Alabama Public Service Commission v. Southern Ry Co

Citation71 S.Ct. 762,341 U.S. 341,95 L.Ed. 1002
Decision Date21 May 1951
Docket NumberNo. 395,395
CourtUnited States Supreme Court

Mr Richard T. Rives, Montgomery, Ala. for appellants.

Mr. Merton Roland Nachman, Jr., Montgomery, Ala., for appellants, pro hoc vice, by special leave of Court.

Mr. Charles Clark, Washington, D.C., for appellee.

Mr. Chief Justice VINSON delivered the opinion of the Court.

The Southern Railway Company, appellee, brought this action in the Federal District Court to enjoin the members of the Alabama Public Service Commission and the Attorney General of Alabama, appellants, from enforcing laws of Alabama prohibiting discontinuance of certain railroad passenger service. Appellee's Alabama intrastate service is governed by a statute prohibiting abandonment of 'any portion of its service to the public * * * unless and until there shall first have been filed an application for a permit to abandon service and obtained from the commission a permit allowing such abandonment.' Ala.Code, 1940, tit. 48, § 106.1 Severe penalties are prescribed for wilful violation of regulatory statutes or orders of the Commission by utilities or their employees. Id. §§ 399, 400, 405.

Appellee operates a railroad system throughout the South. This case, however, involves only that Alabama intrastate passenger service furnished by trains Nos. 7 and 8 operated daily between Tuscumbia, Alabama, and Chattanooga, Tennessee, a distance of approximately 145 miles mainly within Alabama. On September 13, 1948, appellee applied to the Alabama Public Service Commission for permission to discontinue trains Nos. 7 and 8, alleging that public use of the service had so declined that revenues fell far short of meeting direct operating expenses. After hearing evidence at Huntsville, Alabama, one of the communities served by the trains, the Commission entered an order on April 3, 1950, denying permission to discontinue on the grounds that there exists a public need for the service and that appellee had not attempted to reduce losses through adoption of more economical operating methods.

Instead of pursuing its right of appeal to the state courts,2 appellee filed a complaint in the United States District Court alleging diversity of citizenship and that requiring continued operation of trains Nos. 7 and 8 at an out-of-pocket loss amounted to a confiscation of its property in violation of the Due Process Clause of the Fourteenth Amendment. Injunctive relief was prayed to protect appellee from irreparable loss, flowing on the one hand from operating losses in complying with Alabama law or, on the other, from severe penalties for discontinuance of service in the face of that law. A three-judge court3 heard evidence, made its own findings of fact and entered judgment holding the Commission order void and permanently enjoining appellants from taking any steps to enforce either the Commission order or the penalty provisions of the Alabama Code in relation to the discontinuance of trains Nos. 7 and 8.4 D.C.1950, 91 F.Supp. 980. The case is properly here on appeal, 28 U.S.C.(Supp.III) § 1253.

Federal jurisdiction in this case is grounded upon diversity of citizenship as well as the allegation of a federal question. Exercise of that jurisdiction does not involve construction of a state statute so ill-defined that a federal court should hold the case pending a definitive construction of that statute in the state courts, e.g., Railroad Commission of Texas v. Pullman Co., 1941, 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971; Shipman v. DuPre, 1950, 339 U.S. 321, 70 S.Ct. 640, 94 L.Ed. 877. We also put to one side those cases in which the constitutionality of a state statute itself is drawn into question, e.g., Toomer v. Witsell, 1948, 334 U.S. 385, 68 S.Ct. 1156, 92 L.Ed. 1460. For in this case appellees attack a state administrative order issued under a valid regulatory statute designed to assure the provision of adequate intrastate service by utilities operating within Alabama.5

Appellee takes the position, adopted by the court below, that whenever a plaintiff can show irreparable loss caused by an allegedly invalid state administrative order ripe for judicial review in the state courts the presence of diversity of citizenship or a federal question opens the federal courts to litigation as to the validity of that order, at least so long as no action involving the same subject matter is actually pending in the state courts. But, it by no means follows from the fact of district court jurisdiction that such jurisdiction must be exercised in this case.6 As framed by the Court in Burford v. Sun Oil Co., 1943, 319 U.S. 315, 318, 63 S.Ct. 1098, 1099, 87 L.Ed. 1424, the question before us is: 'Assuming that the federal district court had jurisdiction, should it, as a matter of sound equitable discretion, have declined to exercise that jurisdiction here?'

In assessing the propriety of equitable relief, a review of the regulatory problem involved in this case is appropriate.

Appellee conducts an interstate business over the same tracks and by means of the same trains involved in this case, and such interstate activities are regulated by the Federal Interstate Commerce Commission, 49 U.S.C. § 1 et seq., 49 U.S.C.A. § 1 et seq. But, it has long been held that this interblending of the interstate and intrastate operations does not deprive the states of their primary authority over intrastate transportation in the absence of congressional action supplementing that authority. The Minnesota Rate Cases (Simpson v. Shepard) 1913, 230 U.S. 352, 33 S.Ct. 729, 57 L.Ed. 1511. And Congress has since provided: 'That nothing in (the Interstate Commerce Act) shall impair or affect the right of a State, in the exercise of its police power, to require just and rea- sonable freight and passenger service for intrastate business, except insofar as such requirement is inconsistent with any lawful order of the (Interstate Commerce Commission).' 49 U.S.C. § 1(17) (a), 49 U.S.C.A. § 1(17)(a).7

This Court has held that regulation of intrastate railroad service is 'primarily the concern of the state.' State of North Carolina v. United States, 1945, 325 U.S. 507, 511, 65 S.Ct. 1260, 1263, 89 L.Ed. 1760 (rates); Palmer v. Com. of Massachusetts, 1939, 308 U.S. 79, 60 S.Ct. 34, 84 L.Ed. 93 (discontinuance of local service).

State and federal regulatory agencies have expressed concern over the chronic deficit arising out of passenger train operations as a threat to the financial security of the American railroads and have recommended drastic action to minimize the deficit, including the discontinuance of unpatronized and unprofitable service.8 However, our concern in this case is limited to the propriety of a federal court injuntion enjoining enforcement of a state regulatory order.9

The court below justified the exercise of its jurisdiction with a finding that continued operation of trains Nos 7 and 8 would result in confiscation of appellee's property in violation of the Due Process Clause of the Fourteenth Amendment. In pursuing the threshold inquiry whether a federal court should exercise jurisdiction in this case, we find it unnecessary to consider issues relating to the merits of appellee's case, issues which appellants did not see fit to raise in this Court either in their Statement of Jurisdiction or in their briefs. We do note that in passing upon similar contentions in the past, this Court has recognized that review of an order requiring performance of a particular utility service, even at a pecuniary loss, is subject to considerations quite different from those involved when the return on the entire intrastate operations of a utility is drawn into question. Atlantic Coast Line R. Co. v. North Carolina Corporation Commission, 1907, 206 U.S. 1, 24—27, 27 S.Ct. 585, 593, 595, 51 L.Ed. 933. The problems raised by the discontinuance of trains Nos. 7 and 8 cannot be resolved alone by reference to appellee's loss in their operation but depend more upon the predominantly local factor of public need for the service rendered. Chesapeake & Ohio R. Co. v. Public Service Commission of West Virginia, 1917, 242 U.S. 603, 608, 37 S.Ct. 234, 236, 61 L.Ed. 520.

The Alabama Commission, after a hearing held in the area served, found a public need for the service. The court below, hearing evidence de novo, found that no public necessity exists in view of the increased use and availability of motor transportation. We do not attempt to resolve these inconsistent findings of fact. We take note, however, of the fact that a federal court has been asked to intervene in resolving the essentially local problem of balancing the loss to the railroad from continued operation of trains Nos. 7 and 8 with the public need for that service in Tuscumbia, Decatur, Huntsville, Scottsboro, and the other Alabama communities directly affected.

Not only has Alabama established its Public Service Commission to pass upon a proposed discontinuance of intrastate transportation service, but it has also provided for appeal from any final order of the Commission to the circuit court of Montgomery County as a matter of right. Ala. Code 1940, Tit. 48, § 79. That court, after a hearing on the record certified by the Commission, is empowered to set aside any Commission order found to be contrary to the substantial weight of the evidence or erroneous as a matter of law, id. § 82, and its decision may be appealed to the Alabama Supreme Court. Id. § 90. Statutory appeal from an order of the Commission is an integral part of the regulatory process under the Alabama Code. Appeals, concentrated in one circuit court, are 'supervisory in character'. Avery Freight Lines, Inc. v. White, 1944, 245 Ala. 618, 622—623, 18 So.2d 394, 398, 154 A.L.R. 732. The Supreme Court of Alabama has held that it will review an order of the Commission as if appealed directly to it, Alabama Public Service...

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