Court Opinion

ID: 8748818
Source: CourtListenerOpinion
Date Created: 2022-11-26 11:17:53.580392+00
Date Added: 2024-06-11T17:00:49.666795
License: Public Domain

PER CURIAM.
By order of November 5, 1964, the motion of Thomas O. Broker, Counsel for The New York, Chicago and St. Louis Railroad Company, to change the designation of the plaintiff to Norfolk and Western Railway Company was granted.
This litigation arises out of the national expectation that the completion of the St. Lawrence Seaway will bring a great increase in ocean-going freight to Great Lakes ports in the heartland of the continent. Chicago, the largest city on the Great Lakes, created the Chicago Regional Port District to build a new harbor to serve this traffic. The Port District prepared docks for the ships to load and unload and trackage for railroad freight cars to serve the docks. Two railroads were closest at hand; six others sought Interstate Commerce Commission permission to build trackage to connect with the Port District. This legal battle has resulted.
These complaints were filed by two railroads to seek an injunction under Title 28 U.S.C., §§ 1336, 2284, and 2321-2325, inclusive, against certain orders of the Interstate Commerce Commission which authorized six other operating railroads to extend their tracks so as to offer direct services to the newly organized Chicago Regional Port District at Lake Calumet near Chicago, Illinois.
One of the two railroads, The New York, Chicago and St. Louis (henceforth the Nickel Plate) has a line so constructed as to parallel and be prepared to serve the east side of Lake Calumet. The other complainant, the Chicago, Rock Island and Pacific Railroad Company and the Pullman Railroad Company (henceforth Rock Island) has trackage adjacent to the west side of Lake Calumet and has been providing service for such port facilities as previously existed at Lake Calumet for many years.
The six operating railroads (whose “invasion” of the Lake Calumet area is resisted by Nickel Plate and Rock Island) initiated the original proceeding before the Interstate Commerce Commission by a series of applications filed, starting in 1956. These applications sought I.C.C. approval of the construction of the necessary trackage and trackage right agreements to interconnect various of the six railroads to each other and ultimately to the Chicago Port District tracks at Lake Calumet.1 Subsequent supplemental ap*976plications and amendments sought approval likewise of an agreement between the six railroads and' the Chicago Port District for operations within the Port District.
Lengthy hearings were held before the I.C.C. Hearing Examiner in 1957 at which Rock Island and Nickel Plate intervened on leave granted and objected.
Estimates of tonnage anticipated to be handled through the Port subsequent to the opening of the St. Lawrence Seaway made by various witnesses for the petitioners before the Hearing Examiner ran from 30,000,000 tons per year to 58,000,-000 tons per year, with grain and coal believed likely to constitute the bulk of this tonnage.
Extensive testimony was also taken from representatives of shipping and importing firms and concerns which had prospective economic relationships with the development of the proposed Port District.
We are confronted with two basic problems: (1) whether there is substantial evidence to support the decision of the Interstate Commerce Commission; and (2) the denial to the plaintiffs of due process of law.
The evidence submitted at the hearing before the I.C.C. Hearing Examiner by interveners in that proceeding who are plaintiffs in this one, bore principally upon three points: First, that the prospects of the port were not as rosy as the estimates of its proponents who testified before the Commission would have liked for the Commission to believe; second, that the two intervening railroads, plaintiffs herein, either were serving or were available to serve the port and the general area *977surrounding it; third, that the railroad service offered by them had been entirely satisfactory and still was. These latter two factual contentions on the part of the intervening railroads were largely undisputed. As to these the dispute lies not over the facts but over the legal conclusions which the opposite parties would seek to draw therefrom.
A subsidiary problem arose, however, during the course of the hearing before the Hearing Examiner and has continued down into the debate before the Interstate Commerce Commission and the presentation of issues to this court. This issue pertains to railroad operations within the Port District itself. The record shows that the Port District had built railroad trackage within its boundaries to serve the various docks and elevators and other port installations which the port was calculated to provide for. The basic plan for the port contemplated that all railroad operations would move over this Port District trackage. Obviously, therefore, some agreement would have to be provided among the parties if there was to be multiple railroad use as to charges to each and as to the plan of operation for the switching of cars in and out of the Port District.
Nonetheless, petitioners’ applications as originally filed and as amended up to the point of the hearing before the Hearing Examiner did not request certificates of convenience and necessity for operation within the boundaries of the Port District. This was explained by petitioners’ contention that no such certificates were legally required. Further, they claimed and showed that Rock Island was operating within the Port District without such a certificate. The Interstate Commerce Commission ruled otherwise.
Petitioners did, however, present an unexecuted proposed agreement designed to show a general plan of operation. This was introduced at the hearing before the Examiner and petitioners’ witnesses were cross-examined by interveners in relation to it.
With this factual background before him, the Hearing Examiner entered lengthy findings of fact and recommended issuance of the certificates of convenience and necessity which the six railroads had applied for.
Extensive objections having been filed by interveners, the Interstate Commerce Commission heard oral arguments in relation to the objections and handed down a formal opinion containing findings of fact which largely duplicated those of the Hearing Examiner.
Among the important findings for which we find substantial support in this record are the following:
“Lake Calumet Port is the major deepwater port facility of the port of Chicago. It is in the heart of the Chicago railroad switching district, and is contiguous to major arterial highways. Port District facilities and industries have unparalleled access to barge, rail, lake steamer, and motor transportation, and in the immediate future there will be complete access to ocean transportation.
“The port of Chicago has been and will continue to be the major Great Lakes general cargo port insofar as export and import shipments are concerned. Also, beginning with the 1959 shipping season, that port will become a dominant export gateway for grain moving both direct to ports abroad and in some instances to Montreal for forwarding abroad. ****** “The Chicago metropolitan area embraces 3,617 square miles, and includes 5 counties in Illinois and 1 in Indiana. In addition to the city itself, the area contains approximately 180 suburban or satellite communities with a total of 14,500 manufacturing establishments employing some 2,800,000 people. The present population of the area is 6,250,000, which is expected to increase to approximately 7,900,000 persons by 1980.
*978****** “The total w& •'rborne traffic from and to the port of Chicago for the year 1955 was 71,490,510 tons, including overseas and Canadian export and import traffic as well as waterborne domestic traffic moving on the Great Lakes and on the Illinois waterways.
******
“When the St. Lawrence Seaway, with locks 800 feet long, is opened for the 1959 navigation season, and a draft of 27 feet is made available all the way from Montreal into the principal Great Lakes ports, there will be an important change in the size and capacity of the vessels engaged in Great Lakes overseas cargo transportation.
“Whereas under the conditions described the ships could not exceed 258 feet, the expectations were that beginning April 1959 the carriers using the enlarged St. Lawrence Seaway will be able to operate vessels about 400 to 450 feet in length. Against the present maximum cargo capacity of 180,000 cubic feet, the larger ships will have space for dry cargo totaling 350,000 cubic feet. In addition, they will have deep tanks ranging to about 15,000 cubic feet and space for 30,000 to 35,000 cubic feet of refrigerated cargo.
* * * * * *
“When the seaway is in operation, it will no longer be a question of vessel supply. The world merchant marine presently has slightly over 6,000 vessels that can navigate the enlarged St. Lawrence Seaway. These vessels total more than 25 million deadweight tons. If only 5 per cent of these ships (approximately 300 vessels) came into the Great Lakes, making 2 to 3 trips a year, there would be 600 to 900 vessels coming into the port of Chicago each season. An efficient, economical interchange of cargo between the land carriers and the watercarriers for such a volume of shipping will necessitate a substantially broadened railroad service into and out of the Lake Calumet port.
******
“Good, efficient, and prompt service is always important in general business, but in the field of international commerce it is mandatory.
******
“Applicants’ plan of operation.— Witnesses on behalf of the applicants emphasize the fact that a large port handling oceangoing traffic cannot efficiently operate unless adequate supporting rail facilities are available. The combined yard capacity of the applicants is 61,601 cars, or more than 12 times that presently available to serve the port through the Rock Island.
■X* *)fr •X’ •X- 45*
“The record shows that, if the applications are granted, the movements over the applicants’ proposed route into the port will be more direct and will not involve occupation of the South Shore tracks for a longer period of time than at present. Direct delivery by the applicants entails less handling and, being in control of the entire movement to and from the port, applicants would be in position to expedite the shipments as the occasions demand. The proposed operations also would be less expensive because of the elimination of the switching charges now absorbed on line-haul traffic.
* * * * * *
“Some indication of future traffic through the port may be determined from the business generated in the immediate past. At the time of the hearing the port had been in operation for a relatively short period. Witnesses for the operators of the facilities at Lake Calumet Harbor were unanimous in forecasting mate rial increases in the tonnages for the future The present facilities at the lake are not expected to be utilized to capacity for several years, and large additions are planned for early con*979struetion. It is imperative, therefore, that at the very beginning of this new era of development a plan and system for handling the transportation needs of the port be established which will assure the type of service that is expected and will provide for steady progress and expansion.”
It should be noted that although this last finding was preceded by a recital of the position of the applicants and that of the interveners pertaining to estimates of future port traffic, these estimates were not adopted by the Interstate Commerce Commission except as stated above.
As to the subsidiary issue pertaining to the operational plan within the Port District, the I.C.C. report of October 5, 1959, (307 I.C.C. 493) may be read as a finding of fact that such a plan was essential, but it also specifically held that supplemental applications must be filed showing the details of such an operational plan for specific certification by the Commission. Such applications were filed and ultimately, after an executed operational agreement between the six railroads and the Port District had been filed, supplemental orders were issued granting the required certificates of convenience and necessity.
As to this phase of the case, although interveners requested it, no additional hearing was ever held.
On the basis of the findings indicated above, the Commission entered original and supplemental orders2 granting the certificates of convenience and necessity sought by the six railroads for operations up to and within the Port District.
We choose to deal with the issues in this case under separate categories: First, those pertaining to the construction of trackage and leasing agreements for operation over trackage up to the property line of the Port District; and secondly, those issues bearing on operations within the Port District itself.

First Category

Although plaintiffs in this proceeding present a great many questions, we believe as to the first category the material issues can be fairly summarized under three headings:
First, did the intervening railroads before the Interstate Commerce Commission, the plaintiffs herein, have such rights to the rail business into and out of the Lake Calumet area by virtue of proximity and prior service to this area so as to require this court to invalidate the certificates of convenience and necessity issued to the other six railroads by the Interstate Commerce Commission?
Second, should the orders of the Interstate Commerce Commission complained of under this category be vacated because they are based upon a “stale record,” i. e., was there a denial to the plaintiffs of due process of law?
Third, is there substantial evidence to support the orders of the Interstate Commerce Commission granting the six railroads certificates of convenience and necessity for the construction of trackage and trackage lease agreements up to the boundary of the Port District?

Second Category

Issues pertaining to the certificates for operation within the Port District can be summarized in one question:
Under the full record should the supplemental orders of the Interstate Commerce Commission granting certificates of convenience and necessity for the six railroads to operate within the Port District be vacated because said supplemental orders were entered without due process to the plaintiffs?

First Category

As to the first category of issues pertaining to the orders granting permission to operate up to the boundaries of the Port District, the major conclusions of the Interstate Commerce Commission are as follows:
“Consideration of the entire record herein warrants the conclusion *980that the applications should be approved. Such approval would result in greater rail competition, better service, greater car supply, and lower rates for the industries on Port District property at Lake Calumet Harbor. Direct service to the port by the applicants would place them on a par with the Rock Island insofar as solicitation of originated grain traffic for export is concerned, and the applicants would retain control of their freight equipment made empty at the port, so that such equipment could be returned in fast shuttel service to country elevators without loss of time required by interchange.
“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. Better service to shippers and receivers of freight through the elimination of delays, by providing single-line hauls, or more direct hauls, is clearly in the public interest. 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 a single trunkline railroad when so many adjacent railroads are available and anxious to serve the port. Although the port is now served by approximately 100 common-carrier trucklines, and there is no restriction on the number of barges and ships permitted to serve the port, the Rock Island is the only railroad presently serving the port.
“Congress, the courts and this Commission have placed a higher value on future convenience and necessity than on the convenience and necessity that presently might exist in section 1(18) construction proceedings. If the applicants can prove, as they have herein, that the proposed construction either presently or in the reasonably near future is necessary to meet a public need, and will be reasonably profitable, we may issue a certificate authorizing the proposed construction. Transportation service which aids in the future development of a territory is in the public interest. Interstate Commerce Commission v. Oregon-W. R. & Nav. Co., 288 U.S. 14 [53 S.Ct. 266, 77 L.Ed. 588]. Considering all the circumstances in these proceedings, particularly the expansion program now in progress at the port, and the increased amount of rail traffic to be made available at the port, we are of the opinion that the additional service of the applicants is warranted. Gulf, M. & O. R. Co. Construction, 271 I.C.C. 541.” 307 I.C.C., at 527.
We feel that this record does not offer ample support in fact and law for the conclusions of the Interstate Commerce Commission quoted above.
Title 49 U.S.C. § 1(18) gives the Interstate Commerce Commission the right to approve extensions of rail service limited only by the requirement that there be substantial showing that “present or future public convenience and necessity” require the extension:
“Extension or abandonment of lines; certificates required; contracts for joint use of spurs, switches, etc. No carrier by railroad subject to this chapter shall undertake the extension of its line of railroad, or the construction of a new line of railroad, or shall acquire or operate any line of railroad, or extension thereof, or shall engage in transportation under this chapter over or by means of such additional or extended line of railroad, unless and until there shall first have been obtained from the Commission a certificate that the present or future public convenience and necessity require or will require the construction, or operation, or construction and operation, of such additional or extended line of railroad.” 49 U.S. C. § 1(18).
It has long been held that provision of competition for shipper benefit was one *981of the considerations of public convenience and necessity available to the Interstate Commerce Commission under the terms of the act. Chesapeake & Ohio Railway Co. v. United States, 283 U.S. 35, 51 S.Ct. 337,75 L.Ed. 824 (1931); Schaffer Transportation Co. v. United States, 355 U.S. 83, 78 S.Ct. 173, 2 L.Ed.2d 117 (1957).

Second Category

As to the issues involved in the operation of the six railroads within the Port District, a recital of additional background facts is required.
In the original applications filed by the six railroads for certificates of convenience and necessity to bring their rail service to the Port District, as we have noted, no such certificates were requested for the operations within the boundaries of the Port District itself. It was apparently the view of the six railroads that if they were able to negotiate agreements with the Port District this took care of the matter without any I.C.C. certificate. In its original report of October 5, 1959, however, the I.C.C. ruled that such certificates of convenience and necessity were necessary for operation of the railroads concerned within the Port District itself:
“We are of the opinion that operation by the applicants into the Port District, as proposed, constitutes an extension of a line of railroad requiring our prior approval * * 307 I.C.C. 493, 525.
The I.C.C. further ruled that supplementary applications must be filed seeking certificates of convenience and necessity for operations within the port, and reserved judgment on the unexecuted lease agreement which purported to show the general method of operation contemplated within the port until the filing of such supplementary applications.
The six railroads concerned thereupon complied, filing supplemental applications seeking certificates pertaining to operations within the port and the two intervening railroads then sought a hearing on these supplemental applications. A hearing on the supplemental applications was denied by the I.C.C.
Thereafter, as a result of negotiations between the six railroads and the Port District, an operating agreement was negotiated and executed which did not, however, correspond in several important particulars, including the economic terms, with that which had been previously authorized by the I.C.C.
On the filing of this executed agreement, the I.C.C. issued another supplemental order pointing out the variances and requiring the six railroads to file supplemental applications for permission to operate in accordance with the provisions of the executed agreement and withholding approval until such supplemental applications were filed. The Commission thereupon entered its final supplemental order, dated November 26, 1962, which approved the operating agreement as previously negotiated and signed. It should be noted that at no time during this proceeding was there any hearing on the terms of the operating agreement. In its final order the Commission dealt with this matter in the following language:
“In our report of September 19, 1960 [312 I.C.C. 277] we held that a hearing was not necessary for a determination of the questions at issue. We also denied a request of the Rock Island for further hearing by our order of August 23, 1962. Since the general public convenience and necessity for the applicants’ operations over the Port District’s tracks has been determined with only the specific terms and conditions of such operations remaining for approval, and since most of the interveners’ objections to the modified agreement are actually only reiterations of their objections to the overall proposals of the applicants to serve the harbor area which have been previously discussed and disposed of in our prior reports and orders herein, we do not deem it proper to revisit upon the applicants and other parties to the pro*982ceeding the additional time and expense of a hearing upon the modified agreement.” 317 I.C.C. 502, 503.
It is clear that a certificate of convenience and necessity cannot stand unless it is based on findings of fact supported by substantial evidence. 5 U.S.C. § 1009(e).
SUMMARY AND CONCLUSION It appears to us that there are two fatal flaws in the proceedings and the orders of the Interstate Commerce Commission. The first concerns the sufficiency of the evidence to support the I.C.C.'s determination of public convenience and necessity, and the second concerns the denial to the plaintiffs of due process of law.
At the time of the hearing the applicants had not requested the I.C.C.’s permission to operate within the Port District. This failure was due to their belief that such requests were not necessary. The I.C.C. ruled otherwise. As a result of that ruling, the applicants presented evidence at the hearing of a proposed agreement between applicants and the Port District. On the basis of that agreement, and the other evidence presented, the I.C.C. granted the requested authority, contingent upon the proposed plan’s being executed.
However, the proposed plan was not executed. Negotiations continued between the applicants and the Port District for several years, with various proposals being considered. Eventually an agreement was reached, and it was upon the basis of this agreement that the I.C.C. finally issued the certificate of public convenience and necessity, without however having granted the parties any further hearings.
One of the provisions of the agreement that was finally consummated governed the rates to be paid by the railroads as rentals to the Port District. The final agreement called for a different formula to be applied in determining the rentals payable to the Port District by the railroads for the use of the District’s property. The final agreement differed from the agreement which had been previously authorized by the I.C.C. in several important particulars, including the economic terms.
Thus we see that the I.C.C., after having said that it would issue a certificate of public convenience and necessity if the proposed plan were adopted, nevertheless granted the certificate in spite of the fact that a different plan was adopted without further hearings.
We have concluded that there is insufficient evidence in the record to support the Commission’s determination that a certificate of public convenience and necessity should be granted to the applicants to operate within the Port District. This conclusion results from our belief that it is impossible for the Commission to make a supportable determination of public convenience and necessity unless there is adequate evidence in the record as to operating costs. It cannot be disputed that one of the important elements which must be considered in determining whether a certificate of public convenience and necessity should issue is whether the operation can be profitably undertaken. We fail to see how a decision on potential profitability can be made unless there is a record which shows what the operating costs will be. A major deficiency exists because the rental provisions under the final plan differ materially from the rental provisions under the plan originally proposed.
The record shows what the rental rates will be, but does not show what effect those rates will have on the overall operating costs. This is important because the rental is dependent upon the number of cars handled. The only evidence on the effect of specific rates relates to the proposed rates which never were put into effect. Certainly, to support a grant of public convenience and necessity, a record should contain evidence as to what impact the rental charges will have upon the profitability of the venture. A hearing following the execution of the final agreement between the applicants and the Port District would have provided that evidence.
*983The plaintiffs, although not parties to the final agreement, will be required to operate under the terms of the agreement entered into between their adversaries and the Port District. They were not given an opportunity to present evidence or to cross-examine the contracting parties concerning the agreement. The fact that plaintiffs did have some opportunity to introduce evidence and to cross-examine in regard to the original proposed agreement does not rectify this omission. The failure to give plaintiffs timely notice before the hearing upon the final agreement was contrary to the Administrative Procedure Act and the rules which Section 1(18) of the Interstate Commerce Act states must be observed; these statutes reflect the constitutional requirements of due process.
It is our conclusion that the Commission’s failure to give plaintiffs an opportunity to introduce evidence and to cross-examine witnesses in regard to the various managerial and economic aspects of the final plan, by which they were bound, constituted a denial to them of due process of law
It is our further conclusion that the I.C.C. is required to reconsider the issue of public convenience and necessity with reference to the operations up to the boundaries of the Port District by conducting a complete rehearing. The tracks outside the Port District go only to the boundaries of the District, and the only purpose of building them will be to enable the applicants to operate within the District.
We have concluded that a rehearing is required upon all of the issues for the reason that the operation of railroad services up to the boundaries of the Port District cannot be considered apart from the railroad operation within the Port District.
The original order of the I.C.C. and the supplemental orders dated September 19, 1960, August 23,1962, and November 26, 1962, will be vacated and the case will be remanded for the taking of further evidence upon all issues raised herein.
EDWARDS, Circuit Judge, dissents.

. “By application filed October 22, 1956, in Finance Docket No. 19538, the Kensington and Eastern Railroad Company Ta nonoperating company], the Illinois Central Railroad Company, The Philadelphia, Baltimore and Washington Railroad Company [a nonoperating company], and
The Pennsylvania Railroad Company applied under section 1(18) of the act for authority to construct a line of railroad, approximately 1.431 miles, in Cook County, Ill. The initial segment of 2,900 feet, or 0.549 mile, would be constructed by the Kensington & Eastern at an estimat*976ed cost of $222,596; the next 630 feet, or 0.119 mile, would be built by the Illinois Central at an estimated cost of $35,-886; and the final 4,030 feet, or 0.763 mile, would be constructed by the Pennsylvania in behalf of the Philadelphia, Baltimore & Washington at an estimated cost of $604,094. Each applicant is to finance its proposed construction from current funds available in their respective treasuries. The track will lead out from the westbound main line of the Kensington & Eastern at a point a short distance east of Doty Avenue and then extend east and north to a connection with the proposed track of Pennsylvania on land owned by the Pennsylvania. A portion of the Pennsylvania construction would be on property leased from the Chicago Regional Port District, hereinafter referred to as the Port District. The connection between the Illinois Central and the Pennsylvania segments would be made at about 130th Street, and the Pennsylvania track, in turn, would connect with the track owned by the Port District.
“In the same application, the Illinois Central, the Pennsylvania, and the Chicago South Shore and South Bend Railroad (South Shore) seek authority under section 5(2) of the act for the acquisition of trackage rights over the line to be constructed and certain existing tracks over which it is necessary to operate in order to reach the Lake Calumet Harbor Port, hereinafter sometimes called the harbor or port. The railroad properties of the Kensington & Eastern are leased to and are operated by the South Shore. A crossover would be installed between the eastbound and westbound tracks of the Kensington & Eastern, immediately west of the connection with the track leading to the port, to enable trains coming to the harbor to cross from the eastbound to the westbound track of the Kensington & Eastern to enter the track leading to the port.
“By application filed April 25, 1957, in Finance Docket No. 19742, The Belt Railway Company of Chicago (Belt Railway or Chicago Belt) requests authority under section 5(2) of the act to acquire trackage rights over the Illinois Central, the Kensington & Eastern, the South Shore, and the Pennsylvania from a point on its line at or near 95th Street to a point on the railroad tracks of the Port District on the west side of Lake Calumet Harbor, near 130th Street.
“By application filed September 9,1957, in Finance Docket No. 19921, The Michigan Central Railroad Company, The New York Central Railroad Company, and the Indiana Harbor Belt Railroad Company applied for authority under section 5(2) of the act to acquire-trackage rights on behalf of the New York Central and Indiana Harbor Belt over the lines of railroad owned or operated by the Illinois Central, the Kensington & Eastern, the South Shore, and the Pennsylvania leading to Lake Calumet Harbor Port.” Illinois Central Railroad et al. Construction and Trackage Rights, 307 I.C.C. 493, 494-495 (1959) (Footnotes omitted.)

. These supplemental orders are reported at 312 I.C.C. 277 (1960) and 317 I.C.C. 502 (1962).