This is an appeal from a final decree of the District Court, composed of three judges as required by section 266 of the Judicial Code (28 USCA § 380), enjoining the enforcement of an order of the Illinois Commerce Commission which prescribed rates for telephone service in the city of Chicago, upon the ground that the order was confiscatory and hence was in violation of the due process clause of the Fourteenth Amendment. 38 F.(2d) 77. The order of the Commission was made on August 16, 1923, to be effective October 1, 1923. It reduced rates for four classes of coin box service and thus applied to a large part of the intrastate service of the complainant, the Illinois Bell Telephone Company.
An interlocutory injunction, restraining the enforcement of the rates, was granted on December 21, 1923, and the order was affirmed by this Court on October 19, 1925. 269 U.S. 531, 46 S.C.t. 22, 70 L. Ed. 397. This interlocutory order was made upon the condition that, if the injunction were dissolved, the complainant should refund to its subscribers the amounts paid by them in excess of the sums chargeable under the Commission's order. The suit was not brought to a final hearing until April, 1929, and the court found that at the time of its decision (January 31, 1930) the amount thus reserved for refunds exceeded $11,000,000. The court said that the delay in bringing the case to trial was attributable to the city of Chicago and that the complainant had been ready at all times to proceed. But the decree enjoining the rates speaks from its date, and the question is necessarily presented, not only whether the order of the Commission was confiscatory when made, but also as to its validity during the period that has intervened, and as to the respective rights of the complainant and its subscribers in relation to the fund thus accumulated. Groes-
[Argument of Counsel from pages 136-143 intentionally omitted] beck v. Duluth, South Shore & Atlantic Railway Co., 250 U.S. 607, 609, 40 S.C.t. 38, 63 L. Ed. 1167.
The court found that 99 per cent. of the stock of the complainant, the Illinois Company, is owned by the American Telephone & Telegraph Company, which also owns substantially the same proportion of the stock of the Western Electric Company; that the Illinois and American companies unite in rendering long distance service under an arrangement for a division of tolls; that at the time to which the inquiry related, in October, 1923, there was in effect an agreement by which the Illinois Company paid to the American Company 4 1/2 per cent. of its gross revenues for rent of instruments and as compensation for engineering, executive, financial and other services; that a large part of the materials entering into the construction of the plant and equipment of the Illinois Company were purchased from the Western Electric Company and much of its operating expense consisted of payments made under a contract with that company for apparatus and supplies. The courtfur ther found that the American Company owned a controlling interest in fifteen telephone companies which, in connection with other companies controlled by those subsidiaries and some companies in which its interest was not controlling, were operated as a system with the avowed purpose of rendering a nation-wide and unified telephone service; that the American Company had stated that 'the associated companies are specialists in local service problems, with local operating forces, identified and familiar with the needs of the communities they serve'; that 'the parent company undertakes the solution of the problems that are common to all,' and in this way there was provided a central authority equipped to perform adequately general functions, leaving to the local companies responsibility for local affairs.