Core-Mark International Inc. v. Montana Board of Livestock

2014 MT 197, 329 P.3d 1278, 376 Mont. 25, 2014 Mont. LEXIS 533, 2014 WL 3672987
Montana Supreme Court·Decided July 24, 2014·No. No. DA 13-0595·Published·Cited by 7 cases

Opinion

JUSTICE RICE

delivered the Opinion of the Court.

¶1 Core-Mark International, Inc. (Core-Mark) appeals the order of the First Judicial District Court, Lewis and Clark County, affirming the decision of the Montana Board of Livestock (Board) to retain the administrative rule prohibiting the sale of milk in Montana more than 12-days after pasteurization (12-day Rule). The Board held a two-part administrative proceeding regarding Core-Mark’s petition to amend or [27] repeal the 12-day Rule. The first part was a formal evidentiary hearing conducted by an independent hearing examiner who issued a proposed decision for consideration by the Board. Following the second part of the proceeding, receipt of public comment, the Board chose not to accept the recommendations of the hearing examiner, including repeal of the 12-day Rule.

¶2 A restatement of the issues on appeal is as follows:

¶3 1. Whether the District Court erred in concluding the administrative proceeding was not a contested case proceeding?

¶4 2. If the District Court did not err in concluding the proceeding was not a contested case, did it err by applying the arbitrary and capricious standard of review?

¶5 3. If the arbitrary and capricious standard of review applied, did the District Court err in determining that the Board’s decision did not violate that standard?

¶6 4. Whether the District Court erred in concluding that the 12-day Rule is a valid exercise of the Board’s authority?

FACTUAL AND PROCEDURAL BACKGROUND

¶7 Core-Mark is a sales and marketing company distributing groceiy products throughout the United States. Core-Mark distributes products throughout the Northwest, including Montána, from its division headquarters in Spokane, Washington.

¶8 The Board is an administrative body made up of seven members who must be active livestock producers residing in the state. Section 2-15-3102, MCA. The Board is the head of the Department of Livestock (the Board and the Department are collectively referred to herein as the “Board”), an administrative agency created by § 2-15-3101, MCA. Among other powers, the Board is authorized to “adopt rules and orders that it considers necessary or proper for the. supervision, inspection, and control of the standards and sanitary conditions of... milk and its byproducts.” Section 81-2-102( l)(f), MCA.

¶9 Dean Foods, d/b/a Meadow Gold Dairies (Meadow Gold), is a domestic dairy processor. Meadow Gold owns and operates processing plants and distributes its products throughout the United States. It owns processing plants in Billings and Great Falls, and is the largest milk distributor in Montana. Montana Milk Producers Association (MMPA) is an association of Montana dairy farmers who supply milk to be processed in Montana. MMPA exists to advocate for the interests of Montana dairy farmers and the Montana milk industry.

¶10 In 1980, the Board conducted a public rulemaking proceeding to [28] consider adopting proposed rules “concerning the dating of milk containers for freshness.” 11 Mont. Admin. Register 1603-06 (June 12, 1980). This proceeding resulted in ádoption of regulations regarding the dating and sale of grade A milk in Montana. All such milk is required to be in a container marked with a pasteurized date and a sell-by date. Admin. R. M. 32.8.203(1) (2014). The sell-by date can be no longer than 12 days from the date of pasteurization. Admin. R. M. 32.8.202(2). Milk must be removed from store shelves at or before the expiration of the 12 days, Admin. R. M. 32.8.202(3), and is prohibited from being sold for public consumption when 12 days or more have elapsed since pasteurization, Admin. R. M. 32.8.202(1). These regulations do not apply to milk that is “processed for sale and sold out of state,” Admin. R. M. 32.8.204(2), or to “buttermilk, eggnog, and ultra-pasteurized or aseptic processed milk products,” Admin. R. M. 32.8.101(l)(c). Collectively, the requirement for the 12-day sell-by date and the restriction on sale after the 12th day is referred to as the “12-day Rule.”

¶11 In 2002, Inland Northwest Dairies (Inland), the processor of Darigold milk, requested authorization from the Board to allow Inland to sell milk in Montana produced in its Spokane plant and labeled with both the Montana 12-day “sell-by” date and a processor-determined “use-by” date used on Darigold milk sold in other states.1 The Board granted Inland the requested exemption to dual-date its products, though the exemption did not exempt Inland from the prohibition on selling milk past the 12-day sell-by date. Inland Sold milk in Montana marked with both the use-by date and the 12-day sell-by date until 2008 when the Board rescinded the dual-dating exemption.

¶12 In 2008, when the exemption was rescinded, Core-Mark was the distributor of Inland’s milk. Core-Mark unsuccessfully attempted to negotiate a resolution with the Board. After this effort failed, Core-Mark filed suit against the Board in Montana federal district court, challenging the validity and constitutionality of the 12-day Rule, and seeking an injunction against its enforcement. During the federal litigation, Core-Mark and the Board negotiated a settlement whereby Core-Mark agreed to dismiss the case without prejudice and instead pursue an administrative process. The nature of this administrative process is the central issue in this appeal, discussed herein. The [29] settlement was formalized by a written Memorandum of Understanding (MOU), which described the process as follows:

Core-Mark shall submit a petition to the Department pursuant to the process outlined in Montana law, see MCA 2-4-315, seeking modification of the 12-day Rule. The Department shall accept the petition and set the matter for hearing with an independent hearings examiner at a place, date and time mutually agreed upon by the parties. The Department shall ensure that the petition is heard in a manner that will give all interested parties the opportunity to present sworn testimony and evidence on all issues raised in the petition.

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Core-Mark International Inc. v. Montana Board of Livestock, 2014 MT 197, 329 P.3d 1278, 376 Mont. 25, 2014 Mont. LEXIS 533, 2014 WL 3672987 (Mo. 2014).

2014 MT 197 (Core-Mark International Inc. v. Montana Board of Livestock) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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