Townsend v. Yeomans

delivered the opinion of the Court.

This suit was brought by tobacco warehousemen to restrain the enforcement of a statute of Georgia, approved March 28, 1935, fixing maximum charges for handling and selling leaf tobacco. Ga. L. 1935, pp. 476-8.

The statute was assailed as an arbitrary and capricious exercise of state power, repugnant to the Fourteenth Amendment of the Federal Constitution, and as placing a direct burden upon interstate commerce in violation of the commerce clause. The hearing in the District Court was by three judges (28 U. S. C. 380) and, upon findings of fact and conclusions of law, a final decree was entered dismissing the bill of complaint, one judge dissenting. The case comes here on appeal.

The facts found by the District Court with respect to the tobacco industry in Georgia and the nature of the transactions at the warehouses are not in dispute. It appears that this industry is relatively new, beginning in 1917, but by the year 1925 it was becoming well established. The type of tobacco grown in Georgia is the “bright leaf” which is almost exclusively used in the manufacture of cigarettes. This variety is grown extensively in North Carolina, to a much less extent in South Carolina and Georgia, and to some extent in Virginia, Kentucky and Tennessee. The acreage planted by the individual farmer in Georgia is comparatively small but the aggregate acreage is now not only very considerable but is widely distributed over a large area in the southern portion of the State.

The necessity for markets and the early maturity of the tobacco in Georgia presented an opportunity which

The principal purchasers of the bright leaf tobacco grown in Georgia and elsewhere are limited to a few large manufacturers of cigarettes. These are called “the Companies.” They purchase tobacco only at warehouse auction sales to which they send or furnish “buyers.” Each buyer is the representative of one of the competing purchasers and a “set of buyers,” usually from eight to twelve in number, is made up of representatives from each of the purchasing cigarette manufacturers. The presence of a “set of buyers” is essential at an auction sale. A town having one or more warehouses is known as a “market.” By sending a set of buyers to a new warehouse, the manufacturers may recognize a new market, and by refusing to send one to an old market may cause its abandonment; and by sending either one or two sets of buyers to a given market the manufacturers may determine the rapidity with which the accumulated tobacco may be disposed of. There is another class of purchasers known as “speculators.” These on rare occasions buy tobacco from a grower and have it transported to a warehouse for sale. At auction sales speculators to a limited extent, as compared with buyers, purchase tobacco for a later sale. There is strenuous and expensive competition between warehousemen in securing tobacco from growers to be

The tobacco belt in Georgia comprises about twenty counties in the southern part of the State, and in 1935 there were fifteen towns known as “markets.” Seven of the markets were supplied with one set of buyers and eight were furnished two sets. The “two set markets” had a total of thirty and the “one set markets” a total of fifteen warehouses in operation. The quantity of tobacco sold in the warehouses and the average prices ranged from 106,483,019 pounds at 9.86 cents per pound in 1930, to 71,826,352 pounds at 18.91 cents per pound in 1935.

After the tobacco has been cured and is ready for the market, the grower grades it as best he can and the resulting “piles” of loose leaves are placed in sheets which are then tied and the tobacco is so transported to the selected warehouse for sale. Auction sales are held daily during five days of the week, and in any particular warehouse as often as sufficient tobacco accumulates. It is essential that there be present the warehouseman, an auctioneer and other skilled help, and one set of buyers. The warehouseman makes the opening bid. If this is not taken or raised by another, the warehouseman generally becomes the purchaser of the tobacco for his own account. If not sold in that fashion the bidding continues until the sale is announced. The grower or other owner may turn down the sale and in such case he may hold the tobacco for a later sale or remove it. After the sale has been completed the tobacco is delivered to the purchaser who removes it from the floor. The purchaser has it reweighed and pays the warehouseman. The warehouseman then pays the seller the purchase price, less warehouse charges. Tobacco purchased by the warehouseman is afterwards sold by him at auction.

When the Act in question was passed, the warehouse charges, based upon three elements, the sale value, the number of piles handled and the weight of the quantity sold, were as follows:

Commissions: 2y2 per cent, on gross sales.

Auction fees: 25 cents per pile up to 200 pounds; 50 cents per pile above 200 pounds.

Weighing and handling fees: 25 cents per pile up to 100 pounds, and 25 cents for each additional 100 pounds.

The Act of 1935 prescribed the following maximum charges:

Auction fees: 15 cents on all piles of 100 pounds or less; 25 cents on all piles over 100 pounds.

Weighing and handling fees: 10 cents per pile of 100 pounds or less, and 10 cents for each additional 100 pounds.

It will be observed that the statutory reduction is confined to the auction fees and the charges for weighing and handling. The percentage reduction is difficult of

The District Court made additional findings, which appellants challenge, with respect to the control exercised by the warehousemen over the charges made for their services and their common agreement as to the amount of these charges. The court found that by reason of their control of the warehouses “warehousemen have, unless regulated by law, an unduly coercive control over the prices charged the growers for service's”; that beginning with the tobacco selling season of 1927 all warehousemen in Georgia have uniformly maintained “a hard and fast schedule of charges”; that, while there have been some exceptions, they are “so insignificant as to be immaterial”; that prior to 1927 the warehousemen in Georgia for many years, if not from the beginning of the industry, “had maintained and exacted from sellers of tobacco a uniform schedule of charges substantially, if not identically, the same as the schedule fixed by the Act of 1935.”

The court also found that the propriety of charging more for handling tobacco in Georgia than in the Carolinas had not been established; that it had not been shown that the Georgia Act “was passed without any knowledge on the part of the legislature as to actual con

The court made findings with regard to the organization known as the “Tobacco Warehousemen’s Association” of which all the complainants were members. The court said that the prosecution of the suit was “an organized fight through the Warehousemen’s Association”; that the growers are not eligible for membership in that organization; that “the Association and the buyers determine the date the market in Georgia opens and substantially determine the date on which it closes”; that the Association undertakes to deal with such practices as affect the interest of the members and adopts rules which they are to observe. The court quoted from the minutes of meetings certain action tending to support the view that there was a common agreement as to warehouse charges and a concert of action in relation to the present suit. The court concluded that “through the Warehouse-men’s Association and their common agreement” as to charges the complainants “maintain and enjoy a virtual monopoly in the field covered by their operations”; that the business of tobacco warehousemen in Georgia in 1935,

First. Unless there is conflict with the authority of the Congress over interstate commerce, the enactment of the statute was clearly within the competency of the Georgia legislature. While appellants’ assignment of errors challenge the conclusion of the District Court that the business of the tobacco warehouses was one “affected with a public interest,” their counsel conceded in the argument at bar that the challenge could not be sustained. That concession was appropriate in view of the evidence and the findings. The uncontroverted facts with respect to the nature and extent of the tobacco industry, the establishment of markets for public sales, and the dependence of the industry upon the services of the warehousemen in connection with these sales, show beyond cavil the public interest in these markets and in the maintenance of reasonable charges for the services there rendered.

A similar conception of public interest, reenforced by abundant experience, is reflected in the legislation of other tobacco growing States. In Virginia the sale of tobacco in public warehouses has long been regulated by statute and maximum charges have been fixed. Code of Virginia, 1887, §§ 1819-1825; 1924, §§ 1376-1381. In North Carolina such regulation goes back to an early day. See Consolidated Statutes of North Carolina, §§ 5124 et seq. In Gray v. Central Warehouse Co., 181 N. C. 166 ; 106 S.

“Indeed, as far back as the history of the state extends, the business of tobacco warehouses has been, if not a public duty, always ‘affected with a public use.’ The laws of North Carolina from 1669 to 1790 have been compiled as State Records, vols. 23, 24 and 25, by the writer of this opinion [Chief Justice Clark], and in the index thereto, in the last named volume, it appears that no less than 75 statutes were enacted prior to 1790 in regard to tobacco warehouses requiring inspection, regulation, and fixing charges in such business. To the fullest extent, therefore, their regulation and control by the public has been recognized and enforced in this State. — In fact, there is no subject in which the protection of the producers against extortion and combinations to reduce prices is more important.”

In South Carolina maximum charges for selling leaf tobacco upon the floor of tobacco warehouses are fixed. Code, South Carolina, 1932, § 7197, and earlier statutes there cited. The statute of Georgia, here under attack, copies almost exactly the South Carolina statute. See, also, as to the authority of the State, Nash v. Page, 80 Ky. 539 ; Pannell v. Louisville Tobacco Warehouse Co., 113 Ky. 630 .

So far as the present controversy turns upon the power of the State to give this sort of protection to this industry, provided its regulation is not arbitrary or confiscatory and in the absence of conflict with the federal power over commerce, our rulings are decisive in support of the state action. Munn v. Illinois, 94 U. S. 113 ; Budd v. New York, 143 U. S. 517 ; Brass v. Stoeser, 153 U. S. 391 ; German Alliance Insurance Co. v. Lewis, 233 U. S. 389 ; O’Gorman & Young v. Hartford Insurance Co., 282 U. S. 251 ; Nebbia v. New York, 291 U. S. 502 .

Confiscation is not shown. The presumption of reasonableness has not been overthrown. O’Gorman & Young v. Hartford Insurance Co., supra. It is apparent

Appellants contend that the legislative action was taken without investigation and hence must be considered to be arbitrary and beyond the legislative power. There is no principle of constitutional law which nullifies action taken by a legislature, otherwise competent, in the absence of a special investigation. The result of particular legislative inquiries through commissions or otherwise may be most helpful in portraying the exigencies to which the legislative action has been addressed and in fortifying conclusions as to reasonableness. Nebbia v. New York, supra, pp. 516 et seq. But the legislature, acting within its sphere, is presumed to know the needs of the people of the State. Whether or not special inquiries should be made is a matter for the legislative discretion. Here, the existence of the industry, highly important to the State, the transactions in the tobacco markets, the

Second. The main contention of appellants is that the State had no power to enact the regulation as it attempted to govern transactions in the course of interstate and foreign commerce. Appellants urge that practically all the tobacco grown in Georgia is shipped out of the State, about forty per cent, in foreign, and the remaining sixty per cent, in interstate, commerce; that the purchasers at the “markets” in Georgia for the most part are manufacturers of cigarettes who immediately have the tobacco transported to their plants outside the State; that the purchases made by speculators and warehouse-men are for the purpose of resale as soon as possible to the cigarette manufacturers, and thus that the tobacco so bought, as well as the rest, “is destined for interstate or foreign shipment.”

We find it unnecessary to pass upon the authority of the Congress to regulate the charges of the warehouse-men, for we are of the opinion that, if it be assumed that Congress has that authority, it has not been exercised and in the absence of such exercise the State may impose the regulation in question for the protection of its people.

The federal statute, to which appellants refer, is the “Tobacco Inspection Act” of August 23, 1935. 49 Stat. 731 . That statute, while declaring the transactions in tobacco at auction markets to be “affected with a public interest” (§2) had a limited objective. It did not undertake to regulate the charges of warehousemen or in any way to derogate from the existing state legislation upon that subject. It sought to aid tobacco growers by establishing and promoting the use of standards of classification and by maintaining an official inspection service.

The case calls for the application of the well-established principle that Congress may circumscribe its regulation and occupy a limited field, and that the intent to supersede the exercise by the State of its police power as to matters not covered by the federal legislation is not to be implied unless the latter fairly interpreted is in actual conflict with the state law. Savage v. Jones, 225 U. S. 501 , 533; Atlantic Coast Line v. Georgia, 234 U. S. 280 , 293, 294; Illinois Central R. Co. v. Public Utilities Comm’n, 245 U. S. 493 , 510; Carey v. South Dakota, 250 U. S. 118 , 122; Lehigh Valley R. Co. v. Public Utilities Comm’n, 278 U. S. 24 , 35; Atchison, T. & S. F. Ry. Co. v.

Laying on one side the federal statute, as in no way inconsistent, we find no ground for concluding that the state requirements lay any actual burden upon interstate or foreign commerce. The Georgia Act does not attempt to fix the prices at the auction sales or to regulate the activities of the purchasers. The fixing of reasonable maximum charges for the services of the ware-housemen in aid of the tobacco growers does not militate against any interest of those who buy. They pay the bid price, as accepted, and the warehouseman pays the seller, deducting from the purchase price the warehouse charges.

We are thus brought to the final contention of appellants that the state law, although not in conflict with any exertion of federal authority, must fall as being repugnant to the existence of an exclusive federal power although unexercised. The contention ignores the principle that this ground of invalidity is to be found only with respect to such matters as demand a general system or uniformity of regulation; that in other matters, admitting of diversity of treatment according to the special requirements of local conditions, the States may act within their respective jurisdictions until Congress sees fit to act. Cooley v. Board of Wardens, 12 How. 299 , 319; Minnesota Rate Cases, 230 U. S. 352 , 399, 400; Hendrick v. Maryland, 235 U. S. 610 , 622; Morris v. Duby, 274 U. S. 135 , 143; Sproles v. Binford, 286 U. S. 374 , 390.

In the instant case, the Georgia statute deals with a local need, exercising the State’s protective power with respect to its own industry. A similar contention to that now advanced was held untenable in Munn v. Illinois, 94 U. S. 113 , where state regulation of charges by the proprietors of grain elevators was sustained despite the fact that the elevators were used as instrumentalities by those

In Cargill Co. v. Minnesota, 180 U. S. 452 , 470, the requirement of a state license for grain warehouses on railroad rights of way was found to be not inconsistent with the power of the Congress, although the warehouse company purchased the grain, handled in or shipped from its warehouse, for the purpose of transporting it as its property to its terminal elevators in Wisconsin and Illinois and thence to other points in the eastern States. Id., p.

Even where the Federal Government has intervened, as in the United States Warehousing Act of August 11, 1916, 7 U. S. C., c. 10, in providing for licenses for warehouses where agricultural products are “stored for interstate or foreign commerce,” we held that the license did not convert the warehouseman into an instrumentality of the Federal Government and, while by means of the licensing provisions a measure of control over those engaged in the business was secured to the national government, still the license did not confer upon the warehouseman immunity from state taxation. Federal Compress Co. v. McLean, 291 U. S. 17 , 22, 23. That case was followed by our decision in Chassaniol v. Greenwood, 291 U. S. 584 , to the effect that the business of buying and selling cotton locally produced, processed and warehoused, was local in character, and that a local occupation tax upon the buyer did not contravene the commerce clause although the course of the business was such that all the cotton so bought was ultimately shipped by the buyer in interstate or foreign commerce. On similar grounds . we held in Minnesota v. Blasius, 290 U. S. 1 , 8, that because there was “a flow of interstate commerce” which was subject to the regulating power of the Congress, it did not necessarily follow that, in the absence of a con

All these decisions but illustrate the principle that the mere existence of the congressional power, no conflict with its exercise being shown, does not deprive the States of their authority to safeguard their local interests by legislation which does not directly burden transactions in interstate or foreign commerce.

The cases upon which appellants rely are distinguishable. In Dahnke-Walker Co. v. Bondurant, 257 U. S. 282 , the statute held to be invalid imposed burdensome conditions upon the enforcement of rights arising from transactions in interstate commerce. In Lemke v. Farmers Grain Co., 258 U. S. 50 , the North Dakota statute of 1919 disclosed a comprehensive scheme to regulate the buying of grain in the course of interstate commerce. Such purchases could be made only by those who held licenses from the State, paid state charges for the same, and acted under a system of grading, inspecting and weighing fully defined in the Act. The grain could only be purchased subject to the power of the state grain inspector to determine the margin of profit which the buyer could realize upon his purchase. That margin of profit was defined to be the difference between the price paid at the North Dakota elevator and the market price, with an allowance for freight, at the Minnesota points to which the grain was shipped and sold. The state officer was thus authorized to “fix and determine the price” to be paid for grain which was “bought, shipped, and sold in interstate commerce.” That the provision was a regulation of interstate commerce was said to be “obvious from its mere statement.” Id., pp. 56-58. The later North Dakota statute of 1923 fell under a like condemnation in

Here, the Georgia Act lays no constraint upon purchases in interstate commerce, does not attempt to fix the prices or conditions of purchases, or the profit of the purchasers. It simply seeks to protect the tobacco growers from unreasonable charges of the warehousemen for their services to the growers in handling and selling the tobacco for their account. Whatever relation these transactions had to interstate and foreign commerce, the effect is merely incidental and imposes no direct burden upon that commerce. The State is entitled to afford its industry this measure of protection until its requirement is superseded by valid federal regulation. The judgment of the District Court is

Affirmed.