No. 13186
I N THE SUPREME COURT OF THE STATE OF M N A A
OTN
197 6
VITA-RICH DAIRY, I N C . , a c o r p o r a t i o n ,
and BEATRICE FOODS COMPANY, a c o r p o r a t i o n ,
P e t i t i o n e r s and A p p e l l a n t s ,
DEPARTMENT O BUSINESS REGULATION OF THE
F
STATE O MONTANA, and BOARD OF MILK CONTROL
F
O THE STATE OF MONTANA, a d i v i s i o n of t h e
F
Department of Business R e g u l a t i o n ,
Respondents and Respondents.
Appeal from: D i s t r i c t Court o f t h e F i r s t J u d i c i a l D i s t r i c t ,
Honorable P e t e r G. Meloy, Judge p r e s i d i n g .
Counsel of Record:
For A p p e l l a n t s :
Burton and Coder, Great F a l l s , Montana
Howard C. Burton a r g u e d , G r e a t F a l l s , Montana
F o r Respondents:
H a r r i s o n , Loendorf a n d Poston, Helena, Montana
James T. H a r r i s o n , Jr. a r g u e d , Helena, Montana
-- -
Submitted: June 2 , 1976
Decided: G f 6 1976
F i l e d : &U i 6 197p
Mr.J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion o f t h e
Court.
T h i s i s a n a p p e a l from t h e d e n i a l of a p e t i t i o n f o r
i n j u n c t i v e r e l i e f , j u d i c i a l r e v i e w , and d e c l a r a t o r y judgment
by t h e d i s t r i c t c o u r t , Lewis & C l a r k County. Appellants,
Vita-Rich D a i r y , I n c . , B e a t r i c e Foods Co., Clover Leaf J e r s e y
D a i r y , I n c . , and James R. Hansen d/b/a Hansen's A l l S t a r D a i r y ,
were p e t i t i o n e r s i n t h e d i s t r i c t c o u r t . They o b j e c t t o c e r t a i n
p a r a g r a p h s o f r u l e s a d o p t e d by t h e Board o f Milk C o n t r o l ( B o a r d ) ,
a d i v i s i o n o f t h e Department o f B u s i n e s s R e g u l a t i o n o f t h e S t a t e
of Montana. A p p e l l a n t s make t h r e e s p e c i f i c o b j e c t i o n s :
(1) They a l l e g e t h e Board d i d n o t have t h e power t o
r e g u l a t e t h e t r a n s p o r t a t i o n of f l u i d m i l k p r i o r t o a n amendment
t o s e c t i o n 27-405, R.C.M. 1947, e f f e c t i v e A p r i l 7 , 1975, and
s i n c e t h e r u l e s were a d o p t e d and promulgated p r i o r t o t h a t d a t e ,
t h e e n t i r e a d m i n i s t r a t i v e p r o c e s s must be r e d o n e .
( 2 ) The Milk C o n t r o l Board by r e g u l a t i n g t h e manner o f
t e r m i n a t i o n of a m i l k p r o d u c e r ' s c o n t r a c t d e s t r o y e d t h e m u t u a l i t y
of c o n t r a c t between p r o c e s s o r s and p r o d u c e r s and t h e r e b y d e p r i v e d
them of t h e i r freedom of c o n t r a c t . Appellants a l s o argue t h a t
t h e f a c t t h e procedure f o r a producer t o terminate h i s c o n t r a c t
w i t h a p r o c e s s o r i s d i f f e r e n t from t h e p r o c e d u r e f o r a p r o c e s s o r
t o terminate h i s c o n t r a c t w i t h a producer c o n s t i t u t e s a v i o l a t i o n
of t h e e q u a l p r o t e c t i o n c l a u s e .
( 3 ) The r u l e s which r e q u i r e a p r o c e s s o r t o pay f o r a l l
m i l k r e c e i v e d from a p r o d u c e r amount t o a n e x t r a formula m i l k
p r i c e i n c r e a s e , w e r e n o t promulgated w i t h t h e p r o p e r adminis-
t r a t i v e procedure.
T h i s a p p e a l i s from a n a d m i n i s t r a t i v e d e c i s i o n . A court
r e v i e w i n g a n a d m i n i s t r a t i v e d e c i s i o n must c o n s i d e r t h r e e b a s i c
p r i n c i p l e s i n d e t e r m i n i n g what t h e s c o p e o f t h a t r e v i e w s h o u l d
be :
F i r s t , The C o u r t r e c o g n i z e s t h a t l i m i t e d j u d i c i a l r e v i e w
strengthens t h e administrative process. Limited r e v i e w e n c o u r a g e s
t h e f u l l and c o m p l e t e p r e s e n t a t i o n of e v i d e n c e t o t h e agency by
t h e p a r t i c i p a n t s i n t h e a d m i n i s t r a t i v e p r o c e s s by p e n a l i z i n g
t h o s e who a t t e m p t t o add new e v i d e n c e o r new l i n e s of argument
a t t h e j u d i c i a l review l e v e l . A d e novo r e v i e w e n c o u r a g e s t h e
p a r t i c i p a n t s t o s a v e t h e i r e v i d e n c e u n t i l i t r e a l l y c o u n t s and
p r e s e n t it f i r s t t o t h e r e v i e w i n g c o u r t r a t h e r t h a n t o t h e
agency which h a s t h e knowledge and e x p e r i e n c e i n t h e f i e l d it
regulates. The r e s u l t i s t h a t t h e agency which h a s t h e knowledge
and e x p e r i e n c e i n i t s s u b s t a n t i v e f i e l d d o e s n o t h e a r a l l t h e
e v i d e n c e , making it d i f f i c u l t t o make a p r o p e r d e c i s i o n . It also
r e s u l t s i n t h e d e c i s i o n b e i n g made by a r e v i e w i n g c o u r t which
d o e s n o t have t h e s p e c i a l i z e d knowledge o r e x p e r i e n c e i n t h e a r e a .
A p p e l l a n t s r e c o g n i z e t h i s i n t h e i r b r i e f , when t h e y p o i n t o u t :
" P r o c e e d i n g s b e f o r e t h e Board o f Milk C o n t r o l
might, t o t h e c a s u a l observer, appear t o s t a r t
i n t h e m i d d l e and produce o n l y vague t e s t i m o n y .
T h i s r e s u l t s from t h e f a c t t h a t t h e members o f
t h e Board and n e a r l y a l l p e r s o n s a p p e a r i n g be-
f o r e t h e Board a r e t h o r o u g h l y knowledgeable
concerning t h e o p e r a t i o n of t h e milk i n d u s t r y . -
I n consequence, t h e b a s i c s a r e s k i p p e d s i n c e
i t i s assumed t h a t everyone i n v o l v e d i s aware
of them. Some members of t h e C o u r t may n o t be
s o knowledgeable c o n c e r n i n g t h e o p e r a t i o n of t h e
milk i n d u s t r y . " (Emphasis s u p p l i e d . )
4 Davis ~ d m i n i s t r a t i v eLaw, § 28.21 p o i n t s o u t :
" * * * E x p e r i e n c e h a s now proved t h a t j u d i c i a l
r e v i e w i m p a i r s a n a d m i n i s t r a t i v e program o n l y
when t h e r e v i e w i n v o l v e s undue s u b s t i t u t i o n of
j u d i c i a l f o r a d m i n i s t r a t i v e judgment on prob-
lems w i t h i n t h e a g e n c y ' s s p e c i a l competence."
Second. J u d i c i a l economy r e q u i r e s t h a t t h e v a r i o u s
f u n c t i o n s i n v o l v e d i n t h e a d m i n i s t r a t i v e p r o c e s s must be d i v i d e d
on t h e b a s i s of c o m p a r a t i v e a b i l i t i e s and q u a l i f i c a t i o n s of e a c h
body. Courts a r e s p e c i a l i s t s i n c o n s t i t u t i o n a l i s s u e s , stat-
u t o r y i n t e r p r e t a t i o n , t h e r e q u i r e m e n t s of a f a i r h e a r i n g , and
t h e d e t e r m i n a t i o n t h a t a f i n d i n g i s s u p p o r t e d by s u b s t a n t i a l
evidence. The agency i s a s p e c i a l i s t i n t h e s u b s t a n t i v e matter
t h a t t h e l e g i s l a t u r e d e l e g a t e d t o it t o r e g u l a t e .
Third. The a g e n c y ' s a c t i o n s need a b a l a n c i n g c h e c k .
I n t h e a b s e n c e of a body w i t h i n t h e agency which i s s e p a r a t e d
from t h e a c t u a l d e c i s i o n and i n which a l l p a r t i e s have c o n f i d e n c e ,
a limited j u d i c i a l inquiry t o see ( a ) t h a t a f a i r procedure w a s
used, ( b ) t h a t q u e s t i o n s of law were p r o p e r l y d e c i d e d a n d , (c)
t h a t t h e d e c i s i o n i s s u p p o r t e d by s u b s t a n t i a l e v i d e n c e , i s neces-
sary.
I t i s t h e s e p r i n c i p l e s which u n d e r l i e t h e Montana Admin-
i s t r a t i v e P r o c e d u r e Act, s e c t i o n 82-4216, R.C.M. 1947, p r o v i d i n g
f o r j u d i c i a l r e v i e w of c o n t e s t e d c a s e s . However, t h i s s e c t i o n
d i d n o t narrow t h e scope of r e v i e w i f t h e o r i g i n a l e n a c t i n g s t a t -
u t e which c r e a t e d t h e agency p r o v i d e d f o r b r o a d e r r e v i e w .
S e c t i o n 82-4216(1) p r o v i d e s i n p e r t i n e n t p a r t :
"This s e c t i o n does not l i m i t u t i l i z a t i o n of o r
t h e s c o p e o f j u d i c i a l r e v i e w a v a i l a b l e under
o t h e r means of r e v i e w , r e d r e s s , r e l i e f , o r t r i a l
d e novo p r o v i d e d by s t a t u t e . "
The comments t o t h e 1961 Uniform Law Commissioners' Revised Model
S t a t e A d m i n i s t r a t i v e P r o c e d u r e Act on S e c t i o n 1 5 ( a ) [ J u d i c i a l
Review o f C o n t e s t e d C a s e s . ] which i s i d e n t i c a l t o s e c t i o n 82-
,
4 2 1 6 (1) R.C.M. 1947, s t a t e :
"An i m p o r t a n t q u e s t i o n t h a t a r i s e s under sub-
s e c t i o n ( a ) i s whether o r n o t t h e r e v i e w pro-
v i s i o n s s h o u l d be made e x c l u s i v e and a l l o t h e r
r e v i e w p r o v i s i o n s on t h e s t a t u t e books should
be r e p e a l e d . Each s t a t e w i l l have t o d e a l
with t h i s matter a s t h e l o c a l circumstances
d i c t a t e . On t h e one hand, i f t h e r e i s b u t one
mode and s c o p e o f review, t h e s t a t e p r o c e d u r a l
structure is greatly simplified. On t h e o t h e r
hand, l o c a l c o n s i d e r a t i o n s , i n c l u d i n g p r a c t i c a l
c o n s i d e r a t i o n s connected with o b t a i n i n g adoption
o f t h e Model A c t , may i n d i c a t e o r even r e q u i r e
t h e r e t e n t i o n , a t l e a s t f o r t h e moment, of p r e -
e x i s t i n g methods o f j u d i c i a l r e v i e w . "
A t t h e t i m e of enactment t h e Montana l e g i s l a t u r e l e f t t h e p r e -
e x i s t i n g j u d i c i a l review s t a t u t e s i n t a c t . However, t h e Milk
C o n t r o l B o a r d ' s r e v i e w p r o v i s i o n , s e c t i o n 27-428, R.C.M. 1947,
was r e p e a l e d e f f e c t i v e J u l y 1, 1975. T h i s a p p e a l was t a k e n
p r i o r t o t h a t t i m e , t h e r e f o r e s e c t i o n 27-428 a p p l i e s t o t h i s
c a s e , a l l o w i n g f o r a b r o a d e r scope of j u d i c i a l r e v i e w . The
language of s e c t i o n 27-428, R.C.M. 1947, p r o v i d e s t h e p r o c e d u r e
f o r an appeal t o t h e d i s t r i c t court. By i n f e r e n c e , t h e s e c t i o n
a l l o w s t h e d i s t r i c t c o u r t a b r o a d e r s c o p e of r e v i e w . The Mon-
t a n a A d m i n i s t r a t i v e P r o c e d u r e Act l i m i t s r e v i e w t o t h e r e c o r d
and a l l o w s a d d i t i o n a l e v i d e n c e o n l y where need i s shown t o t h e
c o u r t and t h e n a l l o w s t h a t e v i d e n c e t o be t a k e n o n l y b e f o r e t h e
agency. The Milk Board r e v i e w p r o v i s i o n s of s e c t i o n 27-428,
R.C.M. 1947, a l l o w e v i d e n c e t o be p r e s e n t e d t o t h e c o u r t .
I n t h i s c a s e , however, no a d d i t i o n a l e v i d e n c e was t a k e n b e f o r e
the court. The e f f e c t , f o r t h i s c a s e , i s t h a t t h e s c o p e of
r e v i e w i s l i m i t e d t o t h e r e c o r d , no o t h e r e v i d e n c e having been
offered.
C l e a r l y , w i t h i n t h e s c o p e of j u d i c i a l r e v i e w i s a p p e l -
l a n t s ' f i r s t c o n t e n t i o n t h a t t h e Board had no power t o r e g u l a t e
t h e h a u l i n g r a t e s c h a r g e d p r o d u c e r s by t h e p r o c e s s o r s . This i s
a m a t t e r of s t a t u t o r y i n t e r p r e t a t i o n .
The t r a n s c r i p t of t h e h e a r i n g h e l d September 1 0 , 1974,
b e f o r e t h e Milk C o n t r o l Board e x p l a i n s by t e s t i m o n y t h e r e a s o n
t h e Board was i n v o l v e d i n t h e r e g u l a t i o n of h a u l i n g r a t e s .
I n t h e m i d d l e 1 9 6 0 ' s "some of t h e p r o d u c e r s g o t t h e i d e a
t h a t p o s s i b l y e a c h t i m e t h e Board g r a n t e d t h e p r o d u c e r s a n
i n c r e a s e , a c o r r e s p o n d i n g r a i s e i n t h e h a u l i n g r a t e s ensued
* * *." The p r o c e s s o r c h a r g e s t h e p r o d u c e r for h a u l i n g t h e
producer's milk t o t h e p r o c e s s o r ' s p l a n t ; t h i s charge i s o f f s e t
a g a i n s t t h e amount t h e p r o c e s s o r pays t h e p r o d u c e r f o r h i s
m i l k ; and, i f e a c h p r i c e i n c r e a s e g r a n t e d t o t h e p r o d u c e r i s
matched by a n i n c r e a s e i n t h e amount o f f s e t by t h e p r o c e s s o r
f o r h a u l i n g , t h e n e t e f f e c t would be t h a t t h e p r o d u c e r would
g e t no i n c r e a s e and t h e Board would b e p o w e r l e s s t o s e t t h e
p r i c e paid t o producers f o r t h e i r milk. The Board i n i t s
n e x t p r i c e o r d e r ( # 7 2 1 , e f f e c t i v e May 1, 1 9 7 2 ) e s t a b l i s h e d
t h i s presumption:
"Any s u b s t a n t i a l o r s i g n i f i c a n t r a i s i n g o f t h e
r a t e s charged producers f o r hauling t h e i r milk
from f a r m - t o - p l a n t a f t e r t h e e f f e c t i v e d a t e o f
t h i s o f f i c i a l o r d e r and w i t h o u t good c a u s e shown,
w i l l b e presumed t o b e a d i l u t i o n o f t h e p r i c e
t o be paid s a i d producers f o r t h e i r Class I
m i l k , and a v i o l a t i o n o f t h i s o f f i c i a l o r d e r . "
A p p e l l a n t s a r g u e t h i s o r d e r and a l l s u b s e q u e n t o r d e r s ,
i n c l u d i n g t h e o n e b e f o r e t h e C o u r t which e s t a b l i s h e s a s t a t e w i d e
u n i f o r m method f o r d e t e r m i n i n g h a u l i n g r a t e s , exceed t h e B o a r d ' s
power.
The s e c t i o n o f t h e Milk C o n t r o l A c t which e n u m e r a t e s
t h e B o a r d ' s g e n e r a l powers i s s e c t i o n 27-405, R.C.M. 1947, which
p r i o r t o amendment e f f e c t i v e A p r i l 7 , 1 9 7 5 , p r o v i d e d :
"The Board i s h e r e b y v e s t e d w i t h t h e powers,
and it s h a l l b e i t s d u t y t o s u p e r v i s e , r e g u l a t e
and c o n t r o l t h e m i l k i n d u s t r y o f t h e s t a t e o f
Montana, i n c l u d i n g t h e p r o d u c t i o n , t r a n s p o r t a -
t i o n , p r o c e s s i n g , s t o r a g e , d i s t r i b u t i o n and
s a l e o f m i l k i n t h e s t a t e o f Montana f o r con-
sumption w i t h i n t h e s t a t e * * *."
The amendment, Laws o f 1975, Chap. 267, e f f e c t i v e A p r i l 7 ,
1975 i s e n t i t l e d :
"AN ACT CLARIFYING THE AUTHORITY OF THE DEPARTMENT
O BUSINESS REGULATION OVER MILK TRANSPORTATION
F
RATES; AMENDING SECTION 27-405, R.C.M. 1947; AND
P R O V I D I N G AN IMMEDIATE EFFECTIVE DATE."
T h i s amendment added t h i s c l a u s e a f t e r t h e word " t r a n s p o r t a t i o n " :
" * * * i n c l u d i n g t r a n s p o r t a t i o n r a t e s which
d i s t r i b u t o r s , c o n t r a c t h a u l e r s , and o t h e r s
c h a r g e p r o d u c e r s * * *."
S t a n d i n g a l o n e t h e s t a t u t e , e v e n i n i t s pre-amendment form, i s
clear. The Board h a s t h e power t o " s u p e r v i s e , r e g u l a t e and
c o n t r o l t h e m i l k i n d u s t r y o f t h e s t a t e o f Montana, i n c l u d i n g
* * * transportation * * *." The 1975 amendment makes e x p r e s s
r e f e r e n c e t o t h e type of rate r e g u l a t i o n i n d i s p u t e here, t o
c l a r i f y t h a t t h e Board had power o v e r t h e s e r a t e s .
A p p e l l a n t s a r g u e t h a t a s u b s e q u e n t s e c t i o n o f t h e Milk
C o n t r o l Act c l o u d s t h e c l e a r mandate of s e c t i o n 27-405, R.C.M.
1947. F i r s t , s i n c e t h e s t a t u t e p r i o r t o i t s 1971 r e v i s i o n i n c l u d -
ed h a u l i n g and h a n d l i n g a s f a c t o r s t o be c o n s i d e r e d i n s e t t i n g
t h e p r i c e of m i l k , t h a t o n c e t h e Board had compensated t h e pro-
d u c e r f o r h a u l i n g c o s t s , t h e Board was p o w e r l e s s t o f u r t h e r r e g -
u l a t e hauling r a t e s .
,
Second, t h e y a r g u e s e c t i o n 27-407 (11) R.C.M. 1947, o f
t h e Milk C o n t r o l A c t h a s t h e e f f e c t of removing from t h e Board
t h e power t o r e g u l a t e f a r m - t o - p l a n t h a u l i n g rates. That s e c t i o n
provides :
"No a l l o w a n c e f o r f r e i g h t , o t h e r t h a n f r e i g h t
f o r t r a n s p o r t a t i o n of m i l k from t h e farm t o
p l a n t , s h a l l be c h a r g e d t o a p r o d u c e r by a d i s -
t r i b u t o r o r d e a l e r u n l e s s it i s found and o r d e r e d
by t h e b o a r d , a f t e r n o t i c e and h e a r i n g i n t h e
manner h e r e i n b e f o r e s p e c i f i e d , t h a t s u c h a n
a d d i t i o n a l f r e i g h t allowance i s necessary t o
p e r m i t t h e movement o f m i l k i n t h e p u b l i c i n t e r e s t . "
A p p e l l a n t s r e l y on t h e c l a u s e " o t h e r t h a n f r e i g h t f o r t r a n s -
p o r t a t i o n o f m i l k from farm t o p l a n t " a r g u i n g t h a t t h i s e x c e p t s
farm-to-plant h a u l i n g r a t e s from t h e B o a r d ' s power t o r e g u l a t e .
D e a l i n g w i t h a p p e l l a n t s ' second argument f i r s t , t h i s
Court has o f t e n s a i d i n construing l e g i s l a t i v e i n t e n t s t a t u t e s
must be r e a d and c o n s i d e r e d i n t h e i r e n t i r e t y and l e g i s l a t i v e
i n t e n t may n o t be g a i n e d from t h e wording of any p a r t i c u l a r
s e c t i o n o r s e n t e n c e , b u t o n l y from a c o n s i d e r a t i o n of t h e whole.
Home Bldg. & Loan v . Board of E q u a l i z a t i o n , 1 4 1 Mont. 1 1 3 , 375
P.2d 3 1 2 ; Teamsters v . Cascade Co. School D i s t r i c t N o . 1, 162
Mont. 277, 280, 511 P . 2d 339. ,
On t h e whole s e c t i o n 27-407 (11)
R.C.M. 1947, s p e a k s t o t h e p r o c e d u r e and r e q u i r e m e n t s f o r a l l o w -
i n g of i n t e r p l a n t h a u l i n g c h a r g e s . I t r e q u i r e s t h a t t h e s e c h a r g e s
be a l l o w e d o n l y a f t e r a f u l l h e a r i n g and a showing t h a t t h e
i n t e r p l a n t movement i s i n t h e p u b l i c i n t e r e s t . The normal
farm-to-plant r a t e s a r e e x c e p t e d from t h e heavy burden of having
t o make s u c h a showing, b u t t h e y a r e n o t exempt from t h e power
o f t h e Board t o r e g u l a t e .
B e f o r e amendment i n 1 9 7 1 , t h e r e q u i r e m e n t t h a t " h a u l i n g ,
h a n d l i n g " c h a r g e s be c o n s i d e r e d i n s e t t i n g t h e p r i c e o f m i l k
was r e p l a c e d by s e c t i o n 2 7 - 4 0 7 ( 5 ) , R.C.M. 1947, which r e q u i r e s
t h a t among t h e f a c t o r s t o be c o n s i d e r e d i n e s t a b l i s h i n g t h e m i l k
p r i c e formula i s :
" ( h ) The need, i f any, f o r f r e i g h t o r t r a n s p o r -
t a t i o n c h a r g e s t o b e d e d u c t e d by d i s t r i b u t o r s
from p r o d u c e r p r i c e s f o r b u l k m i l k * * *."
This s e c t i o n d o e s n o t r e q u i r e t h a t t r a n s p o r t a t i o n r a t e s be i n -
c l u d e d i n t h e p r i c e o f m i l k , it o n l y r e q u i r e s t h a t t h e Board
consider i f a deduction i s proper. T h i s s e c t i o n c a n i n no way
be c o n s t r u e d t o p r o h i b i t t h e Board from r e g u l a t i n g t h e r a t e s
charged t o p r o d u c e r s f o r h a u l i n g t h e i r m i l k .
Upon c a r e f u l e x a m i n a t i o n , w e f i n d n o t h i n g i n t h e Milk
C o n t r o l Act which i n any way l i m i t s t h e power g r a n t e d i n c l e a r
and u n e q u i v o c a l t e r m s i n s e c t i o n 27-405, R.C.M. 1947, t o t h e
Milk C o n t r o l Board t o " s u p e r v i s e , r e g u l a t e and c o n t r o l t h e m i l k
i n d u s t r y of t h i s s t a t e , i n c l u d i n g * * * transportation * * *."
The Board was w i t h i n i t s power t o e s t a b l i s h r u l e s , a s it d i d
h e r e , c r e a t i n g a s t a t e w i d e uniform method o f s e t t i n g h a u l i n g
rates.
Next, a p p e l l a n t s o b j e c t t o t h e s e R e g u l a t i o n s , S e c t i o n s
21, 22, 23, o f MAC 8-2.12(1)-S1200:
" ( 2 1 ) I n f e r i o r q u a l i t y o r non-compliance w i t h
t h e l a w f u l R e g u l a t i o n s of d u l y c o n s t i t u t e d
h e a l t h o r s a n i t a t i o n a g e n c i e s s h a l l be r e a s o n s
f o r t h e r e j e c t i n g of p r o d u c e r m i l k . In a l l
c a s e s t h e r e j e c t i o n of t h e m i l k must be sup-
p o r t e d by a s t a t e m e n t t o t h e p r o d u c e r s e t t i n g
f o r t h t h e r e a s o n ( s ) f o r which t h e m i l k was re-
jected. A copy o f s a i d s t a t e m e n t must be mailed
t o t h e Department.
" ( 2 2 ) Except f o r p e r s i s t e n t r e p e t i t i o n of t h e
c a s e s s e t f o r t h i n p a r a g r a p h ( 2 1 ) h e r e o f , no
p r o d u c e r ' s c o n t r a c t o r purchasing agreement,
whether e x p r e s s o r i m p l i e d , may be t e r m i n a t e d
by a d i s t r i b u t o r e x c e p t f o r c a u s e a f t e r n o t i c e
and h e a r i n g by t h e Department o f B u s i n e s s
R e g u l a t i o n i n a c c o r d a n c e w i t h t h e r u l e s and
p r o c e d u r e s p r e s c r i b e d by t h e Montana Adminis-
t r a t i v e Procedure A c t .
" ( 2 3 ) N producer s h a l l terminate h i s c o n t r a c t
o
o r s e l l i n g agreement w i t h a n y d i s t r i b u t o r e x c e p t
by g i v i n g a t l e a s t t h i r t y ( 3 0 ) d a y s ' WRITTEN
n o t i c e t o t h e d i s t r i b u t o r and t o t h e Department
h i s i n t e n t i o n t o t e r m i n a t e ; PROVIDED, however,
t h a t n o t h i n g h e r e i n s h a l l p r e v e n t a d e a l e r and
p r o d u c e r from p r o v i d i n g by WRITTEN c o n t r a c t o r
agreement f o r a s h o r t e r o r l o n g e r p e r i o d o f
n o t i c e , PROVIDED, FURTHER, however, t h a t t h e
p r o d u c e r must be p a i d i n f u l l by t h e 1 5 t h d a y
o f t h e month f o l l o w i n g t h e month o f s u c h t e r m i n -
ation. "
A p p e l l a n t s o b j e c t t o t h e s e r e g u l a t i o n s on two c o n s t i t u t i o n a l
grounds. F i r s t , t h e s e r e g u l a t i o n s v i o l a t e t h e p a r t i e s "freedom
o f c o n t r a c t " and s e c o n d , t h e d i f f e r e n t t r e a t m e n t o f p r o c e s s o r s
and p r o d u c e r s v i o l a t e s t h e e q u a l p r o t e c t i o n c l a u s e .
T h i s C o u r t h e l d t h e Milk C o n t r o l A c t t o be c o n s t i t u t i o n a l
i n Milk C o n t r o l Board v . Rehberg, 1 4 1 Mont. 1 4 9 , 376 P.2d 508.
T h e r e t h e C o u r t d i s c u s s e d t h e l e a d i n g U n i t e d S t a t e s Supreme C o u r t
m i l k r e g u l a t i o n c a s e , Nebbia v . N e w York, 291 U.S. 502, 54 S.Ct.
505, 78 L.ed 940. I n answering a s i m i l a r e q u a l p r o t e c t i o n a t -
t a c k Nebbia s e t f o r t h t h e b a s i c t e s t . It requires that i f the
l e g i s l a t u r e h a s t h e power t o c o n t r o l t h e a r e a , Rehberg i n d i c a t e s
t h a t u n d e r Montana law it d o e s , t h e c l a s s i f i c a t i o n made must n o t
be a r b i t r a r y o r u n r e a s o n a b l e , t h e r e must b e d i s t i n c t i o n s which
j u s t i f y t h e d i f f e r e n c e of t r e a t m e n t . This test i s e q u a l l y a p p l i -
c a b l e w h e t h e r t h e l e g i s l a t u r e o r a n agency c r e a t e d by t h e l e g i s -
lature makes the c l a s s i f i c a t i o n .
T h e r e was t e s t i m o n y b e f o r e t h e Board t o t h e e f f e c t " i n
t h e good o l d d a y s a f e l l o w w i t h a few cows and a shed b a r n c o u l d
go i n t o t h e p r o d u c t i o n o f milk". Today, however, e n t r y i n t o t h e
d a i r y farming b u s i n e s s r e q u i r e s a l a r g e investment. Consider-
i n g t h e problem b e f o r e u s , t h e r e a r e a number o f problems t h a t
t h e producer f a c e s i n o r d e r t o s t a y i n business. Most pro-
d u c e r s depend on a s i n g l e p r o c e s s o r who buys a l l o f t h a t p r o -
d u c e r ' s milk. I f a producer w a s terminated, t h e s o l e source
o f t h e r e v e n u e needed t o r e c o u p h i s l a r g e i n v e s t m e n t and t o
p r o v i d e s u p p o r t f o r him and h i s f a m i l y would b e gone. The
p r o d u c e r s c a n go t o t h e Board t o g e t p r o t e c t i o n a g a i n s t t h e
economic c a t a s t r o p h e which would r e s u l t from t e r m i n a t i o n w i t h -
o u t cause. The p r o c e s s o r who d e a l s w i t h s e v e r a l p r o d u c e r s
would s u f f e r a good d e a l l e s s harm when h i s c o n t r a c t w i t h a
p r o d u c e r was t e r m i n a t e d t h a n would a p r o d u c e r t e r m i n a t e d by t h e
only processor i n t h e area. I t would b e less d i f f i c u l t f o r a
processor t o f i n d another producer than f o r a producer t o f i n d
another processor. These a r e t h e d i s t i n c t i o n s which j u s t i f y
t h e difference i n treatment. The e v i d e n c e b e f o r e t h e Board
shows t h e d i f f e r e n c e i n t r e a t m e n t i s n o t a r b i t r a r y and i s a
reasonable distinction.
Nebbia v . New York, 291 U.S. 502, 54 S.Ct. 505,78 L.ed
940, 948, 950, 951, d e a l s w i t h t h e freedom o f c o n t r a c t a r g u m e n t ,
t h e Court pointed out:
"Under o u r form o f government t h e u s e o f p r o p e r t y
and t h e making o f c o n t r a c t s a r e n o r m a l l y m a t t e r s
o f p r i v a t e and n o t o f p u b l i c c o n c e r n . The g e n e r a l
r u l e i s t h a t both s h a l l be f r e e o f governmental
interference. But n e i t h e r p r o p e r t y r i g h t s n o r
c o n t r a c t r i g h t s a r e a b s o l u t e ; f o r government c a n n o t
e x i s t i f t h e c i t i z e n may a t w i l l u s e h i s p r o p e r t y
t o t h e detriment of h i s fellows, o r e x e r c i s e h i s
freedom o f c o n t r a c t t o work them harm. E q u a l l y
fundamental w i t h t h e p r i v a t e r i g h t i s t h a t of t h e
p u b l i c t o r e g u l a t e i t i n t h e common i n t e r e s t .
"The F i f t h Amendment, i n t h e f i e l d o f f e d e r a l
a c t i v i t y , and t h e F o u r t e e n t h , a s r e s p e c t s S t a t e
a c t i o n , do n o t p r o h i b i t g o v e r n m e n t a l r e g u l a t i o n
f o r t h e public welfare. They m e r e l y c o n d i t i o n t h e
e x e r t i o n o f t h e a d m i t t e d power, by s e c u r i n g t h a t t h e
end s h a l l b e a c c o m p l i s h e d by methods c o n s i s t e n t w i t h
due process. And t h e g u a r a n t y o f d u e p r o c e s s , as
h a s o f t e n been h e l d , demands o n l y t h a t t h e law s h a l l
n o t b e u n r e a s o n a b l e , a r b i t r a r y o r c a p r i c i o u s , and
t h a t t h e means s e l e c t e d s h a l l have a r e a l and
s u b s t a n t i a l r e l a t i o n t o t h e o b j e c t s o u g h t t o be
attained.
"The C o n s t i t u t i o n d o e s n o t g u a r a n t e e t h e u n r e s t r i c t -
ed p r i v i l e g e t o engage i n a b u s i n e s s o r t o c o n d u c t
it a s one p l e a s e s . * * * "
The d i s c u s s i o n above shows t h e r u l e i s r e a s o n a b l e and
not arbitrary. The o b j e c t i v e o f t h e Board was t o minimize t h e
a p p r e h e n s i o n on t h e p a r t of p r o d u c e r s t h a t t h e y m i g h t b e t e r m i -
n a t e d w i t h o u t c a u s e and t h u s t o e n c o u r a g e them t o remain i n t h e
milk production business. The g o a l o f t h e Milk Board i s t o
m a i n t a i n a h e a l t h y m i l k i n d u s t r y i n Montana. The manner i n
which t h e Board s e e k s t o a c h i e v e i t s o b j e c t i v e i s by p r o v i d i n g
f o r a h e a r i n g and a l l o w i n g t e r m i n a t i o n t o be f o r c a u s e o n l y i s
f a i r t o both p a r t i e s . The h e a r i n g p r o v i d e s t h e p a r t i e s a c h a n c e
t o a i r t h e c o n t r o v e r s y and t h e Board i s a n i m p a r t i a l e x p e r t body,
which i s i d e a l f o r making a f a i r and knowledgeable d e c i s i o n .
Appellants' l a s t i s s u e i s t o t h a t r e g u l a t i o n which r e q u i r e s
them t o pay f o r a l l f l u i d m i l k t h e y r e c e i v e from t h e p r o d u c e r s .
B e f o r e t h e 1 9 7 1 amendment s e c t i o n 27-403, R.C.M. 1947, r e q u i r e d
t h a t t h e p r o c e s s o r pay t h e C l a s s 111 p r i c e f o r a l l skim m i l k
"used". The 1971 amendment e l i m i n a t e d t h i s l a n g u a g e . The new
r u l e s r e f l e c t t h e change. Appellants argue t h a t s i n c e they
must pay f o r a l l m i l k r e c e i v e d and a r e no l o n g e r a l l o w e d t o
deduct a f i x e d percentage f o r shrinkage, t h e milk producer w i l l
r e c e i v e a l a r g e r t o t a l payment f o r t h e m i l k h e s u p p l i e s t h e
processor. T h i s , t h e y c o n t e n d , amounts t o a n e x t r a f o r m u l a m i l k
p r i c e increase not i n conformity with t h e proper a d m i n i s t r a t i v e
p r o c e d u r e , t h e r e f o r e t h e a d m i n i s t r a t i v e p r o c e d u r e must b e r e d o n e .
F i r s t , t h e r e w a s no e x t r a f o r m u l a m i l k p r i c e i n c r e a s e .
~t i s conceded t h a t t h e r u l e change h e r e c h a l l e n g e d h a s t h e same
e f f e c t a s would a m i l k p r i c e i n c r e a s e w h e t h e r e x t r a f o r m u l a o r
n o t , i t g i v e s t h e p r o d u c e r more money f o r h i s m i l k . This w a s
n o t t h e o b j e c t of t h e r u l e , o n l y a n i n c i d e n t a l r e s u l t . The
p r o d u c e r s s o u g h t t h i s r u l e f o r two r e a s o n s , 1) t h e y f e l t t h a t
t h e i r milk i s an i t e m of value, 2 ) they f e l t i f processors had
t o pay f o r a l l m i l k t h e y r e c e i v e , t h e y would be more e f f i c i e n t
and c a r e f u l w i t h it t h a n i f t h e y d i d n o t have t o pay f o r m i l k
they waste.
The p a r t i e s i n v o l v e d i n t h i s a p p e a l r e c e i v e d t h e d e t a i l e d
n o t i c e which c l e a r l y s t a t e d t h e n a t u r e o f t h e proposed r u l e
changes. Counsel f o r a p p e l l a n t s w a s p r e s e n t a t t h e h e a r i n g and
a r g u e d a g a i n s t t h e changes and f o l l o w i n g t h e h e a r i n g s u b m i t t e d
a b r i e f t o t h e Milk C o n t r o l Board opposing t h e changes. There
w a s no d e f e c t i n t h e due p r o c e s s r e q u i r e m e n t o f n o t i c e , no s u r p r i s e ,
nor any o t h e r p r o c e d u r a l u n f a i r n e s s which would r e q u i r e t h a t t h e
a d m i n i s t r a t i v e p r o c e s s be r e p e a t e d . A p p e l l a n t s knew of t h e r u l e
changes and t h e i r e f f e c t and made t h e i r o b j e c t i o n s known t o t h e
Board. Based on t h e e v i d e n c e b e f o r e i t , t h e Board d e c i d e d t o prom-
ulgate the rules.
There i s no c o n s t i t u t i o n a l i n f i r m i t y and no c l a i m t h a t
t h e agency exceeded i t s s t a t u t o r y a u t h o r i t y . This Court f i n d s
t h a t a f a i r p r o c e d u r e w a s u s e d , and t h e d e c i s i o n was based on
t h e evidence.
The o r d e r o f t h r i c t c o u r t i s affirmed.
We c o n c u r : /
Hon. Edward T . D u s s a u l t , D i s t r i c t
Judge, s i t t i n g i n p l a c e o f M r . Chief
J u s t i c e James T . H a r r i s o n .
- 12 -