Source: https://supreme.justia.com/cases/federal/us/298/349/
Timestamp: 2019-04-26 16:11:17+00:00

Document:
1. The function of the Interstate Commerce Commission, in prescribing divisions of joint rates under § 15(6) of the Interstate Commerce Act, is a legislative function. P. 298 U. S. 356.
2. Exertion of the power of the Commission in that regard is conditioned upon its finding, after a full hearing, that the divisions in force do not, or in the future will not, comply with the standards specified by § 1(4). Id.
3. In proceedings to determine and prescribe divisions, the Commission is governed by §§ 1(4), 15(6), and 15a(2) of the Act; it is not required or authorized to investigate or determine whether the joint rates are reasonable or confiscatory; its duty is to make the divisions fair, and this does not depend upon the level of the rates or the amounts of revenue to be divided. P. 298 U. S. 357.
4. When made in accordance with the Act, the Commission's orders prescribing divisions are equivalent to Acts of Congress requiring the carriers to serve for the amounts so specified. Id.
5. An order of the Commission prescribing divisions, or continuing them in force, may be declared void and its enforcement permanently enjoined at the suit of a carrier whose share of the joint rate proves to be noncompensatory, even though the joint rate itself be not confiscatory. Id.
6. An order of the Commission denying relief to a carrier complaining under § 15(6) of the Act of unjust and inequitable divisions of joint rates operates to require service under them, and, though negative in form, is in effect affirmative. P. 298 U. S. 358.
7. An order of the Commission sustaining divisions of joint rates as just, reasonable, and equitable under § 15(6) of the Act is not arbitrary and in excess of the Commission's power because based in part on the financial needs of the carriers. Id.
attributable to all the operations of the railroad properties of the carriers. P. 298 U. S. 360.
9. A report and order of the Interstate Commerce Commission from which some of the members dissent has the same legal effect as if supported by all. P. 298 U. S. 361.
10. Findings of the Commission in fixing divisions under § 15(6) of the Act and its determination of the significance of the particular facts found held conclusive though too much weight was given to the financial needs of carriers. P. 298 U. S. 362.
11. Where the application of carriers to the Interstate Commerce Commission for just, reasonable, and equitable divisions of joint rates under § 15(6) of the Act raised no question of confiscation, held that the findings in its report could not be construed as addressed to that issue. P. 298 U. S. 363.
12. Denial by the Interstate Commerce Commission of a petition for rehearing of an order sustaining divisions of joint rates, the petition raising for the first time the issue of confiscation, held to amount to a command by the Commission that, notwithstanding their invocation of constitutional protection, the petitioning carriers must make the adjustment ordered, involving the payment of enormous sums and the use of their property to serve the public for the compensation specified in the order. P. 298 U. S. 363.
13. Upon the question whether the divisions of joint rates prescribed by the Interstate Commerce Commission constitute just compensation within the meaning of the Fifth Amendment, the findings of the Commission could not constitutionally be made conclusive. The District Court may receive evidence in addition to what was before the Commission and weigh all the evidence and make its own findings in deciding the constitutional question. St. Joseph Stock Yards Co. v. United States, ante p. 298 U. S. 38. P. 298 U. S. 364.
14. A carrier petitioning the Commission for just, reasonable, and equitable divisions of joint rates -- the reasonableness of the rates themselves not being in question -- is not obliged to raise in advance the question whether the existing divisions are confiscatory. Held that, in this case, the complaining carriers who sought in vain, by petition for rehearing, to have the Commission inquire into the alleged confiscatory results of its order were entitled to seek judicial relief. P. 298 U. S. 369.
15. Evidence held insufficient to prove with the requisite certainty that the divisions of joint rates on transportation of citrus fruit have proved or will prove to be confiscatory. P. 298 U. S. 372.
Appeal from a decree of the District Court of three judges which dismissed a bill to enjoin the enforcement of an order of the Interstate Commerce Commission determining divisions of joint rates on transportation of citrus fruit.
The history and structure of the joint rates shed light on questions to be decided. June 25, 1908, the Commission found the rates, called "gathering rates," from places of shipment in Florida to junctions in the northern part of that state reasonable, but that the charges for transportation from the junctions to the north were unreasonable.
In 1915, the Commission allowed the carriers in official territory a general rate increase of 5 percent, [Footnote 11] and, in 1917, granted an additional 15 percent. [Footnote 12] These increases were applicable generally to interterritorial hauls. The specifics for northern lines were not advanced. In 1918, while the carriers were under federal control, the director general raised rates 25 percent. The divisions to the southern and northern lines were increased by that ratio. In 1920, after the railroads were returned to their owners, the Commission granted to carriers in the southern group a general rate increase of 25 percent, and to those in the eastern group, which included the northern lines here involved, an advance of 40 percent. It also authorized charges for interterritorial hauls to be raised by 33 1/3 percent. [Footnote 13] While that was enough to increase the southern carriers' shares by 25 percent and those of the northern lines by 40 percent in harmony with the respective rate increases, each group of carriers received divisions raised by 33 1/3 percent. The northern lines emphasize the fact that, if their divisions had kept step with rates in that territory, they would have been increased four times, whereas, in fact, their divisions did not share at all in either of the first two advances, and only partially in the fourth -- i.e., 33 1/3 instead of 40 percent.
of divisions of rates to trunk line and New England territory. [Footnote 17] Thus, the issue concerning divisions of citrus fruit rates from Florida to destinations in official territory was segregated from the broader controversy. The order here assailed assigns to appellants divisions yielding more than did those accepted by them for a long time prior to the taking effect of the rate order of July 10, 1928.
There was before the Commission no question as to the validity of the joint rates. There was no claim that they were not sufficient to cover "out-of-pocket costs" -- i.e., the amount by which performance of the service covered by the rates caused operating expenses and taxes to be higher than otherwise they would have been. Nor was it suggested that they were confiscatory -- i.e., not sufficient to cover operating expenses and taxes justly apportionable to the traffic plus an amount reasonably sufficient in the circumstances to constitute just compensation for the use of the carriers' property in that service. The division of presumably reasonable rates was the only problem before the Commission. Neither complaint alleged that existing divisions were not more than sufficient to cover the out-of-pocket costs, or that they were confiscatory.
"to establish just, reasonable, and equitable divisions thereof as between the carriers . . . participating therein which shall not unduly prefer or prejudice any of such participating carriers."
the carriers may, by suit in equity, have the order prescribing, or requiring to be kept in force, the challenged divisions adjudged void, and its enforcement permanently enjoined. [Footnote 21] Section 15(6) requires the Commission, on complaint of any participating carrier, to determine whether existing divisions are just, reasonable, and equitable, and, if not, to prescribe others that do comply with the law. Its denial of relief from existing divisions operates to direct service under them. Though negative in form, the order of denial is affirmative in effect. In some circumstances, carriers may accept rates or divisions that do not yield enough to cover operating expenses and taxes that are fairly apportionable to the service plus a reasonable return for the use of their railroads. If revenues yielded exceed the amounts by which operating expenses are increased on account of the service covered by such charges, then legitimately the carriers' net earnings may thus be enhanced. When conditions permit, such rates or divisions may be established and kept in force without detriment to competing carriers, shippers, other transportation, or the public. Just as an owner may sell his property for less than the amount he would be entitled to have upon expropriation, so may carriers, conditions warranting it, render service for less than, by exertion of sovereign power, they could be compelled to accept.
"because the commission erroneously subordinated all matters which, under § 15(6) . . . , it is required to consider to the element of southern lines' supposed 'financial need.'"
valid, its order may be annulled if shown to rest on a misconstruction of the Act or upon inadequate or unsupported findings of fact. [Footnote 22] The Commission alone is authorized to decide upon weight of evidence or significance of facts. There is no single test by which "just," "reasonable," or "equitable" divisions may be ascertained; no fact or group of facts may be used generally as a measure by which to determine what division will conform to these standards. Considerations that reasonably guide to decision in one case may rightly be deemed to have little or no bearing in other cases. Error as to the weight to be given financial needs, operating costs, or other material facts is not a misconstruction of the Act.
to ascertain the weight assigned to any fact or argument in prescribing the divisions. We find no support for appellants' claim.
2. Appellants also maintain that the order is in excess of power granted by the act because, as they assert, the Commission considered rates of return from the carriers' entire operations on all their railroad property, instead of fair return from transportation of citrus fruit on the use fairly attributable to that service.
"shall give due consideration, among other things, to . . . the amount of revenue required to pay their respective operating expenses, taxes, and a fair return on their railway property held for and used in the service of transportation."
Their contention assumes and depends upon a construction of the quoted clause that would limit consideration of the return to services covered by the divisions under consideration and prohibit taking into account returns from all service. But that is not the meaning of the clause. The language "property held for and used in the service of transportation" is broad enough to include all carrier property. It requires no discussion to demonstrate that § 15(6) authorizes the Commission to take into account and give due weight to revenues from all transportation service, the operating expenses and taxes chargeable to the same and the amounts available as compensation for the use of all carrier property. And unquestionably the paragraph also empowers the Commission to take into account the revenues, expenses, taxes, and returns attributable to the service covered by the divisions under consideration. The record shows that the Commission received and considered evidence in relation to both these matters of fact.
For a haul of 600 miles, the northern factor is 87 and the southern 161. The latter is 85 percent higher than the former. The average hauls are about 825 miles in the south and 375 miles in the north. For these distances, the factors are 194 for the south and 60 for the north, or O.235 per mile for the longer haul in the south and O.160 per mile for the shorter haul in the north. The advantage per mile is 47 percent for the south. Taking into consideration the respective lengths of haul and the fact that divisions, like rates, should decrease per mile as the length of haul increases, this 47 percent checks well within the 85 percent in the first test.
For the average southern haul of 825 miles, the southern factor is 94 percent of the corresponding first-class rate, whereas the northern factor is 62.5 percent. Yet the southern class rates average more than 30 percent higher than the eastern class rates, and the Commission has several times found that this difference is not fully justified by transportation conditions.
considerations were not entitled to much weight. While financial need is important, the report and order of the Commission gave it too much weight.
The wide difference of opinion among the members may suggest doubt as to some basic findings of fact, but it gives no support to appellants' claim that the Commission acted arbitrarily or in excess of powers granted by the Act. The legal effect of the challenged report and order is the same as if supported by all members of the Commission. [Footnote 24] Although it may be plain that, if considered without regard to the facts other than relative transportation and costs of the service, the divisions would seem extremely favorable to the southern lines, the Commission's findings based on evidence and its determination as to the significance of pertinent facts found are conclusive. Appellants' contention cannot be sustained.
3. Before taking up appellants' claim of confiscation, some preliminary questions require consideration.
There is no statute that can be held to limit as suggested trial of an issue of confiscation. No question as to compensation in the constitutional sense was raised by the complaints to the Commission. The issues there concerned only the fairness of divisions. Prior to the taking effect of the order, appellants filed a petition for rehearing in which they claimed that its enforcement would confiscate their property; they then made substantially the same contentions as they make in this suit, and sought opportunity to support them by evidence in order to obtain the Commission's findings of fact and decision upon the question of confiscation. But the Commission denied their application. That denial of hearing amounted to a command of the Commission that, notwithstanding their petition to it invoking constitutional protection, appellants must make the specified adjustment involving the payment of enormous sums, and use their property to serve the public for the compensation specified in the order. As the carriers' application to the Commission for just, reasonable, and equitable divisions under § 15(6) raised no question of confiscation, its findings in the report may not be construed as addressed to that issue.
in substance and effect, of the property itself, without due process of law, and in violation of the constitution of the United States."
"By this legislation, Congress seems to have assumed the right to determine what shall be the measure of compensation. But this is a judicial, and not a legislative, question. The legislature may determine what private property is needed for public purposes; that is a question of a political and legislative character. But when the taking has been ordered, then the question of compensation is judicial. It does not rest with the public, taking the property, through Congress or the legislature, its representative, to say what compensation shall be paid, or even what shall be the rule of compensation. The Constitution has declared that just compensation shall be paid, and the ascertainment of that is a judicial inquiry."
new or strange in this. It has always been a part of the judicial function to determine whether the act of one party (whether that party be a single individual, an organized body, or the public as a whole) operates to divest the other party of any rights of person or property. In every constitution is the guaranty against the taking of private property for public purposes without just compensation. The equal protection of the laws, which, by the Fourteenth Amendment, no state can deny to the individual, forbids legislation, in whatever form it may be enacted, by which the property of one individual is, without compensation, wrested from him for the benefit of another, or of the public. This, as has been often observed, is a government of law, and not a government of men, and it must never be forgotten that, under such a government, with its constitutional limitations and guaranties, the forms of law and the machinery of government, with all their reach and power, must, in their actual workings, stop on the hither side of the unnecessary and uncompensated taking or destruction of any private property, legally acquired and legally held."
that 'just compensation' shall be paid is comprehensive, and includes all elements, and no specific command to include interest is necessary when interest or its equivalent is a part of such compensation."
"The ascertainment of compensation is a judicial function, and no power exists in any other department of the government to declare what the compensation shall be, or to prescribe any binding rule in that regard."
See Davis v. Newton Coal Co., 267 U. S. 292, 267 U. S. 301; Phelps v. United States, 274 U. S. 341.
"When the property itself is taken by the exertion of the power of eminent domain, just compensation is its value at the time of the taking. So where, by legislation prescribing rates or charges, the use of the property is taken, just compensation assured by these constitutional provisions is a reasonable rate of return upon that value."
or legislative finding. Legislative declaration or finding is necessarily subject to independent judicial review upon the facts and the law by courts of competent jurisdiction to the end that the Constitution as the supreme law of the land may be maintained. Nor can the legislature escape the constitutional limitation by authorizing its agent to make findings that the agent has kept within that limitation. . . . It is said that we can retain judicial authority to examine the weight of evidence when the question concerns the right of personal liberty. But if this be so, it is not because we are privileged to perform our judicial duty in that case, and, for reasons of convenience, to disregard it in others. The principle applies when rights either of person or of property are protected by constitutional restrictions. Under our system, there is no warrant for the view that the judicial power of a competent court can be circumscribed by any legislative arrangement designed to give effect to administrative action going beyond the limits of constitutional authority."
5. Although not suggested by appellees, it is here urged that the lower court was without power to consider the question whether the order is confiscatory. Grounds taken are that appellants did not seasonably raise that issue or present their evidence upon it to the Commission, and that, in respect of divisions, as distinguished from the joint rates to be divided, confiscation can never be the ultimate issue.
But neither group of carriers claimed before the Commission or here asserts that the joint rates are not sufficient to permit nonconfiscatory divisions that are just, reasonable, and equitable within the meaning of § 15(6). By failure to suggest the contrary, they virtually concede them adequate for all purposes. The order prohibits the application of any other divisions, and, unless enjoined, must be given effect according to its terms. It directs adjustment on the prescribed basis on shipments made after November 22, 1930. 144 I.C.C. 603. If that part of the order is carried into effect, the amounts to be paid under it by the northern lines to the southern lines will exceed, as asserted by appellants, $1,200,000.
And the application of the prescribed basis to future shipments will correspondingly reduce northern lines' compensation.
"It is settled that, in determining what the divisions should be, the Commission may, in the public interest, take into consideration the financial needs of a weaker road, and that it may be 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.' [Footnote 30]"
does not disclose the Examiners' recommendations, but states that its conclusions differ somewhat from those proposed by the Examiners. For the reason given in the Commission's objection, upon which the court excluded what the Examiners proposed to the Commission, the appellants would not have been justified in raising the question of confiscation upon the proposed report.
"When the Commission denied the second petition, it already had before it and had considered the proffered evidence in support of the claim of confiscation that appellants desired it to consider, as well as the entire record of the previous hearings, much of the testimony in which consisted of cost calculations and other statistical data offered by the appellants."
in Manufacturers Ry. Co. v. United States, 246 U. S. 457, 246 U. S. 489, and recently expounded in St. Joseph Stock Yards Co. v. United States, ante, p. 298 U. S. 38.
Appellants appropriately invoked judicial power to obtain constitutional protection against the Commission's order. The District Court rightly held them entitled to introduce evidence in addition to that contained in the record before the Commission, and rightly proceeded upon consideration of all the evidence to make findings, and, upon the basis of the facts that it found, to decide upon the constitutional question.
6. As to proof of confiscation.
immediate future will be sufficient to constitute just compensation within the meaning of the Fifth Amendment for the services covered by the divisions.
To warrant reversal insofar as the order directs adjustment and refund, it must clearly appear from the evidence before us that its enforcement, in respect of the period involved, would leave appellants less than enough to cover operating expenses, taxes, and just compensation for the use of their property fairly attributable to the service covered by the divisions. To warrant reversal of the decree in other respects, the evidence must show that the prescribed divisions were, and in the future will be, confiscatory.
Appellees' suggestion that the challenged report and order come to this Court upon concurrent findings of the Commission and District Court is without force. Denial, without more, of the second petition for rehearing involved no finding of fact. It was merely a refusal to pass upon the question of confiscation then for the first time presented. And, as the Commission in prescribing divisions acted legislatively, and not judicially, the rule, that, where two courts have reached the same conclusion on a question of fact, it will be accepted here unless clearly erroneous does not apply.
Appellants' method of calculation. -- For each carrier, figure system costs per car mile thus: ascertain from its reports to the Commission operating expenses and taxes; apportion total between freight and passenger according to formula prescribed by the Commission; from freight expense, deduct cost of car repairs, depreciation, and retirements; divide remainder by total freight car miles, and to the quotient add 2 cents per mile paid for use and maintenance of refrigerator cars used to haul citrus fruit. The result is taken to represent the cost per car mile of transportation of that freight. It depends upon the assumption that citrus fruit car mile cost is at least as high as the average of system car mile cost.
To ascertain property value apportionable to the service covered by the prescribed divisions: divide investment in road and equipment as reported to Commission on the basis of freight operating expenses -- less cost of repair, depreciation, and retirement of freight cars -- to total operating expenses, and take such proportion of value so assigned to freight as citrus fruit car miles are to total freight car miles. Citrus fruit net revenues divided by value assigned to that traffic gives rate of return.
In the same season 4,662 carloads of citrus fruit from Florida were hauled by southern carriers to other gateways named in the order, and by northern lines thence to destinations in central territory. Calculations on the same basis indicate revenues $285,064.02, estimated expenses $232,456.87, surplus $52,607.15. Appellants say of this surplus $39,644.92 is accounted for by 1,253 cars, hauled a short distance by northern carriers, affected by minimum provisions of the order, and that the cost assigned to them is understated.
England Territory, as settled, amounted to about $285,000 less than if made on mileage prorate. Divisions on basis prescribed by the order would have been about $600,000 less than if made on mileage prorate. The prescribed divisions on shipments to New York and Philadelphia are more than 94 percent of local rates from the south to Richmond and are less than 35 percent of local rates north from Richmond. Southern weighted average hauls calculated on short line distances were 810 miles and the northern 358 miles. Contrary to the established general rule, the order prescribes higher divisions per mile for the longer than for the shorter haul. The average earning per loaded car mile south was 31.4¢ and north 21¢.
Appellants claim that the cost per citrus fruit car mile is greater than the average of all. To support that contention, they emphasize evidence introduced to support these facts: refrigerator cars used are very much heavier than the cars used to haul dead freight; additional inspection service is required, hauling over road and handling in terminals is more expeditious than that given to ordinary cars. There are required at destination relatively very expensive produce terminals. Diversions and reconsignments are more frequent. Expedited service requires at intermediate and final terminals, more employees for inspection, repairing, and keeping records than otherwise would be necessary, extra engines and crews are required promptly to classify, to switch to icehouses, to effect reconsignments, to make up trains and to haul them. The relatively high percentage of empty car movement makes it hard to balance movement in both directions, and frequently requires operation of locomotives over the road without cars.
given a specialized, expedited service which is undoubtedly more expensive than the ordinary run of freight. They refer to the testimony of experts who expressed opinion to the effect that the cost of transporting citrus fruit was greater than the average cost of handling all freight, to evidence tending to show that physical conditions, such as bridges, grades, tunnels, complex terminals affecting operating conditions on those portions of northern lines used for the transportation of relatively large amounts of citrus fruit are more adverse than on their respective systems as a whole.
They draw comparisons indicating 10.56 cents to be the Baltimore & Ohio system average cost per car mile as against 14.61 cents on the operating division over part of which most of its citrus fruit is hauled; correspondingly 10.95 cents appears to be the Pennsylvania system average as against 11.59 cents for its Eastern Region and New York Zone over a part of which most of its citrus fruit is hauled. [Footnote 34] Basing the statement on mere opinion of an expert, they say that, on hauls over the Pennsylvania line through Baltimore and Philadelphia to New York, the transportation expense alone was 14.2 cents per car-mile.
rate and not with just compensation within the meaning of the Fifth Amendment.
The Commission's statement to the effect that citrus fruit transportation service "is undoubtedly more expensive than the ordinary run of freight" is not entitled to any weight, for it does not appear that the statement referred to cost per car mile. For aught that appears, some other unit may have been meant. And, as they lack disclosed definite bases of established fact, no weight may be given to cited opinions of appellants' expert witnesses to the effect that citrus fruit car mile cost is higher than system average.
Nor is there any force in appellees' suggestion to the effect that the evidence on which appellants seek to prove the prescribed divisions confiscatory would similarly condemn divisions that they accepted for a long time prior to the reduction of the joint rates November 9, 1928. As shown above, carriers, advantageously to themselves and the public, may and sometimes do apply rates and divisions that are lower than they could be compelled by law to accept.
22, 1930, and also as near as possible to the time of trial in the district court. The order prescribing the challenged division has been in effect for a long time, and, in the absence of proof clearly showing that, on the basis of present and prospective conditions, it is confiscatory, its enforcement ought not to be enjoined.
Appellants' evidence was addressed primarily to the question whether, as to citrus fruit traffic moving through the Richmond gateway, the prescribed divisions were confiscatory. In determining whether, as to any carrier, that evidence was sufficient, appellants' estimated citrus fruit car mile cost is of prime importance. A slight variation in that figure is sufficient to change the balance from one side of the account to the other; to change surplus revenue to deficit. If, since the order took effect, that cost has been, or in the immediate future will be, substantially less than the contemporaneous system car mile cost, appellants' proof is not sufficient to show confiscation. It is very difficult to attain the high degree of certainty in respect of this vital factor that is obviously necessary to make dependable proof.
Operating expenses are incurred in innumerable services, few of which, if any, are the same in respect of car mile cost as is the transportation of citrus fruit here in question. There are many elements that affect system average that have no relation to citrus fruit car-mile costs. It would seem that, without specific knowledge of details of operation affecting cost during representative periods, no dependable opinion could be reached as to the cost relationship on which the appellants' case depends.
claim. A very small part of the Pennsylvania system mileage is used to haul substantial quantities of Florida citrus fruit The principal volume moves over the lines north from Potomac Yards. Ordinarily, density of such traffic would make for lower car-mile cost. Appellants claim that there, it is relatively high, but the evidence fails adequately to support that contention. Appellants' failure to introduce evidence based on observations or tests made contemporaneously with transportation in representative periods subsequent to the taking effect of the order and near to the time of trial strongly suggests that the figures on which appellants' calculations are based could not be supported, and leaves in grave doubt the validity of their proof.
We conclude that the evidence is not sufficient to establish with requisite certainty what has been or will be the cost of the service covered by the prescribed divisions, and that the District Court rightly dismissed the suit.
28 U.S.C. §§ 41(28), 44-46.
194 I.C.C. 729; 198 I.C.C. 375.
Official classification territory, generally speaking, includes territory east of the Mississippi river and north of the Ohio and Potomac rivers, including New England, portions of Virginia and West Virginia, and certain destinations in Missouri, Iowa and Wisconsin. See map, 31 I.C.C. 350.
"Official territory is subdivided into three subterritories, which have been recognized in ratemaking for many years. These are New England, lying east of the eastern boundary of New York; trunkline territory, which extends westward from there to a line drawn through Buffalo and Salamanca, N.Y. Warren, Oil City, Pittsburgh, and Washington, Pa., Wheeling, Parkersburg, Charleston, and Gauley, W.Va., these cities being usually referred to as the 'western termini' of the trunklines, and Central Freight Association territory, referred to herein as central territory, lying west of that line."
Eastern Class-Rate Investigation, 164 I.C.C. 314, 322.
The order directed carriers to adjust divisions in accordance with the basis above indicated on shipments which moved subsequent to November 22, 1930.
The Boston & Maine Railroad; the New York Central Railroad Company; Pittsburgh & Lake Erie Railroad Company; the New York, New Haven & Hartford Railroad Company; the Central Railroad Company of New Jersey; Reading Company; Lehigh Valley Railroad Company; the Delaware, Lackawanna & Western ,Railroad Company; the Delaware & Hudson Railroad Corporation; Erie Railroad Company; Pere Marquette Railway Company; Charles M. Thompson, trustee of the Chicago & Eastern Illinois Railway Company; the Chesapeake & Ohio Railway Company.
Atlantic Coast Line Railroad Company; W. R. Kenan, Jr., and S. M. Loftin, receivers of the Florida East Coast Railway Company; Georgia, Southern & Florida Railway Company; L.R. Powell, Jr., and Henry W. Anderson, receivers of the Seaboard Air Line Railway Company; Southern Railway Company; Winston-Salem Southbound Railway Company; Florida, Central & Gulf Railway; Fort Myers Southern Railroad Company; Jacksonville, Gainesville & Gulf Railway; Tampa Southern Railroad Company; Tavares & Gulf Railroad Company; Louisville & Nashville Railroad Company, the Cincinnati, New Orleans & Texas Pacific Railway Company.
Florida Fruit & Vegetable Shippers' Protective Assn. v. A.C.L. R. Co., 14 I.C.C. 476.
The Five Per Cent Case, 31 I.C.C. 351; 32 I.C.C. 325.
The Fifteen Per Cent case, 45 I.C.C. 303.
Ex parte 74, 58 I.C.C. 220, 226.
194 I.C.C. 729 at p. 730.
Terminal R. Assn. v. United States, 266 U. S. 17, 266 U. S. 30. Cf. Prentis v. Atlantic Coast Line Co., 211 U. S. 210, 211 U. S. 226-227; Louisville & Nashville R. Co. v. Garrett, 231 U. S. 298, 231 U. S. 305-307.
New England Divisions Case, 261 U. S. 184, 261 U. S. 195, 261 U. S. 204; United States v. Abilene & Southern Ry. Co., 265 U. S. 274, 265 U. S. 284-286, 265 U. S. 291; Brimstone R. & C. Co. v. United States, 276 U. S. 104, 276 U. S. 115-117; Beaumont, S.L. & W. R. Co. v. United States, 282 U. S. 74, 282 U. S. 82, 282 U. S. 89.
New England Divisions Case, 261 U. S. 184, 261 U. S. 195; Dayton-Goose Creek Ry. v. United States, 263 U. S. 456, 263 U. S. 477, 263 U. S. 485 et seq. United States v. Abilene & Southern Ry. Co., 265 U. S. 274, 265 U. S. 285; Beaumont, S.L. & W. Ry. Co. v. United States, 282 U. S. 74, 282 U. S. 88.
Judicial Code, § 24(28), 28 U.S.C. § 41(28). Alton R. Co. v. United States, 287 U. S. 229; United States v. New River Co., 265 U. S. 533, 265 U. S. 540. Cf. Chicago Junction Case, 264 U. S. 258, 264 U. S. 263.
Interstate Commerce Comm'n v. Louisville & Nashville R. Co., 227 U. S. 88, 227 U. S. 92; Manufacturers' Ry. Co. v. United States, 246 U. S. 457, 246 U. S. 481; Chicago Junction Case, 264 U. S. 258, 264 U. S. 265; United States v. Abilene & Southern Ry. Co., 265 U. S. 274, 265 U. S. 291; Brimstone R. & C. Co. v. United States, 276 U. S. 104, 276 U. S. 116-117; St. Louis & O'Fallon Ry. Co. v. United States, 279 U. S. 461, 279 U. S. 487; Florida v. United States, 282 U. S. 194, 282 U. S. 214-215; United States v. Baltimore & O. R. Co., 293 U. S. 454, 293 U. S. 462 et seq.; Atchison, T. & S.F. Ry. Co. v. United States, 295 U. S. 193, 295 U. S. 202.
Meeker & Co. v. Lehigh Valley R. Co., 236 U. S. 412, 236 U. S. 427; Florida v. United States, 282 U. S. 194, 282 U. S. 215; United States v. Baltimore & O. R. Co., 293 U. S. 454, 293 U. S. 464. Cf. Beaumont, S.L. & W. Ry. v. United States, 282 U. S. 74, 282 U. S. 86.
Boyle v. Zacharie, 6 Pet. 348; Williams v. Eggleston, 170 U. S. 304, 170 U. S. 311; Matthews v. Clark, 105 S.C. 13, 19, 89 S.E. 471; L.D. Willcutt & Sons Co. v. Driscoll, 200 Mass. 110, 115, 85 N.E. 897; Feige v. Michigan Central R. Co., 62 Mich. 1, 4, 28 N.W. 685; Lombard v. Lombard, 57 Miss. 171, 174. Cf. 23 U. S. Peyton, 10 Wheat. 454, 23 U. S. 461; Woodruff v. Parham, 8 Wall. 123, 75 U. S. 139.
Denver Union Stock Yard Co. v. United States, 57 F.2d 735, 739; St. Joseph Stock Yards Co. v. United States, 58 F.2d 290, 295; Morgan v. United States, 8 F.Supp. 766, 769; Union Stock Yards Co. of Omaha v. United States, 9 F.Supp. 864, 875; St. Joseph Stock Yards Co. v. United States, 11 F.Supp. 322, 326; American Commission Co. v. United States, 11 F.Supp. 965, 969.
Cf. King Mfg. Co. v. Augusta, 277 U. S. 100, 277 U. S. 102.
Murray's Lessee v. Hoboken Land & Improvement Co., 18 How. 272, 59 U. S. 276; St. Joseph Stock Yards Co. v. United States, ante, p. 298 U. S. 38.
Prendergast v. New York Tel. Co., 262 U. S. 43, 262 U. S. 50; Oregon R. & N. Co. v. Fairchild, 224 U. S. 510, 224 U. S. 525. Cf. Chicago, B. & Q. R. Co. v. Osborne, 265 U. S. 14.
Ohio Valley Co. v. Ben Avon Borough, 253 U. S. 287; Bluefield Co. v. Public Service Comm'n, 262 U. S. 679, 262 U. S. 689; Dayton-Goose Creek Ry. Co. v. United States, 263 U. S. 456, 263 U. S. 485-486; Ohio Utilities Co. v. Commission, 267 U. S. 359, 267 U. S. 364; Lehigh Valley R. Co. v. Utility Commissioners, 278 U. S. 24, 278 U. S. 36-41; United Railways v. West, 280 U. S. 234, 280 U. S. 251; Crowell v. Benson, 285 U. S. 22, 285 U. S. 46, 285 U. S. 56, 285 U. S. 60; State Corporation Comm'n v. Wichita Gas Co., 290 U. S. 561, 290 U. S. 569. Cf. Tagg Bros. v. United States, 280 U. S. 420, 280 U. S. 443; Phillips v. Commissioner, 283 U. S. 589, 283 U. S. 600; American Surety Co. v. Baldwin, 287 U. S. 156, 287 U. S. 168.
United States v. Abilene & Southern Ry. Co., 265 U. S. 274, 265 U. S. 284-285, citing 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.
Garfield v. Goldsby, 211 U. S. 249, 211 U. S. 262; Jones v. Securities & Exchange Comm'n, ante, p. 298 U. S. 1.
Banton v. Belt Line Ry., 268 U. S. 413, 268 U. S. 418; Bluefield Co. v. Public Service Comm'n, 262 U. S. 679, 262 U. S. 693; Galveston Elec. Co. v. Galveston, 258 U. S. 388, 258 U. S. 400; Smith v. Illinois Bell Tel. Co., 282 U. S. 133, 282 U. S. 162.
Kansas City S. Ry. Co. v. Albers Commission Co., 223 U. S. 573, 223 U. S. 591-594; Cedar Rapids Gas Light Co. v. Cedar Rapids, 223 U. S. 655, 223 U. S. 668-669; Oregon R. & N. Co. v. Fairchild, 224 U. S. 510, 224 U. S. 528; Union Pacific R. Co. v. Public Service Comm'n, 248 U. S. 67, 248 U. S. 69; Los Angeles Gas Corp. v. Railroad Comm'n, 289 U. S. 287, 289 U. S. 315-316; Norris v. Alabama, 294 U. S. 587, 294 U. S. 589-590; United States v. Idaho, 298 U. S. 105; St. Joseph Stock Yards Co. v. United States, ante, p. 298 U. S. 38.
The Baltimore Division of the Baltimore & Ohio extends from Brunswick, Md. through Washington D.C., and Baltimore to Park Junction (Philadelphia).
The combined Eastern Region and New York Zone (P.R.R. portion) of the Pennsylvania embraces system lines east of Altoona, Pa. and Renovo, Pa. except the Long Island Railroad.
Citing Sloss-Sheffield Steel & Iron Co. v. Louisville & N. R. Co., 30 I.C.C. 597, 602; Sugar from Key West, 112 I.C.C. 347, 348; Georgia Public Service Commission v. Atlantic Coast Line R. Co., 186 I.C.C. 157, 187.
Citing Atlantic Coast Line v. Florida, 203 U. S. 256, 203 U. S. 260; Wood v. Vandalia R. Co., 231 U. S. 1, 231 U. S. 6-7.
Florida v. United States, 202 U. S. 1, 202 U. S. 9.
Citing Iron Ore Rate Cases, 41 I.C.C. 181, 281; California Growers' & Shippers' Protective League v. S.P. Co., 129 I.C.C. 25, 52; Georgia Public Service Comm'n v. Atlantic Coast Line R. Co., 186 I.C.C. 157, 183; R. W. Burch, Inc. v. Railway Express Agency, 190 I.C.C. 520, 535; 197 I.C.C. 85.
Northern Pacific Ry. v. North Dakota, 216 U. S. 579, 216 U. S. 580; Knoxville v. Knoxville Water Co., 212 U. S. 1, 212 U. S. 18; Minnesota Rate Cases, 230 U. S. 352, 230 U. S. 466; Missouri Rate Cases, 230 U. S. 474, 230 U. S. 507. Cf. Pacific Gas Co. v. San Francisco, 265 U. S. 403, 265 U. S. 406; McCardle v. Indianapolis Co., 272 U. S. 400, 272 U. S. 416.
Chicago, Milwaukee & St. P. Ry. Co. v. Tompkins, 176 U. S. 167, 176 U. S. 178.
Atchison, T., & S.F. Ry. Co. v. United States, 284 U. S. 248, 284 U. S. 260-261; Los Angeles Gas Corp. v. Railroad Comm'n, 289 U. S. 287, 289 U. S. 311; Great Northern R. Co. v. Weeks, 297 U. S. 135.
question of "confiscation" in this suit. If "confiscation" is threatened, there is ample remedy; but the redress must be sought in a different proceeding.
First. The question on which I differ from the Court is this: where, in a suit to set aside a divisions order under the Urgent Deficiency Act of October 22, 1913, c. 32, 38 Stat. 208, 216, the Court concludes that there was, in entering the order, no error of law or of fact and no irregularity of procedure or abuse of discretion, may it proceed to inquire into a charge, not seasonably made before the Commission, that the divisions order would result in "confiscation" when applied to the through rates prescribed by a rate order then in force, which rate order had been acquiesced in by all participating carriers and was not then under review? In my opinion, the answer should be "no." For, if the charged "confiscation" is due to the alleged inadequacy of the prescribed through rates, the appropriate remedy is to apply to the Commission to revise the rate order. If the charged "confiscation" is due to alleged failure of the Commission to allot to the complaining carriers their fair share of an adequate through rate, they are barred from complaining in this suit, because they failed seasonably to raise, before the Commission, that issue and present there the evidence in support thereof. They could, of course, apply to the Commission to modify the order so as to make it just for the future.
While the Commission may at any time modify or supersede an order, no court has power to set an order aside except for inherent error or procedural irregularity. To hold that this divisions order may be set aside because "confiscation" will result if it is applied in connection with the rate order not under review, and not objected to, would make of that claim a paramount and prerogative right hitherto unknown to the law.
Second. The treatment of the suit as a "confiscation case" has led to serious misconceptions. The term "confiscation"
is appropriately used only in a proceeding for the fixing of rates, where the objection is made that the Commission, in prescribing rates, made them so low that they are not compensatory, and that the government is thereby taking private property for the public without paying compensation. The order under review is not a rate order. It is an order under § 15(6) of the Interstate Commerce Act, which fixes, as between the carriers participating in existing through rates, "just, reasonable, and equitable divisions," but leaves the through rate undisturbed. Ordinarily, divisions of through rates are governed by agreement between the carriers. It is only where they fail to agree that an application is made under that section.
In a proceeding to fix "just, reasonable, and equitable divisions," "confiscation" can never be an ultimate issue. For, as a matter of substantive law, the fact that the share allotted to one is not compensatory is without legal significance. The Commission's task is solely to make a fair division of existing rates. A division, although fair, may conceivably fail to give any of the connecting carriers adequate compensation for the service rendered, because the through rate -- the thing to be divided -- is itself inadequate. Or conceivably the through rate may be so generous that all participants will receive compensatory divisions although, as between themselves, the division itself is unfair. The fact that the share assigned to one is noncompensatory will be of evidential value if accompanied by evidence that some other carrier is receiving better treatment. But, unless it appears that some other carrier was so favored, the noncompensatory character of the division would be entirely immaterial. And, even when relevant, may be of little or no weight because of other considerations.
"among other things, . . . the efficiency with which the carriers concerned are operated, the amount of revenue required to pay their respective operating expenses, taxes, and a fair return on their railway property held for and used in the service of transportation, and the importance to the public of the transportation services of such carriers, and also whether any particular participating carrier is an originating, intermediate, or delivering line, and any other fact or circumstance which would ordinarily, without regard to the mileage haul, entitle one carrier to a greater or less proportion than another carrier of the joint rate, fare, or charge."
Thus, a division may be "just, reasonable and equitable" although it allots to one carrier a noncompensatory share and to another carrier a compensatory share, because it was inefficiency in operation by the former which rendered its share noncompensatory. Or the seemingly preferential treatment of the latter might be justified by the fact that it was the originating carrier, and hence entitled by established transportation practice to the larger share of the through rate.
but change in the through rate would not necessarily render the existing decisions unfair.
Third. The through rates which the Commission was requested to divide in the proceeding under review are those on citrus fruit from Florida to points north of the Potomac and Ohio rivers. These had been prescribed by order entered July 10, 1928, Railroad Commissioners of Florida v. Aberdeen & Rockfish R. Co., 144 I.C.C. 603, and the level of rates thereby prescribed was acquiesced in. That order did not deal with divisions. The divisions governing the Florida citrus fruit traffic had, for many years prior to July 10, 1928, been fixed by agreement. After entry of that order (which reduced the through rates on the average about 67 cents a ton), there developed a controversy as to the divisions. Being unable to agree, all the carriers -- the southern lines by original complaint, the northern lines by cross-complaint -- applied to the Commission under § 15(6) of the Interstate Commerce Act, and asked it to fix the "just, reasonable, and equitable divisions." By order entered July 3, 1933, the Commission did so, Atlantic Coast Line R. Co. v. Arcade & Attica R. Co., 194 I.C.C. 729. It is that divisions order which it is sought to have set aside with a view to having the share of the northern carriers increased at the expense of the southern. Two alleged errors of law charged to the Commission were quickly disposed of by the court as being unsubstantial. Did it commit any error of law or of fact, or was it guilty of an abuse of discretion in respect to the claim of "confiscation"?
of the northern lines followed on April 20, 1931. Hearings began on May 11, 1931, and continued for more than seven months. Briefs were filed before the Examiners. When their proposed report was submitted to the parties, both sides filed exceptions. In the proceedings before the Examiners, there was no claim by the northern lines that the divisions sought by the southern lines would be confiscatory. The Examiners' proposed report did not mention that subject, and there was no claim made that divisions recommended by them would be confiscatory. The case was argued orally before the full Commission on the exceptions to the Examiners' report, and extensive briefs were submitted. There was no claim or suggestion before the Commission that the division sought or proposed would be confiscatory. On July 3, 1933, the Commission entered the order for the divisions which it found to be "just, reasonable, and equitable." There was no reference to the subject of confiscation in the accompanying report, which occupies 34 pages. Atlantic Coast Line R. Co. v. Arcade & Attica R. Co., 194 I.C.C. 729-762.
(b) The northern lines presented a petition requesting that the hearing be reopened for reconsideration on the evidence already introduced and supplemental data called from statistical reports in the Commission's files, which it was agreed should be treated as evidence. On October 9, 1933, the proceedings were reopened as requested to reconsider, upon the evidence originally submitted and that then added, whether there had been an error of judgment in fixing the divisions. There was no claim made in this petition for a rehearing that the divisions which had been prescribed by the order of July 3, 1933, were confiscatory. The Commission discussed in a supplemental report of 13 pages the errors assigned; concluded that the objections were unfounded, and on January 8, 1934, affirmed the divisions prescribed. There was no reference in the supplemental report to the subject of confiscation. Atlantic Coast Line R. Co. v. Arcade & A. R. Co., 198 I.C.C. 375-387.
(c) On April 27, 1934, the northern carriers presented a second petition for a rehearing, and with it presented, as additional evidence, "cost studies." There was no suggestion that these were, in a legal sense, newly discovered evidence; nor was there a contention that they were evidence of a change in economic or traffic conditions which required that the Commission's conclusion should be changed. The main claim was, as in the first petition for rehearing, that the Commission erred in its judgment. But he second petition contained a claim that the divisions awarded to the northern lines were confiscatory. On May 14, 1934, this second petition was denied without opinion.
(d) On May 25, 1934, the northern carriers brought this suit in the federal court for Eastern Virginia to set aside the order of July 3, 1933. The bill sought relief on five grounds. Prominent among them was the claim that this division was confiscatory. At the hearing before the three judges, which began on September 17, 1934, and occupied six days, the plaintiffs introduced in evidence a transcript of the evidence before the Commission on which the order complained of had been entered and confirmed, consisting of 2,054 pages of oral testimony and 358 exhibits. Over objections of the defendants, the plaintiffs were permitted to introduce additional oral evidence, of which the transcript fills 1,066 pages; also, 70 exhibits. On December 31, 1934, the court entered a final decree dismissing the bill. Its unanimous opinion disposes briefly of the objections other than confiscation. To that subject nearly all of the 18-page opinion is devoted. 9 F.Supp. 181-199.
into consideration to the single element of the southern lines' supposed financial needs. (2) That, while purporting to give "due consideration" to a "fair return" on the railway property of the southern lines, the Commission "considered only the rates of return of said Southern lines from the entire operations of such lines, instead of a fair return on Southern lines' property fairly attributable to the service of transporting citrus fruit." (3) That the divisions allowed are confiscatory. On the reargument, confiscation was the only subject discussed, and the opinion of the Court deals mainly with it.
Fourth. Clearly, the Commission did not err either in a ruling of law or a finding of fact as to "confiscation," since it made no ruling of finding on that subject. Was it guilty of an abuse of discretion in refusing to pass upon it? Congress conferred upon the Commission power to grant or deny, in its discretion, a petition for rehearing of a decision. Interstate Commerce Act, § 16a. It may be granted after entry of an order or before, and the case may be reopened to admit additional evidence. The "cost studies" submitted with the second petition for rehearing were not, in a legal sense, newly discovered evidence. There was a belated offering of evidence in support of a belated contention. The purpose was to introduce, at that late day, more evidence bearing upon the question of what would be fair.
or relates to a matter of lesser dignity. No reason has been suggested why that rule should not apply equally to a judicial review by the district courts, and this Court, of the action of the Commission. And no case has been found in which the applicability of the rule to a case like the present has been questioned.
The case at bar is not like Atchison, Topeka & Santa Fe Ry. Co. v. United States, 284 U. S. 248, where the order was set aside because the Commission refused to reopen the case and hear additional evidence. That offered was of changed conditions, important, because every rate order is subject to revision upon changes in conditions, and the change which had occurred since the hearings was catastrophic. To refuse to reopen the hearing under those circumstances was held to be an abuse of discretion. In the case at bar, no controlling change of condition was alleged. There was not even a claim of newly discovered evidence. The Atchison case rests upon its exceptional facts. It is apparently the only instance in which this Court has interfered with the exercise of the Commission's discretion in granting, or refusing, to reopen a hearing. Compare United States v. Northern Pacific R. Co., 288 U. S. 490, 288 U. S. 492 et seq.; Illinois Comm'n v. United States, 292 U. S. 474, 292 U. S. 480-481; St. Joseph Stock Yards Co. v. United States, ante, p. 298 U. S. 38.
specified. . . . They command service, and for that purpose expropriate the use of carriers' property. If, when made, the prescribed divisions are or later shall become less than just compensation, the carriers may not be required to serve therefor. And if, after appropriate effort, they fail to obtain divisions . . . that do constitute just compensation for their services, including the use of their properties, the carriers may, by suit in equity, have the order prescribing, or requiring to be kept in force, the challenged divisions adjudged void and its enforcement permanently enjoined."
"that said complainants, cross-complainants, defendants and respondents, according as they participate in the transportation be, and they are hereby notified and required to cease and desist, on and after November 1, 1933, and thereafter to abstain from asking, demanding, collecting or receiving, divisions of said joint rates upon other bases than those prescribed."
The only command to serve is contained in the rate-order not here under review.
of the carriers, and thus affect indirectly the adequacy of existing rates, but they are in no sense rate orders.
Prominent among determinations judicial in their nature are those under § 3 whether allowances made to one shipper for the use of his facilities, or for services, are, as between him and competing shippers, fair, or whether they constitute preferential treatment; determination under paragraph 15 of § 1, of the fair amount payable by one carrier to another for the use of terminals or equipment or for services rendered; determinations under paragraph 12 of § 1, whether distribution made of coal cars among shippers is just and reasonable; determinations under the Valuation Act of March 1, 1913, c. 92, 37 Stat. 701, of the fair value of railroad properties. Among the administrative functions is that of determining under the Safety Appliance and Boiler Inspection Acts what changes in equipment are required in order to insure safety; under paragraphs 4 and 9 of § 1, what additional facilities and equipment are required to insure adequate transportation service; under paragraphs 2 to 10 of § 1, whether a carrier should be permitted to issue securities or assume financial obligations, and, if so, on what terms; under paragraphs 18 to 22, whether a carrier should be permitted to construct, acquire, or control an additional line, or to abandon the whole, or any part of, one existing.
or judicial order which inherently was, and remained, free of error.
Sixth. The question discussed is not one of merely procedural importance. To permit inquiry into the question of confiscation under the procedure here pursued might affect seriously the substantive rights of other participating carriers. As the divisions order merely allots the share of each in existing rates, any addition to the share given to one must necessarily be taken from the share of others. For aught that appears, the share of the southern carriers received, or insisted upon, is no more than a compensatory return. If the Court had in this case concluded that the share allotted to the northern carriers was noncompensatory, and pursuant to its action their share were increased, the result might be to make the share of the southern carriers noncompensatory.
In passing upon the issue of confiscation, the Court discussed the question whether the trial court properly admitted evidence which had not been introduced before the Commission, and decided that the evidence was admissible. I do not agree with the Court's conclusion on that subject. But, as the issue of "confiscation" was, in my opinion, not properly before the trial court, I refrain from discussing the question what evidence would have been admissible if that issue had been. See Crowell v. Benson, 285 U. S. 22, and St. Joseph Stock Yards Co. v. United States, supra.
MR. JUSTICE STONE, MR. JUSTICE ROBERTS And MR. JUSTICE CARDOZO join in this opinion.

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