Opposition Brief — Consumers Education & Protective Ass'n v. Pennsylvania Milk Marketing Board

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} Supreme Court, U.S.

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No. 97-327 ls

afta

IN THE

SUPREME COURT OF THE UNITED STATES

; OCTOBER TERM, 1997

CONSUMERS EDUCATION & PROTECTIVE

ASSOCIATION and LANCE HAVER,

Petitioners,

v.

PENNSYLVANIA MILK MARKETING BOARD,

LEHIGH VALLEY DAIRIES, INC.,

ATLANTIC DAIRY COOPERATIVE,

PENNSYLVANIA ASSOCIATION OF MILK DEALERS,

ROSENBERGER’S DAIRY, INC.,

CLOVER FARMS DAIRY, and WAWA DAIRY,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE COMMONWEALTH COURT OF PENNSYLVANIA

BRIEF OF RESPONDENT

ATLANTIC DAIRY COOPERATIVE

IN OPPOSITION

DONALD F. COPELAND

One Meetinghouse Place

Norristown, PA 19401

(610) 279-3700

Counsel for Land O'Lakes, Inc.,

Successor tn interest to

Atlantic Dairy Cooperative.

September 22, 1997

Washington, D.C. © THIEL PRESS ¢ (202) 328-3286

(:)

PARTIES TO THE PROCEEDING

The petition accurately lists the parties to the proceed-

ing, provided that Land O’Lakes, Inc. is successor in

interest to Atlantic Dairy Cooperative by reason of a

merger effective April 1, 1997. The former Atlantic

Dairy Cooperative is operated as Land O’Lakes, Inc.

Eastern Milk Operations.

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TABLE OF CONTENTS

PARTIES TO THE PROCEEDING...............

TABLE OF GOUT a oes ok wo es

A. The Pennsylvania Milk Marketing Law.........

B. Pencedund Gs ee as a ke kas

REASONS FOR DENYING THE WRIT ...........

COM ALIBOON . . ce eee eae ees ck

TABLE OF AUTHORITIES

Cases:

Exxon Corp. v. Governor of Maryland, 437 U.S.

127 (2070). .....5 5. no

Finucane v. Pennsylvania Milk Marketing Board,

482 A.2d 1152 (Pa. Cmwith. 1990) ............

Ford Motor Co. v. Insurance Com'r of Comm. of

Pennsylvania, 874 F.2d 926 (3rd Cir. 1989).......

Maine v. Taylor, 477 U.S. 131 (1986).............

Milk Control Board v. Eisenberg Farm Products,

SOG U5. SOG (RUD 6 ec ids week dees eewces

Norfolk Southern Corp. v. Oberly, 822 F.2d 338

(Sed Ce. DORI)... . ce ueaueeeeeie as. s.

Penn Dairies, Inc. v. Milk Control Commission, 318

US. S62 OG i. ceca eee ee es

Philadelphia v. New Jersey, 437 U.S. 617 (1978)... ...

Sylvan Seal Milk & Milk Control Commission, 264

F. Sepp. 10028 (6.BA Ph. BOBIR. cc ec ccc ce cens

United Dairy Farmers Coop. Assoc. v. Milk Control

Commission, 335 F. Supp. 1008 (M.D. Pa.

207%)... . 00h0as ee ee

Statutes:

31 P.S. §700j-101

31 P.S. §700j-801

31 P.S. §700j-802

No. 97-327

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1997

CONSUMERS EDUCATION & PROTECTIVE

ASSOCIATION and LANCE HAVER,

Petitioners,

PENNSYLVANIA MILK MARKETING BOARD,

LEHIGH VALLEY DAIRIES, INC.,

ATLANTIC DAIRY COOPERATIVE,

PENNSYLVANIA ASSOCIATION OF MILK DEALERS,

ROSENBERGER’S DAIRY, INC.,

CLOVER FARMS DAIRY, and WAWA DAIRY,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE COMMONWEALTH COURT OF PENNSYLVANIA

BRIEF OF RESPONDENT

ATLANTIC DAIRY COOPERATIVE

IN OPPOSITION

STATEMENT OF THE CASE

The petition seeks this Court’s review of a decision of

the Commonwealth Court of Pennsylvania (“Common-

wealth Court”) that the Pennsylvania Milk Marketing

Law does not violate the Commerce Clause of the United

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States Constitution. Several Respondents have filed

briefs setting forth in detail the factual background of

this case. To avoid repetition, this brief will summarize

the significant factual background and the Court is

respectfully referred to the briefs of the several Respond-

ents for a more detailed review of the factual back-

ground.

The Commonwealth Court affirmed a General Order

of the Pennsylvania Milk Marketing Board (‘‘PMMB’’)

which established minimum wholesale prices for milk

in Pennsylvania Milk Marketing Area No. 1 (Philadel-

phia area). The General Order included prices charged

to the School District of Philadelphia. The PMMB’s

original order was issued in September, 1995, was

amended in October, 1995, and was based upon a hearing

record which encompassed several days of hearings.

Petitioners, together with the School District of Phila-

delphia, were petitioners before the Commonwealth

Court and together sought review by the Pennsylvania

Supreme Court which denied their petition for review

on May 23, 1997. The School District of Philadelphia

has not joined in this Petition for a Writ of Certiorari.

A. The Pennsylvania Milk Marketing Law.

The sale of milk in Pennsylvania is regulated by the

Pennsylvania Milk Marketing Law (“‘the Law’’), 31 Pur-

don’s Pennsylvania Consolidated Statutes Annotated

§ 700j-101, et seq. The PMMB, an independent agency,

is charged with implementation of the Law. The Law

provides that the PMMB will set minimum prices for

the wholesale and retail sale of milk by official order.

(Section 802). These minimum prices are to be based

upon “‘all conditions affecting the milk industry . . .

including the amount necessary to yield a reasonable

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return . . . On aggregate milk sales by milk dealers or

handlers and stores selling milk”. (Section 801) Prices

are set based upon a hearing record, and the PMMB

considers several factors including costs incurred by a

cross section of dealers selling in the area. The rate of

return allowed to such milk dealers is set forth in sec-

tion 801 of the Law at two and one-half percent to

three and one-half percent “based on net sales of price-

controlled products determined in accordance with

generally accepted accounting principles.”

B. Procedural History.

Upon application of Respondent, Lehigh Valley

Dairies, Inc., the PMMB held an evidentiary hearing

which lasted for several days in June, 1995. The hear-

ing record established that the Philadelphia Milk Mar-

keting Area No. 1 is a competitive market with sub-

stantial competition from milk dealers based in Penn-

sylvania as well as New Jersey. The cross section of

milk dealers utilized by the PMMB even included a

New Jersey dealer.

At the hearing, the School District of Philadelphia

sought a reduction of five cents in the price of half-

pint containers of milk utilized by the School District

and offered evidence that milk prices charged in Penn-

sylvania are higher than milk prices charged in parts

of neighboring states. The School District of Phila-

delphia offered evidence that a milk dealer from which

it purchases half-pints of milk also sells half-pints to

urban schools in New Jersey at approximately four cents

less per half-pint than it is required to pay under the

PMMB’s official order.

Based upon the hearing record, Official General Order

A-890 was issued by the PMMB effective October 1,

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1995. The Official General Order reduced half-pint

prices for milk sold to schools by approximately one

and one-third cents.

REASONS FOR DENYING THE WRIT

The petitioners’ claim does not warrant review by

this Court. The decision by the Court below that the

Pennsylvania Milk Marketing Law does not violate the

Commerce Clause of the United States Constitution was

a plainly correct application of long settled law. There

is no conflict between the circuits.

1. In Milk Control Board v. Eisenberg Farm Products,

306 U.S. 346, 59 S.Ct. 528, 83 L.Ed. 752 (1939), this

Court considered the constitutionality of the Pennsyl-

vania Milk Control Law and found that minimum prices

established on milk purchased by an out-of-state dealer

from a Pennsylvania milk producer, where the milk goes

into interstate commerce, does not violate the Com-

merce Clause of the United States Constitution. In

Sylvan Seal Milk, Inc. v. Milk Control Commisston, 246

F. Supp. 1001 (E.D. Pa. 1967), the District Court found

no substantial constitutional questions as to the validity

of the Pennsylvania Milk Control Law. Thus, we start

with well reasoned decisions that Pennsylvania Milk

Control Law is not, per se, unconstitutional. See also,

Penn Dairies, Inc. v. Milk Control Commission, 318

U.S. 261, 63 S.Ct. 617, 87 L.Ed. 748 (1943).

In regulating commerce among the several states, the

Commerce Clause limits the power of the several states

to enact laws which discriminate against or impose

unjustifiable burdens on interstate commerce. This

interpretation is clear and well settled. However, state

statutes the effect of which is to impose only an inci-

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dental burden on interstate commerce have been recog-

nized to be an unavoidable result of a state’s legislative

effort to protect the health and safety of the inhabi-

tants of the state. Philadelphia v. New Jersey, 437 U.S.

617, 98 S.Ct. 1231, 57 L.Ed.2d 475 (1978). Such

statutes are valid and must be distinguished from state

statutes that affirmatively discriminate against inter-

state commerce. Maine v. Taylor, 477 U.S. 131, 106

S.Ct. 2440, 91 L.Ed.2d 110 (1986). In Eisenberg,

supra, this Court recognized that state statutes exercis-

ing the state’s police power will necessarily have some

effect upon interstate commerce but so long as it only

incidentally or indirectly burdens interstate commerce

it does not violate the commerce clause. It is also clear

and well settled that where a statute even-handedly

affects both in-state and interstate interests, but does

not prohibit the flow of interstate goods, place added

costs upon them or distinguish between in-state and

out-of-state companies in the retail market, the statute

does not discriminate against interstate commerce.

Exxon Corporation v. Governor of Maryland, 437 U.S.

117, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978), Ford Motor

Co. v. Insurance Com’r. of Comm. of PA, 874 F.2d 926

(3rd Cir. 1989); Norfolk Southern Corp. v. Uberly, 822

F.2d 338 (3rd Cir. 1987).

The United States District Court for the Middle Dis-

trict of Pennsylvania has found that the Pennsylvania

milk control statute does not burden, and has only an

incidental effect upon, interstate commerce. United

Dairy Farmers Coop. Assoc. v. Milk Control Commis-

ston, 335 F. Supp. 1008 (M.D. Pa. 1971), aff’d, 404

U.S. 930, 92 S.Ct. 280, 30 L.Ed.2d 244 (1971).

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2. Petitioners “protectionist” argument is without

merit. The statute treats in-state and out-of-state, effi-

cient and inefficient, dealers the same. The same bur-

dens fall equally upon in-state and out-of-state dealers

and the fact that those out-of-state dealers who do busi-

ness in Pennsylvania are affected by the statute does not

constitute discrimination in violation of the Com-

merce Clause. Exxon Corporation v. Governor of Mary-

land, supra; Norfolk Southern Corp. v. Oberly, supra.

3. Local interests are promoted by the Milk Control

Law and outweigh any incidental burden on interstate

commerce. The Legislature of the Commonwealth of

Pennsylvania has reconsidered milk price controls on

several occasions and has decided that price controls are

necessary to promote the overall regulatory scheme. A

legitimate state objective is discernable from the Legis-

lative Purpose and Preamble to the Law. The purpose is

stated to be, inter alia, “the protection of the public

health and welfare and for the prevention of fraud”. 31

Pa. C.S.A. §700j-101. The Legislature also set forth in

the Preamble to the Law that the milk industry in Penn-

sylvania is ‘“‘a business affecting the public health and

affected with the public interest”. Since milk is a vital

commodity in Pennsylvania and the Legislature found

that an adequate supply at a stable price is required for

the benefit of the inhabitants of the state, retail mini-

mum price controls are a rational means to achieve that

objective. Finucane v. PA Milk Marketing Board, 582

A.2d (1152 Pa. Cmwlth. 1990).

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- CONCLUSION

For the reasons given above, the petition should be

denied.

. Respectfully submitted,

DONALD F. COPELAND

One Meetinghouse Place

Norristown, PA 19401

(610) 279-3700

Counsel for Land O’Lakes, Inc.,

Successor in interest to

Atlantic Dairy Cooperative.

Dated: September 22, 1997