United States v. American Railway Express Company/Opinion of the Court

Transportation Act 1920, c. 91, § 418, 41 Stat. 456, 485, amending Interstate Commerce Act, § 15, par. 3 (Comp. St. Ann. Supp. 1923, § 8583) directs that the Commission 'shall whenever deemed by it necessary or desirable in the public interest * *  * establish through routes.' Paragraph 4 of that section provides:

'In establishing any such through route the Commission shall     not *  *  * require any carrier by railroad, without its      consent, to embrace in such route substantially less than the      entire length of its railroad and of any intermediate      railroad operated in conjunction and under a common      management or control therewith, which lies between the      termini of such proposed through route, unless such inclusion      of lines would make the through route unreasonably long as      compared with another practicable through route which could      otherwise be established.'

That is, the Commission shall not compel the carrier to short haul its traffic. The main question for decision is whether the American Railway Express Company, which uses the railroads for its transportation service as described in Wells Fargo & Co. v. Taylor, 254 U.S. 175, 177, 178, 41 Sup. Ct. 93, 65 L. Ed. 205, is itself a 'carrier by railroad' within the meaning of paragraph 4.

The American was organized, in June, 1918, as a war measure, to take over the express business done on the railroads which had come under federal control. After the government relinquished such control, this consolidation of the transportation business and property of the express companies was approved by the Commission, under paragraph 7 of section 5 of the Interstate Commerce Act, as amended by Transportation Act 1920 (Comp. St. Ann. Supp. 1923, § 8567). Consolidation of Express Co., 59 Interst. Com. Com'n R. 459. Uniform contracts were entered into by the American with substantially all the railroads of the United States (Express Contract, 1920, 59 Interst. Com. Com'n R. 518); and it enjoyed a practical monopoly of the railroad express business until May 1, 1921. On that day the Southeastern Express Company entered the field, by utilizing for that purpose the Southern Railway System and affiliated lines, in all about 10,000 miles of railroad. Many cities and towns in the Southeastern States are now served both by the American and by the Southeastern. These are called common points. A larger number in those states are served only by one of the companies. These are called exclusive points. Except in the Southeastern States, practically all railroad express offices in the United States are exclusive points of the American.

The Southeastern sought to have the American agree with it to establish through routes and joint rates between all points served by them respectively, whether common points or exclusive, and to permit the shipper to give the routing instruction. The American declined to do this, limiting its concurrence to routes between the exclusive points of one company and the exclusive points of the other. In this way it attempted to secure to itself either the entire haul or the longest possible haul. Thereupon the Southeastern instituted, before the Commission, proceedings against the American, praying that the Commission establish the through routes and joint rates sought. Another proceeding, seeking in part like relief, was brought against the two express companies by shippers' associations. The cases were consolidated. The Commission ordered the establishment of some of the through routes prayed for, finding that, in order to secure adequate service, it was necessary and desirable in the public interest that competitive joint routes be established, although the American had reasonable routes from origin to destination, or from origin to a point nearer destination than the joint through routes established. Southeastern Express Co. v. American Railway Express Co., 78 Interst. Com. Com'n R. 126; Id., 81 Interst. Com. Com'n R. 247.

Before the effective date of the order, this suit to enjoin its enforcement was brought by the American against the United States in the federal court for Northern Georgia. The Seaboard Air Line Railway, one of the many railroads with which the American has a contract, intervened as plaintiff. The Commission, the Southeastern, the Southern Traffic League, and other shippers' associations intervened as defendants. The case was heard on application for a temporary injunction by three judges, pursuant to the Act of October 22, 1913, c. 32, 38 Stat. 208, 219, 220; the order was held void on the ground that the American is a 'carrier by railroad,' within the meaning of paragraph 4, and that therefore the Commission was, on the facts found, without power to make the order, and a temporary injunction was granted, Circuit Judge Bryan dissenting. 293 Fed. 31. The case is here on separate appeals from that decision by the several respondents. The three appeals present the same questions of law.

First. The power to establish through routes is conferred broadly as to all carriers by paragraph 3 of section 15. The limitation upon the power in respect to a 'carrier by railroad' is imposed by paragraph 4. The language which embodies this limitation is not appropriate to describe the situation of an express company. It is that the Commission may not compel the carrier to embrace in the through route 'substantially less than the entire length of its railroad and of any intermediate railroad operated in conjunction and under a common management or control therewith, which lies between the termini of such proposed through route, unless * *  * .' An express company has no railroad. It is served by many railroads, as it is served by water lines, by motor trucks, and by horses and wagons. Moreover, the language of paragraph 4 describes aptly a single railroad system, but not a system of express routes extending over many separate railroad systems. Practically every express company has had, as the American has now, routes over many separate railroad system. However numerous the railroads used, all the routes are parts of a single express system. If an express company is a 'carrier by railroad,' the 'entire length of its railroad' must, as the American argues, be construed to mean the entire length of all the lines of the railroads within the United States over which it has routes. Such a construction would, if adopted, tend to give permanency to an existing monopoly although it failed to give adequate service. For it would deprive the Commission of power to foster the competition found necessary to secure such service. There is nothing in Transportation Act 1920 which evinces in intention on the part of Congress to accomplish such a purpose.

The natural meaning of the term 'carrier by railroad' is one who operates a railroad, not one whose shipments are carried by a railroad. The term is not found in the original Act to Regulate Commerce, which was applicable only to carriers 'engaged in the transportation of passengers or property wholly by railroad, or partly by railroad and partly by water.' When the amendment of 1906 extended the Commission's jurisdiction to express companies, sleeping car companies and pipe lines, and that of 1910 extended its jurisdiction to telegraph, telephone and cable companies, occasion for differentiating between carriers arose, as some of the provisions of the Act to Regulate Commerce were obviously not applicable to all the classes of carriers which had been made subject to regulation. But to what extent its provisions should be applied to any class was left, by those amendments, largely to construction. In Transportation Act 1920 the phrase 'carrier by railroad' seems to have been systematically employed to designate sections of the Interstate Commerce Act which apply only to carriers operating railroads. The term was introduced by it in paragraph 4 in place of the word 'company' which had been used in the amendment of 1910. The purpose of the substitution was to make it clearer that the prohibition against compelling a carrier to short-haul its traffic was limited to railroads. The same phrase had been adopted in the federal Employers' Liability Act of April 22, 1908, c. 149, §§ 1, 2, and 3, 35 Stat. 65, 66 (Comp. St. §§ 8657-8659). As used in that act, it was held in Wells Fargo & Co. v. Taylor, 254 U.S. 175, 187, 188, 41 Sup. Ct. 93, 65 L. Ed. 205, not to include independent express companies doing business over railroads. In section 15(4) of Transportation Act 1920, it should be given the same meaning. Compare United States ex rel. Cnicago, New York & Boston Refrigerator Co. v. Interstate Commerce Commission (decided May 26, 1924) 265 U.S. 292, 44 Sup. Ct. 558, 68 L. Ed. --.

Second. The American claims that the order is void, even if the limitation contained in paragraph 4 is not applicable to express companies. One contention is that the order exceeds the power conferred upon the Commission, because it is, as a matter of law, unreasonable to establish a second through route merely for the sake of securing competition in service. Another contention is that the order exceeds the power conferred upon the Commission because it purports to authorize the shipper to give routing instructions. The further claim is made that the American has, as a matter of law, the right to carry, over its own lines, traffic which it originates, as long as this can be done without unreasonably delaying the delivery at destination; that this right to haul its traffic to destination is property protected by the Fifth Amendment; that to authorize the shipper to give routing instructions takes this property; and that the provision for making an equitable division of the joint rate does not afford the legal compensation for the taking to which it is entitled.

The Southeastern insists that these claims, although adequately presented in the bill of complaint, cannot be availed of in this court, because they were overruled by the District Court and the American did not take a cross-appeal. The objection is unsound. It is true that a party who does not appeal from a final decree of the trial court cannot be heard in opposition thereto when the case is brought there by the appeal of the adverse party. In other words, the appellee may not attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary, whether what he seeks is to correct an error or to supplement the decree with respect to a matter not dealt with below. But it is likewise settled that the appellee may, without taking a cross-appeal, urge in support of a decree any matter appearing in the record, although his argument may involve an attack upon the reasoning of the lower court or an insistence upon matter overlooked or ignored by it. By the claims now in question, the American does not attack, in any respect, the decree entered below. It merely asserts additional grounds why the decree should be affirmed. These grounds will be examined.

The competitive route ordered must, of course, be reasonable in character from the standpoint of transportation; and there must be reasonable cause for establishing it. In this case, no objection is made to the character of the routest ordered. The objection is that, as a matter of law, the competitive routes cannot be justified because the time required for delivery over the existing routes of the American is as short as it would be under the competitive joint routes. To this objection the action taken by Congress supplies an answer. Under the act of 1906, the Commission could act only if no 'reasonable and satisfactory through route exists.' In Interstate Commerce Commission v. Northern Pacific Ry. Co., 216 U.S. 538, 30 Sup. Ct. 417, 54 L. Ed. 608, this court set aside an order to establish a second through route because it deemed the existing one adequate. Thereupon, Congress, by the amendment of 1910, struck out the proviso and empowered the Commission to establish through routes 'whenever deemed by it to be necessary or desirable in the public interest.' In transportation, the quality of the service furnished may be as important to the shipper as the rate. The Commission found, in the proceeding under review, that the service of the American, in some instances, had been inadequate, and that, in 'considering competition, time is not the only important element. Conpetition tends to make each company improve its general treatment of the public, its practices, rules and regulations in regard to its methods of doing business.' It found, also, that the 'service at common points has improved since the formation of the Southeastern.' Its conclusion, that the establishment of the competitive routes was necessary and desirable in the public interest, is not shown to have been unreasonable.

The existence of a competitive route ordinarily implies an option in the shipper. To give him the privilege of directing the routing is a corollary of the establishment of competitive routes. Upon shippers of railroad freight this right was expressly conferred by Congress, in paragraph 8 of section 15, subject only 'to such reasonable exceptions and regulations' as the Commission may prescribe. The rights, in this respect, of shippers by express, were not dealt with in terms. The matter was, therefore, left subject to regulation by the Commission under general provisions of the act. Paragraph 3, which empowers the Commission to establish through routes, authorizes it, also, to fix 'the terms and conditions under which such through routes shall be operated.' Its order that the shipper by express may direct the routing is not unreasonable. As the American has no absolute right to retain traffic which it originates, and as the provision authorizing the shipper to direct the routing is reasonable, the order does not violate late any of its constitutional rights. We have no occasion to consider any of the other grounds urged in its support.

Reversed.