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United States v. Lewes Dairy Inc.

: October 14, 1964.


Author: Kalodner

Before KALODNER, FORMAN and SMITH, Circuit Judges.

KALODNER, Circuit Judge.

The United States instituted a proceeding in the District Court against Lewes Dairy, Inc., to enforce compliance with the provisions of the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C. § 601 et seq., and of the Marketing Order (Order No. 127, later renumbered No. 16) regulating the handling of milk in the Upper Chesapeake Bay, Maryland marketing area (7 C.F.R. Part 1027)*fn1

The District Court entered on May 21, 1963, an order requiring the defendant to pay into the registry of the court arrearages due under the Marketing Order for the period from February, 1960, to December, 1962, in the amount of $92,956.65, and also to pay into the registry of the court amounts currently due under the Marketing Order.

In the interim, Lewes Dairy, Inc., and Clifford S. Ott and James M. Faulkner, doing business as Hollybrook Dairy, a co-partnership, instituted proceedings in the District Court against the Secretary of Agriculture, pursuant to the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C. § 608c(15) (B), to review the denial of petitions for relief from Marketing Order No. 127 addressed to the Secretary pursuant to Section 608c (15) (A) of the Act*fn2

In this second proceeding, the District Court, on motions for summary judgment filed by the plaintiffs and by the Secretary, upon "Findings of Fact" and "Conclusions of Law", entered its order holding invalid Marketing Order No. 127 as it applied to the plaintiffs. The Secretary has appealed from this order, at our No. 14643.

The District Court, on July 16, 1963, entered an Order in the earlier enforcement proceeding so as to relieve Lewes Dairy, Inc. of the obligation of paying, as provided in its Order of May 21, 1963, the $92,956.65 arrearages into the registry of the court, pending appeal. The later Order provided that in the event this Court should reverse the District Court's Order in the review proceeding and remand for further administrative proceedings, the obligation to pay the arrearages should be deferred until sixty days after a final determination of the new proceeding*fn3 The United States has appealed at our No. 14642 from this July 16, 1963 Order.

With respect to the review proceeding (appealed at No. 14643), which we take up first, the ultimate issue is whether the Milk Marketing Order involved establishes an economic trade barrier inconsistent with the provisions of Section 608c(5) (G)*fn4 of the Agricultural Marketing Agreement Act of 1937, as amended, 7 U.S.C. § 608c(5) (G). See Lehigh Valley Cooperative Farmers, Inc. v. United States, 370 U.S. 76, 82 S. Ct. 1168, 8 L. Ed. 2d 345 (1962). However, the Secretary preliminarily asserts that the issue was not developed in the administrative proceeding and therefore contends that the cause should be remanded for further administrative proceedings, unless, of course, this Court should determine as a matter of law that the Milk Marketing Order is valid as applied.In this connection the Secretary contends that the District Court exceeded its authority in finding facts and in supplanting the Secretary in the exercise of functions initially committed to him.

Since we are in agreement with the preliminary assertion of the Secretary, an abbreviated statement of the underlying facts will suffice.

The background of milk regulation and the operation of a Milk Marketing Order are set forth in United States v. Rock Royal Co-operative, Inc., 307 U.S. 533, 59 S. Ct. 993, 83 L. Ed. 1446 (1939). Reference to that decision saves repetition. Moreover, the particular Milk Marketing Order here involved is discussed in specific detail in United States v. Mills, 315 F.2d 828, 831 (4th Cir. 1963), cert. den. sub nom. Willow Farms Dairy, Inc. v. Freeman, 374 U.S. 832, 83 S. Ct. 1874, 10 L. Ed. 2d 1054, the relevance of which is made apparent by footnote 2, supra. Again, reference to that decision saves repetition.

Lewes Dairy, Inc. and Hollybrook Dairy are milk companies with plants located in Delaware but which market milk in the Upper Chesapeake Bay Marketing Area, the regulated area encompassed by Milk Marketing Order No. 127. Under that Order, sales of fluid milk within the marketing area, rather than plant location, determine whether a milk company is to be regulated. The sales of Lewes Dairy, Inc. and Hollybrook Dairy made them "poolplants" subject to full regulation under the Upper Chesapeake Bay Marketing Order. Lewes Dairy, Inc., Hollybrook Dairy, and others, refused to comply with the Milk Marketing Order (as a result of which the United States commenced the enforcement proceeding already referred to). The dairies jointly filed petitions with the Secretary seeking administrative relief on broadly stated claims. Upon denial, judicial review on equally broadly stated claims was sought below. However, between the denial of administrative relief by the Secretary of Agriculture and the commencement of the judicial review proceeding in the court below, the United States Supreme Court handed down its decision in Lehigh Valley. The plaintiffs contend that they then merely "sharpened" their attack upon the validity of the Marketing Order in terms of that decision, which they also urge overruled, in effect, the decision of this Court in Titusville Dairy Products Co. v. Brannan, 176 F.2d 332 (1949), cert. denied 338 U.S. 905, 70 S. Ct. 307, 94 L. Ed. 557.

The gravamen of Lewes Dairy's position in the court below rests upon the fact that it did a portion of its business outside the Upper Chesapeake Bay Marketing Area, in Delaware, where it was allegedly in competition with unregulated milk companies, which, according to Lewes Dairy, could obtain their milk supplies at lower cost than the minimum prices to which the Milk Marketing Order subjected Lewes Dairy on all its milk purchases. This, Lewes Dairy contends, gave its competitors an advantage. The Milk Marketing Order's provisions, it is not disputed, made Lewes Dairy a "fully regulated" company, even though some of its sales were not within the marketing area, so that it was required to pay minimum prices on all its milk purchases without regard to where its milk was sold. This, Lewes Dairy contends, created a "trade barrier" not permitted under Section 608c(5) (G), as interpreted by Lehigh Valley.

Motions for summary judgment were filed in the Court below first by the Secretary and then by Lewes Dairy. Without regard to other issues which had been raised before the Secretary and in the complaint for review in the District Court (as to which see United States v. Mills, supra) the District Court made "Findings of Fact" and stated "Conclusions of Law"*fn5, although the Secretary opposed Lewes Dairy's motion on the grounds reasserted here insofar as the "trade barrier" issue is concerned.

In this instance, we have no hesitancy in concluding that the District Court's so-called "Findings of Fact" concerning the competitive effects of the Milk Marketing Order on the particular dairies here involved are unsupportable either as a proper exercise by the District Court of the summary judgment procedure under Rule 56, Federal Rules of Civil Procedure, or as a proper function of the District Court under the review procedure established by the Act pursuant to ...

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