United States District Court, E.D. Pennsylvania
June 15, 2004.
KREIDER DAIRY FARMS, INC., a Pennsylvania Family Farm Corporation, Plaintiff,
ANN M. VENEMAN, Secretary of the United States Department of Agriculture, Defendant.
The opinion of the court was delivered by: JAMES KNOLL GARDNER, District Judge
This matter is before the court on the parties' cross-motions
for summary judgment. For the reasons expressed below, we
conclude that defendant is entitled to judgment as a matter of
law on plaintiff's claims. Therefore, we grant defendant's
motion, deny plaintiff's motion, and dismiss plaintiff's
The factual background of this civil action was described in
detail by United States District Judge Edward N. Cahn in a
related decision, Kreider Dairy Farms, Inc. v. Glickman, No.
95-CV-6648, 1996 U.S. Dist. LEXIS 12094, at *5-7 (E.D. Pa. August
14, 1996). The following facts are taken from Chief Judge Cahn's
August 14, 1996 decision.
Plaintiff Kreider Dairy Farms, Inc. ("Kreider") is a dairy farm
corporation with its principal office in Manheim, Pennsylvania.
Manheim is located within what the United States Department of
Agriculture ("USDA") considers to be the Middle Atlantic area, a
region in which sales of milk are regulated by Federal Milk
Marketing Order 4 ("Order 4"). See 7 C.F.R. § 1004 (1995).
Although Kreider is physically located within the boundaries of
Order 4, it sells fluid milk in the marketing area covered by the
New York-New Jersey Milk Marketing Order 2 ("Order 2").*fn1
Since 1990, Kreider has been selling packaged kosher fluid milk
to two subdealers or handlers: the Foundation for the
Preservation and Perpetuation of the Torah Laws and Customs, Inc.
("FPPTLC") and Ahava Dairy Products, Inc. ("Ahava"). The FPPTLC
is a distributor of fluid milk and milk products and is located
in Baltimore, Maryland It sells fluid milk to customers in
Lakewood, New Jersey. Ahava, which is also a distributor of fluid
milk and milk products, is located in Brooklyn, New York. Ahava
distributes its dairy products in Brooklyn, Manhattan, and
Queens, New York.*fn2
This civil action is closely related to earlier litigation
between plaintiff and defendant in Kreider Dairy Farms, Inc. v.
Glickman, Nos. 95-CV-06648 and 98-CV-00518 ("Kreider I").
Kreider I and the instant action ("Kreider II") share the
same factual background, and the procedural history of Kreider
I is essential to an understanding of the issues before us on
appeal in Kreider II. The procedural history of both actions
follows, and is taken from, the August 14, 1996 opinion of Chief
Judge Cahn in Kreider, 1996 U.S. Dist. LEXIS 12094, at * 5-7,
and from the opinion of the United States Court of Appeals for
the Third Circuit in Kreider Dairy Farms, Inc. v. Glickman,
190 F.3d 113, 116-117 (3d Cir. 1999), where indicated.
In December 1990 the Market Administrator ("MA") responsible
for administering Order 2 learned that Kreider was selling fluid
milk to Ahava for distribution into the milk marketing area
covered by the New York-New Jersey Milk Marketing Order.
Subsequently, the MA determined that Kreider also sold milk to
the FPPTLC, which distributed it into the Order 2 marketing
By letter dated December 19, 1990, the MA informed Kreider that
it might be subject to regulation under Order 2 and instructed it
to file reports with the MA's office. In January 1991 Kreider
filed an application for a producer-handler designation with the
MA for Order 2.*fn4 The MA denied the application based on
its determination that Kreider did not meet the requirements of a
producer-handler as defined in § 1002.12 of Order 2. See
7 C.F.R. § 1002.12 (1995).
Instead, in July 1992, following audits of Kreider, the MA
concluded that Kreider should be billed as a regulated handler
operating a partial pool plant under Order 2. On August 7, 1992
the MA sent a billing statement to Kreider, billing it as a
regulated handler under Order 2 for the period November 1991 to
June 1992. Subsequently, the MA continued to bill Kreider on a
monthly basis as a handler operating a partial pool
On December 28, 1993 Kreider filed a petition challenging the
MA's determination that Kreider was a handler regulated by Order
2 and liable for payments to the producer-settlement fund, rather
than a producer-handler exempt from such payments.*fn6 The
Judicial Officer ("JO") dismissed Kreider's petition, affirming
the MA's determination that Kreider was not eligible for
producer-handler status because it sold milk to two subdealers,
Ahava and FPPTLC.*fn7 The JO found that Kreider's reliance
on Ahava and FPPTLC to distribute some of its fluid milk products
evidenced its lack of complete and exclusive control over all
facilities and resources used for the production, processing and
distribution of milk, as required to qualify as a
producer-handler under Order 2.*fn8
On October 18, 1995 Kreider filed a complaint pursuant to the
AMAA in the District Court challenging the JO's decision. See
AMAA, 7 U.S.C. § 608c(15)(B) (1994). By opinion and Order dated
August 14, 1996, the District Court denied the parties' cross
motions for summary judgment and remanded for further
administrative findings on whether Kreider was "riding the pool,"
that is, whether Kreider was the type of dairy for which
producer-handler status should be denied pursuant to the
promulgation history of the producer-handler exemption.*fn9
On remand, Administrative Law Judge ("ALJ") Edwin S. Bernstein
held a hearing on April 23, 1997 and issued a Decision and Order
dated August 12, 1997 holding that Kreider was "riding the pool"
and therefore was not entitled to producer-handler
status.*fn10 Kreider did not timely appeal this decision,
and the decision of ALJ Bernstein became final.*fn11
On February 17, 1998 Kreider commenced Kreider II by filing a
new petition for review while ALJ Bernstein's decision was on
appeal.*fn12 The new petition sought a refund of Kreider's
payments to the producer-settlement fund from December 1995
through December 1997.*fn13 Kreider subsequently filed an
amended petition which expanded the time period under review to
Kreider II first came before Judicial Officer William G.
Jensen on a certified question from ALJ Dorothea A. Baker as to
whether or not it should be dismissed based on the doctrine of
res judicata.*fn15 JO Jensen found that Kreider II was
barred by claim preclusion to the extent that it pertains to the
period December 1995 to April 1997 (the period during which
Kreider sold milk products to Ahava).*fn16 Because Kreider
I did not decide the issue of Kreider's status during the period
when Kreider did not sell fluid milk products to Ahava, JO Jensen
did not preclude Kreider from litigating its status under Order 2
for the period from May 1997 through December 1999.*fn17
Further proceedings before ALJ Jill S. Clifton led her to
dismiss the portion of Kreider II which survived JO Jensen's
issue-preclusion decision, on the grounds that Kreider's failure
to re-apply for producer-handler status rendered the petition
defective.*fn18 In the alternative, ALJ Clifton found that
it would have been reasonable for the MA to deny any such
application on the basis of Kreider's ongoing sales to
On August 5, 2003 JO Jensen affirmed ALJ Clifton's
decision.*fn20 Specifically, JO Jensen held that Kreider's
January 1991 application for designation as a producer-handler
did not constitute an application for designation as a
producer-handler for the period from December 1995 through
December 1999.*fn21 Finding that an application was a
necessary prerequisite for designation as a producer-handler, JO
Jensen determined that the Kreider II petition was
In the alternative, JO Jensen found that Kreider was barred by
issue preclusion from litigating its status under Order 2 for the
period from December 1995 through April 1997, when Kreider was
still selling fluid milk products to Ahava.*fn23 As for the
remaining period of time from May 1997 through December 1999,
when Kreider was no longer selling to Ahava, JO Jensen held that
Kreider would not have been entitled to producer-handler status
based on its sales to FPPTLC.*fn24 JO Jensen based this
finding on a combination of factors that were indicative of
Kreider's lack of control over distribution of its products,
including Kreider's lack of familiarity with FPPTLC's
operations*fn25 and FPPTLC's ability to turn to other
suppliers during periods of short supply.*fn26
On August 22, 2003 plaintiff filed a one-count Complaint
against defendant seeking judicial review of the August 5, 2003
decision pursuant to the Agricultural Marketing Agreement Act,
7 U.S.C. § 608c(15)(B), and the Administrative Procedure Act,
5 U.S.C. § 706. Defendant filed an Answer to the Complaint on
November 10, 2003, and the administrative record of the USDA
decision was filed on December 15, 2003.
On February 20, 2004 plaintiff filed a Motion for Summary
Judgment. Defendant's Motion for Summary Judgment was filed on
April 1, 2004. Plaintiff filed its Memorandum of Plaintiff,
Kreider Dairy Farms, Inc. in Opposition to Defendant's Motion for
Summary Judgment on April 23, 2004.
The parties agree that there are no issues of material fact.
Each party believes that it is entitled to judgment as a matter
of law on the Complaint based on the undisputed facts.
For the reasons which follow, we find that defendant is
entitled to judgment as a matter of law on plaintiff's Complaint.
Thus, we now grant defendant's motion for summary judgment, deny
plaintiff's motion, and dismiss plaintiff's Complaint.
STANDARD OF REVIEW
Our review of the Decision and Order "is limited to a
determination whether the rulings of the Secretary [of the USDA]
are in accordance with law and his findings are supported by
substantial evidence." Lewes Dairy, Inc. v. Freeman,
401 F.2d 308, 315-316 (3d Cir. 1968); see 7 U.S.C. § 608c(15)(B). We may
not find facts de novo. Id. at 315. Specifically, "[t]he scope
of review is a narrow one and the court should not substitute its
judgment for that of the agency. Kreider I, 1996 U.S. Dist.
LEXIS 12094, at *7-8 (citing Motor Vehicle Manufacturers
Association v. State Farm Mutual, 463 U.S. 29, 43,
103 S.Ct. 2856, 2866-2867, 77 L.Ed.2d 443, 457-458 (1983)). Because we
find that the August 5, 2003 Decision was supported by
substantial evidence and was in accordance with the law, we
affirm that Decision and Order. Therefore, we grant defendant's
motion, deny plaintiff's motion, and dismiss plaintiff's
The basis for the instant appeal of JO Jensen's August 5, 2003
Decision is the denial of producer-handler status to Kreider for
the period of December 1995 to December 1999. Specifically, JO
Jensen affirmed the decision of ALJ Clifton that Kreider's
failure to re-apply for producer-handler status for the period at
issue rendered the petition defective. For the reasons explained
below, we find that the August 5, 2003 Decision was supported by
substantial evidence and was rendered in accordance with the law.
Accordingly, we grant defendant's motion and deny plaintiff's
For the time period relevant to this action, 7 C.F.R. § 1002.12
controlled the designation of handlers as producer-handlers in
Order 2.*fn27 Specifically, 7 C.F.R. § 1002.12 provided for
such a designation "following the filing of an application
pursuant to" the requirements set forth in detail in § 1002.12.
Thus, at a minimum, a handler was required to properly apply for
Kreider argues that its January 1991 application for
producer-handler status satisfies this application requirement.
However, the January 1991 application was denied by the MA on
August 7, 1992.*fn28 On appeal to the JO, the MA's decision
was affirmed. After the issue of the MA's denial of Kreider's
application was remanded to the USDA by Chief Judge Cahn's
Opinion and Order dated August 14, 1996, ALJ Bernstein again
affirmed the denial of producer-handler status on August 12,
1997.*fn29 That decision was not timely appealed and became
final.*fn30 Thus, Kreider's January 1991 application for
producer-handler status was finally resolved and the denial of
such application affirmed.
For this reason, we find that the decision of JO Jensen that
the January 1991 application for producer-handler status did not
constitute an application for such designation for the period of
December 1995 to December 1999 as required by 7 C.F.R. § 1002.12
was rendered in accordance with the law and based on substantial
evidence of record.*fn31
Kreider next argues that its monthly reporting and ongoing
litigation with the USDA constituted an application sufficient to
allow administrative judicial review. However, we must defer to
the administrative agency's findings in this regard. See Motor
Vehicle Manufacturers, 463 U.S. at 43., 103 S.Ct. at 2866-2867,
77 L. Ed.2d at 457-458. JO Jensen's decision affirmed the
conclusions of ALJ Clifton that such filings did not constitute
an application.*fn32 Kreider's failure to re-apply for
producer-handler status wholly by-passed the MA who could have
granted Kreider's new application. We find JO Jensen's
conclusions to be in accordance with the requirement of
7 C.F.R. § 1002.12 that Kreider file a formal application for the
producer-handler designation. Thus, we conclude that JO Jensen's
decision not to treat Kreider's monthly reports to the MA as an
application for producer-handler status was rendered in
accordance with the law.
Finally, Kreider argues that a formal re-application for
producer-handler status for the period from December 1995 to
December 1999 would have been futile. Futility is a recognized
exception to the general rule that the failure to exhaust
administrative remedies bars judicial review of agency action.
Susquehanna Valley Alliance v. Three Mile Island Nuclear
Reactor, 619 F.2d 231, 245 (3d Cir. 1980). In its brief,
however, Kreider does no more than conclusively state that a
re-application would have been futile.
On such a bare assertion we cannot find that such a
re-application would have been futile. Moreover, by failing to
re-apply for designation as a producer-handler in December 1995
Kreider denied the MA the opportunity to reconsider Kreider's
status in light of the changed circumstance that Kreider had
stopped selling fluid milk to Ahava. There is no basis for this
court to determine that such re-application under changed
circumstances would have resulted in a denial of the
producer-handler designation and thus have proved futile. Thus,
we reject Kreider's argument that the futility exception applies
to exempt Kreider from the administrative requirements of
7 C.F.R. § 1002.12.
Therefore, we find that the August 5, 2003 Decision and Order
of JO Jensen determining that Kreider failed to first re-apply
for such status before seeking administrative judicial review was
rendered in accordance with the law and was supported by
substantial evidence. Because we affirm JO Jensen's decision that
Kreider's petition was premature, we need not address JO Jensen's
alternative reasoning for denying such designation.
For all the foregoing reasons, we grant defendant's motion for
summary judgment and deny plaintiff's motion for summary
judgment. Accordingly, we enter judgment in favor of Defendant on
plaintiff's claims and dismiss plaintiff's Complaint.
NOW, this 15th day of June 2004, upon consideration of the
Motion for Summary Judgment, which motion was filed by plaintiff
on February 20, 2004; Defendant's Motion for Summary Judgment,
which motion was filed on April 1, 2004; and the Memorandum of
Plaintiff, Kreider Dairy Farms, Inc. in Opposition to Defendant's
Motion for Summary Judgment, which brief was filed on April 23,
2004; and for the reasons expressed in the accompanying Opinion,
IT IS ORDERED that defendant's motion is granted.
IT IS FURTHER ORDERED that plaintiff's motion is denied.
IT IS FURTHER ORDERED that judgment is entered in favor of
defendant on plaintiff's claims.
IT IS FURTHER ORDERED that plaintiff's Complaint is