Puerto Rico v. Shell Co. (PR), Ltd.

Citations: 302 U.S. 253; 58 S. Ct. 167; 82 L. Ed. 235; 1937 U.S. LEXIS 545Docket: 18

Court: Supreme Court of the United States; December 6, 1937; Federal Supreme Court; Federal Appellate Court

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In the case of People of Puerto Rico v. Shell Co. P.R. Limited, the petitioner, representing the People of Puerto Rico, initiated a criminal proceeding against the respondents for conspiracy in restraint of trade, violating Puerto Rico's local anti-trust act from 1907. The district court in San Juan dismissed the charges, ruling that the Sherman Anti-Trust Act of 1890 and the Clayton Act of 1914 encompassed the entire area covered by the local act, rendering it void. This dismissal was upheld by the Supreme Court of Puerto Rico and subsequently affirmed by a higher court.

The primary issue for the Supreme Court was whether the Sherman Act's Section 3 barred the Puerto Rican legislature from enacting its own local anti-trust law. The relevant sections of both the Sherman Act and the local act were noted to be substantially similar. Section 3 of the Sherman Act applies to "any territory of the United States," leading to the contention that Puerto Rico might not fall under this designation. However, the Court determined that the legislative intent at the time of the Sherman Act's passage did not exclude Puerto Rico, and it would be unreasonable to assume that Congress would have intended to exempt it had the presence of such territories been anticipated. The Court concluded that the term "territory" in the Sherman Act is applicable to Puerto Rico, affirming the lower courts' decisions.

In Balzac v. Puerto Rico, the Supreme Court determined that the Sixth Amendment's right to a jury trial does not apply to U.S. territories that are not incorporated into the Union, specifically noting that neither the Philippines nor Puerto Rico qualifies as such incorporated territory. The applicability of congressional acts to Puerto Rico depends on the act's character and intent, requiring a nuanced interpretation of the term "territory." Although Puerto Rico may not be classified as a territory under the Sixth and Seventh Amendments or certain statutes, in Kopel v. Bingham, the court recognized Puerto Rico as a "territory" under section 5278 of the Revised Statutes, which allows governors to demand the surrender of fugitives. The definition of "territory" in this context includes areas organized under U.S. law, possessing a separate legislature and governed by appointed officials. The court concluded that Puerto Rico is a fully organized territory, despite not being incorporated into the U.S. Furthermore, it asserted that Puerto Rico should also be considered a "territory" under section 3 of the Sherman Act, noting that Congress intended to comprehensively address issues of trade and commerce through this legislation, exercising its authority beyond just the commerce clause.

The term 'trade' in section 3 of the Sherman Act is interpreted to have a broader meaning compared to its usage in section 1, reflecting Congress's intention to apply its full powers regarding trade and commerce to all territories under its jurisdiction. The term 'territory' is similarly interpreted in its broadest sense, encompassing all organized territories, including Puerto Rico. The court agrees with the lower court's view that while the local act contains different wording from the Sherman Act, the substantive provisions are equivalent, and both acts define a crime against U.S. sovereignty. However, the court disagrees with the conclusion that the local act is pre-empted by Congress, thus maintaining jurisdiction for the local district court over the offense. 

The Foraker Act of 1900 established that U.S. statutory laws apply in Puerto Rico, with certain exceptions, and vested local legislative powers in a legislative assembly, which has been preserved in subsequent organic acts. The legislative authority extends to all locally applicable matters, similar to the powers of organized continental territories. Previous court cases emphasize that territorial legislatures possess substantial self-governing powers under the oversight of national authority, akin to state legislatures. The determination of legislative subjects is based on historical legislative practices with the consent of the governed.

The legislative power granted to Puerto Rico under sections 32 of the Foraker Act and 37 of the Organic Act of 1917 is described as extensive and encompassing local matters. A key issue is whether the act in question addresses a legislative matter that is applicable locally. It is established that conspiracy in restraint of trade within Puerto Rico is a local issue, falling squarely within the legislative authority provided by the aforementioned acts. Furthermore, the existence of the Sherman Act does not preclude the enforcement of local legislation; the assumption that local law cannot coexist with federal law is rejected, given the autonomy granted to Puerto Rico and the non-conflicting nature of both statutes.

The Foraker Act and the Organic Act aimed to empower Puerto Rico with local self-determination and autonomy akin to that of states, establishing a governmental structure with legislative, executive, and judicial branches. This framework conferred quasi-sovereign attributes, including immunity from lawsuits without consent. Additionally, the acts granted the territory significant governmental powers such as taxation and law enforcement, paralleling the authorities of state legislatures.

The Congress's comprehensive grant of legislative power underscores the importance of local governance in addressing local offenses through local courts. The insular Supreme Court acknowledged the necessity of local control over prosecuting local monopolies, emphasizing the unique interest of Puerto Rico in enforcing its laws, which may not receive the same attention from federal authorities. Thus, local officials are deemed more likely to actively pursue violations of local statutes.

The congressional grants of power under the Foraker Act and the Organic Act of 1917 empower the Puerto Rican government to legislate on local matters, with the only limitation being that such legislation must be consistent with the acts themselves. No federal statute indicates an intent to restrict local legislative power solely to areas lacking explicit congressional legislation. Concerns about potential conflicts between local and federal interpretations of the acts are deemed unfounded, as there is no substantial conflict. In the event of a conflict, federal appellate courts are equipped to resolve it. Additionally, legislative duplication does not pose a risk of double jeopardy; prosecution under either federal or local law will bar subsequent prosecution under the other for the same offense, as established in the Grafton case. This principle is based on the understanding that both sets of laws derive from the same sovereign authority.

Acts may constitute distinct offenses against a state and the United States; however, this principle does not apply to actions in the Philippine Islands, where the jurisdiction is entirely derived from the United States. The U.S. has paramount authority over the Philippines, contrasting with state governments that derive their powers independently. The situation in the Grafton Case was misinterpreted, as the court-martial was enforcing the Sixty-Second Article of War, a federal law, rather than the local Philippine statute. This distinction is supported by the Criminal Code, which indicates that while local laws may be referenced, prosecutions are fundamentally to enforce federal law. Additionally, decisions from the supreme courts of four states created from former territories align with this perspective, reflecting a deep understanding of territorial powers and their implications at the time those rulings were made.

The Supreme Court of Wyoming ruled that a territorial statute criminalizing bigamy was valid and enforceable, despite an existing federal statute that also defined and punished the crime. The court emphasized the relationship between national and territorial governments, asserting that both could impose penalties for bigamy without conflict, as the federal law did not limit the territory's legislative power. It recognized that the crime of bigamy, defined by Congress, was an offense against the sovereignty of the United States, but the territory also had the authority to legislate on the matter as an offense against its own sovereignty. This reasoning was supported by subsequent decisions in Utah that maintained the validity of local statutes alongside federal law. Additionally, the court referenced other cases, such as Territory v. Guyott and Territory v. Long Bell Lumber Co., which upheld territorial statutes against similar federal laws. However, it noted that the Supreme Court of Arizona incorrectly ruled against a bigamy statute in Territory v. Alexander, rejecting the Wyoming precedent based on differing interpretations from a federal case.

General language from *El Paso N.E. Ry. Co. v. Gutierrez* and *Davis v. Beason* appears to support the lower court's decision. However, these cases have been misunderstood. The *Gutierrez* case centered on a New Mexico statute that restricted the ability to file wrongful death claims, requiring an affidavit and imposing a one-year limit for suit initiation. This statute was challenged in Texas after Enedina Gutierrez sought damages for her intestate's death due to a railway accident in New Mexico. The railway company invoked the New Mexico statute, but the Texas Supreme Court ruled that the Federal Employers' Liability Act governed the case and invalidated the New Mexico law because it conflicted with federal law.

The court emphasized that the Federal Employers' Liability Act supersedes conflicting territorial laws. Chief Justice Marshall's principle from *Cohens v. Virginia* was cited, asserting that broad statements in legal opinions must be interpreted within their specific context. Additionally, the opinion in *Davis v. Beason* stated that Congress can supersede state or territorial legislation on the same subject matter, but this assertion lacked necessity in the context of the case and failed to account for the requirement of actual conflict between the laws in question.

The statute penalizing individuals for teaching, advising, or encouraging bigamy or polygamy was upheld, despite an overarching federal law aimed at suppressing these practices in U.S. territories. The court confirmed that bigamy and polygamy are crimes under both federal law and Idaho law. It stated that the federal law is a general statute applicable to all territories and does not limit their legislative authority over related offenses. The court’s comments, while potentially broader than necessary for the case, suggest that the federal law should not be interpreted too broadly.

In Domenech v. National City Bank, the court ruled that a Puerto Rican tax on a national bank was invalid as it conflicted with federal law, specifically section 5219 of the Revised Statutes, which prohibits such a tax. The court emphasized that the general power to tax granted to Puerto Rico does not imply permission to impose unauthorized taxes.

Concerns regarding jurisdictional conflicts between Puerto Rico's local anti-trust act and the Sherman Act were dismissed. The local act simply allows local courts to enforce its provisions without overlapping jurisdiction over the Sherman Act. The enforcement entities for both acts are ultimately controlled by the same sovereignty, suggesting coordinated enforcement rather than conflict. Consequently, the court deemed Puerto Rico's anti-trust act valid and reversed the lower court's judgment.

Jurisdiction to prevent and restrain violations of the Act (sections 1-7) is granted to the district courts of the United States, with district attorneys operating under the Attorney General's direction to initiate equitable proceedings against such violations. Under section 24(2) of the Judicial Code, U.S. district courts have jurisdiction over crimes and offenses recognized by federal authority. The Puerto Rico Act of March 14, 1907 declares illegal any contract or conspiracy that restrains trade or competition, with violators facing misdemeanor charges, punishable by fines up to $5,000, imprisonment for up to one year, or both, at the court's discretion. The district courts in Puerto Rico are authorized to enforce this law, and its attorneys must initiate injunctions or civil proceedings against violations. Additionally, the Fifth Amendment ensures no person is tried twice for the same offense, a principle echoed in the Puerto Rico Organic Act of 1917, which similarly prohibits double jeopardy. Crimes by military personnel are under the jurisdiction of general court-martials, which determine appropriate punishment.