JERSEY CREAMERY v BRD OF MILK CON
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No. 12233 I N T E SUPREME C U T O THE STATE O M N A A H OR F F OTN 1972 JERSEY CREAMERY, I N C . , a corpora t i o n , P l a i n t i f f and Respondent, T E BOARD O MILK CONTROL O T E H F F H MONTANA DEPARTMENT O BUSINESS REGUTATION, F a n a d m i n i s t r a t i v e agency o f t h e S t a t e of Montana, Defendant and Appellant. Appeal from: D i s t r i c t Court of t h e F i r s t J u d i c i a l D i s t r i c t , Honorable Gordon Bennett, Judge p r e s i d i n g . Counsel of Record: For Appellant : Geoffrey L. B r a z i e r argued, Helena, Montana. For Respondent: Hughes, Bennett and Alan F. Cain, Helena, Montana. George T. Bennett argued, Helena, Montana. Submitted: Decided September 26, 1972 Qm1 7 1972 Mr. Justice Wesley Castles delivered the Opinion of the Court. This is an appeal from a declaratory judgment entered for plaintiff in the district court of the first judicial district, county of Lewis and Clark. Plaintiff is Jersey Creamery, Inc., a corporation, doing business as a dairy. Defendant is the Board of Milk Control, an administrative agency of the state of Montana. Hereinafter plaintiff will be called "~ersey"and defendant "~oard". Jersey operates what are known as "Quality Chekd" dairies, and is a member of the Quality Chekd Dairy Products Association. Jersey proposed a scholarship contest whereby the fact of the contest would be advertised on its milk cartons and through other advertising media throughout the state. Applicants for the scholarship were not required to purchase anything from Jersey, but merely to complete an application blank. These blanks were found on the cartons, but any applicant could make his own application form, as long as it contained the necessary information. These applications were then to be given to an independent agency to pick the winners by a drawing, All applications except those of non-residents of the state or employees of Jersey were eligible to win the contest. There was no necessity for the purchase of any of Jersey's merchandise to be eligible to win. Winners of the contest received funds to be applied toward a college education, the funds to be paid directly to the college of the winner's choice. Jersey informed the Board of its proposed scholarship contest as part of a national "Quality Chekd" program, The Board informed Jersey this contest would violate the Montana Milk Control Act and that the contest was prohibited. Jersey then appealed to the full Board, thereby exhausting its administrative remedies. The final ruling of the Board was that the scholarship contest violated specific sections of the Milk Control Act and regulations of the Board. A declaratory judgment action was commenced in the district court, The facts being admitted and there appearing to be no need for an evidentiary hearing, the court concluded that the proposed scholarship contest was not prohibited. The court stated the provisions of section 27-414.1 and section 27-414.2, R.C.M, 1947, are applicable only to trade practices which would result in decreasing prices actually paid for milk products below those fixed by the Board, and that this contest would not result in such a lowering of prices. The pertinent issue here is whether the district court was correct in ruling, as a matter of law, that the scholarship contest was not in violation of the Milk Control Act of the state of Montana as contained in Chapter 4, Title 27, R.C.M. 1947, and regulations promulgated thereunder. The principal purpose of the Milk Control Act was to insure an adequate supply of healthful milk. One of the methods to insure such supply is to control the price of milk at the various stages from producer to ultimate consumer. To aid the Board to accomplish this the legislature has empowered the Board to prohibit any practices, however disguised, which would allow a member of the milk industry to reduce the price of milk below that set by the Board. This Court has previously ruled that the regulation of the milk industry was a proper exercise of the state's police power and that the milk industry was an industry affected with a public interest. Milk Control Board v. Rehberg, 141 Mont. 149, 376 P.2d 508. The Board contends that under case law, statutes, and regulations this contest is barred; and specifically under section 27-414 (b) ( ) , R,C.M, 1947, which reads : c I11naddition to the general and special powers heretofore set forth, the board shall have the power to make and formulate reasonable rules and regulations governing fair trade practices as they pertain to the transaction of business among licensees under this act and among licensees and the general public. Such reasonable rules and regulations governing fair trade practices shall contain, but shall not be limited to, provisions regarding the following methods of doing business which are hereby declared unfair, unlawful, and not in the public interest: "b () The giving of any milk, cream, dairy products, services, or articles of any kind, except to bona fide charities: for the purpose of securing or retaining the fluid milk or fluid cream business of any customer. "c () The extension to certain customers of special prices or services not available to all customers who purchase milk of like quantity under like terms and conditions. I1 From the authority of the legislature, the Board is not limited to this statute, but can make additional regulations govern fair trade practices. The Board relies on the following regulations: "Regulation 30: The giving of any milk, cream, dairy products, services, or articles of any kind, except to bona fide charities, for the purpose of securing or retaining the fluid milk or fluid cream business of any customer,It "Regulation 31: The extension to certain customers of special prices or services not available to all customers who purchase milk in like quantity under like terms and conditions. It "Regulation 35: The giving or agreeing to give, discounts, whether in the form of money, merchandise, coupons, stamps, prizes, bonuses or premiums in any form or the buying or selling of any merchandise conditional upon the sale of fluid milk products which would directly or indirectly reduce the monetary value of such products below the minimum price established by Official Order of the Milk Control Board." "Regulation 35: The using of such items as bottle caps, cartons, stamps, coupons, or any other item distributed with milk sold at retail or wholesale to qualify a person to receive a prize, award, or any other thing of value, which would d i r e c t l y o r monetary value of f l u i d ducts below t h e minimum e s t a b l i s h e d by O f f i c i a l Board. " i n d i r e c t l y reduce t h e milk o r f l u i d milk pror e t a i l o r wholesale p r i c e Order of t h e Milk Control According t o t h e Board, Regulation 30 would r e q u i r e t h e meeting of two c r i t e r i a before a t r a n s a c t i o n would a t t a i n prohibited s t a t u s . There must be (1) t h e a c t of giving of s e r v i c e s o r a r t i c l e s of any kind, and (2) t h e i n t e n t t o secure o r r e t a i n f l u i d milk o r f l u i d cream business of any customer. I n the view of t h e Board, t h e s c h o l a r s h i p c o n t e s t f a l l s w i t h i n such p r o h i b i t e d a c t i v i t y . This Court cannot s u s t a i n such view with r e s p e c t t o t h e c o n t e s t involved here. Section 27-414, R.C.M, 1947, and Regulations 30 and 31 s t a t e s p e c i f i c a l l y t h e n a t u r e of u n f a i r t r a d e p r a c t i c e s which a r e t o be prohibited and r e g u l a t e d by t h e Board. It i s c l e a r from t h e s e s t a t u t e s and r e g u l a t i o n s t h a t t h e only u n f a i r t r a d e p r a c t i c e s which a r e t o be p r o h i b i t e d a r e those schemes and devices t h a t r e s u l t i n e f f e c t i v e l y lowering t h e p r i c e of milk below t h e minimum s e t by t h e Board, Such devices can be s e c r e t r e b a t e s , refunds, unearned discounts, t h e giving away of products o r o t h e r valuable items t o customers, extension of s p e c i a l p r i c e s o r s e r v i c e s , o r t h e giving of r e b a t e s o r discounts i n t h e form of p r i z e s t o customers t o induce them t o buy and continue t o buy milk. Regulations 35 and 36 p r o h i b i t t r a d e p r a c t i c e s which would reduce t h e p r i c e of milk below t h a t set by t h e Board. These r e g u l a t i o n s p r o h i b i t t h e giving of discounts of any type, f o r t h e buying of milk. They a l s o p r o h i b i t t h e use of b o t t l e caps, c a r t o n s , stamps, e t c , t o q u a l i f y a person t o r e c e i v e a p r i z e , which would d i r e c t l y o r i n d i r e c t l y reduce t h e p r i c e of milk. However, t h e r e i s nothing i n t h e a u t h o r i t y granted t h e Board t o r e g u l a t e a d v e r t i s i n g o r promotional schemes, u n l e s s they would c o n s t i t u t e such above mentioned a c t i v i t y . Clearly i n t h i s case t h e scholarship c o n t e s t does n o t d i r e c t l y o r i n d i r e c t l y a f f e c t t h e p r i c e of milk charged by J e r s e y o r paid by i t s customers. A s h e r e t o f o r e mentioned, persons applying f o r t h e s c h o l a r s h i p did n o t have t o buy anything t o e n t e r o r win. It i s t r u e t h a t t h e i n t e n t of J e r s e y i s t o draw noncustomers i n t o purchasing t h e i r milk products, however t h i s method of a d v e r t i s i n g i s n o t p r o h i b i t e d by law. This type of a d v e r t i s i n g i n no way a f f e c t s t h e p r i c e of milk paid by t h e customers, and t h e r e f o r e i s n o t prohibited, I n no sense, i s such a c o n t e s t an "unfair t r a d e p r a c t i c e " and t h e Board has no a u t h o r i t y t o c o n t r o l i t . The s t a t u t e s allow t h e Board t o make o t h e r such reasonable and necessary r e g u l a t i o n s a s i t deems necessary; b u t t h e r e i s nothing i n t h e s t a t u t e s o r r e g u l a t i o n s now promulgated by t h e Board, which would make t h e scholarship c o n t e s t p r o h i b i t i v e . This does n o t answer t h e question of whether t h e Board could make r e g u l a t i o n s t o p r o h i b i t t h i s type of a c t i v i t y , but t h a t question i s not before t h i s Court. The f i n a l argument presented by t h e Board i s t h a t t h e d i s t r i c t c o u r t e r r e d when i t concluded t h a t t h e circumstances of t h e case r e l a t e d t o t h e provisions of s e c t i o n s 27-414.1 and 27-414.2, R.C.M. 1947. W cannot agree. e It i s t r u e t h e s e s e c t i o n s were not s p e c i f i c a l l y mentioned i n t h e pleadings, however t h a t p o i n t does n o t s e t t l e t h e i s s u e . The Board i t s e l f c i t e d s e c t i o n 27-414, R.C.M. 1947, i n denying Jersey the r i g h t t o participate i n t h i s contest. It i s t h e duty of t h e d i s t r i c t c o u r t i n making i t s determination upon t h e law t o consider the e n t i r e Milk Control Act and a l l provisions t h e r e i n bearing upon the question, and t o f u r t h e r consider a l l provisions thereof c i t e d by counsel. The d i s t r i c t c o u r t i s n o t l i m i t e d t o only those s t a t u t e s which a r e c i t e d i n t h e pleadings. There was no e r r o r by t h e d i s t r i c t c o u r t when i t included t h e s e s e c t i o n s i n i t s conclusions of law. These s e c t i o n s were p e r t i n e n t t o t h e c a s e and were c o r r e c t l y considered. The judgment o f t h e d i s t r i c t c o u r t i s affirmed. ~ s s o c i a t g ustice J ............................... Associate J u s t i c e s . Mr. Justice John Conway Harrison dissenting: 1 dissent. The ruling of the district court should be reversed. Regulation 30 of Official Order 614-C, provided for by section 27-414, R.C.M. 1947, if liberally interpreted prohibits just such a scheme as provided in this contest.In opening the corral gate and allowing this cow out of the corral, it is safe to predict that distributors will devise all types of contests in the name of advertising which will ultimately affect the sales price of a quart of milk. Such trade practices are not within the "public interest" as declared by section 27-401, R.C.M. 1947.
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