RAILWAYS OUSTED FROM CONTROL OF COMPETING LINES.

Court of Appeals for Franklin County.

#### State of Ohio, on Relation of Timothy S. Hogan, Attorney-General, v. The Hocking Valley Railway Company et al.

Decided, August 22, 1917.

*Restraint of Trade*— Brought *About Through Railway Control*— Stoclc *Oionership Permissible in Kindred But not in Competing*Lines— *Railioays Ousted from Control Provided for Under the Agreement of*1910.

1. The Zanesville & Western Railway is a feeder and therefore a kindred rather than a competing line of the Toledo & Ohio Central, and no legal impediment exists to the holding of its stock by the Toledo & Ohio Central or the Lake Shore *&*Michigan Southern. Neither is there objection to the holding of Toledo & Ohio Central stock by the Lake Shore & Michigan Southern or to the holding of Hocking Valley stock by the Chesapeake & Ohio.

2. The agreement of March, 1910, providing for the acquisition by the Lake Shore and Chesapeake & Ohio of stocks of certain coal companies, and for the exclusive control of the Toledo & Ohio Central by the Lake Shore, and the Hocking Valley by the Chesapeake & Ohio, with a trusteeship over the Kanawha & Michigan, with a tonnage agreement and arrangements for interchange of transportation facilities, was inconsistent with the decree of the Circuit Court of Franklin County of January, 1910; and notwithstanding action has been taken by the Federal Court requiring disposition of the stocks so acquired and surrender of control in so far as it affects interstate commerce, this court holds1 that the state is entitled to the benefit of additional relief with respect to intrastate business, and grants a decree of ouster with reference to control of coal mining stocks and the right to continue in the enjoyment of tonnage agreements and the interchange of transportation facilities complained of.

3. The New York Central as the successor to the Lake Shore in control of the Toledo *&*Ohio Central is properly a party to the decree, but so much of the supplemental petition as is involved under the ■averments as .to competition between the New York Central and the Toledo & Ohio Central is dismissed without prejudice.

*242*Joseph McGhee,*Attorney-General of Ohio; *Frank Davis, Jr.,*special counsel, *E. C. Morton, M. A. Daugherty, Weller, McCoy & Jones*and *R. J. O’Dell,*of counsel for state.

*Lawrence Maxwell, A. C. Reavitt*and *Wilson & Rector,*for the Chesapeake & Ohio and Hocking Valley railway companies.

*Doyle, Lewis, Lewis*& *Emery,*for the New York Central, the Lake Shore & Michigan Southern, the Toledo & Ohm Central, the Zanesville & Western and the Kanawha & Michigan railway companies.

By the Court

(Kunkle, Allread and Ferneding, JJ., concurring) .

The state charges the defendants with a combination and conspiracy in restraint of trade in respect to intrastate traffic.

The alleged combination attacked by the state in the present action originated in the Morgan plan of reorganization of the blocking Valley Railway Company which contemplated and subsequently embraced control of the Toledo & Ohio Central, the Kanawha & Michigan, and the Zanesville & Western railway companies. These companies were largely engaged in the transportation of bituminous coal from the Ohio and West Virginia coal fields to the cities and markets of Ohio and to the Great Lakes.

In the process of the financial development of this combination, there was acquired a controlling stock interest in certain coal mining companies operating the Ohio and West Virginia districts, and the stock of the blocking Valley Company (which was then the holding company) fell into the hands of what is called the Trunk Line Syndicate, composed of the five trunk lines controlling the transportation of coal from the entire Appalachian mining district into the markets of the middle west.

At this juncture, the state filed a petition in *quo warranto*in the Circuit Court of Franklin County, which resulted in a judgment entered January 18, 1910 (12 C.C.[N.S.], 49 and 145), ordering a dissolution of the Morgan combination between the blocking Valley on the one hand and the Toledo & Ohio Central, the Kanawha & Michigan and the Zanesville & Western upon the *243other; and also ordering a dissolution of the stock-holding connection between the Hocking Yalley Railway Company and the various coal mining companies controlling mines along the line of said railway in the Hocking Yalley district in the state of Ohio.

Following the final judgment of the Circuit Court of Franklin County, there was executed what is known as the March, 1910, agreement between the Lake Shore and Chesapeake & Ohio railway companies and acquiesced in by the other railroads forming the Trunk Line Syndicate.

Without going into unnecessary detail, this contract provided for the acquisition by the Lake Shore and Chesapeake & Ohio companies of the stock held by the five companies composing the Trunk Line Syndicate. It also provided for the transfer of the Hocking Yalley stock exclusively to the Chesapeake & Ohio and of the Toledo & Ohio Central stock exclusively to the Lake Shore Company. The contnact further provided for the transfer of a portion of the stock of the Kanawha & Michigan to the Chesapeake & Ohio and for the trusteeing of the majority of the controlling interest in the Kanawha & Michigan Company for the joint benefit of the Lake Shore and the Chesapeake & Ohio companies.

By this plan, the Hocking Yalley Company was, through stock ownership, practically acquired by the Chesapeake & Ohio Company and by similar means the Lake Shore Company practically acquired the Toledo *&*Ohio Central and the Zanesville & Western; while the Kanawha & Michigan, which paralleled the Chesapeake & Ohio in West Yirginia and the Hocking Yalley in Ohio, and connected with both the Toledo & Ohio Central and the Hocking Yalley, was made subject to joint control by the Chesapeake & Ohio and the Lake Shore companies. This contract provided for the disposition and trusteeing of the stocks in the coal companies which the Hocking Yalley Railroad Company had been ordered to dispose of by the decree of the Franklin county circuit court.

The contract contained a provision for the joint use of the western division of the Toledo & Ohio Central and of the Hock*244ing Valley main line for the transportation of coal cars at the option of either company. '

There was a further provision for an arrangement for the distribution of the business of the coal companies whose bonds had been guaranteed by the Toledo & Ohio Central and the Hocking Valley Railway Company, to protect the railway companies upon such guaranty. There was evidently an arrangement for an equal division between the Hocking Valley and the T. & O. C. of the tonnage originating on the K. *&*M.

Following the March, 1910, agreement and the re-organization and operation of the railway and coal companies thereunder, this action was brought.

Subsequent to the bringing of this action, the United States Government brought an action in the United States Court at Cincinnati to enjoin the various railway companies from carrying out the March, 1910, agreement upon the ground that the same and the operation of the railroad companies thereunder was in violation of the federal anti-trust act. This action was finally decided in favor of the Government, and the defendants were ordered to dispose of their interest in the said coal companies, and the Chesapeake & Ohio was ordered to dispose of its interest in the Kanawha & Michigan Railway Company. This order has been carried out to the approval of the United States Court.

1 At the instance of the Attorney-General of Ohio, who appeared as *amicus curiae,*the United States Court reserved the question of the corporate power of certain of the railroad companies to hold stock in the other railroad corporations.

The railroad now owned and operated by the Zanesville & Western was probably intended by the original promoters to be an independent competing company for the transportation of bituminous coal. But as now existing, its railroad extends only from Thurston, a small village on the Toledo & Ohio Central, into the coal mining district, and does not reach the coal markets either directly or by any connections independent of the Toledo & Ohio Central.

We have reached the conclusion that the Zanesville & West*245ern is a feeder rather than a competitor of the Toledo & Ohio Central and, therefore, that there is no legal impediment to the right of the Toledo & Ohio Central or the Lake Shore & Michigan Southern to hold the capital stock of the Zanesville & Western.

The New York Central Railroad Company, the successor by consolidation, of the Lake Shore Company, was brought in by a supplemental petition charging, among other things, that the New York Central Company was a competitor of the Toledo & Ohio Central Railroad Company.

The question of the right of one railroad company to acquire and hold the stock of another railroad company under Sections 8683 and 8784 of the General Code is now settled by the recent decision of our Supreme Court in the case of *Pollitz*v. *the Public Utilities Commission of Ohio,*96 Ohio State, page —.

The only condition, therefore, affecting the right of the holding company to acquire the stock of other railroad companies is that the two companies are kindred .and not competing.

We think the evidence shows that the Lake Shore Company aiid the Toledo *&*Ohio Central Company were connected so as to permit the passage of trains from one railroad to the other. The Chesapeake *&*Ohio was not, at the time this .action was brought, or the case tried, physically connected with the Hocking Valley, but we think that makes no difference in view of the decision in the Pollitz ease. We find, as a fact, that the Hocking Valley Railway Company and the Chesapeake & Ohio Railway Company were not competitors for intrastate business. Idle United States Court held, by necessary inference if not directly, that those companies were not competitors for interstate business and the action of the United States Court is the last word upon the subject of interstate business. We, therefore, follow the .action of the United States Court in respect to interstate commerce, and find no legal impediment to the Chesapeake *&*Ohio Company holding the stock of the Hocking Valley Company, nor do we find that .the acquisition and holding of the stock of the Toledo & Ohio Central Railroad Company by the Lake Shore Company, was illegal.

*246The state contends, and we think correctly, that the March, 1910, agreement and the operation of the railroad companies thereunder, down to the time when the relief granted by the United States District Court was put into effect, was not a compliance with the order of the Circuit Court of Franklin County, but amounted to a continuance of the unlawful combination previously existing.

The March, 1910, .agreement and the operation of the railroad companies thereunder did not terminate the railroad ownership of the stock in the coal mining companies nor the guaranty of bonds of such companies and the consequent control over the business of such companies. The provision of the March, 1910, agreement for the joint control of the Kanawha & Michigan Railroad Company, which was a competing company with both the Chesapeake & Ohio and the Hocking Valley, and the tonnage arrangement with reference to shipments arising thereon, together with the optional exchange of transportation facilities between the Hocking Valley Company and the Toledo & Ohio Central Company as to its western division, was inconsistent with the complete divorcement of the Chesapeake & Ohio and the Hocking Valley and the Toledo & Ohio Central and the Kanawha & Michigan as competing systems of transportation.

It would, therefore, follow that the combination following the March, 1910, agreement, and in existence at the time the present action in *quo warranto*was brought, was illegal and inconsistent with the decree of the Franklin county circuit court.

It is contended, however, that since the judgment of the United States District Court, and the disposition of the coal company and railway stocks under the approval of said court, this ease becomes a moot case and that no order can be made or relief granted.

The case of *United States*v. *Hamburg-American Company,*239 U. S., 466, is cited.

We think, upon a consideration of the authorities, that the rule that a court should not decide a moot question does not apply to the present case.

*First.*Because the question is not entirely moot. This court finding it proper to grant additional relief.

*247*Second.*Because the subject of the present action involves intrastate traffic which was not involved in the federal action; and

*Third.*Because the state should be entitled to the benefit of the judgment as to intrastate traffic over which it has exclusive control.

The judgment of the United States District Court does not assume to control intrastate traffic,' and whether the defendants would observe the regulations of the United States District Court as to intrastate traffic depends upon their volition and not upon the force .and effect of the order of the United States Court. *State*v. *Cox,*87 O. S., 335. (See opinion of Donahue, J.)

It is true that the stocks of the coal companies and the Kanawha & Michigan Railroad Company have been actually disposed of under the supervision of the United States District Court, but the state is entitled to have the dissolution made permanent as to intrastate traffic and to have a supervision over 'the future conduct of the defendants in respect thereto.

"While some reference was made in the majority opinion of the judges of the United States District Court to the optional exchange of facilities between the Hocking Valley and the Toledo *&*Ohio Central as to its western division, no relief was granted in that court.

We think it is important that the two competing systems, to-wit: the Chesapeake & Ohio and the Hocking Valley on the one hand, and the Toledo & Ohio Central and the Kanawha *&*Michigan on the other, be completely divorced, and that such optional exchange of facilities is inconsistent, especially in view of the prior relationship and the tendency of these competing companies towards trade restriction.

It therefore follows that there should be a decree ousting the original defendants from the right to own or control the stocks of coal mining companies or continue the guaranty of bonds of such companies; that the defendants should also be ousted of the right to continue the exchange of facilities between the Hocking Valley and the Toledo *&*Ohio Central as *248stipulated in the March, 1910, agreement, and that the Chesapeake & Ohio should be ousted from the right to own, control or have an interest in the eaptial stock of the Kanawha & Michigan Railroad Company.

The New York Central Railroad Company was properly made a party and the decree should operate against it as the successor of the Lake Shore & Michigan Southern Railroad Company.

The averment of the supplemental petition against the New York Central Company to the effect that that company is a •competitor with the Toledo & Ohio Central, is in the nature of an original cause of action against the New York Central Company.

The chief contention upon this issue being that the Lake Erie, Alliance & Wheeling, operating in mining district No. 8, and now controlled by the New York Central Company, is a competitor of the Toledo & Ohio Central Company. It is true that the Lake Erie, Alliance & Wheeling Company was one of the transportation lines involved in the Morgan plan, and if the original Morgan plan was still in operation, or should be revived, the situation as to the Lake Erie, Alliance & Wheeling Company might be important, but in view of the relatively small amount of competition possible between the Lake Erie, Alliance & Wheeling and the Toledo & Ohio Central Company, and also in view of the fact that the New York Central did not stipulate as to the evidence brought into the record from the United States Court, we think so much of the supplemental petition as is involved under the averments as to competition between the New York Central Company and the Toledo & Ohio Central Company should be dismissed without prejudice.

Decree of ouster accordingly.