Sioux City Stock Yards Co. v. United States

• Decision Date: 23 April 1943
• Docket Number: Civ. No. 121.
• Citation: 49 F. Supp. 801
• Parties: SIOUX CITY STOCK YARDS CO. v. UNITED STATES.
• Court: U.S. District Court — Northern District of Iowa

49 F. Supp. 801

SIOUX CITY STOCK YARDS CO. v. UNITED STATES.

Civ. No. 121.

District Court, N. D. Iowa, W. D.

April 23, 1943.

Henry C. Shull and Robert M. Harben, both of Sioux City, Iowa, for plaintiff.

James A. Doyle, of Lincoln, Neb., and Tobias E. Diamond, William B. Danforth, and Franklin E. Gill, all of Sioux City, Iowa, for defendants.

Before JOHNSEN, Circuit Judge, DONOHOE and DELEHANT, District Judges.

JOHNSEN, Circuit Judge.

The Sioux City Stock Yards Company seeks to enjoin the enforcement of, and to set aside, a cease and desist order, made by the Secretary of Agriculture under the provisions of the Packers and Stockyards Act, 1921, as amended, 42 Stat. 163-168, 44 Stat. 397, 7 U.S.C.A. §§ 201-203, 205-217, forbidding it to deprive Carpenter-Walsh Commission Company, as the operator of an established livestock commission business at the stockyard in Sioux City, Iowa, of the continued use of its stockyard facilities.

The applications for an interlocutory injunction and for a permanent injunction on the merits were consolidated for hearing, by stipulation and agreement of the parties, and the matter has been heard by a three-judge court, called pursuant to 42 Stat. 168, 7 U.S.C.A. § 217, and 36 Stat. 1149, 38 Stat. 220, 219, 28 U.S.C.A. §§ 46, 47, 48.

The facts are undisputed. The Sioux City stockyard, owned and operated by plaintiff, has been duly posted by the Secretary of Agriculture, under 42 Stat. 163, 7 U.S.C.A. § 202, as being subject to the provisions of the Packers and Stockyards Act. See 9 Code of Fed.Reg. § 204.1. Carpenter-Walsh Commission Company was duly registered as a market agency at such stockyard, as required by 42 Stat. 163, 7 U.S.C.A. § 203. For a number of years preceding the event here involved, plaintiff had recognized the Commission Company's right to operate at the stockyard, by leasing office space to it in the Exchange Building maintained for that purpose and by assigning yard pens to it, in accordance with the rules and practice applicable to all 29 of such market agencies operating at the market.

On January 5, 1942, plaintiff sent the Commission Company a letter, stating that, after an analysis of the volume of business handled by the Commission Company and the pen facilities which had been used in connection with it, plaintiff had concluded that the operations of the Commission Company were not essential to the proper conduct of the Sioux City market, and that its office lease, which expired December 31, 1941, would therefore not be renewed, and that, effective February 1, 1942, its pen assignments would be discontinued. Similar notices were sent to two other commission companies.

The Commission Company filed an informal complaint against plaintiff with the Secretary of Agriculture, under 42 Stat. 165, 7 U.S.C.A. § 210, and, after notice and filing of answer, the matter was submitted to a trial examiner designated by the Secretary, on a written stipulation of facts and upon the briefs of the parties. The examiner made a report and recommendations favorable to the Commission Company, to which plaintiff filed its exceptions. The matter was then heard on oral argument by an Assistant to the Secretary of Agriculture, pursuant to 9 Code of Fed.Reg. § 202.1. Thereafter, on December 17, 1942, the Assistant entered the cease and desist order against plaintiff, which is here attacked, with supportive findings.

The Secretary's findings are based upon the written stipulation of facts. They show that, during 1941, Carpenter-Walsh Commission Company had handled only 0.9 per cent of the livestock receipts at the Sioux City stockyard and had made a daily average use of its assigned pen space of only 7.8 per cent. The only commission companies at the stockyard which had a lower percentage were the two which also were given discontinuance notices. Of the remaining commission companies, the next highest had a percentage of 1.4 of the total livestock receipts on the market. There were five companies which each did a business of between 1 and 2 per cent; six did a business of between 2 and 3 per cent; and the business of the others ranged between 3 and 10.1 per cent. On a cattle basis (3 hogs or 5 sheep being treated as equal to 1 head of cattle), the average daily receipts at the Sioux City market were 5,315 head, while those of Carpenter-Walsh Commission Company were 50 head, with a range from 539 to 31 head. The daily average use of assigned pen space by the commission companies at the stockyards, other than the three which were given discontinuance notices, ranged from 44.8 per cent to 3.5 per cent, with a general average of 23.5 per cent.

The findings of the Secretary point out, however, that there is nothing in the stipulation, or in the record otherwise, to indicate that there were too many commission companies using plaintiff's stockyard facilities for the efficient handling of the livestock on the market; or that any other commission company had been handicapped in its operations by the granting of yard pens and office space to Carpenter-Walsh Commission Company; or that the operations of the Carpenter-Walsh Commission Company had resulted in any financial loss or burden to plaintiff or constituted an economic waste on the market to the buying and shipping public; or that the Commission Company could not have been assigned less pen space, commensurate with its business, and thus have shown a considerably higher percentage of space use, — it appearing from the stipulation that ten other commission companies had been assigned smaller pen space than that allocated to Carpenter-Walsh Commission Company.

The Secretary further observed in his findings that "the evidence as to the use of pen space and volume of business done is restricted to the year 1941", and that "it seems inadequate, at least on the evidence in this proceeding, to deprive the complainant of the right to do business on the basis of a one-year test period, especially when a smaller allocation of pen space would have shown a higher percentage of utilization and when the allocation of pen space, if made in accordance with the volume of business done by the commission firms in previous years, would indicate that 1941 is not necessarily a representative year for the complainant's business."

The Secretary also pertinently called attention to the fact that there was no contention that Carpenter-Walsh Commission Company had been guilty of any misconduct or any violation of the Packers and Stockyards Act; that it appeared that the Commission Company had been operating regularly as an established market agency at the stockyard for a number of years preceding; that the evidence showed no rule or regulation of the stockyard "which put the complainant on notice that its continuation in business depended upon the degree of utilization of assigned pen space or the volume of business done"; that the Commission Company had never been given any notice that the volume of its business was unsatisfactory, prior to the receipt of the summary notice of January 5, 1942, advising it that its right to do business at the stockyard was being summarily terminated as of February 1, 1942; and that such a summary attempt to exclude the Commission Company from the market and to terminate its established business "violates fundamental standards of fairness."

As to the contention of the Stock Yards Company that the Commission Company was not essential to the market and that its elimination would be conducive to efficiency, the Secretary declared: "But, in view of the evidence, the gist of these claims seems to be simply that, all the complainant's business could be transacted more efficiently if absorbed by the other larger firms. This may be true, but it hardly establishes the reasonableness of the respondent's action and, if permitted to serve as the sole criterion for liquidating commission firms, could easily bring about a monopoly of one or two firms by successive eliminations of the firms doing the least business."

In support of its right to an injunction, plaintiff contends here that there is involved only a purely private relationship between itself and the Commission Company, in which no injury is threatened or is being visited upon the buying or shipping public; that the question therefore is simply one of inherent managerial power and function in respect to its ownership of the stockyard property, and of legitimate discretion in controlling the physical facilities of the business in which it is engaged; that the regulatory powers of the Secretary of Agriculture under the Packers and Stockyards Act do not extend to such incidents, and his authority cannot be exercised to curtail plaintiff's right to lease its facilities to whom and upon such conditions as it desires, so long as no market injury is threatened or visited upon the buying or shipping public; that, before the Secretary of Agriculture has the right to interfere in such a situation or relationship, it must appear that market injury to the buying or shipping public exists or is threatened, and the Secretary must make such a foundational finding, based upon substantial evidence in the proceedings before him; and that, if the Packers and Stockyards Act be not so construed, then it is unconstitutional as depriving plaintiff of its freedom of contract and of its property without due process of law, in violation of the Fifth Amendment.

A reading of the provisions of the Packers and Stockyards Act, 7 U.S.C.A. § 181 et seq., its legislative history, and the interpretative decisions under it, indicates clearly that Congress has conferred upon the Secretary of Agriculture plenary power to supervise and regulate the business of a public stockyard and its market agencies, including all the material incidents and relationships of its marketing processes. See H.R.ReportNo.77, 67th Cong., 1st session; Stafford v. Wallace, 258 U.S. 495, 42 S.Ct. 397, 66 L.Ed. 735, 23 A.L.R....