Source: https://supreme.justia.com/cases/federal/us/270/593/
Timestamp: 2019-04-19 10:49:46+00:00

Document:
1. Relief, under the Trade Commission Act, against unfair competition must be afforded in the first instance by the Commission. P. 270 U. S. 603.
2. A decree of the circuit court of appeals affirming orders which denied an interlocutory injunction to the plaintiff and granted one to the defendant, and remanding the cause with direction to dismiss the bill and make the injunction permanent, is final for purposes of appeal. Id.
3. Transactions between the members of the New York Cotton Exchange, consisting of agreements made on the spot for purchase and sale of cotton for future delivery, the cotton to be represented by warehouse receipts issued by a licensed warehouse in the Port of New York and to be deliverable from such warehouse, are local transactions not involving interstate commerce. Id.
4. The fact that such agreements are likely to give rise to interstate shipments does not make the agreements interstate commerce, such shipments being merely incidental. Id.
5. A contract between the cotton exchange and a telegraph company under which the exchange, at its own expense, collects its quotations of such sales and delivers them to the telegraph company, which transmits them like other messages at the charges of the recipients, to such persons only as the exchange approves, the telegraph paying the exchange for the privilege of having the business, is not a violation of the Sherman Anti-Trust Act. P. 270 U. S. 604.
6. In thus furnishing quotations to some and refusing them to others, the exchange is but exercising the ordinary right of a vendor of news; the telegraph company, as carrier, cannot deliver the messages to others than those designated by the seller, and the contract between exchange and telegraph does not, in purpose or effect, operate directly or unreasonably to restrain interstate commerce or to create a monopoly. P. 270 U. S. 605.
jurisdiction to decide the claim, and a decision dismissing the bill upon rejection of the claim is not a dismissal for want of jurisdiction. P. 270 U. S. 608.
8. Under Equity Rule 30, requiring that the answer state any counterclaim "arising out of the transaction which is the subject matter of the suit," a cotton exchange, in a suit against it and a telegraph company to cancel a contract between them respecting the sending out of exchange quotations and for a mandatory injunction to compel delivery of quotations to plaintiff, was entitled to seek by counterclaim an injunction restraining the plaintiff from wrongfully obtaining its quotations. P. 270 U. S. 609.
Appeal from a decree of the circuit court of appeals which on interlocutory appeal sustained orders of the district court (291 F. 681) refusing an interlocutory injunction to the plaintiff and granting one for a defendant on a counterclaim, and which directed a final decree dismissing the bill and making the injunction permanent. The suit was based on the Sherman Law, and primarily concerned the validity of a contract between the New York Cotton Exchange and the Western Union Telegraph Company for the distribution of quotations of that exchange to such persons only as received its approval.
use them in connection with a bucket shop or to give them out to other persons. The Gold & Stock Telegraph Company, a New York corporation and a subsidiary of, and controlled by, the Western Union, is engaged in disseminating quotations of cotton prices by means of ticker service, owned and operated by it, tickers being located in exchanges, brokerage houses, and elsewhere in the several states. The Odd-Lot Exchange made application to the two telegraph companies for this service in the form required by the contract with the New York exchange. It was refused, the New York exchange having declined to give its consent to the installation on the ground, among others, that, after investigation, it had ascertained that the Odd-Lot had succeeded another exchange, which had been convicted of conducting a bucket shop, and that the Odd-Lot had in its membership many members of the convicted exchange, and was organized as a cover to enable its members to engage in the same unlawful business.
the purpose of monopolizing and restraining that commerce. There is an attempt to allege unfair methods of competition, which may be put aside at once, since relief in such cases under the Trade Commission Act must be afforded in the first instance by the commission.
The prayer is for a decree cancelling the Western Union contract, adjudging the New York Cotton Exchange to be a monopoly, restraining appellees from refusing to install a ticker and furnish the Odd-Lot and its members, as they do others, with continuous cotton quotations, and for other relief.
The answer, in addition to denials and affirmative defensive matter, sets up a counterclaim to the effect that the Odd-Lot, though it had been refused permission to use the quotations of the New York exchange, was purloining them, or receiving them from some person who was purloining them, and giving them out to its members, who were distributing them to bucket ships, with the consequent impairment of the value of appellees' property therein. An injunction against the continuance of this practice was asked.
Both parties moved for interlocutory injunctions. The district court denied appellant's motion and granted that of appellees. 291 F. 681. Upon appeal, both orders were affirmed by the circuit court of appeals. 296 F. 61. By stipulation of the parties authorizing such action, the circuit court of appeals remanded the cause, with directions to the district court to enter a final decree dismissing the bill and making permanent the injunction granted appellees. Since this left to the district court only the ministerial duty of complying with the mandate, the decree below, for purposes of appeal, is final. Gulf Refining Co. v. United States, 269 U. S. 125, 269 U. S. 136.
First. We are of opinion that, upon the allegations of the bill, no case is made under the federal antitrust laws.
The only possible ground on which the suit can be maintained rests in the claim that there is a violation of §§ 1 and 2 of the Sherman Anti-Trust Act, c. 647, 26 Stat. 209, for which appellant is entitled to sue under § 16 of the Clayton Act, c. 323, 38 Stat. 737. And whether this claim is tenable turns alone upon the effect of the contract between the New York exchange and the Western Union. Independent of that contract, there is no averment of fact in the bill upon which a violation of the Anti-Trust Act can be predicated. The New York exchange is engaged in a local business. Transactions between its members are purely local in their inception and in their execution. They consist of agreements made on the spot for the purchase and sale of cotton for future delivery, with a provision that such cotton must be represented by a warehouse receipt issued by a licensed warehouse in the Port of New York and be deliverable from such warehouse. Such agreements do not provide for, nor does it appear that they contemplate, the shipment of cotton from one state to another. If interstate shipments are actually made, it is not because of any contractual obligation to that effect, but it is a chance happening which cannot have the effect of converting these purely local agreements or the transactions to which they relate into subjects of interstate commerce. Ware & Leland Co. v. Mobile County, 209 U. S. 405, 209 U. S. 412-413. The most that can be said is that the agreements are likely to give rise to interstate shipments. This is not enough. Engel v. O'Malley, 219 U. S. 128, 219 U. S. 139. See also Hopkins v. United States, 171 U. S. 578, 171 U. S. 588-590; Anderson v. United States, 171 U. S. 604, 171 U. S. 615-616.
and delivers them to the telegraph company for distribution to such approved persons. The real distributor is the exchange; the telegraph company is an agency through which the distribution is made. In effect, the exchange hands over the quotations, as it might any other message, to the telegraph company for transmission, charges to be collected from the receivers. The payment which the telegraph company makes to the exchange is for the privilege of having the business. It does not alter the character of the service rendered.
information, and are also willing to pay the telegraph company the expense of transmitting the information. The information delivered to the respondents for transmission is a communication which the stock exchange wishes to transmit to the persons it designates, and to no one else. I can see no reason why the stock exchange should be required to furnish the appellant with this information, which relates solely to its own business upon its own property, or why the respondents should be required to violate their agreement with the stock exchange and the law of this state, and furnish to the appellant information which had been communicated to the respondents by the stock exchange for a specific purpose and none other."
"But, so far as these contracts limit the communication of what the plaintiff might have refrained from communicating to anyone, there is no monopoly or attempt at monopoly, and no contract in restraint of trade, either under the statute or at common law. Bement v. National Harrow Co., 186 U. S. 70; Fowle v. Park, 131 U. S. 88; Elliman v. Carrington,  2 Ch. 275. It is argued that the true purpose is to exclude all persons who do not deal through members of the Board of Trade. Whether there is anything in the law to hinder these regulations being made with that intent we shall not consider, as we do not regard such a general scheme as shown by the contracts or proved. A scheme to exclude bucket shops is shown and proclaimed, no doubt -- and the defendants, with their contention as to the plaintiff, call this an attempt at a monopoly in bucket shops. But it is simply a restraint on the acquisition for illegal purposes of the fruits of the plaintiff's work. Central Stock & Grain Exchange v. Board of Trade, 196 Ill. 396. We are of opinion that the plaintiff is entitled to an injunction as prayed."
also, there being no independent basis of jurisdiction; (2) that the counterclaim does not arise out of any transaction which is the subject matter of the suit, and (3) that the decree is not justified by the allegations of the counterclaim or the proof.
"Jurisdiction is the power to decide a justiciable controversy, and includes questions of law, as well as of fact. A complaint setting forth a substantial claim under a federal statute presents a case within the jurisdiction of the court as a federal court, and this jurisdiction cannot be made to stand or fall upon the way the court may chance to decide an issue as to the legal sufficiency of the facts alleged any more than upon the way it may decide as to the legal sufficiency of the facts proven. Its decision either way upon either question is predicated upon the existence of jurisdiction, not upon the absence of it. Jurisdiction, as distinguished from merits, is wanting only where the claim set forth in the complaint is so unsubstantial as to be frivolous or, in other words, is plainly without color of merit. [Citing cases]. In that event, the claim of federal right under the statute is a mere pretense, and, in effect, is no claim at all."
we are not prepared to say that they are so obviously insufficient as to cause it to be without color of merit, and in effect no claim at all. We think there is enough in the bill to call for the exercise of the jurisdiction of a federal court to decide, upon the merits, the issue of the legal sufficiency of the allegations to make out the claim of federal right. This was evidently the view of the court below, and we construe it mandate as a direction to dismiss the bill on the merits, and not for want of jurisdiction.
"The answer must state in short and simple form any counterclaim arising out of the transaction which is the subject matter of the suit, and may, without cross-bill, set up any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity against him, and such set-off or counterclaim, so set up, shall have the same effect as a cross-suit, so as to enable the court to pronounce a final decree in the same suit on both the original and the cross-claims."
Two classes of counterclaims thus are provided for: (a) one "arising out of the transaction which is the subject matter of the suit," which must be pleaded, and (b) another "which might be the subject of an independent suit in equity" and which may be brought forward at the option of the defendant. We are of opinion that this counterclaim comes within the first branch of the rule, and we need not consider the point that, under the second branch, federal jurisdiction independent of the original bill must appear, as was held in Cleveland Engineering Co. v. Galion D. M. Truck Co., 243 F. 405, 407.
purloining or otherwise illegally obtaining them, and asks that this practice be enjoined. "Transaction" is a word of flexible meaning. It may comprehend a series of many occurrences, depending not so much upon the immediateness of their connection as upon their logical relationship. The refusal to furnish the quotations is one of the links in the chain which constitutes the transaction upon which appellant here bases its cause of action. It is an important part of the transaction constituting the subject matter of the counterclaim. It is the one circumstance without which neither party would have found it necessary to seek relief. Essential facts alleged by appellant enter into and constitute in part the cause of action set forth in the counterclaim. That they are not precisely identical, or that the counterclaim embraces additional allegations, as, for example, that appellant is unlawfully getting the quotations, does not matter. To hold otherwise would be to rob this branch of the rule of all serviceable meaning, since the facts relied upon by the plaintiff rarely, if ever, are in all particulars the same as those constituting the defendant's counterclaim. Compare The Xenia Branch Bank v. Lee, 7 Abb.Pr. 372, 390, 394. And see generally Cleveland Engineering Co. v. Galion D. M. Truck Co., supra, p. 408; Champion Spark Plug Co. v. Champion Ignition Co., 247 F. 200, 203-205.
So close is the connection between the case sought to be stated in the bill and that set up in the counterclaim that it only needs the failure of the former to establish a foundation for the latter; but the relief afforded by the dismissal of the bill is not complete without an injunction restraining appellant from continuing to obtain by stealthy appropriation what the court had held it could not have by judicial compulsion.
on the counterclaim because not warranted by the allegations or proof. Evidently for the purpose of facilitating an appeal to this Court, appellant, by stipulation, consented that the affidavits filed in support of the preliminary application should be treated as testimony in support of the counterclaim, and, on this, that the court of appeals might direct the entry of a final decree. The district court thought the pleadings and affidavits sufficient to warrant a preliminary injunction, and the court of appeals thought them sufficient to sustain a decree making that injunction permanent. We see no reason to differ with their conclusions.

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