Henderson v. C. Thomas Stores

• Decision Date: 24 November 1942
• Docket Number: No. 812.,812.
• Citation: 48 F. Supp. 295
• Parties: HENDERSON, Administrator, Office of Price Administration, v. C. THOMAS STORES, Inc., et al.
• Court: U.S. District Court — District of Minnesota

48 F. Supp. 295

HENDERSON, Administrator, Office of Price Administration, v. C. THOMAS STORES, Inc., et al.

No. 812.

District Court, D. Minnesota, Fourth Division.

November 24, 1942.

David Ginsburg, General Counsel, and Brunson Mac Chesney, Asst. Gen. Counsel, both of Washington, D. C., Alex Elson, Regional Atty., and John F. Manierre, Regional Enforcement Atty., both of Chicago, Ill., and William L. Prosser, State Counsel, John M. Palmer, State Enforcement Atty., and Donald F. Pratt, Senior Enforcement Atty., all of Minneapolis, Minn., for plaintiff.

R. H. Fryberger, of Minneapolis, Minn., for defendants.

NORDBYE, District Judge.

The above-entitled cause came before the Court on plaintiff's application for a preliminary injunction. The application is based on the verified bill of complaint and on the affidavits and exhibits thereto attached. Defendants' response consists of an affidavit by E. H. Rasmussen, together with the exhibits attached, and the oral testimony of L. W. Bailey and E. H. Rasmussen.

Plaintiff seeks to restrain the defendants

"(a) from selling or delivering any groceries, food or other commodities subject to the General Maximum Price Regulation at prices in excess of the maximum prices permitted by the General Maximum Price Regulation, as heretofore or hereafter amended or supplemented;

"(b) from failing or refusing to prepare and preserve for examination, by any person, during business hours, a complete and accurate statement showing prices which they, or either of them, charged for such of those commodities, as they, or either of them, delivered or supplied during March, 1942, and their, or either of their, offering prices for the delivery or supply of such commodities during such month, together with an appropriate description or identification of each said commodity, and their, or either of their, customary allowances, discounts or other price differentials;

"(c) from failing or refusing to preserve for examination by the Office of Price Administration, all existing records relating to the prices which they, or either of them, charged for such of those commodities they, or either of them, delivered or supplied during the month of March, 1942, and their, or either of their, offering prices for delivery or supply of such commodities during such month;

"(d) from failing or refusing to keep and make available for examination by the Office of Price Administration, records customarily kept by them, or either of them, relating to the prices which they, or either of them, charged for such of those commodities as they, or either of them, sold after May 18, 1942, and in addition records showing, as precisely as possible, the basis upon which they, or either of them, determined maximum prices for those commodities;

"(e) from failing or refusing to prepare and file with their, and each of their, appropriate War Price and Rationing Board of the Office of Price Administration, a statement showing their, or each of their, maximum price for each cost-of-living commodity as referred to and described in said General Maximum Price Regulation, together with an appropriate description or identification of such commodity; and from failing or refusing to keep said statement up to date by filing a statement of their, and each of their, maximum prices for new cost-of-living commodities, newly offered for sale during the previous month, together with an appropriate description or identification of such commodity;

"(f) from failing or refusing to mark the maximum price of each cost-of-living commodity sold at retail, in a manner plainly visible to and understandable by the purchasing public;

"(g) from otherwise failing or attempting, or agreeing to do anything whatsoever, in violation of said General Maximum Price Regulation, as heretofore or hereafter amended or supplemented."

The bill of complaint sets forth various violations between May 18, 1942, and September 18, 1942, of the General Maximum Price Regulation promulgated under Section 2(a) of the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix § 902 (a). The relationship between the parties and the manner of doing business should be briefly related. The C. Thomas Stores, Inc., hereinafter referred to as the Stores Company, is engaged in the sale of groceries, food and other merchandise through some 62 stores located in the State of Minnesota. All of the stores are owned and operated by this company, with local managers in charge of each operation. The Mutual Wholesale Food & Supply Company, hereinafter referred to as Mutual, is primarily engaged in the sale at wholesale to the Stores Company of all the merchandise and commodities which are sold by that company. All of such merchandise is sold to the Stores Company on consignment, and Mutual remains the owner until the sales have been consummated by the Stores Company. Settlements are made daily by the Stores Company for all merchandise sold since the previous day's accounting. Mutual determines the retail price for which all merchandise sold by it shall be disposed of by the Stores Company. It appears that the merchandise is paid for by the Stores Company on the basis of cost plus and cartage charges. Furthermore, Mutual and the Stores Company are closely allied. Mutual was organized for the purpose of buying merchandise at wholesale for disposition to the Stores Company. With the exception of a very few independent merchants, the sole customer of Mutual is the Stores Company. Defendant L. W. Bailey is President and General Manager of Mutual, and Treasurer and General Manager of the Stores Company; L. W. Houston is President of the Stores Company; T. B. Koehler is Vice President of the Stores Company; R. L. Messick is Secretary of Mutual; and E. H. Rasmussen is buyer and manager of the purchasing department of Mutual. The other individual defendants are managers of the various local stores.

Each of the grocery stores operated by the Stores Company is designated as a Zone A, Zone B, or Zone C store. The Zone A stores are large, self-service stores, usually located at a desirable corner or other advantageous location in the larger cities. The Zone B stores are other city stores, and the Zone C stores are the so-called country stores located outside of the cities. Generally speaking, in absence of local competition as to certain individual items, it had been the practice and the custom of the defendant Stores Company for several years prior to March, 1942, by reason of the services available to the customers and other circumstances, to maintain uniform prices in all the stores in the same zone, but higher prices were maintained in the C zone than in the B zone, and in the B zone than in the A zone. It is the position of the plaintiff that, under the Act and regulations, the maximum prices permitted for merchandise sold by the stores in any particular zone during March, 1942, are the highest prices for which such merchandise can be sold by the stores in that particular zone after March 31, 1942. In other words, in determining the maximum prices to be charged under the Act by a store in the A zone, such store could not base its charges on the maximum prices charged during March, 1942, for any particular commodity in a B zone store. That this position is sound seems free from doubt, and it is expressly sustained and supported by the regulation promulgated on April 28, 1942, commonly referred to as Bulletin No. 1. Under Section 20 of the reprint entitled "Definitions and Explanations," is found the following (p. 13):

"(s) Seller: `Seller' includes a seller of any commodity or service. Where a seller makes sales or supplies services through more than one selling unit, other than salemen making sales at uniform prices, each separate place of business of the seller shall be deemed to be a separate seller * * *."

Under General Maximum Price Regulation Bulletin No. 2, entitled "What Every Retailer Should Know About the General Maximum Price Regulation," issued in May, 1942, by the Office of Price Administration, there appears on page 4 of the reprint the following interpretation: "1. Each store in a group of chain stores is considered as a separate retailer and must determine its own ceiling prices."

Any other construction or interpretation of the Act in this regard would tend to defeat its very purpose. The prices charged in the Zone C stores are markedly higher than those which prevail in the super-markets where the customer serves himself. No good reason is suggested why the system adopted by the retailer should not prevail in the application of the regulations. It is common knowledge that there are some chain store companies which operate over the entire Nation. Obviously, if the purposes of the Act are to be achieved, the maximum prices charged by a chain store in one section of the country cannot be accepted as a prevailing March, 1942, price in a store owned by the same chain located hundreds of miles away and where entirely different conditions and circumstances prevail. It is no answer to assert that the chain stores should be considered as a unit under legislation designed to control inflation because such organizations are so considered for the purposes of taxation and in the application of other regulatory measures promulgated by the Government. The present Act is a war measure designed to check an enemy to our economic welfare. No greater hardship rests on the chainstore operator under this ruling than that which befalls the individual store owner, and the Administrator, in promulgating the regulation and ruling, is only giving effect to a situation which the Stores Company herein has itself established and maintained for very evident reasons. In passing, it may be of interest to observe that, where legislation which inhibited sales below cost was being considered, a large chain-store operator took the position that the Act was unfair and illegal, and in this regard was...