State of Colorado v. United States 1926

Decision Date03 May 1926
Docket NumberNo. 195,195
Citation271 U.S. 153,46 S.Ct. 452,70 L.Ed. 878
PartiesSTATE OF COLORADO v. UNITED STATES et al. Argued March 5-8, 1926
CourtU.S. Supreme Court

Messrs. Barney Whatley and Wayne C. Williams, both of Denver, Colo., for the State of Colorado.

[Argument of Counsel from pages 154-155 intentionally omitted] Mr. Blackburn Esterline, of Washington, D. C., for the United States.

The Attorney General and Mr. R. Granville Curry, of Washington, D. C., for Interstate Commerce Commission.

Mr. R. Bruce Scott, of Chicago, Ill., for Colorado & Southern Ry. Co.

[Argument of Counsel from pages 157-158 intentionally omitted] Mr. Justice BRANDEIS delivered the opinion of the Court.

This suit was brought by Colorado against The United States, in the federal court for that state, to enjoin and set aside, in part, an order of the Interstate Commerce Commission issued February 11, 1924. The order is a certificate that present and future public convenience and necessity permit the abandonment by the Colorado & Southern Railway Company, six months thereafter, of a branch line located wholly in that state. The certificate was issued under Interstate Commerce Act, § 1, pars. 18-20, as amended by Transportation Act 1920, c. 91, § 402, 41 Stat. 456, 477 (Comp. St. Ann. Supp. 1923, § 8563).

The company is a Colorado corporation. It owns and operates in intrastate and interstate commerce a railroad system located partly in Colorado and partly in other states. The branch was constructed under the authority of Colorado and was acquired by the company under its authority. The line is narrow gauge. It is now physi- cally detached from other lines of the company; but it is operated in both intrastate and interstate commerce as a part of the system by means of connections with other railroads. The certificate was granted on the ground that the local conditions are such that public convenience and necessity do not require continued operation, that for years operation of the branch had resulted in large deficits, that future operation would likewise result in large deficits, that the operating results of the branch are reflected in the company's accounts, that it would have to make good the deficits incurred in operating the branch, and that thus continued operation would constitute an undue burden upon interstate commerce. Abandonment of Branch Line by Colorado & Southern Ry., 72 Interest. Com. Com'n R. 315; Id., 82 Interst. Com. Com'n R. 310; Id., 86 Interst. Com. Com'n R. 393.

The application for the certificate was filed September 1, 1921. Before any hearing thereon, the state moved that the proceeding be dismissed on the ground, among others, that, as the branch was wholly intrastate, the Commission was without jurisdiction of the application. This objection was overruled. Thereafter the state opposed, on the merits, the granting of the certificate. The case was first heard before division 4 of the Commission on exceptions filed by the company to the examiner's proposed report. On July 28, 1922, the application was denied, with leave to renew it 'if the improvement in operating results, confidently anticipated by protestants, should not materalize.' 72 Interst. Com. Com'n R. 315. On May 19. 1923, the company filed a petition praying that the case be reopened and set for further hearing. Division 4 heard it. On September 24, 1923, an order was entered that the certificate issue. 82 Interst. Com. Com'n R. 310. A hearing before the full Commission was then sought by the state and the other protestants. Compare United States v. Abilene & Southern Ry. Co., 265 U. S. 274, 281, 44 S. Ct. 565, 68 L. Ed. 1016. The request was granted. On February 11, 1924, the order was affirmed with the modification that the certificate should not take effect until six months from that date. Abandonment of Branch Line by C. & S. Ry., 86 Interst. Com. Com'n R. 393. The effective date of the certificate was later extended to September 11, 1924, and finally to October 11, 1924. 94 Interst. Com. Com'n R. 657, 661.

Meanwhile, this suit had been begun. The Commission and the company intervened as defendants. On August 19, 1924, a decree dismissing the bill on the merits was entered, upon final hearing, without opinion. A motion for a suspension of the order of the Commission pending an appeal was denied. The case is here on direct appeal under the Act of October 22, 1913, c. 32, 38 Stat. 208, 220 (Comp. St. § 998). The order is assailed as void insofar as it authorizes abandonment and discontinuance of operation in intrastate traffic. The remedy pursued is the appropriate one. See Texas v. Eastern Texas R. Co., 258 U. S. 204, 42 S. Ct. 281, 66 L. Ed. 566.

First. The main contention of the state is that the Commission lacks power to authorize the company to abandon, as respects intrastate traffic, a part of its line lying wholly within the state. The argument is this: While a railroad cannot, in the absence of express statutory provision or contract, be compelled by a state to continue operating its lines at a loss when there is no reasonable prospect of future profit, and may therefore, without such consent, abandon all lines within the state (Brooks-Scanlon Co. v. Railroad Commission, 251 U. S. 396, 40 S. Ct. 183, 64 L. Ed. 323; Bullock v. Florida, 254 U. S. 513, 520, 41 S. Ct. 193, 65 L. Ed. 380; Railroad Commission v. Eastern Texas R. Co., 264 U. S. 79, 85, 44 S. Ct. 247, 68 L. Ed. 569), it has no right to abandon a part of the lines, merely because operation will be attended by pecuniary loss, and still continue to enjoy the privilege of operating other parts within the state (Chesapeake & Ohio Ry. Co. v. Public Service Commission, 242 U. S. 603, 37 S. Ct. 234, 61 L. Ed. 520; Fort Smith Light & Traction Co. v. Bourland, 267 U. S. 330, 45 S. Ct. 249, 69 L. Ed. 631). The charter of the Colorado & Southern is a contract with the state. By accepting the charter, the company assumed the obligation of providing intrastate service on every part of its line within the state. Colorado & Southern Ry. v. Railroad Commission, 54 Colo. 64, 92-93, 129 P. 506. The extent and character of this service is subject to regulation by the state. The inherent power of a state to regulate intrastate traffic by requiring the railroad to operate every part of its line, like its power to order a particular service, is, of course, subject to the limitation that the order must not be unreasonable. But the fact that operation of the branch will necessarily result in financial loss, would, in no event, be more than an important circumstance bearing upon the reasonableness of the state's order requiring the service. In the case at bar no question of the reasonableness of the state's action can arise, because the state has not issued any order; it has merely protested against the Commission's releasing this Colorado corporation from the primary duty voluntarily assumed of maintaining some service on the branch. This the Commission cannot do as respects intrastate commerce. Transportation Act 1920 did not purport to take from the state its powers to control intrastate commerce. Nor did it confer upon the Commission power to release a corporation chartered by the state from its primary obligation to furnish service. If paragraph 18 of section 1 should be construed as authorizing the Commission to do so without the consent of the state, the provision would be unconstitutional. Compare Texas v. Eastern Texas R. Co., 258 U. S. 204, 217, 42 S. Ct. 281, 66 L. Ed. 566. Such is the argument.

The argument rests upon a misconception of the nature of the power exercised by the Commission in authorizing abandonment under paragraphs 18-20. The certificate issues not primarily to protect the railroad, but to protect interstate commerce from undue burdens or discrimination. The Commission by its order removes an ob- struction which would otherwise prevent the railroad from performing its federal duty. Prejudice to interstate commerce may be effected in many ways. One way is by excessive expenditures from the common fund in the local interest, thereby lessening the ability of the carrier properly to serve interstate commerce. Expenditures in the local interest may be so large as to compel the carrier to raise reasonable interstate rates, or to abstain from making an appropriate reduction of such rates, or to curtail interstate service, or to forego facilities needed in interstate commerce. Likewise, excessive local expenditures may so weaken the financial condition of the carrier as to raise the cost of securing capital required for providing transportation facilities used in the service, and thus compel an increase of rates. Such depletion of the common resources in the local interest may conceivably be effected by continued operation of an intrastate branch in intrastate commerce at a large loss.

The sole objective of paragraphs 18-20 is the regulation of interstate commerce. Control is exerted over intrastate commerce only because such control is a necessary incident of freeing interstate commerce from the unreasonable burdens, obstructions or unjust discrimination which is found to result from operating a branch at a large loss. Congress has power to authorize abandonment, because the state's power to regulate and promote intrastate commerce may not be exercised in such a way as to prejudice interstate commerce. The exertion of the federal power to prevent prejudice to interstate commerce so arising from the operation of a branch in intrastate commerce is similar to that exerted when a state establishes intrastate rates so low that intrastate traffic does not bear its fair share of the cost of the service (Railroad Commission of Wisconsin v. Chicago, Burlington & Quincy R. Co., 257 U. S. 563, 42 S. Ct. 232, 66 L. Ed. 371, 22 A. L. R. 1086; Nashville, Chattanooga & St. Louis Ry. v. Tennessee, 262 U. S. 318, 43 S. Ct. 583, 67 L. Ed. 999), or when the state authorities seek to compel the erection of a union...

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