordinate and pragmatical objective is to endeavor so to arrest the flow into New Jersey of out-of-state milk as to insure the exhaustion of the domestic production before recourse is had to foreign sources.

Nevertheless the importation of milk has never been reduced to a trickle and the plaintiffs declare that the administrative regulations here under judicial scrutiny are but crafty contrivances to suppress the interstate trade.

It is explained that the major points of the regulations here impugned were previously embodied in Senate bills Nos. 318 and 319 and in Assembly bill No. 429 introduced during the 1950 session of the Legislature and that they failed of passage. The Commissioner of Health acknowledged that "the impetus for the formulation and publication of these regulations came from outside your (his) Department." Thus the plaintiffs intimate that the Department of Health manifestly succumbed to the cozy warmth of an applauding group.

All of the foregoing evidence was evidently introduced to embroider the substratum of fact underlying the specific questions to be answered.

Initially we are not insensible to the general principle that administrative regulations have in their support the rebuttable presumption of validity and that the administrative agency has acted lawfully, regularly, and not oppressively.

State Board of Milk Control v. Newark Milk Co., supra; Hynes v. Grimes Packing Co. , 337 U.S. 86, 69 S. Ct. 968, 93 L. Ed. 1231 (1949); 42 Am. Jur. 680, § 240. It may be supposed that almost every regulation has a plus and a minus. It is not often that one of such is an unanimous blessing.

However, if the measures invoked are within the lawfully delegated authority of the agency and tend to serve a legitimate interest of society, the wisdom, need and appropriateness of the course pursued is not ordinarily a justiciable question. Abelson's, Inc., v. N.J. State Board of Optometrists , 5 N.J. 412, 420 (1950); 42 Am. Jur. 610, § 209.

The suggestion that the instant regulations were promulgated without a preliminary submission to a public hearing and without accordant findings to support them is, in the absence of some constitutional or statutory requirement, of no legal significance. State Board of Milk Control v. Newark Milk Co. , 118 N.J. Eq. 504, 522 (E. & A. 1935); In re Port Murray Dairy Co. , 6 N.J. Super. 285, 293 (App. Div. 1950); 42 Am. Jur. 423, § 94. Contrast R.S. 26:1 A -7.

Nor do we ascribe cogency to the premise that the authority to formulate regulations of this nature is solely confined to the precinct of the Public Health Council of the State Department of Health, although its code may within the scope of its appropriate functions deal with the production, distribution and sale of certified milk. L. 1947, c. 177, p. 795; R.S. 26:1 A -7. In any construction of its delegated authority, the power of the Council is limited to the establishment of sanitary regulations to preserve and improve the public health. So also it must be realized that the State Department of Health is likewise the creature of the Legislature, from which its powers are inherited. The Department has no inherent jurisdiction to make laws or to exercise the full police power of the State Government. Such agencies are to be confined within the limits that a construction of the grants of powers will assign to them, and those recognizable

delegated powers must be employed in a reasonable manner.

In the final analysis, it is the nature of the subject matter and the end to be served that determine the quality, content and authenticity of the regulatory power.

The pressure of the attack upon the validity of the regulations at hand is accentuated by the insistence that they offend the Federal Constitution. The commerce clause presents the remarkable instance of a national power which was comparatively unimportant for three-quarters of a century and which has since in peace time so developed that it is now, in its nationalizing tendency, perhaps the most conspicuous power possessed by the Federal Government. Farrand, Records of the Federal Convention, vol. II, p. 308, vol. III, pp. 478, 547; The Federalist, No. XLII; 1 Curtis, History of the Constitution 502; Story, The Constitution, sec. 259, 260; Fiske, The Critical Period of American History , 144; Warren, The Making of the Constitution , 567; Justice Frankfurter, The Commerce Clause; Ribble, State and National Power over Commerce.

And yet, for the protection of the public health and safety few businesses other than public utilities have been more thoroughly regimented and regulated by the states within constitutional limitations than the milk industry. Milk is an essential item of diet. It is a well known medium for the growth of bacteria. Vigilance against its contamination is imperative.

Of immediate relevancy is the statement of Mr. Justice Jackson, who delivered the opinion of the court in Hood & Sons v. Du Mond , 336 U.S. 525, 69 S. Ct. 657, 93 L. Ed. 865 (1949):

"This distinction between the power of the State to shelter its people from menaces to their health or safety and from fraud, even when those dangers emanate from interstate commerce, and its lack of power to retard, burden or constrict the flow of such commerce for their economic advantage, is one deeply rooted in both our history and our law."

Justice Cardozo, speaking for the same court in Baldwin v. Seelig , 294 U.S. 511, 55 S. Ct. 497, 79 L. Ed. 1032 (1935), had indicated that the economic objective, as distinguished from any health, safety, and fair dealing purpose of regulation, was the root of its invalidity.

We think that it must be acknowledged without further comment that the police power may not be employed by the state of destination for the sole purpose of erecting stone by stone an economic barrier against competition with the products of another state. Such ramparts, however advantageous to the economic security of our local producers, nonetheless impede the universally desirable mobility of commerce.

Also must we heed the argument that the regulations before us were not promulgated by an agency to which the Legislature has confided the duty to take measures requisite for the elimination of destructive trade practices, ruinous competition, and the maintenance of price levels, but by a department whose sphere of authority is limited to matters of public health. Cf. Dairy Products Law, R.S. 24:10-1, et seq. , and Milk Control Act of 1941, c. 274, § 21; R.S. 4:12 A -21. Nevertheless, we are importuned in this instance to fuse legal reasoning with the neoteric social thought.

In this field of inquiry it is not unprecedented for the divergent and oppugnant arguments of counsel to project slender distinctions between direct and indirect burdens upon interstate commerce. That the commerce clause impliedly imposes some restraint upon the governmental power of the State is indubitable. The limitations in the given case are the offspring of the implications of meaning of the clause, exemplified successively by the decisions of Justices Marshall, Taney, Waite, and Fuller and ever since projected in cases perhaps less capacious but scarcely less controversial. It may be that this implied negative operation of the clause on state power has been influenced beyond the bounds of rigorous legal logic by the evolutions of time, experience and trends of policy, but such thin shades of difference disappear where it is made manifest that the real purpose of the regulation

in question, as well as its naturally foreseeable tendancy, is to suppress or mitigate the consequences of competition between the states.

"Economic welfare is always related to health, for there can be no health if men are starving. Let such an exception be admitted, and all that a state will have to do in times of stress and strain is to say that its farmers and merchants and workmen must be protected against competition from without, lest they go upon the poor relief lists or perish altogether. To give entrance to that excuse would be to invite a speedy end of our national solidarity. The Constitution was framed under the dominion of a political philosophy less parochial in range. It was framed upon the theory that the people of the several states must sink or swim together and that in the long run prosperity and salvation are in union and not division." Baldwin v. Seelig, supra. On the other side of the coin we perceive that in the interest and promotion of the public health there is the need of an adequate supply of milk for the inhabitants of the State.

Certainly it is not to be supposed that a commodity, by reason of its extra-state origin, is completely immunized by the commerce clause from the exercise of state regulatory power. Reasonable regulation for the public good of a business affected, as the cases say, with a public interest, is admittedly permissible under the police power. Nebbia v. New York , 291 U.S. 502, 54 S. Ct. 505, 78 L. Ed. 940 (1934); State Board of Milk Control v. Newark Milk Co. , 118 N.J. Eq. 504 (E. & A. 1935).

We might embark upon an elaborate description of the characteristics of the commerce clause, its dimensions, its tolerances and its applications, were we not aware that the subject has been so frequently discussed in prior opinions.

In this period during which the clash of the divergent interests continues to resound, it is cautious to explain that our conclusions here expressed reflect only our conception of the composition and intrinsic character of the particular regulations

under review, examined in the light of the evidence adduced in these actions.

So the interrogatories addressed to us as they recede in our reflections seem to converge upon the questions: (1) are these regulations inherently health or economic measures; (2) are their purposes and effects beyond the constitutional boundaries of the state police power; (3) are they in relation to the public health arbitrary, unreasonable and capricious; and (4) does the so-called 50 per cent command regulation, in any event, lack sufficient standards to be enforceable?

I

THE FIFTY PER CENT COMMAND REGULATION

"WHEREAS, It is necessary to assure an adequate supply of milk for the inhabitants of this state, and the amount of milk available varies at different seasons of the year.

THEREFORE, Be It Resolved, that the State Department of Health does hereby require that all plants approved for the distribution or sale of fluid milk in New Jersey shall have their permanent permit so conditioned that New Jersey can command fifty per cent (50%) of its approved milk at any time during the period of the permit."

Within the area of our research this regulation seems to be one "wrapped in the solitude of its own originality." Our attention has, however, enveloped an acquaintance with the resolution adopted in 1946 by the Department of Health of the City of New York which required all approved milk-receiving stations or plants to ship into the city such percentage of their total receipts of milk and in such form (either fluid milk, cream, cheese, or other milk products) as the commissioner of health of the city should from time to time determine, and we observe that the trial court in which the validity of the command was challenged granted the motion for an injunction pendente lite against its enforcement on the ground that the regulation was not a sanitary regulation but was a burden on interstate commerce. Westchester County v. Department of Health , 65 N.Y.S. 2 d 313

(Sup. Ct. 1946), affirmed 297 N.Y. 491, 74 N.E. 2 d 190 (Ct. of App. 1947). We have noticed, too, that in 1927 the legislature of the State of Maryland enacted a statute requiring oyster packers, as a condition for the issuance of a license, to agree to deliver to the state ten per cent of the empty oyster shells, even though some of the live oysters came from other states. Leonard & Leonard v. Earle , 279 U.S. 392, 49 S. Ct. 372, 73 L. Ed. 754 (1929).

We are aware that reasonable regulations designed to secure the cleanliness, wholesomeness and purity of milk have been judicially sustained with conspicuous unanimity but with a like concordant adherence to the principle that the regulation must be reasonable and possess a recognizable adaptation to the object sought to be accomplished by it. Regal Oil Co. v. State , 123 N.J.L. 456 (Sup. Ct. 1939); N.J. Good Humor, Inc., v. Bradley Beach , 124 N.J.L. 162 (E. & A. 1940).

Accordingly we are asked whether the above-quoted regulation to which we now specifically allude has any reasonable relation to the public health and will in any consequential degree conduce to its preservation, or has it the genuine and direct object and purpose to promote in a forbidden manner the economic welfare of our local milk producers. Cf. Labash v. Bd. of Embalmers, &c. , 12 N.J. Super. 334 (App. Div. 1951). "If the dominant purpose be the advancement of private interests under the guise of the general welfare, there is a perversion of the power." Reingold v. Harper , 6 N.J. 182, 192 (1951).

"Whatever relation there may be between earnings and sanitation is too remote and indirect to justify obstructions to the normal [free] flow of commerce in its movement between states," said the court in Baldwin v. Seelig, supra.

But let us first consult the evidence pertaining to this regulation. On August 3, 1950, the Commissioner of the State Department of Health replied in writing to an inquiry concerning this particular regulation and others, the relevant portion of which reads:

"Receipt is acknowledged of your letter of July 18th in which you submit certain queries relative to the additional rules and regulations recently promulgated by the Health Commissioner:

3. 'In connection with the regulation which requires the permit be conditioned so that the State of New Jersey can command 50% of the suppliers output of the approved plan at any time, we would like to have answers to the following questions which have already been brought up by the members of the Association we represent:

'Does the regulation permit the call plan to operate on any basis less than 50%?' Answer: Yes.

'Would it be possible for the Department of Health to make a call upon certain permit holders to the extent of 50% and no calls at all upon other permit holders?' Answer: Yes.

'The regulation indicates that the State of New Jersey can command 50%. What officers or group of officers shall represent the State of New Jersey in making the command?' Answer: The Attorney General, the Commissioner of Health and the Director of the Office of Milk Industry.

'Would a permit holder called upon to ship 50% of his milk to New Jersey be forced to ship such milk at perhaps lower than the prevailing market price for ...


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