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Wawa Dairy Farms Inc. v. Wickard

decided.: June 5, 1945.


Author: Stephens


STEPHENS, Circuit Judge.

Federal Milk Order No. 61, regulating the handling of milk in the Philadelphia marketing area, was issued in 1942 by the Secretary of Agriculture pursuant to authority contained in the Agricultural Marketing Agreement Act of 1937, 7 U.S.C.A.§ 601 et seq. Appellant Dairy petitioned the Secretary of Agriculture under § 8c(15)(A) of the Act, 7 U.S.C.A. § 608c(15)(A),*fn1 for a modification of parts of the order or for a declaration of appellant's exemption from the terms of the order. The Secretary denied the petition, and appellant sued for a review by the district court under § 8c(15)(B) of the Act, 7 U.S.C.A. § 608c(15)(B).*fn2 The district court found the order "in accordance with law" on motion for summary judgment, and the Dairy appeals. A detailed statement of the case may be found in the opinion of the district court, D.C., 1944, 56 F.Supp. 67.

The milk order attacked herein regulates minimum prices payable by handlers to producers of milk in the defined area. Dependent upon the locations of milk-receiving facilities,*fn3 certain deductions from the fixed minimum prices are authorized. Three zones are established; one comprises the territory within 11 miles of the Philadelphia City Hall, one the territory more than 11 but less than 31 miles therefrom, and one the territory more than 31 miles therefrom. No allowances are made for milk-receiving facilities within the first or 0-11 mile zone. For facilities within the 11-31 mile zone a graduated deduction is permitted on a mileage basis to compensate for transportation costs. Deductions of two different types are authorized for plants within the 31 plus mile zone, namely, a transportation allowance and a receiving station allowance. The latter represents the value of services rendered by the receiving stations.

Appellant maintains a plant for the processing and bottling of milk 18 miles from the City Hall. The milk is transported in bottles 22 miles from its processing plant to a distribution plant within the 11 mile zone. Under milk Order No. 61 in computing the minimum price payable to its producers appellant is entitled to a transportation allowance only, but by the instant action it seeks the establishment of its right to deduct the receiving station allowance. Specifically, appellant contends that as to it the milk order is arbitrary, unreasonable, discriminatory, and confiscatory in prescribing a receiving station allowance only for plants in the 31 plus mile zone because, as it claims, substantial evidence does not support the drawing of the demarcation line at 31 miles. Inadequacy and inequitableness of the transportation allowance in the 11-31 mile zone is asserted, and the propriety of adjudging the case by summary judgment is questioned.

According to the custom of the Philadelphia marketing area the producer bears the cost of transporting milk to the market, and the handler bears the cost of processing and distributing. The milk is either "direct shipped" to bottling plants, that is, picked up in cans by trucks and carried on the average of from 30 to 35 miles, or it is delivered to more or less convenient receiving stations. There, the milk is weighed, tested, cooled, and then shipped in tank trucks to the processing and bottling plants. Producers cool the milk "direct shipped" but ordinarily do not cool milk taken to a receiving station.

Direct shipment of milk has greatly increased with the improvement of highways and motor vehicles, and many receiving stations near the metropolitan area have been abandoned because of the growing practice of directly shipping milk to the processing and bottling plants. There are 47 receiving stations operating under Order No. 61, none of which is within 25 miles of the Philadelphia City Hall and only 2 of which are within the 31 mile zone. There are 6 receiving stations within 31 to 40 miles from the City Hall, and all others are still further away. Of the 78 processing and bottling plants subject to the order, only 3 are more than 31 miles from the City Hall,*fn4 39 are within 11 miles, and 36 are 11 to 31 miles therefrom. Within the 16-20 mile area there are 13 bottling plants including that of appellant.

31-Mile Line.

Under the terms of § 8c(15)(A) and (B), 7 U.S.C.A. § 608c(15)(A) and (B), a ruling of the Secretary of Agriculture in a proceeding initiated under subsection (A) is "final, if in accordance with law," and upon a review of the ruling the district court may inquire only whether substantial evidence supports the Secretary's findings. Federal Security Administrator v. Quaker Oats Co., 1943, 318 U.S. 218, 228, 63 S. Ct. 589, 87 L. Ed. 724; New York State Guernsey Breeders' Co-op., Inc. v. Wickard, 2 Cir., 1944, 141 F.2d 805, 808.

The fixing of a 31 mile line outside which the receiving station allowance may be deducted, and within which the allowance may not be deducted, is supported by substantial evidence. It is not questioned that a line of demarcation must be drawn somewhere, and of course such a line must be reasonable. The evidence substantially supports the court's finding that the 31 mile line as found by the Secretary is reasonable and proper. It reveals that of the 125 plants to which the milk order applies, only 2 receiving stations are located within the 31 mile zone whereas 45 are without it, and only 3 bottling plants are located without it whereas 75 are within it. And as has already been stated, the volume of milk delivered to receiving stations within the 31 mile zone has so greatly decreased that delivery to such stations is now exceptional. By the practice of shipping directly to bottling plants, the receiving station allowance is eliminated, netting a higher price to producers. The growth of the direct shipment practice and the correlative decline in the use of the close-in receiving stations demonstrates a very significant decline in the utility of the latter and is convincing evidence that the 31 mile line is founded upon good reason and therefore is not arbitrary.

The evidence shows that much the greater quantity of milk consumed in the Philadelphia marketing area is satisfactorily "direct shipped" and average of 30-35 miles. It appears that no receiving station is economically useful within a radius of 20 miles from a processing plant. There is no dispute that a processing plant within 11 miles of the City Hall should not be entitled to deductions from minimum prices either for transporting or for receiving milk. It would seem to follow that a receiving station to be essential must be some 20 miles or more beyond the 0-11 mile zone or at least 31 miles from the City Hall.

That the utilization of close-in receiving stations is steadily and substantially being lessened negatives appellant's suggestion that direct shipment is inconvenient to producers, and is costly to them because of the added expense of cooling.

Order No. 61 was formulated after an exhaustive hearing by federal authorities at which testimony taken at hearings of the Pennsylvania Milk Control Commission was incorporated. There is no question in our minds that substantial evidence in the case supports Order No. 61 as a proper exercise of the discretion vested in the Secretary of Agriculture. Federal ...

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