Pennsylvania Railroad Company v. United States, Civ. A. No. 35250.

• Decision Date: 15 June 1965
• Docket Number: Civ. A. No. 35250.
• Parties: The PENNSYLVANIA RAILROAD COMPANY et al., Plaintiffs, v. UNITED STATES of America and the Interstate Commerce Commission, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

260 F. Supp. 536

The PENNSYLVANIA RAILROAD COMPANY et al., Plaintiffs, v. UNITED STATES of America and the Interstate Commerce Commission, Defendants.

Civ. A. No. 35250.

United States District Court E. D. Pennsylvania.

June 15, 1965.

Edward A. Kaier, Philadelphia, Pa., for plaintiffs.

Drew J. T. O'Keefe, U. S. Atty., Joseph R. Ritchie, Jr., Asst. U. S. Atty., Philadelphia, Pa., Nicholas deB. Katzenbach, U. S. Atty. Gen., Archibald Cox, Sol. Gen., John H. D. Wigger, Dept. of Justice, Antitrust Div., Washington, D. C., for the United States.

Robert W. Ginnane, Gen. Counsel, I. K. Hay, Deputy Gen. Counsel, I. C. C., Washington, D. C., for Interstate Commerce Comm'n.

Karl C. Grannan, Dept. of Agriculture, Washington, D. C., for intervening defendant.

Walter Milbourne, Pepper, Hamilton & Scheetz, Philadelphia, Pa., Arthur L. Winn, Jr., LaRoe, Winn & Moerman, J. Raymond Clark, LaRoe, Winn & Moerman, Washington, D. C., for Port of New York Authority.

Samuel Mandell, Chief, Div. of Franchises, New York City, for City of New York.

M. W. Wells, Maguire, Voorhis & Wells, Orlando, Fla., James J. Leyden, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for Florida Citrus Comm'n and others.

J. Edgar McDonald, New York City, Liebert, Harvey, Herting & Short, Philadelphia, Pa., for New York Central R. R.

J. T. Clark, Gen. Atty., Cleveland, Ohio, Liebert, Harvey, Herting & Short, Philadelphia, Pa., for Erie-Lackawanna R. R.

Before HASTIE, Circuit Judge, and BODY and HIGGINBOTHAM, District Judges.

OPINION OF THE COURT

HASTIE, Circuit Judge.

This action by several railroads seeks judicial invalidation of an order, issued by the Interstate Commerce Commission under sections 1(5) and 3(1) of the Interstate Commerce Act. In substance, the order requires the plaintiffs to cease, desist and abstain from charging new and increased rates for long haul shipments of fresh fruits and vegetables from the southern and southwestern areas of the country to stations in New York City, which are higher than their rates applicable to transportation from the same points of origin to northern New Jersey stations. Port of N. Y. Authority v. Aberdeen & Rockfish R. R., 1964, 321 I.C.C. 738, 755.

The affected New York and New Jersey stations are all within a single metropolitan area and heretofore have constituted a rate group within which there has been parity of long haul rates. The long haul concept is limited to transportation over distances greater than 150 miles. The disputed order neither fixes rates nor precludes any increase or decrease of group rates. It merely invalidates a newly created rate differential between different destinations within the metropolitan area.

The order is based upon an accompanying report wherein the Commission has found that the new rate differential unjustifiably disrupts the integrity of a long-established rate group and, therefore, is both "unjust and unreasonable", within the meaning of section 1(5) of the Interstate Commerce Act, and "unduly preferential" to the New Jersey area and "unduly prejudicial" to the New York area, within the meaning of section 3(1) of the Act.

The new tariffs involved in this case have the effect of splitting the New York rate group into two rate areas, one of which includes some 100 stations in New Jersey and the other, some 25 stations in New York.¹ Before this innovation, group rates for shipments of various vegetables from a representative Florida station to the New York metropolitan area had been approximately $400 per carload, with minor variations for different commodities. The challenged new tariffs increase the rates for representative carload shipments to New York stations by $57. However, even with this increase it is undisputed, and the Commission has found, that the revenue produced by the new New York rates is less than the carriers' out-of-pocket expenses for transportation and delivery to certain New York stations.

Almost all of the evidence of higher New York costs, urged in justification of this breaking of the rate group, related to one New Jersey station and one station consisting of three New York piers. Accordingly, in considering whether the new rate structure was unduly prejudicial to New York and preferential to New Jersey, the Commission examined and determined relative costs incurred by the carriers from the point in New Jersey where the line haul from the south ends until freight becomes available to the consignee either at a Jersey City station or across the river at a New York pier. The Commission dealt separately with "terminal" costs, which are costs of movement—switching and, where necessary, floatage—from the end of the line haul to the point of delivery, and "station" costs incurred in providing suitable facilities for delivery. The Commission found that terminal costs for representative movements to New York piers are about $14.14 per carload higher than terminal costs for Jersey City delivery. It also found additional differences in costs of providing and maintaining station facilities at different points of delivery. "Ordinary" costs of providing station facilities at the New York piers were found to be $12.29 per carload higher than Jersey City station costs. And the costs of special facilities and conveniences provided at New York pier stations add an additional $36.82 to the costs of carload deliveries at this point.

Certainly these differences are substantial, since in the aggregate they amount to about 15% of the total charge for transporting vegetables from the south to New York. Moreover, as has been pointed out, the increased rates, while compensating for this differential, will still yield the carrier less than the actual cost of the services rendered.

On the other hand, the Commission expressed its proper concern to avoid, if it fairly could, the sacrifice of general advantages inherent in group rates as well as the imposition of any demonstrable particular disadvantage upon the New York area through an increase in fruit and vegetable rates applicable to New York stations only.

The history and general advantages of the rate group concept, with its requirement of long haul rate parity for all stations within a single metropolitan area, have been frequently expounded. In The New York Harbor Case, 1917, 47 I.C.C. 643, the Commission recognized as a fact the essential industrial and commercial unity of the metropolitan district centering on the Port of New York, saying:

"The industrial district of northern New Jersey is so near the city of New York and so densely populated that the whole region, both in New York and in New Jersey, is commonly referred to as `the metropolitan district'. Many thousands of people who are employed in New York have their homes in New

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