Opinion · Supreme Court of the United States
Interstate Commerce Commission v. Chicago Great Western Railway Co.
28 S. Ct. 493
- Type
- Opinion
- Court
- Supreme Court of the United States
- Jurisdiction
- Federal
- Date
- 1908-03-23
- Topic
- general
noting “[t]hose presumptions of good faith and integrity which have been recognized for ages as attending human action” | positing distinction between duties that are “ministerial, and therefore such as may legally be imposed upon a ministerial body” and those that are “legislative, and therefore, under the Federal Constitution, a matter for congressional action” | “in fixing their own rates, they [railroads] may take into account competition with other carriers, provided only that the competition is genuine, and not a pretense” | "in fixing their own rates, they [railroads] may take into account competition with other carriers, provided only that the competition is genuine, and not a pretense"
Citator
- Cited by
- 57 opinions
INTERSTATE COMM. COMM.v. CHICAGO G.W. RY.,209 U.S. 108(1908)
28 S.Ct. 493
INTERSTATE COMMERCE COMMISSIONv. CHICAGO GREAT WESTERN RAILWAY COMPANY.
APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT
OF ILLINOIS.
No. 73.
Argued April 16, 17, 1907.
Decided March 23, 1908.
CERTAIN proceedings were had before the Interstate Commerce
Commission. They were commenced by the filing of a petition by
the Chicago Live Stock Exchange in April, 1902, charging the
defendants, who are now the appellees, with the violation of §§ 1
and 3 of the Interstate Commerce Act of February 4, 1887. The
specific offense stated was that the defendants were charging
higher rates of freight upon live stock shipped from Missouri
River points, and other points
Page 109
similarly situated, to Chicago, than upon dressed meats and the
prepared products known as packing-house products. It was
contended that this higher rate of freight was an unlawful
discrimination against shippers of live stock to Chicago, and
gave to shippers of packing-house products an undue and
unreasonable preference and advantage over the former; that it
subjected the Chicago Live Stock Exchange and its members, who
were engaged in the business of selling live stock on commission,
as well as the owners of live stock and the shippers thereof, to
an unreasonable prejudice and disadvantage. The several
defendants, with one or two exceptions, answered, denying the
allegations of the complaint. After a hearing, the Interstate
Commerce Commission, on January 7, 1905, filed its report and
opinion, including findings of fact, and made an order, which is
the foundation of this suit. The order is in these words:
"Order of Commission.
"This case being at issue upon complaint and answers on file,
and having been duly heard and submitted by the parties, and full
investigation of the matters and things involved having been had,
and the Commission having, on the date hereof, made and filed a
report and opinion containing its findings of fact and
conclusions thereon, which said report and opinion is hereby
referred to and made a part of this order:
"It is ordered, that, in accordance with said report and
opinion, the present relation of rates maintained and enforced by
defendants [naming them all, eighteen in number], whereby their
rates for transportation are higher upon live cattle and live
hogs than upon the dressed or prepared products of cattle and
hogs on shipments thereof to Chicago, in the State of Illinois,
from points on the Missouri River, Sioux City, in the State of
Iowa, to Kansas City, in the State of Missouri, inclusive, and
from South St. Paul, in the State of Minnesota, or from points in
the territory between the Missouri River or South St. Paul and
Chicago, constitutes wrongful prejudice
Page 110
and discrimination, in violation of the provisions of the act to
regulate commerce; and that said defendants be, and each of them
is hereby, notified and required to case and desist, on or before
the fifteenth day of February, 1905, from maintaining or
enforcing the said unlawful relation of rates, and from further
continuing said unlawful prejudice and discrimination.
"And it is further ordered, that a notice embodying this order
be forthwith sent to each of the defendant corporations, together
with a copy of the report and opinion of the Commission herein,
in conformity with the provisions of section 15 of the act to
regulate commerce."
The defendants not complying with this order, the Interstate
Commerce Commission caused this suit to be commenced in the
Circuit Court of the United States for the Northern District of
Illinois, seeking to compel compliance. The defendants answered,
admitting service of the order and refusal to comply therewith,
denying that it was legal or binding, but on the contrary
claiming that it was in violation of their rights. After the
filing of the petition to enforce the order of the Commission and
the answers thereto, and in August, 1905, the Commission also
commenced an original proceeding under and by virtue of the act
of February 19, 1903 (32 Stat. 847), known as the Elkins Act,
charging substantially the same discrimination. These cases were
consolidated and heard before the Circuit Court, an enormous
volume of additional testimony being taken, and on November 20,
1905, that court announced its opinion, stated its findings of
fact and conclusions of law, and ordered that the bill should be
dismissed. A decree accordingly was so entered.
141 F. 1003. The findings of fact were as follows:
"First. That the live stock rates are reasonable in
themselves. All live stock from points west, southwest and
northwest of the Missouri River and St. Paul are shipped on a
proportional rate from the Missouri River or St. Paul to Chicago.
These rates are equal to or less than the rates on dressed meats
Page 111
and packing-house products between the same points. There can be,
and is, no complaint as to such traffic. The local rates from the
Missouri River and St. Paul, and from 150 miles east, to Chicago,
are as shown in above schedule. These rates gradually decrease
until the Mississippi River is reached, and the average Iowa rate
is 21 cents. The great weight of evidence indicates that these
rates are at least reasonably low.
"Second. That the cost of carrying live stock is greater than
that of carrying dressed meats and packing-house products.
"Third. That the value of the service of carriage is greater
to the packers, because of the higher price of a car of dressed
meats or packing-house products. Dressed meats and packing-house
products are in value worth nearly twice as much as live stock.
This factor is important, in ordinary cases, however, in part,
because of the greater risk of carriage of high-priced
commodities. In these cases, as to the particular commodities in
question, the evidence shows that the defendant railroad
companies pay out a much larger amount in damages for losses
arising from the carriage of live stock than they do for losses
arising from the carriage of dressed meats and packing-house
products, in proportion to the value of the products carried, and
more in damages per car regardless of the value. This makes the
risk of carriage greater for live stock. The result is that the
value of the service is not such an important factor in this kind
of a case as it is considered to be in ordinary cases.
"Fourth. That the rates in question given to the packers at
Missouri River and St. Paul were the result of competition. The
product of the packers at these points was large in quantity, was
certain and continuous in amount, was in the hands of a few
people, and for years before the Federal injunction of March,
1902, had been competed for so strenuously by the railroads
reaching and passing through these points, as to cause the
cutting of rates and the giving of secret rebates in large
amounts. Four of the defendant companies, the Chicago,
Page 112
Milwaukee St. Paul Railroad Company, the Chicago Northwestern
Railway Company, the Chicago, Rock Island Pacific Railway
Company, and the Chicago, Burlington Quincy Railway Company,
passed through these points into the territory west of the
Missouri River and St. Paul. Four other of the defendant
companies, the Chicago Great Western Railway Company, the Chicago
Alton Railway Company, the Illinois Central Railroad Company,
and the Wabash Railroad Company reached the Missouri River points
and St. Paul, competing for this business. Other railroads,
running south to the Gulf of Mexico, also competed more or less
for said business, including the Atchison, Topeka Santa Fe
Railway. After said injunction was granted the defendant
railroads (according to evidence herein) obeyed it, and until
August of that year the said traffic was carried under
competition between the defendants at the rate of 23 1/2 cents
from Missouri River points to Chicago, and 25 cents from St. Paul
to Chicago, etc., as set out above. As a result of such
competition, the Chicago Great Western Railway Company became
dissatisfied with the proportion of the business it received,
and, in order to get what it claimed as its share, cut the rate
to 20 cents to Chicago and 18 1/2 cents to the Indiana line for
eastern business, and published the same. This it did under a
contract with the packers running for seven years. The Chicago
Great Western Railway Company was the longest route from Chicago
to the Missouri River points. The other railroad defendants, to
meet the rate made by the Chicago Great Western Railway Company,
as a result of competition, met and published the same rate.
These rates were not made voluntarily, but from necessity arising
from competition; the necessity being that of carrying the goods
at the lower rate or losing the business to which the officers of
said companies thought they were entitled. This cutting of the
rate by the Chicago Great Western Railway Company was not the
origin of competition. That had existed legally since March,
1902, between defendant railroads and also between them and the
Atchison, Topeka Santa Fe
Page 113
Railway Company. There was not competition enough at said points
to lower the rate as to live stock. There was little and
different competition on rates as to live stock at points between
the Missouri River and St. Paul and Chicago. The only places
where the opportunities for competition existed as to live stock
the same as to packing-house products were immediately at
Missouri River points and St. Paul, and there only as to live
stock driven in on foot from the surrounding country. There is
comparatively a small amount of this stock. If it was exactly the
same kind of a commodity as that furnished by the packers there
would be an opportunity for competition in this at these points
alone.
"Fifth. That the competition in question did not result from
agreement of the defendants, but was actual, genuine competition.
"Sixth. That the present rates on live stock have not
materially affected any of the markets, prices, or shipments;
that they are reasonably fair to Chicago and to the shippers;
that the shipments of live stock from points between Chicago and
the Missouri River and St. Paul are as great in proportion to the
volume of business as before the present rates were made; that
the majority of the live stock comes to Chicago from points as
near as 150 miles this side of the Missouri River and St. Paul,
and that the lower rate given to the packers does not seem to
directly influence or injure the shippers of live stock.
"Seventh. That the rates for carrying packers' products and
dressed meats were remunerative. They did not pay any portion of
the fixed charges and interest of the railroad companies, nor its
full share of the operating expenses, but they did pay more than
its cost of movement and leave something to apply upon operating
expenses.
"Eighth. That the welfare of the public, including the
shippers, consumers, and all localities and markets, does not
seem to be materially affected by the present rates.
"Ninth. That the usual custom for railroads is to charge a
higher rate for the finished product than for the raw material,
Page 114
and this, as a rule, has been applied to live stock and its
finished products. This is not universal, however. There are many
commodities where the raw material is charged more for carriage
than its finished product, as in the case of the raw material of
cotton and compressed cotton, straw, unbaled and baled, pig iron
and its products, and many other commodities. It also appears
that for sixteen years out of twenty-three, between Missouri
River points and St. Paul and Chicago, the published rates on
live stock were higher than on dressed meats and packing-house
products. Many witnesses testified that the ideal rate for the
finished product would be higher than the raw material. This,
however, was based on the presumption that competition or
commercial necessity did not interfere, and that the cost of
service and value of the products would be greater in case of the
finished products than in that of the raw material."
Section 3 of the Interstate Commerce Act,24 Stat. 380, so far
as it is material for this case, is as follows:
"It shall be unlawful for any common carrier subject to the
provisions of this act to make or give any undue or unreasonable
preference or advantage to any particular person, company, firm,
corporation, or locality, or any particular description of
traffic in any respect whatsoever, or to subject any particular
person, company, firm, corporation, or locality, or any
particular description of traffic, to any undue or unreasonable
prejudice or disadvantage in any respect whatsoever."
And § 3 of the Elkins Act,32 Stat. 847, provides:
"That whenever the Interstate Commerce Commission shall have
reasonable ground for believing that any common carrier . . . is
committing any discriminations forbidden by law, a petition may
be presented alleging such facts" (such discrimination), "to the
Circuit Court of the United States sitting in equity having
jurisdiction . . . and upon being satisfied of the truth of the
allegations of said petition said court shall . . . require a
discontinuance of such discrimination by proper orders, writs,"
etc.
Page 115
A higher rate on live stock than on its products is contrary to the natural rule or law that the raw-material rate shall not be higher than that on the manufactured article.
A departure from that rule is contrary to public policy, because it involves the destruction of large public interests which have been built up under the rule.
The making of the live-stock rate higher than the product rate is contrary to the almost universal practice of carriers throughout the country under which the rate on live stock is made no higher, but in many instances less, than the rate on the prepared product.
The higher rate on the live stock than on the product is violative of the rule that, other things being equal, value should control or be taken into account in rate making — the article of higher value taking a higher rate than one of lower value.
The changed relation is unlawful because it was made for an unlawful purpose, namely, the building up of the Missouri River markets at the expense of the Chicago markets, and its natural tendency is to that end.
The changed relation is unlawful because it was initiated by the Chicago Great Western Railway Company solely with a view of promoting its own interest and without regard to the public interest involved.
The changed relation is unlawful because there was no legitimate competition in rates necessitating it — the only prior competition being in the shape of rebates.
The contract of the Chicago Great Western Railway Company with the Missouri River packers is unlawful under the so-called "anti-trust" act because it gives that company a "monopoly of a part of the trade or commerce among the several States," and, also, because it is "a contract in restraint of trade and commerce among the several States."
The contract is unlawful because it was for the reduction of a rate on the product claimed to be already unreasonablyPage 116low and which, that being the case, as reduced, places a burden upon other traffic.
The contract is unlawful because it gives an undue preference to one article of traffic (the product) over another article of traffic (live stock), both articles being in active competition with each other in the markets.Mr. Cordenio A. Severance, with whomMr. Frank B. KelloggandMr. Robert E. Oldswere on the brief, for appellee, Chicago Great Western Railway Company:
Findings of fact by the Circuit Court should be accepted on appeal as witnesses testified in open court.Halsellv.Renfrow,202 U.S. 291;Shappiriov.Goldberg,192 U.S. 240;Beyerv.Le Fevre,186 U.S. 119;Stuartv.Hayden,169 U.S. 14;Warrenv.Keep,155 U.S. 267;Crawfordv.Neal,144 U.S. 596;Evansv.Bank,141 U.S. 107.
The contract between respondent Chicago Great Western Railway Company and various packers was proper exercise of its right to compete for business.Cottingv.Godard,183 U.S. 79;Hopkinsv.United States,171 U.S. 600;Delaware, LackawannaWestern Ry. Co. v.Kutter, 147 F. 51;InterstateComm. Comm. v.B. O. Ry. Co., 43 F. 37;Whitwellv.Continental Tobacco Co., 125 F. 454.
The rate on live-stock products brought about by the Chicago Great Western contract did not involve an undue preference or unjust discrimination within the meaning of the Interstate Commerce law.Interstate Comm. Comm. v.B. O. Ry. Co.,145 U.S. 276;East Tenn., V. G. Ry. Co. v.Interstate Comm.Comm.,181 U.S. 1;Texas Pacific Ry. Co. v.InterstateComm. Comm.,162 U.S. 197;Interstate Comm. Comm. v.AlabamaMidland Ry. Co.,168 U.S. 144;Louisville Nashville Ry. Co. v.Behlmer,175 U.S. 648;Interstate Comm. Comm. v.Louisville Nashville Ry. Co.,190 U.S. 273;D., L. W. Ry.Co. v.Kutter, 147 F. 51;Interstate Comm. Comm. v.B. O. Ry. Co., 43 F. 37;Plattv.Le Cocq, 150 F. 391;Interstate Comm. Comm. v.Western AtlanticPage 117Ry. Co., 93 F. 83; Judson on Interstate Commerce, §§ 175-183.
Neither the Commission nor the court had the right to ignore the relative cost of the service in determining whether the apparent discrimination was undue or unreasonable.Squirev.Michigan Central Ry. Co., 3 I.C.C.R. 521.
The Commission, previous to the amendment of the law in 1906, had no power to fix rates, and hence no power to establish the relation between rates.Cincinnati, N.O. Tex. Pac. Ry. Co. v.Interstate Comm. Comm.,162 U.S. 184;Interstate Comm. Comm. v.C., N.O. Tex. Pac. Ry. Co.,167 U.S. 479;InterstateComm. Comm. v.Alabama Midland Ry. Co.,168 U.S. 145;Southern Pacific Co. v.Colorado Fuel Iron Co., 101 F. 779.
Findings of fact of the lower court, from which the conclusion necessarily followed that respondents have a decree in their favor, was abundantly supported by the testimony and the law.Mr. Ed. Baxterfor appellees as of record.Mr. Charles A.Clarkfor intervenor, T.M. Sinclair Company, Limited.Mr.Frank T. Ransomfor intervenor, Union Stock Yards Company of Omaha, Limited.Mr. Stephen S. BrownandMr. John E. Dolmanfiled a brief on behalf of intervenor, St. Joseph Stock Yards Company of St. Joseph, Missouri.Mr. S.A. Lyndefiled a brief on behalf of appellee, The Chicago Northwestern Railway Company.
The complainant, before the Interstate Commerce action, was an incorporated association. The purposes for which it was organized were, as stated in its charter, "to establish and maintain a commercial exchange; to promote uniformity in the customs and usages of merchants; to provide for the speedy adjustment of all business disputes between its members; to facilitate the receiving and distributing of live stock, as well as to provide for and maintain a rigid inspection thereof, thereby guarding against the sale or use of unsound or unhealthy meats; and generally to secure to its members the benefits of cooperation in the furtherance of their legitimate pursuits." Its members were, as found by the Commerce Commission, "engaged in the purchase, shipment and sale of live stock for themselves and upon commission." It was such an association, with members engaged in the business named, that initiated these proceedings and in whose behalf they were primarily prosecuted. While it may be that the proceedings are not to be narrowly limited to an inquiry whether this particular complainant has been in any way injured by the action of the railroad companies, yet that question must be regarded as the one which was the special object of inquiry and consideration. It is true that the Commission subsequently commenced under the Elkins Act an independent suit in its own name, but it was practically to enforce the award made by the Commission after its inquiry into the controversy between the live stock exchange and the railroad companies.
It must be remembered that railroads are the private property of their owners; that while from the public character of the work in which they are engaged the public has the power to prescribe rules for securing faithful and efficient service and equality between shippers and communities, yet in noPage 119proper sense is the public a general manager. As said inInt.Com. Com. v.Ala. Mid. R.R. Co.,168 U.S. 144,172, quoting from the opinion of Circuit Judge Jackson, afterwards Mr. Justice Jackson of this court, inInt. Com. Com. v.B. O.R.R. Co., 43 F. 37, 50:
"Subject to the two leading prohibitions that their charges shall not be unjust or unreasonable, and that they shall not unjustly discriminate so as to give undue preference or disadvantage to persons or traffic similarly circumstances, the act to regulate commerce leaves common carriers, as they were at the common law, free to make special rates looking to the increase of their business, to classify their traffic, to adjust and apportion their rates so as to meet the necessities of commerce and of their own situation and relation to it, and generally to manage their important interests upon the same principles which are regarded as sound and adopted in other trades and pursuits."
It follows that railroad companies may contract with shippers for a single transportation or for successive transportations, subject though it may be to a change of rates in the manner provided in the Interstate Commerce Act —Armour Packing Co. v.The United States, ante, p. 56, and also that in fixing their own rates they may take into account competition with other carriers, provided only that the competition is genuine and not a pretense.Int. Com. Com. v.B. O.R.R. Co.,145 U.S. 263;T. P. Ry. Co. v.Int. Com. Com.,162 U.S. 197;Int. Com.Com. v.Ala. Mid. Ry. Co., supra; L. N.R.R. Co. v.Behlmer,175 U.S. 648;East Tenn. c. Ry. Co. v.Int. Com.Com.,181 U.S. 1;Int. Com. Com. v.L. N.R.R. Co.,190 U.S. 273.
It must also be remembered that there is no presumption of wrong arising from a change of rate by a carrier. The presumption of honest intent and right conduct attends the action of carriers as well as it does the action of other corporations or individuals in their transactions in life. Undoubtedly when rates are changed the carrier making the change must,Page 120when properly called upon, be able to give a good reason therefor, but the mere fact that a rate has been raised carries with it no presumption that it was not rightfully done. Those presumptions of good faith and integrity which have been recognized for ages as attending human action have not been overthrown by any legislation in respect to common carriers.
The Commerce Commission did not find whether the rates were reasonable or unreasonableper se. Its omission may have been owing, partly at least, to the decision inInterstate CommerceCommissionv.C., N.O. T.P. Ry. Company,167 U.S. 506, for this controversy arose before the amendment of June 29, 1906.34 Stat. 584. On the other hand, the Circuit Court found specifically that the live-stock rates were reasonable, and also that the rates for carrying packers' products and dressed meats were remunerative. See Findings 1 and 7. Obviously shippers had in the rates considered separately no ground of challenge. But the burden of complaint is not that any rates taken by themselves were too high, but that the difference between those on live stock and those on dressed meats and packers' products worked an unjust discrimination.
It is insisted that "the making of the live-stock rate higher than the product rate is violative of the almost universal rule that the rates on raw material shall not be higher than on the manufactured product." This may be conceded, but that the rule is not universal the proposition itself recognizes, and the findings of the court give satisfactory reasons for the exception here shown. See Findings 2, 3 and 9. The cost of carriage, the risk of injury, the larger amount which the companies are called upon to pay out in damages make sufficient explanation. They do away with the idea that in the relation established between the two kinds of charges any undue or unreasonable preference was intended or secured.
Finding No. 6 is very persuasive. It reads:
"Sixth. That the present rates on live stock have not materially affected any of the markets, prices, or shipments;Page 121that they are reasonably fair to Chicago and to the shippers; that the shipments of live stock from points between Chicago and the Missouri River and St. Paul are as great in proportion to the volume of business as before the present rates were made; that the majority of the live stock comes to Chicago from points as near as 150 miles this side of the Missouri River and St. Paul, and that the lower rate given to the packers does not seem to directly influence or injure the shippers of live stock."
If the rates complained of have not materially affected any of the markets, prices, or shipments; if they are reasonably fair to Chicago and the shippers; if the shipments of live stock from the west to Chicago are as great in proportion to the bulk of the business as before the present rates were made, and the lower rate given to the packers does not directly influence or injure the shippers of live stock; it is difficult to see what foundation there can be for the claim of an undue and unreasonable preference. It would seem a fair inference from the findings that the real complaint was that the railroad companies did not so fix their rates as to help the Chicago packing industry; that they recognized the fact that along the Missouri River had been put up large packing-houses, and, without any intent to injure Chicago, had fixed reasonable rates for the carrying of live stock to such packing-houses and also to Chicago; that those packing-houses being nearer to the cattle fields were able to engage in the packing industry as conveniently and successfully as the packing-houses in Chicago. If we were at liberty to consider the mere question of sentiment, certainly to place packing-houses close to the cattle fields, thus avoiding the necessity of long transportation of the living animals — a transportation which cannot be accomplished without more or less suffering to them — and to induce transportation to those nearer packing-houses would deserve to be commended rather than condemned.
With reference to competition we have referred to the cases in this court in which that matter has been considered. AccordingPage 122to the fourth finding the rates in question given to the packers at the Missouri River and St. Paul were the result of competition. Without recapitulating all the facts disclosed in that finding it is enough to say that the Chicago Great Western Railway Company, which had the longest line from Chicago to Missouri River points, made a reduction in the rates, and did this, as its president testified, "for the purpose of securing a greater proportion of the traffic in the products of live stock than it had been previously able to obtain." That is one of the facts inducing competition, and one of the results expected to flow from a reduction of rates. It certainly of itself deserves no condemnation. In order to secure to themselves what was likely to be transferred to the Great Western by virtue of its reduction of rates, the other companies also made a reduction and, as shown by the fifth finding, the competition was not the result of agreement, but was an "actual, genuine, competition." It may be true, as contended by counsel for the appellant, that even a genuine competition which results in a change of rates does not necessarily determine the question whether the rates as fixed work an undue preference or create an unlawful discrimination. Those rates fixed may make a preference or discrimination irrespective of the motives which caused the railway companies to adopt them, and yet the fact of a genuine competition does make against the contention that the rates were intended to work injustice. An honest and fair motive was the cause of the change in rates; honest and fair on the part of the Great Western in its effort to secure more business, and equally honest and fair on the part of the other railway companies in the effort to retain as much of the business as was possible. In other words, this competition eliminates from the case an intent to do an unlawful act, and leaves for consideration only the question whether the rates as established do work an undue preference or discrimination; and as the findings of the court show that the result of the new rates has not been to change the volume of traffic going to Chicago, or materially affect the businessPage 123of the original complainant, it would seem necessarily to result that the charge of an unlawful discrimination is not proved. In short, there was no intent on the part of the railway companies to do a wrongful act, and the act itself did not work any substantial injury to the rights of the complainant.
We have not attempted to review in detail the great mass of testimony, amounting to two enormous printed volumes. It is enough to say that an examination of it clearly shows sufficient reasons for the findings of fact made by the Circuit Court.
In short, the findings of the Circuit Court were warranted by the testimony, and those findings make it clear that there was no unlawful discrimination.
The decree of the Circuit Court isAffirmed.
MR. JUSTICE MOODY did not hear the argument nor take part in the decision of this case.