Amicus Curiae Brief — West Lynn Creamery, Inc. v. Healy

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TABLE OF CONTENTS

TABLE OF AUTIOURITIGS ccc ccc ccceesvecs iil

INTEREST OF AMICUS CURIAE .......... l

STATEMENT OF THE CASE .......-.000. 2

INTRODUCTION AND SUMMARY

oe eT 3

oe eee oe ee 6

I. THE MASSACHUSETTS STATUTE,

WHICH COMBINES THE VALID

SUBSIDIZATION OF IN-STATE

INDUSTRY WITH THE EVEN-

HANDED COLLECTION OF DEALER

FEES FROM DEALERS SELLING

MILK WITHIN THE STATE, IS

FULLY CONSISTENT WITH THE

COREG GEA cc tt ct eee 6

A. A State’s Subsidization of an

In-State Industry Does Not

Violate the Commerce Clause ........ 6

B. The Collection of a Fee for

Milk Handled for Sale Within

the State is a Valid Exercise

of State Governance Which Does

Not Interfere With or Dis-

criminate Against Interstate

rt te og ee ete a ON 10

i iii

TABLE OF CONTENTS - Continued TABLE OF AUTHORITIES

C. The Price Order is Not Rendered PAGE

Unconstitutional By Virtue of the I. Cases

Fact that Its Two Components, Each

of Which is Valid Under the Commerce Bacchus Imports, Ltd. v. Dias

Clause, Work Together To Achieve the 468 U.S. 263, 271 (1984) .......... 5, 6, 16

Legitimate State, Purpose of Assisting ee

the State’s Dairy Industry .......... 13 Baldwin v. G.A.F. Seelig, Inc.,

294 ee

1. Massachusetts’ Order Was ue anes .

Adopted in Furtherance

of a Substantial Legitmate 437 U.S. 617, 624 (1988) .............. 19

State Interest and Provides

Significant Local Benefits. ......... 13 Cumberland Farms, Inc. v. LaFaver,

; D. Me. Aug.

2. The Massachusetts Order 1353) (No 93-3066) qin ‘a eer 5

Furthers the Legitmate Pur-

pose of Preserving Its Dairy Guy v. Baltimore, 100 U.S. 434,

Industry In a Manner Completely 443 (1980), 601 A.2d 610,

Consistent With the Commerce Ge SS ee wbisls a. owes 5

ous aaa se WS 66 6 8 8 3 me 16

Il. UNDER PIKE BALANCING, THE 373 ULS. 64 (1963)... se. 12

LEGITIMATE GOVERNMENTAL oe

INTERESTS ADVANCED BY THE Henneford v. Silas Mason Co..,

MASSACHUSETTS ORDER OUT- 300 U.S. 577, 586 (1937) .......... 8, 12, 15

WEIGH THE INCIDENTAL EFFECT

UPON INTERSTATE COMMERCE ..... 18 V "

Ee 7, 10, 18

air nits ie a Se ab 6616 # s 8 80 21

v ,

ee 13

Farm Products, 306

CP cscccssecccccers 12, 13, 17

iV No. 93-141

TABLE OF AUTHORITIES - Continued mahenis

Supreme Court of the United States

October Term, 1993

Nebbia v. New York,

291 U.S. 502 (1934) 6 ww ee es 13, 19

486 U.S. 269, 273-274,

os. oer , 6, 10, 19 WEST LYNN CREAMERY, INC. and

yo fl ree 5 eneeeTs DAMRY, bec.

— F the Justices Petitioner,

601 A.2d 610, 617-19 Vv.

a )) ne 5

JONATHAN HEALY, Commissioner of

Pike v. B Church, Inc. Massachusetts Department of Food and Agriculture,

397 ILS. 137 (IDO) iw ww ee ee ewes 5, 18, 20 Respondent.

On Writ of Certiorari to the

Co. v. Andrews, 375 U.S. Massachusetts Supreme Judicial Court

SF - TC) eee eee eee 12

Reeves, Inc. v. Stake Brief of the State of New Jersey As Amicus

447 U.S. 429 (1980) Terre r errr re rer. e 10 Curiae in Support of the Respondent

Il. STATUTES

INTEREST OF AMICUS CURIAE

Vt. Stat. Ann. Tit. 6, §2924

ane 1] This case involves the ability of State governments to

COUR ED. FI sneer eeers: regulate all aspects of the dairy industry in order to ensure

, the maintenance of a fresh, wholesome supply of sanitary

gy tay amg mn. - ete ere ae 7 milk for the consumers of their respective States. The State

of New Jersey has long maintained an aggressive milk

control program for the benefit of producers, the State’s

consumers and dealers.

In addition, New Jersey has experienced a similar crisis

regarding the failure of the Federal Milk Marketing Orders

to provide a reasonable return to its dairy farmers. As a

2

result the number of New Jersey dairy farms have been

significantly reduced.

New Jersey believes that support systems for dairy

farmers, such as the one Massachusetts has enacted, are

vital options to maintaining a healthy dairy industry. This

is necessary to assure not only an adequate supply of milk

to New Jersey consumers, but to provide many attendant

benefits such as the maintenance of the agricultural services

industry and taxpaying open space. Such goals are

especially important in New Jersey the country’s most

densely populated state. Through its experience in milk

regulation, New Jersey is uniquely qualified to discuss the

importance of maintaining dairy producers to the health of

the State’s overall dairy industry.

In a broader context, New Jersey supports the ability of

states to utilize two important tools for governing -- (1) the

payment of subsidies to domestic industries and (2) the even-

handed collection of fees for events occurring within its

borders. The provision of subsidies funded through special

purpose fees and taxes should be an option available to state

governments to carry out their legitimate functions.

STATEMENT OF THE CASE

The Commissioner of the Massachusetts Department of

Food and Agriculture issued a “Pricing Order" (J.A. 32-

43') upon finding that the State’s milk production industry

was in a state of emergency and was predicted, in the

absence of immediate price stabilization, to lose, “over one-

third of its remaining dairy farms over the next year,” (J.A.

28). The Governor's Special Commission found that this

crisis would threaten both the supply of fresh milk to

Massachusetts consumers as well as the open farm lands

' The term "J.A.” refers to Joint Appendix.

3

currently “used as wildlife refuges, for recreation, hunting,

fishing, tourism, and education". (J.A. 13).

This "Pricing Order" did not actually set milk prices in

Massachusetts or elsewhere, but instead established a

subsidy system to increase the amount of income that

Massachusetts milk producers would receive for their milk.

The Order set a “target price" to be used in determining the

amount of the subsidy that Massachusetts milk producers

were to receive. The “target price" represented the amount

that efficient dairy farmers in Massachusetts would require

per hundred pounds of milk (hundredweight) in order to

remain viable. (J.A. 32.) Therefore, it provided a

benchmark for use in apportioning subsidy money to them.

To receive the equivalent of the “target price" for each

hundredweight of milk produced, milk producers would have

to receive subsidy premiums equal to the difference between

that “target price” and the federally mandated “blend price”

for the area.”

The subsidies are paid to Massachusetts dairy farmers

from a special purpose fund, the Dairy Equalization Fund.

Each month, each Massachusetts milk producer receives a

pro rata share of the money in the Equalization Fund based

on the amount of milk produced (up to a maximum of two

hundred thousand pounds). If there is not enough money in

the Dairy Equalization Fund in a given month to give each

Massachusetts dairy farmer this maximum amount, then the

dairy farmer only receives its pro rata share of the money

in the fund. If there is money left in the fund after all

Massachusetts dairy farmers receive the full distribution for

the milk they produce, it is divided among all milk dealers

in proportion to their Fund contributions. (J.A. 36-38).

"For convenience, amicus refer to that difference as the “target

premium."

4

Massachusetts funds its Dairy Equalization Fund

through fees imposed on all Massachusetts milk dealers

selling milk for consumption in Massachusetts. The amount

of the fee is equal to one-third of the "target premium" per

hundredweight; the same fee is paid by all such dealers,

regardless of the origin of their milk or the price that they

paid for it. No fees are collected fron: out-of-state milk

producers.

INTRODUCTION AND SUMMARY OF THE ARGUMENT

Petitioners’ arguments turn on their characterization of

the Massachusetts Order as one involving the extraterritorial

setting of milk prices, (See, e.g., Pet. Br. 12, 16, 26) or the

impermissible appropriation of out-of-state money for the

benefit of in-state dairy farmers. (See Pet. Br. 11, 12, 16,

30-31). However, a fair reading of the Massachusetts

Pricing Order demonstrates that it does not set milk prices

either inside or outside Massachusetts, nor does it funnel

out-of-state money to in-state dairy farmers.

Instead, the Order achieves the entirely permissible goal

of preserving a valued local industry through the use of two

time-honored mainstays of state governance -- (1) the

payment of subsidies to those within the State who are

engaged in a particular industry; and (2) the evenhanded

collection of fees for events occurring within its borders.

These two legitimate, longstanding state powers are not

rendered unconstitutional when used in concert to achieve a

permissible purpose simply because that same purpose could

also have been pursued through constitutionally

impermissible means (such as extraterritorial price-fixing or

the erection of trade barriers).

It is well established that States may, consistent with the

Commerce Clause, subsidize their own domestic industries.

"Direct subsidization of domestic industry does not

ordinarily run afoul of [the Commerce Clause]

prohibition{.]" New Energy Co, v. Limbach, 486 U.S. 2

278 (1988). In addition, the evenhanded mada A a

for events occurring within State borders does not violate the

Commerce Clause. Therefore these two permissible

governmental functions are not rendered impermissible when

they are used in concert to achieve a legitimate state

purpose.

The Order’s subsidy program represents a permissible

means for Massachusetts to “encourag[{e] domestic industry,"

Bacchus Imports, Lid. v. Dias, 468 U.S. 263, 271 (1984),

because the Order does not seek to “build up

(Massachusetts’] domestic commerce by means of unequal

and oppressive burdens on the industry and business of other

states." Id. at 272 (quoting Guv vy. Baltimore, 100 U.S.

434, 443 (1980)). See Opinion of the Justices, 601 A.2d

610, 617-19 (Me. 1991) (upholding constitutionality of

similar subsidy program for Maine dairy farmers);

,.__ F. Supp. __ (D.

Me. Aug. 3, 1993) (No. 93-2066). . aaah

Since the Massachusetts Order involves subsidies, no

Commerce Clause analysis is required. However, if the

Court determines that the Massachusetts milk pricing

subsidy is subject to Commerce Clause analysis, the

appropriate standard by which to evaluate the validity of the

Massachusetts law is that set forth in Pike v, Bruce Church,

Inc., 397 U.S. 137 (1970). Under this standard, where a

local enactment operates evenhandledly to effectuate a valid

local public interest and its effects upon interstate commerce

are merely incidental, the local enactment will be upheld

unless the burden imposed upon interstate commerce is

found clearly excessive in relation to the local interest

advanced. Id. at 142.

Any burden on interstate commerce is indirect. The

Massachusetts law is applied evenhandedly to in-state and

Out-of-state milk dealers.

The local benefits furthered by such laws far outweigh

any indirect burden on interstate commerce. The

maintenance of local farmers is essential to ensuring an

adequate supply of milk to consumers. Milk is a unique,

highly perishable commodity whose supply levels fluctuate.

It is important to maintain a stable local milk supply in

periods of excess milk supply in order to ensure adequate

supplies during periods of shortages.

ARGUMENT

I. The Massachusetts Statute, Which

Combines the Valid Subsidization

of In-State Industry With the

Evenhanded Collection of Dealer

Fees From Dealers Selling Milk

Within the State, Is Completely

Consistent With the Commerce

Clause.

A. A State’s Subsidization of an In-

State Industry Does Not Violate the

Commerce Clause.

As this Court observed in Bacchus Imports, Ltd. v.

Dias, 468 U.S. 263, 271 (1984), "[nJo one disputes that a

State may enact laws pursuant to its police powers that have

the purpose and effect of encouraging local industry."

Moreover, a State may, consistent with the Commerce

Clause, provide that encouragement to local industry in the

form of a direct subsidy. “Direct subsidization of domestic

industry does not ordinarily run afoul of [the Commerce

Clause] prohibition{.]" New Energy Co, v. Limbach, 486

U.S. 269, 278 (1988). State subsidies for local industries

are generally lawful because "(t]he Commerce Clause does

not prohibit all state action designed to give its residents an

7

advantage in the marketplace, but only action of that

description in connection with the State’s regulation of

interstate commerce. Id. (emphasis in original). Thus, the

Commerce Clause does not prohibit a state from providing

direct support for its local industry as long as that support

is not accompanied by regulatory measures which burden or

restrict the flow of interstate commerce.

Indeed, petitioners apparently concede that a direct

subsidy from general revenues to Massachusetts dairy

farmers would pass constitutional muster. (See Pet. Br. 32

& n.27 (suggesting that “the state could provide dairy

farmers with tax subsidies from the Commonwealth's

general tax fund," and that “such subsidy programs are

presumed to be valid."); (Id. at 29).

Petitioners strenuously argue, however, that the

Massachusetts pricing order is not a subsidy, (See Pet. Br.

at 13, 28-31), placing great weight on the fact that the word

subsidy" does not appear in the Commissioner’s Order.

(Id. at 13, 30). But a measure’s validity cannot be

determined by semantics; it is the substance of the measure

that must be scrutinized under the Commerce Clause.

When that exercise is undertaken, it becomes quite obvious

that the Massachusetts Order is a subsidy. State funds are

channeled to those Massachusetts farmers engaged the milk

production. Ina manner analogous to the State's action in

, 426 U.S. 794 (1976),

Massachusetts is spending its own, legitimately obtained

money to "purchase" something it values: the viability of

its farmers and the State's entire dairy industry and the

resulting aesthetic and community benefits. See Hughes v.

Alexandria Scrap, 426 U.S. at 809, 810.

The repeated efforts of petitioners to characterize the

Order, not as a subsidy, but as “price-fixing,” are

unpersuasive when the actual manner in which the Order

operates 1s examined. As this Court has admonished, such

8

“catch words and labels . . . are subject to the dangers that

lurk in metaphors and symbols." Henneford v._ Silas

Mason Co., 300 U.S. 577, 586 (1937). It is inaccurate to

characterize the Order as price-fixing, when milk prices are

not set, either in Massachusetts or outside the State. The

Order does not impose changes of any kind on the milk

prices that are paid by dealers to producers. Dealers have

every incentive to buy milk as cheaply as possible, from

whatever source. The fact that price-setting could have

been used to achieve the same effect of fostering a domestic

industry does not mean that Massachusetts Order is a form

of price-setting. (See Part C., below).

Indeed, the premise for petitioners’ price-setting

analogies -- that Massachusetts, having set prices for its

own milk, has extended those same prices extraterritorially

in order to avoid competitive undercutting -- collapses upon

closer scrutiny. The “target price" which Massachusetts

dairy farmers receive for their milk has clearly not, even

under petitioners’ erroneous assumptions, been imposed

upon dealers, since the dealer's fee would only be enough

to cover one-third of the distance between the federal

minimum and the “target price." The “target price" serves

not as the foundation of an extraterritorial price-setting

scheme, but only as a benchmark for distributing domestic

subsidies. The dealer fees-are fully legitimate fees which

the government is entitled to collect and use as a funding

source. (See Part B, below).

Petitioners also argue that the fact that the money flows

from a special purpose fund, rather than from general

revenues, keeps it from being a permissible subsidy. (Pet.

BR. 28). But where, as here, the collection of money into

the special purpose fee is a valid exercise of state authority

over transactions taking place within its boundaries (See

Part B, below), there is no constitutionally cognizable basis

for drawing a distinction based on revenue source.

~ SS eaten’ 2 <4”

owt Re fo e-

9

The distinction which petitioners attempt to draw

between the revenue sources is based on the erroneous

factual premise that the Dairy Equalization Fund is

primarily financed by out-of-state producers. (See. Pet. Br.

32 n. 27) (distinguishing subsidy programs drawn from

general revenues from the pricing order at issue here on the

grounds that the former “would be using Massachusetts

funds derived from Massachusetts residents" and "would

afford Massachusetts legislators and voters a direct say in

whether to support a particular state industry with state tax

dollars"). But the dealer fees are not drawn from

nonresident producers, as petitioners imply; instead, they

are paid by Massachusetts milk dealers who either absorb

the loss themselves or pass it on to Massachusetts

consumers. (J.A. 58-59). The record in this case clearly

indicates that the two parties upon which the incidence of

the fee falls -- Massachusetts dealers and Massachusetts

consumers -- were quite involved in the process of

developing the Order. (J.A. 26-27).

Reduced to its essence, the argument of petitioners

concerning the effects of the Pricing Order on interstate

commerce amounts to an assertion that the Order must be

invalidated as discriminatory because it does not provide

equivalent subsidies to all out-of-state dairy farmers who

compete with the recipients of the subsidy in Massachusetts.

See e.g., J.A. 59 (Comments of Mr. Altman from Record

of Proceedings Before the Commissioner) ("Massachusetts

farmers are getting $15 [per hundredweight whereas New

York and Vermont farmers are not[.}").

But the Commerce Clause is not violated simply

because the State does not extend a subsidy to all those

outside of the State who compete in the same industry. On

the contrary, the Court has indicated that such “rules

restricting to state residents the enjoyment of state

educational institutions, energy generated by a state-run

plant, police and fire protection, and agricultural

10

improvement and business development programs .. . .

reflect the essential and patently unobjectionable purpose of

State government -- to serve the citizens of the State."

Reeves, Inc. v. Stake, 447 U.S. 429 (1980).

The negative economic effects of which petitioners

complain are not unique to subsidies drawn from special

purpose funds; they are the inevitable result of any subsidy

program which succeeds in improving the competitive

position of domestic industry vis-a-vis its out-of-state

competitors. As a consequence, under petitioners’ analysis

no state subsidy program could survive unless it were made

available to all potential out-of-state competitors of in-state

recipients. Such a radical infringement of state authority

finds no support in the dormant Commerce Clause. Since

the beginning of our nation, the States have "experiment{ed]

with different methods of encouraging local industry," and

the Court has never construed the Commerce Clause as

requiring a state to “subsidize out-of-state business."

Alexandria. Scrap, 426 U.S. at 816 (Stevens, J.,

concurring). On the contrary, the Court recently

reaffirmed in Limbach that "“{dJirect subsidization of

domestic industry does not ordinarily run afoul of" the

Commerce Clause. Limbach, 486 U.S. at 278.

B. The Collection of a Fee for All

Milk Handled For Sale Within the

State Is a Valid Exercise of State

Governance Which Does Not

Interfere With or Discriminate

Against Interstate Commerce, _

Petitioners’ argument is premised on the assertion that

the dealer fees assessed on all milk dealers selling milk for

11

consumption in Massachusetts are a thinly veiled vehicle for

drawing money away from out-of-state milk producers and

passing it onto in-state milk producers, (Pet. B. p.24).

This premise is supported neither by the facts nor by

economics. The assessment placed on dealers within the

State instead serves primarily to burden some state residents

(milk dealers and milk consumers) for the benefit of other

state residents (dairy farmers). This has been the intent of

the law from the outset. (J.A. 17-18, 22-23).

The factual findings below indicate that this intention

has been realized. That dealer fees are a recognized way of

reassigning in-state benefits and burdens is demonstrated by

the fact that both of the New England “export states”

identified by petitioner (Maine and Vermont) (J.A. 16-17),

have adopted legislation similar to Massachusetts’ which

provides for the distribution to in-state milk producers of

fees assessed on all milk dealers selling within the State.

See Vt. Stat. Ann.Tit. 6 §2924 (West Supp. 1993), Me.

Rev. Stat. Ann. Tit. 36 $4541 (West 1992).

Hence, contrary to petitioners’ assertions, the Order is

not a conduit channeling out-of-state money into the pockets

of in-state dairy farmers; instead, it is a nondiscriminatory

measure designed to reallocate State resources. The Order

treats all in-state and out-of-state dealers alike: all of them

must pay premiums based on their sales of milk to in-state

customers, and none of them are required to pay premiums

on their sales of milk to out-of-state customers. No

provision of the Order discriminates against out-of-state

dealers or interferes with the interstate transportation of

milk. The Order does not restrict the flow of milk into or

out of Massachusetts, nor does it tax the interstate shipment

of milk or any out-of-state purchases or sales of milk. The

Order also does not restrict the ability of in-state or out-of-

state dealers to buy milk from out-of-state producers at

whatever price such producers may charge.

* See Id. at 816-17 (noting the absence of any Commerce Clause

challenge to a state subsidy program prior to Alexandria Scrap); Id. at

805, 807 (majority opinion) (same). tn

12

Under the Order, all in-state and out

. r th : -of-state deale

selling milk in Massachusetts must pay the same sonmiem

on local sales of milk, resulting in "equal treatment for in-

state and Out-of-state [dealers] similarly situated..."

E Lo. v. Reily, 373 U.S. 64, 70 (1963).

The stranger from afar is subject to no greater Nad a 1

. than the dweller within the :

ayo gates." Heeneford, 300 U.S.

The Order's requirement of monthly premi

by all milk dealers on their in-state see i aocuianty Oe

kind of evenhanded regulation of local transactions in milk

that this Court has previously upheld. In Milk Control

, 306 . 34

for example, the Court upheld kwh. hes hy i

imposed upon all milk dealers buying milk within the state

of Pennsylvania, even though the ultimate destination of

some of the milk was out of state. In that case, the Court

reasoned that "the uniform operation of the statute locally

would be crippled and might be impracticable" if milk

dealers could "ignore the requirements of the statute on the

ground that all or a part of the milk they purchase is

destined to another state." Id. at 353. Likewise. in this

case, Massachusetts is imposing a fee on all dealers who

seek to sell their milk in Massachusetts. Such a scheme

could not Operate in a uniform and workable manner if

dealers could ignore the fee to the extent that some portion

of their milk hailed from out of state. See also Polar Ice

» ore oo -

82 (1964) (upholding “that provision in he Floriés om

Control Act which imposes a tax in the amount of 15/100

of | cent upon each gallon of milk distri

distributor.") g milk distributed by a Florida

While it may be the case that the

; payment of dealer

ei coupled with the improved competitive position of

assachusetts dairy farmers, has some impact on milk

producers in other states, that effect is only an incidental

13

one. The fact that some incidental burden results from a

State’s valid regulatory action is not fatal under the

Commerce Clause; indeed, any regulatory action will have

some such impact. As the analysis in Part C demonstrates,

however, any such incidental impact is not of constitutional

stature. “Every state police statute necessarily will affect

interstate commerce in some degree, but such a statute does

not run counter to the grant of Congressional power merely

because it incidentally or indirectly burdens interstate

commerce.” Eisenberg, 306 U.S. at 351.

c. The Price Order Is Not Rendered

Unconstitutional By Virtue of the

Fact That Its Two Components,

Each of Which Is Valid Under the

Commerce Clause, Work Together

To Achieve the Legitimate State

Purpose of Assisting the State’s

Dairy Industry.

1. Massachusetts’ Order Was

Adopted in Furtherance of a

Substantial, Legitimate State

Interest and Provides Significant

Local Benefits.

Ever since Nebbia v. New York, 291 U.S. 502 (1934),

this Court has recognized that states have a legitimate

interest in regulating the milk industry to prevent conditions

that would “cut off the supply of a commodity needed by

the public, or portend the destruction of the industry itself."

Id. at 538. In , 336

U.S. 525, 529 (1949), the Court pronounced:

Production and distribution of milk

are so intimately related to public

health and welfare that the need for

regulation to protect those interests

14

has long been recognized and is,

from a constitutional standpoint,

hardly controversial. Also, the

economy of the industry is so

eccentric that economic controls have

been found at once necessary and

difficult. These have evolved

detailed, intricate and comprehensive

regulations, including price-fixing.

They have been much litigated but

were generally sustained by this

Court as within the powers of the

State Over its internal commerce as

against the claim that they violated

the Fourteenth Amendment [Footnote

and citation omitted. ]

In this case, the Massachusetts ISSi

concluded, after extensive public ea gy ype

emergency of unprecedented proportions” existed within the

Massachusetts dairy industry and could be remedied only by

adopting the subsidy program contained in the Order. (J.A

30-31) The Commissioner determined that, unless

Massachusetts dairy farmers received a larger payment for

their milk than the minimum price provided by federal

regulations, many local farmers would fail and an industry

Critical to the State's economy would face economic ruin

The Commissioner also found that, by supporting local

dairy farmers, the Order would result in assuring “a local

supply of fresh milk for consumers". (J.A. 32).

Thus, the purpose of the Order, which is designed to

provide important local benefits, is legitimate. The subsidy

program established is clearly necessary to avert a systemic

failure within the Massachusetts dairy industry. Nearly half

of the dairy farms in Massachusetts failed between 1980 and

1991. Likewise, New Jersey has suffered a substantial

reduction in the number of its dairy farms. The record

15

clearly established that the average cost of production of

Massachusetts dairy farmers substantially exceeded the

amounts they received for their milk. (J.A. 27-28) In

these circumstances, the Massachusetts Commissioner was

entitled to provide a subsidy in order to “save an industry

from collapse.” (J.A. 128)

Petitioners’ assertion that the true purpose of the

Massachusetts Order is to isolate Massachusetts milk

producers from competition, (See Pet. Br. 19-21 & n.20) is

inaccurate. While it is true that the Order was designed to

bolster Massachusetts dairy farmers and thereby make them

better able to compete with other states, this was not done

by projecting competitive restraints into other states.

Instead, in the manner of all subsidies, Massachusetts

improved the competitive posture of its own dairy farmers.

Petitioners’ only argument about the purportedly

anticompetitve effects of the Order can be made only by

first drawing a faulty analogy between the Order and the

actual setting of milk prices. Petitioners speculate about the

action Massachusetts would have taken in response to

competitive forces. If Massachusetts had assisted its

farmers by setting Massachusetts milk prices, petitioners’

aruge, it would then be forced to respond to lower prices in

other States by imposing its own higher milk prices upon

milk produced out-of-state, as was done in Baldwin _v.

G.A.F. Seelig, Inc., 294 U.S. 511 (1935). (See Pet. Br. at

23-25). But the premise for this line of argument is false;

Massachusetts did not choose to set milk prices and was

not, therefore, faced with the competitive dilemma

described by petitioners. Massachusetts is merely engaged

in utilizing its own funds to assist a flagging industry.”

‘Even if Massachusetts were shown to be motivated by a desire to

achieve the same result as could be attained through such price fixing, this

would not make its otherwise valid exercise of state authority improper.

See Henneford, 300 U.S. at 586 (rejecting argument that motives, which

“cause[d] [a use tax] to be stigmatized as equivalent to a protective tanff,”

16

2. The Massachusetts Order Furthers

The __ Legitimate Purpose of

Preserving Its Dairy Industry In A

Manner Completely Consistent

With the Commerce Clause.

Petitioners attempt to draw a negative i

the fact that the Massachusetts Order — poe ta . a

desire to achieve the result of promoting the Massachusetts

dairy industry. Petitioners attempt to equate the

Massachusetts Order with the extraterritorial price-fixing

scheme that was struck down in Baldwin simply because

the measures share a common goal of fostering a State's

dairy industry.

Yet, as the Court made clear in Bacchus, the goal of

fostering local industry does not itself run afoul of the

constitution, although the specific means chosen to attain

that goal may do so:

No one disputes that a State may

enact laws pursuant to its police

powers that have the purpose and

effect of encouraging domestic

industry. However, the Commerce

Clause stands as a limitation on the

means by which a State can

constitutionally seek to achieve that

goal. ([Bacchus, 468 U.S. at 271

(emphasis added). ]

_Here the means chosen do not have the negative impact

on interstate Commerce that was presented with the price-

setting scheme in Baldwin. The Massachusetts Order does

17

not seek to “project its legislation into Vermont by

regulating the price to be paid in that state for milk

acquired there," nor does it do the functional equivalent by

placing barriers on the sale of milk that failed to sell for a

minimum price. Instead, Massachusetts chose to use its

own money, lawfully collected through a special fee

program, to subsidize a valued industry.

While it is undoubtedly true that the Massachusetts

Order, like "[e]very state police statute[,] necessarily will

affect interstate commerce in some degree," it “does not run

counter to the grant of Congressional power merely because

it incidentally or indirectly burdens interstate commerce."

Eisenberg, 306 U.S. at 351. Petitioner has produced no

evidence to show that the Order imposes an undue burden

on interstate commerce, apart from its conclusory assertion

that the subsidy program will encourage more milk

production by local farmers and thereby cause less out-of-

state milk to be imported into Massachusetts. Contrary to

this claim, the Commissioner specifically found that the

Order (i) had no adverse effect on prices received by out-

of-state producers, and (ii) was followed by a decrease in

production by Massachusetts dairy farmers. (J.A. 88-89).

Thus, there is no indication that the Order has imposed a

significant adverse burden on interstate commerce.

Finally, the suggestion of petitioners that some

alternative means less burdensome to interstate commerce

should have been used by Massachusetts is without merit.

Among their suggested alternatives is the use of a direct

subsidy from general revenues to Massachusetts milk

producers. But they do not explain how altering the source

of the subsidy would remove any burden on interstate

commerce. Although petitioners have repeatedly intimated

that the dealer fees somehow draw money from out-of-state

milk producers, they have never explained how this

could invalidated it, noting that * , me « ¢ i

adidas o tn en oe oe motives alone will seldom, if ever, happens, nor have they rebutted the record findings to the

ae its motives would be recognized as contrary.

18

Petitioners have seized upon a fact having no real

bearing on Commerce Clause analysis -- that some of the

dealers who fund the subsidy in question are dealing in milk

that originated in another state -- as a way of attacking

completely legitimate subsidies to prevent the collapse of

Massachusetts dairy farming. Since the Commerce Clause

provides no reason for drawing a distinction between

subsidies funded through general revenues and subsidies

funded through special purpose fees and taxes, there is no

constitutional basis for arbitrarily limiting the range of

legislative choices available to States in carrying out their

legitimate governmental functions. It may be that the

voting public, upon whom the primary incidence of the fee

falls, prefers such a special purpose fund on the grounds

that it offers greater governmental accountability and

provides them with a clearer picture of the purposes to

which their increased milk prices are put.

Petitioners would deprive a State’s voters of this option,

forcing them to subsidize their dairy industry through

general revenues or not at all. The Commerce Clause does

not require such limits on a State's legislative options. See

Vv ., 426 U.S. 794, 817

(1976)-(Stevens, J., concurring) (the Commerce Clause is

“primarily intended . . . to inhibit the several States’ power

to create restrictions on the free flow of goods within the

national market, rather than to provide the basis for

questioning a State’s right to experiment with different

incentives to business").

Il. Under Pike Balancing, the

Legitimate Governmental Interests

Advanced by the Massachusetts

Order Outweigh the Incidental

Effect Upon Interstate Commerce.

19

This Court has consistently held that the level of

scrutiny that a court must give to a local law challenged

under the Commerce Clause depends upon whether it

patently discriminates —. interstate commerce or is

merely burdensome. See

Limbach, 486 US. 269, "273. 274 (1988);

, 437 U.S. 617, 624 (1988).

When patent discrimination is involved, the regulation will

be subjected to heightened scrutiny and a "virtually per se

rule of invalidity” will be applied. Id. However, when a

regulation serves a legitimate local governmental interest it

will be invalidated only if ‘ts incidental burden upon

interstate commerce is clearly excessive when weighed

against the benefits it confers upon the state promulgating

it. Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).

As previously stated, the courts have long recognized

that the regulation of the milk industry is a legitimate

exercise of a State’s authority. See Nebbia v. New York,

supra. In order to maintain an adequate supply of milk to

consumers, the State must be concerned with the adequacy

of milk supply. It is important to maintain a_ state's

producers in times of oversupply of milk and resultant

lower producer prices because of the heavy capital

expenditure needed and the long time required to establish

a new dairy herd. This is especially important in densely

populated states like New Jersey where high land values

increase the initial capital costs and thus the difficulty of

getting into the dairy business.

Local dairy producers are essential to maintaining an

adequate supply of milk for several reasons. First, a nearby

supply of milk is necessary to meet emergency milk supply

requirements. In addition, dealers must be able to monitor

production quality standards by the dairy farmers.

Moreover, the dealer’s long term cost of securing local

supplies (including transportation costs) are lower, thereby

insuring reasonably priced milk to the state’s consumers.

20

Furthermore, the volatility of the milk industry requires

the maintenance of local dairy farmers in times of

oversupply so they will maintain a presence during periods

of shortage. A shortage of milk supply for fluid use

occurred most recently in New Jersey and throughout the

northeastern part of the United States during the period

beginning in the fall of 1987 through the spring of 1990.

During this period the presence of local farmers was

essential to assuring an adequate supply of milk for

consumers.

This legitimate state interest must be balanced against

the incidental effect on interstate commerce. It is apparent

from a fair reading of the record, that the assessment is

applied evenhandedly to in-state and out-of-state dealers.

All dealers may pass any increase on to Massachusetts’

consumers. Any effect on interstate commerce would be

slight while the state has a significant interest in assuring

the maintenance of a fresh supply of milk to its citizens.

For these reasons, under Pike, the Massachusetts milk

subsidy does not violate the Commerce Clause of the United

States Constitution.

21

~ CONCLUSION

The judgment of the Supreme Judicial Court of

Massachusetts should be affirmed.

Respectfully submitted,

Fred DeVesa

Acting Attorney General of New Jersey

Attorney for State of New Jersey as

Amicus Curiae

Mary Carol Jacobson

Assistant Attorney General

Counsel of Record

Gregory Romano

Deputy Attorney General

On the Brief

R.J. Hughes Justice Complex

CN 093

Trenton, New Jersey 08625

(609) 984-9664

Dated: December 13, 1993