Brannan v. Stark Dairymen's League Co-Op Association/Opinion of the Court

This action by dairy farmers, nonmembers of cooperative associations, concerns 1941 amendments to an order of the Secretary of Agriculture dealing with the marketing of milk in the Boston area. It was previously here as Stark v. Wickard, 1944, 321 U.S. 288, 64 S.Ct. 559, 88 L.Ed. 733, where it was held that the respondents had such an interest in the Order as to give them legal standing to object to those of its provisions here under attack. Upon remand the provisions were held invalid by the District Court, 82 F.Supp. 614, and that decision was affirmed in the Court of Appeals for the District of Columbia Circuit. 87 U.S.App. D.C. 388, 185 F.2d 871. We granted certiorari. 341 U.S. 908, 71 S.Ct. 621, 95 L.Ed. 1346.

The question now presented is whether those amendments to the Order which provide for certain payments to cooperative associations are within the authority granted the Secretary by the Agricultural Marketing Agreement Act of 1937. The respondents seek to enjoin the enforcement of the provisions in question.

The purpose of the Act and the nature of the Secretary's Order No. 4 thereunder are set out in some detail in Stark v. Wickard, supra, 321 U.S. at pages 291-302, 64 S.Ct. at pages 561 567. It is here sufficient to note the following aspects of Order No. 4, as amended: In the Order, issued pursuant to the Act, the Secretary divided all milk marketed in the Greater Boston area into Class I, which is sold as fluid milk, and Class II, which is used for other purposes such as the manufacture of butter and cheese. The Order provides for the fixing of minimum prices to be paid by handlers for each of these classes of milk. Each handler pays for milk in accordance with the amount of each class he has purchased. Producers, however, are paid the same price for milk delivered no matter what use is made of the particular milk by the handler. The Market Administrator computes, on the basis of prices paid by handlers, the value of all milk sold in the area each month. After making certain adjustments, he divides that value, as adjusted, by the total quantity of milk sold in the area during the month, to determine the 'blended price,' which is the price actually paid the producer. One adjustment made in determining the 'blended price' is the deduction providing for the disputed payments to cooperatives. This deduction is thus 'a burden on every area sale.' Stark v. Wickard, supra, 321 U.S. at page 303, 64 S.Ct. at page 567. 'Apparently, (it) is the only deduction that is an unrecoverable charge against the producers. The other items deducted under (the Order) are for a revolving fund or to meet differentials in price because of location, seasonal delivery, et cetera.' Id., 321 U.S. at page 301, 64 S.Ct. at page 567. The effect of the deduction and the correlative payments to cooperatives is to reduce the amount which producers, such as respondents, who are not members of cooperatives would otherwise receive for their milk, and to increase correspondingly the receipts of cooperatives. We must determine whether the Secretary was authorized by the statute to include the provisions requiring this deduction and these payments in the Order. No question is presented as to the adequacy of the evidence to support the findings of the Secretary, but rather, a question as to the power granted the Secretary by Congress.

The disputed provisions were introduced into the Boston Order in 1941, after hearings called by the Secretary. Affidavits, filed by representatives of the Secretary in support of his motion for summary jdugment in the District Court, show the following: A major issue at the hearings was the amount of a uniform allowance, previously 26¢ per hundredweight, which was reflected in the price paid by all handlers for Class II milk. This allowance resulted in a lower price to handlers for Class II milk than for Class I milk. It was intended to defray the cost of handling surplus milk. There was a considerable variance in milk plant costs which was thought to make continuance of a uniform rate undesirable. Cooperative plants showed higher costs than those of proprietary handlers. That difference was attributable not only to the cooperatives' maintenance of a reserve supply to meet irregular demands of proprietary handlers for Class I milk, but also to overcapitalization and excess capacity which had existed prior to any federal regulation. To meet these higher costs cooperatives proposed a lower uniform allowance for Class II milk, coupled with payment to cooperatives only for market services, although they had engaged in the activities claimed to constitute market services for years without any such payment. In the amendments resulting from the hearings, the uniform allowance to handlers was reduced from 26¢ to 21 1/2¢, while at the same time the provisions here contested, requiring payments to cooperatives alone, were introduced.

Section 8c(5) of the Act provides that orders relating to milk and its products shall contain one or more of certain enumerated terms and conditions, 'and (except as provided in subsection (7)) no others (emphasis added). It is paragraph (D) of subsection (7) upon which the Secretary relies. That paragraph authorizes provisions 'incidental to, and not inconsistent with, the terms and conditions specified in subsections (5), (6), and (7) and necessary to effectuate the other provisions of such order.' The provisions here in question are not specifically authorized by any part of the Act. Both courts below thought these provisions to be neither incidental nor necessary, and to be inconsistent with terms specified in the named subsections.

The payments to the cooperative associations are said to be justified as remuneration for services performed for the market by the associations. To qualify for the payments, an association must meet eight requirements listed in the Order. But none of these shows any indication that the activity it prescribes will benefit nonmembers, with the possible exception of the seventh, which requires that the association collaborate '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.' Even if this requirement comprehends a service to nonmember producers substantial enough to be significant in determining the validity of a mandatory contribution from them to cooperatives, it does not support the exaction in issue, which concededly is based mainly upon other services primarily performed for members.

Indeed, those 'services' which the Secretary principally urges as justifying the payments do not appear among the expressed prerequisites for the payments. Chief among the activities claimed to benefit all producers are those which tend to maintain an adequate supply of fluid milk at all times and to dispose of surplus supply. A principal source of the problems of milk marketing is the seasonal character of milk production. Herds sufficient to meet the demand for fluid milk during the winter months produce much more than enough to satisfy that demand during the summer months. It is contended that the cooperative associations handle a proportionately larger share of surplus milk than other handlers. It appears that they engage in the manufacture of milk products as a means of absorbing the surplus, and otherwise aid in obviating the 'dumping' of surplus and discouraging the reduction of herds to a point below that necessary to supply the demand in the season of low production. It may be conceded that these activities are indirectly beneficial to the whole market, even though they are engaged in for the direct advantage of members only. However, proprietary handlers also carry on activities of this kind, and their plants handle two-thirds as much surplus milk as do those of the cooperatives. Prior to amendment of the Order in 1941, the cost of handling surplus milk was recognized in the uniform 26¢ allowance to all handlers of Class II milk, but only cooperative associations now receive the payments in issue here. It is clear that the associations are in no way required to handle any of the surplus milk of nonmembers. More significant, there is no requirement in the Order that the associations take any action directed toward solution of the problem, even with respect to surplus milk of their members.

Other 'services' of the cooperatives which are claimed to be beneficial to all producers are, as they affect the issue here, relatively insignificant. These activities are, like the others, primarily designed for the advantage of members, although they may sometimes incidentally benefit the whole market. They generally amount to no more than playing the part of an alert, intelligent, organized participant in the market. They include such functions as employing economists to study the needs of the industry, participating in hearings on orders such as that involved here, being attentive to changing factors in the market, and maintaining the cooperative organizations by promotional work to show farmers the benefits of cooperation and by educational work among members. One may observe some incongruity in requiring some producers to pay others for vigorously prosecuting their own interests, especially where their interests may sometimes conflict with those of the producers burdened with the payments.

In these circumstances, we cannot say that the disputed provisions fall within the authority granted by the catch-all phrases of § 8c(7)(D) of the Act. We note at the outset that § 8c(5) states in specific and lengthy detail the provisions which may be included in milk marketing orders. That subsection lays down comprehensive directions for classification, pricing, and the operation of the equalization pool mechanism, particularly as to adjustments and deductions employed in determining the blended price. But § 8c(5) does not authorize the provisions challenged here. Section 8c(7) authorizes a congeries of general terms which may be included in all marketing orders, including those dealing with commodities other than milk and milk products. The Secretary claims authority for the provisions in question is given by the last paragraph of this omnibus subsection, a paragraph authorizing the inclusion of auxiliary provisions 'incidental to * *  * the terms and conditions specified in subsections (5), (6), and (7)'. Yet it is claimed that the contested provisions are of such basic importance that their validity may be crucial to the success of the whole milk marketing program. We do not think it likely that Congress, in fashioning this intricate marketing order machinery, would thus hang one of the main gears on the tail pipe. The conclusion that these provisions are not 'incidental' to the specified terms is further supported by the presence of § 8c(5)(E), expressly authorizing deductions from payments to producers for other, specified services, and indicating the likelihood of similar specific authorization for the contested deductions if Congress intended that they should be made. Finally, the provisions cannot be incidental to the enumerated terms and conditions since they are inconsistent therewith.

The payments to cooperatives are inconsistent with § 8c(5)(A), which provides that all handlers shall pay uniform prices for each class to milk, subject to certain adjustments of no concern here. The discriminatory effect of the payments becomes the more evident when they are considered in context with the reduction in the uniform allowance to all handlers on the price of Class II milk. That reduction was simultaneous with the establishment of the system of payments to be made to cooperatives only and to be funded by deductions from prices paid all producers. The result would have been substantially similar if the allowance to proprietary handlers had been reduced while the allowance to cooperatives had been permitted to remain at its previous higher level. Such a lack of uniformity in prices paid by handlers would clearly have contravened § 8c(5)(A).

The deduction for payments to cooperatives is inconsistent with § 8(c)(5)(B), which requires the payment of uniform prices to all producers for all milk delivered, subject to certain adjustments not here pertinent. It has been contended that the deduction does not affect the uniform price of milk, but represents only a reimbursement for services. The argument seems to be that all producers receive a uniform price while the deduction merely constitutes a charge to all producers for services, a charge which happens to be paid certain associations of producers because those associations perform the services. The fact remains that the 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. Although made to members collectively, these payments necessarily redound to members individually. Thus, if they are used to pay the costs of the associations, they reduce pro tanto the contributions which are required from individual members. But we need not go further than to hold that the argument cannot negate inconsistency with the uniform price requirement where, as here, the services for which the payment is made are performed for the direct benefit of the cooperatives' memberships, are but incidentally helpful to other producers, and are not a required condition to receipt of the payments.

Since the provisions for payments to cooperatives are not incidental to § 8c(5) and (7), but are inconsistent with the former subsection, we need not determine whether they are 'necessary to effectuate the other provisions' of the Order, the third requirement of § 8c(7)(D).

When the directly relevant provisions of the Act thus demonstrate lack of authority for the payments to cooperatives, no power to require them can be implied from the general instruction of § 10(b)(1) to the Secretary, directing him to accord 'recognition and encouragement' to cooperative associations.

Without support in the words of the statute the challenged provisions must fall, for neither legislative history nor administrative construction offers any cogent reasons for a contrary result. Available indicia of congressional intent at the time of enactment lend weight to the contention that specific provision would have been made for this kind of payments to cooperatives if they were meant to be made. Attempted amendment later to provide authorization for the payments, and the accompanying discussion in Congress, are, as a whole, indecisive. Approval of the payments by Congress cannot be inferred from its ratification, upon passage of the Agricultural Marketing Agreement Act in 1937, of marketing orders previously issued under the Agricultural Adjustment Act. Even if we were to accept the proposition that Congress there intended to confer statutory authority for all future provisions like any of those then existing in any marketing order, we would reach the same conclusion because neither the provisions for these particular payments nor any closely analogous provisions were at that time present in any marketing orders. Nor have provisions bearing substantial similarity to those before us since been included in other orders so frequently as to amount to a consistent administrative interpretation of import in construing the Act. Many provisions for payments to cooperatives appearing in other orders have been of a kind specifically authorized by the statute. Thus, the provision of the first Boston Milk Order for a price differential as between cooperative milk and noncooperative milk was upheld in Green Valley Creamery v. United States, as a 'market differential' authorized by § 8c(5)(A)(1).

We have no occasion to judge the equity or the wisdom of the payments to cooperatives involved in this case. We hold that they are not authorized by the Act.

Affirmed.

Mr. Justice JACKSON and Mr. Justice MINTON took no part in the consideration or decision of this case.

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