Court Opinion

ID: 9418891
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:42:19.929969+00
Date Added: 2024-06-11T08:03:01.345690
License: Public Domain

Mr. Justícb McReynolds
delivered the opinion of the Court.
Appellee, incorporated under the laws of Illinois and Indiana, has been an interstate common carrier by railroad since 1884. It operates the “Chicago Outer Belt Line,” 195 miles long, which runs from a point on Lake Michigan, north of Chicago, around .that city to South Chicago, Gary and Porter, south and east. This line connects and interchanges freight with every railroad entering Chicago and serves many industrial plants. Among them are certain'large producers of steel and steel products, operated by corporations, sometimes called “Subsidiaries,” all of whose shares belong to the United States Steel Corporation: Illinois Steel' Company, American Bridge Company, American Sheet and Tin Plate Company, National Tube Company, American Steel and Wire Company, and Cyclone Fence Company. Transportation of' products—raw, semi-finished and finished—to and from and amongst the plants of the six' constitutes 60% of appellee’s business. It files tariffs and complies generally with the Interstate Commerce Act and Commission regulations. During the years 1926-1930, its annual operating revenue exceeded $20,000,000;
The United States Steel Corporation, a holding—non- . operating—corporation organized in 1901, then acquired and has ever since held, all shares of appellee, also all those of the producing companies.
By an Original Bill_filed 1930 (amended 1932), the United States instituted this proceeding against appellee, sole defendant, in the District Court, Northern Dis*498trict of Illinois. They alleged that by transporting articles manufactured, mined, produced, or owned by subsidiaries of the United States Steel Corporation, appellee violated the Commodities Clause of the interstate Commerce Act, Act June 29, 1906, c. 3591, 34 Stat. 584, 585; U. S. C., Title 49, § 1 (8), copied in the margin,1 and asked for an injunction prohibiting such action.
After answer, voluminous evidence and trial, the court below made findings of fact and announced an opinion. It concluded—
Mere ownership by the United States Steel Corporation of all shares of both appellee and a producing subsidiary was not enough to show that products made or owned by the latter were articles or commodities produced by the former, or under its authority,- or which it owned in whole or in part, or in which it had an interest, direct or indirect, and was forbidden to transport by the Commodities Clause.
Also, “no single piece of evidence taken alone, nor all taken together and considered as a whole warrant the inference that the defendant and the producing and manufacturing subsidiaries are under the domination, control, direction, and management-of the Steel Corporation, in the sense that the defendant and the other subsidiaries are mere departments, branches, adjuncts, and instrumentalities' of the Steel Corporation. The evidence fails to show that the defendant has any interest, direct or indi*499rect, legal or equitable, in the articles or commodities which it transports for the subsidiaries of the Steel Corporation.”
A final decree dismissed the Bill for want of equity and the cause is here by direct appeal (U. S. C., Title 49, § 45). Both conclusions are challenged and we are asked to reverse the decree and grant relief as originally prayed.
The Commodities Clause became part of the Interstate Commerce Act in 1906, U. S. C., Title 49, § 1 (8), and has remained without material change. It was first interpreted here- in United States v. Delaware & Hudson Co., (1909) 213 U.S. 366, 415, where, by Mr. Justice White, the Court said:
“We then construe the statute as prohibiting a railroad company engaged in interstate commerce from transporting in such commerce articles or commodities under the following circumstances and conditions: (a) When the article or' commodity has been manufactured, mined, or produced by a carrier or under its authority, and, at the time of transportation, the carrier has not in good faith before the act of transportation dissociated itself from- such article or commodity; (b) When the carrier owns the article or commodity to be transported in whole or in part; (c) When the carrier at the time of transportation has an interest, direct or indirect, in a legal or equitable sense in the article or commodity, not including, therefore, articles or commodities manufactured, mined, produced or owned, etc., by a bona fide corporation in which the railroad company is a stockholder.”
This construction has been accepted and followed in the later cases. United States v. Lehigh Valley R. Co., 220 U. S. 257, 266; United States v. Delaware, L. & W. R. Co., 238 U. S. 516, 526; United States v. Reading Co., 253 U. S. 26, 62; United States v. Lehigh Valley R. Co., 254 U. S. 255, 266.
*500Through Mr. Justice Lamar, the court said, in United States v. Delaware, L. & W. R. Co.—
“But mere stock ownership by a railroad, or by its .stockholders, in a producing company cannot be used aa test by which to determine the legality of the transportation of such company’s coal by the interstate carrier. For, when the Commodity Clause was under discussion, attention was called to the fact that there were a number of anthracite-roads which at that time owned stock in coal companies. An amendment was then offered which, if adopted, would have made it unlawful for any such road to transport coal belonging to such,- company. The amendment, however, was voted down;.and, in the light of that indication of congressional intent, the Commodity Clause was construed to mean that it was not necessarily unlawful for a railroad company to transport coal belonging to a corporation in which the road held stock. United States v. Delaware & Hudson Co., 213 U. S. 414. For a stronger reason, it would not necessarily be illegal for the road to transport coal belonging to a corporation whose stock was held by those who owned the stock of the railroad company.”
Notwithstanding the intent imputed to Congress by this opinion, announced in 1915, no amendment has been made to the Commodities Clause. We must, therefore, conclude that the interpretation of the Act then accepted has .legislative approval.
It is now insisted that, although a railroad company may own the shares of a producing company and yet transport the latter’s products without violating the Commodities Clause, if a holding company acquires the shares of both carrier and producer, then such transportation becomes illegal. The theory is that the subsidiaries of holding companies are necessarily no more than parts of' it. Evidently, this is entirely out of harmony with the reasoning advanced to support the construction of the *501Act adopted in United States v. Delaware & Hudson Co., supra; also in direct conflict with the above quoted language from United States v. Delaware, L. & W. R. Co.
Considering former rulings, it is impossible for us now to declare as matter of law that every company all of whose shares are owned by a holding company necessarily becomes an agent, instrumentality, or department of the latter. Whether such intimate relation exists is a question of fact' to be determined upon evidence. -
Counsel for appellants submit that the record compels the inference of fact that appellee and the subsidiary producing companies are but departments of the United States Steel Corporation; and that, as in United States v. Reading Co., supra, we should find the carrier is violating the Commodities Clause. It is not claimed that this inference derives from any single fact, but out of the mass. The following portion of the opinion in United States v. Reading Company is heavily relied upon— •
“But the question which we have presented by this branch of the case [alleged violation of the Commodities Clause] is not the technical one of whether ownership by a railroad company of stock in a coal company renders it unlawful for the former to carry the product of the latter, for here the railroad company did not own any of the stock of the coal company. The real question is whether combining in a single corporation the ownership of all of the stock of a carrier and of all of the stock of a coal company results in such community of interest or title in the product of the latter as to bring the case within the scope of the provisions of the act.”
And, having regard to this, they say—“The affirmative answer given in the Reading case is controlling here.”
Obviously, what was there stated cannot be taken as declaration of an abstract principle; it had application *502to the relevant circumstances. Later (pp. 61-62) in the same opinion the essential ones are revealed—
“All three of the Reading companies had the same officers and directors and it was under their authority that the mines were worked and the railroad operated, and they exercised that authority in the one case in precisely the same character as in the other—as officials of the Holding Company. The manner in''which the stock of the three was held resulted, and was intended to result, in the abdication of all independent corporate action by both the Railway Company and the Coal Company, involving as it did the surrender to the Holding Company of the entire conduct of their affairs. It would be to subordinate reality to legal form to hold that the coal mined by the Coal Company, under direction of the Holding Company’s officials, was not produced by the same ‘authority’ that operated the Reading Railway lines.”
If the evidence here showed the relationship between the holding company, the carrier, and the producing companies to be substantially as in the Reading case, that opinion well might be regarded as controlling.. But there is material difference and we must look elsewhere for guidance.
Properly to appraise the situation now presented particular attention must be given to the following facts. All shares of appellee and the subsidiary producing companies have been owned by the United States Steel Corporation since 1901. The railroad has been under constant supervision by the Interstate Commerce Commission. In The Matter of Alleged Rebates to the United States Steel Corporation, 36 I. C. C. 557, (1915). It functions as a separate corporate carrier under imme*503diate control of its own directors, no one of whom is on the board of the holding company; it owns all necessary equipment, makes its own contracts, manages its own finances, serves its patrons without discrimination and apparently to their satisfaction^ The lawfulness of the .relationship between the holding company and subsidiaries was challenged in United States v. United States Steel Corp., decided here in 1920, 251 U. S. 417. After long and thorough investigation and consideration, this court held the Anti-trust Act was not being violated. The present proceeding is one to prevent probable future unlawful conduct and not to punish acts long since completed, however reprehensible. “Our -consideration should be of not what the Corporation had. power to do or did, but what it has now power to do and is doing.” United States v. United States Steel Corp., supra, p. 444.
The court below made definite findings of fact and upon them reached the conclusions .stated above. Although criticized, and notwithstanding certain isolated acts may indicate undue control over thé carrier at their dates, we think that the findings are essentially correct and support the decree. Instances of participation in the affairs of the appellee by the officers of the United States Steel Corporation, stressed by counsel, are relatively few; a material part of them occurred years ago—some of the more important in 1909. They are not adequate to support the claim that appellee must be regarded as the alter ego of its sole stockholder. The mere power to control, the possibility of initiating unlawful conditions, is not enough, as clearly pointed out in United States v. Delaware & Hudson Co., supra. That a stockholder should-show concern about the company’s affairs, ask for reports, sometimes consult with its officers, give advice and even *504object to proposed action is but the natural outcome of a relationship not inhibited by the Commodities Clause.
We find no adequate reason for disapproving the challenged decree and it must be

Affirmed.

 From and after May first, nineteen hundred and eight, it shall be unlawful for any railroad company to transport from any State, Territory, or the District of Columbia, to any other State, Territory, or the District of Columbia, or to any foreign country, any article or commodity, other than timber and the manufactured products thereof, manufactured, mined, or produced by it, or under its authority, or which it -may own in whole, or in part, or in which it may have any interest, direct or indirect, except such articles or commodities as may be necessary and intended for its use in the conduct of its business as a common carrier.