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H. P. HOOD & SONS v. UNITED STATES ET AL. *FN*

decided: June 5, 1939.

H. P. HOOD & SONS, INC. ET AL
v.
UNITED STATES ET AL.*FN*



CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT.

Hughes, McReynolds, Butler, Stone, Roberts, Black, Reed, Frankfurter, Douglas

Author: Reed

[ 307 U.S. Page 590]

 MR. JUSTICE REED delivered the opinion of the Court.

These cases involve the constitutionality of the Agricultural Marketing Agreement Act of 1937*fn1 as applied in an order of the Secretary of Agriculture regulating the handling of milk in the Greater Boston, Massachusetts, Marketing Area.

The petitioners, H. P. Hood & Sons, Inc., and Noble's Milk Company of No. 772 and Whiting Milk Company of No. 809, original defendants below, are engaged in handling milk in the marketing area in the current of interstate commerce or in a manner which burdens that commerce. Producers intervened as defendants, petitioner E. Frank Branon on the side of H. P. Hood & Sons and Chester D. Noyes beside the Whiting Company. The respondents, plaintiffs below, are the United States of America and the Secretary of Agriculture. The parties will be referred to as defendants and plaintiffs, respectively.

It is unnecessary to detail the facts of each case. They are two of many instituted by the plaintiffs to secure obedience to the Order. On October 1, 1937, bills of complaint were filed in the District Court for the District of Massachusetts, 21 F.Supp. 321, for the purpose of enjoining Hood & Sons, Noble's Milk Company and

[ 307 U.S. Page 591]

     Whiting Milk Company from violating the terms of Order No. 4 as amended. A temporary mandatory injunction issued on November 30, 1937. A supersedeas followed soon after, conditioned upon payment by the three handlers into the registry of the court of the amounts billed to them by the Market Administrator for equalization charges and marketing services under the Order. Answers to the bills asserted constitutional infirmities in the Act and fatal weaknesses in the Order as amended. A Special Master was charged with the duty of finding the facts in these and similar suits. His report was filed on January 27, 1939. Shortly thereafter, the District Court confirmed the report, sustained both the Act and the Order, and entered a decree for the plaintiffs. The defendants took an appeal to the Circuit Court of Appeals and, after the cases were docketed, filed petitions for writs of certiorari. The writs were granted because important questions of federal law undecided by this Court were involved and pending appeals in other cases with similar issues were ready for argument.

The pertinent provisions of the Marketing Act have been summarized in United States v. Rock Royal Co-operative, ante, p. 533. They will not be repeated here.

Order No. 4, as amended, which the plaintiffs seek to enforce, is the culmination of an extended effort by the Secretary to work out a plan to regulate the marketing of milk in the Boston area. Order No. 4 was originally issued on February 7, 1936, under the Agricultural Adjustment Act.*fn2 All steps leading to its issuance were taken. On November 30, 1935, the Secretary gave notice of a public hearing on a proposed marketing agreement and order. Hearings were held. A marketing agreement was tentatively approved which handlers failed to accept.

[ 307 U.S. Page 592]

     On January 25, 1936, the Secretary found and proclaimed that the purchasing power of milk could not be satisfactorily determined for the pre-war base period from available statistics in the Department of Agriculture, but could for the post-war period. August, 1919, to July, 1929, was declared the base period for the purpose of issuing an order. On February 5, 1936, the Secretary made a determination, as required by § 8c (9), as to the necessity for issuing an order. The President approved the determination, and the Order issued. It remained in effect until August 1, 1936, shortly after the District Court for the District of Massachusetts held that the Act under which the Order was issued was unconstitutional.*fn3 On that day the Secretary suspended the Order for an indefinite time.

After the passage of the Marketing Act, the Secretary, on June 24, 1937, gave notice of a hearing upon proposed amendments to Order No. 4. On the following day he terminated the suspension of the formal and administrative provisions as of July 1, and of the price-fixing provisions as of August 1. Hearings were held. A proposed marketing agreement failed of approval by the handlers. On July 17, 1937, a referendum took place. It will be discussed later at some length because of contentions which question its validity. On July 27, 1937, acting pursuant to § 8c (9), the Secretary determined that the failure of the handlers to sign tended to prevent effectuation of the declared policy of the Act; that issuance of the proposed amendments to the Order was the only practical means of advancing the interests of milk producers in the area; and that the issuance was approved by over 70 percent of the producers who during May, 1937, were engaged in the production of milk for sale in the area. The President approved the determination.

[ 307 U.S. Page 593]

     On July 28, 1937, "Order No. 4, Amendment No. 1" issued. In it the Secretary made findings upon the evidence introduced at the hearings upon the proposed amendments and ratified the original findings in so far as they were not in conflict with the new ones. He made no finding or proclamation, as he had in the original Order, that satisfactory statistics were not available for the pre-war period but were for the post-war period. It is not disputed that the latter was used as the base period for the purpose of computing the prices to be used in the amended Order.

This amended Order is based upon the same principles discussed in United States v. Rock Royal Co-operative, ante, p. 533, and companion cases, decided today. It establishes a comprehensive scheme for the regulation of milk handled in interstate or foreign commerce in an area which includes Boston and 36 other cities or towns. A Market Administrator, appointed by the Secretary of Agriculture, is in charge. Producers and handlers are defined, the first as any person producing milk in conformity with the health regulations applicable to milk sold for consumption as milk in the marketing area, the second as all, including producers or associations of producers, who engage "in such handling of milk, which is sold as milk or cream in the Marketing Area, as is in the current of interstate commerce or which directly burdens, obstructs, or affects interstate or foreign commerce in milk and its products."

There are two use classifications, roughly, fluid and non-fluid. A price is stated for Class I or fluid milk; a formula, based primarily on the price of cream in Boston and casein in New York, is provided for the calculation of the Class II price for each delivery period. Minimum prices determine the value of all the milk delivered by all producers to all the handlers subject to the Order. Except to associations of producers for Class I milk, payment

[ 307 U.S. Page 594]

     to producers is made at a blended price. The Administrator computes the value of milk for each handler by multiplying the quantities used by him in each class by the class price, and by adding the two results. Then the values for all handlers are combined into one total. Adjustments are made for differentials. The adjusted total is divided by the total quantity of milk. The result is a weighted average price somewhere between the two class prices, known as the "blended price." Each handler pays his producers at the blended price. The amount paid to producers may be less, or it may be more, than the value of the milk sold by the handler. Equalization is made among handlers. As the Order puts it, after paying his own producers, each handler pays "To producers, through the Market Administrator, by paying to or receiving from the Market Administrator, as the case may be, the amount by which payments made . . . are less than, or exceed, the value of milk as required to be computed for such handler. . . ."

The defendants urge that the decree of the District Court should be reversed because of error under the Constitution, under the statute, under the Order itself. It is contended that the equalization provisions of the amended Order violate the due process clause of the Fifth Amendment; that the price fixing features of the Act and Order constitute an invalid exercise of the power to regulate commerce and an invasion of the powers reserved to the states under the Tenth Amendment;*fn4 and that the Act involves delegation of legislative power. The amendments to the Order are said to be void because an essential finding required by the statute is lacking. The referendum among producers is assailed as improperly conducted. And the defendants in No. 772 raise the point that the Market Administrator failed to comply with the provisions of the amended Order.

[ 307 U.S. Page 595]

     is authorized to find and proclaim the post-war base period. By § 8c (1) the Secretary is authorized to issue "and from time to time amend" orders. Obviously, as a general clause to make all the provisions of §§ 8c, 8d and 8e applicable to amendments, § 8c (17) was adopted. Without it questions would have been pertinent as to the applicability to amended orders of various provisions in these sections. Doubt would arise as to the power to change the base period after it was once determined. There would seem to be no occasion to review the absence of satisfactory statistics, however, on a proposed amendment which does not involve any change in the base period. The requirement for finding and proclamation in adopting a base period is not intended to force the Secretary to go through a meaningless ritual. A determination of the necessity of using the post-war base period once made and proclaimed satisfies the conditions of §§ 8c (17) and 8e for amendments, so long as no amendment is made which involves a ...


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