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January 12, 1944

JERSEY CITY (VINSON, Economic Stabilization Director, Intervener),

The opinion of the court was delivered by: MCLAUGHLIN

McLAUGHLIN, Circuit Judge.

In this case the plaintiff, City of Jersey City, New Jersey, and the intervener plaintiff, Fred M. Vinson, Economic Stabilization Director, prayed this court to set aside, annul and perpetually enjoin, pursuant to Sections 41(28) and 47 of the Judicial Code, 28 U.S.C.A. §§ 41(28), 47, the rate order issued by Interstate Commerce Commission on June 8, 1943 in a matter titled Investigation and Suspension Docket No. 4394, Passenger Fares of Hudson & Manhattan Railroad Company, 255 I.C.C. 649, and a supplemental order issued therein on November 2, 1943. 256 I.C.C, . The order of June 8, 1943 authorized the said carrier to increase the fare on its downtown line (extending from Jersey City and Hoboken, New Jersey, to Hudson Terminal in downtown New York City, New York) from 8 to 9 cents, for the duration of the war and six months thereafter, or until otherwise ordered by the Commission. The supplemental order of November 2, 1943 authorized the carrier, in lieu of the 9 cent downtown fare, to charge a cash fare of 10 cents or a token fare on a basis of eleven tokens for $1, upon establishing an identical fare on the carrier's uptown line; the present uptown fare being 10 cents, without a token fare. On November 26, 1943, after a hearing, this court issued an interlocutory injunction suspending the enforcement of said rate orders pending final hearing on the merits.

 Full and Fair Hearing

 At the outset we are confronted with the vitally important question of whether the plaintiff and intervener were given a full and fair hearing by the Commission. From the facts, the petition by the carrier to the Commission was one for additional revenue. The orders of the Commission were based upon Section 15(1) of the Interstate Commerce Commission statute, 49 U.S.C.A. § 15(1), which specifically provides for a full hearing. The United States Supreme Court in Interstate Commerce Commission v. Louisville & Nashville Railroad Co., 227 U.S. 88, 33 S. Ct. 185, 57 L. Ed. 431, stresses this. The Supreme Court said in that case at page 93 of 227 U.S., at page 187 of 33 S. Ct.: "The Commission is an administrative body and, even where it acts in a quasi judicial capacity, is not limited by the strict rules, as to the admissibility of evidence, which prevail in suits between private parties. Interstate Commerce Comm. v. Baird, 194 U.S. 25, 24 S. Ct. 563, 48 L. Ed. 860. But the more liberal the practice in admitting testimony, the more imperative the obligation to preserve the essential rules of evidence by which rights are asserted or defended. In such cases the Commissioners cannot act upon their own information as could jurors in primitive days. All parties must be fully apprised of the evidence submitted or to be considered, and must be given opportunity to cross-examine witnesses, to inspect documents, and to offer evidence in explanation or rebuttal.In no other way can a party maintain its rights or make its defense. In no other way can it test the sufficiency of the facts to support the finding; for otherwise; even though it appeared that the order was without evidence, the manifest deficiency could always be explained on the theory that the Commission had before it extraneous, unknown, but presumptively sufficient information to support the finding. United States v. Baltimore & Ohio S.W.R. Co., 226 U.S. 14, 33 S. Ct. 5, 57 L. Ed. 104."

 In the report and order of the Interstate Commerce Commission of June 8, 1943 appears the following: "Based on the foregoing facts and estimates, respondent points out that under present fares it would be necessary for its annual traffic to increase by about 30 percent over that of 1941 in order to meet the current interest requirements on its bonded indebtedness."

 The same report and order also stated: "It should be understood that if at any time prior to the expiration of that period, by reason of changed conditions of otherwise the revenue results to respondent should prove to be materially different from those estimated in this report, any party to this proceeding is of course at liberty to seek to bring the facts with respect thereto to our attention at a further hearing."

 Following that order of June 8, 1943, the carrier filed a supplemental petition alleging inability to collect the allowed 9 cent fare and asking for a token fare which amounted to 9 1/10 cents and in the alternative, a 10 cent cash fare. The intervener filed an answer to that supplemental petition asking that the Commission "'in view of petitioner's tremendously improved current earnings * * *' to 'reconsider its previous modification of its original order and return petitioner's downtown fares to the original level of 8(. This will serve the national program to keep down the cost of living.'"

 Then followed the Interstate Commerce Commission order of August 3, 1943 Which allowed the prayer of the supplemental petition of the carrier.Thereafter, the municipal plaintiff filed its bill of complaint in this court with Fred M. Vinson, Economic Stabilization Director, intervening as a coplaintiff. After that, the Interstate Commerce Commission, of its own motion, held a supplemental hearing which it confined solely to the practicability of the 9 cent fare. At that hearing both the intervener plaintiff and the municipal plaintiff attempted to present evidence relating to the 1943 earnings of the carrier for the purpose of showing that under such earnings no increase in fare whatsoever was justified. This offer was rejected by the examiner for the Commission. Both plaintiffs objected to such limitation of the scope of the hearing. In addition, cross-examination of a carrier witness by the plaintiffs as to a $240,000 charge for expenses alleged by the carrier and called War Damage Reserve, was refused by the examiner although it was strenously suggested that such item was no longer acceptable, at least for any such amount. Thereafter the intervener plaintiff petitioned the Commission to modify its order of September 18, 1943 which limited the scope of the further hearing and to permit testimony of the earnings of the carrier since the original closing of the record, alleging that the record as it then stood was stale and did not reflect the true picture. The municipal plaintiff informally joined in that application by letter. The Commission, in its opinion of November 2, 1943, said concerning the offer to submit evidence of the carrier's 1943 earnings: "Considering the contents of the motion now before us, and the offers of additional evidence made at the recent further hearing, we have no reason to believe that, if the additional hearing sought were held, we would feel warranted in modifying our findings as made in the second report * * * the motion will therefore be overruled."

 Obviously, from the above language, the Commission was not concerned with the technical niceties of the effort to present the desired testimony. It actually considered the proposed evidence and decided that, despite it, its decision should stand. The municipal plaintiff and the intervener, by that evidence, offered to show that the carrier's rise in business and net earnings had completely removed any reason for an increase over the 8 cent fare.In refusing to consider such testimony which, under the terms of its tender, went to the heart of the controversy, in our judgment the Commission did act arbitrarily and contrary to the mandate of its statute. As Mr. Chief Justice Hughes said in Atchison, Topeka & Santa Fe Railway Co. v. United States, 284 U.S. 248, at page 262, 52 S. Ct. 146, at page 150, 76 L. Ed. 273: "We think that this action was not within the permitted range of the Commission's discretion, but was a denial of right."

  In that case, which seems very much in point here, the court also said, speaking as to the function of the Interstate Commerce Commission in such circumstances, page 262 of 284 U.S., page 150 of 52 S. Ct., 76 L. Ed. 273: "In the discharge of its duty, a fair hearing is a fundamental requirement. Interstate Commerce Comm. v. Louisville & Nashville R. Co., 227 U.S. 88, 91, 33 S. Ct. 185, 57 L. Ed. 431. In the instant proceeding, the hearing accorded related to conditions which had been radically changed, and a hearing, suitably requested, which would have permitted the presentation of evidence relating to existing conditions, was denied."

 We do not see that the contentions raised by the defendants that the plaintiffs are estopped from questioning the validity of the orders of June 8, 1943 and November 2, 1943; and that the action is prematurely brought, are answers to the above. Starting with the intervener's answer on July 19, 1943 to the carrier's supplemental petition, these plaintiffs have ever since that time been specifically requesting the Commission to reconsider its increase in fare order, in view of the carrier's tremendously improved current earnings. The intervener did it formally in its answer above referred to. Both plaintiffs strenuously urged it at the supplemental hearing and thereafter by the petition above referred to in which the Commission was requested to broaden the scope of its supplemental hearing so as to include evidence as to the carrier's 1943 earnings. The Commission order of November 2, 1943 definitely decided that such new evidence would not be admitted. That order permitted the carrier to file and make effective the new tariffs on fifteen days' notice. The Commission took the position that it was without power to further suspend the tariffs. In reality, therefore, both plaintiffs had exhausted their remedy before the Commission. In connection with this, the language of the order of June 8th above quoted permitted any party to the proceeding to bring any changed conditions resulting in a different revenue situation to the attention of the Commission for a further hearing.

 In passing, we do not see either under the I.C.C. statute or the relevant decisions that any request for rehearing is actually required prior to suit in this court. In Baltimore & Ohio Railroad Co. v. United States, 298 U.S. 349, at page 371, 56 S. Ct. 797, at page 809, 80 L. Ed. 1209, the United States Supreme Court held: "No act of Congress requires carriers, in advance of suit to set aside divisions or other orders, to petition the commission for rehearing, repeal or modification. Nor has Congress attempted to limit the time within which the carrier may sue to enjoin enforcement of an order of the Commission prescribing rates or divisions."

 By the language of its order of November 2, 1943, the Commission indicates plainly that it had actually passed upon and rejected the offer of the plaintiffs to present the 1943 earnings of the carrier in an effort to show that any increase in fare under the true present facts was not justified. In such situation the remedy of the plaintiffs before the Commission was exhausted; with the plaintiffs, if ...

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