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June 29, 1936



The is an equity suit brought by plaintiffs to set aside an order of the Secretary of Commerce requiring plaintiffs (who compose the Gulf Intercoastal Conference) to cease and desist the practice of entering with shippers into certain rate contracts.

The order complained of restrained plaintiffs from charging two separate rates for the same service: One, the higher, charged against those shippers who refused to sign contracts agreeing to use plaintiffs' facilities exclusively; the other, a lower, charged against those shippers who enter into such contracts. The hearing was by a court constituted in accordance with the provisions of section 47 of title 28 U.S.C.A. (see, also, Act Sept. 7, 1916 c. 451, § 31, 39 Stat. 738 [ 46 U.S.C.A. § 830]).

 Up to 1916 there was -- speaking generally -- no regulation by Congress of the rate structure and other practices of common carriers engaged in intercoastal transportation. In 1916 Congress passed the Shipping Act (39 Stat. 733, § 14, as amended, 46 U.S.C. § 812 [ 46 U.S.C.A. § 812]). The act applies somewhat differently to carriers by water engaged in foreign commerce and those engaged in intercoastal commerce. As to the latter, Congress required that schedules of reasonable rates, fares, etc., should be filed with the Shipping Board and observed by the carriers. The act forbade carriers' charging anything in excess of the maximum except with the approval of the Board; forbade rebates, discrimination, or unfair methods against a shipper patronizing another carrier. Section 16 (46 U.S.C.A. § 815) provides that:

 "It shall be unlawful for any common carrier by water, or other person subject to this chapter, either alone or in conjunction with any other person, directly or indirectly --

 "First. To make or give any undue or unreasonable preference or advantage to any particular person, locality, or description of traffic in any respect whatsoever, or to subject any particular person, locality, or description of traffic to any undue or unreasonable prejudice or disadvantage in any respect whatsoever."

 In 1933 Congress enlarged the powers of the Shipping Board (47 Stat. 1425, § 2 46 U.S.C.. § 844 [ 46 U.S.C.A. § 844]). The new act required every carrier to file with the Shipping Board and keep open to the public its actual schedule of rates, fares, etc.; and forbade any change in the rates, fares, etc., except by publishing and filing a new schedule not effective, without the approval of the Board, earlier than thirty days after filing; and gave the Board power to suspend the effectiveness of the new schedule pending a hearing.Under the 1916 act, carriers were required to file only their maximum rate. Under the 1933 act, they are required to file their actual rate, and the actual rate so filed may not be changed without giving thirty days' notice.

 On June 10, 1933, the President issued an Executive Order numbered 6166, pursuant to the Executive Department Reorganization Act of June 30, 1932 (47 Stat. 413, §§ 401-409), as amended March 3, 1933 (47 Stat. 1517, § 16), whereby he abolished as of August 10, 1933, the United States Shipping Board and transferred its functions to the Department of Commerce. Ever since, the functions of the Shipping Board have been administered by the Department of Commerce under the direction of the Secretary.

 In February, 1934, the Secretary instituted an investigation into the practices of intercoastal carriers, including the practice of extending preferential rates to shippers who agreed to use the carrier's facilities exclusively.This original proceeding was designated Docket No. 126. As a result of the hearings, an order was entered July 3, 1935, requiring the Gulf Conference on or before October 3, 1935, to discontinue the use of the contract rate system as embodied in the tariff on file. This order was vacated September 16, 1935, and a new hearing held, known as Docket No. 294. On January 21, 1936, the Department issued its report of the investigation, and the Secretary issued his order requiring the Gulf Conference to cancel the contract rates as contained in its tariff. The findings of the Secretary were:

 1. "It is clear that the real purpose of the suspended rates and rule is to prevent shippers from using the lines of other carriers and to discourage all others from attempting to engage in intercoastal transportation from and to the Gulf."

 2. "The Department finds the contract rate system provided for in the schedules under suspension not justified by transportation conditions in the trade involved, and unduly and unreasonably preferential and prejudicial in violation of section 16 of the Shipping Act, 1916."

 The effective date of the order was continued to June 30, 1936, and it is the purpose of this suit to annul and set it aside, on the grounds that the findings of the Department and the order of the Secretary are contrary to the evidence and contrary to the law applicable to the situation.

 The question of the lawfulness of the order, and the further question whether the transfer of the functions and authority of the Shipping Board to the Shipping Board Bureau of the Department of Commerce is legal and valid, are the two questions for decision.

 Briefly, the contract rate system works as follows: The Conference selects a number of items as to which it establishes a contract rate. These items are usually those heavy commodities which move regularly in large quantities. Shippers of these commodities may execute a contract and thus avail themselves of the advantages of a lower rate that during the period of the contract may not be increased. The shipper -- as his part of the agreement -- promises to ship by vessels of the Conference lines all water-borne shipments which he makes from any Gulf Port of the West Coast during the term of the contract. The agreement does not prevent the shipper from transporting by rail to the West Coast or from shipping out of North Atlantic or South Atlantic Ports. It does require him, however, if he ships from the Gulf to the West Coast to use one of the Conference lines, and paragraph 4 of the contract provides that if the ...

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