Interstate Commerce Commission v. Mechling, 72

• Decision Date: 31 March 1947
• Docket Number: No. 72,72
• Citation: 91 L.Ed. 1102,330 U.S. 567,67 S.Ct. 894
• Parties: INTERSTATE COMMERCE COMMISSION v. MECHLING et al
• Court: U.S. Supreme Court

330 U.S. 567

67 S.Ct. 894

91 L.Ed. 1102

INTERSTATE COMMERCE COMMISSION

v MECHLING et al.

No. 72.

Argued Feb. 12, 13, 1947.

Decided March 31, 1947.

Appeal from the District Court of the United States for Northern District of Illinois.

[Syllabus from pages 567-569 intentionally omitted] Mr. Daniel H. Kunkel, of Washington, D.C., for appellant.

Mr. David O. Mathews, of Washington, D.C., for appellees, U.S. and Secy. of Agriculture.

Mr. Edward B. Hayes, of Chicago, Ill., for appellee, A. L. Mechling.

Mr. Nuel D. Belnap, of Chicago, Ill., for appellee, Inland Waterways Corp.

Mr. Justice BLACK delivered the opinion of the Court.

A District Court of three judges enjoined in part an order of the Interstate Commerce Commission, and the case is here on appeal under 28 U.S.C. §§ 47, 47a, and 345, 28 U.S.C.A. §§ 47, 47a, 345. The Commission order specifically relates to the railroad rate for grain transported from Chicago, Illinois, to New York and other eastern points,¹ after that grain has been transported to Chicago from the west by connecting rail or water carriers on through bills of lading. In such through shipments the through rate is a combination of distinctly separate rates charged respectively for shipments from the west to Chicago and from Chicago to the east. The charge fixed for the last leg of the shipment is called, in railroad parlance, a 'reshipping' or 'proportional' rate. It is lower from Chicago to the east than a 'local' rate charged for a shipment from Chicago to the east which originates in Chicago. See Atchison, T. & S.F.R. Co. v. United States, 279 U.S. 768, 771, 49 S.Ct. 494, 495, 73 L.Ed. 947.

For many years eastern railroads have carried grain east from Chicago at reshipping rates 8 1/2 cents per hundred pounds lower than local rates. Up to 1939 this Chicago-to-the-east reshipping rate had been identical for grain, whether brought to Chicago by a connecting railroad, connecting lake steamer, or connecting barge. Although barge lines were much slower than railroads, they were less expensive to operate and therefore could afford to transport freight much more cheaply than railroads. The result was that the barge-rail rate from a point in the west to eastern destinations was considerably cheaper than the all-rail rate from that point—the difference being measured by the relative cheapness of shipping over the barge leg of the through route. Because of the cheaper barge rates, much of the railroads' grain freight business from localities which could be served by either barge or rail shifted to the barges² after 1933 when barge service from western grain localities to Chicago was resumed.³ This was the barge versus rail competitive situation which existed when in 1939 the eastern railroads filed schedules with the Commission which imposed on ex-barge grain the local rate from Chicago east, but allowed ex-rail and exlake grain the benefit of the 8 1/2 cent lower 'reshipping' rates on the eastern haul. The result of this rate schedule would have b en that, although barge lines could still have carried grain from the west to Chicago much more cheaply than the railroads could, by the time the grain had been reshipped to New York or other eastern points, the barge-rail carriage would have been more expensive to the shipper than all-rail carriage. This would have put the barge lines at a competitive disadvantage with railroads in barge-served localities. At the Commission hearing to test the validity of the higher ex-barge grain rates, a railroad representative candidly stated that the purpose of the proposal was to 'drive this business off the water and back onto the rails where it belongs.' 248 I.C.C. 307, 321. This purpose would most probably have been accomplished had the high ex-barge reshipping rates gone into effect.

The Commission, after a hearing, made an order which left the railroad-proposed higher rates in effect, but stated that 'in a proper proceeding we might prescribe proportional rates on the ex-barge traffic lower than local rates or joint barge-rail rates lower than the combinations.' 248 I.C.C. 307, 311. A District Court set aside the Commission's order on the ground that fixing higher rates for ex-barge grain than for ex-rail and ex-lake grain rates 'discriminates against water competition by the users of barges.' Cargill, Inc., v. United States, D.C., 44 F.Supp. 368, 375. On appeal this Court reversed, saying that its decision carried 'no implication of approval of any rates here involved.' Interstate Commerce Commission v. Inland Waterways Corp., 319 U.S. 671, 691, 63 S.Ct. 1296, 1307, 87 L.Ed. 1655. It reserved for future consideration in a proceeding before the Commission the amount, if any, which the eastern railroads could increase 'reshipping' rates for ex-barge over those for ex-lake and ex-rail grain. Id. at pages 687, 688, 691, 63 S.Ct. at pages 1305, 1307, 87 L.Ed. 1655.

The Commission has now considered and decided that question in a proper proceeding. 262 I.C.C. 7. It found the originally proposed 8 1/2 cent higher rates for ex-barge grain to be unlawful and required the eastern roads to cancel the schedules fixing those increased reshipping rates. This part of the Commission's order has not been challenged. But it also concluded that ex-barge grain rates east from Chicago would be reasonable and lawful even though they were 3 cents per hundred pounds higher than rates for ex-rail and ex-lake grain. Consequently, the Commission provided that its order cancelling the scheduled reshipping rate increase was 'without prejudice to the filing of new schedules in conformity with the findings herein.' Thus, the effect of the whole order was to permit, if not require, the railroads to charge higher reshipment rates for ex-barge than for ex-lake and ex-rail grain. Under these rates, barge-rail grain shipments would be a trifle less expensive than all rail transportation between the same points.⁴ But the through barge-rail transpor- tation would cost more than it would have if the through rates had accurately reflected the cheaper in-bound barge rates. The Commission considered these higher rates for ex-barge grain, which resulted in higher through rates, justified so long as there remained to ex-barge grain 'a fair opportunity to move in competition with lake-rail and all-rail traffic.'

Appellees⁵ then filed this action in the District Court against the Commission and the United States to cancel, annul, and enjoin enforcement of the order, insofar as it permitted the railroads to put these new higher ex-barge grain rates into effect. The complaints charged that the order was in violation of the Interstate Commerce Act, as amended by the Transportation Act of 1940, 54 Stat. 898. It was contended that the order was void because it approved railroad rates which penalized ex-barge grain to the extent of 3 cents perhundred pounds, solely because the grain had been transported to Chicago in barges, and without evidence or adequate findings that it cost the railroads 3 cents more to transport ex-barge than it cost to transport ex-rail or ex-lake grain. The United States, represented by the Department of Justice, appearing as a defendant, admitted these allegations. The Interstate Commerce Commission intervened and defended the order. After a hearing, the District Court found that the allegations were sustained. Accordingly, it set aside and enjoined enforcement of the order to the extent that it permitted the 3 cent extra charge.⁶ The result of the District Court's judgment was to leave in effect the long-existing eastern railroad rates which provide the same rates for carrying ex-barge, ex-lake, and ex-rail grain east from Chicago.

Judicial review of the findings of fact and the expert judgments of the Interstate Commerce Commission where the Commission acts within its statutory authority is extremely limited. And § 307(d) of the 1940 Act⁷ authorizes the Commission 'in the case of a through route' to 'prescribe such reasonable differentials as it may find to be justified between all-rail rates and the joint rates in connection with such common carrier by water.' Cf. United States v. Chicago Heights Trucking Co., 310 U.S. 344, 352, 353, 60 S.Ct. 931, 935, 936, 84 L.Ed. 1243; Board of Trade of Kansas City v. United States, 314 U.S. 534, 546, 62 S.Ct. 366, 372, 86 L.Ed. 432. But the congressional debates and committee reports on the 1940 Act and the statutory provisions which emerged from this legislative background show that Congress enunciated positive policies and specific limiting standards which it expected the Commission to follow in fixing rates, including 'differentials' between all-rail and water-rail rates. The provisions of the Trans- portation Act of 1940 which brought water carriers under Interstate Commerce Commission jurisdiction were vigorously opposed in Congress by those who feared that the Commission might raise barge rates in order to enable railroads better to compete with inherently cheaper water transportation. These opponents were repeatedly assured by sponsors of the 1940 Act who advocated Commission regulation of water ransportation that the questioned legislation unequivocally required the Commission to fix rates which would preserve for shippers the inherent advantages of barge transportation: lower cost of equipment, operation, and therefore service.⁸ As Senator Wheeler, spokes- man of the Interstate Commerce Committee of which he was chairman, pointed out on the floor of the Senate, the 1940 Act contains at least three separate provisions, a prime purpose of which is to protect the water carrier's natural advantages.⁹ The Act's declaration of policy emphasizes that the Act must be 'so administered as to recognize and preserve the inherent advantages' of 'all modes of transportation subject to the provisions of this Act.' 54 Stat. 898, 899, 49 U.S.C. notes preceding §§ 1, 301, 901, 49 U.S.C.A. notes preceding sections 1, 301, 901. In order...