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CITY PITTSBURGH v. MILK MARKETING BOARD COMMONWEALTH PENNSYLVANIA (03/05/71)

decided: March 5, 1971.

CITY OF PITTSBURGH, A CITY OF THE SECOND CLASS, AND MARION K. FINKELHOR AND RALPH LYNCH, JR., INDIVIDUALLY AS CONSUMERS
v.
MILK MARKETING BOARD OF THE COMMONWEALTH OF PENNSYLVANIA



Appeal, from General Order A-762 of the Pennsylvania Milk Marketing Board, authorizing price increases in Milk Marketing Area No. 7, comprising ten counties in their entirety and three counties partially in western Pennsylvania.

COUNSEL

Marion K. Finkelhor, Assistant City Solicitor, with him Ralph Lynch, Jr., City Solicitor, for appellant.

Charles M. Guthrie, Assistant Attorney General, for appellee.

Willis F. Daniels, with him Daniels and Swope, for intervenors.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Manderino, Mencer and Barbieri (who has since been appointed to the Supreme Court of Pennsylvania and did not participate in the decision). Opinion by Judge Kramer.

Author: Kramer

[ 1 Pa. Commw. Page 302]

This is an appeal by the City of Pittsburgh and two individuals*fn1 as consumers from an adjudication and General Order No. A-762 dated September 3, 1970 (which became effective September 14, 1970), issued by the Milk Marketing Board of the Commonwealth of Pennsylvania (Board).

This order, which set the minimum prices for certain milk products regulated by the Board and which affects a population of approximately three million people in western Pennsylvania in Milk Marketing Area No. 7 (comprising 10 western Pennsylvania counties in their entirety and three counties partially), came as a result of the filing of a petition on May 11, 1970, by 27 dairy dealers (which companies comprise the Greater Pittsburgh Dairy Association) seeking an increase in the price of regulated milk and dairy products.

Apparently there are a total of about 80*fn2 dairy dealers in the new Southwestern Milk Marketing Area No. 7, and during the year 1969 they had "net sales" in the amount of $174,165,975.

The City argues that the Board's General Order No. A-762 is invalid, illegal, arbitrary, and contrary to law and that the Board's adjudication was an abuse of the Board's discretionary power, in that (1) the Board failed to carry out its duty to consider all the evidence presented and available; (2) the Board refused to permit the introduction of evidence on consumer prices in other market areas and refused any cross-examination on such matters; (3) the Board's findings and the record

[ 1 Pa. Commw. Page 303]

    as submitted failed to support the margin of profit realized by certain stores which sell more than four hundred quarts per single delivery; and (4) the Board failed to establish a uniform system of accounts as required by the statute (31 P.S. 700j-704), and therefore the findings of the Board cannot be sustained on the record.

The Board (which became the appellee on appeal), together with the dairy dealers (which became intervenors on appeal), argue that the record does support the findings of the Board and that the entire proceedings together with General Order No. A-762 are in compliance with the law.

With the exception of a special increase in the wholesale discount rate (Official General Order No. A-753, effective June 1, 1970), the last overall order affecting the resale and producer prices of milk immediately preceding the order in question in this case was General Order A-725, which became effective October 15, 1969 (some seven months prior to the petition requesting another increase in milk prices in this case).

The effect of General Order No. A-762 is (among other price increases) to increase the price of Class 1 milk two cents per quart, four cents per half-gallon, and eight cents per gallon on both out-of-store*fn3 and retail-home-delivery purchases so that the new prices of milk for retail (home delivery) milk will be thirty-six cents per quart, sixty-nine cents per half-gallon, and $1.34 per gallon, and for out-of-store purchases will be 35 cents per quart, 65 cents per half-gallon, and $1.26 per gallon.

[ 1 Pa. Commw. Page 304]

These increases, according to the Commission's finding, will increase the cost of milk $7,838,894 annually for those who purchase milk from the 30 dairy dealers who were used for the statistical support for the findings of the Commission. In view of the fact that the record shows these dealers represent 70.9% (on a pounds of milk basis*fn4) of the sales in Area No. 7, the consumers in the entire Area No. 7, from all dealers, will have their cost of milk increased about $11,000,000 per year. The order also increases producer prices to align them with the Federal Marketing Order No. 36.

The constitutionality of the Pennsylvania milk regulation statutes has been tested and is well settled. The courts consistently have held them to be constitutional. Colteryahn Dairy v. Milk Control Commission, 332 Pa. 15, 1 A.2d 775 (1938), Milk Control Commission v. Eisenberg, 306 U.S. 3, 46, 83 L. ed. 752 (1939), Penn Dairies, Inc. v. Milk Control Commission, 318 U.S. 261, 87 L. ed. 748 (1943), Milk Control Commission v. Lily-Penn Food Stores, Inc., 434 Pa. 189, 253 A.2d 630 (1969).

The Milk Marketing Law (Act of April 28, 1937, P.L. 417, as amended by the Act of July 31, 1968, P.L. , No. 294, 31 P.S. 700j-101 et seq.) at Section 906 (31 P.S. 700j-906) sets down the guidelines for the scope of inquiry by this Court, where it states: "Upon any appeal the court shall determine whether or not the order appealed from is reasonable and in conformity with law. The appellant shall have the burden of proving that an order of the board is unreasonable or illegal. If the court shall determine that the order is unreasonable or illegal, it shall remit the case to the board with directions to reform the findings or order, or to revoke the order, in accordance with the court's

[ 1 Pa. Commw. Page 305]

    opinion." The Pennsylvania Supreme Court in the case of Milk Control Commission of Pennsylvania v. United Retail Grocers Association, et al., 361 Pa. 221, 226, 64 A.2d 818, 820 (1949) in referring to identical language in the original act (Act of April 28, 1937, P.L. 417), sheds further light on the scope of review when it said: "The sufficiency of evidence presented before the Commission for the purpose of inducing a decision that fair return to producers or dealers, as the case may be, requires a revision of established minimum prices or markups, is a matter for the exercise of judgment by the Commission, in the first instance, and its conclusion may not be disturbed unless it has capriciously refused to consider items that should have been entertained, or has entertained items that should not have been entertained, or has not given that weight to the evidence which due process requires." We recognize that the statute has vested authority in the Board to determine technical matters, and that in carrying out this determination it is necessary for the Board to exercise discretion in making its adjudication. It may happen that the exercise of that discretion will be difficult and not to the liking of many persons. However, even though the reviewing court might have chosen a different application, it should overturn the adjudication of the Board only for a clear abuse of discretion or an error of law. It is the duty of this Court to determine whether the Board in fixing milk prices in this case has considered those factors which are essential to sustain the validity of the Board's order. With these guidelines in mind, we believe that the record in this case discloses a clear abuse of discretion.

Before getting to the issues on which this Court must rule, we feel compelled to mention the Board's view of its function vis-a-vis the persons who purchase and consume milk, because that view is relevant to a

[ 1 Pa. Commw. Page 306]

    test of the Board's exercise of its discretion. The Board in its brief observed: "The Board is aware that the consumer is disorganized, uninformed, and in the main, too disinterested or dispersed to participate effectively in price hearings conducted by the Board. On the other hand, the Board submits that the legislation under which it performs its functions, does not provide it adequate tools or authority to present the 'consumer's cause' in any substantial fashion. The Board is also aware that [it] has become quite popular and the current vogue to espouse the 'consumer's cause.' There are numerous persons and organizations extant in this Commonwealth who lay claim to this worthy purpose, but we must admit that the Board has seen little result from their efforts beyond numerous cries of outrage in the mass media. However, the Legislature did not create the Milk Marketing Board to function in accordance with editorial comment and press releases." (Emphasis added)

This statement together with Board counsel's argument that the absence of members of the consuming public as protestants at the Board's hearings somehow supports an increase in the price of milk, invite the inference that the consumers' interests received scant consideration in these proceedings. In a determination of whether the consumers were entitled to more, we must examine the statute.

In referring to the statute, we note that, in the first section pertaining to milk control, the legislative purpose reads as follows: "In the exercise of police power of the Commonwealth, it is hereby declared that the production, transportation, manufacture, processing, storage, distribution, and sale of milk in the Commonwealth is a business affecting the public health and affected with a public interest, and it is hereby declared that this act shall be and is hereby enacted for the purpose

[ 1 Pa. Commw. Page 307]

    of regulating and controlling the milk industry in this Commonwealth, for the protection of the public health and welfare and for the prevention of fraud. Act of April 28, 1937, P.L. 417, Art. I, § 101." 31 P.S. 700j-101. (Emphasis added)

In 1968 the title of the Milk Control Law of 1937 was changed to "Milk Marketing Law", Act of July 31, 1968, P.L. . The purpose clause remained the same.

In Section 801 of the Act (31 P.S. 700j-801), which is the price fixing section, the Legislature reiterates its legislative intent on the subject of protection to the public, wherein it says, "The board . . . shall ascertain and maintain such prices for milk in the respective milk marketing areas as will be most beneficial to the public interest . . ."

In addition, the Legislature says in that same section, "The board . . . shall . . . maintain such prices . . . as . . . will best protect the milk industry of the Commonwealth and insure a sufficient quantity of pure and wholesome milk to inhabitants of the Commonwealth, having special regard to the health and welfare of children residing therein." This same section directs the Board to set prices upon "all conditions" which will yield a reasonable return to the producer, at not less than the cost of production, and a reasonable return to the milk dealer or handler. We find nothing in the Act nor in the reported cases which support the proposition that anyone should receive any kind of preference over anyone else, or that there is no "authority" to protect the consumer's cause.

From a reading of the statute, therefore, it is possible to break down the legislative purpose of milk price regulations in this state into three categories, each of which is entitled to equal consideration, as follows: (1) the producers of milk, (2) the transporters, processers,

[ 1 Pa. Commw. Page 308]

    and sellers of dairy products, and (3) the consuming public. The Board's implication to the contrary notwithstanding, the interest of the consuming public is entitled to the same consideration as those of the other two categories. We recognize that balancing the interests of each of these parties may require a delicate hand; however, the Legislature clearly intended that all three be given equal consideration insofar as is reasonably possible.

It is not within the purview of this Court to make the decision on whether or not there should be any regulation of the dairy industry. Only the Legislature can do that, and it has consistently been the sense of that deliberative body to continue the regulation. Once that decision is made for us there must be compliance within the full meaning of the legislative intent. Halfway measures are not compliance.

Procedure

In this case an organization representing twenty-seven dairy dealers filed a Petition requesting an increase in prices. Normally, and under the Board's rules, they should have been required to go forward at the hearing to support their petition.

This was not done. Instead, the Board directed that its own witness (its Executive-Secretary) be called first. He was asked a total of twelve questions concerning (1) his identification, (2) the identification of his (including his staff) summary exhibit, and (3) the identification of the thirty dairy dealers chosen for his exhibit. He was not called upon to explain the details of his exhibit which ultimately was the basis upon which the Board made its findings.

Rather, the Board then permitted the dairy dealers' counsel to cross-examine this Board's staff witness, over

[ 1 Pa. Commw. Page 309]

    the objections of the City, for the obvious purpose of attempting to permit the petitioners to support their case through him. The City also interrogated the Board's staff witness. Only thereafter did the dairy dealers present their evidence and ...


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