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KENNY v. UNITED STATES

March 26, 1952

KENNY et al.
v.
UNITED STATES et al.



The opinion of the court was delivered by: SMITH

This is a civil action under Sections 2321 to 2325, inclusive, of Title 28 U.S.C., 28 U.S.C.A. 2321 to 2325. The jurisdiction of the Court is based upon the provisions of Section 1336 of Title 28 U.S.C., 28 U.S.C.A. 1336. The plaintiffs seek: first, to set aside and annul an order heretofore entered by the Interstate Commerce Commission; and second, to enjoin the operation of a tariff filed by the Hudson & Manhattan Railroad Co., and the collection of fares thereunder. The action is before the Court on the record made at the hearing before the Commission.

The defendants challenge the right of the plaintiffs to maintain this action. It appears from the record that several, if not all, of the plaintiffs have a real interest in the controversy and have a right to maintain the action; the others have a right to intervene therein. 28 U.S.C.A. § 2323. We, therefore, believe it unnecessary to discuss the question. It is our opinion that the case can, and should, be decided on the merits.

 The Hudson & Manhattan Railroad Co., hereinafter identified as the Railroad, is engaged exclusively in the transportation of passengers; it handles no package, freight or express matter, except certain mail. It operates a rapid transit system between terminals in the cities of New York, N.Y., and Jersey City and Hoboken, N.J., and maintains stations at intermediate points between these terminals. The service which it renders may be described as a 'local interstate service.' *fn1" The lines and basic services of the Railroad are fully described in the Report of the Commission.

 Pursuant to the provisions of the 'Interstate Commerce Acts' 49 U.S.C.A § 1 et seq., and the regulations promulgated thereunder, the Railroad filed with the Commission a passenger tariff establishing a fare of twenty cents, an increase of five cents, for interstate transportation between points in the cities of New York, N.Y., and Jersey City, and Hoboken, N.J. The tariff was published and filed on April 11, 1951, and by its terms was to become effective on May 13, 1951; this procedure was in compliance with Section 6(3) of the said Act. Thereafter the City of Jersey City and twelve other municipalities filed a formal protest.

 Pursuant to the authority vested in it by Section 15(7) of the Act, 49 U.S.C.A. 15(7), the Commission suspended the operation of the tariff for a period of seven months, the maximum permitted by statute, and initiated an investigation 'concerning the lawfulness' of the fares established therein. (Suspension Orders entered on May 11 and May 25, 1951). Thereafter the proceeding was assigned for hearing before a designated examiner. The hearings, conducted on June 26, 27, 28 and July 16, 17, 18 and 19, were finally concluded on July 20, 1951. The proceeding was assigned for oral argument and was heard by the Commission on October 31, 1951 on the record made before the examiner. The decision of the Commission was reported and filed on December 3, 1951, and on that date it entered an order vacating the suspension and discontinuing the proceeding. The present action followed.

 The principal grounds urged by the plaintiffs in support of this action are stated in Point One and Point Two of their brief. It is charged in the former that 'the Commission has failed so manifestly in the exercise of its powers and responsibilities as to present a case of arbitrariness and statutory ultra vires.' It is charged in the latter that the Commission's order 'is arbitrary and ultra vires because it rests upon a total misconception by the Commission of the regulatory tasks which faced it in this case.

 A careful study of the arguments advanced under Point One discloses that the principal complaint is that the Commission 'made a determination of justness and reasonableness without proper findings, and on the basis of findings which are inadequate both on the face of its report and as tested by the record.' The contention appears to be that the Commission failed to make the basic findings essential under the law to support its order and that its approval of the tariff was therefore arbitrary and not in accordance with the law. This contention is without merit.

 We concede that the law imposes upon the Commission a duty to find and adequately state the basic facts upon which it has proceeded. United States v. Chicago, M., St. P. & P.R. Co., 294 U.S. 499, 504-506, 55 S. Ct. 462, 79 L. Ed. 1023; United States v. Baltimore & O.R. Co., 293 U.S. 454, 463, 55 S. Ct. 268, 79 L. Ed. 587; Florida v. United States, 282 U.S. 194, 215, 51 S. Ct. 119, 75 L. Ed. 291. An adequate statement of fact is essential to the proper and intelligent review by the court of a proceeding conducted by the Commission; the sufficiency of such a statement, however, should be measured by the limits of the statutory power invoked, here the jurisdiction 'to prescribe just and reasonable' rates and fares. Ibid. This jurisdiction is defined in Sections 15 and 15a of the Act, 49 U.S.C.A. 15 and 15a, particularly subdivisions (1) and (7) of the former and subdivision (2) of the latter.

 The statutory standards which the Commission must apply in the exercise of its jurisdiction are defined by Section 15a(2), supra, as follows: 'In the exercise of its power to prescribe just and reasonable rates the Commission shall give due consideration, among other factors, to the effect of rates on the movement of traffic by the carrier or carriers for which the rates are prescribed; to the need, in the public interest, of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service; and to the need of revenues sufficient to enable the carriers, under honest, economical, and efficient management to provide such service.' A proposed tariff may be approved as lawful only if it is determined to be 'just and reasonable' in the light of these factors. It should be noted, however, that the statute does not exclude the consideration of 'other factors.'

 The statute reserves to the carrier a primary right to establish tariffs but vests in the Commission the authority to determine their 'lawfulness.' United States v. Chicago, M., St. P. & P.R., Co., supra, 294 U.S. 506 and 510, 55 S. Ct. 462; Skinner & Eddy Corp. v. United States, 249 U.S. 557, 564, 565, 39 S. Ct. 375, 63 L. Ed. 772; Interstate Commerce Commission v. Louisville & Nashville R. Co., 227 U.S. 88, 92, 33 S. Ct. 185, 57 L. Ed. 431. This power is specifically defined by Section 15(7), supra. The burden is upon the carrier to prove not only that the proposed tariffs are 'just and reasonable' but also that they are lawful. Ibid. The proposed tariffs may be approved as 'just, reasonable and not unlawful' only if they meet the statutory requirements. A tariff initiated by the carrier pursuant to the provisions of the Act 'must be upheld as lawful unless adequate reasons are presented for setting it aside.' United States v. Chicago, M., St. P. & P.R. Co., supra, 294 U.S. 510, 55 S. Ct. 467.

 The report of the Commission must be examined in the light of these established principles and its sufficiency must be tested by the statutory criteria. United States v. Chicago, M., St. P. & P.R. Co., supra. It is our opinion that the report, when thus examined and tested, is adequate. It contains a comprehensive recital of the ultimate facts upon which the Commission proceeded and an adequate statement of the reasons which prompted its action.

 The Commission found and concluded that the Evidence as a whole indicates (1) that respondent is in need of an immediate substantial increase in revenue, which can be obtained only through substantially higher fares; (2) that the proposed fares do not exceed maximum reasonable fares; (3) that respondent's facilities are efficiently and economically operated, and their continued operation is necessary to the large majority of protestants; (4) that numerous improvement and economies have been and are being made by respondent in its operations; (5) that the principal expenses which the proposed fares are to offset are those resulting from the increased costs of labor, materials, and supplies which have occurred since 1948; that the evidence upon which the present fares were authorized was based upon financial and operating conditions for that year; and (6) that under the proposed fares respondent's revenues will be substantially increased.' The Commission further found and concluded '(1) that respondent's aggregate operating revenues are less than its reasonable expenses, and (2) that the proposed local interstate fares are just and reasonable and nor otherwise unlawful.'

 These ultimate findings and conclusions are supported by the additional, subsidiary findings of fact stated in the report. The subsidiary findings of fact are germane to the ultimate facts found by the commission. They cover: (1) the value of the carrier's properties; (2) the earning record and financial condition of the carrier; (3) the efficiency of management and operation; (4) the nature and extent of the service rendered and the need therefor; (5) the approximate cost per passenger for the service rendered; (6) the schedule of operations and the nature and extent of the traffic; (7) the increase in passenger accommodations and the consequent increase in car mileage; (8) the income, past and expected, from railway operations; (9) the income from sources other than railway operations; (10) the improvement program undertaken by the carrier and the necessity therefor; (11) the increase in the basic rates of wages and the effect thereof on the cost of operations; (12) the increase in the cost of materials and the effect thereof on the cost of operations; (13) the diversion of passenger traffic experienced by the carrier in past years and occasioned by the growth and availability of other means of transportation, to wit, other carriers and private automobiles; (14) the prospective loss of traffic reasonably ascribable to public resistance to the proposed increase; (15) the increase in revenue which may be expected from the proposed fare increase notwithstanding such public resistance; and (16) the need of the carrier for further revenue if it is to maintain an efficient railway operation.

 It is our opinion, after a careful examination and study of the entire record, including the exhibits, that there was ample evidence to support the findings of fact stated by the Commission in its report. The arguments of the plaintiffs, as we understand them, necessarily invite 'the court to substitute its judgment for that of the Commission upon matters of fact within the Commission's province. This is not the function of the court.' Interstate Commerce Comm. v. Atchison, T. & S.F.R. Co. (Los Angeles Switching Case), 234 U.S. 294, 314, 34 S. Ct. 814, 820, 58 L. Ed. 1319. It is settled that an order of the Commission, adequately supported by findings of fact, is conclusive unless it appears that (1) it is unjust and unreasonable in its consequences; (2) it is based upon a mistake of law; (3) it is not supported by substantial evidence; or (4) the Commission acted arbitrarily and exceeded its statutory powers. Interstate Commerce Commission v. City of Jersey City, 322 U.S. 503, 512, 513, 64 S. Ct. 1129, 88 L. Ed. 1420; Virginian Railway Co. v. United States, 272 U.S. 658, 663, 665, 666, 47 S. Ct. 222, 71 L. Ed. 463; Western Paper Makers' Chemical Co. v. United States, 271 U.S. 268, 271, 46 S. Ct. 500, 70 L. Ed. 941; Skinner & Eddy Corp. v. United ...


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