Document: 333 U.S. 771 68 S.Ct. 868 92 L.Ed. 1077 UNITED STATESv.SOUTH BUFFALO RY. CO. et al. No. 198. Argued Feb. 2, 1948. Decided April 26, Appeal from the District Court of United States for Western New York. Mr. Philip B. Perlman, Sol. Gen., Washington, D.C., appellant. Bruce Bromley, York City, appellees. Justice JACKSON delivered opinion Court. 1 The Government, by direct appeal Court,1 invites us to reconsider and overrule interpretation commodities clause Interstate Commerce Act2 promulgated in v. Elgin, J. & E.R. Co., 298 492, 56 841, 80 1300. That holding, substance, is that prohibition3 against a railroad company transporting any commodity which it owns or has an interest, except its own use, does not prevent corporation whose stock wholly owned holding also all railway, unless control railway so exercised as make alter ego company. 2 present challenge doctrine predicated on following facts: Bethlehem Steel Corporation (the company) substantially stocks South Buffalo Railway Company (South Buffalo) Company). At Lackawanna plant, near Buffalo, N.Y., produces steel fabricates various products. These are transported plant rails trunk-line carriers. In fact, provides sole terminal connection between this industry railroads. It operates about 6 miles main-line track 81 spur track, 58 trackage being leased right-of-way within where connects with other itself. 3 While 70% revenues have been derived traffic, renders switching 27 unrelated industries, some considerable size. enables them ship, connection, over five systems through interchange seven more. 4 performs no transportation service facilities outside State York, only district. classified Commission 'S—1' carrier, defined one engaged 'performing services only.' files tariffs covering service, both Public Service Commission. appear participate line-haul interstate route receive division joint rate. 5 1936 decided 1300, held production set-up Corporation, Bethlehem's competitors, did violate clause. Thereupon, made study relations itself, light decision. revised intercorporate relationship next few years comply, was advised, conditions under had found statute inapplicable Steel. seem necessary recite complex details dealings before reorganization 1940 action injunction begun until 1943 crucial question whether there contemporaneous violation threat writ should be directed. Voluntarily abandoned courses conduct grounds injunction, though they may sometimes relevant evidence intent similar issues. times Government's case, controlled shipper carrier corporations. unquestionably power favor shipping subsidiary at expense carrying subsidiary, vice versa. first we will now hold were possession power, regardless remains dormant, makes out statute. This said Elgin Case not. 7 contentin decision misconstrued Act, misunderstood legislative history misapplied Court's prior decisions. view take case decide what extent, if any, these contentions correct. enough say impression, might approved. But do write clean slate. What written but series events, convinces overruling modification left Congress. As our last day, when questions statutory construction, constitutional import, Congress can rectify mistake, such was, change policy time, circumstances reversal readily made. Massachusetts States, 611, 747. Moreover, unlike cited one, considered alleged mistake it. 8 Commission, after repeatedly calling attention during pendency, reported defeat litigation. Referring cases said, 'We recommend Congress, facts already available reports investigations conducted congressional committees, shall determine appropriate limit jurisdiction further legislation extend necessary.'4 took action. 9 inaction inadvertence failure appreciate effect interpretation. A Bill introduced Senate containing language relating affiliates subsidiaries calculated set aside decision.5 Section 12 Act read follows: 10 'It unlawful and, January 1, 1941, than air, transport, commerce subject article commodity, timber manufactured products thereof, manufactured, mined, produced authority affiliate, controlling person indirect, legal equitable, articles intended use business carrier.' 11 italicized portions indicate proposed additions would extended cover (1) carriers railroads, (2) subsidiaries, persons. beginning hearings thereon Committee chairman that, respect clause, purpose 'To effective prohibiting utilized their indirect.'6 week later, course began offered showing statement: 13 'Let me you reference lot time wasted I am speaking myself committee. think changed; going drastic changes bill suggest, i ought incorporated particular piece legislation, come up separate devote thought subject. economic structure industries something consideration legislation.'7 14 discussion Chairman added: 'I say, also, stay disrupt great many seriously wanted attempt anything kind particularly specific legislation.'8 15 When Senate, eliminated original retained. Committee, reporting bill, 'The rewritten far too subcommittee early therein.'9 16 Government argues characterization rejected 'too drastic' based extension terms common proposal include 'subsidiary, person' carrier. We believe, however, fair reading leads conclusion 'drastic readjustment' feared expected application sought here least much If objected extending carriers, simple matter delete short words accomplished change, still leave undisturbed more complicated provision concerning affiliates, since text each disconnected other. 17 foregoing, seems clear when, discussing 'prevented company, somebody position, operating railroad,' intend result,' he expressed prevailed 18 asks apply unchanged adopted 'far drastic.' considerations led suggestion problem presented position require rather judicial process. And pertinent length margin10 clearly think, responsible S. 2009, became Transportation 1940, 49 U.S.C.A. § seq., deliberately refused legislate into law asked 19 could, course, refuse follow precedent, different rule applies competitor. making future, impartial like situations. Limitations traditional upon powers permit so. 20 Whatever decision, faced readjustments force, special industry,11 concluded allowed, present, stand. cannot ignore persuasive, equally involved request abandoned. 21 relief court equity nature afford example 'upset' owning line type referred who 'it questionable want radical departure system.' demand perpetually enjoin restrain interest. There rail inbound raw materials outbound huge reach traffic thus prohibit yields railroad's revenues, taken away doubtless increase cost unaffiliated remain served. Of literally probably ultimately desired. To forbid physical operation needlessly damaging aimed at, suppose, force financial divorce interest clear, history, because prohibition drastic. independent ownership could desirable. dependent facility wedged shippers, whom controls shown likely. Under theory, group shippers road. Nor evils exist threatened transferred railroads pool them. road, despite ownership, bound federal state serve without discriminations unreasonable charges. exact cm pliance duties. argument, situation exists presents opportunity temptation abuse concealed evasions duty. forestall possible abuses remedy indication failed approval situations greater injury interests result withholding. equitable decline seen fit aside. 22 argument even accepting establishes reduce mere department Bethlehem. trial contains less proof sustain Case. Without reciting voluminous detail, agree. Bethlehem, stockholder, Buffalo. not, disregard either sense, entity treat ego. On contrary, ostentatiously maintained formalities existence, choosing directors several citizens interested naive believe chose men posts records probability act adversely representing chief stockholder railroad. instance best So long considers inadvisable see nothing done incur liability violation. expect courts corporate itself disregarded; done. establish identity hostility customer. Its preserved form substance—the substance existence largely form. otherwise decide, sufficient. 23 Judgment affirmed. 24 RUTLEDGE, BLACK, DOUGLAS, MURPHY join, dissenting. 25 another saddles load correcting emasculation statute, drawing Congress' explicitly it, unjustified inference approves mistake. teeth U.S.C. 1(8), overruled, dictated misreads, my opinion, giving basis opposite one. 26 forbids 'any transport * indirect *.' 'in indirect' read, effect, indirectly 100 per cent hence company's profits, arrangement having effects.' 'direct indirect,' hauls fr affiliated Company. Any answer factual inquiry degree Holding actually complicate problem.1 Only most sophisticated, unsophisticated, process reasoning members integrated producing empire2 operations every member. Particularly, Company, 'for profits realized two must find way Company) treasury—any discriminating practice harm general shipper3 profit Company.' Reading 253 61, 40 425, 433, 64 760. Here customers same me, deny, fact occupying inconsistent positions designed prevent. supra.4 28 dispute construed differently case. assumption then misconstrued, unwilling correct error concludes subsequently indicated distorted amended adopted. Since overruled committee drastic,'5 inferred 29 premise wrong. overlooks inquiry, namely, reason objection applying relationships presn t cases, pertinence. reason. Senators active sponsoring felt case.6 broad purposes others sweeping. new instead applied types air perfectly included 1940. 30 importance abundantly vigorous objections behalf parties affected water carriers,7 pipe lines,8 motor carriers.9 argued proper interestsi n reasons applicable rail. arguments concluding desirable indeed gone beyond coverage 1940.10 Rather jeopardize entire program comprehended Act,11 naturally sound strategy required narrower, highly controversial problem. 31 Statements show real amendment drastic.'12 Indeed show, together statements regarded unfortunate likely arise.13 Even opposition short-line drastic, 12, conjunction prohibited anyone owned, investment, ten railroad.14 groups limited carriers.15 sum, assumed aid.16 therefore conclude prompted reject compel deny impact sponsors erroneous. 32 host induced forego extremely extensions equivalent difficulty interpreting views legislator taking account exemplified note 6, warning seldom determined negative actions subsequent enactment construed. rejection more, less, indicative acquiescence complete inactivity been. 'silence weight, ambiguous support reaches today. Girouard 328 66 826, 60 1084; cf. Cleveland 329 14, concurring page 21, 67 13, 16. 33 justified 'equitable' somewhat obliquely advances. suggested refusal precedent competitor, Corporation. But, specious character permits X ground Y violates explanation res judicata apply, Commissioner Sunnen, 591, 715, Steel, prejudiced benefited decade contrary statute's plain policy. 34 feels requested compelled sell likely, nor remedied relief. undoubtedly influenced majority dissenting justices foreclosed determination Reliance today statement 'that approved.' exercise adapt afforded give adjustments secure conformity orderly inoppressive manner. duty this. 35 level effectively answered Stone, joined Brandeis Cardozo, case: doubt withhold inducement favoritism experience occur ingle occupies shipper. See 60, (433), Before sweeping prohibitions, rebate discrimination rates, facilities, injurious public. By Sherman Anti-Trust §§ 1-7, note, forbidden combinations restraint commerce. stop there. aimed, practices penalized, suppression favorable opportunity, inseparable actual engage inimical performance duties Delaware, L. W.R. Co. 231 363, 370, 65, 66, 269; supra.' 504, 844, 1300.17 36 expresses letter return responsibility. again reenact once provided for, mandate nullified part misconstruction. 45, 45; 345, 345. 1(8). h e provides: 'From May first, nineteen hundred eight, State, Territory, Columbia, foreign country, authority, whole part, 50 Annual Report I.C.C. (1936). 76th Cong., 1st Sess., March (legislative day 28) 1939. Hearings (April 3, 1939). Id., 427 10, Ibid. (May 16, 8, extent gave revision excerpts 1939: opening hearing, Senator Wheeler, Chairman, stated 'to indirect.' During testimony oft General Counsel, Association American Railroads, colloquies place: 'Senator Reed. Judge, section language. marked 'O.K.' here. decisions Supreme E.J. E. case? 'Mr. Fletcher. get just moment. word. those drew H.R. 4862, undertake put recommendation Six well. 'Now people object companies kind. mention draftsmen prepared reflecting Six. Chairman. called phone prevented railroad, small operating. result.' Emphasis supplied.) relation that. One associates suggests, Senator, possibly minutes ago Reed, effect. disagree chairman, bold. currently discussing.' (Emphasis promptly perhaps rashly did, mind amendment, mention. willing Well, should. For instance, lumber You exempt that? company? Yes. altogether lumber. speaking, industrial Union Railroad know is. started shouting. 44, 22, reads: 'or affiliate' new, see. new. accord know, trifle try accomplish thing kind, reproduce existing law. very doubtful afraid cause readjustment. (case) (interposing). familiar Fletcher (continuing) brought directly, medium Illinois little confused Reed have. My recollection company—you call company—which corporation. contended o vernment freight violating directly commercial enterprises tonnage, tonnage owned. remember Brandeis, Cardozo dissented right. Stone wrote opinion. inclined (sic) presently constituted, minority view. express speak frankly, lawyer myself. Whether wise unwise, bill. logical Butler did. E.G. was.' (Justice McReynolds Court.) Later, Counsel Mississippi River System Carriers' Association, made: Bayles. also. tightened layman fear criticized, strange meet construction States. 'Testimony counsel coal operators following: White. Norman. Very substantial ones. substantial. 44. tried do, frank you, Norman goes understood respects? respect. no; says, around puts right.' coal-industry contract followed. Then: again, big certainly studied loaded dynamite concerned. mind, difficulties question, mind. Suppose reenacted 'In reenacting law, approved Court.' 1939, addition quoted body said: '* foolish waste talking clause) atement 'As before, tremendous upset lines business, pointed text, report stated: forbidding certain exceptions material (timber products) retained 12. Commodities Clause. retains 'commodities clause' (sec. 1(8) Act), therein.' 10. Comment, Clause Regulation Industrial 46 Yale L.J. 299; Col.L.Rev. 1175. approximately 57 including Some produce ore Chile, Venezuela, Cuba Upper Great Lakes regions; mines West Virginia Pennsylvania. Two operate ocean-going steamship lines, hauling plants subsidiaries. carries mining subsidiary. Seven officers directors, plants. assume favoring 'its versa.' factually domination plus former employees continue principal well 'Historical ties associations, combined strategic holdings stock, occasion potent substitute obvious modes control.' North Securities Exchange 327 686, 693, 785, 790, 90 945. S.Rep.No.443, Sess. 15; 427, 590, 772. expressly 'Judge, *. (sic), view.' 68. He later 'was States.' Id. 309. Wheeler (apparently primarily carriers): him, explained case.' 67, Three days point discussion, apparently refreshed frankly witness went considerably carrier's stock. merely reverse better form, laws Medes Persians.' 385. After version remarked: 'There Court." 386. dilemma. persuaded originally realized, hesitated old lest reenactment His today's reached outweighed risk 427; infra. Such choice hardly 'approval' 236, 284—286, 308—310, 385—387, 427—432, 623, 632, 633, 692, 753, 754, 926—928. 386, 589—597, 606—610, 612, 654—660, 736—742. 127, 432, 433. example, petroleum strenuously opposed effected divorcement producers. supra; id. 935. Opposition farm lobbies directed clause: 'Section appears endanger activities 100,000 farmers area cooperatively associated themselves who, exorbitant increasing grain, livestock, cooperative trucking associations trucks local regional cooperatives.' 432—433. 311. opposition, came adversly applicability supra. They out, far-reaching 65 privately merchant marine change. 772; abandon once. shorten witnesses 'You quit wasting your announcement yesterday hope idea given consideration, modified eliminated, concerned.' 590. Later felt, divorce, ships industry, subject, requires muc study, handled legislation. No question. provisions separate, past.' 6. 541; 285, 385, 421, 435, 841. 4.

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