Court Opinion

ID: 9426456
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:18:02.112367+00
Date Added: 2024-06-11T17:23:00.980768
License: Public Domain

Mr. Justice Stevens,
with whom Mr. Justice Stewart joins, dissenting.
The question presented is not whether it is desirable for a railroad to spend its money wisely. It clearly is. The question is not whether Congress could authorize the Interstate Commerce Commission to regulate a railroad’s expenditure of funds for capital improvements, deferred maintenance, or costs of material. It clearly could. The question is simply whether or to what extent Congress did grant the Commission such authority.1
If the power the Commission purports to exercise in this case really exists, it is rather surprising that it has lain dormant for so long and has been disavowed so often.2 Nowhere in the voluminous statutory language *522quoted by the Court can I find an authorization to the Commission to impose direct regulatory controls on a railroad’s expenditures. Nor is there any precedent for this action in either the Commission’s decisions, see n. 2, supra, or in the decisions of this Court. Quite the contrary, the holdings in ICC v. United States ex rel. Los Angeles, 280 U. S. 52, that the Commission lacked power to compel the railroads to construct a new passenger station, and in United States v. Pennsylvania R. Co., 242 U. S. 208, that the Commission could not order a railroad to furnish tank cars for shipping oil, imply that the Commission possesses no such power.3
*523If the Commission may not impose such regulation directly, it is equally impermissible for it to do so indirectly by attaching conditions to its approval of rate increases.4 For periodic rate adjustments are inevitable in response to the ever-present pressures of economic change and it is almost equally inevitable that carriers will assert all available grounds in support of such adjustments. The petition in the present case sought to justify the increase for a variety of overlapping reasons: the increased cost of wages, fuel, and materials; increased interest rates; the decreased access of railroads to capital markets; the need to prevent deterioration of existing equipment; the need to modernize and expand capacity *524to meet increased demand; the disparity between the rate of inflation and past increases in railroad rates.5 Any one of these justifications could, on the Court’s rationale, furnish the predicate for Commission regulation of decisions heretofore regarded as the prerogative of railroad management. The Commission’s power to work its will in the form of conditional approvals, if valid, is only slightly less pervasive than the power to regulate affirmatively.6
Nor do I believe the Commission’s action can be supported as an exercise of some sort of inherent equitable power to order specific performance by the Chessie of a commitment it has made. The description of industry conditions in the petition for the general rate increase was entirely accurate. It did not purport to describe the condition of each railroad in the country. The revenue needs of financially sound railroads, like the Chessie, are vastly different from those of bankrupt and near-bankrupt lines.7 General rate increase proceedings are not principally concerned with the revenue needs of particular railroads but serve the quite different purpose of determining whether an increase is appropriate on an industrywide or an areawide basis. As this Court recognized in United States v. Louisiana, 290 *525U. S. 70, general rate increase proceedings would prove impossible “if instead of adjudicating upon the rates in a large territory on evidence deemed typical of the whole rate structure, [the Commission] were obliged to consider the reasonableness of each individual rate before carrying into effect the necessary increased schedule.” Id., at 75-76. The primary concern must be with indus-trywide or areawide economic conditions, not with the financial condition of particular carriers. Indeed, the petition for a general rate increase in this case did not contain any representations specifically addressed to the financial condition of the Chessie and the attached schedules contained financial statements of the Chessie of unchallenged accuracy.8 There was no misdescription of the industry and there was no misdescription of the Chessie.
But even if the petition had misrepresented the prosperous financial condition of the Chessie, the proper remedy would have been to suspend the rate increase as it applied to the Chessie.9 The reason the Commission did not take this step is that it would have forced competing railroads to lower their rates and hence would have denied them the increased revenues they need to make improvements.10 Thus, the Commision’s position is not *526that conditional rate increases are necessary to maintain the integrity of the ratemaking process, but rather that they are necessary for either of two very different purposes: to prevent strong railroads from making excess profits at the rates necessary to provide a reasonable return to weak railroads;11 or to protect weak railroads from competition at the lower rates that would otherwise be imposed on strong railroads.12
Section 15a of the Interstate Commerce Act once contained a provision that served precisely these purposes. The Transportation Act of 1920, 41 Stat. 456, added to § 15a a “Recapture Clause,” which applied to “net railway operating income substantially and unreasonably in excess of a fair return upon the value of . . . railway property held for and used in the service of transportation.” § 422, 41 Stat. 489. The Recapture Clause required that one-half the excess revenues be paid to the Commission and placed in a special fund for loans to less prosperous railroads and that the remainder be kept by the railroad in a special reserve fund that *527could be used only for purposes specified in the statute. 41 Stat. 489-491. Together with the provision in the 1920 Act that first authorized general rate proceedings, 41 Stat. 488, the Recapture Clause permitted the Commission to prevent strong railroads from making excess profits while enabling it to set general rates high enough to give weak railroads a reasonable return.13 However, the Recapture Clause was repealed, and the excess revenues fund redistributed, by the Emergency Railroad Transportation Act, 1933, §§205, 206, 48 Stat. 220. The repeal was in part attributable to the economic distress of the railroads during the Great Depression, but Congress was also impressed by reasons of a more permanent character. The House Committee on Interstate and Foreign Commerce reported the repealer favorably, relying on the following testimony of the chairman of the legislative committee of the Interstate Commerce Commission:
“ ‘There is something incongruous in a system of regulation which finds it necessary to permit carriers to earn more than they ought to earn, and meets the difficulty by taking money away after *528it is received.’ ” H. R. Rep. No. 193, 73d Cong., 1st Sess., 30 (1933).
The parallel with what the Commission has purported to do in the present case — permit the Chessie to earn more than it should but forbid expenditure of the excess — is striking. The only difference is that the Commission asserts this power without express authorization, relying instead upon its broad power to prescribe “just and reasonable rates” under § 15a (2) of the Interstate Commerce Act, as it read before its recent amendment.14 Ironically, that provision was enacted by the same section of the same Act that repealed the Recapture Clause, § 205 of the Emergency Railroad Transportation Act, 1933, 48 Stat. 220. It is doubtful that Congress would have used the general language of former § 15a (2) to confer, by implication, a broader power than it had previously granted in express terms and with specific limitations in the Recapture Clause. It is inconceivable that it intended to do so in the same section of the same Act that repealed the Recapture Clause.
I would affirm the judgment of the District Court.

 Cf. NAACP v. FPC, 425 U. S. 662, 665. See also id., at 673-674 (Burger, C. J., concurring in judgment) (emphasizing the need for caution before concluding that Congress authorized the Federal Power Commission to regulate business practices not previously regulated by that agency).

 As recently as 1971, the Commission disavowed precisely the position it has taken in this case. Referring to a report finding a need for the railroads to double their expenditures for equipment and facilities, the Commission stated:
“The development of capital for investments of the type recommended in this report remains the function of management and is not a measure of the reasonableness of rate levels. It is to be hoped that the earning capacity of the carriers will be such as to *522enable them to command adequate investment money on either a debt or equity basis. That capacity, however, has reference to their individual management and concerns a problem distinct from the lawfulness of their rates.” Ex parte No. 266, Increased Freight Rates, 1970 and 1971, 339 I. C. C. 125, 180-181 (1971) (emphasis added).
The Commission has repeatedly disavowed any general power to require railroads to purchase and maintain sufficient equipment for adequate service. Duralite Co., Inc. v. Erie Lackawanna R. Co., 339 I. C. C. 312, 314 (1971); Adequacies—Passenger Service—Southern Pac. Co., 335 I. C. C. 415, 423-425 (1969); Oliver Mfg. Supply Co. v. Reading R. Co., 297 I. C. C. 654, 658 (1956); Jacksonville Port Terminal Operators Assn. v. Alabama, T. & N. R. Co., 263 I. C. C. 111, 116 (1945); Joseph A. Goddard Realty Co. v. New York, C. & St. L. R. Co., 229 I. C. C. 497, 502 (1938). The Commission has made the same representation to Congress. ICC 86th Annual Report 23 (1972); ICC 84th Annual Report 9 (1970); ICC 70th Annual Report 83 (1956).

 The Court distinguishes Los Angeles and presumably Pennsylvania R. Co. as well on the grounds (a) that the Commission has conditioned the rate increase only upon expenditures in the broad categories of “delayed capital improvements” and “deferred maintenance,” (b) that the railroads themselves represented that they needed the increase for such expenditures, and (e) that the Commission only exercised its suspension powers and the railroads remained free to seek a general rate increase. Ante, at 514-515. The second and third reasons are discussed infra, at 523-525, and n. 6. The first *523is plainly insufficient, for administrative intrusion into managerial decisionmaking does not decrease as the scope of the decision increases. In this case, the intrusion is great precisely because the decision is general: whether to allocate an increase in revenues to operating expenses, to deferred capital and maintenance expenditures, or to other purposes. For the Chessie, the increased revenues at stake are approximately $29.7 million for the first three quarters of 1975. App. 346, 357, 368, 379, 390, 401, 412, 423, 434. Nationwide, the Commission estimated that a 10% increase would produce a $1.5 billion increase in annual revenues for the industry, of which 70%, less increased income taxes, is subject to the disputed condition. Ex parte No. 305, Nationwide Increase of Ten Percent in Freight Rates and Charges, 1974; Orders of Apr. 30, 1974, May 3, 1974, and July 18, 1974; Jurisdictional Statement 28a, 33a, 59a.

 An order allowing a rate increase subject to a condition is in no sense equivalent to an order allowing a rate increase without conditions but upon a finding that the increase is needed for only one purpose. In the former case, the condition may be enforced by actions for injunctions and forfeitures. 49 U. S. C. §§ 16 (7) — (9), (12). In the latter, the railroad could not be forced to rescind the rate increase without a full hearing to determine whether its rates were “unjust or unreasonable.” 49 U. S. C. § 15 (1). By itself, I would think proof that the increased revenue had been expended for other purposes would be insufficient to show that the increased rates were “unjust or unreasonable,” at least in the absence of intentional misrepresentation in the prior rate increase proceedings.

 Ex parte No. 305, supra; App. 101-119.

 The Commission’s suspension power, upon which the Court relies, ante, at 512-515, is an equally insufficient predicate for the exercise of control over expenditures. Since the Commission cannot impose the condition in the exercise of its ratemaking powers, it cannot accomplish the same result by suspending the rate increase to coerce the railroads into “consenting” to the condition by submitting a tariff to that effect.

 One railroad represented that it needed the increase in order to meet payrolls and another that it needed the increase to accelerate a bankruptcy reorganization program. Ex parte No. 305, supra; App. 109-110, 112.

 Ex parte No. 305, supra, and. Schedules A and B; App. 95-124, 142-154.

 The broad language of §§ 15 and 15a of the Interstate Commerce Act, both before and after their recent amendments, contemplates suspension and regulation of rates of individual carriers. See ante, at 510-512, nn. 8, 9, and ante, at 517-521.

 The Commission has candidly stated its reasons for not suspending the rate increase with respect to individual railroads:
“In theory the Commission could discipline a railroad that misled it about the uses to which it would put revenues collected only with the Commission’s permission by reducing that line’s rates and requiring it to make refunds. But because the railroads compete with *526each other (freight usually can be sent over two or more lines using different routes to reach the same destination), if the Commission ordered an offending railroad to reduce its rates other lines would be compelled to follow suit and would themselves be deprived of the funds they need to make improvements.” Brief for Appellants 22.

 1 do not mean to express the opinion that Chessie’s profits would be excessive at the increased rate.

 The Commission’s position is in fact somewhat broader: Any railroad that failed to make deferred capital and maintenance expenditures in the appropriate amounts, but charged the full increased rate, would receive an unjust and unreasonable rate. Ex parte No. 805, supra; Order of June 3, 1974; Jurisdictional Statement 42a-43a. Consequently, the condition was necessary either to prevent all such railroads from receiving an unreasonable return, or to avoid imposing a lower rate on such railroads and thus putting competitive pressure on the railroads that do make the prescribed expenditures.

 The language of the Recapture Clause stated as much:
“(5) Inasmuch as it is impossible (without regulation and control in the interest of the commerce of the United States considered as a whole) to establish uniform rates upon competitive traffic which will adequately sustain all the carriers which are engaged in such traffic and which are indispensable to the communities to which they render the service of transportation, without enabling some of such carriers to receive a net railway operating income substantially and unreasonably in excess of a fair return upon the value of their railway property held for and used in the service of transportation, it is hereby declared that any carrier which receives such an income so in excess of a fair return, shall hold such part of the excess, as hereinafter prescribed, as trustee for, and shall pay it to, the United States.” 41 Stat. 489.

 See ante, at 510 n. 8.