Ohio v. United States
292 U.S. 498 (1934)

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U.S. Supreme Court

Ohio v. United States, 292 U.S. 498 (1934)

Ohio v. United States

No. 868

Argued May 8, 1934

Decided May 28, 1934*

292 U.S. 498

APPEALS FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE SOUTHERN DISTRICT OF OHIO

Syllabus

The Interstate Commerce Commission found that intrastate rates on bituminous coal from certain mining districts in southeastern Ohio to destinations in the northeastern portion of the state, as reduced by order or permission of the Public Utilities Commission of the state, were substantially lower, distance considered, than interstate rates on such coal moving to the same destinations from districts in Pennsylvania and West Virginia; that the interstate rates from the latter districts were reasonable; that the system of differentials between the Ohio origins and the more remote other-state origins was proper, distance and other conditions considered; that the reduced Ohio rates were unduly preferential of persons and localities in Ohio and unduly prejudicial to persons and localities in the Pennsylvania and West Virginia districts, and that, to remove such discrimination, the intrastate rates should be increased to their former level and the preexisting interrelationship reestablished. In a suit to annul the resulting order, held:

1. Objection that the Commission did not afford a fair hearing is based on excerpts from its report, taken out of their connection, and is disproved by an examination of the record, report, and findings. P. 292 U. S. 505.

2. There was ample evidence before the Commission to sustain the finding of undue prejudice against interstate shippers and localities. P. 292 U. S. 506.

3. It is not required of the Commission that, before it can remove undue prejudice caused by intrastate rates to districts of origin in other nearby states whose rates are under consideration and found reasonable, it must find or make reasonable other interstate rates to the destination in question, which are adjusted on a

Page 292 U. S. 499

different rate base and apply to districts lying in comparatively remote areas. P. 292 U. S. 506.

4. It is a theory of ratemaking that the longer haul may be expected to yield a lower ton-mile return. P. 292 U. S. 508.

6 F.Supp. 386 affirmed.

Appeal in No. 886 dismissed.

Appeals from decrees of the District Court, constituted of three judges, which dismissed the bills in two suits to set aside an order of the Interstate Commerce Commission. The two suits had been consolidated for trial. The cross-appeal, No. 886, was from an order of the court below staying the operation and enforcement of the order of the Commission for 60 days. This order of the court below was vacated by this Court, February 12, 1934, see 291 U.S. 644. The cross-appeal is therefore now dismissed as moot.

Page 292 U. S. 500

MR. JUSTICE ROBERTS delivered the opinion of the Court.

These are appeals from orders of a statutory court of three judges, convened in the Southern District of Ohio, in two suits, one brought by the state of Ohio and the Public Utilities Commission of Ohio, and the other by the Wheeling & Lake Erie Railway Company against the United states and the Interstate Commerce Commission, to enjoin and set aside two orders of the Commission. The suits were consolidated for trial. The first of the Commission's orders, that of May 2, 1933, required the increase of Ohio intrastate rates on bituminous coal from certain mining districts in Eastern and Southern Ohio to destinations in the northeastern portion of the state. The second order, that of May 9, 1933, required the rates prescribed by the first to be increased by the amount of the surcharge authorized upon interstate rates on bituminous coal in the Fifteen Per Cent case, 178 I.C.C. 539, 179 I.C.C. 215, and 191 I.C.C. 361. While the causes were under submission, the period during which the surcharge was authorized expired, and it was discontinued. The court therefore refrained from any adjudication as to the order of May 9, 1933, and no issue is here raised concerning it.

The court granted preliminary injunctions, but, after a hearing on the merits, dissolved them and dismissed the bills. It however stayed the operation of the order of May 2, 1933, for a period of sixty days so that the plaintiffs might perfect an appeal to this Court. Upon the allowance of an a peal (No. 868), the defendants took a

Page 292 U. S. 501

cross-appeal (No. 886) assigning as error the entry of the stay order. By decree of February 12, 1934 (291 U.S. 644), the stay was vacated. The appeal in No. 886 will therefore be dismissed as moot.

The Commission's order of May 2, 1933, requiring the rates intrastate from points in Southern and Eastern Ohio to destinations in Northeastern Ohio, on bituminous coal in carload lots, to conform to those in effect prior to June 30, 1932, was entered under § 13(3) and (4) of the Interstate Commerce Act. [Footnote 1] The Commission found that the reduced rates put into effect on the intrastate traffic in question as a result of orders or permission of the Public Utilities Commission of Ohio were unduly preferential of persons and localities in Ohio, unduly prejudicial to persons and localities without the state, and that they cast an undue revenue burden upon interstate commerce.

The appellants, conceding the Commission's power under § 13(3) and (4) of the Act (Florida v. United states,282 U. S. 194, 282 U. S. 208; United states v. Louisiana,290 U. S. 70; Florida v. United states,292 U. S. 1), claim the dismissal of the bills was erroneous for these reasons: (1) The Commission did not afford them the full and fair hearing to which they are entitled by § 13 of the Act. (2) There is no evidence to support the finding that restoration of the state rates to their former level was required to avoid undue preference and prejudice between persons and localities. (3) The Commission exceeded its authority in requiring the state rates to be raised without first having found reasonable, or made reasonable, all substantially competitive interstate rates to the same destinations.

The District Court held the order justified by reason of undue preference and prejudice, but did not pass upon the lawfulness of the Commission's action in respect of

Page 292 U. S. 502

revenue discrimination. We hold the decision of the court was right, and we need not discuss the arguments presented as to revenue burden.

The litigation does not involve statewide rates, but only those on bituminous coal in carloads from producing fields in Ohio to destinations in that portion of the state lying northwardly of a line drawn east and west through Columbus, and eastwardly of a line drawn north and south through Galion and Sandusky and Columbus. The latter territory is highly industrialized, and great quantities of coal are there consumed for manufacturing and domestic purposes. This comes from the producing districts in Eastern Ohio and from those to the east and south in Pennsylvania, West Virginia, Kentucky, and adjoining states. The rates are group rates from each mining district, all mines within a single district enjoying the same rate to a given destination. As found by the court below, prior to August 1, 1932, there was maintained what it described as

"a finely balanced and nicely adjusted schedule of interstate and intrastate rates on bituminous coal from the Western Pennsylvania, Northern West Virginia, and Ohio coal mining districts, to Northeastern Ohio, with fixed differentials which have been regarded as essentially reasonable, in view of all the elements which must be considered in ratemaking."

These differentials had been maintained long prior to the year 1932; the rates being based upon that from the Pittsburgh district to Youngstown. With that rate fixed, those from more remote producing districts, such as Connellsville, immediately south of the Pittsburgh district, and Fairmont, south of Connellsville, in Northern West Virginia, were made by adding a differential, and rates to Cleveland and other more distant destinations also by adding a differential.

In 1932, the Ohio Commission ordered a reduction in the rates from two Ohio producing districts (Middle-Massillon and Ohio No. 8) to Canton and to Massillon.

Page 292 U. S. 503

Thereafter, the Wheeling & Lake Erie Railway sought and obtained permission to extend the reductions to other destinations. The result was lowered scales to important coal consuming points such as Cleveland and Lorain. The New York Central, the Pennsylvania, the Baltimore & Ohio, and the Pittsburgh & West Virginia, as well as the Wheeling & Lake Erie, serve the Ohio producing territory. They resisted the proposed reductions of the Wheeling & Lake Erie, but without success. In order to meet competition, they reduced the rates between No. 8 District in Ohio and Northeastern Ohio destinations. Thereafter, in order to preserve rate relationships, the Ohio Commission compelled reductions from mines in the Cambridge, Hocking, and Pomeroy districts. Thus, by November 1, 1932, all of the intrastate rates between origins in Ohio and destinations in the territory above mentioned had been substantially lowered. This threw out of relation the interstate rates from the Freeport, Pittsburgh, Connellsville, and Fairmont districts.

Several proceedings before the Interstate Commerce Commission resulted. In September and October, 1932, twelve carriers serving the Ohio districts and other origin territory in Pennsylvania, Maryland, and nearby states complained that the reductions gave an undue advantage and preference to persons and localities in Ohio to the prejudice of persons and localities outside the state, and charged also unreasonable and unjust discrimination against, and undue burden upon, interstate commerce. The Commission ordered an investigation, and named as respondents all railroads operating in Ohio subject to its jurisdiction. Subsequently, four complaints were filed on behalf of operators of mines in Pennsylvania, Maryland, and West Virginia. These alleged that the reduced Ohio rates in their relation to interstate rates were unduly preferential of Ohio shippers and localities, and unduly prejudicial to interstate shippers and localities, and unjustly

Page 292 U. S. 504

discriminated against interstate commerce. Three of the complaints asserted that the interstate rates to Northeastern Ohio from mines in the Pittsburgh, Freeport, Connellsville, and Fairmont districts were unreasonable and in violation of § 1 of the Interstate Commerce Act. After the Ohio rates were reduced the, P. & W.Va. Railroad lowered its rates from the Pittsburgh district. The Commission suspended these rates, but by a subsequent order permitted their continuance subject to further investigation. The complaint cases and the investigation and suspension case against the P. & W.Va. Railroad were consolidated with the thirteenth section investigation and heard upon a single record.

The Commission found that Northeastern Ohio is served principally by the Pennsylvania, New York Central, Baltimore & Ohio, Wheeling, and Nickle Plate-Erie systems; that all of these carriers participate in the rates and transportation of bituminous coal from the Ohio mines and mines in Pennsylvania, West Virginia, and other states, to the same destination, and that there is a large movement of coal from the Ohio, Pennsylvania, and West Virginia mines to Northeastern Ohio. From the record, it concluded that coal is transported from the Ohio mines to the destinations in question

"at intrastate rates which are generally substantially lower, distance considered, than are the reasonable interstate rates herein provided, under which such coal is moved to such destinations from Pennsylvania and West Virginia,"

and that

"this disparity in rates is greater than is warranted by differences in transportation conditions from the Ohio mines, on the one hand, and the Pennsylvania and West Virginia mines, on the other."

There was evidence in substantial volume bearing upon the issue of the reasonableness of the existing interstate rates from the Freeport, Pittsburgh, Connellsville, and Fairmont districts to the destination territory involved.

Page 292 U. S. 505

Much evidence was adduced as to rates approved by the Commission in other proceedings for approximately similar hauls, under similar transportation conditions. The Wheeling & Lake Erie introduced a cost study, and the state and other parties produced evidence as to coal rates in Illinois, fixed by the Commission, and a comparison of the conditions in that territory and those found in Ohio, all for the purpose of demonstrating that the reduced Ohio rates were maximum reasonable rates. There was evidence in opposition to this contention. The testimony showed that coal had moved freely from all producing areas, intrastate and interstate, under the old rates, and tended to prove that the unbalancement of the relation between the state and interstate rates had retarded and prohibited the shipment of a large quantity of coal from the other states to Northeastern Ohio. The Commission, in its report, discusses this evidence in detail, and, based upon it, makes findings to the effect that the interstate rates from the Freeport, Pittsburgh, Connellsville, and Fairmont districts are reasonable; the system of differentials between the nearer state origins and the more remote interstate origins is proper, distance and other conditions considered, the reduced state rates are unduly preferential of persons and localities in Ohio and unduly prejudicial to persons and localities in the Freeport, Pittsburgh, Connellsville, and Fairmont districts, and, in order to remove the undue discrimination between persons and localities, the intrastate rates should be increased to the former level and the preexisting interrelationship reestablished.

1. The assertion that appellants were denied a fair hearing rests not upon any refusal to receive evidence tendered, but upon the Commission's alleged misconception of the rules as to burden of proof. It is said that, from the outset, the Commission acted upon a presumption that the reduced Ohio rates were unlawful, and cast

Page 292 U. S. 506

on the appellants the burden of overcoming it by a preponderance of proof impossible of production. This complaint is founded upon a portion of the opening sentence of the report and two sentences near its close, and by an analysis of the remainder of the report intended to show that the Commission gave too little weight to appellants' evidence and too much to that in opposition. On examination of the record, the report, and the findings, we are satisfied there is no adequate foundation for the contention. The excerpts from the report which are cited, when read in their context, indicate only that the Commission intended fairly to inquire with respect to the lawfulness of the attacked rates and, after evaluating all the proofs on both sides, concluded that the preponderance was heavily against the appellants. The hearing was fair.

2. Untenable also is the position that there was no sufficient evidence to support the finding of preference and prejudice. We agree with the District Court that the proof of discrimination against interstate shippers and localities was convincing. Upon the issue whether the preference and prejudice was undue -- that is, whether the interstate rates were reasonable, whether the attacked intrastate rates were reasonable maxima, and what the proper relationship between the two scales should be, a large amount of evidence was taken and considered in detail. There was ample support for each of the findings. In effect, we are asked to reexamine the evidence, appraise it, and hold the Commission erred in its judgment as to the facts. We have often said that we have no such power.

3. The claim is that the Commission exceeded its authority in requiring state rates to be raised without having found or made reasonable all substantially competitive interstate rates. This contention requires the statement of certain matters in addition to those above recited. As we have seen, the coal which reaches Northeastern

Page 292 U. S. 507

Ohio comes from mines within and without the state. Those within Ohio are grouped in eight origin districts lying in the eastern and southern portions of the state. Those without Ohio lie in two rough ares known as the inner and outer crescents. The inner includes the Pittsburgh district in Western Pennsylvania contiguous to the Ohio River, the Connellsville immediately to the south, the Fairmont to the south of that, and eleven others to the southwestward through Northern West Virginia, Eastern Kentucky, and Tennessee. The outer crescent is composed of districts extending in a wider are eastward and southward of the inner crescent from the Altoona in Pennsylvania at the northeastern extremity to the Rathburn in Southern Tennessee at the southwestern extremity. [Footnote 2]

The mines in each district enjoy the same rate to a single destination, but the rates from the more remote districts are higher than those from the Ohio districts and from the more northerly districts in the inner crescent. In the proceedings before the Commission, the only attack upon the reasonableness of interstate rates was leveled at those from the Pittsburgh, Connellsville, and Fairmont regions. The complainants did not plead or offer proof that the rates from the more southerly districts in the inner crescent, or from those in the outer crescent, were unreasonably high. Nor did the appellants, who were respondents before the Commission, assert or attempt to prove that they were too low. These rates were put in evidence by the appellants, but only for the purpose of showing, by comparison of the ton-mile earnings under them, that the reduced Ohio rates were reasonable maxima.

Page 292 U. S. 508

The argument is that, by confining its investigation of the reasonableness of the interstate rates to those from the Freeport, Pittsburgh, Connellsville, and Fairmont origins and neglecting to investigate the reasonableness of those from the inner and outer crescents generally, the Commission exposed intrastate commerce to unjust discrimination in relation to competitive interstate commerce originating in the inner and outer crescents. Support for the argument is drawn from the assertion first, that the existing interstate rates from the crescents are lower than those from the Ohio mines, and, secondly, that the entire crescent adjustment has always been made and regulated so as to represent a reasonable average level, and therefore any consideration of the Ohio rates should rest upon a comparison of the average reasonableness of the entire interstate adjustment.

The appellants fail to call attention to anything in the record which supports either of these statements, and we have been unable to find anything of the sort. The fact is that the rates from the southern inner and from the outer crescent territory are much higher than those from Ohio mines, and considerably in excess of those from the Freeport, Pittsburgh, Connellsville, and Fairmont districts. It is undoubtedly true that the former show lower earnings per ton-mile than the latter. This, however, is in entire accord with the theory of ratemaking -- namely, that the longer haul may be expected to yield a lower ton-mile return. But, entirely apart from this, the record not only does not disclose that the entire adjustment of interstate rates from the Appalachian district is upon an average basis, but shows the contrary. Coal moves from Ohio origins and from both the crescents to destinations in territory other than the destination area here involved. Rates upon these movements have been the subject of repeated investigations by the Commission. Examination of the record and of the various proceedings with

Page 292 U. S. 509

respect to these interstate rate adjustments discloses that there are four major adjustments on northwestward-bound coal from Ohio and the crescents. One is the lake cargo go adjustment, applicable on coal moving to lower Lake Erie ports for transshipment by water. The rate from any origin district is the same to all ports to which rates are published, but there are differentials in favor of Ohio origins and against inner and outer crescent districts. [Footnote 3] A second embraces rates to Northwestern Ohio, Northeastern Indiana, and the Southern Peninsula of Michigan. The third is to territory west of that just mentioned, in which Chicago is a typical destination point. To the destination territory covered by the last-mentioned areas the adjustments are similar, though the differentials from various points of origin are not the same. Five of the Ohio districts -- No. 8, Cambridge, Hocking, Pomeroy, and Jackson -- have the same rate to any given destination; the other Ohio districts take differentials under the rates from the former. All inner crescent districts have the same rate to a given destination. It is 50

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