United States v. Hopkins, 82 F. 529

82 F. 529 | U.S. Circuit Court for the District of Kansas | 1897

FOSTER, District Judge

(after stating the facts). It will be observed that the answer of the defendants denies and puts in issue the allegations of the. bill charging a combination or conspiracy or contract in restraint of trade or commerce, and denies any monopoly or attempt to monopolize or combination to monopolize any part of the trade or commerce among the several states, and denies that the business for which the exchange was organized, and in which its members are engaged, comes under the class of commerce or trade among the states.

The first question, whether there is any combination in restraint of trade or commerce, or a- combination to monopolize any part of trade or commerce, on the part of the defendant association, is to be determined, not alone from what appears upon the face of its preamble, rules, and by-laws, but from the entire situation and the prac-iical working and results of tlie defendants’ methods of doing business, as disclosed by tlie testimony in the case. The defendant association is located at Kansas City, on the line between Kansas and Missouri, in tlie immediate vicinity of the Kansas City Stock Yards, and in close association therewith, being tenants of said stock-yards company. Said yards, with, perhaps, tlie exception of the yards at Chicago, are the largest in the country, and handle great numbers of live stock. These yards, the packing houses, and thii-s exchange are all situated at the gateway through which flows the great stream of commerce of several states and territories, and amoug all the business tributary to this locality probably none is as important as the live-stock business and the various industries connected therewith. The defendant association is entirely voluntary in form, and does not directly require any person engaging in the live-stock commission business to become a member; but it will be observed that rule 16 prohibits any member from dealing with any person violating any of the rules or regulations of the exchange, or an expelled or suspended member, after notice of such suspension has been issued by the secretary or board of directors. In practice, as amply appears from Ihe testimony of many witnesses, this rule shuts out all dealings and business intercourse between members and nonmembers of the association. It is shown beyond cavil that the entire membership of the association regards a commission merchant attempting to do business at the Kansas City Stock Yards without joining the ex change as one violating this rule, and treat him accordingly. And this construction is a natural one, for a compliance with the rules of the exchange» requires a party to subscribe to its rales and by-laws, and to pay a-membership fee (which is now $2,500), to pay Ms assessments, and observe all other requirements, including the fees and commissions fixed for handling live stock; and it may well be said that any dealer or broker does business in violation of these rales who does business at all and fails to join the association. The testimony discloses several instances of parties attempting to enter the field, and do business there, without joining the exchange; and in every instance, unless protected by the courts, they have been compelled to abandon the undertaking. All parties now engaged in the business are members of the exchange, except Greer, Mills & Co., who are making a fight in the courts to maintain their business, and are temporarily protected by injunction. If appears from the testimony that any person or partnership attempting to carry on business independent of the association is invited to apply for membership, and if he fails to do so, or if rejected, and attempts to proceed. Ms name is written on a blackboard kept for public use in the exchange building, and all members are warned against dealing with. Mm. This admonition is strictly obeyed, and such person is boycotted. The outcome is inevitable. The combined opposition of three hundred men against one can produce but one result. Almost every purchaser or vendor of live stock, including the great packing houses, does business through commission merchants, and nearly the entire volume of live stock received at the yards is consigned to and controlled by these merchants, members of the exchange. In vain does the outside dealer offer attractive bargains for the sale or purchase; of stock; they will have no intercourse with him. This state of affairs is known and circulated among stock growers and shippers, and they dare not ship their stock to this boycotted broker or firm. These facts are established and amplified by a multitude'of witnesses. .The object and purpose of the exchange is written across its face, where all can read. It is to control and monopolize the entire business of buying and selling live stock at the Kansas City Stock Yards. It is clearly a combination to restrict, control, and monopolize that class of trade and commerce. The defendants declare that the rules, regulations, and prices for doing the business are all reasonable and fair and for the best interests of buyer and seller. Possibly that is so, although it is not apparent, looking at the interests of the stock grower or purchaser, why the number of solicitors of business should be limited to three for each firm, or why there should be a restriction on telegraphic information as to the state of the market, or why he should be compelled to pay a commission of 50 cents a head on-cattle when he paid 25 cents before the exchange was organized, or why there should be discriminating charges on stock from different localities.

Counsel for defendants have, with commendable zeal and industry, submitted for oúr consideration the rules of a great number of exchanges and boards of trade throughout the cities of the United States, dealing in corporate stocks, grains, live stock, and various other things, and contend that they are essential, if not indispensable, to the commerce and business interests of the country, and that to grant the prayer of this bill would be the deathblow of those institutions. Courts cannot shut their eyes to thé results of their judicial conclusions, but how far such results should control those conclusions depends on several conditions, not necessary to discuss here; nor would it be proper to consider here what effect this act of congress may have on these organizations, or any of them. I may be permitted to say, however, that the methods and aims of many of these exchanges and boards of trade are not altogether beneficial to the business and commerce of the country. That they are beneficial to the members, and perhaps to the locality, may be admitted. It must also be admitted that a properly conducted agency or medium through which the vendor and vendee may readily sell and buy everything that enters into commerce or trade is demanded by the business interests of the whole country; but this agency should not be permitted to tamper with or in any way impede or restrain the natural fiow of the stream of industry or commerce. The crying complaint of to-day, and the great menace to the welfare of the people, is the tendency of wealth to monopolize and control, by trusts and combinations, the products and industries of the country; and it must be confessed by every thoughtful observer that many of the so-called stock and produce exchanges are among the most potent instruments for the accomplishment of these purposes by speculators and adventurers. Men who add nothing to the productive wealth of the country grow rich or poor by gambling on the wealth produced by others. Men are daily selling, through these exchanges, millions o£ bushels .of corn, wheat, and other produce, who neither have nor expect to have a bushel; and others are buying millions, who never expect to receive a bushel. Both sides are tampering -with the normal prices fixed by the law of supply and demand, and attempting, by false and dishonest means and methods, to serve their ends. The courts have uniformly condemned this class of business as illegal, and, though it is under the ban of the law, it still flourishes. The remedy must be looked for in legislation, and not in the courts alone.

This act of congress is aimed against all restrictions of interstate commerce, and we need not discuss the reasonableness of such restrictions. It is evidently the purpose of the law to permit commerce between the states to flow in its natural channels, unrestricted by any combinations, contracts, or conspiracies, or monopolies whatsoever. U. S. v. Trans-Missouri Freight Ass’n, 166 U. S. 290. 17 Sup. Ct. 540; U. S. v. E. C. Knight Co., 156 U. S. 1, 15 Sup. Ct. 249; Leisy v. Hardin, 135 U. S. 107, 10 Sup. Ct. 681; Walling v. Michigan, 116 U. S. 454, 6 Sup. Ct. 454; Robbins v. Taxing Dist., 320 U. S. 490, 7 Sup. Ct. 592.

But one material question remains in the case: Is the business in which the defendants are engaged commerce between the stales? The circumstance that their place of business is located on both sides of the'line between the states of Kansas and Missouri is, in my opinion, a fact of no material importance in the solution of this question; no more than would be the fact that the business of a farmer or manufacturer was so located, and that he passed from one state to the other for his convenience in the transaction of his usual business. The method of business of the defendants is as follows: The shipment of live, stock from growers, dealers, and traders in Kansas, Colorado, Nebraska, Missouri, Texas, New Mexico, Arizona, Oklahoma, and other states and territories is solicited by the commission merchant in various ways, but largely by the personal solicitation of agents who travel about the country and interview the stock men. Frequently the commission man .makes loans of money on the herds, secured by chattel mortgage. The consignment of the stock is made to the commission man or firm at the Kansas City Stock Yards, and there unloaded. Frequently the shipper draws on the consignee through his local bank with the bill of shipment attached; and, when the stock is sold, the loan on the cat tie, or the draft on the consignee, as the case may be, is paid out of the proceeds, and the balance remitted to the shipper. While the broker is soliciting consignments of stock for sale, he is also on the alert for purchasers. He sells the stock without regard to its destination. Rome is reshipped to other markets in other states, notably to Chicago and St. Louis. Much of it, especially hogs, is slaughtered at the large packing houses near by, in Kansas and Missouri. Is this business, so conducted, interstate commerce, or merely an incident or aid to such commerce?

Commerce among the states has been defined as follows:

“Commerce with foreign countries and among the states, strictly considered, consists in intercourse and traffic, including in these terms navigation and the transportation and transit of persons and property, as well as the purchase, sale, and exchange of commodities.” County of Mobile v. Kimball, 102 U. S. 691; Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196, 5 Sup. Ct. 826.

In Re Greene, 52 Fed. 113, Judge Jackson says:

“In the application of this comprehensive definition, it is settled by the decisions of the supreme court that such commerce includes, not only the actual transportation of commodities and persons between the states, but also the instrumentalities and processes of such transportation; that it includes all the negotiations ánd contracts which have for their object, or involve as an element thereof, such transmission or passage from one state to another.”

In U. S. v. E. C. Knight Co., 156 U. S. 13, 15 Sup. Ct. 254, Mr. Chief Justice Fuller, speaking for the court, says:

“The regulation of commerce applies to the subjects of commerce, and not to matters of internal police. Contracts to buy, sell, or exchange goods to be transported among the several states, the transportation and its instrumentalities, and articles bought, sold, or exchanged for the purpose of such transit among the states, or put in the way of such transit, may be regulated, but this is because they form part of interstate trade or commerce.”

It has been repeatedly held by the supreme court that a person soliciting orders for goods or freights to be shipped from one state to another, and express agents transporting goods from state to state, are engaged in commerce between the states, and a local tax or license cannot be imposed for transacting such business. Walling v. Michigan, 116 U. S. 446, 6 Sup. Ct. 454; Pickard v. Car Co., 117 U. S. 34, 6 Sup. Ct. 635; Robbins v. Taxing Dist., 120 U. S. 489, 7 Sup. Ct. 592; Asher v. Texas, 128 U. S. 129, 9 Sup. Ct. 1; McCall v. California, 136 U. S. 104, 10 Sup. Ct. 881; Norfolk & W. R. Co. v. Pennsylvania, 136 U. S. 114, 10 Sup. Ct. 958; Crutcher v. Kentucky, 141 U. S. 47, 11 Sup. Ct. 851; Brennan v. City of Titusville, 153 U. S. 289, 14 Sup. Ct. 829; Minnesota v. Barber, 136 U. S. 313, 10 Sup. Ct. 862. It has also been heid that telegraphy between the states is interstate commerce. Leloup v. Port of Mobile, 127 U. S. 640, 8 Sup. Ct. 1380; Pensacola Tel. Co. v. Western Union Tel. Co., 96 U. S. 1; Telegraph Co. v. Texas, 105 U. S. 460. The question of vriiat constitutes commerce between the states, and thus protected by the constitution, and that which is merely an incident or aid to' such commerce, and exempt from federal control, has been much considered by the federal courts, and sometimes the line of distinction is difficult of discernment. Having a watchful regard for the police powers of the states, and the right of taxation, the federal courts have carefully discriminated in these cases, so that the general government should take nothing to itself not fairly delegated by the constitution. Nathan v. Louisiana, 8 How. 73; Crutcher v. Kentucky, 141 U. S. 47, 11 Sup. Ct. 851; Budd v. New York, 143 U. S. 517, 12 Sup. Ct. 468; Kidd v. Pearson, 128 U. S. 1-20, 9 Sup. Ct. 6; U. S. v. E. C. Knight Co., 156 U. S. 1, 15 Sup. Ct. 249; Munn v. Illinois, 94 U. S. 113; In re Greene, 52 Fed. 113; Henderson v. Mayor, etc., 92 U. S. 259; Covington & C. Bridge Co. v. Kentucky, 154 U. S. 204, 14 Sup. Ct. 1087; Henderson Bridge Co. v. Kentucky, 166 U. S. 150, 17 Sup. Ct. 532.

Perhaps a fair test of the character of defendants’ rules and bylaws would be presented by these questions: Could a state, by legislation, impose on this traffic the restrictions and regulations demanded by these rules and by-laws? Could it limit the number of agents a merchant should have soliciting business in other states? Could it restrain telegraphic communication between points in different states? Could it make a discrimination in rates for handling stock shipped from different localities outside of the state? It is indisputable that all the live stock shipped to these defendants for sale from states other than Kansas and Missouri, after it has (altered the current of commerce between the states, continues and remains the subject of such commerce until the transportation is terminated, and the property becomes a part of the general property of the state. It is also well settled that, while this property is the subject of interstate commerce, no- state, municipality, or other power but congress can impose taxes, restrictions, or regulations upon it, except so far as is proper, in the exercise of police regulaiions, for the protection of the health, morals, and person of the citizen, and except for proper charges and regulaiions for the use of local instruments as aids or incidents to such commerce, sucli as docks, 'bridges, wharves, elevators, ferries, pilotage, etc., when congress lias not acted in the matter.

In the case of Bowman v. Railway Co., 125 U. S., at page 497, 8 Sup. Ct. 704, Mr. Justice Matthews lays down this principle in the following language:

“It is also an established principle,,as already indicated, that the only way in which commerce between the slates can he legitimately affected by state laws is when, by virtue of its police power and its jurisdiction over persons and property within its limits, a state provides for the security of the lives, limbs, health, and comfort of persons, and the protection of property, or when it does those things which may otherwise incidentally affect commerce,— such as the establishment and regulation of highways, canals, railroads, wharves, ferries, and other commercial facilities; the passage of inspection laws to secure the due quality and measure of products and commodities; the passage of laws to regulate or restrict the sale of articles deemed injurious to the health or morals of the community; the imposition of taxes upon persons residing within the state or belonging to its population, and upon avocations and employments pursued therein, not directly connected with foreign or interstate commerce or with some other employment or business exorcised under authority of the constitution and laws of the United States; add the imposition of taxes upon all property within the state, mingled with and forming part of the great mass of property therein. But, in making such internal regulations, a state cannot impose taxes upon persons passing through the state, or coming into if merely for a temporary purpose, especially if connected with interstate or foreign commerce; nor can it impose such taxes upon property imported into the state from abroad, or from another state', and not yet become, a part of the common mass of property therein; and no discrimination can be made by any such regulations adversely to the persons or property of other states; and no regulations can be made directly affecting interstate commerce.”

Bowman v. Railway Co., 125 U. S. 465, 8 Sup. Ct. 689, 1062; License Cases, 5 How. 504; Passenger Cases. 7 How. 283; Nathan v. Louisiana. 8 How. 73; Freight Tax Case, 15 Wall. 232; Leisy v. Hardin, 335 U. S. 100, 10 Sup. Ct. 681 (Original Package Case); Henderson v. Mayor, 92 U. S. 259; Kentucky & I. Bridge Co. v. Louisville & N. R. Co., 37 Fed. 567; Guy v. Baltimore, 100 U. S. 434; Railway Co. v. Becker, 32 Fed. 849; Plumley v. Massachusetts, 155 U. S. 461, 15 Sup. Ct. 154; Covington & C. Bridge Co. v. Kentucky, 154 U. S. 204, 14 Sup. Ct. 1087; U. S. v. Addyston Pipe & Steel Co., 78 Fed. 712; Packet Co. v. Keokuk, 95 U. S. 80 (wharfage); Welton v. Missouri, 91 U. S. 275; Walling v. Michigan, 116 U. S. 446, 6 Sup. Ct. 454; Coal Co. v. Bates, 156 U. S. 577, 15 Sup. Ct. 415; In re Rahrer, 140 U. S. 545, 11 Sup. Ct. 865; In re Minor, 69 Fed. 233; Scott v. Donald, 165 U. S. 58, 17 Sup. Ct. 265; Pittsburg & S. Coal Co. v. Louisiana, 156 U. S. 590, 15 Sup. Ct. 459; Hooper v. California, 155 U. S. 648, 15 Sup. Ct. 207; Emert v. Missouri, 156 U. S. 296, 15 Sup. Ct. 367.

Counsel for defendants contend that their business is only an aid or incident to commerce, — something in the nature of personal service; but it is not apparent that a combination for services may not be a restraint or monopoly of commerce, under the act of congress. U. S. v. Trans-Missouri Freight Ass’n, 166 U. S. 312, 17 Sup. Ct. 540. But the business of defendants is more than personal services; it is not merely a local instrumentality in aid of commerce. Defendants are active promoters, and frequently interested jiarties, in this immense traffic. They reach out over many states and territories by their solicitors and advertisements, and gather in, for sale and slaughter, millions of cattle, sheep, and hogs, and their rules and regulations cover the entire business, and extend over the whole held of operation. Touching the question of what are aids or incidents to commerce, as well as police powers of the states, the following cases are in point: Packet Co. v. St. Louis, 100 U. S. 423; Vicksburg v. Tobin, Id. 430; Packet Co. v. Catlettsburg, 105 U. S. 559; Parkersburg & O. R. Transp. Co. v. City of Parkersburg, 107 U. S. 691, 2 Sup. Ct. 732; Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196, 5 Sup. Ct. 826; Huse v. Glover, 119 U. S. 543, 7 Sup. Ct. 313; Hall v. De Cuir, 95 U. S. 485; Cooley v. Board, 12 How. 298; Packet Co. v. Aiken, 121 U. S. 444, 7 Sup. Ct. 907; Sands v. Improvement Co., 123 U. S. 288, 8 Sup. Ct. 113; Monongahela Nav. Co. v. U. S., 148 U. S. 312, 13 Sup. Ct. 622; St. Louis v. W. U. Tel. Co., 148 U. S. 92, 13 Sup. Ct. 485; Munn v. Illinois, 94 U. S. 113; Budd v. New York, 143 U. S. 517, 12 Sup. Ct. 468; New York, L. E. & W. R. Co. v. Pennsylvania, 158 U. S. 431, 15 Sup. Ct. 896; Henderson Bridge Co. v. Kentucky, 166 U. S. 150, 17 Sup. Ct. 532.

The defendants further contend .that when this live stock reaches Kansas City, and is unloaded into the stock yards, it ceases to be the subject of interstate commerce. This proposition, however, covers but one point in the controversy, for several of thé rules and bylaws of defendants have more than a local operation, and extend beyond state lines. Does this stock, once upon the stream of commerce, cease to be such when unloaded at Kansas City? Could the state of Kansas tax these cattle in the stock yards?

The defendants cite the case of Brown v. Houston, 114 U. S. 623, 5 Sup. Ct. 1091, and Coal Co. v. Bates, 156 U. S. 577, 15 Sup. Ct. 415. In the former case the coal Avhich was subjected to taxation had reached its destination, — i. e. the state of Louisiana, — and was there offered for sale in great or small quantities to suit the purchaser. The court says:

“It might continue in that condition for a year or tiro years, or for'only a day. * * * We do not mean to say iliat if a ¡ax collector should be stationed at every ferry and railroad depot in the city of New York, charged with the duty of collecting a tax on every wagon load or car load of produce or merchandise brought into the city, that it would not be a regulation of and restraint upon interstate commerce, so far as the tax should be imposed on articles brought from other states. We think it would be, and that if would be an encroachment upon the exclusive power of congress.”

Bearing upon this question is the case of Brown v. Maryland, 12 Wheat. 419; also, Leisy v. Hardin, 135 U. S. 108, 10 Sup. Ct. 684. In this case Mr. Chief Justice Fuller, speaking for the court, says:

“That the point of time when the prohibition ceases, and the power of the state to tax commences, is not the instant when the article enters the country, but when the importer has so acted upon it that it has become incorporated and mixed up with die mass of property in the country, which happens when the original package is no longer such in his hands; that the distinction is obvious between a. iax Which intercepts the import as an import on its way to become incorporated with the general mass of property, and a tax which iinds the article already incorporated with that mass by the act of the importer.”

This .live stock is shipped from different states for immediate sale, aud, if the market ai. Kansas City is not satisfactory, it is to be shipped to another market. I cannot believe it ceases to be the subject of interstate commerce when unloaded into the stock yards. Sections 4386 and 4387 of the Revised Statutes humanely prohibit any railroad company whose road forms any part of a line over which animals arc; conveyed from one state to another from confining them in cars over 28 consecutive hours without unloading them for rest, water, and food for at least 5 consecutive hours. Under the act of congress of May 29, 1884, establishing a “Bureau of Animal Industry,” and the act of March 3, 1891, for the inspection of live cattle, hogs, etc., the general government has established inspectors at the-Kansas City Stock Yards, assuming that such stock comes within the purview of said acts of congress. While realizing the importance of the issue involved in this case, and the responsibility of making application of the “Anti-Trust Act” to a, new order of facts, I am impelled to the conclusion that, under the facts and the law applicable thereto, the prayer of this bill should be granted.