Merchants' Warehouse Co. v. United States

44 F.2d 379, 1930 U.S. Dist. LEXIS 1418

• Court: District Court, E.D. Pennsylvania
• Decided: October 8, 1930
• Status: Published

Opinions

THOMPSON, District Judge.

The Merchants’ Warehouse Company, the Pennsylvania Warehousing & Safe Deposit Company, and the Philadelphia Warehousing & Cold Storage Company filed bills in equity praying for an order and decree to annul and set aside an order of the Interstate Commerce Commission entered on December 28, 1929. The order of the Commission was promulgated in three eases, which were consolidated, heard together, and decided in the report of the Commission, entitled Gallagher et al. v. Pennsylvania Railroad Company, 160 I. C. C. 563.

The complaints before the Commission charged that certain allowances paid to the plaintiff warehouse companies by the Pennsylvania Railroad Company, the Reading Company, and the Baltimore & Ohio Railroad Company, defendants before the Commission, subjected the complainant warehouse companies to unjust discrimination, undue prejudice, and disadvantage, and unduly preferred and advantaged the plaintiff warehouses, with which the complainants were competitors as warehousemen, in violation of sections 2 and 3 of the Interstate Commerce Act (49 USCA §§ 2, 3).

The plaintiff warehouses and the complainants before the Commission, who are intervening defendants in this proceeding, operate at Philadelphia warehouses, at and from which they ship and receive, load, unload, store, distribute, and deliver in small quantities carload lots of merchandise, known as “package freight,” carried or to be carried at carload rates, which they have previously solicited for such handling from their customers located generally in cities outside of Pennsylvania. For those services they collect from their customers certain warehouse rates and charges.

The business in which the warehouses with which we are concerned are engaged, is thus described in the Commission’s report:

“In all the larger cities, including Philadelphia, public warehouses are customarily used for the receipt, storage, and distribution of merchandise. That these warehouses perform an important public service is undisputed. The merchandise warehouse receives goods in carloads and distributes them in smaller quantities to local jobbers or retailers, or reships them in less-than-carload lots to near-by destinations; issues negotiable and nonnegotiable receipts, provides insurance,, and allows credit to be obtained on merchandise stored; provides recoopering, marking, and separation of varieties, and various incidental clerical services. Warehouse services enable manufacturers to keep spot stocks for their customers; equalize production by steadily absorbing the manufacturers’ output while eliminating heavy investment in reserve storage space; reduce freight charges and save time in transit through handling goods in carload quantities; reduce fire risk and loss and damage claims; and eliminate the necessity of providing storage space at point of origin. Both complainants and the contract warehouses furnish these services.”

The plaintiffs in the instant case operate, in competition with the interveners, who were complainants before the Commission, the same typo of warehouses and render the same kind of services generally as the intervenors, for which charges are collected from their customers. The carriers, the Pennsylvania Railroad Company, the Baltimore & Ohio Railroad Company, and the Reading Company, pay to the plaintiffs, in connection with the loading, unloading, and “handling” by them of such merchandise, certain sums, ranging from 30 cents to 50 cents per ton, but make no such payments to the warehouses which were complainants before the Commission. No payments are made if the shipments are unloaded within the forty-eight hours free time. The Pennsylvania Railroad Company pays the allowances in question to the Merchants’ Warehouse Company, the Baltimore & Ohio to the Pennsylvania Warehousing & Safe Deposit Company, and the Reading Company to the Philadelphia Warehousing & Cold Storage Company, the plaintiffs here. Payments are also made by the Pennsylvania to the Quaker City Cold Storage Company and by the Reading to the Pennsylvania Warehousing & Safe Deposit Company.

In some instances, the carriers own the land or warehouses which the plaintiffs hold under lease. In other instances, the carriers do not own the land or the warehouses.

In the report of the Commission, because of the fact that the payments, which are alleged to be preferential, discriminatory, and prejudicial as against the intervening defendants, are made in accordance with contracts with the respective carriers of many years standing, the warehouse companies, which receive the allowances, are designated as “contract warehouses.”

The contracts provide that the warehouse shall accord to traffic passing over the lines of the carrier preference in facilities furnished by the warehouse over traffic passing over other lines; shall load or unload or handle freight received to be shipped over the lines of the carrier, or received by the warehouse from the carrier for delivery to consignees; shall notify the consignees of the arrival of in-coming freight; shall be responsible for the prompt collection of freight charges and other charges upon in-bound freight; shall indemnify and hold harmless the carrier for all damage to and all loss of freight in the custody of the warehouse; shall maintain fire insurance; shall notify the carrier of the failure of consignees to receive freight; shall comply with directions with respect thereto received from the carrier; shall indemnify the carrier against liability on account of any of the warehouses’ acts of omission and on account of bills for merchandise issued by the warehouse. For those services the carriers agree to make payments to the contract warehouses as provided in the contracts.

The terminal services of the contract warehouses include the removing and recording of the seals from the cars placed for unloading, placing seals on loaded cars and preserving the record thereof, examining the merchandise, noting the damage and the cause thereof, the prompt inspection of the equipment, prompt loading and unloading to minimize delay, storing the shipment for the forty-eight hours free time, including protection against fire through insurance, taking up bills of lading and canceling the same, delivering the merchandise to the consignee and taking receipts therefor, handling claims for damage, disposal of refused merchandise, executing bills of lading for out-bound shipments,, tallying the contents of the cars.

The record thoroughly establishes the fact that the contract warehouses and the intervening warehouses are engaged in the same kind of business, and each ships and receives at its warehouses package freight of all kinds destined to or shipped from various points in the United States over the railroads, and that the circumstances and conditions surrounding handling and movement of the traffic are similar if not identical. It is further shown by the record that the services which the contract warehouses perform, for which the contracts provide for the payment of compensation by the carrier to them, are performed,, for their patrons, by the intervening defendants who were complainants before the Commission; that the latter load and unload the freight for their patrons, pay and collect freight charges, send notices of arrival to their customers, check the contents of the cars, give the railroads reports, notify the railroads of damage to the freight, prepare bills of lading, mark and stencil packages, recooper and perform in general identical services for their patrons.

As to this, the Commission finds:

“The services performed by the contract warehouses do not differ in substance from those rendered by complainants. The warehouses of complainants and those of the contract warehouses are served by private sidetracks or sidings connecting with the lines of one or more defendants. Both handle the same classes of freight, and both obtain business by widespread advertising in prominent trade publications, by sending letters, pamphlets, and circulare to prospective customers offering them their services, and by personal solicitation. There is active and keen competition between complainants and the contract warehouses. Concerns using public-warehouse facilities generally select the company offering them the lowest aggregate charge for the distribution of their goods. By means of the allowances the contract warehouses are able to quote lower charges than can complainants.”

Evidence was introduced on behalf of the complainants before the Commission for the purpose of showing that all of the services performed by the contract warehouses, including the loading of freight into, and the unloading of freight from, railroad cars, are warehouse trade services which are performed by all merchandise warehouses under the terms of their contracts and arrangements with their patrons, the manufacturers and wholesalers, and not transportation services, and that the contract warehouses’ premises were not in fact public terminals of the carriers.

The Commission found from the evidence that:

“* * * The contract warehouses are compensated for the solicitation of freight for movement over the lines of the respective defendants through the payment of the allowances in question; that traffic considerations have been the primary motive for the payment of these allowances; that the facilities of the contract warehouses, while nominally open to the general public as railroad freight stations, are not in fact public stations but are confined to the handling of merchandise for the patrons of the warehouses; and that the services performed by the contract warehouses in connection with the loading or unloading of freight, including the sending of arrival notices, the collection of freight charges, and other incidental matters, are in fact performed for the benefit of the owner of the merchandise rather than for defendants.

“While the contract warehouses are not the owners of the goods received or shipped by them, all of defendants’ dealings are with these companies and none with the owners of the goods. As to many of the inbound carload shipments the contract warehouses are the only parties to whom delivery of the goods could be made as carload shipments, the real owners being concerns which ship carload merchandise to the contract warehouses for distribution in less-than-carload lots. The contract warehouses, even though not the owners of the goods, have been given dominion over such goods for transportation purposes, and accordingly for transportation purposes they should be deemed the consignors of shipments from or consignees of shipments to their warehouses. The same is true as to complainants, shipments from and to their warehouses being handled in substantially the same manner.”

The Commission concluded that:

“* * * The practice of defendants in making allowances to the contract warehouses in connection with the loading or unloading of package freight at Philadelphia as aforesaid, and refusing to make similar allowances to complainants for performing similar services, results in unjust discrimination, in undue preference of the contract warehouses, and in undue prejudice to complainants. The record discloses that these allowances are nothing more than a device to attempt to lend legality to the payment of rebates to the contract warehouses. It is apparent that the unjust discrimination and undue prejudice can lawfully be corrected only by terminating the allowances.”

The Commission accordingly entered its order of December 28, 1929, requiring the defendant railroads to cease, desist from, and abandon publishing or making allowances to the contract warehouses in connection with the loading or unloading of package freight at Philadelphia, and requiring the Pennsylvania and the Baltimore & Ohio Railroads to cancel tariff provisions which had been published by them, making the contract warehouses a part of their station facilities at Philadelphia.

Although the railroads were defendants before the Interstate Commerce Commission, they did not intervene in the instant proceedings and took no part through counsel or otherwise at the hearing and argument of the ease. We must assume, therefore, that they are satisfied with the order requiring them to desist from the payments and to cancel their tariff provisions, not only those under which the payments are made to the petitioners, but those in which the petitioners’ warehouses are designated as public freight stations.

The original' contracts, which the Commission has declared discriminatory and prejudicial, had their origin when there was nothing unlawful in contracts or arrangements between interstate earners and the shipping public in making such allowances or deductions out of freight rates as have since been denounced and made unlawful by existing law, so that the question before the court is not whether the system set up was ethically bad, but whether it is condemned by the law as it now is.

It is insisted on the part of the plaintiffs that the findings and order of the Commission are not supported by substantial evidence. It is not, however, contended that the courts may put their judgment as to finding of fact based upon substantial evidence against that of the Commission. The court may not inquire into the expediency of the order, nor will it consider facts further than to determine whether there was sufficient evidence to support the order. Interstate Commerce Commission v. Union Pacific Railroad, 222 U. S. 541, 32 S. Ct. 108, 56 L. Ed. 308; Nashville Railway Company v. Tennessee, 262 U. S. 318, 43 S. Ct. 583, 67 L. Ed. 999; Assigned Car Cases, 274 U. S. 564, 47 S. Ct. 727, 71 L. Ed. 1204. The courts will not inquire into the soundness of the reasoning whereby the Commission’s conclusions are reached. Interstate Commerce Commission v. Illinois Central Railroad Company, 215 U. S. 452, 30 S. Ct. 155, 54 L. Ed. 280; Skinner & Eddy Corporation v. United States, 249 U. S. 557, 39 S. Ct. 375, 63 L. Ed. 772. These are matters left by Congress te the administrative tribunal appointed by law and informed by experience. Illinois Central Railroad Company v. Interstate Commerce Commission, 206 U. S. 441, 27 S. Ct. 700, 51 L. Ed. 1128. Assigned Car Cases, supra. And whether a practice is unjustly discriminatory or preferential is a question of fact entrusted exclusively by the act to the Commission for determination upon the evidence in a particular case. Interstate Commerce Commission v. Alabama Midland Railway Company, 168 U. S. 144, 18 S. Ct. 45, 42 L. Ed. 414; Nashville Railway v. Tennessee, supra.

The case is very similar to the case of Terminal Warehouse Company of Baltimore City v. United States et al. (D. C.) 31 F.(2d) 951, 057, where the Terminal Warehouse Company of Baltimore had a contract or arrangement with the Pennsylvania Railroad Company substantially similar to the contracts involved here. In the proceeding before the Commission, the practice of the railroad, in paying the Terminal Company allowances for the performance of terminal services in connection with the loading and unloading of package freight at Baltimore, was found by the Commission to result in an unjust discrimination as against the McCormick Warehouse Company, which was conducting a warehouse business in competition with the Terminal Warehouse Company. The bill of complaint was dismissed upon the ground that the finding by the Commission of discrimination and unreasonable preference was sustained by the evidence before the Commission.

In discussing the contentions of the Terminal Warehouse Company, Judge Soper said:

“The contention of the Terminal Warehouse Company is that the Commission’s order is wrong, because the Warehouse Company has been designated in the tariff as a public station of the carrier, and hence in this place the carrier is obliged, under the exception to rule 27, to load and unload carload freight, and may employ and pay the Terminal as its agent to do the work. But the conclusion to which the Commission came destroys the essential premise upon which this argument is based; for it found that the Terminal Warehouses,, although nominally open to the general public, are in fact confined to the receipt and forwarding of merchandise concerning which the Terminal is employed to render some warehouse service. We are bound by this conclusion of fact, if it is supported by substantial evidence. Anchor Coal Co. v. U. S. (D. C.) 25 F.(2d) 462, 471. In our opinion, the evidence not merely supports, hut requires, the conclusion which the Commission has reached. It is true that 20 per cent, of all carload package freight, shipped to Baltimore over the Pennsylvania, is handled by the Terminal Warehouse, and that any shipper, desiring warehouse facilities, may send his goods to its platform. But these circumstances do* not constitute the warehouse a public station. It is not used by shippers or consignees, who do not require or desire the services of the Terminal Warehouse Company, and either do not make use of any warehouse, or send their goods to other warehouses of a private or public character. The distinction between this situation and that in the case of U. S. v. Baltimore & Ohio Railroad, 231 U. S. 274, 34 S. Ct. 75, 58 L. Ed. 218, upon which the complainant relies, is obvious; for there the premises used by the carrier as a freight station, although furnished and operated by a nearby shipper, who used it to a greater extent than any other shipper, was nevertheless open to all shippers and actually used for the benefit of all alike.”

It is contended on behalf of the plaintiffs, in discussing Judge Soper’s consideration of the argument for the Terminal Warehouse Company, that, while the evidence in that ease may have justified the finding of the Commission that the warehouses there in question were not railway terminal stations, the decision was based upon the undisputed evidence that no shippers or consignees, who were not customers of the warehouse company, used the warehouse as a shipping or delivery station. It is argued that in the instant case there is not sufficient evidence to show that shippers generally do not use the contract warehouses as railroad freight terminals, and they point, as evidence to the contrary, to testimony before the Commission showing that, during one year, 744 carloads of freight were brought by team and loaded in carload lots at the Merchants’ Warehouse, which were not placed in storage. It is argued that the negative testimony.was not sufficient to support the finding of fact by the Commission in the face of the testimony about the 744 carloads.

As to the first proposition, that the positive evidence was not sufficient to establish the fact, we think that there is enough substance in it to support the Commission’s findings, in view of the rule stated above that the courts cannot put their judgment as to conclusions of fact against that of the Commission. As to the testimony contra, it is- not shown anywhere, as to the 744 carloads, that any of the shippers of those carloads of freight were not patrons of the warehouse company handling them, although it performed no storage services as to those particular shipments, and the railroad company did pay it for loading onto the ears, as agreed under the contract. Moreover, there is evidence, oral and documentary (the latter through circulars, advertisements, and pamphlets, soliciting business as merchandise and distributing warehousemen), that the sidings of the contract warehouses, where the cars were “spotted” for loading or delivered for unloading, were designated by them as their “private sidings.” '

It is further argued on behalf of the plaintiffs that the service of loading, unloading, assorting, storing, and delivering the carload shipments rendered by the plaintiffs for their patrons at their warehouses after the carriers had delivered the ears to them upon their warehouse sidings, is not a trade service, but is a transportation service. As has already teen stated, the services rendered by the intervening warehouses are in every substantial detail the same as those rendered by the contract warehouses.

It cannot be contended that the intervening warehouses render a transportation service. If, therefore, under identical facts and circumstances their service to their patrons is not a transportation service, how can that of the contract warehouses become so merely because the railroads agree to perform the loading and unloading at the contract warehouses, and designate their private sidings as railroad terminals.

The question as to whether or not they are transportation services is a question of fact and, if supported by substantial evidence, is conclusive upon the court. United States v. Erie Railroad Company, 280 U. S. 98, 50 S. Ct. 51, 74 L. Ed. 187; Assigned Car Cases, supra.

There is no evidence of record to show that the railroads exercise any control over the plaintiffs’ warehouses or their business, except that shown by the contracts, under which it is contended for the plaintiffs that they are employees and agents of the railroad company for performing the duties of loading and unloading, which the railroads, it is claimed, are under an obligation to perform for shippers and consignees at their designated terminal stations. This obligation, if it is such, arises from the fact that the Pennsylvania Railroad and the Baltimore & Ohio Railroad have made provision in their tariffs by which they take upon themselves the service to consignors and consignees of loading and unloading carload package freight carried at railroad rates.

Rule 27 of the official Consolidated Freight Classification, to which the carriers are parties, provides as follows:

“Section 1. Owners are required to load into or on ears freight for forwarding by rail carriers, and to unload from cars freight received by rail carriers, carried at carload ratings.”

The Pennsylvania Railroad and the Baltimore & Ohio Railroad provide in their tariffs by exceptions to Rule 27 that they agree to load or unload carload package freight at certain Philadelphia freight stations, included among which are tile contract warehouses. The Reading Company has no such tariff provisions, but also pays its contract warehouses for performing the work of loading and unloading carload package freight as agreed in the contracts.

The plaintiffs point to these tariff provisions as justification for the payments by the railroads, upon the ground that the railroads, having assumed the obligation to load and unload, which under Rule 27 above cited rests upon the consignors and consignees, have exercised their right to select their employees to do this work for them and to designate their own terminal stations as the place where the service is to be performed; that, having the tariff obligation, they may limit themselves to the selection of their employees and may lawfully select the plaintiffs as such without being guilty of any unlawful discrimination, preference, or prejudice.

It is well settled that a railroad carrier may exercise its own discretion in the selection of its agents and employees to perform any part of its transportation service and that the mere granting of privileges, which are incidentally a part of the compensation for services rendered, is not unlawful as preferential or discriminatory as against others who are not thus selected. Del., L. & W. R. R. Co. v. Morristown, 276 U. S. 182, 48 S. Ct. 276, 72 L. Ed. 523; Donovan v. Pennsylvania Co., 199 U. S. 279, 26 S. Ct. 91, 50 L. Ed. 192; Great Northern Ry. Co. v. Minnesota, 238 U. S. 340, 35 S. Ct. 753, 59 L. Ed. 1337; Express Cases, 117 U. S. 1, 6 S. Ct. 542, 628, 29 L. Ed. 791, and 117 U. S. 601, 6 S. Ct. 1190, 29 L. Ed. 791; Chicago, St. L. & N. O. R. Co. v. Pullman Car Co., 139 U. S. 79, 11 S. Ct. 490, 35 L. Ed. 97; Black & White Taxicab Co. v. Brown & Yellow Taxicab Co., 276 U. S. 518, 48 S. Ct. 404, 72 L. Ed. 681, 57 A. L. R. 426.

But there is substantial evidence to support the facts found by the Commission that the warehouses of the plaintiffs are not in fact open public freight stations of the railroads; that the service rendered by them nnder the contracts is a trade service and not a transportation service, in that it was rendered by the contract warehouses and by the interveners, each for its patrons in precisely the same way; that thereby the plaintiffs are enabled to perform such service for their patrons for a lower charge than that for which the interveners can perform the same service to their patrons.

It is clear that the payment of the allowances by the railroads under the contracts was not a consideration for employment in a transportation service.

Passing to the contention that the Commission was wrong in finding that the contract warehouses, even though not the owners of the goods, had been given dominion over such goods for transportation purposes and accordingly for transportation purposes should be deemed the consignors of shipments from or consignees of shipments to their warehouses, it is contended here, as it was in Terminal Warehouse v. United States, supra., that, inasmuch as the Bills of Lading Act, 39 Stat. 545, § 42 (49 USCA § 122) provides that, unless the context otherwise requires, “consignor” and “consignee,” respectively, mean the person named in the bill as the person from whom the goods have been received for shipment, or to whom the delivery of the goods is to be made, the contract warehouses cannot be deemed the consignors or consignees because the billing invariably names a consignor or consignee other than the warehouses.

It is well settled that the actual situation underlying a shipment rather than recitals in the shipping documents should control the application of the acts of Congress. And while the billing in the instant case did not name the contract warehouses as consignors or consignees and the documents in consignments were made out “in care of” the warehouses, it is inconceivable that the mere wording of the shipping documents can justify a course of action which would otherwise he contrary to law. Terminal Warehouse Co. v. United States, supra.

The Supreme Court has held that carriers may not lawfully discriminate for or against forwarders of goods. I. C. C. v. Del., L. & W. R. Co., 220 U. S. 235, 31 S. Ct. 392, 55 L. Ed. 448; United States v. Lehigh Valley R. R. Co. (D. C.) 222 F. 685; Lehigh Valley Railroad Co. v. United States, 243 U. S. 444, 37 S. Ct. 434, 61 L. Ed. 839. We follow the reasoning of Judge Soper in Terminal Warehouse Company v. United States, supra :

“Both the warehouse and the forwarder solicit and obtain the transportation of goods. The forwarder is concerned with the assembling of goods into carload lots at the point of shipment and the carriage of the same to one consignee, who may he the forwarding agent himself, and who receives the goods and distributes them to the parties for whom they are intended. The warehouseman is chiefly concerned with the receipt and distribution of goods from the carrier after they have reached their destination. It is true that the forwarder is usually the consignor or the consignee of the goods, and it may be conceded arguendo that the warehouse company in this case is not. But both are closely related to the carriage of the goods and to the carrier, and both are entitled to the protection of the statute.”

In our opinion, the Commission was right in finding that the actual business of the warehouses was not that of rendering service to the railroad companies in loading and unloading, and in storage for the account of the railroad companies, but that they were conducting a general warehousing business for their own patrons and that the payments made by the railroad companies under the guise of rendering service to them put the contract warehouse companies in the position of preference and advantage over the intervening warehouse companies which had the facilities and were engaged in business precisely similar to that of the plaintiffs; that by means of the payments the contract warehouses were enabled not only to obtain a preference and advantage for themselves over competing warehouses, but also were enabled to perform for their patrons warehouse services and other services in connection with transportation at a less rate than could be obtained for shippers who were' patrons of the intervening warehouses.

We conclude that the payment of the allowances by the railroads under the contracts comes within the provisions of section 2 of the Interstate Commerce Act, as amended by section 404 of the Transportation Act of 1920 (49 USCA § 2), in that the contracts constitute devices whereby the carriers receive from the contract warehouses, through the deduction out of freight rates of the allowances, a less compensation for services rendered than they charge and receive from the intervening warehouses for doing a like service under substantially similar circumstances and conditions, and thereby subject the latter to unjust discrimination.

We further conclude that, under section 3 of the above Act (49 USCA § 3), the payment of the allowances gives an undue and unreasonable preference and advantage to the contract warehouses, and subjects the intervening warehouses to an undue and unreasonable prejudice and disadvantage.-

Several trade and commercial organizations intervened on behalf of the plaintiffs, and at the argument and in their briefs they have reinforced the contentions of the plaintiffs and have predicted serious results to the commercial interests of Philadelphia in case the order of the Commission is allowed to stand. While these arguments ab ineonvienti have had due consideration, we must determine the issues involved, unaffected by what the results may be, in accordance with the law as enacted. Such results as may flow from the order of the Commission are properly for the consideration of Congress and not the courts.

The bills are dismissed.

DICKINSON, District Judge, concurs.