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September 19, 1963

UNITED STATES of America, Plaintiff,
INTERSTATE COMMERCE COMMISSION et al., Defendants, and The Aberdeen and Rockfish Railroad Company, et al., Intervening Defendants

The opinion of the court was delivered by: HOLTZOFF

The issue in this action is whether freight rates on railroad shipments of knocked-down motor vehicles and motor vehicle chassis, as approved by the Interstate Commerce Commission, are unreasonable and excessive. This suit is brought by the United States as a shipper of the commodity, to set aside an order of the Commission ratifying the rates charged by railroads. The matter is before this Court at this time on cross-motions for summary judgment.

This litigation arises in an unusual manner. In 1943 the Government shipped carloads of knocked-down motor vehicle chassis over the Chesapeake and Ohio Railroad and paid the transportation charges according to the tariff then prevailing. Harrison Construction Company and Grafton Coal Company shipped similar articles over the Pennsylvania Railroad and the Baltimore and Ohio Railroad, respectively. These two shippers subsequently brought proceedings before the Interstate Commerce Commission claiming that the rates were excessive. The Commission sustained their contention, held that the freight rates charged on this commodity were unreasonable and excessive, determined what the maximum allowable rates should be, and directed reparation for the excess.

 Subsequently the General Accounting Office of the United States, on the basis of the decision of the Interstate Commerce Commission in the Harrison and Grafton cases, ruled that the Chesapeake and Ohio Railroad Company had been overpaid on the Government shipments. In order to secure reimbursement of these alleged overcharges, the General Accounting Office directed that corresponding deductions be made from other freight bills that later became due to the Railroad from the Government. The Chesapeake and Ohio Railroad Company then instituted an action in the Court of Claims to recover the amounts so deducted. That Court stayed and prosecution of the suit until the reasonableness of the rates could be determined by the Interstate Commerce Commission. Following this order of the Court of Claims the United States brought an appropriate proceeding before the Commission, seeking a review of the freight rates in question. The Commission reopened the Harrison and Grafton cases also, consolidated the three, and heard them together. The Commission concluded that its prior decision had been erroneous and that the rates actually charged by the railroads were not unreasonable or excessive. The Government then filed the complaint in the present action to review and set aside the order of the Interstate Commerce Commission. A large number of Class 1 railroads were permitted to intervene as defendants.

 Authority for maintaining this action is found in 49 U.S.C. § 17(9), which reads as follows:

 'When an application for rehearing, reargument, or reconsideration of any decision, order, or requirement of a division, an individual Commissioner, or a board with respect to any matter assigned or referred to him or it shall have been made and shall have been denied, or after rehearing, reargument, or reconsideration otherwise disposed of, by the Commission or an appellate division, a suit to enforce, enjoin, suspend, or set aside such decision, order, or requirement, in whole or in part, may be brought in a court of the United States under those provisions of law applicable in the case of suits to enforce, enjoin, suspend, or set aside orders of the Commission, but not otherwise.'

 The fixing of railroad freight rates is a complex and intricate undertaking requiring expert knowledge and skill. It differs from the determination of rates to be charged by public utilities of other types. Most public utilities, other than those in the transportation field, deal in a single commodity or service, such as gas, electric power, telephone service, and the like. In such cases, it is necessary to calculate what income is likely to be received by the utility if the rate is fixed at a specified amount, and ascertain whether the expected earnings would result in a fair return. In the case of transportation facilities, however, rates must be established on hundreds, or possibly thousands, of different commodities. The question then becomes, in part, whether the entire rate structure comprising the sum total of the income to be realized from all shipments of these many types, will result in a fair return to the carrier. No one freight rate may be considered individually. The entire group with its innumerable ramifications must be evaluated as a whole, like a piece of tapestry composed of thousands of individual threads of various colors and hues. It is a resultant of many elements. Economic effects of particular rates on communities which they affect, and on lines of business to which they relate; the extent to which they are likely to attract shipments to transportation facilities of a specific type or draw it to competitors; the amount of charges that the traffic will bear and numerous other factors must all be weighed in determining the reasonableness of freight rates. The task comprehends much more than mathematical computations. The outcome depends on sound judgment and keen discernment based on an appraisal of the various considerations and their interrelation. Obviously strong reliance must be placed on the expertise of the regulating agency.

 It is well settled that the scope of judicial review of final decisions of administrative agencies is narrow. It is limited and restricted to determining whether the agency committed any errors of law, or transcended the legal limitations on its authority; whether there is substantial evidence to sustain its findings of fact; and whether the result reached was arbitrary or capricious. The Courts are not empowered to consider and weigh the evidence de novo and reach an independent conclusion. These considerations are of particular weight in connection with matters such as rate fixing in which technical knowledge and expert skill play a large part.

 In Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 286, 287, 54 S. Ct. 692, 694, 78 L. Ed. 1260, Mr. Justice Cardozo aptly summarized these principles, as follows:

 'The structure of a rate schedule calls in peculiar measure for the use of that enlightened judgment which the Commission by training and experience is qualified to form. (Case cited.) It is not the province of a court to absorb this function to itself. (Cases cited.) The judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.'

 Other authorities that sustain or apply these principles are legion. It suffices to cite only a few. Interstate Commerce Commission v. Union Pacific R. Co., 222 U.S. 541, 547-548, 32 S. Ct. 108, 56 L. Ed. 308; Consolidated Edison Co. of New York v. National Labor Relations Board, 305 U.S. 197, 59 S. Ct. 206, 83 L. Ed. 126; United States v. Pierce Auto Freight Lines, 327 U.S. 515, 535-536, 66 S. Ct. 687, 90 L. Ed. 821; Atwood's Transport Lines, Inc. v. United States, D.C., 211 F.Supp. 168, 173, affirmed 373 U.S. 377, 83 S. Ct. 1312, 10 L. Ed. 2d 420; Easton Pub. Co. v. Federal Communications Commission, 85 U.S.App.D.C. 33, 175 F.2d 344, 349; Interstate Commerce Commission v. Martin Brothers Box Co., 9 Cir., 219 F.2d 811, 813; American Union Transport, Inc. v. United States, 103 U.S.App.D.C. 229, 234, 257 F.2d 607, 612.

 The voluminous record before the Hearing Examiner, whose conclusions were confirmed and adopted by the Commission, contains a great deal of oral testimony and numerous exhibits tending to sustain the fairness of the rates approved by the Commission, and explaining the method by which they were reached. The Commission rendered a detailed opinion, in the course of which it made the following significant observations:

 'Classification is not an exact science. Basically it is simply a determination of reasonable relations between commodities, with grouping of kindred articles. (Case cited.) It is not unusual for articles with similar physical characteristics to be included in a single group for rating purposes, even though there is a wide range of value and weight density. (Case cited.)'

 To make a comprehensive summary of the evidence before the Commission would unnecessarily prolong this opinion to an inordinate length. For our purposes, it suffices to give an indication of the nature of some of the evidence that was presented to the Commission, without attempting an exhaustive enumeration. The history of rate structures generally during the war years and of the rates on the commodities involved in this proceeding, was discussed by witnesses in detail. Comparisons were introduced between the rates on knocked-down automobile chassis, and those on other similar articles. Evidence was adduced concerning the amount, volume and weight of shipments of the type in question. A showing was made as to what rate would be low enough to attract more business to the railroads, but high enough to make it attractive to the carrier.

 It is evident that the decision of the Hearing Examiner and the subsequent ruling of the Commission were reached after careful study of all of the relevant and extensive data that were presented at the hearings. The Court perceives no basis for holding that there was no substantial evidence to sustain the order of the Commission, or for reaching a conclusion that the rates approved by the Commission are unreasonable or excessive. Obviously, there was nothing arbitrary or capricious, or in violation of law, in the action of the Commission. Government counsel do not demonstrate ...

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