ICC v. Union Pacific R. Co. - 222 U.S. 541 (1912)
U.S. Supreme Court
ICC v. Union Pacific R. Co., 222 U.S. 541 (1912)
Interstate Commerce Commission v.
Union Pacific Railroad Company
Argued October 18, 19, 1911
Decided January 9, 1912
222 U.S. 541
The Act to Regulate Commerce makes the findings of the Interstate Commerce Commission as to reasonableness of a rate prima facie correct. Cincinnati &c. Ry. v. Interstate Commerce Commission, 206 U. S. 154.
Orders of the Interstate Commerce Commission are final unless beyond the power that the Commission can constitutionally exercise, beyond its statutory power, or based upon a mistake of law.
An order of the Commission, regular on its face, may be set aside if it appears that the rate is so low as to be confiscatory and in violation of the constitutional prohibition against taking property without due process of law, or if the Commission acted so arbitrarily and unjustly as to fix rates contrary to evidence or without evidence to support its conclusions, or if the authority was exercised in an absolutely unreasonable manner.
This Court, in determining the validity of an order of the Interstate Commerce Commission, confines itself to the ultimate question as to whether the Commission acted within its power. It will not consider expediency, nor will it consider facts further than to determine whether there was sufficient evidence to support the order.
Where, as in this case, there is testimony as to value of the roads, amounts expended, dividends, ratio of earnings and expenses, and other matters, there is evidence to support the conclusions, and the findings of the Commission on such facts are conclusive.
Reasonableness of railroad rates cannot be proved by categorical answers like those given in regard to value of articles of merchandise; too many elements are involved which require consideration.
Quaere whether the maintenance of an admittedly low rate for a long time raises a presumption of reasonableness because the carriers realized a profit thereon.
An order of the Interstate Commerce Commission is not to be considered by itself alone, but must be considered in the light of all the testimony, and when carriers themselves maintain a ratio of difference, a rate fixed by the Commission maintaining the same ratio of difference cannot be said to be beyond its power.
An order of the Interstate Commerce Commission within its power cannot be held invalid because it appears that possibly the Commission considered other subjects than the reasonableness of the rate, and, in this case, held that an order fixing a rate on lumber was not invalid because the Commission examined into the effect of the rate on the lumber business and on the industries of the various points affected.
These three appeals are brought by the Interstate Commerce Commission from a decree enjoining a reduction of lumber rates named in tariffs filed by the Great Northern, the Northern Pacific, and the Union Pacific Railroads.
The tariffs under consideration involve rates on lumber from the coast, Spokane District, and Montana-Oregon points to St. Paul, Omaha, and Chicago. It is admitted that the rates on shingles, hemlock, cedar, and other forest products have a fixed relation to those on fir lumber, and that the differentials from Spokane and the Montana-Oregon Territory have a like fixed relation to those from the coast.
The summary of these very lengthy records will therefore be limited to a statement of those facts bearing directly on the pivotal question as to the validity of the order fixing a rate of forty-five cents per hundred pounds on fir lumber from the coast to St. Paul.
In 1893, the rate, from the coast, on fir lumber, over the two northern lines to St. Paul, was fixed at forty cents, and since 1901 the rate to Omaha at fifty cents.
In 1907, the three carriers concurrently filed new tariffs, making the rate from the coast to St. Paul sixty cents, to Omaha fifty-five cents, and to Chicago sixty cents. Thereupon
various corporations filed complaints before the Commission, alleging that the proposed rates were unreasonable and would seriously affect the lumber industry. The carriers emphatically denied both of these allegations, and, in explanation of the causes leading up to the advance, showed that when the Great Northern was completed to the coast, about 1893, almost all of the freight shipped over its line went from the East to the West -- cars being hauled back empty to St. Paul, its eastern terminus. In order to correct this expensive and unremunerative situation, the Great Northern decided to put in a rate on lumber so low that mill men on the Pacific coast might compete with dealers in white and yellow pine in the Chicago market, 2,500 miles distant. It thereupon reduced the existing rate to forty cents. That cut was met by the Northern Pacific, which also reached St. Paul, but the Union Pacific at that time made no change in its rate. The reduction opened up new markets, and was soon followed by heavy shipments of lumber to the East. The business grew steadily, and prior to the filing of the tariffs in 1907, the empty-car movement had been completely reversed, many cars being hauled empty from St. Paul to the coast, and returning to the East loaded with lumber.
Traffic increased to such an extent that it became necessary to open up new tunnels, construct additional passing tracks, and reduce grades and curves. There was a constant increase in gross earnings, but the carriers contended that there had been such an enormous and disproportionate increase in the cost of operation that it was absolutely necessary to discontinue the unremunerative forty-cent rate and advance it to fifty cents, which they insisted was just and reasonable.
There was no finding as to the effect on gross earnings which would result from the proposed advance of ten cents. But, as the Great Northern, in one year, hauled 1,765,095,997 tons one mile, equivalent to about 30,000
cars, of the average load of 58,000 pounds, transported 2,000 miles from the coast to St. Paul, the advance of ten cents per hundred, or $58 per car, would represent a gross annual increase, for that company alone, of $1,740,000.
An immense amount of evidence was offered by both parties in support of their respective contentions. The Commission rendered an elaborate opinion (14 I.C.C. 1) and concluded by finding that the old rates were just and reasonable, and should be restored to all points on and west of the Pembina line, which ran from the Canadian line almost due south through Fargo, Omaha, to Port Arthur, Texas. As Omaha was on this line, the effect of that part of the order was to prohibit the fifty-five-cent advance, and to restore the old rate of fifty cents to Omaha, which had been in force since 1901. As to rates east of the Pembina line, the Commission held that
"they might reasonably be somewhat increased, but not more than five cents per hundred, to be graded up so as to reach the maximum increase at . . . St. Paul; . . . the rate from the Missouri River crossing should be graded up, the maximum increase of five cents reached at the Mississippi River. Chicago rates should apply to all points between the Mississippi . . . and Chicago."
The carriers thereupon filed separate bills to enjoin this order, and repeated therein the contentions made before the Commission, averred that the old forty-cent rate to St. Paul and the fifty-cent rate to Omaha were not only unremunerative, but proportionately so much lower than rates on other merchandise as to amount to an unjust discrimination, alleged that the prosperous condition of the lumber business did not require or justify a further maintenance of this low rate, and, among other things, insisted (1) that the order was beyond the power of the Commission because entered without any evidence or finding, that the rates fixed by the carriers were unjust or unreasonable, and (2) was void because the Commission
erroneously held as a matter of law that the long continuance of the old rate during a period when the carriers' total income was sufficient to pay dividends raised the presumption that the old rates were reasonable.
The Commission demurred, and in its answer averred that evidence was introduced showing and tending to show that the advanced rates were unreasonable and that, after a full hearing, it was of opinion that the rates complained of were unreasonable, and entered its order accordingly, that the determination of that question involved the exercise of a discretion committed solely to the Commission, and that the
"courts ought not and could not review its judgment and finding, unless it be made clearly to appear that the orders complained of transcend the pale of legitimate regulation."
The cases were referred to a master, who reported that the allegations of discrimination were not only too general, but that there was no evidence upon which any ruling could be predicated on that subject; that the substance of the bill was that the rates put in by the Commission were confiscatory, and, as to that, held that the evidence was not sufficient to warrant the court in setting aside so much of the order as restored the rates to and west of the Pembina line. There was some evidence that the cost of hauling freight over the Union Pacific was greater than over the Northern lines because it crossed the mountains at a point 2,000 feet higher than they did. But the master found as a fact that the traffic conditions were substantially the same over the three roads, and that the distance from the coast to Omaha was 1,800 miles and to St. Paul 2,052 miles. He thereupon held as a matter of law that, when the Commission fixed fifty cents as a reasonable rate to Omaha over the shorter route, it necessarily followed that the lower rate of forty-five cents over the longer route to St. Paul was not only unreasonable, but unjust.
"though the rate might not be confiscatory,
yet an order which on its face is inherently inconsistent with the fundamental principles of rational justice and perverts the spirit and intent of the Interstate Commerce Act, though in form within the limits of delegated power, is, in fact beyond those limits and is an unlawful order, and one which results in the taking of property without due process of law."
He recommended that the court should enjoin so much of the order as permitted an advance of only five cents to points east of that line.
The Commission and each of the carriers filed many exceptions to the report, as to which the circuit court passed the following order:
"All the exceptions to the report of the master must be overruled. Those which challenge his finding that the reduction by the Interstate Commerce Commission of the fifty-cent rate on lumber to St. Paul and other points east of the Pembina line was arbitrary, and so palpably unjust and unreasonable and so discriminatory that it was beyond the power of the Commission, are overruled on the ground that this action of the Commission was beyond its power, or so palpably and gravely unjust and unreasonable as to be beyond the substance, if not beyond the form, of its power."