Board of Trade of Kansas City, Mo v. United States

• Court: U.S. Supreme Court
• Writing for the Court: FRANKFURTER
• Citation: Board of Trade of Kansas City, Mo v. United States, 314 U.S. 534, 62 S.Ct. 366, 86 L.Ed. 432 (1942)
• Decision Date: 05 January 1942
• Docket Number: No. 143,143
• Parties: BOARD OF TRADE OF KANSAS CITY, MO., et al. v. UNITED STATES et al

314 U.S. 534

62 S.Ct. 366

86 L.Ed. 432

BOARD OF TRADE OF KANSAS CITY, MO., et al.

v UNITED STATES et al.

No. 143.

Argued Nov. 18, 1941.

Decided Jan. 5, 1942.

Rehearing Denied Feb. 2, 1942.

See 315 U.S. 826, 62 S.Ct. 621, 86 L.Ed. —-.

Appeal from the District Court of the United States for the Western District of Missouri.

Messrs. Samuel J. Wettrick, of Chicago, Ill., and M. W. Borders, of Kansas City, Mo., for appellants.

Mr. J. Stanley Payne, of Washington, D.C., for appellees United States and Interstate Commerce Commission.

Mr. Frank A. Leffingwell, of Dallas, Tex., for appellees Texas Industrial Traffic League and others.

Mr. Justice FRANKFURTER delivered the opinion of the Court.

We have before us on this appeal orders embodying a series of determinations made by the Interstate Commerce Commission after inquiries into the grain rate structure stretching over a period of twelve years. The plaintiffs are millers, elevator companies, boards of trade, grain exchanges, and other business interests in Kansas City, St. Louis, Omaha, St. Joseph, Atchison, Leavenworth, and Minneapolis, the great grain centers known in the trade as 'primary markets'. The Commission's orders, they complain, create an unlawful discrimination under the Interstate Commerce Act, §§ 1(5), 2, 3(1), 49 U.S.C.A. §§ 1(5), 2, 3(1), by prohibiting the interruption of shipments of grain for the purpose of being stored, marketed, or processed—technically characterized as transit privileges—at these primary markets on the lower rates under which these privileges are available at competing interior points (i.e grain centers other than primary markets). The District Court dismissed the complaint, 36 F.Supp. 865, and the case is here on appeal. Judicial Code § 210, 28 U.S.C. § 47a, 28 U.S.C.A. § 47a.

As one phase of the effort to relieve agricultural distress, Congress in 1925 by the Hoch-Smith Resolution directed the Interstate Commerce Commission to make a thorough investigation of the rate structure of common carriers 'in order to determine to what extent and in what manner existing rates and charges may be unjust * * * or unduly preferential, thereby imposing undue burdens, or giving undue advantage as between the various localities and parts of the country, the various classes of traffic, and the various classes and kinds of commodities, and to make, in accordance with law, such changes, adjustments, and redistribution of rates and charges as may be found necessary to correct any defects so found to exist.' 43 Stat. 801, 49 U.S.C. § 55, 49 U.S.C.A. § 55.

Accordingly, on September 30, 1926, the Commission instituted a comprehensive investigation into the rates and practices affecting grain and grain products in the Western District.¹ The Commission called its proceeding 'unusual', involving as it did 'three-score and more of major issues, affecting every part of a vast territorial domain, each of which would ordinarily present a case of more than average importance'. Grain and Grain Products Within the Western Dist. and for Export, 164 I.C.C. 619, 697. Extensive hearings were held, and on the basis of a huge record of some 53,000 pages of testimony, including 2,100 exhibits, 20,000 pages of memoranda, exceptions, and oral arguments, the Commission on July 1, 1930, issued a report and order prescribing maximum rates for grain and grain products. 164 I.C.C. 619. A supplemental report and order were issued on April 13, 1931. Grain and Grain Products Within the Western Dist. and for Export, 173 I.C.C. 511. Because the Commission did not take evidence relating to the drastic changes in economic conditions due to the depression occurring between the close of its hearings and the date of its orders, this Court set aside the orders. Atchison, etc., Ry. Co. v. United States, 284 U.S. 248, 52 S.Ct. 146, 76 L.Ed. 273. New and extensive hearings were thereupon held, and on October 22, 1934, the Commission in an elaborate report affirmed some of its earlier findings and modified others. Grain and Grain Products within the Western Dist. and for Export, 205 I.C.C. 301. Upon further consideration of the record, the Commission issued a supplemental order to remove discriminations between interior points. Grain and Grain Products Within the Western Dist. and for Export, 215 I.C.C. 83. Dealers at the primary markets thereupon filed formal complaints seeking modification of that part of the Commission's orders which differentiated between transit privileges at primary markets and those at interior points. Hearings upon these complaints produced more than 7,000 pages of new testimony and over 250 exhibits. On July 27, 1937, the Commission authorized but did not require the carriers to meet the requests of the primary markets. Grain Case Modifications, 223 I.C.C. 235. The carriers having declined to act on this authorization, the Commission was petitioned to enter a mandatory order. Proceedings were reopened, new arguments were heard, and on July 12, 1938, the Commission found that the prescribed rates did not subject the primary markets to any 'undue prejudice and disadvantage'. Grain Case Modifications, 229 I.C.C. 9, 16. Upon reconsideration this conclusion was affirmed on March 13, 1939. Grain Case Modifications, 231 I.C.C. 793. To upset these findings and to strike down the orders based upon them the present suit was filed.

Since the transit privilege is at the core of this litigation, a brief exposition of its mechanics and manipulations becomes necessary. The privilege of transit enables grain to be shipped from point A to point B, there to be stored, marketed, or processed, and later reshipped to point C at a rate less than the combination of the separate rates from A to B and B to C. See Transit Case, 24 I.C.C. 340; Atchison, T. & S.F. Ry. v. United States, 279 U.S. 768, 777 779, 49 S.Ct. 494, 497, 498, 73 L.Ed. 947; Locklin, Economics of Transportation (1935) 122, 123, 629—631. The shipper pays the local rate on the inbound shipment to the transit point, B in our illustration. A receipted freight bill specifying the point of origin, the rate paid, and other pertinent data, is recorded with the transit bureau as evidence of intention of further transportation of the inbound grain or its equivalent. When the outbound shipment is tendered to the carrier, the freight bill is surrendered in order that the shipper may obtain an outbound rate lower than that which he would otherwise be compelled to pay. The privilege belongs, as it were, to both the grain and its shipper. 'The benefit attaching to grain shipped into the primary market is commonly so broad that it is transferable not only to another owner of the same grain, but to like grain coming from the same country point.' Atchison, T. & S.F. Ry. v. United States, 279 U.S. 768, 778, 49 S.Ct. 494, 498, 73 L.Ed. 947.

This privilege was available in the primary markets under two different rate schemes: (1) the 'overhead through rate' and (2) the 'rate-break combination'.

(1) An overhead through rate is the rate from an originating point to the final destination, or to a gateway like Chicago, via a particular point. Thus, on a shipment of grain from Enid, Oklahoma, to Chicago via Kansas City, the overhead through rate was 38.5 cents per hundred pounds. Under this rate, grain reaching Kansas City could receive the various privileges of transit upon payment of 23,5 cents (the local rate from Enid to Kansas City) upon the inbound shipment, and the difference (known as the 'transit balance') between the overhead through rate, 38.5 cents, and the 23.5 cents inbound rate, upon the outbound shipment.

(2) On a 'rate-break' basis, however, grain moved on a combination of the local or flat rate from the originating point to the primary market and the 'proportional' rate from that market to a gateway or the final destination. The primary markets therefore came to be known as 'rate-break' points. The 'proportional' rate, representing an average of transit balances under overhead through rates, was designed to offset the competitive advantages of lines going through rate-break points as against lines starting there. The significance of the rate-break combination lay in the fact that for many points of origin there were no overhead through rates. In the above example, the proportional rate on outbound grain shipments from Kansas City to Chicago was 17.5 cents. The applicable rate on a shipment of grain from an originating point having no through rate to Chicago via Kansas City, with or without transit at Kansas City, was a combination of the local rate to Kansas City and the proportional rate from Kansas City to Chicago.

Thus, the difference between the two systems permitting transit at primary markets was the rate at which the outbound traffic moved. Under the rate-break combination the outbound shipment moved at the proportional rate; under the overhead through rate, it moved at the transit balance. The availability of these two rate bases, the Commission found, gave rise to serious discriminations: 'Whether outbound shipments are at proportional rates or transit balances depends upon the selection of the inbound freight bill. If the inbound freight bill covers a shipment from an origin point from which there is no overhead rate with transit to final destination, the outbound shipment is at the proportional rate. But grain from a point from which there is no overhead rate with transit can, under present practice, be substituted for grain from a point from which there is such an overhead rate with transit, and can be forwarded, upon pres- entation of the inbound expense bill covering inbound transportation from the latter point, at the transit balance due that expense bill.' 164 I.C.C. 619, 634.

'The uncertainty in advance as to the outbound basis of charge arises from the dependence of that charge upon a check of the individual shipper's range of inbound billing. The outbound charge will be a transit...