State of Minnesota v. Northern Securities Company

• Citation: 48 L.Ed. 870,24 S.Ct. 598,194 U.S. 48
• Decision Date: 11 April 1904
• Docket Number: No. 433,433
• Parties: STATE OF MINNESOTA, Appt. , v. NORTHERN SECURITIES COMPANY, Great Northern Railway Company, Northern Pacific Railway Company, et al
• Court: United States Supreme Court

194 U.S. 48

24 S.Ct. 598

48 L.Ed. 870

STATE OF MINNESOTA, Appt.,

v NORTHERN SECURITIES COMPANY, Great Northern Railway Company, Northern Pacific Railway Company, et al.

No. 433.

Argued January 7, 8, 1904.

Decided April 11, 1904.

Messrs. W. B. Douglas, M. D. Munn, and George P. Wilson for appellant.

Messrs. George B. Young, John G. Johnson, M. D. Grover, C. W. Bunn, and W. P. Clough for appellees.

[Argument of Counsel from pages 49-56 intentionally omitted] Mr. Justice Harlan delivered the opinion of the court:

By a statute of Minnesota passed March 9th, 1874, it was pro- vided that no railroad corporation or the lessees, purchasers, or managers thereof should consolidate the stock, property, or franchises of such corporation with, or lease or purchase the works or franchises of, or in any way control, any other railroad corporation owning or having under its control a parallel or competing line; nor should any officer of such corporation act as an officer of any other railroad corporation owning or having the control of a parallel or competing line; and the question whether railroads were parallel or competing lines should, when demanded by the party complainant, be decided by a jury as in other civil issues. Minn. Laws, 1874, p. 154.

A subsequent statute, passed March 3d, 1881, provided that any railroad corporation, either domestic or foreign, whether organized under a general law or by virtue of a special charter, might lease or purchase, or become owner of or control, or hold the stock of, any other railroad corporation, when the respective railroads could be lawfully connected and operated togther 'so as to constitute one continuous main line, with or without branches,' § 1; and that any railroad corporation, whose lines of railroad within or without the state might be lawfully connected and operated together to constitute one continuous main line, so as to admit of the passage of trains over them without break or interruption, 'could consolidate their stock and franchises so as to become one corporation.' § 2. But by the same statute it was provided that no railroad corporation should consolidate with, lease, or purchase, or in any way become owner of, or control, any other railroad corporation, or any stock, franchises, rights of property thereof, which owned or controlled 'a parallel or competing line.' § 3. Minn. Laws, 1881, p. 109.

At a later date, 1899, the legislature of Minnesota passed another statute relating principally to such restraints upon trade and commerce as interfered with competition among those engaged therein. That statute contained these provisions '§ 1. Any contract, agreement, arrangement, or conspiracy, or any combination in the form of a trust, or otherwise, hereafter entered into which is in restraint of trade or commerce within this state, or in restraint of trade or commerce between any of the people of this state and any of the people of any other state or country, or which limits or tends to limit or control the supply of any article, commodity, or utility, or the articles which enter into the manufacture of any article [of] utility, or which regulates, limits, or controls or raises or tends to regulate, limit, control, or raise the market price of any article, commodity, or utility, or tends to limit or regulate the production of any such article, commodity, or utility, or in any manner destroys, limits, or interferes with open and free competition in either the production, purchase, or sale of any commodity, article, or utility, is hereby prohibited and declared to be unlawful. § 2. That when any corporation heretofore or hereafter created, organized, or existing under the laws of this state, whether general or special, hereafter unites in any manner with any other corporation wheresoever created, or with any individual, whereby such corporation surrenders or transfers, by sale or otherwise, in whole or in part, its franchise, rights, or privileges, or the control or management of its business to any other corporation or individual, or whereby the business, management, or control of the business of such corporation is limited, changed, or in any manner affected, and the purpose or effect of such union or combination is to limit, control, or destroy competition in the manufacture or sale of any article or commodity, or is to limit or control the production of any article or commodity, or is to control of fix the price or market value of any article or commodity, or the price or market value of the material entering into the production of any article or commodity, or in case the purpose or effect of such union or combination is to control or monopolize in any manner the trade or commerce, or any part thereof, of this state or of the several states, such union, combination, agreement,* arrange- ment, or contract is hereby prohibited and declared to be unlawful. . . . § 3. Any corporation heretofore or hereafter created, organized, or existing under the laws of this state, which shall hereafter, either directly or indirectly make any contract, agreement, or arrangement, or enter into any combination, conspiracy, or trust, as defined in § 1 of this act, shall, in addition to the penalty prescribed in § 2 of this act, forfeit its charter, rights, and franchises, and it shall thereafter be unlawful for such corporation to engage in business, either as a corporation or as a part of any combination, trust, or monopoly, except as to the final disposition of its property under the laws of this state. . . . § 6. That for the purpose of carrying out the provisions of this act any citizen of this state may, and it is hereby declared to be the duty of the attorney general to, institute, in the name of the state, proceedings in any court of competent jurisdiction against any person, partnership, association, or corporation who may be guilty of violating any of the provisions of § 1 of this act, for the purpose of imposing the penalties imposed by this act, or securing the enforcement of § 3 hereof.' Minn. Gen. Laws, 1899, chap. 357.

These statutes being in force, the state of Minnesota instituted this suit in one of its own courts against the Northern Securities Company, a corporation of New Jersey; the Great Northern Railway Company, a corporation of Minnesota; the Northern Pacific Railway Company, a corporation of Wisconsin, which, having filed its articles of incorporation with the secretary of state of Minnesota, became subject to the laws of that state relating to railroad corporations; and James J. Hill, as president of the Northern Securities Company, and individually.

What is the nature of the case as disclosed by the complaint filed in the state court?

The complaint alleged——

That the Great Northern Railway Company and the North- ern Racific Railway Company each owned or controlled and maintained a system of railways connecting the Great Lakes and the Pacific ocean, their main roads constituting, substantially, parallel and competing lines;

That pursuant to an agreement between the defendant Hill and other stockholders of the Great Northern Railway Company (representing a controlling interest in the stock of that company) and J. Pierpont Morgan and other stockholders of the Northern Pacific Railway Company (representing a controlling interest in the stock of that company) the Northern Securities Company was incorporated solely as an instrumentality through which the stock, property, and franchises of the Great Northern and Northern Pacific Railway Companies should be consolidated in effect, if not in form, and the management and control of their business affairs, respectively, including the fixing of rates and charges for the transportation of passengers and freight over any and all of the lines of railway of each of those companies, as well within as without the state, be vested in and controlled by the Securities Company, and all competition in freight and passenger traffic between the two systems of railway, within and without the state, to be suppressed and removed; that by means of such arrangement it was sought and intended to ignore, evade, and violate the laws of the state prohibiting as well the consolidation of the stock, property, or franchise of parallel or competing lines of railway therein, and the control or management thereof, as all combinations in restraint of trade or commerce within the state, and between the people of Minnesota and the people of other states and countries; and that, if the Securities Company was allowed to hold and control the stocks of the constituent railway companies, and to carry out the purpose and object of its incorporators as well as its own, 'full faith and credit will not be given to the public acts of this complainant, and it will be deprived of a further right guaranteed to it by the Constitution of the United States.'

That the said scheme had been consummated, and said two railway systems were now under the absolute management and control of the Securities Company, and 'by reason thereof all competition between said lines has been destroyed and a monopoly in railway traffic in Minnesota (as well as without said state) has been created, to the great and permanent and irreparable damage of the state of Minnesota, and to the people thereof, and in violation of its laws, and of the laws of the United States in such case made and provided, viz.: The act of Congress approved July 2d, 1890, entitled 'An Act to Protect Trade and Commerce Against Unlawful Restraints and Monopolies' [26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3200];' and

That the carrying out the above agreements and plan of consolidation and monopoly, and in every step taken to consummate it, the officers and directors of each of said railway companies were severally fully advised and consented thereto, and, unless restrained by this court, the Securities Company would continue to manage and control the business and affairs of Great...