Opinion — Skinner & Eddy Corp. v. United States

A iy SALE RS PRONE nae A 5

SKINNER & EDDY CORP. ». UNITED STATES. 557

Syllabus.

SKINNER & EDDY CORPORATION v. UNITED

STATES ET AL.

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE DISTRICT OF OREGON.

No. 215. Argued March 11, 1919.—Decided May 5, 1919.

Where a suit to enjoin the enforcement of an order of the Interstate

Commerce Commission is based upon the ground that the order

exceeded the statutory powers of the Commission and, hence, is

void, the courts may entertain jurisdiction notwithstanding no

attempt has been made by the plaintiff to obtain redress from the

Commission itself. P. 562.

Where rates allowed by the Commission in a proceeding initiated by

carriers for relief from the long and short haul clause were later

increased as a result of orders made when the proceeding was re-

opened on the application of a state commission and a merchants

association, held, that the new orders were to be regarded as resting

upon the original petition of the carriers, so that, under the juris-

dictional Act of October 22, 1913, a suit to enjoin their enforcement

was properly brought in a judicial district where one of the carriers,

a party defendant, had its residence. P. 563.

The clause in § 4 of the Commerce Act, as amended June 18, 1910,

providing that when a railroad carrier shall, in competition with a

water route, reduce rates between competitive points, it shall not be

permitted to increase them unless, after hearing by the Commis-

sion, it shall be found that the proposed increase rests upon changed

conditions other than climination of water competition, has no

application where the reduction was with the approval of the Com-

mission, ordered after hearing, upon application by the carrier for

relicf from the long and short haul clause. P. 564.

Held, that, in this case, changed conditions “other than the elimina-

tion of water competition,’ were found by the Commission. P. 569.

An order under § 4 of the act, granting relief from the long and short

haul clause, is subject to future modification by the Commission

without any application from the carrier. P. 570.

Affirmed.

THE case is stated in the opinion.

Sy eS fem fa

FOO Se ee

ae HANS

DAS OCTOBER TERM, 1918.

Opinion of the Court. 49 U.S.

Mr. Joseph N. Teal, with whom Mr. Wiliam C. Mc-

Culloch, Mr. L. B. Stedman and Mr. W. E. Creed were

on the brief, for appellant.

Mr. Assistant Attorney General Frierson for the United

States.

Mr. Albert L. Hopkins, with whom Mr. P. J. Farrell

was on the brief, for the Interstate Commerce Com-

mission.

Mr. John F. Finerty, with whom Mr. E. C. Lindley,

Mr. M. L. Countryman, Mr. Charles Donnelly, Mr. O. W.

Dynes and Mr. A. C. Spencer were on the brief, for the

appellee railroad companies.

Mr. Justick Branpets delivered the opinion of the

court.

The last paragraph of § 4 of the Act to Regulate Com-

merce, as amended by Act of June 18, 1910, c. 309, § 8,

36 Stat. 539, 547, declares that: ‘‘Whenever a carrier by

railroad shall in competition with a water route or routes

reduce the rates on the carriage of any species of freight

to or from competitive points, it shall not be permitted

to increase such rates unless after hearing by the Inter-

state Commerce Commission it shall be found that such

proposed increase rests upon changed conditions other

than the elimination of water competition.”

On August 21, 1916, Skinner & Eddy Corporation

brought this suit in the District Court of the United

States for the District of Oregon to enjoin an increase

in carload rates on iron and steel products from Pitts-

burgh to Seattle. The United States, the Commission,

and sixteen railroads were joined as defendants. The

bill charged that the action of the carriers in increasing

SKINNER & KDDY CORP. ». UNITED STATES. 559

557. Opinion of the Court.

their rates and that of the Commission in authorizing

such increase violated the above provision of the Com-

merce Act and, being beyond their respective powers,

was void. The relief asked against the carriers was to

prevent the collection of the proposed increased rates

until the ‘“‘Commission shall have held a hearing to de-

termine whether the proposed increases rest upon changed

conditions other than the elimination of water competi-

tion.”’ The relief asked against the Commission was to

prevent its taking any steps to enforce certain orders

“so far as the same permit” such increases. An appli-

cation for an interlocutory injunction heard before three

judges on December 29, 1916, was denied; and later the

bill and a supplemental bill, filed December 16, 1916,

were dismissed on the ground that they do not state

any cause of action. The case comes here by direct

appeal. The essential facts are these:

After the decision by this court in Jntermountain Rate

Cases, 234 U. S. 476, and while the Sacramento Case

(United States v. Merchants & Manufacturers Traffic

Association, 242 U. S. 178) was pending in the District

Court, carriers forming connecting lines between Pitts-

burgh and Seattle applied to the Commission in the

same proceeding for further modification of Amended

Fourth Section Order No. 124, so as to permit a reduction

in carload rates on iron and steel products from Pitts-

burgh to Seattle without making such reduced rates

applicable to intermediate points of destination. An

order granting leave for a reduction from 80 cents! to

65 cents per 100 pounds was entered March 1, 1916.

Rates on Tron and Steel Articles, 38 I. C. C. 237. The

carriers soon thereafter filed tariffs making that reduction

' 80 cents was the specific published rate; but the combination of

the Pittsburgh-Chicago rate of 18.9 cents and the Chicago-Seattle

rate of 55 cents was 73.9 cents, and it was at this rate that the traffic

from Pittsburgh actually moved.

ES ES .

EEE LAE EL EN LIN TEE LET EAO POEL LALEY OY HAE PRN AD fh

SRT

PT RR Me RR

cae

560 OCTOBER TERM, 1918.

Opinion of the Court. 249 U.S.

effective April 10, 1916; and on that date the 65-cent

rate became operative.

During March, 1916, two applications had been made

to the Commission in the same proceeding on behalf of

shippers to reopen for further consideration other fourth

section applications of carriers concerning westbound

transcontinental rates and for modification of orders

issued thereon. The petitioners for such modification

were the Spokane Merchants’ Association and the Rail-

road Commission of Nevada, which had theretofore taken

an active part in the proceedings (Railroad Commission

of Nevada v. Southern Pacific Co., 21 1. C. C. 329; Com-

modity Rates to Pacific Coast Terminals, 32 1. C. C. 611).

Their prayer was for removal of the existing discrimina-

tion in transcontinental freight rates against the inter-

mountain territory and in favor of the Pacific Coast

ports. The ground alleged for seeking the modification

was that by reason of slides in the Panama Canal and the

increased demand for shipping due to the World War,

water competition, which had theretofore been held to

justify lower rates to the Pacific Coast ports, had in large

part disappeared. Thereupon the Commission reopened

on April 1, 1916, these applications, including that on

which was entered the order of March 1, 1916, respecting

iron and steel rates from Pittsburgh to Seattle; and a

hearing was ordered “respecting the changed conditions

which are alleged in justification of a modification of the

Commission's orders.”

None of the railroads had requested the reopening of

the applications or the hearing; and when it was held,

all opposed further modifteation of the transcontinental

‘utes. No increased rates were proposed by them; and

no specific increased rates were considered by the Com-

mission. The petitioners introduced evidence respecting

the changed conditions as a basis for modifying the

several fourth section orders. On June 5, 1916, the Com-

eS So - ¥ ELE PE OLN Ty

Ps

SKINNER & EDDY CORP. v. UNITED STATES. 561

557. Opinion of the Court.

mission filed a report (Reopening Fourth Section A pplica-

tions, 40 I. C. C. 35) in which it found that while the

Panama Canal had been meanwhile reopened there was

not then ‘‘any effective water competition between the

two coasts” or likely to be any in the near future, and

that ‘‘the war and an unparalleled rise in prices for ocean

transportation have so changed the situation as to trans-

form a relation of rates which was justified when estab-

lished to one that is now unjustly discriminatory against

intermediate points.” It found also that these conditions

were temporary. An order (amended July 13, 1916) was

then entered, effective September 1, 1916, rescinding

those previously entered on the several applications of

carriers, including that of March 1, 1916, authorizing

the 65-cent Pittsburgh-Seattle rate; and the carriers

were directed to reduce the degree of discrimination then

existing in favor of Pacific Coast ports as against inter-

mediate territory.

Upon entry of this order the carriers filed tariffs ef-

fective September 1, 1916, raising, among others, the

Pittsburgh-Seattle iron and steel rates from 65 cents to 94

cents. Promptly, on August 4, 1916, Skinner & Eddy

Corporation protested, requested that the tariffs be

suspended until a hearing could be had thereon, and

alleged that the proposed increase violated, as later set

forth in its bill of complaint, the last paragraph of the

fourth section. Their request was not then granted.

Thereafter, by action of the Commission and the carriers,

not necessary to detail, the effective date of the tariff

fixing the 94-cent rate was postponed to December 30,

1916; and meanwhile these tariffs were, with »onsent of

the Commission, canceled upon the understanding that

new tariffs fixing a 75-cent rate effective on that day

would be filed. When the 75-cent rate was filed, Skinner

& Eddy Corporation again protested on the same ground

and made, as theretofore, the same request for a sus-

BAP ag tT

FOLIOS NORE LE TEEN EGE EMER § 66 HS

+

W2 OCTOBER ThRM 1918.

Opinion of the Court. 249 U.S.

pension of the tariffs and a hearing; and again the request

was not granted.

First. The defendants contend that the District Court

did not have jurisdiction of the subject-matter of this

suit ; because orders entered in a fourth section proceeding

cannot be assailed in the courts; at least, not until after

a remedy has been sought under §§ 13 and 15 of the Act

to Regulate Commerce. This contention proceeds ap-

parently upon a misapprehension of plaintiff's position.

If plaintiff had sought relief against a rate or practice

alleged to be unjust because unreasonably high or dis-

criminatory, the remedy must have been sought pri-

marily by proceedings before the Commission, Loomis v.

Lehigh Valley R. R. Co., 240 U.S. 43, 50; Texas & Pacific

Ry. Co. v. American Tie & Timber Co., 234 U.S. 138, 146;

The Minnesota Rate Cases, 230 U. 3. 352, 419; Robinson

v. Baltimore & Ohio R. R. Co., 222 U.S. 506; Baltimore

& Ohio R. R. Co. vy. Pitcairn Coal Co., 215 U. 8. 481; and

the finding thereon would have been conclusive, unless

there was lack of substantial evidence, some irregularity in

the proceedings, or some error in the application of rules

of law, Manufacturers Ry. Co. v. United States, 246 U.S.

457, 482; Pennsylvania Co. v. United States, 236 U.S. 351,

361; Los Angeles Switching Case, 234 U. 8. 294, 311; Kansas

City Southern Ry. Co. v. United States, 231 U.S. 423, 440;

Procter & Gamble Co. v. United Slates, 225 U.S, 282, 297-

298; Interstate Commerce Commission vy. Union Pacific

R. R. Co., 222 U.S. 541. But plaintiff does not contend

that 75 cents is an unreasonably high rate or that it is

discriminatory or that there was mere error in the action

of the Commission. The contention is that the Com-

mission has exceeded its statutory powers; and that, hence,

the order is void. In such a case the courts have juris-

diction of suits to enjoin the enforcement of an order,

even if the plaintiff has not attempted to secure redress

in a proceeding before the Commission. /nterstate Com-

SKINNER & EDDY CORP. v. UNITED STATES. 563

557. Opinion of the Court.

merce Commission v. Diffenbaugh, 222 U.S. 42, 49; Loutsi-

ana & Pacific Ry. Co. v. United States, 209 Fed. Rep.

244, 251; Atlantic Coast Line R. R. Co. v. Interstate Com-

merce Commission, 194 Fed. Rep. 449, 451. The Sacra-

mento Case, supra, was a case of this character. Compare

Interstate Commerce Commission v. Louisville & Nashville

R. R. Co., 227 U. 8. 88, 92; Southern Pacific Co. vy. Inter-

state Commerce Commission, 219 U. 8. 433. The District

Court properly assumed jurisdiction of this suit.

Second. The defendants contend, also, that if the subject-

matter was within the jurisdiction of a District Court of

the United States, it was not within that of Oregon.

The objection is based upon the Act of October 22, 1913,

¢. 32, 38 Stat. 208, 219, which declares: ‘‘The venue of

any suit hereafter brought to enforce, suspend, or set

aside, in whole or in part, any order of the Interstate

Commerce Commission shall be in the judicial district

wherein is the residence of the party or any of the parties

upon whose petition the order was made.’’ And it is

asserted that the parties upon whose petition the order was

made, are the Merchants’ Association of Spokane, a resi-

dent of the Eastern District of Washington, and the Rail-

road Commission of Nevada, a resident of the District

of Nevada. The applications of these parties, filed in

March, 1916, were doubtless instrumental in securing a

reopening of the proceedings which resulted in the order

complained of. But the proceedings in which the order

was made were the original applications of carriers for

rclief under the fourth section. The report and the order

are entitled, ‘‘In the Matter of Reopening Fourth Section

Applications.”’ One of the carriers which had made such

application for relief from the provisions of the fourth

section was a resident of Oregon, namely, the Oregon-

Washington Railroad and Navigation Company; and as

it was joined as defendant in the suit, the District Court

for Oregon had jurisdiction over the parties.

A 8 eae ATI he illo 5

S64 OCTOBER TERM, 1918.

Opinion of the Court. 249 U. 8.

Third. The main contention of plaintiff is that, as the

carriers had in 1916 reduced the rate from 80 cents to

65 cents, neither the carriers nor the Commission had

power to increase the rate without a prior finding by the

Commission upon proper hearing ‘that such proposed

increase rests upon changed conditions other than the

elimination of water competition ;’’ and that no such hear-

ing had been had or finding made.

In construing this provision it is important to bear in

mind the limits of the Commission's control over rates.

Neither the Act to Regulate Commerce nor any amend-

ment thereof has taken from the carriers the power which

they originally possessed, to initiate rates; that is, the

power, in the first instance, to fix rates or to increase or

to reduce them.' Legislation of Congress confers now

upon the Commission ample powers to prevent by direct

action the exaction of excessively high rates. The original

act, proceeding upon the common-law rule which pro-

hibits public carriers from charging more than reasonable

rates, gave the Commission power to declare illegal one

unduly high; but even after such a determination the

Commission lacked the power to fix the rate which should

be charged. Cincinnati, New Orleans & Texas Pacific

Ry. Co. v. Interstate Commerce Commission, 162 U. 8. 184,

196-197; Interstate Commerce Commission v. Cincinnati,

New Orleans & Texas Pacific Ry. Co., 167 U. S. 479;

Interstate Commerce Commission v. Alabama Midland Ry.

Co., 168 U. 8. 144, 161. Effective control was not secured

until the Act of 1906 had given to the Commission the

' By Act of August 9, 1917, c. 50, § 4, 40 Stat. 270, 272, it was pro-

vided that until January 1, 1920, no increased rate or fare shall be filed

except after approval thereof has been secured from the Commission.

On the 28th day of December, 1917, the Government took control

of the railroads, as a war measure, under Act of August 29, 1916, c.

418, 39 Stat. 619, 645. Proclamation of December 26, 1917, 40 Stat.

1733, 1734.

SKINNER & EDDY CORP. v. UNITED STATES. 565

dd7. Opinion of the Court.

power to fix, after such hearing, the rate which should be

charged ; Interstate Commerce Commission v. Humboldt S. 8S.

Co., 224 U. S. 474, 483; and the Act of 1910 had given it

power to suspend, during investigation, tariffs for new

rates, and placed upon the carrier the burden of proof

to establish the reasonableness of the increased rates.

M. C. Kiser Co. v. Central of Georgia Ry. Co., 236 Fed.

Rep. 573.

Congress, however, steadfastly withheld from the Com-

mission power to prevent by direct action the charging

of unreasonably low rates. The common law did not

recognize that the rate of « common carrier might be so

low as to constitute a wrong; and Congress has declined

to declare such a rule. Despite the original Act to Regu-

late Commerce and all amendments, railroads still have

power to fix rates as low as they choose and to reduce

rates when they choose.'’ The Commission's power over

them in this respect extends no further than to discourage

the making of unduly low rates by applying deterrents.

One such deterrent is found in the fact that low rates,

because voluntarily established by the carrier, may be

accepted by the Commission as evidence that other rates,

actual or proposed, for comparable service are unreason-

ably high. Board of Trade of Carrollton, Ga., v. Central

of Georgia Ry. Co., 28 1. C. C. 154, 164; Sheridan Chamber

of Commerce v. Chicago, Burlington & Quincy R. R. Co.,

26 I. C. C. 638, 647. Compare Louisville & Nashville

R. R. Co. v. United States, 238 U.S. 1, 11 et seg. The

voluntary making of unremuneratively low rates in im-

portant traffic may also tend to induce the Commission to

resist appeals of carriers for general rate increases on the

ground of financial necessities. But the main source of

the Commission’s influence to prevent excessively low

' Subject only to the requirement of notice as provided in § 6 of the

Act to Regulate Commerce, as amended.

oe ee

6 OCTOBER TERM, 1918.

Opinion of the Court. 240 U.S.

rates lies in its power to prevent unjust discrimination.

Compare Houston, East & West Texas Ry. Co. vy. United

the carrier may remove the discrimination either by rais-

ing the lower rate to the relative level of the higher, or

by lowering the higher to the relative level of the lower,

or by equalizing conditions through fixing rates at some

intermediate point. American Express Co. v. Caldwell,

244 U.S. 617, 624.

A special group of cases in which the Commission may

indirectly prevent unduly low rates through its power to

prevent unjust discrimination is that provided for by the

long and short haul clause. It was enacted to remedy

one large class of discriminations by creating a legislative

presumption that the charge of more for a short haul

under substantially similar circumstances and conditions

than for a longer distance over the same line in the same

direction was unjust. As originally enacted, the provision

was construed to authorize the carrier to determine pri-

marily whether the required dissimilarity of circumstances

and conditions existed and also to authorize the acceptance

of competitive conditions as a justification of a lower rate

for the longer distance. So construed, the provisions

proved inefficacious, and the act was amended in 1910 by

striking out the ‘substantially similar circumstances and

conditions" clause and making the prohibition absolute

except to “the extent to which such designated common

carrier may be relieved from the operation of this section”

by the Commission. Intermountain Rate Cases, supra.

But the lack of power to prevent by direct action exces-

sively low rates remains; the carrier still having the option,

if relief from the operation of the fourth seetion is denied,

}

§

States, 234 U.S. 342. The order prohibiting the unjust

: discrimination, however, leaves the carrier free to con-

} tinue the lower rate; the compulsion being that if the low

, rate is retained, the rate applicable to the locality or

i article discriminated against must be reduced. That is,

SKINNER & EDDY CORP, ¢. UNITED STATES. 567

557. Opinion of the Court.

to keep in effect the low rate to the more distant point

by lowering the rates to intermediate points.

The last paragraph of § 4, here in question, which was

added by the Act of 1910, was designed to prevent the

railroads from killing water competition by making exces-

sively low rates. But again Congress refrained from pro-

hibiting the carrier to reduce the rate and declined to

confer upon the Commission power to prevent by direct

action a reduction. The act still leaves the carrier abso-

lutely free to make as low a rate as it chooses; and merely

provides another deterrent, in declaring that, if the rate

is once reduced in competition with a water route or

routes, it cannot, thereafter, be increased, ‘“‘unless after

hearing by the Interstate Commerce Commission it shall

be found that such proposed increase rests upon changed

conditions other than the elimination of water competi-

tion.”’ This provision may become operative in any case

where there has been competition between a railroad and

a water line, inland or coastwise. But we have now to

determine merely whether the prohibition applies where

the rates in question were reduced with the approval of

the Commission given after hearing, by order entered

upon application of the carrier for relief from the operation

of the fourth section,

The language of the paragraph is general and read

alone might compel that construction. But it may not

be read alone. It must be construed in the light of the

purpose of its enactment, of the earlier paragraphs of

$4, and of other sections in the Act to Regulate Com-

merce designed to prevent unjust discrimination. The

specific purpose of $4 was to prevent discrimination by

charging less for the longer haul, unless in the opinion

of the Commission the circumstances make such action

just. Discrimination, just when sanctioned, may become

most unjust. Recognizing this fact, Congress provided

that the judgment of the Commission should be exercised

FE OT CLP rir Ee

PP ere ee

ea

PPO CEE FEIT eS PAL AO Myer

|

ri

My

y

$

,

x

é

3

4

3

|

OP 9

PROD

568 OCTOBER TERM, I918.

Opinion of the Court. 249 U.S.

“from time to time’’ to determine ‘the extent to which

[the] . . . carrier may be relieved from the operation

of this section.’’ In other words, the leave granted is not

for all time. It is revocable at any time, either because

it was improvidently granted or because new conditions

have arisen which make its continuance inequitable.

The specific purpose of the last paragraph of $4 is to

ensure and preserve water competition; to prevent com-

petition that kills. A reduction made under the authority

of a fourth section order after full hearing must have

been found by the Commission to have been reasonably

necessary in order to preserve competition between the

rail and the water carrier. .\ reduction so made is not

within the reason of the prohibition declared by the last

paragraph. Transportation conditions are not static;

the oppressor of today may tomorrow be the oppressed.

And in order to preserve competition between rail and

water carriers it is necessary that the Commission's

power to approve a modification of rates be as broad as

it is to approve a modification in order to prevent unjust

discrimination. F:ven a literal reading of § 4 would not re-

quire that the prohibition contained in the last paragraph

be extended to reductions made with the approval of

the Commission. The preceding paragraph declares

that ‘‘the commission may from time to time prescribe

the extent to which such designated common carrier

may be relieved from the operation of this section.” The

last paragraph is a part of the section. Why should not

the Commission's power to relieve be extended to it?

The construction contended for by plaintiff would

rather ensure monopoly than preserve competition. If

a rail rate reduced in competition with a water route for

the avowed purpose of preserving competition by rail

should result, contrary to the Commission’s expectations,

in eliminating the water competition, because so low as

to drive the water carrier out of business, then the pro-

SKINNER & EDDY CORP. ». UNITED STATES. 569

557. Opinion of the Court.

hibitively low rate would have to be continued perma-

nently and other water competition be thereby prevented

from arising; unless, perchance, some changed condition

should develop which might make removal of the bar

possible. Or, if the reduction in the rail rate, sanctioned

by the Commission under the fourth section as not un-

justly discriminating against intermediate points, because

forced upon the rail carriers by oppressive water compe-

tition designed to destroy its business to the port, should

become thereafter unjustly discriminatory, because the

water carrier, destroyed by its own rate cutting, aban-

doned the route, still the low rail rate and resulting

discrimination would have to continue. Only compelling

language could cause us to impute to Congress the in-

tention to produce results so absurd; and the language

of the last paragraph of § 4 is clearly susceptible of the

more reasonable construction contended for by defend-

ants.

Fourth. The defendants further contend that, even if

the prohibition of the last paragraph of § 4 be construed

to apply also where the reduction was made with the au-

thority of the Commission, the increase of the Pittsburgh-

Seattle rate to 75 cents is valid, because the finding of

the Commission complies with the prescribed condition

that the increased rate must rest ‘‘upon changed con-

ditions other than the elimination of water competition.”

It found in terms that: ‘‘the conditions formerly existing

have materially changed’’; that ‘‘the withdrawal of

boats from this [coast to coast] service has not been on

account of the rates made by the rail carriers with which

the boats compete, but on account of slides in the Panama

Canal and the extraordinary rise in ocean freights’’;

that the substantial disappearance of water competition

was merely temporary; that competing water carriers

‘‘announced their intention ultimately to return to this

service” and ‘that the time of such return depended in

570 OCTOBER TERM, 191s,

Opinion of the Court. 249 U.S.

part upon the measure of the rates they would be able

to secure for this service in competition with the rail

lines.’ It is clear that the changed conditions so found

are something other than the ‘elimination of water

competition’ which Congress intended should not justify

raising the reduced rates. Compare American Insulated

Wire & Cable Co. v. Chicago & North Western Ry. Co.,

26 1. C. C. 415, 416.

Fifth. The plaintiff attacks, however, the validity of

the order of June 5, 1916 (amended July 13, 1916) also

on the ground that it was not made upon application of

the carrier— insisting that application by the carrier is

not only a prerequisite to the original granting of relief

under the fourth section, but also to the modification

from time to time by the Commission of the relief af-

forded. This court expressed in the Sacramento Case,

supra, at p. 187, its doubt whether such application was a

prerequisite even to the original granting of relief. It

is clear that application by the carrier is not a prerequisite

to modification. As shown above, orders granting relief

under the fourth section are not grants in perpetuity.

Neither a carrier nor a favored community acquires

thereby vested rights. Necessarily implied in each such

order is the term, ‘‘until otherwise ordered by the Com-

mission’’; and the original application is always subject

to be reopened, as it was here.

The District Court did not err in dismissing the bill

(and supplemental bill) on the merits; and its decree is

Affirmed.