Court Opinion

ID: 8789461
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:46:18.676194+00
Date Added: 2024-06-11T17:03:15.678372
License: Public Domain

GRUBB, District Judge
(concurring). I desire to add a few words concerning the first and fourth grounds assigned by the plaintiff for the issuance of the temporary injunction. v
First, As to res adjudicata. Upon this point the inquiry is whether the issues presented for determination under the present and second supplemental bill are identical with those determined by the final decree upon the first supplemental bill in this cause. To answer this inquiry it is necessary to ascertain what were the issues presented under the respective supplemental bills. An examination of the record in the original case convinces me that the master and the district judge found only that the system of statutory rates, comprised in the Eight Group or 110 Commodity Rate Acts, the Maximum Passenger Rate Act, and the Maximum Freight Act, was confiscatory in its operation upon the entire intrastate business of the plaintiff.
It is true that the pleadings were broad enough to present the same issue as to the operation of the 214-cent passenger rate in and of itself, and possibly there is evidence in the record tending to establish its confiscatory nature without reference to the statutory freight rates. It is clear to me, however, that the master and the district judge did not attempt to determine the operation of the 2%-cent statutory passenger rate apart from its companion statutory freight rates. The finding of the master, approved by the court, was that the passenger rate, in connection with the freight rates, and contra, had the effect of making the entire intrastate business of the plaintiff unremunera-tive. This appears from the language of the master’s report and of the opinion and decree of the district judge. The Supreme Court of the United States in the Minnesota Rate Cases have since determined that the problem ordinarily presented in state-made rate cases is the effect of the statutory or commissiommade rates upon the intrastate business of the carrier in its entirety.
It is true that the district judge stated in the course of his opinion that the evidence showed that the passenger business of' plaintiff in Alabama cost the plaintiff to earn a dollar as much or more than its freight business*, from which the inference is sought to be drawn that, as the entire intrastate business was held to be unremunerative, both passenger and freight were separately so held. If the court had intended to find the effect of the statutory passenger rate, in its operation on plaintiff’s intrastate business separately, it is not conceivable that it would have left this finding to be inferred. It is not contended that there was any express and explicit determination of the effect of the passenger rate as there was of the entire schedule of rates. The evidence submitted would not have enabled the master or the district judge to have made either an exact or approximate separate determination of that kind, and there had been no period of experiment of the effect of the statutory passenger rate in its operation, apart from the statutory freight rates, up to the date of the final decree. The only separation *49of passenger and freight business shown by the record was merely incidental to the distribution of the plaintiff's entire business in Alabama as between intra and inter state business according to the method of plaintiff's expert accountant, whose method was adopted by the master and the district judge.
The data to enable the court to reach a correct approximate conclusion being absent from the record, and the report of the master and the opinion and decree of the district judge containing no express finding as to the separate effect of the passenger rate, it is fair to presume that none was made. The assertion in the opinion that the passenger business was not conducted more profitably than the freight business is not a finding that the 2I/d-cent passenger rate, apart from its connection with the statutory freight rates, so substantially contributed to a loss of revenue as to cause confiscation. It is true that the mandatory paragraph of the final decree separately enjoined the Commission from enforcing each of the rate statutes; but, upon tlie question of res adjudicata, this paragraph is to be controlled by the preceding paragraph which sets out explicitly the court’s finding and which, properly construed, contains no such finding, but only a finding that the entire statutory system of rates, both passenger and freight when taken in connection with each other, was confiscatory.
is the issue so found by the court the same in substance as that presented by the second supplemental bill on which the temporary injunction is now asked? It is clear that if the defendants had restored the entire statutory schedule of rates, freight and passenger, after the passing of the decree enjoining them, they could have overcome the defense of res adjudicata only by showing a change of conditions occurring since the decree, having the effect of making the plaintiff's intrastate business remunerative, at the time of such restoration, under the statutory rates. Conceding that such action could he taken under their general and independent rate-making power and without apphing to the district court under the permissive terms of the decree, it could only prevail against tfie defense of the previous adjudication by a showing of that character. If all tlie rates were restored together, the one significant change of conditions (i. e., the operation of the 2x/>-cent passenger rate in connection until the plaintiff’s voluntary and higher freight rates instead of the statutory ones) would not have occurred, and change of conditions could be predicated only upon reports of plaintiff’s earnings and expenses for operations after the date of the decree, showing a different status from those considered by the court.
However, in this case the Commission restored, by the order complained of, only the passenger rate, and the final decree in the original cause, enjoining the enforcement of the statutory freight rates, left it open to the plaintiff to put in force voluntarily any freight rates that were reasonable and would prove remunerative, and it had at the time of the Commission’s order availed itself of this right as to the rates affected by the Eight Group Acts. The situation which confronted the Commission when it made the order complained of was therefore a materially different situation from that which confronted *50the district court when it entered the final decree in the original cause. The difference consisted in the fact that the plaintiff was then earning more on its intrastate business, by reason of the restoration of its voluntary freight rates, than it had been earning during the period of experiment from June 1, 1909, until the date of the final decree, when the statutory freight rates as well as the 2%-cent passenger rate were being enforced against it. The statutory passenger rate might well have been held to be confiscatory in its operation on plaintiff's intrastate business, when taken in connection with the reduced statutory freight rates, and yet may prove fully, compensatory when taken in connection with the higher voluntary freight rates in force when the order restoring the statutory passenger rate was to take effect. This question, as well as the question as to whether the passenger rate, wh’en considered without reference to changed conditions, contributed substantially, of itself, to reduce plaintiff's intrastate earnings below the remunerative point, have never been judicially determined as between the parties and both are open to contestation under the present bill.
Fourth. The confiscatory effect of the 2%-cent passenger rate. In order that the rate complained of be shown to be confiscatory, the plaintiff must establish: (1) That its entire intrastate business in Alabama, after the restoration of the voluntary freight rates affected by the Eight Group Acts, in connection with the enforcement of the 2%-cent passenger rate by the Commission, will prove unremunera-tive; and (2) that the 2%-cent passenger rate is so unreasonably low as to substantially contribute to this result.
The rate complained of is probably not entitled to the presumption of correctness which usually attends commission-made rates, in view of the fact that the opinion of the Commission shows that it reached its conclusion that the 2%-cent fare was reasonable, not by reliance upon changed conditions, shown either by the restoration by plaintiff of voluntary freight rates or by the consideration of earnings and expenses during the period between the final decree and its order, but by discarding the methods of apportionment adopted by the master and the district judge by which they arrived at the contrary conclusion, and by the adoption of different methods. While the methods of apportionment adopted by the master and the district judge on the final hearing are not conclusive on this hearing, they are entitled to as much or more weight than a finding of the Commission based on different methods of computation and apportionment, and avail to remove any presumption of reasonableness that would .otherwise arise from the rate fixed by the Commission. The burden is nevertheless on the plaintiff to establish with reasonable certainty that the rate complained of is confiscatory, as is asserted in the new supplemental bill.
The plaintiff seeks to establish the proposition that, even with the higher voluntary freight rates in force, the entire intrastate business, under a 2%-cent passenger rate, would prove unremunerative by methods of computation and apportionment substantially like those used on the final hearing in the original cause, applied to statistics *51of earnings and expenses reported tinder the operations since the final decree and since the restoration of the freight rates pursuant to its authority. On the other hand, the defendants assail the methods of the apportionment so used to ascertain the value of the property devoted to intrastate passenger business and the proportion of expense properly chargeable to it, on the grounds advanced before the district court upon the final hearing.
it cannot be true that we are concluded by the methods of apportionment adopted upon the former hearing in this cause. If it is our duty to decide the ultimate fact of the reasonableness of the 2%-cent rate as against the defense oí res adjudícala interposed by plaintiff, it is clearly our duty to decide it according to what are now correct methods of apportionment, though they may differ from those adopted upon the former hearing. This is as true of methods of apportionment as it would be true of an erroneous arithmetical rule, if such ati erroneous rule had entered into the previous calculation. Any other principle could serve only to perpetuate the error, if any existed, and to render any future hearing, for this reason, a futile one. It is our duty to follow the methods of apportionment used upon the former hearing so far, and only so far, as we believe they are calculated to produce correct results and to conform to the law as it now stands.
Without entering upon any detailed analysis, I think the plaintiff’s methods of apportionment of values and expenses, both as between inter and iutra state business and passenger and freight business, are subject to some of the criticisms presented by defendants’ counsel. The reply contention of plaintiff is that, conceding the justice of the criticisms for the sake of the argument only, they are not of sufficient importance to change the result; that there were omitted items, now supplied, and to credit for which plaintiff is entitled, that more than offset the errors on the other side; and that the confiscation is so palpable that erroneous methods, if they exist, may be safely ignored, as was done by the Supreme Court in certain of the recently decided rate cases.
After a full study of the record and briefs, T am not reasonably satisfied that the plaintiff’s methods of apportioning values and expenses as between passenger and freight and inter and iutra state business are calculated to produce the certain results that are now exacted of a common carrier, seeking the aid of a court to restrain the enforcement of statutory or commission-made rates, by the decisions of the Supreme Court in the 'Minnesota, Missouri, and Arkansas rate cases, recently decided. The difficulty, if not the impossibility, of reaching the requisite certainty, as intimated in these decisions, in the absence of accounts currently kept by the carrier, showing the result of operations properly distributed, is emphasized by the necessity for the double distribution between freight and passenger and between inter and iutra state business which the exigencies of this case require and by the fact that the proof on which the ascertainment rests on this application consists of ex parte affidavits, not contradictorily taken. *52Upon the values used upon the former hearing, without correction and upon the defendants’ computation and division of expense between passenger and freight traffic, the entire passenger traffic of plaintiff in Alabama would yield a return slightly in excess of 8 per cent., and upon the defendants’ corrected values a return of 7.22 per cent. On the other hand, the plaintiff, by its values and methods of division, reaches the conclusion that it receives no substantial return upon its passenger business, inter and intra state, in Alabama. This is not a case, therefore, where methods of division can be ignored, since the question of confiscation depends upon which of the values and methods is to be adopted by the court as the correct one.
The plaintiff must also reasonably satisfy the court of the second proposition that any deficiency in intrastate earnings below the point of remuneration, that may exist, is substantially contributed to by the enforcement of the reduced passenger rate. That rate cannot be said to be so unreasonably low as to be confiscatory, unless its operation is attended with that result. -Even though the intrastate earnings have reached the unremunerative point, it does not follow that every rate reduction thereafter is an act of confiscation. It is conceivable that the reduction of a specific, rate may be inconsequential in its effect on the entire intrastate business, or at least of not sufficient consequence to constitute confiscation, or that, by increasing the amount of business done at the lower rate, it may be attended with no loss of earnings or even with an increase. In such a case the fact that the entire intrastate earnings of a carrier did not, either before or after the reduction, yield a fair return would not condemn the reduced rate.
If the record in this case shows no substantial loss in plaintiff’s passenger earnings attending the reduction of the passenger rate, while it was enforced, as compared with the periods when the 3-cent rate was effective, it will satisfactorily appear that there was no confiscation. A conclusion upon this question may be reached upon admitted facts and figures without resort to complicated and disputed methods of apportionment. A comparison of the annual gross passenger earnings of the plaintiff’s railroad in Alabama from the fiscal year ending June 30, 1907, up to February 28, 1913, the last month available, as reported by the plaintiff, will serve to show the effect of the operation of the two rates. Of this period the 3-cent fare was in force from July 1, 1907, to June 1, 1909, and from April 17, 1912, to February 28, 1913, and the 2%-cent fare was in force from June 1, 1909, to April 17, 1912. A tabulated statement of reported gross passenger earnings for the fiscal years 1907, 1908, 1909, 1910, 1911, and 1912, showing intrastate, interstate, and total separately is appended.
Passenger Revenue.
Tnf'M’K'f’n'fp Tni'vnsfnfii T’rtfnl
Fiscal year ending June 30, 1007.$764,300.78 $1,110,583.93 $1,SS3.S34!71
Fiscal year ending June 30, 1008. 797,315.56 1,087,558.44 1,884,'874.00
Fiscal year ending June 30, 1900. 785,028.30 918,117.59 1,703,145.72
Fiscal year ending June 30, 1910. 823,171.86 972,717.42 1,795.S89.2S
Blscal year ending June 30, 1911. 854,563.34 1,072,605.07 1,927,168.41
Fiscal year ending June 30, 1912 . 929,023.20 1,167,097.77 2,096,720.07
*53The fiscal years 1907, 1908, and 1909 (except one month) are years during which the 3-cent fare was operative. The fiscal years 1910, 1911, and 1912 (except 2(4 months) are years in which the 2(4-cent fare was operative.
Inspection of the table shows that the interstate gross passenger earnings of plaintiff have increased each fiscal year during the series, without exception; that intrastate passenger earnings decreased from the year 1907 progressively until the year 1910 and from that year progressively increased each year, until for the year 1912 they had passed the high-water mark of the year 1907. Total passenger earnings of plaintiff iti Alabama decreased for the years 1909 and 1910 over the years 1907 and 1908, which were substantially alike, and beginning with the year 1910 progressively increased, until for the year 1912 the total earnings in Alabama exceeded those for the year 1907 by $212.826.26. In the same year (1912) the interstate passenger earnings in Alabama exceeded interstate passenger earnings for the year 1907 by $164,722.42, and the intrastate passenger earnings for 1912 exceeded those for 1907 by ,$48,113.84. The 2(4-ccut rate was in effect the fiscal year ending June 30, 1909, up to April 17, 1912. The year ending june 30, 1907 was the most pros-perólas year the railroads of the country have experienced. It was followed by the panic of October, 1907, and the panic years of 1908 and 1909. Earnings during the panic years were naturally abnormally small, and a comparison of the year 1907 with those years would be misleading. The year 1912 was a typical year of prosperity and affords a fait year of comparison with the last preceding year of prosperity, which was 1907. Such a comparison show's that passenger earnings under the 2(4- cent rate for both inter and intra state traffic were materially in excess of those for this most prosperous previous year. It is true that, if a normal increase had been added each year to the previous year from 1907 to 1912, the excess of 1912 over 1907 would have been much greater, but the intervening panic years account for the absence of continuous normal increases during the period of comparison. It does not seem that confiscation can be predicated upon a rate which, during the last year it was effective, produced an increase in intrastate earnings over the intrastate earnings of the preceding most prosperous year, and which did this, not only' without causing a reduction in interstate passenger earnings for the same year, but wdien these earnings were also greatly in excess of those of the same prosperous year of comparison. Whether this result was obtained by' a stimulation of passenger business due to the reduced fare or to the normal growth of the tributary country during the intervening years, or to the increase of travel always attendant upon the return of good limes, it remains true that for some reason the conditions in 1912 were such that plaintiff could conduct its passenger business in Alabama, under the reduced rate, with results that compared favorably with its passenger earnings for the most prosperous year in the history of our railroads, and hence without confiscation.
*54The same rate produced the following increases in intrastate gross passenger earnings during each of the three years of the period of its operation over the preceding year:
1910 over 1909. $54,599-83
1911 over 1910. 99,887.65
1912 over 1911. 95,092.70
—as compared with decreases for the years 1909 over 1908 and 1908 over 1907 when the 3-cent fare was effective. However, these, as stated, were panic years and not fair standards of comparison.
The aggregate increase on plaintiff’s intrastate gross passenger earnings for the three years when the 2%-cent fare was effective was $249,488.18. During the same period the interstate gross passenger earnings increased $143,994. The total passenger returns for the plaintiff in Alabama increased $393,575.08. Percentages of increase were respectively 27.2 per cent., 18 per cent., and 23.1 per cent for intra, inter, and total passenger receipts.
It may be true that the increase in intrastate earnings for the first year during which the 2%-cent rate was effective over the last year the 3-cent fare was effective was partly at the expense of the interstate earnings through the custom of the interstate passengers re-buying tickets at stations near tire Alabama state line to get the benefit of the reduced Alabama rate, as is shown-by the reduced comparative increase in interstate earnings for that year. However, the increase of the second year in which the reduced rate was effective over the first and of the third year over the second (which were each in greater amount) cannot be so accounted for, since the same fare was in effect during each of those years. The motive that induced interstate passengers to avoid paying the 3-cent fare by rebuying their tickets at state line stations, with the incident trouble of re-checlcing baggage when they had any, would also tend to induce intrastate passengers to travel as infrequently and as few miles as possible and so tend to restrict intrastate passenger travel under the 3-cent fare, and for a like reason the reduced 2%-cent rate would to some extent stimulate such travel. However, it is not necessary to attribute the admitted increase in passenger travel to the reduced rate. It concededly exists, and, whatever may be its cause, it avails to show'that a rate under which such returns are possible cannot.be now confiscatory, whatever might have been said of it under previous conditions of traffic. Otherwise reductions of passenger rates would never be justified because of increased earnings due to increased population and denser traffic conditions, such as appear from the affidavits of plaintiff’s witnesses to have obtained on its line in Alabama. So the percentages of increase might or might not have been greater under a 3-cent fare, dependent upon how much or how little the increase was due to stimulation caused by the lower rate; but in view of the very substantial absolute increase in each class of passenger earnings over each preceding year, bringing them finally above all previous records, confiscation cannot be predicated merely on diminished percentages of increase over what might have obtained under the 3-cent fare.
*55It is contended that the 3-cent fare itself did not yield a fair return on the property devoted to intrastate passenger business, and so affords an improper basis for comparison. If is, however, voluntarily maintained in other states by the plaintiff and ivas voluntarily fixed by it as the uniform rate for its branch and main lines in Alabama and is the maximum passenger rate in all parts of the United States with few and restricted exceptions. If the plaintiff’s methods of apportionment show the 3-cent fare to be unreinunerative, it argues that such methods may prove too much. Increased gross earnings under the lower rate might be handled at so great an increased expense as to make the returns uuremimerative on the increased business. The record shows, however, that the intrastate passenger trains of plaintiff ivere never filled to their capacity before the time of the final hearing and so could accommodate the increased travel with little additional expense. It shows also that but two new trains were added during the period of comparison; that they were both interstate trains, not essential for the accommodation of intrastate passengers; and that the additional train cost, outside of these two trains, was small. The expense, other than the train cost, including terminal expense, of the increased travel is obviously small. So that the increases in gross earnings under the reduced rate would not be consumed to any appreciable extent by increased expenses caused by its handling.
A comparison of results of operation after the 3-cent fare was restored on April 17, 1912, and until February 28, 1913, the last available month, with the earnings for the corresponding periods while the 2J->-cent rate was in force, shows no such differences as would indicate confiscation. They are as follows:
Intrastate Passenger Revenue.
May, 1909, to February, 1910. $ 791.,108.84
May, 1910, to February, 1911. 880,10(5.05
May, 1911, to February, 1912. 967,672.15
May, 1912, to February, 1912. 1,056,(582.99
Increases in Intrastate Passenger Revenue.
In Dollars. In Percentage.
1910-11 over 1909-10. 891,997.21 12.08
1911-12 over 1910-11. 81.566.10 9.20
1012-18 over 1911-12. 88,610.84 9.16
The increase in revenue since May 1, 1912, with the added %-cent due to the increase in rate, is below the normal in percentage and not substantially above the average of increase for the two years next preceding, in amount. If the restoration of the 3-ceut fare has worked no greater differences than these in plaintiff’s intrastate earnings, it is difficult to understand how the 25,4-cent fare can be held to be 'confiscatory.
For the reasons assigned in the opinion of Circuit Judge Shelby and those herein expressed, whatever conclusion may be reached upon the final hearing after fuller presentation and by witnesses subjected to cross-examination, I am of the opinion that the plaintiff, at this stage of the cause, has not shown with the degree of certainty *56now exacted of it in this class of cases that the rate complained of would be confiscatory if put in present operation.
Note. — See, also, Seaboard Air Line Ry. v. R. R. Commission of Alabama (C. C.) 155 Fed. 792; Louisville & N. R. Co. v. Railroad Commission of Ala. (C. C.) 157 Fed. 944; Central of Ga. Ry. Co. v. Railroad Commission of Ala. (C. C.) 161 Fed. 925; Louisville & Nashville R. R. Co. v. Railroad Commission of Alabama, 170 Fed. 225, 95 C. C. A. 117; South & N. A. R. Co. v. Railroad Commission of Ala. (C. C.) 171 Fed. 225; Louisville & Nashville R. R. Co. v. R. R. Commission of Alabama (D. C.) 196 Fed. 800; Louisville & N. R. Co. v. R. R. Commission of Ala. (D. C.) 205 Fed. 800.