Summary of a Recent
Judicial Development in
Marketing Orders

Milk Producers Fail to Enjoin USDA from Adjusting "Make Allowances"
in Favor of Producers of Manufactured Dairy Products

Eric H. Foy
National AgLaw Center Research Associate

Summary of Decision

In Arkansas Dairy Cooperative, Inc. v. United States Department of Agriculture, 576 F. Supp. 2d 147, 2008 WL 4277952 (D.D.C. 2008), the United States District Court for the District of Columbia held that once the United States Department of Agriculture (USDA) fixed minimum milk prices at a level other than parity, it could adjust minimum milk prices to respond to changed circumstances without considering other factors set forth in the Food, Conservation, and Energy Act of 2008 (FCEA) and the Agricultural Marketing Act of 1937 (AMAA). The court denied the dairy producers' motion for a temporary injunction, and held that dairy producers did not have standing to challenge the federal milk marketing order (FMMO) because they were not seeking to protect a personal right granted by statute.

Background

FMMOs set a minimum price for sellers of raw milk and impose obligations on dealers who purchase milk.

See id. at *4-5. Federal "make allowances" are provided to producers of manufactured dairy products because the USDA determined that producers of such products compete in a national market instead of a regional market. Id. at *5-6. In January 2006, the USDA announced that it would conduct a hearing to address proposed adjustments to make allowances in the pricing formulas. Id. at *9. On September 6, 2006, the USDA announced that it had insufficient evidence to issue a decision changing the make allowances. Id. The hearing reconvened and an interim order was issued; however, a legal challenge was launched to halt the implementation of the make allowance changes. Id. at *9-10: see also Bridgewater Dairy, LLC v. United States Department of Agriculture, 2007 WL 634059 (N.D. Ohio Feb. 22, 2007). Ultimately, on June 16, 2008, the USDA issued a tentative partial final decision. Id. at *11. The decision stated that make allowances needed to be adjusted to reflect the significant increase in costs that producers of manufactured dairy products were experiencing. Id. The proposed rule was adopted as an interim final rule on July 31, 2008. Id. at *12. However, the instant lawsuit delayed the rule's effective date. Id. at *13.

Arguments

Defendants argued that the dairy producers lacked standing to bring the lawsuit because the AMAA is the type of law that precludes judicial review according to the Administrative Procedure Act (APA). Id. at *13-14.

Plaintiffs contended that they had standing because the final rule reduces payments into the producer settlement fund. Id. at *14. Plaintiffs also sought injunctive relief. Id.

Analysis and Holdings

Because the legal challenges before the court were "presented by a group of producers and cooperatives . . . objecting to a regulation rather than a producer asserting a definite personal right in a settlement fund," the court held that plaintiffs lacked standing to challenge the FMMO. Id. at *17-18. Unlike its shorter standing analysis, the court's lengthy analysis of plaintiffs' request for temporary injunctive relief consisted of four parts: (1) whether there was a substantial likelihood that plaintiffs would succeed on the merits of their claim, (2) whether plaintiffs would suffer irreparable injury absent an injunction, (3) whether an injunction would harm the defendants or other interested parties, and (4) whether the public interest would be furthered by an injunction. Id. at *20. The court stated that the plaintiffs' likelihood of success was minimal because plaintiffs' characterization of the agency's rulemaking process conflicted with the facts and plaintiffs' brief. Id. at *21. Also of note, the court stated that plaintiffs' claims were based on an erroneous reading of 7 U.S.C. § 608(c)(18), which did not constrain the USDA to consider the FCEA and AMAA before adjusting make allowances. Id. As for satisfying the irreparable harm prong, the court stated that plaintiffs' burden was very high. Id. at *32. Because plaintiffs alleged only claims of economic harm, they did not make a convincing case for irreparable harm. Id. at *33-34. Finally, the court found no significant public interests weighing in favor of granting extraordinary relief, and stated that plaintiffs failed to make a convincing argument that their alleged harm would be greater than the harm to the dairy industry as a whole. Id. at *35-36. For these reasons, the court denied plaintiffs' motion for preliminary injunction. Id. at *36.

The case was decided on September 19, 2008.