Court Opinion

ID: 9635148
Source: CourtListenerOpinion
Date Created: 2023-08-22 13:39:19.400544+00
Date Added: 2024-06-11T18:09:20.111045
License: Public Domain

HARRIS, District Judge
(concurring in part and dissenting in part).
(Defendants in intervention Golden Gate Transit Lines and Pacific Greyhound Lines shall be hereinafter referred to as “Golden Gate” and “Pacific” respectively, as in the majority opinion.)
I concur in the majority opinion upholding the jurisdiction of the Commission. I dissent in the refusal of the Court to grant plaintiffs permission to amend the complaint regarding the issue of the sufficiency of the evidence.
The motion to amend the complaint and the proposed amendment itself must be considered in the light of the historical events and proceedings conducted by the defendant in intervention, Pacific, before the California Public Utilities Commission (formerly the Railroad Commission of California).
The granting or refusing to grant leave to amend cannot be viewed in a judicial vacuum, nor can the determination and the exercise of a sound discretion be reached without a regard for the realities, and the background and motives which inspired Pacific to invoke the procedural technique hereafter adverted to.
Particularly is this so by reason of the admission made by Pacific that it invoked the procedure under Section 5(2) of Title 49 U.S.C.A., before the Interstate Commerce Commission, creating Golden Gate, in order to circumvent the rate-making authority and jurisdiction of the California Public Utilities Commission. In short, the foregoing section was availed of as a legal device to avoid not only the proceedings and decisions which will be reviewed immediately hereafter, but as well, the express agreement made by Pacific, which in turn inured or should inure to the benefit of residents and commuters of the bay area communities -involved in this litigation.
Judicial notice may be had of the fact that Pacific has appeared before the California Public Utilities Commission on numerous occasions in connection with its operations in Marin and Sonoma Counties.1 In 1939 it made its application to replace Northwestern Pacific *624Railroad which was then serving commuters by means of rail and ferryboat service. When many North Bay residents protested at the proposed change, Pacific assured the California Railroad Commission that it would assume the exclusive transportation service on a minimum financial recovery basis. (42 Opinions and Orders of the Railroad Commission of California 661) At page 668 the following language appears in the opinion of the Commission:
“The record, as it now stands, shows conclusively that the Greyhound is the only carrier which is able financially and otherwise to provide Marin County with a service to take the place of that to be abandoned. It has made a firm offer to substitute its proposed service for that of the Northwestern Pacific in event it is granted authority to serve the entire territory to be abandoned by the rail carrier.
“The record shows that the Pacific Greyhound Lines made its proposal not with the thought that it would return the full cost of operation, but that it would realize something over and above the out-of-pocket cost of operation. The inference may be fairly drawn that the decision to embark upon this undertaking was made with some hesitation and only after a long and complete study of its feasibility. It may be that the Pacific Greyhound Lines was influenced to some extent by the fact that if its application were granted and the Northwestern Pacific Railroad authorized to abandon service, the Northwestern Pacific Railroad, a wholly owned subsidiary of the Southern Pacific Company/4) would be relieved of a substantial continuing out-of-pocket loss.
(“(4) The Southern Pacific Company owns approximately 39% of the common stock of the Pacific Greyhound Lines”)
“Whatever may have been the underlying reasons which influenced the Greyhound to make this offer is relatively unimportant, as the record leaves no doubt that it was made in good faith and with the avowed purpose of providing Marin County with a satisfactory, adequate, and enduring transportation service. These underlying reasons only become important in evaluating the statement of the Greyhound, heretofore quoted, to the effect that a denial of the right to serve Mill Valley would necessitate a withdrawal of its offer and a resurvey of the entire proposal.”
The order of the Commission based upon its pleadings and opinion concluded as a condition for the granting of a certificate of public convenience and necessity that:
“(4) The rights and privileges herein authorized may not be discontinued, sold, leased, transferred, nor assigned unless the written consent of the Railroad Commission to such discontinuance, sale, lease, transfer, or assignment has first been obtained.”
At a recent hearing,2 Pacific admitted that it had agreed to operate without hope of financial reward except the realization of sufficient returns to cover the actual out-of-pocket costs of the North Bay venture.
The foregoing review is significant by reason of the recent Supreme Court decision in Federal Power Comm. v. Sierra Pac. Power Co. (Pacific Gas & Electric Co. v. Sierra Pacific Power Co.), 350 U.S. 348, 76 S.Ct. 368, 372, 100 L.Ed. 388, decided shortly after the instant ruling of the Interstate Commerce Commission.
In setting aside an order of the Commission and remanding the Pacific Gas and Electric Company case, the Supreme *625Court held that a public utility may not be relieved of an improvident bargain even though such bargain produces less than a fair rate of return on its investment. The Commission’s duty is to protect the public interest as distinguished from the “private interests of the utilities.” A contract is neither unjust nor unreasonable merely because it is unprofitable to the utility. The express agreement of Pacific with the California Railroad Commission dated May 21, 1940, provident or improvident, cannot be ignored.
By parity of reasoning, when the ICC reviews local operations of Pacific it must consider its financial returns in terms of the public interest. Even though income realized from a specific sector is less than a fair rate of return, Pacific is not entitled to relief in the absence of proof of losses (not offset by interstate revenue), which place a burden on interstate commerce.
Plaintiffs in their proposed amendment to the complaint have sought to point out the frailties in Golden Gate, as well as the avoidance on the part of Pacific of the agreement made in the vital proceedings before the California Public Utilities Commission — vital in the sense that the proceedings sought to and did protect the public interest as distinguished from the “private interests of the utilities.” Cf. Pacific Gas & Electric Co. v. Sierra Pacific Power Co., supra.
The proposed amendment sets forth and challenges the findings of the ICC as to the financial ability of Golden Gate to operate. They charge that their limited capital structure — contributed by Pacific — and the narrow scope of their operations preclude economic success. The amendment also challenges numerous findings pertaining to Golden Gate as a carrier, contending that there is no substantial evidence to show that the local operations will support this carrier. If, in fact, such operations now earn a fair return for Pacific, the latter had no basis for complaining about the intrastate drain on its interstate business and the supposed burden placed upon interstate passengers.
Plaintiffs’ allegations establish the necessity for a complete hearing and review before this Court.3 This is especially so in view of the fact that Pacific has undertaken to avoid the consequences of its agreement with the California Public Utilities Commission (see especially pp. 672, 678 of 42 Ry. Comm, of California), by disposing of its local operations to an independent, but wholly owned subsidiary without first obtaining written consent from the California Commission, which is opposed to the transfer.
Under all of the circumstances4 and in the exercise of a sound and liberal discretion, Rule 15(a), F.R.Civ.P., plaintiffs’ motion to amend should be granted, since “justice so requires.”5
As a matter of alternative relief, consistent with the Supreme Court decision in Pacific Gas & Electric Co. v. Sierra. Pacific Power Co., supra, consideration should be given to a remand of said! cause to the Interstate Commerce Commission for further proceedings.6

. 42 Ry.Comm. 372 and 661; 50 PUC 650; 53 PUC 634, etc.

. Vol. 53 California Public Utility Commission Reports 634.

. Cf. Breswick & Co. v. United States, D.C., 138 F.Supp. 123, 137, 138.

. It should be observed that no defendant will suffer any substantial prejudice by permitting plaintiffs to amend their complaint. The California Public Utilities Commission granted Pacific a rate increase on its local operations shortly after this matter was argued and submitted to the court.

. Armstrong Cork Co. v. Patterson-Sargent Co., D.C., 10 F.R.D. 534; McDowall v. Orr Felt & Blanket Co., 6 Cir., 146 F.2d 136; Maryland Casualty Co. v. Rickenbaker, 4 Cir., 146 F.2d 751; Lloyd v. United Liquors Corp., 6 Cir., 203 F. 2d 789; and L. A. Tucker Truck Lines, Inc., v. United States, D.C., 100 F.Supp. 432.

. Cf. United States v. Ohio Power Co., 77 S.Ct. 652; Inland Motor Freight v. United States, D.C., 60 F.Supp. 520 (9th Cir.) ; Clarke v. U. S., D.C., 101 F. Supp. 587; Carolina Freight Carriers Corp. v. United States, D.C., 38 F.Supp. 549.