Argument for Defendant in Error.

276 U.S.

The provision that co-operative associations shall not be considered in restraint of trade or contrary to the laws against pooling or combinations, is a proper declaration of public policy.

The Congress of the United States has declared this policy. Clayton Act; Capper-Volstead Act, February 18, 1922; Co-operative Marketing Act, July 2, 1926.

Anti-Trust laws are an expression of public policy adopted by the legislature and by Congress, and may be changed. That public policy has undergone a change since the enactment of the original Sherman Anti-Trust Law and the anti-trust laws of the several States, has been recognized by the courts in numerous cases and has been recognized at common law without regard to statute. Potter v. Dark Tobacco Growers Co-op. Ass'n, 201 Ky. 441; Rifle Potato Growers v. Smith, 78 Colo. 171; Harrell v. Cane Growers Co-op. Ass'n, 126 S. E. 531; List v. Burley Tobacco Growers Co-op. Ass'n, 114 O. S. 361; Clear Lake Co-op. Live Stock Shippers Ass'n v. Weir, 200 Ia. 1293; Northern Wisconsin Co-op. Tobacco Pool v. Bekkedal, 182 Wis. 571; Burley Tobacco Society v. Gillaspy, 51 Ind. App. 583; U. S. v. Freight Ass'n, 166 U. S. 290; Village of Euclid v. Ambler Realty Co., 272 U. S. 365. Connolly v. Union Sewer Pipe Co., 184 U. S. 540, distinguished. See American Sugar Refining Co. v. Louisiana, 179 U. S. 89; New York Central R. R. v. White, 243 U. S. 188; Miller v. Wilson, 236 U. S. 373; Billings v. Illinois, 188 U. S. 97; Cox v. Texas 202 U. S. 446; Duplex Printing Press Co. v. Deering, 254 U. S. 443.

The Connolly case has uniformly been held inapplicable to co-operative marketing cases. Dark Tobacco Growers Co-op. Ass'n v. Dunn, 150 Tenn. 612; Kansas Wheat Growers Ass'n v. Charlet, 118 Kans. 965; List v. Burley Tobacco Growers Co-op. Ass'n, 114 O. S. 361; Minnesota Wheat Growers Co-op. Marketing Ass'n v.

71

Argument for Defendant in Error.

Huggins, 162 Minn. 471; Northern Wisconsin Co-op. Tobacco Pool v. Bekkedal, 182 Wis. 571.

Sections 26 and 27 are reasonable and necessary provisions to make the co-operative marketing system practical and effective and to safeguard the marketing contract between the association and its members from breach deliberately induced by third persons outside the association. Tobacco Growers Warehouse Ass'n. v. Danville Warehouse Co., 144 Va. 456; Northern Wisconsin Co-op. Tobacco Pool v. Bekkedal, 182 Wis. 571; Hollingsworth v. Texas Hay Ass'n, 246 S. W. 1068; Texas Farm Bureau Cotton Ass'n. v. Stovall, 113 Tex. 273.

The marketing contract is the cornerstone of the cooperative marketing structure. The legislature has a right to protect such contracts against breach which threatens the marketing system. Commonwealth v. Hodges, 137 Ky. 233; Hollingsworth v. Texas Hay Ass'n., 246 S. W. 1068; Tobacco Growers Co-op. Ass'n. v. Danville Warehouse Co., 144 Va. 456.

The penal provision is necesary to protect the contract. Therefore, the courts have, without exception, sustained the remedies provided by the Co-operative Marketing Act to enforce the performance of the contract. Burley Tobacco Society v. Gillaspy, 51 Ind. App. 583; Arkansas Cotton Growers Co-op. Ass'n v. Brown, 275 S. W. 46; Harrell v. Cane Growers Co-op. Ass'n, 160 Ga. 30; Kansas Wheat Growers Ass'n v. Schulte, 113 Kan. 672; Manchester Dairy System v. Hayward, 82 N. H. 193; Oregon Growers Co-op. Ass'n v. Lentz, 173 Ore. 571; Owen County Burley Tobacco Society v. Brumback, 128 Ky. 137; Dark Tobacco Growers Co-op. Ass'n v. Dunn, 150 Tenn. 612; Dark Tobacco Growers Co-op. Ass'n v. Mason, 150 Tenn. 228.

It is an actionable tort for an outsider to deliberately and maliciously interfere with the contract relations of other parties. Lumley v. Gye, 2 El. & Bl. 216; Bowen v.

Argument for Defendant in Error.

276 U.S.

Hall, 6 Q. B. 333; Temperton v. Russell, 1 Q. B. 719; Angle v. Chicago, St. P. & M. & O. Rwy., 151 U. S. 1; Bitterman v. L. & N. Rwy., 207 U. S. 205; Kinner v. Lake Shore & M. S. R. R., 69 O. S. 339; Schulbach v. McDonald, 179 Mo. 163; Samuelson v. State, 116 Tenn. 470; Hitchman Coal & Coke Co. v. Mitchell, 245 U. S. 229; 16 Rose's Notes, 727; Westinghouse Electric & Mfg. Co. v. Diamond State Fiber Co., 268 Fed. 121; 15 R. C. L. 60; 38 Cyc. 508; Northern Wisconsin Co-op. Tobacco Pool v. Bekkedal, 182 Wis. 571; R. and W. Hat Shop v. Scully, 98 Conn. 1; Thacker Coal & Coke Co. v. Burke, 59 W. Va. 253; Beekman v. Marsters, 195 Mass. 205; Swain v. Johnson, 151 N. C. 93; 17 Col. Law Rev. 113; 36 Har. Law Rev. 663.

Sections 26 and 27 are a proper exercise of police power to prevent fraudulent and unlawful evasion or breach of contract. Bacon v. Walker, 204 U. S. 311; Reaves Warehouse Corp'n. v. Commonwealth, 141 Va. 194; Jewell Warehouse Co. v. Kemper, 206 Ky. 267; Rosenthal v. New York, 226 U. S. 260; Shurman v. Atlanta, 148 Ga. 1; Louisiana v. Weinstein, 181 La. 1086; Levi v. Annison, 155 Ala. 149; Lemieux v. Young, 211 U. S. 489; Kidd Dater & Price Co. v. Musselman Grocery Co., 217 U. S. 461; Steele, etc. Co. v. Miller, 92 O. S. 115.

Statutes closely analogous have been adopted in the cotton-growing States to prevent fraud in the sale of cotton. Parks v. Laurns' Cotton Mills, 75 S. C. 560; State v. Moore, 104 N. C. 714. See also Minnesota ex rel. Beek v. Wagener, 77 Minn. 483; Biddles v. Enright, 239 N. Y. 354; Holsman v. Thomas, 112 Oh. St. 397; Hall v. Geiger Jones Co., 242 U. S. 539; Caldwell v. Sioux Falls Stockyards Co., 242 U. S. 559; Merrick v. N. W. Halsey Co., 242 U. S. 568; Brazee v. Michigan, 241 U. S. 340; Engel v. O'Malley, 219 U. S. 128.

The penalties provided in § 27 do not deny due process of law or the equal protection of the laws to warehouse

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Opinion of the Court.

men and auctioneers. Fidelity Mutual Life Ass'n. v. Mettler, 185 U. S. 308; Fraternal Mystic Circle v. Snyder, 227 U. S. 497; St. Louis, Iron Mountain & Southern Ry. v. Williams, 251 U. S. 63; Chicago, N. W. Ry. v. Nye, Schneider, Fowler Co., 260 U. S. 35; Atchison, T. & S. F. R. R. v. Matthews, 174 U. S. 96; Seaboard Air Line v. Seegars, 207 U. S. 73; St. Louis J. M. & S. R. Co. v. Wynne, 224 U. S. 354; Yazoo & M. V. R. R. v. Jackson Vinegar Co., 226 U. S. 217; M. K. & T. R. Co. v. Cade, 233 U. S. 642. Distinguishing, Atchison, T. & S. F. Ry. v. Vosburg, 238 U. S. 56. Hartford Fire Ins. Co. v. Wilson Toomer Fertilizer Co., 4 F. (2d) 835.

The counterclaim for a declaration of rights as to the Anti-Trust Law is improper pleading. The state courts have no jurisdiction of an action for treble damages under the Sherman Anti-Trust Law.

A tortious intermeddler with the contracts between defendant in error and its members cannot raise the question of their illegality. Northern Wisconsin Co-op. Tobacco Pool v. Bekkedal, 182 Wis. 571.

MR. JUSTICE MCREYNOLDS delivered the opinion of the Court.

The Liberty Warehouse Company, a Kentucky corporation, operates a warehouse at Maysville in that State and there receives and sells loose-leaf tobacco for the accounts of growers. The Burley Tobacco Growers' Cooperative Marketing Association incorporated under The Bingham Co-operative Marketing Act (Ch. 1, Acts of Kentucky, 1922) commenced this proceeding against the Warehouse Company in the Mason County Circuit Court. It charged the Warehouse Company with willful violation of the Act by selling pledged tobacco, and asked judgment for the prescribed penalty ($500) and attorney's fees.

The Bingham Act (32 sections) authorizes the incorporation of non-profit, cooperative associations for the

Opinion of the Court.

276 U.S.

orderly marketing of agricultural products; provides only producers may become members and that the corporation may contract only with them for marketing such products. It declares that these contracts shall not be illegal; prescribes penalties for interfering therewith, and further provides that the association shall not be deemed a conspiracy, illegal combination or monopoly. Three pertinent sections follow.

"Sec. 26. Misdemeanor to induce breach of marketing contract of co-operative association-spreading false reports about the finances or management thereof.

"Any person or persons or any corporation whose of ficers or employees knowingly induce or attempt to induce any member or stockholder of an association organized hereunder to breach his marketing contract with the association, or who maliciously and knowingly spreads false reports about the finances or management thereof, shall be guilty of a misdemeanor and be subject to a fine of not less than one hundred ($100.00) dollars and not more than one thousand ($1,000) dollars for each such offense; and shall be liable to the association aggrieved in a civil suit in the penal sum of five hundred ($500) dollars for each such offense."

"Sec. 27. Warehousemen liable for damages for encouraging or permitting delivery of products in violation of marketing agreements.

"Any person, firm or corporation conducting a warehouse within the State of Kentucky who solicits or persuades or permits any member of any association organized hereunder to breach his marketing contract with the association by accepting or receiving such member's products for sale or for auction or for display for sale, contrary to the terms of any marketing agreement of which said person or any member of the said firm or any active officer or manager of the said corporation has knowledge or notice, shall be liable to the association aggrieved in a civil