United States v. James Patten 10, 1911

• Decision Date: 29 April 1912
• Docket Number: No. 282,282
• Citation: 33 S.Ct. 141,57 L.Ed. 333,226 U.S. 525
• Parties: UNITED STATES, Plff. in Err., v. JAMES A. PATTEN et al. Argued November 9 and 10, 1911. Ordered for reargument before full bench
• Court: U.S. Supreme Court

226 U.S. 525

33 S.Ct. 141

57 L.Ed. 333

UNITED STATES, Plff. in Err.,

v JAMES A. PATTEN et al.

No. 282.

Argued November 9 and 10, 1911.

Ordered for reargument before full bench April 29. 1912.

Reargued October 23 and 24, 1912.

Decided January 6, 1913.

[Syllabus from pages 525-527 intentionally omitted] Former Solicitor General Lehmann and Solicitor General Bullitt for plaintiff in error.

[Argument of Counsel from pages 527-531 intentionally omitted] Messrs. George P. Merrick, Henry Wollman, William E. Church for defendant in error.

Messrs. John C. Spooner, Joseph P. Colton, Jr., and George Rublee for defendants in error.

[Argument of Counsel from pages 532-534 intentionally omitted] Mr. Justice Van Devanter delivered the opinion of the court:

This is a criminal prosecution under the anti-trust act of July 2, 1980 (26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3200), the indictment being in eight counts. In the circuit court demurrers to the third, fourth, seventh, and eighth counts were sustained and those counts dismissed (187 Fed. 664); whereupon the government sued out this writ of error under the criminal appeals act of March 2, 1907 (34 Stat. at L. 1246, chap. 2564). The case has been twice orally argued. At the second argument the government expressly abandoned the third and fourth counts and challenged only the ruling upon counts seven and eight. Thus, the propriety of the ruling upon the first two need not be considered.

In passing upon the demurrers, the circuit court proceeded first to construe the counts; that is, to ascertain with what acts the defendants are charged, and next, to consider whether those acts are denounced as criminal by the anti-trust act, the conclusion being that they are not.

The limitations upon our jurisdiction under the criminal appeals act¹ are such that we must accept the circuit court's construction of the counts, and consider only whether its decision that the acts charged are not condemned as criminal by the anti-trust act is based upon an erroneous construction of that statute.

At the outset we are confronted with the contention that the decision is not based upon a construction of the statute. But to this we cannot assent. The court could not have decided, as it did, that the acts charged are not within the condemnation of the statute, without first ascertaining what it does condemn; which, of course, involved its construction. Indeed, it seems a solecism to say that the decision that the acts charged are not within the statute is not based upon a construction of it.

Each of the counts in question charges the defendants and others with engaging in a conspiracy 'in restraint of, and to restrain,' by the method therein described, 'trade and commerce among the several states' in the supply of cotton available during the year ending September 1, 1910, such supply consisting of all the cotton grown in the Southern states in that year and the cotton left over from prior years. The counts are long, and the acts which the circuit court treated as charged in them are indicated by the following excerpt from its opinion, the footnotes being ours:

'These counts are alike, with the exception of the statement of overt acts,² and each may be, broadly speaking, divided into three parts, which may be thus summarized:

'(1) The charging part contains a general charge of conspiracy in restraint of interstate commerce, with the usual formal and jurisdictional averments.

'(2) The second part contains a 'description of the trade and commerce to be restrained.' Under this head it is stated, in substance, that cotton is an article of necessity raised in the Southern states, which moves in a large volume in interstate and foreign commerce, and that it is bought and sold upon the New York Cotton Exchange to such an extent as to practically regulate prices elsewhere in the country, so that future sales by speculators upon such exchange of more than the amount of cotton available at the time of delivery would create an abnormal demand and resultant excessive prices in all cotton markets.³

'(3) The third part contains a 'description of the method devised and adopted by the conspirators for re- straining the trade and commerce.' It is alleged, at the outset, that the conspirators were to restrain trade and commerce by doing 'what is commonly called running a corner in cotton.' Averments then follow showing how the corner was to be brought about and its effect, which may be thus analyzed:

'(1) The conspirators were to make purchases from speculators upon the New York Cotton Exchange of quantities of cotton for future delivery, greatly in excess of the amount available for delivery when deliveries should become due.⁴

'(2) By these means an abnormal demand was to be created on the part of such sellers, who would pay excessive prices to obtain cotton for delivery upon their contracts.

'(3) The excessive prices prevailing upon the New York Exchange would cause similar prices to exist upon other cotton markets.

'(4) 'As a necessary and unavoidable result of their acts, said conspirators were to compel' cotton manufacturers throughout out the country to pay said excessive prices to obtain cotton for their needs, or else curtail their operations.

'(5) And also, as 'a necessary and unavoidable result' of said acts, an unlawful obstruction would be put upon interstate trade and commerce.⁵

'The offense charged, then, is a conspiracy in restraint of trade through the operation of a 'corner."

Although ruling that there was no allegation of a specific intent to obstruct interstate trade or commerce, and that the raising of prices in markets other than the Cotton Exchange in New York was 'in itself no part of the scheme,' the court assumed that the conspirators intended 'the necessary and unavoidable consequences of their acts,' and observed that 'prices of cotton are so correlated that it may be said that the direct result of the acts of the conspirators was to be the raising of the price of cotton throughout the country.'

Upon the second argument the defendants contended, and counsel for the government expressly conceded, that 'running a corner' consists, broadly speaking, in acquiring control of all or the dominant portion of a commodity, with the purpose of artificially enhancing the price; 'one of the important features of which,' to use the language of the government's brief, 'is the purchase for future delivery, coupled with a withholding from sale for a limited time;' and as this definition is in substantial accord with that given by lexicographers and juridical writers, we accept it for present purposes, although observing that not improbably in actual usage the expression includes modified modes of attaining substantially the same end.

Whilst thus agreeing upon what constitutes running a corner, the parties widely differ as to whether what is so styled in this instance contained the elements necessary to make it operative. The point of difference is the presence or absence of an adequate allegation that the purchasing for future delivery was to be coupled with a withholding from sale, without which, it is conceded by both parties, the market could not be cornered. But the solution of the point turns upon the right construction of the counts, and that, as has been indicated, is not within our province on this writ of error. We must assume that the counts adequately allege whatever the circuit court treated them as alleging. Its opinion, given at the time, although not containing any express ruling upon the point of difference, shows that the counts were treated as alleging an operative scheme,—one by which the market could be cornered. The court spoke of it as 'contrary to public policy,' as 'arbitrarily controlling the price of a commodity,' and as 'positively unlawful in any state having a statute against corners.' Evidently, it was assumed that every element of running a corner was present. We accordingly indulge that assumption, but leave the parties free to present the question to the district court for its decision in the course of such further proceedings as may be had in that court.

We come, then, to the question whether a conspiracy to run a corner in the available supply of a staple commodity, such as cotton, normally a subject of trade and commerce among the states, and thereby to enhance artificially its price throughout the country, and to compel all who have occasion to obtain it to pay the enhanced price or else to leave their needs unsatisfied, is within the terms of § 1 of the antitrust act, which makes it a criminal offense to 'engage in' a 'conspiracy in restraint of trade or commerce among the several states.' The circuit court, as we have seen, answered the question in the negative; and this, although accepting as an allegation of fact, rather than as a mere economic theory of the pleader, the statement in the counts that interstate trade and commerce would necessarily be obstructed by the operation of the conspiracy. The reasons assigned for the ruling, and now pressed upon our attention, are (1) that the conspiracy does not belong to the class in which the members are engaged in interstate trade or commerce, and agree to suppress competition among themselves, (2) that running a corner, instead of restraining competition, tends, temporarily at least, to stimulate it, and (3) that the obstruction of interstate trade and commerce resulting from the operation of the conspiracy, even although a necessary result, would be so indirect as not be to a restraint in the sense of the statute.

Upon careful reflection we are constrained to hold that the reasons given do not sustain the ruling, and that the answer to the question must be in the affirmative.

Section 1 of the act, upon which the counts are founded, is not confined to voluntary restraints, as where persons engaged in interstate trade or commerce agree to suppress competition among...