Source: https://supreme.justia.com/cases/federal/us/292/522/
Timestamp: 2019-04-25 18:10:35+00:00

Document:
1. It is a primary aim in the new railroad policy inaugurated by the Transportation Act, 1920, to secure avoidance of waste, and the authority given to the Interstate Commerce Commission to permit consolidations, purchases, leases, etc., was given in aid of that policy. P. 292 U. S. 530.
2. The criterion to be applied by the Commission in the exercise of its authority to approve such transactions -- a criterion reaffirmed by the amendments of Emergency Railroad Transportation Act, 1933 -- is that of the controlling public interest. P. 292 U. S. 531.
3. The term "public interest," as used in the statute, is not a mere general reference to public welfare, but has direct relation to adequacy of transportation service, to its essential conditions of economy and efficiency, and to appropriate provision and best use of transportation facilities. P. 292 U. S. 531.
4. Under § 5 of the Interstate Commerce Act, as amended by §§ 201 and 202 of Title II of the Emergency Railroad Transportation Act of 1933, the Interstate Commerce Commission has power to authorize a lease of one interstate railway to another permitting the lessee to abandon or remove general offices and shops of the lessor, the maintenance of which as found by the Commission would entail unnecessary and wasteful expenditures, even though such abandonment or removal be forbidden by the law of the the lessor's incorporation in which such offices and shops are located. P. 292 U. S. 532.
5. By concession in this case, the lease and order do not affect the "public" or principal office which the lessor is required to keep in Texas by the laws of that state, as distinguished from "general offices" required by the Texas "Office-Shops" Act, so that there can be no interference by the lease in question with the supervision of the state over the lessor company in matters essentially of state concern. P. 292 U. S. 532.
the authority of the Federal Coordinator of Transportation and kindred matters) shall be construed to relieve any carrier from any contractual obligation which it may have assumed, prior to the enactment with regard to the location or maintenance of its offices, shops, or roundhouse at any point, is not inconsistent with power in the Commission, when acting under § 5 of the Interstate Commerce Act, as amended by Title II of the Emergency Act, to relieve from like obligations imposed by state statute. P. 292 U. S. 533.
"of all other restraints or prohibitions by or imposed under authority of law, state or federal, insofar as may be necessary to enable them to do anything authorized or required by"
any order under the foregoing provisions of that section. Held that the scope of the immunity is not limited to laws of the same genus as antitrust legislation. P. 292 U. S. 534.
Appeal from a decree of the District Court, consisting of three judges, which dismissed a bill brought by the Texas, and some of its officers and municipalities, to annul an order of the Interstate Commerce Commission.
The Interstate Commerce Commission, by its report and order of October 4, 1933, authorized the Kansas City Southern Railway Company, a corporation organized under the laws of Missouri, to acquire control by lease of the railroad and properties of the Texarkana & Fort Smith Railway Company, incorporated under the laws of Texas. 193 I.C.C. 521. In this suit, the State of Texas, and officers and municipalities of that state, assailed the order as transcending the authority granted to the Commission by the Congress. The order was sustained by the District Court, 6 F.Supp. 63, three judges sitting as required by statute, and from its decree this appeal is taken.
The Interstate Commerce Commission was divided in opinion. Upon a prior hearing, the Commission approved the lease upon the condition that the paragraph in controversy should be eliminated. Report and order of December 27, 1932, 189 I.C.C. 253. Following the enactment of the Emergency Railroad Transportation Act 1933 (Act of June 16, 1933, c. 91), the proceeding was reopened, and, after hearing, the Commission modified its order by striking out the above-mentioned condition, thus approving and authorizing the lease with its provision, in § 5, as to offices and shops.
The findings of fact set forth in the Commission's report are not contested. The lines which constitute what is called the Kansas City Southern Railway system (embracing the portions covered by the proposed lease) extend from Kansas City, Missouri, to Port Arthur, Texas (over 800 miles). The line of the Kansas City Southern Railway Company, the applicant, extends from Kansas City, Missouri to Mena, Arkansas. The line of the Texarkana & Fort Smith Railway Company is in two segments. The northern segment extends from Mena in a southerly direction, crosses the Arkansas-Texas state line, and runs through Texarkana and thence southeasterly into Arkansas and to the Arkansas-Louisiana state line.
The portions of this segment in Arkansas are operated by the applicant under a lease previously authorized by the Interstate Commerce Commission. 105 I.C.C. 523. The portion of the northern segment which lies in the State of Texas is approximately 31 miles in length. The southern segment of the Texarkana & Fort Smith Railway extends from the Louisiana-Texas state line at the Sabine River to Port Arthur, Texas, and is approximately 50 miles in length. Thus, the total main line mileage of the Texarkana & Fort Smith Railway in Texas is 81 miles; there are about 18 miles of branch lines. The portion of the railroad system lying between the Arkansas-Louisiana state line and the Louisiana-Texas stated line, approximately 228 miles, is owned by the Kansas City, Shreveport & Gulf Railroad Company, a subsidiary of the applicant.
The Commission, on the first hearing, found that the consummation of the plan presented by the applicant would result in an annual saving, under normal conditions, of about $81,000. This finding was repeated in the final report. The estimated saving would result from the unification of operations, the discontinuance of general offices of the Texarkana & Fort Smith Railway Company at Texarkana, and the removal to Shreveport and Kansas City of many of the activities at Texarkana which caused duplication of work. Thus, under the proposed plan, the auditor's and treasurer's departments of the Texarkana & Fort Smith Railway Company would be transferred to the applicant's headquarters at Kansas City, with an estimated annual saving of over $57,000. The offices of the general freight agent, general passenger agent, superintendent, and division engineer, and of the master mechanic at Port Arthur, would be removed to Shreveport and consolidated with similar offices of the applicant, at an estimated annual saving of over $21,000. There would also be a decrease in expenses for various services in connection with the building at Texarkana.
Shreveport, said the Commission, is considered to be more centrally located from an operating standpoint than Texarkana, and there are at that point the applicant's main terminal for the southern territory, shops for heavy repairs, more industry, greater population, and more railroad connections.
"in view of the volume of interstate traffic handled by the T. & F.S. and the net income earned by that carrier, it is clear that the expenditure of approximately $81,000 a year, which will be unnecessary under the plan that the applicant proposes to put into effect under the lease, constitutes an undue burden upon interstate commerce."
"that the lease by the Kansas City Southern Railway Company of the railroad and properties of the Texarkana & Fort Smith Railway Company, located in Texas and elsewhere not now under lease, in accordance with the proposed lease, will be in harmony with and in furtherance of the plan for the consolidation of railroad properties heretofore established by us, and will promote the public interest."
"the Commission finds that, subject to such terms and conditions and such modifications as it shall find to be just and reasonable, the proposed consolidation, merger, purchase, lease, operating contract, or acquisition of control will be in harmony with and in furtherance of the plan for the consolidation of railway properties established pursuant to paragraph (3), and will promote the public interest,"
"has direct relation to adequacy of transportation service, to its essential conditions of economy and efficiency, and to appropriate provision and best use of transportation facilities."
New York Central Securities Corp. v. United States, supra.
"Prejudice to interstate commerce may be effected in many ways. One way is by excessive expenditures from the common fund in the local interest, thereby lessening the ability of the carrier properly to serve interstate commerce."
ante, p. 292 U. S. 1. In the present case, the findings of the Commission, setting forth undisputed facts, leave no doubt that the provision of the lease permitting the abandonment, or removal from the state, of general offices and shops of the lessor has direct relation to economy and efficiency in interstate operations and to the achievement of the purpose which the Congress had in view in its grant of authority.
"maintain a public office or place in this state for the transaction of its business, where transfers of stock shall be made and where shall be kept for inspection by the stockholders of such corporation's books,"
in Texas, as the Texas statute requires. See, as to service of process, Art. 2029, Revised Civil Statutes of Texas 1925. In view of the disclaimer on behalf of the United States and the Interstate Commerce Commission, and the interpretation placed upon the provision in the lease, we assume that the question before us merely relates to the abandonment or removal of "general offices," shops, etc., as distinguished from the "public office" required by the Texas statutes -- that is, to those transportation facilities the continued maintenance of which, in the circumstances described by the findings of the Commission, would entail unnecessary and burdensome expenditures in operation. As thus construed, we find no ground for concluding that the approval of the provision in the lease was beyond the Commission's authority. There is no interference with the supervision of the state over the lessor in matters essentially of state concern, as distinguished from the operations which in their effect upon interstate commerce are of national concern.
"Nothing in this title shall be construed to relieve any carrier from any contractual obligation which it may have assumed prior to the enactment of this Act (June 16, 1933) with regard to the location or maintenance of offices, shops, or roundhouses at any point."
imposed by statute. [Footnote 4] The insertion of the provision in Title I, with its restricted application, and the omission of a similar provision from Title II, indicate an intentional distinction.
"The carriers and any corporation affected by any order made under the foregoing provisions of this section shall be, and they are hereby, relieved from the operation of the antitrust laws as designated in § 1 of the Act entitled 'An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,' approved October 15, 1914, and of all other restraints or prohibitions by or imposed under authority of law, state or federal, insofar as may be necessary to enable them to do anything authorized or required by such order."
removal of the burdens of excessive expenditure, the removal of such burdens when imposed by state requirements was an essential part of the plan. The state urges that, in the course of the passage of Transportation Act, 1920, a provision for federal incorporation of railroads was struck out. But, while railroad corporations were left under state charters, they were still instrumentalities of interstate commerce, and, as such, were subjected to the paramount federal obligation to render the efficient and economical service required in the maintenance of an adequate system of interstate transportation. Colorado v. United States, supra.
The decision in International & Great Northern Ry. Co. v. Anderson County, 246 U. S. 424, is not opposed. Apart from the fact that, in that case, the state court had found, upon the verdict of a jury, that the maintenance of the offices and shops at the place at which the predecessor of the plaintiff in error had contracted to maintain them did not impose a burden upon interstate commerce -- a finding which this Court found no reason to disturb (id., pp. 246 U. S. 433-434) -- the case arose prior to the enactment of Transportation Act 1920, and the question here presented was not involved.
The decree dismissing the bill of complaint is affirmed.
"But the Southern Company (applicant) does not assume the performance of any corporate obligations on the part of the Texarkana Company independent of its obligations as a common carrier. The Southern Company does not assume any obligation to maintain, during the term of this lease, any general offices, machine shops, or roundhouses for or belonging to the Texarkana Company at any particular place or places, regardless of present or previous locations thereof, but shall have the right to change any existing location of general offices, machine shops, roundhouses, and terminal facilities belonging to the Texarkana Company, and to relocate the same, and, from time to time, to change the same, during the full term of this lease, and shall have the right to make all such locations, changes and alterations as in the judgment of the Southern Company will enable it to operate the demised premises in the public interest and with the greatest economy and efficiency, and the Southern Company shall not be obligated or bound to perform any contractual, statutory, or other obligations with reference to such matters which may now or hereafter rest upon the Texarkana Company, and any and all such changes may be made, from time to time, by the Southern Company as may be approved by the judgment of its officers or Board of Directors."
"Art. 6260. No corporation, except one chartered under the laws of Texas, shall be authorized or permitted to construct, build, operate, acquire, own or maintain any railways within state."
"Art. 6275. Every railroad company chartered by this state, or owning or operating any line of railway within this state, shall keep and maintain permanently its general offices within this state at the place named in its charter for the location of its general offices. If no certain place is named in its charter where its general offices shall be located and maintained, then said railroad company shall keep and maintain its general offices at such place within this state where it contracts or agrees to locate its general office for a valuable consideration."
"Art. 6278. Railroad companies shall keep and maintain at the place within this state where its general offices are located the office of its president, or vice-president, secretary, treasurer, local treasurer, auditor, general freight agent, traffic manager, general manager, general superintendent, general passenger and ticket agent, chief engineer, superintendent of motive power and machinery, master mechanic, master of transportation, fuel agent, general claim agent, and each one of its general offices shall be so kept and maintained by whatever name it is known, and the persons who perform the duties of said general offices, by whatever name known, shall keep and maintain their offices at the place where said general offices are required to be located and maintained, and the persons holding said general offices shall reside at the place and keep and maintain their offices at the place where said general offices are required by law to be kept and maintained. . . ."
"Art. 6286. No railroad company shall change the location of its general offices, machine shops, or roundhouses, save with the consent and approval of the Railroad Commission of Texas, and this shall apply also to receivers and to purchasers of the franchises and properties of railroad companies and to new corporations formed by such purchasers or their assigns. . . ."
"(4)(a). It shall be lawful, with the approval and authorization of the Commission, as provided in subdivision (b), for two or more carriers to consolidate or merge their properties, or any part thereof, into one corporation for the ownership, management, and operation of the properties theretofore in separate ownership, or for any carrier, or two or more carriers jointly, to purchase, lease, or contract to operate the properties, or any part thereof, of another; or for any carrier, or two or more carriers jointly, to acquire control of another through purchase of its stock, or for a corporation which is not a carrier to acquire control of two or more carriers through ownership of their stock, or for a corporation which is not a carrier and which has control of one or more carriers to acquire control of another carrier through ownership of its stock."
"(b) Whenever a consolidation, merger, purchase, lease, operating contract, or acquisition of control is proposed under subdivision (a), the carrier or carriers or corporation seeking authority therefor shall present an application to the Commission, and thereupon the Commission shall notify the Governor of each state in which any part of the properties of the carriers involved in the proposed transaction is situated, and also such carriers and the applicant or applicants, of the time and place for a public hearing. If, after such hearing, the Commission finds that, subject to such terms and conditions and such modifications as it shall find to be just and reasonable, the proposed consolidation, merger, purchase, lease, operating contract, or acquisition of control will be in harmony with and in furtherance of the plan for the consolidation of railway properties established pursuant to paragraph (3), and will promote the public interest, it may enter an order approving and authorizing such consolidation, merger, purchase, lease, operating contract, or acquisition of control upon the terms and conditions and with the modifications so found to be just and reasonable."
See Cong.Rec.73d Cong.1st Sess. vol. 77, pt. 5, p. 4439.
Compare subdivision (8) of § 5 of the Interstate Commerce Act as amended by Transportation Act 1920.

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