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CENTRAL R. CO. v. UNITED STATES

August 28, 1951

CENTRAL R. CO. OF NEW JERSEY
v.
UNITED STATES



The opinion of the court was delivered by: MCLAUGHLIN

Plaintiff seeks to set aside an order of the Interstate Commerce Commission dated December 29, 1949 which in turn had set aside a prior order of the Commission dated October 11, 1948 and dismissed the complaint in the cause. Plaintiff also asks that the Commission's order of May 18, 1950 dismissing its petition for reconsideration be set aside. As the Code requires, the suit is brought against the United States. The Interstate Commerce Commission and 20 of the 245 railroad companies that were named as defendants below have intervened.

The litigation revolves around allowances for car-float and lighterage service in New York Harbor. In the proceedings before the Commission, the complaint named as defendants the 12 other New York Harbor roads, as well as all of the connecting railroad carriers operating in Official Territory *fn1" and participating in joint rates between New York Harbor and other points in and beyond said territory. The complaint alleged that the allowances which accrued to the plaintiff and other New York Harbor lines, for the performance of car-float and lighterage service within the free lighterage limits of New York Harbor out of joint class and commodity rates were inadequate, unjust, and unduly prejudicial to the plaintiff, and unduly preferential of defendant lines, in violation of Sections 2(4) and 3(4) of the Interstate Commerce Act, 49 U.S.C.A. §§ 1(4), 3(4). It was further alleged that the defendants' practice of maintaining said allowances at a non-compensatory level was an unjust and unreasonable practice in violation of Section 1(6) of the Act. Plaintiff prayed that the Commission prescribe the minimum division of the joint rates to be received by the plaintiff and the other New York Harbor roads as compensation for the lighterage and floatage service. After hearing, the Commission raised the allowance from 4.4 cents a 100 pounds for float shipments to 6 cents per 100 pounds and increased the 4.4 cents allowance for 100 pounds on lighterage shipments on a sliding scale to from 6 to 11 cents per 100 pounds depending upon the amount of the joint rate. These new allowances were to be further increased by the same percentages as the joint rates had been increased in certain other Commission proceedings.

 Following the entry of its report *fn2" and order to the above effect, upon petition of certain of the defendants, the proceeding was reopened by the Commission for reargument and reconsideration. Thereafter *fn3" the Commission, in reversing its prior decision, found that '* * * the great bulk of the New York rates, the divisions of which are here in issue, do not include the full cost of the lighterage and floatage services in New York Harbor which are performed under such rates.' Therefore, the Commission held that it was precluded '* * * from prescribing allowances for lighterage or floatage services as divisions of joint rates based primarily upon the cost of the harbor service alone, and without careful consideration of the cost of the line-haul and other services performed under such rates.' The Commission affirmed its finding made in the previous report and for the reasons given therein, that the plaintiff's data purporting to show the costs of the non-harbor services performed under the joint rates was unacceptable. The Commission specifically found that there was no reliable cost data in the record of the case '* * * for measuring the justness and reasonableness of the harbor allowances by the divisions of the joint rates received by the connecting carriers.' The Commission then concluded upon the record, '* * * that the allowances assailed have not been shown to have been or to be unjust, unreasonable, inequitable, or unduly prejudicial as alleged, * * *.' Regarding the charge that the acquiescence of the other New York Harbor lines and their connecting carriers in non-compensatory harbor allowances constituted an unlawful practice under Section 1(6) of the Interstate Commerce Act, the Commission held '* * * that the allegation of unlawfulness under section 1(6) of the act has not been sustained.'

 Objections to the Findings of Fact.

 Plaintiff first argues that the Commission's report and order '* * * is unsupported by any valid findings of fact, * * *.' In attempted substantiation of this five propositions are presented. The first of these calls the Commission's finding that '* * * the great bulk of the New York rates, * * *, do not include the full cost of the lighterage and floatage services in New York Harbor which are performed under such rates.', a 'fallacious assumption'.

 The above finding, rather than being fallacious, is amply supported by decisions of the Commission in other proceedings and by the evidence below. The undisputed reason for the level of the basic rates into New York from points west and south thereof was the competition between the rail lines and the boat lines operating on the Erie Canal, and those rates, first established by the New York Central which performed no lighterage service, were later met by the other rail lines. New York Harbor Case, 47 I.C.C. 643, 707-708. In that decision the Commission found that 'There is no evidence whatever to show that the basic rates from Chicago to New York include any allowance for terminal services'. Later the Commission, in Eastern Class Rate Investigation, 164 I.C.C. 314, 447, approved the addition of ten miles on the New York end '* * * not as a measure of the cost of water-borne traffic in New York Harbor but merely a device for securing representative group distances.' Neither plaintiff's attempted distinction of the Eastern Class Rate case not its effort to eliminate the fundamental reason for the New York Harbor allowance situation as ancient and long ago discarded, are at all persuasive. It is noteworthy that the plaintiff neither before the Commission nor to this Court, has called attention to any decision standing for the doctrine that the New York joint rates take into consideration the full cost of unusual harbor terminal services. Nor has the plaintiff been able to explain away the fact that in the more recent general revenue proceedings since the New York Harbor case and the Eastern Class Rate case, as the Commission stated in its second report, 276 I.C.C. 655, 657, '* * * no special consideration was sought of, or given to unusual terminal services, at New York or elsewhere, and the general increases therein authorized did not, and were not intended to, make any change in the relative transportation burden to be borne by the rates to and from New York as compared with the rates to and from any other points.' Moreover, there was in the record below strong testimony by defendants' witness Butler which fully justifies the Commission finding. And this Court cannot ignore the frank assertion made by the plaintiff in its motion before the Commission to dismiss the petition of certain defendants for reargument and reconsideration, where on pages 13 and 14 of the plaintiff's motion it was said: 'Although it may be quite true that the rates to and from New York Harbor do not include specific extra allowances for the excess costs of harbor service, no one has complained that the rates themselves are not reasonable rates for the entire service rendered.'

 Plaintiff's second point under this general head is that the Commission misinterpreted the cost studies of the principal defendant harbor lines which were in evidence on behalf of the plaintiff. Those studies consisted of certified abstracts of testimony and exhibits introduced by the harbor lines in prior proceedings before the Commission. *fn4" As the Commission found, the studies were for different periods than plaintiff's harbor costs; they were not prepared in the same manner or upon the same basis as the plaintiff's costs and they did not, in the words of the second report, '* * * show the excess cost of the harbor service over the ordinary origination and termination cost, * * *' as outlined in the plaintiff's own cost study. The Commission held, as it had in its first report, that '* * * the studies thus offered, even as evidence of total harbor costs, are incomplete.' There is no substantial challenge of the Commission's above fact findings. From those findings it is obvious that the studies were not fairly comparable with the Central's own survey of its costs.

 Complaint is then made of a statement in the Commission's report which reads: 'If increased harbor allowances are to be based in part on the excess cost of the harbor service over the ordinary origination and termination cost, and if as complainant contends such allowances must be the same for all of the harbor lines, it follows that the excess costs to be used are not those of any one carrier, but the average for all of the harbor services for which the allowances are made.' Plaintiff states that the Commission '* * * evidently assumed that there was no such evidence of 'average cost' in the record.' and goes on to conclude that the Commission made an 'Erroneous finding that evidence of 'average cost' is lacking.'

 Plaintiff's fourth objection is that the Commission made the 'Erroneous finding that there is 'no evidence' of the divisions of service performed as between the other harbor carriers and their connections.' Effort is made to support that statement by reference to exhibits produced by defendants' witness Butler and his testimony in connection therewith.

 The actual language of the Commission was that: 'There is no evidence, however, as to the divisional arrangements between the other harbor lines and their connections under the joint rates applying in connection with those lines on the principal or typical commodities, nor as to the extent of the service performed by the other harbor lines as compared with the service performed by their connections under such rates. There is no indication that the divisional arrangements between the Jersey Central and its connections are representative of the divisional arrangements between the other harbor lines and their connections, nor that the commodity rates shown as applying in connection with the Jersey Central are in all respects typical of those applying in connection with the other harbor lines. The record is deficient in this respect.'

 We have examined each of the Butler exhibits and they in nowise contradict that finding. To point up the deficiency mentioned by the Commission we need only look to the kind of evidence presented by the plaintiff regarding its own harbor service. That type of proof was not submitted with respect to the other New York Harbor lines and that lack is the precise deficiency above mentioned by the Commission. Plaintiff's chief traffic witness, Ewing, introduced several exhibits listing the principal commodities handled in the lighterage service by the plaintiff during the ten year period, 1934-1943, and the principal commodities in car-float service in the five year period from 1939-1944. He also showed in these exhibits the divisional arrangements, including the harbor allowances, between the plaintiff and its connecting lines of the joint rates on such principal commodities. The evidence as to the divisions on lighter-age traffic revealed practically all of the commodities handled in that service by plaintiff during the ten year period. The presentation as to the car-float traffic consisted of the divisions of more than 2,000 rates on some 450 commodities. But there was no evidence in the record before the Commission as to the principal or typical commodities handled in harbor service by the other harbor lines, the rates thereon, or the divisional arrangements of such rates between the other harbor lines and their connecting lines. Some of Butler's exhibits relied on by plaintiff as supplying this deficiency merely related to certain class rates between New York and representative points and the present divisions of such rates, together with the divisions as they would be under the formula proposed by plaintiff. The remaining Butler exhibits simply indicated the number of cars handled in harbor service during the month of October, 1945, by the several New York Harbor lines, the territory in which they originated or terminated, the revenue of the New York Harbor lines during that month, and the revenue of their connections, and the revenue as it would be under the formula proposed by plaintiff. The Butler exhibits had nothing to do with the divisional arrangements under the joint rates between the other harbor lines and their connections in the movement of their principal or typical commodities. That being so, the Commission could not have concluded that the principal or typical commodities handled by the other harbor lines in harbor service were transported under class rates. The record before the Commission warrants its finding as to the deficiency of the above evidence.

 The last objection of the plaintiff with respect to alleged factual errors in the report deals with a minor item in connection with the Commission's conclusion that 'It does not follow, because the total operating and other costs mentioned have risen, which have been met by general increases in rates, that an increase must also be made in the harbor allowances in exactly the same ratio.' (Emphasis supplied).

 We think that conclusion sound and, in the absence of competent proof that the harbor allowance sought should be in exactly the same proportion as the joint rate increases since 1915 (which have not only been authorized but put into effect) the fact that in prior rate decisions the Commission did allow the same proportionate increase in the harbor allowance as it granted in the joint rates, can hardly be said to be binding upon the Commission in this case in the face of its present above quoted language.

 In addition, the Commission's above comment was soundly based on the record before it. Plaintiff failed to prove that the present New York rates contain all of the percentage increases authorized by the Commission since 1915. Defendant railroads vigorously deny that such is the fact and they point to the testimony of plaintiff's principal traffic witness, Ewing, who, in discussing his own exhibits, admitted that there have been substantial reductions in the past 15 or 20 years and for many years prior to that in a great number of rates which move traffic to and from New York. It appears that rate reductions made after general revenue cases are not unusual and that, according to Ewing, the depressed rates mentioned by him were effected to meet truck and canal competition and for other reasons, such as consideration of what the traffic would bear, the nature of the traffic, problems of loading, etc.

 Alleged Errors of Law.

 Under this caption it is first argued that, since the primary issue in this litigation is harbor costs and not the over-all joint rates, the latter must be presumed to be reasonable under Baltimore & Ohio R.R. Co. v. United States, 298 U.S. 349, 56 S. Ct. 797, 80 L. Ed. 1209, and that the Commission erred in its construction of Section 15(6) of the Act *fn5" by ignoring such presumption.

  The Jersey Central by means of this litigation is endeavoring to obtain an increase in its harbor allowance out of the joint New York rates. The Commission at no time has objected to the Central making harbor costs the primary issue. In a strictly divisions case, as said in Baltimore & Ohio R.R. Co. v. United States, supra, 298 U.S.at page 357, 56 S. Ct.at page 802, '* * * the Commission is governed by sections 1(4), 15(6), 15a(2), 49 U.S.C.A. § 1(4), 15(6), 15a(2); it is not required or authorized to investigate or determine whether the joint rates are reasonable or confiscatory. * * * The purpose of the provisions just cited is to empower and require the commission to make divisions that colloquially may be said to be fair.' We need not concern ourselves with the question of whether the unusual factual situation present in this matter would permit it to be classified as within the group governed by the B. & O. decision because here the Commission did not hold that the New York rates were not reasonable. Such a ruling was not important to its decision and was not contended for by any of the defendants. The Commission did say that since '* * * the joint rates, or at least most of them, do not include the full cost of the harbor services, * * * for the purposes of this proceeding, (they) must be assumed to be below a maximum reasonable level.' (Emphasis supplied). This is a far cry from plaintiff's statement that the Commission '* * * necessarily determined that the New York rates which it had prescribed, were not compensatory, * * *.' All the Commission did was to find that since one division of presumably reasonable joint rates was below cost, the joint rates themselves for the purpose of this action would be assumed to be below a 'maximum reasonable level'. The Jersey Central, itself, in its already referred to motion to dismiss defendants' petition for reargument and reconsideration after the filing of the first report, would seem to be in agreement with this though of the Commission. Speaking of those specific New York joint rates, it there said, 'There is, of course, a wide range between minimum reasonable rates and maximum reasonable rates and no one has attempted to say where in that range these rates come.' (Emphasis supplied).

 The second alleged error of law by the Commission is said to be that the Commission concluded '* * * that it could not pass on the 'fairness' of the terminal allowance complained of without, at the same time, determining the adequacy of all the other subdivisions of the countless rates involved.' This is a gross overstatement of the holding of the Commission. The Commission did not conclude, as the plaintiff would have us believe, that in prescribing harbor allowances, it had to require '* * * specific evidence, and separate adjudication, in respect to each division of each rate of each carrier, * * *.' The Supreme Court, in the New England Divisions Case (Akron, C. & Y.R. Co. v. United States), 261 U.S. 184, 196, 43 S. Ct. 270, 275, 67 L. Ed. 605, had termed such a construction of the divisions statute, Section 15(6), unworkable and not required either by the Interstate Commerce Act or by the Constitution. The Court there laid down the 'typical evidence rule' which in brief permitted the Commission to order a general increase of divisions to carriers '* * * based upon evidence which the Commission assumed was typical in character, and ample in quantity, to justify the finding made in respect to each division of each rate of every carrier.' (Emphasis supplied.) Here, what the Commission in fact concluded was that 'The just, reasonable, and equitable division or allowance for harbor service to which the complainant or any of the other harbor lines is entitled, as part of the total service performed by all of the carriers under the joint rate, can be determined only by considering the respective divisions of the rate and the services rendered thereunder, with the object of reasonably relating the harbor allowance to the portions of the rate distributed among the respective line-haul carriers.' (Emphasis supplied) and that for it to revise the harbor service allowances it would need sufficiently comprehensive evidence produced before it '* * * to enable us to determine that the resulting divisions, not only of the Jersey Central, but of the other harbor lines, as well as of the line-haul carriers, will be just, reasonable and equitable.' This is entirely consistent with the plaintiff's theory of its case, for plaintiff's counsel stated on the first oral argument before the Commission that 'The entire case was presented on the theory that there should be a division of the revenue in proportion to the respective costs of the harbor lines on the one hand, and of the line-haul carriers on the other hand.' The Commission found that the needed proof was lacking. As detailed by the Commission in its second report, plaintiff's major failure of proof consisted in (1) unacceptable data purporting to show the costs of the non-harbor services performed under the joint rates; *fn6" (2) incomplete harbor cost studies on the other New York Harbor lines; *fn7" (3) no evidence as to divisional arrangements between the other harbor lines and their connections on the principal or typical commodities, the rates thereon, and the extent of service performed by the other harbor lines as compared with the service ...


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