Petition for Writ of Certiorari — Safeway Stores, Inc. v. Bowles

Offles - Succeine Sourt, U. 3.

Fy ee |

EC 29 1944

EY

OLERK

Supreme Court of the Tuited States

Ovcroser TrerM, 1944

SAFEWAY Srores, LINcorvoraren, Petitioner,

V.

Cursrer Bowes, Price Administrator.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES EMERGENCY COURT OF AP-

PEALS AND BRIEF IN SUPPORT THEREOF

KuisHa Hanson,

Kuior C. Lover,

Counsel for Petitioner,

729 Fifteenth Street, N. W.,

Washington 5, D. C.

December 29, 1944.

FRESS OF JUDD & DETWEILER, INC., WASHINGTON, D. C.

TABLE NYTENTS

Page

Petition:

A. STATEMENT OF MATTER INVOLVED..... 1

ys rere rere rr ere 6

C. QUESTIONS PREBENTIOD ...ceccsvsesecsss 6

D. REASONS FOR THE ALLOWANCE OF THE

I ec ha eut aha we eaa ea een ke ee ke 7

Brief:

DG ee SD sh a xe Ue Ne Gad ek nce yeatans 9

ie, WEISS oko sab naa keh da Kogekh eee se 9

lil. STATEMENT OF THE CASE... .......00005. 10

IV. SPECIFICATION OF ERRORS .............. 10

V. QUESTIONS PRESENTED «nc cic as ceccccces 11

VI. STATUTORY PROVISIONS INVOLVED ..... 11

VII. SUMMARY OF ARGUMENT ................ 12

VII. ARGUMENT:

Point 1. The Administrator acted arbitrarily

and ecapriciously in classifying retail food stores

by sales volume and type of ownership........ 15

Point 2. The differentials adopted by the

Administrator were based upon data which

were neither adequate nor representative, and

also upon an arbitrary use of that data........ 22

Point 3. The Administrator has arbitrarily

and eapriciously precluded the petitioner from

realizing any appreciable mark-up allowance

for performing essential pre-retail functions. . . 26

Point 4. Over-all protits are irrelevant to this

proceeding, but they show the effect of the Ad-

ministrator’s discriminatory action........... 30

Point 5. The interpretation of the Emergency

Court makes the Price Control Act unconsti-

tutionally discriminatory and renders the re-

view provisions ineffective in violation of the

due process clause of the Fifth Amendment... . 33

Ee. SE, 43a sO ck kanes deueciea<cncents 35

CITATIONS

Administrative:

General Maximum Price Regulation......... ......... 31

General Order No. 51, Amendment 2................. 3, 5*

H. R. 4376, 78th Congress, 2d Session................. 19*

Maximum Price Regulation No. 238.................. 31

* Refers to footnotes.

Maximum Price |. NO LOS. cece eee eee ee ees 31

Maximum Price Rewulution No. 271 (revised)........ 3, 5*

Maximum Price Sesmaletinn No. RE rere ee 4*

Maximum Price Regulation No. 390...........-.++-- 3

re ss ee 15*

Maximum Price Regulation No, 421............ 3, 5*, 28, 29*

Maximum Price Regulation No. 422 . .

3, 4, 5, 22, 25, 28, 29", 30, 31

pS ES ES EI eee ere Tee 15*

EINE TOG: DE os ons cc nce sn ce gece ccexnaees 27, 28*

ee eS SS ae errr:

Maximum Price Regulation No. 423............ 4, 22 ,25, 30

Maximum Price Regulation No. 426..............-+- 3, 5*

Constitutional:

Fifth Amendment to the Constitution ........ 8, 14, 15, 33, 34

Judicial:

Currin v. Wallace, 906 U.S. 1.......ccccescevcccees 33

Detroit Bank v. United States, 321 U.S. 414.......... 33

Philadelphia Coke Company v. Bowles, 139 F. (2d)

eR ON a Cee a cow abode eth 4664 SWE ae 34

Safeway Stores v. Brown, 138 FP. a, eee 5*

Yakus v. United States, 321 U.S. 414................ 33

Statutory:

Act of June 30, 1944, 58 Stat. 632 .................. 21

Emergency Price Control Act (56 Stat. 23), as amended:

ys Celik ak 4 $4 v4 6 eave AD Owe 2,7

et a sha ek see bes 846 won 8 11, 17, 25

lea icccs ewe ae knee de ne 10, 12, 21

CE EIT eer er re Te eee 5*

ey eG kw dh ce ek bs ee dkwhis ens 8, 34

So eo va isa nia Kw ea Oia e KR 6, 12

ESE re ERR eR PE ED 12, 25

Na Sa a ga 6,9

* Refers to footnotes.

il

Supreme Court of the United States

Ocroser TERM, 1944

No. 798

Sareway Srores, [Incorporatep, Petitioner,

v.

Curster Bowes, Price Administratur.

Petition for a Writ of Certiorari to the United States

Emergency Court of Appeals and Brief in

Support Thereof

PETITION

To the Honorable the Chief Justice of the United States and

the Associate Justices of the Supreme Court of the United

States:

The petition of Safeway Stores, Incorporated, respect-

fully submits to this Honorable Court the following:

A

STATEMENT OF MATTER INVOLVED

This ease is based upon protests filed by petitioner against

five price regulations and one general order issued by the

Price Administrator whereunder various allowances were

la

provided for the performance of pre-retail functions, ex-

cept when such functions were performed by petitioner and

others similarly situated, and whereunder various percent-

age mark-ups were provided for the determination of re-

tail ceiling prices, which mark-ups, in many instances,

varied, to petitioner’s detriment, between the latter’s re-

tail stores and those of its competitors in the same sales-

volume category, all in purported pursuance of Section 2

of the Emergency Price Control Act, 56 Stat. 28, 50 U.S. ¢.

Appx. § 901.

The facts are established by the allegations of the com-

plaints (R. 516-526, 532-542) as admitted by the answers

(R. 528-531, 544-547).

Petitioner, a Maryland corporation with its principal

offices in Oakland, California, owns and operates more than

2,300 retail food stores in 23 States of the United States and

in the District of Columbia as a single corporate entity. It

has an historic business practice of maintaining the same

prices on the same commodities in all of its stores in the

same trading area, irrespective of the total sales volume of

each store. The majority of the stores had a total sales

volume for the year 1942 of less than $250,000 per store.

Petitioner sells numerous commodities, including meats,

fresh fruits and vegetables, dry groceries (canned and

packaged foods), and soaps and cleansers. It makes most

of its purchases direct, for which purpose it maintains

buying offices and receiving warehouses, also both produce

and dry-grocery warehouses such as are maintained by in-

termediate sellers, retailer-owned cooperatives, and inde-

pendent wholesalers. It performs all functions required

from the purchase of the commodity through its delivery

to the retail store: inspecting, sorting, trimming, caring

for and storing, packaging, ete., as the case may be, and then

assembling orders, loading the trucks, and making deliver-

ies. These functions are often called wholesale functions,

although they are more accurately termed pre-retail fune-

tions, or warehousing and pre-warehousing functions. Suf-

fice it to say, petitioner performs them, and expenses are in-

curred in their performance.

Petitioner is in active competition with all retail grocery

and meat distributors in its various trading areas, including

eroups of so-called retailer-owned cooperatives which main-

tain and operate warehouses that perform wholesale fune-

tions of essentially the same type as those performed by

petitioner.

The regulations in question are Maximum Price Regula-

tion 390 (8S F. R. 6428), MPR 422 (8 F. R. 9395), revised

MPR 271 (8 F. R. 7017), MPR 421 (8 F. R. 9388), MPR

426 (8 F. R. 9546), and General Order 51, Amendment 2

(8 F. R. 8690).

Maximum dollars and cents prices for all household

soaps and cleansers sold at retail food stores were

established by MPR 390. For the purpose of fixing prices

retail food stores were classified into four different groups.

Groups 1, 2 and 8 were classified upon the basis of the type

of ownership and the volume of sales. Group 4 was classi-

fied solely upon the basis of volume of sales. Thus Group

1 is comprised of independent stores with a sales volume of

less than $50,000; Group 2 of independent stores with a sales

volume of $50,000 or more but less than $250,000; and Group

3 of chain stores (that is, stores included in a group of four

or more under common ownership whose combined 1942

sales totalled $500,000 or more) which individually have a

sales volume of less than $250,000. Group 4 is comprised

of all stores with a sales volume of $250,000 or more, whether

independent or part of a chain store organization. The Ad-

2a

+

ministrator adhered to this classification in other regula-

tions here involved." :

In MPR 422 the Administrator established percentage

markups to be used by Group 3 and Group 4 stores, within

which groups petitioner’s stores fall, in determining the

ceiling prices to be charged by them for certain dry groceries

and perishables listed in the regulation. In MPR 423 he

established percentage mark-ups to be used by Group 1 and

Group 2 stores. Generally, the mark-up for Group 4 is

lower than for Group 3, and in most instances the mark-up

for Group 3 is lower than for Groups 2 and 1.

The variations in these mark-ups are graphically illus-

trated by a table (R. 525-6) showing the percentage ratios

permitted for each group of stores. The mark-ups_ per-

mitted Group 1 stores, which are the highest where there is

any difference, are shown as 100%, whereas the mark-ups

for the other groups are expressed in percentages as com-

pared to the 100% in Group 1. For example, in the case of

eanned meat (Item 19, R. 526) Groups 1 and 2 are allowed

the same maximum mark-up under MPR 423, expressed as

100%, whereas, under MPR 422, Group 3 stores are allowed

only 71.4% as much, and Group 4 stores 66.7%. In the case

of gelatin and pudding mixtures (Item 14, R. 526) the

maximum mark-up is allowed a Group 1 store, while a

Group 2 store is permitted only 89.3% as much, a Group

3 store 75%, and a Group 4 store only 46.4%.

Under the other regulations here involved allowances are

afforded to various persons, other than petitioner and those

similarly situated, for performing essential pre-retail fune-

tions. Petitioner is precluded from taking the mark-ups

provided because they are restricted to persons who do

‘Tt is significant, however, that the Administrator departed from

what he is pleased to eall his “standard classification” of stores

when he drafted MPR 355, and still further when he drafted various

amendments thereto. See petitioner’s petition in Docket No. 799

in this Court.

~

J

not ‘‘sell’’ at retail. Prior to the argument in the lower

court certain allowances, had been provided (MPR 422, § 18)

for packaging services performed in the warehouse. Then,

after the argument of the case and before the decision was

rendered by the Emergency Court, the Administrator ad-

mitted the inequity of his attitude and recognized the per-

formance of certain pre-warehouse functions by persons in

petitioner’s category. He did this, more than 15 months ”

after the issuance of the protested regulations, by allowing

a mark-up (provided by Amendment 32, 9 I. R. 12590, to

MPR 422) of 144% above first cost, after the adjustment of

certain specified charges and additions, for the perform-

ance of such functions. The Economie Stabilization Director

approved the action as being ‘‘necessary to correct a gross

inequity.’? This relief is partial not only because it does

not include those pre-retail functions and services which

are performed after the commodities are received in peti-

tioner’s warehouses and until they are actually delivered to

2 Dilatory taeties have been characteristic of the Administrator,

‘at least in his dealings with petitioner. Three of the price regula-

tions and the one general order involved herein were issued and

protested as follows: (1) RMPR 271 issued May 23, 1948, and pro-

tested July 3rd (R. 86-91) ; (2) GO 51, Amendment 2, issued June

22, 1943, and protested July 15th (R. 103-108); (3) MPR 421

issued July 8, 1943, and protested July 21st (R. 119-127); and (4)

MPR 426 issued July 10, 1948, and protested September 2d (R.

137-141). The dates upon which the Administrator was required

to take action upon these protests pursuant to Section 203(a) of

the Priee Control Act were, respectively, August 23rd, September

20th, October 6th, and October 8th, 1943. After the expiration, on

August 23rd, at the time when the Administrator was required to

act upon the protest to RMPR 271 petitioner filed a complaint in

the Emergency Court on the theory that the Administrator’s failure

and refusal to act were equivalent to a denial of the protest. This

contention was finally decided adversely to petitioner, the court

holding that an overt act of denial was required by the Act. Safeway

Stores v. Brown, 188 F. (2d) 278. Subsequently, in the light thereof,

on May 23, 1944, petitioner found it necessary to request that the

Emergency Court issue a mandatory erder requiring the Administra-

tor to take final action on the aforementioned protests. On June 1,

1944, he denied them.

6

petitioner’s retail stores, but also because they do not apply

even to those pre-warehouse functions which are performed

for commodities (not processed or manufactured by peti-

tioner) other than fresh fruits and vegetables. The relief

is also partial where it actually applies because it does

not grant to petitioner allowances comparable to those per-

mitted other persons who performed substantially the same

functions.

Protests were duly filed to the five price regulations and

one general order here involved. Two of the protest pro-

ceedings were consolidated and then denied by the Admin-

istrator. The other four protest proceedings were likewise

consolidated and denied. Each group of protests became the

subject of a separate complaint filed in the Kmergeney

Court pursuant to Section 204(a) of the Kmergency Price

Control Act, 50 U. S. C. Appx. § 924(a), 56 Stat. 31, and

they were there consolidated. That Court entered a judg-

ment of dismissal on November 29, 1944.

B

JURISDICTION

The jurisdiction of this Court is invoked under Section

204(d) of the Emergency Price Control Act, 50 U.S. C.

Appx. § 924(d), 56 Stat. 31. The complaints herein were

dismissed by the Emergency Court on November 29, 1944.

(R. 605.)

9:

QUESTIONS PRESENTED

The primary questions presented are:

(1) Whether the Administrator may classify stores on

the basis of sales volume and type of ownership (chain or

independent) without regard for the services rendered or

the functions performed.

7

(2) Whether the Administrator, by adopting widely

varying price differentials, may diseriminate between peti-

tioner’s stores in Groups 3 and 4 and also between those

stores and independent stores (Groups 1 and 2) which do

less than $250,000 gross business annually, as do the ma-

jority of petitioner’s stores.

(3) Whether the Administrator may provide mark-up

allowances for pre-retail functions and services performed

by persons other than petitioner without providing similar

mark-up allowances for such functions and services when

they are performed by petitioner.

D

REASONS FOR THE ALLOWANCE OF THE WRIT

1. The Emergency Court of Appeals has decided a sub-

stantial question of Federal law of general importance which

has not been, but should be, settled by this Court. Section

2 of the Emergency Price Control Act provides for the

establishment of maximum prices which will be ‘‘gen-

erally fair and equitable’’. The decision of the Emergency

Court herein is to the effect that discriminatory mark-

ups and allowances may at the same time be ‘‘fair and

equitable’’. The Court refuses to recognize any discrimi-

nation in the determination of mark-ups and allowances

even though similar diserimination were characterized by

the Stabilization Director as a ‘‘gross inequity’’; it con-

siders its only duty to be to determine whether the ultimate

retail prices have been shown not to be generally fair and

equitable. In support of its conclusion that they are proper

the Court points to the fact that petitioner operates at a

profit. Thus, mere operation at a profit is made the sole

criterion of a fair and equitable price structure. Diserimi-

nation is condoned if it does not result in an actual operat-

SAAS

8

ing loss to the person who is adversely affected. Such an

interpretation of the Act circumvents the intent thereof to

prevent inflation without resort to arbitrary tactics, such

tactics being grounds for declaring a regulation invalid

under the review provisions of the Act. If such an inter-

pretation were warranted, the Act would be invalid as un-

constitutionally discriminatory.

2. The Emergency Court has interpreted the Price Con-

trol Act in such a way as to defeat the due process of law

guaranteed by the Fifth Amendment to the Constitution

and provided by Congress. Section 204 of the Act contains

provisions for the review of actions of the Administrator

denying protests against price regulations. The Kmer-

gency Court is empowered to set aside any regulation which

is found to be ‘‘arbitrary or capricious’’. However, by

interpreting the Act to authorize arbitrary methods unless

they are shown to be unfair and inequitable to a major por-

tion of the industry, the court has rendered ineffective the

review provisions and made a mockery of the due process

provided by the Act and guaranteed by the Fifth Amend-

ment.

Wuenrerore, the petitioner prays that a writ of certiorari

be issued to review the judgment of the United States HMmer-

gency Court of Appeals in the above entitled cause, that

said judgment be reversed, and that petitioner may have

such other and further relief in the premises as to this Hon-

orable Court may seem meet and proper.

Respectfully submitted,

Kuisna Hanson,

Kuior C. Lover,

Counsel for Petitioner,

729 Fifteenth Street, N. W.,

Washington 5, D, C.

December 29, 1944,