Blumenstock Bros. Advert. Agency v. Curtis Publ'g Co., 252 U.S. 436 (1920)
Case details
Citation
252 U.S. 436
Full caption
BLUMENSTOCK BROTHERS ADVERTISING AGENCY v. CURTIS PUBLISHING COMPANY.
Country
United States
Jurisdiction
Federal
Court
Supreme Court of the United States
Decided
Apr. 19, 1920
Majority
Day (Justice)
BLUMENSTOCK BROTHERS ADVERTISING
AGENCY v. CURTIS PUBLISHING COMPANY.
ERROR TO THE DISTRICT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS.
No. 197. Submitted January 26, 1920.—Decided April 19, 1920.
Jurisdiction based on diverse citizenship cannot be maintained in the District Court, over defendant’s objection, in a district where neither party resides. P. 440.
To confer jurisdiction on the District Court over an action for triple damages under § 7 of the Sherman Anti-Trust Act, a claim under the statute, plainly real and substantial, must be set up by the averments. Id.
A business conducted by an advertising agency of placing, by contracts with publishers, advertisements for manufacturers and merchants, in magazines which are published and distributed throughout the United States, is not interstate commerce, although the circulation and distribution of the publications themselves be such; and a declaration claiming triple damages for injury alleged to have resulted from refusal of a publisher to accept such advertisements from such an agency pursuant to an attempt of the publisher to monopolize the business of publishing such advertising matter, fails to state a claim or cause of action of the substantial character requisite to confer jurisdiction on the District Court under the Sherman Anti-Trust Act. P. 441. International Textbook Co. v. Pigg, 217 U. S. 91, distinguished.
Affirmed.
The case is stated in the opinion.
Mr. Colin C. H. Fyffe for plaintiff in error. Mr. Paul N. Dale and Mr. David R. Clarke were on the brief.
Mr. Amos C. Miller for defendant in error. Mr. Sidney S. Gorham, Mr. Henry W. Wales and Mr. Gilbert Noxon were on the brief.
Mr . Justi ce Day delivered the opinion of the court.
This suit was brought by the Blumenstock Brothers Advertising Agency against the Curtis Publishing Company in the District Court of the United States for the Northern District of Illinois to recover treble damages under § 7 of the Sherman Anti-Trust Act. 26 Stat. 209. The case here concerns the question of the jurisdiction of the District Court. Judicial Code, § 238. The plaintiff is a corporation of the State of Missouri, the defendant a corporation of the State of Pennsylvania. The defendant appeared specially in the District Court and moved to dismiss the complaint for want of jurisdiction, the grounds stated being:
1. “That in each of the counts of plaintiff’s original declaration, and in the additional count thereof, it appears that the plaintiff is a citizen and resident of the State of Missouri, and that this defendant is a citizen and resident of the State of Pennsylvania.”
2. “That in none of said counts is a cause of action stated by plaintiff within the provisions of the Act of Congress approved July 2nd, 1890, entitled, ‘An Act to protect trade and commerce against unlawful restraints and monopolies.
The court entered judgment dismissing the suit for want of jurisdiction over the defendant or the action.
The record contains a certificate stating that the court found that it had no jurisdiction of the defendant and no jurisdiction to entertain the action. The certificate further states, that the question involved is whether the transaction set forth in the several counts of the declaration involves a question of interstate commerce, and whether the averments in said several counts of the declaration state a cause of action within the provisions of the Act of July 2, 1890.
The declaration is voluminous, containing five counts p. 438and an additional count. So far as it is necessary for our purpose the cause of action of the plaintiff may be said to rest upon the allegations: That the plaintiff is engaged at Chicago in conducting an advertising agency. That when customers or principals desire to place advertisements in the magazines and periodicals of the trade they make plaintiff their agent, and plaintiff contracts with the defendant and other publishers and distributors of magazines; that plaintiff had many customers for whom it placed advertisements in the periodicals published and distributed by the defendant and in other periodicals of other publishers, all of which were distributed throughout the United States and the several States thereof; that the defendant was the owner and publisher of three periodicals sold and distributed throughout the United States known as “The Saturday Evening Post,” “The Ladies Home Journal,” and “The Country Gentleman;” that the business of the defendant in publishing, selling and distributing said periodicals was interstate commerce. The character of each of the several publications is described, and a large circulation is attributed to each of them; and it is stated that in publishing and distributing said periodicals defendant held itself out as desirous of taking, receiving, printing, publishing, and distributing throughout the United States its publications and advertisements to persons, firms and corporations concerning their business and occupation; that in the course of the business the defendant dealt with the plaintiff and other advertising agencies; that the defendant in the regular course of its business dealt with not only advertisers, but with advertising agencies such as the plaintiff, and it is alleged that such dealings were transactions of interstate commerce, and that the business of editing, publishing and distributing throughout the United States the advertising matter contained in said publications, pursuant to contracts made with its customers and advertising p. 439agencies, was interstate commerce; that such commerce is dependent for its operation and growth upon advertising facilities offered by magazines and periodicals such as those of the defendant, and that such publications constitute the chief method of presenting to the buying public the articles held out for sale; that the advertising facilities were necessary to dealers, merchants, and manufacturers in order to bring their products to the notice and attention of purchasers; that the defendant’s periodicals, particularly “The Saturday Evening Post,” have an important position among such publications, and are largely read throughout the United States; that “The Saturday Evening Post” is the most necessary of such advertising mediums to the customers of the plaintiff; that the defendant’s periodicals, together with certain other magazines, periodicals and publications owned by persons other than the defendant, had, to a certain extent, exclusive control of a certain field of advertising; that the magazines and other publications which control and do all the advertising business of the field in question are few in number; that for the advertising of goods and merchandise offered for sale in commerce there were no adequate facilities except those offered by the defendant and other publishers of similar magazines; that the defendant was desirous of using its preponderant position in this special field of advertising as a means of acquiring for itself and its publications, especially for “The Saturday Evening Post,” a monopoly of the publication and distribution of advertising matter in this restricted field of advertising throughout the United States in violation of the Anti-Trust Act; that the defendant refused without any reasonable cause to accept proper and ordinary advertising matter or copy offered in the usual way to the defendant by the plaintiff and other advertising agencies unless the plaintiff, and other advertising agencies, would agree to allow the defendant to increase its p. 440preponderance in said advertising field by permitting it to control and limit and reduce, at the will of the defendant, the amount of advertising given by the plaintiff and other advertising agencies to the owners and publishers of other magazines, journals, periodicals and other publications aforesaid, which were competing with the defendant in the field of advertising mentioned and described; that by reason of the illegal and wrongful acts, done by the defendant in pursuance of its attempt and scheme to create a monopoly for its own benefit in, and to monopolize the advertising business, plaintiff lost the business of its customers for whom it had been acting as agent in placing of advertisements with defendant’s and other publications, and was prevented from making further contracts for the placing of advertising matter in publications of the defendant, and in consequence thereof, in any other publication of a like or similar character, to the damage of the plaintiff in the sum of $25,000.
The declaration contains an alleged cause of action at common law, but as neither the plaintiff nor the defendant reside in the district in which the suit was brought, it is conceded that such cause of action could not be maintained in that court against the defendant’s objection. Section 51, Judicial Code.
The Sherman Anti-Trust Act (§ 7) created a cause of action in favor of any person to recover by suit in any District Court of the United States, in the district in which the defendant resides or is found, three-fold damages for injury to his business or property by reason of anything forbidden and declared unlawful in the act. In order to maintain a suit under this act the complaint must state a substantial case arising thereunder. The action is wholly statutory, and can only be brought in a District Court of the United States, and it is essential to the jurisdiction of the court in such cases that a substantial cause of action within the statute be set up.
In some cases it is difficult to determine whether a ruling dismissing the complaint involves the merits of the cause of action attempted to be pleaded or only a question of the jurisdiction of the court. In any case alleged to come within the federal jurisdiction it is not enough to allege that questions of a federal character arise in the case, it must plainly appear that the averments attempting to bring the case within federal jurisdiction are real and substantial. Newburyport Water Co. v. Newburyport, 193 U. S. 561, 576.
In cases where, as here, the controversy concerns a subject-matter limited by federal law, for which recovery can be had only in the federal courts, the jurisdiction attaches only when the suit presents a substantial claim under an act of Congress. This rule has been applied in bankruptcy cases (Grant Shoe Co. v. Laird Co., 212 U. S. 445;) in copyright cases (Globe Newspaper Co. v. Walker, 210 U. S. 356;) in patent cases (Healy v. Sea Gull Specialty Co., 237 U. S. 479;) in admiralty cases (The Jefferson, 215 U. S. 130).
We come then to inquire whether the cause of action stated was a substantial one within § 7 of the Sherman Anti-Trust Act. It is not contended that any combination, conspiracy, or contract in restraint of trade is alleged such as would bring the case within the first section of the act. The second section is relied upon which in terms punishes persons who monopolize or attempt to monopolize, or combine with others to monopolize any part of trade or commerce among the several States or with foreign nations.
The Anti-Trust Act, it is hardly necessary to say, derives its authority from the power of Congress to regulate commerce among the States. It declares unlawful combinations, conspiracies, and contracts and attempts to monopolize which concern such trade or commerce. It follows that if the dealings with the defendant, which p. 442form the subject-matter of complaint, were not transactions of interstate commerce, the declaration states no case within the terms of the act.
Commerce, as defined in the often quoted definition of Chief Justice Marshall, in Gibbons v. Ogden, 9 Wheat. 1, 189, is not traffic alone, it is intercourse, “It describes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse.”
In the present case, treating the allegations of the complaint as true, the subject-matter dealt with was the making of contracts for the insertion of advertising matter in certain periodicals belonging to the defendant. It may be conceded that the circulation and distribution of such publications throughout the country would amount to interstate commerce, but the circulation of these periodicals did not depend upon or have any direct relation to the advertising contracts which the plaintiff offered and the defendant refused to receive except upon the terms stated in the declaration. The advertising contracts did not involve any movement of goods or merchandise in interstate commerce, or any transmission of intelligence in such commerce.
This case is wholly unlike International Textbook Co. v. Pigg, 217 U. S. 91, wherein there was a continuous interstate traffic in textbooks and apparatus for a course of study pursued by means of correspondence, and the movements in interstate commerce Were held to bring the subject-matter within the domain of federal control, and to exempt it from the burden imposed by state legislation. This case is more nearly analogous to such cases as Fielden v. Shelby County Taxing District, 145 U. S. 1, wherein this court held that a broker engaged in negotiating sales between residents of Tennessee and non-resident merchants of goods situated in another State, was not engaged in interstate commerce; and within that line of
cases in which we have held that policies of insurance are not articles of commerce, and that the making of such contracts is a mere incident of commercial intercourse. Paul v. Virginia, 8 Wall. 168; Hooper v. California, 155 U. S. 648; New York Life Ins. Co. v. Deer Lodge County, 231 U. S. 495. We held in Hopkins v. United States, 171 U. S. 579, that the buying and selling of livestock in the stockyards of a city by members of the stock exchange was not interstate commerce, although most of the livestock was sent from other States. In Williams v. Fears, 179 U. S. 270, we held that labor agents engaged within the State of Georgia in hiring persons to be employed outside the State were not engaged in interstate commerce. In Ware & Leland v. Mobile County 209 U. S. 405, we held that brokers taking orders and transmitting them to other States for the purchase and sale of grain or cotton upon speculation were not engaged in interstate commerce; that such contracts for sale or purchase did not necessarily result in any movement of commodities in interstate traffic, and the contracts were not, therefore, the subjects of interstate commerce. In the recent case of United States Fidelity & Guaranty Co. v. Kentucky, 231 U. S. 394, we held that a tax upon a corporation engaged in the business of inquiring into and reporting upon the credit and standing of persons in the State, was not unconstitutional as a burden upon interstate commerce as applied to a non-resident engaged in selecting and distributing a list of guaranteed attorneys in the United States, and having a representative in the State. The contention in that case, which this court denied, was that the service rendered through the representatives in Kentucky, and other representatives of the same kind acting as agents of merchants engaged in interstate commerce, to furnish them with information through the mails, or by telegraph, or telephone, as a result of which merchandise might be transported in interstate commerce,
Syllabus. 252 U. S.
or withheld from such transportation, according to the character of the information reported, was so connected with interstate commerce as to preclude the State of Kentucky from imposing a privilege tax upon such business.
Applying the principles of these cases, it is abundantly established that there is no ground for claiming that the transactions which are the basis of the present suit, concerning advertising in journals to be subsequently distributed in interstate commerce, are contracts which directly affect such commerce. Their incidental relation thereto cannot lay the groundwork for such contentions as are undertaken to be here maintained under § 7 of the Sherman Anti-Trust Act. The court was right in dismissing the suit.
Affirmed.
ASKREN, ATTORNEY GENERAL OF THE STATE OF NEW MEXICO, ET AL. v. CONTINENTAL OIL COMPANY.
SAME v. SINCLAIR REFINING COMPANY.
SAME v. THE TEXAS COMPANY.
APPEALS FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF NEW MEXICO.
Nos. 521-523. Argued January 5, 6, 1920.—Decided April 19, 1920.
A law of New Mexico defining “distributors” of gasoline as those who sell it from tank cars, receiving tanks or stations, or in or from tanks, barrels or packages not purchased from a licensed distributor, and “retail dealers” as those other than distributors who sell it in quantities of 50 gallons or less, lays an annual license tax of $50.00 p. 445on each distributor for each distributing station, place of business or agency, and of $5.00 on each retailer for every place of business or agency,—besides imposing an excise of 2c per gallon on all gasoline sold or used, to be paid and made return of by distributors and dealers; it provides inspectors to see to its enforcement, and devotes the resulting revenue first to pay their salaries and expenses, and then to a highway fund. Held, that it is not an inspection act merely, but a privilege tax; and, as applied to parties who bring gasoline from without and sell it within the State, the act is void—a burden on interstate commerce—in so far as it relates to their business of selling in tank car lots and in barrels and packages, as originally imported from other States, but, if separable, it is valid in its application to sales made from such original packages in retail quantities to suit purchasers. P. 447.
An excise on purely local dealing in a commodity cannot be treated as a discrimination against other States merely because the commodity is not produced in the State imposing the tax but comes wholly from other States. P. 449.
The question whether an act assuming to tax a business in its interstate and intrastate aspects is separable as to the latter, reserved for final hearing where the relative importance of the two classes of business as conducted by plaintiffs could not be ascertained from the case as made on application for temporary injunction. P. 450.
Affirmed.
The case is stated in the opinion.
Mr. A. B. Renehan, with whom Mr. 0. 0. Askren, Attorney General of the State of New Mexico, and Mr. Harry S. Bowman, Assistant Attorney General of the State of New Mexico, were on the brief, for appellants.
Mr. Charles R. Brock and Mr. E. R. Wright, with whom Mr. Milton Smith, Mr. W. H. Ferguson, Mr. S. B. Davis, Jr., and Mr. Elmer L. Brock were on the briefs, for appellees.
Mr . Justice Day delivered the opinion of the court.
These suits were brought by the three companies, appellees, in the District Court of the United States for the p. 446District of New Mexico, to enjoin the enforcement of an act of the legislature of the State entitled: “An Act providing for an excise tax upon the sale or use of gasoline and for a license tax to be paid by distributors and retail dealers therein; providing for collection and application of such taxes; providing for the inspection of gasoline and making it unlawful to sell gasoline below a certain grade without notifying purchaser thereof; providing penalties for violations of this act and for other purposes.” The law is found in Session Laws of New Mexico, 1919, c. 93, p. 182.
The cause came before three judges upon an application for temporary injunction and a counter-motion to dismiss the bills of complaint. The temporary injunction was granted, and a direct appeal taken to this court.
The provisions of the act so far as necessary to be considered define a distributor of gasoline as meaning “every person, corporation, firm, co-partnership and association who sells gasoline from tank cars, receiving tanks or stations, or in or from tanks, barrels or packages not purchased from a licensed distributor of gasoline in this State. ” A retail dealer is defined as meaning: “A person, other than a distributor of gasoline, who sells gasoline in quantities of fifty gallons or less. ” Every distributor is required to pay an annual license tax of $50.00 for each distributing station, or place of business, and agency. Every retail dealer is required to pay an annual license tax of $5.00 for every place of business or agency. An excise tax is imposed upon the sale or use of gasoline sold or used in the State after July 1,1919; such tax to be 2c per gallon on all gasoline so sold or used. Any distributor, or dealer, who shall fail to make return or statement as required in the act, or shall refuse, neglect or fail to pay the tax upon all sales or use of gasoline, or who shall make any false return or statement, or shall knowingly sell, distribute or use any gasoline without the tax upon the sale or use thereof p. 447having been paid as provided in the act shall be deemed guilty of a misdemeanor, and punished by a fine and forfeiture of his license. It is made unlawful for any person (except tourists or travelers to the extent provided in the act) to use any gasoline not purchased from a licensed distributor or retail dealer without paying the tax of 2c per gallon. Inspectors are provided for, for each of the eight Judicial Districts of the State, who are required to see that the provisions of the act are enforced, and privileged to examine books and accounts of distributors and retail dealers, or warehousemen or others receiving and storing gasoline and of railroad and transportation companies, relating to purchases, receipts, shipments, or sales of gasoline; their salaries are provided, and salaries and expense bills are to be paid out of the State Road Fund. Any person who shall engage or continue in the business of selling gasoline without a license or after such license has been forfeited, or shall fail to render any statement, or make any false statement therein, or who shall violate any provision of the act the punishment for which has not been theretofore provided, shall be deemed guilty of a misdemeanor and upon conviction shall be punished by a fine or imprisonment, or both. The State Treasurer is required to set aside from the license fees and taxes collected under the provisions of the act a sufficient sum to pay the salaries and traveling expenses of the inspectors out of the money received from such collections, and to place the balance to the credit of the State Road Fund to be used for the construction, improvement and maintenance of public highways.
It is evident from the provisions of the act thus stated that it is not an inspection act merely; indeed, the inspectors do not seem to be required to make any inspection beyond seeing that the provisions of the act are enforced, and the excess of the salaries and fees of the inspectors is to be used in making roads within the State. Considering p. 448its provisions and the effect of the act, it is a tax upon the privilege of dealing in gasoline in the State of New Mexico.
The bills in the three cases are identical except as to the number of distributing stations alleged to belong to the companies respectively. As there was no answer, and the bills were considered upon application for injunction, and motion to dismiss, their allegations must be taken to be true.
Plaintiffs are engaged in the business of buying and selling gasoline and other petroleum products. The bills state that they purchase gasoline in the States of Colorado, California, Oklahoma, Texas and Kansas, and ship it into the State of New Mexico, there to be sold and delivered. The bills describe two classes of business—first, that they purchase in the States mentioned, or in some one of said States, gasoline, and ship it in tank cars from the State in which purchased into the State of New Mexico, and there, according to their custom and the ordinary method in the conduct of their business, sell in tank cars the whole of the contents thereof to a single customer, before the package or packages, in which the gasoline was shipped have been broken. In the usual and regular course of their business they purchase gasoline in one of the States, other than the State of New Mexico, and ship it, so purchased from that State, in barrels and packages containing not less than two 5-gallon cans, into the State of New Mexico, and there, in the usual and ordinary course of their business, without breaking the barrels and packages, containing the cans, it is their custom to sell the gasoline in the original packages and barrels. The gasoline is sold and delivered to the customers in precisely the same form and condition as when received in the State of New Mexico; that this manner of sale makes the plaintiffs distributors of gasoline as the term is defined in the statute, and they are required to pay the sum of 850.00 per annum for each of their stations p. 449as an annual license tax for purchasing, shipping and selling gasoline as aforesaid.
A second method of dealing in gasoline is described in the bills: That the gasoline shipped to the plaintiffs from the other States, as aforesaid, is in tank cars, and plaintiff, or plaintiffs, sell such gasoline from such tank cars, barrels and packages in such quantities as the purchaser requires.
As to the gasoline brought into the State in the tank cars, or in the original packages, and so sold, we are unable to discover any difference in plan of importation and sale between the instant case and that before us in Standard Oil Co. v. Graves, 249 U. S. 389, in which we held that a tax, which was in effect a privilege tax, as is the one under consideration, providing for a levy of fees in excess of the cost of inspection, amounted to a direct burden on interstate commerce. In that case we reaffirmed, what had often been adjudicated heretofore in this court, that the direct and necessary effect of such legislation was to impose a burden upon interstate commerce; that under the Federal Constitution the importer of such products from another State into his own State for sale in the original packages, had a right to sell the same in such packages without being taxed for the privilege by taxation of the sort here involved. Upon this branch of the case we deem it only necessary to refer to that case, and the cases therein cited, as establishing the proposition that the license tax upon the sale of gasoline brought into the State in tank cars, or original packages, and thus sold, is beyond the taxing power of the State.
The plaintiffs state in the bills that their business in part consists in selling gasoline in retail in quantities to suit purchasers. A business of this sort, although the gasoline was brought into the State in interstate commerce, is properly taxable by the laws of the State.
Much is made of the fact that New Mexico does not produce gasoline, and all of it that is dealt in within that
Syllabus. 252 U. S.
State must be brought in from other States. But, so long as there is no discrimination against the products of another State, and none is shown from the mere fact that the gasoline is produced in another State, the gasoline thus stored and dealt in, is not beyond the taxing power of the State. Wagner v. City of Covington, 251 U. S. 95; and the cases from this court cited therein.
Sales of the class last mentioned would be a subject of taxation within the legitimate power of the State. But from the averments of the bills it is impossible to determine the relative importance of this part of the business as compared with that which is non-taxable, and at this preliminary stage of the cases we will not go into the question whether the act is separable, and capable of being sustained so far as it imposes a tax upon business legitimately taxable. That question may be reserved for the final hearing. The District Court did not err in granting the temporary injunctions, and its orders are
Affirmed.