LANDMARK SUPREME COURT RULING Baldwin vs. G.A.F. Seelig

BY GARY LATTA

In a previous issue of Northeast Dairy Magazine, we reviewed a 1994 interstate commerce decision from the U.S. Supreme Court, known as West Lynn Creamery, Inc. v. Healy, 512 U.S. 186. The Court opinion regarding a Massachusetts state pricing order made repeated references to the earlier, and somewhat similar, case known as Baldwin vs. G.A.F. Seelig, 294 U.S. 511.

That 1935 case was another interstate commerce challenge involving members of the northeast dairy industry. The case went all the way to the U.S. Supreme Court, which ruled in favor of G.A.F Seelig. The Court reinforced principles that one state, in its dealings with another, cannot place itself in economic isolation.

In 1933, the New York State Legislature enacted laws that estab- lished minimum prices to be paid by dealers to producers of milk. To not be undercut by lower-priced imports from surrounding states, the New York law contained a protective measure that extended its minimum price to other states. If the producer in a surrounding state was paid less than the state-established minimum, then it was illegal to sell or purchase this lower-priced milk in New York.

New York’s stated purpose of their law was to:

1. Assure adequate supplies of pure wholesome milk.

2. Guard the economic welfare of state producers.

G.A.F. Seelig was a New York City milk dealer that purchased its supply from parent company Seelig Creamery Corporation in Fair Haven, Vermont. Seelig transported their Vermont milk to the New York metropolitan district in 40-quart cans. Each can was the equivalent of about 10 gallons. Once it arrived in New York, 90% of the milk was sold in its original cans, and 10% was bottled in consumer sizes for resale. To protect their higher price from imports of out-of-state supplies, New York Agriculture & Markets implemented a permit process, where all milk dealers and distributors had to agree to its terms. Violations were met with fines and loss of license. In essence, New York mandated their protective price be extended to that part of the supply which came from surrounding states. The New York City metro area and surrounding communities sourced 70% of their milk supply in state, and 30% from neighboring states.

Refusing to comply, and threatened with losing its New York permit, Seelig brought a suit against Commissioner Baldwin and other officials in the U.S. District Court for the Southern District of New York. Seelig won a partial victory. They would be allowed to sell their milk in the original cans, but could not resell the 10% that was repackaged in consumer sizes. Ultimately, both Seelig and Commissioner Baldwin appealed to the U.S. Supreme Court.

The case was argued in mid-February and decided on March 4, 1935. The opinion of the court was unanimous in favor of Seelig, declaring New York’s law unconstitutional and holding that it is a violation of the Commerce Clause for a state to regulate intrastate prices by prohibiting the import of lower-priced goods in interstate commerce. The opinion of the court was delivered by Justice Benjamin Cardozo, with the other Justices joining unanimously.

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HIGHLIGHTS OF THE OPINION INCLUDE:

“ New York has no power to project its legislation into Vermont by regulating the price to be paid in that state for milk acquired there. So much is not disputed. New York is equally without power to prohibit the introduction within her territory of milk of wholesome quality acquired in Vermont, whether at high prices or at low ones. This again is not disputed. Accepting those postulates, New York asserts her power to outlaw milk so introduced by prohibiting its sale thereafter if the price that has been paid for it to the farmers of Vermont is less than would be owing in like circumstances to farmers in New York. The importer, in that view, may keep his milk or drink it, but sell it, he may not.”

“It is the established doctrine of this court that a state may not, in any form or under any guise, directly burden the prosecution of interstate business.”

“Such a power, if exerted, will set a barrier to traffic between one state and another as effective as if customs duties equal to the price differential had been laid upon the thing transported.”

“Nice distinctions have been made at times between direct and indirect burdens. They are irrelevant when the avowed purpose of the obstruction, as well as its necessary tendency, is to suppress or mitigate the consequences of competition between the states.”

“What is ultimate is the principle that one state, in its dealings with another, may not place itself in a position of economic isolation. Formulas and catchwords are subordinate to this overmastering requirement. Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents. Restrictions so contrived are an unreasonable clog upon the mobility of commerce. They set up what is equivalent to a rampart of customs duties designed to neutralize advantages belonging to the place of origin. They are thus hostile in conception, as well as burdensome in result.”