Evening star., 1929-01-04
i. S. OPENS RAIL
VALUE ARGUMENT
Defense of |. C. C. Ruling Is
Started in Supreme Court
in 0'FaIIon Suit.
By the Associated Press.

By the Associated Press.
The Government brought forward it
battery Of big legal guns today to repe
the attack made by the st. Louis 6
OFallon Railroad of the methods o
the Interstate Commerce Commission
IN valuing railroad properties.
George w. Wickersham. former At
forney General, and Walter l.. Fisher
former Secretary of the Interior, boil
in the Taft cabinet. were called upor
in the Supreme Court to defend tht
valuation placed upon the nine-milt
line. The decision may affect all of the
railroads in the United States, mas.
much as the valuation finally accepted
will guide the commission in making
rates
Would Increase Valuation.
Mr.. Fishers brief held that should
The railroad win it would mean that
the valuation of S18900.000, 900, which
the commission had estimated for all
interstate railroads, must be increased
approximately 90 per cent, or over SILL
00O. 900 900. with an approximate so per
cent increase in rates.
The Government insists that the COM
mission has proceeded in precise con-
formity with the direction OF Congress,
and has given proper consideration to
all elements which Congress had IN
tended should enter into valuation for
rate-making purposes. This contention
is denied by the O'Fallon.
The brief Of Mr. WickerSham said the
true basis laid down by the supreme
Court for the valuation OF public IT'LL
itjes did not require the exclusive con-
sideration of either reproduction or
original costs. but directed that all ele-
mentS should be given consideration.
The commission had broad discretion,
he declared. in Weighing the various
elements and had not abused its au-
thority He insisted it had properly re-
iecled the contention that the spot cost
Of reproduction should be considered as
the sole basis of valuation. The rail-
road, he said, had failed to sustain its
contention that the valuation of its
property for regulatory purposes must
be based solely on the cost of repro
duction at prices prevailing at the time
the commission took any action based
on valuation.
Validity of Methods Hit.
The railroad appeared before the high
tribunal to argue that the methods
used by the Interstate Commerce Com
mission in the valuation of railroad
property for rate making and other
regulatory purposes were invalid, and
its case was presented through counsel
Daniel NJ Kirby of ST. Louis and Fred
erick H Wood of New York City.
The two attorneys late yesterday re-
served few minutes to close tomorrow
after counsel for the Government,
George w. Wickersham, a former At
torney General, and Walter L. Fisher, a
former Secretary of Interior, have been
heard.
The session Yesterday was closed by
Donald R. Richberg, general counsel for
the National Conference on Valuation
of American Railroads.
Justice Butler voluntarily withdrew
when the argument began, and will not
participate, it was stated, in the deci-
sion of the case. 1t was explained that
before going on the bench he had acted
as counsel for a conference of railroad
presidents in valuation matters.
Hold Increase Ignored.
The attack on the valuation work of
the commission was made by Wood,
who contended sufficient consideration
had not been given by the commission
in making its valuation to the material
increase in the cost of reproduction
between 1914, the year selected by the
commission for its valuation work, and
subsequent years when it applied its
valuation for rate-making purposes and
for the recapture of excess earnings
from railroads found to be receiving in
comes above per cent.
He explained the commission used
index figures designed TO bring the
valuation down to date, but insisted
that its formula was defective, and that
its work had resulted In confiscation.
Kirby directed most of his effort to
the contention that the commission was
wrong when it refused to treat the ST.
Louis & O'Fallan Railroad and the
manufacturers railroads, in which most
of the stock is owned by estate of
Adolph Busch, as one property. He
asserted that had the commission done
so there would have been no excess
earnings had the values of the two
properties been considered together.
Richberg was permitted by the court
to file brief ana participate in the
oral argument at the request of the
Senate, and during the brief time he
spoke yesterday, found several members
OF the court in disagreement with him
on some of the highly technical valua-
ton theories he advanced.
Declares Valuation Sound.
He told the court he was of the opin-
ion that the commissions valuation was
sound and should be sustained, insist
ing 1t had wide discretion in the mat
ter Of determining valuations.
Wood, counsel for the railroad, insist
ed, however, that instead of making its
valuation in accordance with law, the
commission had based its findings on a
mathematical formula. 1.-The primary
purpose of which was to determine the
approximate investment in the property
and are materially less than its true
value as disclosed by the commission's
Cwn evidence"
Our first ground. therefore," he con-
tinued, lis that the commission did not
determine the value in accordance with
the law, but on the basis of its concep-
ton as to what the law ought to be
Our second ground is that even under
the prudent investment theory its find
1ngs of value were wholly without evil
dentiary support"
He asserted that had the commission
instead Of valuing the major portion oi
the property at its approximate cost al
obsolete pre-War prices, given consider
alton to the present enhanced costs OF
construction, the value Of the structural
elements of the property would have
been not less than SO per cent higher
The only consideration given to such
enhanced prices, he declared, was tt
reject them altogether as an irrelevant
fact"
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