In re Arkansas Rate Cases

• Decision Date: 03 May 1911
• Docket Number: 1,637.,1,636
• Citation: 187 F. 290
• Parties: In re ARKANSAS RATE CASES. ST. LOUIS SOUTHWESTERN RY. CO. v. ALLEN et al., Board of R.R. Com'rs of Arkansas. ST. LOUIS, I.M. & S. RY. CO. v. SAME.
• Court: U.S. District Court — Eastern District of Arkansas

187 F. 290

In re ARKANSAS RATE CASES. ST. LOUIS SOUTHWESTERN RY. CO. v. ALLEN et al., Board of R.R. Com'rs of Arkansas. ST. LOUIS, I.M. & S. RY. CO. v. SAME.

Nos. 1,636, 1,637.

United States Circuit Court, E.D. Arkansas, Western Division.

May 3, 1911

[Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted]

Moore, Smith & Moore, for complainants.

Joseph M. Hill and James H. Harrod, for defendants.

TRIEBER District Judge.

The St. Louis, Iron Mountain & Southern Railway Company, which will be referred to herein as the Iron Mountain Railway, and the St. Louis Southwestern Railway Company, referred to as the Southwestern Railway Company, instituted these proceedings against the Board of Railroad Commissioners of the state of Arkansas to enjoin the enforcement of the freight and passenger tariffs promulgated by that board in pursuance of the powers delegated to it by the laws of the state of Arkansas. The grounds upon which the relief is sought are that the rates which apply solely to intrastate traffic are noncompensatory and confiscatory when applied to the entire intrastate business of each of the companies. A preliminary injunction was granted in 1908 by Mr. Justice Van Devanter, then one of the Circuit Judges of this circuit. His opinion is reported in 163 F. 141. In 1909 the temporary injunction was modified by this court. 168 F. 720. The pleadings were perfected and a large volume of testimony taken by the parties. At the urgent request of counsel for all parties, the services of a master to make findings of facts and state his conclusions of law were dispensed with, notwithstanding what was said in Chicago, Minneapolis & St. Paul Ry. v. Tompkins, 176 U.S. 167, 20 Sup.Ct. 336, 44 L.Ed. 417, and the cause heard by the court upon the pleadings and proofs.

It is though best that at the threshold of these cases the most important principles of law applicable to cases of this nature should be stated. These are rules of law which have been so frequently determined by the highest court of the land that they may now be properly regarded as elementary, and for this reason it will be sufficient to merely state them, without unduly lengthening this opinion with a long list of citations to sustain them.

(a) A state has the power to establish rates to be charged by common carriers for the exclusively intrastate carriage of freight and passengers, and this may be done by direct action of the lawmaking department, or a commission to whom that department of the government has by law delegated it.

(b) The rates thus established must be reasonable and fair to the carriers, as well as the public. The state may not make rates so as to confiscate the carrier's property; nor can the carrier make rates which are oppressive to those who by necessity are compelled to employ its services. Whether they are so or not is a question for judicial investigation and determination.

(c) Presumptively rates thus established by authority are reasonable and just, and the burden of proof to show the contrary is upon the party attacking them.

(d) To justify courts to set aside rates thus established, it is incumbent upon the carriers to prove by evidence which is clear, unequivocal, and convincing, and leaves the court reasonably free from doubt, that they are unjust, that they amount to a taking of property without just compensation, and that to make them compensatory the rates would not have to be so high as to make them oppressive to the public.

(e) The rights of carriers and the public are reciprocal. The carrier is entitled to ask a fair return upon the value of its property which it employs for the public convenience, and the public is entitled to demand that no more be exacted from it for the use of the public highway than the services rendered are reasonably worth, and not be oppressive.

Before passing upon the evidence and the law arising therefrom, there are some other important rules of law raised by counsel for both parties which should be determined at this time; for some of them if sustained, would relieve the court of the necessity of examining the voluminous evidence in these cases, and others will, to a great extent, control the final conclusions to be drawn from the evidence.

Interference with Interstate Commerce.

It is claimed that as the rates prescribed for intrastate business, freight as well as passenger, necessarily affect interstate rates, such acts of the states, whether by direct legislation or through a commission clothed with such power, although limited by the provisions of the statute to intrastate business exclusively, are a burden upon interstate commerce and therefore violative of the commerce clause of the national Constitution.

That intrastate tariffs bear certain relations to, and to some extent control, interstate rates, cannot be doubted. The evidence in this case establishes that fact conclusively, and even in the absence of such evidence the court would be justified to take judicial notice of it. No better illustration is needed than the facts and conclusions of law in Gulf, C. & S.F. Ry. Co. v. Texas, 204 U.S. 403, 413, 27 Sup.St. 360, 51 L.Ed. 540. And this seems to be the rule adopted by the Interstate Commerce Commission since the decision in the Gulf R.R. Case. Ambrey & Semple v. Galveston, etc., Ry. Co., 17 Interest. Com. Com'n R. 267, and rule 56b of administrative rules. Although the Texas case was one involving freight only, the same principle applies to passenger rates. In fact, it is more apparent in the latter than in the former. Even in the absence of a rule to that effect by the Interstate Commerce Commission, or of decisions of the courts, if the states of Arkansas, Texas, and Missouri each enact a two-cent rate fare, it would be folly for a carrier to attempt to charge a higher rate for interstate or transstate passengers in those states; for passengers would purchase tickets to the state line of each state at the reduced local rates, and thus defeat the higher interstate rates, although the state rates are by the statutes of these states limited to intrastate transportation solely. As stated by Mr. Justice Brewer in his opinion in Gulf, C. & S.F. Ry. Co. v. Texas:

'In this respect there is no difference between an interstate passenger and interstate transportation. If Hardin, for instance, had purchased at Hudson an interstate ticket for Texarkana, intending all the while after he reached Texarkana to go on to Goldthwaite, he would not be entitled on his arrival at Texarkana to a new ticket from Texarkana to Goldthwaite at the proportionate fraction of the rate prescribed by the Interstate Commerce Commission for carriage from Hudson to Goldthwaite. The one contract of the railroad company having been finished, he must make a new contract for his carriage to Goldthwaite, and that would be subject to the laws of the state within which that carriage was to be made.'

Nor does the intention of the shipper or passenger to avoid the higher interstate rates by the purchase of tickets or shipments at the lower intrastate rates change the rule of law. On that point Mr. Justice Brewer, in the Gulf Case, answered negatively the question thus propounded:

'If the only contract of shipment was for local transportation, would the state law in respect to the mode of transportation be set one side by the federal law in respect to interstate transportation, on the ground that the shipper intended, after the one contract of shipment had been completed, to forward the goods to some place outside the state?'

But does the fact that these intrastate rates bear such relation to interstate rates necessarily make the statutes of a state regulating charges for intrastate transportation by carriers engaged in interstate as well as intrastate commerce void? No authorities directly sustaining this claim have been cited to the court, although the cases in which statutes of this nature have been attacked are numerous. The only cases cited are those holding in general terms that state statutes which amount to some regulation of foreign or interstate commerce, or which directly or by their necessary operation burden interstate commerce, are invalid, as violative of the commerce clause of the national Constitution. On the other hand, Mr. Justice Brewer, in Ames v. Union Pacific Ry. Co. (C.C.) 64 F. 165, 172, affirmed sub nomine Smyth v. Ames, 169 U.S. 466, 18 Sup.Ct. 418, 42 L.Ed. 819, expressly held:

'Neither can I understand how the reduction of local rates, as a matter of law, interferes with interstate rates. It is true the companies may, for their own convenience, to secure business, or for any other reason, rearrange their interstate rates, and make them conform to the local rates prescribed by the statute; but surely there is no legal compulsion. The statute of the state does not work a change in intestate rates, any more than an act of Congress prescribing interstate rates will legally work a change in local rates. Railroad companies cannot plead their own convenience, or the effects of competition between themselves and other companies, in restraint of the otherwise undeniable power of the state.'

Louisville & Nashville Ry. Co. v. Eubank, 184 U.S. 27, 22 Sup.Ct. 277, 46 L.Ed. 416, cited for complainants, is not in point, as all that was decided in that case was that a state cannot compel carriers to adjust their intrastate rates with reference to their interstate rates.

But it is urged that in the Ames Case the evidence failed to show the effect of the state rates on interstate rates, while in the cases at bar that fact is fully established. In Peik v. Chicago, etc., Ry Co., 94 U.S. 164,177, 24 L.Ed. 97 Mr. Chief Justice Waite, speaking for the court...