Reply Brief for the Petitioner — United States Ex Rel. Chicago Great Western R. Co. v. ICC

FILE COPY ann ores See

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IN THE

Supreme Court of the United States

Ocrosger Tzrm, A. D, 1934.

No. 234

f

THE UNITED STATES OF AMERICA, ex reu., CHICAGO

GREAT WESTERN RAILROAD COMPANY, ayn THE

KANSAS CITY SOUTHERN RAILWAY COMPANY,

Petitioners,

vs.

INTERSTATE COMMERCE COMMISSION, ATCHISON,

TOPEKA AND SANTA FE RAILWAY COMPANY,

ET AL.,

| Respondents.

REPLY BRIEF FOR PETITIONERS.

| Raven M. Suaw,

S. W. Moone,

| F. H. Moons,

A. F. Sanors,

Frank H. Townze,

Attorneys for Petitioners.

INDEX.

i eeeneneemenneeenet

P

The question of whether or not the Commission denied 3

TOO POUND 6 once nss is cccdupanesueedeeuceénute ahaa 2

The question of the Commission’s power ............ 6

The question of public interest...........ccccesceve 20

Other contentions of respondents Seasbens eshacaceeaus 22

GIN 406 dnp ndidiendenh cheek cc secant 24

Cases Crrzp,

B. A. & P. Ry. Co. v. United States, 290 U. 8. 127..... 3

Claiborne-Annapolis Ferry Company v. United States,

We OME Sb kcickiccticsede ce 14

Cleveland, ete. R. Co. v. United States, 275 U.S. 404... 14

Colorado v. United States, 271 U. 8. 153, 163.......... 10

Commission v. 8. P. R. Co., 264 U. 8. 331, 347........ 10

Discontinuance of Inland Stations in New York City,

SE I EENG s.86k0dis sdebbse0cn 8

General Investment Co. v. N. Y. C. R. Co., 271 U. 8. 228

H. E. & W. T. R. Co. v. United States, 234 U.S. 342...

Humboldt Steamship Company Case, 224 U. S. 474...

Interstate Commerce Commission v. Los Angeles, 280

Wee WB e. os Vesenine co bonnckk chbewd o 18

ono

li

Long Island Railroad Company Akandonment, 162 I.

ET 14

Long Island Railroad Company Trackage, 162 1.C.C. °

I vaso cccccccccccccceevcccccces 13

Louisville & N. R. Co. v. Mottley, 219 U. S. 467, 482... 17

Louisville Cement Company Case, 246 U. S. 638...... 3

Miguel v. McCarl, 291 U. S. 442.................4.. 2

Missouri-Kansas-Texas Railroad Co. v. Kansas City

mens oe, ©0., 196 1. 0.0. 4... cc ccc tecccceces 23

Missouri Pacific R. Co. v. United States, 4 Fed. Supp.

oo cece cccccccccccccccccecs 15

Nebbia v. New York, 291 U. S. 502.................. 17

New York Central Securities Corporation v. United

EEE ego oss ccccccccescccccccccceces 15

Oregon Short-Line Railway Company v. Northern Pa-

cific Railroad Company, 61 Fed. 158.............. 7

Roberts v. United States, 176 U. S. 221.............. 2

St. Louis Southwestern Railway Company Control, 180

EER SES bb er cbecvccccccccccccccececess 16

Smith v. Interstate Commerce Commission, 245 U. S.

ena hes coccerscccccccccccccccceces 10

Southwestern Bell Telephone Company Case, 183 I.

sec ccreccccccsccccecccceses 8

Sutter Butte Canal Co. v. Commission, 279 U.S. 125.. 17

Texas v. Eastern Texas R. R. Co., 258 U. S. 204....... 18

Texas & Pacific R. Co. v. Gulf, ete. R. Co., 270 U. S.

re MED EUG bs dee eoccebocevecccccces 10

Texas & Pacific Railway Company v. United States, 289

eee eo UU sey vccbecccvvevuceceseees 7

- Transit Commission v. United States, 284 U. 8. 360, 289

on ‘ere OLE a ie ates 14

United States, ex rel. Delaware*& Hudson Company,

EME ee epccscccees Desh latcecetinessasegse 23

United States v. Interstate Commerce Commission, 252

DUM IESE ss aes ceroccccccccceccesvecccccuvesse 5 a

IN THE

Suprene Court of the United States

Octoser Term, A. D. 1934.

No. 234.

THE UNITED STATES OF AMERICA, ex ret., CHI-

CAGO GREAT WESTERN RAILROAD COMPANY,

and THE KANSAS CITY SOUTHERN RAILWAY

COMPANY,

Petitioners,

vs.

INTERSTATE COMMERCE COMMISSION, ATCHI-

SON, TOPEKA AND SANTA FE RAILWAY COM-

PANY, er at,

Respondents.

REPLY BRIEF FOR PETITIONERS.

May Ir PLease THe Court:

In the briefs filed herein, all respondents take the posi-

tion that the Commission exercised a jurisdiction which

makes its action impregnable to ma...mus. In addition,

the brief of the Kansas City Terminal Railway Company

(hereinafter called the Terminal Company) argues that

the Commission did not have the power which it is said to

have exercised, thus taking both sides of the same ques-

tion. We wish to submit a brief reply to the arguments

_ presented.

2

The question of whether or not the Commission denied

its power,

The Commission argues in its brief (pp. 28 et seq.) that

mandamus is not available to control the judgment and dis-

cretion of the Commission. We wish to make it plain that

petitioners do not contend that the manner in which the

Commission should exercise its power and discretion can

be controlled by mandamus. Our only claim is that a

wrongful denial of power by the Commission; a refusal

by it to exercise a power and jurisdiction conferred upon

it by statute, is subject to mandamus, and that in this case

there was such a wrongful denial of power and refusal to

act.

The argument made seems to reduce to two points which

are somewhat contradictory of each other. One is that the

Commission, by sustaining a challenge of its power to act,

exercised a judgment and discretion which cannot be con-

trolled by mandamus. The second is that the action of the

Commission was not a negative determination of its power,

but an administrative determination that petitioners’ legal

position was such that no relief could be given them.

The answer to the first point made is obvious, for cer-

tainly a court or commission does not exercise jurisdiction

and power by declining to do so. In the Humboldt Steam-

ship Company Case, 224 U. S. 474, it was urged that the

Commission’s action, being an alleged error of law, could

not be corrected by mandamus. - But the claim was over-

ruled, this Court saying at page 484:

‘‘But if it absolutely refuse to act, deny its power,

from a misunderstanding of the law, it cannot be said

to exercise discretion.”’’

In Miguel v. McCarl, 291 U. S. 442, this Court said (p.

452), citing Roberts v. United States, 176 U. S. 221, that

the act of an officer of government may be ministerial even

though it depends upon a statute which requires some con-

3

struction by the officer. We submit that in this case the

taking of jurisdiction by the Commission for the purpose

of holding that it did not have the power and authority

claimed for it was not an action impregnable to mandamus.

On the second point made, the language used by the Com-

mission in its report and quoted in our main brief demon-

strates that it was passing on the question of its own power

and authority and not upon the legal status of petitioners.

No respondent has claimed the contrary; in fact, those

statements of the Commission are not discussed. That the

Commission did deny its power and authority is the only

conclusion to be drawn from its statements that the motion

to dismiss petitioners’ petitions was a challenge of its power

(R. 92); that the question for decision was whether or

not the claimed power had been conferred upon it (R. 94);

that the claimed power and authority had not been con-

ferred by Section 3 (4) (R. 95) or by any other provision

of the Act. (R. 96.) In the Louisville Cement Company

Case, 246 U. S. 638, statements by the Commission that it

was ‘‘without power to grant the relief prayed for’’ and

that it was ‘‘without jurisdiction,’’ were held (pp. 641,

642) to demonstrate a denial of power and authority. The

Commission used the same phrases in its report in the case

at bar.

This circumstance distinguishes the case at bar from B.

A. é P. Ry. Co. v. United States, 290 U. 8. 127, Interstate

Commerce Commission v. United States, 289 U. 8. 385, and

Interstate Commerce Commission v. N. Y., N. H. & H. R.

Co., 287 U. S. 178, cited by respondents. In the B. A. & P.

Ry. Co. Case, 290 U. S. 127, there was no question of the

Commission’s power to deal with the matter presented to

it. The construction to be placed upon the word ‘‘deficit’’

was as much a part of the merits of the claimant’s case as

any other essential fact that it was required to prove, and

the Commission exercised the authority conferred upon it

> 4

by law when it determined that construction. In Interstate

Commerce Commission v. United States, ex rel. Campbell,

289 U. S. 385, the Commission held that the proof submitted

to it was insufficient to justify an award of reparation;

obviously an exercise of power and authority. In the VN. Y.,

N. H. @ H. Ry. Co. Case, 287 U. 8. 178, the value claimed

by the railroad had been included in the valuation of its

properties by the Commission, and the issue was the pro-

priety of the method followed in stating the value.

Thus, in all these cases the Commission had actually

exercised power within the limits of its jurisdiction. The

only question presented was whether it had acted properly,

and in accordance with its previous decisions, this court

held that it would not undertake to control the judgment

and discretion of the Commission. In General Investment

Co. v. N. ¥. C. R. Co. 271 U. S. 228, also cited by respond-

ents, this court held (p. 230) that whether a plaintiff seek-

ing relief has the requisite standing is a question going to

the merits, but the case has no application here. As ap-

pears from the report of the Commission, its action was

not based on the lack of standing on the part of petitioners,

but on the alleged lack of your on the part of the Com-

mission itself.

The argument that the Commission exercised jurisdic-

tion is based upon respondents’ complete failure to give

any consideration to the issue presented to the Commission

by the motion to dismiss petitioners’ petitions or to the

language used by the Commission in deciding that issue.

As we pointed out in our main brief (p. 21), even the lan-

guage used by the Commission in dealing with paragraphs

(1) and (3) of Section 3 of the Act (R. 96) is a disclaimer

of power, rather than an exercise of it.

There is a further answer to respondents’ argument that

the Commission did exercise a power and authority within

the jurisdiction conferred upon it by statute. As we said

5

in our main brief (pp. 50, 51), the Commission apparently

considered petitioners’ intervening petitions as applica-

tions by petitioners for a revision or reformation of the

operating agreement. This was in error, for the issue ac-

tually presented to the Commission was one of prejudice

and discrimination alleged to be in violation of law. If the

Commission, in doing what it did, was passing upon its

right to revise the operating agreement, its action cannot

protect it against the issuance of the writ prayed for herein.

In such ease, its conclusions dealt with an issue not before

it for consideration and did not constitute an adjudication

of any of the merits of the claims presented by petition-

ers.

This is so, no matter what the Commission said or did

on the issue of its power to revise or reform the operating

agreement and regardless of what its power may have been

to deal with that issue. An exercise of power by the Com-

mission sufficient to defeat mandamus must be the exercise

of a power committed to it by law. It may not consist of

the expression of opinion on a matter not committed to it

by law and hence beyond its power, or on a matter not be-

fore it for decision. In United States v. Interstate Com-

merce Commission, 252 U.S. 178, the Commission declined

to ascertain certain facts required by the Valuation Act,

for the reason, as stated by it, that such ascertainment was

veyond the possibility of rational determination and called

for inadmissible assumptions and impossible hypotheses.

Under respondents’ theory, that action amounted to the

exercise of jurisdiction, judgment and discretion. This

court, however, held that mandamus would lie to compel

action by the Commission, saying (p. 188) that the Com-

mission’s action was ‘‘an unwitting assumption of author-

ity by the Commission which it did not possess.’’

Thus, no matter what view is taken of what the Commis-

sion did, the writ prayed for should issue. Had the Com-

6

mission taken jurisdiction of the issues actually presented

to it, it would have been required upon the conclusion of

testimony, to find the facts determining the existence or

non-existence of the prejudice and discrimination which

was claimed to exist and then announce its conclusion upon

those facts. Certainly, it did not do this, nor do we under-

stand that respondents claim it did. If, then, it declined

to act on the charge of unlawful discrimination and preju-

dice presented to it, and on which it certainly had power

to act, its action was clearly wrong and the writ should

issue.

On the other hand, even if it actually exercised its power

and discretion, as asserted by respondents, it would seem

that the power was exercised in considering the question of

whether there should be a revision of the operating agree-

ment. Since this question was not submitted to it for con-

sideration, its determination thereof, whether on the merits

or otherwise, does not give it immunity from mandamus to

compel it to exercise its undoubted jurisdiction and power

with respect to the issue which was submitted to it.

THE QUESTION oF THE CoMMISSION’s Power.

Respondents differ among themselves on the question of

whether the Commission actually had the power and au-

thority claimed for it by petitioners. The contention of

the Commission seems to be that it not only exercised its

power in dismissing petitioners’ petitions, but actually had

the power which it exercised. On the other hand, the Ter-

minal Company, while agreeing that the Commission exer-

cised power to the extent that its action is not subject to

correction through mandamus, further asserts that this

exercise of power was gratuitous on the part of the Com-

mission, and devotes many pages of brief to the proposition

that the Commission had no power to do that which the

Terminal Company says it did. The other intervening

7

railroad respondents have filed a brief concurring in the

various arguments presented by the Terminal Company.

The position of the railroad respondents with respect to

paragraphs (1) and (3) of Section 3 of the Interstate Com-

merce Act is predicated upon a word by word analysis of

the language of those paragraphs, it being claimed that

they contain no language conferring upon the Commission

jurisdiction over such relations between railroad compa-

nies as those existing at Kansas City. It is further claimed

that any doubts as to that jurisdiction would have to be

resolved against its existence because it would confer upon

the Commission power to revise the operating agreement.

In order to reach these conclusion, the railroad respond-

ents have been compelled to take a much narrower view of

the prohibitions against discrimination and prejudice con-

tained in paragraphs (1) and (3) of Section 3 than this

court has ever taken, and have also been compelled to dis-

regard certain language of the paragraphs themselves. It

is said that paragraph (1) deals only with discrimination

and prejudice against shippers, this conclusion being sup-

ported by citations from a few decisions of courts and the

Commission. These decisions do not, we submit, support

the conclusion reached.

In Texas ¢ Pacific Railway Company v. United States,

289 U. S. 627, this court held that the purpose of Sections

2,3 and 4 of the Act was to prevent unjust discrimination

resulting from existing practices, the Act having been

passed for the protection of those who pay or bear the

rates. Since petitioners do pay and bear the charges of

which they complain in the case at bar, they claim no mean-

ing in the Act which this court has not upheld.

In Oregon Short-Line Railway Company v. Northern Pa-

cific Railroad Company, 61 Fed. 158, it was held that the

complaining railroad could not appropriate the grievance

of a traffic or locality and complain on account of it. Peti-

8

tioners are not doing this, as the claimed discrimination

and prejudice operates only to their disadvantage. Their

case is not based upon an injury to anyone else.

In the Southwestern Bell Telephone Company Case, 183

I. C. C. 771, and in Discontinuance of Inland Stations in

New York City, 173 I. C. C. 727, the Commission did hold

that the discrimination and prejudice prohibited by Section

3 (1) was a prejudice of and discrimination against ship-

pers, but this conclusion was based upon what was said to

be the legislative history of the paragraph. That legisla-

tive history, as quoted in the brief of the Terminal Com-

pany (pp. 28, 29), is no more than a statement of the lan-

guage of the paragraph, which remits us to the language

of the paragraph to discover its meaning. Moreover, in

the Squthwestern Bell Telephone Case the Commission did

hold that Section 3 (3) specifically prohibited discrimina-

tion between carriers, but the railroad respondents deny

this, although seeking the advantage of the Commission’s

holding with respect to the meaning of Section 3 (1).

The argument of the railroad respondents as to the char-

acter and kind of prejudice and discrimination prohibited

by paragraphs (1) and (3) of Section 3 disregards every

decision of this court announcing the effect of the para-

graphs as related to the general purposes of the Interstate

Commerce Act. As long ago as 1914, this court, in H. E.

é W. T.R. Co. v. United States, 234 U. S. 342, considered

the language now contained in Section 3 (1) of the Act. In

that case the Commission had required the removal of dis-

crimination against interstate commerce, its action being

taken under Section 3 (now Section 3 (1)) of the Act.

Dealing with the claim that authority to make the order

had not been conferred upon the Commission by Congress,

this court quoted the language of the law and said at page

356:

This language is certainly sweeping enough to em-

9

brace all the discriminations of the sort described which

it was within the power of Congress to condemn. There

is no exception or qualification with respect to an un-

reasonable discrimination against interstate traffic

produced by the relation of intrastate to interstate

rates as maintained by the carrier. It is apparent

from the legislative history of the act that the evil of

discrimination was the principal thing aimed at, and

there is no basis for the contention that Congress in-

tended to exempt any discriminatory action or prac-

tice of interstate carriers affecting interstate com-

merce which it had authority to reach.’’

This announcement of the purposes of the law has been

consistently approved by this court in all subsequent de-

cisions on the same subject (pp 28 et seq. our main brief),

but these decisions are ignored by respondents or are

sought to be distinguished on immaterial grounds. We sub-

mit that the application of the law can not be limited as re-

spondents seek to limit it. To so limit it would deprive the

Commission of a major weapon in combating the evils

at which the law was aimed and would severely cripple it

in attempting to carry out the purposes of Congress.

The argument of the railroad respondents necessarily

implies a lack of power in the Commission to deal with the

Kansas City terminal, no matter what the facts are. Thus,

those facts might show the existence of an undue and un-

just prejudice of and discrimination against petitioners.

It might appear, as petitioners claim it does, that the pay-

ments made by them because of their use of the facilities

of the Terminal Company are so burdensome as to prob-

ably cause their bankruptcy; that such payments only bene-

fit other roads, and that ‘petitioners receive nothing for

them ; that such payments are so large in amount as to limit

or destroy petitioner’s ability to perform well their inter-

state functions. Nevertheless, the argument of the rail-

road respondents would compel the conclusion that the

10

Commission has no power or authority under the law to

correct the situation. We submit that this is not so.

This court has held that the ‘‘preservation of the earn-

ing capacity and conservation of the financial resources of

individual carriers is a matter of national concern’’ (T.

é P. R. Co. v. Gulf, etc. R. Co., 270 U. 8. 266, 277); that

prejudice to interstate commerce may result from ‘‘exces-

sive expenditures in the local interest, thereby lessening

the ability of the carrier properly to serve interstate com-

merce’’ (Colorado v. United States, 271 U. S. 153, 163);

that the purpose of Congress was ‘‘to prevent interstate

carriers from incurring expenses which will lessen their

ability to perform well their interstate functions’’ (Com-

mission v. S. P. R. Co., 264 U. 8. 331, 347). And the stat-

ute itself contains ‘‘a specific prohibition of preferences

and discriminations in all ways that they can be executed,

with corresponding regulatory power in the Commission.”

(Smith v. I. C. C., 245 U. S. 33, 43.)

These holdings cannot be reconciled with a®construc-

tion of the law whicH would permit at Kansas City the con-

tinuance of a prejudice and discrimination which can be

shown to be. so pronounced as to constitute a severe drain

upon the resources of petitioners; so severe, indeed, that

it may well lessen their ability to perform well their in-

terstate functions. Paragraphs (1) and (3) of Section 3

contain apt words upon which the power of the Commis-

sion to act in this casé may be properly. based. In so act-

ing, it would exercise no power which it has not exercised

many times in the past.

Many cases are cited by the Terminal Company on the

proposition thats the distribution of the tax and interest

charges of the Terminal Company among its owning lines

is a matter of corporate relationship with which the Com-

mission can have nothing t6 do. The Terminal Company —«

,

vy

ig

11

has designated these charges at page 31 of its brief as

“payments on &ccount of a vested proprietary right in

physical facilities and their use.’* But nowhere in the

- brief is it said that petitioners receive anything for the

money paid by them to the Terminal Company or on its

account, other inan the use of its facilities to the extent that

those facilities are nsed: It must be conceded, as it ap-

parently is, that this is the only benefit received by any

proprietary line of the Terminal Company for the pay-

ments made by it. The operating agreement itself so pro-

vides.

There is in this case, therefore, no question of fhe inter-

corporate relationships of railroad companies, aside from

those relationships necessarily resulting from the obliga-

tion of petitioners and the other proprietary lines to per-

form their duties as common carriers in interstate com-

merce. The distribution of the capital stock of the Ter-

minal Company among its proprietary lines has nothing

whatever to do with this relationship. There being noth-*

ing here involved but the payments made by petitioners for

a right of user essential to the discharge of their duties

88 common carriers in intefstate commerce, it would seem

to follow that ‘the Commission has power to prohibit any

prejudice or discrimination in those payments.

Much is also said in the brief of the Terminal Company

with respect to the facts in connection with the acquisi-

tion of its present property, and there is considerable

speculation as to what would have been the rights of the

various trunk lines had something else been done. Such

discussion is profitless. The essential facta are that the

Terminal Company was formed and its properties ‘ ac-

quired or constructed for the sole purpose of furnishing

terminal facilities for all the railroads serving Kansas

i ; that those facilities are now used by those railroads,

12

including petitioners, in the discharge of their duties as

common carriers in interstate commerce; that this use is all

they get for the money expended by them; and that their ~

ownefship of some perééntage of the stock of the Terminal

Company means nothing, either with respect to the right

of user or with respect to the obligation to pay.

We submit that these circumstances fix a jurisdiction in

the Commission which cannot be affected by the designa-

tion of certain of those charges as ‘‘capital expenditures”’

or by assuming that had some other plan been followed, the

rights and obligations of the various railroads would have

been different,, The argument of respondents on this point,

as stated by Commissioner Eastman (R. 116), confuses

the status of the railroad companies as stockholders of

the Terminal Company with their status as users of its

terminal facilities.

The major argument presented by the railroad respond-

ents is predicated upon the assumption that the Commis-

sion was called upon by petitioners to modify or annul the

present operating agreement. This proposition is re-

peatedly stated in the brief of the Terminal Company in

various forms. At page 23 it is said that the Commission

was asked to set aside a contract. At page 39 it is said

that there is no authority in paragraphs (1) and (3) of

Section 3 for the annihilation of the operating agreement.

At page 42, reference is made to the power of the Com-

mission to set aside contracts already made. At page 45,

it is said that if Congress had intended to destroy solemn

contracts withont compensation it would have made that

intention plain. At page 49, it is said that petitioners want

a revision of the operating agreement.

Starting from this assumption, it is argued that the law

does not specifically confer upon the Commission power

to set aside the operating agreement, and that this power

s

13

is so far reaching that it may not be inferred; that conse-

quently the power does exist and that the Commission’s

denial of that power was proper and must be sustained.

This entire argument is based upon the false premise that

petitioners asked the Commission to deal with the oper-

ating agreement. Such is not the case, although the Com-

mission apparently had that idea. (R. 95, 96.) The Court

of Appeals.also seems to have the same idea. (RB. 208.) This

mistaken view of the Court of Appeals may may have been

responsible for the conclusion stated by it with respect to

the Commission’s power. (R. 208.)

As we said in our original brief (p. 51), we may con-

cede a lack of power in the Commission to modify or an-

nul the operating agreement, but this lack of power in the

Commission implies no lack of power to deal with an un-

lawful discrimination and prejudice resulting from the

operation of the agreement. In dealing with that discrim-

ination and prejudice, the Commission would give no con-

sideration to the agreement at all, as its power to deal with

such a violation of the law is not affected by the existence

of the agreement. The Commission has itself adopted this

view in other cases.

In Long Island Railroad Company Trackage, 162 I. C. C.

218, it was claimed that the Commission did not have ju-

risdiction of the compensation to be paid for the trackage

there in issue. Without undertaking to pass upon the va-

lidity of the state statute which it was claimed reserved

jurisdiction to the New York Transit Commission, the Com-

mission said at page 221:

‘The power conferred upon us by the Act is in the

interest of p interstate commerce. The car-

riora here involved being engaged in interstate com-

merce, our jurisdiction is plenary.”’

On the further hearing in the same case (180 I. C. C.

14

439), the same question of jurisdiction was raised, but the

Commission only said, at page 446, with respect to this con-

tention:

‘*It is unnecessary to repeat what was stated in our

prior report with respect to our jurisdiction. ”’

The order it finally made in the proceeding was sus-

tained by this court in Transit Commission v. United

States, 289 U. S. 121.

In Long Island Railroad Company Abandonment, 162 I.

C. C. 363, the jurisdiction of the Commission was chal-

lenged on the ground that it constituted an inva-

sion of the state sovereignty, since the Transit Com-

mission of New York had ordered the removal of grade

crossings on the line proposed to be abandoned, which

crossings could only have been removed through expendi-

tures so great as to be regarded by the Commission as

wasteful and therefore a burden on interstate commerce.

Both in the first hearing and in a subsequent hearing at

166 I. C. C. 671, the Commission declined to pass upon the

constitutional questions thus raised, only saying (162 I.

C. C. 363, 374) that it was of opinion that it had the requi-

site jurisdiction and power. Its order in the case was sus-

tained by this court in Transit Commission v. United

States, 284 U. S. 360.

The same conduct by the Commission has been specifi-

cally approved by this court in other cases. In Claiborne-

Annapolis Ferry Co. v. United States, 285 U. S. 382, it was

argued that the order of the Commission there attacked

was void for the reason that the applicant did not have

corporate power to operate the ferry which was the sub-

ject of the application. This court said at page 391, that

this question of corporate power was one which could not

be considered since Congress never intended to impose >

upon the Commission the duty of determining matters of

.

»’

15

that nature before granting or withholding assent to the

construction of an extension.

In New York Central Securities Corporation v. United

States, 287 U. S. 12, the order of the Commission was chal-

lenged upon the ground, among others, that the proposed

leases were ultra vires and in conflict with certain Ohio

statutes. This court held (pp. 26, 27) that the Commission

was not required to consider these questions, saying that

there was no warrant for concluding that Congress in-

tended to fetter the exercise of the Commission’s authority

by requiring that it determine such matters before making

an order, and that the question of corporate powers could

not properly be raised in the suit to set aside the Commis-

sion’s order.

In Cleveland, etc. R. Co. v. United States, 275 U. 8. 404,

the Commission had made an order requiring the Rail-

road Company to make switch connections with the tracks

of a coal company, the authority of the Commission being

limited to the construction of such connections with pri-

vate side tracks. The order was challenged on the ground

that a state statute, which had been upheld by the state

Supreme Court, declared the tracks of the coal company to

be public tracks. The Commission, however, made its order

without passing upon the validity of the state statute, and

its order was affirmed by this court on a holding that the

state court judgment could not affect the Commission’s

jurisdiction.

In Missouri Pacific R. Co. v. United States, 4 Fed. Supp.

449, it was claimed that the order of the Commission an-

thorizing the Southern Pacific Company to acquire con-

trol of the St. Louis Southwestern Railway Company was

void upon the ground, among others, that it had the ef-

fect of annulling and abrogating an agreement known as

the Gould-Huntington Agreement. The Commission. had

~

16

declined to pass upon the validity of the agreement, say-

ing (180 I. C. C. 175, 203) that its order must be based

upon the public interest; that it was not within its prov-

ince to construe the agreement or adjudicate the rights

of the parties thereunder; that the question was whether

_ the acquisition of control sought was in the public inter-

est and that the status of the parties under the agree-

ment should rest with the courts. The existence of the

agreement was again urged upon the District Court as a

ground for setting aside the Commission’s order; but that

court, in denying the claim, said (p. 456) :

‘‘Even if it were conceded that the Texas & Pacific

had rights under the Gould-Huntington agreement

which the acquisition of control of the Cotton Belt by

the Southern Pacific might result in the violation there-

of, the commission had power to make the orders com-

plained of upon its determination that the public in-

terest called for such acquisition. Louisville & N. R.

Co. v. Mottley, 219 U. S. 467; Kansas City Southern

R. Co. v. United States, 231 U. 8S. 423; New York v.

United States, 257 U. S. 591.”’

The decision of the District Court in this case was affirmed

by this court in a per curiam opinion on October 22, 1934,

leg ty GN are?

Petitioners only desire the Commission to take the same

action in the case at bar as it took in the foregoing cases;

that is to say, we desire it to pass upon the question of

the alleged discrimination and prejudice. If the claimed

violation of law is found to exist, the Commission should

enter an order prescribing what is to be done, without re-

gard to the operating agreement. The question of what

would then happen under the agreement, as between the

proprietary lines, could be left to the courts, if necessary,

just as the Commission said should be done in St. Louis

Southwestern Ry. Co. Control, 180 I. C. C. 175, 203. The

Terminal Company has indicated some questions which

might arise (pp. 58, 59, ite brief), but it is not necessary for

17

the Commission to consider these matters, nor are the possi-

bilities suggested by counsel important in this case. The

power of the Commission to cure an existing law viola-

tion cannot be limited by such considerations.

Under the foregoing decisions and the cases cited in our

original brief (pp. 48, et seq.), the Commission surely has

power to make an order prohibiting unlawful prejudice

and discrimination, even though it may result from the

operation of a contract. That power was first established

by this court in the Mottley Case, 219 U. S. 467, 482, and

has been repeatedly followed. In Sutter Butte Canal Co.

v. Commission, 279 U. 8. 125, this court, in speaking of the

Mottley Case, supra, said, at page 138:

**In that case it was held that the power of Con-

gress to regulate commerce among the states, which

is analogous to the police power of the states in reg-

ulating G nee utilities, extended to rendering impos-

sible enforcement of contracts made between carriers

and shippers, although valid when made, because they

were all made subject to the possibility that even if

valid when made, Congress might, by exercising its

} ower, render them invalid.’’

One of the most recent expressions of this court on this

subject is in Nebbia v. New York, 291 U. S. 502, where this

court said at page 523:

‘‘Under our form of government the use of prop-

erty and the making of contracts are normally mat-

ters of private and not of public concern. The gen-

eral rule is that both shall be free of governmental in-

terference. But neither property rights nor contract

rights are absolute; for government cannot exist if the

citizen may at will use hi a at 4 to the detriment

of his fellows, or exercise his of contract to

work them harm. Equally fundamental with the pri-

vate right is that of the public to regulate it in the

common interest.’’

Since petitioners’ attack before the Commission was not

upon the operating agreement but upon a claimed discrimi-

18

nation and prejudice violative of the act, the argument

of respondents on this point necessarily falls. This court

is not called upon, as respondents say, to invest the Com-

mission with a new far-reaching power to modify or an-

nul contracts, but is only asked to require the Commis-

sion to exercise its power to hear and determine a case

involving a discrimination and prejudice alleged to be in

violation of the law.

The decisions of this court in Interstate Commerce

Commission v. Los Angeles, 280 U. S. 52, Interstate Com-

merce Commission v. Oregon-Washington Railroad & Nav-

tigation Co., 288 U. 8S. 14, and Texas v. Eastern Texas

R. R. Co., 258 U. 8. 204, cited by respondents, have no

application to the case at bar. In the Los Angeles

Case, the Commission was said to have power to re-

quire the building of a gigantic union station costing many

millions of dollars. In the Oregon-Washington Railroad

é Navigation Co. Case, the Commission had claimed

power to require the building of a railroad at large cost

into a territory which the defendant company had not un-

dertaken to serve, and which railroad could only have

been operated at a loss. In the Texas Case, it was sought

to invest the Commission with power to deal with intra-

state commerce, independently of its effect on interstate

and foreign commerce. These were powers of the broad-

est type; were new in every sense of the word, and the

claim that they existed was not founded upon any lan-

guage of the Interstate Commerce Act. On the other hand,

the power of the Commission to deal with discrimination

and prejudice must surely be conceded by now. That power

was recognized in the cases cited by respondents. As was

said in the Los Angeles Case, 280 U. 8. 52, at page 62, the

Commission, while Cenying its jurisdiction, was careful

19

to point out that no question of discrimination or prefer-

ence had been presented to it.

We submit that under the foregoing it should be held

that the language of paragraphs (1) and (3) of the In-

terstate Commerce Act is sufficiently broad to confer upon

the Commission power to deal with and correct such prej-

udice and discrimination as is alleged by petitioners to ex-

ist at Kansas City; and that neither the existence of the

operating agreement nor the ownership of stock of the

Terminal Company by petitioners can be given the effect

of depriving the Commission of that jurisdiction, a ju-

risdiction which it must be held to have if the purposes of

Congress, as repeatedly announced by this court, are to

be fulfilled.

* With respect to paragraph (4) of Section 3 of the act,

all respondents present the same argument. This argu- .

ment reduces to the claim that petitioners are not such

carriers as may take advantage of the paragraph, for the

reason that the operating agreement now gives them the

right to use the facilities of the Terminal Company upon

payment of the amounts prescribed by that agreement. On

this point we can add nothing to what was said in our

main brief (pp. 33, et seq.). |

We submit that the error of respondents lies in their as-

sumption that the compulsion which they insist is neces-

sary. must exist with respect to physical use only and not

© with vespect to the compensation to be paid for that use.

It seems to us that the required compulsion nay exist

either with respect to the physical usecor with- respect to

the compensation to be paid for such use, since it is ob-

Vious that both must be dealt with to make effective any

exercise of power by the Commission under paragraph

: 4 (4). | | sag

. | Soar Hf it be conceded that the right to use and the com-

20

pensation to be paid for such use are of equal importance

under paragraph (4), as they certainly are, it seems plain

that the jurisdiction of the Commission should exist to

determine either issue independently of the other. Re-

spondents’ argument compels the conclusion that if peti-

tioners declined to pay the charges required by the Kan-

sas City operating agreement, and were by reason thereof

barred from the use of the facilities of the Terminal Com-

pany, their right to reacquire that use under Section 3 (4),

upon the payment of compensation to be fixed by the

Commission, would be admitted. We cannot follow a con-

struction of the law which denies a jurisdiction under that

paragraph merely because petitioners have failed to vio-

late the terms of the agreement.

The question of public interest.

We refer to this subject because of the relative impor-

tance given it in respondents’ brief. The Terminal Com-

pany takes the position in its brief (pp. 64, e¢ seq.) that

the holders of the bénds of the Terminal Company are

such parties in interest that they were entitled to be heard

in the proceedings before the Commission; that any or-

der of the Commission which might reduce the payments

of petitioners on account of interest and tax charges of

the Terminal Company, in order to remove an unlawful

discrimination and prejudice, would deprive those bond-

holders of their rights contrary to law.

The brief of the Commission suggests (p. 43) that some

bonds of the Terminal Company were sold after the Com-

mission made its report and order of November 10, 1925;

that these bonds were probably purchased by the public

upon the faith of the Commission’s decision; and that the

purchasers of those bonds would, therefore, be prejudiced

in the event of any decision in the case at bar which might

result in granting to petitioners any reduction in the

charges now paid by them.

21

We concede that the holders of the bonds of the Ter-

minal Company are entitled to the benefit of every clause

of the indenture securing their bonds, but fail to see how

their rights would be affected by the entry of an order

such as petitioners requested. Those bondholders may

now have the right to look to the solvent users of the Ter-

minal Company’s facilities for the payment of the prin-

cipal of and interest on the Terminal Company’s bonds

held by them, but the granting of the relief requested by

petitioners would not affect this right.

As we pointed out in our original brief (pp. 55, 56),

the bondholders are interested in receiving their money

from the Terminal Company which issued the bonds. Un-

der the operating agreement, any amounts which should

be but are not paid by a using company must be made up

by the remaining companies, so that at the present time a

bondholder has no way of knowing what proprietary lines

will contribute the money he receives from the Terminal

Compafhy, nor in what proportions the proprietary lines

will make their contributions. Thus, so far as the bond-

holder is concerned, the situation under such an order as

petitioners suggest would be the same as the situation

which now obtains.

If such an order were made and every proprietary line

of the Terminal Company except petitioners thereafter

defaulted its obligations under the operating agreement,

petitioners would be required to pay all obligations of the

Terminal Company so long as they were able, either on a

user, numerical or some other basis. These considerations

make it plain that petitioners have requested nothing which

will injure any holder of the secnrities of the Terminal

Company, and this being so, it is unnecessary to give con-

sideration to the question of what the legal rights of such

security holders might be if something else were proposed

to be done.

22

‘ Other contentions of respondents,

It is faintly suggested i in the brief of the Terminal Com-

pany (pp. 88, 89) that the case is moot and also that it.

should be disposed of on the ground of petitioners’ laches,

These matters are dealt with in our main brief. (pp. 56,

et seq., 61, et seg.) The Terminal Company does not urge

these. points with any insistence, and we submit that the

argument heretofore presented in our main brief with re-

spect to them fully answers the suggestions made.

It is further suggested by the Terminal Company (p.

87, its brief) that the intervening petitions filed with the

Commission by petitioners unduly broadened the issues

in violation of the Commission’s rules, and that the Com-

mission should lave dismissed them for that reason. On

this point it is sufficient to say that no matter what the

- Commission ‘might or ehould have done, it did not dismiss

these petitions because they were in violation of any of its

rules. On the contrary, it received the petitions and a mo-

tion to dismiss them, reserved the motion to dismiss until

the hearing on the merits, and thereafter dismissed the

petitions, not because they broadened the issues, but on a

holding that the (ommission had not the power and au-

thority to grant the relief requested or that relief which

the Commission thought was requested. The failure of

the Commission to dismiss the petitions on the ground that

they unduly broadened the issues concludes the Terminal :

Company, and it may not now be heard to complain of the

_ Commission’s action in this respect.

_ All briefs for the respondents also present a substantial

volute of argument said,to show that the unlawful preju-

~~~~diee and discrimination alleged by petitioners does not in

fact exist. In our brief (pp. 44, et. seg.) we make some

reference to the facts, but only for the purpose of giving

point to our argument i in fa of the power of the Com-

mission to grant the relief requested by petitioners, We

assume that the ascertainment of facts to prove or dis-

prove the unlawful prejudice and discrimination alleged by

petitioners will be left to the Commission, and that it is, ©

therefore, unnecessary to-argue those facts to this court.

We only wish to direct attention to the fact that in decid-

ing on the petition of the Missouri-Kansas-Texas Railroad

(198 I. C. C. 4), the Commission was required, under Sec-

tion 3 (4) of the Act, to fix the amount-to be paid by that

railroad ‘‘on the principle controlling compensation in con-

demnation cases.’’ Its conclusion that the user basis could

not be used was reached because of this statutory require-

ment. Moreover, petitioners have never insisted upon the

user method of distributing the tax and interest charges of

the Terminal Company as being the only method of curing

the discrimination and prejudice alleged to exist. The de-

termination of what is necessary to produce that result

will, we assume, be left to the Commission should this Court

conclude that the writ prayed for should issue.

As a final answer to the relief which petitioners have

requested, the Terminal Company, in concluding its brief

(pp. 98, et seq.) urges that a decision supporting the claims

of petitioners with respect to the Commission’s jurisdiction

will produce a ‘‘swarm’’ of similar controversies ; that con-

tract and property rights and agreements will be disrupted

-with ‘‘a complete destruction of all confidence in the writ-

ten word.’”’ This argument has been made many times. A

complete answer to it was made by this Court in United

States, ex rel. v. Delaware & Hudson Company, 213 U. 8.

366, which case involved the constitutionality and meaning

of the so-called commodities clause. Dealing with a similar

argument there made, this Court said, at page 405:

‘‘We at once summarily dismiss all the elaborate

suggestions made in argument as to the alleged wrong

to result from the enforcement of the clause, if it be

24

_-wusceptible of the construction which the government

has placed upon it. We do this because, obviously,

mere suggestions of inconvenience or harm are wholly

irrelevant, as they cannot be allowed to influence us in

determining the question of the constitutional power

of Congress to enact the clause.’’

Obviously, the determination of the issues presented

~ herein cannot be made to depend upon the considerations

suggested by counsel, nor upon the further assertion that

if petitioners are unsuccessful, all pending litigation aris-

ing out of the operating agreement will be terminated.

Conc.usion.

The operating agreement relating to the use of the prop-

erties of the Terminal Company by petitioners and the

other proprietary lines of the Terminal Company has ap-

proximately one hundred and seventy-five years to run. It

is plain that the burdens imposed upon petitioners under this

agreement are extremely serious. While respondents have

indicated some doubt as to the correctness of the figures

contained in Petitioners’ Exhibit 2, attached to the petition

in the Supreme Court of the District (R. 60), the report of

the Commission itself (R. 88) affirmatively shows the extent

of the burden under which petitioners have been and are

now laboring. This burden will continue for the full term

of that agreement, unless the Commission has the power:

which we contend it has.

In the last analysis, respondents’ contentions on the ques-

tion of the Commission’s jurisdiction reduce to the claim

that the operating agreement itself is of such sanctity that

no matter what law violations and other improprieties may

result from its operation, petitioners can secure no relief

from any source. We submit that this cannot be so, under

the law as consistently construed and applied by this court.

25

The judgment of the Court of Appeals should be reversed

with directions that the writ of mandamus prayed for be

issued.

Respectfully submitted,

Ravrs M. Sxaw,

S. W. Moons,

F.. H. Moors,

A. F. Smrra,

Franz H. Townzn,

Attorneys for Petitioners.