Alto Dairy v. Veneman, Ann ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-3422
ALTO DAIRY, et al.,
Plaintiffs-Appellants,
v.
ANN VENEMAN, Secretary of Agriculture,
Defendant-Appellee,
and
CONTINENTAL DAIRY PRODUCTS, INC., et al.,
Intervening Defendants-Appellees.
____________
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 02 C 750—William C. Griesbach, Judge.
____________
ARGUED MAY 21, 2003—DECIDED JULY 15, 2003
____________
Before FLAUM, Chief Judge, and POSNER and MANION,
Circuit Judges.
POSNER, Circuit Judge. Dairy farmers located mainly in
Wisconsin brought this suit to enjoin an amendment
(adopted by the Department of Agriculture after a formal
rulemaking proceeding; published at 7 C.F.R. § 1033.7(c)(2);
and explained in Milk in the Mideast Marketing Area; Interim
2 No. 02-3422
Order Amending the Order, 67 Fed. Reg. 48743 (July 26, 2002))
to the federal rules regulating the price of milk. These
rules are called “milk marketing orders,” and so the amend-
ment is also a milk marketing order. The district judge
held that the plaintiffs lacked standing to challenge the
amendment, not in the Article III sense that the plaintiffs
had suffered and would suffer no harm from the amend-
ment, or would derive no benefit from a judgment invali-
dating the amendment, but in the sense of having been
denied by Congress a right to sue. So he dismissed the
suit for lack of federal jurisdiction. But he went on to de-
clare that, if he was wrong about jurisdiction, the suit
would still have to be dismissed because the plaintiffs’
challenge lacked merit. The plaintiffs have appealed, chal-
lenging the judge’s ruling on standing and also arguing
that if there is standing we should reach the merits and
vacate the amendment because the Department of Agricul-
ture failed to give them proper notice concerning the re-
lief that might emerge from the rulemaking proceeding.
While the Department defends the judge’s ruling on stand-
ing, it has also responded to the plaintiffs’ argument on
the merits. The merits having thus been fully briefed, we
can decide them if there is standing.
The federal scheme for regulating the price of milk pivots
on the fact that milk is more highly valued by the market
when it is sold for fluid consumption than when it is sold
as an input into the manufacture of cheese or other dairy
products. If milk were perishable, as it was in the days
before refrigerated storage and transportation, dairy farmers
serving urban markets (where milk is more likely to be
consumed in fluid form than made into cheese or butter)
would get higher prices for their output than dairy farmers
remote from cities, who being unable to ship their milk
a long distance would perforce sell most of it to manufac-
turers of cheese and other dairy products. But when refrig-
No. 02-3422 3
erated storage and transportation arrived on the scene, it
became feasible for the remote dairy farmers—Wisconsin
dairy farmers, for example—to ship milk to cities in
other states, pushing down the price of fluid milk there
and so hurting the dairy farmers who were located near
those cities.
This was a natural, procompetitive development, as in
other cases in which a reduction in the quality-adjusted
cost of transportation enlarges geographic markets. But
the federal regulatory scheme for milk, like so much
economic regulation adopted during the Great Depression
of the 1930s (much of it, however, since abolished as a
consequence of the deregulation movement), is premised
on dissatisfaction with the results of competition, polemi-
cally described as “ruinous” by those producer interests
that it pinches. (For a near unintelligible description of
conditions thought to render competition among dairy
farmers unworkable, see Nebbia v. New York, 291 U.S. 502,
517-18 (1934).) To limit the competition between remote
and proximate dairy farmers for the lucrative fluid-milk
business of the cities, Congress in the Agricultural Market-
ing Agreement Act of 1937, 50 Stat. 246, as amended,
7 U.S.C. §§ 601 et seq., authorized the Department of Agri-
culture to proceed as follows. The Department fixes a
minimum price for each “class” of milk, with class deter-
mined by end use: thus the price fixed for milk intended
for fluid consumption is higher than the price fixed for
milk intended for cheese. This “value of service” pricing,
conventional in regulated industries, is actually a form of
price discrimination, that is, pricing guided not by cost
(the cost of producing milk is the same regardless of the
use to which the milk is put by the purchaser), as under
competition, but by differences across consumers in willing-
ness to pay. Price discrimination increases sellers’ profits,
thus counteracting the alleged (though almost certainly
4 No. 02-3422
spurious) tendency of dairy farmers to destroy their busi-
ness by competing overvigorously. More realistically, milk
price discrimination is intended to redistribute wealth
from consumers to producers of milk.
Farmers of course do not sell directly to the ultimate
consumer. The direct purchasers of milk from dairy farmers
are referred to as “handlers.” They might be owners of
supply plants (of which more later), or milk distribu-
tors, cheese factories, or other intermediaries in the milk
market. It is the handlers who pay the prices fixed by the
federal regulators. The revenues generated by the dis-
criminatory pricing scheme and received in the first in-
stance by the handlers are pooled, and each dairy farmer
whose sales contributed to the pool receives a share of
the revenues that is equal to his percentage not of the
total revenues of the pool’s members but of their total
physical output. By virtue of this method of dividing up
the pot, each farmer receives the same price (called a
“blended” price) for each unit of milk that he sells regard-
less of the end use of his milk. A farmer who sold all
his milk to a cheese factory (in fact most milk produced
in Wisconsin is used to make cheese, rather than being
drunk) would receive from the pool the same price per
unit of output as a farmer who sold all his milk for fluid
consumption, even though the handler would have paid
a much lower price for the former than for the latter milk.
The result, or at least the intended result, is that the
first farmer in our example, the one who sells all his milk
to a cheese factory, will have no incentive to divert some
of his output to the fluid market, where the price is high-
er, because the price that he receives for the milk he sells
is independent of the use to which that milk is put. Such
a diversion, what economists call “arbitrage,” would un-
dermine and, if uncontrolled, eventually destroy the
scheme of discriminatory pricing and thus reduce the
No. 02-3422 5
incomes of dairy farmers as a group. The distant farmers
are “kept in their place,” as it were—kept selling locally to
the cheesemakers rather than trying to sell to fluid-milk
distributors in the cities—by being given a share of fluid-
milk revenues.
The fly in the ointment, and the cause of the present
litigation, is that the Agriculture Department has divided
the nation into regions and fixed different blended prices
in the different regions. The blended price is higher in
regions in which fluid-milk consumption is a higher frac-
tion of total milk use, because in such regions a higher
fraction of milk is sold to handlers at the high minimum
price that the Agriculture Department has set for milk
consumed in fluid form. The “Mideast,” which com-
prises Indiana, Michigan, Ohio, and parts of Pennsylvania
and West Virginia, is one of these regions. Wisconsin, which
is a large manufacturer of cheese, is not in the Mideast
region and the blended price in its region is lower because
of the high fraction of its milk output that goes to make
cheese rather than being drunk. Naturally, therefore,
Wisconsin dairy farmers would like to sell as much of
their milk in the Mideast as they can (and for the fur-
ther reason that the Department has fixed a higher mini-
mum price for milk sold for consumption in fluid form
in the Mideast states than in Wisconsin, see 7 C.F.R.
§ 1000.52)—or rather, they would like as many of their
sales as possible to be pooled with the Mideast producers’
sales and so be remunerated at the higher Mideast blended
price. For they have no wish to incur the costs of actually
shipping their milk to the Mideast; they would much
rather continue to ship it to nearby cheese factories in
Wisconsin, their traditional customers. To the extent that
Wisconsin milk production is pooled with that of the
Mideast dairy farmers, the latter will lose revenues be-
cause the Wisconsinites will be taking out revenue at the
6 No. 02-3422
Mideast blended price while contributing to the pool the
revenue generated by sales at lower prices to the cheese
factories. If all their output were sold to cheese factories,
the revenue they would be contributing to the pool would
be their output multiplied by the low price fixed for the
sale of milk destined for use as an input into the making
of cheese, while the revenues they would be receiving
as their share of the Mideast pool would be their output
multiplied by the Mideast blended price.
To limit the type of arbitrage described in the preced-
ing paragraph, the Agriculture Department has long re-
quired that a supply plant—a handler that buys milk from
the farmer for storage and redistribution—resell 30 percent
of its milk into a region in order to be eligible for the
blended price fixed for that region. If it does sell 30 percent
there, however, its entire output, not just the 30 percent,
qualifies for the region’s blended price. Moreover, the
Agriculture Department also authorizes a practice called
“paper pooling,” which permits a supply plant in one
region to “associate” with dairy farmers in another region,
who by virtue of the “association”—which can be com-
pletely informal—are treated as if they shipped their milk
to the supply plant. Thus, if a dairy farm in Indiana is
“associated” with a milk supply plant in Wisconsin, but
sells its milk to a milk distributor in Indiana and ships the
milk directly there rather than via the supply plant, its
sales, though entirely within Indiana, nevertheless are
counted as part of the 30 percent of the Wisconsin sup-
ply plant’s sales that must be made in the Mideast region
in order to allow the supply plant’s entire sales to be
included in the Mideast pool. Ten percent of the 30 percent
must actually be shipped into the distant region, but the
other 27 percent need not be. So the nominal 30 percent
requirement is reduced to 3 percent. A supply plant in
Wisconsin, buying all its milk from local farmers, need ship
No. 02-3422 7
only 3 percent of its milk to the Mideast to qualify for the
Mideast blended price for its entire output, so long as
another 27 percent is supplied by Mideast dairy farmers
associated with the Wisconsin plant.
The rationale for paper pooling, which makes perfectly
good sense, is that farmers should be permitted to ship
directly to distributors, without having to go through
supply plants. And until 2000, paper pooling did not
create significant arbitrage opportunities, because the
Agriculture Department forbade distant supply plants
to receive the full blended price in the region of their
associated dairy farmers. But the prohibition was rescinded
that year, see 7 C.F.R. § 1000.50, and with that rescission
paper pooling became a loophole through which the
Wisconsin dairy farmers rushed. The amendment they
challenge closes the loophole by forbidding the qualify-
ing 30 percent to include local shipments from distant
supply plants. 7 C.F.R. § 1033.7(c)(2). If a supply plant
in Wisconsin wants to associate with a dairy farmer in the
Mideast region, so that sales by that farmer will qualify
for the Mideast blended price, the plant must now re-
quire the farmer to ship his milk to the supply plant for
reshipment to customers in the Mideast. The plaintiffs
criticize the requirement because it is often more econ-
omical for the dairy farmer to bypass the supply plant,
especially as the quality of the milk may drop when it is
pumped into and then out of the supply plant, and espe-
cially when the farmer and the distributor are near each
other but distant from the supply plant. Were the blended
price in the Mideast sufficiently high, an Indiana dairy
farmer might be induced to ship his milk to a Wisconsin
supply plant for resale to an Indiana milk distributor, in
order that the dairy farmer’s output would contribute to
the supply plant’s making its 30 percent quota. That would
be a great waste. But the plaintiffs’ criticism is neither here
8 No. 02-3422
nor there, since the only challenge they mount in this court
to the amendment is that it was adopted without proper
notice to them.
Before we consider that issue, which is the issue on the
merits, we must satisfy ourselves that the plaintiffs have
a right to seek judicial review of the Agriculture Depart-
ment’s order amending the Mideast milk marketing order.
The district judge, as we mentioned, thought they did not.
The circuits have divided over the question. Compare
Minnesota Milk Producers Ass’n v. Madigan, 956 F.2d 816,
817-18 (8th Cir. 1992); Farmers Union Milk Marketing Co-op
v. Yeutter, 930 F.2d 466, 471-74 (6th Cir. 1991), and Suntex
Dairy v. Bergland, 591 F.2d 1063, 1065-67 (5th Cir. 1979),
all holding that milk producers (dairy farmers) do have a
right to judicial review of milk marketing orders, with
United Dairymen of Arizona v. Veneman, 279 F.3d 1160, 1165
(9th Cir. 2002), and Pescosolido v. Block, 765 F.2d 827, 832-
33 (9th Cir. 1985), holding that they do not. The judge
thought that this court had taken the latter position in
Uelman v. Freeman, 388 F.2d 308 (7th Cir. 1967) (see also
United Milk Producers v. Benson, 225 F.2d 527, 529 (D.C.
Cir. 1955), a similar case), and he felt bound by that deci-
sion, which in addition he thought bolstered by the Su-
preme Court’s ruling in Block v. Community Nutrition
Institute, 467 U.S. 340 (1984), that consumers do not have
standing to challenge milk market orders.
Uelman is not controlling. The Supreme Court had held
in Stark v. Wickard, 321 U.S. 288 (1944), that even though
the milk marketing law did not in so many words confer
on producers a right to judicial review of milk marketing
orders, they could challenge such an order if in issuing it
the Agriculture Department had exceeded the authority
delegated to it by Congress and in doing so had infringed
a definite right of the producer, id. at 307-10, criteria not
No. 02-3422 9
satisfied in Uelman. The plaintiffs in our case seek judicial
review not on the basis of the extrastatutory rule of Stark,
321 U.S. at 307-10, but on the basis of the Administrative
Procedure Act, which confers a right to mount a judicial
challenge to agency action on persons “adversely affected
or aggrieved by agency action within the meaning of a
relevant statute,” 5 U.S.C. § 702, unless the statute in
question “preclude[s] judicial review.” 5 U.S.C. § 701(a)(1).
Section 702 certainly describes these plaintiffs, who are
injured in their pocketbooks by having their access to the
Mideast blended price, which is higher than the blended
price in their region, curtailed. Moreover, dairy farmers,
the plaintiffs in this case, are, as the Court noted in Stark,
321 U.S. at 305-06, the very group that the milk marketing
law seeks to protect. “The right of judicial review is ordi-
narily inferred where congressional intent to protect the
interests of the class of which the plaintiff is a member
can be found; in such cases, unless members of the pro-
tected class may have judicial review the statutory objec-
tives might not be realized.” Barlow v. Collins, 397 U.S. 159,
167 (1970); see also American Federation of Government
Employees, Local 2119 v. Cohen, 171 F.3d 460, 469 (7th Cir.
1999); First National Bank & Trust Co. v. National Credit Union
Administration, 988 F.2d 1272, 1275 (D.C. Cir. 1993).
The Agriculture Department argues that the milk mar-
keting law repeals so much of the APA as would otherwise
entitle dairy farmers to challenge a milk marketing or-
der that harmed them. The milk marketing law expressly
authorizes judicial review of milk marketing orders at the
behest of handlers, 7 U.S.C. § 608c(15), but is silent on the
right of a dairy farmer (that is, a producer, rather than a
purchaser from the producer) to get judicial review. The
Department asks us to infer from this silence that Con-
gress meant to preclude judicial review by farmers, thus
bringing this case within 5 U.S.C. § 701(a)(1). But inferences
10 No. 02-3422
from congressional silence are treacherous; oversights
are common in the hurly-burly of congressional enact-
ment; omissions are not enactments; and even deliberate
omissions are often subject to alternative interpretations,
as here. Handlers are not indifferent to the price of milk,
since they are the purchasers of milk from the dairy farmers.
But as middlemen, able to pass on a portion, maybe a
very large portion, of any higher price to their custom-
ers—the milk distributors, cheese factories, and so forth—
they may be indifferent to many changes in milk market-
ing orders, including the one at issue in this case, which
basically transfers wealth from Mideast to Wisconsin
dairy farmers. No such indifference can attend the farmers
who have brought the present suit; every additional
cent they receive for their milk goes directly to their bottom
line. Congress may have thought it obvious that as the
intended beneficiaries of milk marketing orders, dairy
farmers could challenge those orders in court, but not
obvious that handlers could, and so it expressly author-
ized suits by them as well.
History supports this interpretation. What is now the
milk marketing law was originally a part of the first Agri-
cultural Adjustment Act, passed in 1933, 48 Stat. 31, and
that act contained no provision for judicial review of pric-
ing orders issued under it, including milk marketing or-
ders. The statutory provision authorizing handlers to
sue was added to the AAA in 1935 and was retained when
the Act’s provisions dealing with milk marketing were
split off and made the subject of a separate statute, the
statute involved in this case, the Agricultural Marketing
Agreement Act of 1937. Block v. Community Nutrition
Institute, supra, 467 U.S. at 346. This was years before the
Administrative Procedure Act was enacted. After it was
enacted, with the provision quoted earlier (5 U.S.C. § 702)
that by its terms would have seemed to entitle milk pro-
No. 02-3422 11
ducers as persons aggrieved by adverse milk marketing
orders to obtain judicial review, there was no urgent
need for Congress to revisit the milk marketing law and
add a provision expressly authorizing that review.
Now it is true that in denying standing to milk con-
sumers, the Supreme Court in Block had emphasized that
allowing them to challenge milk marketing orders in
court would cause the administrative remedies that the
milk marketing law had created to be bypassed; and the
concern extends to producers (though not in every case,
and specifically, as we’ll see, not in this case). The provi-
sion entitling handlers to judicial review starts off by say-
ing that “any handler subject to [a milk marketing order]
may file a written petition with the Secretary of Agriculture,
stating that any such order or any provision of any such
order or any obligation imposed in connection therewith
is not in accordance with law and praying for a modifica-
tion thereof or to be exempted therefrom. He shall there-
upon be given an opportunity for a hearing upon such
petition, in accordance with regulations made by the
Secretary of Agriculture, with the approval of the President.
After such hearing, the Secretary shall make a ruling
upon the prayer of such petition which shall be final, if
in accordance with law.” 7 U.S.C. § 608c(15)(A). The hand-
ler can seek review of that ruling in federal district court.
Id., § 608c(15)(B). There is no similar provision regarding
petitions for administrative review by consumers—or
producers. So if permitted to sue, consumers or pro-
ducers might raise in court objections to the milk market-
ing order that the regulators had not had a chance to
consider. “Nowhere in the [milk marketing] Act is there
an express provision for participation by consumers in
any proceeding. In a complex scheme of this type, the
omission of such a provision is sufficient reason to be-
12 No. 02-3422
lieve that Congress intended to foreclose consumer par-
ticipation in the regulatory process.” Block v. Community
Nutrition Institute, supra, 467 U.S. at 347.
The implication is less that judicial review should be
denied to all aggrieved persons except handlers than
that aggrieved persons should be required to exhaust
administrative remedies before suing. The distinction
was not important in Block. Consumers’ interests are
aligned with handlers’ interests, and handlers, who have
to exhaust their administrative remedies as we have just
seen, have express authority to sue. So there was little
need to complicate the administrative scheme by allowing
(more precisely, by imputing to Congress an intent to
allow) consumers to sue as well. Cf. Illinois Brick Co. v.
Illinois, 431 U.S. 720, 745-47 (1977), denying indirect pur-
chasers (generally consumers) the right to bring antitrust
suits seeking damages from remote sellers since direct
purchasers can do so. Milk producers’ interests, however,
tend to be antagonistic to handlers’ interests, producers
being the sellers and handlers the buyers.
All this is made clear in Block. “The structure of this Act
indicates that Congress intended only producers and
handlers, and not consumers, to ensure that the statutory
objectives would be realized. Respondents [i.e., the con-
sumers who had brought the suit in Block] would have
us believe that, while Congress unequivocally directed
handlers first to complain to the Secretary that the prices
set by milk market orders are too high, it was neverthe-
less the legislative judgment that the same challenge, if
advanced by consumers, does not require initial administra-
tive scrutiny . . . . Allowing consumers to sue the Secretary
[of Agriculture] would severely disrupt this complex
and delicate administrative scheme. It would provide hand-
lers with a convenient device for evading the statutory
No. 02-3422 13
requirement that they first exhaust their administrative
remedies. A handler . . . would need only to find a con-
sumer who is willing to join in or initiate an action in the
district court. The consumer or consumer-handler could
then raise precisely the same exceptions that the handler
must raise administratively. Consumers or consumer-
handlers could seek injunctions against the operation
of market orders that ‘impede, hinder, or delay’ enforce-
ment actions, even though such injunctions are expressly
prohibited in proceedings properly instituted under 7
U.S.C. § 608c(15) [i.e., by handlers].” Block v. Community
Nutrition Institute, supra, 467 U.S. at 347-48. Notice the
distinction that the Court draws between consumers and
producers, properly so since the stepping-on-the-heels-of-
the-handlers concerns that it expresses about allowing
consumers to sue do not arise when the suit is by a pro-
ducer.
The reasoning of Block, transposed from consumer to
producer suits, suggests that imposing a requirement
of exhausting administrative remedies would be greatly
preferable to abrogating the right to sue. Every federal court
and agency has inherent authority (unless abrogated by
Congress) to reexamine its decisions if asked to do so within
a reasonable time, Glass, Molders, Pottery, Plastics & Allied
Workers Int’l Union, AFL-CIO, CLC, Local 182B v. Excelsior
Foundry Co., 56 F.3d 844, 847 (7th Cir. 1995); In re Met-L-
Wood Corp., 861 F.2d 1012, 1018 (7th Cir. 1988); Isle Royale
Boaters Ass’n v. Norton, 330 F.3d 777, 786 (6th Cir. 2003); Dun
& Bradstreet Corp. Foundation v. United States Postal Service,
946 F.2d 189, 193-94 (2d Cir. 1991), including we assume
the Agriculture Department; and so the producers could
have complained to the Department about the loophole-
closing amendment. But the courts do not have the pow-
er to require an agency to make the persons subject to its
regulatory powers jump through procedural hoops not
14 No. 02-3422
found in its organic statute or implementing regulations,
as a precondition to obtaining judicial review. That’s what
5 U.S.C. § 704 says, and the Supreme Court explained
in Darby v. Cisneros, 509 U.S. 137, 146-47 (1993), that
adding those hoops would make it too difficult for ag-
grieved persons to determine when agency action was final
so that they could seek judicial review. The milk marketing
law authorizes only handlers to ask the Department for
relief from a milk marketing order. We cannot impose
a similar rule on producers.
But presumably the Department can by amending the
procedures that it has promulgated for milk-marketing
hearings. See 7 C.F.R. pt. 900; cf. 5 U.S.C. § 553(e); Auer
v. Robbins, 519 U.S. 452, 459 (1997). “Except as otherwise
expressly required by statute, agency action otherwise
final is final for purposes of this section whether or not
there has been presented or determined an application
for a declaratory order, for any form of reconsideration, or,
unless the agency otherwise requires by rule and provides that
the action meanwhile is inoperative, for an appeal to superior
agency authority.” 5 U.S.C. § 704 (emphasis added). This
provision, as the Court remarked in Darby, “by its very
terms, has limited the availability of the doctrine of ex-
haustion of administrative remedies to that which the
statute or rule clearly mandates.” 509 U.S. at 146 (empha-
sis added). “Agencies may avoid the finality of an initial
decision, first, by adopting a rule that an agency appeal be
taken before judicial review is available, and, second, by
providing that the initial decision would be ‘inoperative’
pending appeal. Otherwise, the initial decision becomes
final and the aggrieved party is entitled to judicial review.”
Id. at 152.
The absence of a requirement that the producers ex-
haust their administrative remedies weakens the argu-
ment for allowing them to seek judicial review. For the
No. 02-3422 15
argument if accepted creates a risk of their bypassing the
agency and raising objections that the agency might have
responded to more effectively than in its brief in the re-
viewing court—but not in this case. And maybe not in
any case, since as we have just seen the Agriculture Depart-
ment can impose a requirement of exhaustion, and it ought
not be allowed to use its failure to do so to block judicial
review of its orders. But let us set that point to one side
and focus narrowly on this case. Remember that the only
complaint the plaintiffs are pressing in this appeal is that
they didn’t receive adequate notice of the relief contem-
plated by the Department; they didn’t know what was
at stake for them in the proceeding and therefore they
didn’t participate fully in it, though some of them, as the
defendants stress, did participate to a greater or lesser
extent. Although the Department is in a better position
than we are to decide whether their objections to the
amendment have sufficient merit to warrant reopening
the rulemaking proceeding, they are not asking us to rule
on those objections. They are asking us to decide the
purely procedural question whether the Department gave
them adequate notice. Requiring them to tender this issue
first to the Department would be a waste of time.
The Department’s final argument against allowing
producers to sue is that many of them, dairy co-ops for
example, are both producers and handlers (that is, these
producers have cut out the middleman) and could sue
in the latter capacity. But these hybrids have no quarrel
as handlers with the order. If the Department nevertheless
believes, as it seems to, that they could sue to protect their
interests as producers, it is giving away the game; for
there is no reason to confine the right to sue to producers
adventitiously engaged in handling as well.
We conclude that producers can seek judicial review of
milk marketing orders that pinch them, and so we can
16 No. 02-3422
proceed at last to the merits, which is to say to the issue
of notice. The Administrative Procedure Act requires pub-
lished notice of proposed rulemaking, 5 U.S.C. § 553(b),
but does not specify how detailed the notice must be.
We have said that “notice is adequate if it apprises inter-
ested parties of the issues to be addressed in the rulemak-
ing proceeding with sufficient clarity and specificity to
allow them to participate in the rulemaking in a meaningful
and informed manner.” American Medical Ass’n v. United
States, 887 F.2d 760, 767 (7th Cir. 1987). But “while an agency
must explain and justify its departures from a proposed
rule, it is not straitjacketed into the approach initially
suggested on pain of triggering a further round of notice-
and-comment.” Id. at 769. “The law does not require that
every alteration in a proposed rule be reissued for notice
and comment. If that were the case, an agency could ‘learn
from the comments on its proposals only at the peril of’
subjecting itself to rulemaking without end.” First American
Discount Corp. v. CFTC, 222 F.3d 1008, 1015 (D.C. Cir. 2000).
The purpose of a rulemaking proceeding is not merely
to vote up or down the specific proposals advanced before
the proceeding begins, but to refine, modify, and supple-
ment the proposals in the light of evidence and argu-
ments presented in the course of the proceeding. If every
modification is to require a further hearing at which that
modification is set forth in the notice, agencies will be
loath to modify initial proposals, and the rulemaking
process will be degraded.
The notice that the Department issued, Milk in the
Mideast Marketing Area; Notice of Hearing on Proposed Amend-
ments to Tentative Marketing Agreement and Order, 66 Fed.
Reg. 49571 (Sept. 28, 2001), stated: “A public hearing is
being held to consider proposals that would amend certain
pooling and related provisions of the Mideast order.
No. 02-3422 17
Proposals include . . . decreasing the amount of producer
milk that can be diverted to nonpool plants for varying
months of the year; and increasing the minimum amount
of milk that a producer needs to deliver to pool plants
in order to qualify as a producer and to be eligible to be
pooled on the order . . . [and] eliminating a provision that
currently permits a pool plant to have both a pool and a
nonpool portion; [and] establishing a ‘net shipment’ pro-
vision for milk received at pool plants for determining
pooling eligibility.” Though this is gobbledygook to an
outsider, insiders such as the plaintiffs would realize
that the focus of the proceeding would be on their eligibil-
ity to be pooled with the Mideast producers (that is what
being “pooled on the [Mideast] order” means).
What is true is that none of the proposals was identical
to the amendment that the Department adopted at the
end of the proceeding, namely the prohibition of paper
pooling with distant plants. But paper pooling was one
of the principal methods by which the plaintiffs got to
pool with the Mideast producers, so that they had to as-
sume that it would be one of the issues in the proceeding
and a possible target for reform. They knew their aggressive
inroads into the Mideast were controversial; they knew
that in engaging in paper pooling with Mideast farmers
they were exploiting the loophole created by the Depart-
ment’s abolition in 2000 of the price penalties for such
pooling; they knew therefore that a curtailment of their
access to the Mideast blended price was a likely outcome
of a rulemaking proceeding expressly concerned with the
criteria for eligibility for pooling with the Mideast produc-
ers. They knew enough to know that if they wanted to
protect their participation in the Mideast pool they would
have to participate in the rulemaking proceeding. Their
choice not to do so cannot be attributed to a lack of notice.
18 No. 02-3422
The judgment dismissing the suit is modified to base
dismissal on the merits rather than on lack of jurisdiction,
and as so modified is affirmed.
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—7-15-03