ICC v. Iowa Cooperative Association
| Decision Date | 24 December 1964 |
| Docket Number | Civ. A. No. 2-559. |
| Citation | 236 F. Supp. 873 |
| Parties | INTERSTATE COMMERCE COMMISSION, Plaintiff, v. IOWA COOPERATIVE ASSOCIATION, G & E Transportation, Inc., Palmer Peters, Oran Kuehl, Kenneth Winser, Robert J. Weibers, Murlin Johannsen, George Coats, Elmer W. Adams, and Western Iowa Pork, Inc., Defendants. |
| Court | U.S. District Court — Southern District of Iowa |
Harry F. Horak, Kansas City, Mo., for Interstate Commerce Commission.
Monte M. Taylor, Hotz, Hotz & Taylor, Omaha, Neb., Connolly & Connolly, Council Bluffs, Iowa, for defendants.
The Interstate Commerce Commission (hereinafter called Commission) brings this action pursuant to Title 49, Sections 304(a) (1) and 322(b), U.S.Code, to permanently enjoin Iowa Cooperative Association (hereinafter referred to as ICA) and G & E Transportation, Inc. (hereinafter referred to as G & E) from transporting property in interstate commerce by motor vehicle, for compensation, without appropriate authority from the Commission, and pursuant to Section 2 of the Elkins Act (Title 49, Section 42, U.S.Code) to so enjoin the remaining defendants from aiding and abetting such transportation.
The defendants contend that transportation by Iowa Cooperative Association is exempt under Title 49, Section 303(b) (5), U.S.Code, and that the interstate transportation of dressed hog carcasses is exempt by virtue of Title 49, Section 303(b) (6), U.S.Code.
Trial was held before the Court on December 3, 1964, at Council Bluffs, Iowa, with the plaintiff appearing by its attorney, Harry F. Horak, and the defendants by their attorney, Monte Taylor. The Court, in reaching its conclusions, has considered the pleadings, evidence, stipulations, and arguments and trial briefs of counsel.
The evidence established that the transportation being performed consisted of shipments of dressed hog carcasses, described variously as fresh pork, dressed hogs, dressed pork and meat, for Western Iowa Pork, Inc., from Harlan, Iowa to California points, butter for Farmers Union Cooperative Creamery, from Superior, Nebraska to California points, and fresh fruits and vegetables for various shippers (nonmembers of ICA), from California to midwestern points. Transportation charges are assessed upon either a flat basis or a rate per 100 pounds. The Commission challenges the lawfulness of the meat and butter transportation.
Defendant G & E is an Iowa corporation that owns and leases vehicles which are used in the transportation. Defendants Coats and Adams own all of the issued stock of defendant G & E. Defendant Coats also owns vehicles used in the transportation. As officers of G & E and under an arrangement between G & E and ICA, Coats and Adams manage the transportation herein. Defendants Peters, Kuehl, Winser, Weibers and Johannsen are members, officers and directors of ICA. ICA is an Iowa corporation formed under Chapter 499 of the Code of Iowa for 1950, I.C.A., and purports to perform the transportation. Defendant Western Iowa Pork, Inc. uses the transportation service and its participation is more fully hereinafter set forth.
The first question is whether defendants are eligible for the partial exemption accorded cooperative associations by Part II of the Interstate Commerce Act (49 U.S.C. § 301 et. seq.). The exemption provision of Title 49, Section 303(b), reads as follows:
"Nothing in this chapter, except the provisions of section 304 relative to qualifications and maximum hours of service of employees and safety of operations or standards of equipment shall be construed to include * * * (5) motor vehicles controlled and operated by a cooperative association as defined in sections 1141-1141j of Title 12, as amended, or by a federation of such cooperative associations, if such federation possesses no greater powers or purposes than cooperative associations so defined * * *."
The cooperative association, in order to be eligible to perform for-hire transportation service in interstate commerce by motor vehicle under Title 49, Section 303(b) (5), U.S.Code, must meet the definition of such an association and comply with the provisions of Title 12, Sections 1141 to 1141j, known as the Agricultural Marketing Act and particularly with Section 1141j thereof, which provides:
ICA does not deal in farm products or farm supplies. It performs transportation as a for-hire carrier by motor vehicle in interstate commerce. Transportation is a service. In order to be accorded this exemption, the cooperative association must control and operate the vehicle, must be an association of farmers operated for their mutual benefit as producers, such transportation must be a farm business service, and the association must meet the third requirement of said section 1141j.
ICA is not a bona fide agricultural cooperative association and does not qualify as such. It is obvious to the Court that it exists in name only and is a fictitious sham. It was conceived and organized by defendants Coats and Adams who also own defendant G & E. These three own vehicles which they desire "to keep rolling." Both Coats and Adams had formerly been associated with similar purported cooperatives which have been found by the Commission and this Court to have been operating unlawfully. Machinery Haulers Assn. v. Agricultural Commodity Service, 86 M.C.C. 5, and I.C.C. v. Agricultural Cooperative Association, D.C., 34 F.R.D. 497. Coats and Adams, in order to lend an agricultural air to the cooperative, induced five farmers to act as incorporators, members, officers and directors of ICA. They were defendants Peters, Kuehl, Winser, Weibers and Johannsen. The testimony of these five clearly shows that they have no familiarity with the business and transportation involved. No transportation service is rendered for them individually. Only Coats and Adams are authorized to sign checks in the name of ICA. All matters of policy and detail are determined by Adams and Coats. Stockholders' and directors' meetings of ICA are held only when decided by Adams. The only interest of the five farmers in ICA is the $20.00 fee received by each for attending meetings.
Defendant Western Iowa Pork, Inc. is a member of ICA. This raises the question whether it is eligible to such membership. It was incorporated in Iowa on August 7, 1961 and began operations as a hog slaughtering plant in April, 1963. It was formed as a civic endeavor for the promotion of the industrial development of the Harlan, Iowa community. Its corporate stock is owned by persons in that area, many of whom are farmers or farm owners. However, each stockholder has as many votes as shares of common stock owned. There is no limitation upon the rate of dividend that may be paid. Clearly, Western Iowa Pork, Inc. was not incorporated as and does not qualify as an agricultural cooperative association. It is an ordinary commercial business corporation. All of the hogs slaughtered by it are purchased from outside sources. It does not raise or feed hogs. A cooperative association as defined in the Agricultural Marketing Act, as noted above, must be an organization in which member-farmers act together for their mutual benefit as producers of farm products or as purchasers of farm supplies and farm business services. As used in the statutory definition, the term "farmers" includes not only individuals, but also may include corporations, partnerships, and other business entities. Compare United States v. Maryland & Virginia Milk Pro. Ass'n, D.C., 167 F. Supp. 45, reversed on other grounds, 362 U.S. 458, 80 S.Ct. 847, 4 L.Ed.2d 880. Obviously, however, such persons, whether natural or corporate, must be engaged, to some extent at least, in a common pursuit—farming—in order to qualify for membership in a lawfully constituted agricultural cooperative. In other words, farming, is the denominator which binds such persons together in a common purpose. Those not engaged in agrarian activities, and having no agricultural production whatever, clearly are not eligible for membership. Machinery Haulers Assn. v. Agricultural Commodity Service, supra. Western Iowa Pork, Inc. is not a farmer and is not engaged in agricultural production.
The next consideration is the percentages of member versus nonmember business, as set forth in the third requirement of the Agricultural Marketing Act, supra....
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ICC v. Southwest Marketing Association
...the third requirement of said Section 1141j. The facts in this case are similar to those outlined in Interstate Commerce Commission v. Iowa Cooperative Association, D.C., 236 F.Supp. 873. Later, this Court, in Agricultural Transportation Association of Texas v. United States and I.C.C., D.C......