Lemke v. Farmers Grain Co of Embden

• Decision Date: 27 February 1922
• Docket Number: No. 456,456
• Parties: LEMKE, Atty. Gen. of North Dakota, et al. v. FARMERS' GRAIN CO. OF EMBDEN, N. D
• Court: U.S. Supreme Court

258 U.S. 50

42 S.Ct. 244

66 L.Ed. 458

LEMKE, Atty. Gen. of North Dakota, et al.

v FARMERS' GRAIN CO. OF EMBDEN, N. D.

No. 456.

Argued Nov. 14, 1921.

Decided Feb. 27, 1922.

Mr. Seth W. Richardson, of Fargo, N. D., for appellants.

Mr. David F. Simpson, of Minneapolis, Minn., for appellee.

Mr. Justice DAY delivered the opinion of the Court.

This suit was brought by the complainant, a co-operative association incorporated under the laws of North Dakota, and engaged in the business of operating a public elevator and warehouse for the purchase, sale, distribution and storage of wheat, oats, rye, barley, seeds and flax at the village of Embden in that state. The association retains no profit. If there is a surplus over operating expenses at the close of the season, such surplus is distributed among the grain growers according to the amount sold by each. The purpose of the suit is to enjoin the enforcement of the North Dakota Grain Grading and Inspection Act, passed February 11, 1919, chapter 138, North Dakota Laws 1919. The bill omitting allegations as to certain federal statutes which have become obsolete, is based upon two grounds: First. That the state statute is an unlawful regulation of and burden upon interstate commerce and, therefore, violates the Commerce Clause of the Federal Constitution. Second. That the state statute is in conflict with the Federal Grain Standards Act of August 11, 1916, chapter 313, 39 Stats. 482, 485 (Comp. St. §§ 8747 1/2—8747 1/2k).

Upon filing its bill complainant moved for a temporary injunction, which application was heard before three Federal Judges. A motion to dismiss the suit was also filed. The court denied this motion and granted a temporary injunction, finding that the North Dakota law imposed a substantial burden upon interstate commerce, and was in conflict with the Federal Grain Standards Act. Afterwards an answer was filed by the Attorney General of North Dakota on behalf of all the defendants, and later a separate answer was filed on behalf of Ladd and McGovern, officials charged with the execution of the state laws. Upon trial the District Court denied the injunction, and held that the state statute did not place a burden upon interstate commerce, and was not in conflict with the Federal Grain Standards Act, and entered a decree accordingly, from which appeal was taken to the Circuit Court of Appeals for the Eighth Circuit. That court reversed the decree of the District Court, held the state statute unconstitutional, and invalid as in conflict with the federal statute, and directed the issuance of a permanent injunction to prevent the enforcement of the state law. 273 Fed. 635.

At the threshold we are met with a question of the jurisdiction of the Circuit Court of Appeals to review the decree of the District Court. It is well settled that when the jurisdiction of the District Court rests solely upon an attack upon a state statute because of its alleged violation of the Federal Constitution, a direct appeal to this court is the only method of review. Section 238, Judicial Code (Comp. St. § 1215). Carolina Glass Co. v. South Carolina, 240 U. S. 305, 36 Sup. Ct. 293, 60 L. Ed. 658, and cases cited. It is equally well settled that where the jurisdiction is invoked upon other federal grounds, as well as the one attacking the constitutionality of a statute of a state, an appeal may be taken to the Circuit Court of Appeals, with ultimate review in this court if the cause is within a class within our jurisdiction. In our view the case falls within the class permitting appeal to the Circuit Court of Appeals. Section 24, Judicial Code (Comp. St. § 991), gives to the District Court jurisdiction of cases arising under the Constitution or laws of the United States. The attack upon the state statute because of its repugnancy to the federal statute required a consideration and construction of both statutes, and their application to the facts found. These considerations presented a ground of jurisdiction arising under a law of the United States, and was not dependent solely upon the application and construction of the Federal Constitution. Spreckels Sugar Refining Co. v. McClain, 192 U. S. 397, 407, 24 Sup. Ct. 376, 48 L. Ed. 496; City of Pomona v. Sunset Co., 224 U. S. 330, 32 Sup. Ct. 477, 56 L. Ed. 788. We, therefore, hold that the Circuit Court of Appeals had jurisdiction of the cause.

We pass to a consideration of the merits. The record discloses that North Dakota is a great grain-growing State producing annually large crops, particularly wheat, for transportation beyond its borders. Complainant, and other buyers of like character, are owners of elevators and purchasers of grain bought in North Dakota to be shipped to and sold at terminal markets in other States, the principal markets being at Minneapolis and Duluth. There is practically no market in North Dakota for the grain purchased by complainant. The Minneapolis prices are received at the elevator of the complainant from Minneapolis four times daily, and are posted for the information of those interested. To these figures the buyer adds the freight and his 'spread,' or margin, of profit. The purchases are generally made with the intention of shipping the grain to Minneapolis. The grain is placed in the elevator for shipment and loaded at once upon cars for shipment to Minneapolis and elsewhere outside the State of North Dakota. The producers know the basis upon which the grain is bought, but whoever pays the highest price gets the grain, Minneapolis, Duluth or elsewhere. This method of purchasing, shipment and sale is the general and usual course of business in the grain trade at the elevator of complainant and others similarly situated. The market for grain bought at Embden is outside the State of North Dakota, and it is an unusual thing to get an offer from a point within the State. After the grain is loaded upon the cars it is generally consigned to a commission merchant at Minneapolis. At the terminal market the grain is inspected and graded by inspectors licensed under federal law.

That such course of dealing constitutes interstate commerce, there can be no question. This court has so held in many cases, and we have had occasion to discuss and decide the nature of such commerce in a case closely analogous in its facts, and altogether so in principle, Dahnke Walker Milling Co. v. Bondurant, decided December 12, 1921, 257 U. S. 282, 42 Sup. Ct. 106, 66 L. Ed. 239. In that case the facts disclose that a company organized in Tennessee and carrying on business there, went into Kentucky and, through an agent there, bought wheat for shipment to the company's mill in Tennessee. The state court held that the transaction was merely a purchase of wheat in Kentucky, and made the Tennessee company amenable to the regulatory statutes of the State. This court rejected the conclusion of the state court, and held that the buying, no less than the selling of grain under such circumstances was was a part of interstate commerce, committed to national control by the Federal Constitution. Applying the principle of that decision, and the previous decisions of this court cited in the opinion, the complainant's course of dealing in the buying of grain, which it purchased and sold under the circumstances as herein disclosed, was interstate commerce. Being such, the State could not regulate the business by a statute which had the effect to control and burden interstate commerce.

Nor is this conclusion opposed by cases decided in this court and relied upon by appellants, in which we have had occasion to define the line between state and federal authority under facts presented which required a definition of interstate commerce where the right of state taxation was involved, or manufacture or commerce of an intrastate character was the subject of consideration. In those cases we have defined the beginning of interstate commerce as that time when goods begin their interstate journey by delivery to a carrier or otherwise, thus passing beyond state authority into the domain of federal control. Cases of that type are not in conflict with principles recognized as controlling here. None of them indicates, much less decides, that interstate commerce does not include the buying and selling of products for shipment beyond state lines. It is true, as appellants contend, that after the wheat was delivered at complainant's elevator, or loaded on the cars for shipment, it might have been diverted to a local market or sent to a local mill. But such was not the course of business. The testimony shows that practically all the wheat purchased by the complainant was for shipment to and sale in the Minneapolis market. That was the course of business, and fixed and determined the interstate character of the transactions. Swift & Co. v. United States, 196 U. S. 375, 25 Sup. Ct. 276, 49 L. Ed. 518; Eureka Pipe Line Co. v. Hallanan, decided by this court December 12, 1921, 257 U. S. 265, 42 Sup. Ct. 101, 66 L. Ed. 227, and United Fuel Gas Co. v. Hallanan, decided the same day, 257 U. S. 277, 42 Sup. Ct. 105, 66 L. Ed. 234.

In view of this state of facts we come to inquire whether the North Dakota statute is a regulation of interstate commerce, and, therefore, beyond the legislative power of the State. Pertinent parts of the Act are stated in the margin.¹

This Act shows a comprehensive scheme to regulate the buying of grain. Such purchases can only be made by those who hold licenses from the State, pay state charges for the same, and act under a system of grading, inspecting and weighing fully defined in the act. Furthermore, the grain can only be purchased subject to the power of the State Grain Inspector to determine the margin of profit which the buyer shall realize upon his purchase. This authority is conferred in section 23, and the margin of profit is defined to be the difference between the price paid at the North Dakota elevator and the market...