Ann Arbor R. Co. v. MICHIGAN PUBLIC SERVICE COM'N

• Decision Date: 06 July 1950
• Docket Number: Civ. A. No. 9198.
• Citation: 91 F. Supp. 668
• Parties: ANN ARBOR R. CO. v. MICHIGAN PUBLIC SERVICE COMMISSION et al.
• Court: U.S. District Court — Western District of Michigan

91 F. Supp. 668

ANN ARBOR R. CO. v. MICHIGAN PUBLIC SERVICE COMMISSION et al.

Civ. A. No. 9198.

United States District Court E. D. Michigan, S. D.

July 6, 1950.

Gustavus Ohlinger, and Ohlinger, Koles, Wolf & Flues, Toledo, Ohio, Louis E. Burke, and Talbot Smith, Ann Arbor, Mich., for plaintiff.

Stephen J. Roth, Attorney General, Archie C. Fraser, Assistant Attorney General, Albert J. Thorburn, Special Assistant Attorney General, for defendants.

Before SIMONS, Circuit Judge, and LEVIN and THORNTON, District Judges.

LEVIN, District Judge.

This three-judge court is convened under the authority of Title 28, U.S.C.A. § 2281, on plaintiff's application for an interlocutory injunction enjoining the Michigan Public Service Commission and others from enforcing its order that plaintiff operate one passenger train daily in each direction between Durand and Frankfort, Michigan.

Plaintiff alleges that enforcement of the order will result in an unconstitutional deprivation of its property and irreparable losses in substantial amounts.

The defendants have not answered the petition. They move its dismissal, contending:

(1) That a three-judge court may not be convened upon an application for an injunction to restrain an order of a state administrative agency unless the constitutionality of a statute of the state is questioned, and

(2) That the court is without jurisdiction to inquire into the validity of the alleged unlawful order of the Commission because remedies available to the plaintiff under state statutes have not been exhausted.

The United States Supreme Court in Oklahoma Natural Gas Co. v. Russell et al., Constituting the Corporation Commission of the State of Oklahoma et al., 261 U.S. 290, 43 S.Ct 353, 67 L.Ed. 659, put all doubts at rest that a three-judge court was the proper forum to hear an application, alleging, as does that of the plaintiff, that enforcement of an order of a state administrative agency would result in confiscation of property without just compensation, in violation of the guarantees of the Constitution of the United States. The following are three of the numerous cases in which three-judge district courts have been convened to hear and determine attacks upon the orders of state regulatory commissions. Atlantic Coast Line R. Co. v. Public Service Commission of South Carolina et al., D.C.S.C., 77 F.Supp. 675; Chicago, B. & Q. R. Co. v. Illinois Commerce Commission et al., D.C. Ill., 82 F. Supp. 368; Southern Ry. Co. v. Alabama Public Service Commission et al., D.C.Ala., 88 F.Supp. 441.

Since the year 1895, with the exception of the period from 1931 to 1943 when the properties of the plaintiff were in the possession of and operated by court appointed receivers, the plaintiff has operated a railroad and car ferries as a common carrier of freight and passengers in interstate commerce between the City of Toledo, Ohio, and cities in Wisconsin and Michigan.

The plaintiff has for many years provided passenger train service once daily, except Sunday, in each direction between its southern terminus, Toledo, Ohio, and Frankfort, Michigan, its northern terminus. This is the only rail passenger service furnished by the plaintiff. The Ohio trackage is 5.72 miles and the Michigan trackage is 292 miles. The revenues of the trains have been derived from passenger fares, compensation for the carriage of mail, express and miscellaneous items. The major out-of-pocket operating expenses of these trains consist of wages for train crews, cost of locomotive fuel, oil, supplies, and the cost of maintaining and servicing locomotives and cars. In addition to these expenses, there are other expenses incidental to the operation of a railroad, such as the cost of equipment and expenses allocable in part to these trains and in part to plaintiff's freight service.

In August 1941, when the road was in receivership, the receiver, alarmed by the size of the losses sustained in the operation of these two trains, petitioned the defendant Commission for authority to discontinue this service. Before a determination could be had, the United States entered the War and the proceedings on the petition were, on February 28, 1944, continued until a date no later than six months after the official termination of the War.

Hostilities ceased on September 2, 1945. The operating passenger train loss, having regard to actual out-of-pocket expenses only, for the years 1941 to 1947, inclusive, amounted to $370,308.35. On May 28, 1948, the plaintiff petitioned the defendant for resumption of the proceedings, but the Commission, on July 7, 1948, denied the petition, and made an order that the plaintiff, either one year from said date, or six months after the official termination of the War, whichever date was earliest, could notice the matter for further hearing and consideration.

The operating passenger train loss for 1948 was $137,351.51. On July 11, 1949, the plaintiff petitioned for a further hearing, which was granted, and hearings were held on September 23 and 24 and December 1 and 2, 1949.

The operating passenger train loss for 1949 was in excess of $150,000. The passenger revenue for January, 1950, was less than half the revenue received in January 1949.

On February 21, 1950, defendant Commission made the order complained of, whereby it granted to the plaintiff permission to discontinue passenger service between the Michigan-Ohio state line and Durand, Michigan, a distance of approximately 90 miles, but directed continuance of the daily weekday service north of Durand to Frankfort, a distance of 198 miles but at hours which vary greatly from present schedules.

The defendants' contention that the plaintiff has not exhausted state remedies is premised upon the fact that the plaintiff has neither filed an application to the defendant Commission for a rehearing (Comp.Laws Mich. 1948, § 460.351, Mich. Stat.Ann. Sec. 22.111), nor appealed to the courts of the state as it had the right to do. (Comp.Laws Mich. 1948, § 462.26, Mich. Stat.Ann. 22.45). There is no absolute right to a rehearing under the Michigan statute. The defendant Commission is given a broad discretion to refuse or grant a petition for rehearing. There is nothing in the statute requiring an application for rehearing before state judicial remedies may be pursued.

"As the law does not require an application for a rehearing to be made and its granting is entirely within the discretion of the Commission, we see no reason for requiring it to be made as a condition precedent to the bringing of a suit to enjoin the enforcement of the order." Prendergast et al., Constituting the Public Service Commission of the State of New York et al. v. New York Telephone Company, 262 U.S. 43, 48, 43 S.Ct. 466, 468, 67 L.Ed. 853.

The procedures provided by the Michigan statutes for the review of the Commission's orders are judicial and not administrative remedies. The courts of Michigan are prohibited by its Constitution from exercising other than judicial powers. "We must not usurp the functions of an administrative body. This the Constitution of the State forbids. Michigan Constitution 1908, Art. IV." Goodfellow v. Detroit Civil Service Commission, 312 Mich. 226, 232, 20 N.W.2d 170, 172.

The controversy having reached the judicial stage, the plaintiff is not obliged to take advantage of available state court remedies before pursuing available Federal remedies. Where relief is sought from an order of an administrative tribunal on the ground that it is repugnant to the United States Constitution, the plaintiff may immediately assert his rights in the Federal courts. Bacon et al., Public Service Commission of the State of Vermont v. Rutland Railroad Co., 232 U.S. 134, 34 S.Ct. 283, 58 L.Ed. 538; State Corporation Commission of Kansas et al. v. Wichita Gas Co. et al., 290 U.S. 561, 54 S.Ct. 321, 78 L.Ed. 500; Union Light, Heat & Power Co. v. Railroad Commission of Commonwealth of Kentucky et al., D.C., 17 F.2d 143. The issues present no unresolved questions of state law which require this court to withhold relief or insist that the plaintiff first avail itself of judicial remedies provided by state statutes in accordance with the doctrine expressed in American Federation of Labor et al. v. Watson, Attorney General et al., 327 U.S. 582, 66 S.Ct. 761, 90 L.Ed. 873, and the case of Shipman et al. v. DuPre et al., 339 U.S. 321, 70 S.Ct. 640.

The issue being one of confiscation, this court has not restricted itself to an examination of the transcript of the proceedings had before the Commission, but conducted a trial de novo, heard witnesses presented by both sides and considered other relevant evidence.

Plaintiff has no turntables, shops or terminal facilities of any kind at Durand, and without such equipment and facilities it is and will be impossible for it to operate trains between Durand and Frankfort, as ordered by defendant Commission. In order for plaintiff to procure the necessary equipment for the operation and to construct the buildings and facilities therefor, it will be necessary to make large capital expenditures and long delays will be encountered. If the plaintiff were to adopt the new schedules required by the defendant Commission, it would be necessary to incur additional operating costs for maintenance of the train, engine switching and payroll because the trains on the new schedules would be operating during the late afternoon and night hours.

The line from Durand to Frankfort makes scheduled and flag stops at thirty-two stations. These places have a total population of 58,493. The area served is essentially of an agricultural and resort character. The population in the three northern counties served has declined during the past twenty-five years. Eighteen communities have a population of under five hundred persons, and ten of these have a population of under one hundred. The area although so sparsely populated has excellent roads, and one out of four...