Thomsen v. Cayser
Restored to docket for argument before full bench June 21, 1915.

Reargued January 19 and 22, 1917.

Decided March 6, 1917.

[Syllabus from pages 66-68 intentionally omitted]

Action, brought in the circuit court of the United States for the southern district of New York, by plaintiffs in error against defendants in error and others under the Sherman Act to recover damages for injuries sustained as the result of a combination in restraint of foreign trade.

The defendants, it is charged, being common carriers between New York and South African ports, did, under certain company names, some time prior to December, 1898, enter into a combination and conspiracy in restraint of trade and commerce between New York and ports in South Africa, to be rendered effective by making certain discriminations in rates of freight to be charged which were calculated to coerce and prevent plaintiffs and other shippers and merchants similarly situated from employing such agencies and facilities of transportation as might be afforded them by other common carriers.

For such purpose they united under the name of 'The South African Steam Lines' and distributed a circular  (exhibit A) promising to pay shippers by their lines 10 per cent upon the net amount of freight at tariff rates received on shipments from the United States to Africa, the commission to be computed every six months up to the 31st of January and the 31st of July in each year, and to be payable nine months after such respective dates, but only to shippers who shipped exclusively by their lines to certain African ports, and provided that the shippers directly or indirectly have not made or have not been interested in any shipments by other vessels.

The commission is not payable on the goods of any consignee who directly or indirectly imports goods by vessels other than those despatched by the combining lines.

These terms, it is charged, are against public policy and in restraint of trade.

About the middle of the year 1901 the defendant Deutsche Dampschiffahrts Gesellschaft, Hansa, and the firm of Funch, Edye, & Company, as its agent, offered to transport merchandise to South African ports at reasonable rates and lower than those imposed by the other defendants. Thereupon the other defendants, for the purpose of avoiding the competition of those carriers, accepted them into the scheme and combination, and there was agreement between them to continue the monopoly, and another circular was issued like the first, including only the additional announcement that the Deutsche Dampschiffahrts Gesellschaft, Hansa, had been added as one of the parties to the first-named agreement. The circular is attached to the complaint as exhibit B.

Subsequently the defendants adopted a verbal agreement that altered the circulars to the effect that the so-called 'loyal' consignees could collect the so-called rebates regardless of whether the shippers were also loyal; but on the condition that where the shippers and consignees were both loyal, the rebates would be paid to the shippers, while if the consignee alone were loyal, the rebate would be paid by the defendants in London direct to the so-called loyal consignee.

Defendants have not despatched steamers to African ports at stated and regular dates, but have placed steamers on berth to receive general cargo only at such times and for such ports in South Africa as they deemed best for their private gain and profit.

By reason of the monopoly so created by defendants, shippers among whom are plaintiffs-have been compelled to submit to hardships and inconvenience, and to pay unreasonable and higher rates to such extent as to leave at the present time in the possession of defendants collectively, as plaintiffs are informed, about one and one-half million dollars representing the extortion of their rates, and that of such amount £1,112, 7s. 11d. has been extorted from plaintiffs.

Two steamship companies, the Prince Line and the Houston Line, have, since the spring of 1902, offered to carry from the United States to South African ports merchandise for a reasonable and remunerative rate lower than that exacted by defendants.

Defendants, to prevent such steamers from competing, have, in addition to the terms imposed on the South African trade by the circulars above mentioned, imposed further conditions which, while they ostensibly reduced the lower rate of freight and announced that defendants would pay the greater difference arising therefrom, by them called a special commission, they still exacted the payment of the higher rates, by them called tariff rates, at the time of shipment, and imposed the following further condition: (1) Precedent to the payment of such difference they require all shippers to be loyal to them. (2) Each shipper to disclose the name of his consignee. (3) The difference in rates to be computed only on those steamers which would come into direct competition with the steamers of either the Prince Line or the Houston Line, called by defendants 'fighting steamers.' (4) The special commission or rebate to be granted only on limited amounts of freight room, to be allotted at the will and discretion of defendants, additional freight room to be paid for at the higher rate under the conditions expressed in the circulars.

These additional conditions are intended to further restrain trade, and in fact have prevented shippers who had already shipped goods under the original conditions imposed by the circulars from further exporting as much merchandise to South African ports at reasonable rates offered other shippers.

To further secure the monopoly of the carrying trade to such ports and oust competition defendants have threatened to withhold and have withheld by way of forfeit the repayment of the so-called rebates from all those among whom are plaintiffs, so-called by them 'loyal shippers' and 'loyal consignees,' as aforesaid, 'who would not continue to remain loyal under the additional conditions superimposed as aforesaid.'

For illustration plaintiffs adduce two instances when they were obliged to pay higher rates on a portion of the shipments, which rates were higher than those offered by the opposition lines, and defendants threatened, if plaintiffs made the shipments over the latter lines upon the more favorable terms, to withhold from repaying plaintiffs all sums previously so compulsorily paid by plaintiffs.

Plaintiffs are informed and believe that since the opposition lines have offered to carry freight to South African ports defendants have, by reason of their conspiracy, refused to allot uniform and proportionate freight room on their steamers, and have arbitrarily discriminated between several shippers and even against the so-called 'loyal' shippers and consignees, with the unlawful intent that the moneys so held by them would be sufficient security to prevent such shippers or consignees from making shipments of or importing their goods by the competing vessels.

By reason of the conspiracy plaintiff and others similarly situated have been compelled either not to ship at all, and to lose a great deal of their trade, or to ship on defendants' steamers a small portion of merchandise at the lower rates, and the remainder, of the same class and even of the identical lot of merchandise, at the higher rates, which is practically prohibitive of any trade whatever by reason of the fact that the substantial difference between the two rates would be a discrimination against the various consignees and customers of plaintiffs and the various shippers and customers of other shippers by the same steamer.

The conspiracy violates the laws of the United States and especially the Act of July 2, 1890 [26 Stat. at L. 209, chap. 647, Comp. Stat. 1913, § 8820], entitled, 'An Act to Protect Trade and Commerce against Unlawful Restraints and Monopolies.' Plaintiffs allege damages in the sum of £1,112, 7s. 11d., equal to $5,560, for which they pray as the excess over a reasonable rate, and the further sum of $10,000 damages, and the trebling of these sums.

The defendants, by their company names, filed separate answers in which they deny some of the allegations of the complaint and admit others. They deny conspiracy and combination for the purpose or with the effect set out in the complaint. They admit the making and issuing of the circulars designated A and B in the complaint, but deny that they have the effect or were intended to have the effect ascribed to them.

They admit the refusal to pay plaintiffs certain claims as rebates, but deny the distinction between loyal shippers and loyal consignees and all of the inferences and assertions in regard thereto.

As a separate defense they allege that all freight carried by them for plaintiffs was carried on bills of lading, each of which contained on its face the statement of the amount of freight to be paid, and in respect to which in every instance plaintiffs either paid the freight or agreed to pay the amount of freight stated in the bill of lading, and in each instance gave a due bill which was subsequently paid; that the payments were made freely and voluntarily and without protest; and that, so far as any of the payments were made pursuant or with reference to the printed circulars, plaintiffs co-operated knowingly in such transactions, and cannot now be entitled to any relief on account of payments of freight made thereunder.

It was prayed that the complaint be dismissed.

Upon the issues thus formed there were two trials. At the conclusion of the testimony on the first trial the court considered that no cause of action was established under the Sherman Law and upon motion of defendants dismissed the complaint. 149 Fed. 933.

The judgment was reversed by the circuit court of appeals (October, 1908). 92 C. C. A. 315, 166 Fed. 251.

Upon the return of the case to the circuit court it was tried to a jury, resulting in a verdict for plaintiffs against the defendants composing the firms of Cayser, Irvine, & Company; Barber & Company; and Norton & Son, the action as to the other defendants having abated or been dismissed by the court.

The judgment recites that the action was brought under the act of Congress of July 2, 1890, and that a verdict had been rendered against the defendants above named for the sum of $5,600, with interest in the sum of $1,973.06,-in all, $7,573.06; that thereupon the court directed the clerk to treble the amount of the verdict, pursuant to the terms of the act of Congress, making the amount $22,719.18, and that, the parties consenting, the court fixed $2,500 as an attorney's fee. The judgment was reversed by the circuit court of appeals, one member dissenting (July, 1911). 111 C. C. A. 368, 190 Fed. 536.

The circuit court at the first trial (Judge Hough sitting) was of opinion that the testimony did not establish that the combination charged against defendants was in unreasonable restraint of trade. The circuit court of appeals expressed a different opinion. The court said that the substance of the complaint was that defendants were engaged as carriers in South African trade and had entered into a combination in restraint of all foreign trade and commerce, in violation of the act of Congress, by means of a scheme under which they united as 'The South African Lines,' fixed rates, and shut off outside competition by requiring shippers to pay a percentage in addition to a reasonable freight rate, which they should receive back in case-and only in case-they refrained from shipping by other lines. And the court said the evidence showed the existence of a 'conference' for the purpose of fixing and maintaining rates, and a return 'commission' to 'loyal' shippers. The manifest purpose of the combination and its effect were, it was further said, to restrain contravention of the Federal Anti-trust Act. contravention of the Federal Anti-trust Act.

The court considered that whether the restraint was reasonable or unreasonable was immaterial under the decisions of this court, or whether the combination was entered into before or after plaintiffs commenced business, the statute applying to continuing combinations, or whether the combination was formed in a foreign country, as it affected the foreign commerce of this country and was put into operation here. And as the plaintiffs had alleged damage, the court decided that they were entitled to an opportunity to prove it, and remanded the case to the circuit court.

Upon the second appeal the court declared a change of view, saying: 'When this case was in this court before we said, upon the authority of the decisions of the Supreme Court as we then interpreted them, that whether the restraint of trade imposed by the combination in question was reasonable or unreasonable was immaterial,' and that it was 'also apparent from the record that the circuit court upon the second trial, in holding as a matter of law that the combination shown was in violation of the statute, acted upon the same view of the law.' And further: 'In the light of the recent decisions of the Supreme Court in Standard Oil Co. v. United States, 221 U.S. 1, 55 L. ed. 619, 34 L.R.A.(N.S.) 834, 31 Sup. Ct. Rep. 502, Ann. Cas. 1912D, 734, and United States v. American Tobacco Co. 221 U.S. 106, 55 L. ed. 663, 31 Sup. Ct. Rep. 632, the construction so placed upon the statute by this court and the circuit court must be regarded as erroneous and a new trial must be granted unless the contentions of the parties are correct that, upon the facts shown, this court can now determine the legality of the combination.'

The court then said that it was impossible to hold that the record disclosed a combination in unreasonable restraint of trade, but that it would be unduly prejudicial to plaintiffs to reverse the judgment with instructions to dismiss; that as the plaintiffs had presented their case in view of the decision of the court that the reasonableness of the restraint was immaterial, it would be unjust to them to dismiss the complaint because their proof did not conform to another standard, and that upon another trial the plaintiffs might be able to 'produce additional testimony tending to make out a case within the Supreme Court decisions referred to.' Accordingly, the court remanded the case for a new trial.

Subsequently a rehearing was granted on petition of plaintiff's who waived any right to a new trial and consented that the case should be disposed of one way or the other. As a result of the rehearing the mandate was recalled and the judgment reversed, with instructions to enter an order dismissing the complaint.

This writ of error was then allowed.

Mr. Lorenzo Ullo for plaintiffs in error on original argument.

Mr. A. Leo Everett for plaintiffs in error on reargument.

[Argument of Counsel from pages 76-78 intentionally omitted]

Messrs. J. Parker Kirlin, Thomas Thacher, and Charles R. Hickox for defendants in error.

[Argument of Counsel from pages 79-81 intentionally omitted]

Statement by Mr. Justice McKenna:

Mr. Justice McKenna, after stating the case as above, delivered the opinion of the court: 

Notes

'Notice to Shippers in the United States.

'Commission in Respect of Shipments by Steam and Sailing Vessels.

'London, 31st December, 1898.

'1. Shippers to all ports of the Cape Colony and of Natal and to Delagoa bay are hereby informed that until further notice, and subject to the conditions and terms set out herein each of the undernamed lines will pay shippers by their line a commission of 10 per cent, calculated upon the net amount of freight at tariff rates received by such line from such shippers on their shipments from the United States to South Africa.

'2. The said commission to be computed every six months up to the 31st January and 31st July in each year, and to be payable nine months after such respective dates to those shippers only who, until the date at which the commission shall become payable, shall have shipped exclusively by vessels despatched by the undernamed lines respectively from the United States to ports of the Cape Colony, Natal, and Delagoa bay, provided that such shippers, either as principals or as agents, have not directly or indirectly made or been interested in any shipments to any of the aforesaid ports by vessels other than those despatched by the undernamed, and also provided that the statement of claims for such commission shall be made in the annexed form, within twelve months of the date of shipment, to the line which shall have carried the goods in respect of which the commission is claimed.

'3. The above commission is not payable on the goods of any consignee who directly or indirectly imports goods by vessels other than those despatched by the undernamed lines.

'(Subscribed) American & African Steamship Line.

Union-Clan Line.

'All previous notice to shippers or consignees with reference to returns on freight are canceled.

'Note.-The above commission will be payable to the shippers whose names appear on the bills of lading or to their order.'
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