296 F. 61 | 2d Cir. | 1923
(after stating the facts as above). It appears that the New York Cotton Exchange provides an exchange room in the city of New York where its members meet and make contracts for themselves or as brokers for customers, for the purchase and sale of cotton for future deliveries. Their transactions aggregate many million bales of .cotton annually. The contracts are made on the Exchange between 10 a. m. and 3 p. m. by open viva voce'bidding. It claims that the knowledge of the prices upon which these contracts are based constitute a peculiar kind of property and that their value depends on the right to confine the distribution of the quotations to such telegraph companies as will contract with the Exchange therefor and to such customers as will agree with the telegraph companies and the Exchange not to furnish them to others. The Western Union Telegraph Company pays to the Exchange annually a considerable sum of money for the privilege of receiving these quotations and distributing them to those customers of whom the Exchange approves. If any person can promptly acquire these quotations, surreptitiously, and without paying therefor and can give them out to others, the telegraph companies would be put at a disadvantage in competing with such persons and would no longer be willing to pay to New York Cotton Exchange the annual sum now paid to it for the privilege of receiving these quotations.
The complainant does not challenge the claim of the Cotton Exchange that it has a property right in the quotations. Indeed, its right to come into equity for the relief which it seeks assumes that the quotations constitute á species of property. It is that upon which the jurisdiction of equity depends, as courts- of equity are concerned only in the protection of property rights. And the right to acquire property is as much entitled to protection as the right to protect property already acquired. International News Service v. Associated Press, 248 U. S. 215, 236, 39 Sup. Ct. 68, 63 L. Ed. 211, 2 A. L. R. 293. And in Board of Trade v. Christie Grain & Stock Co., 198 U. S. 236, 250, 25 Sup. Ct. 637, 49 L. Ed. 1031, the Supreme Court held that quotations of prices or dealings upon a board of trade communicated on confidential terms to numerous persons under a contract not to make them public were entitled to the protection of the law. And see Hunt v. New York Cotton Exchange, 205 U. S. 322, 27 Sup. Ct. 529, 51 L. Ed. 821.
But all the parties to this suit are citizens of the state of New York, so that the jurisdiction of the court in this case does not rest upon diversity of citizenship. If jurisdiction of the bill exists, it must be because the acts complained of therein violate the federal anti-trust laws.
It is plain that the bill cannot be maintained under the Federal Trade Commission Act of 1914 (38 Stat. 717 [Comp. St. §§ 8836a-8836k]). That act declares that unfair methods of competition in commerce are unlawful and the Commission is empowered to prevent persons, partnerships, or corporations, with certain exceptions, from using suck methods of competition. But as the oply relief that act provides is before the Federal Trade Commission it affords no support whatever for the bill now before us.
But the Act of October 15, 1914, known as the Clayton Act, in section 16 (Comp. St. § 8835o), provided that any person, firm,_ corporation, or association, shall be entitled to sue for and have injunctive relief in any court of the United States having jurisdiction over the parties against threatened loss or damage by a violation of the antitrust laws when and under the same conditions and principles' as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity under the rules governing such proceedings, 38 St. part 1, Ch. 323, page 737. And it has been held in General Investment Company v. Lake Shore & Michigan Southern Railway Co., 260 U. S. 261, 287, 43 Sup. Ct. 106, 67 L. Ed. 244, that the right to sue thus given is to be exercised only in “a court of the United States.” It cannot be asserted in a state court.
The Sherman Anti-Trust Act provides as follows:
“Section 1. Every contract, combination in tbe form of trust or otherwise, or conspiracy, in restraint of trade or commerce among tbe several states, or with foreign nations, is hereby declared to be illegal. * * #
Sec. 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states, * * * shall be deemed guilty of a misdemeanor. * * *" 26 Stat. 209.
So that the question which we have to determine is whether the contract which the New York Cotton Exchange has made with the Western Union Telegraph Company, respecting the quotations on the Exchange, is a contract in restraint of trade or commerce, or whether there is shown on the part of the defendants or any of them a monopoly or an attempt to monopolize any part of interstate commerce.
The Supreme Court in Standard Oil Co. v. United States, 221 U. S. 1, 31 Sup. Ct. 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734, and in United States v. American Tobacco Co., 221 U. S. 106, 31 Sup. Ct. 632, 55 L. Ed. 663, construed the Anti-Trust Act as prohibiting only contracts or acts which were unreasonably restrictive of competitive conditions, and in the case last cited the court quoted approvingly from the opinion in the Joint Traffic Case, 171 U. S. 568, 19 Sup. Ct. 25, 43 L. Ed. 259, the statement that—
“The act of Congress must have a reasonable construction, or else there would scarcely be” an agreement or contract among business men that could not be said to have, indirectly or remotely, some bearing upon interstate commerce, and possibly to restrain it.”
The cases disclose that where the facts clearly show that the purpose of a contract is not to regulate, obstruct, or restrain interstate commerce, but that the object is properly and fairly to regulate the transaction of the business in which the parties to it are engaged, the agreement will be upheld as not within the statute. The contract is good if “it can be seen that the character and terms of the agreement are well calculated to attain the purpose for which it was formed, and where the effect of its formation and enforcement upon interstate trade or commerce is in any event but indirect and incidental, and not its purpose or object.” Anderson v. United States, 171 U. S. 604, 19 Sup. Ct. 50, 43 L. Ed. 300.
And the record in this case discloses that the intention and purpose of the parties in making the contract which the complainant attacks in this suit was a proper and legitimate one. Prior to 1-903 the tele-, graph companies were at liberty to gather quotations in the exchange room and to sell them to any one desiring them. The only motive of the Telegraph Companies was profit, and the more customers the greater the profit. But it is said this resulted in the creation of many bucket shops throughout the country, where the quotations were posted on a blackboard and the keeper of the bucket shop accepted all offers of persons resorting to his place to bet on the fluctuations of prices as indicated by such quotations; these alleged trades or bets being opened at the last price on the blackboard and being closed when the blackboard price reached a point where the customer’s margins became exhausted, or where prior thereto the customer desired to close his trade at the last-named price thus essential to the conduct of such business. The use by these institutions throughout the country of these quotations necessarily brought the New York Cotton Exchange and other regular exchanges into discredit with the public; it being supposed, from the presence of these quotations, that these bucket-shops were in some way connected with these exchanges. To correct-this condition and suppress these gambling places, so far as they were operating on its quotations, the New York Cotton Exchange made a contract in 1903, requiring the telegraph companies— in order to acquire the quotations — to enter into a contract with the Exchange substantially in the form of the contract herein involved. The purpose was, so it is said, to confine the distribution of the quotations to those desiring them for lawful purposes, and to thereby exclude their being given to persons who would not carefully safeguard them and confine them to their own offices. To the success
This plan to prevent the misuse of quotations necessarily imposed, either upon the Exchange or the distributing telegraph company, the burden of determining the character and purpose of each applicant for the quotations. The telegraph company had no pecuniary interest in restricting the number of its customers for quotations. The only person having a real interest in preventing the misuse of the quotations was the Exchange itself, and the contract conferred upon the Exchange the right and duty to pass upon the character and purpose of each applicant and make its decision final by providing that the telegraph company should not furnish the quotations to anyone whose application was disapproved by the Exchange. .
- It cannot be said that the contract involved was entered into for the purpose of restraining trade or of creating a monopoly. It appears to us that its purpose was that of properly regulating the transaction of the New York Cotton Exchange and of preventing the misuse of its quotations. It is not a contract in restraint of trade or commerce within the meaning of section 1 of the Sherman Act as construed by the Supreme Court. Neither is it an attempt to monopolize trade or commerce among the several states within the meaning of section 2 of the Sherman Act.
The New York Cotton Exchange has the property right in the quotations which it collects. As such owner the Exchange is under no legal duty to sell its quotations to any particular person nor to all because it sells to some. These quotations relate solely to the business of the Exchange which is under no obligation to communicate them, and the telegraph company, as its agent, communicates them to those persons to whom the Exchange permits the communication to be made. In this we see no illegality. Whitwell v. Continental Tobacco Co., 125 Fed. 454, 60 C. C. A. 290, 64 L. R. A. 689; Matter of Renville, 46 App. Div. 37, 61 N. Y. Supp. 549. So far .as the contract limits the right of the telegraph company to communicate the quotations to such persons as the Exchange approves, we are unable to distinguish this case from that of Board of Trade v. Christie Co., 198 U. S. 236, 25 Sup. Ct. 637, 49 L. Ed. 1031. That case involved a contract made by the Chicago Board of Trade with the telegraph companies for the distribution of its quotations. The Supreme Court held that contracts under which the Board of Trade furnished the telegraph companies with its quotations, on condition that they would only be distributed to persons in contractual relations with, and approved by the Board, and not to what are known as bucket shops, were not void as being in restraint of trade, either at common law or under the Anti-Trust Act.
The complainant asks a mandatory injunction compelling the defendants to furnish to it the continuous quotations of prices of contracts for the future delivery of cotton made on the New York Cotton Exchange. The transactions in which the latter Exchange is engaged and in which the complainant itself is engaged constitute, it is claimed, interstate commerce.- The bill alleges that the purchases and sales made on the Exchange “constitute a large and important part of the 'interstate commerce as between said cotton growing states and other states, including the state of New York. That in addition to the said interstate sales and purchase as alleged for delivery from said states, through and into many states of the United States, and into the state of New York, the said interstate commerce involves the interstate shipments and transportation of said commodity, through and from said cotton growing states, to the state of New York whence it is consigned and shipped to other cotton markets of the United States and foreign countries for manufacture.” The contracts made on the New York Cotton Exchange are made in the board room of the Exchange in the city of New York, and they provide that the cotton is deliverable from licensed warehouses in the- Port of New York. Performance of the contract is made by the delivery of negotiable warehouse receipts issued by licensed warehouses in New York. There is no obligation to malee delivery at any place except in the Port of New York. Such a transaction is local in its character and does not involve interstate commerce. The decisions of the Supreme Court make this clear. In Hopkins v. United States, 171 U. S. 578, 19 Sup. Ct. 40, 43 L. Ed. 290, it was held that the Kansas City Live Stock Exchange was not engaged in interstate commerce under the following circumstances: It received consignments of cattle from owners in other states upon an understanding that they should be sold and the net amount realized on the sale returned to the owners. In its opinion the court said:
“ * * * it ig immaterial over how many states the defendants may themselves or by their agents travel in order to thereby secure the business. They do .not purchase the cattle themselves; they do not transport them. They receive them at Kansas City, and the complaint made is in regard to the agreements for charges for the services at that point in selling the cattle for the owner. Thus everything at last centers at the market at Kansas City, and the charges are for services there, and there only, performed.
“The selling of an article at its destination, which has been sent from another state, while it may be regarded as an interstate sale and one which the importer was entitled to make, yet the services of the individual employed at the place where the article is sold are not so connected with the subject sold as to make them a portion of interstate commerce, and a combination in regard to the amount to be charged for such service is not, therefore, a combination in restraint of that trade or commerce. Granting that the cattle themselves, because coming from another state, are articles of interstate commerce, yet it does not therefore follow that before their sale all persons performing services in any way connected with them are themselves engaged*71 in that commerce, or that their agreements among each other relative to the compensation to be charged for their services are void as agreements made in restraint of interstate trade.”
There are other decisions of that court which assert a like doctrine. See Anderson v. United States, 171 U. S. 604, 19 Sup. Ct. 50, 43 L. Ed. 300; Ware & Leland v. Mobile County, 209 U. S. 405, 413, 28 Sup. Ct. 526, 52 L. Ed. 855, 14 Ann. Cas. 1031; Hill v. Wallace, 259 U. S. 44, 42 Sup. Ct. 453, 66 L. Ed. 822.
The complainant relies upon Board of Trade of the City of Chicago v. Olsen, 262 U. S. 1, 43 Sup. Ct. 470, 67 L. Ed. 839. That case involved an appeal from a decree which dismissed a bill in e.quity brought by the Board of Trade to enjoin certain United States officials from taking steps to enforce the Act of Congress of September 21, 1922, known as the Grain Futures Act, the constitutionality of which act was directly involved. That case is not distinguishable in principle from that of Stafford v. Wallace, 258 U. S. 495, 42 Sup. Ct. 397, 66 L. Ed. 735, 23 A. L. R. 229, which involved the constitutionality of the Packers’ and Stockyards’ Act of 1921 (Comp. St. Ann. Supp. 1923, §§ 8716i4~87161/4z). In neither case has the court overruled the cases heretofore cited in this opinion in which sales on the Exchange were regarded as transactions in intrastate commerce and not in interstate commerce. It sustained' the right of Congress to regulate in the one case the boards of trade and in the other the various stockyards of the country as great national public utilities. The acts involved assumed that the corporations regulated by the acts conducted a business affected by a public use of a national character and that they were therefore subject to national regulation. These cases show that the power to regulate interstate commerce is not limited by the fact that intrastate transactions may0 have become so interwoven therewith that the effective government of the former incidentally controls the latter. We find another illustration of the principle in the Transportation Act of 1920 which authorizes supervision by the Interstate Commerce Commission of intrastate commerce where it is so carried on as to favor persons or localities in intrastate commerce as against those in interstate commerce. See Railroad Commission of Wisconsin v. Chicago, Burlington & Quincy R. R. Co., 257 U. S. 563, 42 Sup. Ct. 232, 66 L. Ed. 371, 22 A. L. R. 1086; The Minnesota Rate Cases, 230 U. S. 352, 399, 33 Sup. Ct 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18.
But we find nothing in Stafford v. Wallace, supra, or in Chicago Board of Trade v. Olsen, or in any decision of the Supreme Court, which supports the complainant’s contention that the New York Cotton Exchange is engaged in interstate commerce. Neither are we cit-. ed to any act of Congress which entitles the complainant to maintain its bill. And we conclude that the bill itself must be dismissed.
Equity Rule 30 (198 Fed. xxvi), permits the defendant in his answer to “state in short and simple form any counterclaim arising out of the transaction which is the subject-matter of the suit, and may without cross-bill set out any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity
The counterclaim sets up a cause of action' within the jurisdiction of the District Court as a court of equity and within its jurisdiction as a federal court. On the dismissal of the complainant’s bill the counterclaim in this suit is entitled to be treated as an original bill within the rule laid down by this court in Vidal v. South American Securities Co. (C. C. A.) 276 Fed. 855, 875, and the authorities there cited. It has frequently been said to be the general rule that the dismissal of the original bill carries with it a cross-bill. United States v. California, etc., Land Co., 192 U. S. 355, 24 Sup. Ct. 266, 48 L. Ed. 476; Dows v. Chicago, 11 Wall. 108, 20 L. Ed. 65; Cross v. De Valle, 1 Wall. 1, 17 L. Ed. 515; Ulman v. Iaeger’s Adm’r (C. C.) 155 Fed. 1011; Markell v. Kasson (C. C.) 31 Fed. 104;,Glos v. Peo, 259 Ill. 332, 102 N. E. 763, Ann. Cas. 1914C, 119; Bell v. McLaughlin, 183 Ala. 548, 62 South. 798. But it is generally recognized that the dismissal of the original bill does not necessarily carry with it' a cross-bill. Whether it has that effect depends' upon whether the cross-bill is defensive merely or sets up new facts and prays for affirmative relief against the plaintiffs in the original bill and shows grounds for equitable relief which may uphold the jurisdiction of the court independent of the original bill. 21 C. J. 514.
Where, as here, the bill and the counterclaim relate to the same subject-matter, it is quite immaterial that in the case of a cross-bill, and the same principle applies to a counterclaim, the parties thereto are citizens of the same state, and no diversity of citizenship exists. The cross-bill and the original suit are but one cause, and jurisdiction of the latter includes-the former. If thé court has jurisdiction of the original bill, it has jurisdiction of the cross-bill without reference to the citizenship of the parties, and the cross-bill need .not disclose grounds of federal jurisdiction. Shields v. Barrow, 17 How. 130, 15 L. Ed. 158; Freeman v. Howe, 24 How. 460, 16 L. Ed. 749; Cross v. De Valle, 1 Wall. 14, 17 L. Ed. 515; Milwaukee & M. R. Co. v. Chamberlain, 6 Wall. 748, 18 L. Ed. 859; Krippendorf v. Hyde, 110 U. S. 276, 4 Sup. Ct. 27, 28 L. Ed. 145; Phelps v. Oaks, 117 U. S. 236, 6 Sup. Ct. 714, 29 L. Ed. 888; Hogg v. Hoag (C. C.) 107 Fed. 807, affirmed 154 Fed. 1003, 83 C. C. A. 677; Portland Wood Pipe Co. v. Slick Bros. Const. Co. (D. C.) 222 Fed. 528; Cleveland Engineering Co. v. Galion Dynamic Motor Truck Co. (D. C.) 243 Fed. 405. Jurisdiction having attached on the allegations contained in the bill, the court may, upon the hearing, dismiss the bill and grant relief under the counterclaim, although the counterclaim could not have been sustained as an original bill for lack of jurisdiction.
While the court was without jurisdiction to grant the relief which the complainant sought because the facts stated in its bill did
The counterclaim does not bring in any new subject-matter. It relates to the same contract upon which the amended bill is based and to the quotations of the New York Cotton Exchange which the complainant seeks to obtain by having the contract declared illegal. The counterclaim does not introduce new and distinct matters into the litigation. The subject-matter is the same in both.
We are thus brought to a consideration of the counterclaim on the merits. The defendant charged on information and belief the fact to be that the plaintiff either itself purloined the quotations of the defendant Exchange, or that it received them from some person who is purloining them and giving them to its members. When the equity of a bill rests upon the existence of a particular fact, it is necessary that that fact should be clearly alleged. And the allegations of a bill seeking an injunction must be specific. Allegations made upon information and belief are, as a rule, insufficient. In any case where the matters do not lie within the personal knowledge of the plaintiff, he may allege those matters upon information and belief; but the statements of the bill as to such matters should be corroborated as far as possible by the affidavits of persons having personal knowledge. Street’s Equity Practice, vol. 3, p. 1351, § 2307. United States v. Butler (D. C.) 278 Fed. 678; In re United Wireless Telegraph Co. (D. C.) 201 Fed. 445; Leavenworth v. Pepper (C. C. A.) 32 Fed. 718; Brooks v. O’Hara (C. C.) 8 Fed. 529.
In the instant case, while the allegations of the counterclaim as to the purloining of the quotations, by the complainant, or as to its receiving them from some one who is purloining them,' are upon information and belief, they are sufficiently supported by the affidavits which were presented to the court in support' of the counterclaim. Moreover, while the complainant in reply denied that it is itself purloining the quotations, it does not deny in. any pleading or affidavit that it is receiving them. The right of the New York Cotton Exchange to protect by injunction its right in the quotations which it collects is, under the circumstances disclosed, indisputable. As the court said in the similar case of Board of Trade v. Christie Grain & Stock Co., 198 U. S. 236, 250, 25 Sup. Ct. 637, 639 (49 L. Ed. 1031):
“ * '■* * The plaintiff's collection of quotations is' entitled to the protection of the law. It stands like a trade secret. The plaintiff has the right to keep the work which it has done, or paid for doing, to itself. The fact that others might do similar work, if they might, does not authorize them*74 -to steal the plaintiff’s. Compare Bleistein v. Donaldson Lithographing Co., 188 U. S. 239, 249, 250. The plaintiff does not lose its rights hy communicating the result to persons, even if many, in confidential relations to itself, under a contract not to make it public, and strangers to -the trust will be restrained from getting at the knowledge hy inducing a hreach of trust and using knowledge obtained by such a breach.”
See Exchange Telegraph Co. v. Gregory & Co. (1896) 1 Q. B. D. 147; F. W. Dodge Co. v. Construction Information Co., 183 Mass. 62, 66 N. E. 204, 60 L. R. A. 810, 97 Am. St. Rep. 412; Board of Trade v. C. B. Thomson Commission Co. (C. C.) 103 Fed. 902; Board of Trade v. Hadden-Krull Co. (C. C.) 109 Fed. 705; National Tel. News Co. v. Western Union Tel. Co., 119 Fed. 294, 56 C. C. A. 198, 60 L. R. A. 805; Illinois Commission Co. v. Cleveland Tel. Co., 119 Fed. 301, 56 C. C. A. 205; Board of Trade v. McDearmott Commission Co. (C. C.) 143 Fed. 188, 190; McDearmott Commission Co. v. Board of Trade, 146 Fed. 961, 962, 77 C. C. A. 479, 7 L. R. A. (N. S.) 889, 8 Ann. Cas. 759; Board of Trade v. Hadden-Krull Co. (C. C.) 109 Fed. 705; Board of Trade v. Celia Commission Co., 145 Fed. 28, 76 C. C. A. 28; Board of Trade v. Price, 213 Fed. 336, 130 C. C. A. 302.
The order appealed from, which denied the complainant’s motion and granted the defendant’s for a preliminary injunction, is affirmed. And the court below is directed to dismiss the complainant’s amended bill.