193 F. 699 | N.D. Cal. | 1912
The bill seeks to enjoin the enforcement as invalid of an order of the respondent, the Railroad Com
The bill attacks the validity of the ordinance of the board upon three specific grounds: (1) That the rates fixed thereby are so unreasonably low as ta> be confiscatory, and that their enforcement will result in taking complainant’s property without due process of law, in violation of the guaranties of the Constitution of the United States; (2) that the order, if enforced, will directly and necessarily interfere with interstate commerce, and is therefore in violation of the provision of the Constitution committing the power to regulate that subject whdlly to Congress; (3) that, under the facts alleged as to the situation of certain competing lines of road and the circumstances disclosed under which the order was promulgated, its effect, if enforced, will he to deprive complainant of the equal protection of the law, in violation of the fourteenth amendment to the Constitution of the United States.
Counsel in their presentation of the case have followed the order and sequence of the objections as just stated, and it will therefore prove more satisfactory perhaps to follow the same order in discussing the questions raised by the demurrer for the purpose of considering the sufficiency of the bill.
1. As to Unreasonableness of the Rates.
Aside from the jurisdictional facts, and avoiding certain general averments as to the effect of the order repeated throughout the bill in various forms, and partaking more of the nature of conclusions than of ultimate facts, the pertinent features of the bill affecting- the first ground of objection to the order of the commission are these: That complainant is a common carrier of freight and passengers, owning and operating connecting lines of railroad in the states of California, Nevada, Utah, Arizona, and other states and territories, and as such is engaged in both interstate and intrastate commerce. That, in connection with and as a part of its system, it was at the times mentioned in the bill operating the line of road affected by the order in question, described as “a certain line of railway within the state of California, between the city of San Pedro and the city of Uos Angeles, known as and called the 'San Pedro Branch,’ and was carrying over its said railway line freight and passengers under tariffs of rates, fares, and charges duly established, published and filed with said defendant,” which tariffs of rates so filed are alleged to be fair, just, and reasonable. The proceedings leading up to the hearing before the respondent hoard, and culminating in the order complained of, are then stated, and the order of the board is set out in full, and it is alleged:
‘‘That the rates fixed, established, prescribed and ordered to be published by defendant will reduce the rates and revenues received by your orator upon*702 the business carried by it on said Ran Pedro Branch to an amount of at least thirty per cent. (30%), which is the direct reduction provided for by the schedule of rates prescribed by defendant; and your orator alleges further that if the said reductions prescribed and ordered published by defendant are enforced, your orator’s power and lawful right to charge and collect just, fair and reasonable rates for the transportation of freight on its said San Pedro Branch are denied to it; and that the said orders entered by defendant prescribe an unjust, unreasonable and unremunerative basis of rates and charges for services performed by your orator as aforesaid, and said orders if enforced will result in the confiscation of your orator’s property, in violation of section 1 of article 14 of the amendments to the Constitution of the United States, and will result in the talcing of your orator’s property without due process of law.”
That said rates ‘‘will not yield your orator a fair and reasonable return on the amount of money invested by your orator in gaid San Pedro Branch line railroad for the following reasons:
“The present value of the said San Pedro Branch, or the cost of reproducing the same, exclusive of rolling stock and excluding that portion' of said branch and facilities necessary thereto which are within the Bos Angeles Terminal limits, is at least the sum of fifteen million, nine hundred and twenty-three thousand, four hundred and eighty-seven dollars ($35,923,487); upon the' said San Pedro Branch the detailed earnings and expenses have been carefully computed by your orator upon bases and formulae prescribed by the said defendant for the months of April and October, 1910, which months were prescribed and designated by said defendant. These earnings, expenses, and taxes for one year, based upon the earnings of the said Sail
Pedro Branch for the said months of April and October, 1910, are hereby set forth in the following statement:
Total gross revenue for one year on San Pedro Branch......... $746,776 32
Total operating expenses, located and apportioned to said branch 253,806 23 Total taxes of said branch, being 4 per cent, of gross revenue.... 29,870 05
Total operating expenses, including taxes as above............. 283,676 28
Excess of revenue over operating expenses and taxes........... 463,100 04
Known loss on said branch by reason of order of defendant..... 112,439 03
Amount remaining............................................ 350,660 4(L
“The percentage of return which this last-named amount would afford upon the value or cost of reproducing said San Pedro Branch ($15,923,487) would be 2.22 per cent.”
It is alleged: That in conducting transportation on said San Pedro Branch, and in the administration of its business affairs with reference to its said San Pedro Branch, the same has been and is carried on in a prudent and economical manner, and yet, notwithstanding, its earnings from said branch line of railroad for the transportation of property or otherwise have not yielded a fair or just return on the value of its property, and will not, under the rates prescribed by defendant, yield a fair and just return upon the value thereof.
“That the principal water carriers competing with your orator for transcontinental traffic to and from said city of Bos Angeles at the ports of San Pedro and San Diego are the Pacific Mail Steamship Company, the American-Hawaiian Steamship Company, and the California xVtlantic Steamship Company, known as the ‘Bates & Chesebrough Bine,’ and that large amounts of the transcontinental traffic moving into or out of said ports to and from said city of Bos Angeles is transported under and by virtue of through rates, fixed and established by the owners or managers of said steamship lines, and is moved on through bills of lading to and from said city of Bos Angeles in competition with the rates fixed and established on its lines by your orator and by the Interstate Commerce Commission; and your orator and said Steamship Companies are now competing with each other and carrying said traffic at less than reasonable rates and at the lowest rates that would re-*703 numerate either or any of them for the service performed.” That the said steamship companies “and numerous other steamships owned and operated by other persons and companies transport freight to and from points outside the. state of California through the ports of San Pedro and San Diego to and from said city of Los Angeles on through bills of lading, and that in the case of them and each of them they pay your orator's local rates to and from San Pedro, or the proportional rate of the Atchison, Topeka & Santa Ké Railway Company to or from said port of San Diego, or from the port of Redondo, thus making such local or proportional rate a part of the entire charge for through shipment. That, if said orders entered by defendant as set forth herein are permitted to go into effect, the said steamship companies will make no change in the through or transcontinental' rates now assessed and collected by them, but the said steamship companies will pay a less or lower local or proportional rate between the points hereinbefore named, and thus a portion of the sums now collected from traffic Carried by yonr orator between said cities of San Pedro and Los Angeles will be given to said steamship companies; and therefore your orator alleges and charges that the effect of said orders so made and entered will lie either to force your orator to reduce its freight rates from points outside the state of California to and from said city of Los Angeles, or to compel your orator to yield to said steamship companies a large portion of its revenues annually without any benefit whatever to your orator’s patrons, the shippers, merchants. and manufacturers of the city of Los Angeles. And your orator further alleges that for these reasons the defendant in entering its said orders misconceived the law and transcended and exceeded its jurisdiction and powers, and in thus attempting to appropriate the property of your orator attempted to deprive yonr orator of its property without due process of law, and in violation of the Constitution and laws of the United States. That many steamer and boat lines, as well as many so-called tramp vessels, now land at said port of San Pedro and discharge cargoes which have been shipped from the Atlantic seaboard, from European ports, from Puget Sound ports, from ports on the Columbia river, and from foreign and interstate points and ports, destined for said city of Los Angeles, and that, after unloading at said port of San Pedro, said steamer and boat lines and so-called tramp vessels take cargo from San Pedro for said ports, which cargo has been transported by your orator from said city of Los Angeles to said San Pedro. And your orator further alleges that, if the decisions and orders of said defendant hereinbefore referred to shall be permitted to go into effect, a large part of this traffic, for which yonr orator and said steamer and boat lines are now competing, will be diverted from your orator’s rail lines to the said steamer and boat lines and tramp vessels, and great, irreparable damage will thereby be inflicted upon your orator’s intrastate and interstate rail lines, and your orator will be compelled to reduce its intrastate and interstate rates in order to meet said competition and retain said traffic, or, failing to do that, your orator will lose said traffic and be deprived of the revenue now accruing therefrom.”
These are the averments of the bill which may be considered as at all material to the objection that the rates fixed by the order complained of are of the character alleged; and the question is, Do the facts alleged make a case calling for relief?
In the first of these cases, in speaking of the matters necessary to be alleged and found, it is said:
“When the railroad within the state is used in both interstate and local commerce, it is necessary next to determine what part of its value should fairly be considered as devoted to each use separately, because obviously the company should not exact such excessive rates for local traffic as will also produce a return upon a value employed in a business over which the state has no control. Neither class of traffic, interstate or local, should be made to bear a burden caused by paring the rates on the other to the quick. It is generally agreed that, given the entire value of the railroad property in the state, it is fair to apportion it among the different kinds or classes of business upon a revenue basis; that is to say, in proportion to the gross revenue produced by them respectively. And a like rule applies when the questions involved require separate consideration of the freight and passenger business. In this way will be found the fair proportion of value devoted to each particular use, upon' which the owner is. entitled for such use to a reasonable return.”
These considerations do not ignore the difficulties encountered and recognized by the courts, where a property is devoted to both interstate and local commerce, in attempting, for the purposes of pleading or proof, to segregate definitely either investment, income, or expenses as applicable to each character of traffic; but, while the greatest certainty is not required, there are well-understood bases for giving fairly accurate approximations, and'such at least it is required of a party to allege in his pleading that reasonable certainty may be had before granting injunctive relief in such a case.
The bill in its general structure is much akin to and cannot he distinguished in material substance from that filed for a like object in Southern Pacific Co. v. Campbell, supra, where, in sustaining a demurrer to the bill as not stating a case for equitable intervention, Judge Bean says:
'“Again, the complainant does not state the amount of interstate traffic which will be affected by the order, nor the cost of service, nor the value of the property devoted to such business. It sets out the value of the entire property, the gross receipts and disbursements for both state and interstate business for a number of years prior to the date of the order, the amounts received from state and interstate business, freight and passenger, during*706 the year 1909, and approximate percentage of tonnage affected by the order sought to be enjoined, assuming, as X take it, that both local and interstate traffic are affected by such order. There is no allegation as to the cost of conducting state business as distinguished from interstate business, and no statement of the difference between passenger and freight expenses.”
As stated in San Diego, etc., v. National City, 174 U. S. 739, 19 Sup. Ct. 804, 43 L. Ed. 1154:
“Judicial'interference should never occur unless the case presents, clearly and beyond all doubt, such a flagrant attack upon the rights of property under the guise of regulations as to compel the court to say that the rates prescribed will necessarily have the effect to deny just compensation for private property taken for public use.”
2. As to Interference with Interstate Commerce.
These features of the bill are open to the same criticism as those applying to the question of unreasonable rates. They consist largely of general averments as to the prospective effect of the order of the commission without stating concrete facts from which such effect would logically or naturally result. It is not readily to be perceived from anything stated in the bill just how such results as those pre
“So, ii it be that, the local state rates as fixed and regulated by the State Railroad Commission on these commodities unsettle in some way previously fixed transcontinental or interstate rates, that circumstance does not render the state rates invalid as an interference with interstate commerce.”
The averments of the bill, as I read them, do no more than bring the case within this doctrine. Under the facts stated, the order of the commission may and probably will work some modification in the traffic arrangements .between complainant and its connecting interstate lines, both of rail and water carriage, and to some extent affect their interstate rates; but that result will not necessarily militate against the lawfulness of the order. As stated by Judge Brewer in Ames v. U. P. R. Co. (C. C.) 64 Fed. 172:
“Neither can I understand how the reduction of local rates as a matter of law interferes with interstate rates. It is true that the companies may, for their own convenience, to secure business, or for any other reason, rearrange their interstate rates, and make them conform to the local rates prescribed by the statute; but surely there is no legal compulsion. The statute of the state does not: work a change in interstate rates, any more than an act of Congress prescribing interstate rates would legally work a change in local rates. Railroads cannot plead their own convenience, or the effect of competition between themselves and other companies, in restraint of the otherwise undeniable power of the state.”
It is said, in effect, that the local rates on the line affected are so interwoven with and dependent upon the transcontinental rates both by rail and water by which complainant is affected that confusion is bound to result, and that the rates fixed by this order will necessarily
“A rate fixed by a state railroad commission for intrastate traffic, if just and reasonable in and of itself, cannot be held to be unlawful and discriminatory because it may conflict with some rate fixed by the railroad company for interstate traffic. Upon adjustment the latter rate must yield.”
The case of Shepard v. Northern Pacific Ry. Co. (C. C.) 184 Fed. 765, relied upon by complainant, was decided upon a state of facts so wholly and essentially different from those appearing here that it has no just application to this case. There the orders of the commission under the acts of the Legislature worked a drastic and sweeping change in the whole field of local rates throughout the entire state, both freight and passenger; and Judge Sanborn, under the facts there appearing, held that their effect upon the commerce of the 'jobbing centers, not only of Minnesota, but of those immediately adjacent in other states, was so material as to necessarily affect interstate traffic. To quote his language:
“The acts of the Legislature of Minnesota and the orders of its commission are so general and so far-reaching in their effect that there is no doubt that they unavoidably affect the interstate commerce of the" companies. * * Kach of the acts and orders challenged has the natural and necessary effect substantially to burden and directly to regulate interstate commerce, to create undue and unjust discrimination between localities in Minnesota and those in adjoining states, and it is unconstitutional and void.”
See, also, in this respect Arkansas Rate Cases (C. C.) 187 Fed. 290; Louisville & Nashville, etc., R. Co. v. Siler (C. C.) 186 Fed. 176.
3. As to the Objection that the Order Denies Complainant the Equal Protection of the Law.
‘‘That company, if it is so minded, may meet the rates of the Southern Pacific Company herein established. If it does not desire to do so, it is directed to notify tliis commission of that fact within ten days from the date hereof, whereupon we shall take the additional steps necessary to arrive at a conclusion as to what rates should be charged by this company.”
It does not appear whether the Salt Lake Line has acquiesced in such rates, but it is alleged, in substance, that the lines of the Southern Pacific Company and those of the Salt Lake Road between the two terminal points affected by the order are practically of the same length, that they are operated in the same manner and haul the same kind of freight, that the character of service is identical, and that the value of the service is also practically identical; and it is alleged that, under these circumstances, the order of the commission in fixing the rates over the complainant’s line, while at the same time permitting the Salt Lake Line to continue its present rates, amounts to a deprivation, through the operation of the commission’s order, of the equal protection of the law as to complainant. ’Similar averments are made as to the line of the Atchison, Topeka & Santa Fe Railway Company running between the city of Los Angeles and the port of Redondo: the theory of complainant, as evidenced by its bill, being that the failure of the commission to regulate by the same order the rates upon the two competing lines mentioned resulted in an unlawful and unjust discrimination against it.
Rut these facts do not disclose a denial to complainant of the equal protection of the law as that term is used in the Constitution. The mere identity of distance and similarity of service alleged by complainant to exist as between it and its competitors are not sufficient as a foundation upon which to base such a conclusion. Any attempt to state the respective values of the property invested in the competing lines is wholly lacking, and such fact must be made to appear as a necessary basis upon which to predicate the present contention. Its absence leaves no sufficient showing from which to deduce that the rates on those lines should necessarily be the same as those applicable to the complainant. As stated in Smyth v. Ames, 169 U. S. 466, 546, 18 Sup. Ct. 418, 434 (42 L. Ed. 819):
“The basis of all calculations as to the reasonableness of rates to be charged by a corporation maintaining a highway raider legislative sanction must be the fair value of the property being used by it for the convenience of the public. * * * What the company is entitled to ask is a fair return upon the value of that which it employs for the public convenience. On the other hand, what the public is entitled to demand is that no more bo exacted from it tor the use of a public highway than the services rendered by it are reasonably worth.”
The case is not at all like Cotting v. Kansas City Stockyards, 183 U. S. 79, 22 Sup. Ct. 30, 46 L. Ed. 92, cited by complainant. There the Legislature had passed an act undertaking to classify the business of operating stockyards within the state, and had made a classification -which, without any just or reasonable foundation in the circumstances, put the complaining stockyards company in a class by itself, with burdensome and'unjust regulations as applied to it. The act was held void as having no reasonable ground under the law upon which to stand as a proper classification for the purpose; and that was all that was decided in that case. The order of the commission under consideration is in no proper sense an act of classification, but, if it were, the facts alleged are not sufficient to determine that it was an unjust one. Home T. & T. Co. v. Los Angeles, 211 U. S. 265, 29 Sup. Ct. 50, 53 L. Ed. 176.
These considerations cover all the points pressed upon the attention of the court material to be noticed, and it results from what has been said that the demurrer should be sustained.
Accordingly the demurrer is sustained, the temporary restraining order vacated, and the bill is dismissed.