United States v. Louisiana & Pacific Railway Company (234 U.S. 1)/Opinion of the Court

A preliminary objection is made to the jurisdiction of the commerce court in that the order of the Commission is not reviewable because merely of a negative character. The commerce court examined this question, and in view of the amended order of October 30, 1912, reached the conclusion that the order was affirmative in its nature, and of a character permitting of review by proper proceedings in that court under the act giving it jurisdiction in such cases. We find no reason to differ with this conclusion, and are of opinion that the commerce court had jurisdiction in the case.

It is further insisted upon the authority of Proctor & G. Co. v. United States, 225 U.S. 282, 56 L. ed. 1091, 32 Sup. Ct. Rep. 761, and other cases in this court which have followed that decision, that in the present cases the decision rests upon conclusions of the Commission as to matters of fact only, which are within the sole jurisdiction of that body, and not reviewable in the courts. But we shall consider the case upon the findings of fact preceding this opinion, which are identical with those made by the Commission, and test the conclusions reached as matters of law, giving proper consideration to matters of fact which are not in dispute.

The final decree of the commerce court vacated and set aside the portion of the Commission's order reading as follows:

'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.

'3. It is ordered, that the principal defendants [trunk lines, naming them], be, and they are hereby, notified and required to cease and desist, and for a period of two years hereafter, or until otherwise ordered, to abstain from making any such allowances to any of the above-named parties to the record in respect of any such above-described service.'

The question now before this court is the correctness of this decree.

A perusal of the findings and orders of the Commission make it apparent that the grounds of decision upon which it proceeded were two: first, that these roads were mere plant facilities; second, that they were not common carriers as to proprietary traffic. The Commission held that before incorporation they were plant facilities, and that after incorporation they remained such. What the Commission means by plant facilities may be gathered from a consideration of some of its decisions. In General Electric Co. v. New York C. & H. R. R. Co. 14 Inters. Com. Rep. 237, a network of interior switching tracks, constructed to meet the necessities of the business, were held to be mere plant facilities. The same principle was applied to the internal trackage of large industrial plants in Solvay Process Co. v. Delaware, L. & W. R. Co. 14 Inters. Com. Rep. 246. These systems of internal trackage were not common carriers, and, however extensive, were intended to and did furnish service for the plants which owned and operated them. But a common carrier performing service as such, regulated and operated under competent authority, as observed by Commissioner Prouty in Kaul Lumber Co. v. Central of Georgia R. Co. 20 Inters. Com. Rep. 450, 456, is no longer a mere appendage of a mill, 'but a public institution.' It thus becomes apparent that the real question in these cases is the true character of the roads here involved. Are they plant facilities merely, or common carriers with rights and obligations as such?

It is insisted that these roads are not carriers because the most of their traffic is in their own logs and lumber, and that only a small part of the traffic carried is the property of others. But this conclusion loses sight of the principle that the extent to which a railroad is in fact used does not determine the fact whether it is or is not a common carrier. It is the right of the public to use the road's facilities and to demand service of it, rather than the extent of its business, which is the real criterion determinative of its character. This principle has been frequently recognized in the decision of the courts. We need not cite the many state cases in which it has been so held, in view of the fact that the same principle was laid down in the late case of Union Lime Co. v. Chicago & N. W. R. Co. 233 U.S. 211, 58 L. ed. -, 34 Sup. Ct. Rep. 522. In that case the supreme court of Wisconsin sustained the extension of a spur track to reach the quarries and lime kilns of a single company as a public use authorizing the exercise of the right of emiment domain, and this court affirmed the judgment. Dealing with the contention that the Wisconsin statute was invalid because it authorized action appropriating property upon the exigency of a private business, this court said (p. 221):

'A spur may, at the outset, lead only to a single industry or establishment; it may be constructed to furnish an outlet for the products of a particular plant; its cost may be defrayed by those in special need of its service at the time. But none the less, by virtue of the conditions under which it is provided, the spur may constitute at all times a part of the transportation facilities of the carrier which are operated under the obligations of public service and are subject to the regulation of public authority. As was said by this court in Hairston v. Danville & W. R. Co. 208 U.S. 608, 52 L. ed. 641, 28 Sup. Ct. Rep. 331, 13 Ann. Cas. 1008: 'The uses for which the track was desired are not the less public because the motive which dictated its location over this particular land was to reach a private industry, or because the proprietors of that industry contributed in any way to the cost.' There is a clear distinction between spurs which are owned and operated by a common carrier as a part of its system and under its public obligation, and merely private sidings. See State, De Camp, Prosecutor, v. Hibernia Underground R. Co. 47 N. J. L. 43; Chicago, B. & N. R. Co. v. Porter, 43 Minn. 527, 46 N. W. 75; Ulmer v. Lime Rock R. Co. 98 Me. 579, 66 L.R.A. 387, 57 Atl. 101; St. Louis, I. M. & S. R. Co. v. Petty, 57 Ark. 359, 20 L.R.A. 434, 21 S. W. 884; Dietrich v. Murdock, 42 Mo. 279; Bedford Quarries Co. v. Chicago, I. & L. R. Co. 175 Ind. 303, 35 L.R.A.(N.S.) 641, 94 N. E. 326.'

The Commission has recognized this principle as applicable to tap lines, for in Central Yellow Pine Asso. v. Vicksburg, S. & P. R. Co. 10 Inters. Com. Rep. 193, 199, it said:

'While these logging roads are almost or quite without exception mill propositions at the outset, built exclusively for the purpose of transporting logs to the mill, they soon reach a point where they engage in other business to a greater or less extent. As the length of the road increases, as the lumber is taken off and other operations obtain a foothold along the line, various commodities besides lumber are transported, and this business gradually develops until in several cases what was at first a logging road pure and simple has become a common carrier of miscellaneous freight and passengers. Almost all these lines, even where they are run as private enterprises, do more or less outside transportation, and it would be difficult to draw any line of demarcation between the logging road as such and the logging road which has become a general carrier of freight.'

This representation, it is contended by the attorney general of Louisiana, who appears here in behalf of the Louisiana Railroad Commission, intervener, is aptly descriptive of the growth and development of railroads in that state.

Furthermore, these roads are common carriers when tried by the test of organization for that purpose under competent legislation of the state. They are so treated by the public authorities of the state, who insist in this case that they are such, and submit in oral discussion and printed briefs cogent arguments to justify that conclusion. They are engaged in carrying for hire the goods of those who see fit to employ them. They are authorized to exercise the right of eminent domain by the state of their incorporation. They were treated and dealt with as common carriers by connecting systems of other carriers,-a circumstance to be noticed in determining their true character. United States v. Union Stock Yard & Transit Co. 226 U.S. 286, 57 L. ed. 226, 33 Sup. Ct. Rep. 83. They are engaged in transportation as that term is defined in the commerce act and described in decisions of this court. Coe v. Errol, 116 U.S. 517, 29 L. ed. 715, 6 Sup. Ct. Rep. 475; Covington Stock-Yards Co. v. Keith, 139 U.S. 128, 35 L. ed. 73, 11 Sup. Ct. Rep. 461; Southern P. Terminal Co. v. Interstate Commerce Commission, 219 U.S. 493, 55 L. ed. 310, 31 Sup. Ct. Rep. 279; United States v. Union Stock Yard & Transit Co. supra.

Applying the principles which we have stated as determinative of the character of these roads, and without repeating the facts concerning them, they would seem to fill all the requirements of common carriers so employed, unless the grounds upon which they were determined not to be such by the Commission are adequate to that end. The Commission itself as to all shippers other than those controlled by the so-called proprietary companies treated them as common carriers, for it has ordered the trunk lines to re-establish through routes and joint rates as to such traffic. But, says the government (and it insists that this fact alone might well control the decision), the roads are owned by the persons who also own the timber and mills which they principally serve.

This fact is not shown to be inconsistent with the laws of the state in which they are organized and operated. On the contrary, the public authorities of that state are here insisting that these companies are common carriers. Congress has not made it illegal for roads thus owned to operate in interstate commerce. While Congress, in enacting the commodities clause amending § 1 of the act to regulate commerce (34 Stat. at L. 584, chap. 3591, U.S.C.omp. Stat. Supp. 1911, p. 1288), sought to divorce transportation from production and manufacture, and to make transportation a business of and by itself, unallied with manufacture and production in which a carrier was itself interested, the debates, which may be resorted to for the purpose of ascertaining the situation which prompted this legislation, show that the situation in some of the states as to the logging industry and transportation was sharply brought to the attention of Congress, and led to the exemption from the commodities clause of timber and the manufactured products thereof, thus indicating the intention to permit railroads to haul such lumber and products although it owned them itself. And that Congress had the constitutional power to enact such exemption was held in United States ex rel. Atty. Gen. v. Delaware & H. Co. 213 U.S. 366, 416, 417, 53 L. ed. 836, 852, 853, 29 Sup. Ct. Rep. 527. This declaration of public policy which is now part of the commerce act cannot be ignored in interpreting the power and authority of the Commission under the act. The discussion resulting in the action of Congress shows that railroads built and owned by the same persons who own the timber were regarded as essential to the development of the timber regions in the Southwest, AND THE NECESSITY OF SUCH ROADS WAS DWElt upon and set forth with ample illustration by Commissioner Prouty in his concurring opinion in this case.

As we have said, the Commission by its order herein required the trunk lines to reestablish through routes and joint rates as to property to be transported by others than the proprietary owners over the tap lines. This order would of itself create a discrimination against proprietary owners, for lumber products are carried from this territory upon blanket rates applicable to all within its limits. It follows that independent owners would get this blanket rate for the entire haul of their products while proprietary owners would pay the same rate plus the cost of getting to the trunk line over the tap line. The Commission, by the effect of its order, recognizes that railroads organized and operated as these tap lines are, if owned by others than those who own the timber and mills, would be entitled to be treated as common carriers and to participate in joint rates with other carriers. We think the Commission exceeded its authority when it condemned these roads as a mere attempt to evade the law and to secure rebates and preferences for themselves.

It is doubtless true, as the Commission amply shows in its full report and supplemental report in these cases, that abuses exist in the conduct and practice of these lines and in their dealings with other carriers, which have resulted in unfair advantages to the owners of some tap lines and in discriminations against the owners of others. Because we reach the conclusion that the tap lines involved in these appeals are common carriers, as well of proprietary as nonproprietary traffic, and as such entitled to participate in joint rates with other common carriers, that the determination falls far short of deciding-indeed, does not at all decide-that the division of such joint rates may be made at the will of the carriers involved and without any power of the Commission to control. That body has the authority and it is its duty to reach all unlawful discriminatory practices resulting in favoritism and unfair advantages to particular shippers or carriers. It is not only within its power, but the law makes it the duty, of the Commission to make orders which shall nullify such practices resulting in rebating or preferences, whatever form they take and in whatsoever guise they may appear. If the divisions of joint rates are such as to amount to rebates or discriminations in favor of the owners of the tap lines because of their disproportionate amount in view of the service rendered, it is within the province of the Commission to reduce the amount so that a tap line shall receive just compensation only for what it actually does.

For the reasons stated, we think the Commerce Court did not err in reaching its conclusion and decision, and its judgment is affirmed.