Public Service Commission of Utah v. United States

• Decision Date: 19 May 1958
• Docket Number: No. 15,15
• Citation: 2 L.Ed.2d 886,356 U.S. 421,78 S.Ct. 796
• Parties: PUBLIC SERVICE COMMISSION OF UTAH and Utah Citizens Rate Association, Appellants, v. UNITED STATES of America, Interstate Commerce Commission, et al
• Court: U.S. Supreme Court

356 U.S. 421

78 S.Ct. 796

2 L.Ed.2d 886

PUBLIC SERVICE COMMISSION OF UTAH and Utah Citizens Rate Association, Appellants,

v UNITED STATES of America, Interstate Commerce Commission, et al.

No. 15.

Argued Dec. 9, 1957.

Decided May 19, 1958.

Messrs. Calvin L. Rampton and Keith Sohm, Salt Lake City, Utah, for appellants.

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

Mr. Elmer B. Collins, Omaha, Neb., for Railroad appellees.

Mr. Justice CLARK delivered the opinion of the Court.

This appeal presents another clash between state and federal authority in the regulation of intrastate commerce. The Public Service Commission of Utah and the Utah Citizens Rate Association, appellants, seek to set aside an order of the Interstate Commerce Commission entered in a proceeding under § 13(3) and (4) of the Interstate Commerce Act¹ in which an increase in intra- state freight rates to the general level of interstate rates was granted to railroads operating in Utah. 297 I.C.C. 87. The principal contention here is that the evidence before the Commission was insufficient to support its ultimate finding that existing intrastate rates caused 'undue, unreasonable, and unjust discrimination against interstate commerce.' 297 I.C.C., at 105. A three-judge District Court found against appellants on this and all subsidiary issues. 146 F.Supp. 803. Upon direct appeal, 28 U.S.C. § 1253, 28 U.S.C.A. § 1253, we noted probable jurisdiction. 1956, 352 U.S. 888, 77 S.Ct. 128, 1 L.Ed.2d 84. Having concluded that certain findings of the Commission lack sufficient support in the evidence, we reverse the judgment of the District Court.

The action of the Commission was limited to freight rates on intrastate traffic in Utah. In Ex Parte No. 175 the Commission had increased interstate freight rates on a national basis by an aggregate of 15%.² The appellee railroads applied to the Public Service Commission of Utah for a like increase in intrastate rates. After a full hearing, the Utah Commission dismissed the application on the ground that the railroads had not produced evidence concerning their intrastate operations as required by Utah law. No appeal was taken. Instead, pursuant to 49 U.S.C. § 13(3) and (4), 49 U.S.C.A. § 13(3, 4), the railroads filed a petition with the Interstate Commerce Commission which led to the order under attack here. The Commission found the evidence insufficient to establish any undue or unreasonable advantage, preference, or prejudice as between persons or localities in intrastate commerce, on the one hand, and interstate commerce on the other. But in findings patterned after those approved in King v. United States, 1952, 344 U.S. 254, 73 S.Ct. 259, 267, 97 L.Ed. 301, it concluded that the intrastate rates caused 'undue, unreasonable, and unjust discrimination against interstate commerce.' 297 I.C.C., at 105. It sought to remove this burden by generally applying to intrastate traffic the 15% interstate increase previously granted in Ex Parte No. 175.³

Appellants attack two findings of the Commission as not being supported by substantial evidence. The first is that existing intrastate rates were abnormally low and failed to contribute their fair share of the revenue needs of the railroads. Evidence was introduced to show that some of Utah's intrastate rates were lower than corresponding interstate rates for like distances. No showing was made, however, of the comparative costs of perform- ing such services. The second finding under attack is that the conditions incident to intrastate transportation were not more favorable than those incident to interstate movements. The evidence underlying this finding indicated only that goods moving intrastate were handled precisely as were those in interstate transportation, being intermingled on the same trains.

Intrastate transportation is primarily the concern of the State. Federal power exists in this area only when intrastate tariffs are so low that an undue or unreasonable advantage, preference, or prejudice is created as between persons or localities in intrastate commerce on the one hand and interstate commerce on the other, or when those rates cast an undue burden on interstate commerce.⁴ Proof of such must meet 'a high standard of certainty,' Illinois Central R. Co. v. Public Utilities Comm'n, 1918, 245 U.S. 493, 510, 38 S.Ct. 170, 176, 62 L.Ed. 425; before a state rate can be nullified, the justification for the exercise of federal power must 'clearly appear.' State of Florida v. United States, 1931, 282 U.S. 194, 211—212, 51 S.Ct. 119, 123—124, 75 L.Ed. 291. The Court pointed out in State of North Carolina v. United States, 1945, 325 U.S. 507, 511, 65 S.Ct. 1260, 1263, 89 L.Ed. 1760, that the findings supporting such an order of the Interstate Commerce Commission must encompass each of the elements essential to federal power. Thereafter, in King v. United States, supra, we stressed the necessity of substantial evidence to support the findings, although we held it unnecessary 'to establish for each item in each freight rate a fully developed rate case.' 344 U.S. at page 275, 73 S.Ct. at page 270. In King, however, the insufficiency of the findings rather than of the evidence was urged upon the Court. Those findings, which we held adequate to support an order increasing intrastate rates, were, inter alia, (1) that existing intrastate rates were abnormally low and did not contribute a fair share of the railroads' revenue needs; (2) that condi- tions as to the movement of intrastate traffic were not more favorable than those existing in interstate commerce; (3) that the rates cast an undue burden on interstate commerce; (4) that the increase ordered by the Commission would yield substantial revenues; and (5) that such increase would not result in intrastate rates being unreasonable and would remove the existing discrimination against interstate commerce. 344 U.S. at pages 267 268, 73 S.Ct. at pages 266—267, footnote 13. We also held in King that the Commission might give weight to deficits in passenger revenue when prescribing intrastate freight rates so as to meet overall revenue needs. In our most recent review of federal power in this intrastate area, Chicago, M., St. P. & P.R. Co. v. State of Illinois, 1958, 355 U.S. 300, 78 S.Ct. 304, 2 L.Ed.2d 292, we relied on the principles of the above cases in striking down an increase in intrastate passenger fares for a suburban commuter service because the Commission had failed to take into account 'the carrier's other intrastate revenues from Illinois traffic, freight and passenger.' 355 U.S. at page 308, 78 S.Ct. at page 309.

We do not believe that the evidence here met the exacting standards required by our prior cases. As to the finding that prevailing intrastate rates were abnormally low and failed to contribute a fair share of overall revenue, we discover no positive evidence to indicate that the relative cost of intrastate traffic was as great as that of interstate shipments. The absence of such evidence is important, for it is not enough to say that interstate rates were higher on similar shipments for like distances, State of Florida v. United States, supra, 282 U.S. at page 212, 51 S.Ct. at page 124, especially where, as here, there was some indication that intrastate traffic moved at lower cost than interstate. The annual reports of the four interstate railroads operating in Utah showed that their Utah operating ratios (freight service cost divided by freight service revenue) and the Utah density statistics (ton mils of traffic per mile of main track) were more favorable than comparable system-wide fig- ures. The Commission discredited the density statistics because of the absence of branch-line inclusion in the totals. This was true, however, in the case of both Utah and syste-wide computations, leaving no apparent foundation for the conclusion of unreliability.

Other evidence seemed to indicate that those railroads with the larger percentages of total operations within Utah enjoyed higher rates of overall return for 1953, the year just prior to the hearings in this case. The Denver & Rio Grande, with almost half of its entire operations within Utah, showed a rate of return of 6.06%. The Southern Pacific and Union Pacific, with substantially smaller proportions of Utah operations Showed returns of 3.48% and 3.56%, respectively.

Statistics introduced by the railroads as to comparative economic conditions showed recent economic improvement to be greater percentagewise in the West and particularly in Utah than in other sections. The emphasis recently has switched from agriculture to industrial and mining activity, with its resulting increase in traffic—a factor tending to suggest more favorable railroad operating conditions.

As to the finding that intrastate conditions were not more favorable than those incident to interstate transportation,⁵ the railroad evidence on this point was far from substantial. In essence, it merely showed that intrastate and interstate traffic was handled by the same crews and intermingled in the same movement. This evidence failed to establish that all material factors bearing on the reasonableness of rates were substantially the same. As we have previously noted, appellants offered convincing evidence not only of greater density on intrastate operations, permitting a wider spread of fixed costs, but also of lower operating ratios and higher returns as the percentage of intrastate traffic increased. In the face of this proof the evidence as to general similarity of conditions falls short of the 'high standard of certainty' required.

It is suggested that the Commission, in granting general interstate increases, frequently proceeds on the assumption that intrastate rates will be raised to the same level. But this assumption is no through ticket permitting it to approach the question of intrastate rates with partiality for a...