RICE ET AL. v. SANTA FE ELEVATOR CORP. ET AL.
NO. 470.
SUPREME COURT OF THE UNITED STATES
Argued February 13, 14, 1947. - Decided May 5, 1947.
331 U.S. 218
William C. Wines, Assistant Attorney General of Illinois, argued the cause for petitioners in No. 472. With him on the brief was George F. Barrett, Attorney General.
Leo F. Tierney argued the cause for respondents. With him on the brief were Ferre C. Watkins, Charles F. Meyers, Floyd E. Thompson, Frederick Mayer, Carl Meyer and Louis A. Kohn.
Acting Solicitor General Washington, Assistant Attorney General Berge, Robert C. Barnard, W. Carroll Hunter and Lewis A. Sigler filed a brief for the United States, as amicus curiae, urging affirmance.
Opinion of the Court by MR. JUSTICE DOUGLAS, announced by MR. JUSTICE BLACK.
Respondents in these two cases are warehousemen engaged in the business of operating public warehouses for the storage of grain in Illinois. Their warehouses are operated under licenses issued by the Secretary of Agriculture pursuant to the United States Warehouse Act,
In 1944 Rice filed a complaint with the Commission, charging respondents1 with maintaining unjust, unreason-
Respondents moved to dismiss on the ground that the United States Warehouse Act superseded the authority of the Commission to regulate in the manner sought by the complaint. The Commission denied the motion and set the cause for a hearing on the merits. Thereupon respondents brought these suits in the District Court to enjoin further proceedings before the Commission and to enjoin the Attorney General of Illinois from instituting any proceedings against respondents to enforce any order of the Commission in the matter. Motions of petitioners to dismiss were granted. On appeal the Circuit Court of Appeals reversed, holding that the United States Warehouse Act superseded state regulation of respondents as to the matters presented in petitioners’ complaint.3 156 F. 2d 33. The cases are here on petitions for writs of certiorari which we granted because of the public importance of the questions presented.
The United States Warehouse Act, as originally enacted in 1916 (
In 1931 Congress amended the Act.
First. The chief matters which are the basis of the complaint before the Commission are treated as follows by the Illinois law and by the Federal Act:
(1) Just and reasonable rates. The complaint charges that respondents’ rates are unjust and unreasonable. Under the Illinois statute public utility rates must be just and reasonable; and the Commission after a hearing may fix rates which meet that standard.
(2) Discrimination. The complaint alleges that respondents discriminate against the public and in favor of the Federal Government and its agencies by granting the latter preferential storage rates. The power of the Illinois Commission to fix rates, to which we have referred, includes the power to eliminate discriminatory rates. And see Grain Warehouse Act § 15. The Federal Act requires the publication and disclosure of licensed warehousemen‘s rates, as we have seen. Section 13 of the Federal Act makes it the duty of a licensed warehouseman to receive agricultural products for storage “in the usual manner in the ordinary and usual course of business, without making any discrimination between persons desiring to avail themselves of warehouse facilities.” And by
(3) Dual position of warehousemen. The complaint charged violations of Illinois law by acts of respondents in storing and dealing in their own grain while storing grain for the public. See Hannah v. People, 198 Ill. 77, 64 N. E. 776. The Federal Act requires every receipt issued for agricultural products by a licensed warehouseman to disclose “if the receipt be issued for agricultural products of which the warehouseman is owner, either solely or jointly or in common with others, the fact of such ownership . . . .”
(4) Mixing high quality public grain with inferior grain owned by respondents, delay in loading grain. The complaint charges that these practices7 are part of the abuses flowing from the conflicting positions of respondents as public grain warehousemen and dealers in grain. They are alleged to violate the rule of Hannah v. People, supra, and provisions of the Public Utilities Act which prohibit any preference or advantage to any person and which disallow any act of prejudice or disadvantage to any person. § 38. And see Grain Warehouse Act § 17. Section 13 of the Federal Act, as we have seen, provides that every licensed warehouseman “shall receive for storage” any agricultural product “without making any discrimination between persons desiring to avail themselves of warehouse facilities.” Section 15 provides for the inspection and grading of fungible agricultural products by federal inspectors. Section 16 permits licensed warehousemen “if authorized by agreement or by custom” to mingle fungible products with other products “of the same kind and grade.” Section 16 likewise prohibits the mixing of fungible products “of different grades.”8 Section 30 provides fine and imprisonment for any person who fraud-
(5) Sacrificing or rebating storage charges, retaining desirable transit tonnage, utilizing preferred storage space. These practices, charged in the complaint,9 are alleged to be other manifestations of the evils of a public warehouseman also being a dealer in grain. They are said to be violative of the principles announced in Central Elevator Co. v. People, 174 Ill. 203, 208-209, 51 N. E. 254, 256. And these practices are said to be acts of prejudice or disadvantage outlawed by § 38 of the Public Utilities Act which we have already mentioned. On the other hand, the Federal Act, as we have seen, requires every licensed warehouseman to “receive for storage” any agricultural product “without making any discrimination between persons desiring to avail themselves of warehouse facilities.” § 13.
(6) Maintenance of unsafe and inadequate elevators; inadequate and inefficient warehouse service. The complaint alleges that as a result of these practices fire insurance premiums have become exorbitant and prohibitive; that owners of grain have suffered damages due to the deterioration of grain. The Illinois Commission is granted broad powers over the maintenance of facilities which are adequate and efficient (§§ 32, 49, Public Utilities Act) including the power to order the making of additions, exten-
(7) Operating without a state license. The complaint charges that respondents may not lawfully operate without a license from Illinois. See Grain Warehouse Act § 3. The Federal Act gives the Secretary of Agriculture authority to issue licenses on terms and conditions specified. §§ 3, 4, 5.
(8) Abandonment of warehousing service. The complaint alleges that respondents have abandoned services without consent of the Illinois commission. Approval of the Commission to abandon or discontinue service is required. § 49a, Public Utilities Act. Licenses issued under the Federal Act “shall terminate as therein [§§ 4, 9]
(9) Failure to file and publish rate schedules; rendering warehousing service without filing and publishing schedules. These matters, charged in the complaint, are regulated by §§ 33 and 35 of the Public Utilities Act. Under the Federal Act a warehouseman must file his rate schedules before a license issues; proposed changes in them must be filed before made; the current schedule of charges must be posted in a conspicuous place in the principal office where receipts issued by the warehouseman are delivered to the public. Reg. 5, § 3; Reg. 2, § 6.
As we have seen, Congress in 1931 made the “power, jurisdiction, and authority” of the Secretary of Agriculture conferred by the Act “exclusive with respect to all persons securing a license” under the Act, so long as the license remains in effect. It is argued by respondents that § 29 should be construed to mean that the subjects which the Secretary‘s authority touches may not be regulated in any way by any state agency, though the scope оf federal regulation is not as broad as the regulatory scheme of the State and even though there is or may be no necessary conflict between what the state agency and the federal agency do. On the other hand, petitioners argue that since the area taken over by the Federal Government is limited, the rest may be occupied by the States; that state regulation should not give way unless there is a precise coincidence of regulation or an irreconcilable conflict between the two.
It is clear that since warehouses engaged in the storage of grain for interstate or foreign commerce are in the federal domain, United States v. Hastings, 296 U. S. 188,
Congress legislated here in a field which the States have traditionally occupied. See Munn v. Illinois, 94 U. S. 113; Davies Warehouse Co. v. Bowles, 321 U. S. 144, 148-149. So we start with the assumрtion that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress. Napier v. Atlantic Coast Line R. Co., 272 U. S. 605, 611; Allen-Bradley Local v. Wisconsin Employment Board, 315 U. S. 740, 749. Such a purpose may be evidenced in several ways. The scheme of federal regulation may be so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it. Pennsylvania R. Co. v. Public Service Comm‘n, 250 U. S. 566, 569; Cloverleaf Butter Co. v. Patterson, 315 U. S. 148. Or the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject. Hines v. Davidowitz, 312 U. S. 52. Likewise, the object sought to be obtained by the federal law and the character of obligations imposed by it may reveal the same purpose. Southern R. Co. v. Railroad Commission, 236 U. S. 439; Charleston & W. C. R. Co. v. Varnville Co., 237 U. S. 597; New York Central R. Co. v. Winfield, 244 U. S. 147; Napier v. Atlantic Coast Line R. Co., supra. Or the state policy may produce a result inconsistent with the objective of the federal statute. Hill v. Florida, 325 U. S. 538. It is often a perplexing question whether Congress has precluded state action or by the choice of selective regulatory
A forceful argument is made here for the view that the Illinois regulatory scheme should be allowed to supplement the Federal Act and that the Illinois Commission should not be prevented from acting on any of the matters covered by Rice‘s complaint, unless what the Commission does runs counter in fact to the federal policy. That is to say, the actual operation of the state system may be harmonious with the “measure of control” over warehousemen which the Federal Act imposes. Federal Compress Co. v. McLean, 291 U. S. 17, 23. That, it is said, can only be determined after the Illinois Commission has acted.
That argument is illustrated in several ways. The Illinois Commission may fix rates; the Secretary of Agriculture cannot. He may, to be sure, suspend or revoke licenses if unreasonable or exorbitant charges are made. If the Commission fixes unreasonable or exorbitant rates, there will be a conflict with thе Federal Act and the state rate order must fall. But until it is known what the Commission will do, no conflict with the Federal Act can be shown. If indeed it reduces rates, as may be presumed, no conflict with the Federal Act will likely exist. Another illustration concerns the dual position of the warehousemen. It is pointed out that all the Federal Act requires is disclosure; that the more basic state policy of uprooting the practice of public warehousemen storing and dealing in their own grain is not inconsistent with the federal policy of disclosure. Another illustration relates to the preferential and discriminatory practices in connection with the rebate of storage charges, retention of desirable
At first blush that construction of the Federal Act has great plausibility. It preserves intact the federal system of warehouse regulation, leaves the State free to protect local interests, and strikes down state power only in case what the State does in fact dilutes or diminishes the federal program.
But the special and peculiar history of the Warehouse Act indicates to us that such a construction would thwart the federal policy which Congress adopted when it amended the Act in 1931. Prior to that time, as we have pointed out, the Federal Act by reason of its express terms had been subservient to state laws relating to warehouses and warehousemen. Congress in 1931 found that condition unfavorable and undertook to change it. If Congress had done no more than to eliminate from § 29 the language which resulted in the Act‘s subservience, there would be a strong case for holding that state regulatory systems were not to be affected unless they collided with the Act. That construction would receive reinforcement from the provision in § 29 that the Secretary “is authorized to cooperate with State officials charged with the enforcement of State laws” relating to warehouses and warehousemen. Cf. Union Brokerage Co. v. Jensen,
These actions were explained in the Committee Reports.
The previous subservience of the Act to state law was said to have militated “against the full value of Federal warehouse receipts for collateral purрoses.”11 S. Rep. No. 1775, 71st Cong., 3d Sess., p. 2. The amendment to § 6 followed “naturally” the revision of § 29. Id. The amendment to § 29 was designed to make “the Federal act independent of State laws” and to “place the Federal act on its own bottom.” Id. While a warehouseman need not operate under the Act, if he chose to be licensed under it, he would then “be authorized to operate without regard to State acts and be solely responsible to the Federal act.” Id. Warehousemen, having made their choice
That is strong language. It makes unambiguous what was meant by the deletion from § 6 of any requirement that federal licensees comply with state laws regulating warehousemen. It makes clear the significancе to be attached to the special wording of § 29. The amendments to § 6 and § 29, read in light of the Committee Reports, say to us in plain terms that a licensee under the Federal Act can do business “without regard to State acts“; that the matters regulated by the Federal Act cannot be regulated by the States; that on those matters a federal licensee (so far as his interstate or foreign commerce activities are concerned) is subject to regulation by one agency and by one agency alone.12 That is to say, Congress did more than make the Federal Act paramount over state law in the event of conflict. It remedied the difficulties which had been encountered in the Act‘s administration by terminating the dual system of regulation. Cf. First Iowa Hydro-Electric Coop. v. Federal Power Commission, 328 U. S. 152. As stated by the Supreme Court of South Dakota, warehousemen electing to come under the Federal Act need serve but one master, and that one the federal agency. In re Farmers Cooperative Assn., 69 S. D. p. 202, 8 N. W. 2d p. 562. The cooperation which the Secretary was authorized tо undertake with state officials was cooperation in harmonizing the exclusively federal and the exclusively state systems of regulation.
Thus, by eliminating dual regulation and substituting regulation by one agency, Congress sought to achieve “fair and uniform business practices” which, as noted in Federal Compress Co. v. McLean, supra, p. 23, was the purpose of the amended Act.
The test, therefore, is whether the matter on which the State asserts the right to act is in any way regulated by the Federal Act. If it is, the federal scheme prevails though it is a more modest, less pervasive regulatory plan than that of the State. By that test each of the nine matters we have listed is beyond the reach of the Illinois Commission, since on each one Congress has declared its рolicy in the Warehouse Act. The provisions of Illinois law on those subjects must therefore give way by virtue of the Supremacy Clause.
Second. There were matters, other than those we have mentioned, which were charged in the complaint before the Commission.
(1) Failure to secure prior approval of the Illinois Commission for management, construction, engineering, supply, financial and other contracts between respondents and affiliates. Such approval is said to be required by § 8 (a) (3) of the Public Utilities Act.
(3) Failure to secure approval of issuance of securities payable at periods of more than twelve months after date. Such approval is said to be required by § 21 of the Public Utilities Act.
These regulatory measures, it is said, are designed to prevent unwarranted drains on utility funds or the creation of unsound financial structures which would affect the ability of warehousemen to render adequate service at reasonable rates.
The United States Warehouse Act contains no provisions relating expressly to these three matters. And we are told that the Secretary of Agriculture has made no attempt to exercise any jurisdiction over them. But possibilities of conflict and repugnancy are conjured up. It is stated, for example, that the Secretary might determine that a warehouseman could not offer suitable warehouse service without an addition to his warehouse, that the financing of an addition might require the warehouseman to issue securities, that state disapproval of the issue might prevent the licensee from making the required additions. But it will be time to consider such asserted conflicts between the State and Federal Acts when and if they arise. Any such objections are at this stage premature. Congress has not foreclosed state action by adopting a policy of its own on these matters. Into these fields it has not moved. By nothing that it has done hаs it preempted those areas. And see Federal Compress Co. v. McLean, supra, p. 23. In more ambiguous situations than this we have refused to hold that state regulation was superseded by a federal law. Penn Dairies, Inc. v. Milk Control Commission, 318 U. S. 261.
So ordered.
MR. JUSTICE FRANKFURTER, with whom MR. JUSTICE RUTLEDGE concurs, dissenting.
More than seventy years ago this Court upheld the regulation of grain warehousing rates by Illinois and did so despite the relation of the great grain elevators to interstate commerce. Munn v. Illinois, 94 U. S. 113; and see Budd v. New York, 143 U. S. 517. State regulation of grain elevators had become so much part of our economic and political fabric, and so important was it deemed that the State laws remain in full force, that when Congress, in 1916, passed the first Warehouse Act (Part C of the Act of August 11, 1916,
The facts of the case are not in dispute. Rice, an owner and shipper of grain, filed with the Illinois Commerсe Commission a complaint charging respondent warehouse owners with violations of the Illinois Public Utility Act (
This Court now orders the proceedings before the Illinois Commerce Commission to be enjoined, without knowledge on our part what it is that Illinоis would exact of respondents. It has not yet been decided by the authoritative voice of Illinois law, the Supreme Court of Illinois, which of her regulatory requirements would survive respect by that Court for the controlling federal Act. This Court has heretofore acted on the wise rule that it will not “assume in advance that a State will so construe its law as to bring it into conflict with the federal Constitution or an act of Congress.” Allen-Bradley Local v. Board, 315 U. S. 740, 746. The suit in the District Court was, in any event, premature. It should, on familiar principles, be ordered held in the District Court until the claim of Illinois may be authoritatively ascertained in the State courts, thereby perhaps avoiding a claim of conflict between State and federal legislation. Compare the series of cases from Thompson v. Magnolia Petroleum Co., 309 U. S. 478, to Spector Motor Co. v. McLaughlin, 323 U. S. 101.
On the merits of the controversy our problem is to determine what freedom to regulate its grain warehouses has been left to Illinois, after Congress exercised its constitu-
The general considerations to be taken into account in striking a balance, and not to be acknowledged merely platonically, have been indicated in my opinion in Bethlehem Steel Co. v. New York State Labor Relations Board, 330 U. S. 767. Suffice it to say that due regard for our federalism, in its practical operation, favors survival of the reserved authority of a State over matters that are the intimate concern of the State unless Congress has clearly swept the boards of all State authority, or the State‘s claim is in unmistakable conflict with what Congress has ordered.
Assuming that the undefined scope of Illinois law covers all the relief sought before the Illinois Commission, it is not suggested that there is actual conflict between the limited federal control through the licensing device and the policy of Illinois. Indeed, it seems to be admitted that the enforcement of the State Act might well effectuate, at least in some aspects, the policy of the federal statute. Moreover, despite a statement in the House Report that the purpose of the 1931 Amendment was to make the Act “independent of any State legislation on the subject” (H. Rep. No. 2314, 70th Cong., 2d Sess., p. 4), the Court does not find that in making “the power,
I cannot agree. As to rates, for example, Congress has merely given the Secretary power to revoke a license if its holder charges “unreasonable or exorbitant” rates. The practical assumption, I submit, is not that Congress has put an end to the tried machinery for rate-fixing by the States without putting another in its place. It is rather that it would permit its licensing authority to avail itself of the facilities of the established rate-fixing agencies of the States and cooperate with them in ascertaining whether Illinois licensees are charging “unreasonable and exorbitant” rates. Such would be the practicalities of government where both State and Nation have converging yet separate interests, and such authorized collaboration between national and State governments should be the assumption in construing the Act unless Congress has left no doubt that it was so bent on avoidance of all possible conflict that it left no room for concert. Indeed, the very section which confers “exclusive” authority upon the Secretary of Agriculture authorizes him “to cooperate with State officials charged with the enforcement of State laws relating to warehouses . . . .”
By the United States Warehouse Act, Congress did not undertake a general, affirmative regulation of warehouses,
Congress was content to allow two warehousemen in similar circumstances to operate under different rules if one chose to seek a federal license and the other did not. It offered perquisites incident to such a license to a warehouseman who wanted them. Such a scheme does not persuasively indicate a purpose to free such a federal licensee from regulations to which others are subject and which are not in practical conflict with the requirements of the federal law. For instance, has Congress really expressed with reasonable clarity its purpose to forbid to the States the fixing of warehouse rates and thus deprive the States of a long-standing regulatory power which the United States chose not to assume? Is it not more con-
Nor is there anything in the history of the federal Act which requires such destructive consequences to a long-standing body of State enactments. When the 1916 Act was passed, Congress emphasized the need for State regulation by subordinating federal action to such regulation. By 1931 forty States had laws regulating warehouses, laws which at least in some aspect did not conflict with the powers vested in the Secretary of Agriculture. An impressively large number of States fixed warehouse rates. The Court now finds in the legislative history of the 1931 Amendment a purpose to wipe out all these regulations as to the holders of federal licenses.
That Amendment eliminated the subservience of the federal Act to the laws of the States, fоr such subservience really nullified the practical purposes at which Congress aimed in 1916 by a voluntary federal licensing system. The purpose was to make “the Federal act independent of State laws,” and to “place the Federal act on its own bottom.” While such language in a Committee Report, treated merely as words, might be interpreted as an im-
If so fundamental a change were designed, it would normally be reflected in the financial provisions made by Congress, and in the reports on the administration of the Act. The appropriations for administering the United States Warehouse Act show no substantial increase as a consequence of the 1931 Amendment. For the years pre-
| 1929 ( | $240, 320 |
| 1930 ( | 256, 000 |
| 1931 ( | 241, 000 |
| 1932 ( | 312, 200 |
| 1933 ( | 313, 020 |
| 1934 ( | 296, 220 |
| 1935 ( | 271, 383* |
Moreover, those charged with the enforcement of the Act seem to have been unmindful of the far-reaching consequences now imputed to it. The reports of the Secretary of Agriculture, of the Chief of the Bureau of Agricultural Economics, and of the Chief of Agricultural Marketing Service, for the years after 1931, disclose administrative attitudes and practices no different from those of preceding years. No mention is made of the State laws which, the Court now holds, were superseded though not conflicting with federal administration. In citing the advantages incident to a federal license, no mention appears of so important an item as relief from existing State regulations.
The history of the federal act shows that at no time has Congress deemed it desirable to introduce compulsory uniformity of warehouse regulation. By freeing federal licensees from overriding State regulation Congress was not by indirection seeking to create such a uniform system. But the effect of the interpretation now given to the 1931 Amendment is the establishment of uniformity of non-regulation, in that it introduces laissez faire outside the very narrow scope of the Secretary‘s powers. It is easy to exaggerate the danger of undesirable consequences flowing
Notes
“The amendment suggested relative to section 29 aims to make the Federal warehouse act independent of any State legislation on the subject. As the law now reads, it can be nullified by State legislation. There are conflicts at present between the State laws and the Federal act. For instance, under certain State laws warehousemen are permitted to ship the products from their warehouses to a terminal or other warehouse while the receipts are outstanding. The prime purpose of the Federal warehouse act is to make it possible to finance, properly, agricultural products while in storage. No banker can safely loan on a warehousе receipt representing a product to be in a certain warehouse when, as a matter of fact, it may be moved under authority of State law to some other and distant warehouse. The Federal warehouse act, as now worded, specifically prohibits removal of the product prior to the return of the receipts. This department emphatically believes that this requirement of the Federal act is sound and the banking fraternity generally shares that same feeling. It is at once apparent to you, of course, that if the Federal act may be nullified by State laws with respect to a feature as important as this that the value of Federal warehouse receipts might be destroyed. For that reason, then, we have suggested amending section 29 so as to make the Federal warehouse act independent of any State legislation on warehousing.”
Hearing before Senate Committee on Agriculture and Forestry on H. R. 7, 71st Cong., 3d Sess., p. 10. And see id., pp. 22-26.
Independent Gin & W. Co. v. Dunwoody, 40 F. 2d 1, arose under the law as originally enacted. It was a suit brought by warehousemen, who were licensed under the Federal Act, to enjoin officials of Alabama from enforcing provisions of Alabama warehouse law. These were
“Bankers have repeatedly pointed out that this section of the warehouse act is its weakest feature. This amendment will clarify and remove many uncertainties from the credit man‘s viewpoint. As the law now reads, for fear the Federal act may be negatived by State legislation or regulation, a banker is obliged to follow closely the laws of the 48 different States, the regulations thereunder, and the administrative rulings thereunder. This is an impossible task. The suggested amendmеnt will place the Federal act independent of State acts and should enhance the value of receipts for collateral purposes.”
And see H. R. Rep. No. 4, 71st Cong., 1st Sess. As stated in note 4, supra, the amendment was recommended by the Secretary of Agriculture “so as to make the Federal warehouse act independent of any State legislation on warehousing.”
“The outbreak of the European war emphasized the fact that the farm marketing machinery of this country is seriously weak, insufficient, and inadequate—a condition which already had been more or less recognized by students of farm economics. From a very thorough study of our system of marketing there will appear: (1) A lack of adequate storage facilities; (2) a lack of proper control and regulation оf such storage systems as exist; (3) an absence of uniformity in their methods of operation and the form of receipts issued; (4) a multiplicity of standards for grading and classification, or in some cases an entire absence of such standards for grading and classification; (5) a lack of disinterested graders, classifiers, and weighers; (6) a lack of proper relationship between the storage and banking systems of the country.
“The inauguration under this bill of a permissive system of warehouses licensed and bonded under authority of the Federal Government for the storage of staple and nonperishable agricultural products upon which uniform receipts may be issued, the weights and grades of the products specified therein having been previously determined by licensed weighers and graders in accordance with Government standards, would go far in the direction of standardizing warehouse construction, storage conditions, insurance, accounting, financing, and the handling and marketing of farm products.”