Source: http://supreme.nolo.com/us/265/274/case.html
Timestamp: 2019-04-24 05:51:03+00:00

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1. An order made by a division of the Interstate Commerce Commission being operative, unless stayed by the division or the full Commission pending a rehearing by the latter (amended Act to Regulate Commerce, §§ 16a, 17 ), a suit to enjoin enforcement of such an order is within the jurisdiction of the district court, and whether relief should be denied until the plaintiff, through application for rehearing, shall have exhausted the administrative remedy is a matter of judicial discretion. P. 265 U. S. 280.
the other carriers participating in the joint rates, whose shares were left unchanged, were not necessary parties. P. 265 U. S. 282.
3. In determining just divisions, the Commission must consider relative cost of service; whether a particular carrier is an originating, intermediate or delivering line; the efficiency of operation of each carrier; the revenue it requires for operation expenses, taxes and a fair return; public importance of the transportation services involved, and any other facts which would ordinarily, without regard to mile haul, entitle one carrier to a greater or less proportion than another. P. 265 U. S. 284.
4. The financial needs of a weaker road may also be taken into consideration in determining divisions of joint rates. Id.
5. The mere fact that increased divisions allowed a carrier were measured by percentages of the revenues of the several connecting carriers from the joint traffic does not establish that the division is unjust or guided solely by relative financial ability. P. 265 U. S. 285.
6. An order increasing the divisions of a carrier is not arbitrary merely because the corresponding decreases are confined to the carriers immediately connecting with it, these having the right to apply for further readjustment as between themselves and remoter carriers. P. 265 U. S. 286.
7. An order of the Commission is not invalidated by the mere admission as evidence of matter which in judicial proceedings would be incompetent. P. 265 U. S. 288.
8. But a finding without evidence is beyond the power of the Commission. Id.
9. Reports of carriers on the Commission's files cannot be treated as evidence when not introduced as such, in a proceeding which, though initiated by the Commission primarily to protect the public interest, may result in an order in favor of one carrier as against another. Id.
10. Rule XIII of the Commission does not purport to relieve the Commission from introducing, by specific reference, such parts of the reports of carriers, properly on file, as it wishes to treat a evidence. P. 265 U. S. 289.
11. The right of carriers to insist that consideration by the Commission of matter not in evidence invalidates its order is not lost by their submission of the case without argument or their consent to omission of a tentative report by the examiner. Id.
filed with the Commission by plaintiff carrier pursuant to law, held tantamount to no notice whatever of evidence used against them. P. 265 U. S. 289.
13. The divisions of joint rates may be determined on the basis of individual rates and divisions, shown by tariffs and division sheets and found sufficiently typical in character and ample in quantity to justify findings as to each division of each rate of every carrier involved (New England Divisions Case, 261 U. S. 184), but it cannot be inferred, because the joint rates and divisions between particular carriers work injustice in the aggregate, that each particular division of each rate is unjust and in like proportion. P. 265 U. S. 290.
Appeal from a decree of the district court perpetually enjoining the enforcement of an order of the Interstate Commerce Commission.
Court for Kansas which perpetually enjoined the enforcement of an order made by the Commission, on August 9, 1922, under § 15(6) of the Interstate Commerce Act as amended by Transportation Act 1920, c. 91, § 418, 41 Stat. 456, 486. The order relates to the divisions of interstate joint rates on traffic interchanged, within the United States, by the Kansas City, Mexico & Orient system with 13 carriers whose lines make direct connection with it. The order provides that, on all such interchanged traffic, the existing divisions of these carriers shall be reduced by a fixed percent, and that the Orient shall receive the amount so taken from its connections. [Footnote 1] The order also directed the Orient and the connecting carriers to make, at stated intervals, reports of the financial results of the divisions ordered, permitted any carrier to except itself from the order, in whole or in part, by proper showing, and retained jurisdiction in the Commission "to adjust on the basis of such reports the divisions herein prescribed or stated, if such adjustment shall to us seem proper." Kansas City, Mexico & Orient Divisions, 73 I.C.C. 319, 329.
Commission in April, 1922, pursuant to an application of the receiver of the Kansas City, Mexico & Orient Railroad Co. and an affiliated Texas corporation. It appeared (and was not denied) that the public interest demanded continued operation of the railroad; that the revenues were insufficient to pay operating expenses; that the operation was being efficiently conducted, and that, unless relief were afforded by increasing the Orient's division of joint rates and/or otherwise, operation would have to be suspended and the railroad abandoned. [Footnote 2] The 13 carriers who brought this suit participated in the investigation undertaken by the Commission, and supplied certain statistical information requested of them. But they introduced no evidence before the Commission, and the case was submitted there without argument. None of the connecting carriers made application to be excepted from the order. Nor did any of them apply for a rehearing. Before the effective date of the order, this suit was begun. On application for a temporary injunction, it was heard by three judges, pursuant to the Act of October 22, 1913, c. 32, 38 Stat. 208, 220, and a temporary injunction was granted. Upon final hearing, motions of the defendants to dismiss the bill were denied, the injunction was made permanent, and a rehearing was refused. 288 F. 102.
carriers should have exhausted the administrative remedy afforded by a petition for rehearing before the full Commission. The investigation and order were made not by the whole Commission, but by division 4. [Footnote 3] The order of a division has "the same force and effect . . . as if made . . . by the Commission, subject to rehearing by the Commission." Interstate Commerce Act as amended, § 17(4). Any party may apply for such rehearing of any order or matter determined. § 16a. Meanwhile the order may be suspended either by the division or by the Commission. In this case, the order, by its terms, was not to become effective until 37 days after its entry. There was consequently ample time within which to apply for a rehearing and a stay before the plaintiffs could have been injured by the order.
questions of joinder of parties, of the admissibility of evidence, and of failure to introduce formal evidence. Most of the objections do not appear to have been raised before the division. If they had been, alleged errors might have been corrected by action of that body or by the full Commission. The order involved also a far-reaching question of administrative power and policy which, so far as appears, had never been passed upon by the full Commission, and was not discussed by these plaintiffs before the division. In view of these facts, the trial court would have been justified in denying equitable relief until an application had been made to the full Commission, and redress had been denied by it. But, in the absence of a stay, the order of a division is operative, and the filing of an application for a rehearing does not relieve the carrier from the duty of observing an order. [Footnote 5] Despite the failure to apply for a rehearing, the court had jurisdiction to entertain this suit. Prendergast v. New York Telephone Co., 262 U. S. 43, 262 U. S. 48-49. Compare Chicago Rys. Co. v. Illinois Commerce Commission, 277 F. 970, 974. Whether it should have denied relief until all possible administrative remedies had been exhausted was a matter which called for the exercise of its judicial discretion. We cannot say that, in denying the motion to dismiss, the discretion was abused.
given a division larger than justice merely as between the parties would suggest "in order to maintain it in effective operation as part of an adequate transportation system," provided the share left to its connections is "adequate to avoid a confiscatory result." Dayton-Goose Creek Ry. Co. v. United States, 263 U. S. 456, 263 U. S. 477; New England Divisions Case, 261 U. S. 184, 261 U. S. 194-195. It was not contended before the Commission that a reduction of the carriers' divisions would reduce their rates below what is compensatory. [Footnote 9] There is in the record no evidence on which it could be determined that any of the divisions ordered will result in confiscatory rates. And there is nothing in the order which prohibits rate increases. Compare United States v. Illinois Central R. Co., 263 U. S. 515, 263 U. S. 526.
intermediate carrier, might be such that the connecting carrier could not get the traffic but for the service which the Orient renders, and that this factor, together with others ignored in the existing divisions, would require the precise change directed to render the divisions just and reasonable as between the parties. It is also pointed out that the contributions to be made by the connecting carriers bore a direct relation to their prosperity. But it does not appear that the Commission based its finding solely on the financial needs of the Orient and the financial condition of the connecting carriers.
Invalidity of the order is urged on the further ground that the Commission made the incidental fact of physical connection with the Orient the sole test for determining which carriers should have their divisions reduced, and that such action is clearly arbitrary. It is true that the order affects, in terms, only the 13 carriers whose lines have direct connection with the Orient; but it does not follow that the action was arbitrary. These connecting carriers have a demonstrable interest in having the operation of the Orient continued. Other carriers doubtless have an interest, but it is less certain. It is open to any of these 13 carriers to institute proceedings before the Commission with a view to securing a partial distribution of their burden among other connecting carriers. Compare United States v. Illinois Central R. Co., 263 U. S. 515, 263 U. S. 526. The basis of division adopted by the Commission is not shown to be in any respect inconsistent with the rule declared in New England Divisions Case, 261 U. S. 184. Nor is it shown that the Commission ignored any factor of which consideration is required by the act.
be used as freely as if the data had been formally introduced in evidence.
would not relieve the Orient, if a party to it, from this requirement. Every proceeding is adversary, in substance, if it may result in an order in favor of one carrier as against another. Nor was the proceeding under review any the less an adversary one because the primary purpose of the Commission was to protect the public interest through making possible the continued operation of the Orient system. The fact that it was on the Commission's own motion that use was made of the data in the annual reports is not of legal significance.
by their acquiescing in the suggestion that the presentation of a tentative report by the examiner be omitted. While the course pursued denied to the Commission the benefit of that full presentation of the contentions of the parties which is often essential to the exercise of sound judgment, it cannot be construed as a waiver by the carriers of their legal rights. The general notice that the Commission would rely upon the voluminous annual reports is tantamount to giving no notice whatsoever. The matter improperly treated as evidence may have been an important factor in the conclusions reached by the Commission. The order must therefore be held void.
"deemed typical of the whole rate structure" will support a finding as to each rate in the structure by raising a rebuttable presumption concerning each rate; that typical "evidence" in this sense means not evidence directly representative of every individual rate, but evidence tending to show the general situation; that a like presumption arises in a division case; that the data dealing with the traffic in the aggregate, which was furnished by the exhibits constituted such typical evidence; that, in this proceeding, information concerning individual rates and divisions was not essential, and that the course pursued by the examiner is in substance that upheld in the New England Divisions Case, 261 U. S. 184, 261 U. S. 196-199.
The argument is not sound. The power conferred by Congress on the Commission is that of determining, in respect to each joint rate, what divisions will be just. Evidence of individual rates or divisions, said to be typical of all, affords a basis for a finding as to any one. But averages are apt to be misleading. It cannot be inferred that every existing division of every joint rate is unjust as between particular carriers because the aggregate result of the movement of the traffic on joint rates appears to be unjust. These aggregate results should properly be taken into consideration by the Commission, but it was not proper to accept them as a substitute for typical evidence as to the individual joint rates and divisions. In the New England Divisions Case, tariffs and division sheets were introduced which, in the opinion of the Commission, were typical in character and ample in quantity, to justify the findings made in respect to each division of each rate of every carrier. A like course should have been pursued in the proceeding under review.
The percentage of the reduction prescribed in respect to the several carriers ranges from 10 to 30 percent. Thus, the Missouri Pacific's division was shrunk 20 percent. It was estimated that the resulting reduction of its revenues would be $115,789.22. That amount, added to the existing share of the Orient on this traffic, would increase its division, on weighted average, over 14 percent. The Texas & Pacific's division was also shrunk 20 percent. The estimated resulting reduction of its revenues would be $121,140.81. But that amount, added to the existing share of the Orient on this traffic, would increase its division about 25 percent. The order differs from that upheld in New England Divisions Case, 261 U. S. 184, which prescribed a percentage increase of the division of the New England roads and directed that the amount of the increase be taken from the existing shares of the several connecting carriers.
These needs had been the subject of repeated enquiries by the Commission in connection with the granting and the renewal of a loan from the United States under § 210 of Transportation Act, 1920. Loan to Kansas City, Mexico & Orient Railroad, 65 I.C.C. 36; ibid., 265; 67 I.C.C. 23; Loans to the Receiver of Kansas City, Mexico & Orient Railroad, 70 I.C.C. 639; ibid., 646.
See Interstate Commerce Act as amended, § 17; Annual Report of the Commission (1920) pp. 3-6; The Chicago Junction Case, 264 U. S. 258, note 3.
See Rules of Practice before the Commission, 1916, pp. 16, 23; 1923, pp. 18, 28. For instances of cases which were heard by a division and later reheard by the Commission, see E. I. Dupont de Nemours Powder Co. v. Houston & Brazos Valley R. Co., 47 I.C.C. 221; 52 I.C.C. 538; Rockford Paper Box Board Co. v. Chicago, M. & St. P. Ry. Co., 49 I.C.C. 586; 55 I.C.C. 262; Steinhardt & Kelly v. Erie R. Co., 52 I.C.C. 304; 57 I.C.C. 369; Quinton Spelter Co. v. Fort Smith & Western R. Co., 53 I.C.C. 529; 61 I.C.C. 43; Empire Steel & Iron Co. v. Director General, 56 I.C.C. 158; 62 I.C.C. 157; John Kline Brick Co. v. Director General, 63 I.C.C. 439; 77 I.C.C. 420.
See Interstate Commerce Act as amended, § 16a.
The case is wholly unlike those in which it is held that, where a shipper attacks a through rate, all participating carriers must be made respondents, even though the through rate is made up of separately established elements. The complainant may wish to direct his attack only against one of these. But it is only the through rate which is in issue. It may be reasonable although one of its elements is not. It must stand or fall as an entirety. See Stevens Grocer Co. v. St. Louis, Iron Mountain & Southern Ry. Co., 42 I.C.C. 396, 398; McDavitt Bros. v. St. Louis, Brownsville & Mexico Ry. Co., 43 I.C.C. 695; La Crosse Shippers' Assn. v. Chicago, Milwaukee & St. Paul Ry. Co., 43 I.C.C. 605, 607; E. I. Dupont de Nemours Co. v. Pennsylvania R. Co., 43 I.C.C. 227. Compare Star Grain & Lumber Co. v. Atchison, T. & S.F. Ry. Co., 14 I.C.C. 364, 371; Indianapolis Chamber of Commerce v. Cleveland, Cincinnati, Chicago & St. Louis Ry. Co., 46 I.C.C. 547, 556; Johnson & Son v. St. Louis-San Francisco Ry. Co., 51 I.C.C. 518, 520.
Compare Southern Pacific Co. v. Interstate Commerce Commission, 219 U. S. 433, 219 U. S. 443; New England Divisions Case, 261 U. S. 184, 261 U. S. 189; United States v. Illinois Central R. Co., 263 U. S. 515, 263 U. S. 525.
Compare New England Divisions Case, 261 U. S. 184, 261 U. S. 193-195; Wichita Northwestern Ry. Co. v. Chicago, Rock Island & Pacific Ry. Co., 81 I.C.C. 513, 517.
These joint rates had been recently raised. Increased Rates, 1920, Ex parte 74, 58 I.C.C. 220. There was reductions later. See Reduced Rates, 1922, 68 I.C.C. 676; 69 I.C.C. 138.
These include for each of the carriers the data showing for the year freight tons, one mile; passengers, one mile; all revenue car miles; all revenue train miles; the total operating revenue; total operating expenses; net revenue and investment in road and equipment -- and they involved calculation of the respective gross revenues per ton mile, per car mile, per train mile; operating expenses per train mile, per car mile, per ton mile; net revenue per ton mile, per car mile, per train mile; the return per $1,000 of investment, on the gross revenue, the net revenue, and the railway operating income; the percentage of return on the gross revenue, the net revenue and the operating income. The net railway operating income for each of the lines is in the record.
"Where relevant and material matter offered in evidence is embraced in a document containing other matter not material or relevant and not intended to be put in evidence, such document will not be received, but the party offering the same shall present to opposing counsel and to the Commission true copies of such material and relevant matter, in proper form, which may be received in evidence and become part of the record."
"In case any portion of a tariff, report, circular, or other document on file with the Commission is offered in evidence, the party offering the same must give specific reference to the items or pages and lines thereof to be considered. The Commission will take notice of items in tariffs and annual or other periodical reports of carriers properly on file with it or in annual, statistical, or other official reports of the Commission. When it is desired to direct the Commission's attention to such tariffs or reports upon hearing or in briefs or argument, it must be done with the precision specified in the second preceding sentence. In case any testimony in other proceedings than the one on hearing is introduced in evidence, a copy of such testimony must be presented as an exhibit. When exhibits of a documentary character are to be offered in evidence, copies should be furnished opposing counsel for use at the hearing."
Its observance will not hamper the Commission in the performance of its duties. For, if the materiality of some fact in a report is not discovered by the Commission until after the close of the hearing, there is power to reopen it for the purpose of introducing the evidence.
The exhibits showed for the year 1921, the volume of traffic moving on joint rates and interchanged between the Orient and each of its direct connections; the part of the joint service performed by the Orient and the part performed by its connection; the revenue arising from the joint service, and how that revenue was divided. For example: the exhibits showed that, during 1921, the Santa Fe and the Orient interchanged 26,278 tons of freight; that, with respect to such freight, the Orient performed 8,162,294 ton-miles of transportation and the Santa Fe 5,793,098 ton-miles; that the revenue arising from this joint service was $218,827.71, of which the Orient received $106,889.59 and the Santa Fe $111,938.12; that the per ton-mile revenue of the Orient was 1.309 cents and the per ton-mile revenue of the Santa Fe 1.932 cents.

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