BROWN v. BANANA DISTRIBUTORS OF CONNECTICUT, (D.Conn. 1943)

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Docket Number

Civ. No. 1025.

Motions

Motion to dismiss : Denied

Attorney(S)

J. Stephen Knight, Office of Price Administration, of Hartford, Conn., for plaintiff. Willis G. Parsons and Gross, Hyde, Williams, all of Hartford, Conn., and George J. Elbaum, of Boston, Mass., for defendants.

Judges

SMITH, District Judge.

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Smart Summary

Factual and Procedural Background

This opinion concerns a motion to dismiss filed by defendants in a case brought by the Office of Price Administration against Banana Distributors of Connecticut, Inc. The defendants challenge the validity of regulations concerning the pricing of imported bananas under the Emergency Price Control Act of 1942. The complaint alleges that defendants violated Maximum Price Regulation 285 by compelling purchasers to buy another commodity along with bananas at a total price exceeding the regulated maximum, constituting an evasion of the price control regulations.

Legal Issues Presented

Whether the Emergency Price Control Act of 1942 requires prior approval by the Secretary of Agriculture for regulations concerning imported agricultural commodities such as bananas.
Whether the complaint sufficiently states a cause of action by alleging a violation of the price control regulations through a "tying agreement" or similar practice.

Arguments of the Parties

Defendants' Arguments

The regulations concerning bananas are invalid because, under the Emergency Price Control Act of 1942, such regulations require prior approval by the Secretary of Agriculture, which was not obtained.
The complaint fails to state a cause of action because the phrase "tying agreement" is either too vague or does not encompass the alleged conduct.

Plaintiff's Arguments

The term "any agricultural commodity" in the Act applies only to agricultural commodities produced within the United States, thus imported bananas are not subject to the Secretary of Agriculture's approval requirement.
The complaint properly alleges a violation of the Maximum Price Regulation by describing conduct that constitutes evasion of the maximum price through a tying arrangement, regardless of the precise definition of "tying agreement."

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
United States v. Armour Co. of Delaware, D.C.Mass. 1943, 50 F. Supp. 347	Supports the proposition that evasion of maximum price regulations, including by tying agreements, constitutes a violation of the Emergency Price Control Act.	The court relied on this precedent to affirm that the practice alleged constitutes an evasion of the maximum price and thus violates the Act, regardless of the terminology used.

Court's Reasoning and Analysis

The court first addressed the defendants' claim that regulations concerning bananas require prior approval by the Secretary of Agriculture under Section 3(e) of the Emergency Price Control Act. The court analyzed the statutory language, noting that although the phrase "any agricultural commodity" could be read broadly, the legislative intent and context indicate it applies only to commodities produced domestically. Because bananas are imported, the court held that prior approval by the Secretary of Agriculture is not necessary for price regulations on bananas.

Next, the court examined the sufficiency of the complaint's allegations regarding the "tying agreement." The court found that while the term "tying agreement" lacks a precise and universally accepted definition, the critical issue is whether the conduct constitutes evasion of the maximum price regulations. The complaint alleges that defendants compelled purchasers to buy tomatoes along with bananas at a combined price exceeding the regulated maximum for bananas alone, effectively evading the regulation. The court concluded that this practice constitutes a violation of the Act regardless of the label "tying agreement," and the complaint adequately states a cause of action.

Accordingly, the court denied the defendants' motion to dismiss.

Holding and Implications

The court denied the defendants' motion to dismiss.

The holding establishes that the Emergency Price Control Act's requirement for prior approval by the Secretary of Agriculture does not extend to imported agricultural commodities such as bananas. Additionally, the court clarified that evasion of maximum price regulations through tying arrangements or similar practices constitutes a violation of the Act, even if the term "tying agreement" is not precisely defined. The direct effect is that the plaintiff's complaint survives the motion to dismiss, allowing the case to proceed. The opinion does not establish new precedent beyond the application of existing principles to the facts at hand.

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BROWN, Administrator, Office of Price Administration, v. BANANA DISTRIBUTORS OF CONNECTICUT, Inc., et al.

SMITH, District Judge.

Defendants' motion to dismiss is founded upon two claims: First — that under the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix, § 901 et seq., regulations concerning bananas are invalid unless approved by the Secretary of Agriculture.

This raises the question of the meaning of the term "any agricultural commodity" in Section 3(e) Title 1 of the Act, 50 U.S.C.A.Appendix, § 903(e). It is the contention of the Government that this language in the act was intended to refer only to agricultural commodities produced within the United States, and that bananas, being an imported commodity, were not intended to be covered by the act's requirement of prior approval by the Secretary of Agriculture of action with respect to any agricultural commodity. This interpretation has been followed by the Secretary of Agriculture, pursuant to Opinion No. 4434, dated August 22, 1942, by the Solicitor of the Department, as well as by the Office of Price Administration. A reading of Section 3(e) alone would give the meaning contended for by the defendants. However, in view of the fact that the provisions of the balance of Section 3 obviously refer to commodities produced in this country, although not in strict terms so limited, and in view of the fact that Subsection (e) was added in the Senate in an effort to give the Secretary of Agriculture control over prices received by the American farmer, I am constrained to agree with the construction contended for by the plaintiff and hold that prior approval by the Secretary of Agriculture is not necessary as a prerequisite to the validity of orders by the Price Administrator concerning the maximum prices of imported agricultural commodities under the Price Control Act of 1942.

The second ground for the motion to dismiss is the alleged failure of the complaint to set forth a cause of action because it depends upon the meaning of the phrase "tying agreement", which is either too vague or, if susceptible of definition, does not include the type of practice charged in the complaint.

The complaint charges a violation of Maximum Price Regulation 285, Section 1351.1258, prohibiting the evasion of the price limitations of the price regulation in connection with the sale of imported fresh bananas along or in conjunction with any other commodity, or by way of tying agreement, or otherwise.

The violation charged is the sale of imported fresh bananas in violation of the Regulation in that defendants have compelled and are compelling purchasers to purchase another commodity, such as tomatoes, as a prerequisite to the purchase of bananas, at a total price in excess of the maximum prices allowed by the Regulation, and refusing to sell bananas except with an agreement to purchase such other commodity at such a price, which practices are alleged to constitute a tying agreement in violation of Section 1351.1258.

The phrase "tying agreement" is not, so far as appears, one of well defined meaning in the trade. It might be construed to mean the tying together of several commodities, some under price limitation and some not, or some scarce and some not, or it might be construed to mean a tying of a purchaser to one source of supply as in the "tied houses" which long constituted an evil in the liquor trade. Any type of tying agreement is a violation of the act if used as a means of evasion of the maximum price allowed by the maximum price regulation, but it must be made to appear that the practice is so used in order to set up a valid charge of violation of the act.

Conceivably, any of the practices mentioned might be unconditionally prohibited by regulation if found to carry with it too great a likelihood of use for the purpose of evasion, as similar practices are prohibited with regard to commodities in other maximum price regulations, but such practice, to be thus prohibited, must be sufficiently defined to be readily understandable by those subject to the act. However, the Regulation, as drawn, prohibits evasion by any method, necessarily including a "tying agreement", if that be taken as a description of the method here employed. It is the evasion of maximum prices, not the method, which is prohibited by this section.

The allegations contained in the complaint herein charge compulsion to purchase another commodity with the regulated commodity at a price higher than that set for the regulated commodity by the maximum price regulation, and refusal to sell the regulated commodity except in conjunction with the other commodity and except at such a price. This necessarily constitutes an evasion of the maximum price. For, if the allegations of the complaint are true, and they must be taken as true for the purpose of this motion, the purchaser of the bananas from the defendant is making a payment above the maximum set by the Regulation in order to obtain the bananas.

Since this practice constitutes an evasion of the maximum price established by the Regulation, it is a violation of the act. See opinion of Judge Healey in United States v. Armour Co. of Delaware, D.C.Mass. 1943, 50 F. Supp. 347. It appears to me that the practice alleged is such an evasion and that it is immaterial whether it be called a "tying agreement" or not, to make it subject to control by the courts in a civil action to enforce the act. The motion to dismiss is, in all respects, denied.