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STERLING DAVIS DAIRY v. FREEMAN

October 7, 1965

STERLING DAVIS DAIRY, Plaintiff,
v.
Orville L. FREEMAN, Secretary of Agriculture of the United States of America, Defendant



The opinion of the court was delivered by: LANE

 This matter comes before the court by way of its review jurisdiction pursuant to 7 U.S.C. § 608c(15)(B) of the Agriculture Marketing Agreement Act of 1937. *fn1" Both plaintiff and defendant, United States Secretary of Agriculture, seek summary judgment on the facts appearing in the administrative record. Wawa Dairy Farms v. Wickard, 56 F. Supp. 67 (E.D.Pa.1944), aff'd 149 F.2d 860 (3d Cir. 1945); Windham Creamery, Inc. v. Freeman, 230 F. Supp. 632 (D.C.N.J.1964).

 It is plaintiff's contention that certain actions by the Secretary and his agents - particularly the Market Administrator for the New York-New Jersey area - have not been in accordance with the law of the governing milk order. *fn2" More specifically, Sterling Davis Dairy alleges (1) that the Market Administrator erroneously determined plaintiff's milk operation to be one of "pool plant" status during the August 1957 through March 1958 period in issue; (2) that certain assessments representing skim milk differential payments imposed on plaintiff by the Market Administrator for the months including April 1958 through December 1960 are contrary to recent Supreme Court interpretation of the 1937 Act; and (3) that the same Supreme Court interpretation requires a rebate from the Producers Settlement Fund for certain now invalid compensatory payments made during June 1958.

 Previous to this action, these several determinations were upheld by both the Hearing Examiner and the Judicial Officer in Department of Agriculture administrative appeals proceedings conducted pursuant to 7 U.S.C. § 608c(15)(A). *fn3"

 In defining the scope of judicial review, section 10(e) of the federal Administrative Procedure Act states that "the court shall review the whole record or such portions thereof as may be cited by any party." *fn4" The Supreme Court in Universal Camera Corp. v. National Labor Relations Bd., 340 U.S. 474, 71 S. Ct. 456, 95 L. Ed. 456 (1951), considered the above-cited section at great length. There, Justice Frankfurter affirmed the duty of the reviewing tribunal to take into account the entire administrative record, including that evidence which "fairly detracts from" or contradicts the agency decision. Id. at 488, 71 S. Ct. 456.

 It is not the function of the court, however, to engage in a de novo fact-finding or trial process. Rather, such review is limited to ascertaining whether on the whole record the agency decision is established by substantial evidence, and is not contrary to law. Federal Security Adm'r v. Quaker Oats Co., 318 U.S. 218, 63 S. Ct. 589, 87 L. Ed. 724 (1943).

 Substantial evidence has been defined as "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consolidated Edison Co. of New York v. National Labor Relations Bd., 305 U.S. 197, 229, 59 S. Ct. 206, 217, 83 L. Ed. 126 (1938). Once such a basis is found - again, in light of all of the record proofs - the court can not exercise an independent judgment so as to overrule or modify the decision of a Congressionally empowered administrator. Wawa Dairy Farms v. Wickard, supra; C. J. Wieland & Son Dairy Products Co. v. Wickard, 68 F. Supp. 93 (E.D.Wisc.1946); Windham Creamery, Inc. v. Freeman, supra.

 Agency actions "contrary to law" typically involve fundamental issues of constitutional powers, statutory authority and interpretation, and specific constitutionality as regards various procedural aspects of due process. See Rochester Tel. Corp. v. United States, 307 U.S. 125, 139-140, 59 S. Ct. 754, 83 L. Ed. 1147 (1939). It is to be noted that the "substantial evidence" test itself is closely related to the due process concept. An administrative ruling not reasonably supported by the proofs is, hence, violative of due process because of its inherently arbitrary character. This relationship is of particular significance to the instant controversy, for here plaintiff's contention that its pool plant denomination is not "in accordance with law," rests on the alleged failure of the evidence to so sufficiently demonstrate.

 The concept of "burden of proof" offers a final guideline in court review of administrative rulings. Regarding this, it is well established that the onus of showing arbitrary and capricious, or otherwise illegal agency activity, is borne by the challenging party. See Wawa Dairy Farms, Inc. v. Wickard, 56 F. Supp. 67, 70, supra; Windham Creamery, Inc. v. Freeman, supra.

 Moreover, the burden of establishing the classification of milk handled is statutorily imposed upon plaintiff, as an acknowledged milk handler under the Act. Should any handler fail to demonstrate otherwise, all milk is classified as Class I-A, and all skim milk in Class II and Class III is subject to the fluid skim differential. 7 C.F.R. § 1002.31. For purposes of administering the Act, each handler is required to submit monthly reports to the Market Administrator revealing the amount, type, source, and disposition of milk received at his particular plants. 7 C.F.R. § 1002.50. To the end of verifying these reports, handlers must make available to the Market Administrator, during the usual hours of business, all relevant records and accounts. 7 C.F.R. § 1002.54.

 We now turn to plaintiff's argument. Central to Sterling Davis's initial allegation is the proper effectuation of 7 C.F.R. § 1002.28(a) in light of the facts as revealed by the record. That section, formerly cited at 7 C.F.R. § 927.29(a), defines "temporary pool plants" within the New York-New Jersey milk marketing area. It pertinently reads as follows:

 
"For any of the months of January through March and July through December, any plant at which 25 per cent or more of the receipts of milk from dairy farmers and units is classified in Class I-A on some basis other than the failure to account for such milk shall automatically be designated a pool plant for such month. * * *"

 In the judgment of the Market Administrator, such test was so met by plaintiff's operation for the months of August, 1957 through March 1958. As a result, the dairy became indebted to the Producer Settlement Fund in the amount of some $24,518.00, plus $602.04 to cover incidental assessment for administration.

 Plaintiff attacks this determination on dual grounds: The first, dealing with the computation of milk receipts from dairy farmers during the contested period; and the second, regarding Class I-A sales of fluid milk in the New York-New Jersey marketing area. In its argument, plaintiff stresses not the unreasonableness of the Market Administrator's decision in the context of the information available during audit, but rather what it avers are the true facts based on new evidence adduced during the administrative hearing. Since the above-cited pool plant test relies ...


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