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BOARD OF PUB. UTIL. COM'RS OF NEW JERSEY v. UNITED

December 17, 1937

BOARD OF PUBLIC UTILITY COM'RS OF NEW JERSEY
v.
UNITED STATES et al.



The opinion of the court was delivered by: FORMAN

FORMAN, District Judge.

Plaintiff, the Board of Public Utility Commissioners of the State of New Jersey, petitions this court to set aside, annul, and enjoin the enforcement of the order of the Interstate Commerce Commission of September 28, 1934, in docket No. 25570, entitled Intrastate Class Rates in New Jersey, 203 I.C.C. 357. Ten carriers, the New York Central Railroad Company, West Shore Railroad (The New York Central Railroad Company, lessee), Erie Railroad Company, the Delaware, Lackawanna & Western Railroad Company, Lehigh Valley Railroad Company, the Pennsylvania Railroad Company, the Central Railroad Company of New Jersey, Reading Company, Pennsylvania-Reading Seashore Lines, the Baltimore & Ohio Railroad Company, New York, Susquehanna & Western Railroad Company, Lehigh & New England Railroad Company, New York, Ontario & Western Railroad Company, the New York & Long Branch Railroad Company, and the Chamber of Commerce of the state of New York have intervened and, along with the defendants, the United States of America and Interstate Commerce Commission, contend that the order is valid.

 In May of 1924 the Interstate Commerce Commission entered upon an investigation of the class rate *fn1" structure of official classification territory. This area embraces substantially the region east of the Mississippi and north of the Ohio and Potomac rivers, including also the New England States. The resulting final report is entitled Eastern Class-Rate Investigation, 164, I.C.C. 314. Supplemental reports are to be found at 171 I.C.C. 481 and 177 I.C.C. 156. By this order the Commission prescribed maximum reasonable class rates as the lawful standard for interstate application throughout official classification territory. In Appendix E at page 467 of 164 I.C.C. the basic scale of reasonable maximum rates is prescribed. These rates vary in accordance with the class of freight, i.e., first, second, third, etc., and the number of miles the freight is to be transported. The distance component rule is known as the finding 4 formula, and is set forth as follows: "4. We find that in computing distances for the application of the distance scales prescribed in this proceeding the shortest routes should be used over which carload traffic can be moved without transfer of lading." 164 I.C.C. 314, 394.

 Plaintiff accepted this distance rule and the Appendix E scale of maximum rates. The carriers, however, went beyond this. At a hearing conducted by the plaintiff it was disclosed that the carriers proposed to establish rates in New Jersey that would be higher than the rates prescribed in accordance with Appendix E and the distance rule. In due course plaintiff issued its report and order of May 11, 1932, authorizing carriers to establish new intrastate class rates for application throughout New Jersey to be made in accordance with Appendix E and the distance rule, and it also restrained the carriers from establishing the higher rates. Subsequently, in response to the petition of the carriers, the Interstate Commerce Commission, invoking section 13 of the Interstate Commerce Act, as amended, 49 U.S.C.A. § 13, instituted an investigation of the matter, the report of which may be found in docket No. 25570, entitled Intrastate Class Rates in New Jersey, 203 I.C.C. 357. Following that investigation the Commission promulgated its order of September 28, 1934, of which the plaintiff herein complains. The Interstate Commerce Commission denied the contention of the carriers that the state rate adjustment caused unjust discrimination against, and undue prejudice to, interstate commerce on a statewide basis, but held that rates prescribed by plaintiff board between Camden, N.J., and points as to which Camden is intermediate over short line routes, on the one hand, and points in New Jersey beyond 80 miles, including New Jersey points in the New York group, were unduly prejudicial to Philadelphia, and unduly preferential to Camden. The dispute then is confined to the intrastate class rates of the common carriers between points in counties in the northern part of New Jersey, grouped with New York City, and points in the southern part of New Jersey, grouped with Philadelphia. The pertinent parts of the Commission's order are as follows:

 "It is ordered, That the respondents herein, according as they participate in the transportation, be, and they are hereby notified and required to cease and desist, on or before December 1, 1934, from the undue prejudice and preference which, as found in said report, would result from the rates prescribed by the Board of Public Utility Commissioners of New Jersey.

 "It is further ordered, That said respondents, according as they participate in the transportation, be, and they are hereby, notified and required to establish on or before December 1, 1934, upon notice to this Commission and to the general public by not less than 30 days' filing and posting in the manner prescribed in section 6 of the Interstate Commerce Act, and thereafter to maintain class rates between Camden, N.J., and points as to which Camden is intermediate over shortline routes, on the one hand, and other points in New Jersey commonly grouped with New York, N.Y., as to class rates between Philadelphia, Pa., and New York, N.Y., on the other hand, which shall not be lower than the present class rates between Philadelphia, Pa., and said points in New Jersey commonly grouped with New York, N.Y."

 This order was based upon the following finding in the Eastern Class-Rate Investigation: "14. We find that maximum class rates to and from New York City and its environs should be constructed on the bases set forth in Appendix K." 164 I.C.C. 314, 445.

 Turning to Appendix K of the report of that investigation, 164 I.C.C. 314, 481-483, it will be found that the basis of rates applicable to and from "New York City and its environs" depends on the territory from and to which the traffic moves. Subdivision A covers "Long-haul Rates to and From Points in Trunk-Line Territory." Philadelphia is designated as "long-haul" territory in so far as concerns the basis of rates on traffic to and from "New York and its environs." The application of this rule was projected inland to embrace points within seven counties in Northern New Jersey; namely, Hudson, Bergen, Passaic, Morris, Essex, Union, and Middlesex.

 Between this portion of New Jersey and points in trunk line territory, including Philadelphia, the long haul class rates are "based on distances 10 miles over the disstance" to certain specified rail termini in New Jersey. The distance to each of these rail termini is determined by the finding 4 formula, supra, and to this is added the ten miles for delivery to any station in the New York group.

 The order of the Commission was also based upon finding 16, 164 I.C.C. 314, 448, which prescribes a specific basis for constructing rates between the Philadelphia group "as defined in respondents' proposals" and points in trunk line territory and New England for distances greater than 80 miles. As will appear from page 445 of the Eastern Class-Rate Investigation, supra, respondents' proposals defined the "Philadelphia group" to include Camden, N.J., in keeping with the traditional rate treatment of this industrial port area.

 Briefly stated, the grouping of Camden and other points with Philadelphia, and points in the seven northern counties of New Jersey with New York City operates as follows: For the purpose of rate classification these points in Southern New Jersey and New York City are considered as one unit, respectively. By order of the Interstate Commerce Commission freight moving from Camden to any of the points within the seven counties in Northern New Jersey is treated for the purpose of rate classification as if it had traveled the distance from Philadelphia to New York City. In other words a constructive distance is applied instead of finding 4, which provides that the "shortest routes should be used over which carload traffic can be moved without transfer of lading." Then this constructive mileage would be applied to Appendix E to ascertain the charge for shipping.

 Plaintiff complains of the order of the Interstate Commerce Commission in the following respects: (1) The order is invalid in that it did not emanate from a full hearing as required by section 13(4) of the Interstate Commerce Act, as amended, 49 U.S.C.A. § 13(4). (2) It is not supported by findings of fact. (3) It is without support in the evidence. (4) It authorizes establishment of intrastate rates that are unlawful per se. (5) The imposition of the Appendix K rule on the intrastate class rate structure of New Jersey by the Commission's order was a mistake of law. (6) Lawful rate grouping will not create inflations of rates.


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