Amicus Curiae Brief — Moore v. United States

Supreme Court brief1973

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INDEX TO BRIEF

BUTE EWU pa veccccvedecseeses coves

INTEREST OF THE AMERICAN COTTON

SHIPPERS ASSOCIATION ........see000% eevee

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED ............ evegecce

STATEMENT OF THE CASE ...........06. coves

QUESTIONS PRESENTED .........2000- cccccces

SUMMARY OF ARGUMENT—

I, The Supreme Court has Jurisdiction to

eS ee Ae oe oe uciabaees

II. Application of the Qualification Requirement

. and the Penalty Sanction Violates the Com-

TOECS CHBUEG oo ce cccivcvccsccseceneceses

PRELIMINARY STATEMENT ........e0ee0. eee

ARGUMENT—

I. The Court Has Jurisdiction to Hear this

Be BORER OF COPTOESEL 2c ccccccees

B. The Effect of the Mississippi heme

COMES S COREIICRUIOR cds vcccnevcocese

C. The Mississippi Statute is a Hybrid of

State and Federal Law, and Jurisdiction

Exists to Decide the Federal Questions.

D. The Federal Questions was Timely

Raised by Appellant in the State Court

POE cp ddecacdessceonseses

a “ee

II. Application of the Mississippi Statutes to

the Present Circumstances, Barring Appel-

lant from ever Maintaining an Action to

Enforce a Valid Contract, Violates the

Commerce Clause of the Federal Constitution

A. Mississippi's Regulation of Foreign

CD ‘cpcebcsces cc yavweberene

So aeaR ee

PMSA WY

Fcndin a. fh Nan Snes ka

B. The Issues Under the Commerce

CURURE ccccccccceedeccescescccccccecs 52

1, Analytical Framework ............ 54

2. Defining Interstate Commerce Under

Article I, Section 8 .......cesee00. 55

C. Determining the Validity of §5309-221

and § 5309-239 Under the Commerce

OS TET TTT cde bvececanesuedicre 84

1, As Applied to This Case, §5309- 221

and § 5309-239 by Their Necessary

Operation Unconstitutionally Impose

a Direct Effect on Iaterstate Com-

MOTE woccccccccees eccccesccsenes 84

2. The Actual Effect of §5309-221 and

.249 as Applied Materially Burdens

Interstate Commerce and Local

Interests can be Promoted by Alter-

natives Which Affect Interstate Com -

merce Less Sever€é:y ......04 eoees 93

CG ete cc cctaaa kc nwees eeeeee eeeeeeveeveeee 100

Cases Cited

Adams Express Co. v. New York,

Bae WE. SECO 4 4 hale ous hace vecwuwiGacsa 88

Beck v. Washington,

Pe ae errr oes a ere 39

Bibb v. Navajo Freight Lines, Inc. ,~ ‘

San US. SRR EATS eens csc cvcceccksvcsvass 92

Boddie v. Connecticut ,

GOR TIS. TFL TEITA) og ccc i svcnccecscunss 10, 43,99

Brinkerhoff-Faris Co. v. Hill,

282-U.5. G73 (TSI) wn vccves iendkawanace Sai 36, 39

Bruhn's Freezexk Meats v. United Siates,

438 F.2d 13SaC6th Cir. 1971) occ cccccrecces 63

a Sh th a pais Te ba a de i? . RS Pe Sees ae a eae ee a a

California v. Thompson,

ES UG, BOD C194) eee c ieee ccc de iesces o% 91

Chassaniol v. City of Greenwood,

BPE IG, SOE CEGBD 65 kik wa cccccccss onsen 70

Chicago Bd. of Trade v. pone

Oe Rak EAS POE nck inne oA aware re rts 56

Cincinnati, Portsmouth, Big Sandy and

Pomeroy Packet Co. v. —

200 U.S. 879 (1906) 0. ccccces Terres errr 25

Cole v. Arkansas,

Bee RIGOR OO CRPOUD 00k 6 pin bb 800 es 00d veem 39

Cone Mills Corp. v. Hurdle,

369 F. Supp. 426(N.D. Miss.

as. Geer eer ere Se ¥e.0 0000 be Ses Os LL, 84, 72,89

Consolidated Turnpike Co. v. Norfolk and

Ocean Mae Ry. Co.

228 U.S. 596 (1913) . TUT TET CECT Cre ee 24

Cooley v. Bd. of Port en

_ Or By. BUOY Sn a cues (A. ceeeKnne.s pina eee

Corn Products Refining Co. v. Eddy,

249 U.S, GAPCIGAD 2... oeaascs ete eT ere a

Crutcher v. Kentucky,

TO) UG. OZ. EEOSE) on cc ccccccce evtesbdesc vue’ 27,85

Dahnke-Walker Milling Co. v. Bondurant,

257 U.S. 263 G92E33. . es. ke eaeee BS 7,33,41, 59,84

Davis v. Department of Labor,

ae TB, BOO CEBGE) 4 vax sac awicancocn iehac’e 41

Dean Milk Co. v. Madison,

O00 0.8. SOR 4108)) oo. oe ik os Rinse eee 10, 51,97

Duckworth v. Arkansas,

TARA SOP AOU 8 vou ct 0 dawn das edn ene 53, 91

Dunn v. Blumstein,

405 U.S. 330 (1972) . Teorey reer eee 97

Edelman v. Boeing Air Pibeaseet, Inc. ,

BOP Spe WON CRUOUE oi bac cdecnnnasskveeiiask 72,73

Eli Lilly & Co., Inc. v. Sav-on-Drugs,

366 U.S. 276 (1961) Pete tees eects eeeeeenee 27,41,74

iii

. a

BVT ALRITE LAL Ne PTW LIN MTT OE LON GRY AE LIE LOY TERRI MTD ESR PER APD Serene 2.0 ON

AA IUAT ONION TREE MEE :

Eureka Pipeline v. Hallanan,

DSF UM. BIT UGA) cccnccaseccevinesecsese BB,

Evansville-Vanderburgh Airport Authority

District v. Delta Air Lines,

: G65 U S707 CUP TR) ce cctccccccvess ‘eawees 72

° Evco v. Jones, .

; OP IB PEARSE) oc ectvcccevass Teer ee Tee 73

’ Federal Compress Co. v. McLean,

; wed 4365, 87: CURSE) oc ccccscss errr er er ss 70

= Ferguson v. Skrupa,

& BFE Cs FOO CSO) bi ec ceo sencawvecs eure 45

i Flood v. Kuhn,

: O07 O.S; QE LVGP7IZ) vances deccces sveccee 810,41, 44

. Flournoy v. Wiener,

q Bat US. Boe CIEE) Fipcccn'vas errr. vere 30

"Freeman v. Hewit,

" 329 U.S, 249 (1946) ....... (Asawa hheeewsaeas 53, 74

4 Furst v. Brewster,

i 282 U.S. 493 (1931) ...... iccceauss 4404044005 27,64

; Garrity v. New Jersey, .

k Oe 05. PS CEGOT inc s cet deccises cena | OF 21

Gordon v. Lance,

1 OO UL SEP). iv c aa ti ankeass ee rs ee re 100

_ Great Northern Ry. Co. v. Sunburst Oil and

: Refining Co.,

BOT Us tn Boe CLOGS) civescveccs rT Ter ee we 38

’ Heart of Atlanta Motel v. United States,

4 SPs U.S; BAL EES 2. cae PEP eee TT Lee 56

: Herb v. Pitcairn,

q Vr te ae, re pita veianecet 24

| Houston Eastand West Ry. v. United States,

Be Lia Ge CERO oko hG oc cccketads inewere & 56

H. P. Hood & Sons, Inc. v. DuMond,

SA i CROCE TES) S66 URR TOES i ds kee xng cree 92

Huron Cement Co. v. Detroit,

Be ie SOTIIED nck iccdicnccsvvus c+ knew e 54

International Shoe Co. v. Washington,

oa0 0,8. 310 (1948) o cceccteccas wean 9,42,48,98

International Textbook Co. v. Pigg,

BET Gabe OL TILDIO) iiinain cake ee snsees 27, 67,86

Joy Oil Co. v. State Tax Commission,

Bee SB BOO UE PEF) 64564 eer NS eRe ES 79

Katzenbach v. McClung,

ie 8 dc BOO COON) Kee hue edeineey ewaesee 52

Kosydar v. National Cash Register Co.,.

42 U.S.L.W. 4767 (U.S. May 20, 1974) ...... 10,78

Lanza v. New York,

TI hak he CAPONE Rabie bbe aso ceo e beens va

Lemke v. Farmers' Grain Co.,

ROMs LAER) 4 bk oa ees howd cues 33, 59, 74

Lynumn v. Illinois, .

be oe” eS | ee 23

Martin v. Trout,

SPT Waa Ste LL eUO) 6.04bseanx bie tre esa aes 24

Missouri ex rel. Missouri Insurance Co. v.

Gehner, ;

pe el eae GL Sa 5,7,36

Missouri ex rel. Southern Ry. Co. v. Mayfield,

OURO. TUIGU acini vit acknowl sayeveety /3Q

Mitchell v. W. T. Grant Co.,

42 U.S.L.W. 4671 (U.S. May 13, 1974) . 10,44,87,99 °

M/S Bremen v. Zapata Off-Shore Co..,

We Sede: PEO cocks ae hk eee ba aee en 11,45,95, 99

Murdock v. City of Memphis,

Of U8. SIOLIBTS) vices dv cces opin w bike keane k A

Myles Salt v. Bd. of Commissioners,

239 U.S. 478 (1916) ....... Terreeer rere kas 35

NAACP v. Alabama,

ao/ U.S, 449 (1958) ........... vere or ere Ts os 96

NAACP v. Alabama,

ER gS 5. ® 5 ieee arenntay ante ncaa aaa vias 9,96

Nashville, Chattanooga & St. Louis Ry. Co.

v. Wallace,

BOS TF S.. DOP CIPSE) oc cicvccctvedvtesecscess 72

National Labor Relations Bd. v. Jones &

Laughlin Steel Corp.,

te ie ep ee ee eee Cire ° 52

North Dakota State Bd. of Pharmacy v.

Snyder's Drug Stores,

42 U.S.L.W. 4035(U.S. December 5, 1973).. 45

Northwestern States Portland Cement Co. v.

Minnesota,

Bae Us SO CAGE) cvvdeiciccinas cbeekawews 72

Parker v. Brown,

EP BU CO ik ce nckiccevs age 18)

Parker v. Lin-Co Producing Co.,

EDF Dia oak CRU, BPOP) ck dca oder ceoderes 27,42

Perez v. United States,

‘ 42 U5; 146 (2971) 2... Aenean sean uk 71

Perkins v. Benguet Consolidated Mining Co.,

| PEE IB. 407 CY wok saceskcisas neers. ye

Pike v. Bruce Church,

ie SB eg eB rere 10, 51, 89, 96

' Powell v. Pennsylvania,

; 127 8, GTR UISOR ona cis ed cas eka aves 45

) Raley v. Ohio,

fi wee 1,5, 40 CIS) vvceckivcss Aer ener thewes 22

4 Richfield Oil Corp. v. State Bd. of Equalization,

A Bare 0B, PLEIN Fiske nk cawndcan cide a's —as 30

| Robbins v. Shelby County Taxing District,

Cae tise MT RA OT) Sak ca bei ci whiaseeeaes cee 85

Robertson v. California,

S20 U.S. COO CFS) cceicciccs re cebeue : 91

Ross Construction Co. v. U.M. & M. Credit

Corp.,

214 So.2d 822 (Miss. 1968) ......... issn 27, 42

Saunders v. Shaw,

244 U.S. 317 (1917) TTT treet neces 7,325

PELL EO WE I PIE IE SE IE ON ROE STEP BE I EI ee

Schollenberger v. Pennsylvania, [

176. S. 1 (1698)... ccs Sin mae Terre eee 46 :

Shafer v. Farmers' Grain Co., : f

SEE UD, SOD CATESD ocacscccsassiinves rrr 64

Sioux Remedy Co. v. Cope,

(2 GN Me 2b) ot eh Terre eC eer e 67, 87

South Carolina Highway Depariment v.

Barnwell Bros.,

BS 13 By Ar ALO one tse vewewei ash esseve 92

Southern Pacific Co. v. Arizona,

SES U), Bs POS CLPE co cc cnd dacs ces ... 46, 52, 60, 100

Southern Pacific Co. v. Gallagher,

A BFF TAGS ans eis be 0 SVS sakes 73

Sprout v. South Bend,

OTF Be BOs CIRO i iver tnccnesvessnces 69

Stafford v. Wallace, ;

258 U.S. 495 (1928) occ ccc rcccccvccvvcees 59

Standard Oil Co. v. Johnson,

SE Cl, WOe CEPOER bain 060 00 bes ceaewaveses 6, 31

State Bd. of Insurance v. Todd Shipyards , j

BP lcs Sat CED 04 0 6 hb bse ene pis Kanes 41, 44, 72

State Tax Commission v. Van Cott,

306 U.S, SLE (IGS cc cccccs eaeea wen oocegg, 6, 28

Street v. New York, ;

PPREILE, SIOCSO coc ctscsccces eabeaebwes | 34

Swift & Co. v. United States,

1960.8. 375 (1908) i. .>% res re ree ‘one 56

Townsend v. Yeomans, 4

Ss EE CART ss 4 0 hs 0 hae cb bd one hes 71, 91

Ungar v. Sarafite,

Pe ae Ee Ie bk vcnucneb bos o0bs0 00 dan 24

Union Brokerage Co. v. Jensen, .

Be Sag ee CL io vvcbvacsaeses csosees 407-00; 92

United Air Lines v. Mahin,

BA 1D. GERI G I ios io ckciawss era, ee |

United States v. Carolene’ Products Co.,

we ae a PE REE a 5 6 aiken en eeahsceusiuses 100

vii

United States v. Rock Royal Co-op..,

907 U.S. S33 (1939)... cccccccrvccceccccvves 7 |

United States v. South-Eastern

Underwriters Assn.,

Bae Ue Dae CAPE) soiicsvesivocsccenveness 52

United States v. Wrightwood Dairy Co. ,

PLD Mics LE ELORED CK ie bees cede vetenenees 57

Western Union Telegraph Co. v. Kansas,

rel Die Me eit eee pteakessce Te reT eye 85

Wickard v. Filbum,

17 US. LLL (1942) ...ccccccecccvccccccces 52

Willson v.* Black-Bird Creek Marsh Cain

27 U.S. 245 (1829) osc cece eccccceeeereccee 52

Law Reviews

Greene, Hybrid State Law in Federal Courts, P

G3 Bare: 2... BaP: 209 (IGA 5 a vcowiidasase Fe ha Oe

Note, Foreign Corporations — State Boundaries

- for National Business, 59 Yale L.J. 737

CPE acs bdancdre tases cite a koe Rabie heed 9

Note, Foreign Corporations: The Siterrelaiionehip

4 Between Jurisdiction and Qualification,

‘ SS Bad . Lids SSB (19SB) gc cw cevecsecistweas 9, 42, 47

| Wolfson and Kurland, Certificates By State

Courts of the Existence of a Federal Question,

63 Harv. L. Rev. 111 (1949) ..... ieee eink ees 19, 23

Texts and Treatises

A. Cox, Cotton: Demand, Supply,

BI Merchandising (1953) ......... Fibpnewes ica 58

7 W. Fletcher, Cyclopedia Corporations (1960) .. 41, 67

F, Frankfurter and J. Landis, The Business of

the Supreme Court (1928).......e.e00- pains 21

Hart and Wechsler's, The Federal Courts and

the Federal System (Bator, Mishkin,

Shapiro, Wechsler ed.) (1973) ......... ties Bae

viii

SAL IT RFI EEE ON ILE OR OME EM YN MB aE SESS LEE

a a A ee en

. : Pi AN TIS bw Sr EE

Restatément 2d of Conflict of Laws .....eeeeee. +48

Robertson and Kirkham, Jurisdiction of the °

Supreme Court of the United States,

(Wolfson and Kurland ed. 1951) ..... ostweults Ohe oe

R. Stern and E. ‘Gressman, Supreme Court

Practice (4th Ed. 1969) ....... sete e eines 20, 21, 34

Miscellaneous

Model Business Corporation Act Annotated

(2d ed. 1971) 27, 41, 46

1968 U.S. Code Cong. & Admin. News......... 95

1970 U.S. Code Cong. & Admin. News......... 12

1973 U.S, Code Cong. & Admin. News......... 13

U.S. Department of Agriculture, Cotton

Situation (Nov. 1973) CS-263 . go cccscccccecs 16

U.S. Department of Agriculture, August 1

(1973) Crop Report (Aug. 9, 1973) ....ccecee 15

U.S. Department of Agriculture Ecomonic

Research Service, Statistics on Cotton

Related Data 1930-67, Supplement for 1972

(Feb. 1973, Statistical Bulletin No. 417)..... 15, 6°

Statutes

‘Mississippi Code Ann. Sections:

LNT ind 5h oh se ean cscs ck iv =

S500 2200) occ, ceuls Dackucex see sus 4, 26, 54, 84

SP SA KT k ds i whe ke hw ens Duedcn kcebiwes 4

POEs ba be edn ba Oven eee pve seas un 4

te PRO ob vc ak ve jehundes (etnavenket cceeee +

RO ce whic oh Ce ackihs cuneeennee ne wu 4, 26, 84

De OEE bw kv ee neck dick nia bee ae 2 ag m 4

SONS 6 bb Sikhs s kes che re Pe Cee Fe — 4

Cen oy Ses «ee vi rT ere deasewnaie 4, 49

SOUAD vcviccris aseese Sg todo caer — 4, 80

CERIN ETE RI LIE ERD SNE SOE OT EE ea ams

Pic were kc dh bse Seas eee Tie ere eee Lee oe 59, 94

gos cass sane gn neta 41 .

706: CAAA). ones. ES iy oan ne ge 12, 94

OS Sa ape peer ere 12

FUP ks BOIL abet otbescebsoncecsssens> 41, 59, 94

7 Ate BOMOL bn bencésvecsens’ cob nbueneers 94

BP Aes SUBST b0os cb ust eben istbkweareedene 19

i es er ee Orr Eee ee Ste 14

LLRs ii

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1973

NO. 73-628

ALLENBERG COTTON COMPANY, INC.,

Appellant,

BEN E, PITTMAN,

Appellee.

ON APPEAL FROM THE SUPREME COURT

OF THE STATE OF MISSISSIPPI

BRIEF FOR THE

AMERICAN COTTON SHIPPERS ASSOCIATION

AS AMICUS CURIAE

AUTHORITY TO FILE

This brief of the American Cotton Shippers Association

as amicus curiae in support of the position of-Appellant

~ Allenberg Cotton Company is filed with the consent of the

parties. This consent was received by telephone from

Mr. George C. Cochran on behalf of Appellee Pittman and

from Mr. John McQuiston II on behalf of Appellant Allen -

berg. Mr. Cochran and Mr. McQuiston agreed to furnish

James F. Blumstein, counsel for amicus, written consent

prior to the submission deadline, pursuant to Rule 42(2),

and such written approval will be filed with the Court upon

receipt.

If such written consent does not arrive by the submis-

sion deadline, amicus requests that this be treated as a

Motion for Leave to File, pursuant to.Rule 42(3). The

American Cotton Shippers Association submitted a brief

as amicus curiae in support of Appellant's Jurisdictional

Statement and wants to present its views on the merits to

the Court on behalf of its members.

INTEREST OF THE

AMERICAN COTTON SHIPPERS ASSOCIATION

The American Cotton Shippers Association is a trade

association of-cotton merchants, shippers and exporters

of raw cotton. The association was founded in 1924 and

is incorporated under the laws of the state of Tennessee.

The association is authorized to cooperate and treat with

_ Cotton Exchanges, Cotton Shippers Associations, tton

Buyers Associations, Cotton Manufacturers Associations,

Compresses, Gins and individuals in the United States and

_ in any foreign country in evolving rules, regulations and

» practices governing the cotton trade which shall be fair to

_ all concerned; and is authorized to engage in all such

, activities in connection with the cotton industry as come

A see : epREN :

+ within the province of a trade association including the right

to sue and be sued by the corporate name.

The 492 members of the association derive their status

through membership in one of five federated associations,

such associations doing business in sixteen states through-

out the cotton belt:

Arkansas-Missouri Cotton Trade Association

Atlantic Cotton Association

Southern Cotton Association :

AONE SASSO FULLERENE OURS ELOCL IO PLN DN ORL OLN EES IE PLACE LIE ABEL ASN LBA A SIEVE DEE a GEE

BE 2 PR I NARI HE, (MOE Ps LNA OLE OBOE PLIEE TGS

SMB A ENS OE LET, BEL PRG IT PUES LLG LAA A RY

iP gl

‘

;

Texas Cotton Association

Western Cotton Shippers Association

Of the total U.S. cotton crop the member firms handle

over 70% of the raw cotton sold to domestic textile mills

and export 80% of the U.S. crop sold in foreign markets.

Four cooperative marketing associations and textile mill

buyers control the remaining portions of these markets.

The involvement of members of this association in the

purchase and sale of cotton directly involves them to a

substantial degree in the transacting of business in inter-

state commerce. Any possible ruling that directly affects

the continued orderly transacting of the business of the

members of this association is a matter of concern to the

American Cotton Shippers Association. Its interest in

this case is therefore manifest, and it therefore requests

leave of this Court to file this brief as amicus curiae.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The lower court used statutory references to Missis-

sippi Code 1942 Annotated, and amicus has used the same

referencing. However, the Mississippi Code was recom-

piled and renumbered in the Mississippi Code 1972 Anno-

tated. For the Court's convenience, amicus sets forth

herein the corresponding reference sections, especially

since the court in Cone Mills Corp. v. Hurdle, 369 F. ©

Supp. 426(N.D. Miss.,-1974), an important intervening

case, uses the 1972 Code numbering.

e till aaah ene |

1942 Code (1972 Supp. where bein me 1972 Code

§ 1437 § 13-3-57

§5309-221(e) ; ' §79-3-211(e)

§ 5309-225. §79-3-219.

§5309-226 § 79-3-221°

§ 5309 -230 §79-3-229

§ 5309-239. §79-3-247

§ 5309-312 3 §79-3-289

§ 5345 §79-1-27

$5346 §79-1-29

§ 9697(i) ; §27-31-1(i)

STATEMENT OF THE CASE

The facts of this case are adequately detailed in Appel -

lant's Jurisdictional Statement, pp. 3-12, and Appellant's

Brief. Amicus will therefore refrain from restating the

facts herein. ?

: | QUESTIONS PRESENTED

1. WHETHER THIS COURTHAS JURISDICTION TU HEAR

THIS APPEAL?

a. WHETHER THE CERTIFICATE OBTAINED IS

_ THAT OF THE MISSISSIPPI SUPREME COURT

OR OF THE PRESIDING JUSTICE ONLY, AND

IF OF THE COURT WHETHER IT IS ——.

SIVE ON THIS COURT?

b. WH THER THE MISSISSIPPI QUALIFICATION

STATUTE INCORPORATES THE FEDERAL CON-

_ STITUTIONAL DEFINITION OF INTERSTATE

COMMERCE, THEREFORE MAKING IT A HY-

BRID OF STATE AND FEDERAL LAW AND

NECESSARILY RAISING THE FEDERAL QUES-

ria a, Cea: RENNIE NTR IRR rs By 8 IRES PECL IE POPE R AO DLL LER OILED, Pg IO RELI

SALA LONE LOA GE Sith DLA L ALAA AEG Be BSR IIA, cal OME AE LALA LOPE LENE Sia

TION IN ITS CONSTRUCTION BY THE MISSIS-

SIPPI SUPREME COURT?

c. WHETHER IN VIEW OF THE CIRCUMSTANCES

THE CONSTITUTIONAL QUESTION WAS EX-

PLICITLY RAISED IN A TIMELY MANNER UND8R

THE RULE IN MISSOURI EX REL. MISSOURI IN-

SURANCE CO. V. GEHNER, 281 U.S. 313 (1930)

OR CORN PRODUCTS REFINING CO. V. EDDY,

249 U.S. 429 (1919)?

AUTRES See: e

2. WHETHER THE TRANSACTION BETWEEN BUYER

AND SELLER OF COTTON WAS IN OR AFFECTED

INTERSTATE COMMERCE?

3. WHETHER, IF IN OR AFFECTING INTERSTATE COM-

MERCE, SUCH TRANSACTION NECESSARILY OR BY

ITS EFFECT VIOLATED THE COMMERCE CLAUSE?

SUMMARY OF ARGUMENT

I, The Supreme Court Has Jurisdiction to Hear This Appeal

The law of federal jurisdiction concerns the distribution

of power between the states and the federal government.

Federal courts do not review federal questions that are

not drawn in question in state courts because of fear that

decision by the federal courts may intrude on state power

to resolve state law questions. Murdock v. City of Mem-

phis, 87 U.S. 590 (1875).

(a) But where a state court actually decides a federal

question, it would be counterproductive and violative of

the policy of federal -state comity if the federal courts

questioned the propriety of the state court's reaching the

federal question. That is a matter for the state courts

themselves to resolve. Similarly, it is apparent that the

federal courts should accept the statement of the state

Po LE LG LODE RELIED BID ALE EEL ALA BOI EE IGP SALI, LGN DMP IE, EAGLES LEME IGN SREP RI AOD Ea BA Mes o -

AE hs OP SPE LED we te he ES Mae

court that it actually reviewed the federal question. The

certificate is a device that has been used to clarify ambig-

uous records and opinions of state cases, but this Court

* has given the same deference to state court certificates

that it has to state court opinions, and indeed to do other -

wise would defeat the very reason for federal restraint.

In this case, counsel for Allenberg sought a certificate

from the state supreme court, and the court issued such

a certificate in language closely paralleling a certificate

found in the leading Supreme Court practice book. While

Signed by the Presiding Justice, the certificate states that

it is modifying the court's order to include the statement

in the certificate. This Court should accept the certificate

for what it says it is and for what counsel explicity sought

—a certificate by the state court and not of a single justice.

As a certificate of th@court, it should be conclusive on this

Court that the federal question was considered by the state

supreme court.

(b) Mississippi law exempts transactions in "interstate

commerce" from the general qualification requirement for

foreign corporations. This exemption reflects a mandatory

limitation on state power imposed by the Commerce Clause

and therefore uses the federal concept as its own referent.

The Mississippi statute therefore adopts and incorporates

the federal meaning as a necessary element in construing

its own statute. See Cone Mills Corp. v. Hurdle, 369

F.Supp. 426(N.D. Miss. 1974). Cf. United Air Lines v.

Mahin, 410 U.S. 623 (1973). When the Mississippi Supreme

Court declined to apply the statutory exemption respecting

transactions in interstate commerce to the transactions

herein, it was necessarily making a determination that the

statute was valid and that the federal Commerce Clause was

no impediment to such application. Standard Oil Co. v.

Johnson, 316 U.S. 481 (1942); State Tax Commission v.

~ A

a? ad

Van Cott, 306 U.S. 511 (1939). See Robertson and Kirk-

ham, Jurisdiction of the Supreme Court of the United States

§99 (Wolfson and Kurland ed. 1951); Greene, Hybrid State

Law in the Fedeval Courts, 83 Harv. L. Rev. 289 (1969),

federal question prior to the petition for rehearing. If,

contrary to Appellant's contention, it be concluded that.

no federal question were presented or decided prior to the

petition for rehearing, that would still be timely in the

UN Aes ah apt eRe pipe ote

OES

circumstances of this case. Under the doctrine of Saunders ;

v. Shaw, 244U.S. 317(1917), and Missouri ex rel. Mis-

souri Insurance Co. v. Gehner, 281 U.S. 313 (1930), a

litigant is not required to anticipate deprivation oftéonsti-

tutional rights or to seek explicitly to protect them in ad-

vance of their actual deprivation. Allenberg won its

lawsuit in the trial court, which found Allenberg exempt

from the qualification requirement. It was the decision

of the Mississippi Supreme Court that resulted in the actual

infringement on federal Commerce Clause interests, and

Appellant raised this point at the earliest time in the peti-

tion for rehearing. The federal question in such circum-

stances is timely raised. Cf. Corn Products Refining Co.

v. Eddy, 249 U.S. 428, 432 (1919).

Il. Application of the Qualification Requirement and the

Penalty Sanction Violates the Commerce Clause.

(a) The underlying transaction herein is covered by

the terms of Dahnke-Walker Milling Co. v. Bondurant,

257 U.S. 282 (1921). In Dahnke-Walker a purchase was

made by an agent of a foreign corporation in Kentucky for

shipment to Tennessee. This Court held that the purchase

as well as the actual transportation constituted interstate

commerce and held invalid the state's qualification require -

ment in its application. Allenberg is a cotton merchant

SE PRES LICE PGE SERRE RM PS

ee a ae o ‘. a oS Santee

i .

ee We as

a JG

whose business is the facilitation of interstate commerce

in cotton. The market for cotton is worldwide, and it is

universally recognized that the market for agricultural

commodities most closely resembles the classical market

‘structure. Congress has confirmed this reality and the

national interest in maintaining a smooth operating and

privately run market system in cotton. It has adopted in

legislative findings the concept of commerce embodied in

Dahnke-Walker and related cases that encompasses the

negotiation, purchase, and sale as well as the actual trans- |

portation of the cotton out of state. The findings of Congress

should be accorded great weight, and this Court should be

very wary of interfering with a pattern of commercial

development fostered by Dahnke-Walker and subsequent

state and federal legislation adopting its concepts. Cf.

Flood v. Kuhn, 407 U.S. 258 (1972).

(b) The nature of the Mississippi statutes as applied

herein impermissibly intrude on the Commerce Clause.

It is inconsistent with the free trade concept embodied in

the Commerce Clause that a state be able to require a

foreign corporation to secure a license to transact inter -

‘state commerce within its borders. Requiring a certificate

of authority for interstate transactions manifests a restric-

tion on interstate commerce at war with the precepts of a

national marketplace and assured access to local markets

for interstate commercial activities. Dahnke-Walker and

its progeny state explicity that the nature of such a regula -

tion violates the Commerce Clause.

Moreover, the statute is uneven in its application to

Mississippi residents and to foreign corporations. Con-

tracts entered into by foreign corporations are not void,

but merely unenforceable by the foreign corporation. On

the other hand, if a Mississippi resident seeks to maintain

a bargain, he can sue on the contract. ‘This is the kind

ES PALE GRRE IAN ee NN PORE IE ORY: ERE A : * til

of parochialism that fosters retaliation and recrimination

among states and undermines the free trade area foreseen

by the Founding Fathers and certainly a major reason for i: (

our national prosperity today.

TUR AR RN EEN

their application herein is to unduly burden interstate com- _

merce, ‘The state's primary interest is in protecting its

citizens against fraud by overreaching foreign corporations.

The qualification requirements were designed to provide

accountability to local citizens by establishing a basis for

acquiring jurisdiction. NAACP. v. Alabama, 377 U.S.

288, 305 (1964); Cone Mills Corp. v. Hurdle, 369 F.Supp.

at 431. But since International Shoe Co. v. Washington,

326 U.S. 310 (1945), wherein the "minimum contacts"

doctrine was formulated for purposes of allowing state

jurisdiction over foreign corporations, all states have

adopted long arm statutes. See Note, Foreign Corpora-

tions — State Boundaries for National Business, 59 Yale

L.J. 737 (1959). Mississippi has a long arm statute and

a specific provision for permitting service on local agents

of foreign corporations. oa: 5346 Miss. Code 1942

Ann. Since Allenberg could eaSily have been served, the

interests of the state are somewhat diminished.

Moreover, the Mississippi statute, unlike the Model

Business Corporation Act from which it is adopted and un-

like the vast majority of other states, requires that a foreign

corporation have qualified at the time the contract is actual -

ly made in order for it to maintain an action in state court.

This is obviously a severe penalty which can no longer be

justified in light of modern rules of service of process and

jurisdiction. See Note, Foreign Corporations: The Inter-

relationship Between Jurisdiction and Qualification, 33 Ind.

L.J. 358 (1958). By absolutely barring foreign corpora-

tions from state courts, the Mississippi law also promotes

pees ' " SERS RN EER NET ER ROT EE ER i cas

chk eid . <

OR bas 2H — ee

extra-judicial remedies of a kind frowned upon by this

_ Court in Mitchell v. W.T. Grant Co,, 42 U.S.L.W. 4671,

4677 (U.S. May 13, 1974), and infringes on the foreign

corporation's interest in access to a judicial forme an

interest this Court recently has declared to be basic.

Boddie v. Connecticut, 401 U.S. 371 (1971).

The existence of alternatives which are less intrusive

on the federal interstate commerce interest must be con-

sidered and balanced in determining whether application

of a state statute will be held unduly burdensome on the

Commerce Clause. Pike v. Bruce Church, 397 U.S. 137,

142; Dean Milk Co, v. Madison, 340 U.S. 349, 354 (1951).

The existence of broad jurisdictional statutes and the pos-

sibility of a curative provision indicate that the state's

interest is not sufficient when balanced against the over -

riding federal interest in the free flow of commerce.

(d) The commercial reliance on Dahnke-Walker and

the specific equities in this case preclude modification or

overruling of Dahnke-Walker. In Flood v. Kuhn, 407

U.S. 258 (1972), this Court indicated its unwillingness to

~ interfere with commercial relationships that had developed

in reliance upon a decision of this Court. Congressional

and state legislation have reinforced the institutionalization

of the doctrine of Dahnke-Walker, and modification of that

rule would cause unwarranted gommercial disruption in

an area already too uncertain. Cf. Kosydar v. National

Cash Register Co., 42 U.S.L.W. 4767 (U.S. May 20, 1974)

(need for a rule justified otherwise 'mechanical" approach).

Fale nian ita Ded te sate

ee ee er

y Moreover, in this particular case, affirming the judg-

ment of the Mississippi Supreme Court would be the utmost

j insirony. A rule that is supported because of its preven-

_ tion of fraud is used by a contract breacher to defeat an

_ otherwise valid commercial obligation, freely bargained

- for and without any evidence of fraud on the part of the

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foreign corporation. Allenberg and others similarly ;

situated stand to lose thousands of dollars directly into F

the pockets of those*#ho renege on “solemn contracts", 3

Cf. M/S Bremen «. Zapata Off-Shore Co., 407 U.S. 1,

12-13 (1972), and @hem justify their refusal to deliver under

the mask of protecting Migsissippians against fraud. This

is casuistry of the first order; it seeks to justify refusal

to enforce contracts for a broader good when the reality

is that only Pittman will gain an unjustified windfall profit

with this Court's sanction. This is, therefore, scarcely

the case in which to reconsider basic doctrine.

PRELIMINARY STATEMENT

“When money speaks enticingly, listeners become liti-

gants." Cone Mills Corp. v. Hurdle, 369 F.Supp. 426,

429 (N.D. Miss. 1974). These words, written by Federal

District Judge Orma Smith in a cotton \contract reneging

case, sum up what has happened in this and all too many |

similar cases currently in litigation throughout the cotton -

growing region. Judge Smith took judicial notice of his

own docket to "observe that literally scores of suits have

been filed to either enforce or rescind advance or forward

contracts for the sale and delivery of eon fiber." Id.

The reasons for the massive impetus to break cotton con-

tracts relate to market conditions and to the decision of

the Mississippi Supreme Court now under review.

As Judge Smith found, the price of raw cotton fiber on

world markets "rose in a sudden and spectacular fashion"

in 1973. Weather conditions, unprecedented foreign and

domestic demand, dollar devaluation, and related factors

combined to cause the market price to more than double

within a six month period. id. -

Because of this striking rise in the market price, some

cotton growers have been unable to resist the corrupting

ARP ce |

urge for immediate gain. Impelled by the short-sighted

desire for ‘windfall profits, and unmindful of the staggering

consequences of contract breaching on other blameless

parties, this defendant seeks to undermine a recently

developed course of dealing that holds the promise of long-

run stability for cotton producers and others in the cotton

trade. By reneging on contractual obligations to deliver

cotton at harvest time—agreements entered into at arm's

length and freely bargained for —defendant, and others

like him, threatens the economic welfare of an entire

industry. Moreover, his action, if successful, may sub-

vert recent federal-gevernment initiatives in promoting

self-reliance in the cotton trade and increased exports to

‘markets overseas. ~The failure of these governmental

efforts naturally could have the most serious and wide-

spread economic effects since all Americans share in the -

miseries brought on by runaway inflation and recurring

balance of payments. The contribution of the agricultural

sector is especially noteworthy, with the rising sales on

international markets. See 1970 U.S. Code Cong. &

Admin. News 4792,

Defendant's actions may have far-reaching consequences.

Since the end of World War II, the United States Govern -

ment has actively sought to improve marketing procedures

for agricultural commodities. Congress has declared

that "a sound, efficient, and privately operated system for

distributing and marketing agricultural products is essen-

tial to a prosperous agriculture and is indispensable to

the maintenance of full employment and to the welfare,

prosperity, and health of the Nation.” 7U,S,C, §1621.

_ Accordingly, Congress directed the Secretary of Agriculture

to conduct programs "designed to eliminate artificial bar -

riers to the free movement of agricultural products,” 7

U.S.C. §1622 (d), and to foster new and expanded markets

(domestic and foreign). 7U.S.C. §1622(e). Unhappily,

however, for more than twenty-five years, cotton market -

ing was characterized by heavy réliancé on governmental

supports for crop surpluses. As Mr. Kenneth E, Frick,

administrator of the U.S. Department of Agriculture's

Agricultural Stablization and Conservation Service has

stated, by acquiring and holding stocks of cotton at tax-

payer expense for long periods of,time in Commodity Credit

Corporation (CCC) approved warehouses, the government

has been performing an inventory function for the trade

and has been serving as a market for farmers for more

than a generation, . od

Guaranteed government price supports generated cotton

surpluses stored in CCC warehouses. ‘The government

sought to curtail planting as part of its support program

in order to reduce overall production. But in recent years,

the surplus or carryover of cotton has diminished to the

point where government sought to increase output. The

government, consistent with its emphasis on a successful,

privately operated market system, encouraged production

by cotton farmers on acreage not subject to federal price re

supports. Cotton produced on other than allotted land, =

however, was grown at thé farmer's own risk. The ap-

proach very clearly “put a greater reliance on the market-

place" and sought to "bring agriculture production in line

with the demands of the marketplace" 1973 U.S. Code

Cong. & Admin. News, p. 1757.

This program went into effect for the 1971 crop year,

and before planting their crops‘ many farmers sought a

method for reducing this risk while at the same time assur -

ing themselves additional, reasonable profits. As a means

of protection against price declines from the increased .

production, especially since government supperts would

be unavailable for unallotted acreage, many farmers turned

to a new type of contractual agreement, the "forward" con-

tract.

By forward contracting, a grower agrees to sell his }

future crop before it is planted or soon thereafter. A

capable farmer can virtually assure himself a profit

even before planting. If he is unable to negotiate a

price which he anticipates will be profitable, he may

plant other crops which are in demand or simply allow

his land to lie fallow. Thus, in theory at least, forward

contracting will help restore traditional principles of

supply and demand to the cotton market with the added

feature that the element of risk is reduced.

The grower, moreover, can borrow on forward con-

tracts and textile mills can price their finished product

long before manufacture. Forward contracting also ~

enables the retail merchant to determine the price of

an article manufactured from cotton months in advance.

Cone Milis Corp. v. Hurdle, 369 F. Supp. at 430.

As the private market functions more smoothly, the

need for constant federal government tinkering diminishes,

the burden on taxpayers dwindles, and the Congressional

goal of an efficient "privately operated" marketing system

is more nearly attained. But the contimi success of the

forward contracting device depends on Miutuality of trust

and reliance on the strict aditérence to contractual obliga -

tions. Realizing the desirability and importance of forward

contracting for cotton growers, especially under the new

farm law, 87 Stat. 221, cotton producer organizations

have stressed that producers and merchants must be able

to rely on each other's commitments if contracting is to

» succeed as a viable marketing tool. The demise of for -

. ward contracting because of reneging and unenforceability

» could even affect the level of U.S. exports since foreign

| countries seem to place great weight on the American ©

» reputation for fulfilling contractual responsibilities, or

» at least upholding contractual rights in court.

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The financial consequences resulting from the mass

refusals to deliver are severe enough, but consider also

the possible impact on American foreign policy interests

of judicial sanction for mass contract breaching. Suppose,

for example, that the plaintiff in this situation were not

an American corporation "foreign" to Mississippi, but

instead a Japanese firm (a lot of cotton from Marks, Mis-

sissippi went to Japan, A-60) a mainlaind Chinese buyer,

Korean, Dutch, or English purchaser. Imagine the inter -

national repercussions of allowing each state to interfere

with enforcement of admittedly valid contracts by denying

access to the legal process to good faith foreign purchasers. ~

The ultimate embarrassment to the United States of such

a situation is clear evidence of the wisdom of the tradition -

al court-imposed limitations on state action in the field of

inter state and foreign commerce.

In 1971, 11% of the United States upland (i.e., grown

in the southeastern United States) cotton crop was forward

contracted. The contract between Appellant Allenberg

and Appellee Pittman was signed in January, 1971 and

applied to Pittman's 1971 crop when harvested. During

1971, cotton prices rose, and by harvest time in Novem-

ber, 1971, the Pittman cotton was worth some $18,000 more

than the contract price; Pittman refused to deliver.

In 1972, the practice of forward contracting hecame

more widespread, with 32% of the United States upland cot-

ton crop sold in advance of harvest. U.S. Dept. of Agri-

culture, August 1 (1973) Crop Report (Aug. 9, 1973) p.2.

But the market for cotton declined during 1972 so that for -

ward cotton contracts entered into in February, 1972, for

example, brought an average) price,of 30.27 cents per pound

while farmers who waited until harvest time in October,

1972, received an average price of 25.56 cents per pound.

Statistics on,Cotton Related Data 1930-1967, Supplement

3% rs |

“Ay z

DASE LCP SLT SGOT OAP se? LED ERE ERE LE GT SED IOC TILTON LG FELL, sh Ne |

PAD POMPE) Se AMY oh aw

for 1972, U.S. Dept. of Agriculture Economic Research

Service (Feb, 1973, Statistical Bulletin No. 417) p. 85.

The 1972 experience evidently persuaded even more farmers

to contract ahead for sale of their crop for over half the

1973 crop was forward contracted, with the percentage in

the Delta region (including Mississippi) above 70%, U.S.

Dept. of Agriculture, Cotton Situation (Nov. 1973), CS-

263, p. 9.

The market price for cotton, as previously noted, sky-

rocketed in 1973, Prior to the harvest season, the Mis-

sissippi Supreme‘Court sent shock waves throughout the

cotton -growing region when it decided the present case,

reversing the trial court and holding that an out-of-state

cotton broker could not enforce concededly valid forward

cotton contracts. This decision and the 1973 market

situation placed in jeopardy the validity of contracts for

more than one million bales of cotton produced and for -

ward contracted in Mississippi. Coming in April, the

decision provided a basis for optimism among short-sighted

and venial producers that they could renege on their freely

bargained for, arms-length contracts, and rely on the

assistance of the Mississippi courts to deny enforcement

, to foreign corporations which, relying on state law and

direct Supreme Court precedent in Dahnke-Walker Milling

| Co. v. Bondurant, 257 U.S, 282 (1921), had not obtained

\ a certificate of authority to do business in Mississippi.

| Responsible producers and producer organizations, recog-

nizing the importance of maintaining the viability of the

forward contract and realizing the reliance placed on the

contract price by others in the cotton trade, urged compliance

_ with the contracts; but all too many farmers sought to cap-

/ italize on the short-run windfall opportunity, heedless of

_ the harm caused the buyers in the near term and them-

» selves in the long term if the forward contract technique

* became suspect.

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jihinnion be . sme, t : t 18 ESE ON A A hs OE

‘

The cotton program of the government for 1974 is based

upon a 1973 change in the law. 87 Stat, 221. The new

program places an even heavier emphasis on the use of

the marketplace and further government withdrawal from

direct subsidy, unless a specified target price for cotton

is not achieved, A cornerstone of this policy is that

farmers be able to forward contract so as to reduce their

risk if they wish. The greater reliance on forward con-

tracts is, thus; a pillar of federal policy. Yet, continued

uncertainties about the validity of these contracts diminishes ©

their value and popularity. If a foreign corporation not

. qualified to do business in Mississippi must run the risk j

of expensive litigation on a contract, it is unlikely toenter

into one. Inevitably, this will place a considerable burden

on those in the business to qualify in all cotton -producing

states; but it will also keep out of the market foreign ©

corporations unable or unwilling to qualify because thé>

amount of business they do in a particular state does not

_-warrant it. Or it could deter a new entrant into the market-

place (e.g. a Japanese corporation) from, buying in a state.

The United States balance of payments, situation can ‘ill

afford the imposition of insular qualification requirements

on a state by state basis where the effect may well be re-

ducing the ease with which prospective buyers enter the

American agricultural marketplace. Moreover, imposi-

tion of state by state qualification requirements for inter -

state cotton transactions would allow highly capitalized and

big-volume brokers and buyers to gain a protected position

in the cotton market,’ with excessively ' concentrated power.

This would inherently open up the opportunity for abuses,

such as artificially controlled supply and lower prices for

individual farmers, by limiting the number of potential

purchasers of his produce. 7

Finally, it is important to understand peecisely how

the forward contract operates in an individual situation.

~ ; 2 4

hon LOLITA LL. EA REGLL LINC LAS LE VO LLEL LLY EMT LLL EEO LE LE DAE EN OLR ne .' " 3

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The Allenberg-Pittman transaction involved in this case

adequately demonstrates the commercial consequences of

a”breach of contract, The most important point to bear

in mind is that Allenberg stood to gain nothing from the

improved market price for cotton between planting and

harvest. Allenberg makes,commitments to furnish cot -

ton at a specified future time at a certain price, The

terms of this commitment reflect the market situation at

the time the contract is made, By the time of harvest,

Allenberg has long since committed itself to -_

the cotton it has agreed to buy from farmers, |

- in reality, Allenberg is in the same situation as the

farmer, having committed itself to sell at a low market

price while the price went up. But Allenberg's contractual ~

obligation must be met; If it, cannot enforce its original con-

tract with the farmer, then Allenberg must purchase spot

cotton at the time it must deliver, .The $18,000 price differ -

ential in this case comes directly out_of Allenberg's pocket

as a disruptive business loss, Quite on the contrary for

Pittman, his planning and commitments, like Allenberg's,

were all based on the lower’ price; enforcement of the Allen-

berg-Pittman contract will bring about no dislocation for

‘Pittman as a result, This is therefore not a case of which

party will benefit from a fortuitous rise in price —that is,

4} among competing claimants for windfall gain, Rather, this

is a case where one party (Pittman) seeks windfall profit by

saddling the other party (Allenberg), which had already

locked itself into a commitment based in good faith on the

deal with Pittman, with substantial out of pocket, disruptive

losses. Moreover, if the price of cotton had declined,

the contract under Mississippi law would be entirely en-

forceable by Pittman against Allenberg. Miss, Code 1942 |

Ann, §5304-234, This is important background in under -

standing the commercial realities among the parties as

well as the institutional interests.in a "sound, —?

* i

le atin a sat dis tn remap PRE thy YG hit MOD, tty by a et ser congo ge. A

OA it GURL 6 A Pca ARETE, ABE LIE CD AA OO AE. i RES CB et PUNE,

es,

and privately operated system for distributing and market -

ing agricultural products..." 7U.S,C, §1621.

ARGUMENT

I, VHE COURT HAS JURISDICTION TO HEAR THIS

APPEAL

The jurisdiction of this Court is invoked pursuant to

28 U.S.C. $1257(2), which permits appeals from final judg -

ments of the highest court of a state "where is drawn in

question the validity of a statute of any state on the ground

of its being repugnant to the Constitution . . . and the

decision is in favor of its validity." While it has been

argued that "[i]f there is any area of the law which should

be crystal-clear, it is the jurisdiction of the Supreme

Court of the United States,". Wolfson and Kurland, Certifi-

cates By State Courts of the Existence of a Federal Ques-

tion, 63 Harv. L. Rev, 111 (1949), this clarity, unfortun-

ately, has not always been attained.

+ A,

A. Appeal or. Certiorari

The critical question here is whether Allenberg drew

in question the constitutionality of the Mississippi statute

as applied so as to justify the exercise of appellate juris-

Giction by this Court, As an initial matter, there is an

issue whether the ''validity" of a state statute is sustained

within the meaning of §1257(2). When the state court

holds the statute applicable to a particular set of facts as

against a contention that such an application is invalid on

federal grounds, Citing Dahnke-Walker Milling Co. v.

Bondurant, 257 U.S. 282 (1971), Stern and Gressman arsue

that such a state court decision— the kind under review

here — does fall within the jurisdictional statute:

* This is true even though the statute on its face bears no

federal impediment. Thus where the court holds that

eye D A ESS EE

€

PPE OAD RIE LIC RR EL LE EN Lt ——

a particular transaction is intrastate rather than inter-

state commerce and that on such basis the state statute

may be applied and enforced, the validity of the statute

has been sustained as to those facts.

R. Stern and E. Gressman, Supreme Court Practice (4th

Ed.) 85 (1969) (hereinafter cited as Sterm and Gressman).

Of course, Dahnke-Walker is a case heavily relied upon

by Appellant with respect to the merits of this Cause; its

jurisdictional significance is especially important also

because, upon reargument, the Court found an appeal the

appropriate method of review. a

It is possible, however, that this Court could construe

Appellant's claim in such a way that certiorari rather - ‘

than appeal would lie. Appellant's Jurisdictional State -

ment (p. 2) requests that the papers be treated as a petition

for certiorari as is authorized by 28 U.S.C. §2103, if

certiorari would be the appropriate mode of review under

§1257(3). Were appellant's claim viewed not as a chal-

lenge to the validity of the Mississippi statute as applied

to the specific facts herein but rather taken as.a claim of

exemption from application of that statute because of the

federal rights under the Commerce Clause, then certiorari

would be appropriate. Steyn and Gressman 85-87. Analyzed

this way, the Mississippi Supreme Court's decision amounts

- to a denial of Allenberg's assertion of a federal Commerce

. Clause right, not a validation of the Mississippi statute. '

In such a situation, certiorari would be the appropriate

_ method of review. Admittedly, the lines of demarcation

here are somewhat difficult to follow; moreover, the dis-

~ tinctions should not ultimately affect this Court's determina -

tion to hear this cause. For the reasons amply demonstrated

_ in Appellant's Jurisdictional Statement, this case in any

- event is "certworthy" and, even if review be discretionary,

~ such discretion should be exercised to grant review on the

eee

merits. This procedure has been adopted where the :

Court has postponed the question of jurisdiction toa hear- —

ing on the merits. Stern and Gressman 90. See Garrity —

v, New Jersey, 385 U.S. 493, 496 (1967).

B. The Effect of the Mississippi Supreme Court's

Certification

"The mechanism of law—what courts are to deal with

which causes and subject to what conditions — cannot

be dissociated from the ends law subserves. So-called

jurisdictional questions treated in isolation from the

purposes of.the legal system to which they relate be-

come barren pedantry. After all, procedure is instru-

mental; it is the means of effectuating policy. Particu-

larly true is this of the federal courts." —

F. Frankfurter and J. Landis, The Business of the Supreme

Court 2 (1928). The law of federal jurisdiction concerns

the distribution of power between the states and the federal

government. , Unless viewed from this perspective, this

field is “surely a sterile topic." Hart and Wechsler's, The

Federal Courts and the Federal System (Bator, Mishkin,

Shapiro, Wechsler ed.) (1973). ' Unfortunately, the law

regarding the form and effect of staté court certificates

is somewhat opaque and smacks of the "barren pedantry”

. criticized by Frankfurter and:Landis.

From §1257(2) and $1257(3), it is clear that a precondi-

tion for the exercise of Supreme Court jurisdiction is that

the federal issue be "drawn in question" in the state courts.

This represents a jurisdictional rule of federal comity

for the orderly procedures of state courts. In the exer -

cise of its appellate jurisdiction, the United States Supreme

“Court should not review claims a fi presented to the lower

court whose final judgment it reviews. Naturally, in

some cases, like this one, there will be ambiguity about

Wa a A ae ees ee

irre coer teas? Prentih a7 2°? ate

whether the federal question entered into the decision of

the state court. The Mississippi statute and the Missis-

sippi Supreme Court decision both refer to "interstate

commerce," but neither states definitively whether this

concept is identical with the federal constitutional concept.

Moreover, the Mississippi Supreme Court did not explicit-

ly state whether it considered the force of the federal

Commerce Clause in its decision.

Cognizant of this ambiguity, Allenberg's counsel sought

to clarify the situation by asking the state court to certify

whether or not it had considered and decided the federal :

question. This certification procedure arose as a practical

response to cases where the specific grounds of decision

by a state court were ambiguous. It reflected a rational,

common sense compromise that would both preserve state

hegemony over state issues, see Murdock v. City of Mem-

phis, 87 U.S. 590 (1875), and allow federal review of fed-

eral questions when appropriately raised in state proceed -

ings. If federal-state comity and power distribution were

the primary concerns, then it was reasonable for the

United States Supreme Court to defer to the judgment of

the state court if the state court certified that the federal

question had been considered or raised. This deference

is consistent with the desire to avoid federal intrusion

on state court prerogatives. . When the state court says

it considered or decided a federal issue, there can be no

concern of federal overreaching.

This Court's approach to cases in which state courts

actually decide a federal question conforms to the general

policies just described. This Court routinely refuses to

examine whether a federal question was properly raised

in state court proceedings when the highest state court

assumes or holds that a federal question was properly

before it. ‘There can be no question as to the proper

msi § Wi OM Resi OS ° + LEE, SNEED IONE TRS AT LN AOR 8 ~ , , ——_

23 oe

presentation of a federal claim when the highest state court

passes on it." Raley v. Ohio, 360 U.S. 423, 436 (1959).

This Court then considers it irrelevant to the exercise of

its jurisdiction how or when the federal issue was raised

in the state courts. ‘An irrebuttable presumption is

created that the federal question was timely and properly

raised." Stern and Gressman 127. _

This Court's refusal to challenge a state supreme

court's judgment about its own processes reflects the

same sense of comity that underlie$ federa}refusal to

decide state law issues. It is not the busihess of the United

States Supreme Court to challenge the prdp jety of a state

supreme court's decision to consider-tr ec e a federal

question. Indeed, a contrary rule could promote federal -

state disharmony. \

The rule of deference that has grown up with regard to

state court decisions considering or deciding federal ques-

tions has difect applicability to state<ourt ceytifications.

There is no reason for this Court to scrutiniz such a

certificate in any greater detail than it doesja |state court

opinion. As two commentators have stated,

be "'that.a certificate of a state court is conclisive as to

whether a federal question has been raised and decided,"

Wolfson and Kurland, Certificates By State Courts of the

Existence of a Federal Question, 63 Harv. L. Rev. 111,

117 (1949). Regardless of the means through which a

state court speaks on this issue, its certificatién that it

considered or decided a federal question should be con-

clusive. »

This a»proach now has been adopted/as a rule by this

Court. wor exaniple, in Lynygnn v. Illinois, 372 U.S.

528, 536 (1963), the Court dedfined to search beyond an

Illinois Supreme Court certification that the decision of

the federal claim was necessary to its judgment even though

' ae |

a prior rule of Illinois procedure required that the consti-

tutional claim be raised at trial. Lynumn is therefore a

complete rebuttal to the point raised in Appellee's motion

to dismiss or affirm that Allenberg failed to raise a consti-

tutional claim at trial, a matter discussed in further detail

below. See Motion to Dismiss or Affirm, p. 6, n. 4.

See also Ungar v. Sarafite, 376 U.S. 575, 582-83 (1964)

(New York Court of Appeals' amended remittitur held

determinative); Herd v. Pitcairn, 324 U.S. 117, 128 (1945).

If the effect of a state court certification should be and

is determinative when it states that a federal question was

timely raised or decided, the next question is what form

that certificate must take. The early case of Martin v.

Trout, 199 U.S. 212 (1905), one of the first cases in which

the state court certificate technique was used, distinguished

between a certificate from the court and one from a single

justice. 199 U.S. at 222-24. Some language in Con-

solidated Turnpike Co. v. Norfolk and Ocean View Ry.

Co., 228 U.S. 596 (1913), indicated that formal entry in

a journal would be a distinguishing characteristic, but the

Court in that case went on to assume that the certificate

was from the state court and dismissed because of an

adequate, independent state ground. The reason to dis-

tinguish between a court certificate and that of a justice is

rational enough: any single judgegmay not share the same

understanding of a case as do his brethren. But determin-

ing whether a certificate reflects a statement of a court

and therefore its judgment on a case must be done with

» full understanding of the reasons for concern. There

should be flexibility and deference to state court procedures,

and counsel should be able to rely on the certificate he

_ solicits from the state court.

In this case, counsel for Allenberg applied to Justice.

- Powell for an extension of time so that he could "secure a

certificate from the Supreme Court of Mississippi" that

the federal question had been timely raised. Counsel's

application to Justice Powell cited Lynumn v. Illinois, 368

U.S. 908 (1961), in which the certification procedure was

used. Moreover, the certificate of the Mississippi Court

very closely parallels the language of the certificate held

sufficient in Cincinnati, Portsmouth, Big Sandy and Pomeroy

Packet Co. v. Bay, 200 U.S. 179, 182 (1906), to establish

that the federal question was timely raised and necessarily

considered. This is hardly an accident since the standard '

Supreme Court practice book, Stern and Gressman, sets

this certificate out as a model in its forms section (p. 676).

See also language from Lanza v. New York, 370 U.S. 139,

142 n. 6 (1962), cited in Stern and Gressman 677.

Allenberg presented its application to the Mississippi

Supreme Court. The certificate was expressly made a

part of the judgment and entry of reversal. It recites that

the court considered and decided the federal question on

appeal and in the petition for rehearing. Moreover, the

state Supreme Court clerk certified that the Certificate

was an order that appeared of record on file in her office.

Under these circumstances it would be exalting form over

substance to hold the certificate inadequate. Counsel for

Allenberg conscientiously followed the path set out by this

Court, and the certificate he received from the Mississippi

court should be taken as what he sought, without having to

go back to that court and have the certificate appear in

some slightly different form with some extra magic words.

This Court should respect the process of the state court—

that it acted according to regular procedure. This Court

runs no risk of overreaching fed jurisdiction when it

pays heed to such explicit state court certification. If

there is a problem, it is that of the Mississippi court to ©

resolve for itself. Allenberg should be able to rely on its

good faith effort to present the application’ to the state court

, — ; vate

OE en) Semen dea ye ae

and to rely on the form as approved by this court and set

out in the form book as a model. ‘This certificate, there-

fore, should be sufficient to establish this Court's juris-

diction. ;

C. The Mississippi Statute is a Hybrid of State and

Federal Law, and Jurisdiction Exists to Decide

the Federal Questions.

Even if the certificate of the Mississippi Supreme Court

not be deemed conclusive on the question of whether

the federal issue were adequately presented or decided

by the state courts, it is clear that this court will accord

such a certificate significant weight. This is especially

true in a situation such as that herein where there is a

close relationship between the state statute and federal

rights under the Commerce Clause.

Under Mississippi law "No foreign corporation trans-

acting business in this state without a certificate of author -

ity skall be permitted to maintain any action, suit or

proceeding in any court of this state." Miss. Code 1942

‘Ann. §5309-239 (1972 Supp.). In the section defining the

term "transacting business" the statute states that "'a for-

eign corporation shall not be considered to be transacting

business in this state, for the purposes of this chapter,

by reason of carrying on in this state any one or more of

the following activities: .. .(e) Transacting any business

in interstate commerce." Miss. Code 1942 Ann. 5309-221

' (1972 Supp.). Consequently, as a matter of state law, if

a foreign corporation is transacting any business in inter -

state commerce, as defined by the Mississippi courts,

then it need not have a certificate of authority in order to

maintain an action in state courts.

This statutory framework is not totally novel with the

state of Mississippi; it is derived in modified form from

the Model Business Corporation Act. Ross Construction

Co. v. U.M.& M. Credit Corp., 214 So.2d 822, 826-27

(Miss. 1968); Parker v. Lin-Co. Producing Co.,197

So.2d 228, 230 (Miss. 1967). The exception to the quali-

fication requirement for a foreign corporation when trans -

acting interstate commerce is a legislative response to a

constitutional mandate. That is, the interstate commerce

exemption embodied in § 5309-221 (e) is not a purely vol-

untary exercise of legislative grace by the Mississippi

legislature but a constraint imposed on state power by the

Commerce Clause of the United States Constitution. Art.

I, sec. 8, The right to conduct intérstate commerce is

guaranteed by the federal constitution, and no state can

require a license for carrying out interstate business, ;

absent a Congressional mandate. See, e.g., Crutcher v. |

Kentucky, 141 U.S. 47, 57-58 (1891); International Text-. 4

book Co. v. Pigg, 217 U.S. 91, 108, 111 (1910); -Dahnke-

Walker Milling Co. v. Bondurant, 257 U.S. 282, 291 (1921);

Furst v. Brewster, 282 U.S. 493, 498 (1931); Eli Lilly

& Co. v. Sav-On-Drugs, Inc. , 366 U.S. 276, 278 & n. 7,

284-85 (1961). The commentary to the Model Business Y

Corporation Act makes clear the constraint imposed_on- ss &

state power by the federal Commerce Clause. Indeed, it

specifically cites and discusses International Textbook Co.

v. Pigg, 217 U.S. 91 (1910) and Dahnke-Watker Milling

Co. v. Bondurant, 257 U.S. 282 (1921) as reasons for

exempting transactions in interstate contmerce,

From this analysis, it would appear that the term “inter - :

x» &

i Supreme Court decision in this case, the fed-

eral court in‘iorthern Mississippi has held that the state

law here in question incorporates the federal constitutional

concept.

en anne alii

- — ——

ge an

"In summary, sitting in diversity as a Mississippi

Court we have determined that the state intended to

and did incorporate a federal standard into state law."

Cone Mills Corp. v. Hurdle, 369 F. Supp. 426, 433 (N.D.

Miss. 1974). This view is bolstered by examination of

section 5309-312, which indicates the state's intention to

adopt the federal standard as its own referent. That

section states that "The provisions of this chapter shall

apply to commerce with foreign nations and among the :

several states only in so far as the same may be permitted

under the provisions of the Constitution of the United States."

This language indicates that Mississippi, when enacting

its own law, intended to apply established federal concepts,

as used in the Model Act and in International Textbook and

Dahnke-Walker. This is also the express holding of

Cone Mills Corp., supra. Cf. 17W. Fletcher, Cyclo-

4 pedia Corporations 321 (1960) ("The question of what is

interstate commerce is a federal question, and the federal

decisions are controlling in state courts. "’)

Where state law incorporates or makes reference to

federal constitutional principles, adequate grounds for

exercising this Court's jurisdiction exist. In State Tax

Commission v. Van Cott, 306 U.S. 511 (1939), a Utah

tax statute exempted salaries for services rendered in

connection with an essential governmental function. The

Utah Court felt constrained by a United States Supreme

Court ruling that federal salaries were immune from state

taxation and held that the Utah statute did not apply. Sub-

sequent to the Utah court's decision, this Court overruled

the immunity case on which the Utah court had relied.

This Court then took jurisdiction, finding that the federal

question was so intermingled with the interpretation of

‘state law that the adjudication of the state issue could not

be made independently of the federal issue.

—

pedir cere ETP CMON ENCE SA PE ED GGL SAE AS SAPO GE ROL. Yared: OEM AL

"({I]f the state court did in fact intend alternatively to

base its decision upon the state statute and upon an |

immunity it thought granted by the Constitution as inter-

preted by this Court, these two grounds are so inter -

woven that we are unable to conclude that the judgment

rests upon an independent interpretation of the state

law." Id. at 514.

Similarly, in this case the federal constitutional principles

are so clearly a concern of the Mississippi legislature that

interpretation of the Mississippi law must be closely inter -

woven with the Mississippi Supreme Court's view of the

limitations imposed by the Commerce Clause.

In Standard Oil Co. v. Johnson, 316 U.S. 481 (1942),

a unanimous decision of this court, the question was whether

a military post exchange came within an exception in the

California gasoline tax law for any motor vehicle fuel sold

® to the United States Government or any department thereof.

This Court found that the California statutes incorporated

federal law tc determine thé relationship between post ex-

changes and the government of the United States; it then

‘proceeded jo decide that under federal law post exchanges

were arms of the federal government deemed by it essen-

tial for the performance of governmental functions. Ac-

cordingly, this Court took jurisdiction, decided the federal

question, and reversed and remanded to the California

courts.

In the present case, finding jurisdiction on the ground

' of state incorporation of federal law would permit a remand

to the Mississippi Supreme Court to determine whether its

view of state law would be altered after exposition of the

federal law by this Court.. This approach was followed

not only in Standard Oil v. Johnson, supra, but also in

Missouri ex rel. Southern Ry. Co. v. Mayfield, 340U.S.

1 (1950), an FELA case. The Missouri Court denied de-

, ering + ) Pees Horses mg

PINE LOLA I 6 Ciggea Pets ROR wre coe =

aan tec AYALA BO te ere...

. fendant's claim of forum non conveniens on ambiguous

‘grounds. Writing for the majority, Justice Frankfurter

noted three possible reasons for the denial of the forum

non conviens claim: local procedure and the exercise of

discretion, which would not involve a federal question;

an interpretation of the Privileges and Immunities clause

of the federal Constitution; an interpretation of the FELA

statute. Despite this ambiguity, the Court took jurisdic-

tion to decide that neither the federal statute nor the fed-

eral Constitution required a particular outcome:

"Therefore, if the Supreme Court of Missouri held as

it did because it felt under compulsion of federal law

j . « « » it should be relieved of that compulsion. It

j should be freed to decide . , . according to its own

; local law." 340 U.S, at 5.

i The same approach was followed in Perkins v. Benquet

_ Consolidated Mining Co., 342 U.S. 437(1952). Cf. Richfield

| Oil Corp. v. State Bd. of Equalization, 329 U.S, 69 (1946);

| United Air Lines v. Mahin, 410 U.S. 623, 630-32 (1973).

_ The best statement of the rule adopted in Van Cott, Johnson

_ and later cases was expressed by Justice Frankfurter: _

3 ", , . where a decision under state law necessarily -

involves the construction or validity of federal law the

determination of such federal law in the application of

state law gives rise to a federal question for review

here.” Ue

21 U.S, 253, 272 (1944) (Frankfurter,

Flournoy v. Wiener,

J. dissenting). ~

| ‘in United Air Lines v, Mahib, 410 U.S, 623 (1973), Appellant argued

| in state court that a state law should be intepreted in a certainway, The

_ Illinois Supreme Court sted this argument, with two justices feeling un-

_ able to accept Appellant's position because of limitations imposed by the /

§ (continued on following page)

i. , al "4 ‘ : sore d

Commentators have generally acknowledged that this

Court's jurisdiction properly lies where state law incor- F

porates or makes reference to federal law. The editors ¥

of an authoritative work on this Court's jurisdiction state

the principle as follows:

POOR ELSE ENED WO NETS BOGE I AR pe IB et |

31 t

‘Where the meaning of a state statute depends upon

federal law, incorporated by it, a construction of that

state statute interpreting federal law, presents a federal —

question for the suprenk Court and is not a state ground

of decision, If this were not the rule, many intepreta-

tions of federal law by~state courts would not be review-

able by the Supreme Court, and state legislatures could

frame statutes in such a way as to preclude review of

the constitutionality of their application by the Supreme

Court,"

Robertson and Kirkham, Jurisdiction of the Supreme Court

of the United States (Wolfson and Kurland ed,) 180-181

(1951). And Standard Oil Co. v. Johnson, supra, is used

as a principal case in the recently revised edition of a

highly respected casebook on federal courts, indicating

its continued vitality. Hart and Wechsler's The Federal

Courts and the Federal System \(Bator, Mishkin, Sha piro

and Wechsler ed.) 483-89 (1973).

Perhaps the most detailed scholarly treatment of this

issue is found in Greene, Hybrid State Law in the Federal

Courts. 83 Harv. L. Rev. 289, 309-15 (1969). To deter-

- -

(Continued from preceding page. ) a: .

Commerce Clause. The Supreme Court neue to decide the federal ques-

tion because its disposition might have a determinative impact on the con-

struction of mate law. “The possibility that the state court might have

reached the same conclusion if it had decided the question purely as a

matter of state law does not create an adequate and independent state

ground that relieves this Court of the necessity of considering the federal

question,” 410 U, Ss. at 630-31,

“y PY POTS pean ers Prue ee |

- ;

sie teten de eae dashed ate a,

mine whether a state law is a "hybrid, '’ with interconnect -

ing state and federal elements, Greene argues that the »

"touchstone... is whether the federal law is itself ra -

tive in the eircumstances of the case— whether Supreme

Court jurisdiction could effect the coordination of two

coextensive afd possibly conflicting obligations." Jd. at

309. Greene Uses an example of a state enactment that

seeks to exercise the maximum state power without con-

travening a federal limitation on state authority. In such

a case, a state might adept the federal limitation as the

definition of the power, it seeks to exercise. Mississippi

seems to have had the federal limitation in mind, See

section 5309-312, If the state court seemingly decides a

state question but inevitably relies on federal precepts,

? then Tt is proper to.invoke Supreme Court jurisdiction, |

» Green's discussion and,cases cited hereinabove would

justify this Court's exercising jurisdiction Had the state

court construed the state statute as Appellant Allenberg

| sought because. of the federal overtones of such statutory

: construction. It surely must equally be the case that

jurisdiction exist# where the state court reads a state

) statute in such a way not to uphold a federal interest but

_ to give too little weight to that federal» constitutional inter -

/ est. "If the state law is a hybrid, ‘it ought to be review-

_ able in its own right, whether or not a federal question

- has been separately decided." Id. at 312, The hybrid

state law issue, therefore, is not an adequate. independent

ground barring review of the federal questions in the case;

rather it is itself enough of a federal question to be inde-

pently reviewable. Id. at 320,

Finding jurisdiction on the basis of the incorporation

of federal standards in state law raises the further question

for this Court: of what issue to decide on the merits, In

Standard Oil Co. v. Johnson, supra, justice Black acknowl -

edged that if the California court's construction of the state

Nee

bateeinie 2 RSE EM ERE SIF AO TOES LS ARETE Ta" ESBS R Ter art

<i -

statute had depended purely on local law, then that construc -

tion would have been conclusive; this Court would then

have had to determine whether the California statute, as _

construed and applied, would violate the federal constitu-

tion. The approach inJohnson obviated the necessity of

determining that ultimate issue since the Court construed

federal law and remanded to the California court, The

ultimate question was deferred until a later stage.

In the present case, a ruling that the Mississippi law

was a hybrid, incorporating federal standards, would allow

disposition on either a narrow ground as inJohnson or on

the broader ground. Following Johnson, the Court could

limit its analysis to whether the transaction was in inter -

state commerce as that concept has evolved in federal

constitutional adjudication, See, e.g., Dahnke-Walker

Milling Co. v. Bondurant; Lemke v. Farmers' Grain Co.,

258 U.S. 50 (1922); Eureka Pipe Line v. Hallanan, 257

U.S. 277 (1921). Assuming that this “Court would find

that interstate commerce in the federai Constitutional

sense was involved, as the Court in Cone Mills did, it

would then be up to the Mississippi Court to determine

whether the state statute therefore provided an exemption.

See Cone Mills. If the state court on remand found the

state statute applicable to the present factual situation,

denying exemption to Allenberg, this Court on appeal would

have to decide the issue whether this type of regulation of

interstate commerce was constitutional. Alternatively,

this Court could decide the broader issue now—determining

on this appeal whether this application of Mississippi law '

not only involves interstate commerce but constitutes an

undue or direct burden on such commerce, making it un-

constitutional in its application, Either path is possible,

but finding jurisdiction on the hybrid state law basis does °

allow a decision on the merits on a narrower federal ground.’

See generally Greene, Hybrid State Law in the Federal :

Courts, 83 Harv. L. Rev, 289, 312 n,92 (1969).

repuine oeranmenermemenm@lly

Di The Federal Question Was Timely Raised By

Appellant in the State Court Proceedings. .

In the previous two sections, @micus has argued (1)

that the Mississippi Supreme Court, through its certificate,

has said that it actually considered and decided the federal

question and (2) that the Mississippi law is a hybrid, ‘in-

separably intermixing federal and state concepts,. and

therefore a decision interpreting the application of state

law herein necessarily involves a federal question. In

this section, amicus will show as an independent matter

that this Court should hold that Appellant Allenberg ex-

plicitly presented the federal question in a timely fashion

under the circumstances.

Appellee Pittman concedes that Appellant Allenberg

specifically and expressly raised the claim pressed here

in a petition for rehearing before the Mississippi Supreme

Court. Motion to Dismiss or Affirm at 10. Assuming

for argument's sake that Appellee is corréct in his*asser -

tion that the federal question was raised for the first time

in the petition for rehearing—a matter disputed by Appel -

lant, by the Mississippi Supreme Court's certificate, and

byamicus' hybrid law argument:~there is still an issue

whether raising the federal question at that stage was. +

timely and therefore can support this Court's jurisdiction.

It is true, as Appellee contends, that raising the federal -

question in a petition for rehearing is generally insufficient

to establish federal appellate jurisdiction. See-Stern and

Gressman at 124; Robertson and Kirkham, Jurisdiction

of the Supreme Court of United States (Wolfson and Kur-

land ed.) 129 (1951). Nevertheless, it is also true, as

Justice Harlan has noted, that the "issue whether a federal

question was sufficiently and properly raised in the state

courts is itself ultimately a federal question. . ." Street

v. New York, 394 U.S: 576, 583 (1969). A particular

Oe UO a tt a

~ 35.

situation cannot deprive a litigant of a reasonable oppor -

tunity to have his federal claim argued and decided. In

such circumstances, the general rule about the ineffective -

ness of a petition for rehearing must yield and raising the

federal question will be timeiy in the petition for rehearing

if that is realistically the earliest opportunity. See

Robertson and Kirkham, supra, at 130.

The early case of Saunders v. Shaw, 244 U.S. 317

(1917), illustrates the kind of situation, similar to the

present one, where an issue raised in the petition for re-

hearing was held sufficient to invoke this Court's juris -

diction, Plaintiff sued to enjoin collection of a drainage

tax, offering evidence to show his land was outside the

levee system and therefore not benefited. Defendant ob-

jected, and the trial court excluded the evidence as inad-

missible; but for purposes of appeal the proof was put

into the record. Defendant declined to cross-examine,

maintaining his view that the evidence was inadmissible.

The trial court sustained defendant's evidentiary position

and ruled for him on the merits, a decision affirmed by

the state supreme court. On rehearing, the state supreme

court reversed itself, holding for plaintiff and relying on

the evidence that iis land was not benefited by the levee

system and therefore not subject to taxation under the inter -

vening decision in Myles Salt Cov. Board of Commis-

sioners, 239 U.S. 478 (1916). Defendant then sought re-

hearing on the ground that he had not had an opportunity

to challenge plaintiff's evidence on the issue of benefit,

but the court denied this rehearing under its traditional

limitation to one rehearing.

On appeal to this Court, defendant claimed that his in-

ability to present evidence was a denial of due process

that resulted from the state supreme court's decision.

For a unanimous Court, Justice Holmes found that juris-

“

Lei PEELE LIBS Side ¢

bee.

J Rist ae

PMT casio cd.

diction had been established. When the trial court ruled

plaintiff's proof inadmissible, defendant was under no duty

to put in evidence he deemed irrelevant. The due process

claim did not arise until the state supreme court's decision,

but a denial ofjrights need not only be by legislation, it can

also be in the form of a judicial decision. Cf. Brinkerhoff-

Faris Co. v. Hill, 281 U.S. 673, 680 (1930) (a violation

of due process: "is none the less clear when that result is

accomplished by the state judiciary in the course of con-

struing an otherwise valid. . . state statute.") Justice

Holmes observed that defendant raised the constitutignal

issue at the earliest opportunity, and he did not seeAvhat

more could have been done.

In the present case, Allenberg sued on its contract in

state court. Certainly it could not be expected to raise

a constitutional issue in its complaint. It is sheer specu-

lation whether Allenberg could have raised the federal

constitutional question on appeal if it had lost in chancery

court, for Allenberg's position was sustained at trial.

Appellee concedes that "[u]nder Mississippi practice,

Allenberg (having won.below) was not required to make a

. « . delineation of issues raised by the case." Motion

to Dismiss or Affirm, at 6. Therefore, only when the

Mississippi Supreme Court reversed the trial did Allen-

berg have gn opportunity expressly to point out the federal

question involved.”

In Missouri ex rel. Missouri Insurance Co. v. Gehner,

281 U.S. 313 (1930), a state statute taxing insurance com-

“oF course,, the Mississippi Supreme Court's Certificate and the hybrid

nature of that ftate law both indicate that the federal question was in fact

considered bythe state court in the original appeal. This argument as-

sumes, however, without conceding, that the petition for rehearing was

the first time that the state courts were presente | in the federal issue.

' This Allenberg did explicitly and in a timely manner at its first opportunity.

ibe ya

- |

t |

WA aains

pany property allowed deductions for a reserve and unpaid

policy claims. The company, in addition, deducted the

United States Government bonds it held. The state board

of equalization held that the reserve and unpaid claims

were subject to state tax, ruling these deductions in vio-

lation of the state constitution. The board, however,

found that the United States Government bonds were not

taxable. On appeal the Missouri Supreme Court held

that all assets, including the bonds, were taxable. The

company petitioned for rehearing, arguing that the Mis-

souri statute as so construed violated Article I, section

8 of the United States Constitution, which gives Congress

the power to borrow money on the credit of the United

States. Jd. at 318-19. A unanimous court (the dissent

was on the merits) agreed that the case was properly be-

fore the Supreme Court. Acknowledging that it generally

will not consider contentions first made in the petition for

rehearing, the Court said:

But here the Company, at the first opportunity, invoked

the protection of the federal constitution . . . It could

not earlier have assailed the section as violative of the

Constitution and laws of che United States. The board

of equalization completely eliminated the bonds from

its calculation . . . It may not reasonably be held that

the Company was bound to anticipate such a construction

or in advance to invoke federal protection against the

taxation of its United States bonds."

Id. at 320 (emphasis supplied).

Gehner and the case here under review are very similar

from a jurisdictional perspective. Structurally, the power

to. borrow money comes immediately before the Commerce

Clause in the Constitution, and the Gehner case involved

a limitation on state power that flowed from the implica-

tions of the granted federal power. The present case

4 NG Na easy!

also involves a claim that a grant of federal power operates

to curtail the exercise of certain otherwise valid state

authority. In Gehner the state board upheld the Company's

view that the United States bonds were not taxable. Here,

the Chancery Court sustained Allenberg's view that it

could maintain this action since the transaction was in

interstate commerce and exempt from the qualification

requirement. In Gehner, the state supreme court re-

versed, finding against the Company, and the Company

immediately raised the federal claim in light of that con-

struction. Here, the Mississippi Supreme Court likewise

reversed, and Allenberg likewise pressed its federal claim

in view of the court's interpretation of state law. In ~~

Gehner, the Court found that the company could not rea-

sonably be held to anticipate the state supreme court's

ruling. Here Allenberg could hardly be expected to an-

ticipate a decision that directly contravened Dahnke-Walker

Milling Co. v. Bondurant, supra, and a host of other

precedents. The reasonableness of Allenberg's position

is sustained by the similar view expressed by Judge Smith

in Cone Mills Corp. v. Hurdle, 369 F. Supp. 426(N.D.

Miss. 1974) (Allenberg was also a party in a companion

lawsuit). As in Gehner, the Court here should hold that

it has jurisdiction.

Appellant's position is further supported by another

unanimous decision, authored by Justice Cardozo, Great

Northern Ry. Co. v. Sunburst Oil and Refining Co., 287

U.S. 358 (1932). That case involved a claim by a shipper

that freight rates, approved by a state commission, were

excessive. The commission agreed and ordered a retro-

active rebate, a procedure permitted under state statute

according to prior case law. On appeal by the railroad,

the state supreme court overruled its previous decision

and held such retroactive rebates impermissible. How-

ever, the court sustained the shipper's claim by holding

‘

the overruling prospective only and allowing all claims

based on the previous decision. The railroad claimed

this resolution violated due process.

This Court, after reciting the general rule, found that

raising this claim in the petition for rehearing was suffi-

cient to establish jurisdiction because the railroad could

not object to the prospective application until the Court

made its ruling. Jd. at 367. Similarly, Appellant herein

could not challenge the effect of the Mississippi Supreme

Court's statutory interpretation until that court actually

rendered its decision. But the point was brought to the

court's attention in a timely manner at the first opportunity.

It is thus clear that the action of a state supreme court

can itself raise federal constitutional questions. Brinkerhoff-

Faris Co. v. Hill, 281 U.S. 673, 680 (1930); Cole v.

Arkansas, 333 U.S. 196, 201 (1948) (proceedings in state

supreme court part of the process of law under which a

conviction must stand or fall). And challenge of that action

on a petition for rehearing will be deemed timely in such

cases. Indeed, under the doctrine of Com Products Refin-

ing Co. v. Eddy; 249 U.S. 429, 432 (1919), it may be that

the effect of state court's action may be sufficient to raise

the federal question. But the case for jurisdiction here is

_even stronger than in Corn Products because of the explicit

attempt to obtain state court review of its own decision

through a petition for rehearing. This presentation, even

if in a petition for rehearing, serves the ends of federal -

state comity and should be viewed with favor by this Court

in cases of this kind. See generally Beck v. Washington,

369 U.S. 541, 553 (1962), distinguishing outcome therein

from situation where review is sought in petition for ,

rehearing.

ep yers: Pony

I aR OO HERETO GLE ER AA at AR

seb WAS PMR gies Nps

| 5 + Shex sie tnd

maith ad xs sinpenai’

Il. APPLICATION OF THE MISSISSIPPI STATUTES TO

THE PRESENT CIRCUMSTANCES, BARRING APPEL-

LANT FROM EVER MAINTAINING AN ACTION TO

ENFORCE A VALID CONTRACT, VIOLATES THE

COMMERCE CLAUSE OF THE FEDERAL CONSTI-

TUTION.

Underlying the claim by defendant is a challenge to the

very legal and constitutional system under which our na-

tional economy has grown and thrived. Defendant, who

consciously stan.'s in breach of concededly valid contracts,

enlists the aid of this Court in an ignoble scheme, There

is not one word in the record to challenge the validity of

the contract entered into by Allenberg and Ben E. Pittman,

Indeed, the testimony of Pittman is explicit acknowledgment

of his signing a contract to deliver his cotton to Allenberg

(A -82-85), and the trial court so held. Mississippi law

expressly states that failure of a foreign corporation to

obtain a certificate of authority "shall not impair the

validity of any contract."’ Miss. Code 1942 Ann. §5309-

239 (1972 Supp. ).-

Rather, defendant-appellee, who intentionally seeks to

trammel on the trust and fair-dealing (A-64) of Appellant,

unabashedly requests this Court to ignore a four-square

binding precedent, as the Mississippi Supreme Court did

below. Dahnke-Walker Milling Co. v. Bondurant, 257

U.S. 282 (1921). Defendan*, who appears in this Court with

the unclean hands of a contr..ct breacher, has the effrontery

straight -facedly to urge this Court to uphold his claim be-

cause of the State of Mississippi's alleged interest in pro-

tecting against fraud. This is nothing but bald dissimula-

tion. Unheeding of his own long-run interests, insensitive

to the dire hardships imposed on o‘hers, unconcerned

about the impact on federal policy, and uninhibited by con-

siderations of fidelity to an integrated national marketplace,

defendant asks this Court to overrule, or re-interpret,

explicit precedent in order to support his position,

_ The Dahnke-Walker doctrine, however, is as valid

today as it was in 1921. Asa matter of law, it stands on

a solid foundation, and as a matter of policy this is an

inappropriate case in which to erode its holding. Dahnke-

Walker held that a state cannot require a foreign corpora -

tion to qualify to do business when transactin® interstate

commerce, and "[t]he purchase of goods by a foreign

corporation for shipment to another state constitutes inter -

state commerce, and the commerce includes the purchase

quite as much as it does the transportation,"' 17 W.

Fletcher, Cyclopedia Corporations 373-74 (1960) (footnotes

omitted)... Dahnke-Walker Milling Co. v. Bondurant,

257 U.S. 282, 290 (1921). The principle established pro-

tects interstate commerce from parochial state regulations

that could fragment the national. marketplace; it guarantees

that no state can "impede an out-of-state seller's access

to the state market. . ."" Eli Lilly and Co. v. Sav-on-

Drugs, 366 U.S. 276, 284 (1961) (Harlan, J., concurring),

Under Dahnke-Walker, states are unable to require regis-

tration, certification or Ticensure as a precondition for

transacting ‘interstate commerce. That rule is as sound

today as it was in 1921,

This doctrine has stood the test of time and spawned

widespread development of commercial relationships in

reliance on it. Only under the most compelling or equita -

ble circumstances should it be eroded, Cf. Flood v. Kuhn,

407 U.S. 258 (1972); State Bd. of Insurance v. Todd Ship-

yards, 370 U.S. 451, 456-57 (1962); Davis v. Dept. of

Labor, 317 U.S. 249, 258-59 (1942) (Frankfurter, J.,

concurring). Congress has adopted terminology similar

_ to that in Dahnke-Walker with specific reference to cotton,

7 U.S.C. §2101, § 1341. And indeed the regulatory scheme

of the Model Business Corporation Act, from which the

;

Mississippi laws are adopted, Ross Construction Co. v.

V.U.M. and M. Credit Corp., 214 So, 2d 822, 826-27

(1968), responds to the regulatory framework and limita -

tions establislied in Dahnke-Walker, exempting interstate

transactions from state qualification requirements. See,

Model Business Corporation Act Annot. 2d ed. § 106 (and

comment 4.05); § 124 (1971). Actually, since the decision

in Dakrke-Walker, the severe penalty imposed for failure

to qualify — inability to maintain an action in a state court

—has become less important as this court has narrowed

due process limitations on obtaining service of process

and jurisdiction on foreign corporations, See International

Shoe Co. v. State of Washington, 326 U.S. 310 (1945)

(enunciation of minimum contacts doctrine); Note,

Foreign Corporations: The Interrelation of Jurisdiction

‘and Qualification, 33 Ind. L. J. 358, 376 (1958).

Also, the Mississippi penalty statute here under re-

view, Miss. Ccde 1942 Ann. §5309-239, is an especially

draconian regulation since, unlike the Model Act, it does

not incorporate a curative provision. Section 124 of the

Model Act bars a foreign corporation from maintaining an

action "until such corporation shall have obtained a certifi- ~

cate of authority.'’ But Mississippi declined to include

that saving feature in its adaptation-of the Model Act.

Under the Model Act, Allenberg could maintain this action

because it obtained a certificate of authority to do business

in Mississippi shortly after the Mississippi Supreme

-Court's ruling in this case. Motion to Dismiss or Affirm

at B-12. oe

Under Mississippi law a foreign corporation is precluded

from suing to enforce a contract right unless it had quali-

fied to do business at the time of the transaction. Cone

Mills Corp. v. Hurdle, 369 F. Supp. 426, 432 (N.D.

Miss. 1974); Parker v. Lin-Co Producing Co., 197 So.

2d 228, 230(Miss. 1967). Thus, Allenberg's good faith

effort at compliance is unavailing here. While this Court

has upheld statuies defying access to state courts by

foreign corporations in cases where intrastate activities

were involved, Eli Lilly and Co. v. Sav-on-Drugs, 366

U.S. 276 (1961), and where the company has localized its

business operations so as to be indistinguishable from a

domestic corporation, Union Brokerage Co. v. Jensen,

322 U.S. 202 (1944), the consequences of those decisions

were mitigated because both New Jersey, 366 U.S. at 277,

and Minnesota, Union Brokerage Co.. v,. Jensen,9N.W.

2d 721, 724(Minn. 1943), had saving provisions, allowing

suit upon subsequent qualification, Moreover, within the

past five years or so, this Court has recognized the funda -

mental nature ofa party's access to a judicial forum.

See, e.g., Boddie v. Connecticut, 401 U.S. 371 (1971).

This recognition underscores the significant effect the

penalty provision has and its interference with interests

this Court has deemed of basic importance.

The Mississippi penalty is therefore unusually and un-

necessarily severe and presents an especially poor case

for retrenchment from the Dahnke-Walker standard. In

Mississippi, retroactive modification of Dahnke-Walker

would be extraordinarily disruptive, Cone Mills v. Hurdle,

369 F. Supp. at 429 and reward breachers of valid con-

tracts with windfall pecuniary gain at the expense of those

who in good faith relied on settled judicial doctrine, which

indirectly had the imprimatur of Congress in its cotton

legislation and of the draftsmen of the Model Business

Corporation Act. This result would be especially in-

felicitous since the state of Mississippi's interests are

now adequately served by broad jurisdictional legislation,

described infra.

Re Fer 4 mes

Moreover, withdrawal of a judicial remedy for a foreign

corporation trying to enforce a contract made in interstate

commerce may promote dubious extra-judicial acitivity.

A non-qualified foreign corporation under Mississippi law

can defend a lawsuit; it just cannot maintain one. Asa

result, were a prospective purchaser by s¢lf-help to gain

possession of the goods contracted for it would have the

legal authority to retain them under the terms of the con-

tract in defending a suit. This means that in the present

case, if Allenberg had resorted to self-help to gain pos-

session of Pittman's cotton, perhaps removing the picked ©

cotton from temporary storage ricks on the farm, Allen-

berg could have asserted its legal rights under the con-

‘tract. | This Court has indicated its unwillingness to pro-

mote extra-judicial self-help remedies in commercial _

transactions, but upholding the Mississippi court herein

would bring about that result. Cf. Mitchell v. W. T.

Grant Co., 42 U.S.L.W. 4671, 4677(U.S. May 13, 1974).

While this Court undoubtedly can and often has reviewed

‘ constitutional doctrine in light of experience or an altered

historic environment, Mitchell v. W. T..Grant Co., 42

U.S.L.W. 4671, 4682 (U.S. May 13, 1974) (Stewart, J.,

dissenting), it has been "loath" to overturn Commerce

. Clause cases which have set a pattern of commercial

practice, explicitly or implicitly accepted by Congress

and relied on by the commercial interests involved. See

Flood v. Kuhn, 407 U.S. 258, 283-84 (1972); State Bd.

of Insurance v. Todd Shipyards, .370 U.S. 451, 457 (1962).

This Court should be particularly wary of overturning a

course of trade that has proven so successful, and is so

vital to a smooth functioning market in cotton and other

raw agricultural commodities. Chief Justice Burger, in

deferring to a forum selection clause in an international

contract, pointedly has observed that the expansion of

American business "will hardly be encouraged" if "solemn

contracts" are not given effect by the courts. M/S Bremen

'v. Zapata Off-Shore Co., 407 U.S. 1, 9(1972). This

deference to precedent is all the more warranted when the

equities of the specific case are taken into account. ‘This

contract

"was made in an arm's-length negotiation by experienced

and sophisticated businessmen, and absent some com-

pelling and countervailing reason it should be honored

. by the parties and enforced by the courts. . . There

are compelling reasons why a freely negotiated private

international [or interstate] agreement, unaffected by

fraud, undue influence, or overweening bar gaining

power, such as that involved here, should be given full

effect."

M/S Bremen v. Zapata Off-Shore Co., 407 U.S. at 12-13.

The claim by Appellee Pittman is hardiy the compeiling

circumstance that would justify wholesale re-examination

or erosion of the Dahnke-Walker rationale. On the con-

trary, developments subsequent to Dahnke-Walker rein-

force the wisdom of its doctrine in facilitating commerce

while encouraging states to promote their legitimate inter -

ests in less intrusive ways. Accordingly, because it is

sound and because no adequate reasons for re-evaluation

exist, this Court should be guided by its venerable precedent?

3 amicus recognizes that Dahnke-Walker was decided in an era when

substantive due process was at its peak, This Court recently has rejected

that approach particularly in areas of economics and welfare. See North

Dakota State Bd. of Pharmacy v. Snyder's Drug Stores, Inc., 42 U.S.L. W.

4035, 4038-39.(U.S, December 5, 1973); Ferguson v. Skrupa, 372 U.S.

726 (1963). But this disavowal of earlier substantive due process cases

does not control Commerce Clause precedents. The Court has allowed

greater leeway for state activity tinder the police power where the actions

involve intrastate affairs than when the federal interest in interstate com-

merce is involved. See Bibb v. Navajo Freight Lines, Inc., 359 U.S.

520, 529 (1959); Compare Powell v. Pennsylvania, 127 U.S. 678 (1888)

(Continued on following page)

‘MAASAI ALLEL ate ei ay

oy a ae

at NEARER Tah AE et

A. Méssissippi's Regulation of Foreign Corporations

Several observations about the Mississippi statutory

framework are germane. First, as previously noted,

the Mississippi corporate statutes are based generally on

the Model Business Corporation Act. Section 5309-239,

the penalty provision regarding transacting business with-

out a certificate of authority, draws heavily from section

124 (formerly section 117) of the Model Business Corpora -

tion Act; but there is one mafor and extremely significant

difference: the Model Act has an explicit curative provi-

sion so that a foreign corporation is barred from maintain -

ing an action only until such time as it obtains a certificate

of authority. The Mississippi statute disallows subse -

quent cure by qualifying to do business (see Cone Mills

Corp. v. Hurdle, 369 F. Supp. at 431-32; Parker v. Lin-

Co Producing Co., 197 So.2d 228, 230 (Miss. 1967); ob-

viously the chilling effect and possible disruption of such

a provision on the free flow of interstate commerce is

strikingly acute. .

Second, the exception, when interstate commerce is

being transacted, to the certificate of authority require -

ment is a legislative response to a constitutional mandate.

That is, "it would be unrealistic to conclude the interstate

commerce exception was enacted as a voluntary exercise

of legislative grace. It is a recognition of a constraint

imposed upon state power by the Commerce Clause."

(Continued from preceding page)

(Due Process Clause does not bar state from prohibiting production and sale

of cleomargarine) with Schollenberger v. Pennsylvania, 171 U.S, 1, 15-

17 (1898) (Commerce Clause bars state from prohibiting the flow of un-

colored oleomargarine into the state from another state). This reflects

both the different character of the federal interest in due process and com-

merce cases and the concomitantly different role necessarily played by the

Court in these kinds of cases. See Southern Pacific Co. v. Arizona, 325

U.S. 761, 767 (1945).

ba Lad

Cone Mills Corp. v. Hurdle, 369 F. Supp. at 432. Section

5309 -221(e) derives from and was enacted to satisfy a con-

stitutional duty not to impose preconditions on a foreign

corporation's access to local markets in transacting inter -

state commerce. “This point is further elaborated, with

citations, in the section on jurisdiction over hybrid state

laws. ~

Third, the severe penalty section in the Model Business

Corporation Act, and the even more stringent penalty pro-

vision in the Mississippi Act, barring access to state °

courts to non-qualified foreign corporations, are ‘'de-

signed to enable Mississippi citizens to seek necessary

judicial redress locally by encouraging ‘foreign’ corpo -

rations transacting business in Mississippi to make them-

selves amenable to process in this state." Cone Mills

Corp. v. Hurdle, 369 F. Supp. at 431. This rather severe

penalty for not qualifying can only be understood in light

of early doctrines governing personal jurisdiction over

foreign corporations.

Traditionally, there have been two bases of personal

jurisdiction over foreign corporations: actual consent,

normally manifested by compliance with a state qualifica-

tion statute; and engaging in sufficient activity within the

state to establish a jurisdictional basis. Note, Foreign

Corporations: The Interrelation of Jurisdiction and Quali-

fication, 33 Ind. L.J. 358 (1958). It was quite under-

standable why states would impose heavy sanctions on

foreign corporations which did rfot obtain a certificate of

authority (and thereby qualify to do business); such quali-

fication subjected foreign corporations to state jurisdiction

through consent. A foreign corporation could choose not

to qualify, but the severe penalty in case it guessed wrong

—not being able to maintain an action in state courts —

was an incentive to qualify and thereby subject itself com-

prehensively to state jurisdiction.

SVP SRL BARR Ha we

This rationale sheds light on the reason for these pen-

alty provisions. They were not designed as vehicles for

windfall gain for fortunate defendants, but rather as means

for subjecting foreign corporations to suit and accounta-

bility in the courts of the state. Viewed in this light, the

customary inclusion of a currative provision becomes

understandable since the state's objective is corporate

responsibility to the citizens of the state, not abrogation

of legitimate obligations by state residents to foreign

corporations.

)

coun? >, Updan piads Sites

This Court's decision in Internationl Shoe Co. v. State

of Washington, 326 U.S. 310(1945) discarded the "doing

business — presence or implied consent" rationale for

jurisdiction "and its mechanistic determinations in favor

of a more flexible and realistic jurisdictional basis of

reasonableness in view of the activity within the state."

Note, Foreign Corporations: The Interrelation of Juris-

diction cnd Qualification, 33 Ind. L.J. 358, 373 (1958).

Chief Justice Stone described "certain minimum contacts"

within the state ''such that the maintenance of suit does

not offend ‘traditional notions of fair play and substantial

justice.""" 326U.S, at 316. Relevant factors included

the character of the corporation's activities and not just

their quanti.,.

Hebe oat:

In the subsequent case of Perkins v. Benquet Consoli-

dated Mining Co., 342 U.S. 437 (1952), this Court indi-

cated an expansion \n the constitutionally permissible ex-

tent of state jurisdiction over a non-qualified foreign

corporation. International Shoe reduced the limitations

on the basis of and) Perkins reduced the limitations on the

extent of jurisdiction over non-qualified foreign corpora -

tions, and these jurisdictional criteria are now embodied

in the Restatement, 2d of Conflict of Laws. See sections

42, 52, and 43-51} They are also reflected in the juris-

\ dictional and service of process statutes of Mississippi.

= : . i= ~~

Mississippi corporate law allows service of process

on foreign corporations even if they have not qualified to

do business in the state. Section 5309-230 provides for

service of process on foreign corporations that are au-

thorized to transact business, but the last sentence notes

that "Nothing herein contained shall limit or affect the

right to serve any process, notice or demand, required

- or permitted by law to be served upon’a corporation in any

other manner now or hereafter permitted-by law." \ And

§ 5345 states that "Any corporation claiming existence

under the laws of any other state ..., found doing business

in this state, shall be subject to suit here to the same ex-

tent that corporations of this state aré...."* Section 5346

then sets out the basis for serviee of process on foreign

corporations which do not qualify to do business in Mis-

sissippi pursuant to 5309-221, -225, and -226. Section

5346 provides in pertinefit part as follows:

Process may be served upon any agent of such foreign

corporation found within the county where the suit is

brought, no matter what character of agent such person

may be; and in the absence of an agent, it shall be suf-

ficient to serve the process upon any person, if found

within the county where the suit is brought, who repre-

sented the corporation at the time of the transaction out

of which the suit arises took place, or if the agency

through which the transaction was had be itself a corpo-

ration, then upon any agent of that corporation upon

whom process might have been served if it were the

defendant.

In the instant case plaintiff was represented in its deal -

ings with all defendants herein by a Mr. Hayward Coving-

ton. Mr. Covington has a residencé in Marks, Mississippi,

and by the terms of § 5346 plaintiff Allenberg could have

been served, in case of any breach on its part, through

SES ACRS METS

HSM LACE A iad HAE: ANA AAR NR RII ASG TUR lB a a a a i oe _

Se ar Oe ae

service on Mr. Covington. Section 5346 is perfectly ade-

quate to assure cotton growers their day in court in case

of a prospective breach by a cotton purchaser. See also

§ 1437, Mississippi's long arm statute. The supposed

protection against fraud ernbodied in § 5309-239, the bar

to access to Mississippi courts, is quite clearly overkill

in the context of the cotton producer/cotton purchaser re-

lationship. Section 5346 offers a mutch less intrusive

means of protecting Mississippi farmers against fraud by

foreign corporate purchasers. P

_ The diminished limitations on the exercise of state

jurisdiction over foreign corporations have spawned vastly

expanded jurisdictional statutes not oniy in Mississippi.

but elsewhere, as reflected by the 1971 edition, Restate -

ment 2d of Conflicts. It is therefore fair to conclude that

“insofar as qualification sought jurisdiction through

actual consent and sought to induce compliance by a

negative, self-enforcing, no-suit sanction, the present

rules and the results thereunder are without reason.

A non-complying foreign corporation is denied access

to the courts through the application of a no-suit sanc-

tion on the ground that by its failure to qualify it has

not made itself available to the local forum. But in

truth, if the state or a private party plaintiff sought to

bring an action against the corporation, jurisdiction

could be had. . . The result is that defendants to

actions brought by corporate plaintiffs are often re-

lieved of their just obligations, a result that should be

permitted only if necessary to serve a greater public

interest. Such justification is lacking now and perhaps ©

always has been."

Note, Foreign Corporations: The Interrelation of Juris-

diction and Qualification, 33 Ind. L.J. 358, 376 (1958).

The existence of a satisfactory alternative to the penalty

provision——an alternative which has a much less harmful

effect on interstate commerce and does not chill such

commerce — is relevant in determining the constitutional

validity of the Mississippi statute in this case. See gen-

erally Pike v. Bruce Church, 397 U.S. 137, 142 (1970)

(The extent of the burden on interstate commerce that will

be tolerated depends in part on whether the state's, inter -

ests "could ‘be promoted as well with a lesser impact on

interstate activities."'); Dean Milk Co. v. Madison, 340

U.S. 349, 354 (1951) (Economic barriers to interstate

commerce cannot be erected under the police power "if

reasonable nondiscriminatory alternatives, adequate to

conserve legitimate local interests, are available.")

The existence of alternate means of protecting against

fraud, by serving process on a foreign corporation's agent,

or through the long-arm statute, highlights exactly what is:

at stake ini this litigation. Defendant seeks not to vindicate

the interests of the state in guarding against fraud. That

is a masquerade, a smokescreen, a sham. Defendant,

rather, risks undermj ing the national system of commerce

so necessary to the economic welfare of the nation, not for

the noble purpose of defending the interests of Mississip-

pians against overreaching foreign corporations but for

self-aggrandizement, pure and simple. There is and can

be no inference of wrongdoing on the part of plaintiff in

this transaction; but if defendant should claim some griev-

ance against plaintiff, he has his remedy in the courts of

the state of Mississippi pursuant to § 5345 and §5346 or

§ 1437. Clearly, it is not a fair day in court that defend-

ant seeks but rather an absolute roadblock to an impartial

hearing on the merits. Indeed, on that hearing on the

merits, the trial court has-already ruled against defend-

ant. This is not protection against fraud; it is sheer

venality.

‘

nate bik Gp Be RAE

ewes

B. The Issues Under the Commerce Clause

The Commerce Clause has long been viewed as a major

source of federal power. Since the days of the New Deal,

the courts have found increasingly broad Congressional

authority to protect and promote an integrated national

market. See, e.g., National Labor Relations Board v.

Jones &Laughlin Steel Corp., 301 U.S. 1 (1937); Wickard

v. Filburn, 317 U.S. 111 (1942); Heart of Atlanta Motel

v. United States, 379 U.S, 241 (1964); Katzenbach v.

MgClung, 379 U.S. 294 (1964). But as this Court noted

in Wickard, it was Chief Justice John Marshall who @e-

scribed the federal commerce power with a "breadth

never yet exceeded."" 317U.S, at 120. Itwas Marshall

who held an organic concept of commerce, and that view

has held pre-eminence for at least thirty-five years. Cf.

United States v. South-Eastern Underwriters Assn., 322

U.$. 533, 547 (1944) (Insurance contracts, though local

in nature, are part of a "chain of events which becomes

interstate commerce."’)

That the Commerce Clause grants extensive power to

the federal government, however, has not precluded all

state exercise of regulation that might have some bearing

on commerce. Since the decision in Wilson v. Black-

Bird Creek Marsh Co., 27 U.S. 245 (1829), this Court

has recognized that there is some room for legitimate

state regulatory power, even where there is an incidertal

effect on interstate commerce. See Cooley v. Board of

Port Wardens, 53 U.S. 299 (1851). Of course, where

Congress chooses to exercise its authority, inconsistent

state legislation affecting commerce must fall. See gen-

erally Southern Pacific Co. v. Arizona, 325 U.S. 761,

767 (1945). But even in the absence of Congressional

action, state legislation will be held invalid under the

negative implication of the Commerce Clause,where there

is a need for national uniformity or where the burden on

commerce is direct or substantial. See Cooley; Southern

. Pacific, Pike v. Bruce Church, 397 U.S. 137 (1970). As

the Court stated in Southern Pacific, 325 U.S. at 769:

For a hundred years it has been accepted constitutional

doctrine that the Commerce Clause, without the aid of

Congressional legislation, thus affords some protection

from state legislation inimical to the national commerce,

and that in such cases, where Congress has not acted,

this Court, and not the state legislature, is under the

Commerce Clause the final arbiter of the competing

demands of state and nationa] interests.

See also Freeman v. Hewit, 329 U.S. 249, 252 (1946).

In analyzing any particular state statute in light of the

Commerce Clause, the Court will examine both the nature

_and the effect of the burden on commerce. Southern

Pacific, 325 U.S. at 770; Pike, 397 U.S. at 145. It will

determine whether Congress has spoken on the issue since

Congress has the undoubted power to redefine the distribu -

tion of power over interstate commerce." Southern

Pacific, 325 U.S. at 769; cf. Union Brokerage Co. v.

Jensen, 322 U.S. 202, 209 (1944). It will determine

whether uniformity of regulation is necessary, for if it is

then state power must yield. See Bibb v. Navajo Freight

Lines, 359 U.S. 520(1959). It will examine the exist-

ence of alternatives available to the states that have a .*

lesser impact on interstate commerce. See Pike, 397

U.S. at 14; Dean Milk Co. v. Madison, 340 U.S. 349,

354 (1951); Parker v. Brown, 317 U.S. 341, 367 (1943)

(state's measure "appropriate to the end sought"); Duck-

worth v. Arkansas, 314 U.S. 390, 393, 396 (1941) (statute

“reasonably necessary" to achieve state's goals). And

finally, even if the effect of the state law on commerce is

< i

RES BR: DK TRON Bet

only incidental, the Court will balance the local and na-

tional interests at stake and if compelling allow the state

law to stand. Pike at 146.

1. Analytical Framework

It should be clear that a basic threshold question in the

_Commerce Clause analysis is the existence of interstate

commerce in the federal constitutional sense. Under

Commerce Clause doctrine, however, the existence of

interstate commerce_does not of itself end the analysis

since some state laws can have an effect on commerce

and still pass constitutionai muster. See, e.g., Huron

Cement Co. v. Detroit, 362 U.S. 44(1960). A second

analytical step is therefore necessary before a statute can

be declared either constitutional or unconstitutional under

the Commerce Clause.

The Mississippi statute establishes an exemption for

transactions in interstate commerce to the general quali-

fication requirement for foreign corporations. Miss.

Code 1942 Ann. §5309 -221(e). In the section on juris-

diction, amicus has argued that the Mississippi law is a

hybrid, incorporating the federal constitutional definition

of interstate commerce into state law. ‘This view was

adopted by the federal district court in Cone Mills Corp.

v. Hurdle, 369 F. Supp. 426, 432 (N.D. Miss. 1974).

Under this approach, it would be appropriate for this Court

to decide only the narrow question whether the transaction

involved is in interstate commerce. A finding here that

interstate commerce is involved would dictate a reversal,

with the possibility of a remand to allow the Mississippi

Court to re-construe the statute in light of this Court's

guidance on the federal constitutional meaning of inter -

state commerce. Cf. Perkins v. Benquet Consolidated

Mining Co., 342 U.S. 437(1952); United Air Lines v.

Yep Dm

Mahin, 410 U.S. 623, 630-31 (1973). In Cone Mills Corp.,

Judge Smith concluded that the state law incorporated the

federal concept of interstate commerce; he independently

found that Allenberg (a plaintiff in a case consolidated with

Cone Mills Corp.) conducted its cotton merchandising

business in interstate commerce, and found as a matter

of state law that Allenberg was therefore exempt from

the qualification requirement under Mississippi law.

This Court could likewise restrict its analysis at this

time to the question whether this transaction was in inter -

state commerce, without reaching the ultimate question

whether such interference transgressed the power of the

State as limited by the Commerce Clause.

2.” Defining Interstate Commerce Under Article I,

Section 8

The threshold question in Commerce Clause cases is

whether or not the subject of regulation involves or affects

“interstate or foreign commerce. This is true both when

the issue is Congressional power and state police power.

If a given activity is in intrastate commerce and has no

effect on interstate commerce, then the federal govern -

ment has no legislative authority pursuant to the Commerce

Clause or the necessary and proper clause. For this rea-

son, the courts since at least 1937, when the Jones and

Laughlin Steel case was decided, 301 U.S. 1 (1937), have

consistently construed the scope of interstate activity and

concern broadly. Ina country whose eccaomic prosperity

has depended on the preservation of a smooth national

market, unencumbered by localized barriers to the flow

of trade, it is axiomatic that the scope of federal power

must be pervasive. Especially in a highly industrialized

and interdependent economy, the need for defining federal

commerce interests broadly is critical 4

At least since the time of Swift and Co. v.. United States,

196 U.S. 375 (1905), a federal antitrust action against a

meatpackers' conspiracy, the Supreme Court has recog-

nized that activities nominally conducted within a single

state can have a significant impact on interstate commerce

and are therefore subject to federal regulation. Cf.

Houston East and West Ry. v. United States, 234 U.S.

342 (1914) (Shreveport Rate Case). And in Chicago Board

of Trade v, Olsen, 262 U.S. 1, 40 (1923), in upholding

the validity of the Grain Futures Act, the Supreme Court

noted the importance of the question of price in trade

among the states: "Sales of an article which affect the

country-wide price of the article directly affect the

country-wide commerce in it."" Cf. Lemke v. Farmers'

Grain Co., 258 U.S, 50 (1922).

- Perhaps the most graphic illustration of the Court's con-

cern with aggregate effects is the caseof Wickard v. Fil-

burn, 317 U.S, 111 (1942), which upheld the application

of the Agricultural Adjustment Act of 1938 to home-grown

and home-consumed wheat. Pursuant to the Act, federal

authorities regulated production of wheat even if intended

for consumption on the producer's farm. Subjected to a

penalty for producing wheat in excess of the quota allotted

to him, appellee claimed that his crop was not within the

4 perhaps no single piece of federal legislation so clearly indicates the

modern economic interdependencies as the wage and price controls under

which this country lived for the past two years, These national regulations

cover in minute detail what at one time might have been considered purely

local activities, The reason for such comprehensive regulations at the

national level is that inflation nationwide can be affected by economic

activity at all levels, ‘ Aggregate demand and aggregate supply have a

determinative impact on the national marketplace, and therefore the indi-

vidual elements cf the national market, taken collectively, have a nation-

wide effect.»

NOEL VERGE AA’ VAY TO ONE IMRT MRM A A DALAL OND LEE, ENE TE LMA NYE RIE IE LOE IG PIRI AS PROT SE YING

a |

PRA EIEIO AIGA ILT CPO PLATE LPM AT LT CLIN I EID HN La eran ew i" —_

reach of federal power because it was consumed on his

farm. | The Court held that the home-consumed crop

could be regulated by Congress, finding that a home-

cons:med product like wheat has an effect upon the price

and market conditions for wheat. Even if never marketed,

it supplies a need of the producer that would otherwise be

met by purchases in the market. ''Home-grown wheat in

this sense competes with wheat in commerce,."" 317 U.S.

at128. To similar effect is United States v. Wrightwood

Dairy Company, 315 U.S. 110 (1942), wherein this Court

upheld a federal regulation of the price of milk produced

and sold entirely within Illinois. Cf. United States v.

Rock Royal Co-op, 307 U.S, 533, 568-569 (1939),

The importance of allowing broad Congressional au-

thority over commerce cannot be stressed too greatly,

Yet, if in a situation such as this case’, where the ques -

tion is the validity of a state law, the Court defines the

scope of the Commerce Clause interests narrowly, then

it must also at the same time necessarily circumscribe

Congressional power. Since Congress can only regulate

activities in or that affect interstate and foreign commerce,

a finding that no interstate commerce is involved or af-

fected implicitly means that Congressional regulatory

power is somewhat diminished. But the broad federal

regulatory activity with regard to farm products —legis-

lation consistently upheld by the courts — indicates the

paramount federal concern with raw agricultural produc-

tion and marketing, an interest that is threatened by the

lower court's action herein.

At this point it will be helpful to review some of the

specific characteristics of the cotton industry. The cot-

ton market-is a “complex of interrelated, economic forces

and institutional facilities which in operation serves to

equate the demand for and the supply of cotton in terms

EE moe i Se Can

LAR OLY HM eye amar

58 / |

of prices." A. Cox, Cotton: Demand, Supply, Merchan-

dising 1 (1953). The various local trading units and cot-

ton exchanges are not self-contained marketg but part of

an overall cotton marketing system. Jd. e relevant

area for defining the cotton market is thetegritory over

which the economic forces and institutional facilities oper -

ate to establish effective price competition. ‘The area of

the market for cotton is world-wide, though the facilities

for effecting the bulk of the transactions are located in a

comparatively few well-known exchanges with world-wide

memberships and wire connections." Jd. at1-2. Because

the costs of communication and transportation are relatively

low, there is international competition in the world market-

place and a "definite price relationship” among all units

of the world market. Thus, it can be accurately con-

cluded that there is a "world price and world market for

all cotton as well as for each major growth (such as

American). Id. at2.,

In recognition of the organic nature of interstate com-

merce and of the need:to define interstate commerce as a

dynamic process, both"Congress and the Supreme Court

have given their approval to the "stream of commerce"

concept, For example in the Packers and Stockyards Act,

Congress defined interstate commerce as follows: F

es [A] transaction in respect to any article shall be

considered to be in commerce if such article is part of

that current of commerce usual in the livestock and

meatpacking industries, whereby livestock [et al]...

are sent from one State with the expectation that they

will end their transit, after purchase, in another, in-

cluding ... all cases where purchase or sale is either

for shipment to another State, or for slaughter of live -

stock within the State and the shipment outside the State

of the products resulting from such slaughter.

“¢

PRANAB AGN LINE RTE pL RRM OREN Henn oIe via” sony Moony ONDA LES MEPL RN A YOR a LRN

7U.S.C, §183. In Stafford v. Wallace, 258 U.S. 495

(1922), the Supreme Court upheld the Act, relying upon

the stream of commerce concept as developed in Swift and

Co. v. United States, 196 U.S, 375(1905). See also

Lemke v. Farmers' Grain Co., 258 U.S, 50 (1922); -

Dahnke-Walker Milling Co. v. Bondurant, 257 U.S, 282

(1921); Eureka Pipe Line v. Hallanan, 257 U.S, 27%,(1921).

A similar broad view is reflected in the Congressional

definition of interstate commerce in the Commodity Ex-

change Act 7 U.S,C, §3, which is an almost identical re -

statement of the definition contained in the Packers and

Stockyard Act, But of most direct significance to the

issues in the instant case is the very recent Congressional

declaration of policy with specific reference to cotton,’ in

the Cotton Research and Promotion Act, 7 U.S.C, §2101:.

Cotton is the basic natural fiber of the Nation. It is

produced by many individual cottongrowers throughout

the various cotton-producing States of the Nation?*

Cotton moves in large part in the channels of interstate

and foreign commerce and such cotton which does not

move in such channels directly burdens or affects inter-

state commerce in cotton and cotton products. All

cotton produced in the United States is in the current of

interstate or foreign commerce or directly burdens,

obstructs, or affects interstate or foreign commerce

in cotton or cotton products. The efficient production

of cotton and the maintenance and expansion of existing

markets and the development of new or improved mar -

kets and uses is vital to the welfare of cottongrowers .

and those concerned with marketing, using, and proc-

essing cotton as well as the general economy of the

Nation. (Emphasis supplied).

‘

Ve SL ob. SAA RS

Lass EARLE MEE NAD RC at

OGY ARP RIERA AEE LRT

This explicit Congressional finding that all cotton produced

in the United States is in interstate commerce or directly

affects it is a reaffirmation of the realities of the cotton

trade as described by Professor Cox in his previously

quoted work. As the Supreme Court has often stated,

this Congressional statement is entitled to great judicial

deference, see e.g., Southern Pacific Co. v. Arizona,

supra, In Cone Mills Corp., supra, the Court specifi-

cally found that "[t]here is no significant amount of cotton -

milling in Mississippi .... As a practical matter in the

cotton industry, Mississippi cotton almost invariably has

an out-of-state destination." 369 F. Supp. at 436.

The principles of defining interstate commerce that

have evolved in deciding the scope of federal power have

likewise been applied by the courts in cases like the pres-

ent one where the negative implications of the Commerce

Clause are atissue. That the standards for determining

whether interstate commerce is involved are interrelated

1egardless of whether the question arises .imthe context

of a federal statute or a state law is made clear by cross-

citations. For example, in United States v. Rock Royal

Co-op, 307 U.S. 533 (1939), a challenge to the validity of

a federal regulation of the price of milk sold within a state,

the Court rejected the contention that Congress was power -

less to regulate such a local transaction. Specifically

citing Dahnke-Waltker Milling Co. v. Bondurant, 257 U.S.

282, 290, 291 (1921) and Lemke v. Farmers' Grain Co.,

258 U.S. 50, 54 (1922), cases invalidating state laws as

Pas a legislative finding, Congress has also determined that “American

cotton is a basic source of clothing and industrial products used by every

person in the United States and by a substantial number of people in foreign

countries, American cotton is sold on a world-wide market and moves

from the places of production almost entirely in interstate and foreign com-

merce to processing establishments located throughout the world ...."

7 U.S.C. §1341.

SO NS RL CTD

violations of the Commerce Clause, the Supreme Court in

Rock Royal held that interstate commerce was involved

since "where commodities are bought for use beyond state

lines, the sale is part of interstate commerce." 307 U.S.

at 568-69 & n. 38. When interstate commerce was found,

' federal power followed.

The Supreme Court's decision in Dahnke-Walker on the

interstate commerce issue is directly on point here and

should be controlling. In the present case Allenberg, a

cotton merchant, contracted with the defendant through a

local agent for the delivery of cotton at the time of harvest.

Under the terms of the contract and pursuant to the normal

course of dealing, the picked cotton would be ginned, sepa -

rating the seed and the hull from the cotton, and pressed

into bales. Under the terms of the contract, the cotton

is then to be placed in a warehouse, which would issue a

negotiable warehouse receipt. The seller then would de-

liver the warehouse receipt and the U.S.D.A. classifica -

tion cards to the local broker, who would pay the farmer

and draw a draft on a Memphis bank for reimbursement

(A-53, 68). Samples of the bales of cotton were to be

sent by. the farmer both to the U.S. Department of Agri-

culture for classification and to Allenberg at its office in

Memphis (A-7). Under the contract, if there is a delay

in the process of issuing the negotiable receipt,. then the

responsibility for paying warehouse charges remains with

the seller. This means that the risk of loss stays with

the seller until the receipt is transferred to Allenberg,

or until the cotton is invoiced to Allenberg (A-7, 94).

The cotton bought by Allenberg in Mississippi, includ-

ing Pittman's cotton, was all . purchased for shipment out-

side of Mississippi (A-78, 79, 96). The cotton purchased

by Allenberg from Pittman had already been obligated by

Allenberg to customers outside of Mississippi before this

a a Ra

2 fol cia HA ipl oil dla RB Pt RS hs ok OK A RS ‘

Pid ite cern ccareneminns nine tir® sgn BENE Aalak m NEad By Kelvr wee. tN

contract had been entered into. The Pittman cotton, in-

deed, was purchased for the purpose of satisfying part of

this obligation (A-79). The contract with Pittman was

typical in this regard of Allenberg's normal course of

dealing. All cotton purchased by Allenberg was shipped

in interstate commerce and obligated prior to the trans -

action to customers outside of Mississippi. It thus had

an ascertainable destination out of state at the time the

contract was made; "according to the general practice of

the industry, the commodity became a pért of interstate

commerce when it was purchased by Allenberg."' Cone

Mills Corp.. supra, 369 F. Supp. at 436-37.

In Dahnke-Walker a Tennessee corporation contracted

with a Kentucky farmer for the purchase of wheat through

a locally resident agent. Delivery of the wheat and pay-

ment were both to take place in Kentucky, and nothing was

stated expressly in the contract about the ultimate destina -

tion of the wheat although Dahnke-Walker intended to use

it in its mill located in Tennessee. Since the Tennessee

corporation had made other purchases of wheat in Kentucky,

the transaction was not a single isolated deal but part of

a course of trade.

As in the instant case, the farmer in Dahnke-Walker

claimed that the transaction was not in interstate commerce.

The Kentucky court sustained that view, finding that the

activity was intrastate commerce; it therefore held the con-

tract unenforceable by the Tennessee corporation, which

had not qualified to do business in Kentucky.. On appeal

the United States Supreme Court reversed, holding that

the transaction was in interstate commerce. It is note-

worthy that this Court heard reargument in the Dahnke-

Walker case, and decided a similar issue on that same day

in Eureka Pipe Line Co. v. Hallanan, 257 U.S. 265 (1921),

. 63

so it is clear that the Court gave special attention to the

important issue confronting it.

The facts and holding in Dahnke-Walker are on all fours

with the instant case. The Supreme Court expressly stated

that interstate commerce is "not confined to transportation

from one state to another, but comprehends all commer -

cial intercourse between different states and all the com-

ponent parts of that intercourse." 257 U.S. at 290. That

organic view of interstate commerce as a dynamic process

has been the predominant understanding of the concept and

has been followed undeviatingly since 1937. See Bruhn's

Freezer Meats v. United Siates Department of Agriculture,

438 F.2d 1332, 1339-40 (8th Cir. 1971). The Court in

Dahnke-Walker went on to hold, 257 U.S. at 290-91:

Where goods in one state are transported into another

for purposes of sale, the commerce does not end with

the transportation, but embraces as well the sale of

the goods after they reach their destination and while

they are in the original packages. [citations omitted]

On the same principle, where goods are purchased in

one state for transportation to another, the commerce

includes the purchase quite as much as it does the

transportation .. .

... In no case has the court made any distinction be -

tween buying and selling or between buying for trans-

portation to another state and transporting for sale in

another state, Quite to the contrary, the import of

the decisions has been that, if the transportation was

incidental to buying or selling, it was not material

whether it came first or last. (Emphasis supplied. )

The Dahnke-Walker standard for determining interstate

commerce was followed in Lemke v. Farmers' Grain Co.,

—_ 258 U.S. 50 (1922), where the Court invalidated a compre -

ar Set

Sethe ANGIE” aR Sa Gates ail Peer

Moa:

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Dicices PALER RE APOLLON ED ENLACE L IU Rit Bi

hensive North Dakota regulatory scheme for the purchase

of locally produced grain. Purchasers of grain in North

Dakota bought with the intent of shipping for resale in

Minnesota. The Court found that this out-of-state ship-

ment was the general course of business in the grain trade,

258 U.S. at 42, much as shipment of cotton out of Missis-

sippi is the usual course of business in the cotton trade.

Citing Dahnke-Walker, the Court in Lemke said: "That

such course of dealing constitutes interstate commerce,

there can be no question."" Jd. The Court reached this

conclusion even though it conceded that the grain could

have been diverted to a local market; it was enough for

the Court that such was not the ordinary course of busi-

ness. Id. at55. Cf. Eureka Pipe Line Co. v. Hallanan,

257 U.S. 265, 272 (1°21).

in Shafer v. Farmers' Grain Co., 268 U.S. 189 (1925),

the Court invalidated a new North Dakota law regulating

grain transactions. ‘The Court noted that the buyers made

and’ executed contracts within the stete, but that the wheat

was purchased for shipment out of sate as soon as grain

accumulated in carload lots. Finding that wheat was an

article of commerce and the "subject of dealings that are

nation-wide," the Court concluded that "[bjuying for ship-

ment, and shipping, to markets in other States when con-

ducted as before shown constitutes interstate commerce —

the buying being as mucha part of it as the shipping."

(Emphasis supplied) 268 U.S. at 198. Similarly, pur-

chasers of cotton in Mississippi, in the ordinary course

of their business, intend to ship outside the state, and in

this case Allenberg expected to ship out of state as soon

“ after acquiring the legal ability to do so as possible.

In Furst v. Brewster, 282 U.S. 493 (1931), the Court

gave further meaning to its interpretation of interstate

commerce. Invalidating a statute which operated much

Soo tee Y Ga ty SS TD

like the Mississippi statute in the present case, the Su-

- preme Court held that every negotiation, contract, trade,

and dealing between citizens of different states, which

contemplates and causes the importation from one state

to another, whether of goods, persons, or information,

_is a transaction in interstate commerce. Id. at 497-98.

It is clear that Allenberg contemplated the shipment of the

cotton it bought from Mississippi to its out-of-state cus-

tomers at the time of purchase and customarily effectuated

that interstate movement at the earliest possible time.

Subsequent decisions by this Court have reaffirmed the

breadth of the interstate commerce concept. For example,

in United States v. South-Eastern Underwriters Assn.”

322 U.S. 533 (1944), the Court found that insurance trans-

actions constituted interstate commerce: ”

"We may grant that a contract of insurance, considered

as a thing apart from negotiation and execution, does

not itself constitute interstate commerce .... But it

does not follow from this that the Court is powerless

to examine the entire transaction, of which that con-

tract is but a part, in order to determine whether there

may be a chain of events which becomes interstate com-

merce ... In short, a nationwide business is not deprived

of its interstate character merely because it is built

upon sales contracts which are local in nature. Were

the rule otherwise, few businesses could be said to be

engaged in interstate commerce."

322 U.S. at 547. While South-Eastern Underwriters in-

volved interpretation of federal antitrust legislation, its

decision on the interstate commerce issue very clearly

was intended to apply as a limitation on state power.

Furst v. Brewster, supra, one of the progeny of Dahnke-

Walker, was approvingly cited, 322 U.S. at 547 n. 26,

eee ave or |

and Chief Justice Stone pointed out that the majority hold-

ing did not find Congressional power because of the effect

on commerce but because "the contracts are themselves

interstate commerce." 322 U.S. at 570 (Stone, C.J.,

dissenting). The later case of State Bd. of Insurance v.

Todd Shipyards, 370 U.S. 451, 452 (1962), expressly af-

firmed the previous finding that the modern business of

insurance is "interstate commerce," with the implications

that that holding had as a limitation on state power. Cf.

Flood v. Kuhn, 407 U.S. 258, 282 (1972) ("Professional

baseball is a business and it is engaged in interstate

commerce.) «

And, in H. P. Hood& Sons, Inc. v. DuMond, 336U.S.

525 (1949), the Court invalidated a New York milk licensure

law because of the effect it had on interstate commerce.

Noting that "[olur system, fostered by the Commerce

Clause, is that every farmer and every craftsman shall

be encouraged to produce by the certainty that he will have

free access to every market in the Nation," the Court con-

cluded no foreign state through statute or regulation can

exclude such a person. "Likewise, every consumer may

look to the free competition from every producing area in

the Nation to protect him from exploitation by any."' 336

U.S. at 539.

The modern rule, developed from the cases discussed,

is that where one purchases goods in one state for trans-

portation to another, the interstate commerce transaction

includes the purchase as well as the transportation. If

the transportation is incidental to the buying or selling, it

is immaterial whether the transportation takes place before

or after the sale or whether delivery for transportation is

made to a common carrier, a private carrier, or to the

purchaser for transportation himself. Thus, for example,

when a seller of meat delivers to a purchaser at the plant,

ee RY SN CE

and the purchaser is to promptly transport the meat across

state lines, the sale itself is part of interstate commerce.

See Bruhn's Freezer Meats v. United States Department

of Agriculture, 438 F.2d 1332, 1339-40 (8th Cir. 1971).

The Eighth Circuit's decision in Bruhn's Freezer Meats ;

cites approvingly and relies heavily on both United States

v. Rock Royal Co-op, 307 U.S. 533, 568-69 (1938) and

Dahnke-Walker, indicating the continued vitality of the

interstate commerce concept as expressed in those cases.

The negotiations in this case, where the contract is part

of interstate commerce, are themselves interstate com-

merce. 17 W. Fletcher, Cyclopedia Corporations 318

(1960). And "the character of commerce does not depend

upon the place of final ratification of the contract." Id.

at 320. Indeed, Fletcher, far from negating the principle

in Dahnke-Walker, often restates its holding. For ex-

ample, he says that "[iJt is well settled that constitutional

and statutory provisions regulating the doing of business

in the state by foreign corporations do not apply to trans-

actions in interstate commerce. . .," citing Dahnke-

Walker. 17 W. Fletcher, Cyclopedia Corporations 589-

99 andn. 72 (1960). He notes elsewhere that the qualifi-

cation statutes ‘'are not applicable to foreign corporations

engaged in interstate or foreign commerce. . ., for if

construed as applicable to such corporations, the statutes

would be unconstitutional." Jd. at 504. And, citing

Sioux Remedy Co. v. Cope, 235 U.S. 197 (1914) and ter-

national Textbook Co. v. Pigg, 217 U.S. 91 (1910), Fletcher

concludes that with isolated exceptions a "foreign corpora-

tion cannot be denied the right to sue nor can conditions be

imposed on the right to sue, on a cause of action based on

a transaction involving interstate commerce..." Id.

at 405 andn. 45.°

SFletcher at one point states that qualification statutes do not apply to

foreign corporations doing interstate commerce. Then a Union Broker-

(Continued on following page)

“ 4 2 DA MRED re pag

s C

ee ees

Appellee's Motion to Dismiss or Affirm, at page 13,

quotes a portion of section 8415, to the effect that a pur-

chase is not interstate commerce where the transaction is

complete before interstate commerce begins. But Appellee

picks and chooses with remarkable discernment which sen-

tences of that section to cite. He omits the immediately

prior sentence, two subsequent sentences, and some rele-

vant footnotes. The full section reads as follows:

"The purchase of goods by a foreign corporation for

shipment to another state constitutes interstate com-

merce and the commerce includes the purchase

quite as well as it does the transportation.*” A mere

purchase in the state, however, without a shipment out-

side the state, does not constitute interstate commerce,”

and a purchase is not one in interstate commerce where

the transportation is complete before interstate com-

merce begins, and the purchase makes no provision as

to shipment to the foreign corporation outside the state?!

If there is no intention to take the property outside the

state, or to resell it outside the state, the transaction

is not one in interstate commerce,” although it is im-

material that a small portion of the goods is actually

resold within the state."°” The regular course of busi-

ness of the foreign corporation, in connection with such

purchases, as to shipment of purchases outside the

state, fixes and determines the interstate character of

the transaction.” The mere fact that the purchase is

—

(Continued from preceding page)

age Co. v. Jensen, 322 U.S, 202 (1944), he nctes that “there are indica-

tions that interstate commerce may no longer sei’e as a barrier to qualifi-

cation.” 17 W. Fletcher, Cyclopedia Corporations 387 (1960). This

statement reflects the understandable ambiguity left by Union Brokerage

case, discussed infra, but it was written before this court's clarifying de-

cision and limitation of that case in Eli Lilly and Co. v. Sav-on-Drugs,

366 U.S, 276 (1961). .

ny APN Re SAID

f.o.b. cars in the state does not prevent the purchase

from being one in interstate commerce.” Purchases

in the state by a branch office of the foreign corporation

are not transactions in interstate commerce.”®

Thus, Fletcher recognizes, citing Shafer, that the pur-

chase of goods by Allenberg for shipment out of Mississippi

is interstate commerce, and the commerce includes the

purchase as well as the actual transportation. In support

of this proposition, Fletcher cites Dahnke-Walker as ''a

leading case on this questior."" 17 W. Fletcher, Cyclo-

pedia Corporations 374 n. 491 (1960). Fletcher also notes,

as the court in Cone Milts Corp. did, that the regular pat-

tern of business practice with regard to such purchases

determines the interstate character of the entire trans-

action, citing Lemke. 17 Fletcher at 376 and n. 54. And

the intention of the purchaser at the time of the purchase

to make resales outside the state is controlling on the

question of interstate commerce. Jd. at 375 nn. 51 and

52. Cf. Sprout v. South Bend,277 U.S. 163, 168 (1928).

(In determining whether a transaction is in interstate com-

merce, ‘[t]he actual facts govern. For this purpose,

the destination of the passenger when he begins his journey

and known to the carrier, determines the character of the

commerce.") The record here shows that all Allenberg's

cotton purchases were for interstate resale (A-96). And,

as the court found in Cone Mills Corp., and as reported

by the U.S. Department of Agriculture, virtually all of

the cotton grown in Mississippi is shipped out of state.

U.S.D.A. Supp. for 1972 to Bulletin No. 417 - Statistics

on Cotton and Related Data 1930-1967, pp. 58, 77. Cf.

Lemke v. Farmers' Grain Co., 258 U.S. 50, 53-55 (1922).

The course of trade is thus clear; the intent of the pur-

chaser is established; and at least the constructive notice

of the seller is manifest since virtually all cotton produced

TS = |

III AO REY oe

[A= oe ge cf ee fa fee, oa PO tee *

in Mississippi is shipped in interstate commerce, From

the totality of the circumstances, there can be but one

conclusion: the entire transaction was in the stream of

interstate commerce —negotiation, purchase, sale and

shipment. This is the reality of the trade, as recognized

by Congress for many years, by this court long ago, by

the federal court on the scene in Mississippi, and by the

trial court herein.

Despite the overwhelming authority for defining inter -

state commerce as a dynamic process that includes all the

component elements of an interstate transaction—an almost ~

uniform holding at least since the decision in 1937 in Jones

& Laughlin Steel —there may be some question of the rele-

vancy of two state taxation cases decided in 1934, Chas-

saniol v. City of Greenwood, 291 U.S. 584 (1934) (occupa-

tion tax on every person engaged in the business of buying

or selling cotton for himself within the city); Federal Com-

press Co. v. McLean, 291 U.S. 17 (1934) (state excise

tax on operating a cotton compress).

In Pike v. Bruce Church, 397 U.S. 137, 141 (1970), the

Supreme Court indicated that the basis for the holdings in

Federal Compress and Chassaniol was unclear. Speaking

for a unanimous Court, Justice Stewart observed that the

decisions could be construed as holding that the activities

taxed took place before interstate commerce began, or —

they could be seen as deciding that the burden upon com -

merce was at the most indirect and remote. Justice

Stewart went on to find that the actions of Arizona in Pike

affected interstate commerce, regardless of the view

taken of Federal Compress and Chassaniol.

In light of subsequent developments in Commerce Clause

doctrine, it is probably wiser to view those cases as hold-

ing that there was a burden on interstatc commerce, but

28)

that the burden was indirect and therefore not unconstitu-

tional. This is the second alternative articulated by Justice

Stewart in Pike and would conform more nearly to subse-

quent Commerce Clause developments after Jones and Laugh-

lin Steel. But facts of the instant case are distinguishable

even assuming the continued vitality of the "mechanical

test'’ of Federal Compress and Chassaniol. See gener-

ally Parker v. Brown, 317 U.S. 341, 360-61 (1943).

In Townsend v. Yeomans, 301 U.S, 441 (1937), in

which regulations on the handling and selling of tobacco

were upheld, the Court clearly indicated that the regula-

tion affected commerce but found the burden indirect and

thus constitutional. Nevertheless, the Court drew an

analogy to Federal Compress and Chassaniol because

the warehouses were regulated in their dealings with the

farmers but not in their dealings with buyers from out of

state to whom the warehousemen sold tobacco. 301 U.S.

at 457-58. Federal: Compress and Chassaniol, thus are

better understood as cases in which indirect burdens on

interstate commerce were upheld. Cf. Pike, 397 U.S.

at 141,

Of course, whether or not the effect of any particular

burden on interstate commerce is direct and therefore

unconstitutional requires the court to weigh competing

,interests and values. But the modern Commerce Clause

cases such as Wickard v. Filburn, supra, Heart of Atlanta

Motel v. United States, 379 U.S. 241 (1964) and Katzen-

back v. McClung, 379 U.S. 294 (1964), indicate that a

restrictive ‘interpretation of the scope of the federal com-

merce interest is inconsistent with prevailing understand-

ing and realities. Cf. Perez v. United States, 402 U.S.

146 (1971) (Upheld power of Congress in Consumer Credit

Protection Act to forbid extortionate extension of credit.)

A conclusion that interstate commerce was not involved

PCIE, a |

Ma ME Sr te eA Bee PSV AL MT

in the transactions herein would directly conflict with

Congressional findings which are entitled to great judicial

deference. See State Bd. of Insurance x. Todd Shipyards,

370 U.S. 451, 456 (1962). Besides, such a view would

ignore the subsequent developments in the area of state

taxation. Recent tax cases make it clear that a state has

the power to impose a tax on interstate commercial activi-

ties provided that the tax is not discriminating against

_ interstate commerce and not excessive in relation to the

governmental benefit conferred by the state. See North-

western States Portland Cement Co. v. Minnesota, 358

U.S, 450(1959). That is, the state can require inter -

state commerce to bear its fair share of the tax burden,

but the tax must have a rational relationship to the value

of the governmental services conferred. Evansville-

Vanderburgh Airport Authority District v. Delia Air Lines,

405 U.S. 707, 715-16 (1972).

In. United Air Lines, Inc. v. Mahin, 410 U.S. 623 (1973),

the. Supreme Court upheld the constitutionality of an Illinois

general’revenue use tax as applied to aviation fuel stored

in [Illinois and then loaded aboard aircraft there and con-

sumed in interstate flight. Relying on two 1933 taxation

cases, Edelman'v. Boeing Aiy Transport, Inc. , 289 U.S.

249 (1933), and Nashville, Chattanooga and St. Louis R. Co.

v. Wallace, 288 U.S. 249 (1933), Justice Blackmun drew

.a distinction between a state tax on consumption of fuel,

which would be impermissible as a direct burden on inter -

state commerce, and the Illinois tax on storage and with-

drawal of fuel, which "does not place an unconstitutional

burden on interstate commerce." 410U.S, at 629. Im-

portantly, the Court recognized that both kinds of taxation

affected interstate commerce, but concluded that the tax

on consumption was excessively burdensome because of

the risk of multistate taxation of interstate commerce.

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73 &

Thus, in United Air Lines the Court viewed Edelman

and Nashville as cases involving an indirect and remote

burden on interstate commerce. Contra: Southern Pacific

Co. v. Gallagher, 306 U.S, 167, 176(1939). Yet these

two cases certainly lend themselves to the same analytical

ambiguity as Federal Compress and Chassaniol. That is,

they can be seen either as holding that the tax was on intra

state commerce or constituted an indirect burden on inter -

state commerce. The modern and analytically preferable

approach is to interpret the scope of interstate commerce

broadly and then to determine whether the effect on such

commerce is excessively burdensome. See Evco v. Jones,

409 U.S. 91 (1972).

Language in Federal Compress itself indicates that the

balancing approach was the one employed hv Justice Stone.

_ He noted that property withdrawn from transportation,

"whether intrastate or interstate, until restored to a

transportation movement interstate, has often been held

subject to local taxation." 291 U.S. at 21.’ He concluded

that the privilege tax created an indirect and remote burden

on interstate commerce and therefore did not transgress

constitutional limitations. 291 U.S, at22. Cf. Edelman,

289 U.S. at 252; Nashville, 288 U.S. at 267. It is this

balancing analysis that most nearly conforms to the subse-

quent developments in Commerce Clause jurisprudence

and should be applied herein, despite some admittedly

confusing references to taxation of intrastate activity in

Federal Compress, Chassaniol, Edelman and Nashville.

In United Air Lines Justice Blackmun acknowledged that

this area of state taxation law is cloudy and complicated,

but he went on to attribute this primarily to “the varied

nature of interstate activities" which make line drawing

difficult. 410U.S. at 629. From that statement, it

would appear that this Court now views the early state

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tax cases as involving or affecting interstate commerce

but not so directly or burdensomely as to be —eet

Moreover, tax cases raise somewhat different and spe-

cialized issues. See Lemke v. Farmers' Grain Co.,

258 U.S. 50, 55(1922). Interstate commerce is not im-

munized from bearing its fair share of taxation, provided

the tax is non-discriminatory and equitably apportioned.

See B. Schwartz, Constitutional Law 121-22 (1972); Cf.

Eli Lilly & Co. v. Sav-on-Drugs, Inc. , 366 U.S, 276,

289 (1961) (Douglas, J., dissenting); Evansville-Vander-

burgh Airport Authority, supra; United Air Lines, supra.

As the Court has said, the state has a legitimate and im-

portant interest in securing revenue from activities that

derive govermentally conferred benefits. At the same

time, the Court will be vigilant to minimize the danger of

double taxation of interstate commerce. The objective

is to achieve fiscal fairness so that businesses contribute

tor the maintenance of such governmental services as

police and fire protection, maintenance of access roads,

and maintenance of instrumentalities of interstate com -

merce. See United Air Lines; Evansville-Vanderburgh

Airport Authority. Since taxation 1s the ouly means of

raising revenue, state taxation cases are somewhat ,su

generis and must be decided on anad hoc basis. Even in

the taxation area, however, Justice Frankfurter often

warned of the potential dangers of state intrusion on fed-

eral interests. For example, in Freeman v. Hewitt, 329

U.S, 249 (1946), in determining the limitations on a state

income tax, the Court found an impediment on the "cur -

rents of commerce across the State line, while the aim of

the Commerce Clause was precisely to prevent States from

exacting toll from those engaged in national commerce."

329 U.S, at 254, Yet in Northwestern States Portland

Cement Co. v. Minnesota, 358 U.S. 450 (1959), the Court

upheld a fairly apportioned tax concededly on interstate

activities,

These tax cases reflect the difficulty the Court has had

in accommodating state revenue interests with federal

interests in preserving an integrated national marketplace.

See Freeman v. Hewit, 329 U.S. at 252. The states have

legitimate claims on interstate commerce to pay its fair

share of local costs, and governmental revenue, for better

or worse, must derive from some form of taxation. Local 1 i

interests are therefore served only when revenue can be

collected (though there are of course different types of

taxation), and this then brings about the delicate balancing

this Court has undertaken: to minimize the danger of _

double or excessive taxation while simultaneously allow-

ing the states a source of revenue “having a relation to l

the event taxed."" United Air Lines v. Mahin, 410 U.S,

at 630. The goal is to achieve a "fair result," |

In this section, amicus is urging that the transaction

involved herein be declared in interstate commerce. The

question whether this is then an undue burden on commerce

is addressed in the next section. While the tax cases are

decided within a Commerce Clause framework, the out-

come often turns on different factors, enumerated above

Federal Compress and Chassaniol must be viewed with

these considerations in mind.’

Tit is instructive in this regard to examine the concurring opinions of =

Justice Harlan in Northwestern States Portland Cement Co. v. Minnesota,

358 U.S, 450, 468 (1959) (Harlan, J. concurring) and Eli Lilly and Co. v.

Sav-on-Drugs, Inc., 366 U.S, 276, 284 (1961) (Harlan, J. concurring),

Northwestern Cement held that a state could constitutionally tax net income

from the exclusively interstate operations of a foreign corporation. Justice

arlan‘s concurrence expressly rejects the view that prior cases allowed state

taxation only on interstate business, 358 U.S, at 466. He concluded that

this was “both novel doctrine and unreal analysis... because this Court has

never held that activities... performed solely in aid of interstate sales, are

intrastate Commerce,” Id, at 468. In Eli Lilly, however, Justice Harlan

explicitly noted that the basis for exerting state regulatory authority (quali-

fication to do business) was that the activity of the foreign corporation was

localized and wholly separate from interstate commercé.~366 U.S, at 285,

227, His clear understanding is that a qualification requirement for inter-

staie. transactions would be unconstitutional, even though a tax might pass

muster,

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In any event, even assuming the relevance of the tax

cases and the ongoing vitality of the "mechanical test" of

Federal Compress and Chassanio], they are distinguishable

on their facts from the situation involved in the present

contrcversy and certainly cannot support the conclusion

that the transaction herein was not in or did not affect

interstate commerce,

As the court in Pike noted, the early Mississippi cases

involved cotton that had come to rest in Mississippi, and

"“[b]efore shipping orders [were] given, it [had] no ascer-

tain

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