APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 71-549)
Before Aldisert, Gibbons and Higginbotham, Circuit Judges.
Under the Agricultural Adjustment Act of May 12, 1933, 48 Stat. 31, as amended, 7 U.S.C. § 601 Et seq., the minimum price at which milk processors and distributors ("handlers") may purchase unprocessed milk from farmers ("producers") is subject to regulation by the Secretary of Agriculture. As a result, milk prices are typically adjusted in accordance with changing economic indices in order to assure, Inter alia, "an orderly flow of the supply . . . (of milk) to market throughout its normal marketing season to avoid unreasonable fluctuations in supplies and prices." 7 U.S.C. § 602(4). This case raises the question whether Abbotts Dairies Division of Fairmont Foods Company ("Abbotts"), after succeeding ultimately in invalidating a Milk Marketing Order of August 20, 1969, may now recover the difference between the invalid order price and a lesser proposed price for the period between September, 1969 and July, 1970.*fn1 Also before us are the issues whether the amount of Abbotts' overpayment could be made subject to reduction to the extent that Abbotts "passed on" any excess prices to its customers, and whether the Secretary must in the first instance consider the restitution question.
The district court, rejecting the passing on defense determined that Abbotts could receive recompense in the amount of the difference between the invalid order price and the price at which Abbotts would have been able to purchase milk during the period in question. The district court determined also that the case should be remanded to the Secretary for ascertainment of that amount and the amount of interest, if any, which should be awarded.*fn2 For the reasons expressed below we reverse the district court's order of remand to the Secretary and instruct the district court to make findings in the specified areas, as necessary, and enter judgment accordingly.
The procedural history of this case cannot, unfortunately, be stated so briefly as would be desired. Over a period of nine years the issues in this case have been litigated, adjudicated, revised and reconsidered in several different administrative and judicial proceedings. There have been three rulings by the Secretary since the August 20, 1969, Order, pursuant to three administrative proceedings; there has been extensive litigation in the United States District Court, first the Secretary's action for a preliminary injunction before Judge Luongo and then the hearings before and adjudications by Judge Ditter on the validity of the August 20, 1969, Order and the availability of damages; and, now, there have been two appeals to this Court.
Decades ago scholars pressed for reform of the judicial process; they were confident that the new administrative law process would be above all far more expeditious, fair, and responsive than what had sometimes proven to be a slow, protracted judicial process. This case exemplifies one instance in which those lofty expectations of expedition have not been met, and it is difficult to imagine a case intertwined with greater confusion and delay on a problem which, but for the administrative process, was not extremely complex. Despite this Abbotts is confronted with a request for yet another remand which could extend this litigation into its second decade.
The triggering event for this case took place on August 20, 1969, when the Secretary issued a Milk Marketing Order for the Delaware Valley Marketing Area*fn3 instituting what is known as a "penny-by-penny" system for adjusting the minimum price which a milk handler (E. g., Abbotts) must pay to milk producers. According to this system the minimum price of milk would rise on a penny-by-penny basis in conformity with rises in the price of milk in the Minnesota-Wisconsin area. This penny-by-penny pricing constituted a departure from the Delaware Valley Marketing Area tradition of bracket pricing, by which the price of milk moved in steps of twenty (20) cents when by the relevant economic formula a different bracket became applicable. The practical effect of the penny-by-penny system was that the price of milk became indisputably higher during the period at issue. At a hearing before the Secretary on October 30, 1969, to reopen the matter of the August 20, 1969, Order, Abbotts as well as all producers who were represented opposed the penny-by-penny system in favor of bracket pricing.*fn4 Significantly, Abbotts' proposal at that hearing was a bracket price different from, and in excess of, the price under the previously valid Marketing Order.*fn5
After a hearing and upon finding that Abbotts had refused to pay the August 20, 1969, Order price, Judge Luongo on August 20, 1970, enjoined Abbotts to cease and desist violations of the Marketing Order, to pay in the future the higher minimum price provided in the Secretary's Marketing Order and otherwise adhere to that Order, and to pay $34,126.25 as its due share of the administrative expenses of maintaining a producer-settlement fund.*fn6 In enjoining Abbotts, Judge Luongo rejected its request, contained in its April 22, 1970, Answer, that if the Government's prayer for an injunction was granted those funds representing the difference between the proposed bracket price Abbotts was willing to pay and the penny-by-penny price the Secretary demanded should be deposited with the court.*fn7 In rejecting this request Judge Luongo relied upon the view that the reserve in the producer-settlement fund would stand as a ready source for recovery of overpayments in the event the August 20, 1969, Marketing Order was subsequently invalidated.
On November 27, 1972, Judge Ditter filed an opinion overturning the decision of the Secretary which upheld the penny-by-penny August 20, 1969, Order as being based upon no evidence whatever. 351 F. Supp. 561 (E.D.Pa.1972). The matter was remanded to the Secretary at his request, and later came before Judge Ditter again. In his opinion of January 9, 1975, he again held the August 20, 1969, Order to be invalid, concluding: "(T)here is no substantial evidence to support the decision and it is therefore arbitrary and capricious and must be set aside." 389 F. Supp. 1, 12 (E.D.Pa.1975). In 1976 Judge Ditter yet again spoke to the issue, rejecting the Secretary's motion for reconsideration. 421 F. Supp. 415 (E.D.Pa.1976), Aff'd, 559 F.2d 1207 (3d Cir. 1977) (judgment order).*fn8 As detailed at the outset, the present appeal follows Judge Ditter's decision on monetary recovery only.
Throughout the procedural history of this case Abbotts and the Government have been the only litigating adversarial parties. A milk farmers' cooperative, Pennmarva Dairymen's Cooperative Federation, Inc. ("Pennmarva"), having been granted limited intervention for the determination of the refund issue, is before us on this appeal asserting, Inter alia, that no In personam judgment can be filed against current producers for receipt by producers in 1969 and 1970 of overpayments which were required by a then operative minimum pricing Order.
We will first consider the availability of the passing on defense in the present case. Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S. Ct. 2224, 20 L. Ed. 2d 1231 (1968), established that in a § 4 Clayton Act*fn9 suit it is no defense that a party seeking to recover overcharges has passed on equivalent price increases to its customers. The court expressed two fundamental and related rationales: first, that permitting a passing on defense would create complex, burdensome and possibly insoluble problems of proof; second, that enforcement of antitrust laws would be impeded if such a defense were deemed litigable.
The economic reasons given in support of the first rationale are not logically limited to antitrust suits. These reasons are illustrated as follows. If the exact amount of an overcharge were passed on by a purchaser-seller, the effect on that purchaser-seller may still have been a negative one for the quantity of sales may have decreased. Even if sales increased after the exact amount of the overcharge was passed on there is no way of determining how much they would have risen absent the overcharge. Also, a defendant could not practically prove that the purchaser-seller would not have raised his prices without passing on an overcharge. If the purchaser-seller would ...