Earl Warren: Numbers 15, 17, and 20, Illinois Central Railroad Company et al. versus Norfolk and Western Railway Company et al., Calumet Harbor Terminals, Incorporated, appellants versus Norfolk and Western Railway Company et al., and United States and Interstate Commerce Commission, appellants, versus Norfolk and Western Railway Company et al. Mr. O'Brien.
William J. O'Brien, Jr.: Mr. Chief Justice, may it please the Court. This case concerns the validity of reports and orders of the Interstate Commerce Commission granting authority to six railroads whom I represent to extend their lines and operations to serve the facilities of the principal customers and shippers of the Rock Island Railroad at Lake Calumet Harbor in Chicago, Illinois which customers and shippers I also represent. The case presents two issues. I shall treat with the primary issue as to whether or not there was substantial support in the evidence to the findings and conclusions of the Commission. And Mr. Posner, the Department of Justice will treat with the issue as to whether or not the Rock Island was denied due process of law when the Commission refused to grant further hearings in the case. At the outset let me say that this is not a merely confined to the Rock Island and the six railroads but it is a case of the six railroads wishing to serve the port and the principal shippers at Lake Calumet wanting these railroads to serve the port on a one side and the Rock Island, the sole railroad serving the port on the other. A statutory three-judge District Court in Cleveland, Ohio, as one judge dissenting held it was not ample support in the record for the conclusions of the Commission and they should injunction permanently restraining the Commission from putting its orders into effect. At the same time the court found there is substantial support in the evidence with the major findings of the Commission. And these findings Your Honors, we respectfully submit in adopting themselves would justify the granting of a certificate by the Commission. Appellants, applicants before the Commission and intervening shippers seek to have this injunction dissolved in order that the observers proposed which the Commission found to be required in the future public convenience necessity might be initiated and accelerated. Contrary to the intent of Congress, the District Courts and the Rock Island would write out from Section 1, Paragraph 18 of the Interstate Commerce Act, the word “future”. That Act in substance through that portion in the Act in substance provides that, “no railroad shall extend its lines or its operations until it asked first obtain from Interstate Commerce Commission a certificate of the present or future public convenience and the necessity requires or will require such construction and/or operation. In the light of the evidence submitted by shippers, Court and Public Officials in the light of the findings of the commission themselves not be -- the Court including the dissenting opinion. It's difficult to understand the opinion and order of the District Court which is carefully inconsistent and contradictory. When the applications were filed with the Commission approximately 10 years ago, the appellants sought to prove and did so to force the examiners satisfaction and later the Commission satisfaction that the service proposed by the railroads would aide in the development of the Court, at port, excuse me. The Commission found and the courts said, there were substantial support in the record to the finding that Lake Calumet Harbor is located and one of the heaviest industrial areas in the world. That presents one of the greatest potentials for the generating of traffic in the country. That is the major port of the Port of Chicago. The major deep water port of the Port of Chicago and it is located in Chicago as the heart of Chicago's railroad switching district. The Port of Chicago was then the major Great Lake's general cargo port and in 1959 was to become a dominant gateway for export grain. This property is publicly owned and as leased to individual operators by the Chicago Regional Port District, individual operators like appellants here. At the time of the hearing, over $24 million have been spent on the initial development of Lake Calumet Harbor including the construction of grain elevators, public warehouses, cold storage plants, transit sheds, trucking terminals, and 14 miles of railroad tracks. Additional basic findings for which the Court held over substantial support in the record where the following that the great – the lakes to Gulf Waterway completed 1933 is St. Lawrence Seaway which would be completed in 1959 and the Calumet Sag Channel nearing completion would make the port one of the busiest in the country. Its facilities have unparalleled access to barge, lake steamer, and motor transportation. And what the opening of the St. Lawrence Seaway would have complete access to ocean transportation. It is however served by one railroad. With the opening of the St. Lawrence Seaway beside there'll be an appreciable increase in the size and the capacity of the ships serving the Great Lakes overseas transportation, stated more briefly. The size and carrying capacity, the ships would be doubled in order to permit a greater percentage of the world's merchant train to reach the Port of Chicago each season. The Commission found and the Court had a substantial support in the record for defining that an efficient economic transportation of cargo between land carrier and water carrier would necessitate it's substantially broaden -- substantially broaden railroad service into a notably Calumet Harbor. And that prompt efficient service in the field of international transportation was mandatory and that it was necessary for any port dealing in Interocean freight to have supporting facilities nearby and that the And that the applicants had rail yards in close proximity to the port equal to 12 times at presently available through the Rock Island. Applicants would be in a position to make direct deliveries and expedite shipments as the case demanded. Their operation would be cheaper because of its -- and careless handling. Regarding future traffic, but what the Commission found and the Court against it. There was substantial support in the record for the finding that base of the testimony of representatives of the appellants here and the port and public officials. There would be amount material increase in future tonnage that the present facilities of the port would not be reached to capacity for several years that large additions were planned for earlier construction. In other words, imperative to the future success of the port that a plan system for handling the transportation needs be established in order to ensure a service which would provide for steady growth and expansion.
Speaker: So far as I understand it, (Inaudible) to the District Court that it was regarded?
William J. O'Brien, Jr.: You're right Mr. Justice Harlan.
Speaker: What if something happen?
William J. O'Brien, Jr.: They all agree this -- they all agreed on this. In other words, all three judges agreed that there was a substantial support in the record of these findings of the Commission.
Speaker: Do you agree with that?
William J. O'Brien, Jr.: Yes, Your Honor. In addition the testimony of the manager of the Chicago Regional Port Districts, are representatives of the shippers and receivers not located -- not only at the port but also in the -- say distributor thereto are the representative of the Chicago Association of Commerce and Industry of the Chicago Board of Trade and U.S. Department of Agriculture. Our testimony disclosed and the Commission found that the competitive rail service here offered by the applicants would provide single line switching service and charges and adequate car supply equal to 30 times that of the Rock Island. Protection against strikes, fast competitive rail service over a 1900 additional industries located in the Chicago switching district which would receive direct single line service to the port. The elimination of delays due to the interchange of cars between line whole carriers and delivering carriers, and the removal of a hindrance and the detriment to the port which is limited to the services of one carrier, one railroad carrier. These are the conclusions of the Commission which are base upon the administrated expertise of the Commission and are not matters for determination by the District Court. And yet that Court without further ado after reviewing the conclusions of the Commission said there is not support in the evidence for such findings, the citation of record reference that we have on pages 7 and 8 of our brief show complete support in these -- of these findings, and the Rock Island does not and could not dispute these record references. Mr. Chief Justice, it's time for your chairman.
Earl Warren: Very well, --
William J. O'Brien, Jr.: Alright.
Earl Warren: -- It's just about recess now.
William J. O'Brien, Jr.: Mr. Chief Justice, may it please the Court. Mr. Justice Harlan just prior to a recess you asked if there was a unity of expression by the judges of that particular point and as far as the basic findings of the Court of the Commission were concern very unanimous that there was substantial support. But then when it anyone that came to the conclusions, the dissenting opinions said that there was basis for -- basic support for the conclusions of the Commission. But the dissenting of -- or the majority opinion held that there was not ample support to the conclusion.
Speaker: (Inaudible)
William J. O'Brien, Jr.: You just said what I'm about to say Mr. Justice Harlan. Incredible as it may appear the majority opinion has taken, has made up largely of sections taken verbatim from the dissenting opinion including the recitation of facts, findings, and even citations of the decisions of this Court. It is evident to the majority of the Court did not understand the decisions of this Court which were lifted verbatim from Judge Edwards dissenting opinion. Such as Chesapeake and Ohio Railway versus United States and Schaffer Transportation Company versus United States where in this Court said that Congress empowered the Commission to grant authority to construct new lines to create competitive service if and when it should find that it necessary and convenient in the future and present public interest. And that no carrier is entitled to protection from competition if the present or future public convenience and necessity wants that additional service. These cases which we had cited in our brief and which the dissenting opinion -- Judge have decided, were cited by the majority presumably in support of there con -- conclusion. The District Court misconceived not only its own -- the effect of the Commission's action but its own function. It is obvious the District Court told it was the chief arbiter of the paramount public interest when as a matter of fact, the statute clearly state that this is the Office of the Commission. The District Court is limited to ascertaining whether or not there is warrant in the facts in law for the action of the Commission. The judicial function that Court was exhausted when it found that there was ample support in the record for the -- the findings of the Commission with respect to the size and capacity of Lake Calumet of its future transportation needs and the capacity of the applicants. When it made those findings -- when it stated that there was ample support to those findings, its tasks was finished. The Rock Island and briefs cites Commission cases were in relief was denied in certain application cases. This of course is the Office of the Commission to deny applications where findings supporting the granting of an application to that type are missing. If its here to commission finds that there is evidence to port -- to support a finding that public convenience fu -- present or future public convenience to the necessity warrants the granting on application. The Court is powerless to step in and substitute its judgment for that of the Commission as long as there is warrant in the facts in the applicable law. What the present or future public convenience necessity requiring the premise is a matter which has been left by Congress to the informed judgment of the Commission. Rock Island labels the Commission's finding with respect to a future traffic as based upon conjecture, highly speculative. This is the same Rock Island on brief and then again, before the District Court stated and I quote, “We purchased the Pullman Railroad upon the conviction that Lake Calumet Harbor would someday be an international port. Its growth is assured. It is only 10% completed. This is a rich -- potentially rich industrial area.” The Commission made its decision based upon all the evidence submitted to it including Rock Island only non-carrier witness, Professor Fair. With respect to the -- even the District Court found that the Commission's finding with respect to the fact that traffic would increase in volume and revenues would increase in the future, have substantial support in the evidence. With respect --
Byron R. White: Now, is there any indication in this record that the -- that the history of the growth since the findings were made is different from the predictions?
William J. O'Brien, Jr.: No, Mr. Justice White. There's not -- no evidence in the record to that effect.
Byron R. White: So there's nothing in this case that District Court may have thought that findings was just plain stale and so far the line of actually that the --
William J. O'Brien, Jr.: There was --
Byron R. White: -- there ought to be a new record made?
William J. O'Brien, Jr.: There was an allegation made Mr. Justice White because the Rock Island and the petition for reconsideration before the Commission, proper this evidence as available to the Commission for review as to what the -- what have transpired since the case had been closed. And the Commission weighed this evidence --
Byron R. White: -- not this evidence the case close before the Commission?
William J. O'Brien, Jr.: I believe its 1959, we -- it is my turn to take at that time. There were subsequent petitions were -- a subsequent supplemental applications filed to correct the deficiency and also for approval of a -- an operating agreement and that was finally approved by the Commission in 1962. With reference to this the -- a District Court in the Rock Island alleged that there was not support -- not substantial support in the record for the findings of the Commission with respect to whether or not the operation was profitable. The Commission did so find that the operations on land whole revenue -- involving land whole revenues would be profitable and the Rock Island does not argue with this. Since the District Court found there was ample -- substantial support in the record for the finding that the proposed operation would be less expensive because there would be -- they had eliminate the switching charges. Rock Island bases its whole attack upon the cross towns switching about which the Commission had expressed some concern. The Commissioner however as the body charge with the administration in the Act regarding rate said that this was a matter which could be successfully resolved in the future. Rock Island in attempting to rate up the word future from the statute contended in this brief and before the Commission, that as long as the Commission failed to make a finding that its service was unsatisfactory that it had no right, no power to grant authority to other carriers to perform to -- to supply competitive service. What Rock Island fails to add however is that each one of its customers are -- the Lake Calumet Harbor supported these applications. Inspite of its allegation that the service was satisfactory. Shippers' representatives of port, public officials all stressed that value of competitive rail service and the effect it would have upon the development of the port. The president of the largest terminal company in the world, the appellant, North Pier Terminal Company testified and he cited his own company's experience for having removed its facilities from Milwaukee because it lack competitive service. It had the service of a single truck line carrier. He cited this in his experience and having the lead a place in Chicago. He located out the Lake Calumet Harbor with the expectation. There they would receive competitive rail service while the Commission found that the service of the Commission -- of the Rock Island was fairly satisfactory. Its own superintendent justified as to the fact that they have received complaints in 1955, 1956 and 1957. The other warehouse operators Lake Calumet testified that they agreed with the present North Pier Terminal when he testified that actually there service left something to be desired. That they had complained continually but at the service had improved and he was asked when the service improved. And he said when this case would docket? When this case docketed? We ask the Court to reverse the opinion in order that District Court and remand to that court with the instructions to dismiss the complaint.
Hugo L. Black: (Inaudible)
William J. O'Brien, Jr.: Yes, I do Mr. Justice Black. In other words, the whole evidence should be taken in consideration and our whole evidence here Mr. Justice Black is that the basic findings, the findings of the Commission are have been found they have support in the record and there are -- the Chesapeake on Ohio case, the Schaffer Transportation case, there are many cases of this Court which state that the District Court has no right to substitute its opinion as long as he find -- they made differ from the conclusion rates. But as long as there support in the record for findings of the Commission, they cannot change that conclusion.
Potter Stewart: An appeal, here we're dealing with the three-judge District Court --
William J. O'Brien, Jr.: I was thinking of the defense Mr. Justice Stewart. I have -- the general principle of the Universal Camera case as I understand it is that all the evidence, the total evidence should be considered. I really feel that there are other cases closer to point in that. Thank you.
Hugo L. Black: Well, in this case as I understand (Inaudible)?
William J. O'Brien, Jr.: I don't believe that's inconsistent.
Hugo L. Black: (Inaudible)
William J. O'Brien, Jr.: No, I never say -- I don't -- I believe there are other cases Mr. Justice Black that --
Hugo L. Black: (Inaudible)
William J. O'Brien, Jr.: Yes.
Hugo L. Black: (Inaudible)
William J. O'Brien, Jr.: I believe it would.
Byron R. White: Mr. O'Brien, is that what you have thought that the Commission should have held another hearing on the ultimate rate, the lease rate that was set?
William J. O'Brien, Jr.: That is correct, Mr. Justice White.
Byron R. White: You haven't requested something that, have you or have I missed it?
William J. O'Brien, Jr.: No, Mr. Posner, counsel of the Department of Justice will. I may add this one particular point. I'm going over the last night again I read the dissenting opinion as well as the majority opinion. And there is one statement in there where Judge Edwards was of the impression that this new contract that the agreement between -- the lease agreement between the ports and the railroads have not been the subject of interrogation at the original hearing. But actually if -- it was the subject of interrogation and as matter of fact you can find that on pages 798, 802 of the record. And I believe that is the only place were it lead --
Byron R. White: Well, Mr. Posner is going to talk about this?
William J. O'Brien, Jr.: Yes, he is Mr. Justice White. Thank you very much.
Earl Warren: Mr. Posner.
Richard A. Posner: Mr. Chief Justice and may it please the Court. In a moment, I shall speak to the issue of whether the appellees were denied improperly a right to be heard on these applications. But I like to take just one moment to speak to Mr. Justice White's point about the staleness of the record. In their brief in this Court, the appellees asked the Court to take judicial notice of the number of documents, reports and photographs which indicate that Lake Calumet Harbor has grown less explosively in the year since the hearing before the Commission's hearing have in 1957 that some of the witnesses at that hearing predicted. And it's the appellee's argument that --
Byron R. White: Or the Commission found?
Richard A. Posner: Excuse me?
Byron R. White: And the Commission found?
Richard A. Posner: I'm sorry.
Byron R. White: I mean the witnesses testified and the Commission found?
Richard A. Posner: Well, I -- there is a difference there which I want to mention in one moment. They say the appellee has argued that there should be a remand to the Commission for further proceedings for a further hearing because of this alleged dullness. But first I like to suggest that the allegations as to the failure of the port to fulfill to the completely its promise, the predictions of its traffic is not a new development in this case that the Commission had no opportunity to fail to consider in a way because in a petition for reconsideration filed at the end of the 1962, the appellees brought to the Commission's attention, statistics showing the tonnage in freight cars handled by the port between 1957 and 1962, and again argued that a new evidentiary hearing was necessary. Now the Commission denied that petition for reconsideration and I think correctly so, in this circumstances of this case. In the first place returning to Mr. Justice White's question, the Commission's decision in which it approved these applications had never relied upon the highly enthusiastic projections of the witnesses in the hearing such as the general manager of the Fourth District Court who had given specific tonnage figures which he expected to before to attain in given years. All the Commission is fumed as a predicate for its conclusion that this additional service should be authorized was that the Port had excellent long range prospects for growth and development. And as to this general projection of the port's growth and prosperity, there is no official in this case. The appellees witnesses as well as the witnesses for the applicant railroads agree that over the long range, the Port would grow. Now in the second place and perhaps --and more pointedly, the Commission had found not nearly that additional rail service was necessary to handle the increase traffic that was projected. But it found that rail service was necessary to induce the hope for expansion. Commission emphasized that the port needed this rail service from the outset of its development if there was to be development. And the reason is simply that as the record amply demonstrates competitive and adequate rail service is an enormously important factor in a port's competitive position. It's clear that Lake Calumet Harbor competes with a great many ports not merely Great Lake ports and other ports in the Chicago area but ports on a gulf coast, the Atlantic Ocean. And if Lake Calumet is to compete successfully, Commission found. There must be competitive and adequate rail service and to give just one example of why this is so. The Commission stressed that an important element of the promise of the port was the center of the grain. The international grain trade and it was evidence that the operators of the large ships which applied this trade are very leery about calling that ports where there may be delays due to adequate railroad cost supply or perhaps, the strike against the rail carrier. Other conditions which are -- which tend to be associated with the single line rail service. Are these delays are very expensive to this ship operators. They also often disturbed the credit transactions under which this trade moves. So it is not at all surprising that in the last 10 years when due to this protract of litigation Lake Calumet Harbor had the services going to be one railroad. Its growth was less than anticipated and this development confirms rather than undermines the Commission's conclusion. And we submit, it's not a ground but for a remand --
Hugo L. Black: (Inaudible)
Richard A. Posner: But I -- I assume that there must be a reason for believing --
Hugo L. Black: (Inaudible)
Richard A. Posner: Well, that would not -- that would certainly not be true everywhere. But all of the witnesses agree that Lake Calumet Harbor had some unique -- had a unique potentiality. It is not just another port. It happens to be a strategically situated between the Great Lakes and the Mississippi River and its right near the Chicago area which is a great industrial center and it was believed that the port had a natural potential for large growth. And it was also felt that additional rail service was needed if that potential was to be realized. I mentioned in this connection that the Commission also have emphasize how anomalous it is in this nation for a major public port facility, like Lake Calumet Harbor to be served by only one railroad. The evidence showed that this is unusual circumstance for a Harbor of this cite quite apart from projections of increased service.
Potter Stewart: What was the basis of that conclusion open -- was there evidence or was this some kind of expertise that the situations to this time which led the Commission to preclude. Well really, the potential can only be realized that this competitive rail services did for.
Richard A. Posner: No, this was not a finding based merely on the Commission's general knowledge of the railroad industry. The port's general manager and other witnesses testified that there were delays and other problems this -- and higher cost associated with single railroad service and that the operators of the ships which conduct this grain trade would refuse to call at Lake Calumet Harbor for this reason.
William J. Brennan, Jr.: Or was the talk between the one railroad and seven or (Voice Overlap).
Richard A. Posner: I think with the respect --
William J. Brennan, Jr.: One railroad or two?
Richard A. Posner: Well, once it's granted that competitive rail service is necessary. I should think that the number of railroads to be admitted would depend principally on whether the projected traffic was capable of sustain them. If as the Commission found these seven railroads can operate profitably and economically there, they should allow to get an additional point. And that is that these seven railroads among them will provide direct access to all I believe, all the major rail carriers that would be serving Lake Calumet Harbor. All that draws from the grain producing regions. I also might mention that these railroads are not going to operate helter-skelter in the port but have worked out an agreement for coordinating their operations.
William J. Brennan, Jr.: Have they actually installed the fact of (Inaudible)?
Richard A. Posner: No, this has all been held up by this litigation. Now, I should like to devote the balance of my time to the second issue here. Mr. O'Brien discussed whether that public interest -- public convince a necessity present or future requires the additional rail service proposed by the applicants and I should like to deal with contention of the appellees that they were denied an opportunity to be heard on the merits of the agreement which the six applicant railroads entered into with the Chicago Regional Port District. That is the public authority which has developed and which administers the Port and the agreement which I would speak from that in that which govern -- which was to govern the use of the 10 or so miles of tracks which the Port District had built in the harbor area by these six railroads. And if the Court will --
Potter Stewart: Now, this issue the District Court unanimously agreed, didn't they that the event of the record --
Richard A. Posner: That's correct.
Potter Stewart: -- in the event that the appellees had been denied that kind of --
Richard A. Posner: That's correct. If the Court will bear with me a moment, I think I can define the issue more particularly by tracing how this agreement governing the use of the tracks came into the case and was dealt with by the Commission. Now, from the very outset of the proceeding of the hearings happen in 1957. It was perfectly obvious that the applicants were contemplating service within the Court itself over the tracks which the District had built there, a use of tracks which would of course require the District's agreement. The applicants were not interested million transporting the goods and to and from the District line but of -- obviously, they wanted to served the warehouses and grain elevators and transit shares and other facilities located within the harbor area on adjacent to tracks which the Port District had built for this purpose. And so, agreement was regarded from the beginning as an essential aspect of the controversy. It was introduced into the record and it was subject of testimony and cross-examination. I think it's fair to say that everyone connected with the proceeding assumed that the feasibility of the arrangements which the railroads would workout with the Port District was an essential factor and whether the Commission should grant permission for the additional service.
Potter Stewart: Rock Island, I think it has to use little tracks for now?
Richard A. Posner: Yes. Rock Island operates under a contract with the Port District under which it pays no compensations which is use. I shall explain its arrangement with the Port District is not affected by the agreement which the applicants made. Now why would I say --
Potter Stewart: What?
Richard A. Posner: -- the agreement was in the record in the hearing before the examiner and was discussed and was a focal point of controversy. The railroads, the applicant railroads had not asked specifically for in their applications for express authority to operate over the Port District's tracks. They didn't do that because there was a question whether such specific authority was required. One reason they didn't is the Rock Island under the contract are mention by Mr. Justice Brennan had never sought the Commission approval feeling the -- that that was not necessary. The Commission however found that the original applications were deficient in the failing to request this authority and that the six railroads could not be used to Port District's tracks unless they asked for authority to do so from the Commission. However, the Commission beamed this as a technical deficiency and permitted the applicants to remedy it by filing a supplemental -- supplement to the applications or supplemental application in which they are ask for this authority. And the Commission granted the application without a further hearing. Now so far I think, there's no serious question of a denial of hearing because the agreement which the Commission approved was the identical one was wholly immaterial changes, identical to the one that has been in the record -- in the proceeding before the examiner. However, after this --
Abe Fortas: Excuse -- excuse me, at that --
Richard A. Posner: Yes.
Abe Fortas: -- point, first thing where the appellees notifying that that is where the appellees notified that the Commission was complaint an issue in an order approving their agreement as had been filed?
Richard A. Posner: They -- they I -- I assume, perhaps been correctly that the original application was that the supplement to the application was served -- was --
Abe Fortas: Served on --
Richard A. Posner: --served on the --
Abe Fortas: On the appellee --
Richard A. Posner: -- on the appellee.
Abe Fortas: In fact, so they view that this was from --
Richard A. Posner: Yes. But in any event, they immediately filed this -- had throughout this proceeding file and after the Commission approved it filed and objecting document and the Commission reaffirmed its determination on -- I mean, but I have no doubt that --
Abe Fortas: When they finally --
Richard A. Posner: -- as a matter of fact, excuse me just one second.
Abe Fortas: Uh-huh.
Richard A. Posner: When the appellants filed their supplement in the application, the appellees promptly filed a document to strike it as improper and made a number of contention address to it. So they did have to applicants we have.
Abe Fortas: I see. And they don't --
Richard A. Posner: Now, if --
Abe Fortas: -- and they don't object now to -- or they didn't object then to the sufficiency of the evidence to support the initial order issued by the Commission from the --
Richard A. Posner: They --
Abe Fortas: -- from the face of the case
Richard A. Posner: They objected to the sufficiency of the evidence to support this approval. But all of the evidence and all of these suggestions had been made and considered in the hearing before the hearing examiner. So there was no -- there was no new evidence that require additional hearing. As I say, after the Commission approved the application with the agreement governing the use these tracks. The applicants in the Port District then modified the agreement and the Commission approved the modified agreement without a further evidentiary hearing, although, with notice -- full notice and argument for the appellees. Our contention however is that that this modification was not material. It did not raise factual issues which required an evidentiary hearing. Now the modification, the only even arguably material modification, there were small changes and worthy community here had to do with computation of the rental that the applicants would be required to pay the Port District to use this 10 miles or so track within the district. Now in the original agreement at which I repeat, there had been full hearing, full canvassing of the issues. The annual rental for the use of the tracks was to be the lower of two figures. The first of this was 5% of the current assessed valuation of the rail facilities in the district. And that 5% figure would have come out to about $35,000.00 per year. The second figure was to be computed by multiplying the number of cars handled to or from the district in a year including locomotives and empty cars by $2.00. So that would -- these two methods of computation which ever produced the lower rental would be the yearly sum due. Now it's finally executed and approved by the Commission, the percentage evaluation term which I say would have come out to that $35,000.00 was deleted. And the rent became a flat per car rate of $2.00. Now, there was some change in the definition of car that is to exclude locomotives and most empty cars. Basically the new rate is $2.00 per revenue car loaded or partially loaded. So what the question of a right to a hearing boils down to, is whether Commission was required to conduct an evidentiary hearing to determine whether this change in rental formula might so undermined the ability of the applicants to provide a -- an economical and a self-sustaining service that the application should be denied. Now, we say that it was not material. I think there are several reasons for that. The first is that, it is quite obvious to the Commission and to this Court, the railroad industry is one traditionally played by very heavy fixed costs that arriving from its investment in tracks, real estate and engines, and repairs shops and the like. And whatever fixed cost to this sort of large part of total costs. The value of the business that affirmed is able to generate becomes critical to its ability to make money. The more it sells, the railroad industry, the more traffic it handles. The more revenue it has to cover these heavy fixed costs which by definition remain constant while the traffic increases. And therefore, it seems to us that if -- if the Commission originally found. It was perfectly reasonable for the railroads to be paid $2.00 per car whether it's a volume was relatively low that is up to the $35,000.00 percent of valuation figure. Now therefore, it must be reasonable for it to be able to pay at the same rate when its volume increases. Now, if that become a little confusing, let me restate it slightly. Under the old agreement, you would pay $2.00 a car but not in excess of the 5% of figure is $35,000.00. So, if he carried 17,000 cars a year. You would pay the $2.00 rate, $34,000.00. On the other hand, if you carry 20,000 cars, you would pay only the 5% figure which was lower. So under the new agreement which eliminates this 5% figure, it is conceivable that the total rental in any year might exceed that under the old agreement. If they carry 30,000 cars, they will have to pay $60,000.00 roughly. But as I say, if the railroads could pay these $2.00 rates when volume is very poor, it's down on the 2,000 or 3,000 cars a year level. They should certainly be able to pay it when there volume is good because if their traffic is heavy. They will have all the more revenue to be covering there heavy fixed cost and this flat $2.00 rate will be less burden to this rate.
Abe Fortas: This rate was binding on the -- was applicable to the appellees as well as to the appellant?
Richard A. Posner: No. The appellees -- the agreement expressly provides that it shall affect any rights that the Rock Island Railroad might have under its preexisting arrangements with the district. And as I mentioned it currently carries the cars over the District tracks for no rental payment. Now it's conceivable that the District will in the future sometime want to receive rental from the Rock Island as well but the agreement does find them and as Mr. O'Brien pointed out. The statement in the dissenting that plan that the appellees were somehow being subjected to an agreement which that not have an opportunity to be heard on is utterly without foundation in the record. Now in addition to what -- it seems to us and to the Commission, the logic of the situation. Why this change in the rental in fact that was immaterial? Commission also stated and I think with considerable foundation that in general it is reasonable for the Commission to accord a measure of difference two rentals terms which had been fixed by arms length bargaining between the -- between parties which have a rough equality of bargaining power. And I think that principle is particularly valid here because it's quite clear that the Port District does not have an interest indulging the railroads and charging them a rate which will conclude them offering a self-sustaining service. As I mention, the Port District has allowed the Rock Island to carry cars over its lines at no rental and there's -- let's say the Port is desperately eager to a track adequate rail service. It's a public non-profit body. There's no reason or suppose that it is out to gouge the railroad so that the railroads would be -- would bind themselves to an exorbitant rental. And just to touch right briefly on the point raise by Mr. Justice Black as to the bearing of the Universal Camera case. Assuming that this Court, eventhough, this is a direct appeal that would ordinarily accord a measure of difference to the District Court's handling of the factual issues here. I would again stress the extraordinary manner in which this majority opinion was drafted and which I think undermines whatever authority it would other applies bring with it. It is a -- it was the material portions on the public convenience and necessity issues were borrowed verbatim from the dissenting opinion. All of the essentials subsidiary area findings of the Commission were declared by the majority to have ample -- to have substantial support in the record and all -- and in essence all the majority did was to insert the word not before the Commission's -- before the dissenting page conclusion that the Commission's ultimate findings and order had ample support in the record. And in those circumstances, I think the much less deference is due the majority opinion. And in conclusion then, we urge that the Commission's orders here both insofar as they approved the additional rail service which the applicant railroads propose and also insofar as they approved the applicant's arrangement with the Port District should be sustained, and without any further hearings to delay this litigation which already has prevented like Lake Calumet Harbor from realizing its potentials for these 10 years of litigating. Thank you.
Earl Warren: Mr. Desch.
Theodore E. Desch: Mr. Chief Justice, may it please the Court. At the outset before it slips my mind, I would like to clear up one point which was incorrectly stated by Mr. Posner and Mr. O'Brien, I'm sure invertedly. They said that there is just one railroad serving Lake Calumet presently. At the time of the hearing in 1957 and presently, there are and there were rather and are two railroads at Lake Calumet. The Rock Island which I represent and the New York, Chicago and St. Louis railroad, then known as Nickel Plate which since that time is been merged into the Norfolk and Western. There's two railroad services at Lake Calumet but there be no question on that score.
Byron R. White: Were they competitor?
Theodore E. Desch: Sir?
Byron R. White: Were they competitor?
Theodore E. Desch: One served the eastside of the lake, the Nickel Plate, the Rock Island the Westside.
Byron R. White: They were not competitor?
Theodore E. Desch: In the sense, they are not. No, sir. Now, the District Court held that were was no substantial support in fact there law for the Interstate Commerce Commission's approval of additional rail service to Lake Calumet. We submit that that decision is correct and the basis of the record before the Court, the dictate of the statutes, and the findings of this Court and other courts. We submit that the issue here is really quite simply. Assuming the adequacy of the existing service to an area and we submit that there is really no question about the adequacy of existing service. The Commission made a finding in its order that Rock Island service was adequate and there were really no complaints about it to amount to anything. Assuming the adequacy of existing service, what kind or quality of evidence must the Commission have before it to support a valid exercise of its judgment in approving additional rail service which in the terms of the statute will be required to serve future public convenience and necessity. We submit then that there's really no question about present public convenience and necessity. The Commission's order could not have been founded upon that if it found that the Rock Island's present service in 1957 was adequate. We suggest that the District Court resolution of this issue was quite direct. In 1957, with the St. Lawrence Seaway uncompleted with its effect on the Great Lakes shipping traffic really unknown and with only 10% of the Lake Calumet Project constructed neither the applicant railroads and/or anyone else could have prove that the proposed additional rail service would be needed in the reasonably in the future. We say there was and is absolutely no need for additional rail service at Lake Calumet. In the absence of that need, construction of additional rail service would not be in the public interest. This is a very type of wasteful competition which this Court has condemned in many cases. In an example of a case such as that is Texas and Pacific versus Gulf, Colorado and Santa Fe, we cited at page 33 of our brief. Now, how that the railroad appellant succeed before the Commission? I would like to give you my version of how that came about. First place, we submit the timing was perfect to the commencement of the proceeding. In 1957 at the time of the hearing, Lake Calumet Port was for all practical purposes still on the drawing boards. St. Lawrence Seaway was in its development stage. It was uncompleted that time. Because of these facts, it was really no basis for a certificate constructed upon present convenience and necessity. The Commission had to issue a certificate it had to be based upon future convenience and necessity. This we submit gave our opponents before the Commission a wide latitude in the gnome of speculation and conjuncture and guess work on -- what the needs at the Port really work.
Byron R. White: What you say that the -- as matter of law the Commission leaves it powers or authority with its statutory authority if it issued a certificate based on -- between the traffic rather than the present traffic?
Theodore E. Desch: It's certainly not. We will readily --
Byron R. White: (Inaudible)
Theodore E. Desch: -- we'll readily conceive that Commission may use estimates and predictions as to the future and I will treat with that subject in a great deal of detail in a moment, Mr. Justice White. Now how could this so-called evidence, this type of evidence these predictions be refuted? We contend that the hearings in 1957 that there would really no factual basis for the estimates which respect to tonnage and increase rail traffic at the Port. The passage of time, nine years now, has proved us correct, we submit.
Abe Fortas: I hope --
Theodore E. Desch: We ---
Abe Fortas: -- you're varying to tell us what happen in those nine years?
Theodore E. Desch: Yes, sir. I shall.
Abe Fortas: Suppose -- the Commission or all of it in nine years ago and it hasn't gone into affect here, is it?
Theodore E. Desch: It will be my pleasure to explain that to you sir.
Abe Fortas: It will be my pleasure to hear your explanation.
Theodore E. Desch: We stated in our briefs and argument before the Commission that the Commission abused it discretion in accepting in relying upon this type of evidence. We submit that our position has been vindicated. Now, gaining an opportunity to be heard in this case is been extremely difficult on the point of view of the Rock Island and Pullman Railroad Company. To begin with, the railroad appellant objected to the intervening petitions filed by Rock Island and Nickel Plate and sought to deprive us of an opportunity to be heard and our position to the applications. The fact that Rock Island had made an investment of millions of dollars out of Lake Calumet had in their view apparently absolutely no bearing on the issues before the Commission. Our brief records in detail the large investment that Rock Island made in purchasing Pullman Railroad Company and I don't go into that now. But I would like to mention the a few of the many important and valuable contributions that Rock Island and Pullman made to he development of the Port area such things as the contributions of the land for street and road purposes around Lake Calumet. Dedications without compensation, Pullman Railroad Company, the Rock Island's predecessor port gave away its riparian right along the shore of Lake Calumet to the City of Chicago. It donated some 10 acres of land to the US Government, so that turning base in number five could be constructed that if amount of the report. These are the substantial contribution that my client made. Now the appellants here, --
Hugo L. Black: (Inaudible)
Theodore E. Desch: Sir?
Hugo L. Black: (Inaudible)
Theodore E. Desch: No, sir, prior to the hearing in 1957. Now, the appellants have made no contributions of the development of area. They have taken no interest in the development of Lake Calumet until in 1956 and 1957. It appeared to them that there might be some potential insofar as traffic is concerned at Lake Calumet and they decided to file its applications and get in there if they could. It might be well at this point to examine the position of the railroad appellants more closely. Now throughout these proceedings, they have attempted to give the impression that they are motivated by a desire to assist in the development of the port and to furnish additional rail service for the benefit of industries that might be located on port property. The true attitude of the majority of the railroad applicants may be judge from there past conducts in this proceeding. And we suggest the story begins back in 1947 sometime ago. At that time, Illinois Central and its wholly-owned subsidiary, the Kensington in eastern railroad filed an application with the Illinois Commerce Commission to extend a spare track across the territory in railroad of Pullman Railroad Company to gain access to the Lake Calumet Port. Now, this was prior to the formation of the Chicago Regional Port District. It wasn't created by act of the legislature of Illinois until 1951. The application was filed by the Illinois Central in 1947. This application of Illinois Central was resisted by the Pullman Railroad Company, my client, and the New York Central, and the Belt Railway Company of Chicago. Those two railroads are applicants in the proceeding before the Court. Now in 1949 while that matter was pending before the Illinois Commerce Commission, Rock Island purchased the Pullman Railroad Company in approximately 350 acres of land adjacent to Lake Calumet. The consideration Rock Island paid for the Pullman was $2, 200,000.00 and that acquisition was approved by the Interstate Commerce Commission that has a very important bearing in this matter, we suggest. Rock Island then intervened in the pending Illinois Commerce Commission proceeding to resist the advances of the Illinois Central and its efforts to get into the lake. To make the long story short, the Rock I -- rather Illinois Central attempt to gain access Lake Calumet territory was afforded by the Supreme Court of the State of Illinois which held an opinion filed on January 22, 1953 that was just the sort thing which the general rules controlling competition and regulated industries were directed and held that Rock Island was entitled to the fruits of its investment. And that Illinois Central should not be able to invade the territory. Now that Chicago Belt intervene in Rock Island's proceeding before the Interstate Commerce Commission to acquire Pullman Railroad Company. Chicago Belt urged that application be denied and that it be permitted to acquire Pullman. The Illinois Central also appear in that proceeding before the Interstate Commerce Commission, it contended, the IC contended that it would have no objection to Rock Island's acquire and control of Pullman if Illinois Central were permitted to purchase that part of Pullman Railroad Company located south of 124th Street in the City of Chicago. Namely that part of Pullman which serve Lake Calumet. In other words, I see he wanted the whole Port of Chicago rather the Port of Lake Calumet for itself. Now the Commission in approving Rock Island's application rejected the Belt's position saying that -- there's on evidence in the record that the Belt can do as good a job as or superior than Rock Island. It also rejected the position of the Illinois Central. And the reason the Illinois Central contended that it had -- it should be permitted to purchase the south part of the Pullman Railroad was it up until 1960 and it had a shorts per track serving two ice houses at Lake Calumet. When the ice houses when out of business, Illinois Central pull up it tracks in 1960. It had no tracks there since that time until 1949 that that was the basis upon it -- upon which it contended it should be entitle to control Pullman south of 124th Street and serve solely Lake Calumet Port. The story continues. In 1956, further applications were filed by Chicago Belt on one hand and the New York Central and Michigan Central, and the Indiana Harbor Belt two subsidiaries of New York Central and the other. Each of these applications sought to preempt the field then service to Lake Calumet Port. When these railroads --
Byron R. White: Where was this filed?
Theodore E. Desch: Before the Interstate Commerce Commission, sir.
Byron R. White: The Interstate --
Theodore E. Desch: Yes, sir. Now, when these railroads realized that they might frustrate their ambitions by fighting among themselves. They joined together and filed the applications which are the subject matter of this proceeding before the Court today.
Byron R. White: How long with some other railroads?
Theodore E. Desch: Along with additional railroads, yes. The fact that Rock Island alone is performing the switching service on the Westside of the Port is really not so unusual. It is a utility regulated under the law, applicable to all railroads. In addition, it operates under the conditions imposed by the Interstate Commerce Commission when the Rock Island pull -- purchase the Pullman Railroad Company. These conditions were required that Rock Island performs service for all railroads in the port area without discrimination. Again, our compliance with these Pullman conditions and that what's the Interstate Commerce Commission told them does not question in these proceedings. In this proceeding before the Court, the Commission found that we were complying with these conditions. If the applicants are successful, the Rock Island investment authorized by the Interstate Commerce Commission in the Pullman acquisition case will be seriously impaired. We sank $2,200,000.00 into that railroad. Then that result of the success of the applicants in this case would be the nullification of the former of the action of the Commission. Applicants like to say that our position at Lake Calumet is a monopoly. We find that term in their briefs. We submit that there isn't over in this situation. We have the only physical access to the area out of Lake Calumet Port but we handle cars of all railroads under reciprocal arrangements according to Pullman condition which guaranteed fairness in the handling of all the railroad traffic. The in affect you might you say, all railroad served, they came at Port through the switching service of Rock Island. Now, the applicants would supplant our switching service with theirs. But really it's just another switch engine. That would be a joint switch engine paid for by all of the applicants that would be the same type of switch engine as ours, people by -- crew members just as ours are.
Hugo L. Black: Isn't Rock Island considers the (Inaudible)?
Theodore E. Desch: No, sir. Not directly from the District but the benefit we gained by buying the Pullman Railroad Company was the purchase of some traffic generating potential out of south side of Lake Calumet. Mr. O'Brien was absolutely correct a moment ago when he said that we have hopes for the future at Lake Calumet. Certainly we did. We wouldn't invest $2,200,000.00 there and we have enjoyed some traffic out there. But if left these applicants in, that pie will be cut up in so many small pieces that no one would profit from it.
Byron R. White: Who (Inaudible)?
Theodore E. Desch: The Chicago Regional Port District itself finance the construction.
Byron R. White: (Inaudible)
Theodore E. Desch: Yes, sir. We do. I pay under -- we pay a certain charge per tires. I'll explain to you in little more detail later. At the time of the hearing, I should say, we did not have an agreement with the Port District. We were using the tracks without paying compensation. And for that reason, the record has nothing in it about our agreement with Chicago Regional Port District. But the -- we do have an agreement and it bears on these issues in this case.
Hugo L. Black: (Inaudible)
Theodore E. Desch: It was made in the December of 1960, sir, to be effective of January 1, 1961 and it's been effect since.
Earl Warren: After the hearings were closed?
Theodore E. Desch: After the hearing were closed on October 11, 1957.
Earl Warren: (Inaudible)
Theodore E. Desch: Yes, sir without compensation, Mr. Chief Justice.
Earl Warren: (Inaudible)
Theodore E. Desch: None whatsoever except the revenues generated by our movement of freight for tenants of the Port District.
Tom C. Clark: (Inaudible)
Theodore E. Desch: Pardon me, Your Honor?
Tom C. Clark: How many acres on the lake?
Theodore E. Desch: About 350 acres adjacent to Lake Calumet.
Tom C. Clark: It belonged to Pullman?
Theodore E. Desch: It -- it's belongs to Pullman or the holding company of Pullman. You see Pullman is a railroad company and then there was the Holding Company Pullman Incorporated which owned a number of subsidiaries.
Tom C. Clark: Now, how much did you get the District?
Theodore E. Desch: Oh, we didn't pay the District anything. We didn't --
Tom C. Clark: How much you give the District out of 300?
Theodore E. Desch: We gave the District none of that land. These donations by Rock Island and Pullman occurred prior to 1957.
Tom C. Clark: You still have at 300?
Theodore E. Desch: Yes, sir. Substantially except for prices we have sold off from time to time to other industries that it may help --
Tom C. Clark: What you gave the district in the city was the riparian rights?
Theodore E. Desch: The riparian rights and dedication of land for street highway purposes in that sort of thing.
Tom C. Clark: Do you say Mr. Desch that the Rock Island would then the district now carries traffic in the investment roads?
Byron R. White: Yes, sir.
Tom C. Clark: Now, where do you pick it up?
Theodore E. Desch: At the various yards around the Chicago switching districts where we first --
Tom C. Clark: Their yards or?
Theodore E. Desch: Their yards and our yards where we presently interchange traffic. They give us cars of freight and we switch them to the port.
Tom C. Clark: The port is open, is it?
Theodore E. Desch: Yes, it is. It's approximately 10% constructed today according their plans that were introduced in events in 1957.
Tom C. Clark: Is --
Theodore E. Desch: The same facilities that were constructed at the time of the hearing exist today with no change.
Tom C. Clark: Well at least, we're all getting and they have to -- do they need new trackers, I don't understand this?
Theodore E. Desch: There are -- No, sir. There won't be additional track it's in the port. As a matter of fact, --
Tom C. Clark: Not in the port?
Theodore E. Desch: To the --
Tom C. Clark: I understand that you now pick up there traffic at your yard and their yards --
Theodore E. Desch: That's right.
Tom C. Clark: -- and within that area and bring to the port.
Theodore E. Desch: That's right.
Tom C. Clark: Now if they get in, what do they do?
Theodore E. Desch: Well if they get in, they will have to construct the short piece of track in order to gain access to Port District trackage and the -- if they construct and then grab each other trackage rights over segments of their various railroads. This will permit each one of these six operating railroads to gain access to the port. And each one, according to their plan will move in and out, twice a day, deposit cars for the yard --
Tom C. Clark: So you look -- did you use all the traffic of there that you now carry?
Theodore E. Desch: And we will lose all of that traffic, exactly. Yes, sir.
Tom C. Clark: How about the proportion of you told traffic. Is that -- is this like it show?
Theodore E. Desch: Perhaps the record does disclose that but I can't recall.
Tom C. Clark: Does your traffic increased efficiently since?
Theodore E. Desch: Increased sir? No, it hasn't. As a matter of fact in 1958 which was the first full year of operation at the port, our traffic at the port was that the level of about 17,000 or 18,000 cars. And I believe that the traffic at the port has not since that time gotten back up to that level perhaps with the exception of one year. In other words, the traffic dropped after the port opened.
Tom C. Clark: Why do they want to go in there, I don't understand?
Theodore E. Desch: I'm at lost to explaining myself to be honest with you.
Abe Fortas: But there was nothing in your agreement with the District to the effect that the District will not permit any other railroad to use the tracking that's within the District, was there?
Theodore E. Desch: No, sir. Our agreement --
Abe Fortas: We didn't bargain for that.
Theodore E. Desch: No.
Abe Fortas: Now the ICC nine years ago, an order authorizing these railroads -- these other railroads to build up to the District, is that right?
Theodore E. Desch: That's right.
Abe Fortas: What's happen in those nine years? Don't forget to tell me that?
Theodore E. Desch: Well, the short answer sir is that because of the applicants inability to negotiate a satisfactorily lease agreement between the six operating railroads in the Port District. Approximately four to five years were wasted with various supplemental applications for the Commerce Commission and the various withdrawals of agreement from the Port District and submission of additional agreements. Finally, in 1962, I remember the hearings were held in the 1957. The Commission approved the so-called non-exclusive used agreement covering that applicant's operations over the Port District's tracks. Now, we participated in none of those negotiations. We don't have a thing to do with it. For us to sign the non-exclusive use agreement, what I mean, our capitulation in the agreement that these other railroads could serve the port.
Abe Fortas: And what happen between 62 and 65 on the District Court in its order?
Theodore E. Desch: Various pleadings were filed before the Interstate Commerce Commission and the complaints and supplemental complaints filed before the three-judge District Court. The oral argument before the Court and a considerable period of time before the Court entered its opinion and decision.
Abe Fortas: So this is sort of part of course, isn't it?
Theodore E. Desch: You might say that, yes, sir.
Abe Fortas: For transport, isn't it?
Theodore E. Desch: Yes, that's right.
Byron R. White: Well, if the -- is the support fully develop now in the sense that whatever plans they worked for it have now been --
Theodore E. Desch: Not at all Your Honor. I plan to get into that in just a moment in great detail but the port was constructed in at according to estimates, according to the proposal for its construction. It was a 10% complete in 1957 and it is still just 10% complete.
Byron R. White: In other words, the project had to been contemplated in some 10% complete now.
Theodore E. Desch: Yes, Your Honor.
Byron R. White: And the thing was at 1957?
Theodore E. Desch: Yes, Your Honor.
Byron R. White: Why should I -- I must confess it's a complete confusion. What Mr. Posner told us, one of the problems but it hasn't got beyond 10%. If it gets beyond 10%, you have to let these other six roads in.
Theodore E. Desch: Well, that would be there contention. There's no question about it but we submit that's ridiculous. There are so many other factors which control --
Byron R. White: Why -- why is ridiculous in terms of number of cars. You say that now about 17,000 cars, right?
Theodore E. Desch: It's about -- right.
Byron R. White: Everything comes in on Rock Island?
Theodore E. Desch: That's right.
Byron R. White: And that's because you pick up any traffic of those roads as well as others directed to the port.
Theodore E. Desch: That's right. The industries at the Port generate the traffic and receive the traffic. In fact, that one railroads presents there or six railroads presents there. It wouldn't have anything to do with traffic generation -- generating circumstance.
Byron R. White: The things are moving half of these could be involved that they have Michigan attempts not the only competition would be involved is that competition for carriage of the traffic from in this -- to or from an industry inside the Port to where it is that you pick up this simply traffic now?
Theodore E. Desch: It's about right.
Byron R. White: I mean, how many miles is that?
Theodore E. Desch: And that's why we say that --
Byron R. White: 60 miles or -- 60 or?
Theodore E. Desch: --with just within the Chicago switching District. Just a matter of a few mile and that's why we say that the Commission in --
Byron R. White: Is that the only -- is that the only rate of constitution that you really thought about?
Theodore E. Desch: As far as the New York Central is concerned because we operate to the west and to the southwest, of New York Central of east.
Byron R. White: All -- all these paints all about is to do -- has the great privilege of carrying within the District at some rail head and also with --
Theodore E. Desch: Oh, no. Pardon me Your Honor. I misunderstood your question. Considerably more than that is involved there. Part of the applicants here are direct competitors of Rock Island, that western and south western railroads. And we contend as in Judge Edwards in his dissenting opinion below found. We the Rock Island have $800,000.00 in line whole revenue that would be subject to diversion annually if these applicants got into that port.
Byron R. White: Because some of this at the same destination with --
Theodore E. Desch: Yes, sir.
Byron R. White: And right now, no one would choose to have sent -- to send some traffic to a destination you serve over some other railroad concerning the same destination because it has to be a switching charge with and delay --
Theodore E. Desch: That's generally correct Mr. Justice White, yes.
Byron R. White: So as long as you're in there, you got a --
Theodore E. Desch: We that -- that --
Byron R. White: -- you got an operator --
Theodore E. Desch: The railroad --
Byron R. White: -- you think you served.
Theodore E. Desch: -- the railroad that serves the industry is locally general controls the tracks and that's why we seek to keep these applicants out.
Earl Warren: What is the difference in these people by reasonable fact that is (Inaudible)?
Theodore E. Desch: I'm sorry Mr. Chief Justice, I --
Earl Warren: The six railroads want to come in.
Theodore E. Desch: Yes.
Earl Warren: They can't come in hour and a half, they have to take your service (Inaudible) at the end of the District --
Theodore E. Desch: Yes, sir.
Earl Warren: What is that that cost you then?
Theodore E. Desch: This evidence on this subject was offered in great detail at the hearing. We submit that it would cost them more than they would enjoy in revenues and there's a great deal of detail that the must be considered in determining what those cost are which I really can't explain to you without reading it from the record. But we submit that those expenses would exceed their revenues in certain cases and would consequently be improvident. That's why we contend that this should improve among other things and the improvident operation in allowing the applicants into the port.
Earl Warren: (Inaudible)
Theodore E. Desch: Generally speaking that's correct.
Hugo L. Black: (Inaudible)
Theodore E. Desch: So -- some of amount we admit but --
Earl Warren: -- substantially --
Theodore E. Desch: It's not substantial. It's called the terminal switching allowance. When a line whole railroad moves cars into a switching district like Chicago and those cars are destined to an industry which is not local to that railroad. Then that line whole railroad must switch those cars to the switching carrier which does have that industry local to it. And the in --
Earl Warren: And substantially (Inaudible) --
Theodore E. Desch: We submit not.
Earl Warren: I beg your pardon?
Theodore E. Desch: We submit that it would not -- it wouldn't benefit the shipper because of this so-called terminal switching allowances are absorbed by the line whole carrier. They are not passed along to the shipper freight in any fashion.
Earl Warren: May I ask you this one other question. You said the port was said the Secretary of State what was said. It is still not a conviction (Inaudible).
Theodore E. Desch: There are number of factors. The very opposition of some these railroad applicants to traffic on the St. Lawrence Seaway. You see, some of these eastern railroads that apply to get into the Port really opposed the St. Lawrence Seaway. They don't want to see that to take traffic away from them. So that's one consideration but I would say that generally the biggest consideration is the other failure of the St. Lawrence Seaway to generate great lake shipping traffic that it was expected to generate.
Byron R. White: Is that true of all the ports?
Theodore E. Desch: I think by and large that's true.
Byron R. White: I mean, this isn't just a question of carrying a harbor not being able to compete against other ports --
Theodore E. Desch: Yes, sir. Mr. Justice White, I believe you're correct.
Byron R. White: Which -- which is right?
Theodore E. Desch: That it would affect all ports.
Byron R. White: And the other ports have the same experience?
Theodore E. Desch: I think that's correct.
Byron R. White: There may have been rosy predictions other ports and they haven't found it either is that what you think?
Theodore E. Desch: I think that maybe correct. I don't know but I --
Byron R. White: Do you think -- well, how do you know then that this isn't Calumet Harbor its effort? And it just walked out as comparative -- competitive to another port. Mr. Posner's point is that, if the third degree of traffic is important -- is an important factor in how well Calumet competes with other ports that it might -- might be competing for the same traffic. Now, you can state Calumet Harbor didn't had -- had been very well that maybe true but what if it is after that, the other ports have been well and Calumet Harbor just lost out.
Theodore E. Desch: I submit that that's not the case here. I think that the failure of St. Lawrence Seaway to live the expectations because it is effective to all ports in the Great Lakes system just about the same.
Byron R. White: The trouble is that none of this -- in the record material is that --
Theodore E. Desch: There's the trouble. Now, we ask this Court to take judicial notices and some facts which I'm getting in a moment and we feel that they're very revealing and they help prove --
Byron R. White: Didn't you ask to say -- didn't ask the ICC to take notice of the same thing?
Theodore E. Desch: Yes.
Byron R. White: What they say to you?
Theodore E. Desch: They refuse to do it and we consider that as an abuse of discretion.
Byron R. White: -- why should we second guess the ICC on the relevance or the significance of this kind of information that's been there business to deal with?
Theodore E. Desch: We don't ask this Court, sir to take -- to second guess to the ICC.
Byron R. White: Isn't that exactly what you ask the ICC?
Theodore E. Desch: No, we're not. We're asking this Court --
Byron R. White: Well then why shouldn't you ask them first?
Theodore E. Desch: We did asked the inters --
Byron R. White: So you are asking us the same as you ask them?
Theodore E. Desch: I won't agree with you sir.
Byron R. White: You're asking us --
Theodore E. Desch: We're asking this Court --
Byron R. White: -- and the Court of Appeals --
Theodore E. Desch: -- we're asking this Court to determine whether or not the District Court below applied the proper standards of review correctly.
Byron R. White: Well, that's to affirm the Court of Appeals, don't you?
Theodore E. Desch: The District Court, three-judge court --
Byron R. White: This defining the District Court now?
Theodore E. Desch: That's right.
Byron R. White: And then you walk out here victory, you know. What you were hearing to?
Theodore E. Desch: That's right. No. It is --
Byron R. White: You want one?
Theodore E. Desch: If I -- if I may correct my statement. The court below correctly remanded this proceeding to the Interstate Commerce Commission for further hearings and say that was right.
Byron R. White: Further hearings on what?
Theodore E. Desch: On all issues before the Commerce Commission in the first place.
Byron R. White: I see.
Earl Warren: May I ask one more question as you asked the (Inaudible)?
Theodore E. Desch: Yes, sir. After the St. Lawrence Seaways had opened a year or two, they open in April of 1959. We have a case in many times in this proceeding because of the piecemeal approach to this case and the Commission took to file further pleadings before the Interstate Commerce Commission. And each time we got an opportunity, we used it. We tried to bring to the attention of the Commission facts which had to come into our attention. You see it's our contention here that at the time of the hearing in 1957. There were really no facts upon which to base the crucial findings of the Commission as the future convenience and necessity. Soon as we got an opportunity to submit those facts, the Commission we tried to do it but we were not permitted to do it.
Earl Warren: (Inaudible)
Theodore E. Desch: That's true.
Earl Warren: (Inaudible)
Theodore E. Desch: That's right. That's why we suggest that these petitions -- these applications of the applicants were premature.
Earl Warren: I just want to (Inaudible)?
Theodore E. Desch: No, we don't contend that, Your Honor.
Earl Warren: (Inaudible)
Theodore E. Desch: No, we don't contend that here. Now at the hearing, the railroad applicant said that there were plans for the future. They would render inadequate the presently adequate rail service that Rock Island furnished at the port. Now, just what was the evidence before the Commission in 1957? This so-called evidence may be summed up this way in our view. First, that Lake Calumet Port was designed to become the major deepwater port facility in the Port of Chicago. Tonnage anticipated to be handled through like Lake Calumet Port subsequent to the opening of the St. Lawrence Seaway would be in the range of $30 million to $58 million tons per year, rail traffic to and from Lake Calumet Port during the coming the year in 1958. Now the hearing was held in 1957, would be approximately 27,000 car loads a year and could easily increase to 76,500 by 1962, possibly 115,000 cars per year by 1968 and anywhere from 250,000 to 350,000 carloads per year when both sides of the lake were developed. Now, this is the kind of fantasy the Commission considered as evidence. Now, further so-called evidence considered by the Commission when the Port would be completed. There would be 13 docking ships. By 1960 a third grain elevator and five additional transits sheds would have been constructed. On the eastside of the lake, the largest commercial tank farm in mid continental America would be built by 1964 to 1967. There was no other evidence in the record with respect to the expected rail traffic at the Port. None of these predictions has to come to pass. Traffic -- rail traffic at the Port is very much the same today as it was in 1957. Now in light of this evidence and we submit to this is really no evidence at all and the fact that presently adequate rail service at Lake Calumet. The District Court correctly rejected the major findings of the Commission. Now, here is where we come to grips with the real issue on this case. It's simply to substantiality test. It prescribed by Section 10 (e), the Administrative Procedure Act. The crucial findings rejected by the court below and I quote them, “The time has come when additional rail service at the port is required for the future development of the industries now or here after located at the Port.” And I quote further, “If the applicants can prove as they have herein that the propose construction either presently or in the reasonably near future is necessary to meet the public meet and will be reasonably profitable, we may issue a certificate.” Now, this is the crucial finding that the court below found not supported by substantial evidence. In light of the evidence before the Commission, the proper reviewing standard that there must be substantial evidence supporting adequate findings was correctly applied.
Tom C. Clark: Mr. Desch, what's your conception to what would be the proper evidence the support finding of fact?
Theodore E. Desch: It's a very difficult question Your Honor. It's easier for me to say to you and point out to you, why there was not proper evidence in this case. It is difficult to determine where the level is.
Tom C. Clark: I'm just wondering if there would be any right.
Theodore E. Desch: Oh, I see.
Tom C. Clark: To which you would say those proper evidences?
Theodore E. Desch: I think there would be --
Tom C. Clark: But what? That's I'm trying to get with what?
Theodore E. Desch: That the additional bonds had been sold by the Chicago Regional Port District and that they have additional revenues with which to construct the additional grain elevators, piers, back up warehouses, and transit sheds. That's one thing. Now, they had -- it sold their initial bond issue of $24 million and used every penny of it to build what they had been and what they have now.
Tom C. Clark: Which if they have the traffic they might (Inaudible), is it not?
Theodore E. Desch: That's quite possible, Your Honor.
Tom C. Clark: If there's any indication (Inaudible)?
Theodore E. Desch: I can answer to that only to this extent, Your Honor. I know of no plans that our concretes or no plans at all rather for the issuance of the any further bonds in the construction of any further facilities out there. They are discussing with some developers the possibility of filling the north end of Lake Calumet and creating what has been called the Chicago Metropolitan Food Distribution Center. Now, that's an entirely different proposition from what they had in mind that the hearings in 1957 and what we show in our brief here. This is the photograph introduced by the applicants --
Tom C. Clark: What page is that Mr. Desch?
Theodore E. Desch: That is page 55 of Rock Island brief --
Tom C. Clark: Thank you.
Theodore E. Desch: -- and it's ICC Exhibit number H2 and what it is, is a photograph of a Plaster Perez Model of what the developers of the port had in mind would be done in the future. And the facing photograph which we asked this Court to take judicial notice of is a photograph that was taken in April of this year showing what actually exists out there. It shows you how plans and hopes didn't materialize. Now, the case of American Airlines versus CAB teaches us that future --
Abe Fortas: I suppose it's arguably counsel that --
Theodore E. Desch: Sir?
Abe Fortas: I suppose it's arguable and it hadn't been this nine-year delay, this railroad have been allowed to go ahead as the ICC order would have permitted that situation at Lake Calumet would have been improved. Then it say the history of this country as I read it in large extent compelling among necessary facilities like building of which they took facilities necessary amount?
Theodore E. Desch: It's certainly arguable. I'm sure that they will take that position before the Commission when this case is remanded there. We refer the Court to the case of American Airlines versus CAB which teaches us that future public convenience and necessity must be grounded on a hardcore of factual possibility. Now on the question of the future need at Lake Calumet, none of the evidence introduced before the Commission neither the analysis of the affect upon Great Lakes shipping traffic that would follow the opening of the St. Lawrence Seaway. Now the estimates of tonnage that would be handled at Lake Calumet Port nor when and to what extent the port facilities would be constructed. None of this evidence had a hardcore of factual possibility. We suggest that they were fashion merely from guess, guess works, speculation and surmise.
Tom C. Clark: We have hardcore in this case Mr. Desch?
Theodore E. Desch: Yes, sir.
Hugo L. Black: (Inaudible)
Theodore E. Desch: In the light of --
Byron R. White: You've -- now, the ICC is a -- had a -- the interesting to this before the -- you file with this for the reconsiderations on its basis? Can you --
Theodore E. Desch: Yes, it did.
Byron R. White: That's what you do?
Theodore E. Desch: Certainly did. Yes, Your Honor.
Byron R. White: And what the --what the District Court, three-judge court --
Theodore E. Desch: That's correct.
Byron R. White: Now, you're up here and each stage of the ICC look at your evidence, listen to all this and said it wasn't surmise then and this isn't surmise now apparently. They don't really agree with you on a significant --
Theodore E. Desch: I stand correct and they abuse their discretion in so holding. Yes, Your Honor.
Byron R. White: And you want us to say that the ICC have to reappraised this particular evidence to say the ICC really doesn't want us to?
Theodore E. Desch: Not at all. If I may, all we ask this Court --
Byron R. White: -- do know what they're talking about.
Theodore E. Desch: All we ask this Court to do is to find that the District Court was correct when it conceived --
Byron R. White: In fact, they did know what you're talking about.
Theodore E. Desch: When it can -- when it concluded that the crucial findings of the Commerce Commission were not supported by substantial evidence. That's all --
Byron R. White: Because they really didn't know what they're talking about.
Theodore E. Desch: That's right.
Byron R. White: Definitely know.
Theodore E. Desch: Now, the appellants here they set up a straw man then when they accused us in the District Court of failing to accord the Commission's expertise its due. We'll be the first to admit that administrative agencies are knowledgeable in matters that their supposed to supervise that the Commission here knows all about railroads and that it must and should -- it does, it should use its expertise. Now, there's no question that the Court in reviewing an administrative agencies' determinations should not substitute its judgment for that of the Commissions. We don't ask this Court to do it. We didn't ask the District Court below the Court. However, it seems to us equally clear that the reviewing Court should only -- must determine whether a proper factual foundation with legally sufficient evidence is present in the case. Now, to permit the Commission under unbridle discretion and defining the type of evidence on which it will act with the best the reviewing courts of one of the most important checks they have on administrative discretion.
Byron R. White: I know Mr. Desch you told us amicus that finding as the future was based purely on conjecture etcetera, etcetera. But precisely what was the nature of the evidence without label? I know Mr. Posner told us something of predictions by the general manager of the port, did he not?
Theodore E. Desch: Yes, sir.
Byron R. White: And I think Mr. O'Brien mentioned the head of some very large terminal company --
Theodore E. Desch: Terminal Company. These were all guesses by this gentleman --
Byron R. White: About what?
Theodore E. Desch: -- as to the future would hold.
Byron R. White: I know that what you said, but what other other evidence besides those two, is my question.
Theodore E. Desch: That the --
Byron R. White: On the same nature?
Theodore E. Desch: That so many tons of years of shipping traffic head in prior years moved down the Great Lakes St. Lawrence Seaway route in years. For instance, 1955 and 1956 which in our view would have no bearing whatsoever on the need for need future rail traffic at the Court.
Byron R. White: Now anything else?
Theodore E. Desch: Yes, sir. Now in the court's opinion below, there are two sections which we would direct your attention to. One is a list of findings of the Commission which the Court characterizes as important and for which the court below find substantial support in the record.
Byron R. White: Yes.
Theodore E. Desch: Now, there -- this is at page 1409 of the record, been in record. Lake Calumet the first one we disagree with respectfully but we disagree with it. It is not the Lake Calumet Harbor. It is not the major Deep Water Port facility the Port of Chicago. There are others there are more important as the facts that which we asked this Court to take judicial notice of proof that the -- these other facts that the Port of Chicago --
Earl Warren: (Inaudible)
Theodore E. Desch: Sir?
Earl Warren: You ask this?
Theodore E. Desch: No, I don't. Here are findings of the Commission for which the court below found substantial evidence in the record. Now, what the court below did was to assess each finding of the Commission consider each one and decide whether it had substantial support in the record or not, whether substantial evidence supported it. Now, this list beginning on page 1409 is a list of findings for which there was substantial support according to the Court. Yet, further on beginning on page 1430, there are -- there's a list of findings which the Court decided were not supported by substantial evidence in the record and we submit that these were the crucial findings. Now, the findings of the Court found were supported by evidence were label important findings by the Court and the Court had to go through the Commission's order and comb those findings out and list them. The findings which the Court decided were not supported by the substantial evidence of record were listed in the section of the Commission's order labeled, “finding and conclusions”. And we submit these with the crucial findings of the Commission which destroyed the ultimate determination that future public convenience and necessity required rail service when those findings weren't supported by substantial evidence.
Hugo L. Black: Was there any evidence to show or was there any findings to show that granting certificate to the other railroad would increase the transport?
Theodore E. Desch: No such findings Your Honor.
Hugo L. Black: What you have is nine years later that has not increase in value?
Theodore E. Desch: That is --
Hugo L. Black: There's not been increase was then not feasible?
Theodore E. Desch: That is correct. But we submit there are many other factors which contributed to that result. Not just the fact that Rock Island and Nickel Plate served the port. Things such as the length of the shipping season on the Great Lakes --
Hugo L. Black: Are we to take it that's not of any importance? That we did take it that there's not evidence and no findings and we have no right to assume that the granting of certificates to these other railroads would increase the traffic?
Theodore E. Desch: It is the position of the Rock Island that it would not and there are no findings that --
Hugo L. Black: That physique that it would?
Theodore E. Desch: I'm really not sure Your Honor, to be honest with you.
Hugo L. Black: You say there is no finding at all or no indication from the Commission that other carriers would insist the traffic? That was to justify the question of it?
Theodore E. Desch: I've -- to be -- in my view of it. There is no specific finding on that issue.
Hugo L. Black: If there -- if the evidence is to show them?
Theodore E. Desch: Well of course, they contended at the hearing that all of the evidence offered tended to show that --
Hugo L. Black: That's all the evidence? Did they offer any evidence to show that they were granted certificates to operate? If this is to support the (Inaudible)?
Theodore E. Desch: No, sir. Not that I can point to.
Byron R. White: Oh, I gather that Mr. Posner made this argument that this is one of the basis -- one of the basis for the -- one of the means for the Commission action. They needed competitive service to generate traffic?
Theodore E. Desch: They expected because of the estimates made by witnesses for the applicants.
Byron R. White: Who expected this?
Theodore E. Desch: The Commission. The Commission --
Byron R. White: Did they say it so?
Theodore E. Desch: The Commission expected the traffic --
Byron R. White: Did they say so?
Theodore E. Desch: Yes, sir.
Byron R. White: But why isn't a finding then if it is not that -- that you mean competitive service to generate traffic?
Theodore E. Desch: It is -- it is not a finding to that effect --
Byron R. White: What is the (Voice Overlap)?
Theodore E. Desch: -- Mr. Justice White.
Byron R. White: What's this finding Mr. Desch, its page 1411 of the record? Beginning with some indications that suit the traffic etcetera? Isn't that that in nature?
Theodore E. Desch: Which one sir?
Byron R. White: That's at 1411 is in fact one those did they found supported by substantial support in record, yes. The one beginning with some indications to future traffic do the Port maybe determined from the business generated maybe its half it over?
Theodore E. Desch: Yes, sir. It is.
Byron R. White: Well, isn't that the kind of finding that Mr. Posner was addressing himself to?
Theodore E. Desch: I can see that it is, yes.
Byron R. White: Now, why isn't that sufficient to support the ultimate conclusion?
Theodore E. Desch: Because that finding was not base upon substantial evidence in the view of the court below. If Your Honor please.
Byron R. White: The only -- the thing that puzzles me is the earlier findings which deal with the past and then as I understand this finding at 1411. That in fact is a prediction of the future rested on these findings that proceeded as the past business of the growth of the St. Lawrence Seaway, the New York said there going in there. The tonnage they previously carried. What they're now be able to do able with ships that exceeds 258 deep and vessels 400 to 450 feet length and so forth. And was this a prediction base on that sort of thing that this much then give larger business to the Court provided there was competitive rail service and --
Theodore E. Desch: Well, there's one that is one implication that may arise from reading that finding. Yes, Your Honor.
Byron R. White: Yes.
Theodore E. Desch: But still remains that the issue here, the issue below, was that finding supported by substantial evidence. And we submit that it was.
Byron R. White: But what you're saying anyway is -- whatever the evidence maybe it's in those findings beginning at 1409 up to 1411 which preceded?
Theodore E. Desch: Yes, Your Honor.
Byron R. White: And you don't think those were not?
Theodore E. Desch: That's right. That's correct. Now, this Court has already discussed the problems involved in the exercise of an agency's judgment and attempting to assess the needs of the future. The case we're referring to is U.S. versus Detroit and Cleveland Navigation Company. We believe this decision makes clear, the validity of the decision below in our case. In Detroit and Cleveland, it was noted that forecast of the future are necessary and that uncertainties need not prevent the Commission from taking action. However, the opinion makes clear in that case at the service of the existing carrier had been prior to its interruption during the Second World War, insufficient and inadequate of finding of the Commission which the Court in that case held was supported by substantial evidence. In addition in Detroit and Cleveland, the Commission expressed doubt that the existing carrier would be able to meet foreseeable demands. It is a current we suggest that circumstances in that cases are totally different from ours. We have numerous findings by the Commission that the services of Rock Island and Nickel Plate are more than adequate at present. And that both lines are well prepared to meet the demands of the future. It is further distinction between these two cases, in Detroit and Cleveland that was observed that the case before the Court was not one when there was service being presently rendered but with new commerce seeking entry into the field. Now, here we have a -- precisely that situation. We are rendering an adequate service and new commerce are seeking entry into the field. And for that reason, we suggest that evidence and support of future need must be even more compelling.
Hugo L. Black: What did you state that the evidence might consume without (Inaudible)?
Theodore E. Desch: Well, the -- the shippers at the port of course appeared and testified in favor of the applications. They said they wanted additional service. But that's understandable. All industries want all the service they can get and all shippers would like to have the service of the -- of more than one railroad. The reason that we were the only parties in the proceeding protesting these applications was it -- we were the only parties in the proceeding that stood to lose anything. Our $2,200,000.00 thousands of investment, if Your Honor please --
Hugo L. Black: (Inaudible)
Theodore E. Desch: No, not at all. Of course, we don't.
Hugo L. Black: How can you (Inaudible)?
Theodore E. Desch: Well, all I can do, Your Honor is to refer to the Universal Camera case and the reviewing court must consider the record as a whole including the body of evidence supposed to the Commission's view and making its determination whether or not the findings of the agency are supported by substantial evidence. And we say here, that the court below did just that. They consider the record as a whole and there was a lot of evidence which we offer to post to the Commission's view and reach the proper conclusion. And really it's not for this Court to second guess the Commission as rather the court below as Mr. Posner would suggest you should. In other words, you shouldn't dispose to the issues on appeal with the Supreme Court. If this Court concludes that the court below misconceived the proper reviewing standard or grossly misapplied it. Then by long string of cases in this Court the case should be sent back to the District Court for a proper application of the proper reviewing standards. Now, if this Court or the Department of Practice followed in cases such as Universal Camera and Pittsburg Steamship Company; and take on the burden for determining itself the validity of Commission's decision. The fact since 1957 of which we have asked this Court to take judicial notice make it apparent that were no sufficient factual or legal basis for the determination of the Commission. In our brief, we have set forth within our judgment was the evidential predicate for the Commission's decision. And some these consisted of the assumption that St. Lawrence Seaway would be completed. The estimates of tonnage which were expected down to the Port of Chicago first thence to Lake Calumet Port and the estimates of a tremendous increase of freight car loadings at the port. These were the estimates which the Commission had before it at the time. Now, the data set forth in the Corps of Engineers reports and the annual reports of the Chicago Regional Port District demonstrate beyond question that the opening of the St. Lawrence Seaway has had no appreciable effect on shipping tonnage at Lake Calumet nor upon freight car loadings there. Both of these figures have remained relatively stable since 1959 when the St. Lawrence Seaway was opened.
Hugo L. Black: (Inaudible)
Byron R. White: What?
Theodore E. Desch: The overwhelming failure of any of these estimates to materialize is not only traceable to the disappointing effect seaway had on great lake shipping in general but at least in part to the lack of materialization of any of the plans and hopes for the development of Lake Calumet. Lake Calumet Port is still very much only a shallow lake six miles down from a -- the mouth of the river and Lake Michigan.
Earl Warren: (Inaudible)
Theodore E. Desch: It is my --
Earl Warren: (Inaudible)
Theodore E. Desch: -- it is my understanding, if that is correct Mr. Chief Justice the depth of the St. Lawrence Seaway and the Welland Canal and all those other streams and waterways that had to be open is now at 27 feet graph as I understand it. This should permit just about any ocean going vessels to gain access to Lake Michigan and on the rest of the Great Lakes.
Earl Warren: We've been asking this a few years ago in the (Inaudible)?
Theodore E. Desch: That's right. It is a crucial aspect of Great Lake shipping, the depth and the graph the vessels.
Earl Warren: (Inaudible)
Theodore E. Desch: I believe that the 27 feet of graph is now possible in the whole route of the St. Lawrence Seaway.
Byron R. White: Could you --
Theodore E. Desch: There's one --
Byron R. White: -- just take me on this if not you're the only railroad in there, now if the company -- if the company grains (Inaudible), I suppose that there's one place -- when you put it that's on a railroad?
Theodore E. Desch: Yes, sir.
Byron R. White: If the company is to compete for that company, once they put in there, could the railroads really historically have railroads subjected to sell their lands to competitors of their customers?
Theodore E. Desch: Not at all.
Byron R. White: If you got 300 -- did you got 300 acres of ground up there that I supposed you sell to industry?
Theodore E. Desch: That's quite correct, Your Honor.
Byron R. White: And that you wouldn't have any reluctance at all to set up a competitor that one of your customers?
Theodore E. Desch: Anybody who ships traffic on railroads would be a good prospect for a location in our railroad.
Byron R. White: But the -- the way it is that the ports could have land to sell that I can invest to for the lease in the industry?
Theodore E. Desch: Yes, sir. That's correct. That's its purpose.
Byron R. White: And that you're not the only source of land wherein industrial locations --
Theodore E. Desch: That's right.
Byron R. White: But you are one of them?
Theodore E. Desch: That is correct.
Byron R. White: And that if the other railroads never would be -- they came in here all -- that they would not the only land, would they? They would just have package rights?
Theodore E. Desch: They would just be granting railroad service to shippers.
Byron R. White: And that only would the overall of the -- so that we need a regulating the industrial development is up to the Port District?
Theodore E. Desch: In the sense and insofar as its real property is concerned --
Byron R. White: Yes.
Theodore E. Desch: -- where it doesn't own the land, it doesn't control it.
Byron R. White: Well, I think it's on the area (Inaudible) one way would be used to state an evidence as to the future of this case would be the Port District would issue more bonds and build more terminals, and warehouses, and all of that.
Theodore E. Desch: That's correct. Yes, Your Honor.
Byron R. White: Only you on the terminal have land for that purpose within --
Theodore E. Desch: Oh, no. The -- there are other owners of land. As a matter of fact, Pennsylvania Railroad bought a parcel not too far from Chicago Regional Port District's land. And that it purchase the land at least it back to the shipper. Just one word --
Byron R. White: Have you taken judicial knowledge of the fact that it increase in the number of railroads, would increase the business traveling through that point?
Theodore E. Desch: I respectfully suggest Your Honor that you couldn't --
Byron R. White: (Inaudible)
Theodore E. Desch: -- as I don't consider that that is a fact that it was so well established that it is common knowledge to a people who are consider experts in the railroad business. I just like to spend a word on the point raised by Mr. Posner with respect to the non-exclusive use agreement covering the applicants' use of the Fourth District Tracks. As I said before, the Rock Island at the time of the hearing had not signed an agreement covering its use of the Port District's tracks. But after that time, in 1961 did sign. But that agreement provides that upon final adjudication of this proceeding, it will terminate. So in effect if the applicants are successful in this case, Rock Island will be in the position of not having a contract. And then we will be forced to go the Port District and negotiate on terms substantially similar to the terms to that non-exclusive use agreement because it's so provide. So really when the Commission approved that non-exclusive use agreement without a hearing and without given us a chance to cross-examined as to the facts. It approves the contract which would bind Rock Island in the future. And that's why we say, we were deprived of due of process. And the court below --
Abe Fortas: What did they -- did you say that at the time that this contract was laid between the District and the appellants of for use of the rail facilities within the District. You had no contract?
Theodore E. Desch: That is correct. And no, Your Honor. We had a contract. We signed our contract effective January 1, 1961. The ultimate agreement between the applicants and the Port District was not finally entered into until 1962, when it was approved by the Commission.
Abe Fortas: Well --
Theodore E. Desch: They've negotiated that contract over a five-year period. But personally --
Abe Fortas: That your contract provides that when a final contract was entered into Court of Appeals exhaustion with the appellants that you're contract will terminate?
Theodore E. Desch: No, Your Honor.
Abe Fortas: Or it depends?
Theodore E. Desch: Our contract with the Port District provides that upon final adjudication of this litigation one way or another. That contract will terminate.
Abe Fortas: Which part of the litigation?
Theodore E. Desch: This litigation here. If this Court for instance should decide that the court below was incorrect and that the application should be granted and that the applicant should be permitted to gain access to the port. That would be final adjudication at that time. Our agreement with the Port District is to our use of its tracks would terminate by its own terms. Then we would have to negotiate with the Port District under terms of the Commission approved not exclusive use only.
Abe Fortas: Why did you enter into that sort of agreement?
Theodore E. Desch: Well, it was an interim matter. We did know what the future held at the time.
Abe Fortas: Are they --
Theodore E. Desch: We realized that the Port District had a right to some compensation for its tracks. As a matter of fact, it -- in it's prospectus for the issuance of its bonds. They stated to prospective investors that the certain income would be derived from rental of railroad track.
Abe Fortas: Have you paid them for the use of that tracks before 1961?
Theodore E. Desch: No, sir. We had not?
Abe Fortas: But they are entitled to it?
Theodore E. Desch: Well, they contend it that they were. We contended that they weren't and we enter into this agreement without prejudice to our respect to positions in that regard.
Abe Fortas: And now you're complaining because they gave you interim contract. Is that more favorable rate than the contract with the appellants or use in facts within the District?
Theodore E. Desch: We're not complaining about our contract with the Port District. We had it into voluntarily --
Abe Fortas: What -- was it that lower right?
Theodore E. Desch: We say, “Yes, it is.” It amounts to about -- we pay about $20,000.00 a year based upon the level of compensation. But if the -- the flowery estimates that were introduced in evidence by the applicants' witnesses come to pass will have 76,000 cars a year at $2.00 per car, the only thing $143,000.00 a year for the use of the track.
Abe Fortas: Well -- well, wait a minute. Let's take it a lot easier. Suppose to apply the appellant rights to your present use of or you use some then as last year. Would you have to pay more or less?
Theodore E. Desch: We pay about the same Your Honor.
Abe Fortas: About the same?
Theodore E. Desch: Yes, sir.
Abe Fortas: So that at the -- on the basis of your present use of the facilities within the District. Applying the tonnage rate to you would not cost you any interest?
Theodore E. Desch: That's correct.
Abe Fortas: And now, you're getting in your time machine and you want us to take into account the fact that the practical rate may increase.
Theodore E. Desch: According to the applicants, it would. Yes, Your Honor.
Abe Fortas: It is not when the different kind of time machine?
Theodore E. Desch: Well, if the Interstate Commerce Commission is unusual position. It wants to have its case it needed to. If they --
Abe Fortas: Show the rest to us --
Theodore E. Desch: If basis of this issue to the order upon this high traffic potential figures. Yet, it says that the actual payment for the use of the tracks won't be very high because the level of the cars is only at 12,000 or 13,000 cars a year.
Abe Fortas: Now, if they refused -- you say, that the cars -- the contract made with the appellants was normal course the applicable to you some day that you shouldn't been heard --
Theodore E. Desch: Yes, Your Honor.
Abe Fortas: -- on the terms of that contract.
Theodore E. Desch: Right.
Abe Fortas: Now, you work with is that it?
Theodore E. Desch: That is correct.
Abe Fortas: Can you -- sorry that time is expired. Can you tell me less than a minute, exactly what happen procedurally I mean the -- of the (Inaudible)?
Theodore E. Desch: Well, it may take longer than that. It's really a long torturous procedure but there were three --
Abe Fortas: But you may very briefly (Inaudible) in your time?
Theodore E. Desch: I think I can answer you very shortly.
Abe Fortas: -- that you answer for the information? Is that were enough to (Inaudible) --
Theodore E. Desch: Yes, sir. Many times.
Abe Fortas: On the terms of -- there had been negotiation between the appellants and the --
Theodore E. Desch: On the finally approved not exclusive use again. That's correct.
Abe Fortas: And the Commission denied you an opportunity to excuse, to be heard, to make argument that you sending out.
Theodore E. Desch: That is correct Your Honor.
Earl Warren: Mr. Posner.
Richard A. Posner: We return to Mr. Justice Fortas' question for a moment. The form of agreement between the applicant railroads and the Port District was a part of the record in the original hearing before the Hearing Examiner and its term --
Byron R. White: (Inaudible)
Richard A. Posner: Oh, excuse me. THe original -- the form of agreement between the applicant railroads and the Port District was an exhibit in the record before the hearing examiner. It was subject to testimony and to cross-examination. Now, they finally executed agreement was not subject of a separate evidentiary hearing and as I've said the single material change was in the computation of the rental agreement and our contention is simply that a hearing was not required on that change because it did not raised a serious factual question. A question arose as to whether the Commission had made an expressed finding that additional rail service was necessary to enable the Port to realize its potential and at page 310 of the printed record which is the portion of the Commission's report. There is a paragraph dealing with this. The Commission states, if the time has come when additional rail service at the Port is required for the future development of the industries now or hereafter to be located there and further along --
Byron R. White: Emphasis is on the hereafter?
Richard A. Posner: Well, I -- no. I would put the emphasis on future development and --
Byron R. White: Inferentially, they found what you said. That doesn't say so it's expressly about that?
Richard A. Posner: Further it down the paragraph, I think it is expressed because the Commission says to --
Tom C. Clark: What page now?
Richard A. Posner: 310, which it said, it would be a detriment and hindrance to the full and complete development of Lake Calumet Harbor if it were limited to the service of the single railroad. On --
Hugo L. Black: If that -- did it say to that these are the facts had increased railroad services, to bring more business to the board? That seems to me -- to be rather crucial thing?
Richard A. Posner: I wouldn't -- I wouldn't put it quite that way. I would say that, railroad -- additional railroad service per se will not bring additional traffic to the port. But the potential of the port in terms of its location and facilities to induced additional traffic depends on additional rail service. Additional rail service is a necessary although not as sufficient condition to induce this additional service.
Hugo L. Black: Did you find anything in the -- that indicates that they have finally that in here additional rail service going to increase the amount of business to be divided up among the parties?
Richard A. Posner: No, I don't think the Commission found that. I think what the Commission found was that the opening of the St. Lawrence Seaway and other developments would attract additional service to the Port but --
Byron R. White: Mr. Posner, what about that last sentence that starting at the bottom of page 310? Considering all of circumstance in these proceeding, technically the expansion program now on progress of the port and the increase amount of rail traffic to be made available at the port. We are of the opinion of the additional service of the application was going, what's that mean?
Richard A. Posner: It was certainly the Commission's belief that the Port would grow and would have addi -- and would attract more service so that these additional railroads would be --
Byron R. White: But then -- can it be read and -- I must say although I have this difficulty so often with the ICC thing to prove. Can that be read as saying there's going to be an increase amount of rail traffic necessary for all these other reasons to this Port. And one railroad can handle it and therefore, we got six more? May that be read that way?
Richard A. Posner: I think -- I think what the Commission is saying is, there will be more traffic in business but unless additional service is authorize now at the outset of this development. The development may not materialize --
Byron R. White: Lake Calumet?
Richard A. Posner: Yes.
Byron R. White: Is the St. Lawrence, this is the only entrance, the only way to the St. Lawrence Seaway, I gather?
Richard A. Posner: Right. There are many Great Lakes Ports.
Byron R. White: And -- and Lake Calumet wants -- there's going to be more traffic moving on the seaways?
Richard A. Posner: Right.
Byron R. White: Than there ever has been and if Calumet wants to carry its share, it better get some more railroads, is that what it says?
Richard A. Posner: Yes.
Hugo L. Black: So that it depends on -- how did they arrive in there premises?
Richard A. Posner: That's true. And I like to suggest --
Hugo L. Black: It doesn't depend on whether the railroads observed were going to increase, didn't it?
Richard A. Posner: Correct, yes. And I think that on page 8 of the appellant railroad's brief, there is a list of record citations of the underline evidence which supports this finding.
Byron R. White: You mean more than those that I have referred to earlier Mr. Posner, at 14 or is it 1409 to 1411 of the opinions still more than those?
Richard A. Posner: That -- that is the Commission's finding but I'm referring to the testimony that --
Byron R. White: I see.
Richard A. Posner: -- that supports that finding.
Byron R. White: Oh, the actual evidence.
Richard A. Posner: Yes, the actual.
Byron R. White: Yes.
Hugo L. Black: But the railroad said it has been adequate up today?
Richard A. Posner: The Commission is correct. Yes.
Earl Warren: Then that incidental one, the railroad service in not needed unless that is the future entity by reason of the port?
Richard A. Posner: That's true. But the Commission also found that unless the additional -- unless that rail service was instituted promptly. The port might not develop at all. The Port needed the railroad if --
Earl Warren: They needed the railroads?
Richard A. Posner: Yes.
Earl Warren: They need the railroads is only if they have increased of?
Richard A. Posner: Well, needed the railroads to induce Great Lake shippers --
Hugo L. Black: Does it say that?
Richard A. Posner: That -- that is how I read the language of the Commission's opinion and it is certainly much supporting --
Earl Warren: It's been nine years now. There's been no increase?
Richard A. Posner: Well, as I mention originally to be --
Potter Stewart: Well, that proves the conduct they taken --
Richard A. Posner: To put it very concretely. There was evidence that a Great Lake -- a Great Lake shipper will not pull at a Port if he fears inadequate in the sense of inadequate rail service in the sense of a lack of competitive rail service. He will choose another Port and unless Lake Calumet Harbor has this competitive rail service. The steamship lines are going to stay away from it.
Potter Stewart: Well, isn't that another way Mr. Posner of saying that no the port hasn't grown. You recognize that it has not -- you say it hasn't because these things been held up for nine years?
Richard A. Posner: That's correct.
Potter Stewart: That's what you're saying?
Richard A. Posner: Yes.
William J. Brennan, Jr.: So that's not what they based it on I guess, isn't it?
Richard A. Posner: They did recognize that unless and stated that unless this additional service was authorized the Port might not fulfill its promise. These steamship companies might not call at the port unless is assured of the --
William J. Brennan, Jr.: (Inaudible) They're not training that (Inaudible)?
Richard A. Posner: That's correct.
William J. Brennan, Jr.: -- terminal that where they would regularly (Inaudible) as to what kind of service?
Richard A. Posner: Well, if you take it from the standpoint of the grain merchants say located in the Iowa, some place like that. He has a great number of places of ports of embarkation for here, everywhere from New Orleans to New York to Great Lakes. Now, as purports which do not have what the steamship operators require at -- regarded at the grains service, the ocean rates are going to be higher. And therefore the shipper is going to find a more advantageous rate combination, rail plus ocean rates elsewhere. And just one final point in regard to Mr. Justice Brennan's questions as to what kind of evidence the Commission based its predictions hereupon. I would refer you to pages 841 and 1065 of the printed record.
Byron R. White: 1065 of the (Inaudible) --
Richard A. Posner: Yes. That is the testimony of two professors. One for the applicants, one for appellees who had made learned studies of the potentiality of the port. And I think it indicates the range of factors which the Commission was required to waive.
Earl Warren: Very well. We'll Adjourn.