Although P. & P.U. admits that the agreement has never been
submitted to the I.C.C. for Section 5(1) approval, it argues that
I.C.C. approval of the agreement upon plaintiff's application
under Section 5(2) in F.D. No. 15354 is tantamount to Section
5(1) approval. That argument must fail.
Section 5(2), 49 U.S.C.A. § 5(2), provides that the I.C.C. may
approve an agreement for the joint use of facilities by two or
more carriers if it finds that such joint use "will be consistent
with the public interest." The standard for Section 5(1) approval
is more restrictive. Thus, the I.C.C. may approve a pooling
agreement under 5(1) only if it finds that such pooling "will be
in the interest of better service to the public or of economy in
operation, and will not unduly restrain competition."
Section 5(1) is explicit in its provisions. The precise
standards fixed by Congress may not be diluted by application of
a doctrine of implied ratification. Cf., United States v.
Socony-Vacuum Oil Co., 310 U.S. 150, 225-227, 60 S.Ct. 811, 84
L.Ed. 1129; United States v. Maryland & Virginia Milk Producers'
Ass'n, D.D.C., 167 F. Supp. 799, 808, aff'd 362 U.S. 458, 80 S.Ct.
847, 4 L.Ed.2d 880. Before a pooling agreement becomes lawful, it
must have been submitted to the I.C.C. upon an application
invoking Section 5(1), Cf., Norfolk & Southern Bus Corp. v.
Virginia Dare Transp. Co., supra, 159 F.2d at 310-311, and
approval must have been granted upon express findings in
accordance with the statutory standard.
To the extent hereinabove indicated, the 1911 contract violates
Section 5(1) and is void and unenforcible.
In my opinion, the contract is illegal and void to the same
extent under Section 1 of the Sherman Act, 15 U.S.C.A. § 1, which
provides that any agreement in restraint of trade or commerce
among the several states is illegal.
The provisions of the contract which require plaintiff to
deliver to P. & P.U. all traffic destined to industries or other
railroads at or near Peoria and Pekin and those which reserve to
P. & P.U. all traffic originating or terminating at industries on
its line, if valid, would prohibit plaintiff from serving
industries accessible to its lines and from establishing
interchange connections with any other railroad for its own
account. Thus, the contract, in that respect constitutes an
agreement not to compete in P. & P.U.'s area of operations in
terminal delivery or interchange traffic, and not to compete with
P. & P.U. in the matter of soliciting for its own account or
fixing rates for traffic moving in the Peoria-Pekin area served
by P. & P.U.'s lines.
The Keystone of the Sherman Act is competition, and agreements
and practices in restraint of competition without "any redeeming
virtue" are per se unreasonable and therefore invalid. Northern
Pacific R. Co. v. United States, 356 U.S. 1, 4-5, 78 S.Ct. 514, 2
L.Ed.2d 545. Among practices which have been held to be per se
violations are price fixing, United States v. Socony-Vacuum Oil
Co., 310 U.S. 150, 210, 60 S.Ct. 811, 84 L.Ed. 1129, division of
markets and territory, Timken Roller Bearing Co. v. United
States, 341 U.S. 593, 71 S.Ct. 971, 95 L.Ed. 1199; United States
v. Addyston Pipe & Steel Co., 85 F. 271, aff'd 175 U.S. 211, 20
S.Ct. 96, 44 L.Ed. 136, and tying arrangements, Northern Pacific
R. Co. v. United States, supra; International Salt Co. v. United
States, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20.
To some extent, each of those practices is reflected in this
contract. By its contract, plaintiff agreed not to compete with
P. & P.U. for freight traffic originating at any point on P. &
P.U.'s lines. It could participate in that traffic only by
accounting to P. & P.U. for its participation, and at rates
established by P. & P.U. The contract requires that all car
traffic of plaintiff coming into, going out of or through the
Peoria-Pekin area, whether destined for terminal delivery or
intermediate interchange with other roads, be switched and
handled by P. & P.U., irrespective of the existence of C. & N.W.
facilities for terminal delivery
or direct interchange thereof. Although plaintiff lacks direct
access to the lines of most of the trunk line railroads serving
the area and would require the intermediate service of a terminal
road to effect interchange therewith, the contract makes no
distinction between that area of need and the area in which
plaintiff may interchange directly with roads to the lines of
which it has access. P. & P.U.'s service is extended under the
agreement on an all or nothing basis.*fn12 Finally, the contract
provides that C. & N.W. trains might enter Peoria only over the
lines of P. & P.U.*fn13
In the Norfolk case, it is said that the Sherman Act proscribes
any agreement which results in a substantial lessening of
competition in the facilities and services available to the
public. 159 F.2d at 310. Each of the summarized provisions of the
1911 contract imposes a substantial restraint upon competition
and each, in the absence of I.C.C. approval, is per se
unreasonable and void.
As P. & P.U. points out, the beneficent place of the terminal
company as a part of the big picture of railroad operations was
recognized by the Court in United States v. Terminal Railroad
Ass'n, 224 U.S. 383, 32 S.Ct. 507, 56 L.Ed. 810. That was a suit
by the United States under the antitrust laws to enjoin the
consolidation of the three principal terminal railroad systems
serving the St. Louis, Missouri gateway. While the court held
that consolidation of facilities to be lawful, if conditioned
upon proper safeguards, it remanded the case to the lower court
with directions to enter an order enjoining certain restraints of
competition, including the continued use by the Association of
the provision in its agreements with proprietary lines requiring
such lines to use only the facilities of the Association for
handling freight under their control moving to or through or from
the St. Louis gateway. Thus, the decree ordered by the court
enjoined, as monopolistic, the continued use of a contract
provision of the precise nature which P. & P.U. by its
counterclaim seeks to enforce in this case.
It is immaterial to decision of the issues presented that
plaintiff acquiesced in the contract and operated thereunder
until 1957 or that plaintiff sought and obtained I.C.C. approval
of the extension thereof. The principle of estoppel may not be
invoked to compel plaintiff to do, or to continue to do, an
unlawful act. Louisville & N.R. Co. v. Mottley, 219 U.S. 467, 31
S.Ct. 265, 269-271, 55 L.Ed. 297; Pittsburg, C.C. & St. L.R. Co.
v. Fink, 250 U.S. 577, 582-583, 40 S.Ct. 27, 63 L.Ed. 1151.
I conclude that the 1911 contract, as extended, insofar as it
reserves to P. & P.U. all terminal delivery and interchange
service at the Peoria-Pekin gateway and all traffic originating
on its lines and insofar as it provides that P. & P.U. may fix
the rates for all traffic moving within its area from points
served by its lines is, per se, an unlawful restraint of
competition and void.
Illinois Central R. Co. v. Michigan Central R. Co.,
18 Ill. App.2d 462, 152 N.E.2d 627, in which P. & P.U. seeks solace,
is distinguishable from the case at bar. There the court enforced
an agreement for the joint use by Michigan of I.C. terminal
facilities in Chicago. It does not appear from the reported
opinion that Michigan was restricted to the use of I.C. services
and no other or that any contention
was made that the agreement violated the antitrust laws. The
import of the decision is that an agreement to pay an annual
rental for terminal facilities "so long as" the premises "shall
be used for a general passenger station" was enforcible even
though not limited in point of time.
Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 81
S.Ct. 623, 5 L.Ed. 2d 580, has no application to the case at bar.
Tampa and Nashville, entered into a contract whereby Tampa agreed
to buy from Nashville all coal needed for operation of its
generating plants for a period of 20 years. The contract was
upheld against Nashville's contention that it constituted a
violation of Section 3 of the Clayton Act. 15 U.S.C.A. § 14. I
don't believe that that decision is to be read as a blanket
approval of all requirements contracts over antitrust objections
in view of the Court's stress upon the fact that this contract
covered, at most, one per cent of the coal available from the
production area involved.*fn14
In any event, the "requirements contract" features of the 1911
contract are not here in issue. It is not contended that
plaintiff has not used P. & P.U. service where required by its
operations or that it has failed to pay for the services which
its operation required. On the contrary, the contention is that
plaintiff has refused to use P. & P.U.'s services at Sommer and
in the operation of its M. & St. L. division, services which
plaintiff does not need.
Parmalee Transp. Co. v. Keeshin, 7 Cir., 292 F.2d 794, has no
application to the circumstances here presented. The charge made
by the complaint in that case was a conspiracy by divers
individuals, including a former member of the I.C.C., and divers
railroads to eliminate competition in bidding for an
inter-terminal transfer contract. The companion case to
Parmalee*fn15 involved only the question of the
constitutionality of a city ordinance regulating transfer of
passengers in interstate commerce.
The counterclaim of intervener presents no genuine issue of
fact for decision. Assuming, arguendo, that its estoppel theory
is legally sufficient to state a claim against plaintiff in any
event, an estoppel may not be invoked to compel the doing, or
continuation, of an unlawful act.
The case is an appropriate one for summary judgment, and
judgment will be entered declaring the 1911 contract, as
extended, void and unenforcible to the extent that it:
a. Reserves to P. & P.U. all rail traffic originating at points
upon its lines;
b. Reserves to P. & P.U. the right to transfer, switch and
handle all C. & N.W. traffic coming into, or going out of, or
through Peoria and vicinity;
c. Reserves to P. & P.U. the right to establish rates for all
traffic originating at all points upon its lines for delivery of
trans-shipment at any other point upon its lines; and
d. Requires that all trains of C. & N.W. entering Peoria must
enter over the tracks of P. & P.U. to the extent that enforcement
of that provision would interfere with plaintiff's normal
interchange operations at Sommer and with the operation of the M.
& St. L. division.
An injunction is ordered which shall permanently enjoin P. &
P.U. from enforcing, or attempting to enforce, such provisions of
The counterclaims of P. & P.U. and intervener are denied.
Plaintiff shall prepare and submit to the court within 15 days
a judgment and injunction order in accordance herewith.