In re City of Louisville Kentucky/Opinion of the Court

Petition for a rule on the judge of the district court of the United States for the western district of Kentucky to show cause why a mandamus should not issue commanding him to vacate the supplemental order of reference entered on March 10, 1913, in the cause entitled Cumberland Teleph. & Teleg. Co. v. Louisville, pending in said district court, and to desist from further trying in the cause the question whether the ordinance of March 6, 1909, in litigation in the cause, is confiscatory and void as to the company, and further commanding him to dismiss the bill of complaint, retaining the same on the docket, however, for the purpose of ascertaining the amounts collected by the company from its patrons in the city of Louisville in excess of the rates prescribed in the ordinance, and for the further purpose of distributing the same among the persons entitled thereto.

A rule was issued in accordance with the petitioner, and return thereon duly made by the district judge.

The suit referred to was brought by the Telephone & Telegraph Company against the city in the circuit court, the predecessor of the district court, on the 8th of March, 1909, and sought an injunction enjoining the city of Louisville from enforcing the ordinance referred to on the ground that the rates prescribed by it were confiscatory. Upon the filing of the bill a temporary restraining order was granted. A motion was also made for an injunction pendente lite, but was not passed upon till final hearing on the 25th of April, 1911, when a permanent injunction was decreed, the court adjudging the rates fixed to be confiscatory.

On the 15th of June, 1909, the city moved for an order requiring the company to pay into court all sums collected in excess of those fixed in the ordinance. Thereupon the company agreed that if the court make no order in pursuance of the motion, it would keep an accurate account of the sums collected in excess of the rates fixed in the ordinance, and would, on the final hearing, pay the amounts into court for distribution among those entitled thereto, provided the ordinance was not declared to be confiscatory. In pursuance of the agreement the court refrained from making the order prayed for, and allowed the restraining order to remain in force.

An appeal to this court was taken by the city from the decree of perpetual injunction, and the decree was reversed. 225 U.S. 430, 56 L. ed. 1151, 32 Sup. Ct. Rep. 741. This court reviewed the evidence upon which the circuit court decided that the rates were confiscatory, and said:

'We express no opinion whether to cut this telephone company down to 6 per cent by legislation would or would not be confiscatory. But when it is remembered what clear evidence the court requires before it declares legislation otherwise valid void on this ground, and when it is considered how speculative every figure is that we have set down with delusive exactness, we are of opinion that the result is too near the dividing line not to make actual experiment necessary. The master thought that the probable net income for the year that would suffer the greatest decrease would be 8.60 per cent on the values estimated by him. The judge, on assumptions to which we have stated our disagreement, makes the present earnings 5-10.17 per cent, with a reduction by the ordinance to 3-6.17 per cent. The whole question is too much in the air for us to feel authorized to let the injunction stand.

'Decree reversed without prejudice.'

A mandate was issued, the material parts of which are as follows:

'On consideration whereof, it is now here ordered, adjudged, and decreed by this court that the decree of the siad circuit court in this cause be, and the same is hereby, reversed with costs, without prejudice; and that the said defendant, city of Louisville, recover against the said complainant, $3,945.65, for its costs herein expended, and have execution therefor.

'And it is further ordered that this cause be, and the same is hereby, remanded to the district court of the United States for the western district of Kentucky for further proceedings not inconsistent with the opinion of this court.'

On the return of the case to the district court, as successor of the circuit court, in obedience to the mandate, the original decree was set aside and the case restored to the docket. Subsequently, on motion of the city, the court appointed a special master to take proof of and report the amount, with interest, collected by the company in excess of the rates fixed by the ordinance. Power was given to the master to subpoena witnesses and examine the books and records of the company. A motion of the city to require the company to pay the amount into the court was postponed. A motion of A. Englehard & Sons Company for leave to file a bill of intervention was set for hearing November 12, 1912. The master proceeded to the execution of his duties under the order, but had not completed them at the time the petition herein was filed. The sums in excess of the rate will aggregate more than $100,000.

On March 10, 1913, the district court (it is alleged, without any motion being made or any further steps taken by any party to the cause, on its own initiative, entered a supplemental order of reference wherein the clerk of the court was appointed a special master to ascertain and report the gross earnings of the company after the rate ordinance went into effect, the gross expenses incurred in operating its property, and the net income derived by the company from operating its plant since the ordinance was put into effect.

The court justified this order by its interpretation of the opinion and mandate of this court. The city protested against the entry of the order, denying that it was a proper interpretation of the opinion of this court, and insisted that the district court, in response to the bill of complaint, should 'adjudge that the ordinance in question was not confiscatory, and that the complainant take nothing by its bill.' And it is now alleged that the cause is at an end so far as the rights of the company to have the ordinance adjudged confiscatory and void are concerned, and that the district court has no further jurisdiction; that the trial of the issue cost the city $20,000, and a new trial will cost it the same sum, and that no appeal can be taken until such trial be had; and, having no adequate remedy but mandamus, the petitioner prays that one issue to require the judge to vacate his order and to desist from further trying the issue.

It is alleged that the special master, who was appointed to ascertain the amounts collected by the company, is ready to make his report, and will make it in a short time.

It is further alleged the amounts collected in excess of the ordinance are a trust fund held by it for the benefit of the patrons of the company as their rights may appear, and that they are entitled to have restitution made to them by the district court, and that therefore the litigation between the company and the city should not be dismissed absolutely, but should be retained on the docket for the purpose of having collected and distributed the excessive collections. And this relief is prayed in addition to the mandamus.

Due return to the rule was made. It is, in effect, that the court considered the opinion and decree of this court permitted a discretion to retain the case for an actual experiment of the rates, and, thus considering it, made the order of March 10, 1913.

We think the discretion was properly exercised. The terms of the mandate permitted further proceedings, and it is well to recall what had been done. The decree of this court was rendered June 7, 1912. The Telephone Company put the ordinance rates into effect July 1, 1912. On motion of the city a special master was appointed to take proof and report the amount collected by the company between the latter date and March 8, 1909, and subsequently, after an interchange of views between court and counsel, the order of March 10, 1913, was made. It will be observed, therefore, that an actual experiment of the rates had been voluntarily undertaken and had been in effect for more than eight months before the order under review was entered, and the court conceived that observation of the experiment might secure greater accuracy and confidence in the result, and, besides, inform the court of matters as they progressed.

We repeat, we think the court did not exceed the discretion permitted, and the rule is discharged.