Court Opinion

ID: 9745001
Source: CourtListenerOpinion
Date Created: 2023-08-26 22:28:09.83379+00
Date Added: 2024-06-11T07:24:54.592880
License: Public Domain

HANEY, Circuit Judge.
This suit was brought to set aside an order of the Interstate Commerce Commission which suspended tariffs and schedules of rail rates on petroleum products filed by petitioners.
Petitioners filed a tariff with the Interstate Commerce Commission on March 10, 1939, known as Supplement No. 5, and on the following day filed an additional tariff, known as Supplement No. 6, which reduced rates on shipments of refined petroleum products in bulk from origin points in Oregon and Washington to points in Oregon and Washington east of the Cascade Mountains, to points in Northern Idaho, and to Nelson, British Columbia. The origin points included Portland and Linnton, Oregon, and Longview, Hoquiam, Tacoma, Seattle, Richmond Beach, Everett and Bellingham, Washington, and are also referred to as marine storage points. For example of the reduction, the tariffs disclosed a rate of 25‡ per 100 pounds from marine storage points to Spokane, Washington. The pre*996vious rate had been 41^ per 100 pounds. There were corresponding decreases to other destination points.
Various protests were filed against the rates, and on April 8, 1939, the Commission entered its order suspending the operation of the tariffs until November 10, 1939, and initiated an investigation as to the lawfulness of the rates and tariffs. After hearing the Commission made a report and an order requiring cancellation of the tariffs on or before November 9, 1939. The present suit was instituted to set aside such order.
The report of the Commission discloses that the cause of the rate changes is the construction and operation of independent oil refineries at Spokane and in Northern Montana. The California refineries had little competition in the Inland Empire. Beginning in 1938, the inland refiners began making inroads in the business of the California refiners because of their proximity, principally, since they could reduce prices. The California refiners advised the railroads and the truck lines that in order to meet the situation, rates must be reduced. The carriers took no definite action. The California refiners then decided to utilize the Columbia River. Some of them began construction of storage facilities at Umatilla, a point on the Columbia River about 200 miles east of Portland, Oregon, with the view of using river boats for movement of petroleum products to Umatilla, and trucks for movement of such products from Umatilla to various points in the Inland Empire.
When the railroads became aware of such plans they discussed the matter with the California refiners, and inquired what rates would be necessary in order to hold the traffic to the rails. They were advised that the rate should not be over 25 cents per 100 pounds and possibly as low as 22.5 cents from marine storage points to Spokane, because the river rate from Portland to Umatilla or Attalia, a Columbia River point about 27 miles up river from Umatilla, was 7.5 cents, and common carrier truck service from those points to Spokane would be 17 cents, although by private truck, the cost would be about 15 cents. The railroads thereupon filed the tariffs in question upon such basis.
The Commission found “that the proposed rates are compensatory, considering all costs” and stated generally that the problem was “to determine what incentive the rail lines must afford the California refiners to create that equality of opportunity which should fairly apportion the traffic between the rail lines and the river-truck routes”. It considered what the cost to the California refiners would be to Spokane by the river-truck route. Regarding the first' portion of the journey, Portland to Umatilla or Attalia, it said: “We are not convinced that the 7.5-cent rate to Umatilla has yet reached that degree of permanence and stability which would warrant us in recognizing it as the controlling river factor. It is based more on judgment than on the hard lessons of experience. There is a strong possibility that unforeseen circumstances may require it to be increased. Looking to an indefinite future period, we feel that it would be safer to here figure on a 9-cent port-to-port rate * * *. ”
The Commission further stated: “To the 7.5-cent, or 9-cent river rate must be added the cost of putting the traffic through the storage and transfer facilities at the head of navigation, for no similar cost is incurred on traffic which moves by rail or truck directly from the north-coast ports.” This cost was estimated at 1.5 cents by one witness and the Commission assumed that figure for purposes of discussion. Incidental items were placed at % cent.
Regarding the truck-rate from Umatilla or Attalia to Spokane, the Commission states that by private truck, the cost would be 15 cents, and that while a 17 cent rate was probably compensatory for carrier trucks, such rate “would have an undue tendency to break down the rate structure and that a 19-cent rate should be adopted as a minimum”. It stated, in this connection, that the shippers would prefer to use carrier-truck service.
The Commission also found that while the river-truck service required a little more time than all truck or all rail service, it was inconsequential, and that insofar as-the shippers were concerned, they had no-preference as to the type of service, if costs were equal.
In summing up the factors involved the Commission stated that the situation was one “where carriers by rail, by highway, and by water are engaged in a competitive struggle over an important form of traffic”; that to “the most important destination point, Spokane, the evidence justifies conclusions that the proposed rail rate of 25 cents from the north-coast ports would yield some margin over full costs; that the motor carriers could, with a heavy volume of traffic, make both ends meet on a rate at *99717 cents from Umatilla and Attalia to Spokane; and that it is possible that the water carriers, likewise with a heavy volume of traffic, might be able to operate without loss on a 7.5-cent rate from Portland to Umatilla and Attalia, allowing nothing for terminal expense at those river ports or for marine insurance”.
As particularly revealing of the Commission’s theory of decision, we quote the following two paragraphs therefrom:
“We were given power to fix minimum rates, however, primarily for the purpose of preventing destructive competition in rates and promoting the financial stability of the transportation agencies. Our duty in the exercise of that power is not done, therefore, if we allow competitive rates to gravitate to the lowest possible level. Minimum rates should be fixed, if it can be done, at levels which are consistent with some degree of carrier prosperity; and in so fixing them we ought to be able to count on the cooperation of the shippers, because reasonable prosperity for the carriers is in the final analysis to the advantage of those whom they serve.
“These principles we have had in mind in our findings in these proceedings. If we were to assume that the shippers of petroleum products would use every means in their power to bring down their transportation costs to the lowest possible level, regardless of the effect upon the public carriers whose welfare is vital to the best interests of the country, we would go to a somewhat lower level of minimum rates. We do not believe, however, that such an assumption is justified, and in that disbelief we shall prescribe minimum rates which in our judgment will promote a somewhat healthier degree of prosperity for all the carriers concerned, by rail, by highway, and by water. A fair trial of such rates is, we are persuaded, clearly desirable.”
Based upon the foregoing, the Commission found “that the proposed rail rates from the northcoast ports are below a minimum reasonable level and hence would be unlawful,” and ordered the tariffs suspended without prejudice to the establishment of rates based on a river rate of 9 cents plus a half cent for incidental charges, plus approved truck rates beyond, which, to Spokane, were fixed at 19 cents or a total of 28.5 cents.
Petitioners allege that the order is void for a number of reasons, among which the principal ones are: (1) the Commission did not find that the tariffs violated any provision of the Interstate Commerce Act; (2) the order deprived petitioners of the right to use managerial judgment; (3) that the Commission was wrong in assuming its function to be to determine what rail rates “create that equality of opportunity which should fairly apportion the traffic between rail lines and the river-truck routes”; and (4) that the method used by the Commission (river rate plus incidental cost plus truck rate) was erroneous because: (a) rail carriers have inherent advantages because its operating costs are less; (b) the river rate figure used was 9 cents which was based on prophecy, despite evidence of the 7% cent rate; (c) the truck rate should have been the cost of private trucking; and (d) it was based in part on a conclusion of the Commission that the refiners should not attempt to obtain the lowest possible rate.
Commission’s Power as to Policy
Petitioners make a number of contentions, the soundness of which is to be determined by a decision of the question as to whether the Commission had the power to suspend the tariffs because they conflicted with a policy established by Congress. Petitioners assert that the rail carriers are free to exercise their discretion in meeting competition by establishing reduced rail rates, if such rates are compensatory and do not violate any provision of the Interstate Commerce Act; that the validity of such rates must be considered independently of their effect on nonrail competitors; that since there are no findings that the rates violate any provision of the Interstate Commerce Act, the Commission had no jurisdiction or power to suspend the tariffs.
Prior to the Transportation Act, 1920, the Commission was not empowered to fix minimum rates which could be charged, but only maximum rates. Skinner & Eddy Corp. v. United States, 249 U.S. 557, 564, 39 S.Ct. 375, 63 L.Ed. 772. When the bill which became the Transportation Act, 1920, was reported by the Committee, the report (House Report No. 456, 66th Congress, 1st Session, 1919, p. 19) stated that the Commission should be empowered to fix minimum rates, and: “ * * * With this power the Commission could prevent a rail carrier from reducing a rate out of proportion to the cost of service, by establishing a minimum, below which such carrier could not fix its rate. It would also prevent a rail carrier from destroying wa*998ter competition between competitive points by prohibiting such carrier from so reducing its rates as to destroy its water competitor. Circumstances have been cited where the rail carrier destroyed its water competitor by such a reduction of rates as to make it impossible for the water carrier to survive. When once competition was thus driven off the rail rates would be restored or would rise to even higher levels ‡ sj« ‡ w
In accordance with this report the Transportation Act, 1920, was enacted. Act of February 28, 1920, Ch. 91, 41 Stat. 456. Section 418 of that act amended § 15 of the Interstate Commerce Act so that it provided, 49 U.S.C.A. § 15(1): “Whenever, after full hearing * * * the commission shall be of opinion that any individual or joint rate, fare, or charge whatsoever demanded, charged, or collected by any common carrier * * * is or will be unjust or unreasonable or unjustly discriminatory or unduly preferential or prejudicial, or otherwise in violation of any of the provisions of this chapter, the commission is authorized and empowered to determine and prescribe what will be the just and reasonable individual or joint rate, fare, or charge, or rates, fares, or charges, to be thereafter observed in such case, or the maximum or minimum, or maximum and minimum, to be charged * * "
By § 500, 49 U.S.C.A. § 142, it was provided in part: “It is declared to be the policy of Congress to promote, encourage, and develop water transportation, service, and facilities in connection with the commerce of the United States, and to foster and preserve in full vigor both rail and water transportation. * * * ”
While it is true that petitioners have the right to initiate and determine for themselves in the first instance what the rates shall be,1 the Commission is empowered to suspend such rates and fix minimum rates, if the proposed rates are unjust, unreasonable, unjustly discriminatory, unduly preferential, prejudicial, or violate some other applicable statute. 49 U.S.C.A. § 15(1). Even prior to the Transportation Act, 1920, the effect of the proposed rate on the carrier proposing it, was not the sole determining factor, for among other things, the Commission was to consider also the interests of the shipper and the public,2 and the effect of competition3 in determining the reasonableness of the rates.
By the Transportation Act, 1920, Congress established the policy to “foster and preserve” both rail and water transportation — the exact contrary to the destruction of competition between them. To that end, the Commission was empowered to fix a minimum of rates for the railroads so that . the latter could not, by reducing its rates, put an end to the existence of water transportation. The danger that water transportation might destroy the railroads was apparently remote. In other words in the establishment of rates by the Commission, there was to “be impartial recognition and promotion of the interests of all”. Mississippi Valley Barge Co. v. United States, 292 U.S. 282, 288, 54 S.Ct. 692, 694, 78 L. Ed. 1260. See also: Youngstown Sheet & Tube Co. v. United States, 295 U.S. 476, 55 S.Ct. 822, 79 L.Ed. 1553.
When carrier-truck service became a significant factor in transportation, the policy of equality among all carriers as to rates was extended by the Motor Carrier Act, 1935. Act of Aug. 9, 1935, Ch. 498, 49 Stat. 543. By § 202 of that act, 49 U.S.C.A. § 302, Congress declared: “It is hereby declared to be the policy of Congress to regulate transportation by motor carriers * * * improve the relations between, and coordinate transportation by and regulation of, motor carriers and other carriers * * Here again is an expression of policy to the effect that competition among carriers should be restricted to factors other than rates; that the services of each should be equalized to the extent that a shipper would not prefer another because of a cheaper rate. The Commission, we think, correctly stated its duty when it said that the question for determination was “what incentive the rail lines must afford the California refiners to create that equality of opportunity which should fairly apportion the traffic between the rail lines and the river-truck routes”. In this connection, petitioners urge that it is not the function of the Commission to “apportion” the traffic. We do *999not understand that the Commission did or intends to “apportion” the traffic. It merely equalized, by differentials, the prospects or opportunities for procuring traffic.
Petitioners contend that Ann Arbor R. Co. v. United States, 281 U.S. 658, 50 S.Ct. 444, 74 L.Ed. 1098, is authority for the proposition that § 500 of the Transportation Act, 1920, and § 202 of the Motor Carrier Act, 1935, are not applicable here. The statute in the case relied on is entirely dissimilar to the ones in the two acts mentioned. No policy of equalization is mentioned in the statute in the case relied on, but only “a hopeful characterization of an object”, which object was to obtain “the lowest possible lawful rates” for agricultural products. Such object has no bearing upon a policy of equalization among carriers.
Petitioners further rely on the following from Mississippi Valley Barge Co. v. United States, supra, 292 U.S. at page 288, 54 S.Ct. at page 694, 78 L.Ed. 1260: “For the determination of this case there is no need to go into the question whether the declaration of the policy of Congress to foster rail and water transportation creates a new standard of duty for the Commission in the ordering of rates, or is a source of private rights if the duty is ignored. * * * The most that it can mean * * * is that where carriers by land and water are brought within the range of the regulatory powers of the Commission, as e.g., in establishing through routes or joint rates, there shall be impartial recognition and promotion of the interests of all.”
Petitioners assert that since the water carriers and private truck carriers have not been “brought within the range of the regulatory powers of the Commission” the principle of equality .is not to be considered.’ This language, we think, does not have the effect ascribed to it, but simply means that when the Commission regulates two different forms of carriers it should not be partial and should promote the interests of' both. It was not meant that in other cases, the Commission should be partial, which is the effect of petitioner’s contention.
We have purposely omitted consideration of the interests of the public because if the findings of the Commission as to the rates of each of the types of carriers is correct, the interest of the public is not a controlling factor, since a fair rate by any one of the carriers would amount to the same sum to the public. In other words, the interest of the public does not conflict with the policy of equalization. What the rule would be in a case where the interest of the public would conflict with such policy, as, e.g., a case where a fair rate for one carrier would be substantially less than a fair rate for another type of carrier, we have no occasion to determine. Compare: Petroleum from California to Oregon, 214 I.C.C. 668, 677; Petroleum Between Washington and Oregon Points, 225 I.C.C. 382. We are expressing our views in a case where the fair rates for the various types of carriers have a substantially identical effect on the public. In such case we think equality among such carriers must rule.
The Findings
Petitioners make a contention that the order is void because of a lack of findings that the tariff violates some particular provision of the Interstate Commerce Act. The Commission found that the proposed rates “are below a minimum reasonable level” and since we hold that the Commission could lawfully make such a finding based on the ground that the proposed rates would violate an established policy of the lawmakers, this contention must fail.
Petitioners further contend that the evidence discloses the river rate to be 7.5 cents per 100 pounds, and when the Commission undertook to determine what the rate would be, it entered the domain of prophecy. We think the contention must fail. The evidence in favor of petitioners was that one of the two water carriers which could transport petroleum products, and which was “not in good financial condition”, had made only four trips from Portland to Umatilla, its rate then being 7.5 cents per 100 pounds, and that such carrier was “willing to bind itself by contract to continue it as a maximum to Umatilla for as much as 5 years”. Opposed to such evidence was the evidence that the rate of the other water carrier which “has strong financial support” was 13.5 cents per 100 pounds. An engineering expert estimated the first water carrier’s costs in 1938 to be about 5 cents per 100 pounds to The Dalles, and about 5 cents additional from The Dalles to Umatilla; that the costs of the second water carrier was 12.9 cents per 100 pounds, and that the future costs, based on present river conditions and indications as to volume of traffic, would be about 10 cents per 100 pounds, although the rate might decrease to 5 cents upon improve*1000ment of the river, use of proper equipment, and increase of volume of the traffic.
In this state of the evidence the Commission was not compelled to accept the rate of the first water carrier as conclusive. The argument that the Commission has prophesied as to the rates of the water carriers lacks substance in view of the absence of previous service. As said by the Commission, the 7.5-cent rate “is based more on judgment than on the hard lessons of experience”. The Commission is not deprived of power to carry out the Congressional desires simply because it must of necessity predict a future event.
Considerable criticism is levelled at the Commission because of its statements that it would approve “a somewhat lower level of minimum rates” if it were justified in believing that the petroleum shippers “would use every means in their power to bring down their transportation costs to the lowest possible level, regardless of the effect upon the public carriers”. Petitioners contend that the Commission thus acted as a soothsayer. When placed in the setting shown by the evidence, however, these statements lose their prognosticatory nature. The California refiners have built storage and other facilities at Umatilla at considerable expense. As stated by the Commission, those “which have been built at Attalia and Umatilla are permanent institutions, and the California refiners expect to use them, regardless of the rates here proposed by the railroads from the north-coast ports”. The Commission further said that “the river facilities are not sufficient to take the entire movement and, at least for some time to come, much of the traffic will have to go by rail or by truck from the north-coast .ports, even if the rail rates and the truck rates from those points are made higher than the river-truck rates”. There is no suggestion that these evidentiary findings are not amply supported by the evidence.
While the Commission said that the “record is convincing that the great bulk of the traffic will seek the lowest level of charge” it is obvious that even if the river-truck rate might be lower than the rail rate physical facts show that it would be impossible for the refiners to use water carriers only. Lack of facilities and equipment would prevent such an event, and undoubtedly it was for such reaáon that the Commission said that it was not justified in assuming that the refiners “would use every means in their power to bring down their transportation costs to the lowest possible level”.
There remains the question as to whether or not the petitioners at a 25-cent rate would obtain a fair return, and thus bring the public interests into conflict with the policy of equality among carriers. The Commission found that the proposed rates were “compensatory, considering all costs” and “would yield some margin over full costs”. It did not find that the proposed rates would yield a “fair return” to the petitioners. The clear implication is to the contrary, for the Commission said: “we shall prescribe minimum rates which in our judgment will promote a somewhat healthier degree of prosperity for all carriers concerned”. It is not contended that the evidence disclosed that the proposed rates would yield a fair return to the petitioners. In this situation we must assume the contrary, and therefore a conflicting public interest does not appear.
Decree will be entered for defendant.

 Interstate Commerce Comm. v. Chicago G. W. Ry., 209 U.S. 108, 119, 28 S. Ct. 493, 52 L.Ed. 705.

 Interstate Commerce Commission v. Cincinnati, N. O. & T. Railway Co., 167 U.S. 479, 511, 17 S.Ct. 896, 42 L.Ed. 243; Texas & Pac. Railway v. Interstate Com. Com., 162 U.S. 197, 234, 16 S.Ct. 666, 40 L.Ed. 940.

 Interstate Commerce Com. v. Alabama Midland Ry., 168 U.S. 144, 164, 18 S.Ct. 45, 42 L.Ed. 414.