Alabama Public Service Commission v. Southern Railway Co. , 71 S. Ct. 762 ( 1951 )

Mr. Chief Justice Vinson

delivered the opinion of the Court.

The Southern Railway Company, appellee, brought this action in the Federal District Court to enjoin the members of the Alabama Public Service Commission and the Attorney General of Alabama, appellants, from enforcing laws of Alabama prohibiting discontinuance of certain railroad passenger service. Appellee’s Alabama intrastate service is governed by a statute prohibiting abandonment of “any portion of its service to the public . . . unless and until there shall first have been filed an application for a permit to abandon service and obtained from the commission a permit allowing such abandonment.” Ala. Code, 1940, tit. 48, i 106.¹ Severe penalties are prescribed for wilful violation of regulatory statutes or orders of the Commission by utilities or their employees. Id. §§ 399, 400, 405.

Appellee operates a railroad system throughout the South. This case, however, involves only that Alabama intrastate passenger service furnished by trains Nos. 7 and 8 operated daily between Tuscumbia, Alabama, and Chattanooga, Tennessee, a distance of approximately 145 miles mainly within Alabama. On September 13, 1948, appellee applied to the Alabama Public Service Commission for permission to discontinue trains Nos. 7 and 8, alleging that public use of the service had so declined that revenues fell far short of meeting direct operating expenses. After hearing evidence at Huntsville, Alabama, one of the communities served by the trains, the Commission entered an order on April 3, 1950, denying permission to discontinue on the grounds that there exists a public need for the service and that appellee had not attempted to reduce losses through adoption of more economical operating methods.

Instead of pursuing its right of appeal to the state courts,² appellee filed a complaint in the United States District Court alleging diversity of citizenship and that requiring continued operation of trains Nos. 7 and 8 at an out-of-pocket loss amounted to a confiscation of its property in violation of the Due Process Clause of the Fourteenth Amendment. Injunctive relief was prayed to protect appellee from irreparable loss, flowing on the one hand from operating losses in complying with Alabama law or, on the other, from severe penalties for discontinuance of service in the face of that law. A three-judge court³ heard evidence, made its own findings of fact and entered judgment holding the Commission order void and permanently enjoining appellants from taking any steps to enforce either the Commission order or the penalty provisions of the Alabama Code in relation to the discontinuance of trains Nos. 7 and 8.⁴ 91 F. Supp. 980 (1950). The case is properly here on appeal, 28 U. S. C. (Supp. Ill) § 1253.

Federal jurisdiction in this case is grounded upon diversity of citizenship as well as the allegation of a federal question. Exercise of that jurisdiction does not involve construction of a state statute so ill-defined that a federal court should hold the case pending a definitive construction of that statute in the state courts, e. g., Railroad Commission of Texas v. Pullman Co., 312 U. S. 496 (1941); Shipman v. DuPre, 339 U. S. 321 (1950). We also put to one side those cases in which the constitutionality of a state statute itself is drawn into question, e. g., Toomer v. Witsell, 334 U. S. 385 (1948). For in this case appellee attacks a state administrative order issued under a valid regulatory statute designed to assure the provision of adequate intrastate service by utilities operating within Alabama.⁵

Appellee takes the position, adopted by the court below, that whenever a plaintiff can show irreparable loss caused by an allegedly invalid state administrative order ripe for judicial review in the state courts the presence of diversity of citizenship or a federal question opens the federal courts to litigation as to the validity of that order, at least so long as no action involving the same subject matter is actually pending in the state courts. But, it by-no means follows from the fact of district court jurisdiction that such jurisdiction must be exercised in this case.⁶ As framed by the Court in Burford v. Sun Oil Co., 319 U. S. 315, 318 (1943), the question before us is:

“Assuming that the federal district court had jurisdiction, should it, as a matter of sound equitable discretion, have declined to exercise that jurisdiction here?”

In assessing the propriety of equitable relief, a review of the regulatory problem involved in this case is appropriate.

Appellee conducts an interstate business over the same tracks and by means of the same trains involved in this case, and such interstate activities are regulated by the Federal Interstate Commerce Commission, 49 U. S. C. §§ 1 et seq. But, it has long been held that this interblending of the interstate and intrastate operations does not deprive the states of their primary authority over intrastate transportation in the absence of congressional action supplementing that authority. Minnesota Rate Cases, 230 U. S. 352 (1913). And Congress has since provided:

“That nothing in [the Interstate Commerce Act] shall impair or affect the right of a State, in the exercise of its police power, to require just and reasonable freight and passenger service for intrastate business, except insofar as such requirement is inconsistent with any lawful order of the [Interstate Commerce Commission].” 49 U. S. C. § 1 (17) (a).⁷

This Court has held that regulation of intrastate railroad service is “primarily the concern of the state.” North Carolina v. United States, 325 U. S. 507, 511 (1945) (rates); Palmer v. Massachusetts, 308 U. S. 79 (1939) (discontinuance of local service).

State and federal regulatory agencies have expressed concern over the chronic deficit arising out of passenger train operations as a threat to the financial security of the American railroads and have recommended drastic action to minimize the deficit, including the discontinuance of unpatronized and unprofitable service.⁸ However, our concern in this case is limited to the propriety of a federal court injunction enjoining enforcement of a state regulatory order.⁹

The court below justified the exercise of its jurisdiction with a finding that continued operation of trains Nos. 7 and 8 would result in confiscation of appellee’s property-in violation of the Due Process Clause of the Fourteenth Amendment. In pursuing the threshold inquiry whether a federal court should exercise jurisdiction in this case, we find it unnecessary to consider issues relating to the merits of appellee’s case, issues which appellants did not see fit to raise in this Court either in their Statement of Jurisdiction or in their briefs. We do note that in passing upon similar contentions in the past, this Court has recognized that review of an order requiring performance of a particular utility service, even at a pecuniary loss, is subject to considerations quite different from those involved when the return on the entire intrastate operations of a utility is drawn into question. Atlantic Coast Line R. Co. v. North Carolina Corporation Commission, 206 U. S. 1, 24—27 (1907). The problems raised by the discontinuance of trains Nos. 7 and 8 cannot be resolved alone by reference to appellee’s loss in their operation but depend more upon the predominantly local factor of public need for the service rendered. Chesapeake & Ohio R. Co. v. Public Service Commission of West Virginia, 242 U. S. 603, 608 (1917).

The Alabama Commission, after a hearing held in the area served, found a public need for the service. The court below, hearing evidence de novo, found that no public necessity exists in view of the increased use and availability of motor transportation. We do not attempt to resolve these inconsistent findings of fact. We take note, however, of the fact that a federal court has been asked to intervene in resolving the essentially local problem of balancing the loss to the railroad from continued operation of trains Nos. 7 and 8 with the public need for that service in Tuscumbia, Decatur, Huntsville, Scottsboro, and the other Alabama communities directly-affected.

Not only has Alabama established its Public Service Commission to pass upon a proposed discontinuance of intrastate transportation service, but it has also provided for appeal from any final order of the Commission to the circuit court of Montgomery County as a matter of right. Ala. Code, 1940, tit. 48, § 79. That court, after a hearing on the record certified by the Commission, is empowered to set aside any Commission order found to be contrary to the substantial weight of the evidence or erroneous as a matter of law, id. § 82, and its decision may be appealed to the Alabama Supreme Court. Id. § 90. Statutory appeal from an order of the Commission is an integral part of the regulatory process under the Alabama Code. Appeals, concentrated in one circuit court, are “supervisory in character.” Avery Freight Lines, Inc. v. White, 245 Ala. 618, 622-623, 18 So. 2d 394, 398 (1944). The Supreme Court of Alabama has held that it will review an order of the Commission as if appealed directly to it, Alabama Public Service Commission v. Nunis, 252 Ala. 30, 34, 39 So. 2d 409, 412 (1949), and that judicial review calls for an independent judgment as to both law and facts when a denial of due process is asserted. Alabama Public Service Commission v. Southern Bell Tel. & Tel. Co., 253 Ala. 1, 11-12, 42 So. 2d 655, 662 (1949).

The fact that review in the Alabama courts is limited to the record taken before the Commission presents no constitutional infirmity. Washington ex rel. Oregon R. & N. Co. v. Fairchild, 224 U. S. 510 (1912). And, whatever the scope of review of Commission findings when an alleged denial of constitutional rights is in issue, it is now settled that a utility has no right to relitigate factual questions on the ground that constitutional rights are involved. New York v. United States, 331 U. S. 284, 334-336 (1947); Railroad Commission of Texas v. Rowan & Nichols Oil Co., 311 U. S. 570, 576 (1941). Appellee complains of irreparable injury resulting from the Commission order pending judicial review, but has not invoked the protective powers of the Alabama courts to direct the stay or supersedeas of a Commission order pending appeal. Ala. Code, 1940, tit. 48, §§ 81, 84.¹⁰ Appellee has not shown that the Alabama procedure for review of Commission orders is in any way inadequate to preserve for ultimate review in this Court any federal questions arising out of such orders.

As adequate state court review of an administrative order based upon predominantly local factors is available to appellee,¹¹ intervention of a federal court is not necessary for the protection of federal rights. Equitable relief may be granted only when the District Court, in its sound discretion exercised with the “scrupulous regard for the rightful independence of state governments which should at all times actuate the federal courts,”¹² is convinced that the asserted federal right cannot be preserved except by granting the “extraordinary relief of an injunction in the federal courts.”¹³ Considering that “[f]ew public interests have a higher claim upon the discretion of a federal chancellor than the avoidance of needless friction with state policies,”¹⁴ the usual rule of comity must govern the exercise of equitable jurisdiction by the District Court in this case. Whatever rights appellee may have are to be pursued through the state courts. Burford v. Sun Oil Co., 319 U. S. 315 (1943); Railroad Commission of Texas v. Rowan & Nichols Oil Co., 311 U. S. 570, 577 (1941); Railroad Commission of Texas v. Rowan & Nichols Oil Co., 310 U. S. 573, as amended, 311 U. S. 614, 615 (1940).

The Johnson Act, 48 Stat. 775 (1934), now 28 U. S. C. (Supp. III) § 1342, does not affect the result in this case. That Act deprived federal district courts of jurisdiction to enjoin enforcement of certain state administrative orders affecting public utility rates where “A plain, speedy and efficient remedy may be had in the courts of such State.” As the order of the Alabama Service Commission involved in this case is not one affecting appellee’s rates, the Johnson Act is not applicable. We have assumed throughout this opinion that the court below had jurisdiction, supra, p. 345, but hold that jurisdiction should not be exercised in this case as a matter of sound equitable discretion. As this Court held in Great Lakes Dredge & Dock Co. v. Huffman, 319 U. S. 293, 297-298 (1943):

“This withholding of extraordinary relief by courts having authority to give it is not a denial of the jurisdiction which Congress has conferred on the federal courts .... On the contrary, it is but a recognition . . . that a federal court of equity . . . should stay its hand in the public interest when it reasonably appears that private interests will not suffer. . . .

“It is in the public interest that federal courts of equity should exercise their discretionary power to grant or withhold relief so as to avoid needless obstruction of the domestic policy of the states.”¹⁵

For the foregoing reasons, the judgment of the District Court is

Reversed.

1 Upon the filing of an application for permission to discontinue, the statute provides for notification of municipal officials, publication of notice in the area affected by the change in service, and a hearing by the Commission. Ala. Code, 1940, tit. 48, § 107. “The commission, as it deems to the best interest of the public, may grant in part or in whole, or may refuse such applications, . . . .” Id. § 108.

2 Ala. Code, 1940, tit. 48, §§ 79 et seq.

3 Under 28 U. S. C. (Supp. III) §2281, only a district court of three judges may issue an injunction restraining enforcement of “any State statute by restraining the action of any officer of such State in the enforcement or execution of such statute or of an order made by an administrative board or commission acting under State statutes . . . .” The word “statute” comprehends all state legislative enactments, including those expressed through administrative orders. American Federation of Labor v. Watson, 327 U. S. 582, 591-593 (1946); Oklahoma Natural Gas Co. v. Russell, 261 U. S. 290, 292 (1923).

4 Appellants contend for the first time in this Court that a suit to restrain state officials from enforcing unconstitutional state laws is, in effect, a suit against the state prohibited by the Eleventh Amendment. The contention is not tenable in view of the many cases prior to and following Ex parte Young, 209 U. S. 123 (1908), in which this Court has granted such relief over the same objection.

5 The Alabama statute requiring application for a permit from the Alabama Public Service Commission before discontinuing transportation service was upheld by this Court in St. Louis-San Francisco R. Co. v. Alabama Public Service Commission, 279 U. S. 560 (1929). The statute was recently construed and applied by the Alabama Supreme Court in Alabama Public Service Commission v. Atlantic Coast Line R. Co., 253 Ala. 559, 45 So. 2d 449 (1950).

6 Gulf Oil Corp. v. Gilbert, 330 U. S. 501, 504-505 (1947); Great Lakes Dredge & Dock Co. v. Huffman, 319 U. S. 293, 297 (1943); Atlas Life Ins. Co. v. W. I. Southern, Inc., 306 U. S. 563, 570 (1939); Canada Malting Co., Ltd. v. Paterson Steamships, Ltd., 285 U. S. 413, 422-423 (1932).

7 Appellee seeks to discontinue only two of several passenger trains serving the same communities. This is a proposed partial discontinuance and not an abandonment over which the Interstate Commerce Commission is given exclusive authority under 49 U. S. C. §§ 1 (18-20). Colorado v. United States, 271 U. S. 153 (1926). The I. C. C. has held that it has no authority under 49 U. S. C. §§ 1 (18-20) to authorize a partial discontinuance as such of intrastate passenger service. Kansas City Southern R. Co., 94 I. C. C. 691 (1925); New York Central R. Co., 254 I. C. C. 745, 765 (1944).

8 See 64th Annual Report, Interstate Commerce Commission (1950) 5-6; 63d Annual Report, Interstate Commerce Commission (1949) 4 — 5; Increased Freight Rates, 194-8, 276 I. C. C. 9, 32-40 (1949); Proceedings, 61st Annual Convention, National Association of Railroad and Utilities Commissioners (1949) 378-382, 410-414.

9 As the jurisdiction of the Interstate Commerce Commission under 49 U. S. C. § 13 (4) has not been invoked for decision as to whether the continuance of this intrastate service constitutes an undue discrimination against interstate commerce, we cannot, in this proceeding, consider any impact the order of the Alabama Public Service Commission might have on interstate commerce. Western & Atlantic R. Co. v. Georgia Pub. Serv. Comm’n, 267 U. S. 493 (1925), and cases cited therein.

10 Compare Pacific Tel. & Tel. Co. v. Kuykendall, 265 U. S. 196 (1924), where supersedeas was not available to adequately protect federal rights, and Oklahoma Natural Gas Co. v. Russell, 261 U. S. 290 (1923), where supersedeas was sought but denied by the state court.

11 Compare such cases as Bacon v. Rutland R. Co., 232 U. S. 134 (1914), where State judicial review procedures plus review in this Court were thought to be inadequate. This inadequacy derived from the rationale that the federal right of a utility to be protected from confiscation of its property depended upon “pure matters of fact” to the extent that a de novo hearing of such facts in a federal court was essential to the protection of constitutional rights. Prentis v. Atlantic Coast Line R. Co., 211 U. S. 210, 228 (1908). See Lilienthal, The Federal Courts and State Regulation of Public Utilities, 43 Harv. L. Rev. 379,424 (1930). The decisions in Railroad Commission of Texas v. Rowan & Nichols Oil Co., 311 U. S. 570, 576 (1941), and New York v. United States, supra, holding that due process does not require relitigation of factual matters determined by an administrative body, eliminated the premise upon which equitable relief in Bacon rested.

12 Matthews v. Rodgers, 284 U. S. 521, 525 (1932). See Pennsylvania v. Williams, 294 U. S. 176, 185 (1935).

13 Railroad Commission of Texas v. Rowan & Nichols Oil Co., 310 U. S. 573, as amended, 311 U. S. 614, 615 (1940).

14 Railroad Commission of Texas v. Pullman Co., 312 U. S. 496, 500 (1941).

15 In Meredith v. Winter Haven, 320 U. S. 228, 237 (1943), the Court sustained the exercise of jurisdiction by a federal court in a case involving matters of state law, but only where decision “does not require the federal court to determine or shape state policy governing administrative agencies” and “entails no interference with such agencies or with the state courts.” The absence of a legal remedy in the federal courts does not of itself justify the granting of equitable relief in such cases. Atlas Life Ins. Co. v. W. I. Southern, Inc., 306 U. S. 563, 569-570 (1939).