Aberdeen and Rockfish Railroad Co. v. United States

Decision Date30 June 1967
Docket NumberNo. 15454.,15454.
Citation270 F. Supp. 695
PartiesABERDEEN AND ROCKFISH RAILROAD COMPANY et al., Plaintiffs, v. The UNITED STATES of America and the Interstate Commerce Commission, Defendants.
CourtU.S. District Court — Eastern District of Louisiana

COPYRIGHT MATERIAL OMITTED

Donald F. Turner, Asst. Atty. Gen., Louis C. LaCour, U. S. Atty., John H. D. Wigger, Atty., Dept. of Justice, for the United States.

Robert W. Ginnane, Gen. Counsel, Arthur J. Cerra, Associate Gen. Counsel, Betty Jo Christian, Atty., I. C. C., for Interstate Commerce Commission.

Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., Sidley, Austin, Burgess & Smith, Washington, D. C., for plaintiff Southern Railroads.

Walter R. McDonald, Hurt, Hill & Richardson, Joseph H. Kavanaugh, Baton

Rouge, La., for intervening plaintiff railroads.

Montgomery, Barnett, Brown & Read, New Orleans, La., Kemper A. Dobbins, Cleveland, Ohio, Joseph F. Eshelman, Philadelphia, Pa., Eugene E. Hunt, New Haven, Conn., Edward A. Kaier, Philadelphia, Pa., Kenneth H. Lundmark, New York City, Charles C. Rettberg, Jr., Baltimore, Md., for intervening defendant railroads.

Before WISDOM, Circuit Judge, and HUNTER and WEST, District Judges.

EDWIN F. HUNTER, Jr., District Judge:

This is an action to set aside and enjoin in part the order of the Interstate Commerce Commission (Commission) in Docket No. 29885,1 Official-Southern Divisions, 325 I.C.C. 1 and 325 I.C.C. 449, which prescribed divisions of joint-rail rates on freight traffic moving between Official and Southern territories.2

Freight traffic between the North and the South moves on joint rates which are established when two or more carriers publish a single charge to be paid by the shipper for carriage from the originating point on one line to a destination on another. The proportion of the joint rates which each line receives as its share is called a "division" which is normally determined by agreement among the participating carriers. Prior to the orders of the Commission in this proceeding, the primary divisions accruing from Official-Southern traffic were made under an equal-factor scale prescribed by the Commission itself in its 1953 decision in Docket No. 29885 (officially reported at 287 I.C.C. 497). This decision followed the landmark decision of the Commission in Class Rates Investigation, 1939, 262 I.C.C. 447 (1945), wherein the Commission found that the higher rate level which was at that time applicable to the movement of rail freight in Southern territory, constituted an unlawful discrimination against the South.3 In the Class Rates proceeding, the Commission ordered the discriminatory class rates structure eliminated and replaced with a uniform rate structure to be applicable throughout the United States east of the Rocky Mountains. In the Divisions case that immediately followed the order removing the territorial differences in class rates, the Commission ordered that, in line with the new uniform class rates, a uniform divisional scale be used by both Northern and Southern railroads in dividing revenues from North-South traffic. Official-Southern Divisions, 287 I.C.C. 497, 523, 546-547 (1953).4

In 1956, the Northern railroads, dissatisfied with this equal-factor basis of dividing joint rates, called upon the Commission's statutory authority to determine that the joint rate divisions "are or will be unjust, unreasonable, inequitable or unduly preferential" and to prescribe "just, reasonable and equitable divisions" in their place. (49 U.S.C.A. § 15(6).

Upon completion of the hearings, issuance of an Examiners' Report, exceptions and replies thereto, and after hearing oral argument, the Commission issued its 1965 report and order finding that the existing divisions were in violation of Section 15(6). Considering each of the Section 15(6) criteria, the Commission found that both groups of carriers were being operated efficiently and that neither group should be considered as more or less efficient than the other (325 I.C.C. at 18), that there were no differences in importance to the public attributable to the two railroad groups (325 I.C.C. at 28), that neither group had greater revenue needs than the other (325 I.C.C. at 49), but that there is a decisive difference in the relative costs of rendering the service as between the groups of carriers. (325 I.C.C. at 50).

Finding everything else to be substantially equal and that an adjustment in the existing divisions was required to compensate the respective carriers according to their expenditures in the joint effort of handling the traffic, the Commission concluded that the relative costs of the parties can properly serve as a guide for the determination of just, reasonable, and equitable divisions for the future (325 I.C.C. at 50).

The order prescribed a new divisional formula which gives the Northern railroads 45% more than the Southern railroads for each terminal service performed and 10% more than the Southern railroads for each mile of line-haul service performed. The Commission went on to construct new scales which reflected the principles affecting long versus short hauls and then prescribed a scale of divisional factors based on fully distributed costs which divide the revenue in proportion to those costs (325 I.C.C. at 50-51). The net effect of the Commission's action was to reduce the revenue of the Southern railroads by $8,838,000.5

The action in this Court was originally brought by forty-two (42) railroads which together make up virtually the entire rail system in the States of Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee. The Southern Governors' Conference and the Southeastern Association of Railroad and Utilities Commissioners filed an intervening complaint asking that the Commission's action be set aside in part. Forty-eight (48) railroads serving primarily Northern areas intervened in defense of the Commission's order.

It should be noted that plaintiffs do not seek to set aside the order in its entirety. Their argument is that the Commission determined two precise issues which are severable, namely: (1) whether the Northern lines were entitled to an increase in their divisions because of higher costs than the Southern lines, and (2) whether the old scale of divisional factors was invalid because of an excessive terminal element of 37 integers in the initial mileage block. The effect of the Commission's action on the two subjects (as petitioners put it) would be:

(1) The reconstruction of the divisional scale benefited the Southern railroads by $7,426,000 annually.
(2) The inflations accorded the Northern railroads reduced the Southern railroads by $16,264,000 annually.
(3) The net effect of these two computations was to reduce the revenue of the Southern railroads by $8,838,000.

Plaintiffs argue that we possess the power and should set aside as unlawful only that part of the order which prescribed increased divisions for the Northern lines. They further contend that such action would leave in force the old uniform scale, minus 37 integers which resulted from the Commission's alleged "separate action correcting the excessive terminal factors in the existing uniform divisional scale." This Court, it is true, by virtue of its authority under 28 U.S. C.A. § 2321, has the power to "set aside in whole or in part" an order of the Commission, and there are situations where provisions excised from administrative orders are separable or so minor as to make remand inappropriate. This is certainly not the case here. The Commission gave weight to the plaintiffs' initial mileage block argument only "in light of our subsequent conclusion to be guided by the relative costs in our general determination * * *." It cannot be known what the Commission would have done with respect to giving weight to that argument if it were viewed independent of the other facts which induced the Commission to prescribe the divisional bases which it did prescribe.

The Commission determined only one issue in two steps, (I.E.) it determined the unlawfulness of the old divisions and prescribed new divisions for the future. If the plaintiff succeeds here in permanently setting aside the Commission's order as it prescribes the new divisional scales, there would remain no severable part of the order. This is true because there is nothing whatever in the record to even suggest that the Commission found reasonable (provisionally, contingently, or otherwise) any basis of divisions other than that which plaintiffs seek to annul in this action. Accordingly, since the Commission's order is not severable and this Court lacks jurisdiction to prescribe divisions, the function of this Court ends if it finds the Commission's order prescribing divisions is contrary to law or unsupported by adequate findings or substantial evidence. F. P. C. v. Idaho Power Company, 344 U.S. 17, 73 S.Ct. 85, 97 L.Ed. 15 (1952); Salzberg v. United States, 176 F.Supp. 867 (S.D.N.Y.1959).

We proceed to a review of the Commission's findings, conclusions and the evidence. The applicable standards of judicial review are limited in scope by settled principles of Administrative law, both general6 and statutory.7 These standards are to be vigorously enforced.

In Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 167-168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962), the Supreme Court stated:

"Expert discretion is the life blood of the administrative process, but `unless we make the requirements for administrative action strict and demanding, expertise, the strength of modern government, can become a monster which rules with no practical limits on its discretion.' New York v. United States, 342 U.S. 882, 884, 72 S.Ct. 152, 153, 96 L.Ed. 662 (dissenting opinion). `Congress did not purport to transfer its legislative power to the unbounded discretion of the regulatory body.' Federal Communications Comm'n v. RCA Communications,
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