St. Joseph Stock Yards Co. v. United States

• Decision Date: 01 May 1935
• Docket Number: No. 245.,245.
• Citation: 11 F. Supp. 322
• Parties: ST. JOSEPH STOCK YARDS CO. v. UNITED STATES et al.
• Court: U.S. District Court — Western District of Missouri

11 F. Supp. 322

ST. JOSEPH STOCK YARDS CO. v. UNITED STATES et al.

No. 245.

District Court, W. D. Missouri, St. Joseph Division.

May 1, 1935.

COPYRIGHT MATERIAL OMITTED

Culver & Phillip, of St. Joseph, Mo., and William N. Strack and Ross Dean Rynder, both of Chicago, Ill., for petitioner.

Harold M. Stephens, Asst. Atty. Gen., Wendell Berge, Sp. Asst. Atty. Gen., Seth Thomas, Asst. Atty. Gen., and J. S. Bohannan, Atty., Department of Agriculture, of Washington, D. C., and Maurice M. Milligan, U. S. Dist. Atty., of Kansas City, Mo., for defendants.

Before STONE, Circuit Judge, and REEVES and OTIS, District Judges.

PER CURIAM.

In 1929 the Acting Secretary of Agriculture initiated an inquiry into the rates being charged by petitioner for various services at its stockyards at St. Joseph, Mo. After full hearing, the matter was finally argued and submitted in May, 1930. In February, 1931, and before decision, petitioner filed an application to reopen the case because of changes in general economic conditions affecting its business. The Secretary denied this application, and (July, 1931) entered an order fixing rates. An action to enjoin these rates resulted in determination by this court that the case should have been reopened. St. Joseph Stock Yards Co. v. United States (D. C.) 58 F.(2d) 290. Thereafter the Acting Secretary reopened the case generally, and hearing was had from January 10 to February 16, 1933. On January 6, 1934, the Acting Secretary forwarded proposed findings, conclusions, and order to petitioner with a statement that exceptions thereto might be filed by February 2, 1934. On February 2d petitioner filed exceptions and also filed an application again to reopen the case because of change in conditions since the close of the hearing on February 16, 1933. In May, 1934, the Secretary denied the application to reopen the case and entered an order fixing rates. This action challenges both the denial of the application to reopen and the order fixing rates.

I. Application to Reopen.

Obviously, if the case should be reopened for further evidence before the Secretary, no decision here upon the rate order is in place. Therefore the propriety of reopening the case will be considered first.

The changes relied upon in the application to reopen as being changes of an unusual character affecting the business of this petitioner are set forth therein and are as follows: (1) Effect of the Agricultural Adjustment Act (May 12, 1933, USCA, title 7, §§ 601-619); (2) effect of National Industrial Recovery Act (June 16, 1933, USCA, title 15, §§ 701-712); (3) effect of action of the President under the Gold Reserve Act (January 30, 1934, USCA, title 31, §§ 440-446); (4) showing of actual business experience for calendar year 1933.

1. The argument as to effect of the Agricultural Adjustment Act is that the announced policy of the Secretary is to reduce the number of hogs which he has power to do under the processing tax powers; that this results in 25 per cent. per annum reduction hereafter and vitally influences the volume of hogs coming to this market. As to cattle and sheep, the contention is that various efforts are being made to include them within the power of similar reduction by the Secretary. Any virtue in this contention must depend upon the relative permanency of the order as to hogs — the matter as to sheep and cattle is entirely speculative. In fact, the permanency of the hog order is purely speculative.

This ground is solely concerned with the volume of business, by that meaning the volume of receipts of live stock at complainant's yards. The Secretary used an estimated volume as a rate factor (page 160). Therein he states the numbers each of cattle, calves, hogs, and sheep used in his factor. A comparison of these figures with those of actual receipts (page 157) for the six years, 1927-1932, inclusive, reveals that the Secretary's figures are very conservative. As to hogs, his figure is only 126,010 above the lowest receipt (in 1932) during the above six-year period. In view of the above conservatism of the Secretary, it is by no means clear that such estimates are so far wrong as to be influenced materially by the operation of this act.

Because of the speculative character as to the occurrence or permanency of the suggested action by the Secretary under the act and because of the conservative estimate of volume of receipts used by the Secretary, we think this ground insufficient to warrant reopening of the case.

2. The contention as to the National Industrial Recovery Act is that it has resulted in a substantial raise in wages of employees. Also it is alleged that existing labor and economic conditions have had a like effect. The permanency and the extent of these effects are, obviously, uncertain and doubtful.

3. The effect of the Gold Reserve Act action, both on increase in operating expenses and in an estimated cost of reproduction new, less depreciation of complainant's structures, seems too speculative to merit consideration.

4. As to the estimated effect of these rates if applied to 1933 business, the difference between the amount which is claimed would have been earned thereunder and the amount found by the Secretary to constitute the reasonable net return is too small to be taken as a guide for a rate. It is to be expected that any business will have annual fluctuations. Rates are not based upon the result of the business of any one year alone but upon what is estimated as being the average business over a proper term of years; the future being gauged by the past. The past years here taken by which to gauge the future include six years, two of which were deeply affected by the depression. The experience before the Secretary was up to ten days before the date of the hearing.

All of the above contentions involve effects upon the business of petitioner which are entirely uncertain and unpredictable with any degree of accuracy. They are being urged in connection with the rates in the order here challenged. Only actual experience under such rates can furnish any real criterion or guide as to the effects urged. This experience should be obtained by practical test. No sufficient showing appears for not making such test to determine these matters which are of such doubtful and uncertain influence. The case should not be reopened at this time. If actual experience hereafter for a proper period under the rates fixed by the order reveals sufficient reasons, the order can then be challenged through the proper channels.

II. Confiscatory Character of Rate Order.

1. Powers of Secretary.

Numerous attacks are made upon the power of the Secretary to determine various elements of fact entering into a decision upon the rates. It is unnecessary to discuss separately any of these. The power of Congress to regulate the rates at stockyards through the Packers and Stockyards Act (7 USCA § 181 et seq.) has been sustained (Stafford v. Wallace, 258 U. S. 495, 42 S. Ct. 397, 66 L. Ed. 735, 23 A. L. R. 229; Tagg Bros. & Moorhead v. United States, 280 U. S. 420, 50 S. Ct. 220, 74 L. Ed. 524). That act empowers the Secretary of Agriculture to determine rates. Obviously, such designation carries all powers necessary or proper to execute the authority. Vital to such execution is the investigation and determination of all fact matters pertinent to rates to be regulated. The contentions here have to do only with such matters.

2. Confiscation.

Scope of Review. — At the very threshold is the preliminary question: What is the scope of this review? Is the petitioner entitled to the independent judgment of this court as to the law and the facts upon the record made before the Secretary or is this court bound to accept the findings of fact made by the Secretary if they are supported by substantial evidence?¹

If violation of the Constitution were not charged, there would be no doubt but that in the review here inquiry as to facts should go no further than to determine whether the facts found are substantially supported. Tagg Bros. & Moorhead v. United States, 280 U. S. 420, 443, 444, 50 S. Ct. 220, 74 L. Ed. 524. But the debate, whether when the issue of confiscation is raised the court independently should make findings, a debate not yet decided by the Supreme Court as to cases arising under the Packers and Stockyards Act, goes on. The Supreme Court expressly passed the question without decision in the Tagg Bros. Case, 280 U. S. 420, loc. cit. 443, 50 S. Ct. 220, 74 L. Ed. 524.

The question should be decided, and it should be decided in this case. The court ought not to exceed its jurisdiction, and it ought not invade the jurisdiction of an administrative agency. Moreover, it is greatly to be desired that a clear guide should be set up for use in future cases of this character.

The latest decision of this question was by a three-judge court for the District of Nebraska. Union Stock Yards Co. v. United States (D. C.) 9 F. Supp. 864. The case was similar to this. The principal issue was that of confiscation. In the opinion by Circuit Judge Woodrough (Circuit Judge Gardner and District Judge Munger concurring) the court said (9 F. Supp. 864, loc. cit. 873): "Our judicial function does not go beyond the decision of the constitutional question whether the rates as fixed are confiscatory. His the Secretary's findings of fact supported by substantial testimony are not subject to review."

That the court is required to exercise its independent judgment as to the facts was the view expressed in the opinion of a three-judge court in Denver Union Stock Yard Co. v. United States (D. C.) 57 F.(2d) 735, 739.

In St. Joseph Stock Yards Co. v. United States (D. C.) 58 F.(2d) 290, loc. cit. 296, the question was not decided, but in a footnote to the opinion it is said that a majority of the court subscribed to the first and a minority to the second of the two theories stated.

A three-judge court in Morgan v. United States (D....