Source: http://supreme.nolo.com/us/268/39/case.html
Timestamp: 2019-04-21 06:34:52+00:00

Document:
Northern Pacific Railway Company v.
1. A judgment of a state supreme court sustaining an order of a state commission which fixed intrastate railroad rates, and overruling the railroad's claim that the rates were confiscatory and based on arbitrary findings of fact unsupported by evidence, held reviewable by writ of error. P. 268 U. S. 42.
2. An administrative order fixing railroad rates upon a finding without evidence or made upon evidence that clearly does not support it, is an arbitrary act against which courts will afford relief. P. 268 U. S. 44.
and less than carload, indiscriminately. Held that this was a fundamental error and a denial of due process of law. P. 268 U. S. 42.
4. The invalidity of an order arbitrarily lowering rates which the . evidence shows are confiscatory is not avoided by making it for an experimental period. P. 268 U. S. 45.
Error to a judgment of the Supreme Court of Washington affirming an order of the Department of Public Works in a suit brought by the above-named and three other railroads to set the order aside.
few exceptions, been initiated from time to time by individual tariffs of the several carriers. In 1918, the Director General of Railroads made a horizontal increase of 25 percent. In 1920, after the decision in Ex parte 74, Increased Rates, 1920, 58 I.C.C. 220, a further increase of 25 percent was authorized by the Public Service Commission of the state. Complaint was made that some of the rates as so raised were excessive and discriminatory, and that the rate structure lacked uniformity.
On December 28, 1920, the Public Service Commission instituted a proceeding before itself for the purpose of investigating the log rates and making such order thereon as the facts found should warrant. Hearings were duly had in which shippers and the four transcontinental carriers participated. Much evidence was introduced. The carriers insisted that the existing rates were unremunerative. They also filed, during the hearings, a joint tariff embodying the higher rates which they deemed reasonable. A suspension order issued, and the two proceedings were consolidated. On February 1, 1922, the Department of Public Works (by which the functions of the commission had come to be exercised) made a report in which it found that the existing rates were highly remunerative. Thereupon it entered an order which, among other things, abrogated all the intrastate log tariffs then in force, cancelled the suspended joint tariff filed by the carriers, and established a uniform distance tariff applicable to these railroads, to remain in effect during an experimental period of 12 months, or until further order of the department. The tariff so prescribed reduced greatly the rates theretofore prevailing. It was estimated that the revenues of the several carriers from this traffic would be lessened from 15 to 37 percent, and that additional losses in revenue would result from changes prescribed concerning minimum loadings.
evidence tending to show that their existing rates were so low as not to yield any return upon the property employed in the business, and that the rates did not defray fully the operating costs of the traffic and its proportion of the taxes payable. This evidence was in character persuasive. It was fairly specific, direct, and comprehensive. If the facts warranted, the shippers and the public officials might, of course, have shown by evidence of similar character that the carriers' evidence was inherently untrustworthy, or it might have been overcome by more persuasive evidence to the contrary. Little attempt was made to show that any testimony introduced by the carriers was inherently untrustworthy. Little conflict with the evidence of the carriers was developed by the evidence as to specific facts introduced for the shippers and the public. Apparently, necessary inferences from specific facts established by the carriers were not explained away. The department's findings concerning operating costs rested largely upon deductions from data found in published reports of the carriers and in their exhibits filed in this case. Instead of attempting to show by evidence, reasonably specific and direct, what the actual operating cost of this traffic was to the several carriers, the department created a composite figure representing the weighted average operating cost per 1,000 gross ton miles of all revenue freight carried on the four systems, and made that figure a basis for estimating the operating cost of the log traffic in Washington. [Footnote 4] This was clearly erroneous.
miles. In using the above composite figure in the determination of this issue, the department necessarily ignored, in the first place, the differences in the average unit cost on the several systems, and then the differences on each in the cost incident to the different classes of traffic and articles of merchandise, and to the widely varying conditions under which the transportation is conducted. In this unit cost figure, no account is taken of the differences in unit cost dependent, among other things, upon differences in the length of haul, [Footnote 5] in the character of the commodity, in the configuration of the country, in the density of the traffic, in the daily loaded car movement, in the extent of the empty car movement, in the nature of the equipment employed, in the extent to which the equipment is used, and in the expenditures required for its maintenance. Main line and branch line freight, interstate and intrastate, carload and less than carload, are counted alike. The department's error was fundamental in its nature. The use of this factor in computing the operating costs of the log traffic vitiated the whole process of reasoning by which the department reached its conclusion.
upon a finding made without evidence, The Chicago Junction Case, 264 U. S. 258, 264 U. S. 263, or upon a finding made upon evidence which clearly does not support it, Interstate Commerce Commission v. Union Pacific R. Co., 222 U. S. 541, 222 U. S. 547, is an arbitrary act against which courts afford relief. The error under discussion was of this character. It was a denial of due process. Compare New York & Queens Gas Co. v. McCall, 245 U. S. 345, 245 U. S. 348. The invalidity was not avoided by making the order, in terms, for an experimental period. The rates as to which the evidence was primarily directed were those in force before and during the hearings. If even the existing rates were confiscatory, as the carriers' evidence embodying the results of ample experience tended to show, there could be no reason for awaiting the test of the much lower rates which were prescribed. The cases which applied the principle of awaiting the result of an experimental period for untried rates have no application here. Willcox v. Consolidated Gas Co., 212 U. S. 19; Northern Pacific Railway Co. v. North Dakota, 216 U. S. 579; Cedar Rapids Gas Light Co. v. Cedar Rapids, 223 U. S. 655; Louisville v. Cumberland Telephone & Telegraph Co., 225 U. S. 430, 225 U. S. 436; Brush Electric Co. v. Galveston, 262 U. S. 443.
These are the Northern Pacific, the Great Northern, the Chicago, Milwaukee & St. Paul, and the Oregon-Washington of the Union Pacific System.
On May 16, 1922, the Interstate Commerce Commission entered an order reducing Washington interstate rates. Reduced Rates, 1922, 68 I.C.C. 676. Thereupon the Department of Public Works made, on June 22, 1922, a corresponding reduction in the intrastate log rates, but it provided specifically that, in view of the pending litigation, this order should not apply to the carriers here involved. Second Annual Report of the Department of Public Works, p. 70, appendix G.
The character of the proceeding in the state court and the provisions of law applicable thereto are set forth in Oregon R. Co. & Navigation Co. v. Fairchild, 224 U. S. 510. It was conceded, as was there held, that the legal proceeding prescribed by the state affords an adequate opportunity for testing by judicial review the lawfulness of the order complained of.
The figure taken for the Oregon-Washington was the average cost per 1,000 gross ton miles of that company, not of the whole Union Pacific system. The lines of the Oregon-Washington are located in three states, with an aggregate of 2,218 miles of road.
On the Northern Pacific, the average length of haul of all its intrastate traffic in Washington was 99 miles; of all its traffic in Washington, interstate and intrastate, 142 miles; of all its traffic on the whole system, 334 miles. Compare Shepard v. Northern Pacific Ry. Co., 184 F. 765, 781-782.

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