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DANVILLE TOBACCO ASSN. v. FREEMAN

March 3, 1964

DANVILLE TOBACCO ASSOCIATION et al., Plaintiffs,
v.
Orville L. FREEMAN, Secretary of Agriculture, Defendant



The opinion of the court was delivered by: WALSH

This matter came on for hearing before the Court, sitting without a jury, on January 27 and 28, 1964. Plaintiffs seek a declaratory judgment and injunctive relief and ask the court to declare invalid certain regulations promulgated by the Secretary of Agriculture pursuant to The Tobacco Inspection Act of 1935, and identical regulations promulgated under the Commodity Credit Corporation Charter Act of 1948. Plaintiffs also seek judicial review of an administrative determination of the Secretary of Agriculture regarding the aforementioned regulations.

The Court having considered the stipulated facts, the pleadings, and the record, now makes the following findings of facts and conclusions of law.

 Findings of Fact

 1. Two of the plaintiffs, the Danville Tobacco Association and the Winston-Salem Warehouse Association, are trade associations representing owners and operators of tobacco warehouses in Danville, Virginia and Winston-Salem, North Carolina. The remaining parties plaintiff are owners or operators of tobacco warehouses in Danville and Winston-Salem.

 The defendant is Orville L. Freeman, Secretary of Agriculture.

 2. Prior to 1942, the then Secretary of Agriculture had promulgated certain regulations under The Tobacco Inspection Act of 1935 (7 U.S.C. § 511), designating certain markets throughout the country where tobacco might be sold at auction. Among the places so designated, and for which price supports were provided, were Danville, Virginia and Winston-Salem, North Carolina.

 3. In addition to designating markets, the Secretary further authorized certain markets to hold multiple 'sales'. A sale is an individual sub-market within a designated market. For each designated sale, the Secretary has required that there be furnished by him inspectors and graders who, just prior to the sale, examine the tobacco to be offered at the auction and indicate the grade of the tobacco to be sold. No tobacco may be offered for sale at auction on any designated market or sale until it has been inspected and certified by an authorized representative of the Secretary. Criminal penalties are provided for violation of these provisions of the Act.

 4. Under the Commodity Credit Corporation Act of June 29, 1948 (15 U.S.C. § 714), the Secretary also promulgated regulations providing that if any tobacco which is sold at auction on designated markets or at designated sales does not bring certain minimum prices, then such tobacco will be acquired as collateral for loans made by the Stabilization Board.

 5. On July 2, 1958, the Secretary promulgated certain amended regulations under The Tobacco Inspection Act and under the Commodity Credit Corporation Act, said amended regulations under the two Acts being identical and reading in part as follows:

 'REASONABLE INSPECTION AND PRICE SUPPORT SERVICES. The extension of tobacco inspection and price support services to new markets and additional sales will be conditioned upon the reasonableness of such services existing in the applicant market area. Transactions in tobacco as conducted at auction markets involve the sale of tobacco at a bona fide auction sale participated in by an adequate set of buyers. Determination with respect to reasonableness, and consequently with respect to granting or denying additional services, will be based on evidence (1) that the applicant market or sale will function as a bona fide auction sale and has firm commitments from an adequate set of buyers that they will participate in the sale if inspection and price support services are provided. * * * 7 C.F.R. 29.2(a) and 6 C.F.R. 464.1017(a).' (emphasis supplied).

 '291. DEFINITIONS. As used in this subpart, the following terms shall have the following meanings: '(b) 'Adequate set of buyers' shall mean 5 or more buyers representing 5 or more companies or buying organizations who could reasonably be expected to purchase at least two-thirds of the total U.S. production of the kind of tobacco for which the additional services are requested. 7 C.F.R. 29.1(b) and 6 C.F.R. 464.1016(b).'

 6. On or about April 24, 1961, plaintiffs, the Danville Tobacco Association and the Winston-Salem Warehouse Association, pursuant to the Tobacco Inspection Act regulations, 7 C.F.R., Part 29, filed applications with the defendant for additional inspection and price support services to permit an additional or fifth sale each in the Danville and Winston-Salem markets. Hearings on these applications were held beginning May 24, 1961 in the two cities.

 7. On June 2, 1961 plaintiffs, the Danville Tobacco Association and The Winston-Salem Warehouse Association, filed a petition for the repeal of those provisions of the regulations which provide that a determination on an application for inspection and price support services for an additional sale shall be based on evidence that the applicant sale will function as a bona fide auction sale and has firm commitments from an adequate set of buyers that they will participate in the sale if inspection and price support services are provided. It was also proposed to delete the definition of 'adequate set of buyers' and the provision of the regulations placing the burden of proof upon the applicant to show by documentary evidence or testimony of buying organizations which buying organizations are committed to participate in the sale.

 8. Notice of proposed rule-making in connection with the foregoing petition for repeal of the above-described regulations was published in the Federal Register on July 25, 1961 (26 F.R. 6625) in accordance with Section 4 of the Administrative Procedure Act (5 U.S.C. § 1003). Pursuant to the notice, some 180 written submissions of data, views, and arguments were filed with the Hearing Clerk of the ...


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