Kansas City Southern Ry. Co. v. Daniel

• Citation: 180 F.2d 910
• Decision Date: 21 April 1950
• Docket Number: No. 12819.,12819.
• Parties: KANSAS CITY SOUTHERN RY. CO. v. DANIEL, Attorney General of Texas, et al. LOUISIANA & ARKANSAS RY. CO. v. DANIEL, Attorney General of Texas, et al.
• Court: U.S. Court of Appeals — Fifth Circuit

180 F.2d 910 (1950)

KANSAS CITY SOUTHERN RY. CO. v. DANIEL, Attorney General of Texas, et al. LOUISIANA & ARKANSAS RY. CO. v. DANIEL, Attorney General of Texas, et al.

No. 12819.

United States Court of Appeals Fifth Circuit.

March 24, 1950.

Rehearing Denied April 21, 1950.

A. L. Burford, Texarkana, Tex., Major T. Bell, Beaumont, Tex., for appellant.

C. K. Richards, Assistant Attorney General of Texas, Price Daniel, Attorney General of Texas, for appellee.

Before McCORD and WALLER, Circuit Judges, and DOOLEY, District Judge.

WALLER, Circuit Judge.

On February 12, 1948, the Attorney General of Texas filed similar suits in the State Court of Travis County, Texas, against the Kansas City Southern Railway Company, a corporation of Missouri, and the Louisiana & Arkansas Railway Company, a corporation of Delaware, wherein he sought to collect penalties in a total sum of approximately thirty million dollars for violations of Articles 6260, 1536, and 6476, Revised Civil Statutes of Texas 1925, requiring all railroads in Texas to be owned, operated, and maintained by Texas corporations and prescribing penalties for their violation. See also Section 6 of Article X of the Texas Constitution, Vernon's Ann.St.¹

One of these suits alleged that the Kansas City Southern Railway acquired, and since January 1, 1944, has continuously owned, operated, and maintained, a railway, doing intrastate business within the State of Texas without having acquired a charter from the State as required by Article 6260, supra, and, therefore, is subject to the accumulated penalties provided by the statutes for such violations for which the State had a lien that it was entitled to foreclose.

The suit filed against the Louisiana & Arkansas Railway Company alleged that it had acquired, and had continuously owned, maintained, and operated a railway within the State of Texas since August 25, 1939, in intrastate commerce without having obtained a charter from the State as required by Section 6260, supra, wherefore it had thereby become subject to the penalties of the Texas statutes for which the State had a lien that should be declared and foreclosed.

The cases were removed to the United States District Court for the Western District of Texas upon the filing of a petition by Defendants alleging that the amount in controversy exceeded $3,000.00 and that the action was one arising under the Constitution and laws of the United States in that the Defendants were engaged in interstate commerce over their railroads in the State of Texas pursuant to the approval and authorization of the Interstate Commerce Commission as provided in the Interstate Commerce Act, Title 49 U.S.C.A. § 5(2) (a), by virtue of which they had the lawful right also to do intrastate business in Texas; that the suit by the State Attorney General was an effort to set aside, annul, and suspend in whole or in part a valid order of the Interstate Commerce Commission; that the defendants were legally owning, operating, and maintaining railways in Texas under and pursuant to valid orders of the Interstate Commerce Commission entered pursuant to Federal law; and that the suits present claims and disclose controversies of such nature that they could only correctly be determined by a declaration under, and in the light of, the aforesaid Act of Congress and the opinion and orders of the Interstate Commerce Commission made pursuant thereto.

Upon removal the Attorney General filed motions to remand the cases to the State Court, asserting that the records did not present causes removable under the statutes and laws of the United States in that they were not suits of a civil nature, but were suits by the sovereign State of Texas for penalties based upon a State statute designed to enforce the police powers of the State; that the suits did not arise under the Constitution and laws of the United States, and that no Federal question was presented by the record; that it was apparent upon the face of the record that the Plaintiff was not seeking to annul or suspend an order of the Interstate Commerce Commission and was not challenging the Defendants' right to transact interstate commerce within the State of Texas. The petitions of the Plaintiff in the State Court contained no reference to any orders of, or statutes relating to, the Interstate Commerce Commission, and revealed the existence of no Federal question. The Court's orders remanding the cases failed to state the grounds upon which the motions were granted, but it will be assumed that it was because of the failure of the Plaintiff's petitions to exhibit the existence of a Federal question.

The position of the Attorney General on the merits was, and is, that notwithstanding the fact that the Interstate Commerce Commission had allowed the Railroads to acquire and operate railroads in Texas in disregard of the Texas statutes, nevertheless those statutes are still in effect insofar as intrastate traffic is concerned and the transaction of such intrastate business without compliance with the statute of Texas has rendered the Railroads liable to the penalties sought.

On the 18th of February, or nine days after the unappealable orders remanding the State suits were filed, the Railroads filed the complaints in the present cases alleging: (a) that the cases arise under the Constitution and laws of the United States, viz., the commerce, due process, and equal protection clauses of the Federal Constitution, art. 1, § 8 cl. 3; Amend 14, as well as under the Interstate Commerce Act, 49 U.S.C.A. § 1 et seq.; (b) that suits were pending in the State Court for the foreclosure of statutory liens totalling many millions of dollars and for injunctions to restrain those Railroads from operating in intrastate commerce in Texas; (c) that their operations in Texas were pursuant to authority and permission of the Interstate Commerce Commission; (d) that the statutes of Texas aforementioned have been superseded and rendered ineffective by orders of the Interstate Commerce Commission made pursuant to the Interstate Commerce Act; (e) that the Railroads have complied in full with the Federal law in and about the operation of these railroads in Texas; (f) that the suits in question represent an attempt on the part of the State to regulate, and to impose an undue and unreasonable burden upon, interstate commerce in violation of the commerce clause of the Federal Constitution; and that the Texas statutes relied on by the Attorney General are arbitrary and unreasonable and unconstitutionally deprive the Plaintiffs of their property without due process, and equal protection, of the law.

The Railroads prayed for interlocutory and final injunctions restraining the Attorney General and his aids from prosecuting, or directing the prosecution of, the suits in the State Courts or other suits of like tenor and effect or from attempting to enforce against them Articles 1536, 6260, and 6476, Revised Civil Statutes 1925, of Texas, and for an adjudication that there has been no violation of these articles, but on the contrary that they have been superseded by the orders of the Interstate Commerce Commission and are no longer in effect; and that the Defendants, and any and all other persons claiming to act under the supervision of the Attorney General, be perpetually enjoined from enforcing the aforementioned statutes or from advising, instituting, prosecuting, or aiding in any criminal prosecution, or in any suit of any character to recover or impose upon, or enforce against, the Plaintiffs any fine or penalty for refusal to observe the aforementioned statutes of Texas.

The Attorney General and his co-defendants, appearing specially, moved to dismiss the suits on the ground, among other things, that they were suits against the State of Texas, which had not consented to be sued nor waived its immunity from suit, and that under the Eleventh Amendment to the Federal Constitution the Court below was without jurisdiction; that the judgments entered in the removed and remanded causes were res judicata; that the complaints were attempts to collaterally attack the orders of the Federal Court in remanding the causes; and that the jurisdiction of the State Court in and for Travis County, Texas, was prior and exclusive.

The Court below, deeming the suits to be suits "against the State of Texas", dismissed them and it is from this order of dismissal that these appeals were taken. Since the same proceedings with the same results were had in the suit filed by the Louisiana & Arkansas Railway Company, the appeals in the two cases were consolidated for record, briefs, argument, and disposition.

At the outset of our consideration we are confronted with the question of whether or not the Court below was without jurisdiction of these suits under the Eleventh Amendment providing that: "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State or by Citizens or Subjects of any Foreign State."

There is much learning, as well as some confusion, as to what constitutes a suit against a state within the interdiction of the Eleventh Amendment. Many cases have been written since the holding in Chisholm v. Georgia, 2 Dall. 419, 1 L.Ed. 440, provoked the prompt adoption of the Eleventh Amendment in order to withdraw jurisdiction from Federal Courts in suits against a state by citizens of other, or foreign, states.

Mr. Justice Frankfurter, in his dissent in Larson v. Domestic & Foreign Corp., 337 U.S. 682, 69 S.Ct. 1457,² aptly outlined the following categories into which the decisions of the Supreme Court dealing with suits against a sovereign government generally fall:

(1) Cases in which the plaintiff seeks an interest in property which concededly, even under the allegation of the complaint, belongs to the government, or calls for an assertion of what is...