Document: 396 U.S. 491 90 S.Ct. 708 24 L.Ed.2d 700 UNITED STATES, Appellant,v.INTERSTATE COMMERCE COMMISSION et al. Charles E. BRUNDAGE al., Appellants, v. STATES CITY OF AUBURN, Appellant, LIVINGSTON ANTI-MERGER COMMITTEE, INTERSTATE Nos. 28, 38, 43, 44. Argued Oct. 21 and 22, 1969. Decided Feb. 2, 1970. [Syllabus from pages 491-494 intentionally omitted] Richard W. McLaren, Chicago, Ill., Louis B. Dailey, New York City, Valentine Deale, Washington, D.C., for appellants. Fritz R. Kahn, Hugh Cox, Fred H. Tolan, Seattle, Wash., K. Merrill, appellees. Mr. Chief Justice BURGER delivered the opinion of Court. 1 The Interstate Commerce Commission orders that give rise to these appeals grow out applications seeking approval a merger plan filed by Great Northern Railway Company Pacific (collectively Lines), three their subsidiaries—the Coast Railroad Company, Burlington & Quincy (Burlington), Spokane, Portland Seattle (SP&S). approved three-judge Federal District Court Columbia affirmed Commission.1 We affirm judgment 2 factual historical setting is important an understanding our disposition appeals. operates some 8,200 miles road located in 10 States two Canadian provinces. has approximately 6,200 track seven one province. Lines operate largely area west St. Paul, Minneapolis, Duluth, running points across Tier (Minnesota, North Dakota, Montana, Idaho, Washington) Tacoma, Portland. Pacific's tracks run generally somewhat south Northern's. jointly own control SP&S, while owns controls Company. Burlington's 8,648 extend Chicago Twin Cities southwesterly Missouri, Kansas, Colorado, Montana. By its subsidiaries2 reaches Gulf Mexico at Houston Galveston. SP&S 599 Oregon which 515 are mainline. This mainline provides most direct route Spokane strategic importance because lies on main transcontinental routes West terminal both roads. 32 track, all King County, Washington; rolling stock motive power leased Northern. 3 Rail competition areas served principally between carriers: Northern, Pacific, Milwaukee, Paul (Milwaukee). Because complement those Lines, there no substantial corporate parents. overshadow Milwaukee each principal competitor other. carry lion's share traffic Duluth Northwest, roads having good access Northwest through certain vital gateways area. Although was designed constructed be it never accounted large percentage carriage Northwest; become ratemaking railroad. explanation this although possessing superior grades shorter Cities, had adequate Lines' SP&S. As result, role been shorthaul carrier feeding much profitable long-haul Minneapolis. 4 population region traversed concentrated easterly westerly extremities. rich agricultural mineral resources, embraces country's richest timber reserves. However, markets products limited number distant region; major shipments must move east. Thus, transportation capable carrying bulk rate low enough permit participation extreme region. well serves need. There historically, however, imbalance low-rated agricultural, mineral, forest produce flowing region, high-rated manufactured goods into former inherently suited rail transport, but latter subject incursions other modes carriage. water virtually nonexistent, truck present time growing. 5 have long sought merge single unified system. In Pearsall Co., 161 646, 16 705, 40 L.Ed. 838 (1896), ruled attempt consolidate operation contrary Minnesota statute prohibiting consolidation parallel competing railroads. next struck down Securities Co. United States, 193 197, 436, 48 679 (1904), as Sherman Act, 26 Stat. 209, 15 U.S.C. § seq.3 Then declining fortunes carriers led Congress enact Transportation Act 1920, 41 456, charged with affirmative responsibility formulate plans simplifying Nation's transport 'into systems.' 481. engendered third effort, under Commission's auspices, Lines.4 effort foundered requirement excluded system, were unwilling without Burlington. 6 * Present Merger 7 1955 began investigating anew possibility would combine five roads—the Burlington, Coast, Lines—to form Extensive negotiations dealing phases proposed commenced. Five years later, 1960, agreement finally reached. It provided merged acquire subsidiaries companies leasehold, trackage, joint-use rights terminals incident thereto. lease thereby acquiring road's trackage rights. 8 further shareholders receive common share-for-share basis. stockholders and, addition, one-half $10 par 1/2% preferred held date merger, retired over 25-year period, beginning fifth anniversary redeemable option any after merger. amounting 97.18% total shares outstanding, canceled remaining given 3.25 Proceedings 9 First Report.—As result renewed 1961 380, amended, 49 5, authorization issuance securities, assumption obligations authority necessary effectuate merger.5 public hearings 1962 Department Justice, Agriculture, various railway employee groups, nine or state regulatory agencies, Western (North Western), inter alia, actively opposed proposed. Shippers related interest groups appeared support proposal. Hearing Examiner submitted report 1964 recommending transactions, protective conditions. heard oral argument dated March 31, 1966 (First Report), rejected Examiner's recommendation disapproved vote 5.6 applicants petitioned reconsideration, asserting they willing accept conditions another affected road, Western, entered attrition agreements objecting unions protection employees, yield dollar savings greater than estimated Report. While petition pending before Commission, agree roads; then agreed merger.7 Thereafter, withdrew opposition urged approve it. Approval advocated objections withdrawn parties who previously either completely absent imposition These included Public Utility Commissioner Oregon, South Iowa, Wisconsin, Michigan.8 11 Second Report.—On January 4, 1967, granted application reopened proceedings reconsideration hearings. order terms issues, hearing taking evidence question amount light Northwestern, changes relevant occurred close first hearing. Oral arguments followed. On November 30, handed (Second Report) approving consistent imposing protect carriers.9 April 11, 1968, denied reconsideration.10 12 acting complaint May 9, challenging Other intervened, plaintiffs11 defendants.12 After preliminary resulted stay pendente lite, case merits court designated accordance 28 §§ 2325 2284. court, Senior Circuit Judge Fahy, unanimously sustained holding transactions guided applicable legal principles findings supported evidence. dismissed complaints, vacated stayed appeal Upon filing Court, we ordered final disposition. II Appeals Here 13 Four taken Court's judgment; (No. 28), Stockholders' Protective Committee 38), City Auburn, Washington 43), Livingston Anti-Merger 44). 14 Each four appellants attacks different grounds. challenges cover every aspect rather complex expositions fact objection, will dealt seriatim. With cases posture review 'determine whether proceeded law conclusions accord statutory standards evidence.' Penn-Central N&W Inclusion Cases, 389 486, 499, 88 602, 608, 19 723 (1968). should emphasized, Fortas noted, speaking similar context, '[w]ith respect task limited. do not inquire satisfies conception interest. Determination factors entrusted primarily governing statute.' Id., 498—499, 608. here amended 1940, 54 905, 5. when 'consistent interest' proposal 'just reasonable.' determining standard met, 'give weight following considerations, among others: (1) effect transaction upon service public; (2) inclusion, failure include, railroads territory involved transaction; (3) fixed charges resulting (4) employees affected.' 5(2)(c). 17 addition listed above, also consider anticompetitive effects consolidation, 5(11) relieved antitrust laws. McLean Trucking 321 67, 83—87, 64 370, 378—381, 544 (1944). 18 Report found improved shippers enable make more efficient use facilities shortest swiftest internal available. afford $25 million per year tenth consequence 5,200 jobs eliminated, being significant source reduced operating costs. analyzed impact eliminate Tier. reasoned even attached benefit remain weak compared noted earlier, concluded did benefits such scope outweigh lessening Tier; disapproved. When considered additional including changed positions objectors, new realized merger; issued. estimated, $40 removed eliminated except normal course attrition. Aside changes, acceptance record same based. acknowledged failed appropriate aims national policy facilitate mergers development comprehensive view too stringently. went reexamine weighing them against public, shippers, roads, accentuating strengthened competitive outweighed 20 That easy problem attested lengthy history attempts lines dates back three-quarters century. efforts establish system represent 20th century phase American West; brackets period enormous growth change, developments needs. Against background surprising members divided favor 1967 made meet many raised. Nor remarkable great departments government, interest, took opposing positions; vigorous advocacy divergent views difficult narrowed sharpened issues aided resolution, ensuring factor ought elude attention. Appellants' Contentions (a) No. Justice.—The Antitrust Division Department, ground properly apply 5(2)(b) contends diminution financially healthy, preclude clear showing serious need met beyond efficiencies normally flow urges instant presents healthy carriers, prime served. Admittedly 'drastic competition.' argues shown economies operations, satisfied erred refusing enjoin 22 maintains prior 1920 laws underlying policies applied full force commanded nationwide 'for properties continental systems,' 481, intended promote absorption strong carriers. To extent intend encourage producing only usual 'normal' kinds benefits, guiding consolidations judged. according alter policy, duty confine corners plan. suggests analyze if great, determine required secure benefits. standard, urges, legislative [s 5] generally, goal simplification railroad systems underlay Acts 1940.'13 23 correct stating focal point concern throughout consideration problems preservation combination strong. saw one—but one—means objectives. whole embodied economy efficiency operations. See California Southern 264 331, 341, 44 376, 377—378, 68 713 (1924); Texas Gulf, Colorado Santa Fe 270 266, 277, 46 263, 70 578 (1926); 292 522, 530, 819, 824, 78 1402 (1934); Lowden, 308 225, 232, 60 248, 252, 84 208 (1939). furthers unit results joining 'sick' serve equally longrange objectives immunized consistently interpreted way. find basis reading congressional objective confining combinations rescue halt lame. Central Corp. 287 12, 53 45, 77 138 (1932), cautioned 25 '[t]he carriers' cannot deemed affect validity conferred Commission. acquisition aid preventing injurious waste securing thus committed administrative agency facts developed particular case.' 25—26, S.Ct., 48—49. decision passage way altered basic policy14 enactment. recognized Joe Paper Atlantic Line 347 298, 319, 74 574, 586, 98 710 (1954), adopted recommendations Six passed 1940 promulgate Committee's elimination circuitous routing could consolidations.15 recently County Marin 356 412, 880, 879 (1958), observed: 27 'The purpose sweeping revision directed itself take initiative developing trial approach inadequate. extended motor initiate unifications. 'Instead, authorized carrier-initiated, voluntary if, terms, modifications might prescribe, tests justice reasonableness *.' (Emphasis added.) Schwabacher 334 182, 193, 958, 964, 92 1305 (1948). short, change means, end remained same. very language 'unification section' expresses clearly desire industry proceed toward integrated simplification.' 416—418, 883. original.) (Footnotes omitted.) turn now accorded discussed comprehensively dispositively 370 (1944), several trucking companies. Since nowhere else so definitively issue, analysis Rutledge quotation: 29 special suggests, quite apart explicit provision Section 5(11), anti-trust 'the regulation qualified And emphasis legislation achieving adequate, efficient, economical supervision business operations practices heavy reliance enforcement free business, cf. 138, counterpart policy. 30 '[T]here can little doubt measure proposals all-rail all-motor circumstances effectuation informed furthered 'encouraging organization stronger units' industry. authorizing import general permissibility. participants requirements 5(11). doing so, presumably account strict supervision, particularly rates public—an effective safeguard evils attending monopoly, directed. background, inference possible that, propriety motor-carrier still value, chiefly aids attainment 31 'Therefore, bound accede *. 'Congress however neither wholly inapplicable nor passing ignore Hence, participating may obtain immunity prosecution sense relieves duty, matter, competitors situation 33 'In estimate appraise curtailment along advantages service, safer operation, lower costs, etc., assist effectuating over-all Resolving considerations requires extensive facilities, expert considerable knowledge left wisdom experience commission,' courts, interest.' [Citations omitted.] If exceed limits within confined discretion evidence, function upset order.' 83—88, 378—381. 34 Accord, Minneapolis L.R. 361 173, 186-188, 80 229, 237—239, 223 (1959); Seaboard Air 382 154, 156—157, 86 278—279, (1965); see Florida East 259 F.Supp. 993 (D.C.M.D.Fla.1966), aff'd curiam, 386 544, 87 1299 (1967). 35 sufficient Lines—in strike balance overall needs Congress. contention tends isolate individual enter controlling considerations. 'Competition merely here,' U.S., 500, 609 And, add, implied specifically mentioned 5(2)(c) statute. reports, exhibited sensitivity accommodating based long-range consolidations. Indeed, disapprove margin study specified infirmities reached conclusion decisive supplemental reflected Our review, like reveals determination applicants, enhanced Report, improvements Reports loss Lines. Striking say improperly. 36 deserve elaboration. car supply, wider routing, better loading unloading privileges, tracing claims service. able eliminating yard interchange delays, providing faster realize consolidating yards, repair management, duplicate train services pooling cars trains receivers. opening remove artificial barriers markets, sources services. 37 adverse position turn, public. Following accepted Milwaukee. Under lying Northerns handicapped limitations eastern western terminals, greatly improved. Absent continue strangled system; gives prospect affording placed inception hoped achieve. Its past meaningful came part reach Portland, southwest California. strictly understandable destined fail true line though terminus lay few latter's sea. 38 north-south short Longview, barely half distance border Washington's southern border. Moreover, westbound notwithstanding Milwaukee's deep Washington. joined pointing precluded disadvantage carrier. 39 imposed substantially enlarge potential due enlargement capability. afforded flexible Another condition giving link Pacific. All compete east-west linkage north, exclusive domain Northerns. lesser buttress newly project relative vis-a-vis discounts difficulty precise forecasts overstate projections. deal probabilities arise genuine wide area, something choice negating idea disappear Northwest. (b) Committee.—The Committee16 appealed affirmance merger's exchange provisions. put contentions perspective describe how reaching terms. 42 continuing relates land holdings. holds acres fee six acres. lands natural coal, oil, timber, income. centered lands. financial adviser suggested earning sold level above Pacific's, holdings vast resources worth justify ratio insisted 60—40 traditional strength. stumbling block segregating properties. One create classes stock, issued representing resource properties, second solution spinning off corporation using proceeds contribution Neither solutions acceptable negotiators, inherent administering interests, litigation bondholders tax consequences negotiators include 43 Thereafter concessions, abandoning claim permanently larger immediate equality. recognition Northern's historically higher market price equal earnings enterprise longterm worked five-year roads' advisors, boards directors stockholders.17 Shortly thereafter formed. ratio, pressing undervalued adjust estimates property's or, preferably, segregated separate corporation, available shareholders. reviewed valuation making concluding good-faith-arm's length bargaining fairly group stockholders' value unsupported spinoff unfair He recommended exchange. 45 issue ratio. reconsidered earlier decision, refused request reopen hear matter. again pressed contentions. basically grounds his continued attack abused updated finding just reasonable proffered ultimate fairness finding. exercised was, therefore, abuse. 47 lacks ratios reasonable; it; erred, discretion, appellant process permitting respecting contributions shareholders, especially properties; does contain segregation lacking merit shareholders; upholding action. leads us reject 5(2) finds reasonable. Examiner, fully feasible fair stockholders. note fulfilling responsibilities carefully reasonable, agency, less dictate once met. hardly argued protecting interests. unwillingness abuse deny law. What said Jersey 322 503, 1129, 1420 here: 50 'Administrative evidence—particularly where examiner, parties, exceptions always creates gap closed promulgated. difficult, intricate, deliberate careful. coming litigants demand rehearings matter circumstance arisen, trend observed, discovered, hope ever consummated reopening. almost rule necessity matters right, pleas discretion. likewise invoked body order, reviewing body.' 514—515, 1134. 51 Pierce Auto Freight 327 515, 66 687, 821 (1946), 'it bodies addressed Only clearest sustain exception rule.' 535, 697. 52 nothing persuade shareholders' (1948), relied Committee, contrary. stockholder's determined 'current worth' equity. mean repeated updating agency; lead interminable delay. A reflect current shareholder's meets submission proposal, subsequent events materially purporting show presently considerably more, Northern's, initial hearings, fluctuations companies' stock. But fluctuations, context altered. refusal (c) Auburn.—The opposes reasons set brief adequately assess communities explain why convincingly communities. Auburn objects open testimony concerning Auburn. city 19,000 inhabitants halfway trains. city's dependent activity there. indicated approved, closed, town Everett, side Company's 55 Insofar action applies here. object challenge raise alone decide 56 yard's closing city. assuming closing, long-run Tier, transitory dislocations occasion justifiable record. imagine cause communities, employees. 57 seem altered; stated maintain yard. employment unaffected conclude Auburn's hardships similarly situated, posited record, warrant disapproval harm complained disappeared. 58 (d) 44, Committee.—Citizens living about Livingston, Helena, Glendive, appear prelude discussing contentions, stated. 59 1864 created (Railroad) build Lake Superior Puget Sound. subsidize right-of-way alternate sections right-of-way. According Railroad's charter encumber franchise approval, here.18 1870 resolution allowing bonds secured property foreclosure default. mortgage pledged, foreclosed 1875. committee bondholders. Later, returned pursuant reorganization authorize mortgaging right-of-way, encumbered pledging mortgages. 1896, mortgages defaulted commenced, negotiated settlement (Railway), operated since. 97% Railroad, longer company. party 1896 sham actually sale Railway; sale, void. Congress; constitute valid liquidation. claimed title remains Railroad. succeeded, involving place procured. Finally, specific jurisdiction. 61 presented merit. ruling appellant's litigate merits. 5(2)(a) pertinent part: 62 '(a) shall lawful, subdivision paragraph— 63 '(i) franchises, thereof, ownership, theretofore ownership 5(2)(a). premise Livingston's assume jurisdiction proper seek bring erroneous assumption. subtleties 'good title' Cf. O. C. Wiley Sons 85 542, 543—545 (D.C.W.D.Va.), 338 902, 308, 94 554 (1949); Walker 388, (D.C.W.D.Tex.1962); Investors, Inc. 374, 392 n. (D.C.S.D.N.Y.1968), 393 479, 707, 687 (1969). 'is permissive, mandatory,' 27, adjudication questions. realm regulating systems. 65 ample applicants. Railway's successor judicially determined, impliedly times. Boyd, 228 482, 554, 931 (1913), creditor assertable equity represented assets amounted old company became new. bona fide judicial ineffective bar '[a]s valid. [T]he divested (to properties) 506, 561. 67 311 317, 264, 210 (1940), described appellee follows: 'Pursuant acquired railroad, grant, original since obtained patents millions grants.' 328, 269. 69 Attorney General Harmon 1897 advised Secretary Interior grants Op.Atty.Gen. 486. treated patented amounts Railway. 1905 asked Moody, later Associate right grants, reaffirmed predecessor's legitimate 401. 1954 minority sued aside titles franchises declared accounting profits received 1954. exhaustive Edward A. Tamm barred laches complaint. Landell 122 253 (D.C.D.C.1954), aff'd, 96 U.S.App.D.C. 24, F.2d 316, cert. denied, 350 844, 76 85, 100 752 (1955). think err adjudicate title. stated, '[f]or purposes rely existing records supplemented opinions Attorneys General.'19 faced prohibited charter. applicant prohibits absence consent. contends, provisions charter, violated securities chartering 238 393, 427, 908, 921—922, 1360 (1915), binding makes unlawful. relies Union Mason Fort Dodge 199 160, 19, 134 (1905), standing proposition restrictions predecessor federal survive private company's franchise. 71 Citydecision controlling, despite context. 1862 chartered 1865 authorization, pledged gain monies construction. 1871 construction bridge Missouri River, grant conditioned bridge's compensation, paid owner bridge. inserted statutes Sometime built Utah purchased corporation. allow bridge, contending purchaser mortgage, statute's reasoning appended attach bind owner. 72 different. corporation's another, speaks follow hands therefore follows creating Wisconsin corporation.20 acted Conclusion 73 entire forth done vested balancing values units. hereby vacated. 75 DOUGLAS cases. reported 296 853 (D.C.D.C.1968). Worth Denver controlled historic majority, Brewer, narrower Acquisition, 162 I.C.C. (1930). Among allied liability 20a obtaining extensions abandonments 1(18) 1(20), inclusive, Act. 328 460 (1966). majority Commissioners Bush, Tucker, Webb, Tierney, Brown, Deason. Tuggle, Freas, Murphy, Walrath, Goff dissented. oppose Milwaukee-North Petitions justness agreement, Rio Grande investigation Western. petitions denied. 331 Deason, Stafford, Syphers voted Tierney Brown Hardin participate decision. modified 1967. June 17, issued, allowed grain opened contained challenged us. Attacking following: Committee; State Board Montana; Service Minnesota. intervening defendants 230 shippers. substance Department's Agriculture O.T. 1943, Brief 40, Seaboard-Coast litigation, 993, 1012—1013 1299, 285 cases, decided 1944 1966, rejected. bill Senate moratorium otherwise violate Clayton 731, 18. bill. committee. Hearings S. 3097 Subcommittee Monopoly Judiciary, 87th Cong., 2d Sess. (1962). apparently violative 436 (1904). gave leading feasibility economies.' 37, appointed September 20, 1938, President Submit Recommendations Situation, December 23, H.R. 2531 House Foreign Commerce, 76th 1st Sess., 259—308 Appellant represents 3% stockholders, hold 5% outstanding 73.81% 6.64%, remainder voted. 1968 ICC's 73.2% voting 2.57% against, voting. Prior votes vigorously July 1864, 3, 367. 853, 877 Appellees contend 20a(7) 20a(7), relieve inhibiting laws, law, modifies conflicting Railway, contention. APPENDIX B

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