American Federation of Tobacco Growers v. Neal

• Decision Date: 29 July 1950
• Docket Number: No. 6062.,6062.
• Citation: 183 F.2d 869
• Parties: AMERICAN FEDERATION OF TOBACCO GROWERS, Inc. v. NEAL et al.
• Court: U.S. Court of Appeals — Fourth Circuit

183 F.2d 869 (1950)

AMERICAN FEDERATION OF TOBACCO GROWERS, Inc. v. NEAL et al.

No. 6062.

United States Court of Appeals Fourth Circuit.

Argued June 19, 1950.

Decided July 29, 1950.

T. Ryland Dodson, Danville, Va., and George E. Allen, Richmond, Va. (Fowler & Dodson, Danville, Va., and Allen, Allen, & Allen, Richmond, Va., on brief), for appellant.

C. Stuart Wheatley, Danville, Va. (Garrett & Wheatley, Danville, Va., on brief), for appellees.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

PARKER, Chief Judge.

This is an appeal from a summary judgment for defendants in a suit to obtain an injunction and recover damages under the Sherman Anti-Trust Act, 15 U.S.C.A. § 1 et seq., and the statute to prevent discrimination against farmers Cooperative Associations, 15 U.S.C.A. §§ 431-433. Plaintiff is the American Federation of Tobacco Growers, a farmers cooperative association, incorporated under the laws of Virginia, trading as Growers Cooperative Warehouse, and owning a tobacco warehouse just outside the corporate limits of Danville, Virginia. The defendants now in the case are the Danville Tobacco Association, an incorporated association which constitutes a tobacco board of trade and as such controls the selling of tobacco on the Danville market, and individual tobacco warehousemen of Danville who are members of the executive committee of the Danville Tobacco Association. A number of tobacco buyers were originally named as defendants, but they were dismissed from the case prior to the summary judgment and relief is no longer asked against them.

Danville, Virginia, is one of the largest markets in the bright tobacco belt. The total sales of tobacco there in the year preceding the institution of this action were around 58,000,000 pounds having a value of approximately $29,000,000. There are a number of tobacco warehouses in the city to which farmers bring their tobacco from the surrounding territory; and in these warehouses it is sold at auction. The Board of Governors of the bright Belt Warehousemen's Association has prescribed rules and regulations governing auction sales throughout the bright tobacco belt; and among these are regulations to the effect that the sales shall be held for only five and one-half hours per day, that the number of baskets of tobacco which may be sold per hour shall not exceed 400 and that not more than 300 pounds of tobacco may be sold in one basket. The bidders at the sales are representatives of the tobacco manufacturing companies and independent buyers or speculators. The presence of a group of buyers representing the principal manufacturing companies is necessary for the holding of a satisfactory auction sale; and, as it is not possible under the regulations for a buyer to bid on more than 2200 baskets per day, it is necessary for each of the companies to have a number of buyers at a large market like Danville. There were buying on that market at the time of the institution of this suit four sets of buyers representing the leading tobacco manufacturing companies of the country.

The market in Danville is controlled by the Danville Tobacco Association, which is a corporation created by the General Assembly of Virginia in the year 1887 "for the purpose of encouraging, promoting and regulating the sales of leaf tobacco and trade therein in the town of Danville". Its membership is composed of tobacco warehousemen who operate warehouses in Danville and tobacco buyers who buy in the Danville market. It is governed by an executive committee of twelve persons, who fix the rates charged by the warehouses, which are uniform, apportion the selling time among the warehouses, pass upon applications for membership in the association and generally control and regulate the Danville market. Of supreme importance to every warehouseman is the allotment of selling time, since the allotment made by the association is respected by the buyers and it is not practical to conduct auction sales except in accordance with the allotment.

Plaintiff, a tobacco farmers cooperative, built a tobacco warehouse in the year 1949, just outside the corporate limits of Danville, at a strategic location on a public highway, just across the Dan River and not more than a quarter of a mile distant from the warehouse of one of the members of the association. Application was made for membership in the association and an allotment of selling time; but both were refused by the executive committee. No reason was given for the refusal except that plaintiff's warehouse was outside the city limits and that the association for that reason could not admit it to membership and had no power to allot selling time to it. It is admitted that, with the four sets of buyers who were operating, sufficient selling time was available to permit an allotment to plaintiff without depriving other warehousemen of the selling time necessary to their operations. Plaintiff attempted to function independently but was unable to do so, since it was impossible to have a set of buyers furnished by the competing tobacco companies to buy in plaintiff's warehouse alone and the farmer customers were not willing to have their tobacco sold at an auction where these companies were not represented. One sale was held on September 12, 1949, where buyers representing two companies were present; but the results were so unsatisfactory that no further sales were attempted. The result of the action of the association in refusing to allot selling time to plaintiff, therefore, was to exclude it completely from the Danville market.

Plaintiff filed suit alleging that the action of the association was violative of the provisions of the Sherman Anti-Trust Act and that, since such action was motivated by the fact that plaintiff was a farmers co-operative association, it was violative, also, of the statute forbidding discrimination against such associations. The facts were developed by depositions; and the District Judge entered summary judgment for defendants on the theory that, although a restraint of trade was shown, it was not an unreasonable restraint in view of the fact that warehousemen within the City of Danville were burdened by higher real estate values and higher building costs than warehousemen outside the city and were subject to certain taxes to which the latter were not subject, and that defendants had done nothing to prevent plaintiff's proceeding independently if it was able to do so. We think that this was erroneous, that an unreasonable restraint of trade was clearly shown and that there was sufficient evidence on the issue as to discrimination against a farmers cooperative, in view of the fact that the reason given by defendants for excluding plaintiff from the market was so unsubstantial as to justify a conclusion that it was a mere pretext.

There can be no question but that, by their control of the allotment of selling time, defendants had it within their power to exclude plaintiff from the Danville market or that plaintiff was excluded therefrom and eliminated as a competitor as a result of their exercising the power. The reason given by defendants for their action, i.e. that they were not allowed by their charter to admit to membership warehouses not within the corporate limits of Danville or to exercise any sort of regulation over warehouses beyond those limits, will not stand analysis. The act incorporating the tobacco board of trade had reference, of course, not to the corporate limits of Danville but to the tobacco market which was growing up at that place, a market in which tobacco was sold from all the surrounding country. It was to the regulation of this...