State v. Lanesboro Produce & Hatchery Co.

Legislation against unfair competition in the purchase of butterfat by manufacturers or vendors seems to have got under way in L. 1909, c. 468; L. 1913, c. 230; L. 1917, c. 337; and L. 1921, c. 305, in all of which the intent to injure or destroy competition was included in the definition of the offense created. In L. 1923, c. 120, for the first time the sinister purpose was eliminated from the definition of the offense. The prosecution of the Fairmont Creamery Company followed, and the act was ultimately declared unconstitutional as lacking due process by the United States Supreme Court in Fairmont Creamery Co. v. Minnesota, 274 U.S. 1, 9,47 S.Ct. 506, 508, 71 L. ed. 893, 897, 52 A.L.R. 163, for the reason that, without the element of sinister intent in the definition of the offense, the statute had "no reasonable relation to the anticipated evil."

While the Fairmont Creamery case was under consideration by the United States Supreme Court, and doubtless because of some remark from the bench on the argument, L. 1927, c. 252, covering other farm products, eggs, and poultry, as well as butterfat, was enacted, obviously with the thought that permitting a purchaser to meet, but not overbid, prices offered by competitors would obviate the constitutional objections upon which the Fairmont Creamery case was expected to turn.

In L. 1937, c. 420, the 1927 law was reënacted with some additional provisions not here relevant. The 1937 law was held unconstitutional in State v. Northwest Poultry Egg Co.203 Minn. 438, 281 N.W. 753, because its definition of the offense was so vague and uncertain as to lack due process. That decision has stood until now. L. 1945, c. 122, enacted since the acts complained of in the case at bar, has changed from "actual" to "reasonable" the definition of costs required to be deducted. Obviously, this was done in an endeavor to eliminate the infirmities which resulted in the Northwest Poultry decision. No question is here raised as to the effect on this case of the change in definition.

The state relies heavily upon the opinions of this court in State v. Fairmont Creamery Co. 162 Minn. 146, 202 N.W. 714,42 A.L.R. 548, and in Id. 168 Minn. 378, 210 N.W. 163, 608, subsequently reversed by the Supreme Court of the United States in 274 U.S. 1, 47 S.Ct. 506, 71 L. ed. 893, 52 A.L.R. 163, and upon the dissenting opinions in State v. Northwest Poultry Egg Co. 203 Minn. 438, 281 N.W. 753. It also insists that the Fairmont Creamery case has been overruled by the Nebbia case and subsequent ones.

Defendant has made what it calls "Assignments of Error," which, of course, is not only unnecessary in a criminal case but does not serve to circumscribe the questions presented to this court if they are raised and argued by defendant. Such assignment is particularly out of place where the trial court made no ruling but has, as in this case, certified questions to this court.

I agree with Mr. Justice Thomas Gallagher that we should adhere to the holding in State v. Northwest Poultry Egg Co.203 Minn. 438, 281 N.W. 753, since the question of vagueness was there thoroughly threshed out and the majority of this court held that the act now under consideration was unconstitutional as lacking due process. We should not subject this court to the criticism that we are vacillating with every change of personnel and that lawyers will not know how to advise their clients or trial courts know what principles to rely on.

In my view, there are more compelling reasons than those stated in the Northwest Poultry case why we should hold that the statute under consideration should be held to lack due process. In that connection, it is important for us to bear in mind that we have a duty to perform in interpreting our own constitution and the due process clause contained therein. When we apply our state due process clause, we are not bound to follow any interpretive relaxation of the inhibitions of the Fourteenth Amendment made by the Supreme Court of the United States. We are bound by the decisions of that court as to what the due process clause of the Fourteenth Amendment prohibits; but, in interpreting our own clause, we are not bound to follow what that court says is not a violation of the Fourteenth Amendment. We should exercise our own judicial judgment as to what we deem a violation of our own constitution. Reed v. Bjornson, 191 Minn. 254, 261, 253 N.W. 102, 105; Highland Farms Dairy, Inc. v. Agnew, 300 U.S. 608, 613, 57 S.Ct. 549,552, 81 L. ed. 835, 840.

In McElhone v. Geror, 207 Minn. 580, 585, 292 N.W. 414, 417, this court had before it the so-called fair trade practices act, which prohibited the sale of merchandise below its cost "for the purpose or with the effect of injuring competitors and destroying competition." It seems clear from the expressions in that opinion that it was the view of this court that it was not due process to inhibit business practices that are not ordinarily harmful unless they are indulged in for the purpose of injuring competitors or destroying competition. In that case, the law was sustained because such purpose and effect were included in the definition of the offense created. Other courts of high standing have taken that view. Commonwealth v. Zasloff, 338 Pa. 457, 13 A.2d 67. 128 A.L.R. 1120, is a strong case on this point. There, as in McElhone v. Geror, the act under consideration was an inhibition against price cutting; but, unlike L. 1939, c. 403, the Pennsylvania act, like the act here under consideration, applied regardless of intent or of its effect upon competitors. It was held unconstitutional. See, also, for a like holding, State v. Packard-Bamberger Co. Inc. 123 N.J.L. 180, 8 A.2d 291. It seems to me that it is not without significance that the legislature adopted the theory in L. 1939, c. 403, that sinister intent and harmful effect were essential elements in legislation against unfair and competitive trade practices. If we hold that such elements are not necessary when ordinarily the practice inhibited is not harmful, we shall stand alone.

The majority opinion here takes the position that Fairmont Creamery Co. v. Minnesota, 274 U.S. 1, 47 S.Ct. 506,71 L.ed. 893, 52 A.L.R. 163, is no longer the law, and that particularly Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505,78 L. ed. 940, 89 A.L.R. 1469, has in effect overruled it. I do not so analyze the two cases. Both the Fairmont Creamery and the Nebbia cases are governed by the same principle — that the inhibition of the statute must have reasonable relation to theapprehended evil. Whether it has such relation is determined bywhether the prohibited practice produces evil consequences inordinary circumstances where business is carried on as usual. In both opinions the language used should be interpreted in the light of the question presented and the facts to which the law was applied. General statements culled from opinions without reference to the facts under consideration are of little or no value as authority and may be positively misleading when applied to problems wholly different in character. We have a concrete problem to solve, and it is my opinion that it can be solved by well-established principles.

In the Fairmont Creamery case, it was held that the evil sought to be remedied was high bidding, with the purpose to destroy competition, and that the principle was violated by prohibiting the exercise of private rights the exercise of which "does not ordinarily produce evil consequences, but the reverse." The court stated (274 U.S. 9, 47 S.Ct. 508,71 L.ed. 897, 52 A.L.R. 167):

"The real question comes to this — May the State, in order to prevent some strong buyers of cream from doing things which may tend to monopoly, inhibit plaintiff in error from carrying on its business in the usual way heretofore regarded as both moraland beneficial to the public and not shown now to beaccompanied by evil results as ordinary incidents? Former decisions here require a negative answer. We think the inhibition of the statute has no reasonable relation to theanticipated evil — high bidding by some with purpose to monopolize or destroy competition. Looking through form to substance, it clearly and unmistakably infringes private rights whose exercise does not ordinarily produce evil consequences, but the reverse." (Italics supplied.)

And in commenting upon the absence of intent from the definition of the crime, the court quoted with approval from Tyson and Brother v. Banton, 273 U.S. 418, 443, 47 S.Ct. 426,432, 71 L. ed. 718, 728:

"* * * One vice of the contention is that the statute itself ignores the righteous distinction between guilt and innocence, since it applies wholly irrespective of the existence of fraud, collusion or extortion * * * and fixes the resale price as well where the evils are absent as where they are present. It is notpermissible to enact a law which, in effect, spreads anall-inclusive net for the feet of everybody upon the chancethat, while the innocent will surely be entangled in itsmeshes, some wrong-doers also may be caught." (Italics supplied.)

(This court in McElhone v. Geror, 207 Minn. 580, 585,292 N.W. 414, 417, quoted the italicized language as applied to persons "carrying on business in a legitimate way.")

In the Nebbia case, 291 U.S. 502, 54 S.Ct. 505,78 L. ed. 940, 89 A.L.R. 1469, the evil feared was that unrestrained competition would prevent producers from receiving a reasonable return for their labor and investment, which would threaten the relaxation of vigilance against contamination and would threaten the destruction of an industry vital to the health and prosperity of the state. It was held that the means employed (fixing adequate prices) had a (291 U.S. 525, 54 S.Ct. 511,78 L. ed. 950) "real and substantial relation to the object sought to be attained"; so there is no conflict so far as the principle here involved is concerned between the Nebbia and the Fairmont Creamery cases. They both apply the same principle but reach different results, due to the fact that in one case the definition of the crime had no reasonable relation to the evil sought to be eliminated; whereas, in the other case, the definition did have such reasonable relation. In the Nebbia case, it could hardly be held otherwise than that the maintenance of the fixed prices was necessary to restrain the ruthless competition then going on in the milk business. In that case, the usual course of business under the conditions there involved produced the evil consequences sought to be cured. There was too much competition for the good of the industry and the health of the people of New York.

In the Fairmont Creamery case, it stands adjudicated by the Supreme Court of the United States that (274 U.S. 9,47 S.Ct. 508, 71 L. ed. 897, 52 A.L.R. 167):

"* * * the inhibition of the statute has no reasonablerelation to the anticipated evil — high bidding by some with purpose to monopolize or destroy competition. Looking through form to substance, it clearly and unmistakably infringesprivate rights whose exercise does not ordinarily produce evilconsequences, but the reverse." (Italics supplied.)

Thus, it is obvious that much more was decided than that the statute was faulty because it omitted permission to meet competitive prices. The case really turned on the application of the principle discussed above.

Perhaps the most persuasive answer to the contention that the Nebbia case in effect overruled the Fairmont Creamery case is contained in the opinion of the three-judge federal court of the Minnesota district in the case of the Great Atlantic Pacific Tea Co. v. Ervin (D.C.) 23 F. Supp. 70, wherein Circuit Judge Sanborn and District Judges Nordbye and Joyce rendered an extraordinarily able and thorough opinion in which many of the questions involved in the various provisions of the statute known as the Minnesota Fair Trade Practices Act, L. 1937, c. 116, were involved. While much of the discrimination there inhibited was that perpetrated (23 F. Supp. 72) "intentionally, for the purpose of destroying the competition of any regular established dealer in such commodity, * * * or to prevent the competition of any person," there were some features of the inhibition that applied regardless of intent. That court, having before it both the Nebbia and the Fairmont Creamery cases, did not regard the Nebbia case as overruling the Fairmont Creamery case. It defined the principle involved in these cases as follows (23 F. Supp. 76):

"The guaranty of due process demands only that the meansshall not be unreasonable, arbitrary, or capricious, and thatthey shall have a real and substantial relation to the objectsought to be attained," citing the Nebbia case.

In discussing Central Lbr. Co. v. South Dakota, 226 U.S. 157,33 S.Ct. 66, 57 L. ed. 164, which involved a statute which included sinister intent in its inhibitions and which in the Ervin case was cited by the defendants as justifying their position, the court distinguished the South Dakota case from the paragraph of the Minnesota statute which did not involve intent, and cited the Fairmont Creamery case as determinative of the question of the validity of the paragraph of the Minnesota law which they were then considering (23 F. Supp. 78) . "There [in the Fairmont Creamery case], as here, the statute applied regardless of intent or purpose," and the court quoted with approval the part of the Fairmont Creamery decision which I have quoted above, including the test as to theexercise of rights which do not ordinarily produce evilconsequences.

In short, the court holds that the restatement in the Nebbia case of the rule as to what business is subject to legislative regulation does not leave the legislature free of all restraints in regulating business. It must still respect the due process clause, which demands that inhibitions must have areasonable relation to the object sought to be attained and that whether it does have that relation depends on whether, under ordinary circumstances, where thereis no sinister intent, the inhibited practice has no harmfulconsequences.

Even as amended, the statute before us allows a dealer to meet, but not to overbid, his competitor. Overbidding, if innocent of sinister intent or harmful effect, is certainlyincident to normal practice in a competitive market. It benefits rather than harms the producer unless indulged in in furtherance of a purpose and with the effect of eliminating competition.

Olsen v. Nebraska ex rel. Western Reference Bond Assn. Inc.313 U.S. 236, 61 S.Ct. 862, 85 L. ed. 1305, 133 A.L.R. 1500, relied on by the state, merely involved a limitation on commissions which employment brokers might charge persons for whom they found employment.

To summarize, it strikes me, first, that we should follow our own decision in the Northwest Poultry case that the statute here under consideration lacks clear definition of the crime sought to be created, and, second, that the United States Supreme Court has not overruled, by implication or otherwise, the principle recognized in the Fairmont Creamery case; that, even if it had, such interpretive relaxation of the rule of due process under the Fourteenth Amendment is not controlling in our interpretation of our own due process clause; that, since paying different prices in different sections of the state is not unusual or harmful in the ordinary course of competitive business and is compulsory under the present statute on account of the variance in required deductions where there is no competitor, the forbidding of such practice, unless related to an intent to destroy or injure competition, lacks due process under our own constitution.

I submit that the majority opinion leaves the bench and bar as well as dealers in farm products without intelligible guidance in determining proper conduct, unless, indeed, it is the court's purpose to establish the rule that the legislature is free of all restraints in regulating business. That, in effect, is the state's contention here.