964

AGRICULTURAL MARKETING AGREEMENT ACT

COURT DECISIONS

SUNTEX DAIRY, et al., v. BLOCK.

No. 80-2101.

Filed January 21, 1982.

(Cite as 666 F.2d 158)

AMAA - Milk orders - Producers - Merger of orders Policy - Arbitrary and capricious Substantial evidence - Committed to agency discretion.

The United States Court of Appeals for the Fifth Circuit affirmed the district court decision, which in turn affirmed the Secretary's determinations that merged order tended to effectuate policy of the Act, failure of milk handlers to approve agreement tended to prevent effectuation of policy of Act, and issuance of order was only practical means of advancing interests of producers in the area. Ample evidence was presented at hearing from which Secretary could conclude that proposed order tended to effectuate policy of Act. Thus, "arbitrary and capricious" and "substantial evidence" standards were met. Secretary's determinations concerning handler failure to sign marketing agreement and necessity of order were committed to agency discretion by law and were therefore non-reviewable.

Before: TATE and WILLIAMS, Circuit Judges."

UNITED STATES COURT OF APPEALS

TATE, Circuit Judge:

FOR THE FIFTH CIRCUIT

The plaintiff milk producers brought this action to challenge an order by the Secretary of Agriculture, which merged six milk marketing orders in Texas into a single new order regulating the former six-market area and additional previously unregulated counties. The district court held that substantial evidence supported the Secretary's determinations that (a) the merged order tends to effectuate the policy of the Act, (b) the failure of the milk handlers to approve the agreement tends to prevent the effectuation of the policy of the

Due to his death on December 22, 1981, Judge Ainsworth did not participate in this decision. The case is being decided by a quorum. 28 U.S.C. § 46(d).

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Act, and (c) issuance of the order is the only practical means of advancing the interests of the producers in the area. On appeal, the plaintiffs argue that all three determinations were unsupported by substantial evidence, and were arbitrary, capricious, and an abuse of the Secretary's discretion. We find that the Secretary's determination that the merged order tends to effectuate the policy of the Act was supported by substantial evidence, and was not arbitrary, capricious, or an abuse of discretion, and that his further determinations concerning the effect of handler failure to approve the marketing arrangement and the necessity of the order were discretionary acts not subject to review by the courts except for procedural irregularity or fraud. We therefore affirm.

The Merger of the Texas Milk Marketing Orders

The federal milk marketing regulation provisions embodied in the Agricultural Marketing Agreement Act of 1937, 7 U.S.C. § 601 et seq. ("the Act") and various federal regulations present a highly complex scheme. Its purposes are to establish and maintain orderly marketing conditions for the covered commodities that will result in parity prices to farmers, to protect consumers in approaching the parity prices, to establish and maintain standards for commodities, to insure an orderly flow of the supply of commodities to market, and to avoid the disruption of orderly marketing through continued regulation.' Regulation is accomplished, in part, by the issuance of orders by the Secretary of Agriculture ("the Secretary") that establish a uniform minimum price to be paid to "producers" by "handlers," (i.e., those dairy farmers who manufacture raw milk into bottled milk and other products).2

The Act provides that the Secretary shall issue a proposed order if, after notice and a hearing, he finds, and sets forth in the order, that the issuance of such order "will tend to effectuate the declared policy" of the Act.3 An

17 U.S.C. § 602.

The "labyrinth of federal milk marketing regulation provisions" is described in detail in Zuber v. Allen, 396 U.S. 168, 172-87, 90 S.Ct. 314, 317-25, 24 L.Ed.2d 345 (1969), and in our previous decision in this case, Suntex Dairy v. Bergland, 591 F.2d 1063 (5th Cir. 1979).

37 U.S.C. § 608c(3) provides that: "Whenever the Secretary of Agriculture has reason to believe that the issuance of an order will tend to effectuate the declared policy of this chapter

(continued...)

order may become effective if it is approved by a requisite proportion of the affected producers, and if at least 50 percent of the affected handlers enter into a marketing agreement. If, however, the handlers fail or refuse to enter into a marketing agreement, the order may nevertheless become effective if the Secretary determines that lack of handler approval "tends to prevent the effectuation of the declared policy of the Act," that the order is "the only practical means of advancing the interests of the producers," and that the requisite number of affected producers approve the order. Under the statutory scheme, a hearing is specifically required for the determination as to whether the issuance of the proposed order will tend to effectuate the purposes of the Act (the "tendency" hearing), 7 U.S.C. § 608c(3) and (4); however, the statute does not require an additional hearing for the Secretary's further determinations about refusal of handler approval and about the necessity of the order (the "necessity" determination), 7 U.S.C. § 608c(9)(A) and (B).

Prior to the issuance of the merged order challenged here, Texas was

3(...continued)

he shall give due notice of an opportunity for a hearing upon a proposed order." 7 U.S.C. § 608c(4) then provides that:

After such notice and opportunity for hearing, the Secretary of Agriculture shall issue an order if he finds, and sets forth in such order, upon the evidence introduced at such hearing (in addition to such other findings as may be specifically required by this section) that the issuance of such order and all of the terms and conditions thereof will tend to effectuate the declared policy of this chapter with respect to such commodity.

*The Act provides (with certain modifications not relevant here) that at least two-thirds of the producers engaged in producing the commodity for market within the specified production area, two-thirds of the producers engaged in producing the commodity for sale within the specified marketing area, or the producers who have produced for market at least two-thirds of the volume of the commodity within either the specified production area or market area, may approve the order. 7 U.S.C. §§ 608c(8)(A) and (B).

57 U.S.C. § 608c(9)(A).

67 U.S.C. § 608c(9)(B).

77 U.S.C. §§ 608c(9)(B)(i) § (ii). The requisite number of producers is the same as that described in note 4, supra.

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8

regulated by six separate milk marketing orders. The plaintiffs are independent milk producers who were regulated under the former Corpus Christi Federal Milk Marketing Order. After a nine-day hearing, the Secretary promulgated a proposed order in which he found, on "the basis of evidence introduced at the hearing and the record thereof" that the issuance of an order that merged the six Texas orders, together with several previously unregulated areas, "will tend to effectuate the declared policy of the Act."" A final order was then issued in which the Secretary determined that:

(1) The refusal or failure of handlers. . . of more than 50 percent of the milk, which is marketed within the Texas marketing area, to sign a proposed marketing agreement, tends to prevent the effectuation of the declared policy of the Act;

(2) The issuance of the Texas order, which amends and merges the aforesaid orders, is the only practical means pursuant to the declared policy of the Act of advancing the interests of producers as defined in the Texas order;

(3) The issuance of the Texas order . . . is approved or favored by at least two-thirds of the producers who participated in a referendum and who during the determined representative period were engaged in the production of milk for sale in the Texas marketing area."

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The practical effect of this merged order is that the Corpus Christi producers will receive a lower minimum price for their milk than they received under the separate order that formerly regulated them.

The plaintiffs then brought an action in district court in which they alleged that the merged order was invalid because it was not supported by substantial

The six previously separate milk marketing order were: South Texas, 7 C.F.R. § 1121 (1975); North Texas, 7 C.F.R. § 1126 (1975); San Antonio, 7 C.F.R. § 1127 (1975); Central West Texas, 7 C.F.R. § 1128 (1975); Austin-Waco, 7 C.F.R. § 1129 (1975); and Corpus Christi, 7 C.F.R. § 1130 (1975).

evidence." The district court held that the plaintiffs lacked standing to challenge the substantive merits of the milk marketing order. We reversed and remanded, Suntex Dairy v. Bergland, 591 F.2d 1063 (5th Cir. 1979). On remand, the district court found that all determinations by the Secretary were supported by substantial evidence, which ruling is the subject of the present appeal.

The Secretary's Determination that the Merged Order Tends to Effectuate the Policy of the Act

The plaintiffs contend first that the Secretary's determination that the merged order would tend to effectuate the purposes of the Act was unsupported by substantial evidence and was arbitrary, capricious, and an abuse of discretion.12 We find this contention without merit.

Our inquiry into the Secretary's decision that the merged order tends to effectuate the policy of the Act is limited, as in the case of judicial review of other agency decisions involving an adjudicatory hearing, to determining whether the agency's findings and conclusions were "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," 5 U.SC. § 706(2)(A), or "unsupported by substantial evidence," 5 U.S.C. § 706(2)(E). See, e. g., Refrigerated Transport Co., Inc. v. I.C.C., 616 F.2d 748, 751 (5th Cir. 1980). The "arbitrary and capricious" standard is narrow and permits a reviewing court merely to consider whether the agency decision "was based on a consideration of the relevant factors and whether there had been a clear error of judgment." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823-24, 28 L.Ed.2d 136 (1971). The "substantial evidence" standard requires a determination that agency findings are supported by "such relevant evidence as a reasonable mind might accept as

The plaintiffs also argued that a dairy cooperative, Associated Milk Producers, Inc., which has filed a brief as amicus curiae in the present case, violated a Missouri district court antitrust injunction by bloc voting during the referendum to get producer support for the order. In Suntex, we held that although the bloc voting may have violated the terms of the district court injunction, "[t]he appropriate response... is a matter for the Missouri district court under that court's continuing jurisdiction to enforce or protect its injunction order." 591 F.2d at 1068.

12These are two of the standards of review contained in the Administrative Procedure Act, 5 U.S.C. § 706(2)(A and E). For a recent discussion of judicial review of agency action, see Pierce & Shapiro, Political and Judicial Review of Agency Action, 60 Tex.L.Rev. ----(1981).