In re Whitney & Company

• Decision Date: 18 November 1959
• Docket Number: No. 16476.,16476.
• Citation: 273 F.2d 211
• Parties: In re WHITNEY & COMPANY, a corporation.
• Court: U.S. Court of Appeals — Ninth Circuit

273 F.2d 211 (1959)

In re WHITNEY & COMPANY, a corporation.

No. 16476.

United States Court of Appeals Ninth Circuit.

November 18, 1959.

James E. Corkey, Asst. Gen. Counsel, John W. Carter, Jr., Atty., Federal Trade Commission, Washington, D. C., for petitioner.

Bogle, Bogle & Gates, Robert Graham, Seattle, Wash., for respondent.

Before BONE, POPE and HAMLEY, Circuit Judges.

HAMLEY, Circuit Judge.

Statement of Proceedings

This is a criminal contempt proceeding instituted by this court pursuant to 18 U.S.C.A. § 401(3).¹ The respondent is Whitney & Company, a Washington corporation. This company engages in the business of packing, selling, and distributing canned salmon and other seafood products.

On March 25, 1946, in proceedings before the Federal Trade Commission,² an order was entered requiring Whitney to forthwith cease and desist from:

"Paying or granting, directly or indirectly, to any buyer, anything of value as a commission or brokerage, or any compensation, allowance or discount in lieu thereof, upon purchases made for such buyer\'s own account."³

The cease and desist order was affirmed by this court. Federal Trade Commission v. Whitney & Company, 9 Cir., 192 F.2d 746. Thereafter, and on April 1, 1955, this court entered a decree commanding Whitney to comply with and obey the above-quoted Commission order.

On May 22, 1959, the Federal Trade Commission filed a memorandum placing certain facts before this court concerning Whitney's asserted disobedience of the decree of April 1, 1955. On the same day we issued an order requiring the company to show cause why it should not be found guilty of criminal contempt and be punished therefor.

Certified copies of the show cause order and of the memorandum of the Federal Trade Commission were served upon the company by the United States Marshal. The company filed a timely response and a supporting memorandum. A memorandum in reply was filed by the Commission and the matter was argued orally before the court on October 12, 1959.

The described contempt proceedings bring into question two unrelated transactions entered into by Whitney subsequent to our decree of April 1, 1955. These transactions are separately discussed in the next two sections of this opinion.

Sale to Nakat Packing Corporation.

In June 1956 Whitney undertook to act as broker for American Packing Co., of Seattle, in connection with the sale of 810 cases of canned salmon. Whitney advised American that Whitney would undertake to sell this salmon for the account of American at a price to the consuming trade of fifteen dollars per case less usual trade discounts for cash, swell, and label allowances and for a 5% brokerage commission to Whitney. This would result in a net to American of $14.25 per case, less cash, swell, and label allowances. In so advising American, Whitney intended that if it was unable to sell the salmon for the account of American at that price, Whitney would purchase the 810 cases for its own account.

Whitney was of the opinion that it could sell this salmon to Nakat Packing Corporation, of Seattle, or other purchasers in the consuming trade for fifteen dollars per case and endeavored to do so. Nakat, however, was unwilling to pay fifteen dollars per case for this salmon.⁴

Thereafter, Whitney, in its own name and for its own account for resale, purchased these 810 cases of salmon from American. No brokerage services were performed by Whitney in connection with this purchase for its own account. The 810 cases were sold to Whitney by American in two lots, a separate invoice being issued by American for each lot.

On each of these invoices the price of fifteen dollars per case was shown, subject to discounts for cash, swell, and label allowances, and "Less 5% Brokerage." Similarly, the two documents entitled "Account of Sale," issued by Whitney to American covering these two lots, show a price of fifteen dollars a case, with like discounts, "Less 5% Commission."

After purchasing this canned salmon, Whitney, acting in its own name and for its own account, sold the 810 cases to Nakat for $14.50 per case less usual trade discounts for cash, swell, and label allowances.

Whitney asserts that the documents referred to above erroneously reflect that the disposition of the 810 cases was to be handled as a brokerage transaction, but that the transaction as finally consummated was not of that nature.

It is true that Whitney did not act as a broker in acquiring or disposing of the salmon, since it bought and sold for its own account.⁵ But the cease and desist order in question is not restricted to Whitney's brokerage activities. If, though Whitney sells for its own account, it grants anything of value as a purported commission or brokerage, or grants any compensation, allowance, or discount in lieu thereof in connection with a sale to one buying for his own account, the order is violated.⁶

Whitney sold the 810 cases to Nakat for $14.50 per case, less the usual discounts for cash, swell, and label allowances. The documents recording this sale make no mention of a commission or brokerage or any compensation, allowance, or discount in lieu thereof. But the lack of such a notation on these documents is not conclusive. The facts surrounding the entire transaction may establish, despite lack of corroboration in the selling documents, that a discount was granted in lieu of a purported commission or brokerage.

An examination of the surrounding circumstances reveals that this was the case. When Nakat declined to pay fifteen dollars per case, Whitney's plan to act as a broker in the transaction failed. It could not reduce the price to Nakat by giving Nakat part of Whitney's seventy-five-cent brokerage per case, as that would have been a direct grant of a discount in lieu of commission or brokerage. This was forbidden by the cease and desist order.

But in thereafter buying the salmon from American for fifteen dollars less "5% brokerage," and selling it to Nakat for $14.50 a case, Whitney gave Nakat an indirect grant of a discount in lieu of a commission or brokerage. In effect, Whitney passed along to Nakat fifty cents of the seventy-five-cent discount Whitney had received from American in lieu of purported brokerage.

The course followed by Whitney was a transparent attempt to circumvent the cease and desist order here in question. If persons subject to such orders were enabled to escape their effect by following such a course, these orders would be largely ineffective and unenforceable. It was to preclude subterfuges of this kind that the order here in question expressly forbade indirect as well as direct discounts in lieu of a commission or brokerage to persons buying for their own account.

Sale to Ivar Wendt.

On September 19, 1956, Whitney sold to Ivar Wendt, of Seattle, Washington, 8,000 cases of canned salmon. Wendt serves as a primary broker and also as a primary dealer in canned salmon.

The salmon was to be delivered and paid for in 1,600 case lots. Under the terms of the purchase contract Whitney sold the salmon to Wendt at a price of $9.50 per case, less "Regular — 5%, 1½%, 1/10%." The 1½% and 1/10% discounts were the usual discounts for cash, swell, and label allowances. The "Regular — 5%" discount is not further explained in this instrument. The invoice concerning the first 1,600 cases delivered under...