Source: https://law.justia.com/cases/federal/appellate-courts/F2/383/571/429492/
Timestamp: 2020-07-12 23:23:29
Document Index: 100300481

Matched Legal Cases: ['§ 20', '§ 20', '§ 20', '§ 20', '§ 77', '§ 205', '§ 5', '§ 5', '§ 19', '§ 3', '§ 153', '§ 201']

Edward S. Watts et al., Appellants, v. Missouri-kansas-texas Railroad Company, Appellee, 383 F.2d 571 (5th Cir. 1967) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fifth Circuit › 1967 › Edward S. Watts et al., Appellants, v. Missouri-kansas-texas Railroad Company, Appellee
Edward S. Watts et al., Appellants, v. Missouri-kansas-texas Railroad Company, Appellee, 383 F.2d 571 (5th Cir. 1967)
US Court of Appeals for the Fifth Circuit - 383 F.2d 571 (5th Cir. 1967) August 10, 1967
Rehearing Denied September 20, 1967
Birn v. Childs Co., Sup.Ct.1942, 37 N.Y.S.2d 689, was a suit to enforce a covenant in the indenture which required the corporation to pay certain sums into a sinking fund. The New York Supreme Court distinguished that case from cases like the present: "This suit is one for the enforcement of a covenant of the indenture, the sinking fund provision, and is not one to enforce payment of the debentures or their coupons, and it thus falls within the scope of [the section of the indenture with requirements similar to those of Section 6.06 here]." 37 N.Y.S.2d at 696.7 See Betts v. Massachusetts Cities Realty Co., 1939, 304 Mass. 117, 23 N.E.2d 152.
" [I]t is hereby declared to be in aid of the national transportation policy of the Congress, as set forth in the preamble of the Interstate Commerce Act, as amended, in order to promote the public interest in avoiding the deterioration of service and the interruption of employment which inevitably attend the threat of financial difficulties and which follow upon financial collapse and in order to promote the public interest in increased stability of values of railroad securities with resulting greater confidence therein of investors, to assure, insofar as possible, continuity of sound financial condition of common carriers subject to part I of said Act, to enhance the marketability of railroad securities impaired by large and continuing accumulations of interest on income bonds and dividends on preferred stock and to enable said common carriers, insofar as possible, to avoid prospective financial difficulties, inability to meet debts as they mature, and insolvency."
The Katy argues that the Interstate Commerce Commission should decide the issues calling for the interpretation of its Accounting Classifications, which are, as noted above, incorporated into the procedure for determining "available income."8 (See footnote 3, supra). We agree. This action concerns more than the two parties, and "enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body * * *." United States v. Western Pacific R. Co., 1956, 352 U.S. 59, 64, 77 S. Ct. 161, 165, 1 L. Ed. 2d 126, 132. The decision of these issues by a court and jury would endanger the uniform application of the Interstate Commerce Act and would waste the opportunity to use the experience and expert knowledge of the Interstate Commerce Commission in interpreting regulations which it promulgated to serve policies which it is charged to pursue.
The Supreme Court, in Kansas City S. R. Co. v. United States, 1913, 231 U.S. 423, 34 S. Ct. 125, 58 L. Ed. 296, recognized the value of, and indeed, the necessity for, the uniform system of accounting exacted of the railroads by the Commission. In that case, the railroad had spent large sums on improving its lines by replacing certain steeply graded trackage with trackage of a gentler grade. These improvements were financed by successive bond issues as money was required. The railroad also had outstanding an issue of preferred stock, which paid dividends only out of current earnings. The railroad wished to charge the entire sum spent on the improvements to "Additions and Betterments," which was a capital account. The Commission, on the other hand, held that its accounting procedures required the railroad to deduct from the cost of improvements the estimated replacement cost of the portions of track abandoned, and to charge this replacement cost, less salvage, to the operating expenses account of that year. The railroad attacked the reasonableness of the accounting regulations, and complained that such a great current expense would cut down earnings and prohibit payment of dividends on bonds and preferred stock. Without such payments, the railroad argued, its credit would be impaired, and it would no longer be able to float the succeeding bond issues needed for further improvements.
"Plainly, the lawmaking body recognized the essential distinctions between property accounts and operating accounts, between capital and earnings; it recognized that the practice of different carriers varied in respect of these matters; and that no system of supervision and regulation would be complete without requiring the accounts of all the carriers to speak a common language." 231 U.S. at 441-443, 34 S. Ct. at 130, 58 L. Ed. at 303-304.
The Commission found the modification under § 20b to be in the public interest, to be in the best interests of the carrier, of the holders of all classes of its stock, and of the holders of the obligations affected by the modification, and not adverse to any creditor not directly affected by the modification. These findings are required by § 20b(2) (b) (d). Cf. Schwabacher v. United States, 1948, 334 U.S. 182, 68 S. Ct. 958, 92 L. Ed. 1305. In addition, under § 20b(5), the Commission's authority was "exclusive and plenary"; and the parties were "relieved from the operation of all restraints, limitations, and prohibitions of law, Federal, State, or Municipal, insofar as [might] * * * be necessary to enable them to make and carry into effect the alteration or modification so approved * * *." Cf. Schwabacher v. United States, supra. By § 20b(8), "the Commission may from time to time, for good cause shown, make such supplemental orders in the premises as it may deem necessary and appropriate."
While the doctrine of primary jurisdiction is not of antiquity, it has a respectable geneology and is almost as old as the first of the administrative agencies to which it entrusts reference. In Texas & P.R.C. v. Abilene Cotton Oil Co., 1907, 204 U.S. 426, 440-441, 27 S. Ct. 350, 355, 51 L. Ed. 553, 559, Mr. Justice (later Chief Justice) White said for the Court:
"No fixed formula exists for applying the doctrine of primary jurisdiction. In every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation. These reasons and purposes have often been given expression by this Court. In the earlier cases emphasis was laid on the desirable uniformity which would obtain if initially a specialized agency passed on certain types of administrative questions. * * * More recently the expert and specialized knowledge of the agencies involved has been particularly stressed. See Far East Conference v. United States, 342 U.S. 570, 72 S. Ct. 492, 96 L. Ed. 576. The two factors are part of the same principle, `now firmly established, that in cases raising issues of fact not within the conventional experience of judges or cases requiring the exercise of administrative discretion, agencies created by Congress for regulating the subject matter should not be passed over. This is so even though the facts after they have been appraised by specialized competence serve as a premise for legal consequences to be judicially defined. Uniformity and consistency in the regulation of business entrusted to a particular agency are secured, and the limited functions of review by the judiciary are more rationally exercised, by preliminary resort for ascertaining and interpreting the circumstances underlying legal issues to agencies that are better equipped than courts by specialization, by insight gained through experience, and by more flexible procedure.' Id. 342 U.S. at pages 574, 575, 72 S. Ct. at page 494.
"The doctrine of primary jurisdiction thus does `more than prescribe the mere procedural timetable of the lawsuit. It is a doctrine allocating the law-making power over certain aspects' of commercial relations. `It transfers from court to agency the power to determine' some of the incidents of such relations." 352 U.S. at 63-65, 77 S. Ct. at 165, 1 L. Ed. 2d at 132-133.
In Thompson v. Texas Mexican R. Co., 1946, 328 U.S. 134, 66 S. Ct. 937, 90 L. Ed. 1132, the Texas Mexican Railway had an agreement with the Brownsville Railroad permitting Brownsville to use certain Texas Mexican tracks. Either party could terminate the agreement upon twelve months' notice. Brownsville went into reorganization in 1933. In 1940 Texas Mexican gave notice of termination of the agreement, but after the 12 months had elapsed, the trustee of the Brownsville continued to use the Texas Mexican tracks, and the latter sued for an injunction. The Supreme Court held that primary jurisdiction resided in the Commission to determine the rights of the parties. The Court reasoned that the Commission controlled the reorganization under § 77 of the Bankruptcy Act, 11 U.S.C.A. § 205; and controlled questions of trackage rights and abandonment of lines under §§ 5(2) and 1(18) of the Interstate Commerce Act, 49 U.S.C.A. §§ 5(2), 1(18). The Court thus emphasized that all of the questions there in issue had been committed by statute to the Commission. Mr. Justice Douglas stated for the Court:
* * * [I]t is one of the Commission's high functions to protect the public interest against unfair or oppressive financial practices which in the past led to such great havoc and disaster. That policy would be undermined if the carriers could repair to courts for determination of the conditions under which trackage rights could be secured. Then jury verdicts or settlements would take the place of the expert and informed judgment of the Commission." 328 U.S. at 147-148, 66 S. Ct. at 945, 90 L. Ed. at 1141.
We do not suggest that the necessary computations are purely esoteric or arcane to courts, but we know that the Commission has insights and experience denied judges. The subleties of railroad financing, encased in jargon and tucked into the interstices of the administrative scheme, may escape us. The answer to the question of what is income, if given by us, could destroy or impair the ratemaking or capital structures of the Katy, whereas the statutory scheme comprehensively commits their superintendent to the Commission. Income relates to rates, and rates relate to competition. The capital structure was designed to add to the length and fullness of days for the Katy. Control over these matters has been ceded to the Commission, in order that an informed, uniform, consistent policy may result. The piecemeal, sporadic decisions by courts should not interfere with or bypass these statutory schemes. Far East Conference v. United States, 1952, 342 U.S. 570, 72 S. Ct. 492, 96 L. Ed. 576; Thompson v. Texas Mexican R. Co., supra; Carter v. American Telephone & Telegraph Co., 5 Cir. 1966, 365 F.2d 486, cert. denied 385 U.S. 1008; Maddock & Miller, Inc. v. United States Lines, 2 Cir. 1966, 365 F.2d 98; River Terminals Corp. v. Southwestern Sugar & Molasses Co., 5 Cir. 1958, 253 F.2d 922, remanded on other grounds, 1959, 360 U.S. 411, 79 S. Ct. 1210, 3 L. Ed. 2d 1334. See 3 Davis, Administrative Law § 19.01 esp. at 5 (1958). Compare United States v. Radio Corp. of America, 1959, 358 U.S. 334, 79 S. Ct. 457, 3 L. Ed. 2d 354.11
The Holders argue that they do not here attack the validity or reasonableness of the Commission's Accounting Procedures. They also argue, citing Great Northern R. Co. v. Merchants' Elevator Co., 1922, 259 U.S. 285, 42 S. Ct. 477, 66 L. Ed. 943, and Louisiana & A. R. Co. v. Export Drum Co., 5 Cir. 1966, 359 F.2d 311, that the accounting regulations, principles, and practices are clear and easily comprehensible by laymen.
259 U.S. at 291-292, 42 S. Ct. at 479, 66 L. Ed. at 946-947.
"While the television industry is also a regulated industry, it is regulated in a very different way. That difference is controlling. Radio broadcasters, including television broadcasters * * * are not included in the definition of common carriers in § 3(h) of the Communications Act, 47 U.S.C. § 153(h), as are telephone and telegraph companies. Thus the extensive controls, including rate regulation, of Title II of the Communications Act, 47 U.S.C. §§ 201-222, do not apply. Television broadcasters remain free to set their own advertising rates. As this Court said in Federal Communications Com. v. Sanders Bros. Radio Station, 309 U.S. 470, 474, 60 S. Ct. 693, 84 L. Ed. 869.
"Thus there being no pervasive regulatory scheme, and no rate structures to throw out of balance, sporadic action by federal courts can work no mischief. The justification for primary jurisdiction accordingly disappears." 358 U.S. at 348-350. 79 S. Ct. at 466, 3 L. Ed. 2d at 364-365.
United States v. Western P. R. Co., supra, 352 U.S. at 64, 77 S. Ct. at 165, 1 L. Ed. 2d at 132