Opinion
No. 568635.
1947-04-2
STATE ex rel. CULLITAN, Pros. Atty. v. GREATER CLEVELAND LIVERY OWNERS ASS'N et al.
Frank T. Cullitan, Pros. Atty., and Saul S. Danaceau, Asst. Pros. Atty., both of Cleveland, for plaintiff. Wm. J. Corrigan, of Cleveland, for defendant.
Action by State on the relation of Frank T. Cullitan, Prosecuting Attorney for Cuyahoga County, against Greater Cleveland Livery Owners Association and others, for an injunction restraining the commission by defendants of acts allegedly designed to accomplish unlawful purposes of fixing prices, restricting trade and destroying competition.
Judgment for plaintiff.Frank T. Cullitan, Pros. Atty., and Saul S. Danaceau, Asst. Pros. Atty., both of Cleveland, for plaintiff. Wm. J. Corrigan, of Cleveland, for defendant.
McNAMEE, Judge.
This action is brought by the State of Ohio on relation of the prosecuting attorney of Cuyahoga County against the Greater Cleveland Livery Owners Assocation, the individual members thereof, and the secretary of the organization Joseph M. Walsh.
Plaintiff alleges that said association constitutes an unlawful combination for the purpose of fixing prices, restricting trade, and destroying competition, and seeks an injunction restraining the commission by said defendants of acts which plaintiff asserts are designed to further the accomplishment of the alleged unlawful purposes.
The defendant association was organized in the early part of 1946 and includes within its membership twenty-one of the twenty-three independent automobile livery owners who furnish livery service to the funeral directors of Cuyahoga County. These twenty-one members of the association own fifty-six automobiles and the two nonmember livery owners own one half of that number, or twenty-eight automobiles. These vehicles consist of various types of transportation equipment used at funerals such as hearses, flower cars, and limousines for passengers. In addition to the equipment of the livery owners, there are two hundred and thirty-seven automobiles owned by the two hundred and forty-six funeral directors of Greater Cleveland. When not necessary to meet their own requirements, many funeral directors hire their equipment to other undertakers. In this latter respect they act in direct competition with livery owners.
Immediately after its organization the Livery Owners Association through its officers conferred with representatives of the Funeral Directors Association and proposed an increase of livery service charges and the adoption of a zone schedule of rates modeled after a similar zone schedule in effect in Chicago, Illinois. After several meetings between representatives of the Livery Association and the Funeral Directors Association the latter indicated a willingness to pay increased rates but rejected the proposal to fix said rates in accordance with the newly proposed zoning system.
Under date of February 27, 1946, the Association forwarded a letter to all funeral directors of Greater Cleveland containing the following: ‘Enclosed you will find copy of the new rates for livery hire approved and adopted by our association. These new rates will go into effect May 1st, 1946.’
This letter was followed by another communication which stated: ‘Enclosed is a copy of new rates for all types of livery cars owned by members of the Greater Cleveland Livery Owners Association. In order to permit you time to adjust your rates to your customers the new rates will not become effective until July 1st, 1946.’
Upon the price list published by the Association and enclosed in the foregoing communications there appears the following: ‘Effective June 1st, 1946, Livery owned by members of this Association will not be permitted on any funeral with livery owners not members of this association. Complaints must be made in writing to the Association secretary.
Copies of these price lists containing the foregoing quoted matter were forwarded also to each member of the Association. The Association also published and forwarded to each funeral director a list of the names of the members of the Association on which the foregoing quoted statement appeared.
Again, and in relation to the same subject, Article 4, Sec. 2 of the Constitution of the Association provides: ‘Effective June 1st, 1946, livery owned by members of this Association will not be permitted on any funeral with livery owners not members of this association.’
Article 8, Sec. 1 of the Constitution of the Association provides: ‘The rates as adopted and published will be the official rates of this Association. All members and patrons of this Association will receive a copy.’
Pursuant to Article 3, Sec. 4 of the Constitution, each member pledges himself to abide by the Constitution, by-laws, rules and regulations of the Association. The Constitution contains provisions for the collection of accounts by the Association against members thereof, and prohibits an member who is delinquent in the payment of his accounts from receiving livery from any other member of the Association. The constitution fixes the initiation fee of members at $1,000.
In the Constitution there are provisions for the imposition of fines for failure of members charged with a violation who fail to produce their ‘books' for examination; and failure to appear and testify before the Grievance Committee is subject to fine also, and each member waives any right of action against the Association, its members, officers or employees on account of wrongs and torts.
It is conceded by plaintiff that the established rates are reasonable and that the increased prices were warranted in view of higher costs of maintenance and operation. The evidence discloses that livery owners charge funeral directors for services rendered and the latter collect these amounts, plus a profit, directly from their patrons. Thus the increase in price of livery service is passed on to members and the public.
Section 6391, General Code (Valentine Act), so reads:
‘A trust is a combination of capital, skill or acts by two or more persons, firms, partnerships, corporations or associations of persons, for any or all of the following purposes:
‘1. To create or carry out restrictions in trade or commerce.
‘2. To limit or reduce the production or increase, or reduce the price of merchandise or a commodity.
‘3. To prevent competition in manufacturing, making, transportation, sale or purchase of merchandise, produce or a commodity.
‘4. To fix at a standard or figure, whereby its price to the public or consumer is in any manner controlled or established, an article or commodity of merchandise, produce or commerce intended for sale, barter, use or consumption in this state.
‘5. To make, enter into, execute or carry out contracts, obligations or agreements of any kind or description, by which they bind or have bound themselves not to sell, dispose of or transport an article or commodity, or an article of trade, use, merchandise, commerce or consumption below a common standard figure or fixes value, or by which they agree in any manner to keep the price of such article, commodity or transportation at a fixed or graduated figure, or by which they shall in any manner establish or settle the price of an article, commodity or transportation between them or themselves and others, so as directly or indirectly to preclude a free and unrestricted competition among themselves, purchasers or consumers in the sale or transportation of such article or commodity, or by which they agree to pool, combine or directly or indirectly unite any interests which they have connected with the sale or transportation of such article or commodity, that its price might in any manner be affected. Such trust as is defined herein is unlawful, against public policy and void.’
There can be little question that the auto livery business is ‘trade’ as that term is used in the statute. The word ‘trade’ is not to be interpreted in a narrow sense as importing only the buying, selling or exchanging of commodities. In Atlantic Cleaners & Dyers, Inc., et al. v. United States, 286 U.S. 427, 428, 52 S.Ct. 607, 76 L.Ed. 1204, the Supreme Court of the United States held the business of dyeing and cleaning and renovating clothes to be ‘trade’ within the meaning of the Sherman Act, 15 U.S.C.A. §§ 1-7, 15 note. The Court quoted with approval the following statement of Mr. Justice Story, found in Schooner Nymph, 18 Fed.Cas. page 506, No. 10,388 1 Summ. 516, 517, 518: ‘The argument for the claimant insists that ‘trade’ is here used in its most restrictive sense, and as equivalent to traffic in goods, or buying and selling in commerce or exchange. But I am clearly of opinion, that such is not the true sense of thw word, as used in 32d section. In the first place, the word ‘trade’ is often, and indeed generally, used in a broader sense, as equivalent to occupation, employment, or business, whether manual or merchantile. Wherever any occupation, employment, or business is carried on for the purpose of profit, or gain, or a lifelihood, not in the liberal arts or in the learned professions, it is constantly called a trade. Thus, we constantly speak of the art, mystery, or trade of a house-wright, a shipright, a trilor, a blacksmith, and a shoe-maker, though some of these may be, and sometimes are, carried on without buying or selling goods.'
Defendants urge that their association is not a monopoly. Many of the members of the association are men of modest means whose capital assets are limited to one automobile operated by the owner. Others own but two or three automobiles.Only one member of the association owns as much as ten vehicles. Their counsel appropriately characterizes them as ‘a small group of struggling operators.’ Their individual economic status is such as to induce united action in the common interest. A Court cannot be unsympathetic with the efforts of these men to obtain a fair and reasonable price for the services rendered by them. Manifestly this result can be achieved more effectively by united action than by the independent efforts of each livery owner. But neither considerations of sympathy nor an appreciation of the apparent need for economic unity in dealing with a larger interest will permit a court to disregard unambiguous terms of the statute. It cannot be gainsaid that the Valentine Act of Ohio, like the Sherman Act of the Federal Congress, was designed primarily to prevent large combinations of capital from engaging in monopolistic practice to the detriment of smaller businesses and the public generally. Whether this paramount purpose has been well served must be debated elsewhere. The statute makes no distinction between large and small combinations. Its terms are precise and plain. It denounces ‘a combination of capital skill or acts by two or more persons * * *,’ for any or all of the purposes therein enumerated.
In United States v. E. C. Knight Co., 156 U.S. 1, 16, 15 S.Ct. 249, 255, 39 L.Ed. 325, Chief Justice Fuller said: ‘Again, all the authorities agree that, in order to vitiate a contract or combination, it is not essential that its result should be a complete monopoly; it is sufficient if it really tends to that end, and to deprive the public of the advantages which flow from free competition.’ 36 Amer.Jur.Sec. 13, p. 494.
While it is true that the members of the association are compelled to meet the competition of funeral directors who, when the exigencies of their business permit, exchange automotive equipment amongst themselves, yet it is apparent that many funeral directors rely largely, and some of them perhaps entirely, upon the services of livery owners. Furnishing livery service to funeral directors is an established business in this community. More than nine tenths of all those engaged exclusively in that business are members of the Association. They have agreed to restrain competition amongst themselves and are attempting by a form of boycotting to interfere with the normal course of trade in refusing to deal with funeral directors on occasions when the latter deal with nonmembers of the Association.
The evidence discloses that nonmembers have been denied business by former patrons because of this rule promulgated by the Association. It further appears that nonmembers cannot now join the Association except upon payment of the exorbitant and prohibitive fee of $1,000. These practices, together with the announced purposes of the Association as set forth in its Constitution, tend to a monopoly and deny the advantages that flow from free competition.
The applicable principles that govern are stated as follows: ‘If the combination is in fact in restraint of trade, and monopolistic in its tendency, it is illegal, however reasonable the prices fixed by the parties thereto, however great the competition they had to encounter, and however great the necessity for curbing themselves by joint agreement from committing financial suicide by ill-advised competition.’ 36 Amer.Jur.Sec. 10, page 492.
The fact that the increased prices are reasonable does not relieve against he application of the provisions of the statute.
In United States v. Socony Vacuum Oil Company, 310 U.S. 150, at page 220, 60 S.Ct. 811, at page 843,84 L.Ed. 129, Mr. Chief Justice Douglas said: ‘Any combination which tampers with price structures is engaged in an unlawful activity. Even though the members of the price-fixing group were in no position to control the market, to the extent that they raise, lower, or stabilize prices they would be directly interfering with free flow of market forces. The Act places all such schemes beyond the pale and protects that vital part of our economy against any degree of in-interference.’
Again, 310 U.S. at page 212, 60 S.Ct. at page 842, 84 L.Ed. 455, the following appears:
‘Thus for over forty years this Court has consistently and without deviation adhered to the principle that price-fixing agreements are unlawful per se under the Sherman Act and that no showing of so-called competitive abuses or evils which those agreements were designed to eliminate or alleviate may be interposed as a defense. And we reaffirmed that well-established rule in clear and unequivocal terms in Ethyl Gasoline Corporation v. United States, 309 U.S. 436, 852, 60 S.Ct. 618, 626, 84 L.Ed. 852, decided March 25, 1940, where we said:
‘Agreements for price maintenance of articles moving in interstate commerce are, without, more, unreasonable restraints within the meaning of the Sherman Act because they eliminate competition.’
See also Rayess v. Lane Truck Co., 138 Ohio St. 401, 35 N.E.2d 447;Central Ohio Salt Co. v. Guthrie, 35 Ohio St. 666. The Ohio law is well summarized in the following statement in 27 O.J., Sec. 16, p. 170: ‘No Ohio decision has upheld a transaction whose purpose was to fix prices or establish a monopoly, or, with one exception, whose sole purpose was to reduce competition. The initial presumption is against all arrangements in restraint of trade.’
Boycotting is a form of restaint that comes within the provisions of the statute. In 36 American Jur.Sec. 27, pages 508, 509, it is stated that: ‘Boycotting or blacklisting third persons who deal with the party attached may produce the intended result as directly as physical violence; and such conduct is equally illegal. A combination by two or more persons for the purpose of boycotting a third person is a combination to create and carry out a restriction in trade and commerce, and is a violation of state anti-trust laws.’
It is true that in two previous cases decided by this Court, State ex rel. v. Electric Business Ass'n et al., 29 Ohio N.P.,N.S., 73, and Clover Meadow Creamery et al. v. National Dairy Products et al., 29 Ohio N.P.,N.S., 243, it was held that members of an association had a right to meet, exchange ideas and to discuss and agree upon reasonable prices, but in neither of the foregoing cases was judicial sanction given to the practice of regulating prices by concerted action or by attempting to maintain the prices established by coercive measures.
Defendants urge that the principles of law which permit working men to organize ought to be applied here. It may be said of those members who own and operate but one automobile that they proximate the status of workmen who supply their own tools, but like the members who own multiple cars they are operators of businesses, they are independent contractors and not employees. Clearly the owners of more than one car are employers. There is no genuine similarity of purpose between this Association and a labor union.
It appears that in the respects hereinbefore indicated the acts of the Association are violative of the terms of the Valentine Act. The extensive scope of this and similar acts in other states as interpreted by courts is well expressed in the following statement in 21 A.L.R., 1110: ‘It may be said, however, generalizing from the cases, that the anti-trust acts are violated by any agreement, understanding, combination, association, plan, or club, between, among, or composed of those engaged in the same business,-although called by a name indicating apparently existing competition or openly setting out only worthy objects not in conflict with such acts, the effect of which is to secure harmonious action among the operators or members in relation to the regulations of price, the limitation of production or the division of business or territory.’
A journal entry may be prepared in accordance with the foregoing, with exceptions allowed to all defendants.