Where the constitutional defenses asserted in the answer and
embraced in the instructions asked and refused in an action for
penalties for violating an order of a state commission are not
confined to the reasonableness of the order as such, but also
challenge the power of the state to inflict the penalty at all
under the circumstances disclosed by the answer, the judgment does
not rest on grounds of local law alone, but a federal right has
been set up and denied which gives this Court jurisdiction to
review the judgment under § 709, Rev.Stat.
A state statute which compels a railroad to distribute cars for
shipments in a manner that subjects it to payment of heavy
penalties in connection with its interstate business imposes a
burden on its interstate business, and is unconstitutional under
the commerce clause of the Constitution, and so
held in
regard to the Arkansas act and order of the commission in regard to
distribution of cars for shipment of freight.
Whether or not the rules of an association of railroads in
regard to exchange of cars are efficient to secure just dealings as
to cars moved in interstate commerce is a matter within federal
control, and it is beyond the power of a state court to determine
that they are inefficient and to compel a member of the association
to violate such rules.
85 Ark. 311 reversed.
Page 217 U. S. 137
The facts, which involve the constitutionality under the
commerce clause of the Constitution of the United States of a
regulation of the Railroad Commission of Arkansas as to delivery of
freight cars, are stated in the opinion.
Page 217 U. S. 140
MR. JUSTICE WHITE delivered the opinion of the Court.
Prior to October, 1905, the Railroad Commission of Arkansas
promulgated a rule by which, within five days after written
application by a shipper, it was made the duty of a railway
company, under the conditions prescribed in the rule, to deliver
freight cars to such shipper, for the purpose of enabling him to
load freight. The rule in question, known as order No. 305, is in
the margin.
*
Page 217 U. S. 141
Complaint was made by Philip Reinsch before the commission,
charging the St. Louis Southwestern Railway Company with having
violated this rule, in that it was fifty-one freight cars short in
complying with written applications made at various times in
October, November, and December, 1905, and January, 1906, for the
delivery at a station called Stuttgart
Page 217 U. S. 142
of a much larger number of freight cars. The commission found
that the railway company was short in the delivery of cars, as
alleged, and that its failures in that respect not only violated
order No. 305, previously referred to, but also § 10 of an Act of
March 11, 1899, embodied in Kirby's Digest as § 6803. It also
declared that, by these violations of the statute and rule of the
commission, the railway company had become subject to penalties in
favor of the State of Arkansas, as provided in § 18 of the Act of
1899, being § 6813 of Kirby's Digest, which penalties were to be
enforced as therein provided. Conformably to the section in
question, the prosecuting attorney for the proper county commenced
this action in the name of the state against the railway company to
recover penalties to the amount of $1,950. Rule No. 305 of the
commission was recited, the proceedings before the commission were
detailed, and the order made by the commission finding the defaults
on the part of the railway company was set out, and upon these
considerations the prayer for the statutory penalty was based.
A demurrer having been overruled, an answer was filed on behalf
of the railway company. By that answer, it was alleged that the
company was engaged in the transportation of interstate shipments
of freight over its line of railroad in the States of Arkansas,
Illinois, Louisiana, and Missouri, and that its equipment of
freight cars for the transaction of its business, both interstate
and state, was ample. That, anticipating the possible increase of
business, both interstate and state, and as a precautionary
measure, the company had, prior to the autumn of 1905, endeavored
to contract for the construction of a large number of additional
freight cars, but failed to do so because the car manufacturers had
such a press of work that they were unable to take the order. That
thereupon, in an effort to provide for every future contingency,
the corporation had, at a very large expense, commenced the
construction of a plant of large capacity to enable it to
manufacture its own cars, and was pressing the same to completion
in the
Page 217 U. S. 143
shortest possible time. It was alleged that, at the time of the
alleged defaults, there was an extraordinary demand for cars both
for the movement of interstate and local traffic, and when, as the
result of this condition, the shortage developed, the company had
equally distributed its cars to the shippers along its line, giving
no preference to interstate over local shippers, or to local over
those desiring cars for interstate shipments. It was alleged that
it would have been impossible for the company to comply with rule
No. 305 without discriminating against its interstate commerce
shippers, and therefore obedience to the rule would have resulted
in a direct burden upon interstate commerce. Referring to the
interstate commerce business of the company, which it was alleged
moved over its own line through the States of Arkansas, Illinois,
Louisiana, and Missouri, and thence by connecting roads throughout
the United States and Canada, it was charged the burden imposed
upon the company to deliver cars to local shippers without
reference to the effect and operation of such delivery upon the
interstate commerce business of the company would be a direct
burden upon interstate commerce, and therefore repugnant to the
Constitution of the United States, and that the same result would
flow from enforcing the command of the commission as embodied in
its rule No. 305. The rule, moreover, was especially assailed as
being repugnant not only to the commerce clause, but to the
Fourteenth Amendment, both because of the inherent nature of the
duty which the rule sought to impose and also because of the
unreasonable conditions which were expressed therein.
There was a trial to a jury. Without going into detail, it
suffices to say that specific instructions were asked, in
reiterated form, by the defendant company concerning its asserted
defenses under the Constitution of the United States -- that is,
the repugnancy to the Constitution of the rule of the commission
and of the statute imposing penalties upon it for its failure to
furnish cars. After verdict against the company for $1,350 and
judgment thereon, the cause was taken to the
Page 217 U. S. 144
Supreme Court of the State of Arkansas, and from the action of
that court in affirming the judgment (85 Ark. 311), this writ of
error is prosecuted.
The question for decision will be simplified by analyzing the
action of the court below -- that is, by stating the facts which it
deemed were established, and by precisely fixing the issues and
principles governing the same which the court stated and applied.
Clearing the way to consider the proposition which it conceived the
case involved in its fundamental aspect, the Supreme Court of
Arkansas at once disposed of the contention that the commission was
without power to adopt rule No. 305 by the statement that the power
to do so was expressly conferred by statutes of the state. The
court did not pass on the contentions concerning the alleged
conflict between the rule and the Constitution of the United
States, because it was expressly declared that it was not at all
necessary to do so. This was based upon the conclusion that the
duty to furnish the cars which had been demanded arose from
statutory provisions (Kirby's Digest §§ 6803, 6804), which were but
expressive of the common law, and that the liability for the
penalty which was imposed by the judgment below equally resulted,
considering the default as alone arising from violations of the
statutory duty.
The statutory duty to supply cars on application having been
thus ascertained, and the failure of the company to furnish after
demand not being disputed, the court was brought to consider what
it declared to be the only question in the case -- that is,
"whether the undisputed evidence introduced by appellant presented
a sufficient excuse for the failure to furnish the cars." Insofar
as adequate excuse could arise from the complete discharge by the
company of the duty to equip its road with a sufficient number of
cars, it was recognized that the proof was ample; indeed, the court
said:
"In fact, the appellant was shown to have a larger car equipment
than the average freight-carrying road, and the failure to furnish
cars was wholly due to an inability to regain
Page 217 U. S. 145
its cars which were sent to other roads carrying freight from
its own line."
Coming, then, to state the facts concerning the cause which the
court expressly found was wholly responsible for the failure to
deliver all the cars asked for, it was pointed out:
"The appellant is an originating line, originating about 70
percent of its traffic and receiving about 30 percent. To
illustrate its situation, during the month of November, 1905, it
had in revenue service 9,517 cars, of which it averaged daily 3,982
in use on its own lines, 5,525 off its line, and 2,519 foreign cars
in use. In other words, a daily balance of exchange of 1,473 cars
was against it, and its shortage in cars was only about 650 per
day."
Directing attention to the fact that the preponderant
originating business of the road led to a preponderance of
interstate over domestic or local traffic, and that such interstate
traffic would be greatly impeded, if not paralyzed, by breaking
bulk at the state line and refusing to give continuous
transportation, by not allowing its cars, when loaded, to move
beyond its line to the roads of connecting carriers, the court was
brought to consider whether thus permitting the cars to move for
the purpose of continuous interstate commerce traffic was, in and
of itself, a fault entailing legal responsibility under the statute
for a refusal to deliver cars for local traffic when requested. In
holding the negative of this proposition the court said:
"The evidence indisputably establishes that it is a benefit to
the shipping public to interchange cars, and not to refuse to send
cars off the line. . . . It is unquestionably good for the public
that the railroads of the United States have a system of
interchange of cars, instead of each road hauling to its termini
only, and thereby force reloading and reshipment. The inconvenience
and expense of such a system would at once condemn it as failing to
meet public requirements. It is unquestionably the policy of both
state and federal legislation to facilitate, if not require, an
interchange
Page 217 U. S. 146
of cars. The most recent illustration of this policy is found in
§ 17 of the Act of April 19, 1907 (Acts 1907, p. 463). For one
railroad company to be an Ishmaelite among its associates would
operate disastrously to its shippers. The shippers of Arkansas
expect the public carriers to put their cotton to the spinners in
New England, and their fruit to the North and their lumber and coal
to the four quarters of the Union, without change from consignor to
consignee."
Thus, deciding that the mere delivery of cars for through
transportation was not a factor in determining whether there was
legal fault, the court came to consider whether there was anything
in the arrangement by which the cars in question were permitted to
go off the line which, in and of itself, constituted fault and
consequent responsibility for failure to furnish all the cars
required in time of shortage. Reviewing the evidence on this
subject, it was found that the company was a member of an
association known as the American Railway Association, which had
adopted rules governing the interchange of cars from one road to
another, with provisions for the return thereof and for
compensation therefore, the association embracing and its rules
governing ninety percent of the railroads of the United States.
Fixing thus the system which controlled the company in the
interchange of its cars, it was determined that the mere formation
of an association for such purpose was not repugnant to the laws
against combinations in restraint of trade, the court, after
referring to various state decisions to that effect, saying:
"The result of these and other decisions, as summed up in an
excellent textbook, is that these associations are lawful, and
their rules and regulations, when reasonable, will be upheld. 2
Hutchinson on Carriers (3d ed.), § 861. Mr. Elliott says that such
associations formed for the purpose of making and enforcing
reasonable regulations to facilitate business and secure the prompt
loading, unloading, and return of cars cannot be held illegal, upon
the ground that the constituent companies, by becoming members,
surrender their corporate
Page 217 U. S. 147
functions and control to the association. 4 Elliott on
Railroads, § 1568."
Having thus sustained the right of the road to deliver its cars
for the purpose of continuous transportation beyond its line in
interstate commerce, and sanctioned the general method by which it
was sought to regulate and control the transmission and return of
such cars -- that is, by membership in the American Railway
Association -- the nature and character of the rules of the
association were considered. Without going into detail or following
the statements of the court on the subject, it suffices to say
that, analyzing the rules of the association, the court concluded
that the regulations were inefficient in many respects, did not
provide sufficient penalties to secure the prompt return of cars by
roads which might receive the same, but, on the contrary, afforded
a temptation in time of car shortage, inducing a road having the
cars of another road to retain and use them, paying the penalty, as
to do so would afford it an advantage. Pointing out that the
general result of the operation of the rules of the American
Railway Association for the interchange of cars had proven
ineffective in the past, it was held that the company was at fault
for delivering its cars to other roads for the movement of
interstate commerce subject to the regulations of the American
Railway Association, and therefore the penalty imposed in the
judgment was rightly assessed.
As the penalty, which the court sustained, was enforced solely
because of its conclusion as to the inefficiency of the rules and
regulations of the American Railway Association, which governed
ninety percent of the railroads in the United States, the court was
evidently not unmindful that the carrier before it was powerless,
of its own motion, to change the rules thus generally prevailing,
and therefore was necessarily either compelled to desist from the
interchange of cars with connecting carriers for the purpose of the
movement of interstate commerce or to conduct such business with
the certainty of being subjected to the penalties which the state
statute provided
Page 217 U. S. 148
for. We say this since the court said:
"It may be better for the appellant to suffer these ills than to
sail under a black flag and refuse to send its cars beyond its
line. That is not a question for the court. Until the appellant
carrier shows reasonable rules and regulations for the interchange
of cars, it cannot avail itself of these rules of interchange as
causing and excusing its default to the public, for the rules here
shown have proved unreasonable and inefficient before this default
occurred."
And the gravity of the ban on interstate commerce which it was
thus recognized would result from the ruling made cannot be more
vividly portrayed than by once again quoting the statement of the
court on the subject, saying: "For one railroad company to be an
Ishmaelite among its associates would be disastrous to its
shippers." If the railroad company, compelled to be a law unto
itself because of its inability to change, by its own isolated
will, the rules of the American Railway Association, should prefer
to subject itself to the penalties inflicted by the state statute,
rather than bring disaster to its shippers, the seriousness of the
burden to which interstate commerce would be subjected cannot be
better illustrated than by saying that, by the provisions of the
state statute, the penalty upon the carrier for each violation of
the act or of the rules and regulations of the commission was not
less than five hundred nor more than three thousand dollars.
When, by thus following the careful analysis made by the court
below, the contentions which the case present are circumscribed and
the issues to which all the controversies are reducible are
accurately defined, we think no serious difficulty is involved in
their solution. In the first place, it is suggested by the
defendant in error that no federal question arises for decision,
and therefore the writ of error should be dismissed. This rests
upon the theory that, as the court below put the rule of the
commission, No. 305, out of view, and declared in its statement of
the case that no extraordinary or unusual rush of business on the
line of the defendant company
Page 217 U. S. 149
occasioned the car shortage, therefore no ground of federal
cognizance remained, as, in other respects, the action of the court
below was, in effect, placed purely upon matters of local concern
broad enough to sustain its judgment. The contention is plainly
without merit. It is to be conceded that the ruling of the court as
to the irrelevancy of the rule adopted by the commission eliminates
from consideration so much of the answer and of the instructions
asked by the company and refused, relating to the repugnancy of the
order to the commerce clause of the Constitution, both on account
of its inherent operation and because of unreasonable provisions,
which, it was alleged, it contained. But the constitutional
defenses which were asserted by the answer, and which were embraced
in the instructions asked and refused, were not confined to the
mere order as such, but plainly challenged the power of the state
to inflict the penalty for the failure to furnish the cars under
the circumstances disclosed by the answer. And the ruling of the
court that the asserted power arose from the statute, instead of
from the rule adopted by the commission, but changed the form
without in any way minimizing or obscuring the completeness of the
federal defense which was made in the pleading and necessarily
passed upon by the court below.
Coming to the merits, we think it needs but statement to
demonstrate that the ruling of the court below involved necessarily
the assertion of power in the state to absolutely forbid the
efficacious carrying on of interstate commerce, or, what is
equivalent thereto, to cause the right to efficiently conduct such
commerce to depend upon the willingness of the company to be
subjected to enormous pecuniary penalties as a condition of the
exercise of the right. It is to be observed that there is no
question here of a regulation of a state forbidding an unequal
distribution of cars by a carrier for the benefit of interstate to
the detriment of local commerce. This is the clear result of the
finding below as to the proportion of the originating traffic of
the road, and the extent of
Page 217 U. S. 150
the cars retained and those permitted to go beyond the line of
the road for the purposes of interstate commerce. If it be that the
court below was right in its assumption that the rules of the
American Railway Association, governing, as was conceded by the
court, ninety percent of the railroads, and hence a vast proportion
of the interstate commerce of the country, are inefficient to
secure just dealing as to cars moved by the carriers engaged in
interstate commerce, that fact affords no ground for conceding that
such subject was within the final cognizance of the court below,
and could by it be made the basis of prohibiting interstate
commerce or unlawfully burdening the right to carry it on. In the
nature of things, as the rules and regulations of the association
concern matters of interstate commerce inherently within federal
control, the power to determine their sufficiency, we think, was
primarily vested in the body upon whom Congress has conferred
authority in that regard.
The judgment of the Supreme Court of the Arkansas is
reversed, and the case remanded for further proceedings not
inconsistent with this opinion.
MR. CHIEF JUSTICE FULLER dissents.
*
"It is ordered by the commission that its rules be so amended
that, when a shipper makes written application to a railroad
company for a car or cars, to be loaded with any kind of freight
embraced in the tariff of said company, stating in said application
the character of the freight, and its final destination, the
railroad company shall furnish same within five days from 7 o'clock
a.m. the day following such application. Provided that, when a
shipper orders a car or cars and does not use the same, he shall
pay demurrage for such time as he holds the car or cars at the rate
of $1 per car per day, dating from 7 o'clock a.m. after the car or
cars are placed."
"Or, when the shipper making such application specifies a future
day on which he desires to make a shipment, giving not less than
five days' notice thereof, computing from 7 o'clock a.m. the day
following such application, the railroad company shall furnish such
car or cars on the day specified in the application."
"When freight in carloads or less is tendered to a railroad
company, and correct shipping instructions given, the railroad
agent must immediately receive the same for shipment and issue
bills of lading therefor, and whenever such shipments have been so
received by any railroad company, they must be carried forward at
the rate of not less than fifty miles per day of twenty-four hours,
computing from 7 o'clock a.m. the second day following the receipt
of shipment. Provided that, in computing the time of freight in
transit, there shall be allowed twenty-four hours at each point
where transferring from one railroad to another or rehandling
freight is involved."
"The period during which the movement of freight is suspended on
account of accident or any cause not within the power of the
railroad company to prevent shall be added to the free time allowed
in this rule and counted as additional free time."
"The commission reserves the right, on its own motion, to
suspend the operation of these rules, or any one or more of them,
in whole or in part, whenever it shall appear that justice demands
such action, and the commission will, upon complaint, hear and act
upon application for a like suspension."
"Nothing in these rules shall apply to shipment of livestock and
perishable freight where the rules of this commission or the laws
of the state require the more prompt furnishing of cars or movement
of freight than provided for by these rules."