`NORTHEAST DAIRY COMPACT COMMISSION

_____________________________

)

)

In Re Petitions of Crowley Foods, )

Inc., Stewart’s Processing Corp., ) Docket Numbers: HEP-97-001, 002,

Farmland Dairies, Inc., and ) 004 and 005

Cumberland Farms, Inc. )

______________________________)

 

Final Decision of the Commission

I. Findings of Fact:

The Northeast Dairy Compact Commission, having received and considered the Original Proposed Findings of Fact, Conclusions of Law, and Decision of the hearing panel, Petitioners’ Response of September 19, 1997, the panel’s Final Proposed Findings of Fact, Conclusions of Law and Decision, and the record developed in the proceedings, finds the following facts:

 

1. Crowley Foods, Inc. is a New York corporation with its principal corporate offices at 49 Court St., Binghamton, NY 13902. Crowley Foods owns and operates packaged fluid milk processing and manufacturing plants in Albany and Binghamton, New York. These plants distribute fluid milk products in New England, including Massachusetts. These plants receive raw milk from dairy farms located almost exclusively outside of New England.

2. Stewart’s Processing Corp. is a New York corporation with principal corporate offices and a fluid processing plant located at Saratoga Springs, New York 12866. Stewart’s Processing receives its raw milk supplies from New York dairy farms and distributes its packaged fluid milk products to stores in New York and Vermont.

3. Farmland Dairies, Inc. is a New Jersey corporation with principal corporate offices and a milk processing plant at 520 Main Ave., Wallington, New Jersey 07050. Farmland procures its raw milk supply from farms located in New Jersey, Pennsylvania, and New York. Farmland distributes packaged fluid milk products to customers in New Jersey, New York, Pennsylvania, and New England.

4. Cumberland Farms, Inc. is a Delaware corporation with principal corporate offices at 777 Dedham St., Canton, Massachusetts 02062. Cumberland Farms owns and operates a fluid milk processing plant in Rensselaer (East Greenbush), New York, which receives raw milk from dairy farmers located primarily in eastern and central New York, and a small supply from producers in Vermont. Cumberland Farms competes with New England processors and handlers for raw milk supplies throughout its New York procurement area. Cumberland Farms distributes packaged fluid milk products from that plant to its own convenience stores and to other buyers in New York, Pennsylvania, Connecticut, Massachusetts, New Hampshire and Vermont.

5. Petitioners, in aggregate, supply approximately three percent of all packaged, Class I, fluid milk sales in the regulated area of the six New England states. Almost all of the remainder of the supply is provided by plants located in the New England region.

6. During the summer and fall of 1996, the Compact Commission was organized pursuant to specific requirements of Article III of the Northeast Interstate Dairy Compact. § 4 of the Compact requires that:

 

"There is hereby created a commission to administer the compact, composed of delegations from each state in the region. A delegation shall include not less than three nor more than five persons. Each delegation shall include at least one dairy farmer who is engaged in the production of milk at the time of appointment or reappointment and one consumer representative. Delegation members shall be residents and voters of, and subject to such confirmation process as is provided for in, the appointing state. Delegation members shall serve no more than three consecutive terms with no single term of more than four years, and be subject to removal for cause."

 

7. There is at least one dairy farmer and one consumer representative, so designated by the appointing authority of each of the six New England states as required by the Compact, duly appointed and serving. The Commission includes the following members with their representative affiliation indicated:

Connecticut:

William R. Brophy III Retailer

Shirley Ferris Commissioner, Dept. of Agriculture

Robert Jacquier Dairy Farmer

Mae S. Schmidle Consumer Representative

Frank A. Starvel Dairy Processor

Maine:

Fred Hardy Dairy Farmer

Ed McLaughlin Commissioner, Dept. of Agriculture

Michael A. Wiers Consumer Representative

Massachusetts:

Charles Arbing Dairy Processor

Gordon Cook Dairy Farmer

Jay Healey Secretary, Dept. of Food and Agriculture

Mary Kelligrew Kassler Consumer Rep. (Director, MA WIC Program)

Samuel Shields Dairy Farmer

New Hampshire:

Powell Cabot Dairy Processor

Debora Erb Dairy Farmer

William Zweigbaum Consumer Representative

Rhode Island:

(vacant as of 7/1/97) Consumer Representative

Aaron W. Briggs Dairy Farmer

Steve Volpe Acting Administrator, Div. of Ag. Programs

John L. Smith Director, RI WIC Program

Christine Jabour Asst. Atty. Gen.(Chief, Consumer Protection.)

Vermont:

Jaques Couture Dairy Farmer

Andy Dykstra Dairy Farmer

Harold Howrigan Dairy Farmer

Millicent Rooney Dairy Processor

Robert Starr Consumer Representative

8. § 4 of the Compact further provides that in all respects other than those referred to in Finding #6, "delegation members shall serve in accordance with the laws of the state represented." Each member of the Commission currently serving was duly appointed in accordance with the laws of each of the states.

9. During the period from December 1996 to April 1997, the Compact Commission conducted meetings and public hearings on price regulation, and received written comments and proposals. The Commission takes official notice that 52 witnesses appeared during the hearings, advocating a variety of approaches to an over-order price structure including specific prices and limits on outside milk from coming into the regulated area. The Commission also received 79 written comments and exhibits on the proposed rule during the informal rulemaking process. In its published Final Rule, the Commission noted that it:

 

"was persuaded by the reasoning of economists Reenie DeGeus and Bill Gillmeister, dairy economists for the Vermont and Massachusetts Departments of Agriculture, respectively. They jointly proposed, and the Commission adopted, an over-order price regulation based in part on an inflation adjustment. Using the Class I, Zone 1 price for 1991 as the base year (a year in which prices were markedly low), and adjusting forward using the 1990 Consumer Price Index (CPI), yielded the amount of $16.94." See: 62 FR 29634 (May 30, 1997).

 

10. Based on Finding #9, officially noticed from the public rulemaking record, petitioners’ alleged Statements of Fact 11 and 13 are deemed irrelevant and immaterial as evidence of how the Commission decided on the over-order price of $16.94. Further, the Commission finds that petitioners’ allegations regarding AgriMark and its economist are not credible to prove petitioners’ inference of bias in the Commission or irregularity in its rulemaking process.

11. The Commission published a narrative Decision and Final Rule, See: 62 FR 29626 (May 30, 1997). The Commission conducted a producer referendum which approved the Final Rule, codified at 7 CFR §§ 1300.1 et. seq.

12. The Final Rule established a Class I, Zone 1, over-order price of $16.94/cwt. The over-order price regulation applies to the route distributions of Class I milk in New England by pool plants and partially regulated pool plants, and other handlers. 7 CFR § 1301.9.

13. The Compact over-order price obligation for milk marketed in July 1997, to be paid by pool plants and partially regulated plants, was $3.00/cwt., representing the difference between the July Class I milk price under Federal Milk Marketing Order #1 at Boston (Zone 1) ($13.94), and the Compact over-order price ($16.94). The August, 1997 over-order price obligation was $ 2.96. The September, 1997 over-order price obligation is $2.84. The October, 1997 over-order price obligation will be $ 1.63.

14. 7 CFR § 1301.1 requires all handlers to file reports of monthly milk receipts and Class I distributions in the regulated area on or before the 8th of each month. 7 CFR § 1307.2 requires the Commission to render a statement of the Compact over-order obligation to handlers on or before the 15th day of each month. 7 CFR § 1307.3 requires payment by handlers of the Compact over-order obligation on or before the 18th day of each month. It also requires payment by the Commission to the handlers of their producer-settlement fund credit by the 20th day of each month. Handlers are then required by 7 CFR § 1307.4 to pay their producers the over-order producer price/cwt. of production on or before the 20th day of each month.

15. As found in Findings # 1 through 4 above, each petitioner has a plant which is located outside the regulated area of the six New England states and has Class I distributions within the regulated area. All four petitioners thereby come under the definition of "handler" under 7 CFR § 1301.9, each being a "partially regulated plant" within the meaning of § 1301.6.

16. The Compact over-order price regulation requires distribution to producers of a "compact over-order producer price" per cwt. of production. See: 7 CFR §§ 1306.3 and 1307.4. Distribution is made to all New England farmers supplying pool plants and partially regulated plants and to out-of-region farmers supplying such plants.

17. Out-of-region producers who ship to pool plants qualify for distribution,

 

"provided that on more than half of the days on which the handler caused milk to be moved from the dairy farmer’s farm during December 1996, all of that milk was physically moved to a pool plant in the regulated [area] OR: to be considered a qualified producer, on more than half of the days on which the handler caused milk to be moved from the dairy farmer’s farm during the current month and for five (5) months subsequent to July of the preceding calendar year, all of that milk must have moved to a pool plant;" 7 CFR § 1301.11(b).

 

18. Any out-of-region producer who ships to a partially regulated plant under the rule qualifies for disbursement. 7 CFR § 1301.11(c).

19. For August, 1997, the over-order producer price was $1.30/cwt. The actual amount distributed was $1.28/cwt., reflecting the payment amounts into the court registry escrow account by petitioners.

20. Assuming the traditional utilization rate of approximately 50%, the over-order producer price in September will be $1.40/cwt., which would be adjusted for the payments into escrow to $1.38.cwt. The projected October distribution would be $.74/cwt., which would be adjusted for payments into escrow to $.72/cwt.

21. The New England traditional milk market has historically been supplied by, among others, milk processing plants located outside the physical boundaries of the six New England states, such as those owned by petitioners. See: 62 FR 29635 and 23039-23040.

22. Most of the dairy farms in the New England milkshed are organized into dairy cooperatives.

23. In general, milk processing plants do not, as a matter of practice, segregate producer milk received from differing locations for processing purposes. Rather milk is generally co-mingled as a joint supply of raw product for processing purposes.

24. Under the Compact over-order price regulation, all pool plants and partially regulated plants are subject to an identical over-order price obligation and receive over-order credit from the pool. For example, all pool plants and partially regulated plants were subject on August 18 to the identical $3.00 over-order obligation for their route distributions in the New England regulated area for July milk. Pool plants and partially regulated plants also received the same disbursement of the $1.28 over-order producer price on August 20. Similarly, all pool plants and partially regulated plants will be subject on October 18 to the (estimated) identical $1.63 over-order obligation for their route distributions in the New England regulated area for September milk. Pool plants and partially regulated plants will also receive the same disbursement of the (estimated) $0.72 over-order producer price on October 20.

25. All producers supplying partially regulated plants receive a pro rata share of the disbursement made to such plant for its Class I distributions in the New England regulated area. For example, on August 20, partially regulated plants received the over-order producer price of $1.28 on the volume of all Class I distributions in the New England marketing area, for disbursement pro rata to all producers supplying such plants.

26. Pursuant to § 18(a) of the Compact, on November 5, 1996, the Commission established a start-up assessment for one year, imposed upon "each handler who purchases milk from producers within the region," for Class I distributions in the New England marketing area by such handlers. The start-up assessment was in the amount of 1/10th of 1% the Federal Milk Market Order #1, Zone 1, Blend Price. The start-up assessment was not imposed on any of the petitioners.

27. Also pursuant to § 18(a) of the Compact, the Commission imposed an administrative assessment as part of the Compact over-order price regulation. See: 7 C.F.R. Part 1308. Pursuant to § 18(a) of the Compact, the administrative assessment was imposed "for the specific purpose of [the regulation’s] administration, in the amount of 3.2 cents/cwt., upon all Class I route distributions in the New England marketing area.

28. Congress expressly approved the text of the Compact in §147 of the 1996 Farm Bill, 7 U.S.C. § 7256, referenced as S.J. Res. 28(1)(b). In discussing that section as part of the Conference Report on the 1996 Farm Bill, Senator Leahy and Senator Lugar noted that:

 

"This compact will allow the six New England States to regulate the price of all class drinking milk sold in those States. The regulation may apply to any class milk sold in the New England States but produced elsewhere, as well as to such milk produced by New England farmers. The compact also provides that farmers from beyond New England receive its benefits as well as their New England counterparts." 142 Cong. Rec. S3056 (Mar, 28, 1996).

 

Senator Leahy and Senator Lugar also noted that Congressional Consent to the Compact did not:

 

"limit the compact commission’s authority to establish a compact over-order price regulation for all fluid milk marketed into the compact region in any form, packaged or bulk, produced in another production region in the United States." Id. at 3057.

 

29. The Federal District Court found in its Order of August 13, 1997 that the

 

"Compact price regulation provides no incentive or basis for the New England-based plant to switch or add supply from a farmer associated with on of the plaintiffs [including the petitioner]. Based on the fundamental principle of marketing area-based pricing, the New England-based plant must always pay the same price for milk. Thus, there is no incentive for the New England-based plant to switch supply to that provided by a farmer associated with one of the plaintiffs [including the petitioner]. Indeed, to do so would likely mean disrupting well-established patterns of supply with individual farmers and cooperatives.

Also, Ross points out that because there are ample supplies of milk, there should be no disruption." Order, August 13, 1997, New York State Dairy Foods, Inc., et. al. v. Northeast Dairy Compact Commission, et. al., Civil Action No. 97-11576-PBS at 3 (citing affidavit of Carmen L. Ross).

 

30. Insofar as petitioners’ alleged Statements of Fact 1, 2, 3, 4, 5, 6, 7, 8, 9, 17, and 18 characterize the law and its application, rather than facts, they are dealt with in the Commission’s Conclusions of Law.

31. Insofar as Statements of Fact 22 through 27 and the allegations of facts in the appended affidavits describe alleged economic harm to petitioners, they are dealt with in the Commission’s Conclusions of Law.

 

II. Conclusions of Law

At the outset, the Commission notes that it finds the presentation of petitioners’ legal claims and the alleged facts upon which those claims are based to be confusing, repetitive, overgeneralized, conclusory and speculative. The petitioners’ use of word processing technology has served neither the petitioners, the panel, nor the Commission well. Notwithstanding the petitioners’ failure broadly to meet their burdens of production and persuasion, the Commission will go forward with its decision in the interest of administrative justice. To the degree necessary and possible, the Commission has interpreted and clarified the petitioners’ claims based on their submissions.

The petitioners’ response filed on September 19, 1997, offers little clarification or assistance in this regard. Although it generally outlines "objections" to the panel’s Proposed Findings, it suggests no specific modifications, alterations, or amendments. The continuing lack of specificity has been particularly difficult for the panel and the Commission to deal with in light of the stipulated time frame for an expedited decision.

On this basis, the Commission considered each of petitioners’ stated "Grounds on Which the Regulation and its Application are Challenged As Not Being In Accordance With Law." The Commission’s Conclusions of Law with regard to each of petitioners Grounds are set forth below, in the same order as presented by petitioners. The format of petitioners’ presentation of legal claims is followed with the exception of Sections 1E and 4B where the Commission has separately responded to petitioners’ claims of economic harm gleaned from petitioners’ submissions.

1. Authority to Regulate Class I Milk Produced, Packaged and Processed Outside of New England

Based on a number of grounds, petitioners challenge the Compact Commission authority to regulate "Class I milk produced by dairy farmers outside of New England, packaged and processed outside of New England, but sold in packaged form to New England customers."

  1. Constitutional Claim

First, and most broadly asserted, petitioners claim that the exercise of such regulatory authority over milk produced and packaged outside of New England violates the Commerce Clause, Article I, § 8 of the United States Constitution, in that the authority was not consented to by Congress. As the Commission found at Finding #28, Congress expressly approved the text of the Compact relied upon by the Commission in imposing and administering its price regulation. The introductory paragraph of the Consent declares that:

 

"Congress hereby consents to the Northeast Interstate Dairy Compact entered into among the States of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont as specified in section 1(b) Senate Joint Resolution 28 of the 104th Congress, as placed on the calendar of the Senate. . . [Emphasis supplied].

 

As discussed below, petitioners’ claims contradict the statutory language. See, e. g. §§ 9(d) and 10(7); subparts B and C infra. In addition, petitioners’ claims misapprehend the basic constitutional function of the Compact.

The Compact’s Statement of Purpose and Declaration of Policy expressly contemplates formal, cooperative, interstate regulation of the entire relevant, regional, milk market by the participating states, to cure the problem inherent in the historic pattern of limited, individual, state market regulation. That historic pattern of limited, individual state regulation is outlined in the Statement of Purpose at § 1 of the Compact:

 

"Historically, individual state regulatory action has been an effective emergency remedy available to farmers confronting a distressed market. The federal order system, implemented by the Agricultural Marketing Agreement Act of 1937, establishes only minimum prices for dairy products, without preempting the power of states to regulate milk prices above the minimum levels so established. Based on this authority, each state in the region has individually attempted to implement at least one regulatory program in response to the current dairy industry crisis.

 

The Commission interprets petitioners’ unclear characterization of the Compact’s regulatory pattern as strikingly similar to that utilized historically by individual states and as described by this cited paragraph from the Compact’s Statement of Purpose. Under petitioners’ model, the New England region is made to resemble an individual state, such that the regulatory authority stops at the line demarcated by the territorial boundaries of the six states, much as the authority of an individual state may reach only to its state borders, by operation of the Commerce Clause. See: Baldwin v. G.A.F. Seelig, 294 U.S. 511 (1935) and West Lynn Creamery v. Healy, 512 U.S . 186 (1994).

Yet immediately after the above-cited paragraph, the Statement of Purpose contrasts the Compact’s interstate, regional regulatory pattern with this historic, single-state pattern:

 

In today’s regional dairy marketplace, cooperative, rather than individual state action may address more effectively the market disarray. Under our constitutional system, properly authorized, states acting cooperatively may exercise more power to regulate interstate commerce than they may assert individually without such authority…" [Emphasis added].

 

The New England marketplace is configured regionally in precisely the manner contemplated by the Statement of Purpose. The Commission found in Finding #5 that the market is primarily supplied by processing plants located in the Compact region, or within the territorial boundaries of the six New England states. In marginal but still significant amount, the market is also supplied by plants, including those operated by petitioners, located outside the territorial boundaries of the New England states.

In sum, New England’s traditional milkshed and milk market are not demarcated by state borders – they are regional. The function of regulation for a market with such regional character, within the meaning of the Compact’s Statement of Purpose, can only be made effective by application to the market’s supply in total. To configure the Compact price regulation so as to allow one traditional component of the market’s supply to participate unregulated in the marketplace, in the manner asserted by petitioners, would be simply to render the regulatory scheme inoperative and therefore absurd within the meaning of this Statement of Purpose.

Petitioners’ affiant, Robert Handforth has indicated that without the imposition of the regulation on its New York milk supply, it would be able to significantly increase its sales in New England. Were packaged milk from this source of supply allowed to enter the market unregulated, such milk would be able to undercut the regulated price imposed upon the regulated competition. While the supply provided by plants located outside the New England region is relatively marginal, it is apparent that this market share could quickly increase if left unregulated against its competition. The net result would thereby be to provide the unregulated milk a competitive advantage in the marketplace solely on the basis of operation of the regulation. This would be irrational market regulation.

To reinforce the Commission’s reading of the language of the Congressional Consent, the Commission takes note that the Compact’s legislative history contains two express descriptions of the Compact’s authority to regulate milk produced and packaged outside the New England market for distribution in the market. As set forth in Finding #28, the Congressional Record includes a colloquy of key Senators on this precise point. Senator Leahy, Compact sponsor and Farm Bill conferee, first explained, generally, that:

 

This compact will allow the six New England States to regulate the price of all class drinking milk sold in those States. The regulation may apply to any class I milk sold in the New England States but produced elsewhere, as well as to such milk produced by New England farmers.. 142 Cong. Rec. S3056 (Mar. 28, 1996) (Emphasis added).

 

Senator Leahy and Senator Lugar also emphasized that the Congressional conditions of consent do not "limit the compact commission’s authority to establish a compact over-over price regulation for all fluid milk marketed into the compact region in any form, packaged or bulk, produced in another production region in the United States." 142 Cong. Rec. S3057 (Mar. 28, 1996) [Emphasis added].

A plain reading of the Compact’s provisions as reinforced by the relevant legislative history answers any question of constitutional infirmity raised by petitioners. Absent express conditions of Congressional consent, as a creature of federal law, the Compact’s authority to regulate milk produced and packaged outside the New England states and marketed in those states is immune from challenge under the Interstate Commerce Clause, in the manner asserted by petitioners. Northeast Bancorp, Inc. v. Board of Governors of the Federal Reserve System, 472 U.S. 159, 174 (1985).

 

B. Intended Geographic Limits of Congressional Consent and the Secretary of Agriculture’s Finding of Compelling Interest

 

Petitioners appear to claim that the Commission’s authority is limited by Congressional Consent to the territorial region of New England. Based on the plain language of the Congressional Consent as reinforced by the legislative history quoted above from Senators Leahy and Lugar at 142 Cong. Rec. S3056 and S3057 (Mar. 28, 1996) that "[t]he regulation may apply to any class I milk sold in the New England States but produced elsewhere, as well as to such milk produced by New England farmers," the Commission concludes otherwise. There the Senators emphasized that the Congressional conditions of consent do not "limit the compact commission’s authority to establish a compact over-order price regulation for all fluid milk marketed into the compact region in any form, packaged or bulk, produced in another production region in the United States."

The Commission has found in Finding #21 that the traditional New England milk market or milkshed has historically been supplied by milk processing plants located outside the physical boundaries of the six New England states. The Congress, in approving the text of the Compact, authorized the Commission to regulate Class I milk sold in New England regardless of where it was produced. See: 142 Cong. Rec. S3056. To conclude that Congress intended otherwise would make the regulatory scheme unworkable and would thwart the purposes of the Compact, the actual text of which the Congress approved. See: supra at p. 13.

The petitioners also assert that the extension of the Compact over-order price regulation to Class I milk produced and processed outside of New England violates the regional limitations in the Secretary of Agriculture’s determinations of public interest. The Commission rejects this claim for the reasons outlined above. The Commission notes that the Secretary's authority to make the finding has been exercised and upheld by the Federal District Court in the case of Milk Industry Foundation v. Glickman, 949 F. Supp. 882 (D.D.C. 1996) and Milk Industry Foundation v. Glickman, 967 F. Supp. 564 (D.D.C. 1997).

The Commission concludes that there is no limitation in either the Congressional Consent or Secretary Glickman’s authority or finding of compelling public interest.

 

C. Construction of the First Sentence of 7 U.S.C. § 7256(7), hereinafter referred to as Condition of Consent #7

 

Petitioners further assert that Condition of Consent #7 in fact limits such regulatory authority. Petitioners assert that such authority, "violates the express mandate of § 147(7) of the Farm Bill that the Commission shall take no action which will ‘in any way limit the marketing in [New England]... of any milk or milk product produced...’ outside of New England." Petitioners’ reading of § 147(7) is improperly restrictive, as well as inconsistent with the overall statutory design of the Compact as expressly approved by Congress.

The first sentence cited by petitioners must be read in context with the entire subsection. 7 U.S.C. §7256(7), in its entirety, reads as follows:

 

"(7) The Northeast Interstate Dairy Compact Commissions shall not prohibit or in any way limit the marketing in the Compact region of any milk or milk product produced in other production area in the United States. The Compact Commission shall respect and abide by the ongoing procedures between Federal milk marketing orders with respect to the sharing of proceeds from sales within the Compact region of bulk milk, packaged milk, or producer milk originating from outside of the Compact region. The Compact Commission shall not use compensatory payments under section 10(6) of the Compact as a barrier to the entry of milk into the Compact region or for any other purpose. Establishment of a Compact over-order price, in itself, shall not be considered a compensatory payment or a limitation or prohibition of the marketing of milk. " (Emphasis added)

 

The fourth, or last, sentence of Condition of Consent #7 makes clear that the imposition of price regulation upon packaged milk brought in from outside the Compact region, "in itself," does not constitute a limitation or prohibition of the marketing of such milk. This sentence directly contradicts petitioners’ reading of the condition of consent.

Rather than mandating a blanket prohibition of regulation as argued by petitioners, the Commission reads Condition of Consent #7, including the first sentence, as instead reinforcing a basic principle of milk market regulation. This principle establishes that any regulated market must remain open to competition from outside the market in all respects except for operation of the regulation. More particularly, price regulation uniformly applied to all market participants ensures the regulation creates neither competitive advantage nor disadvantage. In this manner, the regulation, "by itself", creates neither limitation nor prohibition on the marketing of milk in the regulated area.

Petitioners’ selective and restrictive reading of Condition of Consent #7 is also inconsistent with the essential regulatory provisions contained in the Compact and approved without condition by Congress. These provisions provide express authority to regulate milk brought in from beyond the New England regulated area.

Section 10(7) of the Compact authorizes the Compact to regulate milk handled by "partially regulated plants". Section 2(7) defines a partially regulated plant as a "milk plant not located in a regulated area but having sales within such regulated area, or receipts in such area." (Emphasis added). Congress in no way conditioned or eliminated this express authority to regulate "sales within such regulated area" by a "milk plant not located in a regulated area." Petitioners’ contention that the Commission lacks the authority to regulate such milk is thus misplaced.

Finally, petitioners’ apparent concept of a "partially regulated plant" highlights the irrational market consequences that could flow from petitioners’ proposed construction of the first sentence of Condition of Consent #7. Petitioners’ concept of a partially regulated plant would apparently allow regulation of milk produced by New England farmers and packaged by a plant located outside the region for sale within the region. At the same time, milk produced by farmers outside the region for such processing and sale would evade regulation. Accordingly, a partially regulated plant could simultaneously market regulated and unregulated milk from the same plant.

Under the regulatory pattern set forth by petitioners, it can be envisioned that such regulated and unregulated packaged product processed at the same plant could wind up being sold side by side in a retail outlet. This would certainly be the case for petitioners Cumberland Farms and Stewart’s Dairy, which retail the milk processed by their milk plants in New England retail outlets.

The Commission finds such a regulatory pattern can only be termed irrational, and contrary to the stated purpose of authorizing regulation of the regional marketplace. It is also contrary to the express provision of § 3(b) of the Compact which reads:

 

"It is the intent of this compact to establish a basic structure by which the commission may achieve those purposes [ enunciated in § 1] through the application, adaptation and development of the regulatory techniques historically associated with milk marketing and to afford the commission broad flexibility to devise regulatory mechanisms to achieve the purposes of this compact."

 

Finally, the Commission notes that certain express, technical, terms of the Compact further establish the provision of regulatory authority over milk produced and processed outside the regulated area. § 9(d) provides that whenever price regulation has been established,

 

The legal obligation to pay such price shall be determined solely by the terms and purpose of the regulation without regard to the situs of the transfer of title, possession or any other factors not related to the purposes of the regulation and this compact. (Emphasis added)

 

§ 9(d)’s application of the regulation "without regard to the situs of the transfer of title" is provided without limitation. The "legal obligation" to adhere to the regulation thus extends beyond any territorial boundaries as advocated by petitioners.

  1. Compensatory Payments

Petitioners further argue that price regulation of milk produced, processed and packaged outside of New England and marketed in New England "violates the express prohibition in §147(7) of the Farm Bill against use of ‘compensatory payments under §10(6) of the Compact…for any…purpose’". Petitioners’ construction of this third sentence of Condition of Consent #7 is to preclude completely the Commission’s authority to regulate any milk brought in from outside the territorial boundaries of New England. The thrust of petitioners’ apparent argument is that any regulation of such milk constitutes imposition of a compensatory payment prohibited by condition (7).

In part for the reasons set forth in subsections A and C, above, the Commission rejects this construction of Condition of Consent #7 as establishing such a blanket prohibition of the regulation of milk brought in from outside the New England states. Petitioners’ construction is also, again, too restrictive with regard to the condition’s overall treatment of compensatory payments. Furthermore, petitioners’ construction is inconsistent with the Compact’s inclusion of another provision, left unconditioned by Congress, which provides an explicit methodology for pricing of such outside milk and which is distinct from the compensatory payment approach.

Again, petitioners’ selective citation to condition of consent (7) must be read in context:

 

"(7) The Northeast Interstate Dairy Compact Commissions shall not prohibit or in any way limit the marketing in the Compact region of any milk or milk product produced in other production area in the United States. The Compact Commission shall respect and abide by the ongoing procedures between Federal milk marketing orders with respect to the sharing of proceeds from sales within the Compact region of bulk milk, packaged milk, or producer milk originating from outside of the Compact region. The Compact Commission shall not use compensatory payments under section 10(6) of the Compact as a barrier to the entry of milk into the Compact region or for any other purpose. Establishment of a Compact over-order price, in itself, shall not be considered a compensatory payment or a limitation or prohibition of the marketing of milk."

 

The third and fourth sentences of the condition clearly must be read together. The express statement of the fourth sentence – that price regulation, in itself, shall not be considered a compensatory payment – strongly establishes that use of the remainder of the Compact’s unconditioned regulatory provisions should not be construed as involving the use of "compensatory payments." In any event, the Commission concludes the last sentence establishes that petitioner’s reading of the condition’s intent is overbroad.

Most significantly, the condition in no way limits the additional, express, authority of the Commission to regulate "partially regulated plants", as provided by Compact § 10(7). As previously discussed, such plants as are those "being not located in a regulated area but having Class I distribution within such area…". § 10(7) expressly authorizes the "pricing and pooling of milk handled by" such plants.

The express inclusion of the one pricing mechanism of compensatory payments under §10(6), along with another, distinct, mechanism of "pricing and pooling of milk" immediately following under §10(7), establishes that the Compact as originally conceived contained two separate means to regulate milk brought into the regulated area from beyond the area. The phrasing of the second mechanism, premised upon the "pooling" of milk, establishes the critical distinction. Under §10(6), "persons who bring Class I milk into the regulated area" must "make compensatory payments to the extent necessary to equalize the cost of milk…" (Emphasis added) By contrast, under §10(7), "partially regulated plants" are made subject to provisions of "pricing and pooling". (Emphasis added)

Under §§ 9(6) and 10(7), partially regulated plants and pool plants can be made subject to the same regulatory provisions of pricing and pooling of milk with regard to the cost of all milk marketed in the regulated area. This is the precise pattern of the Compact Over-order Price Regulation adopted by the Commission. As the Commission has found in Finding #24, both pool plants and partially regulated plants are subject to the identical compact over-order price obligation to the pool, and receive the identical compact over-order price credit from the pool, for milk marketed in the regulated area.

As set forth in Finding #24, for example, all pool plants and partially regulated plants were subject on August 18 to the identical $3.00 over-order obligation for their route distributions in the New England regulated area for July milk. Pool plants and partially regulated plants also received the same disbursement of the $1.28 over-order producer price on August 20. Similarly, all pool plants and partially regulated plants will be subject on October 18 to the (estimated) identical $1.63 over-order obligation for their route distributions in the New England regulated area for September milk. Pool plants and partially regulated plants will also receive the same disbursement of the (estimated) $0.72 over-order producer price on August 20.

This pattern of regulation is distinct from the compensatory payment pattern of regulation described by petitioner’s Statement of Facts, and as authorized by § 10(6) of the Compact. Such a pattern requires persons bringing milk into the regulated area to make a payment into the pool designed to "equalize" the cost for such milk against the cost paid by pool plants. As simply making an equalization payment, furthermore, such a person receives no credit from the pool for disbursement to supplying farmers. For example, such an equalization payment would have required petitioners on August 18 to make payment in some amount resembling $1.72 ($3.00 - $1.28 (debit – credit paid by and to pool plants)). According to this regulatory pattern, furthermore, petitioners would have received no over-order credit for disbursement to producers.

In sum, the Commission’s regulatory pattern based on the full pooling of milk under §§ 9(d) and 10(7) of the Compact regulates milk marketed by partially regulated plants into the regulated area in the same manner as that marketed by pool plants. In both cases, all plants make full payment into the pool and receive payment back for that volume. For each plant operated by petitioners, rather than being in the regulated posture of a "person bringing milk into the regulated area", such plant is instead "partially regulated" under the Compact, for the volume of milk marketed in the area.

The distinction in the Compact as originally drafted between these two regulatory mechanisms may be a subtle one, but it is no less vital for that subtlety. Congress expressed its recognition of this original, two-fold, regulatory pattern in the manner by which it consented to the Compact. In condition of consent (7), Congress at once disallowed the provision for use of compensatory payments provided by Compact §10(6) but left undisturbed the succeeding authority under §10(7) to price and pool milk by partially regulated pool plants.

For these reasons, the Commission rejects petitioners’ contention that its regulation of "Class I milk produced… packaged and processed outside of New England but sold …to New England customers" is an unlawful form of compensatory payment.

 

E. Economic Harm Alleged With Regard to the Regulation of Milk Produced and Processed Outside of the New England Regulated Area and Marketed in the Regulated Area

 

Petitioners have alleged that they will suffer economic harm as a result of the imposition of the Compact over-order price regulation on milk produced and processed outside of the New England regulated area and marketed in the regulated area. The mere assertions of harm are too general and are not substantiated with any specific evidence in petitioners’ presentation.

Moreover, petitioners’ allegations are merely predictions of what might happen in the future. See e.g. petitioners’ Statement of Fact # 22: the "pricing rules will have the adverse impact of increased milk prices and other direct charges to processors…; Statement of Fact # 25: "Higher consumer milk prices in New England will result in lower sales for processors…". (Emphasis added) These predictions are wholly conclusory and are not substantiated beyond the mere assertions. There are no actual facts presented in support of the conclusory assertions.

Finally, petitioners’ alleged Statement of Fact # 24, that "[f]or partially regulated processors, the Compact over-order assessment for distribution into New England will increase raw product costs which are not applied to local competitors" is incorrect. As found in the Commission’s Finding #24, partially regulated plants are subject to the same over-order obligation as pool plants, or those competitors located in New England.

For these reasons, the Commission concludes that the nature of petitioners’ alleged claims of economic harm are not substantiated, are too speculative, and are too general to warrant granting the relief requested. As a fundamental principle of law, petitioners, as the moving parties, have the burden of producing evidence beyond the mere assertion of an alleged fact, to prove the fact asserted. The petitioners have not met that burden and the claims are rejected.

 

2. Authority to Regulate Class I Milk Produced Outside of New England but Packaged and Processed in New England

 

None of these petitioners challenge application of the Compact over-order price regulation on the operation of any plant which packages and processes milk in New England from producers outside of New England. Petitioners lack standing to raise the legal claims in Statement of Ground #2 and the claims and argument are, therefore, found to be irrelevant and immaterial.

3. Authority to Regulate Producer Milk Outside of Regulated Area

Petitioners claim that "the Compact Rules, as written or as applied to establish and directly regulate an "over-order" Class I plant price for milk received from producers other than those ‘located in a regulated area,’ are not authorized by and violate Compact § 9(d)." This legal claim is more fully developed in petitioners’ Statement of the Facts #1 which asserts that the Commission’s authority under §9(d) of the Compact is "limited to plants and ‘other handlers receiving milk from producers located in a regulated area.’" (Emphasis by petitioners)

In its entirety, the pertinent first sentence of § 9(d) is as follows:

 

"(d) The commission is hereby empowered to establish the minimum price for milk to be paid by pool plants, partially regulated plants and all other handlers receiving milk from producers located in a regulated area."

 

Petitioners apparently read the last clause of the sentence – "receiving milk from producers located in a regulated area" - as modifying each of the preceding "pool plants" and "partially regulated plants" along with, generally, "all other handlers…" Petitioners’ construction is inconsistent with the plain language, with basic "regulatory techniques historically associated with milk marketing", and with "commonly understood general meanings" of milk marketing under §3 of the Compact.

Consistent with the most logical reading of the statutory language and within commonly understood usage and intended purposes of milk market regulation, the language underlined by petitioner modifies only "all other handlers", and thereby defines a third, distinct, class of regulated entity. Accordingly, the Commission concludes that § 9(d) authorizes the Commission to establish compact over-order price regulation for three classes of regulated entities:

 

1) pool plants [as defined by Compact § 2(6)];

2) partially regulated plants [as defined by Compact § 2(7)]; and

3) all other handlers receiving milk from producers located in a regulated area.

§ 2(6) defines a pool plant as a "any milk plant located in a regulated area." Such "pool plants" are the fundamental "regulatory technique historically associated with milk marketing" contemplated therein by § 3(b) of the Compact. They provide the basic regulatory tool for establishing uniform price regulation for market distributions in a particular marketing area. For the New England marketing area, pool plants supply fully 97 percent of the packaged milk product. See Commission’s Finding # 5.

In equally, fundamental, common usage, pool plants can only be understood to encompass supply from farms without regard to location of the farm. This is to ensure that all milk received by such a processing facility is uniformly regulated. If the distinction were drawn as argued by petitioners, some part of the supply to regulated facility would go unregulated, thus defeating the regulation’s purpose of uniformity.

The Commission finds petitioners’ construction of the definition of "partially regulated plants" similarly unsupportable as directly contrary their definition in § 2(7). Section 2(7) defines a partially regulated plant as a "milk plant not located in a regulated area but having sales within such regulated area, or receipts in such area." (Emphasis added). Section 2(7)’s definition of partially regulated plant use of the conjunctive "and" to join the clause – "receipts from producers located in such area" - instead of the disjunctive "or" makes clear that the definition encompasses milk received from producers outside the regulated area.

Consistent with such common usage, § 9(d) expressly recognizes that all supply provided to a pool plant or partially regulated plant applies without regard to location of the supplying farm. Accordingly, § 9(d) establishes that

 

Whenever [price regulation] has been established…, the legal obligation to pay such price shall be determined solely by the terms and purpose of the regulation without regard to the situs of the transfer of title, possession or any other factors not related to the purposes of the regulation and this compact.

 

Finally, the Commission notes the third class of such "other handlers receiving milk from producers located in a regulated area" includes cooperatives, or formal organizations of farmers. As farmer organizations for assembling and marketing milk, this class is distinguished from the processing facilities which make up the other two classes of regulated entities - pool plants and partially regulated plants.

As set forth in Finding # 22, most of the farmers comprising the New England milkshed are organized in such cooperatives. The remainder is understood as comprised of "independent" producers. Within commonly understood terms of milk market regulation, processing facilities "receive" milk from independent producers and cooperatives. In the latter case, it is the cooperative which "receives" the milk from its producer members, within the meaning of § 9(d), and then markets the milk to the processing facility.

The Commission concludes that the language in §9(d) of the Compact "receiving milk from producers located in a regulated area" modifies only "all other handlers" as a separate category and does not apply to or limit the scope of the Commission’s authority for regulating pool plants or partially regulated plants. On the basis of this plain reading of the statutory language, the Commission rejects the petitioners’ claim.

4. Authority to Establish and Distribute Proceeds to Producers Outside the New England Regulated Area

 

    1. Response to Petitioners’ Legal Claim
    2. Petitioners further argue that "the Compact Rules, as written or as applied to establish and distribute proceeds of a Compact over-order revenue pool applied to producers located without the regulated area, violate the limits of pooling authority contained in Compact Sec. 10(5)(A)."

      Petitioners apparently are alleging in Conover’s affidavit that § 10(5)(A) is the only mechanism provided for making disbursements to supplying farmers, whether inside or outside the regulated area. In fact, §§ 9 and 10 provide a number of options for payment.

      The Commission finds that § 10(7) addresses the specific circumstance here complained of, with regard to payment to farmers located outside the regulated area supplying a plant also located outside such area. As discussed above, such plants are "partially regulated plants" under the definition of § 2(7). The Commission’s regulatory provisions addressing the payment of all farmers supplying partially regulated plants, located both inside and outside the regulated area are premised primarily upon this statutory section.

      Further, the intent of Congress in consenting to the Compact was that all farmers supplying regulated plants should receive the over-order producer price. The colloquy between Senators Leahy and Lugar quoted above indicates the intent that "[t]he compact also provides that farmers from beyond New England receive its benefits as well as their New England counterparts." 142 Cong. Rec. S3056 (Mar. 28, 1996).

      The Commission finds that § 10(7) authorizes the adoption of "[p]rovisions specially governing the pricing and pooling of milk handled by partially regulated plants." The Commission, therefore, concludes that the statutory language of the Compact reinforced by the legislative history gives the Commission authority to distribute to producers outside of New England.

    3. Allegations of Economic Harm Relating to Distribution of Proceeds to Producers Outside the New England Regulated Area
    4. Petitioners present certain allegations of economic harm relating to distribution of proceeds to producers outside the New England regulated area. Petitioners’ supporting affidavit by Mikael B. Pedersen contains the following statement that:

       

      "[d]uring the past several months, New England handlers and cooperative associations have been actively soliciting dairy farmers which supply milk to Crowley’s New York plants with a promise of greater income if the producers switch allegiance to the New England/Compact market. Producers supplying Crowley, in addition, have advised that they will not continue to supply milk to Crowley unless Crowley is able to match the competitive price flowing to some New York producers from the New England Compact pool.

       

      A new affidavit is also filed with petitioners’ September 19 response by Gary Dake of Stewart’s Processing Corp., indicating that Stewart’s has been required to make such matching payments to retain its supply.

      In the petitioners’ September 19 response, they raise an additional, apparently new claim of economic harm with regard to matching payments. Petitioners assert that their raw product cost of milk distributed in New York is made higher than that of their New England competitors as a result of such payments. See: Petitioners’ September 19 response, pages 8 and 9. Petitioners new, additional argument is in essence derived from the previous claim that they must match the regulation’s rate of payment to producers supplying New England based, or "pool plants". The additional claim is that such payments, if required to retain supply, serve to increase their procurement cost for milk sold in New York compared to the cost incurred by pool plants. The same issues are therefore raised by both claims of economic harm – whether petitioners must duplicate in some fashion the payments made to producers supplying pool plants for milk procured for ultimate sale in New York and, is so, whether petitioners are harmed by having to make such payments.

      Petitioners’ allegations of economic harm are again presented in conclusory, speculative form. Most significantly, there is no documentation in either cited affidavit of the number of supplying farms which petitioners have lost, much less any identification of the number of farms which might be lost. With regard to the Crowley Foods, Inc. and Stewart’s Processing Corp. affidavits, there is simply no indication of just how many, if any, farms affiants might lose in fact. Nor is there any calculation of the relative percentage of such alleged vulnerable supply against petitioners’ overall supply.

      Petitioners’ supporting affidavit by Conover is similarly speculative. While there is a theoretical description of the potential for market disruption (See paragraphs 23 through 28), there are no actual facts presented of such disruption. Rather, the argument is as is generally presented in petitioners’ Statement of Fact #23 that: "New York processors . . . will be adversely affected".

      The speculative nature of such claims was highlighted in the Federal District Court’s recent decision in this matter. The Court there "conclude[d] that any harm to the plaintiffs from the August 20 distribution is speculative." Order, August 13, 1997, New York State Dairy Foods, Inc., et. al. v. Northeast Dairy Compact Commission, et. al., Civil Action No. 97-11576-PBS, at 3. The Court reached this conclusion by specific reference to analysis presented by the Compact Commission’s Regulations Administrator, Carmen L. Ross, as follows:

       

      "Compact price regulation provides no incentive or basis for the New England-based plant to switch or add supply from a farmer associated with on of the plaintiffs [including the petitioner]. Based on the fundamental principle of marketing area-based pricing, the New England-based plant must always pay the same price for milk. Thus, there is no incentive for the New England-based plant to switch supply to that provided by a farmer associated with one of the plaintiffs [including the petitioner]. Indeed, to do so would likely mean disrupting well-established patterns of supply with individual farmers and cooperatives.

      Also, Ross points out that because there are ample supplies of milk, there should be no disruption." Id. at 3-4.

       

      The other allegations are similarly speculative. See petitioners’ Statement of Fact #26 "Higher producer prices will stimulate milk production in New England"; Statement of Fact #27: The market burdens and barriers to milk from New York…will also have the tendency to cause less Class I milk to flow to New England."

      The Commission concludes that the speculative nature of petitioners’ claims of economic harm in this regard are too speculative, standing alone, to warrant the granting of the relief granted by petitioners. The Commission again refers to the fundamental principle of law cited at p. 18 that petitioners, as moving parties, have a burden to produce evidence to substantiate an asserted fact. They have not met that burden and their claim that distribution of the proceeds of price regulations to producers in New York is, therefore, rejected.

      Finally, to the extent that the petitioners are concerned that there might be unanticipated consequences in implementation of the over-order price regulation, the Commission notes [ as it did in its final regulation, 62 F.R. 29626, 29638 (May 30, 1997)] that it is carefully monitoring the regulation and evaluating its effect on the market.

       

      5. Authority for Administrative Assessment

       

      A. Start up Assessment

      The Commission found in Finding #26 that none of the petitioners was assessed for start-up costs. Accordingly, petitioners have no grounds to complain against the establishment or imposition of the start assessment.

      B. Administrative Assessment

      Petitioners claim that the Commission’s authority to impose an assessment for administrative costs is limited. Unlike the language of § 18(a) that applies to start up assessments, the language referring to assessments for administrative purposes does not limit the Commission’s authority as to duration, source or amount. The relevant language reads:

       

      "In addition, if regulations establishing an over-order price or a compact marketing order are adopted, they may include an assessment for the specific purpose of their administration."

       

      The Commission concludes that the costs of administration of the Compact over-order price regulation were intended to be born by all handlers subject to the regulation with sales of Class I milk in the regulated region, including pool plants, partially regulated plants, and all other handlers receiving milk from producers located in the regulated area. The imposition of a $0.032/cwt. administrative assessment on petitioners for Class I sales in New England is well within the Commission’s authority under § 18(a) of the Compact.

       

      6. Imposition of Administrative Assessment Only on Class I Milk

       

      Petitioners argue that the Compact over-order price regulation for application of the § 18(a) administrative assessment is inconsistent with the "blend price" assessment objectives of § 18(a) and with federal and state equal protection guarantees. Their argument is grounded on the assertion that there is no rational basis related to a legitimate state interest in requiring "the class most burdened by Compact regulation to bear all of the costs of administration, while other classes of milk users in New England (Class II, III, and III-A), which benefit equally from distribution of the pooled ‘producer over-order price,’ share in none of the costs of administration."

      It is not apparent from the record that is before the Commission what the "’blend price’ assessment objectives of § 18(a)" might be. § 18(a) of the Compact limits the amount of any start-up assessment that the Commission might establish to "one-tenth of one percent of the applicable federal market order blend price per hundredweight of milk." While that language indicates clear legislative intent to limit the amount of the assessment, it is not clear that the federal market order blend price was chosen as a basis for calculation for any purpose other than ease of administration. Because there is no readily apparent "’blend price’ assessment objective", the Commission finds no inconsistency with the implementing regulation.

      In analyzing the petitioners’ equal protection claim, the Commission notes that state and federal laws are generally entitled to a presumption of validity against attack under this clause. Parham v. Hughes, 441 U.S. 347 (1979). The petitioners have neither alleged nor shown that they are members of a protected or suspect class for purposes of equal protection analysis. See: Harris v. McRae, 448 U.S. 297 (1980), McGowan v. Maryland, 366 U.S. 340 (1961). They must, therefore, show that the discriminatory treatment alleged has no rational basis related to a legitimate state interest for purposes of finding any violation of their equal protection rights. See: Kite v. Marshall (CA, 1981) 661 F.2d 1027, rehearing denied 666 F.2d 591, cert. denied 457 U.S. 1120. See also: Massachusetts Board of Retirement v. Murgia, 427 U.S. 307 (1976) and City of New Orleans v. Dukes, 427 U.S. 297 (1976). The petitioners have not met that burden.

      The Congress, in its consent to the Northeast Interstate Dairy Compact, indicated a clear intention of authorizing over-order price regulation of only Class I fluid milk. See: § 147 (2) of the 1996 Farm Bill, 7 U.S.C. § 7256. This regulation is rationally related to the legitimate purpose of providing "a stable, local supply of pure, wholesome milk" as "a matter of great importance to the health and welfare of the region." See: § 1 of the Compact. The primary focus of the Compact and the over-order price regulation is on the Class I fluid milk market. It is eminently reasonable to assess the costs for administration of the regulatory program on those who distribute Class I milk in New England as a cost of doing business in the market.

      The Commission concludes that the Compact rules are consistent with federal and state equal protection guarantees.

      7. Composition of the Compact Commission

       

      The petitioners argue that § 4 of the Compact, or its application by participating states, creating or providing a Commission with dairy farmer members and other members with substantial pecuniary and political interest in the establishment of an over-order pricing order, violates due process mandated by the Fifth and Fourteenth Amendments of the Constitution of the United States and by the Constitutions of participating states.

      As the indicated in Finding #7 above, the Commission finds that the Commission is made up of representatives of consumers, dairy farmers, dairy processors, and others. The mere assertion that the Commission includes interested parties does not provide sufficient foundation for invalidating an Act of Congress and the several states as violative of due process. Schweiker v. McClure, 456 U.S. 188, 196 n. 10 (1982). The Congress, [and] the several state legislatures and the appointing authorities chose to include dairy farmers and consumer representatives to ensure that the expertise of these groups was utilized by the Commission. That legislative and gubernatorial judgment is entitled to deference. Absent specific allegations of bias or irregularities, the mere presence of interested persons on governmental boards that regulate those persons’ professions does not evidence bias and is not a violation of due process. See: Friedman v. Rogers, 440 U.S. 1, 18 (1979); Abramson v. Gonzales, 949 F.2d 1567, 1579 (11th Cir. 1992).

       

      As the court pointed out in Lopez v. Henry Phipps Plaza South, 498 F.2d 937 (2nd Cir. 1974):

       

      "to forbid tribunals composed of individuals drawn from organizations interested in the matter being regulated on the ground of such interest would deny the tribunal valuable and perhaps otherwise unavailable expertise."

       

      The Commission notes further that farmers have long played a part in the federal

      regulatory policy through participation on decision-making committees (See, e.g.:

      Glickman v. Wileman Bros. & Elliot, Inc., 117 S.Ct. 2130, 2136 (1997) and through

      producer referenda (See, e.g.: Block v. Community Nutrition Institute, 467 U.S. 340, 346

      (1984).

       

      Beyond this lack of general grounds for disqualifying farmer and other members of the Commission from participating in the establishment of an over-order price regulation, the petitioners have neither alleged specific facts nor submitted any evidence to prove any disqualifying bias or pecuniary interest beyond their merely conclusory statements in the petition and the September 19 response. The Commission concludes that the composition of the Commission, defined in § 4 of the Compact and as implemented by the participating states, is not in conflict with the due process requirements of the Fifth and Fourteenth Amendments to the Constitution of the United States or of the several participating states’ constitutions.

      8. Appointment of the Hearing Panel

      The Commission concludes that the provisions of the interim rule for appointment of the hearing panel for consideration of these petitions adequately ensure the petitioners a fair and impartial panel. The Chair of the Commission, in appointing the panel members pursuant to the requirements of 7 CFR §1301.4(a) by Order of August 19, 1997, has appointed no member with a pecuniary interest in the matter nor resident in the same state as any of the petitioners’ principal place of business.

      The law presumes the legitimacy of the appointment order and there is a "presumption of honesty and integrity in those serving as adjudicators." Withrow v. Larkin, 421 U.S. 35, 47 (1975). Adjudicators are "assumed to be men [sic] of conscience and intellectual discipline, capable of judging a particular controversy fairly on the basis of its own circumstance." U.S. v. Morgan, 313 U.S. 409, 421 (1941). Philosophical or policy bias, a predisposition in favor of the law or regulation the agency enforces, for example, is not considered to be a disqualifying bias. See: American Cyanamid v. F.T.C., 363 F.2d 757 (1966). See also: Heffron and McFeeley, The Administrative Regulatory Process, p. 274; and Davis, 3 Administrative Law Treatise (1980), p. 362. Absent specific allegations and clear evidence of bias for any particular member, recusal is not required. Housing Study Group v. Kemp, Ibid. Panel members have evidenced no disqualifying bias merely by their participation in voting as delegates on the Commission.

      In its September 19 response, the petitioners have cited New Hampshire Milk Dealers Association v. Milk Control Board, op. cit., for the proposition that panel members should recuse themselves in this case. In that case, however, the Court found that, because the Chair of the Milk Board had no pecuniary interest in the case, that he entertained no ill will or prejudice toward any of the parties, and that he had no bias or prejudgment concerning the issues of fact involved nor as to the outcome of the hearings, recusal was not necessary. In that case, as here, participation and advocacy in the legislative process was not sufficient alone to require disqualification.

      The petitioners have demonstrated no specific grounds of pecuniary interest, prejudice toward a party, or bias beyond the mere conclusory statements in the petition and the September 19 response. The petitioners have not met their burden to show by "clear and convincing evidence" any such grounds.

      9. Employee, Staff or Advisor Disqualification

      The Commission concludes that, absent a specific allegation of bias or impropriety, the staff is not disqualified from advising the panel or the Commission hearing these petitions. The same general considerations and presumptions discussed above on the qualification of Commission members to sit as members of the hearing panel apply to the Commission’s staff and legal advisors who may assist the hearing panel, See: Greenberg v. Federal Reserve Board, 968 F.2d 164 (2nd Cir. 1992). The mere allegation, as outlined by petitioners in the September 19 response, that agency staff has advocated for the establishment of the Compact as a representative of producer organizations is not sufficient to disqualify. Again, absent specific allegations and "clear and convincing evidence" of bias for any particular staff person or legal advisor, disqualification or recusal is not required.

      10. Application of the Administrative Procedure Acts

      The Commission concludes that the provisions of the federal and applicable state Administrative Procedure Acts do not apply to these proceedings. On its face, the federal Administrative Procedure Act applies only to federal governmental agencies. The Compact Commission does not come within the definition of agency. See: 5 U.S.C. § 551. The rulemaking provisions of the Compact itself in § 11 make specific reference only to the informal rulemaking provisions of the federal APA, 5 U.S.C. § 553, for purposes of the rulemaking, and the Commission has abided by those procedures in the rulemaking. Nowhere else does the Compact mention the federal or any state Administrative Procedure Act. Congressional and state legislative intent is then presumed to be that the provisions do not apply to these proceedings. Inclusio unius, exclusio alterius. Since the Commission has chosen not to apply APA provisions under its interim rule governing these administrative proceedings, 7 CFR § 1381 et. seq., the provisions of the APAs do not apply.

      While the Commission concludes that the specific statutory provisions of the Administrative Procedures Acts do not apply, it recognizes that common law requirements of due process do apply. The handler petition procedures provided under the Commission’s interim rules provide adequate protection of petitioners’ due process rights. See: U. S. v. Florida East Coast Railway Co., 410 U.S. 224 (1973).

      III. Based on the above findings of fact and conclusions of law, the Commission orders the following:

      A. Petitioners’ prayer that the Commission find and declare that its milk pricing Rules, applied to persons who bring packaged Class I milk into New England, by exacting a charge on such packaged Class I milk produced on non-New England dairy farms, and processed in non-New England milk plants:

       

      (1) constitute a tariff or other burden on interstate commerce not permitted under Article I, § 8, of the Constitution of the United States, and for which Congress has not given its consent under Article I, § 10 of the Constitution;

      (2) violate the geographic limitations of Congressional consent to the Compact, as described in § 147 of the 1996 Farm Bill;

      (3) violate express prohibitions in § 147 of the 1996 Farm Bill against use of compensatory payments applied to out-of-region milk "for any purpose" and against any form of direct or indirect limitations on milk and milk products marketed to New England from other production areas; is denied.

       

      B. Petitioners’ prayer that the Commission find and declare that its milk pricing Rules, as applied to persons who bring bulk Class milk into New England, by exacting charges on such milk produced on non-New England dairy farms:

       

      (1) constitute a tariff or other burden on interstate commerce not permitted under Article I, § 8 of the Constitution of the United States, and for which Congress has not given its consent under Article I, § 10 of the Constitution;

      (2) violate the geographic limitations of Congressional consent to the Compact, as described in § 147 of the 1996 Farm Bill;

      (3) violate express prohibitions in § 147 of the 1996 Farm Bill against use of compensatory payments applied to out-of-region milk "for any purpose" and against any form of direct or indirect limitations on milk and milk products marketed to New England from other production areas; is denied.

       

      C. The petitioners’ prayer that the Commission find and declare that its milk pricing Rules, as applied to milk received from producers located without the regulated area and to persons who bring such milk as packaged or bulk Class I milk into New England, by direct imposition of a "compact over-order price" on such persons, is not authorized by § 9(d) of the Compact which limits such over-order price regulation to milk received "from producers located in a regulated area" is denied.

      D. The petitioners’ prayer that the Commission find and declare that its milk price pooling and equalization rules, as applied to extend distribution of equalization pool proceeds to milk received from producers located without the regulated area and required to be paid through persons who bring such milk as packaged or bulk Class I milk into New England, is not authorized by § 10(5)(A) of the Compact which limits distribution of any Compact over-order price revenue to "producers throughout the regulated area" is denied.

      E. The petitioners’ prayer that the Commission find and declare that the Compact rules assessing charges for costs of administration and for start-up costs, as applied to milk purchased from producers located outside of the regulated area is not authorized by § 18(a) of the Compact which limits such assessments to milk purchased by handlers "from producers within the region" is denied.

      F. The petitioners’ prayer that the Commission find and declare that the Compact rules assessing charges for cost of administration and for start-up costs, as applied to exclude or exempt New England handlers as to milk used for Class II, III or III-A purposes, violates § 18(a) of the Compact which provides for a uniform assessment collected from "each handler who purchases milk from producers within the region", not just Class I handlers and not just for Class I milk is denied.

      G. Petitioners’ prayer that the Commission find and declare that the Compact rules assessing charges for costs of administration and for start-up costs, as applied to exclude or exempt New England handlers as to milk used for Class II, III, or III-A purposes, violates equal protection guarantees of the United States Constitution and of the Constitutions of each of the several New England states is denied.

      H. Petitioners’ prayer that the Commission find and declare § 4 of the Compact, or its application by the Compact participating states, creating or providing for a Commission with many dairy farmer members, and other persons with substantial pecuniary, personal or political interest in the establishment of an over-order pricing order, renders the Compact procedure and resulting Compact Rules in conflict with requirements of due process mandated by the Fifth Amendment to the United States Constitution and applicable to states pursuant to the Fourteenth Amendment to the United States Constitution, and/or as required by due process provisions of the Constitutions of the several Compact participating states is denied.

      I. The petitioners’ prayer that the Commission cease applying and/or enforcing each of the foregoing Compact rules and provisions as to milk from outside the region is denied.

      J. The petitioners’ further prayer that pursuant to 7 CFR § 1381.4, the Chair select from the Commission members a panel to adjudicate this matter, members of which:

       

      (a) have no pecuniary interest in the distribution of Compact over-order producer prices;

      (b) are not in direct or indirect competition with the petitioners or other processors or milk suppliers outside the New England region;

      (c) have not, by their participation in the milk over-order pricing proceedings, by their state delegation vote, or otherwise, evidenced a bias or predisposition to establish, maintain, or defend a regulated Class I milk price in excess of that which the United States Secretary of Agriculture, in the Federal Milk Marketing Order Program, has found to be in the public interest

       

      was denied by the panel on August 25, 1997 and that denial is confirmed by the Commission.

      K. Petitioners further request that no member, employee, staff or other person who participated in the deliberations concerning, and writing or promulgation of, the over-order price regulation be involved in advising or contacting the panel adjudicating this petition. The request was denied by the panel on August 25, 1997 and that denial is confirmed by the Commission.

      L. Petitioners’ request that members of the panel and any person participating in or advising the panel fully comply with the adjudicatory requirements of the federal Administrative Procedure Act and comparable state administrative procedure requirements was denied on August 25, 1997 and that denial is confirmed by the Commission.

      Entered this 23rd day of September, 1997

      IT IS SO ORDERED

      For the Commission:

      Michael Wiers, Chair

      Return to Petition Decisions
      Return to the Northeast Dairy Compact Home Page