The opinion of the court was delivered by: BARD
This is an action brought by Chester Bowles, Price Administrator, Office of Price Administration, (1) to enjoin violations of Section 4(a) of the Emergency Price Control Act of 1942 as amended
and of Revised Maximum Price Regulation No. 169, 'Beef and Veal Carcasses and Wholesale Cuts', 7 F.R. 10381, issued under the Act; and (2) to recover treble damages on behalf of the United States of America. Jurisdiction is conferred upon this Court by Section 205(c) of the Act, 50 U.S.C.A.Appendix § 925(c).
I make the following special
1. Defendants Samuel Villari, Peter Villari and John Villari are, and since December 14, 1939, have been, engaged in the slaughtering business as copartners trading as S. Villari and Sons. The partnership owns and operates a slaughtering plant and abattoir at 220-230 Moore Street, Philadelphia, Pennsylvania.
2. Defendant Moore Street Retail Meat Cooperative Association is, and has been since July 5, 1944, a corporation organized and existing by virtue of the laws of the State of Pennsylvania. The office and principal place of business is at 220-230 Moore Street, Philadelphia, Pennsylvania, the identical office and plant used by the Villaris. The cooperative is engaged in the business of buying, selling, slaughtering and dealing in animals, meats and provisions.
3. Defendants Emerson V. Wilson, George Braun and Morris Kanefsky are respectively the President, Secretary and Treasurer of Moore Street Retail Meat Cooperative Association.
4. Pursuant to the provisions of Section 2(a) of the Emergency Price Control Act of 1942 as amended, 50 U.S.C.A.Appendix § 902(a), the Price Administrator issued Revised Maximum Price Regulation No. 169, 7 F.R. 10381, effective December 16, 1942, which Regulation, as amended, has been at all times until the date hereof in full force and effect. This regulation establishes maximum prices for the sale, purchase, delivery or receipt of beef and veal carcasses and wholesale cuts and prohibits violation of the price ceiling by direct or indirect evasive methods.
5. For some time prior to June, 1944, S. Villari & Sons contended they were unable to operate profitably due to the insufficient margin between the ceiling price for dressed meat established by Revised Maximum Price Regulation No. 169 and the rising price of livestock.
6. During the early part of June, 1944, Samuel Villari consulted his attorney, Arthur E. Dennis, Esquire, to discuss the possibility of evolving a plan whereby the Villaris could operate their business at a profit.
7. Mr. Dennis suggested to Samuel Villari that a cooperative association composed of S. Villari & Sons' customers be organized for the purpose of operating a slaughtering business; that the cooperative association buy or lease the Villaris' plant and equipment and employ Villari and his sons to manage and operate the slaughtering business for the cooperative association. Pursuant to the plan suggested by Dennis, on June 27, 1944, a letter was sent by Villari to his customers inviting them to attend a meeting at Dennis' office to discuss 'ways and means of remaining legally and profitably in business.'
8. On June 29, 1944, the meeting was held at the office of Mr. Dennis. There were present at this meeting defendants Samuel Villari, John Villari and Peter Villari; defendants Emerson V. Wilson, George Braun and Morris Kanefsky; Arthur E. Dennis, Esquire; Sidney Berg, Esquire, an associate of Mr. Dennis as counsel in other retail meat cooperative associations; William H. Sherry, accountant for S. Villari & Sons; and about sixty retail meat dealers who were either customers of the Villaris or were retailers known to Mr. Dennis and invited to the meeting by him.
9. Samuel Villari spoke to the assemblage and told them he would be forced to close his business because he could no longer operate profitably. Mr. Dennis advised the retail meat dealers that, unless they organized a cooperative association, rented the Villari plant and employed the Villaris to operate the establishment, Villari would close his establishment and the supply of meat they were presently receiving from S. Villari & Sons would be ended.
10. Mr. Dennis then outlined the general plan of the proposed cooperative association: That Villari would lease his slaughter house and equipment to the association for $ 450 per week; that Samuel Villari would accept $ 150 per week as salary; that Peter Villari and John Villari would each accept $ 75 per week as salary; that the Villaris would manage and operate the slaughtering plant; that the Villaris would purchase live cattle, kill the cattle, and dress the beef in the same manner in which S. Villari & Sons had heretofore conducted its business but under the supervision and direction of the cooperative association; that Villari reserved the right to slaughter for himself in the conduct of his own business; that the lease and the contract of employment would be terminable at the option of either party upon fifteen days' notice.
11. Mr. Dennis then informed the assemblage that under government regulations Villari could not slaughter more than fifty-one army style cattle each week; that Villari had agreed to slaughter the fifty-one head of army style cattle per week, together with some inferior grades of cattle, calves, and lambs, totalling a minimum of 50,000 pounds of dressed meat weekly; that this limited supply of dressed beef would have to be distributed among the members of the cooperative in proportion to their needs; that members of the cooperative would be preferred over non-members in the distribution of meat and only after the requirements of members were filled then the excess, if any, could be sold to non-member retailers.
12. The retailers were also informed by Mr. Dennis that the margin between the price of live cattle and the price ceiling for dressed meats was so small that the cooperative could be expected to lose money; that economies might be effected by efficient operation, by not providing delivery service, and by changing the types and grades of animals to be slaughtered; that the cooperative should be able to realize a profit in the future if the government revised its price regulations; that the statute under which the cooperative was to be incorporated limited the subscription of members to a maximum of $ 1,000; and that, therefore, the members would be called upon to make additional investments from time to time since the original capital investment would be insufficient to operate the business over a long period.
13. At the suggestion of Mr. Dennis, Sidney Berg, Esquire, was engaged to represent the retailers and to draw up the necessary organization papers and agreements with the Villaris. On the basis of the plan of operation proposed by Dennis and the statement by Villari that he was about to go out of business (as outlined in paragraphs 9, 10, 11 and 12, supra), the retailers proceeded to subscribe to shares of stock. The individual subscriptions were for $ 250, $ 500, $ 750 and $ 1,000, or 10, 20, 30 and 40 share lots at $ 25 per share, and the total subscription, including a few subscriptions made after the meeting but before incorporation amounted to $ 27,750 apportioned among seventy-two members. When the retailers present at the meeting had subscribed, the names of the subscribers were read from a list together with the number of shares each had purchased and the average number of sides of beef to which each subscriber would be entitled to receive each week conditioned on the availability of cattle. The relationship between the number of sides of beef per week and the number of shares subscribed was approximately one side of beef per week for every ten shares ($ 250).
14. At the conclusion of the meeting on June 29, 1944, the subscribers elected officers and directors, and instructed Berg to incorporate the cooperative and do whatever legal work was necessary to commence operation of the slaughtering business.
15. Mr. Berg, with the assistance of Mr. Dennis, counsel for Villari, prepared Articles of Association for the Moore Street Retail Meat Cooperative Association which were submitted to and approved by the Secretary of State of Pennsylvania on July 5, 1944.
16. On July 10, 1944, a committee authorized by the Board of Directors met with Dennis, Berg and Sherry and resolved that a lease and contract of employment be consummated with the Villaris on the terms outlined by Mr. Dennis at the meeting of June 29, 1944 (Par. 10). The Committee prepared a written lease and a written contract of employment between Samuel Villari and the Moore Street Retail Meat Cooperative Association dated July 17, 1944, for the term of one year, terminable at the will of either party upon fifteen days' notice and with a provision that termination of the employment contract automatically terminated the lease. These agreements were approved by the Board of Directors, but were never signed by Villari nor did the Board of Directors ever insist upon execution.
17. On or about July 15, 1944, the cooperative association commenced business operations under the management of Samuel Villari assisted by Peter Villari and John Villari. Supervision of the cooperative was nominally in the Board of Directors, but that supervision was in fact only perfunctory, the only actual evidence of control being a suggestion to Villari that he slaughter a lower grade of cattle to reduce operating losses.
18. The members of the cooperative purchased and received dressed meats from the cooperative in proportion to the amount which each had invested. The stockholders received an average of one side of army style beef weekly for each ten shares purchased and, in addition, small quantities of veal and lamb. Actually the weekly purchases of each stockholder varied from week to week, depending on the number of cattle slaughtered by Villari and the availability of the grade of beef required by the particular member. Because the cooperative was ...