Chicago & EIR Co. v. United States

• Decision Date: 27 August 1952
• Docket Number: Civ. No. 486.
• Citation: 107 F. Supp. 118
• Court: U.S. District Court — Southern District of Indiana
• Parties: CHICAGO & E. I. R. CO. v. UNITED STATES et al.

107 F. Supp. 118

CHICAGO & E. I. R. CO. v. UNITED STATES et al.

Civ. No. 486.

United States District Court, S. D. Indiana, Terre Haute Division.

August 27, 1952.

COPYRIGHT MATERIAL OMITTED

David O. Mathews, Thomas N. Cook and Gerald L. Phelps, Chicago, Ill., Hays & Hays, Sullivan, Ind., for plaintiff.

Marshall E. Hanley, U. S. Atty., Indianapolis, Ind., for defendant.

Matheson, Dixon & Brady, Detroit, Mich., Gilliom, Armstrong & Gilliom, Indianapolis, Ind., for intervening defendants.

Allen Crenshaw, Associate Chief Counsel, Washington, D. C., for Interstate Commerce Commission.

Before SWAIM, Circuit Judge, and PLATT and STECKLER, District Judges.

PLATT, District Judge.

In this case, which is properly presented to the court,¹ the plaintiff, Chicago and Eastern Illinois Railroad Company seeks to annul and permanently set aside certain orders of the Interstate Commerce Commission² which required plaintiff to cancel a reduction which it had made in its rate for carrying automobiles from Evansville, Indiana, to St. Louis, Missouri. The reduction was first proposed by plaintiff to the Commission in a tariff filed with it on March 10, 1950. Upon the filing of protests by two interested motor carriers and an association of such carriers, the proposal was ordered temporarily suspended and the matter was set down for a hearing before an examiner. After the hearing, and while related applications were pending before the Commission,³ plaintiff voluntarily suspended the effective date of the proposed reduction until March 12, 1951. The reduced rate was thereupon put into effect and remains in effect today, the Commission having extended the effective date of its order at the request of this court. Upon the filing of the complaint herein, the motor carriers and the association who were protestants in the proceedings before the ICC sought and were granted leave to intervene. The issues having been joined on the pleadings, the parties have filed briefs and argued orally before the Court.

The basic undisputed facts appearing from the findings of the Commission and the transcript of testimony before the Examiner, which has been filed herein, can be summarized briefly. The Chrysler Corporation operates a plant at Evansville for the assembly of Plymouth automobiles. Plaintiff is the only railroad directly serving this plant. From the start of Chrysler's occupancy of the plant in 1935 until 1940 or 1941 the bulk of the transportation of Plymouths from Evansville to St. Louis was handled by motor carrier but by the latter year plaintiff, by instituting substantial rate reductions, had captured a sizeable amount of such business. Except for stoppages caused by war, strikes and model changeovers, plaintiff continued to transport a substantial number of cars every month until March, 1947. After that time and until this reduction was adopted, plaintiff had no share in Chrysler's Business except for a shipment of five carloads of automobiles in March, 1949.

At the time of the hearing plaintiff's published tariff for the transportation in question was 62 cents per hundred pounds, as contrasted with the 64 cent rate of the competing motor carriers. In the course of conversations with the Chrysler corporation plaintiff was told that in order to regain a share of the business it should offer transportation at a rate at least 23 cents below that of the motor carriers. Chrysler explained this statement by showing that the additional costs of loading and unloading a rail car, over and above the cost of motor transport, were 13 and 10 cents, respectively. Plaintiff, having determined to meet this differential of 23 cents by establishing a tariff of 41 cents per hundred pounds, began these proceedings to establish such a rate. It urged that the reduced rate was compensatory and necessary to meet the competition of motor carriers, and that under the provisions of the Interstate Commerce Act, 49 U.S.C.A. Sec. 15(7), it had the right to meet such competition.

The bulk of the testimony and exhibits produced at the hearing before the Examiner dealt with statistics and analyses bearing upon plaintiff's ability to compete at such a rate. In the course of the transportation from Evansville it is necessary for plaintiff to switch the loaded cars from the Chrysler plant to the nearby Wansford yard, then to take them by through freight train to the Brewer yard near Danville, Illinois; the cars are then switched to the North yard in Danville and moved by a road engine to Villa Grove, Illinois, where they are picked up by a through freight train coming from Chicago and taken to the Mitchel yard near Madison, Illinois. At that point the cars are picked up by a transfer engine which transfers them to the Terminal Railroad Association at Madison for transportation to St. Louis. The return movement of the empty cars is over the same route. The total distance over plaintiff's line is approximately 345⁴ miles, and the round trip would take seven or eight days.

An average carload of four Plymouth automobiles weighs approximately 12,320 pounds. At the rate of 41 cents per hundred pounds, plaintiff thus realizes a gross revenue on this movement of approximately $50.51 per carload. From this amount plaintiff deducts a bridge and switching charge of $9.63 per car, paid to the Terminal Railroad Association, leaving a net revenue of $40.88. Over the entire line of 345 miles the reduced rate thus produces a net revenue of 11.84 cents per car-mile, or 1.924 cents per ton-mile; plaintiff's average system car-mile and ton-mile revenues for the year 1949 were 42.85 and 1.406 cents, respectively.⁵

In seeking to demonstrate that the reduced rate would be compensatory plaintiff offered testimony to establish a basis for cost studies which it had prepared on the movement of a carload of automobiles from Evansville to St. Louis and the return of an empty car over the same route. It first presented detailed analyses of the so-called "out-of-pocket" expenses incurred in the transportation of a hypothetical car of appropriate weight in trains which had actually made such movements during the months of February and March, 1950.⁶ The resultant cost figures were $28.64 and $26.52, respectively, and included yard and road engine expenses for fuel, repairs, engine-house, lubricants and supplies, an allowance for freight train car repairs, supplies and other expenses, and wage costs for train, engine and yard crews. They do not include wages for yardmasters, yard clerks, and yard switch and signal tenders, nor any yard supplies. A further cost study was then prepared to show that the added out-of-pocket expenses per car of moving an additional ten cars per day⁷ over this route, based upon the figures for March, would amount to $14.33. Thus, if any one of these cost calculations is to be accepted, it is clear that plaintiff would realize a net profit from the proposed traffic. The discrepancy between plaintiff's calculation of the average out-of-pocket, or variable,⁸ costs of handling existing traffic, and its estimate of the added, or marginal,⁹ cost of the additional traffic was attributed by plaintiff's witnesses to a number of factors. First, it was shown that under existing schedules it would be possible to handle an additional ten cars daily in both directions without using any additional trains, motive power, crews, or, for the most part, switching operations. Furthermore, plaintiff owned 58 automobile cars, many of them available for immediate use, which were equipped with Evans-type loaders (apparently necessary for such shipments) and an additional 233 automobile cars which could be so equipped at a cost of $1,000 each if the others proved insufficient. Plaintiff also suggested that the cost of existing station and clerical forces were fixed and intimated that such forces were sufficient to handle an additional 200 or 300 carloads per month. For these reasons it included in its estimate of expectable added cost only the expenses of locomotive fuel, repairs and lubricants, and freight-train car repairs.

The intervenors herein, as protestants at the hearing before the examiner, cross examined plaintiff's witnesses in an attempt to demonstrate that its cost studies were inadequate and inaccurate. They also introduced experts of their own and cost studies, based in part upon earlier reports of the Commission, which purported to show that the proposed rate would not be compensatory to plaintiff. These studies were in turn attacked by plaintiff as inadequate for the reason that the recent dieselization of plaintiff's entire equipment had produced such substantial savings in operating costs as to render obsolete the earlier data. Evidence was also introduced by direct and cross examination to show that, even in the post-war years, carriers by rail had been able to compete successfully with motor carriers where the rate differential was as little as ten or twelve cents, and that in the past Chrysler had used a differential of 10 or 12 cents in determining whether to use rail or motor shipments.

The orders under review herein were issued in accordance with the Commission's adoption of the report of its Division 2, which in turn was an acceptance of the examiner's recommendation that the proposed rate be rejected. It is important to a proper understanding of this case to note that the Commission did not pass upon the question of whether the proposed rate was compensatory, which would be necessary to a finding as to whether it was "just and reasonable";¹⁰ nor did it decide whether the rate would be discriminatory, preferential or prejudicial.¹¹ Its ultimate holding was that:

"We find that the reduced rate under investigation has not been shown to be just and reasonable." (Italics added).

The Commission reached this result, after summarizing the evidence, upon the following analysis and findings of fact. First, it was shown that plaintiff's contention that the...