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IDEAL FARMS, INC. v. BENSON

February 10, 1960

IDEAL FARMS, INC. and Franklin Lakes Dairy Producers, Inc., Plaintiffs,
v.
Ezra Taft BENSON, Secretary of Agriculture of the United States of America, Defendant. IDEAL FARMS, INC., Garden State Farms, Inc., Franklin Lakes Dairy Producers, Inc., and Ideal Farms Dairy Products, Inc., Plaintiffs, v. Ezra Taft BENSON, Secretary of Agriculture of the United States of America, Defendant



The opinion of the court was delivered by: WORTENDYKE

Each of these cases is before this Court pursuant to the provisions of subsection 15(B) of section 8c, (7 U.S.C.A. § 608c(15)(B),) of the Agricultural Adjustment Act of 1933, as amended, re-enacted and amended by the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C.A. § 601 et seq., hereinafter referred to as the Act. The cases have been consolidated here because they arise from consolidated proceedings in the Department of Agriculture, Dockets A.M.A. 27-120 and 27-122. Plaintiffs complain of the action of the defendant, by his Judicial Officer, hereinafter referred to as Secretary, in dismissing plaintiffs' petitions, filed under subsection 15(A) of the Act, to revoke certain sections of Milk Marketing Order No. 27, promulgated by the Secretary on June 10, 1957 to take effect August 1, 1957. In A.M.A. 27-120 below, plaintiffs named in Civil 1295-58 here, attacked the validity of section 927.65 of Order No. 27 'insofar as it requires the milk of producer-distributors to be equalized for those located in Northern New Jersey.' In A.M.A. 27-122 below, plaintiffs named in Civil 98-59 here, attacked sections 927.3, 927.40 and 927.71 of the same Order 'insofar as they include any part of Northern New Jersey in the Marketing Area' of the Order. The record of the proceedings before the Hearing Examiner and Judicial Officer of the Department comprises some 16,000 typewritten pages, exclusive of pleadings and exhibits. While the subsection, 15(A) proceedings were still pending before the Secretary, Ideal Farms, Inc. prematurely urged, in opposition to the Government's action to compel its compliance with section 927.77 of the same Order (No. 27), its present contentions of administrative procedural irregularity in the adoption of the Order, and lack of statutory authority for the Order's requirement that handlers who are also producers make payment to the Producer Settlement Fund based upon so much of the milk handled by them as they obtain from their own farms. See United States v. Ideal Farms, Inc., D.C.N.J.1958, 162 F.Supp. 28, affirmed 3 Cir., 1958, 262 F.2d 334.

Plaintiffs in both actions are New Jersey corporations. In the earlier, hereinafter called No. 1295, the plaintiffs are two in number, Ideal Farms, Inc., referred to as Ideal, and Franklin Lakes Dairy Producers, Inc., referred to as Franklin Lakes. In the other action, No. 98, these two plaintiffs are joined by two others, Garden State Farms, Inc., called Garden State, and Ideal Farms Dairy Products, Inc., referred to as Ideal Products. All plaintiffs operate in the northern part of New Jersey, which area was, for the first time, by the provisions of the Order as amended, made a part of a Milk Marketing Area. Ideal is a milk handler, as defined in § 608c(1) of the Act and in § 927.7 of the Order. That corporation operates a processing and bottling plant in Paterson, New Jersey, from which milk is distributed to retail and wholesale purchasers. Ideal buys no milk from other dairy farmers or producers, but does handle and sell milk produced on farms which it rents, and also buys milk from other milk plants. Franklin Lakes is also a milk handler, operating a milk receiving plant in Wantage, New Jersey, where it collects milk from dairy farms owned by others, together with milk produced on its own farms, and thereafter sells it to other handlers. Ideal Products is a handler of milk which it buys from producers and sells to other handlers. Garden State is a handler which receives milk from producers and other handlers, processes, bottles and sells it to purchasers within the marketing area defined in Order No. 27.

 All of the plaintiffs complain of alleged denial of due process in the administrative proceedings which resulted in the adoption of the Order, and Ideal and Franklin Lakes contend that the provisions of 927.65 of the Order, insofar as they may be construed to require the pooling and pricing of milk moved to a handler's plant from such handler's own farms, are not authorized by the Act and find no support in the evidence before the Secretary.

 Because they involve similar questions of law, these cases have been consolidated (Rule 42(a) F.R.Civ.P., 28 U.S.C.A.), and, because no genuine issues of material fact appear, the purely legal questions raised by the pleadings are presented by cross-motions for summary judgment under F.R.Civ.P. 56. See Wawa Dairy Farms v. Wickard, 3 Cir., 1945, 149 F.2d 860.

 Plaintiffs' contentions are stated in their consolidated brief on these motions, as follows:

 (1) 'Imposition of section 927.3, and section 927.65 of Order No. 27 upon the north Jersey area and these plaintiffs is invalid in that there was a lack of due notice of the hearing and improper use of the record by the Secretary as well as improper rulings and orders by the hearing examiners and the Judicial Officer.'

 (2) 'Pooling and pricing regulations of handlers' own farm production is beyond the authority granted to the Secretary of Agriculture by the statute.'

 Order No. 27, as originally promulgated by the Secretary on August 5, 1938, covered the New York metropolitan milk marketing area (7 C.F.R. §§ 927.1-927.89, Rev. 1952), and established 'a formula under which distributors of milk thereby regulated account to producers at a minimum price which varies according to the geographical area in which the milk is delivered to the purchaser by the distributor.' Fahy, J., in United Milk Producers of New Jersey v. Benson, 1955, 96 U.S.App.D.C. 227, 225, F.2d 527, 529. As stated in the cited case, the basic purpose of milk marketing orders promulgated and administered under the Act is 'to stabilize the price of milk, in aid of both producers and distributors or handlers, and to maintain orderly marketing conditions.' United States v. Rock Royal Cooperative, Inc., 1939, 307 U.S. 533, 59 S. Ct. 993, 83 L. Ed. 1446, and H. P. Hood & Sons, Inc. v. United States, 1939, 307 U.S. 588, 59 S. Ct. 1019, 83 L. Ed. 1478, are there cited as upholding the validity of the Act and of particular marketing orders made pursuant thereto. No impropriety in the administrative proceedings which promulgated the Order was asserted or considered in the United Milk Producers case, supra.

 By the provisions of the Act, 7 U.S.C.A. § 608c(1) and (2), the Secretary is directed not only to issue, but from time to time to amend orders applicable to persons engaged in the handling of milk (handlers) in the current of or which directly burdens, obstructs or affects interstate commerce. Subdivision (3) of the same section directs that the Secretary, whenever he has reason to believe that the issuance of an order will tend to effectuate the declared policy of the Act with respect to milk, 'shall give due notice of and an opportunity for a hearing upon a proposed order,' *fn1" Section § 608c(11) prohibits issuance of an order relating to a commodity which is applicable to all production or marketing areas, or both, unless the Secretary finds that 'the issuance of several orders applicable to the respective regional production areas or regional marketing areas, or both, as the case may be, of the commodity * * * would not effectively carry out the declared policy' of the Act.

 Plaintiffs base their assertion that their inclusion in the Order, by the provisions of § 927.3 thereof, is illegal upon the alleged insufficiency of notice to them that the scope of the Secretary's hearing might include the consideration of an amendment or revision of the existing Order No. 27 to extend its regional coverage to northern New Jersey. Such contention is without support in law or fact. The record of administrative proceedings in each of these cases discloses adequate compliance with 5 U.S.C.A. § 1003 and with part 900.4 of Title 7, Code of Federal Regulations relating to Agricultural Marketing Agreements and Orders. *fn2"

 In his statement of principles on proposed new milk marketing regulation in the New York-New Jersey area, published December 31, 1955 (20 F.R. 10167), the Secretary invited interested parties to submit proposals for embodiment either in a single order covering both areas or in a separate order for New Jersey alone. On May 25, 1956 there was published (21 F.R. 3537) a notice of hearing on proposals for a separate new milk marketing order for northern New Jersey. This notice was supplemented by one published June 6, 1956 (21 F.R. 3799), which announced that the subject matters of the hearing would be the handling of milk in the New York Metropolitan Milk Marketing Area and a proposed marketing agreement and order regulating the handling of milk in the Northern New Jersey Milk Marketing Area. The noticed hearing was convened at Newark, New Jersey, on June 18, 1956, and during its course a motion was made to expand the agenda to include consideration of a comprehensive order to combine regulation of milk handling in metropolitan New York and in northern New Jersey. This motion, after argument, was denied by the Secretary on June 25, 1956. The hearings under the original notice continued intermittently until recessed on December 20, 1956, but they were reconvened March 5, 1957, in New York City, pursuant to notice of call by the hearing examiner, duly published in the Federal Register on February 27, 1957 (22 F.R. 1128). A press release issued by the Secretary February 21, 1957, announcing that the reconvened hearing would be open for submission of evidence on a single marketing order for the Metropolitan New York-Northern New Jersey Areas was confirmed by a supplemental notice of hearing published in the Federal Register on February 28th (22 F.R. 1219). Motions attacking the timeliness and propriety of the latter notice were made to and overruled by the hearing examiner on March 5, 1957, and the hearings continued for eighteen more days, with participation therein by the present plaintiffs and their attorneys, until concluded on March 29, 1957.

 Section 900.4 of Rules and Regulations adopted by the Secretary pursuant to Section 10(c) of the Act (7 C.F.R. 900.4) requires that 'the notice of hearing shall contain a reference to the authority under which the marketing agreement or marketing order is proposed; shall define the scope of the hearing as specifically as may be practicable; shall contain either the terms or substance of the proposed marketing agreement or marketing order or a description of the subjects and issues involved and shall state the industry, area, and class of persons to be regulated, the time and place of such hearing, and the place where copies of such proposed marketing agreement or marketing order may be obtained or examined. The time of the hearing shall not be less than 15 days after the date of publication of the notice in the Federal Register, * * * unless the Deputy Administrator shall determine that an emergency exists which requires a shorter period of notice, in which case the period of notice shall be that which the Deputy Administrator may determine to be reasonable in the circumstances: Provided, That, in the case of hearings on amendments to marketing agreements or marketing orders, the time of the hearing may be less than 15 days but shall not be less than 3 days after the date of publication of the notice in the Federal Register.' (See also footnote 2 supra). It appears to be the contention of the plaintiffs that the entire Order No. 27 is invalid as to them because (a) they had insufficient notice that the contemplated regulation of milk marketing for northern New Jersey would be achieved by a territorial enlargement of the scope of the existing New York metropolitan order of the same number, instead of the originally contemplated separate order for the New Jersey area, and (b) the provisions of the single comprehensive order, of which they presently complain, cannot legally derive support from evidence adduced upon hearings held pursuant to the original notice of May 18, 1956, and (c) they were precluded from presenting evidence upon the hearings which reconvened on March 5, 1957, which might have exempted them from the impact of the comprehensive order insofar as it required handlers to account to the producer settlement fund for milk which they produce upon their own farms. In short, plaintiffs insist that the hearing noticed on February 27, 1957 was a promulgation hearing, contemplating a new regulatory order project rather than an amendment or modification of that scheme of regulation which had been under consideration by the Secretary since his published statement of December 15, 1955, and hearing notice of May 18, 1956. Plaintiff's attack upon the Order as a whole is obviously in aid of that upon the provisions of § 927.65 thereof which the plaintiffs contend are beyond the authority delegated by the Act 'insofar as this Section attempts to require the pooling and pricing of milk moved to a handler's plant from such handler's own farm' (plaintiffs' brief, p. 32). We shall examine plaintiff's contentions in the order of their statement of the legal questions which they present.

 Sufficiency of Notice

 The supplemental notice of hearing published February 28, 1957, to be convened March 5, 1957, for the first time announced the Secretary's intention to regulate northern New Jersey by a comprehensive order including metropolitan New York, whereas 12,000 pages of testimony had by then been taken at 84 sessions in contemplation of embodying the New Jersey regulation in a separate order. The notice of February 28, 1957 also announced that support for the proposed comprehensive order would be sought in the evidence already presented, as well as in that to be taken pursuant to the hearing there noticed. Because the comprehensive order for the first time placed under regulation thousands of New Jersey milk handlers, hundreds of New Jersey milk handlers, it is plaintiff's insistence that the supplementary notice of February 28 must necessarily have constituted a call for a 'promulgation' hearing for March 5, not a hearing upon a proposed amendment, ...


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