The opinion of the court was delivered by: TIMBERS
MEMORANDUM OF DECISION AFTER TRIAL
This action was brought by six dairy farmers residing in Rensselaer County, New York, suing for themselves individually and on behalf of all other persons in their class similarly situated and affected.
They seek declaratory and injunctive relief against the Secretary of Agriculture. Three other dairy farmers residing in Litchfield County, Connecticut, and Berkshire County, Massachusetts, for themselves individually and on behalf of all other persons in their class similarly situated and affected, were permitted to intervene as defendants. The essential questions presented are: (1) whether the Agricultural Marketing Agreement Act of 1937, 7 U.S.C. § 601, et seq., authorizes the Secretary of Agriculture to include in the Connecticut Milk Marketing Order, 7 C.F.R. § 1015, et seq. (1968), certain farm location differentials, 7 C.F.R. § 1015.72 (1968), which have been in effect since 1959; (2) whether the farm location differentials are unconstitutionally discriminatory; and (3) whether there is substantial evidence in the administrative record to support the Secretary's inclusion of these differentials in the Connecticut Milk Marketing Order.
After an eleven day trial at Albany, the Court holds that the Act does authorize the farm location differentials; that such differentials are not unconstitutionally discriminatory; and that there is substantial evidence in the administrative record to justify inclusion of these differentials in the Connecticut Milk Marketing Order. Accordingly, a permanent injunction enjoining the Secretary of Agriculture from administering the Connecticut Milk Marketing Order in such a way as to give effect to the farm location differentials is denied.
Jurisdiction is founded upon 28 U.S.C. § 1331(a), 28 U.S.C. § 1337, 28 U.S.C. §§ 2201-02, 5 U.S.C. §§ 701-06 and 7 U.S.C. § 601, et seq.
Venue is properly laid in this District pursuant to 28 U.S.C. § 1391(e).
PROPRIETY OF CLASS ACTION AND CLASS ACTION DEFENSE; ADVERSARY NATURE OF PROCEEDINGS
Pursuant to Rule 23(c)(1), Fed.R.Civ.P., the Court on October 20, 1967, after hearing evidence, entered two orders: one permitting the named plaintiffs to maintain the instant action as a class action and the other permitting the named defendant-interveners to maintain a class action defense.
With respect to the named plaintiffs, the Court determined, pursuant to Rule 23(a) and (b)(1)(B), Fed.R.Civ.P., that they may properly represent the interests of those producers producing milk on their respective farms and selling such milk to handlers operating under the order regulating the handling of milk in the Connecticut marketing area, 7 C.F.R. § 1015, et seq. (1968), where the farms of such producers are located outside the area described in 7 C.F.R. § 1015.72(a) (1968) (in short, those who do not qualify for the 46 cents differential).
With respect to the three named defendant-interveners, the Court likewise determined, pursuant to Rule 23(a) and (b)(1)(B), Fed.R.Civ.P., that they may properly represent the interests of those producers producing milk on their respective farms and selling such milk to handlers operating under the order regulating the handling of milk in the Connecticut marketing area, 7 C.F.R. § 1015, et seq. (1968), where the farms of such producers are located within the area described in 7 C.F.R. § 1015.72(a) (1968) (in short, those who do qualify for the 46 cents differential).
In view of the recent decision of the United States Court of Appeals for this Circuit in Eisen v. Carlisle & Jacquelin, 391 F.2d 555 (2 Cir. 1968), the Court on April 22, 1968 directed that all members of plaintiffs' and defendant-interveners' classes be given formal notice of the pendency of the action and an opportunity to be heard with respect to the continued maintenance of the action as a class action. The notices were sent by April 24, 1968 and made returnable on May 15, 1968.
Prior to the Court's order of April 22, 1968, Kenneth Hewitt and Leonard Duncan, members of plaintiffs' class, filed two papers entitled "Motion For Leave To Intervene Under Rule 24 or to Otherwise Enter Action Under Rule 23 for Purpose of Taking Depositions, to Move Dismissal of Suit and for Other Related Relief," and "Answer of Interveners and Motion to Dismiss Action, for Disposition of Escrow Fund and Other Relief." Since these papers made allegations of collusion which if true would not only have merited reversal of the class action orders but dismissal of the action, a hearing was similarly directed on May 15, 1968.
The Court thereafter held exhaustive hearings on May 15, May 27, and June 10, 1968, at which hearings all questions relating to the propriety of the maintenance of this action as a class action and all questions relating to Hewitt's and Duncan's claim of collusion were explored. Every interested person was given an opportunity to be heard and to present evidence through the testimony of witnesses and by means of exhibits. The complete record of all prior proceedings in this case was available for inspection by all interested persons at the Albany seat of Court from May 9, 1968.
The evidence presented not only does not in any way justify dismissal of the action but it clearly merits reaffirmation of the Court's orders of October 20, 1967 permitting plaintiffs and defendant-interveners to maintain this action as a class action pursuant to Rule 23(a) and (b)(1)(B), Fed.R.Civ.P. Plaintiffs' class of approximately 250 persons and defendant-interveners' class of approximately 3000 are without any doubt "so numerous that joinder of all members is impracticable." No one has disputed, nor can anyone dispute, that there are questions of both law and fact common to the classes and that the claims of plaintiffs and defenses of defendant-interveners are typical of the claims and defenses of their classes. Furthermore, as a practical matter, the adjudication of the differentials' validity with respect to individual members of the classes would be dispositive as to all class members because the differentials cannot be enforced or withdrawn piecemeal.
The only issue which merits discussion is the charge of collusion raised by Hewitt and Duncan. Also involved here is the issue of fairness and adequacy of representation with respect to plaintiffs' maintenance of this action as a class action. Basically, Hewitt and Duncan claim that the Consolidated Milk Producers' Association (CMPA), formerly the Connecticut Milk Producers' Association, solicited plaintiffs to bring this action in the Northern District of New York, and through payment of plaintiffs' counsel fees and other means have acted to control this action for the benefit of defendant-interveners' class who constitute the majority of the Association's members.
There is no question about the fact that CMPA as an organization is interested in the continuation of farm location differentials. The vast majority of its members receive these differentials and feel that it will be to their benefit to continue to receive them. Defendant-interveners are members of CMPA and their counsel also serves as counsel to CMPA. Furthermore, CMPA readily admits that after the farm location differentials in the neighboring New York-New Jersey Milk Marketing Order were held invalid by the Court of Appeals for the District of Columbia in 1966, the Association was troubled by the consequential uncertainty surrounding the validity of the Connecticut differentials. Part of this concern derived from the fact that a minority of its members, including all the named plaintiffs, did not receive the differentials and had vocally expressed their unhappiness with the situation. In fact, as established by the credible evidence, plaintiff Cranston had discussed the institution of a legal action to challenge the differentials with his long-time friend and neighbor, Attorney John P. Weatherwax, both before and after the decision in the District of Columbia.
It was only after Attorney Weatherwax had agreed to institute such an action challenging the differentials, that Cranston was contacted on January 27, 1967 by a CMPA official who had heard rumors that Cranston and others intended to commence a suit. This contact was the result of a decision on January 25, 1968 by CMPA to aid any members undertaking either to challenge or defend the differentials by reimbursing such members for reasonable expenses and attorney fees. The CMPA official explained the policy and mentioned the name of a possible attorney, but Cranston said that he already had his own. The official told Cranston that he would like to check on his reputation and see what kind of an attorney he was and if he was capable, because the Association was concerned about having good attorneys on both sides of the question. Aside from the offer to reimburse for reasonable expenses and this conversation, there was a subsequent meeting between CMPA officials, plaintiffs and Attorney Weatherwax. There is nothing, however, to suggest that CMPA in any way acted improperly. But most importantly, there is not an iota of credible evidence that CMPA, defendant-interveners, or defendant, acted, attempted to act, or even desired to act, to control plaintiffs' conduct in these proceedings. On the contrary, the record clearly demonstrates that plaintiffs for a number of years have been keenly interested in the abolition of the differentials, that they are just as keenly interested at this time, and that their counsel, Attorney Weatherwax, at all times has conscientiously, expertly and with the highest professional sense of duty to plaintiffs endeavored to represent their interests. Attorney Weatherwax has forthrightly, earnestly, and unceasingly prosecuted this lawsuit to enjoin the application of the differentials. He has conducted his case as any gentleman and lawyer should and would and has never conceded a point nor failed to present a plausible argument.
The Court is fully cognizant that the payment by one side in an action of an opposing counsel's legal fees is a red flag as to collusion. See United States v. Johnson, 319 U.S. 302, 87 L. Ed. 1413, 63 S. Ct. 1075 (1943). But in the instant situation, the Association is in a unique position - it is a democratic institution composed of members on both sides of the question and it is duty-bound to serve the interests of all its members. Certainly under these circumstances, the Association's offer to reimburse any of its members for expenses does not give rise to collusion per se. Rather, the question must be whether the Association has in any way acted to control plaintiffs' conduct of the law suit. Cf. San Francisco v. Boyd, 22 Cal.2d 685, 140 P.2d 666 (1943). If the Court thought that there was even the slightest attempt to exert such control, it would not only reverse its class action orders but it would dismiss the entire action. The Court, however, is thoroughly convinced that no such attempt was made, that the proceedings have been of an adversary nature on the highest level, and that plaintiffs have fairly and more than adequately represented the other members of their class. The Court therefore not only refuses to dismiss this action but reaffirms its decision to permit it to proceed as a class action.
THE AGRICULTURAL MARKETING AGREEMENT ACT OF 1937 AND THE CONNECTICUT MILK MARKETING ORDER
The Agricultural Marketing Agreement Act of 1937, 7 U.S.C. § 601 et seq., confers upon the Secretary of Agriculture the power to regulate the price and marketing of milk and milk products, as well as various other agricultural commodities. With respect to the milk industry, the Act represents the ultimate attempt by Congress to deal with a "nation-wide distress of milk farmers, a distress which had culminated in a milk farmers' 'strike' - accompanied by violence and constituting an incipient agrarian revolution - that threatened to cut off a vital part of the nation's food supply." Queensboro Farms Products v. Wickard, 137 F.2d 969, 974 (2 Cir. 1943) (Frank, J.).
The basic factors giving rise to what Judge Frank described as the "exquisitely complicated 'milk problem'" were set forth by the Supreme Court in United States v. Rock Royal Co-operative, Inc., 307 U.S. 533, 549-50, 83 L. Ed. 1446, 59 S. Ct. 993 (1939):
"It is generally recognized that the chief cause of fluctuating prices and supplies is the existence of a normal surplus which is necessary to furnish an adequate amount for peak periods of consumption. This results in an excess of production during the troughs of demand. As milk is highly perishable, a fertile field for the growth of bacteria, and yet an essential item of diet, it is most desirable to have an adequate production under close sanitary supervision to meet the constantly varying needs. * * * Since all milk produced cannot find a ready market as fluid milk in flush periods, the surplus must move into cream, butter, cheese, milk powder and other more or less nonperishable products. Since these manufactures are in competition with all similar dairy products, the prices for the milk absorbed into manufacturing processes must necessarily meet the competition of low-cost production areas far removed from the metropolitan centers. The market for fluid milk for use as a food beverage is the most profitable to the producer. Consequently, all producers strive for the fluid milk market."
The first far-reaching Congressional attempt to meet the problem was the Agricultural Adjustment Act of 1933. That Act provided for marketing agreements and authorized the Secretary of Agriculture to issue "licenses" for the regulation of agricultural commodities, including milk and milk products. In 1935, this Act was amended, partly in order to meet the delegation problems raised by the Supreme Court's decision in A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 79 L. Ed. 1570, 55 S. Ct. 837 (1935). These amendments subsequently were reaffirmed and reenacted by Congress in the Agricultural Marketing Agreement Act of 1937 (the Act), and, as such, represent the legislative scheme extant today and that involved in this litigation.
In order to achieve such orderly marketing conditions as will establish "parity" prices for the dairy farmer and a level and sufficient flow of milk to the market (Section 2 of the Act, 7 U.S.C. § 602), the Act authorizes the Secretary of Agriculture to issue milk marketing orders for the various sections of the country and specifies the terms and conditions which may be included in such orders.
Section 8c(5)(A) of the Act, 7 U.S.C. § 608c(5)(A), provides for the classification of milk by each order according to milk's various uses, and for the establishment of a minimum price for each category. Thus, under the Connecticut Milk Marketing Order, which is involved in this litigation and which regulates all milk marketed in Connecticut whether produced in the state or shipped into the state from elsewhere, there are two general categories. 7 C.F.R. §§ 1015.51 and 1015.52 (1968). One category consists essentially of fluid milk used for beverage purposes, while the other consists primarily of milk used for nonfluid purposes. The minimum price for the category of milk used for fluid purposes is the higher to reflect the desirable position of such milk in the marketplace. 7 C.F.R. § 1015.60 (1968). When the "handler", the party who first purchases the farmer's milk either directly or through a marketing cooperative, disposes of milk, he ultimately becomes obligated for the minimum price associated with the use to which that particular milk is put.
Section 8c(5)(B) of the Act, 7 U.S.C. § 608c(5)(B), provides, however, that the individual farmer is not to receive payment according to the use of his particular milk. Instead, he is to be paid a uniform price determined either on the basis of the total obligations of the handler to which he delivers his milk or on the basis of the total or pooled obligations of all the handlers covered by an order. Under the Connecticut Order, the uniform, or blend, price is determined under the latter alternative. 7 C.F.R. § 1015.64 (1968). Thus, each handler pays this blend price, adjusted for certain factors to be discussed subsequently, to the farmers or cooperatives from whom he makes his purchases. By paying a farmer according to the marketwide utilization of milk rather than according to the utilization of his particular milk, competition among farmers to sell their milk for fluid use is eliminated.
Since the amount for which a handler becomes obligated is determined on the basis of the use of only the milk he handles, and the amount due his farmers is determined by the use of all the milk covered by the Order, Section 8c(5)(C), 7 U.S.C. § 608c(5)(C), permits resort to a "producer settlement fund" to bring the two amounts into balance. If in any month the utilization value of a handler's milk exceeds the blend price value, the handler must pay the difference into the fund. On the other hand, if the utilization value is less than the blend price value, the handler withdraws the difference from the fund. See 7 C.F.R. §§ 1015.80-.82 (1968).
As noted above, the uniform price otherwise payable to each farmer is subject to certain adjustments. Section 8c(5)(B), 7 U.S.C. § 608c(5)(B), specifically authorizes adjustment for "volume, market and production differentials customarily applied by the handlers subject to [the] order" and adjustments for "the grade or quality of the milk delivered" and "the locations at which delivery of such milk is made."
The Connecticut Milk Marketing Order contains three principal adjustments to the uniform price payable to dairy farmers. Section 1015.71 of the Order, 7 C.F.R. § 1015.71 (1968), provides for a "butterfat differential". Under it a farmer receives either more or less than the uniform price according to whether and by how much the butterfat content of his milk exceeds or falls below a standard level. This differential clearly is related to the grade or quality of the milk and therefore unquestionably is authorized by the Act. It is not challenged here.
Section 1015.62 of the Order, 7 C.F.R. § 1015.62 (1968), providing for "plant zone differentials", also is unchallenged. Under this section a farmer receives a lesser price as the distance from Hartford of the handler's plant receiving the farmer's milk increases. The section, however, treats all plants in Connecticut, irrespective of their distance from Hartford, and those plants in Rhode Island and Massachusetts which are not more than fifty miles from Hartford, as if they were in Hartford. The result is that only those producers who deliver their milk to plants outside of this wide area receive a price which decreases as the actual road mileage from Hartford increases. Essentially, the purpose of the differential is to reflect in the price received by the farmer the added cost to the handler of moving the milk from the more distant receiving plants into the marketing area for distribution. Such a differential clearly is authorized as an adjustment according to "the locations at which delivery of such milk is made."
The third differential, referred to in the plural as "farm location differentials" because it consists of two parts, is found in Section 1015.72 of the Order, 7 C.F.R. § 1015.72 (1968). It is the validity of this provision which plaintiffs attack. Section 1015.72 provides:
"(a) In making payments to producers for milk received from a farm located in Connecticut, Rhode Island, in that portion of New York State east of the Hudson River and south of the Berkshire Section of the New York State Thruway, or in that portion of Massachusetts south of the Massachusetts Turnpike, there shall be added 46 cents per hundredweight.
(b) In making payments to producers for milk received from a farm located outside the area described in paragraph (a) of this section, but within that portion of New York State east of the Hudson River and south of the northern boundaries of North Greenbush, Sand Lake, and Stephentown townships in Rensselaer County, and within that portion of Berkshire County, Massachusetts north of the Massachusetts Turnpike, there shall be added 23 cents per hundredweight.
(c) The uniform price for pool milk other than producer milk shall be subject to the applicable differentials for milk received from farms located in the areas set forth in paragraphs (a) and (b) of this section. * * *"
What this means essentially is that farmers selling milk under the Connecticut Order, whose farms are located in Connecticut, Rhode Island and certain neighboring sections of New York and Massachusetts, receive either 46 or 23 cents more per hundredweight for their milk than other farmers whose farms are located outside of this area but who still market their milk in Connecticut. The obligations of the handlers are not increased to provide for payment of these differentials. Rather, the uniform blended price is decreased so that the total or pooled obligation of all the handlers will be sufficient to cover payment of both the uniform blend price to all farmers under the Order and the additional 46 and 23 cents per hundredweight payable to those designated under this section. Therefore, since the provision results in a lower uniform blend price, those who receive only this price and no differential have standing to attack the provision. Stark v. Wickard, 321 U.S. 288, 302-311, 88 L. Ed. 733, 64 S. Ct. 559 (1944); Blair v. Freeman, 125 U.S. App. D.C. 207, 370 F.2d 229, 234 (D.C.Cir. 1966). Furthermore, those farmers now receiving the 23 cent differential would receive a still higher price for their milk if there were no "farm location differentials" at all. Consequently, these farmers have a similar interest and standing to challenge the provision. For this reason, the Court has permitted plaintiffs, who are composed both of farmers not receiving any differential and of farmers receiving the 23 cent differential, to represent all such farmers as a single class in this action.
CLAIMED LACK OF AUTHORIZATION FOR FARM LOCATION DIFFERENTIALS
1. Uniform Price Requirement
Plaintiffs' primary contention in challenging the validity of the farm location differentials is that the differentials are unauthorized departures from the requirement of Section 8c(5)(B)(ii) of the Act, 7 U.S.C. § 608c(5)(B)(ii), that farmers receive a "uniform" price for all their milk "irrespective of the uses made of such milk by the individual handler to whom it is delivered. * * *" The farm location differentials do, of course, result in a variation in the price received by different farmers. But as agreeable as the concept of price uniformity may be in the abstract, Congress quite obviously did not look upon price uniformity as an absolute rule or even as a goal in itself. For one thing, Congress specifically provided in Section 8c(5)(B) of the Act for adjustments to the uniform price. Furthermore, Congress drafted the Act to allow marketing orders to provide for individual handler pools rather than a market wide pool. Section 8c(5)(B)(i) of the Act. In other words, at the option of the Secretary and with the approval of the dairy farmers, the Connecticut Order could simply direct that each farmer receive payment from his handler according to the utilization of all the milk disposed of by only that particular handler instead of according to the utilization of all the milk disposed of in the entire market. If this were done, there would be no uniformity of price among farmers selling their milk to different handlers.
What Congress hoped to achieve was orderly marketing conditions and higher prices. Sections 1 and 2 of the Act, 7 U.S.C. § 602. The attainment of these aims depends in large part upon the elimination of the incentive among dairy farmers to compete for the higher priced fluid milk market. For this reason, Congress set down the general principle that the price paid a farmer for his milk should remain the same "irrespective of the uses made of such milk." Therefore, a variation from price uniformity is not repugnant to the Act simply because it is a variation but will be considered so if the effect of the variation is to increase competition. As the Supreme Court stated in Lehigh Valley Cooperative Farmers, Inc. v. United States, 370 U.S. 76, 79, 8 L. Ed. 2d 345, 82 S. Ct. 1168 (1962), "[it] is in order to avoid destructive competition among milk producers for the premium outlets that the statute authorizes the Secretary to devise a method whereby uniform prices are paid by milk handlers to producers for all milk received, regardless of the form in which it leaves the plant and its ultimate use." The farm location differentials do not in any manner stimulate competition for the fluid milk market since the differentials are paid solely on the basis of the location of a producer's farm and without any regard to the particular use made of the individual producer's milk.
This is not to say that the Secretary can include in a milk marketing order any adjustments to the uniform price which he thinks advantageous and which do not bring about ruinous competition or a disorderly market. Quite the opposite is true. Plaintiffs correctly point out that, in enacting the 1935 amendments to the Agricultural Adjustment Act of 1933, Congress was greatly concerned lest milk marketing regulation fall prey to the delegation infirmities noted in the Supreme Court's then recent opinion in A.L.A. Schechter Poultry Corp. v. United States, supra. Congress carefully attempted to delineate and circumscribe the Secretary's powers.
Section 8c(5) provides that milk marketing orders shall contain only provisions specified in that section or terms incidental to and consistent with those specified provisions if necessary for their effectuation, and no others. Of even greater relevance is that part of Section 8c(5)(B) which makes payment of the uniform price "subject * * * only to adjustments for (a) volume, market, and production differentials customarily applied by the handlers subject to [the] order, (b) the grade or quality of the milk delivered, [and] (c) the locations at which delivery of such milk is made * * *." Congressional intent is clear that the only authorized departures from the uniform price are those enumerated in Section 8c(5)(B).
The Court therefore concludes that, although the farm location differentials are not incompatible with the marketing concept underlying the uniform price principle, the Court cannot uphold their validity unless they fall within one of the specified permissible adjustments. But even if one of the enumerated adjustments does allow such differentials, the Court can affirm the differentials contained in the Connecticut Order only if the Secretary of Agriculture relied upon that specific adjustment as justification when he promulgated the Order. SEC v. Chenery Corp., 332 U.S. 194, 196, 91 L. Ed. 1995, 67 S. Ct. 1575 (1947); SEC v. Chenery Corp., 318 U.S. 80, 87-88, 87 L. Ed. 626, 63 S. Ct. 454 (1943).
2. The Secretary's Justification
The farm location differentials were included in the Connecticut Milk Marketing Order when the Secretary of Agriculture first promulgated the Order in 1959. 24 Fed.Reg. 1049 (1959). That promulgation and the Secretary's Final Decision issued in connection therewith were the result of extensive hearings held in 1958 in accordance with Sections 8c(3) and (4) of the Act, 7 U.S.C. §§ 608c(3) and (4).
In his Final Decision, the Secretary set forth detailed findings with respect to the farm location differentials:
"Provision should be made also for the payment of a market differential to producers in the nearby supply area. The monies for the payment of these differentials will be obtained by a deduction from the total value of all milk before completing the computation of the market-wide uniform price * * *.
"Milk received from the nearby area has long represented the major part of the total Connecticut supply. The differentials adopted recognize the higher percentage of the milk near to the market than of milk in the more distant zones which customarily has been used for fluid purposes. Nearby producers have been able to obtain a price higher, in relation to more distant producers, than can be accounted for by the advantage in the cost of transportation to market. This historical pattern of pricing has been typical in the markets of this region, and market differentials of this type have been adopted in the nearby regulated markets. The differentials adopted will reflect more representative values with respect to the milk of both nearby and distant producers since the nearby producer will share in the higher-priced Class I market to an extent somewhat greater than otherwise would be the case under market-wide pooling.
"In addition, the use of a nearby differential will assist in providing appropriate price alignments for direct delivery producers which will permit Connecticut handlers to continue to compete in the purchase of milk on reasonable terms with dealers in adjacent markets. The amounts of such differentials are very similar to those employed in other New England Federal order markets and are in reasonable alignment with the schedule employed in the New York-New Jersey market. Such differentials were proposed and generally supported by both producers and handlers at the hearing. Their employment will tend to promote orderly marketing in the milkshed." 24 Fed.Reg. 1049, 1063 (1959).
These findings were reaffirmed by the Secretary in 1960 after lengthy hearings on the New England orders. 25 Fed.Reg. 7819, 7833-34 (1960). Most recently in 1964, after further hearings, the Secretary again ruled in favor of continuation of the differentials:
"4. Farm location differentials. The farm location differential provisions under the present New England orders should be continued under the Massachusetts-Rhode Island order and the Connecticut order. * * *
"Such farm location differentials have been in effect under the several New England orders since the inception of the orders. The differentials were adopted to reflect in the pricing structure of the orders historical price relationships by location which prevailed in these markets. It was found that customarily somewhat higher values, above those which normally reflected transportation costs, attached to milk produced near the principal consumption centers as compared to the market value of milk produced in the more distant areas of the milkshed." 29 Fed.Reg. 11205, 11213 (1964).
The findings quoted above indicate that the Secretary considered the Connecticut farm location differentials to be "adjustments for (a) * * * market * * * differentials customarily applied by the handlers * * *" as provided in Section 8c(5)(B) of the Act. For example, at the very outset of the discussion of farm location differentials in the 1959 Final Decision, the Secretary refers to the need for the payment of a "market differential." He then discusses the differential in terms of past practice and as a "historical pattern of pricing * * * typical in the markets of this region" and points out that "market differentials of this type have been adopted in the nearby regulated markets." The Secretary's later Final Decisions contain similar references.
Plaintiffs, however, ignore this language and stress the statement by the Secretary that the differentials will permit the nearby producer to "share in the higher-priced Class I market to an extent somewhat greater than otherwise would be the case under market-wide pooling." 24 Fed.Reg. 1049, 1063 (1959). Plaintiffs argue that this is an admission that the differentials are in fact based on the utilization of milk. As indicated above, however, the differentials are paid on the basis of farm location. The use made of the milk by the handler is totally irrelevant. The commonly understood meaning of a differential, referred to in the Secretary's statement, was explained at the trial by Mr. Herbert L. Forest, Director of the Dairy Division of the United States Department of Agriculture:
"A differential in an order for any purpose means that some farmer or some farmers who get the differential get a higher price, and the only way they can get a higher price as compared with other farmers is to take it out of the higher utilization, because it is the class 1 higher value added to the pool which gives any basis for farmers getting a higher value. So that when one producer gets a differential as compared to another, in effect he is drawing out of this higher value which class 1 has put into it. Some other farmers get less. So when we talk about differentials, we usually say he gets a bigger cut of class 1 sales, because in effect that is what it means. That is the only place the differential can come from."
Furthermore, the Secretary's conclusion that the differentials would assist in providing proper price alignments so that Connecticut handlers could compete for milk supplies with handlers in adjacent markets, far from showing that the differentials are incompatible with the Act, indicates that they are vital to achieve orderly markets, an avowed objective of the Act.
Defendant-interveners suggest that farm location differentials can also be classified as production differentials or adjustments depending on the location of delivery of milk. While the Court recognizes the force of arguments along these lines, no such findings were made by the Secretary in his Final Decisions. As the Secretary states in his brief in the instant action:
"Either the farm location differential is a proper adjustment to the uniform price within the express provisions of 8c(5)(B)(ii), i.e. a 'market differential customarily applied', or it is not. That is the real question in issue. The Secretary's finding leaves no doubt as to his justification."
The Court must therefore confine itself to consideration of whether farm location differentials are in fact market differentials customarily applied by handlers.
3. Legislative and Administrative History
If the phrase "market * * * differentials customarily applied by the handlers" clearly either did or did not encompass on its face farm location differentials, the Court's task would be simple. Plaintiffs, on the one hand, contend that, in view of Congressional concern over the delegation problem, only the explicit use in the Act of the words "farm location differentials" could be taken as authorization of such differentials, and therefore the phrase relied on by the Secretary patently does not authorize these differentials. On the other hand, defendant-interveners argue that the statutory language plainly includes farm location differentials. The Court disagrees with both of these claims. A desire to delineate and circumscribe an administrator's powers does not automatically result in or insure clear, precise and self-defining statutory language. When the language does not measure up to the ideal standard, the courts would be doing a disservice to the legislative branch if, instead of using available means at arriving at the true intent of Congress, they refrained from giving the language any meaningful effect at all. A similar disservice would result if the courts went to the other extreme and held the language to include everything that any conceivable reading could find it to include. It is perfectly obvious to the Court that the term "market differentials" is sufficiently broad and indefinite when used in connection with marketing orders that apply to several types of differential; but by the same token this broadness does not necessarily mean that Congress intended it to have such a wide scope. The Court therefore finds entirely proper the suggestion of the Secretary that the Court resort to the usual aids to legislative interpretation in order to ascertain whether Congress intended farm location differentials to be encompassed by "market * * * differentials customarily applied by the handlers subject to such order."
Examination of the House of Representatives report, H.R.Rep.No. 1241, 74th Cong., 1st Sess. (1935), and the similar Senate report, S.Rep.No. 1011, 74th Cong., 1st Sess. (1935), which accompanied the 1935 amendments to the Agricultural Adjustment Act of 1933, does not result in immediate clarification of the issue. On the one hand, the reports evidence a clear Congressional intent to affirm the varied marketing efforts and practices engaged in by the cooperatives prior to the 1933 Act and continued pursuant to licenses issued under that Act, and to encourage local variations in marketing plans.
"The proposed amendments substitute the word 'order' for 'license' in order more accurately to describe the nature of the Secretary's regulatory power. The operations of cooperative marketing associations will be reenforced by the new sections of the bill dealing with these matters and these provisions will assure the cooperation of processors and distributors in programs intended to raise farm prices. The marketing agreements and licenses which have been issued and entered into pursuant to the Agricultural Adjustment Act have contained a great variety of provisions in order to adapt each particular program to the peculiar problems and circumstances presented in a given area by a particular commodity.
"So that proper recognition may be given to local differences which may exist in production or marketing methods or conditions, orders are required to be limited in their application to the smallest practicable regional production or marketing areas, and orders applicable to the same commodity or product are required to prescribe such terms applicable to different production or marketing areas as will recognize local production and marketing differences. Orders relating to milk and its products are exempted from the requirement that they be limited in their application to the smallest practicable regional production or marketing areas.
"Third. Subsection (5) of the proposed section 8c states specifically the terms which may be included in orders relating to milk and its products. These terms follow the methods employed by cooperative associations of producers prior to the enactment of the Agricultural Adjustment Act and the provisions of licenses issued pursuant to the present section 8(3) of the Agricultural Adjustment Act." H.R.Rep.No. 1241, supra at 7, 9; see S.Rep.No. 1011, supra at 9.
On the other hand, the definitions of volume, production, and market differentials given in the reports would, if followed, make invalid many of the local adjustments and variations achieved ...