Central Law Journal.

ST. LOUIS, MO., AUGUST 30, 1907.

THE GOVERNMENT'S CASE AGAINST THE STANDARD OIL COMPANY FOR ACCEPTING REBATES FROM THE CHICAGO AND ALTON RAILWAY COMPANY CONTRARY TO THE PROVISIONS OF THE ELKINS LAW.

The recent decision of Judge Landis in the government's case against the Standard Oil Company for violation of the Elkins Law, in accepting rebates from the Chicago & Alton Railway Co., is generally accepted as a wise and beneficent one. This decision finds the Standard Oil Company with knowingly violating the law 1,462 times and assesses against them the maximum fine of $20,000 for each offense. A fine of twenty-nine million two hundred and forty thousand dollars is not to be picked up in the street every day. Nevertheless, it is not incommensurate with the offense, especially as it is intended to be highly punitive. The effect other combinations and corporations seeking rebates must necessarily be beneficent, for none of them but will fear such an execution of the law and beware of the conduct which may make it amenable to such a force.

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For years laws have been enacted for the purpose of preventing unjust discrimination on the part of large corporations, and with every enactment there has come evasion. Recent articles in English papers have scored our inability to cope with corporate powers, and the opinion has gone abroad generally, that there had been a great decline in the proper administration of law in America, of which we recently made mention. This decision by Judge Landis will help to inspire the needed punitive force in other decisions and thereby restore in the public mind a confidence in our government in the due administration of the law.

While the fine imposed seems to be excessive, it is within the limitations of the statute, and, considering the fact that no corporation is said to have profited so largely by rebates as the Standard Oil Company, it cannot be said to be incommensurate with the offense. Judge Landis well knew that the people had a right to expect a judicial de

termination to equal the emergency, and having met it to the general satisfaction, has a right to expect the people to back up so just a judgment with such a will and spirit that it should in no way lose the force and effect which it was intended it should have on other corporations which have been evading the law. The manner in which an opinion is received by the people has a great influence upon its future stability, particularly when it is based upon a law which was intended to prevent injustice by preventing unfair competition. The general welfare of the nation was provided for by the law which the Standard Oil Company violated, so that in the size of the punishment meted out to it, the general welfare, not the spite of the judge who assessed the fine, was consulted and conserved. The Supreme Court of the United States will scarcely permit a lesser consideration to outweigh so great a consideration as the general welfare. In praesentia majoris cessat potentia minoris.

The statute known as the Elkins Law which covers the question of offering or accepting rebates from interstate carriers is as follows: "And it shall be unlawful for any person, persons, or corporation to offer, grant, or give, or to solicit, accept, or receive any rebate, concession, or discrimination in respect of the transportation of any property in interstate or foreign commerce by any common carrier subject to said act to regulate commerce and the acts amendatory thereto, whereby any such property shall by any device whatever be transported at a less rate than that named in the tariffs published and filed by such carrier as is required by said act to regulate commerce and the acts amendatory thereto, or whereby any other advantage is given or discrimination is practiced. Every person or corporation who shall offer, grant, give, or solicit, accept or receive any such rebates, concessions, or discrimination, shall be deemed guilty of a misdemeanor, and on conviction thereof, shall be punished by a fine of not less than $1,000 nor more than $20,000.” Then followed provisions for publication. We can not hope to cover the whole of the opinion in this editorial, but a few portions of it will give a fair view of the whole situation:

"This is a prosecution of the Standard Oil Company of Indiana for alleged violations o the Act approved Feb. 19, 1903, known as th

Elkins law. The charge is that the defendant's property was transported by the Chicago & Alton Railway Co. at rates less than those named in the carriers' tariff schedules, published and filed with the interstate commerce commission, as required by law. The offenses are alleged to have been committed during the period from Sept. 1, 1903, to March 1, 1905. The indictment contains 1,903 counts, each charging the movement of a car of oil. Certain of the transportation is alleged to have been from Whiting, Ind., to East St. Louis, Ill., the remaining counts covering transportation from Chappell, Ill., to St. Louis, Mo. The plea was 'not guilty.' On the trial 441 counts were withdrawn from the consideration of the jury on grounds not going to the ultimate questions involved in the case. On 1462 counts the verdict was 'guilty.' | Motions for a new trial and in arrest of judgment having been overruled, the matter is now before the court for the imposition of the penalty authorized by law.

The defendant maintains that the interstate commerce law does not apply to the Alton company's connection with the transportation of defendant's property, inasmuch as the road it operates lies wholly within the state of Illinois. The theory is that the haul by the Chicago Terminal from Whiting across the Illinois line to Chappell, and the haul by the St. Louis Terminal from East St. Louis across the Missouri line to St. Louis are each interstate, and therefore subject to federal control, but that the Alton company's interstate haul of the same property from Chappell to East St. Louis is beyond the reach of the federal authority. The trouble with this contention is that it ignores the basic proposition underlying the whole question and confuses the intrastate character of the carrier with the interstate character of the commerce in which the carrier is engaged. The true and primary test is whether the commodity to be transported is to pass from one state into another state. If it does so pass, then it is interstate commerce, regardless of whether the rails over which it moves be operated by one or many carriers. And when this commodity begins to move, interstate commerce has begun, and interstate commerce it continues to be until it reaches destination.

If in such continuous line there be a road lying wholly within a county in a state, the

carrier operating such road, in respect to the movement of that commodity, is engaged in interstate commerce as clearly as if its line extended from the origin to the destination of the shipment, and is therefore as to such transportation subject to federal control. To adopt the views contended for by defendant, namely, that congress may prescribe the rate. which the shipment must pay for the move. ment from Whiting to Chappell, and from East St. Louis to St. Louis, and that the legislature of Illinois may prescribe the rate effective on the link connecting these two ends of the route traveled by the commodity would be to create a situation impossible in practice as it is illogical in theory."

A peculiar and interesting question in the case was raised by the offer of the Standard Oil Company to prove that they did not know that a different rate from that accepted by them had been filed by the Chicago & Alton Railway Company with the Interstate Commerce Commission. Under the Elkins Law, as it stood in 1903, the word "knowingly" was not incorporated in the section charging the offense; this was added at the last session of congress by the Hepburn Rate Bill. The distinction is important, as the Standard Oil Company in the principal case was indicted for acts committed before the Hepburn amendment went into effect. The Standard Oil Company claimed that it had no knowledge of the fact that the Chicago & Alton Railway Company had not duly filed and published the rate it charged, but supposed, and claimed that it had a right to suppose, in view of what was told it by its traffic manager, and in view of the fact that the other roads were charging the same rate, that it was paying the Alton a lawful rate. It offered to prove all this, but the prosecution being under the Elkins law as enacted in 1903, and not under the Elkins law as it stands today, the court ruled that the Standard Oil Company was bound to know what the lawful rate was, the same as it was bound to know any other law, for a rate duly established is but a law, and, therefore, refused all testimony tending to show that the Standard Oil Company did not know that it was receiving the benefit of a rate that had not been lawfully established. If the prosecution had been under the Elkins law as it now stands this testimony would clearly

have been competent, and if it had been sufficient to satisfy the jury there could not have been any conviction in the first place, and in the second place there could not have been a fine of $29,240,000. "We fear," says Senator Foraker in a recent address, "that the government will in due time find that the Elkins law as it was amended by the rate bill has been weakened and not strengthened, for as to all offenses since the passage of the Hepburn law there cannot be fine, forfeiture or imprisonment, except only in cases where the offenses have been knowingly committed."

NOTES OF IMPORTANT DECISIONS.

CRIMINAL TRIAL-NECESSITY OF PRESENCE OF ACCUSED AT EVERY STAGE OF A CRIMINAL PROCEEDING.-It is no merely technical requirement which has come down to us from our fathers that a person on trial for the alleged commission of a crime shall be present at every stage of the proceeding. And this rule cannot be partially infringed as was done by the trial court in the recent case of Pierce v. State (Tenn.), 103 S. W. Rep. 780, by confining the prisoner in an adjoining room and permitting him to peer through an open doorway, while the verdict is being announced, without invalidating the entire proceedings.

In the principal case the accused was convicted of murder. When the verdict was announced, he was in a room adjoining the courtroom handcuffed to another prisoner. He was not in sight of the judge, and could not see all of the jurors. The door of the room was being held open by the sheriff, who obstructed the view of accused by standing in the doorway. The Supreme Court of Tennessee held that by such action on the part of the court the accused was deprived of his constitutional right to be present in court at his trial.

The court, in the course of a very interesting opinion, gives a careful resume of the decisions of the courts conserving this very important right of a defendant. The court said: "The potent fact in this case, which is undisputed, is that at the time the jury returned its verdict the prisoner was in another room, handcuffed to another prisoner, and not in sight of the trial judge. While the court finds that the door was open, it was being held open in some fashion by a deputy sheriff, who claims to have held it open with his head.

It is admitted that the sheriff himself was in the doorway, thus obstructing the view of the prisoner, who was sitting on a bench in the prisoner's chamber, handcuffed in the manner already described. It is also admitted that while the prisoner, from his position, could see some of the jury, he could not command a view of the entire jury. Finally it is admitted that the prisoner,

from his position, could not see the trial judge; nor could the trial judge see the prisoner. These admitted facts are utterly subversive of fundamental and constitutional rights guaranteed a prisoner on trial for his life or liberty. It is well settled that it is essential to a valid trial and conviction on a charge of felony that the defendant shall be personally present, not only when he is arraigned, but at every subsequent stage of the trial, unless he may and does waive his right to be present. Accordingly it has been held that defendant must be present at the arraignment and plea (Hall v. State, 40 Ala. 698); at the impaneling and swearing of the jury (Rolls v. State, 52 Miss. 391); at the discharge of the jury because of the sickness of a juror of inability to agree (State v. Smith, 44 Kan. 75, 24 Pac. Rep. 84, 8 L. R. A. 774, 21 Am. St. Rep. 266; State v. Wilson, 50 Ind. 487, 19 Am. Rep. 719); during the examination of witnesses or the reception of other evidence (People v. Kohler, 5 Cal. 72); when the court charges the jury and when they are recharged or given additional instructions after retirement (Bonner v. State, 67 Ga. 510); when the case is finally submitted to the jury (Allen v. Commonwealth, 86 Ky. 642, 6 S. W. Rep. 645); when the verdict is received or amended (Waller v. State, 40 Ala. 325; State v. France, 1 Overt. 434; Clark v. State, 4 Humph. 254; State v. Jones, 2 Yerg. 22; Andrews v. State, 2 Sneed, 550; Hutchinson v. State, 3 Cold. 95; Witt v. State, 5 Cold. 15; Stewart v. State, 7 Cold. 338); and when sentence is pronounced (Cole v. State, 10 Ark. 318; Harris v. People, 130 Ill. 457, 22 N. E. Rep. 826)."

Defendant's presence is not necessary durproceedings which are no part of the trial, but merely preliminary or subsequent thereto. Jones v. State, 152 Ind. 318, 53 N. E. Rep. 222. According to the better opinion the hearing and determination of a motion for a new trial or in arrest of judgment is no part of the trial, and defendant need not be present. Com. v. Costello, 121 Mass. 371, 23 Am. Rep. 277; Cyc., vol. 12, p. 523.

CORPORATE CITIZENSHIP A LEGAL FICTION.

It is the purpose of this article to suggest and discuss the following question: Is the general government obliged to allow trusts and monopolies to sue as citizens in the federal courts? In other words, are trusts and monopolies entitled, as a constitutional right, to the aid of the federal courts in their predatory operations for the destruction of all competing corporations.

In considering this question it will be well to bear in mind what is meant in the commercial world by the term "trust," and how

trusts and monopolies are treated by the common law. A combination of several corporations has in recent years taken the once honored name of "trust," because in such case all the wealth of the combined corporations is placed under the management of a single set of trustees. A large aggregation of wealth under the control of one set of trustees enables the combination to destroy competition and become a monopoly. But a combination of several persons (individual or corporate) for the purpose of destroying competition and monopolizing some necessary or convenience of life, has always been treated by the common law as a menace to the publicwelfare, against public policy and illegal. It cannotbe too often stated or too forcibly emphasized, that trusts and monopolies are "against the common law;" that they can not legally exist in the absence of positive legislation in their behalf; that there is no such thing as a legal trust, or a legal monopoly, without "paternal" legislation. A state, however, can legalize trusts and monopolies as well as other evils. The state, if so disposed, could license lotteries, gaming houses and race track gambling, as well as Sunday and all night saloons.

Defeated by the courts on common law principles, combinations for the destruction of competition go to a state (New Jersey for instance) and procure from the legislature authority to transform themselves into single corporations with such large aggregations of corporate wealth as enable them to buy up, or crush out, all competing corporations. The centralization in a single corporation (like the Standard Oil Company) of a hundred million dollars or more, by state authority, is the club used at the present time for the destruction of competition. And when competition is destroyed the corporate combination becomes a monopoly. Trusts and monopolies cannot be prevented without putting reasonable limits to the aggregations of corporate wealth now authorized by state legislation. New Jersey will not put such limits, and the general government cannot, without an amendment to the constitution of the United States empowering congress to prevent and suppress monopolies throughout the United States by appropriate legislation.

In the meantime, must the general government continue to recognize the monopolistic corporations created by New Jersey as citi

zens entitled to use the federal courts for the enforcement of their claims throughout the United States? If the state of Texas, under her constitution, providing that "monopolies are contrary to the genius of a free government, and shall never be allowed," can prevent monopolies organized in another state from invading her state courts and compelling their aid in the enforcement of their claimsif Arkansas, Tennessee and North Carolina under like constitutional provisions, and other states, in accordance with their common law public policy, can prevent such invasion, why cannot the general government refuse to recognize New Jersey monopolies as citizens, and refuse to give them the aid of the federal courts? This brings us back to the consideration of the question, stated in the beginning of this article: "Is the general government obliged to allow trusts and monopolies to sue as citizens in the federal courts."

The fourteenth amendment of the constitution of the United States declares who are citizens as follows: "All persons born or naturalized in the United States and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside." These are the only two methods in which one may become a citizen of the United States; first, by birth therein; second, by naturalization. This amendment has reference only to natural birth and to national naturalization. Congress is empowered "to establish an uniform rule of naturalization.”1 The exercise of this power by congress is exclusive of the exercise of a like power by the state. The states do not naturalize though they may confer special privileges upon aliens.

The Supreme Court of the United States has directly held that a corporation is not a citizen within the meaning of the provision of the constitution which declares that, "the citizens of each state shall be entitled to all privileges and immunities of citizens in the several states."2 The term "citizens" as there used applies only to natural persons, members of the body politic owing allegiance to the state, not to artificial persons created by the legislature, and possessing only the

1 Art. 1, sec. 8, cl. 4.

2 Art. 4, sec. 2.

between citizens of different states."'4 In the consideration of this article, the supreme court during the time of Chief Justice Marshall held that "a corporation aggregate, composed of citizens of one state, might sue a citizen of another state in the circuit courts of the United States; that is, they in effect decided that although the artificial being, a corporation aggregate, was not a citizen, as such, and therefore could not sue in the courts of the United States, as such, yet the court would look beyond the mere corporate character, to the individuals of whom it was composed; and if they were citizens of a different state from the party sued, they were competent to sue in the courts of the United States; but all the corporations must be citizens of a different state from the party sued." Such was held to be the law as early as 1809 and as late as 1840.5

Afterwards the supeme court took another step in favor of corporations, and held that "where a corporation is created by the laws of the state, the legal presumption is, that its members are citizens of the state in which alone the corporate body has a legal existence; and that a suit by or against a corporation in its corporate name, must be presumed to be a suit by or against citizens of the state which created the corporate body; and that no averment or evidence to the contrary is admissible for the purpose of withdrawing the suit from the jurisdiction of the court of the United States."'6

3 Paul v. Virginia, 8 Wall. 168; Western Turf Association v. Greenberg, 27 Sup. Ct. Rep. 384, decided February 25, 1907.

4 Art. 3, secs. 1, 2.

5 The Bank of the United States v. Deveaux, 5 Cranch, 61; The Bank of Vicksburg v. Slocumb, 14 Pet. 60.

6 See Ohio & Miss. R. R. Co. v. Wheeler, 1 Black, 286; Thomas v. Board of Trustees, 195 U. S. 207.

By this legal fiction or judge-made law, citizens of Ohio, Pennsylvania and New York are conclusively presumed to be citizens of New Jersey when they are in the federal courts as members of a New Jersey corporation. The supreme court has more than once admitted that this doctrine of indisputable citizenship "went to the very verge of judicial power." Thus in St. Louis & S. F. R. Co. V. James the court say: "We are unwilling to sanction such an extension of a doctrine which went to the very verge of judicial power. That doctrine began, as we have seen, in the assumption that state corporations were composed of citizens of the state which created them; but such assumption was one of fact, and was the subject of allegation and traverse, and thus the jurisdiction of the federal courts might be defeated. Then after a long contest in this court, it was settled that the presumption of citizenship is one of law, not to be defeated by allegation or evidence to the contrary."8

But notwithstanding this doctrine (involving as it does a legal fiction or judge-made law) the question still remains to be considered: Are combinations of presumed citizens of New Jersey in the form of a trust or a corporate monopoly, entitled, by an undeniable, constitutional right, to bring suits in the federal courts for the enforcement of their claims against citizens and corporations of the other states. "Except in the few cases of which the supreme court is authorized to take cognizance, it is necessary that the courts shall be created by congress, and their respective jurisdictions defined; and in creating them, congress may confer upon each so much of the judicial power of the United States as to its wisdom shall seem proper and suitable, and restrict that which is conferred at discretion. In doing so it may apportion among the several federal courts all the judicial power of the United States or it may apportion a part only, and in that case what is not apportioned will be left to be exercised by the courts of the states.' 79

Does it not follow that congress, in the exercise of such power, may provide by law that, in the class of cases where the jurisdic

7 161 U. S. 545, 563.

8 See also Doctor v. Harrington, 196 U. S. 579, decided February 20, 1905.

Cooley, Constitutional Law, 126.