Illinois Central Railroad Company v. Interstate Commerce Commission

• Decision Date: 27 May 1907
• Docket Number: No. 588,588
• Citation: 51 L.Ed. 1128,27 S.Ct. 700,206 U.S. 441
• Parties: ILLINOIS CENTRAL RAILROAD COMPANY, Gulf and Ship island Railroad Company, Southern Railroad Company, et al., Appts., v. INTERSTATE COMMERCE COMMISSION
• Court: U.S. Supreme Court

206 U.S. 441

27 S.Ct. 700

51 L.Ed. 1128

ILLINOIS CENTRAL RAILROAD COMPANY, Gulf and Ship island Railroad Company, Southern Railroad Company, et al., Appts.,

v INTERSTATE COMMERCE COMMISSION.

No. 588.

Argued April 22, 23, 1907.

Decided May 27, 1907.

This case involves the validity of an order of the Interstate Commerce Commission requiring the appellants 'to cease and desist on or before the 1st day of April, 1905, from further maintaining or enforcing the unlawful advance of 2 cents per 100 pounds, or the said unlawful rates resulting therefrom, for the transportation of lumber from shipping points on defendants' respective lines in the state of Louisiana east of the Mississippi river, and in the states of Mississippi and Alabama to Cincinnati, Louisville, Evansville, Cairo, and other points on the Ohio river commonly called and known as Ohio river points.'

The order was made in the matter of the complaint filed with the Commission by the Central Yellow Pine Association, an incorporated association composed of persons, firms. and corporations engaged in the business of manufacturing yellow pine lumber in the states of Mississippi, Alabama, and that part of Louisiana east of the Mississippi river.

The complaint charged that the appellants were common carriers by rail, engaged in interstate commerce, and as such were engaged in the transportation of yellow pine lube r from the mills and lumber plants of the members of the Yellow Pine Lumber Association to the territory known as the 'Central Freight Association territory,' which lies on the north of the Ohio river and on and between the Mississippi river on the west and a line running through Buffalo and Pittsburg on the east, and that the members of the association are dependent upon appellants for the transportation of their lumber to the markets of the country; that the appellants and the railways carrying yellow pine lumber to the same markets from the territory west of the Mississippi river, embracing the states of Texas, Arkansas, and that part of Louisiana west of the river, by agreement or concert of action advanced the rate on yellow pine lumber from the territories both east and west of the Mississippi river on and beyond the Ohio river in Central Freight Association territory 2 cents per 100 pounds. The advance was made applicable south of the Ohio river and effective on and from April 15, 1903, except as to the Louisville & Nashville road, as to which it became effective June 22, 1903. And it was alleged that such advance was 'unjust, unreasonable, as well as discriminative, in violation of the act to regulate commerce.' The answer of the railways admitted the advance, but denied that it had the character and effect charged, but alleged that, on the contrary, it was reasonable and just and not in violation of law. The answers also specifically justified the advance by the conditions of the market and the traffic, including competition, and the costs of operating the roads. Testimony was taken on the issues thus formed.

The Commission sustained the complaint and made the order recited above. 10 Inters. Com. Rep. 505. The railways refused to obey. The Commission then instituted this proceeding in the circuit court of the United States for the eastern district of Louisiana, where further proof was taken and a decree rendered which affirmed the order of the Commission and made it the order of the court. The roads were also enjoined from further disobedience to the order. No opinion was filed. The testimony was voluminous, and the report and findings of the Commission are very long. They are reported in 10 Inters. Com. Rep. 505, supra. The conclusions of the Commission are mingled somewhat with legal arguments, but the following may be selected as important and pertinent to the questions which the controversy presents:

The lumber-producing districts are divided in territory (1) west of the Mississippi river; (2) territory east of the river; and (3) southeastern territory, composed of the states of Georgia, Florida, and part of Alabama. The lumber of each of these districts competes in the sale of their products in 'Central Freight Association territory.'

The roads of the appellants are located in and serve the second of these territories.

The advance in rates was made as well in territory west of the Mississippi river, 'and was made, in fact, though not expressly, by agreement between the defendants (appellants) and the roads west of the river,' after several meetings, at a consultation between the representatives of the roads. The roads east of the river took the initiative.

At Cairo traffic from a large portion of the lumber-producing districts meets or converges en route to destination. The rates on other Ohio river crossings are based on Cairo; that is, they bear a fixed relation to the Cairo rate, being advanced or reduced as that rate is advanced or reduced. The through rates to points beyond the Ohio river in Central Freight Association territory are made up of the full local rates of the roads north of the Ohio as the proportions of those roads. Whatever is left of the through rates are the proportions of the roads south of the Ohio. The rates to interior points north of the Ohio are made on the lowest combination rates to the Ohio plus the rates beyond, and are blanket rates, being the same from all shipping points or points of production to the samede stination. The rates to the Ohio are to the north bank and include the bridge tolls.

There are divisions of rates south of the Ohio between what are termed the 'originating' between what are termed the 'originating' roads, on which the lumber is principally manufactured, and the roads intermediate between them and the river.

There had been, from time to time, changes or fluctuations in the rate. Prior to 1894 the roads west of the Mississippi claimed and were allowed a differential of 2 cents. This placed at a disadvantage the shippers east of the Mississippi, and a readjustment of rates was made, and on May 1, 1894, the rate to Cairo from east of the Mississippi was reduced to 13 cents per 100 pounds, the rate in force from west of the Mississippi. This rate remained until September 9, 1899, about five years, when it was advanced to 14 cents, and so remained until April 15, 1903, nearly four years, when the advance of 2 cents complained of was made.

The railroads west of the Mississippi make a certain allowance to the mills which have 'logging roads,' that is, roads by which logs are hauled from the timber to the mills. This is called 'tap line allowance or division.' It ranges 1 to 2 cents per 100 pounds, up to as high as 6 cents, and varies, to some extent, according to the destination of the traffic. The mills east of the river have logging roads also, but appellants make no allowance to them. The only exception is the Mobile & Ohio road, which grants allowances to about four mills on its line. The New Orleans & Northeastern road put in a tap line allowance of 2 cents, but other roads east of the river objected, and it was withdrawn. There does not appear to be any reason for such allowance west of the Mississippi which does not apply east of that river, and it amounts to a rebate or reduction from the regularly published rate, and gives an advantage to the mills west of the Mississippi over those east, although the published rates from both are the same.

The lumber business had grown from its inception and was largely and possibly more prosperous than it had been before, but the proof does not show that for two of three years preceding the advance the prices of mill products had materially increased or that the profits realized were unusual or excessively large.

As to the operating expense of the roads the Commission said:

'The proof shows increases in wages and in prices of material and equipment, but not in a marked degree for the two years, 1901 and 1902, immediately preceding the advance rate. These increases have doubtless added materially to operating expenses, but the total annual increases in those expenses are, of course, due only in part to the advances in wages and prices of supplies and equipment. They are attributable in a great measure to the constant growth or enlargement of the business of the roads. Not only has the lumber business of the roads greatly increased, but their business in general. The greater the volume of business, the greater is the aggregate cost of conducting it; or, in other words, of operating the roads. The total operating expenses of the roads, as reported by them, have also been much enlarged by the inclusion therein of large expenditures for permanent improvements.

* * * * *

'While the operating expenses of the defendants have constantly grown, the gross earnings from operation have also increased from year to year to such an extent as to have resulted in a constant increase in net earnings. This is shown in the tables set forth in our findings of fact (finding 14).'

Sufficient cause was not shown, either in the alleged profit in the lumber business or in the increased cost of operating the roads, for the advance in the rates on lumber. And, answering the contention that the former rate was not adequately remunerative, the Commission expressed the view that 'reasonableness in this sense of a rate on a single article of traffic is one of almost insuperable difficulty.' And further, tha t he value of the entire property of a road 'can shed but little, if any, light upon the question.' The rate on one article might reasonably or unreasonably be high and the total of rates be remunerative or otherwise. But, it was concluded, even if that be a mistaken view, it was impossible, with any degree of accuracy, to determine from the voluminous and conflicting testimony on the subject introduced in behalf of both parties what was the value of the property employed by the roads. The Commission thought that the elements to be considered in...