Source: https://supreme.justia.com/cases/federal/us/355/300/
Timestamp: 2019-04-22 20:42:52+00:00

Document:
After the Illinois Commerce Commission had denied a railroad's request for authority to increase intrastate passenger fares for its Chicago suburban commuter service, claimed as necessary to enable it to operate such service without an out-of-pocket loss, the railroad petitioned the Interstate Commerce Commission for relief under 49 U.S.C. § 13(4). The latter Commission found that the railroad's revenues from this particular service fell short of meeting the out-of-pocket cost of such service, concluded that this caused undue discrimination against interstate commerce, and prescribed higher intrastate fares to produce enough revenue to eliminate the out-of-pocket loss and to allow $77,000 annually as a contribution to indirect costs and taxes. It also increased interstate fares to two points in Wisconsin to conform to the increased intrastate fares. The District Court set aside the Commission's order, enjoined its enforcement, and remanded the case to the Commission for further proceedings.
Held: the judgment is modified and affirmed. Pp. 355 U. S. 301-312.
1. The Commission's findings were not adequate to support its order under § 13(4). Pp. 355 U. S. 306-309.
(a) The deficit from this single commuter operation cannot fairly be adjudged to work an undue discrimination against the railroad's interstate operations without findings which take into account the carrier's other intrastate revenues from Illinois freight and passenger traffic. Pp. 355 U. S. 306-309.
(b) The portion of the prescribed increases designed to produce $77,000 annually as a contribution to indirect costs and taxes is not based on adequate findings. P. 309, n 8.
2. The Interstate Commerce Commission did not err in considering evidence which was not presented by the railroad to the State Commission. Pp. 355 U. S. 310-311.
3. The District Court did not err in setting aide so much of the Commission's order as authorized an increase in the interstate fares to the two Wisconsin points, since those rates are so interwoven with, and so closely bound to, the intrastate rates that a proper disposition of this case requires that the Commission reconsider them as part of its reconsideration of the entire Chicago suburban commuter service. Pp. 355 U. S. 311-312.
146 F.Supp. 195 affirmed with modifications.
". . . any such . . . [existing intrastate] fare . . . causes . . . any undue, unreasonable, or unjust discrimination against interstate . . . commerce."
The three-judge District Court set aside the order, enjoined its enforcement, [Footnote 2] and remanded the case to the ICC for further proceedings. 146 F.Supp. 195. The District Court held, inter alia, that the ICC failed to make findings appropriate to show that the existing fares caused undue, unreasonable or unjust discrimination against interstate commerce. The judgment was appealed under 28 U.S.C. § 1253. [Footnote 3] We noted probable jurisdiction, 352 U.S. 939.
The ICC found that the Milwaukee Road's 1954 passenger revenues from the Chicago suburban commuter service fell short by $306,038 of meeting the out-of-pocket cost of the service. This was the basis of the conclusion that the existing intrastate fares caused undue discrimination against interstate commerce. To remove this discrimination, the ICC prescribed fares to produce $383,000 additional annual revenue, enough to eliminate the determined out-of-pocket loss and to allow $77,000 annually as a contribution to indirect costs and taxes. The question for our decision is whether the District Court properly set aside the ICC order as void for lack of findings necessary to support an order under § 13(4).
multiple-ride tickets numbered 3,910,526 of this total, and accounted for $1,374,261 of the revenue.
such discontinuances and consolidation of trains, give respondent sufficient revenues to permit operation of the Chicago suburban service without an out-of-pocket loss."
The State Commission did not act on the application until 1954. Meanwhile, the Milwaukee Road changed the suburban service from a steam to a diesel operation. The State Commission found that the cost savings effected by this change eliminated the out-of-pocket loss, and, on November 10, 1954, denied the application. The Milwaukee Road thereupon, in February, 1955, petitioned the ICC for relief under § 13(4).
This case presents once again the problem of adjusting state and federal interests in the regulation of intrastate rates. These intrastate rates are primarily the State's concern, and federal power is dominant "only so far as necessary to alter rates which injuriously affect interstate transportation." North Carolina v. United States, 325 U. S. 507, 325 U. S. 511. Thus, whenever this federal power is exerted within what would otherwise be the domain of state power, the justification for its exercise must "clearly appear." Florida v. United States, 282 U. S. 194, 282 U. S. 212. The statute provides a practical method of minimizing the inevitable irritations inherent in the conflict by requiring the ICC to notify the State whenever there is brought before it any fare imposed by state authority. In addition, the ICC may confer with the state regulatory authority, or may hold joint hearings with the state agency, when the State's ratemaking authority may be affected by the action taken by the ICC. 49 U.S.C. § 13(3).
"among other things, the need, in the public interest, of adequate and efficient railway transportation service and the need of revenues sufficient to sustain such service,"
a standard written into 49 U.S.C. § 15a(2). King v. United States, 344 U. S. 254, 344 U. S. 264. No formal requirements are prescribed for the findings to be made by the ICC under § 13(4). United States v. Louisiana, 290 U. S. 70, 290 U. S. 80. Reasonable determinations suffice. Florida v. United States, 292 U. S. 1, 292 U. S. 9. But the justification for the exercise of this exceptional federal power to interfere with intrastate rates must be made definitely and clearly apparent. Florida v. United States, 282 U. S. 194, 282 U. S. 212.
discrimination against the road's interstate operations, without regard to the contribution of other Illinois intrastate revenues, freight or passenger, concerning which both the record and the findings are entirely silent.
We think this is a case where the ICC cannot be sustained in altering intrastate rates merely because the Chicago suburban commuter traffic -- of the Milwaukee Road's total intrastate Illinois traffic, freight and passenger -- is not remunerative or reasonably compensatory. Cf. Florida v. United States, 282 U. S. 194; North Carolina v. United States, 325 U. S. 507. The limited and exceptional federal power asserted by § 13(4) over intrastate rates must be exercised with "scrupulous regard for maintaining the [primary] power of the state in this field." North Carolina v. United States, 325 U. S. 507, 325 U. S. 511. It is, of course, desirable that each particular intrastate service should as nearly as may be pay its own way and return a profit -- but the State Commission, not the ICC, has the responsibility in the first instance to achieve that desired end. Passenger deficits have become chronic in the railroad industry, and it has become necessary to make up these deficits from more remunerative services. The ICC has recognized this practical reality of today's railroading, and has changed its rate-fixing policy so that, if interstate passenger service inevitably and inescapably cannot bear its direct costs and its share of joint or indirect costs, the ICC feels compelled in a general rate case to take the passenger deficit into account in the adjustment of interstate freight rates and charges. King v. United States, 344 U. S. 254, 344 U. S. 261. An equally broad power must be conceded to a state commission in the exercise of its primary authority to prescribe and adjust intrastate rates.
v. Chicago, B. & Q. R. Co., 257 U. S. 563; New York v. United States, 257 U. S. 591. It was held that the state passenger rates in that circumstance were not producing their fair proportionate share. In North Carolina v. United States, 325 U. S. 507, also a passenger fare case, the ICC order was not sustained because the findings were held to be insufficient. Nonpassenger fare cases in which ICC orders raising intrastate rates were sustained were United States v. Louisiana, 290 U. S. 70; Florida v. United States, 292 U. S. 1, and King v. United States, 344 U. S. 254. The order was not sustained, however, in an earlier Florida case, Florida v. United States, 282 U. S. 194. The only case ostensibly based upon a revenue discrimination caused by a local operation was not a passenger fare case. Illinois Commerce Commission v. United States, 292 U. S. 474. Basically, the discrimination there complained of, however, was a "persons and locality" discrimination against interstate shippers.
"If different evidence is to be offered or a different basis of fares is to be urged before the interstate commission, the state commission should have been given a chance to fix fares on the same evidence and the same basis."
"Where a railroad seeks the fixing of higher intrastate rates by the interstate commission after failing in such endeavor before a state commission, § 13(4) does not contemplate that the state commission is to be considered only a way station in a journey to the interstate commission."
146 F.Supp. 195, 201, 202.
"To hold . . . that there can be no adjustment of intrastate rates by the Interstate Commerce Commission so far as may be needed to protect interstate commerce until the state itself has first 'sat in judgment on the issue of the lawfulness of those intrastate rates' would be to impose a limitation not required by the terms of the statute and repugnant to the grant of authority."
Id. at 282 U. S. 210.
In this case, the ICC might more wisely have arranged for joint hearings under § 13(3) or have deferred action pending an opportunity for the State Commission to consider this evidence. However, nothing in the statute compels either course, or denies the ICC the power to determine the question presented by the railroad's petition, whatever may have been the evidence presented before the State Commission. See North Carolina v. United States, 128 F.Supp. 718, aff'd, 350 U.S. 805; Illinois v. United States, 101 F.Supp. 36, 47, aff'd, 342 U.S. 930.
with and so closely bound to the intrastate rates that a proper disposition of this case reasonably requires that the Commission reconsider them as part of its reconsideration of the entire Chicago suburban commuter service. The only reason why the ICC increased the interstate rates was to make them conform to the increased intrastate rates.
Paragraph 3 of the District Court judgment dated June 14, 1956, is modified to provide that the remand to the ICC shall be for further proceedings not inconsistent with this opinion.
* Together with No. 27, United States v. Illinois et al., and No. 28, Interstate Commerce Commission v. Illinois et al., also on appeals from the same Court.
"Whenever in any such investigation the commission, after full hearing, finds that any such rate, fare, charge, classification, regulation, or practice causes any undue or unreasonable advantage, preference, of prejudice as between persons or localities in intrastate commerce, on the one hand, and interstate or foreign commerce, on the other hand, or any undue, unreasonable, or unjust discrimination against interstate or foreign commerce, which is forbidden and declared to be unlawful it shall prescribe the rate, fare, or charge, or the maximum or minimum, or maximum and minimum, thereafter to be charged, and the classification, regulation or practice thereafter to be observed, in such manner as, in its judgment, will remove such advantage, preference, prejudice, or discrimination. Such rates, fares, charges, classifications, regulations, and practices shall be observed while in effect by the carriers parties to such proceeding affected thereby, the law of any State or the decision or order of any State authority to the contrary notwithstanding."
The injunction was stayed pending the hearing of the appeal to this Court. The excess fares are being impounded under a provision of the stay order providing for their refund to the persons who paid them in the event the judgment appealed from is affirmed.
The Milwaukee Road is the appellant in No. 12. The United States is the appellant in No. 27. The ICC is the appellant in No. 28. Each appeals from the particular provisions of the judgment by which it is aggrieved.
The interstate fares to the two Wisconsin points were also raised in this proceeding by an ICC order entered November 21, 1955, and Order No. 26550, Passenger Fares and Surcharges, 214 I.C.C. 174, was modified so as to permit the rates to be made effective. No affirmative order raising the intrastate rates was made, however, until March 2, 1956. The ICC report allowed the Milwaukee Road and the Illinois Commerce Commission 60 days in which to adjust the intrastate rates on the bases prescribed in the report. Failing such adjustment, the order of March 2, 1956, prescribing the intrastate rates was entered and Order No. 11703, Intrastate Rates Within Illinois, 59 I.C.C. 350, was modified to permit the Milwaukee Road to make the intrastate rates effective.
"Whenever, in any investigation under the provisions of this chapter, or in any investigation instituted upon petition of the carrier concerned, which petition is hereby authorized to be filed, there shall be brought in issue any rate, fare, charge, classification, regulation, or practice, made or imposed by authority of any State, the commission, before proceeding to hear and dispose of such issue, shall cause the State or States interested to be notified of the proceeding. The commission may confer with the authorities of any State having regulatory jurisdiction over the class of persons and corporations subject to this chapter or chapter 12 of this title, with respect to the relationship between rate structures and practices of carriers subject to the jurisdiction of such State bodies and of the commission, and to that end is authorized and empowered, under rules to be prescribed by it, and which may be modified from time to time, to hold joint hearings with any such State regulating bodies on any matters wherein the commission is empowered to act and where the ratemaking authority of a State is or may be affected by the action taken by the commission. The commission is also authorized to avail itself of the cooperation, services, records, and facilities of such State authorities in the enforcement of any provision of this chapter or chapter 12 of this title."
Railroad Commission of Wisconsin v. Chicago, B. & Q. R. Co., 257 U. S. 563, 257 U. S. 586.
"The effective operation of the [Interstate Commerce] [A]ct will reasonably and justly require that intrastate traffic should pay a fair proportionate share of the cost of maintaining an adequate railway system."
This would seem to be particularly required here in light of the Commission's recognition "that the deficit from the [Milwaukee Road's] total passenger operations is relatively greater than from its suburban operations."
The Commission found that the Milwaukee Road earned in 1954 from its freight operations $37,293,050, and suffered a deficit from all passenger operations of $22,824,532, resulting in a net railway operating income of $14,568,518. This represented a return of approximately 2%.
We agree with the District Court that that portion of the prescribed increases designed to produce $77,000 annually as a contribution to indirect costs and taxes is not based upon adequate findings. There is no finding of the total of indirect costs and taxes to which contribution is to be made, nor any finding from which we may infer how the ICC derived its conclusion that a $77,000 contribution was fair. It is axiomatic that, to know whether something is a fair proportionate part of something else, we must be told what the something else is.
On the other hand, we cannot agree with the District Court that there was not support in the evidence for the ICC's finding that the prescribed rates would be just and reasonable for the future. The ICC did not rely solely upon the comparison with the similar fares of the Northwestern, for there was ample other evidence in the record to sustain their findings. But the factors which determine the reasonableness of a rate are so different from the factors which determine what is a fair proportionate share of a carrier's total income that a finding of the reasonableness of the rates prescribed does not embrace all the findings necessary to support the exercise of the § 13(4) power.

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