KING ET AL., CONSTITUTING THE FLORIDA RAILROAD AND PUBLIC UTILITIES COMMISSION, v. UNITED STATES ET AL.
No. 9
Supreme Court of the United States
Argued October 15, 1952. - Decided December 22, 1952.
344 U.S. 254
Charles H. Weston аrgued the cause for the United States and the Interstate Commerce Commission, appellees. With him on the brief were Acting Solicitor General Stern, Acting Assistant Attorney General Clapp, James L. Morrisson and Edward M. Reidy. Philip B. Perlman, then Solicitor General, and Daniel W. Knowlton were on a motion to affirm.
Frank W. Gwathmey argued the cause for the Atlantic Coast Line Railroad Co. et al., appellees. With him on the brief was James A. Bistline.
Arnold H. Olsen, Attorney General, Charles V. Huppe, Assistant Attorney General, and Edwin S. Booth filed a brief for the State of Montana et al., as amici curiae, urging reversal.
MR. JUSTICE BURTON delivered the opinion of the Court.
The questions here are: (1) whether the Interstate Commerce Commission, in prescribing intrastate freight rates for railroads under
This is an action against the United States brought in the United States District Court for the Northern District of Florida, under
The underlying proceedings originated in 1940. The Interstate Commerce Commission then undertook a nationwide investigation of interstate railroad freight rates, under
In 1947, the Commission found such further increases in operating costs and decreases in passenger revenue that it authorized an additional nationwide interim increase of 10% in interstate freight rates. Soon it raised this to 20%. In a third report it varied the percentage in different areas, with the result that in the southern territory, including Florida, the increase was 25%. The 1948 final report confirmed this 25% increase. Ex Parte No. 166, Increased Freight Rates, 1947, 269 I. C. C. 33, 270 I. C. C. 81, 93, and 403. The Commission‘s estimates of revenue contemplated the application of the increased rates to intrastate, as well as to interstate, transporta-
Upon publication of these reports, the railroads asked their respective state authorities to authorize comparable increases in intrastate rates. The Florida Commission approved most of the increases but declined to approve the final increаse from 20% to 25%.5
On petition of the Florida railroads, the Interstate Commerce Commission undertook its own investigation of Florida intrastate railroad rates under
The Interstate Commerce Commission then gave the Florida Commission a final opportunity to permit the increased rates to be applied to intrastate transportation. Upon the latter‘s failure to act, the Interstate Commerce Commission ordеred the railroads “thereafter to maintain and apply for the intrastate transportation of freight from and to points in the State of Florida freight rates and charges which shall be no lower than the approved rates and charges, or on the approved rate bases, as provided in said report.”7
I. The Interstate Commerce Commission in prescribing intrastate freight rates for railroads under § 13 (4) of the Interstate Commerce Act may give weight tо deficits in passenger revenue.
In Ex Parte No. 168, Increased Freight Rates, 1948, 272 I. C. C. 695, 276 I. C. C. 9, the Commission reviewed the changing attitudes it has adopted concerning the role of passenger deficits and freight rates. In such cases as the Five Per Cent Case, 31 I. C. C. 351, the Commission in 1914 concluded that each class of service should completely and independently provide its own proportionate share of expenses and profits.8 In 1949 the Commission says:
“However, because of changed theories adopted by Congress in the Transportation Act, 1920, and
Citing with approval its similar views in Ex Parte No. 103, Fifteen Per Cent Case, 1931, 178 I. C. C. 539, and Ex Parte No. 123, Fifteen Per Cent Case, 1937-1938, 226 I. C. C. 41, the Commission summarizes its present position as follows:
“These cases are typical of our more recent holdings upon this question. While we regard it as ‘trite to say that each particular service, coach, sleeper, parlor car, and head end, should as nearly as may be pay its own way and return a profit’ (Eastern Passenger Fares in Coaches, 227 I. C. C. 17, 25), and we have accepted the contention that there may be traffic that should not be burdened with a shortage of passenger service return (Livestock, Western District Rates, 190 I. C. C. 611, 629), yet, if passenger service inevitably and inescapably cannot bear its direct costs and its share of joint or indirect costs, we have felt compelled in a general rate case to take the passenger deficit into account in adjustment of freight rates and charges. Both the freight and passenger services аre essential, and revenue losses or deficits on the one necessarily must be compensated by earnings on the other if the carriers are to continue operations. Both may be subjected to reasonable rates and charges to produce the fair aggregate return, even though thereby a higher rate of return may be exacted from the one than from the
This change of policy was the inevitable consequence of steadily increasing passenger operating costs, together with the growth of vigorous competition from automobiles and other forms of transportation which made it futile to compensate for the passenger deficits by increasing passenger rates. The railroads were forced to abandon passenger mileage, reduce service and improve their facilities, while fixing passenger rates аt a level as adequate as competition permitted.9
In recent years, a nationwide passenger deficit has been obvious except during the peak of wartime passenger traffic. The ratio between passenger operating expense and revenue has varied in different areas but has been uniformly unfavorable to the railroads.10
for 1 year, by an uninterrupted increase in the passenger service operating ratio from 81.29 percent in 1923 to 101.22 percent in 1930, the latter being the first year of the 11 years 1920-30 in which there was an operating deficit in this service. Since that year there has been an annual operating deficit in passenger service, except during the war years 1942-45.
“Passenger service operating ratiоs and net railway operating deficits in 1948, by specified districts and regions
District or region Operating ratio Net railway operating deficit Eastern district_ 120.8 $216, 450, 000 Pocahontas region_ 177.8 35, 725, 000 Southern region_ 127.3 72, 982, 000 Western district_ 132.2 234, 625, 000 Total_ 127.4 559, 782, 000” 276 I. C. C. at 36, 40; see also, pp. 14-31 for data as to value, revenue, expenses, operating income, rate of return, traffic, efficiency, etc., and pp. 32-40 as to passenger deficits.
See Moulton, The American Transportation Problem, c. V (1933); 63d, 64th and 65th Annual Reports of the Interstate Commerce Commission, at pp. 3, 5 and 41, respectively.
The question remains whether that Commission may give weight to deficits in passenger revenue (either intеrstate or intrastate) when prescribing intrastate freight rates under
In the instant case, however, there is no showing that the character of operating conditions in Florida intrastate passenger traffic differs substantially from that of inter-
“Increased passenger deficits, by reason of the continuing rise in operating expenses and the growing use of other forms of transportation, is a condition bearing alike upon intrastate and interstate rates. There is here no claim or showing that the passenger deficits of the respondents do not result from intrastate as well as interstate operations, and the passenger deficit of the East Coast, which operates entirely within Florida, would appear to indicate to the contrary.
“The record affords no justification for a difference in treatment in this respect [passenger deficits] between Florida intrastate traffic, on the one hand, and interstate traffic to and from Florida, on the other hand. The question of passenger deficits is a serious one for both carriers and shippers, and would become even more serious for interstate shippers if this burden were imposed entirely upon them [rather than being shared on a like basis with intrastate shippers on the same lines].” 278 I. C. C. at 67-68. See opinion below, 101 F. Supp. at 944.
It appears from the report in Ex Parte No. 168, 276 I. C. C. at 40, that, in 1948, the passenger service operating ratio for the southern territory was 127.3% while the operating rаtios of the three principal Florida railroads in that year were 120%, 127% and 128%. In Florida, moreover, the discontinuance of railroad passenger service would not permit the discontinuance of high-speed tracks and equipment because of the need for fast freight schedules to transport perishable fruits and vegetables from Florida. The Commission dealt with the freight and passenger revenues and properties of the Florida roads as a
The Commission also finds that “the Florida intrastate rates [without the 5% increase] . . . are abnormally low and are not contributing their fair share to the revenues required by respondents [Florida railroads] to enable them to render adequate and efficient service and to operate profitably, and thereby accomplish the purpose of the Interstate Commerce Act . . . .” Finding No. 5, 278 I. C. C. at 72.
In the instant case there is no evidence which would require the Commission to treat Florida intrastate rates differently from interstate rates in southern territory. Instead, there are findings that it would cause unjust discrimination against interstate commerce in Florida if the intrastate freight rates are not increased so as to reflect the same increase as is applied by the Commission to like interstate traffic in the southern territory. See note 13, infra.
The same National Transportation Policy applies to
“This Court has consistently held that this section [
§ 13 (4) ] is to be construed in the light of§ 15a (2) and as supplementing it, so that the forbidden discrimination against interstate commerce by intrastate rates includes those cases in which disparity of the latter rates operates to thwart the broad purpose of§ 15a to maintain an efficient transportation system by enabling the carriers to earn a fair return. So
This was confirmed in Florida v. United States, 292 U. S. 1, 5-6.
We conclude that there is no reason why the Commission may not give weight to passenger deficits in prescribing the intrastate freight rates in Florida, as it does in prescribing interstate freight rates for the southern territory.12
II. The Commission‘s findings involved in this рroceeding are sufficient to sustain the rates prescribed.
Several of the Commission‘s findings which lend support to its order are printed in the margin.13 Its author-
The nature and adequacy of the findings necessary to support an ultimate finding of “unjust discrimination against interstate commerce” were considered in North Carolina v. United States, supra. In that case this Court held that the Commission‘s findings were not adequate to support the Commission‘s order to raise state-wide intrastate passenger rates from 1.65 cents per mile to 2.2 cents per mile, although the latter rate was prescribed by the Commission as a minimum rate for comparable interstate passenger service on the same lines and trains. The finding which was primarily needed, and was there found lacking, was one that the intrastate service at 1.65 cents per mile did not contribute its fair share of the earnings required to meet maintenance and operating costs and to yield a fair return on the value of the property directed to the transportation service, both interstate and intrastate.
This Court held that the mere disparity between the rates for comparable intrastate and interstate service was not enough per se to establish the requisite unjust discrimination. Confronted with evidence that the interstate rate of 2.2 cents per mile was above a reasonable rate level for comparable intrastate passenger service, a finding supported by evidence was held to be necessary to show the contrary. Such a finding, lacking in the North Carolina case, is supplied here by finding No. 3, which states that the “intrastate rates . . . herein approved will not exceed a just and reasonable level.” 278 I. C. C. at 72.
In the North Carolina case there was no finding that the existing intrastate rate was inadequate. In fact, its
Whereas in the North Carolina case there was evidence to indicate that the conditions in that State were more favorable to profitable intrastate transportation of passengers than in the Nation at large, here the Commission‘s finding No. 2 expressly states that “the transportation conditions incident to the intrastate transportation of freight in Florida are not more favorable and such conditions in the Florida peninsula are somewhat less favorable than those (1) within southern territory and (2) between Florida and interstate points.” Id., at 72, and see 63-67.
Supporting the conclusion that the proposed increase in the Florida intrastate freight rates will not drive away business but will prove profitable and reasonable, the Commission in its finding No. 6 says that “the establishment of intrastate rates . . . increased sufficiently to equal the level herein approved will substantially increase respondents’ [railroads‘] revenues therefrom, and will constitute not more than a fair proportion of respondents’ total income . . . .” Id., at 73.
The foregoing findings cover the needs emphasized in the North Carolina case. They go far beyond the bare disparity between the existing intrastate rate and the
The Commission has applied to the Florida operations the same conclusion it reached as to the need for increased revenue on a national basis and has distributed the burden within Florida along the same lines it followed when estimating the revenues available in the southern territory from intrastate as well as interstate operations. In the absence of any showing that it is not applicable to Florida, the evidence which forms the basis of the Commission‘s nationwide order becomes the natural basis for its Florida order.
The Commission in the instant case has provided that these “findings are without prejudice to the right of the authorities of the State of Florida, or any other interested party, to apply for a modification thereof as to any specific intrastate rates . . . on the ground that they are not related to the interstate rates . . . on like traffic in such a way as to contravene the provisions of the Interstate Commerce Act.” Id., at 74. Certain of the rates in the original order already have been modified or removed from that order. 101 F. Supp. at 946.
No question has been raised here as to the adequacy of the evidence upon which any of the findings are based. Although no such point is urged, supporting evidence appears in the record of the “full hearing” under
“The decision in the first proceeding, that the increase in interstate rates was reasonable, was made in the hope that the state commissions would bring intrastate rates into harmony. When they failed to do so, the Commission reaffirmed its finding that the new interstate rates were reasonable and found that the intrastate rates must be raised in order that the intrastate traffic may bear its fair share of the revenue burden. It is plain from the nature of the inquiry that the rate level, to which both classes of traffic were raised, was found reasonable on the basis of the traffic as a whole. Where the conditions under which interstate and intrastate traffic move are found to be substantially the same with respect to all factors bearing on the reasonableness of the rate, and the two classes are shown to be intimately bound together, there is no occasion to deal with the reasonableness of the intrastate rates more specifically, or to separate intrastate and interstate costs and revenues. Compare American Express Co. v. Caldwell, 244 U. S. 617; United States v. Louisiana, supra; Florida v. United States, ante, p. 1.” Illinois Commerce Commission v. United States, 292 U. S. 474, 483-484. See also, Montana v. United States, 106 F. Supp. 778, 783.
The appellants point out that in the North Carolina case, this Court mentioned the absence of other findings. Those, however, are not needed to sustain an order already supported by such findings as have been made in this case.15
Similarly, the North Carolina case mentions, but does not make indispensable, the specific findings in dollars which were absent there. Reference was made in the North Carolina case to the absence of “findings as to what contribution from intrastate traffic would constitute a fair proportion of the railroad‘s total income” and also to the absence of any “finding as to what amount of revenue was required to enable these railroads to operate efficiently.” 325 U. S. at 516. The Court emphasized the Commission‘s reliance on “the mere existence of a disparity between what it said was a reasonable interstate rate and the intrastate rate fixed by North Carolina.”
“[T]he administrative arm of the Commission [would be] paralyzed, if instead of adjudicating upon the rates in a large territory on evidence deemed typical of the whole rate structure, it were obliged to consider the reasonableness of each individual rate before carrying into effect the necessary increased schedule.” United States v. Louisiana, 290 U. S. 70, 75-76, and see 78-79. See also, Illinois Commerce Commission v. United States, 292 U. S. 474, 483; Florida v. United States, 292 U. S. 1, 9; Georgia P. S. Commission v. United States, 283 U. S. 765, 774; Wisconsin R. Commission v. Chicago, B. & Q. R. Co., 257 U. S. 563, 588. Where the Commission seeks to deal generally with rates and revenues in a large area on evidence typical of the area as a whole, it may proceed by way of a general order supported by sufficient evidence applicable to the whole territory.16 At the same time it
For these reasons, we conclude that the findings before us sustain the order of the Commission and that the Commission was authorized to give the weight it did to passenger deficits when prescribing intrastate freight rates. The judgment accordingly is
Affirmed.
MR. JUSTICE BLACK is of opinion that the facts found by the Commission were not adequate to support the order and would set aside the order on authority of North Carolina v. United States, 325 U. S. 507.
MR. JUSTICE DOUGLAS, with whom MR. CHIEF JUSTICE VINSON concurs, dissenting.
The Court has taken an unprecedented and, in my view, an unwarranted step in enlarging the authority of the Interstate Commerce Commission. It upholds the power of the Commission to raise intrastate freight rates, not because they favor intrastate over interstate commerce, not because they fail to yield their fair share of the carriers’ revenue, but because the carriers’ interstate passenger operations are lоsing money.
The power of Congress to regulate intrastate rates stems from its authority to promote and protect interstate commerce. See Shreveport Rate Case, 234 U. S.
The Commission, of course, is authorized to regulate intrastate rates so that intrastate operations will provide a fair share of the carriers’ revenue.4 See Wisconsin Commission v. Chicago, B. & Q. R. Co., 257 U. S. 563. But that authority rests on the Commission‘s power to remove discrimination. If, for example, intrastate freight operations fail to produce an adequate return as determined by reference to the cost of the intrastate operations and the investment in the intrastate business, interstate commerce is discriminated against. But there is no such failure in this case. Intrastate freight operations in Florida are amply profitable and carry their fair share of the load. The Commission nevertheless has saddled the intrastate freight business with the deficits from the interstate passenger business. If there is any discrimination herе, it is against the local Florida shipper.