[244 U.S. 617, 618] Messrs. C. O. Bailey, Branch P. Kerfoot, T. B. Harrison, J. H. Voorhees, and C. W. Stockton for plaintiffs in error.
Messrs. John Barton Payne, R. B. Scott, and A. P. Humburg, as amici curiae, on behalf of Illinois Central Railroad Company.
Messrs. Oliver E. Sweet, Byron S. Payne, P. W. Dougherty, and Clarence C. Caldwell for defendants in error.
Messrs. Charles W. Needham and Joseph W. Folk, as amici curiae, on behalf of the Interstate Commerce Commission.
Mr. Justice Brandeis delivered the opinion of the court:
In 1912 the Interstate Commerce Commission entered upon a comprehensive investigation of express rates, [244 U.S. 617, 619] practices, accounts, and revenues. Its report1 resulted in the establishment, on February 1, 1914, throughout the United States, of the so-called uniform zone and block system of rates in interstate transportation, and the prompt adoption, in forty states, of the same system in intrastate transportation. 2 South Dakota did not adopt the national system. It adheres to a schedule of maximum express charges, known as Distance Tariff No. 2, which was promulgated by its Board of Railroad Commissioners in 1911, and which, on weighted average, is about 40 per cent lower than the Zone and block system. Shippers of Sioux City, Iowa, complained that the differences between these interstate and intrastate scales of rates resulted in unjust discrimination against them, to the advantage of their South Dakota competitors. Proceedings to secure relief were brought by them before the Interstate Commerce Commission; and on May 23, 1916, its report and order were filed. Traffic Bureau v. American Exp. Co. 39 Inters. Com. Rep. 703.
This order,3 couched in general terms, prohibited charg- [244 U.S. 617, 620] ing after August 15, 1916 (later extended to September 15, 1916), 'higher rates for the transportation of shipments by express between Sioux City, Iowa, and points in the state of South Dakota, than are contemporaneously . . . demanded . . . for transportation under substantially similar circumstances and conditions for substantially equal distances between Sioux Falls, Mitchell, Aberdeen, Watertown, and Yankton, South Dakota, on the one hand, and said points in the state of South Dakota, on the other, which said relation of rates has been found by the Commission to be unjustly discriminatory.' The order made 'the report containing its findings of fact and conclusions thereon' a part thereof; and the report makes clear that the order applied only to competitive territory, and that this is the southeastern section of South Dakota. The report also declared 'that the South Dakota rates are too low to be made the measure of interstate rates between Sioux City and South Dakota points;' that the existing interstate rates 'have not been shown to be unreasonable;' that no reason has been presented for modifying them; and that the Commission is 'under no doubt as to how the unjust discrimination found to exist should be corrected;' but the report did not expressly state that the intrastate rates should be raised, nor did it enumerate the competitive points in South Dakota to which the rate adjustment should apply.
In July, 1916, the express companies conferred informally with the Board of Railroad Commissioners about introducing in South Dakota complete intrastate tariffs corresponding with the zone and block system scale, and also about introducing special tariffs on that basis covering [244 U.S. 617, 621] rates between the cities of Sioux Falls, Mitchell, Aberdeen, Watertown, and Yankton and all other points in the state. On August 5 the Board issued an order for a general investigation of express rates; and set for hearing on December 4, 1916, that investigation as well as the applications to put into effect these special or general tariffs. In an opinion then filed, it said:
On August 25, the express companies formally presented to the Board the special tariffs, to become effective September 15. And on September 12, the Board formally refused to allow the same to be filed, and rejected them, among other reasons, because the
On the same day the attorney general of South Dakota and the Board of Railroad Commissioners brought an original proceeding in the supreme court of the state against the American Express Company and Wells Fargo & Company to enjoin them from putting into effect the special tariffs covering all their rates within the state to [244 U.S. 617, 622] and from the five cities named; and a restraining order was issued. The defendants complied with the restraining order; but filed an answer in which they set up the order of the Interstate Commerce Commission, and alleged that about August 15 they published certain express rate tables, but that
There was in the answer no explicit allegation that no change in rates had been made except as required by the Commission's order. 4 [244 U.S. 617, 623] The plaintiffs demurred to the answer upon the ground that it did not state facts sufficient to constitute a defense to the suit. The demurrer was sustained, and defendants having elected to stand on their answer, a perpetual injunction was granted on December 5, which enjoined the express companies from putting into effect the special tariffs presented on August 25,
A petition for writ of error to this court was allowed December 11, 1916. The record was filed here January 27, 1917, and included in it is the opinion of the supreme court of South Dakota, filed in the cause January 20, 1917. The reasons there given for holding that the order of the Interstate Commerce Commission is no justification for disregarding the order of the Board of Railroad Commissioners of South Dakota embody, in substance, the argument made here on behalf of the state's officials. [244 U.S. 617, 624] 1. The nature of the Interstate Commerce Commission's order.
In its specific direction the order merely prohibits charging higher rates to and from Sioux City than to and from the five South Dakota cities. It could be complied with (a) by reducing the interstate rates to the South Dakota scale, or (b) by raising the South Dakota rates to the interstate scale, or (c) by reducing one and raising the other until equality is reached in an intermediate scale. The report (which is made a part of the order) contains, among other things, a finding that the interstate rate which was prescribed by the Commission was not shown to be unreasonable. This finding gives implied authority to the express companies both to maintain its interstate rates and to raise to their level the intrastate rates involved. The Shreve port Case (Houston, E. & W. T. R. Co. v. United States) 234 U.S. 342 , 58 L. ed. 1341, 34 Sup. Ct. Rep. 833. For, if the interstate rates are maintained, the discrimination can be removed only by raising the intrastate rates.
But the finding that discrimination exists and that the interstate rates are reasonable does not necessarily imply a finding that the intrastate rates are unreasonable. Both rates may lie within the zone of reasonableness and yet involve unjust discrimination. Interstate Commerce Commission v. Baltimore & O. R. Co. 145 U.S. 263, 277 , 36 S. L. ed. 699, 703, 4 Inters. Com. Rep. 92, 12 Sup. Ct. Rep. 844. Proceedings to remove unjust discrimination are aimed directly only at the relation of rates. If in such a proceeding an unreasonable rate is uncovered and that rate made reasonable, it is done as a means to the end of removing discrimination. The correction is an incident merely.
2. The power of the Interstate Commerce Commission.
The supreme court of South Dakota declares:
That court denies not only the intent of Congress to confer upon the Commission authority to remove an existing discrimination against interstate commerce by directing a change of an intrastate rate prescribed by state authority, but denies also the power of Congress under the Constitution to confer such power upon the Commission or to exercise it directly. The existence of such power and authority should not have been questioned since the decision of this court in the Shreveport Case.
It is also urged, that even if the Commission had power, under the circumstances, to order a change of the intrastate rates, the order in question was invalid, because the Commission, instead of specifically directing the change, undertook to give to the carrier a discretion as to how it should be done and as to the territory to which it should apply. The order properly left to the carrier's discretion to determine how the discrimination should be removed; that is, whether by lowering the interstate rates or by raising the intrastate rates, or by doing both. In its general form the order is identical with that under consideration in the Shreveport Case. Where a proceeding to remove unjust discrimination presents solely the question whether the carrier has improperly exercised its authority to initiate rates, the Commission may legally order, in general terms, the removal of the discrimination shown, leaving upon the carrier the burden of determining also the points to and from which rates must be changed, in order to effect a removal of the discrimination. But where, as here, there is a conflict between the Federal and the state authorities, the Commission's order cannot serve as a justification for disregarding a regulation or order issued under state authority, unless, and except so far as, it is definite as to the territory or points to which it applies. For the power of the Commission is dominant [244 U.S. 617, 626] only to the extent that the exercise is found by it to be necessary to remove the existing discrimination against interstate traffic. Still, 'certum est quod certum reddi potest.' Whether the order here involved is definite presents a question of construction which will be considered later.
3. The requirements of the state law.
The South Dakota statute (1911, chap. 207, 10, as amended 1913, chap. 304) provides that no advance in intrastate rates may be made except after thirty days' notice to the Board of Railroad Commissioners by filing of schedules, and to the public by publication and posting in every office of the carrier in the state. The special tariff here in question, which was presented to the Board informally at conferences in July, was not formally offered for filing until August 25. It was, by its terms, to take effect September 15; and notice to the public was not made as provided in the statute. But these provisions cannot be held to apply to changes in intrastate rates over which the Board has no control. The proper conduct of business would suggest the giving of some notice (as was done by the express companies in the instant case); but a valid order of the Commission is, when applicable, a legal justification for disregarding a conflicting regulation of the state law-because the Federal authority is dominant.
4. The scope of the order.
If the general words of the order are read alone, they might perhaps be understood as applying to rates between the five named South Dakota cities and all other 'points' in South Dakota. But the order explicitly makes the report which is filed therewith a part thereof; and the order itself also qualifies the general words used, by the clause: 'Which said relation of rates has been found by the Commission to be unjustly discriminatory.' The report makes it thus perfectly clear that the order applies only to the 'points' in competitive territory, or, [244 U.S. 617, 627] as the supreme court expresses it, those 'commercially tributary' both to the five cities and to Sioux City. That territory, as the report also shows, is the southeastern part of South Dakota; and as to this alone, the discrimination was found to exist. The express companies were not warranted by anything in the order in extending the special tariffs of rates to and from the five cities to include 'points' in every part of the state. As to all rate advances other than those in the competitive territory, their action was unauthorized.
It is urged on behalf of the state officials that the order does not show with the necessary precision to what 'points' it applies; and that if not wholly void for indefiniteness, it at least cannot serve as a justification for failure to observe the regulations and orders imposed by authority of the state. In cases of this nature, where the dominant Federal authority is exerted to affect intrastate rates, it is desirable that the orders of the Interstate Commerce Commission should be so definite as to the rates and territory to be affected as to preclude misapprehension. If an order is believed to lack definiteness an application should be made to the Commission for further specifications. But the order, although less explicit than desirable, is, when read in connection with the railroad map, not lacking in the requisite definiteness. As the order is limited to the relation of rates to and from Sioux City and to and from the five South Dakota cities 'under substantially similar circumstances and conditions and for substantially equal distances,' and the report states that the American Express Company operates 'over the lines of the Chicago & Northwestern Railway Company and the Chicago, St. Paul, Minneapolis, & Omaha Railway Company,' and that the Wells Fargo & Company operates 'over the Chicago, Milwaukee, & St. Paul Railway Company,' it furnishes the necessary data for adjusting the rates in controversy. [244 U.S. 617, 628] 5. The jurisdiction of the state court.
It is urged that the supreme court of South Dakota erroneously assumed jurisdiction, because this proceeding is an attack upon an order of the Interstate Commerce Commission; that by the Act of Congress (36 Stat. at L. 539, 540, 543, chap. 309, Comp. Stat. 1916, 993) exclusive power 'to enjoin, set aside, annul, or suspend in whole or in part any order of this Interstate Commerce Commission' was vested in the commerce court; and that by the Act of October 22, 1913, abolishing that court (38 Stat. at L. 219, chap. 32), the exclusive power was transferred to the several district courts. If this were a proceeding professedly 'to enjoin, set aside, annul, or suspend' an order of the Commission 'in whole or in part,' a state court would obviously have no jurisdiction. The bill does not purport to attack, nor does it even refer to, any such order. It alleges only that the express companies propose 'increases and advances' in charges for intrastate transportation, by introducing 'existing interstate rates.' It is the answer which sets up the order of the Commission as a justification; and plaintiffs deny that it is such. Whether or not the state court has jurisdiction cannot, of course, depend upon the professed purpose of the proceeding nor upon the mere form of pleading. An order may be as effectively annulled by misconstruction as by avowedly setting it aside. But we have no occasion to determine in the instant case under what circumstances and to what extent the effect of orders of the Commission may be questioned in state courts. The answer does not allege that all the intrastate rates to and from the five cities which have been advanced were advanced in compliance with the order of the Commission. It alleges merely that the rates applied were those prescribed 'for interstate traffic between points within and points without the state of South Dakota;'6 and it is clear that the [244 U.S. 617, 629] special tariffs here in question include advances of rates between the five cities and many 'points' in the state to which the Commission's order did not apply. It could not, therefore, afford a justification for putting into effect those intrastate rates without first making the publication required by the state law and securing the approval of the state board. These rates the supreme court of South Dakota had jurisdiction to enjoin, and the decree must be affirmed to that extent. It is also clear that the decree of the supreme court, in so far as it enjoined the express companies from advancing any intrastate rate to and from the five cities until the same shall have been approved by the South Dakota Board of Railroad Commissioners, was erroneous. So far as it extends to rates in the competitive territory as to which discrimination was found to exist, it must be modified and the injunction dissolved. With this modification the decree of the state court is affirmed and the cause remanded for further proceedings not inconsistent with this opinion.
It is so ordered.
Mr. Justice McKenna dissents.
[ Footnote 1 ] Re Express Rates, Practices, Accounts, & Revenues, 24 Inters. Comp. Rep. 380; 28 Inters. Com. Rep. 132. The order was modified in some respects in 1915, 35 Inters. Com. Rep. 3.
[ Footnote 2 ] 28 Ann. Rep. of Interstate Commerce Commission, p. 26.
[ Footnote 3 ] 'This case being at issue upon complaint and answers on file, and having been duly heard and submitted by the parties, and full investigation of the matters and things involved having been had, and the Commission having, on the date hereof, made and filed a report containing its findings of fact and conclusions thereon, which said report is hereby referred to and made a part hereof:
[ Footnote 4 ] The answer also alleged that shippers and organizations representing the merchants of the five South Dakota cities had brought suit against these and other express companies in the district court of the United States for the northern district of Iowa to enjoin the enforcement of the order of the Interstate Commerce Commission and the putting into effect of the special tariffs above referred to; that on filing the bill an order of notice issued; that the United States and the Interstate Commerce Commission appeared specially to object to the jurisdiction of the court; and that on August 28, three judges sitting, an order was entered as follows: 'the plaintiffs, with leave of court, offer their evidence in support of the application for a temporary writ of injunction, and the court finds that upon the showing made the plaintiffs would not be entitled to a temporary writ of injunction, and therefore declines to pass on the plea to the jurisdiction. . . ..' See also Brown Drug Co. v. United States, 235 Fed. 603.
[ Footnote 5 ] On December 5, 1916, the defendants had also applied for dissolution of the restraining order, alleging, among other things, that the United States had instituted suit against them in the district court of the United States for the southern district of New York to recover the penalties prescribed by Congress, to wit, $5,000 a day for failure to comply with the order of the Interstate Commerce Commission; and that they were liable to further suits.
[ Footnote 6 ] The claim that the express companies attempted to make only those changes which were required to comply with the order of the Commission was first explicitly made in the petition for writ of error to this court. There was, however, in the motion filed December 5, to dissolve the restraining order, a general allegation that the express companies 'were ordered to put into effect the rates restrained' by the state court.