The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-11-20
US. CHARGES DECEIT
IN LACKAWANNA CASE
Attorney General Says Railroad
Violates Commodities Clause
in Mining Business.
EVASION THROUGH COAL co.

WASHINGTON. Nov IA case 70 test
The scope OF the commodities clause or
the last railway act was brought IN tne
Supreme court to-day when the Attorney
General fled the brief Of the Government
in it's appeal frem the Judgment sno
decree OF the United States District Court
for the District Of New Jersey dlsmlsslns
the biu hled bv the Government In that
court against the Delaware, Backawo ma
aud Western Railway and the Delaware
Lackawarna and Western Coal Company
The Government contends that the rail-
-oaa company, while continuing 10 uans-
port IN interstate commerce anthracite
coal mined ana purchased by II, mas n9'
in good faith ASSOCIATED itself there-
from before the transportation ana tneIe-
fore is continuing TO violate the cornnnodi-
Ties clause"
II is also contended that CONTRACT
between the railway company and the coai
ompany Of August 2, 1909. restr aims inter-
state trade and commerce. In VIOLATION OF
the Sherman law.
In It's bill in the lower court the Gov
eminent asked that the court enjoin the
railroad company from carrying IN inter.
state commerce coal mined oy Ah'
transferred 10 the ccal company iater.
The railway involved In this suit refused
70 concsde the const!tutionality OF the
+ commodities clause. and when the court
sustained Il as constitutional the LacHs
wanna then arranged to authorize the sale
I Of the coal mined by IL to corporation
| now known as the Lacka" anna Goa
Company.
! Tne Government insists that the organi-
cation of the coal company was not maze
| in 'c1oi faith. but was subsidiary OF tne
/ Lack wanna railroad, and points out tha'
I A dividend OF 80 per cent. was voted 70
I stockholders OF the railway stock to enaols
/ them to subscribe TO the stock CT the coal
company then organizing.
An Official statement BY the Department
,or Justice concerning tho case and prece'
dents says:
In the case OF the United States vs.. thu
Delaware and Hudson Company the Su
p~em- Court construed the commodities
/ clause IS prohibiting railroad IRON
Transporting articles in which at the tint
o. transportation Il has any interest
rect or indirect. nv legal or equitable
sense Il further he'd that railroad ooe'
not necessarily have an interest, direc
70 Indirect. n legal or equitable sens
Tin articles manufactured or produced b.
f., bous hde corp-rst.on Of which the ran
road - a s.ockhoIder.
In a later case. the United States VS.
the Leh.gh VALLEY Railroad Company, IN
supreme Court held that II the corporation
owning the articles transported BY raj!
road vas so lderuned with the rallroa'
as In fact 20 Ne but an arm OF the railroad
hen the railroad would have an interes
IA the articles IN the sense OF the statute
Under this II mas been contended ina
the statute Is not violated unless the ran
road has the required interest in the art
cles at the very time OF transportation.
Tn the light OF these two decisions Tn
following plan mas been devised by som
railroads to bring themselves within N
law. a railroad company engaged, say.
m...nG coal either directly or Indirect.
through a controlled corporation, which
but part Of itself. organizes new COZ
aorat.on and distributes the stock OF IN
: corporation ratably among the stocsholt
ers OF the railroad and the management
the new corporation is dominated by on
, GERS Of the railroad company.
The railroad sells 10 the new oorporf
tion At the mouth OF the mines It's produ'
ton OF coal under a contract which place
the new corporation largely II not con
pletely within the power OF the railroa
This Plan is challenged in the case no
pending n the Supreme Court against q
{ Delaware, Lackawanna and Western Raj
road Company ana the Delaware, Lack
wanna ana Western Coal Company