Liberty Warehouse Co v. Burley Tobacco Growers Marketing Ass, CO-OP

• Citation: 276 U.S. 71,48 S.Ct. 291,72 L.Ed. 473
• Decision Date: 20 February 1928
• Docket Number: CO-OP,No. 18,18
• Parties: LIBERTY WAREHOUSE CO. v. BURLEY TOBACCO GROWERS'MARKETING ASS'N
• Court: United States Supreme Court

276 U.S. 71

48 S.Ct. 291

72 L.Ed. 473

LIBERTY WAREHOUSE CO.

v BURLEY TOBACCO GROWERS' CO-OP. MARKETING ASS'N.

No. 18.

Argued Feb. 23, 1927.

Decided Feb. 20, 1928.

[Syllabus from pages 71-73 intentionally omitted]

Mr. Allan D. Cole, of Maysville, Ky., for plaintiff in

error.

[Argument of Counsel from pages 73-78 intentionally omitted] Mr. Aaron Sapiro, of New York City, and Robert S. Marx, of Cincinnati, Ohio, for defendant in error.

[Argument of Counsel from pages 78-83 intentionally omitted]

Page 83

Mr. Justice McREYNOLDS delivered the opinion of the Court.

The Liberty Warehouse Company, a Kentucky corporation, operates a warehouse at Maysville, in that state, and there receives and sells loose-leaf tobacco for the accounts of growers. The Burley Tobacco Growers' Co-operative Marketing Association, incorporated under the Bingham Co-operative Marketing Act (chapter 1, Acts Ky. 1922), commenced this proceeding against the warehouse company in the Mason county circuit court. It charged the warehouse company with willful violation of the act by selling pledged tobacco, and asked judgment for the prescribed penalty ($500) and attorney's fees.

The Bingham Act (32 sections) authorizes the incorporation of nonprofit co-operative associations for the

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orderly marketing of agricultural products, and provides only producers may become members and that the corporation may contract only with them for marketing such products. It declares that these contracts shall not be illegal, prescribes penalties for interfering therewith, and further provides that the association shall not be deemed a conspiracy, illegal combination, or monopoly. Three pertinent sections follow:

'Sec. 26. Misdemeanor to Induce Breach of Marketing Contract of Co-operative Association-Spreading False Reports about the Finances or Management Thereof.

'Any person or persons or any corporation whose officers or employees knowingly induce or attempt to induce any member or stockholder of an association organized hereunder to breach his marketing contract with the association, or who maliciously and knowingly spreads false reports about the finances or management thereof, shall be guilty of a misdemeanor and be subject to a fine of not less than one hundred ($100.00) dollars and not more than one thousand ($1,000) dollars for each such offense, and shall be liable to the association aggrieve in a civil suit in the penal sum of five hundred ($500) dollars for each such offense.

'Sec. 27. Warehousemen Liable for Damage for Encouraging or Permitting Delivery of Products in Violation of Marketing Agreements.

'Any person, firm, or corporation conducting a warehouse within the state of Kentucky who solicits or persuades or permits any member of any association organized hereunder to breach his marketing contract with the association by accepting or receiving such member's products for sale or for auction or for display for sale, contrary to the terms of any marketing agreement of which said person or any member of the said firm or any active officer or manager of the said corporation has knowledge or notice, shall be liable to the association aggrieved in a civil

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suit in the penal sum of five hundred ($500) dollars for each such offense; and such association shall be entitled to an injunction against such warehouseman to prevent further breaches and a multiplicity of actions thereon. In addition, said warehouseman shall pay to the association a reasonable attorney's fee and all costs involved in any such litigation or proceedings at law.

'This section is enacted in order to prevent a recurrence or outbreak of violence and to give marketing associations an adequate remedy in the courts against those who encourage violations of co-operative contracts.

'Sec. 28. Associations are Not in Restraint of Trade.

'Any association organized hereunder shall be deemed not to be a conspiracy nor a combination in restraint of trade nor an illegal monopoly; nor an attempt to lessen competition or to fix prices arbitrarily or to create a combination or pool in violation of any law of this state; and the marketing contracts and agreements between the association and its members and any agreements authorized in this act shall be considered not to be illegal nor in restraint of trade nor contrary to the provisions of any statute enacted against pooling or combinations.'

The petition (filed Dec. 14, 1923) alleges:

That the association was organized to provide means for orderly marketing of tobacco grown or acquired by members and no others. Identical contracts (the standard form is exhibited) with many growers obligate them to deliver to it all of their tobacco during five years. Tobacco received under these contracts is sold to manufacturers and dealers as market conditions permit and the proceeds less expenses are distributed among the members, according to quality and quantity of their deliveries.

That one Mike Kielman joined the association and executed the standard contract. Notwithstanding this he delivered two thousand pounds of the 1923 crop to the warehouse company and it sold the same, with full

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knowledge of the circumstances. Before the sale the association notified the warehouse company of Kielman's membership and of his marketing contract, requested it not to sell his tobacco and called attention to the prescribed penalties.

'Plaintiff says that after service of said notice and with the full knowledge that said tobacco had been sold to this plaintiff, the defendant knowingly persuaded and permitted the said Mike Kielman to breach his marketing contract with the plaintiff association by accepting and receiving the said member's product for sale and for auction and selling same contrary to the terms of said marketing agreement, contrary to the provisions of section 27 of the Bingham Co-operative Marketing Act.'

The standard contract provides:

'The association agrees to buy and the grower agrees to sell and deliver to the association all of the tobacco produced by or for him or acquired by him as landlord or lessor, during the years 1922, 1923, 1924, 1925 and 1926. * * * The association agrees to resell such tobacco, together with tobacco of like type, grade and quality delivered by other growers under similar contracts, at the best prices obtainable by it under market conditions, and to pay over the net amount receive therefrom (less freight, insurance and interest), as payment in full to the grower and growers named in contracts similar hereto, according to the tobacco delivered by each of them,' etc.

'Inasmuch as the remedy at law would be inadequate; and inasmuch as it is now and ever will be impracticable and extremely difficult to determine the actual damage resulting to the association should the grower fail so to sell and deliver all of his tobacco the grower hereby agrees to pay to the association for all tobacco delivered, consigned or marketed or withheld by or for him, other than in accordance with the terms hereof, the sum of five cents per pound as liquidated damages averaged for all types

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and grades of tobacco, for the breach of this contract; all parties agreeing that this contract is one of a series dependent for its true value upon the adherence of each and all of the growers to each and all of the said contracts.

'The grower agrees that in the event of a breach or threatened breach by him of any provision, regarding delivery of tobacco the association shall be entitled to an injunction to prevent breach or further breach thereof and to a decree for specific performance and sale of personal property under special circumstances and conditions, and that the buyer cannot go to the open markets and buy tobacco and replace any which the grower may fail to deliver.'

The warehouse company presented an amended answer and counterclaim in three sections.

The first sets up 'in estoppel and in bar' of the alleged action that the association since January 13, 1922, has been a trust or combination of the capital, skill and acts of divers persons and corporations doing commercial business in Kentucky and between that state and other states and foreign countries 'organized and conducted for the express purpose of unlawfully and contrary to the common law, creating and carrying out restrictions in trade' under the guise of stabilizing prices.

The second asserts that sections 26 and 27, Bingham Act, conflict with the Fourteenth Amendment, abridge defendant's privileges and immunities as a citizen of the United States, deprive it of corporate life, liberty, and property without due process of law and deny it equal protection of the laws.

The third seems to be based upon the Kentucky Declaratory Judgment Law. It advances a counterclaim; also asks the court to determine whether the Bingham Act is valid and for a declaration of rights and duties.

The trial court struck section 3 'from the records' and sustained demurrers to sections 1 and 2. The

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warehouse company elected to plead no further. Trial by jury was waived, 'the petition being submitted to the court on the law and facts.' Judgment for $500-the prescribed penalty-and $100 attorney's fees went for the association, and was affirmed by the Court of Appeals.

In order to prevail here, the warehouse company must show that enforcement of the challenged judgment would deprive it-not another-of some right arising under the Constitution or laws of the United States properly asserted below. Southern Railway Co. v. King, 217 U. S. 524, 30 S. Ct. 594, 54 L. Ed. 868; Standard Stock Food Co. v. Wright, 225 U. S. 540, 32 S. Ct. 754, 56 L. Ed. 1197; Hendrick v. Maryland, 235 U. S. 610, 621, 35 S. Ct. 140, 59 L. Ed. 385; Jeffrey Mfg. Co. v. Blagg, 235 U. S. 571, 576, 35 S. Ct. 167, 59 L. Ed. 364; Dahnke-Walker Co. v. Bondurant, 257 U. S. 282, 289, 42 S. Ct. 106, 66 L. Ed. 239.

No federal right was impaired by striking section 3 from the amended answer and...