Louisville Nashville Railroad Company v. Eubank/Opinion of the Court

The writ of error in this case does not bring up for review any judgment of the court of appeals of the state of Kentucky, the highest court of that state. It appears that the circuit court of that state is the highest court in which a decision of the case could be had, presumably on account of the amount of the judgment. There was no opinion delivered by the judge holding the court in which the case was tried, and as the case did not go to the highest court of that state, we are without the benefit of any written opinion of the courts of Kentucky in regard to the question involved. We have already held, in the case of Louisville & N. R. Co. v. Kentucky, 183 U.S. 503, ante, 95, 22 Sup. Ct. Rep. 95, that the section of the Kentucky Constitution above set forth, as applied to places all of which are within the state, violates no provision of the Federal Constitution.

The effect of the decision by the state court now under review is to hold that the provision of § 218 of the state Constitution is not confined to a case where the long and short hauls are both within the state of Kentucky, but that it extends to and embraces a long haul from a place outside of to one within the state, and a shorter haul between points on the same line and in the same direction, both of which are within the state; and the question is whether the provision of that Constitution as thus construed is or is not a violation of the commerce clause of the Constitution of the United States.

It would seem that the foundation upon which the validity of the constitutional provision is based is the theory that it operates solely upon the rate within the state, making that rate unlawful if it exceed the rate for the longer distance over the same line in the same direction, though, as in this case, the longer distance is from Nashville, Tennessee, to Louisville, Kentucky. The claim must be that the only effect of the provision is to regulate the rate between points within the state, and that it has no direct effect upon, nor does it in any degree regulate or affect, the rate between points outside and those points which are within the state. The contention is that the state does not prescribe or regulate the rates outside of its borders; that the company may announce and enforce any rate it pleases regarding interstate commerce. It simply directs that between points within the state of Kentucky the charge shall not be greater for a shorter haul than for a longer haul, even though such longer haul may be between a point outside and one inside of the state; that this does not constitute an interference with or a regulation by the state of interstate commerce, and hence the provision is valid.

If this contention were correct, and the constitutional provision as construed by the state court did not by its enforcement regulate or immediately and directly influence and affect the interstate commerce of defendant, either as to amount or rates, the provision in question would be valid. But is it correct? And is there no such immediate influence upon or regulation of the interstate commerce of the defendant?

By the demurrer and the motion for judgment on the pleadings it is admitted that the rates from all points on the defendant's road within the state of Kentucky to Louisville for the transportation of tobacco are not too high, but are in fact just and reasonable in themselves, and to that extent the general obligation of a carrier to make charges that are just and reasonable is fulfilled. There is also a rate for the transportation of tobacco from Nashville to Louisville of 12 cents per 100 pounds, and that rate is arrived at because of the existence of water competition between the two points which absolutely prevents the company from making a greater charge, for if it did it would get no business; and yet on account of the fact that trains are to be run in any event and expenses incurred by reason of the operation of the road, it pays the company to take the tobacco at the rate named, even though it is below what would otherwise be a fair and reasonable compensation for the transportation. It follows, therefore, and the fact is averred, that although under the circumstances it pays the company to transport the tobacco from Louisville at the rate of 12 cents per 100 pounds, yet if it were confronted with the alternative of either giving up such transportation (which a charge of 25 cents per 100 pounds would necessarily result in) or of reducing the charge from Franklin to Louisville to 12 cents per 100 pounds for tobacco, it would be compelled to give up the transportation from Nashville rather than reduce the charge from Franklin to Louisville. If the state of Kentucky has the right to base its provision for the rate of a short haul within its own borders by comparison with the rate for a longer haul partly within and partly without its own borders, notwithstanding the direct effect of a limitation arrived at by such comparison may be the regulation or even the suppression of the interstate commerce of the carrier, then this provision is valid; otherwise it would seem to be the reverse.

That the railroad commission is authorized upon application to permit the company to charge less for longer than for shorter distances is immaterial. If the provision in question, if enforced, does directly affect interstate commerce, its invalidity is not cured by the fact that if the railroad commission should choose, it might permit the interstate charges to remain. In either case the interference is illegal.

The result of the construction of this provision by the court below is in effect to prohibit the carrier from making a less charge for the transportation from Nashville to Louisville than from Franklin to Louisville, or else to make a charge that will prevent its doing any business between the states in the carrying of tobacco. The necessary result of the provision under the circumstances set up in the answer directly affects interstate rates, or, in other words, directly affects interstate commerce, for it directly affects commerce between Nashville and Louisville. The fact is not altered by putting the proposition in another form, and saying that the constitutional provision only prevents the carrier from charging a greater sum for the shorter distance from Franklin to Louisville, both within the state, unless the consent of the railroad commission is obtained, because in either event the charge from Nashville to Louisville enters into and forms a part of the real subject-matter of the provision, the greater sum for the shorter distance within the state being compared with the lesser sum for the longer distance without the state; and the prohibition is absolute, unless the consent of the commission is obtained, from charging any more for the shorter distance within the state than for the longer distance partly within and partly without the state. And in this case, in order to maintain its state rate, it must fix its interestate rate at an amount which prohibits its doing interstate business.

We fully recognize the rule that the effect of a state constitutional provision, or of any state legislation upon interstate commerce, must be direct, and not merely incidental and unimportant; but it seems to us that where the necessary result of enforcing the provision may be to limit or prohibit the transportation or articles from without the state to a point within it, or from a point within to a point without the state, interstate commerce is thereby affected, and may be thereby to a certain extent directly regulated; and in that event the effect of the provision is direct and important, and not a mere incident.

Although not exactly in point, yet the case of Wabash, St. L. & P. R. Co. v. Illinois, 118 U.S. 557, 30 L. ed. 244, 1 Inters. Com. Rep. 31, 7 Sup. Ct. Rep. 4, is somewhat analogous in principle. In that case chapter 114 of the Revised Statutes of Illinois, § 126, came under consideration. That section enacted that if any railroad corporation should charge for the transportation of freight, etc., upon its railroad, of any distance within the state, the same or a greater amount of toll or compensation than is at the same time charged collected, or received for the transportation in the same direction of any passenger, etc., over a greater distance of the same road, such charges should be deemed prima facie evidence of unjust discrimination prohibited by the act, and penalties were provided for its violation.

An action was brought to recover for a violation of the provisions of the act, and in the declaration it was alleged that the company had charged Elder & McKinney for transporting goods from Peoria in the state of Illinois to New York city at the rate of 15 cents per 100 pounds, and on the same day the company charged Bailey & Swannell for transporting another carload of the same kind of goods from Gilman in the state of Illinois to the city of New York at the rate of 25 cents per 100 pounds, although the carload transported for Elder & McKinney from Peoria was carried 86 miles further in the state of Illinois than the other carload of the same weight; and it was claimed that as the freight was of the same class in both instances, and carried over the same route, except as to the difference of distance, a discrimination against Bailey & Swannell was made in the charges against them, as compared with those given to Elder & McKinney, and hence suit was brought. Mr. Justice Miller delivered the opinion of this court, in which he expressed some doubt whether the statute of Illinois had been correctly construed by the court below, yet as that court had given an interpretation to it which made it apply to commerce among the states, although the contract was made within the state of Illinois and a part of its performance was within the same state, this court was held to be bound as to the construction given to the act by the state court. What that construction was is stated by the court itself. It said:

'We see no reason to depart from the conclusion reached in this case when it was here before. See People v. Wabash, St. L. & P. R. Co. 104 Ill. 476. But to avoid misapprehension we deem it advisable to state explicitly that we disclaim any idea that Illinois has authority to regulate commerce in any other state. We understand and simply hold that, in the absence of anything showing to the contrary, a single and entire contract to carry for a gross sum from Gilman, in this state, to the city of New York, implies necessarily that that sum is charged proportionately for the carriage on every part of that distance; and that a single and entire contract to carry for a gross sum from Peoria, in this state, to the city of New York, implies the same thing; and that, therefore, when it is shown that there is charged for carriage upon the same line less from Peoria to New York (the greater distance) than from Gilman to New York (the less distance), and nothing is shown to the effect that such inequality in charge is all for carriage entirely beyond the limits of this state, a prima facie case is made out of unjust discrimination under our statute occurring within this state. We hold that the excess in the charge for the less distance presumably affects every part of the line of carriage between Gilman and the state line proportionately with the balance of the line. The judgment is affirmed.' Wabash, St. L. & P. R. Co. v. Illinois, 105 Ill. 236.

In regard to this question, Mr. Justice Miller, in the course of his opinion, said:

'It becomes, therefore, necessary to inquire whether the charge exacted from the shippers in this case was a charge for interstate transportation, or was susceptible of a division which would allow so much of it to attach to commerce strictly within the state, and so much more to commerce in other states. The transportation, which is the subject-matter of the contract, being the point on which the decision of the case must rest, was it a transportation limited to the state of Illinois, or was it a transportation covering all the lines between Gilman in the one case and Peoria in the other in the state of Illinois, and the city of New York in the state of New York?'

The court held it was the latter, and said, after examining the other cases (page 575, L. ed. p. 250, Inters. Com. Rep. p. 37, Sup. Ct. Rep. p. 12):

'We must therefore hold that it is not, and never has been, the deliberate opinion of a majority of this court that a statute of a state which attempts to regulate the fares and charges by railroad companies within its limits, for a transportation which constitutes a part of commerce among the states, is a valid law.' In regard to the effect of the Illinois statute upon interstate commerce, it was further said:

'Let us see precisely what is the degree of interference with transportation of property or persons from one state to another which this statute proposes. A citizen of New York has goods which he desires to have transported by the railroad companies from that city to the interior of the state of Illinois. A continuous line of rail over which a car loaded with these goods can be carried, and is carried habitually, connects the place of shipment with the place of delivery. He undertakes to make a contract with a person engaged in the carrying business at the end of this route from whence the goods are to start, and he is told by the carrier, 'I am free to make a fair and reasonable contract for this carriage to the line of the state of Illinois, but when the car which carries these goods is to cross the line of that state, pursuing at the same time this continuous track, I am met by a law of Illinois which forbids me to make a free contract concerning this transportation within that state, and subjects me to certain rules by which I am to be governed as to the charges which the same railroad company in Illinois may make, or has made, with reference to other persons and other places of delivery.' So that, while that carrier might be willing to carry these goods from the city of New York to the city of Peoria at the rate of 15 cents per 100 pounds, he is not permitted to do so because the Illinois railroad company has already charged at the rate of 25 cents per 100 pounds for carriage to Gilman, in Illinois, which is 86 miles shorter than the distance to Peoria.

'So, also, in the present case, the owner of corn, the principal product of the country, desiring to transport it from Peoria, in Illinois, to New York, finds a railroad company willing to do this at the rate of 15 cents per 100 pounds for a carload, but is compelled to pay at the rate of 25 cents per 100 pounds, because the railroad company has received from a person residing at Gilman 25 cents per 100 pounds for the transportation of a carload of the same class of freight over the same line of road from Gilman to New York. This is the result of the statute of Illinois, in its endeavor to prevent unjust discrimination, as construed by the supreme court of that state. The effect of it is that whatever may be the rate of transportation per mile charged by the railroad company from Gilman to Sheldon, a distance of 23 miles, in which the loading and the unloading of the freight is the largest expense incurred by the railroad company, the same rate per mile must be charged from Peoria to the city of New York.'

Is not this reasoning applicable here? The Nashville owner of tobacco wishes to have it transported to Louisville, and asks the defendant to carry it. It responds that it would like to carry it at the rate of 12 cents per 100 pounds, but that it cannot do so because it has established a reasonable rate between points both of which are in Kentucky, and which rates are more than 12 cents, and that if it were to carry at the rate of 12 cents from Nashville to Louisville it would be necessary, on account of the law of Kentucky, to carry at the same rate all tobacco between all points in that state, which would entail a loss in the business between those points which the company would not be justified in sustaining; therefore the transportation is declined, for it cannot get more than 12 cents from the Nashville man. Is it an answer to this statement to say that the company can get this business by lowering its rates within the state to the same rate as charged from Nashville? Is it bound, in order to secure this interstate commerce, to lower its rates all through the state? If it be, is not the law which accomplishes this result a direct interference by the state with interstate commerce? And if it do not lower its state rates, and in consequence must raise its interstate rates in order to make its state rates valid, and thus must lose to an appreciable and important extent the interstate commerce, is not a law from which such necessary and direct consequences result a regulation in effect by the state, of that commerce which ought to be free therefrom?

In Hall v. DeCuir, 95 U.S. 485, 24 L. ed. 547, it was said: 'But we think it may safely be said that state legislation which seeks to impose a direct burden upon interstate commerce, or to interfere directly with its freedom, does encroach upon the exclusive power of Congress.' The vice of the provision lies in the regulation of the rates between points wholly within the state, by the rates which obtain between points outside of and those which are within the state.

The facts in this case have been thus fully referred to for the purpose of showing how directly and also how injuriously such a provision might affect interstate commerce. Other cases may be supposed where the effect might not be so oppressive. But the fact which vitiates the provision is that it compels the carrier to regulate, adjust, or fix his interstate rates with some reference at least to his rates within the state, thus enabling the state by constitutional provision or by legislation to directly affect, and in that way to regulate, to some extent the interstate commerce of the carrier, which power of regulation the Constitution of the United States gives to the Federal Congress.

It has been urged that, assuming Congress to have the power to fix interstate rates, if that body should prescribe the interstate rate for the transportation of commodities (tobacco, for instance) from Nashville to Louisville, for a railroad carrier, that the state might then fix the local rates by that standard, and if so, why could it not do the same thing when the carrier itself fixes its interstate rate? In the case supposed, the rate is fixed and the interstate commerce regulated by the body which has the power to impose such rate on the carrier and to regulate its interstate commerce. The state might, in the case supposed, enact that the road should not charge more, or at a greater rate, for a short haul within the state, than Congress provided for the long interstate haul. The reason is that Congress in the case presented is assumed to have the power to direct and regulate the interstate rate, and having that power and exercising it, the state could then provide that its internal charge should not exceed that rate, and there would be in that case no interference with or regulation of interstate commerce directly or indirectly by the state, its action could have no possible effect upon the interstate rate, as the amount of the charge would be regulated by the body with which the right of regulation exists.

It seems also to be thought that there is no regulation of commerce, provided it is not interfered with or regulated in all ways by which transportation of commodities between interstate localities may be accomplished, that if the commodity (tobacco in this case) can be transported by any other means or route, or by any other individual or corporation, than the one affected by the regulation, commerce is not regulated within the constitutional meaning. On the contrary, it seems quite clear that any law which in its direct result regulates the interstate transportation of a single individual carrier, or company of carriers, violates the provision in question; that it is no answer to say the commodity can still be transported by another carrier or by water instead or rail, so long as the direct effect of the state legislation is to regulate the transportation of the commodity by a particular means, by rail instead of by water, or by a particular individual or company.

It is also argued that if Congress should enact that an interstate rate shall be the sum of the local rates prescribed by the several states for the parts in the line within its borders, it could not correctly be maintained that such enactment would amount to an interference with the power of the state over local rates, and the mere fact that Congress accepted the local rates and made them the basis of an interstate rate could not be held to be an interference by Congress with local commerce; and if not, how can it be held an interference by the state when it recognizes existing interstate rates as a basis for its legislation concerning local rates? We think there is no analogy between the two cases.

In the case supposed the states have fixed the local rates within their respective borders, and the action of Congress in fixing their sum as the rate for interstate commerce does not in any way regulate or interfere with the respective state rates already, or from time to time, adopted by the state. In thus fixing the interstate rate Congress may most seriously interfere with or regulate interstate commerce, but that it has the right to do; and on the other hand the state by such a statute regulates the local rate, but that it has the right to do.

Congress does not directly or indirectly interfere with local rates by adopting their sum as the interstate rate.

In the case at bar the state claims only to regulate its local rates by the standard or the interstate rate, and says the former shall be no higher than the latter, but the direct effect of that provision is, as we have seen, to regulate the interstate rate, for to do any interstate business at the local rate is impossible, and if so, it must give up its interstate business or else reduce the local rate in proportion. That very result is a hindrance to an interference with, and a regulation of, commerce between the states, carried on, though it may be, by only a single company.

We are of opinion that as construed by the state court, and so far as it is made applicable to or affects interstate commerce, the 218th section of the Constitution of Kentucky is invalid, and the judgment of the Circuit Court of Simpson County, Kentucky, is therefore reversed, and the case remanded to that court for such further proceedings therein as shall not be inconsistent with this opinion.

And it is so ordered.

Mr. Justice Brewer, with whom concurred Mr. Justice Gray, dissenting: