Baltimore Co v. United States

• Decision Date: 03 January 1939
• Docket Number: No. 133,133
• Citation: 83 L.Ed. 318,305 U.S. 507,59 S.Ct. 284
• Parties: BALTIMORE & O.R. CO. et al. v. UNITED STATES et al
• Court: U.S. Supreme Court

305 U.S. 507

59 S.Ct. 284

83 L.Ed. 318

BALTIMORE & O.R. CO. et al.

v UNITED STATES et al.

No. 133.

Argued Dec. 7, 8, 1938.

Decided Jan. 3, 1939.

Appeal from the District Court of the United States for the Southern District of New York.

Mr. Edwin H. Burgess, of New York City, for appellants.

[Argument of Counsel from pages 507-511 intentionally omitted] Mr. J. Stanley Payne, of Washington, D.C., for appellees The United States and Interstate Commerce Commission.

[Argument of Counsel from pages 511-513 intentionally omitted] Mr. John J. Hickey, of Washington, D.C., for appellee Warehousemen's Protective Committee.

Mr. A. Lane Cricher, of Washington, D.C., for appellee American Warehousemen's Ass'n, Merchandise Division.

Mr. Henry E. Foley, of Boston, Mass., for appellee Boston Port Authority.

Mr. Justice REED delivered the opinion of the Court.

The Interstate Commerce Commission entered an order on February 2, 1937, which directed certain carriers serving the Port of New York district to cease and desist on or before April 5, 1937, from permitting shippers in interstate commerce over the carriers' lines from occupying 'space by lease or otherwise in warehouses, buildings or on piers owned or controlled directly of indirectly by, or affiliated with' the carriers involved 'at rates and charges which failed to compensate said' carriers 'for the cost of providing said space.' The cease and desist order likewise directed the carriers to abstain from storing, handling or insuring goods for shippers at less than cost. One carrier was also directed to abstain from granting concessions to a warehouse company by means of leasing space to the warehouse company at less than the cost of the space to the carrier.

As authorized by the Judicial Code,¹ a petition in equity was filed in the United States District Court for the Southern District of New York on March 9, 1937, seeking a permanent injunction against the enforcement of the order. A hearing was had by a three-judge court pursuant to the provisions of the Urgent Deficiencies Appropriation Act of October 22, 1913,² and a final order dismissing the petition entered on March 23, 1938.³ An appeal was taken directly to this Court as authorized by the Urgent Deficiencies Act and the Judicial Code.⁴

The order appeal from was entered in an investigation into 'practices of carriers affecting operating revenues or expenses'⁵ undertaken by the Interstate Commerce Commission upon its own motion.⁶ For convenience the general investigation was divided into different parts; the one in which the order under consideration was entered is Part VI, 'Warehousing and Storage of Property by Carriers at the Port of New York.' The particular practices affected by the order were brought to the attention of the Commission by complaints of warehouse operators in the New York district that warehouses owned or controlled by the carriers were being operated contrary to the Interstate Commerce Act. Full reports of the investigation into the practices complained of were made by the Commission on December 12, 1933,⁷ and June 8, 1936.⁸ The first report terminated in an admonition; the second report was followed by an order which never became effective. This order was superseded by the Commission's order of February 2, 1937, in controversy here. This last order was entered by the Commission upon reconsideration of its former reports.⁹ The Commission postponed its effective date until the injunction was brought and the lower court has entered an order for a further stay pending the determination of the appeal to this Court.

While the issues here are matters of law depending on whether admitted facts support the order, it will be helpful for an understanding of the basis of our opinion to have summarized the underlying facts found by the lower court.

The railroads affected by the order are the Baltimore & Ohio Railroad Company, the Central Railroad Company of New Jersey, the Delaware, Lackawanna & Western Railroad Company, Erie railroad Company, Lehigh Valley Railroad Company, the New York Central Railroad Company and the Pennsylvania Railroad Company. All are subject to the Interstate Commerce Act. As common carriers they operate lines of railroad extending in a generally westward direction from the Port of New York district to various western points and compete each with the others for domestic nd foreign commerce to and from the district. All united in the petition to enjoin the enforcement of the order. Their petition name as defendant the United States of America. The Interstate Commerce Commission and the Warehousemen's Protective Committee intervened. Later, orders were entered allowing the intervention of the American Warehousemen's Association, Merchandise Division; the Boston Port Authority; and the City of Boston.

It was the practice of these carriers to furnish to shippers in the Port of New York area the storage, handling and insurance which were under investigation. On ac- count of the high price and great demand for storage space in the wholesale and retail business locations of New York, dealers must store their surplus stocks in lowrent sections. To serve those merchants who do not have their own warehouse facilities, numerous companies not affiliated with the carriers are engaged in the commercial warehouse business in the immediate vicinity of New York. Their business, like the warehouse businesses owned or operated by or affiliated with the carriers, not only covers the storage of goods but its handling in and out of cars and ships with all the incidental services connected therewith such as the issuance of warehouse receipts, inspection, cooperage, marking, and weighing.

Neither the complaints of the competitors of the carriers in the warehousing business nor the terms of the Commission's order are directed at the involuntary storage of goods incidental to transportation. This is the period before or after shipment during which goods occupy cars or floors without any charge above the strictly transportation rate. The warehousing practices complained of are those in connection with accessorial services of the carriers, accurately designated commercial warehousing. Examples of such services are the storage and other warehousing services furnished by the carriers or their affiliates or subsidiaries, to enable shippers to hold and handle their commodities beyond the time allowed by transportation rates and in ways not required by rail movement itself. All of the carriers 'now generally store freight on piers owned or leased by them and in warehouses operated by affiliated or subsidiary companies.' This business is carried on in various ways. Some carriers lease space to shippers for warehousing; others have aided in financing structures on their property in which they lease space from their own subsidiaries; and still others own directly the buildings and lease them to subsidiaries for warehouse operations. In all cases the carriers exercise sufficient control over the warehouse facilities to make them subservient to the competitive needs of the carriers. Their entrance into warehousing was brought about by a desire to induce shippers to use particular rail facilities and as first one and then the other of the carriers gained traffic by their warehouse conveniences, it seemed necessary for their competitors to equip themselves with similar advantages. Obviously a shipper, who can secure transportation, storage, handling and insurance together from a carrier and its affiliates for an aggregate cost which is less than the sum for which he can secure the various services when purchased separately from carriers and non-affiliated enterprises, will deal with those offering the best terms. The storage largely determines the transportation route. To get the rail transportation of large shippers, the carriers sought them out and offered warehousing services and space below the rates of private warehousemen and below the cost to the carriers of the services rendered. It was not only a contest between carriers and private warehousemen but also between the carriers themselves. Traffic departments of the railroads became solicitors for warehousing business. Favored shippers were rented space by the carriers below compensatory figures. To meet the requirements of this competition the various Port of New York railroads added many new buildings in recent years. This provided many millions of square feet of space above the present needs of the district.¹⁰

Another form of warehousing is found in a development of the storage-in-transit privilege at the Port of New York. The carriers have rules and regulations governing this privilege which are published in separate tariffs filed with the Commission. These tariffs provide that westbound freight in carloads 'from points within the free lighterage limits of New York Harbor may be stored in designated warehouses * * * within the Port District, and, if reforwarded by rail within the period specified in the tariffs * * * the through rate * * * from point of origin in New York Harbor to the final destination, will be applied.'

As the through rate from shipside and from warehouse is the same, if the shipment moves outbound from the warehouse over the line of the inbound carrier, a shipper using carrier warehouses has the advantage of port stoppage without extra transportation cost. This tariff arrangement does not affect charges for warehousing services in connection with the storage. The storage is commercial in character and involves large tonnages. While the transportation tariffs permit varying periods of from twelve to thirty-six months for the different commodities, storage may be continued beyond this time limit at the same rate. Prior to October 16, 1934, the tariffs permitted the removal of the commodities stored at any time in any quantity and by any means of transportation without additional charge. On that date an additional...