Source: https://supreme.justia.com/cases/federal/us/293/194/
Timestamp: 2019-04-23 02:37:31+00:00

Document:
1. The presumption attaching to legislative action is a presumption of fact -- a presumption of the existence of factual conditions supporting the legislation; it is a rebuttable presumption. P. 293 U. S. 209.
2. When a classification made by the legislature is called in question, if any state of facts reasonably can be conceived that would sustain it, there is a presumption of the existence of that state of facts, and he who assails the classification must carry the burden of showing by a resort to common knowledge or other matters which may be judicially noticed, or to other legitimate proof, that the action is arbitrary. P. 293 U. S. 209.
3. That a classification made by a statute is arbitrary may appear on the face of the statute or by facts admitted or proved. P. 293 U. S. 210.
4. Where legislative action is suitably challenged and a rational basis for it is predicated of the particular economic facts of a given trade or industry which are outside the sphere of judicial notice, those facts are properly the subject of evidence and of findings. P. 293 U. S. 210.
5. With the notable expansion of the scope of governmental regulation, and the consequent assertion of violation of constitutional rights, it is increasingly important that, when it becomes necessary for the Court to deal with the facts relating to particular commercial or industrial conditions, they should be presented concretely with appropriate determinations upon evidence, so that conclusions shall not be reached without adequate factual support. P. 293 U. S. 210.
6. That provision of the New York Milk Control legislation which permits dealers not having a "well advertised tradename" to sell milk at a minimum price lower than the minimum imposed on dealers having such a name, and which is limited in its operation to sales in the City of New York, does not appear to have been enacted as a precaution against monopoly, nor in support of a policy to increase the sales of milk. P. 293 U. S. 205.
having a "well advertised tradename" may have enjoyed before the State's scheme of fixing minimum prices to producers and consumers was adopted, and (2) as a means of insuring a return to old competitive conditions should that scheme be abandoned cannot be determined without knowledge of the particular trade conditions in the City of New York. Those conditions lie largely beyond the range of judicial notice, and, in a case disposed of below, without evidence or findings, by sustaining a motion to dismiss the bill for failure to state a cause of action, this Court cannot undertake to glean the factual basis of the provision from tables and statements in legislative reports not addressed to the subject, or from affidavits submitted to the court below on a motion for a preliminary injunction, which fell with the dismissal of the bill. P. 293 U. S. 207.
8. A New York statute and administrative regulations fixing minimum prices for milk sold in New York City established a differential to the disadvantage of dealers having "a well advertised tradename," requiring in effect that the milk they dealt in be priced at one cent more per quart than milk dealt in by competitors. One of the four dealers classed within the quoted designation sued to enjoin enforcement of the differential, alleging, among other things, that it deprived the plaintiff of a large part of the market for its milk and seriously impaired the value of its property and goodwill, and that it was arbitrary, oppressive, and discriminatory, without any relation to public health or public welfare or to any of the objects for which the statute was enacted. Upon this ground, the bill charged that the statutory provision violated the due process and equal protection clauses of the Fourteenth Amendment.
(1) That it was error to dismiss the bill as insufficient on its face to state a cause of action. Pp. 293 U. S. 203, 293 U. S. 213.
(2) That the plaintiff should be permitted to proceed with the cause; the motion for preliminary injunction should be heard and decided; there should be a final hearing on pleadings and proofs, and the facts should be found and conclusions of law stated as required by Equity Rule 70 1/2. P. 293 U. S. 213.
Appeal from a decree of the District Court, constituted of three judges, which dismissed, on a motion equivalent to a demurrer, a bill brought by the Borden Company against Baldwin, Commissioner of Agriculture and Markets of the State of New York, the Attorney General of the State, and five district attorneys, to enjoin enforcement of a provision of the New York Agriculture and Markets Law added by c. 126, Laws of 1934, § 258(q).
Complaining that the fixing of this differential, in respect to sales of the same commodity, was an invasion of rights guaranteed by the Fourteenth Amendment, plaintiff brought this suit to enjoin enforcement. An interlocutory injunction was sought, and a court of three judges was convened. Defendants moved to dismiss the complaint upon the grounds that it failed to state a cause of action in equity, and that the provision of the statute was constitutional. Affidavits were presented on both sides and the case was heard on the motion for injunction and the motion to dismiss. In view of the cumulative penalties provided, the court had no doubt of its jurisdiction to pass upon the question of constitutionality. Dealing with the case in that aspect, the court held that the complaint did not state a cause of suit, and dismissed it for that reason. The court regarded the application for an interlocutory injunction as necessarily falling with the complaint, and hence made no findings of fact., 7 F.Supp. 352, 354. The plaintiff appeals.
states that the loss in trade it thus suffers amounts to not less than 25,000 quarts of bottled milk daily.
Plaintiff alleges that the maintenance of this differential, with the consequent privilege to its competitors and restraint upon itself, is "arbitrary, oppressive and discriminatory," and has "no relation to the protection of the public health or the public welfare or to any of the objects or purposes" for which the statute was enacted, and, upon this ground, plaintiff charges that the statutory provision violates the due process and equal protection clauses of the Fourteenth Amendment. Inability to obtain a license, unless plaintiff agrees in writing to comply with the statute and orders, and the prohibitive character of the penalties prescribed, are assigned as affording the basis of equitable jurisdiction.
the discrimination. As the court below said, the statute seeks to take away from dealers who have well advertised tradenames "economic advantages which were not only theretofore lawful, but which have generally been commended and fostered." It strikes at the advantage acquired by dealers through the reputation of their brands and the consequent disposition of the public to buy them. In view of the peculiar nature and effect of this provision, and of the novel and important constitutional question that it presents, we think that the complaint should not have been dismissed for insufficiency upon its face, and that the plaintiff is entitled to have the case heard and decided with appropriate findings by the trial court, unless it satisfactorily appears, upon facts of common knowledge or otherwise plainly subject to judicial notice, that the provision should be sustained as resting upon a rational basis consistent with constitutional right. Accordingly, we pass to the consideration of the various grounds that are suggested as adequate support for the legislative action.
thoroughly regimented and regulated by the New York as the milk industry." For many years, it has been "progressively subjected to a larger measure of control." Nebbia v. New York, supra, pp. 291 U. S. 521-522. This control has been in the interest of sanitary precautions and proper methods of production and trade. But, because of the serious condition of the industry by reason of decline in prices and demoralizing practices, as reported by a legislative committee after an elaborate examination, and upon the committee's recommendations, the legislature has now proceeded to price control. The legislative committee did not, however, recommend the fixing of the differential here in question, and hence did not state grounds in support of such a discrimination. [Footnote 7] But, in considering possible grounds, we are aided by the suggestions which the Attorney General of the State and the counsel for the Department of Agriculture and Markets, with their special experience, have been able to bring forward.
of the differential, need not be, in any sort of combination or acting otherwise than in lawful competition with each other, as well as with other dealers. The differential hits each dealer having a well advertised tradename, regardless of the extent of that dealer's trade. That may be large or small. The court below said in its opinion that the four distributors determined by the department to have well advertised tradenames sell about 35 percent of the bottled milk that is sold to stores in the City of New York, and this is also stated in appellant's brief. That appears to be the amount of the described trade of the entire group, which are united only by the common characteristic that each member has a well advertised tradename. How much of the trade each of the four distributors may have does not appear. [Footnote 8] So far as the criterion of the statute is concerned, that makes no difference. If the statutory provision is sustained as to Borden's on the simple showing of a well advertised tradename, without more, it must also be sustained as to every other dealer with a well advertised tradename -- those now on the list and those which the state authority may hereafter place there -- no matter how small a part of the trade the dealer may have, or how independent of any connection with anyone else, or how free from any improper trade practice or lacking in monopolistic opportunity such a dealer may be.
General and the counsel for the Department of Agriculture and Markets. The answer is made that whatever opportunity there may be for increased sales lies in the lower price, and not in the differential. If it be assumed that the lower price is a reasonable minimum and that it favors sales, the maintenance of the differential prevents the plaintiff and others in like case from resort to it.
of their buying advantage by compelling all dealers to buy from producers at prices fixed according to utilization of the milk;" that this regulation involved "a stern readjustment of former competitive conditions," and the question was whether the independents should also be deprived of their selling advantage. The point is also made that the milk control law purports to be an emergency measure, and that the legislature was entitled to protect existing opportunities of the independent dealers so that, if the emergency ceased and price control were abandoned, there could be a return to competitive conditions without such an elimination of dealers as might be caused by a temporary period of compulsory minimum prices on a uniform scale.
The factual basis of this contention is disputed, and there are no findings disclosing it. Appellant asserts that there was not at any time any customary or accepted difference in price between the milk sold by it under its tradename and the milk of its competitors who are now favored by the fixed differential. And reference is made to the disturbed state of the trade, preceding the enactment of the milk control law, and to the effect of the ban imposed by local ordinance upon the sale of "loose milk," which led to changes in methods of distribution and to price adjustments from time to time in order to meet competition.
principle that the State has a broad discretion in classification, in the exercise of its power of regulation, is constantly recognized by this Court. Still, the statute may show on its face that the classification is arbitrary (Smith v. Cahoon, 283 U. S. 553, 283 U. S. 567) or that may appear by facts admitted or proved. Southern Ry. Co. v. Greene, 216 U. S. 400, 216 U. S. 417; Air-Way Electric Appliance Corp. v. Day, 266 U. S. 71, 266 U. S. 85; Concordia Fire Insurance Co. v. Illinois, 292 U. S. 535, 292 U. S. 549. Or, after a full showing of facts, or opportunity to show them, it may be found that the burden of establishing that the classification is without rational basis has not been sustained. Lindsley v. Natural Carbonic Gas Co., supra; Rast v. Van Deman & Lewis Co., 240 U. S. 342; Radice v. New York, 264 U. S. 292; Clarke v. Deckebach, supra; Ohio Oil Co. v. Conway, 281 U. S. 146; Tax Commissioners v. Jackson, 283 U. S. 527. But where the legislative action is suitably challenged, and a rational basis for it is predicated upon the particular economic facts of a given trade or industry, which are outside the sphere of judicial notice, these facts are properly the subject of evidence and of findings. With the notable expansion of the scope of governmental regulation, and the consequent assertion of violation of constitutional rights, it is increasingly important that, when it becomes necessary for the Court to deal with the facts relating to particular commercial or industrial conditions, they should be presented concretely with appropriate determinations upon evidence, so that conclusions shall not be reached without adequate factual support.
authority within its sphere, and in enforcing individual rights, shall not proceed upon false assumptions.
As the court below said, no precedents come very close to the instant case. In Rast v. Van Deman & Lewis Co., supra, the facts were fully disclosed (pp. 240 U. S. 345-347), and it was held that the use of profit-sharing coupons and trading stamps constituted a distinct method of doing business justifying license taxes (p. 240 U. S. 357). The Court pointed out that the complainants' schemes did not rest with mere advertising, with "identification and description, apprising of quality and place," where the "acquisition of the article to be sold constitutes the only inducement to its purchase" according to the "practice of old and familiar transactions," but that those schemes tempted by a promise of a value greater than the article sold, and hence might be thought to be a "lure to improvidence" (p. 240 U. S. 365). See also Tanner v. Little, 240 U. S. 369. In State Board of Tax Commissioners v. Jackson, supra, where a license tax with respect to chain store operation was upheld, evidence had been received and considered by the District Court, but that court did not go beyond a partial summary of the facts and general conclusions of law. We said that, had Equity Rule 70 1/2 been in force at the time of the trial, we should feel constrained to remand the case with directions to make findings of fact (p. 283 U. S. 533); but, in the circumstances, the Court proceeded to summarize the proofs, and, on a full examination of the factual differences between chain stores and individually owned units, reached the conclusion that these differences afforded a basis for the tax assailed (pp. 283 U. S. 534-536, 283 U. S. 541). See also Liggett Co. v. Lee, 288 U. S. 517, 288 U. S. 532.
been brought to restrain the enforcement of an order of the Rent Commission of the District of Columbia cutting down rents for apartments. Plaintiff alleged that the emergency which had been held to justify the rent measures (sustained in Block v. Hirsh, 256 U. S. 135), had ceased. We said that the plaintiff's allegations could not "be declared offhand to be unmaintainable," and that it was not impossible "that a full development of the facts" would show them to be true, and, in that case, the operation of the statute would be at an end (p. 264 U. S. 548). Before deciding the question, we found that it was "material to know the condition of Washington at different dates in the past," and that "obviously the facts should be accurately ascertained and carefully weighed." We said that this could be done more conveniently in the Supreme Court of the District than here, and, for this reason, the judgment below, dismissing the bill, was reversed, and the cause was remanded for appropriate ascertainment of the facts (p. 264 U. S. 549).
with well established precedents. See Estho v. Lear, 7 Pet. 130; Chicago, M. & St. P. Ry. Co. v. Tompkins, 176 U. S. 167, 176 U. S. 179; United States v. Rio Grande Dam & Irrigation Co., 184 U. S. 416, 184 U. S. 423; Lincoln Gas & Electric Light Co. v. Lincoln, 223 U. S. 349, 223 U. S. 364.
A similar course should be taken here. While the complaint is lacking in the specific and definite allegations as to trade conditions which would be appropriate to the plaintiff's assertions in supporting its attack on the statute, we think that the plaintiff should not be refused standing in court upon the allegations made. As we do not approve the procedure adopted below, we do not pass upon the ultimate question of the constitutionality of the statute. The plaintiff should be permitted to proceed with the cause; the motion for preliminary injunction should be heard and decided, and the cause should proceed to final hearing upon pleadings and proofs; the facts should be found and conclusions of law stated as required by Equity Rule 70 1/2.
Laws 1933 (N.Y.), chap. 158; see Nebbia v. New York, 291 U. S. 502.
Order of May 5, 1933. The four dealers thus designated were: "Borden's Farm Products Co., Inc., Borden;' Sheffield Farms Co., Inc., `Sealect;' Dairymen's League Co., `Dairylea;' and M. H. Renken Dairy Co., `Renken.'"
Laws of 1934 (N.Y.), chap. 126.
"It shall not be unlawful for any milk dealer who, since April tenth, nineteen hundred thirty-three, has been engaged continuously in the business of purchasing and handling milk not having a well advertised tradename in a city of more than one million inhabitants to sell fluid milk in bottles to stores in such city at a price not more than one cent per quart below the price of such milk sold to stores under a well advertised tradename, and such lower price shall also apply on sales from stores to consumers; provided that in no event shall the price of such milk not having a well advertised tradename be more than one cent per quart below the minimum price fixed for such sales to stores in such a city."
The Act of 1934, like the preceding act (§ 301), defines "store" as meaning "a grocery store, hotel, restaurant, soda fountain, dairy products store and similar mercantile establishment." Section 253.
It appears that, in the case of both the Acts of 1933 and 1934, the provision in question was added in the course of legislative consideration of proposed measures, and at the instance of dealers described as independents. 7 F.Supp. p. 353.
Thus, it does not appear how much of the "store" trade in bottled milk is that of the Borden Company or of the Sheffield Company or of the Dairymen's League Company or of the Renken Dairy Company, the four distributors found to have well advertised tradenames.
How hazardous it is to assume that particular trade facts are of common knowledge is shown by the various estimates of the number of "stores" at which milk is sold in the City of New York, these estimates apparently varying from 25,000 to 60,000.
We are in accord with the view that it is inexpedient to determine grave constitutional questions upon a demurrer to a complaint, or upon an equivalent motion, if there is a reasonable likelihood that the production of evidence will make the answer to the questions clearer.
Since our brethren find that likelihood to be present in this case, and are content to postpone an adjudication of the merits, we refrain from any discussion of the validity of the statute on the basis of facts within the range of judicial notice, and assent to the judgment recommended in the opinion of the court.

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