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UNITED STATES v. PULLMAN CO.

April 20, 1943

UNITED STATES
v.
PULLMAN CO. et al.



The opinion of the court was delivered by: GOODRICH

GOODRICH, Circuit Judge.

 The Pullman Company is today, and has been since 1900, except for railroads which have performed their own sleeping car service, the only person or company in the United States engaged in the business of furnishing sleeping car service to the railroads of the United States. Plaintiff does not contend that the mere fact that one engages in an interstate commerce business in which he has no competitors makes him a violator of the Sherman Act. It contends rather that Pullman is the sole entrepreneur because of the successful completion of a plan formed in the early days of the company's history to eliminate its competitors and its successful arrangement of affairs with contracting railroads to the end that no one else can now get into a position to compete either in manufacturing, furnishing or operating of sleeping cars.

 George M. Pullman was the founder of the business which still bears his name. That name has become synonymous with sleeping car transportation in the United States. In 1858 Mr. Pullman arranged with a predecessor of the Alton Railroad to remodel two of its day coaches into sleepers. In 1863 he and Benjamin Field constructed an entirely new sleeping car, the famous "Pioneer", the success of which laid the foundation for the general introduction of sleeping car transportation in America. The Pullman business was incorporated as Pullman's Palace Car Company in 1867.

 It serves no useful purpose to detail in this opinion the facts concerning the development of the sleeping car business from 1858 to 1900 already appearing in the findings of fact made by the Court upon the testimony and exhibits or settled by stipulation of the parties. Numerous companies and individuals entered the field. Varying types of arrangements were made between sleeping car companies, including Pullman, and the railroads. Sometimes the furnishing of sleeping car service was a joint affair with the railroad and the sleeping car company both participating. Sometimes it was an out and out contract to provide a service in sleeping cars. Our findings of fact state that there was competition to some extent between sleeping car companies for the business of the traveling public at one time. While the Wagner Palace Car Company's sleeping cars were used on what are now known as the New York Central lines and the Pullman Company's sleepers were used on the Pennsylvania lines, obviously the passenger from New York to Chicago had his choice of competing sleeping car services.

 More important was the competition, or possibility of competition, among sleeping car companies for the business of supplying the various railroads with sleeping cars and sleeping car service. There was such competition. Officers of the Pullman Company stated this as a fact before the Interstate Commerce Commission. Pullman at one time or another lost the business of the Central Vermont, the Chicago & Northwestern, the Chicago, St. Paul, Minneapolis & Omaha, the Missouri, Kansas & Texas, the Michigan Central and the New York, Ontario & Western to Wagner. At other times it had lost its business on the Richmond & Danville and on a portion of the Central Railroad of New Jersey to the Union, Mann and Woodruff companies. It is true that not all of the various sleeping car companies competed with each other for the business of all the railroads. In some instances, their operations were non-competitive, one's operation beginning at the geographical point where the other's service ceased. But there was some competition and always the possibility of more, depending upon the aggressiveness of the management of the various companies, where several sought the sleeping car business of the railroads.

 At an adjourned special meeting of the stockholders of Pullman held on January 31, 1870, the following entry, inter alia, appears in the minutes of the meeting: "Whereas, -- It appears to the Stockholders, upon full consideration of the subject, that the importance and value of the Business conducted by this Company very largely depends upon forming continuous lines of Sleeping Car communication, and also upon the absorption of Sleeping Car facilities upon as many Trunk Lines of Railway as possible thereby preventing useless competition; --"

 Again, on April 3, 1873, at a meeting ratifying the acquisition of control of the Erie and Atlantic Sleeping Coach Company, the minutes state: "Whereas -- It is deemed expedient to embrace in our system as far as practicable all the through lines between Chicago and New York, * * *."

 The plaintiff stresses the importance of these recitals; the defendants minimize them. We think they are competent evidence to show defendants' state of mind at the time. The time, of course, was a good while ago, long before the Sherman Act. But if such declarations point in the direction of a path which has been followed continuously since their adoption, it is not unfair to take them as the initiation of a consistent Pullman policy. Standard Oil Company of New Jersey v. United States, 1911, 221 U.S. 1, 46, 47, 75, 76, 31 S. Ct. 502, 55 L. Ed. 619, 34 L.R.A., N.S., 834, Ann.Cas.1912D, 734; United States v. Reading Company, 1920, 253 U.S. 26, 43-45, 40 S. Ct. 425, 64 L. Ed. 760.

 Between 1867 and 1900 the Pullman Company acquired every other sleeping car concern in the United States which had not theretofore gone out of business or had not been acquired by other companies subsequently absorbed by the Pullman Company or by the Wagner Palace Car Company. The last purchase was that of the Wagner Palace Car Company which was acquired in 1899. This was the only acquisition which was shown to have occurred after the passage of the Sherman Act. We heard a great deal in the evidence concerning the surrounding circumstances of these acquisitions and especially that relating to the Wagner Company. Defendants point out, and the plaintiff concedes, that in no case was the acquisition by Pullman the result of predatory practices such as misrepresentation, temporary price cutting to kill a competitor, or the like. Pullman further says that the price paid in each instance was reasonable and that the overtures which resulted in the acquisition were made by the seller and not Pullman as buyer. Plaintiff disputes the reasonableness of the price paid in some instances, especially in the cases of Central Transportation Company and the Wagner Company.

 We do not think that the issue whether defendants have violated the Sherman Act turns upon who initiated negotiations for purchase or whether the price paid by Pullman was high or low. Pullman did buy and whatever the price paid was, it was not too much from Pullman's point of view for it built the units secured into an integrated and successfully operated whole. Competitors were all absorbed. *fn2"

 If this were all we had in the case we should face the difficult question whether a violation of the Sherman Act is involved where a business enterprise, admittedly engaging in interstate commerce, has acquired the sole possession of the field by absorption, in non-predatory fashion, of all of its competitors. Defendants say that to answer this question in the affirmative is to maintain that one in business competition may do everything except succeed. The plaintiff's position on the point is categorically taken with an affirmative answer to the question. It says that mere possession of exclusive control over a commodity or service constitutes monopolization; a fortiori there is monopolization when such power is obtained by acquisition of competitors. For this conclusion it cites Standard Oil Company of New Jersey v. United States, 1911, 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L.R.A., NS., 834, Ann.Cas.1912D, 734; United States of America v. American Tobacco Company, 1911, 221 U.S. 106, 31 S. Ct. 632, 55 L. Ed. 663; United States v. Reading Company, 1920, 253 U.S. 26, 40 S. Ct. 425, 64 L. Ed. 760; United States v. Great Lakes Towing Co., D.C.N.D.Ohio, 1913, 208 F. 733. However, the Court does not feel compelled to rest the decision of this case on the fact of a company acquiring all its competitors by purchase, the last acquisition being forty-three years ago. While the doctrine of laches does not apply against the United States *fn3" we should approach the question of equitable relief with great hesitancy in a case where the last operative fact was nearly half a century old.

 The plaintiff's case, however, is not presented in such a closed volume. The contention is that not only did the Pullman Company engross the market through the acquisition of all competitors, but that it has maintained itself since as the sole proprietor of the business of furnishing sleeping car service by devices which have continued and entrenched its exclusive position. Further, it is urged, the business practices of the defendants right up to the time of this law suit are such that only an organization with complete monopolization of the market which it serves could ...


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