Brannan v. Stark Dairymen's League Co-Op Association/Dissent Black

Mr. Justice BLACK, with whom Mr. Justice REED and Mr. Justice DOUGLAS concur, dissenting.

I dissent and would sustain the provisions of the Secretary of Agriculture's Boston milk order which the majority here invalidates. Those provisions require that cooperatives be reimbursed for a part of the cost they incur in performing services which the Secretary and the Court of Appeals have found benefit all dairy farmers in the Boston market area. Two or three sentences, or clauses in them, of today's majority opinion avow that the Court invalidates the payment provisions solely on the ground that the Secretary is without statutory authority to include them in his order. The remainder of the Court's opinion is not at all limited to an attempt to justify an exclusively statutory holding. For despite the clause at the end of the Court's opinion that it does not 'judge the equity or the wisdom of the payments', nearly all of its 15 pages are devoted to a studied effort to leave the impression that the payments are unfair handouts, gratuities, or subsidies to inefficiently operated cooperatives. It seems appropriate, therefore, to explain at the very outset the true nature of these payments and the consequences of outawing them.

In general the Secretary's order fixes prices and regulates distribution of milk in the Greater Boston area. Under this marketing system the purchase price of all milk sold by farmers in the area is paid into a collective fund or pool. After deduction of legally authorized amounts it is the duty of the Government's market administrator to distribute the fund so that all contributing farmers will receive so far as possible equal amounts for equal quantities of milk of the same quality. The difficulty of achieving this uniformity of price as between cooperative and non-cooperative farmers is complicated by many factors. Non-member farmers receive direct payment for their milk from this market pool fund. But highly material here is the fact that the pool funds are not distributed to farm cooperative association members but instead are paid directly to the associations of which they are members. These associations then deduct certain expenses before distributing the balance to their member farmers. Many of these expenses are incurred by the association in performing beneficial market-wide services which bring about higher milk prices for all farmers. Fund payments to non-cooperative farmers, however, are subject to no such association deductions. The result is that farmer members of cooperatives may get less for their milk than non-members. See United States v. Rock Royal Co-op., 307 U.S. 533, 579, 580, 59 S.Ct. 993,1015, 1016, 83 L.Ed. 1446. In this way non-members can get a free ride paid for by cooperating farmers; the latter have always objected to this, regarding it as a dog-in-the-manger attitude and an unfair market practice. Before the Government stepped into the milk picture, the cooperating farmers used strong coercive measures to compel non-cooperatives to help pay a fair share of cooperative costs in rendering market-wide services. And from the beginning of government regulation in the 1930's the Government has adopted measures to insure that non-member farmers pay for the benefits they receive.

The provisions here nullified prescribe a legal and peaceful method to require non-cooperative farmers to pay their fair share of market costs, thereby preventing the recurrence of the kind of violent strife with which this country became all too familiar before the present national farm policy was adopted. The provisions have been a part of the Boston order since 1941-eleven years. In accordance with them more than one and a half million dollars have been paid to cooperatives. If illegally received, I suppose the money is illegally held. Whether these farmer associations can survive the Pandora's box of lawsuits this case is likely to turn loose is anybody's guess. Perhaps most dairy farmers in New England would not of their own accord file suits against the cooperatives, for the record indicates an overwhelming farmer support for the market order including these challenged provisions. In fact, the five farmers whose names appear as challengers of these provisions are not the persons most interested in sabotaging the Boston milk order. Expenses of this litigation, already more than $25,000 by 1949, have been borne by milk handlers. These handlers have no financial interest in the fund and did not even have standing to bring this suit in their own name. United States v. Rock Royal Co-op., supra, 307 U.S. 561, 59 S.Ct. 1007, 83 L.Ed. 1446. The attitude of these private proprietors in this and past attacks on cooperatives justifies a rather strong inference that cooperatives will continue to be defendants in lawsuits pushed by wellfinanced adversaries.

It may be suggested that despite possible floods of litigation, the cooperatives can be saved from complete bankruptcy by statutes of limitations, judicially created defenses, finespun legal or verbal distinctions, or even by emergency congressional legislation. But if some might happen to befriend cooperatives in the future, the blow today inflicted is hardly calculated to make cooperatives very enthusiastic about performing the important functions in the market program that Congress wanted them to. Moreover, these particular New England associations are not the only ones placed in imminent jeopardy by today's holding. As the majority opinion points out, cooperative associations in other areas have been receiving payments for market-wide services under similar market orders of the Secretary. Under such provisions millions of dollars have been received by these other cooperatives. They too have little if any chance to escape harassment from the swarm of lawsuits this case invites.

Congress intended cooperatives to be what they actually have been-the backbone of the farm market system and the dynamo which makes the system function. Without them, many think that program would have been a flop; with their help comparative peace has now come to an industry that in the twenties and early thirties was divided into fighting factions engaging in bitter warfare and bloodshed on the nation's highways. Regardless of the consequences, however, the majority's body blow to cooperatives would be justified if required by congressional command. But Congress has expressed its desire precisely to the contrary. This is shown, I believe beyond all doubt, by the language, history, background and administration of the marketing laws.

I feel deeply that the Court's action in this case checkmates the congressional will, unjustifiably inflicts a grievous wrong on cooperatives, and plays havoc with a national farm policy that is working peacefully and well. The judiciary should not cavalierly throw a monkey wrench into its machinery.

History, Background, and Administration of the Act.-An inherent problem of the milk industry is that cows produce more milk at some seasons of the year than at others. This means a seasonal excess of supply over demand which can result in disastrous price cutting in an uncontrolled market. In an attempt to avoid the harmful consequences of price cutting farmers combined in cooperative associations which agreed to find a market for all the milk their members produced. Through the channel of collective bargaining, they were able to obtain better prices and a wider market for fluid milk. With the surplusage that still remained, they turned to the manufacture of cheese, butter, and other by-products, even though their manufacturing plants were forced to remain idle during the seasons of no surplusage. Congress itself recognized the inherent value of these cooperative organizations, and with a view to helping farmers improve their market position, it passed the Capper-Volstead Act in 1922 and the Agricultural Marketing Act of 1929.

These Acts treated cooperative associations as useful governmental instrumentalities to achieve congressional agricultural policies. With such help cooperatives made progress, although in every market area there were some producers who refused to join. These non-member producers, without paying anything for it, nevertheless received direct advantages from the work of the cooperatives in raising milk prices, diverting surplusage, and improving general market conditions. This produced deep resentment on the part of cooperative-producers which resulted in bitter strife and unrest.

Thus, an acute agricultural problem has long been one of devising means whereby each producer would pay his fair share of the cost of rendering needed market-wide services. Prior to passage of the Agricultural Adjustment Act of 1933, the cooperatives themselves used thier bargaining power to meet the situation. A 1929 contract between the cooperative association and handlers (purchasers of milk from producers) in the Chicago marketing area illustrates the methods used. All handlers were required to agree not to purchase milk from non-member producers unless the latter agreed to a certain deduction. This deduction was equal to that the handlers were required to make in the case of milk purchased from member-producers. In both instances the deduction was paid by the handlers to the cooperative to defray its expense incurred for the services. This procedure insured that no producer of milk received benefits without paying something for them.

The Agricultural Adjustment Act of 1933 empowered the Secretary of Agriculture to regulate the milk industry by a system of licensing and marketing agreements. In the licenses issued under this Act, the Secretary included various provisions relating to payments to cooperatives for the rendition of marketing services. Some licenses contained provisions similar to those of the Chicago contract of 1929. Others contained provisions which required all producers who did not belong to cooperative associations to pay 'service charges' to organizations created by order of the Secretary. These organizations rendered the same services which cooperatives did and charged the same for them. Thus all producers were required to pay their share for market services, either directly to a producer-owned association or to an association sponsored by the Secretary to force non-members to pay their part.

In 1935 Congress amended the Agricultural Adjustment Act to provide for market regulation by means of orders. The first Boston milk order was issued under § 8(b) of that Act as amended. That order required the payment of a higher price per hundredweight for cooperative milk than for non-cooperative milk. This was based on the Secretary's finding that 'the differential in prices to associations of producers, and producers, is justified as a reasonable allowance for services actually performed by associations of producers.' Green Valley Creamery v. United States, 1 Cir., 108 F.2d 342, 345. This differential which remained in the order from the date it was issued in 1936 until 1941 was held valid by the Court of Appeals for the First Circuit in Green Valley Creamery v. United States, supra. See also United States v. Rock Royal Co-op., 307 U.S. 533, 562, 565, 59 S.Ct. 993, 1007, 1009, 83 L.Ed. 1446. From 1941 to the present the Secretary's Boston order has contained the kind of cooperative payment provisions now in issue, and treated by the majority as a gratuity.

In summary, before 1933 cooperative associations forced payments for their services by exertion of collective strength. After passage of the Agricultural Adjustment Act of 1933 licenses issued under it up to 1935 compelled such payments. Congress amended the Act in 1935. Committee Reports show that orders of the Secretary issued under the Amendment should 'follow the methods employed by cooperative associations of producers prior to the enactment of the Agricultural Adjustment Act and the provisions of licenses issued' between 1933 and 1935. The same Committee Report in explaining why the Secretary should recognize and encourage cooperative associations 'to promote efficient methods of marketing and distribution' said: 'it has been found from experience that the participation by * *  * associations of producers has been of material value in administering' the agricultural program. The 1937 Amendment to the Act went still further and 'expressly ratified, legalized, and confirmed' all 'marketing agreements, licenses, orders, regulations, provisions, and acts' of the Secretary of Agriculture issued under the former Act. 50 Stat. 246, 249, 7 U.S.C.A. § 672. Some of the orders and licenses thus expressly ratified by Congress contained the provisions requiring non-members to pay for collective market services. And a Committee Report on this 1937 legislation referred to the Act's marketing program as 'valuable supplements to the cooperative efforts of producers, particularly in the case of fruits, vegetables, and milk.' Finally, in 1948 Congress again manifested its approval of the Secretary's program which at that time included the very cooperative payments now at issue.

The Court brushes aside the foregoing history and invalidates the cooperative payment provisions. Its asserted reason for doing so is that statutory authority for the payments is lacking. We are left in the dark as to whether the Secretary lacks all authority to make payments to any and all persons, or has authority to pay everybody else except cooperatives, or has authority to pay everybody else except New England cooperatives. The Court's opinion leads me to believe that its real basis for invalidation is a belief that:

(1) The payments are a mere gratuity, a subsidy to inefficiently operated cooperatives.

(2) The Secretary's order properly construed does not require cooperatives to perform market-wide services; therefore they should be paid nothing, regardless of the fact that they actually performed such services for the past eleven years.

(3) It is evil and illegal to pay cooperatives for working to benefit a whole group of which they are a part.

First. If these payments were mere gratuities as the District Court held and as intimated by the majority, I too would hold them illegal. However, they cannot be considered gratuities because administrative findings of fact and the whole record show precisely the contrary. I cannot agree that it is for this Court to redetermine facts found by the Secretary after at least three exhaustive public hearings -findings which were not even challenged by the parties. The administrative history of the Marketing Act shows conclusively that at the time of the first of these hearings in 1941 the right of cooperatives to receive payments for market-wide services was well established. From the evidence before the Secretary at this first hearing he concluded that the payments to cooperatives were justified and would tend to effectuate the purposes of the Act. 6 Fed.Reg. 3762, 7 CFR, 1941 Supp., § 904.0. In 1943 another public hearing was held at which an unsuccessful attempt was made to eliminate cooperative payment provisions from the order. One of the findings resulting from this hearing is as follows: 'The present plan of payments to cooperatives, which became effective August 1, 1941, was based on the consideration that to achieve the benefits to all producers which the order is designed to provide two types of activity by producers' cooperative marketing organizations are desirable: (1) presentation of evidence at hearings concerning the needs of producers with respect to prices for milk and differentials to reflect handling costs to furnish an adequate basis for constructive amendments to the order, and (2) assumption of responsibility for a reserve of milk to meet the irregular needs of distributors which is essential in a market which provides market-wide equalization among all producers of the total value of the milk. * *  * From these considerations it was concluded that provision for payments to cooperative associations is considered necessary to equitably apportion the total value of milk among producers. The testimony in support of the proposal to completely eliminate this feature of the order does not show that these considerations were substantially erroneous.' 9 Fed.Reg. 3057, 3059. In 1947 still another unsuccessful attempt was made to eliminate these provisions. At this public hearing the Secretary expressly reaffirmed the prior crucial findings on which the order rests. 12 Fed.Reg. 4921, 4928. It is the provisions of this 1947 order now held invalid.

There was an abundance of evidence to support the Secretary's findings that the cooperatives in the Boston area were equipped to and did constantly provide substantial services to help sustain the market price of milk and to stabilize its distribution. Evidence showed that New England cooperatives maintained expensive manufacturing equipment to take care of surplus milk; that most of the surplus milk was concentrated in cooperative plants and that even proprietary handlers normally depended on cooperatives in time of short production. There was testimony that all these activities imposed huge financial burdens on cooperative associations and that unless non-members were made to bear part of these large costs, cooperating farmers, who saved the market from the chaos of a fluctuating milk supply, would actually get less net amounts for their milk than did the non-members who merely reaped the harvest sown by others.

The foregoing suggests but a very minor part of the evidence on which the Secretary found that the cooperative payment provisions were consistent with the Act's terms and necessary to effectuate the order's other provisions designed to maintain a smoothly functioning market. The Court of Appeals agreed with the Secretary as to the value of cooperative services. 87 U.S.App. D.C. 388, 392, 399, 185 F.2d 871, 875, 882. Its opinion not only conceded that 'there was substantial evidence that these services were rendered' but emphatically declared 'There is no doubt that these services are pronounced aids to all participants in the marketing area-producers, handlers and consumers.' In fact the Court of Appeals rather impatiently rejected the 'gratuity' theory of the payments by declaring that the record made the market-wide aid of cooperatives 'so clear that it serves no purpose to describe the helpful effects in detail.' This Court now resurrects this rejected theory by implying that the cooperative payments are mere gifts, thereby upsetting the Secretary's findings while asserting that it is indulging in pure statutory construction. This, of course, is the safest way to upset findings supported as these are by substantial evidence.

Second. The majority seems to imply that even if the cooperatives do render valuable market-wide services they ought not to be paid. This is because the Court, reading the order with punctilious nicety, finds that it lacks words expressly compelling cooperatives to render the precise services for which they are paid. I fail too see why cooperatives should not be paid for work they actually do, but in any event I read the order as requiring that those services be performed.

The public hearings held in connection with this order resulted in findings that cooperatives should be paid for rendering two broad types of market services. Most importantly, they were to be paid for the 'assumption of responsibility for a reserve of milk to meet the irregular needs of distributors.' 9 Fed.Reg. 3059. Section 904.10(b)(2) of the order specifies the amounts to be paid cooperatives for meeting this responsibility. This section by its very terms requires that before they get their pay cooperatives must meet their responsibility by running plants which sell or process milk. It does so in the following language: 'Each qualified association shall be entitled to payment at the rate of 2 cents per hundred-weight on milk received from producers at a plant operated by that association.' Neither the New York order nor any other order could possibly contain a more compelling requirement for the cooperatives to perform these market services than does this order-namely, no work, no pay.

Section 904.10(b)(1) specifies the amounts to be paid cooperatives for their work in bringing about better milk prices for all farmers. This is the second broad type of service which the Secretary found cooperatives should be paid for. In order to be entitled to receive any payment whatsoever for this service, a cooperative must not only comply with the provisions of the Capper-Volstead Act, but also must 'collaborate(s) with similar associations in activities incident to the maintenance and strengthening of collective bargaining by producers and the operation of a plan of uniform pricing of milk to handlers.' If a cooperative does the things required by the Capper-Volstead Act and the last-mentioned section of the order, it is bound to be working to bring about better milk prices for all dairy farmers in the area.

After public hearing, the administrator of this Act has found on three separate occasions that cooperatives expended their time and money in performing these market-wide services. I am not sure why the majority forbids the payments. I hope it is not on the theory that the Secretary's supposed lack of linguistic skill must deprive cooperatives of pay for the work they did during the past eleven years. Whether this is the theory, one cannot be sure.

Third. The majority states that there is somewhat of an 'incongruity' in allowing cooperatives to be paid for 'vigorously prosecuting their own interests,' leaving the inference that there is something inherently evil and illegal in such payments. I do not see why. It seems more incongruous and wrong to me to let non-members get something for nothing and at the sole expense of the cooperating farmers. There is certainly no conflict of interest among farmers in connection with the obtaining of a higher price for the milk of all. The payments were made to achieve this end. Furthermore, I doubt if the majority would want to hold that Congress is barred from taking advantage of the belief of many that government regulation can be most effective where the fullest possible use is made of the aid and helpful services of those who are being regulated. I find it impossible to believe that Congress intended to compel the Secretary to hire more regular, all-time government employees to perform, and in many instances to duplicate, work that could be best and perhaps least irritatingly performed by farmer-owned and farmercontrolled associations. To the contrary, the controlling law expressly directs the Secretary to use cooperatives where he can. That it is evil for the Secretary to pay cooperatives for market services seems an unduly fastidious concept.

Finally, I do not agree with the majority that statutory authority for these payments is lacking. The Act first authorizes the Secretary to take certain specified actions designed to set up a well-functioning Government-controlled milk-market system. To avoid the inevitable rigidity of its expressly defined authorizations Congress went further and authorized the Secretary to provide for additional market mechanisms 'Incidental to, and not inconsistent with, the terms and conditions specified * *  * and necessary to effectuate the other provisions of such order.' 49 Stat. 750, 757, 7 U.S.C. § 608c(7)(D), 7 U.S.C.A. § 608c(7)(D). The key words in this section, referred to by the Court of Appeals as 'the measuring standard' are 'incidental,' 'not inconsistent,' and 'necessary.' Largely relying on their selections of abstract word definitions, the District Court and the Court of Appeals held that the Secretary's order was forbidden by each of these key words. This Court clearly agrees that the order for payment is not 'incidental' and is 'inconsistent' with the Act's terms. However, it meticulously avoids any reliance on the word 'necessary.'

A. Necessary.-The Secretary concluded that cooperative payments were 'necessary' to effectuate the other terms of his order. An overwhelming majority of the farmers affected by the payment provision voted in favor of them. The administrative history of the Act shows that the payments have made a substantial contribution to the smooth operation of the government's program. Congress itself has ratified these very provisions now in issue. All of this is enough for me; I would hold that the provisions are 'necessary' within the meaning of the Act.

B. Incidental.-The majority holds that these payments are not 'incidental' to the other terms of the order. This holding seems to be based on the idea that the payment provisions are too important to be merely 'incidental.' This idea is in marked contrast to the Court's previous statement that 'the payments to cooperatives have in each year constituted no more than a fraction of one percent of the total value of milk marketed in the area.' I do not doubt that these payments are of considerable importance in carrying out the basic market control system set up by the Act. But I deny that they are such independent ends in themselves that they are something more than an 'incidental' part of the program they were designed to serve. Clearly the payment provisions are auxiliary to the main purpose of the Act and its market system. Consequently, the Court refuses to give that 'considerable flexibility' which we have previously said the Secretary should have 'to include provisions auxiliary to those definitely specified.' United States v. Rock Royal Co-op., supra, 307 U.S. 575, 576, 59 S.Ct. 993, 1014.

C. Inconsistent.-The Court's holding that the cooperative payments are 'inconsistent' with the Act is based on the notion that the order destroys uniformity of prices received by cooperative members and non-members to the detriment of non-members. The Court's holding in its regard rests in part on its unsupported and unsupportable findings that 'receipts of nonmembers resulting from delivery of a given quantity of milk are smaller than those of the associations and their members. This is true because nonmembers are paid only the blended price while members receive, through their associations, the disputed payments in addition to the blended price.' The crucial error of these assumptions or findings of fact, whichever they are, is the Court's assertion that cooperative service payments 'redound to members individually.' There is not only an absence of evidence to support this assertion, but it is contrary to the known facts of the way cooperatives work. The only possible support for such an extraordinary inference is by a renewed adoption of the theory that these payments are gratuities, a theory the Court of Appeals emphatically rejected. But this record actually shows that it costs the cooperatives more to perform the services than they are paid. It also shows that cooperatives are compelled to deduct the complete cost of these services long before the member farmers are paid for their milk. The result is that but for these payments the cooperative members are bound to get less than the blended price for their milk while non-members get the blended price. The very reason the Secretary authorized these payments who to insure so far as possible that non-members should not get more for their milk than cooperating farmers do. It is therefore the Court's action today, not the Secretary's order, that prevents uniformity of price in the Boston area.

In striking down these provisions of the Secretary's order, the Court has departed from many principles it has previously announced in connection with its supervision over administrative agents. Under these principles, the Court would refrain from setting aside administrative findings of fact when supported by substantial evidence; we would give weight to the interpretation of a statute by its administrators; when administrators have interpreted broad statutory terms, such as here involved, we would recognize that it is our duty to accept this interpretation even though it was not 'the only reasonable one' or the one 'we would have reached had the question arisen in the first instance in judicial proceedings.' Unemployment Compensation Comm. of Territory of Alaska v. Aragan, 329 U.S. 143, 153, 67 S.Ct. 245, 250, 91 L.Ed. 136. Only a short while ago in a Labor Board case this Court said: 'Not only are the findings of the Board conclusive with respect to questions of fact in this field when supported by substantial evidence on the record as a whole, but the Board's interpretation of the Act and the Board's application of it in doubtful situations are entitled to weight.' National Labor Relations Board v. Denver Bldg. and Construction Trades Council, 341 U.S. 675, 691, 692, 71 S.Ct. 943, 952, 953, 95 L.Ed. 1284. True, this was said with reference to a Labor Board case under the Taft-Hartley Act, 29 U.S.C.A. § 141 et seq., but findings and interpretations of the Secretary of Agriculture should stand on no lower level.

I dissent.