Opinion — United States v. Patten

UNITED STATES v. PATTEN.

ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR

THE SOUTHERN DISTRICT OF NEW YORK.

No. 282. Argued November 9, 10, 1911; reargued October 23, 24,

1912.—Decided January 6, 1913.

On appeal under the Criminal Appeals Act of March 2, 1907, this

court must accept the lower court's construction of the counts, and

its jurisdiction is limited to considering whether the decision of the

526 OCTOBER TERM, 1912.

Syllabus. 226 U.S.

court below that the acts charged are not eriminal is based upon an

erroneous Construction of the statute alleged to have been violated,

In order to decide whether acts charged are within the condenmation

of a statute, the court must first ascertain what the statute does eon-

demn and that involves its construction,

On appeal under the Criminal Appeals Act of 1907 this court must

assume that the counts of the indietment adequately allege whatever

the lower court treated them as alleging: and, where its decision

shows that it assumed that every element necessary to form a com-

bination was present, this court has jurisdiction to determine

whether such a combination was illegal under the statute which de-

fendants are charged with Violating.

A conspiracy to run a corner in the available supply of a staple com-

modity which is normally a subject of interstate commerce, such as

cotton, and thereby to artificially enhance its price throughout the

country, is within the terms of $1 of the Anti-trust Act of July 2,

1SOO.

Section | of the Anti-trust Act is not confined to voluntary restraints

but includes involuntary restraints, as where persons not engaged in

Interstate commerce conspire to compel action hy others or ereate

artificial conditions, which necessarily affect and restrain such

commerce,

A combination otherwise illegal under the Anti-trust Act as suppress-

ing competition, is not the less so because for a time it may tend to

stimulate competition —and so held as to a corner in cotton,

The Anti-trust Aet does not apply to a combination affecting trade or

commerce that is purely intrastate, or where the effeet on interstate

commerce is merely incidental and not direet: but although carried

on Wholly within a State, if the necessary operation of a combination

is to directly impede and burden the due course of interstate com-

meree, it is within the prohibition of the statute: and so held as toa

corner in cotton to be run in New York City.

Persons purposely engaging in a conspiracy which necessarily and

direetly produces the result which a prohibitory statute is designed

to prevent are, in legal contemplation, chargeable with intending to

produce that result; and so held that if the details of the conspiracy

are alleged in the indictment an allegation of specific intent to pro-

duce the natural results is not essential.

The character and effect of a conspiracy is not to be judged by dis-

tmembering it and viewing its separate parts, but only by looking at

it as a whole.

Is7 Fed. Rep. 664, reversed.

UNITED STATES v. PATTEN. 327

226 U.S. Argument for the United States.

Tur faets, which involve the jurisdiction of this court

under the Criminal Appeals Aet of March 2. 1907. and

Whether a corner in cotton constitutes an legal combina-

tion under the Sherman Anti-trust Act, are stated in the

opinion.

The Solicitor General for the United States: !

The seventh count of the indictment charged that the

defendants conspired to run a “corner” in cotton.

In construing the indictment the lower court held that

the corner charged was an illegal combination, saying:

“Corners are illegal. They are combinations contrary

to public policy and all contracts and undertakings in

support thereof are void. . . . A corner is alto-

gether wrong, both from a lege! and an economical stand-

point... . The combination deseribed in these

counts is negatively illegal without any prohibitory stat-

ute and would be positively unlawful in any State having -

a statute against corners.”

Therefore, this court must assume that the indictment

sufficiently alleged the existence of an illegal corner, as

this court is bound by the construction which the lower

court places upon the language used in the indietment.

United States vy. Keitel, 211 U. 8S. 370; United States v.

Biggs, 211 U.S. 507.

Contracts of purchase or sale for future delivery are

valid even though (1) the purchaser's object is pure specu-

lation and he intends not to receive and pay for them but

he expeets to resell them before delivery; (2) the seller

has not the goods in his possession and has no means of

obtaining them except by subsequently purchasing them,

and (3) the parties at the time of delivery in fact settle

upon the “difference” in price without an actual delivery.

Mr. Solicitor General Lehmann for the United States on the first

argument.

OCTOBER TERM. 1912.

i

Argument for the United States. 226 U.S.

It is only when both parties at the time of the contract

intend to settle upon “differences” that the contract be-

comes illegal. Sawyer, Wallace & Co. v. Taggart, 14

Bush, 727; Bibb vy. Allen, 149 U.S. 481, 492; Clews v.

Jamieson, 182 U. 8. 461, 489-495; Board of Trade vy.

Christie Grain & Stock Co., 198 U. 8. 236, 248; Forget v.

Ostigny, App. Cas. (1895) 318.

A corner is a combination for the purpose of buying up

for future delivery the greater portion of the available

supply of a given commodity and entering into contracts

for the future delivery of more than the available supply,

and holding the same back from sale and not assigning

or transferring the contracts of sale until the demand

shall so outrun the supply as to enable the operators of

the corner to advance the price abnormally. Black's

Law Dictionary, 271; 9 Cye. 978; Booth v. Illinois, 184

U.S. 425, 430.

Corners have universally been held to be illegal because

affecting the natural course of trade and commerce and

tending to enhance prices. Arnot v. Pittston & Elmira

Coal Co., 68 N.Y. 558; Foss y. Cummings, 149 Hiinois,

$53 (affirmed 40 Il. App. 523): Lamson v. Bryden, 160

Illinois, 613; Morris Run Coal Co. vy. Barclay Coal Co.,

GS Pa. St. 173; Pacifie Factor Co. v. Adler, 90 California,

110; Raymond v. Leavitt, 46 Michigan, 447; Sampson vy.

Shaw, WL Massachusetts, 145; Samuels y. Oliver, 130

Illinois, 73; Wells v. MeGeoch, 71 Wisconsin, 196; Wright

v. Crabbs, 7S Indiana, 487.

Any conspiracy although not technically a “corner”

but having as its object the arbitrary increase or depres-

sion of prices is in restraint of trade. Central Salt Co. v.

Guthrie, 35 Oh. St. 666; Craft v. McConoughy, 79 Illinois,

346; India Bagging Association y. Kock, 14 La. Ann. 168;

King v. Norris, 2d 1d. Kenyon, 300; Leonard v. Poole,

114 N. Y. 371; People v. Goslin, 73 X. Y. Supp. 520;

People v. Milk Exchange, 145 N. Y. 267: People v. North

UNITED STATES rv. PATTEN. 529

226 U.S. Argument for the United States.

River Sugar Co., 54 Hun, 354; People v. Sheldon, 139 N. Y.

251.

The rule to be extracted from all those cases is that any

combination whose object is the enhancement of prices by

virtue of combined effort is in restraint of trade and

illegal.

The numerous cases in this court have held that com-

binations (a) to fix rates for railway transportation, (b) to

determine the prices to be bid for pipe in public compe-

tition, (c) to sell tiles at a fixed price to non-members of

the combination, (¢d) to combine railroads in one manage-

ment through a holding company, (e) to bid the same

prices for fresh meats, (f) to boyeott dealers in one State

who purchased from a factory in another State, (g) to

secure control of the petroleum trade by stock ownership,

(/)) to acquire the tobacco industry, and (/) to control even

intrastate terminal facilities where the effect was to give

control over the access to the city from other States, are

in restraint of interstate trade, because their object or

necessary effect was (1) to suppress competition between

those engaged in interstate commerce, (2) to enhance the

prices of articles of such commerce, (3) to burden the free

transaction of such commerce by one engaged therein or

(4) to control some part of such commerce. Addyston

Pipe Co. v. United States, 175 U.S. 211; Loewe v. Lawlor,

208 U.S. 274; Montague & Co. v. Lowry, 193 U.S. 38;

Northern Securities Co. v. United States, 193 U. 8. 197;

Oklahoma vy. Kansas Natural Gas Co., 221 U. 8. 229;

Standard Oil Co. v. United States, 221 U. S. 1; Swift &

Co. v. United States, 196 U.S. 375; United States v. Amer-

ican Tobacco Co., 221 U.S. 106; United States v. Joint

Traffic Ass’n, 171 U.S. 505; United States v. St. Louis

Terminal, 224 U. 8. 383; United States v. Trans-Missouri

Freight Ass'n, 166 U.S. 290.

A corner in cotton, which is a common object of in-

terstate commerce and is produced in many States, is

VOL. CCXXVI—34

530 OCTOBER TERM, 1912.

Argument for the United States. 226 U.S.

clearly in restraint of trade because it interferes with the

free flow of such commerce. Montague & Co. v. Lowry,

193 U.S. 38; Swift & Co. v. United States, 196 U.S. 375,

398, 399; Shawnee Compress Co. v. Anderson, 209 U.S.

423, 434; United States v. St. Louis Terminal, 224 U. 8.

383, 397, 405; Gibbs v. MeNeeley, 118 Fed. Rep. 120, 126.

The temporary and feverish stimulation of competition

by the corner does not prevent it from being in restraint

of trade, as Montague & Co. v. Lowry and United States

v. St. Louis Terminal, each illustrates an increase of ecom-

petition ineident to a combination ia restra gt of trade.

In response to the suggestion that the effect of a corner

on interstate commerce is only indirect and incidental,

we submit that the only cases wherein it has been held

that the contract or combination attacked was not in

violation of the Sherman Act beeause its effect on inter-

state commerce was «© iy incidental or indirect were

United States v. E. C. Knight Co., 156 U.S. 1 (so ex-

plained and limited in the Trans-Missouri, Addyston

Pipe, Northern Securities, Swift & Co., Danbury Hatters,

Standard Oil, and American Tobacco cases as to be of

little value as authority), Hopkins v. United States, 171

U.S. 578 (as explained in the Addyston Pipe, Montague,

and Swift & Co. cases), Anderson v. United States. 171

U.S. 604, and Cincinnati Packet Co. vy. Bay, 200 U.S. 179.

Obviously those decisions that fixing charges for local

commission merchants and keeping out of business for

five years in connection with the sale of property, were not

in violation of the Sherman Act because of their purely

indirect effect on interstate commerce are no precedents

for holding that a corner in cotton affects interstate com-

merce only indirectly.

The lower eourt determined the meaning of the lan-

guage used in the indictment, to wit, what acts are charged

against the defendants, and such interpretation is eon-

clusive upon this court. (n/ted States v. Keitel, 211 U.S.

UNITED STATES v. PATTEN, 531

226 U. 8. Argument for Defendant in Error.

370; United States v. Biggs, 211 U. 8. 507. But under the

Criminal Appeals Act this court has the right to deter-

mine whether the facts so alleged in the indictment con-

stitute a violation of the Sherman Anti-trust Act. United

States v. Heinze, 218 U.S. 532, 540; S. C., 218 U.S. 550;

Umnted States vy. Bitty, 208 U.S. 393.

Mr. George P. Merrick, with whom Mr. William E.

Church was on the brief, for defendant in error Patten:

The argument of the Government is not confined to the

allegations of the indictment. Black's Dictionary, 271;

Foss v. Cummings, 149 Illinois, 353; Samuels v. Oliver, 130

Hlinois, 73; Wells v. McGeough, 71 Wisconsin, 196.

The only effect of the Government's resort to the state-

ment of overt acts is to accentuate essential defects of

the indictment. That statement cannot, in law, and does

not in fact, aid the indictment. Pettibone v. United Slates,

148 U.S. 197; Smith v. United States, 157 Fed. Rep. 721;

United States v. Patterson, 55 Fed. Rep. 639; United States

v. Britton, 108 U. 8. 199.

Whatever restraint upon interstate commerce might

result from acts charged, would be but indirect, remote and

incidental. The statute only condemns acts having direet

and immediate effect. Addyston Pipe Co. vy. United

States, 175 U.S. 211; Atkens vy. Wisconsin, 195 U.S. 194;

Anderson v. United States, 171 U.S. 604; Bigelow v. Calu-

met & H. M. Co., 167 Fed. Rep. 721; Cincinnati P. Co. v.

Bay, 200 U.S. 179; Continental W. Co. v. Voight & Sons,

212 U.S. 227; Field v. Barber Asphalt Co., 194 U.S. 618;

Hopkins v. United States, 171 U. 8. 578; Loewe v. Lawlor,

208 U.S. 274; Montague v. Lowry, 193 U.S. 38: Northern

Securities Co. v. United States, 193 U.S. 197: Oklahoma v.

Kansas N. G. Co., 221 U. S. 229; Standard Oil Co. v.

United States, 221 U. 8. 1; Swift & Co. v. United States,

196 U. S. 375; United States v. E. C. Knight & Co., 156

U.S. 1; United States v. Joint T'. Assn., 171 U.S. 509;

532 OCTOBER TERM, 1912.

Argument for Defendants in Error. 226 U. S.

United States v. Trans-Mo. Freight Assn., 166 U.S. 290;

United States v. Union P. R. R. Co., 188 Fed. Rep. 102;

United States v. St. Louis Terminal, 224 U.S. 383; Wash-

ington & G. R. R. Co. v. Hickey, 166 U.S. 521.

This court has no jurisdiction to review the judgment

of the Cireuit Court beeause that judgment was not

based upon a construction by it of the Anti-trust Act, but

upon repeated constructions thereof by this court. Even

if technically this court has jurisdiction, it will not exercise

it merely for the purpose of reaffirming propositions al-

ready settled by it. Davies vy. Slidell, 154 U.S. 625:

Equitable Life Ass'n Soc’y v. Brown, 187 U. S. 308:

Leonard vy. VS. R. R. Co., 198 U.S. 416; United States v.

Biggs, 211 U. 8. 507; United States v. Bitty, 208 U.S.

393; United States v. Heinze, 218 U.S. 532: United States

v. Keitel, 211 U. 8. 370; United States v. Mescall, 215 U.S.

26.

Mr. John C. Spooner, with whom Mr. Joseph P. Col-

ton, Jr, and Mr. George Rublee were on the brief, for de-

fendants in error, Seales ef al.:

Under the Criminal Appeals Aet the court may only

review the construction of the Sherman Act by the Cir-

euit Court. United States v. Biggs, 211 U.S. 507; United

Slates v. Keitel, 211 U.S. 370.

In sustaining the demurrer to the seventh count the

Cireuit Court did not wrongly construe the Sherman

Aet. That count does not charge a direct interference

with interstate commerce. Ware & Leland yv. Mobile,

209 TS. 405; Addyston Pipe & Steel Co. v. United States,

175 U.S. 211; Anderson v. United States, 171 U. 8. 604:

Hoplias v. United States, 171 U.S. 578; Northern Securi-

tics Co. v. United States, 193 U.S. 197: Standard Oil Co. v.

(nited States, 221 U.S. 65; United States v. Joint Traffic

Assecution, 171 U.S. 505: United States v. EB. C. Knight

te., 126 U.S. 1.

UNITED STATES v. PATTEN. 533

226 U. S. Argument for Defendants in Error.

The purchase of future contracts is not unlawful

Board of Trade vy. Christie Grain & Stock Co., 198 U.S.

236.

No violation of any law except the Anti-trust Act is

charged. Anderson v. United States, 171 U.S. 615: Whit-

well v. Continental Tobacco Co., 125 Fed. Rep. 454, 457.

In sustaining the demurrer to the third count the Cir-

cuit Court did not wrongly construe the Sherman Act.

Harriman v. Northern. Securities Co., 197 U.S. 291; United

States vy. American Tobacco Co., 164 Fed. Rep. 712.

The Northern Securities Case and the Tobacco Case can

be distinguished.

The Sherman Act is not an instrument by which a

district attorney can arbitrarily curb the amount of profit

which an individual can make in buying and selling com-

modities, or even in speculating on an exchange —merely

by an allegation (not susceptible of definite proof) which

he inserts in an indietment, that it will have certain effects

on interstate commerce.

The seventh count does not charge monopoly or com-

bination with regard to the sale of cotton.

The ground of the illegality of corners is that they are

gaming contracts.

The prosecutor avoids the fundamental question

whether the conspiracy described would directly restrain

interstate commerce.

The restraint of trade charged is indirect by reason of

the intervention of voluntary acts of independent human

agents. See the “Squib” Case, reported as Scotl v. Shep-

herd, 2 Blackstone, S92.

If the Government’s contention that count seven sets

forth an offense under the Sherman Act, then every gen-

eral strike of workmen is condemned by that statute.

Certainly no such result was contemplated by the framers

of the statute, and no such doctrine was announced in

Loewe vy. Lewlor, where the act complained of was an

534 OCTOBER TERM, 1912.

Opinion of the Court. 226 U.S.

immediate interference with a manufacturer’s trade; where

defendants physically obstructed the liberty of the plaintiff

to trade in interstate commerce.

The corner count does not charge any combination to

withhold cotton from sale. The Cireuit Court’s construe-

tion of the indictment in that regard is conclusive. United

States v. Biggs, 211 U.S. 507; United States vy. Keitel, 211

U.S. 370.

A defective charge of conspiracy cannot be aided by aver-

ments of overt acts. Commonwealth vy. Hunt, 4 Met. 111:

Commonwealth v. Shedd, 7 Cush. 514; Conrad vy. United

States, 127 Fed. Rep. 798; McConkey v. United States, 171

Fed. Rep. 829; M’ Kenna v. United States, 127 Fed. Rep.

88; Pettibone v. United States, 148 U.S. 197: Smith v. United

States, 157 Fed. Rep. 721; United States v. Britton, 108 U.S.

199; United States v. MacAndrews, 149 Fed. Rep. 823;

United States y. Milner, 36 Fed. Rep. 890; United States v.

Patterson, 55 Fed. Rep. 605.

The court has no jurisdiction to review the judgment

of the Circuit Court.

Mr. Justice Van DevaNTeR delivered the opinion of

the court.

This is a criminal prosecution under the Anti-trust

Act of July 2, 1890, 26 Stat. 209, e. 647, the indictment

being in eight counts. In the Cireuit Court demurrers to

the third, fourth, seventh and eighth counts were sus-

tained and those counts dismissed, 187 Fed. Rep. 664,

whereupon the Government sued out this writ of error

under the Criminal Appeals Act of March 2, 1907, 34

Stat. 1246, ¢. 2564. The case has been twice orally

argued.

At the second argument the Government expressly

abandoned the third and fourth eounts ana challenged

only the ruling upon counts seven and eight. Thus, the

UNITED STATES rv. PATTEN. 535

226 U.S. Opinion of the Court.

propriety of the ruling upon the first two need not be

considered.

In passing upon the demurrers the Circuit Court pro-

eeeded first to construe the counts, that is, to ascertain

with what acts the defendants are charged, and next to

consider whether those acts are denounced as criminal by

the Anti-trust Aet, the conclusion being that they are not.

The limitations upon our jurisdiction under the Crim-

inal Appeals Act ' are such that we must accept the Cir-

cuit Court’s construction of the counts and consider only

whether its decision that the acts charged are not eon-

demned as criminal by the Anti-trust Act is based upon

an erroneous construction of that statute.

At the outset we are confronted with the contention

that the decision is not based upon a construction of the

statute. But to this we cannot assent. The court could

not have decided, as it did, that the acts charged are not

within the condemnation of the statute without first as-

eertaining what it does condemn, which, of course, in-

volved its construction. Indeed, it seems a solecism to

say that the decision that the aets charged are not within

the statute is not based upon a construction of it.

‘Each of the counts in question charges the defendants

and others with engaging in a conspiracy “in restraint of

and to restrain, ’ by the method therein described, “ trade

and ecommerce among the several States” in the supply of

cotton available during the year ending September 1,

1910, such supply consisting of all the cotton grown in the

i The act is set forth in full in 211 U.S. at page 398, and rulings

thereunder are found in United States vy. Bitty, 208 U. 5. 393, 399;

United States v. Keitel, 211 U.S. 870, 308; United States v. Biggs, 211

U.S. 507, 518; United States v. Mason, 213 U.S. 115, 122; United States

v. Meseall, 215 U.S. 26, 31; United States v. Sterenson, 215 U.S. 190,

195; United States v. Heinze, 218 U.S. 532, 540; United States v. Heinze,

No. 2, 218 U. 8. 547, 550; United States vy. Kissel, 218 U, 5, 601, 606;

United States v. Miller, 223 U. 5. S00, 602.

536 OCTOBER TERM, 1912.

Opinion of the Court. 226 U.S.

Southern States in that year and the cotton left over from

prior years. The counts are long, and the acts which the

Circuit Court treated as charged in them are indicated by

the following excerpt from its opinion, the foot notes being

ours:

“These counts are alike, with the exception of the state-

ment of overt acts,’ and each may be, broadly speaking,

divided into three parts, which may be thus summarized:

“(1) The charging part contains a general charge of

conspiracy in restraint of interstate commerce, with the

usual formal and jurisdictional averments.

“(2) The second part contains a ‘description of the

trade and commerce to be restrained.’ Under this head it

is stated, in substance, that cotton is an article of necessity

raised in the Southern States, which moves in large volume

in interstate and foreign commerce, and that it is bought

and sold upon the New York Cotton Exchange to such an

extent as to practically regulate prices elsewhere in the

country, so that future sales by speculators upon such

exchange of more than the amount of cotton available at

the time of delivery would create an abnormal demand

and resultant excessive prices in all cotton markets.?

’One count contained a statement of overt acts, while the other

contained no such statement, a difference not here material.

* In order that the brief summary and analysis of the third part nay

be better understood, the second part is here reproduced:

“DESCRIPTION OF TRADE AND COMMERCE TO BE RESTRAINED.

“And the grand jurors aforesaid, upon their oath aforesaid, do fur-

ther present that for many years past cotton has been “rown, one crop

a year, in divers of the States of the United States, among others,

Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama,

Tennessee, Mississippi, Kentucky, Louisiana, Oklahoma, Texas,

Arkansas, Missouri and New Mexico; that such cotton has been and

is an article of prime necessity to the people of the United States, and

the growing and the spinning and manufacturing of the same into yarns

and fabrics have necessitated the cultivation of many millions of acres

of land in the States last aforesaid and the employment of many thou-

UNITED STATES ¢. PATTEN. 537

226 U.S. Opinion of the Court.

(3) The third part contains a ‘description of the

method devised and adopted by the conspirators for re-

sands of persons, in those States and in other Statesof the United States,

in connection with the planting, cultivating, picking, ginning, com-

pressing, storing, selling, shipping, and transporting of such cotton;

that about sixty per cent. of the cotton so grown has been shipped to

and consumed in foreign countries in each crop year; that of the re-

maining forty per cent. of such cotton about one-half has been spun

into yarns and manufactured into cotton fabries by spinners and man-

ufacturers in said Southern States for the use of the people of the

United States and foreign countries, and the other half has been

shipped te Northern States of the United States, among others, Massa-

chusetts, Rhode Island, New York, Pennsylvania, New Hampshire,

Maine, Connecticut, Maryland, New Jersey, and Delaware, in pur-

suance of sales of the same to spinners and manufacturers in the last-

mentioned States, and there spun into varns and manufactured into

fubries for the use of the people of the United States and foreign coun-

tries; that the demand for such cotton in foreign countries and in said

Northern and Southern States has been steady and continuous through-

out all portions of cach crop vear; that in the ordinary course of business

said spinners and manufacturers have bought little or no cotton bevond

that required by them for their linmediate needs; that such cotton has

been extensively bought and sold upon the Cotton Exchange in said

city of New York for future delivery in the United States during

current @p years, so much so that cotton bought and sold elsewhere

in the United States than on that exchange has customarily been

bought and sol at prices corresponding to the prices prevailing upon

said exchange; that although, as the grand jurors aforesaid, upon their

oath aforesaid, charge the fact to be, the rules of sant Cotton Exchange

at New York City have required that all sellers and purchasers of

cotton upon that exchange for future delivery should contemplate the

actual delivery and receipt of cotton sold and purchased by them

there, it has been possible for more cotton to be sold at a given time or

at given times upon said exchange for future delivery at a given time

or given times during a current crop vear by speculators, that is to say,

persons not having any cotton in their possession, than would be in

existence at such future time or times and available to such speculators

for acquisition and delivery to the purchasers thereof; that under such

cireumstances it has been necessary for such sellers of cotton upon

said exchange for sueh future delivery to make settlements with pur-

chasers in cash or its equivalent, at the prices prevailing upon said

538 OCTOBER TERM, 1912.

Opinion of the Court. 226 U.S.

straining the trade and commerce.’ It is alleged, at the

outset, that the conspirators were to restrain trade and

commerce by doing ‘what is commonly called running a

corner in cotton.’ Averments then follow showing how

the corner was to be brought about and its effect, which

may be thus analyzed:

“(1) The conspirators were to make purchases from

speculators upon the New York Cotton Exchange of

quantities of cotton for future delivery greatly in excess of

the amount available for delivery when deliveries should

become due.!

exchange at the time or times such settlements have been made, as to

whatever cotton such sellers were unable to acquire and deliver to such

purchasers when such delivery was due; that the artificial condition

produeed by such excessive purchases, when made, has invariably

created such an abnormal demand for cotton on the part of such sellers

that very excessive prices therefor have prevailed upon said exchange,

and upon all other exchanges and in all cotton markets, until after such

settlements have been made, so that bona fide purchasers of cotton for

consumption in spinning and manufacturing have been compelled for

a time to pay the same excessive prices in order to obtain cotton for

their needs; that the cotton crop for the crop year beginning Septem-

ber. 1, 1909, and ending September 1, 1910, approximated ten million

and five hundred thousand bales; that about two hundred and sixty-five

thousand bales of cotton were left over and available at the beginning

of said crop year of the crops of prior crop years; that the foregoing

allegations of this paragraph of this count of this indictment apply to

the cotton of said crop year and to that of prior crop years; and that

each of said conspirators, when so conspiring as in this count of this

indietment set forth, well knew all the premises in this count afore-

said.”

' The language of the charge is: ‘They were to make purchases from

day to day upon said Cotton Exchange at New York City, from specu-

lators, of quantities of cotton for future delivery at different times

during said crop year greatly in excess of the amount of cotton which

would be in existence and available for delivery to them by the sellers

thereof when such deliveries were due, reference being had to the

usages and requirements of said trade and commerce which are in this

count above set forth.”’

UNITED STATES v. PATTEN. 539

226 U.S. Opinion of the Court.

“(2) By these means an abnormal demand was to be

created on the part of such sellers who would pay excessive

prices to obtain cotton for delivery upon their contracts.

“(3) The excessive prices prevailing upon the New

York Exchange would cause similar prices to exist upon

other cotton markets,

“(4) ‘As a necessary and unavoidable result of their

acts, said conspirators were to compel’ cotton manufac-

turers throughout the country to pay said excessive prices

to obtain cotton for their needs or else curtail their opera-

tions.

(5) And also, as ‘a necessary and unavoidable result’

of said acts, an unlawful obstruction would be put upon

interstate trade and commerce. !

“The offence charged, then, is a conspiracy in restraint

of trade through the operation of a ‘corner, 2...”

Although ruling that there was no allegation of a specific

intent to obstruct interstate trade or commerce and that

the raising of prices in markets other than the Cotton

exchange in New York was ‘‘in itself no part of the

scheme,’ the court assumed that the conspirators intended

“the necessary and unavoidable consequences of their

acts,” and observed that “prices of cotton are so corre-

lated that it may be said that the direct result of the acts

of the conspirators was to be the raising of the price of

cotton throughout the country.”

Upon the second argument the defendants contended,

and counsel for the Government expressly conceded, that

“running a corner” consists, broadly speaking, in ac-

quiring eortrol ef all or the dominant portion of a com-

modity with the purpose of artificially enhancing the

.

price, ‘one of the important features of which,” to use the

'Of these allegations the court said in its opinion: “We must also

assume that the allegations of the results to follow the conspiracy are

more than the conclusions or economic theories of the pleader and

amount to allegations cf fact.’

540 OCTOBER TERM, 1912.

Opinion of the Court. 226 U.S.

language of the Government’s brief, “is the purchase for

future delivery, coupled with a withholding from sale for

a limited time;”’ and as this definition is in substantial ac-

cord with that given by lexicographers and juridical writers,

we accept it for present purposes, although observing that

not improbably in actual usage the expression includes

modified modes of attaining substantially the same end.

Whilst thus agreeing upon what constitutes running a

corner, the parties widely differ as to whether what is so

styled in this instance contained the elements necessary

to make it operative. The point of difference is the

presence or absence of an adequate allegation that the

purchasing for future delivery was to be coupled with -

withholding from sale, without which, it is conceded by

both parties, the market could not be cornered. But the

solution of the point turns upon the right construction of

the counts, and that, as has been indicated, is not within

our province on this writ of error. We must assume that

the counts adequately allege whatever the Circuit Court

treated them as alleging. Its opinion given at the time,

although not containing any express ruling upon the

point of difference, shows that the counts were treated as

alleging an operative scheme, one by which the market

could be cornered. The court spoke of it as “contrary to

public policy,” as “arbitrarily controlling the price of a

commodity,’ and as ‘positively unlawful in any State

having a statute against corners.” Evidently, it was as-

sumed that every element of running.a corner was present.

We accordingly indulge that assumption, but leave the

parties free to present the question to the Distriet Court

for its decision in the course of such further proceedings

as may be had in that court.

We come, then, to the question, whether a conspiracy

to run a corner in the available supply of a staple com-

modity, such as cotton, normally a subject of trade and

commerce among the States, and thereby to enhance

UNITED STATES v. PATTEN. 541

226 U.S. Opinion of the Court.

artificially its price throughout the country and .o compel

all who have oceasion to obtain it to pay the enhanced

price or else to leave their needs unsatisfied, is within the

terms of § 1 of the Anti-trust Act, which makes it a erim-

inal offense to “‘engage in” a “conspiracy in restraint of

trade or commerce among the several States.””. The Cir-

cuit Court, as we have seen, answered the question in the

negative; and this, although accepting as an allegation of

fact, rather than as a mere economic theory of the pleader,

the statement in the counts that interstate trade and

commerce would necessarily be obstructed by the opera-

tion of the conspiracy. The reasons assigned for the

ruling, and now pressed upon our attention, are (1) that

the conspiracy does not belong to the class in which the

members are engaged in interstate trade or commerce

and agree to suppress competition among themselves,

(2) that running a corner, instead of restraining competi-

tion, tends, temporarily at least, to stimulate it, and

(3) that the obstruction of interstate trade and commerce

resulting from the operation of the conspiracy, even al-

though a necessary result, would be so indirect as not

to be a restraint in the sense of the statute.

Upon careful reflection we are constrained to hold that

the reasons given do not sustain the ruling and that the

answer to the question must be in the affirmative.

Section 1 of the act, upon which the counts are founded,

is not confined to voluntary restraints, as where persons

engaged in interstate trade or commerce agree to suppress

competition among themselves, but includes as well in-

voluntary restraints, as where persons not so engaged

conspire to compel action by others, or to create artificial

conditions, which necessarily impede or burden the due

course of such trade or commerce or restrict the common

liberty to engage therein. Loewe v. Lawlor, 208 U. 8. 274,

293, 301. As was said of this section in Standard Oil Co.

v. United States, 221 U.S. 1, 59:

542 OCTOBER TERM, 1912.

Opinion of the Court. 226 U.S.

“The context manifests that the statute was drawn in

the light of the existing practical conception of the law

of restraint of trade, because it groups as within that

class, not only contracts which were in restraint of trade

in the subjective sense, but all contracts or acts which

theoretically were attempts to monopolize, yet which in

practice had come to be considered as in restraint of

trade in a broad sense.”

It well may be that running a corner tends for a time

to stigaulate competition; but this does not prevent it

from being a forbidden restraint, for it also operates to

thwart the usual operation of the laws of supply and de-

mand, to withdraw the commodity from the normal cur-

rent of trade, to enhance the price artificially, to hamper

users and consumers in satisfying their needs, and to

produce practically the same evils as does the suppression

of competition.

Of course, the statute does not apply where the trade or

commerce affected is purely intrastate. Neither does it

apply, as this court often has held, where the trade or

commerce affected is interstate, unless the effect thereon is

direct, not merely indirect. But no difficulty is encoun-

tered in applying these tests in the present case when its

salient features are kept in view.

It was a conspiracy to run a corner in the market. The

commodity to be cornered was cotton, a product of the

Southern States, largely used and consumed in the North-

ern States. It was a subject of interstate trade and com-

merce, and through that channel it was obtained from

time to time by the many manufacturers of cotton fabrics

in the Northern States. The corner was to be conducted

on the Cotton Exchange in New York City, but by means

which would enable the conspirators to obtain control of

the available supply and to enhance the price to ali buyers

in every market of the country. This control and the

enhancement of the price were features of the conspiracy

UNITED STATES v. PATTEN. 543

226 U.S. Opinion of the Court.

upon the attainment of which it is conceded its success

depended. Upon the corner becoming effective, there

could be no trading in the commodity save at the will of

the conspirators and at such price as their interests might

prompt them to exact. And so, the conspiracy was to

reach and to bring within its dominating influence the

entire cotton trade of the country.

Bearing in mind that such was the nature, object and

scope of the conspiracy, we regard it as altogether plain

that by its necessary operation it would directly and ma-

terially impede and burden the due course of trade and

commerce among the States and therefore inflict upon the

publie the injuries which the Anti-trust Act is designed

to prevent. See Swift & Co. v. United States, 196 U.S.

375, 396-400; Loewe v. Lawlor, 208 U. 8. 274; Standard

Oil Co. v. United States, 221 U. 8. 1; United States v.

American Tobacco Co., 221 U.S. 106. And that there is no

allegation of a specific intent to restrain such trade or

ecommerce does not make against this conclusion, for, as

is shown by prior decisions of this court, the conspirators

must be held to have intended the necessary and direct

consequences of their acts and cannot be heard to say

the contrary. In other words, by purposely engaging ina

conspiracy which necessarily and directly produces the

result which the statute is designed to prevent, they are,

in legal contemplation, chargeable with intending that

result. Addyston Pipe & Steel Co. v. United States, 175

U. S. 211, 243; United States v. Reading Co., 226 U.S.

324, 370.

The defendants place some reliance upon Ware & Leland

vy. Mobile County, 209 U. S. 405, as showing that the opera-

tion of the conspiracy did not involve interstate trade or

commerce, but we think the case does not go so far and

is not in point. It presented only the question of the

effect upon interstate trade or commerce of the taxing

by a State of the business of a broker who was dealing

544 OCTOBER TERM, 1912.

Opinion of the Court. 226 U.S.

in contracts for the future delivery of cotton, where there

was no obligation to ship from one State to another; while

here we are concerned with a conspiracy which was to

reach and bring within its dominating influence the entire

cotton trade of the country and which was to be executed,

in part only, through contracts for future delivery. It

hardly needs statement that the character and effect of a

conspiracy is not to be judged by dismembering it and

viewing its separate parts, but only by looking at it as a

whole. Montague & Co. v. Lowry, 193 U.S. 38, 45-46;

Suift & Co. v. United States, 196 U.S. 375, 386-387.

As we are of opinion that the statute does embrace the

conspiracy which the Circuit Court treated as charged in

counts seven and eight, as construed by it, its judgment

upon those counts is reversed and the case is remanded

for further proceedings in conformity with this opinion.

Reversed in part.

Mr. Justice Lurton, dissenting.

The majority seem to base a judgment of reversal upon

the assumption that the court below interpreted the

counts in question as charging all the elements essential

to a technical ‘“‘corner.”’ To this view of the opinion of

the court below I do not assent. As I interpret that

opinion the court held the count bad because it did not

charge a ‘“‘corner.”’ Thus interpreted there was no error

in quashing the count. I am authorized to say that the

Chief Justice concurs in this dissent.

Mr. Justice Houmes also dissents.