Beaumont Ry Co v. United States United States v. Beaumont Ry Co

• Decision Date: 24 November 1930
• Docket Number: Nos. 44,45,s. 44
• Citation: 75 L.Ed. 221,282 U.S. 74,51 S.Ct. 1
• Parties: BEAUMONT, S. L. & W. RY. CO. et al. v. UNITED STATES et al. UNITED STATES et al. v. BEAUMONT, S. L. & W. RY. CO. et al
• Court: U.S. Supreme Court

282 U.S. 74

51 S.Ct. 1

75 L.Ed. 221

BEAUMONT, S. L. & W. RY. CO. et al.

v UNITED STATES et al. UNITED STATES et al. v. BEAUMONT, S. L. & W. RY. CO. et al.

Nos. 44, 45.

Argued Oct. 20, 1930.

Decided Nov. 24, 1930.

[Syllabus from pages 74-76 intentionally omitted] Messrs. Frank H. Moore, of Kansas City, Mo., Samuel W. Moore, of New York City, W. E. Davis, of Kansas City, Mo., and M. G. Roberts, of St. Louis, Mo., for the southwestern lines.

The Attorney General and Messrs. Edward M. Reidy and Daniel W. Knowlton, both of Washington, D. C., for the United States and Interstate Commerce Commission.

Mr. Frank H. Towner, of Chicago Ill., for the western trunk carriers.

Mr. Justice BUTLER delivered the opinion of the Court.

This is a suit brought in the District Court for the Western District of Missouri by appellants, carriers in southwestern territory, against the United States, to annul and set aside an order of the Interstate Commerce Commission prescribing divisions of joint rates applicable to certain freight traffic between points in that territory and points in western trunk line territory or via western lines to and from points in eastern territory. The Commission and certain western trunk line carriers intervened. The case was tried before a court of three judges. Title 28 U. s. Code, § 47, 28 USCA § 47. It sustained the order and dismissed the petition. 36 F.(2d) 789. The southwestern lines appealed. Title 28, U. S. Code, § 345(4), 28 USCA § 345(4). The court stayed the enforcement of the prescribed divisions until determination here. The United States and Interstate Commerce Commission appealed from that order.

The Commission's order complained of was made in proceedings, instituted October 8, 1923, by the Commission on its own motion. Its report defines western trunk line territory to include Iowa, Minnesota, Wisconsin, the Upper Peninsula of Michigan, Illinois, North Dakota, South Dakota, and that part of Missouri on and north of the main line of the Missouri Pacific between Kansas City and St. Louis; it defines the southwestern territory to include Texas, Arkansas, Oklahoma, that part of Louisiana west of the Mississippi river, and so much of Missouri as is south of the above-mentioned line of the Missouri Pacific.

Twelve western trunk lines and thirty-two southwestern lines were parties to this investigation. The former, carriers in that territory having little or no mileage in the southwest, demanded increases, and were by the Commission called complainants; the latter, carriers in the southwest having little or no mileage in the other territory, merely sought to retain the existing divisions, and were called defendants. The Santa Fe and Rock Island, named as defendants, have important lines in both territories. The former regarded itself as a southwestern carrier; the latter remained neutral. The investigation was as to the reasonableness of divisions of joint rates on freight traffic between points on lines of respondents in southwestern territory and points on lines of respondents in western trunk line territory moving through Kansas City or St. Louis in Missouri, East St. Louis, Cairo, Gale, or Thebes in Illinois, and of divisions of the joint rates accruing to respondents on traffic moving through such gateways between such points in southwestern territory and points in eastern territory that lie east of the Illinois-Indiana state line.

The Commission made a report (148 I. C. C. 457) in which, among other things it found (page 477):

Existing divisions were established for the most part about 35 years ago, and conform to no logical or consistent basis. They are considerably more favorable to the western trunk lines in case of oil and lumber than in case of other traffic. Transportation conditions have changed materially since most of the divisions were established, and the changes have benefited the southwestern lines more than they have those in the other group. And the trend is distinctively in favor of the former. In respect of density of traffic, transportation conditions are more favorable in western trunk line territory, but conditions vary in different parts of that territory, and are considerably more favorable in Illinois than in the other states included in that region, and are progressively less favorable from east to west. The difference in transportation conditions is reflected in the level of rates in the two territories. It is not possible from the record to determine just what the average difference is, but it appears to be greater than the difference in average transportation conditions. This is particularly true of the class rates, which are constructed upon somewhat different theories in the two territories and are in process of revision in the western trunk line territory. The cost of operation per ton mile, including all expenses, charges, and a fair return on investment probably does not average as much as 20 per cent. higher in the southwestern territory than in the other group. On the whole, the financial condition of the western trunk lines is not as good as that of the southwestern lines.

The report continues (page 478):

'The divisions here in issue are dealt with of record on a group basis. They are, in other words, the divisions 'in the aggregate' north and south of the gateways named, and no question is raised with respect to the divisions of individual carriers. In our opinion the divisions in issue are not just, reasonable, and equitable. Many of them are unjust to complainants, and some of them are unjust to defendants. To cure their defects, they must be readjusted upon a consistent basis which will as nearly as practicable reflect, in the light of all the facts of record, the differing conditions in the two territories.'

The Commission found that divisions for the future should be made as follows: The joint rates applicable to traffic moving to or from points in Illinois and Wisconsin should be divided in the proportions that the first-class rate on the southwestern scale for the length of haul south of the gateway and 80 per cent. of such rate for the length of haul north of the gateway, respectively, bear to the total of such assumed rates. Similarly, the joint rates on traffic to or from other points in western trunk line territory should be divided by taking for the northern haul 87 (instead of 80) per cent. of such assumed rate. The western trunk lines' share of joint rates applicable on the traffic to or from points in the territory east of the Illinois-Indiana line should be determined in like manner on the basis of 80 per cent. of the assumed rate for the northern haul and by deducting 10 cents from that portion. Where differentials are used in the construction of the joint rates, they should be deducted before prorating and added to the division accruing to the carriers in the region where they apply. These rules or formulas were made subject to some exceptions, which need not be given.

The report states that the assumed rates are intended to reflect general differences in transportation conditions. The factor of 80 per cent. gives the southwestern carriers an advantage of 25 per cent., and the use of 87 per cent. makes a difference in their favor of about 15 per cent. The Commission found that complexity in the bases to be employed is not desirable, that the differentiation provided for would produce sufficiently accurate and reasonable results, and that divisions made in the manner specified will for the future be just, reasonable, and equitable.

The southwestern lines presented a petition for rehearing which was denied. But the Commission made an additional report, 156 I. C. C. 94, and modified its findings as to joint rates applicable to traffic to and from points in Illinois and Wisconsin or in the eastern territory by changing the factor attributable to the haul north of the gateways other than Kansas City from 80 to 75 per cent. of the assumed rate, and by increasing from 10 cents to 15 cents the amount to be deducted from the western lines' proportion of joint rates applicable to and from points in eastern territory.

On the same day that it announced its second report, June 10, 1929, the Commission made the order. As to the joint rates in question, it directs that the 'just, reasonable and equitable divisions in the aggregate north and south of said gateways' shall be made in accordance with the findings and formulas above mentioned. Divisions made on the bases prescribed, while decreasing the western trunk lines' shares on some shipments, will increase them on many more, and it is estimated that the order will operate to give those lines about $3,000,000 annually, over and above what would be yielded to them under existing divisions. This is much less than 1 per cent. of the total freight operating revenues of the southwestern carriers.

The appellants contend that the act requires the Commission to determine the divisions of each carrier upon a consideration of its own rights and needs, and does not authorize the Commission to base its order upon group conditions or upon average conditions in the group.

Section 15(6) provides that whenever, after full hearing, the Commission is of opinion that divisions of joint rates are or will be unjust, unreasonable, inequitable, or unduly preferential or prejudicial as between parties thereto, the Commission shall by order prescribe the just, reasonable, and equitable divisions thereof to be received by the several carriers. 'In so prescribing and determining the divisions of joint rates, fares and charges, the Commission shall give due consideration, among other things, to the efficiency with which the carriers concerned are operated, the amount of revenue required to pay their respective operating expenses, taxes, and a fair return on their railway property held for and used in the service of transportation, and the importance to the public of the transportation services of such...