Cincinnati, Portsmouth, Big Sandy and Pomeroy Packet Co. v. Bay

Background

A group of sellers — George W. and William Bay and their packet company — sold two steamers, two deck barges, two coal flats and a small stock interest to another river packet company for $30,500. The buyer agreed to pay instalments and also to pay $3,600 annually in advance for five years. The contract included a clause suspending payments if competing boats forced very low rates, a five-year promise by the sellers not to run packet passenger or freight service between Cincinnati and Portsmouth, and a promise by the buyer to maintain the sellers’ rates, not exceeding railroad rates. The sellers sued to recover an unpaid instalment, and the buyer argued the whole agreement violated the federal law of July 2, 1890.

Reasoning

The central question was whether the agreement unlawfully restrained trade under the 1890 statute because it might affect interstate commerce. The Court found the contract was primarily a sale of a local river business and goodwill, and the noncompete promise was part of the price paid for that sale. The suspension clause was treated as protection against a losing bargain, not an attempt to monopolize trade. The buyer’s promise to maintain rates was separate and not the basis of the debt sued upon. Any effect on commerce between States was incidental and insignificant, so the statute did not make the whole agreement void.

Real world impact

The ruling lets courts enforce sale agreements that include temporary noncompete and payment arrangements when those covenants are part of selling a local business and do not primarily aim to restrain interstate trade. It affirms the state court’s judgment for the sellers and leaves closer interstate-commerce questions for cases with clearer national effects.