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United States v. United Dairy Farmers Cooperative Association


decided: December 28, 1979.



Before Adams, Rosenn and Sloviter, Circuit Judges.

Author: Per Curiam


The question posed in this appeal is whether United Dairy Farmers Cooperative Association (United Dairy) is a "handler" of milk within the meaning of the Agricultural Marketing Agreement Act of 1937, 7 U.S.C. 608c (1976). United Dairy asserts that it is not a handler and therefore need not comply with Federal Milk Marketing Order No. 36, 7 C.F.R. § 1036 (1978), nor must it exhaust the administrative remedies provided in the statute before it may defend the action brought by the Secretary of Agriculture's Market Administrator to enforce the Order. The district court, holding that the administrative route must be taken, granted the Administrator's motion for summary judgment and directed the dairy cooperative to comply with the Order. Because the uncontroverted allegations in the pleadings and the affidavits establish that United Dairy is a handler of milk within the statutory definition, we affirm.

The statute at issue authorizes the Secretary of Agriculture to issue orders setting minimum prices, varying from region to region, that handlers must pay to producers of milk, as well as the timing and method of payment.*fn1 The Government brought this enforcement proceeding alleging that United Dairy violated section 73 of Order No. 36, 7 C.F.R. 1036.73 (1978), by failing to pay producers on or before the eighteenth day after the end of the month. The unpaid amounts as of the end of July 1978 were alleged to be $7,468.93. In its answer United Dairy denied that it was a handler of milk within the jurisdiction of the Act or the Order, denied that it violated the Order, and specifically denied that any payments to producers had been wrongfully withheld.

United Dairy claims that it is not a handler within the definition of the Order at 7 C.F.R. 1036.9 (1978) because

(a)ll of the farmers for whom the government is claiming that certain amounts of money are due, were members of the Defendant Cooperative Association. As members of that Association, they produced milk which was transported to processing facilities owned by the cooperative, where the milk was processed, taken to stores also owned by the Cooperative, and sold to the public. The title to the product in effect is the inventory of the cooperative until the consumer buys it. The product therefore sold to the consumer is in effect the inventory of the cooperative.

Appellant's Brief at 4.

The Department of Agriculture's regulations define handlers with a fair degree of specificity.*fn2 The statute, however, is quite general. It empowers the Secretary to issue orders "applicable to processors, associations of producers, and others engaged in the handling of any agricultural commodity or product thereof specified (as is milk) in subsection (2) of this section. Such persons are referred to in this chapter as "handlers.' " 7 U.S.C. § 608c(1) (1976). Subsection 15(A) states that "(a)ny handler subject to an order may file a written petition with the Secretary of Agriculture, stating that any such order or any provision of any such order or any obligation imposed in connection therewith is not in accordance with law and praying for a modification thereof or to be exempted therefrom." The statute further entitles the handler to a hearing on the petition and to judicial review of the Secretary's ruling. Id. § 608c(15)(B).

It has long been established that the administrative relief provided in the statute is not merely permissive but exclusive in the first instance: any challenge to the applicability of an order must first be made administratively. United States v. Ruzicka, 329 U.S. 287, 294, 67 S. Ct. 207, 91 L. Ed. 290 (1946).*fn3 Moreover, any enforcement proceeding initiated by the Secretary will not be stayed or impeded while the handler pursues his administrative remedies.*fn4

The cases are clear, as United Dairy seems to concede,*fn5 that a handler must exhaust its administrative remedies before challenging the Secretary's Order, even if the challenge is only by way of defense to the Secretary's enforcement action in federal court.*fn6 Because United Dairy is, by its own admission, an association of milk producers that transports, processes, and distributes milk for sale to the public,*fn7 it is a handler within the meaning of the statute and must therefore take the administrative route to contest the Secretary's Order. There is evidence in the record that United Dairy had notice that the Secretary considered it to be a handler and expected the cooperative to comply with the terms of the Order.*fn8

We need not decide on this appeal whether the cooperative is a handler within the more specific definition of the Order,*fn9 whether the Order is valid in general or as applied to United Dairy, or whether the Order was in fact violated. All these matters are for the agency to consider in the first instance.

Accordingly, the judgment of the district court will be affirmed.

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