Wallace v. Currin

Citation95 F.2d 856
Decision Date05 April 1938
Docket NumberNo. 4224.,4224.
PartiesWALLACE, Secretary of Agriculture, et al. v. CURRIN et al.
CourtU.S. Court of Appeals — Fourth Circuit

COPYRIGHT MATERIAL OMITTED

Morris R. Clark, Sp. Asst. to Atty. Gen., and John H. Manning, Asst. U. S. Atty., of Raleigh, N. C. (Robert H. Jackson, Asst. Atty. Gen., Hugh B. Cox and Robert L. Stern, Sp. Assts. to Atty. Gen., and J. O. Carr, U. S. Atty., of Wilmington, N. C., on the brief), for appellants.

B. S. Royster, Jr., of Oxford, N. C. (Royster & Royster, of Oxford, N. C., on the brief), for appellees.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

PARKER, Circuit Judge.

This is an appeal from a decree enjoining officials of the Department of Agriculture and the United States Attorney for the Eastern District of North Carolina from enforcing the provisions of the Tobacco Inspection Act of August 23, 1935, 7 U.S.C.A. § 511 et seq. The appellees, complainants below, are warehousemen operating tobacco auction warehouses in Oxford, North Carolina. Four questions are presented by the appeal: (1) Whether complainants have any standing under the facts as shown to ask the relief prayed; (2) whether the act is a valid regulation of interstate commerce or void as an invasion of the reserved power of the states; (3) whether the act is void as an unconstitutional delegation of legislative power to the Secretary of Agriculture or to the growers of tobacco; and (4) whether the act violates the due process clause of the Fifth Amendment.

Sales of tobacco are conducted throughout the tobacco growing sections of the United States according to the same general plan, which is as follows: After the tobacco has been cured and is ready for marketing, the grower grades it as best he can, arranges it in bundles and hauls it to the auction warehouse. It is unloaded at the warehouse and bundles or "hands" of tobacco are placed in baskets and weighed under the supervision of a warehouse employee. A ticket is placed on each pile, giving the name of the owner, the number of pounds of tobacco in the pile, and spaces for the name of the buyer and the price paid. The baskets are arranged in rows with a passageway between, and buyers may then come on the floor and inspect it. Sales are by auction and are conducted with great rapidity, the minimum speed being 360 baskets per hour, or one basket every ten seconds. As soon as a sale is made, a ticket marker places the name of the buyer and the price paid on the ticket. The grower may reject the bid and have the tobacco resold or withdraw it from the warehouse, but unless this is done promptly the buyer removes it and the sale is complete. Because of the speed with which the sale is conducted, there are many errors in grading which are prejudicial to the grower whose tobacco is being sold and who is generally without the technical knowledge of grading necessary for the protection of his own interest.

To remedy this evil, by establishing and promoting the use of standards of classification and by maintaining an official inspection service and grading the tobacco in advance of sale, as well as by furnishing to the grower information of the market price being paid for tobacco of the several grades, was the purpose of the act of Congress here under consideration. See Townsend v. Yeomans, 301 U.S. 441, 452, 57 S.Ct. 842, 847, 81 L.Ed. 1210. This was expressed in Report No. 1102 of the 74th Congress, First Session, as follows:

"The first provision of the bill, which applies to tobacco sold on what are known as auction markets, has for its objects (1) the grading of the growers' tobacco by government graders before sale so they will know what grades they are offering for sale, and (2) furnishing the growers with a daily and weekly market news service so they will know what the different grades of tobacco are bringing, and thus put them in position intelligently to accept or reject sales.

"In order to understand the real objects of this first provision of the bill it is thought that a short statement of the present auction system of selling tobacco is in order. Tobacco is the only major farm crop which is sold at auction. In many localities, particularly in Virginia, North Carolina, South Carolina, Georgia, Florida, West Virginia, and Maryland, and in certain sections of Tennessee, Kentucky, Ohio, Indiana, and Missouri there is no other method of selling tobacco available to growers.

"Tobacco, under the auction system as now conducted, is sold in baskets containing from 10 to 200 or more pounds. These baskets are placed upon the warehouse floor in long rows and the tobacco is sold to the highest bidder at public auction by the warehouseman, who operates on a fee or commission basis and who is supposed to represent the tobacco grower. The sales are made without the grades of the several lots being first determined and without the grower knowing what the same grades are bringing. The selling is extremely rapid, being at a rate, on most markets, of one basket every 10 seconds. The purchasers are the representatives of the tobacco companies and speculators, commonly called `pin-hookers', who are experts in the grades of tobacco. There are between 60 and 100 grades in a single type of tobacco, and it is not practical for a farmer to familiarize himself with the technical factors on which these grades are based, or to keep informed as to market prices without a definite system of Government grades.

"Without any standard or guide, farmers sort their tobacco for market, as best they can, into lots of like quality, color, and length, which they commonly refer to as `grading'. However, the farmer has no definite system of grades of his own, and the private grading systems used by the buyers are kept strictly confidential by them, so without Government standards the farmer has no definite guide for sorting his tobacco. Without a definite standard for sorting, or `grading' as the farmers call it, farmers generally are unable to class their tobacco correctly to meet the trade's demand. Buyers frequently refuse to bid on lots of tobacco due to the fact that it is not properly sorted. Improperly sorted lots of tobacco usually command a much smaller price as compared with prices paid for tobacco which is uniformly sorted into lots. Many lots of tobacco after being bought are re-sorted by the buyer into two or three different grades.

"The possession of grade and price information by the buyers, and the lack of it on the part of the growers, places the growers under a severe handicap in the marketing of their tobacco and opens the way to abuses and practices by which farmers are victimized. The picture is simply this: Here is a farmer offering his tobacco for sale through a warehouse at the rate of a basket every 10 seconds, at public auction, to the highest bidder, without the grade being first established and without knowing what similar tobacco is bringing. On the other hand we have the purchaser who is an expert judge of tobacco, who has a well-established private system of grades, and who is in possession of all available information with respect to quality and price. It is the thought of the committee that if the purchaser needs an expert in grades in order to protect his interest in the sale the grower should be accorded the same protection."

The act, in addition to providing for the establishing of official standards for grading tobacco and for distributing information relative to market supply, demand, and prices, provides for free inspection in those markets in which tobacco moves in interstate commerce and which have been designated by the Secretary of Agriculture to receive the inspection service. The Secretary is authorized to designate for this service auction markets where tobacco moves in commerce, and commerce within the meaning of the act is defined by section 1 (i) thereof, 7 U.S.C.A. § 511 (i), as follows: "`Commerce' means commerce between any State, Territory, or possession, or the District of Columbia, and any place outside thereof; or between points within the same State, Territory, or possession, or the District of Columbia, but through any place outside thereof; or within any Territory or possession, or the District of Columbia. For the purposes of this chapter (but not in any wise limiting the foregoing definition) a transaction in respect to tobacco shall be considered to be in commerce if such tobacco is part of that current of commerce usual in the tobacco industry whereby tobacco or products manufactured therefrom are sent from one State with the expectation that they will end their transit, after purchase, in another, including, in addition to cases within the above general description, all cases where purchase or sale is either for shipment to another State or for manufacture within the State and the shipment outside the State of the products resulting from such manufacture." Before any market may be designated by the Secretary he is required to take a referendum vote of the growers who sold tobacco on the market during the preceding marketing season, and he is forbidden to designate any market for the service unless two-thirds of the growers voting in the referendum favor it. Section 5 of the act, 7 U.S.C.A. § 511d, which is the one pertinent to the question here presented, is as follows: "Sec. 5. The Secretary is authorized to designate those auction markets where tobacco bought and sold thereon at auction, or the products customarily manufactured therefrom, moves in commerce. Before any market is designated by the Secretary under this section he shall determine by referendum the desire of tobacco growers who sold tobacco at auction on such market during the preceding marketing season. The Secretary may at his discretion hold one referendum for two or more markets or for all markets in a type area. No market or group of markets shall be designated by the Secretary unless two-thirds of the growers voting favor it. ...

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