| M.D. Ala. | Jul 24, 1913
Lead Opinion
This is a supplemental bill seeking to enjoin an order of the Railroad Commission of Alabama fixing intrastate. passenger rates.
The suggestion raises a question as to the legality of the organization of the court with three judges and is the first thing to be considered.
The following are the parts of the statute most relevant; the addition made by amendment being placed in italics:
“No interlocutory injunction suspending or restraining the enforcement, operation, or execution of any statute of a state by restraining the action of any ofiicer of such state in the enforcement or execution of such statute, or in the enforcement or execution of (in order made by an administrative board or commission acting under and pursuant to the statutes of such state, shall be issued or granted by any justice of the Supreme Court, or by any District Court of- the United States, or by any judge thereof, or by any circuit judge acting as district judge, upon the ground of the unconstitutionality of such statute, unless the application for the same shall be presented to a justice of the Supremo Court of the United States, or to a circuit or district judge, and shall be heard and determined by three judges, of whom at least one shall be a justice of the Supreme Court or a circuit judge, and the oilier two may bo either circuit or district judges, and unless a majority of said three judges shall concur in granting such application.” Judicial Code, § 206; 36 Stat. 1102; 37 Stat. 1013.
The suggestion of counsel is that the amendment left the statute still requiring that the application should be made upon the ground of the “unconstitutionality of such statute,” and does not in words make it apply to the unconstitutionally of an order made by a board or commission. The intention of Congress in enacting the statute must control in its interpretation if that intention can be ascertained by an examination of the amendment in connection with the section as it stood before the amendment. The section, before amendment, required a judge, when an application was made to him for an interlocutory injunction upon the ground of the “unconstitutionality” of a statute, to call to his assistance two other judges to sit with him on the hearing of the application. The intention of the amendment was to extend the original statute so as to have it include “an order made by an administrative board or commission” acting under and pursuant
“An act restricting the issuance of interlocutory injunctions to suspend the enforcement of the statute of a state or of an order made by an administrative board or commission created by and acting under the statute of a state.” 87 Stat. 1013.
When the application for the interlocutory injunction is to restrain the execution of a statute of a state, to make the statute requiring the three judges applicable, the application must be “upon the ground of the unconstitutionality of such statute.” To make’the words-“upon the ground of the unconstitutionality of such statute” applicable literally to suits to enjoin the enforcement of an order of a board or commission would permit the amended statute to have application only when the statutes creating a commission were alleged to be unconstitutional. At the time of the passage of the amendment, the constitutionality of statutes creating such commissions was so well settled that it is clear that Congress did not have in view suits attacking such statutes. It had in mind, as the title and the act both show, the orders made by a board or commission. The amended statute, by its words, extends to an application to enjoin the enforcement of any order made by an administrative board or commission acting under and pursuant to the statutes of a state. If the words limiting the application of the amendment, when it is sought to enjoin the enforcement of a statute, to cases where it is alleged that the statute violates the Constitution, are to be applied also to cases where it is sought to enjoin an order of a commission, the word “unconstitutionality” must be made to apply to the order of the Commission and not to a statute. When the power to regulate rates is exercised by the Legislature directly, the statute, as originally enacted and as amended, is applicable when such legislation is attacked as violative of the Constitution; and when the Legislature delegates its power to regulate rates to a commission, and the order of the Commission is attacked because it is violative of the Constitution, the amendment was intended to make the procedure requiring three judges applicable. The Commission’s order is the exercise of a legislative function and was thought by some to be within the meaning of section 266 as originally enacted. The amendment, at least, was clearly intended to include orders by a commission that are alleged to be violative of the Constitution. While not controlling, it may be mentioned that it appears from the discussion of the amendment in the House of Representatives, when it was on its passage, that such was there understood to be its purpose. Congressional Record (3d Session, 62d Congress, March 3, 1913) vol. 49, p. 4781. Whether the amendment extends the procedure requiring three judges to applications to -enjoin every order that the Commission may make is not a question before us. It is sufficient for this case to hold that it extends to any order made which is alleged in the application for an interlocutory injunction to be violative of the federal Constitution. To hold otherwise would make the amendment practically ineffective and defeat the legislative intention.
The decree in question here is confined to fixing intrastate passenger rates. The decree which is pleaded as res judicata was one relating generally' to the plaintiff’s intrastate freight and passenger rates. It declared unconstitutional and confiscatory (so far as concerns the plaintiff’s traffic) an act of the Legislature of Alabama of March 2, 1907, and eight acts of November 23, 1907, and parts of the Alabama Code of 1907, which re-enacts those acts. It was decreed that each of these acts was confiscatory when taken “in connection with the other rate acts” affected by the decree. The decree also specifically condemns as confiscatory the act of the Alabama Legislature fixing a maximum intrastate passenger rate of 2*4 cents per mile. The statute fixing this rate is so condemned “when taken in connection with the other rates covered by the decree.” This decree is still in force; no appeal having been taken from it. The plaintiff, after the decree, reestablished and now has in effect its higher freight rates, which it enforced before the enactment of the legislation which the decree declared confiscatory. The decree set up as res judicata only condemned the intrastate passenger rates when taken in connection with the other rates also condemned in the same decree. It was not adjudged that the intrastate passenger rates, taken in connection with the higher freight rátes re-established by the decree, were confiscatory. To hold that the decree was res judicata of this controversy would be, in effect, to declare that it debarred the Commission from ever afterward fixing rates; that it permanently deprived the Commission of authority to regulate rates. That the District Court had no authority to do this was decided without dissent (on this question) in Railroad Commission v. Central of Georgia Railway Co., 170 Fed. 22S, 240, 95 C. C. A. 117. The decree of the District Court invalidating the Alabama statutes fixing freight rates entirely changed the situation. Even if the 2-*/2-ccnt passenger rate were confiscatory, taken in connection with those statutes, it might not he now, taken in connection with the higher freight rates and the changed conditions. The Commission, in fixing the rate in question here, was not acting under the statutes declared by the decree void as against the plaintiff, but it was acting under the Alabama statutes creating the Commission and conferring on it generally the authority to regulate intrastate rates. Louisville & Nashville Railroad Co. v. Railroad Commission of Alabama (by Hon. W. I. Grubb, District Judge, May 5, 1913) 205 F. 800" court="M.D. Ala." date_filed="1913-05-05" href="https://app.midpage.ai/document/louisville--n-r-v-railroad-commission-of-alabama-8788372?utm_source=webapp" opinion_id="8788372">205 Fed. 800. The former decree does not estop the Commission from making the order in suit here.
. 3. It is contended that the order should be enjoined because it was made without proper notice to the plaintiff; that it was not granted an opportunity to defend. The record refutes this contention because it shows that the procedure conformed to the Alabama statutes, which the Circuit Court of Appeals for this circuit, without dissent (on this point), has held to be valid and constitutional. Railroad Commission v. Central of Georgia Railway Co., 170 F. 225" court="5th Cir." date_filed="1909-04-06" href="https://app.midpage.ai/document/railroad-commission-v-central-of-georgia-ry-co-8771253?utm_source=webapp" opinion_id="8771253">170 Fed. 225, 240, 95 C. C. A. 117. Notice was given the plaintiff in conformity to the Alabama statutes, and a formal hearing was had, at which the plaintiff offered evidence bearing on the issues involved. There was no want of legal formalities in the procedure before the Commission.
If the order made by the Commission had fixed a general schedule of rates covering the intrastate operations of the carrier taken as a whole, this contention would certainly present the controlling question. Such question was presented in Smyth v. Ames, 169 U. S. 466, 18 Sup. Ct. 418, 42 L. Ed. 819" court="SCOTUS" date_filed="1898-03-07" href="https://app.midpage.ai/document/smyth-v-ames-smyth-v-smith-smyth-v-higginson-94833?utm_source=webapp" opinion_id="94833">42 L. Ed. 819, and in Simpson et al. v. Shepard, 230 U.S. 352" court="SCOTUS" date_filed="1913-06-09" href="https://app.midpage.ai/document/the-minnesota-rate-cases-97966?utm_source=webapp" opinion_id="97966">230 U. S. 352, 33 Sup. Ct. 729, 57 L. Ed. 1511" court="SCOTUS" date_filed="1913-06-09" href="https://app.midpage.ai/document/the-minnesota-rate-cases-97966?utm_source=webapp" opinion_id="97966">57 L. Ed. 1511. The controlling question in such cases is whether or not the state has overstepped the constitutional limit and made the rate so low as to deprive the carrier of its property without due process of law. This case (the case made by the supplemental bill) is to be distinguished from cases which involve all or practically all of .the intrastate passenger and freight rates charged by a railroad. The order sought to be enjoined, and which is the only subject of controversy before us, requires the plaintiff to put into effect in Alabama an intrastate passenger rate of 2y3 cents a mile for adults and 1% cents a mile for children. The great volume of evidence submitted relates to the issue, necessarily involved in the main case, as to whether or not the railroad was earning under the general schedule of rates then in question a fair return on the value of its property devoted to intrastate public service. The solution of that question in favor of the plaintiff would <.not be conclusive against the defendants in the instant case, be
These rules are not mere cautionary phrases. They are intended to mark the limits of judicial interference. If the inferior courts will' regard these principles, not as platitudes, but as rules prescribed for their guidance, it will greatly lessen legislation and litigation in relation to the regulation of the tariffs of public service corporations.
Conceding that this case should be considered as one controlled by the rule of adequate return on investment, the question arises as to the sufficiency of the evidence offered to show that the order is confiscatory.
The first step in the proof required of the plaintiff is to show the value of the property upon which a return is claimed. If such value is unduly inflated, all calculations based on it are misleading. The plaintiff estimates the total value of its property devoted to public use in Alabama at $42,750,933.08. This value is stated in affidavits and is referred to as being the same found by the special master in the main case. It is not practicable to refer to all the items about which there is controversy included in this valuation, but the principle upon which the evidence as to value was received and upon which it is now offered is best shown by an excerpt from the special master’s report:
“The first objection is that the estimate of the Chief Engineer was made in 1907, when the prices were higher than for previous years, and it is insisted that the prices should have been on the average prices for a series of years. But it appears that the law contemplates values at the time of the controversy, and the proof shows that prices have a general tendency to higher levels, and distinctly shows that the reconstruction would now cost as much as the estimates amount to.
“The next point is that in reproduction the enhanced value of property for 50 or a 100 years, caused, amongst other things, by the facilities furnished by the road, is not to be considered. But there is no known method of determining the share of development of a .country assignable to the existence of*43 a particular market facility. And, besides, the road is entitled to all enhancement of values. If values decline, the road is the loser; if they advance, the road is entitled to the benefit. So it is declared, and, seemingly, with justice.
“The road as it exists has value from every incident of situation which affords opportunity to earn an income. And the right of way on reproduction for rate determination obviously must include every such surrounding. The new road is to be the ‘forced .heir’ of the old road, vanishing in imagination as the new is constructed. And the enhancement of values includes and represents such advantages as time has given to the location.
“The present right of way is an artery and vein of commerce, receiving and imparting its current from and to the adjacent and connecting country, by and through infinite smaller connections. And the new road succeeds to the situs without losing a drop of blood (commerce). And all enhancement of prices is an inherent constituent of the situs.”
The following is an excerpt from the opinion in the Minnesota Rate Cases, which deals with the same subject:
“And where the inquiry is as to the fair value of the property, in order to determine the reasonableness of the return allowed by the rate-making power, it is not admissible to attribute to tho property owned by the carriers a speculative increment of value, over the amount invested in it and beyond the value of similar property owned by others, solely by reason of the fact that it is used in the public service. That -would be to disregard the essential conditions of the public use and to make the public use destructive of the public right.
“The increase sought for ‘railway value’ in these cases is a.n increment over all outlays of the carrier and over the values of similar land in the vicinity. It is an increment which cannot be referred to any known criterion but must rest on a mere expression of judgment which finds no proper test or standard in tho transactions of the business world. It is an increment which, in the last analysis, must rest on an estimate of the value of the railroad use as compared with other business uses; it involves an appreciation of the returns from rates (when rates themselves are in dispute) and a sweeping generalization embracing substantially all the activities of the community. Tor an allowance of this character there is no warrant.
“Assuming that the company is entitled to a reasonable share in the general prosperity of tho communities which it serves, and thus to attribute to its property an increase in value, still the increase so allowed, apart from any improvements it may make, cannot properly extend beyond tho fair average of the normal market value of land in the vicinity having a similar character. Otherwise we enter the realm of mere conjecture. Wo therefore hold that it was error to base tho estimates of value of the right of way, yards, and terminals upon the so-called ‘railway value’ of the property. The company would certainly have no ground of complaint if it were allowed a value for these lands equal to the fair average market value of similar land in the vicinity, without additions by the use of multipliers, or otherwise, to cover hypothetical outlays. The allowances made below for a conjectural cost of acquisition and consequential damages must be disapproved; and, in this, view, we also think it was error to add to the amount taken as the present value of the lands the further sums, calculated on that value, which were-embraced in the items of ‘engineering, superintendence, legal expenses,’ ‘contingencies,’ and ‘interest during construction.’
“By reason of the nature of the estimates and the points to which the testimony was addressed the amount of the fair value of the company’s land cannot be satisfactorily determined from the evidence, but it sufficiently appears, for the reasons we have stated, that tho amounts found were largely excessive.” Simpson et al. v. Shepard, 230 U. S. 252, 33 Sup. Ct. 729, 57 L. Ed. 1511.
The underlying principles upon which the plaintiff has proceeded to establish the values upon which it claims adequate return cannot be
In some way the value of the property must be proved. It would not be now claimed that the carrier had the unqualified right to make charges to produce a return on the face value of its stocks and bonds. It would seem equally unjust to permit the carrier to- make charges to produce a return on the investment of a surplus acquired by unreasonable tariffs, for that would be to base the right to commit a second wrong upon the successful imposition of the first.
Proof of the value of the property devoted to public intrastate use is only one step, and not the most difficult one, in the case. To sustain its contention, the plaintiff must offer evidence to show the cost of the intrastate and interstate traffic. The cost of freight and passenger traffic must then be separated. Any desired result may be proved by figures if the one making them is permitted to arbitrarily select the predicate upon which to base his calculations. When the division of the expenses is based chiefly on opinion or on limited investigation made with the view of obtaining desired results to be used in pending litigation, we should hesitate to hold it convincing within the rules requiring strict proof of confiscation.
The extreme difficulty and intricacy of making the calculations and proof would indicate the necessity of a system of account keeping on which to base them (Allen et al. v. St. Louis, Iron Mountain & Southern Ry. Co., 230 U.S. 553" court="SCOTUS" date_filed="1913-06-16" href="https://app.midpage.ai/document/allen-v-st-louis-iron-mountain--southern-railway-co-97973?utm_source=webapp" opinion_id="97973">230 U. S. 553, 33 Sup. Ct. 1030, 57 L. Ed. 1625" court="SCOTUS" date_filed="1913-06-16" href="https://app.midpage.ai/document/allen-v-st-louis-iron-mountain--southern-railway-co-97973?utm_source=webapp" opinion_id="97973">57 L. Ed. 1625, June 16, 1913); but the difficulties do not relieve the plaintiff of the burden. The method used by the plaintiff to ascertain the per cent, to be applied to freight haulage and passenger haulage expenses is the result of a test made during one week in September, 1907, to ascertain the relative train cost of an interstate ton mile and an intrastate ton mile, and the relative train cost of an interstate passenger mile and an intrastate passenger mile. Men rode on the plaintiff’s trains in Alabama for that week and gathered data. From information so obtained and from conductor’s reports, it was ascertained what busi
The plaintiff attempted to do in one week what could only be done by “prolonged and minute investigation of particular facts with respect to the actual traffic as it was being carried over the line.” The result of the calculations relating to adequate return depend on this ratio. Can a ratio thus obtained be accepted as sufficient to sustain a finding of confiscation ? An answer to this question is at least indicated by the Supreme Court (italics ours):
“The statements of the complainants’ witnesses os to the extra cost of in tra-slato business, while entitled to respect as expressions of opinion, manifestly involve wide and difficult generalisations. They embrace, without the aid of statistical information derived from appropriate tests and submitted 1o careful analysis, a general estimate of all the conditions of transportation, and an effort to express in the terms of a definite relation, or ratio, what clearly could be accurately arrived at only by prolonged and minute investigation of particular fads with respect to the actual traffic as it was being carried over the line. The extra cost, as estimated by those witnesses, is predicated not simply of haulage charges but of all the outlays of the freight service, including the share of the expenses for maintenance of way and equipment assigned to the freight department. And the ratio, to be accurately stated, must also express the results of a suitable discrimination between the interstate and intrastate traffic on through and local trains respectively, and of an attribution of the proper share of the extra cost of local train service to the interstate traffic that uses it. The wide range of the estimates oí extra cost, from three to six or seven times that of the interstate business per ton mile, shows both the difficulty and the lack of certainty in passing judgment.
“We are of opinion that on an issue of this character, involving the constitutional validity of state action, general estimates of the sort here submitted, with respect to -a subject so intricate and important, should not be accepted as adequate proof to sustain a finding of confiscation. While accounts have not been kept so as to show the relative cost of interstate and intrastate business, giving particulars of the traffic handled on through and local trains, and presenting data■ from which such extra cost as there may be of intrastate business may be suitably determined, it would appea/r to have been not impracticable to have had such accounts kepi or statistics prepared, at least during test periods, properly selected. It may be said that this would have been a very difficult matter, hut the company, having assailed the unconstitutionality of the state acts and orders, was bound to establish its case, and it was not entitled to rest on expressions of judgment when it had it in Us power to present accurate data whidh would permit the court to draw the right conclusion.” Simpson et al. v. Shepard, 230 U.S. 352" court="SCOTUS" date_filed="1913-06-09" href="https://app.midpage.ai/document/the-minnesota-rate-cases-97966?utm_source=webapp" opinion_id="97966">230 U. S. 352, 33 Sup. Ct. 729, 57 L. Ed. 1511" court="SCOTUS" date_filed="1913-06-09" href="https://app.midpage.ai/document/the-minnesota-rate-cases-97966?utm_source=webapp" opinion_id="97966">57 L. Ed. 1511.
“There was also testimony on each side as to certain tests, but these covered only a few days.” Knott et al. v. Chicago, Burlington & Quincy R. R. Co., 230 U.S. 474" court="SCOTUS" date_filed="1913-06-16" href="https://app.midpage.ai/document/missouri-rate-cases-97967?utm_source=webapp" opinion_id="97967">230 U. S. 474, 33 Sup. Ct. 975, 983, 57 L. Ed. 1571" court="SCOTUS" date_filed="1913-06-16" href="https://app.midpage.ai/document/missouri-rate-cases-97967?utm_source=webapp" opinion_id="97967">57 L. Ed. 1571, June 16, 1913.
The contention is that the plaintiff, at the rate in question, carried passengers at a great loss. If that be true, under the rule which shows such loss, what rate per mile for carrying a passenger would the carrier have to charge in order to earn 8 per cent, on that part of its investment devoted to intrastate service?
The record shows that the country is richer and more prosperous along the lines of the plaintiff’s road than in other parts of the state. And yet the other roads have maintained the rates that are here contested for the last five years. It is true that‘some of these roads at first resisted the enforcement of these rates. The present conditions being the same, or at least not unfavorable to the plaintiff, it would seem not unfair, so far as the plaintiff is concerned, to make the rates uniform. Seaboard Air Line v. Florida, 203 U.S. 261" court="SCOTUS" date_filed="1906-12-03" href="https://app.midpage.ai/document/seaboard-air-line-railway-v-florida-ex-rel-ellis-attorney-general-96523?utm_source=webapp" opinion_id="96523">203 U. S. 261, 269, 27 Sup. Ct. 109, 51 L. Ed. 175" court="SCOTUS" date_filed="1906-12-03" href="https://app.midpage.ai/document/seaboard-air-line-railway-v-florida-ex-rel-ellis-attorney-general-96523?utm_source=webapp" opinion_id="96523">51 L. Ed. 175.
The record shows that passenger rates like those fixed by the order were in force on the plaintiff’s road under a decision of the United States Circuit Court of Appeals in Railroad Commission of Alabama v. Central of Georgia Railway Co., 170 F. 225" court="5th Cir." date_filed="1909-04-06" href="https://app.midpage.ai/document/railroad-commission-v-central-of-georgia-ry-co-8771253?utm_source=webapp" opinion_id="8771253">170 Fed. 225, 95 C. C. A. 117, from June 1, 1909, to April 17, 1912, and that, during the period of the enforcement of the lower rate, there was a great increase in the number of intrastate passengers and in the number of intrastate passenger miles. Tables of figures are presented showing a great yearly increase apparently under the stimulus of the lower rate. The in
The ultimate question here is whether or not the rate prescribed for intrastate passengers under all the circumstances is reasonable — reasonable for the carrier and the public. The question as to whether or not, on its entire intrastate business, the plaintiff is receiving an adequate return, say 6 per cent, or 8 per cent., on its entire investment for public use is not absolutely controlling. The case is taken out of that rule, because it does not involve a general schedule of rates, and by the other particular facts of the case which have been mentioned. The question of adequate return on the entire investment involves merely one element in the solution of the ultimate question of whether or not the rate prescribed for the subdivision of the traffic is reasonable. The solution of the ultimate question depends on the particular facts of each case. The public has a right to demand that no more be exacted from it than, in view of all the facts, the services are reasonably worth. And the carrier should he protected in the right to demand what they are reasonably worth. Rates that are too low are not only unfair to the carrier but worse for the public than those that are too high, for they would ultimately prevent the operation of existing railroads and forbid the building of new ones. The fact that only passenger rates are involved, and the circumstances, to which reference has been made, that the plaintiff, for reasons which are, perhaps, commendable, carries a large part of its freight at cost or at a loss, and lias constructed many branch lines with the knowledge that they would not immediately he profitable, shows conclusively that the test of adequate return upon its whole intrastate business is not controlling in this case. Tosses voluntarily incurred in one branch of its traffic cannot justly be recouped by unreasonable charges in another branch. Unreasonable intrastate passenger rates cannot be justly maintained to cover losses voluntarily incurred as a matter of policy, although the policy in itself may be wise and beneficial to the public.
The facts claimed by the plaintiff to he proved as to values and income, when taken in connection with other facts shown by the record, are not such as to call for the application of the rule that would invalidate an order fixing rates for failure to produce adequate return; and, if the case is considered as controlled by the rule relating to adequate return, the evidence is not sufficient to show the value of the plaintiff’s property upon which it would be entitled to a return; nor
The injunction should therefore be:
Denied.
Concurrence Opinion
(concurring). I desire to add a few words concerning the first and fourth grounds assigned by the plaintiff for the issuance of the temporary injunction. v
First, As to res adjudicata. Upon this point the inquiry is whether the issues presented for determination under the present and second supplemental bill are identical with those determined by the final decree upon the first supplemental bill in this cause. To answer this inquiry it is necessary to ascertain what were the issues presented under the respective supplemental bills. An examination of the record in the original case convinces me that the master and the district judge found only that the system of statutory rates, comprised in the Eight Group or 110 Commodity Rate Acts, the Maximum Passenger Rate Act, and the Maximum Freight Act, was confiscatory in its operation upon the entire intrastate business of the plaintiff.
It is true that the pleadings were broad enough to present the same issue as to the operation of the 214-cent passenger rate in and of itself, and possibly there is evidence in the record tending to establish its confiscatory nature without reference to the statutory freight rates. It is clear to me, however, that the master and the district judge did not attempt to determine the operation of the 2%-cent statutory passenger rate apart from its companion statutory freight rates. The finding of the master, approved by the court, was that the passenger rate, in connection with the freight rates, and contra, had the effect of making the entire intrastate business of the plaintiff unremunera-tive. This appears from the language of the master’s report and of the opinion and decree of the district judge. The Supreme Court of the United States in the Minnesota Rate Cases have since determined that the problem ordinarily presented in state-made rate cases is the effect of the statutory or commissiommade rates upon the intrastate business of the carrier in its entirety.
It is true that the district judge stated in the course of his opinion that the evidence showed that the passenger business of' plaintiff in Alabama cost the plaintiff to earn a dollar as much or more than its freight business*, from which the inference is sought to be drawn that, as the entire intrastate business was held to be unremunerative, both passenger and freight were separately so held. If the court had intended to find the effect of the statutory passenger rate, in its operation on plaintiff’s intrastate business separately, it is not conceivable that it would have left this finding to be inferred. It is not contended that there was any express and explicit determination of the effect of the passenger rate as there was of the entire schedule of rates. The evidence submitted would not have enabled the master or the district judge to have made either an exact or approximate separate determination of that kind, and there had been no period of experiment of the effect of the statutory passenger rate in its operation, apart from the statutory freight rates, up to the date of the final decree. The only separation
The data to enable the court to reach a correct approximate conclusion being absent from the record, and the report of the master and the opinion and decree of the district judge containing no express finding as to the separate effect of the passenger rate, it is fair to presume that none was made. The assertion in the opinion that the passenger business was not conducted more profitably than the freight business is not a finding that the 2I/d-cent passenger rate, apart from its connection with the statutory freight rates, so substantially contributed to a loss of revenue as to cause confiscation. It is true that the mandatory paragraph of the final decree separately enjoined the Commission from enforcing each of the rate statutes; but, upon tlie question of res adjudicata, this paragraph is to be controlled by the preceding paragraph which sets out explicitly the court’s finding and which, properly construed, contains no such finding, but only a finding that the entire statutory system of rates, both passenger and freight when taken in connection with each other, was confiscatory.
is the issue so found by the court the same in substance as that presented by the second supplemental bill on which the temporary injunction is now asked? It is clear that if the defendants had restored the entire statutory schedule of rates, freight and passenger, after the passing of the decree enjoining them, they could have overcome the defense of res adjudicata only by showing a change of conditions occurring since the decree, having the effect of making the plaintiff's intrastate business remunerative, at the time of such restoration, under the statutory rates. Conceding that such action could he taken under their general and independent rate-making power and without apphing to the district court under the permissive terms of the decree, it could only prevail against tfie defense of the previous adjudication by a showing of that character. If all tlie rates were restored together, the one significant change of conditions (i. e., the operation of the 2x/>-cent passenger rate in connection until the plaintiff’s voluntary and higher freight rates instead of the statutory ones) would not have occurred, and change of conditions could be predicated only upon reports of plaintiff’s earnings and expenses for operations after the date of the decree, showing a different status from those considered by the court.
However, in this case the Commission restored, by the order complained of, only the passenger rate, and the final decree in the original cause, enjoining the enforcement of the statutory freight rates, left it open to the plaintiff to put in force voluntarily any freight rates that were reasonable and would prove remunerative, and it had at the time of the Commission’s order availed itself of this right as to the rates affected by the Eight Group Acts. The situation which confronted the Commission when it made the order complained of was therefore a materially different situation from that which confronted
Fourth. The confiscatory effect of the 2%-cent passenger rate. In order that the rate complained of be shown to be confiscatory, the plaintiff must establish: (1) That its entire intrastate business in Alabama, after the restoration of the voluntary freight rates affected by the Eight Group Acts, in connection with the enforcement of the 2%-cent passenger rate by the Commission, will prove unremunera-tive; and (2) that the 2%-cent passenger rate is so unreasonably low as to substantially contribute to this result.
The rate complained of is probably not entitled to the presumption of correctness which usually attends commission-made rates, in view of the fact that the opinion of the Commission shows that it reached its conclusion that the 2%-cent fare was reasonable, not by reliance upon changed conditions, shown either by the restoration by plaintiff of voluntary freight rates or by the consideration of earnings and expenses during the period between the final decree and its order, but by discarding the methods of apportionment adopted by the master and the district judge by which they arrived at the contrary conclusion, and by the adoption of different methods. While the methods of apportionment adopted by the master and the district judge on the final hearing are not conclusive on this hearing, they are entitled to as much or more weight than a finding of the Commission based on different methods of computation and apportionment, and avail to remove any presumption of reasonableness that would .otherwise arise from the rate fixed by the Commission. The burden is nevertheless on the plaintiff to establish with reasonable certainty that the rate complained of is confiscatory, as is asserted in the new supplemental bill.
The plaintiff seeks to establish the proposition that, even with the higher voluntary freight rates in force, the entire intrastate business, under a 2%-cent passenger rate, would prove unremunerative by methods of computation and apportionment substantially like those used on the final hearing in the original cause, applied to statistics
it cannot be true that we are concluded by the methods of apportionment adopted upon the former hearing in this cause. If it is our duty to decide the ultimate fact of the reasonableness of the 2%-cent rate as against the defense oí res adjudícala interposed by plaintiff, it is clearly our duty to decide it according to what are now correct methods of apportionment, though they may differ from those adopted upon the former hearing. This is as true of methods of apportionment as it would be true of an erroneous arithmetical rule, if such ati erroneous rule had entered into the previous calculation. Any other principle could serve only to perpetuate the error, if any existed, and to render any future hearing, for this reason, a futile one. It is our duty to follow the methods of apportionment used upon the former hearing so far, and only so far, as we believe they are calculated to produce correct results and to conform to the law as it now stands.
Without entering upon any detailed analysis, I think the plaintiff’s methods of apportionment of values and expenses, both as between inter and iutra state business and passenger and freight business, are subject to some of the criticisms presented by defendants’ counsel. The reply contention of plaintiff is that, conceding the justice of the criticisms for the sake of the argument only, they are not of sufficient importance to change the result; that there were omitted items, now supplied, and to credit for which plaintiff is entitled, that more than offset the errors on the other side; and that the confiscation is so palpable that erroneous methods, if they exist, may be safely ignored, as was done by the Supreme Court in certain of the recently decided rate cases.
After a full study of the record and briefs, T am not reasonably satisfied that the plaintiff’s methods of apportioning values and expenses as between passenger and freight and inter and iutra state business are calculated to produce the certain results that are now exacted of a common carrier, seeking the aid of a court to restrain the enforcement of statutory or commission-made rates, by the decisions of the Supreme Court in the 'Minnesota, Missouri, and Arkansas rate cases, recently decided. The difficulty, if not the impossibility, of reaching the requisite certainty, as intimated in these decisions, in the absence of accounts currently kept by the carrier, showing the result of operations properly distributed, is emphasized by the necessity for the double distribution between freight and passenger and between inter and iutra state business which the exigencies of this case require and by the fact that the proof on which the ascertainment rests on this application consists of ex parte affidavits, not contradictorily taken.
The plaintiff must also reasonably satisfy the court of the second proposition that any deficiency in intrastate earnings below the point of remuneration, that may exist, is substantially contributed to by the enforcement of the reduced passenger rate. That rate cannot be said to be so unreasonably low as to be confiscatory, unless its operation is attended with that result. -Even though the intrastate earnings have reached the unremunerative point, it does not follow that every rate reduction thereafter is an act of confiscation. It is conceivable that the reduction of a specific, rate may be inconsequential in its effect on the entire intrastate business, or at least of not sufficient consequence to constitute confiscation, or that, by increasing the amount of business done at the lower rate, it may be attended with no loss of earnings or even with an increase. In such a case the fact that the entire intrastate earnings of a carrier did not, either before or after the reduction, yield a fair return would not condemn the reduced rate.
If the record in this case shows no substantial loss in plaintiff’s passenger earnings attending the reduction of the passenger rate, while it was enforced, as compared with the periods when the 3-cent rate was effective, it will satisfactorily appear that there was no confiscation. A conclusion upon this question may be reached upon admitted facts and figures without resort to complicated and disputed methods of apportionment. A comparison of the annual gross passenger earnings of the plaintiff’s railroad in Alabama from the fiscal year ending June 30, 1907, up to February 28, 1913, the last month available, as reported by the plaintiff, will serve to show the effect of the operation of the two rates. Of this period the 3-cent fare was in force from July 1, 1907, to June 1, 1909, and from April 17, 1912, to February 28, 1913, and the 2%-cent fare was in force from June 1, 1909, to April 17, 1912. A tabulated statement of reported gross passenger earnings for the fiscal years 1907, 1908, 1909, 1910, 1911, and 1912, showing intrastate, interstate, and total separately is appended.
Passenger Revenue.
Tnf'M’K'f’n'fp Tni'vnsfnfii T’rtfnl
Fiscal year ending June 30, 1007.$764,300.78 $1,110,583.93 $1,SS3.S34!71
Fiscal year ending June 30, 1008. 797,315.56 1,087,558.44 1,884,'874.00
Fiscal year ending June 30, 1900. 785,028.30 918,117.59 1,703,145.72
Fiscal year ending June 30, 1910. 823,171.86 972,717.42 1,795.S89.2S
Blscal year ending June 30, 1911. 854,563.34 1,072,605.07 1,927,168.41
Fiscal year ending June 30, 1912 . 929,023.20 1,167,097.77 2,096,720.07
Inspection of the table shows that the interstate gross passenger earnings of plaintiff have increased each fiscal year during the series, without exception; that intrastate passenger earnings decreased from the year 1907 progressively until the year 1910 and from that year progressively increased each year, until for the year 1912 they had passed the high-water mark of the year 1907. Total passenger earnings of plaintiff iti Alabama decreased for the years 1909 and 1910 over the years 1907 and 1908, which were substantially alike, and beginning with the year 1910 progressively increased, until for the year 1912 the total earnings in Alabama exceeded those for the year 1907 by $212.826.26. In the same year (1912) the interstate passenger earnings in Alabama exceeded interstate passenger earnings for the year 1907 by $164,722.42, and the intrastate passenger earnings for 1912 exceeded those for 1907 by ,$48,113.84. The 2(4-ccut rate was in effect the fiscal year ending June 30, 1909, up to April 17, 1912. The year ending june 30, 1907 was the most pros-perólas year the railroads of the country have experienced. It was followed by the panic of October, 1907, and the panic years of 1908 and 1909. Earnings during the panic years were naturally abnormally small, and a comparison of the year 1907 with those years would be misleading. The year 1912 was a typical year of prosperity and affords a fait year of comparison with the last preceding year of prosperity, which was 1907. Such a comparison show's that passenger earnings under the 2(4- cent rate for both inter and intra state traffic were materially in excess of those for this most prosperous previous year. It is true that, if a normal increase had been added each year to the previous year from 1907 to 1912, the excess of 1912 over 1907 would have been much greater, but the intervening panic years account for the absence of continuous normal increases during the period of comparison. It does not seem that confiscation can be predicated upon a rate which, during the last year it was effective, produced an increase in intrastate earnings over the intrastate earnings of the preceding most prosperous year, and which did this, not only' without causing a reduction in interstate passenger earnings for the same year, but wdien these earnings were also greatly in excess of those of the same prosperous year of comparison. Whether this result was obtained by' a stimulation of passenger business due to the reduced fare or to the normal growth of the tributary country during the intervening years, or to the increase of travel always attendant upon the return of good limes, it remains true that for some reason the conditions in 1912 were such that plaintiff could conduct its passenger business in Alabama, under the reduced rate, with results that compared favorably with its passenger earnings for the most prosperous year in the history of our railroads, and hence without confiscation.
1910 over 1909. $54,599-83
1911 over 1910. 99,887.65
1912 over 1911. 95,092.70
—as compared with decreases for the years 1909 over 1908 and 1908 over 1907 when the 3-cent fare was effective. However, these, as stated, were panic years and not fair standards of comparison.
The aggregate increase on plaintiff’s intrastate gross passenger earnings for the three years when the 2%-cent fare was effective was $249,488.18. During the same period the interstate gross passenger earnings increased $143,994. The total passenger returns for the plaintiff in Alabama increased $393,575.08. Percentages of increase were respectively 27.2 per cent., 18 per cent., and 23.1 per cent for intra, inter, and total passenger receipts.
It may be true that the increase in intrastate earnings for the first year during which the 2%-cent rate was effective over the last year the 3-cent fare was effective was partly at the expense of the interstate earnings through the custom of the interstate passengers re-buying tickets at stations near tire Alabama state line to get the benefit of the reduced Alabama rate, as is shown-by the reduced comparative increase in interstate earnings for that year. However, the increase of the second year in which the reduced rate was effective over the first and of the third year over the second (which were each in greater amount) cannot be so accounted for, since the same fare was in effect during each of those years. The motive that induced interstate passengers to avoid paying the 3-cent fare by rebuying their tickets at state line stations, with the incident trouble of re-checlcing baggage when they had any, would also tend to induce intrastate passengers to travel as infrequently and as few miles as possible and so tend to restrict intrastate passenger travel under the 3-cent fare, and for a like reason the reduced 2%-cent rate would to some extent stimulate such travel. However, it is not necessary to attribute the admitted increase in passenger travel to the reduced rate. It concededly exists, and, whatever may be its cause, it avails to show'that a rate under which such returns are possible cannot.be now confiscatory, whatever might have been said of it under previous conditions of traffic. Otherwise reductions of passenger rates would never be justified because of increased earnings due to increased population and denser traffic conditions, such as appear from the affidavits of plaintiff’s witnesses to have obtained on its line in Alabama. So the percentages of increase might or might not have been greater under a 3-cent fare, dependent upon how much or how little the increase was due to stimulation caused by the lower rate; but in view of the very substantial absolute increase in each class of passenger earnings over each preceding year, bringing them finally above all previous records, confiscation cannot be predicated merely on diminished percentages of increase over what might have obtained under the 3-cent fare.
A comparison of results of operation after the 3-cent fare was restored on April 17, 1912, and until February 28, 1913, the last available month, with the earnings for the corresponding periods while the 2J->-cent rate was in force, shows no such differences as would indicate confiscation. They are as follows:
Intrastate Passenger Revenue.
May, 1909, to February, 1910. $ 791.,108.84
May, 1910, to February, 1911. 880,10(5.05
May, 1911, to February, 1912. 967,672.15
May, 1912, to February, 1912. 1,056,(582.99
Increases in Intrastate Passenger Revenue.
In Dollars. In Percentage.
1910-11 over 1909-10. 891,997.21 12.08
1911-12 over 1910-11. 81.566.10 9.20
1012-18 over 1911-12. 88,610.84 9.16
The increase in revenue since May 1, 1912, with the added %-cent due to the increase in rate, is below the normal in percentage and not substantially above the average of increase for the two years next preceding, in amount. If the restoration of the 3-ceut fare has worked no greater differences than these in plaintiff’s intrastate earnings, it is difficult to understand how the 25,4-cent fare can be held to be 'confiscatory.
For the reasons assigned in the opinion of Circuit Judge Shelby and those herein expressed, whatever conclusion may be reached upon the final hearing after fuller presentation and by witnesses subjected to cross-examination, I am of the opinion that the plaintiff, at this stage of the cause, has not shown with the degree of certainty
Note. — See, also, Seaboard Air Line Ry. v. R. R. Commission of Alabama (C. C.) 155 F. 792" court="None" date_filed="1907-07-14" href="https://app.midpage.ai/document/seaboard-air-line-ry-co-v-railroad-commission-9303757?utm_source=webapp" opinion_id="9303757">155 Fed. 792; Louisville & N. R. Co. v. Railroad Commission of Ala. (C. C.) 157 F. 944" court="None" date_filed="1907-09-04" href="https://app.midpage.ai/document/louisville--n-r-co-v-railroad-commission-9303825?utm_source=webapp" opinion_id="9303825">157 Fed. 944; Central of Ga. Ry. Co. v. Railroad Commission of Ala. (C. C.) 161 F. 925" court="M.D. Ala." date_filed="1908-03-21" href="https://app.midpage.ai/document/central-of-georgia-ry-co-v-railroad-commission-of-alabama-8767459?utm_source=webapp" opinion_id="8767459">161 Fed. 925; Louisville & Nashville R. R. Co. v. Railroad Commission of Alabama, 170 F. 225" court="5th Cir." date_filed="1909-04-06" href="https://app.midpage.ai/document/railroad-commission-v-central-of-georgia-ry-co-8771253?utm_source=webapp" opinion_id="8771253">170 Fed. 225, 95 C. C. A. 117; South & N. A. R. Co. v. Railroad Commission of Ala. (C. C.) 171 F. 225" court="None" date_filed="1909-06-30" href="https://app.midpage.ai/document/south--n-a-r-v-railroad-commission-of-alabama-9304231?utm_source=webapp" opinion_id="9304231">171 Fed. 225; Louisville & Nashville R. R. Co. v. R. R. Commission of Alabama (D. C.) 196 F. 800" court="N.D. Ala." date_filed="1912-04-05" href="https://app.midpage.ai/document/louisville--n-r-v-railroad-commission-8783427?utm_source=webapp" opinion_id="8783427">196 Fed. 800; Louisville & N. R. Co. v. R. R. Commission of Ala. (D. C.) 205 Fed. 800.
Dissenting Opinion
(dissenting). The act of Congress providing for the calling in of two judges in certain applications for temporary injunctions is a restrictive statute, not at all flattering to the intelligence and impartiality of the District Judges of the country, and it does not in my judgment call for a liberal construction, and so I am not inclined to broaden the statute to cover a supposed intention of the lawmaker, but rather disposed to leave the matter to the Supreme Court, and in the meantime hold that the eminent lawyers in the judiciary committee of Congress who framed the same meant exactly what they said and said exactly what they meant.
I appreciate the force of Judge SHELBY’S reasoning in regard to the proper construction to be given to the statute, and under the peculiar circumstances of this case I am not disposed to make any further point in the matter.
Whether, in view of the previous and just concluded litigation between the same parties, the Railroad Commission of Alabama had a right to disregard the final decree rendered in the case and pay no attention to the seventh paragraph thereof (a paragraph, by the way,, that the Supreme Court in former decisions and in the lately decided railroad cases seems to think of some force, and a necessary part of a like degree), has, I understand,'been substantially passed upon by Judge GRUBB, and therefore I am disposed to accept Judge SHELBY’S conclusions in that respect, and make no point against the same, although fully satisfied that it would have been more respectful and seemly if the Railroad Commission had made application to the court under the seventh paragraph- of the final decree, alleging changed conditions and asking proper relief.
The supplemental bill 'brings before us at this hearing the entire litigation between the parties, and it seems to me that at this time, and acting on this application for an interlocutory order, all the matters in contest in the main case and settled by the decree rendered are for the present inquiry res adjudicata; and no presumption in favor of. the action of the Railroad Commission, and no presumption generally in f-avor of statutory boards, can now be interposed to reopen any of the issues that were passed upon and decided in the aforesaid final decree. And if there were any presumptions to be indulged on this hearing, they preponderate on the side of the complainant, who is en
As I read the final decree, which is a part of the law of the case we are now considering, the court-decided that the statute requiring a maximum 2 (/¿-cent passenger rate on the complainant's railway and branch lines in Alabama was void, as confiscatory, and neccssaiily in and of itself void. It is not to be presumed that the court could or would declare a statute of the state void which was not tainted with unconstitutionality. I paid attention to the argument (not, however, based on facts as found by the master and approved by the court) that the 2'J/2-cent statute was only decreed void as a part of a system, and I think the same without force. Kvery statute of a state is part of a system of all the laws of the state, and there is nothing in the act which, as one dealing with one only subject, shows it was to stand or fall with other statutes passed by the same Legislature.
With this preliminary the question before us is whether, on the record and showing made by the parties, a case has been made which entitles the complainant to an injunction maintaining the status quo pending a final hearing upon the issues presented by the bill. Certainty that the complainant will recover on final hearing is not called for. Decided probability, based on the facts presented, is all that we are expected to require on this hearing. The evidence before us is voluminous, general, specific, and detailed, involving matters of the building, costs, expenses, receipts and disbursements, maintenance, and operation of the complainant’s railway and numerous branches, intrastate and interstate, in Alabama, and also much of the same located in other states, and some involving costs, expenses, disbursements, and profits in practices of other railroads in and out of Alabama. To analyze the evidence at present and support my conclusions in the case will take more time than T have at my disposal or the exigencies of the case will allow (incidentally I refer to the voluminous briefs in the case); but to all these matters I have given careful examination and consideration in the light of decisions cited and all the very late decisions in rate cases by the Supreme Court of the United Slates, and my conclusions are that no changed conditions arising since the rendition of"the final decree in the main case have been shown making a 21/4-cent passenger rate reasonable and compensatory on complainant's lines, and that the complainant has ma.de a case that entitles it to an injunction pending the suit — a case which, if as well established by evidence contradictorily taken, will entitle the complainant to relief on final hearing.
On Application for Appeal and Supersedeas, or for a Continuance of the Restraining Order Pending Appeal.
The plaintiff’s petition for an interlocutory injunction having been •denied, the plaintiff presented a petition praying for an appeal to the
“This cause coming on to be heard upon the application of the plaintiff, the Louisville & Nashville Railroad Company, for the allowance of an ai>peal direct to the Supreme Court of the United States from an order of the District Court, composed of two Circuit Judges and a District Judge, denying the petition of the plaintiff for an injunction pendente lite, as prayed for in its supplemental bill in this cause, and upon the application of the plaintiff for a supersedeas and an order restraining the enforcement of an order of the Railroad Commission of Alabama set out in its supplemental bill;
“And the court being of opinion that, owing to uncertainty as to the proper construction of section 266 of the Judicial Code, with relation to the authority of the court to restrain the enforcement of the order, pending the appeal, and in view of the present status of the case, and the pendency of other cases that are likely to present the same question for decision, and of the importance of a final and authoritative decision thereof to the public and the litigants, the application for a supersedeas and for a restraining order would better be presented to the Supreme Court:
“It is therefore ordered that the plaintiff’s application for the allowance of the appeal and for supersedeas or a restraining order against the enforcement of the order of the Railroad Commission of Alabama, pending the appeal, be denied, the court not passing upon the merits of the application, and without prejudice to the right of the plaintiff to renew its application for an appeal and for a restraining order, pending the appeal; in the Supreme Court, or as it may be advised.'
“Given ‘this 13th day of September, 1913.”
Concurrence Opinion
I concur in the decree refusing to continue the restraining order pending the appeal, but I reach that conclusion from a consideration of the application on its merits. My view would lead to a denial of the application, but not to referring the motion to the Supreme Court. The plaintiff would, of course, be free to make such application to that court as it chose to make.
It is argued that, because one of the judges dissented from the decision on the first application, such doubt is. created that the second application should be granted. If one thing is made clear by the statute, it is that one judge cannot grant the injunction. If, when the injunction is refused by the court, composed of three judges, the dissent of one of the judges was permitted to control a second application, and cause an injunction or a continuance of the restraining order, the purpose of the statute would be defeated. One judge could still prevent the enforcement of the rates fixed by a Commission or by a Legislature.
It is urged that the second application should be granted because the decision of this court may be reversed. If a majority of the court now believe we have decided erroneously in refusing the injunction on the first application, the way to correct it here, if we have authority
Stress is laid on the plaintiff’s offer to-give bond to indemnify passengers. The same tender was made on the application for an interlocutory injunction. Where the rights of a defendant may be protected by bond, the court will often exercise its discretion in favor of granting or continuing an injunction; bond being required of the plaintiff. This is often the case in controversies between individuals involving a sum of money or certain property, or even involving contracts, where the interest involved is certain and the defendant in the suit is the person to be indemnified. The bond in such cases protects-the defendant. Here the defendants have no interest in the litigation. The suit is really against the people who travel or who may travel on the plaintiffs road. The Attorney General of the state receives notice under the statute, and appears, together with special counsel, for those really interested. The people who would travel at a lower rate, but who do not travel when the rate is unreasonable, are interested in enforcing the rate fixed by the Commission. No bond can be framed to protect them, for the individuals or numbers of individuals who would travel at the lower rate cannot be ascertained. The fact is, whatever the theory may be, that the bond in a case like this affords no adequate protection. The plaintiff, in argument, insists that at the 3 cents a mile rate it collects from passengers every day $400 more than it receives at the 2%-cent rate; that is, if it obtains the stay, and if there is a delay of 300 days in deciding the appeal, it will collect $120,000 that the Commission and this court have decided it ought not to collect. During the 300 days the plaintiff will hand each purchaser of a ticket a coupon representing the excess charge. The theory is that these coupons will be presented and redeemed if the lower rate is finally sustained. The fact is that such coupons are not, to any considerable extent, preserved and presented. Probably not one coupon in a hundred would ever be presented for payment. The plaintiff has nothing to lose and everything to gain by litigation and appeals prosecuted .under such bonds. To allow an injunction under the circumstances is to needlessly encourage such suits and appeals and to prolong the litigation. The plaintiff has nothing to lose. If it fails in the final result, it will have the cash in hand to cover all possible claims, with probably a large surplus that would never be claimed.
The reasons which led to the passage of the statutes now forming, section 266 of the Judicial Code are well known, and are part of the judicial and political history of the country, and no comment on them is necessary. The. legislation was intended to check and prevent a
The provision requiring five days’ notice to the Governor and Attorney General and to the defendants, the provision peremptorily limiting the operation of the temporary restraining order, and the provision that the federal courts will surrender jurisdiction upon certain conditions of litigation in the slate courts (judicial Code, § 266), ah point to a reluctance on the part of Congress to have state action en
But if it be conceded that the statute or the general law gives us a discretionary power to set aside the Commission’s rate now in force and to reinstate the rates fixed by the railroad company — a question not necessary to decide now — I do not think a case is presented for the exercise of such discretionary power. The application to continue the restraining order should be refused, because we have already decided that the rate fixed by the Commission should not be enjoined. I reach this conclusion from reasons given in this opinion and from the reasons given in other opinions filed in this case on the application for an interlocutory injunction.