Evening star., 1928-12-20
WORLDS BIGGEST
LAW SUIT IN COURT
Rail System Valuation, ESti-
mated at 46 Billion DOL
lars, at Stake.
BY FREDERIC WILLIAM VILE.

What is called "the biggest lawsuit
In the world" is about to come up for
final argument before the United States
Supreme Court. 1t concerns the valua-
ton of the entire American railroad
system. which is estimated to be worth
something like $4,000, 100000, based on
what it would cost today to reproduce
il. The issue at stake, which Eitally
affects everybody who owns share OF
railroad stock or q bond of a railroad
company, relates 20 what is "a fair re-
turn" on railroad investment within the
meaning of the Federal transportation
act. The case is before the supreme
Court in connection with the st. LOUIS
Ss OFallon Railroad, 9-mile coal line
running out Of East st. Louis. Ill. Ihe
Interstate Commerce Commission de-
clares that the road has received
good deal more than the statutory 6
per cent on its value" The owners
of the road contest this claim on the
part of the commission. 1t is now up
to the Supreme Court to decide what Is
the right definition of the word value:
Although only the st. Louis q Oral
lon property is directly involved, all the
railroads of the country are interested
in the case because the valuation pfln-
ciple now TO be fixed by the supreme
Court will henceWorWard govern the
valuation of the whole railroad system:
The fabulous amount Of money wrapped
up in the litigation is represented by
the capital invested in Americas 25O,-
O00 miles of rail lines. Three years ago
TRANSFORMATION authorities figured that
tho original cost of all existing railroads
i'm the United States was $4,000, ,000,-
GOO The same authorities estimated
that the cost of reproducing them. at
the end of 1925, calculated on the prices
Of materials at that time, would be
$4,000, 100000.
The difference between the original
cost and the estimated present-tlme
value of hte railroads is the thorny
problem on which the Interstate Com
fnerce Commission and the carriers APP
pear to disagree. 1t is represented, 1or
example. from the commissions stand
noint. that railroad managers seek.
valuation of their properties which
would give them "a fair return" on
$4,000, 900, 600 more than was actual
ly invested" in them. That huge sum
is the difference between the estimated
cost and estimated value Of the lines.
The interests which oppose the rail-
roads viewpoint charge them with de-
manding a return on shadow dollars"
1t is contended that if the carriers
were to be permitted to exact "a fair
return" on the S18,000,0 ,000,0 900 of ''un-
invested" capital, they would have to
increase their profits at least $1,000
100000 year. Labor, the organ
of the railroad brotherhoods, asserts
"thiS money would have to come out OF
either the shippers or the workers"
The st. Louis & OFallon Railroad
filed its brief in the Supreme Court
last week. Acting for many of the
railroad unions and for the National
Conference on Valuation of Railroads,
Donald r. Richberg, Chicago lawyer,
had previously filed a brief in rebuttal
of the carriers position. Mr.. Rich
berg appears as "a friend of the court"
at the express request of the United
States Senate. He is probably the
foremost authority on railroad law in
the country. Mr.. Richberg played an
important part in the conferences
which led up to the enactment of the
Watson-Park law, creating the Fed
eral Railroad Mediation Board three
years ago.
Labor explaining the interest of
rail workers in "the biggest lawsuit in
the world" says: Railroad workers
contend that the value of a road has
nothing to dc with its obligation to pay
proper wages. But at every wage hear
ing, the roads drag in the question by
claiming that they cannot get fair
return on their value if they grant
the desired increase. Plainly, if that
value is almost doubled by court action,