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National Dairy Products Corp. v. Hoffman

Decided: July 1, 1963.


For modification -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Schettino and Haneman. For reversal -- Justice Hall. The opinion of the court was delivered by Francis, J. Hall, J. (dissenting).


Appellant National Dairy Products Corporation, a licensed New Jersey milk dealer, was found guilty by respondent Floyd R. Hoffman, Director of the Office of Milk Industry, of selling milk to Penn Fruit Company, Inc., a Pennsylvania corporation, in violation of certain regulations establishing dealer-store minimum prices. The penalty imposed was revocation of the dealer's license and an order to sell its milk business and interests in this State, unless within 90 days of the order National Dairy agreed to cease selling milk to Penn Fruit at less than the fixed dealer-store prices, and pay a penalty of $25,000 to the Office of Milk Industry. National Dairy's appeal from the order was certified by this court on its own motion before arguments were heard in the Appellate Division. We continued the stay of the Director's order granted by the Appellate Division.

The facts are not involved, but for purposes of perspective a short recital of them appears necessary.

National Dairy Products Corporation is a corporation of the State of Delaware, with its principal office in New York City. It is engaged in the processing, sale and distribution of dairy products in a number of states. Offices are maintained in Philadelphia, Pennsylvania, as well as plants in Philadelphia and Chambersburg, Pennsylvania, Washington, D.C. and Camden, New Jersey. The record indicates that for purposes of economy and centralized distribution, National's dairy products, after being processed at its plants elsewhere, are transported to the Camden, New Jersey plant

at which they are either picked up at the platform by the customers or delivered to them by National's trucking facilities. For example, milk in glass gallon jugs is bottled at the company's 47th Street, Philadelphia location, cream buttermilk is processed at its Tabor Avenue, Philadelphia place, cottage cheese at Chambersburg, and sour cream at Washington, D.C. These products are then assembled at Camden for sale or distribution, or both. Some processing of milk, although not in glass gallon containers, is engaged in also at Camden.

National is licensed as a milk dealer in New Jersey under N.J.S.A. 4:12A-1. Such a dealer is defined in the act as:

"Any person who sells or distributes milk, including on consignment or for the account of a producer, or who purchases milk from producers or other milk dealers, as herein defined, and who, in addition thereto, pasteurizes in his own plant or bottles in his own plant for sale in this State to consumers or stores or other milk dealers or processors, as herein defined, except for consumption on the premises of the producers. * * *"

Penn Fruit Company, Inc. is a Pennsylvania corporation with its principal office in Philadelphia. It operates a chain of supermarkets in New Jersey, Pennsylvania, New York, Maryland and Delaware. Eleven such markets are maintained in New Jersey; each one is licensed in the name of Penn Fruit Company to sell milk as a store.

A store is defined to be:

"A grocery store, delicatessen, food market, hospital, institution, hotel, restaurant, soda fountain, dairy products store, any governmental agency, roadside stand and similar mercantile establishments." N.J.S.A. 4:12A-1.

Penn Fruit has been a long-time customer of National, purchasing milk and other dairy products for its stores in Pennsylvania and New Jersey. Prior to the events giving rise to this proceeding, the method of operation between the two companies was a simple one. Penn Fruit would ascertain the needs of its individual stores in the two states, and

then place the order with National indicating the requirement (including quantities of milk) of each store. National would then deliver the stipulated gallons and other quantities of milk and dairy products from the Camden plant in its own trucks directly to each store in New Jersey or Pennsylvania. During this period, National charged Penn Fruit the minimum or above-the-minimum price established by O.M.I. for dealer-store sales.

In August 1961 a change took place in their method of operation. On May 5, 1961 the Pennsylvania Milk Control Commission issued a milk dealer's license to National. (The company is referred to frequently, both in Pennsylvania and here, as "Sealtest," the designation given to the administrative division of National involved in these transactions. See Milk Control Commission v. Penn Fruit Company, 410 Pa. 242, 188 A. 2 d 705 (Sup. Ct. 1963).) Consequently, National then held dealers' licenses in New Jersey and Pennsylvania.

A milk dealer is defined by the Pennsylvania statute as:

"* * * [A]ny person, including any store * * * who purchases or receives or handles * * * milk within the Commonwealth, for sale, * * *." 31 P.S. § 700j-103.

Such a person cannot buy, distribute or sell milk within or without Pennsylvania unless licensed. 31 P.S. § 700j-401. The Commission is authorized to exempt stores (by official order) from the license requirements if all of the milk sold by them has been purchased or acquired from a Pennsylvania-licensed milk dealer. 31 P.S. § 700j-402. Penn Fruit has neither dealer nor store license in Pennsylvania.

In August 1961 Penn Fruit continued to give National the orders for milk and dairy products representing the requirements of its individual stores in New Jersey and Pennsylvania; National continued to charge the O.M.I. approved dealer-store prices for the New Jersey store sales. These products were delivered by National trucks from the Camden plant to the Penn Fruit New Jersey stores as in the past.

But in that month, the orders for the Pennsylvania stores began to receive different treatment. Penn Fruit gave National the orders listing the needs of its individual stores in Pennsylvania. But, as of August 14, Penn Fruit sent its own trucks from Philadelphia to National's Camden plant, picked up the orders for the Pennsylvania stores and delivered them at the individual store locations in that state by means of its own employees and equipment. According to the agreement of the parties (which O.M.I. concedes) these purchases and sales were made at National's Camden plant; delivery and transfer of title of the milk took place there also.

The new arrangement with respect to Penn Fruit purchases at Camden for the Pennsylvania stores meant that some of the products involved, perhaps all (the record is not entirely clear), engaged in double transportation between the two states. For example, as has been indicated above, the gallon jugs of milk were processed and bottled at National's 47th Street, Philadelphia plant; they were then transported to Camden, and the jugs purchased by Penn Fruit were delivered at that place to the Penn Fruit trucks which in turn brought them back into Pennsylvania for delivery to Penn Fruit stores in and around Philadelphia. The explanation for National's failure simply to deliver the milk and other dairy products to Penn Fruit in Philadelphia is that the Camden plant is maintained as a central distribution point, and that Penn Fruit is only one of the customers supplied at that place. It does appear, however, that with the advent of the new system, National ceased charging Penn Fruit O.M.I. dealer-store prices. O.M.I. dealer-subdealer prices were substituted. These prices were substantially lower than those applicable to store sales.

A subdealer is defined as:

"Any milk dealer who does not own, operate or lease a plant and does not pasteurize or bottle milk, but who purchases milk from a milk dealer or processor and sells or resells to a store or consumer, but the aforesaid definition shall not be deemed to include a store." N.J.S.A. 4:12A-1.

Subdealers represent a separate class of milk dealer commonly known to the trade in New Jersey for many years. They are independent businessmen, representing an operation between the dealer and the store or home consumer. They may be described in simple terms as milk delivery men who are in business for themselves; they deliver door-to-door to homes, and they may sell and deliver to licensed stores. They must be distinguished from ...

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