Texas Ry Co v. United States 11 8212 13, 1932

• Decision Date: 29 May 1933
• Docket Number: No. 1,1
• Citation: 77 L.Ed. 1410,289 U.S. 627,53 S.Ct. 768
• Parties: TEXAS & P. RY. CO. et al. v. UNITED STATES et al. Reargued Oct. 11—13, 1932
• Court: U.S. Supreme Court

289 U.S. 627

53 S.Ct. 768

77 L.Ed. 1410

TEXAS & P. RY. CO. et al.

v UNITED STATES et al.

No. 1.

Reargued Oct. 11—13, 1932.

Decided May 29, 1933.

Appeal from the District Court of the United States for the Southern District of Texas.

[Syllabus from pages 627-629 intentionally omitted] Mr. Luther M. Walter, of Chicago, Ill., for appellants New Orleans Joint Traffic Bureau et al.

Mr. Charles M. Spence, of Dallas, Tex., for appellants Texas & P. Ry. Co. et al.

Mr. Wylie M. Barrow, of Baton Rouge, La., for appellant the State

of Louisiana.

Mr. Edward R. Schowalter, of New Orleans, La., for appellant Lousiana Public Service Commission.

Mr. John St. Paul, Jr., of New Orleans, La., for appellant Board of Comrs. of Port of New Orleans.

Messrs. A. L. Burford, of Shreveport, La., and R. E. Milling, Jr., of New Orleans, La., for appellants Louisiana & A. Ry. Co. et al.

Mr. Daniel W. Knowlton, of Washington, D.C., for appellees the United States and the Interstate Commerce Commission.

Mr. R. S. Outlaw, of Chicago, Ill., for appellees Missouri-Kansas-Texas R. Co. et al.

Mr. R. C. Fulbright, of Houston, Tex., for appellees Galveston Chamber of Commerce et al.

Mr. Justice ROBERTS delivered the opinion of the Court.

The Galveston Commercial Association complained to the Interstate Commerce Commission that carload commodity rates on import, export, and coastwise traffic between a portion of western classification territory and Galveston were unreasonable, and their relationship with those to and from Houston, Texas City, Beaumont, Port Arthur, and Orange, Texas, and New Orleans, La., was unduly prejudicial to Galveston.¹ The claim of unreason ableness was abandoned, as was also the assertion of discrimination in favor of the other Texas ports. The latter intervened and prayed the same relief as might be accorded Galveston in respect of rate relationship with New Orleans. The issue was therefore narrowed to one of prejudice to them and preference of New Orleans. Railroads serving the Texas ports and various shippers and commercial bodies intervened in support of the complaint; interests connected with the port of New Orleans and shippers intervened in opposition.

The Commission found that export and import rates on fourteen commodities from or to points in Arkansas, Texas, Oklahoma, Southern Kansas, and Louisiana west of the Mississippi river were unduly prejudicial to Galveston and unduly preferential of New Orleans. In all instances where the distance to Galveston is less than the distance to New Orleans by not over one hundred miles it permitted equal rates; but for differences in distance exceeding one hundred miles it prescribed certain named minimum differentials in favor of Galveston. ²

On rehearing the prior decision was modified b including the other Texas ports with Galveston in the finding of undue prejudice; substituting a 25 per cent. difference in distance for the 100-mile basis; exempting from the scope of the order rates to or from points on the Texas & Pacific and the Louisiana Railroad & Navigation Company;³ exempting rates on petroleum and its products; and making certain other changes not here material.⁴

The proceeding was later reopened for the purpose of deciding whether the Texas & Pacific and the L.R. & N. should continue to be exempted. The Commission reversed its previous finding and included them within its orders. ⁵ Both carriers filed bills in the District Court to enjoin the enforcement of all the orders except in so far as the second exempted them from the finding of preference and prejudice. The cases were consolidated, and upon final hearing before three judges the bills were dismissed.⁶ The plaintiffs, Texas & Pacific and L.R. & N., and also the state of Louisiana, the New Orleans traffic bureau, and other interveners appealed.

The Texas ports are served by some half dozen lines which either themselves or through their connections reach the areas of origin or destination embraced in the Commission's order. Generally speaking, their routes trend north rather than east of Galveston. The Southern Pacific is the only carrier serving both Galveston and New Orleans. Texas is also connected with New Orleans by the Gulf Coast Lines, by the Texas & Pacific, extending east from El Paso through Dallas and Fort Worth to Shreveport, La., and thence southeast to New Orleans, and by the L.R. & N., which connects Eastern Texas and Western Louisiana with that port. Several other lines extend between New Orleans and Western Louisiana, Arkansas, Kansas, and Oklahoma.

With minor and immaterial exceptions, the carriers serving the Texas ports and New Orleans have for many years equalized the import and export commodity carload rates between the territory embraced in the Commission's orders and Galveston and New Orleans. The gravamen of the complaint is that in many instances the distance to New Orleans is so much greater than that to the Texas ports, and the increased haul so important a part of the service rendered, that this factor should be reflected in a fixed differential in rates. The Commission's order prescribing differentials is challenged only in so far as it compels the Texas & Pacific and the L.R. & N. to establish rates to New Orleans higher by the amount of the fixed differentials than those charged between the same interior points and the Texas ports. Inasmuch as the assertion of unreasonableness was withdrawn and the Commission made no finding that the Galveston rates were unreasonable, the prohibitions of section 1 of the act to regulate commerce, as amended, are not involved.⁷ The evidence failed to show that the rates of the Texas & Pacific and the L.R. & N. on export and import shipments to and from New Orleans were not compensatory. The Commission refused to find that they were so low as to cast a burden on other traffic. There was therefore no basis for an order fixing minimum reasonable rates under section 15(1) of the Act.⁸ The parties agree that authority for the order must be found in section 3(1), which is:

'It shall be unlawful for any common carr er * * * to make or give any undue or unreasonable preference or advantage to any particular person, company, firm, corporation, or locality, or any particular description of traffic, in any respect whatsoever, or to subject any particular person, company, firm, corporation, or locality, or any particular description of traffic, to any undue or unreasonable prejudice or disadvantage in any respect whatsoever.' ⁹

The appellants contend that in the circumstances disclosed the ports as such are not localities preferred or prejudiced, but that, if they may be so denominated, the Texas & Pacific and the L.R. & N. cannot be held responsible for any undue prejudice to the Texas ports, since they do not reach those ports with their own lines or control the rates to or from them. They also assert that the orders violate article 1, § 9, of the Constiution, which prohibits any regulation of commerce giving preference to ports of one state over those of another; are without support in the evidence, and arbitrary.

The cause has been twice argued; it was first presented at the October term, 1931, and on account of the importance of the questions involved a reargument was ordered and was had at the October term, 1932.¹⁰ Statement of certain facts and settled principles will tend to clarify and define the issues presented.

The traffic with which we are concerned does not move on through bills of lading, but the movement is, nevertheless, from points of origin to a foreign or coastal destination, or vice versa, and is therefore essentially through transportation. Compare Binderup v. Pathe Exchange, 263 U.S. 291, 309, 44 S.Ct. 96, 68 L.Ed. 308. As the Commission said in this case: 'A port is neither the destination nor the origin of traffic passing through it. It levies toll on the traffic, in substantially the same manner as do common carriers, in its charges for the use of its facilities in the transfer of traffic between the rail and water carriers.' Although the shipper in the first instance consigns the commodity to the port and a separate contract is made for ocean carriage, the through rate none the less consists of the rail rate to the port, plus the ocean freight, which is the same from all Gulf ports.¹¹

The choice of route is determined solely by the rail rates from or to the ports. If these are equalized, the shipper has an option; but, if they are disparate, the route through the port taking the higher rate is necessarily excluded. A very slight differential in the rail rate, in some instances as little as a fraction of a cent per hundred pounds, will divert the traffic through the port so advantaged. The application of a distance scale to the rail rate automatically precludes shipment through the more distant port.

Long prior to the passage of the act to regulate commerce the railroads, recognizing this situation, and desiring to hold to their own lines the traffic running to ports which they serve, equalized rates through the ports reached by their own lines with those maintained by their rivals to other ports, or established differentials in favor of their own ports in order to retain a portion of the competitive export business. And a carrier serving two ports has for like reason fixed an equal or lower rate to the more distant of the two, solely to meet the competition of rivals who reached it by more direct routes. These practices have not been indulged either to aid or to harm a port as such, but solely to obtain or retain business for the carrier's own line. ¹² With the abstract fairness of such ad- justment neither the Commission nor the courts have any concern. This is not to say, however, that the rates promulgated are beyond the Commission's jurisdiction. While that body has no control over the ocean rate, it has power to compel a reasonable charge for the rail haul. Compare Armour Packing Co. v. United...