State of North Carolina v. United States, Civ. A. No. 836.

• Decision Date: 11 February 1955
• Docket Number: Civ. A. No. 836.
• Citation: 128 F. Supp. 718
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: STATE OF NORTH CAROLINA, The North Carolina Department of Agriculture, the North Carolina State Highway and Public Works Commission, The North Carolina Farm Bureau Federation, Inc., and The Farmers Cooperative Exchange, Plaintiffs, v. UNITED STATES of America, The Interstate Commerce Commission, Aberdeen & Rockfish Railroad Company et al., Defendants.

128 F. Supp. 718

STATE OF NORTH CAROLINA, The North Carolina Department of Agriculture, the North Carolina State Highway and Public Works Commission, The North Carolina Farm Bureau Federation, Inc., and The Farmers Cooperative Exchange, Plaintiffs, v. UNITED STATES of America, The Interstate Commerce Commission, Aberdeen & Rockfish Railroad Company et al., Defendants.

Civ. A. No. 836.

United States District Court, E. D. North Carolina.

Argued January 21, 1955.

Decided February 11, 1955.

Harry McMullan, Atty. Gen. of North Carolina, I. Beverly Lake and John Hill Paylor, Asst. Attys. Gen. of North Carolina, for State of North Carolina and North Carolina Department of Agriculture.

R. Brookes Peters, Kenneth Wooten, Jr., J. Melville Broughton, Jr., and Robert B. Broughton, Raleigh, N. C., for North Carolina State Highway and Public Works Commission.

Stanley N. Barnes, Asst. Atty. Gen., James E. Kilday and Willard R. Memler, Sp. Assts. to the Atty. Gen., and Julian T. Gaskill, U. S. Atty., Goldsboro, N. C., for the United States.

Edward M. Reidy, Gen. Counsel, and Leo H. Pou, Asst. Gen. Counsel, Washington, D. C., for Interstate Commerce Commission.

L. G. Anderson, Washington, D. C., James B. McDonough, Jr., Norfolk, Va., Charles P. Reynolds, Washington, D. C., Arthur J. Winder, Norfolk, Va., Henry Joyner, Raleigh, N. C., for defendant railroads.

Before PARKER, Circuit Judge, and GILLIAM and WARLICK, District Judges.

PARKER, Circuit Judge.

This is an action to set aside and enjoin the enforcement of an order of the Interstate Commerce Commission entered under Section 13(4) of the Interstate Commerce Act, 49 U.S.C.A. § 13(4),¹ granting an increase of intrastate freight rates on railroads in the State of North Carolina. A court of three judges has been constituted as required by statute, the case has been heard upon the record made before the Commission and the briefs and arguments of counsel and has been submitted for final decree. The contention of plaintiffs is that the order of the Commission, finding undue discrimination against interstate commerce and against persons and localities engaged therein, is not supported by the record.

The facts are that within the State of North Carolina, a long and narrow state, which is crossed by the great railroads constituting the principal arteries of commerce in the southeastern section of the United States, there is not now and for many years has not been any distinction between the handling of freight in interstate and intrastate commerce, the bulk of both interstate and intrastate freight being handled by the interstate railway systems in the same way and with the same instrumentalities. If there has been any difference, it is that the cost with respect to intrastate freight is greater because the hauls are shorter. For thirty years or more parity between intrastate and interstate rates has been maintained.

In Ex parte No. 175, the Commission in 1951 and 1952 gave consideration to requested increases in freight rates throughout the United States made necessary by rising prices and higher wage rates and entered orders granting increases of interstate rates, the increases in southern territory being first 2%, then 6% and finally 15%, except as to certain commodities with respect to which smaller increases were granted. See 280 I.C.C. 179, 281 I.C.C. 557, 284 I.C.C. 589 and 289 I.C.C. 395. Following these increases, the North Carolina Utilities Commission granted first a 6% and then an additional 9% increase in intrastate rates on all except a very limited number of commodities. Upon appeal to the Superior Court, however, this order of the Utilities Commission was vacated and set aside, and an appeal to the State Supreme Court was taken and is still pending.

Before the decision of the Superior Court was rendered on the appeal from the Utilities Commission, the railroads filed another petition with that Commission asking that the 15% increase in rates theretofore granted, which was to expire in February 1954, be extended to December 31, 1955. The case in the Superior Court was decided, however, before the petition asking the extension of the order could be heard; and, on the basis of that decision, the Utilities Commission denied the requested extension.

Upon the denial of this last petition by the Utilities Commission, the railroads sought no further relief with respect to intrastate rates from that Commission or from the state courts, but filed a petition with the Interstate Commerce Commission asking relief under sections 13(3) and 13(4) of the Interstate Commerce Act on the ground that the intrastate rates resulted in undue discrimination against interstate commerce and persons and localities engaged therein. The Commission thereupon held a hearing lasting for four days in which it heard a great volume of testimony and gave thorough consideration to freight rates within the state and filed a report and order granting, with certain minor exceptions, the increases necessary to restore the parity between intrastate and interstate rates.

The report of the Commission finds in detail the evidentiary facts upon which its ultimate findings are based, and there is no contention that this finding of evidentiary facts is not amply supported by the evidence in the case. It is not necessary to repeat them here; but it is sufficient to say that they fully support the ultimate findings of the Commission which are as follows:

"1. The conditions incident to the intrastate transportation of freight in North Carolina are not more favorable than those incident to the interstate transportation in North Carolina and in the adjoining states.

"2. The amounts and percentages by which interstate freight rates and charges between points in North Carolina and points in other States were increased, as authorized in Ex Parte No. 175, are just and reasonable.

"3. The present North Carolina intrastate rates and charges on freight traffic imposed by authority of the State are abnormally low, and traffic thereunder fails to produce its fair share of the earnings required to yield revenue sufficient to enable the respondents, under honest, economical, and efficient management, to provide adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service, and thereby accomplish the purpose of the Interstate Commerce Act, as set forth in the national transportation policy declared by the Congress, to develop and preserve a national transportation system adequate to meet the needs of the commerce of the United States, of the postal service, and of the national defense; the burden thus cast upon interstate commerce is undue in and to the extent that these intrastate rates and charges are less than they would be on the basis herein prescribed; and these intrastate rates and charges cause, and for the future will cause, undue, unreasonable, and unjust discrimination against interstate commerce.

"4. Except as to road aggregates, there is active competition between persons and localities engaged in interstate commerce moving to and from points in North Carolina, on the one hand, and persons and localities engaged in intrastate commerce in North Carolina, on the other hand; this competition extends throughout the State of North Carolina and to freight traffic generally; and the existing disparities between the current interstate and intrastate freight rates result in undue preference of and advantage to persons and localities in North Carolina in intrastate commerce and undue prejudice of and disadvantage to persons and localities in interstate or foreign commerce.

"5. The undue, unreasonable, and unjust discrimination, and the undue and unreasonable advantage, preference, and prejudice herein found to exist should be removed by applying to the North Carolina intrastate rates and charges the same respective increases as are, and for the future may be, maintained by the respondents on like interstate traffic between points in North Carolina and adjoining States under our authorization in Ex Parte No. 175, except that an increase of not exceeding 12 percent may be applied to the North Carolina intrastate rates on cinders, coal; cinders, clay or shale (Haydite); cinders, slate; coal ashes and slag, expanded, in open-top cars.

"6. The establishment of increases in intrastate rates and charges as prescribed in finding 5 will not result in unreasonably high rates or charges, nor in rates or charges that are unreasonable in relation to interstate rates or charges, and will increase the respondents' revenues by at least $1,300,000 annually.

"7. The increased revenues to the respondents which will result from the increased rates and charges as provided in finding 5 are required from intrastate traffic in North Carolina in order to enable the respondents to provide adequate and efficient railway transportation service."

Upon these findings the Commission entered its order authorizing the railroads to put into effect a 15% increase in intrastate freight rates, except with respect to certain commodities as to which the increase was limited to 12%. The findings were in essence the same as those made by the Commission which were before the Supreme Court and were held sufficient to sustain the Commission's order in King v. United States, 344 U.S. 254, 73 S.Ct. 259, 97 L.Ed. 301. In that case the Supreme Court di...