Court Opinion

ID: 9419665
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:50:51.589832+00
Date Added: 2024-06-11T16:42:12.461324
License: Public Domain

Me. Justice Reed,
dissenting.
The Court has set aside an order of the Interstate Commerce Commission which was entered May 8, 1944, on a Commission report of the preceding March 25th. 258 I. C. C. 133. The order covered investigations instituted
*521upon separate petitions of carriers in North Carolina, Kentucky, Alabama and Tennessee to determine whether the maintenance of intrastate fares in these states at levels below fares and charges established for application to interstate traffic in respective states on October 1, 1942, caused undue or unreasonable advantage, prejudice or preference between persons or localities in intrastate commerce on the one hand, and interstate commerce on the other, or any such discrimination against interstate commerce. 49 U. S. C. § 13 (4). The petitions sought, too, prescription of fares and charges by the Commission to remove any preference, advantage, prejudice or discrimination found to exist. See also Alabama v. United States and Davis v. United States, post, p. 535. This dissent is applicable both to this and that opinion.
Without summarizing the entire report we call attention to a finding which it contains that traffic moving under these lower intrastate fares is not contributing its fair share of the revenues required to enable appellees (the interstate carriers) to render adequate and efficient transportation service and that this “unlawfulness should be removed by increasing” the intrastate fares to the level of the interstate fares. 2581. C. C. 154,155, Findings 5 and 6. This finding, if supported by evidence, is in our opinion sufficient to justify the applicable order of May 8th which is under review in this appeal. That order required the carriers to maintain and apply intrastate fares on bases no lower than those applied by the carriers in interstate transportation to, from and through the four states.
The Interstate Commerce Commission has the power to make this order on a valid finding of such discrimination against interstate commerce. 49 U. S. C. § 13 (4). It has long been established that this section delegates a valid power of regulation of intrastate rates to the Commission. Railroad Commission v. Chicago, B. & Q. R. Co., 257 U. S. 563. Cf. Minnesota Rate Cases, 230 U. S. *522352, 432, and Houston, E. & W. T. R. Co. v. United States (the Shreveport case), 234 U. S. 342, 351. It gives authority to the Commission to raise intrastate rates so that that traffic may produce its fair share of the required earnings. United States v. Louisiana, 290 U. S. 70, 75. And that authority does not depend upon the recapture, in whole or in part, of excess earning of individual railroads under the requirements of the Transportation Act of 1920, 41 Stat. 488, § 15a, now repealed, Emergency Railroad Transportation Act, 1933, 48 Stat. 220, § 205, for creation of a general railroad contingent fund for financing the national transportation system of railways. Section 13 (4) was not changed by the Act of 1933. This section in conjunction with the revised and reenacted § 15a of the Interstate Commerce Act now empowers the Commission, in accordance with the statutory provisions, to remove the discrimination against interstate commerce by prescribing intrastate fares.1 Florida v. United States, 292 U. S. 1, 4, First. Cf. Illinois Commerce Comm’n v. Thomson, 318 U. S. 675, 682. This Court today recognizes this rule. The four states attack the finding of discrimination against interstate commerce, which finding is essential to the validity of the present order to maintain intrastate fares at the level of interstate fares, on the ground that there is neither finding nor evidence that the intrastate rates are *523not producing a proper proportion of the carriers’ needed revenue. This Court sustains the attack as sufficient to invalidate the Commission order. We think the argument, which the Court has sustained, has its source in a misconception of the purpose of this present proceeding.
The petitions were filed by the carriers, the investigation was made and the order under dispute here was entered to coordinate the intrastate passenger fares in these four states with the passenger fare structure of the entire country. 258 I. C. C. 133. There had been a number of recent proceedings involving the national structure. The evidence, which will be referred to later, presented in those proceedings is, we think, properly to be considered in this investigation and the power of the Commission to require intrastate fares to conform to interstate fares in the four states is to be appraised in the light of a purpose to establish a national passenger rate structure. The Court apparently accepts as a premise the contention of the states that the present proceeding is an isolated investigation by the Commission into an application by the respective carriers in the four states to have their intrastate fares' raised to the level of their interstate fares because the intrastate earnings were below a fair proportion of the carriers’ total required income.2 Instead we think that *524these proceedings are but another step in the comprehensive regulation by the Commission of the general passenger fare structure.
Basic Interstate Fares. The basic passenger fares were first investigated on a national scale by the Commission in Passenger Fares and Surcharges, No. 26550, decided February 28, 1936. In this proceeding carrier coach and pullman fares respectively were fixed at not to exceed 2 and 3 cents per passenger mile. 214 I. C. C. 174, 256.3 The order, see paragraph 3, page 257, left these respondent roads in the southern territory free to continue certain experimental fares, which were as low as 1.5 cents per mile in coaches. A ten per cent increase, applicable to both the basic 2 and 3 cent fares and the experimental fares, was allowed on January 21, 1942, in a proceeding before the Commission, docketed as Ex parte No. 148, Increased Railway Rates, Fares, and Charges, 248 I. C. C. 545, 549, 564, 566, 612. A reference to the Commission’s *525decisions in the above proceedings will indicate the full hearing which was given the fare problems in those cases. In the Passenger Fares case, the report of the Commission, 214 I. C. C. at 175, shows that all carriers by railroad subject to the act were made respondents and that a committee of the State Commissioners cooperated with the Commission in determining the issues. In the Increased Railway Rates case, all the states were notified of the pendency of the proceeding and a committee of the state commissions also attended the hearing and oral argument and conferred as to the determination of the issues. 248 I. C. C. at 549. All rail carriers were again before the Commission.
After the ten per cent increase, the railroads of southern passenger association territory filed, on July 14, 1942, a petition in Passenger Fares and Surcharges, No. 26550, seeking a modification of paragraph 3 of the conclusions, 214 I. C. C. at 257, to enable them to file tariffs increasing their coach fare to 2.2 cents (2 cents plus 10 per cent). The Commission ruled that its former decision in No. 26550, 214 I. C. C. at 256, permitted all railroads, respondents therein, which included applicants, to charge a basic fare of 2 cents and that a general increase of 10 per cent on these rates had been authorized in Ex parte No. 148, and that therefore the Commission could and it did authorize the application of the 2.2 cent basic rate to interstate rates in southern territory. The Commission by order of August 1, 1942, directed that the petition in No. 26550 be denied, evidently because the order in that number had been superseded by the “Increased Rates” proceedings, Ex parte No. 148, and that its order in Ex parte No. 148 be modified to effectuate this increase and that it be left otherwise unchanged.4 The participating *526carriers then approached the separate state authorities to obtain their consent to the increase for intrastate passenger traffic in accordance with the recitation in the order of January 21, 1942, in Ex parte No. 148.5 On the refusal of the rate regulatory authorities of North Carolina, Alabama, Tennessee and Kentucky to authorize the application of the increased interstate basic coach fare of 2.2 cents, with corresponding adjustments for pullmans, to all intrastate fares, this present proceeding was initiated by the carriers to secure the Commission order of May 8, 1944, here involved, which requires the application of a basis no lower than their present interstate basis to intrastate fares, notwithstanding the refusal of the state rate authorities to authorize a similar application. The commissions of the respective states, and the Price Administrator for himself and the Director of Economic Stabilization intervened.
The foregoing references make plain that beginning with the comprehensive investigation of passenger fares, which was instituted by Commission order of June 4,1934, and resulted in the order of February 28,1936, 2141. C. C. 174, the state regulatory authorities have not only been advised of the rate proceedings but have participated in *527them. The record specifically shows this participation except in the supplementary proceeding under docket No. 26550, which was filed July 14, 1942, and resulted in the order of August 1, 1942, in docket Ex parte No. 148. This August 1, 1942, order, note 4 supra, permitted increasing the carriers’ interstate fares of 1.65 cents per passenger mile (the 1.50 cents of the 1936 experimental southern district fares, then adjudged by the Commission to be “not unreasonable or otherwise unlawful,” 214 I. C. C. 257, par. 3, and the ten per cent increase thereon of Ex parte No. 148, 248 I. C. C. 545, 564-66) to 2.2 cents. There was no occasion or requirement for hearing or report by the Commission or notice to the states of the petition of the southern passenger association carriers for permission to apply this 2.2 cents basic passenger rate to their interstate traffic.
The southern railroad passenger rate problem was stated in the terms of “what reasonable fare basis will meet with the greatest revenue response from the public?” 214 I. C. C. at 201. The conclusion of the Commission is thus summarized at page 255, finding of fact No. 11:
“Giving appropriate consideration to all of the evident circumstances and conditions which are likely to affect the ultimate revenue result to respondents, a maximum-fare basis, one way and round trip, for general application, of 2 cents per mile in coaches and 3 cents per mile in pull-mans would be most likely to lessen the transportation burden of respondents and to harmonize with present-day economic conditions, with consequent fuller assurance to the respondents of realizing a fair return upon their property investment. There is doubt whether at least in the southern district a coach fare of 1.5 cents per mile is not producing better revenue results for those respondents than would any higher fare, and it may also be that round-trip fares on both coach and pullman traffic at a lower rate per mile than the one-way fares herein pre*528scribed would bring to respondents better revenue results than the higher fares. These matters are left to the discretion of respondents.”
This resulted in the following provision by the Commission, at page 257:
“3. The present experimental fares in the southern and western districts and on the Norfolk & Western are not unreasonable or otherwise unlawful.”
Obviously this provision was to make clear that the current lower rates of the southern carriers were not disapproved. It cannot properly be read, even though entirely isolated from its context, as a requirement that the southern carriers should continue to apply this lower basis to their passenger fares. The preceding provision limited the regular passenger fare structure of all railroads, including of course the southern carriers now appellees, to a maximum of 2 cents per passenger mile in coaches, without prejudice to lower fares. Lower fares were “discretionary” with the company. The accompanying order limited maximum interstate fares generally to 2 cents and contained no reference to the lower experimental fares. Thus a national interstate basis schedule, universally applicable,6 was established by the report and order in docket No. 26550, the Passenger Fares and Surcharges decision, and this basis was increased to 2.2 cents per mile by the January 21, 1942, order in Ex parte No. 148, 248 I. C. C. 545. Consequently when the southern carriers, appellees here, petitioned on July 14, 1942, seeking a modification to permit the publication of interstate passenger tariffs in conformity with the previous conclusions in No. 26550 and Ex parte No. 148, no further investigation, report or notice to anyone was needed.
The interstate basis had been fixed at 2.2 cents a few months before. Carriers and states alike had acquiesced. The carriers now wished to exercise the discretion to raise *529fares, which discretion had been reserved to them in No. 26550, 214 I. C. C. at 255, and subsequent conclusions 2 and 3, at 256. All that was necessary was to modify the order in Ex parte No. 148 of January 21, 1942, which had approved, “as proposed,” a requested ten per cent increase in fares “as published in passenger tariffs,” 248 I. C. C. 550, 565, and the order, note 5 supra, so that the limitation “as published in passenger tariffs” would be removed. The appellee carriers had outstanding published tariffs of 1.50 cents when the January 21, 1942, order was entered. The August 1, 1942 order removed the limitation. See note 4 supra.
The preceding paragraphs under “Basic Interstate Pares” demonstrate, we think, that no further hearings or findings by the Commission were necessary to enable the Commission to authorize the application of the national basis of 2.2 cents to their interstate fares by the appellee carriers, instead of the 1.65 cents in effect prior to the order of August 1, 1942.
Discrimination Against Interstate Commerce. The Court holds, however, that even if it is assumed that the order permitting the interstate basic fare of 2.2 cents is valid, it does not follow that the intrastate passenger traffic earnings on the 1.65 cent rate are not contributing a fair proportion of the required total earnings of the road. The Court points to evidence from which the Commission might have found that the 1.65 cent basis, or a lower, basis than 2.2 cents, would produce sufficient to meet the intrastate contribution. Evidence is set out in the Court’s opinion showing greatly increased passenger earnings. The Court concludes that as such evidence is presented in this record, the Commission must make finding that no lower fare will produce intrastate traffic’s proportion of revenue before requiring the application of the interstate 2.2 cent rate to intrastate fares.
This argument, we think, flows from another phase of the same misconception to which we earlier referred as *530the source of the Court’s erroneous conclusion. These proceedings ought not to be treated as isolated efforts to secure higher intrastate rates because the present intrastate rates are not producing their fair share of the total required income. To the Court’s requirement, which it reads into §§13 (4) and 15a, of a specific finding on the issue of whether the present 1.65 cent intrastate rate produces now the proper intrastate proportion of revenue, there seems to us a conclusive answer. The interstate maximum was adopted by the Commission on the assumption that the intrastate rates would be adjusted to the same level. Therefore revenue from intrastate rates at the interstate fares is required to produce the needed income.
In this present proceeding the validity of the interstate rate of these carrier appellees was re-examined.7 Evidence as to each appellee carrier of former deficits from its entire passenger traffic prior to 1942 was noted. Evidence as to their passenger operating ratios, their increased expenses, their net earnings on passenger business and other operations also, was received and appraised. Attention was called, 258 I. C. C. 142, to the fact that the previous investigation into passenger rates, Ex parte No. 148, had anticipated the earnings during war years, page 142, and their need for deferred maintenance and war service, page 148. The interstate basic rate was found just and reasonable. See Alabama Intrastate Fares, 258 I. C. C. 133, 137.
The figures used were aggregate figures for past passenger receipts and expenses. Audits for representative periods showed the estimated amount of additional *531revenue from the increased intrastate fares.8 The statistics for the net railway operating income were introduced which covered all receipts and expenses. The evidence of train service in the respective states led the Commission to find that travel conditions were “substantially similar,” 258 I. C. C. 154. If the Commission’s conclusion as to carrier revenue needs assumed equal intrastate and interstate fares and if the present interstate rates were held “just and reasonable,” it follows that the finding that the lower intrastate rates were not contributing their fair share of the “revenues required to enable respondents to render adequate and efficient transportation service” was proper. This logically led to the finding 6, that this failure of intrastate traffic to contribute its part discriminated against interstate commerce.
The determination of the necessary basic interstate rate in all these proceedings was made on the supposition of intrastate rates of equal level. When general basic rates, fares or charges are fixed by the Commission, the Commission necessarily gives consideration “to the need of revenues sufficient to enable the carriers, under honest, economical, and efficient management to provide” railway transportation at the lowest cost. § 15a. Therefore when interstate rates are fixed with the supposition of an equal level for intrastate rates, for substantially similar service, it requires a contribution on that basis from intrastate rates to avoid intrastate discrimination against interstate traffic. If it appears that interstate fares have been fixed with the supposition of an equal level for intrastate *532fares, then it is clear that intrastate rates are not producing their expected revenue. The Commission thus would have manifested its consideration of the statutory requirements of §§ 13 (4) and 15a that due consideration be given revenue and efficient management in finding unjust discrimination against interstate commerce and in prescribing the intrastate rate which would remove the discrimination. See United States v. Carolina Carriers Corp., 315 U. S. 475, 489.
In the proceeding in which these southern interstate carriers were permitted to apply the general basic interstate coach rate of 2.2 cents, the order therein of August 1, 1942, by adopting the order of January 21, 1942, in Ex parte No. 148, 248 I. C. C. 545, required the appellee carriers to make application to. the state authorities for similar intrastate increases. See note 5, supra. The required applications led directly to this litigation.
Both in Passenger Fares and Surcharges, 214 I. C. C. 174, 257, par. 5, and Increased Railway Rates, Ex parte No. 148, 248 I. C. C. 545, 565-66, which are the two investigations which brought interstate coach fares to a maximum of 2.2 cents per passenger mile, the Commission itself ordered the numerous intrastate fares which were under its direction because regulated by the Commission through previous § 13 proceedings, modified in accordance with the interstate fares. As pointed out in the preceding paragraph the order in Ex parte No. 148 required application to state rate regulatory bodies for authority to increase the intrastate passenger rates to the same level. Specific consideration was given to various objections raised by state commissions to the proposed new fares and rates, all with an eye to securing future compliance by the states with the interstate rates to be set by the Commission. See 248 I. C. C. at 560, 565, 574, 580, 582. In the Passenger Fares investigation, the figures on passenger traffic reflect the aggregate use of trains without consideration of a division of the traffic between inter- and intrastate. 214 *533I. C. C. 174, 176, 179, 180, 185, 200, 209, 221, 230, 231. The Commission said at page 187:
“At the time the 1920 increase was authorized many of the States prohibited passenger fares above certain amounts per mile, most of them 2 cents or 2.5 cents, and section 13 orders by us became necessary in order to bring the intrastate fares in those States up to the interstate basis.”
The tables of passenger statistics in the appendices do not separate the traffic. Revenue from all passenger traffic was the dominant motive. See “Fact Findings,” page 253. Evidence in Ex parte No. 148 likewise related to aggregate revenue. So did the expected increases.
“On the basis of traffic, both interstate and intrastate, moved during 1941 and moving when the petition was filed, allowing for readjustments required by commercial and traffic conditions, petitioners estimate that the proposals will yield increased revenue for all class I railroads of about $356,956,000 per year.” 248 I. C. C. 552.
The interstate increase of Ex parte No. 148 “became effective on intrastate traffic in all of the States” by state order. 258 I. C. C. at 136. The general considerations on the decline in railroad passenger traffic which motivated the Commission in establishing the new interstate rate applied to both intrastate and interstate traffic. 214 I. C. C. at 176; 248 I. C. C. at 551. As a matter of fact, separation of interstate and intrastate income is not required by the Commission in its annual reports. 49 C. F. R. § 120.11 et seg. These proceedings convince us that the Commission reached its conclusion as to the proper interstate rate with the understanding that the interstate rate would be applied to intrastate traffic and that such revenue as might result from that application was needed by the carriers involved to furnish adequate service.
Under § 13 (4) of the Interstate Commerce Act in proceedings as to unjust discrimination against interstate commerce, the issue is not the earnings from intrastate *534traffic but the appropriate proportion of those earnings as compared with earnings from interstate commerce. Section 15a requires consideration of costs, economy and adequate transportation service. Section 13 (4) requires a finding of discrimination against interstate commerce as a basis for regulation of intrastate commerce, 258 I. C. C. 154-55, pars. 5 and 6. It may be that the earnings from intrastate commerce may sometimes be one percentage of aggregate earnings and at another time another percentage. The Commission may conclude .that the carriers’ required revenue may best be obtained from intrastate passenger fares rather than from freight rates. The reverse was once true. Cf. 214 I. C. C. at 227. These are matters for Commission decision.
The language of 15a has been modified from its original form in the Transportation Act of 1920 so that it no longer specifically empowers the Commission to deal with fares and rates of carriers as a whole for the nation or as a whole in designated territories or rate groups. We think, however, that the present statute, “In the exercise of its power to prescribe just and reasonable rates,” the Commission shall give consideration to various named factors, is adequate to permit general rate regulation under 15a and § 1 (5). This power has been unquestioned. See Passenger Fares and Surcharges, 214 I. C. C. 174, and Class Rate Investigation No. 28300 and Consolidated Freight Classification No. 28310. It is the only practicable approach to the problem. See discussion in New England Divisions Case, 261 U. S. 184, 196. We cannot treat the present proceeding as disassociated from the general investigation into passenger fares. United States v. Louisiana, 290 U. S. 70, 76-79. We think it is adequately shown that the orders in the general investigation were predicated upon the assumption that intrastate passenger traffic would have an equal basis with interstate traffic for fares.
*535Unjust or Unreasonable Intrastate Fares. It may be that the intrastate fares prescribed by the Commission are unjust or unreasonable in certain items. The report of the Commission provides a remedy for such a situation:
“The foregoing findings are without prejudice to the right of the authorities of the affected States, or of any interested party, to apply for modification thereof as to any specific intrastate fare on the ground that such fare is not related to interstate fares in such a way as to contravene the provisions of the Interstate Commerce Act.” 258 I. C. C. at p. 155.
The remedy for a readjustment of the basic interstate fare or for a separation of the levels of interstate and intrastate fares is by application to the Commission for reopening of Passenger Fares and Surcharges, 214 I. C. C. 174.
We do not consider the other points which are raised by the appeal.
The Chief Justice, Mr. Justice Roberts and Mr. Justice Frankfurter join in this dissent.

 The present § 15a, 49 U. S. C., reads as follows:
“(1) When used in this section, the term ‘rates’ means rates, fares, and charges, and all classifications, regulations, and practices relating thereto.
“(2) In the exercise of its power to prescribe just and reasonable rates the Commission shall give due consideration, among other factors, to the effect of rates on the movement of traffic by the carrier or carriers for which the rates are prescribed; to the need, in the public interest, of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service; and to the need of revenues sufficient to enable the carriers, under honest, economical, and efficient management to provide such service.”

 Compare the following excerpt from the opinion of the Court:
. “But the question posed by the Commission’s conclusion was whether the particular North Carolina railroads were obtaining from North Carolina’s intrastate passenger rates their fair part of such funds as were required to enable these particular railroads to render adequate and efficient service. The Commission made no findings as to what contribution from intrastate traffic would constitute a fair proportion of the railroad’s total income. It made no finding as to what amount of revenue was required to enable these railroads to operate efficiently. Instead, it relied on the mere existence of a disparity between what it said was a reasonable interstate rate and the intrastate rate fixed by North Carolina. It thought this action was justified by this Court’s opinion in Illinois Commerce Comm’n v. United States, 292 U. S. 474, 485.”

 States made the earliest efforts to limit passenger fares. E. g. Kansas, 1901, § 66-167, Revised Statutes of Kansas (1923); North Dakota, 1907, §4796, Compiled Laws of North Dakota (1913); Illinois, 1907, § 170, Callaghan’s Illinois Statutes Annotated (1924); Iowa, 1913, §8126, Code of Iowa (1924). Such limitations were, of course, not uniform. On May 25, 1918, by General Order No. 28, the United States Railroad Administration in order to increase the operating revenue fixed the national basic passenger fare in coaches, interstate and intrastate, at not less than 3 cents per mile, with a surcharge for pullmans. This produced a considerable degree of uniformity. An increase of 20% or to 3.6 cents was made as of August 26, 1920. In the depression of the 1930s certain carriers operating in southern territory experimented with fair success on revenues with fares as low as 1.5 cents per mile in coaches. Alabama Intrastate Fares, 258 I. C. C. at 134.
Approximate uniformity before 1936 was maintained by the Commission’s use of 13 (4) orders to bring intrastate fares into line with interstate fares. The Commission found it more convenient later to secure state adoption of its rates by cooperation through agreement. See Sharfman, The Interstate Commerce Commission II, pp. 287-344,

 “It is further ordered, That the order of January 21, 1942, in Ex parte No. 148, be, and it is hereby, further modified so as to authorize the aforesaid petitioners to apply the increase of 10 per cent approved *526in said order to a basic coach fare of 2 cents per mile on the lines of said petitioners, subject to the rule for the disposition of fractions as modified by order of July 6, 1942, in said proceeding, and that in all other respects said order of January 21, 1942, shall remain in full force and effect.”

 The portion of the order referred to reads as follows:
“It appearing . . . that the proper authorities of all States have been notified of this proceeding, and similar application has been or will be made to the regulatory authority of the respective States for permission to increase similarly petitioners’ intrastate rates, fares, and charges;

“It is ordered, That the increased passenger fares as proposed by the said petitioners be, and they are hereby, approved . . .”

 There were certain specified exceptions. 214 I. C. C. at 244.

 The national investigation, Ex parte No. 148, has also been reopened and reexamined as late as December 12, 1944, but the passenger rates were left unchanged. 259 I. C. C. 159. This report discussed intermediate reexaminations of the national passenger rate structure.

 Alabama Intrastate Fares, 2581. C. C. 133, 154-55, Finding 5:
“Respondents’ revenues under the lower intrastate fares are less by at least $725,000 per annum in Alabama, $500,000 in Kentucky, $525,000 in North Carolina, and $525,000 in Tennessee than they would be if those fares were increased to the level of the corresponding interstate fares, and traffic moving under these lower intrastate fares is not contributing its fair share of the revenues required to enable respondents to render adequate and efficient transportation service.”