Agricultural Transp. Ass'n of Texas v. United States

274 F. Supp. 528, 1967 U.S. Dist. LEXIS 9291
CourtDistrict Court, N.D. Texas
DecidedOctober 24, 1967
DocketCiv. A. CA 4-746
StatusPublished
Cited by7 cases

This text of 274 F. Supp. 528 (Agricultural Transp. Ass'n of Texas v. United States) is published on Counsel Stack Legal Research, covering District Court, N.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Agricultural Transp. Ass'n of Texas v. United States, 274 F. Supp. 528, 1967 U.S. Dist. LEXIS 9291 (N.D. Tex. 1967).

Opinion

WILLIAM M. TAYLOR, Jr., District Judge.

This is an action to set aside, restrain and enjoin an order of the Interstate Commerce Commission entered against Agricultural Transportation Association directing plaintiff to cease and desist from participating in the transportation of property in interstate commerce for compensation. The Commission’s order was issued in accordance with a finding by a hearing examiner that plaintiff was not a “cooperative association”, as defined by the Agricultural Marketing Act of 1929, as amended, Title 12 U.S.C.A. §§ 1141 and 1141j, and was not entitled to the cooperative association exemption from the requirements of the Interstate Commerce Act, § 203(b) (5), Title 49 U.S.C.A. § 303(b) (5). 1 We affirm the Commission’s Order.

*531 In January, 1963, the Interstate Commerce Commission, on its own motion, commenced an investigation of Agricultural Transportation, hereafter referred to as “ATA”, to determine whether ATA was performing transportation of property in interstate commerce “for and on behalf of Iowa Beef Packers, Inc., City Packing Company, Estes Packing Company, Pet Milk Company, Neuhoff Bros. Packers, Inc., Melton Provision Co., Inc., Libby, McNeill & Libby, Topeo Associates, Inc., and Safeway Stores, Inc., and [whether] the said companies have been and are now participating in * * * violations of [§§ 206(a) and 209(a) of the Interstate Commerce Act].” Between June, 1963 and July, 1963, hearings were conducted by an examiner in Dallas, Texas, and San Francisco, California. In his report of December, 1963, the examiner concluded that ATA, acting in concert with the above respondents, had engaged in interstate transportation of commodities for compensation. A cease and desist order was entered against ATA by Division I of the Commission. That same Division, acting in an appellate capacity, denied plaintiff’s petition for reconsideration and motion for further oral hearings in March, 1965. In April, 1965, the Commission acknowledged that an issue of General Transportation Importance was existent in the ATA investigation and agreed to entertain plaintiff’s application for reconsideration. The Commission, sitting en banc, denied the application in August of 1966, and this lawsuit followed.

ATA was organized and incorporated in February, 1962, under the Cooperative Marketing Act and the general corporation laws of the State of Texas 2 as a non-profit, no-capital corporation for the mutual benefit of its members. Its principal place of business is in Fort Worth, Texas.

A total of 51 members participate in the association (see attached appendix). In servicing these members ATA transports fresh beef and pork, frozen boxed meat, livestock, fresh fruits and vegetables, frozen fruit and vegetables, frozen citrus concentrates, canned goods, table products, desserts, margarine and shortening, frozen pies and waffles, and other processed or manufactured products to and through 12 states and Mexico. Transportation is also provided for nonmembers. ATA receives compensation for all carriage services it performs, from members and nonmembers alike. From the revenues so acquired ATA pays the salaries of its 16 administrative personnel and its 144 truck drivers, rents its 67 refrigerated trailer-trucks, and satisfies its other business expenses. ATA has distributed deferred patronage refund certificates, representing $25,000 in surplus revenues, to its members and nonmembers on a pro rata basis.

Plaintiff’s principal contention in this court is that the Commission’s conclusion *532 that it was violating the Agricultural Marketing Act, 12 U.S.C.A. § 1141j, was predicated upon arbitrary fact finding and erroneous application of the law in determining that ATA received a greater percentage of its revenue from nonmembers than it did from members.

The third proviso of § 1141j(a) is a clear-cut expression of the legislative intent. To qualify as a cooperative under the Act,

“the association shall not deal in farm products, farm supplies, and farm business services with or for nonmembers in an amount greater in value than the total amount of such business transacted by it with or for members. * * ”

ATA is engaged in transporting the raw materials of its members to the processing plant and in transporting the processed product to the wholesale and retail outlets. The hearing examiner found that of these processed materials, actual farming activities by ATA members accounted for from 1% to 95% of the total, the precise percentage varying from member to member. The remaining portion of each member’s total processed products was found to be attributable to the respective member’s purchase contracts with outside nonmember parties. This situation was found to be most prevalent among the 22 members who were packers or fabricators of meat products. Most of these concerns had contracted with other motor carriers for the transportation of their outside purchases to the processing plants. Once processed, ATA would undertake the commingled transportation of these products and those it had carried to process.

The hearing examiner concluded that 66% of the processed goods transported by ATA in interstate commerce as member shipments were composed of raw materials purchased by members from nonmembers. Applying this percentage to the revenue figures for the period under investigation, the examiner subtracted 66% of the $1,340,342 member-derived compensation and added that figure to the $1,190,011 nonmember-derived compensation. 3 This put nonmember income substantially in excess of member income. The examiner therefore recommended that a cease and desist order be entered.

Division I of the Commission discarded the examiner’s use of the 66% figure, recognizing that it represented the averaging of. unweighted percentages and hence was statistically invalid. The Commission obtained the same result as the examiner, however, by applying a “functionally related” standard. It found that the raw materials which the meat oriented members purchased from outside sources were not functionally related to those members’ feedlots and farm activities. Division I stated,

“Where a food processor as part of his processing operation, commingles agricultural commodities produced on his own farm or feedlot with those purchased elsewhere, such commodities lose any identifiable relationship to the processor’s operations and must be treated as nonmember business, and transportation provided therein cannot be considered a farm business service.”

The total revenue from the 22 meat packers-fabricators was therefore treated as nonmember revenue.

As to the association members who engaged in no farming activities, but which purchased farm products under contract with outside producers, the division held that “actual ownership or operation of farms is a prerequisite to qualify an individual organization as a farmer.”

*533

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274 F. Supp. 528, 1967 U.S. Dist. LEXIS 9291, Counsel Stack Legal Research, https://law.counselstack.com/opinion/agricultural-transp-assn-of-texas-v-united-states-txnd-1967.