Source: https://openjurist.org/387/us/326
Timestamp: 2019-04-18 15:09:56+00:00

Document:
The ATCHISON, TOPEKA AND SNT A FE RAILWAY COMPANY et al. UNITED STATES et al., Appellants, v. The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY et al.
This is a controversy between the Mountain-Pacific railroads and certain Midwestern railroads, involving the proper division between them of joint rates from through freight service in which they both participate. Dissatisfied with their share of existing divisions, the Midwestern carriers called upon the Interstate Commerce Commission's statutory authority to determine that joint rate divisions 'are or will be unjust, unreasonable, inequitable, or unduly preferential,' and to prescribe 'just, reasonable, and equitable divisions' in their place.1 The Commission found that the existing divisions were unlawful, and established new divisions which, on the average, gave the Midwestern carriers a greater share of the joint rates.2 The District Court set aside the Commission's order on the ground that certain of its findings were deficient.3 We noted probable jurisdiction, 383 U.S. 964, 86 S.Ct. 1269, 16 L.Ed.2d 307, to consider important questions regarding the Commission's powers and procedures raised by the District Court's decision.
In the proceedings before the Commission, which consolidated the Eastern and the Midwestern complaints, the Mountain-Pacific railroads not only defended the existing divisions, but sought a 10% increase in their share. Regulatory commissions of States in Mountain-Pacific Territory also intervened. The consolidated proceedings involved rate divisions affecting about 300 railroads, which voluntarily aligned themselves into three groups—Eastern, Midwestern, and Mountain-Pacific—and submitted evidence and tried the case on this group basis. A great deal of time was consumed in compiling and introducing massive amounts of evidence—more than 800 exhibits and over 11,200 pages of testimony. The Hearing Examiners made a recommended report in 1960. After considering written briefs and oral arguments from the various groups of parties, the Commission issued its original report in March of 1963. The Commission found the existing divisions to be unlawful, and prescribed increased divisions for the Midwestern and Eastern carriers, effective July 1, 1963.
After reviewing the nature of the traffic involved and considering the special claims of the various groups, the Commission found that 'none of the contending groups is more or less efficiently operated than another,' and that 'there are no differences in the importance to the public attributable to the three contending groups of carriers.' Its decision thus turned on more direct financial considerations, to which the Commission devoted a substantial part of its lengthy report. Under Commission practice, these financial considerations are divided into 'cost of service' and 'revenue needs.' The former consists of the out-of-pocket expenses directly associated with a particular service, including operating costs, taxes, and a four percent return on the property involved. 'Revenue needs' refers to broader requirements for funds is excess of out-of-pocket expenses, including funds for new investment.
In assessing comparative revenue needs, the Commission found that the average rate of return for 1946—1958, based on net railway operating income from all services as a percentage of the value of invested property,8 was 3.40% for the Eastern roads, 3.49% for the Midwestern group, and 4.64% for the Mountain-Pacific carriers. The Commission also found that the Mountain-Pacific railroads had the most favorable record and trend in both freight volume and freight revenues, and the Eastern railroads the least favorable, with the Midwestern roads occupying an intermediate position. In response to the Mountain-Pacific carriers' complaint that their net operating income from all services had not increased as fast as net investment in recent years, the Commission noted that this was primarily due to disproportionate passenger deficits that offset favorable income from freight services. The Commission also discounted the contention that the Mountain-Pacific carriers were entitled to greater revenues to provide funds for new investment, finding that the needs of the various carrier groups for such funds were not appreciably different. The claim of the Midwestern carriers that they had the most pressing need for revenues was also rejected by the Commission.
After entertaining petitions for reconsideration, the Commission adopted a supplemental report in late 1963. For the first time, a few carriers abandoned the three-group basis on which all the prior proceedings had been conducted. Requests for special treatment were made on behalf of one Mountain-Pacific road, the Denver & Rio Grande, and two Midwestern carriers, the Missouri-Kansas-Texas (Katy) and the St. Louis-San Francisco (Frisco), on the ground that the divisions prescribed by the Commission had an unduly harsh effect on them.14 The Commission considered and largely rejected these and other criticisms of its original decision, and issued a supplemental order substantially reaffirming its original order after making minor technical modifications.
None of the appellees now defends the position espoused by the District Court, that the Commission was required to make separate individual findings for each of the 300 railroads involved in the proceedings before it. But the error in that position, which rejects over 40 years of consistent administrative practice, requires comment.
'Obviously, Congress intended that a method should be pursued by which the task, which it imposed upon the Commission, could be performed. * * * To require specific evidence, and separate adjudication, in respect to each division of each rate of each carrier, would be tantamount to denying the possibility of granting relief. We must assume that Congress knew this * * *.' 261 U.S., at 196—197, 43 S.Ct. at 275.
The pragmatic justifications for the Commission's group procedures are obvious. Even on a group basis, the Commission proceedings in this case require a voluminous record and were not completed until nearly 10 years after the complaints were filed. To demand individual evidence and findings for each of the 300 carriers in the Commission proceedings would so inflate the record and prolong administrative adjudication that the Commission's regulatory authority would be paralyzed.
Nor do considerations of fairness require disregard of administrative necessities. The premise of group proceedings, as the New England Divisions Case explicitly recognized, is that evidence pertaining to a group is typical of its individual members. 261 U.S., at 196—199, 43 S.Ct., at 275—276. See also Beaumont, S.L. & W.R. Co. v. United States, 282 U.S. 74, 82—83, 51 S.Ct. 1, 4—5, 75 L.Ed. 221. It has always been accepted that an individual carrier may challenge this premise and, on proper showing, receive independent consideration if its individual situation is so atypical that its inclusion in group consideration would be inappropriate. It is the Commission's practice to accord independent treatment to an individual carrier when a proper request for special consideration is made.21 But no such requests were made during the hearings and presentation of evidence in this case. Instead, the individual carriers voluntarily aligned themselves into groups, presented evidence and tried the case on a group basis, and asked the Commission to prescribe new divisions on a group basis. In this situation, the Commission was not obligated on its own motion to demand evidence and make findings on an individual basis. Departure from the practicalities of group procedure is justified only when there is a real need for separate treatment of a given carrier; the individual carriers themselves, which have the closest understanding of their own situation and interests, are normally the appropriate parties to show that such need exists.
Among the errors that the District Court found in the Commission's decision was its failure to state the revenue needs of each individual carrier in terms of precise dollar amount. While not defending the requirement of individual findings, the appellees do contend that the Commission was required to dte rmine the revenue needs of the various carrier groups in precise dollar amount, and they also urge other errors in the Commission's treatment of revenue needs. We believe, however, that in the case's present posture these criticisms are largely misdirected.
In increasing the shares of the Eastern railroads the Commission did rely on revenue needs as well as costs, but it found costs alone the controlling factor in raising the divisions of the Midwestern carriers. In the conclusions in its original report, the Commission stated that there should be increases in the Eastern divisions 'reflecting revenue need as well as cost,' but in the very next sentence it went on to say that as between the Midwestern and Mountain-Pacific roads, 'differences in earning power are less marked, but our consideration of the evidence bearing on cost of service previously discussed convinces us that the primary midwestern divisions as a whole are too low.' Its reliance on costs alone in increasing the Midwestern shares is confirmed by the Commission's supplemental report, in which it again rejected a request of the Midwestern carriers for even higher divisions based on their claim of pressing revenue needs: 'It was our stated view that (increases in the Midwestern divisions) were supported by the evidence concerning cost of service, but that the proposal of the midwestern lines gave undue weight to their claimed revenue need.'22 Since revenue needs were important factors only which regard to the Eastern divisions, and those divisions are no longer in issue because the Eastern roads have settled with the Mountain-Pacific carriers, any errors committed by the Commission in its treatment of revenue needs are no longer relevant.23 But even assuming that the Commission did attach some limited significance to revenue needs in raising the Midwestern divisions, we cannot conclude that its treatment of revenue needs was legally inadequate. The Commission devoted over 25 pages of its reports to revenue needs. It discussed at length the proper basis for computing rates of return and found the rates of return for the various carrier groups; it also examined the record and trends in net railway operating income from all services, and from freight and passenger services considered separately.
The Commission placed considerable emphasis on rates of return in its discussion of comparative revenue needs. Following its established practice, it found that a value basis, rather than book cost, as urged by the Mountain-Pacific roads, was the proper method for calculating the investment base.24 The evidence disclosed that the Mountain-Pacific lines had enjoyed a 4.64% return, as opposed to 3.40% for the Eastern lines, and 3.49% for the Midwestern lines. The suggestion that these findings in terms of rate of return were insufficient because they did not express revenue needs in terms of absolute dollar amount is totally novel and unreasonable. This suggestion seems to stem from a misconception of the Commission's function in divisioins cases. Its tasks is not to transfer lump sums of cash from one carrier to another, but to 'make divisions that colloquially may be said to be fair.' Baltimore & O.R. Co. v. United States, 298 U.S. 349, 357, 56 S.Ct. 797, 802, 80 L.Ed. 1209.25 The relative financial strength of the carriers involved is a key factor in this task, see the New England Divisions Case, 261 .S . 184, 189 192, 43 S.Ct. 270, 273—274, 67 L.Ed. 605, and the use of comparative rates of return is an obviously appropriate basis for the exercise of administrative judgment. Rates of return are a familiar tool of analysis in the financial community. The Commission has long relied on this form of analysis in divisions cases,26 and in passing on the Commission's performance in such cases, this Court has never suggested that ultimate findings of revenue need in terms of absolute dollar amount were required.27 Appellees are unable to suggest any clear regulatory purpose that would be served by such findings. We decline now to impose upon the Commission a rigid mechanical requirement that is without foundation in precedent, practice, or policy.
The appellees have sought to convince us that this finding is factually incorrect, but we decline to invade the administrative province and second-guess the Commission on matters within its expert judgment. Baltimore & O.R. Co. v. United States, 298 U.S. 349, 359, 56 S.Ct. 797, 803, 80 L.Ed. 1209; Alabama G.S.R Co. v. United States, 340 U.S. 216, 227—228, 71 S.Ct. 264, 271—272, 95 L.Ed. 225.
The appellees also contend that the Commission erred in its treatment of passenger deficits. In discussing revenue needs, the Commission pointed out that since 1950—1952 the Moutain-Pacific carriers had enjoyed substantial increases in operating revenue from freight services, while the freight revenue of the Eastern carriers had declined. It also noted that the Midwestern carriers' freight revenues had remained relatively constant, and concluded that these comparative trends were likely to continue. The Mountain-Pacific carriers, however, complained that, despite their favorable trend in freight revenues and large amounts of new investment that they had recently made, their rate of return from all services had declined. In reply, the Commission observed that the Mountain-Pacific carriers' passenger deficits had increased substantially since 1950—1952 and had offset their impressive performance in freight revenues.
We regard the assumption that the Commission attached great importance to Mountain-Pacific passenger deficits in raising the Midwestern divisions as fanciful. As we have already noted, those increases were based exclusively or almost entirely on cost considerations. To the extent the Commission may have relied on comparative revenue needs, passenger deficits were not a significant factor. The discussion of passenger deficits in the Commission's original report occurred primarily in the context ofco mparing the revenue needs of the Mountain-Pacific carriers with those of the Eastern roads, when the Commission emphasized that the Eastern railroads had been much more successful in curbing losses on passenger service than the Mountain-Pacific carriers. Any error in the Commission's treatment of passenger deficits prejudiced the Midwestern as well as the Mountain-Pacific carriers, for in rejecting a Midwestern revenue needs argument in its supplemental report, the Commission noted that the Midwestern carriers had also done a much poorer job than the Eastern carriers in halting the swell of passenger deficits. Furthermore, the Commission did not ignore the overall financial strength of the various groups of carriers, but found that the Mountain-Pacific carriers' rate of return from all services was substantially higher than that of either the Midwestern or Eastern carriers.
The claim of unfair surprise is strained in light of the fact that the Commission has frequently differentiated passenger and freight revenues in freight rate division cases.28 While passenger deficits did not become an important issue in this case until the report of the Hearing Examiners was handed down, the Commission relied upon statistics which were matters of public record, and the Mountain-Pacific carriers had ample opportunity to debate the issue in their exceptions to the Hearing Examiners' report and their petitions for reconsideration of the Commission's original decision. And while the Commission has sometimes acted to offset passenger deficits in freight rate cases,29 the issues are quite different when, in a divisions case, it is argued that carriers in one part of the country should subsidize the passenger operations of carriers elsewhere.
If the Commission were to give controlling weight to passenger deficits in a divisions case, it might be appropriate to take more evidence on the issue and discuss it in greater depth than the Commission did here. But in light of the fact that, in this case, passenger deficits were of negligible relevance to the Commission's decision to increase the Midwestern divisions, we find no errors in the Commission's findings and procedure on this point that would justify setting aside its order.
After carefully considering this evidence, the Commission decided to base its cost findings on the special cost study and analysis prepared by the Mountain-Pacific carriers. However, it made certain adjustments in the Mountain-Pacific analysis which, in the adjustment of the Commission, more accurately reflected the true costs of the traffic involved.
'It is difficult to ascribe the empty movement of a car to a particular commodity or class of traffic because of the variety of the lading, and the fact that cars used occasionally for hauling transcontinental traffic may at other times serve widely different uses, including local movements within each territory * * *. The defendants urge that insufficient consideration was given to special cars * * *. They would be included in (Rail Form A) tending to increase the empty-return ratios in all territories. Here they accounted for only about 4 percent of the total movement * * *.
'(T)hat the proportion of branch line mileage for each group is almost the same and the amount of traffic on branch lines is so small that some other factors cause the lower unit cost in mountain-Pacific territory. The principal factor is clearly the high density of traffic, 76 percent higher than the Midwest.
'Although the cost per mile may be somewhat higher in mountainous territory, this higher cost is shared by so many more tons of traffic that the cost per ton-mile is lower.
From the Mountain-Pacific cost study, as adjusted in these particulars, the Commission found that the Mountain-Pacific carriers enjoyed a much higher margin of revenue over costs than did the Midwestern carriers, and for this reason prescribed increases in the Midwestern divisions.
The Mountain-Pacific carriers also contended that certain factual premises on which the Commission based its allocation of road maintenance costs were erroneous and that there was no foundation for the Commission's choice of a value basis for investment rather than book cost.
The appellees argue that since the District Court failed to pass on the cost issues, we are precluded from doing so. It is true that we have occasionally stated that it is not our general practice 'to review an administrative record in the first instance.' United States v. Great Northern R. Co., 343 U.S. 562, 578, 72 S.Ct. 985, 994, 96 L.Ed. 1142; Seaboard Air Line R. Co. v. United States, 382 U.S. 154, 157, 86 S.Ct. 277, 278, 15 L.Ed.2d 223. But we think that policy is not applicable on the facts of this case. The presentation and discussion of evidence on cost issues cns tituted a dominant part of the lengthy administrative hearings, and the issues were thoroughly explored and contested before the Commission. Its factual findings and treatment of accounting problems concerned matters relating entirely to the special and complex peculiarities of the railroad industry. Our previous description of the Commission's disposition of these matters is sufficient to show that its conclusions had reasoned foundation and were within the area of its expert judgment. Baltimore & O.R. Co. v. United States, 298 U.S. 349, 359, 56 S.Ct. 797, 803, 80 L.Ed. 1209; New York v. United States, 331 U.S. 284, 328, 335, 349, 67 S.Ct. 1207, 1230, 1234—1241, 91 L.Ed. 1492. Thirteen years have elapsed since the complaints in this case were first filed. The appellees' attacks on the legal validity of the Commission's findings on cost are so insubstantial that no useful purpose would be served by further proceedings in the District Court. We conclude that there was no legal infirmity in the Commission's cost findings.
The Commission devised a special divisional scale, adapted to the particular circumstances of this case and designed to produce the moderate overall increases in the Midwestern divisions that it found justified by the evidence relating to cost of service. Appellees contend that the Commission did not sufficiently explain its choice of new divisions, that the divisions are not justified by the evidence relating to cost, and that the Commission was required to find the exact revenue effect of the new divisions in precise dollar amount. None of these contentions has sufficient merit to warrant setting aside the Commission's order.
Burlington Truck Lines v. United States, 371 U.S. 156, 83 S.Ct. 239, 9 L.Ed.2d 207, relied upon by the appellees, is thus inapposite. In that case the Court stressed that there were 'no findings and no analysis' to justify the Commission's choice of remedy, 'no indication of the basis on which the Commission exercised its expert discretion.' 371 U.S., at 167, 83 S.Ct., at 245. See also Gilbertville Trucking Co. v. United States, 371 U.S. 115, 129—131, 83 S.Ct. 217, 225—226, 9 L.Ed.2d 177. Here the Commission explained why it had escorted to divisional scales and why it modified the familiar 29886 scale; it found that the modified scale would produce divisions appropriate to its cost findings. The Commission's 'expert discretion' has a considerable role to play in so technical a matter as railroad rate divisions, and there was sufficient explanation of its exercise in this case. Alabama G.S.R. Co. v. United States, 340 U.S. 216, 227—228, 71 S.Ct. 264, 271—272, 95 L.Ed. 225; Board of Trade of Kansas City, Mo. v. United States, 314 U.S. 534, 548, 62 S.Ct. 366, 372, 86 L.Ed. 432.
Appellees claim that if the changes in divisions were based on costs, the Commission was required to start from scratch and construct the new divisional scale directly from cost data. In their view, a scale like that used by the Commission in this case, constructed on a weighted mileage basis and adjusted to reflect comparative costs, is per se invalid. We cannot impose such mechanical restrictions on the range of remedies from which the Commission may choose. It is true that in a more recent territorial divisions case, involving Eastern and Southern Territories, the Commission did establish a divisional scale constructed directly from costs.32 But the two methods of constructing divisional scales are merely alternative mechanisms for dividing rates in conformity with the evidence.33 What is appropriate in one case may be inappropriate in another, and the fact that the Commission may, in the light of accumulating experience, devise new remedial techniques does not make the ones that it formerly employed unlawful.34 It is also true that the changes produced by the new scale were not the same for every existing division. Some of the particular Midwestern divisions were increased more than others, and a few were actually reduced. But that is only to be expected when a uniform scale is substituted for divisions produced by negotiation between the several carriers, and especially when, as the Commission found, the existing divisions were based on subgroupings that were not well-defined. Cf. Beaumont, S.L. & W.R. Co. v. United States, 282 U.S. 74, 86—88, 51 S.Ct. 1, 5—6, 75 L.Ed. 221. The Commission's cost findings dictated moderate overall increases in the Midwestern divisions; the remedy it chose was appropriately calculated to achieve that result.
The District Court held that the Commission was required to find the exact effect, in precise dollar amount, of the new divisions on the revenues of each of the 300 carriers involved in the Commission proceedings. The appellees also contend that the Commission was obliged to make such findings, at least with respect to the various carrier groups involved. These views stem from the same misconception of the Commission's decision that we have already dealt with in the discussion concerning revenue needs. The Commission did not undertake to transfer lump sums of money from the Mountain-Pacific carriers to the Midwestern roads in order to meet certain defined revenue needs of the latter carriers. If it had, there might be more substance to these contentions. But, even in such a case, all the details of the divisions' actual operationmi ght be difficult to foresee, and precise calculation impossible. It is also dubious whether any useful regulatory purpose would be served by such a rigid requirement, which this Court has never imposed in the past.35 In any event, the Commission's action in this case was based not on revenue needs, but cost of service, and it found that the divisions which it established would produce moderate overall increases in the shares of the Midwestern group, in accord with its cost findings. None of the figures, charts, or tables concocted by the appellees convinces us that this finding was not based upon substantial evidence. Alabama G.S.R. Co. v. United States, 340 U.S. 216, 227 228, 71 S.Ct. 264, 271—272, 95 L.Ed. 225.
Finally, the Mountain-Pacific carriers quarrel with the Commission's prescription of a minimum division of 15%. They contend that the evidence pertaining to terminal costs and standby costs that a participating railroad must incur regardless of the length of its carriage does not justify so high a minimum division. But the Commission found that: 'Both in many divisional bases voluntarily established in the past and as well in our decisions it has been common practice to accord minimum divisions for carriers having relatively short hauls, sometimes as high as 20 or 25 percent but more usually 15 percent. The increasingly burdensome terminal costs in recent years are persuasive that a 15-percent minimum is justified.' We cannot find that the Commission exceeded its proper role in weighing and interpreting the evidence when it made this finding. Baltimore & O.R. Co. v. United States, 298 U.S. 349, 359, 56 S.Ct. 797, 803, 80 L.Ed. 1209. For similar reasons, we also reject the Mountain-Pacific carriers' criticism of the weight assigned to the first 50 miles of carriage in the Commission's divisional scales.
The appellees finally contend that the Commission erred in its treatment of a single Mountain-Pacific carrier, the Denver & Rio Grande, and two Midwestern carriers, the Katy and the Frisco. It is argued that the situation of these three carriers was dissimilar to that of the groups with whom they were considered, that the typical evidence rule of the New England Divisions Case was inapplicable, and that the Commission was therefore required to make separate findings concerning these carriers. The appellants point out that these carriers voluntarily aligned themselves with their respective groups, presented evidence and argued the case on that basis, and never suggested that they should receive separate treatment until after the Commission's original decision. They argued that the Commission should not be required, on its own motion, to guess which of 300 carriers may require individual treatment when none of them even requests it. Cf. United States v. L. A. Tucker Truck Lines, 344 U.S. 33, 37, 73 S.Ct. 67, 69, 97 L.Ed. 54. The District Court resolved these contentions by stating that 'there has been no intentional relinquishment of a known right on the part of any of these roads.'36 This language is more appropriate to a criminal trial than an administrative proceeding. Reconciling the need for efficient regulatory adjudication with fairness to the parties and due concern for the public interest is a different, and difficult, problem.
But we need not undertake to resolve this problem in all its broad ramifications. The contentions made on behalf of the three individual carriers are basically quite limited. It is not argued that the Commission erred in generally treating them on a group basis and not making individual findings on their costs and revenue needs. The basis claim is that the divisions prescribed by the Commission have an unfair and unduly harsh impact on these individual carriers.
The Katy and the Frisco claim that the new divisions will result in a net decrease in their revenue shares; while many of their divisions were increased under the Commisson § order, some highly profitable divisions that they had negotiated with respect to lumber carriage were reduced. The Commission found that this situation 'was fully disclosed in the evidence of the midwestern lines and foreshadowed in the examiners' recommended report. The petitioners are therefore not in a position to claim that the effect of our decision was a surprise.' But more than procedural grounds justify rejecting the tardy claims of the Frisco and the Katy for separate treatment. The Act does not give any carrier a vested right to divisions that it may have negotiated. It does not recognize prescriptive privileges, but requires the Commission to establish 'just, reasonable, and equitable divisions.' The mere fact that the new divisions may have caused a net reduction in the revenues of two Midwestern carriers while raising those of other Midwestern carriers does not establish the invalidity of the new divisions. For the high divisions on lumber previously negotiated by these two roads may have been far in excess of their cost of service. The Katy and the Frisco have not shown that the new divisions do not fairly reflect their cost of service. The Commission was justified in stating that '(w)e see no reason for making a special exception from our findings' for them.
The Rio Grande participates in transcontinental service between Utah gateways (Ogden and Salt Lake City) and Denver and Pueblo, Colorado, on the border of Mountain-Pacific Territory. There it interchanges with Midwestern carriers who provide service to the Missouri River and beyond. The Union Pacific operates entirely by itself a competitive route between Utah and Missouri River gateways. Both the Union Pacific and the Rio Grande accept traffic at the Utah gateways from the Western Pacific and the Southern Pacific. The Commission's divisions break at the border of Mountain-Pacific territory, at the Colorado junctions, but do not provide for any subdivisions in Mountain-Pacific territory. The Rio Grande complains that, as a result, it must bear the whole reduction in the Mountain-Pacific divisions. Its competitor, the Union Pacific, is unaffected by the new divisions because it operates in both Mountain-Pacific and Midwestern territory and does not, insofar as relevant here, interchange with Midwestern carriers. The Rio Grande contends that the Southern Pacific and Western Pacific will not accept divisions from it lower than they obtain from the Union Pacific, and thus it will be squeezed. It alleges that it will lose $8,500,000 as a result, and that its net income is only 10,500,000.
Of course, the Commission could not simply rest on such notions of estoppel to justify infliction of substantial injury upon an important railroad serving the public. But it was not at all clear at the time of the Commission's decision, and it is still not clear, that the new divisions will have the disastrous or unfair effects alleged by the Rio Grande. The revenue effect on the Rio Grande hinges, in important part, on the subdivisions it is able to negotiate with the other Mountain-Pacific carriers. The Mountain-Pacific carriers, including the Rio Grande, urged the Commission to permit such voluntary negotiation in the first instance before taking action itself.37 The Commission acceded to this request by specifically providing in its orders that the carriers involved were free to negotiate divisions to equalize competitive routes between gateways. Thus at the time of the Commission's decisions, the impact of the new divisions on the Rio Grande's revenues was speculative and uncertain, and voluntary negotiation of subdivisions was available. It could be assumed that the actual reduction in the Rio Grande's revenues might turn out to be no greater than that of the other Mountain-Pacific carriers. In these circumstances, the Commission was not required to rearrange the foundations of a decision that had been reached after long years of proceedings and affected 300 carriers, nor was it required to embark on new hearings to deal with the Rio Grande's claims.
'To consider the weight of the evidence, or the wisdom of the order entered, is beyond our province. * * * But the way is still open to any carrier to apply to the Commission for modification of the order, if it is believed to operate unjustly in any respect.' 261 U.S., at 204, 43 S.Ct., at 278.
We hold that the Commission's original and supplemental orders are valid, and that the District Court erred in setting them aside. When it entered interlocutory injunctions against these orders, the District Court imposed certain protective conditions. They provided that if the Commission's orders were eventually upheld, they would be deemed effective as of July 1, 1963, and March 30, 1964, respectively, and the various carriers would be required to resettle the interim revenues they received in accordance with the divisions established in the orders. Pending appeal of its final decision to this Court, the District Court stayed execution of its judgment permanently setting aside the Commission's order and remanding the case to the Commission; with the consent of the parties, it also provided that these protective conditions should be continued in effect. The Commission has required the carriers involved to adopt certain accounting procedures designed to facilitate the eventual implementation of these protective conditions. Since we now uphold the validity of the Commission's orders, it will be necessary for the District Court, with such assistance from the Commission as seems appropriate, to supervise resettlement of revenues in accordance with its protective conditions. The judgment of the District Court is reversed, and the case is remanded for further proceedings consistent with this opinion. It is so ordered.
321 I.C.C. 17, 322 I.C.C. 491.
Certain Southern carriers did participate in some of the proceedings before the Commission in relation to service they perform in Eastern Territory. And the Southern Governors' Conference and the Southeastern Association of Railroad and Utilities Commissioners, parties in pending litigation involving divisions between Southern and Eastern Territory, filed an amicus brief here.
Assume a carriage of 1,000 miles by a Mountain-Pacific road and 500 miles by Midwestern carrier. On a straight mileage basis of dividing the joint rate fare, the Mountain-Pacific carrier would receive two-thirds of the fare and the Midwestern road one-third. Under the system described in the text, the Mountain-Pacific carrier would be credited with 1,500 miles of carriage and the Midwestern line 500. They would accordingly divide the joint fare on a three-fourths-one-fourth basis.
In 1929, the Commission undertook another investigation of the Midwestern-Transcontinental divisions. In 1934, on the basis of a record it termed 'most unsatisfactory,' the Commission concluded that 'we are unable to find that the divisions of the transcontinental rates are unlawful.' Divisions of Freight Rates, 203 I.C.C. 299, 335. In the present proceeding, the Commission stated that the weight to be ascribed its 1934 decision was a question 'of little moment * * * in view of changes which have occurred in the intervening years.' 321 I.C.C. 17, 72.
Interstate Commerce Act, § 15(6), 41 Stat. 486, 49 U.S.C. § 15(6).
The value of the investment base was determined for this purpose by the valuations of railroad property made by the Commission's Bureau of Valuation.
Thus, for carriage between the Buffalo-Pittsburgh area to points on or near the Pacific coast, with interchange at Chicago, the Commission provided that the Eastern carrier should receive 22% of the joint fare, leaving the remaining 78% to be divided between carriers providing service west of Chicago.
Official-Southwestern Divisions, 287 I.C.C. 553.
A few of the 50-mile increments enjoy a factor of 13. See table, n. 13, infra.
Some of the 50-mile increments enjoy factors of 14 or 15. See table, n. 13, infra.
Column Three provides the factor for the Mountain-Pacific haul. Column One provides the Midwestern factor on Midwestern-Transcontinental traffic, and Column Two the Midwestern factor for Eastern-Transcontinental traffic. Column Two also applies to subdivisions of carriage in Midwestern Territory.
To illustrate the operation of the scale, assume a carriage of 1,000 miles in Midwestern Territory by a Midwestern railroad and an additional carriage by a Mountain-Pacific road of another 1,000 miles in Mountain-Pacific Territory. Column One gives the Midwestern carrier a factor of 294, and Column Three assigns the Mountain-Pacific railroad a factor of 323. The sum of the factors is 617. The Midwestern carrier would receive 294/617, or 48% of the joint rate, and the Mountain-Pacific carrier 323/617, or 52% of the rate.
Certain individual contentions were also made by the Wabash Railroad on petition for reconsideration before the Commission, but they are no longer part of the issues in these cases (hereafter referred to as this case).
The nonsettling Midwestern railroads include the eight appellants in No. 8, the Chicago & North Western, the Chicago Great Western, the Chicago, Milwaukee, St. Paul & Pacific, the Green Bay and Western, the Gulf, Mobile & Ohio, the Illinois Central, the Missouri Pacific, and the Soo Line, and 45 of their short-line connections.
Also involved are subdivisions in Midwestern Territory between the Midwestern appellants and the settling Midwestern roads. Furthermore, five of the Midwestern appellants operate in a small part of Eastern Territory, comprising southeastern Illinois and a few areas in Indiana. The Eastern divisions are applicable to some of these operations, but the only active issue between the appellants and the Mountain-Pacific roads relating to the divisions is a 15% minimum division prescribed by the Commission and discussed in Part V of this opinion.
Beaumont, S.L. & W.R. Co. v. United States, 282 U.S. 74, 51 S.Ct. 1, 75 L.Ed. 221; Baltimore & O.R. Co. v. United States, 298 U.S. 349, 56 S.Ct. 797, 80 L.Ed. 1209; Boston & Maine R. Co. v. United States, 371 U.S. 26, 83 S.Ct. 117, 9 L.Ed.2d 95, affirming D.., 208 F.Supp. 661.
E.g., Southwestern-Official Divisions, 234 I.C.C. 135; Divisions of Rates, Official and Southern Territories, 234 I.C.C. 175; Official Western Trunk Line Divisions, 269 I.C.C. 765; Official-Southern Divisions, 287 I.C.C. 497; Official-South-western Divisions, 287 I.C.C. 553, 289 I.C.C. 11; Official-Southern Divisions, 325 I.C.C. 1.
We cannot accept the notion that the Administrative Procedure Act, 60 Stat. 237, as amended, 5 U.S.C. §§ 551—559 (1964 ed. Supp. II), overruled these established precedents and imposed a requirement of individual findings upon the Commission.
For example, in Official-Southern Divisions, 325 I.C.C. 1, 449, the Commission undertook separate consideration and prescribed special divisions for the Norfolk Southern Railroad after that carrier had disassociated itself from its geographical group and presented evidence on an individual basis.
The Eastern divisions do apply to some service by five of the Midwestern appellants in a small part of Eastern Territory, but the only active issue with regard to these divisions is whether the Commission's minimum 15% divisions are justified by the evidence on cost. See n. 17, supra.
As the Court observed in ICC v. Hoboken Manufacturers' R. Co., 320 U.S. 368, 381, 64 S.Ct. 159, 166, 88 L.Ed. 107, 'The prescription of divisions where carriers are unable to agree is not a mere partition of property. It is one aspect of the general rate policy which Congress has directed the Commission to establish and administer in the public interest.' See also the New England Divisions Case, 261 U.S. 184, 195, 43 S.Ct. 270, 275, 67 L.Ed. 605.
E.g., New England Divisions, 66 I.C.C. 196, 202; Alabama & Mississippi R. Co. v. A., T. & S.F.R. Co., 95 I.C.C. 385, 402 403; Divisions of Freight Rates, 148 I.C.C. 457, 476; Atlantic Coast Line R. Co. v. Arcade & A.R. Co., 194 I.C.C. 729, 752—755, 198 I.C.C. 375, 382—384; Divisions of Freight Rates, 203 I.C.C. 299, 328, 342; Southwestern-Official Divisions, 216 I.C.C. 687, 701—702, 739; Southwestern-Official Divisions, 234 I.C.C. 135, 146, 148; Official-Southern Divisions, 287 I.C.C. 497, 503—504; Official-Southwestern Divisions, 287 I.C.C. 553, 564, 289 I.C.C. 11, 12.
Beaumont, S.L. & W.R. Co. v. United States, 282 U.S. 74, 51 S.Ct. 1, 75 L.Ed. 221; Baltimore & O.R. Co. v. United States, 298 U.S. 349, 56 S.Ct. 797, 80 L.Ed. 1209; Boston & Maine R. Co. v. United States, 371 U.S. 26, 83 S.Ct. 117, 9 L.Ed.2d 95, affirming D.C., 208 F.Supp. 661. Cf. State of New York v. United States, 331 U.S. 284, 329, 347—349, 67 S.Ct. 1207, 1231, 1240 1241, 91 L.Ed. 1492.
Chicago, M., St. P. & P.R. Co. v. State of Illinois, 355 U.S. 300, 78 S.Ct. 304, 2 L.Ed.2d 292, relied upon by the appellees, is not apposite. There the Court upheld the District Court in setting aside an order of the Commission made under § 13(4) of the Interstate Commerce Act, 24 Stat. 383, as amended, 49 U.S.C. § 13(4). The Commission had ordered increases in fares on an intrastate passenger run made by the Milwaukee Road, on the ground that existing fares did not cover operating and indirect costs and thus constituted an 'undue, unreasonable, or unjust discrimination' against the Milwaukee Road's interstate operations. The Court held that the Commission erred in comparing the costs and revenues of the particular intrastate service involved instead of all the Milwaukee Road's intrastate operations in Illinois taken together. In a footnote, the Court also stated that it agreed with the District Court's holding that the Commission had not satisfactorily explained how it derived the figure of $77,000 as the commuter service's proper share of indirect costs. 355 U.S., at 309—310, n. 8, 78 S.Ct., at 309—310. It did not hold that in any consideration of revenue need the Commission must make findings in precise dollar amount, but that when it does make precise dollar findings as the basis for raising intrastate fares, it must explain how they were derived.
Moreover, different issues are involved in an intrastate fare case and a rate divisions case, and in the former context this Court has noted that the Commission's exercise of its § 13(4) power must be scrutinized 'with suitable regard to the principle that whenever the federal power is exerted within what would otherwise be the domain of state power, the justification of the exercise of the federal power must clearly appear.' State of Florida v. United States, 282 U.S. 14, 211—212, 51 S.Ct. 119, 124, 75 L.Ed. 291. See also Pub. Service Comm. of Utah v. United States, 356 U.S. 421, 425—426, 78 S.Ct. 796, 798—799, 2 L.Ed.2d 886.
Divisions of Freight Rates, 148 I.C.C. 457, 474—475; Atlantic Coast Line R. Co. v. Arcade & A.R. Co., 194 I.C.C. 729, 753, 755; Southwestern-Official Divisions, 216 I.C.C. 687, 698, 708; Florida East Coast R. Co. v. Atlantic Coast Line R. Co., 235 I.C.C. 211, 236—237; Official Western Trunk Line Divisions, 269 I.C.C. 765, 772; Gardner v. Akron, C. & Y.R. Co., 272 I.C.C. 529, 573—577.
E.g., Increased Freight Rates, 1948, 276 I.C.C. 9, 35. See also King v. United States, 344 U.S. 254, 263—264, 73 S.Ct. 259, 264—265, 97 L.Ed. 301.
Also, when as little as 50% of the traffic on a branch line was in some way related to interterritorial service, the Mountain-Pacific study charged 100% of the expenses of the branch to the cost of the latter service. The Commission's rejection of this technique was not challenged in the District Court.
Official-Southern Divisions, 325 I.C.C. 1, 449. The parties in that case specifically requested a cost-constructed scale.
See Beaumont, S.L. & W.R. Co. v. United States, D.C., 36 F.2d 789, 799. This Court has never suggested that there was legal infirmity in divisional scales constructed on a basis similar to that employed by the Commission in this case. Beaumont, S.L. & W.R. Co. v. United States, 282 U.S. 74, 51 S.Ct. 1, 75 L.Ed. 221; Baltimore & O.R. Co. v. United States, 298 U.S. 349, 56 S.Ct. 797, 80 L.Ed. 1209; Boston & Maine R. Co. v. United States, 371 U.S. 26, 83 S.Ct. 117, 9 L.Ed.2d 95, affirming D.C., 208 F.Supp. 661.
Georgia Public Service Comm. v. United States, 283 U.S. 765, 775, 51 S.Ct. 619, 623, 75 L.Ed. 1397. See also Virginian R. Co. v. United States, 272 U.S. 658, 665—666, 47 S.Ct. 222, 225 226, 71 L.Ed. 463.
See nn. 26 and 27, supra, and accompanying text.

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