62 Agric. Dec. 406

Q. Okay. Did you think at the time that Kreider stopped selling to Ahava that that was a change that would necessitate reapplying for producer/handler status in Order No. 2?

A. No.

Q. Well, didn't stopping the sales of milk to Ahava change how Kreider could be considered under Order No. 2?

A. I guess we're still trying to figure that out.

Tr. 120-21.

I conclude Petitioner's January 1991 "Application for Designation as Producer-Handler" (PX C) did not constitute an application for designation as a producer-handler for the period December 1995 through December 1999. Kreider I, the proceeding regarding Petitioner's January 1991 application, is concluded. A necessary prerequisite to the Market Administrator's designation of a person as a producer-handler is that person's filing an application for designation as a producer-handler (Tr. 77-78).12 Since Petitioner failed to file an application for designation as a producer-handler under former Milk Marketing Order No. 2 subsequent to the January 1991 application, Petitioner's Amended Petition should be denied as a premature challenge to a denial of an application for designation as a producer-handler that has not yet been filed or denied.

Producer-Handler Status For the Period December 1995 - April 1997

Even if Petitioner had filed an application for designation as a producer-handler for the period December 1995 through December 1999, I would uphold any denial of the application for the period December 1995 through April 1997, based on issue preclusion.

Petitioner claims it is entitled to recover payments Petitioner made to the producer-settlement fund during the period December 1995 through April 1997. Petitioner distributed fluid milk products to Ahava in each month of this December 1995 through April 1997 period (Amended Pet. ¶¶ 13-16). The

127 C.F.R. § 1002.12 (1999).

13

issue of Petitioner's status under former Milk Marketing Order No. 2 in those months in which Petitioner distributed fluid milk products to Ahava was decided in Kreider I. Thus, Petitioner is barred by issue preclusion from relitigating in Kreider II Petitioner's status under former Milk Marketing Order No. 2 during the period December 1995 through April 1997.13 Petitioner could have been designated as a producer-handler under former Milk Marketing Order No. 2 only if Petitioner's entire distribution of fluid milk products within former Milk Marketing Order No. 2 qualified. Distribution of fluid milk products to one disqualifying customer, such as Ahava, results in person's ineligibility for designation as a producer-handler. There can be no "customer-by-customer" determination of producer-handler

status.

Market Administrator's Basis for Denying Producer-Handler Status

For The Period May 1997 - December 1999

Even if Petitioner had filed an application for designation as a producer-handler for the period December 1995 through December 1999, I would uphold any denial of the application for the period May 1997 through December 1999, based on Petitioner's sales to "subdealers."

The Market Administrator, who, in 1990, became aware that Petitioner was distributing fluid milk products into the area covered by former Milk Marketing Order No. 2, did not designate Petitioner a producer-handler based on the types of customers to which Petitioner distributed a portion of its fluid milk products (PX B, PX E). Further, the Assistant Market Administrator for former Milk Marketing Order No. 2 testified that Petitioner did not qualify as a producer-handler under former Milk Marketing Order No. 2 during the period May 1997 through December 1999, because of the types of customers to which Petitioner distributed a portion of its fluid milk products (Tr. 34-41). The requirements to be a producer-handler do not prohibit any types of customers; however, in order to meet the requirements for designation as a producer-handler, a person must exercise complete and exclusive control over

14

"In re Kreider Dairy Farms, Inc., 59 Agric. Dec. 779, 786-87 (2000) (Ruling on Certified Question).

147 C.F.R. § 1002.12(b) (1999).

62 Agric. Dec. 406

the distribution of its fluid milk products (Tr. 36).15 Thus, an applicant for producer-handler status could be denied producer-handler status based upon the applicant's customer's subsequent distribution of fluid milk products.

The Market Administrator denied producer-handler status to Petitioner on the ground that Petitioner distributed fluid milk products to "subdealers." Having a "subdealer" as a customer is sufficient grounds to deny Petitioner producer-handler status under former Milk Marketing Order No. 2, according to Respondent. Respondent maintains Petitioner "is not distributing all of the milk it sells" because of the "subdealers." Therefore, Petitioner does not exercise complete and exclusive control over the distribution of its fluid milk products which is necessary to meet the requirements for designation as a producer-handler under former Milk Marketing Order No. 2. (Respondent's Brief at 7, 12.)

An administrative agency's interpretation of its own regulations must be accorded deference in any administrative or court proceeding, and an agency's construction of its own regulations becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulations.16

The Market Administrator was the official responsible for administering former Milk Marketing Order No. 2. It is well settled that an official who is responsible for administering a regulatory program has authority to interpret the provisions of the statute and regulations. Moreover, the interpretation of that official is entitled to great weight."7

157 C.F.R. § 1002.12(b)(1) (1999).

Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994); Stinson v. United States, 508 U.S. 36, 45 (1993); Martin v. OSHRC, 499 U.S. 144, 150-51 (1991); Lyng v. Payne, 476 U.S. 926, 939 (1986); United States v. Larionoff, 431 U.S. 864, 872 (1977); INS v. Stanisic, 395 U.S. 62, 72 (1969); Udall v. Tallman, 380 U.S. 1, 16-17 (1965); Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 413-14 (1945).

"Lawson Milk Co. v. Freeman, 358 F.2d 647, 650 (6th Cir. 1966); In re Stew Leonard's, 59 Agric. Dec. 53, 73 (2000), aff'd, 199 F.R.D. 48 (D. Conn. 2001), printed in 60 Agric. Dec. 1 (2001), aff'd, 32 Fed. Appx. 606, 2002 WL 500344 (2d Cir.), cert. denied, 123 S. Ct. 89 (2002); In re Mil-Key Farm, Inc., 54 Agric. Dec. 26, 76-77 (1995); In re Andersen Dairy, Inc., 49 Agric. Dec. 1, 19 (1990); In re Conesus Milk Producers, 48 Agric. Dec. 871, 876 (1989); In re Echo Spring Dairy, Inc., 45 Agric. Dec. 41, 58-60 (1986); In re County Line Cheese Co., 44 Agric. Dec. 63, 87 (1985), aff'd, No. 85-C-1811 (N.D. III. June 25, 1986), aff'd, 823 F.2d 1127 (7th Cir. 1987); In re John Bertovich, 36 Agric. Dec. 133, 137 (1977); In re Associated Milk Producers, Inc., 33 Agric. Dec. 976,982 (1974); In re Yasgur Farms, Inc., 33 Agric. Dec. 389, 417-18 (1974); In re Weissglass Gold Seal Dairy Corp., 32 Agric. Dec. 1004, 1055-56 (1973), aff'd, 369 F. Supp. 632 (S.D.N.Y. (continued...)

The doctrine of affording considerable weight to interpretation by the administrator of a regulatory program is particularly applicable in the field of milk. As stated by the court in Queensboro Farms Products, Inc. v. Wickard, 137 F.2d 969, 980 (2d Cir. 1943) (footnotes omitted):

The Supreme Court has admonished us that interpretations of a statute by officers who, under the statute, act in administering it as specialists advised by experts must be accorded considerable weight by the courts. If ever there was a place for that doctrine, it is, as to milk, in connection with the administration of this Act because of its background and legislative history. The Supreme Court has, at least inferentially, so recognized.

Similarly, in Blair v. Freeman, 370 F.2d 229, 232 (D.C. Cir. 1966), the court stated:

A court's deference to administrative expertise rises to zenith in connection with the intricate complex of regulation of milk marketing. Any court is chary lest its disarrangement of such a regulatory equilibrium reflect lack of judicial comprehension more than lack of executive authority.

Therefore, I give considerable weight to the Market Administrator's determination that Petitioner was not a producer-handler under former Milk Marketing Order No. 2 during the period May 1997 through December 1999.

The Market Administrator's interpretation of former Milk Marketing Order No. 2 differed from Petitioner's interpretation, concerning whether Petitioner exercised complete and exclusive control over the distribution of its fluid milk products. The Market Administrator had greater access than did Petitioner to information about the distribution by Petitioner's customers of Petitioner's fluid milk products. Petitioner was largely unaware of what happened to its fluid milk products once Petitioner had delivered those products to its customers. The distribution of Petitioner's fluid milk products beyond Petitioner's "subdealer" customers was adequate grounds for the Market Administrator to determine that Petitioner had not maintained complete and exclusive control over the distribution of its fluid milk products.

"(...continued)

62 Agric. Dec. 406

The Market Administrator sought to ensure that Petitioner bore all the risk of supplying its customers with fluid milk products during the months of short production and bore all the burden of carrying surplus fluid milk products during the months of excess production. If neither Petitioner nor its "subdealer" customers were accountable to the producer-settlement fund, and if Petitioner's "subdealer" customers were accessing fluid milk products from other producers, even if Petitioner was not, Petitioner could obtain an unearned economic benefit by not bearing the full risk or the full burden of supplying its customers with fluid milk products. At Kreider I's conclusion, the Market Administrator's determination not to designate Petitioner as a producer-handler was justified, according to Judge Bernstein's Decision and Order on Remand. 18 Judge Bernstein concluded Petitioner's customer Ahava was at all times supplied by at least one producer other than Petitioner and Ahava could obtain fluid milk products from other producers if Petitioner could not meet Ahava's needs during periods of short production. Judge Bernstein also concluded Petitioner maintained an annual surplus that was lower than the average of producer-handlers in former Milk Marketing Order No. 2 and Petitioner was able to reduce its surplus because of its ability to rely on other producers to meet Ahava's needs.

The Market Administrator's interpretation of complete and exclusive control over the distribution had a rational basis and was applied consistently and not arbitrarily or capriciously. I conclude the Market Administrator's interpretation of the term "complete and exclusive control" as used in 7 C.F.R. § 1002.12(b)(1) was not contrary to law.

The "Subdealers”

During May 1997 through December 1999, Respondent claims three of Petitioner's customers were "subdealers": (a) the FPPTLC; (b) D.B. Brown, Inc.; and (c) Jersey Lynn (Respondent's Brief at 4; Tr. 40).

Petitioner did not distribute fluid milk products to Jersey Lynn during the period May 1997 through December 1999 (PX 4).

Petitioner distributed fluid milk products to D.B. Brown, Inc., in 7 months of the period May 1997 through December 1999, the last 6 months of 1997, and the first month of 1998. The Assistant Market Administrator for former Milk Marketing Order No. 2 testified that D.B. Brown, Inc., is a food

In re Kreider Dairy Farms, Inc., 59 Agric. Dec. 21 (1997).