United States Tel. Co. v. Central Union Tel. Co.

Decision Date10 January 1913
Docket Number2,082.
Citation202 F. 66
CourtU.S. Court of Appeals — Sixth Circuit

[Copyrighted Material Omitted]

During the period prior to 1898, the Central Union Telephone Company had established a system of long-distance telephone communication extending over large parts of the states of Ohio and Indiana. It also owned and controlled local telephone exchanges in many cities and villages in this territory. The American Telephone & Telegraph Company, by license or stock ownership or otherwise, controlled the Central Union, so that the latter, with its local exchanges and long-distance lines, became allied to, and in a sense a part of, the so-called Bell System, extending throughout the United States. At the same time there also existed, in the two states named, a large number of so-called independent local telephone exchanges, often operating a local exchange in direct competition with the local exchange of the Central Union, at the same place, but not amounting to a completely competing system, because the independent local exchanges were not generally connected with each other by long-distance lines, and hence could not give to their local patrons long-distance service. It was the established practice and rule of the Central Union not to permit its long-distance lines to be used by or for the local independent exchanges and it thus promoted its own local business by offering in connection therewith long-distance service which local competitors could not give. The bill alleges, and it is now to be taken as true, that this conduct and policy of the Central Union Company were intended for, and were effective toward, unfairly suppressing competition and oppressively establishing a monopoly in the telephone business.

In this situation the United States Telephone Company was organized as an independent long-distance company, for the purpose of furnishing long-distance service to the independent exchanges in the two states named and adjacent territory. It proceeded to, and did, expend several million dollars in the construction of such lines, and in connection with this planning and development it negotiated and made contracts with a large number of independent local exchanges in Ohio Indiana, and Michigan, which contracts provided for an interchange of business, 'so that a comprehensive and adequate independent telephone system was thereby created. ' This independent system thereupon entered into and carried on a general telephone business, competing with the Bell system in the territory named, and in about 1907, it had been so successful that it was furnishing long-distance service for 800 independent exchanges, 2,000 independent stations, and 700,000 telephones. Up to the time last named the Central Union Company had adhered to its policy of refusing to furnish service to independent exchanges, but at about that time it abandoned that policy, in whole or in part, and began to solicit an exchange of business with the local independent companies; in other words, the Central Union Company entered into active competition with the United States Company for the long-distance business of the independent local exchanges. The contracts above named, between these exchanges and the United States Company, provided that, for points reached by that company, they should give their long-distance business exclusively to that company and receive long-distance business from that company alone, so that this new policy of the Central Union Company amounted to soliciting the independent exchanges to break their contracts with the United States Company. Several independent exchanges accepted the offers made by the Central Union Company, and entered into interchange arrangements with it.

Against two or three of such independent local exchanges, the United States Company filed injunction complaints, and obtained injunctions in the common pleas court of Ohio. The Central Union Company continuing such solicitation, the United States Company filed this bill in the United States Circuit Court for the Northern District of Ohio, asking an injunction against the continuance of such acts. The defendants demurred, and the Circuit Court dismissed the bill. The United States Company appealed to this court. The hearing of the appeal was long delayed awaiting the decision of the Supreme Court of Ohio; but that decision, when rendered, was not controlling, as hereafter explained, and accordingly the appeal has been argued and submitted to this court.

W. L. Cary, of Columbus, Ohio, and Cable & Parmenter, of Lima, Ohio, for appellant.

John H. Doyle, of Toledo, Ohio, Murray Seasongood, of Cincinnati, Ohio, and W. B. Mann, of Indianapolis, Ind. (Paxton, Warrington & Seasongood, of Cincinnati, Ohio, and Doyle & Lewis, of Toledo, Ohio, of counsel), for appellees.

Before KNAPPEN and DENISON, Circuit Judges, and SATER, District Judge.

DENISON Circuit Judge (after stating the facts as above).

After the decision of the present case by Judge Tayler in the court below, an appeal from the common pleas court, in one of the injunction cases, was affirmed by majority vote of the circuit court (in Ohio, an intermediate appellate court). This was carried to the Supreme Court. The Supreme Court of Ohio has six members. Five sat to hear this case, and the decree of the circuit court was affirmed by a vote of three to two, but without any opinion. It is the fixed rule of the Supreme Court in Ohio that the law, as settled by the decision, is to be found only in the syllabus. Adelbert College v. Wabash R.R. Co. (C.C.A. 6) 171 F. 805, 812, 96 C.C.A. 465, 17 Ann.Cas. 1204. Under these circumstances, it is said that we should not examine for ourselves the questions involved, but should adopt the same disposition of the matter as was reached in the Ohio Supreme Court.

Counsel do not agree as to whether the action of the state courts was in such sequence of events, or whether that action so involved the construction of the state statutes or state policy only, rather than federal statutes or matters of general law, that it would be our duty to adopt the conclusion of those courts; but we see no necessity for considering that problem. It is clear that the obligation to follow the lead of the state courts does not arise, unless the court to be followed is the court of last resort in the state (Anglo-American Co. v. Lombard (C.C.A. 8) 132 F. 721, 742, 68 C.C.A. 89); and particularly so when the lower court opinions are not unanimous or numerous and old enough to show a settled rule. We think we must interpret the action of the Supreme Court of Ohio as a declaration that, lacking concurrence by a majority of the court, it was unwilling to lay down any general rules or principles as applicable to the existing situation. Under these circumstances, we feel bound to decide the issues according to our own judgment.

The court below based its conclusion largely upon the ground that the exclusive feature of the contracts between the independent locals and complainant was in itself unlawful and void, as tending to unlawful trade monopoly. If that court was right in this, all the other questions argued become immaterial, and so that question is naturally the first to be considered. This necessitates a more careful statement of this feature of the contracts.

Taking one of the contracts as typical, we find that the long-distance company (complainant) agrees to build a line to the corporate limits of the village, and thence upon the poles of the local company to its central exchange in the village, receiving a license to use therefor the poles of the local company's village lines; that service will be given from all lines owned, controlled, or connected with the lines of either party over the lines of the other party and its connections; that neither party will enter into contract with any other person or corporation whereby any of the rights, privileges, or advantages acquired by this contract might be impaired; that the long-distance company will transmit, over the lines owned or controlled by the local company, all messages destined to points thereon, and not reached by the long-distance company's own lines; that the local company will transmit over the lines of the long-distance company all messages to points 'not now reached' by the local company's own lines (as shown by the attached plat of existing local lines); that the tolls and charges shall be divided in agreed proportions; and that the contract shall remain in force for 99 years.

Speaking generally, the policies of the state of Ohio, and of the United States, regarding restrictions of competition, are the same; if there are differences, they are immaterial here. The rule is that of the common law, declared for Ohio by the Valentine Act, and for the United States by the Sherman Act. Salt Co. v. Guthrie, 35 Ohio St. 666; section 4427-- 1 R.S. Ohio; Standard Oil Case, 221 U.S. 1, 31 Sup.Ct. 502, 55 L.Ed. 619, 34 L.R.A. (N.S.) 834, Ann. Cas. 1912D, 734; Act July 2, 1890, c. 647, 26 Stat. 209 (U.S. Comp. St. 1901, p. 3200); State v. Buckeye Pipe Line Co., 61 Ohio St. 520, 548, 56 N.E. 464; State v. Gage, 72 Ohio St. 210, 73 N.E. 1078. That any particular class of business should be exempted from this prevailing policy would require clear and explicit legislative declaration to that effect. The courts cannot make such exemptions, merely because forceful reasons can be stated why such particular business is a 'natural monopoly.' If it is, this only means that the Legislature might well have made an exemption, or, at most, that in a judicial determination of what amounts to a substantial and direct restraint, rather than an incidental or indirect restraint, the...

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