POLAR CO. v. ANDREWS

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Argument of Joe J. Harrell

Chief Justice Earl Warren: Number 38, Polar Ice Cream and Creamery Company, Appellant, versus Charles O. Andrews, et cetera.

Mr. Harrell.

Mr. Joe J. Harrell: Mr. Chief Justice, members of the Court, may it please the Court.

This is an action and a direct appeal from a decision of a three-judge District Court which was convened in the Northern District of Florida.

An action was brought by Polar Ice Cream and Creamery Company challenging the constitutionality of a portion of the Florida Milk Commission Act being Chapter 501 Florida Statutes.

The complaint, an amended complaint asked for injunctive relief and also asked for declaratory relief with respect to the application of certain orders insofar as they affected the Polar Ice Cream and Creamery Company which is a milk distributor located in Pensacola, Florida which is 16 miles from the Alabama state line.

The lower court considered three questions and one was whether or not the application of a portion of this Act and the orders which implemented it by the Florida Milk Commission burdened unduly interstate commerce, also whether or not minimum producer prices with respect to sale made to military installation could be enforced by the State of Florida.

And the third question which the District Court considered was whether or not the distributor's tax on milk distributed which was 15 cents per 100 gallons, milk distributed by a Florida producer, Polar Ice Cream and Creamery Company to military installations exclusive jurisdiction to which have been seeded to the United States was in fact applicable and collectible by the State of Florida.

Those were the three questions which the District Court determined adversely to the Polar Ice Cream and Creamery Company, and from this adverse decision, a direct appeal is taken to this Court.

In November 1961, the Pensacola area which consisted of the Western most four counties located within the State of Florida came within the jurisdiction of the Florida Milk Commission.

These four counties, prior to that time had been without the jurisdiction of Florida -- of the Florida Milk Commission.

Immediately after they came within the jurisdiction of the Florida Milk Commission, the Florida Milk Commission began a scheme which we contend burden unduly interstate commerce.

Justice Potter Stewart: How was it which brought these four counties under the Milk Commissions jurisdiction action by the Commission or?

Mr. Joe J. Harrell: It was a vote by the milk producers of those four counties.

Justice Potter Stewart: Of those four counties.

Mr. Joe J. Harrell: Of those four counties, that's correct sir.

Justice Potter Stewart: Under the state setup, that's on (Voice Overlap) --

Mr. Joe J. Harrell: Yes under state of law, they voted in on November 21, 1961, they came within the jurisdiction of the Florida Milk Commission.

The first thing that the Florida Milk Commission did with respect to these four counties was to set a minimum producer price of 61 cents per gallon which was the highest price in the United States, the highest published price in the United States as that -- as of that time.

The second thing that the Milk Commission did to implement this particular scheme was to enter an allocation order in which it allocated all of the Class I sales to Florida Milk Commissions to Florida Milk producers and set up in a ratio which total 100% of all sales, the amount of sales which were to be allocated to each particular producer of Polar Ice Cream and Creamery Company.

The third ground which implemented this particular scheme was the law which said that Polar Ice Cream and Creamery Company or a milk distributor could not terminate its relationship with a producer except for just cause.

And the court has held that just cause is not -- that is not just cause if he could buy his milk cheaper elsewhere.

There was a further implementation in that if --

Justice Byron R. White: What court (Inaudible)

Mr. Joe J. Harrell: The Florida Court.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Yes, I do have Mr. Justice White.

It is in Odom versus the State of Florida.

I cited in my brief.

Justice Byron R. White: The Supreme Court?

Mr. Joe J. Harrell: Yes, the Supreme Court State of Florida.

Also if the milk distributor does not take all of the milk tendered to it by the Florida producers, then of course a show-cause order can the -- set against the distributor and his license can be revoked.

So that we have here a situation in which the Florida milk producers and I'm speaking about the Pensacola area, Florida milk producers, the ones pertinent to this case.

Although they are located -- although the Pensacola plant of Polar is just 16 miles from the Alabama line, nevertheless the Florida milk producers of Polar are insulated so that they are guaranteed in effect the highest price in the United States for the sale of their milk.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Yes.

Justice Byron R. White: -- about any (Inaudible)

Mr. Joe J. Harrell: That is not exactly accurate.

Polar must buy first from these producers and must exhaust their supply of milk insofar as its Class I needs, a concern before it can go elsewhere and purchase milk.

Justice Byron R. White: (Inaudible) outside the Florida (Inaudible)

Mr. Joe J. Harrell: No, it can go outside of Florida after it satisfies the Class I requirements from the milk tended it by its Florida producers.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: No.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: No sir, it's not geared to that.

It's geared to the -- to the Class I sales.

Polar must purchase insofar as Florida producers can furnish it all of its requirements of Class I sale even to the extent of 115% in excess of its requirements of Class I sales before it can go outside.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That is correct.

Of course, it will immediately become obvious then, that the Polar producers will energetically try to bill and increase their supply --

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That's correct.

That is the whole theory about it.

And of course, the record is clear that this is a deficit area and that Polar gets 70% of its milk supply from without the State of Florida and that many of its regular producers are located immediately across in the State of Alabama.

We directly will reflect that, we have cited the gallonage including from Black Belt producers which is right across Alabama and this Alabama producers.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That is correct sir for Class I sales.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That is correct sir.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Yes, sir.

Justice Byron R. White: (Inaudible) outside of that area.

Mr. Joe J. Harrell: Yes, sir.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Not Class I sales because they have the other classifications you see.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That's correct but it means that --

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: The record is unclear of other than to this extent.

The testimony was that at times, the Florida producers produced more than the Class I sales and at other times, they did not.

The record is unclear with respect to that particular percentage.

But this means of course that that an Alabama producer, even though he -- the closer in fact geographically will never have an opportunity of selling at a Class 1 price to Polar until all of Polar's Florida producers have been given the opportunity of getting the Class I sales.

So that the out-of-state producers are insulated and isolated from selling to Polar by a tariff barrier and by a tariff wall which economically is just as real as can be.

In that result, economically of course will be this. It will be that Polar will have to then either go out and pay and buy its Class II sales or Class III or IV needs from outside sources at a lower price because this Court of course is familiar with the classification of milk and that Class I received the highest price and the price paid decreases in the decreasing scale of classification.

So that it means that the Alabama producer or the Mississippi producer even though he'll be a regular producer could never have an opportunity literally to eat at the first table until after all of the needs of Class I sales of Polar are satisfied insofar as Florida producers are able to satisfy those needs.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Yes, sir.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That is absolutely correct Your Honor and --

Justice Byron R. White: Or not at all.

Mr. Joe J. Harrell: And -- or not at all.

That's right.

It would be one of the way.

The economic factor could be reflected in two ways.

On Polar, it would mean that Polar would have to go out and pay a higher price in order to assure the supply of the milk.

Looking the other way, it would mean that Alabama could never have an opportunity.

Alabama or other outside producers could never have an opportunity of selling at the Class I price or the 61-cent price so that they would either have to accept a price which would be economically feasible for the purchase of Class II, III and IV milk or else they could say, “No,” as the court said, “We can drink the milk but sell to you we cannot unless you play the --“

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Right because --

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That's right.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That's correct and so then -- then it would be confronted with this situation where it would be cheaper to purchase Class II from Florida because economically, they could not go out to purchase Class II from Alabama, Mississippi or some other state at a price which would be economically be.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: In a play -- in order to assure the supply, yes sir.

And that is basically --

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: I believe that it's in the record that it was 54 and half cents with respect to the Class I.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Yes, yes.

Justice John M. Harlan: It's now a federal marketing are you involved in this area?

Mr. Joe J. Harrell: No, sir there's -- there's no federal marketing order involved in this area.

If we go to the next question which was considered by the lower court, we find this situation that Polar Ice Cream and Creamery Companies throughout the years and the record reflects that for the past eight years, it has supplied the milk requirements of Fort Benning Georgia among other military installations.

The milk requirement for Fort Benning Georgia per year under the contract which was in evidence was $1,760,000.

So it was a sizable contract.

Also Polar supplies the Pensacola Naval Air Station, Tyndall Field Air Force Base, which is located at Panama City, Florida and also the Mine Defense Laboratory at Panama City, Florida.

Now of each these military installations with the exception of the Mine Defense Laboratory, the military installations are located on property exclusive jurisdiction to which had been seeded to the United States of America, some of this -- some of these installations having been seeded as early 1855 which is the Pensacola Naval Air Station reservation.

But on each of the others, by deed of cession, the military installations are located on the property exclusive jurisdiction to which has been seeded to the United States.

We are then confronted with the next question in which Court considered and that was this, “Can the State of Florida enforce its minimum producer price of 61 cents against sales which are made to military installations exclusive jurisdiction to which have been seeded to the United States?”

And as an ancillary, the question to the U.S. Mine Defense Laboratory to which the record is unclear as to whether or not there was an exclusive deed of cession but it appears that there was none.

Justice Arthur J. Goldberg: Mr. Harrell?

Mr. Joe J. Harrell: Yes sir.

Justice Arthur J. Goldberg: Why this (Inaudible)

Mr. Joe J. Harrell: Yes, through the testimony of Mr. E.V. Fisher.

Justice Arthur J. Goldberg: And at any price?

Mr. Joe J. Harrell: No sir, no sir.

At a price -- or excuse me I misunderstood --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: Yes, I misunderstood your question.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: That is Fisher and also --

Justice Arthur J. Goldberg: What is your complaint about that?

Mr. Joe J. Harrell: Our complaint is this that it means that no military personnel in Florida can drink Florida milk.

It means that if one gallon of Florida milk although it's located, the Pensacola Naval Air Station is located within three or four miles of this plant, it's right in Pensacola.

If a gallon of Florida milk is delivered to that Pensacola Naval Air Station, the producer must be paid 61 cents per gallon for each and every gallon of Florida milk.

Justice Arthur J. Goldberg: But the first question in your argument was that (Inaudible), is that correct?

Mr. Joe J. Harrell: That is correct.

Justice Arthur J. Goldberg: (Voice Overlap)

Mr. Joe J. Harrell: That is correct.

Justice Arthur J. Goldberg: Now the second question in your argument is that (Inaudible)

Mr. Joe J. Harrell: That is correct because of the peculiarity under the procurement policy and the peculiarity of the fact that exclusive jurisdiction of this military installation was seeded to the United States and that the State of Florida is without jurisdiction to say that this Florida produced milk must be delivered at 61 cents per gallon paid to Florida producers.

Now, insofar as other milk for example -- insofar other Florida milk that is not the crux of the question but it turns basically on that issue.

And so I hoped I made myself clear with respect to that time.

Unknown Speaker: Mr. Harrell --

Mr. Joe J. Harrell: Yes sir.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Yes, sir.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Well, I can -- I can only cite and it will take only a moment if the Court will permit to read exactly what the Lower Court, Judge Caldwell in his opinion stated the issues to be.

And the very first issue and I quote from 182 of the record, "Whether Chapter 5 or 1, Florida Statutes and the regulations and orders of defendants has applied to milk delivered by plaintiff to military reservations are constitutional.”

And that's at Page 181 and that was the first issue that the Judge himself considered. And he squarely considers that and he squarely considers and in fact discusses the Polar case at the time in his opinions stating that the Polar case had not been decided at the time that he wrote his opinion.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Package been delivered and processed.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That is very true.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Because if Florida Milk is used, because Florida is the cheapest source of supplies because the milk does not involve transportation cost, it of course would be the most readily available with a guaranteed source of supply and if it were used to fill the military contracts then of course each gallon would had -- would have to be paid for as the rate of 61.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Yes sir and I direct the Court's attention to Mr. Fisher's testimony in which he states that yes if it is to the military, it would be at the rate of 61 cents per gallon.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That there is absolutely squarely, their position.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Well, that's right.

And I quoted page -- at page 148 of the record Your Honor and you can put your hand right on it.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: So that is -- that is the exact position and that is the position and as I understood issues and as the Judge Caldwell understood him when he wrote the opinion.

That was the issue which he considered with respect to the use of military milk insofar as the fulfilling of the military contracts, the use of Florida milk, excuse me.

Then we come to the third --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: Yes sir?

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: No sir, no.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: The logic behind the argument is that it is certainly and in appearance with the procurement policy of the United States leaving aside the exclusive jurisdiction of the location of the situs of this that certainly is an interference if they say all (Inaudible) who want to use Florida Milk, you can bid on this contract although Polar has had this contract for eight years but if he uses Florida Milk, he must begin by paying a producer price of 61 cents a gallon.

The evidence reflects that he was delivering packaged and delivered milk to Fort Benning Georgia I believe for 58 cents package homogenized, pasteurized and delivered for a price of 58 cents per gallon sold at as a practical economic situation, it would eliminate any bidder using Florida Milk from bidding on a military contract.

Just the sheer economics will be immediately apparent.

In other words, when he has to pay for producer milk 3 cents more than the actual processed and delivered price, it puts an end to the use of Florida milk for the servicing of military contract.

Justice John M. Harlan: Did the United States (Inaudible)

Mr. Joe J. Harrell: The United States has not sir, to my knowledge.

Justice John M. Harlan: (Inaudible)

Justice William J. Brennan: Well, I thought (Inaudible)

Mr. Joe J. Harrell: Your Honor insofar as sale to the United States Government on -- on military installations exclusive jurisdiction which has been seeded.

It's the exact same situation as the Pacific Coast.

Justice William J. Brennan: (Inaudible)

Mr. Joe J. Harrell: Oh yes, sir, yes.

Justice William J. Brennan: (Inaudible) those regulations, is to believe (Inaudible) the Federal Government negotiation (Inaudible).

Mr. Joe J. Harrell: I do not intend to evade your question but let me preface the answer phrase by saying this.

That as I understand the cornerstone of the procurement regulations is competitive bidding that is the -- as I read the Polar case that is the absolute cornerstone although secondarily procurement can be head by negotiations.

Justice William J. Brennan: (Inaudible)

Mr. Joe J. Harrell: The producer price was not considered by in the Polar Case only at the wholesale price but it--

Justice William J. Brennan: (Inaudible)

Mr. Joe J. Harrell: No sir, that's correct.

In the lower court both producer and the wholesale price were considered when the case reach this Court only the wholesale price was considered and the producer price was not considered.

Justice William J. Brennan: (Inaudible)

Mr. Joe J. Harrell: No sir, I'm not saying that.

But I am saying -- I am saying this, that -- that if the -- that if the producer -- I am saying this that if there is a fixed produce -- producer price which has the effect of eliminating the use of Florida milk from the fulfillment of a contract in bidding then certainly that would be an interference with a procurement policy and in that event, the State of Florida could not so interfere.

It's the identical thing as the wholesale only these steps down to the producer price which is the next level and --

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Only this suggestion and on--

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Well, I think economically certainly Pensacola -- the Pensacola Naval Air Station being right within four miles, there would be an economic distance advantage to Polar Ice Cream and Creamery Company bidding on that contract as opposed to some other Alabama.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Perhaps they would not.

Perhaps they could supply for a lesser amount as the record reflects and as we have stated for the past eight years, Polar Ice Cream and Creamery Company has been able to compete -- competitively with the low bid.

But this was -- you will recall, this was before these four counties came under the -- the Florida Milk Commission and of course it was on and altogether the different basis because at that time, there were no regulations or requirements of paying a minimum producer price of 61 cents.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Well, there are some other --

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: No.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: There was -- there is one in Montgomery Alabama.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: And to be utterly candid with the Court, there are a few people -- there are few companies in position to handle this quantity of milk.

But the record reflects that Polar Ice Cream and Creamery is the largest -- one of the largest independent milk dealers certainly in the South.

And as a practical problem, there are very few companies that are able to bid on a contract of this magnitude that I think is --

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: And then the last of portion of our brief is consider the question of whether or not Florida can impose a distributor's tax of 15 cents per 100 gallons on all of the milk which is delivered to the military.

Our position is squarely this that certainly on these military installations, exclusive jurisdiction to which it has been seeded to the United States, Florida is without jurisdiction to impose that tax on the distributor because the tax is leveled upon sales made by the distributor and the impact would have necessity fall on the Government.

It would increase the price of milk and also --

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: That is correct.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: That is correct Your Honor.

And so Polar contends that Florida is without jurisdiction because the same situation found here is the situation which was found in Pacific Coast Dairy of course at market field and also with respect to the installations in all cases.

Justice Hugo L. Black: In which question presented is that come under?

Mr. Joe J. Harrell: That comes under the --

Justice Hugo L. Black: This argument.

Mr. Joe J. Harrell: That comes under the --

Justice Hugo L. Black: You have two?

Mr. Joe J. Harrell: Three -- the third, the third question.

Justice Hugo L. Black: Where is it?

Mr. Joe J. Harrell: On Page 41.

Justice Hugo L. Black: In your brief (Voice Overlap) --

Mr. Joe J. Harrell: Of our main brief.

I beg your pardon.

Justice Hugo L. Black: I find that the two questions only presented on your brief on Page 4.

Mr. Joe J. Harrell: On page 41.

But excuse me that --

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Yes sir that's the one, page 41.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: No sir because the third.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Yes, it's related to both points but the third -- the third point, it seems that we would be on extremely solid ground and that I've been unable to find any cases which would call this Court -- which would indicate that this Court has departed from the position which has always taken down through the years and that is -- the cession of exclusive jurisdiction of course means just that unless there was a saving clause and therefore, the State was without jurisdiction to levy the tax.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Yes sir, yes sir.

So that the -- I hope I made myself clear with respect to the three issues as we understand them.

Unknown Speaker: (Inaudible) where does tax (Inaudible)?

Mr. Joe J. Harrell: The tax goes to the support of the Milk Commission, yes sir.

And before I sit down, I would like before the Court to understand that this is a little different, however, from a tax which is an inspection tax with respect to purity or wholesomeness of that or anything of that sort, Chapter 501 does not touched on the purity or the wholesomeness of milk and that is with -- that is on the jurisdiction of the Department of Agriculture in the State of Florida.

And of course 501 is only interested in the economic aspects insofar as the regulation of milk is concern.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: Yes, he was.

He did not feel that it would be the best interest of the milk industry or the dairy.

Chief Justice Earl Warren: Mr. Horne?

Argument of Mallory E. Horne

Mr. Mallory E. Horne: Mr. Chief Justice, may it please the Court.

On behalf of the Milk Commission, I will address myself primarily to the two points.

One the involvement of the military milk, the other with the regulatory fee imposed by State and reserve to Mr. Savary, may it please the Court, the question of the involvement of commerce.

I think first of all the brief explanation of the Florida's approach to the military milk question and particularly with the reference to this area might be helpful.

First of all, as this case begin its development even prior to the complaint and in responding to your question, the record does reflect the vociferous opposition of this plaintiff to the jurisdiction of the Commission.

The record reflects that as a result of -- and by the way Your Honor that he does not load himself because he's a distributor, producers and producer-distributors do load.

After series of letters to his producers against after they succeeded in loading in this jurisdiction, this record reflects a series of unilateral price slash-in to the producers directed to this plant unparallel in our history of milk in the State.

So the answer is very definitely, he was opposed and from that time on this case begin.

Now, what its involvement in military milk?

I think one significant thing.

The complaint which brought forth to jurisdiction of this three-judge tribunal, one alleged primarily that the military milk order, effective in the Pensacola market precluded his utilization of other state milk.

And jurisdiction in that point brought forth, the three-judge tribunal going up.

Now, before we can even get the pre-trial conference, the producers brought it out as they can in our statutory structure, the military milk order.

So that at the time of the pre-trial conference, may it please the Court, there was no statutory or regulation or attempted enforcement in the field of military milk at all, none.

So that Judge Caldwell in his pre-trial order says that we are in effect true with the military milk question, it has become moot.

And there was an order into that effect in the reference and it is noted in my brief.

Justice William J. Brennan: What was that?

Mr. Mallory E. Horne: Sir?

Justice William J. Brennan: What was that (Inaudible)

Mr. Mallory E. Horne: Yes sir.

Justice William J. Brennan: Military milk orders will not (Inaudible)

Mr. Mallory E. Horne: Yes sir, yes sir but the point --

Justice William J. Brennan: (Inaudible)

Mr. Mallory E. Horne: Yes sir.

But the point is that he cannot -- let me -- this brings over to this field of classification of milk Judge and here's the point.

And that is that we have classifications of milk.

Class I is generally that which is utilized in a drinking form by customers.

Now, military milk itself would fit that classification.

But because of the necessity of bidding, if they want use it, there is a classification, a separate classification called military milk and a separate price.

In most areas when they do have a military price, if someone that they go to 41 to 45 cents.

Now, the military classification was removed in Florida prior to this trial.

So what he's doing here is saying at the time of this trial, they get it back in the backdoor and saying, “But what if we wanted to use Florida milk in this area since there is no classification of it?”

And the -- he's involved here is because of this.

He can do two things if he wants to use Florida milk but be mindful that it came into court because it was keeping him from using other state milk that he can acquire.

And this gentleman testified in court that if he never saw of another Florida producer, the milk man would not miss one delivery.

That's how significant this matter is to him.

He didn't need a Florida producer and in fact over 70% of his businesses, milk is obtained elsewhere.

But he can obtain Florida milk on a bilateral arrangement with producers to obtain that milk.

He cannot unilaterally say it.

But he get it from other surplus areas of the state, if he can persuades his own producers or other producers to produce more than their commitment and allocate it to military relationships bilaterally --

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: Actually, no.

I'm not saying exactly Judge.

I don't want to mislead you about this.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: The milk that he's obtaining from his base earned producers.

If it used in Class I channel and military actually without a separate definition of military, it would be Class I.

However -- so if he did but now what he's telling you is that I want to use this milk, Florida milk.

But at the same time in his testimony, he tells you that when Wisconsin is in surplus, he can go through brokers and bring milk back in Florida for 30 cents.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: Unless he can obtain a bilateral agreement elsewhere in Florida or even in his own area for the production of separate milk.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: No.

Justice Byron R. White: -- priority.

Mr. Mallory E. Horne: No I'm saying that if he wants to go another producer or at a dairy farm and asked them to produce milk for him for dairy, 41 cents.

He can do that and we --

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: Yes, sir.

That's right.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: Yes.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: Yes but we do not try the make him use it, is the point.

How can we encroach and how can we be construed to be interfering with the government contract when we do nothing in the area?

It's difficult for me to understand what the Court would strike down if you struck down our involvement because we simply do nothing, if he selects this milk.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: Yes, sir.

I am -- I am suggesting that he paid 61 before the Milk Commission even came in.

I'm suggesting to you that and record reflects that he paid his producers the same ones you're using now, 61 cents per gallon on a blend based prices.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: Yes sir.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: That's my understanding of it.

It never has and never will because in every area of this country and this is one the things that's causing the milk industry to be in a metamorphosis from actually this concept of locally supplied milk to the big brokerage surplus-storage type situation.

And that's why you beginning to see more and more of this type of case.

But in anyway, Florida Commission is doing absolutely nothing.

They tried to say that the Polar case says, “As I understand what you said.

There is ridiculous because there, you have the State of California saying that X number of cents per gallon, you must charge.”

This involved the direct relationship between the distributor and the military installation.

Justice Byron R. White: What is the (Inaudible)

Mr. Mallory E. Horne: I don't think it is.

I don't think it ever will be difficult for him to buy out-of-state milk.

It never has been a problem.

It isn't one now.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: No sir it won't be.

Justice Byron R. White: (Inaudible)

Mr. Mallory E. Horne: No I think he is absolutely and unequivocally convinced that he wants to destroy the Florida Milk Commission.

I think it's his one ambition in life and I think he says so.

But the military question is ridiculous.

We did not set a price at either level and the Polar case attacked that one point.

And to say that you said in the Polar case that you're prohibiting any involvement or any expenditure that affects a military price is ridiculous too and yet that's what they said in their reply brief to you.

Justice William O. Douglas: On Page 75 of the record that the court says that this issue would become moot.

Mr. Mallory E. Horne: Yes sir.

Justice William O. Douglas: Could you explain that again?

Mr. Mallory E. Horne: I cannot explain it Judge.

I can't understand why we are arguing it here.

The court there said, “It's moot because we abolished our order and yet the biggest part of the transcript in this case involved a military installation.”

And we argued it again in this brief.

I cannot understand it because it in fact Judge had become moot.

Justice William O. Douglas: By reason of?

Mr. Mallory E. Horne: By reason of the destruction of the military milk order.

So that there was no compulsion that he buy milk from Florida producers at any specific price or that he sells to the military installations at any particular price in fact we took a hands-off policy.

Justice William O. Douglas: Is that the status of the present time?

Mr. Mallory E. Horne: Yes, sir.

That's the status of the present time.

Now with respect to the regulatory fee involved here and I -- I can't see that it violates a single standard that you ever set forth with respect to a state rights, states right to have a regulatory body hence sufficient financially to accomplish that aspect to this jurisdiction.

This statute simply says this, that the producers and the distributors play identically the same fractional percentage of each gallon of milk produced on the one hand or distributed on the other for the financing of this Commission.

That fee never touches the general revenue fund of the State of Florida.

It is never expended in any function of our Government, save this Florida Milk Commission.

It is held by the state controller in trust and separate from all other general revenue funds and it ever exceeds 125% of the budgeted needs of Florida Milk Commission in a base for the rest of that year.

There was no testimony in this record whatsoever that this fee was one excessive.

It was applied to this distributor differently than any other distributor, nor that it ever touched in any way the general revenue fund of the State of Florida.

It's difficult for me to see how any regulatory fee could one be fairer or two, fail to meet the standards set down by this Court to compare to the Standard Oil case is absorbed, the gasoline taxes of this Country either go directly to the general revenue funds at several states or they are earmarked constitutionally or statutorily for roads and this is not the specific case here.

So I think that the question of the involvement of the military in either of its aspects is not justified and that the position of the State of Florida in both regards is fair and meet standard set fort by this Court.

Thank you very much.

Chief Justice Earl Warren: Mr. Savary.

Argument of Johnson S. Savary

Mr. Johnson S. Savary: Mr. Chief Justice, may it please the Court.

I will address my remarks mainly to the commerce question that has been brought up by the appellant in this case.

But before doing so, I believe that it will be of assistant to this Court and analyzing the facts in this case, and this case to understand a little bit more about the milk biddings in the State of Florida.

Now very briefly, there are five milk marketing areas in the State of Florida under the jurisdiction of the Florida Milk Commission.

We are concerned in this case only with the Pensacola area.

But very briefly, we have the Tallahassee area, the Northeast area which is Jacksonville, the Central Florida and the Tampa area.

Now, this so-called scheme that the appellant accuses the Commission of adopting is the same scheme used in every other area in the State of Florida.

In other words, we have a uniform system of milk regulation in each of the five milk marketing areas.

Now, I should point out to the Court to this 61 cent price has -- since the trial on this case been dropped to 59 cents in the Pensacola area.

It is also 59 cents in the Tallahassee area but it is 61 cents in the other three areas.

So in effect the Tallahassee and Pensacola area has a lower Class I price in the other areas in Florida.

Now, the base order or base scheme as referred to by appellant is as I said a uniform order but designating each milk marketing area but the same intent, the same construction, the same meaning as in this order, as an area order in the State of Florida.

Now, the Pensacola area was under the control of the Florida Milk Commission until in April of 1958 which timely produces loaded the Commission now or a period of approximately four years, the Commission was out of this area.

The producers ordered them back in once again in November 21, 1961.

Following this point, the Polar Ice Cream Company, the appellant in this case arbitrarily cut prices to his producers.

He cut it from -- from 61 cents that he was paying prior to the time this Commission came back in to 56 cents retroactive prior to the date the Commission came back in.

It further cut in month later down to 47 cents, I believe in on that to 43 cents per gallon.

Following this unilateral price cutting on the part of appellant, the Commission in due course exercise its authority on the statute and issued a letter to appellant stating that the producers that when your plant prior to the time the Milk Commission came back in are the producers that are assigned basis in your plant based on the previous course of needs.

Now, we are dealing merely with a local problem that Pensacola, the same problem we have in every other milk marketing area in Florida.

When the Commission goes in, the Commission must assign basis to a plant for a price order is nothing without a base order.

You can say that price order is 50 cents a gallon for Class I milk or 60 or 59, but unless you have a base order, and unless the producer and the distributor know what milk goes in or what category, you've got nothing to apply you prices to.

Now in the Pensacola area, it is actually a deficit area.

I think on theories in the United States, it is a milk deficit area.

The record shows and the Commission does not contested that there has been a surplus milk situation in United States for over 10 years and that there still is and I think they're all with will be surplus milk situation.

The Polar Company states that 70% of its total usage of milk or in other words 70% of milk, they process through that plant, comes from out-of-state.

The 30% of what they could do are processed and package comes from the milk marketing area in Pensacola area.

Now, out of the 70%, it comes in the Polar, Polar has no contractual arrangement, they have no base arrangement, they have no other arrangement with any other state, any other producers.

I challenge the appellant to show in his record where there's any testimony as to regular Alabama producers.

Now, he is trying to infer to this Court that because Pensacola is only 16 miles from the Alabama state line that they carry on a regular course of business with Alabama producers.

That is not the case.

They buy from a milk brokerage firm and the Demopolis, Alabama come and know as the Black Belt theory cooperative incorporated.

We call it cooperative but in effects it's actually a corporation.

They buy surplus milk.

The Alabama Milk Control Board regulates prices in Alabama.

They regulate the milk business in Alabama.

They're telling Alabama is distributed it for every gallon of Class I milk that you sell, you must pay your Alabama producers 56 and a half cents per gallon.

Mr. Zirkleback, the President of the Polar Company in the trial of the case and it appears in the record states that they -- he can go in Alabama and buy milk for 30 cents per gallon.

May it please the Court, the only milk he buy for 30 cents of gallon is surplus milk and we are not prohibits him from doing that.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Not to the extent that Florida Commission does Mr. Justice Goldberg.

Alabama, I understand, wants follow what Florida us doing.

But at the present time, they are faced with an influx of milk from Mississippi and Tennessee and Arkansas into Northern Alabama.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: That is correct Your Honor, yes, sir.

Justice Arthur J. Goldberg: -- and that is a basic step.

Mr. Johnson S. Savary: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible) purposes.

Mr. Johnson S. Savary: Yes, sir.

Justice Arthur J. Goldberg: Exactly.

Mr. Johnson S. Savary: Now, perhaps, the base order might go a half step further, a state that you must accept that because of the base order -- now the base order guarantees to Polar that it's going to get pretty much so many gallons per day and per week, per month out of the Pensacola area.

A producer of Polar may not go to border to sell his milk, may not go with the formal, they may not go to seal test.

His milk must be transported from his barn to Polar.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Yes.

Justice Arthur J. Goldberg: (Inaudible) to sell it.

Mr. Johnson S. Savary: That is correct Your Honor.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Yes but sir except.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Yes except --

Yes, let me not mislead.

You owned this -- the order does not specify the 30%.

Justice Arthur J. Goldberg: I understand it -- (Inaudible)

Mr. Johnson S. Savary: But based on the present application of approximately the proportion of milk that had being produced by the Florida producers and sold to the Polar plant.

Now, the order further states that there's 110% and 115% provision which is really, really -- you might call it a nice hair we called the distributor must accept up to 110% of the producer's milk that he must only pay for that percentage that actually gets into Class I sale.

The surplus is only a surplus price, your Class II, III, and IV prices.

Now, the Florida Commission follows the pricing schedule of the federal milk marketing area which is in existence in Southeast Florida, some eight counties and Southeast Florida has a federal order.

Now, we follow their price allocation and definitions on Class II, III, and IV milk.

Whatever their price is, we allow the same price to the Florida producers in our area and that is in effect based upon the Chicago commodity exchange.

So we say that -- that to whatever extent, Polar has Class I sales in Florida, Florida only that they must first use the milk that is assigned to them by these producers that is guaranteed to them to you.

They use that milk, and the record is very incomplete on it's phase and I'm sure that you will observe it and reading the record that the Judge Jones, Judge Caldwell and Judge DeVane, the three judges who herd the case referred to the fact that the Polar Company had no records on actual sales and utilizations.

They could not prove and did not prove at the trial of this case as to what extent of their sales where in Florida, as to what percentage of the Florida produced milk went in the Florida sale.

Mr. Zirkleback stated that as far as he was concerened, he did not keep records that he's treated milk as he would have can of sardines, it was only altogether.

And I don't see how that they can come in to this Court with all of these issues as to the Commerce Clause when there's nothing into record on the any violation of the Commerce Clause, whatsoever.

We did strictly with a local situation.

Now, I might make one further observation, that when Polar first came in the Court, they came into the military question with Mr. Horne has discussed and there are many complaints.

They finally got into to a face of commerce by saying in paragraph 43 of their amended complaint.

Polar says that “Because Florida Milk Commission forces us, requires us to take all of the Florida produced milk and any surplus produce milk and use it in our sales.

First, it violates a Commerce Clause.

We do not do that.

We only say that you have to take the Florida milk insofar as the Class I sale was utilized.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Yes except the from what the argument--

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Yes, but we say that any sales he wants to put in the military, he is free to contract Fort on out-of-state milk or on any other produced milk in Florida.

But we say that a Class I sale and we will further do insofar as pricing is concerned, is this milk sold on the street, in the store or delivered to the houses.

We don't want do that any way regulate military milk.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Mr. Justice White, he may go to his Florida producers and say that after I use your milk to the extent of my Class I sale.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Military milk is specifically defined, although it might be fresh wholesome fluid milk.

We have a separate category for military sales so that we won't in any way try to regulate.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: No, sir.

We still have the definition.

We just do not have a military order in the Pensacola area.

Alright so I'll try to explain it if I might.

Mr. Horne actually had the military phrased this question.

But in any milk order, in the milk areas excuse me, there is in effect what we call a military order which states that the producers have agreed to produce milk to be sold to the military at a free arranged price between the producer and the distributor.

They have agreed.

They have contractually made and argued and set a price and then producer say that, “We will produce surplus milk and you can put it in the military.”

The -- initially when this case was filed, there was a military order in effect in the Pensacola area.

That order was voted out by the producers.

In other words, the producers are saying that we cannot produce milk, keeping it for you to bid on the military that we are like any other businessmen that we don't want to sell our goods at a loss just to give you the privilege of bidding on a military contract with any other contract.

That we know what it cost us to produce milk and we can't sell that cheap.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Sir?

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: There is in the general allocation order which I'm not sure if it's in the record or not.

That classifies a separate and distinct classification of military milk so that if producers want to produce for surplus milk for that, they might.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: We disagree with that contingent Mr. Justice White because of the reason that this one --

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: The contention of the Commission is this very brief with that.

So long as he has Class I sale, in other words apart from military, taking military out separate.

If he has Class I sale, separate from his military, he must take a Florida produce milk first and put it into the Class I sale.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: After the Class I sales are used up, this milk becomes surplus milk.

He make contract with those producers for diverting in --

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Insofar as pricing his concern is not Your Honor.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Sir?

Justice Byron R. White: Think about the contract.

Mr. Johnson S. Savary: Yes, sir.

Now, a word if I might about --

Justice Arthur J. Goldberg: Would it be correct to say (Inaudible)

Mr. Johnson S. Savary: If the producers wish --

Justice Arthur J. Goldberg: If they want to change (Inaudible)

Mr. Johnson S. Savary: Yes, sir.

Justice Arthur J. Goldberg: In that respect?

Mr. Johnson S. Savary: Well, we're not holding them at all in that one point.

Let me say one point I meant about the way the price is determined for Class I sales in Florida.

The statute it's very clear in the elements, the Florida Milk Commission must consider in arriving at a Class I price.

As I mentioned, it was 61 cents and they reduced it to 59 cents.

They had a detail price study that what it cost to raise a gallon of milk or produce a gallon of milk in Florida, whether it be for sales to a supermarket, to a house or any other purpose of which it was intended to be used, it cost the same.

They took into consideration the cost of the cows, the land, the taxes, the real state taxes of course, the property taxes, the labor, the bid, and they inserted a minimum amount for overhead and profit.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Yes, sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: No sir, we had no Jurisdiction whatsoever in Alabama.

And I would -- they have speculated and not even attempted to say what it cost to raise a gallon of milk in Alabama, I have no idea.

I know that if Mr. Zirkleback can buy the 30 cents of gallon, surplus milk over there, that's indicative to me that it can be produce to that.

However, the Commission, control board, all had said he produced price 56 and a half cent for a gallon.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Mr. Justice Goldberg, I have run across one federal case and it involved a milk marketing -- federal milk marketing area which is in St. Louis.

But I think that the requirement as to infringement upon the importation of outside milk would be substantial saying on the Federal Act as on the state regulation.

And I was going to discuss that case after lunch very briefly.

Print this transcript Transcript: 

Argument of Johnson S. Savary

Chief Justice Earl Warren: Mr. Savary, you may --

Mr. Johnson S. Savary: Mr. Chief Justice --

Chief Justice Earl Warren: -- continue.

Mr. Johnson S. Savary: -- may it please the Court.

Before the lunch recess, I had finished summarizing my argument as to point one that Polar claimed was the reason that this order or the regulation on the statute of the Florida Milk Commission violate the Commerce Clause.

Now, the second point that they urged in their mini complaint was that because Florida Milk Commission had them pay the Florida producers 61 cents per gallon for milk that after they did that it economically, they were unable to go out and compete for milk.

And very briefly, I state that because they readily admit in their record, in the testimony and this is the record back at the trial as they are able to go out and buy milk at any time for 30 cents a gallon or 35 cents of gallon, 36 cents a gallon, that economically they have not been heard at all by virtue of the requirement that they pay the Florida producers, a Class I producer price.

Now, in summary as to the Commission position as to whether or not it violates the Commerce Clause, we steadfastly and affirmatively state, may it please the Court, that we are dealing only with a local problem, that we're not in any way attempting to regulate commerce, that we're not in any way attempting to go into Alabama or Mississippi or Arkansas or Wisconsin, any other state and this circle back buys his milk.

We are not going in that state of regulating it.

We are merely dealing with a local problem in Pensacola that is similar to the problem we have in each of our other four milk marketing areas.

Now, --

Justice Hugo L. Black: Do you impose any kind of burden on a local distributor who does buy milk from other States because it's not imposed on other distributors of the State?

Mr. Johnson S. Savary: No sir, we do not sir.

Mr. Justice --

Justice Hugo L. Black: No kind of penalty and no kind of burden?

Mr. Johnson S. Savary: No sir Mr. Justice Black, the -- any distributor who buys milk from other State is treated the same as they distributed buys all these milk from interstate.

There's no penalty, there's no burden, there's no any other tax other than a tax that's always been discussed here today which is the -- the taxes supposedly working of the Milk Commission.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Until only on -- only after it has used.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Yes sir, the -- the --

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Yes sir Class I milk.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Yes sir --

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Yes sir, if they're still supplying Class I sales.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: That's correct Your Honor.

Justice Byron R. White: (Inaudible)

Justice Hugo L. Black: Why do you say that does not impose a burden?

Mr. Johnson S. Savary: May it -- Mr. -- Mr. Justice Black, we feel that it is not a -- a burden on interstate commerce in any respects because we're dealing with only a local problem first under our police power and that is to ensure a wholesome supply of fresh milk to the consumers in the State of Florida and to promote the dairy industry in the State of Florida which is -- which were charged with under our law, which has been upheld by this Court -- the (Inaudible) law which has been upheld by this Court many times before.

We don't --

Justice Hugo L. Black: Which -- which case -- which case do you refer as upholding that power?

Mr. Johnson S. Savary: As I understand the -- the original case of Nebbia versus New York upheld the right of a State to impose a Milk Control law, to promote the dairy industry within the State of New York and the Florida laws model quite substantially after the New York law.

Also it is quite similar to the Pennsylvania law and the Virginia law.

Now, Mr. Justice Goldberg asked me right before lunch about this base plan and wanting to know if were there any decisions on it.

There is a decision in the State of Florida which has been cited our brief which is the Borden Company versus Odham, the previous milk -- Chairman of the Milk Commission and that's cited in 121 So.2d 625.

And that case upheld the right of the Florida Milk Commission to -- as a -- as a measure of putting the producers and distributor together, upheld the right to assign bases of a producer and a plant.

And that would throughout the State of Florida and the four areas with the exception of the Pensacola area at that time, Pensacola was not under the Florida Milk Commission so there was no burying of that case on Pensacola.

But again the Florida Milk Commission, the right in the other four areas to pass such a base order that we have passed and we have an application in those four areas and it's the same base order that we have now passed for the Pensacola area.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: The -- insofar as it would be limited to the producers that have earned a base in a particular distributing plant --

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Dealing -- Mr. Justice White, with the hypothetical question, I feel that our base order would too vastly do that, but we do not have that situation in Pensacola area.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: We have strictly deficit area out there.

Justice Hugo L. Black: What is the difference in your law as you say defines and a statute might be drawn by Legislature could effect what dealers buy and selling milk produced in Florida, hereby prohibited buying milk from outside the State to supply customers, while they are buying, while they are distributors and licensed to sell at all, and that they should be penalized.

Is there any difference?

Is that the effect of your statute?

Mr. Johnson S. Savary: I don't so argue that is Mr. Justice Black.

My argument is it --

Justice Byron R. White: You argue that it's not?

Mr. Johnson S. Savary: My -- perhaps, I haven't understood your question but -- but our argument --

Justice Hugo L. Black: -- (Voice Overlap) -- you just said that, in order to conserve the dairy industry, I'm not saying it's -- absolutely would mean one way or the other position.

In order to conserve the production of milk in the dairies farm of Florida, the Florida people about the health and safety of the people, hereby declared to be the policy that people shall only sell, distribute milk in the State of Florida, Florida milk, would have a license and none shall be granted a license unless they agree in advance that they will first buy all their milk from this Florida, before they buy it from any other States and it should be a crime for them to buy milk from any other States under -- in that situation.

Is that the -- is that the effect of your sentence?

Mr. Johnson S. Savary: No, sir.

Justice Hugo L. Black: Why?

Mr. Johnson S. Savary: The effect of our statue is that we will license a distributor.

For instance, a new distributor could come into Pensacola today and be licensed as a milk distributor, if the otherwise meets the -- the requirements of our law.

He is not got any previous producers tied to him in effect until there is a base building period in his plant.

He is free to buy his milk where he wishes to buy.

Justice Hugo L. Black: When he gets the license under this, you say he's not.

He's got to buy from them at 61 cents I understood you to say, until all their milk's exhausted and during that time, he can't buy any from outside of the State to supply his need.

Mr. Johnson S. Savary: Yes sir, except that going back prior to the time the Milk Commission went back into jurisdiction, these are the same producers heed by contract with buying and paying the same price for prior the time we went into control, and we merely picked up where that left off and assign these producers a base in that plant which they had already previously earned.

Justice Hugo L. Black: What effect does that have on the interstate commerce question involved?

Mr. Johnson S. Savary: In -- in the Pensacola area, I don't think it has any effect on it Mr. Justice Black, because you have a deficit area and secondly, because you have a -- a guarantee of milk from Florida producers to a Florida plant to be sold locally in the State of Florida.

You're dealing only with a local problem under the police power.

I don't think that that Milk Commission may -- could tell Polar they had to sell Florida milk in Alabama or had to sell Florida milk in Mississippi or any other State.

Justice William O. Douglas: If you look --

Mr. Johnson S. Savary: I think --

Justice William O. Douglas: -- at the record at page 186 a minute and --

Mr. Johnson S. Savary: Yes, sir.

Justice William O. Douglas: Have you construct me out?

Near the -- near the middle of the page, the court said -- the District Court in this case, "The defendant does not attempt to regulate the price that plaintiff pays his out-of-state producer nor do the regulations restrict plaintiff from purchasing out-of-state milk in any amount or for any price."

Is that right?

Mr. Johnson S. Savary: Let me read that, the defendant does not attempt to -- the fist page of it is that, we do not tell Polar what it must was pay for any out-of-state milk it buys.

He is free of contract for any way it wants to.

Justice William O. Douglas: Not if not -- not for using this Class I category though, is he?

Mr. Johnson S. Savary: It maybe used for any use Polar wishes to make of it Mr. Justice Douglas, but on our base plant, he must first use a Florida milk in Florida sales.

Justice William O. Douglas: Well, that's a qualification then from what the court says here.

Mr. Johnson S. Savary: Yes -- now --

Justice William O. Douglas: Nor do the regulations restrict plaintiff from purchasing out-of-state milk in any amount or for any price, but that isn't consistent of what you said other, is it?

Mr. Johnson S. Savary: I -- I was going to -- that we, in any way limit except that he must first use the Florida milk in Class -- in Florida Class I sale.

He is free at any time to buy any other milk he wishes at any other price.

He can manufacture with it.

He can sell it to military.

He can sell it back in Alabama, to Mississippi, any place he wishes to sell.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: There -- Mr. Justice White, there is no evidence in the record than an Alabama producer had been attempting to compete.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: That -- there is --

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: That is correct and if the Alabama milk is sold by an Alabama distributor in Florida, the Alabama distributor must pay that Alabama producer 56 and half cents per gallon.

Justice Byron R. White: (Inaudible) that -- that's sale in Alabama distributor (Inaudible)

Mr. Johnson S. Savary: For retail sale.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: No sir, except that he must comply with the Fair Trade Practice Order --

Justice Byron R. White: Yes.

Mr. Johnson S. Savary: -- which is -- is a part from this producer price.

Justice Byron R. White: So the -- the Alabama (Inaudible)

Mr. Johnson S. Savary: At the same price, Polar must sell it for.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Yes sir.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: No only selling in that the Alabama distributors not have any economic advantage on the retail selling in whatsoever.

In fact, he got an additional cost of transporting it into Florida sir.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Some of --

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Well, some of the 56 and half cents now -- so that the Court will not be misled.

The -- the price now is 59 cents and not 61 out there.

So --

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: That's correct Your Honor, he does not.

Justice William O. Douglas: Then why isn't this governed by the Baldwin and Seelig case insofar as Class I is concerned?

Mr. Johnson S. Savary: The Baldwin-Seelig case as I understood it had to do with the State of New York.

Justice William O. Douglas: And the State of Vermont.

Mr. Johnson S. Savary: And the State of Vermont, and the State of New York told these dealers that they could not sell milk in the State of New York unless they paid as much that they would have to pay if they bought New York milk.

Justice William O. Douglas: Well, that's just a -- a variation of this theme of this case.

You can't sell it as long as out-state milk in Class I as long as there's a local supply.

Mr. Johnson S. Savary: Yes sir, but I don't -- I don't think that they're as the same Mr. Justice Douglas because in the Baldwin and Seelig case, Seelig brought all of his milk out of Vermont.

He bought from a separate corporation that he owned in Vermont, the Seelig Creamery, and he bought it from locally produced -- local producers in the State of Vermont.

He transported a hunk of 90 % in cans and he sold after he transported it in the State of New York 90% in the containers and in 10% he processed all of his milk, he sold in New York came from Vermont.

Every drop and the State of New York said, “We will not give you a license and be illegal for you to sell this milk in New York unless you pay Vermont the same thing you have to pay for New York milk.”

And as I understood --

Justice Hugo L. Black: I don't quite get your difference.

The sentence to which Justice Douglas declared to your case in 186 had not, do the regulation, restrict plaintiff from purchasing out-of-state milk in any amount or for any price.

I understand you say that is to rest but it does keep him from selling.

Mr. Johnson S. Savary: No, sir.

They -- they may sell it.

Justice Hugo L. Black: As Class I milk in Florida unless they have already exhausted the Florida market.

Mr. Johnson S. Savary: Yes, sir.

But they are free to buy and make any use of it and manufacture it.

Justice Hugo L. Black: Free to buy and make use of it except for them to use in which they want to make.

Class I -- Class I.

Mr. Johnson S. Savary: Well, it -- it can still -- in the Pensacola area, there is a position where that there are still Class I sales available running out-of-state milk.

Justice Hugo L. Black: That may -- that maybe true but so far as these people are concerned as I understand it, what you have is a circulation.

Well, why do you -- when a man gets a license and he's a dealer, he can't buy Class I milk outside to the State and sell it, purchases in Florida unless he first shows that he's exhausted all the supply of Class I milk to be purchased inside Florida.

Mr. Johnson S. Savary: Only from the producers that have earned a base --

Justice Hugo L. Black: Oh, whoever it is?

Mr. Johnson S. Savary: Yes, sir.

Justice Hugo L. Black: It does place or whatever amount it is but it is the right amount.

But it does place a burden on people who wants to sell milk in there because their customers, if they -- if they get their milk, they can sell it except in the classification which brings them price below that which they can sell, isn't that right?

Mr. Johnson S. Savary: If it in fact, and if this Court finds that such a regulatory scheme places the burden on interstate commerce, it is such an insignificant burden as compared with the -- the police power that the State have to regulate his own industries within its own State.

Justice William J. Brennan: (Inaudible), I believe Polar had power (Inaudible) to sell it for, is that right?

Mr. Johnson S. Savary: Yes sir.

Justice William J. Brennan: But to that extent, (Inaudible) that aspect of commerce filed an Alabama distributor (Inaudible).

Mr. Johnson S. Savary: Yes, going beyond the record and speculating a moment.

I know -- I can't conceive of any instance where an Alabama distributor would buy the milk at 56 and half cents and get it into his plant and cool it and transport it into Pensacola and be able to sell it that even below 59 cent.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: Yes.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: Yes sir.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: Yes sir.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: Yes, now --

Unknown Speaker: (Inaudible)

Mr. Johnson S. Savary: It may Your Honor.

Unknown Speaker: That's the Pensacola industry who issued the (Inaudible)

Mr. Johnson S. Savary: Mr. -- Mr. Polar may go into Alabama and buy every gallon of milk it could find at 30 cents a gallon and resell it to Fort Benning, Georgia.

And I only say so in that is we feel we are entitled to a regulatory tax which Mr. Horne discussed this morning.

Unknown Speaker: (Inaudible)

Mr. Johnson S. Savary: If he can reach an agreement with the Florida producers, yes sir.

The -- the Milk Commission is not stepping back in this military milk area that the -- the Commission feels that the Florida producers have the right to say whether or not they wanted milk sold below cost and that they have that contract right to do so.

But Mr. Polar may buy Alabama milk at 30 cents and sell it to Fort Benning.

Now, may I please re-brief it to two cases which I may have --

Justice Hugo L. Black: May I have just one question on that in there?

Mr. Johnson S. Savary: Yes, sir.

Justice Hugo L. Black: As I understand what you're are saying is that the State has not, by regulation or otherwise, put any burden that would keep the military Government from buying on a competitive basis, is that what I am --

Mr. Johnson S. Savary: Yes, sir.

Justice Hugo L. Black: But that a man maybe unable to buy from a producer, in course demand the producer voluntarily desires not to sell it.

Mr. Johnson S. Savary: Yes, sir, that is correct.

Justice Hugo L. Black: We're getting back to that basis as to what the State doing, what the individual did.

Mr. Johnson S. Savary: Yes, sir.

Now there are two cases which I have found on this base system of allocation.

Now, in the case in this Court had before the Lehigh Valley Coop versus United States which came out of Pennsylvania.

In that case, this Court was asked to decide whether or not the -- the milk administrator had the right under the Agriculture Adjustment Act of 1937 to pay as you order, the compensatory payment order which it attempt -- which it passed and attempted to enforce and that order was struck down because the administrator did not have that authority.

Now under that case, the Section 8 (c) (f) (g) of the Act, states that no marketing agreement or order applicable to milk and its products in any marketing area shall prohibit or in any manner, limit in the case or products of milk, the marketing in that area of any milk or product of any other production area -- area in the United States.

Now, in that case as I understood the Court's decision, it suggested that even though the "compensatory-payment” plant in that case was struck down, that nonetheless an administrator under the provisions of this Act could still pass an order which stated that the "compensatory-payment" could be based not as the base in case, but be based upon the difference between what he pays for the milk and a Class I price in effect in the pool of that particular time.

Now, in the case of case of Bailey Farm Dairy versus Anderson and this case is not in our brief and I like to give the Court citation to this case.

157 F.2d 87, the name of the Bailey Farm Dairy versus Anderson, and certiorari was denied by this Court and --

Unknown Speaker: (Inaudible)

Mr. Johnson S. Savary: Excuse me, 157 F.2d 87 --

Unknown Speaker: (Inaudible)

Mr. Johnson S. Savary: Came from -- out of St. Louis area and certiorari was denied by this Court in 329 US 788.

Justice Arthur J. Goldberg: Is that (Inaudible)

Mr. Johnson S. Savary: Yes sir and then I say --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Mr. Justice Goldberg, I see a distinction but I think that a -- as a similarity between the areas of an undue burden on interstate commerce and an undue burden on importation of milk from another area on a Federal Milk Marketing area, I think that -- that substantially the -- the test would be the same if it's a burden in one essence, it was certain to be as the statute says, indirectly or directly prohibit the importation from one area into another and I mention this case for that one reason that in this Bailey case --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Yes sir, we concede that Congress has the right to regulate commerce but we think that until Congress acts on a particular area that displayed on its police power, has a right to regulate a local condition and if it indirectly affects commerce along as Congress had not acted in that area, then we're safe.

And I -- I submit to this Court the same test for measuring a burden on interstate commerce could be same test on measuring whether or not on a Federal Milk Marketing area, there was a burden on bringing milk in from one area into another area.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Yes, sir, I do.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Yes sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: The -- the milk case --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: Yes sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Johnson S. Savary: I don't believe that we in our philosophy limited to the protection only of the dairy industry.

We with that, say that in order to ensure to our citizens a wholesome supply of fresh fluid milk that the police power in the station be exercised to regulate the milk industry.

Because of the peculiarities with the milk industry which is not present in -- in any other industry that I know of as it is present with the milk industry.

And secondly in with that, we're interested in not protecting but promoting the economic industry of milk in the State of Florida.

In the Bailey case and very briefly, the Milk Order stated that a milk handler must allocate to his milk producers, I believe its 85% or 90% of all of the milk produced by those producers into Class I sales before he can bring in out-of-state milk into that area and give it a Class I sales price.

That the only difference between that base order and the base order we have is 10% and that is the only difference.

There is one other case and this is all --

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: Yes, sir.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: That is correct Mr. Justice White.

The other case is found as a Virginia case construing the Virginia Milk Act which also is not in our brief is Southside Cooperative Milk Producers Association versus State, 92 S.E.2d 351.

The Supreme Court of Virginia stated that under the Virginia Act which is almost the same as the Florida Act that the Milk Control Board had the right to assign bases in a plant and allocate milk down to his base producers.

In summary, I would like to say that position of Florida Milk Commission that in the exercise of police power granted in the statute that we do not feel the we are burdening interstate commerce but if we do is only incidental and it's promiscuous in the exercise of our police power to govern and control merely a local problem.

Justice Byron R. White: (Inaudible)

Mr. Johnson S. Savary: We -- we have frozen a base Mr. Justice White and said that our producers cannot --

Justice Byron R. White: (Voice Overlap)

Mr. Johnson S. Savary: -- increase.

The --

Justice Byron R. White: (Inaudible) could your Florida producers have 150,000 gallons of milk (Inaudible)?

Mr. Johnson S. Savary: Only if the 150,000 gallons is within the base that has been frozen and we froze the base until the Florida producers, they cannot produce an excess of that amount and get a Class I price for it.

Justice Byron R. White: (Inaudible) but Polar, Polar meet (Inaudible).

Mr. Johnson S. Savary: Well, -- every month that Polar sales go up and down, he knows that he can count on a 100,000 or 150,000 gallons of milk from Florida producers.

He knows that's coming in.

And that is one to the elements and we feel that is a -- a fair deal for Polar as it is a fair deal for the producers.

He's guaranteed that much milk.

You don't have to look for it, it's there.

Unknown Speaker: (Inaudible)

Mr. Johnson S. Savary: Yes, sir.

Unknown Speaker: (Inaudible)

Mr. Johnson S. Savary: It was taken over by the four-year period.

Unknown Speaker: About a four-year period?

Mr. Johnson S. Savary: Yes sir.

Unknown Speaker: Now, Polar's (Inaudible)

Mr. Johnson S. Savary: Right now if they go above it this month, he is free to contract for the amount that is --

Unknown Speaker: Outside of it?

Mr. Johnson S. Savary: Outside.

Yes, sir.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: That's surplus milk insofar as pricing is concerned.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: You mean the freeze of the base?

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: We're speculating again as to whether it will or will not be.

We don't foresee that see they would be changed.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: Yes, sir.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: Conceive, yes sir.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: Yes.

Justice William J. Brennan: (Inaudible)

Mr. Johnson S. Savary: Yes sir.

Thank you.

Chief Justice Earl Warren: Very well.

Argument of Joe J. Harrell

Mr. Joe J. Harrell: Let me direct myself just to that --

Chief Justice Earl Warren: Mr. Harrell.

Mr. Joe J. Harrell: -- particular situation a moment that the base of course is certainly percentage situation of Class I sales.

It's not only gallon into basis and the percentage totals up to 100% of Class I, that's exactly the point sir.

In other words, it -- it's a hot -- it's a percentage not a gallonage so that so long supposed that -- supposed that his Class I sales would have doubled, nevertheless, that percentage would shift upward so that if Mr. (Inaudible) who was the first producer named in the record had 8.67% for his base --

Justice William J. Brennan: (Inaudible)

Mr. Joe J. Harrell: That's right.

Then instead of him being at that same level, he would have doubled the amount but the percentage would remain the same and there's the base in the thing.

Justice William J. Brennan: (Inaudible)

Mr. Joe J. Harrell: No question about it.

Their law says it and -- and if it's absolutely the truth.

Justice William J. Brennan: But (Inaudible), the producer and (Inaudible) ties for his purpose are only those producers who you are buying that went under --

Mr. Joe J. Harrell: That -- that is correct, yes sir.

Justice William J. Brennan: So that -- so that's the only time that you will not have, let's say 100% of your requirement because that particular could not (Inaudible)

Mr. Joe J. Harrell: That is -- that is correct.

And I don't want to get off on something that's not pertinent but this is very pertinent and that is that this base could be transferred so that conceivably you see to a bigger dairy.

Justice William J. Brennan: You mean other producers?

Mr. Joe J. Harrell: If the Milk put -- if the Milk Commission approved it, they could transfer that to another bigger dairy and he would have to take ever increasing quantities of milk.

And I want to correct something that I said here this morning by any plaintiffs and I want to apologize.

I said the case with just cause, was the Odham case.

The Odham case which is reported in 121 So.2d 625, considered the same problem but it was the case which made the Milk Commission go to the Legislature and have the just cause redefined so that the case that considers that squarely and says that he cannot terminate that relationship without just cause is Florida Dairy versus Florida Milk Commission reported at a 149 So.2d, 867.

And I cite that at page 23 of our main brief, so I did want to clear that up but they -- they touch on the both -- on the same problem but this later case was after the Legislature had amended this to see that they could not terminate the relationship without just cause.

And the point that rose in that was the distributor came in and said he was losing money and he wanted to terminate the relationship.

And the Court said, “No, there's been no abuse of discretion because sufficient just cause has not been shown even though you are losing money by having to take this milk from them, you cannot terminate the relationship so that there is another part of the same scheme that forces a milk distributor into a permanent marriage which he cannot terminate except upon the Milk Commission giving him the permission so to do and he --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: I feel sure that he could.

The testimony says that he could.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: Well, Mr. Justice Goldberg, the record guild the figures of the milk which he himself purchased from Black Dairy's from these other places he supplies and for the month of November 1961 and they give the gallonage so that he shows exactly how his business was run.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: That's 70% is correct, that you -- that is correct --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Joe J. Harrell: I'm only speaking from the record he said that it was not.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Yes, sir.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Yes sir, I would like to straighten you out and there again, instead of conjecture -- if we will go to the record, I think that might be heavy.

The Administrator of the Milk Commission, Mr. Fisher, testified at pages 147 and 148 of the record, that if he uses Florida milk for the military, it would be Class I and he would pay 61 cents a gallon.

And the next question was, “You know that's true?”

And Mr. Fisher says, “Yes, I know it and you do too.”

Mr. Fisher was the Administrator of the Florida Milk Commission.

He was the headman in-charge and that is as clear as the record can be.

So that leaves us with this.

Your question Mr. Justice White, all throughout this argument, has been to determine whether or not there is any requirement if a gallon of Florida milk goes into the military to pay 61 cents for it.

That has been as I understand the problem.

And I tell you that the record says exactly that's what is required to be.

Now, there's nothing --

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Not a thing and there's nothing in this record about they can make some sort of negotiated contract.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Well, here -- here is the reason.

I want to clear that up for you.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Alright, let me -- let me tell you how this came about.

There was a proposed military order which they talked about but the producers voted not to be bound by that so that that automatically took that out of the case and left in the 61 cents price.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Insofar as the Pensacola area is concerned, there is not.

So that the only order and the only requirement for military milk used in the Pensacola area is 61 cents a gallon.

Justice Potter Stewart: But -- am I right in my understanding that with respect to milk which is to be sold to the military, the military installation, there is no requirement that the -- that the -- that Polar first exhaust the Class I supply in the four-county area, is that right?

Mr. Joe J. Harrell: That is not absolutely correct.

They say this.

The testimony says that insofar as the military milk is concerned, you don't have to use Florida milk.

Justice Potter Stewart: That's right.

Mr. Joe J. Harrell: If you use Florida milk, you pay 61 cents per gallon.

Justice Potter Stewart: Right.

Mr. Joe J. Harrell: That's right.

Justice Potter Stewart: But there's no requirement that you use any Florida milk?

Mr. Joe J. Harrell: No, there is not.

That's right -- for -- for the military.

Justice Byron R. White: (Inaudible)

Justice Potter Stewart: That's the order --

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: No sir it's not.

I don't find it in the record.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: Exactly.

Justice Byron R. White: (Inaudible)

Mr. Joe J. Harrell: That's right.

Justice Byron R. White: (Inaudible)

Justice Potter Stewart: You don't have to exhaust the -- the four-county supply.

Mr. Joe J. Harrell: I'm frank to say that the record is devoid of that particular subject because if the Milk Commission took the position that because the producers voted down the Military Milk Order in effect that the only thing logically to draw from that was that military milk was of no concern in this case, that is the position make taken today.

But yet, the other side of the coin is if you use a gallon of Florida milk for our good Florida boys based at the Pensacola Naval Air Station, you must pay 61 cents a gallon for it.

Justice Potter Stewart: If you us the four-county law?

Mr. Joe J. Harrell: If you use -- that --

Justice Potter Stewart: -- but there's no requirement of any kind to do so?

Mr. Joe J. Harrell: As I say, the record is devoid of (Voice Overlap) --

Justice Potter Stewart: But you conceived that's correct, don't you?

We will understand the case.

Mr. Joe J. Harrell: Yes sir, I'm -- I'm trying to help you and I say that that's their position and so far as any order of the military -- order that Polar used Florida milk for the military, there is none, to answer you directly.

Justice Potter Stewart: Right (Inaudible).

Thank you.

Unknown Speaker: (Inaudible)

Mr. Joe J. Harrell: Yes sir, yes sir.

There's only one other thing.

There've been several references that Polar is paying the same price to producers that after the Milk Commission came in that he paid the four.

That is incorrect in our site for -- so that the Court will understand that page.

The record at page 135 which clearly said that and that is this, 61 cents was paid only for an agreed amount of milk and all over that amount of milk which was furnished by these producers we're paying for at $4 a hundred weight or 35.5 cents per gallon.

So that's a big difference as opposed to the contention, otherwise and the record bears that out and I would like to call the Court's attention.

Another thing is this, the Court might have some puzzle as to how could -- how did this problem arise now when opposing counsel said the Milk Commission had previously been in the Pensacola area and then was out of the area.

The answer to that is this.

This is the first time since the establishment of the Milk Commission that there's ever been a base system of allocation which takes that Pensacola area.

This was the first time.

And when they were in the Milk Commission -- when the Milk Commission was in before, there was never a based allocation system and of course that's the whole bias of the thing.

And I think this Court safely understands it and I appreciate your time.