United States v. Abilene Ry Co, 456

CourtUnited States Supreme Court
Citation68 L.Ed. 1016,265 U.S. 274,44 S.Ct. 565,35 A.L.R.2d 1013
Docket NumberNo. 456,456
PartiesUNITED STATES et al. v. ABILENE & S. RY. CO. et al
Decision Date26 May 1924

265 U.S. 274
44 S.Ct. 565
68 L.Ed. 1016


ABILENE & S. RY. CO. et al.

No. 456.
Argued March 4, 1924.
Decided May 26, 1924.

[Syllabus from pages 274-276 intentionally omitted]

Page 276

Mr. Clifford Histed, of Kansas City, Mo., for intervener kemper.

Mr. J. Carter Fort, of Washington, D. C., for appellant Interstate Commerce Commission.

Messrs. T. J. Norton, of Chicago, Ill., and M. G. Roberts, of St. Louis, Mo., for appellees.

[Argument of Counsel from pages 276-278 intentionally omitted]

Page 278

Mr. Justice BRANDEIS delivered the opinion of the Court.

This is an appeal by the United States and the Interstate Commerce Commission from a decree of the federal

Page 279

court for Kansas which perpetually enjoined the enforcement of an order made by the Commission, on August 9, 1922, under section 15(6) of the Interstate Commerce Act as amended by Transportation Act 1920, c. 91, § 418, 41 Stat. 456, 486 (Comp. St. Ann. Supp. 1923, § 8583). The order relates to the divisions of interstate joint rates on traffic interchanged, within the United States, by the Kansas City, Mexico & Orient system with 13 carriers whose lines make direct connection with it. The order provides that on all such interchanged traffic the existing divisions of these carriers shall be reduced by a fixed per cent., and that the Orient shall receive the amount so taken from its connections.1 The order also directed the Orient and the connecting carriers to make, at stated intervals, reports of the financial results of the divisions ordered, permitted any carrier to except itself from the order, in whole or in part, by proper showing, and retained jurisdiction in the Commission 'to adjust on the basis of such reports the divisions herein prescribed or stated, if such adjustment shall to us seem proper.' Kansas City, Mexico & Orient Divisions, 73 Interst. Com. Com'n R. 319, 329.

The order was entered after an investigation into the financial needs of the Orient system, undertaken by the

Page 280

Commission in April, 1922, pursuant to an application of the receiver of the Kansas City, Mexico & Orient Railroad Co. and an affiliated Texas corporation. It appeared (and was not denied) that the public interest demanded continued operation of the railroad; that the revenues were insufficient to pay operating expenses; that the operation was being efficiently conducted; and that, unless relief were afforded by increasing the Orient's division of joint rates and/or otherwise, operation would have to be suspended and the railroad abandoned.2 The 13 carriers who brought this suit participated in the investigation undertaken by the Commission, and supplied certain statistical information requested of them; but that introduced no evidence before the Commission, and the case was submitted there without argument. None of the connecting carriers made application to be excepted from the order. Nor did any of them apply for a rehearing. Before the effective date of the order, this suit was begun. On application for a temporary injunction, it was heard by three judges, pursuant to the Act of October 22, 1913, c. 32, 38 Stat. 208, 220, and a temporary injunction was granted. Upon final hearing, motions of the defendants to dismiss the bill were denied, the injunction was made permanent, and a rehearing was refused. 288 Fed. 102.

First. The Commission moved, in the District Court, to dismiss the bill on the ground that the suit was premature. The contention is that, under the rule of Prentis v. Atlantic Coast Line, 211 U. S. 210, 29 Sup. Ct. 67, 53 L. Ed. 150, orderly procedure required that, before invoking judicial review, the

Page 281

carriers should have exhausted the administrative remedy afforded by a petition for rehearing before the full Commission. The investigation and order were made, not by the whole Commission, but by division 4.3 The order of a division has 'the same force and effect * * * as if made * * * by the Commission, subject to rehearing by the Commission.' Interstate Commerce Act as amended, § 17(4) being Comp. St. Ann. Supp. 1923, § 8586. Any party may apply for such rehearing of any order or matter determined. Section 16a (Comp. St. § 8585). Meanwhile the order may be suspended either by the division or by the Commission. In this case, the order, by its terms, was not to become effective until 37 days after its entry. There was, consequently, ample time within which to apply for a rehearing and a stay, before the plaintiffs could have been injured by the order.

Division 4 consists of 4 members. There are 11 members on the full Commission. Under these circumstances, what is here called a rehearing resembles an appeal to another administrative tribunal. An application for a rehearing before the Commission would have been clearly appropriate.4 The objections to the validity of the order now urged are in part procedural. They include

Page 282

questions of joinder of parties, of the admissibility of evidence, and of failure to introduce formal evidence. Most of the objections do not appear to have been raised before the division. If they had been, alleged errors might have been corrected by action of that body or by the full Commission. The order involved also a far-reaching question of administrative power and policy, which, so far as appears, had never been passed upon by the full Commission, and was not discussed by these plaintiffs before the division. In view of these facts, the trial court would have been justified in denying equitable relief until an application had been made to the full Commission, and redress had been denied by it. But, in the absence of a stay, the order of a division is operative, and the filing of an application for a rehearing does not relieve the carrier from the duty of observing an order.5 Despite the failure to apply for a rehearing, the court had jurisdiction to entertain this suit. Prendergast v. New York Telephone Co., 262 U. S. 43, 48 49, 43 Sup. Ct. 466, 67 L. Ed. 853. Compare Chicago Rys. Co. v. Illinois Commerce Commission (D. C.) 277 Fed. 970, 974. Whether it should have denied relief until all possible administrative remedies had been exhausted was a matter which called for the exercise of its judicial discretion. We cannot say that, in denying the motion to dismiss, the discretion was abused.

Second. The plaintiffs contend that the order is void, because only a part of the carriers who participated in the joint rates were made parties to the proceedings before the Commission. Section 15(6) provides that where existing divisions are found to be 'unjust * * * as between the carriers parties thereto * * * the Commission shall, by order, prescribe the just, reasonable and equitable divisions thereof to be received by the several

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carriers.' More than 170 carriers participated in the joint rates in question. Of these only 39 carriers, whose roads lie wholly west of the Mississippi river, were made respondents before the Commission. The argument is that all who are parties to the through rates are necessarily interested in the divisions of those rates; that failure to join some is not rendered immaterial by the fact that the order made affects directly only those before the Commission, since it would be open to a carrier whose division is reduced, to seek contribution later by a proceeding to readjust the divisions as between it and other carriers who were not parties to the original case; and that an order under this section is invalid unless it disposes completely of the matter in controversy. This argument is answered by what was said in New England Divisions Case, 261 U. S. 184, 201, 202, 43 Sup. Ct. 270, 67 L. Ed. 605. The order, in terms, affects only the 13 carriers whose lines connect directly with the Orient system. Only their divisions were reduced. The shares of all others who participated in the joint rates were left unchanged. All participating carriers might properly have been made respondents. But that was not essential, for it was not necessary that all controversies which may conceivably arise should be settled in a single proceeding. There was no defect of parties in the proceeding before the Commission.6

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Third. The plaintiffs contend that the order is void because made on a basis which Congress did not and could not authorize.7 The argument is that Transportation Act 1920 requires earnings under joint rates to be divided according to what is fair and reasonable as between the parties; that what is so must be determined by the relative amount and cost of the service performed by each of the several railroads; and that the Commission, ignoring this basis of apportionment and making the determination in the public interest, gave to the needy Orient system larger divisions merely because the connection carriers were more prosperous. Relative cost of service is not the only factor to be considered in determining just divisions. The Commission must consider, also, whether a particular carrier is an originating, intermediate or delivering line; the efficiency with which the several carriers are operated; the amount of revenue required to pay their respective operating expenses, taxes, and a fair return on their railway property; the importance to the public of the transportation service of such carciers; and other facts, if any, which would, ordinarily, without regard to mileage haul, entitle one carrier to a greater or less proportion than another of the joint rate.8 It is settled that, in determining what the divisions should be, the Commission may, in the public interest, take into consideration the financial needs of a weaker road, and that it may be

Page 285

given a division larger than justice merely as between the parties would suggest 'in order to maintain it in effective operation as part of an adequate transportation system,' provided the share left to its connections is 'adequate to...

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