199 F. 621 | W.D. Wash. | 1912
These cases are now before the court upon demurrers to the complaints. They were heard together, and will be considered and disposed of in the same way.
The bill in case No. 1,094 alleges: That complainant is operating as one system lines of railroad in the state of Washington and other states, and is engaged in state and interstate commerce. That the greater part of its business in said state is interstate; the same cars being used for both interstate and intrastate commerce. That defendants Fee, Jones, and Wilson constitute the Public Service Commission of the state of Washington. That the defendant Tanner is its Attorney General. That the defendants Hyde and Carman are intrastate shippers of the state of Washington, sued as representatives of that class of shippers.
That in February, 1912, said Commission made an order requiring complainant to cease making charges under its freight tariffs throughout the state, and thereafter to charge only lower rates
That the rates lowered by the Commission were on freight in classes 1, 2, 3, 4, 5, A, B, C, D, and E, according to complainant’s classification of freight products, and excluded “lower class, or commodity rates * * * specifically established.”
That the Commission found complainant’s property used as a common carrier in the state of the value of $127,250,000. This was conceded by the bill to be approximately true. The value of the property is alleged to be:
For state business......................................... $70,648,971 00
For interstate' business.................................... $56,603,029 00
For state freight business..................................$43,480,949 00
For state passenger business............................... $27,168,022 00
For interstate freight business............................. $39,833,444 00
For interstate passenger business........................... $16,707,585 00
That for the'fiscal year ending June 30, 1911, its revenues in the state of Washington, under the old tariff, were:
From state freight business.................................$6,435,416 35
From interstate freight business............................. $5,877,130 10
Miscellaneous freight earnings............................... $ 561,050 41
Intrastate proportion miscellaneous freight earnings..........$ 292,806 60
Interstate proportion miscellaneous freight, earnings..........$ 268,243 81
Revenues received on account of hire of freight equipment.... $ 038,379 65
Intrastate proportion of same...............................$ 333,163 96
Interstate proportion of same...............................$ 305,215 09
Revenues from intrastate passenger business.................. $3,654,988 04
From interstate passenger business.......................... $2,255,824 06
Miscellaneous passenger earnings............................ $ 867,420 50
Intrastate proportion of same...............................$ 536,378 14
Interstate proportion of the same............................ $ 331,042 36
Rental passenger equipment..................................$ 336,647 69
Intrastate proportion of same................................$ 208,169 4.7
Interstate proportion of same................................ $ 328,478 22
Received from operations connected with passenger service----$ 124,500 04
Intrastate proportion of same................................ $ 76,985 84
Interstate proportion of same............................... $ 47,514 20
That for the same year the operating expenses for the state of Washington were $13,280,609.31, segregated as follows:
For carrying freight......................................... $8,502,079 84
For carrying passengers..................................... $4,778,529 47
The ton miles carried intrastate freight were.................. 420,662,143
The ton miles interstate freight carried were.................. 738,963,'823
That one ton mile, intrastate freight, costs 2% times as much as one ton mile interstate freight. That, therefore, of the total freight expense—
The proportion intrastate would be..........................$4,993,356 51
The j>roportion interstate would be.......................... $3,508,723 33
Eor the same period — ■
The intrastate passenger miles were........................... 328,783,847
The interstate passenger miles were........................... 105,843,492
The proportion for intrastate service was....................$2,786,838 39
The proportion for interstate service was....................$1,991,691 08
That for said year the taxes paid were chargeable as follows, segregated on the basis of revenue:
Against intrastate freight earnings........................... $ 442,SSI 65
Against interstate freight earnings........................... $ 405,729 45
'Against intrastate passenger earnings....:................... $ 276,723 92
Against interstate passenger earnings..............•.____■.____$ 170,7S8 72
The total earnings, as shown for intrastate freight and freight
equipment, was— ----:........:......................1.. $7,041,3S6 91
The total expense and taxes chargeable against the same was.. $5,436,238 16 Leaving an income of----::..............;................1. $1,G05,14S 75
That this income only amounts to 3.692 per cent, on 'the part of .the property, assignable to intrastate freight business.
The total intrastate passenger earnings, including rental, and hire, of passenger equipment, were.....................$4,476,521 49
The total taxes and expenses chargeable against the same were ..................................................... $3,063,562 31
Leaving an income for intrastate passenger business.......... $1,412,959 IS
, — or a percentage on the property assignable to intrastate passenger business of 5.201 per cent.
That on. the total valuation assignable to all intrastate business, both freight and passenger, amounting to $70,648,971, the percentage of income was 4.272 per cent: - That, using the same method of calculation for the fiscal year ending June 30, 1910, the income upon such valuation was 4.771 per cent. That the rates for the years 1910 and 1911'are'as great as can be reasonably anticipated .for the future, and constitute,a less rate than capital employed similarly in the state of Washington generally receives. That the charges fixed- by the Commission are much lower than the tariffs of 1910’ and 1911', and that the change will cause a reduction in freight ■revenue of .two hundred thousand dollars annually. That complainant’s road “is well and judiciously located, properly equipped and built, having reference to the business of the country and that reasonably to be expected, and is well and economically operated.”
The prayer of the complaint is- that the order of the Commission be declared unconstitutional and void, and'the rates fixed thereby unreasonable and confiscatory; that the Commissioners and *At'tbrney 'General and their successors be' enjoined from enforcing the .provisions of the order and. the rates, fixed, and that the other defendants and all other shippers:be.'enjoined from attempting to ship under said rates or to enforce the provisions of the order; that an accounting be taken o.f .complainant’s earnings and expenses and the .value .'of-the-portion-of its property-devoted to freight-traffic in Washington; and that an ascertainment be made of the return the complainant can receive thereon under existing rates.
The bill of 'complaint in case No. 1,093' alleges: That complain
That complainant’s railroads were constructed and acquired at the fair and reasonable value thereof. That the same are judiciously and wisely located, and have been at all times, and now are, well, properly, and economically operated.
That, upon complaint to said Commission — made by certain commercial organizations of the cities of Tacoma and Seattle — that the rates and fares of complainant and other carriers in the state were unreasonably high, a hearing was had, and the Commission made an order on December 13, 1911, reducing the intrastate freight rate. That another such order was made February 5, 1912.
That complainant has ever since complied with these orders. That the law of the state of Washington provides that each violation of these orders constitutes a separate offense, punishable by a fine of $1,000.
That the orders were made capriciously and arbitrarily, contrary to the evidence and without regard to complainant’s right to earn a fair return on its-property devoted to the public use. That the rates are confiscatory and will deprive complainant of its property, without due process of law, in violation of the fourteenth amendment to the Constitution of the United States.
Tlmt complainant’s outstanding bonded debt amounts to.....§143,831,909 09
Tliat complainant's paid-up capital stock amounts to........ §209,981,875 00
That said capitalization is fair and reasonable, and represents less iban the actual value of its property.
That in the state of Washington it owns 875 miles of railroad. That therein it operates, as owner or otherwise, 1,080 miles.
That the Commission, in 1909, found complainant’s property in tlie state to be of the fair market value of.............. §59,577,212 00
That thereafter, in 1910, it found such property to be worth.. §07,000,000 00
That complainant has ever since been taxed by the state authorities on these values.
That the value of its property devoted to its business as a common
Of that portion of Its property within the state used In intrastate freight business is in excess of the sum of............$15,463,678 95
And of such property devoted to intrastate passenger business is in excess of........................................... $17,365,291 86
That the complainant’s total earnings from all freight traffic in the state—
For' the fiscal year ending June 30, 1910, were................$5,463,603 81
Of which there was intrastate............................... $2,217,074 95
And of which there was interstate.......................... $3,246,528 86
That complainant’s operating expenses, rentals and taxes, excluding fixed charges and any return on investment, for all freight business in the state—
For the fiscal year ending June 30, 1910, were................ $4,409,188 47
And for the fiscal year ending June 30, 1911, were............$4,893,918 42
That the cost of doing intrastate business is much greater than interstate, from two to five times as great; that the amount of expense properly chargeable to intrastate traffic would reduce the income, under the Commission’s order, so as to leave an insufficient amount to constitute a fair retúrn on the property devoted to this use.
That substantially 45 per cent, of complainant’s revenue on intrastate freight traffic is derived from that part of the traffic covered by the Commission’s order; that, prior to the enforcement of such order, its rates were from 25 to 50 per cent, higher than under the order; that the enforcement of said order would decrease its earnings from that traffic approximately $300,000. annually.
That its total passenger earnings from all sources in the state of Washington—
For the fiscal year ending June 30, 1910, were................$3,905,050 61
Of which there was intrastate............................... $2,543,264 70
And of which there was interstate...................•........$1,361,785 91
That the total of like earnings—
For the fiscal year ending June 30, 1911, was................$4,180,310 33
Of which there was intrastate............................... $2,512,507 48
And of which there was interstate........................... $1,667,802 85
That its expenses on passenger business in the state of Washington—
For the fiscal year ending June 30, 1910, were................$3,538,754 79
And for the fiscal year ending June 30, 1911, they were......$4,221,727 82
That, if complainant should refuse to comply with such orders, a multitude of damage suits against it and its agents would result. That the earnings from any class of freight business can be readily determined, but that the expenses cannot be accurately determined, as the same property is being used at the same time in the carrying of hundreds of daily items of both state and interstate traffic. That it will require an accounting to ascertain the approximate cost of doing purely state business.
That an important part of complainant’s business consists of all rail shipments from different parts of the United .States to points in Eastern Washington. That in such trade it must compete with the water and rail routes by way of the Pacific ports. That, by the Commission’s order, the water and rail rate for interstate traffic was materially lowered. That complainant and other all-rail carriers, to meet such lowered rate, were compelled to lower their interstate all-rail rate. That this result constitutes an unlawful interference with interstate commerce in violation of article 1, § 8, of the Constitution of the United States.
That, by reducing the rates from Western Washington commercial centers to local distributing points in Washington, near its other boundaries, there will be such a marked discrimination against interstate traffic with points just beyond the borders of the state as to force a reduction in the rate on interstate shipments. That this, also, constitutes an unlawful interference with interstate commerce.
The prayer of the complaint is that the order of the Public Service Commission be vacated as confiscatory, for injunctive relief against the defendants, and for an accounting to determine the value of complainant’s property devoted to intrastate freight traffic in Washington.
If the conclusion of the pleader alone, without1 detailed information, is considered, it is, shown that the effect, which it is contended the Commission’s rates would have upon interstate rates, is not a necessary or direct result; but, if at all effective, they become so because the carrier- — -for prudential reasons, to prevent friction with the interstate shippers and possible loss of business oh account of too great a disparity between the intrastate and interstate rates to adjacent points— would lower the interstate rate to more nearly conform to the intrastate rate. This is neither the legal .effect of the Commission’s order nor the direct result. It is merely incidental, and would not form a basis to avoid the Commission’s order on the alleged ground that it will regulate and control interstate commerce, or put a burden thereon. If the rates fixed are just and reasonable, this alone would not defeat the Commission’s action. Woodside v. Tonopah & R. G. Co. (C. C.) 184 Fed. 358, 360; O. R. & N. R. R. Co. v. Campbell (C. C.) 173 Fed. 957; Southern Pacific R. R. Co. v. Campbell (C. C.) 189 Fed. 182.
The question of what is a fair and adequate return is a, mixed one of law and fact. Complainant in cause No. 1,094 alleges in its .bill; ' ■ '
*629 “The return which your orator received, as aforesaid, in the years 1910 and 1911 is about as large as your orator can reasonably anticipate for the future, by reason of increased competitive conditions, * * * and is a less rate than your orator is entitled to have upon its capital invested in the business of transportation, and is a less rate than capital employed in other and somewhat similar business in the state of Washington generally receives.”
In Willcox v. Consolidated Gas Co., 212 U. S. 19, at page 49, 29 Pup. Ct. 192, at page 199 (53 L. Ed. 382, 15 Ann. Cas. 1034), it is said:
“Under the circumstances the court held that a rate which would permit a return of 6 per cent, would be enough to avoid the charge of confiscation, and for the reason that a return of such an amount was the return ordinarily sought and obtained on investments of that degree of safety in the city of New York. Taking all llie facts Into consideration, we concur with the court below on this question, and think complainant is entitled to 6 per cent, as a fair return on the value of its property devoted to public use. * « * Of course, there is always a. point below which a. rate cannot be reduced and at the same time permit a proper return upon the value of the property. * * * ” Central of Ga. R. R. Co. v. R. R. Commission of Ala. (C. C.) 161 Fed. 925; L. & N. R. R. Co. v. Brown et al., R. R. Commissioners (C. C.) 123 Fed. 917; New Memphis Gas & Light Co. v. City of Memphis (C. C.) 72 Fed. 952; Spring Valley Water Co. v. City & County of Sail Francisco (C. C.) 121 Fed. 574; Milwaukee Klee. Ry. & Light Co. v. City of Milwaukee (C. C.) 87 Fed. 577, 585; Puget Sound Elec. Ry. v. R. R. Commission, 65 Wash. 75, 117 Pac. 739.
The Northern Pacific bill shows that, while that complainant and the Commission agree that the total value of the railroad company's property in the state of Washington is $127,250,000, yet they do not agree concerning what portion of this total is used in intrastate commerce; complainant alleging it to be $70,648,971, and the Commission finding it to be $52,172,500. In the Great Northern bill the value of its property devoted to intrastate traffic is alleged to be in excess of $32,828,970.81 ; but it is alleged that the Commission has found it to be $30,150,000. It is upon the true valuation— if either of these be so — that the complainants are entitled to a fair and reasonable return. Thus one ground of the controversy is disclosed by the bills. The complainants’ general distance freight schedule, which was modified by the Commission, provided rates for ten classes of freight. For a distance of five miles the cost was graded down from 10 cents a' hundred for the first class, through the intervening eight classes to 2 cents a hundred for the tenth class — class “F.” The advance in each rate for the different classes was uniform regarding one another for greater distances than five miles,' but the charge by mile uniformly diminished with the increase in the length of the haul. For example: For 100 miles the rate was 60 cents a hundred for first class and 12 cents a hundred for class “F.” For 200 miles the rate was $1 a hundred for the first-class freight, and 20 cents a hundred for class “F.”' For
The Commission’s order recognized and adopted the system of classification embodied in the complainant’s tariff, but made a graduated reduction in all the rates. of these classes, except the rate for the first five miles. For example, the rate for first class for 100 miles was 50 cents a hundred, instead of 60 cents, a reduction of 16% per cent. For 300 miles the rate was made 91 cents a hundred, instead of $1.40, a reduction of 35 per cent. For 500 miles the rate was made $1.28 a hundred, instead of $1.80, a reduction of a little more than 28 per cent. By the order of the Commission, it was provided that the rates for the second, third, fourth, fifth, sixth, seventh, eighth, ninth, and tenth classes should not exceed 85, 70, 60, 50, 50, 40, 30, 25 and 20 per cent., respectively, of the first-class rate. Other tariffs were affected by the Commission’s order, but, like the foregoing, the reduction and changes were made with mathematical uniformity. This is enough to disclose that the Commission’s order, changing the tariff in this manner, was done to absorb what was conceived to be a general overcharge arising from some basic difference as an overvaluation of the property devoted to intrastate use. To absorb this general overcharge, a uniform reduction was made. It is thus made apparent that the controversy does not apply to.this or that particular one of these 10 classes of freight in any way different from the oth.ers; but that it concerns them all. The Commission by adopting the same uniform ratio for the reduction in freight rates from first class down to the tenth, or “F,” class, shown in the railroad’s tariff, conceded the proper exercise, by the railroad of a discretion in the matter of classification, so far as the class rates are related to one another.
This contention is made on what is conceived to be the authority of Cotting v. Kansas City Stockyards, 183 U. S. 79, 22 Sup. Ct. 30, 46 L. Ed. 92. But, even in that case, it is warningly said:
“The court (Supreme Court) has held that the Legislature may not prescribe rates which, if enforced, would amount to a confiscation of the property. But it has not held affirmatively that the Legislature may enforce rates which stop only this side of confiscation and leave the property in the hands and under the care of the owner, without any remuneration for its use.”
If the Commission had attempted to reform the rates as a whole (Cotting v. Kansas City Stockyards, supra, at page 89 of 183 U. S., 22 Sup. Ct. 30, 46 F. Ed. 92), then the statements of totals, as in 'the Northern Pacific bill, would probably have been sufficient. The carrier is not primarily concerned as to the uniformity of the rates, and cannot complain of what it names as discrimination in rates “so long as the total is enough to furnish such return” — a reasonable return upon a fair valuation of its property. “It is not important that, with relation to some customers, the price is not enough.” Willcox v. Consolidated Gas Co., 212 U. S. 19, at page 54, 29 Sup. Ct. 192, at page 201 (53 L. Ed. 382, 15 Ann. Cas. 1034).
Complainants have recognized the necessity of setting out the revenue from passenger business, as well as freight. This must be done under any circumstances to establish that the total revenue is not unreasonably high. Being armed with the right of eminent domain, the right to take for its use the property of the individual at its fair market value, the public is entitled to the services of the common carrier at what they are reasonably worth — at least so long as such services so furnished will afford the carrier a reasonable return upon its property devoted to the public use. The public, therefore, has the right to freight rates in which there is no unreasonable discrimination against any locality or class of freight. The tabulation of values, revenues, and expenses in both bills of complaint fail to disclose the net revenue derived in the past under the old rates from the classes of freight included in the Commission’s order. They do not disclose the amount of expenses properly chargeable to those classes; nor set out any estimate of wdiat the revenue and expense would be on the same under the Commission’s order. They do not disclose what, if any, net revenue has been realized from the intrastate freight rates not affected by the order, nor whether the same were carried at a profit or loss.
The Great Northern bill does not show the expenses properly chargeable to intrastate freight, alleging that the expenses cannot be ascertained with mathematical certainty. The presumption upon demurrer would, therefore, be that freight, other than in those classes affected by the order, was not carried at a profit. There must be some point beyond which a carrier cannot go in discriminating in freight charges against various classes of freight, else one class may be compelled to bear the expense of the whole traffic.
Without deciding the question finally upon these demurrers, it is held that it is not sufficient to justify the revenue received on
While the foregoing does not furnish'the requisite information, it does show, with the other facts alleged, a sufficient grasp of the details of the business in these particulars to enable the complainants to furnish approximately correct statements of these amounts, and this before entering upon a reference and accounting. The difficulty in forming a reasonably accurate estimate of the amount to be credited and charged to the different classes of freight traffic is obvious, especially so as its subdivision into different classes is extended. The Supreme Court has said: “How specu-
lative” are these figures that are “set down with delusive exactness.” City of Louisville v. Cumberland Tel. & Tel. Co., 225 U. S. 430, 32 Sup. Ct. 741, 56 L. Ed. 1151; Southern Pacific Ry. Co. v. Railroad Commission (D. C.) 193 Fed. 699; South. Pac. Ry. Co. v. Campbell (C. C.) 189 Fed. 182.
The foregoing shows the more need of a painstaking effort to narrow the issues and develop with precision all the equities of the cause from its inception. The allegations in the bills concerning the danger of incurring great daily penalties, if the Commission’s order was not complied with, were evidently inserted as a ground justifying the asking of equitable relief and not as an attack upon the .commission law itself under the fourteenth amendment to the Constitution of the United States. Willcox v. Consolidated Gas Co., 212 U. S. 19, at pages 53, 54, 29 Sup. Ct. 192, 53 L. Ed. 382, 15 Ann. Cas. 1034; Reagan v. Farmers’ Loan & Trust Co., 154 U. S. 362, 14 Sup. Ct. 1047, 38 L. Ed. 1014; Berea College v. Commonwealth of Kentucky, 211 U. S. 45, 54, 29 Sup. Ct. 33, 53 L. Ed. 81.
.The demurrers will be sustained.