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Cumberland Farms Inc. v. Moffett

Decided: June 24, 1987.

CUMBERLAND FARMS, INC., AND PENN VALLEY FARMS, INC., PLAINTIFFS-APPELLANTS,
v.
WOODSON W. MOFFETT, JR., INDIVIDUALLY AND AS DIRECTOR, DIVISION OF DAIRY INDUSTRY, STATE OF NEW JERSEY, DEFENDANT-RESPONDENT. IN THE MATTER OF THE REVOCATION OF THE LICENSE OF ALLEN R. CASE, T/A THE CORNER STORE, BAPTISTOWN, NEW JERSEY



Docket No. A-1917-84T7, On appeal from Regulations Promulgated by the Division of Dairy Industry. Docket No. A-2427-84T7, On appeal from a Decision of the Director of Dairy Industry.

Michels, O'Brien and Landau. The opinion of the court was delivered by Landau, J.s.c. (t/a).

Landau

[218 NJSuper Page 333] These are consolidated appeals which raise certain common questions respecting the regulation of milk sales in New Jersey. This marks yet another chapter in the long legislative and litigation history of this embattled industry.

Proceeding under R. 2:2-3(a)(2) Cumberland Farms, Inc. (Cumberland) challenges rules promulgated by the Division of Dairy Industry, in the Department of Agriculture (Division) as N.J.A.C. 2:52-6.1 and N.J.A.C. 2:53-3.1, which prohibit sales below cost by licensed milk dealers and licensed stores respectively; and N.J.A.C. 2:52-3.1 and N.J.A.C. 2:53-4.1, which impose prior notice requirements upon changes in source of supply by dealers and stores respectively. Cumberland's appeal purports to attack the rules both facially and as-applied. It also contends that the so-called "presumptive cost guidelines" promulgated periodically by the Director amount to regulation, yet are not subject to challenge by hearing.

Allen R. Case, t/a The Corner Store (Case) appeals from the final decision of the Director, Division of Dairy Industry revoking his license to sell milk for violation of the sales below cost regulations. This decision was rendered after a full administrative hearing on the record. Although he did not do so below, Case here challenges the above regulations and guidelines substantially on the same grounds as Cumberland.

On leave granted the New Jersey Milk Industry Association, Inc. has participated in this appeal as amicus curiae.

FACTS

CUMBERLAND FARMS

Cumberland Farms is a vertically integrated "jug store" milk dealer*fn1 with a processing and packaging facility as well as a

chain of retail outlets which trade under the same name. It desires to expand its operations to include wholesale sales to other non-processing milk sellers such as supermarket chains.

The present controversy between Cumberland and the Division arose in late September 1984 when Cumberland, as a short-term "promotion," reduced its store milk price from $1.89 to $1.79 per gallon. The Director subsequently denied Cumberland's license application pursuant to N.J.S.A. 4:12A-35(5), due to its continued failure to provide the Division with records to enable it to determine whether Cumberland was selling at a price below its cost. Cumberland was notified of its right to a hearing under N.J.S.A. 4:12A-34, but has never participated in such a hearing. On at least one occasion the Director, citing Cumberland's unlicensed status, declined to address a notice of intent to change suppliers, submitted by a potential Cumberland customer. N.J.A.C. 2:53-4.1. Attempts at adjustment under N.J.S.A. 4:12A-43 proved unsuccessful.

On December 21, 1984, Cumberland filed this appeal pursuant to R. 2:2-3(a)(2) challenging the validity of the below-cost and notice regulations and seeking review of the Director's action with respect to its milk dealers license. Cumberland also sought emergent relief under R. 2:9-8.

On January 7, 1985, by order of this court Cumberland's emergent application was dismissed as moot in view of a stipulation entered into whereby the Division agreed to issue Cumberland a license, on condition that it turn over the requested records.

As the record now stands, the challenged regulations have yet to be applied to Cumberland.

We note that without moving under R. 2:5-5(b), Cumberland has attempted to supplement the record provided on appeal

under R. 2:5-4(b), with references to events occurring subsequent to filing this appeal. These materials are not properly before us and will not be considered. Cherry Hill Dodge, Inc. v. Chrysler Credit Corp., 194 N.J. Super. 282 (App.Div.1984).

CASE t/a "THE CORNER STORE"

The Case matter began in March 1982, when the Division notified Case that in its opinion, the price at which the "Corner Store" was selling milk was below its cost in violation of N.J.A.C. 2:53-3.1. The letter requested that Case either adjust his price, document the meeting of competition or show that his price was above all the elements of cost as set forth in N.J.A.C. 2:53-3.2. Further, the Division set the matter for an informal hearing as provided by N.J.S.A. 4:12A-43. Case did not comply with any of the three requests contained in the letter nor did he appear at the informal hearing.

In July 1982, the Division filed a complaint in the Superior Court, Chancery Division, Mercer County, which resulted in an order requiring Case to comply with Division regulations. Case did not appeal from this order.

Through his accountant, Case attempted to provide the Division with information that showed that Case's price was higher than all his cost elements. After its own audit, the Division rejected this study since it did not reflect all the elements of costs enumerated in N.J.A.C. 2:53-3.2. The Division asked Case to adjust his price accordingly. Case did not accept these conclusions. The Division notified him in March 1983 that his license to sell milk was revoked subject to his statutory right to a hearing. Case requested a hearing under N.J.S.A. 4:12A-34, and the matter was referred to an Administrative Law Judge (ALJ).

In August 1984 the ALJ issued his Initial Decision in which he found that Case failed to calculate his cost of selling a gallon of whole white milk in accordance with N.J.A.C. 2:53-3.2. The ALJ further found that Case was selling milk at a price below his cost contrary to N.J.A.C. 2:53-3.1.

On February 7, 1985, after the ALJ's decision became final under N.J.S.A. 52:14B-10 and attempts at informal adjustment under N.J.S.A. 4:12A-43 had failed, the Director adopted the ALJ's findings of fact and conclusions of law and issued an order revoking Case's milk license effective February 25, 1985. Case appeals from this order.

On appeal, in addition to joining Cumberland's facial and as-applied attack on the below cost and notice regulations, Case argues that the records submitted by it substantially comply with N.J.A.C. 2:53-3.2 and therefore the Director's decision revoking his license is arbitrary and unreasonable.

CHALLENGES TO THE REGULATIONS

Appellants*fn2 challenge the validity of the above-referenced rules and ...


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