Court Opinion

ID: 9304250
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:15:18.244921+00
Date Added: 2024-06-11T17:13:49.683658
License: Public Domain

BAKER, Circuit Judge
(dissenting). By the Hepburn act (Act June 29, 1906, c. 3591, § 4, 34 Stat. 589 [U. S. Comp. St. Supp. 1907, p. 900]), the following provision, among others, was added to the interstate commerce law (Act Feb. 4, 1887, c. 104, § 15, 24 Stat. 384 [U. S. Comp. St. 1901, p. 3165 ]):
“It shall be Its [the Commission’s] duty, whenever, after full hearing upon a complaint, * * * it shall be of the opinion that any of the rates, or charges whatsoever, demanded, charged or collected by any common carrier or carriers * * * are unjust or unreasonable, or unjustly discriminatory, or unduly preferential or prejudicial. * * * to determíne and prescribe what will be the just and reasonable rate or rates to be thereafter observed in such cases as the maximum to he charged. * * * All orders * * * shall lake effect within such reasonable time, not loss than thirty days, and shall continue in force for such period of time, not'exceeding two years, as shall be prescribed in the order of the Commission, unless the same shall be suspended or modified or set aside by the Commission or be suspended or set aside by a court of competent jurisdiction.”
Complainants are common carriers whose rates on certain traffic are directed to be reduced by the order complained of. Two grounds for injunction are alleged. One is that the new rates are confiscatory. There is no proof whatever that the rates which the Commission prescribed as just and reasonable are not sufficient to pay the cost of handling that traffic, to cover that traffic’s full proportion of maintenance and overhead expenses, and to return to the carriers an ample net profit. Furthermore, proof is lacking that, if the carriers should reduce other rates to correct what they claim is the maladjustment caused by the Commission’s order, the reduction would not leave them abundant net returns. For the purposes of this hearing, therefore, it must stand as an agreed fact that the present reduction is neither directly nor indirectly obnoxioiis to the charge of taking private property without just compensation.
Discrimination is the other ground adduced by complainants. But the alleged discrimination is not against the carriers. It is against certain classes of traffic of Chicago and St. Louis and other places similarly situated. If it be true that loss or injury will be inflicted by the Commission’s order upon Chicago and St. Louis shippers, they, if any, are the ones to complain. Nothing is added to the carriers’ case by attempting to count upon the grievances of others.
There is only one aspect that I can discover in which the carriers’ case remains for consideration. If the action of the Commission is outside of its lawful powers — if the grant of the rate-making power is itself void, or if, the grant being valid, the present action of the Corn-*690mission is not within the grant — the order complained of is the act of intermeddlers and trespassers. And on that basis the threatened invasion of the carriers’ revenues would require an injunctive decree, whether the reduction woüld be confiscatory or not, or whether the interference would cause discrimination or not.
Certain shippers have been permitted to intervene and adopt the complainants’ allegations regarding discrimination. I am doubtful of their right to stand in these suits as complainants. It is unnecessary, however, to consider that question, for on the evidence they have failed to establish preponderantly and clearly that the alleged discrimination is undue discrimination. Take the Detroit fiber-can maker, for example. He pays 19 cents a hundredweight on the raw material into Detroit and 56 cents a hundredweight on the" finished product out to the Missouri river cities. His New York competitor pays 17 cents on the raw material into New York and 76 cents on the finished product out to the Missouri river cities. The Commission’s reduction of 5 cents a hundredweight, instead of putting the Detroit maker under the heel of his Eastern competitor, would merely deprive him of a small part of the existing advantage in his favor. On the basis of last year’s business, the Detroit man might suffer (if the Eastern maker should give Missouri river purchasers the whole benefit of the reduction) a diminution in his $27,000 net profits to the extent of $1,500 — about five-eighteenths of that part of the net profits attributable to the Detroit man’s advantage in freight rates. In the other instances relied on, a weighing of the testimony leads to the same general conclusion, namely, that if the carriers, of their own initiative, had made the reductions in question, the shippers in Central Traffic territory could not establish by the evidence in this record that there was undue discrimination. If, however, these interveners are proper co-complainants, they are entitled to have their existing advantages protected from an invasion that has no warrant in law. But since that is the same question that arises on the bills of the complainant carriers, it is immaterial whether the interveners have any better standing than that of friendly advisers of the court.
Is the Commission’s order void for want of jurisdiction to make it? The question is not whether a lawful power or authority has been shown to have been wrongly exercised, but whether there is any law at all for the power or authority claimed and exercised.
No contention is made that the portion of the Hepburn act herein above quoted is void on account of its being an unconstitutional delegation of legislative power. I assume, in the absence of specific assault, that the precedents have virtually placed that question beyond profitable debate. If Congress cannot constitutionally make a general declaration that the rates shall be reasonable and not unjustly discriminatory, and then trust an executive body to hear evidence and decide questions of fact respecting reasonableness and just discrimination, the power of Congress over rates would be worthless, for it would be utterly impracticable for Congress itself to make enactments to cover the specific instances.
*691No contention is directly made that the. rate provision of the Hepburn act is void for indefiniteness and uncertainty. A direct answer, sufficient for present needs. I think, would be that the instructions to the Interstate Commerce Commission are as definite and certain as those given by state Legislatures to state commissions in commerce acts that have been upheld by all the courts. But that the rate provision of the Hepburn act is void for indefiniteness and uncertainty may indirectly be asserted in and by complainants’ proposition that the particular way in which, or ground upon which, the Commission proceeded in these cases to reduce rates is not a way or ground included among those ways and grounds along and upon which Congress authorized the Commission to act.
I find in the rate provision no naming of specific grounds upon which the Commission must base its action. Such a naming would, of course, exclude all other grounds except those of the same nature. It is true that the initiative in rate changing remains with the carriers, and that the Commission can take jurisdiction only of those rates that are complained of, and can change such rates only after a full hearing. But neither can courts, of their own initiative, investigate and decide controversies. Limitation of procedure by which a subject-matter may be reached is no limitation of the power to deal with the subject-matter after it has been reached in accordance with the prescribed procedure. And 1 believe that the judicial department should not claim the exclusive right to make wrong decisions which shall be impervious to collateral attack.
Going further, and assuming that it is proper to inquire into the Commission’s reasons for making these orders, I do not find that complainants’ criticisms are justified.
Taking the opinion of the Commission in the Missouri river case in its entirety, it seems fairly clear to me (though certain parts removed from their context may create a doubt) that two issues were separately considered and passed upon. The first was the reasonableness of the $1.47 seaboard-Missouri river rate in and of itself. The fact that the $1.15 rate from the seaboard to St. Paul and the Chicago-Kansas City rate of 47 cents on traffic destined tO' Texas common points were profitable rates was considered as evidence that on the basis of cost of operation the seaboard-Missouri river rate was “unreasonably and unjustly high.’’ The other issue was what, if any, reduction could be made “without doing injustice elsewhere.” In substance, it was found that the St. Paul rate was influenced by lake competition, and the Texas rates by Gulf competition; that it would not be fair to the Twin Cities to deprive them of that part of the difference (all the difference except nine cents) which was fairly attributable exclusively to lake competition; and that the reduction to Western jobbers could be made, with probably great benefit to the prosperity of the country as a whole by reason of the extension and increased usefulness of centers of distribution, and without probably unduly affecting the commercial situation of Chicago and St. Louis. In short, it seems to me that the Commission took into consideration *692all the pertinent facts and circumstances affecting the questions presented by the complaints before them.
If, however, it were conceded that the controlling consideration, without which the rate would not have been changed, was the Commission’s intention to establish additional basing lines, the orders, in my judgment, would be .within the power granted by Congress. One possible system of rate-making would be to adopt the postage method of a uniform charge throughout the whole country, irrespective of distance. Another would be to divide the country into zones, and adopt a uniform charge from any place within one zone to any place within another zone irrespective of distance. Another system would be to base the charge absolutely upon mileage. None of these has ever become established on American railroads (though I believe the use of any of them, because not expressly denied, was open to the Commission). But, if any serious meaning is to be attributed to the rate-making provision in the Hepburn act, there should be no doubt' that Congress did not intend to deny to the Commission the right to use the very system which the railroads have developed and established in this country.
While cost of service must not be lost sight of in any system of, rate-making, in the American system the prime factor has been the character of the merchandise and the volume of the traffic therein. That is, the prime factor has been the value of the service to commerce rather than the cost of the service to the carrier. In other words, I the prime factor has been to charge what the traffic will bear; that is,not to charge what the traffic will not bear. For example, the discovery of natural gas in Indiana led to the establishment of steel, glass, and tinplate mills, which could be operated profitably on account of the cheap fuel. When the natural gas failed, those mills would have been compelled to quit on account of the high cost of transporting their manufacturing materials, if they had not obtained very cheap coal. The traffic managers of the railroads considered the situation and greatly reduced the rates on coal consigned to those mills, while maintaining the old rates on the very same kind of coal from the very same fields to other consumers in whose cases the carriers’ cost of the transportation service was the same. The Indiana Railroad Commission held this not to be an unjust discrimination. This illustration gives a glimpse of the statesmanlike breadth of vision which traffic managers have quite generally employed in building up and maintaining the commerce of the country (and thereby the ultimate interests of their companies).
The principle of considering what the traffic will bear — what rates will best promote traffic as a whole — early led to the establishment of tapering rates. And while in former times competition (or pooling or other arrangement to avoid competition) was influential in determining rates to basing points (places common to two or more railroads), tapering rates invariably developed on the lines separatelv (in the absence of competition) by reason of the desire to encourage and promote traffic.
*693The first consolidations of minor lines into main lines from the East terminated at Buffalo, at Pittsburg, and at Parkersburg. Through those cities was drawn the Ene that separates Trunk Line territory from Central Traffic territory. The next extensions were to Chicago and St. Louis — to the line that separates Central Traffic territory from Trans-Mississippi territory. The rate from New York to Buffalo was less than the rate from New York to Syracuse, say, plus the rate from Syracuse to Buffalo. The New York-Buff alo haul was on one line, and the rate structure was built on the tapering plan. But when the new and separate line was extended to Cleveland, the rate from New York to Cleveland was likewise made less than the rate from New York to Buffalo plus the rate from Buffalo to Cleveland. And similarty the rate from New York to Chicago was made less than the rate from New York to Cleveland plus the rate from Cleveland to Chicago. The same thing was true of traffic from the Pacific coast; the San Erancisco-Chicago rate being less than the sum of the in and out rates of Salt Lake City, Denver, or Kansas City. That is, in considering what rate in relation to distance a commodity could pay consistently with the largest volume and increase of volume of traffic, it was found (railroad economics being empirical) that the tapering plan should, as a general rule, be carried across the separate ownerships and across the dividing lines between “traffic territories.”
When the federal government in quite recent years began to lay an effective restraining hand upon traffic management, the separately incorporated carriers had not extended the tapering plan across the dividing line between Central and Trans-Mississippi territory. Rebating was condemned (and may have been stopped). Discriminating in favor of industries or localities in which the carriers were privately interested was condemned (and may have been stopped). That was unjust discrimination. But the just discrimination which traffic managers founded on an untainted discernment of commercial conditions, growths, relations, and possibilities has never been condemned by Congress. Congress has not indicated any disapproval of the rate system that was actually developed between the Atlantic seaboard and the Mississippi. The presumption is, I think, that Congress desired the development of the tapering system of rates to continue, and expected that the carriers, when the population and purchasing power of the West should have sufficiently increased, would extend the same system beyond that they had brought to the Mississippi. The river is insignificant as a physical obstacle. The difficulty of arranging through transportation, if not already negligible on account of community of interests and various intercorporate relations would be no greater than it was in the cases of the lines east and west of Buffalo and of Pittsburg. The initiative has been left to the carriers; but not the ultimate determination. If the carriers have decided that a barrier shall stand till they say otherwise, nevertheless the growth in population and commerce will go bn in the West and increasingly call for the removal of the harrier. If, by reason of the carriers’ refusal, the Commission is required to act, 1 believe Congress in the Hepburn act expressed its intent that the Commission should be free to employ the *694system of tapering rates (to be applied as a general, not an unalterable, rule) ; should be free to make the same kind of discriminations that the carriers could lawfully make if they had taken the initiative; should be free to consider the value of the service to the country’s commerce rather than merely the cost of the service to the carriers; should be free, while securing to the carriers an ample immediate return, to adjust the rates so as to bring forth the largest volume and increase of volume of the country’s commerce as a whole.
Complainants say that such vast power in the hands of the Commission might be used arbitrarily, to the ruin of particular regions or cities. That, of course, is not a conclusive argument that the power does not exist. To allow carefully selected public officers to exercise under the sanctity of their official oaths the same power over cities and regions that the carriers confessedly may exercise does not strike me as such a monstrous thing. And if dangers appear in the exercise of the grant, I think the remedies lie with the appointive power, that determines the personnel of the Commission, and with the legislative power that can at its pleasure amend or repeal the interstate commerce law.