United States v. Pacific & Arctic Railway & Navigation Company/Opinion of the Court

by Joseph McKenna

United States Supreme Court

228 U.S. 87

United States  v.  Pacific & Arctic Railway & Navigation Company

 Argued: February 26, 1913. --- Decided: April 7, 1913

The district court said that it was 'without jurisdiction to entertain or determine the questions involved in the first five counts of the indictment in either a criminal or civil proceeding,' until the matters of discrimination between carriers or shippers, or the giving or refusing of joint traffic arrangements, 'have been submitted to and passed on by the Interstate Commerce Commission.' For this conclusion the court relied on Texas & P. R. Co. v. Abilene Cotton Oil Co. 204 U.S. 427, 51 L. ed. 553, 27 Sup. Ct. Rep. 350, 9 Ann. Cas. 1075, and Baltimore & O. R. Co. v. United States, 215 U.S. 429, 54 L. ed. 296, 30 Sup. Ct. Rep. 164.

It may be well, even at the expense of repetition, to give a summary of the indictment before passing to the special contention of the parties. The route described is between ports of the United States (called southern ports) and places in northern Alaska and Canada (called northern ports)-(1) by steamship lines from the United States and Vancouver, (southern ports) to Skagway (the entire wharfage facilities being owned by the North Pacific Wharves & Trading Company); (2) thence by railroad to the headwaters of the Yukon river; (3) thence by boat down the Yukon river to Dawson, etc. (called the northern ports). The route is designated as the White Pass & Yukon Route, and is constituted of (a) the Pacific & Arctic Railway & Navigation Company, a West Virginia corporation; (b) the British Columbia-Yukon Railway Company, incorporated under the laws of British Columbia; (c) the British-Yukon Railway Company, incorporated under the laws of the Dominion of Canada; and (d) the British-Yukon Navigation Company, Limited, incorporated under the laws of British Columbia. These companies are referred to as 'the railroad company,' and own the only line of transportation between the wharf at Skagway and the Yukon river.

By mutual agreement between the defendant steamship companies, the Wharves Company, and the railroad company, through routes and joint rates were established, thus making one continuous line of common carriers for freight and passengers between the United States (southern ports) and northern Alaska (northern ports).

The Humboldt Steamship Company and other independent lines plied between the United States and Skagway.

By agreement between the defendants, the railroad refused to make any through route or joint rates with the Humboldt Company, or with any of the independent steamship lines, and refused to bill freight or passengers from the United States to Yukon river points, or reversely, except by ships belonging to one of the defendant companies.

By agreement between the defendants the railroad fixed so-called local rates between Skagway and the Yukon river points, which rates were very much higher than the railroad's pro rata of the through rate.

The Wharves Company charged $2 a ton for freight if shipped on a vessel not owned by one of the defendant companies. If shipped and consigned to one who had entered into, or was about to enter into, a contract to have all of his shipments so carried, the wharfage charge was only $1. Wharfage charges in excess of $1 are unreasonably high.

As a result of the agreement, shippers were compelled to use only the ships of the defendant steamship companies, as in that way alone could lower through rates be obtained. Competition in water transportation was destroyed between the defendant steamship companies and the independent lines, defendants obtained a monopoly of the transportation business between the United States and Alaska, and the Humboldt Company was discriminated against in the matter of through rates. These agreements between the defendant companies are alleged to be (count 1) for the purpose of eliminating competition from the business of transportation between the United States and Alaska; (second count) to monopolize such business; (counts 3, 4, and 5) to discriminate against the Humboldt Company. Count 6 we omit from consideration for the present.

The charges of the indictment may be even further concentrated and attention directed to these elements: The defendant steamship lines and the Humboldt and independent lines from the United States to Skagway, the wharf at Skagway, and the railroad from Skagway to the Yukon river points. The only possibility of competition is in the water part of this route. This controlled, the entire transportation is controlled; and to this control the action of the defendants was directed, the means of control being an agreement between the defendants to throw all the trade into the hands of the defendant steamship companies by the railroad company establishing through route and joint rates with them, and refusing to do so with the Humboldt Company or any of the independent companies. The Wharves Company gave its assent by its wharfage charges, and all evasion was prevented by so fixing the local rates that their combination was greater than the through rate agreed on. It is manifest that the scheme was effective, and cut out the Humboldt line and the independent lines as factors in the routes of transportation between the United States and the Yukon river points. Is the scheme illegal?

This is asserted by the government and denied by the defendants. The court below, if we take some parts of its decisions, held that the forum of that question was the Interstate Commerce Commission. But, considering the decision of the court as a whole, we think it construed the anti-trust act, upon which counts 1 and 2 were based, and to those counts we shall confine our discussion for the present. This is admitted by defendants. They say that as the court held that, in order to constitute restraint of trade or monopolization of trade under the anti-trust act, the acts charged must be such as at common law constituted restraint of trade, and were unlawful, to that extent the court construed the act. And, setting forth the grounds of the ruling, counsel say that the court decided that the entering into through-route agreements by a common carrier with one or more connecting carriers, and the refusal to make such agreements with other connecting carriers, was not unlawful either at common law or by the interstate commerce act; and the court held, therefore, that such act did not constitute restraint within the meaning of the anti-trust act. The right of a carrier to select its connections must be admitted (we state the right as absolute, without regard to the interstate commerce act, for our present purposes), and if there were nothing else in the case the conclusion of the district court would have to be affirmed. But there is another and important element to be considered. The charge of the indictment is that the agreements were entered into not from natural trade reasons, not from a judgment of the greater efficiency or responsibility of the defendant steamship lines as instruments in the transportation than the independent lines, but as a combination and conspiracy in restraint of trade by preventing and destroying competition in the transportation of freight and passengers between the United States and Alaska, and obtaining a monopoly of the traffic by engaging not to enter into agreements with the independent lines. There is a charge, therefore, of infringement of the anti-trust law,-of something more done than the exercise of the commonlaw right of selecting connections, and the scheme becomes illegal. Swift & Co. v. United States, 196 U.S. 375, 396, 49 L. ed. 518, 524, 25 Sup. Ct. Rep. 276. We do not pause to justify this conclusion, either by the general purpose of the act or by its adjudged applications. Its general purpose has been elaborately set forth in very recent cases; and particular instances of its application, pertinent to the case at bar and illustrative of it, are exhibited by Swift & Co. v. United States, supra, and Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20, 57 L. ed. --, 33 Sup. Ct. Rep. 9. In those cases, as here, rights were brought forward to justify a purpose which transcended the limits put upon their exercise by the anti-trust act. In those cases, as here, the purpose (the means being different) was the prevention or destruction of competition, and the agreements here are exactly adapted to the purpose. Not the railroad only, but the Wharves Company as well, is charged to be in the combination. It was intermediate the railroad and the steamship lines, and discriminated in its wharfage charge, it is alleged, to aid in the purpose of the combination; and, to complete and make effective the purpose, the local rates from Skagway to Yukon points were made greater than that part of the through transportation.

Whether $2 per ton (the rate charged to independent lines, as against $1 per ton, charged to the defendant steamship lines) was reasonable or unreasonable, or whether a through rate may be less than the sum of the local rates, we are not called upon to consider, although the court below thought the inquiry important, and the defendants make it prominent in their contentions. The plan makes the parts unlawful (Swift & Co. v. United States, supra), whatever they may be independently of it, and whether there is or is not a standard of reasonableness which juries may apply is aside from the question. It is equally unimportant to consider whether the Interstate Commerce Commission has power to pass on the rates, as such, or through routing, as such. We are dealing with an indictment which charges a criminal violation of the antitrust act, and of that the criminal courts have cognizance, with power of decision upon the principle which we have expressed.

The next contention of defendants is that, as part of the transportation route was outside of the United States, the anti-trust law does not apply. The consequences and, indeed, legal impossibility, are set forth to such application, and, it is said, 'make it obvious that our laws relating to interstate and foreign commerce were not intended to have any effect upon the carriage by foreign roads in foreign countries, and . . . it is equally clear that our laws cannot be extended so as to control or affect the foreign carriage.' This is but saying that laws have no extraterritorial operation; but to apply the proposition as defendants apply it would put the transportation route described in the indictment out of the control of either Canada or the United States. These consequences we cannot accept. The indictment alleges that the four companies which constitute the White Pass & Yukon Route (referred to as the railroad), and owned and controlled by the same persons, entered into the combination and conspiracy alleged, with the intention alleged, with the Wharves Company and the defendant steamship companies. In other words, it was a control to be exercised over transportation in the United States, and, so far, is within the jurisdiction of the laws of the United States, criminal and civil. If we may not control foreign citizens or corporations operating in foreign territory, we certainly may control such citizens and corporations operating in our territory, as we undoubtedly may control our own citizens and our own corporations.

The ruling of the district court, sustaining the demurrer to the first and second courts, was therefore erroneous.

The decision of the district court upon counts 3, 4, and 5 must be determined upon different principles than those which we have just expressed in passing on counts 1 and 2. The district court, as we have seen, decided that the conduct of the defendants was not subject to judicial review in a criminal or civil case until it had been submitted to and passed upon by the Interstate Commerce Commission. The government attacks the conclusion with arguments of great strength, and contends that it makes the Commission not only the judges of the civil relief that private shippers may be given against the carriers by the interstate commerce act, but gives the Commission the control and practical determination of the criminal provisions of the law. The argument, in effect, is that the conclusion of the district court confounds the civil and criminal remedies of the law, the private injury and the public injury, resulting from the violation of its provisions. And who, it is asked, will initiate the criminal proceeding, and by what proof will it be supported? What degree of proof is to be accorded to the finding of the Commission-presumptive or conclusive? If neither, it is argued, 'it would be a senseless thing to regard such a finding as a condition precedent of the United States to indict.' If, it is asked further, the finding of the Commission is to have either prima facie or conclusive effect, against whom is it to have such effect? If against a defendant, what becomes of the 6th Amendment of the Constitution? The argument of the government is cast in a series of questions which end in the final answer, as it is contended, that under the decision of the district court the Interstate Commerce Commission 'becomes practically the court of final criminal jurisdiction.'

The contentions of the government would be formidable indeed if the interstate commerce act was entirely criminal. But it is more regulatory and administrative than criminal. It has, it is true, a criminal provision against violations of its requirements, but some of its requirements may well depend upon the exercise of the administrative power of the Commission. This view avoids the consequences depicted by the government. It keeps separate the civil and criminal remedies of the act, each to be exercised in its proper circumstances. It makes the interstate commerce act what it was intended to be and defined to be in the cases cited by the district court, to wit: Texas & P. R. Co. v. Abilene Cotton Oil Co. 204 U.S. 427, 51 L. ed. 553, 27 Sup. Ct. Rep. 350, 9 Ann. Cas. 1075, and Baltimore & O. R. Co. v. United States, 215 U.S. 492, 54 L. ed. 296, 30 Sup. Ct. Rep. 164. And it would, in our judgment, be an erroneous view to take that the great problems which the act was intended to solve, and the great purposes it was intended to effect, should be considered of less consequence than the facility which should be given to some particular remedy, civil or criminal. We need not extend the discussion. The purpose of the interstate commerce act to establish a tribunal to determine the relation of communities, shippers, and carriers, and their respective rights and obligations dependent upon the act, has been demonstrated by the cited cases, and also the sufficiency of its powers to deal with the circumstances set forth in the indictment.

The district court sustained count 6 against the demurrer of the corporate defendants, but held its averments were not sufficient to connect the individual defendants with the offense charged. This is a construction of the indictment, and not subject to review.

It is urged by the individual defendants that the objection is applicable to the other counts of the indictment, and that the court would have undoubtedly so ruled but for its construction of the anti-trust act; and it is also urged that in case of reversal of the court's decision upon the construction of the act, it be permitted to pass upon such of the grounds of demurrer as were not passed upon in the former ruling. We yield to the request, and the more readily as the government does not express great confidence in the sufficiency of the indictment. Its final contention is that the judgment of the district court be reversed, with instructions 'to pass on the sufficiency of the indictment without regard to the action or nonaction of the Interstate Commerce Commission.'

The judgment is therefore reversed as to counts 1 and 2, and the case remanded with instructions to proceed in accordance with this opinion.

Notes