236 U.S. 585 (1915), Northern Pacific Railway Company v. North Dakota

Citation:236 U.S. 585, 35 S.Ct. 429, 59 L.Ed. 735
Party Name:Northern Pacific Railway Company v. North Dakota
Case Date:March 08, 1915
Court:United States Supreme Court

Page 585

236 U.S. 585 (1915)

35 S.Ct. 429, 59 L.Ed. 735

Northern Pacific Railway Company


North Dakota

United States Supreme Court

March 8, 1915




This Court takes the facts as found by the state court as established, unless

(1) A federal right has been denied as the result of a finding shown by the record to be unsupported by evidence, or

(2) A conclusion of law as to a federal right and a finding of fact are so commingled as to make it necessary to analyze the latter.

Neither of those conditions exists in this case.

Railroad property is private property devoted to public use, and the state has a broad field for the exercise of its discretion in prescribing reasonable rates for common carriers within its jurisdiction.

It is not necessary there should be uniform rates or the same percentage of profits on every sort of business; there is room for reasonable classification.

Despite this range of permissible action, the state has no arbitrary power over rates; the devotion of the carrier's property to public use is qualified by the carrier's right to a reasonable reward; the state

Page 586

may not select a commodity on a class of traffic, even if of a low grade, and, instead of fixing a reasonable rate, require the carrier to transport it at less than cost or for merely nominal compensation

Public interest cannot be invoked as a justification for demands passing the limits of constitutional protection.

This Court does not sit as a revisory board to substitute its judgment for that of the legislature or its administrative agent.

This Court is not required to concern itself with mere details of a schedule; or to review a particular tariff which yields substantial compensation, when the profitableness of the intrastate business as a whole is not involved. But a different question arises when the state has segregated a commodity, or a class of traffic, and has attempted to compel the carrier to transport it at a loss or without substantial compensation.

There is a presumption that rates fixed by the state for intrastate traffic are reasonable and just, but it is one that may be rebutted by the carrier's showing, as in this case, that it is noncompensatory.

As the maximum intrastate rates on coal in carload lots fixed by ch. 51 of the laws of North Dakota are unreasonable, either requiring the carrier to transport the commodity at a loss or for a merely nominal compensation after taking into account the entire traffic to which the rates apply, the state exceeded its authority in enacting the statute which amounts to an attempt to take the property of the carrier without due process of law in violation of the Fourteenth Amendment.

26 N.D. 438 reversed.

The facts, which involve the validity under the due process provision of the Fourteenth Amendment of a statute of North Dakota fixing maximum intrastate rates for transportation of coal by railroad companies, are stated in the opinion.

Page 588

HUGHES, J., lead opinion

MR. JUSTICE HUGHES delivered the opinion of the Court.

By Chapter 51 of the Laws of 1907, the Legislature of North Dakota fixed maximum intrastate rates, graduated according to distance, for the transportation of coal in carload lots. It was further provided that, in case the transportation was over two or more lines of railroad, it should be considered as one haul, the compensation for which should be divided among the carriers according to their agreement, or, if they could not agree, as the railroad

Page 589

commissioners should decide, subject to appeal to the courts. While the statutory rates governed all coal shipments, their practical application was almost solely to lignite coal.

The carriers refused to put the rates into effect, and in August, 1907, the attorney general of the state began proceedings in its supreme court to obtain a mandatory injunction against the Northern Pacific Railway Company, the Minneapolis, St. Paul, & Sault Ste. Marie Railway Company, and the Great Northern Railway Company. The companies answered that the statute violated the commerce clause of the federal Constitution, and also that it infringed the Fourteenth Amendment by fixing rates that were "unremunerative," "unreasonable," and "confiscatory." The supreme court of the state, overruling these contentions, granted the injunction. 19 N.D. 45. It was held that the evidence was not sufficient to overcome the presumption in favor of the rates. On writ of error from this Court, the decree was affirmed without prejudice to the right of the railroad companies to reopen the case after an adequate trial of the rates. 216 U.S. 579.

This decision was rendered in the early part of the year 1910, and thereupon the rates were put into effect. After a trial for over a year, the case was reopened, voluminous testimony was taken, and the supreme court of the state, making its separate findings of fact as to the effect of the rates in the intrastate business of each carrier, and stating its conclusions of law, entered judgment commanding the carriers to keep the rates in force. 26 N.D. 438. The Northern Pacific Railway Company and the Minneapolis, St. [35 S.Ct. 431] Paul, & Sault Ste. Marie Railway Company have sued out these writs of error.

The period to which the testimony relates is the fiscal year ending June 30, 1911. The facts may be thus summarized:

Page 590

Northern Pacific Railway Company.

The total revenue received by this company for the intrastate carriage of lignite coal for the fiscal year was $58,953.07. It was also deemed to be practicable to ascertain the amount of expense properly chargeable to this traffic. Upon this point, the court said:

As a result of the painstaking work of the accounting department of this railway company, and its endeavors to render all the assistance possible in determining the matter of the apportionment of expense to this commodity, as is evidenced by the care and detail in the accounting, the information furnished by the exhibits, and that the books of the company have been thrown open to the experts of the state, we are enabled to arrive with a reasonable degree of certainty at the proper proportion of expense that should be chargeable against the revenue received from the carriage of this commodity.

26 N.D., p. 446.

With respect to the division of some of the items of expense (maintenance of way and structures, and taxes) there was no dispute, and, as to the others, the range of controversy was narrow. The company contended that the traffic in question produced at the statutory rates a loss of $2,253.65; the state insisted that it yielded a profit of $2,391.63. After a detailed analysis, the state court found the charges against the revenue received from the lignite traffic to be: (1) for train operation expense, $30,850.12; (2) switching, $4,971; (3) station service, $4,182.58; (4) freight car repairs, renewals, and depreciation, $7,121.54; (5) traffic and general expenses (no loss and damage allowed), $1,456.14; (6) maintenance of way and structures, $7,119.93; (7) taxes, $2,424.15; making the total expenses, $58,125.46, and the surplus income, $827.61. Id., pp. 460, 461. The summary of the findings of fact is as follows:

That, as to the Northern Pacific Railway Company, out of total freight receipts for lignite coal amounting to

Page 591

$58,953, the total cost of transportation, or out-of-pocket costs, together with all fixed or overhead expenses apportionable to said lignite traffic, consumed all of said receipts excepting $847, its net profit in the handling of the lignite business for the twelve months in question. That such rate is slightly remunerative, but in fact noncompensatory, considering the volume of freight carried and the property of the railroad devoted thereto.

Id., p. 439.

Minneapolis, St. Paul, & Sault Ste. Marie Railway Company.

The state court regarded the statistics furnished by this company as being in the main estimates without satisfactory bases. Still, on making an elaborate examination of the facts disclosed by the record, all the testimony adduced in the three cases being available in each one, so far as pertinent, and on taking judicial notice of certain local conditions, the court was able to find sufficient proof to justify it in determining that, under the statutory rates, the intrastate transportation of lignite coal was conducted by this company at a loss. Id., pp. 461-472. A large part of the traffic, after a short haul, was delivered to connecting carriers -- the Northern Pacific and Great Northern lines -- and the prorating of the statutory compensation for the entire haul operated injuriously. As to...

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