Chicago, Milwaukee St Paul Pacific Railroad Co v. State of Illinois United States v. State of Illinois Interstate Commerce Commission v. State of Illinois

• Citation: 2 L.Ed.2d 292,78 S.Ct. 304,355 U.S. 300
• Decision Date: 13 January 1958
• Docket Number: 27,Nos. 12,28,s. 12
• Parties: CHICAGO, MILWAUKEE, ST. PAUL & PACIFIC RAILROAD CO., Appellant, v. STATE OF ILLINOIS, Illinois Commerce Commission, and Milwaukee Road Commuters' Association. UNITED STATES of America, Appellant, v. STATE OF ILLINOIS, Illinois Commerce Commission, and Milwaukee Road Commuters' Association. INTERSTATE COMMERCE COMMISSION, Appellant, v. STATE OF ILLINOIS, Illinois Commerce Commission, and Milwaukee Road Commuters' Association
• Court: United States Supreme Court

355 U.S. 300

78 S.Ct. 304

2 L.Ed.2d 292

CHICAGO, MILWAUKEE, ST. PAUL & PACIFIC RAILROAD CO., Appellant,

v STATE OF ILLINOIS, Illinois Commerce Commission, and Milwaukee Road Commuters' Association.

UNITED STATES of America, Appellant,

v. STATE OF ILLINOIS, Illinois Commerce Commission, and Milwaukee Road Commuters' Association.

INTERSTATE COMMERCE COMMISSION, Appellant,

v. STATE OF ILLINOIS, Illinois Commerce Commission, and Milwaukee Road Commuters' Association.

Nos. 12, 27, 28.

Argued Nov. 12, 1957.

Decided Jan. 13, 1958.

Mr. Raymond K. Merrill, Chicago, Ill., for appellant Chicago, M., St. P. & Pac. R. Co.

Mr. J. Lee Rankin, Solicitor Gen., for appellant the United States.

Mr. Charlie H. Johns, Jr., Washington, D.C., for appellant Interstate Commerce Commission.

Mr. Harry R. Begley, Chicago, Ill., for appellees State of Illinois and Illinois Commerce Commission.

Mr. S. Ashley Guthrie, Chicago, Ill., for appellee Milwaukee Road Commuters' Ass'n.

Mr. Justice BRENNAN delivered the opinion of the Court.

The State of Illinois, the Illinois Commerce Commission, and the Milwaukee Road Commuters' Association, aggrieved by an order of the Interstate Commerce Commission fixing intrastate passenger fares for the Milwaukee Road's Chicago suburban commuter service higher than the fares authorized by the State Commission, brought this action in the District Court for the Northern District of Illinois, Eastern Division, seeking relief under 29 U.S.C. § 1336, 28 U.S.C.A. § 1336. The ICC order, 297 I.C.C. 353, was made under 49 U.S.C. § 13(4), 49 U.S.C.A. § 13(4),¹ which authorizes the ICC to prescribe intrastate fares if it finds that '* * * any such * * * (existing intrastate) fare * * * causes * * * any undue, unreasonable, or unjust discrimination against interstate * * * commerce.' The three-judge District Court set aside the order, enjoined its enforcement,² and remanded the case to the ICC for further proceedings. 146 F.Supp. 195. The District Court held, inter alia, that the ICC failed to make findings appropriate to show that the existing fares caused undue, unreasonable or unjust discrimination against interstate commerce. The judgment was appealed under 28 U.S.C. § 1253, 28 U.S.C.A. § 1253.³ We noted probable jurisdiction, 352 U.S. 939, 77 S.Ct. 260, 263, 1 L.Ed.2d 236.

The ICC found that the Milwaukee Road's 1954 passenger revenues from the Chicago suburban commuter service fell short by $306,038 of meeting the out-of-pocket cost of the service. This was the basis of the conclusion that the existing intrastate fares caused undue discrimination against interstate commerce. To remove this discrimination the ICC prescribed fares to produce $383,000 additional annual revenue, enough to eliminate the determined out-of-pocket loss and to allow $77,000 annually as a contribution to indirect costs and taxes. The question for our decision is whether the District Court properly set aside the ICC order as void for lack of findigns necessary to support an order under § 13(4).

The Chicago suburban commuter service, except for a relatively insignificant exception mentioned below, is entirely an intrastate service. It is provided in two directions from Chicago's Union Station. One direction, wholly within Illinois, is west from Chicago some 37 route miles to Elgin, Illinois. The other direction is north from Chicago to Walworth, Wisconsin; however, 62 of the 74 route miles in that direction, and 24 of the 26 station stops, are located with Illinois.⁴ Total 1954 passenger revenues from this service were $1,796,231 from 4,869,064 passengers. Commuters traveling on commutation and multiple-ride tickets numbered 3,910,526 of this total and accounted for $1,374,261 of the revenue.

Commuter fares of most of the railroads providing commuter service in the Chicago area have been determined, at least since 1950, in joint hearings conducted by the ICC and the State Commission under 49 U.S.C. § 13(3), 49 U.S.C.A. § 13(3).⁵ 297 I.C.C. 353, 354. On July 24, 1952, however, the Milwaukee Road, instead of filing petitions or schedules with both Commissions, filed a petition with the State Commission only requesting

'authority to discontinue all off-peak Chicago suburban passenger trains and consolidate certain peak-hour trains and also to increase one-way, round-trip and commutation fares to such extent as will after taking into consideration the economy effected by such discontinuances and consolidation of trains, give respondent sufficient revenues to permit operation of the Chicago suburban service without an out-of-pocket loss.' 297 I.C.C., at 355.

The State Commission did not act on the application until 1954. Meanwhile the Milwaukee Road changed the suburban service from a steam to a diesel operation. The State Commission found that the cost savings effected by this change eliminated the out-of-pocket loss and, on November 10, 1954, denied the application. The Milwaukee Road thereupon, in February 1955, petitioned the ICC for relief under § 13(4).

This case presents once again the problem of adjusting state and federal interests in the regulation of intrastate rates. These intrastate rates are primarily the State's concern and federal power is dominant 'only so far as necessary to alter rates which injuriously affect interstate transportation.' State of North Carolina v. United States, 325 U.S. 507, 511, 65 S.Ct. 1260, 1263, 89 L.Ed. 1760. Thus, whenever this federal power is exerted within what would otherwise be the domain of state power, the justification for its exercise must 'clearly appear.' State of Florida v. United States, 282 U.S. 194, 212, 51 S.Ct. 119, 124, 75 L.Ed. 291. The statute provides a practical method of minimizing the inevitable irritations inherent in the conflict by requiring the ICC to notify the State whenever there is brought before it any fare imposed by state authority. In addition, the ICC may confer with the state regulatory authority, or may hold joint hearings with the state agency, when the State's rate-making authority may be affected by the action taken by the ICC. 49 U.S.C. § 13(3), 49 U.S.C.A. § 13(3).

The occasion for the exercise of the federal power asserted by § 13(4) is the necessity for effecting the required contribution by intrastate traffic of its proportionate share of the revenues necessary to pay a carrier's operating cost and to yield a fair return.⁶ When intrastate revenues fall short of producing their fair proportionate share of required total revenues, they work an undue discrimination against interstate commerce, and the ICC may remove the discrimination by fixing intrastate rates high enough reasonably to protect interstate commerce. Illinois Commerce Commission v. United States, 292 U.S. 474, 479, 54 S.Ct. 783, 785, 78 L.Ed. 1371; Railroad Commission of State of Wisconsin v. Chicago, B. & Q.R. Co., 257 U.S. 563, 586, 42 S.Ct. 232, 236, 66 L.Ed. 371; United States v. State of Louisiana, 290 U.S. 70, 75, 54 S.Ct. 28, 31, 78 L.Ed. 181. In determining whether an undue revenue discrimination against interstate commerce is caused by intrastate rates, the ICC may consider 'among other things, the need, in the public interest, of adequate and efficient railway transportation service and the need of revenues sufficient to sustain such service,' a standard written into 49 U.S.C. § 15a(2), 49 U.S.C.A. § 15a(2). King v. United States, 344 U.S. 254, 264, 73 S.Ct. 259, 265, 97 L.Ed. 301. No formal requirements are prescribed for the findings to be made by the ICC under § 13(4). United States v. State of Louisiana, 290 U.S. 70, 80, 54 S.Ct. 28, 33, 78 L.Ed. 181. Reasonable determinations suffice. State of Florida v. United States, 292 U.S. 1, 9, 54 S.Ct. 603, 606, 78 L.Ed. 1077. But the justification for the exercise of this exceptional federal power to interfere with intrastate rates must be made definitely and clearly apparent. State of Florida v. United States, 282 U.S. 194, 212, 51 S.Ct. 119, 124, 75 L.Ed. 291.

In the instant case the ICC interfered with suburban commuter rates—intrastate rates peculiarly localized in impact upon the Chicago suburban community. In substance, the ICC found that because this single segment of the Milwaukee Road's intrastate operations in Illinois did not meet out-of-pocket costs, there was an undue discrimination against the road's interstate operations, without regard to the contribution of other Illinois intrastate revenues, freight or passenger, concerning which both the record and the findings are entirely silent.

We think this is a case where the ICC cannot be sustained in altering intrastate rates merely because the Chicago suburban commuter traffic—of the Milwaukee Road's total intrastate Illinois traffic, freight and passenger—is not remunerative or reasonably compensatory. Cf. State of Florida v. United States, 282 U.S. 194, 51 S.Ct. 119, 75 L.Ed. 291; State of North Carolina v. United States, 325 U.S. 507, 65 S.Ct. 1260, 89 L.Ed. 1760. The limited and exceptional federal power asserted by § 13(4) over intrastate rates must be exercised with 'scrupulous regard for maintaining the (primary) power of the state in this field.' State of North Carolina v. United States, 325 U.S. 507, 511, 65 S.Ct. 1260, 1263, 89 L.Ed. 1760. It is of course desirable that each particular intrastate service should as nearly as may be pay its own way and return a profit—but the State Commission, not the ICC, has the responsibility in the first instance to achieve that desired end. Passenger deficits have become chronic in the railroad industry and it has become necessary to make up these deficits from more remunerative services. The ICC has recognized this practical reality of today's railroading and has changed its ratefixing policy so that if interstate passenger service inevitably and inescapably cannot bear its direct costs and its share of joint or indirect costs, the ICC feels compelled in a general rate case to take the passenger deficit into...