Townsend v. Yeomans 1937

• Decision Date: 24 May 1937
• Docket Number: No. 781,781
• Citation: 301 U.S. 441,57 S.Ct. 842,81 L.Ed. 1210
• Parties: TOWNSEND et al. v. YEOMANS, Atty. Gen. of Georgia, et al. Argued May 3-4, 1937
• Court: U.S. Supreme Court

301 U.S. 441

57 S.Ct. 842

81 L.Ed. 1210

TOWNSEND et al.

v YEOMANS, Atty. Gen. of Georgia, et al.

No. 781.

Argued May 3-4, 1937.

Decided May 24, 1937.

Appeal from the District Court of the United States for the Middle District of Georgia.

Messrs. Robert C. Alston and Wm. Hart Sibley, both of Atlanta, Ga., for appellants.

[Argument of Counsel from page 442 intentionally omitted] Messrs. O. H. Dukes, of Atlanta, Ga., and L. W. Branch, of Quitman, Ga., for appellees.

Mr. Chief Justice HUGHES delivered the opinion of the Court.

This suit was brought by tobacco warehousemen to restrain the enforcement of a statute of Georgia, approved March 28, 1935, fixing maximum charges for handling and selling leaf tobacco. Ga.Laws 1935, pp. 476—478.

The statute was assailed as an arbitrary and capricious exercise of state power, repugnant to the Fourteenth Amendment of the Federal Constitution, and as placing a direct burden upon interstate commerce in violation of the commerce clause. The hearing in the District Court was by three judges (28 U.S.C. § 380 (28 U.S.C.A. § 380)) and, upon findings, of fact and conclusions of law, a final decree was entered dismissing the bill of complaint, one judge dissenting. The case comes here on appeal.

The facts found by the District Court with respect to the tobacco industry in Georgia and the nature of the transactions at the warehouses are not in dispute. It appears that this industry is relatively new, beginning in 1917, but by the year 1925 it was becoming well established. The type of tobacco grown in Georgia is the 'bright leaf' which is almost exclusively used in the manufacture of cigarettes. This variety is grown extensively in North Carolina, to a much less extent in South Carolina and Georgia, and to some extent in Virginia, Kentucky, and Tennessee. The acreage planted by the individual farmer in Georgia is comparatively small, but the aggregate acreage is now not only very considerable but is widely distributed over a large area in the southern portion of the state.

The necessity for markets and the early maturity of the tobacco in Georgia presented an opportunity which was early recognized by experienced and skilled warehousemen who were operating in the tobacco belts of North Carolina and other states, where selling seasons began some time after the termination of the selling season in Georgia. With few exceptions, competent warehousemen, and experienced and skilled auctioneers and helpers in handling and selling tobacco are not found in Georgia and must be obtained from other states. There were forty-five warehouses operated in 1935, thirty-nine of which were connected in some capacity with warehouses in North Carolina, Kentucky, Virginia, or Tennessee.

The principal purchasers of the bright leaf tobacco grown in Georgia and elsewhere are limited to a few large manufacturers of cigarettes. These are called 'the Companies.' They purchase tobacco only at warehouse auction sales to which they send or furnish 'buyers.' Each buyer is the representative of one of the competing purchasers and a 'set of buyers,' usually from eight to twelve in number, is made up of representatives from each of the purchasing cigarette manufacturers. The presence of a 'set of buyers' is essential at an auction sale. A town having one or more warehouses is known as a 'market.' By sending a set of buyers to a new warehouse, the manufacturers may recognize a new market, and by refusing to send one to a old market may cause its abandonment; and by sending either one or two sets of buyers to a given market the manufacturers may determine the rapidity with which the accumulated tobacco may be disposed of. There is another class of purchasers known as 'speculators.' these on rare occasions buy tobacco from a grower and have it transported to a warehouse for sale. At auction sales speculators to a limited extent, as compared with buyers, purchase tobacco for a later sale. There is strenuous and expensive competition between warehousemen in securing tobacco from growers to be handled and sold, but in the sale of tobacco there is no competition except such as exists between the respective buyers and speculators at the auction sales, and the bids of the warehousemen themselves.

The tobacco belt in Georgia comprises about twenty counties in the southern part of the state, and in 1935 there were fifteen towns known as 'markets.' Seven of the markets were supplied with one set of buyers and eight were furnished two sets. The 'two set markets' had a total of thirty and the 'one set markets' a total of fifteen warehouses in operation. The quantity of tobacco sold in the warehouses and the average prices ranged from 106,483,019 pounds at 9.86 cents per pound in 1930, to 71,826,352 pounds at 18.91 cents per pound in 1935.

After the tobacco has been cured and is ready for the market, the grower grades it as best he can and the resulting 'piles' of loose leaves are placed in sheets which are then tied and the tobacco is so transported to the selected warehouse for sale. Auction sales are held daily during five days of the week, and in any particular warehouse as often as sufficient tobacco accumulates. It is essential that there be present the warehousman, an auctioneer, and other skilled help, and one set of buyers. The warehouseman makes the opening bid. If this is not taken or raised by another, the warehouseman generally becomes the purchaser of the tobacco for his own account. If not sold in that fashion, the bidding continues until the sale is announced. The grower or other owner may turn down the sale and in such case he may hold the tobacco for a later sale or remove it. After the sale has been completed, the tobacco is delivered to the purchaser who removes it from the floor. The purchaser has it reweighed and pays the warehouseman. The warehouseman then pays the seller the purchase price, less warehouse charges. Tobacco purchased by the warehouseman is afterwards sold by him at auction.

The tobacco is ready for the market in the latter part of July or early in August. The exact date for opening the selling season is fixed by the manufacturers, who are the principal buyers, and the warehousemen. The selling season is from three to five weeks in length. The short tobacco season causes growers to rush tobacco to the market and does not give them a fair opportunity 'to properly grade, store, bundle, and orderly market their tobacco.' The short season is in large part occasioned by the efforts of the manufacturers to transfer their buyers to the North Carolina belts, in some of which the selling seasons begin early in September, and the efforts of the warehousemen to dispose of the tobacco in Georgia so that they and their auctioneers and other skilled employees may proceed to the later and larger seasons of North Carolina and other states.

When the act in question was passed, the warehouse charges, based upon three elements, the sale value, the number of piles handled, and the weight of the quantity sold, were as follows:

Commissions: 2 1/2 per cent. on gross sales.

Auction fees: 25 cents per pile up to 200 pounds; 50 cents per pile above 200 pounds.

Weighing and handling fees: 25 cents per pile up to 100 pounds, and 25 cents for each additional 100 pounds.

The act of 1935 prescribed the following maximum charges:

Commissions: 2 1/2 per cent. on gross sales.

Auction fees: 15 cents on all piles of 100 pounds or less; 25 cents on all piles over 100 pounds.

Weighing and handling fees: 10 cents per pile of 100 pounds or less, and 10 cents for each additional 100 pounds.

It will be observed that the statutory reduction is confined to the auction fees and the charges for weighing and handling. The percentage reduction is difficult of exact determination. Complainants say that the gross income of the warehousemen will be reduced about 20 per cent. The difference in dollars between the amount which complainants would have received in 1935 under the former schedule and the amount of which they would be entitled under the act is found to be $115,920.90, and this amount was paid into the registry of the court. Statutes in North Carolina and South Carolina fix the same scale of charges as those prescribed by the Georgia act. No attack has been made upon the constitutionality of these statutes. The scale heretofore in effect in Georgia 'is not so high as the non-statutory Tennessee or Kentucky charges.'

The District Court made additional findings, which appellants challenge, with respect to the control exercised by the warehousemen over the charges mae for their services and their common agreement as to the amount of these charges. The court found that by reason of their control of the warehouses 'warehousemen have, unless regulated by law, as unduly coercive control over the prices charged the growers for services'; that beginning with the tobacco selling season of 1927 all warehousemen in Georgia have uniformly maintained 'a hard and fast schedule of charges'; that, while there have been some exceptions, they are 'so insignificant as to be immaterial'; that prior to 1927 the warehousemen in Georgia for many years, if not from the beginning of the industry, 'had maintained and exacted from sellers of tobacco a uniform schedule of charges substantially, if not identically, the same as the schedule fixed by the Act of 1935.'

The court also found that the propriety of charging more for handling tobacco in Georgia than in the Carolinas had not been established; that it had not been shown that the Georgia act 'was passed without any knowledge on the part of the legislature as to actual con- ditions under which the business was, and is, being carried on in Georgia'; that it had not been proved 'what each or any warehouseman, individual or corporate, lost in revenue by reason of the scale of charges prescribed by the act'; that it was not denied 'that some warehousemen earned a satisfactory profit' and...