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Marchezak v. McKinley

decided: October 3, 1979.

JOHN MARCHEZAK, G. RICHARD MOOSE ET AL., APPELLEES,
v.
MYRON R. MCKINLEY, MARKET ADMINISTRATOR OF FEDERAL ORDER NO. 36 AND REFERENDUM AGENT, AND ROBERT BERGLAND, UNITED STATES SECRETARY OF AGRICULTURE, APPELLANTS IN NOS. 78-2652 AND 79-1090, JOHN MARCHEZAK ET AL., APPELLEES, V. MILK MARKETING, INCORPORATED, AN AGRICULTURAL COOPERATIVE CORPORATION, APPELLANT-INTERVENOR IN NOS. 78-2387 AND 79-1094.



Before Seitz, Chief Judge, and Gibbons and Sloviter, Circuit Judges.

Author: Seitz

Opinion OF THE COURT

This is an appeal by the Secretary of Agriculture (the Secretary), the Milk Marketing Administrator of Federal Order Number 36, and Milk Marketing, Inc., from a final order of the district court enjoining the Secretary from enforcing a marketing order issued under the Agricultural Marketing Agreement Act of 1937, 7 U.S.C. §§ 601 Et seq. (1976). The marketing order deals with the method by which producers of milk are to be paid for their products. The plaintiff-appellees are twenty-seven producers of milk who brought this action to challenge the Secretary's authority under the Act to issue the order.

I.

A.

Before turning to the proceedings in the district court, some understanding of the dairy industry and the federal government's response to its unique problems is necessary. Like many other persons engaged in agriculture, milk producers generally do not sell their products directly in the market. Instead, they rely on middlemen ("handlers") to purchase and distribute their dairy goods. Also like other farmers, milk producers often find themselves subject to wide fluctuation in the prices of their products as well as frequently depressed market conditions. The situation can be exacerbated by natural variations in the supply of milk.

Congress addressed the plight of the milk producer in portions of the Agricultural Marketing Agreement Act of 1937, 7 U.S.C. §§ 601 Et seq. (1976) (the Act). In essence, the Act seeks to ensure that all producers selling to handlers receive a uniform price. See, e. g., id. § 608c(5)(A)-(B). To achieve this goal, the Secretary computes a monthly price for each region covered by a milk marketing order. The eastern Ohio-western Pennsylvania region is one such area. See 7 C.F.R. part 1036 (1979).

In the mid-1970's, the Secretary became concerned over late payments by handlers to producers in the eastern Ohio-western Pennsylvania region. He decided that the government needed a constant and reliable source of information about the timeliness of handlers' payments to producers. Accordingly, for this and other reasons he filed notice of a hearing and proposed rulemaking pursuant to 7 U.S.C. § 608c(3)-(4) (1976). 42 Fed.Reg. 48,886 (1977). After the hearing and the vote of producers required by 7 U.S.C. § 608c(9)(B) (1976), the Secretary issued milk marketing order number 36. See 43 Fed.Reg. 33,652 (1978), Codified in scattered sections of 7 C.F.R. part 1036 (1979). Because plaintiffs in this case all are independent producers (I. e. not members of an agricultural cooperative), we need only focus on the portions of order 36 relating to independents.

The order provides that in two situations a handler pays the money he owes a producer over to the market administrator, who then pays the independent. First, the handler can elect to pay the independent through the administrator. See 7 C.F.R. §§ 1036.71(a)(1), 1036.73(d) (1979). Second, if the handler is late in paying, he must pay through the administrator for three consecutive months. See id. § 1036.73(d). If neither of these two events occurs, then the independent receives payment directly from the handler just as he did before order 36 went into effect.

Several features of order 36 are important to note for purposes of this case. First, although all members of a cooperative must receive payment through the market administrator, See id. § 1036.71(a), the order has no effect on the price the producers receive for their milk. Even though the method of payment may vary between independents and cooperative members, they receive exactly the same price. Second, order 36 also does not discriminate between independents and cooperative members as to the time they receive payment. Even if a handler pays an independent producer directly, he must do so by the same day on which the market administrator pays producers. See id. § 1036.73(d). Thus an independent being paid directly gets his money no later than a cooperative member.

Third, order 36 does not change the dates for payment that existed prior to its promulgation. Payments for the first half of the month must be paid by the end of the month, those for the second half by the eighteenth day after the end of the month. See id. § 1036.73(a)-(b). This schedule is essentially unchanged from the old one. See 43 Fed.Reg. 33,652, 33,658 (1978). Thus no producer receives money later than he did before order 36 came into effect.

Plaintiffs are twenty-seven independent milk producers. They filed this action for an injunction solely to challenge the Secretary's authority under the Act to promulgate the portions of order 36 relating to payment through the market administrator. They do not contest the other provisions of order 36 or the procedure followed in promulgating it. On October 24, 1978, the district court granted them a preliminary injunction, which this court subsequently stayed.

Thereafter, the intervenor-defendant Milk Marketing filed a motion to dismiss because the action was collusive and because the plaintiffs were not the real parties in interest. The Secretary and the Market Administrator also filed a motion to dismiss (or for summary judgment in the alternative), arguing that the plaintiffs lacked standing because they had not demonstrated any harm to them from order 36. After a hearing, the district court denied the motions to dismiss and postponed the motion for summary judgment pending the hearing on the final injunction.

At the conclusion of that hearing, the district court enjoined the Secretary from enforcing order 36. In an unpublished decision, the court reasoned that Congress had intended the Act to be strictly construed; without specific statutory authorization, the Secretary could not issue the marketing order here.

After concluding that the Secretary was powerless to issue the regulation, the court then addressed the plaintiffs' standing. The court seemed to reason that the Secretary's lack of authority to issue order 36 conferred standing on the plaintiffs. In effect, the district court felt that because the Secretary could not issue order 36, producers had a right to receive payment directly from the handlers. This right to direct payment accordingly gave the plaintiffs standing. Thus it concluded that "it is the change in the form of payment which gives the Plaintiffs their standing."

The appellants now argue that the plaintiffs lack standing and that the Secretary did have statutory authority under 7 U.S.C. §§ 608c(5)(A), 608c(5)(E) (ii), 608c(7) (1976), to ...


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