Court Decisions

The Northeast Dairy Compact Commission has been a party in three lawsuits testing the constitutionality and implementation of the Northeast Interstate Dairy Compact. In two of the cases, the Commission was a defendant; in the third, the Commission is a plaintiff.

In the first case, Milk Industry Foundation v. Glickman, the national trade association representing the interests of milk processors filed a lawsuit in federal district court in Washington, D.C., challenging the constitutionality of the Northeast Interstate Dairy Compact as well as the administrative propriety of the Secretary of Agriculture’s finding of a "compelling public interest" in the New England region. (By Congressional condition of consent to the Compact, the Secretary’s finding was a condition precedent to implementation of the Compact.) The Commission intervened as a defendant in this action. The federal district court first denied the plaintiffs’ motion for a preliminary injunction, and later, granted the Secretary’s and the Commission’s motions for summary judgment, concluding that the Compact was constitutional and that the Secretary’s "compelling public interest" finding satisfied the requirements of the federal Administrative Procedure Act. Plaintiffs subsequently appealed this decision to the United States Court of Appeals for the District of Columbia Circuit. On January 20, 1998, the appellate court affirmed the district court’s decision. Although MIF had the option to seek either rehearing before the appellate court or discretionary review from the United States Supreme Court, it requested neither form of review. Accordingly, the MIF litigation has now been concluded, and the constitutionality of the Northeast Interstate Dairy Compact has been upheld.

In the second case, the Commission and its executive director, Daniel Smith, were named as defendants in New York State Dairy Foods, Inc. et al. v. Northeast Dairy Compact Commission et al., a lawsuit brought in federal district court in Boston, MA. The primary plaintiffs in this litigation were non-New England milk processors who challenged the scope of the Commission’s authority to regulate milk that is produced and processed outside the region but distributed in the region. Plaintiffs also challenged the general composition of the Commission. Plaintiffs initially filed a request for a preliminary injunction seeking to enjoin the Commission from collecting certain over-order obligations from these processors, but the district court denied this motion in August 1997. The case was then briefed by both sides and argued before the court on April 1, 1998.

U.S. District Court Judge Patti B. Saris on November 2, 1998 ruled in favor of the Northeast Dairy Compact Commission. In its ruling, the court denied the challenges brought by the processors and granted the motion for summary judgment filed by the Compact Commission.

The court denied the processors' challenge that the Commission lacked the authority to regulate Class I (fluid) milk produced, processed and packaged outside of New England but distributed within New England. Judge Saris said Congress' consent to the Northeast Interstate Dairy Compact gave the Commission the authority to promulgate provisions governing the pricing and pooling of partially regulated plants (milk plants not located in the regulated area but having fluid milk sales within such an area or receipts from farmers located in such an area).

The court also denied a challenge by the processors that the Commission did not have the authority to charge a 3.2 cent administrative assessment per hundred pounds of milk on fluid milk handlers regardless of the source of the milk they process, if they distribute their milk in New England. To the plaintiffs' claim that the administrative assessment violates the equal protection clause of the federal and state constitutions because it should also apply to the distributions of manufactured milk products, Judge Saris stated, "This is sour milk." She noted that the Commission has no regulatory authority over non-Class I distributions. Judge Saris concluded, "…it is rational for the Commission to assess the costs of administering the over-order regulation -- an assessment to which Congress consented -- on all those who distribute Class I milk in the regulated area 'as a cost of doing business in the market.'"

The plaintiffs had also charged that the participation in certain Commission activities by Compact Commission members who were New England producer or processor representatives violated the Due Process Clause of the Constitution because these members had a direct interest in the milk pricing. The court, however, denied this challenge, stating that individuals from a particular industry typically serve on administrative bodies with regulatory authority over that industry. Judge Saris said, "The inclusion of dairy farmers on the Commission reflects a deliberate judgement by the participating Compact states -- a judgement approved by Congress -- to account for dairy farmer expertise within each state delegation." She added that the Commission also represents diverse interests, including consumers, not solely those of New England producers and processors.

On appeal to the Federal Circuit Court of Appeals for the First Circuit, the court upheld the district court decision on November 30, 1999. 198 F.3d 1 (1999). On May 1, 2000, the United States Supreme Court denied New York State Dairy Foods, Inc.'s petition for a writ of certiorari. 529 U.S. 1098 (2000).

The Commission also is party to one lawsuit in its own name. The case, Northeast Dairy Compact Commission v. The Organic Cow, is an enforcement action brought by the Commission in Federal District Court in Burlington, VT. The Commission is seeking to compel The Organic Cow to make its over-order payment obligations into escrow, pending final resolution of The Organic Cow's request for an exemption from the price regulation. On March 31, 1998, the Commission concluded that The Organic Cow's request for an exemption from the price regulation was not warranted. The Organic Cow appealed the Commission's ruling to the Federal District Court for the District of Vermont where it was consolidated with the Commission's enforcement action.

On April 2, 1999, the court ruled that, although the Commission's regulation of organic milk was constitutional and did not violate equal protection or due process, the Commission failed to make clear its reasoning for denying the exemption. 46 F.Supp. 298.The District Court remanded the case back to the Commission for further proceedings.Upon reconsideration and further briefing and argument by the parties, the Commission again denied the exemption on June 6, 2000.The Organic Cow again appealed to the Federal District Court.Arguments on the appeal were heard by the court on June 13, 2001 and a decision is pending.