Algoma Coal & Coke Co. v. United States

• Decision Date: 06 July 1935
• Docket Number: No. 337.,337.
• Citation: 11 F. Supp. 487
• Court: U.S. District Court — Eastern District of Virginia
• Parties: ALGOMA COAL & COKE CO. et al. v. UNITED STATES et al.

11 F. Supp. 487

ALGOMA COAL & COKE CO. et al. v. UNITED STATES et al.

No. 337.

District Court, E. D. Virginia.

July 6, 1935.

E. L. Greever, of Tazewell, Va., and R. E. Quirk and J. V. Norman, both of Washington, D. C., for plaintiffs.

Elmer B. Collins, Sp. Asst. to the Atty. Gen., for the United States.

J. Stanley Payne, of Washington, D. C., for Interstate Commerce Commission.

R. V. Fletcher, of Chicago, Ill., R. W. Barrett, of New York City, Guernsey Orcutt, of Pittsburgh, Pa., T. P. Healy, of New York City, M. Carter Hall, of Richmond, Va., F. G. Dorety, of St. Paul, Minn., J. M. Souby, of Omaha, Neb., M. G. Roberts, of St. Louis, Mo., J. R. Bell, of Washington, D. C., H. H. Larimore, of St. Louis, Mo., W. A. Northcutt, of Louisville, Ky., W. N. McGehee and F. W. Gwathmey, both of Washington, D. C., Elmer A. Smith, of Chicago, Ill., J. Carter Fort, George H. Gardner, D. Lynch Younger, and John C. Donnally, all of Washington, D. C., and W. H. T. Loyall, of Norfolk, Va., for the railroads, as defendants and interveners.

Before SOPER, Circuit Judge, and WAY and CHESNUT, District Judges.

CHESNUT, District Judge.

This is a proceeding in equity under the authority of the Act of Congress of October 22, 1913, known as the Urgent Deficiencies Appropriation Act (U. S. C., title 28, § 41 (28), 43-48, 28 USCA §§ 41 (28), 43-48), to enjoin, suspend, set aside, and annul orders of the Interstate Commerce Commission made and entered on March 26, 1935, in a proceeding described as "Emergency Freight Charges, 1935, Ex parte No. 115" (208 I. C. C. 4). The plaintiffs are 179 corporations engaged in the business of mining coal in the states of Virginia, West Virginia, Kentucky, and Tennessee, which is shipped in interstate commerce. As required by the statute, a three-judge court was constituted by order dated April 12, 1935, and the plaintiffs' application for an interlocutory injunction was set for hearing at Richmond, Va., on April 17, 1935. After the hearing on that day an order was entered denying the application for a preliminary injunction. Thereupon by stipulation of counsel the case was also submitted for final decree on the petition of the plaintiffs and the answers of the respective defendants, together with certain affidavits submitted by the parties.

The original defendants in the case, in addition to the United States and the Interstate Commerce Commission, were four railroad corporations on which shipments from the plaintiffs' coal mines originate for carriage in interstate commerce. Other railroad companies have been made parties defendant to the case as intervenors. Extended briefs have been submitted by counsel for the respective parties.

Upon further consideration of the case presented, we are of the opinion that the bill of complaint must be dismissed. The reasons for this conclusion follow.

In the Commission Case referred to (Emergency Freight Charges, 1935, Ex parte No. 115) the Commission dealt with a petition filed with it on August 27, 1934, on behalf of substantially all the Class I railroad carriers in the continental United States which sought authority to make certain increases of a general nature in their freight rates and charges, to meet in part increased expenses of operation, caused by an increased wage scale and rising cost of materials and supplies, estimated to be $293,000,000 annually, which, it was represented, would so affect net railway operating income as to jeopardize the solvency of a large portion of the railway systems. The railroads disclaimed any attempt to increase rates to an amount necessary to yield a fair return. Their objective was stated as follows: "They are seeking in this proceeding only such reasonable increase in their freight rates and charges as will, taking into consideration the effect of such increase on the movement of traffic, increase their revenues and thus enable them to meet, in part, the increases in their operating expenses chargeable to the increases in the level of wages of railroad labor and in the unit price of materials and supplies, which increases in operation expenses but reflect the economic policies of the government."

In their petition the railroads did not ask for a general horizontal change in the rate level by applying a uniform percentage increase, but did ask for increases on a selective basis. In general, an increase of 10 per cent. in existing rates was proposed, subject to certain maxima and exceptions, and the subjecting of certain commodities to increases of flat amounts instead of percentages, with exception of others from any increases. To avoid the most acute truck competition, increases were proposed in certain cases only for the longer hauls. It was estimated that the rate changes proposed would increase revenues by approximately $170,000,000 a year, assuming that intrastate rates would be similarly increased. The prayer of the petition was that the Commission find the proposed rates to be just and reasonable and permit tariffs based thereon to become effective without suspension, together with other necessary relief of a technical nature under sections 4 and 6 of the Interstate Commerce Act (49 USCA §§ 4, 6), including the modification of all outstanding orders prescribing rates or relation of rates, so far as necessary to permit the increases to be made effective.

Extensive hearings were held by the Commission at various times and at various places beginning October 1, 1934, and continuing until the testimony was closed early in December, 1934. A committee representing state commissions sat with the Interstate Commerce Commission at the hearings and during oral arguments and conferred with the federal body. The testimony taken exceeded 8,000 pages. The evidence offered by the carriers was principally devoted to statistical data dealing with the financial results of their operations in recent years. The great majority of the testimony was offered on behalf of the shippers, and was said by the Commission in its report (Emergency Freight Charges, 1935, 208 I. C. C. 4, page 23) to be strikingly similar to that presented in the Fifteen Per Cent. Case, 1931, 178 I. C. C. 539; Id., 179 I. C. C. 215; Id., 191 I. C. C. 361 (sometimes referred to as Ex parte No. 103). While some shippers supported the petition of the railroads and some were neutral, the great majority were opposed to the increase. A considerable amount of testimony related particularly to the production, marketing, and consumption of bituminous and anthracite coal. In its report the Commission reviewed, in relation to the proposed increases, the general agricultural situation and commercial and economic conditions affecting forest products, coal and coke, petroleum, iron ores, and other commodities.

With regard to the legal questions presented, the Commission in its report, Emergency Freight Charges, 1935, 208 I. C. C. 4, on page 24, said:

"The applicants stress their conception of this proceeding as a `revenue case as distinguished from a rate case,' meaning thereby, as they further state, that — the `railroads, in this case, depend upon their revenue necessities as establishing in large part the reasonableness of the rates as proposed, rather than upon features to which appeal is ordinarily made when it is asserted that a particular rate should be increased because it is out of line with other rates and, therefore, not bearing its reasonable proportion of the burden.'

"The applicants concede that `the duty devolves upon them to show affirmatively that the rates proposed are reasonable in and of themselves.' They urge, however, that they should not be expected to deal separately with each rate involved in order to prove its reasonableness, since so long a time would be required as to defeat the end of the proceeding. To establish the reasonableness of the rates which would result from their proposals the applicants rely almost wholly on the fact that the $170,000,000 of added revenue, which their estimate leads them to expect, would still fall short of earning a fair return on what they consider half the value of their property. They base this argument largely on Dayton-Goose Creek Ry. Co. v. United States, 263 U. S. 456, in which the Supreme Court (page 480) 44 S. Ct. 169, 172, 68 L. Ed. 388, 33 A. L. R. 472 said:

"`Rates which as a body enable all the railroads necessary to do the business of a rate territory or section, to enjoy not more than a fair net operating income on the aggregate value of their properties therein economically and efficiently operated, are reasonable from the standpoint of the individual shipper in that Section.'

"Applicants' argument is substantially the same as that which they advanced in Ex parte No. 103. In referring to that argument at pages 560-564 of the original report in that case 178 I. C. C. 539, we said:

"`But section 15a has not, in our opinion, made revenue needs the "paramount and controlling" factor in the determination of a reasonable general level of rates. Factors which theretofore were relevant and entitled to consideration, notwithstanding the revenue needs of individual carriers, are still relevant and entitled to consideration, notwithstanding the revenue needs of the carriers in the aggregate or by groups.'"

Section 15a of the Interstate Commerce Act was amended by the Emergency Railroad Transportation Act 1933 (49 USCA § 15a), and the Commission noted that the instant proceeding was the first general revenue case presented to it since the amendment, and that some of the shippers contended that the effect of the amendment was to shift the emphasis in rate making from the need of the carriers for revenue to the need of the shippers for free movement of traffic. As to this the Commission observed: "There is nothing in the terms of either the old or new section to indicate that primary weight should be given to any particular clause, and the Supreme Court in referring to the new section has stated...