Southern Pac. Co. v. Railroad Commission of Cal.

• Decision Date: 07 February 1912
• Citation: 193 F. 699
• Parties: SOUTHERN PAC. CO. v. RAILROAD COMMISSION OF CALIFORNIA.
• Court: U.S. District Court — Northern District of California

193 F. 699

SOUTHERN PAC. CO. v. RAILROAD COMMISSION OF CALIFORNIA.

United States District Court, N.D. California.

February 7, 1912

H. C Booth, G. D. Squires, and C. W. Durbrow, for complainant.

Max Thelen and John M. Eshleman, for defendant.

VAN FLEET, District Judge.

The bill seeks to enjoin the enforcement as invalid of an order of the respondent, the Railroad Commission of the state, reducing certain class and commodity rates on freight moving between the port of San Pedro and the city of Los Angeles over the lines of complainant's railroad running between those points, so far as such rates apply to local or intrastate traffic. In answer to an order to show cause why an injunction pendente lite should not issue, the respondent has appeared and interposed a demurrer, both general and special, challenging the bill as wanting in equity and as lacking a disclosure of sufficient facts to warrant the relief prayed; and it is upon this demurrer that the questions presented arise.

The bill attacks the validity of the ordinance of the board upon three specific grounds: (1) That the rates fixed thereby are so unreasonably low as to be confiscatory, and that their enforcement will result in taking complainant's property without due process of law, in violation of the guaranties of the Constitution of the United States; (2) that the order, if enforced, will directly and necessarily interfere with interstate commerce, and is therefore in violation of the provision of the Constitution committing the power to regulate that subject wholly to Congress; (3) that, under the facts alleged as to the situation of certain competing lines of road and the circumstances disclosed under which the order was promulgated, its effect, if enforced, will be to deprive complainant of the equal protection of the law, in violation of the fourteenth amendment to the Constitution of the United States.

Counsel in their presentation of the case have followed the order and sequence of the objections as just stated, and it will therefore prove more satisfactory perhaps to follow the same order in discussing the questions raised by the demurrer for the purpose of considering the sufficiency of the bill.

1. As to Unreasonableness of the Rates.

Aside from the jurisdictional facts, and avoiding certain general averments as to the effect of the order repeated throughout the bill in various forms, and partaking more of the nature of conclusions than of ultimate facts, the pertinent features of the bill affecting the first ground of objection to the order of the commission are these: That complainant is a common carrier of freight and passengers, owning and operating connecting lines of railroad in the states of California, Nevada, Utah, Arizona, and other states and territories, and as such is engaged in both interstate and intrastate commerce. That, in connection with and as a part of its system, it was at the times mentioned in the bill operating the line of road affected by the order in question described as 'a certain line of railway within the state of California, between the city of San Pedro and the city of Los Angeles, known as and called the 'San Pedro Branch,' and was carrying over its said railway line freight and passengers under tariffs of rates, fares, and charges duly established, published and filed with said defendant,' which tariffs of rates so filed are alleged to be fair, just, and reasonable. The proceedings leading up to the hearing before the respondent board, and culminating in the order complained of, are then stated, and the order of the board is set out in full, and it is alleged:

'That the rates fixed, established, prescribed and ordered to be published by defendant will reduce the rates and revenues received by your orator upon the business carried by it on said San Pedro Branch to an amount of at least thirty per cent. (30%), which is the direct reduction provided for by the schedule of rates prescribed by defendant; and your orator alleges further that if the said reductions prescribed and ordered published by defendant are enforced, your orator's power and lawful right to charge and collect just, fair and reasonable rates for the transportation of freight on its said San Pedro Branch are denied to it; and that the said orders entered by defendant prescribe an unjust, unreasonable and unremunerative basis of rates and charges for services performed by your orator as aforesaid, and said orders if enforced will result in the confiscation of your orator's property, in violation of section 1 of article 14 of the amendments to the Constitution of the United States, and will result in the taking of your orator's property without due process of law.'

That said rates 'will not yield your orator a fair and reasonable return on the amount of money invested by your orator in said San Pedro Branch line railroad for the following reasons:

'The present value of the said San Pedro Branch, or the cost of reproducing the same, exclusive of rolling stock and excluding that portion of said branch and facilities necessary thereto which are within the Los Angeles Terminal limits, is at least the sum of fifteen million, nine hundred and twenty-three thousand, four hundred and eighty-seven dollars ($15,923,487); upon the said San Pedro Branch the detailed earnings and expenses have been carefully computed by your orator upon bases and formulae prescribed by the said defendant for the months of April and October, 1910, which months were prescribed and designated by said defendant. These earnings, expenses, and taxes for one year, based upon the earnings of the said San Pedro Branch for the said months of April and October, 1910, are hereby set forth in the following statement:

Total gross revenue for one year on San Pedro Branch ..............	$746,776 32
Total operating expenses, located and apportioned to said branch ...	253,806 23
Total taxes of said branch, being 4 per cent. of gross revenue ......	29,870 05
Total operating expenses, including taxes as above .................	283,676 28
Excess of revenue over operating expenses and taxes ................	463,100 04
Known loss on said branch by reason of order of defendant ..........	112,439 63
Amount remaining ...................................................	350,660 41

'The percentage of return which this last-named amount would afford upon the value or cost of reproducing said San Pedro Branch ($15,923,487) would be 2.22 per cent.'

It is alleged: That in conducting transportation on said San Pedro Branch, and in the administration of its business affairs with reference to its said San Pedro Branch, the same has been and is carried on in a prudent and economical manner, and yet, notwithstanding, its earnings from said branch line of railroad for the transportation of property or otherwise have not yielded a fair or just return on the value of its property, and will not, under the rates prescribed by defendant, yield a fair and just return upon the value thereof.

'That the principal water carriers competing with your orator for transcontinental traffic to and from said city of Los Angeles at the ports of San Pedro and San Diego are the Pacific Mail Steamship Company, the American-Hawaiian Steamship Company and the California Atlantic Steamship Company, known as the 'Bates & Chesebrough Line,' and that large amounts of the transcontinental traffic moving into or out of said ports to and from said city of Los Angeles is transported under and by virtue of through rates, fixed and established by the owners or managers of said steamship lines, and is moved on through bills of lading to and from said city of Los Angeles in competition with the rates fixed and established on its lines by your orator and by the Interstate Commerce Commission; and your orator and said Steamship Companies are now competing with each other and carrying said traffic at less than reasonable rates and at the lowest rates that would remunerate either or any of them for the service performed. ' That the said steamship companies 'and numerous other steamships owned and operated by other persons and companies transport freight to and from points outside the state of California through the ports of San Pedro and San Diego to and from said city of Los Angeles on through bills of lading, and that in the case of them and each of them they pay your orator's local rates to and from San Pedro, or the proportional rate of the Atchison, Topeka & Santa Fe Railway Company to or from said port of San Diego, or from the port of Redondo, thus making such local or proportional rate a part of the entire charge for through shipment. That, if said orders entered by defendant as set forth herein are permitted to go into effect, the said steamship companies will make no change in the through or transcontinental rates now assessed and collected by them, but the said steamship companies will pay a less or lower local or proportional rate between the points hereinbefore named, and thus a portion of the sums now collected from traffic carried by your orator between said cities of San Pedro and Los Angeles will be given to said steamship companies; and therefore your orator alleges and charges that the effect of said orders so made and entered will be either to force your orator to reduce its freight rates from points outside the state of California to and from said city of Los Angeles, or to compel your orator to yield to said steamship companies a large portion of its revenues annually without any benefit whatever to your orator's patrons, the shippers, merchants, and manufacturers of the city of Los Angeles. And your orator further alleges that for these reasons ...