Peto v. Howell

• Decision Date: 13 February 1939
• Docket Number: No. 6625.,6625.
• Citation: 101 F.2d 353
• Parties: PETO v. HOWELL.
• Court: U.S. Court of Appeals — Seventh Circuit

101 F.2d 353 (1938)

PETO v. HOWELL.

No. 6625.

Circuit Court of Appeals, Seventh Circuit.

December 14, 1938.

Rehearing Denied February 13, 1939.

Meyer M. Rich and Murray Schwartz, both of Kansas City, Mo., and M. Lester Reinwald and Morris Sostrin, both of Chicago, Ill., for appellant.

Amos C. Miller, Edward R. Adams, Sidney S. Gorham, Jr., Robert W. Wales, and William Simon, all of Chicago, Ill., for appellee.

Before MAJOR and TREANOR, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Plaintiff sued to recover damages alleged to have been caused by a monopoly by defendant in violation of Section 2, Chapter 1, Title 15, U.S.C.A., which provides that "every person who shall monopolize, or attempt to monopolize, * * * any part of the trade or commerce among the several States * * * shall be deemed guilty" of a violation of the law, suing under Title 15, Chapter 1, Section 15, U.S.C.A., providing that any person injured in his business or property by reason of any violation of the Anti-Trust Laws may sue and recover three-fold the damages by him sustained. Plaintiff is a dealer in grain living in Kansas City, and defendant a grain trader and member of the Chicago Board of Trade.

Plaintiff, in his second amended complaint, charged that corn is a staple commodity, grown principally in western United States, shipped largely to eastern states in interstate commerce, moving from west to east, from one state to another, on through railroad rates, under tariffs permitting grain to be stored temporarily in Chicago; that the Board of Trade conducts a public market for the purchase and sale of grains for present and future delivery; that grain, to be deliverable on future contracts, must be in public warehouses in the Chicago district designated as "regular"; that Chicago is the principal corn market of the United States and that the price of corn throughout the country is based upon the prices quoted there.

It was further alleged that defendant, for the purpose of monopolizing trade in Chicago and throughout the United States, in violation of the federal statutes, on April 24, 1931, began to purchase on the Board, large amounts of "July corn," that is, corn to be delivered in Chicago during the month of July; that by May 25, 1931, defendant had purchased approximately 3,250,000 bushels of July corn; that thereafter in the middle of May, he purchased 4,250,000 additional bushels and held on June 1, 1931, approximately 7,500,000 bushels; that he made additional purchases until, on July 1, 1931, he owned future contracts for delivery of July corn in the amount of 8,500,000 bushels; that this amount exceeded the supply of corn available for delivery in Chicago in July; that the purchases were made with the intention on the part of defendant of withholding the commodity from the market and thereby causing a sharp increase in its price; that he withheld the corn from the market and that his action in so doing caused a rapid rise in the price; that delivery of corn to persons holding contracts for the purchase thereof was customarily made by delivery of warehouse receipts; that defendant had received on July 30, 1931, in performance of his contracts of purchase, warehouse receipts covering all of the deliverable July corn in storage in the Chicago district; that there were in storage in Chicago 5,650,000 bushels of deliverable corn; that this had all been delivered to defendant; that he had received in addition some 1,500,000 bushels which he had thereafter sold and delivered outside of the United States; that the total corn delivered to defendant by the socalled shorts to apply on his contracts amounted to approximately 7,000,000 bushels, so that on July 30, 1931, defendant still owned contracts for delivery of 1,500,000 bushels of July corn; that there was then no corn in Chicago of deliverable grades that could be delivered; that those who had contracted to deliver corn could not procure it; that thereby defendant cornered the market, became the dictator of the price in Chicago corn and exacted of those unable to deliver, in settlement, an excessive sum of money; that plaintiff was amongst those and thereby was forced to pay in settlement a large amount of money; that the action of defendant as related constituted a monopoly of the corn market of Chicago and of the United States, amounted to direct obstruction to interstate commerce in said commodity, unreasonably restrained interstate commerce therein, and artificially caused an increase in the price, all contrary to the acts of Congress.

Plaintiff relied upon the Grain Futures Act, Title 7, Chapter 1, Section 5, U.S.C.A., as follows:

"Transactions in grain involving the sale thereof for future delivery as commonly conducted on boards of trade and known as `futures' are affected with a national public interest; that such transactions are carried on in large volume by the public generally * * *; that the transactions and prices of grain on such boards of trade are susceptible to speculation, manipulation, and control, and sudden or unreasonable fluctuations in the prices thereof frequently occur as a result of such speculation, manipulation, or control, which are detrimental to the producer or the consumer and the persons handling grain and products and by-products thereof in interstate commerce, and that such fluctuations in prices are an obstruction to and a burden upon interstate commerce in grain and the products and by-products thereof and render regulation imperative for the protection of such commerce and the national public interest therein. (United States Code, Title 7, Chapter 1, Section 5; Sept. 21, 1922, c. 369, § 3, 42 Stat. 999.)"

"§ 3. When transaction deemed in interstate commerce; * * *. For the purposes of this chapter (but not in any wise limiting the definition of interstate commerce in the preceding section) a transaction in respect to any article shall be considered to be in interstate commerce if such article is part of that current of commerce usual in the grain trade whereby grain and grain products and by-products thereof are sent from one State with the expectation that they will end their transit, after purchase, in another * * * (Sept. 21, 1922, c. 369, § 2, 42 Stat. 998.)"; held constitutional in Board of Trade of City of Chicago v. Olsen, 262 U.S. 1, 43 S.Ct. 470, 67 L.Ed. 839.

Plaintiff's evidence tended to substantiate all of the averments of the bill. It appeared clearly that the defendant began to enter into July future contracts in April, 1931; that such futures were selling then at the lowest price in eight years; that the price continued to fall; that defendant added to his holdings; that at the end of May, the price had declined to 54¼ cents and that he had, as alleged, acquired contracts for approximately 8,358,000 bushels of July corn; that this constituted approximately 90 per cent. of the "total commercial visible supply of corn" in the United States; that during the last three days in July there was no more corn in Chicago to be delivered; that those who had contracted to deliver to him were unable to procure corn in Chicago or elsewhere because of lack of time; that the fluctuations in price in the last three days were unusual and of much wider range than under normal conditions; that the price was such that corn in Iowa normally destined for other places moved to Chicago; that the price was artificially raised about 25½ cents per bushel; that on August 1, following the expiration of the delivery month, corn fell in price some 10 per cent and before the end of August had depreciated some 40 per cent.

Defendant admits that liquidation of his holdings at any time prior to the expiration of July by an attempt to sell his future contracts would have caused a wide break in the market price "with serious effect upon the defendant and the country." He further says that the ordinary method of disposing of such contracts was to accept delivery and that some of the shorts never made delivery and settled with him as alleged by plaintiff.

The purchases of defendant were made through some sixteen different accounts with eight different grain brokerage houses. He purchased corn not only in his own name but in the names of other persons, in these sixteen accounts. He shipped to Canada about 900,000 bushels of corn, delivered to him under these contracts, before the expiration of July. He made a substantial profit upon all of his contracts. He also purchased cash corn in July of 322,000 bushels, which are included in the total of 8,358,198 bushels. He had left at the end of July, 7,440,975 bushels. The commercial visible supply of corn on August 1, 1931, was 8,123,000 bushels, and of this amount 7,673,000 bushels were in Chicago. In other words, defendant had at that time 97 per cent of the total of deliverable corn in Chicago, and that in Chicago was 94 per cent of the entire amount in the United States; hence defendant held 90 per cent of the entire national commercial visible supply.

The court held the evidence insufficient to support a verdict for plaintiff and directed a verdict for defendant. Plaintiff now insists that there was substantial evidence of monopoly and of an attempt to monopolize a part of interstate commerce, forbidden by Section (2) of the Act. Defendant insists that all of the deliveries to him were intrastate in character; that he purchased in Chicago, contracts for the delivery of corn in Chicago; that he did not monopolize or attempt to monopolize any part of interstate commerce and that plaintiff is without right to recover because he was engaged in a gambling transaction.

Stated succinctly, plaintiff's case is this: "I have been injured in my business by reason of defendant's violation of the Anti-Trust law in that he monopolized or attempted to monopolize that part of trade or commerce among the several states which consists of the commercial visible supply of corn in the...