Court Opinion

ID: 9304249
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:15:18.242427+00
Date Added: 2024-06-11T17:13:49.679457
License: Public Domain

GROSSCUP, Circuit Judge.
The bill in No. 29,247 is to restrain the Interstate Commerce Commission from putting into force an order entered June 24th, 1908, relating to rates from the Atlantic sea*681board to the Missouri River. Since the filing of the bill, six railroads, other than the complainants, have intervened; as also nine individuals and corporations, representatives of the trade and manufacturing interests of St. Louis, Chicago, Milwaukee, Detroit and Cleveland. To defend the order, certain commercial and manufacturing firms in Missouri River cities have also intervened. Indeed, the contest, in its larger aspect, is a contest, not so much between the shippers and the railroads, as between the commercial and manufacturing interests of the Missouri River cities and of the Atlantic seaboard on the one part (their interests being identical) and the commercial and manufacturing interests of what is known as the Central Traffic territory (the territory west of Buffalo, Pittsburg and Parkersburg, and east of the Mississippi River) on the other part.
The bill in No. 29,472 is a bill to restrain the Interstate Commerce Commission from putting into force an order entered on the 2d day of March, 1909, on complaint of George Kindel, a manufacturer of Denver, Colorado, relating to joint rates from Chicago and St. Louis to Denver; the question raised, in its larger aspect, being again a question, not so much between the shippers and the railroads, as between the commercial and manufacturing interests of Denver and of the territory east of the Mississippi River on the one side, and the commercial and manufacturing interests of the Missouri River cities on the other.
Case No. 29,247 is on final hearing, while case No. 29,472 is upon a motion for a tempórary injunction upon the bill and a demurrer thereto. In the latter case certain affidavits were filed which, in view of the conclusion to which we have come, it is unnecessary to consider.
The rate now in force from the Atlantic seaboard to the Missouri River, on first class matter, is $1.47 per hundred pounds. The proposed reduction by the Commission is to $1.38 per hundred pounds. The through rate now in force on the same matter from the Atlantic seaboard to the Mississippi River is 87 cents per hundred pounds, which, plus the through rate from the Mississippi'River to the Missouri River (60 cents per hundred pounds) makes the same total, $1.47 per hundred pounds, as the rate from the Atlantic seaboard to the Missouri River. It is not proposed by the Commission that these through rates, or cither of them, should be reduced. On the contrary, the Commission proposes to retain them, to the end that the manufacturers and jobbers on the Atlantic seaboard may deliver their goods to the Missouri River cities on a joint rate nine cents less per hundred pounds on first class matter (and a corresponding differential upon second, third and fourth class matter) than would be done if the goods, or (in the case of manufacturing) the raw material going into the goods, were first sent to the cities in the Mississippi River territory, and then re-sent from those cities to the Missouri River cities.
The joint rate now in force from Chicago to Denver, on first class matter, per hundred pounds, is $2.05, and from St. Louis to Denver,’ $1.80. The proposed reduction by the Commission is to $1.80 in the Chicago rate, and $1.62 in the St. Louis rate — the through rates, however, from Chicago and St. Louis to the Missouri River cities, and *682from the Missouri River cities to Denver, to remain unchanged — the effect of which will be that the manufacturers and jobbers to the eastward of the Mississippi River may deliver their goods to Denver at a joint rate of 23 cents less per hundred pounds, on first class matter— and a corresponding differential on second, third and fourth class matter — by way of St. Louis, and approximately the same by way of Chicago, than would be done if the goods, or, in the case of manufacturing, the raw material, were first sent to the cities along the Missouri River and then re-sent from those cities to Denver; from which it is apparent that, whatever may be the principle on which these orders are based, the effect will be, by means of the differentials named, to protect to a certain degree the Missouri River jobbers and manufacturers within a given zone of territory against the jobbers and manufacturers m the Central Traffic Association territory, and to protect, to a certain degree, the Denver jobbers and manufacturers, within a given zone of territory, against the competition of the Missouri River jobbers and manufacturers, as also to open up to the Atlantic seaboard, in its trade with both the Missouri River and the Denver zones of territory, the advantages contained in the differentials, against the competition of both the intervening Central Traffic Association territory and the Missouri River territory. That such a power, exercised upon any principle outside of cost of carriage, or the conditions created by competitive carrying lines, or any other natural conditions, and exercised with substantial effect — power artificially to apportion out the country into zones tributary to given trade centers to be predetermined by the Commission, and non-tributary to others — would be a power. essentially different in principle from the mere power of naming rates that are reasonable, is, we think, too clear on its face to render discussion necessary.
There is no testimony that the cost of carriage from the Atlantic seaboard to the Missouri River, or the cost of carriage from Chicago and St. Louis to Denver is less on through traffic than on traffic that goes first to the Mississippi River and then is re-shipped to Missouri River cities, or that goes first to Missouri River cities and then is reshipped to Denver. On the contrary, it was stated at the argument and not controverted, in the case of shipments from the Atlantic seaboard to the Missouri River cities, that the cost of service is not greater on re-shipments than on through shipments. Cost of service, therefore, is neither the principle upon which the Commission’s orders are founded nor the purpose for such orders.
There are no natural competitive carrying lines, such as the water lines that affect rates to Minneapolis and St. Paul, or to the Gulf cities, or to the Pacific Coast, that call for or suggest a less joint rate in either of these cases than the sum of the two through rates. Indeed, no suggestion, based upon competitive lines of carriers, or upon increased cost of service, or upon any other consideration than the one hereafter named, is offered as a reason for the orders of the Commission involved.
What then is the principle upon which the orders of the Commission are based; what their purpose; and what will be their effect ? Upon *683the answer to these questions the power of the Commission to make the orders turns.
The trade centers of the country, as they exist to-day, have grown up as the result of conditions, some of them natural, and some of them more or less artificial. For many years the Mississippi River was the country’s frontier. To reach it, the eastern roads were built and consolidated, and at the Mississippi River they stopped. In time the frontier was pushed to the Missouri River. To reach that country, the western roads were built; from the Mississippi River they started; and at the Missouri River all the earlier ones stopped. The Mississippi River thus became a dividing line between the eastern and the western system of carriers, and on that account, perhaps more than for any other reason, became what is known as a base line for the fixing of through rates; that is to say, through rates from the Atlantic seaboard were made to the Mississippi River somewhat less than the sum of the intermediate local rates, and through rates were made from the Mississippi River westward somewhat less than the sum of the intermediate local rates; no rate, however, through or joint, before the orders here involved, having been made that ignored the Mississippi River as the base line. Subsequently, the Missouri River became a dividing line between the railroads east of it and the railroads west of it — becoming at the same time a base line for the fixing of through rates; that is to say, through rates were made to the Missouri River, from the eastward, somewhat less than the sum of the intermediate local rates between the rivers; and through rates were made from the Missouri River westward somewhat less than the sum of the intermediate local rates; none o E the rates, however, ignoring the Missouri River as the base line.
That the purpose of the Commission, in the orders involved, is to annul these conditions upon which the trade centers of the country have grown up, interposing a rate-making principle entirely different, is not controverted. That principle, as stated by the Commission itsel f, in its most general terms, is that the rates “through” the basing lines — that is, from any point east of such basing line to any point west of such basing line — shall always be less than the sum of the rates from the initial point to the basing line and from the basing line on to the point of delivery. As thus stated, the principle, abstractly, may not be wrong. We are not prepared to say that the Commission has not power to enter upon a plan looking toward a system of rates wherein the rates, for longer and shorter hauls, will taper downward according to distance, provided such tapering is both comprehensively and symetrically applied — applied with the design of carrying out what may he the economic fact that, on the whole, it is worth something less per mile to carry freight long distances than short distances.
But it does not follow that power of that character includes power, by the use of differentials, to artificially divide up the country into trade zones tributary to given trade and manufacturing centers, the Commission, in such case having, as a result, power to predetermine what the trade and manufacturing centers shall be; for such a power, vaster than any that any one body of men has heretofore exercised, *684though wisely exerted in specific instances, would be putting in the 'hands of the Commission the general power of life and death over every trade and manufacturing center in the United States.
Now, is it this power — the one last stated — that the Commission, in the orders before us, is actually exerting? And will the effect of these orders be to put such power, on the part of the Commission, into substantial effect? These are the questions on which these cases turn.
That the Commission, in the orders under consideration, is entering upon the exercise of such power, and intentionally doing it, is, we think, clearly shown:
(a) By the express avowal of the Commission, in the body of its opinion in case No. 29,247 (giving the reasons why the inter-river rates are not reduced). The occasion that gave rise to the order in favor of the Missouri River cities was the complaint that St. Paul and Minneapolis could invade territory naturally tributary to the Missouri River cities, because of the lower joint rate from the seaboard to the Twin Cities than from the seaboard to the Missouri River cities.; and one of the purposes of the Commission in reducing the rate between the Mississippi and the Missouri Rivers, as part of the seaboard-Missouri River joint rate, undoubtedly was to ameliorate that disadvantage. But that an additional purpose was to protect the Missouri River cities against the competition of the trade and manufacturing of the Central Traffic Association territory, and to give to the Atlantic seaboard advantages in rates'over Central Traffic territory, is clearly set out in the opinion, as follows:
“That if the local rates between the Mississippi and Missouri Rivers were reduced, it would give the same degree of advantage to all the producing and distributing centers on and east of the Missouri River, and their relative advantages and disadvantages would not be changed
And also by this further paragraph in the opinion:
“It seems patent that any change in the rates east of the Mississippi River, even if warranted, would fail to accomplish what the complainants desire, because whatever of advantage accrued therefrom to Missouri River cities, would accrue to a like degree or extent to their principal competitive commercial centers
(b) By the fact that there was no inquiry by the Commission respecting the “reasonableness” or “unreasonableness” of the rates between the Mississippi River and the Missouri River, or between the Missouri River and Denver, other than on the zone theory of apportioning trade — no attempt to arrive at a rate that would be reasonable, other than on the postulate that there must be a differential against the Central Traffic territory in favor of the Missouri River cities, and against the Missouri River cities in favor of Denver; and by the fact,
(c) That the Commission, under circumstances inviting explanation, does not disavow its claim of power, or the effect of these orders. The excerpt quoted from the Commission’s opinion in 'the Missouri Rivei rate hearing, was used as the ground upon which the preliminary order in No. 29,247 was chiefly based. Since that time, the Commission has spoken in the Denver rate hearing and also in its annual report. In neither has there been a disavowal of the power said to be claimed or the effect said to be produced; and
*685(d) By the differentials themselves — differentials in both cases that bear no indication whatever that they are parts of a comprehensive and symmetrical tapering system based on the possible economic fact that, on the whole, it is worth less per mile to haul long distances than short distances; but, on the contrary, differentials that are applied at given lines abruptly and decidedly — just so adjusted as to protect the one zone against the competition of the other. Indeed, it is our judgment that the Commission believes itself possessed of this power-claims such power as belonging to it under the law, and as beneficial to the trade and commerce of the country — and that if the question were put plainly to that able body of men, there would be no effort to conceal their ultimate purpose under any pretext that, in the orders under review, they were dealing merely with the “reasonableness” or “unreasonableness” of the specific rates involved.
Such being, in our judgment, the principle on which the orders were actually based, and the purpose of the Commission, the question remains, what is their substantial effect? Much testimony on that question has been introduced. A. manufacturer of fiber cans in Detroit, testifies that his principal competitors are on the Atlantic seaboard; that from the east he gets his raw material, paying regular railroad rates; that considering the rates as they now are, the eastern man gets to the Missouri River country on an even basis with him; hut that if the differential in the order is applied, it will give to the seaboard, as the place for the manufacturing of cans, an 'advantage in trade with the Missouri River cities that will put the Detroit manufacturer, so far as that field is concerned, out of business. “Business is done on such a close margin that that would control the business. He [the eastern competitor] would get it and I would lose it.” In other words, in such manufactures, where the Central Traffic Association territory must bring its raw material, or a substantial part of it, from the east, with no differential in their favor, the differential that the Commission applies, in the orders before us, would make it commercially disadvantageous to have the manufactory located in Central Traffic Association territory. Or, as Mr. Hill tells us, respecting the application of zone rates in Australia, the centers of manufacturing and trade would build up at the ends of the lines only.
The Sherwin-Williams Company, manufacturers of varnish, paint, etc., at Cleveland, say:
“Raw material brought into the seaboard and shipped west to Chicago and the Mississippi River is on the basis of fourth class rate. The same is true with regard to the manufactured product. AVere the manufacturers on the seaboard allowed the differential of four cents between the rivers, I can see no other way but what it would actually close the varnish factories west of Buffalo if such a combination wore strong enough or cared to control the entire output.”
And again:
“Assuming our profits were 20 cents a hundred pounds and the new ad.-justment occasioned a diminution of profits to 16 cents, I think our establishment would be wiped out of business. There is no question but that the eastern manufacturers would fill (lie territory with their salesmen and get the business until you could not do business at a profit.”
*686Whitelaw Brothers, of St. Louis; jobbers and commission merchants in heavy chemicals, say: That should an attempt be made to add to the advantage that Missouri River cities already get in the way of carload commodity rates — two, three, five, seven or nine cents a hundred more — the result would be that they could not do business in the Missouri River country; “that two cents a hundred in the lot of. merchandise that we handle is our profit, and we don’t always get it.”
Other witnesses testify to the same effect; many of them admitting, however, that the differential would not wipe out their profits; but all of these insisting that the very fact that their seaboard competitors could say to the merchants in the Missouri River country that the seaboard had an advantage of nine cents in freight over the intervening Central Traffic Association territory would create such an impression upon the minds of the Missouri River dealers as to put the manufacturers in the intervening territory at a great disadvantage.
It was said at argument that in none of these cases was the entire profit wiped out — that in many cases, on the contrary, in Central Traffic territory, owing to natural advantages, the profits even then would remain larger to the Central Traffic territory manufacturer than to his seaboard competitor. But that is not the point of the inquiry. The inquiry is not, are the.trade and manufacturing of the intervening zone put out of competition; but are they, by this artificial differential, put at a disadvantage in competition that they otherwise would not suffer; for unless the Commission has power over the trade and manufacturing of the country, every commercial house and manufacturer is entitled to all the .advantages that .their natural situation gives them. And why, unless the effect is a substantial one, was it sought by the initiating commercial and manufacturing interests of the Missouri River cities, and why is it asked for by the manufacturing interests of the seaboard? Is it not enough, upon the question presented to us, that the change is wanted by those, who know better than we do, its value to them, and is resisted by those, who know better than we do, its disadvantages to them? Indeed, but for the consciousness of the Commission that by such differentials natural advantages in the way of competition could be overcome, these orders would never have been entered, for their very purpose was to countervail the differentials that the Twin Cities, by reason of their natural situation, had been obtaining — differentials only a little larger than the ones here involved.
That being the case, the question recurs, what power on this subject did Congress intend to confer upon the Commission? The manufacturers of the Atlantic seaboard say that inasmuch as their competitors in the Central Traffic, Association territory are in closer proximity, both to the consumers of the West and to the raw material originating in the West, as in the case, for instance, of the shoe and leather industry, it is only fair that a rate differential may be interposed that, 'to some extent, will counterbalance such disadvantages. Did Congress intend, in the Interstate Commerce Act, that this, counterbalancing power should be given to the Interstate Commerce Commission? The merchants and jobbers of the Missouri River cities claim that as against the merchants and jobbers of St. Louis, Chicago and Milwau*687bee, the jobbing centers next contiguous to them (and it appears that the jobbing trade is largely dependent upon contiguity), they are fairly entitled to the trade of the Missouri River territory; and likewise, the merchants and jobbers of Denver, as against the merchants and jobbers of the Missouri River cities next contiguous to them, claim that they are fairly entitled to the trade of the territory tributary to Denver. Did Congress intend to confer upon the Commission, through its supervision over rates, power to determine the fairness of such claims, and to carry out such determination ? The protective tariff policy of the nation, as a nation, against the competition of alien nations, has been carried out by Congress in the imposition of rates or burdens upon imported articles. Did Congress intend, in the ‘Interstate Commerce Act. to extend that principle so as to have it protect given zones into which the country, intraterritorially, might be divided, against the natural advantages of contiguous zones, to be effectuated by the fixing of carrier rates as the general protective principle is effectuated by the fixing of customs rates by Congress? Tf so, the first and necessary step would have been to have conferred upon the Commission power, full and express, to fix rates.
But when we come to the Interstate Commerce Act (Act Feb. 4, 1887, c. 104, 24 Stat. 379 [U. S. Comp. St. 1901, p. 3154]), we find that Congress has left the fixing of rates initially, not with the Commission. but with the railroads. The sole power conferred upon the Commission is, in any given case of a rate being found unreasonable iti the amount charged, or unduly discriminatory between individuals or localities, to command the carrier to desist, and, as a corrective, to name a rate in the place of such given rate that will not be unreasonable or unduly discriminatory. These provisions, as we read them, were designed, so far as localities are a factor in the question, to prevent localities from being built up or destroyed by artificial rates, not to continue the policy that, by artificial rates, builds up and destroys localities — to take away from the railroads tlie power of life and death over the manufacturers and commerce of given localities, not to transfer such power to the Commission or any other single body of men. Possibly there remains to the railroads, as the law now stands, power to lower the rates “to what the traffic will bear” — temper the rates to peculiar conditions — in the case of some new promise of commerce struggling to get upon its feet; moved thereto, as a matter of course, by tlieir judgment that what may appear to be largely a matter of benevolence now will turn out to he a sagacious and profitable planting of seed. But surely Congress did not intend to invest the Commission with power to compel the railroads to make such ventures. Nor could the railroads themselves enter upon them as parts of a scheme to rearrange trade zones and trade centers. Indeed, it was largely upon the complaint that such power was the exercise of arbitrary power, and was being usurped by the railroads, that led Congress, in the fir,st instance, to enact the Interstate Commerce Act; and until Congress speaks with more certainty than it lias already spoken, we do not feel at liberty to read into the act an intention that the manufacturers and commerce of any given locality have, by the enactment of the Inter*688state Commerce Law, simply been changed from the keeping of the railroads to that of the Commission.
The right of the courts to review these orders is challenged, and Union Bridge Company v. United States, 204 U. S. 364, 27 Sup. Ct. 367, 51 L. Ed. 523, is urged upon us as a ruling of the Supreme Court of the United States that the finding of the executive power of the Government, when such finding is constitutionally committed to the executive power by law, shall not be reviewed by the courts. With that case, we -have no dispute. In that case the act clearly put it within the power of the Secretary of War to determine whether the bridge involved was an unreasonable obstruction of the Allegheny River; and the bestowal of that power on the Secretary of War was held to be constitutional. The whole question, therefore, in that case, was a question of fact, constitutionally committed by the law to the executive department of the Government.
But in the case here, the question involved is not a question of fact, but a question of power — the question is not whether, by the application of correct principles, a given rate has been decided-by the Commission to be unreasonable, but whether the principles applied are themselves within the power of the Commission; for Congress did not intend to confer upon the-Commission power to do by indirection what it could not directly do — did not intend to include within the word “reasonable” every power over the trade and manufacturing of the country that the Commission should determine it was reasonable that it (the Commission) should possess.
Again, it is urged that though the effect of the order in the Missouri River case is to discriminate in favor of the Atlantic seaboard and the Missouri River cities against the Central Traffic territory, and in the Denver case in favor of Denver and the east Mississippi River country against the Missouri River cities, the discrimination is not “undue” within the meaning of the Interstate Commerce Act; and that therefore the Courts have no power to enjoin. The difficulty with this argument is that it draws no distinction between the power that the Commission is actually given — a power that carries with it, as a necessary incident, the right to make discriminations if they be not “undue”— and a power that the Commission is usurping; no distinction between the case where the question is whether a lawful power is unlawfully exercised, and a case where the question is, is there any law at all for the power claimed. Were the Commission exercising its power under the Interstate Commerce Act, attended with discrimination, the question would be whether the discrimination was “undue.” But here the question is not one of discrimination, due or undue, -under the Interstate Commerce Act; but has the Commission any power to do what it is seeking to do? No question of discrimination being “undue” arises, except in the wholly different sense of whether the advantages and disadvantages artificially accruing to the localities affected are substantial enough to call for the interposition of a court of equity.
In No. 29,247 a permanent injunction will be granted.
In No. 29,472 the temporary injunction prayed for will be granted.
It must be understood, however, that these orders of the Commission *689are enjoined solely because, in our judgment, they lay upon the commerce and manufacturing of the localities affected an artificial hand that Congress never intended should be put forth, and therefore are outside the power conferred on the Commission by Congress; for with the question of a reduction in rates, or a re-adjustment of rates, from which such artificial results have been eliminated, we are not now dealing.
KOHLSAAT, Circuit Judge, concurs.