Baltimore and Ohio Railroad Company v. United States

• Decision Date: 18 November 1965
• Docket Number: Civ. A. No. 65-348.
• Citation: 249 F. Supp. 712
• Parties: The BALTIMORE AND OHIO RAILROAD COMPANY, Bessemer and Lake Erie Railroad Company, Lehigh Valley Railroad Company, the New York Central Railroad Company, Norfolk and Western Railway Company, the Pennsylvania Railroad Company, the Pittsburgh & Lake Erie Railroad Company, Reading Company, Western Maryland Railway Company, Plaintiffs, v. The UNITED STATES of America and the Interstate Commerce Commission, Defendants, and Erie-Lackawanna Railroad Company, Intervening Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

249 F. Supp. 712

The BALTIMORE AND OHIO RAILROAD COMPANY, Bessemer and Lake Erie Railroad Company, Lehigh Valley Railroad Company, the New York Central Railroad Company, Norfolk and Western Railway Company, the Pennsylvania Railroad Company, the Pittsburgh & Lake Erie Railroad Company, Reading Company, Western Maryland Railway Company, Plaintiffs, v. The UNITED STATES of America and the Interstate Commerce Commission, Defendants, and Erie-Lackawanna Railroad Company, Intervening Defendant.

Civ. A. No. 65-348.

United States District Court W. D. Pennsylvania.

November 18, 1965.

Robert G. Boes, Cleveland, Ohio, Edward A. Kaier, Philadelphia, Pa., Rene J. Gunning, Albert W. Laisy, Baltimore, Md., Richard J. Murphy, Chicago, Ill., William P. Quinn, Philadelphia, Pa., Henry M. Wick, Jr., Delisi, Wick & Vuono, Pittsburgh, Pa., for plaintiffs.

Wm. H. Orrick, Jr., Asst. Atty. Gen., John H. D. Wigger, Atty., Dept. of Justice, Washington, D. C., Gustave Diamond, U. S. Atty., Pittsburgh, Pa., Donald F. Turner, Asst. Atty. Gen., Robert W. Ginnane, Gen. Counsel, H. Neil Garson, Assoc. Gen. Counsel, Thomas H. Ploss, Interstate Commerce Comm., Washington, D. C., for defendants.

J. T. Clark, Gen. Atty., Erie-Lackawanna R. R. Co., Cleveland, Ohio, Ralph H. German, Houston, Cooper, Speer & German, Pittsburgh, Pa., for intervenor.

Before STALEY, Circuit Judge, and WILLSON and ROSENBERG, District Judges.

WILLSON, District Judge.

The complaint in this case was filed on March 31, 1965. This three-judge court was duly convened by an order of the Chief Judge of the Circuit. In the complaint it is stated that this civil action is one to enjoin, suspend, annul and set aside a report and order of the Interstate Commerce Commission in a proceeding before the Interstate Commerce Commission known as Investigation and Suspension Docket No. 8095, Iron Ore, Cleveland, Ohio, to Ohio and Pennsylvania, 323 I.C.C. 746. The proceeding before the Commission arose as a result of schedules filed by Erie-Lackawanna Railroad Company to become effective April 17, 1964, and later, in which it was proposed to establish multiple-car rates on iron ore from Cleveland, Ohio, to eight destinations in Ohio and seven destinations in Pennsylvania.¹ The case was referred to Division 2 of the Commission. On January 28, 1965, it filed a report and order which was served on February 12, 1965, which is the final order of the Commission in this case, as a petition for reconsideration was in due course denied. Ten competing railroads protested Erie-Lackawanna's proposed new rate schedule. Nine of the same railroads are plaintiffs in this case. In effect the final order of the Commission vacated the previous suspension of the operation of the proposed rates and permitted the filing of a new tariff by Erie-Lackawanna which became effective April 1, 1965. In the complaint it is alleged that the jurisdiction in this Court is conferred by United States Code, Title 28, Sections 1336, 1398, 2284, and 2321 through 2325.

In accordance with the practice in this Court, the case was first presented to Judge Rosenberg. It is to be noticed that on March 31, 1965, the day before the effective date of the rates, Judge Rosenberg denied plaintiffs' application for temporary restraining order. Thereafter this civil action came on for hearing before this three-judge court. It is conceded that this Court has jurisdiction of the subject matter and of the parties. Counsel have been heard at oral argument, and their briefs have been duly considered. It is well at this point to emphasize that there is no dispute of any substance as to the factual background with respect to the evidence received by the Commission and with respect to the orders entered by the Commission. The contention is made, however, that the Commission acted without making proper findings, and that it erred as a matter of law in its conclusions.

Since 1916, all the railroads involved in this case have charged a uniform tariff on iron ore moving on their lines from Lake Erie ports southward to the steel mills in Ohio and Pennsylvania. It is a matter of common knowledge that iron ore from the Mesabi Range is carried across the lakes by ore vessels to various docks on lower Lake Erie and thence by rail to the steel mills. A uniform tariff rate has been in effect since the order of the Commission entered in Iron Ore Rate Cases, 41 I.C.C. 181, (1916), 44 I.C.C. 368, (1917).

This uniformity in the rate schedule for iron ore moving southward by rail was upset when Erie-Lackawanna filed its new rate schedule on mutiple-car shipments. Single car shipments are not affected. The proposed rates are subject to a minimum of 10,000 gross tons per shipment, and, for each car, the marked capacity thereof. Each shipment must be tendered at one time and move from one consignor to one consignee. Upon protests being filed by ten railroads, the operation of the schedules was suspended until November 16, 1964, and voluntarily postponed thereafter until the final order of the Commission entered February 12, 1965. In a nutshell, the reduction in the rates filed by Erie-Lackawanna amounts to 20 cents a ton below the prior rates as most shipments as a matter of practice are necessarily over 10,000 gross tons.

The report of the Commission in this case, "Investigation and Suspension Docket No. 8095, Iron Ore, Cleveland, Ohio, to Ohio and Pennsylvania," 323 Interstate Commerce Commission Reports, pages 746 through 755, with two pages of appendices is in evidence.

It is to be noticed that no shipper or receiver of iron ore appeared before the Commission or filed a protest; it is well also to note that the plaintiffs before the Commission stipulated that the proposed rates are compensatory.

The report of the Commission on this point is as follows:

"At the hearing, the protestants stipulated on the record that the proposed rates are compensatory. Upon questioning of the examiner whether the rates met out-of-pocket costs or fully distributed costs, protestants replied: `Whatever the proper cost standard is we will agree it is met by these rates.' Accordingly, the respondent did not present cost evidence in this proceeding." (p. 747).

Erie-Lackawanna has but one port facility on Lake Erie, and that is situate at Cleveland. Its proposal is to establish new multiple-car rates from Cleveland to the 15 destinations served by its own line. The Erie-Lackawanna has stated and the Commission has agreed that the purpose of the lower multiple-car rates is to place Erie-Lackawanna in a better position to compete for a greater portion of the decreasing volume of iron ore traffic transported in smaller vessels to Lake Erie ports, and thereby improve its financial condition. On evidence the Commission found that the volume of iron ore traffic is in general decreasing. All the railroads have suffered a decrease in this traffic, but on evidence the Commission found that Erie-Lackawanna suffered a greater decrease in proportion to other carriers because of various disadvantages involved. One main reason is because of the trend to larger ships since 1950. However, these newer and larger ore-carrying vessels are unable to navigate the Cuyahoga River and the tributary "Old River Bed" to the site of Erie-Lackawanna dock facilities.

The Commission concluded on evidence that Erie-Lackawanna is effectively barred from competing for the ore transported in such ships, and is confined to transporting only the ore from the smaller lake vessels, which are able to navigate the river to its docks. In this connection the Commission stated that: "Considering various disadvantages involved, such as dock limitations, the scheduling of ships, the bunching of vessels because of weather conditions, and the trend to larger ships, respondent nevertheless hopes to attract an additional million or more tons of ore under the proposed rates. This estimate is predicated upon an assumption that other railroads would not reduce the rates from their docks." (p. 748).

The Commission's decision favoring the low Erie-Lackawanna rates on ore is, we believe, based upon substantial evidence. This evidence as a whole supports the finding by the Commission that Erie-Lackawanna has over the years, due to its disadvantage in dock facilities, increasingly become handicapped in securing its share of the iron ore traffic. For instance, the tables in the appendix attached to the Commission's report show significant declines in the shipments of iron ore handled by the railroads from 1947 to 1963. All the roads lost business. However, Erie-Lackawanna has suffered a greater decline than the other railroads. Table 1-A and Table 2 give the index figures. The average of 1947 through 1949 is 100. Based on the computation made by the Commission for 1961-63, Erie-Lackawanna's index figure was 43; whereas Baltimore & Ohio was 84; Chesapeake & Ohio, 103; New York Central, 78; Nickel Plate, 70, and Pennsylvania, 52. Under Table 2, in 1963, the index for all roads was 52. Thus, for the years cited in the report, Erie-Lackawanna has a greater decline except for the Bessemer & Lake Erie Railroad.

The evidence just mentioned which the Commission received and relied on in making its basic findings is briefly summarized as follows. At the hearing before the Commission, Erie-Lackawanna produced John S. Parsons, its chief engineer who gave testimony concerning the physical characteristics of that part of the Cleveland Harbor relevant to Erie-Lackawanna's ore unloading operations; that the length of the largest ship which could navigate the existing channel to its dock was 631 feet; that its dock could not handle ships of more than 700 feet in length; and that funds were not available for drastic improvements to the facilities necessary to accommodate the larger vessels.

Joseph G. Wood, vice president and manager of operations of an independent Great Lakes steamship company testified on behalf of Erie-Lackawanna that...