United States of America v. Merchants Manufacturers Traffic Association of Sacramento

• Decision Date: 04 December 1916
• Docket Number: No. 452,452
• Citation: 37 S.Ct. 24,242 U.S. 178,61 L.Ed. 233
• Parties: UNITED STATES OF AMERICA, Interstate Commerce Commission, Atchison, Topeka, & Santa Fe Railway Company, et al., Appts., v. MERCHANTS' & MANUFACTURERS' TRAFFIC ASSOCIATION OF SACRAMENTO et al
• Court: U.S. Supreme Court

242 U.S. 178

37 S.Ct. 24

61 L.Ed. 233

UNITED STATES OF AMERICA, Interstate Commerce Commission, Atchison, Topeka, & Santa Fe Railway Company, et al., Appts.,

v MERCHANTS' & MANUFACTURERS' TRAFFIC ASSOCIATION OF SACRAMENTO et al.

No. 452.

Argued October 19, 1916.

Decided December 4, 1916.

Assistant Attorney General Underwood for the United States.

Mr. Joseph W. Folk for the Interstate Commerce Commission.

Mr. John E. Alexander for appellees.

[Argument of Counsel from pages 179-181 intentionally omitted] Mr. Justice Brandeis delivered the opinion of the court:

By the Act of June 18, 1910, chap. 309, 36 Stat. at L. 539, 547, Comp. Stat. 1913, § 8566, amending § 4 of the Act to Regulate Commerce [24 Stat. at L. 380, chap. 104], carriers were prohibited from charging more 'for a shorter than for a longer distance over the same line or route in the same direction' without obtaining authority from the Interstate Commerce Commission so to do. A period of six months from the passage of the amendment was provided within which carriers might file application for authority to continue charges of that nature then lawfully existing.

For many years prior to 1910 it had been a common practice to make freight rates from the East to Pacific coast points lower than to intermountain territory, because of competition by the Atlantic-Pacific ocean carriers. About 185 interior cities near the coast had been granted the same transcontinental rates as the ports of San Francisco and Oakland, because the competing water carriers customarily 'absorbed' the local rates or charges from the ports to those cities. Among the interior cities thus treated as 'Pacific Coast Terminals' were Sacramento, Stockton, San Jose, and Santa Clara. The extent to which the higher rates to intermountain territory were justified and the proper basis for 'back haul' rates had been the subject of many hearings before the Interstate Commerce Commission.

Proceeding under § 4, as amended, six railroads applied to the Commission under date of December 7, 1910, for relief in respect to west-bound transcontinental commodity rates. The applications, after enumerating the then-existing tariffs, sought authority specifically 'to continue all rates shown in the above-named tariffs from eastern shipping points designated to Pacific coast terminal points,' and generally 'to continue the present method of making rates lower at the more distant points than at the intermediate points, such lower rates being necessary by reason of competition of various water carriers' from Atlantic to Pacific ports. After prolonged hearings the Commission entered its so-called 4th section order No. 124, by which, while declining to grant the applications as made, it authorized charging, in some respects, lower rates for the longer hauls. The limitation of such charges was set by a zone system and rate percentage basis prescribed by the Commission, which involved an extensive readjustment of rates; but the existing practice of treating these interior cities as terminals was not disturbed. The validity of the order was attacked by the carriers in the courts, and, after three years of litigation, finally sustained in Intermountain Rate Cases (United States v. Atchison, T. & S. F. R. Co.) 234 U. S. 476, 58 L. ed. 1408, 34 Sup. Ct. Rep. 986.

Meanwhile the 'effective date' of the order had been extended by the Commission. After the decision of this court, further extensions of the 'effective date' were sought by the carriers and granted. Some modifications of the order were proposed by the carriers. Additional hearings were had in which many shippers participated. Changes in conditions occurring since the entry of the original order on July 31, 1911, were considered,—among others, that Congress had passed the Act of August 24, 1912 [37 Stat. at L. 568, chap. 390, Comp. Stat. 1913, § 8569], giving the Commission jurisdiction over transportation 'by rail and water through the Panama canal;' that the canal itself had been opened on August 15, 1914; that competing ocean rates had been lowered and service improved; and that the ocean carriers had discontinued the practice of 'absorbing' rates from the ports to interior cities. An elaborate supplemental report was made by the Commission on January 29, 1915, and another on April 30, 1915. The propriety of modifications in addition to those proposed by the carriers was shown and a new plan for constructing 'back haul' rates, devel- oped by the Commission, was eventually embodied in the amended 4th section order No. 124 of April 30th, 1915, and adopted by the carriers in the tariffs filed thereunder. Following the limitation imposed by the amended order, the tariffs filed confined the low 'terminal' rates to ports of call like San Francisco and Oakland; and the interior coast cities, including Sacramento, Stockton, San Jose, and Santa Clara, were subjected to rates materially higher than San Francisco and Oakland, though much lower than those to intermountain territory.

Representatives of these four cities, conceiving them aggrieved by the refusal to grant them the same rates as the ports, and alleging that they had participated in whole or in part at hearings which preceded the entry of the last amendment order, applied to the Commission for a rehearing, and when their application was denied, brought this suit in the district court to restrain the enforcement as to them of the amended order, and of the tariffs filed thereunder. The city of Santa Clara and associations representing the traffic interests of Sacramento, Stockton, and San Jose joined as plaintiffs. The United States, the Interstate Commerce Commission, and the six railroads were made defendants. The bill alleged, among other things, that these cities had for a number of years enjoyed the same rates as San Francisco and Oakland; that large industries and other businesses had been established there because they enjoyed terminal rates; that their commercial importance and prosperity would be ruined if the rates were withdrawn; that no changed conditions existed justifying a withdrawal of terminal rates; that they had not been parties to the proceedings in which the orders were made; and that the 'orders authorizing withdrawal of terminal rates' from them were, among other things, 'discriminatory and unjust, were made without said cities having their day in court, or without giving them an opportunity to show the unreasonableness thereof, that no justification for such increase was shown, and the order of April 30, 1915, was without evidence, that petitioners have been denied the equal protection of the law and deprived of property without due process of law, to their irreparable damage.'

The case was heard before three judges; and a final decree was entered which declared that the 'orders of the Interstate Commerce Commission of January 29, 1915, and April 30, 1915, in 4th section a...