Cloverland-Green Spring Dairies, Inc. v. Pennsylvania Milk Marketing Bd.

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
7-24-2002
Cloverland Green v. PA Milk Marketing Bd
Precedential or Non-Precedential: Precedential
Docket No. 01-2210
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PRECEDENTIAL
Filed July 24, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 01-2210 / 01-2219
CLOVERLAND-GREEN SPRING DAIRIES, INC.
v.
PENNSYLVANIA MILK MARKETING BOARD;
BEVERLY R. MINOR, Individually
and as members of the Board;
LUKE F. BRUBAKER; J. ROBERT DERRY,
Individually and as members of the Board
THOMAS E. MCGLINCHEY; GERTRUDE GIORGINI;
SUE A. SPIGLER, ("Milk Consumers"),
Intervenor-Plaintiffs
Cloverland-Green Spring Dairies, Inc.,
Appellant (No. 00-2210)
(D.C. No. 99-cv-00487)
*(Amended per Clerk’s Order filed 10/3/01)
CLOVERLAND-GREEN SPRING DAIRIES, INC.;
v.
PENNSYLVANIA MILK MARKETING BOARD;
BEVERLY R. MINOR, Individually and
as chairperson of the Board;
LUKE F. BRUBAKER; J. ROBERT DERRY,
Individually and as members of the Board
THOMAS E. MCGLINCHEY; GERTRUDE GIORGINI;
SUE A. SPIGLER, ("Milk Consumers"),
Intervenor-Plaintiffs
Thomas E. McGlinchey, Gertrude Giorgini,
Sue A. Spigler, Individually, and on behalf of
milk consumers in PMMB Areas #1 and #4,
Appellants (No. 01-2219)
*(Amended per Clerk’s Order filed 10/3/01)
Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil Action No. 99-cv-00487)
District Judge: Honorable Sylvia H. Rambo
Argued February 5, 2002
Before: SLOVITER, and AMBRO, Circuit Judges
POLLAK,** District Judge
(Opinion filed: July 24, 2002)
Kevin J. McKeon, Esquire
Malatesta, Hawke & McKeon
100 North Tenth Street
Harrisburg, PA 17101
Sheldon A. Weiss, Esquire (Argued)
125 Knightsbridge Road
Mountainside, NJ 07092
Attorneys for Appellant/
Cross Appellee Cloverland-Green
Spring Dairies, Inc.
Thomas J. Finucane, Esquire
(Argued)
14 North Main Street, Suite 500
Chambersburg, PA 17201
_________________________________________________________________
** Honorable Louis H. Pollak, United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
2
D. Michael Fisher
Attorney General of Pennsylvania
Gwendolyn T. Mosley (Argued)
Senior Deputy Attorney General
Calvin R. Koons
Senior Deputy Attorney General
John G. Knorr, III
Chief Deputy Attorney General
Chief Appellate Litigation Section
Office of Attorney General of
Pennsylvania
Strawberry Square, 15th Floor
Harrisburg, PA 17120
Attorneys for Appellees/
Cross Appellants
Allen C. Warshaw, Esquire (Argued)
Duane, Morris & Heckscher
305 North Front Street
P.O. Box 1003, 5th Floor
Harrisburg, PA 17108-1003
Attorney for Appellee
Pennsylvania Association of Milk
Dealers
OPINION OF THE COURT
AMBRO, Circuit Judge:
The primary issue in this case is whether the dormant
Commerce Clause allows a state to impose wholesale price
floors that shield in-state businesses from more efficient
out-of-state competitors. Under the circumstances
presented here, we hold that it does not.
Federal milk marketing orders fix minimum prices (or
price floors) for milk producers’ sales in most of the United
States. Pennsylvania, the fourth-largest milk-producing
state in the nation, sets minimum producer prices above
the federal floors. To compensate its dealers1 and retailers
_________________________________________________________________
1. Milk dealers (i.e., processors) buy raw milk from producers (i.e., dairy
farmers), process it, and sell it at wholesale prices to retailers (e.g.,
supermarkets, convenience stores).
3
for paying higher raw milk costs, Pennsylvania enforces
minimum prices for wholesale and retail milk sales. The
wholesale and retail price floors, which are designed to
"best protect the milk industry of the Commonwealth," are
fixed according to in-state milk dealers’ and retailers’ costs
to guarantee them desirable profits. As a consequence,
wholesale and retail milk prices in Pennsylvania are
considerably higher than the prevailing prices in
neighboring states, none of which imposes price controls.
Out-of-state milk dealers want to compete in the
Pennsylvania market by offering prices below the wholesale
floors, but face criminal penalties for doing so.
Cloverland-Green Spring Dairies, Inc. ("Cloverland"), a
Maryland milk dealer, sued the Pennsylvania Milk
Marketing Board (the "Board") under 42 U.S.C.S 1983,
seeking declaratory and injunctive relief with respect to the
minimum wholesale prices.2 Three milk consumers who live
in Pennsylvania (Thomas McGlinchey, Gertrude Giorgini,
and Sue Spigler) intervened to challenge Pennsylvania’s
minimum retail prices. The Pennsylvania Association of
Milk Dealers (the "Pennsylvania Milk Dealers"), which
represents milk dealers within the Commonwealth,
intervened to help defend the minimum wholesale prices.
The District Court granted summary judgment for the
defendants with respect to both the wholesale and retail
price floors, prompting this appeal. We affirm the Court’s
ruling on the minimum retail prices, but reverse its ruling
on the minimum wholesale prices and remand for further
proceedings.
I. Background
Because we are at the summary judgment stage, we
describe the facts in the light most favorable to Cloverland,
_________________________________________________________________
2. As a state agency, the Board is immune from suit under the Eleventh
Amendment. See Fla. Dep’t of Health & Rehabilitative Servs. v. Fla.
Nursing Home Ass’n, 450 U.S. 147, 150 (1981) (per curiam). But its
three members, whom Cloverland also sued, are not. See Ex parte
Young, 209 U.S. 123, 159-60 (1908). For simplicity, we use the "Board"
to refer to its members.
4
the non-moving party. See Schnall v. Amboy Nat’l Bank,
279 F.3d 205, 209 n.1 (3d Cir. 2002).
In most parts of the United States, producer-to-dealer
milk sales are subject to price floors imposed by the federal
government. Under the federal regulatory scheme, see 7
U.S.C. S 608c; 7 C.F.R. S 1001.1 et seq., the Secretary of
Agriculture divides the country into geographic regions and
issues milk marketing orders that set minimum producer
prices for each region. Prices are set at levels that "insure
a sufficient quantity of pure and wholesome milk to meet
current needs and further to assure a level of farm income
adequate to maintain productive capacity sufficient to meet
anticipated future needs." 7 U.S.C. S 608c(18).3 Congress
first authorized the Secretary to set minimum producer
prices in 1937, amidst widespread fear of a milk shortage.
Today, more than six decades later, dairy farmers across
the United States produce far more milk than our country
consumes.
Pennsylvania’s dairy industry is among our nation’s most
productive. Milk production in the Commonwealth outpaces
consumption by roughly 350%. Annual production per-
capita is around 900 pounds; consumption per-capita is
merely 200 pounds. Only three states (California,
Wisconsin, and New York) produce more milk than
Pennsylvania.4
_________________________________________________________________
3. Beyond inflating prices, the federal floors protect milk producers by
eliminating revenue disparities unrelated to efficiency. Milk producers
are paid different prices according to the use to which their milk is put.
Fluid milk (for example, milk sold in containers) commands the highest
price; milk used to make other dairy products, such as cheese and
butter, sells for less. To encourage producers to sell milk without regard
to its use, the federal scheme pays each milk producer a "blend price"
based on the aggregate uses of raw milk within his region. See West
Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 189 n.1 (1994); Grant’s
Dairy-Me., LLC v. Comm’r of Me. Dep’t of Agric., Food & Rural Resources,
232 F.3d 8, 12 (1st Cir. 2000).
4. See USDA, Federal Milk Market Administrator, Marketing Service
Bulletin: 2001 Milk Production (Feb. 2002), http://fmmacentral.com/
PDFdata/msb0202.pdf (visited July 16, 2002). In addition, the
Commonwealth ranks eleventh in both production per capita and
production per cow. Id.
5
Nonetheless, to "best protect the milk industry of the
Commonwealth and insure a sufficient quantity of pure and
wholesome milk to [its] inhabitants," Pennsylvania forces its
milk producers to sell at "over-order" prices--meaning
prices above those required by federal milk marketing
orders--and, unlike any other state in the region, sets
minimum prices for wholesale and retail milk sales. 31 Pa.
Cons. Stat. Ann. S 700j-801 (2002). The animating statute
is the Pennsylvania Milk Marketing Law (the "Milk Law"),
originally enacted in 1934, before the federal government
began regulating dairy farmers’ prices. See Finucane v. Pa.
Milk Mktg. Bd., 582 A.2d 1152, 1153 n.1 (Pa. Commw. Ct.
1990). Pursuant to the Milk Law, the Board divides
Pennsylvania into six "milk marketing areas" and sets
minimum prices therein, based on "conditions affecting the
milk industry in each milk marketing area," i.e., the
respective costs of "producers, dealers and stores in the
area." S 700j-801. The Board fixes "over-order" producer
prices at levels that guarantee Pennsylvania milk producers
"a reasonable return." Id. Neighboring states, in contrast,
do not impose minimum producer prices, apparently
deeming the federal price floors sufficiently protective of
their milk supplies.
To compensate dealers (and, in turn, retailers) for paying
higher raw milk prices, the Commonwealth fixes wholesale
and retail price floors at levels that guarantee them, also, "a
reasonable return," which the Milk Law defines as"not less
than a two and one-half percent (2 %) nor more than a
three and one-half percent (3 %) rate of return based on net
sales." Id. As a result, Pennsylvania dealers currently reap
profits of around 3.3% of net sales, whereas net resale
margins for dealers’ sales in other states are typically
around 1-2%. Persons who sell (or offer to sell) milk at
prices below those dictated by the Board are subject to
criminal penalties, including imprisonment. 31 Pa. Cons.
Stat. Ann. SS 700j-1001, -1002 (2002).
Pennsylvania’s price control regime is virtually without
peer. Only two other states (North Dakota and Maine)
impose resale price floors. But unlike Pennsylvania, North
Dakota and Maine do not require their milk control
agencies to set price floors, instead giving them the option
6
to do so.5 Everywhere else in the United States, wholesale
and retail milk prices are determined by market forces, not
government fiat.
The five southeastern and ten south-central counties in
Pennsylvania (Areas 1 and 4, respectively, under the
Board’s regime) are part of the Northeast federal milk
marketing region,6 which meanders from northern Virginia
through New Hampshire and Vermont.7 7 C.F.R. S 1001.2
(2002). Evidence indicates that milk dealers in the states
bordering Pennsylvania have the ability to sell fluid milk to
retailers located as far as 150 miles away from their
processing plants. According to a study the Board
conducted in 1992, when the Pennsylvania Milk Dealers
asked it to assess the threats posed by out-of-state dealers,
at least seventeen out-of-state dealers are capable of selling
milk to Pennsylvania retailers. However, while substantial
interstate movement of milk occurs within other parts of
the Northeast region, out-of-state dealers do little business
in Pennsylvania.
Cloverland, which is based in Baltimore, profitably sells
wholesale milk in Maryland at prices well below the
minimum prices applicable to sales in Areas 1 and 4. In the
absence of the wholesale price floors, Cloverland would
offer similarly low prices to retailers in those areas. It has
tried to gain customers in Areas 1 and 4 by competing
based on non-price criteria, such as packaging, quality,
and service, but has been unsuccessful. Cloverland
maintains that the only way it can attract business in
Pennsylvania is by offering lower prices. It offered evidence
that it is almost impossible for dealers to acquire business
in Pennsylvania without offering milk at lower prices
because there is little (if any) difference among dealers with
respect to factors other than price.
_________________________________________________________________
5. Both states’ agencies exercise the option.
6. Other areas within the Commonwealth are not subject to federal
producer price floors. Only the minimum prices for Areas 1 and 4 are at
issue in this case.
7. Cloverland challenges not only the Milk Law, but also two orders
issued pursuant thereto (Orders A-890A and A-900) that set minimum
prices for Areas 1 and 4, respectively. For convenience, we also refer to
the statute and the orders collectively as the "Milk Law."
7
It is unclear why Cloverland is able to offer prices well
below Pennsylvania’s wholesale floors. Perhaps out-of-state
dealers can acquire raw milk at lower prices because their
home states do not impose "over-order" prices, as one of the
defendants’ affiants indicated. On the other hand,
Cloverland suggests that "large producer cooperatives" may
render raw milk prices in neighboring states nearly as high
as those dictated by law in Pennsylvania. So perhaps out-
of-state dealers process milk more efficiently than their
Pennsylvania counterparts, as Cloverland contends.
Whatever the reason, it is apparent that the minimum
wholesale prices prevent Cloverland from using its
competitive advantage in price to attract business in
Pennsylvania. At the same time, there is no evidence that
any in-state dealer wants to sell milk in Pennsylvania at
lower prices; indeed, the Pennsylvania Milk Dealers
intervened in this case to help defend the price floors.
In an effort to justify the wholesale price floors, the
defendants offered evidence, in the form of affidavits from
representatives of the Pennsylvania milk industry, that the
Commonwealth’s "over-order" producer prices are needed to
prevent "predatory pricing" that could cause a milk
shortage, and that the minimum wholesale prices are
necessary to compensate dealers for paying higher raw milk
prices. Cloverland countered with evidence that"for many
decades" the federal producer price floors have yielded an
ample milk supply in other states within the Northeast milk
marketing region, none of which has wholesale or retail
price floors. Further, Cloverland offered evidence that
Pennsylvania’s minimum wholesale prices are much higher
than is necessary to keep reasonably efficient dealers in
business. For instance, Cloverland presented evidence,
which the defendants did not dispute, that efficient milk
dealers can profitably sell milk for thirty cents per gallon
less than the minimum wholesale prices.8
_________________________________________________________________
8. This evidence showed that while dealers spend around twenty-six
cents per gallon to process raw milk and transport it for sale,
Pennsylvania’s price floors inflate dealers’ margins (the difference
between raw milk costs and wholesale milk prices) to fifty-seven cents
per gallon.
8
To put this in perspective, in May 2002, the minimum
wholesale prices in Areas 1 and 4 were $2.66 and $2.64 per
gallon, respectively.9 The defendants maintain that the
wholesale price floors appear excessively high only because
the Board bases them on dealers’ average total costs, which
include both average variable costs (such as raw milk,
processing, labor, and transportation) and average fixed
costs (such as equipment, office space, and other
"overhead" expenses).10 However, this practice of fixing
prices based on average total costs significantly increases
dealers’ profits because it will be in their economic interest
to sell additional units of milk at any price above their
average variable costs, even if below their average total
costs. Outside Pennsylvania, in contrast, milk dealers
generally offer prices based on their average variable costs.
With the record in this state, the parties filed cross-
motions for summary judgment, and the District Court
issued the first of two opinions. After reviewing the record,
the Court determined that, because of the minimum
wholesale prices, "[m]ore efficient out-of-state firms with
lower costs are prohibited from utilizing their competitive
advantage and attracting new customers by offering milk at
lower prices." 138 F. Supp. 2d 593, 610 (2001). Further,
"the clear effect produced on interstate commerce is that
less out-of-state milk passes across the Pennsylvania
border to be sold in Pennsylvania than would in the
absence of the [Milk Law]." Id. Nevertheless, the Court
deemed the burden on interstate commerce merely
"incidental," reasoning that the minimum prices do not
burden out-of-state dealers, but instead burden more
efficient dealers without regard to location. Id. at 607.
_________________________________________________________________
9. See Pennsylvania Milk Marketing Board, Minimum Wholesale/Retail
Prices - May 2002, http://sites.state.pa.us/PA_Exec/Milk/wr200205.pdf
(visited July 16, 2002).
10. See Philip Areeda & Donald F. Turner, Predatory Pricing and Related
Practices Under Section 2 of the Sherman Act, 88 Harv. L. Rev. 697, 700
(1975) (explaining that "[f]ixed costs are costs that do not vary with
changes in output," whereas variable costs "are costs that vary with
changes in output"). Average total cost is calculated by dividing total
production expenses (both fixed costs and variable costs) by units of
output. Id.
9
Therefore, the Court applied the balancing test formulated
in Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970), viz.,
"[w]here [a] statute regulates even-handedly to effectuate a
legitimate local public interest, and its effects on interstate
commerce are only incidental, it will be upheld unless the
burden imposed on such commerce is clearly excessive in
relation to the putative local benefits."
The District Court appeared ready to invalidate the price
floors under Pike, stating that while the burden on
interstate commerce was "clear," no legitimate local benefits
were evident. 138 F. Supp. 2d at 610-12. It noted that "the
federal minimum pricing is ensuring an adequate supply of
milk." Id. at 611. Further, the defendants offered no
evidence that the wholesale price floors were necessary to
avoid a milk shortage, especially since "much more milk is
produced in Pennsylvania than is consumed in
Pennsylvania." Id. However, the Court put off deciding
whether the price floors fail the Pike test to give the parties
thirty additional days to supplement the record. 11 Id. at
612.
Based on evidence subsequently introduced into the
record, the District Court concluded that the wholesale
price floors had some legitimate local benefits and that they
burden interstate commerce less than it previously thought.
Id. at 622. Relying on Pennsylvania milk industry
representatives’ statements that the wholesale price floors
are necessary to compensate dealers for paying "over-order"
producer prices, the Court determined that the minimum
wholesale prices advance the legitimate local interest in
averting a milk shortage. Id. at 621-22. Although there was
considerable evidence that "Pennsylvania produces more
milk than its inhabitants drink and neighboring states have
been able to maintain adequate supplies of milk without
state-mandated prices," this did not prove "that the
putative local benefits are non-existent or that the
legislature could not have believed in the purported
purpose of the statute." Id. at 622.
_________________________________________________________________
11. Having just granted the Pennsylvania Milk Dealers’ motion to
intervene, the District Court wanted to give them an opportunity to
introduce evidence regarding the price floors’ legitimate local benefits.
10
On the burdens side of the scale, the Court reasoned that
out-of-state dealers’ ability to compete based on non-price
criteria rendered the burden on interstate commerce
"minimal," and that Cloverland "offer[ed] no conclusive
evidence" that the minimum wholesale prices
"substantial[ly]" reduce the flow of milk into Pennsylvania.
Id. at 623. The Court relied heavily on statements by four
Pennsylvania dealers and twenty-two Pennsylvania retailers
that dealers compete based on non-price criteria, such as
quality, service, and packaging. Id. It did not mention that
many of the retailers listed price as an important factor--
indeed, a number called it the most important--in deciding
whether to switch dealers. Nor did it mention that several
retailers explicitly said that, were it not for the minimum
wholesale prices, they would buy milk from out-of-state
dealers if they offered lower prices. In addition to
underscoring out-of-state dealers’ ability to compete based
on factors other than price, the Court emphasized that
thirty-three percent of the milk sold by dealers in the
Commonwealth was marketed pursuant to state-approved
service contracts dubbed "tolling agreements," which allow
dealers to sell at prices below the wholesale floors, and that
approximately seven percent of overall fluid milk sales in
Pennsylvania are made by out-of-state dealers participating
in tolling agreements. Id. With this analytical context, the
Court concluded that no reasonable jury could find the
price floors failed the Pike test. Id. at 624.
II. Jurisdiction and Standard of Review
The District Court had jurisdiction under 28 U.S.C.
SS 1331, 1332, and 1343. We have jurisdiction under 28
U.S.C. S 1291.
We review the District Court’s grant of summary
judgment de novo. Fogleman v. Mercy Hosp., Inc., 283 F.3d
561, 566 n.3 (3d Cir. 2002). Summary judgment was
proper if, viewing the record in the light most favorable to
Cloverland, there is no genuine issue of material fact and
the Board is entitled to judgment as a matter of law.12 Fed.
_________________________________________________________________
12. The standard for granting summary judgment on a request for a
declaratory judgment is the same as for any other type of relief. See Fed.
R. Civ. P. 57; Simler v. Conner, 372 U.S. 221, 222 (1963); Gen. Comm.
of Adjustment, United Transp. Union v. CSX R.R., 893 F.2d 584, 586, 589
(3d Cir. 1990).
11
Rawle Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-
23 (1986); Bailey v. United Airlines, 279 F.3d 194, 198 (3d
Cir. 2002). A factual dispute is material if it"bear[s] on an
essential element of the plaintiff ’s claim," and is genuine if
"a reasonable jury could find in favor of the nonmoving
party." Abraham v. Raso, 183 F.3d 279, 287 (3d Cir. 1999)
(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-
251 (1986)).
III. Minimum Wholesale Prices
A. The Basic Analytical Framework
In addition to granting Congress the power "to regulate
Commerce . . . among the several States," U.S. Const. art.
I, S 8, cl. 3, the Commerce Clause has a negative aspect
(commonly called "the dormant Commerce Clause") that
limits the states’ power to regulate interstate commerce.
The dormant Commerce Clause prohibits the states from
imposing restrictions that benefit in-state economic
interests at out-of-state interests’ expense, thus reinforcing
"the principle of the unitary national market."13 West Lynn
Creamery, Inc. v. Healy, 512 U.S. 186, 192-93 (1994).
Axiomatic in dormant Commerce Clause jurisprudence is
the principle that a state cannot impede free market forces
to shield in-state businesses from out-of-state competition.
See, e.g., Polar Ice Cream & Creamery Co. v. Andrews, 375
U.S. 361, 377 (1964) ("[T]he State may not, in the sole
interest of promoting the economic welfare of its dairy
farmers, insulate [its] milk industry from competition from
other States."); H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S.
525, 532 (1949). Thus state laws that discriminate against
out-of-state businesses by forcing them to "surrender
_________________________________________________________________
13. Congress can authorize states to impose restrictions that the
dormant Commerce Clause would otherwise forbid. See, e.g., Shamrock
Farms Co. v. Veneman, 146 F.3d 1177, 1180, 1182 (9th Cir. 1998)
(upholding California’s milk composition standards and pooled minimum
producer price scheme because Congress expressly immunized the
State’s milk regulations from dormant Commerce Clause scrutiny); see
also Norfolk S. Corp. v. Oberly, 822 F.2d 388, 392-93 (3d Cir. 1987). The
Board does not maintain that Congress authorized Pennsylvania to
impose wholesale price floors.
12
whatever competitive advantages they may possess" are
especially suspect. Brown-Forman Distillers Corp. v. New
York State Liquor Auth., 476 U.S. 573, 580 (1986).
The initial question in a dormant Commerce Clause case
is whether the state regulation at issue discriminates
against interstate commerce "either on its face or in
practical effect." Maine v. Taylor, 477 U.S. 131, 138 (1986);
Harvey & Harvey, Inc. v. County of Chester, 68 F.3d 788,
797 (3d Cir. 1995). If so, heightened scrutiny applies.
"Discrimination against interstate commerce in favor of
local business or investment is per se invalid, save in a
narrow class of cases in which the [State] can demonstrate,
under rigorous scrutiny, that it has no other means to
advance a legitimate local interest." C & A Carbone, Inc. v.
Town of Clarkstown, 511 U.S. 383, 392 (1994); Juzwin v.
Asbestos Corp., 900 F.2d 686, 689 (3d Cir. 1990). On the
other hand, if the state regulation does not discriminate
against interstate commerce, but "regulates even-handedly"
and merely "incidentally" burdens it, the regulation will be
upheld unless the burden is "clearly excessive in relation to
the putative local benefits." Pike, 397 U.S. at 142; Harvey
& Harvey, 68 F.3d at 797.
When a facially neutral law has the effect of
disproportionately burdening out-of-state interests, it can
be difficult to determine whether the burden rises to the
level of discrimination against interstate commerce. See
Brown-Forman Distillers Corp. v. New York State Liquor
Auth., 476 U.S. 573, 579 (1986); General Motors Corp. v.
Tracy, 519 U.S. 278, 298 n.12 (1997). Indeed, sometimes
the distinction between state laws subject only to Pike
balancing and those that are nearly per se invalid is "hazy."
Norfolk S. Corp. v. Oberly, 822 F.2d 388, 400 n.18 (3d Cir.
1987). However, as explained in more detail below, it is
clear that state laws that are facially neutral but have the
effect of eliminating a competitive advantage possessed by
out-of-state firms trigger heightened scrutiny. See Hunt v.
Wash. State Apple Adver. Comm’n, 432 U.S. 333 (1977);
Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935).
In this case, Cloverland argues for heightened scrutiny,
but disclaims any contention that the Milk Law is facially
discriminatory. Thus we must consider whether a
13
reasonable jury could find that the minimum wholesale
prices have the effect of discriminating against out-of-state
dealers.
B. Heightened Scrutiny
Two Supreme Court decisions guide our discussion. In
the leading case of Baldwin, the Supreme Court struck
down a New York law prohibiting in-state dealers from
selling milk purchased outside the State at a price below
the New York minimum. 294 U.S. at 521. The law was
challenged by a company that bought lower-cost milk in
Vermont and shipped it by rail to New York for sale there.
Id. at 518, 520. The Court said the law was the functional
equivalent of a tariff. Id. at 521. It eliminated Vermont
farmers’ competitive advantage of producing milk at lower
costs, id. at 522, and thus "neutralize[d] the economic
consequences of free trade among the states." Id. at 526.
Further, if imitated by other states, it could spark a
destructive interstate trade war. Id. at 521-22. "If New York,
in order to promote the economic welfare of her farmers,
may guard them against competition with the cheaper
prices of Vermont, the door has been opened to rivalries
and reprisals that were meant to be averted by subjecting
commerce between the states to the power of the nation."
Id. at 522. While New York contended that the law was an
innocuous effort to ensure an adequate supply of
wholesome milk, the Court explained that any protectionist
law can be couched in non-protectionist terms, and that
upholding state-imposed trade barriers simply because they
save suppliers from market forces would render the
dormant Commerce Clause a nullity.14 Id. at 523.
Four decades later, the Supreme Court invalidated a
_________________________________________________________________
14. The defendants claim that Baldwin does not apply because New
York’s law effectively regulated transactions that occurred outside the
State’s jurisdiction, whereas the Milk Law applies only to in-state
transactions. But the problem with the law invalidated in Baldwin was
not merely its extraterritorial reach, but that it had the practical effect
of discriminating against out-of-state milk producers by eliminating their
competitive advantage. See Donald H. Regan, The Supreme Court and
State Protectionism: Making Sense of the Dormant Commerce Clause, 84
Mich. L. Rev. 1091, 1247-50 (1986).
14
North Carolina statute that prohibited closed containers of
apples sold in the State, regardless of their origin, from
displaying any grade other than that of the United States
Department of Agriculture ("USDA"). Wash. State Apple,
432 U.S. at 349-54. The statute prevented apple growers
from the State of Washington, which imposed especially
strict inspection and quality standards, from using the
superior Washington grade to market their product. Id. at
336-39. The Supreme Court determined that the labeling
rule was subject to heightened scrutiny because it had the
"practical effect" of discriminating against Washington
apples in three ways. Id. at 350-51. First, it forced
Washington apple growers and dealers--but not their North
Carolina counterparts--to change their marketing practices.
Id. at 351. Second, it eliminated the competitive advantage
that the Washington grade gave that State’s apples by
requiring them to be marketed under the "inferior" USDA
grade. Id. at 351-52. Third, it had "a leveling effect which
insidiously operate[d] to the advantage of local apple
producers," giving "the North Carolina apple industry the
very sort of protection against competing out-of-state
products that the Commerce Clause was designed to
prohibit." Id. The Court rejected North Carolina’s claim that
the statute was necessary to avoid the "deception and
confusion" ostensibly resulting from different states’
grading systems, noting, inter alia, that it increased these
dangers by allowing apples to be marketed without any
grade, thereby depriving purchasers of information about
the quality of apples concealed from view by closed
containers.15 Id. at 353-54.
The Supreme Court’s opinions in Baldwin and
Washington State Apple show that if a state regulation has
the effect of protecting in-state businesses by eliminating a
_________________________________________________________________
15. Before Washington State Apple, a three-judge district court concluded
that minimum wholesale prices for in-state sales do not offend the
dormant Commerce Clause, but did not consider whether the result
would be different if out-of-state dealers were disproportionately
burdened. See Baxley v. Ala. Dairy Comm’n, 360 F. Supp. 1159, 1165
(M.D. Ala. 1973); see also Schwegmann Bros. Giant Super Mkts. v. La.
Milk Comm’n, 365 F. Supp. 1144, 1156 (M.D. La. 1973) (same in dicta),
aff ’d, 416 U.S. 922 (1974) (mem.).
15
competitive advantage possessed by their out-of-state
counterparts, heightened scrutiny applies. See Laurence H.
Tribe, American Constitutional Law S 6-8, at 1076 (3d ed.
2000) ("[J]ust as it was impermissible in Baldwin v. Seelig
for New York to eliminate the price advantage of Vermont
milk by mandating a minimum price, so, too, in Hunt v.
Washington State Apple Advertising Commission, was it
impermissible for North Carolina to eliminate the quality
advantage of apples from Washington by proscribing
Washington’s use of a quality grading system that
distinguished its apples from the local product.").
We believe that a reasonable trier of fact could find that
Pennsylvania’s minimum wholesale prices eliminate a
competitive advantage enjoyed by out-of-state dealers like
Cloverland, and thus have an effect indistinguishable from
the protectionist effects deemed fatal in Baldwin and
Washington State Apple. We therefore hold that the District
Court erred by declining to subject the wholesale price
floors to heightened scrutiny.
As noted above, there is a factual dispute over why
Cloverland can profitably sell milk at prices well below
Pennsylvania’s wholesale floors. One conclusion that a
reasonable trier of fact could reach is that out-of-state
dealers have a competitive advantage over their in-state
counterparts. Higher raw milk costs necessitate higher
wholesale prices. Because dealers buy milk from local dairy
farmers, dealers from a state that imposes "over-order"
prices are at a disadvantage when exposed to competition
from dealers whose home states do not prop up milk
producers’ prices above the federal floors. Unlike
neighboring states such as Maryland, where Cloverland is
based, Pennsylvania forces its dealers to pay "over-order"
prices for raw milk. A reasonable trier of fact could find
that out-of-state dealers’ ability to acquire raw milk at lower
costs gives them a competitive edge over Pennsylvania
dealers.16
_________________________________________________________________
16. Quite different considerations were involved in Milk Control Board of
Pennsylvania v. Eisenberg Farm Products, 306 U.S. 346 (1939), where a
Pennsylvania dealer who bought milk from farmers in his neighborhood
and sold it in New York challenged the Commonwealth’s minimum
16
The District Court acknowledged that a reasonable trier
of fact could find that the minimum wholesale prices
reduce the flow of out-of-state milk into Pennsylvania by
preventing "[m]ore efficient out of state firms with lower
costs . . . from utilizing their competitive advantage and
attracting new customers by offering milk at lower prices."
138 F. Supp. 2d at 610. Nonetheless the Court determined
that heightened scrutiny did not apply because the same
burden applies to all non-incumbent dealers, including
more efficient in-state dealers. Id. at 607; see also Sch. Dist.
of Philadelphia v. Pa. Milk Mktg. Bd., 683 A.2d 972, 977
(Pa. Commw. Ct. 1996) (relying on this rationale to uphold
minimum wholesale prices as applied to public schools’
milk purchases). However, it is not clear that the more
efficient in-state dealers postulated by the District Court
actually exist. The Pennsylvania Milk Dealers fervently
support the minimum wholesale prices, and there is no
indication that any Pennsylvania dealer objects to them. In
any event, even if there were evidence that some in-state
dealers would like to compete for business in Pennsylvania
by offering prices below the wholesale floors, a reasonable
trier of fact could find that out-of-state dealers’ ability to
acquire cheaper raw milk gives them a competitive
_________________________________________________________________
producer prices. Id. at 349-50. The Supreme Court upheld the price
floors, emphasizing that they affected only "essentially local" transactions
between in-state producers and dealers, and did not attempt to regulate
the prices at which out-of-state businesses bought or sold milk. Id. at
352. Further, the minimum prices had virtually no effect on interstate
commerce because "[o]nly a small fraction of the milk produced by
farmers in Pennsylvania [was] shipped out of the Commonwealth." Id. at
353. Unlike the wholesale price floors at issue in our case, the law in
Eisenberg imposed only an "indirect" burden on interstate commerce,
Polar Ice Cream, 375 U.S. at 378, affected "an essentially local activity,"
id., and did not have "the practical effect of curtailing the volume of
interstate commerce to aid local economic interests." H.P. Hood & Sons,
336 U.S. at 530-31; cf. Highland Farms Dairy v. Agnew, 300 U.S. 608,
614-16 (1937) (rejecting dormant Commerce Clause challenge to
Virginia’s milk and cream price floors because they expressly exempted
interstate commerce); Grant’s Dairy-Me., LLC v. Comm’r of Me. Dep’t of
Agric., Food & Rural Resources, 232 F.3d 8, 21 (1st Cir. 2000) (holding
that Maine may impose minimum producer prices that apply only to in-
state dealers’ purchases).
17
advantage over the most efficient in-state dealers, and that
the price floors eliminate this advantage.
But the flaw in the District Court’s reasoning is more
fundamental. The Court believed that a state may remove a
competitive advantage possessed by out-of-state firms if
some in-state firms are also adversely affected. As we noted
several years ago, however, the Supreme Court’s decision in
C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383
(1994), "explicitly rejected the argument that a disputed
statute would have to favor all in-state businesses as a
group--a statute may be invalid if it favors only a single or
finite set of businesses." Harvey & Harvey , 68 F.3d at 798.
In Carbone, a town claimed that its flow control ordinance,
which mandated that all solid waste produced within its
borders be processed by a designated local facility, did not
discriminate against out-of-state facilities because it
burdened all in-state facilities save the favored one.
Carbone, 511 U.S. at 390-91. The Supreme Court
disagreed, explaining that "[t]he ordinance is no less
discriminatory because in-state or in-town processors are
also covered." Id. at 391. Indeed, "that the flow control
ordinance favor[ed] a single local proprietor," rather than
local interests generally, "just ma[de] the protectionist effect
of the ordinance more acute." Id. at 392. Similarly, if the
wholesale price floors protect incumbent in-state dealers
not only from out-of-state competitors, but also from in-
state ones (as the District Court conjectured), that simply
exacerbates their protectionist effect.
In sum, a reasonable jury could find that Pennsylvania’s
price floors "neutralize advantages belonging to the place of
origin," Baldwin, 294 U.S. at 527, and"violate[ ] the
principle of the unitary national market by handicapping
out-of-state competitors, thus artificially encouraging in-
state production even when the same goods could be
produced at lower cost in other States." West Lynn
Creamery, 512 U.S. at 193. If out-of-state dealers like
Cloverland are able to sell milk at lower prices than the
Pennsylvania dealers that currently dominate the wholesale
market in Pennsylvania, a reasonable trier of fact could
conclude that, by eliminating out-of-state dealers’
competitive advantage, the Commonwealth’s minimum
18
wholesale prices " ‘cause local goods to constitute a larger
share, and goods with an out-of-state source to constitute
a smaller share, of the total sales in the market.’ " Id. at
196 (quoting Exxon Corp. v. Governor of Md., 437 U.S. 117,
126 n.16 (1978)). This finding would trigger heightened
scrutiny under Baldwin and Washington State Apple.
Therefore, the District Court erred in applying the Pike
balancing test at the summary judgment stage.17
If they are subject to heightened scrutiny, the wholesale
price floors cannot satisfy the dormant Commerce Clause.
Assuming that Pennsylvania has a legitimate interest in
providing special protection for its milk supply beyond that
afforded by the federal producer price floors, it can achieve
its objective through alternative measures that do not
discriminate against interstate commerce. For instance, the
Commonwealth could encourage production by purchasing
large quantities of wholesale milk from its dealers, or large
quantities of raw milk from its dairy farmers. Neither action
would impede out-of-state dealers’ ability to compete for
retailers’ business, and both might be exempt from
_________________________________________________________________
17. Though not necessary to our decision, we note that the minimum
wholesale prices’ discriminatory effect on out-of-state dealers is
compounded by the fact that they "are set by reference to operations of
in-state milk dealers only." Sch. Dist. of Philadelphia v. Pa. Milk Mktg.
Bd., 877 F. Supp. 245, 252-53 (E.D. Pa. 1995) (holding that the plaintiffs
could establish a dormant Commerce Clause violation by showing that
the Board sets minimum prices according to in-state dealers’ costs); cf.
New York v. Brown, 721 F. Supp. 629, 641 (D.N.J. 1989) (finding that
New Jersey statute prohibiting dealers from selling milk at prices below
their average total costs did not discriminate against interstate
commerce because it "set an out-of-state dealer’s minimum allowable
price with respect to the dealer’s own costs and not with respect to those
of New Jersey dealers"). By calibrating wholesale price floors for a
particular milk marketing area to the operating costs of average dealers
in that area, the Commonwealth enables Pennsylvania dealers to operate
less efficiently without fearing losses to lower-cost competitors like
Cloverland. This aspect of Pennsylvania’s scheme appears to run further
afoul of the cardinal rule that states may not shield in-state businesses
from out-of-state competitors. See, e.g., West Lynn Creamery, 512 U.S.
at 205 ("Preservation of local industry by protecting it from the rigors of
interstate competition is the hallmark of the economic protectionism that
the Commerce Clause prohibits.").
19
dormant Commerce Clause scrutiny under the market
participant exception. See South-Central Timber Dev., Inc. v.
Wunnicke, 467 U.S. 82, 93 (1984) ("Our cases make clear
that if a State is acting as a market participant, rather than
as a market regulator, the dormant Commerce Clause
places no limitation on its activities.").
C. Pike Balancing
As explained in the preceding section, a reasonable trier
of fact could find that the minimum wholesale prices have
an impermissible "leveling effect" that eliminates out-of-
state dealers’ competitive advantage over in-state dealers.
Wash. State Apple, 432 U.S. at 351. Even if no such effect
is found, the record nonetheless amply supports a finding
that the wholesale price floors regulate evenhandedly, but
incidentally burden interstate commerce by making it more
difficult for out-of-state dealers to attract new business in
a market dominated by in-state dealers. Such a finding
would require application of the Pike balancing test, under
which the minimum wholesale prices violate the dormant
Commerce Clause if the burden they impose on interstate
commerce clearly outweighs their local benefits. Pike, 397
U.S. at 142. Contrary to the District Court’s view, a
reasonable trier of fact could conclude that the wholesale
price floors fail the Pike test.
We begin with the price floors’ putative benefits. The
defendants insist that we must accept the Pennsylvania
General Assembly’s empirical judgment, expressed in the
Milk Law’s text, that the minimum wholesale prices help
avert a milk shortage that would harm the public health.
Some deference to a state legislature’s asserted purpose
may be appropriate when the burden of a state regulation
falls on in-state as well as out-of-state interests, because in
that context the state legislature’s incentive to protect in-
state interests "will serve as a check against unduly
burdensome regulations." Kassel v. Consol. Freightways
Corp. of Del., 450 U.S. 662, 675 (1981) (plurality opinion);
see also Minnesota v. Clover Leaf Creamery Co., 449 U.S.
456, 473 & n.17 (1981) (stating that the "major in-state
interests" harmed by the challenged statute provided "a
powerful safeguard against legislative abuse"). 18 "Less
_________________________________________________________________
18. Clover Leaf Creamery illustrates the importance of adversely affected
in-state interests in dormant Commerce Clause analysis. Applying the
20
deference to the legislative judgment is due, however, where
the local regulation bears disproportionately on out-of-state
residents and businesses." Kassel, 450 U.S. at 675-76
(striking down Iowa truck-length limitations, which the
State claimed promoted highway safety, under Pike); see
also Tribe, supra, S 6-5, at 1053-55 (stating that courts
should be more skeptical of state legislators’ ostensible
objectives "where a restrictive regulation affects only those
from other states"). There is no evidence that any
Pennsylvania dealers object to the minimum wholesale
prices. Because their burden thus appears to fall only on
out-of-state dealers, the purpose asserted in the Milk Law’s
text deserves little deference.
In any event, "the incantation of a purpose to promote
the public health or safety does not insulate a state law
from Commerce Clause attack. Regulations designed
for that salutary purpose nevertheless may further the
purpose so marginally, and interfere with commerce so
_________________________________________________________________
Pike balancing test, the Supreme Court upheld a Minnesota statute that
banned the retail sale of milk in plastic non-returnable, non-refillable
containers, but allowed such sales in non-returnable, non-refillable
containers made of other materials. Clover Leaf Creamery, 449 U.S. at
458, 473. The statute was facially neutral, and, in contrast to the law
invalidated in Washington State Apple, did not eliminate a competitive
advantage possessed by out-of-state firms. Id. at 472. Nor did it
otherwise discriminate against interstate commerce. Id. However, the
statute incidentally benefitted some in-state firms at the expense of some
out-of-state firms. Containers made of pulpwood,"a major Minnesota
product," would likely be used in place of some of the banned
containers, the plastic resin in which was "produced entirely by non-
Minnesota firms." Id. at 473. But in the aggregate, "there [was] no reason
to suspect that the gainers [would] be Minnesota firms, or the losers out-
of-state firms." Id. at 472-73. Increased sales of reusable plastic bottles
would offset out-of-state plastic producers’ losses, and out-of-state
pulpwood producers would increase their sales in Minnesota. Id. at 472-
73. Further, the statute harmed "major in-state interests"--several of the
plaintiffs challenging the statute were in-state firms. Id. at 473 & n.17.
Finally, the "relatively minor" impediments to interstate commerce
imposed by the statute were justified because it was the least
burdensome means of promoting the State’s "substantial" interests in
conserving natural resources and alleviating solid waste disposal
problems. Id. at 472-73.
21
substantially, as to be invalid under the Commerce
Clause." Kassel, 450 U.S. at 670. Hence the inquiry is not,
as the District Court thought, whether "the legislature could
not have believed in the purported purpose of the statute."
138 F. Supp. 2d at 622 (emphasis added). Assuming that
the General Assembly’s belief was rational, the defendants
cannot simply rely on the Milk Law’s stated purpose. They
must provide evidence that the wholesale price floors have
the benefits contemplated by the General Assembly.
Only meager evidence to this effect appears in the record.
The defendants offer nothing more than speculation by
representatives of the Pennsylvania dairy industry that in-
state milk producers would engage in predatory pricing if
the Commonwealth did not impose "over-order" prices,
along with the representatives’ claims that the minimum
wholesale prices are needed to compensate dealers for
purchasing raw milk at "over-order" prices. However, a
reasonable trier of fact could find that the federal producer
price floors provide ample protection against predatory
pricing. As the District Court said in its first opinion, the
record shows that "the federal minimum pricing is ensuring
an adequate supply of milk." Id. at 611. Pennsylvania is the
only state in the Northeast milk marketing region that
enforces wholesale price floors, yet none of the others has
suffered a milk shortage in recent decades.
Moreover, the current success of the Commonwealth’s
dairy industry belies the defendants’ claims that the
minimum wholesale prices do more than artificially inflate
in-state dealers’ profits. At oral argument, counsel for the
Pennsylvania Milk Dealers accurately noted that
"Pennsylvania is one of the top, I think, top five producers
of raw milk in the country. It is an exporter." As already
noted, the Commonwealth ranks fourth among all states in
aggregate milk production. Per-capita milk production is
even more impressive--Pennsylvania produces four-and-a-
half times as much milk as its residents consume. Unless
eliminating the minimum wholesale prices would cause
Pennsylvania’s milk production to decrease so dramatically
that the Commonwealth would be forced to import milk to
satisfy its residents’ needs--and there is no evidence that it
would--a reasonable trier of fact could find that the
wholesale price floors are superfluous.
22
On the burdens side of the scale, a reasonable trier of
fact could find that the wholesale price floors substantially
impede the flow of out-of-state milk into Pennsylvania by
protecting incumbent in-state dealers from price
competition. Because in-state dealers dominate the
wholesale milk market in Pennsylvania, barriers to
competition burden out-of-state interests more heavily than
in-state ones. Price floors are a barrier especially likely to
safeguard existing suppliers’ market shares; a number of
the retailers who provided affidavits in this case said they
would switch dealers if offered prices below the floors.
Preventing dealers from attracting customers by offering
lower prices thus helps in-state dealers maintain their
traditional hegemony.
The District Court recognized that the wholesale price
floors disproportionately burden out-of-state dealers, but
concluded that there is "no conclusive evidence" of a
substantial burden on interstate commerce because dealers
can compete based on other criteria, such as packaging,
quality, and service. 138 F. Supp. 2d at 623 (emphasis
added). At the summary judgment stage, however, the non-
moving party is not required to produce "conclusive"
evidence. Instead, it need only offer sufficient evidence for
a reasonable jury to find the facts necessary for a decision
in its favor. See, e.g., Celotex, 477 U.S. at 322-23.
Cloverland did that.
There is evidence that it is virtually impossible to displace
incumbent dealers in Pennsylvania without offering prices
below the Board-mandated floors. Not surprisingly, price
seems to be an especially important factor--if not the most
important factor--in retailers’ decisions to find new dealers
or retain their existing suppliers. Several retailers expressly
ranked price as their most important criterion in deciding
whether to seek new wholesale milk suppliers, and said
they would switch to out-of-state dealers if they offered
prices below the current minimums. Therefore, because the
vast majority of incumbent dealers are in-state firms, and
because there is no evidence that any in-state dealer--
incumbent or not--wants to sell at lower prices, a
reasonable trier of fact could find that the minimum
wholesale prices place a substantial, disproportionate
23
burden on out-of-state dealers, and that the ability to
compete based on non-price criteria does not noticeably
alleviate the burden.19
Nor can we agree with the District Court that out-of-state
dealers’ ability to enter into tolling agreements meaningfully
mitigates the burden on interstate commerce. Tolling
agreements can be arranged only with the largest retailers,
such as major supermarket chains. For that reason, only
thirty-three percent of the milk purchased by Pennsylvania
retailers is sold under a tolling agreement. The dormant
Commerce Clause does not allow Pennsylvania to hamper
out-of-state dealers in two-thirds of its wholesale market on
the ground that they may compete freely in the remaining
third. Cf. Wyoming v. Oklahoma, 502 U.S. 437, 455 (1992)
(rejecting Oklahoma’s claim that it could set aside a "small
portion" of its coal market for in-state producers because
"[t]he volume of commerce affected measures only the
extent of the discrimination; it is of no relevance to the
determination whether a State has discriminated against
interstate commerce").20
_________________________________________________________________
19. Contrast Exxon Corp. v. Governor of Md. , 437 U.S. 117 (1978), which
upheld a Maryland statute prohibiting petroleum producers and refiners,
none of which were based in Maryland, from operating retail gasoline
stations within the State. Though the burden fell entirely on out-of-state
companies, it appeared that the statute would not reduce the volume of
out-of-state petroleum products sold in Maryland because producer- and
refiner-owned stations would likely be replaced by stations owned by
independent out-of-state dealers. Id. at 123, 127. Unlike the Maryland
statute in Exxon, which merely caused business to shift from some out-
of-state suppliers to others, id. at 127-28, Pennsylvania’s minimum
wholesale prices protect in-state dealers from losing sales to their out-of-
state counterparts.
20. Moreover, the burden on out-of-state dealers may extend to their
ability to compete in their own states’ wholesale markets. Cloverland
introduced evidence that the minimum wholesale prices enable
Pennsylvania dealers not only to maintain their in-state market shares
without facing price competition from more efficient out-of-state dealers,
but also to leverage their artificially inflated profits from in-state sales to
undercut more efficient dealers’ prices in other states. For instance,
Pennsylvania dealers located in Areas 1 and 4 have offered to sell milk
to Maryland retailers, including many of Cloverland’s customers, at
prices as much as fifteen to twenty cents per gallon less than the
24
Because the record indicates that the minimum
wholesale prices may substantially burden Cloverland and
other out-of-state dealers, and because there is scant
evidence that the price floors advance a legitimate local
interest, summary judgment would be inappropriate even if
a reasonable trier of fact could not find facts sufficient to
trigger heightened scrutiny.
IV. Minimum Retail Prices
We can dispense quickly with the milk consumers’
challenge to the retail price floors. The dormant Commerce
Clause does not prevent a state from forcing its residents to
pay more for a product if no out-of-state interests are
affected. The intervenor-plaintiffs presented evidence that
the retail price floors harm Pennsylvania milk consumers
because lower prices are available in Maryland. But they
failed to present any evidence that the retail price floors
burden interstate commerce by harming out-of-state
interests, and thus their dormant Commerce Clause
argument fails. See United Dairy Farmers Coop. Ass’n v.
Milk Control Comm’n, 335 F. Supp. 1008, 1014 (M.D. Pa.)
(rejecting attack on Pennsylvania’s minimum retail prices
where the plaintiff failed to introduce evidence that the
retail price floors obstructed interstate commerce), aff ’d,
404 U.S. 930 (1971) (mem.). We note, however, that had
the intevenor-plaintiffs introduced evidence that the
minimum retail prices, for instance, impede out-of-state
retailers’ ability to compete in the Pennsylvania milk
market or artificially inflate retail prices in other states (by
reducing price competition among retailers within the
region), the result might be different.
_________________________________________________________________
minimum wholesale prices in Pennsylvania. Cloverland says it has lost
hundreds of thousands of dollars in sales as a result.
The District Court refused to consider testimony by Cloverland
employees regarding the offers made by Pennsylvania dealers, deeming it
inadmissible hearsay. However, a statement offering to sell a product at
a particular price is a "verbal act," not hearsay, because the statement
itself has legal effect. See Fed. R. Evid. 801 advisory committee’s note;
United States v. Montana, 199 F.3d 947, 950 (7th Cir. 1999); Trepel v.
Roadway Express, Inc., 194 F.3d 708, 717 (6th Cir. 1999).
25
V. Conclusion
Genuine issues of material fact exist with respect to
whether Pennsylvania’s minimum wholesale milk prices
interfere with "the Commerce Clause’s overriding
requirement of a national common market." Wash. State
Apple, 432 U.S. at 350 (internal quotation marks omitted).
A reasonable trier of fact could find that the wholesale price
floors eliminate out-of-state dealers’ competitive advantage,
and that Pennsylvania could achieve its stated objectives
through alternative nondiscriminatory measures. The
record also supports a finding that the minimum wholesale
prices’ burdens on interstate commerce clearly outweigh
their local benefits. Therefore, summary judgment should
not have been granted with respect to the wholesale price
floors, and we reverse and remand for further proceedings
on that issue. We affirm the District Court’s ruling with
respect to the retail price floors, however, because there is
no evidence that they burden interstate commerce.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
26