T&T Legal
U.S. Supreme Court - 248/471

Extracted and summarized from the U.S. S.C. Opinions

by J. A. McCulloch


Excerpt from U.S. Supreme Court Opinion 248 U.S. 471


No. 130
Argued Jan. 7 and 9, 1919.
Decided Jan. 20, 1919.

Messrs. Jacob E. Dittus and Ode L. Rankin, both of Chicago, Ill., and Bynum E. Hinton, of Washington, D. C., appeared for The Postal Telegraph-Cable Co.
Mr. Charles W. Needham, of Washington, D. C., for Interstate Commerce Commission (by leave).

Justice Holmes delivered the opinion of the Court.

Three cases were heard together. The other two involved the P.T.C vs. Chicago Great Western RR. and the Western Union Telegraph Co. vs. Baltimore & Ohio RR. "The only question upon which our decision is sought is the validity of the agreements, which are so far alike as to present a single issue here.", stated Justice Holmes.

The first of these cases, Postal Telegraph-Cable Co. v. Tonopah & Tidewater Railroad Co., was originally a suit in the Municipal Court of the City of New York for services rendered to the T&T. The Tonopah & Tidewater claimed that the services consisted of the sending of telegrams relating to railroad business and were covered by a contract such as usually is made between railroads and telegraphs, under which such telegrams were to be sent free of specific charge. The question raised was the validity of the agreement. The Court decided that it was valid and judgment for the T&T was affirmed on appeal, 176 App. Div. 910, 162 N. Y. Supp. 1140.

Each of the contracts elaborately provide for the reciprocal rights of the companies. They were to share expenses between the railroad and telegraph, for the telegraph company's use of the railroad's right of way for its poles by a monthly payment of a certain sum by the telegraph company. They also agreed, this being the point now under question, "... that up to a certain amount calculated at the regular day rates of the telegraph should be delivered free of charge." These messages were to concern the railroad's business and be sent to any points on its system on or beyond the railroad lines. In addition, "... up to an amount calculated in similar manner the railroad would transport the materials, supplies and employees of the telegraph, needed for the construction, maintenance or renewal of the telegraph lines, whether on or off the lines of the road."

At that time, the latest ruling of the Interstate Commerce Commission was that these types of contracts for an exchange of service while valid for services on the line were invalid as to services off the line. The I.C.C. maintained that these 'off-line' services must be charged for by the railroad upon the basis of its published rates and by the telegraph upon that of its charges reasonably charged to other customers for similar services. Presumably the company with charges higher than the other would then have to remit payment of the balance due in each financial period.

The Commission based its position on a proviso added to section 1 of the act to regulate commerce (Act Feb. 4, 1887, c. 104, 24 Stat. 379) by an amendment of June 18, 1910, c. 309, 7, 36 Stat. 544 (Comp. St. 8563). This amendment brought telegraph, telephone and cable companies within the act but also inserted a proviso "that nothing in this Act shall be construed to prevent telephone, telegraph, and cable companies from entering into contracts, with common carriers, for the exchange of services." The question more specifically stated is whether the construction adopted by the Commission is right.

Justice Holmes wrote:

"We do not see how that construction can be got from the words of the act. The words are general and as certainly allow services off the line as services on it to be exchanged. In fact they do so almost in terms by allowing common carriers to exchange with cable companies. This being obvious, it is said that while the abstinence of the act from preventing exchanges covers the whole ground, the exchange of services off the line must be on the terms that we have stated, which makes the act as to them merely a superfluous permission to settle accounts periodically instead of paying for each transaction in cash. But 'exchange' is barter and carries with it no implication of reduction to money as a common denominator. It contemplates simply an estimate, determined by self interest, of the relative value and importance of the sevices rendered and those received. This is admitted with regard to services on the line, and if so whatever services can be exchanged can be exchanged in the same way.

The railroad and the telegraph have grown together in mutual dependence and we are told that contracts of this sort for long terms have been nearly universal for fifty years. The contracts had been called to the attention of Congress repeatedly by the Commission, which, in December, 1906, stated that, so far as it could see, the full performance of them by the carriers would not affect any public or private interest adversely. It held however that under the law as it then stood contracts for services off the line were unlawful. 12 I. C. C. 10, 12. Then the Amendment of 1910 was passed, and passed, we must suppose, having the opinion of the Commission and the notorious longstanding form of existing contracts in view. The contracts are complex, as we have said, and entire. We cannot believe that an act which purported to allow them meant to break them up. The Commission seems not to have believed it in its first ruling upon the amended act.

Our opinion is confirmed by a consideration of the further additions to section 1, in 1910, allowing free passes to be given to the employes of telegraph, telephone and cable lines, and by some further matters of detail referred to in the judgments of the Courts below of which we have cited the reports. The interdependence of the companies is very intimate, and the trouble that would be caused by a narrow construction of the act we believe would be great, with no advantage so far as we can see to any other users of the lines or roads. We do not go into more minute discussion because the result reached must stand on the plain words of the act, the meaning of which is confirmed rather than made doubtful by the circumstances in which the proviso was enacted and the events that had gone before."

The contract with its provisions for exchange of services, both on and off the railroad was valid, the I.C.C.'s determination and position had been invalidated by the 1910 Congressional Amendment.


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