Southern Pacific Terminal Company v. Interstate Commerce Commission and Young
219 U.S. 498 (1911)
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Rule of Law:
A case involving a short-term governmental order that has expired is not moot if the underlying controversy is capable of repetition, yet evading review. Furthermore, a terminal company that is an integral part of an interstate railroad system, under common control and management, is subject to the Act to Regulate Commerce and is prohibited from giving any shipper an undue or unreasonable preference.
Facts:
- The Southern Pacific Terminal Company, which owned wharf and pier facilities at the port of Galveston, was controlled by the Southern Pacific Company, a holding company that also controlled the Southern Pacific Railroad and Steamship Systems.
- The Terminal Company's facilities served as the primary terminal for the Southern Pacific system's import and export traffic at Galveston.
- The Terminal Company entered into a lease agreement with E. H. Young, an exporter of cotton seed products, granting him exclusive use of a large pier and its associated machinery.
- As part of the lease, Young agreed to route all of his shipments over the Southern Pacific system's lines.
- The exclusive arrangement allowed Young to handle his products more efficiently and at a lower cost than his competitors.
- As a result, Young's export business more than doubled that of all his competitors combined, and some competitors were driven out of the export business.
- The Terminal Company's facilities were not large enough to provide similar exclusive arrangements to all other exporters at Galveston.
Procedural Posture:
- The Interstate Commerce Commission (ICC), after a complaint, found that a lease between the Southern Pacific Terminal Co. and shipper E. H. Young constituted an undue preference.
- The ICC issued an order requiring the Terminal Company to cease and desist from the arrangement for a period of not less than two years.
- Southern Pacific Terminal Co. and others filed a bill of complaint in the Circuit Court of the United States for the Southern District of Texas to enjoin and annul the ICC's order.
- The Circuit Court dismissed the bill of complaint, thereby upholding the ICC's order.
- Southern Pacific Terminal Co. appealed the Circuit Court's dismissal to the Supreme Court of the United States.
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Issue:
Does the Interstate Commerce Commission have jurisdiction to prohibit a terminal company, which is an essential and controlled part of an interstate railroad system, from leasing its wharf facilities to a single shipper in a manner that gives that shipper a substantial competitive advantage?
Opinions:
Majority - Mr. Justice McKenna
Yes. The Interstate Commerce Commission has jurisdiction over a terminal company that functions as an essential part of an interstate transportation system, and it can prohibit arrangements that create an undue preference for one shipper. The Court first addressed the issue of mootness, as the Commission's two-year order had expired. It held that the case was not moot because the questions were 'continuing' and the situation was 'capable of repetition, yet evading review,' meaning that short-term orders could consistently expire before appellate review was complete. On the merits, the Court found that although the Terminal Company was a separate corporation, it was functionally united with the Southern Pacific railroads through common control and operation. The Court reasoned that 'it is with the system that the law must deal, not with its elements.' The Act to Regulate Commerce explicitly includes terminal facilities within the definition of 'railroad,' and to exempt them based on separate incorporation would allow carriers to easily evade regulation. The lease gave Young an 'absolute advantage' that constituted an undue preference, which is illegal under the Act. Finally, the Court determined that the traffic was part of interstate and foreign commerce, as the products were destined for export from their initial shipment, and processing them at the wharf was merely an 'incident' in their trans-shipment, not a break in the stream of commerce.
Analysis:
This decision is significant for establishing the 'capable of repetition, yet evading review' doctrine as an important exception to the mootness rule, ensuring that short-term government orders can be judicially reviewed. It also affirmed a broad regulatory power by looking beyond corporate formalities to the functional reality of an integrated transportation 'system.' By treating the terminal company and the railroads as a single entity for regulatory purposes, the Court prevented carriers from using subsidiary corporations to insulate essential facilities from rules requiring non-discriminatory treatment of shippers. This 'systems' approach has been influential in regulatory law, allowing agencies to address the economic realities of complex industries rather than being limited by corporate structure.
