NEW YORK V. UNITED STATES, 331 U. S. 284 (1947)

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U.S. Supreme Court

New York v. United States, 331 U.S. 284 (1947)

New York v. United States

No. 343

Argued March 3, 4, 5, 1947

Decided May 12, 1947*

331 U.S. 284


1. After finding that the existing class freight rate structure discriminates in favor of the northeastern portion of the United States and against the southern and western portions contrary to § 3(1) of the Interstate Commerce Act, the Interstate Commerce Commission issued an interim order under § 15(1) increasing class rates within the northeastern area by 10 percent and reducing those elsewhere east of the Rocky Mountains by 10 percent, pending the formulation of a national uniform classification of freight and effectuation of greater national uniformity in the class freight rate structure.

Held: the order did not exceed the Commission's authority. Pp. 331 U. S. 296-300, 331 U. S. 340-349.

(a) Whatever doubt may have existed as to applicability of the prohibitions of § 3(1) of the Interstate Commerce Act to regional discriminations in rates was removed by the 1940 amendment. P. 331 U. S. 300.

(b) The addition of the words "region, district, territory" to § 3(1) did not require national uniformity in rates regardless of differing costs of the service; but made plain the duty of the Commission, in determining whether discrimination exists, to consider the interests of regions, districts, and territories, and to eliminate territorial rate differences which are not justified by differences in territorial conditions. Pp. 331 U. S. 300, 331 U. S. 305, 331 U. S. 350.

2. The basic finding of the Commission -- that class rates within Southern, Southwestern, and Western Trunk Line Territories, and from those Territories to Official (northeastern) Territory, are generally much higher, article for article, than the rates within Official Territory -- is abundantly supported by the evidence. Pp. 331 U. S. 301-305.

Page 331 U. S. 285

3. An unlawful discrimination in class rates against regions or territories is not dependent on a showing of actual discrimination against shippers located in such regions or territories or negatived by the fact that only a minor portion of freight moves by class rates. Pp. 331 U. S. 306-309.

4. The Commission's finding -- based upon a broad inquiry into the effect of class rates on the economic development of Southern, Southwestern, and Western Trunk Line Territories -- that prejudice to these territories had been established, is supported by substantial evidence. Pp. 331 U. S. 310-315.

5. The Commission's finding that conditions peculiar to the respective territories did not justify the difference in the territorial class rate structure is supported by the evidence. Pp. 331 U. S. 315-332.

(a) The Commission's judgment that the differences in consists between the territories do not justify the present differences in interterritorial class rates is an expert judgment entitled to great weight, and this Court could not disturb its findings on the facts of this record without invading the province reserved for the expert administrative body. P. 331 U. S. 326.

(b) The earning power of the carriers, their freight operating ratios, their rates of return, the estimate of the volume of traffic in the future, and the nature and amount of traffic presently involved in the class rate movements are all relevant to the finding of unlawful discrimination, and this Court cannot say that these considerations do not counterbalance or outweigh the higher operating costs in the West, since the appraisal of these numerous factors is for transportation experts, and the error of judgment on their part, if any, is not of the egregious type which is within the reach of this Court on judicial review. P. 331 U. S. 331.

(c) An assumption that a reduction in the western rate structure, which, as compared with the eastern, is not warranted by territorial conditions and which prejudices the growth and development of the West, would have no effect in increasing the traffic of the western carriers would fly in the face of history, is contrary to the Commission's expert judgment, and would protect a discriminatory rate structure from the power of revision granted the Commission under § 3(1). P. 331 U. S. 332.

6. Notwithstanding the Commission's finding that less than carload traffic as a whole is carried at a deficit in all territories, except possibly in the South, this Court will not set aside the order temporarily reducing the class rates on that traffic -- especially in

Page 331 U. S. 286

view of the Commission's findings that such traffic constitutes less than 2 percent of the total railroad freight tonnage, that much of it moves on exception rates and commodity rates, instead of class rates, and that, if less than carload rates were left unchanged while class rates were reduced, the competitive relations between shippers of less than carload quantities and those shipping in carloads would be materially affected. Pp. 331 U. S. 332-340.

(a) In eliminating unjust discrimination against entire regions and establishing the uniformity required by law in a complete rate structure, the Commission was warranted in making minor collateral readjustments so as to avoid creating new discriminations. P. 331 U. S. 334.

(b) This Court would not be justified in setting aside the Commission's order on the ground that the new less than carload rates are confiscatory -- especially in view of the facts that the order is of an interim nature, this reduction has since been offset by a nationwide increase in all freight rates, the Commission invited the carriers to apply promptly for adjustments to insure that the rates on such traffic are on a compensatory level, and it has not been clearly shown that the result of the order will be confiscatory. Pp. 331 U. S. 334-340.

(c) If additional evidence was necessary to pass on an issue of confiscation raised in a petition for rehearing before the Commission but not supported by the introduction of additional evidence there, the district court should have remanded the cause to the Commission for a further preliminary expert appraisal of the facts which bear on that question, instead of receiving the evidence itself as though it were conducting a trial de novo. Pp. 335-336.

(d) The district court amply protected appellants when it overruled their claim that the interim rates are confiscatory without prejudice to another suit to challenge the legality of those rates if, after a fair test, they prove to be below the lowest reaches of a reasonable minimum or if the permanent rates do not meet that standard. P. 331 U. S. 340

7. Where the Commission finds that an existing rate results in unlawful discrimination contrary to § 3(1), it may, under § 15(1), prescribe a new rate which will be just and reasonable. Pp. 331 U. S. 340-343, 331 U. S. 345.

(a) It is not prevented from doing so by the fact that all rates involved in the rate relationship are not controlled by the same carriers. Pp. 331 U. S. 342-343.

Page 331 U. S. 287

(b) It may take one step at a time, and is not required to eliminate all evils in the rate structure or none. P. 331 U. S. 343.

8. In prescribing a 10 percent increase in class rates in the Northeast, as part of a general adjustment of the rate structure for all of the United States east of the Rocky Mountains in order to eliminate unjust territorial discriminations prohibited by § 3(1), the Commission did not exceed its authority, even though the existing class rates in the Northeast were within the zone of reasonableness. Pp. 331 U. S. 343-349.

(a) The Commission having given due consideration, as required by § 15a(2), to the effect of the rates on the movement of traffic, the need of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service, and the need of revenues sufficient to enable the carriers to provide such service, the weight to be given those factors, and especially the weight to be given the rate of return in current years, as opposed to that in the preceding decade, is for the Commission to determine, and this Court would usurp the administrative function of the Commission if it overruled the Commission's judgment and substituted its own appraisal of these factors. Pp. 331 U. S. 347-349.

9. The fact that the Commission subsequently granted a nationwide increase in all freight rates does not render the interim orders involved in this case obsolete and unenforceable, since the order granting the rate increase emphasizes the distinction between revenue and rate relationship cases and in no way impairs the finding in the present case that the existing class rate structure that has prevailed in the several territories violates § 3(1). Pp. 331 U. S. 349-350.

65 F.Supp. 856 affirmed.

Finding that the existing class freight rate structure discriminates in favor of the northeastern portion of the United States and against the southern and western portions, contrary to § 3 (1) of the Interstate Commerce Act, the Interstate Commerce Commission issued interim orders under § 15(1) increasing class rates in the Northeast by 10 percent and reducing those elsewhere east of the Rocky Mountains by 10 percent pending formulation of a national uniform classification and effectuation of

Page 331 U. S. 288

greater national uniformity in the class freight rate structure. In suits by or on behalf of northern and New England States and western railroads to set aside these orders, the District Court sustained the orders. 65 F.Supp. 856. Affirmed, p. 331 U. S. 351.

Page 331 U. S. 289

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