Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

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WHITE EAGLE COOPERATIVE v. CONNER (January 12, 2009)

Congress enacted the Agricultural Marketing Agreement Act of 1937 (“AMAA”) to regulate the milk producing industry. The AMAA establishes a minimum uniform price for milk in a particular region without regard to its end use. The Department of Agriculture (“USDA”) promulgates milk marketing orders in the different regions. The marketing orders identify the plants and handlers that are regulated. They also determine whether a particular supply of milk is included in the calculation of the blended price for the milk and whether a particular supply receives that price. A diversion limit is the maximum amount of milk a handler can divert to a plant not participating in the program and still be entitled to the blended price. In early 2005, the USDA began a rulemaking addressed at reducing the diversion limit standards. White Eagle Cooperative, a cooperative of milk producers, opposed the amendment. The USDA conducted a hearing in March and issued a interim rule on an emergency basis in July. The interim rule did reduce the diversion limits and became effective in October. A similar final rule was issued in 2006. White Eagle filed a complaint in federal district court. White Eagle alleged that the USDA: a) violated due process by allowing employees of the program administrator to participate in the rulemaking process, b) violated the Regulatory Flexibility Act (“RFA”) by failing to do the proper analysis and support its certification, c) violated the Administrative Procedure Act (“APA”) by failing to support its emergency rule, d) improperly delegated rulemaking authority, e) violated the AMAA by considering end use in its rulemaking, and f) violated the APA by making a decision without adequate record support. The district court granted summary judgment to the USDA. White Eagle appeals.

In their opinion, Judges Ripple, Kanne and Williams affirmed. The Court first addressed the due process argument. White Eagle argued that employees of the organization administering the milk marketing order were biased in favor of the producers because the producers could vote to eliminate the order and, it follows, their jobs. The Court found that White Eagle waived its argument. White Eagle knew as early as February 2005 that these employees were involved in the multi-day hearings and promulgation of the interim rule and yet did nothing. The APA required White Eagle to raise its concerns of bias in a timely manner. The Court next addressed White Eagle’s argument that the USDA failed to address the impact of the regulation on small businesses, as required by the RFA. The Court, noting that it had not yet addressed RFA standing, reviewed the jurisprudence developed in the D.C. Circuit. The Court followed that body of law and concluded that a small entity must be directly regulated by the program to have standing. Since the AMAA regulates handlers, not producers, the Court concluded White Eagle has no standing under the RFA.

The Court addressed two procedural arguments and two substantive arguments on the merits. With respect to the USDA’s support for its emergency rulemaking, the Court did criticize the agency for its lack of specific findings but found its identification of the problem “marginally sufficient” support for the rule. The Court also found no improper delegation of the Secretary’s authority. The Court rejected White Eagle’s substantive arguments: a) it found no support for White Eagle’s claim that the USDA could not consider the end-use of the product in promulgating a regulation, and b) it concluded that the USDA did not “dismiss” White Eagle’s arguments – it simply found them unpersuasive.