Parmelee Transportation Company v. Keeshin

• Decision Date: 30 June 1960
• Docket Number: No. 56 C 323.,56 C 323.
• Citation: 186 F. Supp. 533
• Parties: PARMELEE TRANSPORTATION COMPANY, a Delaware corporation, Plaintiff, v. John L. KEESHIN et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

186 F. Supp. 533

PARMELEE TRANSPORTATION COMPANY, a Delaware corporation, Plaintiff, v. John L. KEESHIN et al., Defendants.

No. 56 C 323.

United States District Court N. D. Illinois, E. D.

June 30, 1960.

Lee A. Freeman, John Paul Stevens, and Thomas C. McConnell, Chicago, Ill., for Parmelee Transp. Co.

Albert J. Meserow, Jerome F. Dixon and Theodore J. Isaacs, Chicago, Ill., for John L. Keeshin & Railroad Transfer Service, Inc.

Noah Walker, M. A. Garvey and D. J. Parker, Chicago, Ill., for Howard E. Simpson & B. & O. R. R.

Joseph H. Wright, Herbert J. Deany and Robert S. Kirby, Illinois Central R. R. Co., Chicago, Ill., for Wayne A. Johnson & Ill. Central R. R.

Robert H. Bierma and M. J. Haberkorn, Chicago, Ill., for Penn. R. R.

Marvin A. Jersild and Charles I. Hopkins, Jr., Chicago, Ill., for Marvin J. Keating & New York Central R. R.

F. O. Steadry and Edward Warden, Chicago, Ill., for Paul E. Feucht & Chicago & N. W. Ry. Co.

Thompson, Raymond, Mayer, Jenner & Bloomstein, Floyd E. Thompson, Albert E. Jenner, Jr., and Philip W. Tone, Chicago, Ill., for H. E. Simpson, P. E. Feucht, W. A. Johnson, F. G. Gurley, A. T. & S. Fe Rwy., B. & O. R. R. Co., Chgo. & N. W. Rwy. Co., I. C. R. R. & Penn. R. R. Co.

Floyd J. Stuppi, Chicago, Ill., for A. T. & S. Fe R. R.

Joseph C. Owens, Chicago, Ill., for Hugh W. Cross.

Amos M. Mathews, Chicago, Ill., for H. B. Siddall.

MINER, District Judge.

This is an action for an alleged violation of Sections 1 and 2 of the Sherman Act (15 U.S.C.A. §§ 1 and 2). Plaintiff is Parmelee Transportation Company, which performed the interstation transfer of passengers and their baggage between and among Chicago's eight railroad stations for many years prior to October 1, 1955. The defendants are (a) John L. Keeshin, who was a successful competitor of Parmelee for a new contract to perform the service, commencing on October 1, 1955, (b) Keeshin's company, Railroad Transfer Service, Inc., which he organized to perform the service after he had been notified he would receive the contract, (c) Hugh W. Cross, formerly a member of the Interstate Commerce Commission, (d) the six railroads which comprised a committee chosen by the 21 railroads having passenger terminals in Chicago to consider the transfer problem and make recommendations to the railroads with respect to its solution, and (e) the presidents of four of the six railroads.

The complaint alleges, and the evidence shows, that 21 railroads operate passenger service terminating in Chicago at one of eight railroad stations. No railroad provides passenger service through Chicago. Thus, it is necessary for any through passenger arriving in Chicago by rail to transfer from one train to another and usually from one station to another. In order to provide a complete through service, the railroads provide transfer from one station to another for through passengers and their baggage, the outgoing line paying the transfer charge.

The evidence shows that early in 1954, as a result of a demand by Parmelee for a 19¢ increase in the coupon charge, the 21 railroads designated a committee of six of their number "to make a study of the transfer situation, including various types of operation that can be devised to definitely meet the needs of the public without increasing the cost to the railroads; report and recommendation to be made to Chicago terminal lines for consideration at a later meeting." (Proceedings of Meeting, Chicago Terminal Lines, Jan. 29, 1954.) The committee chosen consisted of the six railroad defendants, being respectively the principal lines using the major terminals.

The evidence also shows that the committee representatives approached a substantial number of persons and firms which they thought were qualified and might be interested in rendering the transfer service, including John L. Keeshin, a substantial motor truck operator. The Committee held meetings with the various prospective bidders. Eventually, by reason of lack of interest on the part of other bidders or their unwillingness to provide the kind of service the railroads thought was required, the field was narrowed to Parmelee and Keeshin.

Keeshin's initial written bid was submitted on December 15, 1954. He proposed to render the service during the first year for $1.20 per coupon, which was 2¢ per coupon less than Parmelee was then charging. (Parmelee had been granted an increase to $1.22 from the $1.05 rate that was in effect at the beginning of that year, following the demand for rate increase referred to above.) Keeshin proposed that in the subsequent years his coupon charge would be increased 1¢ for each 5¢ per hour wage increase he was required to grant his employees. To permit him to amortize the investment necessary to entry into the business, he requested a five-year contract. On January 15, 1955, following an agreement covering wages of drivers for a three year period, Keeshin modified his proposal by placing ceilings of $1.22 and $1.23 per coupon in effect for the second and third years, respectively. Keeshin also proposed, in his original proposal, to provide new equipment, to replace his passenger equipment every thirty months, to air condition his passenger equipment and to dispatch his vehicles by means of two-way radios. He also agreed to make his books available for inspection by the railroads at any time.

On March 19, 1955, Parmelee submitted its proposal to the committee. Parmelee proposed to reduce its rate for the first year from the $1.22 it was then charging to $1.20, the same figure Keeshin had offered; to increase the rate in subsequent years 1¢ for each 3¢ wage increase Parmelee was required to pay its employees; and, further, to increase the rate in subsequent years 1¢ for each 1% decrease in the number of passengers carried. Parmelee requested an exclusive six and one-half year contract, in order to permit it to amortize its anticipated investment in new equipment.

On April 6, 1955, Keeshin wrote a letter amplifying his previous proposal and stating that, while he recommended that trailers be used to handle baggage and that the railroads have their personnel load and unload stationed trailers as the more economical arrangement for them, he would be willing to continue the baggage handling system which had been in operation for many years with Parmelee. His letter also amplified various portions of his original proposal, but added nothing new in substance, except the assurance that his coupon charge was firm regardless of volume of passenger business.

On May 19, 1955, the committee met with Keeshin and Parmelee officials separately to discuss the respective proposals. Parmelee then withdrew its request that the railroads increase the coupon charge of 1¢ for each 1% decrease in passenger volume. However, Parmelee did not at that time put any ceiling on its charge for the second and third years, other than a ceiling of $1.25, which was applicable to each year of the contract period subsequent to the first. Parmelee did not offer air conditioning, radio dispatching or any schedule for equipment replacement, and declined to let the railroads see its books.

On May 20, 1955, Morris Markin, Chairman of the Board of Directors and principal negotiator for Parmelee, telephoned the chairman of the railroad committee, and advised him that Parmelee would place the following ceilings on its coupon charge: first year—$1.20; second year—$1.22; third year—$1.23; fourth year—$1.24; and balance of contract $1.25. Markin confirmed this change by letter.

The committee met on June 3, 1955, and unanimously voted to recommend to the 21 railroads that the proposal of Keeshin be accepted. On June 13, the 21 railroads approved the recommendation. Parmelee and Keeshin were notified of the railroads' decision.

Subsequently, Keeshin formed defendant, Railroad Transfer Service, Inc., for the purpose of performing the transfer service and the railroads negotiated and entered into a five-year written contract with that company for the performance of the service, operations under the contract to commence October 1, 1955. Railroad Transfer Service has been performing the transfer service since that date.

The foregoing facts are undisputed. The dispute concerns the means by which the railroads were induced to reach their decision to award the transfer contract to Keeshin rather than to Parmelee.

Parmelee alleges that Keeshin induced Cross, who was then a member of the Interstate Commerce Commission, to "influence, induce and persuade" the defendant railroads, and through them the 21 Chicago terminal lines, to accept Keeshin's proposal for a five year exclusive contract instead of Parmelee's proposal for a six and one-half year exclusive contract. (Complaint, par. 31)

These allegations are denied by all the defendants. The defendants contend that the proposals of Keeshin and Parmelee were considered on their merits and that the Keeshin proposal was selected by the railroads in the exercise of their sound business judgment.

Plaintiff's allegations of public injury, apart from the assertion that Cross was disabled as a result of his alleged undertaking from adequately performing his duties as a member of the Interstate Commerce Commission (Complaint, par. 34(i)), are that the services performed by Railroad Transfer are "more costly to said railroads and less extensive and valuable than the services previously performed by plaintiff and which plaintiff had offered to continue to perform" (pars. 33(f) and (i), 34(d)), and that the travelling public will "ultimately" be affected by the alleged increased cost and will be "prejudicially" affected by the alleged decrease in the "quality or extent" of the service. (Complaint, par. 19) These allegations of public injury are denied by the defendants.

Plaintiff also alleges that it has been damaged by being deprived of profits in the sum of $6,400,000 "it would have earned" had it been awarded the contract....