Louisville & Nashville Railroad Company v. United States/Opinion of the Court

The Traffic Bureau of Nashville instituted proceedings before the Commerce Commission against the Louisville & Nashville, Nashville, Chattanooga, & St. Louis, Tennessee Central, Illinois Central R. R. Companies, and the Nashville Terminal Company, seeking (1) a reduction of the $1 rate on coal and (2) to require a discontinuance of what was alleged to be a discriminatory switching practice in the yard at Nashville. After an elaborate hearing, in which volumes of testimony were taken, the Commission found that the $1 coal rate was unreasonable, and established an 80 cent rate. It also passed an order requiring the railroad companies to discontinue the discrimination in furnishing switching facilities. Thereupon the two railroad companies, first named, appellants herein, filed a bill in the district court for the middle district of Tennessee against the United States, the Commerce Commission, and others, attacking the validity of these two orders. The application for a temporary injunction having been denied, the case was appealed to this court.

1. On the argument here the appellants insisted that under the decisions in Florida East Coast R. Co. v. United States, 234 U.S. 167, 58 L. ed. 1267, 34 Sup. Ct. Rep. 867; Interstate Commerce Commission v. Union P. R. Co. 222 U.S. 541, 56 L. ed. 308, 32 Sup. Ct. Rep. 108; Interstate Commerce Commission v. Louisville & N. R. Co. 227 U.S. 88, 57 L. ed. 431, 33 Sup. Ct. Rep. 185, this court will determine whether the facts found do, as a matter of law, support the order of the Commission. The government, on the other hand, contended that the case should be disposed of in conformity with the principle that an appellate court will not interfere with the decision of a chancellor, refusing to grant an interlocutory injunction, unless it clearly appears that there has been an abuse of discretion. There can, of course, be no doubt that such is the general rule. But where the order of the Commission operates to reduce revenue it is manifest that the chancellor's discretion should be influenced by the fact that, though the application is for an interlocutory injunction, the decision thereon may, in many respects, be the equivalent of a final decree. On such a hearing the court should, therefore, consider that fact with all others, and grant the injunction, grant it on terms, or refuse it, as the equity of the case may warrant.

It was no doubt because of the limited time in which orders of the Commission would be operative, and that there might be cases in which irreparable injury would result if an interlocutory injunction was not granted, that Congress, by the act of October 22, 1913 (38 Stat. at L. 220, chap. 32), provided that 'an appeal may be taken direct to the Supreme Court of the United States from the order granting or denying, after notice and hearing, an interlocutory injunction. . . .' This clause and the reasons above mentioned were evidently taken into consideration by the three judges who heard this case. For, in passing upon the application, the court made a full statement of the facts, delivered a carefully prepared opinion discussing the various contentions of the complainants, and then made a decision on the merits of the case as submitted.

2. The facts involved have been so fully stated by the Commission (28 Inters. Com. Rep. 533) and by the court below (216 Fed. 672) that it is unnecessary here to repeat them. The railroad companies did not offer all of the evidence which was considered by the Commission; and on this appeal they do not include in the record all of the hundreds of pages of testimony which had been submitted to the Commission, but-conceding that the evidence was conflicting and tended to support the findings of the Commission they insist that the facts found were insufficient in law to sustain the orders which were made. This most commendable practice not only saved the expense of printing many volumes of testimony, but saved the substantial points in the case from being submerged in a flood of testimony-much of which was explanatory before the Commission and most of which was wholly immaterial in an appellate court which cannot reverse findings when supported by substantial-though conflicting-evidence. The practice is also in compliance with the spirit of the new equity rules (75-77) which call for just such a winnowing out of the useless; the presentation of only the relevant parts of exhibits, documents, tables, and reports, the elimination of all reduplications in written and oral testimony, and a condensation into narrative form of what is material to the then issue before the court.

3. By virtue of this conformity to the rules, we are in a position to consider the sharp-cut issue as to whether, as a matter of law, the Commission's findings of fact sustain its order, and shall discuss first the rate on coal, which, being treated as typical, was principally argued by counsel.

Where an existing freight rate is attacked, the burden is on the complainant to establish that it is unreasonable in fact. This is especially so where, as here, the rate has been in force for a long period during which time the traffic greatly increased in volume. In order to carry this burden in the present case, the Traffic Bureau, while alleging that the rate was unreasonable in itself and by comparison with other like rates, does not seem to have attempted to prove the cost or value of the carrier's service, but apparently relied largely on proof showing that the Nashville rate was higher than that charged for a similar haul to other points.

While some elements of value are fixed, the market price of property and work is affected by so many and such varying factors as to make it impossible to lay down a rule by which to determine what any article or service is worth. But one of the most common measures by which to value the property or service of A is to compare it with the amount charged for the same thing by B, C, and D. But this method, if made the sole basis for ascertaining values, may often lead to improper results. For B, C, and D may charge too much, or they may have been forced to charge too little. The same is true of determining, by comparison, the reasonableness of freight charges. Until some standard is adopted they may prove nothing-even where the two hauls are over the same mileage. For the rate attacked may tend to show that the others are too low while they in turn might be relied on to prove that the first is too high. Both may be unreasonably high, or too low, because compelled by conditions over which the carrier had no control. Water competition, rail competition, and competition of markets, enter so largely into the establishment of rates that mere distance is not necessarily a determining factor; indeed, the statute itself recognizes that there may be circumstances under which it is lawful to charge less for a long haul than for a short haul over the same road. But while all this be true, it is, nevertheless, a fact that a comparison of rates between two points on the same road, or with the charges on other roads, may furnish evidence of probative value.

In the present case the Commission pointed out that many facts had to be considered in applying the evidence offered for the purpose of showing that the $1 rate to Nashville was high by comparison with the charge made to other points. It found that coal was shipped over the Louisville & Nashville R. R. from Kentucky mines to Nashville, Memphis, and Louisville. It also found that there was no substantial dissimilarity in the conditions at those three points, and instituted a special comparison between the rates to those three cities. The result may be indicated by the following tabulation:

From mines--

To Nashville, via L. & N., 109 miles $1 per ton, or 9.2 mills per mile.

To Memphis, via L. & N., 276 miles, $1.10 per ton, or 4 mills per mile.

To Louisville, via L. & N. 142 miles, 65 cents per ton, or 4.5 miles per mile.

The defendants insisted that its $1.10 rate to Memphis did not furnish a fair criterion because it had been made low and reduced in order to meet competition. The Commission, however, found that the river rate to Memphis was $1.40 per ton, so that the appellant's 'not unreasonable' (26 Inters. Com. Rep. 402) rate of $1.10 was not compelled by water competition. It further found that the rail competition at Memphis was not compelling. On these facts, and after giving a history of the increase and decrease in that rate (26 Inters. Com. Rep. 402), the Commission seems to have treated the $1.10 rate, for 276 miles to Memphis, as in the nature of a voluntary charge, which would tend to indicate that the $1 rate for 109 miles to Nashville was too high. A similar view was taken of the situation at Louisville, where water competition existed and where the 60-cent rate from the mine to Louisville, 142 miles, was practically the same as that of the Illinois Central, which charged the same rate for a haul of 125 miles to Louisville.

Of course, competition by rail as well as by water may compel such a reduction in rates as altogether to destroy their value for purposes of comparison. But, as we understand, the Commission held that while there should be no parity between these cities, the rate of $.60 charged by the Illinois Central for a haul of 125 miles to Louisville was, in view of all of the facts, some indication of what a road like the Louisville & Nashville should charge on a haul of 109 miles to Nashville.

Among many other details briefly discussed in the report, the Commission dealt with the question of the earnings on the coal business to Nashville. It found that the Louisville & Nashville's coal cars had an average capacity of 41 tons, so that on shipments from the mines to Nashville there was a car revenue of $41, or a percar-mile earning of 37.78 cents. If the car was returned empty there would be a per-car-mile earning of 18.87 cents. With this as a basis there was a comparison of the Nashville coal earnings with those on all traffic over the other roads entering that city. It showed--

L. & N. $1 rate on coal to Nashville, per car-mile earnings 37.78 cents.

N., C. & St. L., coal to Nashville, per car-mile earnings 24.64 cents.

Illinois Central on coal to Nashville, per car-mile earnings 24.00 cents.

Average of all traffic, loaded and unloaded:

L. & N., per car-mile earnings, 10.54 cents.

N., C. & St. L., car-mile earnings, 10.08 cents.

Illinois Central car-mile earnings, 7.78 cents.

Tennessee Central car-mile earnings, 16.43 cents.

In addition to these comparisons of coal rates and average earning on all traffic, loaded and empty, the Commission found that while the $1 rate to Nashville had been in force many years, the carrying capacity of the cars had increased from 16 to 41 tons and the tractive power of engines from 660 to 1,165 tons. This practically doubled the earning capacity of fully loaded trains; and if, as argued, there has been a much larger increase in cost of labor, material, taxes, and operating expenses, no proof of that fact was made to the Commission, for it found that 'there was little more than a suggestion in the record as to the increased cost of labor and material, and no attempt. . . to show operating cost.' At the hearing of the application for a temporary injunction an affidavit was offered to show that the increase in cost of operation had largely exceeded the increase in earning capacity. But such evidence, important in itself and on the issue of reasonableness, cannot be considered here for the reason that it shifts the issue, for the case was submitted to the district court not to pass on the facts, but on the theory that though the conflicting evidence might sustain the finding, the facts found did not, as matter of law, sustain the order.

It further appeared in the report and finding of the Commission that the Nashville Bureau had offered innumerable exhibits comparing on ton-and car-mile bases the Nashville rate with that to points in the southeast and on the Ohio and Mississippi rivers. Among these were certain rates which the Commission had prescribed. There was also a general comparison on the Nashville rate with the charge for coal and other commodities to Nashville and other destinations. This evidence showed that 'in all these instances the Nashville rate yields the greatest earnings.'

Giving the widest possible effect to the fact that mere comparison between rates does not necessarily tend to establish the reasonableness of either, it is still true that, when one of many rates is found to be higher than all others, there may arise a presumption that the single rate is high. And when to that it added the fact that some of the comparative and lower rates had been prescribed by the Commission, there was at least a prima facie standard, which, after allowing for dissimilarity in conditions, might be used along with all the other evidence in order to test the reasonableness of the Nashville rate. No one of those facts was conclusive, for the character of the country through which the two roads had been built might differ. One might run through a level, thickly populated territory,-the other might have steep grades, long tunnels and a roadway expensive to maintain. The capital invested, the traffic hauled, the cost of operation and the earnings might differ, but nevertheless what was shown to be a reasonable rate on one, might, after allowing for the dissimilarity in conditions, earnings, and cost, be a factor in determining the reasonableness of the rate on the other. The report in this case shows that the rate-making body had before it much and varied evidence of this character. After considering it as a whole, the Commission found that the $1-rate on coal shipped from the Kentucky mines to Nashville was unreasonable. In the light of these findings we cannot say that the facts set out in the report do not support the order. And since there is no contention, at this time, that the reduced rate is confiscatory, we can but repeat what was said in Interstate Commerce Commission v. Louisville & N. R. Co. 227 U.S. 88, 57 L. ed. 431, 33 Sup. Ct. Rep. 185:

'The pleadings charged that the new rates were unjust in themselves and by comparison with others. This was denied by the carrier. The Commission considered evidence and made findings relating to rates which the carrier insists had been compelled by competition, and were not a proper standard by which to measure those here involved. The value of such evidence necessarily varies according to circumstances, but the weight to be given it is peculiarly for the body experienced in such matters and familiar with the complexities, intricacies, and history of rate-making in each section of the country.'

5. In its complaint before the Commission the Traffic Bureau also attacked the practice of the appellants by which, under filed tariffs, each made a charge of $3 per car for switching noncompetitive business between industries within the terminal limits and in conjunction with the Tennessee Central.

The Bureau insisted that this practice was discriminatory and designed to prevent the switching of coal between the Tennessee Central and private industries, located on sidings and reached through the terminals. The defendants admitted the practice and the intention, but insisted that the yards had never been thrown open to such business. They claimed that they had the right to the exclusive use of their own terminals, and could not be required to switch cars loaded with 'coal or competitive freight' to and from the Tennessee Central.

In considering this branch of the case the Commission found that the Louisville & Nashville and the Nashville, Chattanooga, & St. Louis, by reason of indorsements on bonds, and by an agreement to pay 4 per cent on the capital stock of the Nashville Terminal Company, had leased the yards for 999 years,-the rental being paid by the two lessees in proportion to the business done by each. That while the Louisville & Nashville owned 70 per cent of the stock of the Nashville, Chattanooga, & St. Louis, the two roads were not only separate corporate entities, but were competitors at Nashville-particularly in the transportation of coal. It found that each switched for the other and both switched for the Tennessee Central, except as to 'coal and competitive business.' It found that such a switching practice was unreasonable and unjustly discriminatory, and that a 'reasonable practice would permit the switching of coal from the interchange of each carrier to industries on the rails of each other.' It thereupon issued an order requiring appellants to cease the discrimination found to exist and to maintain 'a practice which will permit the interswitching of such shipments from and to the lines of each and every defendant' [including Tennessee Central].

The appellants attack this order as being void because (1) it compels them to admit the Tennessee Central into an arrangement for operating joint terminals at Nashville under a contract guarantying interest on bonds and prorating operating expenses; (2) takes their property in the yards without due process of law; (3) violates § 15 of the commerce act (34 Stat. at L. 589, chap. 3591, [§ 4, amending § 15], Comp. Stat. 1913, § 8583) in compelling them, in effect, to make through routes and joint rates with the Tennessee Central when the appellants themselves have already established 'a reasonable and satisfactory through route; and (4) violates § 3 of the same act, which, after requiring carriers to afford equal facilities for the interchange of traffic, declares that the section 'shall not be construed as requiring any such common carrier to give the use of its tracks or terminal facilities to another carrier engaged in like business.' [24 Stat. at L. 380, chap. 104, Comp. Stat. 1913, § 8565.]

These objections treat the order as being broader than its terms. The Commission did not, as in Waverly Oil Works Co. v. Pennsylvania R. Co. 28 Inters. Com. Rep. 626, 627, pass upon the question as to what was a proper switching charge as affected by the rental of the yard and the cost of operation. Neither did it direct the appellants to establish a joint rate and a through route with the Tennessee Central. Neither did it order the appellants to give the use of their terminals to the Tennessee Central, but only required them to render to the latter the same service that each of the appellants furnishes the other in switching cars to industries located in and near the yard.

Disregarding the complication arising out of joint ownership and the fact that each of the appellants switches for the other, it will be seen that the Commission is not dealing with an original proposition, but with a condition brought about by the appellants themselves. Under the provisions of the commerce act (24 Stat. at L. 380, chap. 104, Comp. Stat. 1913, § 8565) the reciprocal arrangement between the two appellants would not give them a right to discriminate against any person or 'particular description of traffic.' For § 3 requires railroad companies to furnish 'equal facilities for the interchange of traffic between their respective lines. . .' provided that this should 'not be construed as requiring any such common carrier to give the use of its tracks or terminal facilities to another carrier engaged in like business.' If the carrier, however, does not rest behind that statutory shield, but chooses voluntarily to throw the terminals open to many branches of traffic, it to that extent makes the yard public. Having made the yard a facility for many purposes and to many patrons, such railroad facility is within the provisions of § 3 of the statute which prohibits the facility from being used in such manner as to discriminate against patrons and commodities. The carriers cannot say that the yard is a facility open for the switching of cotton and wheat and lumber, but cannot be used as a facility for the switching of coal. Whatever may have been the rights of the carriers in the first instance, whatever may be the case if the yard was put back under the protection of the proviso of § 3, the appellants cannot open the yard for most switching purposes and then debar a particular shipper from a privilege granted the great mass of the public. In substance that would be to discriminate not only against the tendering railroad, but also against the commodity which is excluded from a service performed for others. This feature of the case was thus dealt with by the district court:

'We think it clear that this order does not require the petitioners to give the use of their tracks and terminal facilities to the Tennessee Central Railroad, within the meaning of the proviso contained in § 3 of the act to regulate commerce, or constitute an appropriation of such tracks and terminals for the use of the Tennessee Central Railroad.

* *  *  *  *

'There is furthermore no evidence that the switching practices prescribed will violate the constitutional provision against taking property without due process of law. See Grand Trunk R. Co. v. Michigan Commission, 231 U.S. 468, 58 L. ed. 318, 34 Sup. Ct. Rep. 152. And it may well be assumed that the petitioners will not themselves establish a switching charge so low as to be confiscatory.'

The question as to power of the Commission to make this part of the order is settled by the decision in Pennsylvania Co. v. United States, 236 U.S. 351, 59 L. ed. --, 35 Sup. Ct. Rep. 370, recently decided. The appellants, however, insist that that case did not involve switching, but transportation; and further, they claim that the Pennsylvania road was there ordered to discontinue discrimination-while here the appellants are required by an affirmative order to devote their property to the use of a parallel and competing carrier. But the alleged differences do not serve to take the present case out of the principle announced in that just cited. For in this order the prohibition against the existing practice and the requirement to furnish equal facilities come to the same thing.

In this case the controlling feature of the Commission's order is the prohibition against discrimination. It was based upon the fact that the appellants were at the present time furnishing switching service to each other on all business, and to the Tennessee Central on all except coal and competitive business. As long as the yard remained open and was used as a facility for switching purposes the Commission had the power to pass an order not only prohibiting discrimination, but requiring the appellants to furnish equal facilities 'to all persons and corporations without undue preference to any particular class of persons.' The question as to what is a proper practice, the amount of charge therefor, and the length of time such switching service is to continue, are matters not presented for decision on this record, The judgment of the District Court is affirmed.

Mr. Justice Pitney concurs in the result.

Mr. Justice McReynolds took no part in the consideration and decision of this case.