Kelly v. Union Stockyards & Transit Co. of Chicago

• Decision Date: 05 September 1951
• Docket Number: No. 10414.,10414.
• Citation: 190 F.2d 860
• Parties: KELLY et al. v. UNION STOCKYARDS & TRANSIT CO. OF CHICAGO.
• Court: U.S. Court of Appeals — Seventh Circuit

190 F.2d 860 (1951)

KELLY et al. v. UNION STOCKYARDS & TRANSIT CO. OF CHICAGO.

No. 10414.

United States Court of Appeals, Seventh Circuit.

August 8, 1951.

Rehearing Denied September 5, 1951.

Frank J. McAdams, Jr., William T. Kirby and Robert M. Yaffe, all of Chicago, Ill., for appellants.

Frank H. Towner, Harold A. Smith and Thomas S. Tyler, all of Chicago, Ill., for appellee.

Before KERNER, FINNEGAN and LINDLEY, Circuit Judges.

LINDLEY, Circuit Judge.

This is an appeal from the denial of plaintiffs' motion for a preliminary injunction to restrain defendant from removing them from its "Open Order List" pending the determination of their action for damages and a permanent injunction. Plaintiffs are independent dealers in livestock, registered with the Secretary of Agriculture, who were, prior to March 16, 1951, engaged in trading in livestock at the Union Stock Yards in Chicago. Defendant, a posted stockyard subject to the provisions of the Packers and Stockyards Act, 42 Stat. 159, 7 U.S.C.A. § 181 et seq., renders for hire the services necessary in the successful operation of the Chicago Stock Yards, such as unloading, penning, feeding, watering, selling and weighing of livestock. These services are furnished by defendant on credit to dealers on the "Open Order List," from which plaintiffs were removed on March 16, 1951.

Defendant's removal of plaintiffs from its "Open Order List" was the culmination of an investigation begun in the summer of 1950, when defendant became suspicious of the accuracy of the weights being reported by its weighmasters. With the knowledge of the Department of Agriculture, machines which automatically recorded the weights of all animals weighed were secretly installed in all scales in defendant's stockyard. The weights recorded by these machines, together with the weight tickets prepared by the weighmasters, were turned each week to the Department of Agriculture, whose weekly reports, which were shown to officers of defendant by representatives of the Department, showed substantial overweights recorded by some of the weighmasters. This procedure was followed until early in December, 1950, when representatives of the Department conducted an investigation at the Stock Yards, interrogating the weighmasters, many of whom confessed to accepting bribes to report false weights on animals weighed by them for certain dealers. These men were discharged by defendant and replaced by new weighmasters. With respect to the 57 dealers who had been implicated by the weighmasters and by the written confessions of two traders, the Department of Agriculture issued Orders of Inquiry, each one of which charged the dealer named therein with violating the Packers and Stockyards Act by bribing defendant's weighmasters to report false weights on animals bought or sold by such dealer.¹

Subsequent to issuance of the Orders of Inquiry by the Department of Agriculture, but prior to hearings thereon, the chief of the Department's Packers and Stockyards Division wrote defendant a letter advising it of the issuance of the orders and stating further:

"* * * it has been customary for stockyards managements to extend the open order privilege only to those members of the trade operating at a market who are of unquestioned integrity and responsibility. In view of the seriousness of the formal charges which have been made against the dealers whose names appear on the enclosed list, we believe it is in order for your company to withdraw the privilege of the open order from these members of the trade until such time as disposition has been made of the formal proceedings pending against them * * *."

Defendant, on receipt of this letter, issued its oral order removing plaintiffs from the open order list. To restrain the execution of that order, this proceeding was instituted on March 16, 1951. The suit was originally filed by but one dealer, but many others, including the thirteen who prosecute this appeal, subsequently intervened and participated in the hearing in the District Court.

Plaintiffs' theory below was that defendant's maintenance of an "Open Order List" was "a practice" in rendering stockyard services within the meaning of the Packers and Stockyards Act and that their removal from the list was arbitrary, discriminatory, and in utter disregard of the procedure established by that statute. Defendant, insisting that its "Open Order List" operated only as a designation of those dealers to whom it would extend credit and that its extension of or refusal to extend credit were matters resting solely within its discretion, argued that neither the maintenance of the list nor the removal of names therefrom constituted a practice, as defined in the Act. The District Court, in denying plaintiffs' motion for a temporary injunction,² found that defendant's maintenance of an "Open Order List" and its elimination of plaintiffs therefrom constituted practices in rendering stockyards services and that plaintiffs' removal from the list had the effect of putting them out of business but concluded "that the defendant upon learning of falsification of the weights in the yards from the automatic recorders, on learning of the confessions made to the Superintendent, on being advised by the head of the Packers and Stockyards Division of the Department of Agriculture that most of the weighmasters and some of the dealers had confessed that money had been paid by the dealers to defendant's weighmasters to induce them to falsify the weights involving all of the plaintiffs and intervening plaintiffs, had the right and authority to remove plaintiff and intervening plaintiffs from the `Open Order List'".

It is the position of plaintiffs that the District Court, having found that the maintenance of the "Open Order List" and plaintiffs' removal therefrom constituted practices in the rendering of stockyards services, erred in concluding that defendant had authority to remove them from the list and in denying their motion for a temporary injunction. They contend that, under Section 307 of the Act, 42 Stat. 165, 7 U.S.C.A. § 208, which prohibits unjust or discriminatory practices in furnishing stockyards services, defendant had no authority to put them out of business by removing them from its list, and that legally they can be put out of business or suspended only in the manner provided for in the statute, 7 U.S.C.A. § 204, which authorizes their suspension by the Secretary of Agriculture when, after due notice and hearing, he finds them guilty of a violation of the Act. The defendant, although still maintaining that plaintiffs' removal from the ...