Source: https://supreme.justia.com/cases/federal/us/263/515/
Timestamp: 2019-04-26 16:12:49+00:00

Document:
Justia › US Law › US Case Law › US Supreme Court › Volume 263 › United States v. Illinois Central R. Co.
undue prejudice to a shipper on the connection in view of lower through rates for the same commodity from competing points in the same territory over the trunk line and its branches and other independent connections, both the trunk line and the other participant in the high rate participate in the unjust discrimination, and may be required by an order of the Interstate Commerce Commission to remove the discrimination. P. 263 U. S. 520.
2. A discrimination in rates is not illegal under § 3 of the Interstate Commerce Act unless it is unjust. P. 263 U. S. 521.
3. The fact that preferential rates on traffic originating from some of its connections are given by a carrier in order to retain and increase its business may relieve it from any charge of favoritism or malice, but it will not justify a resulting unjust discrimination. P. 263 U. S. 523.
4. A difference in rates is not illegal unless shown not to be justified by the cost and value of the respective services rendered and by other transportation conditions. P. 263 U. S. 524.
5. The fact that a rate is inherently reasonable and that a lower rate from competing points is not shown to be unreasonably low does not establish that the discrimination is just. Id.
6. A blanket rate from points on a trunk line was made applicable from points on some only of its connections through shrinkage or absorptions allowed the connecting carriers by the trunk line, with resulting prejudice to a shipper on another connection in the same territory to which the privilege was not extended. Held that the fact that the preferential rate was for the purpose of developing traffic on the main carriers lines, or of securing competitive traffic, did not establish the innocence of the discrimination as a matter of law, but was one only of several proven factors to be weighed by the Interstate Commerce Commission, and that the Commission's finding of unjust discrimination, based on a consideration of them all, was conclusive. Id.
7. Such a decision of the Commission is not an attempted substitution of the Commission's policy of ratemaking for that of the carrier. P. 263 U. S. 525.
8. An order of the Commission that a trunk line and short line, participating in a joint rate, desist from resulting discrimination, but which may be satisfied by raising other competing rates of the trunk line or by reducing its division of the joint rate complained of, is not subject to the objection that it will have a confiscatory effect upon the short line. P. 263 U. S. 526.
9. An agreement of a shipper to ship all his products over a railroad is not a continuing assent to the rates in effect when it is made. P. 263 U. S. 527.
10. The power of the Commission to remove unjust discrimination applies to a through rate consisting of a combination of locals, as well as to a joint through rate. Id.
Appeals from decrees of the district court in suits to enjoin enforcement of orders of the Interstate Commerce Commission. In the first case, there was a perpetual injunction; in the second, the bill was dismissed.
each, carriers who were found to have unjustly discriminated against shippers of lumber located on an independent short line were ordered by the Commission to cease and desist from charging them higher through rates than were contemporaneously charged for like services from other points within what is called blanket territory. [Footnote 1] Each case was heard before three judges on plaintiff's motion for a preliminary injunction, on defendant's motion to dismiss the bill for want of equity, and on final hearing. In each, the whole record before the Commission was introduced. In No. 40, the Federal Court for Southern Mississippi perpetually enjoined the enforcement of the order issued by the Commission in Swift Lumber Co. v. Fernwood & Gulf R. Co., 61 I.C.C. 485. In No. 38, the Federal Court for Wyoming dismissed the bill, thus sustaining the order issued for the Commission in Pioneer Lumber Co. v. Director General, 64 I.C.C. 485. Each case is here on direct appeal under the Act of October 22, 1913, c. 32, 38 Stat. 208, 220.
Illinois Central main line, from all on its branches, from all on three independent short lines which connect indirectly with it, and from all on the Mississippi Central (a longer independent line which crosses it running east and west), the carriers have established the same through lumber rates to the Northern markets regardless of the varying distances within the blanket territory. At Fernwood, Mississippi, a little south of its Monticello branch, the Illinois Central connects with the Fernwood & Gulf, an independent short line, on which the Swift Lumber Company has a mill at Knoxo. The distance from Knoxo to the junction is 27 miles. The joint through rate from Knoxo via Fernwood to Northern points, voluntarily established by these carriers, is 2 cents per 100 pounds higher than the rate from Fernwood, or any other point within the so-called blanket territory on the Illinois Central main or branch lines or on the connections mentioned above. The distance to the Northern markets from many of the points on these lines is much greater than the distance from Knoxo, which lies near the center of the so-called blanket territory.
The Swift Lumber Company instituted proceedings before the Commission against the Illinois Central, the Fernwood & Gulf, and connecting carriers in which it attacked the higher rates from Knoxo both as unreasonable, under § 1 of the Act to Regulate Commerce, and as unjustly discriminatory under § 3. The Commission found that the rates from Knoxo were not unreasonable, but that they subject the Lumber Company to undue prejudice in view of the lower rates so given competing points within the so-called blanket territory. The order directed the carriers "according as they participate in the transportation . . . , to cease and desist" from the discrimination found. All the carriers except the Illinois Central and the Fernwood & Gulf acquiesced in the order.
These two joined as plaintiffs in this suit, and urge on several grounds that the order is void.
that the discrimination was unjust, is without adequate supporting evidence. The argument is that these facts, even when supplemented by others appearing in the evidence, do not warrant the finding of the ultimate fact, that the higher rates from Knoxo are unduly prejudicial to the Swift Lumber Company to the extent that they exceed the blanket basis of rates from Fernwood (the junction with the Illinois Central) and other points.
The Illinois Central argues that the discrimination in charging a higher rate from Knoxo cannot be deemed unjust, since the preferential rate to other points was granted solely for the purpose of increasing its own business, and that the lower rate from Knoxo was denied solely in order to preserve its own revenues. In other words, it granted the blanket rate to all points on its own lines in order to develop business originating thereon. It declined to grant the blanket rate (and to increase the absorption) where the connecting line was wholly dependent upon it, and traffic originating thereon could be secured in spite of the higher rate. It granted the blanket rate to points on connection lines (and increased their absorptions) where this was deemed necessary in order to secure traffic which might otherwise go to competitors.
favoritism or malice. But preferences may inflict undue prejudice, though the carrier's motives in granting them are honest. Interstate Commerce Commission v. Chicago Great Western Ry., 209 U. S. 108, 209 U. S. 122. Self-interest of the carrier may not override the requirement of equality in rates. It is true that the law does not attempt to equalize opportunities among localities, Interstate Commerce Commission v. Diffenbaugh, 222 U. S. 42, and that the advantage which comes to a shipper merely as a result of the position of his plant does not constitute an illegal preference, Ellis v. Interstate Commerce Commission, 237 U. S. 434, 237 U. S. 445. To bring a difference in rates within the prohibition of § 3, it must be shown that the discrimination practiced is unjust when measured by the transportation standard. In other words, the difference in rates cannot be held illegal unless it is shown that it is not justified by the cost of the respective services, by their values, or by other transportation conditions. But the mere fact that the Knoxo rate is inherently reasonable, and that the rate from competing points is not shown to be unreasonably low, does not establish that the discrimination is just. Both rates may lie within the zone of reasonableness and yet result in undue prejudice. American Express Co. v. Caldwell, 244 U. S. 617, 244 U. S. 624.
Third. The Fernwood & Gulf contends that the order is obnoxious to the due process clause. The argument is that even its present division of 4 cents per 100 pounds is unremunerative, and that a smaller return would be confiscatory. To this argument there are several answers. The order does not require a reduction of the through rate. It may be complied with by raising the rate from Fernwood and other points now being preferred. Moreover, a reduction of the through rate would not necessarily result in decreasing the amount of the short line's division. The Commission may, upon application, accord to the Fernwood & Gulf the appropriate division. [Footnote 8] The New England Divisions Case, 261 U. S. 184. There is no suggestion that the resulting reduction of the Illinois Central's division would result in rendering the rate confiscatory as to it.
Fourth. The Fernwood & Gulf contends also that the Swift Lumber Company is estopped from questioning the rates applicable to it. The argument is that, when it acquired the mill property from a predecessor of the short line, an agreement provided that all lumber produced should be shipped over the line, and that the 2-cent arbitrary was then known to be in effect, and was thereby assented to for all time. The contract, which is silent as to rates, is not susceptible of the construction urged. We have therefore no occasion to consider whether such an agreement would be valid, and what its effect would be. Compare Southern Pacific Co. v. Interstate Commerce Commission, 219 U. S. 433; United States v. Union Stock Yard, 226 U. S. 286; O'Keefe v. United States, 240 U. S. 294.
In No. 38, where the short line alone seeks to set aside the Commission's order, this additional fact requires mention. The rate to the short line points is not a joint rate, but a combination of the trunk line rate to the junction and the short line local rate. The distinction is without legal significance in this connection. A through route was established, and the transportation is performed as the result of this arrangement between the carriers, express or implied. [Footnote 9] Undue prejudice may be inflicted as effectively by a through rate which is a combination of locals as by a joint through rate. The power of the Commission to remove the unjust discrimination exists in both classes of cases.
In No. 40, decree reversed.
In No. 38, decree affirmed.
Compare St. Louis Southwestern Ry. Co. v. United States, 245 U. S. 136, 245 U. S. 138, note 1. The carriers insist that the rates are not properly called "blanket rates," since they do not apply to all points within the territory, and that they should be termed "group rates."
"undue discrimination against itself or the locality of its plant, as alleged by the cement company [the petitioner before the Commission] was not found; the community declared to be prejudiced by established conditions [Jersey City] had offered no complaint and was not party to the proceedings."
In Penn Refining Co. v. Western New York and Pennsylvania R. Co., 208 U. S. 208, 208 U. S. 221-222, it was sought to hold one of the connecting carriers liable for what the Court deemed to be the act of another.
See St. Louis Southwestern Ry. Co. v. United States, 245 U. S. 136, 245 U. S. 139 , note 2.
See The Tap Line Cases, 234 U. S. 1; Louisiana & Pine Bluff Ry. Co. v. United States, 257 U. S. 114.
As a division of only 2 cents is ordinarily deemed inadequate compensation by a connecting line, and as the trunk line is naturally indisposed to submit to a larger shrinkage of its own division, the through rate is commonly increased by an arbitrary if the traffic will bear it.
Compare Idaho v. Director General, 66 I.C.C. 330, with Idaho v. Oregon Short Line, 83 I.C.C. 4.
Interstate Commerce Commission v. Illinois Central R. Co., 215 U. S. 452, 215 U. S. 470; Interstate Commerce Commission v. Delaware, Lackawanna & Western Ry. Co., 220 U. S. 235, 220 U. S. 251; United States v. Louisville & Nashville R. Co., 235 U. S. 314, 235 U. S. 320; Manufacturers' Ry. Co. v. United States, 246 U. S. 457, 246 U. S. 481; Seaboard Air Line Ry. Co. v. United States, 254 U. S. 57, 254 U. S. 62.
In East Tennessee, Virginia & Georgia Ry. Co. v. Interstate Commerce Commission, 181 U. S. 1, 181 U. S. 11-12, 181 U. S. 23-26, and Interstate Commerce Commission v. Louisville & Nashville R. Co., 190 U. S. 273, the orders of the Commission were only prima facie evidence of facts found by them, since they were entered before the Acts of June 29, 1906, c. 3591, 34 Stat. 584, 589, 591, and the Act of June 18, 1910, c. 309, 36 Stat. 539, 551-554. See Proctor & Gamble Co. v. United States, 225 U. S. 282, 225 U. S. 297-298; Kentucky & Indiana Bridge Co. v. Louisville & Nashville R. Co., 37 F. 567, 613. Moreover, those cases involved primarily a question arising under the fourth section.
This was done, after removing the unjust discrimination, in McGowan-Foshee Lumber Co. v. Florida, Alabama & Gulf R. Co., 43 I.C.C. 581, 51 I.C.C. 317.
See St. Louis Southwestern Ry. Co. v. United States, 245 U. S. 136, 245 U. S. 139, note 2.

References: v. 
 § 3
 v. 
 v. 
 § 1
 § 3
 v. 
 v. 
 v. 
 § 3
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.