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CARNATION CO. v. BUTZ

March 21, 1974

CARNATION COMPANY et al., Plaintiffs,
v.
Earl L. BUTZ, Defendant


John Lewis Smith, Jr., District Judge.


The opinion of the court was delivered by: SMITH, JR.

JOHN LEWIS SMITH, Jr., District Judge.

This action challenges the legality of the Secretary of Agriculture's suspension of scheduled declines in milk support prices without benefit of notice or hearing. The case is now before the Court on cross-motions for summary judgment.

 The action arises under the Agricultural Marketing Agreement Act of 1937 *fn1" and in particular, under § 8c(18) of the Act *fn2" which authorizes the Secretary of Agriculture to "fix minimum prices" to be paid by milk handlers (processors) to milk producers or associations of producers.

 The record reflects that on March 1, 1966, scheduled reductions in Class I milk prices for eleven Federal Milk Marketing Orders took effect to reflect expected seasonal increases in milk supply. The Secretary of Agriculture also on that date issued a suspension notice effective March 2 which suspended these seasonal price adjustments. *fn3" The suspension remained in effect through April 9, 1966. The effect of the Secretary's March 1 action was to return Class I prices in each order to the higher pre-March 1 levels thereby causing plaintiff milk processors to pay more for milk than they would have, had the price decline provisions been allowed to operate. Plaintiffs challenge this action on the ground it was made without benefit of notice or hearing as required by certain provisions of the Act.

 In review proceedings below, the Chief Hearing Examiner for the Department of Agriculture ruled that § 8c(18) of the Act required the Secretary to afford plaintiff's notice and opportunity for hearing before suspending the seasonal price declines in the affected orders. *fn4" This ruling was subsequently reversed by the Department's Judicial Officer who found the Secretary's action justified under § 8c(16) of the Act which authorizes the Secretary to suspend a pricing provision without notice and hearing whenever it tends to no longer effectuate the policy of the Act. *fn5"

 The fact that notice and hearing did not precede the March 1 suspension action is not in dispute. The only issue for this Court's determination is whether the suspension action was legal under the powers granted the Secretary by § 8c(16). For reasons set forth below, the Court finds that the Secretary's March 1 action cancelling scheduled price declines was not authorized by the statutory grant of § 8c(16) but instead constituted an illegal amendment under § 8c(18).

 The record indicates that the March 1 action did not actually withdraw from operation entire Class I orders but rather eliminated from them words and phrases which referred to scheduled price reductions. *fn6"

 Plaintiffs have characterized this transformation as an amendment because it established new prices for future periods which differed from those set forth in existing milk orders. Defendant argues that instead of adjusting prices by way of amendment, his action was a suspension of a scheduled price adjustment and thus sanctioned under § 8c(16). In essence, defendant urges a differentiation between a suspension of a price "adjustment", controlled by § 8c(16), and an "adjustment" by way of an amendment, governed by § 8c(18).

 I

 The language of § 8c(18) requires the Secretary to give notice and opportunity for hearing prior to making amendments or adjustments to price orders. *fn7" The word "amendment" has been variously defined as a modification, alteration or reformation *fn8" while "adjustment" has been accorded the meaning of a correction or modification. *fn9"

 It is clear from even the most cursory review of the Secretary's suspension action, that by purportedly suspending scheduled price reductions, he altered the basic content of each Class I order by substituting one future price for another. To call this act a suspension within the scope of § 8c(16) not only requires sacrificing substance to form but also necessitates ignoring the overall amendatory effect of the action. *fn10"

 In a purely technical sense, it can be said that the words relating to spring price declines were indeed suspended. But the inquiry should not be whether a particular operative provision of an order has been temporarily removed but whether that removal has the effect of producing a new order materially different from the old. The consequences of applying the former test would severely undermine the procedural safeguards required for amendatory actions by § 8c(18) and in fact make their availability superfluous.

 Had the Secretary suspended the Class I order entirely and let free market conditions dictate price, his action would have been sanctioned by § 8c(16). There is nothing in the Act nor its legislative history to indicate that termination or suspension of regulatory controls requires notice and hearing. Instead, defendant adjusted the Class I orders by replacing scheduled spring prices with higher winter ones. The clear effect of this action was to adjust the Class I orders without benefit of notice and hearing.

 It is a cardinal principle of statutory construction that an interpretation of a statutory provision which tends to emasculate its purpose and effect is not favored. Meaning and significance should be given to all the provisions of a statute. United States v. Menasche, 348 U.S. 528, 538, 75 S. Ct. 513, 99 L. Ed. 615 (1954). Consequently, defendant's broad ...


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