Alabama Great Southern Co v. United States Galveston Chamber of Commerce v. United States Railroad Commission of Texas v. United States Savannah Sugar Refining Corp v. United States 48

• Citation: 71 S.Ct. 264,340 U.S. 216,95 L.Ed. 225
• Decision Date: 02 January 1951
• Docket Number: Nos. 45,s. 45
• Parties: ALABAMA GREAT SOUTHERN R. CO. et al. v. UNITED STATES et al. GALVESTON CHAMBER OF COMMERCE et al. v. UNITED STATES et al. RAILROAD COMMISSION OF TEXAS v. UNITED STATES et al. SAVANNAH SUGAR REFINING CORP. v. UNITED STATES et al. to 48
• Court: United States Supreme Court

340 U.S. 216

71 S.Ct. 264

95 L.Ed. 225

ALABAMA GREAT SOUTHERN R. CO. et al.

v UNITED STATES et al.

GALVESTON CHAMBER OF COMMERCE et al.

v. UNITED STATES et al.

RAILROAD COMMISSION OF TEXAS

v. UNITED STATES et al.

SAVANNAH SUGAR REFINING CORP.

v. UNITED STATES et al.

Nos. 45 to 48.

Argued Nov. 8, 9, 1950.

Decided Jan. 2, 1951.

As Amended on Denial of Rehearing

Feb. 26, 1951.

[Syllabus from pages 216-217 intentionally omitted] Mr. Harold E. Spencer, Chicago, Ill., for Alabama Great So. R. co.

Mr. William A. Disque, Washington, D.C., for Galveston Chamber of Commerce.

Mr. Price Daniel, Liberty, Tex., Mr. Charles E. Crenshaw, Houston, Tex., for Railroad Commission of Texas.

Mr. S. R. Hillyer, Chicago, Ill., for Savannah Sugar Refining Corp.

Mr. Philip Elman, Washington, D.C., for appellees U.S. Interstate Commerce Commission.

Mr. Nuel D. Belnap, Chicago, Ill., for appellees, American Barge Line Co. and others.

Mr. Justice MINTON delivered the opinion of the Court.

In No. 45 appellant common carriers by railroad brought this suit against the United States in the District Court for the Northern District of Illinois to enjoin an order of the Interstate Commerce Commission issued June 13, 1949, in a proceeding instituted by the Commission entitled Rail and Barge Joint Rates, No. 26712 on the Commission's docket. Appellee Interstate Commerce Commission intervened as a party defendant before the District Court, as did appellee common carriers by water, American Barge Line Company (American), Inland Waterways Corporation, doing business as Federal Barge Lines (Federal), and Mississippi Valley Barge Line Company (Valley). A statutory three-judge court heard the case and, upon findings of fact made and conclusions of law stated, denied the injunction and dismissed the complaint. 88 F.Supp. 982. This direct appeal under 28 U.S.C. § 1253, 28 U.S.C.A. § 1253 followed.

The Rail and Barge Joint Rates proceeding before the Commission was instituted in 1934 as an investigation ancillary to certain formal complaints before the Commission under § 3(e) of the Inland Waterways Corporation Act as amended by the Denison Act, 45 Stat. 980,¹ and ancillary to other proceedings involving the same subject matter as the complaints. The investigation instituted concerned the reasonableness and lawfulness of existing through routes and joint rates, rules, regulations and practices for application by common carriers by railroad and common carriers by water operating upon the Mississippi and Warrior Rivers and their tributaries; the reasonableness of existing minimum differentials between all-rail rates and corresponding rail-barge, barge-rail and rail-barge-rail rates; the necessity, if any, for the establishment by the railroad and water carriers of additional through routes and joint rates, rules, regulations and practices; and the necessity, if any, for fixing reasonable differentials between corresponding all-rail rates and joint rail and barge rates. Consolidated for disposition with the general investigation were the complaints and other proceedings involving the same general questions.

Hearings held pursuant to this investigation over a period of eight years resulted in a record of some 16,000 pages and 1,500 exhibits. An examiner submitted a report, to which exceptions and replies were filed. After argument before the full Commission, it rendered its written report and findings dated July 7, 1948, 270 I.C.C. 591, supplemented by report dated June 13, 1949, 274 I.C.C. 229, and promulgated the order under attack. The order, made pursuant to § 307(d) of the Transportation Act of 1940,² required the common carriers by rail- road. and water to establish the joint through routes for the transportation of property prescribed in the reports, and to establish and thereafter to maintain and apply over the through routes the joint rates prescribed based upon certain differentials found in the reports to be justified.

Appellant common carriers by railroad represent the railroads required by the order to enter into differential joint rail-barge rates, while appellee common carriers by water are the principal barge lines affected by the order. Appellee Federal is a corporation created by act of Congress, and is supervised by the Department of Commerce. It operates between St. Paul, Chicago, Omaha, St. Louis, New Orleans, Port Birmingham, Alabama, and intermediate ports via waterways connecting the ports. Valley operates between Pittsburgh, points on the Monongahela River, Cincinnati, St. Louis and New Orleans. American operates principally between Pittsburgh and New Orleans. Valley and American are privately owned and their operations have been financially profitable, while Federal has incurred an average net deficit from water-line operations of over $240,000 per year during the period from 1925 to 1947 inclusive.

Much evidence was introduced early in the investigation by both the railroads and the barge lines as to their costs of transportation. The cost section of the Commission made a study of relative costs for the period 1933-38 and concluded that rail-barge operating costs were greater than all-rail operating costs, due largely to the costs of added terminal handling operations. In its report the Commission stated that no useful purpose would be served by making a finding as to relative all-rail and rail-barge costs in the period covered by the study, because since that period there had been radical changes in the conditions affecting cost of transportation service by barge as well as by rail. And after reviewing other factors bearing on costs of operation, the Commission concluded:

'In the face of these facts we cannot find that at the present time there are demonstratable economies in barge-rail transportation on the Mississippi River and its tributaries, including the Warrior, which from the standpoint of cost of service would justify differentials.' 270 I.C.C. at 606.

Appellants' primary contention is that the Commission could not prescribe reasonable differentials between all-rail rates and joint rates in connection with the water carriers without proof of lower cost of the rail-barge service. Since the Commission had no valid proof as to the relative costs of the services, appellants insist that the Commission's order is arbitrary and capricious and its conclusions that the differentials are 'justified as reasonable' and 'necessary and desirable in the public interest' are not supported by substantial evidence and essential findings. This, it is contended by appellants, is apparent on the face of the Commission's report, so that it is not necessary for us to examine the evidence before the Commission.

The case will perhaps be better under stood by an illustration of how the order operates. Assume

Illinois Central local rate New Orleans to Cairo, Ill.. $1.00

Big Four local rate, Cairo to Cleveland, Ohio. 1.00

Illinois Central-Big Four joint all-rail rate, New Orleans

to Cleveland....................... 1.60

The joint all-rail rate of $1.60 is divided as follows:

Illinois-Central, New Orleans to Cairo. .80

Big Four, Cairo to Cleveland.......... .80

Assume a prescribed differential of..... .20

Deduct the differential of $.20 from the $1.60 joint all-rail

rate and the joint barge-rail rate is. 1.40

The $1.40 barge-rail rate is divided between the rail and barge

carriers as follows:

Big Four, Cairo to Cleveland........ .80

Barge, Cairo to New Orleans......... .60 The local situation, New Orleans to Cairo, then, is:

On Illinois Central:

Local all-rail rate................ 1.00

Division of $1.60 joint all-rail rate. .80

On the barge line:

Local port-to-port rate............. .80

Division of $1.40 barge-rail rate... .60

All-rail rates are not disturbed and no question of their being compensatory is raised. The differentials fixed by the Commission are applied to the presently-existing all-rail rates to compute the prescribed joint rail-barge rate. If an all-rail rate should be modified, the differential would not automatically attach to the new all-rail rate; the joint rail-barge rate would remain as now prescribed (subject to independent modification, of course).³ It is apparent that the barge line absorbs all the differential. A railroad carrier allways gets the same amount for its leg, e.g., Big Four, Cairo to Cleveland (see illustration, above), of a joint movement, whether the joint movement is all-rail or rail-barge. The railroad connecting with the barge carrier in a joint rail-barge movement is, as appellants admit, never hurt. 'It is not the rail lines with which the barge lines connect which object to these unjustified differentials. It is the rail lines with which the barge lines compete,' say appellants. In short, the railroads complain of competition.

First. Appellants' attack upon the ground that the order gives a competitive advantage, not justified because not supported by a finding of lesser cost of barge service, is not persuasive. Admittedly, barge service is worth less than rail service. It is slower, requires more handling and entails more risk. A shipper will pay only what the service is worth to him. The shippers' evidence, the Commission found, indicated a fairly unanimous view that the principal worth to them of shipping by barge was the saving in transportation expense which it offered. The Commission is not bound to require a rate as high for the inferior as for the superior service. To do so would certainly destroy the principal worth of the inferior service and send all freight to the railroads; practically, there would be no competition between the different modes of transportation.

Neither the Commission nor this Court has held that lesser cost of service is a finding without which the Commission may not fix a charge, division of rate, or differential.⁴ On the other hand, the considerations just discussed were rightly taken into account by the Commission. We must...