Interstate Commerce Commission v. Northwest Agricultural Cooperative Ass'n , 234 F. Supp. 496 ( 1964 )

SOLOMON Chief Judge.

The Interstate Commerce Commission (Commission) seeks to permanently enjoin the Northwest Agricultural Cooperative Association (Association) from further for-hire transportation in interstate commerce of non-exempt commodities of nonmembers in violation of the Interstate Commerce Act (Act).

The Association is an Idaho non-profit corporation without capital stock. All of its members»are engaged in the production of agricultural products and each has only one vote in the affairs of the Association. The Association’s Articles of Incorporation provide that it shall be operated for the mutual benefit of its members, and it is restricted by its bylaws from paying dividends on membership capital in excess of eight per cent per year.

The Association operates a fleet of longhaul trucks to transport commodities throughout the West, Midwest and Southwest. All commodities transported by the Association for its members are directly related to their agricultural functions.

From November 13, 1963, to March 19, 1964, the Association received approximately $175,000 from hauling member products. The Association also transported for-hire in interstate commerce nonexempt commodities for nonmembers, not engaged in farming operations. These commodities were carried by the Association’s trucks on their return trips after delivering member products to markets. Income from these services was considerably less than income from hauling member products. It is these services which the Commission contends are in violation of the Act.

The Act provides for the regulation of for-hire transportation in interstate commerce. 49 U.S.C.A. § 303(c). However, a “cooperative association,” as defined by the Agricultural Marketing Act, is exempt from regulation. 49 U.S.C.A. § 303(b). The Agricultural Marketing Act provides the following definition of a “cooperative association”:

“(a) As used in this subchapter, the term ‘cooperative association’ means any association in which farmers act together in processing, preparing for market, handling, and/or marketing the farm products of persons so engaged, and also means any association in which farmers act together in purchasing, testing, grading, processing, distributing, and/or furnishing farm supplies and/or farm business services: Provided, hovjever, That such associations are operated for the mutual benefit of the members thereof as such producers or purchasers and conform to one or both of the following requirements: “First. That no member of the association is allowed more than one vote because of the amount of stock or membership capital he may own therein; and

“Second. That the association does not pay dividends on stock or membership capital in excess of 8 per centum per annum. * * *

“Third. That 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. All business transacted by any cooperative association for or on behalf of the United States or any agency or instrumentality thereof shall be disregarded in determining the volume of member and nonmember business transacted by such association.” 12 U.S.C.A. § 1141j(a).

The Commission contends that under this definition the Association is only partially exempt from the provisions of the Act. It admits exemption for those transportation services performed for members, directly or functionally related to their agricultural activities. However, it contends that for-hire transportation of otherwise nonexempt commodities for nonmembers violates the Act.

The Association contends that for-hire transportation of otherwise nonexempt commodities for nonmembers should be exempt because revenue from these activities is much less than revenue from transporting member products and because the income from these activities inures to the benefit of the members by economizing their marketing expenses.

This appears to be a question of first impression for the courts.¹ However, a Hearing Examiner for the Commission recently dealt with this precise question in the matter of Cache Valley Dairy Ass’n, No. MC-C-3876, May 19, 1964. The Hearing Examiner decided that the Dairy Association could not maintain its exemption under the Act, if it continued to provide for nonmembers for-hire transportation of nonexempt commodities, neither directly nor functionally related to farm business. That is the position of the Commission in this case.

I agree with the Commission. The difficulty with defendant’s position is that it sanctions for-hire transportation in open competition with regulated common carriers without subjecting the Association’s fleet to regulation. Though Congress intended to exempt agricultural cooperatives from regulation under the Act in the transportation of their goods to market and their necessary supplies and services on return, I do not read the statute as granting these associations an exemption to enter the general transportation business. Undoubtedly the Association’s practice affords economies to its members, but these are economies not intended to be conferred by the Act.

The foregoing opinion shall serve in place of findings of fact and conclusions of law, in accordance with Rule 52(a) of the Federal Rules of Civil Procedure. However, either party may request additional findings.

The Commission shall present an appropriate judgment.

1 . Two cases containing dicta favoring the Commission’s position are distinguishable in that the Associations involved were not bona fide associations of farmers. Machinery Haulers Ass’n v. Agricultural Commodity Service, 86 MCC 5, and I. C. C. v. Nelson Cooperative Marketing Ass’n, W.D.Okl.1962, 209 F.Supp. 697. I. C. C. v. Jamestown Farmers Union Federated Cooperative Transp. Ass’n, D. Minn.1944, 57 F.Supp. 749, aff’d. 151 F.2d 403, a ease relied on by defendant, is also distinguishable. It concerned only transportation of merchandise and commodities between two bona fide cooperative associations.