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UNITED STATES v. IDEAL FARMS

May 1, 1958

UNITED STATES of America, Plaintiff,
v.
IDEAL FARMS, Inc., Defendant



The opinion of the court was delivered by: WORTENDYKE

This action is brought under 7 U.S.C.A. § 608a(6) to compel compliance with and to enjoin the violation of Milk Marketing Order No. 27 (hereinafter referred to as Order), promulgated to regulate the handling of milk in the New York-New Jersey milk marketing area. 22 Fed.Reg. 4643. Plaintiff also seeks judgment in the aggregate of the amounts, with interest, billed to defendant by the Market Administrator for payment to the Producer Settlement Fund (hereinafter referred to as Fund), pursuant to the provisions of the Order.

The complaint charges that the defendant is a 'handler' of milk as defined in Section 927.7 of the Order, and that, as such a handler, defendant has violated and continues to violate Section 927.77 of the Order by failing and continuing to refuse to pay to the Market Administrator, for and on behalf of the Fund, the respective amounts called for by the billings aforesaid.

 While attacking the validity of the Order, defendant nevertheless admits that it is a 'handler' as defined therein and claims that it has paid into the Fund all moneys by it required to be paid, except moneys billed upon milk produced by the defendant. Accordingly, defendant denies that it has violated Section 927.77 of the Order.

 The answer also alleges and it is conceded that defendant timely instituted, before the Secretary of Agriculture, proceedings authorized by Section 15(A) of the Act (7 U.S.C.A. § 608c(15)(A)) for the review of the Order, and that such proceedings are still pending but have not as yet been heard. While conceding that 'there is no avenue of appeal open to the defendant except first following the 15(A) procedure', defendant preliminarily sought a stay of the present action until a final determination of the proceedings before the Secretary, and claimed that the bringing on of a hearing in those proceedings had been and would probably be further delayed through no fault of the defendant.

 Defendant's motion for such a stay was denied by the Court upon the authority of United States v. Ruzicka, 1946, 329 U.S. 287, 67 S. Ct. 207, 91 L. Ed. 290. A motion by plaintiff for summary judgment was likewise denied, but with leave to renew the same at or after the pretrial conference. When so renewed, the motion was again denied and the case proceeded to trial upon the stipulations made and exhibits marked in evidence at the pretrial conference.

 Upon the close of the evidence for the plaintiff upon the trial, defendant moved for dismissal of the complaint or, in the alternative, for a stay of the action until completion of the 15(A) proceedings before the Secretary, and at the conclusion of the arguments upon these motions, the Court reserved decision.

 Pending its decision, the Court has been advised by letter that the 15(A) hearing before the Secretary has been set down for May 7, 1958. The imminence of that hearing eliminates the basis for defendant's contention that delay in bringing on the hearing before the Secretary rendered illusory the administrative remedy available and exposed the defendant to the probability of irreparable damage were the present enforcement action to proceed to judgment.

 This Court concludes that by reason of defendant's failure to exhaust its available administrative remedy, afforded by 7 U.S.C.A. § 608c(15)(A), for the determination of the propriety legality and constitutionality of the Order, this Court should not entertain or consider defendant's attack upon the validity of the Order. Aircraft & Diesel Equipment Corp. v. Hirsch, 1947, 331 U.S. 752, 67 S. Ct. 1493, 91 L. Ed. 1796. There appears no basis for reasonable anticipation that the defendant will suffer irreparable injury without the Court's present equitable intervention, in view of the obviously adequate administrative remedies available to the defendant. 7 U.S.C.A. § 608c(15)(A); 5 U.S.C.A. § 1009(b); Aircraft & Diesel Equipment Corp. v. Hirsch, supra; Hygeia Dairy Co. v. Benson, D.C.Tex.1957, 151 F.Supp. 661.

 The critical question which the defendant seeks to present here, but which this Court concludes should be first presented in the Section 15(A) proceeding before the Secretary, is whether the defendant, who is a 'handler' of milk, some of which is produced upon its own farms, and some of which is produced by others, is legally obligated under the Order to contribute to the Fund upon its so-called 'own farm produced' milk. For an answer to this question defendant seeks an interpretation of 7 U.S.C.A. § 608c(5)(C) which reads as follows:

 '(C) In order to accomplish the purposes set forth in paragraphs (A) and (B) of this subsection, 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) of this section.' (Emphasis supplied.)

 Defendant controls several plants from which is shipped to a central plant, milk collected and purchased from other producers. Defendant also receives, handles and distributes at its plant, milk produced upon its own farms. Defendant contends that, as to that milk which is produced upon its own farms, it cannot be a 'handler' within the meaning of the language of the foregoing section, because it does not and cannot 'purchase' its 'own farm produced' milk. Defendant argues, therefore, that it is not obligated to make payments into the Fund based upon so much of the milk handled by it which it obtains from its own farms. Of the latter category, it denies that it is a 'handler' within the meaning of the Act.

 For its right to present the foregoing question, defendant relies upon United States v. Rock Royal Co-Operative, Inc., 1939, 307 U.S. 533, 59 S. Ct. 993, 1016, 83 L. Ed. 1446. Although the cited case originated, as here, in an enforcement proceeding, and held that, of four defendants, a proprietary corporation required to pay uniform prices for the milk it purchased as a handler had standing to raise the issue of want of statutory authority to except cooperative handlers from such payment pursuant to an Order issued by the Secretary of Agriculture while the other three could not be heard to complain of the benefits conferred upon them as cooperatives, the decision is not authority for a departure from the rule requiring the exhaustion of administrative remedies before and as a condition precedent to the right of the invocation of judicial relief; that question not having been raised or decided. The Rock Royal case affords illumination here only as it defines 'purchased' as used in the above quoted Section as 'acquired for marketing.'

 Against the absence of any reference in the Rock Royal opinion to the provisions of 7 U.S.C.A. § 608c(15)(A), we contrast United States v. Ruzicka, supra, which held that in an enforcement proceeding such as the present, an attempted justification of failure to pay into the Fund, that the billing was based on faulty inspection of accounts, could not be asserted in such a proceeding, but that recourse must first be had to the specific remedy provided in the form of a 15(A) proceeding before the Secretary. The reason for this ...


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