United States v. Louisiana & Pacific Railway Company (234 U.S. 1)

Statement by Mr. Justice Day:

[Syllabus from pages 1-3 intentionally omitted]

These are all appeals from decrees of the United States commerce court (209 Fed. 244), annulling orders of the Interstate Commerce Commission, refusing in whole or in part to compel certain common carriers which had filed schedules canceling former schedules covering through routes and joint rates with the Louisiana & Pacific Railway Company, the Woodworth & Louisiana Central Railway Company, the Mansfield Railway & Transportation Company, and the Victoria, Fisher, & Western Railroad Company, appellees, hereinafter referred to as the tap lines, to establish or re-establish through routes and joint rates and to grant allowances and divisions to the tap lines.

The Commission, after an extensive investigation of the tap lines in the lumber regions, particularly in the states of Arkansas, Missouri, Louisiana, and Texas, on April 23 and May 14, 1912, filed its report and supplementary report (23 Inters. Com. Rep. 277, 549). The report deals at some length with the manner in which logs and lumber are moved in that territory, and the practices attending such traffic. The Commission found the identification of the road with the industry, the necessity of incorporation to secure divisions and allowances, the great amount in the aggregate paid by the trunk lines to the tap lines, and the resulting discrimination, the fact that allowances were dependent upon the bargain the tap lines might exact from the trunk lines for a proportion of their traffic, and not upon the amount of service rendered, and the fact that most of the lumber mills were near public carriers, and that the tap lines would not be kept in operation if the mills were removed. General principles for determining the character of carriers were set forth, and the conclusion stated that the real relation of a tap line was a question to be decided upon the facts in each case.

The Commission entered upon a particular examination of the various lines under investigation, among others, the appellees in these appeals. It found:

The Louisiana & Pacific Railway Company, controlled by the R. A. Long interests, owning a controlling interest in the Hudson River Lumber Company, the King-Ryder Lumber Company, Longville Lumber Company, and the Calcasieu Long Leaf Lumber Company, consists of the following tracks, all of which were originally constructed as private logging roads: (1) A track from De Ridder Junction, Louisiana (all of the lines involved in these cases are within that state), to Bundicks, a distance of 8 miles. The mill of the Hudson River Lumber Company, in whose interest this track is operated, is located at De Ridder, within a few hundred feet of the trunk lines; Bundicks is apparently a logging camp with a company store. (2) A track from Lilly Junction to Walla, about 7 1/2 miles, the latter being a point in the woods where the King-Ryder Lumber Company has a commissary, and where is located a small independent yellow-pine mill, owned by the Bundick Creek Lumber Company. The mill of the King-Ryder Company is at Bon Ami, a town of 2,000, located on the Lake Charles & Northern Railroad Company, a short distance from and connected by it with Lilly Junction. (3) A track of 2 miles at Longville, a town of 2,000 people, where the Longville Lumber Company has its mill and a store, and where also are several independent stores. (4) A track of 9 miles from Fayette to Camp Curtis, a place of 200 population, where the Calcasieu Long Leaf Lumber Company has a store, its mill being at Lake Charles. (5) A track of 1 mile from Bridge Junction to Lake Charles station. The towns De Ridder, Bon Ami, Lilly Junction, Longville, Fayette, and Lake Charles are connected by the Lake Charles & Northern Railroad, a Southern Pacific Railway Company line, originally built by the Long interests as a part of the Louisiana & Pacific, and sold to the Lake Charles & Northern with the reservation of trackage rights advantageous to the Louisiana & Pacific, By means of this arrangement the Louisiana & Pacific connects with the Kansas City Southern and the Sante Fe at De Ridder, with the Frisco at Fulton (a station south of Fayette), and with the Southern Pacific, Iron Mountain, & Kansas City Southern at Lake Charles. Its equipment consists of 22 locomotives, 6 cabooses, 41 freight cars, and 270 logging cars, and a private car used by its officers, who are connected with the lumber companies, in traveling around the country. The lumber companies have many miles of unincorporated logging tracks connecting with the Louisiana & Pacific at various points. There are a number of other stations on the line, among them Bannister, where the Brown Lumber Company owns a small, independent mill.

The operation is this: The lumber companies load the logs and switch them over the logging spurs to connection with the tap line which hauls them to the mill, an average distance of 30 miles, for which no charge is made. The tap line switches the carloads of lumber from the mill at Lake Charles, a distance of three quarters of a mile, to the Southern Pacific; at De Ridder, only a few hundred feet to the trunk lines; from the Lake Charles mill to the Frisco, a distance of 18 miles; from the Bon Ami mill to the Southern Pacific at Lake Charles, a distance of 40 miles; and from the Longville mill to the Southern Pacific at Lake Charles, a distance of 24 miles,-the average haul for the controlling companies being nearly 20 miles. By written agreement 50 per cent of the lumber must be routed over the Frisco and 40 per cent over the Southern Pacific, but this is not always done. 243,122 tons of lumber, as against 8,819 tons of merchandise, were shipped in 1910, 98 per cent of the whole tonnage being supplied by the controlling interests. The passenger receipts for 1910 were $473.77. A logging train runs daily on each branch, and there is one 'mixed' train, loaded chiefly with logs and lumber, between Lake Charles and De Ridder. The allowances paid by the trunk lines range from 1 1/2 to 5 1/2c. per 100 pounds out of their earnings under the group-lumber rate. The operating revenue for the year ending June 30, 1910, was $220,985.94, with operating expenses of $145,433.69, and there was an accumulated surplus of $73,581.07 on that date.

The Commission found that no charge was made for hauling the logs to the mills by the tap line, and that for the short switching service allowances were made as above stated, and concluded that it regarded the whole arrangement as indefensible and unlawful, and saw no ground upon which any allowance might lawfully be made.

The Woodworth & Louisiana Central Railway Company and the Rapides Lumber Company, situated at Woodworth, are identical in interest. The mill is near the Iron Mountain, which has a spur track to the mill, and the tap line has a standard gauge track from the mill to La Moria, about 6 miles, where it connects with the Southern Pacific Railway, texas & Pacific Railway, and Chicago, Rock Island, & Pacific Railway, and a narrow-gauge track in the other direction for 18 miles, whence spur tracks go into the timber. The equipment consists of 1 standard-gauge locomotive, 5 narrow-gauge locomotives, and 2 standard and 9 narrow-gauge cars. The steel in the logging spurs and 4 of the narrow-gauge locomotives used by the lumber company on the spurs are owned by the tap line and leased to the lumber company; while the right of way for the narrow-gauge track is leased from the lumber company.

The tap line hauls the logs from its terminus to the mill without charge, where they are dumped by the trainmen into the mill pond. The carloads of lumber are switched by the tap line from the planing mill to the place where they are taken by the Iron Mountain, about 25 feet. About 95 per cent of the lumber goes through La Moria, being switched there by the tap line; the allowances from the Iron Mountain out of through rates being from 1 1/2 to 5 1/2c. per 100 pounds, while from the trunk lines at La Moria from 2 to 5 1/2c. There are no joint rates except on lumber. For the year ending June 30, 1910, there were 40,707 tons of freight handled for the lumber company and 2,100 tons of outside traffic. It has no passenger business. Its operations for that year showed a deficit, but there was a surplus from previous years of nearly $10,000. It files annual reports with the Commission.

The Mansfield Railway & Transportation Company and the Frost-Johnson Lumber Company are identical in interest. The tap line extends from Mansfield to a logging camp in the woods, known as Hunter, a distance of about 16 miles, and the line which was originally incorporated by the citizens of Mansfield in 1881, consisting of 2 miles of track from the town to a connection with the Texas & Pacific at Mansfield Junction. Later the Mansfield Company acquired the 2 mile track and equipment, and the interests controlling it purchased a large amount of timber lands near Mansfield at a point called Oak Hill, where a mill was built, and spur tracks were laid into the timber, which were later turned over to the Mansfield Company, with the free privilege reserved to the lumber company to operate logging trains between the timber and the mill, which operation is performed by a subsidiary company. The purchase price did not reflect the value of the reservation. There are about 25 miles of unincorporated logging tracks. The tap line also has a connection with the Kansas City Southern. It owns a locomotive, a passenger coach, and a box car.

The service performed by the tap line is switching cars between the mill and the Kansas City Southern, about 3/4 of a mile, although the mill is within 300 feet of the Kansas City Southern, and was formerly connected by a spur track which was abandoned and taken up, and to the Texas & Pacific, a distance of 2 1/2 miles. The tap line bears the expense of maintaining its tracks extending into the woods.

No other yellow-pine mills are served by the tap line, but there is a hardwood mill adjacent to the Frost-Johnson mill, obtaining a substantial portion of its logs from the latter company or subsidiaries, the price including delivery at the hardwood mill, the logs being hauled by the logging company under its trackage right. Some logs are also obtained from the Texas & Pacific, for the switching of which the hardwood mill pays the tap line $2.50 a car or less. The tap line maintains joint rates on hardwood as well as yellow pine.

Practically no traffic other than that in which the lumber company is interested moves over the track from Mansfield to Hunter, but a good deal of outside traffic moves over the original 2 miles from Mansfield to Mansfield Junction. 16,539 tons of miscellaneous freight were handled during the year ending June 30, 1910, most of which passed over the Mansfield Junction branch, and much of which was for the controlling interests or their employees; while during the same time 28,596 tons, of lumber were handled, 91.4 per cent of which was supplied by the lumber company. A daily train is operated by the tap line in each direction on regular schedule, handling passengers, mail, and express; but in 1910 the passenger revenues were only $1,209.76, while its freight revenues were $25,617.19.

The Commission noticed the abandonment of the 300-foot spur track, and then the payment of an allowance of 1 to 4c. per 100 pounds, and held that it was a mere manipulation of the situation in order to establish an unlawful relation; and also held that since the tap line crosses the right of way of the Texas & Pacific within a short distance, the allowance of a like amount by the Texas & Pacific for switching from the mill to Mansfield and down to the junction was unlawful.

The Victoria, Fisher, & Western Railroad Company and the Louisiana Long Leaf Lumber Company have the same stockholders and officers. The tap line extends from Victoria, where it connects with the Texas & Pacific, to Fisher, where it crosses the Kansas City Southern Railway, and then extends to Cain, in all about 31 miles. A part of the track was built some time ago, and was acquired by the lumber company in 1900. In 1902 the railroad company was incorporated and its stock exchanged as a stock dividend for the line. There are about 25 miles of logging spurs and side tracks. The equipment consists of 5 locomotives, 4 cabooses, 3 box cars, 1 flat car, and 105 logging cars. It does not operate any trains on regular schedule. There are two mills owned by the Lumber Company, one about a mile from the junction with the Texas & Pacific, and the other about half a mile from the tracks of the Kansas City Southern.

The tap line hauls the logs from the forest to the mill, charging $1.50 per 1,000 feet, which is supposed to cover only the service performed on the logging spurs, and not the haul over the main track. The greater part of the lumber from Fisher is turned over to the Kansas City Southern, involving a one-half mile switch by the tap line, and from Victoria is moved by the tap line 1 mile to the Texas & Pacific; a small amount of the lumber from each mill is taken by the tap line to the more distant trunk line, but the same divisions are paid. The allowances range from 3/4 to 4c. per 100 pounds, and the joint rates are the same as the rates published from adjacent mills on the trunk lines, except traffic moving to Texas, for which 1 1/4c. per 100 pounds is added to the junction-point rate. No passengers are carried, and of 316,676 tons of freight for the year 1910, over 99 per cent was furnished by the proprietary company. And the accumulated surplus at the end of June, 1910, was $13,509.17.

The Commission held that the tap line could not participate as a common carrier in joint rates on the products of the proprietary company, but said that the lumber rate of the trunk lines applied from the adjacent mills, and that they might make a reasonable allowance for switching.

The Commission made an order in such matter on May 14, 1912, which it amended on October 30, 1912. The amended order, so far as these appeals are concerned, provided:

'The Commission upon the record finds in the case of the. . . Woodworth & Louisiana Central Railway Company; Mansfield Railway & Transportation Company; Louisiana & Pacific Railway Company; Victoria, Fisher, & Western Railroad Company,-that the tracks and equipment, with respect to the industry of the several proprietary companies, are plant facilities, and that the service performed therewith for the respective proprietary lumber companies in moving logs to their respective mills, and performed therewith in moving the products of the mills to the trunk lines, is not a service of transportation by a common carrier railroad, but is a plant service by a plant facility; and that any allowances or divisions out of the rate on account thereof are unlawful and result in undue and unreasonable preferences and unjust discriminations, as found in the said reports;' and it ordered that the trunk lines should cease and desist and abstain from making any such allowances to the tap lines named.

The commission further ordered that if the trunk lines failed by a time stated, to re-establish the through routes and joint rates in effect on April 30, 1912, on traffic other than the products of the mills of certain proprietary companies, among others, the appellees herein, it would, upon proper petition, enter an order requiring the establishment of such routes and rates, or enter upon an inquiry with respect thereto, and further provided that all divisions of joint rates should be submitted to the Commission for approval.

The appellees thereupon, by their several petitions filed in the United States commerce court, sought to have the order of the Commission, so far as applicable to them, enjoined and annulled. The Interstate Commerce Commission, the Atchison, Topeka, & Santa Fe Railway Company, the Gulf, Colorado, & Santa Fe Railway Company, and the Railroad Commission of Louisiana, intervened. The commerce court said that the question was whether the Commission had acted arbitrarily and on improper considerations in determining under what circumstances a common carrier tap line would be deemed to be performing a mere plant service for a proprietary company, and held that as the service rendered to the proprietary and nonproprietary mills by the tap lines was the same, and as it was held to be a transportation service by an interstate common carrier as to the nonproprietary mills, it must be held to be a similar service as to the proprietary mills, and concluded that the Commission was without power to prohibit the making of joint rates by the trunk lines and the tap lines, and the payment of some division of such rates to the tap lines for their services in hauling logs to and lumber from the proprietary mills, and annulled the order of the Commission in this respect and so far as it applied to the appellees.

The United States and the Interstate Commerce Commission, and the Atchison, Topeka, & Santa Fe Railway Company, and the Gulf, Colorado, & Santa Fe Railway Company, entered separate appeals from the decrees of the commerce court in the four cases instituted by the appellees.

Mr. Blackburn Esterline, Special Assistant to the Attorney General, Solicitor General Davis, and Mr. Karl W. Kirchwey for the United States.

Messrs. Charles W. Needham and Joseph W. Folk for the Interstate Commerce Commission.

[Argument of Counsel from pages 12-17 intentionally omitted]

Messrs. Robert Dunlap. James L. Coleman, T. J. Norton, and Gardiner Lathrop for the Atchison, Topeka, & Santa Re Railway Company.

[Argument of Counsel from pages 17-19 intentionally omitted]

Messrs. H. M. Garwood, Luther M. Walter, and W. R. Thurmond for appellees.

[Argument of Counsel from pages 19-21 intentionally omitted]

Mr. Wylie M. Barrow and Mr. Ruffin G. Pleasant, Attorney General of Louisiana, for the Railroad Commission of Louisiana.

Mr. Justice Day, after making the foregoing statement, delivered the opinion of the court: