49 Agric. Dec. 1 Petitioner's plan being implemented. At the time of the oral hearing Mr. Sheckarski's whereabouts were unknown and he was not a witness at the proceeding. The Petitioner maintains that Andy's Food Basket transaction was approved by the then Mr. Sheckarski and that there was no reason to seek his approval for the AA Grocery arrangement, inasmuch as it was identical to the Andy's Food Basket arrangement. Several of Petitioner's witnesses testified to the existence of conversations with the Market Administrator at which time there was submitted to him for consideration the plan for the Andy's Food Basket transaction. It is clear from their testimony that these witnesses came away with the impression that the Market Administrator had approved of the transaction. This included Mr. Mallorie. It strains the bounds of reasoning to infer that Mr. Sheckarski disapproved of the transaction and that the Petitioner then went out and implemented a plan which had been disapproved. Just what facts were presented to Mr. Sheckarski and what he said that led the conferees to believe that approval had been given may never be known. However, the evidence is clear that the Petitioner's officers and employees and Mr. Mallorie did come away from the conferences with the Market Administrator believing that what they had proposed was legal and that there was nothing wrong in the proposed transaction (except for the Battleground location which was implemented). never Respondent objected to the receipt of evidence relating to the discussions had with the Market Administrator. The Respondent takes the position that none of the testimony of evidence should have been admitted, and since it was, for reasons set forth at the oral hearing, such evidence indicates that Mr. Sheckarski offered no assurances regarding the pool accountability of Petitioner as affected by milk sold by Mallorie to the three Andy's Food Basket stores not located in the Petitioner's regulated plant. Respondent would infer that: "At most, Mr. Sheckarski stated that such sales were legal and would not affect Mallorie's producer-handler exemption." An inference can be drawn from the record evidence that Mr. Sheckarski became aware that the Petitioner and Mr. Mallorie were under the impression that he had made an earlier determination or commitment that their method of operation had been given approval. This is not unreasonable in view of the testimony relating to the fact that at a later meeting (after Market Administrator Sheckarski had been to Washington and discussed the matter) Mr. Sheckarski stated that he regretted if there had been a misunderstanding of his views expressed at the spring meetings. It is indeed unfortunate that Mr. Sheckarski or the other participants to the conferences did not make written memoranda of what facts were presented to the Market Administrator and what situation was approved. When Mr. Sheckarski's successor assumed office he... prepared billings to the Petitioner. Although the evidence is not convincing with respect to what occurred at the conferences with the Market Administrator, we can make no finding that Mr. Sheckarski offered assurances regarding the pool accountability of Petitioner as affected by milk sold by Mallorie to the three Andy's Food Basket stores not located in the Petitioner's regulated plant. It should be noted that there was nothing illegal about the purchase/sale arrangements entered into by these corporations nor were they in contravention of the Order provisions. The question is one of accountability to the pool. The evidence of record is not that convincing to conclude that the conferees had sufficient justification for their reliance upon their impression of what occurred at these conferences. To the Petitioner this indeed will be a harsh decision, but, in view of the position taken by the Department, and the cases set forth above, I do not believe that another result can be forthcoming.... Through the pooling provisions of a Marketing Order the Market Administrators have the responsibility and the authority to assure a fair division of the more profitable fluid milk market among all producers. As noted in the cases, supra, this objective for equalization has been approved by the Courts. I therefore conclude that the Petition and the Amended Petition herein should be dismissed. ADDITIONAL CONCLUSIONS BY THE JUDICIAL OFFICER Petitioner on appeal merely reargues the matters that were presented to the ALJ and correctly decided by the ALJ. Accordingly, it would serve no useful purpose for me to rehash those issues. However, in the event that a reviewing court should disagree with the position of the ALJ set forth above, which I have adopted, it would be relevant to set forth my views as to the matters which I have omitted or changed in the ALJ's initial decision. In this respect, I am in full agreement with the views set forth in the Response to Petitioner's Appeal filed February 13, 1989, and I am attaching that document as an appendix to this decision, which should be regarded as incorporated by reference herein in the event a reviewing court disagrees with the views of the ALJ and myself on the matters set forth above. Since this further argument 49 Agric. Dec. 23 is really not necessary, in my view, the appendix will not be printed in Agriculture Decisions. For the foregoing reasons, the following order should be issued. Order The petition and the amended petition are dismissed. APPENDIX Response to Petitioner's Appeal filed February 13, 1989. [Not to be published herein.-Editor.] In re: FARM FRESH, INC. AMA Docket No. M 106-2. Decision and Order filed April 12, 1990. Rulemaking - Substantial evidence. The Judicial Officer reversed the initial decision filed by Administrative Law Judge Paul Kane (ALJ) which held that the Secretary's Notice of Hearing as to a challenged amendment was insufficient, and that the rulemaking decision was not supported by substantial evidence. The ALJ awarded monetary relief, without interest, based on 18¢ per hundredweight multiplied by the amount of milk received by petitioner at its new plant in Lincoln County, Oklahoma. Petitioner, a "handler" of milk subject to Order No. 106, Milk in Southwest Plains Marketing Area, instituted this action to challenge an amendment to the Order which moved Lincoln County, Oklahoma, from Zone III (which had a negative 18-cent location adjustment) to Zone I, which had no location adjustment. Petitioner's plant was originally located in Ponca City, Oklahoma, which was in Zone III, but petitioner started building a replacement plant in Lincoln County before the amendment process and completed the plant after the amendment process. The Judicial Officer held that the Notice of Hearing expressly stated that evidence would be received as to whether Lincoln County should be moved to Zone I, and, further, that an ALJ has no authority to raise sua sponte an issue as to the validity of the Notice of Hearing not raised by the petitioner. The Judicial Officer also held that the Secretary's decision to move Lincoln County to Zone I was rational and supported by substantial evidence at the rulemaking hearing. The applicable principles are set forth at length in In re Borden, Inc., 46 Agric. Dec. 1315 (1987), aff'd, No. H-88-1863 (S.D. Tex. Feb. 13, 1990). A location adjustment does not have to ensure that a handler can compete competitively in every area that the handler chooses to market milk. The Secretary is required by the Act to price milk under the terms of an order, including the location adjustment provisions, in a manner that will insure that milk will move to all plants in the marketing area. In view of the divergent facts applicable in different marketing areas, the same criteria cannot be used in every order, or even in every zone within an order, in determining the level of a particular location adjustment. Complete equity is not required in a milk order. It is not necessary, in order to sustain the Secretary's action, to conclude that placing Lincoln County in Zone I was the only reasonable approach, or even that it was the wisest approach. If the petition were not dismissed, I would have remanded the proceeding for the Secretary to determine the appropriate remedy in his legislative capacity. Gregory Cooper, for Respondent. Marvin Beshore, for Petitioner. J.E. Burns (Of Counsel), for Petitioner. Initial decision issued by Paul Kane, Administrative Law Judge. This is a proceeding under § 8c(15)(A) of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. § 608c(15)(A)). Petitioner is a "handler" of milk subject to Order No. 106, Milk in Southwest Plains Marketing Area (7 C.F.R. Part 1106). Petitioner instituted this action to challenge an amendment to the Order which moved Lincoln County, Oklahoma, from Zone III (which had a negative 18-cent location adjustment) to Zone I, which had no location adjustment. Petitioner's plant was originally located in Ponca City, Oklahoma, which was in Zone III, but petitioner started building a replacement plant in Lincoln County before the amendment process and completed the plant after the amendment process. Accordingly, petitioner's new plant did not qualify for the minus 18-cent location adjustment that would have been applicable if Lincoln County had not been moved from Zone III to Zone I. Section 8c(5)(A) of the Act authorizes the Secretary of Agriculture to classify milk in accordance with the form in which it is used by a milk handler (e.g., Class I milk is milk sold as fluid milk; Class II milk is milk sold as "soft" products, such as cottage cheese; and Class III milk is milk sold as "hard" products, such as butter), and to fix "minimum prices for each such use classification which all handlers shall pay . . . for milk purchased from producers" (7 U.S.C. § 608c(5)(A)). "Such prices shall be uniform as to all handlers, subject only to adjustments for . . . (3) the locations at which delivery of such milk... is made to such handlers" (id.).1 That adjustment, called a "location adjustment," can be a negative adjustment to the Class price required to be paid by a handler, thereby 'See generally Vetne, Federal Marketing Order Programs, in 1 Davidson, Agricultural Law, § 2.35 (1981 and 1989 Cum. Supp.); Brooks, The Pricing of Milk Under Federal Marketing Orders, 26 Geo. Wash. L. Rev. 181 (1958). 49 Agric. Dec. 23 reducing the handler's cost. A negative location adjustment recognizes the lower value of milk delivered, e.g., to a handler's supply plant located a considerable distance from the consumption center, where the handler must incur extra hauling costs in delivering milk to the consumption center. Conversely, a location adjustment can be a positive adjustment to the Class price required to be paid by a handler, thereby increasing the handler's cost, in order to compensate producers for hauling costs incurred in delivering bulk milk to a handler's distribution plant located a considerable distance from the production area. That is, producers delivering milk to such a distant handler receive extra compensation because they have provided an economic service of benefit to the distant handler. On February 22, 1989, Administrative Law Judge Paul Kane (ALJ) filed an Initial Decision and Order in which he held that the Secretary's Notice of Hearing as to the amendment was insufficient, and the rulemaking decision was not supported by substantial evidence in the rulemaking hearing record. He awarded monetary relief, without interest, based on 18-cents per hundredweight multiplied by the amount of milk received by petitioner at its new plant. On May 11, 1989, petitioner appealed to the Judicial Officer, to whom final administrative authority to decide the Department's cases subject to 5 U.S.C. §§ 556 and 557 has been delegated (7 C.F.R. § 2.35),2 from that portion of the ALJ's decision denying interest. On May 22, 1989, respondent appealed from the remainder of the ALJ's Initial Decision. The case was referred to the Judicial Officer for decision on July 20, 1989. Based upon a careful consideration of the entire record, I agree with respondent's position on appeal that the petition should be dismissed. Before setting forth findings of fact, the following brief background information is taken from Schepps Dairy, Inc. v. Bergland, 628 F.2d 11, 13-16 (1979) (footnotes omitted): *The position of Judicial Officer was established pursuant to the Act of April 4, 1940 (7 U.S.C. §§ 450c-450g), and Reorganization Plan No. 2 of 1953, 18 Fed. Reg. 3219 (1953), reprinted in 5 U.S.C. app. at 1068 (1982). The Department's present Judicial Officer was appointed in January 1971, having been involved with the Department's regulatory programs since 1949 (including 3 years' trial litigation; 10 years' appellate litigation relating to appeals from the decisions of the prior Judicial Officer; and 8 years as administrator of the Packers and Stockyards Act regulatory program). |