Southern Pacific Company v. Interstate Commerce Commission

Decision Date20 February 1911
Docket NumberNo. 527,527
PartiesSOUTHERN PACIFIC COMPANY and Oregon & California Railroad Company, Appts., v. INTERSTATE COMMERCE COMMISSION
CourtU.S. Supreme Court

Messrs. Maxwell Evarts and F. C. Dillard for appellants.

Messrs. Wade H. Ellis and Luther M. Walter for appellee.

[Argument of Counsel from pages 434-437 intentionally omitted] Mr. Chief Justice White delivered the opinion of the court:

Whether the court below was right in refusing to enjoin, at the suit of the railway companies who are appellants, the enforcement of an order of the Interstate Commerce Commission, is the general subject for consideration on this record.

When that which is superfluous is put out of view, it will come to pass that every substantial controversy which the case presents will be disposed of by determining what was the character of the order made by the Commission; that is to say, what was the power which that body exerted in making the order in question. We state at once the pertinent facts.

The Willamette valley, about 150 miles long, lies in the western part of the state of Oregon, south of the Columbia river, and through it there flows in a northerly direction the Willamette river, which empties into the Columbia river. Portland is on the Willamette river, at or near where that river empties into the Columbia river. From Cornwallis, on the Willamette river, a point about 97 miles south of Portland, that is, about that distance from where the Willamette empties into the Columbia, the Willamette is navigable, and there is navigation from Portland to the sea by means of the Willamette and the Columbia rivers. The rails of the Oregon & California Railroad from Portland pass through the Willamette valley, paralleling the Willamette river at various distances, and extend to the Oregon and California state line, where that road connects with the Southern Pacific Company. The latter has for a number of years operated the Oregon & California as part of its system.

In November, 1907, a complaint was filed with the Interstate Commerce Commission on behalf of the Western Oregon Lumber Manufacturers' Association and others, concerning a rate of $5 per ton, in car-load lots, on 'green common rough fir lath and lumber and forest products' from Willamette valley points to San Francisco and bay points, fixed in a tariff filed by the Southern Pacific Company with the Commission, and which became operative in April, 1907. It was charged that the rate complained of was unreasonable in and of itself and discriminatory. It was averred that from about 1898 there had existed a rate of $3.10 for carrying the same character of lumber between the points named; that, upon the faith of this rate, and the belief that it would not be changed, large amounts of capital had been invested in lumber mills in the Willamette valley; that the people in that valley were dependent upon the lumber industry, and that such industry would be destroyed and the population be detrimentally affected if the new rate of $5 per ton was continued to be charged. It was alleged that the $3.10 rate was reasonable in and of itself, and that the rate had been increased without just cause, upon the theory that the lumber interest in the Willamette valley was prosperous, and that hence the traffic could stand the increase. The railroad companies answered, setting up the reasonableness of the $5 rate. They in effect averred that the $3.10 rate, which had previously prevailed, was unreasonably low, and that it had been fixed solely for the purpose of enabling lumber from the Willamette valley to reach a market in San Francisco and day points, which it could not have done if a just and reasonable rate had been exacted. This condition, it was alleged, had arisen from the fact that from Portland and other points on the Columbia river and Puget sound there was a highly developed lumber industry accessible to San Francisco and bay points by water at rates so low as to have absolutely excluded the shipping of any lumber from the Willamette valley by rail to such points, unless a very low rate had been fixed by the railroad companies to meet the water-borne lumber traffic, and that there was no market which was commercially available for the Willamette valley lumber other than that of San Francisco and bay points when the $3.10 rate was fixed. The complaint and the answer which we thus state are not in the record, but we have summarized their contents from a statement made concerning the same by the Interstate Commerce Commission in its answer in this suit, filed in the circuit court.

It is certain that for a number of years the $3.10 rate was applied both to shipments of lumber not only from the Willamette valley, but also from Portland. Several years, however, before the going into effect of the $5 rate fixed in the tariff of April, 1907, a tariff fixing that rate had been made applicable to Portland. During the hearing before the Commission the Portland lumber interests intervened and asked that if the $3.10 rate was restored to Willamette valley, it should also be restored to Portland, so as to prevent discrimination against Portland.

After a hearing, the Commission, in June, 1908, filed its report and made an order adverse to the railway companies, Commissioners Knapp and Harlan dissenting. 14 Inters. Com. Rep. 61. It suffices to say that the order entered directed the railroad to cease from charging the $5 rate complained of from Willamette valley points, and fixed as a proper rate from certain points in the valley the sum of $3.40 a ton, and from the remaining points in the valley the sum of $3.65. Although some of the points embraced by the order were within a few miles of Portland, that city was not given the benefit of the reduction, and therefore remained subject to the $5 rate.

The railroad companies, refusing to yield obedience to the order, commenced this suit in equity in the circuit court of the United States for the northern district of California to have the order set aside and to enjoin its enforcement. After a demurrer was sustained, an amended bill was filed. By this bill it was averred that the rate of $5, fixed by the tariff which the Commission had set aside, was a just and reasonable rate per se, and that the rate fixed by the Commission was so unreasonably low as to be unjust and unreasonable. This was alleged to be the case not only in view of the great increase in the cost of the operation of the road since the time when the $3.10 rate was put in force, but also because of the normally excessive cost of maintenance and operation resulting from the mountainous country which the road traversed, subjecting to an unusual expense for repairing damage done by floods and freshets, the high grades requiring the application of increased motive power, and permitting even with such power the movement of only unusually short trains, thereby causing a much greater average expense. Referring to the rate of $3.10 which had previously prevailed, the circumstances connected with its established rate were detailed. It was alleged that the rate was unreasonably low when fixed, and was so fixed by the railroad solely with the object of encouraging the lumber industry in the Willamette valley, and to enable it to reach a market,—a result which otherwise could not have been attained. The averments on this subject reiterated the statements made in the answer before the Commission. It was alleged that having maintained the unreasonably low rate for the reasons stated, the railroad companies had finally changed the same, and fixed a just and reasonable rate for the services rendered, because of changes in the situation of the lumber interest in the Willamette valley. Those changes, it was said, arose from the opening of markets for lumber from the Willamette valley by means of new railroad routes via Portland as a gateway to the East, by means of which a large percentage of lumber produced in the Willamette valley was moved to other markets. It was alleged that the Commission, in setting aside the increased tariff rate of $5, and fixing substantially the old rate, had exceeded the powers conferred upon it by law, because it did not act in the exercise of the authority conferred upon it to determine whether a rate was just and reasonable in and of itself with regard to the service rendered, but had proceeded upon the assumption that power was conferred upon it to fix an unreasonable rate because of its belief as to the equities of the situation, or upon the basis of principles of estoppel, or upon its conception of public policy and its right to enforce what was deemed best, under the circumstances, for the interest of shippers.

There was a demurrer to the amended bill, and the court certified the case to this court. The certificate was dismissed. 215 U. S. 226, 54 L. ed. 169, 30 Sup. Ct. Rep. 89. On the receipt of the mandate, the demurrer was withdrawn and a new demurrer, as also an answer to the bill, were filed. In the answer the lumber conditions in the Willamette valley were recited, as also what were alleged to be the circumstances connected with the establishment of the $3.10 rate, and the proceedings had before the Commission in the controversy referred to were detailed. The regularity of the proceedings before the commission was averred, and the legality and finality of the findings and conclusions of that body were asserted. It was declared that the rates fixed from the points in the Willamette valley, excluding Portland, were just and reasonable in and of themselves. Traversing the allegations of the complaint, it was averred that the Commission found the $5 rate to be unreasonable and unjust, admitted that it found the $3.10 rate to be a low rate, but denied that it found such rate to be unreasonably low, and denied that the $3.40 and $3.65 rates were substantially the same as the $3.10 rate.

The cause was...

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