City of Atlanta v. Chattanooga Foundry & Pipeworks

• Decision Date: 08 December 1903
• Docket Number: 1,178.
• Parties: CITY OF ATLANTA v. CHATTANOOGA FOUNDRY & PIPEWORKS et al.
• Court: U.S. Court of Appeals — Sixth Circuit

127 F. 23

CITY OF ATLANTA v. CHATTANOOGA FOUNDRY & PIPEWORKS et al.

No. 1,178.

United States Court of Appeals, Sixth Circuit.

December 8, 1903

This was an action to recover damages under the seventh section of the act of Congress of July 2, 2890, c. 647, 26 Stat. 210 (U.S. Comp. St. 1901, p. 3202), known as the 'Anti-Trust Act.' The plaintiff is a municipal corporation of the state of Georgia. The defendants are two manufacturing corporations of the state of Tennessee, engaged in the business of making and selling cast-iron pipe and fittings.

The declaration averred that on or about the 28th of December 1894, the said two companies entered into an unlawful combination for the purpose of restraining interstate trade and commerce with four other corporations engaged in the same line of manufacture, to wit, the Anniston Pipe & Foundry Company, and the Howard-Harrison Iron Company, both corporations of the state of Alabama, and conducting business in that state; the Dennis, Long & Co., a corporation of the state of Kentucky, and carrying on its business in said state; and the Addyston Pipe & Steel Company, a corporation of the state of Ohio, engaged in business at Cincinnati, in that state. The illegal trust agreement complained of is the identical trust which was dissolved by decree of this court in the case reported as The United States v. The Addyston Pipe & Steel Co., 85 F. 271, 29 C.C.A. 141, 46 L.R.A 122, and affirmed by the Supreme Court in Addyston Pipe &amp Steel Co. v. United States, 175 U.S. 211, 20 Sup.Ct. 96 44 L.Ed. 136. Reference may be made to the opinions in those cases for the nature and methods of the trust out of which has arisen the present action.

The declaration, in substance, charges that the plaintiff was engaged in conducting a system of waterworks, and that it derived a large revenue from the sale of water to private consumers, the income going into the city treasury; that, for the purposes and uses of its said waterworks business, it brought during the operations of said unlawful trust a large supply of iron water pipe, and that the contract for its supply of such pipe was given to the Anniston Pipe & Foundry Company as the lowest bidder. It is then averred that, by reason of the said unlawful agreement between the said producers of said pipe, all competition was suppressed, and that the said Anniston Company obtained the contract through an arrangement by which it was to be allowed to obtain same at a price agreed upon between said conspirators, without any competition, and that for this privilege it agreed to pay and did pay to the said association a large sum, called a 'bonus,' which was to be divided between the parties to said arrangement in agreed proportions. It is, in effect, charged that the 'bonus' constituted the difference between the fair and reasonable value of the pipe so bought by plaintiff, and the price which it was compelled to pay, and that this large and unreasonable price was extorted from plaintiff through the unlawful suppression of competition, and by the instrumentality of fictitious bids put in by the other parties to said association, so arranged as to create the semblance of competition, and yet secure the contract for the Anniston Company at the price set by the combination as the ostensible lowest bidder. The plaintiff avers that, by reason of the formation of said illegal combination, interstate commerce in cast-iron pipe was restrained, and plaintiff compelled to deal only with the said Anniston Company, and to pay a price agreed upon by the members of the combination, which was unreasonable; that the bonus so paid out of the price paid by plaintiff was paid into a common pocket, and divided among the conspirators in an agreed way; and that the two Tennessee corporations here sued received their due proportion of said bonus according to the terms and plans of the scheme. By all of which the plaintiff avers that it was compelled to pay for the cast-iron pipe so bought and used in its said waterworks $15,000 more than would have been paid but for the said unlawful trust between the producers of such pipe, and it lays the damage to its business and property at triple the said excess price so paid and reasonable attorneys' fees.

The defendants plead the general issue of not guilty, and the Tennessee statutes of limitations of one and three years.

Upon the conclusion of all of the evidence, the court instructed the jury to find for the defendants. This has been assigned as error, and this writ sued out by the plaintiff below.

George Westmoreland and C. P. Goree, for plaintiff in error.

Frank Spurlock, for defendant in error.

Before LURTON, SEVERENS, and RICHARD, Circuit Judges.

LURTON Circuit Judge, after making the foregoing statement of the case, .

The plaintiff's action is to recover damages incurred in its 'business or property' by reason of a combination forbidden by the act of July 2, 1890, c. 647, 26 Stat. 209 (U.S. Comp. St. 1901, p. 3200), known as the 'Anti-Trust Act,' and its right to recovery depends wholly upon the seventh section of that law.

It is true that plaintiff is a municipal corporation. Nevertheless it was maintaining a system of waterworks, and furnished water to consumers, charging for same precisely as would a private corporation engaged in a like business. That a municipal corporation may be empowered to engage in the business of furnishing water or gas, or in the operation of street railways, as well as many other quasi public occupations, must be conceded. That the profit resulting inures to the public does not alter the fact that when thus engaged it is pro hac vice a business corporation. If its 'business' as a corporation engaged in the occupation of supplying water for a consideration has been injured by the unlawful combination complained of, it is just as much entitled to maintain this suit as a private corporation engaged in a like occupation. That it was not engaged in an interstate water business is true. But if it has no standing to recover damages for an injury to its 'business,' it is not easy to see how it has any better standing to recover for an injury to its 'property.' That there was evidence tending to show that the plaintiff had been compelled to pay an unreasonable price for the pipe which it bought during the continuance of the unlawful combination complained of is not to be disputed. That its purchases were made exclusively from the Anniston Pipe Company, a corporation doing business in Alabama, and that it is not suing that corporation is of no vital significance. The Alabama company and the two Tennessee companies which are sued were members of an association which included practically every pipe manufacturing concern in a situation to compete for the business of the plaintiff. The evidence also tended to show that the object of the combination was to prevent any other producer of such pipe from competing with the Anniston Company for plaintiff's business, and that practices were adopted intended to compel it to deal exclusively with the Alabama member of the association, and to pay a price settled by the combination in advance of any bidding. For this privilege the Alabama corporation agreed to pay a large sum into the pool treasury, called a 'bonus,' which was to be divided among the confederates in agreed proportions. An appearance of competition was to be maintained by bids put in by the other associates, every such bid being higher than the bid to be made by the company to whom the contract had been assigned. There was to be no chance for any other person to secure a contract with the plaintiff than that member of the combine selected in advance of the open biddings.

Mr. Justice Peckham, in Addyston Pipe Co. v. United States, 175 U.S. 211, 243, 20 Sup.Ct. 96, 108, 44 L.Ed. 136, where this very combination was under consideration, speaking for the court of the results of the agreement between the corporations who were members of this trust, said:

'The combination thus had a direct, immediate, and intended relation to, and effect upon, the subsequent contract to sell and deliver the pipe. It was to obtain that particular and specific result that the combination was formed and but for the restriction the resulting high prices for the pipe would not have been obtained. It is useless for the defendants to say that they did not intend to regulate or affect interstate commerce. They intended to make the very combination and agreement which they in fact did make, and they must be held to have intended (if in such case intention is of the least importance) the necessary and direct result of their agreement.'

Undoubtedly it was not competent for the Congress to regulate by legislation commerce which is purely intrastate, and this limitation was recognized in Addyston Pipe Co. v. United States, where the court said:

'In regard to such of these defendants as might reside and carry on business in the same state where the pipe provided for in any particular contract was to be delivered, the sale, transportation, and delivery of the pipe by them under that contract would be a transaction wholly within the state, and the statute would not be applicable to them in that case. They might make any combination they chose with reference to the proposed contract, although it should happen that some nonresident of the state eventually obtained it.'

The direct intention and effect of the combination was to limit and restrict the right of each of the several companies to compete for business with Atlanta, as well as to enhance the price of the commodity which was the subject of the agreement.

We have, then, a direct action by this plaintiff against two of the members of this unlawful combine. That there was no...