to qualify as a bona fide association, then under no circumstances does it have any rights or privileges under the exemption of section 203(b)(5). As previously noted, Cache Valley was duly organized some years ago under the statutes of Utah, and it is made up of about 1,400 farmer members, all of which deal in dairy products. The association has cheese and other processing plants at Smithfield, and the involved farmers act together for the purpose of processing and marketing their dairy products. Cache Valley owns motor carrier equipment, and its principal transportation business is the movement of milk from the farms to the processing plants, and the outbound movement of the finished products from its place of business to the purchaser or consumer. There is no member that has more than one vote, no dividends are paid which are in excess of 8 per centum per annum, and the association serves a limited number of nonmembers. Consequently, services for the latter are far below bounds or restriction contained in the third part of section 1141j of the Marketing Act. The Bureau did not challenge the association's status under the Marketing Act, and in fact it conceded that the concern is a bona fide cooperative association. Based upon the evidence submitted, the examiner concludes that Cache Valley is a bona fide cooperative within the meaning of the Marketing Act. Although Cache Valley is a bona fide cooperative, its powers and duties under the Marketing Act must be determined before a decision can be reached with respect to the transportation services which may be performed under the exemption of section 203(b) (5). In other words, it can perform no greater transportation functions than are authorized and are necessary for the performance of the farm services or business for which it was established. As previously stated, the declared purpose of the Marketing Act is to promote the effective merchandising of agricultural commodities in interstate and foreign commerce so that the industry of agriculture will be placed on a basis of economic equality with other industries, and to that end to protect, control, and stabilize the currents of interstate and foreign commerce in the marketing of agricultural commodities and their food products. Considering the Marketing Act as a whole, and especially section 1141j, it is clear that a cooperative association is one in which farmers, having the mutual interest, act together in processing, preparing for market, and marketing products of persons engaged in farming or in which farmers act together for the purpose of purchasing, testing, grading, processing, distributing, and/or furnishing farm supplies and/or farm business services. Since cooperatives are created for and are to be operated for the benefit of farmers in the development and promotion of the agricultural industry, it is difficult to believe that one can read into this act a specific authorization to perform, in addition to prescribed duties relating to agriculture, services for nonmembers which have no interest whatever in farming or in a farm business. The examiner concludes that an assocition's rights, privileges, and activities are limited under the provisions of the Marketing Act to those which are agricultural in nature or in furtherance of a fam business, and that its transportation activities must carry the same limitation if the exemption of section 203(b)(5) is to apply. In other words, under the exemption such an association cannot transport for nonmembers 2 commodities not related to or an actual part of an agricultural or a farm business. To be more specific, the nonmember transportation activities of a cooperative association, in order to take advantage of the exemption under section 203(b)(5), must be limited to the handling of farm products, farm supplies, or those products or commodities which are a legitimate part of a farm business. A contrary holding would leave the door open for any agricultural cooperative to engage indiscriminately and without restriction (commoditywise), in the general truck business at the expense of authorized motor carriers contrary to the intent of Congress. Cache Valley has been conducting operations in interstate commerce which may not be lawfully performed under the exemption provided in section 203(b) (5). The transportation in interstate commerce of the commodities described in appendix B require authority from the Commission. Each of the other respondents are or have been participating in this unlawful transportation, and although respondents Colorado Fuel & Iron Corporation, Gates Rubber Company, Strevell Patterson Co., and Anderson Coach Co. had discontinued using the services of Cache Valley prior to the hearing, they were made parties to the stipulation in which the latter and the Bureau are a part. In view thereof, the recommended cease and desist order herein will involve all 10 respondents. 2 These clarifying words have been added to the examiner's statement. 96 M.C.C. APPENDIX B Interstate traffic handled for nonmembers The commodities were handled during a 14-month period (from January 1, 1961, to February 28, 1962). The following involve a total of 447 truckloads which moved in interstate commerce. Thirteen loads of steel from Colorado Fuel & Iron Corporation, steel article manufacturer and distributor, of Pueblo, Colo., to Colorado Fuel & Iron Corporation, Salt Lake City, Utah. Twenty loads of steel from Colorado Fuel & Iron Corporation, Pueblo, Colo., to and for Strevell Patterson Co., wholesale distributor of hardware, Salt Lake City, Utah. Two shipments of lumber from Frank Paxton Lumber Co., Denver, Colo., to and for Anderson Coach Co., mobile home manufacturer, Logan, Utah. Twenty-four loads of tires and rubber products from Gates Rubber Company, rubber manufacturer and distributor, Denver, Colo., to Gates Rubber Company, Salt Lake City, Utah. Eight loads of roofing from Ruberoid Co., Denver, Colo., to and from Gresham Roofing Co., roofing supplier and job roofer, Ogden, Utah. Two hundred and ten loads of roofing from Ruberoid Co., Denver, Colo., to and for Harrington & Company, roofing supplier, Salt, Lake City, Utah. Three loads of roofing from Ruberoid Co., Denver, Colo., to and for Cantwell Bros. Lumber Co., retail and wholesale building material supplier, Smithfield, Utah. One hundred and thirty-one loads of grocery store merchandise from various suppliers in Los Angeles and San Francisco, Calif., areas to and for American Food Stores, wholesale division, of Mayfair Markets, Inc., Ogden, Utah. Nine loads of paper products from Dixon Paper Co., paper products converter and distributor, Denver, Colo., to its warehouse in Salt Lake City, Utah. One load of beer from Denver, Colo., to and for Big 4 Distributing Co., beer distributor, Provo, Utah. Four loads of insulation from Denver, Colo., to and for Teeples Insulation Co., insulation contractor, Logan, Utah. Eleven loads of wire products, steel, nails, and ties from Pueblo, Colo., to and for Salt Lake Hardware, general hardware business, Salt Lake City, Utah. One load of clothes hangers from and for Cleaners Hanger Co., hanger manufacturer, Minnequa, Colo., to Salt Lake City, Utah. Three loads of steel from Pueblo, Colo., to and for Walton Feed Co., general feeds, Montpelier, Idaho. One load of tile from Denver, Colo., to and from Masons Supply Co., building supplies, Logan, Utah. One load of pipe from Denver, Colo., to and for Standard Plumbing Supply Co., plumbing supplier, Ogden, Utah. One load of clay brick from Denver, Colo., to and for Jack Whitlock, construction contractor, Logan, Utah. One load of flue pipe from Denver, Colo., to and for Gladding McBean Co., building material supplier, Salt Lake City, Utah. Two loads of bakers' supplies from Denver, Colo., to and for W. H., Bintz Co., bakery goods supplier, Salt Lake City, Utah. One load of lumber from Denver, Colo., to and for Ace Hill & Fixture Co., fixture and lumber supplier, Logan, Utah. NOTE: The shippers and receivers of the above described shipments are not members of the association, nor are they engaged in agricultural production or the production of milk. In each instance transportation charges were assessed by the association, and payments were made by respondents on those shipments which they were parties thereto. ORDER At a Session of the INTERSTATE COMMERCE COMMISSION, Division 1, held at its office in Washington, D.C., on the 23rd day of December A.D. 1964. No. MC-C-3876 CACHE VALLEY DAIRY ASSOCIATION INVESTIGATION OF OPERATIONS This proceeding having been duly instituted, and full investigation of the matters and things involved having been made, and the said division, on the date hereof, having made and filed a report herein containing its findings of fact and conclusions thereon, which report is hereby referred to and made a part hereof: It is ordered, That Cache Valley Dairy Association, Dixon Paper Co., Anderson Coach Co., Cantwell Bros. Lumber Co., Colorado Fuel & Iron Corporation, Gates Rubber Company, Graham Roofing Co., E. N. Harrington, doing business as Harrington & Company, Mayfair Markets, Inc., and Strevell Patterson Co., jointly and severally, cease and desist forthwith and thereafter refrain and abstain from all operations or participation in interstate or foreign commerce, of the character found in said report to be unauthorized and in violation of the said act unless authorization for such operations is obtained. And it is further ordered, That the statutory effective and compliance date of this order be, and it is hereby, fixed as February 8, 1965. By the Commission, division 1. [SEAL] HAROLD D. McCoy, Secretary. United States Court of Appeals for the Ninth Circuit (No. 19,700) NORTHWEST AGRICULTURAL COOPERATIVE ASSOCIATION, INC., A CORPORATION, APPELLANT, v. INTERSTATE COMMERCE COMMISSION, APPELLEE [August 10, 1965] Appeal from the United States District Court for the District of Oregon Before: MADDEN, Judge of the Court of Claims and HAMLEY and BROWNING, Circuit Judges BROWNING, Circuit Judge: The Northwest Agricultural Cooperative Association seeks review of an injunc tion prohibiting it from engaging in certain trucking operations without authorization by the Interstate Commerce Commission.1 The following facts were established by stipulation and by the uncontradicted affidavit of Northwest's president. Northwest is a cooperative composed exclusively of farmers. It was organized to transport the farm products of members to market at less than it would cost if each member arranged separate transportation. The volume of farm supplies brought back from the market areas for members does not equal the volume of farm products shipped to those areas. Consequently, Northwest back-hauls non-farm commodities. This is the traffic enjoined. In a four-month period this traffic produced $41,000 in revenues out of a total of $230,375. If Northwest is denied this income, its cost of transporting farm products to market will exceed the cost of available common carriage, and Northwest will be forced to discontinue its trucking operation. Northwest contends that its trucking operation is exempted from Commission economic regulation by section 203(b)(5) of the Interstate Commerce Act (49 U.S.C.A. § 303(b) (5)), which excludes from such regulation "motor vehicles controlled and operated by a cooperative association as defined in the Agricultural Marketing Act. *** "2 We agree. I Section 203(b)(5) was added to the Interstate Commerce Act by floor amendment. The legislative history consists of a brief discussion in the House.3 1 The district court's opinion is reported in 234 F. Supp. 496 (D. Or. 1964). The 2 Sec. 203(b) of the Interstate Commerce Act (49 U.S.C.A. § 303(b) reads in part as follows: (b) Nothing in this chapter, except the provisions of section 304 of this title relative to qualifications and maximum hours of service of employees and safety of operation or standards of equipment shall be construed to include *** (4a) motor vehicles controlled and operated by any farmer when used in the transportation of his agricultural (including horticultural) commodities and products thereof, or in the transportation of supplies to his farm; or (5) motor vehicles controlled and operated by a cooperative association as defined in the Agricultural Marketing Act, approved June 15, 1929, as amended, or by a federation of such cooperative associations, if such federation possesses no greater powers or purposes than cooperative associations so defined; or (6) motor vehicles used in carrying property consisting of ordinary livestock, fish (including shell fish), or agricultural (including horticultural) commodities (not including manufactured products thereof), if such motor vehicles are not used in carrying any other property, or passengers, for compensation (emphasis added). 79 Cong. Rec. 1218-21 (1935). statements made during the short debate indicate that Congress intended to accomplish the result which the statutory language plainly states: that is, to exempt from economic regulation under the Interstate Commerce Act trucking operations conducted by organizations which satisfy the definition of a "cooperative association" in the Agricultural Marketing Act.1 As Congressman Jones said in introducing the amendment which became section 203(b)(5) of the Interstate Commerce Act, "it would exempt cooperative associations [which] comply with the" Agricultural Marketing Act. Nothing in the debate suggests that Congress intended to limit the type of commodity hauled or otherwise condition the exemption granted any organization which qualified as an Agricultural Marketing Act "cooperative association." The absence of a commodity limitation in section 203(b) (5) is made conspicuous by the presence of such limitations in the exemption provisions which precede and follow section 203(b)(5). See note 2. The conclusion that this difference was deliberate is strengthened by the fact that the exemption provisions in section 203(b) (4a) and section 203(b)(5) were initially stated as clauses in a single sentence. Subsequent to the enactment of section 203(b) (5), bills were introduced in Congress at the request of the Commission to condition the section 203(b)(5) exemption upon the nature of the transportation activities involved Congress took no action on these proposals. 8 For these reasons we conclude that if Northwest's transportation activities are to be limited in the manner suggested by the Commission, the limitation cannot be based upon section 203 (b) (5) of the Interstate Commerce Act, but must be found in the definition of a cooperative association in the Agricultural Marketing Act. II The Agricultural Marketing Act defines a cooperative association as "any association in which farmers act together in processing, preparing for market, handling, and/or marketing the farm products of persons so engaged" or "in which farmers act together in purchasing, testing, grading, processing, distributing, and/or furnishing farm supplies and/or farm business services." See note 4. Transporting farm products and farm supplies, which is Northwest's primary activity, falls within the statutory definition. Moreover, the parties agree that a cooperative does not lose its status by engaging in activities other than its primary statutory activity, so long as they are incidental to the primary activity and necessary to its effective performance. This would appear to end the case, since on the uncontradicted facts Northwest's transportation of non-farm products and supplies was incidental and necessary to its farm-related transportation The pertinent provision of the Agricultural Marketing Act (12 U.S.C.A. § 1141)(a)) reads as follows: (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, however, 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. And in any case to the following: 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. $79 Cong. Rec. 12218 (1935). Motor vehicles controlled and operated by any farmer and used in the transportation of his agricultural commodities and products thereof, or in the transportation of supplies to his farms; or motor vehicles controlled and operated by a cooperative association as defined in the Agricultural Marketing Act. ... (79 Cong. Rec. 12218 (1935)). 7 S. 677, 88th Cong., 1st Sess. (1963); H.R. 3770, 88th Cong. 1st Sess. (1963). dental to, and I.C.C. v. Jamestown Farmers Union, 57 F. Supp. 749, 753 (D. Minn. 1944), aff'd 151 F.2d 403 (8th Cir. 1945) ("But if the cooperative is predominantly engaged in one or more of the activities specified in the Agricultural Marketing Act, and if its business with nonmembers is in an amount not greater in value than the total amount of the business that it transacts with its own members, such association does not lose its fundamental character as a cooperative. In other words, if such activities are merely necessary for the effectuation of the cooperative's principal activities as embraced wit of the cooperative remains unimpaired"); Machinery Haulers Ass'n v. Agricultur M.C.C. 5, 24 (1961) ("Thus, transportation rendered by a farmers' cooperative, essential to, and in furtherance of, the lawful purposes of the cooperative as defin is entitled to the benefits of the partial exemption"). This is also the Secretary of Agriculture's administrative interpretation of the the status orv., 86 tion is Act, both in character and in amount-incidental because limited to otherwise empty trucks returning from hauling member farm products to market, and producing a small return in proportion to Northwest's income from trucking farm products and farm supplies; necessary because it is not economically feasible to operate the trucks empty on return trips and because the additional income obtained is no more than that required to render performance of the cooperative's primary farm transportation service financially practicable. The Commission advances two arguments against this conclusion, the first based upon certain language of the Agricultural Marketing Act, the second upon material in the legislative history. 1. The Commission relies upon the provision in the Agricultural Marketing Act that a cooperative association "shall not deal in farm products, farm supplies, and farm business services with or for non-members in an amount greater in value that the total amount of such business transacted by it with or for members." See note 4. The Commission contends that this express limitation necessarily implies a further limitation that a cooperative association may not deal at all in non-farm products, supplies, or business services. The Commission's reading of the statutory language is unjustifiably strict. Reading the word "farm" this narrowly would exclude even incidental and necessary non-farm business. The Commission overlooks the obvious purpose of the provision to require simply that the cooperative association conduct at least half of its business with members. By statutory definition, a cooperative association's business is that of dealing in "farm products, farm business services, and farm supplies." See note 4. Thus the phrase relied on by the Commission simply describes the primary business of any cooperative association. It should not be interpreted as excluding particular transactions which, though not directly farm-related, are an incidental and necessary part of the cooperative association's general business, any more than should the description of permissible cooperative association activities in the first sentence of the statutory definition. The Commission argues that unless the transportation of non-farm products and supplies is absolutely prohibited, it cannot be limited at all. Farm business with non-members is limited to fifty per cent of a cooperative association's total business; but, argues the Commission, this limitation applies only to "farm" business, and therefore unless non-farm business is totally prohibited, the cooperative might engage in non-farm business with non-members without any limit at all. The argument rests on a faulty premise. A cooperative will retain its exemption only so long as it remains in essential character a "cooperative association" described in the statutory definition. Thus the activities in which it engages must be such that the cooperative can be fairly described as a farmer organization primarily engaged in marketing farm products for farmers or purchasing, testing, or furnishing farm supplies or farm services for farmers and operating for the benefit of the members of the cooperative in their capacity as producers of farm products or purchasers of farm supplies or farm business services. A cooperative would not be of the character contemplated by the statute if its non-farm related business exceeded that which was necessary and incidental to its farm-related business, and in no conceivable circumstances could non-farm related business approach fifty per cent of the total and remain incidental and necessary to that which was farm-related. We are satisfied that the language of the Agricultural Marketing Act does not support the limitation for which the Commission argues. 2. The legislative history upon which the Commission relies consists of statements of members of Congress that cooperative associations qualifying under the Agricultural Marketing Act should not be permitted to enter "any line of business, but "only those connected with farm operations"; that they should furnish business services "not for any others," but "for themselves"; 10 and, more specifically, that they should not "go into the general trucking business." 11 There is nothing in these or any other relevant legislative materials suggesting that Congress intended to impose an absolute prohibition upon transportation by an exempt cooperative association of commodities not intended for use in farm operations, without regard to whether such transportation was necessary and incidental to the performance of a primary activity of transporting farm products and supplies. Northwest is not engaged in a "general trucking business." Its trucking operation, viewed as a whole, is a farm service performed jointly by Northwest's members "for themselves." The return hauls enjoined are "connected with farm 10 Transcript of Hearing, Committee on Banking & Currency, 74th Cong. 1st Sess., S. 1384, Part 2, pp. 63-64. 11 79 Cong. Rec. 12219 (1935). |