United States v. Freight Ass, TRANS-MISSOURI

• Decision Date: 22 March 1897
• Docket Number: TRANS-MISSOURI,No. 67,67
• Citation: 166 U.S. 290,17 S.Ct. 540,41 L.Ed. 1007
• Parties: UNITED STATES v. FREIGHT ASS'N
• Court: U.S. Supreme Court

166 U.S. 290

17 S.Ct. 540

41 L.Ed. 1007

UNITED STATES

v TRANS-MISSOURI FREIGHT ASS'N.

No. 67.

March 22, 1897.

On the 2d of July, 1890, an act was passed by the congress of the United States, entitled 'An act to protect trade and commerce against unlawful restraints and monopolies.' 26 Stat. 209, c. 647; Supp. Rev. St. p. 726.

The act is given in full in the margin.¹ On the 15th day of March, 1889, all but three of the defendants, the railway companies named in the bill, made and entered into an agreement by which they formed themselves into an association to be known at the 'Trans-Missouri Freight Association,' and they agreed to be governed by the provisions contained in the articles of agreement.

The memorandum of agreement entered into between the railway companies named therein stated, among other things, as follows:

'For the purpose of mutual protection by establishing and maintaining reasonable rates, rules, and regulations on all freight traffic, both through and local, the subscribers do hereby form an association to be known as the 'Trans-Missouri Freight Association,' and agree to be governed by the following provisions:

'Article I.

'The traffic to be included in the Trans-Missouri Freight Association shall be as follows:

'(1) All traffic competitive between any two or more members hereof, passing between points in the following described territory: Commencing at the Gulf of Mexico, on the 95th meridian; thence north, to the Red river; thence, via that river, to the eastern boundary line of the Indian Territory; thence north, by said boundary line and the eastern line of the state of Kansas, to the Missouri river, at Kansas City; thence, via the said Missouri river, to the point of intersection of that river with the eastern boundary of Montana; thence, via the said eastern boundary line, to the international line,—the foregoing to be known as the 'Missouri River Line'; thence, via said international line, to the Apcific coast; thence, via the Pacific coast, to the international line between the United States and Mexico; thence, via said international line, to the Gulf of Mexico; and thence, via said gulf, to the point of beginning,—including business between points on the boundary line as described.

'(2) All freight traffic originating within the territory as defined in the first section when destined to points east of the aforesaid Missouri River Line.'

Certain exceptions to the above article are then stated as to the particular business of several railway companies, which was to be regarded as outside and beyond the provisions of the agreement.

Article 2 provided for the election of a chairman of the organization, and for meetings at Kansas City, or otherwise, as might be provided for. By section 2 of that article, each road was to 'designate to the chairman one person who shall be held personally responsible for rates on that road. Such person shall be present at all regular meetings, when possible, and shall represent his road, unless a superior officer is present. If unable to attend, he shall send a substitute, with written authority to act upon all questions which may arise, and the vote of such substitute shall be binding upon the company he represents.'

Section 3 provides that § committee shall be appointed to establish rates, rules, and regulations on the traffic subject to this association, and to consider changes therein, and makes rules for meeting the competition of outside lines. Their conclusions, when unanimous, shall be made effective when they so order; but, if they differ, the question at issue shall be referred to the managers of the lines parties hereto; and, if they disagree, it shall be arbitrated in the manner provided in article 7.'

By section 4 it was provided that 'at least five days' written notice prior to each monthly meeting shall be given the chairman of any proposed reduction in rates or change in any rule or regulation governing freight traffic; eight days in so far as applicable to the traffic of Colorado or Utah.'

Sections 5, 6, 7, 8, 9, 10, and 11 of article 2 read as follows:

'Sec. 5. At each monthly meeting, the association shall consider and vote upon all changes proposed, of which due notice has been given, and all parties shall be bound by the decision of the association, as expressed, unless then and there the parties shall give the association definite written notice that in ten days thereafter they shall make such modification, notwithstanding the vote of the association: provided, that, if the member giving notice of change shall fail to be represented at the meeting, no action shall be taken on its notice, and the same shall be considered withdrawn. Should and member insist upon a reduction of rate against the views of the majority, or if the majority favor the same, and if, in the judgment of such majority, the rate so made affects seriously the rates upon other traffic, then the association may, by a majority vote, upon such other traffic put into effect corresponding rates to take effect on the same day. By unanimous consent, any rate, rule, or regulation relating to freight traffic may be modified at any meeting of the association without previous notice.

'Sec. 6. Notwithstanding anything in this article contained, each member may, at its peril, make at any time, without previous notice, such rate, rule, or regulations as may be necessary to meet the competition of lines not members of the association, giving at the same time notice to the chairman of its action in the premises. If the chairman, upon investigation, shall decide that such rate is not necessary to meet the direct competion of lines not members of the association, and shall so notify the road making the rate, it shall immediately withdraw such rate. At the next meeting of the association held after the making of such rate, it shall be re- ported to the association, and, if the association shall decide by a two-thirds vote that such rate was not made in good faith to meet such competition, the member offending shall be subject to the penalty provided in section 8 of this article. If the association shall decide by a two-thirds vote that such rate was made in good faith to meet such competition, it shall be considered as authority for the rate so made.

'Sec. 7. All arrangements with connecting lines for the division of through rates relating to traffic covered by this agreement shall be made by authority of the association: provided, however, that, when one road has a proprietary interest in another, the divisions between such roads shall be what they may elect, and shall not be the property of the association: provided, further, that, as regards traffic contracts at this date actually existing between lines not having common proprietary interests, the same shall be reported, so far as divisions are concerned, to the association, to the end that divisions with competing lines may, if thought advisable by them, be made on equally favorable terms.

'Sec. 8. It shall be the duty of the chairman to investigate all apparent violations of the agreement, and to report his findings to the managers, who shall determine, by a majority vote (the member against whom complaint is made to have no vote), what, if any, penalty shall be assessed, the amount of each fine not to exceed one hundred dollars, to be paid to the association. If any line party hereto agrees with a shipper, or any one else, to secure a reduction or change in rates, or change in the rules and regulations, and it is shown upon investigation by the chairman that such an arrangement was effected, and traffic thereby secured, such action shall be reported to the managers, who shall determine, as above provided, what, if any, penalty shall be assessed.

'Sec. 9. When a penalty shall have been declared against any menber of this association, the chairman shall notify the managing officer of said company that such fine has been assessed, and that within ten days thereafter he will draw for the amount of the fine; and the draft, when presented, shall be honored by the company thus assessed.

'Sec. 10. All fines collected to be used to defray the expenses of the association, the offending party not to be benefited by the amounts it may pay as fines.

'Sec. 11. Any member not present or fully represented at roll call of general or special meetings of the freight association, of which due and proper notice has been given, shall be fined one dollar, to be assessed against his company, unless he shall have previously filed with the chairman notice of inability to be present or represented.'

Articles 3, 5, 6, and 7 contain appropriate provisions for the carrying out of the purposes of the agreement, but it is not necessary to here set them forth in detail.

Article 4 reads as follows:

'Article 4.

'Any willful underbilling in weights, or billing of freight at wrong classification, shall be considered a violation of this agreement; and the rules and regulations of any weighing association or inspection bureau, as established by it or as enforced by its officers and agents, shall be considered binding under the provisions of this agreement, and any willful vioation of them shall be subject to the penalties provided herein.'

Article 8 provides that the agreement should take effect April 1, 1889, subject thereafter to 30 days' notice of a desire on the part of any line to withdraw from the same.

On the 6th of January, 1892, the United States, as complainant, filed in the circuit court, of the United States for the district of Kansas, through its United States attorney for that district, and under the direction of the attorney general of the United States, its bill of complaint against the Trans-Missouri Freight Association, named in the agreement above mentioned, the Atchison, Topeka & Santa Fe Railroad Company, and some 17 other railroad companies, the officers of which had, it was alleged, signed the agreement above...