King v. United States

• Decision Date: 22 December 1952
• Docket Number: No. 9,9
• Citation: 344 U.S. 254,97 L.Ed. 301,73 S.Ct. 259
• Parties: KING et al. v. UNITED STATES et al
• Court: U.S. Supreme Court

344 U.S. 254

73 S.Ct. 259

97 L.Ed. 301

KING et al.

v UNITED STATES et al.

No. 9.

Argued Oct. 15, 1952.

Decided Dec. 22, 1952.

Rehearing Denied Feb. 9, 1953.

See 344 U.S. 936, 73 S.Ct. 503.

Mr. Lewis W. Petteway, Tallahassee, Fla., for appellants.

Mr. Charles H. Weston, Washington, D.C., for appellees United States and Interstate Commerce Commission.

Mr. Frank W. Gwathmey, Washington, D.C., for appellees Atlantic Coast Line R. Co., and others.

Mr. Justice BURTON delivered the opinion of the Court.

The questions here are: (1) whether the Interstate Commerce Commission, in prescribing intrastate freight rates for railroads under § 13(4) of the Interstate Com- merce Act,¹ may give weight to deficits in passenger revenue; and (2) whether the findings of the Commission which are involved in this proceeding are sufficient to sustain the rates it has prescribed. Our answer to each question is in the affirmative.

This is an action against the United States brought in the United States District Court for the Northern District of Florida, under 28 U.S.C. (Supp. V) § 1336, 28 U.S.C.A. § 1336, by appellants 'as and Constituting the Florida Railroad and Public Utilities Commission.' They ask the court to enjoin, set aside and annul an order of the Interstate Commerce Commission requiring Florida railroads to establish intrastate freight rates which will reflect the same increases as have been authorized by it for comparable interstate traffic.

The underlying proceedings originated in 1940. The Interstate Commerce Commission then undertook a nationwide investigation of interstate railroad freight rates, under §§ 13(2) and 15a(2) of the Interstate Commerce Act, in conformity with the National Transporta- tion Policy stated in § 1 of the Transportation Act of 1940.² The investigation dealt with past and future freight and passenger operations, intrastate as well as interstate. A Committee of Cooperating State Commissioners sat with the Commission and took part in its deliberations. Mounting railroad operating costs and declining passenger revenue led the Commission, in 1946, to authorize a nationwide increase of 20% in basic interstate freight rates. Ex Parte No. 162, Increased Railway Rates, Fares, and Charges, 1946, 264 I.C.C. 695, 266 I.C.C. 537.³

In 1947, the Commission found such further increases in operating costs and decreases in passenger revenue that it authorized an additional nationwide interim increase of 10% in interstate freight rates. Soon it raised this to 20%. In a third report it varied the percentage in different areas, with the result that in the southern territory, including Florida, the increase was 25%. The 1948 final report confirmed this 25% increase. Ex Parte No. 166, Increased Freight Rates, 1947, 269 I.C.C. 33, 270 I.C.C. 81, 93, and 403. The Commission's estimates of revenue contemplated the application of the increased rates to intrastate, as well as to interstate, transporta- tion.⁴ The report concludes with the statement that the 'Committee of Cooperating State Commissioners * * * authorize us to state that they concur in the foregoing report.' 270 I.C.C. 403, 463.

Upon publication of these reports, the railroads asked their respective state authorities to authorize comparable increases in intrastate rates. The Florida Commission approved most of the increases but declined to approve the final increase from 20% to 25%.⁵

On petition of the Florida railroads, the Interstate Commerce Commission undertook its own investigation of Florida intrastate railroad rates under § 13(3) and (4) of the Interstate Commerce Act, 41 Stat. 484, 49 U.S.C. § 13(3) and (4), 49 U.S.C.A. § 13(3, 4). A full hearing was had before a Commissioner and an examiner, followed by a hearing upon exceptions to the examiner's report.⁶ The Commission recommended that intrastate freight rates be established 'between points in Florida which will reflect the same increases as are, and for the future may be, maintained by respondents (railroads) on like interstate traffic to and from Florida, and within Florida under our authorizations in Ex Parte No. 162 and Ex Parte No. 166 * * *.' Finding No. 8, 278 I.C.C. 41, 73.

The Interstate Commerce Commission then gave the Florida Commission a final opportunity to permit the increased rates to be applied to intrastate transportation. Upon the latter's failure to act, the Interstate Commerce Commission ordered the railroads 'thereafter to maintain and apply for the intrastate transportation of freight from and to points in the State of Florida freight rates and charges which shall be no lower than the approved rates and charges, or on the approved rate bases, as provided in said report.'⁷

Before that order took effect, this action was filed. A three-judge District Court was convened. 28 U.S.C. (Supp. V) § 2325, 28 U.S.C.A. § 2325. Two short line railroads and numerous shippers intervened as plaintiffs. The Interstate Commerce Commission and all Class I railroads operating in Florida intervened as defendants. The entire record of the proceeding before the Commission, under § 13(4), was introduced. The court sustained the Commission and dismissed the complaint. 101 F.Supp. 941. That judgment is here on appeal. 28 U.S.C. (Supp. V) §§ 1253, 2101(b), 28 U.S.C.A. §§ 1253, 2101(b).

I. The Interstate Commerce Commission in prescribing intrastate freight rates for railroads under § 13(4) of the Interstate Commerce Act may give weight to deficits in passenger revenue.

In Ex Parte No. 168, Increased Freight Rates, 1948, 272 I.C.C. 695, 276 I.C.C. 9, the Commission reviewed the changing attitudes it has adopted concerning the role of passenger deficits and freight rates. In such cases as the Five Per Cent Case, 31 I.C.C. 351, the Commission in 1914 concluded that each class of service should completely and independently provide its own proportionate share of expenses and profits.⁸ In 1949 the Commission says:

'However, because of changed theories adopted by Congress in the Transportation Act, 1920, and because as a practical matter the increasing degree of unprofitableness of the passenger traffic menaced the continuity of an adequate national system of transportation, we were forced to a more comprehensive view of this question. We observe, also, that at the time of those decisions the railroads enjoyed a practical monopoly in supplying transportation, but that situation no longer exists.' 276 I.C.C. at 34.

Citing with approval its similar views in Ex Parte No. 103, Fifteen Per Cent Case, 1931, 178 I.C.C. 539, and Ex Parte No. 123, Fifteen Per Cent Case, 1937—1938, 226 I.C.C. 41, the Commission summarizes its present position as follows:

'These cases are typical of our more recent holdings upon this question. While we regard it as 'trite to say that each particular service, coach, sleeper, parlor car, and head end, should as nearly as may be pay its own way and return a profit' (Eastern Passenger Fares in Coaches, 227 I.C.C. 17, 25), and we have accepted the contention that there may be traffic that should not be burdened with a shortage of passenger service return (Livestock, Western District Rates, 190 I.C.C. 611, 629), yet, if passenger service inevitably and inescapably cannot bear its direct costs and its share of joint or indirect costs, we have felt compelled in a general rate case to take the passenger deficit into account in adjustment of freight rates and charges. Both the freight and passenger services are essential, and revenue losses or deficits on the one necessarily must be compensated by earnings on the other if the carriers are to continue operations. Both may be subjected to reasonable rates and charges to produce the fair aggregate return, even though thereby a higher rate of return may be exacted from the one than from the other. (Property Owners' Committee v. Chesapeake & O. Ry. Co., 237 I.C.C. 549, 565.)' Id., at 35. See also, Ex Parte 87, Revenues in Western District, 113 I.C.C. 3, 23.

This change of policy was the inevitable consequence of steadily increasing passenger operating costs, together with the growth of vigorous competition from automobiles and other forms of transportation which made it futile to compensate for the passenger deficits by increasing passenger rates. The railroads were forced to abandon passenger mileage, reduce service and improve their facilities, while fixing passenger rates at a level as adequate as competition permitted.⁹

In recent years, a nationwide passenger deficit has been obvious except during the peak of wartime passenger traffic. The ratio between passenger operating expense and revenue has varied in different areas but has been uniformly unfavorable to the railroads.¹⁰

Section 15a(2) of the Interstate Commerce Act and the National Transportation Policy of 1940¹¹ reflect this broad concept of the unity of the Nation's transportation system. They direct the Commission to 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. It permeates such general revenue proceedings as Ex Parte Nos. 162 and 166, supra. It leaves no ground for a claim that the Commission may not give weight to passenger revenue deficits in prescribing interstate freight rates to meet over-all revenue needs. See United States v. Louisiana, 290 U.S. 70, 54 S.Ct. 28, 78 L.Ed. 181.

The question remains whether that Commission may give weight to deficits in passenger revenue (either interstate or intrastate) when prescribing intrastate freight rates under § 13(4). It is conceivable that some considerations properly given weight by the Commission in prescribing interstate freight rates in a general revenue proceeding might not be applicable equally to transportation within a particular state.

In the instant case, however, there is no showing that the character of operating conditions in Florida intrastate passenger...