Stroud v. Benson, 7555.
| Decision Date | 01 April 1958 |
| Docket Number | No. 7555.,7555. |
| Citation | 254 F.2d 448 |
| Parties | Quentin STROUD et al., Appellants, v. Ezra T. BENSON, Secretary of Agriculture of the United States of America, et al., Appellees. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Jesse A. Jones, Kinston, N. C. (Jones, Reed & Griffin, Kinston, N. C., and M. E. Cavendish, Greenville, N. C., on brief), for appellants.
Samuel D. Slade, Attorney, Department of Justice, Washington, D. C. (George Cochran Doub, Asst. Atty. Gen., Julian T. Gaskill, U. S. Atty., Raleigh, N. C., and Lionel Kestenbaum, Attorney, Department of Justice, Washington, D. C., on brief), for appellee, Ezra T. Benson, Secretary of Agriculture.
William T. Joyner, Raleigh, N. C., for appellee, Flue-Cured Tobacco Cooperative Stabilization Corp.
Before PARKER, Chief Judge, and SOPER and SOBELOFF, Circuit Judges.
A number of tobacco farmers instituted suit in the United States District Court for the Eastern District of North Carolina against the Secretary of Agriculture and others to contest the validity of provisions of the 1957 tobacco price support program which required certain varieties of tobacco, known as "discount varieties," to be identified as such when offered for sale on auction warehouse floors. The plaintiffs complained of arbitrary, unauthorized and illegal discrimination against these varieties and sought a declaration of invalidity, an injunction against the enforcement of the Secretary's rules and regulations complained of, and the termination of arrangements made for their implementation and enforcement.
In addition to the injunction against the regulations for identification of flue-cured1 tobacco upon a variety basis, particularly by the issuance of different colored marketing cards and distinctive warehouse basket tickets, the plaintiffs sought that the Secretary and his codefendants be "directed to support plaintiffs' flue-cured tobacco at 90% of parity." One of these other defendants is the Commodity Credit Corporation, a wholly owned corporate agency of the United States, through which the Secretary is authorized and empowered to provide funds for price support. This defendant is by statute immune from the injunctive process. 15 U.S.C.A. § 714b(c). Loans are made by the Corporation as agent of the Secretary to another defendant, the Flue-Cured Tobacco Cooperative Stabilization Corporation of Raleigh, North Carolina, which is chartered under the State laws of North Carolina. The individual defendants, all North Carolinians, are those who constitute the Agricultural Stabilization and Conservation Committee of the United States Department of Agriculture for the State of North Carolina, and its administrative officer, or are managers of several County Agricultural Stabilization offices. These perform purely administrative duties in the execution of the regulations.
The background and development of the 1957 tobacco loan program, including the provisions under attack, may be briefly summarized. American produced flue-cured tobacco had for many years consistently commanded premium prices, especially from foreign buyers, because of its recognized "full-bodied," "full-flavored" and "aromatic" characteristics. As much as one-third to one-half of this country's production entered the export trade notwithstanding that lighter-bodied tobaccos, deficient in the sought after flavors and aromas, were available to foreign buyers at 50% or 80% of the cost of the American standard varieties.
In 1955 and 1956 the market was seriously disrupted by the appearance of three new varieties, known as Coker 139 and 140, and Dixie Bright 244. They were undesirable because wanting in the characteristics, which distinguished American tobaccos. Tobacco known to be of these varieties brings much less than the established varieties. Yet they resembled the regular stock in appearance and could not be identified in cured leaf form when offered on the auction sale warehouse floors. Only after purchase was the deficiency discoverable, too late to give protection to the purchaser. The effect was loss of confidence in the tobacco offered at the auctions, and depressed prices for tobacco generally, because customers hesitated to pay full prices for an article liable to be of short quality.
Complaints from foreign and domestic buyers were numerous and persistent. The new varieties were definitely not wanted in the market, but they offered one advantage to the grower; they were resistant to black shank and wilt and more pounds could be raised per acre of these than of the traditional varieties. A force that may be likened to Gresham's Law in finance was operating in the tobacco market to drive out the highly prized and higher priced varieties. The "discount" varieties were fast taking over. In 1956 as much as 50 to 60% of the tobacco planted was of this new category. As Judge Gilliam, in the District Court, found, the result was to visit a penalty on all producers of the desirable, and more valuable, standard American varieties, and 22.49% of the 1956 crop went into the stabilization pool under price supports. Another such season, the District Judge found, "would be disastrous, perhaps fatal, to the price support program." 155 F.Supp. 489.
The prospects for the future of the industry were indeed alarming. The Department of Agriculture counseled with scientists in agricultural colleges and experimental stations, representatives of the tobacco growing states and many persons engaged in all branches of the tobacco business, including growers. A plan was recommended almost unanimously for the identification of the objectionable varieties, by inspections during growth, and by laboratory examination of samples taken in the field. Only the breeder of the 139 and 140 seed and his chemist, and two other persons dissented. They favored a continuance of the grading methods which had prevailed before the discount varieties came upon the scene — methods which in recent experience had proved inadequate to the need.
The 1957 tobacco price support program adopted by the Secretary of Agriculture embodied the new features. As early as December 18, 1956, the Department announced that changes would be made in the 1957 flue-cured tobacco price support program to discourage production of varieties 139, 140 and 244, irrespective of grade, by supporting these varieties at one-half the support rates for others. It was also made known that support rates would be adjusted to reflect current demand patterns and to encourage cultural practices favoring increase in the proportion of the crop which has desirable flavor and aroma characteristics. Further announcements came in the winter and spring; one notice was mailed to each flue-cured producer about mid-January.
While the precise implementation of the plan for distinguishing varieties by use of different basket tickets was not made known before the beginning of the planting season, it was early declared and repeated that one condition of eligibility for full participation in price support benefits would be proof of the variety. As finally formulated the plan provided for varieties to be established by government inspection, photographs of the growing plants, laboratory examination of samples, as well as information from the farmers. The initial determination was to be made by the County Committee, consisting of farmers, subject to the grower's right to demand reconsideration by the Committee, and examination by variety-identification specialists other than those who previously examined the tobacco being grown on his farm.
On the auction warehouse sale floor the acceptable varieties were put in baskets bearing white marketing cards; the others in baskets bearing a distinguishable card with two stripes printed thereon, and the latter tobaccos, under the plan, received one-half the support to which the others were entitled. The Secretary adopted the 50% fraction, because, according to his findings, it represented the average ratio of the worth of the discount varieties to the worth of regular varieties.
The effect of the plan was swift and impressive. Farmers readily conformed and bidders had the desired assurance that there was no danger of an admixture of unwanted varieties with the standard varieties. There came a sharp and radical reversal; instead of an estimated 50 to 60%, as in 1956, less than 2% of the farmers grew "discount varieties" in 1957. Instead of nearly one-fourth of the crop (22.49%) entering the stabilization pool, as in 1956, the 1957 season witnessed a dramatic restoration of confidence and wholesomeness in the market, and it is estimated that only three to four per cent...
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