Act No. 10 of the Extra Session of the General Assembly of
Louisiana for 1915, relating to the business of refining sugar and
creating the rebuttable presumption that any person systematically
paying in that state a less price for sugar than he pays in any
other state is a party to a monopoly or conspiracy in restraint of
trade,
held unconstitutional under the equal protection
and due process provisions of the Fourteenth Amendment; the
classification therein, if not confined to a single party, being so
arbitrary as to be beyond possible justice, and the presumptions
created having no foundation except on intent to destroy.
While the legislature may go far in raising presumptions and
changing the burden of proof, there must be rational connection
between the fact proved and the ultimate fact presumed.
It is not within the province of the legislature to declare an
individual guilty, or presumptively guilty, of a crime.
A statute must fall as a whole if it falls in sections without
which there is no reason to suppose it would have been passed.
229 F. 284 affirmed.
Page 241 U. S. 80
The facts, which involve the constitutionality under the
commerce clause of, and the Fourteenth Amendment to, the federal
Constitution of Act No. 10 of Louisiana of 1915, relative to, and
regulating the business of, refining sugar, are stated in the
opinion.
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a bill in equity brought by a New Jersey corporation,
the appellee, against the inspector of sugar refining, the
Governor, and the Attorney General of Louisiana to prevent the
enforcement of act No. 10 of the Extra Session of the General
Assembly of that state for 1915. The grounds of relief are the
commerce clause and the Fourteenth Amendment of the Constitution of
the United States.
The plaintiff was granted a preliminary injunction by three
judges in the district court, and the defendants appealed. 229 F.
284.
A summary of the statute is as follows: the business of refining
sugar is declared to be impressed with a public interest "by reason
of the nature and by reason of the monopolization thereof," and on
that footing the regulations are made. After providing for
elaborate reports and inspection of books by the inspector, the act
imposes for the benefit of the inspection fund a tax of one-half
cent for every three hundred and fifty pounds of granulated
Page 241 U. S. 81
sugar made. It then makes it unlawful to buy sugar on an
ex
parte test of quality, etc., and proceeds to authorize the
inspector to make such reasonable regulations not only concerning
that, but affecting any branch of the business of sugar refining,
as he may deem proper and as may be conducive to the public
interest, and to the prevention of monopoly in the business, or to
the protection of the public from its consequences. Then come the
provisions chiefly in issue here. By § 7,
"any person engaged in the business of refining sugar within
this state who shall systematically pay in Louisiana a less price
for sugar than he pays in any other state shall be
prima
facie presumed to be a party to a monopoly or combination or
conspiracy in restraint of trade and commerce, and upon conviction
thereof shall be subject to a fine of five hundred dollars a day
for the period during which he is adjudged to have done so;"
his license to do business in the state is to be revoked, and
any foreign corporation (such as the plaintiff is) is to be ousted
from the state and its property sold. If irreparable injury to the
public interest is shown in such a case, the court may appoint a
receiver at any stage of the proceedings, etc. By § 8, if shown by
affidavit or otherwise, either
in limine or after trial,
that any refinery has been closed or kept idle for more than one
year, it shall be presumed to have been done for the purpose of
violating this act or the laws against monopoly, etc., and if the
counter-evidence does not rebut the presumption, the court shall
order the owner to sell the refinery within six months, and, if
that is not done, shall appoint a receiver to do it within twelve
months. In computing the year of idleness, any plant shall be
treated as idle that has not been operating
bona fide. By
§ 9, in suits for ouster, etc., upon showing by the state that the
monopoly, etc., are detrimental to the public welfare, an
injunction may be issued or a receiver appointed, after a hearing,
subject to an appeal returnable
Page 241 U. S. 82
within five days, to be determined within forty days, etc. By §
10, a fine of from fifty to twenty-five hundred dollars a day is
imposed for violations of the act not otherwise provided for, or of
any of the regulations promulgated by the inspector. By § 11, in
suits under the act, books, letters, and other documents, "or
apparent copies thereof," of the defendant shall be given effect as
being what they purport to be and "as establishing the facts
carried on their face" unless sufficiently rebutted, upon proof of
their having been in the possession or control of the defendant,
and any report of any legislative committee of the state, or of the
Senate or House of Representatives of the United States, or of any
bureau, department, or commission acting under the authority either
of the state or of the Senate or the House of Representatives of
the United States, and the records of any court of any state, or of
the United States, are made
prima facie evidence of the
facts set forth therein, subject to rebuttal. In conclusion, by §
15 the business of refining sugar is defined to be
"that of any concern that buys and refines raw or other sugar
exclusively, or that refines raw or other sugar from sugar taken on
toll, or that buys or refines more raw or other sugar than the
aggregate of the sugar produced by it from cane grown and purchased
by it."
Besides the allegations that bring the plaintiff within the
purview of the act, the claims of the protection of the
Constitution, and the invocation of the principle of
Ex Parte
Young, 209, U.S. 123, for equitable relief, the bill sets
forth some facts that throw special light upon the case. First, for
the bearing of § 8, it shows that formerly the plaintiff purchased
a consolidated refinery called the Louisiana Refinery, increased
its capacity to 2,500,000 pounds daily, and worked it until 1909.
It then built, at a cost of about six million dollars, a new
refinery at Chalmette, with a daily melting capacity of 3,000,000
pounds, since increased to 3,500,000. It then closed the
Louisiana
Page 241 U. S. 83
Refinery, as it could not distribute from New Orleans more
refined sugar than could be made at Chalmette. The machinery of the
Louisiana Refinery is comparatively antiquated, and could not be
operated economically, although, in case of the destruction of the
Chalmette plant, it could be used as a substitute at considerable
expense and after some delay.
As to the presumption created from the systematic paying in
Louisiana a less price for sugar than is paid in any other state,
the bill alleges that the plaintiff purchases on an average less
than one half of the Louisiana sugar crop, of which half over a
third is shipped as bought, to the plaintiff's northern refineries,
so that not much over thirty percent is melted at Chalmette. In
fact, only a comparatively small portion of the plaintiff's
meltings in Louisiana is of sugar produced in Louisiana, the
remainder having been imported. The chief port for the receipt of
raw sugar imported is New York, at or near which there are seven
large refineries now in operation. The Louisiana sugar customarily
has been brought on the market in November and December, during
which months it is pressed for sale in amounts far in excess of the
requirements of all the refineries in the state. Purchasers
therefore had either to ship a part north or to store it, with
consequent loss from deterioration and in weight, interest, and
cost of storage and insurance, and at the risk of a decline in the
market. These elements necessarily affect the price, which cannot
be higher than that in the ultimate market, less the cost of
transportation, and which has been approximately that. Furthermore,
the period of storage is a time when the market for raw sugar
generally declines, and the price of refined sugar follows that of
raw, to the refiner's loss.
Formerly a large part of the sugar manufactured in Louisiana by
the plaintiff was sold in the Middle West and in Minnesota, Iowa,
the Dakotas, etc., and it was to meet
Page 241 U. S. 84
that market that the Chalmette refinery was built. But the great
and rapid increase in the production of beet sugar, which now forms
one sixth of all the sugar consumed in the United States and is
sold at prices below those of cane sugar, has driven the plaintiff
out of those markets to a great extent. The result frequently has
been that the plaintiff has derived little or no advantage from the
purchase of Louisiana sugar, even when bought at a less price than
that in New York on the same day.
The bill also shows fully that the plaintiff melts solely on its
own account, so that its only contact with the public is as a buyer
of raw and a seller of refined sugar, and its business is affected
with a public interest not otherwise than as any other business is,
according to its importance and size. It also shows that much the
greater part of its Chalmette commerce, both in purchase and sale,
is foreign or among the states. There are other allegations besides
those that we have summed up, but enough has been stated to
disclose the plaintiff's case.
The answer alleges that the plaintiff is a monopoly and
combination in restraint of trade in buying, refining, and selling
sugar throughout the United States, and completely controls the
sugar trade in Louisiana, and sets forth a long series of letters
thought to show efforts to obtain and keep such control. It
obliquely intimates that the plaintiff can fix prices on occasion
even in the New York market, admitted to be the ruling one in the
United States. It alleges that suits have been brought against the
plaintiff by sugar planters, under the Sherman Act, for a total of
near $200,000,000, and that, after the exposure of the plaintiff's
criminality in a suit by the United States that seems to have come
to nothing, this law was passed. All of the foregoing, the main
portion of the answer, is offered as ground for denying to the
plaintiff any equitable relief.
In the alternative, if the plaintiff has a standing in
Page 241 U. S. 85
equity, the answer denies the plaintiff's explanation of the
idleness of the Louisiana Refinery and avers that the statement
that it buys less than half the Louisiana crop is deceptive, and
that it buys 70 percent of the raw sugar sold to refiners. It
alleges that the shipping of raw sugar North is due to artificial
conditions created by the plaintiff, and that, but for them, the
whole would be "handled locally." It also alleges that the
difference between the Louisiana and the New York price has been
made less by the plaintiff since 1911 in order to prevent a
repetition of the one successful combination made by the planters.
Finally it alleges that the shipments to New York arrive when there
is no sugar on hand, or when the first sugar from Cuba is coming
in, and enable the plaintiff to influence downward the price of the
Cuban sugar that it needs. Most of the allegations of the bill are
denied, and it is said that the rush to sell in November and
December would have found a market but for the plaintiff's wrongful
deeds.
The answer is signed by the attorney general of the state, and
if he were authorized to interpret the meaning of the other voice
of the state heard in Act No. 10, would seem to import that the
latter was a bill of pains and penalties disguised in general
words. For the first division of the answer shows that the
plaintiff is the only one to whom the act could apply, and that the
statute was passed in view of the plaintiff's conduct, to meet it.
It is upon the assumption of the latter fact that the argument is
pressed that the plaintiff has no standing in equity, since it made
the legislation necessary. If the connection were omitted, it would
be so much the worse for the constitutionality of the act. We deem
it enough to say that neither that supposed connection nor the
general intimations of the plaintiff's wickedness in the answer
deprive it of its constitutional rights, or prevent it from
asserting them in the only practicable and adequate way.
Page 241 U. S. 86
The statute bristles with severities that touch the plaintiff
alone, and raises many questions that would have to be answered
before it could be sustained. We deem it sufficient to refer to
those that were mentioned by the district court: a classification
which, if it does not confine itself to the American Sugar
Refinery, at least is arbitrary beyond possible justice, and a
creation of presumptions and special powers against it that can
have no foundation except the intent to destroy. As to the
classification, if a powerful rival of the plaintiff should do no
refining within the state, it might systematically pay a less price
for sugar in Louisiana than it paid elsewhere, with none of the
consequences attached to doing so in the plaintiff's case. So of
anyone who purchases but does not refine. So of any concern that
does not buy and refine more sugar "than the aggregate of the sugar
produced by it from cane grown and purchased by it," as easily
might happen with a combination of planters, such as the answer
gives us to understand has been attempted heretofore.
As to the presumptions, of course, the legislature may go a good
way in raising one or in changing the burden of proof, but there
are limits. It is
"essential that there shall be some rational connection between
the fact proved and the ultimate fact presumed, and that the
inference of one fact from proof of another shall not be so
unreasonable as to be a purely arbitrary mandate."
Mobile, Jackson & Kansas City R. Co. v. Turnipseed,
219 U. S. 35,
219 U. S. 43.
The presumption created here has no relation in experience to
general facts. It has no foundation except with tacit reference to
the plaintiff. But it is not within the province of a legislature
to declare an individual guilty or presumptively guilty of a crime.
If the statute had said what it was argued that it means, that the
plaintiff's business was affected with a public interest by reason
of the plaintiff's monopolizing it, and that therefore the
plaintiff should be
prima facie presumed guilty upon
proof
Page 241 U. S. 87
that it was carrying on business as it does, we suppose that no
one would contend that the plaintiff was given the equal protection
of the laws. We agree with the court below that the act must fall
as a whole, as it falls in the sections without which there is no
reason to suppose that it would have been passed.
Decree affirmed.