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FRIENDSHIP DAIRIES, INC. v. BUTZ

May 18, 1977

FRIENDSHIP DAIRIES, INC., et al., Plaintiffs, against EARL BUTZ, SECRETARY OF THE DEPARTMENT OF AGRICULTURE OF THE UNITED STATES, Defendant.


The opinion of the court was delivered by: NEAHER

MEMORANDUM AND ORDER

Plaintiffs, nine manufacturers of milk products ("handlers"), brought this action pursuant to § 15(B) of the Agricultural Marketing Agreements Act ("Act"), 7 U.S.C. § 608c(15)(B), for judicial review of a ruling by the Secretary of Agriculture ("Secretary") which amended a milk marketing order ("Order No. 2"), 7 C.F.R.§ 1002, so as to change the formula for calculating minimum milk prices to be paid by handlers to dairy farmers ("producers"). The matter is now before the court on the parties' cross-motions for summary judgment.

 I.

 In accordance with the Act, the Secretary has issued 61 orders regulating the marketing and pricing of milk in various regions of the country. Order No. 2, which covers the eastern part of New York and the northern part of New Jersey, divides milk into two categories: milk used in its fluid state is in Class I, while milk used in the manufacture of other dairy products, such as butter and cheese, is in Class II. Prior to the amendment in question, the price for Class II milk (also known as "reserve milk") was the lower of the prices derived from two alternative formulas: (1) the Minnesota-Wisconsin ("M-W") Series, which is an average of the actual prices paid for milk by selected cheese plants in Minnesota and Wisconsin, and (2) the butter-powder ("b-p") formula, which is based on the public prices paid for butter and nonfat dry milk powder. Generally the two formulas produced fairly similar prices.

 Beginning in October 1973, however, the b-p price dropped precipitously below the M-W price due to imports of butter and nonfat milk powder. Thus the b-p formula became the determinant of Class II prices. The decline in the price of Class II milk occasioned by this change led producers to request the Secretary to hold hearings concerning the continued efficacy of the b-p formula.

 Responding to the producers' request, the Department of Agriculture issued notice on February 12, 1974 to consider proposed amendments to eight orders, including Order No. 2, covering the northeastern part of the country and to consider whether emergency marketing conditions warranted omission of a recommended decision. As published two days later in the Federal Register, the notice contained 17 proposals for changes in the Class II milk pricing provisions.

 The day before the hearing began the Department issued four decisions covering 39 midwestern orders ("the 39 order decisions") which eliminated the b-p price from the pricing formulas of the 15 midwestern orders which had used it and made the M-W price the sole determinant of Class II milk prices in all 39 orders.

 The hearing on the northeastern orders was conducted in Washington, D.C. for six days between February 20-28, 1974. The hearing record consists of 1094 pages and 46 exhibits. The parties were given eight days from the conclusion of the hearing to submit briefs. On March 27, 1974 the Assistant Secretary issued a "partial decision" in which he announced an emergency amendment removing the b-p formula as an alternative method of pricing Class II milk from April 2 through July 31, 1974.39 FR 11567 (Mar. 29, 1974). An order issued two days later confirmed the following temporary pricing scheme: the price of milk utilized in manufacturing products other than butter and nonfat dry milk would be the M-W price, and milk utilized in butter and nonfat dry milk production would be priced below the M-W price by the amount, not to exceed 50 cents, that the b-p price was below the M-W price. 39 FR 11980 (Apr. 2, 1974).

 On June 25, 1974 the Associate Administrator issued a recommended decision that the M-W Series be the permanent basis for determining the Class II milk price. 39 FR 23063 (June 26, 1974). Following a period of time for the filing of exceptions, the Assistant Secretary adopted the recommended decision on July 25, 1974. 39 FR 27678 (July 31, 1974). After the requisite two-thirds of the producers approved the decision, an order was issued on August 21, 1974 in conformity with the decision. 39 FR 30925 (August 27, 1974).

 Plaintiffs' administrative appeal was denied by an administrative law judge on June 2, 1975 in an initial decision. This was adopted as the final decision by the Judicial Officer, on behalf of the Secretary, on August 26, 1975. Plaintiffs then commenced the instant action to review the final decision.

 II.

 The Act empowers the court to remand the proceedings to the Secretary if his ruling is "not in accordance with law." 7 U.S.C. § 608c(15)(B). The court's function is limited to "ascertaining whether or not his findings are supported by any substantial evidence and his conclusion authorized by law." New York State Guernsey Breeders' Co-op. v. Wickard, 141 F.2d 805 (2 Cir.), cert. denied, 323 U.S. 725, 89 L. Ed. 582, 65 S. Ct. 58 (1944).

 A. Standing

 Before turning to the merits of plaintiffs' appeal, defendant's challenge to the standing of six of the nine plaintiffs must be considered. As to two of them, Cuba Cheese Co. and Pollis Dairy Products, Inc., defendant contends that Congress conferred standing only on "handlers" and that these two companies are not handlers because they are not subject to regulation under Order No. 2. Although the suppliers of these dairy processors are subject to regulation, defendant likens the two companies to consumers, who were denied standing in Rasmussen v. Hardin, 461 F.2d 595 (9th Cir.), cert. denied sub nom. Kresse v. Butz, 409 U.S. 933, 93 S. Ct. 230, 34 L. Ed. 2d 188 (1972).

 In Harry H. Price & Sons v. Hardin, 425 F.2d 1137 (5 Cir. 1970), cert. denied, 400 U.S. 1009, 27 L. Ed. 2d 622, 91 S. Ct. 568 (1971), a similar case involving a handler not directly regulated by the order in question, the Fifth Circuit held that the plaintiff had standing because it was "arguably within the zone of interests of the statute" within the rule of Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 25 L. Ed. 2d 184, 90 S. Ct. 827 (1970). See also Walter Holm & Co. v. Hardin, 145 U.S. App. D.C. 347, 449 F.2d 1009 (D.C. Cir. 1971). The Act includes "processors" within the definition of "handlers" without limitation to "regulated processors." 7 U.S.C. § 608c(1).Therefore, the court holders that these two unregulated processors have standing to join in this suit because they are adversely affected by the Secretary's action and they are arguably within the zone of interests of the Act.

 Defendant also seeks the dismissal of Friendship Dairies, Inc., Crowley Food, Inc., Saratoga Dairy, Inc. and Deltown Foods, Inc. because they are not located in this district as required by 7 U.S.C. § 608c(15)(B).This provision, which speaks in terms of jurisdiction, is similar to a venue statute. Cf. 1 Collier on Bankruptcy [*] 2.14 (Section 2a(1) of the Bankruptcy Act, which uses the term "jurisdiction", pertains to venue). Thus, although these four plaintiffs alone would have been required to sue in their home district, the court will allow them to remain in the action since they are directly affected gy the amendment to the order and have participated in all previous steps in this litigation.

 Plaintiffs have raised three objections to the amendments: (1) the manner in which defendant proceeded in issuing these orders violated dur process and statutory provisions: (2) the amendment to the order is not supported by substantial evidence; and (3) local ...


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