ing one man's property for the unjust bene- The legislature cannot prohibit all con- These cases fully support the proposition that just, reasonable, and lawful contracts in relation to property or business cannot be made unlawful by legislative enactments. The police power when invoked to prohibit any act which is otherwise lawful, while it may fall short of the demands of public necessity by reason of constitutional limitations upon its exercise, can never exceed that necessity. Chy Lung v. Freeman, 92 U. S. 280, 23 L. ed. 552; People v. Jackson & M. Pl. Road Co. 9 Mich. 285. The public is not entitled to the alleged benefit which is claimed to be the result of the prohibition of this agreement. The alleged public interest which is sought to be made the basis of this extravagant measure is not the interest of the public, but of one class, which can only be secured at the expense and unjust loss of another. Interstate Commerce Commission, 7th Ann. Rep. 32. Commission, 263; Judge Cooley in Railway In recapitulation of the points above preserted upon the question of the constitutionality of the Anti-Trust Act, if it is held applicable to the agreement in this case, we respectfully insist 1. That the act deprives the defendant of both liberty and property by forbidding a contract just and reasonable in itself, essential to the use of their property and the prosecution of their business, and never before held or claimed to be unlawful or wrong, and by which they only agree to do what they have a right to do. That no such contract can be prohibited by law without a violation of the constitutional provision, whatever advantage to the public in keeping down rates of transportation may be expected to result from it. And that in attempting such a prohibition, the case contemplated by the Constitution is distinctly presented, in which the legislature deems that a public benefit is to be effected by depriving the citizen of his liberty or property without due process of law. 2. That even if such a deprivation could be justified in any case, the public good in this case does not in any sense require it, because (a) Those intended to be benefited are not the public, but only one class of the public who are seeking a business advantage over another and much larger class, which is equally entitled to protection. (b) Even if such a class is held to constitute the public, it is not entitled to the suppression of all restriction upon competition, because such a suppression would be plain and oppressive violation of the equal rights of the other class, inasmuch as it would compel the latter to serve the former by labor and property without a just compensation. (c) The legislation in question is not necessary, even if it is admissible. The complete suppression of all the restriction upon Railroad companies have, for a long time competition to which the public has a right past, been entirely unable, in consequence of to object is already effectually provided for the number of roads and the excessive com-y full and careful congressional legislapetition, to maintain rates that are fairly remunerative. Nor is it true that even the shippers themselves are interested, in the long run, in obtaining the carriage of their goods at rates unreasonably low. But such agreements between competing railway companies are in fact necessary as has been demonstrated by long and disastrous experience. tion, in which no defect or insufficiency can be pointed out; so that the further suppression now proposed only extends to those restrictions, just and reasonable in themselves, to which the public have not a right to ob ject. And even without that or any legisexisting facts, notorious and undisputed, lation, it would be utterly impossible under for railway companies to restrict competition to a degree that would result in any injury to the public. Re Southern R. & S. S. Asso. 1 Inters. (d) That if all restrictions upon compe Com. Rep. 288; Report of Interstate Com-tition were prohibited, the result, instead of merce Commission, 1 Inters. Com. Rep. 653-a public advantage, would be a public calam671; Re Chicago, St. P. & K. C. R. Co. 2 ity, and would injure rather than benefit the Inters. Com. Rep. 148; Second Annual Report of Interstate Commerce Commission, 2 Inters. Com. Rep. 249, 256; Third Annual Report of Interstate Commerce Commission, 23, 25, 41; Fourth Annual Report of Interstate Commerce Commission, 4, 19, 21, 33; Fifth Annual Report of Interstate Commerce very class in whose behalf it is contended for. 3. That if it were admitted that further legislation against restriction against competition was both constitutional and necessary, the provisions of this act in forbidding all such restrictions are not justly adapted to the only end that is admissible on the score of the public good,—the maintenance of just and reasonable rates,-but must result in an infringement of the liberty and property of the defendants, to a degree far beyond what is necessary to that end, and in no way conducive to it. Whatever the merits of the agreement in question may be, no case for an injunction is presented. Even though the authority to make the decree sought exists, the bill is insufficient to invoke it. Story, Eq. Pl. § 271, note; Id., § 27a, note; Campbell v. Mackay, 1 Myl. & C. 618. Mr. George F. Edmunds, for the Pennsylvania Railroad Company, appellee: Before the agreement in question was made the rates of each road had been independently and fairly established by itself, and duly filed with the Interstate Commerce Commission; and these rates were in truth just, reasonable, and in conformity with law in every respect, and were in full operation. This is admitted by the pleadings. This being true, these rates could not have been either raised or lowered, under the existing conditions, without injustice to patrons or eise injustice to those interested in the roads, including the people along their lines, as well as through shippers. To have changed any of them would have been against justice and reason, disobeying the first commandment of the commerce law. In this state of things the agreement, was made. The preamble contains five distinct declarations as follows: and charges, and the rules applicable there to, now in force and authorized by the companies parties hereto upon the traffic covered by this agreement (and filed with the Interstate Commerce Commission as to such of said traffic as is interstate), are hereby reaffirmed by the companies composing the association, and the companies parties hereto shall, within ten days after this agreement becomes effective, file with the managers copies of all such schedules of rates, fares, and charges, and the rules applicable thereto." This section is the immediate and affirmative act of the association. Its essence is that all parties agree to abide by the preexisting just, reasonable, and lawful rates then on file with the Interstate Commerce Commission. It has not been contended by the learned Solicitor General that this section is contrary to law. It is submitted with confidence that no such contention can be nade, and that if the association agreement had stopped there, the agreement would have been simply one to stand by just and reasonable rates independently fixed, on file with the Interstate Commerce Commission, which would be agreeing to do the very thing that the plain words of the statute commanded should be done. The commerce law does not demand competition; it only demands justice, reason, and equality. Every one of its clauses is devoted directly to these ends; and the competition that produces departure from the reason and justice and equality that the act requires violates the essential principle upon which it is (1) To aid in fulfilling the purposes of the Interstate Commerce Act; (2) to co-founded. operate with each other and adjacent trans- I take it to be plain that if these thirtyportation associations; (3) to establish and maintain reasonable and just rates, fares, rules, and regulations on state and interstate traffic; (4) to prevent unjust discrimination, and to secure the reduction and concentration of agencies; (5) and the introduction of economies in the conduct of the freight and passenger service. one defendants had united in an engagement to truly and faithfully adhere to and carry out in their respective conduct all the requirements of the commerce law, and had agreed to the imposition of penalties for infraction, it would be manifest that they had not contracted to restrain trade, either in a general or a partial sense, or in any sense Every one of these declarations is ad- whatever. In this first provision of the mitted to have been true in all respects; and agreement, they have engaged to do that it is admitted that there was no other pur- very thing, and that very thing only, in the pose, and no secret or covert design in reform of specific language referring to a spect to the subject. The preamble thus be-specific and existing just, reasonable, and came, certainly as between the parties to it, lawful state of things which they were then the constitutional guide in the interpreta- acting upon. tion of the body of the contract. The parties next declare that they "make this agreement for the purpose of carrying out the objects above named." The first six articles of the contract provide for organization and administration, in respect of which no criticism has been sug gested except as to $ 5 of article 5 in connection with the Solicitor General's contention in regard to article 7. Article 7 is the first one that is assailed in respect of its fundamental character. It is the fundamental one in regard to rates. If it violates law it is bad, and must not be put in execution. If it provides for the fullest obedience to law and promotes trade, it must be upheld. The first section provides: "Section 1. The duly published schedules of rates, fares, Section 2, of article 7 is the one upon which the principal assault of my learned brother on the other side is made. He mainthe powers and duties of the managers is tains that the language used in describing real purpose, and to make the managers the absolute masters, subject to an appeal to the board of control (being the presidents of all the roads), of the changing and fixing of future rates. The first answer to this is that the pleadings distinctly admit that there was no evasive intention, or any other unjust purpose, in any part of the arrangement. It is therefore not just to maintain what the record admits to be untrue. intended to be evasive and to conceal its But whatever construction or implication may exist in respect of the language of this section, it is sufficient to say that the very next section of the same article declares "That the powers conferred upon the managers shall be so construed and exercised as not to permit violation of the Interstate Commerce Act, or of any other law applicable to the premises, or any provision of the charters or the law 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 hereunder." Here is, in words as clear and specific as the English language is capable of, à distinct jurisdictional limitation upon the powers of the managers as described in the preceding section, and in terms the clause provides that the powers conferred upon the managers shall be so construed and exercised as not to permit the violation of the Interstate Commerce Act, or any other law, and so forth; and it commands the managers to co-operate to these ends with the Interstate Commerce Commission. When the managers, then, come to act under these powers, how do they start? They start with rates established, not by the agreement, but before it was made, and confirmed by it, which were confessedly in conformity with and in promotion of the Commerce Act, and which were absolutely just and reasonable. The managers are to have authority to recommend such changes in those rates and fares as, by the very words of the 2d section, may be reasonable and just and necessary for governing the traffic and protecting the interests of the parties. Reasonableness and justice is the first and fundamental condition of their starting to act at all; and it is declared that they shall not act otherwise than in conformity with the requirements I have already mentioned, contained in the Commerce Act. Can this be an authority to restrain trade, under any definition of the word "restraint?" The only restraint is a restraint against violation of law by the managers in agreeing upon unreasonable and unjust rates against the requirements of the Commerce Act. If we assume that the restraint of trade mentioned in the Trust Act may be a restraint of innocent and just proceeding, can anyone maintain that it makes illegal an agreement, not to violate law, but to obey it? It was obvious when this agreement was made, that rates then existing and being in all particulars reasonable and equal might in the course of changes in production, trade, and other conditions over which the railways could have no control, become unjust and unreasonable and inapplicable to the new conditions, and that in such a case both public and private interests would require that readjustments should be made in order to bring the rates into conformity with what reason, justice, and law should require under such conditions. It was to provide for this that §§ 2 and 3 of the 7th article were inserted. They were inserted in such clear language that it would be impossible for the managers to agree upon any rates in lieu of the just one then existing, that were not, in the same sense and to the same extent, just, reasonable, and for the public interest, as those then existing. The managers must act in that way and to that end, or else they were forbidden by the very terms of the agreement to act at all. I If the managers, contrary to their authority, should have agreed upon a new rate which any one of the independent roads thought to be wrong in itself as being unreasonable and not in conformity with the requirements of the article and of law, that company or any number of companies affected could lawfully and justly (as would be its bounden duty) refuse to conform to the rate of the managers. But, it is asked, would not this road thus refusing be subjected to fines and forfeitures provided in another part of the agreement, and would not it be turned out of the association? answer emphatically, no. If any such thing were attempted under the circumstances named, the company could defend itself in a court of justice against any such wrongful exaction, and could compel the managers and its associate roads to obey the contract, and to give it its just equality of treatment that it was before entitled to. The Commerce Act itself requires in terms the same reasonable and just conduct by railways towards each other as it does in their treatment of their customers and the public. I most earnestly maintain, therefore, that the whole and every part of article 7 is perfectly valid under any possible construction of the language of the Trust Act, as well as in perfect conformity with and in aid of the Commerce Act. I may as well here compare the provisions of article 7, which contains the great leading feature of the whole agreement, with the agreement in the Trans-Missouri case. The difference is broad and fundamental. In this case, as I have shown, the rates agreed to be adhered to in § 1 of article 7 had already been independently established, were in fact reasonable and just, were on file and inferentially approved by the Interstate Commerce Commission and they had been assailed by nobody, and the whole trade of the country affected was proceeding under them with advantage to the shippers, to the people along the lines of the roads, to the railways themselves, and to the general interest of the country. It was an engagement to stand by that state of things, and for the express purpose of continuing that happy state of things, exactly those that the law requires,-that this engagement was made. Turn now to the TransMissouri agreement on the same part of the subject. That agreement did not propose or profess to stand by any then existing rates, it did not indicate that the rates then existing were just or reasonable, but it proposed to put into the hands of its managers the power to establish de novo reasonable rates, etc., and, in the very words of the agreement, for the purpose of mutual protection and nothing else. The Trans-Missouri agreement imposed no restriction upon the discretion of its ratemaking board; it did not impose and evi dently did not intend to impose, the distinct barriers of the law between the powers of its rate board and the people and any one of the roads concerned. It did not profess to look to any other interest than the exclusive interest of the parties themselves; and it will be seen, on a careful study of it, that it was construed and constructed for the sole purpose of keeping and increasing rates, instead of for the purpose of (as in the Joint Traffic Association) of keeping them just and in conformity with law, whether by reduction, increase, or other readjustment. Other essential differences are stated in my brief, which I need not take the time of the court to enlarge upon. These differences are illustrated by what the pleadings in the two cases show. In our case, the practical operation of the agree ment has been to continue the same competition that existed before. This is admitted. It has been to continue the same just and reasonable rates previously established, and to give a co-operative and advantageous service upon equal terms to everybody and of equal benefit to the whole public. The bill in the Trans-Missouri case alleged-there being, it will be remembered, no previously established rates that were agreed upon-that the parties had refused to establish and give their customers just rates. The answer did not meet the charge, but evaded it in the manner that the court will see stated on page 34 of my brief. The practical constructions by parties to contracts in their operations under them has always been considered an important element in determining the true character and meaning of the contract. What I have now stated shows the operating difference between the two con tracts. The words of the article are as follows: "Article 8. Proportions of competitive traffic. The managers are charged with the duty of securing to each company party hereto equitable proportions of the competitive traffic covered by this agreement so far as can be legally done." with the law that each company should have an equitable proportion of the traffic. What does equitable mean? It means that which right and justice and the public interest require. What did justice and public policy require? And what does it still require in respect of the nine great lines connecting the western lakes and the valley of the Mississippi and the whole continent beyond with the Atlantic seaboard? Was it not just and necessary to public interest that each one of these roads passing through great extents of country, and having along them populations and interests to whose welfare the existence of each one of these roads was necessary, should be considered with reference to the through traffic which should come from beyond? The question answers itself. It is obvious, then, that just so far as each road should be enabled to carry the through traffic that naturally belonged to it, by just so far the people along the whole length of its line would be benefited by increasing the income of the line, and thereby contributing to its support and to its ability to make lower rates to all its people from one end of the line to the other. This provision of the 8th article, then, was wholesome, lawful, and necessary, and it was the very thing which one of the clauses in the Commerce Act and the spirit of all its provisions required. I may be allowed to say a word in respect of the objection that no one of the roads could change its rates without giving thirty days' notice, and therefore that this was a restraint of trade in one sense or another. It will be seen on examining the agreement, that each road had the absolute right, under the agreement and pursuant to its provisions, to change its own rates, and still continue a member of the Association. This being so, The next principal contention of my it seems to me impossible to contend that learned brother is that article 8 of the agree-any part of the agreement was any sort of rement violates the Trust Act by restraining straint, unless it can be established that the trade. thirty days' notice was too long. It is a matter of history that when the Commerce Act was passed there was inserted in it the requirement that no rate should be raised except on ten days' notice, and none should be lowered except on three days' notice, publicly displayed. What was the principle of this? It was that justice and fair play to customThis article provides that the managers ers and to the public and to all persons dishall endeavor so far, and only so far, as obe-rectly or indirectly interested in transportadience to the law-that is to say, conformity with the Commerce Act and conformity with the Trust Act-will permit, to secure equitable proportions of the competitive traffic to each one of the companies. It is sufficient answer to my brother's contention to say that the very terms of the article do not require or invite or allow the managers to act under it at all otherwise than the law shall permit. If therefore the Trust Act condemns the efforts referred to, then not to make the efforts. If the Interstate Commerce Act, either in terms or spirit, is adverse to such an effort, the managers are not authorized to take a step. Does it violate the law to merely authorize an agent to do something in the course of business so far, and so far only, as the law will permit? But I contend that it was in conformity tion required that sufficient and timely knowledge of changes in rates which, as we know, affect in a greater or less degree all commercial and productive transactions, should be had by every person and community interested. I suppose I may properly state it as a public fact, now known to everybody engaged in business, that the time fixed in the Commerce Act for notice was much too short, and that unjust inequalities have arisen, again and again, from charges in rates by particular roads on short notice, that favored customers and favorite localities, etc.. would get advantages over others, in violation of the spirit and substance of the Commerce Act. It was for the purpose, then, and with the effect of producing the widest fair play and equality among all persons, all roads, and all communities, that this period of thirty days, instead of ten, was agreed upon. It was obviously right, and being right, it should not be condemned, unless the rigor of a law that cannot be otherwise construed and applied compels it. I submit with sincere confidence, as regards the provision I have just spoken of, as well as regards all the other provisions of the contract, that, instead of being even a partial restraint of trade, they are all provisions of constraint in support and in promotion of trade. Trade is a general word, and its operation, like all other operations that require co-operating and associating forces and arrangement, are advanced by, and indeed, cannot be carried on truly and honestly for public interest without checks and regulations, some of which may restrain and regulate the behavior of a particular element in the whole operation, and by doing so do not restrain, but advance and promote, the whole; just as, to take the simplest of illustrations that occurs to me, in mechanics the safety valve of a locomotive, with its counterweight, regulates and restrains or gives off the accumulating steam in the boiler, in the first place conserving it, restraining it from escape, and in the second place, enabling it to escape. But all this does not restrain the operations of the locomotive; it is necessary to its best and safest performance of duty. A hundred illustrations might be given. the Trust Act, I beg Your Honor's careful attention to the suggestions I have ventured to make in my printed points. I need not enlarge upon them, and have only to call your attention, first, to the grammatical construction of the first section, and second to the citations I have made from law writers, showing a distinct and separate classification of the two phrases, "restraint of trade" in general, and "partial restraint of trade.' If these writers are correct (as nobody doubts, I think, they are), and these two phrases were known and treated in the law at the time of the passage of the act as separate things, the one obnoxious and the other just and wholesome, then I respectfully and earnestly insist that the universal rule of construction requires that the words in the act shall be assigned to the first class and not carried over into the second. Mr. John K. Richards, Solicitor General, for the United States, appellant in reply: Mr. Carter said he would not reargue the questions considered in the Trans-Missouri case, and then proceeded to discuss what constitutes an agreement among railroads in restraint of trade, insisting that one which only prevents competition for the purpose of maintaining reasonable rates is not one in restraint of trade. 1. It is claimed that because nothing has been done under the agreement, no irrepara ble injury has been or can be shown, and therefore no injunction lies. But the antitrust law makes the agreement illegal, and vests the court with jurisdiction to prevent violations of the act. The carrying out of an illegal contract will result in irreparable injury to the public, and this sufficiently My brother on the other side suggests appears from the provisions of the law dethat the clause in the agreement providing claring the illegality and authorizing the infor abolishing soliciting agencies is а re- junction proceedings. straint of trade. I have stated in my printed points my answer to this. I may add, how ever, that soliciting trade or ceasing to solicit trade is not trade itself, and does not belong to it even as an incident. Wherever it is practised it is practised apart from any act of trade; it precedes it, and sometimes leads up to it, and sometimes repels it. It was perfectly competent, therefore, and certainly wise, for these roads to agree to abolish such agencies, and to join, so far as it might be convenient to do for the information of the public, in having agencies at various points of importance to assist ship: pers and manufacturers in the most rapid and economical transmission of their productions. The plan, therefore, substituted 2. It is insisted that an agreement in refor the old practice is one far more advan-straint of trade must restrain trade,-that tageous to the public who wish for hon- is, reduce, or diminish it; that trade must est and equal dealing than the old prac-be injured. tice. But I submit that whatever character An agreement in restraint of trade may or may be imputed to soliciting business, it does not fall within the authority of Congress to regulate it at all. While it is going on the business solicited has not reached the point of being interstate commerce, and cannot reach it until its movement has commenced, or is about to commence, definitely from one state to another. I refrain from making any observation on the constitutional question arising if the Trust Act is to be construed as forbidding innocent contracts promotive of public policy, which I have insisted upon in my printed points, for the reason that in the division of our subjects of discussion this matter will be left entirely to my brother, Mr. Phelps. In respect to the meaning of the words of In the Trans-Missouri case this court held that such an agreement is in restraint of trade, regardless of its purpose and the actual result of its operation. So, after all, the argument of Mr. Carter was directed to a discussion anew of the questions argued and considered and settled by this court in the Trans-Missouri case. may not diminish or reduce trade. The injury sought to be averted by prohibiting such agreements is the injury to the public. The stifling of competition, the creation of a monopoly, may increase the trade in the product controlled, but nevertheless to the injury of the public. To stifle competition is to create a monopoly and place the public at the mercy of the monopoly. The benefits resulting from cheaper products through monopolies have never been held by courts or legislatures as sufficient to overbalance the evils to the government and people from the creation of monopolies. It is a question of method, rather than result. Trusts and monopolies are forbidden in order to preserve competition, and thereby, as far as possible, |
