Midwest Farmers v. United States

• Decision Date: 27 December 1945
• Docket Number: 519,Civ. No. 518,699.
• Citation: 64 F. Supp. 91
• Parties: MIDWEST FARMERS, Inc., v. UNITED STATES et al. CROSBY et al. v. SAME. BARTON v. SAME.
• Court: U.S. District Court — District of Minnesota

64 F. Supp. 91

MIDWEST FARMERS, Inc., v. UNITED STATES et al.

CROSBY et al. v. SAME.

BARTON v. SAME.

Civ. Nos. 518, 519, 699.

District Court, D. Minnesota, Third Division.

December 27, 1945.

COPYRIGHT MATERIAL OMITTED

Jerome Hoffmann, of St. Paul, Minn., for Midwest Farmers, Inc..

Harold LeVander (of Kelly & LeVander), of South St. Paul, Minn., for James T. Crosby & Sons and Walter A. Barton.

J. Stephen Doyle, Jr., Sp. Asst. to Atty. Gen., John S. Griffin, Principal Attorney Department of Agriculture, of Washington, D. C., and Victor E. Anderson, U. S. Atty., and John W. Graff, Asst. U. S. Atty., both of St. Paul, Minn., for respondents.

Before SANBORN, Circuit Judge, NORDBYE and BELL, District Judges.

BELL, District Judge.

The United States Department of Agriculture commenced the above entitled proceedings in the Midwest and Crosby cases on May 27, 1942, and in the Barton case on April 7, 1943, by the issuance of an order of inquiry and notice for hearing in each case alleging that the respondents (petitioners here) had violated the provisions of the Packers and Stockyards Act of 1921, as amended, 7 U.S.C.A. § 181 et seq., hereafter called the Act. Oral hearings were held in St. Paul, Minnesota, before an examiner for the Department of Agriculture commencing July 13 and ending September 22, 1943. The Secretary of Agriculture, acting through properly constituted officers, found that the petitioners had violated Sections 303, 304, 307, 312, 401 of the Act, quoted in the margin,¹ and Section 10 of the Federal Trade Commission Act, 15 U.S.C.A. § 50, which, by reference, is made a part of the Packers and Stockyards Act, 7 U.S.C.A. § 222. The Secretary ordered suspension of the petitioners' registrations as market agencies with the Department of Agriculture for one year in the Midwest and Crosby cases and for thirty days in the Barton case under authority of amendments contained in appropriation acts 1924-1938, 1943, 7 U.S.C.A. § 204, quoted in margin.² The effective date of the order at the request of the petitioners was suspended to December 8, 1943.

Petitions were filed with this court on November 26, 1943, seeking to review and permanently to enjoin the order of the Secretary; and, on application of the petitioners, the court stayed the effective date of the orders pending a hearing on the merits. The government answered and filed motions for summary judgment. The motions were presented orally on February 27, 1945, to a court of three judges. Elaborate briefs since have been filed. The hearings, records, briefs and findings were separate in the proceedings, but the cases were presented to the court together, and, because of similarity of facts, issues, and contentions, conveniently and properly may be covered in one opinion.

In the Midwest case the government alleged: (1) that an officer and stockholder of petitioner who served as a cattle salesman was paid money, in addition to proper commissions, by speculators and dealers who "planted" livestock with petitioner for sale; (2) that the petitioner gave gratuities to truckers and shippers to procure consignments; (3) that employees of petitioner purchased livestock from consignments to petitioner without revealing the name of such purchaser; (4) that the petitioner in reports of sale to shippers of livestock failed to show the true name of purchasers; (5) that petitioner knowingly sold livestock to a speculator who was not registered under the Act; (6) that petitioner rendered accounts of sale to consignor indicating that free service was being furnished by petitioner when in fact compensation for such service was included in commission charges; (7) that the petitioner issued its check to fictitious persons for the purpose of concealing an improper payment of money.

In the Crosby case the government alleged: (1) that petitioners sold livestock consigned to them for sale on a commission and accounted to consignors prices other than those actually received; (2) that petitioners altered copy of official scale tickets issued by the State of Minnesota so as to show prices other than those actually received; (3) that petitioners gave gratuities to truckers and shippers to procure consignments; (4) that petitioners sold calves to Armour & Company under circumstances excluding competitive bidders; (5) that the petitioners issued reports of sale to shippers of livestock without showing thereon the names of the purchaser; (6) that petitioners failed to reveal to shippers purchases of livestock by their employees from consignments to petitioners; (7) that petitioners failed to keep proper books and records disclosing the payments made to brokers and shippers, the purpose of cash withdrawals, the names of purchasers of livestock and the correct prices at which livestock was sold and weighed.

In the Barton case the government alleged: (1) that the petitioner, a cattle salesman for a livestock commission company, in accordance with an agreement between the petitioner and his employer for the purpose of enabling the petitioner to make money at the expense of shippers and at the same time serve the employer as a cattle salesman without salary or at a small salary, sold to himself livestock which had been consigned to his employer for sale on a commission basis, at prices less than the market value and that this practice was followed from January 1, 1936, to January 1, 1940; (2) that petitioner caused such livestock to be weighed to persons who were not the actual purchasers and not to himself, as a result of which the report of such transactions to shippers did not show the name of the actual purchaser; (3) that the petitioner, while registered as a dealer, purported to sell stock to persons who were not the actual purchasers and whose bonds did not cover such transactions.

It was alleged in each case that these acts constituted unfair, discriminatory, and deceptive practices in violation of the Act and the regulations of the Department of Agriculture.

A report of the Federal Trade Commission filed July 3, 1918, after an exhaustive investigation, revealed that five packing companies had complete control over the marketing of livestock from the producer to the consumer. Not only did they fix prices to both, but they owned or controlled stockyard companies and facilities such as exchange buildings, banks, loan companies, terminals, switching and weighing equipment and, indeed, all instrumentalities necessary and convenient to the marketing of livestock. They assigned yard pens to and very largely directed the activities of commission men and traders. By the Act Congress sought to eliminate the unfair and monopolistic practices that existed. One of the chief objectives was to stop collusion of packers and market agencies. Undoubtedly, Congress made an effort to provide a market where farmers could sell livestock and where they could obtain actual value as determined by prices established at competitive bidding. Stafford v. Wallace, 258 U.S. 495, 499-503, 42 S.Ct. 397, 66 L.Ed. 735, 23 A.L.R. 229. While the control of the packers in the marketing of livestock transcends all other purposes of the Act, the practices of the associated agencies require regulation as they likewise are effective and important in marketing livestock.

A stockyard is a public service utility the operation of which affects a national industry. It serves the packing companies, the commission companies, speculators, and traders. It serves the producers of livestock in the area as a market place. All interested parties usually are present when sales are made and have an opportunity to act in their own behalf save the producer of livestock who lives in a distant locality and who seldom is present. The producer consigns his livestock to a market agency to represent him as his agent and who is supposed to have no interest except the welfare of his principal. Accordingly the producer places his financial interests in the absolute control of his agent. Consequently, the success of the livestock producing industry of the country in a large measure depends on the business practices of the stockyard agencies that sell livestock of great value. To say that much depends on the integrity and ethics of those engaged in marketing livestock is speaking stockyards require some sort of supervision mildly. Experience long ago taught that and Congress has lodged it in the Department of Agriculture under the Act of 1921, as amended, obviously because a major portion of the great agricultural industry of the country is vitally concerned.

The Secretary under the Act is authorized to make rules and regulations for its enforcement, 7 U.S.C.A. § 203, to make investigations, hold hearings, make findings, and suspend registration of offenders, 7 U.S.C.A. § 204. When the findings of the Secretary are supported by substantial evidence, the scope of review of the decisions of the Secretary by the courts is limited to determining whether or not such decisions are in accordance with the law. A review by the court under the Act is not a trial de novo but is a review only of questions of law involved in the administrative proceeding. Acker v. United States, 298 U.S. 426, 56 S.Ct. 824, 80 L.Ed. 1257. The findings of the Secretary are final and will not be disturbed by the court if they are in accordance with the law even though, upon a consideration of all the evidence, the court might reach a different conclusion. Tagg Bros. & Moorhead v. United States, 1930, 280 U.S. 420, 442, 50 S.Ct. 220, 74 L.Ed. 524; St. Joseph Stock Yards Co. v. United States, 1936, 298 U.S. 38, 50, 51, 56 S.Ct. 720, 80 L.Ed. 1033; Farmers' Livestock Commission Co. v. United States, D.C.1931, 54 F.2d 375, 377, 378; Swayne & Hoydt, Ltd. v. United States, 1937, 300 U.S. 297, 304, 57 S.Ct. 478, 81 L.Ed. 659; Rochester Telephone Corp. v. United States, 1939, 307 U.S. 125, 145, 146, 59 S.Ct. 754, 83 L.Ed. 1147; Board of Trade of Kansas City v. United...