Baltimore & OR Co. v. United States

CourtUnited States District Courts. 2nd Circuit. United States District Court of Northern District of New York
Citation22 F. Supp. 533
PartiesBALTIMORE & O. R. CO. et al. v. UNITED STATES.
Decision Date27 December 1937

Edward A. Kaier, of Chicago, Ill., and Edw. H. Burgess, of New York City, for plaintiffs.

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

Elmer B. Collins, of Washington, D. C., for the United States.

Wayne W. Wolford, of Washington, D. C., for New Orleans Joint Traffic Bureau.

Laurence F. Daspit, of New Orleans, La., for Henderson Sugar Refinery.

C. R. Hillyer, of Chicago, Ill., for Savannah Sugar Refining Corporation.

John F. Finerty, of Washington, D. C., for National Sugar Refining Co. of New Jersey.

Edgar Watkins, of Atlanta, Ga., for the States of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee.

Before L. HAND, Circuit Judge, and COOPER and COXE, District Judges.

L. HAND, Circuit Judge.

This cause comes up for trial upon petition and answer in a suit to set aside three orders of the Interstate Commerce Commission, suspending certain rates filed with the Commission by the plaintiff carriers, and ordering lower maximum rates to be put into effect. It will clarify the discussion to define in advance several of the terms to be used. "Official Territory" means that lying north of the Ohio and east of the Mississippi, with a little of Kentucky and West Virginia; that part of this territory lying east of a line drawn roughly north and south, called the "Monon Line," and west of another such line, which is not named, is "Destination Territory"; it is the region with which this suit is chiefly concerned; some of the plaintiff carriers are the only roads which reach this territory; some of them have lines direct from the eastern seaboard; some connect with eastern lines; some are such connecting eastern lines. The territory to the south of "Official Territory" is "Southern Territory"; some of the plaintiff carriers connect with southern lines which feed this territory. The existing joint rates from "Southern Territory" to "Destination Territory" when some of the plaintiff carriers filed new rates on May 5, 1935, are the "present rates"; the new rates are the "suspended rates"; they did not differ substantially from the "present rates," and it will be more convenient to ignore the "present rates" altogether. Certain southern refiners protested against the newly filed rates, and the Commission suspended them and ordered an investigation as to their lawfulness. Two New Orleans shippers then filed a complaint that the rates from New Orleans to "Destination Territory" were unreasonable and prejudicial; New York shippers filed a complaint alleging that similar rates from Brooklyn, N. Y., and Edgewater, N. J., to certain points in Virginia, the Carolinas, Kentucky and Tennessee were also unreasonable and prejudicial; and a Savannah shipper filed a complaint that similar rates from Savannah to "Destination Territory" were unreasonable and prejudicial. The Commission, after an investigation upon all three complaints, on March 8th, 1937, by a divided vote cancelled the "suspended rates" as unreasonable, and prescribed lower rates for the future. The plaintiff carriers then began this suit to set aside the three orders and the defendant answered. Numerous interested parties have intervened, and the case comes up for final hearing upon the pleadings and the evidence which consists of the Commission's report, the minutes of the testimony and evidence taken before it, and the orders. The following statement is from the findings of the report. "Destination Territory" is supplied with sugar from eastern refineries on the seaboard at New York, Philadelphia, Baltimore and the like, and by southern refineries in Louisiana and Georgia. "Official Territory" west of the "Monon Line" is supplied by all-rail, by barge-rail, and by barge-truck transportation, and the all-rail rates are controlled by the other two; the result being that rates from "Southern Territory" to "Official Territory" west of "Destination Territory" had been reduced below those to "Destination Territory." Because of water competition all-rail rates from the northern seaboard to all parts of "Official Territory" had also been reduced. The northern carriers connecting with the south refused, however, to reduce the joint all-rail rate from "Southern Territory," to "Destination Territory"; and that was the shippers' grievance in the first and third complaints just mentioned. Two of the orders appealed from brought these rates into accord with the all-rail rates from "Southern Territory" to "Official Territory" west of the "Monon Line," and with all-rail rates within "Official Territory," and corrected these grievances.

Before 1931 sugar had moved in substantial volume by all rail routes from the "Southern Territory" to "Destination Territory," but since then the movement has been almost entirely by barge-truck or barge-rail. All-rail carriage had ceased because of the reduction at that time of the all-rail rates from the eastern seaboard to meet water competition, and of the water competition itself by the Lakes, or by the Mississippi and Ohio Rivers. Nevertheless, the "suspended rates" were not unreasonably high, judged by "operating conditions, value of the commodity, average loading, volume of movement and susceptibility to damage in transit"; indeed, so judged, a somewhat higher level of rates might be lawful in "Official Territory." But, though reasonable when so viewed, these rates had prevented any all-rail movement of sugar from the south since 1932, in spite of a great increase in the barge-rail and barge-truck movement by way of the Mississippi and Ohio during the same period; incidentally, it was impossible to learn how the sugar moving by barge-truck had been divided between "Destination Territory," and "Official Territory" west of the "Monon Line." The "suspended rates" were no greater per mile than those over like distances for a number of other commodities, comparable with sugar in loading, value, volume of movement, and susceptibility to damage in transit; but the rates on these commodities had not been influenced by competition, which had chiefly determined the level of sugar rates.

The Commission found that higher inter-territorial rates were not justified between "Southern" and "Official Territory" than the corresponding intra-territorial rates within these territories, or than the inter-territorial rates on sugar from "Southern Territory" to different parts of "Official Territory." (The effect of this was that the joint all-rail rate from "Southern Territory" to "Destination Territory" must not be higher than from "Southern Territory" to "Official Territory" west of "Destination Territory," or than rates within the "Official Territory" or "Southern Territory.") It found that prevailing rates within those territories formed a reliable test for the rates in question, although the level of practically all rates on sugar had been "determined mainly by carrier competition." It concluded that section 15a(2) of the Interstate Commerce Act, as amended, 49 U.S.C.A. § 15a(2), required it in prescribing reasonable rates, to consider among other factors, the effect of the rates upon the movement of all traffic, and the need of efficient railway transportation; and that as the "suspended rates" would not move the sugar by rail from the south to "Official Territory" including of course "Destination Territory," the proposed rates were necessary if this traffic was to move by rail. It therefore finally concluded that the "suspended rates" were "unreasonable" to the extent that they exceeded the all-rail rates from the south to points west of the "Monon Line," and from the east to other points in "Official Territory." In addition, it found that any carriers, which participated in the "suspended rates," discriminated against the connecting southern lines on one hand, and in favor of connecting lines from eastern ports on the other, in violation of section 3(3) of the Act, 49 U.S.C.A. § 3(3).

The plaintiffs' argument is that the Commission fixed the new rates only to meet barge-rail and barge-truck competition, having found the "suspended rates" "reasonable," if that factor were eliminated. The defendant denies that the Commission made that factor determinative; it says that we have before us merely the ordinary case of fixing a reasonable rate, and that we need not look beyond the finding to that effect. It is entirely plain, however, that this is not true; the Commission again and again referred to the reduction as necessary to move the traffic, and plainly based its action upon its power to make that the controlling factor. Its use as standards of other sugar rates, "determined mainly by carrier competition," confirms this; such rates are not proper standards unless the movement of traffic should be considered. Interstate Commerce Commission v. Louisville & Nashville R. Co., 227 U.S....

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