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PALMER v. UNITED STATES

November 20, 1947

PALMER et al.
v.
UNITED STATES et al.



The opinion of the court was delivered by: PRETTYMAN

This is a civil action brought by certain railroads to enjoin and set aside an order of the Interstate Commerce Commission entered on July 25, 1947, in a proceeding captioned 'Increased Per Diem Charge on Freight Cars'. The Secretary of Agriculture, the Director of the Office of Defense Transportation (whom we shall call simply the Director), the National Agricultural Cooperative Transportation Committee, and certain railroads, some as plaintiffs and some as defendants, have intervened.

 These latter references of the Director are to the following circumstances. Some railroads own many cars, and some own few. Cars move from the tracks of one road to those of another without restriction. Thus, a railroad has on its lines some of its own, called 'system' cars, and some belonging to other railroads, called 'foreign' cars. When a company has an emptied foreign car on its lines and needs a car to move freight, it uses that car. Thus, in times of general car shortage, a railroad which owns plenty of cars may not have enough to serve its customers, while one which owns few cars may have ample foreign cars on its lines to supply its demand. While there has been and is a shortage in the total number of cars in the country, we are told that an acute shortage develops each post-harvest season in cars available to move crops in the west. In past years, and in the current year, at the time of crop movement, some western roads have had on their lines less cars than the number which they own. Some eastern roads, on the other hand, are in possession of more cars than the number which they own. While the Commission's report and the affidavits filed before us do not make this situation either certain or clear, the assumption that railroads in the agricultural areas are large owners of cars which are absent from their lines is the basis for the Director's reference to the return of foreign cars to proprietary lines as a measure to ameliorate the acute car shortage.

 Under an arrangement among the railroads, called the Car Service and Per Diem Agreement, every road pays a daily rental, called a per diem, for each car on its lines but not owned by it. The Director urged that the Commission institute an investigation into the rules and practices with respect to car-hire, and particularly the compensation paid by carriers for the use of cars not owned by the carriers using them, for the purpose of establishing such rules and such basis and rates of compensation as are calculated to promote the more prompt, economical and efficient use and handling of cars. In another letter, he proposed that the per diem charge be increased from $ 1.15 to $ 2 as a stimulant to the prompt handling and return of foreign cars by hiring roads to owning roads.

 On December 18, 1946, the Commission ordered an investigation 'for the purpose of determining whether the establishment of a rate of $ 2,00 per day or other increased rate to be paid to the owner for the use of each car during periods of car shortage (except tank and refrigerator) by any common carrier would promote greater efficiency in the use and increase the supply of cars'. The investigation proceeded; hearings were had in May, 1947; a proposed report by the examiners was released June 18, 1947; oral argument was had before the Commission en banc on July 9, 1947; and on July 25, 1947, the Commission promulgated the report and order here involved. The examiners had recommended 'a temporary increase in the per diem charge with an element of penalty having a direct relation to delinquent handling and delay of box cars'. They recommended that for a temporary period the per diem charge be $ 5 a day on box cars held by one railroad in excess of five days. The Commission rejected the recommendations of the examiners.

 The conclusions of the Commission were that the per diem be increased to $ 2 for six months, October 1, 1947 -- March 31, 1948, and 'that such increased charge will promote greater efficiency in the use and increase the supply of cars (except tank and refrigerator cars), and that such increased charge will be reasonable.' Four of the ten participating Commissioners dissented in three succinct opinions. One concurred because he thought the plan 'worth trying'. The suit at bar followed.

 The authority upon which the Commission based its action was the Interstate Commerce Act, *fn1" particularly Section 1, paragraphs (10), (11), (13) and (14); and more particularly the last-named paragraph, the pertinent portion of which reads: 'The commission may, after hearing, on a complaint or upon its own initiative without complaint, establish reasonable rules, regulations, and practices with respect to car service by common carriers by railroad subject to this chapter, including the compensation to be paid and other terms of any contract, agreement, or arrangement for the use of any locomotive, car, or other vehicle not owned by the carrier using it (and whether or not owned by another carrier), and the penalties or other sanctions for nonobservance of such rules, regulations, or practices.'

 At the hearing there was a difference of opinion among counsel as to the theory, and so as to the nature, of the Commission's report and order, and thus some confusion as to the precise questions presented for our decision. Able counsel for the United States, in a careful and thorough brief, say: 'The issue of reasonable remuneration for car ownership is not in issue in this proceeding. The issue simply is whether the Commission possessed the necessary authority to increase the per diem charge for the purpose of promoting greater efficiency in the use and supply of cars, and if so, whether such regulation was reasonably exercised.'

 This is, in effect, an assertion that in prescribing the compensation payable to owners for the use of cars, the Commission may add to reasonable remuneration for car ownership, solely for regulatory purposes, an amount which will tend to cause hiring railroads to return cars promptly. The Director's letter, the order of investigation, the definition of the issues by the presiding examiner, the testimony of Commission witnesses, the examiners' report, and the conclusion of the Commission's report were all upon that theory. The Commission itself said, in its report, 'We believe the statute contemplates that a per diem charge for the use of freight cars may be used as an instrument of regulation to control the prompt movement and return of cars.'

 At one point during the oral argument counsel for the Commission seemed to agree with the foregoing understanding of the issues. Later, however, he suggested that the order might be sustained as a prescription of reasonable remuneration for car ownership, and in his brief he contended that the amount fixed ($ 2) is not as high as the evidence would warrant if the value of the use of cars in times of car shortage is added to the costs of car ownership to get a reasonable compensation to the owner. Counsel for the railroads intervening as defendants, in support of the Commission's order, argue flatly that 'No Penalty (Punishment) Per Diem (is) involved' in the case and that the $ 2 per diem was designed to compensate the owning railroads in part for the loss of earnings suffered when its cars are on foreign lines.

 We think it perfectly clear that from first to last the Commission intended its order to rest upon its asserted power to fix compensation for the use of cars as a regulatory measure, solely for the purpose of increasing efficiency in the use of cars and at an amount wholly independent of the costs of car ownership, expenses of maintenance and operation, and a reasonable profit. We shall discuss that question first. We shall, however, consider the other contention, that the order can be sustained as a determination of reasonable remuneration for car ownership.

 The authority of the Commission is respect to car-hire charges is, as we have indicated, in Section 1(14) of the Interstate Commerce Act, *fn2" and is to be found in the expression 'reasonable rules, regulations, and practices with respect to car service * * * including the compensation to be paid * * * for the use of any * * * car * * * not owned by the carrier using it'.

  It is necessary at the outset to define with clarity the precise question which the case presents. Counsel for the Commission and for the United States argue as though the issue is the Commission's power to prevent or cure the car shortage. They press upon us the critical national and international situation created by lack of cars to more the crops in the west, and the public interest in the adequacy of the car supply. They argue as though the authority to fix compensation for the use of cars were the full extent of the Commission's power to deal with the situation. The most casual examination of the statute shows that such is not the case. The Commission has power, under the above-quoted section, to establish reasonable rules, regulations and practices with respect to car service, *fn3" which includes the use, interchange and return of cars and the terms of any contract, agreement, or arrangement for the use of cars, and to prescribe penalties for non-observance of its mandates. Those powers are broad. Their scope is not involved here. It would be far afield to consider this case upon the premise that it concerns the full authority of the Commission is what is agreed to be a critical national situation, clearly not only of the present but of a recurring nature. This case concerns only the nature of one specific power.

 The specific problem before us is in two parts: first, a matter of statutory construction, and, second, an inquiry into the sufficiency of findings. The first part is an exceedingly narrow question. It is whether the statutory authority to establish 'compensation for use' empowers the Commission to fix rentals at such amounts, regardless of the costs of ownership, maintenance, and operation, as in its judgment will operate upon non-owning users of cars to promote greater efficiency in that use. The question must be viewed in the light of several indisputable facts. First, entirely apart from its specific power to prescribe compensation for use, the Commission has general power to make regulations to govern the use and return of cars and to fix penalities for violation of such regulations. Second, the per diem charge applies every day a foreign car is on a railroad. It applies whether the car is moving as expeditiously as possible, or is standing still; whether it is in the hands of a consignee for unloading, of a shipper for loading, or is under control of the railroad; whether it is awaiting bottoms for export or is being held by the railroad for expected freight. Third, the charges are paid by one railroad to another railroad. They do not go into the public treasury as would penalties imposed under the statute.

 We think that the correct answer to the question as above-phrased is in the negative. The specific power to fix compensation for the use of cars is not coextensive with the general power to regulate the use of cars. While the determination of proper compensation is a phase of the regulation of use, it is a specific power with definite characteristics and ...


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