Hudson-Duncan & Co. v. Wallace

Decision Date17 May 1937
Docket NumberNo. 9612.,9612.
Citation21 F. Supp. 295
PartiesHUDSON-DUNCAN & CO. v. WALLACE, Secretary of Agriculture.
CourtU.S. District Court — District of Oregon

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Albert W. Gentner, of Portland, Or., for plaintiff.

J. Mason Dillard, Asst. U. S. Atty., of Portland, Or., G. P. Peyton, Atty., Department of Agriculture, of Washington, D. C., and John W. Aiken, Sp. Asst. to the Atty. Gen., for defendant.

JAMES ALGER FEE, District Judge.

This cause arises under an order issued by the Secretary of Agriculture under the provisions of the Agricultural Adjustment Act as amended. 7 U.S.C.A. § 601 et seq.1 A summary of the provisions of the amended act is necessary for a determination of the questions raised. The original law, by a section still retained, declared an emergency because of "a severe and increasing disparity between the prices of agricultural and other commodities" which had "burdened and obstructed the normal currents of commerce in such commodities." Section 601. It is therefore declared to be the policy of Congress, through the exercise of powers delegated to the Secretary of Agriculture,2 "to establish and maintain such balance between the production and consumption of agricultural commodities, and such marketing conditions therefor, as will reestablish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period." Section 602. The Secretary of Agriculture, if he finds that it will effectuate the declared policy of the act, after proper notice, will enter into marketing agreements with those engaged in the handling of any agricultural commodity or product who are designated as "handlers." Section 608c, subd. (1). Subject to the same conditions, he may issue orders. Such orders shall regulate, in the manner provided, only such handling of an agricultural commodity, or product thereof, as is in the current of interstate or foreign commerce, or which directly burdens, obstructs, or affects, interstate or foreign commerce in such commodity or product thereof. Section 608c, subd. (1). Such an order may be applicable to walnuts (section 608c, subd. (2), but shall be issued only upon due notice and after hearing (section 608c, subd. (3), at which findings shall be made (section 608c, subd. (4). The act provides that orders issued relating to walnuts, among other commodities, shall contain one or more of the following terms and provisions: (a) Limiting the quantity of the commodity which may be marketed or transported; (b) allotting the amount of the commodity which each handler may purchase; (c) allotting the amount of the commodity which each handler may market or transport to market; (d) determining the extent of the surplus of the commodity and providing for the control and distribution of the surplus; and, (e) permitting the establishment of reserve pools of the commodity and for equitable distribution of the net returns. Section 608c, subd. (6). Orders are required to contain one or more of the following terms and conditions: (a) Prohibiting unfair methods of competition and unfair trade practices in the handling; (b) providing that the commodity shall be sold by the handlers only at prices filed by such handlers; (c) providing for the selection of an agency or agencies which shall have the power, first, to administer the order; second, to make rules and regulations to carry out the order; third, to investigate the complaints of violations; and, fourth, to recommend amendments. A member of an agency is not deemed to be acting in an official capacity unless he receives compensation from the United States. Section 608c, subd. (7). Where an order is issued with a marketing agreement, it shall not become effective until the handlers of not less than 50 per cent. of the volume of the commodity within the area of the order have signed the marketing agreement, and shall not be effective until approved by at least two-thirds of the producers by number, or by producers who have produced for market at least two-thirds of the volume of such commodity. Section 608c, subd. (8). No order shall be issued which is applicable to all production areas of the commodity unless the Secretary finds that the issuance of several orders would not effectively carry out the declared policy. Section 608c, subd. (11). Approval or disapproval of the co-operative agency may be considered as the approval or disapproval of the members, the stockholders, or persons under contract with the association. Section 608c, subd. (12). Criminal penalties are provided for the violation of an order. Section 608c, subd. (14). "Any handler subject to an order may file a written petition with the Secretary of Agriculture, stating that any such order or any provision of any such order or any obligation imposed in connection therewith is not in accordance with law and praying for a modification thereof or to be exempted therefrom." Section 608c, subd. (15) (A). A hearing is provided, after which the Secretary shall make a ruling which shall be final "if in accordance with law." The District Courts are vested with jurisdiction in equity to review such ruling, provided a bill in equity is filed within 20 days from the date of entry of such ruling. Service of process is made by delivering a copy of the bill of complaint to the Secretary. Section 608c, subd. (15) (B). Under certain conditions, the Secretary may terminate or suspend an order or terminate a marketing agreement. Section 608c, subd. (16). Handlers are required to furnish the Secretary with information as to how the agreement or order is being carried out. Section 608d. In connection with the marketing agreement or an order, the Secretary, if he find that the base period cannot be satisfactorily determined from available statistics of the department, may use the post war period as a base. Section 608e. The Secretary is authorized to establish state and local committees, or associations of producers, to act as agents of their members in carrying out the act. Under these circumstances, the orders issued shall provide that each handler subject thereto shall pay a pro rata share of the expenses incurred by such agency. Section 610.

Pursuant to the provisions of the act, R. G. Tugwell, Acting Secretary of Agriculture, gave proper notice and held hearings for the entering of market agreements, and the issuance of an order, regulating the handling of walnuts grown in Oregon, California, and Washington. Thereafter, when handlers of not less than 50 per cent. of the walnuts had signed a marketing agreement "which regulates the handling of said commodity in the same manner as this order regulates it," and the issuance of the order was approved or favored by at least two-thirds of the producers by volume, the Secretary issued an order, the salient provisions of which will be summarized.

The Secretary determined that the post war period should be used as the base, and upon the evidence concluded: "That more than ninety percent (90%) of the merchantable walnuts grown in California, Oregon and Washington enter into the current of interstate and foreign commerce, and that the handling of walnuts grown in California, Oregon and Washington is in the current of interstate and foreign commerce and directly burdens, obstructs, and affects interstate and foreign commerce in said commodity."

He found that the average price to carry out the provisions of the act should be 17 cents per pound, and that the farmer was only receiving 70 per cent. thereof, and that the low level of prices resulted from a production of more walnuts than could be disposed of, and declared a surplus of 30 per cent., and levied upon each handler 9 cents for each 100 pounds of walnuts handled. He declared that the order was limited in its application to the smallest regional production area of the commodity which is practicable and consistent with carrying out the declared policy of the act. The terms used in the order were given special meaning by a schedule of definitions. A Control Board was appointed consisting of nine members. It was provided that thereafter each of the following groups should nominate four persons from whom the Secretary should select one from each group to fill the places upon the board after the first Monday of April, 1936, viz.: The co-operative packers of California, all packers other than co-operatives of California; a group of packers doing business in California who during the preceding crop year marketed more than 50 per cent. of the walnuts packed in the state and subjected to surplus control; growers of walnuts whose orchards are located in California and who market their commodities through co-operative packers; growers in California whose walnuts were marketed through the packer group above mentioned, handling more than 50 per cent. of the walnuts packed in California; the packers within Washington and Oregon; growers whose orchards are located in Washington and Oregon. The ninth member, who was to act as Secretary, was to be selected by the other members. The powers and duties of the Control Board are prescribed, and its decisions are to be by a majority vote. The members are subject to removal or suspension by the Secretary at any time, and each and every order, regulation, and determination or other act of the Control Board is subject to the disapproval at any time by the Secretary.

Article III of the order sets up an elaborate schedule for the control of distribution, the provisions of which are set out verbatim in the footnote.3

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Article IV deals with credit values of walnuts delivered to the Control Board. These provisions are likewise set out in full.4 It is provided that the Control Board shall have power and authority from time to time to sell or dispose of the holdings of merchantable walnuts at best prices obtainable,...

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