Atchison, Topeka and Santa Fe Railway Co. v. United States

• Decision Date: 27 June 1963
• Docket Number: Civ. A. No. 62 C 2306.
• Citation: 218 F. Supp. 359
• Parties: The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.
• Court: U.S. District Court — Northern District of Illinois

218 F. Supp. 359

The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY et al., Plaintiffs, v. UNITED STATES of America and Interstate Commerce Commission, Defendants.

Civ. A. No. 62 C 2306.

United States District Court N. D. Illinois, E. D.

June 27, 1963.

COPYRIGHT MATERIAL OMITTED

R. H. Bierma, Chicago, Ill., J. P. Canny, Cleveland, Ohio, John C. Danielson, J. A. Gillen, W. P. Higgins, R. J. Lehman, Don McDevitt, R. J. Murphy, Joseph J. Nagle, Chicago, Ill., for plaintiffs.

Philip H. Porter, Madison, Wis., for intervening plaintiffs, Patrick Cudahy, Inc., Oscar Mayer & Co., and Dubuque Packing Co.

Lee Loevinger, John H. D. Wigger, Department of Justice, Washington, D. C., James P. O'Brien, U. S. Atty., Chicago, Ill., for defendant United States of America.

Robert W. Ginnane, Arthur J. Cerra, Interstate Commerce Commission, Washington, D. C., for defendant Interstate Commerce Commission.

Byron M. Gray, Topeka, Kan., for intervening defendant, State Corporation Commission of Kansas.

Warren H. Wagner, Washington, D. C., for intervening defendants, John Morrell & Co., The Rath Packing Co., and Geo. A. Hormel & Co.

Marcus Whiting, Chicago, Ill., for intervening defendant, Armour & Co.

Nuel D. Belnap, Harold E. Spencer, Daniel J. Sweeney, Chicago, Ill., F. T. Barrett, Omaha, Neb., Belnap, Spencer, Hardy & Freeman, Chicago, Ill., of counsel, for intervening defendant, Cudahy Packing Co.

Before CASTLE, Circuit Judge, and HOFFMAN and AUSTIN, District Judges.

JULIUS J. HOFFMAN, District Judge.

In this action, the plaintiff railroads seek an order setting aside and permanently enjoining orders of the Interstate Commerce Commission entered on September 11, 1962, and December 7, 1962, in the proceeding entitled Cudahy Packing Company v. Akron, Canton & Youngstown Railroad Company, et al., I.C.C. Docket No. 32551. Defendants are the United States of America and the Interstate Commerce Commission. Intervening as plaintiffs are Patrick Cudahy Inc., Oscar Mayer and Company, and Dubuque Packing Company. Intervening as defendants are the Cudahy Packing Company, John Morrell & Company, the Rath Packing Company, Geo. A. Hormel & Company, and the State Corporation Commission of Kansas.

A three-judge court was convened in accordance with title 28 U.S.C. §§ 2284 and 2325. Jurisdiction over this proceeding is conferred by title 28 U.S. C. § 1336. The scope of review to which we are limited is prescribed by title 5 U.S.C. § 1009(e) (Administrative Procedure Act).

The Chicago, Milwaukee, St. Paul and Pacific Railroad Company, one of the plaintiffs herein, has its principal offices in the Northern District of Illinois.

The Cudahy Packing Company instituted the proceeding before the Commission, joining most of the nation's railroads as defendants. In its complaint, Cudahy alleged that the rail rates on fresh meats and packinghouse products from its meat packing plants at Omaha, Nebraska, Denver, Colorado, and Wichita, Kansas, to destinations throughout the United States were relatively unjust and unreasonable, unduly prejudicial to the complainant, and unduly preferential of competitors with plants at other origins in the Midwest, in violation of sections 1 and 3 of the Interstate Commerce Act, 49 U.S.C. §§ 1 and 3. The complaint specifically refers to the rates from Omaha, Denver, and Wichita, but it was broadened during the Commission proceedings to include other complaining origins, and the Commission report states that the issues presented upon the record concern the rate relationships of midwestern origins in general on and west of the Illinois-Indiana State line. The complaint sought new origin relationships in the rates from the Midwest to the East and to the West. Various midwestern packers, commissions, and associations were allowed to intervene, some supporting the complainant and some supporting the defendants in the Commission proceeding.

The Commission, on September 11, 1962, in the order here assailed, found that the rail rates from points west of the Mississippi River to official territory (i. e., the area east of the Illinois-Indiana State Line and north of the Ohio River) were unduly prejudicial to such origins and shippers there located and unduly preferential to origins and shippers on and east of the Mississippi River, in violation of section 3(1) of the Act. The Commission, in all other respects, found that the rates had not been shown unlawful.

On December 7, 1962, the Commission denied the petitions of the defendants and intervening defendants (as aligned before the Commission) for reconsideration of the report and order.

The effect of this order is to require the railroads to provide for all origins west of the Mississippi River the same relative level of rates on fresh meats and packinghouse products as those maintained from Dubuque, Iowa, to destinations in official territory, as tested by uniform percentages of the Docket 28300 first-class rates. (For background information concerning the territorial divisions, class rates, exception rates, and commodity rates, see New York v. United States, 331 U.S. 284, esp. 289-90 nn. 1-3, 67 S.Ct. 1207, 91 L.Ed. 1492 (1947)).

The existence of the rate disparity which the Commission found to exist is not contested in this proceeding. Illustrative of the disparity is a comparison, made by the complainant in the Commission proceedings, between the through rates on fresh meats, in boxes, from Omaha to New York and from Dubuque to New York. The Omaha rate, with a distance of 1,358 miles, is 207 cents; it is 35.4% of the current docket 28300 class-100 rate, and at a minimum of 30,000 pounds produces car-mile revenue of 45.7 cents. The Dubuque rate, with a distance of 1,061 miles (86% of the Omaha-New York distance), is 143 cents (69.1% of the Omaha-New York rate); it is 28.5% of the class-100 rate, and produces car-mile revenue of 40.4 cents. (P. 9 of Commission report. Page references for the Commission report are for the copy of the report made "Exhibit A" by plaintiffs and appended to the complaint.) The disparity, it was shown, was not justified by the difference in cost of service to the two regions; the rate spread was shown to be substantially greater than the cost spread for these areas.

In challenging the validity of the Commission's order, plaintiffs and intervening plaintiffs (all hereinafter included in the term "plaintiffs") contend that: (1) The Commission failed to make certain basic and essential findings of fact necessary to support the conclusions reached therein; (2) The Commission unlawfully found that the existence of facts justifying an inequality in freight rate treatment was a matter of defense to be proved by the defendants in the Commission proceeding; and (3) The Commission's ultimate finding that the involved rates are unduly prejudicial to certain shippers and unduly preferential to others is not supported by substantial evidence of record, and, in fact, is contrary to the evidence.¹

I. BASIC OR ESSENTIAL FINDINGS OF FACT

Plaintiffs urge that an order of the Commission made under section 3(1) of the Interstate Commerce Act, finding rates to be unduly prejudicial to certain shippers and unduly preferential to other shippers, must be supported by certain basic or essential findings, namely, (1) That a disparity in freight rates exists; (2) That this disparity has injured the party allegedly prejudiced and benefited the party allegedly preferred, and (3) That traffic from both the prejudiced and preferred points moves under substantially similar circumstances and conditions. Plaintiffs assert that the Commission has not made findings of fact on number (2) and (3) above, and that, as a result, the order is invalid.

Defendants take the position that the Commission has made all the basic findings necessary to support its order. Defendants further contend that, in any event, the Commission is not required to make an express finding of similarity of transportation conditions. We shall first consider whether the Commission is required to find such a similarity of conditions as support for its order under section 3(1) of the Act, and whether, if it is so required, it has done so.

(a) Substantial Similarity of Transportation Conditions

Defendants first contend that the Commission, in an order under section 3(1), need only make the ultimate statutory finding that the rates in question are unduly preferential to some shippers and unduly prejudicial to other shippers, and enough subsidiary findings to show that the Commission has considered the several factors relevant to its conclusion. Defendants assert that the Commission was not required to make a specific finding that the transportation conditions are substantially similar.

Section 14(1) of the Interstate Commerce Act, 49 U.S.C. § 14(1), requires only that the report of the Commission (except in damage cases) "shall state the conclusions of the Commission, together with its decision." Nevertheless, a finding in the language of the applicable statutory provision is not enough; the report must contain, in addition, those "basic or essential findings required to support the Commission's order." Florida v. United States, 282 U.S. 194, 215, 51 S.Ct. 119, 75 L.Ed. 291 (1931). To the same effect, see Alabama Great So. R. R. v. United States, 340 U.S. 216, 71 S.Ct. 264, 95 L.Ed. 225 (1951); Chicago & E. Ill. R. R. v. United States, D.C., 107 F.Supp. 118 (1952), aff'd, 344 U.S. 917, 73 S.Ct. 346, 97 L. Ed. 707 (1953); Stanislaus County, Calif. v. United States, 193 F.Supp. 145 (N.D.Cal.1960).

The "basic findings" which the Commission must make are those which are essential to the existence of its authority to promulgate the rule or enter the order in question. Lubetich v. United States, 315 U.S. 57, 62 S.Ct. 449, 86 L.Ed. 677 (1942); United States v. Baltimore & O. R. R., 293 U.S. 454, 463, 55 S.Ct. 268, 79 L.Ed. 587 (1935). "The basic findings essential to the validity of a given order...