Stanislaus County v. United States

• Decision Date: 07 February 1964
• Docket Number: Civ. No. 8471.
• Citation: 236 F. Supp. 146
• Parties: STANISLAUS COUNTY, a Political Subdivision of the State of California, and Stanislaus County Chamber of Commerce, a Non-profit corporation, Plaintiffs, v. UNITED STATES of America, a sovereign body politic, and the Interstate Commerce Commission, Defendants, and The Atchison, Topeka and Santa Fe Railway Company, a corporation, et al., Intervening Defendants.
• Court: U.S. District Court — Northern District of California

236 F. Supp. 146

STANISLAUS COUNTY, a Political Subdivision of the State of California, and Stanislaus County Chamber of Commerce, a Non-profit corporation, Plaintiffs, v. UNITED STATES of America, a sovereign body politic, and the Interstate Commerce Commission, Defendants, and The Atchison, Topeka and Santa Fe Railway Company, a corporation, et al., Intervening Defendants.

Civ. No. 8471.

United States District Court N. D. California, N. D.

February 7, 1964.

Tom B. Markley, San Francisco, Cal., for plaintiffs.

Lee Loevinger, Asst. Atty. Gen., and Colin Smith, Department of Justice, Washington, D. C., Cecil F. Poole, U. S. Atty., San Francisco, Cal., for defendant United States.

Robert W. Ginnane, General Counsel, and Arthur J. Cerra, Asst. General Counsel, Interstate Commerce Commission, Washington, D. C., for defendant Interstate Commerce Commission.

Charles W. Burkett, Jr., John MacDonald Smith, and W. Harney Wilson, San Francisco, Cal., for intervening defendants.

Before DUNIWAY, Circuit Judge, and HALBERT and MacBRIDE, District Judges.

HALBERT, District Judge:

Plaintiffs, Stanislaus County and Stanislaus County Chamber of Commerce, have brought this action against defendants United States and Interstate Commerce Commission to set aside and annul an order of the I.C.C. entered in the proceeding entitled Stanislaus County, et al. v. Atchison, Topeka & Santa Fe Railway Company et al., I.C.C. Docket No. 31901 (315 I.C.C. 459). On appropriate motion the defendant railroads were granted permission to intervene.

Jurisdiction over this action is conferred by Title 28 U.S.C. § 1336. A three-judge court was convened pursuant to Title 28 U.S.C. §§ 2284 and 2325.

Initially, plaintiffs instituted proceedings before the I.C.C. based on § 3(1) of the Interstate Commerce Act (Title 49 U.S.C. § 3(1)) to remove an alleged unlawful preference and prejudice caused by the maintenance of higher carload and less-than-carload rates for shipments between points in Stanislaus County and the Pacific Northwest and Intermountain territories than for shipments between these territories and the allegedly preferred areas. In a report filed on November 21, 1957, the Commission found in favor of defendants (302 I.C.C. 365).¹ This Court subsequently annulled and set aside the order of the Commission and remanded the cause for further consideration to be followed by a clearer statement of findings and conclusions (Stanislaus County, California v. United States, D.C., 193 F.Supp. 145). The proceedings were accordingly reopened, and even though there was a request by plaintiffs that they be further heard, the Commission, without receiving additional testimony, briefs or arguments, made its decision again in favor of defendants on January 11, 1962. This latter decision is the subject of the instant action.

The scope of review of this Court over the Commission's order is fixed by the Administrative Procedure Act (Title 5 U.S.C. § 1009(e)). The Court must hold unlawful and set aside any action, finding, or conclusion found to be arbitrary, capricious, an abuse of discretion, otherwise not in accordance with the law, or unsupported by substantial evidence. Otherwise, the Court may not reweigh the evidence nor question the soundness of the Commission's reasoning (Shippers' Car Supply Committee v. I. C. C., D.C., 160 F.Supp. 939). The Court must review the whole record, including the Examiner's proposed report (Universal Camera Corp. v. N. L. R. B., 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456).

The Commission ultimately found that the assailed rates were not shown to be unduly prejudicial or preferential in violation of § 3(1). The controlling phrases of that section are "undue or unreasonable preference or advantage" on the one side and "undue or unreasonable prejudice or disadvantage" on the other side.

Congress has not seen fit to provide the Commission with a definition of these phrases. The courts have regarded the definition as a question committed largely to the sound judgment of the Commission to be determined by the Commission in a case by case fashion (Swayne & Hoyt v. United States, 300 U. S. 297, 304, 57 S.Ct. 478, 81 L.Ed. 659; and Manufacturers Ry. Co. v. United States, 246 U.S. 457, 481, 38 S.Ct. 383, 62 L.Ed. 831).² Such a determination involves a finding on a mixed question of law and fact by the Commission in each case, and the Commission's conclusion may be upheld by the court on judicial review only if there is a "rational basis" in law for the conclusion thus reached (Rochester Telephone Corp. v. United States, 307 U.S. 125, 146, 59 S.Ct. 754, 83 L.Ed. 1147; and Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 54 S.Ct. 692, 78 L.Ed. 1260). The Commission's basic findings must be supported by the evidence, and its ultimate finding must flow rationally from the basic findings (Capital Transit Co. v. Public Utilities Commission, 93 U.S. App.D.C. 194, 213 F.2d 176).

The Commission's ultimate statutory finding appears to be based on two separate basic findings. If either such basic finding both had support in the evidence and was legally adequate to support the Commission's ultimate finding, the Court would be obliged to affirm the Commission's order (Cf. Communist Party of U. S. v. Subversive Activities Control Board, 367 U.S. 1, 67, 81 S.Ct. 1357, 6 L.Ed.2d 625). We are, however, of the view that, for the reasons set forth below, the Commission's ultimate finding that the assailed rates are not unlawfully prejudicial or preferential is not, as a matter of law, supportable by either of its basic findings.

The Commission stated its first basic finding as follows:

"We conclude that the described conditions which resulted in the grouping of the allegedly preferred points with San Francisco are not present with respect to points in the county, so as to require that the defendants establish from and to points in the county rates on the same bases as are the rates from the allegedly preferred points." (315 I.C.C., at p. 464.)

The various conditions which the Commission considered and found to differ with respect to the preferred areas when compared with points in Stanislaus County must be examined. The Commission first suggested that distances between points in Stanislaus County and the Pacific Northwest and Intermountain territories are greater than the distances between those territories and the allegedly preferred areas. The Commission subsequently, however, negated this condition as a justification for the rate discrimination.³

The first condition actually considered was the fact that when the San Francisco group was formed, points in the preferred areas were intermediate to San Francisco over railroad routes to and from the Pacific Northwest and Intermountain areas. Rates to and from San Francisco had been depressed because of water carrier competition. Since Title 49 U.S.C. § 4(1) provides that a carrier may not charge greater rates for a short haul than for a long haul over the same line or route in the same direction, it followed that those points which were intermediate along routes to San Francisco at the time the group was established should have been included in the San Francisco rate group.

The undisputed fact is, however, that transportation conditions have changed since the group was established. For example, the Vallejo area has not been intermediate to San Francisco since the construction of the main line of the Southern Pacific from Sacramento to San Francisco, and the San Jose area has not been intermediate to San Francisco since the construction of the Dumbarton Bridge in 1910. As far as intermediacy is concerned, any difference between these points and points in Stanislaus County is purely historical. There is no evidence whatsoever in the record to support a finding that there is any present difference with respect to intermediacy between these preferred points and points in Stanislaus County, and we cannot conclude that purely past intermediacy may rationally serve as any support for the Commission's ultimate finding. Intermediacy may not be considered as justification for present day disparity in rates as between areas otherwise similarly situated when such intermediacy has long ceased to exist.

The second condition considered by the Commission was termed "carrier competition." On this point the Commission said:

"Motor common carriers serving those areas observe the existing San Francisco grouping, and this has been a factor in preserving the railrate group." (315 I.C.C., at p. 463.)

There is no substance to this point. Motor carriers are subject to the same restrictions as the railroads insofar as undue or unreasonable preference or prejudice is concerned (Title 49 U.S.C. § 316 (d)). To attempt to justify rate discrimination by the railroads on the ground that the motor carriers discriminate simply begs the question, for discrimination by the motor carriers may very well also be unlawful. Unlawful activity by one's competitors may not justify similar activity on his part (Cf. Federal Trade Commission v. A. E. Staley Mfg. Co., 324 U.S. 746, 65 S.Ct. 971, 89 L.Ed. 1338). If discrimination by motor carriers can justify discrimination by the railroads, then discrimination by the railroads can justify discrimination by the carriers, and so it goes on with otherwise unlawful rates being perpetuated.

In order for motor carrier competition to rationally and legally serve as support for the Commission's ultimate finding, there must be some showing that the motor carrier rates are not themselves unlawful, i. e. that they are somehow justified. The Commission made no such finding, and we find no such showing in the record.

Thirdly, the Commission considered the proximity of the preferred areas to San Francisco, which has a greater population and industrial density. This consideration might provide a rational basis for the Commission's ultimate finding if the greater population and...