307 U. S. 533

U.S. Supreme Court

United States v. Rock Royal Cooperative, Inc., 307 U.S. 533 (1939)

United States v. Rock Royal Cooperative, Inc.

No. 771

Argued April 24, 25, 1939

Decided June 5, 1939*

307 U.S. 533


Under the Agricultural Marketing Agreement Act of 1937, the Secretary of Agriculture, after notice and hearings, made an order for fixing and equalizing minimum prices to be paid producers for milk sold to dealers ("handlers") and disposed of by the latter either in liquid form or as milk products within a "marketing area" comprising the City of New York and adjacent counties. clubjuris

Page 307 U. S. 534

Efforts to secure the consent of dealers to a marketing agreement having failed, the order, before its promulgation, was submitted by referendum to producers, the vote resulting, as determined by the Secretary with the approval of the President, in acceptance of the order by at least two-thirds of those producers who, during a representative period, had been engaged in production of milk for the marketing area. The Secretary had found that two-thirds of the milk comes to this area from other States where it is produced, or from the New York through other States, and that the other one-third, produced in New York, becomes "physically and inextricably intermingled" with this "interstate" milk, and that all is handled either in the current of interstate commerce or so as to affect, burden, and obstruct interstate commerce in milk and its products. The Secretary had determined also that prices calculated to give milk a purchasing power for producers equivalent to that enjoyed in the base periods selected by §§ 2 and 8e of the Act would not be reasonable, in view of prices for feed and "other economic conditions," and resorted to the authority granted by § 8c(18), to fix prices so as to "reflect" those factors and "insure a sufficient quantity of pure and wholesome milk and be in the public interest." The order provides a method for computing "minimum prices" or values for the milk received by "handlers' during the computation period, varying according to the class of use to which the milk is put, the butter-fat content, distance of transportation, etc. It then provides for fixing the "uniform price" which producers are actually paid by the proprietary (non-cooperative) "handlers," and which, in substance, is determined by multiplying the amount of milk of each class received by all "handlers' during the period, less certain deductions, by the respective "minimum price," making certain deductions, and dividing the total of the remainders by the total amount of the milk received. For the purpose of equalization, the order requires "handlers' to pay into a "Producer Settlement Fund" the amount by which their purchases at the "minimum prices" exceeds the amount of their purchased milk multiplied by the "uniform price." When the value of a "handler's" purchased milk at the "minimum prices" is less than if bought at the "uniform price," the Fund pays him the difference for distribution to his producers. By the terms of the order, cooperative associations of producers which are also "handlers' need not pay the "uniform price," but may settle with their patrons according to their contracts. The order, by these and other means, sought to bring clubjuris

Page 307 U. S. 535

about a fair division among producers of the fluid milk market and utilization of the rest of the supply in other dairy staples, and thus to correct evils arising from overproduction of the fluid milk, price-cutting, etc. Cf. Nebbia v. N.Y., 291 U. S. 502. In a suit by the Government to enforce the order against a proprietary producer of milk and cooperative associations of producers, in which other cooperative associations intervened on the side of the plaintiff, the District Court adjudged the order invalid and dismissed the bill.


1. Suspension of the order by the Secretary under §8c(16)(A) of the Act because of the effect of the decree on its administration and enforcement did not render the proceedings moot, since rights accrued under the order were preserved, and reports, accountings and payments under it were sought from the defendants. P. 307 U. S. 555.

2. Contentions that the adoption of the order was influenced by false representations and coercive tactics practiced by certain cooperative associations which intervened in this case are immaterial, as there is no authority in the courts to go behind the conclusion of the Secretary to inquire into the influences which caused the producers to favor the resolution. P. 307 U. S. 556.

3. The provision of the Act, § 8(12), authorizing cooperatives to express their approval or disapproval of such orders for all their members or patrons is not unreasonable. P. 307 U. S. 559.

4. If the order and Act are otherwise valid, the fact that their effect would be to give cooperatives a monopoly of the market, would not violate the Sherman Act or justify a refusal of an injunction enforcing the order. P. 307 U. S. 560.

5. The objection that the Act does not authorize the provision of the order exempting cooperatives from payment of "uniform prices" required to be paid by proprietary "handlers" cannot be taken by defendants who are themselves cooperatives, but can be taken by a defendant proprietary. P. 307 U. S. 560.

6. This exemption for cooperatives is authorized by § 8c(F) of the Act, which provides that

"Nothing . . . shall . . . prevent a cooperative . . . from . . . making distribution [of net proceeds] . . . in accordance with the contract between the association and its producers."

P. 307 U. S. 561.

7. The objection that, in authorizing payments to cooperatives and certain other "handlers" from the Producer Settlement Fund, the order is without statutory basis cannot be raised by "handlers," clubjuris

Page 307 U. S. 536

whether proprietary or cooperative, since "handlers " have no financial interest in that fund. P. 307 U. S. 561.

8. Section 8e(5) of the Act, in sanctioning exemptions of producer cooperative associations from the duty imposed by the order on other "handlers" of paying a uniform price to producers is not unconstitutionally discriminative. P. 307 U. S. 562.

This results from the nature of cooperatives, the policy of Congress in their regard, their relations to their members, and to price-cutting, as compared with ordinary business corporations.

9. No unconstitutional discrimination is produced by provisions of the order, sanctioned by the Act, which limit minimum prices to milk sold in the marketing area or which passes through a plant in the marketing area, thereby permitting "handlers" to purchase other milk from the same production area at any price they may please. P. 307 U. S. 565.

If such "unpriced" milk be sold by the "handler" outside of the market area designated by the order for a price greater than can be obtained within the area, thus enabling the "handler" to replace losses on sales within the area and still be in a position to pay the "uniform price" for milk supplied to the area, this is a competitive situation which the order did not create, and with which it does not deal.

10. Special differentials on milk coming from certain counties located most favorably to the marketing area, allowed by the order under § 8e(5)(A) of the Act, are not shown to discriminate unduly between producers. The Secretary's determination of their propriety, made on substantial evidence, is supported by a strong presumption. P. 307 U. S. 567.

11. Where milk sold by the dairy farmer locally and milk from other States are drawn into a general plan for protecting the interstate commerce in the commodity from the interferences, burdens, and obstructions arising from excessive surplus and the social and sanitary evils created by low prices, the power of Congress extends also to the local sales. P. 307 U. S. 568.

12. The federal commerce power, where it exists, is complete and perfect. P. 307 U. S. 569.

13. Congress has power over the prices of milk in interstate commerce of the same nature and extent as the power retained by the States over their internal commerce in milk. Nebbia v. New York, 291 U. S. 502. P. 307 U. S. 569. clubjuris

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14. The provisions of the Act and the order which require a "handler" whose purchases at the "minimum price" exceed their value at the "uniform price" to pay the surplus into the Producer Settlement Fund, instead of paying it to his patrons, do not deprive him of liberty and property without due process. P. 307 U. S. 571.

This pooling device is ancillary to the price regulation; both are designed to foster and protect interstate commerce by smoothing out the difficulties of milk surplus and cut-throat competition which burdened the marketing. P. 307 U. S. 572.

As Congress would have the right to limit the quantities of milk in interstate commerce, it may permit its movement on these terms of pool settlement.

15. The Act declares a definite policy to restore parity prices for farmers; directs the Secretary to issue orders to that end whenever he has reason to believe they will tend to effectuate that policy; limits the terms of such orders specifically, while allowing flexible auxiliary administrative discretion; confines its application to specified farm products and the orders to such areas as are "practicable;" and requires preliminary hearings and findings, with right to object to the Secretary and appeal to the courts. In these respects, it sets up sufficient standards, and does not delegate legislative power in violation of the Constitution. P. 307 U. S. 574.

Even though procedural safeguards in the Act cannot validate an unconstitutional delegation, they do protect against arbitrary abuse of properly delegated authority. P. 307 U. S. 576.

16. Section 8c(18) of the Act, which provides that, whenever he finds upon hearing and evidence that prices giving milk and milk products purchasing power equivalent to that of the "base period," defined in §§ 2 and 8e, are not reasonable, in view of the price and available supplies of feeds and other economic conditions which affect market supply and demand for milk and its products in the marketing area, the Secretary shall fix such prices as he finds "will reflect such factors and insure a sufficient quantity of pure and wholesome milk and be in the public interest," sets up a standard sufficient to avoid improper delegation of power. P. 307 U. S. 576.

17. The provisions of the Act for submission of proposed orders for approval of producers of milk, through a referendum, § 8c(9)(B), and the provision authorizing cooperatives to cast the votes of their producer patrons, are not invalid delegation. P. 307 U. S. 577. clubjuris

Page 307 U. S. 538

18. Sections 8c(5)(A), 8c(5)(C) and 8c(5) (F), construed together and with § 8c(1), show that there was no intention to except cooperatives of the agency type (distinguished from the "sale" type) from the duty imposed on handlers generally to pay into the Producer Settlement Fund and share the expenses of administration. The term "purchased" in § 8c(5)(A) means "acquired for marketing;" the section cannot be construed as freeing agents, cooperative or proprietary, from the requirement to account at the minimum prices for milk handled. P. 307 U. S. 578.

This conclusion accords with the legislative reports and debates and administrative construction.

19. The provisions of the Act, § 8c(5)(F) permitting a cooperative to distribute the "net proceeds" of all its sales to its members in accordance with its contract with them refers to the results of the cooperative's sales in the marketing area after complying with the equalization requirements. P. 307 U. S. 579.

20. A provision of the order authorizing any "handler," in determining its net pool obligation, to subtract "the quantity of milk received from the handler's' own farm" does not apply to a cooperative "handler" which has no farm. P. 307 U. S. 581.

26 F.Supp. 534, reversed.

Appeals under § 2 of the jurisdictional Act of August 24, 1937, from a decree of the District Court dismissing two suits brought by the Government to enforce an order of the Secretary of Agriculture, issued under the Agricultural Marketing Agreement Act of June 3, 1937, regulating the handling of milk in an area comprising the City of New York and neighboring counties. One of the suits was against three incorporated "cooperatives," representing milk producers, in the handling of milk in this area. The defendant corporation in the other suit was a "proprietary" handler. One of the appellants is Noyes, Commissioner of Agriculture and Markets of the City of New York, who intervened and petitioned, among other things, for enforcement of a regulation under the state law insofar as the traffic in question might be adjudged clubjuris

Page 307 U. S. 539

to be intrastate commerce. Inasmuch as the operations of all of the defendants are found to be of interstate character, the Court rules that his petition be dismissed. The other three appeals are by the United States and by two incorporated "cooperatives," which intervened to combat charges made against them by the defendants concerning their activities in aid of the adoption and enforcement of the federal order.