United States v. Joint-Traffic Association.

The bill was filed in this case in the circuit court of the United States for the Southern District of New York for the purpose of obtaining an adjudication that an agreement entered into between some 31 different railroad companies was illegal, and enjoining its further execution.

These railroad companies formed most (but not all) of the lines engaged in the business of railroad transportation between Chicago and the Atlantic coast, and the object of the agreement, as expressed in its preamble, was to form an association of railroad companies 'to aid in fulfilling the purpose of the interstate commerce act, to co-operate with each other and adjacent transportation associations to establish and maintain reasonable and just rates, fares, rules, and regulations on state and interstate traffic, to prevent unjust discrimination, and to secure the reduction and concentration of agencies, and the introduction of economies in the conduct of the freight and passenger service.' To accomplish these purposes the railroad companies adopted articles of association, by which they agreed that the affairs of the association should be administered by several different boards, and that it should have jurisdiction over all competitive traffic (with certain exceptions therein noted) which passed through the western termini of the trunk lines (naming them), and such other points as might be thereafter designated by the managers. The duly published schedules of rates, fares, and charges, and the rules applicable thereto, which were in force at the time of the execution of the agreement, and authorized by the different companies and filed with the interstate commerce commission, were reaffirmed by the companies composing the association. From time to time the managers were to recommend such changes in the rates, fares, charges, and rules as might be reasonable and just, and necessary for governing the traffic covered by the agreement and for protecting the interests of the parties to the agreement; and a failure to observe such recommendations by any of the parties to the agreement was to be deemed a violation of the agreement. No company which was a party to it was permitted in any way to deviate from or to change the rates, fares, charges, or rules set forth in the agreement or recommended by the managers, except by a resolution of the board of directors of the company; and its action was not to affect the rates, etc., disapproved, except to the extent of its interest therein over its own road. A copy of such resolution of the board of any company authorizing a change of rates or fares, etc., was to be immediately forwarded by the company making the same to the managers of the association, and the change was not to become effective until 30 days after the receipt of such resolution by the managers. Upon the receipt of such resolution the managers were 'to act promptly upon the same, for the protection of the parties hereto.' It was further stated in the agreement that 'the powers conferred upon the managers shall be so construed and exercised as not to permit violation of the interstate commerce act, or any other law applicable to the premises, or any provision of the charters or the laws applicable to any of the companies parties hereto, and the managers shall co-operate with the interstate commerce commission to secure stability and uniformity in the rates, fares, charges, and rules established thereunder.'

One provision of the agreement was to the effect that the managers were charged with the duty of securing to each company which was a party to the agreement equitable proportions of the competitive traffic covered by the agreement, so far as it could be legally done. The managers were given power to decide and enforce the course which should be pursued with connecting companies, not parties to the agreement, which might decline or fail to observe the rates, etc., established under it; and the interests of parties injuriously affected by such action of the managers were to be accorded reasonable protection in so far as the managers could reasonably do so. When, in the judgment of the managers, it was necessary to the purposes of the agreement, they might determine the divisions of rates and fares between connecting companies who were parties to the agreement and connections not parties thereto, keeping in view uniformity and the equities involved.

Joint freight and passenger agencies might be organized by the managers, and, if established, were to be so arranged as to give proper representation to each company party to the agreement. Soliciting or contracting passenger or freight agencies were not to be maintained by the companies, except with the approval of the managers; and no one that the managers decided to be objectionable was to be employed or continued in an agency. The officials and employes of any of the companies could be examined, and an investigation made, when, in the judgment of the managers, their information or any complaint might so warrant. Any violation of the agreement was to be followed by a forfeiture of the offending company in a sum to be determined by the managers, which should not exceed $5,000, or, if the gross receipts of the transaction which violated the agreement should exceed $5,000, the offending party should, in the discretion of the managers, forfeit a sum not exceeding such gross receipts. The sums thus collected were to go to the payment of the expenses of the association, except the offending company should not participate in the application of its own forfeiture.

The agreement also provided for assessments upon the companies in order to pay the expenses of the association, and also for the appointment of commissioners and arbitrators, who were to decide matters coming before them. No one retiring from the agreement before the time fixed for its final completion, except by the unanimous consent of the parties, should be entitled to any refund from the residue of the deposits remaining at the close of the agreement.

It was to take effect January 1, 1896, and to continue in existence 5 years, after which any company could retire upon giving 90 days' written notice of its desire to do so.

The bill filed by the government contained allegations showing that all the defendant railroad companies were common carriers duly incorporated by the several states through which they passed, and that they were engaged as such carriers in the transportation of freight and passengers, separately or in connection with each other, in trade and commerce continuously carried on among the several states of the Union and between the several states and the territories thereof. The bill also charged that the defendants, unlawfully intending to restrain commerce among the several states, and to prevent competition among the railroads named in respect to all their interstate commerce, entered into the agreement referred to above; and it charged that the agreement was an unlawful one, and a combination and conspiracy, and that it was entered into in order to terminate all sompetition among the parties to is for freight and passenger traffic, and that the agreement unlawfully restrained trade and commerce among the several states and territories of the United States, and unlawfully attempted to monopolize a part of such interstate trade and commerce. The bill ended with the allegation that the companies were preparing to put into full operation all the provisions of the agreement, and the relief sought was a judgment declaring the agreement void, and enjoining the parties from operating their roads under the same. The defendant the Joint-Traffic Association filed an answer (the other defendants substantially adopting it), which admitted the making of the contract, but denied its invalidity, or that it is or was intended to be an unlawful contract, combination, or conspiracy to restrain trade or commerce, or that it was an attempt to monopolize the same, or that it was intended to restrain or prevent legitimate competition among the railroads which were parties to the agreement. The answer, in brief, denied all allegations of unlawful acts or of an unlawful intent, unless the making of the agreement itself was an unlawful act. The answer then set forth in quite lengthy terms a general history of the condition of the railroad traffic among the various railroads which were parties to the agreement at the time it was entered into, and alleged the necessity of some such agreement in order to the harmonious operation of the different roads, and that it was necessary as well to the public as to the railroads themselves.

The case came on for hearing of bill and answer, and the circuit court, after a hearing, dismissed the bill(76 Fed. 895), and upon appeal its decree was affirmed by the circuit court of appeals for the Second circuit, and the government has appealed here.

Sol. Gen. Richards, for appellant.

James C. Carter George F. Edmunds, and E. J. Phelps, for appellees.

[Argument of Counsel from pages 509-558 intentionally omitted]

Mr. Justice PECKHAM, after stating the facts, delivered the opinion of the court.