JUDICIA L REVIEW OF THE INTERSTATE

COMMERCE COMMISSION

Storage

UMEMTS

APR 1 4 1975 H E A R IN G

KANSAS ST AT S UNiV fe R

BEFORE TH E

SUBCOMMITTEE ON CRIME

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OF TH E

COMMITTEE ON THE JUDICIARY 

HOUSE OE REPRESENTATIV ES

NIN ETY-TH IRD CONGRESS

SECOND SESSION

ON

S. 663 and H.R. 785

AM EN DI NG T IT L E 28 OF T H E U NIT ED ST AT ES CO DE W IT H 

RESPEC T TO JU D IC IA L R EV IE W OF DEC IS IO NS OF T H E 

IN TERSTA TE CO MM ER CE CO MMI SS ION

DEC EM BER 10, 1974

Serial No. 63

P ri nte d f or the u se of t he C om mitt ee on th e J udic ia ry

44-987 0

U.S. GOVERNMENT PRIN TING OFFICE 

WASHINGTON : 1975
£'

COMMITTEE ON THE JUDICIARY

PETER W. RO DINO , J r., New Jersey, Chairman

HA RO LD D. DO NO HU E, Massachusetts 

JA CK BROO KS, Texas 

RO BER T W. KA ST EN M EIER , Wisconsin 

DON EDWA RDS, California 

WILLIAM L. HUNO ATE , Missouri 

JOHN CO NY ER S, Jr., Michigan 

JOS HU A EIL BERO, Pennsylvania 

JERO ME R. W ALDIE , California 

WA LTER FLO WE RS, Alabama 

JAMES R. MANN, South Carolina 

PA UL S. SAR BA NE S, Maryland 

JOHN F. SE IB ERLIN O, Ohio 

GE OR GE E. DA NIEL SO N, California 

RO BER T F. DR IN AN, Massachusetts 

CH AR LE S B. RA NG EL , New York 

BA RB AR A JO RD AN , Texas 

RAY TH OR NT ON , Arkansas 

EL IZAB ET H HOLTZ MAN, New York 

WAY NE OWENS, Utah 

EDWARD MEZVINSKY, Iowa

EDWA RD HU TC HI NS ON , Michigan 

RO BER T McC LOR Y, IlUnois a M

H ENRY P. SMITH III, New York 

CH AR LE S W. SAND MAN, Jr., N ew Jersey 

TOM RA ILS BA CK , Illinois

CH AR LE S E. WIGGINS , California 

DAV ID W. DEN NI S, Indiana 

HA MILTON FIS H, J r., New York 

WILEY MA YNE, Iowa 

LA WR EN CE J. HO GA N, Maryland 

M. CALDWE LL BUTLER , Virginia 

WILL IAM S. C OH EN , Maine 

T R EN T LO TT , Mississippi 

HA RO LD V. FRO EH LIC II, Wisconsin 

CARLOS J. MO OR HE AD , California 

JO SE PH J. MA RA ZIT I, New Jersey 

PA UL N. McCLOSK EY, J r., California

Jerome M. Zeifman, General Counsel

Garner J. Cline, Associate General Counsel

Herbert F uchs, Counsel

William P. Shattuck, Counsel

II. Christopher N olde, Counsel

Alan A. Parker, Counsel

J ames F. Falco, Counsel

Maurice A. B arboza, Counsel

Robert J. T rainor, Counsel

Arthur P. Endres, Jr., Counsel

Daniel L. Coh en, Counsel

William P. Dixo n, Counsel

J ared B. Stamell, Counsel

F ranklin G. Polk, Counsel

Thomas E. Mooney, Counsel

Michael W. Blommer, Counsel

Alexander B. Cook, Counsel

Constantine J. Gekas, Counsel

Alan F. Coff ey, Jr. , Counsel

Kenneth N . Kle e, Counsel

S u b c o m m it te e on C r im e

JOHN CO NY ER S, Jr., Michigan, Chairman

PA UL S. SARB AN ES, Maryland 

CH AR LE S B. RA NG EL , New York 

RAY TH ORN TO N, Arkansas 

WAYNE OWENS, Uta h

WILL IAM S. CO HE N, Maine 

HA MILTON FIS H, J r., New York 

HA RO LD V. FR OEH LI CII, Wisconsin 

JO SE PH J. MA RAZIT I, New Jersey

s *

Maurice A. Barboza, Counsel

Timothy J. Hart, Assistant Counsel

Constantine J. Gekas, Associate Counsel

(n>
C O N T E N T S

Pare

Testimony of—

Phillips, Hon. Harry, Chief Judge of the Sixth Circuit........................ 8

g Stafford, Hon. George M., Chairman, Inte rsta te Commerce Commission, accompanied by Fritz R. Kahn, General Counsel. .......... . 17

Prepared statements—

Conyers, Hon. John Jr., a Representative in Congress from the State 

of Michigan, chairman, Subcommittee on Crime_______________ 1

• Phillips, Hon. Harry, Chief Judge of the Sixth Ci rcuit....................... 7

Stafford, Hon. George M., Chairman, Inte rsta te Commerce Commission____________ _ 14

Correspondence—

Hoffman, Herbert E., American Bar Association, letter with enclosures dated December 9, 1974, to Hon. John Conyers, Jr_____ 6

Rakestraw, W. Vincent, Assistant Attorney General, Department of 

Justice, letter with enclosure dated December 9, 1974, to Hon.

Peter W. Rodino, J r______________________________________ 3

Appendixes—

Appendix A—Correspondence________________________________ 27

Imlay, Carl H., General Counsel, Administrative Office of the

U.S. courts, December 6, 1974, letter with enclosures to Timothy 

J. Hart, counsel______________________________________ 27

Cleary, John M., attorney, letter dated December 9, 1974 to

Hon. John Conyers, J r____________________________ 78

Heist, August, president, the National Industrial Traffic 

League, letter to Hon. John Conyers, Jr., dated December 

9, 1974____ ______ _______ ______ _____ ___________ 75

“Report of the Study Group on the Caseload of the Supreme 

Court,” December 1972____________________________ 45

“ Reports of the Proceedings of the Judicial Conference of 

the United State s,” annual report of the Director of the 

Administrative Office of the United States Courts, 1970. . 72

“Three-Judge Court and Six-Person Civil Jur y,” hearing 

held before the Committee on the Judiciary on S. 271 and 

H.R. 8285_______________________________________ 31

“Three-Judge Courts: See How They Run,” by Harris S. 

Ammerman, Legislative Assistant, Administrative Office

4 of the United States Courts________________________ 48

Wright, Hon. J. Skelly, Judge, U.S. Court of Appeals for the

District of Columbia______________________________ 27

Appendix B—Recent decisions of the U.S. Supreme Court regarding 

judicial review of decisions of the Inter state Commerce Commission _ 82

%

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JU D IC IA L R E V IE W OF T H E IN T E R S T A T E COM M ER CE

C O M M IS SI O N

TUESD AY , D ECEM BER 10, 19 74

H ou se of R ep rese ntativ es ,

• Sub co mm itt ee on Crime of th e

C om mi tt ee on th e J udic ia ry ,

Wash ingto n, D.C.

e The subcommittee met, pursuant to notice, at 8:55 a.m., in room

2218, Rayburn House Office Building, John Conyers, Jr. [chairman 

of the subcommittee], presiding.

Present: Representatives Conyers, Thornton, Cohen, Fish, and 

Froehlich.

Also present: Timothy J. Hart, assistant counsel; Dorothy C. Wadley, 

assistant to counsel; and Constantine J. Gekas, associate counsel.

Mr. C on ye rs . The subcommittee will come to order. Good morning 

and welcome.

The Subcommittee on Crime meets this morning to consider S. 663, 

passed by the other body last year, and H.R. 785, a bill introduced 

in this Congress by our colleague on the Judiciary Committee, Congressman Wiley Mayne of Iowa. These two bills would amend chapter 

128 of title 28 of the U.S. Code, that portion commonly known as 

the Hobbs Act, to make the orders of the Interstate Commerce 

Commission reviewable in the same manner as orders of other regulatory agencies.

This morning our subcommittee consists of my colleagues Hamilton 

Fish of New York, the gentleman from Arkansas, Mr. Ray Thornton, 

and the gentleman from Wisconsin, Mr. Harold Froehlich.

I will ask unanimous consent tha t my opening statement be introduced in the record, and without objection it will be so placed in the 

record.

[The statement referred to follows:]

Open in g Sta te m en t of th e H on or ab le J ohn C on ye rs , J r.

Good morning and welcome.

The Subcommittee on Crime meets this morning to consider S. 663, passed

* by the other body last year, and H.R. 785, a bill intro duce d in this Congress 

by my colleague on the Judiciary Committee, Congressman Wiley Mayne of 

Iowa. These two bills would amend ch apter 128 of title 28, U nited States Code— 

commonly known as the Hobbs Act—to make orders of the Inter sta te Commerce 

Commission, except those ordering the pay ment of money, reviewable in the 

same m anne r as orders of o ther regu latory agencies.

This legislation, like t he Speedy Trial Act which we reported three weeks ago 

and which now awaits a rule for consideration by the full House, addresses a 

concern which I consider to be a majo r one now before the Congress: modernizing 

and improving the Federal judicial mach inery to meet the needs of th e twentie th 

century. The problem of antiquated judicial procedures is one of consistent his- 

(1)
toric al concern. The famed jurist Roscoe Pound told the American Bar Association in 1906 th at the work of the courts in the twentieth century could not be 

carried on with the metho ds and machinery of the nineteenth century ; sixty-four 

years late r, speaking to the same group, Chief Justice Burger made this observation :

“If you will read Pou nd’s speech, you will see at once th at we did not heed his 

warning, and today, in the final third of this century, we are still tryin g to operate 

the courts with fundamentally the same basic methods, the same procedures 

and the same machinery he said were n ot good enough in 1906. In the supermarke t 

age we are trying to operate the courts with cracker-barrel corner grocer methods 

and equipment—vintage 1900.’’

The bills we consider today deal with such antiquated procedures. Since 1913 

with the passage of the Urgent Deficiencies Act, orders of the ICC have been 

reviewed in the United States District courts by panels of three judges, at least 

one of whom must be a judge of the cou rt of appeals for the distric t in accordance 

with sections 2321 and 2325 of t itle 28 of the Code. The Hobbs Act, adopted in 

1950, placed such appeals from other agencies in single-judge Dis trict courts, 

with furth er review to be cond ucted by the circuit courts of appeals and the 

Suprem e Court upon petition for writ of certiorari. As it stands today, appeals 

from review of ICC orders by three-judge panels are take n d irectly to the Supreme 

Court on an expedited basis. In December 1972, the Study Group on the Caseload of the Suprem e Court, chaired by Professor Paul Freund of the Harvard 

Law School, had this to say abo ut the current review procedure:

“ Review of ICC orders by a three-judge court with direct appeal to the Supreme; 

Cou rt is an historical anomaly. At one time there was similar review for other 

agencies, bu t this was changed in 1950, and review of the oth er agencies was 

transferred to the courts of appeals. The reasons given for making this change 

for the other agencies are fully applicable to the ICC . . .

“In recent years the Commission has abandoned its opposition to similar 

tre atmen t for its orders. Proposals for review of ICC orders by the courts of 

appeals, supported by the Judicial Conference of the United States and, so far 

as we know, opposed by no one, have been before Congress for several years. 

Since many ICC cases are not of sufficient importance to require review by the 

Suprem e Court, it is clear th at the unique tre atm ent of ICC orders is a burd en 

on the Suprem e Cou rt th at can no longer be justified.”

Over thirt y years ago, Mr. Justice Fra nkfur ter described the three-judge review 

procedure as “a serious drain upon the federal judicial system particularly in 

regions where, despite modern facilities, distance still plays an important part 

in the effective adm inistration of justice.” We have with us this morning Chief 

Judge Ha rry Phillips of the Sixth Circu it, which covers the States of Michigan, 

Kentuck y, Tennessee and pa rt of Ohio. Judge Phillips has on many occasions 

served on panels reviewing Commission orders, and will enlighten us as to the time 

and expense involved in this procedure. During the fiscal year just completed, 

there were 249 cases which requ ired the convening of three-judge panels, and 

appeals taken from ICC orders acco unted for 51, or j ust over 20 percent, of this 

total. In addition to being a sub stantial burd en on circuit court judges, there is 

evidence th at dire ct appeal to the Suprem e Court is a waste of tha t Co urt ’s time 

and is, in many cases, unnecessary. For example, in the October 1972 Term 

which the Court completed las t year, it allowed and disposed of 26 such appeals, 

requiring full briefing and oral argu men t in only 5 cases.

There can be little dou bt th at this legislation carries wide supp ort. The record 

compiled by Senator Burdick ’s Subcomm ittee on the Improvem ent of the Jud icial Mac hinery reveals that, of the 10 chief judges of th e Federal courts of appeals 

and 38 chief judges of Federal distr ict courts who testified, all favored this reform. 

In testimony before Congressman Kasten meier’s subco mmittee on similar legislatio n with a broader sweep, Judg e J. Skelly Wright of the 1).C. Circuit noted 

th at the original problems for which three-judge courts were first conceived 

have been largely eliminated thro ugh oth er reforms, and th at this procedure 

now generates rat her tha n lessening litigation. I have statem ents of a similar 

nature, which I will include in our record, from the Solicitor General of the United 

State s, the An titrus t Division of the Department of Justic e, the Adm inistrative 

Office of the United States Courts, The American Bar Association and ICC 

prac titio ners. All sup port the swift ena ctm ent of this legislation.

We also have with us represe ntatives of the Commission itself who, according 

to their testimony on the other side, generally sup por t this reform. As I und erstand it, they have two specific objections to the bills as presently drafted: first, 

they are opposed to allowing petitioners who appeal their a dministrative decisions
3

the option of filing in the District of Columbia as well as in their principal place 

of business; and second, they think it necessary to amend this legislation to 

clarify and preserve the Commission’s right to defend its actions independent 

of the Department of Justice.

Given the fact tha t the need for this reform is great and that these bills suffer 

no major opposition, I think it would be unwise to belabor the general issues. 

In my view, it would be much more profitable to focus on these objections to 

determine if they are meritorious ones and, if so, take appropriate steps to satisfy 

them so th at this Subcommittee may expedite this much-needed reform.

Mr. Conyers. I want to take this time to say that, like the speedy 

trial bill which was reported 3 weeks ago from this subcommittee, 

this legislation addresses a concern which many of us see as a major one 

I before this Congress. That is, the modernizing and improving of the

Federal judicial machinery to meet the needs of the 20th century. 

The problem of antiquated judicial procedures is one of consistent 

historical concern. The famed jurist, Roscoe Pound, told the American 

» Bar Association as far back as 1906 tha t the work of the courts in

the 20th century could not be carried on with the methods and ma ­

chinery of the 19th century.

Sixty-four years later, speaking to the same organization, Chief 

Justice Burger made this observation:

If you will read Pound’s speech you will see at once th at we did not heed his 

warning and today, in the final third of this century, we are still tryin g to operate 

the courts with fundam entally the same basic methods, the same procedures 

and the same machinery tha t he said were not good enough in 1906. In the supe rmarket age, we are trying to operate the courts with crackerbarrel, corner grocery 

methods and equipment, vintage 1900.

The bills today tha t we consider deal with such a ntiquated procedures and, since 1913, with the passage of the Urgent Deficiencies 

Act, orders of the ICC have been reviewed in the U.S. district courts 

by panels of three judges, one of whom, of course, must be a member 

of the court of appeals. The Hobbs Act, adopted in 1950, changed 

this by permitting appeals in single-judge district courts with further 

review to be conducted by the circuit courts of appeals and the 

Supreme Court on petition for a writ of certiorari.

As it stands today, appeals from the review of ICC orders by threejudge panels are taken directly to the U.S. Supreme Court on an 

expedited basis. This bill has been considered rather extensively in 

the other body and, prior to calling our first witness, I would like to 

place in the record a communication from W. Vincent Rakestraw,

* the Assistant Attorney General for Legislative Affairs, which sets forth 

the views of the Department of Justice on these bills. I would also 

like to place in the record a letter from Herbert E. Hoffman which 

includes the resolution and report of the House of Delegates of the

* American Bar Association. Mr. Hoffman is the director of the association’s Governmental Relations Office.

Without objection, those items are entered into our record.

[The material referred to follows:]

D ep artm ent of J u stic e, 

Washington, D.C., December 9, 1974-

Hon. Peter W. Rodino, Jr.,

Chairman, Committee on the Judiciary,

House of Representatives, Washington, D.C.

Dear Mr. Chairman: This is in response to your request for the views of the 

Department of Justice on S. 663, a bill to improve judicial machinery by amending 

Title 28, United States Code, with respect to judicial review of decisions of the 

Interstate Commerce Commission, and for other purposes, as passed by the Senate.
4

Judicial review of orders of the In ters tate Commerce Commission is now based 

on the Urgent Deficiencies Act of 1913, 28 U.S.C. 1336, 2321-2325. A suit to set 

aside such an order, except one solely for the payment of money, is filed in the 

district court in which plaintiff has his residence or principal office and is heard by 

a panel of three judges, at least one of whom must be a judge of the couit of 

appeals. There is direct appeal as a m atter of right from the three-judge court to 

the Supreme Court. Since anyone adversely affected may sue to annul the order 

in the district in which he has his residence or principal office, there may be 

multiple suits attacking the same order in different districts. There is no express 

time limitation for filing such a suit. In these suits, which are against the United 

States, the Attorney General represents the government; however, the Commission 

and any other party in interest may intervene and be represented by their own 

counsel. Any party to the suit may continue to prosecute or defend it regardless of 

any action or nonaction of the Attorney General. (28 U.S.C. 1253, 1336, 1398,

2284,2321-2325.) 1

S. 663 would place review of ICC orders, except those for the payment of 

money, under the Judicial Review Act of 1950, commonly known as the Hobbs 

Act (28 U.S.C. 2341 et seq.). This Act transferred to the court of appeals the 

jurisdiction of three-judge district courts to review certain orders of the Federal 

Maritime Commission, the Federal Communications Commission, and the *

Department of Agriculture. Notwithstanding the recommendation of the Judicial 

Conference, the 1950 statute as finally enacted did not apply to the Interstate 

Commerce Commission. The Atomic Energy Commission was placed under the 

Act in 1954.

S. 663 would thus change the review of ICC orders in several respects. Jurisdiction will be transferred from the district courts to the courts of appeals. Review 

by the Supreme Court will be by the discretionary writ of certiorari under 28 

U.S.C. 1254 instead of as a matter of right. Multiple suits against the same ICC 

order will be eliminated and there will also be a 60-day limitation for filing petitions with the court of appeals for review of ICC orders.

The Department of Justice strongly recommends the enactment of this bill. The 

existing procedure has imposed a substantial burden on the judiciary which 

should be eliminated.

S. 663 would help to relieve the already full dockets of the federal district 

courts and reduce the need for district and circuit judges to assemble in special 

three-judge district court panels. Many of the judges assigned to these ICC cases— 

particularly those from the courts of appeals—were required to lay aside their 

regular duties to atten d these hearings, frequently in distant locations within 

the circuit, because a full complement of three judges was not regularly assigned 

to the city in which the cases were filed. As far back as 1941, Mr. Justice Frankfurter described the three-judge procedure as “a serious drain upon the federal 

judicial system particularly in regions where, despite modern facilities, distance 

still plays an important part in the effective administration of justice. And all 

but the few great metropolitan areas are such regions.” Phillips v. United States,

312 U.S. 246, 250 (1941).

The burden on the Supreme Court is comparable. It has to review a number of 

ICC cases tha t it ordinarily would decline to do under its certiorari jurisdiction.

Because of the limited public importance of most of these cases, as well as the 

large number of cases involving constitutional or other important questions re- 4

quiring greater attention, the Supreme Court decides most of them without 

full briefing and oral argument.

The bill will have several additional desirable consequences. First, it will eliminate multiple suits attacking a single ICC order brought in different locations 

before different courts. The Hobbs Act provides that the court of appeals in which 9

the agency record is first filed has exclusive jurisdiction to determine the validity 

of the agency order (28 U.S.C. 2349(a)). Also, 28 U.S.C. 2112(a) requires consolidation of all petitions for review of an agency order in one circuit. Second, the 

bill will make applicable to the ICC the Judicial Review Act provision which 

requires tha t a petition attacking an agency order be filed within 60 days from 

its entry. (28 U.S.C. 2344)

Third, placing review of ICC orders under the Judicial Review Act will ease 

the procedural and financial burden on private parties challenging ICC orders 

by requiring the agency, instead of the plaintiff, to file the administrative record 

with the reviewing court. The added cost to the government will not be undue, 

since the new Federal Rules of Appellate Procedure allow the agency to file a 

certified list of the materials comprising the record in lieu of reproducing or filing 

the original papers. Fourth, a quorum of the court of appeals will be able to decide
a case challenging an ICC order when one of the assigned judges has become incapacit ated . See 28 U.S.C. 46(d). A quorum provision does not app ly to thr eejudge distric t courts, and the Supreme Court has held th at the par ticipa tion 

of fewer than three judges renders the decision void. See Ayrshire Corp. v. United

States, 331 U.S. 132 (1947). This becomes a par ticu lar hardship in the rare 

circum stance of the inca pacitation or dea th of a judge after hearing but prior 

to decision.

Fifth, the legislation would make specific what is already assumed by liti gan ts 

and the courts—rules and regulations of the Commission are reviewed in the 

same judicial tribun al which has jurisdic tion to review adjudicated orders of that 

agency. See American Trucking v. A.T . & S.F .R. Co., 387 U.S. 397 (1967). The 

jurisdictional provisions of existing law make no reference to rules a nd regulations, 

even though the procedure and the standards for jud icial review of rules and orders 

differ materially. Despite the practice of the Commission to label th e p romulgation 

of a rule as an order, parties should not be left with u ncertain ty as to the na ture 

and jurisdiction for review of the IC C’s decisions.

In all other material respects, the existing procedure will continue und er the 

new sta tute. Thus, actions will be filed against the United States, with the 

Atto rney General managing and controlling the defense of the agency’s order. 

This is in line with existing procedure applicable to the ICC and to agencies alrea dy 

governed by the Judicial Review Act, and simply reta ins a procedure th at was 

strongly endorsed as critical to the “efficient performance of legal services within 

the Executive Branch ” by the Hoover Commission in 1955. See Commission on 

Organizatio n of the Executive Branch of the Government, Report on Legal

Services and Procedures, p. 6 (1955). The ICC will reta in its right to particip ate 

inde pendently thro ugh all stages of judicial review. In addition, the cou rt of 

appeals will have the same power as do the three-judge district courts to issue 

interloc utory orders to sta y the effect of a challenged decision pending review on 

the merits. The only change would be th at applications for inte rlocutory relief 

will have to be submitted to a three-judge panel of the court of appeals instead of 

merely one distric t judge prior to the empaneling of a three-judge court. In 

practice, this will not amount to any hard ship since comparable applications are 

routinely referred to a panel of the court regularly assigned to h ear motions on an 

expedited basis.

Finally, if review were placed und er the Hobbs Act, as the bill provides, litigan ts and jud ges would have the benefit of an estab lished and familiar proce dure 

with a sizable body of inte rpr etive case law th at has served efficiently and with 

general approval for nea rly 20 years. The De partm ent believes th at the time 

has come for implementation of the long-sought reform of the proc edure for 

reviewing ICC orders. Our experience under the Hobbs Act dem ons trates th at 

this st atute affords the most simple and effective method for ac hieving this reform 

while preserving the salutar y relationship between the Attorney General and 

the Commission which Congress wisely prov ided for in the Urgen t Deficiencies 

Act of 1913. The Solicitor General, in a lette r of August 13, 1973 to Sen ator 

Burdick, specifically affirmed th at the In terstate Commerce Commission would 

continue to have the same au thr oit y to rep resent itself indepe nde ntly in the 

Supreme Court und er S. 663 t hat it now has und er the Urg ent Deficiencies A.ct.

The Office of Manag ement and Budget has advised th at there is no objection 

to the submission of this rep ort from the sta nd po int of the Administration’s 

Prog ram.

Sincerely,

W. Vincen t R akestraw,

Assistant Attorney General.

[The letter of the Solicitor General referred to above is reproduced 

here for purposes of clarity :]

Office of the Solicitor General,

Washington, D.C., August 13, 1973.

Hon. Quentin N. Burdick,

U.S. Senate,

Washington, D.C.

Dear Senator Burd ick: This is in reply to your lette r of July 25, 1973, to 

the Atto rney General, in which you refer to statem ents by form er Solicitor 

General Griswold and Deputy Assistant Attorney General Wilson th at the Solicitor General had “au tho rized” the Interstate Commerce Commission and the 

Federal Maritim e Commission to represent themselve s in the Supreme Court in 

cases where the y were tak ing a position con trary to th at of the United Sta tes.
6

You asked whether you correctly understood th at their statem ents were not 

intended to suggest that without such authorization those agencies could not 

themselves have appeared.

Your understanding of the purport of the statements is correct. The Inter ­

sta te Commerce Commission would continue to have the same autho rity to represent itself independently in the Supreme Court under S. 663 th at it now has 

under the Urgent Deficiencies Act. U nder th e bill it will have the autho rity itself 

to file petitio ns for writs of certiorari, to oppose such petitions when filed aga inst 

it, and to take any other action, including the prep aration and submission of its 

own briefs and the presentation of oral argument, in any cases before the Supreme 

Court in which botn i t and the United States are parties.

Sincerely,

Robert H. Bork, Solicitor General.

American Bar Association, 

Washington, D.C., December 9, 1974-

Re: S. 663—Amending Title 28, U.S.C., With Respect to Judicial Review of 

Decisions of the Inter sta te Commerce Commission.

Hon. J ohn J . Conyers, Jr.,

Chairman, Subcommittee on Crime, Committee on the Judic iary, U.S. House of

Representatives, Washington, D.C.

Dear Mr. Chairman: With reference to the Subcommittee’s hearings on the 

above bill, I am pleased to advise you th at the American Bar Association by action 

of the House of Delegates supports the repeal of 28 U.S.C. Sec. 2325, which 

provides for three-judge distric t courts with direc t appeal to the Supreme Court 

of the United States for review of orders of the Inter sta te Commerce Commission.

The resolution adopted by the House of Delegates in February 1973, togethe r 

with an e xplanatory report, is enclosed.

Sincerely,

Herbert E. Hoffman.

Enclosures.

Resolution Adopted by the American Bar Association House of

Delegates F ebruary 1974

Resolved, Th at the Congress repeal 28 U.S.C. § 2281 and 2282 which provide 

for a three-judge district court with dire ct appeal to the Supreme Court of the 

United States when the con stitutio nality of a state or federal statute is challenged 

and 28 U.S.C. § 2325 which provides for three-judge distric t courts with direct 

appeal to the Supreme Cou rt of the United States for i eview of orders of the Inter sta te Commerce Commission; and

Further Resolved, Th at the President or his designee be authorized to urge the 

Congress to repeal these sections.

RE PO RT

In his nddress at the 95th Annual Meeting of the American Bar Association 

in San Francisco in August, 1972, entitled “T he State of the Federal Jud icia ry— 

1972” (AB A Journal, Vol. 58, p. 1049-1053, Oct. 1972), Chief Justice Burger 

recommended elimination of three-judge distric t courts. The Chief Justice stated, 

in part, th at such courts now disrupt distric t and circuit judg es’ work and that 

direct appeal to the Supreme Court, withou t the benefit of interme diate review 

by a c ourt of appeals, has seriously eroded the Supreme Court’s power to control 

its work load since appeals from such three-judge district courts now account for 

one in five cases heard by the Supreme Court. The Chief Justice furth er sta ted 

th at the original reasons for establishing these special courts, whatev er their 

validity at the time, no longer exist and that there are adequa te means to secure 

an expedited appeal to th e Supreme Court if the circumstances genuinely require it.

The Com mittee’s consideratio n of this problem has revealed th at the Chief 

Jus tice’s views are overwhelmingly supported by the vast majority of federal 

circuit and district court judges. For example, in testim ony given before the Senate 

Subcommittee on Improvements in Judicial Machinery on May 9 and 10, 1972, 

both Chief Judg e Collins J. Seitz of t he United States Court of Appeals for the 

Third Circuit and Chief Judge John R. Brown of the United States Court of 

Appeals for the Fifth Circuit vigorously urged the abolition of three-judge district
7

courts. In 1970 th e Jud icial Conference of th e Un ited Sta tes recommended repe al 

of this legislation (1970 Rept. Jud . Conf. 78-79) and in recent years t he In terstate 

Commerce Commission has aba ndo ned its o ppos ition to repe al of 28 U.S.C. § 2325. 

Furth er, the Re port of the Stu dy Group on the Caseload of the Supreme Court 

dated December, 1972 (pp. 26-30) prepar ed for the Feder al Jud icia l Center by a 

committee under the Chairmanship of P rofessor Paul A. Freund of Ha rvard Law 

School similarly recom mended repeal of th ese sections.

Although there are oth er situations in which the stat ut es prov ide for a threejudg e distric t court with direct appeal to the Su preme Co urt of the Un ited S tates, 

i.e., the Civil Rights Act of 1964 (42 U.S.C. §§ 1971g, 200 0a-5(b), 2000c-6(b)), 

and the Voting Rig hts Act of 1965 (42 U.S.C . §§ 1973b(a), 1973c, 1973h(c)), the 

Com mittee does not, at th is time, tak e a position with reference to these sections. 

The Com mittee intends to give the question of the repeal of these section s further 

stu dy and will make its reco mmendations with respec t thereto a t a futu re time.

* Respectfully s ubm itte d,

Warren Christoph er,

William P. Dickson, J r., 

R obert J. Kutak,

R obert A. Loflar,

* Francis T. P. Plimpton,

Terry Sanford,

J oseph D. T ydings,

T heodore Voorhees,

C. Frank R eifsny der,

Chairman.

Mr. Conyers. We will now call for our first witness, Hon. Harry 

Phillips, chief judge of the U.S. Court of Appeals for the Sixth 

Circuit.

Would you come forward? We are not going to swear you in. We 

will proceed in a more informal way. For my colleagues on the committee, Judge Phillips has been on the Federal appellate bench for 

11 years. He has written extensively. He has been an Assistant U.S. 

State attorney general, a private practitioner, and was named in 1963 

by the late President Kennedy to the sixth circuit bench, and he has 

been the chief judge of tha t circuit since 1969, where he continues 

to serve with distinction.

We have, sir, your statement, which will be entered into the record 

at this point anti we invite you to proceed in any way t hat you want 

in summarizing it or making any additional comments in connection 

with the legislation under contemplation.

[The prepared stateme nt of Hon. Harry Phillips follows:]

* Statement of Hon. Harry Phillips, Chie f J udge of the Sixth Circuit

On behalf of myself and the other federal judges of the Sixth Circuit I wish to 

commend the action of this Subcommittee in scheduling hearin gs on S. 663. We 

are convinced th at this proposed legislation will provide an expeditious review of

* decisions of th e Interstate Commerce Commission, while at the same time effecting 

a more efficient use of judicial manpower. We, therefore, earnestly hope th at the 

Com mittee will give its pro mp t approval to this bill and th at the House will 

pass it and send it to the President before the adjou rnm ent of Congress.

From personal experience, I can testify th at the review of ICC decisions by a 

three-judge District Court is not an efficient procedure. It makes common sense 

and will prom ote consistency to have ICC decisions reviewed by the Cou rts of 

Appeals, in the same m ann er as decisions of the ot her federal a dministrative agencies are reviewed, including the Federal Trade Commission, the Federal Communications Commission, the Federal Power Commission, the Nation al Labor 

Rela tions Board and others.

During my more tha n eleven years as a Circ uit Judge, I have served as a m ember of three-judge district cou rt panels specially convened solely to review ICC 

decisions in a sub sta ntial num ber of cases—in my home state of Tennessee and 

also in Kentucky and on one case in th e S outhern D istrict of Ohio.
The pres ent procedure requires th at ICC cases be heard only in the district 

of the residence or principal office of any of th e parties bringing the action. Unless 

the case is filed in a city where a circuit judge and two distric t judges reside, 

a waste of judicial resources and public funds results because of the travel time t ha t 

is necessary to convene the three-judge panel, freq uently requiring overnight 

accom modations and meals while in trav el status.

To sit on a three-judge distric t court in Memphis, the round trip traveling 

distance from my home in Nashville is 444 miles; in Knoxville, 394 miles; in 

Cha ttanooga, 248 miles; in Greeneville, Tennessee, 406 miles; in Louisville, Ken ­

tucky, 360 miles; and in Lexington, Kentucky, 466 miles. This requires one or 

more days of my time away from oth er duties.

Trav el time is an even more acute problem in those circuits encompassing 

larger geographical areas.

At the present I am assigned to two ICC three-judge panels, one in Memphis 

and the other in Louisville, b oth of which probably will be he ard in January 1975. 

Most of the nine judges of our court in Michigan, Ohio, Kentuck y and Tennessee 

also are assigned at the present time to one or more ICC panels. U these cases 

could be heard by the Court of Appeals for the Sixth Circuit as all other agency 

actions are reviewed, they would be placed on the regular calendar in Cincinnati 

for hearing by a panel of three circuit judges during a regular term of court. Instead 

of trave ling to a distant city, the three circuit judges would walk from their 

chambers in Cincinnati to a courtroom in the same building and hear arguments 

in five cases, including ICC cases, in one day.

Two busy distric t judges mu st leave the ir already congested dockets to sit in 

review of an ICC decision, an area of adm inistrative law th at is quite different 

from cases normally within the jurisdiction and experience of distric t courts. 

Relieving distric t judges of th is responsibility will give them more time to devote 

to their more urgent duties, sue as expediting trials in criminal cases.

The procedure provided by S. 663 also will avoid an unnecessary burden on the 

Supreme Court. The decisions of three-ju dge distric t courts by s tatute are appealable directly to the Supreme Cou rt as a m atter of right. From personal experience 

in hearing these cases, I can testify th at there is rarely any thing of sufficient 

importance or public interest in an ICC case to ju stify this preferred tre atm ent and 

the b urde n it thrust s upon the Supreme Court.

Under S. 663, the Supreme Court would review’ decisions of Courts of Appeals 

in ICC cases by petition for certiorari, in th e same manner th at all other decisions 

of the Courts of Appeals, including those affecting other regulatory agencies, 

are reviewed.

By approving S. 663 this Com mittee will provide a review of ICC orders by 

circuit judges who are experienced in dealing with the decisions of other federal 

regulatory agencies. Furthermo re, you will lighten the burden of district judges 

who, und er manda te to expedite disposition of criminal cases, have extre mely 

pressing demands on their time. To a lesser b ut important extent, you will lighten 

the workloads of circuit judges and Supreme Cou rt Justices as well.

The need for this legislation is well do cumented by testimon y of other witnesses 

and by Senate Report No. 93-500. It is not necessary for me to prolong this 

sta tem ent or to impose furthe r upon the time of the Committe e by repeating 

those facts . This proposed legislation has been recommended many times by the 

Judicial Conference of the United States. As of today it is nearer to enactment 

into law tha n it ever has been before. I am confident t ha t, in urging the approval 

of this bill, I am expressing th e views of every federal judge in the country.

Your favorable consideratio n of this matt er will be deeply apprecia ted.

TESTIMONY OF HARRY PHILL IPS, CHIE F JUDGE OF THE SIXTH 

CIRCUIT

Mr. Phillips. Thank you, Mr. Chairman, gentlemen of the 

committee.

On behalf of myself and all of the other Federal judges in the sixth 

circuit, I wish to commend and express appreciation for the action 

of this subcommittee in scheduling hearings today on S. 663. We are 

convinced that this proposed legislation will provide an expeditious 

review of the decisions of the Interstate Commerce Commission, 

while at the same time effecting a more efficient use of judicial manpower. We, therefore, earnestly hope th at the committee will give its
9

prompt approval to this bill and that, and even though the hour is 

late, tha t the House will pass it and send it to the President before 

the adjournment of the present Congress.

From personal experience, gentlemen, I can testify tha t the review 

of ICC decisions by a three-judge district court is not an efficient 

procedure. It makes commonsense and will promote consistency to 

have ICC decisions reviewed by the courts of appeals, in the same manner as decisions of the other Federal administrative agencies are 

reviewed, including the Federal Trade Commission, the Federal 

Communications Commission, the Federal Power Commission, the 

National Labor Relations Board, and other Federal agencies.

During my more than 11 years as a circuit judge, I have served as 

a member of three-judge district court panels specially convened 

solely to review ICC decisions in a substantial number of cases, most 

of them in my home State of Tennessee and also in Kentucky and 

on one case in the southern district of Ohio.

The present procedure requires tha t ICC cases be heard only in the 

district of the residence or principal office of any of the parties bringing 

the action. Unless the case happens to be filed in a city where a circuit judge and two district judges reside, a waste of judicial resources 

and public funds results because of the traveltime tha t is necessary 

to convene the three-judge panel, frequently requiring overnight 

accommodations and meals while in travel status. I have a paragraph 

in my statem ent illustrating the mileage problem that we have, 

and our circuit is smaller than some of the others. I will not read 

these mileages. They are already in the statement. But every time 

I sit on the three-judge court outside of Nashville, it kills a day or more 

of my time, and the problem is even more acute in other circuits which 

are larger than the sixth circuit.

At the present time I am assigned to two three-judge ICC cases. 

One of them is in Louisville, Ky., the other is in Memphis, Tenn. 

We will hear those cases in January 1975, or perhaps a little later.

Now when I travel to Louisville, which is round-trip 360 miles, or 

when I travel to Memphis, which is 444 miles round-trip from N ashville, again, I will kill the greater part of 2 days to hear those cases. 

Those cases would be heard before our court in Cincinnati under S. 663. 

All of our sessions are held in Cincinnati. All I would have to do would 

be to walk down the hall to the courtroom and hear the ICC case along 

with four other cases the same morning, the same day. We hear five 

cases a day. An ICC case would be heard along with the other cases 

on our docket.

Instead of spending 2 days, I would spend only a fraction of 1 day 

in the hearing. That is the same way tha t we hear reviews from all of 

the other Federal administrative agencies.

Another disadvantage of the present procedure is this: It requires 

two busy district judges to leave their already congested dockets to 

sit in review of an ICC case. ICC law is an area of administrative law 

which is foreign to the day-by-day experience of the district judge.

I sat on an ICC case in Louisville not too long ago. One of the 

district judges had a criminal case that already was old, and he had 

to postpone tha t criminal case until a later date, a case tha t should 

have been tried 6 months earlier. Because of the convening of this 

three-judge court he postponed his criminal case until a later date and 

further delayed a criminal case tha t should have been tried tha t day
10

instead of the ICC case, to which the district judge had to devote his 

duties and his time under the present antiquated procedure.

And as pointed out by the chairman, the procedure provided by 

S. 663 also will avoid an unnecessary burden on the Supreme Court.

The decisions of the three-judge district court are appealable directly 

to the Supreme Court as a matter of right. From personal experience, 

and basing my statement on personal experience, I can testify that 

there is rarely anything of sufficient importance or of public interest 

in the ICC case to justify this case receiving preferred treatm ent over 

all other cases that are heard before courts of appeals from administrative agencies and the burden tha t it thrusts upon the Supreme Court 

of the United States. 1

Under S. 663 the Supreme Court would review decisions of the court 

of appeals in ICC cases by petition for certiorari in the same manner as 

all of the decisions of the court of appeals, including those affecting 

other administrative agencies, are reviewed. *

By approving S. 663 this committee will provide a review of ICC 

orders by circuit judges who are experienced with the decisions involving other Federal regulatory agencies. I do not mean to imply that 

circuit judges are more capable than district judges but we do have 

more experience with dealing with Federal regulatory agencies because 

tha t is a part of our jurisdiction.

This bill would lighten the burden of the district judges who need 

to devote their time to the speedy trial of criminal cases, which this 

committee recently has considered. I t will lighten the burden of circuit 

judges by enabling us to hear these cases without spending so much 

time in travel, and it also will lighten the burdens of the Supreme 

Court Justices.

'Phe need for this legislation is well documented by all the documents tha t appear in Senate Report No. 93-500, which already is 

a part of your record. I t is not necessary for me to prolong this statement or to impose further upon the time of this committee by repeating these facts.

This proposed legislation has been recommended many times by 

the Judicial Conference of the United States, but to the best of my 

knowledge, today it is nearer to being enacted into law than it has 

ever been, although this bill has been before many sessions of the Congress. It already has passed the Senate and if the House can find time 

to approve it this session, it can become law this year without having 1

to be reintroduced in the next session of the Congress.

Federal judges disagree on many subjects, gentlemen, but I am 

confident that when I make this statem ent today, I speak for a unanimous Federal judiciary. This would be one subject on which every 

Federal judge in the United States is in agreement.

In closing, I want to thank you again for conducting this hearing.

I suppose there has never been a Congress in the history of this Nation 

where a Judiciary Committee has had more extraordinary responsibilities thru st upon it than has occurred during this session of the 

present Congress tha t you gentlemen have experienced.

Let me make one final statement before answering any question 

you mav have. I read the statement of the Chairman of the Inte rstate Commerce Commission who will testify as a witness. The Inte rstate Commerce Commission asks this committee to place two amend-
11

merits on this bill. Of course, I am not authorized to speak for the 

Judicial Conference of the United States, and the Conference has 

approved the bill in its present form. Personally, I prefer to express 

no view on these amendments one way or another, because neither 

of the amendments will change the procedures that we are asking 

for consideration of these cases by courts of appeals. But I would 

urge tha t if the committee sees fit to adopt either or both of these 

amendments, tha t these amendments not be permitted to kill this 

bill in this session of Congress. If you do amend it, whatever amendment in your wisdom you decide to adopt, I would urge that those 

amendments be considered and added and not be permitted to let 

this bill bog down and die in the closing days of the present Congress. 

Thank you very much.

Mr. Conyers. Thank you very much, Judge Phillips. We appreciate your remarks and I find tha t your observation about the una ­

nimity of the judiciary is quite accurate from everything I have 

heard. It is one of the reasons that the subcommittee felt impelled 

to, even in the closing days of this, the 93d Congress, to atte mpt to 

thoughtfully consider the matter before us and we appreciate you, 

as our leadoff witness, laying a basis for any questions that may arise 

about this legislation.

I would like to note for the record that my colleague from Maine, 

Bill Cohen, has joined us, and we are going to pass over him for 

questioning for just a little while and ask if the gentleman from 

New York, Mr. Fish, has any questions of our witness?

Mr. Fish. Thank you, Mr. Chairman, and I thank you, Judge 

Phillips, for being here this morning and giving us such a clear sta tement in support of this legislation.

Could I ask just one question, sir: Could you tell us how did the 

procedure for review of ICC decisions today—the present procedure 

before a three-man district court and to the Supreme Court, as a matter 

of right—how did this apparent anomalous situation as distinct from 

other regulatory agencies come to pass?

Mr. P hillips. Aly understanding is that this has been the procedure 

since 1913, and most, if not all of the other regulatory agencies have 

been created since 1913. This is a carryover of an antiquated procedure 

tha t was adopted by Congress in 1913. I believe, that in the Senate 

document 93-500, the legislative history of that provision is covered 

in detail. It is really something tha t nobody has been interested in 

except the Federal judges, and you gentlemen and the gentlemen of the 

previous Congresses have had so many other pressing matters tha t 

just no Congress has gotten around to changing it.

Mr. Fish. There is no further justification of this present practice 

tha t you know of?

Mr. Phillips. None whatever.

Mr. F ish. Thank you, Mr. Chairman.

Mr. Conyers. You are welcome. The Chair recognizes the gentleman 

from Arkansas, Mr. Thornton.

Mr. Thornton. Thank you, Mr. Chairman.

Mr. Phillips, I would like to join in commending you for this fine 

statement, and indeed, it is important tha t we reduce the workload on 

district judges and on the Federal judiciary. I am concerned somewhat
12

about the two questions to be raised by Mr. Stafford, and I appreciate 

tha t you have no comment to make on them.

I would like to ask specifically, in the event that this legislation 

does not go forward, have you experimented with the practice which 

was novel and tried by our three-judge court in Arkansas of having 

the one sitting judge hear the case with the consent of the parties and 

convening the other two judges after reviewing the written presentation as a matter of making the decision, instead of requiring the three 

judges to sit?

Mr. Phillips. We have not done tha t in the sixth circuit because 

I have not thought that was in compliance with this statute. Perhaps 

it is, but the statute says there shall be three judges, and we have the 4

three judges. Now the one judge handles the preliminary matters and 

can even issue a temporary restraining order on all preliminary matters 

leading up to the final hearing. But our practice in the sixth circuit 

is to have three judges each time. **

We try, if it is a Michigan case, to appoint a Michigan circuit judge.

If it is an Ohio case, an Ohio circuit judge. If it is in Kentucky,

Kentucky circuit judge.

It just so happens tha t in my experience during my tenure, we have 

had some vacancies in Kentucky and illnesses in Kentucky, and for 

a considerable period of time I have been covering Kentucky and 

Tennessee both. But we have thought tha t the stat ute says three 

judges and we have always had three judges there for the hearing.

Mr. Thornton. I think I agree tha t if the question were not 

agreed by the parties, tha t the proceeding could go forward as a 

preliminary matter, tha t three judges might indeed be required. But 

I am just throwing out the possibility th at you might be able to shift 

more of the work into the preliminary stages, the gathering of evidence, 

a good bit of the work done at tha t stage rathe r than convening the 

three judges throughout the trial.

Mr. P hillips. Thank you, sir.

Mr. T hornton. I have no further questions.

Mr. Conyers. The gentleman from Wisconsin, Mr. Froehlich.

Mr. Froehlich. No questions, Mr. Chairman.

Mr. Conyers. I want to thank you very much, Judge. We appreciate your coming before us and your statement is, as I have said, 

consistent with all of the indications that we have received. This is 

perhaps one of the least controversial measures this subcommittee »

may ever have before it, even though there are some small differences 

tha t need to be resolved.

Mr. Cohen. Mr. Chairman, could I inquire just briefly?

Mr. Conyers. Yes. Let me now recognize the gentleman from *

Maine, Mr. Cohen.

Mr. Cohen. Judge, do you put any credence in the ICC ’s objection to the alternate venue placing the jurisdiction or venue in the 

D.C. Circuit Court of Appeals?

Mr. Phillips. Well, as I said a moment ago, I am in an awkward 

position. I am a member of the Judicial Conference of the United 

States and the Judicial Conference has approved the bill in the present 

form. Personally, I would prefer not to take a position on these amendments. I just hope tha t if the committee adopts the amendment, or 

either one of them, tha t it does not delay the bill.
13

As I understand the amendment, it would require these proceedings to be filed in the court of appeals of the residence or principal 

place of business of the parties and there would be no alternative 

jurisdiction in the Court of Appeals for the District of Columbia 

Circuit. I would much rather have the bill with this amendm ent 

than to have no bill at all.

Mr. Cohen. I guess I am asking you a personal opinion as opposed 

to a professional opinion, separated out from your position on the 

Judicial Conference as such, as to whether or not, from a judge’s 

point of view, it would be better or more beneficial for the legal 

system to have circuit courts around the country become familiar 

¥ with ICC matters, or whether, in fact, you get a more expeditious

handling, more expertise developed with the D.C. Circuit Court of 

Appeals, and then directly, the Supreme Court.

I am just asking, from a judge’s point of view, what is your opinion?

* Mr. Phillips. I really am not tha t conversant with how these 

cases are handled by the Court of Appeals for the District of Columbia 

Circuit. I do not claim to have any expertise in ICC matters. But if 

experience would give me expertise, I would be an expert. Every 

judge of the Court of Appeals of the Sixth Circuit has one or more of 

these cases now. I designated a panel yesterday in Cleveland, Ohio, 

for another ICC case, a circuit judge and two district judges to hear 

the case. Every circuit judge on the Court of Appeals of the Sixth 

Circuit, and I daresay tha t every circuit judge of every other circuit 

has already had a very considerable amount of experience with ICC 

cases in these three-judge panels, and I would really rather not 

express a view as to whether all of these cases ought to come to 

circuits outside the District of Columbia circuit or whether the 

parties should be permitted to have a choice as to filing in the D istric t 

of Columbia or in another circuit.

Tha t is a matter tha t addresses itself to the wisdom of the committee. I am repeating myself, but I would much rather have the 

bill with the amendment than to have no bill at all.

Mr. Cohen. Thank you very much.

Mr. Conyers. Thank you, judge. It is a pleasure to have had you 

before us this morning.

Mr. Phillips. Thank you, sir.

Mr. Conyers. Our next witness is the Chairman of the Interstate

* Commerce Commission, Mr. George Stafford, who was named the 

first permanent Chairman of the Commission in 1970, pursuant to 

Executive Reorganization Plan No. 1, and we welcome him before 

us at this time.

* We have your prepared statement, Mr. Stafford, so if you would 

come forward at this point, your statem ent will be incorporated 

into the record in full, limiting the necessity of your reading it in 

its entirety.

The subcommittee is apprised of the two critical considerations 

tha t I would imagine you want to present, so that if you would 

introduce the member of your staff accompanying you, you mav 

proceed in any way you choose.

[The prepared statem ent of Hon. George M. Stafford follows:]

44- 987 0 - 75 - 2
14

Statement of George M. Stafford, C hairman, Interstate Commerce

Commission

Mr. Chairman, Members of the Subcommittee: I am pleased to appear here 

today to offer the Commission’s views on S. 663, as approved by the Senate. The 

bill would amend Title 28 of the United States Code, with respect to judicial 

review of decisions of the Interstate Commerce Commission. It passed the Senate 

on November 16, 1973.

Presently, judicial review of Interstate Commerce Commission orders is before 

U.S. district courts of three judges, at least one of whom must be a circuit judge, 

with the decisions of these three-judge courts reviewable by the Supreme Court 

by appeal, rather than by writ of certiorari.1

 In general, S. 663 would change existing law to provide that the Commission’s orders shall be reviewed by the 

U.S. courts of appeals, and that the courts of appeals’ decisions, in turn, shall be 

reviewable by the Supreme Court by the discretionary writ of certiorari rather *

than by direct appeal as of right. More specifically, S. 663 would subject the review 

of Interstate Commerce Commission orders to the Judicial Review Act of 1950 

(Hobbs Act),2

 which currently applies to review of decisions of certain other 

Federal agencies, including the Federal Communications Commission, Federal 

Maritime Commission and Atomic Energy Commission. *

Before discussing specific provisions of S. 663, I should like to note that the 

Commission generally is in accord with the concept that its decisions be reviewed 

by the courts of appeals. In fact, revision of the law has been recommended to the 

Congress by the Commission since 1963. We fully agree with Chief Justice Burger 

and others who have commented that the three-judge court procedure is cumbersome and inefficient, and would add that a court of appeals is clearly a more 

appropriate forum for review of our orders than is a three-judge district court.

Not only is the court of appeals the forum for review of orders of nearly all other 

Federal administrative agencies, but also various features of that review would 

correct what are presently problems in the three-judge district court procedure.

For example, S. 663 would require that judicial review proceedings be instituted 

within 60 days after entry of the Commission’s order, thereby providing a reasonable opportunity to seek review while protecting the integrity of transactions 

approved by the Commission against belated appeals. Under present law there is 

no such specific time limit, apart from the general statutes of limitations and 

concept of laches, within which review actions must be brought. In addition, 

providing for review in the courts of appeals would have the further effect of 

making applicable the provisions 3

 requiring the consolidation of multiple suits 

against a single order in one court and for the agency to provide the administrative 

record for the reviewing court. Under present law, there is no requirement that 

multiple suits be consolidated, and the burden is on the complainant to furnish the 

administrative record to the court.

For these and other reasons, the Commission believes that judicial review in 

the courts of appeals would be an improvement over the existing procedure, and 

it is for this reason that we have long supported the purposes of bills such as 

S. 663. Nevertheless, we are opposed to S. 663 as approved by the Senate and would 

urge its defeat unless materially revised.

CONTROL O F LIT IG A TIO N *

There are two specific features of S. 663 as approved by the Senate that occasion 

objections to the bill. As you are aware, section 8 of the Judicial Review Act,4

 as amended, provides that “ The Attorney General is responsible for and has control 

of the interests of the Government in all court proceedings under this chapter,” *

a provision which does not exist in the judicial review statutes presently applicable 

to the Commission. Present law provides that the United States shall be named 

as defendant,5

 a provision which substantially corresponds to language in the 

Judicial Review Act to the same effect,6

 and that “ the Attorney General shall 

represent the Government in the actions.” 7

 Our concern is that the first sentence of section 2348 is susceptible of the construction that the Commission would be 

precluded from taking a position in a case independent of and separate from

1

 28 U.S.C. 1253, 1336, 1398, 2284. and 2321-25 . 1

 Ch. 15S. T itle 28, 28 U.S.C. 2341 et seq. 3

 28 U.S.C. 2112.

« 28 U.S.C. 2348.

8

 28 U.S.C. 2322. 6

 28 U.S.C. 2344.

7

 28 U.S.C. 2323.
15

th at of the Department or, under section 2350, filing n petition for a writ o 

certio rari on its own.

This area is of the utm ost importance to the Commission for in a few bu t 

significant cases the Departme nt has declined to defend the Commission’s orders 

in court. Sometimes this results from the inte rvention of some other Federal 

agency in opposition to the Commission’s position. A recent example of this was 

the recent Supreme Court case of Atchison, T. & S. F. Ry. Co. v. Wichita Board

of Trade,* where the Secretary of Agriculture opposed the Commission’s order 

and the Department elected to remain neu tral at the district court level. In the 

Supreme Court, the Departme nt did supp ort the Commission in part, bu t not as 

to the merits of the agency’s order.

On other occasions, the Jus tice Depar tment’s reluctance to join in the defense 

of Commission orders stems from the fact th at the Department itself has partic ipated in the Commission proceeding and does not agree with the Commission’s

* ultimate decision. This may result from the De partm ent’s represe ntation of the 

Government as a partic ipant in th e transp ortation process.®

But by far the most troublesome area in which the Justice De partm ent may 

decline to defend Commission orders is where there are differences of opinion on 

questions of policy and sta tutory construction. Because carriers actin g pu rsu ant

* to the Commission’s orders are generally immune from direct attack und er antitru st laws, many of these differences in recent years have involved the issue of 

competition and its evaluation by the Commission in such complex areas as 

interm odal rate competition and railro ad mergers.8 *10

It follows tha t the public interes t is best served by guaranteeing the Commission 

the right which it presently has to defend its actions indepen dent of th e views of 

the Dep artm ent of Justice. To accomplish this, it is necessary to amend S. 663. 

The amen dment should make it clear that th e Commission has the righ t to defend 

its actions inde pendent of the Dep artm ent of Justice. This could be done by adding 

a new section to the bill which would amend the first sentence of section 2348 of 

title 28, United Sta tes Code, to read :

“The Attorney General is responsible for and has control of the inte rests of 

the G overnment in all court proceedings under this chapter, except for a proceeding 

under paragraph (5) of section 2342 of this Tit le.”

In the past, the Department of Justice has opposed provisions similar to the 

amendment we propose here on the ground th at such changes would, in the Departm ent’s view, alter the Attorney General’s responsibility for prim ary control 

of this class of litigation. This, however, disregards what in fact is the existing 

procedure. As a practical matter, the Atto rney General does not now manage or 

control the defense of Commission orders. On the contrary, the almost universal 

practice is the defense of the Commission’s orders to be assigned to an attorn ey 

in the Office of the General Counsel of the Commission. The answers, briefs and 

the other pleadings in most of the actions challenging the validity of Commission 

orders do bear the name of the respective United States Attorneys and th at of the 

Assistant Attorney General in charge of the An titrus t Division and his a ttorneys. 

However, this reflects only the fact th at ordinarily the Dep artm ent of Justice 

joins in the defense of the Commission’s orders and subscribes to the position 

advanced by the Commission’s counsel. In such cases, the role of the Depar tment 

of Justice is largely passive and leaves to the Commission’s counsel the respon-

* sibility for fashioning and presenting the written as well as oral arguments before 

the reviewing courts. At the Supreme Court level, the Solicitor General assumes 

a more active role in the litiga tion in cases where the Departme nt and the Commis8

 Nos. 72-214 and 72-433, Oct. Term 1972, decided Jun e 18, 1973.

» ’ Thus , in a recent district court case, United States v. United States and Interstate Commerce Commission,

Civil Action No. 2624-70, D.D.C ., decided December 12, 1971, th e United States unsuccessfully pursued a 

claim against certain railroads before the Commission, and, on judicial review, declined in its role as stat utory defendant to defend the Commission’s order. The Commission ultim ately won this case.

10 A case in point is Louisville & Nashville R. R. Co. v. United States and Interstate Commerce Commission

(Ingot Molds Case), 392 U.S. 571 (1968). In th at case the Commission held t ha t the N ational T ran sportation 

Policy admonition th at the inheren t advantages of carriers be preserved enabled it to inva lidate a proposed 

railroad rate reduction that would have undermined a bargeline cost advantage, when measured by fully 

distrib uted cost. The Departme nt confessed error and contended th at thi s con stituted a holding up of a 

rate to a particular level to protect the traffic of another mode of transp ortation, in violation of section 15a(3) 

of the Interstate Commerce Act. Th e Supreme Court sus tained the position of the Commission over the continued objection of the D epa rtm ent of Justice.

In United States v. United States and Interstate Commerce Commission (Northe rn Lines Merger Case), 

396 U.S. 49 (1970), the Commission authorize d the merger of th e Great Northern, Nor thern Pacific and 

Burlington Railroads, upon finding, among other things, th at the economies and efficiencies the merger 

would yield would offset any disadvantages resulting from the loss of com petition among the carriers. A 

suit to set aside the Commission’s order was brought by the Department, which also pressed for a s tay of 

consummation of the transaction pending judicial review. T he Supreme Cou rt again sustained the position 

of the Commission.
sion are in agreement, bu t even here there has previously been no question that the Commission has an independent right to pursue its own course of action in cases 

where there are differences between the two agencies.

At this point I hand the Subcommittee a copy of a letter on S. 663 by the 

Honorable Albert B. Maris, Senior U.S. Circuit Judge of the Court of Appeals 

for the Third Circuit. Judge Maris, as you will recall, was previously a member 

of the Judicial Conference and has been involved in questions of judicial review 

of agency orders for many years. The substance of his suggestion here is that the 

Commission should be named as respondent in any action, with a right to intervene 

reserved to the Attorney General. This is, of course, the opposite of present Commission practice and tha t authorized under the Judicial Review7

 Act, where the 

United States is named as defendant or respondent and the agency involved is 

permitted to intervene." Judge Maris’ view is that the agency whose orders are 

under attack is the real party respondent in interest, while the Attorney General 

represents broader policy interests of the Government. While we do not here 

insist upon the specific amendment Judge Maris advocates, we do feel tha t his 

remarks underscore the importance of permitting the Commission to pursue a 

different course of action from th at of the Attorney General at all stages of court 

review.

I am aware of the letter of Solicitor General Bork, referred to on pages 6 and 7 

of the Senate Report (No. 93-500) accompanying the bill, in which he assures us 

of our right of independent access to the Supreme Court. However, as recently 

as this past August, one year after Mr. Bork’s letter, Assistant Attorney General 

Robert G. Dixon, Jr., in charge of the Department’s Office of Legal Counsel, in 

a speech to the American Bar Association in Honolulu stated, and I quote:

‘ The Department of Justice and 0M B have favored centralization of litigation 

in the Attorney General. This insures consistency of government positions on 

similar issues and provides a pool of experienced litigators. Thus Congress has, 

in Title 28, placed litigation for the United States under the control of the Attorney 

General except as otherwise authorized by law. 28 U.S.C. 516-518. Of course, 

there always nave been a certain number of agencies authorized to litigate certain 

matters on their own, but normally not in the Supreme Court,16 and others who would like to do so.”

Because of the foregoing attitude, the Commission urges adoption of the specific 

statutory direction that we suggest.

OPT IO NAL VE NUE

As you know, under existing law, suit to review Commission actions can be 

brought only in the jurisdiction in which the petitioner resides or has his principal 

office. As approved by the Senate, S. 663 would change this and also allow for 

optional venue in the United States Court of Appeals for the District of Columbia.

When we testified before the Subcommittee of the Senate Judiciary Committee, 

we opposed such an approach, and the Department of Justice concurred. It was 

on that basis tha t we supported the legislation. However, when the Committee 

reported the bill and as the Senate passed it, the optional venue provision was 

reinstated.

The experience of the other administrative agencies, subject to Hobbs Act and 

similar review, has been that well above half of their court cases have been brought 

in the Washington, D.C. Circuit Court of Appeals. The Federal Maritime Commission in a ten year period, from 1965 to 1974, had 52 actions brought assailing 

the validity of its orders. Of these 37 were brought in the United States Court 

of Appeals for the District of Columbia Circuit. The Federal Communications 

Commission in a four year period, 1970 to 1973, was involved in 299 such suits, 

237 of them maintained in the District of Columbia. The Atomic Energy Commission during the last year had 18 actions instituted against its order; of these 

13 were brought before the United States Court of Appeals for the District of 

Columbia Circuit.

11 28 U.S.C. 2322, 2323. 2344.

19 “Under existing statutes, some Independent regulatory agencies have been granted 

limited litig atio n authority. For example, the SEC and the FPC, In addition to possessing 

subpoena enforcement power, are empowered to bring an action in any federal distric t 

court to enjoin practices in violation of Its governing sta tutes or any of its rules or 

regulation, 15 U.S.C. 77t( b), 79r ; 16 U.S.C. 825m, 825f(c) * * *

“On the other hand, Supreme Court litig atio n is concentrated in the Solicitor General. 

One exception is the authority given to the Comptroller General to enforce the Presidential 

Election Campaign Fund Act of 1971, Including review In the Supreme Court. 21 U.S.C. 

9010(d). Also, although the sta tutory basis is not altog ether clear (see 28 U.S.C. 2323), 

as a ma tter of practice, the ICC has since 1913 represented itself before the Supreme Court.”
17

As a consequence, the United States Cou rt of Appeals for the District of 

Columbia Circuit has tended to become a supe r adm inistrative agency, seeming 

to conceive of itself as being better informed of the issues before them than the 

adm inistrative agencies whose decisions it reviews, rather tha n limiting itself to 

exposing errors of law allegedly committed by the agencies.

I have no dou bt th at the judges of the Cou rt of Appeals for this Circ uit are no 

less concerned or conscientious tha n those of any oth er Circuit, and neither do I 

dou bt th at the resu lt I perceive was not one of t heir delibera te devising.

Rather, I conceive of it as an inevitable result of the con cen trat ion of ju dicial 

review of a dministrative agency actio n in any single court.

I thin k there is merit in having all of the Circuit Courts of Appeals particip ate 

in the task of reviewing the decisions of the adm inistrative agencies; I think there 

is virtue in encouraging divergent approaches to the resolution of the problems 

the adm inistra tive agencies address, even if at times the cou rts’ opinions smack

♦ of a local rathe r tha n a national flavoring and if at other times the conflicts 

between them pose uncertainty and confusion, at least unt il the Supreme Court 

passes on the rele van t question.

In turn, I think we who are identified with the administrative agencies would 

bette r be able to perform our tasks, be more effective in our responses to the

* Nation’s needs if we had the benefit of the reac tions of the seve ral Courts of 

Appeals rather tha n if we were accountable, for all practic al purposes, to merely 

the United States Court of Appeals for the District of Columbia Circuit.

The suggestion advanced by a Washington lawyer promin ent in practic e 

before the Interstate Commerce Commission and partn er in the law firm rep resenting the National Ind ustrial Traffic League that, unless there is optional venue 

in the Distric t of Columbia, the carriers enjoy a litig atio n advantage th at the 

shippers are denied, is wholly unfounded. There is only one class I railroad based 

here, and no truck or barge line, bu t there are scores of m erchants or wholesalers 

th at might be involved in litigation arising out of I.C.C. orders. Moreover, there 

are far more trade associations domiciled in Washington th at include shippers 

in their memb ership than there are having carrier members; indeed, the Yellow 

Pages of the telephone directory go on for eight pages of listings, from the Aerospace Industries Association of America, Inc., to Zero Pop ulation Growth, Inc., 

both of which happen to be quite active in the transp ort ation area. Therefore, 

access to the Washington, D.C. courts even in the absence of an optional venue 

provision is no less available to the shippers than the carriers.

Before closing, I would like to make one final obse rvation with respec t to 

optional venue. The volume of litig ation arising from orders of the Commission 

is large. For example, in the last three years, 328 suits have been filed in various 

distric t courts. Of these, 19 have been filed in the Distric t of Columbia. Based 

upon the experience of other agencies, it seems reasonable to pre dict th at if 

optional venue is reta ined a m ajority of suits involving Commission orders would 

be filed in the D.C. Circ uit Cou rt of Appeals, thus substantially increasing the 

workload of th at Cou rt. It is easy to envision th at this increased volume would 

result in a backlog of cases involving orders of the I ntersta te Commerce Commission.

Therefore, we oppose S. 663 unless it is amen ded to delete optional venue in 

the District of Columbia.

We ap preciate the opportu nity to present these view’s today. We are concerned

• abo ut the Court review of Commission orders and believe that, with the coming 

of various moves to abolish the three-judge dis tric t courts generally, this is a 

particularly good time to try once again to pu t review of our orders where it 

belongs. Accordingly, wre would sup port S. 663, if the amendments w’e have 

recom mended herein are adopted.

* Th at concludes my formal statem ent. 1 a nd those mem bers of the Comm ission’s 

staff who are with me will a tte mpt to answer any questions you may have.

TEST IMONY OF HON. GEORGE M. STAFFORD , CHAIR MAN, IN TERSTATE COMMERCE COMMISSION, ACCOM PANIED BY FR ITZ R. 

KAHN, GENERAL COUNSEL

Mr. Stafford. Thank you, Mr. Chairman. I have with me at the 

desk my General Counsel, Mr. Fritz R. Kahn, and since you have 

indicated you would like to make this as short as possible, I will not 

read the statement.
18

We have been supporting the idea since 1963 tha t there needs to 

be a change in the method of judicial review, and we still have tha t 

position. But we do feel that the bill, as it passed the Senate, has two 

features in it tha t we feel require amendments. We were, of course, 

happy to hear Judge Phillips in his comments or views as he expressed 

them here. We recognize tha t the local bar in the Washington area 

is very desirous of having optional venue here. I suppose if I were a 

lawyer, and I am not—tha t’s the reason I carry my general counsel 

with me everywhere I go—tha t if I were a lawyer and lived here I 

would want to have it all here, and I cannot blame them for that. 

But we feel it is much more advantageous to have these cases heard 

in the areas in which the cases came from. Moreover, we have some 

question about whether the Justice Department would take a position tha t would be beneficial to or support our position, the position 

tha t the Commission is taking.

We have had instances of this, and, while one official of the Justice 

Department indicated there would be no concern about this, another 

official of the Justice Department in a recent speech in Hawaii to the 

bar indicated the possibility of a different point of view.

So I would be happy to have you direct your questions to me.

However, my counsel will probably reply to most of the legal questions.

Mr. Conyers. Well, just essentially, do you see any serious harm 

resulting if this alternative venue was opened up so tha t the district 

courts would be able to hear cases here in Washington?

Mr. Stafford. Fritz?

Mr. Kahn. Chairman Conyers, in the experience of the other 

agencies subject to Hobbs Act review, and our statement refers to 

the Federal Maritime Commission, the Federal Communications 

Commission and the Atomic Energy Commission, establishes beyond 

a doubt tha t with optional venue, the bar in the rest of the country 

would not participate significantly in the administrative practice of 

law. The practice would be concentrated in the District of Columbia.

The figures we show in this statement establish beyond a doubt 

tha t about 75 percent of all review cases arising out of administrative 

decisions would be brought in the District of Columbia. We believe 

tha t is a very unhealthy development. We think a proportionate 

share of the cases should be brought in Cincinnati, should be heard 

by Judge Phillips and the other members of the sixth circuit, and that 

simply would not be the case under optional venue.

We think the concerns expressed by some of the local bar, and I 

noted before the hearing that both the National Industrial Traffic 

League and the law firm of Donelan, Cleary, and Caldwell, which 

indeed happen to be one and the same since the law firm of Donelan, 

Cleary & Caldwell represents the National Industrial Traffic League, 

we think those concerns tha t optional venue is required to give the 

shippers of the country a fair shake, I think we believe tha t concern 

is wholly unfounded.

We very definitely believe, Chairman Conyers, that it would be 

detrimental to the effective administration of justice if there were 

optional venue in District of Columbia.

Mr. Conyers. But are there any unhealthy consequences that 

would follow? I mean, the fact tha t the petitioner might elect to use
19

the Washington jurisdiction would not be complained of by you. 

You yourself are located and based here. I should not be surprised 

if you were here arguing just the reverse position, your agency would 

prefer this additional jurisdiction.

Mr. Kahn. Chairman Conyers, you are getting into an area tha t 

is very difficult to respond to on the record because we are getting 

into the decisions of the court. Let me assure you that we have talked 

many times with the members of the other agencies. We have talked 

with their general counsels, and the Interstate Commerce Commission 

which presently does not have review optionally in the District of 

Columbia, is the envy of every one of the agencies because we do not 

< have to contend consistently, in 75 percent of the cases, with the

District of Columbia circuit.

Mr. Conyers. Well, is it tha t you do not like the decisions that 

come out of District of Columbia? Or do they know too much about

• administrative law?

What is the problem with this jurisdiction as opposed to any other 

one?

Mr. Kahn. Chairman Conyers, as Judge Phillips would support, I 

am sure, the other circuits view their role as exposing errors of law, 

determining whether the agency acted upon substantial evidence, 

determining whether agency decisions accorded with the law, and I 

regret tha t frequently we find, and the other administrative agencies 

find, the decisions of the U.S. Court of Appeals for the District of 

Columbia circuit go beyond that, and pretty soon, as the chairman’s 

testimony expresses, the District of Columbia circuit becomes a 

super agency.

Mr. Conyers. I recognize the gentleman from Maine, Mr. Cohen.

Mr. Cohen. Just a couple of questions, Mr. Chairman.

I think you indicated that if the alternative venue were allowed 

to be in District of Columbia appeals, tha t 75 percent of the administrative cases would thereby be vested, would be vested in the 

District of Columbia.

Is that correct?

Mr. Kahn. Yes, sir.

Mr. Cohen. Are you saying tha t 75 percent of all the administrative cases involve ICC?

Mr. Kahn. No, sir. I have said tha t in the case of the Federal 

«, Maritime Commission, for example, 37 out of 52 cases brought between 1965 and 1974 were brought in District of Columbia with 

respect to the FCC, out of 299 cases between 1970 and 1973, 237 were 

brought in District of Columbia.

* I am saying tha t with respect to AEC, which is another agency 

under the Hobbs Act, 13 of 18 lawsuits were brought in District of 

Columbia.

We ask the question, why were they not brought elsewhere. I n the 

case of the Interstate Commerce Commission, tha t agency is the 

largest of the administrative agencies in terms of its caseload. The 

ICC renders some 14,000 formal decisions each year. We feel very 

strongly tha t any aggrieved p arty has an inherent right of review. We 

find tha t 125 such actions are brought annually. This is a far larger 

number of cases seeking judicial review than affects any of the other 

agencies, and we are saying tha t 75 percent of these, some 90 cases,
20

will be thrust on the District of Columbia circuit if there were optional 

venue.

Mr. Conyers. Would the gentleman yield?

Mr. Cohen. Yes.

Mr. Conyers. Counsel and Chairman Stafford, you might want to 

consider this, maybe the reason those cases were brought in a larger 

percentage here is tha t it was more convenient for the parties tha t 

were litigating. It may have been less expensive, and there may have 

been an easier availability of the records of the agencies. Is tha t not a 

possible consideration?

Mr. Kahn. I would respectfully respond, Chairman Conyers, tha t 

tha t is not the case. The burden of producing the record at the plaintiff’s request has been upon the agency, and we would have no greater 

difficulty producing the record in San Francisco as in Washington, 

D.C. With respect to the convenience of the parties, if we are talking 

about the complainant, recently we had a case brought by Japa n 

Line in San Francisco. We cannot conceive how it would be any more 

convenient for Japan Lines to litigate its review in Washington, D.C. 

than in San Francisco.

It may be convenient to the bar, and tha t is precisely the point. 

The bar, the administrative bar would be concentrated in Washington, 

and while I am a member of that bar, and I look forward to the day, 

perhaps, when I can be in private practice in Washington, D.C. 

litigating on the other side of the table, I do not think tha t is necessarily a healthy development.

Mr. Conyers. Well, as members of the bar, they advise their client 

where they might want to locate. I am sure if it is more convenient 

to hold a case in San Francisco, th at the counsel will recommend that, 

even if the bar might be placed here.

Mr. Kahn. Chairman Conyers, Japa n Lines found that they had 

very competent counsel in San Francisco, and San Francisco counsel 

did a very effective job in tha t case. If the bar were concentrated in 

Washington, D.C., Japan Line really would have no effective alternative but to litigate in District of Columbia.

Mr. Conyers. Well, I thank the gentleman from Maine for 

yielding, but I find t hat your concern with where the bar operates and 

locates is certainly not, I think, a controlling factor in determining 

whether or not alternative venue should obtain here. I think we are 

overly concerned where a bar practice may locate. There is certainly 

a very logical reason how th at could come about, but why would we 

want to preclude that? I t is almost as if you were saying th at, because 

the administrative bar is in fact located in Washington, we do not 

want to afford them tha t convenience, and tha t we should just 

eliminate the District of Columbia venue as a consideration.

Mr. K ahn. Mr. Chairman, at the present time, the Intersta te Commerce Commission’s bar is well scattered throughout the country. 

The complainants are assured of effective representation throughout 

the country.

I would turn your question around, Chairman Conyers, and ask 

of you, sir, are there anv valid reasons why there should be optional 

venue in the District of Columbia? I can find none except the convenience of the local bar, and I think that that is an insufficient reason 

considering all the detriments tha t would flow from it.
21

Mr. C onyers. Well, suppose it wa s m ore con ven ient for the pa rties. 

I mean, are the re no t any litiga tin g pa rties in Wash ing ton .

Mr. Kahn. Those, of course, can bring their suits in the Distri ct of 

Columbia as the y always hav e, and Ch air ma n Staff ord’s tes tim on y 

does indeed point ou t th at an ap prop ria te share is the District of 

Columbia busines s; 19 ou t of the 328 suits brought withi n the pa st 3 

years were brought in the Di str ict of Columbia.

Mr. Cony ers. Th an k you.

Mr. C ohen. Do you hav e any fear or opin ion th at the District of 

Columbia circ uit engages in policymaking and would change decision 

on these ma tte rs?

♦ Mr. Kah n. Yes, sir.

Mr. Coh en. Is th at why you would prefer to see it sprea d to the 

oth er circu its?

Mr. Kah n. Yes, sir.

* Mr. Coh en. Rat he r than yo ur concern for the bar?

Mr. Kah n. Yes; pa rt of it, yes, sir.

Mr. Coh en. W ould you say th at yo ur princi pal concern is you feel 

they engage in too mu ch policymakin g ra th er th an adh ere to the 

str ict lim its of review by determinin g wh eth er or no t there is the 

evidence or the record support ed it?

Mr. Kah n. Ex actly , and a review of the cases, conversations wi th 

the agencies I am sure , sir, would persua de you of th at.

Mr. Coh en. And you would prefer to see div ers ity as far as the 

places of litig ation and also div ers ity as far as the o pinions th at might 

be ren dered by the variou s circuit courts of appeals as opposed to the 

unifo rm ity which you feel is more policymaking tak en in preempti ng 

the IC C’s jurisdiction?

Mr. Kahn. That is correct, sir.

Mr. C ohen. Th an k you.

Mr. C ony ers. Th e gen tlema n from Arkan sas.

Mr. T hornton. T ha nk y ou, Mr. Ch airma n.

Tu rning to the other objection for a mo me nt, are you equally 

opposed to the language of the bill with regard to responsi bility for 

litigat ion, and are you no t at all persuad ed th at the A tto rney General 

has expre ssed a view th at the Com mission will con tinue to have the 

rig ht to han dle its own litigat ion?

Would you please express you rself on th at point?

Mr. Kah n. Mr. Congressm an, certa inl y th at is a lesser concern . 

The Un ited State s now is nam ed as a st at ut or y pa rty defend an t, and 

we w ork very closely with the attorn ey s of the Dep artm en t of Justi ce 

in the defense of In te rs ta te Com merce Com mission orders.

» We probably wou ld no t have raised the point before thi s comm ittee

in the light of the assura nce s expressed to the Senate comm itte e by 

the Solicitor General, Mr. Ro be rt Bork, bu t for the fact th at the 

As sistan t At torney General in charge of the Office of Legal Counsel, 

perha ps the hig hest au thor ity , constru ing stat ut or y provisi ons, 

in speaking to the ba r in Honolulu, singled ou t the In te rs ta te Commerce Com mission as bein g the one agency th at “h as since 1913 

rep res ented itse lf before the S uprem e Cou rt.”

Only las t mon th, Mr. Con gressm an, the In te rs ta te Com merce 

Commission itself arg ued a case coming to the Suprem e Co urt from 

Po rtlan d, Oreg., a case in which we successfully pe titi oned th e Suprem e
22

Court for plenary review, even though the Solicitor General believed 

the case was inappropriate for Supreme Court review.

We simply want to have the assurance tha t the Interstate Commerce Commission, as it does now, has the right independently to 

present its views to the Supreme Court.

Now, I might note tha t we have found before the Supreme Court 

that, where there has been a divergence of views between ourselves 

and the Solicitor General of the United States, tha t the Supreme 

Court has upheld us as m any times as it has turned us down.

Mr. T hornton. Are you convinced th at you do have that assurance 

tha t you would continue to have some representation rights under the 

language of the bill? 4

Mr. Kahn. No, sir. The language in the bill is the Hobbs Act 

language. Under the Hobbs Act, Assistant Attornev General Dixon 

said, Supreme Court litigation is concentrated in the Solicitor General.

The Solicitor General is the one through whom the Government’s •

litigation is channeled.

Now, in all fairness to Mr. Bork and his predecessors, they frequently, in cases of disagreement with an agency, will extend to the 

agency the right to petition for a writ of certiorari or the right to file 

a brief in opposition to a writ of certiorari, but the Interstate Commerce Commission presently does not have to bow to the wishes of 

the Solicitor General. We have a right independently to seek plenary 

review by the Supreme Court.

So we still have some doubt. We have the assurance from Mr. Bork 

given to the Senate, and th at certainly is part of the legislative history.

But I would note tha t Mr. Rakestraw’s letter to this committee 

very lightly passes over the very precise question which we pose, and 

tha t is, in the absence of the acquiescence of the Solicitor General, 

does the ICC have the right to have its views presented to the Supreme 

Court?

Mr. T hornton. I believe what you are stating—and correct me if 

I am wrong—is tha t presently you have certain rights to represent 

yourself under the law, tha t under the bill as proposed, those rights 

would be extinguished, and instead you would have a discretionary 

grant of authority to do so by the Solicitor General or Attorney 

General’s office which might or might not be withdrawn.

Mr. Kahn. Yes, sir, tha t is precisely correct.

Mr. Thornton. I have no further questions.

Mr. Conyers. The gentleman from New York.

Mr. Fish. Thank you, Mr. Chairman.

At the outset I would like to yield to the gentleman from Maine.

Mr. Cohen. Thank you, Mr. Fish.

Under the existing procedure, the correct route of review is to 

the Supreme Court from the three judge panel, is tha t correct?

Mr. Kahn. That is correct. But if 1 might elaborate on that, 

Congressman Cohen, the practical matter is that the Supreme Court 

exercises the appellate jurisdiction as it does the certiorari jurisdiction, 

and the Commission finds it obtains review by the Supreme Court 

no more frequently than the other agencies.

Mr. Cohen. How many cases have been reversed by the Supreme 

Court for decisions in the three judge panel in the District for 

usurping the jurisdiction of the Commission, in other words, over-
23

stepping its bounds in the rights of review, by the substantial error 

tests and so forth? In how many cases, if you can tell me, or if you 

can furnish me with tha t information, has the Supreme Court actually 

overturned decisions of the circuit court of appeals here in Washington 

for exceeding its bounds?

Mr. Kahn. I would have no occasion to have analyzed the decisions 

of the other agencies.

Mr. Cohen. No; just for the ICC.

Mr. Kahn. For the ICC we have not had review by the U.S. 

Court of Appeals for the District of Columbia Circuit because our 

review is in the U.S. district court, and I am very pleased tha t our 

record of review in the U.S. district court has been very good.

Mr. Cohen. So tha t your fear tha t there is too much policymaking 

really obtains to other agencies rather than ICC?

Mr. Kahn. Yes, sir.

Mr. Cohen. You are not familiar with how many times the Supreme 

Court has overruled tha t court for having engaged in policymaking?

Mr. Kahn. No, sir.

Mr. C ohen. Thank you. Th at’s all.

Thank you for yielding.

Mr. Fish. Going back to the line of questioning about the 

representation by the Department of Justice that the gentleman 

from Arkansas went into, as you know, section 6 of the bill tha t we 

are considering would amend 28 U.S.C. 2323, giving the Attorney 

General responsibility of representing the United States as main 

party. However, our bill does nothing to change the text of the second 

and fourth paragraph of tha t section, as I understand it, which reads:

The Intersta te Commerce Commission and any party or parties of interest 

in the proceeding before the Commission in which an order or requ irem ent is 

made, may appear as parties of their own motion and as of right, and they would 

be represented by their counsel in any action requiring the litigating of any 

action or any pa rt thereof in the interest of any party.

And in the other para grap h, the Atto rnejr General should not dispose of or 

discontinue such action or proceeding over the objection of such pa rty or intervenor who may prosecute, defend, or continue such action or proceeding 

unaffected by the action or non-action of th e Attorney General therein.

Mr. Kahn. Congressman Fish, if I understand the effect of the 

bill correctly, what this does is take out of the usual method of review 

to which we are now subject, the urgent deficiencies review, those 

cases which do not affect the payment of money. So this language 

remains only for the cases affecting the payment of money, if I understand the matte r correctly. The effect of the bill, sir, is to put us under 

the Hobbs Act, and the Hobbs Act language which troubles us, sir, is 

28 U.S.C. 2348, which says the Attorney General is responsible for 

and has control of the interests of the Government.

Mr. Fish. Mr. Chairman, would it be appropriate for me to ask 

Counsel if that conforms with his interpretation?

Mr. Hart. As I read the Senate bill and as I read the legislative 

history and the report of the Senate, I do not think that is a proper 

reading of the language. As I look at chapter 157, there is no reference 

made in section 2323 to actions taken pursuant to the chimters which 

would indicate that this procedure, the rights of the Commission 

deal only with appeals pursuant to or actions concerning orders for 

the payment of money and the collection of fines, et cetera, section
24

2323. I might add th at section 2348 also includes langua ge which 

pres erves the IC C’s right, it seems to me, to proceed independent of 

the Dep artm en t throug h the distr ict and app ellate cou rts, and section 

2350 allows for the filing of certio rari petitions des pite wh at the 

Solicito r General reco mmends or does.

Mr. Kahn . I do no t wa nt to lab or the poin t, Counsel, bu t I thi nk 

the procedures of c hapte r 157 come into play only by virtu e of oth er 

judicial review provisions which no longer would obtai n un de r the 

Hobbs Act.

Mr. Hart. If th at were the case, the n why would this lang uage 

no t be repeale d?

Mr. Kahn. The only repealer is with respec t to the cases involving 

review of In tersta te Com merce Commission orders othe r than those 

involving the paym ent of money.

The existing proc edures would continu e for the decisions invo lving 

mon ey, rep ara tio ns orders.

Mr. Hart. Tha t is as I underst and.

Mr. Fish. If I could con tinue, Mr. Ch airma n, as I un de rst an d it, 

at one point because of a letter to Senator Burdick from the Solicitor 

Gen eral, th at this met yo ur objection and satisfied it.

Mr. Kah n. Yes, sir.

Mr. Fish. Bu t sub seq uently, because of a rec ent speech, your 

fears have come back to surface. You referred , I believe, to a lette r of 

Decem ber 9 from Assistan t At torney General for Leg islative Affairs 

to Ch air ma n Rodino, and I refer you to page 4 of th at l etter in which 

I would pick out two sentences in the midd le parag rap h, the second 

full parag rap h. The first sente nce is,

In all other material respects, the existing procedure will continue under this 

Statute. And the other sentence I refer you to in the middle of the paragraph says 

the ICC will retain its right to participate independently through all stages of 

judicial review.

And I wonder, are you fam iliar with this?

Mr. Kahn. Yes, sir, I read it before the h earing, and i t was exa ctly 

this th at pro mpted my conc ern, previously expressed. Assistan t 

At torney Gen eral Ra ke str aw avoided specifically dealing with 

whether, as Con gressm an Th or nton pointed out, we would have this 

op po rtu nity by suffrance of the Solicito r Gen eral or as a m at te r of 

stat ut or y right.

Mr. Fish. Well, I see y ou r poin t, th at you cer tainly would feel b ette r 

if it was a m at te r of s ta tu to ry r igh t. We face a practic al problem with 

tar geted adjou rnment of the Congress a t the end of nex t week, in going 

bac k to the Senat e with a version th at is different from the one th at 

passed th at body, and I wonder if y ou care to com me nt on the feeling 

th at th is committee in its rep ort on th is bill made i t very plain th at th ey 

wante d you to hav e the independence.

Mr. Kahn. I thi nk th at would be very beneficial, Con gressman 

Fish . Th e stronger the legislative his tor y showing the Com mission is 

assured of its rig ht to ind ependent acti on, the be tte r.

Mr. Fish. Th an k you very much.

Mr. Cony ers. Does counsel Tim Har t have any questio ns?

Mr. Hart. J us t in following up th at line of question ing ve ry quickly, 

Mr. Ka hn, wh at this com mittee and the sub com mittee must be concerned with is the problem of how best to legislative this concern.
25

Consider that, first of all, under the Hobbs Act presently, and under 

other provisions of the U.S. Code, this option of alternative venue is 

afforded to petitioners who appeal orders—the FCC, Dep artm ent of 

Agriculture, the Federal Maritime Commission, and the AEC under 

the Hobbs Act, anti under other provisions of the Code, the NLR B, 

the FCC, and FTC, anti the CAB.

Now, is there anything about the practices anti procedures of the 

ICC tha t would require or justify such a legislative exception?

Mr. Kahn. We believe so for the two reasons that I previously 

mentioned. One is, the volume of cases is substantially larger than that 

of the other agencies, with the possible exception of the NLRB , anti 

second, we now find ourselves in the happy state of having an informed 

bar throughout the country, one tha t is well familiar with the ICC 

anti the courts, anti it would be a pity to lose the benefit of that anti 

encourage the growth of a local bar tha t would specialize in ICC 

practice anti judicial review.

Mr. Hart. Does this situation of an informed bar throughout the 

country not exist with respect to the other agencies as well?

Mr. Kahn. Yes, now, yes, it is an accomplished fact, anti it is too 

late to turn back the clock. We have a unique opportunity to prevent 

that from happening.

Mr. Hart. Well, why should petitioners before those agencies 

be accorded the right to file, either in the D.C. Circuit or in one of 

the other circuits, where petitioners reviewing ICC orders would 

be foreclosed from having tha t option?

Mr. Kahn. If you want to encourage forum shopping, right, this 

is a splendid way of doing it. We think forum shopping is a bad 

practice.

Mr. Hart. I see.

Thank you, Mr. Chairman.

Mr. Conyers. Well, Mr. Stafford and Mr. Kahn, you have come 

before yet another body to offer your testimony. We are grateful to 

you. Most of us have had a chance to examine your comments in the 

other body at length, and we will add your statements and the reasons 

tha t you give for your position for our consideration of the legislation 

before us to that.

Thank you very, very much for your appearance here this morning.

Mr. Stafford. Thank you, Mr. Chairman.

Mr. Kahn. Thank you, Mr. Chairman.

Mr. Conyers. That concludes the hearing this morning on this 

particular piece of legislation.

I would like to ask tha t we go off the record at this point.

[Discussion off the record.]

[Whereupon, at 9:58 a.m., the subcommittee went into executive 

session.]

APPENDIXES

APPENDIX A.—CORRESPONDENCE

Administrative Office of the U.S. Courts,

Washington, D.C., December 6, 1974.

Mr. Timothy J. Hart,

Assistant Counsel, Subcommittee on Crime, House Judiciary Committee, House of

Representatives, Washington, D.C.

< Dear Mr. Hart: I enclose a copy of the statem ent of the Honorable J. Skelley

Wright in his testimony on S. 1876 given on behalf of th e Judicial Conference of 

the United States before the Senate Judiciary Committee. I also enclose an extr act 

of his House testimony on S. 271 taken from the hearings on th at bill.

I furthe r enclose a copy of a report of the so-called Freund Com mittee which,

• at pages 25-32, outlines some of the difficulties with the three-judge cou rt procedure in general and with the three-judge cou rt procedure in I.C.C. cases in pa rticu lar at pages 27-28.

Finally, I enclose an article by a former attorney in this office en title d, ThreeJudge Courts: See How They Run.

I hope these materials will be helpful at least in explaining the serious difficulties 

th at the three-judge cou rt procedure creates both in the distric t courts and cer ­

tain ly in the Suprem e Cou rt which, in addition to its other burdens, considers 

these cases on dire ct appeal.

If you have any fu rth er questions, please do n ot hesitat e to call on us.

Sincerely,

Carl H. I mlay, General Counsel.

Enclosures.

Statement of J. Skelly Wright, J udge, United States Court of Appeals

for the District of Columbia Circuit

I am Judg e J. Skelly Wright and I appear before your Subcommittee todf y on 

behalf of the Judicial Conference of the United States to express the views if 

the Conference with respe ct to one aspect of S. 1876, namely the provision for 

three-judge courts contained in the proposed sections 1375 and 1376 which would 

by added to Title 28 of the United States Code.

While the Judicial Conference of the United States at its October 1971 session 

took the position th at the proposals contained in S. 1876 are on the whole well 

conceived, workable and based upon acceptable compromise of variant views of 

the bench and bar, the Conference reit era ted its preference for the bills it had 

approved in its October 1970 session designed to eliminate the requirement of a 

three-judge distric t court in cases seeking to restrain enforcement of sta te or 

federal sta tut es for repugnance to the Con stitutio n and to provide for direc t 

-« appeal to the Supreme Court in certain cases.

The Conference’s position in opposition to three-judge courts is now’ generally 

embodied in H.R. 3805 of the 92nd Congress which would largely eliminate the 

use of this special kind of forum.

e A. The Three-Judge Court Procedure Constitutes a Substantial Burden on the

Federal Judiciary

The Judicial Conference has for some time been concerned with the increased 

judicial burd en resulting from the convening of three-judge distric t courts in 

injunctive cases alleging unconstitu tionality of federal or sta te sta tut es. In the 

five years from fiscal years 1965 throu gh 1969, the num ber of three -judge district 

courts convened to hear injunctive cases mounting attack s on sta te sta tutes has 

increased over 100 percent, and the upw’ard trend continues.1

 This burd en is an 

addition to a severe backlog in disposing of cases generally and represen ts a 

sub traction from the time judges can devote to their other business.

1

 See compilation atta ched as “Attachment A."

(27)
28

Before r eaching the issue of the continuing need for this special type of panel,

I might briefly adv ert to the special burdens created by three-judge courts. Such 

a case first involves the tim e of the district judge in making a threshold determine 

whether the case is appropriate for a three-judge panel. If he so determines, he 

must notify the chief judge of the circuit, who must study the pleadings to decide 

whether the case is indeed one for thre e judges. If the chief judge of the circuit 

agrees the case should be heard by three judges he designates two other judges 

to sit with the first, one of whom m ust be a judge of the United States Court of 

Appeals. The hearing before the three judges must be given precedence and 

assigned for the earliest practicable day. This means th at thre e federal judges 

must put aside their other judicial work and trav el to one place of holding court 

and, with triple judge power, decide one case. While the statistical numbers of 

three-judge court proceedings are not highly significant, the time consumed by 

judges on these cases, bo th in traveling to the place of hearing and in hearing and 

deciding these cases, represents a serious diminution of their total time. t

After this special three-judge district court has acted, any party may then appeal 

directly to the Supreme Court of the United States from the decision of the threejudge panel pur suant to 28 U.S.C. § 1253, thereby by-passing the United States 

Court of Appeals. The Supreme Court thus m ust dispose of a case, often involving 

delicate issues of federal-state relationships, on the skeletal record developed in •

an injunctive suit in the district court, without intermediate consideration by 

a court of appeals. The burden placed on the Supreme Court of disposing of these 

appeals, in addition to normal cases heard on the discretionary writ of certiorari, 

is formidable and has been growing. Professor Wright has provided this Subcommittee with the statistics to support this statem ent and I shall not repeat them.

The time of the Supreme Court is extremely limited, and the direct appeal procedure preempts time which the Court might more adeq uate ly utilize on more 

compelling questions where a conflict of decisions in the courts below has developed.

In short, original appellate review should be in the United States Courts of 

Appeals, as is normally the situation .

Despite this procedure for direct appeal to the Supreme Court, the burden of 

three-judge courts is not completely removed from the Courts of Appeals which 

are called upon to resolve the jurisdictional issue on appeal: (1) when one judge 

has failed to convene a three-judge court and either denies relief or sets the case 

down for further proceedings, and (2) where a three-judge court itself determines 

th at the case is n ot properly before it. Since the case is not presented to the Court 

of Appeals on its merits, the relief gran ted can only be interlocutory. Thus all 

three tiers of federal courts are involved in this disruptive procedure.

B. The Original Reasons for (he Three-Judge Court Have Disappeared

The original rationale for the three-judge court has long been obsolete and, as 

one com mentator pointed out, began to disappear soon after the original legislation was enacted in 1910.2

 The requirements of a three-judge court were enacted 

by the Congress in Section 17 of the Act of June 18, 1910, 36 Sta t. 539, 557. This 

legislation was responsive to the situation created by Ex parte Young, 209 U.S.

123 (1908), in the wake of which many railroads and utilities attack ed state rat efixing and tax laws, creating a deluge of applications for injunctive relief and races 

to the courthouse doors. In many cases injunctions were issued ex parte by federal 

judges having the effect of suspending enforcement of such sta te legislation. The 

impetus for the legislation was quite clear: the states were resentful of the author ­

ity of a single federal judge to nullify their regulatory policies. Under the procedures then in force the judges could issue te mporary restrainin g orders ex parte

and issue interlocutory injunctions on the basis of affidavits alone, and there were 

no limits on the judge’s discretion to continue interlocutory injunctions and 

tem porary restraining orders indefinitely. Section 17 of the 1910 legislation was 

intended to take this kind of autho rity away from a single judge and place injunctive suits before a three-judge panel. 45 Cong. Itec. 7253-7257.

The original problems were largely obviated two years after passage of the 1910 

legislation when the federal equity rules were revised, extending to all injunctive 

cases much the same protective procedures which the 1910 Act had provided 

for the three-judge court proceeding (e.g., continuance of a 10-day restraining 

order was prohibited under any circumstances). Later two sta tut es further restraining the powers of federal courts to enjoin sta te action were enacted. In the 

Johnson Act of 1934, 48 Stat. 775 (now 28 U.S.C. § 1342), Congress took away 

injunctive power with respect to sta te public utility rat e orders. In the Tax In-

■Ammerraan, Thre e Jud ge Courts : See How They Run, 52 F.R.D. 293, 297 (1971).
29

junc tion Act of 1937, 50 Stat. 738 (now 28 U.S.C. § 1341), Congress restricted 

federal injunctions with respect to stat e taxes. Although by the Judiciary Act of 1937, 50 Stat. 732, Congress extended the 

three-judge requirement to injunctive suits restraining federal laws, it did so in a period when numerous cases testing the con stitutio nality of the economic programs of the Depression years were of prime concern. This, however, was a transi tor y problem which was largely resolved by the Supreme Court’s decisions defining 

the regulatory powers of the federal Congress. Also, a year after the 1937 Act was passed the Supreme Court decided th at a single district judge has not only the power bu t also the duty to deny a statu tor y three -judge c ourt when he is convinced 

th at a “ substan tial constitu tional question” is not presented. California Water

Service Co. v. City of Redding, 304 U.S. 252. This spawned a new kind of lititigatio n 

since parties could further litigate the jurisdictional issue. The powers of a single 

judge to dispose of a petition on jurisdictional grounds are to this day obscure, despite a 1942 Act (now codified as 28 U.S.C. § 2284(5)) which presumably would 

have denied him power to either dismiss or dispose of the case on the merits. In a 1962 case the Supreme Court held th at th at sta tute does not apply “ when 

the constitutional issue pre sented is essentially fictitious.” 3

The proper channels for appealing the jurisdictional issue are likewise confusing. 

To quote Professor Wright on the subject: “The rules on appe llate review of whether a three-judge court was needed 

‘are so complex as to be virtu ally beyond belief.’ The court of appeals may review if the single judge regards the federal claim as so insubstantial as to require dismissal for wan t of jurisdiction or if the single judge correctly concludes th at three judges are not required and decides the merits of the case. If 

the single judge incorrectly believes th at thre e judges are not requ ired and proceeds to the merits, the remedy once was mandamus from the Supreme Cou rt, 

but now appears to be an appeal to the court of appeals. If the court of appeals 

should fail to see th at the case was one for three judges, and reviews on the 

merits, its decision is void. “ If a three-judge court is convened, bu t it determines th at three judges were 

not necessary, appeal is to the court of appeals. If the special court is correctly convened and gives judg ment on the merits, appeal lies direc tly to the Supreme 

Court. If judgment is given on the merits by a three -judge cou rt bu t such a court was not required, appeal should be to the court of appeals rather than 

to the Supreme Court. * * *.” 4

In summ ary, the original problems for which the three-judge cou rt was 

originally conceived have been largely eliminated by reforms in equity procedures now found in the Federal Rules of Civil Procedure. The three-judge cou rt 

procedure generates rather tha n lessens litigation. Moreover, the ideal of pro ­ viding an immediate forum for resolution of constitutional attacks on state and 

federal laws has been lost in the mazes of a procedural jungle.

C. Decisional Law Has Provided Its Own Safeguards Against Precipitous Injunctive

Action by Federal Judges

In its recent opinions the Supreme Court has provided such restrictions on 

federal injunctions as to further obviate the need for three-judge courts.

In Yoxinger v. Harris, 401 U.S. 37 (1971, the Supreme Cou rt held th at inju nctive relief against a sta te criminal prosecution is not available except in exceptional circumstances, as where the prosecution is in the nature of a bad faith 

harassment of the defe ndant in the exercise of his federal rights. The Court has 

also required, as a general proposition, abstention from intervention by injunctio n 

or declarato ry relief in ongoing sta te prosecutions,5 * and in situations were the 

allegedly unconstitutional law has not yet been sought to be enforced against the 

petitioners and no threat of irreparable inju ry is demonstrated.® The Supreme 

Court has in other recent decisions man dated abstention from interventio n in 

sta te criminal processes which have not yet been resolved at the sta te level 7

 or 

in respect to issues which may be resolved on a different basis in pending sta te 

litigation.8

 This patte rn of decisions clearly precludes the sort of precipitous

3

 B ai le y v. P atter so n, 369 U.S . 31, 33.

4 C. Wrfp fit, Fe de ral Co ur ts § 50 a t p. 193 (2d ed. 19 70 ). See als o 9 J. Moore, Fe de ral

Pr ac tic e T 11 0.03 (3 ] (2d ed. 19 70 ).

B Satnu els v. M ac ke ll, 401 TJ.S. 66 (1 97 1).

« M oyle v. Landry , 401 U.S . 77 (1 97 1) ; Dy so n v. Ste in , 401 U.S. 200 (1 97 1) .

7

 P erez v. Le de sm a, 401 U.S . 82 (1 97 1) .

8

 B yr ne v. Kar ale xi s, 401 U.S . 216 (1 97 1).

44-987 0 - 75 - 3
30

intrusion into sta te legal processes by a single federal judge which the original 

three-judge court act sought to control.

Thus the ratio nale which gave life to the three-judge court in 1910 has all bu t 

disappeared. We subm it th at as a general proposition the original reasons for the 

three-judge court have been largely dissipated by limiting sta tut es and decisions 

controlling the jurisdiction of the federal courts collaterally to review sta te laws, 

th at the procedure compounds and confuses rathe r tha n simplifies orderly constitutional decision, and th at the burden placed on panels of judges to handle 

these cases on an expedited basis is onerous in view of the mounting backlog of 

cases of no lesser order of priority. We therefore suggest deletion of the threejudge court provisions of S. 1876 as proposed in the Burdick amendment. We 

strongly oppose, however, incorporation of the Burdick ame ndment into S. 1876. 

S. 1876 is very controversial legislation. It will be long debated and subjecte d to 

innumerable amendments. It might not pass in any form in our tim e, whereas the 

need to relieve the federal courts of the unnecessary burden of three-ju dge district 

courts is urge nt. The legislation to meet this need is uncontroversial. We ask, 

therefore, th at legislative action be taken now eliminating the three -judge dis trict 

court requirements of 28 U.S.C. §§ 2281 and 2282.

Thank you for this opportu nity to express the views of the Judicial Conference 

here today.

COMPILATION A

Table 40.— Three-judge court hearings by nature of suit, fiscal years 1963-71

Fiscal year Total

Review 

of ICC 

orders

Civil

rights

Suits involving State or 

local laws or regulations

Reapportionment

Other

actions

1963________ __________ _________ 129 67 19 16 27 1964_____________ .. . 119 50 21 18 30 1965____________________ _________ 147 60 35 17 35 1 9 6 6 . . . . . . . . . . . . . . . 162 72 40 28 22 196 7. ............ ................................. 171 64 55 10 42 1 9 6 8 . . . . . . . . . . . . 179 51 55 6 67 1969 ............................................ 215 64 81 1 69 1970____ . .. 291 42 162 8 79 1971_______________ . 318 41 176 2 99

Percent change: 1971 over 1970............... 9.3 - 2 .4 8.6 . 25.3

Note: Percent not computed where base is 25 or less.
31

HREE-JUDGE COURT AND SIX-PERSON

CIVIL JURY

H E A R IN G

BEFORE THE

SUBCOMMITTEE ON COURTS, CIV IL LIBERT IES, 

AND THE ADMINISTRATION OF JUSTICE

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

NINE TY -THIRD CONG RESS

SECOND SESSION

ON

S. 271

TO IMPROVE JUD ICIAL MACHINERY BY AMENDING THE 

REQUIREMENT FOR A THR EE-JUD GE COURT IN CERTAIN 

CASES, AND FOR OTH ER PURPOSES 

k AN D

H.R . 8285

TO AMEND TITL E 28, UNIT ED STATES CODE, TO PROVIDE IN 

CIVIL CASES FOR JU RIES OF SIX PERSONS, AND FOR 

OTHER PURPOSES

OCTOBER 10, 1973 AND JANUARY 24, 1974

SERIA L NO. 27

Printed for the use of the Committee on the Jud iciary

25 -45 0

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1973
32

TESTIMONY OF IION. J. SKELLY WRIGHT, CHAIRMAN, JUDIC IAL 

CONFERENCE COMMITTEE ON FEDERAL JURISDICTION

Judge Wright. Mr. Chairman, gentlemen, I am grateful for the 

opportunity to appear before you. I appear as a representative of the 

Judicial Conference of the United States, to express the Conference’s 

views with respect to S. 271 which would repeal sections 22S1 and 22S2 

of title 28 of the Judicial Code.

These sections require the convening of three-judge district courts 

wherever an injunction is sought restraining the enforcement, operation, or execution of a State or Federal statute on the ground of re- 4

pugnance to the Constitution of the United States. S. 271 was originally drafted and sponsored by the Judicial Conference. In its present 

form, it is the same as the original dra ft of the Judicial Conference 

except tha t a three-judge district court for congressional and state- *

wide reapportionment is provided in cases where injunctions are 

sought.

This legislation concerns, as I have stated, only sections 22S1 and 

2282. It does not concern the three-judge district court provisions in 

the Civil Rights Aqt of 1964 or the Voting Rights Act of 1965, nor does 

it relate to the three-judge district court required for review of ICC 

orders.

Xor does it relate to the three-judge district court required under the 

Exp editing Act in antitrust cases. Those later two statutes, the ICC 

review statu te and the Expe diting Act provisions relating to threejudge district courts, are the subject of legislation pending in both 

Houses of Congress, and both Houses are moving in the direction of 

eliminating the three-judge district court both for ICC review and 

for review of antitrust actions under the Expediting Act.

So, yve speak this morning only of those limited cases which require 

three judges because an injunction is sought against the operation of a 

State or Federal statute because of repugnance to tho Constitution.

The Judicial Conference has been concerned for many years about 

the burden of these cases. In the last 10 years, the number of threejudge district court cases under these two statutes has almost tripled.

The number of cases, however, does not indicate the actual extent of 

the burden caused by these cases.

Before a three-judge district court case can even begin, a single *

judge must recognize it as a three-judge district court case. He must 

ask the chief judge of the circuit for the convening of a three-judge 

court. He must certify the necessity. The chief judge of the circuit 

then studies the certification. If he feels it wisely made, he appoints *

two additional judges, one of whom must be a court of appeals judge.

Then the three judges must get together in some way. And in many 

areas of the country, these three judges will live in different parts of 

the circuit so that the first burden encountered in the convening of 

three-judge courts is the actual travel of the judges to the place where 

the trial will be held.

Then, of course, there is the problem of trying a case with three 

judges. There is the problem of ruling on evidence as the swift-moving 

events of the trial take place. Three judges cannot act with the same 

incisiveness as the single judge in making tria l rulings as necessary 

during the trial of a fast-moving case.
33

In addition to the drain on judicial resources at the district and 

circuit levels caused by three-judge district courts, the drain on the Supreme Court’s limited resources is even greater because the ap ­ peals in these cases go directly to the Supreme Court rather than to the court of appeals. And as we all know the number of cases reaching the Supreme Court is increasing each year. These cases are particu ­ larly difficult for the Supreme Court because they do not reach the court by application for writ of certiorari. They reach the Supreme 

Court by direct appeal.

• And desipte the fact that there is this direct appeal to the Supreme Court, very often courts of appeals are brought into the picture to determine whether or not the single judge has improperly failed to call a court or whether or not a court has been improperly impaneled

• with three judges. After the court of appeals makes its. decision, the case goes back down to the district court where the decision of the court of appeals is implemented and the case starts all over again. Now, the Judicial Conference would not have taken the position tha t it has with reference, to three-judge courts if there remained any longer the reasons why three-judge district courts were originally created. Three-judge district courts came into being in 1910 as a result of legislation passed at tha t time. This legislation was a response to rulings by the Supreme Court of the United States which set at naught State legislation that sought to control in the public inte r­ est the burgeoning industrial revolution of the time. In a series of 

decisions led by Ex parte Young, the States felt that their processes 

were being paralyzed by the Supreme Court and so the Congress passed this three-judge legislation to protect the States against acts of one judge who without a hearing of any kind would grant prelim­ inary injunctions restraining States from enforcing their own laws. Now, the reason for this legislation disappeared almost as soon as it was passed. The equity rules were passed immediately, changing the procedures under which the injunctions were issued. The Congress itself reacted and passed the Johnson Act which prohibited Federal courts from restraining rate fixing by State commissions and the Tax Reform Act which prohibited Federal courts from enjoining State collection of taxes. So at least in these two imp ortant areas this three-

• judge court provision no longer was necessary. The equity rules have now been written into the Federal Rules of Civil Procedures. In addition, there have been cases decided by the Supreme Court, a trilogy of cases known as the Younger v. Harris

F

trilogy, which prohibit Federal courts from restra ining State courts

in the criminal field. No longer can Federal courts enjoin the enforce­ ment of criminal statutes of the States unless there is obvious harass­ ment on the part of the State official charged with the enforcement 

of the statute. And so wc suggest—and I am passing through quickly because I know you have a long morning—that the rationale that gave life to 

the three-judge court in 1910 has all but disappeared. Wc submit tha t 

as a general proposition the original reasons for three-judge courts have been largely dissipated by limiting statutes and decisions con­ trolling the jurisdiction of Federal courts collaterally to review State laws and tha t the procedure, the three-judge district court procedure,
34

compounds, and confuses rather than simplifies orderly constitutional decisions and that the burden placed on panels of judges to handle

these cases on an expedited basis is onerous in view of the mounting

backlog of cases of no lesser order of priority.

That concludes my statement, gentlemen. I f you have any questions 

I will be happy to answer.

Mr. Kastexmeier. 'Thank you very much, Judge Wright, for a brief 

but fine statement, certainly to the point. And without objection, sir, 

your statement as submitted will be placed in the record in its entirety.

The prepared statement of Hon. J. Skelly W right follows: ’ *

My name is J. Skelly Wright, and I appear before your Subcommittee today on behalf of the Judicial Conference of the United States to express the views of the Conference with respect to S. 271, which would repeal 28 U.S.C. §§ 22S1 and 

2282 of the United States Code. Those sections require the convening of a three- judge district court in cases where an injunction is sought restraining the en­ •

forcement, operation or execution of any state or federal statute for repugnance to the Constitution of the United States.

A. TH E THREE-J UDGE COURT PROCEDURE CON STITUTES A SUBSTANTIAL BURDEN ON TH E 

FEDERAL JUD ICI AR Y

The Judicial Conference has for some time been concerned with the increased 

judicial burden resulting from the convening of three-judge district courts in injunctive cases alleging unconstitutionality of federal or state statutes. In the five yea rs from fiscal years 19G5 through 19G9, the number of three-judge district courts convened to hear injunctive cases mounting attacks on state statutes has increased over 100 per cent, and the upward trend continues.1

 This burden is an addition to a severe backlog in disposing of cases generally and represents a subtraction from the time judges can devote to their other business.

Before reaching the issue of the continuing need for this special type of panel, I might briefly advert to the special burdens created by three-judge courts. Such a case first involves the time of the district judge in making a threshold determination whether the case is appropriate for a three-judge panel. If he so deter­ mines, he must notify the chief judge of the circuit, who must study the plead­ ings to decide whether the case is indeed one for three judges. If the chief judge of the circuit agrees the case should be heard by three judges, he designates two other judges to sit with the first, one of whom must be a judge of the United States Court of Appeals. The hearing before the three judges must be given precedence and assigned for the earliest practicable day. This means t hat three federal judges must put aside their other judicial work and travel to one place of holding court and, with triple judge power, decide one case. While the statisti­ cal members of three-judge court proceedings are not highly significant, the time consumed by judges on these cases, both in traveling to the place of hearing and in hearing and deciding these cases, represents a serious dimunition of their total time.

After this special three-judge district court has acted, any party may then appeal directly to the Supreme Court of the United States from the decision of 

the three-judge panel pursuant to 28 U.S.C. § 1253, thereby bypassing the United States Court of Appeals. The Supreme Court must thus dispose of a case, often involving delicate issues of federal-state relationships, on the skeletal record developed in an injunctive suit in the district court, without intermediate con­ sideration by a court of appeals. The burden placed on the Supreme Court of disposing of these appeals, in addition to normal cases heard on the discretionary writ of certiorari, is formidable and has been growing. The time of the Supreme Court is extremely limited, and the direct appeal procedure preempts time which the Court might more profitably utilize on more compelling questions where a conflict of decisions in the courts below has developed. In short, original appel­ late review should be in the United States Courts of Appeals, as is normally the situation.

1

 .S'cc compilation attached as “Attachment A.'
Despite this pressure for direct appeal to the Supreme Court, the burden of 

three-judge courts is not completely removed from the Courts of Appeals which are called upon to resolve the jurisdictional issue on appeal: (1) when one judge lms failed to convene a three-judge court and either denies relief or sets the case down for further proceedings, and (2) where a three-judge court itself deter­ mines that the case is not properly before it. Since the case is not presented to the Court of Appeals on its merits, the relief granted can only be interlocutory. Thus all three tiers of federal courts are involved in this disruptive procedure.

B. TH E ORIGINA L REASONS FOR TH E TIIRE E-J VD GE COURT HAVE DISAPPEARED

The original rationale for the three-judge court lms long been obsolete and, as one commentator pointed out, began to disappear soon after the original legisla­ tor was enacted in 1910/ The requirements of a three-judge court were enacted by the Congress in Section 17 of the Act of June IS. 1910, 36 Stat. 539. 537. This legislation was responsive to the situation created by Ex parte Yeung. 209 U.S. 

123 (1908), in the wake of which many railroads and utilities attacked state rate-fixing and tax laws, creating a deluge of applications for injunctive relief and races to the courthouse doors. In many cases injunctions were issued ex

parte by federal judges having the effect of suspending enforcement of such state legislation. The impetus for the legislation was quite clear: the states were resentful of the authority of a single federal judge to nullify their regula­ tory policies. Under the procedures then in force the judges could issue temporary restraining orders ex parte and issue interlocutory junctions on the basis of affidavits alone, and there were no limits in the judge's discretion to continue interlocutory injunctions and temporary restraining orders indefinitely. Section 17 of the 1910 legislation was intended to take this kind of authority away from a single judge and place injunctive suits before a three-judge panel. 45 Cong. Rec. 

7253-7257. The original problems were largely obviated two years afte r enactment of the 1910 legislation when the federal equity rules were revised, extending to all injunctive cases much the same protective procedures which the 1910 Act had provided for the three-judge court proceeding (e.g.. continuance of a 10-day restraining order was prohibited under any circumstances). Later two statutes further restraining the powers of federal courts to enjoin state action were en­ acted. In the Johnson Act of 1934, 48 Stat. 775 (now 28 U.S.C. § 1342), Congress 

restricted federal injunctions with respect to state taxes. Although by the Judiciary Act of 1937, 50 Stat. 732, Congress extended the three-judge requirement to injunctive suits restraining federal laws, it did so 

in a period when numerous cases testing the constitutionality of the economic programs of the Depression years were of prime concern. This, however, was a transitory problem which was largely resolved by the Supreme Court's decisions defining the regulatory powers of the federal Congress. Also, a year after the 1937 Act was passed the Supreme Court decided that a single district judge has not only the power but also the duty to deny a statutory three-judge court when he is convinced that a “substantial constitutional question" is not presented. California Water Service Co. v. City of Redding, 304 U.S. 232 (1938). 

This spawned a new’ kind of litigation since parties could further litigate the jurisdictional issue. The powers of a single judge to dispose of a petition on jurisdictional grounds are to this day obscure, despite a 1942 Act (now codified as 28 U.S.C. § 2284(5)) which presumably would have denied him power to cither dismiss or dispose of the case on the merits. Iu a 1962 case the Supreme Court held tha t that statute does not apply “when the constitutional issue presented is essentially fictitious.’' * The proper channels for appealing the jurisdictional issue are likewise confusing. To quote Professor Wright on the subject: "The rules on appellate review of whether a three-judge court was needed are so complex as to be virtually beyond belief. The court of appeals may review if the single judge regards the federal claim as so insubstantial as to require dis­ missal for want of jurisdiction or if the single judge correctly concludes tha t three judges are not required and decides the merits of the case. If the single

’ Ammernian , {Three-Judge Courts: See How Th ey R un!, 52 F.R.D. 293, 297 (19 71). 

« r tnilni v. Pa tte rson . 3G9 U.S. 31. 33 (19G21.
36

judge incorrectly believes tha t three judges are not required and proceeds to the merits, the remedy once was mandamus from the Supreme Court, but now 

appears to be an appeal to the court of appeals. If the court of appeals should 

fail to see that the case was one for three judges, and reviews on the merits, 

its decision is void.

‘•If a three-judge court is convened, but it determines tha t three judges were 

not necessary, appeal is to the court of appeals. If the special court is correctly convened and gives judgment on the merits, appeal lies directly to the 

Supreme Court. If judgment is given on the merits by a three-judge court but 

such a court was not required, appeal should be to the court of appeals rathe r 

than to the Supreme Court. * • ‘

In summary, the original problems for which the three-judge court was 

originally conceived have been largely eliminated by reforms in equity procedures now found in the Federal Rules of Civil Procedure. The three-judge 

court procedure generates rather than lessens litigation. Moreover, the ideal of 

providing an immediate forum for resolution of constitutional attac ks on state 

and federal laws has been lost in the maze of a procedural jungle.

<-■ DEC ISIO NAL LAW HA S PROVIDED IT S OWN SAFEGUARDS AG AIN ST PRECIPIT OU S 

IN JU NCT IV E ACTION BY FEDERAL JUDGES

In its recent opinions the Supreme Court has provided such restrictions on 

federal injunctions as to further obviate the need for tliree-judge courts. In 

Younger v. Harris, 401 U.S. 37 (1971), the Supreme Court held tha t injunctive 

relief against a state criminal prosecution is not available except in exceptional 

circumstances, as where the prosecution is in the nature of a bad faith harassment of the defendant in the exercise of his federal rights.

The Court has alstr required, as a general proposition, abstention from intervention by injunction or declaratory relief in ongoing state prosecutions," and 

in situations where the allegedly unconstitutional law has not yet been sought 

to be enforced against the petitioners and no threat of irreparable injury is 

demonstrated.0

 The Supreme Court has in other recent decisions mandated abstention from intervention in state criminal processes which have not yet been 

resolved at the state level7

 or with respect to issues which mav be resolved on a different basis in pending state litigation." This pattern of decisions clearly 

precludes the sort of precipitous intrusion into state legal processes by a single 

federal judge which the original three-judge court act sought to control.

Thus the rationale which gave life to the three-judge court in 1910 has all but 

disappeared. We submit tha t as a general proposition the original reasons for 

the three-judge court have been largely dissipated by limiting statu tes and decisions controlling the jurisdiction of the federal courts collaterally to review 

state laws, tha t the procedure compounds and confuses rath er than simplifies 

orderly constitutional decision, and that the burden placed on panels of judges 

to handle these cases on an expedited basis is onerous in view of the mounting 

backlog of cases of no lesser order of priority.

Thank you for this opportunity to express the views of the Judicial Conference 

here today.

Mr. K astexmeier. For the benefit of the committee, Judge Wright, 

and for the record, would you tell us something about the Judicial 

Conference and its composition?

Judge Wright. The Judicial Conference was created by an act of 

Congress. It is composed of the chief judge of each of the circuits, 

each of the 11 circuits, and one district judge from each circuit elected 

by the judges of the circuit so there are 22 members of the Judicial 

Conference, chaired by the Chief Justice of the United States. And 

the Judicial Conference functions through committees. There is a Com-

‘ C. U r ig h t. Fp dp rnl Cou rts 5 50 a t p. 193 (2d ed. 19 70 ), See nMo J. .Moore. I'V lernl P m ctl ce 5 11 0.03 (31 (2d ed. 19 70 ).

8

 H am wJ g v. if a ckell . 401 U.S . 66 (1 97 1) .

« Rov/e v. 

7

Landry , 401 U.S . 77 (1 9 7 1 ); Dyx on v. Ste in , 401 U.S. 20 0 (11H I) P er es v. Le de xm a, 401 U.S. S2 (1 97 1) .

• P i/m c v. Kar al ex ix , 401 U.S 216 (1 97 1) .
37

COMPILATION A.— THREE JUDGE CC'JRT HEARINGS BY NATURE OF SUIT, FISCAL YEARS 1963-73

Fiscal year Total

Review of 

ICC orders Civil rights

Suits involving State or loc al 

laws or regulations

Reapportionm ent a

Other

ctions

1963............................................................. 129 67 19 16 27

1964............................................................... 119 50 21 18 30

1965............................................................. . 147 60 35 17 35

1966............................. ................................. 162 72 40 28 22

1967............................................................. . V i 64 55 10 42

1963............................................................... 179 51 55 6 67

1969............................................................... 215 64 81 1 69

1970............................................................... 291 42 162 8 79

1971....................................................... 318 41 176 2 S9

1972............................................................... 310 52 166 32 60

1973............................................................... 320 52 183 7 78

Percent change: 1973 over 1972................ 3.2 .. 10.2 -7 8 .1 30. 0

Note: Percent not computed where base is 25 or less.

mittee on the Criminal Law, there is a Committee on Judicial Administration, and there is a Subcommittee on Jurisdiction of the Court 

Administration Committee of which I happen to be chairman. It is 

this subcommittee tha t drafted the legislation. We sponsored it. The 

Judicial Conference now is sponsoring it. We have receded from the 

provision for an absolute repeal of 2281 and 2282 insofar as reapportionment cases are concerned, where those reapportionment cases involve congressional redistrictin g or statewide reapportionment. Th at 

change was added in the Senate Subcommittee on Improvements in 

Judicial Machinery and the Judicial Conference has now approved the 

legislation in its present form.

Mr. Kastenmeier. So, we can note that you have been elected among 

your peers, I take it to this post.

You testified in the Senate on behalf of a similar measure; did you 

not ?

Judge Wright. Yes, sir.

Mr. Kastenmeier. Or actually the same one ?

Judge Wright. The same one.

Mr. Kastenmeier. In essence, as I understand it, presently there are 

two bills pending, II.R . 785 which would repeal the existing requirement that orders of the ICC would be subject to three-judge court 

proceedings and also S. 782 which would remove cases under the Ex ­

pediting Act from three-judge court requirements. I assume the Ju ­

dicial Conference supports both of those measures?

Judge Wright. The Judic ial Conference has supported both of those 

measures in the past.

Now. the ICC legislation has been the subject of much discussion 

between the Department of Justice and the ICC, the Commission 

itself.

And I am not familiar with the bill in its present form because the 

controversy there seems to be as to who will be the named party 

in review whether it be the United States or the Commission. What 

turns on that is who represents whom in the court of appeals, whether 

it be the Commission lawyers or the Department of Justice lawyers. 

Now, that is what held the bill up for several years and I understand 

tha t that problem has been resolved.
38

So the Judicial Conference has in the past approved all versions 

of the ICC review bills which eliminate three-judge district courts.

Mr. Kastexmeier. Do I understand that the Judicial Conference 

docs not object to continuing the three judge court requirements that 

come up under the Voting Rights Act of 19G5 and the Civil Rights 

Act of 1964?

Judge Wright. Tha t matter has not come before the Judicial Conference. The number of cases generated from those statutes is miniscule and it is a matter of no great concern.

Mr. Kastexmeier. But I would assume on principle the Judicial 

Conference is for the tolal elimination of three-judge courts except 

when you mention the reapportionment or redistricting cases? And 

does the Conference make a distinction in these two classes of cases?

Judg e Wright. The Conference has not been called upon to consider any proposed changes in the three-judge district court provisions in the Civil Rights Act of 1964 or the Voting Rights Act of 

1965. And consequently the Conference has taken no position with 

reference to any proposed changes. I know of no such proposals and 

consequently I am not able to speak for the J udicial Conference with 

reference to that iftatter.

Mr. Kastexmeier. Does the Judicial Conference object to the threejudge courts as a matter of principle or docs it specifically address 

itself only to three-judge courts under certain statutory requirements?

Judge "Wright. Well, I think the Judicial Conference would have 

to study any proposal, for example, for changing the three-judge 

provisions of the 1964 Civil Rights Act. A case might be of such 

concern and importance tha t it should be treated in the first instance 

by a three-judge district court. For example, under the 1964 Civil 

Rights Act only the Attorney General can ask for a three-judge 

district court and that legislation provides that a three-judge district 

court shall be convened when the Attorney General asks for it in cases 

where he finds a pattern of discrimination in employment, et cetera, 

and consequently the Congress thought that this was an area of such 

importance that in the first instance a three-judge district court ought 

to consider it with the direct appeal to the Supreme Court, which 

would expedite the conclusion of the litigation. Now, it is conceivable 

th at a three-judge district court would still be appropriate in those 

kinds of cases, but I am not in a position to speak for the Judicial 

Conference in connection with this particular subject.

Mr. Kastexmeier. Precisely, what action did the Judicial Conference take in connection with three-judge courts or in connection with 

repeal of 28 United States Code sections 2281 and 2282?

Judge Wrigiit. Precisely the Committee on Court Administration 

drafted legislation which would repeal 22S1 and 2282. Tha t legislation was approved by the Judicial Conference and copies of the proposal were sent to the Jud iciary Committee of the House and the 

Judiciary Committee of the Senate.

Ibis was several years ago, and it has been the subject of legislative consideration since that time.

Mr. K astexmeier. To put your position into a rather different context then, is it your position or the position of the Conference tha t 

these provisions arc now a burden as far as continuing the three-judge
39

district courts is concerned but tha t certain others including the Voting Rights Act of 19G5 and the Civil Rights Act of 19G4 and reapportionment or rc districting cases might not be a burden?

Judge Wrigiit. Th at is correct. The Conference addressed itself to 

the burden, exactly. The Conference does not want to challenge the 

wisdom of the Congress of the United States in deciding who and by 

how many judges cases should be heard.

The Conference does want to call to the attention of the Congress 

the burden tha t results from multiplying the judge power required in 

particular cases and the Conference’s view was and is that under 2281 

» and 2282 the burden is very great.

Over 95 to 97 percent of the three-judge cases, with the exception of 

ICC cases, come from 2281 and 2282 and the Ju dicial Conference was 

therefore moved on its own initiative to draft legislation to have 2281

* and 2282 repealed.

Mr. Kastexmeier. I understand. And as a matter of fact it does not 

speak affirmatively of the retention of other three-judge courts other 

than 2281 and 2282?

It is merely silent as to whether those courts should continue, if as 

a matter of congressional policy as to whether those might still be 

necessary, is th at correct?

Judge Wrigiit. That would be accurate, Mr. Chairman.

Mr. Kastexmeier. Do any statistics exist which might be useful 

for us to justify to our colleagues in terms of judge man-hours or 

cost in dollars, the saving of which would justify affirmative action 

on this bill ?

Judge Wrigiit. We have made no studies as far as I know, time 

studies with reference to three-judge district court cases. All we have 

with reference to them is our experience and the bare statistics as to 

the number and the increasing numbers. And as I indicated the number has trebled in the last 10 years. As far as the reapportionment 

cases are concerned, they are not a problem. There were only seven in 

the last fiscal year, 1973, and only one or two in fiscal 1971.

Mr. Kastexmeier. Thu s far, Judge Wrig ht, I am not aware of any 

and I would ask you do you know of any cogent argument that could 

be made for the retention of three-judge courts under section 2281 or 

2282 by potential litigants or others? Are you aware of any argument

* tha t could be made for retention,

Judge Wright. I would think tha t if the same conditions which 

caused the passage of the legislation in 1910 came to pass again, there 

would be a basis for considering the legislation. You remember that

* legislation related only to attacks on State laws. In 1937. 22^2 was 

passed and tha t involved attacks on Federal laws. There were conditions in 1937 which justified its passage and if those conditions 

recurred I would think tha t serious consideration should be given to 

doing something about them. In other words, where I think the Congress has a right to determine in its own mind whether or not there 

has been an abusive power bn the part of other branches of government, where it has jurisdiction in the area, then it can act to correct 

what it feels is a vice.

Mr. Kastexmeier. Thank you, Judge.

I yield to my friend from California. Mr. Danielson.
40

Mr. Danielson. I have no questions. Mr. Chairman. Thank you, 

Judge Wright.

Judge Wiugiit. Thank you.

Mr. Kastf.xmeier. I would like to yield to the gentleman from 

Illinois. Mr. Railsback.

Mr. R ailsback. Judge Wright, I wonder if you have any idea what 

passage of this bill would mean as far as cuttin g down on appeals, 

direct appeals to the Supreme Court? I wonder, do you have any idea, 

or is it possible to project what this would save as far as your caseload 

is concerned ?

Judge Wright. Well, actually the number of cases going to the 

Supreme Court from three-judge district courts really is only 3 percent of the Supreme Court’s calendar, overall calendar. But, the great 

majority of cases reaching the Supreme Court reached the Supreme 

Court on an application for a writ of certiorari and those cases as you 

know do not always result in appeals or hearings before the Supreme 

Court. As a matter of fact, less than 1 in 10 actually result in any 

work before the Supreme Court other than the action on the application itself. So. even though the percentage is small, the amount of work 

required by the Cburt in these three-judge cases is relatively large 

because, as I have indicated, these are direct appeals. Again, we have 

no time study which would indicate just how much of a Justice’s time 

is spent with these cases.

Mr. Railsback. And it would also save some time as far as the courts 

of appeals are concerned, because they would not have to decide the 

jurisdictional questions so it really would help to cut the caseload of 

both the Supreme Court and the court of appeals, is tha t correct?

Judge Wright. Yes. The jurisdictional aspects of three-judge courts 

present a real problem.

One judge is asked for three-judge court. The chief judge of die 

circuit says no and then where do you go from there?

One judge gets his three-judge district court and then they decide 

tha t three judges really are not necessary. And then do you go to the 

Supreme Court or do you go to the court of appeals? It has been very 

unsatisfactory. Maybe there is a better way to do it but it has not been 

done properly up to this time.

Mr. Railsback. Let me just ask you one last question. The bill 

before us does not repeal section 1253 which relates to the direct appeals from decisions of three-judge courts. I will just read it to you.

It says “Expect as otherwise provided by law, any party may appeal to the Supreme Court from an order gran ting or denying after 

notice and hearing an interlocutory or permanent injunction in any 

civil action, suit or proceeding required by any act of Congress to be 

heard and determined by a district court of three judges.”

We still are leaving intact a three-judge court in certain cases like 

the reapportionment cases, and also the voting rights cases and civil 

rights cases. I am just wondering, tryi ng to recall if those cases, the 

civil rights cases, are those characterized as civil cases where they are 

seeking injunctive relief?

Judge Wright. Yes they are and you have read the statute right. 

Direct appeal to the Supreme Court would be preserved in those cases
41

where three-judge district courts are preserved. But as I have indicated 

before the number of such cases is very small. The reapportionment cases were seven last year and the number of 

the ones under the Civil Rights Act was even fewer, if my recollection 

is right, as well as the ones under the Voting Rights Act. So those 

caseA’eally have not presented a problem. The cases that do present the 

problem, and that is merely because of the numbers, are the cases that 

arise under 2281 and 2282. .

And I might say also that there is no opposition really to this bill

* as far as we can tell. The subcommittee in the Senate on Improvements in Judicial Machinery sent letters to the Attorney General of 

every State in the Union and asked for their comments on the bill, 

because there was some thought tha t perhaps because three-judge

* district court legislation had its genesis in protecting the States, there 

would be some reason why the States might want to retain the legislation; 38 attorneys general did not even answer the request of the 

subcommittee and of the other 12, 3 were in favor of the legislation, 

and about half a dozen misconstrued what the legislation was all about 

and there were 1 or 2 who really were opposed to it.

Mr. R ailsback. Then in addition the sponsors of the bill are really 

providing some additional protection for the States by giving them 

notice where as now they would not be getting such notice in certain 

cases ?

Judg e AAtrigiit. Xot only notice, but the right to intervene on the 

part of the Attorney General.

Mr. Railsback. Right. The righ t to intervene. Thank you.

Mr. Kastexmeier. The gentleman from Massachusetts, Mr. Drinan.

Mr. Drinan. Thank you very much for coming. Judge Wright. It 

is very nice to have you here.

Judge Wright. Thank you.

Mr. Drinan. One question I have about the incidence of civil rights 

litigation for a three-man district court. In the compilation afte r your 

fine statement, I see tha t civil rights in the last 10 fiscal years, with 

three-judge Federal courts, has increased from 19 in fiscal years 1963 

to 183 in 1973. And it is very interesting to note tha t between 1969 

and 1970 the number of civil rights cases with three-judge courts

* doubled from 81 to 162. I do not fully understand, therefore, your 

statement when you say tha t the incidence of three-judge Federal 

courts in civil rights cases is miniscule.

Judge Wright. I was referring to the special three-judge district

* court cases under the Civil Rights Act of 1964, not under 2281 or 

2282. I was refe rring only to those limited civil rights cases, for 

three-judge district court cases provided for in the Civil Rights Act 

of 1964 where the attorney general may ask for a three-judge district 

court in cases where he finds a pattern of discrimination in employment. in schools, or whatever. But that is a very limited, very limited 

group. There have been some under the Voting Rights Act of 196.5 

certainly as you know. But under the 1964 act there have not been 

any or any greater number.

Air. Drinan. Judge, would your proposed statute touch that pa rticular area?

Judge AYrigiit. Xot at all. Xot at all.
42

Mr. Drixax. All right. So, these 183 under civil rights would not 

be touched by this proposal you make?

Judge Wright. Not at all.

Mr. Drixax. You would be relieved by the ICC orders of 52 each 

year but then on the others, the 78, would all of them or most of them 

be ta ken care of by your propo sal?

Judge Wright. The -ICC orders are the subject of other legislation 

which hopefully will pass soon. The other part of the statement is 

correct.

Mr. Drixax. Seventy-eight would be eliminated ? /

Judge W rigiit. Yes.

Mr. Drixax. Well, I always find you very persuasive, judge, and I 

see no difficulty in accepting what you said so eloquently today. Thank 

you. •

Judg e Wrigiit. Thank you.

Mr. Kastexmeier. Just a follow up then on the line of inquiry pursued by Mr. Drinan. In fact, under your present figures, we would be 

relieving the court, the court system, of providing a three-judge distric t court in 78 of 320 cases, in somewhat less tha n 25 percent of the 

cases, and the burden under present figures would be relieved so we 

should not misunderstand tha t this is the lion’s share of the cases. It 

is, in fact, a minority of the cases, a quarter of them perhaps?

Judge Wrigiit. Maybe my mathematics are inaccurate, but this is 

the lion's share of the cases. The only case, looking at the compilation 

for 1973, fiscal 1973, the total of the three-judge cases, district court 

cases, is 320. Only 52 are ICC orders. Those 52 would not be affected 

by S. 271.

Mr. Kastexmeier. Right.

Judge Wrigiit. The seven reapportionment would not be affected.

But, all of the others, more or less all of the others would be affected, 

with the possible exception of any voting rights cases under the Voting Rights Act of 1965 tha t might be included in the other actions.

Mr. Kastexmeier. I understood you to reply to Mr. D rinan, in reply 

to Mr. Drinan to say tha t the civil rights cases numbering 183 would 

not be affected by this legislation. Did I misunderstand you?

Judge Wright. I did not intend to say tha t if I did. What I did 

intend to say was tha t civil rights cases brought under the special *

provisions,of the act of 1964 which require a three-judge district court 

when the Attorney General of the United States certifies the necessity—they would not be affected and the number of such cases has been 

very, very small. w

Mr. Kastexmeier. Let me put the question this way to you, Judge 

Wrig ht. IIow many civil rights would be affected, that is, how many 

civil rights cases are presently brought to a three-judge district court 

under 2281 and 2282 ? That of course we need to know..

Jud ge Wrigiit. In fiscal 1973 I would say close to 183.

Mr. Kastexmeier. So all of those, all of those—well, so that the 

three-judge district court would not be available for civil cases under 

2281 or 22S2 henceforth and that presently is nearly 183 cases?

Judge Wright. That is correct.

Mr. Kastexmeier. And I think that raises a question. Do civil 

rights advocates accept this change? Do they know about it and do
43

they realize they will not have the option of having a three-judge district court under 2281 and 2282 henceforth ?

Judge Wrigiit. I understand tha t the Civil Rights Commission, at 

the time it was chaired by Father Hcsburgh, was contacted inform ally 

by the Subcommittee of the Senate Jud iciary on Inprovements in 

Judicial Machinery and asked for its views on S. 271. I t dit not take a 

position against it, and so I would assume tha t this is a fairly good 

indication tha t the civil rights people across the country are satisfied 

now to have one Federal judge handle th eir cases initially.

Mr. Kastenmeier. Yes. The only reason someone might infe r a di fferent response on their part is the fact tha t as recently as fiscal 1972 

they have been employing or entering into three-judge district courts 

in as much as 183 cases, more than half the total consisting of requests 

for three-judge district courts, and, therefore, one must believe that 

they feel that this is a desirable and favorable forum for them.

So it may be th at the Civil Rights Commission has decided it can 

forgo the three-judge district court but one still is left with the impression th at currently it is being widely used in civil rights cases by 

some litigants.

Judge Wrigiit. The figures here would support exactly what you 

say.

[Subsequently, Judg e W righ t submitted the following.]

U.S. Court of Appeals, 

Washington, D.C. October 10, 1973.

Hon. Robert W. Kastenmeier,

Rayburn House Office Building, Washington, D.C.

Dear Congressman Kastenmeier: At the hearing this morning you pointed 

out tha t of the total of 320 three-judge district court cases for fiscal 1973, 183 

were “civil rights” cases, as shown in the statistics compiled by the Administration Office of the United States Courts. You also suggested that if the civil rights 

litigants in these 183 cases chose a three-judge district court, it might be possible 

tha t civil rights groups who bring such cases would be opposed to S. 271. I regret 

tha t I was not quick enough to make a proper response to your suggestion. When 

an action is brought for an injunction restraining the enforcement of a state or 

federal statute on the ground of unconstitutionality, under 28 U.S.C. §§ 2282 a 

three-judge district court is required. The litigants have no choice. Both Section 

2281 and Section 2282 state tha t such an injunction “shall not be granted by 

any district court or judge thereof unless the application therefor is heard and 

determined by a district court of three judges under section 2284 of this title.”

I am advised tha t the Administrative Office is going to furnish the Subcommittee with a breakdown of the 183 three-judge district court cases filed in fiscal 

1973 shown in its compilation as involving civil rights. It appears tha t a large 

number of the 183 cases are only tangentially related to civil rights.

It was a pleasure to appear before your Subcommittee this morning.

Sincerely,

J. Shelly Wright.

Mr. Kastenmeier. Thank you.

Mr. Drinan. Could I? Would the chairman yield for ju st a minute?

Mr. Kastenmeier. Yes.

Mr. Drinan. I am afra id I misunderstood Judge Wright. If that 

is the case and if I may pursue this just a moment I am looking forward to the testimony here of Mr. Dixon for the Department of Ju stice where on page 8 he says tha t S. 271 would not eliminate all 

three-judge courts. Such courts would be retained in certain ICC cases 

and certain civil rights cases. I am still uncertain which civil rights 

cases will be retained and which will not. Am I to understand th at all
44

183 of these eases would henceforth be ineligible for Federal threejudge Federal courts?

Mr. Kastenmeier. If I understood the response to me it was that 

only insofar as they are pursuing under 2281 or 2282 which have 

been the lion’s share of the 183 current cases.

Mr. Drinan. Well in view of that Mr. Chairman I would suggest 

tha t the Leadership Conference be asked to testify or to submit a 

statement and that other activist groups tha t do in fact litigate on 

behalf of civil rights and civil liberties be given notice of this hearing and th at we get their views on the matter.

Mr. Kastenmeier.. I yield to the gentleman from Iowa. 4

Mr. Mezvinskt. I just want to thank Judge Wrig ht and I have no 

questions Mr. Chairman.

Mr. Kastenmeier. If there are no furth er questions we are grateful 

to you, Judge Wrig ht, for your appearance this morning. And the •

chair will say we will try to ascertain whether or not there is any 

interest, following the suggestion of Mr. Drinan, among civil rights 

litiga nts in retention of the three-judge district court.

Judge Wright. I think tha t tha t would be an excellent idea. If threejudge district court cases are still being sought by civil rights litigants 

then they ought to be heard first to determine whether or not they 

believe tne three-judge district court should be retained to protect 

their interests.

Mr. Kastenmeier. Thank you, Judge.

J udge Wright. Thank you, gentlemen.

Mr. Kastenmeier. The Chair would next like to call on the Honorable Edward J. Devitt, chief district judge of St. Paul, and the 

Honorable Arthur J. Stanley, Jr., senior district judge, Leavenworth, Ivans.

May I say I would ask you both to come up and each make a separate presentation, but because it is my understanding that the thrust of 

your presentations is very much in the same area it might be useful 

to ask you both to appear in tandem before the committee.

We appreciate your appearance this morning, and may I ask Judge 

Devitt, wno is listed first, to proceed.
w a5H:s c t o n . o.c
46

26 CASE LOAD OF THE SU PR EM E COURT

A. Appeals from Federal District Courts

fa) Three-Judge Court Cases. Although there are 

other situatio ns in which the sta tutes provide for a 

three-judge district court with direct appeal to the Supreme Court, the most significant are those in which 

the con stitutiona lity of state or federal sta tutes is chai- *

lenged, 28 U. S. C. 2281. 2282. and those for review 

of Inter sta te Commerce Commission orders. 2S V. S. C.

$ 2325. We recommend eliminatio n of the three-judge *

court, and of direct review, in. these classes of cases.

The historical grounds for this ’jurisd iction, and its consequences in practice, have not been reviewed by Congress for more tha n a generation. In connection with 

such a reexamin ation Congress would have an opportun ity to consider whe ther more recent special provisions for three-judge courts, in the Civil Rights Act of 

1964 (42 U. S. C. 1971g. 2000a-5 fb) . 2000e-0 (b )) 

and the Voting Rig hts Act of 1965 (42 U. S. C.

1973b (a). 1973c. 1973h ( c )). should or should not be 

retained.

Review of ICC orders by a three-judge court with 

direct appeal to the Supreme Court is an historical 

anomaly. At one time there was similar review for 

other agencies, bu t this was changed in 1950. and review 

of the other agencies was transferred to the courts of 

appeals. 5 U. S. C. $ 1032. The reasons given for ,

making this change for the other agencies are fully 

applicable to the ICC.

“The provision for review by the Supreme Court in ♦

its discretion upon certiorari, as in the review of 

other cases from circu it courts of appeals, will save 

the members of the Supreme Court from wasting 

their energies on cases which are not imp orta nt 

enough to call for their attention, and enable them 

to concentrate more fully upon cases which require 

their careful consideration. By allowing certiorari, 

the Court * * 0

 will not any longer be required automatically to hear cases which are not of a nature to
47

CASE LOAD OF THE SU PR EM E COURT 27

merit its consideratio n." ( H. Rep. 2122. p. 4. and 

S. Rep. 2618. p. 5. 81st Cong.. 2d Sess. (1950).)

In recent years the Commission has abandone d its opposition to similar treatm ent for its orders. Proposals 

for review of ICC orders by the courts of appeal, sup ­

ported by the .Judicial Conference of tin' United Sta tes 

and. so far as we know, opposed by no one. have been 

before Congress for several years. Since many ICC cases 

are not of sufficient importance to require review by 

the Supreme Court, it is clear th at the unique tre atm ent 

of ICC orders is a burden on the S upreme Cou rt th at can 

no longer be justified.
48

THREE-JUDGE COURTS:

See How They Run!

by

H arris S. Ammerman *

4

• Legislative Assistant, Administrative Office of the United States Court.

Introduction:

Congress, at the urging of the Judicial Conference of the 

United States, has introduced a proposal for limiting the jurisdiction of the federal three-judge district court.1

 A report by 

the Conference’s Committee 2

 on Federal Jurisdiction states tha t 

“the convening of three-judge panels has in recent years given 

rise to an increased judicial burden.” Three-judge courts hear 

injunction cases alleging unconstitutionality of federal or state 

statutes. The number of courts convened to hear such cases in 

the eight years from fiscal 1963 through 1970 has risen over 125 

percent, and the upward trend shows no sign of abating, according to the Administrative Office of the United States Courts.3

The argument tha t a single judge should not be empowered to 

enjoin the enforcement of allegedly unconstitutional state statutes, because his sole judgment is apt to lack objectivity and 

careful deliberation, has been soundly rebutted over the years 

primarily because of the provision for expeditious appellate review. Meanwhile, the three-judge court has been untouched.

In its October 1970 meeting the Judicial Conference stated 

that not only has the work of the district and appellate courts 

been affected by the need to supply judges for the three-judge district courts but that the direct appeal from such courts to the Supreme Court has often brought tha t Court into the review process prematurely, placing the burden of direct appeal on the Supreme Court in many cases where the “winnowing” process of

♦

♦

1. Se e Ap pen dix I fo r Th ree -Ju dg e 

Co urt Sta tu te (28 U.S.C. §8 2281, 

2282, 2283, 2284, an d 1253).

2. Se e Re po rt of th e Proceedin gs of 

th e Ju di ci al Conference of the

52 F.R.D.

Un ited States, October 29-30, 1970 

p. 78.

3. See, e. g., 42 Cong.Rec. 4846-59 

(1908); 45 Cong.Rec. 7253-57 (1910).

293
49

294 52 FEDERAL RULES DECISIONS

appellate review at the courts of appeals level would have b etter 

served the interests of justice.

Representative Emanual Celler, Chairman of the House Judiciary Committee, introduced H.R. 3805 (February 8, 1971), with 

the support of the Judicial Conference.4 The bill would amend 

sections 2281 and 2282 to eliminate the three-judge court requirement. It would not, however, affect other statu tes which 

include special and independent provisions for three-judge courts, 

i. e., three-judge courts convened for the taking of land by the 

T.V.A.; for violations of the 1964 Civil Rights Act and Voting 

Rights Act of 1965; and I.C.C. matters affected by the proposed 

amendment to the Expediting Act.

Putting aside the criticisms tha t the three-judge court procedure is burdensome, there are still situations where federal-state 

relations are sufficiently delicate to justify the serious deliberation afforded by the three-judge panel. The drafters of H.R. 

3805—or so it appears—believe tha t cases may still arise in the 

racial segregation area 5 which warrant a special panel rather 

than a single judge. And, for this reason they have chosen not 

to tamper with three-judge court provisions now written into 

several civil rights statutes. Not all civil rights statutes, however, include three-judge court provisions. The justification 

which supports the need for three-judge court hearings in cases 

of racial discrimination does not exist in matters regarding the 

Interstate Commerce Commission, or condemnation proceedings 

under the T.V.A. Act.

What justification does the Judicial Conference of the United 

States have in proposing a sharp curtailment of the three-judge 

court procedure? The analysis which follows will attempt to review the substantive and administrative issues. In short, is the 

current procedure fraught with substantive and administrative 

encumbrances which outweigh its usefulness?

Those opposing a legislative curtailment of the three-judge 

court concede that such change would relieve the increased judicial burden, but at the price of creating apprehension tha t distric t court judges, sitting alone, would issue injunctive orders 

indiscriminately. Or worse, it is thought tha t claimants in state 

courts would deluge federal court judges with petitions for injunctive relief. This undoubtedly would cause difficulty were it 

not for two factors to be dealt with later—swift appellate review

4. Se e Appen dix II (copy of H.R . 5. Ba ile y v. Pa tter so n, 369 U.S. 31, 

3805). 82 S.Ct. 549, 7 L.E d.2 d 512 (1962).
50

TH RE E-JU DGE COURT 295

Cite as 52 F.R.D. 203

in the courts of appeals and recent rules in criminal cases 

expounded by the Supreme Court during its October 1970 Term.

I. ORIGINS:

A. Passage of the Original Act

The three-judge, direct appeal procedure was enacted in 1910 

in response to the Supreme Court’s decision in Ex parte Young.6

The Court’s holding encouraged railroads and utilities to attack 

rate-fixing and tax laws, resulting in a deluge of injunctions by 

federal judges suspending such legislation.7

 In Ex parte Young, 

the state statu te in question fixed maximum rates for railroad 

operations within Minnesota. A federal district court, at the 

request of railroad shareholders, granted a tem porary injunction 

to prevent the Minnesota Attorney General from enforcing the 

state law. The state argued tha t the exercise of such injunctive 

power would, in effect, deprive them of the right to regulate 

their own economic enterprises, and added tha t the action constituted a suit against the state barred by the eleventh amendment.8

4

The Minnesota Attorney General violated the district court 

injunction and petitioned the state courts for writs of mandamus 

directing the railroads to adopt and publish rates in conformity 

with the state law. After the federal district court cited him for 

contempt, the Attorney General brought an original habeas corpus proceeding in the Supreme Court, urging tha t the federal 

district court lacked jurisdiction over an official of the state. 

The Supreme Court denied the writ and held tha t the state’s 

immunity from suit did not extend to cases brought to restrain 

state officers from enforcing unconstitutional state laws.9

 The 

Supreme Court failed to calculate the repercussions of their

decision which led to a flood 

utilities.10

6. 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 

714 (1908).

7. Comment, “The Thre e-Ju dge Fed ­

era l Court in Con stitutio nal Litigation: A Procedural Anac hron ism”, 

27 U.Chi.L.Rev. 555, 557 (1960).

8. The eleventh amendment pro ­

vides: “The judicial power of the 

United States shall not be construed to extend to any sui t in law 

or equity, commenced or prosecuted 

aga inst one of the United Sta tes by 

Citizens of ano the r State, or by

of litigation advanced by the

citizens or subjects of any Foreign 

State.” U.S.Const. amend. XI.

9. Ex parte Young, 209 U.S. 123, 160, 

28 S.Ct. 441, 52 L.Ed. 714 (1908).

10. See e. ff., Railroad Commission v. 

Cumberland Tel. & Tel. Co., 212 

U.S. 414, 29 S.Ct. 357, 53 L.Ed. 577 

(1909); City of Knoxville v. Knox ­

ville Wa ter Co., 212 U.S. 1, 29 S.Ct. 

148, 53 L.Ed. 371 (1909); Prentis v. 

Atlantic Coast Line Co., 211 U.S. 

210, 29 S.Ct. 67, 53 L.Ed. 150 (1908).
51

296 62 FEDERAL RULES DECISIONS

*

*

Several states were resentful tha t their regul atory policies 

were so often doomed at the will of a single federal jud ge.11

Temporary restraining orders, moreover, were often issued ex

parte, and interlocutory injunctions could be issued on affidav its 

alone.18 There was no statu tory limit ation on a single district 

judg e’s discretion to continue a temporary restraining order or 

interlocutory injunction, and such orders were often continued 

indefin itely. Federa l-state relations were in sharp con flic t.13

The 1910 Ac t required all applications for interlocutory inju nction restra ining the enforcement of allegedly unconstitution al 

state statutes to be “ heard and determined” by a court of three 

judges, one being a circuit judge or Supreme Cou rt Jus tic e. 

Both parties to such a suit were given the righ t of direct appeal 

to the Supreme Court. The three-jud ge panel was to have precedence over other matters on the docket. Also, the Act provided for notice to the governor and the attorney general of the 

state involved, allowing them five days to respond.14

The A ct ’s prim ary raison d’etr e was to limit single federal 

judges from freel y issuing injunctions. Addit ional ly, Congres s 

felt the panels would improve the quality of deliberation preceding the issuance of injunc tions.15 A three-judge panel, it was 

anticip ated, would therefore protect the states from plaintiff s, 

skilled in shopping for judges who were inclined to be more 

sympa thetic in an equity proceeding. A t least for the specific 

purpose intended, the three-jud ge procedure worked—the states 

no longer were apprehensive about their jurisd iction being 

usurped, and the number of injunctions issued declined.16

Much has been added to the origin al 1910 A ct. In 1913 orders 

of state admin istrative commissions were included in the procedure. The origin al act applied only to the interlocutory injunction, but in 1925, Congress extended the procedure to final injunctions. This extension applied only where an interloc utory 

injunction was sought in conjunc tion with a fina l order.17 The 

Court held tha t such change would correct the problem of a 

single judge deciding whether a final injunction would issue a fter 

a three-judge court had decided the question of the interlocutory

11. See 42 Cong.Rec., supr a.

12. Hu tch eso n, “A Ca se fo r Th ree 

Ju dg es”, 47 Ha rv.L.Re v. 795 (1934).

13. /d., pp. 800-801.

14. 28 U.S.C. §§ 2281, 2282, 2284, 

1253.

15. Se e 45 Cong.Rec., sup ra.

16. Note, “The Th ree -Ju dg e D is tric t 

Cou rt; Scope and Pr oc ed ure Un ­

de r Section 2281”, 77 Ha rv.L.Rev. 

299, 300 (1963).

17. Sm ith v. Wilson, 273 U.S. 388, 

47 S.Ct. 385, 71 L.Ed. 699 (1927).
52

TH RE E-JU DGE COURT 297

Cite ns 32 F.R.D. 203

order. Subsequently, Congress extended the three-judge, direct 

appeal procedure to suits involving the unconstitutionality of 

federal statutes.18 Finally when the statute was codified as 

section 2281 of the 1948 Judicial Code it was made applicable 

to any action in which either a preliminary injunction or a permanent injunction was sought.19

The history of the three-judge court is cast in a somewhat *

anomalous setting. Not long after its passage the needs for the 

Act began to disappear. Federal Equity Rules were adopted 

which limited a temporary restraining order to 10 days.20 Bas- *

ically, the Act left a single federal judge without much power 

even to determine whether or not a case fell under the Act. But 

the Supreme Court reinvested the federal judges with discretionary powers in several key decisions. Ex parte Poresky21 held 

tha t while a single judge could never pass on the merits of a 

complaint which fell within the terms of the Act, he had the 

power to dismiss such a case for want of jurisdiction. In California Water Service Co. v. City of Redding,22 the Court stated 

tha t a single judge not only has the power but also the duty to 

deny the statutory court whenever he is convinced that the Constitutional question before him is not a substantial one.

If the judge reaches the point of determining tha t a “substantial” issue is presented, has he not at least reached the threshold 

of the decisional process where the legal question is laid bare?

It might be urged tha t the finding of substantiality incorporates 

by necessary inference, his judgment tha t a constitutional inconsistency does in fact exist. If so, is there any real distinction 

between the situations (1) where a district judge explores the 

merits of the cause of action to determine whether a “substantial” constitutional issue exists deserving a three-judge panel *

adjudication, and (2) a one-judge decision on the merits followed by appeal to a panel of three judges of the United States 

Court of Appeals? w

B. Subsequent Statutes

In addition to the three-judge requirement pursuant to sections 2281 and 2282, Congress has by separate statutes seen fit 

to apply comparable procedures in other types of cases includ18. 28 U.S.C. § 2282. 21. 290 U.S. 30, 54 S.Ct. 3, 78 L.Ed.

152 (1933).

19. 28 U.S.C. § 2281.

22. 304 U.S. 252, 58 S.Ct. 865, 82 L.

20. See An no tated Rules of Pra ct ice Ed. 1323 (1938). 

in the U. S., 584-951 (D ew hu rst ed.

1914).

52 F.R.D.— l W i
53

298 52 FEDERAL RULES DECISIONS

ing: actions for injunctions against the enforcement of orders 

of the Interstate Commerce A ct ;83 certain anti-trust actions 

brought by the United States;24 and certain discrimination cases 

brought by the United States.25

H. APPLICABILITY OF THREE-JUDGE COURT PROCEDURE

A. Supreme Court Interpretation

The Supreme Court has long recognized the burdensome aspects of the three-judge court procedure, and has for this reason 

purposely narrowed its applicability to avoid obstructing the 

federal judicial dockets. Because the burdensome characteristics of the three-judge court have impinged directly on the 

procedural aspects of the system, th e Supreme Court has deemed 

the statute not “a measure of broad social policy to be construed 

with grea t liberality, but * * * an enactment technical in

the strict sense of the term and to be applied as such.” 26

B. Statutory Requirements

For section 2281 to apply, a state statute or administrative 

order must be challenged, a state officer must be a party defendant, injunctive relief must be sought, and it must be claimed th at 

the statu te or order is contrary to the Constitution of the United 

States. The same rules are, in general, applicable to challenges 

to federal statutes under section 2282.27

The word “statute s”, the Supreme Court says, is “a compendious summary of various enactments, by whatever method they 

may be adopted, to which a State gives her sanction and is 

at least sufficiently inclusive to embrace constitutional provisions.” 28 Municipal ordinances, however, are not “statutes ” 

within the three-judge provision.29 “That section,” Justice 

Brandeis said in Ex parte Collins,30 “was intended to embrace

23. 28 U.S.C. § 2325 (1964); 7 U.S.C. 

§ 217 (1964).

24. 15 U.S.C. § 28 (1964); 49 U.S.C. 

§ 44 (1964).

25. 42 U.S.C. §§ 1971, 2000a-5 (1964).

26. Ph illips v. U nited States, 312 U.S. 

246, 251, 61 S.Ct. 480, 85 L.Ed. 800 

(1941); Se e also Ex part e Collins, 

277 U.S. 565, 567, 48 S.Ct. 585, 72 

L.Ed. 990 (1928); Sw ift & Co. v. 

Wickh am, 382 U.S. I l l , 128-129, 86 

S.Ct. 258, 15 L.E d.2d 194 (1965).

27. C. A. W rig ht, La w of Fed er al 

Co urts, 189 (1970).

28. Am erican Fe de ratio n of La bo r v. 

Wats on, 327 U.S. 582, 592-593, 66 

S.Ct. 761, 90 L.Ed. 873 (1946).

29. Young er v. H ar ris, 401 U.S. 37, 

91 S.Ct. 746, 27 L.E d.2 d 669 (1971); 

Pe rez v. Led esm a, 401 U.S. 82, 91 

S.Ct. 674, 27 L.Ed.2d 701 (1971).

30. 277 U.S. 565, 567-569, 48 S.C t 

585, 72 L.E d. 990 (1928).
54

TE RE E-JUDGE COURT

Cite as 52 F.R.D. 203

299

a limited class of cases of special importance and requiring special treatment in the interest of the public • • * cases of

unusual gra vit y.” Ordinances, said one district judge, are numerous and often of little importa nce.31 Nevertheless, litigan ts 

continue to bring suit challenging the constitutionality of local 

regulations. Inform ation availa ble to the Adm inistr ative Offi ce 

of the United States Cour ts does not show the number of such *

actions, nor are there available data on the number of threejudge hearings convened each year in suits atta ckin g local 

regula tions. 32 *

As indicated earlier, three-jud ge court jurisdiction is not invoked unless the suit to enjoin the operation of a state or federal 

statute is grounded on a claim of unconstitutio nality. The claim, 

moreover, must rely on the federal and not a state constitution.33

In addition to the Supreme Court ’s efforts in narrowing the application of the three-ju dge court jurisdic tion, various courts 

have ruled that three-judges are not required: (1) if the action 

complained of is not, in fac t, attributable to the statute alleged 

to be uncons titu tion al;34 (2) if the injunctio n is sought only 

again st an unconstitutional application of a statute and not the 

statute it se lf;35 or (3) if the real question in issue is not the 

const itutionality of the statute itself but rather its applicability 

to the subject matte r of the litig atio n.38 These restrictions have 

held down the flow of litigation to the three-jud ge panel, but 

the Jud icial Conference contends that the volume is still disruptive and burdensome.

C. Powers o f a Single Judge

If federal jurisdiction is s how n37 and the case requires a threejudge court, the single judge must request the convening of the

31. Calhoun v. Ci ty of Seattl e, 215 

F. 226 (W.D.Was h.1914).

32. See 1970 Adm.Offlce U.S .Co urt s 

Ann .Rep., Table 28.

33. Cook v. Bur nqu ist, 242 F. 321 

(D.Mlnn.1917).

34. Fa rm er’s Gin Co. v. Hayes , 54 F. 

Supp. 43 (W.D.Okla.1943).

35. Ph illips v. United Sta tes, 312 U.S. 

246, 252, 61 S.Ct. 480, 85 L.E d. 800 

(1941); Faubus v. United Sta tes,

254 F.2d 797, 805 (8th Cir.), cert, 

denied, 358 U.S. 829, 79 S.Ct. 49, 3 

L.Ed.2d 68 (1958); Se aly v. Depar tment of Pub. Ins tru ction, 252 F.2d 

898, 900 (3rd Cir.), cert, denied, 356 

U.S. 975, 78 S.Ct. 1139, 2 L.Ed.2d 

1149 (1958).

36. Maison v. Confe der ate d Trib es, 

314 F.2d 169 (9th Cir . 1963).

37. Van Bu sk irk v. Wilkin son , 216 

F.2d 735, 737 (9th Cir. 1954 ); Ex 

par te Pores ky, 290 U.S. 30, 31, 54 

S.Ct. 3, 78 L.E d. 152 (1933).
300 52 FEDERAL RULES DECISIONS

panel. He has no authority to hear it on the merits.38 This 

whole matter regarding the powers of a single judge in a case 

appropriate for three judges has been cloudy. Ex parte Poresky,39

in 1934 held tha t a single judge could dismiss the action for 

want of jurisdiction, and t hat jurisdiction was lacking if the federal constitutional claim was insubstantial. This gave the single 

judge considerable power to explore the merits under the guise 

of determining the jurisdictional issue.40

In 1942 the three-judge court statute was amended in an attempt to spell out the powers of a single judge.41 One of the 

provisions then added, now codified as 28 U.S.C.A. section 2284 

(5), specifies that a single judge “shall not • • • dismiss

the action, or enter a summary or final judgment.” This statutory change was designed, it is argued, to overrule the Poresky

doctrine which the lower courts refused to abandon.42 And the 

Supreme Court in response to this conflict has gone beyond the 

doctrine by approving this practice in Bailey v. Patte rson. 43

Here, the Court said: “The statute comes into play only when 

an injunction is sought ‘upon the ground of unconstitutionality’ 

of a statute. There is no such ground when the constitutional 

issue presented is essentially fictitious.” 44

The other powers of a single judge are defined in the statute. 

Only where there is a prayer for injunctive relief will a threejudge court be convened.45 While the issuance of the injunction 

is properly decided by the three-judge court,46 a single district 

judge has all but assumed the power to dismiss an application for 

a three-judge court if the requirements of equity jurisdiction 

are not stated on the face of the complaint. Thus, a single judge

38. See e. g., Ex par te Me tro polita n 

W ater Co., 220 U.S. 539, 31 S.Ct. 

600, 55 L.Ed. 575 (1911).

39. 290 U.S. 30, 54 S.Ct. 3, 78 L.Ed. 

152 (1934).

40. See Ca lif ornia W ater Service Co. 

v. City of Red ding, 304 U.S. 252, 

255, 58 S.Ct. 865, 82 L.Ed. 1323 

(1938).

41. Act of Ap ril 6, 1942, ch. 210, 56 

St at. 199.

42. Klein v. Lee, 254 F.2 d 188 (7th 

Cir. 1958); Car riga n v. SunlandTujun ga Tel. Co., 263 F.2 d 568 (9th 

Cir. 1959); E as te rn St at es Pe troleum Corp. v. Rogers, 105 U.S.App.

D.C. 219, 265 F.2d 593 (1959), man ­

da mus denied, 361 U.S. 805, 80 S.Ct. 

93, 4 L.E d.2d 56 (1960).

43. 369 U.S. 31, 82 S.Ct. 549, 7 L.Ed. 

2d 512 (1962).

44. Id., at p. 33, 82 S.Ct. a t p. 551.

45. Fle mm ing v. Nestor, 363 U.S. 603, 

80 S.Ct. 1367, 4 L.E d.2d 1435 

(1960); H ar la n v. Pe nn sy lvan ia R. 

R. Co., 180 F.S upp. 725 (W.D.Pa. 

1960).

46. Note , "T he Th ree -Ju dg e D istric t 

Cou rt: Scope and Proc ed ure Un de r 

Section 2281”, sup ra, at 299, 309- 

310.
56

THREE-JUDGE COURT 301

Cite as 52 F.R.D. 293

has dismissed the complaint where there is no showing of irreparable injur y, where there is an adequate remedy in the state 

courts, or where the plainti ff has “unclean hands .” 47

Ordinary equity jurisprudence determines the success of the 

injunctive prayer in civil cases.48 The requirements of equity 

jurisdiction are applied diffe rently in crimin al cases. Tradit ionally, federal courts have not interfered with enforcement o f state 

crimin al statutes. But exceptional circumstances will jus tify 

the issuance of an injunc tion again st the enforcement of a 

state penal statu te.49 The boundaries of the exception have been 

redrawn recently in Led esm a and You nge r to encompass only 

those cases in which the danger of irreparable loss is both grea t 

and immediate. 80 This policy of restrict ion is often justified on 

the ground that the principles of federalism and comity require 

federal courts to refrai n whenever possible from interference in 

the administration of justic e by the states.81 Thus, the equit y 

jurisdictional requirements of irreparable inju ry and inadequacy 

of state remedy are stric tly applied by federal courts in cases 

atta ckin g state crimin al statutes. 'In deference to this policy, 

the federal courts can only assume tha t a parti cular defendant 

will be fairly treated in the state courts and tha t an unconstitutional statute will be struck down by the state judiciary.82 A 

petitioner who chooses to attac k the constitutionality of a state 

crimin al statute will meet a diff icul t task in sati sfying the initia l 

requirements of equity jurisdic tion; i. e., irreparable injur y and 

inadequacy of state remedy. A single judge then may dismiss 

the complaint if it is clear tha t the elements for equitable relief 

are missing.

Commentators have argued that the stat ute’s language has 

caused confusion and delay in the appellate courts because it is

47. Berg, “T hree-Ju dg e D istric t

Co urts: some ju risd ic tion al problem s’ , 46 A.B.A .J., 291-292 (1960).

48. See Pom eroy, Equ ity Ju ri sp ru ­

dence §§ 1337-110 (5th ed. 1941).

49. Spielm an Motor Sales Co. v. 

Dodge, 295 U.S. 89, 55 S.Ct. 678, 79 

L.Ed. 1322 (1935); Fe nn er v. Boykin, 271 U.S. 240, 46 S.Ct. 492, 70 

L.Ed. 927 (1926); Hyg rade Pr ov ision Co. v. Sherm an, 266 U.S. 497, 

45 S.Ct. 141, 69 L.Ed. 402 (1924); 

Ci ty of Ho ust on v. Ja s. K. Dobbs 

Co., 232 F.2 d 428 (5th Cir. 1956); 

Dom browsk i v. Pf ister, 227 F.Supp . 

556 (E.D.La.1964).

50. Younger v. H ar ris, su pr a; Perezs 

v. Led esm a, supr a.

51. “New D. C. Co urts En do rsed ’’, 

W ashing ton Po st, March 23, 1971; 

Note, “T hree-Ju dg e Co urt Rea ssessed: Ch angin g Roles in Fe de ralSta te Re latio ns hips ’’, 72 Yale L.J. 

1646, 1649-52 (1963).

52. Se e Ch aff ee v. Johnson, 229 F.

Supp. 445, 447 (S.D .Miss.1964);

To th v. Silbe rt, 184 F .Su pp. 163, 168 

(N.D.O hio 3960 ); Fo rd v. Atto rney 

Gen., 184 F.S upp. 129, 133 (E.D. 

Pa.), aff ’d pe r curiam, 364 U.S. 291, 

81 S.Ct. 65, 5 L.E d.2d 39 (1960).
57

302 52 FEDERAL RULES DECISIONS

difficult to determine whether a three-judge court is required in 

any given case.83 Despite the Supreme Court’s attitude in Bailey 

v. Patterson, the extent of the single judge’s power to decide the 

preliminary questions is not clear. And the uncertain situation 

regarding appeals from decisions to convene or not to convene 

three judges, adds to the confusion. Additionally, the doctrine 

tha t a three-judge court is not required to enjoin enforcement 

of a statute which is “clearly unconstitutional” 84 or to refuse 

to enjoin a statute which is “clearly constitutional” 88 has cre­ ated new pitfalls in litigation.

III. APPELLATE REVIEW

Appeals from three-judge courts (or refusals to convene them) 

fall into three categories. The courts of appeals will review if 

the single judge regards the federal claim as so insubstantial as 

to require dismissal for want of jurisdiction 86 or if the single 

judge concludes tha t three judges are not required and decides 

the merits of the case.8"

(1) Properly Convened Three-Judge Courts:

An appeal from a three-judge court which is properly convened under section 2281 is directly appealable to the Supreme 

Court by either party pursuant to section 1253.

(2) Improperly Convened Three-Judge Courts:

The decision of a three-judge court improperly convened is 

appealable to the court of appeals since the case should have 

been heard before a single district judge.88 This does not preclude an appeal pursu ant to section 1253, but it is advisable to 

file a concurrent appeal to the court of appeals. If the litigant 

appeals only to the Supreme Court and that court decides tha t 

the prcper appeal is to the court of appeals because a three-judge 

court was improperly convened, there is a possibility that his

53. Section 2281 has been described 

as “long-winded, repetitive, and 

sloppy in draftsm anshi p’’, Currie, 

“The Thre e-Judge Di str ict Court in 

Constitutio nal Litiga tion”, 32 U. 

Chi.L.Rev. 1, 12 (1964).

54. Se e Bailey v. Patterso n, sup ra.

55. Se e Ex pa rte Poresky, sup ra.

56. Jacobs v. Tawes, 250 F.2d 611 

(4th Cir. 1957); Utica Mut. Ins. Co. 

v. Vincent, 375 F.2d 129 (2nd Cir.)

cert, denied 389 U.S. 839, 88 S.C t 

63, 19 L.Ed.2d 102 (1967).

57. Wicks v. Southern Pac. Co.. 231 

F.2d 130 (9th Cir.) cert, denied, 

Wicks v. Brotherhood of Maintenance, etc., 351 U.S. 946, 76 S.Ct. 

845, 100 L.Ed. 1471 (1956); Sardino 

v. Fed eral Reserve Bank, 361 F.2d 

106, 113-116 (2nd Cir.), cert, denied, 385 U.S. 898, 87 S.Ct. 203, 17 

L.Ed.2d 130 (1966).

58. Phillips v. United States, sup ra.
58

THREE-JUDGE COURT 303

Cite ns 52 F .R. D. 293

filing time of 30 days will have lapsed. However, the court has 

in some cases offered relief for those not filing concurrent 

appeals.80

(3) Improperly Refused Three-Judge Court by a Single Judge 

Who Decides the Case on the Merits:

If the single judge incorrectly believes tha t three judges are 

not required and proceeds to the merits, the remedy once was 

mandamus from the Supreme Court,®0

 but now appears to be an 

appeal to the court of appeals.61 If the courts of appeals should <

fail to see tha t the case was one for three judges, and reviews on 

the merits, its decision is voidable by the Supreme Court.62

A. Direct Appeal 63

The three-judge court procedure pursuant to section 1253 

brings a large class of cases directly to the Supreme Court, which 

is not permitted to exercise its traditional right of selective jurisdiction.64 Moreover, such direct-appeals pose a threat to an 

already crowded docket tha t included 3357 cases in 1969.65 The 

Court already has insufficient time for the important cases before it.66 The Court disposed of 2880 cases by denial or dismissal 

of certiorari in 1969, but tha t device is not available in threejudge cases. The policy of certiorari leaves it to the Court to 

determine on a discretionary basis which of the cases on the 

docket shall be once more reviewed. The various provisions for 

mandatory Supreme Court jurisdiction are diametrically opposed 

to tha t policy, presumably because of Congress’ determination 

tha t certain classes of cases are important enough t hat Supreme 

Court review should not depend upon the Supreme Court’s con59. Pennsylvania Public Utility Commission v. Pennsylvania R. R. Co., 

382 U.S. 281, 8G S.Ct. 423, 15 L.Ed. 

2d 324 (1965).

60. Ex parte Metropolitan Wa ter 

Co., supra.

61. Idlewild Bon Voyage Liquor 

Corp. v. Epstein, 370 U.S. 713, 82 

S.Ct. 1294, 8 L.Ed.2d 794 (1962).

62. Stratton v. St. Louis S. W. Ry., 

282 U.S. 10, 51 S.Ct. 8, 75 L.Ed. 135 

(1930).

63. Comment, “Federal Jurisdiction 

—Three-Judge Courts—the recent

evolution in Jur isdiction and Appellate Review ”, 61 Mich.L.Rev. 

1528-30 (1963); Comment, “The 

Thre e-Judge Fed eral Court in Constitut ion al Litigation : A Pr ocedu ral Anachronism”, 27 U.Chi.L. 

Rev. 555-564 (1960); Note, “The 

Three-Judge District Court and Appellate Review”, 49 Va.L.Rev. 538, 

546 (1963).

64. Ha rt, “The Time Chart of the 

Justices ”, 73 Harv.L.Rev. 84 (1959).

65. Note, “The Supreme Court, 1969 

Term”, 84 Harv.L.Review 32 (1970).

66. Ha rt, su pr a.
59

304 52 FEDERAL RULES DECISIONS

«

♦

sent.87 All too often the Court is forced into dealing with insignificant matters, according to Mr. Justice Harlan, “often eithe r at the unnecessary expenditure of its own time or at the 

risk of inadequate appellate review if a summary disposition of 

the appeal is made.” 88 Additionally, as already mentioned by 

the Judicial Conference of the United States, the direct appeal 

eliminates the opportunity for the refining analysis and argument obtained when a case comes through the courts of appeals.

IV. EFFECT ON THE COURTS

Administrative shortcomings of the special panel are seen in 

four categories: overcrowded docket; disruption of judges’ 

schedule; absence of intermediate appellate procedure; and burden on the Supreme Court.

Trial and appellate schedules are obviously disrupted by a procedure which requires triple the judicial manpower normally 

needed to decide a controversy—especially since three-judge cases require prompt hearing. Disruptions are just as apparent 

when a second district judge and a judge of the court of appeals 

must leave th eir own benches.89

The Judicial Conference has concluded that judicial disruption 

at the three-judge level itself constitutes a sufficient impediment 

to justify abandonment or severe limitation of the system. They 

conclude that three-judge hearings cause further confusion to 

already crowded dockets and divert judicial manpower from the 

task of clearing those dockets. Moreover, such disruptions are 

intensified where judgments are reversed because of incorrect 

assignment as between one and three-judge courts.70 The relative infrequency with which three-judge cases have occurred in 

the past is not the basis for arguing for the alteration of section 

2281. From 1963 to 1970, the average number of three-judge 

hearings per year was 176.6, distributed widely throughout the 

10 circuits and the District of Columbia. The average number 

of civil and criminal trials completed during the same period 

was 12,858. Three-judge cases represented .013% of all criminal

67. See Hea rin gs Be for e th e Com mittee on the Ju di ci ar y on S. 2176, 74th 

Cong., 1st Sess. 20 (1935) (Senato r 

Black).

68. Brown Shoe Co. v. Un ited State s, 

370 U.S. 294, 365, 82 S.Ct. 1502, 

1547, 8 L.E d.2d 510 (1962) (concu rrin g in p art an d dissen tin g in 

pa rt) .

69. See e. g., 42 Cong.Rec. 4851 

(1908).

70. See e. g., Ex par te Br an sford, 

310 U.S. 354, 361, 60 S.Ct. 947, 84 

L.Ed. 1249 (1940); Willi s v. W alker, 136 F.S upp . 181 (W.D.K y.1955 ); 

F ra si er v. Bo ard of Tr ustee s, 134 F. 

Supp. 589 (M.D.N.C.1955); An dre w 

G. Nelson, Inc. v. Jessup , 134 F. 

Supp. 218 (S.D.Ind.1955).
60

THREE-JUDGE COURT 30 5

Cite as 52 F.R.D. 293

and civil trials completed in district courts during t he eight year 

span.71 In recent years, though, the problem of crowding at the 

district court level has become more pressing than the statistics 

indicate.

In a recent interview72 the Assistant Director for Legal Affairs, Administrative Office of the United States Courts stated:

“The recommendation of the Judicial Conference of the 

United States to curtail three-judge district court cases is 

based in part upon the administrative difficulty in the convening of these courts.

“Although the number of these cases is relatively small, 

their impact upon the courts is considerably out of proportion to their number. The convening of a three-judge court 

disrupts trial schedules of two judges in a district court as 

well as the hearing schedule of a circuit judge. Frequently, 

judges are disqualified in cases of this type and it becomes 

difficult to locate a judge to serve on a panel. Where the 

case has been filed at a location away from a metropolitan 

area, special travel arrangements are required and expenses 

incurred just for the hearing of the one case. Decisions 

are made by the panel sometimes immediately following a 

hearing but often times further study is required and a decision must be made by telephone since it is difficult for the 

judges to reconvene again in conference. The writing of 

opinions is frequently assigned to district judges, who are 

not accustomed to writing opinions of this type as a routine 

matter. The result is tha t it sometimes takes them longer 

to do this work.”

From fiscal years 1963 to 1970, three-judge court hearings increased from 129 to 291, or 125.6%, while from 1969 to 1970 

alone the increase amounted to 76 or 35.3%. The greatest surge 

occurred in the category marked “civil rights”. This category 

is misleading, although, because it contains a mixture of actions 

brought under section 2281, including those involving the 1964 

Civil Rights Act and the Voting Rights Act of 1965.73 At this

71. See Adm.Office U.S.Courts, Ann. 

Rep. 19G3-1970 (Table C-7).

72. Unpublished remarks by Joseph 

F. Spaniol, Jr., Assistant Director 

for Legal Affairs, Administrative 

Office of the U. S. Courts (March 

25, 1971).

52 F.R .D.— 20

73. Id. Note: “The category of civil 

rights cases in the Report of the 

Director of the Administrative Office includes many cases in which 

there have been insubstantial allegations of violations of civil rights 

sometimes coupled with other valid 

causes of action. Some cases are
61

306 62 FEDERAL RULES DECISIONS

writing, the Office of Procedural Studies and Statistics of the 

Administrative Office of the United States Courts has undertaken a survey to break-down the “civil rights’’ category.’4

The following table is an eight year summary of hearings by 

three-judge courts as compiled by the Administrative Office of 

the United States Courts (Annual Report 1970):

Three-Judge Court Hearings 

by Nature of Suit 

Fiscal Years 1963-1970

Fiscal

Years Total

Review

of

ICC

Orders

Civil

Rights

Suits Involving

State or local 

laws or regulations

ReapportionmentOther

actions

1963 129 67 19 16 27

1964 119 50 21 18 30

1965 147 60 35 17 35

1966 162 72 40 28 22

1967 171 64 55 10 42

1968 179 51 55 6 67

1969 215 64 81 1 69

1970 291 42 162 8 79

Percent Change *

1970 over 

1963 125.6 -3 7.3 752 .6 - 192.6

1970 over 

1969 35.3 -3 4.4 100.0 - 14.5

* Percent not computed where base is 25 or less.

r

difficult to classify so th at any 

mention in the complaint and note 

on the rep ort th at a matt er of civil 

rights is involved would res ult in 

the classifying of the case as a 

civil rights case.”

74. Pre lim ina ry reports indicate that 

many of the three-judge cases are 

convened und er section 2281 in 

connection with Title 42 section 

1983 (Civil action for deprivation 

of rights), which has no threejudge court provision of its own. 

Therefore, Celler’s proposed legislation, H.R. 3805, if passed would 

elim inate the necessity of tlireejudg e courts in these types of civil 

rights actions. The bill, however, 

would not touch civil rights actions 

brought und er the Civil Rights Act 

of 1904 or the Voting Righ ts Act of 

1005, which include sep ara te provisions embodying the three-judge 

cou rt procedure. It is up to Congress to decide whether it is desirable to apply the three -judge pro ­

cedure to only certain types of civil 

rig hts issues.

44-987 0 - 75 - 5
62

THREE-JUDGE COURT 307

Cite on 02 F.il.I). 203

V. H.R. 8805 (92nd Cong ress)

A. What the BUI Would Do:

H.R. 3805 would ame nd sections 2281 and 2282 to elim inate 

the thre e-ju dge court requirement. Depending on the sta tute 

involved in the litig atio n, it would provide for five days’ notice 

to the Attor ney General and Gov erno r of the State or to the 

Attorney General of the United State s and the appro pri ate 

United State s Attorney . It would also add to chap ter 81 of title 

28, dealing with the jurisdiction of the Sup rem e Court, a new 

section 1259, providing for direct appeal of any pre lim ina ry or 

permanent inju nction granted again st the enforc ement of a sta te 

or federal statute for repu gna nce to the Constitution either by 

the appro pri ate court of appeals or by the Supreme Cou rt at the 

election of the Attor ney Gen eral of the State or of the United 

States. (See Appe ndix II) .

B. Arguments Supporting H.R. 3805:

Und er the existin g statutor y procedure, a single distr ict judge 

decides issues—on the me rits —when sta te and federal laws are 

challenged on grounds of unc onstitutionality, except t hat he does 

not have the power to gr an t inju nctive relief. H.R. 3805 would 

gr an t the single federal jud ge thi s power und er all actions 

bro ught und er sections 2281 and 2282. Moreover, the sta tes 

will be adequa tely pro tected again st imp roviden t use of equitable disc reti on by th ei r rig ht of appeal to the courts of appeals. 

It is expected th at thi s righ t of appeal will provide the spring ­

boa rd to alter the three- jud ge co urt as proposed in H.R. 3805— 

improvident judgments on th e distr ict court level will be struck 

down by a cou rt of appeals pu rsu ant to 28 U.S.C. section 1291. 

In Idlewild Bon Voyage Liq uor Corp. v. Epstein TM the Supreme 

Co urt indicated for the first tim e th at the interm ediate cou rts 

of appeals could review a distr ict jud ge’s r efusal to apply section 

2281, thu s disavowing its ea rlier sugg estio ns th at man dam us 

to the Co urt was the exclusive mode of obtaining review of such 

a decision.

Speedy review by the court s of appeals reb uts the arg um ent 

th at single distr ict court judg es are ap t to fav or ind iscrim inate 

and expedie nt injunctive ord ers ra th er than deliberations which 

are well-reasoned. The court s of appeals route is mo re adv antageou s than a three-judge distr ict co urt because its view is nation ally oriented. Moreover, a system of expedited appeals as 

of rig ht from single judg e distr ict c ourts to the c ourts of appeals

75. 370 U.S. 713, 82 S.C t. 1294, 8 

L.Ed .2d 794 (1962).
63

308 52 federal rules decis ion s

in cases under section 2281 is a viable alternative to the current 

direct-appeal procedure because it would avoid the extrem ely 

disruptive withdrawal of an already overworked district judge 

from his own seat of jurisdiction without assurance that the 

three-judge tribunal to which he has been summoned, sometimes 

from a considerable distance, will ultimately be found to have 

V been necessary?®

As already intimated, the worst that could possibly happen 

if the three-judge court were limited in accordance with H.R.

„ 3805, is tha t one district judge might indiscriminately grant temporary restraining orders. Conceding tha t such an order were 

wrongfully issued, a court of appeals would have to make room 

on its docket for the accelerated appeal. No doubt such a quick 

summoning of the appeals machinery would inconvenience the 

overall flow of judicial business. But, this inconvenience is not 

nearly as great as th at presently felt by the convening of a threejudge court.

Perhaps the most salient argument in favor of H.R. 3805 is 

the expected relief to be given to the Supreme Court. The effect 

of reducing the number of direct appeals to the Supreme Court— 

whatever the number—justifies the current legislative proposal. 

Moreover, the Supreme Court undergoes an added burden because in direct appeal cases there is no review of the evidence 

firs t by an intermediate appellate court. And, where questions 

of evidence are raised the Supreme Court might be obliged to 

review the entire record to determine whether burdens of proof 

have been met or whether there is substantial evidence to support a finding. In other words, the Supreme Court does not 

have the benefit of a separate judicial examination of the quesw tions of law raised on the appeal as it would had the appeal

passed thro ugh an intermediate appellate court.

Moreover, by providing special judicial protection for violaw tions of the 1964 Civil Rights Act and the Voting Rights Act of

1965,” H.R. 3805 offers Congress the opportunity to condition 

federal three-judge court jurisdiction according to the weight it 

feels necessary for a special class of Constitutional rights.

VI. CONCLUSION

Given the entire judicial docket in recent years, the number 

of three-judge courts convened to hear questions of the uncon76. See e. g., Ex pa rte Bransford, 77. 42 U.S.C. §§ 1973h, 2000a-5,

swpra; Willis v. Walker, su pr a’, 2000e-6.

Fr as ier <. Boa rd of Trustee s, 

su pr a’, Andrew G. Nelson, Inc. v.

Jessup, supra.
309 TH RE E-JU DG E COURT

Cite a s 52 F .R.D . 203

sti tutio nality of sta tutes and ord ers is small. Justific ati on for 

alt eri ng the system is not necessarily to be found in the statistical tables. In fact, the num ber s tend to be misleading. Fo r example, the numb er of thr ee-ju dge courts convened to hear injun ctio n cases involving att ac ks on sta te statutes has risen over 

192% in the eig ht years from fiscal 1963 t o 1970, bu t the act ual 

numb er in 1970 was a mere 79. If th e numb er pro life rates at 

the pre sen t yea rly rate, then federal c ourt dockets will be severely burdened . Irresp ective of the freq uen cy of its use, the Judicial Conference ma intain s th at the three- jud ge court procedu re 

is anach ron istic and burdensome.

An often-used arg um ent favoring the system is th at it affo rds 

litiga nts a speedy and considered determ ina tion by the Supreme 

Co urt.1* If a c ase is to be mad e f or the pre ser vat ion of th e threejudge cou rt, it must be advance d not on the r ationale which fir st 

brought it into being some 60 years ago. Ra ther, the statutor y 

court mu st be justifi ed on its abi lity to solve con tem porary 

problems.

In its O ctober 1970 t erm the Supreme Co urt moved to fu rthe r 

lim it federal interv ent ion in state c rim inal proceedings a s initially 

expressed in Dombrowski v. Pfister, supra.

“Only in cases of prov en haras sm ent or prosecutio ns undertak en by state offic ials in bad fai th witho ut hope of obt ain ­

ing a valid conviction and perhap s in othe r ex tra ordina ry 

circum stance s where irrepara ble injury can be shown is federa l inju nctive relief again st pend ing stat e prosecutions 

appro priat e.’’ 19

Pre sum ably the effect of this holding will be to reduce the sup ervisory role of the federal court s and pre serve the lette r of federalism , so th at at least in matters ari sin g under sta te crim inal 

statuses, the pa th for interv ent ion is narrow ed and sta te remedies will have to be exhau sted witho ut th e possibility of issuance 

of interlocuto ry ord ers e xcept und er unu sual cases.

H.R. 3805 appears to be designed to alleviate the ad mi nis tra ­

tive burden on time and energy of th e fede ral ju dic iary. At le ast 

th e three- jud ge court should be ma inta ined to he ar civil rig hts 

matt ers, but the jus tifica tion does not e xtend to th e several st atute s exclusive of section 2281 which include three- jud ge court 

provisions. This is the one short-coming of the proposed bill. 

H.R. 3805 would not affect: certa in actions under the an ti- tru st

78. See, e. g., Berg, ABA J., su pra; 79. Perez v. Ledesma, supra, see also

Note, “A Survey of Three-Judge Younger v. Harris, supra.

Requirement”, 47 Geo.L.J. 161

(1958).
65

31 0 52 FEDERAL RULES DECISIONS

statutes; 80 petitions for injunctions to restrain the enforcement 

of an order of the Interstate Commerce Comm ission;81 cases 

arising under condemnation proceedings under the T.V.A. Act.82

A major argum ent favoring the three-judge court procedure in 

civil rights cases is t ha t it affords litigants direct access to the 

Supreme Court on issues which are certainly more sensitive than

* those presented in I.C.C., or anti-trust cases.

The rationale which gave life to the three-judge court in 1910 

has all-but disappeared. With immediate access to the courts

* of appeals, states are no longer in jeopardy of having orders 

issued indiscriminately by single judges. Moreover, th e Supreme 

Court has by decision limited the convening of three-judge courts 

in m atters arising under state criminal statutes.

H.R. 3805 will relieve the current administrative and procedural burdens now caused by the convening of the three-judge 

court. This bill may raise some provocative questions, however. 

Some civil rig hts cases will be affected—others will not. Should 

I.C.C., anti-trust, or condemnation cases under the T.V.A. Act, 

which are handled under special three-judge panel provisions, be 

excluded from the reach of these proposed procedural changes? 

If we retain three-judge review in any proceedings, what is the 

continuing justification for such retention? These are issues 

which undoubtedly will be challenged in debate in the 92nd 

Congress.

30. 49 U.S.C. § 44. 82. 48 St at . 70 (1933), as amend ed,

16 U.S.C. § 831x.

81. 28 U.S.C . § 2325.

APPENDIX I

CHAPTER 155—INJUNCTIONS; THREE-JUDGE COURTS

Sec.

2281. Injunction against enforcement of State statute; three-judge

court required.

2282. Injunction against enforcement of Federal statute; three-judge

court required.

2283. Stay of State court proceedings.

2284. Three-judge distric t cou rt; composition; procedure.

§ 2281. Injunction against enforcement of State statute; threejudge court required

An interlocutory or permanent injunction restraining the enforcement, operation or execution of any State statute by re-
66

THREE-JUDGE COURT 3 H

Cite um 52 F.R.l). 203

straining the action of any officer of such State in the enforcement or execution of such statu te or of an order made by an 

administrative board or commission acting under State statutes, 

shall not be granted by any district court or judge thereof upon 

the ground of the unconstitutionality of such statute unless the 

application therefor is heard and determined by a district court 

of three judges under section 2284 of this title.

§ 2282. Injunction against enforcement of Federal statute;

three-judge court required

An interlocutory or permanent injunction restraining the enforcement, operation or execution of any Act of Congress for repugnance to the Constitution of the United States shall not be 

granted by any district court or judge thereof unless the application therefor is heard and determined by a district court of three 

judges under section 2284 of this title.

§ 2283. Stay of State court proceedings

A court of the United States may not grant an injunction to 

stay proceedings in a State court except as expressly authorized 

by Act of Congress, or where necessary in aid of its jurisdiction, 

or to protect or effectuate its judgments.

§ 2284. Three-judge district court; composition; procedure

In any action or proceeding required by Act of Congress to be 

heard and determined by a district court of three judges the composition and procedure of the court, except as otherwise provided 

by law, shall be as follows:

(1) The district judge to whom the application for injunction 

or other relief is presented shall constitute one member of such 

court. On the filing of the application, he shall immediately 

notify the chief judge of the circuit, who shall designate two other 

judges, at least one of whom shall be a circuit judge. Such judges 

shall serve as members of the court to hear and determine the 

action or proceeding.

(2) If the action involves the enforcement, operation or execution of State statutes or State administrative orders, at least 

five days notice of the hearing shall be given to the governor and 

attorney general of the State.

If the action involves the enforcement, operation or execution 

of an Act of Congress or an order of any department or agency 

of the United States, at least five days’ notice of the hearing shall 

be given to the Attorney General of the United States, to the 

United States attorney for the district, and to such other persons 

as may be defendants.
312 52 FEDERAL RULES DECISIONS

Such notice shall be given by registered mail or by certified 

mail by the clerk and shall be complete on the mail ing thereof.

(3) In any such case in which an application for an inter locutory injunc tion is made, the district judge to whom the application is made may , at any time, gran t a tempo rary restr ainin g 

order to prevent irreparable damage . The order, unless previously revoked by the distric t judge, shall remain in force only 

until the hear ing and determination by the full court. It shall 

contain a specific finding, based upon evidence submitted to such 

judge and identifie d by reference thereto, tha t specified irreparable damage will result if the order is not granted.

(4) In any such case the application shall be given precedence 

and assigned for a hearin g at the earliest practicable day. Two 

judges mu st concur in granting t he ap plication.

(5) An y one of the three judges of the court may perform 

all functions, conduct all proceedings except the tria l, and enter 

all orders required or permitted by the rules of civil procedure. 

A single judge shall not appoint a maste r or order a reference, 

or hear and determine any application for an interlo cutory injunction or motion to vacate the same, or dismiss the action, or 

enter a summ ary or f inal judgm ent. The action of a single judge 

shall be reviewable by the full court at any time before f inal hear ­

ing.

A district court of three judges shall, before final hearing, stay 

any action pending therein to enjoin, suspend or restrain the enforcem ent or execution of a Stat e statute or order thereunder, 

whenever it appears tha t a Sta te court of competent jurisdiction 

has stayed proceedings under such statute or order pending the 

determination in such Stat e court of an action to enforce the 

same. If the action in the Sta te court is not prosecuted diligently and in good fait h, the distri ct court of three judges may 

vacate its stay afte r hearing upon ten days notice served upon 

the atto rney general of the State. As amended Jun e 11, 1960, 

Pu b.L . 86-507, § 1(19 ), 74 St at. 201.

§ 1253. Di rec t app eals fro m decisions of three -ju dg ? co urts

Exc ept as otherwise provided by law, any party may appeal to 

the Supreme Cou rt from an order gran ting or denying, afte r notice and hear ing, an interlocutor y or permanent injunction in 

any civil action , suit or proceeding required by any Ac t of Con ­

gress to be heard and determined by a district court of three 

judges.
68

THREE-JUDGE COURT 31 3

Cite aa 02 F.R.D . 263

92d CONGRESS 

1st Session

IN THE

APPENDIX II

H.R. 3805

HOUSE OF REPRE SEN TATIV ES

February 8, 1971

Mr. Celler introduced the following bill; which was referred 

to the Committee on the Judiciary

A BILL

To eliminate the requirement of a three-judge district court in 

cases seeking to restrain the enforcement of State or Federal 

statu tes for repugnance to the Constitution, and to provide 

for direct appeal to the Supreme Court in certain cases, 

and for other purposes.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled, That section 

2281 of title 28, United States Code, is amended to read as follows:

“§ 2281. Injunction against enforcement of S tate statute

“A preliminary or permanent injunction restraining the enforcement, operation, or execution of any State statute by restraining the action of any officer of such State in the enforcement or execution of such statute or of an order made by an 

administrative board or commission acting under State statutes 

shall not be granted upon the ground of the unconstitutionality 

of such statu te unless at least five days’ notice of the hearing on 

the application for preliminary or permanent injunction is given 

to the Governor and attorney general of the State. Such notice 

shall be given by registered mail o r by certified mail by the clerk 

and shall be complete on the mailing thereof. In any such action in which the State is not a party the court shall permit the 

State to intervene as a party.

“A district court shall, before final hearing, stay any action 

pending therein to enjoin, suspend, or restrain the enforcement

52 F.R.D.— 20Va
69

314 52 FEDERAL RULES DECISIONS

or execution of a State statute or order thereunder, whenever 

it appears t hat a Stat e court of competent jurisdicti on has stayed 

proceedings under such statute or order pending the determination in such State court of an action to enforce the same. If the 

action in the State court is not prosecuted diligently and in good 

faith, the district court may vacate its stay after hearing upon 

ten days’ notice served upon the attorn ey general of the State.

“Th e disposition of cases under this section shall be given 

precedence: the hearin g thereof shall be held on the earliest prac-

• ticable day .”

Se c. 2. Section 2282 of t itle 28, United State s Code, is amended to read as follows:

“ § 2282. Injunction agains t enforcement of Federal statute

“A preliminary or permanent injunction restrain ing the enforcement, operation, or execution of any Ac t of Congress for 

repugnance to the Constitution of the United States shall not be 

granted unless at least five days’ notice of the hearing on the 

application for prelim inary or permanent injunction is given 

to the Atto rney Gener al of the United State s, to the Unite d States 

attorney for the judic ial district in which the action is brough t, 

and to such other persons as may be defendants. Such notice 

shall be given by registered mail or by certified mail by the clerk 

and shall be complete on the mailin g thereof.

“T he disposition of cases under this section shall be given 

precedence; the hearing thereof shall be held on the earliest 

practicable day .”

Se c. 3. Section 2284 of title 28, United State s C ode, is amended to read as follows:

“ § 2284. Three-judge district court; composition; procedure

* “ In any action or proceeding required by Ac t of Congress to 

be heard and determined by a distri ct court of three judges the 

composition and procedure of the court, except as otherwise provided by law, sh all be as follows:

“ (1) The district judge to whom the application for injun ction or other relief is presented shall constitute one member of 

such court. On the filin g of the application, he shall immediat ely 

notif y the chief judge of the ci rcui t, who shall designate two other 

judges, at least one of whom shall be a c ircuit judge. Such judges 

shall serve as members o f the court to h ear and determine the action or proceeding.
70

THREE-JUDGE COURT 3 1 5

Cite a* 52 F.R.D. 283

“ (2) In any such case in which an application for a preliminary 

injunction is made, the distric t judge to whom the application 

is made may, at any time, gran t a temporary restrain ing order 

to prevent irreparable damage. The order, unless previously 

revoked by the district judge, shall remain in force only until 

the hearing and determination by the full court. It shall contain 

a specific findin g, based upon evidence submitted to such judge 4

and identified by reference thereto, tha t specified irreparable 

damage will result if the order is not granted.

“ (3) In any such case the application shall be given precedence *

and assigned for a hearing at the earliest practicable day. Two 

judges must concur in g ranting the application.

“ (4) An y one of the three judges of the court may perform 

all functions, conduct all proceedings except the trial , and enter 

all orders required or permitted by the rules of civil procedure.

A single judge shall not appoint a master or order a reference, 

or hear and determine any application for a prelimin ary injunc ­

tion or motion to vacate the same, or dismiss the action, or enter a summary or final judgment. The action of a single judge 

shall be reviewable by the full court at any time before final 

hear ing.”

Se c. 4. In the analysis of chapter 155, title 28, United States 

Code, the items relating to section 2281 and section 2282 are 

amended to read as follows:

"2 2 81. In ju ncti on ag ai nst en fo rc em en t of Sta te sta tu te .”

"2 28 2. In ju ncti on ag ai nst en fo rc em en t of Fed er al sta tu te .”

Se c. 5. (a) Chapter 81, title 28, United State s Code, is

amended by adding at the end thereo f the following new section: *

“ § 12,59. Direct appeal from judgm ent gran ting injunction

again st enforcement of Stat e or Fe deral statute «

“ An appeal from a judgment granting a preliminary or permanent injunc tion against the enforcement of any State or Federal 

statute for repugnance to the Constitution of the United State s 

shall lie directly to the Supreme Court if the Atto rney Gener al 

of the Sta te or of the United States, depending on the statute 

involved, files in the distric t court a certificate statin g t hat im mediate consideration of the appeal by the Supreme Cou rt is of 

general public importance in the adminis tration of justice.

“The certificate must be filed within fiftee n days afte r the 

filin g of a notice of appeal. When such an order or certific ate
71

316 52 FEDERAL RULES DECISIONS

is filed, the appeal and any cross-appeal shall be docketed in 

the time and manner prescribed by the rules of the Supreme 

Court. That Court shall thereupon either (1) dispose of the 

appeal and any cross-appeal in the same manner as any other 

direct appeal authorized by law, or (2) in its discretion, deny the 

direct appeal and remand the case to the appropriate court of 

appeals, which shall then have jurisdiction to h ear and determine 

the same as if the appeal and any cross-appeal therein had been 

docketed in the court of appeals in the first instance.”

(b) The analysis of chapter 81, title 28, United States Code, is 

amended by adding at the end thereof the following new item:

“ 125 9. Dire ct ap pe al from ju dgm ent g ra nti ng in ju nct io n again st en fo rc em en t of S ta te or F edera l sta tu te .”

92d CONGRESS 

1st Session H.R. 3805

A BILL

To eliminate the requirement of a three-judge district court in 

cases seeking to restrain the enforcement of State or Federal 

statu tes for repugnance to the Constitution, and to provide 

for direct appeal to the Supreme Court in certain cases, and 

for other purposes.

By Mr. Celler 

February 8, 1971

Referred to the Committee on the Judiciary

73

Legislative M atters

The Conference app roved in prin ciple S. 3568 which would , 

ame nd the A dm inistrative Procedure Act to pe rm it the naming of 

the United Sta tes as a defend ant. Th e Conferen ce specifically ap ­

prov ed Section 2 of the bill, elim inating the jurisdictio nal am ou nt 

require ment, and Section 3, pr oviding for suit in the same judicia l 

distric ts in which the federal official or agency m ay be sued.

S. 4000 and H.R . 18485, rela ting to com pensation to growers, 

ma nuf acturers, packers and distribu tors for damage resulting from 

relia nce on the official listing of cyclom ates as a safe prod uct, were 

considered by the Conference to be matters involving legislative 

policy on which the Conference should tak e no action.

T h ree-J udge D istr ic t Cour ts

Th e Conference noted from the C ommittee rep ort the increased 

judicial burden which has resulted from the convening of threejudge distr ict courts in inju nct ion cases alleging u nconstitution ality 

of federal or sta te sta tutes . Originally, three- jud ge distric t cou rts 

were conceived as a means of allaying concern of sta te officials 

directed a t the granting of inju nct ion s agains t enforcemen t of st ate 

sta tutes by a single federal judge. This concern has been lessened 

with the passage of time but the C ommittee reported t hat no t only 

has t he work of t he d istric t a nd circuit cou rts been affected by the 

need to supply judg es for thre e-ju dge cou rts bu t also the direct 

app eal from such cou rts to the Supreme Court h as often brought 

th at Court into the review process pre ma tur ely and placed the 

burden of direct app eal on the Suprem e C ourt in ma ny cases where 

the winnowing process of appellate rev iew at th e circu it co urt level 

would have be tte r served th e interests of justice.

After reviewing t he Comm ittee rep ort on this subject, the C onference approved draft legis lation and authorized its tra nsmittal 

to the 92nd Congress which would amend Sections 2281 and 2282 

of Title 28, United Sta tes Code, to eliminate th e three-judge distric t 

cou rt require ment. Th e proposed legislation would prov ide for five 

day s’ notice to the Attor ney General and the Governo r of the
74

sta te or the Attorney General of the United Sta tes an d the United 

Sta tes Attorney, depending on the statute involved in the litigatio n. 

It would also provide a new section 1259 of Title 28 p roviding for 

the direct review of any preliminary or permanent injunc tion 

gra nte d against enforcement of a st ate or federal statute for repu gnance to the Constit ution by the ap pro priate cou rt of appeals or by 

the Supreme Court a t the e lection of the A ttorney Gen eral of the 

sta te or of the United States, depe ndin g on the statute in suit. 

This legislative proposal would no t affect thre e-ju dge courts convened for the taking of land by T.V.A., for violatio ns of the 1964 

Civil Rights Act, of the Voting Rig hts Act of 1965, nor would it 

cover I.C.C . ma tte rs affected by the proposed amend ment to the 

Exped itin g Act.
THE NATIONAL INDUST RIAL 

TRAFFIC LEAGUE S S ;? ca?fTM rtat,on

Office of the President • Main and 4th Streets • Winston-Salem, NC 27102

December 9, 1974

PRESIDENT

AUGUST HEIST

Director of Traffic 6c Distribution 

R. J . Reynolds Tobacco Co. 

Winston-Salem, NC 27102

VICE PRESIDENT 

J. ROBERT MORTON 

Vice President 

Corporate Trans. 6c Dist. 

Combustion Engineering, Inc. 

900 Long Ridge Rd. 

Stamford, CT 06902

TREASURER 

DONALD BOYES 

Director o f Transportation 

Reynolds Metals Company 

P.O. Box 27003 

Richmond, VA 23261

CHAIRMAN

EXECUTIVE COMMITTEE 

W. K. SMITH 

Vice President/

Director of Transportation 

General Mills, Inc.

P.O. Box 1113 

Minneapolis, MN 55440

JAMES E. BARTLEY 

EXECUTIVE 

VICE PRESIDENT

LYNNETTE S. HANTHORN 

ASSISTANT TREASURER

WILLIAM C. TAFF

DIRECTOR OF ECONOMICS

DONALD E. TEPPER 

DIRECTOR OF 

INFORMATION

Suite 712 

Pennsylvania Bldg 

425-13th Street, NW 

Washington, D.C. 20004 

(202) 393-1693

Hon orable John Conyers, Jr.

Chairman, Sub -Committee on Crime 

Hous e Com mittee on the J udi ciary 

Rayburn House O ffice Buil ding 

Washington, D.C. 20515 

Dear Chairm an Conyers:

The pur pose of this letter is to e xpress to you and 

to the me mbe rs of the Sub -Committee on Crim e the view s of 

the N ati onal Indu strial Tra ffic League w ith respect to two 

bills prese ntl y bef ore y our Commit tee for con sid eration 

(H.R. 785 and S. 663). Both b ill s propose to improve 

Judicial mac hin ery by amendi ng Titl e 28, United States Code, 

wit h respect to j udic ial rev iew of decisi ons of the Interstat e 

Comm erce Commission.

The Nation al Industri al Tra ffi c League which has been 

in con tinuous existence for m ore than 65 years is a volun tar y 

org ani zat ion of ship pers and groups and associ ati ons of shi ppers located througho ut the country. Its mem bers conduct all 

forma of com mercial and ind uatrlal enterp ris es and are subs tanial user s of all modes of for-hire surface tra nsp ortation 

subje ct to regula tio n unde r the Interstat e Com merce Act and 

statutes supplemen tar y thereto. The Leag ue has tra ditionally 

par tic ipa ted act ively in p roceed ing s before the Inte rstate 

Commer ce Commis sio n hav ing a sub stantial and wid esp rea d impact 

upon the mem ber s of the shippi ng public. The League has generally par tic ipa ted in the court procee din gs wit h respect to 

such litigations whe re jud ici al review has been sought.

The Leag ue and its m ember s have a di rect and vital Inter est 

in the bills unde r consideration. The League ha s had a con ­

tinuing inte rest in this important subje ct over the years.

The vie ws of its member shi p were exp ressed in the 91st Congress, 

2nd Ses sio n on S. 3597 perta ini ng to ju dic ial review of decisions 

of the Int erstate Comm erce Commissio n and more rece ntly to the 

Senate Sub-Commi tte e on Improvement in J udicial Machin ery 

reg arding S. 663.
76

Honorable J. Conyers, Jr.

Decemb er 9, 1974 

Page two

In Its letter to the Sena te Sub-Committee the League exp ressed support 

for the provisions of S. 663 w ith one ver y Impo rtant exception. The League 

opposed the p roposed exception suggested by w ay of amendment to Sec tion 2343 

of Title 28, United States code, whi ch would exclude alternate venu e in the 

Uni ted States Circuit Court of A ppe als for the Dist rict of Col umb ia with 

respect to all rules, reg ulations or final orders of the Interstat e Comm erce 

Commis sio n made reviewable by Sec tio n 2321 of T itle 28, United States Code.

It Is our understan din g that whi le S. 663 was adm ended to allo w alternate 

venue, H.R. 785 pre cludes such action. We w ish to express our oppositio n to 

the exclus ion of alt ernate venue.

In disc ussing this point, the Leag ue woul d emphasize that its members are 

located throughout the Unite d States. Based upon the Lea gue's experien ce over 

the years it is its stro ng vie w that the party seek ing J udicia l review should 

have the alternative of bringi ng suit where they resi de or w her e they have their 

princi pal office or before the Un ite d States Circuit Court of Appeal s for the 

Distri ct of Columbia. It Is we ll know n that the latter court, wit h its exte nsive 

exp eri enc e in the rev iew of the orders of other federal admini str ati ve agencies, 

has a reorganized and widel y res pected expertise in the han dli ng of such matters.

It is also to be recogn ize d that a substantial percentag e of those prac tices 

bef ore the Interstate Com merce Com mis sio n have their offices in the District of 

Columbia, at the seat of Government. At the o pti on of those seek ing judicial 

revie w of I.C.C. orders, the u tiliz ati on of such coun sel b efo re the U.S. Circuit 

Court of Appeals for the District of Columb ia woul d have obv ious adv antages of 

con venience and economy. At the same time, should such par tie s desi re to s eek 

judici al review where they reside or have their prin cip al offices, unde r the 

Lea gue's suggested appro ach, they wo uld have such option as well. Actually, the 

Leag ue is at a loss really to u nderst and the opposi tio n to alternate venue expressed by the Interstate Commer ce Commission. At the v ery time whe n unif ormity 

of jud icial review procedures wit h respect to the feder al admini str ati ve agenc ies 

inc luding the I.C.C. is be ing sought, a fundamental variat ion vis -a-vis the 

Inte rstate Commerce Commis sio n w oul d only be justified for the most compelling 

reasons. Such reasons, in the view of the League, are entire ly absent.

In its report, acc omp any ing S. 663, the C omm ittee on the Jud ici ary disc ussed 

the subject of venue. The rein the Committee stated "Se ction 5 of the b ill as 

originall y introduced prov ided that suits seeking judicia l rev iew of I.C.C. decisions could be brought only in the circuit wher e a pet itioner resi des or has 

his pri ncipal place of busine ss.

"This venue pat ter n wo uld have diff ered from the general patt ern of alternate 

venue provided in the judi cial rev iew of actions involving other age ncies under the 

Hobbs Act and other legislation. Under the Hobbs Act, a party seeki ng judi cial rev iew 

has a choice between filing his appeal in the circuit in wh ich he resides or in the 

U.S. Circuit Court of Appe als for the Dist rict of Columbia.
77

Honorable J. Conyers, Jr.

December 9, 1974 

Page three

" The I.C.C. has urged that venu e should be res tricted to the circuit In 

which the petitio ner re si de s. ..The answer to this sugges tio n la that optional 

venu e will exist under the b ill as repo rted and thus It can be expe cted that 

the various num bered circuits wil l have the opport uni ty to rev iew I.C.C. orders.

It Is Important to remem ber that a part y Is not forced to seek rev iew In the 

Dis trict of Columb ia Circuit. If It is convenie nt for him, he may file an appli ­

cation for review in the circuit In wh ich he resides.

" The I.C.C. also suggested that there wo uld be 'a great Jamu p of cases'

In the District of Col umbia if o ptiona l venu e was provid ed which would constitut e 

*- a burden on that cou rt...This con cern seems to be w ith out fou ndation since the

total number of I.C.C. appeals (52 cases in both 1972 and 1973) con stitutes less 

than 5 percent of the 1,360 total filin gs In the Distri ct of Columb ia Circu it 

Co ur t. ...

, " The I.C.C. has also suggested that restri cti ng venue to the circuit

court in wh ich the part y seeking rev iew resides will be ben efi cia l beca use the 

judge of that court wil l have knowle dge of the relevant geogra phi c and commercia l 

con ditions invo lved in the case. Of course, if the party seeking rev iew feels 

that kno wledge of local con ditions is a significant factor, he may file his 

pet ition for revie w in the circ uit in wh ich he resides.

" Afte r careful consideration, the committee has determine d that no except ion 

should be made in the case of the ICC to the gene ral proced ure pro vided for in the 

Hobbs Act. No strong arg uments have been forwarded by the I.C.C. to just ify 

trea tment of appeals from their orders different from that of other agencies.

The committee believe s that par ties seeking app ellate rev iew of I.C.C. orders 

should have the same choice reg arding alternate v enue that Is a vai lable to p art ies 

bef ore other agencies."

The Leag ue strong ly feels that the above dis cus sion pr ovides ample reason for 

ame ndi ng H.R. 785 by deleti ng the prov isions w hich woul d proh ibit the availa bil ity 

of alt ernate v enu e (a) whe re the petitione r resides or has its pri ncipal offi ce 

or (b) before the Uni ted States Circuit Court of Appeal s for the District of Columbia. Such alternate venue should be provided.

The League suppor ts the C omm ission in Its desire to have independent access 

to the Supreme Court. If it is no t clear that the Com mis sio n w oul d continue to have 

that right under the amen ded j udi cia l rev iew pro visions, the Leag ue would have no 

obj ection to an ame ndment whi ch wo uld m ake such independent right clear.

The League wis hes to expr ess to the Sub -Co mmi tte e and to yo u as its Chair man, our 

thanks for the opp ort uni ty to p resent the foregoing views on H.R. 785 and S. 663.

Ver y truly yours,

9 August Heist,

• Pre sident

AH: job 

cc: Members

Sub-Committee on Crime

44 -987 0 - 7 5 - 6
78

JOHN F OONCUAN

JO HN M. CLKARf

JO HN H .C A LO W U l

rR tO E R iC k-WOOO

JOHN K. MASER ZS

DOX ELA N . CLEA RY AND C ALD WELL 

A TTO R N E Y S A N C C O U N S E L O R S AT LAW

9 1 4 W A S H IN G T O N B U IL D IN G

IS ’ ? S T R E E T 6. NEW Y O R K A V E N U E . N. W

W A S H IN G T O N . D. C . 2 0 0 0 5

TCL. II O 1 | 7A 1-I C IS

December 9, 1974

Honorable John 

Chairman, 

Committee on

Conyers, Jr. 

immittee on Crime 

le Judiciary 

House of Representatives 

Washington, D. C. 20515

Re: H.R. 785 and S. 663 (as amend ed) , Judicial 

Review of Decisions of the Interstate

Commerce Commission

Dear Mr. Conyers:

I appreciate the opportunity to express my views 

. with respect to the above legislation. I previously testified before the Subcommittee on Improvements in Jud icial Machinery of the Committee on the Judiciary, United 

States Senate, on July 19, 1974, with respect to S. 663.

I did so as a private attorney specializing in representing 

parties before the Interstate Commerce Commission. I 

write to you in the same capacity. I wish to reiterate 

and express the same views which I expressed before the 

Senate Committee.

I support S. 663 as am end ed. I oppose S. 663 as 

originally drafted insofar as Section 5 of the draft bill 

insofar as it would deny the alternative venue of the 

United States Court of Appeals for the District of Columbia 

Circuit to those seeking judicial revie w of order of the 

Interstate Commerce Commission.

In my view those seeking judicial revie w of I.C.C. 

orders should have equal access to the alternative venue 

of the United States Court of Appeals for the District 

of Columbia Ci rcuit just as do those parties seeking judicial review of the decisions of other regulatory agencies.

Report No. 93-500 accompanying S. 663 discusses the 

venue question at pages 4-6 and concludes at page 6 that:
79

Don elan , Cleary an d Caldwell

Mr. Conyers, Jr. 2. December 9, 1974

"After careful consideration , the 

Committee has de termined that no 

exception should be made in the 

case of the ICC to the general pro ­

cedure provided for in the Hobbs 

Act. No strong arguments have been 

forwarded by the I.C.C. to justify 

treatment of appeals from their orders 

different from that of other agencies. 

The Committee believes that parties 

seeking appellate review of ICC orders 

should have the same choice regarding 

alternate venue that is available 

to parties before other agencies."

I support the conclus ion and the wi sdom beh ind the 

conclusion reached by the Senate Committee. The draft 

provisions of H.R. 785 con tained no limitation on the 

alternative venue. No exception was inserted which would 

deprive parties before the I.C.C. of seeking judicial 

revie w under the alternative venue provisions in the 

District of Columbia. We understand, however, that the 

Interstate Commerce Commission is opposed to the alter ­

native venue provisions and seek the insertion of an 

exception to the normal alternative venue under the Hobbs 

Act. Like the Senate Committee, we submit that no strong 

arguments have been forwarded by the I.C.C. to justify 

treatment of appeals from their orders different from 

that of other agencies.

First, it is important to recognize that with respect 

to cases w hich would affect the railroads generally or 

the motor carriers generally, there are ver y broad options 

available to the railroad industry and the motor carri er 

industry in selecting a forum for judicial review. There 

are railroads everywhere. There are motor carriers everywhere. Thus, they can select a lead pl aintiff in any 

circuit, including the District of Columbia. On the other 

hand, the shipping public which appears before the Inte rstate Commer ce Commission often does so in individual 

cases where there are a limited number of shipper parties. 

Very few shippers reside or have their principal office 

in the District of Columbia. While it is true that there
Don elan . Cleary an d Caldwell

Mr. Conyers, Jr. 3. December 9, 1974

are associations with residence in or principal offices 

in the District of Columbia, such associations do not 

participate in all cases, even those cases of general 

significance. As respondents wi th respect to orders 

of broad application, all the railroads and motor car ­

riers are included thereby establishing some with venue 

in the District of Columbia. In a word, the industries 

regulated by the I.C.C. will still have the alternative 

venue as a practical matter while the shipping public 

will not have such alternative venue in the District.

We ask that the shipping public be give equal access 

to the District of Columbia Courts.

We disagree with any contention by the I.C.C. that 

most of the appeals of its decisions will be here in 

the District of Columbia. Parties will go where they 

believe they can obtain justice with dispatch and economy. The sophistication of the District of Columbia 

Court of Appeals in matters of administrative law, which 

sophistication is recognized by the General Counsel of 

the I.C.C., admittedly may attract parties to this circuit 

because they believe they can obtain justice here.

Some parties who have retained Washington counsel 

in connection with a matter before the Commission may 

feel it is most economical and efficient to have Washington counsel pursue judicial review here rather than 

obtain local counsel in some other circuit. We would 

point out that the travel savings alone accrue not only 

to the party but also to the Commission— a matter that 

should not be taken lightly. If more appeals from I.C.C. 

decisions are taken in the District of Columbia, the 

Commission stands to achieve substantial economies in 

the cost of defending its decisions.

If the denial of alternative venue is intended to 

preclude forum shopping, we submit, as pointed out above, 

that the limitation is more on the public appearing before 

the Commissi on than on the regulated industries. The 

regulated industries, the railroads and the motor carriers in particular, will still have the opportunity 

and flexibility to select what they believe is an appro ­

priate forum.
81

Don ela n. Cleary an d Caldwell

Mr. Conyers, Jr. 4. December 9, 1974

Contrary to the fears expressed by the Commission's 

General Counsel before the Senate Committee (Senate Hearings 

page 23) we do not believe that there is "a certai n amount 

of par ochialism that develops as a result of having that 

review c oncentrated in the District of Columbia Circuit." 

Parochialism is far from a supportable challenge when 

directed against the broad scope of expertise evidenced 

by the District of Col umbia Circuit. Broad expertise 

in matters of administrative law are to be found in this 

circuit. That expertise should be freely accessible 

to parties before the I.C.C., including shipper groups, 

as much as they are for all parties before other agencies.

We also d isagree with contentions that the United 

States Court of Appeals for the District of Col umbia 

Circuit has tended to become a super-administrative agency, 

seeming to conceive of itself as being better informed 

of the issues before them than the administrative agencies 

the decisio ns of which it reviews. Nor do we believe 

that this court either actually or apparently arrogates 

unto itself the right to delve into policy determinations, 

rather than limiting itself to exposing errors of law 

allegedly committed by the defendants. We believe they 

apply their expertise in the area of judicial review of 

administrative decisions in accordanc e with the a ppropriate limitations on that judicial review. The I.C.C. 

has nothing to fear from the District of Columbia Cir ­

cuit. If the Commission's decisions are in accordance 

with law, they will be upheld; if not, they will be reversed as they should be.

Therefore, in considering the proposed legislation 

which would place judicial review of decisions of the 

Interstate Commerce Commission in the United States Courts 

of Appeal, we urge your Committee to provide alternate 

venue in the United States Court of Appeals for the District of Columbia Circuit with respect to review of de cisions of the Interstate Commerce Commission.

JMC/cec
82

Appendix B - Recent Decisions of the United States Supreme Court Regarding Judicial Review of Decisions

of the Interstate Commerce Commission.

108 U. S. SUPREME COURT REPORTS 10 Le d 2d

•[ 3 7 2 U S 7441

•INTERSTATE COMMERCE COMMISSION, Appellant,

THE NEW YORK, NEW HAVEN AND HARTFORD 

RAILROAD CO. et al. (No. 108)

SEA-LAND SERVICE, Inc., Appellant, 

v

THE NEW YORK, NEW HAVEN AND HARTFORD 

RAILROAD CO. et al. (No. 109)

SEATRAIN LINES, Inc., Appellant, 

v

THE NEW YORK, NEW HAVEN AND HARTFORD 

RAILROAD CO. et al. (No. 110)

UNITED STATES, Appellant,

THE NEW YORK, NEW HAVEN AND HARTFORD 

RAILROAD CO. et al. (No. 125)

372 US 744, 10 L ed 2d 108, 83 S Ct 1038 

[Nos. 108, 109, 110 and 125]

Argued February 28, 1963. Decided April 22, 1963.

SUM MARY

Certain railroads proposed to establish reduced TOFC (trailer-on-flatcar) 

rates substantially on a parity with rate s charged by coastwise wate r 

carriers tran sporting trai lers and freight cars. Finding th at t he proposed 

TOFC ra tes were an initial step in a program of rate reduction th at could 

threaten the continued existence of the coastwise water car rier industry, 

the Interstate Commerce Commission suspended the rates as inconsistent 

with the National T ransportation Policy (49 USC preceding 8 1 ). (313 ICC 

23.) A three-judge United States District Court for the District of 

Connecticut set aside the Commission’s order on the ground th at at least 

on the present record, the imposition of a rate differential to protect water 

carriers was prohibited by 49 USC § 15a(3), which provides th at "rates
83

L C. C. v NEW YORK, N. H. & H. R. CO. 109

872 US 744, 10 L ed 2d 108, 83 8 Ct 1038

a car rier shall not be held up to a particu lar level to protect the traffic 

of any othe r mode of transportation, giving due consideration to the objectives of the national tran sportation policy.” The court also sta ted th at 

the Commission's reliance on the national defense factor mentioned in the 

National Transpo rtation Policy (49 USC preceding § 1) was misplaced 

because the reference in t he National Transpo rtation Policy to th e national 

defense represents merely a "hoped for ‘end,’ ” not an operative policy. 

(199 F Supp 636.)

On appeals, the Supreme Court of the United State s vacated the lower 

court’s judgm ent, set aside the Commission’s order, and remanded the 

case to the Commission. In an opinion by Harlan, J., expressing the 

unanimous views of the Court, it was held that on the record the court 

correctly held th at the Commission’s rejection of the proposed TOFC 

rates was not consistent with g 16a (3), but that the court erred in 

determining that the needs of the national defense are not an operative 

pa rt of the National Transportation Policy.

HEADNOTES

Classified to U. 8. Supreme

Appeal and Error 9 1340 — judgment

setting aside ICC order — scope

of review.

1. On appeals to the Supreme Court

of the United States from the decree

of a three-judge Federal Distr ict

Court se tting aside an Interstate Commerce Commission’s order requiring

railroads to cancel proposed TOFC

(trailer-on-flatcar) rates, and enjoining the Commission from canceling

the TOFC rates which return at least

the fully distributed costs of carriage,

the rates in question on the appeals

are not merely those proposed TOFC

rates that return at least the fully distributed costs of carriage, but all of

the proposed TOFC rates which were

before the three-judge court.

Carriers | 243 — rates — responding

to competition.

2. The purpose of 49 USC § 15a (3),

which provides that "rates of a carrier shall not be held up to a particular level to protect the traffic of

any other mode of transportation, giving due consideration to the objectives of a national transportation policy,” is to permit railroads to respond

to competition by asserting whatever

inherent advantages of cost and service they possess.

Court Digest, Annotated

Interstate Commerce Commission 9 60

— powers — rates below cost.

3. The principal but not the only

reason for the reference to the National Transportation Policy (49 USC

preceding § 1) in 49 USC § 15a (3),

which provides that "rates of a carrier shall not be held up to a particular level to protect the traffic of any

other mode of transportation, giving

due consideration to the objectives of

the national transportation policy,” is

to emphasise the Interstate Commerce

Commission’s power to prevent the

railroads from destroying or impairing the inherent advantages of other

modes of transportation, such as by

setting a rate below its own fully distributed costs which would force a

competitor with a cost advantage on

particular transportation to establish

an unprofitable rate in order to attract traffic.

Interstate Commerce Commission 9 62

— rail and water rates — findings

and conclusions.

4. Under 49 USC 9 15a (3) , which

provides that "rates of a carrier shall

not be held up to a particular level to

protect the traffic of any other mode

of transportation, giving due consideration to the objectives of the national transportation policy," the Interstat e Commerce Commission’s findings
8 4

1 1 0 U. S. S U P R E M E C O U R T R E P O R T S

a n d c o n cl u si o n s ar e i n s uffi ci e nt t o 

s u p p ort it s r ej e cti o n of pr o p o s e d r ailr o a d T O F C (tr ail e r- o n -fl at c a r) r at e s 

s u b st a nti all y o n a p a rit y wit h t h e 

r at e s of c o a st wi s e w a t e r c a rri er s 

tr a n s p o rti n g tr ail e r s a n d fr ei g h t c ar s, 

w h er e t h e C o m mi s si o n, wit h o u t d et ermi ni n g t h e i n h er e nt a d v a nt a g e s of t h e 

c ar ri e r s, b a s es it s r ej e cti o n of t h e 

T O F C r at e s o n it s fi n di n g s a n d c o ncl u si o n s t h at ( 1 ) t h e pr o p o s e d T O F C 

r at e s c o n stit ut e d e str u c ti v e c o m p etiti o n, w a t er c a rri er s n e e di n g a f a v o ra bl e r at e dif f er e n ti al i n or d er t o attr a ct tr affi c, a n d ( 2 ) a s a n i niti al st e p 

i n a pr o g r a m of r at e r e d u cti o n s 

t hr e at e ni n g t h e e xi st e n c e of w at er 

c ar ri er s, t h e pr o p o s e d T O F C r at e s 

ar e i n c o n si st e nt wi t h t h e o bj e ct of 

t h e N a ti o n al Tr a n s p ort ati o n P oli c y 

( 4 9 U S C pr e c e di n g § 1) of pr e s er vi n g 

a tr a n s p o rt ati o n s y st e m a d e q u at e t o 

m e et t h e n e e d s of t h e c o m m er c e of t h e 

U nit e d St at e s a n d of t h e n ati o n al 

d ef e n s e.

C a rri e r s 2 4 S — r at e s — di v e rti n g 

tr affi c fr o m ot h er m o d e s of tr a n sp ort ati o n.

5. T h e s etti n g of a c a rri er' s r at e at 

a p a rti c ul ar l e v el d o es n ot c o n stit u t e 

a n u n f air or d e s tr u c ti v e c o m p etiti v e 

pr a c ti c e i n c o n si st e n t wit h t h e N ati o n al 

Tr a n s p o rt ati o n P oli c y ( 4 9 U S C pr ec e di n g 8 1) m er el y b e c a u s e t h e r at e 

will di v ert s o m e or all of t h e tr affi c 

fr o m a c o m p eti n g m o d e of tr a n s p o rt ati o n, e v e n t h o u g h t h e r a t e i s s el e cti v e 

i n c h a r a ct er a n d m a d e i n r e s p o n s e t o 

a p a rti c ul ar c o m p etiti v e sit u ati o n.

I nt er st a t e C o m m er c e C o m mi s si o n 8 1 3 9 

— r at e s — r e vi e w b y c o urt s.

6. O n a p p e al s fr o m a d e cr e e s etti n g 

a si d e a n I nt e r st at e C o m m er c e C o m mi ssi o n or d e r r e q uiri n g t h e c a n c ell a ti o n 

of r ailr o a d r at e s, t h e S u pr e m e C o urt 

of t h e U nit e d St at e s w ill n ot d e ci d e, 

i n t h e a b s e n c e of a d et er mi n a ti o n b y 

t h e C o m mi s si o n, t h e I n h e r e n t a d v a nt a g e s of c o m p eti n g m o d e s of tr a n sp ort ati o n, h o w s u c h i n h er e n t a d v a n ­

t a g e s s h o ul d b e m e a s ur e d or pr ot e ct e d, 

or w h et h er t h e n ati o n al d ef e n s e or a n y 

si g nifi c a nt s e g m e nt of t h e n ati o n' s 

c o m m er c e d e p e n d s u p o n t h e o p er ati o n 

of c er t ai n c a rri e r s, b ut will l e a v e s u c h

1 0 L e d 2 d

q u e sti o n s f o r i niti al r e s ol uti o n b y t h e

C o m mi s si o n.

I n t e r st at e C o m m er c e C o m mi s si o n 1 1 8 

— i n h er e nt c o st a d v a nt a g e — 

b ur d e n of pr o o f.

7. I f a c a rri e r s h o w s t h at a pr op o s e d r at e i s j u s t a n d r e a s o n a bl e fr o m 

t h e st a n d p oi nt of it s o w n r e v e n u e r eq uir e m e nt s, it i s f o r a pr ot e sti n g c ar ­

ri er w h o r eli e s o n a cl ai m of i n h er e nt 

c o st a d v a nt a g e t o b e ar t h e b ur d e n of 

p er s u a di n g t h e I nt er st a t e C o m m er c e 

C o m mi s si o n of t h e e xi st e n c e of t h at 

a d v a n t a g e, alt h o u g h w h e n s u c h a n 

i s s u e i s r ai s e d, e a c h c a rri e r s h o ul d 

bri n g f o r w ar d t h e d at a r el ati n g t o It s 

o w n c o st s t h at ar e r e q uir e d f o r r e s ol uti o n of t h e i s s u e.

C a rri er s 9 2 2 8 — r at e s — c o at di ff e re n c e s — eff e ct.

8. E v e n t h o u g h c a rri er A m a y h a v e 

l o w er c o st s t h a n c a rri e r B, a r at e

e st a b li s h ed b y B m a y b e l a wf ul e v e n 

if it h a s t h e eff e c t of di v erti n g s o m e 

or all of A' s tr affi c, w h e r e t h e o v e r all 

a d v a nt a g e r e st s wi t h B b e c a u s e t h e 

c o st diff er e n c e i s v er y sli g ht a n d B*s 

s er vi c e i s s o s u p eri o r a s t o o ut w ei g h 

a n y s u c h m a r gi n al c o st diff er e n c e.

C a rri er s 9 2 2 8 — r at e s — c o st di ff e re n c e s — eff e ct.

9. A r at e r e d u cti o n b y c a rri er B t o 

t h e l e v el of it s o ut- of- p o c k et c o st s 

m a y b e l a w f ul w h e r e c a rri e r A’ s c o st 

a d v a nt a g e o v er B i s s o gr e at t h at A 

i s a bl e t o c h ar g e a pr ofit a bl e r at e a n d 

still c o m p et e eff e cti v el y.

I nt e r st at e C o m m er c e C o m mi s si o n § 5 6 

—- r at e s — n ati o n al d ef e n s e.

1 0. U n d e r t h e N a ti o n al Tr a n s p ort ati o n P oli c y ( 4 9 U S C pr e c e di n g § 1), 

t h e I nt er st a t e C o m m er c e C o m mi s si o n 

h a s p o w er t o r e g ul a t e t h e r e a s o n a bl en e ss of i nt er st a t e r at e s i n li g ht of t h e 

n e e d s of n ati o n al d ef e n s e.

I nt er st a t e C o m m er c e C o m mi s si o n 9 3 6 

— r at e s —- p o w er s.

1 1. E v e n t h o u g h t h e st at e m e nt of 

t h e N a ti o n al Tr a n s p o rt a ti o n P oli c y i n 

4 9 U S C pr e c e di n g 1 m e nti o n s, a m o n g 

it s ai m s, t h e m e eti n g of t h e n e e d s of 

t h e n ati o n al d ef e n s e, n or m all y, t h e
85

I. C. C. V NEW YORK. N. H. & H. R. CO. I l l

372 US 744, 10 L ed 

more particularize d mandates stated

ia th at policy and the clear congressional design embodied in 49 USC

I lS a(S) govern the lawfuln ess o f proposed rates in a case involving inter -

modal competition, and the Interstate

Commerce Commission may permit

2d 108, 83 S Ct 1038 

thorn to be outweighed only when it

is demonstrated th at the proposed

rates in themselves genuinely threaten

the continued existence of a transportation system that is uniquely capable of filling a transcendent national

defense or other public need.

APP EARA NC ES OF COUNSEL

Robert W. Ginnane, Warren Price, J r , and Ralph S. Spritzer, 

argued the cause fo r appellants.

Carl Helmetag, Jr. argued the cause for appellees.

Briefs of Counsel, p. 1116, infra.

OPINION OF THE COURT

•137 2 US 748]

•Mr, Justice Harlan delivered the 

opinion of the Court.

This case, involving four consolidated appeals from a three-judge 

District Court judgment setting 

aside an order of the Interstate 

Commerce Commission to the extent 

that it rejec ted certain proposed 

railroad rate decreases, bring s before us importa nt questions relating 

to the role of the Commission in its 

task of overseeing competition 

among different modes of transp ortation. The case is the first in which 

this Court has considered the interpretation and application of § 15a 

(3) of the Intersta te Commerce Act, 

added by Congress in the Transportatio n Act of 1958.1

I.

The two corporate appellants 

here, Sea-Land Service, Inc. (fo rmerly Pan-Atlantic Steamship Corpor atio n), and Seatrain Lines, Inc., 

are common car rie rs by water engaged in the Atlantic-Gulf coastwise

1. Section 15a (3) of the Inte rsta te Commerce Act, 72 Stat 672, 49 USC § 16 a(3 ), 

provides:

"In a proceeding invo lving competition 

betw een carriers of different modes of 

transportation subje ct to this Act, the 

Commission, in determining whether a 

rate ia lower than a reasonable minimum 

rate, sha ll consider the facts and circum ­

stance s attending the movement of the 

traffic by the carrier or carriers to which

trade; they are the only two companies now performing this service. 

Sea-Land, which had operated as a 

“break-bulk”* carrier for many 

years, in 1957 Suspended that serv- 

•[37 2 US 747]

ice and converted *four ships into 

crane-equipped trailerships, each 

capable of holding 226 demountable 

truc k trailers. With these ships, 

freight could be moved by highway 

trailers to the port of origin, the 

trailers lifted onto the ships, and 

the process reversed at the port 

of destination. As a result, SeaLand was able to provide a motorwater-motor service which afforded 

door-to-door delivery of goods from 

and to all shippers and consignees, 

even if not situated on a railroad 

siding, in containers that would not 

have to be opened in transi t. Tra ditionally water rates, including 

water-rail and water-motor rates, 

have been lower than the corresponding all-rail rates, and when 

Sea-Land inaugurated its new trailership service in 1957, it published 

reduced rate s which were generally

the rate is applicable. Rates of a carrier 

shall not be held up to a particular level 

to protect the traffic of any other mode of 

tran sportation, giv ing due consideration 

to the objectiv es of the national transpor ­

tatio n policy declared in this Act.”

2. This break-bulk service involved the 

phy sical unloading of freig ht from rail 

car or truck and the loading of the cargo 

into the ships, with the operation reversed 

at the port of destination.
86

112 U. S. SUPREME COURT REPORTS

6% to 7J% lower than the corresponding all-rail boxcar rates. Some 

700 of these reduced rate s were 

placed under investigation by the 

Commission.

In Seatrain's service, fre igh t is 

tran sported to the company’s dock 

in railroad cars, the cars and the ir 

contents are then lifted onto Seatra in’s vessels, and at destination 

the cars are unloaded and delivered 

by rail to the consignee. This railwater-rail service is similar to railroad boxcar service, in tha t it permits carriage from shipper to 

consignee without breaking bulk 

when both shipper and consignee ar e 

located on railroad sidings.

Railroad “piggy-back,” or t rai leron-flatcar (TOF C), service is like 

that provided by Sea-Land. A motor carrie r trailer is hauled by road 

to a railhead, loaded onto a flatcar, 

and demounted at destination for 

delivery by motor carrier to the 

consignee.

Before 1957, railroa d TOFC rate s 

were generally higher than all-rail 

boxcar, water, and land-water rates. 

But in 1957, prim arily in answ er 

to the new improved service and 

lower rate s offered by Sea-Land,

3. Since the esta blishment of these reduced rate s would leav e high er rates In 

effect to and from certain intermediate 

pointe invo lving shor ter hauls, thu s violating the long- and short-haul provisions 

of $4(1 ) of the Act, 49 USC 5 4(1 ), the 

railroads also applied to the Commission 

for the rel ief from these provisions which 

8 4( 1) perm its the Commission to grant. 

This fourth-section application was denied 

by the Commission because, for reas ons 

summarized in the text of this opinion, 

the Commission found the proposed 

TOFC rate s not shown to be ju st and 

reasonable. With resp ect to the fourthsection application its elf, the Commission 

noted tha t "[n] o shippers or receivers located at the intermediate poin ts oppose 

the gra nting of fourth-sec tion relief.” 313 

ICC, at 33. Indeed, no individual ship pers 

came forward to urge tha t the select ive 

character of the reduced TOFC rates here

10 L ed 2d

the appellee railroads proposed to 

establish, on an experimental basis, 

reduced rates on 66 commodity 

•1372 U S 7481

movements between certain ’eastern 

points on the one hand and Fo rt 

Worth and Dallas, Texas, on the 

other.* These rates, which were 

substantially on a parity with SeaLand and Seatrain rate s on the same 

traffic, were suspended and placed 

under investigation by the Commission. In December 1960 the 

commission disposed of 43 docket 

proceedings by issuing a consolidated report embracing the railroad 

TOFC rates involved here as well as 

a number of Sea-Land and Seatrain 

rate s not now before us. 313 ICC 

23.

The Commission found that the 

proposed TOFC rate s were compensatory, that is, they equaled or exceeded out-of-pocket costs, for all of 

the listed movements by railroadleased-flatcars capable of carrying 

two trailers (TTX ca rs), and for all 

but six of the listed movements by 

railroad-owned single tra ile r cars.* 

The Commission f urther found tha t 

the proposed rate s equaled or ex- 

•[37 2 US 7491

ceeded fully ’ distributed costs* for 48

involved in any way discriminated aga inst 

them, and in this Court the Nation al Industrial Traffic Lea gue , a nationwide 

organization of shippers, has filed a brief 

as amicus curiae urging affirmance of the 

decision below.

4. The rates for these six movements 

were withdrawn and are not at issue. 

(The Commission had stated tha t it had 

no way of know ing the percent ages ' of 

TOFC traffic that would move in TTX 

cars and the percent age that would move 

in railroad-owned cars and had thus concluded that the rates for the six movements in question had not been shown to 

be compensatory.)

5. The Commission has stated , in discussing railroad costs, that:

“Fully distributed coats based on the 

out-of-pocket costs plus a revenue-ton and 

revenue ton-mile distr ibution of the constant costs, including deficits, indicate the
87

L C. C. v NEW YORK, N. H. & H. R. CO. 113

872 U S 744, 10 L ed 

of the 66 movements by TTX cars 

and 14 of 66 movements by railroadowned cars.

Having made these findings, the 

Commission addressed itself to w hat 

it considered the “most imp ortant” 

question—“whether these [TOFC] 

rates constitute destructive competition." 313 ICC, a t 44. It noted at 

the outset that, apa rt from the question of rates, most shippers prefer 

rail service to Sea-Land and Seatra in service and that, in order to 

attrac t traffic, the latter carrie rs 

must therefore establish rate s somewhat below those of the railroads. 

As to relative costs, the Commission 

stated tha t Sea-Land costs, both outof-pocket and fully distrib uted, were 

below railroad TOFC costs for all 

66 movements using railroad-owned 

flatcars and for all but 2 of the 66 

movements using TTX cars. But 

the Commission explicitly refrained 

from relying on these findings. Instead it concluded that because of 

a number of fac tors:

"[W ]e cannot determ ine on these 

records where the inherent advantages may lie as to any of the rates 

in issue. We must recognize, also,

revenue nec essa ry to a fair return on the 

traffic, disr egarding ability to pay .” New 

Automobiles in Inters tate Commerce, 259 

ICC 475, 618 (19 45) .

5. The Nation al Transportation Policy, 

54 St at 899, 49 USC preceding {1 , was 

added to the Inter state Commerce Ac t in 

1940. It provides:

“It is hereby declared to be the national 

transportation policy of the Congress to 

provide for fair and imp artial regu lation 

of all modes of tran sportation subject to 

the provisions of this Act, so administe red 

as to recognize and preserve the inherent 

adv antages of each; to promote safe, adequate, economical, and efficient service and 

fos ter sound economic conditions in tran sportatio n and among the several carriers; 

to encourage the establishment and maintenance of reaso nable charges for transportation services, without unjust discrimII0 L « d 2 d ]— 8

2d 108, 83 S C t 1038 

that cost is only one of the elements 

which may appropriately be considered in passing upon the lawfulness of rates. In the exceptional 

circum stances here presented, othe r 

considerations, herein discussed, appear to us determinative of the 

issues.” 313 ICC, at 46. (Emphas is 

added.)

The Commission acknowledged 

tha t the recently enacted § 15a (3) 

prohibited it from holding rail rate s 

up to a particula r level merely to 

•[ 3 7 2 US 750]

protect the traffic of another *mode 

but emphasized th at the prohibition 

was qualified by the phrase "giving 

due consideration to the objectives 

of the national tr ans por tation policy 

declared in this A ct ”4 In this case, 

the Commission stated, the reduced 

TOFC rates were an initial step in a 

prog ram of rate reductions that 

could “fairly be said to threaten the 

continued operation, and thus the 

continued existence, of the coastwise water-ca rrie r industry generally .” 313 ICC, at 47. Since in 

the Commission’s view the coastwise 

shipping so threatened was important to the national defense, to the 

shipping public, and to the economy 

of ports and coastal areas,’ it coninat ions, undue preferences or advantages, 

or unfair or destruc tive competitive practices; to cooperate with the several Sta tes 

and the duly authorized officials thereof; 

and to encourage fair wages and equitable 

working conditions;— all to the end of develo ping , coordinating, and pre serving a 

national tran spor tation system by wate r, 

high way , and rail, as well as other means, 

adequate to meet the needs of the commerce of the United State s, of the Postal 

Serv ice, and of the national defe nse. All 

of the provisions of thi s Act shall be administered and enforced with a view to 

carrying out the above declaration of 

policy.”

7. In support of these conclusions, the 

Commission quoted with approval passages from a 1955 report of the United 

State s Maritime Adm inistration, “A Review of the Coa stwise and Inte rcoastal
88

114 U. S. SUPREME COURT REPORTS 10 L ed 2d

•[37 2 US 751]

eluded th at the objectives *of the 

National Transportation Policy required the establishment and maintenance of a differential between 

rail rate s and those of Sea-Land and 

Sea train which would enable the 

coastwise car rier s to continue their 

service. The Commission decided 

that an appropriate differential to 

accomplish this purpose would be 

67o over Sea-Land rate s for TOFC 

service and somewhat less than 6% 

for boxcar service. Accordingly, the 

proposed TOFC rates were ordered 

to be canceled, without prejudice to 

the filing of new schedules in conform ity with the Commission’s 

views?

The appellee railroads then 

brou ght this action before a threejudge D istrict Court seeking to have 

•[37 2 US 752]

the Commission’s ’order set aside to 

the exte nt tha t it required cancellation of the proposed TOFC rates. 

In November 1961, the court handed 

down its opinion, setting aside the 

Commission’s order in pa rt and enShippin g Trades,” which emphasized the 

national defense importance of break-bulk 

carg o ships; from a 1950 congres sion al 

report, 3 Rep No. 2494, 81s t Cong, 2d 

Sess 17, which referred to "the importance 

to national defense of hav ing domestic 

ton nag e read ily availab le” ; and from a 

1945 Commission decision, War Shipping 

Admin. T. A. Application, 260 ICC 589, 

691, which spoke of the "dependency of 

ports and coastal area s upon the existen ce 

of water transportation."

8. Five of the 10 Comm issioners then 

in office joined in the entir e report. A 

six th, Commissioner Hutchinson, concurred, sta tin g tha t he was “in general 

agr eem ent with the majority report,” 318 

ICC, at 50, adding his own view tha t "the 

ultimate effect of approval of the [TOFC] 

schedules would be to allow rate s of the 

high-c ost carrier [TOFC] to gra vitate to 

a level whereby the low-cos t carrier [se aland ] will be forced to go below its ful l 

costs in order to particip ate in the traffic.” 

Id., at 61. He also expr essed some doubt

joining the Commission from canceling TOFC rate s which return at 

least fully distributed costs, except 

on the basis of c ertain specified findings. 199 F Supp 635. The court 

held that “at least on this record,” 

§ 15a (3) prohibited the imposition 

of a rat e differential to protect the 

water carriers. The reference to 

the National Transporta tion Policy 

in § 15a (3), the court said, was 

intended to qualify the prohibition of mandatory differentials 

. only when factors othe r 

than the normal incidents of fair 

competition intervened, such as a 

practice which would destroy a competing mode of tran spo rtation by 

setting rates so low as to be hurtful 

to the proponent as well as his competitor or so low as to deprive the 

competitor of the 'inh eren t advantage’ of being the low-cost ca rrier.” 

199 F Supp at 642.

The court went on to discuss in 

some detail its understa nding of the 

way in which costs of service for the 

different tran spo rtation modes were 

determined, the possible reasons why

*s to whether a 6% differential waa war ­

ranted. Commissioner McPherson, concurring in part, would have approved all 

compensatory rates but would have Imposed no diffe rential. Three Commissioners (Commissioner Frees, Joined by 

Chairman Wlnchell and Commissioner 

Webb) dissented on the ground tha t the 

Ac t neith er required nor perm itted 

"blanket protection" for water carriers or 

for any mode of tran sportation. Id., at 

61, 52.

In view of our disposition of this case, 

it is not nec essa ry to consider whether, 

in lig ht of Comm issioner Hutchin son’s 

concurrence, the "majority report" in fac t 

represented the vie ws of a majority of 

the Commission and, if not, whether the 

Commission’s decision could be sustained 

in the absence of any rationale commanding the support of a majority of the 

agency. Cf. Secu rities A Exch . Com. v 

Chenery Corp. 318 US 80, 87 L ed 626, 

63 S Ct 454.

[1 0 L ed 2d]
I. C. C. v NEW YORK. N. H. & H. R. CO.

372 US 744. 10 L ed 

the Commission had been reluctant 

to accept relative costs as critical, 

and the precise circumstances under 

which the Commission could properly require cancellation of certain 

TOFC rates. Finally, in rejecting 

the argument tha t a differential was 

required in the inte rests of the national defense, the court stated tha t 

the reference to the national defense 

in the National Transporta tion 

Policy was merely a “hoped-for 

'end,’ ” not an operative policy, and 

tha t in any event the Commission’s 

conclusion with respect to the national defense was not supported by 

adequate evidence.

•[37 2 US 753]

•We noted probable jurisdiction, 

371 US 808, 9 L ed 2d 52, 83 S Ct 

20, because of the importance of the 

questions presented in effectuating 

the congressional design embodied 

in the Int ers tate Commerce Act.*

II.

The significance of § 15a (3) to 

the determination of these appeals 

can best be understood after consideration of the legislative histo ry 

of this provision.

Section 15a (3) was the resu lt of 

several years of congressional consideration of the problems of the 

tran spo rtation industry as a whole 

and of the railroads in particular. 

Concerned with the ir declining 

share in an expanding marke t, and 

with what they regarded as improper adm inistrative interference 

with their efforts to compete, the

9 . There is some question as to precisely 

wha t rates are in issue here; the United 

Sta tes and the Commission su gg est tha t 

these app eals relate only to the TOFC 

rates which are equal to or exceed fully 

distributed costs, since the court below 

did not enjoin the Commission from canceling compensatory TOFC rates under 

tha t level. As we read the opinion and 

judgment below, howe ver, the Commission's order was set aside insofar as it

115

2d 108, 83 S Ct 1038 

railroads vigorously supported legislation introduced in 1955 on the 

basis of a proposal by th e Secretary 

of Commerce. HR 6141, 84th 

Cong, 1st Seas. This bill, which became known as “the three shallnots,” would have amended § 15a 

(1) of the Act to provide that in 

determining whether a rate is less 

tha n a reasonable minimum, the 

Commission “. . . shall not consider 

the effect of such charge on the tra ffic of any other mode of transp orta- 

•[37 2 US 754]

tio n; or *the relation of such charge 

to the charge of any othe r mode of 

transporta tio n; or whether such 

charge is lower than necessary to 

meet the competition of any othe r 

mode of tran sportation

This bill was strongly opposed by 

the Commission and by other carriers, and died in committee. A 

substantially similar bill, however, 

was introduced in the next Congress, HR 5523, 85th Cong, 1st Sess, 

and the Commission renewed its opposition. When, after hearings, a 

Senate subcommittee recommended 

a bill to its parent committee, it explicitly rejected the thre e “shallnots.” But at the same time it 

expressed its concern with “overregu lation”and emphasized that its 

own proposal to add a new § 15a (3) 

was designed to encourage competition among the different modes 

and to perm it each mode to assert 

its inherent advantagea. S Rep No. 

1647, 85th Cong, 2d Sess 10, 18-19.

canceled aM of the proposed TOFC rate s 

before the court, and thus

H e a d n o te 1 any order ente red by the 

Comm ission in the future 

with resp ect to those rates would be subjec t to full judicial review. Accordingly, 

we rej ect as too narrow the position that 

the relevance of the present app eals is 

limited to TOFC rate s tha t return at lea st

the fully distributed costs of carriage .
116 U. S. SUPREME COURT REPORTS 10 Led 2d

The bill at this stage provided tha t 

in a proceeding involving competition with another mode “. . . the 

Commission, in determining whether 

a rail rate is lower than a reasonable minimum rate, shall consider 

the facts and circumstances attending the movement of the traffic by 

railroad and not by such other 

mode.’ Id., at 18. (Emphasis added.)

At hearings before the full Senate Commerce Committee, the Commission opposed the bill as drafted, 

not because it disagreed with the 

principles set out in the subcommittee report but because it feared 

tha t the language used, particularly 

the italicized portion, was inconsistent with those principles and was 

substantially equivalent to the three 

"shall-nots." Hearings on S 3778 

before the Senate Committee on Interstate and Foreign Commerce, 

85th Cong, 2d Sess 165-185. In 

particular Commissioner (then 

Chairman) Fre as expressed concern tha t if the Commission were 

foreclosed from considering the ef- 

•[37 2 US 755]

feet ’of a r ate on a competing mode, 

it would be powerless to reject a 

railroad rate which covered the ra ilroad’s out-of-pocket costs, even if 

that rate had the effect of destroying the inhe rent advan tages of a 

lower-cost ca rrie r. He s tated:

"Whenever conditions permit, 

given transportation should return 

the full cost of performing car rier 

service. . . . In many instances, 

however, the full cost of the lowcost form of transp ortation exceeds 

the out-of-pocket cost of another. 

If, then, we are required to accept 

the rate s of the high cost carrier 

merely because they exceed its outof-pocket costs, we see no way of 

preserving the inhe rent advantages 

of the low cost ca rrier. ” Id., a t 168.

Commissioner Fre as made it 

clear tha t the Commission believed 

the railroads should be permitted to 

assert the ir inhe rent advantages 

too, id., at 172, and suggested tha t 

any proposal specifically authorize 

the Commission to give "due consideration to the inhe rent cost and 

service advan tages of the respective 

car riers,” id., at 169. In furth er 

discussion, it was indicated tha t it 

would be inconsistent with the National Transportation Policy to permit destruction of the inherent 

advantages of any mode of transportation, id., at 170, 171, 177, and 

when Senator Potter suggested the 

deletion of the phrase "and not by 

such othe r mode” and the addition 

of a reference to the National 

Transpo rtation Policy, Chairman 

Freas answered: "We will buy 

Senator Po tter’s suggestion.” Id., 

at 177, 178. Senator Potter’s suggestion was adopted in the final version of the bill.

Other testimony of particu lar intere st here is that of Joh n L. Weller, 

President of Seatrain, who testified 

on behalf of Seatrain and PanAtlantic (now Sea-Land). In opposing the bill recommended by the 

subcommittee, Mr. Weller emphasized tha t he did not seek any more 

•[ J72U 8 75S]

than *to make it possible for the 

Commission to preserve the inherent advantages of the wate r carriers he represented :

“As I explained, our kind of operation can only exist with a 

differential under the railroad 

ra te s; th at is No. 1. We are not entitled to have such a differential, nor 

do I urge one, except in the ease 

where cost is lower than the railroad cost. We have no righ t to ask 

for anything more than tha t.” Id., 

at 30. (Emphas is added.)

The proposal reported out by the
91

L C. C. v NEW YORK, N. H. & H. R. CO. 117

372 US 744, 10 L ed 2d 108, 83 8 Ct 1038

Senate Commerce Committee was in 

the form ultimately adopted by 

Congress and contained the key provision tha t rat es “shall not be held 

up to a par ticu lar level to protect 

the traffic of any other mode of 

tran sportation, giving due consideration to the objectives of the national tran spo rtation policy declared in this A ct ” The Committee, 

quoting with approval the subcommittee's report, made it clear tha t 

the purpose of the proposal was to 

perm it each mode of tran spo rtation 

to assert its “inheren t advantages, 

whether they be of service or of 

cost.” S Rep No. 1647, 85th Cong, 

2d Sess 3. The new subsection, the 

Committee stated, was designed to 

reaffirm the intent of the 1940 Act, 

an intent that had been correctly 

construed by the Commission in 1945 

in New Automobiles in Interstate 

Commerce, 259 ICC 475, but which, 

in the Committee’s view, had not 

been consistently followed.1* The 

•[87 2 US 757]

particular passage in *the New Automobiles decision which the Committee endorsed contained the statemen t:

"[Tjhe re appears no w arrant for 

believing that rail rates, for example, should be held up to a particular level to preserve a moto r-rate 

structure, or vice versa.” 259 ICC, 

at 538.

This theme—th at Congress was 

firmly opposed to rate s maintained 

by th e Commission a t an artificially 

high level merely to protect competing modes—was repeated in the 

House Commerce Committee report, 

HR Rep No. 1922, 85th Cong, 2d

10. During the hearings, Senator 

Smather s had refer red to severa l Commission decisions, e. g.. Petroleum Products in Ill Territory, 280 ICC 681, 691 

<1951); Petroleum Products from Los 

Angeles to Arizona and New Mexico, 280 

ICC 509 (19 51), which were believed to

Sess, and in the debates on the floor 

of both Houses. 104 Cong. Rec 

10822, 10841-10843, 10868-10859, 

12524, 12531, 15628. As stated by 

Representative Harris, Chairman 

of the House Commerce Committee, 

if a ca rrie r could provide a rate th at 

was “fully compensatory,” the Commission could not force it up to a 

higher level “ju st because it is necessary to keep another mode of 

transp ortatio n in business.” Id., at 

12531. The mood of Congress was 

perhaps best summarized by Senator Smathers when he said:

“ [W]e are going to eliminate 

some of the paternalism which has 

heretofore existed in the minds of 

the Interstate Commerce Commission. I think we will breathe into 

our whole system of tran spo rtation 

some new competition, which of 

course is needed, because the public 

and the consumer will benefit therefrom.” Id., at 15528.

This revealing legislative history 

fills out the contours of § 15a( 3). 

There can be no doubt tha t the purpose of this provision 

Headnote z w a 3 to permit the railroads to respond to competition by asserting whatever 

inhe rent advantages of cost and 

service they possessed. The Commission, in the view of the proponents of the bill, had thwarted effective competition by insisting th at 

•[37 2 U S 758]

each form of transpo rtation ’subject 

to its jurisdiction must remain viable at all costs and must therefore 

receive a significant share of the 

traffic. It had, in the words of one 

Congressman, become a “giant 

handicapper.” 11

have sub stantially departed from the 

principles laid down in New Autom obiles. 

Hea ring s on S 3778 before the Senate 

Committee on Inters tate and Foreign 

Commerce, 85th Cong, 2d Sess 174, 175. 

11. Hea ring s, supra, note 10, at 82.
118 U. S. SUPREME COURT REPORTS 10 L ed 2d

Moreover, it is clear th at Congress 

did not consciously or inadvertently 

defeat th is purpose when it included 

in § 15a (3) a reference to the National Transportation Policy. The 

principal reason for this 

Beadnott i reference, as the hea rings show, was to emphasize the power of the Commission to prevent the railroads 

from destroying or impa iring the 

inhe rent advantages of other modes. 

And the precise example given to 

the Senate Committee, which led to 

the language adopted, was a case in 

which the railroads, by establishing 

on a pa rt of their operations a compensatory rate below th eir fully distributed cost, forced a smaller competing lower coat mode to go below 

its own fully distributed cost and 

thus perhaps to go out of business.

III.

We agree with the District Court 

that “at least on this record," the 

Commission’s rejection 

Hetdnoi* t o

f the TOFC rate s here 

at issue and the requirement of a differential over the rates 

of the coastwise carriers were not 

consistent with the mandate of 

§ 15a (3). In light of the findings 

and conclusions underlying the 

Commission’s decision, and more 

particularly its puttin g aside the 

question of “inherent advantages,*’ 

its insistence that TOFC rate s, in 

the words of the prohibition in 

§ 15a (3), “be held up to a p articu lar 

level to protect the traffic’’ of the 

coastwise carrie rs cannot be justi ­

fied on the basis of the objectives 

of the National Tra nsporta tion Policy. Since the Commission appears 

to have relied principally on two 

aspects of t ha t policy— (i) the prohibition of “unfair or destructive 

•t»7J US 7M1

•competitive practices,’’ and (ii) the 

objective of prese rving a tra nspo rtatio n system “adequate to meet 

the needs of the commerce of the 

United States . . . and of the 

national defense” (note 6, supra) 

—we shall consider each of these 

aspects separately.

1. Unfair or Deatructive Competitive Practices.— If there is one fact 

tha t stands out in bold relief in the 

legislative history of § 15a(3), it is 

that Congress did not 

BeUnoto i regard the setting of a 

rate at a par ticu lar level 

as constituting an unf air or destructive competitive practice simply because that rate would dive rt some 

or all of the traffic from a competing 

mode. Moreover, neither the Commission representat ive nor the witness who testified on behalf of the 

appellant carriers (supra, pp. 115, 

116) took this position, since they too 

recognized tha t such an interp retation would be inconsistent with the 

mandate of the National Transportation Policy to "pres erve the inherent advantages of eacA” mode of 

tran sportation. If a carrier is prohibited from establishing a reduced 

rate that is not detrimental to its 

own revenue requirements merely 

because the rate will dive rt traffic 

from others, then the carrie r is 

thwarte d from asserting its own 

inhe rent advantages of cost and 

service. Nor should the selective 

charact er of such a rat e reduction, 

made in response to a particu lar 

competitive situation, be permitted, 

without more, to fu rnish a basis for 

rejecting the rate. Section 15a (3), 

in othe r words, made it clear that 

something more tha n even hard 

competition must be shown before a 

particula r rate can be deemed unfa ir or destructive. The 

BeeSiMte i principal purpose of the 

reference to the National Tra nsporta tion Policy, as we 

have seen, was to prevent a car rier
9 3

v N E W Y O R K. N. H. & H. R. C O. 1 19

3 7 2 U S 7 4 4, 1 0 L e d 

fr o m setti n g a rat e w hic h w o ul d 

i m p air or destr o y t he i n he re nt a dva nta ges of a c o m peti n g carrier, 

f or e xa m ple, b y setti n g a rate, bel o w its o w n f ull y distri b ute d c osts, 

w hic h w o ul d f orce a c o m petit or 

wit h a c ost a d va nta g e o n partic ular 

tra ns p ort ati o n t o esta blis h a n u npr ofita ble rat e i n or d er t o attra ct 

traffic.

•[ 3 7 2 U S 7 8 0]

•It is tr u e t hat i n t he pr ese nt case 

t he C o m missi o n f o u n d t h at wit h res pect t o virt u all y all of t he T O F C 

m o ve me nts i n v ol ve d, Sea- L a n d’s 

o ut- of- p oc ket a n d f ull y distri b ute d 

c osts were bel o w t h ose of t he railr oa ds. B ut t he C o m missi o n at t he 

sa me ti m e e x plicitl y state d t h at “ we 

ca n n ot deter mi ne o n t hes e rec or ds 

w here t he i n he re nt a d va nta ges ma y 

lie as t o a ny of t he rat es i n iss ue.” 

SI S I C C, a t 4 6. ( E m p hasis a d de d.) 

It is n ot f or us t o ma ke t his det ermi nati o n at t hi s sta ge, 

Head note • or t o deci de i n a d va nce 

precisel y h o w eit h er 

carri er’s i n he re nt a d va nta ges 

s h o ul d be meas ure d or pr ote cte d.

11

It ma y be, f o r e xa m ple, t h at n eit h er 

a c o m paris o n of “ o ut- of- p oc ket” n or

1 2. I t w a s ar g u e d b el o w, a n d at l e a st 

i nti m at e d h er e, t h at t h e r ailr o a d s h a d 

f ail e d t o s u st ai n t h e b ur d e n of pr o vi n g 

t h a t t h e y h a d t h e r el a ti v e c o st a d v a nt a g e.

B u t w e a gr e e wi t h t h e c o urt 

H e a d n ot e 7 b el o w t h a t if a c ar ri e r s h o w s 

a pr o p o s e d r at e t o b e j u s t 

a n d r e a s o n a bl e fr o m t h e st a n d p oi nt of it s 

o w n r e v e n u e r e q uir e m e nt s, it i s f or a pr ot e sti n g c ar ri e r w h o r eli e s o n a cl ai m of 

i n h e r e nt c o st a d v a n t a g e t o b e ar t h e 

b ur d e n of p er s u a di n g t h e C o m mi s si o n of 

t h e e xi st e n c e of t h at a d v a nt a g e. Of 

c o ur s e, w h e n s u c h a n i s s ue i s r ai s e d, e a c h 

c ar ri e r s h o ul d bri n g f or w a r d t h e d at a 

r el ati n g t o it s o w n c o st s t h a t ar e r e q uir e d 

f o r r e s ol uti o n of t h e i s s u e. S e e V ari o u s 

C o m m o diti e s fr o m or t o A r k A T e x, 3 1 4 

I C C 2 1 8.

1 2. T h e utilit y of t h e c o n c e pt s of f ull y 

di stri b ut e d a n d o ut- o f- p o c k et c o st s m a y b e 

li mit e d t o t h e ar e a i n w hi c h t h e y h a v e 

tr a diti o n all y b e e n u s e d —t h at of d et e rmi ni n g t h e r e a s o n a bl e n e ss of a r at e fr o m

i d 1 0 8, 8 3 S Ct 1 0 3 8

a c o m pari s o n of “f ull y dist ri b ute d " 

c osts, as t h ose ter m s are defi ne d b y 

t he C o m missi o n, is t he a p pr o priat e 

met h o d of deci di n g w hic h of t w o 

c o m peti n g m o des has t he c ost a dva nt a ge o n a gi ve n m o ve me nt.

11

A n d e ve n if t he c ost a d va nta g e o n 

eac h m o ve me nt were deter mi ne d t o 

lie wit h t he c oast wise car rier s, it 

ma y be t hat s o me or all of t he T O F C 

rate s at iss ue here s h o ul d be all o we d 

•[ 3 7 2 U S 7 8 1 1

t o sta n d beca use t he y * w oul d n ot u nd ul y i m p air t h at a d v a nta ge. * 

T hese a n d ot her si milar q uesti o n s 

s h o ul d be left f or i nitial res ol uti o n 

t o t he C o m missi o n’s i nf or me d j u d gme nt.

T he c o urt bel o w set o ut at s o me 

le n gt h its u n dersta n di n g of t he 

C o m missi o n’s met h o ds of arri vi n g 

at carri er c osts, its a nal y sis of t he 

r ole of “ val ue- of-s er vice” c o nce pts 

i n r ate ma ki n g, a n d its vie ws of t he 

precise circ u m sta nce s u n der w hic h 

t he C o m missi o n c o ul d la wf ull y disall o w t he T O F C rate s at iss ue. We 

fi n d it u n nece ssar y t o c o nsi der t h at 

disc ussi o n i n t his i nsta nc e, si nce we 

h ol d o nl y t h at o n t he pres e nt rec or d, 

t he disall o wa nce of t he rat es i n

t h e st a n d p oi nt of a c a rri er’ s o w n r e v e n u e 

r e q uir e m e nt s. I f s o, s o m e diff er e n t m e a sur e m a y b e pr ef err e d f o r c o m p ari n g t h e 

c o sta of t w o or m or e m o de s of tr a n s p o rt ati o n.

1 4. E v e n t h o u g h c ar ri e r A m a y h a v e 

l o w e r c o sts t h a n c ar ri e r B, t h e o v er all 

a d v a n t a g e m a y r e st wit h B,

e a d n o te S f o r e x a m pl e, if t h e diff er e n c e 

i n c o st i s v er y sli g ht b u t t h e 

s er vi c e of B i s s o s u p eri o r s s t o o ut w ei g h 

a n y s u c h m a r gi n al c o st diff er e n c e. I n 

t hi s e v e nt a r at e e st a bli s h e d b y B m a y 

b e l a wf ul e v e n if it h a s t h e eff e ct of 

di v erti n g s o me or all of A' s tr affi c.

C o n v er s el y, t h e c o st a d v a nt a g e of A 

o v er B m a y b e s o gr e at t h at e v e n if B 

w er e t o r e d u c e it s r at e t o t h e 

H e a d n o te • l e v el of it s o ut- of- p o c k et 

c o st s, A mi g ht b e a bl e t o 

c o nti n u e t o c o m p et e eff e cti v el y a n d still 

c h ar g e a pr ofit a bl e r at e. I n t hi s e v e nt 

B’ s r e d u c e d r at e w o ul d n ot a p p e ar t o i m ­

p air A ’ s i n h e r e nt c o st a d v a nt a g e.

4 4 - 9 8 7 0 - 7 5 - 7
94

120 U. S. SUPREME COURT REPORTS 10 L ed 2d

question was not adequately supported. Cf. Securities & Exch. 

Com. v Chenery Corp. 318 US 80, 

87, 87 L ed 626, 631, 63 S Ct 454.

2. The Needs of the Commerce of 

the United State s and of the National Defense.— The Commission 

gave considerable weight to the factor of “national defense” and perhaps of “commerce” in arriving at 

its decision. But the District Court 

discounted these factors, concluding 

that the reference in the National 

Transp ortatio n Policy to the national defense (and presumably to 

commerce as well) represented 

merely a "hoped-for ‘end,’ ” not an 

operative policy. We disagree with 

this conclusion, but hold

„ . . , that the Commission’s Bead^eS .(372US 762]

reliance on these ’facto rs 

was not supported by adequate findings or substantial evidence.

The prim ary reason for the ref erence to the National Tra nsp ortation Policy in §15a(3)

Headnoto j was to confirm the Commission’s power to protect the inherent advantages of all 

carrie rs from destructive competition. But we cannot conclude that 

this was the only reason, especially 

in view of the choice not to accept 

the Commission’s proposal, which 

would have expressed the qualification in term s of the inhe rent advantage element alone. See p. 116, 

supra. Nor can we conclude th at 

the statutory references to such 

vital considerations as national defense are mere window dressing, 

without any practical significance 

in terms of the CommisHesdootei* sion’s function. “Congress unequivocally reserved to the Commission power to 

regulate reasonableness of intersta te rate s in the light of the needs 

of national defense.” United States 

v Capital Transit Co. 325 US 357,

362, 89 L ed 1663, 1668, 65 S Ct 

1176.

On the other hand, by recognizing 

the relevance of such considerations 

as national defense, we do not imply 

tha t these broad policy f actors may 

be applied so freely as to nullify 

either the more particularized mandates of the National Tra nsp ortation Policy or the clear congressional design embodied in § 15a (3). 

Normally, it is these more specific 

considerations tha t

Bcadooun should govern the lawfulness of proposed 

rates in a case involving interm odal 

competition. Only under extraordinary circum stances may the Commission properly perm it them to be 

outweighed. To jus tify such a result, we believe it must be demonstrate d that the proposed rate s in 

themselves genuinely threat en the 

continued existence of a transportatio n service tha t is uniquely capable of filling a transc endent national

defense or othe r public need.

Measured against this standard, 

the Commission’s conclusions cannot be sustained. The Commission 

did state that the proposed rate s 

were an “initial step” in a program

*[372 US 7*3]

•of rate reductions th at “can fairly 

be said to threat en” the existence 

of the coastwise carriers, but it 

made no findings, and refe rred to no 

supporting evidence, to the effect 

that these par ticula r TOFC rate s 

would drive the corresponding 

water carrier rate s below a profitable level or otherw ise endan ger 

the car rie rs’ survival. Cf. Burlington Truck Lines, Inc. v United 

States, 371 US 156, 167, 168, 9 

L ed 2d 207, 215, 216, 83 S Ct 239; 

Gilbertville Trucking Co. v United 

States, 371 US 115, 130, 131, 9 L ed 

2d 177, 188, 189, 83 S Ct 217. It 

is not enough to rely on th e possible 

effect of other rate reductions not
372 US 744, 10 L ed 

here in issue, a situation with which 

the Commission has ample power to 

deal if occasion arises.

Nor did the Commission present 

an adequate basis for concluding 

that either the national defense or 

any significant segment of the country’s commerce depends upon the 

operation of Sea-Land 

Heatnote < O

r Sea tra in.11 We need 

not consider the question whether reliance on other additional sources migh t have been sufficient,1* for we believe that the 

question is one for initial determination by the Commission, and tha t 

all parties should have an opportunity to adduce relev ant evidence, 

including any evidence tending to 

indicate tha t disallowance of the 

proposed TOFC rate s might ad- 

•[372 US 764]

versely affect the commerce *or th e 

national defense of the country. 

Once raised, these considerations

15. The materials relied upon by the 

Commission are referr ed to in note 7, 

supr a. These ma terials were genernl in 

nat ure , and the most rece nt dated back 

to 1955. Fu rth er, they were not sufficiently related to the specific service ren ­

dered by Sea-Land and Seatrain, which, 

we were informed by Sea-L and’s counsel 

at oral argument, have a combined tota l of 

only eig ht ships currently in operation.

16. The Commission in its brief has

. v NEW YORK. N. H. & H. R. CO. 121

2d 108, 83 S Ct 1038 

(like the factor of inherent advantage ) do not exist solely for the 

benefit of protesting carriers.

In conclusion: We agree with 

the District Court tha t the Commission’s order, insofar as it related to 

the TOFC rates at issue, must be 

set aside. We disagree, however, 

with that court’s determination tha t 

the needs of the national defense are 

not an operative pa rt of the National Transporta tion Policy, and 

we deem it ina ppropriate to approve 

or disapprove of other aspects of the 

court’s opinion. Accordingly, we 

decide that the judgment below 

should be vacated, the order of the 

Commission set aside to the exten t 

that it related to certain railroad 

TOFC rate s described herein, and 

the cause remanded to the Commission for furth er proceedings consistent with this opinion.

It is so ordered.

cited the 1960 testimony of Vice Admiral 

Wilson and of the Mayor of Savannah, 

Georgia, in Decline of Coastwise and 

Interco asta l Shipping Industry, Hearing s 

before the Merchant Marine and Fisheries 

Subcommittee of the Senate Committee on 

Interst ate and Foreign Commerce, 86th 

Cong, 2d Sess 83, 86, 105, 106, and has 

also cited a 1961 letter from Vice Admiral 

Sylvester to Senator Butler, reproduced 

at 107 Cong Rcc 7299-7302.
1289

G

•[39 2 US 371]

•AMERICAN COMMERCIAL LINES, Inc., et al., Appellants, 

v

LOUISVILLE & NASHVILLE R. CO. et al. (No. 797)

AMERICAN TRUCKING ASSOCIATIONS, Inc., 

et al., Appellants, 

v

LOUISVILLE A NASH VILLE R. CO. et al (No. 804)

THE AMERICAN WATERWAYS OPERATORS, 

Inc., Appellant, 

v

LOUISVILLE & NASH VILLE R. CO. et al. (No. 808)

INTERST ATE COMMERCE COMMISSION, Appellant, 

v

LOUISVILLE & NASH VILLE R. CO. et al. (No. 809) 

392 US 571, 20 L Ed 2d 1289, 88 S Ct 2105 

[Nos. 797, 804, 808, and 809]

Argued April 23 and 24, 1968. Decided June 17, 1968.

SUMMARY

This case presented the basic issue whether the Interstate Commerce 

Commission’s action in disallowing a rate reduction proposed by certain 

railroads was inconsistent with § 16a (3) of the Interstate Commerce 

Act, which governs ratemaking in situations involving intermodal competition between carriers. A subsidiary but related issue was whether 

the Commission adequately articulated its reasons for disallowing the 

proposed rate. In making such disallowance the Commission, pending a 

rulemaking proceeding then before it to examine the whole question of 

the cost standards to be used in situations involving intermodal competi-
1290 U. S. SUPREME COURT REPORTS 20 L Ed 2d

tion, adhered to a comparison between fully distributed costs, rathe r 

than between out-of-pocket costs as urged by the railroads, as the basis 

for determin ing which of the two competing modes of transp ortation— 

the railroads or a combined barg e-truck service—had the inherent advantage on the traffic in question. On review of the Commission’s decision, the United States District Court for the Western District of Kentucky, sitting as a statutory three-judge court, held th at the Commission's decision was erroneous. (268 F Supp 71.)

On appeal, the United State s Supreme Court reversed. In an opinion 

by Marshall, J., expressing the views of seven members of the court, 

it was held tha t the initial determination of what method of costing 

should be used as the measure of inherent advantage in intermodal rat e controversies is f or the Inters tat e Commerce Commission, and th at the refore, in view of the pending ratem aking proceeding before the Commission 

to examine the whole question of standa rds of costing in such cases, the 

District Court erred in rejecting the Commission’s decision, and the 

grounds on which it was based.

H arlan, J., concurred in the result, on the ground that it was best to 

do so rathe r than to express his views as a single Justice upon the issue, 

which the court shunned, rega rdin g wha t standard of costing should be 

the criterio n for determining which mode of tran spo rtation had the inherent advan tage.

Douglas, J., dissented, stating th at he would affirm the judgment 

below for the reasons stated by the District Court in its opinion (268 F Supp 71) , which in substance were (1) that the Commission’s order 

lacked a rational basis and thus was arbit rary, and (2) that the order 

was inconsistent with the objectives and purposes of Congress in enacting § 16a (3) of the Inter sta te Commerce Act, and thus was not in accordance 

with law.

TOTAL CLIENT SERVICE LIBRARY REFERENCES

13 A Jur 2d, Carrie rs §§ 33-73, 192 

6 A J ur Pl & PR Forms, Carrie rs, Form 6:1732 

US L E Digest, Carriers 55 212, 2 43; Int ers tate Commerce 

Commission 55 56, 60, 61, 62, 177, 178; Statute s 5 160 

ALR Digests, Carrie rs 55 712, 716

L E Index to Anno, Ca rriers; Inter sta te Commerce Commission

ALR Quick Index, Carrie rs
9 8

A M E RI C A N LI N E S v L O UI S VI L L E & N. R. C O. 1291

3 9 2 U S 5 7 1, 2 0 L E d 2 d 1 2 8 9, 8 8 S Ct 2 1 0 6

H E A D N O T B S

Cl as sifie d t o U. S. S u pre m e C o urt Di ge st, A n n ot at e d

I nt e r st at e C o m m er c e C o m mi s si o n 9 6 0

— p o w er s — r at e s b el o w c o st

1. T h e pri n ci p al b ut n ot t h e o nl y 

r e a s o n f o r t h e r ef e r e n c e t o t h e N ati o n al Tr a n s p ort ati o n P oli c y ( 4 9 U S C

pr e c e di n g | 1) i n 4 9 U S C 8 1 6 a ( 8 ), 

w hi c h pr o vi d e s t h at “ r at e s of a c a rri er 

s h all n ot b e h el d u p t o a p a rti c ul ar 

l e v el t o pr ot e ct t h e tr affi c of a n y ot h er 

m o d e of tr a n s p o rt a ti o n, gi vi n g d u e 

c o n si d e r ati o n t o t h e o bj e cti v e s of t h e 

N a ti o n al Tr a n s p ort ati o n P oli c y, ” i s t o 

e m p h a si z e t h e I n t e r st at e C o m m er c e 

C o m mi s si o n’ s p o w er t o pr e v e nt t h e 

r ailr o a d s fr o m d e str o yi n g or i m p airi n g t h e i n h er e nt a d v a n t a g e s of ot h er 

m o d e s of tr a n s p o rt a ti o n, a s b y s etti n g 

a r at e b el o w t h ei r o w n f u ll y di stri b u t e d c o st w hi c h w o ul d f or c e a 

c o m p etit or wit h a c o st a d v a nt a g e o n 

p a rti c ul ar tr a n s p o rt a ti o n t o e st a bli s h 

a n u n p r ofit a bl e r at e i n or d er t o at tr a ct 

tr affi c.

I nt e r st at e C o m m er c e C o m mi s si o n 9 6 2

— di s all o w a n c e of r at e r e d u cti o n

— i nt e r m o d al c o m p etiti o n

2. T h e I nt e r st at e C o m m er c e C o mmi s si o n’ s di s all o w a n c e of a r at e r e d u cti o n pr o p o s e d b y r ailr o a d s, b y utili z ­

i n g f ull y di stri b ut e d c o st s of t h e r a il ­

r o a d s a s t h e b a si s f o r d et er mi ni n g 

w hi c h of t h e t w o c o m p eti n g m o d e s 

of tr a n s p o rt a ti o n — t h e r ailr o a d s or a 

b a r g e -tr u c k s er vi c e — h a d t h e i n h e r e n t 

a d v a nt a g e o n t h e tr affi c i n q u e sti o n, 

i s, at t h e v er y l e a st, pr e s u m p ti v el y i n 

a c c or d wi t h t h e l a n g u a g e of R 1 6 a ( 3) 

of t h e I nt er st a t e C o m m er c e A c t ( 4 9 

U S C R 1 5 a ( 3 )) — w hi c h pr o vi d e s t h at 

“r at e s of a c a rri e r s h all n ot b e h el d 

u p t o a p a rti c ul a r l e v el t o pr o t e c t t h e 

tr affi c of a n y ot h er m o d e of tr a n s p o rt ati o n, gi vi n g d u e c o n si d e r ati o n t o t h e 

o bj e cti v e s of t h e N ati o n al Tr a n s p o rt a ­

ti o n P oli c y d e cl ar e d i n t hi s A c t, ” (t h at 

i s, "t o pr o vi d e f o r f a ir a n d i m p a rti al 

r e g ul a ti o n f o r all m o d e s of tr a n s p o rt a ­

ti o n s u bj e ct t o t h e pr o vi si o n s of t h e 

A ct, s o a d mi ni s t er e d a s t o r e c o g ni z e 

a n d pr e s e r v e t h e i n h er e nt a d v a nt a g e s 

of e a c h ” ( 4 9 U S C pr e c e di n g 8 1 ) ) — a n d

wi t h t h e i nt e n t o f C o n gr e s s i n utili zi n g 

t h at l a n g u a g e.

St at ut e s 9 1 6 0 — I n t e r st at e C o m m er c e 

A ct — a d mi ni st r ati v e c o n st r u cti o n

3. I n c o n str ui n g § 1 5 a ( 3) of t h e I n ­

t er st a t e C o m m er c e A c t ( 4 9 U S C 

8 1 5 a( 3 )) — w hi c h pr o vi d e s t h at r at e s 

of a c a rri e r s h all n ot b e h el d u p t o 

a p a rti c ul ar l e v el t o pr o t e ct t h e tr a ffi c of a n y ot h er m o d e of tr a n s p o rt a ­

ti o n, gi vi n g d u e c o n si d er ati o n t o t h e 

o bj e cti v e s of t h e N a ti o n al Tr a n s p ort ati o n P oli c y d e cl a r e d i n t h e A c t — t h e 

d e ci si v e f a ct o r i s w h a t C o n gr e s s m e a nt 

i n 1 9 5 8 w h e n R 1 5 a( 3 ) w a s e n a ct e d, 

a n d n ot w h at t h e I nt e r st at e C o m m er c e 

C o m mi s si o n m e a n t i n a 1 9 4 5 d e ci si o n 

o n t h e i s s u e of c o m p etiti v e r at e r e g ul ati o n.

I nt er st a t e C o m m er c e C o m mi s si o n 9 6 1 

— b a si s of r at e s — i nt e r m o d al 

c o m p etiti o n

4. T h e I nt er st a t e C o m m er c e C o mmi s si o n, af t e r d u e c o n si d e r ati o n, m a y, 

r at h er t h a n m u st, d e ci d e t h at s o me 

ot h er m e a s ur e of c o m p ar ati v e c o st s 

mi g ht b e m or e s ati sf a ct or y wi t h r es p e ct t o r at e m a ki n g i n sit u ati o n s i nv ol vi n g i nt er m o d al c o m p etiti o n b et w e e n c a rri er s t h a n t h e o n e it h a d 

tr a diti o n all y utili z e d.

C a rri er s 9 2 4 3 — r at e s — m a xi m u m 

r e v e n u e

5. T h e p ur p o s e of § 1 5 a( 8 ) of t h e 

I nt er st a t e C o m m er c e A c t ( 4 9 U S C 

8 1 5 a ( 3 )) — w hi c h pr o vi d e s t h at r at e s 

of a c a rri e r s h all n ot b e h el d u p t o 

a p a rti c ul a r l e v el t o pr ot e ct t h e tr affi c 

of a n y ot h er m o d e of tr a n s p o rt ati o n, 

gi vi n g d u e c o n si d er ati o n t o t h e o bj e cti v e s of t h e N a ti o n al Tr a n s p o rt ati o n 

P oli c y — i s n ot t o e n a bl e r ailr o a d s t o 

pri c e t h ei r s er vi c e s i n s u c h a w a y a s 

t o o bt ai n t h e m a xi m u m r e v e n u e t h e r efr o m.

C a rri er s 9 2 1 2 — r el ati v e a d mi ni st r ati v e a n d l e gi sl ati v e f u n cti o n s

6. I f t h e t h e ori e s a d v a n c e d b y e c o no mi st s a s wit n e s s e s i n a r ailr o a d r at e
99

1292 U. S. SUPRE ME COURT REP ORTS 20 L Ed 2d

proceeding are as compelling as they 

feel they are in con struing, co ntrary 

to the intent of Congress, a provision 

of the Interstate Commerce Act dealing with intermo dal com petition, Congress is the body to whom they should 

be addressed.

Ca rrie rs §212 — rates — review

— economic policy

7. The courts are ill- qu alified to 

make the kin d of basic judgments 

about economic policy sought by a 

carrier, such as a railro ad , in a ratemaking proceeding before the In te rstate Commerce Commission in a situa ­

tion invo lving inte rmodal com petition; 

it would be particularly inapprop riate 

fo r a court to award a ca rrier, on 

economic grounds, re lief denied it by 

the leg isla ture, as, fo r instance, was 

done by a Federal D is tr ic t Court in 

rejecting the Commission’s dis allow ­

ance of a rate reduction proposed by 

railroads which were in com petition 

with a barge -tru ck service.

Carrie rs § 212; Interstate Commerce 

Commission § 56 — power — rates

— economic policy

8. The Interstate Commerce Commission, as opposed to the courts, is 

not bound in ratemaking proceedings 

from making leg islative judgments 

about matters of economic po licy; it 

is precisely to permit such judgments 

th at the task of regu latin g tra nsportation rates has been entrusted to 

a specialized ad ministrative agency 

rather tha n to courts of general ju ri sdiction.

Interstate Commerce Commission § 3

— power

9. The Interstate Commerce Commission must operate w ithin the lim its 

set out by Congress in ena cting the 

leg islation the Commission admin isters.

Interstate Commerce Commission § 61

— costing method — interm odal 

rate controversies

10. The in itia l determination of the 

question of wh at method of costing 

should be used in interm odal rate controversies as the measure of inh ere nt

advantage of the competing carrie rs, 

is fo r the Interstate Commerce Commission.

Interstate Commerce Commission § 177

— rev iew — disallowance of rate 

reduction

11. A Federal D is tr ic t Court, on review of the Interstate Commerce Commission’s disallowance of a rate reductio n proposed by railro ad s in a 

situa tion invo lving interm odal compe tition with a barge -tru ck service, 

is not justified in rejecting the Commission’s decision because it adhered 

to a comparison between fu lly distribu ted costs rather than between 

out-of-pocket costs as the basis fo r 

determining which of the two competing modes of tra nspo rta tion had 

the inh ere nt advantage on the tra ffic 

in question, where, by takin g such 

action, the D is tric t Court to ta lly ig ­

nored the temporary nature of the 

Commission’s action due to the pendency of a rulem aking proceeding before it to examine the whole question 

of the cost standards to be used where 

comparisons of inte rmodal cost advantages are require d, and instead 

went ahead and, in the guise of resolvin g the pa rticu lar controv ersy 

over a single rate reduction, rendered 

a decision which, for all practical pu rposes, made the rulemaking proceeding moot, thus, in effect, refusin g to 

pe rm it the Commission to deal with 

the complex problems in the broad and 

more suitable context of a rulema king 

proceeding; wh ile there might be some 

justifica tio n fo r such a course when 

the applicable statute clearly require s 

the agency to arriv e at a given result, 

the ins tant case is em phatically not 

such a situation, there being no justificat ion fo r denying the Commission 

reasonable latitud e to decide where it 

w il l resolve the complex issues, in 

addition to how it w ill resolve them.

Adm inistra tiv e Law 9 25; Interstate 

Commerce Commission §60 — 

power — rates

12. The principle that the leg isla ­

tiv e dis cre tion implie d in the ratemaking power necessarily extends to
100

AMERICAN LINES v LOUISVILLE A N. R. CO. 1293

302 US 571. 20 L Ed

the entire legislative process, embracing the method used in reaching the 

legislative determ ination as well as 

that determination Itself, applied to 

rate regulation carried out by the 

Federal Power Commission, is equally 

applicable to rate reg ulation carried 

out by the Interstate Commerce Commission, especially where the determination made on an interim basis is 

in general accord with both the legislative histo ry of the statute involved 

and the results in pr ior cases decided 

by the agency.

Interstate Commerce Commission § 62

— au thor ity — economic contentions

13. The Inters tate Commerce Commission has ample au thority to decline 

to deal with the broad economic contentions advanced by railroads in an 

ind ividual rate case inv olvin g intermodal competition with a barg e-truck 

service, where a rulemaking proceeding is pending before the Commission 

to examine the whole question of the 

cost standards to be used where comparisons of intermodal cost advantages are required.

Interstate Commerce Commission 9 61

— ratemaking — intermodal competition

14. The Interstate Commerce Commission is not obliged to explain why 

it permits out-of-pocket ratemaking, 

in situations involv ing intermodal 

competition between carriers, where 

the competing ca rrier is unregulated 

and not where it is regulated, since 

S 15a (3) of the Inters tate Commerce 

Act (49 USC 9 15a(3)), which governs 

ratem aking in such situations, by its 

own terms applies only to "modes of 

transportation subject to this Act,” 

which by definition means regulated 

carriers.

Inters tate Commerce Commission § 61

— ratemaking — inte rmodal competition — inherent advantage

15. In an Inte rstate Commerce Com2d 1280, 88 S Ct 2105 

mission proceeding to determine which 

of two competing modes of transportation has the "in herent advantage" 

on the traffic in question for purposes 

of ratemaking under 9 15a (3) of the 

Interstate Commerce Ac t (49 USC 

I 15a(3)), it is self-evident, regardless of the label used, that a ca rrier’s 

"in herent advantage” o f being the low 

cost mode on a fu lly dis trib ute d cost 

basis is impaired when a competitor 

sets a rate that forces the ca rrier to 

lower its own rate below its fu lly distributed costs in order to reta in traffic.

Interstate Commerce Commission § 61

— intermo dal rate controversy

16. It is proper fo r the Interstate 

Commerce Commission, as i t has tr aditio na lly done, to take the position that 

a rate strugg le between competing 

modes of tra nsportation, which would 

be likely to eventually result in pushing rates to a level at which the rates 

would no longer provide a fa ir pro fit, 

should be prevented from commencing 

in the first place.

Interstate Commerce Commission § 62

— rate reduction — reasons for 

disallowance — intermodal competition

17. The Inters tate Commerce Commission, upon disallow ing a rate reduction proposed by railroads, adequately articulates its reasons fo r 

determ ining that the rate reduction 

would impair the inhere nt advantage 

enjoyed by a competing combined 

barg e-truck service, where the Commission pointed out that the principle 

proposed by the railroa ds of using 

out-of-pocket costs as the basis on 

which inherent advantage should be 

determined, would, if recognized, permit the railroads to capture all the 

traffic tha t is presently carried by the 

barg e-truck service because the ra ilroad’s out-of-pocket costs were lower 

than those of the barge-truck service.
1294 U. S. SUPREME COURT REPORTS 20 L Ed 2d

APPEARANCES OF COUNSEL

Leonard S. Goodman argued the cause for appellants.

Harry C. Ames, Jr M argued the cause for appellants.

Daniel M. Friedman and Carl Helmetag, Jr., argued the cause

for appellees.

Briefs of Counsel, p 1780, infra.

OPINION OF

•[392 US 574]

’Mr. Justice Marshall delivered 

the opinion of the Court.

The basic issue in these cases is 

whe ther the action of the Inter sta te 

Commerce Commission in disallowing a rate reduction proposed by the 

appellee railroads, 826 ICC 77 

(1965), was consistent with the provisions of § 15a(3) of the Inter sta te 

Commerce Act, 49 USC § 15a(3), 

added by 72 Sta t 572 (1958), which 

governs rate mak ing in situ atio ns involving interm odal competition. A 

subsidiary but related issue is 

whether the Commission adequately 

articula ted its reasons for disallowing the proposed rate. A sta tut ory 

three-ju dge court, upon appeal of 

the Commission’s decision by th e appellee railroads, held th at the Commission’s decision was erroneous on 

both of the foregoing grounds. 268 

F Supp 71 (DC WD Ky 1967). Because of the importance of § 15a (3) 

as the primary guide to ICC resolution of rate controversies involving 

interm odal competition, we noted 

probable jurisdic tion of the appeal 

taken by the Commission and the 

competing carriers from the decision 

•[89 2 US 575]

of the District ’Court.1 2 389 US 1032, 

19 L Ed 2d 820, 88 S Ct 782 (1968). 

For the reasons detailed below, we 

conclude th at the District Court

1. The United States, a statutory defendant in the District Court, supported 

the railroads’ position there and has participated in support of them in the proceedings before this Court

2. The term “inherent advantage” comes 

from the National Transportation Policy,

THE COURT

erred in its rejection of the Commission’s decision, and the grounds 

on which it was based, and we reverse.

I.

Since 1953 the movement of ingot 

molds from Neville Island and Pitts ­

burgh, Pennsylvania, to Steelton, 

Kentucky, has been almost exclusively by combination barge-truck 

service, and since 1960 the overall 

charge for this service has been 

$5.11 per ton. In 1963 the Pennsylvania Railroad and the Louisville & 

Nashville Railroad lowered their 

joint rate for this same traffic from 

$11.86 to $5.11 per ton. The competing barge lines, joined by intervening trucking inte rests, protested 

to th e ICC t ha t the new railroad r ate 

violated § 15a (3) of the Inter sta te 

Commerce Act because it impaired 

or destroyed the “inh erent advantag e”* then enjoyed by the bargetruc k service. The Commission 

thereupon undertook an investigation of the rate reduction.

In the course of the adm inistrative proceedings th at followed, the 

ICC made the following factual findings about which the re is no real 

dispute among the parties. The 

fully distributed cost* to the rail- 

•[39 2 US 576]

roads of thi s service ’was $7.59 p er

49 USC preceding § I, and is incorporated 

by reference into { 15a (3) of the Interstate Commerce Act The meaning of the 

term is the central issue in these cases and 

will be discussed in considerable detail, 

infra, a t 579-694, 20 L Ed 2d at 1296-1306.

3. Fully distributed costs are defined
AMERICAN LINES v LOUISVILLE & N. R. CO. 1295

392 US 671, 20 L Ed 2d 1289, 88 S Ct 2105

ton, and the ‘lon g term out-ofpocket costs”* were $4.69 per ton. 

The fully distribute d cost to the 

barge-truck service* was $5.19 per 

ton.* The out-of-pocket cost7

 of the 

barge-truck service was not separately computed, but was estimated, 

without contradiction, to be approximately the same as the fully distributed cost and higher, in any 

event, than the out-of-pocket cost of 

the railroads. The uncontroverted 

shipper testimony was to the effect 

*[392 US 5771

that price was virtually *the sole 

determinant of which service would 

be utilized, but tha t, were the rates 

charged by the railroads and the 

barge-truck combination the same, 

all the traffic would go to the railroads.

The railroads contended th at they 

should be permitted to maintain the 

$5.11 rate, once it was shown to exceed the out-of-pocket cost attri bu table to the service, on the ground

broadly by the ICC as the “out-of-pocket 

costs plus a revenue ton and revenue-tonmile distribution of the con stant cost s, 

including deficits, [th at] indicate the rev ­

enue necessary to a fair return on the 

traffic, disregarding ability to pay.” New 

Automobiles in Inters tate Commerce, 259 

ICC 475, 613 (1945).

4. The long-term out -of-pocket coats 

were computed under an ICC-sponsored 

formula which generally holds tha t 809? 

of rail operating exp ens es, rents and taxes 

are out-of-pocket in tha t they will vary 

with traffic. To this is added a return 

elem ent of 4% on a portion of the inv est ­

ment (all the equip ment and 50% of the 

road proper ty), which is apportioned to all 

traffic on a proportional basis. Compare 

n. 3, supra.

5. This figure is not pre cise ly a cost 

figure. Rather it is the barge ful ly dis ­

tributed cost, plus the char ge made for 

the truck portion of the serv ice and the 

charge for barge-truck transfer. Since 

all parties seem willing to tre at the figure 

aa one of fully distributed cos t for the 

barge-truck combin aton, no further mention will be made of its dispa rate elem ents .

ft. Because the barge-truck rate of 16.11 

was below the fully distributed co st of the

that any rate so set would enable 

them to make a profit on the traffic. 

The railroads furthe r contended tha t 

the fact tha t the rat e was substantially below the ir fully distributed 

cost for the service was irrelevant, 

since that cost in no way reflected 

the profitability of the traffic to 

them. The barge-truck interests, on 

the other hand, took the position 

tha t § 15a (3) required the Commission to look to the railroads’ fully 

distribute d costs in order to ascertain which of the competing modes 

had the inherent cost advantage on 

the traffic at issue. They argued 

that the fact t ha t the railroads’ rate 

would be profitable was merely the 

minimum requirement under the 

statute . The railroads in response 

contended that inherent advantage 

should be determined by a comparison of out-of-pocket rather than 

fully distributed costs, and they produced several economists to testify

service, Division 2 of the ICC in itia lly concluded tha t the barge-truck combin ation 

had forfeite d its rig ht to claim that its 

inherent adva ntag e of lower fully distributed cost was being impaired by the railroads' set tin g of a matching rate. On reconsideration, the full Commission reversed 

this ruling by Division 2, observing that 

there was no evidence tha t the failure 

of the barge-truck rate to equal fully distributed cos t was due to anyth ing but the 

barge lines* igno rance of the precise 

amount of their fully distributed cos t for 

this service. This determination is not 

challenged here by any party and we ex ­

press no opinion on i t

7. Out-of-pocke t costs have been regarded generally in the se cases as equivalent to what econom ists refe r to as “incremental” or “ma rginal” costs. Accordingly 

we shall equate the term s likewise, although we have no intentio n of vouching for the accuracy of that equation as 

a mat ter of pure economics. Cf. n. 4, 

supra. Such costs are defined generally 

as the costs specifically incurred by the 

addition of each new unit of output and 

do not include any allocation to that unit 

of pre-exist ing overh ead expenses.
103

1296 U. S. SUP REME COURT REPORTS 20 L Ed 2d

that, fro m the standpoint of economic theory, the comparison of outof-pocket, or incremental, costs was 

the only ration al way of reg ulating 

com petitive rates.

The ICC rejected the railroads’ 

contention that out-of-pocket costs 

should be the basis on which inherent advantage should be determined. The Commission observed 

that it had in the past reg ula rly 

viewed fu lly dis tributed costs as the 

appropriate basis fo r determin ing 

which of two competing modes was 

the lower cost mode as regards partic ular traffic. It fu rther indicated 

that the legislative histo ry of § 15a 

(3) revealed that Congress had in 

mind a comparison of fu lly distributed costs when it inserted the re ference to the Nation al Transporta- 

•[39 2 US 578]

tion ‘ Policy in to t hat section in place 

of language sought by the railroads. 

The Commission also emphasized 

that there was a rulemaking proceeding pending before it in which 

the whole question of the proper 

standard of costing in situation s involving inte rmodal competition was 

being examined in depth, and stated 

that "a radical departure fro m the 

fu lly distributed cost norm” would 

not be justified on the basis of the 

record before it in this case.

Having decided to utilize a comparison between fu lly dis tributed 

costs to determine inhere nt advantage, th e Commission then concluded 

that the rate set by the railroads 

would undercut the barge-tru ck 

com bination's abili ty to explo it its 

inherent advantage because the rate 

would force the competing carriers 

to go well below th eir own fu lly distribu ted costs to recapture the tr a ffic fro m the railroads. Moreover,

8. A rate is compensatory in the sense

used by the District Court any time it is

grea ter than the out-of-pocket cost of the

service for which the rate is set. The

since the res ult sought by the ra ilroads was general permission to set 

rates on an out-of-pocket basis, the 

Commission concluded th at eventually the railroads could take all the 

traffic away fro m the barge-tru ck 

combination because the out-ofpocket costs o f the former were lower than those of the la tter and, 

therefore, in any rate wa r the ra ilroads would be able to outlast th eir 

competitors. Accordingly, the Commission ordered th at the railroads’ 

rate be canceled.

The District Court read the statute and its accompanying legisla tive 

history to reflect a congressional 

jud gm ent that inherent advantage 

should be determined in most cases 

by a comparison of out-of-pocket 

costs and that, therefore, railroads 

should generally be p erm itted to set 

any ind ividual rate they choose as 

long as that rate is compensatory.* 

•[39 2 US 579]

The cou rt also held th at the ‘ Commission had failed adequately to ar ­

ticula te its reasons for deciding that 

the p-oper way of determinin g 

which mode of transporta tion was 

the mr re efficient was by comparison 

of fully distributed costs r athe r than 

out-of-pocket costs. Althou gh this 

la tter holding appears firs t in its 

opinion, it is evident that it must 

log ically follow its ru lin g on the 

meaning of § 15a (3), since if Congress in enacting th at section had 

already decided t ha t inhere nt advantage should be determined by reference to fu lly distribu ted costs, there 

would be no special burden on the 

Commission to ju s tify its use of 

them.

II .

This Court has p reviously had octerm fu lly compensatory is sometimes used

to describe a rate in excess of fu lly distributed costs.
A M E RI C A N LI N E S v L O UI S VI L L E & N. R. C O. 1 29 7

3 9 2 U S 5 7 1, 2 0 L E d 

casi o n t o c o nsi der t he mea ni n g a n d 

le gislati ve hist or y of § 1 5a ( 3) of t h e 

I nter state C o m merce Act i n I C C v 

Ne w Y or k, N. H. & H. R. C o. 3 7 2 

U S 7 4 4, 1 0 L E d 2 d 1 0 8, 8 3 S Ct 

1 0 3 8 ( 1 9 6 3) (“ Ne w Ha ve n” ), a n d 

b ot h t he I C C a n d t he District C o urt 

ha ve relie d hea vil y o n t h at decisi o n 

as s u p p ort f or t he c o nflicti n g res ults 

reac he d b y t he m i n t he se case s. Beca use t he stat ut e a n d its rele v a nt 

le gislati ve hist o r y were s o t h or o u g hl y ca n vasse d t her e, we s hall n ot 

u n de rta k e a n y e xte n de d disc ussi o n 

of t he sa me material here. I nste a d, 

we s hall refe r t o t h at o pi ni o n f or 

m ost of t he rele v a nt hist or y.

S o far as rele v a nt here, § 1 5a( 3) 

pr o vi des t h at: “ [r] at es of a carrier 

s hall n ot be hel d u p t o a partic ular 

le vel t o pr ote ct t he traffic of a n y 

ot h er m o de of tra ns p ortati o n, gi vi n g 

d ue c o nsi derati o n t o t he o bjecti ves of 

t he nati o nal tra n s p ortati o n p olic y 

declare d i n t his Act.”

T he Nati o nal Tra n s p ortati o n P olic y, 

4 9 U S C pre ce di n g § 1, st ate s t h at it 

is t he i nte nti o n of t he C o n gre ss: 

“t o pr o vi de f or fai r a n d i m partial 

re g ul ati o n of all m o des of tra ns p ortati o n s u bje ct t o t he pr o visi o ns of 

t hi s act, s o a d mi nistere d as t o reco g nize a n d preser ve t he i n he re nt a dva nt a ges of eac h . . . .”

•[ 3 9 2 U S 5 8 0]

• T he e nact m e nt of § 1 5a ( 3) i n 1 9 58 

was d ue pri maril y t o c o m plai nts b y 

t he railr o a ds t h at t h e I C C ha d mai n2 d 1 2 8 9, 8 8 S Ct 2 1 0 5 

tai ne d rate s at artificiall y hi g h le vels 

i n or der t o pr ot ect c o m peti n g m o des 

fr o m bei n g dri ve n o ut of b usi ness 

b y railr o a d c o m petiti o n. * T he bill 

t h at e ve nt uate d i n t he la n g ua ge t hat 

is prese ntl y § 1 5a ( 3) ori gi nall y pr ovi de d t h at t he I C C, i n c o nsi deri n g 

rat e re d ucti o ns, s h o ul d, i n a pr ocee di n g i n v ol vi n g c o m petiti o n wit h a not he r m o de of tra n s p ortati o n, “c o nsi der t he fact s a n d circ u msta nces 

atte n di n g t he m o ve me nt of t h e tra ffic b y railr oa d a n d n ot by s uc h ot her 

m o de." ( E m p hasis a d de d.) 3 7 2 

U S, at 7 5 4, 1 0 L E d 2 d at 1 16. T his 

la n g ua ge was o bjecte d t o str o n gl y 

b y b ot h t he I C C a n d re pre se ntati ves 

of t h ose carrier s wit h w hic h t h e railr oa ds were i n c o m petiti o n. See 

Heari n gs o n S 3 7 7 8 bef ore t he Se nate C o m mittee o n I nter state a n d 

F orei g n C o m merce, 8 5t h C o n g, 2 d 

Sess ( 1 9 5 8). T he basic gr o u n d of 

o bjecti o n was t h at b y l o o ki n g o nl y 

t o t he effect of a rat e re d ucti o n o n 

t he car rier pr o p osi n g it, t he I C C 

w o uld be u na ble t o pr ote ct t he “i nhere nt a d v a nta ges” e nj o ye d b y c o mpeti n g carrier s o n t he traffic t o 

w hic h a rat e re d ucti o n was t o be 

a p plie d.

•[ 3 9 2 U S 5 8 1]

• U nf ort u natel y, t he mea ni n g of t he 

ter m "i n h ere nt a d va nta g e,” w hic h is 

w hat t he C o m missi o n is s u p p ose d t o 

pr otect, is n o w here s pelle d o ut i n 

t he stat ut e. T he railr o a ds ar g ue, 

a n d t he District C o urt hel d, t hat 

C o n gress i nte n de d b y t he ter m t o

9. A n ill u str ati o n of s u c h a c a s e i s t h e 

d e ci si o n of t h e I C C t h at w a s r e v er s e d i n 

t h e N e w H a v e n c a se. T h er e t h e I C C h a d 

r ef u s e d t o p er mit t h e r ailr o a d s t o s et a 

r at e w hi c h w a s n ot o nl y a b o v e t h ei r o utof- p o c k et c o st f or t h e s er vi c e b ut w a s al s o 

a b o v e t h eir f ull y di stri b ut e d c o st f o r a ppr o xi m at el y h alf of t h e m o v e m e nt s i nv ol v e d. T h e C o m mi s si o n di d n ot r el y o n 

a d et e r mi n ati o n of w hi c h of t h e c o m p eti n g c ar ri er s h a d t h e i n h e r e nt a d v a n t a g e 

a s t o c o st s, b ut i n st e a d d e ci d e d br o a dl y 

t h at t h e r at e w o ul d e v e nt u all y d e st r o y t h e 

( 2 0 L E d 2 d ) — 8 2

c o a st wi s e s hi p pi n g i n d u str y a n d t h er ef o r e 

s h o ul d b e pr o hi bit e d. T hi s C o u rt h el d 

t h a t, i n g e n e r al, t h e I C C w a s r e q uir e d t o 

d et er mi n e w hi c h of t h e c o m p eti n g c arri er s 

p o s s e s se d t h e i n h e r e nt a d v a n t a g e b ef or e 

a r at e c o ul d b e or d er e d c a n c ell e d i n or d er 

t o pr ot e ct a c a rri e r’ s pr e s e nt r at e. W hil e 

t h e C o u rt i n di c at e d t h a t t h e N ati o n’ s d ef e n s e n e e d s mi g h t p er mit pr ot e cti o n of 

e v e n a hi g h er c o st c a rri er i n s o me c a se s, 

it h el d t h a t t h e I C C h a d n ot a d e q u at el y 

s h o w n N e w H a v e n t o b e s u c h a c a se.
105

1298 U. S. SUPREME COURT REPORTS 20 L Ed 2d

refer to situa tions in which one carrier could transport goods at a lower 

incremental cost than another. The 

fallacy of this argument is that it 

renders the term “inherent” advantage essentially meaningless in the 

context of the language and history 

of § 15a (3).

Since the pricing of railroad se rvices below out-of-pocket or incremental cost would result in a net 

revenue loss to the railroad on the 

carriage, the ICC could prohibit such 

practices without reference to the 

costs of any other competing carrier. 

And this is precisely what the language of the bill as originally endorsed by the railroads would have 

provided by its use of the phrase 

“and not by such other mode.” See 

supra, at 580, 20 L Ed 2d at 1297. 

This language was, however, rejected by the Congress and the alternative formulation proposed by the 

ICC, see Hearings, supra, at 169, was 

substituted for it.

[1—31 As this Court said in the 

New Haven case:

“The principal reason for this ref10. The appellees also contend, and the

District Court held, that the statements

in the legislative history of { 15a(3 ) that

Congress intended to compel the Commission to return to the approach to competitive rate regulation it had utilized in

the case of New Automobiles in Intersta te

Commerce, 269 ICC 475 (1946), indicate

that out-of-pocket ratem aking was intended to be the rule in such eases. However, the passage quoted from New Automobiles simply states th at the rates of

one mode of transportation should not be

held up merely to protect competing

modes. It says nothing at all about inherent advantages.

The railroads argue that the basic thrust

of the New Automobiles case was to compare costs on an out-of-pocket basis. And

it is true that many of the comparisons

there made were on tha t basis. However,

an examination of what the Commission

actually said and did in New Automobiles

compels the conclusion th at no fla t rule

of comparison of out-of-pocket coats was

there laid down. Fo r example, the Comerence [to the National Transportation Policy] . . . was to emphasize the power of the Commission 

to prevent the railroads from destroying or impairing the inherent 

advantages of other modes. And 

the precise example given to the 

Senate Committee, which led to the 

language adopted, was a case in 

which the railroads, by esta blishing 

on a part of their operations a compensatory rate below their fully distributed cost, forced a smaller competing low er coat mode to go below 

its own fully distributed cost and 

thus perhaps to go out of business.” 

372 US, at 758, 10 L Ed 2d at 118. 

•[892 U8 532]

•Since these cases are identical to 

the example just described, it would 

seem that, at the very least, the result reached by the Commission here 

is presumptively in accord with the 

language of the statute and with 

the intent of Congress in utilizing 

that language. *

•[>92 U8 581]

•The District Court, however, ignored the above portion of the New

mission concluded that on the basis of a

comparison with the railroads, out-ofpocket costa for shipping automobiles, the

truckers were the lower cost mode only

up to 120 miles. On a fu lly distributed

cost comparison the truckers were the

lower cost mode up to 230 miles. 269

IC C, at 528. A fter discussing at some

length the concept of reasonable minimum

rates, the Commission ultim ately concluded

that generally the truckers had the cost

advantage at distances up to 200 miles

and that the railroads should be permitted to set rates that would permit them

to compete for the longer-haul traffic. 269

ICC, at 639.

Given the fact tha t the Commission was

dealing with an attem pt by the truckers

to get it to hold up railroad rates for distances even gre ater than 800 miles, it is

not surprising that the issue of measuring

inherent advantage as between fu lly distribute d and out-of-pocket costs did not

receive detailed consideration, since by

eith er method the truckers were the low

cost mode only up to a lit tle more than

[20 L Ed 2d)
106

AMERICAN LINES v LOUISVILLE A N. R. CO. 1299

392 US 671, 20 L Ed 

Haven opinion and seized on certain 

other language there in to the effect 

that:

"I t may be, for example, that 

neither a comparison of ‘out-ofpocket* nor a comparison of ‘fully 

distributed* costs, as those term s are 

defined by the Commission, is the 

appropriate method of deciding 

which of two competing modes has 

the cost advantage on a given movement.” 872 US, at 760, 10 L Ed 2d 

at 119.

It coupled this language with its interp reta tion of § 15a (3) as having 

the purpose to promote "ha rd competition,” and concluded th at the 

Commission had the burden of jus ­

tifying any departu re from using 

out-of-pocket cost as the means of 

determining inhe rent cost advantage.

Ml We thin k that the District 

Court erred in its reading both of 

the prior New Haven decision and

2d 1289, 88 S Ct 2106 

of the extent to which Congress intended to fos ter intermodal competition. We note first that nothing 

in the language of the New Haven 

opinion indicates a preference for 

either out-of-pocket or fully distrib ­

uted costs as a measure of inherent 

adv antag e; rath er, all th at is said is 

th at the appropriate measure "may 

be” neither. Given the fa ct t ha t the 

insertion of the reference to inher-

*[392 US 584]

ent advantage into •§ 15a (3) came 

about at the insistence of carriers 

that were demanding that fully distrib uted costs be the sole measure of 

that adva ntage,11 we think tha t the 

clear impo rt of the foregoing statement in the New Haven opinion was 

tha t th e Commission could, afte r due 

consideration, decide that some other measure of comparative costs 

might be more satisfac tory in situations involving intermodal competition than the one it had traditionally 

utilized.“ That is a far cry from 

saying that it must.

♦

200 miles. Thus it cannot fairl y be said 

that New Aut omobiles rep resents a considered choice between the two methods 

of cost comparison. Rather w hat i t stands 

for is the principle emphasized in the 

New Haven case tha t the rates of one 

mode should not be held up to protect the 

revenues of a competitor with out regard 

to which is the low cost carrier.

(3 ] In any event, wha t ma tters so far 

as 116a (3) is concerned is not what the 

Comm ission mea nt in New Auto mob iles 

but what Congress tho ugh t it mea nt in 

1968 when the section was enacted . As 

we have shown in the text of the opinion 

above, Congr ess considered New Automobiles to stand for the principle tha t the 

rate structur e of a com peting mode should 

not be protected by the Comm ission simply 

to prevent it from los ing business through 

competition.

11. The District Court also relied on 

the rejection of a similar proposal by 

truck and barge int erest s tha t fu lly distributed costs be the floor for reasonable 

minimum rates in the course of the enactment of the Nation al Tra nsp ortation Policy in 1940. It seems clear, how ever, tha t

one of the major reas ons for the rejection 

of the so-called Miller-Wadsworth amendment by Cong ress was the possibility that 

its enactment would prevent low-value 

industria l and agr icultural commodities 

from being carried at a rate low enough 

to make it econom ically feasible to ship 

them in int ers tat e commerce. See genera lly Nelson, Rate-M akin g In Transportatio n—-Congressional Intent, I960 Duke L. 

J. 221, 228-238.

12. While it is true that, for var ying 

and sometim es unex plain ed reas ons, the 

Commission has not invariab ly used fully 

distributed costs as the bas is for cost 

comparisons in situ ati ons involving intermodal competition , see 268 F Supp, at 78, 

it is also tru e tha t it h as gen era lly declared 

fully distributed cost comparisons to be 

preferable. Thus in the hearings on the 

bill that was to become $ 15 a(3), Commissioner Frees stat ed :

“Whenever conditio ns perm it, given 

transportation should return the full cost 

of perform ing carrier serv ice. . . . In 

many instances, howe ver, the full cost of 

the low-cost form of tran sportation ex ­

ceeds the out-of-pocket cost of another.
1 0 7

1 30 0 U. S. S U P R E M E C O U R T R E P O R T S 2 0 L E d 2 d

T he District C o urt a p pa re ntl y belie ve d t h at t he C o m missi o n was req uire d t o e xercise its j u d g me nt i n 

t he directi o n of usi n g o ut- of- p oc ket 

*[ 3 9 2 U S 5 8 5]

c osts as t he rat e fl o or ’ beca use t hat 

w o uld e nc o ura ge “ ha r d ” * c o m petiti o n. We d o n ot de n y t h at t he c o mpetiti o n t h at w o ul d res ult fr o m s uc h 

a decisi o n w o ul d pr o ba bl y be “ h ar d.” 

I n dee d, fr o m t he a d mitte dl y sca nt y 

e vi de nce i n t his rec or d, o ne mi g ht 

well c o ncl u de t h at t he c o m petiti o n 

res ulti n g fr o m o ut- of- p oc ket rat ema ki n g b y t he railr o a ds w o uld be s o 

har d as t o r u n a c o nsi dera ble n u mber of prese ntl y e xisti n g bar ge a n d 

tr uc k li nes o ut of b usi ness.

We disa gre e, h o we ver, wit h t he 

District C o urt’s rea di n g of c o n gressi o nal i nte nt. T he la n g ua ge c o ntai ne d i n § 1 5a ( 3) was t he pr o d uct 

of a bitt er str u g gle bet wee n t he railr oa ds a n d t heir c o m petit ors. O ne of 

t he s pecific fea rs of t h os e c o m petit ors t h at pr o m pte d t he c ha n ge fr o m

If , t h e n, w e ar e r e q uir e d t o a c c e pt t h e 

r at e s of t h e hi g h c o st c a rri er m er el y 

b e c a u s e t h e y e x c e e d it s o ut- of- p o c k et 

c o st s, w e s e e n o w a y of pr e s er vi n g t h e 

i n h e r e nt a d v a nt a g e s of t h e l o w c o st c arri e r. ” Q u ot e d at 8 7 2 U S, at 7 5 5, 1 0 L E d 

2 d a t 1 1 6.

1 3. T h e Di stri ct C o u rt a s c ert ai n e d t h e 

l e gi sl ati v e p ur p o s e t o pr o m ot e " h ar d 

c o m p etiti o n ” fr o m t h e f oll o wi n g p a s s a g e 

fr o m t h e N e w H a v e n o pi ni o n:

“ S e cti o n 1 6 a( 3), i n ot h e r w or d s, m a d e 

it cl e ar t h at s o m et hi n g m or e t h a n e v e n 

h ar d c o m p etiti o n m u st b e s h o w n b ef or e 

a p a rti c ul ar r at e c a n b e d e e m e d u n f ai r 

or d e str u cti v e. T h e pri n ci p al p ur p o s e of 

t h e r ef er e n c e t o t h e N a ti o n al Tr a n s p o rt a ­

ti o n P oli c y, a s w e h a v e s e e n, w a s t o pr ev e nt a c a rri e r fr o m s etti n g a r at e w hi c h 

w o ul d i m p air or d e str o y t h e i n h e r e nt a dv a nt a g e s of a c o m p eti n g c a rri er, f o r 

e x a m pl e, b y s etti n g a r at e, b el o w it s o w n 

f ull y di stri b ut e d c o st s, w hi c h w o ul d f or c e 

a c o m p e tit or wi t h a c o st a d v a nt a g e o n 

p a rti c ul ar tr a n s p o rt ati o n t o e st a bli s h a n 

u n pr ofit a bl e r at e i n or d er t o at tr a ct tr a ffi c. ” 3 7 2 U S, at 7 5 9, 1 0 L E d 2 d a t 1 1 8. 

Si n c e t h e s e nt e n c e f oll o wi n g t h e t er m 

“ h a r d c o m p etiti o n ” d e s cri b e d a n e x a m pl e 

of t h e c o m p e titi o n pr o hi bit e d b y t h e N at he ori gi n al la n g u a ge use d i n t he 

bill was t h at t he bill as it t he n rea d 

w o ul d per mit esse ntiall y u nre g ulate d 

c o m petiti o n bet wee n all t he vari o u s 

tra n s p o rtati o n m o des. It was arg ue d wit h c o nsi dera ble f orce t h at 

per mitti n g t he railr oa ds t o price o n 

a n o ut- of- p oc ket basis t o meet c o m- 

*[ 3 9 2 U S 5 M ]

petiti o n w o ul d res ult i n t h e ’ e ve nt u al 

c o m plete tri u m p h of t he railr oa ds i n 

i nter m o dal c o m petiti o n beca use of 

t heir a bilit y t o i m p ose all t heir c o nsta nt c osts * o n traffic f or w hic h 

t he re was n o c o m petiti o n.

T he ec o n o mists w h o testifie d f or 

t he railr o a ds i n t hi s case all state d 

t h at s uc h a n u ne q ual all ocati o n of 

c o n sta nt c osts a m o n g s hi p p ers o n t he 

basis of de ma n d f or railr oa d ser vice, 

i. e., o n t he e xiste nce of c o m petiti o n 

f or partic ular traffic, ’ was ec o n o micall y s o u n d a n d desira ble. A part 

fr o m t he merits of t his c o nte nti o n 

as a matte r of ec o n o mic t he or y, * it 

•[ 3 9 2 U S 5 8 71

is q uite clear t h at it was a ’c o nte nti o n al Tr a n s p or t ati o n P oli c y t h at i s i d e nti c al t o t h e f a ct s of t h e pr e s e nt c a s e, t h e 

Di st ri c t C o urt’ s u s e of t h e t er m t o r e v er s e 

t h e I C C’ s d e ci si o n h er e s e e m s s o m e w h at 

p e c uli ar.

1 4. C o n st a nt c o st s ar e, br o a dl y s p e a ki n g, t h o s e it e m s of e x p e n s e w hi c h ar e i nc urr e d b y a b u si n e s s r e g ar dl e s s of t h e 

s c al e of it s o p er ati o n s. T h e y ar e e s s e nti all y t h e e q ui v al e n t t o w h at i s c o m m o nl y 

c all e d o v er h e a d e x p e n s e s. F o r r ailr o a d s 

c o n st a nt c o st s i n cl u d e s u c h it e m s a s r e al 

e st at e t a x e s, c ert ai n r e nt s, m u c h ri g ht - ofw a y m ai nt e n a n c e e x p e n s e a n d si mil ar e xp e n s e s.

1 5. U n e q u al all o c a ti o n of c o n st a nt c o str 

a s a n el e m e nt of t h e r at e c h ar g e d al s o 

o c c ur s c o m m o nl y w h er e a b ul k y c o m m o dit y 

i s s o l o w v al u e d o n a p er t o n b a si s t h a t 

s etti n g a r at e b y r ef er e n c e t o t h e f ull y 

di stri b ut e d c o st of c ar r yi n g t h e c o m m o dit y 

w o ul d m a k e it u n e c o n o mi c t o s hi p it. S e e 

n. 1 1, s u pr a.

1 5. T hi s C o u rt i s n ot p a rti c ul arl y s uit e d 

t o p a s s o n t h e m erit s of t h e e c o n o mi c 

ar g u m e nt s m a d e b y t h e r ailr o a d s’ e x p ert 

wit n e s s e s i n t h e s e e a se s. M or e o v er, t h eir 

s o u n d n e s s i s n ot e s p e ci all y r el e v a nt t o t h e 

r e s ult w e r e a c h i n t h e pr e s e nt p o st ur e of 

t hi s c o ntr o v er s y. H o w e v er, b e c a u s e t h e
1 0 8

A M E RI C A N LI N E S v L O UI S VI L L E & N. R. C O. 1 S0 1

8 9 2 U S 5 7 1, 2 0 L E d 2 d 1 2 8 9, 8 8 S Ct 2 1 0 5

ti o n t h at w as n ot b y a n y me a ns t h at e n acte d § 1 5 a( 3 ). O ne of t he 

w h oll y acce pte d b y t he C o n gress s pecific e x a m ples gi ve n of a n u n dee e o n o mi c t e sti m o n y ii e m p h a si s e d s o

he a vil y b y b ot h t h e r ailr o a ds a n d t h e 

U nit e d St at e s i n t h eir ar g u m e nt s t o u s, 

we s h all ve nt ur e a fe w o b se r v ati o ns o n 

i t

M o st of t h e e c o n o mi c t e sti m o n y i s dir e ct e d t o w ar d s pr o vi n g t h at t h e utili z a ­

ti o n of o ut- of- p o c k et c o st s i n s etti n g r at e s 

p er mit s t h e r ailr o a d s t o m a xi mi s e t h eir 

pr ofit s. T o t h e e xt e nt t h at o ut- of- p o c k et 

c o st a ar e a c c ur at el y c o m p ut e d, t h a t pr o po siti o n a p p e ar s u n c o ntr o v erti bl e. T h e 

e c o n o mi st s t h e n g o o n t o ar g u e, i n eff e ct, 

t h at w h at i s g o o d f or t h e r ailr o a d s i s g o o d 

f o r t h e c o u ntr y. T hi s ar g u m e nt i s d ev el o p e d a s f oll o w s. W h e n e v e r a r ailr o a d 

l o w er s it s r at e, t h e s hi p p er t o w h o m t h a t 

r at e i s a v ail a bl e b e n efit s. A s l o n g a a t h e 

r at e i s a b o v e t h e o ut- of- p o c k et c o st of t h e 

s er vi c e, t h e r ail r o a d b e n efit s b y o bt ai ni n g 

t h e pr ofit s fr o m tr affi c it f or m e rl y di d n ot 

c a rr y. T h e f a c t t h at a c o m p eti n g c a rri er 

m a y l o s e t h e r e v e n u e it pr e vi o u sl y e ar n e d 

b y c a rr yi n g t h e tr affi c i s i m m a t eri al b ec a u s e t h e r ailr o a d’ s a bilit y t o m a k e a 

pr o fit b y c h ar gi n g t h e l o w e r r at e s h o w s 

t h at it i s, i n s o me s e n s e, m or e effi ci e nt 

t h a n it s c o m p etit or.

I n or d e r t o e v al u at e t h e f or e g oi n g 

ar g u m e nt c ert ai n ot h er a s p e ct s of a r ailr o a d’ s o p er ati o n m u st b e k e pt i n mi n d. 

T h e r e a s o n w h y a r ailr o a d’ s f ull y di stri b ut e d c o st s ar e s u b s t a nti all y gr e at e r 

t h a n it s o ut- of- p o c k et c o st s o n a n y gi v e n 

tr affi c i s, i nt er ali a, b e c a u se c ert ai n c o nst a nt c o st a, s ee n. 1 4, s u pr a, ar e all o c at e d 

t o t h at tr affi c o n a pr o p orti o n al b a si s 

d e s pit e t h e f a ct t h at t h o s e c o st s will b e 

i n c urr e d b y t h e r ailr o a d w h et h e r it c arri e s 

t h e p a rti c ul ar tr affi c or n ot. T h e s e c o nst a nt c o st s m u st b e e ar n e d if t h e r ail r o a d 

i s t o st a y i n b u si ne s s. T h e y ar e all o c at e d 

pr o p orti o n all y o n t h e t h e o r y t h a t, all ot her f a ct or s b ei n g e q u al, s u c h a n all o c ati o n 

will b e t h e b e st w a y of a s s uri n g t h a t e a c h 

s hi p p er c o ntri b ut e s hi s f a ir s h ar e t o w ar d s 

c o v e ri n g t h e c o n st a nt c o st s. O b vi o u sl y t o 

t h e e xt e nt t h at a n y s hi p p e r p a y s m or e of 

t h e c o n st a nt c o st s t h a n a n ot h er wit h o u t 

a n y g o o d r e a s o n f or s o d oi n g t h at s hi p p e r 

i s, i n s o m e s e ns e, di s cri mi n at e d a g ai n s t

T h e r ailr o a d e c o n o mi st s p oi n t o ut t h at, 

b e c a u s e c o n st a nt c o st s b y d efi niti o n ar e 

n ot att ri b ut a bl e t o t h e c ar ri a g e of a n y 

p a rti c ul ar tr affi c, it i s t o s o m e e x t e nt ar bitr a r y t o all o c at e t h e m t o p a rti c ul ar tr a ffi c. T h e y f u rt h er c o nt e n d t h a t all s hi pp er s pr e s e ntl y utili si n g a r ailr o a d’ s s er vi c es ar e b e n efit e d w h e n t h e r ailr o a d 

o bt ai n s a d diti o n al tr affi c at a pr ofit t o it, 

b e c a u s e t h a t pr o fit c a n b e u s e d t o p a y a 

p orti o n of t h e c o n st a nt c o st s c ur r e ntl y b ei n g c h ar g e d w h oll y t o t h e m. T h e f a ct 

t h a t c h a r gi n g a r at e l e ss t h a n it s f ull y 

di stri b ut e d c o st of c a rr yi n g t h e tr affi c r es ult s i n t h e s hi p p er of t h at fr ei g ht p a yi n g 

a di s p r o p orti o n all y l o w s h ar e of t h e r ailr o a d’ s c o n st a nt c o st a i s c o n si d er e d t o b e 

o ut w ei g h e d b y t h e o v er all b e n efit t o t h e 

ot h er s hi p p er s of h a vi n g t h e a b s ol ut e 

a m o u nt b or n e b y t h e m of t h e c o n st a nt 

c o st s d e cr e a s e d b y t h e pr o fit e ar n e d o n t h e 

tr affi c.

 s e e m s a p p a r e nt, h o w e v er, t h at i n a 

c a se w h er e t h e s ole r e a s o n t h a t a r at e 

b el o w f ull y di stri b ut e d c o st i s n e c e s sar y 

t o attr a ct s u c h a d diti o n al tr affi c i s t h e 

c o m p etiti o n of a n ot h er m o d e of tr a n s p ort ati o n, t h at c o nti n u e d e xi st e n c e of t h a t 

c o m p etiti o n i s al s o t h e s ol e e c o n o mi c j u stifi c a ti o n f o r m ai nt ai ni n g t h e r at e at a 

r el ati v e l e v el t h at f a v o r s o n e s hi p p er o v er 

ot h er s. I f t h e c o m p eti n g c a rri er i s dri v e n 

o ut of b u si ne s s b e c a u s e of it s i n a bilit y t o 

m at c h t h e r ailr o a d’ s l o w e r r at e s s et o n a n 

o ut- of- p o c k et b a si s, t h e e c o n o mi c j u s tifi ­

c ati o n f o r p e r mitti n g t h e c o nti n u ati o n of 

t h o s e l o w r at e s w o ul d s e e m t o di s a p p e ar. 

Y e t t h e r ailr o a d e c o n o mi st s a s s ert t h a t i n 

s u c h a sit u ati o n t h e r ailr o a d s h o ul d b e 

r e q uir e d b y t h e I C C t o m ai nt ai n t h e r at e 

at it s ori gi n al l e v el. T h e o b vi o us r e a s o n 

f o r t hi s p o siti o n i s t h at p e r mitti n g a r ailr o a d t o r ai s e it s r at e s o n ce it h a d eff e cti v el y d e str o y e d a c o m p etit o r i n o n e ar e a 

w o ul d e n a bl e it t o pri c e o n a n o ut- ofp o c k et b a si s i n c o m p etiti o n wit h a n ot h er 

c ar ri e r i n a diff er e n t ar e a t h e r e a ft e r a n d, 

i n t ur n, dri v e t h at c ar ri e r o ut of b u si n e s s. 

E v e nt u all y a r ailr o a d c o ul d eli mi n at e all 

it s c o m p etit or s w h o se o ut- of- p o c k et c o st s 

w er e hi g h er t h a n it s o w n. A ft er t hi s w a s 

a c c o m pli s h e d t h e r ail r o a d c o ul d r e- pri c e 

all it s s er vi c e s o n a f ull y di stri b ut e d c o st 

b a si s t h er e b y eli m i n a ti n g all di s cri mi n ati o n b et w e e n it s s hi p p er c u st o m er s.

Of c o ur s e, t h e s hi p p er s f or m e rl y s er ve d 

b y c o m p eti n g m o de s at r at e s pr ofit a bl e 

t o t h e m b ut l o w e r t h a n t h e r ailr o a d’ s f ull y 

di stri b ut e d c o st s w o ul d at t h at p oi nt h a v e 

l o st t h e a d v a nt a g e of t h e l o w c o st s er vi c e. 

T h e o nl y w a y t o p er p et u at e t h e a d v a nt a g e 

pr e vi o u sl y e nj o y e d b y t h o s e s hi p p er s 

w o ul d b e, a s t h e r ailr o a d e c o n o mi st s r e co g ni z e d, ar tifi ci all y t o m ai nt ai n t h eir 

r at e s at t h e f or m e r l e v el d e s pit e t h e a b-
109

»

1302 U. S. SUPREM E

sirable practice, and accepted by the 

members of the Commerce Commit- 

*[392 US 588)

tee *that drafted the sta tut e as such, 

was a case in which certain railroads 

had engaged in day-to-day differential pricing on the carriage of citru s 

fru it from Florida depending on 

whether competitive carriage was 

•[392 US 589]

available *by ship th at day. See 

Hearings, supra, at 153-155. Similar complaints were made about seasonal variations in rates by railroads 

depending on whether winter conditions interfere d with the carria ge of 

freigh t by water. Id., at 162-163. 

Yet, from an economic standpoint, 

such rat e variation s make perfect 

competitive sense insofar as maximization of railroad revenues is concerned. 17

[S-Zl The simple fact is tha t 

§ 15a (3) was not enacted, as the 

railroads claim, to enable them to 

price the ir services in such a way

sence of present economic jus tificat ion for

such a low rate . (I t is true that were

the barriers to re-e ntry into the transp ortati on market low, as asse rted by the ra ilroad econo mists , the pote ntial compe tition

created by the possibility of such reen try

by a com pet ing mode could furnis h an

economic just ific atio n for the contin uance

of the orig inal low rate . How ever, there

is no fac tual evidence in this record from

which it can be concluded tha t barriers

to re-entry are low enough to create such

pote ntial com peti tion .)

I f the onl y jus tificat ion for the mai ntenance of a disp ropo rtion ally low rate to

some shipp ers is the fa ct tha t compe tition

existe d once upon a time for thei r business, would it be irra tion al to conclude

tha t it would be pre fera ble to keep the

orig inal com petition in busin ess to serve

those shipp ers and to require the railroad

to look elsewhere for addition al reven ue?

Would it, fo r example, be possible for

railr oad s to increase their revenu es instead by inc rea sin g, throug h selective rate

decreases, the volum e of traffic shipped

by persons who pre sently pay amounts in

excess of the fu lly distr ibute d cost fo r the

service afforded the m? The se are only a

few of the ques tions tha t come to mind

when we att em pt to eva luat e the economic

COURT REPORTS 20 L Ed 2d

as to obtain the maximum revenue 

therefrom. The very words of the 

sta tute speak of “preservfing ]” the 

inherent advantages of each mode of 

tran spo rtation. If all th at was 

meant by the s tat ute was to prevent 

wholly noncompensatory pricing by 

regulated carriers, language th at 

was a good deal clearer could easily 

have been used. And, as we have 

•[392 U8 590)

shown above, *at least one version of 

such clear language was proposed by 

the railroads and rejected by the 

Congress. If the theories advanced 

by the economists who testified in 

this case are as compelling as they 

seem to feel they are, Congress is 

the body to whom they should be 

addressed. The courts are ill-qualified indeed to make the kind of basic 

judg men ts about economic policy 

sough t by the railroads here. And 

it would be particularly inappropriate for a court to award a carrier,

arg um ents made in this case . We do not

pretend to be able to answ er them . We

merely note their existe nce as evidence

tha t we do not find the arg um ents made

to the IC C here as comp ellin g as did the

Di stric t Cou rt,

Ou r discu ssion here should not be interpr eted as a reje ction of the basic economic points made by the railr oads . It is

mere ly intended to illustra te the desirab ility of ha vin g the init ial resolu tion of these

issues made by a trib una l, and in a proceed ing, more suita ble than the pres ent

one.

17. It is, of course, true tha t such discrim ination s need have no nece ssar y relationship to a railr oad’s cos t of serv ice,

whe ther tha t is compu ted on a fu lly distribu ted or out-of -po cke t basis. On the

other hand, it is also evid ent tha t wh at is

bas ically at issue is a carr ier’ s rig ht to

price dis crim ina torily, either between

ship men ts or ship pers , in order to ma ximize revenues by comp etitio n. By contr as t it can be noted tha t the railr oads

have app are ntly retai ned their prior rate

of $11.86 per ton on ingo t molds in area s

where they have no competitio n fro m

bar ge- tru ck serv ice. The disc riminati on

thus create d is not too diss imila r from

tha t embodied in the above exam ples.

44-987 0 - 75 - 8
AMERICAN LINES v LOUISVILLE & N. R. CO. 1303

392 US 671, 20 L Ed 

on economic grounds, relief denied it 

by the legislature. Yet this is precisely what the District Court has 

done in this case.

[ t - 1 0 ] We do not mean to suggest 

by th e foregoing discussion th at the 

Commission is similarly b arred from 

making legislative judg men ts about 

matters of economic policy. It is 

precisely to permit such judgments 

th at the task of regu lating tra nsportation rates has been entrusted 

to a specialized adm inistrative agency rathe r than to courts of general 

jurisdiction. Of course, the Commission must operate within the 

limits set out by Congress in enacting the legislation it admin isters. 

But nothing we say here should be 

taken as expressing any view as to 

the extent tha t § 1 5a(3) cons titutes 

a categorical command to the ICC 

to use fully distributed costs as the 

only measure of inherent advantage 

in intermodal rate controversies. 

As was stated in the New Haven 

case, it “may be” tha t after due consideration another method of costing 

will prove to be preferable in such 

situation s as the present one. All 

we hold here is that the initial determination of that question is for 

the Commission.

[ ill It is in this connection that 

the timing of this case takes on particular significance. We have already observed that the ICC has 

presently pending before it a broadscale examination of th e whole question of the cost standards to be used 

where comparisons of intermodal 

cost advantages are required. Rather than await the resu lt of that 

rulem aking proceeding, the railroad 

•[3 92 US 591]

•appellees here determined to at ­

tem pt to raise precisely the same 

issues in a much more circumscribed 

proceeding by unilaterally reducing 

the ir rate s on one item of traffic.

2d 1289, 88 S Ct 2106 

The District Court totally ignored 

the temporary nature of the ICC’s 

action in this case and the pendency 

of the rulemaking proceeding. Instead, it went ahead and, in the 

guise of resolving this particular 

controversy over a single r ate reduction, rendered a decision which, for 

all practical purposes, made the rulemaking proceeding moot. While 

there migh t be some justification 

for such a course when the applicable sta tut e clearly requires the agency to arrive at a given result, this 

case is emphatically not such a situation. As this Court stated in New 

Haven, "[ tjh es e and other similar 

questions should be left for initial 

resolution to the Commission’s informed judg ment.” 372 US, at 761, 

10 L Ed 2d at 119.

The Commission stated here tha t 

it intended to exercise its informed 

judgm ent by considering the issues 

presented here in the context of a 

rulemaking proceeding where it 

could evaluate the alternative s on 

the basis of a consideration of the 

effects of a departu re from a fully 

distributed cost standard on the 

tran sportation indu stry as a whole. 

Until that evaluation was completed, 

the Commission took the position 

that it would continue to follow the 

practice it had observed in the past 

of dealing with individual rate reductions on a fully distributed cost 

basis. The District Court, in effect, refused to perm it the Commission to deal with the complex problems of developing a general stan dard of costing to use in determining 

inhere nt advantage in situations involving intermodal competition in 

the broad context of a rulemaking 

proceeding. Instead, it ordered the 

Commission to resolve those problems in the narrow context of this 

individual rat e reduction proceeding.
I l l

1304 U. S. SUPREME COURT REPORTS 20 L Ed 2d

We have already observed tha t 

the District Court erred in interpreting the New Haven decision to 

•[39 2 US $92]

require *the Commission to permit 

out-of-pocket pricing in most instances. Given the fact that New 

Haven indicated that the Commission was to exercise its informed 

judgment in ultimately determining 

what method of costing was preferable, it is clear th at the District 

Court also erred in refusing to permit the Commission to exercise tha t 

judg ment in a proceeding it reasonably believed would provide the most 

adequate record for the resolution 

of the problems involved. We can 

see no justification for denying the 

Commission reasonable latitude to 

decide where it will resolve these 

complex issues, in addition to how it 

will resolve them. The action by the 

District Court here not only deprives 

the Commission of the opportunity 

to make the initial resolution of the 

issues but also prevents it from doing so in a more suitable context.

[13,131 This Court has just recently held that the Federal Power 

Commission had the authority to 

fix rate s on an area-wide basis rather than on an individual producer 

basis and tha t, in order to make 

such a procedure feasible, it had 

sta tutory au tho rity to impose a moratorium upon rate increases by producers for a period of 2j years after 

the setting of the area rate . Permian Basin Area Rate Cases, 390 

US 747, 20 L Ed 2d 312, 88 S Ct 

1344 (1968). The basis for this 

holding was the principle th at the 

"legislative discretion implied in the 

rate making power necessarily extends to the entire legislative process, embracing the method used in 

reaching the legislative determination as well as th at determination 

itself.” Id., at 776, 20 L Ed 2d at 

341. That principle is equally applicable to rate regulation carried 

out by the ICC, especially where, as 

here, the determination made on an 

interim basis is in general accord 

with both the legislative history of 

the sta tute involved and the results 

in prior cases decided by the agency. Accordingly, we hold th at the 

Commission had ample authority to 

decline to deal with the broad contentions advanced by the railroads in 

•[39 2 US $93]

’this individual rate case and that 

the District Court erred in fa iling to 

recognize that auth ority.

[1*1 The District Court also objected to the failure of the Commission to explain why it permitted outof-pocket ratemaking where the 

competing carrier was unregulated 

and not where the competitor was 

regulated. The short answer to this 

is that § 15a (3) by its own term s 

applies only to “modes of tran spo rtation subje ct to this Act,” which 

by definition means regulated carriers. As a result any arb itrarine ss 

tha t may flow from the distinction 

recognized by the Commission between regulated and unregulated 

car rier s in situations of intermodal 

competition is the creation of Congress, not of the Commission.

[13-17) The District Court also 

appears to have held that the Commission did not adequately explain 

how the rate set by the railroads 

would impair or destroy the bargetruc k inhe rent advantage. Yet the 

Commission pointed out th at the 

principle proposed by the railroads 

would, if recognized, permit the railroads to capture all the traffic here 

th at is presently carried by the 

barge-truck combination because th e 

railroads* out-of-pocket costs were 

lower than those of the combined 

barge-tru ck service. The District 

Court seems to have been impressed 

by the fact that the railroads were 

merely meeting the barge-truck
E RI C A N LI N E S v L O UI S VI L L E & N. R. C O. 1 30 5 

3 9 2 U S 5 7 1, 2 0 L E d

r at e, d e s pit e t h e u n c o ntr o v ert e d e vid e n c e t h at gi v e n e q u al r at e s all tr affi c w o ul d m o v e b y tr ai n. Gi v e n a 

s er vi c e a d v a nt a g e, it s e e ms s o m ew h at u n r e ali sti c t o s u g g e st t h at r at e 

p arit y d o es n ot r e s ult i n u n d er c utti n g t h e c o m p etit or t h at d o es n ot 

p o s se s s t h e s er vi c e a d v a nt a g e. I n 

a n y e v e nt, r e g ar dl e s s of t h e l a b el 

u s e d, it s e e ms s elf- e vi d e nt t h at a 

c a rri e r’ s “i n h er e nt a d v a nt a g e ” of 

b ei n g t h e l o w c o st m o d e o n a f ull y 

di stri b ut e d c o st b a si s i s i m p air e d 

w h e n a c o m p etit or s et s a r at e t h at 

f or c e s t h e c a rri er t o l o w er it s o w n 

r at e b el o w it s f ull y di stri b ut e d c o st s 

i n or d er t o r et ai n t h e tr affi c. I n 

•[ 3 9 2 U S 5* 4 ]

a d diti o n, w h e n a ‘ r at e w ar w o ul d b e 

li k el y t o e v e nt u all y r e s ult i n p u s hi n g r at e s t o a l e v el at w hi c h t h e 

r at e s s et w o ul d n o l o n g er pr o vi d e a 

f a ir pr ofit, t h e C o m mi s si o n h a s tr a2 d 1 2 8 9, 8 8 S Ct 2 1 0 6 

diti o n all y, a n d pr o p erl y, t a k e n t h e 

p o siti o n t h at s u c h a r at e str u g gl e 

s h o ul d b e pr e v e nt e d fr o m c o m m e n ci n g i n t h e fir st pl a c e. C e rt ai nl y 

t h e r e i s n o s u g g e sti o n h er e t h at t h e 

r at e c h ar g e d b y t h e b ar g e-tr u c k 

c o m bi n ati o n w a s e x c e s si v e a n d i n 

n e ed of b ei n g dri v e n d o w n b y c o mp etiti v e pr e s s ur e. W e c o n cl u d e, 

t h er ef or e, t h at t h e C o m mi s si o n a d eq u at el y arti c ul at e d it s r e a s o n s f o r 

d et er mi ni n g t h at t h e r ailr o a d s’ r at e 

w o ul d i m p air t h e i n h er e nt a d v a nt a g e e nj o y e d b y t h e b ar g e-tr u c k 

s er vi c e.

T h e j u d g m e nt of t h e Di stri ct 

C o urt i s r e v er s e d a n d t h e c a se s ar e 

r e m a n d e d t o t h at c o u rt wit h dir e cti o n s t o e nt er a j u d g m e nt affir mi n g 

t h e C o m mi s si o n’ s or d er.

It i s s o or d er e d.

S E P A R A T E O PI NI O N

Mr. J u sti c e H arl a n, c o n c urri n g i n 

t h e r e s ult.

A s I u n d er st a n d t h e C o urt’ s p o siti o n, it i s t h at t h e C o m mi s si o n h a s 

n ot d e ci d e d, a n d t h u s t h e C o u rt n e ed 

n ot d e ci d e, t h e q u e sti o n e x pr e s sl y 

l eft o p e n i n I C C v N e w Y o r k, N. H. 

& H. R. C o., 3 7 2 U S 7 4 4, 1 0 L E d 

2 d 1 0 8, 8 3 S Ct 1 0 3 8: w h et h e r o utof- p o c k et c o st s, f ull y di stri b ut e d 

c o st s, or s o m e t hir d st a n d ar d s h o ul d 

b e t h e c rit eri o n f o r d et er mi ni n g, u nd er 5 1 5 a ( 3) of t h e I nt er st at e C o mm er c e A ct, 4 9 U S C § 1 5 a ( 3 ), a n d t h e 

N ati o n al Tr a n s p ort ati o n P oli c y 

( pr e c e di n g § 1 of t h e A ct), w hi c h 

m o d e of tr a n s p o rt ati o n h a s t h e i n ­

1. I d o n ot, h o w e v er, b eli e v e t h a t t h e 

C o urt ! p o siti o n i s r e all y s u p p ort e d b y it s 

r ef er e n c e s t o t h e ar e a pri ci n g a n d m or at ori a s y st e m s a p pr o v e d b y t h e C o urt i n 

t h e P er mi a n B a si n Ar e a R at e C a s e s, 3 9 0 

U S 7 4 7, 2 0 L E d 2 d 3 1 2, 8 8 S Ct 1 3 4 4. 

T h e C o urt’ s o pi ni o n i n t h o s e c a se s e mp h a si s e d t h at t h o s e a d mi ni str ati v e d e vi c e s 

w er e w a rr a n t e d i n li g ht of t h e t er m s of 

t h e N a t u r al G a s A ct a n d of t h e e xtr a orh er e nt a d v a nt a g e. T h e r e a s o ni n g of 

t h e C o urt’ s o pi ni o n i s, I t a k e it, 

t h at t h e C o m mi s si o n m a y pr o p erl y 

a d h er e t o a f ull y di stri b ut e d c o st s 

st a n d ar d p e n di n g it s d e ci si o n i n a 

s e p ar at e r ul e m a ki n g pr o c e e di n g, e n- 

•[ 3 * 2 U S 5 9 5]

titl e d ‘ R ul e s G o v er ni n g t h e A s s e mbli n g a n d Pr e s e nti n g of C o st E vid e nc e, D o c k et N o. 3 4 0 13.

Alt h o u g h I d o n ot d o u bt t h at a n 

a d mi ni str ati v e a g e n c y m a y, w h er e 

t h e or d erl y pr o c es s e s of a dj u di c ati o n 

or r ul e m a ki n g r e q uir e, d ef er t h e 

r e s ol uti o n of i s s u e s t o m or e a p pr opri at e pr o c e e di n g s, I s h o ul d h a v e

di n a r y diffi c ulti e s of r e g ul a ti n g i n d e p e n de nt pr o d u c er s of t h a t c o m m o dit y. I 

s h o ul d n ot h a v e t h o u g ht it u s ef ul or d esir a bl e t o e xtr a p ol at e fr o m t h o s e u n u s u al 

cir c u m st a n c e s a n y g e n er al e xt e n si o n of 

t h e di s cr eti o n of a d mi ni s tr ati v e a g e n ci e s. 

Of c o ur s e, t h e s p e cifi c pr o p o siti o n t a k e n 

b y t h e C o u rt t o d a y fr o m t h e o pi ni o n i n 

t h o s e c a se s, w hi c h h a d i n t ur n b e e n t a k e n 

fr o m L o s A n g el e s G a s C or p, v R ailr o a d
113

1306 U. S. SUPREME COURT REPORTS 20 L Ed 2a

had the greatest difficulty in say- »[j»2 US $»«]

ing that in fact thi s had occurred, these cases.* Nonetheless, ’given

or had been intended to occur, in both the Court’s conclusion and the

Commission, 289 US 287, 304, 77 L Ed

1180, 1191, 53 S Ct 637, may be regarded

as a general principle sust aine d by a number of the Court’s opinions. The difficulty,

I should have supposed, is tha t even that

general proposition is only dimly relevant

to the ques tion s now before us.

2. The appearance and disappearance of

the suggest ion tha t these questions must

be deferred pending the Commission’s

rulemaking proceedin gs on the presentation of cos t evidence des erves a more complete chronicle than the Court has given.

In 1965, more than thre e yea rs aft er the

Comm ission initiate d its rulemaking proceeding, 27 Fed Reg 4102, and some two

months before it decided these cases, the

Comm ission held that “a comparison of

out -of-pocket costs is the most appropriate method for asc ert aining . . . inherent com petitiv e advan tage” where one

of the com peting modes is unregulated.

The Commission found it unneces sary to

defe r tha t question, or even to mention

its separate rulemaking proceeding.

Grain in Multiple-Car Shipments— River

Crossing s to the So., 325 ICC 752, 772.

In the present case, the report and order of the Com mission’s Division 2 indicated that it "adhere[d] to the utilization

of fully distributed costs as the standard

for determ inin g the inherent advantage

of low cost in the situ ation presented."

323 ICC 768, 762-7 63. The opinion did

not pause to refer to the rulemaking proceeding. In the report and order of the

full Commission on reconsideration, the

only referen ce to the rulemak ing proceeding was the brief passa ge quoted by the

Court from the opinion's final section. 326

ICC 77, 84. The three dissen tin g members

of the Comm ission found it unnecessary to

refer to the rulemaking proceedin g. Id.,

at 86, 86, 90.

One year after its decision in these

cases, the Comm ission had occasion to review its approach to these problems. Although the Commission adhered to its

decisions in these cas es and in Grain in

Multiple-Car Ship men ts— River Crossings

to the So., supra, it did not find it necessary to adve rt to its sep ara te rulemaking

proceedin gs. It concluded tha t where the

competition from a regu lated carrier is

"re latively lim ited” it would apply the

rule from Grain in Multiple-Car Shipmen ts, and not tha t from these cases.

There is no evidence wha teve r tha t the

Comm ission regarded these two lines of

authority merely as temp orary expedients,

usefu l only until more care ful analy sis is

nossible. Wine, Pacific Coast to the East,

329 ICC 167, 171-175. And see the concurring opinions of Vice Chairman Tucker

and Comm issioner Fre as, id., at 176, as

well as the separate opinion of Comm issioner Murphy, dissen tin g in par t, id, at

177.

Alth ough the three-judge Distr ict Court

set aside the Comm ission ’s order in the se

cas es, it did not mention the rulemaking

proceeding. 268 F Supp 71.

In its juris dictional statem ent to thi s

Court, the Commission adverted to the

rulemaking proceeding only in a sin gle

sen tenc e, with an ide ntifying footno te,

contained in the statem ent’s conclusion.

Jurisdic tion al Sta tem ent in No. 809, at 17.

In the memorandum of the United St ate s,

urg ing that probable juris diction be noted,

it was said tha t thes e cases “pr ese nt a

major issu e reserved by this Court” in

New Haven, which was "wheth er out -ofpocket cost s, fully distributed costs , or

‘some diffe rent measure' should be the

criterio n for determ inin g which mode of

tran sportation has the inherent adv antage

. . . .” Memorandum for the United

States 3-4. In the various briefs presented to the Court in these four cases,

including the briefs of the United St ate s

and of the Comm ission, I have looked in

vain for any suggest ion tha t, as the Court

now holds, the Com mission’s opinion was

intended merely to defer resolution of the

question reserved in New Haven. Indeed,

I have searched uns ucc essfully in the

Com mission’s brief for any referen ce,

howe ver fleeting , to the rulemaking proceeding. One mig ht have supposed tha t

if, as the Court now finds, the existence

of the rule making proceeding wa s, in

the Com mie tian '» vie w, decisive to the

res ult of this case, the Commission would

have found room in its brief of 51 pages

at least to cite those proceedings. It is

difficult to escape the inference that the

Court has, on a bas is tha t will doubtless

prove as sur prising to the par ties as it

did to me, sim ply postponed decision of a

difficult issu e.
AMERICAN LINES v LOUISVILLE & N. R. CO. 1307

892 US 571, 20 L Ed

isolated statements in the Commission’s opinion consistent with that 

conclusion, I believe it best to acquiesce in the result reached by 

the Court, rathe r than to express 

•[89 2 US 597]

my views *as a single Justice upon 

the issue which the Court shuns.* 

I would be less than candid if I 

did not say that I regard this disposition of these cases as unsatis3. It is, howe ver, proper to add tha t I

have found no support in the record for

the Court’s suggestion that "the railroad

app ellees here determ ined to attem pt to

raise pre cise ly the same iss ue s [as in

2d 1289, 88 S Ct 2105

factory, for what is now done leaves 

this important question ju st where 

our decision of five years ago in the 

New Haven case left it, and new 

litigation will now be necessary to 

resolve the issue.

Mr. Justice Douglas, dissenting.

I would affirm the judgment below 

for the reasons stated by the District Court in 268 F Supp 71.

the rulemaking proceed ing] in a much

more circumscribed proc eeding by unilaterally reducing their rates on one item of

traffic.” Ante, at 590-591 , 20 L Ed 2d

1303.
490 OCTOBER TERM , 1969 

Per Curiam 396 U. S.

FLORIDA v. ALABAMA et al.

ON MOTION FOR LEAVE TO FILE BILL OF COMPL AINT

No. 37, Orig. Decided Janu ary 28, 1970

Sta te of Florida’s motion for leave to file complaint invoking Co urt’s 

original jurisdiction fails to sta te claim warran ting exercise of such 

jurisdiction.

Motion denied.

Claude R. Kirk, Jr., Governor of Florida, and Gerald

Mager on the motion.

Per Curiam.

On January 23, 1970, the plaintiff filed a motion for 

leave to file a complaint invoking the original jurisdiction of this Court naming 49 other States and Robert 

Finch, as Secretary of the Dep artm ent of Health, Education, and Welfare, as parties defendant.

The alleged emergent natu re of the claims for relief 

led the Court to give expedited consideration to the 

motion and proffered complaint and, having examined 

the complaint, we conclude it fails to state a claim against 

any of the defendants warranting the exercise of the 

original jurisdiction of this Court.

Accordingly, the motion to accelerate the time for 

responses to the proffered complaint and the motion for 

leave to file the proffered complaint are denied.
NORTHERN LINE S MERGER CASES 491

Syllabus

UNITE D STATES v. INT ERSTA TE COM MER CE 

COMMISSION et al.

APPEAL FROM TH E UN ITED 8TATES DISTRICT COURT FOR TH E

DISTRICT OF COLUMBIA

No. 28. Argued Octo ber 21, 1969—Decided Febru ary 2, 1970*

In 1967 the Inter sta te Comm erce Commission (IC C) approved a 

merger plan filed by the Gre at Northe rn Railway Co. (GN ) and 

the Northe rn Pacific Railway Co. (NP) (collectively the Northe rn 

Lines), and three of the ir subsidiaries, the' Pacific Coast Railroad 

Co., the Chicago, Burlington <fe Quincy Railroad Co. (Bu rlington), 

and the Spokane, Portla nd Seattle Railway Co. (SP&S). The 

Northe rn Lines operate largely west from St. Paul, Minneapolis, 

and Duluth , across the Northern Tie r of States to Spokane, 

Tacom a, and Portland. NP, with abou t 6,200 miles of track, runs 

generally to the south of GN, which operates about 8,200 miles 

of track. The Northern Lines jointly own and control the Bu rlington and the SP&S. The Burlington has 8,648 miles of track 

extending from Chicago to the Twin Cities and southwesterly to 

Missouri, Kansas, Colorado, and Montana, and by its subsidiaries 

reaches Houston and Galveston. The SP&S has more than 500 

miles of mainline road in Oregon and Washington which provides 

the most direct route from Spokane to Portland and is of strategic 

importance to the N orther n Lines. Rail competition in the N orthern Lines’ area is provided by GN and NP (the principal competito rs), and the Chicago, Milwaukee, St. Paul & Pacific Railroad Co. (Milwaukee), which has not been an effective long-haul 

competitor, never having had adequate access to the Pacific No rth ­

west gateways. Truck competition, present in the area for some 

time, is growing. GN ’s and NP's merger efforts span threequa rter s of a century. The present merger plan was disapproved 

by the ICC in 1966 by a vote of 6 to 5, the ICC finding that: 

although the estimated annu al savings would approxi mat e $25 

million by the ten th yea r aft er merger, a significant source of

•To gether with No. 38, Brundage et al. v. United States et al.,

No. 43, City of A ubu rn v. United States et al., and No. 44, Livingston

Anti-Merger Com mittee v. Interstate Commerce Commission et al.,

on appeal from the same court.
49 2 O C T O B E R T E R M , 19 69 

Syllabus 396 U. 8.

the savings would be the elimination of jobs; the merger would 

eliminate substan tial competition between GN and NP; even with 

protecti ve conditions for the benefit of the Milwaukee, it would 

remain a weak com petitor ; and the plan did not afford benefits of such scope and importance as to outweigh the lessening 

of rail competition in the No rthern Tier. The ICC reopened the 

proceedings in 1967 and considered new evidence on savings to be 

realized from the merger, and the addition al evidence resulting 

in the changed position of some of the maj or objectors to the 

plan. The ICC found th at : the savings would be more than $40

million a year by the ten th year; agreements with the employees had removed union objections to the merger and provided 

that no jobs would be eliminated except by att rit ion; and the 

app licants had accepted all protecti ve conditions sought by Milwaukee; and acknowledged that it had failed to give appro priate 

weight to § 5 of the Inter sta te Comm erce Act to facilitate rail 

mergers "consistent with the public interest.” The ICC then 

re-examined the anticompe titive effects of the merg er, weighing 

them against the savings and benefits to the public, shippers, and 

the roads, and, emphasizing the strength ened position of the Milwaukee, approved the plan because its benefits outweighed its 

anticom petitive effects. The three-judge District Court sustained 

the ICC , holding th at the ICC was guided by the applicable legal 

principles and th at its findings were supported by substan tial 

evidence. Four appe als were taken: (1) the United States, 

through the An titr ust Division of the Departm ent of Justice, 

argues th at the ICC did not properly app ly the standard of § 5 

in determining that the merger was consistent with the public 

interest. It contends th at when a merger will substantially 

diminish competition between two financially healthy, competing 

roads, the anticom petitive effects should preclude app rov al absent 

a clear showing th at a serious tra nsportation need will be met or 

important public benefits will be provided beyond the normal 

savings and efficiencies deriving from a merger; (2) the Northe rn 

Pacific Stockholders’ Prot ecti ve Com mittee challenges the exchange 

ratios agreed upon by the companies for the ir stock on the basis 

th at N P’s land holdings were insufficiently valued; (3) the City 

of Auburn, Wash ington (the western term inus for N P’s transcontinental tra ins whose yard would be closed if the merger were 

appro ved), sup ports the Departm ent of Justi ce’s brief, and contends th at the ICC failed to assess adeq uately the imp act of the 

merger on affected comm unities; and (4) the Livingston AntiMerger Com mittee urges th at the ICC had no autho rity to
118

NORTH ERN LINES ME RGER CASES 493

491 Syllabus

approve the merger because the NP , the successor by purchase 

in 1896 to the Northe rn Pacific Railroad Co. (Railroad) does not 

own the franchise and righ t of way involved in the merger as Congress did not auth orise the sale as required by Railroa d’s charter, 

and Railroad is not a pa rty to the mer ger; and th at if it is held 

th at NP does own the franchise, no merger can tak e place with out 

appro val of Congress. Held: *

1. The IC C’s conclusion th at the merger, as conditioned, 

comported with the public interest und er the standards of § 5

of the Inter sta te Commerce Act, as amended by the Tra nsp or- #

tation Act of 1940, is sup ported by the findings which the

ICC made on the basis of substan tial evidence after measuring

the competitive consequences of the merger against its resulting

benefits. Pp. 506-516.

(a) Congress intended bv the 1940 amendments "to facilitate 

merger and consolidation in the national transp ortatio n system,” 

and th at the industry “proceed toward an integrated tra nspo rta ­

tion system” (Co unty of Marin v. United States, 356 U. S. 412,

416, 4 18), and the congressional objective is n ot to be read as confining mergers to situations where weak carriers are preserved by 

combining with those th at are stron g. Pp. 508-511.

(b) Congress vested in the ICC the task of “apprais[ing] 

the effects of the curtailment of competition which will result 

from [a] proposed consolidation and consider them along with 

the adva ntag es of improved service, safer operation, lower costs, 

etc., to determine whether the consolidation will assist in effectua ting the over-all transp ortation policy.” McLean Trucking

Co. v. United States, 321 U. S. 67, 87. Pp. 511-513.

(c) The ICC’s determination th at the conditions agreed to 

by the applicants, the att rition agreements with the employees, 

the enhanced savings, and manifold service improvements to 

shippers and the public, outweighed the loss of competition between the Northe rn Lines, is sup ported by substantial evidence.

Pp. 513-516.

2. The ICC’s determination th at the stock exchange ratio 

applicable to Northe rn Pacific stockholders and Great Northern

stockholders, which was established, aft er protracted arm’s- *

length negotiations, with the approval of the companies and the

large maj ority of the ir stockholders, is just and reasonable, is

suppor ted by substantial evidence, and the ICC’s refusal to

reopen the record for evidence to upd ate it was not an abuse

of discretion. Pp. 516-522.
119

494 OCTOBER TERM , 1969

Syllabus 396 U. S.

3. The ICC found on the basis of substantia l evidence th at 

the mer ger’s long-run effect would benefit the No rthern Tie r 

communities, including Auburn, even if that cit y’s yard closed 

if the merger was approved. Since it now app ears th at the 

Auburn yard will remain open, the anticip ated principal harm to 

the city because of the merger has disappeared, and a fortiori

the ICC’s refusal to take furthe r evidence on the mer ger’s 

impact on the city was not an abuse of its discretion. Pp. 522-524.

4. The ICC did not err in refusing to disapprove the merger 

because of the Livingston Anti-Merger Com mittee’s contentio n 

that acquisition by NP of its railroad pro perty resulted from 

invalid foreclosure proceedings, as the ICC could, for purposes 

of the merger proceeding, properly rely on “existing judicial 

records supplemented by opinions of two Attorneys Gen eral” on 

the title question which were adverse to the Com mittee’s challenge; nor do the charter provisions of N P’s predecessor in 

interest foreclose the IC C’s approva l of the merger. Pp. 524-530.

296 F. Supp. 853, affirmed.

Assistant Attorn ey General McLaren argued the cause 

for the L nited States. With him on the briefs were 

Solicitor General Griswold, De puty Solicitor General

Springer, and Howard E. Shapiro. Louis B. Dailey

argued the cause for appellants in No. 38. With him 

on the briefs was Harry Tyson Carter. Valentine B.

Deale argued the cause and filed briefs for appellant in 

No. 44. Robert L. Wald and Joel E. Hoffman filed a 

brief for appellant in No. 43.

Fritz R. Kahn argued the cause for appellee Int erstate Commerce Commission in all cases. With him on 

the brief were Robert W. Ginnane and Jerome Nelson.

Hugh B. Cox argued the cause for appellees G reat Northern Railway Co. et al. in all cases. With him on the 

briefs were Ray Garrett, D. Robert Thomas, Lee B. McTum an, Michael Boudin, An tho ny Kane, Louis E.

Torinus, Earl F. Requa, Frank S. Farrell, Eldon Martin,

R. T. Cubbage, and Richard J. Flyn n. Fred H. Tolan
120

NORTH ERN LINES ME RGER CASES 495

491 Opinion of the Cou rt

argued the cause for appellees Pacific Northwest Shippers 

in No. 28. With him on the brief was Alan F. Wohlstetter. Raymon d K. Merrill argued the cause for appellee Chicago, Milwaukee, St. Paul & Pacific Railroad 

Co. in No. 28. With him on the brief were Edwin O.

Schiewe, Warren H. Ploeger, Thomas H. Ploss, and 

Edward H. Foley. Lee Johnson, Attorney General of 

Oregon, and Richard W. Sabin, Assistant Attorney General, filed a brief for appellee Public Utility Commissioner 

of Oregon in No. 28.

Mr. Chi ef Justice Burger delivered the opinion of 

the Court.

The Interstate Commerce Commission orders tha t 

give rise to these appeals grow out of applications seeking 

approval of a merger plan filed by the Great Northern 

Railway Company and the Northern Pacific Railway 

Company (collectively the Northern Lines), and three of 

their subsidiaries—the Pacific Coast Railroad Company, 

the Chicago, Burlington & Quincy Railroad Company 

(Burlington), and the Spokane, Portland & Seattle Railway Company (SP&S). The Commission approved the 

merger and a three-judge Federal District Court for the 

District of Columbia affirmed the orders of the Commission.1

 We affirm the judgment of the District Court.

The factual and historical setting of the merger is 

important to an understanding of our disposition of these 

appeals. Great Northern operates some 8,200 miles of 

road located in 10 States and two Canadian provinces. 

Northern Pacific has approximately 6,200 miles of track 

in seven States and one Canadian province. The N orth ­

ern Lines operate largely in the area west of St. Paul, 

Minneapolis, and Duluth, running from these points

1

 The three-judge court decision is reported as United States v. 

United States, 296 F. Sup p. 853 (D. C. D. C. 1968).
496 OCTOBER TERM , 1969 

Opinion of the Court 396 U.S .

across the Northern Tier of States (Minnesota, Nor th 

Dakota, Montana, Idaho, and Washington) to Spokane, 

Tacoma, and Portland. The Northern Pacific’s tracks 

run generally somewhat to the south of the Great Northern’s. The Northern Lines jointly own and control the 

Burlington and the SP&S, while the Great Northern 

owns and controls the Pacific Coast Railroad Company. 

The Burlington’s 8,648 miles of track extend from Chicago to the Twin Cities and generally southwesterly to 

Missouri, Kansas, Colorado, and Montana. By its subsidiaries 5

 the Burlington reaches the Gulf of Mexico at 

Houston and Galveston. The SP&S has 599 miles of 

road in Oregon and Washington, of which 515 are mainline. This mainline provides the most direct route from 

Spokane to Portland and is of strategic importance to 

the Northern Lines because Spokane lies on their main 

transcontinen tal routes and Portland is an imp orta nt 

West Coast terminal for both roads. The Pacific Coast 

has 32 miles of track, all in King County, Washington; 

its rolling stock and motive power are leased from the 

Great Northern.

Rail competition in the areas served by the Northern 

Lines is principally between three carriers: the Great 

Northern, the Northern Pacific, and the Chicago, Milwaukee, St. Pau l & Pacific Railroad Company (Milwaukee). Because the Burlington’s routes largely complement those of the Northern Lines, there is no 

substantial competition between the Burlington and its 

corporate paren ts. The Great Northern and the Northern Pacific overshadow the Milwaukee and are each the 

principal competitor of the other. The Northern Lines 

carry the lion’s share of traffic between the Twin Cities

2

 The Colorado <fc Southern Railway Company and the Fort 

Worth <t Denver Railway Company are both controlled by the 

Burlington.
122

NORTH ERN LINES ME RGER CASES 497

491 Opinion of the Court

and Duluth and the Pacific Northwest, both roads having 

good access to the Pacific Northwest through control of 

certain vital gateways in the area. Although the Milwaukee was designed and constructed to be a competitor 

of the Northern Lines, it has never accounted for a large 

percentage of the carriage across the Northern Tier States *

to the Pacific Northwest; it has never become a ratemaking railroad. The explanation for this is that although possessing superior grades and a shorter route w

west of the Twin Cities, it has never had adequate access 

to the gateways of the Pacific Northwest, largely because 

of the Northern Lines’ control of the SP&S. As a result, 

its role has been t ha t of a short-haul carrier feeding much 

profitable long-haul traffic to the Northern Lines at 

St. Paul and Minneapolis.

The population of the Northern Tier region traversed 

by the Northern Lines and the Milwaukee is concentrat ed largely in its easterly and westerly extremities.

The Northern Tier is rich in agricultural and mineral 

resources, and embraces the coun try’s richest timber 

reserves. However, the markets for the products of the 

Northern Tier are limited in number and distant from 

the region; the major shipments must move east. Thus, 

transportation capable of carrying its bulk products at 

a rate low enough to permit participation in those markets is of extreme importance to the region. Rail transportation well serves this need. There has been historically, however, an imbalance between the low-rated 

agricultural, mineral, and forest produce traffic flowing 

out of the region, and high-rated manufactured goods 

flowing into the region. The former is traffic inherently 

suited to rail transport, but the latter is subject to incursions from other modes of carriage. Although water 4

traffic in the Northern Tier is virtually nonexistent, truck 

competition has been present for some time and is 

growing.
498 OCTOBER TERM , 1969 

Opinion of the Court 396 U. 8.

Northern Pacific and Great Northern have long sought 

to merge into a single unified transportation system. 

In Pearsall v. Great Northern R. Co., 161 U. S. 646 

(1896), this Court ruled that an att em pt to consolidate 

the operation of the two roads was contrary to a Min ­

nesota statute prohibiting the consolidation of parallel 

and competing railroads. The next merger attem pt was 

struck down in Northern Securities Co. v. United States,

193 U. S. 197 (1904), as contrary to the Sherman Act, 26 

Stat. 209, 15 U. S. C. § 1 et seq.3 4 Then the declining 

fortunes of rail carriers led Congress to enact the Tra nsportation Act of 1920, 41 Stat. 456, which charged the 

Interstate Commerce Commission with the affirmative 

responsibility to formulate plans for simplifying the 

Nation’s rail tran sport “into a limited number of systems.’’ 41 Stat. 481. This engendered a third effort, 

under the Commission’s auspices, to merge the Northern 

Lines? However, this effort foundered on the Commission’s requirement that the Burlington be excluded 

from the Northern Lines system, and the Northern Lines 

were unwilling to consolidate without the Burlington.

I

The Prese nt Merger

In 1955 the Northern Lines began investigating anew 

the possibility of a merger that would combine five 

roads—the Burlington, the SP&S, the Pacific Coast, and 

the Northern Lines—to form a New Company. Extensive negotiations dealing with all phases of the proposed 

merger were commenced. Five years later, in 1960, an 

agreement was finally reached. It provided that the 

Northern Lines, the Burlington, and the Pacific Coast

3

 Th e vote in this historic case was 5 to 4 with one of the 

majority, Mr. Justice Brewer, joining on narrower grounds.

4

 See Great Northern Pacific R. Co. Acquisition, 162 I. C. C. 37
124

NORTHERN LIN ES ME RGER CASES 499

491 Opinion of the Cou rt

be merged into New Company, which was to acquire 

the subsidiaries of the merged companies as well as all 

their leasehold, trackage, and joint-use rights in other 

carriers and the terminals incident thereto. New Company would lease the SP&S, thereby acquiring that 

road’s subsidiaries and trackage rights.

The merger agreement further provided that Northern 

Pacific shareholders would receive common stock of New 

Company on a share-for-share basis. Great Northern 

stockholders would receive one share of New Company 

common for each share of Great Northern and, in addition, one-half share of New Company $10 par 5y2 % preferred for each share of Great Northern held at the date 

of the merger, this preferred stock to be retired over a 

25-year period, beginning at the fifth anniversary of the 

merger, and to be redeemable at the option of New Company any time after the fifth anniversary of the merger. 

The Burlington stock held by the Northern Lines, 

amounting to 97.18%> of the total shares outstanding, 

would be canceled and the remaining shareholders given 

3.25 shares of New Company common for each share of 

Burlington.

Commission Proceedings

First Report.— As a result of these renewed merger 

negotiations between 1955 and 1960, applications were 

filed in 1961 under § 5 of the Interstate Commerce Act, 

24 Stat. 380, as amended, 49 U. S. C. § 5, seeking approval of the merger and authorization for the issuance 

of stock and securities, the assumption of obligations 

and other auth ority necessary to effectuate the merger.’ 

Extensive public hearings were held in 1961 and 1962 at

5

 Among the allied transaction s were the issuance of certain 

securities and the assum ption of obligations and liability in respect 

of securities under § 20a of the Int ers tat e Commerce Act, and the 

obtaining of certain extensions and abandonm ents of railroad lines 

under §§ 1 (18) to 1 (20 ), inclusive, of the Act.
125

500 OCTOBER TERM , 1969

Opinion of the Court 396 U. S.

which the Department of Justice, the Dep artm ent of 

Agriculture, various railway employee groups, nine State s 

or state regulatory agencies, and the Milwaukee and the 

Chicago & North Western Railway Company (No rth 

Western), inter alia, actively opposed the merger as 

t proposed. Shippers and related interest groups appeared in support of the proposal. The Hearing Examiner submitted a report in 1964 recommending approval

K

of the merger and the related transactions, subject to

certain protective conditions. The Commission heard 

oral argument and in a repo rt dated March 31, 1966 

(First Report), rejected the Exam iner’s recommendation and disapproved the merger by a vote of 6 to 5.*

The applicants petitioned for a reconsideration, asserting that they w’ere willing to accept all protective conditions sought by the Milwaukee and anoth er affected road, 

the North Western, that they had entered into attriti on 

agreements with the objecting unions for the protection 

of the employees, and th at the merger would yield 

dollar savings greater than those estimated in the 

Firs t Report. While this petition was pending before 

the Commission, the applicants entered into agreements 

with the North Western and the Milwaukee which provided that the merger applicants would agree to all the 

conditions sought by those roads; the Milwaukee and 

the North Western then agreed to support the merger? 

Thereafter, these roads withdrew their opposition to the 

merger and urged the Commission to approve it. ApA

proval was advocated or objections withdrawn by a

number of parties who had previously either completely 

opposed the merger or opposed it absent imposition of

* 8 328 I. C. C. 460 (1966). The majority included Commissioners

Bush, Tucker, Webb, Tierney, Brown, and Deason. Commissioners 

Tuggle, Freas, Mu rphy, Wa lrath, and Goff dissented.

7

 Th e Northern Lines also agreed not to oppose the authorization 

of a proposed Milwaukee-N orth Western merger.

44-9 87 0 - 75 - 9
126

NORTHERN LINE S MERGER CASES 501

491 Opinion of the Court

adequate protective conditions. These included the 

Departm ent of Agriculture, the Public Utility Commissioner of Oregon, and the State s of North Dakota, South 

Dakota, Iowa, Wisconsin, and Michigan.’

Second Repo rt.—On January 4, 1967, the Commission granted the application and reopened the pro- 4

ceedings for reconsideration and further hearings. Although the order by its terms reopened the proceedings

on all issues, the hearing was limited to taking evidence *

on the question of the amount of savings the merger

would produce in light of the agreement between the 

applicants and the Milwaukee and the North Western, 

and the other changes relevant to savings which had 

occurred after the close of the first hearing. Oral arguments followed. On November 30, 1967, the Commission handed down a report and order (Second Report) 

approving the proposed merger by a vote of 8 to 2 as 

consistent with the public interest and imposing certain 

conditions to protect other carriers.’ On April 11,

1968, the Commission denied an application for 

reconsideration. 10

• Petitions were also filed by the Northe rn Pacific Stockholders’

Protective Committee seeking further hearings with respect to the 

justness and reasonableness of the term s of the merger agreement, 

and the Den ver & Rio Grande Railroad seeking an investigation 

into the agreements entered into by the applicants with the Milwaukee and the No rth Western. These petitions were denied.

’ 331 I. C. C. 228 (1967). Commissioners Tuggle, Mur phy,

Walrath, Bush, Tucker, Deason, Stafford, and Syphers voted to

approve the merger, while Commissioners Tierney and Brown dis- i

sen ted. Commissioner Hardin did not participate in the decision.

10 In this order the Commission modified one of the conditions 

placed on the merger by the order of November 30, 1967. On 

June 17, 1968, a furthe r order was issued, ruling that the Milwaukee 4

must be allowed to bring grain traffic through 11 gateways opened 

to it by conditions contained in the Second Report. Neither the 

order of April 11 nor that of June 17 was challenged in the District 

Court. Hence, they are not before us.
127

502 OCTOBER TERM , 1969

Opinion of the Court 396 U. 8.

District Court Proceedings

The United States, acting through the Dep artm ent of 

Justice, filed a complaint on May 9, 1968, in the United 

States District Court for the District of Columbia challenging the Commission order approving the merger. 

Other parties intervened, some as plaintiffs “ and some 

as defendants.11 After preliminary proceedings had 

resulted in a stay of the Commission’s order pendente

lite, the case was submitted on the merits to the threejudge court designated in accordance with 28 U. S. C. 

§§ 2325 and 2284. The court, in an opinion by Senior 

Circuit Judge Charles Fahy, unanimously sustained 

the Commission, holding that in approving the merger 

and the related transactions the Commission was guided 

by the applicable legal principles and that its findings 

were supported by substantial evidence. The court dismissed the complaints, vacated the stay pendente lite,

and then stayed its order pending appeal to this Court. 

Upon the filing of appeals with this Court, we ordered 

a further stay pending final disposition.

II

The Appeals Here

Four appeals were taken from the District Cou rt’s 

judgme nt; the Dep artm ent of Justice (No. 28), the 

Northern Pacific Stockholders’ Protective Committee

11 Attack ing the merger were the following: the Northern Pacific 

Stockholders’ Protective Committee; the City of Auburn, Washington ; the Sta te of Washington; the Board of Railroad C omm i««ion«»n»

of Mo ntana; the Livingston Anti-Merger Com mittee; and the 

Public Service Commission of Minnesota.

12 Th e intervening defen dants included the applicants, the Milwaukee, the Public Util ity Commissioner of Oregon, and 230 Pacific 

Northwest shippers.
128

NORTH ERN LIN ES MERGER CASES 503

491 Opinion of the Cou rt

(No. 38), the City of Auburn, Washington (No. 43), 

and the Livingston Anti-Merger Committee (No. 44).

Each of the four appellants attacks the approval of 

the merger on different grounds. Because these challenges cover every aspect of the merger, and because of 

the rather complex expositions of fact necessary to the 

disposition of each objection, these appeals will be dealt 

with seriatim. With the cases in this posture the Court 

must review the proceedings before the Commission to 

“determine whether the Commission has proceeded in 

accordance with law and whether its findings and conclusions accord with the statutory standards and are 

supported by substantial evidence.” Penn-Central

Merger and N&W Inclusion Cases, 389 U. S. 486, 499 

(1968). It should be emphasized, however, as Mr. Justice Fortas noted, speaking for the Court in a similar 

context, “(w]ith respect to the merits of the merger . . . 

our task is limited. We do not inquire whether the 

merger satisfies our own conception of the public interest. Determination of the factors relevant to the public 

interest is entru sted by the law primarily to the Commission, subject to the standards of the governing sta tute.” Id., at 498-499.

The governing sta tut e here is § 5 of the Interstate 

Commerce Act, as amended by the Transpo rtation Act 

of 1940, 54 Stat. 905, 49 U. S. C. § 5. The Act provides 

that the Commission is to approve a proposed merger 

when it is “consistent with the public inte rest” and the 

terms of the proposal are “just and reasonable.” In 

determining whether this standard is met, the Commission is to

“give weight to the following considerations, among 

others: (1) The effect of the proposed transaction 

upon adequate transportation service to the public; 

(2) the effect upon the public interest of the 

inclusion, or failure to include, other railroads
504 OCTOBER TE RM , 1969 

Opinion of the Court 396 U. 8.

in the territory involved in the proposed transaction; (3) the total fixed charges resulting from the 

proposed transaction; and (4) the interest of the 

carrier employees affected.” 49 U. S. C. § 5 (2 )(c).

In addition to the four factors listed above, the Commission must also consider the anticompetitive effects of 

any merger or consolidation, because under §5(1 1) of 

the Interstate Commerce Act any transa ction approved 

by the Commission is relieved of the operation of the 

antitr ust laws. McLean Trucking Co. v. United States,

321 U. S. 67, 83-87 (1944).

In its Firs t Report the Commission found th at the 

merger would result in improved service to shippers in 

areas served by the Northern Lines because it would 

enable the roads to make more efficient use of their facilities and would permit the use of the shortest and 

swiftest internal routes available. In addition, the 

merger was found to afford e stimated savings of approximately $25 million per year by the tenth year after 

merger. However, the Commission also found th at as 

a consequence of the merger more than 5,200 jobs would 

be eliminated, this being a significant source of the 

reduced operating costs. The Commission then analyzed 

the antic ompetitive impact of the proposal and found 

it would eliminate substantial competition between the 

Northern Lines in the Northern Tier. The Commission 

reasoned th at even with protective conditions attached 

to the merger for the benefit of the Milwaukee, it would 

remain a weak carrier in the Northern Tier when compared with New Company. The Commission, by a vote 

of 6 to 5, as noted earlier, concluded that the proposed 

merger plan did not afford benefits of such scope and 

importance as to outweigh the lessening of rail competition in the Northern Tier; the merger was disapproved.

When the Commission reopened the proceedings in
130

NORTHERN LINES MERGER CASES 505

491 Opinion of the Court

1967, it considered additional evidence including the 

changed positions of some of the major objectors, and 

new evidence on the savings to be realized from the 

merger; the Second Report was then issued. The Commission found th at rath er than the $25 million previously estimated, in fact more than $40 million per year 4

in savings would be realized by the tenth year after 

merger. It also noted tha t agreements entered into by 

the applicants and their employees had removed objec- *

tions of various unions to the merger and that no jobs 

would be eliminated except in the normal course of a ttrition. Aside from these changes, and the acceptance by 

the merger applicants of protective conditions sought 

by the Milwaukee, the record before the Commission 

was the same as that on which the Firs t Report was 

based. The Second Report acknowledged t ha t the First 

Report had failed to give appropriate weight to one of 

the aims of the national transportation policy and § 5 of 

the Interstate Commerce Act, to facilitate rail mergers 

“consistent with the public inte rest” in the development 

of a comprehensive national transport system, and tha t 

this had led the Commission to view the merger proposal 

too stringently. It then went on to re-examine the anticompetitive effects of the merger, weighing them against 

the savings and benefits to the public, shippers, and the 

roads, and, accentuating the new’ and strengthened competitive posture of the Milwaukee, it concluded that the 

merger proposal should be approved because its benefits 

outweighed its anticompetitive effects in the Northern 

Tier region.

Th at this was not an easy problem for th e Commission 

is attested by the lengthy history of atte mp ts to merge 

these lines which dates back three-quarters of a cen- *

tury. The efforts to establish a more unified rail transportation system in the Northern Tier represent a 20th
131

506 OCTOBER TERM , 1969

Opinion of the Court 396 U. S.

century phase of the development of the American West; 

it brackets a period of enormous growth and change, and 

of new developments in transportation and public needs. 

Against this background it is not surprising that the 

members of the Commission were divided 6 to 5 against 

the merger on the First Report in 1966 and 8 to 2 in 

favor of the merger on the Second Report in 1967 after 

changes had been made in the plan to meet many of 

the objections raised. Nor is it remarkable that two 

great departm ents of government, each charged with 

responsibility to protect the public interest, took opposing positions; vigorous advocacy of divergent views on 

this difficult problem has narrowed and sharpened the 

issues and aided the Court in their resolution, ensuring 

that no factor which ought to be considered would elude 

our attention.

Appellants’ Contentions

(a) A’o. 28, Departm ent of Justice.—The United 

States, through the Antitrust Division of the Justice 

Department, challenges the Commission’s approval of 

the merger primarily on the ground that the Commission in the Second Report did not properly apply the 

standard of § 5 (2 )(b) of the Int ers tate Commerce Act 

in determining th at the merger is consistent with the 

public interest. The Dep artm ent contends that under 

the sta tute when a proposed merger will result in a 

substantial diminution of competition between two financially healthy, competing roads, its anticompetitive 

effects should preclude the approval of the merger absent 

a clear showing th at a serious tran sportation need will 

be met or important public benefits will be provided 

beyond the savings and efficiencies th at normally flow 

from a merger. The Dep artm ent urges that the instant 

case presents a merger between two financially healthy 

carriers, each of which is the prime competitor of the
132

NORTH ERN LIN ES ME RGER CASES 507

491 Opinion of the Court

other in the area served. Admittedly the Commission 

found in its First Report that the merger would result 

in a “drastic lessening of competition.” The Department argues that because no benefits are shown to flow 

from the merger beyond the economies and efficiencies 

normally resulting from unified operations, the Com- 4

mission has not satisfied the statutory standard and tha t 

the D istrict C ourt erred in refusing to enjoin the merger.

The Dep artm ent maintains that prior to 1920 the *

antitr ust law’s and their underlying policies applied with 

full force to railroads and that the Transportatio n Act 

of 1920, which commanded an affirmative development 

by the Commission of a nationwide plan “for the consolidation of the railway properties of the continental 

United States into a limited number of systems,” 41 

Stat. 481, was primarily intended to promote the absorption of financially weak by strong carriers. To the 

extent that the 1920 Act did not intend to encourage 

rail mergers producing only the usual or “normal” kinds 

of merger benefits, the Departm ent contends that the 

policies of the antitr ust laws remain the guiding standard 

by which these consolidations are to be judged. The 

Transpo rtation Act of 1940, according to the Dep artment, did not alter this policy, but only eliminated the 

Commission’s duty to formulate a national plan and to 

confine mergers to the four corners of this plan. The 

Departm ent suggests t ha t when the Commission is determining whether a merger or consolidation is consistent 

with the public interest, it must analyze the merger in ‘

terms of its anticompetitive impact and, if that impact 

would be great, then determine whether the merger is 

required by a serious transportatio n need or necessary M

to secure imp orta nt public benefits. This standard, it 

urges, is “consistent with both the legislative history of 

[§ 5] and, more generally, with the goal of substantial
508 OCTOBER TERM , 1969

Opinion of the Cou rt 396 U. 8.

simplification of railroad systems that underlay the 

Transportation Acts of both 1920 and 1940.” ”

The Dep artm ent of Justice is correct in stating th at 

one focal poin t of concern thro ughout the legislative 

consideration of the problems of railroads has been 

the weak carrier and its preservation through combination with the strong. Congress saw th at as one—but 

only one—means to promote its objectives. The 1920 

sta tute as a whole also embodied concern for economy 

and efficiency in rail operations. See Railroad Commission of California v. Southern Pacific Co., 264 U. S. 331, 

341 (1924); Texas & Pacific R. Co. v. Gulf, Colorado &

Santa Fe R. Co., 270 U. S. 266. 277 (1926); Texas v. 

United States, 292 V. S. 522. 530 (1934); United State s

v. Lowden, 308 U. S. 225, 232 (1939). Thus, a rail 

merger that furthers the development of a more efficient 

transportation unit and one that results in the joining 

of a “sick” with a strong carrier serve equally to promote 

the long-range objectives of Congress and, upon approval 

by the Commission, both are immunized from the oper13 We might note tha t the subs tance of the Dep art ment’s position 

with respect to the Commission’s power to app rov e consolidations 

was presented to this Cou rt by the Secreta ry of Agriculture in 

No. 31, O. T. 1943, McLean Trucking Co. v. United States, 321 U. S. 

67 (1944), Brief for Secretary of Agriculture of the United States 

38, 40, and to the three-judge court in the Seaboard-Coast Line 

merger litigation, Florida East Coast R. Co. v. United States, 259 F. 

Supp. 993, 1012-1013 (D. C. M. D. Fla. 1966), aff’d per curiam, 386 

U. S. 544 (1967). In both of these cases, one decided in 1944 and 

the other in 1966, the De partm ent’s position was rejected. In add ition, in 1962 a bill was before the Senate that would have imposed 

a moratorium on the Commission’s approva l of large railroad mergers 

that would otherwise violate § 7 of the Clayton Act, 38 Sta t. 731, 

15 U. S. C. § 18. The De partment actively supported the bill. It 

was not repo rted out of committee. See Hearings on S. 3097 before 

the Subcommittee on Antitr ust and Monopoly of the Senate Committee on the Judicia ry, 87th Cong., 2d Sees. (1962).
NORTH ERN LINES MERGER CASES 509

401 Opinion of the Cou rt

ation of the antitr ust laws. The policy of the 1920 Act 

has been consistently interpreted in this way. We find 

no basis for reading the congressional objective as confining these mergers to combinations by which the strong 

rescue the halt and the lame.

In New York Central Securities Corp. v. United

States, 287 U. S. 12 (1932), this Court cautioned that 

“ [t] he fact th at the carriers’ lines are parallel 

and competing cannot be deemed to affect the validity of the auth ority conferred upon the Commission. . . . The question whether the acquisition 

of control in the case of competing carriers will aid 

in preventing an injurious waste and in securing 

more efficient transportatio n service i9 thus committed to the judgment of the administrative agency 

upon the facts developed in the particular case.” 

Id., at 25—26.

Although this decision was prior to the passage of the 

Tran sportation Act of 1940, that Act in no way altered 

the basic policy M underlying the 1920 enactment. We 

recognized in St. Joe Paper Co. n. Atlan tic Coast Line

R. Co., 347 U. S. 298, 319 (1954), that Congress adopted 

the recommendations of the Committee of Six when it 

passed the 1940 Tran sportation Act and relieved the 

Commission of its duty to promulgate a national railroad 

consolidation plan. Th at Committee’s report recognized 

economies and efficiencies of operation as well as the 

elimination of circuitous routing to be benefits that could

14 The Commission apparently had no difficulty in approving a 

merger of the Northern Lines under a plan similar to th at held 

violative of the Sherm an Act in Northern Securities Co. v. United

States, 193 U. 8. 197 (1904). The Commission gave as one of the 

considerations leading it to app rove the proposed merger, “th e feasibility of making large operatin g economies.” Great Northern

Pacific R. Co. Acquisition, 162 I. C. C. 37, 47 (1930).
135

510 OCTOBER TERM , 1969

Opinion of the Court 396 U. 8.

flow to the public through consolidations.” As recently 

as County of Marin v. United States, 356 U. S. 412 

(1958), this Court observed:

“The congressional purpose in the sweeping revision of § 5 of the Inters tate Commerce Act in

• 1940 . . . was to facilitate merger and consolidation in the national transportation system. In the 

Transpo rtation Act of 1920 the Congress had dix

rected the Commission itself to take the initiative

in developing a plan ‘for the consolidation of the 

railway properties of the continental United States 

into a limited number of systems,’ 41 Stat. 481, but 

afte r 20 years of trial the approach appeared inadequate. The Transpo rtation Act of 1940 extended § 5 

to motor and water carriers, and relieved the Commission of its responsibility to initiate the unifications. ‘Instead, it authorized approval by the Commission of carrier-initiated, volun tary plans of 

merger or consolidation if, subject to such terms, 

conditions and modifications as the Commission 

might prescribe, the proposed transa ctions met with 

certain tests of public interest, justice and reasonableness . . . ; (Emphasis added.) Schwabacher

v. United States, 334 U. S. 182, 193 (1948). . . 

In short, the result of the Act was a change in 

the means, while the end remained the same. 

The very language of the amended ‘unification section’ expresses clearly the desire of the Congress

* th at the indu stry proceed toward an integrated na15 Report of Com mittee appointed September 20, 1938, by the 

President of the United States, to Submit Recommendations upon 

the General Tra nsp ort ation Situation, December 23, 1938, in Hearings on H. R. 2531 before the House Com mittee on Int ers tat e and 

Foreign Commerce, 76th Cong., 1st Seas., 259-308 (1939).
136

NORTH ERN LINES MERGE R CASES 511

491 Opinion of the Cou rt

tional transportatio n system through substantial 

corporate simplification.” Id., at 416-418. (Em ­

phasis in original.) (Footnotes omitted.)

We turn now to consider the appropriate weight to 

be accorded by the Commission to antitr ust policy in 

proceedings for approval of a merger. The role of antitru st policy under § 5 was discussed comprehensively 

and dispositively in McLean Trucking Co. v. United

State*, 321 U. S. 67 (1944), a case dealing with a merger 

of several large trucking companies. Since this Court 

has nowhere else dealt so definitively with this issue, 

the analysis by Mr. Justice Rutledge in the opinion for 

the Court merits extended quotation:

“The history of the development of the special 

national transportatio n policy suggests, quite apart 

from the explicit provision of §5 (1 1) , that the 

policies of the anti-tr ust laws determine ‘the public 

interest’ in railroad regulation only in a qualified 

way. And the altered emphasis in railroad legislation on achieving an adequate, efficient, and economical system of transportation through close 

supervision of business operations and practices 

rather than through heavy reliance on the enforcement of free competition in various phases of the 

business, cf. New York Central Securities Corp. v. 

United States, 287 U. S. 12, has its counterpart in 

motor carrier policy. . . .

41 [T]here can be little doubt tha t the Commission 

is not to measure proposals for all-rail or all-motor 

consolidations by the standards of the anti-trust 

laws. Congress authorized such consolidations because it recognized that in some circumstances they 

were appropriate for effectuation of the national 

transportation policy. It was informed that this
137

512 OCTOBER TERM , 1969

Opinion of the Court 396 U. S.

policy would be furthered by ‘encouraging the organization of stronger units’ in the motor carrier industry. And in authorizing those consolidations it 

did not import the general policies of the anti-t rus t 

laws as a measure of their permissibility. It in 

• terms relieved participants in appropriate mergers

from the requirements of those laws. § 5 (11). In 

doing so, it presumably took into account the fact 

» that the business affected is subject to strict regulation and supervision, particularly with respect to 

rates charged the public—an effective safeguard 

against the evils atten ding monopoly, at which the 

Sherman Act is directed. Against this background, 

no other inference is possible b ut tha t, as a factor in 

determ ining the propriety of motor-carrier consolidations the preservation of competition among carriers, although still a value, is significant chiefly as 

it aids in the attainment of the objectives of the 

national tran sportation policy.

“Therefore, the Commission is not bound . . . to 

accede to the policies of the anti-tr ust laws . . . .

“Congress however neither has made the a nti-trust 

laws wholly inapplicable to the transportation industry nor has authorized the Commission in passing 

on a proposed merger to ignore their policy. . . . 

Hence, the fact that the carriers participating in a 

properly authorized consolidation may obtain immunity from prosecution under the anti-tr ust laws 

in no sense relieves the Commission of its duty , 

as an administrative matter, to consider the effect 

of the merger on competitors and on the general 

competitive situation in the industry in the light of 

the objectives of the national transportation policy.

"In short, the Commission must estimate the 

scope and appraise the effects of the curtailment of 

competition which will result from the proposed
138

NORTHERN LINES ME RGER CASES 513

491 Opinion of the Court

consolidation and consider them along with the 

advantages of improved service, safer operation, 

lower costs, etc., to determ ine whether the consolidation will assist in effectuating the over-all transportation policy. Resolving these considerations is 

a complex task which requires extensive facilities, 

expert judgment and considerable knowledge of 

the transportation industry. Congress left th at 

task to the Commission . . . . ‘The wisdom and 

experience of that commission,’ not of the courts, 

must determine whether the proposed consolidation 

is ‘consistent with the public interest.’ [Citations 

omitted.] If the Commission did not exceed the 

statutory limits within which Congress confined its 

discretion and its findings are adequate and supported by evidence, it is not our function to upset 

its order.” Id., at 83-88. (Footnotes omitted.)

Accord, Minneapolis A St. L. R. Co. v. United States, 361 

U. S. 173, 186-188 (1959); Seaboard Air Line R. Co. v. 

United States, 382 U. S. 154, 156-157 (1965); see Florida

East Coast R. Co. v. United States, 259 F. Supp. 993 

(D. C. M. D. Fla. 1966), aff’d per curiam, 386 U. S. 544 

(1967).

The Dep artm ent urges that the Commission failed to 

give sufficient weight to the diminution of competition 

between the Northern Lines—in short, that it failed to 

strike the correct balance between antitrust objectives 

and the overall transportation needs that concern Congress. This contention tends to isolate individual factors 

th at are to ente r into the Commission’s decision and 

view them as the controlling considerations. “Competition is merely one consideration here,” Penn-Central

Merger and NAW Inclusion Cases, 389 U. S. 486, 500 

(1968). And, we might add, it is a consideration tha t is 

implied and is in addition to the four specifically men-
139

514 OCTOBER TERM , 1969

Opinion of the Court 396 U. 8.

tioned in § 5 (2)(c ) of the statute. In our view the 

Commission, in both reports, exhibited a concern and 

sensitivity to the difficult task of accommodating the 

regulatory policy based on competition with the longrange policy of achieving carrier consolidations. Indeed,

#

this led the Commission to disapprove the merger by a 

margin of one vote in 1966 afte r five years of study 

because of specified infirmities in the plan. The Commission reached a different conclusion by a decisive vote 

in 1967 on a supplemental record which reflected substantia l changes in the merger plan. Our review, like 

that of the District Court, reveals substantial record evidence to supp ort the Commission’s determination th at 

the conditions agreed to by the applicants, the attriti on 

agreements with the employees, the enhanced savings 

found in the Second Report, and the service improvements to shippers and the public found in both the First 

and Second Reports outweighed the loss of competition 

between the Northern Lines. Striking the balance is for 

the Commission and we cannot say that it did so 

improperly.

The benefits to the public from this merger are important and deserve elaboration. The Commission found 

that substantial service benefits would flow from the 

merger. Shippers will benefit from improved car supply, 

wider routing, bett er loading and unloading privileges, 

and improved tracing and claims service. New Company will be able to use the shortest and most efficient 

routes while eliminating yard interchange delays, thus

* providing shippers with faster service. The Commission 

found that the economies New Company will realize as 

a result of consolidating yards, repair facilities, and man-

► agement, eliminating duplicate train services and pooling

of cars and train s will result in lower rates to shippers 

and receivers. In addition, the opening of strategic gateways to the Milwaukee will remove artificial barriers to
140

NORTH ERN LINES MERGER CASES 515

401 Opinion of the Court

the development of new markets, sources of supply, and 

services.

The Milwaukee objections prior to the First Report 

were based on the adverse impact of the merger on its 

competitive position and, in turn, on shippers and the 

public. Following the First Report the Northern Lines 

accepted conditions urged by the Milwaukee. Under the 

new conditions the posture of the Milwaukee, lying 

largely between the two Northerns and handicapped by 

limitations at both eastern and western terminals, will be 

greatly improved. Absent the protective conditions it 

would continue to be virtually strangled by the unified 

system; with them the Milwaukee gives prospect of 

affording sub stantial competition to the merged lines and 

will be placed in the position that at its inception it 

hoped to achieve. Its past failure to become a meaningful competitor came in large part because its lines did 

not reach into Portland, Oregon, or into the southwest 

terminal of the Northern Lines in California. In a 

strictly competitive situation it is understandable tha t 

neither of the Northern Lines would interchange traffic 

with the Milwaukee except on its own terms and this 

destined that the Milwaukee would fail to become a true 

transcontinental line even though its western terminus 

lay within a few miles of Portland with the lat ter ’s access 

to the sea.

The Milwaukee north-south traffic on the West Coast 

was limited to the short run from Seattle to Longview, 

barely half the distance from the Canadian border to 

Washington’s southern border. Moreover, westbound 

traffic destined for points on one of the Northern Lines 

was taken over by one of them at St. Paul or Minneapolis notwithstanding Milwaukee’s line from there deep 

into Washington. In the proceedings prior to 1966 

many objecting shippers joined the Milwaukee in pointing out that rates and limitations on Milwaukee’s service
141

516 OCTOBER TERM , 1969

Opinion of the Court 396 U. 8.

precluded full use of the Milwaukee to the disadvantage 

of both shippers and the carrier.

The conditions imposed by the Commission’s Second 

Report will alter that situation and substantially enlarge 

the Milwaukee’s competitive potential between St. Paul 

and Minneapolis and the West Coast due to enlargement 

of its long-haul capability. Shippers will be afforded 

more flexible service. Another condition attached to the 

Commission’s approval will perm it the Milwaukee to run 

lines from its present western terminus into Portland, 

giving it a link with the Southern Pacific. All this will 

enable the Milwaukee to compete with the Northern 

Lines for east-west traffic and some north-south traffic as 

well as linkage with Canadian carriers to the north, which 

was previously the exclusive domain of one or both of the 

Northerns. Other conditions of lesser consequence will 

buttress the newly designed competitive posture of 

the Milwaukee.

The contention that the Commission failed to project 

an analysis of the relative position of the Milwaukee visd-vw the merged Northerns discounts the difficulty of 

precise forecasts and tends to overstate the need for such 

projections. The Commission can deal only in the probabilities that will arise from the Milwaukee’s improved 

posture as a genuine competitor for traffic over a wide 

area, something it had never been able to achieve. 

After the merger it will afford shippers a choice of 

routes and service negating the idea that all rail competition will disappear in the Pacific Northwest.

(b) No. 38, The Northern Pacific Stockholders’ Protectiv e Committee.— The Northern Pacific Stockholders’ 

Protective Committee *• has appealed the District Court’s 

affirmance of the Commission’s approval of the pro-

*• Appellant Committee represents about 3% of Northe rn Pacific’s 

stockholders, who hold approxim ately 5% of the outs tanding shares 

of No rthern Pacific.
142

NORTH ERN LINES MERGER CASES 517

491 Opinion of the Court

posed merger’s stock exchange provisions. To put each 

of the Committee’s contentions in perspective requires 

that we describe the source of the Committee’s concern 

and how the applicants dealt with it in reaching the 

present merger terms.

The Comm ittee’s continuing opposition to the merger 

relates to Northern Pacific’s land holdings. The Nor thern Pacific Railway Company holds more tha n two 

million acres in fee and has mineral rights in anoth er six 

million acres. These lands are rich in natural resources, 

including coal, oil, an d timber, and are impo rtant sources 

of income. The negotiations between the parties centered to a large extent on these lands. Northern Pacific’s 

financial adviser had suggested that although Great 

Northern had a better history of earning power and its 

stock had generally sold at a level above that of Northern 

Pacific’s, the large land holdings of the Northern Pacific 

with their vast resources were of sufficient worth to 

justify a share-for-share exchange ratio between the 

Great Northern and the Northern Pacific. The Great 

Northern, however, insisted on a 60-40 stock exchange 

ratio because of its traditional rail strength. After further negotiations the roads realized that the lands were 

a stumbling block to the merger and considered several 

modes of segregating them from Northern Pacific’s rail 

properties. One was to create two classes of New Company stock, one being issued to Northern Pacific shareholders and representing the natural resource properties, 

and another being issued to both Great Northern and 

Northern Pacific shareholders and representing Northern 

Pacific’s rail properties. The second solution considered 

was spinning off the natural resource lands into another 

corporation and using the proceeds from an issuance of 

its stock as a Northern Pacific contribution to the merger. 

Neither of these solutions was acceptable to the negotiators, the former because of the problems inherent in
143

518 OCTOBER TERM , 1969

Opinion of the Court 396 U .S.

administering a corporation for two classes of stockholders with divergent interests, and the latter because 

of potential litigation with bondholders and adverse tax 

consequences to Northern Pacific. The negotiators concluded that the merger plan must include the land hold-

• ings of Northern Pacific.

Thereafter both roads made concessions, the Great 

Northern abandoning its claim for a perm anently larger

* share for its stockholders and the N orthern Pacific ab andoning its claim for immediate equality. The result was 

an exchange ratio giving immediate recognition to Great 

Nor thern’s greater earning power and historically higher 

mark et price while giving Northern Pacific’s shareholders 

equal participation in the earnings of the enterprise on a 

long-term basis. The terms of the merger, as worked out 

by the negotiators over a five-year period, were approved 

by both roads’ financial advisors, their boards of directors 

and their stockholders. 17 Shortly thereafter the Northern Pacific Stockholders’ Protectiv e Committee was 

formed.

When the merger proposal was submitted to the Commission for approval the Stockholders’ Committee opposed the exchange ratio, pressing its claim that the 

natu ral resource lands were undervalued and th at the 

Commission either should adjust the exchange ratio in 

accordance with the Comm ittee’s estimates of the propert y’s worth or, preferably, should order the lands segregated and placed in a separate corporation, the stock of

17 N orthern Pacific’s shareholders approved the merger term s in 

1961 by a vote of 73.81% to 6.64%, the remainder of the stock 

not being voted. In 1968 the shareholders again approved the 

merger’s terms, as conditioned by the IC C’s Second Report, 732% 

voting for and 2.57% voting against, the remainder no t voting. 

Pri or to both of these votes the mem bers of the app ella nt Committee vigorously urged the shareholders to reject the merger as 

being unfair because of the low value given the natur al resource 

propertie s.
144

NORTH ERN LINE S ME RGER CASES 519

491 Opinion of the Cou rt

which would be available to Northern Pacific shareholders. The Hearing Examiner’s report reviewed the 

extensive negotiations between the parties and the 

modes by which they reached a valuation of the contribution each road ’s shareholders were making to New 

Company, concluding that there had been good-faith 

arm’s-length bargaining and that the result of this bargaining fairly reflected each group of stockholders’ contribution to New Company. The Examiner found the 

Comm ittee’s contention on value to be unsupported by 

record evidence and its spinoff proposal to be unfair to 

Northern Pacific shareholders. He recommended approval of the terms of the exchange.

The Commission’s First Report, which disapproved the 

merger, did not reach the issue of the exchange ratio. 

When in 1967 the Commission reconsidered its earlier 

decision, it refused the Committee’s request tha t it reopen 

the record for the taking of new evidence on the exchange ratio, but did hear oral argum ent on the matter. 

The Committee again pressed its contentions. The 

Commission’s Second Report rejected the Comm ittee’s 

arguments upon basically the same grounds given by 

the Hearing Examiner in his 1964 Report.

The Committee continued its atta ck on the stock exchange ratio in the District Court and urged tha t the 

Commission had abused its discretion in refusing to 

reopen the record to receive updated evidence on the 

exchange ratio. The D istrict Court ruled that the Commission’s finding that the terms were jus t and reasonable was supported by substantial evidence. It also 

held that the evidence the Committee proffered was not 

of sufficient importance to have affected the ultimate 

fairness of the Commission’s finding. The discretion 

exercised by the Commission in refusing to reopen the 

record was, therefore, found free from abuse.

The Committee now contends th at the record lacks substan tial evidence to support the Commission’s determina-
145

520 OCTOBER TERM , 1969

Opinion of the Court 396 U. 8.

tion that the exchange ratios are ju st and reasonable; t ha t 

the Commission failed to consider the whole record before 

it; that the Commission erred, abused its discretion, or 

denied appellant due process of law in not perm itting 

the record to be updated respecting the 1967 worth of 

the contrib utions being made by each group of shareholders, especially respecting Northern Pacific’s natural 

resource properties; that the record does not contain 

substantial evidence to support the determination of the 

Commission t ha t the proposed segregation of the natural 

resource lands is a proposal lacking merit and is unfair 

to Northern Pacific shareholders; and that the District 

Court erred in upholding the Commission’s action. Our 

review leads us to reject these contentions.

Under § 5 (2) of the Interstate Commerce Act, the 

Commission is to approve only such merger terms as 

it finds to be just and reasonable. The Commission, 

as had the negotiators and the Hearing Examiner, fully 

considered the proposed segregation of the natural resource properties and concluded t ha t it was neither feasible nor fair to Northern Pacific stockholders. Th at 

determination is supported by substantial record evidence. In passing we note th at although the Commission in fulfilling its statuto ry responsibilities is to carefully review all of the terms of a merger proposal and 

determ ine whether they are jus t and reasonable, it is 

not for the agency, much less the courts, to dictate the 

terms of the merger agreement once this standard has 

been met. It can hardly be argued th at the bargaining parties were not capable of protecting their own 

interests.

The Commission's unwillingness to reopen the record 

in 1967 for the taking of new evidence on the exchange 

ratio was not an abuse of discretion nor did it deny the 

appellant due process of law. What this Court said in
146

NORTHERN LINES MERGER CASES 521

491 Opinion of the Cou rt

Interstate Commerce Commission v. Jersey City, 322 

U. S. 503 (1944), is applicable here:

“Administrative consideration of evidence—particularly where the evidence is taken by an examiner, 

his report subm itted to the parties, and a hearing 

held on their exceptions to it—always creates a gap 

between the time the record is closed and the time 

the administrative decision is promulgated. This is 

especially true if the issues are difficult, the evidence 

intricate, and the consideration of the case deliberate and careful. If upon the coming down of the 

order litigants might demand rehearing, as a matter 

of law because some new circumstance has arisen, 

some new trend has been observed, or some new fact 

discovered, there would be little hope th at the administrative process could ever be consummated in 

an order that would not be subject to reopening. It 

has been almost a rule of necessity that rehearings 

were not matter s of right, but were pleas to discretion. And likewise it has been considered tha t 

the discretion to be invoked was that of the body 

making the order, and not that of a reviewing 

body.” Id., at 514-515.

Moreover, as this Court noted in United States v. Pierce

Auto Freight Lines, 327 U. S. 515 (1946), “it has been 

held consistently that rehearings before administrative 

bodies are addressed to their own discretion. . . . Only 

a showing of the clearest abuse of discretion could sustain 

an exception to th at rule.” Id., at 535.

We find nothing in the Comm ittee’s arguments to persuade us that such an abuse occurred when the Commission refused to take further evidence on the question of 

each group of shareholders’ contribution to the merger. 

Schwabacher v. United States, 334 U. S. 182 (1948), 

relied upon by the Committee, is not to the contrary.
147

522 OCTOBER TERM , 1969

Opinion of the Court 396 U. 8.

Th at decision requires that the value of a stockholder’s 

contribution to a merger be determ ined in accord with 

the “current worth” of his equity. Th at does n ot mean 

there must be a repeated upda ting of the evidence before 

the agency; in a complex merger such as this tha t would 

lead to interm inable delay. A determination th at the 

terms of a merger proposal fairly reflect the current worth 

of each shareholder’s contribution meets the standards of 

Schwabacher if the agency had before it evidence as to 

the worth of the shareholders’ contributions at the time 

of the submission of the proposal, and there is no showing th at subsequent events have materially altered the 

worth of the various shareholders’ contributions to the 

merger. The evidence the appellant Committee presents to this Court, purportin g to show that Northern 

Pacific’s stock is presently worth considerably more, 

vis-a-vis Great Nor thern’s, tha n was th e case at the time 

of the initial hearings, does show fluctuations in the 

worth of the two companies’ stock. But we cannot say 

that those fluctuations, in the context of this merger 

proposal, are sufficient to show th at the worth of the 

various shareholders’ contributions to the merger has 

been materially altered. We agree with the District 

Court th at the Commission’s refusal to reopen the record 

for f urth er evidence was not an abuse of discretion.

(c) No. Jfi, City of Auburn.—The City of Auburn, 

Washington, opposes the merger for the reasons set out 

in the brief of the Dep artm ent of Justice, and, in addition, contends th at the Commission failed to adequately 

assess the impact of the merger upon affected communities and explain why the benefits of the merger convincingly outweigh its adverse effects on these communities. Auburn also objects to the refusal to open the 

1967 hearings for further testimony concerning the impact 

of the merger upon Auburn.

Auburn is a city of 19,000 inhabitants in western 

Washington, halfway between Seattle and Tacoma,
NORTHERN LINES MERGER CASES 523

491 Opinion of the Cou rt

which serves as the western terminus for the Northern 

Pacific’s transcontinental trains. A substantial part of 

the city’s economy is dependent upon that road’s activity 

there. The record before the Commission indicated that 

if the merger were approved, the Auburn yard would 

be closed, and that the town of Ev erett, on the other side 

of Seattle, would become the western terminus for all 

of New Company’s transcontinental trains.

Insofar as the city challenges the Commission’s action 

on the same grounds as the Departm ent of Justice, our 

disposition of the appeal in No. 28 applies here. As for 

the 1967 hearings, the city failed to object to the scope 

of the Commission’s reopened hearings and made no 

atte mpt to present evidence at those hearings. Neither 

did it challenge the Commission’s findings concerning 

the impact of the merger upon Auburn. Only when it 

came before the District Court did it raise its contentions. This alone might preclude its atta ck on the 

merger. But we need not decide that issue because we 

find that the Commission did not abuse its discretion in 

refusing to take evidence in 1967 as to the impact of 

the merger on Auburn.

In the record upon which the Second Report is based 

the Commission had evidence of the impact of the yard’s 

closing on the city. Thus, even assuming the closing, 

the Commission found that the long-run effect of the 

merger would be to benefit communities in the Northern Tier, such as Auburn, and that the brief and transitory dislocations the merger would occasion were not 

sufficient to outweigh the merger’s benefits. We find 

this to be a justifiable conclusion supported by substantial evidence on the record. We can hardly imagine any 

merger of substantial carriers that would not cause 

some dislocations to some shippers, some communities, 

and some employees.

The plans for the Auburn yard now seem to be a ltered ; 

the applicants stated before the District Court and again
149

524 OCTO BER TERM , 1969

Opinion of the Court 396 U.S.

before this Court that they now intend to maintain the 

Auburn yard. As a result, employment in Auburn will 

be largely unaffected by the merger. Since we conclude 

that the Commission properly determ ined th at A uburn’s 

hardships and those of communities similarly situated, 

as posited on the record, did not war rant disapproval of 

the merger, it is difficult to imagine a ny basis upon which 

we might find the Commission to have abused its discretion in not taking further evidence on the merger’s 

impa ct on Auburn when the principal harm of which the 

city earlier complained has disappeared.

(d) No. 44, Livingston Anti-M erger Committee.—Citi ­

zens of M ontana, living in and about Livingston, Helena, 

and Glendive, who appear here as the Livingston AntiMerger Committee, a ttac k the merger on several grounds. 

As a prelude to discussing these contentions, the historical 

facts upon which the Committe e’s attac k is based should 

be stated.

In 1864 Congress created the Northern Pacific Railroad 

Company (Railroad) and granted it authority to build 

a railroad from Lake Superior to Puget Sound. To subsidize this enterprise Congress granted Railroad a rightof-way and alternate sections of land along th at rightof-way. According to the terms of Railroad’s charter it 

could not encumber its franchise or right-of-way without 

congressional approval, and was not authorized to merge 

with another road, except under limited conditions not 

relevant here. 18 In 1870 Congress passed a resolution 

allowing Railroad to issue bonds secured by its property 

and subject to foreclosure for default. Shortly thereafter 

a mortgage was pledged, only to be foreclosed in 1875. 

After the foreclosure proceedings the property was struck 

off to a committee of bondholders. Later, however, the 

property was returned to R ailroad pu rsuant to a reorganization plan. Although Congress did not further author-

*• See Act of July 2 ,18 64, § 3, 13 Stat. 367.

44-9 87 0 - 75 - 11
150

NORTHERN LIN ES MERGER CASES 525

491 Opinion of the Cou rt

ize mortgaging of th e franchise or right-of-way, Railroad 

again encumbered its property by pledging several mortgages. In 1896, after these mortgages had been defaulted 

upon and foreclosure proceedings had been commenced, a 

negotiated settlement was made which resulted in the 

property of Railroad being sold to the Northern Pacific 

Railway Company (Railway), which has operated under 

Railroad’s franchise and upon its right-of-way ever since. 

Railway presently owns 97% of the stock of Railroad, 

which is no longer an operating company.

On the basis of these facts Livingston contends that 

the Inters tate Commerce Commission had no auth ority 

to approve the proposed merger because Railway does 

not own the franchise and right-of-way involved in this 

merger, and Railroad is not a party to the merger. 

Livingston argues that the 1896 foreclosure was a sham 

and it actually was a sale of Railroad property to 

Railway; because Congress never > authorized that sale, 

it is void. In addition, Livingston contends th at the 

mortgages that led to the 1896 foreclosure were not 

authorized by Congress; therefore, they could not constitute the basis for a valid foreclosure and liquidation. The claimed consequence is that the title to the 

franchise and right-of-way remains in Railroad. Livingston argues that even if it should be held that Railway 

does own the franchise and right-of-way, under the 1864 

charter of Railroad, to which Railway succeeded, no 

merger involving these properties can take place without 

congressional approval, and such approval has not been 

procured. Finally, Livingston urges that the Commission and the District Court failed to properly deal with 

these contentions and make specific findings as to the 

Commission’s jurisdiction.

The Commission was presented with these arguments 

and found them to be w ithou t merit. The District Court 

affirmed the Commission, ruling that it had not erred 

in refusing to disapprove the merger because of appel-
151

526 OCTOBER TERM , 1969

Opinion of the Court 396 U. 8.

lant’s claims and had not erred in refusing to litig ate 

their merits. We affirm the District Court. Section 

5 (2) (a) of the Interstate Commerce Act provides in 

per tinent pa rt:

“(a) It shall be lawful, with the approval and 

autho rization of the Commission, as provided in 

subdivision (b) of this paragrap h—

“(i) for two or more carriers to consolidate or 

merge their properties or franchises, or any part 

thereof, into one corporation for the ownership, 

management, and operation of the properties theretofore in separate ownership . . . 49 U. S. C.

§ 5 (2 )( a).

The premise of Livingston’s position is that under this 

sta tut e before the Commission can assume jurisdiction 

over a merger application it must determ ine th at the 

applicants have proper legal title to the rights and 

property which they seek to bring into the merger. This 

is an erroneous assumption. The Commission is not 

required to deal with the subtleties of “good title” before 

assuming jurisdiction over a § 5 matter. Cf. 0. C. W iley

A Sons v. United States, 85 F. Supp. 542, 543-545 (D. C. 

W. D. Va.), aff’d per curiam, 338 U. S. 902 (1949); 

Walker v. United States, 208 F. Supp. 388, 396 (D. C. 

W. D. Tex. 1962); Inte rstate Investors, Inc. v. United

State s, 287 F. Supp. 374, 392 n. 32 (D. C. S. D. N. Y. 

1968), aff’d per curiam, 393 U. S. 479 (1969). And 

because a Commission order under § 5 (2) “is permissive, 

not man dato ry,” New York Central Securities Corp. v. 

United States, 287 U. S. 12, 26-27 (1932), the approval 

of a merger proposal does no t amou nt to an adjudication 

on any such questions. These are m atte rs for the courts, 

not for an agency that has responsibility in the realm 

of regulating tran sportation systems.

In the ins tan t case there were ample grounds for the 

Commission’s assumption of jurisdiction over the appli-
152

NORTHERN LIN ES MERGER CASES 527

491 Opinion of the Court

cants. Although the validity of Railway’s claim that it 

is Railroad’s successor in interest and has good title to 

all of Railroad’s rights and properties has never been 

judicially determined, this Court has impliedly recognized it several times. In Northern Pacific R. Co. v. 

Boyd, 228 U. S. 482 (1913), we held that a creditor of 

Railroad had an assertable claim against the equity of 

Railroad’s shareholders represented by Railway’s assets 

because the foreclosure amounted to little more than a 

judicially approved reorganization in which the shareholders of the old company became the shareholders of 

the new. As against a bona fide creditor of Railroad, 

we found the judicial sale ineffective to bar his rights. 

However, we also state d that

“ [a]s between the parties and the public generally, 

the sale was valid. . . . [T]he Northern Pacific 

Railroad was divested of the legal title [to its 

properties] . . . Id., at 506.

In United States v. Northern Pacific R. Co., 311 U. S. 

317 (1940), we described some of the history of the 

appellee company as follows:

“Pu rsua nt to foreclosure proceedings the Northern 

Pacific Railway Company acquired title to the railroad, the land grant, and all other property of the 

original corporation and has since operated the road 

and obtained patents for millions of acres under the 

land grants.” Id., at 328.

In addition, Attorney General Harmon in 1897 advised the Secretary of the Interior that Railway had 

a right, as successor in interest of Railroad, to pate nts 

on land gra nts made to Railroad. 21 Op. Atty. Gen. 486. 

The Secretary of the Interior thereafter treated Railway 

as Railroad’s legal successor and patented large amounts 

of land to Railway. When in 1905 the then Secretary 

of th e Interior asked then Attorney General Moody, later 

an Associate Justice of this Court, about the right of
153

528 OCTOBER TERM , 1969

Opinion of the Court 396 U. S.

Railway to Railroad’s land grants, Mr. Moody, afte r 

investigating the matter, reaffirmed his predecessor’s conclusion th at Railway was Railroad’s legitim ate successor 

in interest. 25 Op. Atty. Gen. 401. In 1954 a committee of Railroad’s m inority shareholders sued Railway

* seeking to have the 1896 foreclosure set aside and all 

titles and franchises declared to be in Railroad and to 

obtain an accounting from Railway for all properties and

* profits received from 1896 through 1954. In an exhaustive opinion Judge Edward A. Tam m of the U nited States 

District Court for the District of Columbia held the 

action barred by laches and dismissed the complaint. 

Landell v. Northern Pacific R. Co., 122 F. Supp. 253 

(D. C. D. C. 1954), aff’d, 96 U. S. App. D. C. 24, 223 

F. 2d 316, cert, denied, 350 U. S. 844 (1955). In this 

context we think the Commission did not err in assuming jurisdiction over the applicants while refusing to 

adjudicate the merits of Railw ay’s title. As the D istrict 

Court stated, “[f]or purposes of merger proceedings it 

could rely on the existing judicial records . . . supplemented by the opinions of two Attorneys General.” ”

We are then faced with the contention of Livingston 

that Railway is prohibited from participating in the 

merger and th at the Commission is barred from approving it by the terms of Railroad’s charter. Th at charter 

does not authorize Railroad to merge with the applicant 

companies and prohibits the mortgaging of its property 

in the absence of congressional consent. If Railway is 

Railroad’s successor in interest, Livingston contends, it is 

bound by the provisions of Railroad’s charter, and those 

provisions would be violated by the proposed merger and 

issuance of securities incident thereto. Livingston

* argues that because the Act chartering Railroad is a law 

as much as it is a grant, see Oregon <& California R. Co.

v. United State s, 238 U. S. 393, 427 (1915), it is bind-

» 2 9 6 F. Supp. 853, 877 (D . C. D. C. 1968).
154

NORTHERN LIN ES MERGER CASES 529

491 Opinion of the Court

ing upon the Commission and makes the Commission’s 

approval of the merger unlawful. Livingston relies upon 

Union Pacific R. Co. v. Mason City Fort Dodge R. Co.,

199 U. S. 160 (1905), as standing for the proposition that 

statutory restrictions on a predecessor federal railroad 

company survive a foreclosure sale and apply to a successor private railroad company operating on th e original 

company’s rights and franchise.

We do not find the Mason City decision to be controlling, despite its somewhat similar legal and factual 

context. In 1862 Congress chartered the Union Pacific 

Railroad Company and authorized it to build a transcontinental railroad. In 1865 Railroad, pursuant to congressional authorization, pledged a mortgage secured by 

its right-of-way and franchise to gain monies necessary 

for construction. In 1871 Congress granted Railroad 

authority to issue bonds for the construction of a bridge 

over the Missouri River, that gran t being conditioned 

upon the bridge’s being open for the use of all roads for 

a reasonable compensation, to be paid to the owner of 

the bridge. This condition was one generally inserted by 

Congress in statutes authorizing bridge construction. 

Sometime after the bridge was built the 1865 mortgage 

was foreclosed and the Union Pacific Railroad Company, 

a Utah corporation, purchased the assets of the federal 

corporation. It thereafter refused to allow any but its 

own trains to use th e bridge, contending that as purchaser 

under the foreclosure of the 1865 mortgage, it was not 

bound by the 1871 sta tut e’s conditions. This Court 

rejected th at contention and concluded that the conditions applied to the Utah corporation, reasoning that the 

purpose of Congress in authorizing the construction of 

the bridge required th at the conditions appended to tha t 

authorization attach to the bridge and bind its owner.

The instan t case is quite different. Here th e provisions 

of the charter of Northern Pacific Railroad Company 

which are urged to bar this merger were directed only to
155

530 OCTOBER TERM , 1969

Opinion of the Court 396 U. 8.

the operations of th e federal corporation, not to the operation of the railroad. Thus, when th e corporation’s property was sold to another, the conditions of which Livingston speaks did not follow tha t p roperty into the hands of 

the successor corporation. It therefore follows th at the

* statute creating the Northern Pacific R ailroad Company 

did not bar the Interstate Commerce Commission from 

authorizing a merger involving th e Northern Pacific Rail-

* way Company, a Wisconsin corporation.10 We find that 

the Commission acted within its authority in assuming 

jurisdiction over the instant merger proposal and th at 

Railway is not barred by the sta tut e from participating 

in that merger. We have considered Livingston’s other 

contentions and find them to be without merit.

Conclusion

On the entire record we cannot say th at the District 

Court erred in upholding the order set forth in the Second Report or th at the Commission has done other tha n 

give effect to the T rans portation Act of 1920 as amended 

in 1940, which vested in the Commission the responsibility of balancing the values of competition against the 

need for consolidation of rail tran sportation units.

The judgment of the District Court is therefore affirmed 

and the stay granted by this Court pending the resolution of these appeals is hereby vacated.

[Appendixes A and B follow this page.]

Mr. J ustice Douglas took no pa rt in the decision of 

these cases.

20 Appellees contend th at under §§ 5( 11) and 20a (7) of the

*

Interstate Commerce Act, 49 U. S. C. §§ 5 (11), 20a (7) , th e approva l 

of a consolidation proposal operates to relieve the applicants from 

any inhibiting state or federal laws, th at the ch arter of Railroad 

is such a law, and that app roval of the instant merger proposal 

modifies any conflicting provisions in that charter . Since we do 

not find Railroad’s c harter to be binding upon Railway, we need not 

reach th at contention.
Slip Opinion

NOTE : Where It Is feasible, a syllabus (headnote) will be released, as Is being done In connection with this case, at the time 

the opinion Is Issued. The syllabus constitutes no p art of the opinion 

of the Court but has been prepared by the Reporter of Decisions for 

the convenience of the reader. See United States v. Detroit Lumber Co., 200 U.S. 821, 837.

SUP REM E COURT OF THE UN ITE D STATES

• Syllabus

ATCHISON, TOPEKA AND SANTA FE RAILWAY 

CO. et al. v. W ICHITA BOARD OF TRA DE et al.

APPEAL FROM TH E UNITED STATES DISTRICT COURT FOR 

TH E DISTRICT OF KANSAS

No. 72-214. Argued Febru ary 28, 1973—Decided Jun e 18, 1973*

The Intersta te Commerce Commission (IC C) , after hearings, ap ­

proved imposition by appellant railroads of separate charges for 

inspection of grain while in transit, a service th at had previously 

been provided under the line-haul rates. Appellees thereupo n 

brou ght this action in District Cou rt contesting the validity of 

the ICC order. Th at court found th at the ICC had not adequately justified departure from its longstanding rule that such 

separate charges are unlawful unless the carriers can satisfy the 

burd en that rests upon them of proving that their line-haul rates 

are insufficient to cover the total transp ortation service including 

the portion thereof for which separate charges are proposed. The 

court ordered suspension of the in-transit charges unless otherwise 

ordered by the court and remanded the case to the ICC . Held:

The action of the Dis trict Court is affirmed as to the remand to 

the ICC and is reversed as to the injunction suspending the pro ­

posed charges. Pp. 5 -----. 352 F. Supp. 365, affirmed in part

and reversed in part.

Mr. Justice Marshall, in an opinion joined by T he Chie f

J ustice, Mr. J ustice Stewart, and Mr. Justice Black mun, 

concluded th at :

1. The ICC , which justified its departure from its prio r cases 

on the ground that the many rates involved rendered the pre ­

vious requirement impractical and the new charges when added 

to the line-haul rates would not exceed the ICC-prescribed maximum rate level, has not stated its reasons with sufficient clarity

*Together with No. 72-433, Inte rstate Commerce Commission v. 

Wichita Board of Trade et al., also on appeal from the same court.
157

ii ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF TR AD E

Syllabus

to facilitate proper judicial review of its approval of the in-transi t 

inspection charges. Pp. 5-16.

2. Equitable considerations, including the doctrine of primary 

jurisdiction as applied to the facts of this case, required that the 

District Court refra in from expressing a view upon what it 

> believed was permitted by natio nal transp ort ation policy before

the ICC on rema nd could balance the conflicting interests of 

shippers, railroads, producers, and consumers in the proposed 

#

rate changes, cf. Arrow Tran sportation Co. v. Southern R. Co.,

372 U. S. 658; hence, it was imp roper for the Distric t Court to 

enjoin implementation of the proposed new charges. Pp. 16-24.

Mr. J ustice Douglas concurred in the affirmance of the remand 

to the ICC.

Mr. J ustice Whi te , joined by Mr. J ustice Brennan and 

Mr. J ustice Reh nq uist, concurring in the reversal of the injunction, concluded that only the ICC was granted the sta tutory 

autho rity to suspend new freight rates for seven months and the 

District Court has no power to extend that period. Pp. 1-2.

Marshall, J., announced the Co urt’s judgment and delivered an 

opinion, in which Burger, C. J., and Stewart and Blackmun, JJ ., 

joined. Douglas, J., filed an opinion concurring in the affirmance 

of the remand to the Inter sta te Commerce Commission and dissenting from the reversal of the decree authorizing the injunction. 

Whi te , J., filed an opinion concurring in the reversal of the injunction and dissenting from the affirmance of the remand to the In terstate Commerce Commission, in which Bren nan and Reh nq uis t, 

JJ ., joined. Powell, J., took no part in the consideration or 

decision of the cases.
158

NOTICE : This opinion Is subject to formal revision before publication 

in th e preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the 

United States, Washington, D.C. 20543, of any typographical or other 

formal errors. In order that corrections may be made before the preliminary p rint goes to press.

SUPREME COURT OF THE UNITED STATES

Nos. 72-214 and 72-433

The Atchison, Topeka and 

Santa Fe R ailway Company et al., 

Appellants,

72-214 v.

The Wichita Board of 

Trad e et al.

Inter sta te Commerce Commission, Appellant,

72-433 v.

Wichita Board of Trade.

On A p p e a ls fr om th e 

United States District 

Court for the District 

of Kansas.

[June 18, 1973]

Mr. J ustice Marshall announced the judgment of 

the Court, and an opinion in which The Chie f J ustice, 

Mr. J ustice Stewart, and Mr. J ustice Blackmun join.

We noted probable jurisdiction in these cases to resolve two important questions relating to the proper role 

of courts in reviewing approval by the Inter sta te Commerce Commission of proposed rate increases by railroads. 

409 U. S. 1005 (1972). First, lihder what circumstances 

may a reviewing court find th at the Commission has 

failed adeq uately to explain its app are nt dep arture from 

settled Commission precedent? Because the problem of 

determin ing what policies an agency is following, as a 

prelude to determin ing whe ther the agency is acting in 

accordance with Congress’ will, is a recurring one, this 

issue raises general problems of judicial review of agency 

action. The second question in this case is a more limited one: in order to enjoin a proposed rate increase a fter
159

2 ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF T RAD E

a final order by the Inter sta te Commerce Commission, 

wha t sort of error must a District C ourt find in the proceedings of the Commission? We hold th at in this case 

the Commission did not explain its apparen t dep arture 

from precedent in a manne r sufficient to permit judicial 

review of its policies, bu t that, nevertheless, th at kind 

of error does not justify the Distric t Court in entering 

an injunction against imposition of the rate s pending 

review of the Commission’s action on remand. We 

therefore vacate the judgment of the District Court and 

remand for the ent ry of a prop er order.1

I

In this case, the railroads proposed to establish a 

sepa rate charge for inspection of grain while in tra nsit. 2

In order to inspect the grain, the railroad cars loaded 

with it are stopped and placed on track facilities. A 

sample of the grain is take n, and the official grade is 

determined. Once the grade is known and the commercial value of the grain established, the shipper orders 

the car to proceed to the a ppr opr iate m arke t. In-transit 

inspections have sub stantial advantages to shippers over

1

 We have previously stayed the judgment of the District Court 

on condition that appellant railroads keep accounts of the amounts 

received from the in-transit charges. 409 U. S. 801 (1972). We 

hereby direct the District Court to enter an order, consistent with 

this opinion, regarding the disposition of those amounts.

2

 Such a charge is already made for the first in-transit inspection 

in the Eastern Territory. The proposed rates would increase tha t 

charge from $7.42 to $14.33. There would be a slight increase in 

the currently effective charge for the second and subsequent inspections. A large majority of the number of in-transit inspections occur 

in the Western Territory, where most of this country’s grain is 

produced and where no separate charge is now made for the first 

in-transit inspection. Only a few cars are stopped for more than 

one inspection. Thus, for convenience of exposition, we trea t this 

case as involving a proposal for a separate new charge; tha t is the 

real effect of the railroads’ proposal in most instances.
160

ATCHISON, T. & S. F . R. CO. v. WICHITA BD. OF TR AD E 3

inspection at the destina tion . If the grain were to be 

found to be of a different grade tha n expected only after 

arriv al at the destination, sending it to ano ther market 

might be quite expensive. The advantages to purchasers of in- transit inspections, instead of inspection at 

the source th at mig ht satisfy shippers, are less marked 

bu t are nonetheless significant. The grain mig ht deteriorate while in transit, thu s leaving the purchaser with 

grain of a lower qua lity tha n he expected. And the 

possibility of bias of the inspec tor is greater if th e inspection is made at the source.

The Commission found th at “the orderly marketin g 

of grain unde r present practices requires th at a substan ­

tial portion of the commodity moving in commercial 

channels must be subjected to some form of sampling 

and inspection to dete rmine grade or quality.” 339 

I. C. C. 364, 385 (1971).3

 However, it also found th at 

this sampling need no t take place while the grain is in 

transit. The practice of i n-t ran sit inspections developed 

when federal law required inspections for the purpose of 

grading. 39 Stat. 483 (1916). But the diversion of 

grain from railroads to moto r trucks made it difficult to 

enforce the inspection requirements. When trucks are 

used, in- transit inspections are not generally made. 

Thus, in order to simplify the movement of grain, Congress abolished the requ irem ent of inspections. Pub. L. 

90-487, 82 Sta t. 761 (1968). In addition, the convenience of sampling at the source of the grain has increased with the widening reliance on low-cost mechanical 

samplers installed at grain elevators. The Commission 

therefore concluded th at in-transit inspections were not 

necessary for the orderly marketing of grain.

3

 The report of Division 2 of the Commission is found at 339 

I. C. C. 364. The entire Commission “ado pt [ed] and affirm[ed] 

the findings and conclusions reached” in th at repo rt. 340 I. C. C. 

69, 70 (1971).
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4 ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE

It also concluded th at in- tra nsit inspections resulted 

in a substantial decrease in the number of freight cars 

available for general use? Relying on a variety of studies 

conducted by the railroads, the Commission found th at 

each inspection kept a freight car out of use for roughly 

thre e days, and th at the cumulative impact of the delays 

due to in-transit inspection is to reduce the available 

freig ht car fleet by several thousand cars.

Finally, the Commission considered whether the proposed separate charge for each in- transit inspection fairly 

reflected the cost to the railroad of such an inspection. 

Again it relied on quite detailed studies th at established 

the cost of detaining a car, the cost of switching it on 

and off the m ain line, and the clerical costs of conducting 

inspections. The Commission concluded th at the proposed charges were “not excessive in amoun t . . . on the 

basis of the convincing evidence of record showing the 

costs susta ined by the railroads in performing the intra nsit inspection service.” 340 I. C. C., at 71-72.

Shippers who had objected to the proposed new charges 

before the Commission sought review of the Commission’s 

order, and a s tatuto ry three-judge D istrict C ourt was convened. The Distric t Court found th at these conclusions 

were supp orted by sub stan tial evidence, and they are not 

challenged here. Bu t the Distric t Cou rt held th at the 

Commission had not adequately justified its failure to follow “its long-established rule th at it will not allow a separate charge for an accessorial service previously perform ed 

as pa rt of the line-haul rates withou t substantial evidence th at such an additional charge is justified measured 

against the overall services rendered and the overall reasonableness of the increased line-haul rate resulting 

therefro m.” 352 F. Supp. 365, 368. The Commission, 

although it analyzed the cost of each in- tra nsit inspection,

4

 For a description of the car-utilization problem, see United States

v. Allegheny-Lndlum Steel Corp., 406 U. S. 742, 745-746 (1972).
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ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE 5

had made no att em pt to consider the reasonableness of 

continuing the existing line-haul rate, which included 

some charge for in-transit inspections. Instead , the 

Commission had attem pte d to distin guish this case from 

prior cases in which the rule was invoked, bu t the D istrict 

Court, relying on Secretary of Agriculture n. United

States, 347 U. S. 645 (1954), was “ not convinced that the 

insta nt proceeding can be ‘distingu ished’ as the Commission has indicated.” 352 F. Supp. 365, 369.

Although the Commission mu st be given some leeway 

to re-examine and reinte rpret its prior holdings, it is n ot 

sufficiently clear from its opinion th at it has done so in 

this case. A reviewing cou rt must be able to discern 

in the Commission’s actio ns the policy it is now pursuing, so th at it may complete the task of judicial review—in this regard, to determine whether the Commission’s policies are consistent with its mandate from 

Congress. Since we cannot tell from the Commission’s 

opinions what those policies are, we therefore agree with 

the Dis trict Court th at the Commission’s order finding 

the rate s jus t and reasonable cann ot be sustained.

II

Judicial review of decisions by the Inter sta te Commerce Commission in rate cases necessarily has a limited 

scope. Such decisions “are not to be disturbe d by the 

courts except upon a showing th at they are unsupporte d 

by evidence, were made withou t a hearing, exceed consti tut ion al limits, or for some other reason amoun t to 

an abuse of power.” Manufa cturers R. Co. v. United

States, 246 U. S. 457, 481 (1918).5

 As this Court has 

observed, “The process of rate making is essentially 

empiric. The stuff of the process is fluid and changing— 

the res ultant of factors th at mus t be valued as well as 

weighed. Congress has therefore delegated the enforce5

 See also 5 U. S. C. §706 (2).
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6 ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE

me nt of transport ation policy to a perm ane nt expert body 

and has charged it with the duty of being responsive to 

the dynam ic character of transportation problems.” 

Board of Trade of Kansas City v. United S tate s, 314 U. S. 

534, 546 (1942).

# Th e delegation to the Commission is not, of course, 

unbounded, and it is the duty of a reviewing court to 

determin e whe ther the course followed by the Commis-

• sion is consiste nt with its mandate from Congress. See 

ICC v. Inland Waterways Corp., 319 U. S. 671, 691 

(194 3); Bur ling ton Truck Lines, Inc. v. United States,

371 U. S. 156, 167-169 (1962). Cf. N LRB v. Wyman -

Gordon Co., 394 U. S. 759, 767 (1969). Bu t a simple 

examination of the order being reviewed is frequently 

insufficient to reveal the policies th at the Commission 

is pursuing. Thus, this Court h as relied on the “simple 

bu t fundam ental rule of adm inis trative law,” SEC v. 

Chenery Corp., 332 U. S. 194, 196 (1947), th at th e agency 

mu st set forth clearly th e grounds on which it acted. For 

“ [w]e must know what a decision means before th e duty 

becomes ours to say whether it is rig ht or wrong.” 

United Sta tes v. Chicago, M., St. P. & P. R. Co., 294 

U. S. 499, 511 (1935). See also Phelps Dodge Corp. v. 

NLR B, 313 U. S. 177,197 (1941); SE C v. Chenery Corp.,

318 U. S. 80, 94 (1943). And we mu st rely on the 

rationale adopted by the agency if we are to guarantee

* the inte grity of the adm inistrative process. SEC v. 

Chenery Corp., 318 U. S., at 88. Cf. NLRB v. Metropolitan Life Ins. Co., 380 U. S. 438, 443-444 (1965). 

Only in th at way may we “guard against the danger of 

sliding unconsciously from the narrow confines of law 

into the more spacious domain of policy.” Phelps Dodge

Corp. v. NLR B, 313 U. S., at 194.

An agency “may articulate the basis of its order by 

reference to other decisions,” NLRB v. Metrop olitan Life
164

ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE 7

Zrw. Co., 380 U. S., at 443 n. 6. For “ [ajdju dic ate d 

cases may and do, of course, serve as vehicles for the 

form ulation of agency policies, which are applied and 

announced therein. See H. Friendly, The Fede ral Admin istrativ e Agencies 36-52 (1962). They generally provide a guide to action th at the agency may be expected 

to take in future cases. Subject to the qualified role of 

stare decisis in the adm inistrative process, they may 

serve as precedents.” NLRB v. Wyman-Gordon Co.,

394 U. S., at 765-766 (opinion of Fortas, J.). This is 

essentially a corollary of the general rule requiring th at 

the agency explain the policies underlying its action. 

A settled course of behavior embodies the agency’s informed judgment that, by pursuing th at course, it will 

carry out the policies comm itted to it by Congress.

There is, then, at le ast a presumption t ha t those policies 

will be carried out best if the settled rule is adhered to. 

From this presumption flows th e agency’s du ty to explain 

its dep arture from prior norms. Secretary of Agriculture

v. United States, 347 U. S. 645, 653 (1954). The agency 

may flatly repu diate those norms, deciding, for example, 

th at changed circumstances mean th at they are no longer 

required in order to effectuate congressional policy. Or 

it may narrow the zone in which some rule will be applied, because it appears th at a more discriminatin g invocation of the rule will best serve congressional policy. 

Or it may find that, although the rule in general serves 

useful purposes, peculiarities of the case before it suggest th at the rule not be applied in th at case. Whatever 

the ground for the depar ture from prior norms, however, 

it mu st be clearly set forth so that the reviewing court 

may understand the basis of the agency’s action and so 

may judge the consistency of th at action with the 

agency’s mandate.

A furthe r complication arises when, as in the present 

case, the agency distinguishes earlier cases in which it
165

8 ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE

invoked the rule. An initial step, and often the only one 

clearly taken, is to specify factual differences between 

the cases. Those factual differences serve to distinguish 

the cases only when some legislative policy makes the 

differences releva nt to determin ing the proper scope of 

the prior rule. It is all too easy for a court to judge the 

adequacy of an asserted distinction in ligh t of the policies 

the court, rather tha n the agency, seeks to imp lem ent; 

th at is, after all, what an app ellate court does with respect 

to courts of the first instance. Yet when an agency’s 

distinction of its prior cases is found inad equate, the 

reviewing court may ina dve rtently ado pt the stance it 

ordinarily takes with respect to other courts, and thereby 

may invad e “the domain which Congress has set aside 

exclusively for the adm inistrative agency,” SEC v. Chenery Corp., 332 U. S. 194, 196 (1947), th at is, the choice 

of particular actions to carry out the broad policies s tate d 

by Congress. Instead , it is enough to satisfy the re quiremen ts of judicial oversight of adm inistrative actio n if 

the agency asserts distinctions that, when fairly and 

sympath etically read in the context of the entire opinion 

of the agency, reveal the policies it is pursuing. So long 

as the policies can be discerned, the court may exercise 

its prop er func tion of determin ing whether the agency’s 

policies are consistent with congressional directives.

These principles gain con tent when applied to the present case. The Dis trict Court held th at the Commission 

had not repudiated or adequately distinguished its prior 

cases establish ing the rule th at “it will not allow a separate charge for an accessorial service previously performed 

as p art of the line-hau l rates without substan tial evidence 

th at such an addition al charge is justified measured 

against the overall services rendered and the overall reasonableness of the increased line-haul rate resu lting 

therefore.” While this is a fair summ ary of the Com44-987 0 - 75 - 12
166

ATCHISON, T. & S. F. R. CO. v. WIC HITA BD. OF TR AD E 9

mission’s established practice,® it conceals the appar ent 

purpose of the rule, to protect two distinct classes: 

shippers who will c ontinue to utilize the accessorial serv0

 Th e rule has been stated in other ways. See, e. g., p. 4, supra.

In Transit Charges, Southern Territory, 332 I. C. C. 664, 683 

(1968), the Commission stated the rule in these terms: “ [T]he 

proposed charge may not be divorced from the line-haul rate , for 

both, insofar as transi t is concerned, are inextricably interdepende nt. 

[Citations omitted.] While it would seem preferable to have the 

various elements entering into, and constituting, the whole analyzed, 

if indeed they could be separated, the entire transp ort ation service 

rendered, including transit, must be examined in relation to the 

total rates and charges assessed.” The District Court reviewing that 

case rephrased the rule: “Th e question here is what should the 

carrier be paid for a service which it has been rendering, and has 

been charging for, and has been paid for (one knoweth not what) 

which it proposes to separate and charge sepa rately for. Both the 

courts and the Commission have consistently held that what is a 

just and reasonable rate for the service to be sepa rated and charged 

for separately cannot be determined by examining only the typical 

questions of cost, etc., with respect to the separate service. On the 

con trary, the typical questions must be directed to the overall or 

combined picture so that one may conclude (a) tha t the rat e for 

the separated service, looked at by itself in the light of the applicable questions, is just and reasonable; and (b) tha t the remaining rate for the services, sans the sepa rated service, is not rendered 

unjust or unreasonable.” Cincinnati, N. 0. A T. P. R. Co. v. United

States (Civil Action No. 6992, U. S. D. C. Southern Ohio, Jan . 12, 

1970), aff’d, 400 U. S. 932 (1970). The District Court continued, 

somewhat more obscurely: “W heth er the examination is in term s of 

‘what portion of the line-haul rate represented the rate for the 

service to be sep ara ted,’ or whether the search in terminology is for 

the answer to this question: Does the new aggregate rate, composed 

of line-haul plus tran sit rates repre sent a just and reasonable rate 

for all of the services (the aggregate of the severed and the nonsevered )—the principle is the same.” And in Secretary of Agriculture v. United States, 347 U. S. 645, 654 (1945), this Court referred 

to it as “th e prevailing rule . . . tha t a service necessarily encompassed by the line-haul rate cannot be sepa rately restated without 

examining the sufficiency of the line-haul rate to cover it.”
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10 ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRAD E

ice—in this case, those who will still have the ir grain 

inspected w’hile in transi t—an d shippers who will not. 

To decide whether the Commission has adequately explained its failure to follow th at rule, we must consider 

each class in turn, for the Commission may have made 

clear why it need not protect one class by invoking the 

rule bu t it may nonetheless have failed to say why it 

need not protect the other class.

In Unloading Lum ber in N ew York Harbor, 256 I. C. C. 

463 (1943), the Commission dealt with a proposal to 

charge sepa rately for unloading, a service th at was inextricably bound up with the line-haul service. Cf. Secretary of Agriculture v. United States, 347 U. S., at 648- 

649. The Commission said, “I t follows tha t respondents 

may not now segregate a component of th at [line-haul] 

service, making a separate charge therefor, withou t an 

adeq uate showing th at the aggregate charge for the 

through service is reasonable.” 256 I. C. C., at 468. The 

explicit purpose of the rule in this situ atio n is to gua rantee th at shippers receiving the same service th at they 

had previously received do not pay an unreasonable 

amount. See also Du luth Dockage Absorption, 44 

I. C. C. 300 (1917); Terminal Charges at Pacific Coast

Ports, 255 I. C. C. 673, 682 (1943). The rule, in this 

regard, is th at the railroads must dem onstrate both 

th at the proposed charge is reasonable in light of the 

costs of the sepa rate service, and th at the total charge 

for line-haul plus the sepa rate service is reasonable.

The Commission justified its dep arture from its prior 

cases by giving two reasons th at rela te to this aspect of 

the rule. First, it noted that “ [t]h e line-haul rate s applicable on the grain to, from, and through [the] inspection poin ts number in the thou sands and, because of 

the complexities of the grain rate structures, vary to a 

large degree.” Thus, applying the general rule “effectively precludes respondents from ever establishing a sepa-
168

ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE 11

rat e charge for the accessorial first stop for inspection 

regardless of the need for such a charge.” Second, the 

Commission said that “the line-haul rate applicable to 

any movement of grain . . . when coupled with the proposed charge is less tha n the maximum reasonable level 

determined by this Commission. In no instance will 

the combined rate and charge exceed the maxim um level 

prescribed in Grain and Grain Products [, 205 I. C. C. 301 

(1934) and 215 I. C. C. 83 (19 36) ].” 339 I. C. C., at 

386-387.

The maximum rate s prescribed in Grain and Grain

Products have been subjected to a large number of general rate increases.7

 See, e. g., Ex parte Nos. 265 and

267, Increased Freight Rates, 1970 and 1971, 339 I. C. C. 

125 (1971). In those proceedings, the Commission’s 

focus is on the general revenue needs of the railroads. 

Across-the-board percentage increases are permitted 

withou t detailed exam ination of individual rates. As a 

result, there may be specific routes on which the maximum is in fact unreasonable, because, for example, the 

costs of operatin g those routes have not increased as 

rapid ly as the costs elsewhere. Thus, the Commission 

has held th at its approva l of a general increase “does 

not have the effect of appro ving a ny particu lar increased 

rate as not being in excess of a maximum reasonable 

rate.” Coal from Illinois to Alt on and Eas t St. Louis,

274 I. C. C. 637, 670 (1949). See also Tennessee Produce dc Chemical Corp. v. Alabama G. S. R. Co., 277 1. C. C. 

207 (1950); Brim stone R. Co. v. United States, 276 

U. S. 104 (1928). However, in other contexts, the Commission has treated the prescribed rate s as modified by

7

 Currently effective rates are, on almost every route, lower than 

the rates permitted by the general maximum. See 340 I. C. C., at 

71. Often this results from competition from other modes of transport which forces rates below what the railroads would like to 

charge.
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12 ATC HISON, T. & S. F. R. CO. v. WICH ITA BD. OF TR AD E

general increases as “the best evidence of the reasonab leness of corresponding rate s at a . . . da te” after the 

general increase. Agsco Chemicals, Inc. v. Alabama

G. S. R. Co., 314 I. C. C. 725, 733 (1961). Cf. Public

Service Com m’n of No rth Dak ota v. Great Northe rn R.

Co., 340 I. C. C. 739, 750 (1972).

The Commission thu s has not determin ed th at a rate 

which does not exceed the curren t general maximum 

is reasonable. A shipper can challenge any such rat e 

as unreasonable and, if he succeeds, may recover rep ara ­

tions. In addition, the Commission may prescribe a 

rate to be charged in the futu re. 49 U. S. C. §§ 8, 9, 

13 (1 ), 15(1); ICC v. Inland Waterways Corp., 319 

U. S. 671, 687 (1943). In such proceedings, the shipper 

must show th at the rate charged was unreasonable. Cf. 

Louisville & N. R. Co. v. United States, 238 U. S. 1 

(191 5); Shaw Warehouse Co. v. Southern R. Co., 288 

F. 2d 759 (CA5 1961).8 In contrast, when a proposed 

rate increase is challenged by a shipper before it goes 

into effect, “the burden of proof shall be upon the carrier to show th at the proposed changed rate . . . is jus t 

and reasonable.” 49 U. S. C. § 15 ( 7).9

8

 Mr. J ustice Whit e argues that, if a rate at the level of the 

general maximum is reasonable, and if the separate charge is reasonable, the n surely a line-haul rate th at is equal to the general maximum less the sep arate charge is reasonable. The flaw in his argument is that the Commission has never determined that rates at the 

level of the current general maximum are reasonable. Th at is, in 

the example suggested by Mr. J ustice Whit e, the Commission has 

not determined what he says tha t it has “previously found—tha t 120

• is a reasonable charge for both services.” Without this premise, his

argument fails.

9

 If the Commission finds that the proposed rates are unreasonable, 

rat her tha n that the railro ads failed to carry their burden of proof, 

th at finding might be conclusive in a subsequent proceeding. Cf. 

Mitchell Coal & Coke Co. v. Pennsylva nia R. Co., 230 U. S. 247, 

258 (1913); IC C v. Atlantic Coast Line R. Co., 383 U. S. 576, 

590-594 (1966). This does not, however, affect the burden placed 

on carriers in the suspension proceedings.
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ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE 13

The Commission in this case referred to the burden 

th at applying the rule would place on the railroads. It 

rather clearly intended by this to suggest th at the importance of implementing the new charges and so of 

increasing the supply of available freight cars justified 

some modification of its usual allocation of the burden of 

going forward. Instead of requiring the railroads to 

produce sub stantial evidence th at the total charges were 

reasonable, it would leave th at determination to later 

proceedings in which a shipper seeking reparat ions might 

point to particu lar individual charges as unreasonable.

If this were all that was at stake, the Commission 

would have adequately identified the concerns behind 

its course—in light of the pressing need to increase the 

freight car supply, it was not too much to require that 

shippers carry the burden of going forward. Such an 

assessment would surely permit a reviewing court to 

determin e whether the Commission’s action was consistent with congressional tran spo rtation policy. Unfortunately, though, the change involved in making the 

shippers claim th at particu lar rates are unreasonable is 

not all th at is at stake. For in proceedings for reparations, there is also a change in the burden of proof: the 

shipper must produce sub stantial evidence that the rate 

is unreasonable. This would appear to affect the likelihood th at the shipper will prevail. There is a zone in 

which rates are reasonable, United States v. Chicago,

M., St. P. & P. R. Co., 294 U. S. 499, 506 (1935), and it 

would seem to be harder to establish th at the proposed 

rates fell outside th at zone tha n th at they fell within it. 

Or so Congress believed, for it specified the allocation of 

the burden of proof in suspension proceedings as part 

of the cost to the carriers; in retu rn for confining the 

power to suspend rates to the Commission, and so of 

elim inating the threat of long drawn out injunctive proceedings in the courts, Congress made the carriers carry
171

14 ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF TR AD E

a burden of proof th at would otherw ise not have been 

theirs. Cf. Pa rt II I, infra.10

The Commission did not suggest th at its approva l of 

the proposed rates on the grounds it gave would alter 

the usual practice in actions for repa ratio ns. Nor did 

it say why the need for an increased supply of freigh t 

<> cars justified a significant change in the burden of proof.

In this sense, the Commission’s action was, as the District Court noted, “discriminatory per se.”

* It is even harde r to und erstand from the Commission’s

opinion why it departed from the rule in prior cases p rotecting shippers who decide not to have in-transit inspections. If the separate charges are to be effective in 

alleviating the car-shortage problem, there must be a 

substan tial n umber of shippers who do n ot seek in -transit 

inspections. Ye t according to the Commission, the 

railroads need not show th at the present line-hau l rates 

are reasonable charges for the services provided to 

shippers who do not seek in-transit inspections. It

10 The argu men t urged in sup port of the Commission’s orde r is, 

in essence, that the separate charge approved by it was jus t like a 

general rate increase because of th e bre adth of its application. However, the Commission did not use the language characteristic of 

general increase proceedings. See, e. g., Ex parte 259, Increased

Freight Rate s, 1968, 332 I. C. C. 714, 715, 792 (1968). And, if 

this were just like a general rate increase, serious questions would 

arise abo ut the jurisdiction of the District Court to review the Com- 

" mission’s order. See Atlantic City Electric Co. v. United States, 306

F. Supp. 338 (SDNY 1969); Alabama Power Co. v. United State s,

316 F. Supp. 337 (DC 1969), both aff’d by an equally divided court, 

» 400 U. S. 73 (1970). Yet, although the parties have cited those

cases to us, see Brief of the Interst ate Commerce Commission, at 

35, Brief of the Secretary of Agriculture, at 18, Brief of Wichita 

Board of Trade, at 32, the y have not contended at any length that 

the District Court lacked jurisdiction over this case. This suggests 

th at the parties, including the Commission, do not inte rpret the 

Commission’s opinion as resting on the similarity between this case 

and general rate increase cases.
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ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE 15

would appear, thus, th at the Commission has approved 

a policy th at discriminates against what it hopes will 

be a very large number of shippers; it seems to have 

tried to justify its policy by citing reasons th at affect 

only a much smaller class.

Some of the shippers who previously sought in-transit 

inspections will no longer do so. Othe rs had the opportunity for such inspections. Now the railroads propose to eliminate some of the service previously provided yet charge the same rates. The Commission in its 

prior cases has required railroads proposing a similar 

reduction in service either to show th at the rate s then in 

effect did not compensate them for the service, and thu s 

th at the service was being provided at no charge, or to 

reduce the existing rates. See, e. g., Transit Charges,

Southern Territory, 332 I. C. C. 664, 683 (1968); Loading

of Less-T han-Carload Freight at Norfolk Harbor, 91 

I. C. C. 394 (1924); ICC v. Chicago, B. & Q. R . Co., 186 

U. S. 320 (1902).

Noth ing the Commission said suggests any reason why 

the railroads should not be required to follow the same 

rule in this case. At no time have r ates ever been esta blished, or found just and reasonable, when the railroads 

did not include the service of i n-t ran sit inspection. Perhap s th e im perative need to increase the num ber of freight 

cars available to all shippers justifies some alte ration 

of the general rule. Yet the Commission, when dealing 

with shippers who will continue to have in- tra nsit inspections, invoked the fact th at the new charges would 

not raise rate s above those perm itted by the general maxima. As to that class, the Commission app arently believed th at it could not simply refuse to follow preexisting practices on the ground of exigency alone. The 

Commission offered no reason to distinguish the larger 

class from the smaller one, in th at respect. Bu t i t might 

be that rate s for services including an in-transit inspec-
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16 ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TR AD E

tion, at the level of the general maxim um, would be 

reasonable while rates for services withou t such inspections would be unreasonable at th at level, or even below 

it. Thus, the fact th at the new charges will not exceed 

the general maximum seems to have no bearing on the 

question of the reasonableness of the rates th at will continue to be in force for now-reduced services.11

Perhaps the curren t line-haul rates really do not include a sub stantial amoun t attribu tab le to the cost of 

providing in-transit inspections. But cf. Trans cript of 

Hearing, at 231-232, 258-266. Or perh aps the Commission has some reason to reinte rpret the prior cases suggesting th at its rule reflects a concern for rate s th at are 

“increased” simply because of a reduction in services.

As in Secretary of Agricultu re V. United States, 347 

U. S. 645, 652 (1954), the Commission may have reasons 

for “following a procedure fairly ada pted to the unique 

circumstances of this case.” 12 But, as in that case, 

it must make these reasons known to a reviewing cou rt 

with sufficient clarity to permit it to do its job. Even 

giving the Commission’s opinion the most sym path etic 

reading th at we find possible, we cannot discover in it 

an expressed reason for permittin g the railroads to reduce the ir services withou t showing th at the rate s they

11 Th e Commission may have intended to leave this question for 

lat er proceedings. Bu t this course runs into the difficulties noted 

above, supra, p. 13.

12 On remand, the Commission might explain more fully the course 

it followed, or it mig ht ado pt a different course, for example, by 

requiring the carriers to dem onstrate the reasonableness of the linehaul rate s for services provided without an in-transi t inspection on 

a representativ e sample of routes. Most of the prior cases in 

which the Commission invoked the rule involved quite lim ite d 

problems, often confined to a single route. Bu t cf. Transit Charges,

Southern Territory, 332 I. C. C. 664 (1968). If th e C o m m is sio n the n 

explained why that procedure was responsive to the needs of the 

particular case, the prerequisites of judicial review would be satisfied.
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ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE 17

propose to maintain are reasonable rates for the service 

they intend to provide.

I ll

After holding th at the ma tter mus t be rema nded to 

the Inter sta te Commerce Commission for fur the r proceedings, the Distric t Court ordered, “The proposed <

charges are suspended and shall be ineffective until and 

unless otherwise ordered by this C ourt.” No reasons for 

such an order were given; the Dis trict Court did not, for «

example, specify the nat ure of the harm to the shippers 

th at would, presumably, injure them irrep arab ly. Nor 

did it explain the basis for its appar ent belief th at Arrow

Transportation Co. v. Sou the rn R. Co., 372 U. S. 658 

(1963), was distinguishable.

It was error to enter such an injunctio n. The District 

Court clearly had power to suspend the operatio n of the 

Commission’s order pending the final dete rmination of 

the shippers’ suit. Tha t power is given in term s by 28 

U. S. C. §2324: “The pendency of an action to enjoin, 

set aside, annu l, or suspend any order of the Inter sta te 

Commerce Commission shall not of itself stay or suspend the operation of the order, bu t the cou rt may restra in or suspend, in whole or in par t, the operation of 

the order pending the final hearing and dete rmination of 

the action.” But an inju nction forbidding the railroads 

from implementing a proposed change in rates is not, 

strictly speaking, an inju nction suspending the Commission’s order. In this case, for example, the Commission’s order stated, “th e proposed new or increased 

charges for in -transit inspection of grain at various points *

in the United States are jus t and reasonable. . . .” The 

only consequence of suspending th at order is th at the 

railroads may not rely, in some subseque nt proceeding, 

on a Commission finding th at the proposed rates were 

jus t and reasonable. In an action for reparations, for 

example, the railroads could not gain any benefit from
175

18 ATCHISON , T. & S. F. R. CO. v. WICHITA BD. OF TR AD E

the purpor ted Commission approva l of the increases.13

See Arizona Grocery Co. v. Atchison, T. & S. F. R. Co.,

284 U. S. 370 (1932). See also 49 U. S. C. §§ 1 (5), 

10 (1). The Commission’s order also provided th at the 

proceeding be discontinued, and suspension of the order 

requires the Commission to reopen its inquiry.

V Carriers may pu t into effect any rat e th at the Commission has not declared unreasonab le. 49 U. S. C. §§ 6 

t

(3) , 15 (1). Suspension of the Commission’s o rder thu s

does not in itself preclude the carriers from implementing 

a new rate . The power conferred on the District Court 

by § 2324 does not in itself include a power to enjo in the 

railroads from implementing a proposed new charge. 

Rathe r, th at power must be considered as at best ancillary to the general equitable powers of the reviewing 

court, and protective of its jurisdiction. See Arrow

Tran sportation Co. v. Sou thern R. Co., 372 U. S., at 671 

n. 22; Order of Conductors v. Pitney , 326 U. S. 561, 567 

(1946). Cf. Pittsbu rgh & W. Va. R. Co. v. United States,

281 U. S. 479, 488 (1930) ; 28 U. S. C. § 1651 (a ). As 

this Court noted in Scripps-Howard Radio, Inc. v. FCC,

316 U. S. 4 (1942), such a power mu st be inferred from 

Congress’ decision to permit judicial review of th e agency 

action. “If the adm inis trative agency has committed 

errors of law for the correction of which the legislature 

has provided app ropriate resort to the courts, such ju ­

dicial review would be an idle ceremony if the situ atio n 

were irreparably changed before the correction could be 

mad e.” Id., at 10.

Yet it would be surprising if th at power could be exercised to the exten t th at it might substantially inte rfere 

with the func tion of the adm inistra tive agency. “The

13 The Commission may, of course, app rove the rates on a theory 

similar to th at discussed in Pa rt II of this opinion, justifying its 

refusal to requ ire a showing of reasonableness by the fact th at th at 

question would be open in subsequent proceedings. A suspension of 

the Commission order would then have almost no practical meaning.
ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRA DE 19

existence of power in a reviewing court to stay the 

enforcement of an adm inis trative order does not mean, 

of course, th at its exercise should be withou t regard to 

the division of function which the legislature has made 

between the adm inis trative body and the court of review.” 

Ibid. Proper regard for th at division of func tion requires th at we hold erroneous the Distric t Co urt ’s decision to enjoin not only the Commission’s order finding 

the proposed rates just and reasonable bu t also the implem entatio n of those rates.

In Arrow Tran sportation Co. n. Sout hern R . Co., supra,

this Cou rt considered a similar problem. The Inter sta te 

Commerce Commission has the power to suspend proposed rate changes for seven months, while it proceeds 

to consider the reasonableness of the proposal. “If the 

proceeding has not been concluded and an order made 

within the period of suspension, the proposed change of 

rate . . . shall go into effect at the end of such period.” 

49 U. S. C. § 15 (7). In Arrow, parties affected by proposed reductions sought an injunction against the implemen tion of the proposed reductions when, at the end of 

the suspension period, the railroads announced th at they 

intended to pu t the new rate s into effect. The Commission had not determin ed that those rate s were reasonable. The Court concluded th at Congress, by giving the 

Commission the power to suspend rates, had intended 

to preclude the courts from doing the same.

Here, of course, the Commission’s proceeding has been 

concluded, or at least so the Commission tho ugh t when 

it entered its order. The terms of § 15 (7) do not specifically govern this situ atio n. Nor is there any other 

provision in the re lev ant statute s depriving federal courts 

of th eir general equitable power to preserve t he sta tus quo 

to avoid irreparable harm pending review. Yet many 

of the considerations, relied on in Arrow and influencing 

this Court’s definition of the proper relation between 

the courts and the Inter sta te Commerce Commission,
177

20 ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF TRADE

must be drawn on to delineate guidelines for t he exercise 

of the ancillary power, in a proceeding to review a Commission order, to enjoin a rate increase pending final determin atio n of the suit.

The most impo rta nt of these considerations is the 

> group of policies th at are encompassed by the term “pr imary jurisdic tion .” National transportation policy reflects many often-competing interests. Congress has established an adm inis trative agency th at has developed 

a close und erstand ing of the various inte rests and th at 

may draw upon its experience to illum inate , for the 

courts, the play of those inte rests in a particu lar case. 

Cf. Great Northe rn R. Co. v. Merchants Elev ator Co.,

259 U. S. 285 (1922) ; United Sta tes v. Western Pacific

R. Co., 352 U. S. 59 (1956). Ordinarily, then , a cou rt 

should refrain from expressing a preliminary view on 

wha t nat ion al transportation policy perm its, before the 

ICC expresses its view. Bu t when a cou rt issues an 

injunction pending final dete rmination, one important 

element of its judgment is its estima te of the probability 

of ultimate success on the merits by the party challenging the agency action. Virginia Petroleum Jobbers Assn.

v. FPC, 104 U. S. App. D. C. 106, 259 F. 2d 921, 925 

(1958). Depending on the typ e of error the reviewing 

court finds in the adm inis trative proceedings, the issu- 

« ance of an inju nction pending fur the r adm inistrative

action may indicate what the court believes is permitted 

by national transp ortation policy, prior to an expression 

« by the Commission of its view. This is precisely wha t

the doctrine of prim ary jurisdiction is designed to avoid. 

Cf. Order of Conductors v. Pitne y, supra; Locomotive

Engineers v. M.-K .-T . R. Co., 363 U. S. 528, 533 (1960). 

The fact th at issuing an injunction may und ercut the 

policies served by the doctrine of prim ary jurisdiction is
178

ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRAD E 21

therefore an important element to be considered when 

a federal cou rt contemplates such action.14

As we have indicated in Pa rt II of this opinion, we 

require the agency to justify its dep artu re from its prior 

decisions so th at we may understand wh at policies it 

is pursuing. If a reviewing cou rt cann ot discern those 

policies, it m ay remand the case to the agency for clarification and fur the r justification of the dep arture from 

precedent. But an injunction pending the completion 

of those proceedings would be warranted only if the 

reviewing court entertained substantial dou bt about the 

consistency of the Commission’s action with its man date 

from Congress. Cf. Virginian R. Co. v. United States,

272 U. S. 658, 673 (192 6).15 When a case is remanded

14 Brotherhood of Locomotive Engineers v. M.-K .-T . R. Co., 363 

U. S. 528 (1960), shows th at not all judicial injun ction s infringe 

on an agency’s primary jurisdiction. There the Court noted th at 

the Dis trict Co urt’s “exam ination of the nature of the dispute is 

so unlike th at which the [agency] will make of the merits of the 

same dispute, and is for such a dissimilar purpose, that it could not 

interfere with the later consideration of the grievance by the 

[ag enc y].” Id., at 534. Here, in contrast, the District Cou rt must 

consider whether the Commission is likely to find reasons for its 

action that are consistent with congressional policy. Not only is 

such a question exceedingly complex, it is also ju st what the Commission itself must decide before approving the proposed new 

charges.

15 In some cases, the reviewing court might explicitly refrain from 

considering the likelihood of success on the merits in deciding 

whether or not to issue an injunction. Then, if the possibility of 

irreparable damage to the pa rty seeking review or to other interests 

is great enough, an injunction may perhaps be justified. See, c. g.,

Semm es Motors, Inc. v. Ford Motor Co., 429 F . 2d 1197, 1205-1206 

(CA2 1970); Checker Motors Corp. v. Chrysler Corp., 405 F. 2d 319, 

323 (CA2 1969). In this case, however, the Distric t Cou rt did not 

clearly refuse to assess the likelihood of ultimate success and, as 

indicated infra, the possibility of irreparable harm to the shippers 

is quite small.
179

22 ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF TR AD E

on the ground th at the agency’s policies are unclear, an 

inju nction ordina rily interfere s w ith the p rimary jurisdiction of the Commission.16 Cf. Arrow Transportation

Co. v. Sou thern R. Co., supra, at 669-670.

In addition, the reviewing co urt m ust consider whe ther 

irrep arab le harm will result if the injunction is not issued 

and the party seeking it prevails on the merits. Order

of Conductors v. Pit ney, supra. Th at too may inter- 

» fere with the agency’s prim ary jurisdiction. We deal

here with a disp ute between shippers and carriers. In

16 This analysis turns on the fact that typ e of error in this case 

involves precisely a failure by the Commission to do the job committed to it, the proper performance of which is a pred icate of the 

doctrine of primary jurisdiction. Where the error might be considered pure ly procedural, for example, where the Commission failed 

to consider relevant evidence on grounds the reviewing court finds 

inadequate, the issuance of an injunction migh t not interfere with 

the agen cy’s prima ry jurisdiction quite so severely. Yet even there, 

before issuing an injunctio n the reviewing court must consider 

whether the Commission would have come to a different conclusion 

had it considered the evidence. And that may sometimes impinge 

on the sphere committed to the Commission for initial decision.

This Court has distinguished between bla tan tly lawless action 

and mere procedural error in cases raising similar questions of the 

power of courts to intervene in adm inistrative action. See Oestereich

v. Selective Service Board, 393 U. S. 233 (196 8); Fein v. Selective

Service Sys tem , 495 U. S. 365 (1972).

Different considerations would come into play, too, when the reviewing court finds some failure by the carriers in the suspension 

proceeding, rather than a failure by the Commission to do its task. 

A reviewing court might find, for example, th at the Comm ission’s 

conclusion th at the carriers had carried the burd en of proof to 

justify the increase was not sup ported by substan tial evidence. 

Although phrased as a finding of adm inistrative error, this in fact 

relates to the presentation of evidence by the carriers.

Finally, this case involves only claims under the Interst ate 

Commerce Act. Subsequent legislation might affect the relation 

between court and agency and so the pro pri ety of injunctiv e relief. 

Whethe r it does so must be determined by examining that legislation.
180

ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF TR AD E 23

giving the Inter sta te Commerce Commission power to

suspend proposed rat e increases, Congress allocated the

benefit and harm of a suspension. For a period of up

to seven months, the carriers may not collect the increases if the Commission suspends them. The income

th at the y might have gained is lost to them forever.

Congress did provide protectio n to shippers for the period

after the rate s go into effect. The Commission may

requ ire the carriers to keep detailed acco unts of the »

income received as a resu lt of the increase. If the increase is ultimately found unjustified, the Commission 

may order a refund. 49 U. S. C. § 15 (7). Even if the 

Commission does not do so in a suspension proceeding, 

the shippers may recover reparation s und er some circumstances. 49 U. S. C. §§ 8, 9. Thus, it is often quite 

unlikely th at shippers will be irreparably damaged by the 

implementation of a rate increase.17

The re are, however, public interests at stake in this 

litigation, as well as the privat e inte rests of the shippers 

and carriers. The Commission found th at inspection of 

grain is req uired for the orderly marketing of grain. 339 

I. C. C., at 385. Inspections will thu s continue to be 

made. Bu t now, if the Commission ultima tely approves 

the new charges, there will be a sepa rate charge for 

them , eith er by the railroads under the new charges, or 

by someone else engaged in marketing grain. Thi s extra 

cost mu st be absorbed by someone, perhaps by farmers, 

perhap s by the u ltim ate consumers of grain. See T ran script of Hearing 1299. The impact of rates on various

17 The interests of oth er carriers who might object to a proposed 

rat e change are somew hat different. They are not damaged, as the 

ship pers are, by out-of-pocket expenditures, and refunds or repa rations do not remedy the loss of business that the y might suffer.

This factor would thus have less weight in suits by such carriers, 

although the problem of interfering with primary jurisdiction must 

still be considered.
181

24 ATC HISON, T. & S. F. R. CO. v. WICHITA BD. OF TR AD E

groups in this cou ntry is surely releva nt to deciding th at 

the rates are consiste nt with national transportation 

policy.

Bu t the public intere st is not a simple fact, easily d ete rmined by courts. Here, for example, the inte rests 

of farmers and consum ers of grain mu st be balanced 

against the interests of producers and consumers of all 

sorts of oth er goods shipped by rail. For the premise of 

the Commission’s action in this case was th at separate 

charges for in- tra nsit inspections would alleviate the 

freight car shortage. The shortage itself increases the 

cost of transp orting a wide range of prod ucts by rail. 

Thus, the decision th at must be made is whe ther the 

car shortage has a more significant impac t on the nationa l economy than does increased cost for grain products. Congress has committed t ha t decision to the I nt er ­

state Commerce Commission in the first instance, and 

the exten t of har m to farmers and consumers of grain 

cannot be estimated withou t inte rfering with the primary jurisdiction of the Commission.18

18 Although they are far less substan tial tha n the problems of 

primary jurisdic tion and irre parable inju ry, procedural problems 

might also arise when a distric t court considers a request for an 

injunction like th at issued in this case. Review of Commission 

orders is by a three-ju dge distric t court. The United States is the 

defendant. 28 U. S. C. §§2321, 2322. Railroads who app eared 

before the Commission have a right to intervene, 28 U. S. C. § 2323, 

bu t they need not do so. If a railroad chose not to intervene , the 

Distric t Co urt could not enjoin it from implementing the new 

charge. The plaintiffs could, of course, compel an unwilling railroad 

a to appear. Fed. Rule s Civ. Proc., Rule 19 (a) . But, even thou gh

service of process is nationwide, 28 U. S. C. §2321, some plaintiffs 

might find it difficult to serve every railroad th at did not appear 

willingly. The presence before the reviewing court of all interested 

parties, or only some of them , is therefo re relevant to the exercise 

of the court’s discretion to enjoin a proposed rate increase. Like 

the other factors discussed in this opinion, this does not establish 

th at the District Court lacks power to enjoin the impleme ntation of 

proposed rat e increases after a final Commission order, but it is a

44-987 0 - 75 - 13
182

ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TR AD E 25

As this discussion shows, it is very likely t ha t a decision 

to enjoin rates pending reconsideration by the Commission in order to clarify its policies will imply some view 

by the District Court abo ut decisions comm itted to the 

Commission by the doctrine of prim ary jurisdiction.

The District Co urt ’s power to enjoin rates, in order to 

protect its jurisdictio n to review Commission orders, 

must therefore be exercised with grea t care and after full 

and detailed consideration of the problems set out above. »

It will not do to enter such an injunction in the offhanded manner of the Dis tric t Court. Cf. Virginian R.

Co. n. United States, 272 U. S. 658 (1926). Here the 

Distric t Court could not consider the likelihood of success on the merits or where the public in terest lies without 

infringing on decisions comm itted by Congress to the 

prim ary jurisdiction of the Int ers tat e Commerce Commission, and the possibility of harm to the shippers was 

small. It was therefore improper to enter an injunction 

against the implementation of the proposed new charges.

In this case the Commission ordered the railroads to 

maintain records of the amounts collected as a resu lt of 

the new charge. It may be th at this adequately protects the shippers from irrep arab le damage, in light of 

the availability of actions for reparations. The Commission may determine on remand that some fu rth er steps 

must be ta ken to protect the shippers. But in any event, 

it is clear that the D istrict Court should not have entered v

the injunction it did. The action of the Dis trict Court 

is affirmed as to the remand to the Commission and is 

reversed as to the injunctio n suspending the proposed *

charges.

So ordered.

Mr. J ustice Powell took no p art in the consideration 

or decision of these cases.

factor to be considered in determining whether to exercise equitable 

discretion to issue such an injunction.
183

SUPREME COURT OF THE UNITED STATES

Nos. 72-214 and 72-433

On A p p e a ls fr o m th e 

United States District 

Cou rt for the Dis tric t 

of Kansas.

3, 1973]

The Atchison, Topeka and

Santa Fe R ailway Compan y et al.,

Appellants,

72-214 v.

f The Wichita Board of

Trade et al.

Int ers tat e Commerce Commission, Appellant,

72-433 v.

Wichita Board of Trade.

[June 11

Mr. J ustice Douglas, concurring in the affirmance 

of the remand to the Commission and dissenting from the 

reversal of the decree auth orizing the injunction .

In my view the Dis trict Court was quite correct in 

issuing its injunction. Arrow Transportation Co. v. Sou.

R. Co., 372 U. S. 658, is not rele vant here, for the reason 

th at § 15 (7) only purpor ts to control the suspension of 

rate s up unt il the time the Commission has rendered a 

• decision. Afte r th at decision has been made, the reviewing court has, I believe, the power to enjoin the affected 

rates. The new charges which the Commission would 

A impose would have an immediate imp act upon the grain

marketing system. It would affect the volume of business of the grain merchants, it would affect the employment of grain inspectors, and it would resu lt in lower 

prices being paid to the farmers. None of these incidences can be remedied under the existing sta tutory 

scheme, because none of these inte rests is enabled to
184

2 ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF TR AD E

bring suit for a later rate refund. Hence, in my view, 

the grain trad e and the farm ers need this interim protection lest in inspection the m arketin g system suffers severe 

attritio n during the period of remand. The deciding 

principle is th at the Dis tric t Cou rt sits as a court of 

equity, United Sta tes v. Morgan, 307 U. S. 183, 191, and 

as a court of equity has, I believe, ample power to protect the grain ma rke t nationally which would otherwise 

be withou t remedy under the existing sta tutor y regime.

Jurisdiction is gran ted the Dis trict Cou rt “to enforce, 

enjoin, set aside, annul or suspend” any order of the 

Interstate Commerce Act. 28 U. S. C. § 1336 ( a). For 

years th e type of order here involved* was not reviewable. 

See Proctor & Gamble Co. n. United States, 225 U. S. 

282. But th at “neg ativ e” order concept was abandoned 

in Rochester Tel. Corp. v. United States, 307 U. S. 125, 

145. The provisions of the Urgent Deficiencies Act, 28 

U. S. C. § 1336 (a), are an explicit grant of power to 

provide injunctive relief. Under th at Act the “governing principle” is “th at it is the duty of a court of equity 

granting injunctive relief to do so upon conditions th at 

will protect all—including the public—whose interests 

the injunction will effect.” Inla nd Stee l Co. v. United

States, 306 U. S. 153,157. Th at power exists wheth er the 

Commission’s autho rity over rate s is challenged under 

49 U. S. C. § 15 (1) as being unjus t or unreasonable or 

under 49 U. S. C. § 15 (7) relating, as here, to “a new 

individu al or joint rate , fare or charge.” In all cases the 

District Court by reason of 28 U. S. C. § 1336 ( a) sits as 

a cou rt of equity.

*The orde r of Division 2 of the Commission prov ided that the 

proceeding “be, and it is hereb y, discontinued.” 339 I. C. C. 364, 

— . The order of the Commission en banc affirming is in 340 I. C. C. 

6 9 ,---- .
185

SUPREME COURT OF THE UNITED STATES

Nos 72-214 and 72-433

<

The Atchison, Top eka and 

Santa Fe Railway Compan y et al., 

Appellants,

72-214 v.

The Wic hita Board of 

Trade et al.

Inter sta te Commerce Commission, Appellant,

72-433 v.

Wichita Board of Trade.

On A ppeal s fr om th e 

United States Dis tric t 

Cou rt for the District 

of Kansas.

[Ju ne 18, 1973]

A

Mr. J ustice Whit e, with whom Mr. J ustice Brennan and Mr. J ustice Rehnquist join, concurring in the 

reversal of the injunction and dissenting from the affirmance of the remand to the Commission.

I dissent because the District Court erred both in 

holding th at the Commission had inadequate ly explained 

the basis for its judgment and in suspending the new intra nsit inspection tariff beyond the time the statute permits new rate s to be suspended withou t a finding th at 

they are un jus t and unreasonable.

As to the latter, 49 U. S. C. § 15 (7) forbids the suspension of new freig ht rates for more tha n seven 

months w ithout the requisite finding of unreasonableness 

by the Commission. Only the Commission may suspend 

in the first instance; and if the agency refuses to do so, 

the co urt is powerless itself to suspend. The Commission 

may postpone effectiveness of new rates for seven m onths, 

bu t if it does, the sta tute commands that, abs ent the 

app ropriate order of the Commission within th at 

period, “the proposed change of rate . . . shall go into 

effect . . . .” To permit the District Court neverth e-
186

2 ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE

less to extend this period seems to me to be flatly contra ry to the will of Congress. I therefore cannot join 

the Co urt ’s indication that, although the District Cou rt 

has no sta tutory power to do so, it nevertheless reta ins 

sufficient power to enjoin the rates as “ancillary to the 

general equitable powers of the reviewing court, and 

protective of its jurisdic tion .” Ante, p. 18. As I see 

it, the Dis tric t Court contraven ed the precepts of Arrow

Transportation Co. v. South ern R. Co., 372 U. S. 658 

(1963).

As for the remand to the Commission, there is somewhat more to be said. The Commission found, and it 

is not questioned by the Dis tric t Cou rt or by the major ity here, th at in- tra nsit inspection of grain is not an 

essential part of transp ortation service bu t only ancillary 

to it; th at the prem arketin g inspection of grain, in tran sit 

or otherwise, is no longer required by federal law; th at 

in- tra nsit inspection of grain has been the regular practice in Western territory, to some exten t in Southern 

territory, but not in Eastern territory ; th at t he line-haul 

rates for grain in Western and Southern territories established by the railroads or prescribed by the Commission 

have provided one free in- transit inspection stop, bu t a 

separate charge for th at service is the practice in Eas tern 

te rrito ry ; 1

 and that, because of recent developm ents in1

 The Commission noted:

“It is again emphasized that the major impact of the proposal 

under consideration will be on the movement of grain in the western 

district. Most inspections occur in this territory. There is presently effective a separate charge for this service in the East. A 

substantial increase in those charges will result, however, if the 

proposed charges are permitted to become effective. The number 

of in-transit inspections in the South is limited and take place chiefly 

at the ports on export grain tonnage. There is little, if any, opposition to establishment of the charges in southern territory. Practically all of the controversy is concerned with establishment of the 

separate charge for the first inspection of grain within the western 

district.”
187

ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF T RADE 3

tra nsit inspection is no longer an essential service for 

the orderly marketing of grain in Western and Southern 

territorie s. Further more, the unquestioned finding of 

the Commission was th at the principal motiva tion for 

imposing a separate charge for in-transit grain inspection 

was not to increase railroad revenues through collection 

of the charge itself bu t to promote efficient utilization 

of freight cars by discouraging the practice of in-transit 

inspection which had proved extremely wasteful in terms 

of car utilization. The Commission finding, also undisturbed, was th at the separately stated inspection fee 

would discourage the practice of in- transit inspection, 

would con trib ute to a more efficient utilization of freig ht 

cars, and hence help relieve the unquestioned grain -car 

shortage.

With these important preliminary findings and conclusions behind it, the Commission examined in detail 

the reasonablenes of the separate charge being imposed 

for in- tra nsit inspection of grain. Its conclusion was 

th at the charge was reasonable, a judgment not overturned eith er here or in the District Court. Finally, 

the Commission noted th at by the term s of the new 

tariff itself, sep arate in- tra nsit inspection charges could 

not be collected where the combination of the new, 

separate charge and the existing line-haul rate exceeded 

the maximum reasonable level of grain rates established 

in Docket 17,000, Pa rt 7, Ra te Structure Investigation,

Grain and Grain Products, 205 I. C. C. 301 (193 4); 215 

I. C. C. 83 (1936), as raised by subseque nt general revenue increases. Dock et 17,000, Pa rt 7, Ra te Structure

Investigation, was a major national effort, a comprehensive inve stigation of rate s on agricultura l products, and 

resulted, among other things, in the Commission prescribing maximum reasonable freight rate levels for movements of grain. Since t ha t time, there have been general 

rate increases for revenue purposes, in the course of which
188

4 ATCHISON, T. & 9. F. R. CO. v. WICH ITA BD. OF TRAD E

the rates on grain and the ir structure as required by the 

1934 and 1936 determ ination s have been given special 

attention. See for example, Increased Freight Rates,

1967, 332 I. C. C. 280, 300 (1968).

Under the new tariffs now filed, as I have said, if 

the applicable line-hau l rate on the particula r grain 

movement involved is at the maxim um reasonable level 

theretofore prescribed by the Commission in previous 

proceedings, no separate in-transit inspection charge is *

imposed or allowable, nor may the comb ination of the 

new charge and the existing line-hau l rate collected by 

the railroad exceed the maxim um allowable rate as previously determ ined. This is the key to understanding 

that, in approving the separate inspection charge, the 

Commission did not ignore its long standing rule th at 

railroads may not impose separate charges for an ancillary service previously furnished under a line-haul rate 

unless both the reasonableness of the separate charge 

and the line-haul rate are scrutinized. Transit Charges,

Sou thern Territory, 332 I. C. C. 664, 683-684 (1968), 

is, for example a relative ly recent res tate me nt of the 

rule .2

 The Commission though t this rule not controlling 

here because, in the first place, the m agnitude of the task 

of justifying each one of a countless number of line-haul 

grain rate s would, as a practical matter, prohibit the 

imposition of a sepa rate in-transit inspection charge and 

so fru strate the important nonrevenue goal of discouraging in- transit inspection and so improving car utiliz ation.

2

 The Commission’s order was sustained, on other grounds, in 

Cin. N . 0. & T . R. P. Co. v. United States (unreported) (SD Ohio 

1970), aff’d 400 U. S. 932 (1970). The Dis trict Cou rt sustained 

the Commission on the basis that the proposed increase in charges 

might well result in a sub stan tial diversion of the considered traffic, 

with a diminution, rather than an increase, in revenues. In the 

present case, the Commission noted: “Similar conclusions are not 

warranted here.”
189

ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF TRA DE 5

But more fund ame ntal ly, the Commission in any event 

deemed the rule satisfied; for here the reasonableness of 

the line-hau l rate was sufficiently examined and ensured 

by proof th at the new charge was itself reasonable and

by proh ibiting its collection if the total cost of the grain 

movement—its line-haul charge plus the separate inspec-

* tion charge—exceeded the maximum reasonable rate 

theretofore prescribed by the Commission, th at is, the

< maximum reasonable rate the Commission had theretofore prescribed for both the transportation service and

the privilege of in-transit inspection.

Thi s approach seems stra ightforward and adequate. 

Keeping in mind th at Docket 17,000, Pa rt 7, as was 

customary in Western territory, prescribed rates for grain 

movements per mittin g one in-transi t inspection without 

extra charge, let us assume, for example, that the maximum rat e prescribed by the Commission for a partic ula r 

grain movement with in-transit inspection privileges was 

120. Assume fur the r what is the recurring situatio n in 

the case before us—th at the railroad is charging less 

than it may, say 100, for the grain movement with that 

privilege. The railroad then publishes a tariff unde r 

which the line-haul rate of 100 no longer entitles the 

ship per to in- transit inspection, and a separate charge 

of 20 is imposed on those who want th at service. The 

line-haul charge plus the separate in-transi t inspection 

i charge does not exceed what the Commission has heretofore ruled the railroad may collect for both the tra nsportation and the inspection service. This calculus seems

* to me an adequate basis for concluding th at the line-haul 

rate of 100 is itself within the zone of reasonableness. If 

a railroad may charge 120 for a grain movement with intra nsit inspection provided, and the inspection stop is 

proved reasonab ly worth 20, why should there also be 

occasion for considering the reasonableness of 100 as a
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6 ATCHISON, T. & S. F. R. CO. v. WICHITA BD. OF TRADE

line-hau l r ate and so proving again what the Commission 

previously found—th at 120 is a reasonable charge for 

both services?

The Distric t Court tho ught the Commission ignored 

Secretary of Agriculture v. United States, 347 U. S. 645 

(1943), bu t I read th at case far differently. There the 

Court, although being of the opinion th at the Commission had not adequately explained why it was approving 

a sepa rate charge without examining the legality of the 

line-haul rate, was careful to point out th at the Commission was not precluded “from following a procedure 

fairly adapted to the unique circum stances of this case” ; 

nor did the court question “the Commission’s power, 

unde r appropriate findings, to approve such unloading 

charges without pursuing one of these courses. In dealing with technical and complex ma tters like these, the 

Commission must necessarily have a wide discretion in 

form ulating appropriate solutions.” Id., at 652. Th at 

case does not stand for the rule that a sepa rate charge 

for an ancillary service may in no circumstances be permitted with out new proof in tha t proceeding of the 

reasonableness of the line-haul rate.

The prior decisions of the Commission relied upon by 

the D istrict Cou rt establish clearly enough th at the Commission mus t be satisfied with the reasonableness of the 

line-haul rate as an exaction for the remaining services 

before approving a sepa rate charge for a service previously covered by the line-haul rate. Transit Charges,

Sou thern Territory, 332 I. C. C. 664 (196 8); Inv estigation and Suspension Docket No. 5146, Terminal

Charges at Pacific Coast Ports, 255 I. C. C. 673 (194 3); 

Reconsignmen t Case No. 3, 53 I. C. C. 455 (191 9); 

Loading of Less-Than-Carload Freight on Lighters in

Norfolk, Va., Harbor, 91 I. C. C. 394 (1924). In these 

cases, the carriers simply failed to carry their burd en of 

proof.
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ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF T RADE 7

The Dis tric t Court also cited for this pro position Grand

Forks Chamber of Commerce et al. v. Great Northern

R. Co., 321 I. C. C. 356 (1963), bu t the Commission in 

th at case, see id., at 360-362, did precisely wha t it has 

done in this one: it approved a separate in- tra nsit in- 

| spection charge in the case of so-called Group 3 rates

where the line-haul rate and the new charge toge ther 

were less than so-called Group 1 rate s prescribed in Grain

t and Grain Products, 205 I. C. C. 301, 315 I. C. C. 83,

supra. See also Public Service Com m’n n. Great No rth ­

ern R. Co., 340 I. C. C. 739; Alab ama S tate Docks Dept.

n. Alaba ma, T. <fc N. R. Co., 321 I. C. C. 347; Agsco

Chemicals v. Alabama G. S. R. Co., 314 I. C. C. 725.

Neither do I understand why the majority is comforted by the opinion in Cincinnati N. O. & T . P. R. Co.

n. United S ta te s,---- F. Supp. ----- (SD Ohio 1970), in

which the Distric t Cou rt affirmed, bu t on very limited 

grounds (grounds th at would save the case before us 

now), the Commission’s disallowance of a sepa rate tra nsit charge for cotton movements bu t disapproved the 

stringent stan dard by which the Commission required 

the railroads to prove the reasonableness of the resu lting 

line-hau l rate . The District Cou rt restated the prevailing rubric:

“The question here is what should the carrier be 

j paid for a service which it has been rendering, and

has been charging for, and has been paid for (one 

know eth not what) which it proposes to sepa rate 

and charge sepa rately for. Both the courts and the

Commission have consisten tly held that what is a 

just and reasonable rate for the service to be separa ted and charged for sepa rate ly cannot be determ ined by examining only the typical questions of 

cost, etc., with respect to the separate service. On 

the contrary , the typical questions must be directed
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8 ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF TRADE

to the overall or combined picture so th at one may 

conclude (a) th at the rate for the separated service, 

looked at by itself in the light of the applicable 

questions, is jus t and reasonable; and (b) th at the 

rema ining rate for the services, sans the separated 

service, is not rendered unjust or unreasonable.”

The Distric t Court continued:

“Whether the examination is in term s of “what 

portion of the line-haul rat e represented the rate 

for the service to be separated,’ or whether the 

search in terminology is for the answer to this 

question: Does the new aggregate rate, composed

of line-haul plus transit rates represent a jus t and

reasonable rate for all of the services (th e aggregate

of the severed and the nons evered)— the principle

is the same.” (Em phasis added.)

A few paragraphs later, the court repe ated the same 

atlern ate approach. This Court affirmed the District 

Court summarily. 400 U. S. 932 (1970). In the case 

now before us the total of the line-haul rate and the 

sepa rate in-transit charge will in no case exceed what 

the Commission has heretofore found to be a reasonable charge for the aggregate service.

The maxim um permissible rate s for grain movements 

with in-transit inspection privileges were established 

some years ago it is true , bu t they have been subject 

to repeated examination upon the occasions of general 

rate increases and, as this case itself shows, they are far 

from dead letters from the standp oint of eith er the railroads or the Commission. They remain the foundatio n 

of the Commission’s opinion as to wha t just and reasonable grain rate s are with in-transit privileges furnished 

by the railroad. I see no reason for now disagreeing 

with the Commission’s judgment th at the reasonableness 

of a line-haul rate lower tha n the maximum allowable
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ATCHISON, T. & S. F. R. CO. v. WICH ITA BD. OF TRA DE 9

has been sufficiently re-examined to permit imposition 

of a sepa rate in-transit inspection charge, in itself found 

reasonable, when it is also determin ed th at the existing 

line-haul rate and the new inspection charge together 

total less tha n the maxim um Commission-prescribed rate 

for the two services combined. Surely this pres ents an 

inad equate occasion or context in which to fru strate w hat 

the Commission found to be a promising effort to solve 

a critical problem—the freight car shortage—by seeking 

to deter a wasteful practice not indispensable or even, 

in the Commission’s view, unusually im porta nt to the 

orderly marketing of grain under modern conditions.

For these reasons, I respectfully dissent.

O

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