United States v. Trans-Missouri Freight Ass’n, 166 U.S. 290 (1897)
United States v. Trans-Missouri Freight Association
No. 67
Argued December 8, 9, 1896
Decided March 22, 1897
166 U.S. 290
APPEAL FROM THE CIRCUIT COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
Syllabus
The dissolution of the freight association does not prevent this Court from taking cognizance of the appeal and deciding the case on its merits, as, where parties have entered into an illegal agreement and are acting under it, and there is no adequate remedy at law, and the jurisdiction of the court has attached by the filing of a bill to restrain such or like action under a similar agreement, and a trial has been had and judgment entered, the appellate jurisdiction of this Court is not ousted by a simple dissolution of the association, effected subsequently to the entry of judgment in the suit.
While the statutory amount must, as a matter of fact, be in controversy, yet the fact that it is so need not appear in the bill, but may be shown to the satisfaction of the court.
The provisions respecting contracts, combinations, and conspiracies in restraint of trade or commerce among the several States or with foreign countries, contained in the Act of July 2, 1890, c. 647, "to protect trade and commerce against unlawful restraints and monopolies," apply to and cover common carriers by railroad, and a contract between them in restraint of such trade or commerce is prohibited even though the contract is entered into between competing railroads only for the purpose of thereby affecting traffic rates for the transportation of persons and property.
The Act of February 4, 1887, "to regulate commerce," is not inconsistent with the Act of July 2, 1890, as it does not confer upon competing railroad companies power to enter into a contract in restraint of trade and commerce like the one which forms the subject of this suit.
Debates in Congress are not appropriate sources of information from which to discover the meaning of the language of a statute passed by that body.
The prohibitory provisions of the said Act of July 2, 1890, apply to all contracts in restraint of interstate or foreign trade or commerce without exception or limitation, and are not confined to those in which the restraint is unreasonable.
In order to maintain this suit, the Government is not obliged to show that the agreement in question was entered into for the purpose of restraining trade or commerce if such restraint is its necessary effect.
This agreement, though legal when made, became illegal on the passage of the Act of July 2, 1890, and acts done under it after that statute became operative were done in violation of it.
The fourth section of the act invests the Government with full power and authority to bring such a suit as this, and, if the facts alleged are proved, an injunction should issue.
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.
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 Pacific 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 II 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
A 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 VII.
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 insofar as applicable to the traffic of Colorado or Utah.
Sections 5, 6, 7, 8, 9, 10, and 11 of article II 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 any 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 competition 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 reported 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 member 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 IV reads as follows:
Article IV
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 violation of them shall be subject to the penalties provided herein.
Article VIII 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 mentioned in behalf of and for their respective companies. The bill was filed by the government for the purpose of having the agreement between the defendant railroad companies set aside and declared illegal and void, and to have the association dissolved.
It alleged that the defendant railroad corporations signing the agreement were at that time, and ever since have been, common carriers of all classes and kinds of freight and commodities which were commonly moved, carried, and transported by railroad companies in their freight traffic, and at all such times have been, and then were, continuously engaged in transporting freight and commodities in the commerce, trade, and traffic which is continuously carried on among and between the several states of the United States, and among and between the several states and territories of the United States, and between the people residing in, and all persons engaged in trade and commerce within and among and between, the states, territories, and countries aforesaid; that each of the defendants was, prior to the 15th day of March, 1889, the owner and in the control of, and that they were respectively operating and using, distinct and separate lines of railroad, fitted up for carrying on business as such carriers in the freight traffic above mentioned, independently and disconnectedly with each other, and that said lines of railroad had been, and then were, the only lines of transportation and communication engaged in the freight traffic between and among the states and territories of the United States having through lines for said freight traffic in all that region of country lying to the westward of the Mississippi and Missouri rivers, and east of the Pacific Ocean; that these lines of railroad furnish to the public, and to persons engaged in trade and traffic and commerce between the several states and territories and countries above mentioned, separate, distinct, and competitive lines of transportation and communication extending along and between the states and territories of the United States lying westward of the Mississippi and Missouri rivers to the Pacific Ocean; and that the construction and maintenance of said several separate, distinct, and competitive lines of railroad aforesaid had been encouraged and assisted by the United States and by the states and territories in the region of country aforesaid, and by the people of the said several states and territories, by franchises and by grants and donations of large amounts of land of great value, and of money and securities, for the purpose of securing to the public, and to the people engaged in trade and commerce throughout the region of country aforesaid, competitive lines of transportation and communication; and that, prior to the 15th day of March, 1889, and subsequently and up to the present time, each and all of said defendants have been and are engaged as common carriers in the railway freight traffic connected with the interstate commerce of the United States
It is then alleged in the bill as follows:
And your orator further avers that, on or about the fifteenth day of March, 1889, the defendants not being content with the usual rates and prices for which they and others were accustomed to move, carry, and transport property, freight, and commodities in the trade and commerce aforesaid, and in their said business and occupation, but contriving and intending unjustly and oppressively to increase and augment the said rates and prices, and to counteract the effect of free competition on the facilities and prices of transportation, and to establish and maintain arbitrary rates, and to prevent any one of said defendants from reducing such arbitrary rates, and thereby exact and procure great sums of money from the people of the said states and territories aforesaid, and from the people engaged in the interstate commerce, trade, and traffic within the region of country aforesaid, and from all persons having goods, wares and merchandise to be transported by said railroads, and intending to monopolize the trade, traffic, and commerce among and between the states and territories aforesaid, did combine, conspire, confederate, and unlawfully agree together, and did then and there enter into a written contract, combination, agreement, and compact, known as a memorandum of agreement of the Trans-Missouri Freight Association, which was signed by each of said above-named defendants.
The bill then sets forth the agreement signed by the various corporations defendant.
It is further alleged that the agreement went into effect on the 1st day of April, 1889, and that, since that time, each and all of the defendants, by reason of the agreement, have put into effect and kept in force upon the several lines of railroads the rules and regulations and rates and prices for moving, carrying, and transporting freight fixed and established by the association, and have declined and refused to fix or establish and maintain or give on their railroads rates and prices for the carrying of freight based upon the cost of constructing and maintaining their several lines of railroad and the cost of carrying freights over the same, and such other elements as should be considered in establishing tariff rates upon each particular road; and the people of the states and territories subject to said association, and all persons engaged in trade and commerce within, among, and between the different states and territories, have been compelled to, and are still compelled to, pay the arbitrary rates of freight, and submit to the arbitrary rules and regulations, established and maintained by the association, and ever since that date have been, and still are, deprived of the benefits that might be expected to flow from free competition between said several lines of transportation and communication, and are deprived of the better facilities and cheaper rates of freight that might be reasonably expected to flow from free competition between the lines above mentioned; and that the trade, traffic, and commerce in such region of country, and the freight traffic in connection therewith, have been and are monopolized and restrained, hindered, injured, and retarded by the defendants by means and through the instrumentality of such association.
The bill further averred that, notwithstanding the passage of the act of Congress above mentioned, on the 2d day of July, 1890, the
defendants still continue in and still engage in said unlawful combination and conspiracy, and still maintain said Trans-Missouri Freight Association, with all the powers specified in the memorandum of agreement and articles of association hereinbefore set forth, which said agreement, combination, and conspiracy so as aforesaid entered into and maintained by said defendants is of great injury and grievous prejudice to the common and public good, and to the welfare of the people of the United States.
The prayer of the bill is as follows:
In consideration whereof, and inasmuch as your orator can only have adequate relief in the premises in this honorable court where matters of this nature are properly cognizable and relievable, your orator prays that this honorable court may order, adjudge, and decree that said Trans-Missouri Freight Association be dissolved, and that said defendants, and all and each of them, be enjoined and prohibited from further agreeing, combining, and conspiring and acting together to maintain rules and regulations and rates for carrying freight upon their several lines of railroad to hinder trade and commerce between the states and territories of the United States; and that all and each of them be enjoined and prohibited from entering or continuing in a combination, association, or conspiracy to deprive the people engaged in trade and commerce between and among the states and territories of the United States of such facilities and rates and charges of freight transportation as will be afforded by free and unrestrained competition between the said several lines of railroad; and that all and each of said defendants be enjoined and prohibited from agreeing, combining, and conspiring and acting together to monopolize, or attempt to monopolize, the freight traffic in the trade and commerce between the states and territories of the United States; and that all and each of said defendants be enjoined and prohibited from agreeing, combining, and conspiring and acting together to prevent each and any of their associates from carrying freight and commodities in the trade and commerce between the states and territories of the United States at such rates as shall be voluntarily fixed by the officers and agents of each of said roads acting independently and separately in its own behalf.
The defendants were required to answer fully, etc., each and all of the matters charged in the bill, but such answer was not required to be under oath, an answer under oath being specially waived.
The Chicago, Kansas & Nebraska Railway Company, the Missouri, Kansas & Texas Railway Company, and the Denver, Texas & Ft. Worth Railroad Company denied being parties to the association. the other 15 companies filed separate answers, each setting up substantially the same defense.
They admit they are common carriers engaged in the transportation of persons and property in the states and territories mentioned in the agreement, and they allege that, as such common carriers, they are subject to the provisions of the Act of Congress approved February 4, 1887, entitled "An act to regulate commerce," with the various amendments thereof and additions thereto, and they allege that that act and the amendments constitute a system of regulations established by Congress for common carriers subject to the act, and they deny that they are subject to the provisions of the act of Congress passed July 2, 1890, and above set forth.
They admit that they severally own, control, and operate separate and distinct lines of railroad constructed and fitted for carrying on business as common carriers of freight, independently and disconnectedly with each other, except that a common interest exists between certain companies, named in the answer. They admit that the lines of railroad mentioned in the bill furnish lines of transportation and communication to persons engaged in freight traffic between and among the states and territories of the United States, having through lines for freight traffic in that region of country lying to the westward of the Mississippi and Missouri rivers and east of the Pacific Ocean, but deny that they are the only such lines, and allege that there are several others, naming them.
They further admit that, prior to the organization of the freight association, the defendants furnished to the public, and to persons engaged in trade, traffic, and commerce between the several states and territories named in the agreement, separate, distinct, and competitive lines of transportation and communication, and they allege that they still continue to do so.
They admit that some of the roads mentioned in the bill received aid by land grants from the United States, and others received aid from states and territories by loans of credits, donations of depot sites and rights of way, and, in a few cases, by investments of money, and that the people of the states and territories, to a limited extent, made investments in the stocks and bonds of some of the roads, while others, mentioned in the bill, were almost exclusively constructed by capital furnished by nonresidents of that region.
It is also admitted that the purpose of the land grants, loans, donations, and investments was to obtain the construction of competitive lines of transportation and communication, to the end that the public and the people engaged in trade and commerce throughout that region of country might have facilities afforded by railways in communicating with each other and with other portions of the United States and the world, and denies that they were granted for any other purpose.
The defendants admit the formation, on or about March 15, 1889, of the voluntary association described in the bill as the "Trans-Missouri Freight Association."
They deny the allegation that they were not content with the rates and prices prevailing at the date of the agreement; they deny any intent to unjustly increase rates, and deny that the agreement destroyed, prevented, or illegally limited or influenced competition; they deny that arbitrary rates were fixed or charged, or that rates have been increased, or that the effect of free competition has been counteracted; they deny any purpose in the formation of the association to monopolize trade, traffic, and commerce between the states and territories within the region mentioned the bill; and they deny that the agreement is in any respect the illegal result of any unlawful confederation or conspiracy. The defendants allege that the power object of the association is to establish reasonable rates, rules, and regulations on all freight traffic, and the maintenance of such rates until changed in the manner provided by law; that the agreement was filed with the Interstate Commerce Commission as required by section 6 of the act of February 4, 1887. They also allege that it was not the purpose of the association to prevent the members from reducing rates or changing the rules and regulations fixed by the association; that, by the terms of the agreement, each member may do so, the preliminary requirement being that the proposed change shall be voted upon at a meeting of the association, after which, if the proposal is not agreed to, the line making the proposal can make such reduced rate notwithstanding the objection of the other lines; that the purpose of this provision was to afford opportunity for the consideration of the reasonableness of any proposed rate, rule or regulation by all lines interested, and an interchange of views on the effect of such reduction, and that reductions of rates have been made in numerous instances through said process by the association. They admit the agreement took effect April 1, 1889, and that it has remained in operation since, and that the rates, rules, and regulations fixed and established from time to time under said agreement have been put into effect and maintained in conformity to law; and it is denied that, by reason of the agreement, or under duress of fines and penalties, or otherwise, the defendants have refused to establish and maintain just and reasonable rates; and it is alleged that the object of the association at all times has been and is to establish all rates, rules, and regulations upon a just and reasonable basis, and to avoid unjust discrimination and undue preference. They deny that shippers or the public are in any way oppressed or injured by reason of the rates fixed by the association, but, on the contrary, they allege that the agreement and the association established under it have been beneficial to the patrons of the railway lines composing the association and the public at large. These, in substance, are the allegations in the various answers.
The cause came on for hearing on bill and answer before the Circuit Court of the United States for the district of Kansas, First division. That court dismissed the bill without costs against the complainant. 53 Fed. 440. The Government duly appealed from the judgment to the United States Circuit Court of Appeals for the Eighth circuit, and that court, after argument, affirmed, in October, 1893, the judgment of the Circuit Court, without costs, Shiras, district judge, dissenting. 19 U.S.App. 36. From that judgment, the Government has appealed to this Court.
A motion is now made upon affidavits to dismiss the appeal. The affidavits show that, on the 18th of November, 1892, a resolution was adopted by the Trans-Missouri Freight Association, one of the defendants, providing that the organization should be discontinued from and after the 19th of November, 1892, and the secretary was instructed to wind up its affairs at as early a date as possible. It further appeared by the affidavits that the Trans-Missouri Freight Association was actually dissolved, and its existence ended, on the above date, November 19, 1982, and that it has not since that date been revived, nor has it since that date had any activity of any kind, "and that it has not conducted or been engaged in any operations or business whatever, but that it has been dead and out of existence."
It is also alleged as another ground for dismissing the appeal that the matter in controversy does not exceed $1,000, and that the case does not come under any other provision of the act of 1891, allowing an appeal from the Circuit Courts of appeals to this Court. In opposition to the motion, it appeared upon the part of the appellant that at the same meeting at which the resolution above referred to was adopted, the following resolution was also adopted:
Resolved, that a committee of seven be appointed by the chairman of this meeting to draw up a new agreement for the conduct of business now substantially covered by the Trans-Missouri agreement, and to make a report to all lines in the Trans-Missouri Association at a meeting to be called in Chicago on December 6, 1892.
A committee of seven was accordingly appointed, which adopted a resolution calling a meeting for the 6th of December, 1892, of the lines formerly members of the Trans-Missouri Association, and representatives of other interested lines, for the purpose of considering any changes in the tariffs and of business which was under the jurisdiction of that association, and which might be submitted to the parties at that time, and to further consider the organization of one or more rate committees to govern the manner of making rates on such traffic until some permanent organization could be effected. In the early days of December, 1892, the meeting so called was held, and was participated in by most of the railroad companies which were parties to the Trans-Missouri agreement, and at that meeting, an agreement was made upon the subject of rates of freight, and a West Missouri freight rate committee was appointed, the duties of which committee were to establish and maintain reasonable rates in the territory described, and other lines not therein represented, but interested in the freight traffic of such territory, were to be invited to become members. A plan for the establishment of subrate committees for the purpose of agreeing upon rates was therein set forth and agreed to. The agreement was to become effective on the 1st of January, 1892, and to remain in force until the following April, during which time it was supposed that a new and permanent association to provide for an agreement relating to rates of freight might be founded. It does not appear whether such permanent association has been formed, or that the temporary agreement has been actually terminated.
In answer to the motion to dismiss on the ground that the matter in controversy did not amount to over a thousand dollars, the parties have stipulated as follows:
It is hereby stipulated for the purposes of this case, and no other, and without waiving any right to question the legal effect of such fact, that the daily freight charges on interstate shipments collected by all the railway companies at points where they compete with each other were at the time of the agreement mentioned in the pleadings herein, and have been since, more than one thousand dollars.