Opinion · Court of Appeals for the Second Circuit

Frischer & Co. v. Elting

60 F.2d 711

Type: Opinion
Court: Court of Appeals for the Second Circuit
Jurisdiction: Federal
Date: 1932-07-18
Topic: general

AUGUSTUS N. HAND, Circuit Judge (after stating the facts as above). The eomplainants-appellants who sought to import the articles containing synthetic phenolic resin assign error in the decree dismissing the bill of complaint on the ground that: (1) Section 316 of the Tariff Act (19 USC A §§ 17A-180) is unconstitutional because it constitutes an unlawful delegation of legislative power to the President. (2) The findings of the Commission on which the President’s order was based were unlawful (a) because not concurred in by a majority of its members; (b) because the Commission assumed to determine that the articles sought to be imported infringed patents of the Bakelite Corporation and that the infringements were of the class of “unfair acts” mentioned in section 316 (a) of the Tariff Act (19 USC A § 174). (3) Tlie bill should stand because there was ground for invoking .jurisdiction of a court of equity in order to restrain a multiplicity of actions to enforce the bonds given for the temporary entry of the merchandise.

Citator

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Cited by: 6 opinions

FRISCHER CO. v. ELTING,60 F.2d 711(2nd Cir. 1932)

FRISCHER CO., Inc., et al. v. ELTING.

No. 197.

Circuit Court of Appeals, Second Circuit.

July 18, 1932.

Appeal from the District Court of the United States for the Southern District of New York.

In Equity. Suit by Frischer Co., Inc., and others against Philip Elting, Collector of Customs of the Port of New York, to restrain defendant from excluding certain merchandise from entry and for other relief. From a decree dismissing the bill, complainants appeal.

Affirmed.

This suit was brought to restrain the collector of customs of the port of New York from excluding certain articles of merchandise, composed in whole, or in part, of "synthetic phenolic resin form C," and from commencingPage 712actions to collect bonds which he had taken upon the temporary admission of the articles that had thereafter been found to have been improperly admitted. The bill of complaint alleged that the merchandise was subject to be excluded and actions to enforce the bonds were threatened, under the provisions of section 316 of the Tariff Act of 1922 (19 USCA §§ 174-180), on the ground that the merchandise was covered by basic patents and by a registered trade-mark known as "Bakelite," which were infringed by the importers, complainants in this suit. The bill was dismissed by Judge Woolsey because it failed to state a cause of action, and, from the decree of dismissal, this appeal was taken.

Section 316(a), 19 USCA § 174, provides that "unfair methods of competition and unfair acts in the importation of articles into the United States, or in their sale by the owner, importer, consignee, or agent of either, the effect or tendency of which is to destroy or substantially injure an industry, efficiently and economically operated, in the United States, or to prevent the establishment of such an industry * * * are declared unlawful and when found by the president to exist shall be dealt with, in addition to any other provisions of law, as hereinafter provided."

Subdivisions (b) and (c) of the same section (19 USCA §§ 175, 176) authorize the Tariff Commission to investigate any violation on complaint or on its own initiative, in order to assist the President in making decisions under the section. They also authorize the Commission to afford hearings when deemed proper and to make findings in the course of investigations which shall be conclusive if supported by evidence. From such findings an appeal by the importer or consignee to the Court of Customs Appeals is provided upon questions of law only, with a further review by the Supreme Court upon certiorari.

Subdivisions (d), (e) and (f) of the section (19 USCA §§ 177-179) provide that the final findings shall be transmitted to the President, that, if the existence of an unfair method or act "shall be established to the satisfaction of the President," he shall determine the rate of an additional duty not exceeding 50 per cent. of the value of such articles nor less than 10 per cent., "which will offset such method or act," or in extreme cases of unfair acts he shall require the imported articles to be excluded — likewise, when the President has reason to believe that any article is offered for entry in violation of the act, entry may be forbidden until such investigation as the President may deem necessary, provided the Secretary of the Treasury may "permit" entry under bond upon such conditions and penalties as he may deem adequate.

It was alleged in the bill of complaint that the Tariff Commission reported to the President that it had reason to believe that there existed violations of section 316 of the Tariff Act of 1922 in the importation into the United States of articles composed in whole or in part of "synthetic phenolic resin form C"; that this merchandise was covered by basic patents and the trade-mark already mentioned; that both were being infringed by importers who placed the articles on sale; that on April 22, 1926, the President, acting upon this report, directed the Secretary of the Treasury to forbid the entry until the Tariff Commission had made an investigation; that the investigation by the Commission proceeded, and while it was pending the Secretary of the Treasury upon the application of the complainants, but without giving them an opportunity to be heard as to terms or amount, fixed bonds running to the United States whereby the merchandise, then temporarily embargoed by the defendant collector, might be imported, but must thereafter be exported if the President finally held it should be excluded. The bill further alleged that the Commission made findings that the imported merchandise was covered by basic patents which the importers infringed; that the imposition of an additional duty would not offset the unfair acts of the importers; that the merchandise should be excluded; and that the imported articles should bear a label indicating that they were not made of "synthetic phenolic resin form C," manufactured by the owner of the patents, the Bakelite Corporation. The bill also alleged that an appeal was thereafter taken to the Court of Customs and Patent Appeals which, by a divided court, affirmed the Tariff Commission, that a writ of certiorari was denied by the Supreme Court, that, as a result, the Secretary of the Treasury, by order of the President, issued a permanent embargo and directed the defendant collector to require exportation of the merchandise and, in default of this, to notify the complainants and the sureties on the numerous bonds for temporary admission that they would be held liable for the amount of the several bonds pursuant to which the merchandise had been released.

The report of the Tariff Commission, on which the President made his order, had proceeded upon the theory that the imported articlesPage 713fell within the claims of patents belonging to the Bakelite Corporation and that sales of these infringing articles were "unfair acts" within the meaning of section 316 of the Tariff Act of 1922. The report stated that the imported articles were not marked "Bakelite," but that they were sold as "Bakelite" or "imported Bakelite," and should therefore be labeled in such a way as to show that they were not made by the Bakelite Corporation and to prevent confusion with its goods.

The Tariff Commission consisted of six members. The report of the Commission in the present case was concurred in as a whole by three of the members. One concurred in part, one dissented, and the remaining one was absent.

Meyer Kraushaar, of New York City, for appellants.

George Z. Medalie, U.S. Atty., of New York City (Harry G. Herman, Asst. U.S. Atty., of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge (after stating the facts as above).

The complainants-appellants who sought to import the articles containing synthetic phenolic resin assign error in the decree dismissing the bill of complaint on the ground that:

(1) Section 316 of the Tariff Act (19 USCA §§ 174-180) is unconstitutional because it constitutes an unlawful delegation of legislative power to the President.

(2) The findings of the Commission on which the President's order was based were unlawful (a) because not concurred in by a majority of its members; (b) because the Commission assumed to determine that the articles sought to be imported infringed patents of the Bakelite Corporation and that the infringements were of the class of "unfair acts" mentioned in section 316(a) of the Tariff Act (19 USCA § 174).

(3) The bill should stand because there was ground for invoking jurisdiction of a court of equity in order to restrain a multiplicity of actions to enforce the bonds given for the temporary entry of the merchandise.

The contention that section 316 is unconstitutional because it delegates legislative power to the President is answered by such decisions as Buttfield v. Stranahan,192 U.S. 470, 24 S. Ct. 349, 48 L. Ed. 525, Field v. Clark,143 U.S. 649, 12 S. Ct. 495, 36 L. Ed. 294, and Hampton, Jr., Co. v. United States,276 U.S. 394, 48 S. Ct. 348, 72 L. Ed. 624. By the last decision, section 315(c) of the Tariff Act of 1922 (19 USCA §§ 154-159) was sustained as a proper delegation of power. This section authorized the President to increase or decrease duties so as to equalize differences which, upon investigation, he might find to exist between costs of production in this and in foreign countries. Certainly it is now well settled, if it ever was in doubt, that no person has a right to trade with foreign nations broad enough to limit the control of Congress over foreign commerce or to affect its power to determine what merchandise may be imported and upon what terms any right to import may be exercised. The only possible question about the validity of section 316 is whether Congress laid down an adequate standard for the President to apply, when it declared unlawful "unfair methods of competition and unfair acts in the importation of articles * * * or in their sale * * * the effect or tendency of which is to destroy or substantially injure an industry. * * *" The terms are general and vague, but the Federal Trade Commission Act, which has uniformly been recognized as valid, declared "unfair methods of competition in commerce" unlawful and directed the Commission "to prevent persons * * * from using" those methods. Federal Trade Commission Act, § 5 (15 USCA § 45); Federal Trade Comm. v. Gratz,253 U.S. 421, 40 S. Ct. 572, 64 L. Ed. 993; Fed. Trade Comm. v. Eastman Kodak Co.,274 U.S. 619, 47 S. Ct. 688, 71 L. Ed. 1238. In similar vague terms the Shipping Board has been empowered to approve such agreements as it shall not find "unjustly discriminatory or unfair * * * or to operate to the detriment of the commerce of the United States. * * *" Congress could hardly have left the Shipping Board with more general powers or launched it with less definite sailing orders; yet its jurisdiction as a fact-finding body has been sustained in the broadest way. U.S. Nav. Co. v. Cunard S.S. Co.,281 U.S. 759, 50 S. Ct. 410, 74 L. Ed. 1169.

We can have no doubt that section 316, which empowers the President to determine what acts in the importation or the sale of imported articles are unfair and to determine under what conditions these subjects of unfair trade should be exported, is entirely valid, and we so hold.

In view of what we have already said, it is evident that Congress might have left toPage 714the President the whole matter of excluding the merchandise in question because of unfair acts in connection with its importation or sale, or it might have left it to the Tariff Commission with or without a review by a legislative court like the Court of Customs and Patent Appeals or by a constitutional court. United States v. Ju Toy,198 U.S. 253, 25 S. Ct. 644, 49 L. Ed. 1040. The question before us is what Congress actually did, and whether the President, when he directed the collector to export the merchandise, was acting within the terms of section 316 of the Tariff Act.

The "unfair acts" which are declared unlawful by the statute and are ordered to be dealt with as therein provided are those"found by the President to exist."The Tariff Commission is brought on the scene "to assist the President in making * * * decisions." Under section 316(e), 19 USCA § 178, the additional duties imposed upon articles imported in violation of the act are to be determined "whenever the existence of any * * * unfair method or act shall be establishedto the satisfaction of thepresident,"and, in case such additional duties will not offset the unfair acts and the President shall be"satisfied"that the unfair methods or acts have been extreme, he shall direct the articles to be excluded as he deems the interests of the United States require. It is evident from the foregoing that the President is given full power to determine what acts are unfair and injurious to industry. On the face of the statute, the Commission is only employed to"assistthe President in making * * * decisions" and not to bind him. A review of their auxiliary findings by the Court of Customs and Patent Appeals is given as to "questions of law only," and provision is made for an appeal from the decision of that court to the Supreme Court upon certiorari. It seems most reasonable to suppose that the methods which the statute provides for determining whether an act is unfair and whether merchandise shall for that reason be excluded are the only methods which Congress intended to employ to enforce the statute. We realize that on the face of the statute the President is not bound by the recommendations of the Tariff Commission or by the findings of the Court of Customs Appeals or even by the decision of the Supreme Court should it grant a writ of certiorari, for all are in terms advisory. But it is hardly likely that Congress would have set up all this elaborate machinery and provided that the Court of Customs Appeals should review the Tariff Commission only as to matters of law if a suit was to be permitted to test matters again in a constitutional court. The Supreme Court denied a writ of certiorari to the Court of Customs and Patent Appeals in respect to this very litigation. Whether it denied the writ because it declined to take up a case where it would be reviewing the Tariff Commission and the Court of Customs when they were acting only in an advisory capacity, and not judicially (United States v. Ferreira, 13 How. 40, 14 L. Ed. 42; Gordon v. United States,117 U.S. 697, appendix), or whether it denied it as a pure matter of discretion, in any event the importers had a hearing both before the Commission, the Court of Customs and Patent Appeals, and the President, and exhausted their remedy before the Supreme Court as well. We think the statute contemplated no further remedy. Even if the President was not bound to follow the decision of his advisers in matters of law as to which the Court of Customs and Patent Appeals had given a decision, he would undoubtedly have done so. In view of the broad powers of Congress to deal with foreign importations, we think the remedy afforded was ample. It is therefore unnecessary for us to consider the question whether the majority of the Court of Customs and Patent Appeals properly held that sales by the complainants which infringed patents were "unfair acts" within the meaning of section 316, or whether Judge Garrett was right in his dissenting opinion. The Tariff Commission was given power to advise the President, and the legislative Court of Customs and Patent Appeals was authorized to review the findings of the Commission on questions of law. Ex parte Bakelite Corporation,279 U.S. 438, 49 S. Ct. 411, 73 L. Ed. 789. The President's action taken pursuant to the decision of the latter under the provisions of section 316 we regard as final. This applies not only to the findings that the infringements of the patents constituted "unfair acts," but also to the finding that the imported articles were sold as "Bakelite" and must be labeled in such a way as to show that they were not made by the Bakelite Corporation.

There can be no doubt that a majority of the Tariff Commission could act for that body. So the Court of Customs and Appeals has held, Frischer Co. v. Bakelite Corporation,39 F.2d 247, and its decision was justified by the authorities. Cooley v. O'Connor, 12 Wall. 391, 20 L. Ed. 446; Merrill v. Lowell, 236 Mass. at page 467,128 N.E. 862; National Prohibition Cases, 253 U.S. at page 386, 40 S. Ct. 486, 588, 64 L. Ed. 946. AnyPage 715other method of procedure would be awkward, if not impracticable.

The part of the bill seeking to restrain actions to enforce the bonds given upon the temporary entry of the merchandise lacks equity. The mere fact that a large number of suits might be brought is not sufficient to give a court of equity jurisdiction. Mechanics' Ins. Co. v. C.A. Hoover Distilling Co. (C.C.A.) 173 F. 888, 32 L.R.A. (N.S.) 940; Scottish Union, etc., Ins. Co. v. J.H. Mohlman Co. (C.C.) 73 F. 66. Moreover the bonds ran to the United States, and the complainants are attempting to sue it without any statutory consent on its part and without even making it a party. Certainly a decree against the collector who would not be a party to any action to recover on the bonds would be "brutum fulmen."

The decree of dismissal is affirmed.