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Company Law Company Court Cases M.Umer Shehzad 41 Labeeb Shah Sb

M.Com 3nd Semester (MOR) Session 2010-12 Department of Commerce

Railroad Commission v. Pullman Co.

Railroad Commission v. Pullman Co., 312 U.S. 496 (1941)[1], was a case in which the United States Supreme Court determined that it was appropriate for United States federal courts to abstain from hearing a case in order to allow state courts to decide substantial Constitutional issues that touch upon sensitive areas of state social policy. This form of abstention allows state courts to correct things like equal protection violations for themselves, thus avoiding the embarrassment of having state policy corrected by the federal courts. Under Pullman abstention, the federal court retains jurisdiction to hear the case if the state court's resolution is still constitutionally suspect.

Facts
An administrative agency in Texas issued an order requiring sleeping cars on trains to be staffed by conductors (who were white) instead of by porters (who were black). The railroad and the Pullman Co., as well as the porters, sued, alleging a violation of Fourteenth Amendment equal protection. The case was initially considered by a three-judge panel of one Circuit Court judge and two local District Court judges, who held the agency action violated the law of Texas. The case was appealed directly to the Supreme Court.

Issue
Although the parties did not raise the issue before the United States Supreme Court, this case presented an opportunity for the Court to discuss whether it was appropriate for the United States District Court to grant relief, when the suit could have been brought in a state court in Texas.

Result
The Supreme Court, in an opinion by Justice Frankfurter, noted that there are a number of reasons why this case should not be heard by a federal court. Although federal courts may often be called upon to interpret the law of a state, they are really just guessing at the conclusions a state court would arrive at when confronted by the same question. Furthermore, although this case presents a substantial constitutional issue, federal courts must not get into sensitive area of state social policy unless they have to.

Therefore, the court concluded that the issue should be sent back to the state courts to see if the state courts can find some reason why the administrative order is invalid under state law.

United States v. Darby Lumber Co.

United States v. Darby Lumber Co., 312 U.S. 100 (1941), was a case in which the United States Supreme Court upheld the Fair Labor Standards Act of 1938, holding that the U.S. Congress had the power under the Commerce Clause to regulate employment conditions. The unanimous decision of the Court in this case overturned Hammer v. Dagenhart 247 U.S. 251 (1918) and limited the application of Carter v. Carter Coal Company, 298 U.S. 238 (1936).

The issue
The issue was whether Congress had overstepped its constitutional authority in creating the Fair Labor Standards Act. An American lumber company in Georgia that did not meet these standards was charged with violating the law, but had won an appeal, where the appellate judge found that the federal government is barred by the 10th Amendment from interfering in matters that are strictly local, that is, within intrastate boundaries. The Act also required the keeping of records to verify compliance; the appellee argued that this violated his 5th Amendment right protecting him from self-incrimination.

The decision
The Court reversed the appellate court decision. It affirmed the constitutional power of Congress to regulate interstate commerce, which power "can neither be enlarged nor diminished by the exercise or non-exercise of state power." FindLaw. The Court held that the purpose of the Act was to prevent states from using substandard labor practices to their own economic advantage through interstate commerce. In the Dagenhart case, the Court had made the distinction between manufacturing and interstate commerce, so that a business could argue it was engaging in the former, but had not intended the latter. Twenty-two years later, the Court found that earlier argument facile, explaining that Congress was well aware that businesses produce their goods without thought to where it will go; product is pulled and shipped to meet the orders of the day. The Court also found that the requirement of record keeping was entirely appropriate as a matter of enforcing the Act. There were no dissenting opinions in this case.

Sieff, et al., dba S & M Tire & Auto Supply Co. vs Continental Auto Supply, et al. D.C.Minn. (5-16-1941) 39 F.Supp. 683.
Plaintiffs affidavits list over 100 items appearing in their copyrighted catalogs 470 and 471 which it is alleged have been copied without permission by defendants in their 1940 Summer Catalogue. There seems to be no question that these items were substantially copied by the defendants from the plaintiffs copyrighted catalogs but as a defense to their action defendants contend that with the exception of two items... all of the material copied had appeared either in an uncopyrighted catalog, No. 469, published by plaintiffs prior to the issuance of Nos. 470 and 471, or in a catalog issued without copyright notice subsequent to the publication of Nos. 470 and 471, namely No. 472, and that therefore the matter had been dedicated to the public prior to the publication of defendants book, and no infringement occurred. Plaintiffs catalogue No. 472 was circulated from June 25, 1940, and the defendants Summer Catalogue was first mailed and thus first published on July 29, 1940. It was further established by the affidavits on behalf of defendants that all but some thirty of the items in question did not appear in plaintiffs uncopyrighted catalog No. 469 and were therefore dedicated to the public prior to the publication of copyrighted catalogs No. 470 and No. 471. This is conceded by the plaintiffs, so that we are now concerned only with the validity of the copyright on the remaining thirty items, which first appeared in either 470 or 471 and with respect to which the defendants contend that since they were republished in uncopyrighted catalog No. 472, defendants were free to copy them or any other matter found in such catalog even though the items involved had been previously protected by the catalogs 470 and 471, and that plaintiffs have lost any right of action which they may have had upon matter appearing in such copyrighted catalogs by failure of notice in No. 472. Plaintiffs, defendants and the judge agreed that No. 472 was a new work insofar as it fit what is in Section 6 concerning Compilations, or abridgements, adaptations, arrangements, ... other versions ... or works republished with new matter. The plaintiffs argued that No. 472 was merely a new edition of copyrighted catalogs 470 and 471 with comparatively minor changes... and that the publication of No. 472 without copyright notice did not affect the force or validity of the subsisting copyright upon the matter employed or any part thereof. (Inner quotation from Section 6.) The plaintiffs argument was that by Section 6 there is a permissive right to copyright the new work, but that the publication of the new work without the copyright cannot be considered as an abandonment of a copyright to another work....

Defendants strenuously urge, however, that the validity of the subsisting copyright upon the material taken from catalogs 470 and 471 and used in 472 cannot be maintained and secured if notice of such copyright is not carried in the new work.... While under Section 6, as plaintiffs contend, the original matter copyrighted retains the protection of the copyright when carried into a new work, it seems to me that the copyright owner loses his rights to such protections when he neglects to include the prescribed notice in the new edition, and would be deemed by his action to have abandoned his copyright, regardless of his insistence that it was not his intention to so abandon it. A stranger to the situation who had no knowledge of any previous catalogs, on seeing uncopyrighted 472 could feel free to copy any or all matter therein contained since he would have no notice of his copyright on the portions taken from the previous copyrighted edition.

International Shoe Co. v. State of Washington (1941)

Appellant
International Shoe Company

Appellee
State of Washington

Appellant's Claim
As a Delaware-based corporation whose factory was located in Missouri, International Shoe was not liable to pay into the state unemployment compensation fund in the state of Washington.

Chief Lawyer for Appellant

Henry C. Lowenhaupt

Chief Lawyer for Appellee

George W. Wilkins, Assistant Attorney General of the State of Washington

Justices for the Court

Hugo Lafayette Black, William O. Douglas, Felix Frankfurter, Frank Murphy, Stanley Forman Reed, Owen Josephus Roberts, Wiley Blount Rutledge, Harlan Fiske Stone (writing for the Court)

Justices Dissenting
None (Robert H. Jackson did not participate)

Place
Washington, D.C.

Date of Decision
3 December 1941

Decision
That International Shoe was liable to pay state unemployment tax in Washington State because it had had "minimum contacts" with that state.

Summary
The International Shoe decision has been used for the past 50 years to help establish the circumstances under which a person or corporation comes under the jurisdiction of a state that is not a state of primary residence. If a person who lived in the state of Colorado was taking a road trip through the Midwest and was the cause of a minor traffic accident in Minnesota, the Minnesota resident involve The International Shoe case began when the state of Washington sent a notice by registered mail to the company's home office, calling on the company to pay its back taxes to the Washington unemployment compensation system. The state also personally delivered a notice to one of the company's salespeople in Washington. Unemployment tax was levied on companies as a percentage of each employee's earn By the same token, the Court reasoned that the International Shoe Company had had "certain minimum contacts" with the state of Washington. The Court held that if these "minimum contacts" were enough to satisfy "traditional notions of fair play and substantial justice," the company was liable to Washington State's jurisdiction. Given that International Shoe did sell shoes and maintain a sales staff

Sibbach v. Wilson & Co.

Facts
Sibbach (P) brought a personal injury suit in diversity against Wilson (D) in Illinois District Court for injuries sustained in Indiana. Wilson denied the allegations and moved for an order pursuant to FRCP 35 requiring Sibbach to submit to a physical examination to determine the nature and extent of her injuries. The trial court ordered the examination and Sibbach refused to comply. Such an order for a physical examination was not permitted under Illinois state court rules of procedure. Such orders were permitted however under the rules of procedure in Indiana state courts. Neither state had a statute governing the issue. Sibbach refused to comply, arguing that Illinois state procedural law should govern and such an order was therefore invalid. The trial court held Sibbach in contempt and ordered that she be committed. The Court of Appeals for the Seventh Circuit affirmed and the United States Supreme Court granted cert.

Issue
Does a procedural rule that affects a substantial and important right necessarily exceed the rulemaking authority granted to the court under the Rules Enabling Act?

Holding and Rule

No. A procedural rule that affects a substantial and important right does not necessarily exceed the rulemaking authority granted to the court under the Rules Enabling Act. Congress has the power to regulate the practice and procedure of federal courts and may delegate authority to federal courts to make rules of procedure not inconsistent with federal statutes or the U.S. Constitution. The Rules Enabling Act of June 19, 1934 was limited to matters of pleading, practice, and procedure in the federal courts. The Court held that FRCP 35 is within the authority granted to the Court under the Rules Enabling Act and does not abridge, enlarge, or modify the substantive rights of any litigant. Although the Court held that Rule 35 was valid and the trial court could order Sibbach to submit to a physical examination, the Court held that refusal to comply with the order was exempt from punishment as a contempt under FRCP Rule 37(b)(2)(iv). The Court held that it was plain error for the district court to order imprisonment for Sibbach as punishment for contempt for failure to comply with the district courts order.

Disposition: Reversed.

SOUTHERN PACIFIC CO. v. ARIZONA EX REL. SULLIVAN

Location
Southern Pacific Co. headquarters

Facts of the Case

Arizona banned operation of trains more than 14 passenger cars of 70 freight cars long.

Question
Was the Arizona law an unconstitutional burden on interstate commerce?

Decision
7 votes for Southern Pacific Co., 2 vote(s) against

Legal provision
US Const. Art 1, Section 8, Clause 3; Arizona Train Limit Law of 1912

Summary
Yes it was such a burden. The Arizona law imposed a stiff burden on the railroad. It had to operate 30 percent more trains in the state, and it had to break up and remake trains passing through the state. The total cost was several million dollars a year. Moreover, more trains would produce more accidents and the state's safety argument was empirically weak. The innovation in this decision was Stone's use of an "interest-balancing" standard of review, which proved more demanding than the earlier "rational basis" test.