Respondent Vermont dairy farmers ("country" milk producers)
brought this action to invalidate the so-called farm location
differential provided for by order of the Secretary of Agriculture
as contrary to the Agricultural Marketing Agreement Act of 1937.
The effect of the order is to require milk distributors to pay milk
producers situated close to milk marketing areas ("nearby" farmers)
higher prices than are paid to producers located at greater
distances from such areas. In the 1920's, prior to federal
regulation, nearby farmers received higher prices for their milk in
the Boston area than farmers at more distant points. The 1935
amendment to the Agricultural Adjustment Act, carried forward into
§ 8(c) of the Agricultural Marketing Agreement Act of 1937,
provides, in part, for the payment to all producers
"delivering milk to all handlers of uniform prices for all milk
. . . subject only to adjustments for (a) volume, market, and
production differentials customarily applied by the handlers
subject to such order, (b) the grade or quality of the milk
delivered, (c) the locations at which delivery of such milk is
made."
The Department of Agriculture regulations provide a price
differential for "nearby" farmers, and a lesser differential for
intermediate nearby zones. The District Court granted an injunction
against further payments of the differentials, and the Court of
Appeals affirmed.
Held:
1. The statutory scheme, which was to provide uniform prices to
all producers in the marketing area, subject only to specifically
enumerated adjustments, contemplated that "market differentials . .
. customarily applied" would be based on
cost adjustments.
Pp.
396 U. S.
179-187.
Page 396 U. S. 169
(a) The particularity and specificity of the enumerated
differentials negate the conclusion that Congress was thinking only
in terms of historical considerations. P.
396 U. S.
183.
(b) The other statutory differentials, for "volume," "grade or
quality," "location," and "production," all compensate the producer
for providing an economic service benefiting the milk handler. Pp.
396 U. S.
183-184.
(c) In a statute whose purpose was to avoid the infirmity of the
overbroad delegation of the Agricultural Adjustment Act, it would
have been simple to include "nearby" payments in the list of
enumerated differentials, or at least to allude to them in the
draftsmen's report. P.
396 U. S.
185.
2. The "nearby" differentials do not fall into the category of
the permissible adjustments, which are limited to compensation for
rendering an economic service, and neither the Secretary of
Agriculture nor the "nearby" farmer petitioners have advanced any
economic justifications for them that have substantial record
support. Pp.
396 U. S.
188-191.
3. This holding does not depart from the Court's precedents.
United States v. Rock Royal Co-op., 307 U.
S. 533, distinguished. To the extent that
Green
Valley Creamery v. United States, 108 F.2d 342, contravenes
this holding, it is disapproved. Pp.
396 U. S.
191-192.
4. While according great weight to a department's
contemporaneous construction of its own enabling legislation, the
Court cannot abdicate its ultimate responsibility to construe the
statutory language. Pp.
396 U.S.
192-194.
5. Although the Secretary's orders have been specifically
approved by the farmers concerned in accordance with § 9(b)(i) of
the Act, such approval does not legitimize the regulation, which is
not authorized by statute. Pp.
396 U. S.
195-196.
6. A reversal for trial on the merits is not warranted, since
the Department of Agriculture acted on a formal record, and a
remand to the Secretary is inappropriate in the absence of a
request by the Government, which has advanced no new theory for
sustaining the regulation. Pp.
396 U. S.
196-197.
7. The Court of Appeals' award to "nearby" farmer petitioners of
the escrowed differential payments collected before the District
Court entered final judgment will not be disturbed. P.
396 U. S.
197.
131 U.S.App.D.C. 109, 402 F.2d 660, affirmed.
Page 396 U. S. 170
MR. JUSTICE HARLAN delivered the opinion of the Court.
This action was brought by respondent Vermont dairy farmers,
"country" milk producers, seeking a judgment invalidating as
contrary to the Agricultural Marketing Agreement Act of 1937, as
amended, 50 Stat. 246, 7 U.S.C. § 601
et seq. (1964 ed.
and Supp. IV), the so-called farm location differential provided
for by order
Page 396 U. S. 171
of the Secretary of Agriculture. [
Footnote 1] The effect of that order is to require milk
distributors to pay to milk producers situated at certain distances
from milk marketing areas, "nearby" farmers, higher prices than are
paid to producers located at greater distances from such areas. The
District Court issued a preliminary injunction on January 16, 1967,
against further payments, and, on respondents' motion for summary
judgment, transformed its decree into a permanent injunction on
June 15, 1967. The Court of Appeals for the District of Columbia
Circuit affirmed. 131 U.S.App.D.C. 109, 402 F.2d 660 (1968). We
granted certiorari to resolve the important issue of statutory
construction involved in this aspect of the administration of the
federal milk regulation program. 394 U.S. 958 (1969).
Page 396 U. S. 172
I
BACKGROUND
Once again, this Court must traverse the labyrinth of the
federal milk marketing regulation provisions. [
Footnote 2] While previous decisions have outlined
the operation of the statute and the pertinent regulations, a brief
odyssey through the economic and regulatory background is essential
perspective for focusing the issue now before the Court.
A. THE ECONOMICS OF THE MILE INDUSTRY
The two distinctive and essential phenomena of the milk industry
are a basic two-price structure that permits a higher return for
the same product, depending on its ultimate use, and the cyclical
characteristic of production.
Milk has essentially two end uses: as a fluid staple of daily
consumer diet, and as an ingredient in manufactured dairy products
such as butter and cheese. Milk used in the consumer market has
traditionally commanded a premium price, even though it is of no
higher quality than milk used for manufacture. While cost
differences account for part of the discrepancy in price, they do
not explain the entire gap. At the same time, the milk industry is
characterized by periods of seasonal overproduction. The winter
months are low in yield and,
Page 396 U. S. 173
conversely, the summer months are fertile. In order to meet
fluid demand which is relatively constant, sufficiently large herds
must be maintained to supply winter needs. The result is oversupply
in the more fruitful months. The historical tendency prior to
regulation was for milk distributors, "handlers," to take advantage
of this surplus to obtain bargains during glut periods. Milk can be
obtained from distant sources and handlers can afford to absorb
transportation costs and still pay more to outlying farmers whose
traditional outlet is the manufacturing market. [
Footnote 3] To maintain income, farmers
increase production, and the disequilibrium snowballs.
To protect against market vicissitudes, farmers in the early
1920's formed cooperatives. These cooperatives were effective in
eliminating the self-defeating overproduction by pooling the milk
supply and refusing to deal with handlers except on a collective
basis. [
Footnote 4] During
Page 396 U. S. 174
the 1920's era of relative market stability, the nearby farmers
enjoyed premium prices for their product. These favorable prices
were apparently attributable to reduced transportation costs and
also the nearby farmer's historic position as a fluid supplier.
[
Footnote 5]
B. THE FIRST FEDERAL PROGRAM
The drop in commodity prices during the depression years
destroyed the equilibrium of the 1920's, and utter chaos ensued.
Congress, in an effort to restore order to the market and boost the
purchasing power of farmers, enacted the licensing provisions of
the Agricultural Adjustment Act, 48 Stat. 31, 35. Under § 8(3), the
Secretary of Agriculture was empowered
"[t]o issue licenses permitting processors, associations of
producers, and others to engage in the handling, in the current of
interstate or foreign commerce, of any agricultural commodity or
product thereof, or any competing commodity or product thereof.
Such licenses shall be subject to such terms and conditions, not in
conflict with existing Acts of
Page 396 U. S. 175
Congress or regulations pursuant thereto, as may be necessary to
eliminate unfair practices or charges that prevent or tend to
prevent the effectuation of the declared policy and the restoration
of normal economic conditions in the marketing of such commodities
or products and the financing thereof. The Secretary of Agriculture
may suspend or revoke any such license, after due notice and
opportunity for hearing, for violations of the terms or conditions
thereof. . . ."
Under the licensing system, base-rating plans not unlike the
private arrangements that obtained in the 1920's were adopted.
[
Footnote 6] Producers were
assigned bases which fixed the percent of their output that they
would be permitted to sell at the Class I price that was paid for
fluid milk. [
Footnote 7] The
viability of the licensing scheme was jeopardized, however, by
judicial decisions disapproving a similarly broad delegation of
power under the National Industrial Recovery Act provisions, 48
Stat. 195.
Schechter Poultry Corp. v. United States,
295 U. S. 495
(1935). With its agricultural marketing program resting on
quicksand, Congress moved swiftly to eliminate the defect of
overbroad delegation and to shore up the void in the agricultural
marketing provisions. Section 8(3) of the 1933 Act was amended in
1935, and the pertinent language has been carried forward without
significant
Page 396 U. S. 176
change into § 8c of the present Act. Agricultural Marketing
Agreement Act of 1937, 50 Stat. 246, as amended, 7 U.S.C. § 608c
(1964 ed. and Supp. IV). [
Footnote
8]
Page 396 U. S. 177
C. THE PRESENT REGULATORY SCHEME
The present system, which differs little in substance from the
scheme conceived in 1937 for regulating the Boston market,
[
Footnote 9] provides for a
uniform market price payable to all producers by all handlers.
[
Footnote 10] Prices are
established for Class I and Class II uses. The total volume of milk
channeled into the market in each category is multiplied by the
appropriate coefficient price, and the two results are totaled and
then divided by the total number of pounds sold. The result
represents the average value of milk sold in the marketing area and
is the basic "uniform" price. Were all producers to receive this
price they would share on an equal basis
Page 396 U. S. 178
the profits of Class I marketing and assume equally the costs of
disposing of the economic surplus in the Class II market. The
actual price to the producer is, however, the "blended" price,
which is computed by adding and subtracting certain special
differentials provided for by statute and order.
See 7 CFR
§ 1001.64 (1969). The deduction for differential payments withheld
for the benefit of nearby producers reduces the uniform "blended"
price to those producers ineligible to collect this particular
adjustment. [
Footnote 11]
The provision is contained in § 1001.72 of the order, and
provides:
"
In making the payments to producers . . . , each handler
shall add any applicable farm location differential specified in
this section."
"(a) With respect to milk received from a producer whose farm is
located within any of the places specified in this paragraph, the
differential shall be 46 cents per hundredweight, unless the
addition of 46 cents gives a result greater than the Class I price
determined under §§ 1001.60, 1001.62, and 1001.63 which is
effective at the plant at which the milk is received. In that
event, there shall be added a rate which will produce that
price."
A differential of 23� is provided for deliveries from farms in
intermediate nearby zones. § 1001.72(b).
The foregoing provisions appear in the so-called 1964
Massachusetts-Rhode Island Order, which consolidated into one
region the four sub-markets which were previously
Page 396 U. S. 179
regulated separately under the so-called four "New England"
orders: the 1951 Boston order which carried forward the order
adopted for the Boston area in 1937; the Springfield order
promulgated in 1949, and the Southeastern New England order of
1958. Each order included a provision for a nearby differential
payment to farmers within a stated radius of a designated market
center. For example, the differential under the Boston order was
payable to farmers located within a 40-mile radius of the State
House in Boston; a slightly lower differential was paid to farmers
within an 80-mile radius. Under the 1964 order, there is no central
point for the computation of the radius for payment of the
differential; the Secretary has retained the differential
provisions as they appeared in the previous four orders. Farmers
who would have been entitled to the differential under any one of
the previous four marketing regulations continue to receive those
payments under the present order. These nearby farmers are eligible
for the differential on any shipments within the New England
marketing area, even though their milk may actually be used outside
the radius of their particular nearby zone.
II
THE STATUTORY SCHEME
The foundation of the statutory scheme is to provide uniform
prices to all producers in the marketing area, subject only to
specifically enumerated adjustments. The question before the Court,
stated most simply, is whether payment of farm location
differentials, set forth above, is a permissible adjustment under
8c(5)(b) to the general requirement of uniformity of price.
[
Footnote 12]
Page 396 U. S. 180
The Secretary has in the past labeled the "nearby" differential
a "location" differential and defended its inclusion in his orders
on that ground. The justification and argument are now, however,
pitched in a different key. The Government has apparently abandoned
all but one of the numerous theories advanced below, and pressed
most vigorously in the
Blair v. Freeman litigation (125
U.S.App.D.C. 207, 370 F.2d 229 (1966)), and it now stresses the
provision in § 8c(5)(b) for "volume, market, and production
differentials customarily applied by the handlers subject to such
order."
While the proper resolution of the issue is by no means
self-evident, we are persuaded that "market . . . differentials
customarily applied" contemplates cost adjustments. The plain
thrust of the federal statute was to remove ruinous and
self-defeating competition among
Page 396 U. S. 181
the producers and permit all farmers to share the benefits of
fluid milk profits according to the value of goods produced and
services rendered. The Government's proposed reading of the Act,
bottomed as it is on the historical payment of a premium to nearby
farmers during the monopolistic era of the cooperative pools, would
come to perpetuate economic distortion and freeze the milk industry
into the competitive structure that prevailed during the
1920's.
Without the benefit of government muscle to eliminate crippling
price warfare in the summer months, neither nearby nor country
producers could share in the monopoly-type profits that accrue from
fluid milk sales. Absent regulation, only the handlers, if anyone,
would stand to benefit from the "fluid" monopoly. While we cannot
project what would be the case today if a free market prevailed, we
might well anticipate that the nearby producers' winter advantages
would be negligible in view of reduced transportation costs and
more reliable refrigeration. Thus, even in winter, handlers might
be free to play nearby and outlying farmers against each other,
since handlers would be free of the leverage exercised by the
nearby cooperatives during the 1920's. Nearby producers now seek
the best of both worlds. Having achieved the security that comes
with regulation, they seek under a regulatory umbrella to
appropriate monopoly profits that were never secure in the
unregulated market.
We are reluctant to attribute such intent to Congress and simply
in the name of administrative expertise, to follow a path not
marked by the language of the statute. Indeed, such signposts as
may be discerned from the legislative history point in a very
different direction. The legislative history strongly suggests that
"market differentials," as well as all the other differentials,
contemplated particular understood economic adjustments. The House
Report, in discussing the allowable adjustments
Page 396 U. S. 182
characterize the market differential as a payment over and above
the transportation costs,
i.e., a location differential,
for delivery to the primary market. [
Footnote 13] Thus, farmers would share with handlers the
savings from bypassing country-station processing and handling the
milk only at the city plant.
The significance of the legislative history emerges upon study
of the subsequent administrative practice. The original Boston
order obscures the market differential payment by providing, in
place of a labeled adjustment, a two-price structure which allowed
an additional 18� per cwt. for city-delivered milk over and above
the costs of transporting the milk from the country plant. However,
the testimony of Mr. Aplin for the Market Administrator erases any
doubt that those responsible for administering the Act fully
understood the meaning of the Committee's explanation of market
differential. [
Footnote
14]
Page 396 U. S. 183
Subsequent orders have combined the country station handling
adjustment, properly the market differential, and the
location-transportation differential into the so-called zone
differential. [
Footnote
15]
The statute before us does not contain a mandate phrased in
broad and permissive terms. Congress has spoken with particularity
and provided specifically enumerated differentials, which negatives
the conclusion that it was thinking only in terms of historical
considerations. The prefatory discussion in the House Report
emphasizes the congressional purpose to confine the boundaries of
the Secretary's delegated authority. [
Footnote 16] In these circumstances, an administrator
does not have "broad dispensing power."
See Addison v. Holly
Hill Co., 322 U. S. 607,
322 U. S. 617
(1944). The congressional purpose is further illumined by the
character of the other statutory differentials for "volume,"
Page 396 U. S. 184
"grade or quality," "location," and "production," [
Footnote 17] all of which compensate
or reward the producer for providing an economic service of benefit
to the handler. [
Footnote
18]
The general language of the committee report indicating that
Congress intended to carry forward the basic regulatory approach
adopted under the 1933 Act, following the precedent of the 1920's,
is stressed by the dissent to this opinion. This committee
language, it is argued, reinforces the continuity connotations of
the "customarily applied" language, a thrust that is not
blunted
Page 396 U. S. 185
by any specific language indicating a legislative purpose to
treat all farmers equally.
Legislative silence is a poor beacon to follow in discerning the
proper statutory route. For here, the light illumines two different
roads. If nearby payments had the notoriety and significance in the
milk distribution industry attributed to them by the dissent,
Congress could have given its blessing by carving out another
specific exception to the uniform price requirement. In an Act
whose very purpose was to avoid the infirmity of overbroad
delegation and to set forth with particularity the details for a
comprehensive regulatory scheme, it would have been a simple matter
to include in a list of enumerated differentials, "nearby"
payments, or at least allude to them in the report of the
draftsmen. It is clear that Congress was not conferring untrammeled
discretion on the Secretary and authorizing him to proceed in a
vacuum. This was the very evil condemned by the courts that the
1935 amendments sought to eradicate. [
Footnote 19] It would be perverse to assume that
congressional drafters, in eliminating ambiguity from the old Act,
[
Footnote 20] were careless
in listing their exceptions and selecting the illustrations from
the committee report from which their words would ultimately derive
content. [
Footnote 21]
Page 396 U. S. 186
We consider our conclusions in no way undermined by the colloquy
on the floor between Senator Copeland and Senator Murphy upon which
the dissent places such emphasis. A committee report represents the
considered and collective understanding of those Congressmen
involved in drafting and studying proposed legislation. Floor
debates reflect, at best, the understanding of individual
Congressmen. It would take extensive and thoughtful debate to
detract from the plain thrust of a committee report in this
instance. There is no indication, however, that the question of
nearby differentials and the meaning of "market . . . differentials
customarily applied" were precisely considered in the floor
dialogue. The exchange is not only brief, but also inconclusive as
to meaning. [
Footnote 22]
Indeed, Senator Murphy apparently acquiesced
Page 396 U. S. 187
in Senator Copeland's implied criticism of the statute for
providing uniform prices for distant and nearby producers within
the marketing region. When Senator Copeland pursued his inquiry,
asking whether the Act recognized the higher cost for taxes on
nearby lands, Senator Murphy merely recited the differential
provisions of the Act and suggested that they "adopt the present
practice of business," but conspicuously lacking is an affirmative
statement that any specific differential covered these costs. This
is not impressive legislative history, especially in light of
Senator Murphy's earlier agreement with Senator Copeland's
statement that
"[t]he provisions of the equalization . . . provide that a
producer who is producing his milk on farms near to cities would
receive the same price for his product as a farmer who produces his
milk, say, 40 or 50 miles away from the same community,"
and the specific business illustrations of the House Report.
Page 396 U. S. 188
III
SCOPE OF MARKET DIFFERENTIAL
While market differentials customarily applied need not be
restricted to the sole illustration in the House Report, that
illustration, taken in conjunction with the discussion of all the
statutory differentials, suggests that the permissible adjustments
are limited to compensation for rendering an economic service.
[
Footnote 23] The challenged
nearby differentials do not fall into this category. [
Footnote 24]
Nor has the Secretary advanced any economic justification for
these differential payments. It is plain from the administrative
record that the nearby differential was included in the original
Boston order as a recognition of the favored position of nearby
producers in the fluid market and as an inducement to nearby
farmers to approve the Secretary's order. (J.A. 237 [
Footnote 25]) The only sense
Page 396 U. S. 189
in which the handler may be said to gain economically is by
virtue of the elimination of the nearby producer as a potential
competitor. While this factor is mentioned in the findings
accompanying the 1937 order, it has not
Page 396 U. S. 190
been emphasized in the 1964 findings and the testimony at the
1963 hearings suggests that support in the record is indeed scant.
That entry of the nearbys into the distribution market would bring
unwanted competition is irrelevant if it does not jeopardize market
stability. We think the analysis of the court below was correct: if
there is any economic benefit here, producers should receive their
compensation directly from the handlers, and not out of the
market-wide pool. 131 U.S.App.D.C. at 114, 402 F.2d at 665.
While petitioner nearby farmers do not concede so readily the
absence of economic foundation for the differential, no
justifications are advanced that find any substantial support in
the record. The allusion to the evenness of production on nearby
farms would not justify the exclusive payment of this differential
to nearby farmers. If the Secretary intended a production
differential, all producers who qualify would be eligible. Some
amici and petitioners point to higher taxes on nearby
lands and opportunity costs as reasons for retaining the
differential. These are, admittedly, additional costs of nearby
production, but they are of no concern to handlers, who seek only
to obtain reliably milk at the cheapest price.
See Kessel,
Economic Effects of Federal Regulation of Milk Markets, 10 J.Law
& Econ. 51 (1967). This Court has been slow to attribute to
Congress an intent to compensate for inefficient allocation of
economic resources.
Cf. West Ohio Gas Co. v. Comm'n,
294 U. S. 63,
294 U. S. 72
(1935). While petitioners argue that the differential is a
necessary inducement to keep the nearby farmers in business, the
record does not reveal that the Secretary acted out of concern that
the nearby farmers would quit the market, nor is there any evidence
demonstrating the present necessity for nearby producers. In an era
where efficient transportation is
Page 396 U. S. 191
available, this may be of nominal concern. At most, this may
have been an unspoken consideration in 1937. [
Footnote 26]
Since the Secretary made no findings to that effect, the Court
need not consider whether they would justify payment of the nearby
differential in view of the legislative history indicating that the
statute contemplates adjustments primarily for economic costs to
handlers that are absorbed or reduced by the producers. Further, if
the representations of respondents are correct -- and they are not
without support in the record -- it appears that the elimination of
the 40-mile zone nearby differential payments of 46�, even with the
suspension of the intermediate differential payments of 23�, would
result in a higher uniform price to those farmers now receiving the
23� differential. [
Footnote
27]
IV
PRIOR DECISIONS
Our holding does not represent a departure from this Court's
precedents. No opinion of this Court has ever explicitly approved
the nearby differential. Reliance on
United States v. Rock
Royal Co-op., 307 U. S. 533
(1939), is misplaced. This Court's refusal to invalidate the
payment of a nearby differential to farmers in certain counties
named in the New York order must be taken in the context of that
action, which was initiated by the Government against handlers who
refused to obey the regulations. That decision did not repudiate
the District Court's finding that the provision was "discriminatory
as between producers."
Id. at
307 U. S. 567.
The narrow reach of our
Rock Royal holding was recognized
in
Stark v.
Page 396 U. S. 192
Wickard, 321 U. S. 288
(1944), where we noted that
Rock Royal held the handlers
without standing "to object to the operation of the producer
settlement fund,"
id. at
321 U. S. 308,
except as it affected handlers. The Court in
Rock Royal
went on to reject Rock Royal's contention that the payments placed
those
handlers without customers in the nearby counties at
a competitive disadvantage.
Our attention is also drawn to the First Circuit's decision in
Green Valley Creamery v. United States, 108 F.2d 342
(1939). As in
Rock Royal, supra, the parties did not have
standing to raise the invalidity of the nearby differential. To the
extent the First Circuit's view is contrary to our present holding,
we disapprove it.
V
SIGNIFICANCE OF DEPARTMENTAL CONSTRUCTION
While this Court has announced that it will accord great weight
to a departmental construction of its own enabling legislation,
especially a contemporaneous construction,
see Udall v.
Tallman, 380 U. S. 1,
380 U. S. 16
(1965);
Power Reactor Co. v. Electricians, 367 U.
S. 396,
367 U. S. 408
(1961), it is only one input in the interpretational equation. Its
impact carries most weight when the administrators participated in
drafting and directly made known their views to Congress in
committee hearings.
See Power Reactor Co. v. Electricians,
supra; United States v. American Trucking Assns., 310 U.
S. 534,
310 U. S. 539
(1940). In such circumstances, absent any indication that Congress
differed with the responsible department, a court should resolve
any ambiguity in favor of the administrative construction if such
construction enhances the general purposes and policies underlying
the legislation.
Page 396 U. S. 193
See American Power & Light Co. v. SEC, 329 U. S.
90,
329 U. S.
112-114 (1946).
The Court may not, however, abdicate its ultimate responsibility
to construe the language employed by Congress. Those props that
serve to support a disputable administrative construction are
absent here. There is no suggestion in the findings, nor have the
parties explained, how the present differential contributes to the
broad, general purpose of eliminating crippling competition. Nor,
in the present case, has the Court's attention been drawn to any
hearings that suggest that Congress acted with the particular
administrative construction before it in either 1935 or 1937. And
if those administrators who participated in drafting the 1935 Act
understood market differentials to encompass the farm location
differential, they obviously failed to communicate their
understanding to the drafters of the committee report. It is also
evident that the 1937 reenactment of the 1935 amendments was
routine, and did not follow a comprehensive review of the issues
that had been explored in detail by the 1935 draftsmen who wrote
the committee reports. [
Footnote
28]
It is true that a report from the Federal Trade Commission set
forth the computations employed under the 1936 Boston order which
apparently provided for a
Page 396 U. S. 194
nearby differential. [
Footnote 29] But the stark figures, set forth in the
appendix to the report without explication, can hardly be said to
have given the administrative construction the "notoriety" that
this Court found persuasive in
Udall v. Tallman, 380 U.S.
at
380 U. S. 18. In
Udall, the Court was impressed by the fact that the
Secretary's interpretation had "been a matter of public record and
discussion."
Id. at
380 U. S. 17.
Even despite active congressional involvement in reviewing certain
administrative action in connection with particular leases, the
Court noted that it would not attribute ratification to Congress.
Udall v. Tallman, supra. Nor can petitioners put flesh on
this argument by citing § 4 of the 1937 reenactment, 50 Stat. 249,
[
Footnote 30] and the
committee report, H.R.Rep. No. 468, 75th Cong., 1st Sess., 4
(1937), which merely states in the language of the Act that § 4
purports to ratify, legalize, and confirm all action taken pursuant
to the agreement and order provisions under the 1035 statute.
[
Footnote 31]
Page 396 U. S. 195
VI
RELEVANCE OF PRODUCER APPROVAL
Petitioners allude to the fact that the orders in question have
been specifically approved by the farmers concerned as required by
§§ 8c(9)(B)(i) and (ii) of the Act. [
Footnote 32] While the contention is adumbrated, the
argument appears to run as follows: since provision is made for
approval of orders by the regulated subjects, the Secretary's
discretion should be generously interpreted.
Page 396 U. S. 196
If provision for such approval could ever legitimize a
regulation not authorized by statute, the provision has no
significance in the case before us, in light of the considerations
already discussed. It is the Secretary, not the farmers, who is
responsible for administering the statute and initiating orders.
[
Footnote 33]
VII
PROPRIETY OF SUMMARY JUDGMENT
Although the Secretary does not press the point, the private
petitioners argue that this Court should, at the very least,
reverse for a trial on the merits, or, alternatively, reverse with
instructions to remand to the Secretary for further
consideration.
This is not a case where a department has acted without a formal
record. In such instances, a trial might be appropriate to afford
the department an opportunity to develop those facts which underpin
its action. When action is taken on a record, the department cannot
then present testimony in court to remedy the gaps in the record,
any more than arguments of counsel on review can substitute for an
agency's failure to make findings or give reasons. A remand to the
Secretary is inappropriate in the absence of a request by the
Government. Counsel for the Department has advanced no new theory
for sustaining the order.
Cf. SEC v. Chenery Corp.,
318 U. S. 80,
318 U. S. 2
(1943).
Unlike
Addison v. Holly Hill Co., 322 U.
S. 607 (1944), we do not have before us a definition in
a regulation that is necessary to give meaning and content to the
administrative
Page 396 U. S. 197
scheme. Nor does our decision have the effect of engrafting a
definition on a particular statutory term, a function that should,
in the first instance, be left to the appropriate administrative
body. The 1964 order, moreover, expressly provides for severance of
any provision that is found invalid.
See 7 CFR §
1001.96.
VIII
DISPOSITION OF THE ESCROW FUND
Petitioner farmers' last line of retreat is their contention
that they are entitled to escrow monies that have been accruing
since the District Court's entry of the order granting the
respondents' motion for a preliminary injunction. The court below
struck an equitable balance in awarding to petitioners, nearby
farmers, all escrow monies collected prior to the entry of final
judgment by the District Court. This is a fair solution, and one
this Court will not disturb. Petitioners have been on notice since
Blair v. Freeman, 126 U.S.App.D.C. 207, 370 F.2d 229
(1966), that nearby differentials were bottomed on a shaky
statutory premise. Lest losing parties be encouraged to prolong
litigation by frivolous appeals in order to reap a windfall, we
think respondents deserve the fruits of their victory as of the
date of final judgment at trial.
The judgment below is
Affirmed.
THE CHIEF JUSTICE and MR. JUSTICE MARSHALL took no part in the
consideration or decision of these cases.
* Together with No. 52,
Hardin, Secretary of Agriculture v.
Allen et al., also on certiorari to the same court.
[
Footnote 1]
The Secretary has promulgated comprehensive regulations to
govern the marketing of milk, 7 CFR § 1002.1
et seq.
(1969), pursuant to the Agricultural Marketing Agreement Act. The
provisions relevant to this cause are set forth in Part I of this
opinion, at
396 U. S. 178,
infra.
The action was originally brought against the Secretary only.
Petitioners Zuber
et al., nearby farmers, unsuccessfully
sought leave to intervene before the District Court in support of
the Secretary's regulations. When judgment was rendered against the
Secretary, petitioners sought leave to intervene for the purposes
of appeal. Leave was granted, and the Secretary also decided to
take an appeal. The parties have devoted a good deal of energy to
disputing what constitutes the record in this litigation.
Petitioners at various times have referred us to the testimony and
record compiled in an action brought in the Northern District of
New York,
Cranston v. Freeman, 290 F.
Supp. 785 (1968). Respondents have objected, noting that the
record in
Cranston is not formally before this Court, and
have included in the appendix various materials that were not of
record below. The Court need not pause over the controversy, since
none of the materials in respondents' appendix is decisive of the
action before us. As for the references to the
Cranston
record, they too are not decisive of the dispute.
[
Footnote 2]
See, e.g., Lehigh Valley Cooperative v. United States,
370 U. S. 76
(1962);
Brannan v. Stark, 342 U.
S. 451 (1952);
Stark v. Wickard, 321 U.
S. 288 (1944);
United States v. Rock Royal
Co-op., 307 U. S. 533
(1939);
H. P. Hood & Sons v. United States,
307 U. S. 588
(1939). The lower courts have also been plagued by the milk
problem.
See especially Judge Frank's lament,
Queensboro Farm Prods. v. Wickard, 137 F.2d 969 (C.A.2d
Cir.1943);
see also Blair v. Freeman, 125 U.S.App.D.C.
207, 370 F.2d 229 (1966);
Green Valley Creamery v. United
States, 108 F.2d 342 (C.A. 1st Cir.1939).
[
Footnote 3]
For fluid use, milk must be transported in its natural state,
and, as such, is a bulky and highly perishable commodity. Thus,
cost of shipment to a consumer market is greater than transporting
an equal supply to a manufacturing plant. These factors, combined
with more rigid sanitary requirements for plants distributing the
fluid product,
see Agricultural Adjustment Administration
Report, May 1933-Feb. 1934, p. 154, explain part of the disparity
between the price for Class I (fluid milk) and Class II (other
uses) milk. Nearby producers, given equilibrium of supply and
demand, are logical fluid suppliers to the urban areas.
See
generally J. Cassels, A Study of Fluid Milk Prices (1937).
[
Footnote 4]
The cooperative system amounted to a pooling arrangement wherein
participating producers would bargain collectively with the
handlers and threaten to withhold their milk if the handlers
refused to agree to purchase a certain minimum percentage of their
Class I fluid milk from the pool. Without this supply, the handlers
would be unable to meet their winter requirements.
Essential to this arrangement, of course, was a sufficiently
wide membership to insure no alternative source of supply to
recalcitrant handlers.
The second aspect of the arrangement was the division of the
profits among the producer members of the cooperative. Frequently,
employed was a base-rating plan whereby each producer would be
assigned a percentage of his milk for which he could claim payment
at the Class I fluid price. For the remaining production, he would
be paid at the Class II rate. Apparently, bases were assigned
according to the anticipated participation of the producer in the
fluid market. As a result, nearby producers received more favorable
bases in view of their historical role as fluid suppliers in an
equilibrium market. For descriptions of the cooperative systems
see Cassels,
supra, n 3, at 570; J. Black, The Dairy Industry and the AAA
49-51 (1935).
[
Footnote 5]
Because they were historically fluid suppliers, the nearby
producers apparently maintained at all times production sufficient
to service the consumer fluid market. In addition, their close
proximity enabled them to deliver to small retailers. As such, they
were potential competitors.
[
Footnote 6]
See Agricultural Adjustment Administration Report,
supra, n 3, at
159-161; G. Barnhart, The Development of the Licenses and Order
Regulating the Handling of Milk in the Greater Boston,
Massachusetts, Marketing Area, Nov. 3, 1933-June 1, 1946
(unpublished dissertation on file with Department of Agriculture
and Harvard University).
[
Footnote 7]
License 38 for the Boston area provided more favorable bases for
the nearby producers.
See Barnhart,
supra,
n 6, at 95-96.
[
Footnote 8]
"(5) Milk and its products; terms and conditions of orders."
"In the case of milk and its products, orders issued pursuant to
this section shall contain one or more of the following terms and
conditions, and (except as provided in subsection (7) of this
section) no others: "
"(A) Classifying milk in accordance with the form in which or
the purpose for which it is used, and fixing, or providing a method
for fixing, minimum prices for each such use classification which
all handlers shall pay, and the time when payments shall be made,
for milk purchased from producers or associations of producers.
Such prices shall be uniform as to all handlers, subject only to
adjustments for (1) volume, market, and production differentials
customarily applied by the handlers subject to such order, (2) the
grade ar quality of the milk purchased, and (3) the locations at
which delivery of such milk, or any use classification thereof, is
made to such handlers: "
"(B) Providing: "
"(i) for the payment to all producers and associations of
producers delivering milk to the same handler of uniform prices for
all milk delivered by them:
Provided, That except in the
case of orders covering milk products only, such provision is
approved or favored by at least three-fourths of the producers who,
during a representative period determined by the Secretary of
Agriculture, have been engaged in the production for market of milk
covered in such order or by producers who, during such
representative period, have produced at least three-fourths of the
volume of such milk produced for market during such period; the
approval required hereunder shall be separate and apart from any
other approval or disapproval provided for by this section; or"
"(ii) for the payment to all producers and associations of
producers delivering milk to all handlers of uniform prices for all
milk so delivered, irrespective of the uses made of such milk by
the individual handler to whom it is delivered;"
"subject, in either case, only to adjustments for (a) volume,
market, and production differentials customarily applied by the
handlers subject to such order, (b) the grade or quality of the
milk delivered, (c) the locations at which delivery of such milk is
made, and (d) a further adjustment, equitably to apportion the
total value of the milk purchased by any handler, or by all
handlers, among producers and associations of producers, on the
basis of their marketings of milk, which may be adjusted to reflect
sales of such milk by any handler or by all handlers in any use
classification or classifications, during a representative period
of time which need not be limited to one year."
[
Footnote 9]
The Boston order of 1937, 2 Fed.Reg. 1331, established uniform
prices for all producers at $3.19 and $3.01 per cwt. of milk,
depending on the place of delivery, with a further adjustment for
transportation to the handler's plant in the marketing area.
Article VIII, § 4(1) also provided for an adjustment based on the
cost of transporting milk from outlying plants to the primary
Boston market. The present regulations calculate price with
reference to the purchasing power of milk based on the 1958 cost of
living index. No transportation adjustment is provided for in
calculation of the uniform price under § 1001.62 of the order.
Differentials to compensate for one of delivery are retained as
separate adjustments.
See infra.
[
Footnote 10]
The Secretary has three alternative modes of proceeding under
the Act. He may establish "use" prices which all handlers must pay
to all producers according to the actual amount of milk used in
each category, § 8c(5)(A); individual handler pools where all
producers or cooperatives selling to an individual handler shall be
paid a uniform price for milk delivered to that handler; or a
market-wide pool where all handlers must pay all producers a
uniform price for all milk delivered irrespective of end use.
[
Footnote 11]
Also included is an adjustment for delivery to a nearby plant.
The location of handler plants is classified by zones. 7 CFR §
1001.62. Delivery to a plant located nearby the consumer market is,
of course, advantageous to the handler, and the producer is
compensated for this service. The handler also saves the cost of
handling and processing at his country plant in addition to saving
transportation cost. Conversely, depositing milk at handlers'
plants in outlying districts results in a negative adjustment.
[
Footnote 12]
Section 8c(5)(b)(ii) requires all uniform prices to be paid
"irrespective of the uses made of such milk by the individual
handler to whom it is delivered." Respondents contend that the
nearby differential is merely a disguised payment for the nearby
suppliers' greater share of fluid milk sales. Such was apparently
the case in the New Jersey order invalidated by the Court of
Appeals in
Blair v. Freeman, supra, where the payment of
the differential was explicitly linked to the percentage of nearby
milk actually supplied to the fluid market. We share respondents'
skepticism, and our doubts are reinforced by the explicit
connection of differential payments with the share of fluid milk
supplied in the 1936 Boston order. Further cause for skepticism is
found in the present zone differential structure, which
undercompensates the handlers for transportation from outlying
districts, and thus encourages them to buy from nearby farmers.
See Kessel, Economic Effects of Federal Regulation of Milk
Markets, 10 J.Law & Econ. 51, 64-65 (1967). Here, however,
unlike the situation in
Blair v. Freeman, supra, the
producer receives the differential irrespective of the use to which
his milk is ultimately put. Since the nearby differential in the
present order is not directly tied to the percentage of fluid milk
sales, although the order limits differential payments to 46� or
the Class I price, whichever is higher, we accept the Government's
contention that, as a matter of strict logic, the payment of
differentials based on the historical position of nearby producers
as fluid suppliers is not inconsistent with the "irrespective of
end use" requirement.
[
Footnote 13]
"The market differential is a differential which is given to the
producer to compensate him for delivering his milk to a city market
instead of to a country plant. These differentials vary with the
markets, and cannot be qualified as a 'location' differential,
because of the fact that location is usually determined on the
distance from a primary market, whereas market differentials are
usually paid in secondary markets."
H.R.Rep. No. 1241, 74th Cong., 1st Sess., 10 (1935)
[
Footnote 14]
The relevant excerpts from the hearing are included in the Joint
Appendix and appear at 258-259:
"Section 4 . . . provides for location differentials. . . . Now,
the price which is arrived at from the calculation of the pool is a
blended price for all milk f.o.b. the market
with country
station allowances deducted. Now, Paragraph 1 [of § 4] here
provides that there shall be deducted from that blended price in
the case of milk delivered to a plant more than 40 miles from the
State House an amount equal to the car-lot freight rate from that
plant to Boston, so that that deduction would be different for each
freight zone, and the price would be smaller by the amount of
difference in freight from each zone as we go out from the market.
Now, Paragraph 2 [of § 4] provides that, in the case of milk
delivered from a producer to a plant located within forty miles of
the State House there should be added 18 cents per hundredweight.
That is added for the reason that, in the case of country stations,
there is allowed the dealers on Class I milk 20 cents a
hundredweight as a country station charge, and we are allowing for
containers in which to ship the milk three cents in the case of
milk received at city plants, instead of having a 20 cent and a
three cent deduction, which would be 23 cents. There is a receiving
station allowance of only five cents. The difference is 18 cents
per hundredweight. We add back in here 18 cents to the producer
whose milk does not pass through a country station."
(Emphasis added.)
[
Footnote 15]
See Barnhart,
supra, n 6, at 620.
[
Footnote 16]
"To eliminate questions of improper delegation of legislative
authority raised by the decisions in
Schechter et al. v. United
States, the provisions relating to orders enumerate the
commodities to which orders issued by the Secretary of Agriculture
may be applicable, prescribe fully the administrative procedure to
be followed by the Secretary in issuing, enforcing, and terminating
orders, and specify the terms which may be included in orders
dealing with the enumerated commodities."
H.R.Rep. No. 1241,
supra, at 8.
See Brannan v.
Stark, 342 U. S. 451,
342 U. S. 465
(1952).
[
Footnote 17]
In this connection, it should be noted that the production
differential authorized for maintaining an adequate supply for
fluid use during the lean winter months is not, strictly speaking,
a handler cost, but a general cost of the market. It is, however,
an essential cost that cannot be eliminated by looking to an
alternative supplier. Viewed in this context, it is, of course, a
cost to the handler; for, in a nonregulated equilibrium market, a
handler would be forced to pay a premium during the winter months
when supply is limited and demand constant.
[
Footnote 18]
"The volume differential is a differential which is paid when
the operations of several country plants are consolidated into one
plant. The inconvenience which is caused to producers by closing up
plants to which they have been delivering and requiring that all of
their milk be handled by one plant is compensated by an additional
payment to the producers. The production differential is the
differential which is paid to a producer, compensating him for
keeping his farm and milk qualified for a city market even though
his milk may actually be going into manufactured use. . . . The
production differential is a payment to the farmer for performing
this
function in the market."
(Emphasis supplied.) H.R.Rep. No. 1241,
supra, at
10.
In
Brannan v. Stark, supra, this Court invalidated
regulations providing certain payments to cooperatives that had the
effect of reducing the blended price to nonmember producers. The
premise underlying our holding was that these payments would have
to represent compensation for rendering of economic services of
benefit to all producers. Even the dissenters took as a point of
departure the proposition that the payments could be sustained only
if justified in terms of services rendered.
[
Footnote 19]
See Brannan v. Stark, supra.
[
Footnote 20]
"The proposed amendments, insofar as they relate to marketing
agreements and orders, are primarily intended to implement and
spell out in more detail and with greater freedom from ambiguity
the powers which were provided for in the original act. The present
language of the statute is, unfortunately, subject to serious
misconstruction. This has given rise to obstacles in connection
with the enforcement of the marketing agreements and licenses which
have seriously endangered their successful operation."
H.R.Rep. No. 1241,
supra, at 7.
[
Footnote 21]
The verdict of quiescent years cannot be invoked to baptize a
statutory gloss that is otherwise impermissible. This Court has
many times reconsidered statutory constructions that have been
passively abided by Congress. Congressional inaction frequently
betokens unawareness, preoccupation, or paralysis. "It is, at best,
treacherous to find in congressional silence alone the adoption of
a controlling rule of law."
Girouard v. United States,
328 U. S. 61,
328 U. S. 69
(1946). Its significance is greatest when the area is one of
traditional year-by-year supervision, like tax, where watchdog
committees are considering and revising the statutory scheme. Even
less deference is due silence in the wake of unsuccessful attempts
to eliminate an offending interpretation by amendment.
See,
e.g., Girouard v. United States, supra. Where, as in the case
before us, there is no indication that a subsequent Congress has
addressed itself to the particular problem, we are unpersuaded that
silence is tantamount to acquiescence, let alone the approval
discerned by the dissent.
[
Footnote 22]
The floor exchange is reported at 79 Cong.Rec. 11139-11140.
"Mr. COPELAND. What has the Senator to say to the suggestion
that, in a number of communities in up-State New York, there is not
a sufficient supply of milk surrounding the market to take care of
the demand; therefore, milk must be brought into the market from
more distant points? The provisions of the equalization which we
are now discussing provide that a producer who is producing his
milk on farms near to cities would receive the same price for his
product as a farmer who produces his milk, say, 40 or 50 miles away
from the same community."
"Mr. MURPHY. If they were embraced in the same marketing area,
that would be true. Let us keep in mind what the situation is.
There is a deficiency of consumer demand. There is a surplus of
milk. The price is greatly depressed, and has been for 5 years. The
only way in which one can determine how each one of the producers
included in the plan provided here shall bear his share of the cost
of effecting a higher price is to divide the milk by classification
uses."
"
* * * *"
"Mr. COPELAND. I do not think the Senator has quite stated all
the conditions. He does not take into consideration the difference
in the cost of production. Taxes and values of property near the
city are very much higher than in the case of property farther away
from the city. The transportation differential does not compensate
for the difference in cost, as I see it."
"Mr. MURPHY. If the Senator will refer to page 12, line 13, he
will see that there is this qualification: "
" such prices shall be uniform as to all handlers, subject only
to adjustments for (1) volume, market, and production differentials
customarily applied by the handlers subject to such order --"
"They adopt the present practice of business --"
" (2) the grade or quality of the milk purchased, and (3) the
locations at which delivery of such milk, or any use classification
thereof, is made to such handlers."
[
Footnote 23]
The market differential does not, strictly speaking, compensate
the producer for absorbing a cost to the handler, for it may be no
additional cost to the producer to deliver to a city plant. A
nearby farmer, for example, would not incur additional costs by
delivering to a preferred city plant, as opposed to a country
station. The savings to the handler are nevertheless plain, and the
market differential should properly be viewed as an adjustment that
permits the producer to share in the handler's profits resulting
from reduced costs.
[
Footnote 24]
See Kessel,
supra, n 12, at 666 (1967). After criticizing the present
undercompensation for transportation costs from far-away zones as a
disguised subsidy to nearby producers, resulting in an inefficient
allocation of economic resources, the author draws a comparison
with the nearby differential, lamenting, "However weak the case for
zone differentials that fail to depict transportation costs, it is
infinitely stronger than the case for location differentials."
[
Footnote 25]
The Secretary's 1964 findings include the following:
"The farm location differential provisions under the present New
England orders should be continued under the Massachusetts-Rhode
Island order and the Connecticut order."
"A group of nine cooperative associations, which represents
principally producers whose farms are located outside any of the
specified farm location differential areas, proposed that farm
location differentials be eliminated under the New England orders.
Three other cooperative associations proposed that a producer whose
farm is located within New England and who is presently eligible to
receive a farm location differential . . . under any New England
order be eligible to receive the same differential irrespective of
the New England order under which his milk is pooled. Another
cooperative association proposed that the farm location
differentials be increased. . . ."
"
* * * *"
". . . [F]arm location differentials have been in effect under
the several New England orders since the inception of the orders.
The differentials were adopted to reflect in the pricing structure
of the orders historical price relationships by location which
prevailed in these markets. It was found that customarily somewhat
higher values, above those which normally reflected transportation
costs, attached to milk produced near the principal consumption
centers as compared to the market value of milk produced in the
more distant areas of the milkshed."
"While considerable testimony in support of removal of the
provisions was received, it was not established that the farm
location differential provisions are resulting in unstable or
disruptive marketing conditions which warrant their deletion from
the orders at this time. Although certain marketing problems in the
nearby and intermediate market areas were referred to in the
testimony, these problems are not the result of production
increases on farms in these areas which logically might be
attributable to the higher returns to producers in these areas.
Such increases have not been significantly different from those on
farms not eligible for the farm location differentials."
(J. A. 349-351).
There is no reason to dispute the Secretary's finding that the
differentials have no disruptive effect on the market. The issue,
however, is whether the provisions are authorized by statute. The
Secretary's order is devoid of any economic justification, and
relies solely on the historical factor of the nearby producer's
favorable share of the fluid use market.
See also Report
to the Secretary of Agriculture by the Federal Milk Order Study
Committee 74-75 (1962).
[
Footnote 26]
See Report to the Secretary of Agriculture by the
Federal Milk Order Study Committee,
supra, n 25, at 75.
[
Footnote 27]
See J.A. 455 reporting excerpts from the Secretary's
decision of October 21, 1958, accompanying the order for the
Southeastern New England marketing area.
[
Footnote 28]
Judge Frank expressed the view in
Queensboro Farm Prods. v.
Wickard, 137 F.2d 969 (C.A.2d Cir.1943), that Congress
intended to adopt the intervening administrative interpretation of
the "use" language of § 8c(5)(A) by its 1937 reenactment. The
construction of the "use" provision may well have caused more
concern than the interpretation of the § 8c(5)(b) differentials. In
any event, Judge Frank's assumption that Congress gave "careful
consideration . . . in connection with a reenactment," 137 F.2d at
977, is not supported by citation to specific legislative history
that would indicate that Congress had in mind specific problems in
connection with the administration of the marketing provisions.
[
Footnote 29]
The 1936 order provided for payment of a uniform price subject
to adjustments and the a special exception for
"any producer, whose farm is located within forty (40) miles of
the State House in Boston
and who delivers milk to such
handler at a plant located within forty (40) miles of the State
House in Boston, at $3.30 per hundredweight for that quantity of
milk delivered by such producer not in excess of the base of such
producer."
(Emphasis supplied.) Art. VIII, § 1(2). ,
[
Footnote 30]
Section 4 of the Act provided:
"Nothing in this Act shall be construed as invalidating any
marketing agreement, license, or order, or any regulation relating
to, or any provision of, or any act of the Secretary of Agriculture
in connection with, any such agreement, license, or order which has
been executed, issued, approved, or done under the Agricultural
Adjustment Act, or any amendment thereof, but such marketing
agreements, licenses, orders, regulations, provisions, and acts are
hereby expressly ratified, legalized, and confirmed."
[
Footnote 31]
To the extent that Congress could be said to have acted against
the background of the 1936 order, the Court must reject
petitioners' argument. The 1936 order was superseded by the 1937
order, which differed in approach. The provision for nearby
differentials in the 1936 order was obscured by allowing a more
favorable total price to nearby producers.
See n 29,
supra. The 21�
differential incorporated in the 1937 order for the benefit of
intermediate nearby zones was not included in the 1936 order. The
21� differential provided in Art. VIII, § 4(2), of the 1936 order
could have been viewed as a true market differential, since its
payment depended on delivery to a handler within a 40-mile zone
from a producer beyond a 40-mile zone. Further, as noted by the
court below, § 4 is typical of statutory boilerplate traditionally
included in legislative reenactments, to avoid breaks in regulatory
continuity. 131 U.S.App.D.C. at 119, 402 F.2d at 670.
[
Footnote 32]
Section 8c(9) of the Act, 7 U.S.C. § 608c(9), provides that no
order shall become effective until the Secretary determines:
"(B) That the issuance of such order is the only practical means
of advancing the interests of the producers of such commodity
pursuant to the declared policy, and is approved or favored: "
"(i) By at least two-thirds of the producers . . . who, during a
representative period determined by the Secretary, have been
engaged, within the production area specified in such marketing
agreement or order, in the production for market of the commodity
specified therein, or who, during such representative period, have
been engaged in the production of such commodity for sale in the
marketing area specified in such marketing agreement, or order,
or"
"(ii) By producers who, during such representative period, have
produced for market at least two-thirds of the volume of such
commodity produced for market within the production area specified
in such marketing agreement or order, or who, during such
representative period, have produced at least two-thirds of the
volume of such commodity sold within the marketing area specified
in such marketing agreement or order."
[
Footnote 33]
Lower courts have, in some circumstances, permitted an agency to
rely on the approval of those affected by an action as evidence
that the action is in the "public interest."
Compare Citizens
for Allegan County v. FPC, 134 U.S.App.D.C. 229, 414 F.2d 1125
(1969),
with Marine Space Enclosures v. FMC, 137
U.S.App.D.C. 9, 420 F.2d 577 (1969). We need not consider what
scope, if any, may be given to these principles.
MR. JUSTICE BLACK, with whom MR. JUSTICE WHITE joins,
dissenting.
The central question in this cause is whether a provision in the
Secretary of Agriculture's Boston milk market regulation which
provides that farmers close to Boston
Page 396 U. S. 198
will receive a higher price for their milk than farmers farther
away is valid under the Agricultural Marketing Agreement Act of
1937, as amended, 50 Stat. 246, 7 U.S.C. § 601
et seq.
(1964 ed. and Supp. IV). The majority concludes that this higher
payment can be sustained only if it represents "compensation for
rendering an economic service,"
ante at
396 U. S. 188,
and then holds that, since the Secretary has not provided such an
economic justification for this payment, it is invalid. The effect
of affirming the judgment below is that challenged payments which
have been placed in a special fund since June, 1967, and now amount
to over $8,000,000, will be distributed to all farmers selling milk
in the Boston market, instead of only those located near Boston.
This represents a drastic change in the distribution of the income
from the sale of milk, since only the nearby farmers have received
these additional payments for at least 30 years. My study of the
legislative history convinces me beyond any doubt that this result
is wrong, and in direct conflict with the intent of Congress as
expressed in the Agricultural Marketing Agreement Act and its
predecessors. In my opinion, Congress intended to permit the
Secretary to regulate the milk industry in accordance with the
practices that had developed in that industry prior to the first
federal regulation in 1933, and did not intend to eliminate the
economic advantages that specific groups had enjoyed in the past.
Since it is clear beyond a doubt that farmers near Boston received
more for their milk than did other farmers prior to federal
regulation, I would reverse the judgment below and hold this
provision of the Boston milk order valid.
In order to understand the purpose of the 1937 Act, it is
necessary to go back to the 1920's, at a time prior to any federal
regulation. As the majority correctly points out, the economics of
the milk industry at that
Page 396 U. S. 199
time often led to destructive competition and chaos. Milk
producers therefore formed cooperatives for their own protection
and sold milk on a collective basis. All the parties in this case
agree, and the record conclusively shows, that, under the
cooperatives at that time, farmers close to marketing centers
received more for their milk than did farmers farther away. This
higher price resulted from many factors, including the greater
proportion of milk from nearby farms that was used for fluid
purposes, the possibility that those farmers would compete with
handlers by selling directly to customers, smaller seasonal
variation in the volume of milk produced, and higher costs -- such
as taxes and land values -- incurred in farming close to the
cities. [
Footnote 2/1] As long as
economic conditions remained generally stable, the cooperatives
succeeded in protecting all farmers from the dangers of
overproduction and excessive competition. Then the depression set
in, and milk farmers, like so many other Americans, were unable to
maintain stable prices by self-regulation. Congress reacted to this
situation by passing the Agricultural Adjustment Act of 1933
(A.A.A.), 48 Stat. 31, under which the Secretary of Agriculture was
given broad powers to regulate the farm economy through licensing.
Id. § 8(3), 48 Stat. 35. Very few details or standards
describing the Secretary's powers were provided in the 1933 Act,
and there was no attention given to specific problems of
Page 396 U. S. 200
nearby farmers in the milk industry. Under the provisions of
that Act, the Secretary issued a license for the Boston market in
1933, and this first license included provisions that effectively
maintained the historical price advantage of producers close to
Boston. [
Footnote 2/2] In 1935,
bills were introduced in Congress to amend the A.A.A., [
Footnote 2/3] and hearings were held on
those bills in February and March of that year. [
Footnote 2/4] In May, 1935, this Court held, in
Schechter Poultry Corp. v. United States, 295 U.
S. 495, that provisions of the National Industrial
Recovery Act, 48 Stat. 195, were unconstitutional, in part because
that Act delegated powers to an administrative agency without
providing adequate standards and guidelines. The congressional
committees considering the amendments immediately recognized that
the
Schechter decision cast considerable doubt on the
validity of the A.A.A., and they therefore reported out a
completely amended bill which set forth detailed descriptions of
the powers and standards that the Secretary was to employ.
[
Footnote 2/5] As reported and
passed by Congress, that bill contained specific provisions
concerning the milk industry, and it is those provisions that are
involved in the present case. [
Footnote
2/6] The committee reports accompanying that bill make it
abundantly clear that a primary purpose
Page 396 U. S. 201
of the bill was to "eliminate questions of improper delegation
of legislative authority raised by the decision in
Schechter. . . ." [
Footnote
2/7] There is no indication that, when Congress passed those
amendments, it intended to cut back on or limit the authority the
Secretary had actually exercised in regulating milk under the 1933
Act, but, rather, the purpose was to avoid judicial invalidation
resulting from the absence of constitutionally sufficient
standards. History and the legislative record make it quite clear
that Congress, in 1935, was concerned not about limiting an
excessively aggressive Secretary, but about overcoming the
limitations imposed by a Court that was frustrating the
congressional purpose by holding laws unconstitutional. Pursuant to
the 1935 Act, the Secretary issued a new order in 1936 for the
Boston market which, like the 1933 order, contained provisions for
additional payments to nearby farmers. In issuing this order, he
explicitly relied on the historical, economic factors which
justified these additional payments. (J.A. 224.) The effectiveness
of the 1935 amendments was also jeopardized by court decisions,
[
Footnote 2/8] and Congress again
acted by passing a new law, the Agricultural Marketing Agreement
Act of 1937, 50 Stat. 246. This statute reenacted the milk
marketing provisions of the 1935 Act in substantially the same
form, and further provided that all market orders issued under that
Act were "expressly ratified, legalized, and confirmed." 50 Stat.
249. Proceeding under the new Act, the Secretary reinstated the
1936 Boston order, including the additional
Page 396 U. S. 202
payments to farmers located nearer the city, and that order and
the 1937 Act have remained in substantially the same form until
this time. With this general historical picture in mind, it is
easier to answer the central legal question in this case, which is
whether the 1937 Act authorizes the Secretary of Agriculture to
provide that nearby farmers will receive more for their milk than
farmers farther away.
The Act provides that the Secretary shall establish by order
certain basic prices for milk delivered by producers, and allows
him to adjust that basic price to reflect "volume, market, and
production differentials customarily applied by the handlers
subject to such order. . . ." 7 U.S.C. § 608c(5)(b), cl.(a) (1964
ed., Supp. IV). [
Footnote 2/9] The
Secretary here argues that the payment of additional sums to
farmers close to Boston is an authorized "market differential." The
argument cannot be settled simply on the basis of the statutory
language, since there is no definition of the term "market."
However the legislative history makes it clear beyond any doubt
that this provision was designed to allow the Secretary broad
leeway in regulating the milk industry in accordance with prior
practices and differentials in the unregulated market. The
committee reports in both Houses said that the milk order
provisions in the Act were designed to
"follow the methods employed by cooperative associations of
producers prior to the enactment of the Agricultural Adjustment Act
and the provisions of
Page 396 U. S. 203
licenses issued pursuant to the present section 8(3) of the
Agricultural Adjustment Act. [
Footnote 2/10]"
The only discussion of these provisions during the congressional
floor debates fully supports this statement. Senator Copeland, a
former commissioner of health in New York City and a man well
acquainted with the milk industry in New England, asked Senator
Murphy, the floor manager for the bill, about the possibility that
farmers near the cities would receive the same price for milk as
farmers farther away. Senator Murphy's initial answer indicated
this would be so, but, when Senator Copeland pressed the inquiry
further, stating that not all factors had been considered, Senator
Murphy indicated that the provisions for specific differentials
"adopt the present practice of business." [
Footnote 2/11] To me, that reply indicates that nearby
differentials would be permissible, if they were part of the
business practice -- as they were. The majority diminishes the
importance of this discussion by saying that it represents the
views of only two men, not those of the committee, but anyone
acquainted with the realities of the United States Senate knows
that the remarks of the floor manager are taken by other Senators
as reflecting the views of the committee itself. This history makes
it clear that Congress did not intend to limit the authorized
differentials to any specific payments, but, rather, intended to
permit the Secretary to employ whatever practices, consistent with
the history of the unregulated
Page 396 U. S. 204
market, he found necessary to achieve stability in the milk
industry.
Applying these considerations, it becomes plain that the
additional payments to nearby farmers are authorized as a
"differential customarily applied." Nearby farmers had always
obtained a higher price for their milk than farmers farther away,
and the Secretary's regulations in 1933 and 1936 reflected this
historical fact. Reinstatement of the nearby differentials after
passage of the 1937 Act merely continued this prior administrative
practice, based on the earlier economic realities, of paying more
for milk produced on farms close to Boston. Had Congress intended
to eliminate this feature of the prior practice, it would have been
easy to say so, but there is absolutely nothing in the statute or
in the legislative history that demonstrates a desire to alter the
advantage nearby farmers had always enjoyed.
My conclusion that this differential is authorized is buttressed
by the actions of Congress and the Secretary since 1937. There has
always been a healthy controversy among farmers about this
differential, and extensive hearings in 1963 brought forth strong
arguments against continuing it. (J.A. 36-599.) Yet Congress, even
though it amended the statute in 1965, 79 Stat. 1187, still has not
in any way indicated that the nearby differential was unauthorized
by the 1937 Act or that it should be eliminated at this time.
Similarly, the Secretary has continually reviewed this provision
and refused to eliminate it, the most recent time being 1964. (J.A.
346, 349.) Since Congress, in my view, intended in 1933, 1935, and
1937 to authorize payments like the nearby differential, and since
it has not altered this authorization in the past 32 years, I
cannot agree that this Court should or properly can eliminate the
payment, ostensibly through a process of statutory
interpretation.
Page 396 U. S. 205
This interpretation is not based on a theory of legislative
silence, as the majority seems to imply. To me, the legislative
history speaks clearly in saying that Congress intended the
Secretary to regulate the industry in accordance with prior
practices, and the statutory language, statements in committee
reports, and floor debates do not "illumine two different roads,"
ante at
396 U. S. 185.
I see only one path that is marked by the legislative record, and
the only silence I perceive is the striking absence of any
statements in the statute or the legislative history that support
the majority's interpretation.
My conclusion that the location differential is authorized by
the Act finds support in other judicial decisions. In
United
States v. Rock Royal Co-op., 307 U. S. 533
(1939), certain milk handlers made a broadside attack on the New
York order issued under the 1937 Act. This Court rejected that
challenge. One part of the argument was that the nearby
differential provision of that order was invalid. This Court noted
that "[t]he Act authorizes such an arrangement," citing the
provision for market differentials customarily applied.
Id. at
307 U. S. 567.
Although that provision was promulgated under § 8c(5)(A) of the
Act, the identical language supporting that conclusion is found in
§ 8c(5)(B), and it is that latter section which is involved in the
present case. The majority attempts to distinguish that case by
noting that it was a suit brought by the Government against
handlers, but it is difficult to see what difference that makes. It
does not matter who sues; if the Court decides an issue of
statutory interpretation, that decision should remain the same even
if the litigants change. [
Footnote
2/12]
Page 396 U. S. 206
The nearby differential of the Boston order involved here was
also approved by the First Circuit in
Green Valley Creamery v.
United States, 108 F. & 342 (1939). The majority's
dismissal of that case on the conclusion the handlers did not have
standing to raise this issue is irrelevant. The First Circuit there
found the differential valid, and then stated that,
"[f]urthermore," the handlers lacked standing.
Id. at 346.
It does not matter to me whether the decision on the validity of
the location differential is classified as dictum or a holding. The
point remains that the First Circuit considered these payments and
found them expressly provided for by the language of § 8c(5)(b).
Ibid.
The majority disagrees with the interpretation of the statute
set forth above, and instead finds that the foundation of the
portion of 1937 Act involved here was to provide uniform prices to
all producers, with adjustments to that uniform price only as
"compensation for rendering an economic service."
Ante at
396 U. S. 188.
This interpretation, as I understand it, would require the
Secretary to disregard the historical price advantage nearby
producers had in the sale of their milk and to consider only
whether there is a present economic justification for particular
payments. I respectfully submit that this interpretation cannot be
supported by the language of the Act, considered as a whole, or by
the relevant expressions of congressional intent found in the
legislative history. The theory of this Act adopted by the majority
is clearly not that of Congress, but one created by the Court
itself.
The conclusion that each of the differentials specified in the
Act represents only "compensation for rendering an economic
service" finds no support whatsoever in the language of the Act or
the legislative history. None of the adjustments described in the
Act is defined in terms of any "economic service." The majority
does not refer
Page 396 U. S. 207
to any legislative history that indicates such a definition was
intended. It may well be possible for an analyst to fit the
language of the Act, the committee reports, and the floor debates
into a coherent pattern of economic services, but had Congress
desired to require this as a touchstone for the authorized
differentials, it would have been easy for it to have said so.
Congress did not choose to do so in 1933, 1935, or 1937, and it has
not done so in the intervening 32 years. Moreover, if there is any
pattern into which all the differentials clearly fit that is fully
supported by express legislative history, it is the clear pattern
of allowing the Secretary to incorporate provisions reflecting the
customary practices of the milk industry itself. [
Footnote 2/13]
Even if the majority's statutory interpretation were correct, I
do not understand why it would lead to the conclusion that the
judgment below should be affirmed and the challenged payments
distributed at this time to all farmers. Until this Court's
decision, the Secretary had
Page 396 U. S. 208
no reason to know that he had to justify the provisions of this
order as "compensation for rendering an economic service," and his
failure to have provided such a defense does not necessarily mean
it is unavailable. Indeed, the Court apparently would approve this
same provision were the Secretary to issue it again, but only if it
were then accompanied by an economic study that this Court --
composed of lawyers, not economic or agricultural experts -- finds
acceptable. If such a justification is present, the differential
is, in fact, lawful at this time, and it would not seem to matter
that the Secretary has not yet incanted the proper magic words.
I do not see what harm would follow if this Court were simply to
vacate the judgment below, remand the cases to the Secretary for
appropriate study, and continue to place the payments in the
special fund pending ultimate resolution of the controversy. If the
Secretary cannot make the proper economic justification, the only
result would be to postpone the day when the accumulating funds,
which now amount to over $8,000,000, would be distributed. If, on
the other hand, he is able to show that these payments compensate
for an economic service, then the Court would not have
unnecessarily given the accumulated millions to farmers who are not
legally entitled to receive them.
My conviction that the Act was designed to permit the Secretary
to include adjustments that reflected the prior practice of the
milk industry does not mean that he can act with unlimited abandon
and approve a payment simply because, historically, it was provided
for prior to federal regulation. The statute requires that the
Secretary issue orders which "will tend to effectuate the declared
policy of [the Act]. . . ." 7 U.S.C. § 608c(4). Those policies are
specifically set forth, 7 U.S.C. § 60, and in general provide that
orders should establish and maintain orderly marketing
conditions
Page 396 U. S. 209
and parity prices for milk producers. In his latest promulgation
of the Boston order, the Secretary specifically refused to
eliminate the nearby differentials (J.A. 349-357) and found that
the order "will tend to effectuate the declared policy of the Act."
29 Fed.Reg. 12236. That finding cannot be disturbed, nor the nearby
differential invalidated, unless it is shown that the order is not
supported by substantial evidence in the administrative record
considered in its entirety.
Cf. Universal Camera Corp. v.
NLRB, 340 U. S. 474
(1951). In this action the Court of Appeals did not make a specific
finding on the substantiality of the evidence, and the respondents
argue that it is insubstantial, but a review of the entire record
in light of the appropriate legal standards indicates that the
nearby differential in the Boston order is fully supported by
substantial evidence.
In reaching this conclusion, it must be remembered that the
Secretary is required to find only two things. First, that the
proposed provision represents a payment customarily applied in the
milk market, and second, that inclusion of the proposed provision
will further the policies of the Act. The first of these questions
is essentially a factual one, and there is no real argument in this
action that the Secretary was wrong in finding as a matter of
historical fact that nearby farmers received additional payments
which are reflected in the location differential. The respondents
do not really deny the historical existence of this higher price,
but, rather, attack its legality under the Act. The Court of
Appeals, moreover, specifically recognized the historical fact that
such differentials existed, but accepted the respondents' argument
that they were illegal. 131 U.S.App.D.C. at 112-114, 118, 402 F.2d
at 663-665, 669. An independent review of the record confirms the
conclusion that such differentials had been customary in the
market. It is thus easy to conclude that the factual finding
Page 396 U. S. 210
required by the Act has been supported by substantial evidence
in the administrative record.
The second required finding, that the provision will further the
policies of the Act, is a mixed question of fact and administrative
policy. The Secretary has held extensive hearings in the past on
the provisions of the Boston milk order (J.A. 233-247, 257-302,
305-330, 36651), and he has repeatedly found that the nearby
location differential furthers the policies of the Act. Since this
is essentially a question of administrative discretion, and will be
set aside only on a strong showing by the parties that the finding
is without support in the basic facts on which the Secretary has
relied, it is proper to say on this record that this second finding
is adequately supported. Nothing in the respondents' arguments
indicates that the nearby differential does not further the
policies of the Act, but, rather, they argue only that elimination
of the differential would better serve those policies. But this
question is one for the Secretary, not for the parties or for this
Court, to decide.
What is involved here is simply a question of interpreting and
following the will of Congress. Over 30 years ago, Congress decided
that milk producers needed governmental assistance in stabilizing
their income, but it also decided that this stabilization should be
accomplished with a minimal amount of change in the industry's
prior practices. Congress therefore authorized the Secretary of
Agriculture to regulate the industry, and left most of the details
to him. For over 30 years, he has used his authority to regulate
the Boston milk market, and has consistently found it desirable to
provide higher prices for milk produced on farms close to Boston.
It may well be that this decision is not the best or the most
economically sound one that he could make in light of changed
economic conditions in 1969, but that decision is one Congress has
committed to the Secretary alone. In my view,
Page 396 U. S. 211
this Court and the Court of Appeals in this litigation
effectively substitute their will for the will of Congress and
their views of economics and wise administration for those of the
Secretary whom Congress selected to carry out its will. The Court
indicates that its decision will avoid a "windfall."
Ante
at
396 U. S. 197.
In fact, the Court itself creates a windfall of over $8,000,000
which is siphoned out of the pockets of farmers close to Boston and
bestowed like a Christmas present on those farther away. This the
Court does contrary to the informed judgment of the Secretary who,
faithful to the Act, has declared for years that distant farmers
are not eligible for such a bonus. I am unable to agree that this
is a proper function for the Court to perform and I therefore
dissent.
[
Footnote 2/1]
The majority implies,
ante at
396 U. S. 181,
that this higher price in the 1920's was an economic "distortion."
There has been no such finding by the Secretary or any of the
courts below, nor was any evidence taken that was directed at this
issue. This Court is poorly equipped to pass judgment on the
economic validity or invalidity of this higher price, surely not as
well equipped as the Secretary and the economists who advise him.
It is the Secretary, not this Court, to whom Congress has delegated
the task of fixing the prices producers will be paid for their milk
and of making the underlying economic judgments.
[
Footnote 2/2]
This license adopted a somewhat complicated base-rating plan
similar to that used by the milk cooperatives.
See n. 4,
ante at
396 U. S.
173-174. There is general agreement among the parties
that these licenses effectively resulted in higher milk prices to
nearby farmers, and the Court of Appeals recognized this fact. 131
U.S.App.D.C. 109, 113-114, 402 F.2d 660 664-665.
[
Footnote 2/3]
H.R. 5585, S. 1807, 74th Cong., 1st Sess.
[
Footnote 2/4]
Hearing on H.R. 5685 before the House Committee on Agriculture,
74th Cong., 1st Sess.; Hearings on S. 1807 before the Senate
Committee on Agriculture and Forestry, 74th Cong., 1st Sess.
[
Footnote 2/5]
H.R. 8492, 74th Cong., 1st Sess.
[
Footnote 2/6]
These provisions of the 1935 amendments have been carried
forward, virtually without change, into the present statute.
[
Footnote 2/7]
S.Rep. No. 1011, 74th Cong., 1st Sess., 8; H.R.Rep. No. 1241,
74th Cong., 1st Sess., 8.
[
Footnote 2/8]
In
United States v. Butler, 297 U. S.
1 (1936), this Court declared the processing tax
provisions of the A.A.A. invalid, and some district courts then
held that the entire Act was invalid.
E.g., United States v.
David Buttrick Co., 15 F. Supp.
655 (D.C. Mass.1936),
rev'd, 91 F.2d 66 (C.A. 1st
Cir.),
cert. denied, 302 U. S. 737
(1937)
[
Footnote 2/9]
This language was first enacted in the 1935 amendments to the
A.A.A., but was reenacted in the 1937 Agricultural Marketing
Agreement Act without change. There is no relevant legislative
history for the 1937 Act, but the parties all agree that the
history of the 1935 amendments also applies to the 1937 Act. The
discussion of legislative history in the text is based on the 1935
legislative record.
The complete text of the relevant portions of the present
statute is set forth in n. 8,
ante at
396 U. S.
176-177.
[
Footnote 2/10]
S.Rep. No. 1011, 74th Cong., 1st Sess., 9; H.R. Rep. No. 1241,
74th Cong., 1st Sess., 9. This basic purpose is reflected in the
fact that Congress provided the Secretary with three different
schemes of regulation, each of which followed a variety of
regulations used by the milk cooperatives.
See n. 10,
ante at
396 U. S. 177.
In 1965, Congress followed this same basic purpose when it amended
the Act to make explicit the Secretary's power to employ
base-rating plans, described in n. 4,
ante at
396 U. S.
173-174.
See 79 Stat. 1187, 7 U.S.C. §
608c(5)(b), cl.(d) (1964 ed., Supp. IV).
[
Footnote 2/11]
The full discussion is set out in n. 22,
ante at
396 U. S.
186-187.
[
Footnote 2/12]
The majority also seems to imply,
ante at
396 U. S.
191-192, that
Rock Royal did not decide this
issue, since the handlers did not have standing to raise it. It
seems to me that the Court there did decide that the handlers, who
argued that the nearby differential reduced their own profit, could
raise this issue.
[
Footnote 2/13]
In a footnote, n. 18,
ante at
396 U. S. 184,
the majority implies that there is support for this novel
interpretation in our prior decision in
Brannan v. Stark,
342 U. S. 451
(1952), which held invalid a provision in the Boston milk order
that distributed certain sums to producer cooperatives. That case
specifically held that such payments were not authorized by the
catchall provision in the Act permitting provisions in milk
orders
"[i]ncidental to, and not inconsistent with, the terms and
conditions specified in [other sections] and necessary to
effectuate the other provisions of such order."
7 U.S.C. § 608c(7)(D);
Brannan at
342 U. S.
457-458. It is true that the majority there did decide
that the challenged payments did not represent compensation for an
economic benefit received by all produces, but, regardless of the
validity of that decision, it is irrelevant to the decision in this
case. It may be that payments that are sought to be justified
solely on the basis of the "necessary provisions" section require
independent economic justification, but that certainly does not
mean that, where the Secretary relies on a specific adjustment set
forth in the Act, as he does here, he must also defend it on
economic grounds.