Fitch v. Kentucky-Tennessee Light & Power Co.

• Decision Date: 04 June 1943
• Docket Number: No. 9368.,9368.
• Citation: 136 F.2d 12
• Parties: FITCH v. KENTUCKY-TENNESSEE LIGHT & POWER CO., for Use and Benefit of TRI-CITY UTILITIES CO.
• Court: U.S. Court of Appeals — Sixth Circuit

136 F.2d 12 (1943)

FITCH v. KENTUCKY-TENNESSEE LIGHT & POWER CO., for Use and Benefit of TRI-CITY UTILITIES CO.

No. 9368.

Circuit Court of Appeals, Sixth Circuit.

June 4, 1943.

Laurence B. Finn, of Bowling Green, Ky. (Finn & Orendorf and Laurence B. Finn, all of Bowling Green, Ky., on the brief), for appellant.

James W. Stites, of Louisville, Ky., and Lynne A. Warren, of New York City, for appellee.

Before HICKS, SIMONS, and McALLISTER, Circuit Judges.

McALLISTER, Circuit Judge.

The Kentucky-Tennessee Light & Power Company brought suit against Henry D. Fitch, its former president, the Nashville Coal Company, and Justin Potter, its president, alleging that Fitch, in purchasing coal for the Power Company, from the Coal Company, had accepted bribes from Potter and the Coal Company; that the three defendants thereby violated the Robinson-Patman Act; and that they were liable to the complainant in treble damages. Various motions to strike and dismiss were denied by the district court, 37 F.Supp. 728, and, thereafter, in consideration of a covenant not to sue, Potter and the Coal Company paid to the Power Company the sum of $75,000. After a pre-trial hearing and order, in which questions of law were reserved, a jury found, in answer to two special interrogatories, that Fitch had received a commission, brokerage, or other compensation, from the Coal Company, or its president, in connection with the purchase of coal by the Power Company, during the period from June 19, 1936, through September 12, 1939.

After verdict, the questions of law having been determined against Fitch, the case was, on motion, referred to a Special Master to fix the damages in accordance with the statute and, on a finding that the Coal Company had been damaged in the amount of $58,788.01, this sum was trebled and judgment entered thereon against Fitch. Subsequently, the judgment was credited with the amount of $75,000, previously paid by the Coal Company and Potter.

None of the evidence on the trial of the many questions has been included in the record on appeal; and we have before us only the pleadings in the case, the district court's orders, its memorandum on motion to dismiss, and the final judgment entered. No answer was ever filed to appellee's bill of complaint. Appellant had moved to dismiss the bill on the ground that it did not allege such facts as would give the court jurisdiction over Fitch; that Fitch's alleged acts did not "constitute subject matter over which this court has jurisdiction"; and that the bill failed to state a cause of action "upon which this court can grant relief." This motion was denied.

The appeal, therefore, is based upon the denial by the district court of appellant's motion to dismiss. In explanation, it may be observed that the proceedings before the jury resulted from a pre-trial order based on a stipulation between the parties that the jury was to pass upon the question of whether Fitch had received commissions from the Coal Company or its president.

In the same pre-trial order, it was recited that the defendant "reserves, for all purposes of defense and appeal, the issues of law heretofore disposed of" on his motion to dismiss, "and the conclusions of law * * * that the payments * * * to Fitch were made to him while he was engaged in interstate commerce, * * * such conclusions of law being based upon the alleged facts regarding interstate commerce set forth in plaintiff's pleadings and exhibits and bill of particulars, subject, of course, to their competency as evidence, which, for the purpose of defendant's exceptions to the court's ruling and judgment, and for the purpose of defense and appeal, are accepted as undisputed evidence."

Although the manner of presenting the issues for review is somewhat confused, we can only conclude, from all of the foregoing, that the allegations of the bill are to be accepted as true, and that the legal questions to be determined are: (1) whether the Robinson-Patman Act applies to the acceptance of the commissions by Fitch; and (2) whether Fitch was engaged in interstate commerce, and accepted the commissions in the course of such commerce. It is not disputed that Fitch accepted commercial bribes from the Coal Company.

On the first question — whether the statute applies where an agent of the buyer accepts commissions from the seller on the purchase of goods, and retains them for his own benefit — the statute Title 15, Sec. 13(c), U.S.C.A. provides: "That it shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid."

The commercial bribery, alleged and now conceded, consisted of the payment by the Coal Company to Fitch, of 15 cents for each ton of coal sold to the Power Company. Fitch did not pay these amounts over to the Power Company, but concealed the transaction and kept the money for himself. On this particular phase of the case, it is contended that if he had turned the money over to his company, there would have been a violation of the statute; but that payment of a bribe to Fitch, personally, without its receipt by his company, was not an offense within the provisions of the Act. On this point, the controversy depends upon whether the payments to Fitch were "to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid."

Fitch was the president of the Power Company, and as such, its agent and representative. It is contended that inasmuch as Fitch kept the money for himself, he was not "acting in fact for or in behalf, or * * * subject to the direct or indirect control" of the Power Company in the transaction; and that, therefore, acceptance of such commercial bribes was not covered by the Act. But the statutory prohibition is against payment of such compensation to an agent, or representative, as well as to an intermediary therein where such intermediary is acting in behalf of or is controlled by a party other than the one paying the compensation. If it be of any concern in the case, it may be remarked that the phrase — "where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction" other than the party paying the compensation — relates to the intermediary referred to in the statute, and not to the agent or representative of the buyer. As remarked by the district court in its opinion denying appellant's motion to dismiss 37 F.Supp. 734 the words "acting in fact for or in behalf, or is subject to the direct or indirect control of any party to such transaction" qualify the word "intermediary," but do not qualify the word "agent" or the word "representative." In this regard, the district court said: "The qualifying words were used for the purpose of excluding from the act legitimate brokerage, which is is no wise condemned by the act. Since a broker would be an `intermediary', legitimate brokerage would be included and made illegal unless such qualifying words were used. The act catches such intermediaries as are acting for the buyer or under the buyer's control, without being an agent or representative in the legal sense of the word. Accordingly, the statute makes it illegal to make such a payment either to the other party to the transaction or to an agent or representative of such party."

It is contended that the conduct of Fitch in accepting the commissions did not fall within the provisions of the statute for the reason that, in accepting the money, he was not acting for his company and, therefore, the payment to him for his personal benefit, was not a payment "to an agent, representative, or other intermediary therein."

To such argument, the answer is that a faithless agent, in the course of representing his principal, does not by his departure from fidelity, become less an agent. In this case, Fitch received the commissions in connection with the purchases of coal. In connection with such purchases, he acted as an agent or representative of the company; but in keeping the commissions, he acted secretly for his own interests. Any payment of...