Akron, C. & Y. Ry. Co. v. United States

• Court: U.S. District Court — Southern District of New York
• Citation: Akron, C. & Y. Ry. Co. v. United States, 282 F. 306 (S.D. N.Y. 1922)
• Decision Date: 25 May 1922
• Parties: AKRON, C. & Y. RY. CO. et al. v. UNITED STATES (INTERSTATE COMMERCE COMMISSION, Intervener).

282 F. 306

AKRON, C. & Y. RY. CO. et al. v. UNITED STATES (INTERSTATE COMMERCE COMMISSION, Intervener).

United States District Court, S.D. New York.

May 25, 1922

Walter C. Noyes and R. W. Barrett, both of New York City, John C Bills, of Detroit, Mich., George F. Brownell and Clyde Brown both of New York City, N. S. Brown, of St. Louis, Mo., and A H. Elder, W. S. Jenney, H. T. Newcomb and Charles C Paulding, all of New York City, for petitioners.

George F. Brownell and H. A. Taylor, both of New York City, for Erie R.R. System.

Walker D. Hines, of New York City, and J. Carter Fort, of Washington, D.C. (P. J. Farrell, of Washington, D.C., of counsel), for intervening respondent.

Charles F. Choate, Jr., and James Garfield, both of Boston, Mass., for interveners.

Blackburn Esterline, Sp. Asst. Atty. Gen., for the United States.

Before HOUGH, MANTON, and MAYER, Circuit Judges, sitting pursuant to Act Oct. 22, 1913 (38 Stat. 220).

MANTON Circuit Judge.

This is a proceeding under the Urgent Deficiencies Act, approved October 22, 1913 (38 Stat. 219), and the Commerce Court Act, approved June 18, 1910 (36 Stat. 539), by forty-four steam railroad companies operating west of the Hudson river, to annul and enjoin the order of the Interstate Commerce Commission of January 30, 1922, which allowed an increase of fifteen per cent. in divisions accruing to certain carriers operating in the New England states on traffic moving on through joint rates. The United States of America and the Interstate Commerce Commission are made respondents. The New England railroads have been permitted to intervene. The order of January 30, 1922, was entered on complaint of the New England lines asking for an increase of their divisions with the petitioners under the provisions of section 15 of the Interstate Commerce Commission Act, known as the Transportation Act of 1920 (41 Stat. 484, Sec. 418). The original complaint filed with the Commission, dated August 8, 1920, resulted in hearings, and proof was submitted at various dates between December 15, 1920, and April 7, 1921, and on July 6, 1921, the Commission filed a report declining to increase the division of the six complaining railroads operating in New England. A reargument was granted, and on January 30, 1922, the Commission rendered a further report and order granting to the six principal complainants, other than the Bangor & Aroostook Railroad, an increase of their divisions of substantially fifteen per cent.

It appears that, prior to the passage of the Transportation Act of 1920, increases in freight rates were granted to carriers of the country as a whole and are referred to as the 5 per cent. increase, 15 per cent. increase, and the 25 per cent. increase. Upon the passage of the Transportation Act, a proceeding before the Commission, which was known as 'Ex parte 74,' was instituted under which the Commission, pursuant to the provisions of the Transportation Act, established a rate for the Eastern group of railroads comprising all those railroads between the Canadian border on the north, the Virginia gateway on the south, the Mississippi river on the west and the Atlantic coast line on the east, and these included the New England lines. In such Eastern rate group there was an authorized increase in freight rates to the extent of 40 per cent. and upon the passenger rates of 20 per cent. The New England railroads, making claim to a need for additional revenue because of certain conditions hereinafter referred to, applied for a division which resulted in the order here sought to be modified. Complaint of the New England lines, for increased divisions, was based upon the following claims: First. That the cost of operation on the New England roads had been relatively very largely increased because of their terminal characteristics; that the New England lines had a very high relative density of branch lines, stations, switchyards, junctions, and a relatively short haul; that the cost of performing service in New England, because of its terminal characteristics and short haul, had relatively increased, while the cost of performing the service of the petitioners, owing to the improvements in heavy loadings, increased motive power, and other factors pertaining to the long haul, had relatively decreased; that the New England lines had a relatively low density of traffic, producing practically only one-third of the number of revenue ton miles per mile of road produced by the lines west of the Hudson river; that the proportion of freight revenue to passenger revenue was much less on the New England lines than on the lines west of the Hudson river, and that the percentage of increased rates granted by the Commission, namely, 40 per cent. on freight and 20 per cent. on passenger traffic, supplied relatively a very much larger amount of revenue to the lines west than it did to the New England lines.

Second. That the standardization of railroad wages brought about during the period of federal control and by the orders of the Labor Board had tremendously increased the cost of labor to the New England lines, and had relatively increased it very much more than it had increased the cost of labor to the lines west of the Hudson river, both because of the fact that the level of wages generally through New England had before the standardization been lower than the level of wages west of the Hudson, and because, owing to the terminal characteristics of the New England lines, a given expenditure of man power produced relatively a smaller amount of revenue ton miles in transportation.

Third. That there had been a much greater relative increase in the cost of fuel needed for the production of power on the New England lines than upon the lines west of the Hudson, due not only to the distance of the New England lines from the coal mines, which prevented them from obtaining their supplies on such favorable terms, but due also to the fact that every increase of freight rates had increased the cost of bringing coal into New England, which increase operated to the benefit of the lines west of the Hudson river and had been paid by the New England lines.

Fourth. The establishment of the so-called per diem system of charging for car hire had, owing to the poorly balanced traffic of the New England lines, which for every five loaded cars received sent out only two loaded cars, imposed a heavy permanent burden on the New England lines since the establishment of the divisions.

Upon the hearings before the Interstate Commerce Commission, evidence was offered to support the claims advanced by the petitioning New England lines. Such testimony is in considerable volume and was given in considerable detail. It established that the joint rates in New England were established in the early 70's and most of the New England roads divisions dated back more than 32 years ago, and in spite of the changes in the railroad situation, the basis of these divisions has remained practically unchanged. The divisions were based entirely on the trade with mileage, actual or constructive, as the basis. By this long practice of divisions, the parties may be presumed to have considered that it was fair when established. Youngstown Ship & Tube Co. v. P. & L.E. Ry., 29 Interst.Com.Comn.R. 437; Chicago Switching Charges, 28 Interst.Com.Comn.R. 679.

The revenue requirements for the New England roads were proved and considered in considerable detail. The value of the property investment, the fixed charges of the railroads, the resulting deficits and profits during a period of years, were all submitted to the Commission, as were the accounts of the Boston & Maine, the Central Vermont, and the Rutland Railroads. There was evidence of the revenue and property investment per unit of traffic and the net operating income of the New England railroads. There was testimony offered as to the terminal characteristics, the operating handicaps, and the diversity of routes and diffusion of traffic in the New England territory. Such matters as the freight station density, the junction density, and the branch line and the yard density, and the character of the traffic, were all considered in the evidence offered. There was sufficient offered to support an argument of a poorly balanced traffic, and the showing was made that the traffic of the New England roads is spread over a multitude of low-density secondary and branch lines resulting in a relatively short haul. There was also evidence as to the amount of snowfall and the winter conditions which handicapped railroading. The requirements and cost of fuel, together with the wage problem, was considered in considerable detail. We do not deem it necessary to the disposition we shall make of this case to narrate in this opinion the detail of proofs as to each of these various considerations.

A tabulation was submitted showing the alleged claim of the inadequacy of the present divisions as compared with local and New England interline rates and as compared with the cost of service. There were given the percentages which the divisions of the joint rates consisted of, local rates, east and west of the New England junctions, and the relations of the divisions to the mileage prorate east and west. The inadequacy of the present divisions, as indicated by their relation to local rates or mileage prorate, when considered in connection with the length of the haul and character of the service, is thus demonstrated. These tabulations of the several petitioning New England roads were shown. The Commission's report, accompanying its order, said:

'Complainants perform their part of the interchange service under less favorable conditions than their connections west of the Hudson river. They are terminal lines; their hauls

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