United States v. Reading Co.

• Decision Date: 03 July 1915
• Docket Number: 1095.
• Citation: 226 F. 229
• Parties: UNITED STATES v. READING CO. et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

226 F. 229

UNITED STATES v. READING CO. et al.

No. 1095.

United States District Court, E.D. Pennsylvania.

July 3, 1915

Supplemental Opinion, October 27, 1915. [Copyrighted Material Omitted]

J. C McReynolds, Atty. Gen., G. Carroll Todd, Asst. Atty. Hen and Thurlow M. Gordon, Sp. Asst. Atty. Gen., for the United States.

Robert W. De Forest and Wm. A. Barkalow, both of New York City, for defendants Central R. Co. of New Jersey.

Jackson E. Reynolds, of New York City, for defendants Reading Co., Philadelphia & R.R. Co., and Philadelphia & R. Coal & Iron Co.

Henry S. Drinker, Jr., Abraham M. Beitler and John G. Johnson, all of Philadelphia, Pa., for defendant Lehigh Coal & Navigation Co.

Wm. Jay Turner and John G. Johnson, both of Philadelphia, Pa., for defendant Lehigh & N.E.R. Co.

Before BUFFINGTON, HUNT, and McPHERSON, Circuit Judges.

McPHERSON Circuit Judge.

This action was begun in September, 1913, and is the successor of an earlier action brought in 1907, which was decided by this court in 1910 (183 F. 427), and by the Supreme Court in 1912 (226 U.S. 324, 33 Sup.Ct. 90, 57 L.Ed. 243). The suit of 1907 was brought against six of the railroads that reach the anthracite coal field of Pennsylvania, with certain coal companies and other defendants. It rested entirely on the Anti-Trust Act of 1890; the commodities clause of 1906 was not involved. The result of the suit was to declare two transactions unlawful-- a combination through the Temple Iron Company to prevent the construction of a railroad, and a class of contracts known as the '65 per cent. contracts'-- while the principal complaint of the government, namely, that the carriers had combined to distribute the coal tonnage among themselves, was not sustained.

But, as a part of the general combination charged to exist among the carriers, the government had averred that several minor combinations had been made, and upon the existence and the lawfulness of these the Supreme Court did not pass, declaring that if such combinations had been made they must be separately attacked, and therefore dismissing the bill as to them, but without prejudice to the government's right to sue them in detail. The action now before us undertakes to prove the existence of one of these combinations, although the charge made in the suit of 1907 has now been expanded so as to embrace other transactions and other defendants than were embraced by that proceeding. The situation is complicated, and may be difficult to state with clearness. It may perhaps simplify matters if we premise some general statements before taking up the government's case and the various answers thereto.

The present proceeding in equity declares its object to be: (1) To prevent the defendants 'from further restraining and monopolizing, or attempting to monopolize, interstate and foreign trade and commerce, especially in anthracite coal, in violation' of the Anti-Trust Act of 1890; and (2) to prevent some of the defendants 'from transporting in interstate or foreign commerce anthracite coal (not intended for their use as common carriers) mined or produced by them, etc., in violation' of the commodities clause of the act of 1906.

Confining ourselves for the present to the alleged violation of the act of 1890, we note that the subject-matter of the litigation is the interstate and foreign trade in anthracite coal. The coal in question is produced solely from the Pennsylvania deposit, which in the light of our present knowledge seems to be unique. The United States has never owned or controlled it; the present landowners derive their title either from the Penns or from their successor, the commonwealth of Pennsylvania. What kind of regulation the state might have put in force over this mineral asset, if its value had been realized a century ago, and if the views now current in many quarters about the conservation of natural resources had then prevailed, is purely a matter of academic speculation. What actually happened was this: By gradual degrees anthracite coal came to be recognized as an excellent fuel, and thereupon the attention of private capital, always in search of profitable undertakings, was attracted thereto. The region was wild and unsettled, and the state desired to see it developed and was willing to offer inducements to that end. As a result, many persons acquired coal lands for small sums under the liberal land laws of Pennsylvania, and various mining and transporting enterprises were promoted, usually under the direct encouragement and authority of state legislation. Obeying an inevitable tendency, the ownership of these lands in the course of years passed into the hands of a comparatively small number of individuals and corporations, so that now, although there are still many smaller owners, the great bulk of the deposit belongs to a few large corporate producers. The agencies of production and transportation have been vastly improved and multiplied, and the use of the fuel has become so widespread that many industries and a very large number of homes are now greatly interested in the way the owners deal with their property.

The general situation from the point of view of the large coal-carrying and coal-producing companies was thus summarized by Judge Gray in the first Reading Case, 183 Fed.at page 437:

'As appears from the undisputed testimony of the defendants, these present holdings of coal lands have resulted from acquisitions made through a long period of years by the companies named respectively, or their predecessors in title, beginning, in the case of some of the largest holders and in respect to the larger part of the acquisition, long prior to 1874. The gradual growth of these acquisitions and the consequent development of the present situation, it is contended by the defendants, have been induced by natural causes, such as the geographical and topographical features of the anthracite coal region, which have presented serious obstacles to the construction of railroads with which it was sought to penetrate the different coal fields of the anthracite region, and which have enhanced enormously the cost of their construction; that in the earlier periods of the development of this region, when the mines and the production of coal were more largely in the hands of individuals and small corporations, the business of mining and marketing coal was wasteful and often resulted largely in the failure or bankruptcy of those concerned therein. The individual exploiter skimmed the cream, so to speak, of his coal lands, and, unable to meet the expense of practicing the economies necessary to their full development, the mines were not infrequently abandoned, and of this abandonment, deterioration or ruin was the natural result; that, latterly, the recurrence of strikes and labor troubles have contributed to the difficulties of the situation; that these strikes and labor troubles extended to all the coal-mining and coal-shipping operations of the whole region, affecting all producers, great and small alike, and that the solidarity of the labor unions compelled a joint agreement, embracing all engaged in mining operations as to the terms of settlement; that since the last settlement in 1902-03, there has resulted a condition of comparative industrial peace in the anthracite region; that this condition, together with the increased demand for and the consequent increased price of coal have regulated, without destroying, the natural competition of the great carrying and producing companies; that many economies in the production and sale of coal have been made possible, wasteful production largely done away with, and, more than all, a wise and scientific conservation of the future supply of this necessity of modern life has been brought about, to the infinite advantage of the public and of those connected with the production of coal, whether as capitalists or laborers.

'It is further urged by the defendants that the destruction of present conditions and methods attending the production and sale of coal will produce a deplorable anarchy in the trade, and involve in confusion and financial loss all those engaged therein, a confusion and loss by which the consumer is bound to suffer.'

We think the contentions then made fairly state many of the facts, and in the present case we may say of them, as was said by Judge Gray, that while they are not decisive they are pertinent because their importance challenges the court's careful consideration of the question at issue. When we consider that some of the defendants ship coal to almost all the states and to three foreign countries, we obtain some conception of the magnitude of the trade, and the need of caution in dealing with so vast a subject.

The government is not making any attack on the title by which the defendants hold the lands they own in the Pennsylvania region, nor does it seek directly to divest or disturb their enjoyment thereof. The bill does not complain of the method (in and of itself) by which the title is held, and it does not complain of the methods of producing and distributing the coal, so far as these methods are confined to transportation and sale within the state. Neither is the government complaining of the mere amount of the defendants' holdings, or of the mere extent of their business; the act of 1890 has not declared either such amount or such extent to be unlawful, in and of itself; the act is directed simply against unreasonable restraint of interstate and foreign trade, and neither the amount of the defendants' holdings, nor the extent of their business, is relevant to the present inquiry except for the light that may be thrown thereby upon the effect of the defendants' conduct on interstate and foreign trade. In a...