Interstate Commerce Commission v. Delaware, Lackawanna Western Railroad Company

• Decision Date: 03 April 1911
• Docket Number: No. 325,325
• Citation: 31 S.Ct. 392,55 L.Ed. 448,220 U.S. 235
• Parties: INTERSTATE COMMERCE COMMISSION, the American Forwarding Company, et al., Appts., v. DELAWARE, LACKAWANNA, & WESTERN RAILROAD COMPANY et al
• Court: U.S. Supreme Court

220 U.S. 235

31 S.Ct. 392

55 L.Ed. 448

INTERSTATE COMMERCE COMMISSION, the American Forwarding Company, et al., Appts.,

v DELAWARE, LACKAWANNA, & WESTERN RAILROAD COMPANY et al.

No. 325.

Argued February 25 and 28, 1911.

Decided April 3, 1911.

Assistant to the Attorney General Ellis,

P. J. Farrell, and Edwin P. Grosvenor for appellants.

[Argument of Counsel from pages 235-237 intentionally omitted] Messrs. Mazzini Slusser for an appellant shipper.

Messrs. William S. Jenney and Walker D. Hines for appellees.

[Argument of Counsel from pages 237-240 intentionally omitted] Mr. Chief Justice White delivered the opinion of the court:

Was the court below wrong in permanently enjoining the enforcement of an order of the Interstate Commerce Commission directed to the railroad companies who are appellees is the subject which this cause requires us to consider. As a preliminary to stating the proceedings before the Commission and the court, we refer to practices under the act to regulate commerce which gave rise to and developed the controversy with which the order of the Commission was concerned. To do this will not only abbreviate the statement of the case, but will serve to broadly define the one question essential to be decided, and point to the principles applicable to its correct solution.

Before the act to regulate commerce it was usual, first, to give reduced rates to persons who shipped quantities of merchandise; and, second, to charge a proportionately less rate for a carload than was asked for a shipment in less than a carload. After the act, lower rates to wholesale shippers were abandoned, it having been declared that to continue them was contrary to the act. Providence Coal Case, 1 I. C. C. Rep. 107, 1 Inters. Com. Rep. 363. The giving, however, a lesser proprtional rate for a carload than for a less than carload continued, the Commission having at an early date announced that such a practice was not prohibited. Thurber v. New York C. & H. R. R. Co. 3 I. C. C. Rep. 473, 2 Inters. Com. Rep. 742. Without detailing the theory upon which this conception was based, it suffices broadly to say that it embodied the assumption that a carload was the unit of shipment, and rested upon the diference which existed between the cost of service in the case of a carload ship- ment by one consignor to one consignee, and that occasioned by a shipment in one car of many packages by various consignors to various consignees. Leaving aside possible qualifications arising from exceptional conditions, it is true to say that the Commission, however, recognized that the fixing of a lesser rate for a carload was not imperative, but was merely optional. Conformably to these administrative conception it came universally to pass that wherever a lesser charge for a carload than for a less-than-carload shipment was established, such charge was only applicable to shipments made at one time by one consignor of merchandise consigned to one consignee at a single destination. While there was this uniformity, there was, however, much divergence between carriers as to the character of traffic which was given the benefit of the lesser rate for carload shipments and the circumstances under which, when such rate was established, it would be applied. This becomes at once manifest when the rules are considered which prevail in the three geographical divisions into which the United States came to be divided by carriers in order that a similar classification might, in a general sense, obtain under like conditions. The divisions in question are the Southern, the Western, and the Official Classification territory, the first including practically all points east of the Mississippi river and south of the Ohio and Potomac rivers; the second embracing that part of the country west of the Mississippi river and the Great Lakes and an imaginary line extending from St. Louis to Chicago; and the last all of the United States not covered by the two other divisions. In the Southern and Western Classification territory the rules established by carriers allowed the lesser rate for a carload shipment only on a small percentage of the classified articles, and in both these territories restrictions were imposed prohibiting the intermingling of differently classified articles in one car for the purpose of obtaining the carload rate, even though the articles, if they had been shipped separately in carload quantities, might have been entitled to the carload rate. The extent of these limitations upon the right to enjoy the lesser rate for the carload in the territories in question is shown by a statement made by the then chairman of the Interstate Commerce Commission, in the dissenting opinion delivered by him in Export Shipping Co. v. Wabash R. Co. 14 Inters. Com. Rep. 437, 443, viz.:

'A recent careful and authoritative examination of the several classifications shows that in the Southern Classification there are 3,503 less-than-carload and only 773 carload ratings, the carload ratings being 22.1 per cent of the less than-carload; in the Western Classification there are 5,729 less-than-carload and only 1,690 carload ratings, the carload ratings being 29.8 per cent of the less-than-carload.'

In the same opinion it is also stated that in both the Western and Southern Classification territory the small percentage accorded a carload rate was confined to goods embraced within lower grades of classification, taking therefor the lowest rates. In the Official Classification territory, however, a widely different allowance of carload ratings prevailed, since in that territory the carload rating was permitted on a very large number of articles. In that territory, as likewise remarked by Chairman Knapp, 'there are 5,852 less-than-carload ratings and 4,235 carload ratings, the carload ratings being 72.4 per cent of the less-than-carload' against, as we have said, 29.8 per cent and 22.1 per cent in the other territories. This large difference was besides in effect made much greater not only by the higher grades of traffic to which the carload rate was extended, but also because of the enlarged right to ship in one car articles embraced in various classes of traffic to which the carload rating was extended.

There can be no doubt that the privilege of shipping at a lesser rate for the carload shipment than was asked for a less-than-carload shipment came to be interwoven with and inseparable from the movement of commerce through the channels of railroad transportation. And the benefits of the lesser rate came to be obtained not alone by an owner of all the goods shipped in a carload, but by combinations of owners, by agreements between them concerning particular and isolated shipments, by the organization of associations of shippers having for their object the creating of agencies to receive merchandise belonging to the members of the association, and to aggregate and ship them in carload lots in the name of one consignor to a single consignee, at one destination, by the use of commission houses, storage and other companies, etc. It is also undoubted that, in consequence of the facility of shipping at a lesser rate for a carload than for a less-than-carload shipment, there developed a class of persons known as forwarding agents, who embarked in the business of obtaining a carload rate for various owners of merchandise by aggregating their shipments, such agents relying for their compensation upon what they could make from the difference between the carload and less-than-carload rates. The business so carried on by these agents was thus described by Mr. Commissioner Knapp in his dissenting opinion, to which we have previously referred (14 Inters. Com. Rep. 440):

'The business of the forwarding agent, in so far as is material to the question involved, is to collect less-than-carload shipments from different consignors, combine such shipments into carloads, and ship the same in the name of the forwarding agent, or of the owner of one of the less-than-carload shipments, to one consignee, who may be the forwarding agent himself, another forwarding agent at the point of destination with whom he has business relations, or the owner of part of the property transported. The consignee of the shipment, whoever he may be, receives the carload and distributes its contents to the parties for whom they are intended. The forwarding agent finds his compensation and profit in the difference between the carload and less-than-carload rates.

'The saving effected by securing application of the carload rather than the less-than-carload rates may be divided between the forwarding agent and his customer in any agreed proportion. To the extent that the customer secures the carriage of his property at a lower rate than the less-than-carload rate, which would otherwise be applied, he saves money, and the division of the difference between the carload and the less-than-carload rates is a matter of private bargain between him and the agent.'

The extent to which the right to avail of the carload rating in the various modes above stated had come to be a prat of the business of the country is described in the opinion of the Commission in California Commercial Asso. v. Wells, F. & Co. 14 Inters. Com. Rep. 422, delivered on the same day that its opinion concerning this controversy was announced. The Commission said (p. 433):

'Few practices have become more firmly established in the transportation world than that of combining small quantities of freight of various owners and shipping at the relatively lower rates applicable to large consignments; and under this practice has developed an immense volume of traffic which otherwise could never have been brought into being. It is not an exaggeration to say that the enforcement of such a rule by the carriers of the United States would bring disaster upon thousands of the smaller industries, and more surely establish the dominance of the greater industrial and...