Public Service Commission v. United States

PICKETT, Circuit Judge.

The Public Service Commission of the State of Utah and the Utah Citizens Rate Association brought this action to set aside and enjoin the enforcement of an order of the Interstate Commerce Commission granting an increase of intrastate freight rates in Utah in a proceeding under § 13(3) and (4) of the Interstate Commerce Act. 49 U.S.C.A. § 13(3), (4).¹ The Class I railroads operating in Utah intervened. A statutory three-judge court was constituted and an interlocutory injunction granted pending a hearing on the merits of the case.

The underlying proceedings which give rise to this action originated in 1951 before the Interstate Commerce Commission, entitled “Increased Freight Rates 1951”, herein referred to as “Ex Parte 175”, wherein Class I railroads of the United States sought an overall increase in interstate freight rates. After some percentage increases had been authorized, the- Commission, on April 11, 1952, granted increases totaling 15% to all railroads on interstate rates. 284 I.C.C. 589. This increase was subject to certain exceptions and hold-downs. The railroads operating in Utah made application to the Public Service Commission of Utah for increases in intrastate rates in the same percentage as those granted in Ex Parte 175.

The Utah Commission refused to grant' the increases and Section 13 proceedings were instituted before the Interstate Commerce Commission, which entered into an investigation of the Utah intrastate rates. A full and complete hearing was had, at which evidence was offered by the railroads and by protestants, including these plaintiffs. The Interstate Commerce Commission, with exceptions, found that the Utah intrastate rates and charges were abnormally low; that conditions incident to intrastate transportation in Utah were not more favorable than those incident to interstate transportation in that state; that traffic thereunder failed to produce its fair share of earnings required to yield the railroads sufficient revenue to provide adequate and efficient- railway transportation service to accomplish the purposes of the Interstate Commerce Act, and that Utah intrastate rates cast an undue burden upon interstate commerce. 297 I.C.C. 87.² It was also found that the undue burden and unjust discrimination should be removed by applying to the Utah intrastate rates and charges the interstate increase authorized in Ex Parte 175 on like intrastate traffic. The increases, however, were limited by the provision “that increases may not be made in intrastate rates to levels higher than the interstate rates on like traffic to or from Utah for like or greater short-line distances over the same lines of railroad, except in instances where the interstate rates, and not the intrastate rates, are designated as published to meet motor-carrier competition.” It is conceded that the findings meet the requirements of King v. United States, 344 U.S. 254, 73 S.Ct. 259, 97 L.Ed. 301, but it is urged that the evidence does not sustain them.

The Utah Commission did not authorize the increases within the time provided in the order and the railroads were then directed by the Interstate Commerce Commission to make the 15 %■ increase effective on Utah intrastate rates as of March 13, 1956. This action followed.

The matter is before us on the record of the Interstate Commerce Commission proceedings under Section 13. At the opening of the trial the plaintiffs introduced in evidence the Interstate Commerce Commission records and, in addition, offered the record of proceedings made before the Public Service Commission of Utah. The court reserved ruling on the admissibility of the latter record, which had not been introduced in the proceedings before the Commission. It is well settled that when an order of the Interstate Commerce Commission is questioned in an action of this nature, the court shall consider only such matters as were before the Commission prior to the issuance of its order. Tagg Bros. & Moorehead v. United States, 280 U.S. 420, 443, 50 S.Ct. 220, 74 L.Ed. 524; Louisville & Nashville R. Co. v. United States, 245 U.S. 463, 466, 38 S. Ct. 141, 62 L.Ed. 400; State of New York v. United States, 331 U.S. 284, 335, 67 S.Ct. 1207, 91 L.Ed. 1492; Sakis v. United States, D.C., 103 F.Supp. 292, appeal dismissed 344 U.S. 801, 73 S.Ct. 4, 97 L.Ed. 625. The record in the State proceeding is irrelevant and the objection to its admission in evidence is sustained.

The power of Congress to authorize the Interstate Commerce Commission to establish intrastate rates in order to remove unjust discrimination against interstate commerce is not open to dispute. The plaintiffs here do not question that power, although they do question the reasonableness of the increases in Ex Parte 175. See King v. United States, 344 U.S. 254, 274, 73 S.Ct. 259, 97 L.Ed. 301; Florida v. United States, 282 U.S. 194, 211, 51 S.Ct. 119, 75 L.Ed. 291. It appears quite clear that Congress intended that the railway system of the country shall have a reasonable return to carry out the purposes of the Interstate Commerce Act, which would include compensation for intrastate business reasonably proportionate with the interstate business. Railroad Commission of State of Wisconsin v. Chicago, B. & Q. R. Co., 257 U.S. 563, 588, 42 S.Ct. 232, 66 L.Ed. 371; Illinois Commerce Commission v. United States, 292 U.S. 474, 483, 54 S.Ct. 783, 78 L.Ed. 1371. “The fundamental purpose of the Congress in enacting section 13, subdivisions (3) and (4), was to reach intrastate rates that were found to result in unjust discrimination against interstate commerce.” State of Florida v. United States, 282 U.S. 194, 210, 51 S.Ct. 119, 123, 75 L.Ed. 291. The purpose of § 13 (4) is not limited to the removal of unjust and unreasonable discriminations against interstate commerce as it relates to persons and localities, but it imposes on the commission the affirmative duty “to take other important steps to maintain an adequate railway service for the people of the United States.” Railroad Commission of State of Wisconsin v. Chicago, B. & Q. R. Co., 257 U.S. 563, 585, 42 S.Ct. 232, 236; State of Florida v. United States, 282 U.S. 194, 51 S.Ct. 119.

In determining the validity of an order of this nature, a reviewing court may not weigh the evidence; it may not negative the action of the Commission, being “one of those agencies presumably equipped or informed by experience to deal with the specialized field of knowledge, whose findings within that field carry the authority of an expertness which courts do not possess and therefore must respect,” if from a consideration of the entire record there is a rational basis for the action. Universal Camera Corp. v. National Labor Relations Board, 340 U.S. 474, 488, 71 S.Ct. 456, 465, 95 L.Ed. 456. The court may set aside the order, “when it cannot conscientiously find that the evidence supporting that decision is substantial, when viewed in the light that the record in its entirety furnishes, including the body of evidence opposed to the Board’s view.” Universal Camera Corp. v. National Labor Relations Board, supra.

In Interstate Commerce Commission v. Jersey City, 322 U.S. 503, 513, 64 S.Ct. 1129, 1134, 88 L.Ed. 1420, it was said: “ * * * ‘So long as there is warrant in the record for the judgment of the expert body it must stand. * * * “The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.” ’ Rochester Telephone Corp. v. United States, 307 U.S. 125, 145, 146, 59 S.Ct. 754, 764, 765, 83 L.Ed. 1147; Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 286, 287, 54 S.Ct. 692, 693, 694, 78 L. Ed. 1260.”

The principal contention of the plaintiffs is that the evidence does not sustain the finding that the existing intrastate rates cause undue, unreasonable and unjust discrimination against interstate commerce. It is said that the evidence fails because there has been no separation of interstate and intrastate costs and revenues. The evidence is to the effect that there is no distinction in the handling of interstate and intrastate freight shipments. They are both handled on the same trains, by the same crews; the same accounting department, the same traffic department, and the same facilities are used in the dispatch of both shipments. Under such • conditions, the contention of the plaintiffs has been rejected by the courts. King v. United States, supra; Illinois Commerce Commission v. United States, supra; State of North Carolina v. United States, D.C., 128 F.Supp. 718, affirmed 350 U.S. 805, 76 S.Ct. 45. In the Illinois Commerce case, the court said, 292 U.S. 474, 483-484, 54 S.Ct. 783, 787:

“Where the conditions under which interstate and intrastate traffic move are found to be substantially the same with respect to all factors bearing on the reasonableness of the rate, and the two classes are shown to be intimately bound together, there is no occasion to deal with the reasonableness of the intrastate rates more specifically, or to separate intrastate and interstate costs and revenues.”

This does not mean that there must be a uniformity in interstate and intrastate rates. Intrastate transportation is primarily the concern of the state. The Interstate Commerce Commission is without authority to supplant intrastate rates unless there are findings supported by evidence that conditions exist which may bring § 13(4) into play. To authorize an interference with intrastate rates, it must be shown that the intrastate and interstate traffic are intimately bound together; that the conditions incident to intrastate transportation are no more favorable than those incident to interstate traffic, and that the intrastate rates involved are abnormally low and are not contributing their fair share of the revenue to which the railroads are entitled. The mere existence of a disparity in rates is not enough to warrant interference by the Interstate Commerce Commission. State of North Carolina v. United States, 325 U.S. 507, 516, 65 S.Ct. 1260, 89 L.Ed. 1760. The State Commission has complete control of intrastate rates so long as those rates do not unduly burden or discriminate against interstate commerce.

In finding that such a burden and discrimination existed, the Commission did not rely entirely on the disparity in rates. It was shown that the conditions under which interstate and intrastate traffic move were substantially the same with respect to all factors bearing on the reasonableness of the rates. The railroads’ general need for additional revenue was established in Ex Parte 175. There is evidence to the effect that the earnings on the railroads’ investments in Utah are below the national average. The economic ability of the Utah traffic to bear the 15 %• increase found necessary in Ex Parte 175 was shown. The economic conditions in Utah in 1950 had improved greatly over the preceding period, both actually and relatively. Wages were higher than the national average; higher wages and costs of operation which the railroads had to pay in Utah and elsewhere were shown; there had been a substantial increase in the railroads’ property investment in the State, while there was a decrease in net operating income. The cost of handling intrastate shipment was found to be as great, if not greater, than the handling of interstate freight. The percentage of return on net investment of the railroads in Utah was 3.82% in 1953, as compared with 3.98% in 1948, 2.58% in 1949, 4.33% in 1950, 3.66%. in 1951, and 3.91%. in 1952. The record also shows that in 1952 the revenue per ton mile of railroads in the United States was 1.43 cents; in the Western District, 1.393 cents; and in the Mountain Pacific states, which includes Utah, 1.398 cents per ton mile; and in the State of Utah, on intrastate and interstate traffic, 1.258 cents per ton mile. The total annual loss to the railroads caused by the failure to grant the requested increase in Utah was estimated at $1,880,347.³

In State of North Carolina v. United States, D.C., 128 F.Supp. 718, affirmed 350 U.S. 805, 76 S.Ct. 45, the state sought to nullify an order of the Interstate Commerce Commission, applying the Ex Parte 175 rates to intrastate freight in North Carolina. There may be some varying conditions, but on the whole the case was the same as the one before us. In answering the argument that the record did not disclose that the intrastate rates resulted in an undue discrimination against interstate commerce, the court said, 128 F.Supp. at pages 722, 723:

“Plaintiffs contend that there was no sufficient showing of discrimination against interstate commerce and in favor of intrastate commerce resulting from the intrastate rates. It appears, however, that, without the Ex parte No. 175 increases on any of their traffic in 1953, the return on net investment in 1953 for the four principal carriers receiving 87 % of the intrastate revenue would have been 0.94% for the Norfolk Southern, 4.63% for the Seaboard, 4.35% for the Southern and a deficit of more than $4,000,000 for the Atlantic Coast Line, or a combined return for the four roads of 2.84%. This is not a case, then, as plaintiffs argue, where an unnecessary increase was granted in a prosperous territory because of a need in other sections. The need for increase existed in North Carolina as these figures show, and the Commission estimated that the total loss from the non-application of the increase in 1953, was $1,500,000. As the cost of handling intrastate freight was shown to be as great as or greater than the handling of interstate freight, the raising of interstate rates without raising intrátate rates necessarily resulted in throwing an undue share of the cost of the service upon interstate transportation. As said by Mr. Justice Stone in Illinois Commerce Commission v. United States, 292 U.S. 474, 485, 54 S.Ct. 783, 787, 78 L.Ed. 1371, ‘The effect of maintaining a lower rate, intrastate, than the reasonable interstate rate is necessarily discriminatory wherever the two classes of traffic, inextricably intermingled, are carried on, as in the District, under substantially the same conditions.’

“In Railroad Commission of State of Wisconsin v. Chicago, B. & Q. R. Co., 257 U.S. 563, 586, 42 S.Ct. 232, 236, 66 L.Ed. 371, Chief Justice Taft, speaking for the court, said:

“ ‘If the railways are to earn a fixed net percentage of income, the lower the intrastate rates, the higher the interstate rates may have to be. The effective operation of the act will reasonably and justly require that intrastate traffic should pay a fair proportionate share of the cost of maintaining an adequate railway system. * * * If that purpose is interfered with by a disparity of intrastate rates, the Commission is authorized to end the disparity by directly removing it, because it is plainly an “undue, unreasonable, and unjust discrimination against interstate or foreign commerce,” within the ordinary meaning of those words.’ * * * ”

In similar cases concerning the same matter, Louisiana Public Service Commission v. United States, D.C., 125 F. Supp. 180, affirmed 348 U.S. 885, 75 S.Ct. 206, 99 L.Ed. 695, sustained the order of the Interstate Commerce Commission, and Mississippi Public Service Commission v. United States, D.C., 124 F.Supp. 809, affirmed Illinois Central R. R. Comm. v. Mississippi Public Service Comm., 349 U.S. 908, 75 S.Ct. 599, 99 L.Ed. 1244, with one judge dissenting, set aside and enjoined the enforcement of the order.

Plaintiffs’ contention that the order relating to the Utah intrastate rates is invalid because of the flat percentage increase of 15%. in Ex Parte 175, with a savings clause, was contrary to law, is without merit. The validity of the Commission’s order in Ex Parte 175 is not subject to a collateral attack. Callanan Road Imp. Co. v. United States, 345 U.S. 507, 512, 73 S.Ct. 803, 97 L.Ed. 1206; Securities & Exchange Commission v. Central-Illinois Securities Corp., 338 U.S. 96, 143, 69 S.Ct. 1377, 93 L.Ed. 1836; City of Tulsa v. Midland Valley R. Co., 10 Cir., 168 F.2d 252. The determination of just and reasonable rates is for the Commission, not the courts. Montana-Dakota Utilities Co. v. Northwestern Public Service Comm., 341 U.S. 246, 251, 71 S.Ct. 692, 95 L.Ed. 912; Swayne & Hoyt, Ltd. v. United States, 300 U.S. 297, 304, 57 S.Ct. 478, 81 L.Ed. 659; Interstate Commerce Commission v. Illinois Central R. R. Co., 215 U.S. 452, 470, 30 S.Ct. 155, 54 L.Ed. 280; Manufacturers Ry. Co. v. United States, 246 U.S. 457, 481, 38 S.Ct. 383, 62 L.Ed. 831; Texas & Pacific Ry. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553. The courts, in appropriate cases, have upheld flat horizontal percentage rate increases which contained a savings clause to prevent injustices. United States v. State of Louisiana, 290 U.S. 70, 54 S.Ct. 28, 78 L.Ed. 181; The New England Divisions Case (Akron, C. & Y. R. Co. v. U. S.), 261 U.S. 184, 187, 43 S.Ct. 270, 67 L.Ed. 605; Railroad Commission of Wis. v. Chicago, B. & Q. R. Co., supra.

The plaintiffs urge that the record discloses that the Utah intrastate rates, without the 15% increase, are contributing more, not less, than their fair share of the overall revenue needs of the railroads. The Commission did not so find. While the exhibits, in some instances, show intrastate rates equal to or even higher than interstate service, this may result from varying causes which are not material here. The clear import of the Commission’s order is that increases in intrastate rates shall not be made to levels higher than interstate rates for like traffic. The order is also without prejudice to a reexamination as to the lawfulness of any individual Utah intrastate rate on any particular commodity.

We have considered the voluminous record and conclude that the findings of the Commission are supported by substantial evidence. The complaint is dismissed and the interlocutory injunction dissolved; costs to be assessed to the plaintiffs.

1 . 49 U.S.C.A. § 13(4), reads as follows: “Whenever in any such investigation the commission, after full hearing, finds that any such rate, fare, charge, classification, regulation, or practice causes any undue or unreasonable advantage, preference, or prejudice as between persons or localities in intrastate commerce on the one hand and interstate or foreign commerce on the other hand, or any undue, unreasonable, or unjust discrimination against interstate or foreign commerce, which is forbidden and declared to be unlawful, it shall prescribe the rate, fare, or charge, or the maximum or minimum, or maximum and minimum, thereafter to be charged, and the classification, regulation, or practice thereafter, to be observed, in such manner as, in its judgment, will remove such advantage, preference, prejudice, or discrimination. Such rates, fares, charges, classifications, regulations, and practices shall be observed while in effect by the carriers parties to such proceeding affected thereby, the law of any State or the decision or order of any State authority to the contrary notwithstanding.”

2 . The Commission’s findings (297 I.C.C. 105,) are as follows:

“1. The conditions incident to the intrastate transportation of freight in Utah are not more favorable than those incident to the interstate transportation between Utah and adjoining States.

“2. The amounts and percentages by which interstate freight rates and charges between points in Utah and points in other States were increased, as authorized in Ex Parte'No. 175, are just and reasonable.

“3. The present Utah intrastate rates and charges on carload and less-than-carload freight, except on sugar beets and beet-sugar final molasses destined to sugar factories, and excepting certain rates on ■ coal, sheep, and. cattle, hereinafter enumerated, imposed by authority of the State, and abnormally low, and traffic thereunder fails to produce its fair share of the earnings required .to yield revenue sufficient to enable the respondents, under honest, economic, and efficient management, to provide adequate and efficient. railway transportation service at the lowest cost consistent with the furnishing of such service,. and thereby accomplish the purposes of the Interstate Commerce Act, as set forth in the national transportation system adequate to meet the needs of the commerce of the United States, of the postal service, and of the national defense. The burden thus cast upon intrastate rates and charges are less than they would be on the bases herein prescribed; and these intrastate rates and charges cause, and for the future will cause, undue, unreasonable, and unjust discrimination against interstate commerce.

“4. The undue, unreasonable, and unjust discrimination herein found to exist should be removed by applying to the Utah intrastate rates and charges, on the commodities and traffic herein described, the same respective increases as are and for the future may be maintained by the respondents on like interstate traffic between points in Utah and adjoining States under our authorization in Ex Parte No. 175, provided that increases may not be made in intrastate rates to levels higher than the interstate rates on like traffic to or from Utah for like or greater short-line distances over the same lines of railroad, except in instances where the interstate rates, and not the intrastate rates, are designated as published to meet motor-carrier competition.

“5. The establishment of increases in intrastate rates and charges as prescribed in finding 4 will not result in unreasonable rates, or rates that are unreasonable in relation to interstate rates, and will substantially increase the respondents’ annual revenues.

“6. The increased revenues to the respondents which will result from the increased rates and charges as provided in finding 4 are required from intrastate traffic in Utah in order to enable the respondents to provide adequate and efficient railway transportation service.

“7. In certain instances it appears that the present Utah intrastate rates are now as high as corresponding interstate rates including the Ex Parte No. 175 increases for comparable distances. The intrastate rates specified below, are excepted from the findings herein:

“Rates on coal, viz.:

“From Oastle Gate to Milford, Utah, slack and other sizes.

“Prom Oastle Gate to Lund, Utah, slack and other sizes.

“Prom Oastle Gate to Devil's Slide, Utah, slack.

“Rates on sheep, in double-deck cars, viz.:

“Prom Lakeside to Wahsatch, Utah. “Prom Cedar City to Kaysville, Utah.

“Rates on cattle, in single-deck cars, viz.:

“Prom Spanish Pork to Ogden, Utah.”

3 . In Illinois Commerce Comm. v. United States, 292 U.S. 474, 479, 54 S.Ct. 783, 785, the court said:

“The scope and application of section 13(4), Interstate Commerce Act 49 U.S. C.A. § 13(4), have so recently been fully considered in opinions of this Court in United States v. Louisiana, 290 U.S. 70, 54 S.Ct. 28, 78 L.Ed. 181; State of Florida v. United States, 292 U.S. 1, 54 S.Ct. 603, 78 L.Ed. [1077] * * *; see also Georgia Public Service Comm. v. United States, 283 U.S. 765, 51 S.Ct. 619, 75 L.Ed. 1397; Florida v. United States, 282 U.S. 194, 51 S.Ct. 119, 75 L.Ed. 291, that it is unnecessary to repeat that discussion here. Under section 13(4) [of the Interstate Commerce Act] the Interstate Commerce Commission is given plenary power to remove the discrimination created by intrastate rates against interstate commerce, by raising intrastate rates so that the intrastate traffic may produce its fair share of the revenue required to meet maintenance and operating costs and to yield a fair return on the value of property devoted to the transportation service.”