Boston & Maine Railroad v. United States, Civ. A. No. 56-1004.

• Decision Date: 28 April 1958
• Docket Number: Civ. A. No. 56-1004.
• Citation: 162 F. Supp. 289
• Parties: BOSTON & MAINE RAILROAD et al. v. UNITED STATES of America and Interstate Commerce Commission et al.
• Court: U.S. District Court — District of Massachusetts

162 F. Supp. 289

BOSTON & MAINE RAILROAD et al. v. UNITED STATES of America and Interstate Commerce Commission et al.

Civ. A. No. 56-1004.

United States District Court D. Massachusetts.

April 28, 1958.

Lawrence R. Cohen, Herbert Alpert, Boston, Mass., Carl E. Newton, Granville Whittlesey, William T. Griffin, New York City, James W. Grady, New Haven, Conn., Richard Jackson, Boston, Mass., William J. Hickey, Washington, D. C., William A. Colton, Otto M. Buerger, Richard Swan Buell and Joseph P. Hawryluk, New York City, for plaintiffs.

Robert W. Ginnane, Gen. Counsel, and Isaac K. Hay, Asst. Gen. Counsel, I. C. C., Washington, D. C., Victor R. Hansen, Asst. Atty. Gen., James E. Kilday and James H. Durkin, Attys., Dept. of Justice, Washington, D. C., Anthony Julian, U. S. Atty., George H. Lewald, Asst. U. S. Atty., Boston, Mass., S. R. Brittingham, Jr., Chicago, Ill., and Richard J. Ferriter, Boston, Mass., for defendants.

Before WOODBURY, Circuit Judge, and WYZANSKI and McCARTHY, District Judges, by designation of Chief Judge MAGRUDER pursuant to Title 28 U.S.C. § 2284.

WOODBURY, Circuit Judge.

This is a controversy, in the main between the long-haul trunk line railroads and the short-haul terminal railroads, over the price a railroad ought to pay for the use on its lines of freight cars owned by another railroad.

The question of car hire is not novel. To understand its present aspects a little history will prove helpful.

In the early days of railroading in this country no railroad allowed its freight cars to leave its rails. Through freight to be transported over more than one line was unloaded and reloaded at junction points. With the development of more efficient transportation methods following the Civil War this wasteful and time-consuming practice of transferring cargo was gradually abandoned and for a charge the railroads began to permit their loaded cars to move off their tracks onto the tracks of connecting carriers.¹ At first the compensation to the car-owning road was fixed by the railroads on the basis of the mileage travelled by the cars of one road over the tracks of another. This basis for compensation, however, proved unsatisfactory largely for two reasons; the car-owning road had no means of verifying the mileage travelled by each of its cars over other lines and it provided no incentive to the using road for the prompt handling and early return of cars to their owners.²

As a solution the American Railway Association about the turn of the century, after years of study and investigation, established as the basis for compensation a flat sum per day for car use, regardless of the type or age of the car involved or the distance it travelled over the user's line. The per diem rate for use, known simply as the per diem, was gradually increased by the railroads over the years until it reached a point in the early 1950's at which the short-haul, terminating, and predominantly carusing railroads rebelled. This brings us to the present controversy and its background.

Except for one abortive attempt by the Interstate Commerce Commission, see Palmer v. United States, D.C.1947, 75 F.Supp. 63, the per diem rate has always been set by the railroads themselves acting in recent years through their organization, the Association of American Railroads, known as the AAR. An agreement, known as Agreement No. 7, was drafted by the AAR setting up the procedures to be followed by it in fixing per diem rates and this agreement was signed by a majority of the railroads.³ Acting according to the procedures outlined in the agreement, per diem rates were fixed at $1.50 as of September 1, 1947; $1.75 as of November 1, 1949; $2 as of May 1, 1952; and $2.40 as of August 1, 1953.

At first the railroads generally, signers and non-signers of the agreement alike, settled with one another at the rates established thereunder. In March, 1951, however, the New York, Susquehanna & Western Railroad (Susquehanna hereinafter), which was not a party to the agreement, served notice that after April 1 it would no longer pay the $1.75 rate then in effect, but offered to settle its per diem debit balances thereafter on a graduated scale ranging from $1.20 to $2 depending on the age of the cars it used. It later offered to increase its scale to a range of from $1.33 to $2.21 but its offers were not accepted and in consequence it became embroiled in a number of law suits. In June, 1953, the Boston & Maine Railroad and the New York, New Haven and Hartford Railroad Company withdrew from the agreement and gave notice of their refusal to pay the $2.40 rate and also even the earlier $2 rate after July 31, 1954, the Boston & Maine offering to pay on either a graduated basis or at a flat rate of $1.72 per day. Several other railroads took similar courses and the present proceeding ensued.

It started with a complaint filed with the Interstate Commerce Commission by 19 of the larger class I railroads, against five other class I railroads, all of them short-haul roads like the Boston & Maine, the New Haven, and the Susquehanna, and six short-line roads in classes II and III, such as the Barre and Chelsea, the St. Johnsbury & Lamoeille County and the New Jersey and New York Railway Company (Horace Banta, Trustee). Fifteen class I railroads intervened on behalf of the complainants and fifty-six railroads, for the most part in classes II and III, intervened on behalf of the respondents.

The complainants disclaimed any intention to invoke the specific power conferred on the Commission by § 1(14) (a) of the Act which authorizes it to "establish reasonable rules, regulations, and practices with respect * * * to the compensation to be paid for the use of any * * * car * * * not owned by the carrier using it * * *." Instead, alleging that charges less than those fixed under Agreement No. 7 would be unjust, unreasonable and non-compensatory, and that the respondents' actions in offering to pay at other than the uniform per diem rate established therein, had been, were and would be disruptive of the "uniform national basis" for handling per diem which the Commission had deemed necessary in the public interest, the complainants asked that:

"the Commission find and declare that the per diem rates of $1.75 and $2, during the periods in which these rates were effective, were just, reasonable, and otherwise lawful, that the current per diem rate of $2.40, effective August 1, 1953, is just, reasonable and otherwise lawful, and that the performance of orderly transportation service by railroad in the public interest requires uniform observance of such rates by defendants together with other carriers; and that the Commission grant such other and further relief as may be required in the premises."

The defendants answered, in general challenging the per diem rates established under the agreement as excessive and asserting that their offers of settlement were fair, just, reasonable and compensatory. In addition some of them challenged the jurisdiction of the Commission to entertain the complaint. The matter came on for hearing before a trial examiner and he, upon full presentation, filed a proposed report wherein after considering the evidence and arguments in detail he concluded that "The Commission should find and declare that the per diem charges of $1.75 and $2.00 were reasonable during the periods in which they were effective and that a reasonable charge for present use would be $2.10." He accordingly recommended the entry of a declaratory order to that effect.

On exceptions the full Commission reached conclusions differing in part from those reached by the trial examiner. It found on its analysis of the evidence and the arguments that the per diem rates as fixed in the agreement were fair and reasonable. It said that "on the basis of the facts and circumstances before us" the per diem charges specified in the agreement were such as "could properly be established under section 1 (14) (a)" of the Act and that: "It necessarily follows that lower charges in our judgment would not be compensatory, either at present or in the past. Wherefore, it said: "We find and declare that the per diem charges of $1.75, $2.00, and $2.40 were not in excess of reasonable compensation during the periods in which they were effective, and that the latter charge is not in excess of reasonable compensation for present use," and it entered an order discontinuing the proceeding.⁴ Chicago, Burlington & Quincy Railroad Co. v. New York, Susquehanna & Western Railroad Co., 297 ICC 291 (1955), reconsideration and rehearing etc. denied, July 16, 1956.

At the outset of our consideration of this action brought by a number of terminal short-haul railroads under Title 28 U.S.C. § 1336 to enjoin, set aside and annul the above order of the Interstate Commerce Commission, we are faced with the question of its jurisdiction. The assertion is, broadly stated, that the only jurisdiction conferred by Congress on the Commission in the premises is that embodied in § 1(14) (a) giving it power to "establish reasonable rules, regulations, and practices with respect to car service * * * including the compensation to be paid" by one railroad for the use of the cars of another, and that, since this jurisdiction was neither invoked nor exercised, it must follow that the Commission does not have authority to enter a declaratory order as to past or even present rates. We do not agree.

Section 5(d) of the Administrative Procedure Act, 60 Stat. 239, 5 U. S.C. § 1004(d) provides that within its jurisdiction any agency "is authorized in its sound discretion, with like effect as in the case of other orders, to issue a declaratory order to terminate a controversy or remove uncertainty." There can be no doubt that the railroads involved are subject to the jurisdiction of the Commission, nor can there be any doubt that a "controversy" exists between them with respect to car-hire. The question is whether the...