County Line Cheese Company v. Richard E. Lyng, Secretary of Agriculture

823 F.2d 1127, 1987 U.S. App. LEXIS 9661
CourtCourt of Appeals for the Seventh Circuit
DecidedJuly 9, 1987
Docket86-2357
StatusPublished
Cited by5 cases

This text of 823 F.2d 1127 (County Line Cheese Company v. Richard E. Lyng, Secretary of Agriculture) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
County Line Cheese Company v. Richard E. Lyng, Secretary of Agriculture, 823 F.2d 1127, 1987 U.S. App. LEXIS 9661 (7th Cir. 1987).

Opinions

ESCHBACH, Senior Circuit Judge.

This case concerns the validity of several administrative regulations governing the sale of milk. A farmer can get a higher price for milk that will be sold for consumption as milk (Class I milk) than for milk that will be used to make yogurt or cheese (Class II and III milk). Thus, some farmers get better prices than others. To end the adverse effects of “ruinous competition” for that premium, Congress decided to permit all farmers to share equally in the premium. The result was the Agricultural Marketing Agreement Act of 1937, 7 U.S.C. § 601 et seq. Acting pursuant to his authority under the Act, the Secretary of Agriculture has established regional milk pools, which are used to share among farmers in each pool the premium paid for [1129]*1129Class I milk. Each farmer who chooses to participate in the pool receives a uniform price for his milk from the handler he sells it to, regardless of the use the handler makes of the milk. The handlers who then use milk for Class I uses must pay into the “producer settlement fund” the money they saved by not having to pay for the milk at Class I prices. The handlers who use milk for Class II and III uses receive money from the pool, because they had to pay the uniform price rather than just the Class II or III price. County Line was a handler who bought milk principally for Class III uses and thus regularly received payments from the regional fund.

In order to qualify for the pool under the applicable administrative regulations, County Line’s milk had to be “shipped to” Meadow Gold’s plant. Because Meadow Gold did not' need the milk, County Line would pump the milk into the plant, immediately pump it back out again and take it elsewhere. Finding this a waste of time, County Line employees, over a six-month period, simply parked its trucks at Meadow Gold’s plant for a few minutes. The Secretary determined that this did not constitute “shipping” the milk to Meadow Gold, although the pumping in and out routine did. County Line was retroactively disqualified from the pool for six months and had to give back payments it had received from the producer settlement fund in that period. Meadow Gold also incurred liabilities to the pool because of County Line’s disqualification. The district court granted summary judgment affirming the Secretary’s rulings.

County Line and Meadow Gold contend that the Secretary did not act “in accordance with law” as required by the Act in interpreting the regulations to require that the milk be physically unloaded to be considered “shipped to” the plant. They also contend that favorable treatment given pool milk under the regulations violates the Act by erecting a trade barrier to the use of nonpool milk and by failing to give uniform prices to handlers. We will affirm.

I

Various regional “milk orders” have been promulgated pursuant to the Act of the Secretary, including the Indiana Milk Marketing Order, which governed the parties in this case. This is the order’s basic scheme. Producers may choose to participate in the “pool”. The Secretary decides upon an appropriate price for each class of milk: Class I (“fluid milk”: milk sold as milk), Class II (milk used to make soft products like eggnog and yogurt), and Class III (milk used to make hard products like butter and cheese). The Secretary determines how much “pool” milk in each category was bought by handlers from participating producers and multiplies that by the class price. The results from the three classes are added together; this result is divided by the total number of gallons of pool milk. The final result is the “blend price”: that is the minimum price handlers must pay participating producers.

For each handler, it is determined how much he would have had to pay for his milk according to the uses he made of it (use value) and how much he would have had to pay if he bought it all at the blend price (uniform value). For example, a handler who used all the milk he bought as Class I milk would have a higher total use value than uniform value. If the handler’s use value is higher than the uniform value, he must pay the difference into the “producer settlement fund”; if the uniform value is higher, then he receives the difference from the fund. The theory is that each handler will pay producers the blend price for milk. If he then uses that milk as Class I milk, he saved money; the savings go into the fund. If he uses the milk as Class III milk, he paid more than he should have had to pay and the fund reimburses him.

County Line and Meadow Gold, two subsidiaries of Beatrice Foods Company, were both handlers. Meadow Gold owned a distributing plant. County Line owned a supply plant and a cheese factory. County Line bought milk from producers and assembled it at the supply plant. Some of that milk it sold to Meadow Gold; most it [1130]*1130sent to the cheese factory. Because the greater part of County Line’s use was to make cheese, a Class III use, it was advantageous for County Line to qualify for the pool and thus receive payments. Under the applicable regulation, 7 C.F.R. § 1049.-7(b), County Line’s supply plant could qualify each month as a “pool plant” if not less than fifty percent of its milk was “shipped to” a qualified distributing plant. So County Line began to deliver at least fifty percent of its milk to Meadow Gold’s distributing plant.

Meadow Gold did not need that much milk. Meadow Gold got most of its milk from a cooperative and used County Line’s milk only to make up its residual needs. But to permit County Line to qualify for the pool, the parties arranged for County Line to truck at least fifty percent of its milk to Meadow Gold and pump it into its plant. What Meadow Gold did not need was pumped right back onto County Line’s trucks and sent to the cheese factory. The Secretary accepts this as constituting “shipping” the milk to Meadow Gold.

The Market Administrator administers the Indiana Order, which is the body of regulations, promulgated pursuant to the Act, that govern the Indiana milk pool. The Market Administrator audited Meadow Gold in February of 1981, Auditors observed that some County Line trucks, rather than unloading and reloading their milk, simply parked at the plant for a while and then drove off. The auditors examined records of County Line and Meadow Gold, including bills of lading and weight tickets. The auditors first decided how long it would take a truck to drive from County Line’s supply plant to Meadow Gold, pump the milk in and out of the plant, and drive to County Line’s cheese plant. Any truckload that had made it from the supply plant to the cheese plant in less than that minimum time was not counted toward the fifty percent figure necessary to qualify County Line for the pool each month. With these adjustments in mind, it was determined that County Line failed to meet the fifty percent total for any of the months of September, 1980, through February, 1981. In most of those months, County Line was determined to have “shipped” about thirty percent of its milk to Meadow Gold. The September figure was 49.50 percent; thus County Line missed qualifying for that month by only one half of a percentage point.

The supply plant was “depooled” for those months. The Market Administrator required County Line to repay $199,221.74 that it had received in payments from the producer settlement fund.

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Bluebook (online)
823 F.2d 1127, 1987 U.S. App. LEXIS 9661, Counsel Stack Legal Research, https://law.counselstack.com/opinion/county-line-cheese-company-v-richard-e-lyng-secretary-of-agriculture-ca7-1987.