Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

NEW YORK v. UNITED STATES

UNITED STATES DISTRICT COURT, NORTHERN DISTRICT OF NEW YORK


May 9, 1946

STATE OF NEW YORK et al.
v.
UNITED STATES. ATCHISON, T. & S.F. RY. CO. et al. v. SAME

Consolidated suits pursuant to 28 U.S.C.A. §§ 41(28) and 43-48, inc., and also under general jurisdiction of a court of equity, by the States of New York, Delaware, Indiana, Maryland, Michigan, New Jersey, Ohio, Wisconsin and the Commonwealth of Pennsylvania, against the United States of America, and by the Atchison, Topeka & Sante Fe Railway Company and others against the United States of America, to enjoin, set aside, annul and suspend orders of the Interstate Commerce Commission requiring an increase of 10 per cent. in the class rates charged by railroads for transporting freight in so-called Official Territory and a decrease of 10 per cent. in class rates charged by railroads for transporting freight in the so-called Southern Territory, Western Trunk Line Territory, and Southwestern Territory, and corresponding changes in the interterritorial rates, wherein numerous parties in interest were permitted to intervene.

Decree entered dismissing petitions, but dismissal of petition by Western Lines is without prejudice to another suit to restrain enforcement of ad interim rates if they are found, after a fair test, to be confiscatory.

 These two suits put in issue the validity of the same orders of the Interstate Commerce Commission and were consolidated for hearing before a court of three judges constituted in accordance with provisions of the Urgent Deficiencies Act, 38 Stat. 29.

 The first was brought against the United States by the States of New York, Delaware, Indiana, Maryland, Michigan, New Jersey, Ohio, Wisconsin, and the Commonwealth of Pennsylvania to enjoin, set aside, annul and suspend orders of the Interstate Commerce Commission requiring an increase of ten per cent in what are called the class rates charged by the railroads for transporting freight in the so-called Official Territory and a decrease of ten per cent in the class rates charged by railroads for transporting freight in the so-called Southern Territory, Western Trunk Line Territory and Southwestern Territory and corresponding changes in the interterritorial rates. Parties in interest were permitted to intervene *fn1" and, after hearing, an injunction pendente lite was granted.

 Thereafter the Atchison, Topeka, and Sante Fe Railway Company and others which will be referred to as the Western Lines, *fn2" brought another petition against the United States in which the same relief was sought in respect to the same orders. Interested parties were allowed to intervene. *fn3" These two suits were heard as a consolidated action all questions relating to venue having been waived

 In order to understand the issues here presented, as well as the action of the Commission and the relevancy of the facts found by it, some preliminary statement of what was in 1939 apparently the prevailing situation in this country in respect to freight classifications and freight rates is necessary.

 For the purpose of fixing freight rates the country was, and now is, divided into the four territories already mentioned and one other which is called Mountain-Pacific Territory, and which is not involved in these suits. It covers the States of Montana, New Mexico, the western portions of Colorado and Wyoming, and all the States west of them. The other territories, which are involved in these suits, may be roughly described as follows: Western Trunk Line Territory includes the States east of Mountain-Pacific Territory, north of Oklahoma and Arkansas, and west of the Mississippi River and the greater part of Wisconsin and the northwestern portion of Michigan. Southwestern Territory includes the country south of Western Trunk Line Territory and west of the Mississippi River. Southern Territory consists of the country lying east of the Mississippi and south of the Ohio and Potomac rivers. Official Territory comprises the remainder of the country lying north of the Ohio and Potomac rivers and east of the western boundary of Lake Michigan and a line drawn diagonally therefrom to the western bank of the Mississippi River opposite Illinois. Official Territory has two subdivisions one of which includes all of New England and the other of which, known as Zone C, takes in the northern part of Michigan and a small part of Wisconsin. In the Southern Territory the greater part of Florida is a subdivision and in Western Trunk Line Territory there are Zones I, II, III, and IV. In each of these subdivisions rate differentials are applicable which vary the class rates from those in force elsewhere in the territories.

 There are different freight rates in all the territories and these are known as class rates, exceptions to class rates, column rates and commodity rates. Only the class rates are involved in these suits. They are rates based on published classifications which are lists of commodities by name grouped in designated classes. To compute a freight charge under class rates it is necessary to know the classification, the rate for that classification and then take into account factors like weight of the shipment and distance to be carried. The basic rate so fixed for Class I is applicable percentage-wise to the other classes, the rates for them being higher or lower than for Class I as the case may be. Commodity rates are special rates which have been fixed for designated commodities transported between specified points regardless of the class rates; column rates are special rates for certain named commodities which are based upon a given percentage of the class rates; and exception rates are, as their name implies, variations from the class rates. There are also key rates which apply to certain so-called key points. These differing rates, of which all but the class rates will hereafter be called for convenience special rates, have come into being because of various considerations among which have been competition between the railroads themselves, between railroads and carriers by water and by motor truck, orders issued by the Interstate Commerce Commission, which will hereafter be called the Commission, composition and amount of traffic available for carriage, cost of operation and other like relevant factors. The result is more or less of a hodgepodge at least so far as class rates are concerned and various efforts have been made to secure greater uniformity and simplicity in rate making ever since the Commission was created. Despite the efforts of the Commission and the cooperation of the railroads these efforts have heretofore been mainly fruitful only in respect to improving conditions in regard to intraterritorial rates.

 Not only have the class rates varied among the territories, but the classifications published for the several territories have been so different that like articles were, and are, often classified in one class in one territory and in a different class in the others or in one of them. All of this has brought about a most complex system of class rate fixing which has, generally speaking, produced lower class rates for Official Territory than for the others though that appears not to hold true in respect to special rates. Another result has been that a greater proportion of all freight in Official Territory moves on class rates than in the others were exception, column and commodity rates have become more prevalent, though it has come about that in all the territories only a comparatively small percentage of the entire freight carried has been on class rates. What is so carried moves both in carload, and in less-than-carload, lots and the cost of its transportation varies accordingly throughout the territories and also varies somewhat because of dissimilar conditions affecting cost of operation.

 Although the products of farm, mine and forest are by no means negligible within Official Territory, that portion of the country does in some respects stand apart from the remainder because it is there that the greatest concentration of industrial plants, population, and buying power is found. The larger and better markets which producers in general wish to reach are found there and the prevailing lack of uniformity in classifications and in class rates, in so far as they directly bear upon the cost of transportation by freight within Official Territory and interterritorially between it and the other territories, and indirectly through the special rates, was thought by many to be on the whole more favorable to Official Territory, and to shippers and receivers of freight therein, than to the other territories and their shippers and receivers of freight.

 It was against this general background that the Commission determined to institute two investigations and on July 29, 1939, issued orders which, as later modified, resulted in prolonged hearings by Division 2 of the Commission upon due notice to all parties in interest, as to the lawfulness of the classifications and of the class rates in each of the territories now involved. These investigations known as Docket No. 28300 which dealt with the rates and Docket No. 28310 which dealt with the classifications were so related that they were conducted simultaneously. The cooperation of the state commissions was sought in accordance with section 13 of the Interstate Commerce Act, 49 U.S.C.A. § 13, and a committee representing such commissions sat with the Division. The investigation became extremely comprehensive and a large amount of evidence was received which was reviewed by the full Commission. It filed a proposed report in No. 28310 providing for the creation of a uniform classification for all the territories, including that part which is now subject to what is called the Illinois classification which has some interstate application in a border area between Official Territory and Western Territory but has no interterritorial effect, to be compiled by the Commission or by the railroads for the approval of the Commission provided the railroads were willing to undertake the task. The railroads indicated their willingness to do so and the classification is now being made. That will require an enormous amount of work and will take a considerable time, perhaps years. No issues respecting that classification which is dealt with in Part I of the Report are raised now.

 Without serving a proposed report in No. 28300, the Commission filed a comprehensive report dealing with class rates to become effective when the classification is prepared and approved. This report contained numerous findings as to the characteristics of the existing rate structures, the importance of interterritorial traffic, the relative levels of class rates in each territory and the indirect results of the proposed revision. Evidence afforded by intricate and detailed cost studies made by employees of the Commission to show the relative cost of the carriage of freight in the several territories was also received and considered following revisions of the studies made in response to criticisms by interested parties. Findings were made as to interterritorial class rates, the relative levels of revenue from all freight in the Southern and Official Territories, the effect of applying the Official Territory level of all freight rates to all freight moved in Southern Territory, the relative costs and composition of all freight moved in Southern Territory, and the rates of return. The Commission also made findings as to the effect of the class rates on shippers in Southern Territory, the relative costs and composition of the traffic , the rates of return and their effect on the economic development of that territory. Findings on similar or kindred subjects were made respecting the other territories and the interterritorial freight movement among them. The costs of carload and less-than-carload service were considered and findings made as to each. Findings were made as to the effect of motor truck and waterborne freight competition, as to the effect of the special rates on movement of freight taking class rates, and of the discrepancies in the existing class rates on the attainment of uniformity in classification. There is an area geographically within Official Territory which is served by the so-called Pocahontas lines, which are predominantly coal carrying roads, that is for statistical purposes at times treated separately from the remainder of Official Territory because, though those railroads do carry freight at class rates, the bulk of their freight, being coal, is quite different in respect to the means and cost of carriage from the kinds of freight which characterize the carriage elsewhere in the territory. For like reasons Kentucky in the Southern territory was at times likewise treated separately from the remainder of Southern territory in the Report.

 The Commission then found as follows:

 '1. That the intraterritorial class rates (except as they apply to rail-and-water coastal service or relate to short-or weakline arbitraries) applicable within official, Illinois, southern, southwestern, and western trunk-line territories, are, and for the future will be, unjust and unreasonable, in violation of section 1(4) and (5) of the act.

 '2. That the interterritorial class rates in issue in this proceeding applicable between official, Illinois, southern, southwestern, and western trunk-line territories are, and for the future will be, unjust and unreasonable, in violation of section 1(4) and (5)(a) of the act.

 '3. That the relation between the interterritorial class rates applicable from southern, southwestern, and western trunk-line territories to official and Illinois territories, on the one hand, and the intraterritorial class rates applicable within official and Illinois territories, on the other hand, makes, gives, or causes, and for the future will make, give, or cause, undue and unreasonable preference and advantage to official and Illinois territories as a whole and the shippers and receivers of freight located therein, and subjects and for the future will subject, southwestern, and western trunk-line territories as a whole and the shippers and receivers of freight located therein to undue and unreasonable prejudice and disadvantage, in violation of section 3(1) of the act.

 '4. That a just and reasonable basis of class rates, not unjustly discriminatory or unduly preferential or prejudicial, to be observed by the respondents with respect to the traffic described in findings 1, 2, and 3 immediately preceding, will be the following:

 '(a) The application as a maximum for class 1 (class 100) of the scale of rates shown in appendix 10.

 '(b) The rates herein prescribed are to be applied to the distances over the shortest possible rail routes by which carload traffic can be interchanged between carriers without transfer of lading.

 '(c) That the scales of class rates for each class, other than class 1 (class 100), shall bear the percentage relations, to class 1 (class 100) rates found in part I hereof to be just, fair, and reasonable for the classes in the uniform classification. Appendix M to Western Trunk Line Class Rates, 164 I.C.C. 1, 282, contains a table which shows the percentages of class 100, below 100, herein found reasonable; and shows the rates which will result from applying these percentages to any given rate from 30 cents to $ 4. The rates shown in this table should be applied in establishing the rates for classes below 100. For classes above 100, fractions of a cent should be disposed of by dropping those less than one-half and by increasing those of one-half cent or more to the next whole cent.

 '(d) Key-point class rates based on the scale herein found reasonable may be established subject to our approval between points where such rates were prescribed by us in the prior general class rate revisions.

 '(e) That such class rates shall apply to the ratings of commodities taking class rates as the same shall be rated in the uniform classification found to be just, fair, and reasonable in part I hereof.

 '(f) That such revised uniform class rates and classification ratings shall be made applicable simultaneously.'

 No order putting the class rates found to be just and reasonable for the future has been, or will be, made until the new classification becomes effective and no issue is now directly raised as to such rates with which the Commission dealt, but not unanimously, in Part II of its Report.

 What the Commission, also not unanimously, did which is now attached was to provide in Part III of its Report for an ad interim class rate revision which with certain designated minima class I rates provides in general for a 10 per cent increase in class rates in Official Territory and for a 10 per cent decrease in such rates in the other territories involved herein with corresponding changes in interterritorial class rates as already mentioned. The Commission said in part:

 'In parts I and II of this report we have found the classification ratings and class rates involved in this proceeding to be unjust and unreasonable, and unduly and unreasonably preferential and advantageous, as well as unduly and unreasonably prejudicial and disadvantageous in certain respects for the reasons therein stated. It is our duty under Section 15(1) of the act to determine and prescribe what will be the just and reasonable rates and charges, and what classification will be just, fair, and reasonable, to be hereafter followed

 'The record herein is extensive, but from the very nature of these proceedings the comprehensive basis of just and reasonable rates cannot at this time be established in connection with a uniform classification such as we have found to be required as just, fair, and reasonable, until that classification is brought into being. The comprehensive rate revision and classification, unification and revision should be accomplished simultaneously, if possible. From our prior experience with extensive rate readjustments and classification proceedings, and from the record in this proceeding, we know that necessarily considerable time must elapse before the respondents can formulate and tender for our approval a classification which will conform to our findings with respect to justness, fairness and reasonableness. The many complexities inherent in a task of such character and magnitude are inevitable. The shipping public and ratemaking authorities of the States should be afforded opportunity for participation in the undertaking as far as their interests are concerned. And as shown by the record, and as within our common knowledge, there is at the present time a shortage of men who may be devoted to such task by the respondent carriers, public authorities, including this Commission, and by shippers and their organizations. This latter condition is a direct consequence of the withdrawal of such experts from their former employment for active participation in the war.

 'We find, however, that in the circumstances it is possible and practicable to make certain readjustments in the existing basis of class rates, predicated upon the continued application of the existing classifications, which will be just and reasonable, which will have the effect of bringing to the minimum the preferences and prejudices which we have found to be unlawful, as completely as it is practicable now to eliminate such violations. This finding is based upon the peculiar circumstances of the present time, largely the result of the war, and because time will be needed to effectuate a classification revision and application of a scale or scales of class rates as our findings in part I and Art II hereof contemplate. The adoption of the simple and direct method of rate revision which we are about to outline will conserve time, and will obviate many tariff publishing difficulties without complete revision of the classifications before us and the determination and prescription of new scales of rates based thereon.

 'Our general conclusions and findings heretofore made have emphasized the importance and desirability of bringing the several intraterritorial freight-rate structures under consideration closer together in level and more upon the same pattern or scheme. We have also emphasized the importance and desirability of removing as many differences as possible between the interterritorial rates of the respondents and the intraterritorial rates which they maintain. The basis which we shall not outline is in harmony with that objective, and will approach, as a preliminary step, the uniformity of class rate structure which we have previously found will be just, fair and reasonable.

 'We find and determine that the basis hereinafter outlined will result in rates which, until a complete revision in harmony with our previous findings is possible, will be just and reasonable.

 'We find and determine that on and after the effective date of the order to be entered herein, the existing and current interstate class rates applicable to freight traffic moving at the classification ratings within southern, southwestern, and western trunk-line territories as those territories have heretofore been described in this report, and interterritorially between those territories, and also between those territories, and official territory, as hereinbefore described, will be unjust and unreasonable unless reduced 10 per cent. subject to the class 1 scale shown at the end of this paragraph as minima for class 1 rates, and subject to the qualifications hereinafter indicated. This reduction is to be made by using the present current applicable class 1 rates as a base, and reducing them 10 percent, subject to observance of the rates in the distance scale set out hereinafter as a minima. The rates on all the other classes in each class-rate system are to be correspondingly reduced by observing the same percentage relations to the class 1 rates thus reduced that such classes bear to the currently applied class 1 rates. No changes in existing exception rates or column rates are contemplated by this finding. No increase in any existing class rates is to be made under this finding within the southern, southwestern, and western trunk-line territories, and interterritorially between those territories, and also between those territories and official territory. In determining resulting rates, fractions of a cent should be disposed of by dropping those of less than one-half cent and by increasing those of one-half cent or more to the next whole cent. We do not contemplate that groupings in connection with the present class rates shall be changed as a result of this finding. In applying the scale of minimum rates, the distances between groups or blocks of stations upon which the present class rates are based are to be observed, rather than the actual distances to or from such station, when differing therefrom. (The table of rates included at this point in the report is here omitted).

 'We find and determine that simultaneously as a part of the adjustment hereinbefore outlined, the existing applicable interstate class rates for freight traffic moving at classification ratings within official territory (including Illinois territory) should be increased 10 percent as maximum scales, superseding the intraterritorial official class-rate scale heretofore prescribed or authorized by us, subject to the qualifications hereinafter indicated, and that as so increased those scales will be just and reasonable as maxima. The increase of maximum class rates applicable within official territory is to be made by using the present current applicable class I rates as a base, and increasing them 10 percent. The rates on the other classes should be correspondingly increased by observing the same percentage relations to the maximum class I rates as thus increased that such classes bear to the currently applied class I rates. No changes in existing exception rates or column rates are contemplated by this finding. The same provision with respect to disposition of fractions of a cent, as to groupings, and as to the ascertainment of distance hereinbefore stated with respect to the reductions within and between other territories and between those territories and official territory, shall in like manner apply to the increases in the maximum class-rate charge without additional charge therefor. We also find and determine that such pick up and delivery service has been extended in scope largely since our findings and orders in the various proceedings hereinbefore recited which prescribed or approved the class rates in issue in this proceeding. We find and determine from the evidence of record in this proceeding, that when such service is performed the applicable class rate with the existing minimum charge as stated does not yield the out-of-pocket costs incident to the transportation service which its purports to cover. We further find that to the extent the minimum charge per shipment is less than 75 cents, it is below a just and reasonable minimum rate and charge. Upon the record as it stands, and predicated upon the adjustments for the interim period hereinbefore found to be just and reasonable, we determine and find that the minimum charge per shipment, whether pick-up and delivery service is afforded or not, whenever such charge is below 75 cents, is below the minimum of a just and reasonable rate and charge and that 75 cents is and will be a just and reasonable minimum charge to be made.

 'The foregoing findings and determinations are made as of the date when the order to be entered herein becomes effective. Inasmuch as these proceedings will necessarily be held open upon our docket, and as our power to suspend, modify, or set aside our orders is recognized by the act, we do not now prescribe, a specified period of time during which these findings as to the interim adjustment shall continue in force, but make them as continuing until our further order.

 'In certain States the applicable intrastate class rates are held to a basis prescribed by us in orders entered in proceedings under section 13 (3) and (4) of the act. No especial consideration has been given to such intrastate rates in this proceeding. If any modification of our outstanding orders seems necessary, it should be sought by appropriate action as contemplated by our general rules of practice.

 'Our outstanding orders will be modified to the extent necessary to enable the carriers which are bound thereby to publish and file schedule embodying such increases and decreases; and authority will be given by appropriate order under section 6 of the act for the publication of simple forms of supplements to existing schedules to effectuate such increases and decreases. If carriers need relief under the provisions of section 4 of the act, we will give prompt consideration to applications therefor.'

 An order was entered making this ad interim revision effective as of January 1, 1946, but it was suspended pendente lite by order of this Court.

 We find that the facts found by the Commission are supported by substantial evidence and adopt them as our findings. Their inclusion herein by reference to the Commission's Report is to be understood.

 The Western Lines were allowed at the final hearing in this court, over the objection of the defendant, to introduce some evidence on the question of the confiscatory character of the ad interim order as to them. This was received subject to a motion to strike on which decision was reserved at the close of the hearing. The motion to strike is now denied on the authority of Baltimore & Ohio R. v. United States, 298 U.S. 349, 56 S. Ct. 797, 80 L. Ed. 1209, and we make the following findings on the evidence thus received.

 A very large number of different commodities are carried at one time or another in less-than-carload lots by the so-called Western Lines within the rate territories were involved west of the Mississippi River. Some of this traffic, though what percentage was not definitely shown, moves on exception rates and some on commodity rates but a substantial amount of it is carried on class rates. The average loading car of this traffic for the year 1939 was 4.3 tons and that is close to what it had been for some six years previously, though on the whole the year 1939 showed a little decline mainly due to competition by carriers by motor truck and to the greater combining of shipments into carload lots. Because of an order of the Office of Defense Transportation issued in 1942 the minimum per car loading of the less-than-carload traffic was set at 10 tons and that more than doubled the previous average loading per car. That order was still in effect at the time of the hearing. When it is rescinded the railroads intend to return to pre-order practices and may have to cut the average loading to move the freight more quickly though that will depend upon the impact of competition and the volume offered for such carriage. There are some items in what is known as Consolidated Freight Classification No. 16, and the supplements thereto, which are rated fourth class, column 55, to which no commodity or exception ratings are applicable in less-than-carload lots. That is also true in respect to some third class ratings, column 70. There is a substantial movement of such commodities in Southwestern Territory and there is no major railroad, other than the so-called Burlington Lines, which relies for its revenue exclusively on its operations within the Western Trunk Line and Southwestern Territories which has not been in some sort of a receivership or bankruptcy proceeding within the last five years. The raising of rates, other than class rates, for less-than-carload lots as suggested by the Commission in its report for consideration by the railroads has not been done since that has not been thought feasible in view of the probable loss of traffic it would cause.

 There was evidence indicating that the carriage of the commodities above referred to which are not carried by the railroads within Western Trunk Line and Southwestern Territories other than on class rates in less-than-carload lots will not produce enough revenue to pay the cost of their carriage when the ad interim reduction in class rates becomes effective but we are unable to find that to be a fact proved. The statistical evidence to support that contention was based on the assumption that the average car loadings would be as low as 4.3 tons, which was a low point average, and apparently did not take into account that part of the Commission's order which requires a minimum charge of 75 cents per shipment less-than-carload instead of the 55 cent minimum charge heretofore. We have not sufficient confidence in that type of evidence to be satisfied that it proves that deficit carriage is required by the ad interim order, though we find from the evidence that costs of the carriage have for some time been increasing and will probably show additional increases.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.