Statement of the Case.

by the Coal Company, violates the commodities clause of the Act of June 29, 1906. P. 60.

While the ownership by a railroad company of shares of the capital stock of a mining company does not necessarily create an identity of corporate interest between the two such as to render it unlawful under the commodities clause for the railroad company to transport in interstate commerce the products of such mining company, yet where such ownership of stock is resorted to, not for the purpose of participating in the affairs of the corporation in which it is held in a manner normal and usual with stockholders, but for the purpose of making it a mere agent, or instrumentality or department of another company, the courts will look through the forms to the realities of the relation between the companies as if the corporate agency did not exist and will deal with them as the justice of the case may require. P. 62.

Applying this rule, held, that the relation between the Central Railroad Company of New Jersey and the Lehigh & Wilkes-Barre Coal . Company, with the former owning over eleven-twelfths of the capital stock of the latter and using the latter as the coal mining department of its organization, violates the commodities clause, and for that reason must be dissolved. Id.

In 1871, the Lehigh Coal & Navigation Company, owner of extensive coal-producing properties and of the Lehigh & Susquehanna Railroad, leased the railroad for a rental of one-third of its gross earnings to the Central Railroad Company of New Jersey, the line leased and the line of the lessee not being in competition but the one forming a natural extension of the other into the coal fields. Held, that a covenant in the lease, assumed to require the lessor to ship to market over the leased line three-fourths of all the coal which it should produce in the future, was not designed to suppress interstate commerce, did not have that effect, and does not violate the Anti-Trust Act. P. 54.

Covenants in leases of coal lands by the Philadelphia & Reading Coal & Iron Company and Lehigh & Wilkes-Barre Coal Company, obliging the lessees to ship all coal mined by rail routes [29] designated or to be designated, are held unlawful as part of the scheme to control the mining and transportation of coal herein condemned, and their enforcement is enjoined. P. 55.

As to other charges against the Lehigh Coal & Navigation Company, and as respects the Wilmington & Northern Railroad Company, the Lehigh & Hudson River Railway Company, the Lehigh & New England Railroad Company, and the surviving individual defendants, the bill is dismissed without prejudice. Id.

226 Fed. Rep. 229, affirmed in part, reversed in part.

The case is stated in the opinion. Motions to modify the decree were made and denied at this term. Post, 478.

Argument for the Reading Co. et al.

The Solicitor General, with whom The Attorney General and Mr. A. F. Myers were on the brief, for the United States."

Mr. Jackson E. Reynolds, with whom Mr. Charles Heebner and Mr. John G. Johnson were on the brief, for Reading Company, Philadelphia & Reading Railway Company, and the Philadelphia & Reading Coal & Iron Company.

Mr. Robert W. De Forest, with whom Mr. Charles E. Miller was on the brief, for Central Railroad Company of New Jersey.

Mr. Henry S. Drinker, jr., and Mr. Abraham M. Beitler filed a brief on behalf of the Lehigh Coal & Navigation Company.

[30] Mr. John J. Beattie filed a brief on behalf of the Lehigh & Hudson River Railway Company.

Mr. Wm. Jay Turner filed a brief on behalf of the Lehigh & New England Railroad Company.

The following is a summary of the oral argument for the Reading Company et al.

The appellees are not accused of fixing prices by contract with competitors, bringing about any deterioration in product, acquiring additional coal deposits since 1890, dismantling or abandoning properties, limiting output, exclusive or price controlling sales contracts, monopolization of local dealers, espionage over the business of competitors, partitioning the country into non-competitive districts, discriminating in prices to destroy competitors, adopting unfair business policies, exacting unreasonable prices, deriving

" At the first and second hearings the case was argued by Mr. Solicitor General Davis and Mr. Assistant to the Attorney General Todd. Mr. Attorney General Gregory and Mr. Thurlow M. Gordon, Special Assistant to the Attorney General, also were on the brief.

At the first hearing Mr. John G. Johnson argued the case for the Philadelphia & Reading Coal & Iron Company.

Argument for the Reading Co. et al.

excessive profits from the coal business, unfair treatment of employees, or unfair treatment of competitors. Their prices for transportation and for coal have been reasonable, not excessive, "monopoly " prices.

There are in the case three charges: alleged violation of the commodities clause; alleged monopoly in the Schuylkill region; alleged combination in restraint of trade resulting in the Reading's purchase of control of the Jersey Central.

The tests to be applied to determine whether the Reading Railway Company is violating the commodities clause in transporting coal owned by the Philadelphia & Reading Coal & Iron Company at the time of transportation are those laid down in United States v. Lehigh Valley R. R. Co. (220 U. S. 257), and United States v. Delaware, Lackawanna & Western R. R. Co. (238 U. S. 516). These tests are also buttressed by the court's declaration of the general object [31] of the statute to have been to put an end to the carrier's "opportunity to discriminate in favor of itself against other shippers in the rate charged, the facility furnished or the quality of the service rendered." Delaware, Lackawarma & Western R. R. Co. v. United States (231 U. S. 363).

The court is not concerned with the question of who ultimately receives the profit from the sale of the commodity, because it has repeatedly held that the carrier might legally own all of the stock of the corporation which owned the commodity at the time of transportation and thereby receive all the profits from the sale of the same. United States v. Delaware & Hudson Co. (213 U. S. 366, 413, 414).

Furthermore, this court, recognizing the fact that in the legislative progress of the commodities clause in the Senate, where it originated, an amendment in specific terms providing that the enactment should embrace common ownership of stock in railroad companies and coal companies by the same stockholders, was rejected (40 Cong. Rec., pt. 7, pp. 7011-7014), has also unequivocally held that such common ownership "cannot be used as a test by which to determine the legality of the transportation of such [a coal] com

Argument for the Reading Co. et al.

pany's coal by the interstate carrier." United States v. Delaware, Lackawanna & Western R. R. Co. (238 U. S. 516, 526).

The Reading Companies were in existence long prior to the time the commodities clause went into effect-two of them for 37 years and the third for 12 years. The Reading Railway has never had any title to coal lands, has never undertaken any mining operations and has never been engaged in merchandising coal; and the Reading Railway and the Reading Coal Company have never been parties to any sales agency contract of the kind condemned in the Lackawanna Case. These factors, which are the converse of those presented in [32] the Lackawanna Case, differentiate the two cases completely.

The present state of the law places upon the Government the burden of showing, by a preponderance of the proof, that the affairs of the Railway Company and the Coal Company have been so commingled and the distinctions between them so obliterated, as to disregard the fact that they were separate juridical beings; cause them to be one and inseparable, making their affairs indistinguishable; destroy the entity of the Coal Company; and make it a mere puppet subject to the control of the Railway Company and a mere department thereof.

The origin of the holding of the capital stocks of the Coal Company and the Railway Company by the Reading Company cannot be treated as a "mere subterfuge and sham to defeat the commodities clause." The lower court was correct in finding that the reorganization was carried out with scrupulous regard for the law, in entire good faith, and without subterfuge or sham. It was right in its conclusion that the validity of the charter powers of the Reading Companies cannot be impeached; that their right to exist cannot be denied; that complete legislative authority to do the acts they have done cannot be gainsaid, and never has been questioned by the Commonwealth of Pennsylvania, and that the charters of the three companies gave the undoubted right to issue the securities and make the conveyances described.

Argument for the Reading Co. et al.

The ownership of railroad equipment by the Reading Company and the lease thereof to the Railway Company have not been shown to have resulted in giving the latter as a corporation, for its own corporate purposes, complete power over the affairs of the Coal Company, as if the Coal Company were a mere department of the railroad."

66

The purchase money mortgage of the Railway Company scrupulously observes the fact that the Railway Company [33] and the Reading Company are separate juridical beings and in no manner commingles the affairs of the Railway and Coal Companies so as to cause both such corporations to be one for all purposes.

The general mortgage of the Reading Company does not obliterate the distinctions between the Railway Company and the Coal Company and cause them to be one and inseparable.

The Government's evidence and arguments on the extent to which the Coal Company and the Railway Company have officers and offices in common are largely iteration in the past tense of conditions existing more than a decade ago, not only prior to this court's illuminating decision in 1911 in United States v. Lehigh Valley R. R. Co. (220 U. S. 257), but even before the commodities clause itself went into effect on May 1, 1908. That evidence is clearly immaterial and irrelevant as to conditions now existing. Equitable decrees normally speak in the present tense and are applied to remedy existing exils and not to characterize or condemn past wrongs. Even in an action under the Sherman Act an opportunity might well be afforded for a locus pœnitentiæ. United States v. Lehigh Valley R. R. Co. (225 Fed. Rep. 399, 403, 404)..

The foregoing facts fully justified the court below in finding that there was a bona fide separate administration of the affairs of the Coal Company. United States v. Lehigh Valley R. R. Co. (220 U. S. 257, 274).

Attention is directed to the fact that the two companies employ the same counsel and treasurer, and also have the majority of directors in common. Probably no two employees of modern industrial organizations could do less to