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BRANNAN v. STARK ET AL.

decided: March 3, 1952.

BRANNAN, SECRETARY OF AGRICULTURE
v.
STARK ET AL.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT.*fn*

Vinson, Black, Reed, Frankfurter, Douglas, Burton, Clark; Jackson and Minton took no part in the consideration or decision of this case.

Author: Clark

[ 342 U.S. Page 452]

 MR. JUSTICE CLARK delivered the 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, 321 U.S. 288 (1944), 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.

[ 342 U.S. Page 453]

     We granted certiorari. 341 U.S. 908.

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.*fn1 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*fn2 are set out in some detail in Stark v. Wickard, supra, at 291-302. 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

[ 342 U.S. Page 454]

     the deduction providing for the disputed payments to cooperatives.*fn3 This deduction is thus "a burden on every area sale." Stark v. Wickard, supra, at 303. "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., at 301. 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

[ 342 U.S. Page 455]

     the receipts of cooperatives.*fn4 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 judgment in the District Court, show the following: A major issue at the hearings was the amount of a uniform allowance, previously 26cent per hundredweight, which was reflected in the price paid by all handlers for Class II milk.*fn5 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

[ 342 U.S. Page 456]

     a 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 26cent to 21 1/2cent, 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).*fn6 It is paragraph (D) of subsection (7) upon which the

[ 342 U.S. Page 457]

     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

[ 342 U.S. Page 458]

     order."*fn7 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.*fn8

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,

[ 342 U.S. Page 459]

     an association must meet eight requirements listed in the Order.*fn9 But none of these shows any indication that the activity it prescribes will benefit nonmembers, with the possible exception of the seventh, which requires

[ 342 U.S. Page 460]

     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."*fn10 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

[ 342 U.S. Page 461]

     milk as do those of the cooperatives.*fn11 Prior to amendment of the Order in 1941, the cost of handling surplus milk was recognized in the uniform 26cent 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.*fn12

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,

[ 342 U.S. Page 462]

     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 catchall 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 ...


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