Tagg Bros. & Moorhead v. United States

Decision Date18 December 1928
Docket NumberNo. 847.,847.
Citation29 F.2d 750
PartiesTAGG BROS. & MOORHEAD et al. v. UNITED STATES et al.
CourtU.S. District Court — Panama Canal Zone

Francis A. Brogan, Alfred G. Ellick, and Anan Raymond, all of Omaha, Neb. (James M. Beck, of Washington, D. C., of counsel), for plaintiffs.

William J. Donovan, Asst. Atty. Gen., H. B. Teegarden, Sp. Asst. Atty. Gen., and James C. Kinsler, U. S. Atty., of Omaha, Neb., for defendants.

Before LEWIS, Circuit Judge, and WOODROUGH and SCOTT, District Judges.

WOODROUGH, District Judge.

Plaintiffs, constituting market agencies engaged in the buying and selling of live stock on commission at the Union Stockyards at Omaha, Neb., bring this suit against defendants to enjoin the enforcement of an order of November 19, 1926, made by defendant William M. Jardine, as Secretary of Agriculture of the United States, under what is known as the Packers and Stockyards Act of August 15, 1921 (chapter 64, 42 Stat. 159; U. S. C. 1925, title 7, chapter 9 7 USCA §§ 181-229), which said order of November 19, 1926, suspended the tariff of rates theretofore in effect at the Union Stockyards at Omaha, Neb., for the buying and selling of live stock on commission, by market agencies on said market, and prescribed, in lieu thereof, a new schedule, effective January 1, 1927, fixing the maximum commission rates chargeable for the purchase and sale of live stock by such market agencies.

The three original plaintiffs are a corporation, an individual, and a copartnership, respectively suing on their own behalf and on behalf of all others similarly situated. Later other market agencies doing the same kind of business at the same place filed their petition of additional parties in the same case. Plaintiffs say that the act is void so far as it empowers the Secretary to fix rates for the service of the market agencies, that the language of the act does not purport to give the Secretary any power to enforce his rate schedules with penalties, and that the rates which he has fixed are noncompensatory and confiscatory.

There is no doubt that the market agencies at the South Omaha yards are engaged in interstate commerce and are therefore subject to lawful supervision by the federal authority, because, in the commission men's suit to settle that question, the Supreme Court squarely decided that they were. Stafford v. Wallace, 258 U. S. 495, 42 S. Ct. 397, 66 L. Ed. 735, 23 A. L. R. 229. I think that the issues in the Stafford Case presented for the court's consideration the question of the Secretary's power to fix the rates of the market agencies, and that the language used in the opinion and the later opinion — Board of Trade v. Olsen, 262 U. S. 1, 34, 43 S. Ct. 470, 67 L. Ed. 839 — indicates a conclusion reached by the Supreme Court in favor of the existence of the power of the Secretary. However, as the Supreme Court did not directly discuss the question, it may be treated as open for decision in this case.

The plaintiffs say that there is no power to fix their rates and charges, because their work is really like that of wageworkers or men who hire out their energies, skill, and brains in the service of others in a personal way, and that it would deprive them without due process of their liberty, and their property right to bargain for their work, if the government should impose rates upon them. The use of capital plays very little part in the performance of their function by the market agencies. As the Secretary says in the order complained of, "The value of property used is relatively small," and the master in his report notes that a former practice of making advances to customers is being discontinued, tending further to lessen the use of capital. In the argument of the case from another and alternative angle, the use of capital in the business and the matter of returns upon it, depreciation, et cetera, are stressed; but here the commission men picture themselves as men who go upon the market with their skill developed in a highly specialized vocation, and there work for such customers as choose to hire them in strenuous and open competition with all others similarly engaged. They contend they ought to be as free to bargain for the price of their work as any other workmen, and that to take away the right is to deprive them of liberty. They might concede the power of Congress to limit by regulation the rates they may get upon their invested capital used in the business, but that is a secondary matter. The total compensation of all the market agencies amounts to less than 1 per cent. of the value of the stuff they handle; most of it is pay for skilled services, and the main purpose and effect of the Secretary's order is to reduce that pay.

For many years the agencies have operated under a schedule of rates fixed by their Omaha exchange and undoubtedly the fact that the rates are so fixed by an organization of which the commission men and traders are members, and their customers, the live stock owners and shippers, are not, inclines public authority to take a hand in the matter. The Secretary of Agriculture says in his order now under attack in this case: "If the owners of the 58 firms or corporations composing the respondents can through a committee, or whatever other machinery they see fit to adopt, arrive at the rates to be charged the shipper a disinterested governmental agency can fairly arrive at such rates."

There does seem to be an incongruity between the fact that the commission men operate under uniform, fixed rates, and yet make the claim that the sovereign power cannot require that the rates be reasonable. But it is said railroad employees work directly in interstate commerce, and the individuals have long since surrendered to their unions their natural right to fix their wages, still only great emergency would justify fixing a standard, even temporarily. So, notwithstanding their rates fixed by their stock exchange, these plaintiffs still insist that they are in a like case with workers in the handicrafts or professions generally, and immune from rate fixing.

The master, after study of all the authorities, thinks that the plaintiffs are right, and that the Secretary's rate-fixing order is void. He cites many expressions in the opinions of the courts which, standing alone, would appear to sustain him. But we do not agree. We are not persuaded that it is within the power of the plaintiffs to combine and agree among themselves upon commissions that would be exorbitant enough to destroy the market and the interstate commerce, and yet remain beyond the reach of federal regulation. We are satisfied that Congress has full power to regulate this commerce in the basic food supply of the nation throughout the long channel through which it flows. At the one spot of greatest concentration, in the few hours when the commission men have all of the stuff of the commerce in their own hands, the commerce cannot be and is not beyond the pale. If a course of reasoning leads to that end, there is a flaw in it.

The evidence convinces us that the services of the market agencies to which the Secretary's rate attaches are the services of a business, and that the business is affected with the public use. The public use is clearly shown by the circumstances under which the business is carried on. If the public stockyards company itself performed the marketing function in its yards, there would certainly be no question of the public use. There would be obvious the use of the public utilities, the immediate pressing necessary character of the service, the situation which imposes an obligation to serve all comers and all alike, the disparate position of those who have the property in their hands and control with power to sell, and those who own it and all of the incidents, to justify governmental prevention of extortion and regulation of rates. The gist of the business is no different because the public stockyards company assigns and turns over the use of its public facilities to the marketing agencies for the performance of their function, and lets them carry on the marketing in the yards. The public use and incidental obligations are all present.

Plaintiffs' arguments to the effect that the Secretary cannot measure rate of return for brain power, or fix a per cent. on the sweat of the brow, or reconcile the power to regulate and the right of the individual to be free from any confiscation of his liberties, are interesting — possibly embarrassing. But regulation is the daughter of necessity. When open competition is lacking, and monopolistic combination would fix its own rate, necessity arises. Inanimate property of itself neither serves nor produces, without human brain and sweat to guide and drive. So in all regulation there is involved the regulation of the services of man.

The flow of this commerce through the stockyards may be likened to the course of travel across a toll bridge, and there is an analogy if you picture such a bridge equipped with a toll gate at both its ends. When the travelers go upon the bridge, the bridge owner lifts the toll bar and collects the tolls; but when they come to the other end there is a group of men who have an arrangement with the bridge owner to lift the other toll bar for a price. Would it not be absurd to say that the bridge owner's prices may be regulated, but that the others can get together and charge anything they please — that the travelers may be protected from extortion in getting onto the bridge, but not when they come to getting off? Certainly, if the bridge owner's business is affected with a public use, the business of those who control the means of getting off the bridge is so a fortiori.

Nobody imagines that the stockyards company does not get compensation for use of its very costly facilities and its services. It exacts its toll as the commerce goes through. It makes a charge for hay and the like. The commerce cannot go through, however, until the...

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