American Express Company v. State of South Dakota Ex Rel Clarence Caldwell

• Decision Date: 11 June 1917
• Docket Number: No. 902,902
• Citation: 61 L.Ed. 1352,37 S.Ct. 656,244 U.S. 617
• Parties: AMERICAN EXPRESS COMPANY, George C. Taylor, Individually and as President of the American Express Company, and Wells Fargo & Company, Piffs. in Err., v. STATE OF SOUTH DAKOTA EX REL. CLARENCE C. CALDWELL, as Attorney General of the State of South Dakota, et al
• Court: U.S. Supreme Court

244 U.S. 617

37 S.Ct. 656

61 L.Ed. 1352

AMERICAN EXPRESS COMPANY, George C. Taylor, Individually and as President of the American Express Company, and Wells Fargo & Company, Piffs. in Err.,

v STATE OF SOUTH DAKOTA EX REL. CLARENCE C. CALDWELL, as Attorney General of the State of South Dakota, et al.

No. 902.

Argued April 13, 1917.

Decided June 11, 1917.

Messrs. C. O. Bailey, Branch P. Kerfoot, T. B. Harrison, J. H. Voorhees, and C. W. Stockton for plaintiffs in error.

Messrs. John Barton Payne, R. B. Scott, and A. P. Humburg, as amici curiae, on behalf of Illinois Central Railroad Company.

Messrs. Oliver E. Sweet, Byron S. Payne, P. W. Dougherty, and Clarence C. Caldwell for defendants in error.

Messrs. Charles W. Needham and Joseph W. Folk, as amici curiae, on behalf of the Interstate Commerce Commission.

Mr. Justice Brandeis delivered the opinion of the court:

In 1912 the Interstate Commerce Commission entered upon a comprehensive investigation of express rates practices, accounts, and revenues. Its report¹ resulted in the establishment, on February 1, 1914, throughout the United States, of the so-called uniform zone and block system of rates in interstate transportation, and the prompt adoption, in forty states, of the same system in intrastate transportation.² South Dakota did not adopt the national system. It adheres to a schedule of maximum express charges, known as Distance Tariff No. 2, which was promulgated by its Board of Railroad Commissioners in 1911, and which, on weighted average, is about 40 per cent lower than the Zone and block system. Shippers of Sioux City, Iowa, complained that the differences between these interstate and intrastate scales of rates resulted in unjust discrimination against them, to the advantage of their South Dakota competitors. Proceedings to secure relief were brought by them before the Interstate Commerce Commission; and on May 23, 1916, its report and order were filed. Traffic Bureau v. American Exp. Co. 39 Inters. Com. Rep. 703.

This order,³ couched in general terms, prohibited charg- ing after August 15, 1916 (later extended to September 15, 1916), 'higher rates for the transportation of shipments by express between Sioux City, Iowa, and points in the state of South Dakota, than are contemporaneously . . . demanded . . . for transportation under substantially similar circumstances and conditions for substantially equal distances between Sioux Falls, Mitchell, Aberdeen, Watertown, and Yankton, South Dakota, on the one hand, and said points in the state of South Dakota, on the other, which said relation of rates has been found by the Commission to be unjustly discriminatory.' The order made 'the report containing its findings of fact and conclusions thereon' a part thereof; and the report makes clear that the order applied only to competitive territory, and that this is the southeastern section of South Dakota. The report also declared 'that the South Dakota rates are too low to be made the measure of interstate rates between Sioux City and South Dakota points;' that the existing interstate rates 'have not been shown to be unreasonable;' that no reason has been presented for modifying them; and that the Commission is 'under no doubt as to how the unjust discrimination found to exist should be corrected;' but the report did not expressly state that the intrastate rates should be raised, nor did it enumerate the competitive points in South Dakota to which the rate adjustment should apply.

In July, 1916, the express companies conferred informally with the Board of Railroad Commissioners about introducing in South Dakota complete intrastate tariffs corresponding with the zone and block system scale, and also about introducing special tariffs on that basis covering rates between the cities of Sioux Falls, Mitchell, Aberdeen, Watertown, and Yankton and all other points in the state. On August 5 the Board issued an order for a general investigation of express rates; and set for hearing on December 4, 1916, that investigation as well as the applications to put into effect these special or general tariffs. In an opinion then filed, it said:

'The rates which shall be put into effect to remove the discrimination found by the Interstate Commerce Commission to exist in favor of jobbers at Aberdeen, Watertown, Sioux Falls, Mitchell, and Yankton, and against Sioux City and its jobbers, have not yet been determined. As these rates are to apply on intrastate traffic and between stations and over lines wholly within this state, this commission [Board] is the proper tribunal to fix these rates. To permit the putting into effect of two systems of rates, one from the cities named and another from all other cities in the state, would create an intolerable situation.'

On August 25, the express companies formally presented to the Board the special tariffs, to become effective September 15. And on September 12, the Board formally refused to allow the same to be filed, and rejected them, among other reasons, because the

'schedules have not been printed and published, and thirty days' notice of the time when the said proposed classifications, tariffs, tables, and schedules shall go into effect has not been given to the Board of Railroad Commissioners of the State of South Dakota, and to the public, as required by the provisions of § 10 of chapter 207 of the Laws of 1911.'

On the same day the attorney general of South Dakota and the Board of Railroad Commissioners brought an original proceeding in the supreme court of the state against the American Express Company and Wells Fargo & Company to enjoin them from putting into effect the special tariffs covering all their rates within the state to and from the five cities named; and a restraining order was issued. The defendants complied with the restraining order; but filed an answer in which they set up the order of the Interstate Commerce Commission, and alleged that about August 15 they published certain express rate tables, but that

'all rates for the carriage of express matter intrastate throughout the state of South Dakota were left the same as provided in the South Dakota Express Disance Tariff No. 2, Exhibit A hereto, excepting the rates to and from the cities of Sioux Falls, Aberdeen, Watertown, Mitchell, and Yankton, and other South Dakota points; that to the business between said cities . . . and other South Dakota points there were applied the rates prescribed by the Interstate Commerce Commission, as hereinbefore set forth, for interstate traffic, between points within and points without the state of South Dakota; that excepting for the application of the Interstate Commerce Commission rates to traffic to and from said cities . . . no changes were made in the express tariffs throughout the state of South Dakota, as the same had previously existed under the provisions of the South Dakota Distance Tariff No. 2 . . .'

There was in the answer no explicit allegation that no change in rates had been made except as required by the Commission's order.⁴

The plaintiffs demurred to the answer upon the ground that it did not state facts sufficient to constitute a defense to the suit. The demurrer was sustained, and defendants having elected to stand on their answer, a perpetual injunction was granted on December 5, which enjoined the express companies from putting into effect the special tariffs presented on August 25,

'or any of the rates, fares, or charges specified in said tables between the cities of Aberdeen, Mitchell, Sioux Falls, Watertown, or Yankton in the state of South Dakota and other stations of said express companies in said state . . . or . . . charges greater . . . than the maximum rates . . . of . . . Distance Tariff No. 2 . . . unless or until a schedule of express rates shall have first been submitted to the Board of Railroad Commissioners of the State of South Dakota and have been regularly approved and allowed by said board in conformity to the laws of the state of South Dakota.'⁵

A petition for writ of error to this court was allowed December 11, 1916. The record was filed here January 27, 1917, and included in it is the opinion of the supreme court of South Dakota, filed in the cause January 20, 1917. The reasons there given for holding that the order of the Interstate Commerce Commission is no justification for disregarding the order of the Board of Railroad Commissioners of South Dakota embody, in substance, the argument made here on behalf of the state's officials.

1. The nature of the Interstate Commerce Commission's order.

In its specific direction the order merely prohibits charging higher rates to and from Sioux City than to and from the five South Dakota cities. It could be complied with (a) by reducing the interstate rates to the South Dakota scale, or (b) by raising the South Dakota rates to the interstate scale, or (c) by reducing one and raising the other until equality is reached in an intermediate scale. The report (which is made a part of the order) contains, among other things, a finding that the interstate rate which was prescribed by the Commission was not shown to be unreasonable. This finding gives implied authority to the express companies both to maintain its interstate rates and to raise to their level the intrastate rates involved. The Shreve port Case (Houston, E. & W. T. R. Co. v. United States) 234 U. S. 342, 58 L. ed. 1341, 34 Sup. Ct. Rep. 833. For, if the interstate rates are maintained, the discrimination can be removed only by raising the intrastate rates.

But the finding that discrimination exists and that the interstate rates are reasonable does not necessarily imply a finding that the intrastate rates are unreasonable. Both rates may lie within the zone of reasonableness and yet involve unjust discrimination. Interstate Commerce Commission v. Baltimore & O. R. Co. 145 U. S. 263, 277, 36 L. ed. 699, 703, 4 Inters. Com. Rep. 92, 12 Sup. Ct. Rep. 844. Proceedings to...