Source: https://supreme.justia.com/cases/federal/us/330/567/
Timestamp: 2019-04-26 04:45:18+00:00

Document:
1. An order of the Interstate Commerce Commission authorizing, on the "Chicago to the east" leg of grain shipments originating west of Chicago, a proportional rate 3 cents per hundred pounds higher on ex-barge than on ex-lake or ex-rail shipments, held not based on adequate findings and evidence, and therefore unlawful under the Interstate Commerce Act as amended by the Transportation Act of 1940. Pp. 330 U. S. 572-573, 330 U. S. 583.
(a) The policy and provisions of the Transportation Act of 1940 forbid approval by the Commission of barge rates or barge-rail rates which do not preserve the inherent advantages of cheaper water transportation, but which discriminate against water carriers and the goods they transport. Pp. 330 U. S. 574-577.
(b) "Chicago to the east" railroads cannot lawfully charge more for carrying ex-barge than for carrying ex-lake or ex-rail grains to and from the same localities, unless the eastern haul of the ex-barge grain costs the eastern railroads more to haul than does ex-rail or ex-lake grain. P. 330 U. S. 577.
which were strengthened in 1940 expressly to prevent discrimination against water carriers. P. 330 U. S. 577.
(d) The Commission, no more than it could require the barge carriers to raise rates inbound to Chicago which it accepted as reasonable, cannot lawfully bring about the same prohibited result by raising the railroad rates charged by eastern roads for ex-barge grain shipments east from Chicago. Pp. 330 U. S. 577-578.
(e) The Commission's order is not supported by its conclusion that it is "inequitable" for the barges to charge a much lower rate for the inbound grain haul than the competitive western railroads can afford to charge for the same haul. P. 330 U. S. 578.
(f) It is not within the province of the Commission to so adjust rates as to equalize the transportation cost of barge shippers with that of shippers who do not have access to barge service or to protect the traffic of railroads from barge competition. P. 330 U. S. 579.
(g) Congress has not granted the Commission discretionary power to approve any type of rates which would reduce the "inherent advantage" of barge transportation in whole or in part. P. 330 U. S. 579.
(h) Partial compensation of eastern roads for additional transit costs cannot be made in a manner which singles out ex-barge grain for discriminatory treatment in violation of the Interstate Commerce Act. P. 330 U. S. 583.
2. To justify the higher proportional rates on ex-barge grain, the Commission would have to make findings supported by evidence to show how much greater is the cost to the eastern roads of reshipping ex-barge grain than of reshipping ex-lake or ex-rail grain moving from the same localities and requiring the same service as does the ex-barge grain. The "unsifted averages" put forward by the Commission in this case do not measure the allegedly greater costs, nor show that they exist. P. 330 U. S. 583.
3. Since, in this case, the United States was a necessary party to the proceedings in the district court, the order of that court requiring the Commission to serve notice of appeal on the United States was not prejudicial error. P. 573, n 6.
"in a proper proceeding, we might prescribe proportional rates on the ex-barge traffic lower than local, or joint barge-rail rates lower than the combinations."
248 I.C.C. 307. A District Court set aside t he Commission's order on the ground that fixing higher rates for ex-barge grain than for ex-rail and ex-lake grain "discriminates against water competition by the users of barges." 44 F.Supp. 368. On appeal, this Court reversed, but with "no implication of approval of any rates here involved." ICC v. Inland Waterways Corp., 319 U. S. 671. In further proceedings, the Commission authorized ex-barge grain rates east from Chicago 3 cents per hundred pounds higher than rates for ex-rail and ex-lake grain. 262 I.C.C. 7. The appellees then brought this suit in the District Court to set aside the order of the Commission insofar as it permitted the railroads to put the higher ex-barge grain rates into effect. The District Court set aside and enjoined enforcement of the order. The Commission appealed to this Court. Affirmed, p. 330 U. S. 583.
A District Court of three judges enjoined in part an order of the Interstate Commerce Commission, and the case is here on appeal under 28 U.S.C. §§ 47, 47a, and 345. The Commission order specifically relates to the railroad rate for grain transported from Chicago, Illinois, to New York and other eastern points, [Footnote 1] after that grain has been transported to Chicago from the west by connecting rail or water carriers on through bills of lading. In such through shipments, the through rate is a combination of distinctly separate rates charged respectively for shipments from the west to Chicago and from Chicago to the east. The charge fixed for the last leg of the shipment is called, in railroad parlance, a "reshipping" or "proportional" rate. It is lower from Chicago to the east than a "local" rate charged for a shipment from Chicago to the east which originates in Chicago. See Atchison, T. & S.F. R. Co. v. United States, 279 U. S. 768, 279 U. S. 771.
than the all-rail rate from that point -- the difference being measured by the relative cheapness of shipping over the barge leg of the through route. Because of the cheaper barge rates, much of the railroads' grain freight business from localities which could be served by either barge or rail shifted to the barges [Footnote 2] after 1933, when barge service from western grain localities to Chicago was resumed. [Footnote 3] This was the barge versus rail competitive situation which existed when, in 1939, the eastern railroads filed schedules with the Commission which imposed on ex-barge grain the local rate from Chicago east, but allowed ex-rail and ex-lake grain the benefit of the 8 1/2 cent lower "reshipping" rates on the eastern haul. The result of this rate schedule would have been that, although barge lines could still have carried grain from the west to Chicago much more cheaply than the railroads could, by the time the grain had been reshipped to New York or other eastern points, the barge-rail carriage would have been more expensive to the shipper than all-rail carriage. This would have put the barge lines at a competitive disadvantage with railroads in barge-served localities. At the Commission hearing to test the validity of the higher ex-barge grain rates, a railroad representative candidly stated that the purpose of the proposal was to "drive this business off the water and back onto the rails, where it belongs." 248 I.C.C. 307, 321. This purpose would most probably have been accomplished had the high ex-barge reshipping rates gone into effect.
or joint barge-rail rates lower than the combinations."
248 I.C.C. 307, 311. A District Court set aside the Commission's order on the ground that fixing higher rates for ex-barge grain than for ex-rail and ex-lake grain rates "discriminates against water competition by the users of barges." Cargill, Inc. v. United States, 44 F.Supp. 368, 375. On appeal, this Court reversed, saying that its decision carried "no implication of approval of any rates here involved." Interstate Commerce Commission v. Inland Waterways Corp., 319 U. S. 671, 319 U. S. 691. It reserved for future consideration in a proceeding before the Commission the amount, if any, which the eastern railroads could increase "reshipping" rates for ex-barge over those for ex-lake and ex-rail grain. Id. at 319 U. S. 687-688, 319 U. S. 691.
would cost more than it would have if the through rates had accurately reflected the cheaper inbound barge rates. The Commission considered these higher rates for ex-barge grain, which resulted in higher through rates, justified so long as there remained to ex-barge grain "a fair opportunity to move in competition with lake-rail and all-rail traffic."
District Court's judgment was to leave in effect the long existing eastern railroad rates which provide the same rates for carrying ex-barge, ex-lake, and ex-rail grain east from Chicago.
"prescribe such reasonable differentials as it may find to be justified between all-rail rates and the joint rates in connection with such common carrier by water."
"Differences in . . . rates . . . and practices of a water carrier in respect of water transportation from those in effect by a rail carrier with respect to rail transportation shall not be deemed to constitute unjust discrimination . . . or an unfair or destructive competitive practice. . . ."
similar circumstances and conditions." 24 Stat. 379, 380, 49 U.S.C. § 2.
The foregoing provisions flatly forbid the Commission to approve barge rates or barge-rail rates which do not preserve intact the inherent advantages of cheaper water transportation, but discriminate against water carriers and the goods they transport. Concretely, the provisions mean in this case that "Chicago to the east" railroads cannot lawfully charge more for carrying ex-barge than for carrying ex-lake or ex-rail grains to and from the same localities unless the eastern haul of the ex-barge grain costs the eastern railroads more to haul than does ex-rail or ex-lake grain. And § 307(d) authorizing the Commission to fix differentials as between through water-rail and through all-rail rates, does not authorize the Commission to neutralize the effective prohibitions of the other provisions which were strengthened in 1940 expressly to prevent a discrimination against water carriers.
to raise these inbound rates which it accepted as reasonable, [Footnote 10] the Commission has here approved an order which would bring about the same prohibited result by raising the railroad rates charged by eastern roads for ex-barge grain shipments east from Chicago. Congress has forbidden this.
a higher rate to eastern railroads which do not compete with the barges at all. If the western railroads need relief from the competition of barges, that is a question wholly unrelated to the rates of eastern roads. Furthermore, Congress has decided this question of equitable rates as between railroads and barges. It has declared in unmistakable terms that the "inherent advantage" of the lower cost of barge carriage as compared with that of railroads must be passed on to those who ship by barge. It is therefore not within the province of the Commission to adjust rates, either to equalize the transportation cost of barge shippers with that of shippers who do not have access to barge service or to protect the traffic of railroads from barge competition. For Congress left the Commission no discretionary power to approve any type of rates which would reduce the "inherent advantage" of barge transportation in whole or in part. Cf. Mitchell v. United States, 313 U. S. 80, 313 U. S. 97.
ex-rail and ex-lake grain will cause "incurable chaos" in and disrupt the national rail rate structure, which reflects many interrelated conditions governing the transportation of grain from west of Chicago to eastern markets. The Commission does not show how any possible disruption of railroad rates structure arises from giving shippers the full inherent advantage of cheaper barge rates, other than that competing railroads have lost traffic to the barge lines. As we have pointed out, Congress knew that barge line rates were cheaper than rail rates, wanted the shippers to get full benefit of them, and left the Commission no power to take that benefit away from shippers by adjusting rail-barge traffic competition or rates. But we note incidentally that these rates had been equal prior to 1939 without any apparent disruption of the total structure. The possibility of such a disruption does not remotely justify discriminations against barge traffic which actually deprive shippers and the barge companies of the inherent advantages of water transportation guaranteed to them by Congress. See United States v. Chicago, M. & St.P. R. Co., 294 U. S. 499, 294 U. S. 506-510. Nor is the fact that barge-rail rates, from certain places in the west through Chicago to the east, are less than local rail rates from Chicago east, and adequate reason for increasing the east-of-Chicago part of the through barge-rail rate. The initiation of new rates with such a disparity in through rail rates as compared with local rail rates would, of course, be forbidden by § 4 of the Act as amended in the absence of Commission approval. [Footnote 12] But, insofar as the inherent cheapness of the barge leg of the through route produces a disparity between barge-rail rates and local rail rates, Congress has said that the Act must be so administered as to preserve, not eliminate or reduce, the disparity.
terminal service. The formula used here which lumps all through rail grain rates, irrespective of the services rendered, to give rail-carried grain a preferred rate over barge-carried grain, is indistinguishable in cause and consequence from an order which directly raises barge rates to relieve the railroads from barge competition. In any event, there has been no showing by the Commission as to how much, if any, of the 3 cent reshipping rate increase is attributable to the fact that ex-barge grain requires more terminal service on the average than does ex-rail grain.
To justify increasing the reshipping rates of ex-barge grain, the Commission would have to make findings supported by evidence to show how much greater is the cost to the eastern roads of reshipping ex-barge grain than of ex-lake or ex-rail grain moving from the same localities and requiring the same service as does the ex-barge grain. Cf. Florida v. United States, 282 U. S. 194, 282 U. S. 212; North Carolina v. United States, 325 U. S. 507, 325 U. S. 520. The unsifted averages put forward by the Commission do not measure the allegedly greater costs nor indeed show that they exist.
surrounding all-rail and lake-rail transportation from those affecting barge-rail transportation, 262 I.C.C. 27-28, and these findings are not without support in evidence.
The eastern points are in New York and adjacent states and in New England. It is around shipments from Chicago to this territory that this rate controversy chiefly revolves. The proposed new rate increases also related to grain shipments from Chicago to the so-called central territory. The reasons supporting the conclusion we reach apply equally to the central territory increases, and consequently we need not treat them separately.
See 246 I.C.C. 353, 361, 364, 383; 262 I.C.C. 7, 41.
There was barge service from the grain section west of Chicago to that city from 1886 to 1907, when it was discontinued. Such barge service was resumed in 1933. See 262 I.C.C. 7, 20.
The ex-barge proportionals fixed by the Commission were uniformly 5.5 cents lower than local rates from Chicago to the east and 3 cents higher than ex-barge and ex-lake proportionals.
Appellees are (1) A. L. Mechling, a barge water carrier between Chicago and points in Illinois, Missouri, and Iowa; (2) Inland Waterways corporation which transports grain by barges between, among other points, Kansas City and Chicago; (3) the Secretary of Agriculture, who is authorized by statute to make complaints to the Interstate Commerce Commission, and to seek judicial relief with respect to rates and charges for the transportation of farm products.
Two procedural points are raised by the Commission which need not be discussed at length. The first is that the District Court's preliminary injunction was too broad because it enjoined the Commission from permitting the controversial rates to become effective. This question is now moot, but see Inland Steel Co. v. United States, 306 U. S. 153, 306 U. S. 159-160. The second procedural point urged relates to the District Court's order requiring the Commission to serve notice of appeal on the United States. We see no error in this, and even if there were, it could not be prejudicial in connection with the Commission's rights on this appeal. Since the United States was necessarily a party in the District Court, 28 U.S.C. 46, Lambert Run Coal Co. v. Baltimore & O. R. Co., 258 U. S. 377, 258 U. S. 382, we think the District Court cannot be held in error for requiring service of the notice of the Commission's appeal.
54 Stat. 899, 937, 49 U.S.C. § 907(d). In the original proceedings before the Commission, the last evidence was heard and the record was closed before the 1940 Transportation Act became a law. Interstate Commerce Commission v. Inland Waterway Corp., 319 U. S. 671, 319 U. S. 678. The present proceedings are fully governed by the 1940 Act.
"MR LUCAS. . . . The town in which I live is a focal point for the transportation of wheat and corn down the Illinois. The price of wheat and corn at the elevator there is always 2 or 3 cents higher than it is at elevators some 25 or 30 miles farther inland because of the difference between the rates by rail and those by water."
"Under the bill, as I understand it, the Interstate Commerce Commission would have the power, and it would be its duty, to fix rates on the Illinois River with respect to the transportation of that wheat and corn. Would it be possible for the Interstate Commerce Commission to fix the rate the same as the railroad rate from that point to St. Louis?"
"MR. WHEELER. Not if the Commission does its duty, because the bill specifically provides that it must take into consideration the inherent advantages of the water carrier. Everyone agrees that goods can be shipped more cheaply by water than by rail."
"The bill very plainly, about as plainly as language can be written, provides for the protection of the inherent advantages of water transportation as contrasted with other means of transportation. In fixing rates, the water carrier is assured the advantages of the cheaper rate at which he can transport property."
84 Cong.Rec. 5873-5876, 5883, 6131 (1940).
The Commission stated that "The barge rates yield fair returns to the barge carriers, and for the purpose of this proceeding, may be accepted as reasonable." 262 I.C.C. 7, 19.
"the barge-rail rates are far below the all-rail rates from the same and other Illinois origins. This is an inequitable situation giving rise to requests for reductions in the all-rail rates from the Illinois and central territory origins and it is difficult to see, with such extreme disparities, how such requests could properly be denied. . . . [T]here is a substantial production of corn in the central territory. While the farmers therein did not appear at the hearing to show that they were hurt by this situation, such evidence was adduced by others in the same relative position. . . . This is what is meant by the statement . . . that the present ex-barge proportionals from Chicago jeopardize the all-rail rate structure."
"We are warned . . . that a change, once permitted, has a tendency to spread. The acceptance of the new schedule for Milwaukee will lead, it is said, to requests for proportionate reductions by other lines in Indiana . . . , in Illinois, and even in Kentucky, the outcome being characterized in the argument of counsel, though not in the report, as a rate war between the roads. . . . The point of the decision is not that present rates are sound, but that they must be maintained, even if unsound, for fear of a rate war which might spread beyond control. The danger is illusory. The whole situation is subject to the power of the commission, which may keep the changes within bounds."
See § 6, Transportation Act of 1940, 54 Stat. 898, 904, 49 U.S.C. § 4.
"on the average, as compared with the ex-barge grain, the movement under the ex-rail proportionals . . . requires less terminal service at the gateway . . . , less transit service at intermediate points in official territory, and less line haul service to the southern points."
"Like the lake-rail traffic, the barge-rail traffic requires transfer of lading and a full origin terminal service at the interchange port. . . . [I]t never moves in continuous through transportation."
There is apparently no processing of barge carried grain in Chicago. The railroads there charge 3.25-4.5 cents per hundred lbs. to switch barge grain at Chicago from riverside elevators to processing plants. 262 I.C.C. 7, 24.
It is noteworthy that, in its previous consideration of these same ex-barge grain reshipment rates, the Commission was satisfied that "the physical carriage beyond the reshipping point is substantially the same" in ex-rail, ex-lake, and ex-barge shipments, 248 I.C.C. 307, 311.
It appears to me that the Court in this case not only ignores findings of fact by the Interstate Commerce Commission contrary to our own oft-repeated pronouncements about the finality of administrative findings, but it also legislates out of the Transportation Act of 1940 at least two specific provisions which Congress put in, and departs from the policy laid down in § 1 of the Act. Whether the Congressional law or the Court's amendments are the better for the country is a complicated problem of policy which, in my conception of our judicial function, I am not privileged to decide.
"In the case of a through route, where one of the carriers is a common carrier by water, the Commission shall prescribe such reasonable differentials as it may find to be justified between all-rail rates and the joint rates in connection with such common carrier by water."
§ 307(d). The Court reads this discretionary power out of the statute, and holds that the Commission may not establish any differential other than that created by the carriers themselves -- that is to say, the only permissible differential is the difference between barge rates and rail rates for the water leg of the through journey.
"the Commission shall give due consideration, among other factors, to the effect of rates upon the movement of traffic by the carrier or carriers for which the rates are prescribed."
has done so, and finds that a greater differential than that prescribed would create unjust advantages and diversions of traffic. But the Court ignores the effect of what it orders on existing rate structures and on grain producing regions and shippers other than barge users. It simply writes in "shall not consider" where Congress said "shall consider."
Because this decision seems to me to deprive the Commission of these discretionary powers to adjust through rates to general shipping conditions and rate structures, I dissent.

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