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August 20, 1946

BARRETT et al.

The opinion of the court was delivered by: GANEY

This is an action by the Price Administrator of the Office of Price Administration to enjoin the defendants, individually and as copartners, trading as Chandler Laboratories and as Beverage Products Division, from engaging in acts which violate the sugar regulations of the Second Revised Ration Order 3 *fn1" and of General Ration Order No. 8 *fn2" and thereby violate Section 2(a) of the Second War Powers Act of 1942, as amended. *fn3"

Jurisdiction of this action is conferred on this court by virtue of Sec. 2(a) (6) of the Act, 50 U.S.C.A.Appendix, § 633.

 This action was begun on November 26, 1945 and on the same day, until a hearing for a preliminary or final injunction could be had, a temporary restraining order was entered, restraining the defendants from using as industrial users of sugar more sugar in any allotment period than their allotment for that period, from purchasing, receiving or using any sugar until they registered their four industrial user establishments with the OPA, and from transferring sugar or using sugar manufactured by them in the production or processing of any sugar containing product or syrup except upon receiving and surrendering to OPA authorities ration evidences equivalent in weight value to the sugar so transferred or used by them, as provided in the Ration Orders.

 The complaint, as amended, alleged that in December of 1943, the defendants had registered as industrial users of sugar with the OPA under the ration orders then in force and had in the year of 1944 and again in 1945 received from OPA sugar certificates which represented the 'weight value' or the amount of sugar to which the defendants were entitled to buy in any quarterly period of the year; that these allotments were based on the amount (46,791 pounds) of sugar used by the defendants' predecessor during the quarterly periods of the year of 1941; that on or about October 25, 1945, the defendants leased four sugar mills and their accompanying facilities for the sugar-cane harvesting season beginning October 19, 1945 and ending January 31, 1946 for total rentals of One Million Two Hundred Thousand Dollars ($ 1,200,000), but in the event of interruption or termination of the leases through the issuance of any State or Federal Regulations or Orders, the rentals were to be settled on the basis of five dollars per ton for all sugar-cane actually milled and processed by the leased facilities during the period of the lease; that these mills were located in the State of Louisiana and that they had a capacity of processing approximately two hundred forty thousand (240,000) tons of sugar-cane during the lease period; that the defendants failed to register these four establishments with the OPA; that the defendants operated the four mills for the processing and manufacturing of the juice of sugar-cane into sugar at the rate of approximately five hundred thousand (500,000) pounds of sugar per day and that until the time of this suit had manufactured approximately fifteen million pounds of sugar; that they used all this sugar in the manufacture of a product which is sugar as defined by the ration order; that they called this product 'pure cane flavored syrup' which was made by adding hot water to the sugar and, on some occasions, an almost imperceptively minute quantity of flavoring matter which did not interfere with its use as sugar, thus exceeding their sugar quota or allotment by a mere fifteen million pounds; that the defendants have held themselves out to the OPA and to the public as industrial users of sugar and that they have advertised their product as a non-rationed product throughout the country and that they have collected advance payments aggregating over two million dollars for orders for hundreds of thousands of gallons of the product from bottlers of soft-drinks and other industrial users of sugar, and that they have shipped their product to their customers without requesting or accepting ration evidences as required by the Ration Orders.

 Thus in the amended complaint filed March 21, 1946, the original complaint became Count One, and the supplemental complaint became Count Two. The basis of Count One is that the defendants as 'primary distributors' (manufacturers of sugar) delivered Sugar to itself as an 'industrial user' without the surrendering of any ration evidences and that they used more sugar in an allotment period than their allotment provided. The basis of Count Two is that the defendants represented to the OPA and to the public that they were 'industrial users' of sugar when in fact they were 'primary distributors', selling a product which was sugar within the meaning of the ration regulations, to others without obtaining ration evidences.

 While this action was pending in this court, Edward F. LeBlanc, who managed the operations of the four sugar mills for the defendants, filed in the State Courts of Louisiana on or about November 29, 1945, attachment proceedings against the defendants' product then on hand and in various stages of production at the mills for the ostensible purpose of collecting wages due him from the defendants. (It appears that the real purpose of the proceeding was to use the courts as a means of transferring to others the very product which the defendants, by an injunction of this court, were restrained from transferring.)

 On December 3, 1945, the case came up in this court for a hearing upon a motion for a preliminary injunction, and defendants agreed to the issuing of said injunction without a hearing because as stated they wished to defend the attachment proceeding brought against them in the Louisiana State Court. This court set February 11, 1946, as the date for a final hearing on the motion for a permanent injunction.

 The defendants removed the attachment proceeding pending in the Louisiana State Courts in the Opelousas Division of the Western District of the United States District Court of Louisiana and there impleaded other parties to whom they were indebted as the result of contracts concerning the res which was then in the jurisdiction of that court. The Administrator of OPA, who was also impleaded, exercised his option as a representative of the sovereign and requested to be dismissed as a party to the proceedings. After hearing the testimony of defendants' expert witness, Judge Porterie, in the LeBlanc v. Chandler Laboratories et al., D.C.W.D. La., 89 F.Supp. 32, found that the product or res which was in the jurisdiction of the court was of a perishable nature, and that in order to bring the highest price, it would be necessary to sell the product immediately, and that the operation that went on in the four sugar mills was a syrup-making operation and not a sugar-making operation, and that, therefore, the end product of the operation was syrup and not sugar, and ordered that the product or res be sold at public auction without being subject to OPA regulations as to sales price or rationing currency. The same Judge on February 19, 1946, in a motion Ex Proprio Motu, warned that the OPA was not relieving buyers from compliance with Sec. 8.5(c) of the Third Revised Ration Order 3, issued December 29, 1945; and also that the Department of Agriculture was not exempting buyers, sellers, or users of edible molasses from the force and effect of War Food Order 51.

 The final hearing of the case before this court was continued until March 25, 1946, at which time the defendants filed their answer to the complaint as amended denying that they made sugar as defined by Second Revised Ration Order 3, that they were industrial users of sugar and that the ration regulations apply to them or their operations. Therefore the defendants moved to dismiss the complaint on the ground that it is insufficient as a matter of law; and for a summary judgment. Six reasons were set forth for the basis of their motion.


 Primarily for disposition is the contention of the defendants that the bringing of this action in this district was oppressive and inequitable and was intended to and does deprive defendants of a fair and reasonable opportunity to present their defenses.

 Section 2(a)(6) of the Second War Powers Act, as amended, 50 U.S.C.A.Appendix, § 633 provides that the district court of the United States shall have jurisdiction of violations of subsection (a) of this Act or any rule, regulation or order issued thereunder and of all civil actions to enforce any liability or duty created by, or to enjoin any violation thereof, whether heretofore or hereafter issued. It further provides that the venue of any such civil action may be brought in the district where the violation occurs or in the district in which the defendant resides or transacts business.

 Under the power conferred upon the President of the United States by Sec. 2(a) (2) and (8) of the Act, and duly delegated to him, the Administrator issued General Ration Order No. 8 and Second Revised Ration Order 3. In this action, the complaint alleged that the defendants violated these ration orders and that they transact business and have their principal office and place of business in Philadelphia, Pennsylvania. According to the plain language of the Act and the allegations of the complaint the venue of this action is properly laid in this district. The choice of places where a civil action may be brought against a defendant in the event that he violates an order or regulation of OPA is for the convenience of the Administrator and not the defendants. The requirement of having the defendants bring their witnesses from the State of Louisiana to this district, in view of the size and extent of their venture in that State, which ran into the millions of dollars, is not so harsh or inequitable as to deprive them of a fair and reasonable opportunity to present their defense. To ask the defendants to bear the expenses of their witnesses for the brief time needed for the trial of the issues in this case would be but a small fraction of their expenses in this case and would not impose on them an unreasonable burden.

 The defendants' reasons for the motion to dismiss the complaint and for summary judgment in addition to that the question raised by the pleadings in this case are moot, may be stated as follows: The defendants are not subject to the Second Revised Ration Order 3 because (1) the record in the case shows that they combined in one person the function of primary distributors and industrial users of sugar, and (2) the ...

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