Chamber of Commerce of Fargo, ND v. United States

• Decision Date: 08 November 1967
• Docket Number: Civ. No. 4250.
• Parties: CHAMBER OF COMMERCE OF FARGO, NORTH DAKOTA, Public Service Commission, State of North Dakota, Plaintiffs, v. UNITED STATES of America, Interstate Commerce Commission, Defendants, Great Northern Railway Company, Northern Pacific Railway Company, Chicago, Milwaukee, St. Paul & Pacific Railroad Company, and Soo Line Railroad Company, Intervening Defendants.
• Court: U.S. District Court — District of South Dakota

276 F. Supp. 301

CHAMBER OF COMMERCE OF FARGO, NORTH DAKOTA, Public Service Commission, State of North Dakota, Plaintiffs, v. UNITED STATES of America, Interstate Commerce Commission, Defendants Great Northern Railway Company, Northern Pacific Railway Company, Chicago, Milwaukee, St. Paul & Pacific Railroad Company, and Soo Line Railroad Company, Intervening Defendants.

Civ. No. 4250.

United States District Court D. North Dakota, Southeastern Division.

November 8, 1967.

COPYRIGHT MATERIAL OMITTED

John I. Finsness, Fargo, N. D., for plaintiffs.

John O. Garaas, U. S. Atty., Fargo, N. D., for defendant United States.

Henri F. Rush, Jr., Atty., I.C.C., Washington, D. C., for defendants Interstate Commerce Commission and United States.

Frank J. Magill, of Nilles, Oehlert, Hansen, Selbo & Magill, Fargo, N. D., for all intervening defendants.

Thomas H. Ploss, Gen. Atty., Chicago, M., St. P. & P. R. Co., Chicago, Ill., for intervening defendant Chicago, M., St. P. & P. R. Co.

Charles H. Clay, Gen. Atty., Soo Line R. Co., Minneapolis, Minn., for intervening defendants Soo Line R. Co., Great Northern Ry. Co. and Northern Pac. Ry. Co.

Before BLACKMUN, Circuit Judge, and DEVITT and REGISTER, Chief District Judges.

REGISTER, Chief Judge.

Plaintiffs bring this action under Sections 1336, 1398, 2321, 2322 and 2323 of Title 28, United States Code, which provide, inter alia, for suits to enjoin, set aside, annul and suspend orders of the Interstate Commerce Commission. The matter was heard by this three-judge court, pursuant to Sections 2284 and 2321-2325, Title 28, United States Code.

By their joint complaint filed January 3, 1967, the Plaintiffs seek to enjoin, annul, set aside and remand certain orders of the Interstate Commerce Commission in a proceeding entitled "Chamber of Commerce of Fargo, North Dakota, et al. v. Chicago, Milwaukee, St. Paul and Pacific Railroad Company, Docket No. 34584 and Sub. No. 1, North Dakota Public Service Commission v. Chicago, Milwaukee, St. Paul and Pacific Railroad Company," including that decision and order of July 1, 1966 dismissing the complaint and affirming and adopting, by the Rates and Practices Review Board, the statement of facts, conclusions and findings of the Examiner. The Plaintiffs contend that such findings are not based on substantial evidence and are contrary to the evidence, and that such findings and order are erroneous in law, not in accordance with the law, and are arbitrary, capricious, null and void. Following filing of the complaint, a joint answer thereto was duly filed by the Defendants and thereafter, upon application to and order of this Court, the intervenors were permitted to intervene as parties defendant pursuant to Section 2323, Title 28, United States Code, and their answer, also denying Plaintiff's allegations of error in the Commission's order, was duly filed.

We find that this Court has jurisdiction of the subject matter, that venue is properly laid (Section 1398, Title 28, U.S.C.A.), and that the procedural steps taken by Plaintiffs constitute complete exhaustion of their administrative remedies.

A brief statement of the facts in this case and of the history of proceedings had before the Interstate Commerce Commission is essential for an understanding of the specific issues raised.

On January 25, 1965 the Chicago, Milwaukee, St. Paul and Pacific Railroad Company (hereinafter called Milwaukee) reduced its carload freight rates on barley from Minnesota and South Dakota stations to Minneapolis and St. Paul, Minnesota, below the normal, maximum level of rates earlier prescribed by the Interstate Commerce Commission, as adjusted by various authorized increases. Such reductions were made after Milwaukee analyzed the effect of reductions made in 1964 by the competing Chicago and North Western Railway Company (hereinafter called C&NW) on barley rates from South Dakota and Minnesota origins to Minneapolis. Milwaukee determined that C&NW's subnormal rate level, unless met, would result in barley destined for Minneapolis moving away from Milwaukee's elevators to C&NW elevators and routing, in order to secure the higher country elevator prices¹ resulting from the lower C&NW rates.

Neither C&NW in 1964, nor Milwaukee in January 1965, reduced rates on barley from North Dakota. The initial reductions by C&NW and Milwaukee in South Dakota and Minnesota left rates at border stations in these two states substantially lower than rates on barley to Minneapolis and St. Paul from neighboring border stations in North Dakota on the lines of the two railroads—thus creating rate disparities (commonly known as "rate humps") between relatively nearby communities, along the state borders.

The Chamber of Commerce of Fargo, North Dakota, and various elevator operators located at stations on the Fargo branch line of Milwaukee filed their complaint with the Interstate Commerce Commission, attacking the carload freight rates on barley maintained by Milwaukee from its Fargo branch line stations in North Dakota to Minneapolis and St. Paul, Minnesota. The Public Service Commission of the State of North Dakota subsequently filed its complaint, involving all North Dakota origins of Milwaukee to the same destinations, and also attacking carload freight rates on barley from North Dakota origins of C&NW. The complainants alleged that carload freight rates on barley from North Dakota stations of these two railroad defendants were unjust and unreasonable in violation of Section 1 (5), 49 U.S.C.A.,² and unduly prejudicial to North Dakota shippers and unduly preferential of Minnesota and South Dakota shippers located on the lines of these two railroads in violation of Section 3 (1), 49 U.S.C.A.³ The basis for such contentions was the fact that carload freight rates on barley to Minneapolis and St. Paul maintained by these two railroads were substantially higher, distance considered, from North Dakota stations than from Minnesota and South Dakota stations. C&NW, following receipt of the complaint, agreed to reduce its North Dakota rates from its only two North Dakota stations (Ludden and Oakes) to the level maintained from its South Dakota stations. After effecting this change, the North Dakota Public Service Commission petitioned the Interstate Commerce Commission to dismiss the complaint against C&NW, and the Commission did so. Milwaukee revised and adjusted its reductions in the border areas of Minnesota and South Dakota by grading up its rates in these two states geographically, as its lines approach the North Dakota border, to the approximate normal level of rates in North Dakota thus reducing Milwaukee's former "rate humps" to approximately normal grading patterns. The Interstate Commerce Commission assigned or set the proceedings for disposition by "modified procedure" (which eliminates oral hearing and provides for the submission of all testimony and arguments in writing) pursuant to the Commission's General Rules of Practice, 49 C.F.R., Sec. 1.45-1.54. Thereafter this procedure was accomplished, statements of facts and arguments were duly filed with the Commission by the complainants, the Milwaukee, and the other railroads (which were permitted by the Commission to intervene in said proceedings), following which the Examiner filed his report and recommended order. The various Orders of the Commission here under attack were thereafter issued, served and filed in due course. The effect of such orders (herein attacked) was to dismiss the complaints for failure by the complainants to sustain their burden of proof, and to deny to complainants the reduction in Milwaukee's North Dakota barley freight rates which they sought in connection therewith.

The limited scope of judicial review of the Commission's Order is prescribed by the Administrative Procedure Act, Title 5, U.S.C. Sec. 1009(e). This Court has the duty to hold unlawful and set aside agency action, findings, and conclusions found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, or unsupported by substantial evidence. Otherwise, such action, findings, and conclusions must be sustained.

The Supreme Court succinctly stated, in Mississippi Valley Barge Line Co. v. United States, et al., 292 U.S. 282, at pages 286-287, 54 S.Ct. 692, at page 694, 78 L.Ed. 1260:

"* * * The structure of a rate schedule calls in peculiar measure for the use of that enlightened judgment which the commission by training and experience is qualified to form. State of Florida v. United States, 292 U.S. 1, 54 S.Ct. 603, 78 L.Ed. 1077. It is not the province of a court to absorb this function to itself. I. C. C. v. Louisville & Nashville R. Co., 227 U.S. 88, 100, 33 S.Ct. 185, 57 L.Ed. 431; Western Paper Makers' Chemical Co. v. United States, 271 U.S. 268, 271, 46 S.Ct. 500, 70 L.Ed. 941; Virginian Ry. Co. v. United States, 272 U.S. 658, 663, 47 S.Ct. 222, 71 L.Ed. 463. The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body. * * *"

In Interstate Commerce Commission et al. v. Martin Brothers Box Co., 219 F.2d 811, at p. 813 (9 Cir., 1955), in discussing the narrow scope of judicial review of the Commission's orders, the Court stated:

"* * * It is a long-established principle that such orders are not to be set aside by a court if they are within the Commission's statutory power and are supported by substantial evidence. Interstate Commerce Commission v. Union Pacific R. R. Co., 222 U.S. 541, 547, 32 S.Ct. 108, 56 L.Ed. 308. To consider the weight of the evidence before the Commission, or the soundness of the reasoning by which its conclusions were reached, is beyond the province of the courts. Virginian Ry. Co. v. United States, 272 U.S. 658, 663, 47 S.Ct. 222, 71 L.Ed. 463. * *"

See, also: Hart et al. v. Interstate Commerce Commission, 226 F.Supp. 635, 641, (D.C., Minn., 1964), and State Corporation Commission of State...