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Philip W. Buchen Files
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The original documents are located in Box 11, folder "Economy - Inflation Impact
Statements (2)" of the Philip Buchen Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 11 of the Philip Buchen Files at the Gerald R. Ford Presidential Library
THE WHITE HOUSE
WASHINGTON
March 26, 1976
MEMORANDUM FOR:
PHIL BUCHEN
FROM:
DUDLEY CHAPMAN
SUBJECT:
Revision of Executive Order
on Inflation Impact Statements
When we received the attached memorandum from Cal Collier
last summer, I spoke to him by phone and he recommended
that we postpone further action until hearing from him. Since
then, the Meat Packers case, which had gone against us in
the District Court, was reversed by the Court of Appeals,
which could eliminate the basis for our concern.
Nino tells me that he believes he has sent a subsequent
memorandum and that nothing apparently needs to be done.
FORD j LIBRARY
521
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
Jos Rudber
July 9, 1975
MEMORANDUM FOR: PHILIP W. BUCHEN
FROM:
CALVIN J COLLIER
SUBJECT:
Revision of the Executive Order
on Inflation Impact Statements
We have reviewed the changes you proposed to the Executive
Order requiring Inflation Impact Statements. While we are
in complete agreement with the objective of curtailing
litigation over this matter, we have some problems with the
approach you have taken and some concern over timing of any
changes in Executive Order No. 11821.
We are pessimistic about the chance of either the change of
name for the initiative, or the enforcement paragraph having
any significant effect on litigation. Furthermore, these
changes could result in a public impression that the President
is no longer supporting the program and a corresponding reac-
tion, and lessening of effort, by Departments and agencies.
Given the high visibility that the program has been given, a
name change would subject us to ridicule.
I believe it would be a mistake to anticipate that a new name
for the program will have a substantial impact on court action.
While it is unfortunate that a term was initially used which
was so comparable to that used in the environmental statutes,
the comparison is likely to remain even if the order is
recaptioned.
The new Section 6, while purporting to limit judicial inter-
vention, may have little or no effect on the courts. I doubt
that it is sufficient to preclude judicial consideration of an
agency's compliance with the order.
In regard to the timing of a change in Executive Order No.
11821, the agencies are just developing experience with the
initiative. Any substantive revisions at this time would
delay our full implementation schedule and could not reflect
any insights which may be gained by continuing as presently
structured for another few months.
FORD is LIBRARY
2
OMB could have serious problems with the proposed revision of
Section 2. This would require copies of all major proposals
and their economic analyses to be submitted to OMB. While
likely to inundate OMB with paper, the purpose of this sub-
mission is not clear and the potential for various interpre-
tations is obvious.
I am enclosing a memorandum prepared by the General Counsel
of the Council on Wage and Price Stability, which I think will
be of interest to you.
Finally, it is my understanding that Nino Scalia may have some
new thoughts on ways to solve the litigation problem without
undermining the progress we are making to implement the
President's program.
Enclosure
meat packers time aprials opinion no
c/a
FORD : LIBRARY GERALD
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE, N.W.
WASHINGTON, D.C. 20506
July 1, 1975
Jane Finn, Esquire
General Counsel's Office
Office of Management and Budget
Old Executive Office Building
Washington, D.C.
Dear Jane:
Enclosed is a memorandum reflecting my initial thoughts
about the proposed new Executive Order. George Eads and A1 Rees
agree with these views. Further, A1 agrees that it would be use-
ful to have a meeting to discuss this sometime soon.
I also understand that the General Counsel's Office at
FEA is also considering a proposed amendment, for this same pur-
pose, to the Executive Order. I will get in touch with them to
get their proposal.
Since you mentioned Dudley Chapman's interest in this
matter, I am also sending him a copy of the memorandum.
Sincerely,
Vaughn Vanghn C. Williams
General Counsel
CC: Dudley Chapman
BERALD FORD LIBRARY
July 1, 1975
MEMORANDUM TO:
Jane Finn
FROM:
Vaughn Williams UW
SUBJECT:
Proposed Amendment of the
Inflation Impact Program
This is intended to reflect my views about the circulated
draft of a new Executive Order to supersede Executive Order 11821.
As set forth below, I do not like that proposal. I instead pro-
pose that the existing Executive Order 11821 be retained and per-
haps amended by the addition of a paragraph like one of the two
attached.
A. Reason for the Amendment
The proposed amendment, I understand, results from a con-
cern that the existing Executive Order will generally be interpreted,
/
as the District Court in Nebraska has already interpreted it, to
create a private cause of action to enjoin agency actions allegedly
promulgated without full compliance with the Executive Order. Of
Like
course, an Executive Order cannot be determinative of this issue,
sayar
mother doesn how
since (i) the President, unlike Congress, does not have the author-
ity to limit the federal courts' jurisdiction, and (ii) the courts
write you a
*/ I am referring to the District Court's recent decision in
Independent Meat Packers Association V. Butz to enjoin Agri-
culture's proposed new beef grading standards.
FORD is LIBRARY 038870
- 2 -
will subsequently interpret whatever the President signs. Thus,
in my view, the more specific purpose of the proposal is to create
Rather
a "legislative history" reflecting that it was not the President's
Then
change
intention that Executive Order 11821 become the basis for private
Therating
langs.
litigation.
B. The Proposal
The proposal would attempt to accomplish the above purpose
by two means. First, it would add a new Section 6 that focuses
directly on the issue by stating that no litigation was intended.
I agree that the addition of such a paragraph is a useful way to
accomplish the purpose, although I have included as Attachment A
a paragraph that I think would be a more direct and effective state-
ment.
Second, the proposal would attempt to disassociate the
inflation impact program in several ways from the environmental
impact program, an analogy that has perhaps been overstated. These
changes are listed below. I think that they are only cosmetic
changes, with little positive result and probable harmful results.
(1) The proposed new Executive Order would use the term
"economic effect assessment" rather than "inflation impact analy-
sis." While the former does sound less like "environmental impact
statement", I think it is a distinction without any legal
FORD : AERALD LIBRARY
- 3 -
meaning. While it might have been preferable to have the latter
term in the original Executive Order, it would be confusing to
change it now.
(2) The new Executive Order would not require the Federal
Register publication of a certification that the economic effect
of any proposal had been analyzed. I think this would weaken the
program by implying that agency analyses would not and should not
be subject to public comment, even in the agency's own rulemaking
proceeding. In my view these analyses would be assisted by public
comment. Public comment would be consistent with the President's
various comments about the need to avoid the high costs of regula-
tion.
(3) The proposal would revoke Executive Order 11821 and
create a new one, changed as described above. I think that the
use of a new Executive Order underscores changes in the program
*/ As argued in the Justice Department's briefs to date,
whether an Executive Order creates a right to litigation
depends upon whether it was intended to further a statutory
right. (See, for example, Brookhaven Housing Coalition V.
Kunzig, 341 F. Supp. 1026 (1972) - "The Executive Order, hav-
ing been issued and published by the President pursuant to
statutory authority is not a mere internal housekeeping arrange-
ment, as asserted by defendants." I do not think the termi-
nology affects this issue. In the proposed paragraph included
as Attachment A I have tried to explain that the Executive Order
is not based upon any statute but rather upon the President's
"supervisory powers" (whatever that term means).
FORD : GERALD LIBRARY
- 4 -
enough to cause a confused period of transition, during which
the agencies can extend their lack of cooperation, noting that
the changes will have weakened the program. Given the difficul-
ties in initiating Executive Order 11821, I think this is a very
likely reaction by the agencies to the proposal.
C. Alternatives
Generally, I think it is important that any change be pro-
mulgated as an amendment to Executive Order 11821 rather than as
a new Executive Order. There seem to be the following alternatives.
(1) Await the outcome of the Justice Department's appeal
in the Independent Meat Packers Association litigation, at least if
that appeal is proceeding quickly. A favorable result here would
be more dispositive than a changed Executive Order.
(2) Adopt a paragraph, as you suggested, that says that
an agency has fully complied with the Executive Order when it has
undertaken certain procedural steps (that is, published a certifi-
cate, sent a summary of its analysis to the Council, for example).
This alternative would not deny the possibility of judicial review,
*/ There would be enough change to create confusion. Whether
a published certification was still required might cause some
confusion. Whether summaries of analyses are still to be sent
to the Council on Wage and Price Stability, and whether OMB
Circular A-107 would still be effective would more clearly
cause confusion.
FORDO is 07V830 LIBRARY
- 5 -
but would attempt to limit it to these procedural requirements
and not the quality of an agency's analysis. I have included a
draft of such a paragraph as Attachment B.
GERALD FORD LIBRARY
ATTACHMENT A
Draft Amendment for Executive
Order 11821
New Section 6. This Executive Order is issued pursuant
to the President's supervisory powers and is not intended to
create any remedy for the delay, invalidation or other judicial
review of any legislation, rule or regulation proposed by any
agency subject to this Order. Enforcement of the requirements
of this Executive Order shall be effected exclusively through the
supervisory powers of the President and the Office of Management
and Budget.
FUNDO = DERALO LIBRARY
ATTACHMENT B
Draft Amendment for Executive
Order 11821
New Section 6. An agency shall be deemed to have fully
complied with this Executive Order when it has (i) published a
certification of its analysis of the inflation impact of any
major proposal as required by Section 1, and (ii) provided any
information about its analyses that is requested by the Office
of Management and Budget or by any other department or agency,
including the Council on Wage and Price Stability, to whom respon-
sibilities under this Executive Order are delegated.
FOND LIBRARY
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL ON WAGE AND PRICE STABILITY
726 JACKSON PLACE, N.W.
WASHINGTON, D.C. 20506
July 1, 1975
Jane Finn, Esquire
General Counsel's Office
Office of Management and Budget
Old Executive Office Building
Washington, D.C.
Dear Jane:
Enclosed is a memorandum reflecting my initial thoughts
about the proposed new Executive Order. George Eads and A1 Rees
agree with these views. Further, A1 agrees that it would be use-
ful to have a meeting to discuss this sometime soon.
I also understand that the General Counsel's Office at
FEA is also considering a proposed amendment, for this same pur-
pose, to the Executive Order. I will get in touch with them to
get their proposal.
Since you mentioned Dudley Chapman's interest in this
matter, I am also sending him a copy of the memorandum.
Sincerely,
Vaughn Vaughn C. Williams
General Counsel
CC: Dudley Chapman
LIBRAR
July 1, 1975
MEMORANDUM TO:
Jane Finn
FROM:
Vaughn Williams UW
SUBJECT:
Proposed Amendment of the
Inflation Impact Program
This is intended to reflect my views about the circulated
draft of a new Executive Order to supersede Executive Order 11821.
As set forth below, I do not like that proposal. I instead pro-
pose that the existing Executive Order 11821 be retained and per-
haps amended by the addition of a paragraph like one of the two
attached.
A. Reason for the Amendment
The proposed amendment, I understand, results from a con-
cern that the existing Executive Order will generally be interpreted,
as the District Court in Nebraska has already interpreted it, to
create a private cause of action to enjoin agency actions allegedly
promulgated without full compliance with the Executive Order. Of
course, an Executive Order cannot be determinative of this issue,
since (i) the President, unlike Congress, does not have the author-
ity to limit the federal courts' jurisdiction, and (ii) the courts
*/ I am referring to the District Court's recent decision in
Independent Meat Packers Association V. Butz to enjoin Agri-
culture's proposed new beef grading standards.
FORD is LIBRARY
- 2 -
will subsequently interpret whatever the President signs. Thus,
in my view, the more specific purpose of the proposal is to create
a "legislative history" reflecting that it was not the President's
intention that Executive Order 11821 become the basis for private
litigation.
B. The Proposal
The proposal would attempt to accomplish the above purpose
by two means. First, it would add a new Section 6 that focuses
directly on the issue by stating that no litigation was intended.
I agree that the addition of such a paragraph is a useful way to
accomplish the purpose, although I have included as Attachment A
a paragraph that I think would be a more direct and effective state-
ment.
Second, the proposal would attempt to disassociate the
inflation impact program in several ways from the environmental
impact program, an analogy that has perhaps been overstated. These
changes are listed below. I think that they are only cosmetic
changes, with little positive result and probable harmful results.
(1) The proposed new Executive Order would use the term
"economic effect assessment" rather than "inflation impact analy-
sis." While the former does sound less like "environmental impact
statement", I think it is a distinction without any legal
FORD LIBRARY
- 3 -
meaning.
While it might have been preferable to have the latter
term in the original Executive Order, it would be confusing to
change it now.
(2) The new Executive Order would not require the Federal
Register publication of a certification that the economic effect
of any proposal had been analyzed. I think this would weaken the
program by implying that agency analyses would not and should not
be subject to public comment, even in the agency's own rulemaking
proceeding. In my view these analyses would be assisted by public
comment. Public comment would be consistent with the President's
various comments about the need to avoid the high costs of regula-
tion.
(3) The proposal would revoke Executive Order 11821 and
create a new one, changed as described above. I think that the
use of a new Executive Order underscores changes in the program
*/ As argued in the Justice Department's briefs to date,
whether an Executive Order creates a right to litigation
depends upon whether it was intended to further a statutory
right. (See, for example, Brookhaven Housing Coalition V.
Kunzig, 341 F. Supp. 1026 (1972) - "The Executive Order, hav-
ing been issued and published by the President pursuant to
statutory authority is not a mere internal housekeeping arrange-
ment, as asserted by defendants." I do not think the termi-
nology affects this issue. In the proposed paragraph included
as Attachment A I have tried to explain that the Executive Order
is not based upon any statute but rather upon the President's
"supervisory powers" (whatever that term means).
FORD is GERAL LIBRARY
- 4 -
enough to cause a confused period of transition, during which
the agencies can extend their lack of cooperation, noting that
the changes will have weakened the program. Given the difficul-
ties in initiating Executive Order 11821, I think this is a very
likely reaction by the agencies to the proposal.
C. Alternatives
Generally, I think it is important that any change be pro-
mulgated as an amendment to Executive Order 11821 rather than as
a new Executive Order. There seem to be the following alternatives.
(1) Await the outcome of the Justice Department's appeal
in the Independent Meat Packers Association litigation, at least if
that appeal is proceeding quickly. A favorable result here would
be more dispositive than a changed Executive Order.
(2) Adopt a paragraph, as you suggested, that says that
an agency has fully complied with the Executive Order when it has
undertaken certain procedural steps (that is, published a certifi-
cate, sent a summary of its analysis to the Council, for example).
This alternative would not deny the possibility of judicial review,
*/ There would be enough change to create confusion. Whether
a published certification was still required might cause some
confusion. Whether summaries of analyses are still to be sent
to the Council on Wage and Price Stability, and whether OMB
Circular A-107 would still be effective would more clearly
cause confusion.
FORD is LIBRARY
- 5 -
but would attempt to limit it to these procedural requirements
and not the quality of an agency's analysis. I have included a
draft of such a paragraph as Attachment B.
FUND : OERALD LIBRARY
ATTACHMENT A
Draft Amendment for Executive
Order 11821
New Section 6. This Executive Order is issued pursuant
to the President's supervisory powers and is not intended to
create any remedy for the delay, invalidation or other judicial
review of any legislation, rule or regulation proposed by any
agency subject to this Order. Enforcement of the requirements
of this Executive Order shall be effected exclusively through the
supervisory powers of the President and the Office of Management
and Budget.
BENALD
LIS8484
ATTACHMENT B
Draft Amendment for Executive
Order 11821
New Section 6. An agency shall be deemed to have fully
complied with this Executive Order when it has (i) published a
certification of its analysis of the inflation impact of any
major proposal as required by Section 1, and (ii) provided any
information about its analyses that is requested by the Office
of Management and Budget or by any other department or agency,
including the Council on Wage and Price Stability, to whom respon-
sibilities under this Executive Order are delegated.
LIBRARY BERALD Furn
GERALD R. FORD
ACTION
ROUTING AND TRANSMITTAL SLIP
1 TO (Name, office symbol or location)
INITIALS
CIRCULATE
Mr. Buchen
White House
DATE
COORDINATION
2
INITIALS FILE
DATE
INFORMATION
3
INITIALS
NOTE AND
RETURN
DATE
PER CON
VERSATION
4/16
X
4
INITIALS
SEE ME
DATE
SIGNATURE
REMARKS
LIBRARY GERALD F. FORM
Do NOT use this form as a RECORD of approvals, concurrences,
disapprovals, clearances, and similar actions.
FROM (Name, office symbol or location)
DATE
4/16/75
Antonin Scalia / got
PHONE
OPTIONAL FORM 41
552-103
GPO
5041-101
AUGUST 1967
GSA FPMR (41CFR) 100.11.206
AMM:LU:dp
CC: Arms Control &
Disarmament Agency
OLA
Files
APR 1 4 L33
Mr. Ulman
Mrs. Gauf
Honorable Clement J. Zablocki
Chairman, Subcommittee on National
Policy and Scientific Development
Committee on Foreign Affairs
United States House of Representatives
Washington, D. C. 20515
Dear Mr. Chairman:
The Office of Management and Budget has asked this
Department to advise you of its views concerning the amend-
fu
ment to add section 36 to the Arms Control and Disarmament
Act proposed by section 104 of H.R. 1550, a bill to amend
that act, and for other purposes. The new section would
&
require any agency proposing an authorization for a program
exceeding $250 million or an annual appropriation exceeding
$50 million for armaments, ammunition, implements of war
or military facilities to prepare and submit to the Director
, Ins
of the Arms Control and Disarmement Agency an impact
statement. The statements and ACDA reports thereon would
be furnished to the NSC, OMB, and the Congress, and the
Director would be required to make recommendations to the
Congress with respect to any of the programs covered.
As you are undoubtedly aware, existing statutory require-
ments for impact statements by Executive branch agencies
have given rise to voluminous and protracted litigation by
third parties, delaying numerous Federal projects for sub-
stantial periods of time. The proposed amendment also
threatens to give rise to such litigation, even in the
face of legislation authorizing the expenditures. Cf.
Committee for Nuclear Responsibility, Inc. V. Seaborg, 463
F.2d 783, 785 (C.A.D.C. 1971). Since we think it unwise
to risk substantial and unjustified delay in the execution
of programs having important national defense implications,
the Department recommends that the amendment be deleted, or
modified in such a way that the risk of litigation will be
avoided.
R.
GERALD
FORD
LIBRARY
The Office of Management and Budget advises that from
the standpoint of the Administration's program, there is no
objection to the submission of this letter for the considera-
tion of the Congress.
Sincerely,
A. Mitchell McConnell, Jr.
Acting Assistant Attorney General
Office of Legislative Affairs
FORD : LIBRARY DERALD
-
- 2 -
The Plaintiff, Mitchell B. Garshman,
88
1492.
INDEPENDENT MEAT PACKERS AS-
meat meat pur-
is not entitled to preliminary injunc-
SOCIATION, an unincorporated
veyors association, livestock feeders as-
tion enjoining the Defendants from con-
association, Plaintiff,
sociation and restaurant association had
vening, in the absence of his counsel, the
Robert D. Rachlin, Downs, Rachlin &
National Association of Meat Purveyors,
standing to maintain action seeking de-
University Hearing Board to consider
Martin, St. Johnsbury, Vt., for plaintiff.
an unincorporated association,
claratory and injunctive relief from pro-
the charges of academic dishonesty
John M. Dinse, Dinse, Allen & Erd-
Plaintiff-Intervenor,
mulgation and enforcement of Depart-
against him.
mann, Burlington, Vt., for defendant.
National Livestock Feeders Associa-
ment of Agriculture rules revising grad-
An appropriate order will be entered.
MEMORANDUM AND ORDER
tion, Plaintiff-Intervenor,
ing standards for beef. 5 U.S.C.A. §
HOLDEN, District Judge.
National Restaurant Association,
702; 28 U.S.C.A. §§ 1331, 1337.
Plaintiff-Intervenor,
2. Food @-1.7
The defendant has moved to dismis.
NUMBER SYSTEM
Consumer Federation of America
Enactment of regulation requiring
this wrongful death action (14 V.S.A. $$
et al., Plaintiffs-Intervenors,
that all quality graded meat be also yield
1491, 1492) on two grounds: (1) the ac-
V.
graded, which is a measure of quantity,
tion is barred by the applicable statute
of limitations and (2) the plaintiff, by
Earl L. BUTZ, Individually and in his ca-
was beyond authority granted Secretary
pacity as United States Secretary of
of Agriculture under statute providing
Evelyn DUTIL, Administratrix of the Es-
failing to procure ancillary letters of ad-
tate of Raymond Dutil
Agriculture, et al., Defendants,
that Secretary is to certify and identify
ministration in Vermont, lacks capacity.
American National Cattlemen's Associa-
class, quality, quantity and condition of
V.-
to bring this suit. The Court's finding
tion, a corporation, Defendant-
agricultural products to the end that ag-
Marlin M. MAYETTE.
that the plaintiff does lack capacity to
Intervenor.
ricultural products be marked to best ad-
Civ. No. 73-138.
bring this suit makes it unnecessary to
Civ. No. 75-0-105.
vantage and that consumers to able to
reach the statute of limitations issue.
United States District Court,
United States District Court,
obtain quality product which they de-
D. Vermont.
At the hearing on January 3, 1975 on
D. Nebraska.
sire, except that no person shall be re-
Feb. 4, 1975.
these two affirmative defenses, plain-
quired to use the service authorized by
tiff's counsel conceded that the plaintiff
May 29, 1975.
statute. Agricultural Marketing Act of
administratrix had not procured ancil-
1946, § 203(h), 7 U.S.C.A. § 1622(h) 5
Administratrix of decedent's estate
lary letters of administration in Ver-
Meat packers association, meat pur-
U.S.C.A. § 706(2) (A).
brought wrongful death action. On the
mont. Without the authorization of an-
yeyors association, livestock feeders as-
3. United States 0=28
defendant's motion to dismiss, the Dis-
cillary letters of administration issued
Deiation and restaurant association
Constitutional article that President
trict Court, Holden, Chief Judge, held
in Vermont, a plaintiff administratrix
ought action seeking declaratory and
appointed in a foreign jurisdiction lacks
shall from time to time give to Congress
that an administratrix appointed in a
injunctive relief from promulgation and
foreign jurisdiction lacked capacity to
capacity to maintain a wrongful death
information of state of the union, rec-
action in this state. Accordingly, the
forcement of Department of Agricul-
ommend to their consideration necessary
maintain a wrongful death action in
ture rules revising grading standards
measures and take care that laws be
Vermont without the authorization of
complaint must be dismissed. Weinstein
for beef. On plaintiffs' motion for a
faithfully executed gives the President
ancillary letters of administration issued
v. Medical Center Hospital of Vermons,
358 F.Supp. 297 (D.Vt.1972).
permanent injunction and for summary
power to gather information on adminis-
in Vermont.
judgment, the District Court, Denney,
tration of executive agencies. U.S.C.A.
Motion granted.
By dismissing this complaint for lack
J., held that plaintiffs had standing to
Const. art. 2, § 3.
of capacity, the Court leaves the novel
Order affirmed, 2 Cir., - F.2d
maintain action; that Department
and unsettled questions of recent Ver.
4. Agriculture -2
lacked authority to enact regulation re-
mont statutory changes attending the
Executive order requiring consider-
quiring that all quality graded meat be
limitations of actions to the state
ation of inflation related factors such as
Death 31(4)
also yield graded; that material and
courts.¹
cost impact on consumers, markets or
Administratrix appointed in foreign
substantial noncompliance with mandate
governments, effect on productivity of
jurisdiction lacked capacity to maintain
It is ordered:
of executive order requiring considera-
wage earners, businesses or govern-
wrongful death action in Vermont with-
That the defendant's motion to dis-
tion of inflation related factors executive
ments, effect on competition and effect
out authorization of ancillary letters of
miss is granted.
order required that rules revising grad-
on supplies of products or services is
I. The novel questions of state law include
of Civil Procedure, Rule 3, and 12 V.S.A. I
ing standards be set aside; and that
within congressional purpose of Agricul-
whether this action is deemed "commenced"
466 require that action be commenced
plaintiffs were entitled to injunction but
tural Marketing Act. Agricultural Mar-
for purposes of tolling the statute of limita-
by filing or service. There may a further
not to summary judgment since evidence
keting Act of 1946, §§ 202, 203(h), 7 U.
tions as of the date of the complaint (see
question involved win whether actions for
raised issues of fact.
S.C.A. §§ 1621, 1622(h).
Jacques v. Jacques, 128 Vt. 140, 141, 259 A.
wrongful death under 14
Injunction granted.
5. Agriculture -
Cite as 395 F.Supp. 923 (1975)
ing cost impact on consumèrs, business-
James T. Gleason, Omaha, Neb., for
April 15, 1975, but instructed this Court method is called yield grading and çon-
es, and governments, effect on produc-
plaintiff-intervenor National Livestock
conduct:
sists of five numerical grades (1
tivity of wage earners, businesses or
Feeders Assn.
a plenary hearing on the
through 5), with 1 indicating beef that
governments, effect on competition and
Vard R. Johnson, Omaha, Neb., and
quest for a permanent injunction
will yield a high percentage of retail
effect on supplies of important products
Girardeau Spann, Washington, D. C., for
and that a final decision of the Dis-
cuts (e. g., lean cattle having minimal
or services is not merely a "housekeep-
plaintiffs-intervenors Consumer Federa-
trict Court be rendered within 45 days
fat deposits).
ing" order, enforceable only by the Pres-
tion of America, National Consumers
of this order
2. Both quality and yield grading
ident, but falls within judicial review
League, Americans for Democratic Ac-
contemplated by statute governing scope
tion, Consumers Affairs Committee, Na-
In addition, the Eighth Circuit Court of
have been optional. For example, a
of review of agency action, findings and
tional Consumers Congress, Public Citi-
Appeals instructed this Court to reexam-
packing house could have some of its
conclusions. 5 U.S.C.A. § 706.
zen, Amalgamated Meat Cutters and
ine the adequacy of the bond pursuant
carcasses quality graded, others yield
Butcher Workmen of North America
to F.R.Civ.P. 65. Thereafter, on April
graded, and yet others both quality and
6. Food @1.7
(AFL-CIO), Service Employees Interna-
18, 1975, this Court conducted a hearing
yield graded. At present, approximately
Material and substantial noncompli-
tional Union (AFL-CIO), American
on the adequacy of the bond and it was
40% of slaughtered cattle are quality
ance with mandate of executive order re-
ordered increased from $5,000 to
graded. Of these, approximately 70%
quires consideration of inflation related
Federation of Teachers (AFL-CIO).
$10,000, due to the high costs of "daily
fall in the choice category, 7-8% fall in
factors such as cost impact on consum-
Daniel E. Wherry, U. S. Atty., D.
copy" and the likelihood of an expedited
the prime category, and 22% fall within
ers, businesses, markets or governments,
Nebraska, Vincent B. Terlep, Jr., Atty.,
lappeal.
the good grade. Although the stand-
effect on productivity of wage earners,
U. S. Dept. of Justice, Marshall Marcus.
ards for the lower grades (standard,
businesses or governments, effect on
Since these early proceedings, the
Atty., U. S. Dept. of Agriculture, Ste-
commercial, etc.) are used in the indus-
competition and effect on supplies of
Court has permitted four groups to in-
phen L. Muehlberg, Asst. U. S. Atty., D.
try as guidelines, very few- such carcas-
products, required the setting aside of
tervene as plaintiffs, and one group to
Nebraska, for defendants.
ses are officially graded due to the ex-
intervene as a defendant. No other mo-
proposed regulations of Department of
Robert H. Berkshire, Richard J.
pense of grading. Of cattle that are
Agriculture regarding grading stand-
tions to intervene were filed, although
Wegener, Omaha, Neb., and J. Evan
quality graded, approximately 50% are
the Court is aware of actions subse-
ards for beef. 5 U.S.C.A. § 706(2) (A).
Goulding, Gen. Counsel, Denver, Colo.,
also yield graded.
quently filed in other Federal District
7. Injunction (85(2)
for defendant-intervenor, American Na-
Courts alleging the same general cause
3. On September 11, 1974, the Agri-
Injunctive relief would lie from pro-
tional Cattlemen's Assn.
of action.
cultural Marketing Service of the United
mulgation and enforcement of Depart-
States Department of Agriculture pub-
MEMORANDUM
In accordance with F.R.Civ.P. 52, the
ment of Agriculture rules revising grad-
lished a notice and draft of revisions to
Court makes the following findings of
ing standards for beef, where Depart-
fact:
the grades. 7 C.F.R. §§ 53.100-53.105;
ment's action in promulgating regula-
DENNEY, District Judge.
7 C.F.R. §§ 53.201-53.206, 39 Fed.Reg.
tions was in violation of mandates of
This matter comes before the Court
1. Grade standards for beef were
32743 (Sept. 11, 1974).
executive order and thus arbitrary, ca-
for decision subsequent to a hearing
riginally promulgated in 1926, in which
4. The proposed rules differed from
pricious, and an abuse of discretion. 5
held from May 12, 1975 to May 23, 1975.
marbling (the size and dispersion of
the old rules in several aspects.
U.S.C.A. § 706(2) (A).
Jurisdiction is founded under 7 U.S.C.
flecks of fat within the meat) was rec-
a. Conformation (the shape of the
1621 et seq., 28 U.S.C. § 1331, 5 U.S.C.
ognized as a major factor in evaluating
carcase as compared to an ideal
8. Federal Civil Procedure 2546
Evidence, in action seeking declara-
§§ 702 and 706, and 28 U.S.C. § 1337.
quality. The first major revision of the
shape) was eliminated as a factor
grades in 1939 established physiological
tory and injunctive relief from promul-
In this action, filed April 1, 1975.
in determining quality grade.
maturity as an important additional fac-
gation and enforcement of Department
plaintiffs seek declaratory and injunc-
tor in evaluating quality. As a very
b. When officially graded, all car-
of Agriculture rules revising grading
tive relief from the promulgation and
general rule, increases in marbling have
casses would be identified for both
standards for beef, raised material is-
enforcement of Department of Agricul-
a beneficial effect on quality, while in-
quality grade and yield grade (ex-
sues of fact, precluding summary judg-
ture rules revising the grading stand-
reases in maturity have a deleterious
cept for bull carcesses, which are
ment.
ards for beef. After a hearing on plain-
ffect on quality. Eight grades are cur-
insignificant in number)
tiff's motion for a preliminary injune-
rently used to identify these quality dif-
c. In the "A maturity" range (young
tion, the Court, on April 11, 1975, grant-
erences-prime, choice, good, standard,
cattle from 9 to 30 months old in
Frank F. Pospishil, Ben E. Kaslow,
ed interlocutory relief for the reasons
commercial, utility, cutter and canner.
age), maturity was eliminated as
Omaha, Neb., for plaintiff.
stated in the Court's Memorandum
Uniform palatability (a measure of the
a factor in determining quality
age), the marbling requirements
whether to set the new standard at the
ment in the Statement of Considerations
Court recognizes that counsels' error
were reduced one full "degree of
lowest palatability acceptable under. the
eceding the rules 40, Fed Reg. 11535:
was unintentional and no doubt caused.
marbling". for prime and choice.
old standards, to set the new standard at
Berry et al., (J. Animal Science
by the speed at which this lawsuit pro-
the higher palatability required of the
$38;507)
gressed. By way of clarification, there
Item "C" above is of particular impor-
more mature cattle in the "A" range, or
tance, as it involves two decisions. The
b. Romans et al:, (J. Animal Science
are three documents of interest:
to set the new standard somewhere in
elimination of maturity as a factor im-
24:681)
a. An "inflation impact evaluation"
between. The department chose to set
plies that the old formula was in error.
C. Breidenstein, (J. Animal Science
the new standard at the lowest palatabil-
which is prepared by the agency
Under the old standards, as the maturity
27:1532)
before taking "major" action.
ity previously acceptable in that grade.
increased, the palatability increased.
Thus, under the new standards, the con-
d. McBee and Wiles, (J. Animal Sci-
b. A "summary" of the inflation im-
The bottom line of a grade should, of
sumer will receive "choice" graded meat
ence 26:701)
pact statement which is prepared
course, indicate uniform palatability
having a palatability no worse than the
e. Covington et al., (J. Animal Sci-
by the agency and forwarded to
along the line. Once the Department de-
minimum palatability possible under the
ence 30:191)
the Office of Management and
cided to correct the bottom lines of the
old standards for "choice."
f. Norris et al., (J. Food Science
Budget (See Exhibit #6, IT 5(d)).
36:440)
c. A "certification" that the infla-
These references convince the Court that
PROPOSED CHANGES IN THE RELATIONSHIP BETWEEN
tionary impact has been studied,
the Department had substantial evidence
MARBLING, MATURITY. AND QUALITY GRADE
which must accompany the rules.
upon which to decide to change the ma-
In this case, the certification was
DEGREES OF
MATURITY
türity-marbling relationship, and to fix
included at the end of the rules as
MARBLING
A
B
that change at the levels reflected in the
promulgated, 40 F.R. 11535.
new rules.
ABUNDANT
496, The comments received by the De-
The "summary" required in (b) above
is Exhibit #901, a letter from E. L.
partment were very extensive, and in
MODERATELY
the light most favorable to the defend-
Peterson (Administrator, Agricultural
ABUNDANT
PRIME
ants were as follows:
Marketing Service) to Don Paarlberg
(Director Agricultural Economics)
SLIGHTLY
a. Approximately 40% of the com-
which was received by Mr. Paarlberg on
ABUNDANT
ments opposed the change in the
March 6, 1975, and forwarded to the
marbling-maturity requirements.
Council on Wage Price Stability. This
MODERATE
b. Approximately 25% of the com-
was the document the Court thought was
ments opposed the requirement of
the impact statement itself.
MODEST
CHOÍCE
compulsory yield grading.
The Court has not been presented
There was no significant opposi-
with the "evaluation" itself. However,
SMALL
tion'to the elimination of confor-
Exhibit 901 contains the following
mation as a factor in quality
statement:
grading.
SLIGHT
GOOD
7, Executive Order Number 11821,
An analysis of the economic impact of
39 Fed.Reg. 41501, was signed on No-
the grade change proposal was made
TRACES
vember 27, 1974.
by the Commodity Eçonomics Divi-
STANDARD
sion, Economic Research Service.
8. During the earlier proceedings in
While the primary thrust of the study
PRACTICALLY
DEVOID
this Court, all parties represented that
was not directed ab assessing the in-
Exhibit B to Defendants' Objections to
flationary impact the proposal, its
Areas which would be included in the next higher grade.
issuance of a Preliminary Injunction
authors found that most of the sup-
(Filing #4) was the inflationary impact
portive reasons for the proposal have
Area which would be changed from Good to Standard.
statement required by Executive Order
a foundation in economics and actual
11821. In the Court's prior Memoran-
practice. Principal inflation-related
dum, the Court stated its doubt that this
findings, as reported in a December
document was sufficient. The Court has
1974 Supplement to the Livestock and
feeding for fewer days.
which the carcasses are hung and moved
consideration of the following inflation
tive record, the Court was presented
11. Under the old regulations, quali-
mánually to work stations) This meth-
with evidence derived from U.S.D.A.
related factors:
a. Cost impact on consumers, busi-
ty grading was done by official United
od requires that the grader hand stamp
publications to the effect that there was
States Department of Agriculture Grad-
or quality in two locations and for yield
a slight increase in retail price following
nesses, markets, or Federal, State
ers. For this service, the packing house
rade in ten locations. The rollermark-
the change in the regulations in June,
or Local Government.
was charged $14.60/hour. The graders
ings are applied in the usual manner
1965. In addition, the same data shows
b. Effect on productivity of wage
grade approximately 70 carcasses per
and indicate only the quality grade.
a substantial increase in the proportion
earners, businesses or govern-
hour-thus the cost of grading a carcass
The second method under the new reg-
of meat falling in the "choice" grade.
ments at any level.
is approximately $.20 for a typical 600
lilations is designed for packing plants
The 1965 changes in the marbling matu-
c. Effect on competition.
pound carcass; quality grading costs
using a "chain" (similar to a "rail", but
rity relationship were similar in direc-
d. Effect on supplies of important
.033¢ per pound. This cost reflects only
where the carcasses are moved automati-
tion and degree to the proposed regula-
products or services.
the U.S.D.A. fees for the quality grad-
cally to the workstations). The grader
'tions in issue in this case. The Court
hand stamps for quality in two locations,
does not give this evidence great weight,
Circular No. A-107 (Exhibit #6) imple-
ing. In addition to these fees, the pack-
menting the executive order, required
inghouse must employ a "rollerman"
and for yield in two locations. This
due to the complex economic factors
who applies the stamps under the direc-
method uses a rollermark containing
which determine retail meat prices.
the appointment of a "compliance offi-
cer"; such was not done until March 18,
tion and control of the official grader.
both quality and yield marks. (See Ex-
There is, however, no evidence in the ad-
The rollerman is not employed by the
hibits #902-905).
ministrative record indicating a factual
1975. The Court does not view this de-
lay as substantive, but the fact that a
U.S.D.A.; rather, he is furnished by the
Under the old regulations, it was man-
basis for the Department's conclusion
compliance officer was not appointed un-
packinghouse to assist the official grad-
datory to rollermark the brisket, while
that prices would drop at the retail level.
til after the final promulgation of the
er and thereby reduce the time (and fees
under the new regulations that is op-
The Supplement to the Livestock and
charged) for the grading. Rollermen
tional.
Meat Situation (December 1974), Exhib-
rules on March 12, 1975, indicates a se-
rious disregard of the requirements of
typically earn approximately $5.00/hour.
13. The Court finds that the plain-
it # 3, concluded that:
The Court finds that the plaintiffs'
tiffs will suffer more than Ten Thou-
The consumer could be indirectly af-
the executive order.
10. Exhibit #3, contains an analysis
grading costs will roughly double under
sand Dollars ($10,000.00) in increased
fected by a lower relative price of
the new regulations. Other packers will
costs, due to increased grading expense,
choice if the supply of choice should
of the following pertinent factors:
experience higher costs, the exact
exclusive of interest and costs, should
increase dramatically due to the
a. The potential of compulsory yield
amount depending on the proportion of
the regulations in question become effec-
change, and by lower prices in general
grading to improve pricing accu-
their output that has been yield graded
tive. (See Exhibit #21).
if efficiency of the industry is im-
racy.
under the old regulations. While the
14. There is evidence before the
proved.
b. The probable lowering of price to
price per pound is relatively insignifi-
Court, although not in the administra-
The Court finds this conclusion deserv-
the consumer of choice grade meat
cant, the high volume of meat processed
tive record, that consumer preference
ing of little weight, as it is based on
if the supply thereof should "in-
results in a significant cost to the pack-
closely parallels "palatability", as that
meager facts, simplistic economic rea-
crease dramatically."
er. (See Exhibit #21).
term is defined by the Department. All
soning, and is contradicted by the past
c. That retailers will probably have
12. Under the old regulations, quali-
of the Department's research was in
experience of the 1965 changes.
to adjust their buying practices—
ty grade marks were hand stamped on
terms of "palatability" (as determined
17. Immediately after a head of cat-
especially if they had been mar-
the carcass in four locations. Each
bytrained taste panels and various me-
tle is killed and the hide removed, it is
keting ungraded "good" meat un-
grader used a stamp which included his
chanical tests for shear forces and the
inspected for health and sanitation pur-
der a house brand.
initials. To indicate "good" the grader
ike)-there was no recent research re-
poses; see, 21 U.S.C. § 601 et seq. At
d. That packers may find it neces-
would place one stamp in each of the
lating to what actual consumers desire.
this time, the inspector; a U.S.D.A. offi-
sary to be more selective in their
four locations. "Choice" was indicated
In sum, the Department hypothesized a
cial, often requires that grubs and
buying practices to account for the
by two hand stamps in each of the four
consumer whose only desire was palata-
bruises be tull out of the exterior fat
premium placed on yield grades.
locations. Likewise, "prime" required
bility-and then tested for palatability.
çovering. If more than a minor amount
e. That feeders can expect to "feed
three stamps in each of the four loca-
While this is not a totally unreasonable
of fat is removed, yield grading is not
to choice" in fewer days.
tions. Once the grader had stamped the
ssumption, the Court finds no evidence
permitted, as the fat thickness is an im-
f. That beef production will increase
careass, the rollerman would apply the
support, save Exhibit #25, a test con-
portant factor in the yield grade equa-
rollermarks to each side of the carcass.
ducted in 1961.
tion. For reference, that equation is:
in efficiency.
g. That cattle will be marketed at
The yield grade was hand stamped in
15 Seyeral cities require that all
Y=2.5 +2.5T + .2P .0038W ,32A
lower weights, necessitating more
four locations on the carcass.
meat sold at the retail level be quality
where
Under the new regulations, there
graded. One such city is Chicago.
Yield
Grade
(Decimal
digits
.=Adjusted thickness 01 fat over
CONCLUSIONS
or
eye (inches)
In accordance with F.R.Civ.P. 52(a),
Emphasis added).
refuse either yield grading or quality
=Percent kidney, pelvic and heart fat
the Court makes the following conclu-
yhe defendants contend that the serv-
grading. Defendants contend that the
Hot carcass weight (lbs.)
sions of law. Before the trial of this
means the collection of all grading
use of the phrase "the service authorized
case, motions for summary judgment
standards authorized by this subsection.
by this subsection" encompasses all pos-
Area of ribeye (square inches)
were made by Consumer Federation of
They conclude that Section 1622(h) per-
sible grading services-that the Depart-
Under the old regulations, even if exten-
America, et al. (Filing #54); Earl L.
mits a regulation requiring that all qual-
ment is permitted to "bundle" the serv-
sive amounts of fat were trimmed, the
Butz, et al., (Filing #57); American
ity graded meat be also yield graded,
ices together and required that an appli-
carcass was eligible for quality grading.
National Cattlemens Association (Filing
nd vice-versa. Both the wording of the
cant take or refuse the entire "bundle".
The new regulations prohibit any grad-
#59) and the Independent Meat Pack-
statute and its legislative history are
The Court finds this construction of
ing in such a situation.
ers (Filing #69). These motions were
unclear. When this section was debated,
Section 1622(h) erroneous when consid-
taken under advisement due to the 45
Congress apparently did not anticipate
ered in light of the Department's own
Some packers customarily trim fat
day limitation imposed on this Court.
the possibility of grading for yield. See
definitional regulations, and the volun-
while the carcass is on the kill floor.
The decision herein will dispose of the
46 U.S.Code Cong. Service 1584 (1946);
tary tone of Section 1622. In addition,
This trimming involves at most 10
issues raised in the several motions.
92 Cong 9022-9033 (July 15, 1946).
the Court finds no necessity for compul-
lbs/head and is done to improve the ap-
The Department of Agriculture's own
sory yield grading, as a substantial pro-
pearance of the carcass.
[1] The Court finds that it has ju-
risdiction to hear this matter pursuant
construction of Section 1622(h) is as
portion of all meat is yield, graded under
18. Cattle feeders customarily sell to
to 5 U.S.C. § 702, 28 U.S.C. § 1331, and
follows:
the old regulations and no appreciable
packinghouses on a "live weight basis",
7 C.F.R. § 53.1(p) Grading Service.
benefit will result from compulsion.
28 U.S.C. § 1337. See Stark v. Wickard,
meaning that a buyer examines the live
The service established and conducted
(See Findings #18-21).
321 U.S. 288, 290, 64 S.Ct. 559, 88 L.Ed.
cattle and agrees to pay a certain price
733 (1944). Plaintiffs have adequately
under the regulations for the determi-
[2] The Court recognizes that there
per pound of live weight. Occasionally,
alleged "standing" within the teachings
nation and certification or other iden-
exists an economic compulsion to have
cattle are sold on a "grade and yield ba-
of United States v. S. C. R. A. P., 412
tification of the class grade or other
choice grade meat graded as such-the
sis", whereby the purchase price is de-
U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254
quality of livestock or products under
certification as "choice" increases the
pendent on the quality and yield grades
(1973).
standards.
value of the meat. This form of com-
of the carcass, as determined after the
7 C.F.R. § 53.4: Kind of Service.
pulsion is not forbidden by Section
cattle is slaughtered and dressed. There
Compulsory Yield Grading
Grading service under the regulations
1622(h), and is the type of compulsion
is no evidence in the administrative rec-
The first substantive issue for consid-
shall consist of the determination and
that makes a voluntary system viable.
ord, or otherwise, that the practice of
eration pursuant to 5 U.S.C. §
certification and other identification,
It is the tying of yield grade to quality
selling on a live weight basis will
706(2) (A), is whether "compulsory yield
upon request by the applicant, of the
grade which the Court finds in excess of
change.
grading" falls within the authority dele-
class, grade, or other quality of live-
statutory authority.
19. Cattle buyers are adept at assess-
gated by Congress. 7 U.S.C. § 1622(h)
stock or products under applicable
For these reasons, the regulations re-
ing the yield grade of live cattle, and
states as follows:
standards
lating to compulsory yield grading will
consider yield grades when arriving at
(The Secretary of Agriculture is di-
Under U.S.D.A. definitions, both the
be set aside pursuant to 5 U.S.C. §
an average price per pound (live weight
rected and authorized)
to
quality and yield standards are consid-
706(2) (A).
basis) of a pen of cattle.
inspect, certify, and identify the class,
ered as measures of "quality". See 7
20. For carcasses of the same quality
quality, quantity and condition of ag-
C.F.R. § 53.1 and (mm). Yield
Executive Order No. 11821
grade, there is a price spread between
ricultural products when shipped or
grade, which measures the relative pro-
[3, 4] The secondo usue for consider-
received in interstate commerce, under
portion of the weight of trimmed retail
ation is the adequacy of the Depart-
carcasses having. different yield grades.
This price spread varies, depending on
such rules and regulations as the Sec-
cuts to the weight of the carcass is more
ment's actions relative to Executive Or-
retary may prescribe, including as-
properly a measure of "quantity." Al-
der No. 11821° As stated in Youngs-
market conditions, and the exact figures
sessment and collection of such fees as
though the Court is aware of the Secre-
town Sheet & Tube v. Sawyer, 343 U.S.
are published on a daily basis in readily
available market newsletters and the
will be reasonable and as nearly as
tary's definitions to the contrary, and
579, 585, 72 S.Ct. 863 866, 96 L.Ed.
like. (See Exhibit #31).
may be to cover the cost of the service
the proper weight to be accorded that
1153 (1952), "The President's power, if
rendered, to the end that agricultural
definition, the Court finds the Secre-
any, to issue the order must stem either
21. There is no evidence which di-
products may be marketed to the best
tary's construction unfounded. The de-
from an act of Congress or from the
rectly, or by inference, tends to show
advantage, that trading may be facili-
fendants, in their brief, concur in the
Constitution itself." In this regard, the
that consumer preferences will be re-
tated, and that consumers may be able
Court's determination that yield grading
Court has considered Article II, Section
flected back through marketing channels
to obtain the quality product which
is a measure of quantity.
3, of the United States Constitution,
mend to their Consideration such
fendants' proposition, except for the pre-
[7] In conclusion, the Court finds
Navy with respect to naval petroleum
Measures as he shall judge necessary
viously stated Congressional purpose.
instances wherein the action of the
reserves and supersedes provision of the
and expedient
(and)
That statutory directive, combined with
United States Department of Agricul-
Armed Forces Act requiring competitive
he shall take Care that the
the substantive nature of the executive
ture, in promulgating revisions to rules
bidding.
Laws be faithfully executed
order, convinces the Court that the Or-
found at 7 C.F.R. §§ 53.102, 53.104, 53.-
Judgment for plaintiff.
This section, by necessity, gives the
der is more than a housekeeping order
105 and 53.203 to 53.206, was "arbi-
and falls within the judicial review con-
President the power to gather informa-
trary, capricious, an abuse of discretion
tion on the administration of executive
templated by 5 U.S.C. § 706. See, e. g.,
or otherwise not in accordance with
1. War and National Emergency 38
agencies. -The information and analysis
Old Dominion Branch No. 496, National
law", entitling plaintiffs to injunctive
The Emergency Petroleum Alloca-
required by Executive Order No. 11821
Association of Letter Carriers v. Austin,
relief pursuant to 5 U.S.C. § 706(2)(A).
tion Act of 1973 granted to the Presi-
418 U.S. 264, 94 S.Ct. 2770, 41 L.Ed.2d
would also be helpful in recommending
See, generally CPC International v.
dent and his delegates power to allocate
new legislation. The Court has, in addi-
745 (1974) Brookhaven Housing Coali-
Train, 515 F.2d 1032; (8 Cir. May 5,
all domestically produced crude oil and
tion, considered 7 U.S.C. § 1621, the
tion v. Kunzig, 341 F.Supp. 1026 (E.D.
1975).
other petroleum products and to fix the
Congressional Declaration of Purpose of
N.Y.1972).
price of the same whether or not such
[8] Although much of this decision
the Agricultural Marketing Act of 1946.
[6] There is no doubt that the De-
products are produced by a governmen-
rests on uncontroverted facts, there
That section states as follows:
partment's analysis of the inflationary
tal agency or instrumentality, and no ex-
were material issues of fact precluding
In order to attain these
impact did not consider the effect of the
ception is provided with respect to naval
summary judgment. In addition, the
new regulations on:
petroleum reserves. 10 U.S.C.A. §§ 7421
objectives, it is the intent of Congress
Court required expert testimony to fully
to provide for
(a) The productivity of wage earners
et seq., 7430; Emergency Petroleum AI-
(3) an inte-
understand the content and scope of the
location Act of 1973, §§ 2 et seq.,
grated administration of all laws en-
(b) Competition
proposed regulations.
5(a) (1) as amended 15 U.S.C.A. §§ 751
acted by Congress to aid the distribu-
(c) Employment
For these reasons, plaintiffs' prayer
et seq., (a) Federal Energy Ad-
tion of agricultural products through
(d) Energy resources
for permanent injunctive relief will be
ministration Act of 1974, § 2 et seq., 15
research, market aids and services,
granted, and the previously listed mo-
U.S.C.A. § 761 et seq.; Executive Order
and regulatory activities, to the end
(e) Secondary markets (e. g. grain)
tions for summary judgment will be de-
Dec. 4, 1973, No. 11748; Executive Or-
that marketing methods and facilities
In addition, the Department did not
nied by separate order of the Court.
der No. 11790, 15 U.S.C.A. § 761 note.
may be improved, that distribution
weigh the inflationary impact of the al-
costs may be reduced and the price
ternative proposals submitted by con-
2. War and National Emergency 103
spread between the producer and con-
sumers and others. Nor was there a
Provision of the Armed Forces Act
sumer may be narrowed
quantification of those factors the De-
NUMBER
SYSTEM
requiring competitive bidding consti-
with a view to making it possible for
partment did consider. While the Court
tutes neither a special statute nor a nec-
the full production of American farms
recognizes that prognostication of infla-
essary part of the grant of power to the
to be disposed of usefully, economical-
tion is subject to inaccuracies and is at
Secretary of the Navy to conserve and
ly, profitably, and in an orderly man-
best a difficult task, the Department's
maintain the naval petroleum reserves,
ner.
conduct falls woefully short of that re-
MOHAWK PETROLEUM CORPORA-
and is superseded by the price controls
This section thus requires much the
quired by law. In the summary of its
TION, INC., a corporation,
provided by the Emergency Petroleum
analysis, the Department indicated the
Plaintiff,
same analysis of costs and economics as
Allocation Act of 1973 and regulations
nature and inadequacies of the analysis
V.
required by the executive order.
pursuant thereto. 10 U.S.C.A FOR §§ 7421
Youngstown is readily distinguishable,
with the following language:
DEPARTMENT OF the NAVY et al.,
et seq., 7430(b) Emergency etroleum
While the primary thrust of the study
Defendants.
as that case involved the seizure of prop-
Allocation Act of 1993, § 2 et-seq. as
erty for public use, an action of magni-
was not directed at assessing the in-
No. CV 75-3156-AAH.
amended 15 U.S.C.A. § 751 et seq.
tude and one in conflict with constitu-
flationary impact of the proposal, its
United States District Court,
3. War and National Emergency 38
tional principles respecting private prop-
authors found that most of the sup-
C. D. California.
Crude oil refinery was entitled to
erty. Here, the executive order is sup-
portive reasons for the proposal have
May 28, 1975.
injunction requiring the Navy to contin-
ported by, and not in conflict with, con-
a foundation in economics and actual
ue supplying crude oil from a naval pe-
stitutional language, and is within the
practice. (See Exhibit # 901).
troleum reserve after expiration date of
Congressional purpose of the Agricultur-
These facts convince the Court that
Oil refiner brought action for de-
contract between the parties, at a price
al Marketing Act of 1946.
there was a material and substantial
laratory and injunctive relief with re-
permissible under Federal Energy Ad-
[5] The defendants contend that
noncompliance with the mandate of Ex-
spect to its supply of crude oil from na-
ministration regulations, unless and un-
DEPARTMENT OF AGRICULTURE
OFFICE OF THE GENERAL COUNSEL
WASHINGTON, D.C. 20250
March 30, 1976
SUBJECT: Independent Meat Packers Association, et al
V. Earl L. Butz, et al
TO: The Honorable Philip W. Buchen
Counsel to the President
I received a telephone call from a member of your staff
requesting the citation for Independent Meat Packers
Association, et al, V. Earl L. Butz, et al. Rather than
give you just the citation, I thought it might be helpful
to furnish the following documents:
(1) The United States District Court Decision rendered
by Judge Denney in Omaha, Nebraska.
(2) The Government's Brief for Eighth Circuit.
(3) The United States Court of Appeals Eighth Circuit
Decision.
As you are probably aware, the Supreme Court denied
certiorari on March 22, 1976. The notation of this denial
is found in 44 U. S. Law Week 3531 and listed as #75-995.
If you have any specific questions, please feel free to
give me a call.
General JAMES D. Counsel KEAST
(Enclosures)
FORD is LIBRARY CERALD
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
No. 75-1486
1811110 181 TEL 110/ NOV 1911191 12 GEL 1975
Independent Meat Packers
Association, et al.,
*
Egrang
Appellees,
V.
Earl L. Butz, Secretary
of Agriculture, et al ,
Appellants.
*
Appeals from the United
States District Court
*
for the District of
Nebraska.
No. 75-1541
Independent Meat Packers
Association, et al. ,
Appellees.
V.
American National Cattlemen's
Association, etc.,
Appellants.
Submitted: September 11, 1975
Filed: November 14, 1975
Before MATTHES, Senior Circuit Judge, HEANEY and STEPHENSON,
Circuit Judges.
145-8-1003
KoslowE:REK
GL.
MATTHES, Senior Circuit Judge.
These are appeals from an order of the district court*
permanently enjoining the implementation and enforcement of
regulations promulgated by the United States Department of
Agriculture (USDA) pursuant to § 203 of the Agricultural
Marketing Act of 1946, 7 U.S.C. § 1622. ** The regulations
revise official USDA standards for the grades of carcass
The Honorable Robert V. Denney.
**The Secretary and other original defendants appealed on
July 2, 1975 (No. 75-1486). American National Cattlemen's
Association, intervening defendant, see page 3, infra, ap-
pealed on July 23, 1975 (No. 75-1541).
FORD is LIBRARY
-1-
beef, 7 C.F.R. $$53.102, 53.104-.105 (1975), and related
standards for the grades of slaughter cattle, 7 C.F.R.
$$53.203-.206 (1975). Appellee Independent Meat Packers
Association (Packers) initiated this action on April 1,
1975 by filing a complaint seeking declaratory and injunc-
tive relief from that part of the revised regulations pro-
viding that beef carcasses submitted for quality grading
would be automatically graded for yield; in the alternative,
the Packers sought declaratory and injunctive relief from
the regulations in their entirety. The named defendants
were Earl L. Butz, Secretary of Agriculture, Erwin L.
Peterson, Administrator of the Agricultural Marketing Ser-
vice, USDA, and Andrew Rot, Supervisor of the USDA Meat
Grading Branch at Omaha, Nebraska (federal defendants).
The Packers claimed that the compulsory yield provision of
1
the new regulations,
which were to have taken effect on
April 14, 1975, was arbitrary, capricious, "not supported
by substantial evidence," and "in excess of the power" of
the USDA. They further alleged that the revised regulations
were issued in violation of Executive Order No. 11821, which
requires an evaluation of the inflationary impact of all
major legislative proposals, rules, and regulations emanating
2
from the executive branch.
The complaint alleged jurisdiction
1
40 Fed. Reg. 49 (1974)
2
Executive Order No. 11821 also directs the Director of
the Office of Management and Budget to develop criteria for
the identification of major legislative proposals, rules,
and regulations having a significant impact upon inflation
and to prescribe procedures for their evaluation. Pursuant
to this mandate, the Office of Management and Budget on Janu-
ary 28, 1975 sent Circular No. A-107, which prescribes guide-
lines for compliance with the Order, to the heads of all
executive departments.
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-2-
civa
817
under 28 U.S.C. $$1331, 1337 and 5 U.S.C. $$702, 706.
After a hearing on the application for a preliminary
injunction, the district court, being persuaded that there
was a reasonable likelihood of success, issued a prelimi-
nary injunction on April 11 enjoining implementation of the
revised regulations in their entirety upon the posting of a
$5,000 bond.
3 The federal defendants then appealed to this
court, which affirmed the district court's order granting
the preliminary injunction, but remanded the cause for "a
plenary hearing on the request for a permanent injunction"
and an expedited decision. Independent Meat Packers Ass'n
V. Butz, 514 F.2d 1119, 1120 (8th Cir. 1975) (per curiam).
The district court subsequently permitted the American
National Cattlemen's Association (ANCA) to intervene as a
party-defendant and four groups, the Purveyors, Feeders,
4
Restaurants, and Consumers, to intervene as party-plaintiffs.
3
The bond was subsequently ordered increased to $10,000.
4
The Purveyors, Feeders, and Restaurants were represented
by the National Association of Meat Purveyors, National Live-
stock Feeders Association, and the National Restaurant Associa-
tion. The Consumers were represented by the Consumer Federa-
tion of America, the National Consumers League, Americans for
Democratic Action, Consumer Affairs Committee, National Consum-
ers Congress, Public Citizen, Amalgamated meat Cutters and
Butcher Workmen of North America (AFL-CIO), Service Employees
International Union (AFL-CIO), and the American Federation of
Teachers (AFL-CIO).
-3-
LIBRARY
The allegations of plaintiff-intervenors were substantially
the same, except that the Consumers contested principally
the new standards for identifying beef quality.
Prior to trial the Packers, Consumers, and all defendants
filed motions for summary judgment. The federal defendants
also moved for an order limiting the scope of the court's
inquiry to a review of the administrative record.
5
After a
full trial, 6 the district court on May 29, 1975, filed a
memorandum opinion incorporating its findings of fact and
conclusions of law and an order denying all motions for
summary judgment and permanently enjoining enforcement of
the revised regulations. Independent Meat Packers Ass'n V.
Butz, 395 F. Supp. 923 Neb. 1975).
I.
Resolution of the issues raised in this appeal requires
a brief review of the history of the beef grading program
currently in force. The USDA inaugurated its voluntary beef
grading program in May 1927 without express congressional
authorization. 7 To promote a scientific approach to the
problems of marketing, transporting and distributing agri-
cultural products, 8 Congress in 1946 passed the Agricultural
5
The court never formally ruled on the government's
motion. When the federal defendants argued their motion
for summary judgment, however, they reiterated their re-
quest, which was orally denied from the bench. Tr., vol. 1,
at 40-41.
6 The ten-day trial generated seventeen volumes of
testimony and several hundred exhibits.
7
United States Department of Agriculture, Agriculture
Marketing Service, Official United States Standards for
Grades of Carcass Beef 2 (1973).
8 See 1946 U.S. Code Cong. Service 1586.
-4-
Marketing Act. Under § 203 of the Act, 7 U.S.C. § 1622 (h),
the Secretary of Agriculture is authorized to "inspect,
certify, and identify the class, quality, quantity, and
condition of agricultural products
....
under such rules
and regulations as [he] may prescribe
"
Under the
beef grading regulations presently in force, 7 C.F.R.
$53.100 et seq., the USDA grades beef carcasses on a volun-
tary fee-for-service basis. Federal graders evaluate beef
carcasses for their quality grade and yield grade, but
packers may request either one or both of these services.
7 C.F.R. § 53.102 (a). The quality grading system presently
in effect combines both quantitative and qualitative factors,
which are combined to form a final grade. Eight quality grade
designations--Prime, Choice, Good, Standard, Commerical,
Utility, Cutter, and Canner--are applicable to steer and
heifer carcasses. The degree of marbling of intramuscular
fat 10 and the physiological maturity 11 of the slaughtered
cattle are the palatability-indicating characteristics of
the beef. Conformation involves the proportion of meat to
9
The Secretary is authorized to promulgate regulations
"to the end that agricultural products may be marketed to
the best advantage, that trading may be facilitated, and
that consumers may be able to obtain the quality product
which they desire, except that no person shall be required
to use [this] service " 7 U.S.C. § 1622 (h).
10
The degrees of marbling in the order of descending
quantity are as follows: abundant, moderately abundant,
slightly abundant, moderate, modest, small, slight, traces,
and practically devoid. 7 C.F.R. § 53.102 (q).
11
The five maturity groups are identified as A, B,
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D, and E, in order of increasing maturity. Id.
-5-
and
12
bone/of high to low value cuts.
To some extent, increased
marbling compensates for greater physiological maturity, 7
C.F.R. § 53.102 (r) and superior conformation compensates
for marbling except in the Prime, Choice, and Commercial
grades, 7 C.F.R. § 53.102 (s)
The yield grade of a beef carcass is determined by con-
sidering four factors: the thickness of the external fat,
the amount of kidney, pelvic, and heart fat; the area of
1
the ribeye; and the hot carcass weight. 7 C.F.R. § 53.102 (u)
USDA yield grade designation represents the percentage of the
carcass weight that is made up of boneless, closely trimmed
12
Superior conformation, which is generally reflected
in a carcass with a full, well-rounded appearance, means
that there is a high proportion of meat to bone and a high
proportion of weight in the more valuable parts of the car-
cass. 7 C.F.R. § 53.115 (b) (2).
13
The USDA yield grade is determined on the basis of
the following equation: yield grade - 2.50 + (2.50 X ad-
justed fat thickness, inches) + (0.20 X percent kidney,
pelvic, and heart fat) + (0.0038 X hot carcass weight,
pounds) - (0.32 X area ribeye, square inches). 7 C.F.R.
§ 53.103 (a). Yield grades are designated by the numbers
1 through 5. A carcass typical of its yield provides ap-
proximately 2.3 percent more boneless retail cuts from the
round, loin, rib, and chuck than the next lower (higher num-
ber) yield grade. U. S. Dep' of Agriculture, Economic Re-
search Service, Proposed Changes in the Relationship Between
Marbling, Maturity, and Quality Grade 3 (Supp. Livestock
-
Meat Situation Dec. 1974).
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SERALD
LIBRARY
retail cuts from the round, loin, rib, and chuck.
14
When
the USDA introduced yield grading on a voluntary basis in
1965, only 3-1/2 percent of beef submitted for quality
grading was also yield graded. Under the voluntary program
presently in force, approximately 70 percent is graded for
15
yield.
Acting under the rulemaking power vested in the Secre-
tary of Agriculture by § 203 of the Agricultural Marketing
Act of 1946, 7 U.S.C. § 1622 (h), the USDA followed the
notice and comment procedure outlined by § 4 (b) of the
Administrative Procedure Act, 5 U.S.C. § 553(c), in promul-
gating the challenged regulations. First, on September 11,
1974, the USDA filed notice in the Federal Register of pro-
posed changes in standards for grades of carcass beef, 7
C.F.R. $$53.102, 53.104-.105, and the standard for slaughter
cattle, 7 C.F.R. $$53.201-.206. Interested persons were
given an opportunity to present written comments, views,
and arguments during a ninety-day period ending December
16
10, 1974.
Over 4,000 comments and five petitions con-
taining 7,618 signatures were received from a wide cross-
section of the public. After minor modifications, the final
draft accompanied by a Statement of Considerations was pub-
lished in the Federal Register on March 12, 1975 with an
effective date of April 14, 1975. 40 Fed. Reg. 11535 (1975).
14
See Cross, Equations for Estimating Boneless Retail
Cut Yields from Beef Carcasses, 37 J. Animal Science 1267
(1973).
15
Approximately 55-60 percent of all beef produced
is USDA graded for quality.
16
Although not required by the Administrative Procedure
Act, the Department also conducted regional briefings in five
cities.
-7-
The revised regulations contained four major changes
in the standards for grades of carcass beef. First, con-
formation was eliminated as a factor for determining quali-
ty grade. Secondly, all carcasses submitted for grading
would be identified for both quality grade and yield grade.
Thirdly, having determined that increasing physiological
maturity does not affect palatability within the youngest
maturity group (cattle nine through thirty months old),
the marbling requirements for this group were set at the
lowest level previously acceptable in the Prime, Choice,
and Standard grades. For the more mature beef in these
grades increased marbling is still required to compensate
for advancing age, but the minimum degree of marbling re-
quired was lowered by one degree. Lastly, to make the Good
grade more uniform and restrictive, the Secretary limited
this grade to carcasses in the A and B maturity groups and
raised the minimum degree of marbling required by one-half
degree.
The changes in the relationship between marbling-maturity
and quality grades were opposed by most consumers, representa-
tives of restaurants, institutions, their suppliers, and some
feeders. Their opposition was based on the belief that the
changes would impair the palatability of Prime and Choice beef
and that consumers would have to pay "Choice grade prices for
Good grade beef. " The requirement that all beef graded be
graded for both quality and yield was opposed most strongly
by meat packers. They voiced the belief that compulsory yield
grading would increase grading costs, 17 impede their ability
to market carcasses from which exterior fat had been trimmed,
17
The packers are billed $14.60 per hour for work per-
LIBRARY
formed by federal graders during the daytime. 7 C.F.R.
19
§ 53.29 (a).
-8-
require a complete restructuring of their buying practices,
and preclude the grading of certain carcasses. The packers
also questioned the accuracy of the USDA yield grade equation,
especially its subjective application by federal graders.
The cattlemen endorsed the objectives and principal pro-
visions of the regulations. Their studies and experience con-
vinced them that it would be possible to produce fed beef more
economically, using less grain, and a shorter average period
in the feedlot. Combining quality and yield grading would
reward producers of high yielding beef with premium prices
as it would tend to eliminate the use of averages in marketing
cattle.
The district court's memorandum opinion, which was de-
signed to provide the basis for the injunction entered on
May 29, considered the major contentions voiced by the op-
posing groups. First, the court found "substantial evidence"
to support the changes in the relationship between marbling-
maturity and quality grade. 395 F. Supp. at 927. This dis-
posed of the principal challenge of the consumer group plain-
tiffs. Secondly, the court held that "compulsory yield
grading" falls outside the authority delegated to the Secre-
tary of Agriculture by 7 U.S.C. § 1622 (h). The court reasoned
that the requirement that all beef submitted for grading be
graded for both quality and yield is inconsistent with the
voluntary tone of § 1622 (h). Id. at 931. The court also
stated that there was "no necessity for compulsory yield
grading" and that "no appreciable benefit [would] result from
compulsion." Id. Lastly, the court considered the adequacy
of the Department's actions relative to Executive Order No.
11821. Being persuaded that the adequacy of compliance with
LIBRARY
-9-
the terms of the executive order was subject to judicial re-
view, id. at 932, the court ruled that the Secretary's in-
flation impact statement was deficient and that, accordingly,
the regulations should be set aside in their entirety.
II.
Inasmuch as the USDA's alleged failure to comply with
the mandate of Executive Order No. 11821 was the broadest
ground upon which the district court's order enjoining im-
plementation of the new regulations was based, we shall con-
sider this issue first. Executive Order No. 11821, 39 Fed.
Reg. 41501 (1974), requires the Director of the Office of
Management and Budget (OMB) to consider the following fac-
tors in developing criteria for identifying legislative pro-
posals, rules, and regulations having potential impact upon
inflation: cost impact on consumers, businesses, markets,
and government; effect on productivity of wage earners,
businesses, and government; effect on competition; and
effect on supplies of important products or services. The
implementing document, OMB Circular No. A-107, also requires
consideration of the effect on employment and energy supplies
or demand. In accordance with Section 5(d) of the OMB circu-
lar, the Secretary certified that the Department had evaluated
the inflationary impact of the proposed regulations, 40 Fed.
Reg. 11535, 11546 (1975), and forwarded a brief summary of
the evaluation to the Council on Wage and Price Stability.
The district court found this evaluation to be deficient
because it did not consider the effect of the new regulations
on the productivity of wage earners, competition, employment,
energy resources, and secondary markets, weigh the impact of
the alternative proposals submitted, or quantify the factors
-10-
GERAL ORD LIBRARY
that were considered. 395 F. Supp. at 932.
Presidential proclamations and orders have the force and
effect of laws when issued pursuant to a statutory mandate or
delegation of authority from Congress. See Gnotta V. United
States, 415 F.2d 1271, 1275 (8th Cir. 1969) ; Farkas V. Texas
Instrument, Inc. 375 F.2d 629, 632n.1 (5th Cir. 1967) ;
Farmer V. Philadelphia Electric Co., 329 F.2d 3, 7 (3d Cir.
1964) Executive Order No. 11821, issued by the President
on November 27, 1974, cites no specific source of authority
other than the "Constitution and laws of the United States."
The district court found that the Order was authorized by
§ 202 of the Agricultural Marketing Act of 1946, 7 U.S.C.
18
§ 1621.
We disagree. The broad language of § 202 simply
18
Section 202 of the Agricultural Marketing Act of 1946,
7 U.S.C. § 1621, reads in pertinent part as follows:
The Congress declares that a sound, efficient, and
privately operated system for distributing and
marketing agricultural products is essential to a
prosperous agriculture and is indispensable to the
maintenance of full employment and to the welfare,
prosperity, and health of the Nation. It is fur-
ther declared to be the policy of Congress to pro-
mote
a scientific approach to the problems
of marketing, transportation, and distribution
of agricultural products
so that such pro-
ducts capable of being produced in abundance may
be marketed in an orderly manner and efficiently
distributed. In order to attain these objectives,
it is the intent of Congress to provide for
(3) an integrated administration of all laws enacted
by Congress to aid the distribution of agricultural
products through research, market aids and services,
and regulatory activities, to the end that marketing
methods and facilities may be improved, that distribu-
tion costs may be reduced and the price spread between
the producer and consumer may be narrowed
with 'f
view to making it possible for the full production of
American farms to be disposed of usefully, economically
LIBRAR
profitably, and in an orderly manner.
-11-
states the policy objectives of the Act. The district court
additionally relied on article II, § 3 of the Constitution,
which states that "[the President] shall from time to time
give to the Congress Information of the State of the Union,
and recommend to their Consideration such Measures as he
shall judge necessary and expedient;
[and] he shall
take Care that the Laws be faithfully executed
=
This provision alone does not give the executive order the
force and effect of law. Youngstown Sheet & Tube Co. V.
Sawyer, 343 U.S. 579, 587-89 (1952) completely refutes the
claim that the President may act as a lawmaker in the ab-
sence of a delegation of authority or mandate from Congress.
Appellees contend that the Order was authorized by § 3 (a)
of the Council on Wage and Price Stability Act, 12 U.S.C.
19
§ 1904,
which authorizes the President to establish a
19
The Wage and Price Stability Act, 12 U.S.C. § 1904
(Supp. 1975) reads in pertinent part as follows:
Sec. 3 (a) The Council shall-
(1) review and analyze industrial capacity,
demand, supply, and the effect of economic
concentration and anticompetitive practices,
and supply in various sectors of the economy,
working with the industrial groups concerned
and appropriate governmental agencies to en-
courage price restraint;
(2) work with labor and management in the
various sectors of the economy having special
economic problems, as well as with appropriate
government agencies, to improve the structure
of collective bargaining and the performance of
those sectors in restraining prices;
(3) improve wage and price data bases for the
various sectors of the economy to improve col-
lective bargaining and encourage price restraint;
(4) conduct public hearings necessary to provide
for public scrutiny of inflationary problems in
various sectors of the economy;
FORD
(5) focus attention on the need to increase pro-
ductivity in both the public and private sectors
of the economy;
LIBRARY
(6) monitor the economy as a whole by acquiring
as appropriate, reports on wages, costs, pro-
-12-
Council on Wage and Price Stability with the power to moni-
tor the economy and to appraise the inflationary impact of
federal programs and policies. We need not determine, how-
ever, what role Congress contemplated for the President
under the Act 20 because, in our view, Executive Order No.
11821 was intended primarily as a managerial tool for imple-
menting the President's personal economic policies and not
as a legal framework enforceable by private civil action.
See Kuhl V. Hampton, 451 F.2d 340, 342 (8th Cir. 1971) (per
curiam) ; Manhattan-Bronx Postal Union V. Gronouski, 350
F. 2d 451 (D.C. Cir. 1965). Even if appellees could show
that the Order has the force and effect of law, they would
still have to demonstrate that it was intended to create a
21
private right of action.
See Acevedo V. Nassau County,
19 (continued)
ductivity, prices, sales, profits, imports,
and exports; and
(7) review and appraise the various programs,
policies, and activities of the departments
and agencies of the United States for the
purpose of determining the extent to which
those programs and activities are contri-
buting to inflation.
20
The language of the Act is silent with respect to the
President's role other than his authority to appoint the mem-
bers and chairman of the council. The brief legislative
history suggests, however, that "[t]he provisions embodied
in the
Act represent a license by the Congress to the
President to exercise his influence to arrest the infla-
tional spiral." 120 Cong. Rec. 15,245 (daily ed. Aug. 19,
1974) (remarks of Senator Tower). See generally id. at
15, 244-57, 15,261-62, 15,266-80, 15,283-87; id. at 8754-
56 (daily ed. Aug. 20, 1974).
21
We have grave doubts as to whether under Executive
Order No. 11821 appellees have standing to judicially chal-
lenge the adequacy of the impact statement. Under the test
enunciated in Association of Data Processing Service
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LIBRARY
500 F. 2d 1078, 1083-84 (2d Cir. 1974) ; Kuhl V. Hampton,
supra at 342; Farkas V. Texas Instrument, Inc., supra at
632-33; Farmer V. Philadelphia Electric Co. supra at 9;
22
see also Gnotta V. United States, supra at 1275.
Execu-
tive Order No. 11821 does not expressly grant such a right.
To infer a private right of action here creates a serious
risk that a series of protracted lawsuits brought by per-
sons with little at stake would paralyze the rulemaking
functions of federal administrative agencies.
In summary, we conclude that the President did not
undertake or intend to create any role for the judiciary
in the implementation of Executive Order No. 11821. We
hold, therefore, that the district court erroneously set
aside the revised regulations in their entirety because
of alleged deficiencies in the impact statement.
III.
Appellants assert that the district court's conclusion
21 (continued)
Organizations, Inc. V. Camp, 397 U.S. 150 (1970) and Barlow
V. Collins, 397 U.S. 159 (1970), appellees must allege that
they have suffered an "injury in fact" and that they seek
to protect an interest "arguably within the zone of interests
to be practiced or regulated by the statute or constitutional
guarantee in question." 397 U.S. at 153. Appellees fail to
satisfy the "zone of interests" facet of the constitutional
test of standing. As we have noted, the purpose of the
Executive Order is to help implement the President's per-
sonal economic policies.
Appellees have not
shown that the order was designed for their benefit. Cf.
Acevedo V. Nassau County, supra at 1082-83.
22
Contra, Chambers V. United States, 451 F.2d 1045 (Ct.
Cl. 1971).
LIBRARY
-14-
that the USDA exceeded its statutory authority in promulgating
is plainly wrong.
the disputed regulations/ Specifically, the court found the
compulsory yield provision of the new regulations, 40 Fed.
Reg. at 11538, which requires that all beef submitted for
grading be graded for both quality and yield, to be incon-
sistent with the voluntary tone of 7 U.S.C. § 1622 (h), 395
F. Supp. at 931. As we have seen, under § 1622 (h) the
Secretary is directed and authorized to "inspect, certify,
and identify the class, quality, quantity, and condition of
agricultural products
under such rules and regulations
as [he] may prescribe." Section 1622 (h) specifically pro-
vides that no person be required to use the "service author-
ized by this subsection." The Secretary urges that this
language permits him to bundle the Department's grading ser-
vices together and thus require applicants to either take or
refuse the entire bundle.
We turn, then, to an analysis of the statute. In matters
of statutory construction, we are guided by "the provisions of
the whole law, and
its object and policy. " State
Highway Comm'n V. Volpe, 479 F. 2d 1099, 1111-12 (8th Cir.
1973) citing Richards V. United States, 369 U.S. 1, 11 (1962).
"The practical inquiry in litigation is usually to determine
what a particular provision, clause, or word means," but to
answer it one must refer to the "leading idea or purpose of
the whole instrument." 2 J. Sutherland, Statutory Construc-
tion § 4703, .at 336 (3d ed. 1943). The principal purpose of
the Agricultural Marketing Act of 1946 was "to promote through
research, study, experimentation, and,
cooperation among
Federal and State agencies, farm organizations, and private
industries, a scientific approach to the problems of marketing,
transport[ing], and distribut[ing]
agricultural products."
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1946 U.S. Code Cong. Service 1586. To effectuate the pur-
poses of the Act, Congress in § 1622 delegated a broad
range of duties to the Secretary of Agriculture relating
to agricultural products. 23 The emphasis the Act places
on a scientific approach to solving the problems of the
industry suggests that Congress intended the Secretary to
freely use his expertise. Consideration of the literal
meaning of the words employed sheds additional light on
the subject. The key language is "service authorized by
this subsection. It is presumed that Congress has used a
word in its usual and well-settled sense. See Community
Blood Bank V. FTC, 405 F. 2d 1011, 1015 (8th Cir. 1969). The
use of the term "service" in the singular rather than the
plural form supports the Secretary's theory that he can offer
the Department's beef grading services as a single "package."
For the foregoing reasons, we conclude that the Secretary is
authorized to use his expertise to combine the Department's
beef grading services so long as the program as a whole
facilitates the congressional goals set forth in § 1622 (c)
and § 1622 (h).
IV.
This brings us to an analysis of the substantive merits
23
Under $$1622 (c) and 1622 (h), the following goals are
relevant: (1) to develop and improve standards of quality,
condition, quantity, and grade to encourage uniformity and
consistency in commercial practice; (2) to market agri-
cultural products to the best advantage; (3) to facilitate
the trading of agricultural products; and (4) to make
available quality products to consumers.
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of the new regulations. Appellees contended at trial and
assert here that the USDA acted arbitrarily and capricious-
ly in promulgating the revised regulations. They specified
three respects in which, in their view, the "compulsory
yield" provision was defective. In addition to the issues
previously discussed, their complaints focused upon practical
problems inherent in compulsory yield grading, its alleged
ineffectiveness, inflationary impact, and asserted inaccura-
cies in the USDA yield grade formula currently used. They
also launched a multi-faceted attack on the new quality
grade standards, especially its effect on the palatability
of beef and the price of Choice graded beef. Finding "sub-
stantial evidence" to support the new quality grade standards,
the district court resolved this issue favorable to appellants.
Because appellees failed to file a cross-appeal, they may not
now claim that the new quality grade regulations are without
sufficient evidentiary support. See Tiedeman V. Chicago,
Milwaukee, St. Paul & Pacific R. Co., 513 F. 2d 1267, 1272
24
(8th Cir. 1975)
Consequently, the sole issue for our
consideration is whether under the applicable standard of
review there was an adequate basis in the administrative
25
record for the revised yield grade regulations.
Ordinari-
ly, we would remand this matter to the trial court for con-
24
Appellees' citation of Bowman Transportation, Inc.
V. Arkansas Best Freight System, Inc., 419 U.S. 281, 284
(1974) holding that agency findings based on substantial
evidence may "nonetheless reflect arbitrary and capricious
action," is inapposite.
25
The trial court never reached this question. Its
order enjoining implementation of the new regulations was
based solely on questions of statutory authority and com-
pliance with the Executive Order. See II and III, supra.
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sideration of the alleged arbitrariness of the regulation,
but it is not necessary to do so in this case because the
complete administrative record and the transcript of the
trial court proceedings are before us. See Environmental
Defense Fund V. Corps of Engineers, 470 F.2d 289, 301 (8th
Cir. 1972)
Appellees concede that under the guidelines enunciated
in Citizens to Preserve Overton Park, Inc. V. Volpe, 401 U.S.
402 (1971) and Camp V. Pitts, 411 U.S. 138 (1973), the
appropriate standard of review for regulations promulgated
pursuant to the "notice and comment" procedure of the Ad-
ministrative Procedure Act, 5 U.S.C. § 553 (c) (informal
rulemaking) is that specified by 5 U.S.C. § 706 (2) (A), which
authorizes a reviewing court to set aside agency action found
to be "arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.
26
See National
Nutritional Foods Ass'n V. Weinberger, 512 F.2d 688, 700-01
(2d Cir. 1975) ; National Tire Dealers Ass'n, Inc. V. Brinegar,
491 F.2d 31, 34-35 (D.C. Cir. 1974) ; Bunny Bear, Inc. V.
Peterson, 473 F.2d 1002, 1005 (1st Cir. 1973) ; Boating Industry
Ass'n V. Boyd, 409 F.2d 408 411 (7th Cir. 1969)
27
Under the
26
We have already held, under II and III, supra, that
the agency action was "otherwise in accordance with law. "
27
See also Weinberger V. Hynson, Westcott & Dunning,
Inc., 412 U.S. 609, 622n.19 (1973) ; United States V.
Allegheny-Ludlum Steel Corp., 406 U.S. 742, 749 (1972) ;
contra, Chrysler Corp. V. Department of Transportation, 472
F.2d 659, 669 (6th Cir. 1972) (applying substantial evidence
test).
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arbitrary and capricious standard of review, the reviewing
court is to engage in a substantial inquiry into the facts,
but is not empowered to substitute its judgment for that of
the expert agency. The court is to consider only whether
the disputed regulations were based on "consideration of
the relevant factors" or whether there was a clear error
of judgment. Citizens to Preserve Overton Park, Inc. V.
Volpe, supra at 416. See CPC International V. Train, 515
F.2d 1032, 1044 (8th Cir. 1975). To have the regulations
promulgated pursuant to the notice and comment procedure of
§ 553 (c) set aside, the opponents must prove that the regu-
lations are without rational support in the record. See
First Nat'l Bank V. Smith, 508 F.2d 1371, 1376 (8th Cir.
1974) The reviewing court's inquiry into the facts is
further circumscribed by langauge in Overton Park prohibiting
de novo review except when agency action is adjudicatory in
nature and agency factfinding procedures are inadequate, or
when issues that were not before the agency are raised in a
proceeding to enforce nonadjudicatory agency action. 401
U.S. at 415. The parties agree that neither situation
exists here. Their dispute focuses rather on the extent to
which a reviewing court in conducting the "plenary review"
mandated by Overton Park can go outside the administrative
record to hear expert testimony on the merits of the disputed
28
regulations.
28
In Overton Park the court stated
[t]hat [plenary] review is to be based on
the full administrative record that was
before the Secretary at the time he made
his decision. But since the bare record
may not disclose the factors that were
considered or the Secretary's construc-
tion of the evidence it may be necessary
SERA
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Our consideration of the transcript of the trial court
proceedings and the District Judge's memorandum opinion
convince us that the district court, while sometimes ar-
ticulating the correct standard of review, nonetheless
28. (continued)
for the District Court to require some
explanation in order to determine if the
Secretary acted within the scope of his
authority and if the Secretary's action
was justifiable under the applicable
standard.
The court may require the adminis-
trative officials who participated in
the decision to give testimony explaining
their action.
[W]here there are ad-
ministrative findings that were made at
the same time as the decision,
there
must be a strong showing of bad faith or
improper behavior before such inquiry may
be made. But here there are no such for-
mal findings and it may be that the only
way there can be effective judicial re-
view is by examining the decisionmakers
themselves.
The District Court is not, however,
required to make such an inquiry. It may
be that the Secretary can prepare formal
findings
that will provide an ade-
quate explanation for his action. Such
an explanation will, to some extent, be
a "post hoc rationalization" and thus
must be viewed critically. If the Dis-
trict Court decides that additional ex-
planation is necessary, that court should
consider which method will prove the most
expeditious so that full review may be had
as soon as possible.
-
401 U.S. at 420-21 (citations omitted).
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29
exceeded the narrow limits imposed by Overton Park.
The
district court conducted a ten day evidentiary hearing dur-
ing which it heard the expert testimony of private individ-
uals and USDA officials on the merits of the regulations
and, on the basis of that testimony, independently weighed
the evidence and reached its own conclusions. In these
29
THE COURT: I can tell you right now that
I am not going to substitute my judgment
for the Secretary, because he has more
expertise in this than I do.
All I am going to inquire into is
whether he did act within the scope of
his authority under the Act and also
whether he acted arbitrarily and cap-
riciously.
Tr., vol. 1, at 54.
THE COURT: I don't intend to have a
de novo review.
I want to know
if there is substantial evidence to
back up whether or not the Secretary
acted arbitrarily and capriciously.
Tr., vol. 1, at 47.
5. The Court has examined the follow-
ing references
These references
convince the Court that the Department
had substantial evidence upon which to
change the maturity-marbling relation-
ship
395 F. Supp. at 927.
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30
respects the district court erred.
For example, in con-
cluding that the Packers' grading costs would roughly double
under the new regulations, 395 F. Supp. at 928, the district
court apparently rejected testimony by David Hallett, Chief
of the Meat Grading Branch, USDA and Andrew Rot, Supervisor
of the Meat Grading Branch at Omaha, Nebraska, that any
increase would be immaterial. Addressing itself to the
merits of the new yield grade regulations, the district
court found "no necessity for compulsory yield grading" and
that "no appreciable benefit [would] result from compulsion. "
395 F. Supp. at 931. The full administrative record, which
included numerous research studies and over 4,000 comments,
and the Department's construction of the evidence, were be-
fore the district court. The expert testimony heard at
trial offered little that was new. In our view, unless an
inadequate evidentiary development before the agency can
be shown and supplemental information submitted by the
agency does not provide an adequate basis for judicial
30
Appellees' contention that appellants waived their
right to object to the admission of evidence in addition
to the material contained in the administrative record
is without merit. At the outset appellants requested the
trial court to limit the scope of the inquiry. Only after
this request was denied did trial counsel, as a precau-
tionary measure, call expert witnesses to testify on the
merits of the regulations. Even if we were to assume
that appellants did in fact consent to a trial de novo,
the result is the same. As we have noted, the district
court was not empowered to conduct a de novo review.
rord
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review, the court in conducting the plenary review mandated
by Overton Park should limit its inquiry to the administra-
tive record already in existence supplemented, if necessary,
by affidavits, depositions, or other proof of an explana-
tory nature. See Citizens to Preserve Overton Park, Inc.
V. Volpe, note 27 supra; National Nutritional Foods Ass'n
V. Weinberger, supra at 701; Bradley V. Weinberger, 483
F.2d 410, 415 (1st Cir. 1973).
We proceed to an independent examination of the re-
cord to determine whether the Department acted arbitrari-
ly or capriciously in promulgating the regulation. The
principal thrust of appellees' argument is that because
of alleged inaccuracies in the USDA yield grade equation
and its subjective application by USDA graders, compulsory
yield grading will not achieve its purpose--to force the
wholesale market for beef and cattle to reflect the full
retail sales value differences associated with differences
in yield. 40 Fed. Reg. at 11536. USDA statistics indi-
cate that for Choice beef carcasses there is between a
$5.00 and $6.00 per hundred weight difference in value be-
tween adjacent yield grades. Tr., vol. 11, at 1272-73.
Under current marketing practices, approximately 75 per-
cent of slaughter cattle is purchased and paid for on a
live weight basis. Because the packer-buyer uses a system
of averages to bid for a pen of slaughter cattle, producers
presently have little incentive to increase the production
of high-yielding slaughter cattle. Tr., vol. 13, at 1478-91.
It is the Department's view that if the producers were paid
a substantial premium for beef carcasses qualifying for yield
grades 1 and 2, they would respond by providing leaner beef
with less waste. 40 Fed. Reg. at 11536. The administrative
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record shows and the Secretary concluded that because cattle
being slaughtered today are younger and heavier than those
marketed when the original yield grade study was made in
31
the late 1950'
the prediction equation currently used
may tend to underestimate actual retail yield in certain
carcasses, particularly among the "exotic" breeds. We
note, however, that a number of research studies contained
in the administrative files indicate that the yield grade
system is the most accurate method of estimating retail
yield that is both economical and practical for use on a
32
daily basis.
Appellees also question the usefulness of
compulsory yield grading in light of the fact that, as we
31
Murphey, Estimating Yields of Retail Cuts from Beef
Carcasses, 19 J. Animal Science 1240 (1960)
32
See, e.g., Defendant's Exhibit 616 (variables used
in the yield grade equation appear to be the most accepta-
ble among those reported when accuracy, speed, and expense
are considered; Defendant's Exhibit 662 (prediction equa-
tion using the same factors as those used in the USDA
equations predicted percent boneless steak and roast meat
with a multiple correlation of 0.97) ; Defendant's Exhibit
666 (equations containing the variables used in the USDA
equation resulted in the highest coefficients of multiple
determination for percent of boneless steak and roast meat) ;
Defendant's Exhibit 670 (yield grade is most accurate meth-
od for predicting carcass composition, percent fat, and
protein that can be readily applied by graders in a slaugh-
ter facility on large numbers of animals) ; Defendant's
Exhibit 672 (USDA equation, with a simple correlation co-
efficient of 0.83, is one of the three most useful equa-
tions for predicting retail yield).
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have noted, cattle are generally purchased on the hoof
rather than on a carcass grade and weight basis. The
yield grade stamps are not applied until the cattle are
slaughtered, skinned, cleaned, and chilled for approxi-
mately twenty-four hours. Thus under existing buying
practices the full use of yield grading as a pricing
mechanism requires that the packer-buyer be able to sub-
jectively evaluate the retail yield of live cattle with
a fair degree of accuracy. Studies by Wilson,
33
34
Gregory,
35
and Crouse,
tend to support the Department's position
that subjective live appraisal by trained personnel has
predictive value. Appellees place great emphasis on the
fact that, in practice, federal graders estimate three of
the four factors used in the yield grade equation by means
of visual observation. We cannot say, however, that the
subjective application of the yield grade equation sub-
stantially impairs its accuracy. Under USDA regulations
the amount of external fat on a carcass is evaluated in
terms of the thickness of the fat over the ribeye, but
this measurement must be adjusted to reflect uneven deposi-
tion of fat on the carcass. 7 C.F.R. § 53.102 (v). The
regulations permit and provide for the adjustment which,
as a practical matter, must be subjective. Id. The fact
that no packer or other financially interested party has
ever used the Department's appeals procedure to appeal a
33
Defendant's Exhibit 601 (concluding that fat thick-
ness, which is the primary factor used in determining yield
grade, can be predicted in live animals with moderate accura-
cy and finding a correlation between live estimated fat thick-
ness and carcass cutability of 0.65).
34
Defendant's Exhibit 602 (concluding that approximately
25 to 35 percent of the variation in actual cutability can be
accounted for on the basis of live estimates of cutability).
35
Defendant's Exhibit 631 (live animal estimates of car-
cass yield grades accounted for 51 and 65 percent of the var-
iation in carcass yield and percentage of actual cutability.
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36
yield grade determination
convinces us that subjective
evaluation of yield grades is not a real problem.
We recognize that a compulsory yield grade program may
cause a certain loss in flexibility by limiting packers'
ability to merchandise certain kinds of carcasses, especially
those that are overfat or damaged, and by precluding those
packers who customarily trim exterior fat prior to grading
from selling such fat as an edible byproduct. Nevertheless,
the disadvantages are to be balanced against the expected
beneficial effects of the program, including the creation
of price signals that will induce producers to shift their
37
resources to the production of leaner cattle.
This is pre-
cisely the type of situation that calls for the exercise of
administrative expertise. Scientists at Texas A & M Univer-
sity's Agricultural Experiment Station recently compiled the
data collection phase of a study designed to evaluate the
prediction equation currently in use. If the Department
concludes, after thorough analysis of the date, that the
yield grade system is no longer suitable, the Secretary,
under 7 U.S.C. § 1622 (c) 38 should revise the regulations
36
Tr., vol. 11, at 1268-69.
37
Community Economics Division, Economic Research
Service, U. S. Dep't of Agriculture, Economics of Beef
Grades: Present and Proposed [Preliminary Draft November
27, 1974].
38
Under 7 U.S.C. § 1622 (c), the Secretary is authorized
and directed to "develop and improve standards of quality,
condition, quantity, grade, and packaging, and recommend
and demonstrate such standards in order to encourage uni-
formity and consistency in commercial practice."
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accordingly. Appellees argue that the Department acted
prematurely in promulgating the new regulations before
collection and analysis of the Texas data was complete.
Perhaps it would have been more desirable, as a point of
procedure, if the Department had waited. We cannot disre-
gard the fact, however, that the research studies previous-
ly discussed support the yield grade system currently in
force.
V.
We hold that a district court reviewing regulations
promulgated pursuant to the notice and comment procedure
specified by 5 U.S.C. § 553 (c) is not empowered to conduct
a de novo hearing. All parties agreed, as did the District
Judge, that de novo review was not appropriate. But our
examination of the voluminous record of the trial proceed-
ings convinces us that the district court did in fact hold
39
a de novo trial
and that the expert evidence relating to
the merits of the regulations influenced the District Judge's
decision. We have thoroughly reviewed the administrative
record with certain explanatory evidence and conclude that
the compulsory yield provision of the new regulations cannot
be set aside as arbitrary and capricious. For all of the
foregoing reasons we dissolve the injunction issued by the
district court and remand the case with instructions to
enter a judgment declaring that the revised regulations are
valid and dismissing the complaints filed by the Independent
Meat Packers Association and the intervening plaintiffs.
39
Perhaps our earlier remand for "a plenary hearing," "
514 F.2d at 1120, motivated the district court to hold a
full-scale trial.
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