All States Freight, Inc. v. New York, New Haven & Hartford Railroad Company

PETITIONER:All States Freight, Inc.
RESPONDENT:New York, New Haven & Hartford Railroad Company
LOCATION:The Realtor Building, formerly McCrory’s Five and Ten Cent Store

DOCKET NO.: 22
DECIDED BY: Warren Court (1962-1965)
LOWER COURT:

CITATION: 379 US 343 (1964)
ARGUED: Oct 21, 1964
DECIDED: Dec 14, 1964

Facts of the case

Question

Audio Transcription for Oral Argument – October 21, 1964 in All States Freight, Inc. v. New York, New Haven & Hartford Railroad Company

Warren E. Burger:

Number 22, All States Freight, Incorporated, et al., Appellants, versus New York, New Haven and Hartford Railroad Company et al.

Mr. Carpenter, you may proceed with the argument.

Homer S. Carpenter:

Mr. Chief Justice, may it please the Court.

This case involves railroad rates for the transportation of property in Interstate Commerce.

The rates were published in the spring of 1959 and the case is now five-and-a-half years old.

The rates were first published by the New Haven Railroad but were promptly followed by the publication of equivalent rates for the New York Central, the Boston and Maine, the Maine Central, and the Central of Vermont.

Generally speaking, the rates applied from the principal cities of New England to Chicago, Illinois and St. Louis, Missouri.

Certain Midwestern railroads which provided the connections for the New England lines to those cities also became parties to the rates.

Potter Stewart:

These were westbound only?

Homer S. Carpenter:

Yes sir, westbound only, Justice Stewart.

The reason that the new rates applied only to those two cities was by election of the New Haven itself.

Their purpose was to compete with a new plan of railroad service which was trailer-on-flatcar.

It was called Plan III and was instituted in New England by the New York Central in 1958.

The New York Central offered that service and its initial phase only to those two cities and the Plan III trailer-on-flatcar service was of a special nature.

It was provided that charges which were essentially flat charges in the sense that they were stated in aggregate sums of money to apply for the transportation not to exceed 70,000 pounds of freight and not to exceed two trailers.

There was a further restriction on those trailer-on-flatcar rates that — or the trailer-on-flatcar charges that no one commodity in the total shipment could exceed 60% of the aggregate weight of the shipment.

The tariff also provided that the trailers had to be supplied by the shipper and that the shipper likewise had to supply his own bridge service between the commercial installation and the railroad terminal.

As a matter of actual practice, however, the New York Central was leasing trailers to shippers on a one way trip lease and was providing the bridge service both other than tariff charges.

Now, the effect to this new service on the New Haven Railroad was immediate.

Within the first two months that the service was offered by the New York Central, the New Haven lost 400 car loads of traffic to these two destinations which it could identify.

I should also point out that the New Haven had also published these Plan III charges for the new trailer-on-flatcar service but it had some disabilities.

It had two gateways to the west.

One at Maybrook, New York and the other one in New York City itself, I think the New Haven called the Harlem River where it made connection with westbound carriers.

The clearances on both of those routes were not such as to permit the standard size trailer on a standard height boxcar or flatcar to be transported.

The New Haven, however, had been using a special sort of a car, they called it a clisham car which carried the trailer at the lower level than an ordinary flatcar but it couldn’t very well provide that service to the west because the unloading facilities for this specialized car were not maintained by all of its connections.

It had under progress, however, a program for eliminating its low occurrences and accordingly it published these new rates which are an issue here subject to an expiration date.

The expiration date was in September of 1959 prior to at time it came along that expiration date was postponed.

By September of 1959, the clearance problems what the New Haven had encountered, had been cleared up with respect to one of its routes, the one through Maybrook.

And of course, that gave it access to the both — both cities that is Chicago and St.Louis.

Moreover it — it also secured from the Interstate Commerce Commission by that time, permission to substitute two short flatcars for one long one.

Homer S. Carpenter:

The original Plan III contemplated that there would be two trailers to each flatcar and the New Haven didn’t have long flatcars.

I mentioned these matters because I think it’s important due to the fact that the New Haven, even after it had eliminated its difficulties that I have spoken of and was in a position to secure the traffic under Plan III continued nonetheless to press for approval of these rates.

This was recognized by the Commission in its decision.

When the rates were first published, they were suspended on the petition of the appellants here.

Then later, that suspension was vacated upon petition of the railroads.

However, the Commission continued its investigation which had instituted the time the suspension took place.

Now by the provisions, the Interstate Commerce Act, the burden of justifying a change in freight rates is upon the proponent of that change that the hearing which the Commission held, only the New Haven undertook the discharge effort.

The other railroads simply stated that they published the rates for the purpose of remaining competitive with the New Haven itself.

(Inaudible)

Homer S. Carpenter:

There were several, the New York Central, they were the New York Central, the Boston and Maine, the Maine Central and the Central of Vermont.

Those, Justice White, were the originating roads in New England.

The roads which made connections or the ones that didn’t have their own lines to Chicago and St. Louis joined with them in the publication of the rates.

Byron R. White:

(Inaudible)

Homer S. Carpenter:

No, no, it was not.

The rates were stated to apply upon traffic that was transported in boxcars.

And I should point out here that the New Haven had a surplus of these boxcars for westbound move.

The rates were expressed in cents per 100 pounds but they were graded by reference to the amount of weight in a given shipment.

That is to say that the highest of these rates was at 45% of first class and it applied to shipments of 20,000 pounds minimum weight and the rates were graded downward as the minimum weights increased by 10,000 pounds increments until at 70,000 pounds the rates were 19% of first class.

The rates had application upon virtually any commodity.

The only exceptions were livestock, perishables, explosives and articles highly susceptible to damage.

With those limited exclusions, it applied where the rates applied whether the shipments were in single commodity carloads or in carloads of mixed commodities.

Potter Stewart:

Well, I suppose in addition to those specific exceptions, there are good many commodities that simply can’t travel in boxcars, isn’t that true?

Homer S. Carpenter:

Yes, that’s true, for instance —

Potter Stewart:

So, in practical matter, those were also —

Homer S. Carpenter:

As a practical matter, yes, the rates were — the rates were restricted to transportation in boxcars, Your Honor.

In addition, the rates had alternative application with all the other boxcar rates.

By that, I mean that if there was a lower rate published for any particular commodity for boxcar movement, that lower rate would apply.

These rates serve only to mark the ceiling at which the railroad charge would be computed.

After hearing in briefs, the rates were found unlawful by the Commission’s hearing examiner because they are violative of Section 1(6) of the Interstate Commerce Act.

We have set that out at page 2 of our brief here.

Homer S. Carpenter:

I’m sorry, it’s at page 3, the middle of the page, and it reads in part as follows.

“It is hereby made the duty of all common carriers subject to the provisions of this part to establish, observe, and enforce just and reasonable classifications of property for transportation with reference to which rates, tariffs, regulations or practices are/or maybe made or prescribed in just and reasonable regulations and practices affecting classifications, rates, or tariffs.”

The section goes on to deal with other matters.

The railroads filed exceptions to the report of the examiner and Division 2 of the Commission consisting of three commissioners of whom Commissioner Fritz dissented, held that the rates are not violative of Section 1(6) in as much as they were held to be justified by the particular circumstances of this case.

Commissioner Fritz dissented upon the grounds that all freight rates or all commodity rates such as these are on straight shipments, can be justified under only special circumstances which he felt were not present here.

These appellants then petitioned the entire Commission as at that time we had a right to do for reconsideration of the report by Division 2.

In the entire Commission with three commissioners dissenting, issued its report which condemned these rates on two grounds.

First, it was held that the rates constitute a destructive competitive practice in contravention of the National Transportation Policy and second, that the rates do violate the provisions of Section 1(6) of the Act.

Now, these two conclusions were very intimately related and they stem, we believe, from a single basis.

That was the fact that as demonstrated by the evidence of record before the Commission, these all freight rates which have been established for the New Haven and with respect to which the evidence all related operated to hurt rather than to help the New Haven financially.

Potter Stewart:

So, do you understand the holding that — that’s violated the National Transportation Policy insofar as it amounted to a destructive, competitive practice to be that the — that it was self-destructive.

It was a self-destructive, competitive practice with a harm done was to the — to the New Haven Railroad?

Homer S. Carpenter:

To both, Your Honor.

Potter Stewart:

The destruction done?

Homer S. Carpenter:

Yes, yes, Your Honor, to both though, not just to the New Haven.

The New Haven Court — and I would touch on this later.

The court below in an earlier decision had itself defined the destructive competitive practice as one which is harmful to the proponent of it —

Potter Stewart:

Yes.

Homer S. Carpenter:

— and also, harmful to its competitors.

Potter Stewart:

Does it need to be both?

Homer S. Carpenter:

I think so.

Potter Stewart:

You think there’s a holding here that it was both?

Homer S. Carpenter:

There is a holding here that it was both.

Earl Warren:

Was there a holding that it needs to be harmful to both?

Homer S. Carpenter:

I don’t think so, Your Honor.

I believe the holding was that — I’m sure the holding was that this practice would be destructive of just and reasonable rate structures upon which carriers and shippers alike depend for adequate service, the maintenance of adequate service.

Now, there was no holding that this would be harmful to the motor carriers.

We didn’t litigate on that basis or at least the Commission didn’t decide on that basis.

We had urged that before the Commission — Commission had no — no finding on it.

The Commission made two findings in connection with this ultimate conclusion and also with respect to this evidence relating to the injury to the New Haven as well as to the other carriers through the destruction of the rate structure.

Homer S. Carpenter:

The first was that the rates applied to straight car loads and displaced all other higher car load rates.

They represented the highest level, the Commission said, at which the bulk of the New Haven’s westbound traffic were moved.

The second finding concerned this study which actually moved — or of the traffic which actually moved on these all freight rates which have been referred to by the Commission in its decision as Section 2 rates.

That was by reason of fact that they were published in Section 2 of a given tariff.

That study covered a period of 11 weeks.

The New Haven had analyzed those shipments to determine which of them consisted the movements which they had afford in taking place by way of the New Haven itself at its preexisting rates in which have been attracted to the new Section 2 rates from some other service.

The study showed and the Commission found the fact that the new traffic which had been attracted by the all freight rates amounted to more than four million pounds during this 11-week period but that the total revenue for both the new and the old traffic had not appreciably increased over that which would have accrued that the old traffic been handled the old rates.

I would like to read at this time from page 12 of the printed record.

(Inaudible)

Homer S. Carpenter:

Yes, there was.

(Inaudible)

Homer S. Carpenter:

No, no, that — that would not have followed.

This and the — that they had handled four million additional pounds of traffic at substantially the same gross revenue.

Now obviously, the gross revenue — it caused the railroad to handle that four million pounds and the Commission recognized this because it said, and I read from page 12 of the printed record here, “Thus for this period” and the Commission was referring to the 11-week period, “the respondent”, that’s the New Haven, “moved over four million pounds of additional traffic in return for $129 of added revenue.

This represents less than one-third of ascending revenue for each additional 100 pounds of traffic moved.”

The Commission then referred to the fact that the evidence respecting costs —

Potter Stewart:

Well that — that’s not a holding that they lost money necessarily and depending on Justice White’s question but merely a suggestion that maybe they didn’t make as much money.

Homer S. Carpenter:

That the — true, true.

They lost money.

I — I meant to convey this impression, they lost money by reason of the fact that they handled — they had to handle the additional traffic for so very little money.

Potter Stewart:

So, very little addition revenue which indicated at least they made less money, made less profit.

Homer S. Carpenter:

That’s right.

They lost money over what they would have made had they hadn’t —

Potter Stewart:

Put in these rates.

Homer S. Carpenter:

— put in these rates and handle that.

Commission then referred to the fact that the evidence respecting cost had indicated that the — all freight rates would recover operating cost both out-of-pocket and fully distributed and commented that the earlier report by Division 2 was based primarily on that fact.

The Commission commented there that right after its finding with respect to the special study that these new Section 2 rates have been shown to return revenues which were in excess of the out-of-pocket cost of providing a service and also, the fully distributed cost.

Byron R. White:

(Inaudible)

Homer S. Carpenter:

Yes because in the aggregate — in the aggregate, Justice White, the railroad was worst off by reasonable rates than it would have been without and that’s what the study showed.

Let me diverge here because this is a — an important aspect of the case on this matter of cost.

Homer S. Carpenter:

There is, I think, an inclination by most of us to accept the labels as dispositive of facts and the Commission labels these costs out-of-pocket cost and fully distributed coSt.

(Inaudible)

Homer S. Carpenter:

Yes.

William J. Brennan, Jr.:

(Inaudible)

Homer S. Carpenter:

It would have been —

William J. Brennan, Jr.:

It would have been.

Homer S. Carpenter:

— if the old rates had continued and the traffic which — the study indicated would have moved, had there been no change in the rates.

William J. Brennan, Jr.:

(Inaudible)

Homer S. Carpenter:

That’s right and for $129 by reason of the new rates, Justice Brennan; the railroad had to transport an additional four million pounds of traffic.

Byron R. White:

(Inaudible)

Homer S. Carpenter:

No.

No, I didn’t mean that.

If they had gotten the four million pounds under the old rates, they would have made — they would have made much greater profit.

It would have made a much greater profit.

The point was and what the study disclosed was, that there was a certain portion of all of the traffic that moved at the new rates which theretofore had been moving by the — by the railroads’ regular boxcars service at the regular rates of the railroads.

And if this traffic had moved at the old rates, it would have produced revenues —

William J. Brennan, Jr.:

Does it tell us here what the revenues would have been had this traffic would have been moved, is that here?

Homer S. Carpenter:

Yes, it says — well, you have to compute it.

Potter Stewart:

Because the whole assumption is that they wouldn’t have had this four million additional pound had they not put in the new rates?

Homer S. Carpenter:

That’s right.

Potter Stewart:

Isn’t that correct?

Homer S. Carpenter:

And had they not — had they not put in the newer rates, they would have had substantially the same amount of revenue without the four million pounds.

Potter Stewart:

They carried four million pounds less freight.

Homer S. Carpenter:

That’s right.

And if you carried less freight but had the same amount of revenue substantially.

Tom C. Clark:

Aren’t they taking freights from other railroads other —

Homer S. Carpenter:

Other forms of transportation.

Tom C. Clark:

Now what about the service aside from that they didn’t make $129, what about the service to the public or to the — to the shipper?

Homer S. Carpenter:

This sounds in the question that Justice White had asked about the cost because there is, we believe, a great public interest in the maintenance of sound economic conditions in the railroad industry.

So, the railroads can continue to provide service and the motor carriers and all transportation agencies.

Tom C. Clark:

Well, if they continue, they made $129 more.

Homer S. Carpenter:

No, they didn’t, Justice Clark.

That was gross revenue.

That was gross revenue that they made more.

Tom C. Clark:

How did they come out with that?

Homer S. Carpenter:

They came out — we recomputed it in our brief and we had to compute it from the — the evidence that was submitted and it’s at page 10 of this blue brief.

That at the normal rates in transporting only the traffic that would have moved or the assumption being that it would have moved at the normal rates, their net above out-of-pocket cost would have been in the vicinity if $76,000, transporting the additional four million pounds of traffic.

At the new and reduced old commodities rates, the net was in the vicinity of $36,000, a loss of net or reduction of net came out of $40,000.

Byron R. White:

Well that does include when they ship at low cost, doesn’t it?

Homer S. Carpenter:

No, I didn’t say that they — that they were shipping below coSt.

I didn’t mean to imply that and that’s why — the Commission found that they did not.

Byron R. White:

— that’s to the contrary.

Homer S. Carpenter:

That’s right.

Byron R. White:

Fully distributed.

Homer S. Carpenter:

That’s right, even the fully distributed basis, and that’s why I wanted to discuss those labels because I — I think an understanding of them by the Court is essential here.

It must be recognized that in the operation of railroads, you have a great jointness of cost, the road that’s maintained for all kinds of types of traffic and for passenger traffic, and freight, and everything else.

Well, the consequence, the Commission in its cost findings formulas that are applied started off by dividing this total cost through allocations.

They allocated to passenger service and so much to the freight service.

In the freight service, they allocate out of that so much for the less than carload service and then so much for the carload service.

Now, we’re talking about carload cost here when the Commission referred to.

William J. Brennan, Jr.:

What if they had not listed this for four million pounds in those cars, those cars in any event would have had to move westward entry, wouldn’t it?

Homer S. Carpenter:

That’s true, that’s true.

Again —

William J. Brennan, Jr.:

(Voice Overlap) it doesn’t —

Homer S. Carpenter:

There are —

William J. Brennan, Jr.:

It doesn’t make sense to me that —

Homer S. Carpenter:

Justice —

William J. Brennan, Jr.:

If I’m moving the formula in pounds; they do get additional revenue don’t they?

Homer S. Carpenter:

Yes, a $129

William J. Brennan, Jr.:

I have trouble seeing how that cost them even more.

Homer S. Carpenter:

Well, the Commission’s — the Commission’s evidence — the evidence before the Commission was that it did and the Commission essentially found that.

William J. Brennan, Jr.:

Where is the finding at how much more it cost to move four million pounds than it would have cost them, have they sent the car then?

Homer S. Carpenter:

It’s implicit.

It isn’t — it isn’t an explicit finding.

Byron R. White:

Why then?

Homer S. Carpenter:

I don’t know.

Byron R. White:

(Inaudible)

Homer S. Carpenter:

I don’t think so.

I think where the Commission makes the finding that four million pounds of traffic additional has been handled for only $129 of additional revenues.

That’s sufficient.

I think it carries with it the concept that this is where —

William J. Brennan, Jr.:

Probably where I’m having my difficulty here, I don’t understand why it carries with it this concept as a necessary interest.

Homer S. Carpenter:

Because —

William J. Brennan, Jr.:

There’s probably wrong about it but I don’t see it.

Homer S. Carpenter:

Well because Justice — Justice Brennan, it — it cost the railroads to handle traffic.

Their costs are not just —

William J. Brennan, Jr.:

Well, hadn’t they — they obviously have closed to handle those empty boxcars, hadn’t they?

Homer S. Carpenter:

But not as great.

Oh, no, no.

No, not one — nowhere near.

You got to spot the cars for loading, you have all these things to do, nowhere and everything.

Yes, yes, let me — let me talk about, if I may, about this fully distributed cost because I think that Justice White is disturbed here and you too Justice Brennan.

I stated that the Commission’s cost formulas do these allocations so that you have your total railroad or portion of the total railroad cost that are allocated to carload freight rate.

Now, the formula then says that you’re going to take 80% of that total and then treat it as out-of-pocket.

The remaining 20% being treated as constant and the theory is that it will be incurred whether the railroad handles more or less traffic anyhow, that 20% is going to be incurred.

So that put to one side, the add on I should add or state here too a return here in this out-of-pocket cost of 4% on the book value of the rolling stock and 2% on the book value of the roadway.

They then utilize various formulae to allocate that 80% to compute out-of-pocket cost for boxcar traffic of one sort or another but two of them are just call traffic.

All the rest, these are all allocations.

Then when you come to fully distributed cost, you must add back the 20% and in addition, you must add back the deficits which the railroads have incurred by reason of their passenger service and the less than carload freight service which also incurs the deficit.

This is the total of the constant cost that the Commission has to distribute to compute fully distributed cost.

Homer S. Carpenter:

Now, the allocation of these constant costs to the traffic for which the fully booked — for which the out-of-pocket cost have been computed is done on an arbitrary formula, it is by tons and ton miles and produces a different result than if you allocate it on the basis of the ratio that the out-of-pocket cost had to each other.

And you come out ultimately with a figure saying that the railroads must, from all of their freight traffic, and this is the important part,from all of their freight traffic, they have got to recover something substantially in excess of out-of-pocket cost.

Now, what that amounts to in the Eastern District is about 40% of the out-of-pocket cost.

In this case, the cost all related to the so-called Eastern District and not to the New Haven specifically.

I believe the New Haven’s constant cost would be larger because it incurs a larger deficit from passenger operations.

Now —

Potter Stewart:

The Eastern District goes to the Mississippi then down south to as far as the Ohio, isn’t that right?

Homer S. Carpenter:

Yes and that — substantially, that’s correct.

The — and of course, these rates run to the Mississippi the 40% that from all of the carload traffic must be secured from obviously the traffic that can bear the imposed.

Now, bituminous coal doesn’t supply anything like that.

You use sand and gravel or — and we’re talking all carload traffic.

The result is that your boxcar traffic has to make a return of substantially greater than this.

And when you get over then into the area of determining how much a given type of traffic should return in that excess of out-of-pocket cost in order to permit the railroads to stay financially viable, you get into an area where the pencil of the cost expert breaks.

Because obviously, if you have a particular traffic, that can’t be transported at anything like 40% in excess of out-of-pocket cost.

It might be better for the railroad to transport it at 30% in excess.

And here’s where the — rather than to forego it because thereby the traffic would give some contribution to this constant cost, this payment.

Well —

Earl Warren:

Mr. Carpenter, may I, just for the purpose of orienting myself better, ask this question.

As I understand it was held below that this did not injure the truckers and that you do not raise that issue here.

Homer S. Carpenter:

We do not raise that issue here.

That’s correct, Mr. Chief Justice.

Earl Warren:

What is the vital interest of the truckers that you’re trying to protect here?

Homer S. Carpenter:

Our interest is that our rate structures not be destroyed because they would be destroyed if the railroad rate structure is destroyed.

Earl Warren:

Alright, not to point against you.

Homer S. Carpenter:

It held — it held that here, the railroad had the right to do this, in spite of the fact that it violates Section 1(6) of the Act.

Earl Warren:

I know but I —

Homer S. Carpenter:

And does not constitute instructive competitive rights.

Earl Warren:

As I understood you to say that the Court held that you were not injured and that you do not raise that issue here.

Homer S. Carpenter:

Well, we don’t picture our case.

We don’t say that it is by reason of our injury that these rates are unlawful.

Homer S. Carpenter:

We say these rates are unlawful because of their effect on the rate structures of railroads themselves that they do not conform to the requirements of the Interstate Commerce Act.And we say that the Commission so found.

Earl Warren:

It does seem to me that you — you’re arguing more for the New York, New Haven and Hartford than you are for your own client.

Homer S. Carpenter:

It may sound that way, Mr. Chief Justice.

Our interest is — our interest is that we not be subjective to this unlawful competition.That is our interest but that is not the issue on which the case turns.

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

The Commi — Justice Goldberg, the Commission did not find.

We were not injured.

Arthur J. Goldberg:

Well, I thought you said it did?

Homer S. Carpenter:

No.

Earl Warren:

That’s what prompted my question.

Homer S. Carpenter:

The Court —

Earl Warren:

I thought you did too.

Homer S. Carpenter:

No, the Court said that.

The Commission did not.

Byron R. White:

The Commission didn’t find your way.

Homer S. Carpenter:

No, the Commission made no finding.

Arthur J. Goldberg:

Let’s assume the Commission made those findings and the court found that you were injured.

You’re not arguing the point here, do you?

You’re saying that it’s destructive of the rate.

Homer S. Carpenter:

No, we’re saying it’s destructive of just and reasonable rate structures and we are injured by that.

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

Well, we compete, Justice Goldberg, with the railroads.

But the railroads do not have a just and reasonable rates structure, neither can we.

Potter Stewart:

There was no finding at all and by the Commission.

Homer S. Carpenter:

This is not a Section 15.

Potter Stewart:

No, I understand that, no holding by the Commission, no decision that — that the inherent advantage of truck transportation was —

Homer S. Carpenter:

None.

Potter Stewart:

— impaired.

Homer S. Carpenter:

None.

Potter Stewart:

And there was an explicit — explicit finding to the contrary by the Court.

Potter Stewart:

That is an affirmative finding that it was not impaired, isn’t that right?

Homer S. Carpenter:

I think the Court made the finding there.

Potter Stewart:

Towards the close of the Court’s opinion, I haven’t got it right (Voice Overlap).

Homer S. Carpenter:

I don’t think the court really made a finding.

I think it was implicit in the Court’s finding.

Potter Stewart:

Implicit, alright.

Homer S. Carpenter:

No explicit power.

Potter Stewart:

And now so you’re here not quarrelling with that, not saying that you have been directly damaged by these rates, directly damage — your competitive position directly damage by these rates, are you?

You’re trying to say the railroad from itself as I get it.

Homer S. Carpenter:

We’re trying to save our own bacon, Commissioner or Justice Stewart.

The thing we say is this, that under the Interstate Commerce Act, we have the right to complain, Section 13, and the Act gives anybody the right to complain about anything done unlawful.

We think that as competitors of the railroad, we have the right to demand that they operate lawful and maintain a lawful rate structure.

This is the thing that we are urging here because the collateral effect of their failure to do, precisely that will kill us.

Earl Warren:

Mr. Carpenter —

Homer S. Carpenter:

We don’t make a Section 15a(3) case on here, I want to be clear.

Byron R. White:

What about what you said earlier that the finding of the destructive competitive practice necessarily — necessarily involves injury to some competitor and to the actor himself and that therefore, I gather from what you’ve earlier said that that it is essential finding destructive competitor of competitive practice, a few people were hurt, I mean directly.

Homer S. Carpenter:

We are — we are but —

Byron R. White:

Well, that the answer, aren’t you contending that you are hurt —

Homer S. Carpenter:

We — we are.

Byron R. White:

— directly and —

Homer S. Carpenter:

I’m sorry if I gave a contrary impression.

We are hurt.

The point that I wanted to make is that we are not pitching our case upon our harm.

We are not making a Section 15a(3) case out of this and we have not.

Now, what the Commission said is.

Byron R. White:

And how could you avoid it if one of the issues is whether there’s a destructive competitive practice and harm to you is an essential of the destructive competitive practice as you put it, I’m not saying I agree with you.

Homer S. Carpenter:

Well, Commissioner, the destructive competitive practice is in the National Transportation Policy.

Byron R. White:

That’s right.

Homer S. Carpenter:

That’s where the reference coSt.

Byron R. White:

That’s right.

Homer S. Carpenter:

It does not necessarily mean intermodal competition.

Now, the court below drew that or made that error it stated in its opinion that this law is a Section 15a(3) case and said that the Commission ought never will made any such finding, with respect there’s — they said that it wasn’t clear to them as to why the Commission had made it.

They then ignored entirely this study to which I referred.

Byron R. White:

If somebody — if somebody you’re on (Inaudible) injury to you were essential have misguided you that conclusion might be that you wouldn’t be hurt.

Homer S. Carpenter:

No, we are hurt.

We are hurt.

There’s no question about it.

And the Commission — the Commission made this finding at Section — page 15 of the printed record.

It says “While such rates” and they’re talking about all commodity rates, “ignore to some extent the individual commodity classifications, they are necessary in established part of the national rate structure and thus, may appropriately be regarded as a reasonable separate category of classification, provided always that such rates are so restricted as not to undermine seriously any just and reasonable rate structure.

The rates here under investigation apply not only on mixed but also on street shipments of numerous commodities which would otherwise be subject to higher rates.

Thousands of commodities are included in this sweeping adjustment without relation to classification principles and without regard to the destructive effect which the proposed rates would have upon just and reasonable rate structures necessary to the maintenance of a national or of an adequate National Transportation System.”

Now that, of course, would include us.

If not restricted to reasonable mixtures, such rates could and no doubt would break down these rate structures to the detriment of carrier or carriers and shippers alike.

The evidence is clear that such result would follow approval of the proposed rates.

In these circumstances, the rates must be condemned as constituting a destructive competitive practice in contravention on the National Transportation Policy, and also, as in violation of Section 1(6).

Earl Warren:

Mr. Carpenter, I just — just like to ask you one more question then I won’t take any more of your time.

But if the Commission made no finding as to whether you are injured or not, the record wouldn’t support any finding that you were not.

Why do — why is it that you don’t bring that issue to us when the court below found that you were not injured?

Homer S. Carpenter:

Well again, Mr. Chief Justice, I want to make it clear that we don’t pitch our case on the injury to us.

We pitch it on the fact that these rates will injure us collaterally through their violation of the Interstate Commerce Act.

We put our primary emphasis upon that violation that we have an interest to be sure, but the effect upon us, is a collateral.

This is not an intermodal competitive case.

That’s — we have the right to complain because our competitors violate the Act.

We are injured by that violation.

That’s the practical reason that we complain, but our complaint is pitched on the legal ground that they violated.

Now, I’d like to come back if I may to this matter of the cost because the Division 2 of the Commission or the court below had put a good deal of reliance upon the fact that these — even these reduced rates do recover full cost as the Commission computes it.

But I want to emphasize that here, the court below invaded the sphere of the Commission because it is in the determination of just how much a given traffic should provide in excess of out-of-pocket costs where the administrative expertise of the Interstate Commerce Commission comes into play.

Now here, we think there was an invasion, an intrusion by the Court into the administrative field and we insist that the only way that the railroads can remain viable is for the Commission to exercise the administrative obligation which it has to fix these rates in relation to all of these considerations.

That’s what it did here.

Here, it said that Section 1(6) of the Act requires us to — or requires the railroads to have all of its — all of their rates in reasonable relation to each other, and where the railroads fail to do that, the very purpose of this differential pricing in order to recover the total cost is destroyed.

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

The railroads argue that to the court below, Justice Goldberg, and the Court held that it could.

The — I don’t think that the existence of those others destroys the meaning of Section 1(6).

Now, the railroads had urged that the maintenance by them of a tariff is known as the uniform freight classifications is all it’s necessary to satisfy the requirements of Section 1(6).

The court below said that really maintenance of these classifications which are nothing but categories of traffic by which class rates are made applicable was for the purpose of fixing maximum reasonable rates.

The railroads had urged that in the court below and the court so found but the railroads now say that now it’s only for class rates.

They don’t have any argument anymore that it’s with respect to maximum rates only.

They say it’s only with respect to class rates and that they are — they are useful both — both from a standpoint of regulation of maximum as well as minimum rates.

But when they say that, they in effect read Section 1(6) virtually out of the Act because as far as class rates are concerned, only about 1% of the traffic now moves.

And we take the position and we say under the decision of this Court in the Ann Arbor case to say that by the Commission itself that the proper interpretation of Section 1(6) is that the commodity rates likewise apply the categories of traffic the very nature of the fact.

There are special ways to be sure.

But they make a separate category of traffic for — in particular circumstance and this is true of all commodity rates at under separate or under special circumstances, particular circumstances.

The Commission has approved them because it found them to be consistent with the requirements of Section 1(6).

They were just and reasonable classification of traffic for that particular circumstance.

The Commission said that wasn’t here.

It wasn’t here and the Commission is using a statutory tool which was given to them.

I want to say one other thing.

Tom C. Clark:

What about the rest of the —

Homer S. Carpenter:

Yes.

Tom C. Clark:

Does Section 1(6) apply to piggyback?

Homer S. Carpenter:

Yes, the issue was raised before the Commission on that and the Commission held that this was a just and reasonable classification with respect to these Plan III piggyback rates, Justice Clark.

Tom C. Clark:

They —

Homer S. Carpenter:

The Commission —

Tom C. Clark:

I’ll take a truck and put all types of freight on it —

Homer S. Carpenter:

With the —

Tom C. Clark:

Where would it come, under the classification of each type of that freight or it come under the classification of a piggyback?

Homer S. Carpenter:

No, it’s under the classification of a piggyback.

There is the restriction as I mentioned earlier of 60%, no more than 60% of the total lading in the shipment can be what more than one — that can be one commodity.

Tom C. Clark:

Well, you can violate 1(6) in a piggyback but you can’t here.

Homer S. Carpenter:

Well, the Commission held specifically in that case, Justice Clark, that the mixture requirements had been put in for the purpose of protecting the carload rate structure.

Tom C. Clark:

And suppose —

Homer S. Carpenter:

And that it was adequate for that purpose, therefore, there was no violation of 1(6), they say.

Tom C. Clark:

Then that 60-40 here would not be a violation?

Homer S. Carpenter:

Perhaps, I don’t know.

Tom C. Clark:

Is that in this case?

Does this case show what the percentage is?

Homer S. Carpenter:

There is no percentage.

These rates would apply to a straight shipment as well as a mixture.

Tom C. Clark:

You put anything you want to in the car, don’t you?

Homer S. Carpenter:

Other than these exceptions that we spoke of, it would have to be boxcar traffic, because there are certain very limited exception, virtually anything.

Tom C. Clark:

On the truck well you put — you have to put 60%.

Homer S. Carpenter:

You’d have two trailers that could be — there has to be more than one commodity and that commodity no one of two commodities could be more than 60% of the weight of the aggregate.

Tom C. Clark:

On the two trailers.

Homer S. Carpenter:

On the two trailers, yes.

Potter Stewart:

There only be — can there be a maximum of only two commodities on the —

Homer S. Carpenter:

Yes, sir.

As a matter of fact, I think in some instances there’s been some contention made and I’m not — I’m not clear on it that there could be just one commodity if it’s 42,500 pounds for which you pay but which you’d paid for 70,000 pounds.

If I make myself clear, it’s a technical feature of this.

William J. Brennan, Jr.:

Do you say Mr. Carpenter that on the piggyback shipment, there could be a maximum of two tons, one of which —

Homer S. Carpenter:

Minimum of two.

The minimum —

Potter Stewart:

My question was — well then I’ve misunderstood you and I thought I’d ask, can there be no more than two and that you said yes, there can be no more than two.

Homer S. Carpenter:

Yes that’s right.

There must be a minimum of two.

Potter Stewart:

I know.

It’s a different question.

Homer S. Carpenter:

There can be no more than two.

Tom C. Clark:

What?

Byron R. White:

What was that?

Potter Stewart:

You’re saying two is quite opposite thing, unless my ears are deceiving.

Potter Stewart:

How many commodities are you allowed to ship on the piggyback?

Homer S. Carpenter:

Oh, any number.

Potter Stewart:

Any number.

Homer S. Carpenter:

Yes.

Potter Stewart:

But at least two.

Homer S. Carpenter:

But at least two.

Potter Stewart:

Okay.

Homer S. Carpenter:

Are we clear?

Potter Stewart:

I think so.

Homer S. Carpenter:

So that — so if you had a 70,000 pound shipment of two commodities with the 60% provision and you’d have 42,000 pounds would be the most that one of them could weigh.

William J. Brennan, Jr.:

Yes, but then I gather the balance could be in a 95 or a hundred different thing.

Homer S. Carpenter:

True.

William J. Brennan, Jr.:

Now, how does that differ on these boxcars and so I think Justice Black and I would dissent of it?

Homer S. Carpenter:

These rates have no such restriction at all.

William J. Brennan, Jr.:

So you can have a hundred different items or a single item?

Homer S. Carpenter:

Single item.

William J. Brennan, Jr.:

I see.

Single item 100% of weight?

Homer S. Carpenter:

Yes sir, absolutely.

William J. Brennan, Jr.:

Now what difference does that make?

Homer S. Carpenter:

That’s what would mean, Justice Brennan that all of the rates that have been fixed the boxcar transportation of commodities in single carload movements or single commodity carloads would be defeated by these if they were above these rates and these rates are on extremely low level.

William J. Brennan, Jr.:

For example, just pick an item I suppose it’s not a good one but let’s pick furniture — well, let’s just take chairs, identical chairs.

And the regular rate is 10 cents and this rate is four cents, we then send a boxcar full of chairs at four cents instead of 10, is that right?

Homer S. Carpenter:

Absolutely right.

Byron R. White:

As long as you send under the particular destination.

Homer S. Carpenter:

That’s right.

Of course, the evidence before the Commission was that the railroad having to put these and we’re thinking about putting them, making them applicable to other destinations.

But the case was tried on this too.

Byron R. White:

And according to your view, completing its suicide.

Is that — why would the railroad really do that?

Homer S. Carpenter:

I don’t know, Justice White.

That’s why we have an Interstate Commerce Commission to prevent them from doing it?That’s why the —

Byron R. White:

Well, that’s why you got corporate management too.

Homer S. Carpenter:

Yes and sometimes the corporate —

Byron R. White:

So what about the — and what about them?

Homer S. Carpenter:

Well, the New Haven Railroad in receiver ship, it’s unknown.

Byron R. White:

I understand that but still that management supposedly.

You got —

Homer S. Carpenter:

Sir.

Byron R. White:

Why would it commit a suicide like this in the course of (Voice Overlap)?

Homer S. Carpenter:

Well, the — sometimes it’s desperate and maybe what the situation wants here, I don’t know.

I don’t know since — since the year one, railroads have put in rate policies that the Commission has — had to condemn because they thought it was bad for the nation as a whole and sometimes for the railroad itself.

Tom C. Clark:

The piggyback did go, didn’t it, on the 60-40?

Is that proven just for the railroad itself?

Homer S. Carpenter:

Well, I think the answer to this still lies in the future.

We litigated that case.

We opposed those piggyback rates, Commission found we are wrong, we appealed it to the — asked the order be set aside in Kansas City in the federal court there and the court sustained the Commission and this Court has already affirmed.

We think there are some serious flaws on those rates but I think the matter will have to await the experience in the transportation industry to determine whether they’re good or not, Justice Clark.

Tom C. Clark:

Are you going to have then do what you have not done here because to me you would have show that the piggyback is distructive of the railroad and therefore violated national transportation policy.

You haven’t shown that here, haven’t you?

Homer S. Carpenter:

Oh yes.

We —

Tom C. Clark:

That you’ve showed and hurt you.

You said there’s no evidence, is that it?

Homer S. Carpenter:

Oh — the — the — there’s evidence before the Commission.

The Commission’s finding did not include it.

There was the evidence before the Commission that it would hurt us, oh yes.

Tom C. Clark:

They didn’t base it on there.

Homer S. Carpenter:

They did not base it.

They based it upon the proposition that it would destroy all rate structure, all classification.

Homer S. Carpenter:

And that this was bad for the transportation industry as a whole, not only — not only the railroads but also us.

Tom C. Clark:

I’m sure that the Congress certainly intended that in the national transportation policy to build up its strong national transportation system.

At the same time, don’t you think that they had a least of the side blanks for the — for the shipper?

And the convenience of him and whether or not the railroad was rendering good service to the public?

Homer S. Carpenter:

No question about that.

Tom C. Clark:

And here you have — you have a railroad who has picked up all these additional traffic.

You say it’s only $129 more but you don’t — there’s no finding showing who was hurt.

And maybe they’ve picked up this traffic as far as we know from sources that were using some other.

Maybe they’re using their own trucks or something like that.

We don’t know whether they took traffic away from other railroads or not or from you, from a truck.

It might have jammed up more traffic.

It appears to me because of the nature of the reduction in the rate.

Perhaps, I might have been using my own trucks but when the railroad comes along and says they will do it for four cents, I say well that’s cheaper than I can get myself so I just ship with them.

Homer S. Carpenter:

Justice Clark, there were some findings or there was some evidence on that.

There were some findings by Division 2.

That Division 2 found that the diversion had been 30,000 pounds or for every 30,000 pounds of traffic that was attracted to this traffic, there was a 100,000 pounds that had come from real service itself, do I make myself clear?

In other words, that the ratio of the traffic that had been attracted was 30,000 of it from the railroad or from the motor carriers and a 100,000 from other railroad service.

Tom C. Clark:

Then it was picked out by reasonable deduction.

Homer S. Carpenter:

And this was by reasonable deduction.

Tom C. Clark:

I know but it was traffic that was moving anyway.

Homer S. Carpenter:

The 100 — yes that’s right.

No new traffic generated, if that’s what you mean.

Tom C. Clark:

Only —

Homer S. Carpenter:

This was all diverted.

I wanted to say one other thing, the government has filed a brief in this case in which it takes issue with the Court on the value of service concept at which the Court injected into this case there was no value of service mentioned by the Commission in its decision or no reliance for the Commission on that concept to break regulation.

We —

Potter Stewart:

Doesn’t Section 1(6) reflect that concept of great regulation and insofar as the Commission found that this violated 1(6) that it violated the value of service concept.

Would that be fair to say?

Homer S. Carpenter:

Justice Stewart, I think it is fair to say that but classification considerations include many, many things besides the value of service, many things.

And the —

Potter Stewart:

Which has the expense of loading and unloading various commodities?

Homer S. Carpenter:

Yes.

Yes, many.

Potter Stewart:

But that among other things it does that 1(6) does reflects the — as in the matter of railroad economics of the value of service concept which the District Court said was now an obsolete concept in view the facts of railroads are no longer monopolies.

Homer S. Carpenter:

That’s right.

The Commission asked the case be set back to it so they can have a further hearing on this value of service concept.

We don’t think that that ought to be done.

This case is almost six years old and we think there should be a termination of it here.

The issue of value of service is not per se in this case, and if the — if the Commission wants to make some determination as to the modern day meaning of it, we think, it ought await a case where it is specifically an issue.

We think that the decision by the Commission, the holding in the Court with the law supported adequately by the Commission’s findings and we asked this Court to reverse the judgment of the court below and remand the case with instructions to dismiss the complaint.

Earl Warren:

Then the — didn’t the Commission itself recognized the inadequacy of these findings?

Homer S. Carpenter:

The Commission in its brief to this Court stated that it entertained doubts as to the adequacy of its finding on destructive competitive price.

We say that there’s no necessity to make a precise literary finding on that score.

That you read the Commission’s report as a whole and that’s what this Court said in the Alabama Great Southern case.

I have a citation for that here, Alabama Great Southern Railway Company v. United States 340 U.S., 216.

If you do read this report by the entire Commission as a whole you can’t help but come to the conclusion that its ultimate finding is based upon its discussion of the evidence where it made this finding that the railroad would be required to handle a lot of traffic for virtually no revenue.

A lot of additional traffic for virtually no revenue, and that this was made.

We think also that there is another decision by this Court that’s relevant here.

You held that where the Commission has plainly considered the evidence before it has reached an obvious conclusion from that evidence that that’s adequate but you don’t need to tell the specific finding setting forth each step in the chain of a logical reason that was Minneapolis and St. Louis Railroad v. United States 361 U.S. 173.

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

No, no, no.

I said it must have — I wouldn’t go that far Justice Goldberg.

I don’t believe I did before.

If it —

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

Yes —

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

No.

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

Well, here — here is my philosophy on that that where it does or where it fails to benefit, the approval but does injure its competitors, it is by definition of a destructive competitive price.

Homer S. Carpenter:

Because that’s obviously the only effect is to destroy or to injure a competitor.

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

Sometimes.

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

This might be.

Absolutely you’re right, Justice Goldberg.

And here, the Commission made a finding on that too.

It said that it would be detrimental to carriers and shippers alike for this rate structure to be destroyed as these rates will do, and that’s the basis of the Commission’s decision.

Potter Stewart:

Now, to destroy the concept of Section 1(6).

Homer S. Carpenter:

The rate structure, it said —

Potter Stewart:

It’s the basis for the Commission to —

Homer S. Carpenter:

That’s right.

That’s the basis of the destructive competitive right.

Potter Stewart:

And 1(6) — Section 1(6) is “We pledge at least in part economic concept of value of service to the amount”.

Homer S. Carpenter:

That is one of the considerations which is certainly part.

Potter Stewart:

Reflected in one.

Homer S. Carpenter:

Reflected in one.

That is the maintenance of different levels of rates on different commodities.

Certainly, value of service is one of the things that’s considered.

Potter Stewart:

Right.

And the — and the — at least it is said that the underlying basic important question in this case is the issue of the continuing validity or not of the value of service doctrine today, and if so, to what extent it continues to be valid, am I right?

Homer S. Carpenter:

The court below and that would be the question — that’s what it says.

Potter Stewart:

And the government’s brief as well?

Homer S. Carpenter:

The government’s brief — the government’s brief touches on that too, yes.

Arthur J. Goldberg:

(Inaudible)

Homer S. Carpenter:

That’s right, Justice Goldberg.

The situation is that that the stake of the shipper is in the maintenance of an adequate transportation system.

The — and that the shipper is general.

The Commission said that there can’t be this adequate transportation system if you destroy the rate structure.

These rates will destroy the rate structure and the evidence proves it.

Homer S. Carpenter:

That’s the case on a thumbnail.

Thank you, sir.

Earl Warren:

Mr. Ginnane.

Robert W. Ginnane:

Mr. Chief Justice, may it please the Court.

I’m appearing on behalf of the United States and the Interstate Commerce Commission.

The Commission on the United States did not appeal from the judgment below.

Rather, at the time the motor carriers took an appeal, we filed to the Court a memorandum stating in part that while the Commission believes that the District Court’s decision was based upon an erroneous interpretation of Section 1(6) and of the National Transportation Policy, still entertained some doubt as to the adequacy of its findings in relation to the matters relied upon by the District Court.

And therefore, the Commission voted rather than to appeal to this Court, to reopen the proceedings for further consideration.

We now join with the motor carrier appellants here in urging that the judgment below be reversed but while they asked that the court below be directed to dismiss the complaint, it is still the view of the United States and of the Commission that upon reversal, the proceedings should be remanded to the Commission for further consideration.

Arthur J. Goldberg:

Mr. Ginnane, this (Inaudible).

Robert W. Ginnane:

We aren’t always certain.

For example, in the South Carolina Train Discontinuance case which we had before this Court last term.

That form judgment clearly would have prevented the Commission from reopening.

Other judgments of three-judge courts will be quite to the contrary.

Well, remand or set aside the Commission’s order, remand it to the Commission for further proceedings is consistent with the Court’s opinion.

And in many instances, I think the Court probably doesn’t specifically think about it.

Arthur J. Goldberg:

(Inaudible)

Robert W. Ginnane:

I found that the Commission’s order was invalid and enjoined its enforcement.

Tom C. Clark:

You could bring another case on another theory, couldn’t you?

Like the damage to the commodities.

Robert W. Ginnane:

I think that’s right on reopening.

The Commission might have arrived at the same result by a different route or indeed at a different result.

After all there were three — there were three dissenting commissioners and we lived on an era of very rapid competitive and technological change in this great making area.

Tom C. Clark:

Well, does the Commission have a substance (Inaudible) here?

Robert W. Ginnane:

We say that the court below erred in two major respects.

But the Commission feels that that even with a reversal of the decision below that it should discuss some features of this case in more detail, further explication that it did.

Tom C. Clark:

They should think that the findings that it made are not adequate or to meet the attack as now being made upon the order.

Robert W. Ginnane:

That is correct sir.

Hugo L. Black:

Why wouldn’t the proper order here that hardly the Court should take as viewpoint at all be merely to vacate the judgment without reversing and without passing on the legal question, send it back to the Commission in view of its request to be allowed to make further findings?

Robert W. Ginnane:

Because sir, I believe that they would leave both the Commission and the parties at large and uncertain on the two matters — on the two rulings of law of the court below.

Robert W. Ginnane:

Those rulings were first that Section 1(6) applies only to class rates, has no application to commodity rates.

And secondly, that the value of service pricing principle was outlawed as a matter of law by them — by the enactment of the National Transportation Policy in 1940.

I respectfully urge that the Commission and the parties need to know where they stand on those two matters or we could go no further.

Hugo L. Black:

The vacation would leave it fully undecided.

Robert W. Ginnane:

Except by —

Hugo L. Black:

It would leave — that would vacate the judgment below and — but we’ll give you a chance but be on our understanding if you know what we mean.

In reality, this case ought not to be passed on as a whole until the Commission makes further findings.

Robert W. Ginnane:

Well it’s —

Hugo L. Black:

We can’t see whether there’d be any injury that’s why I m asking.

After vacation, more or less of a kind of a moot thing if you — with the legal decision if you tell us that there is — really not enough finding there.

It needs to be directed — it needs to be improved.

Robert W. Ginnane:

Well, in effect sir, that’s why the government didn’t take an appeal.

Hugo L. Black:

Well that’s — maybe the government was right.

It might not be a question to answer (Inaudible).

Robert W. Ginnane:

I don’t —

Which is sort of abstract?

Robert W. Ginnane:

I don’t see it how it could be, giving the District Court’s opinion a fair reading.

It seems to me, they hold as flatly as they can that their classification of property provisions of Section 1(6) apply only to the class rate structure and cannot be applied — do not apply to commodity rates of any kind.

And what does that exactly mean?

Robert W. Ginnane:

I think that’s the fair reading of it.

Is it necessary to the holding or depending on what the scale of time.

Robert W. Ginnane:

And then there is the — and then there is the further holding.

We think our fair reading is very flat that the value of service concept in pricing was outlawed as a matter of law since 1940.

Potter Stewart:

You tell —

Your answer is to the correct the opinion.

Robert W. Ginnane:

And the others.

Byron R. White:

And opinion that you would have — that you have motor carrier held — hold an appeal you would have standing in its entirety, right?

Robert W. Ginnane:

Or tried to come back as it were to — to use the popular case, to come back and continue the dialogue with that court.

Byron R. White:

Yes.

Yes, but on the new — but maybe on a new case on the different theory that you would have had these two points.

Byron R. White:

You would have left the District Court’s judgment just standing.

Robert W. Ginnane:

But frankly, we would not have accepted it for all time and for the entire United States.

Byron R. White:

I understand that.

Robert W. Ginnane:

The points are much too great importance for the entire transportation system.

Tom C. Clark:

(Inaudible)

William J. Brennan, Jr.:

And Mr. Ginnane what do you mean vacated?Does that mean as a matter of having force of law of the opinion?

But you didn’t — you don’t have the problem here.

Robert W. Ginnane:

You had — this Court have something of the same problem in the New Haven competitive rate case which came up here that — which you decided two years ago.

Now, there — there the same three judge court in New Haven had extensive discussion — hostile discussion to the value service pricing.

But in this Court, this Court, they found it unnecessary to go into that area at all.

Tom C. Clark:

You want to do it now.

It’s like, for me, you’d be less better off if we vacated that you submitted it on this record because you admit that the facts are not sufficient.

Robert W. Ginnane:

Oh, not the facts — the Commission’s findings and discussions.

Tom C. Clark:

Find — I mean the findings.

So you might suffer severely, you went on the merits while it was vacated.

You would be much better off and if you would not appeal and then you have that standing as been pointed out by (Inaudible).

Robert W. Ginnane:

Because I’m in this position and the case is here, the Court has noted jurisdiction.

Hugo L. Black:

What did the courts do to vacate it?

Robert W. Ginnane:

I’m sure the Court has done all —

Hugo L. Black:

My trouble is something like, there are — you want us to correct the opinion and then send it back on the basis that it’s not ready for final decision.

Robert W. Ginnane:

Well sir, it would be more involved in correcting an opinion.

Because if the court below was wrong — was wrong in those two propositions of law, I assume that its judgment cannot stand.

The judgment below would have to be reversed.

William J. Brennan, Jr.:

But you’re not asking us if I understand it to reinstate the Commission on their requirement, on the contrary.

You’re telling us that what you want to do is we reconsider on some of these things and perhaps maybe come with a different finding.

Robert W. Ginnane:

It could well be.

William J. Brennan, Jr.:

Well in that — I don’t see really why the Commission is urging us to decide these questions which that the — that was all that suggested the abstract the basis of the findings of the Commission.

Robert W. Ginnane:

Well, I can only say — again, reminding you sir that we did not ask the Court that.

William J. Brennan, Jr.:

I know well — but really on that you know when something like this comes to you, what’s our option?

It’s either to affirm or to note that the three judges determination on the mere fact that to note doesn’t mean necessarily to the court.

William J. Brennan, Jr.:

Or whether we’re going to decide the issue as we saw, but that’s the only way we can reach it rightly and not quite this, as another search.

Robert W. Ginnane:

But I submit that if not — that this is not quite declaratory.

I submit that the judgment below simply cannot stand.

If the Court — if the Court is wrong, I mean —

William J. Brennan, Jr.:

We vacated at once.

Potter Stewart:

They both stand vacated.

That’s the judgment and there’s nothing we can do — the opinion or we’re still be putting around and (Inaudible).

What you’re saying is that all you want us to say is that in all circumstances, Section 1(6) has to be taken into account and —

Robert W. Ginnane:

Has to be taken into account so far as changing economic transportation circumstances from them.

There is a sweeping language in the District Court’s opinion that suggests that in no circumstances perhaps at least the value of service concept can be taken into account.

It doesn’t follow that necessarily does it that the the choice between those two broad experience?

Robert W. Ginnane:

I think that’s absolutely right.

Whether there is rapid shifted —

Before we decided the question broadly we want to know what we’re deciding in terms of findings and the record that you recognized.

Robert W. Ginnane:

I can’t quarrel with your suggestion.

The government cannot quote over that.

We were content to accept that at the beginning of the appeal — the appeal to the Court.

Now, is there a difference from what you put it now?

Robert W. Ginnane:

But with — but with the case here, it seemed less important that — and that we participate in brief and argument.

We express our view as to the courts.

There’s a natural reaction in the case pending five years ago and its (Inaudible) when we speak of the law.

Robert W. Ginnane:

Well that these are continuing problems.

The carrier — has its rates in effect.

It is not being hurt.

These all commodity rates are rather common in the United States at this point.

And the question as to what are proper of commodity rates under the Act and in terms of a development of a sound transportation system are presently and will be important questions.

Commission has dealt with them again and again.

I should say that motor carriers have done just about as much experimenting with these all commodity rates as railroads have.

And many of the Commission decisions of this subject involve all commodity rates proposed by motor carriers.

It so happens that this is the first litigation in which the courts have really taken a specific careful look at the all commodity rate problem.

Robert W. Ginnane:

But the Commission’s — the Commission’s books are full of decisions on the subject.

Potter Stewart:

Was there any suggestion on specifically of the question of the continuing validity of the value of service concept?

Robert W. Ginnane:

No, sir.

The Commission did not use the phrase.

Potter Stewart:

So they’re thought.

And that’s the — that’s the underlying important issue here, isn’t it?

Robert W. Ginnane:

Certainly on the — certainly on the structure of the decision below.

Because it seems to us on a fair reading and they were coming back to where they left off in the Pan Atlantic case.

Potter Stewart:

Yes.

Robert W. Ginnane:

That the Commission was acting to preserve value of the value of service principle as the Court put it in a desire to hold fast to a path of the past which have already slipped beyond our reach.

Now, leaving aside any question of — law there.

We respectfully submit that that was not the Court’s rule.

The Commission is well aware that the progressive development of intermodal competition that the ability of railroads to obtain from a high value of traffic — a higher rate of traffic, a higher contribution to overhead, then lower rate of traffic is — has been progressively impaired.

But that impairment varies as between commodities and between competitive points and between competitive areas.

Potter Stewart:

This is the thing that is suggested to me at least my Brother’s questions, whether or not all of these shouldn’t be developed on a further hearing in this case before the Commission, because none of that has developed by the Commission, isn’t it?

Robert W. Ginnane:

But what I’m saying to you now, sir, is practically a matter of common knowledge.

That their existing railroad rate structure still, to an amazing extent and involves value of service pricing.

If then — they’re going study departure value, permitted by the Commission under the pressure of — of competitive and technological change and — and may well continue.

But it shows up in the price structure to this extent that the category of manufactured commodities alone produces a far greater contribution to railroad overhead than the entire product of mines, forest and agriculture.

Now, that may not always be true, but unless Congress specifically commenced, surely the Congress — surely the Commission is not required to shift to a cost-basis exclusively overnight and the sudden abandonment of value of service pricing.

Believe me, it would produce a vast economic dislocation of this country, primarily for shippers whose plants and markets have been developed in reliance upon a rate structure which still includes a great deal of value of service pricing.

Byron R. White:

(Inaudible) about the low rates.

Robert W. Ginnane:

The low rates?

Byron R. White:

I mean, the low-value commodities, is that right?

Robert W. Ginnane:

Correct sir.

Potter Stewart:

People whose located in parts of markets based on — based on having a great, great subsidized by high-value commodities.

Robert W. Ginnane:

Correct, sir.

Now, as Commission changed, there maybe less and less justification or need, or even possibility for value of service pricing in the system.

And that we submit that what is needed and I quote a former — our late Commissioner Johnson, “Is an orderly transition from a justifiable past practice to one that recognizes and gives effect to the exigencies of the price.”

That transition is already in progress.

Robert W. Ginnane:

It has been for years.

And it may continue under competitive and technological pressures.

And if so, it’ll be a good thing.

It will be what the system needs.

But to say that as a matter of law, Congress said, “Outlaw”; the application of value of service pricing in 1940 with the National Transportation Act.

We submit has absolutely no support in the language or history of the National Transportation Policy.

It’s an extraordinary discovery 24 years later.

The only specific thing in the history of the Transportation Policy was during the 1940 debates, on the 1940 Transportation Act where Senator Wheeler in many, respects the father of that Act, stated flatly and we have it in our brief, that value of service pricing was perfectly consistent and properly applied, with the inherent advantage concept of the National Transportation Policy.

And even with the Transportation Act of 1958, there is not a suggestion that value of service was to be cut off abruptly.

The railroads didn’t dare suggested either.

And it’s perfectly understandable because value of service properly applied protects the revenues of the carrier, not of its competitors.

Earl Warren:

Mr. Kaier.

Edward A. Kaier:

Mr. Chief Justice, may it please the Court.

I think that I should first address myself to the question which has — have been discussed in the last five minutes.

I think, Your Honors, that the District Court did decide a matter essential to its decision and a matter which was put up to it by the parties for decision namely, the applicability of Section 1(6) of the Interstate Commerce Act to these rates.

As a matter of fact Your Honors, it was the Commission’s decision on that issue which caused us to take the case to Court.

We feel so strongly that Section 1(6) was meant to apply only to class rates and that it was here distorted to apply to commodity rates and to reach a result not permitted by Section 15a(3) that we went to Court.

So we submit that on that issue, there is a solid basis for the exercise of jurisdiction by this Court and that it will not simply be declaring principles for rendering an advisory opinion on that.

Now, as far as the value of service matter is concerned, I think there is much to what Mr. Ginnane said.

I believe that the lower court did use language that was too broad with reference to that.

Certainly, it is true that some railroad rates have to be made as high as reasonably the traffic can be made to bear, and that’s what value of service of course means.

And that must be done.

And I don’t think it’s been outlawed.

But I do not think, Your Honors, that the value of service matter was at all necessary to the lower court’s opinion.

It did not reach its opinion, I may suggest, on the basis of value of service.

This is what it said.

It was trying to get at the Commission’s motive for having invoked the classification requirement of Section 1(6) and it’s simply speculated that the Commission’s motive was to hold fast to the value of service principle.

It said, it would appear that the Commission here invokes 1(6) as a means of preserving a basis for the value of service principle and then it went on and gave the rather broad statements to the effect that value of service was something or the past and really outlawed by the transportation policy.

Now, Your Honors, the same court said very much the same thing.

It was composed of different judges in the other New Haven case.

Edward A. Kaier:

And in that case, this is the way your court disposed of the matter.

You said, “The court below set out at some length its understanding of the Commission’s method of arriving at carrier cost its analysis of the role of value of service concepts in ratemaking and its views of the precise circumstances under which the Commission could lawfully disallow the rates at issue.”

Then you said, “We find it unnecessary to consider that discussion in this instance since we hold only that on the present record, the disallowance of the rates in question was not adequately supported.”

Now, I respectfully suggest to the Court that you could decide the Section 1(6) point which was basic to the lower court’s decision and to the Interstate Commerce Commission’s decision.

And you could say that as to the value of service matter, you are not passing on that and it need not be passed upon.

And with those views, I should think, Mr. Chief Justice that the Court does have a basis for jurisdiction and I respectfully suggest could and should hear us on the 1(6) point — Section 1(6) point.

And —

Hugo L. Black:

What is the status of the rates now?

Edward A. Kaier:

The rates are in effect, Mr. Justice Black, and have been for five years.

Hugo L. Black:

So that the railroad would not be injured so far the rates are concerned.

Edward A. Kaier:

That is correct.

It —

Hugo L. Black:

By a vacation.

Edward A. Kaier:

That is correct.

It would not be.

But I suggest to Your Honors that there is nothing undone which needs to be done for Your Honors to pass on the 1(6) issue.

Byron R. White:

The issues — the way you approach it.

Edward A. Kaier:

The way we approach it well —

Byron R. White:

The validity or not of that rate service.

Edward A. Kaier:

Yes sir, yes.

Hugo L. Black:

But the other point is I think so — and what is wrong, it was trying to wait until the case can’t be decided on the basis of all the facts and all the claims that are made.

So long as you are not being injured by your rates.

Edward A. Kaier:

Well of course, the important thing, if Your Honor please, is that we are here.

We prepared for it.

The briefs have been written and I don’t think we would be any — any better off.

Hugo L. Black:

But you would — undoubtedly, you wouldn’t but they seem to think they can make that case stronger.

I can understand your objection to this case.

Edward A. Kaier:

Mr. Justice Black, it really isn’t — it really isn’t that.

I mean objectively, I don’t think that there is anything lacking for the Court to pass on the legal questions as to whether Section 1(6) applies to non-class rates.

Hugo L. Black:

Then we are asked after we decide that to send it back to the Commission for more finding and so forth.

Edward A. Kaier:

Oh, no.

If you decide that in our favor, I think the case is over.

Hugo L. Black:

I know you wouldn’t ask it but I understand they’re asking that we leave it open so they can go ahead with the same proceeding.

At least it could follow up the idea they have and that more fact might make the situation better for their side.

Edward A. Kaier:

Well, I suppose they like to win eventually but I don’t see that that’s a reason, sir, for not deciding the legal questions, the applicability of 1(6).

Hugo L. Black:

But it’s a mere legal question, that’s what bothers me, if it’s a mere legal statement of a broad principle knowing that the situation is not yet ready for a final decision on the merits of this case.

That would be a rather extraordinary thing to do, wouldn’t it?

Edward A. Kaier:

I think that if you decide that legal question, you have decided the merits of this case because I submit there is no other basis upon which the Commission’s order could be sustained if you decide that Section 1(6) did not apply.

Conversely, if we decided against you then they might have to deal with that.

Edward A. Kaier:

Yes, I think that’s true.

Potter Stewart:

That your contention which I think I fully understand that regardless of any further findings or development in further hearings that you are basically at issue here, now in this case which is properly here and which necessarily involves this issue.

You are basically at issue as to the applicability of 1(6) to commodity rates.

Edward A. Kaier:

That is absolutely correct, Mr. Justice Stewart.

And in the court below, when that issue was raised, no one suggested neither government nor trucking associations that the case wasn’t right for decision on that point.

And the Court didn’t decide it.

Hugo L. Black:

I understood the trucking association and still they could drive.

Edward A. Kaier:

Yes.

Hugo L. Black:

They want to protect your client’s interest.

Edward A. Kaier:

That’s what they want to do, Mr. Justice, yes.

Shall I proceed with my argument, Mr. Chief Justice?

Earl Warren:

Yes, you could.

Edward A. Kaier:

Well, my argument of course is on the applicability of Section 1(6) to commodity rates or I might say to non-class rates which I call commodity rates.

And I should like to add very briefly to the facts which have been stated to you by Mr. Carpenter.

First, the New Haven relies very heavily upon the category of traffic known as manufactured and miscellaneous for the revenues necessary to operate its line.

60% and more of its freight revenues come from that category of traffic.

By reason of truck competition, both private and for hire, the long-haul traffic of the New Haven then is that originated by it then delivered to connections in this category of manufacture and miscellaneous.

It was cut in half between 1947 and 1958.

It dropped from 2,942,000 tons in 1947 to a 1,480,000 in 1958.

William J. Brennan, Jr.:

It could have a total of 15 million tons in a position (Inaudible).

Edward A. Kaier:

I don’t think so, Your Honor, because it went down — it’s pretty steadily year by year in good years and bad.

Edward A. Kaier:

And then as has been told you, the New Haven was confronted with an additional competitive force, one in July 1958 competing railroads established this Plan III, trailer-on-flatcar piggyback service.

As Mr. Carpenter said during the first two months that that service was in effect, the New Haven lost to the New York Central an addition — 400 carloads of traffic from Boston to St. Louis alone and it lost additional traffic that originated at Connecticut points, was trucked to New York, there put on flatcars, and moved out by other railroads from that point.

So it was obvious, Your Honors, that the New Haven had to do something to meet these committed — competitive forces that were taking its vital traffic, the traffic without which it couldn’t render service.

The logical thing for it to do, it concluded, was to reduce its rates for boxcar service.

And this was for two reasons.

First, the New Haven has a very large imbalance of movement as between loaded and empty.

With a 150 cars a day moving empty from points on its line to St. Louis and Chicago where they are given over to western connections.

We said 150 cars a month in our brief which I regret that is wrong, it’s 150 a day.

And this amounts to an unused capacity of three million tons a year.

Now, the second factor which indicated that the way that New Haven should proceed was to reduce its boxcar rates, was that it had disabilities with respect to the performance of trailer-on-flatcar service.

Equipment disabilities, clearance disabilities, some but not all were cleared up.

By the time the Commission’s decision was rendered, by no means all have been cleared up.

They still have equipment difficulties and they’re upgrading with the scope of being unable to handle 40-foot trailers which are very popular on 40-foot cars which is the kind that New Haven has most of.

Now, since these empty cars were moving, anyway, it would of course be a very economial thing for the New Haven to transport traffic in them.

So it filed a reduced rates applying from New York, from New England points to the plateau places that it was delivering these empty boxcars to St. Louis and Chicago.

The rates were made substantially on the same level as the piggyback rates of the competing carriers affect which Mr. Hunt will discuss when he discusses as he will the destructive competitive practice point.

Now, it has been said, Your Honors, that the — a mixture rule applies in connection with the piggyback rates and the other carriers requiring that at least a minimum of 60% of the commodities be other than one commodity.

There must be not more than 60% of one, that’s it, a maximum, not more than 60% of one commodity.

However, one shipper can have a trailer load completely of chairs or anything else.

Another shipper can have a trailer load of completely of desks or anything else.

And then they get together through a shipper association and tender these two cars as one shipment and it moves.

So the mixing rule is something that — can easily be complied with without embarrassment to the shipper who is shipping on piggyback rates.

Potter Stewart:

This sends both trailers on one flatcar?

Edward A. Kaier:

Both trailers on one flatcar.

Byron R. White:

The affect of rules applies to flatcars (Voice Overlap).

Edward A. Kaier:

Precisely.

So that the New Haven in connection with its rates could not have a mixing rule and meet that competition.

Now, the rates are called all commodity rates but has — has been —

Byron R. White:

At this point then the (Inaudible).

Was there finding to that matter or not?

Edward A. Kaier:

I think there were, if Your Honor please, I don’t recall that there were any findings about that.

Byron R. White:

Is this one of the — one of the issues?

Edward A. Kaier:

No.

No we all agreed on that.

We all agreed on that, no issue about it.

The rates are called all commodity rates but of course in fact they are not all commodity rates as has already been brought out to exclude a good many things damaged — easily damaged goods, all the many articles of commerce that move in flatcars, in tank cars, in refrigerator cars, gondola cars and so forth exclude them for traffic which has high port costs.

Byron R. White:

Does your (Inaudible) consider up to this kind of this — the government does it for free that on page 29 when they’re talking about this mixing rules, this question is not the one that the Court could be called upon to consider the evidence and findings by the Commission which it did not address itself to these considerations.

They should be given after they do so.

Edward A. Kaier:

Yes.

Byron R. White:

I take it that the government is suggesting that we shouldn’t assume that at this juncture that here that New Haven could compete if it had a mixing rule.

Edward A. Kaier:

Perhaps the government is contending — contending that, Mr. Justice White.

I really don’t think that it’s essential to —

Byron R. White:

You really aren’t all agreed on this.

Edward A. Kaier:

Pardon me?

Byron R. White:

You really aren’t all —

Edward A. Kaier:

I thought we were.

And I saw Mr. Carpenter, I thought nodding approval and I had recalled that the matter was mentioned in the Commission’s brief but I didn’t recall that they indicated additional findings where it needed.

No shipper or receiver of freight opposed the rates.

They were opposed only by the New Haven’s competitors.

They were found to cover a fully distributed cost which means of course the cost of hauling the traffic involved plus the contribution to overheads plus the contribution to passenger deficit and less than carload deficit.

Now, with those remarks, I should like to discuss the applicability of Section 1(6) to these rates.

Class rates are applied to traffic by means of two separate tariffs.

One is called the classification.

And in the classification, virtually all articles of commerce are assigned to one or another of the classes which are about 31 in number.

No rates are specified in that tariff.

Then there’s another tariff called the class rate tariff in which the rates in cents per hundred pounds are set forth between all points roughly east to the Rocky Mountains and they show the rate applicable on each of the classes made in the classification tariff.

The class rates are established independent of the articles upon which they will apply and the classification is established independent of the rates.

Now, commodity rates in contrast are made specifically applicable to a mean commodity or group of commodities.

With respect to these commodity rates, therefore, the function which is indispensable in applying a class rate to a given shipment that of assigning the article to a given classification simply does not take place.

Now, it is obvious that even though a class rate may be entirely reasonable, a shipper can be hurt, can be charged an excessive rate or a rate which is improperly related to another commodity or to a rate on another commodity by the classification into which his article is placed.

Edward A. Kaier:

With respect to things which move under class rates, therefore, it was thought necessay that there’d be legal protection of the act of classifying, making the classification.

And therefore, Section 1(6) of the Act which enjoins upon the carriers to establish just and reasonable classification with reference to which rates are or maybe made shall be established and it prohibited every unjust and unreasonable classification.

In the case of commodity rates, however, Section 1(6) would serve no purpose, not served by other sections of the Act.

If a rate is too high, it is unlawful under Section 15(1) which prohibits unreasonable rates and the Commission may reduce it under Section 15(1).

If it is improperly related to another rate, it is unduly prejudicial under Section 3 and the Commission may reduce it — may correct the relationship under Section 15(1).

If it is too low, the Commission may find it unreasonable under Section 1 as supplemented by the National Transportation Policy and 15a(2) and enter a minimum rate order under Section 15(1), so that every situation, with respect to commodity rates, is covered by these other sections of the Act.

Now, Your Honors at the time the Interstate Commerce Act was passed in 1887 most traffic moved on class rates and there was complaint to the Committee which was considering the Interstate Commerce Act Cullom Committee that people were being injured by improper classification or by diversity of the classification that was one in the east called the official classification, one in the south and one in the west, an individual carriers have their own classifications.

But the Cullom Committee did not give the Commission the power to prescribe rates and it said nothing about classifications.

In the Hepburn Act of 1906, the Commission was given the power to fix a rate.

Therefore, it could just declare it unreasonable then it would have to go into Court and get the aid of a court to enjoin — enforce its orders.

The Hepburn Act of 1906 gave the Commission the power to prescribe rates.

But this was thought to be inadequate since the amount of transportation charges could be affected by a change in classification as well as the change in rates.

Now, I submit that the legislative history shows very clearly that the purpose of 1(6) is to govern the applica — to — to command reasonable as of classification for use in connection with class rates.

The Senate — a report of the senate bill stated some doubt has been raised as to whether under the provisions of Section 15 of the existing Act the Commission is empowered to review classification of freight as well as rates and to make orders dealing with improper classifications.

By Section 9 of the bill, this doubt is removed and the power is expressly vested in the Commission.

Similarly, Mr. Russell, a member of the House Committee which is in-charge of the bill stated that he had been informed and I quote, “The shipper can be extorted from, he can be made to pay an unjust rate just as well through classifications as he can through the fixing of a rate.

The carrier can put the article in one classification subject to a given rate and if the ICC sees fit to declare that rate unreasonable and reduce it declaring much over the reasonable rate to take its place that carrying corporation can obtain the same benefit and put the shipper under the same disadvantage by simply changing the classification of the freight.”

And then Mr. Mann, Senator Mann, the chairman of the committee and the man who’s named the bill bears stated that classification of freight is just as important as rates because by moving a particular article from one class to another, you affect the rates.

So I submit that this congressional history clearly shows that the problem that Congress was trying to solve by the enactment of Section 1(6) was the problem of ensuring reasonable classification for use in connection with class rates.

The first important case after the enactment of 1(6) was the western classification case decided in 1912.

And there, the Commission stated and I quote, “At the present time, the three great classifications official flying in the east, western and southern subject to exception sheets and commodity rates are the only classifications applying to interstate traffic.

And these three classifications, the only ones applying to interstate traffic applied only in fixing classification ratings for use in connection with class rates.

And in that same case, the Commission said this and I think it is highly significant and I would like to quote it, it’s just about five lines.

“Classification is an art or science in itself.

The correct method of procedure,” I’m doing a little skipping here but it doesn’t change the substance.

“The correct method of procedure is that the uniform classification must be worked out without an attempt to affect revenues.

Classification and rates and revenues should be kept entirely separate.

It would only complicate and confuse matters to attempt through the instrumentality of the classification to bring about a revision in rates and charges whether a rate is too high or too low should be made a separate and distinct issue from classification.

It seems very clear, therefore, that the Commission considered classification of freight as something to be used in connection with the application of class rates.

It could hardly have considered reasonable classification requirement of 1(6) to apply to commodity rates and yet say as it did that classification and rates should be kept entirely separate.

Edward A. Kaier:

Even in the present case, Your Honors, the examiner who held against us apparently could not get out of his mind that classification within 1(6) is that applying to class rates for he said, “The examiner finds and concludes that the rates tend to vitiate and undermine the Uniform Freight Classification which I interpolate is something applying to class rates in violation of Section 1(6) of the Act.

The rates he said undermine and tend to vitiate and tend undermine the Uniform Freight Classification.

(Voice Overlap) Probably that prevent etcetera in case you (Inaudible).

Edward A. Kaier:

If Your Honor please, there — let me say it first that I think that it was so generally assumed that classification — the classification provision related to class rates that the matter did not come up until — I mean squarely until one a case involving all commodity rates such as we have here and the Commission held that the provision did not apply and I’ll discuss that after the noon recess.

Earl Warren:

We’ll recess.

Edward A. Kaier:

I was about to discuss the case entitled All Freight to the Pacific CoaSt.

A decision of the Interstate Commerce Commission passing upon the lawfulness of all commodity rates under Section 1(6) of the Act.

And I think that the position that 1(6) is violated by all commodity rates is best summed up by quoting a sentence from the dissenting opinion of Commissioner Alldredge.

Commissioner Alldredge was the great champion of the idea that the reasonable classification provision applied not only in connection with class rates but commodity rates as well.

And he said, “The significance of classification should be considered in its broadest sense that is as furnishing a comprehensive basis system with the distribution of the general rate burden and the establishment of rate relations.

And so regarded it necessarily embraces commodity rates as well as so called class rates.”

The majority of the Commission answered this by stating, “Respondents now maintain a full line of class rates in governed by the western classification from and to all points involved in this proceeding as required by Section 1(6) of the Interstate Commerce Act.”

And then a little bit later it said, “Class rates normally reflect the maximum of reasonableness on good falling within the various classes of traffic.

Commodity rates are established” and then I’m skipping a little bit “when circumstances and conditions suggest the class basis is too high for application on the traffic.”

And then this very significant statement, “We have approved this basis of ratemaking and have never required commodity rate to conform to the ratings of the classification.”

A little later on it said, “All rates are required to be just and reasonable, nondiscriminatory and non-prejudicial.

To require carriers to maintain rates only on a classification basis would make Section 1(6) paramount to all other sections of the Act.”

Commissioner Eastman in his concurring opinion stated, “As is well known the classification of freight which the railroads published, clasifications of freight which the railroads publish are for the purpose of governing the application of their class rates.”

He then went on to State — well that’s an offer on Commissioner Eastman at that point.

Commissioner Webb in his dissent in this case stated that the legislative and historical background of Section 1(6) leaves no doubt that the requirement of classification was intended to reinforce the Commission’s power to establish maximum reasonable rates but not to prohibit or restrain competitively compelled departures from the classification.

And the reference there, the maximum reasonable rate is that the highest rates that are in the tariffs are the class rates.

That decision in All Freight to the Pacific Coast was challenged in a district court of three judges in Washington.

And the Commission’s order was sustained.In another major case involving all commodity rates it was again held by the Commission that 1(6) did not apply and that was all freight rates to point in Southern territory which of course we have cited in our brief.

Arthur J. Goldberg:

(Inaudible) this classification rates involved (Inaudible)?

Edward A. Kaier:

No, no it is not Your Honor.

Class rates are also apply on many carload movements.

Arthur J. Goldberg:

(Inaudible)

Edward A. Kaier:

Yes, there would be — there would be Your Honor.

Arthur J. Goldberg:

(Inaudible)

Edward A. Kaier:

In carload lots, there would be and of course it is important to those people who do ship on class rates today, although the number is getting smaller but to those who do, it’s very important that their classification be reasonable as well as their rates.

Edward A. Kaier:

Ordinarily, the classification assigns a lower class — a lower classification rating for carloads than less than carloads on the same commodity.

Potter Stewart:

It’s important I just think to remember that these rights in your issues just applicable to Chicago and St. Louis less found.

Edward A. Kaier:

That is correct sir.

Now, the Commission states in its brief that the Commission has consistently scrutinize the reasonableness of freight classifications in the passing on commodity rates.

But a careful reading of the cases that it cites on that proposition will show that in doing so, it was applying the provisions of Section 1(5) as to reasonable rates, Section 2 as to unjust discrimination, or Section 3 as to undue prejudice.

And in none of them did it rely upon Section 1(6) of the Act.

I believe that this is the first case in which the entire Commission has applied Section 1(6) to commodity rates.

There are two decisions of the division three — division two of the Commission in which 1(6) was invoke against commodity rates.

And those are very interesting for this reason.

As I have said District Commissioner Alldredge was the great champion of the idea that 1(6) applied to commodity as well as class rates.

He didn’t persuade anybody, any of his colleagues that that was so except Commissioner Johnson.

And in these two cases, Commissioners Alldredge and Johnson constituted the majority of Division 2 of the Commission which consists of three men.

The third man did not concur in their opinions.

But other than those, I think there are no decisions holding 1(6) applicable to commodity rates although it’s been on the books since 1910.

Arthur J. Goldberg:

(Inaudible)

Edward A. Kaier:

Well, I think it’s this, Mr. Justice Goldberg.

We have now enacted by Congress, Section 15a(3), the object of which was to give the railroads greater freedom in making competitive rates and to indicate the rules which should apply.

And that is to say that they could meet competition and make rates lower as low as they wanted to regarded as necessary to meet the competition provided they didn’t take away an inherent advantage of one of the competing carriers.

Now, of course, the railroads drill for a long time to get that legislation and here it is just fresh on the books.

And the Commission invokes Section 1(6) and says, “Now, in addition to meeting the requirements that you have always had to meet, in addition to meeting the standards of Section 15a(3) recently enacted, you must now also meet classification principles.”

Now, classification principles have taken a rather classic form in which certain elements are considered, one of which is value of the commodity.

And the idea has been that value of the commodity.

It means that something of high value can take higher rates and something of low value will take lower rates.

And of course that was all well and good when the railroads had a monopoly and the man had to ship by railroad.

But if you tell a man that now, he’ll go around the corner to see a trucker and if he can’t get what he wants from the trucker, he’ll buy a truck.

And he can hold diamonds in that truck just as cheaply as he can call coal.

And I don’t want to get into discussion of value of service.

But I believe that that is what the District Court had in mind when it was talking about value of service here.

That is to say value of the commodity.

But at all events, our fear is that if the Commission imposes the requirement that in judging the lawfulness of competitive rates, it’s going to judge them also by whether they conformed to classification principles were going to be met with a frustration of the purpose of Section 15a(3) because the Commission will condemn them, because they don’t confrm to classification practices and say, “Oh yes, if they are right under 15a(3) but basically they don’t conform to something that for years we’ve been doing” namely applying classification principles.

Potter Stewart:

From the way of — how new a development is a commodity rates, are they fairly new?

Edward A. Kaier:

Oh no, Your Honor, they have been — and they were in effect even before the Interstate Commerce Act was passed but used much less frequently.

Potter Stewart:

More sparingly.

Edward A. Kaier:

Yes.

Potter Stewart:

Now, it’s what 99% of the freight.

Edward A. Kaier:

That’s what the — I believe the lower court said 99%, it’s 95 anyway maybe 99, I don’t know.

Potter Stewart:

What brought them in on the freights, did they come in the days when railroads were still a monopoly?

Edward A. Kaier:

Oh, yes, yes.

Potter Stewart:

What brought them in?

Edward A. Kaier:

Well there’d be competition between railroads or competition with railroads and waterlines or perhaps in many situations in order to get the traffic to market, it wouldn’t move if the rate was too high say it was on — in certain circumstances at least it wouldn’t.

Now, the classification was something that applied all over a territory.

For example here in the East, Mr. Commissioner, the official classification applied just about from the Atlantic Sea Board to the Mississippi River and North of the Ohio.

Now, fixed the classification rating for that whole territory.

Between certain points from the territory there may have been need by reason of some competitive factor to make a lower rate.

So instead of dislodging the classification applying generally, they just made a commodity rate to apply between those points.

Now, the government attempts to distinguish All Freight to the Pacific Coast on the ground that’s the — all commodity rates in effect there or approved there were higher than the individual rates on individual commodities embraced within the all commodity group.

And I submit that that is really a very superficial distinction.

It seems to me that the idea that an all commodity rate does not offend classification principles if it is higher than the individual rates on individual commodities completely overlooks the fact that the individual rates themselves were made without reference to classification principles.

So I submit that that is no distinction at all.

And moreover, the Commission’s reference to the fact in its decision was to distinguish two other cases on the grounds of undue preference and prejudice and have nothing whatever to do with the application of Section 1(6).

So I submit, if You Honors please, that commodity rates are not within the purpose of Section 1(6) in the Commission’s decisions up to this time.

William J. Brennan, Jr.:

You’ve mentioned classification principles overtime, is there (Inaudible) principles?

Edward A. Kaier:

More or less.

William J. Brennan, Jr.:

What are they?

Edward A. Kaier:

They — there doesn’t have to be — there doesn’t have to be, Mr. Commissioner, but they are pretty fixed.

They’re stated on page 10 of the government’s brief.

William J. Brennan, Jr.:

Oh I see, in the footnote?

Edward A. Kaier:

Yes sir.

William J. Brennan, Jr.:

Thank you.

Edward A. Kaier:

Your Honor, if I may interpolate at this point, you will notice that nearly all of these relate to cost factors, things that affect cost to transportation.

Edward A. Kaier:

And New Haven’s rates really comport very well with the cost factors.

It’s really just the value of factor, the value of the commodity that is not considered by those rates but that’s neither here or nor there from the standpoint of your decision of the issue here.

Just to summarize then, I submit, that commodity rates are not within the purpose of Section 1(6).

They are not within the legislative history of the reason for enacting Section 1(6).

The Commission up to this case, ever since 1910, has not applied them to commodity rates.

And if they are applied to commodity rates, this Court’s decision and the 1958 Amendment to the Section 15a(3) will be frustrated.

And I ask, therefore, that the Court affirm the lower court’s holding at Section 1(6) does not apply to these rates.

Thank you, Mr. Chief Justice.

Earl Warren:

Mr. Hunt.

Eugene E. Hunt:

Mr. Chief Justice, may it please the Court.

There is another lack of validity in the suggestion by appellants that the Interstate Commerce Commission has included any findings of fact in their final report on reconsideration underlying the finding of destructive competitive practice.

Now, they point to the statement in the report which is on page 12 of the record, “To the affect that during 76 days prior to the hearing before the ICC that our Section 2, all commodity rates produce four million pounds of additional traffic in return for a $129.00 of that in revenue.”

The record as a whole shows that the statement is without any meaning whatever to the final decision of the Commission.

Now I think or for furthermore, there are — in fact there are no findings whatever in their report to support its finding of destructive competitive practice.

Now, I think a brief examination, and I’ll attempt to make it as brief as possible, of the record will show this.

It shows first that the New Haven had in mind in publishing in Section 2, all commodity rates two things and I think that Mr. Kaier covered this.

I would like to cover it very briefly.

First, to fill up about 150 boxcars which were moving each day empty westbound.

Secondly, it hoped to prevent the erosion of its boxcar traffic to motor carriers on one hand and to the Plane III carriers on the other.

Now, certainly the Plan III piggyback and I think this is well established — was established to comeback motor carrier competition both regulated and unregulated.

Therefore when we are attempting in our boxcar rates to meet Plan III this doesn’t mean that we’re meeting other rail competition.

It means we are trying to adjust our boxcar rates to accommodate motor carrier competition already being met by Plan III piggyback.

Now, it should be noted in the record — I will — should have noted that the record shows that after 76 days of operation, the New Haven’s new rate schedule had attracted only about three cars per day average of new traffic and that be attracted from the trucks only about one car a day to fill up the 150 which we had available.

Now, this performance, it has to be admitted, shows something less than an overwhelming success as a result of our rates.

And perhaps this may show that the rates aren’t low enough.

It certainly doesn’t support a finding of destructive competitive practice.

Byron R. White:

What the — and I suppose that it does show that the erosion of your traffic was a rest issue.

Eugene E. Hunt:

To that I think it does show.

Byron R. White:

I mean this is the real point, isn’t it that — and this is one of the real point, the comparison of the — the comparison between what the new rates produce and what would have been produced with just the old rates, had you carried the same amount of traffic is meaningless unless — unless you can show — unless you can show that you would have carried the same amount of traffic —

Eugene E. Hunt:

That’s the matter I want to cover, Your Honor.

Byron R. White:

As a matter of fact — as a matter of fact if you have to do rates, you might have only carried half as much.

Eugene E. Hunt:

That’s correct.

This is the matter that I would like to cover.

And certainly it doesn’t show that we — that we gained more traffic.

It shows that we at least handle a certain amount of traffic under the Section 2 rates.

Byron R. White:

Which —

Eugene E. Hunt:

Which we may not have handled it, we have had to use the prior — the previously effective rates.

Byron R. White:

Which means that even — which means that if you work making a million dollars off this new traffic, you weren’t losing as much as you would have without the rate.

I mean at least if you would — the argument is — the argument is that these are very least that this had to do with to — is to arrest your laws of traffic, and the erosion of your business, that’s the very least that you say.

Eugene E. Hunt:

I would go this far, Your Honor.

I think the fact that it attracted some boxcar traffic and some truck traffic it would at least indicate they were effective.

To what extent they were effective, we don’t know and the record doesn’t show and I don’t think anybody can get into the realm of speculation and ratemaking to the extent of saying the rates at a certain level attracted to certain number of boxcars.

And that these will come from such and such source and we’ll make such and such revenue.

It’s — it’s impossible to do.

And of course, this is one of the problems which the Commission has in front of it, when it’s considering new rates as these are.

William J. Brennan, Jr.:

Is your three-day average still maintained?

Eugene E. Hunt:

Your Honor, I don’t know.

The record closed that three a day and I have no reason to believe that’s more than that.

Byron R. White:

But they’re still continuing these rates after five years.

Eugene E. Hunt:

The rates are still in effect, Your Honor.

So far as I know they still move traffic.

Potter Stewart:

Although that New Haven now itself does have piggyback.

Eugene E. Hunt:

New Haven does have piggyback, Your Honor.

We — the record shows that we had some disadvantages at the time the record was close.

Potter Stewart:

Physical and (Voice Overlap) but I understood those were correct and perhaps that’s outside the record.

Eugene E. Hunt:

They have not been entirely correct.

Byron R. White:

Well, you got the big flatcar?

Eugene E. Hunt:

I’m sorry I couldn’t hear you, sir.

Byron R. White:

You got the large flatcar that can carry trailers.

Eugene E. Hunt:

We have some large flatcars, that’s why this is a question of supply.

Eugene E. Hunt:

There may be shortages of long flatcars to handle all the available traffic.

I think that may be one of our problems because of finance.

We have a large number of 40-foot flatcars which are the old type and which trailers are still loaded on, even though there are two trailers for shipment.

They use one trailer to a flat car in many instances.

Now, in 1958 and this goes to the construction of the rates, what the rates actually did, how we approach this problem of attempting to fill the 150 empty boxcars and prevent erosion to the highway.

In 1958, practically all eastern carriers and I think this has been covered before, I’ll keep it brief.

Practically, all eastern carriers faced a serious erosion of traffic to highway carriers both regulated and unregulated.

And that during that same year the Transportation Act of 1958 was passed and as a result of that legislation, the eastern blinds were encouraged to expand on a — an old form of trailer- on-flatcar service, and this was known as Plan III which Mr. Carpenter has already explained.

I think that just in brief, I will explain that the piggyback rates apply on two trailers, moving in the same shipment not necessarily on the same flatcar within the same shipment.

A maximum loading is permitted of 70,000 pounds.

The rates are the same for the shipment regardless of the character of traffic in the boxcar or in the trailers, or regardless of the weight less than 70,000 pounds.

It’s irrelevant to this discussion that there is an excess charge for over seven.

At any rate this is the type of rate which has been in existence for sometime, it was an existence at the time that we were establishing our Section 2, all commodity rates.

And these had to be a consideration in establishing our rates and in determining a level at which those rates would be established our Section 2 or commodity rates and these had to be a consideration in establishing our rates and in determining the level at which those rates would be established.

And incidentally I’m not sure if this was set.

The Plan III service and charges had been approved by the Commission and Eastern Central Motor Carriers v. Baltimore and Ohio, reported 314 I.C.C. 5, 1961.

And the decision of the three-judge court upholding the Commission in 226 Fd. Supp. 318 was affirmed by this Court in Cooper-Jarrett v. United States, number 159 of this term.

So in 1959, when the Section 2 rates were being formulated, it was clear that in a new pricing approach, had to be resolved with a key in hand of those rates with the existing Section 3 or Plan III piggyback rates.

Now, along this line, there have been — and I think this was mentioned I don’t know to what extent.

There were in existence in the time our Section 2 rates were established, also Section 1 rates and these likewise were on all commodity freight.

They were — one rate however from Boston to Chicago the level of the rate was I believe $2.13 cents per 100 pounds.

For a shipment, a minimum weight of shipment of 30,000 pounds.

However, because of a various fringe benefits in connection with those rates, the average car loading was about 20,000 pounds per car on a shipment of Section 1 of all commodity rates.

Now, the rates which we have here are here in issue are constructed on the one end.

You will notice they are made of a scale.

There’s a rate (Inaudible) to lowering the scale add more to a shipping weight of 20,000 pounds.

That rate is the same as the Section 1 or substantially the same as a Section 1 all commodity rate, which has been in existence for years.

Now, it went down to the other end of this scale where 70,000-pound rates, and that is the same as the Plan III rates on a 70,000-pounds shipment.

But it’s higher to the extent that a shipper would pay in addition to the Plan III rate, a pickup and delivery charge or cost that either end of the terminal — at either terminal both in origin and destination.

Now, in the center of the — of the scale of rates, we have of course some 10,000 pounds increments rates on 20,000, 30,000, 40,000, 50,000, 60,000 and 70,000 pounds.

Eugene E. Hunt:

In the center of the 30,000-pound rates on this scale which is here involved, were made somewhat higher, slightly higher, and this is shown in exhibit 22 Page 176 of the record.

They’re slightly higher than the motor carrier 30,000-pound rates on most commodities which are shown in that exhibit.

Our 40,000-pound rates, this is of course would create an incentive, were slightly lower than the range of 30,000-pound motor carrier rates shown in that exhibit.

Now, this is not entirely a consistent pattern but it is consistent as with possible in establishing a single level of rates based on shipping weights.

Now I like to mention this that the charge for a 50,000-pound shipment from Boston to Chicago in Plan III would be $494.50 cents as compared with a charge for a similar shipment in boxcars under Section 2 of $530.

So, these are related.

You have then the Section 2 rates tied in with — with your Plan III piggyback.

Now, it’s entirely clear, I think, that because we had published our Plan III rates at levels which were hidden with — which were competitive with motor carriers, and particularly with unregulated private truckers, we could expect our closely related boxcar rates to capture some truck traffic and in effect, in fact this did happen as the record shows.

Now, although not — though it was not conclusive, we also presented the Commission some figures, the only ones available, to show a trend under the new schedules, and those are the ones shown on page 12 of the record which were in the Commission’s final report.

Now, all the exhibit shows on its face and these may be partly in response to Mr. Justice White’s question.

In my mind is that the new schedules are effective in attracting some truck traffic.

To what extent they have retained traffic, we can’t say.

We think they were somewhat successful in that regard at least they carried some traffic.

In order to provide and I’d like to — to quickly go through this.

In order to provide the Commission with a comparison of earnings, the New Haven’s witness prepared Exhibit 28, that’s at page 200 of the record which shows the times that tonnages and earning under the new rates and then re-rated them the same tonnages using the old rates.

Now, they used two assumptions, first, that the volume would be the same and this is in response to Mr. Justice White’s question.

They assumed that the volume of traffic would be the same as under the old rates.

And they also assumed that the same number of boxcars would be required to handle that traffic as under the new rates, even though — even though under the new rates the average loading was quite high.

Now it’s made of — it’s quite clear in the record that the comparison couldn’t be taken as an accurate measure of improved revenues, and certainly I — I think that in our discussion this is clear.

And certainly, it couldn’t be taken as a measure of net revenues because the service performed under the old rates was quite a bit different and more extensive than under the new.

And again, we didn’t know how much traffic we’d move would be retained under the — under the old rates if they had been on effect rather than the rates.

Now, as to the possible increase in that revenues, the cost of handling a traffic at the old Section 1 rates, were greater because the number of boxcars needed were — were — a greater number of boxcars were needed to handle the same amount of traffic.

The Commission statement in the report, therefore, at page 12, as to the four million pounds for additional $129 is wholly without meaning, and nevertheless the — appellants rely on this to show destructive competitive practice.

Now, if the Commission had intended to support its finding, it would had to reconcile several other things and quickly they would had — they would have had to justify its approving the Plan III piggyback rates, which would have produced and this is shown in our record at page 201.

It would produced if the same traffic which moved into 76 days had then — had moved in Plan III piggyback, it would have accrued $1200 less revenues.

Now, this isn’t disturbing to us because the cost of piggyback is different, and the service is different.

Now next, the Commission must have seen in the record that an average of only three cars per day were moving under the Section 2 rates, the same time 34 cars per day were moving under the old Section 1 rates just between Boston and Chicago, and this is shown in the printed record 199.

So this clearly shows a lack of validity in the Commission’s fear that Section 1 rates or Section 2 rates would destroy the rate structure and that traffic moving under Section 2 would constitute the bulk of the freight moving out of the lines of the New Haven and to the points involved in the tariffs.

Now, one final thing, the question of net revenue under the new rates was raised, the assumption that the traffic would have moved in one boxcar and under the old rates for every boxcar under the new rates is shown to be erroneous in the record that — well I can’t put my finger on the record reference, but there is a — a reference in the record showing that the average rate or the average number of cars under the old rate of Section 1 was two per shipment and the average was about 20,000 pounds per shipment.

Now, if we then recalculate the cost of moving the two boxcars under the old rates for every boxcar under the new rates, we will find that the New Haven actually has save itself from $18,000 out-of-pocket loss, whereas that the — the record shows that it actually did gain $36,000 above out-of-pocket costs.

Eugene E. Hunt:

Now, I think that in conclusion I — I had said enough to indicate that the record is completely clear to show that the New Haven and its connections achieve the rates that are here involved into the existing rate structure.

I think there is no question that a whole lot of traffic is not moving under these rates, we can’t blame that.

However, I think that indicates that it is a pragmatic test.

I think that indicates that the rates are not destructively — a destructive competitive practice.

In a sense we wish that there was more indication that this solved but we simply aren’t moving enough traffic for the Commission to have found that the rates constituted destructive competitive practice.

Byron R. White:

Does that conclude the argument on your side?

Eugene E. Hunt:

Yes sir, that does.

Byron R. White:

Could I ask you question through Mr. Hunt.

Why isn’t — why isn’t literally speaking this rate that you published a class rate, and then applies to a lot of commodities but you know a lot of commodities with enterprises?

There are some exclusions.

Eugene E. Hunt:

We have but well — you said why it isn’t the class rate, Your Honor?

Byron R. White:

Yes.

Eugene E. Hunt:

Well, it isn’t a class rate because it doesn’t relate to the uniform freight classification which Mr. Kaier’s away referred to.

Byron R. White:

That so — is that — that’s the —

Eugene E. Hunt:

That’s a missing — that’s a compelling reasonable maximum rates.

Byron R. White:

This is a prescribe — this is a prescribed uniform classification —

Eugene E. Hunt:

That’s correct, Your Honor.

Byron R. White:

— to which the railroads must conform if you’re going to have a class rate?

Eugene E. Hunt:

I’m sorry I didn’t get the last.

Byron R. White:

Well, it’s a classification that the railroads must comply with if they’re going to publish a class rate, is that it?

Eugene E. Hunt:

That’s correct and the class rate itself is prescribed as well.

Byron R. White:

Well, I know but that — it must prescribe with this — comply with this classification and it’s going to publish a class rate.How do you know when you published a class rate?

Eugene E. Hunt:

Well, the Commission tells us, Your Honor, what class rates are and they tell us what the maximum —

Byron R. White:

Well, why isn’t this one?

Eugene E. Hunt:

Because this is not prescribed by the Commission obviously.

They condemned it rather than prescribe it.

But the class rate is the maximum rate which are — well which can be charged for a traffic.

The class rate and the classification of course as Mr. Kaier said go together, and together these form the maximum rate which can be charged for any class of traffic.

Byron R. White:

Well, I gather that under the Commission’s approach that within one area — within one area there couldn’t be both a class rate and an all commodity rate which the Commission would approve.

Eugene E. Hunt:

I’m not sure that I understand the question, your Honor.

Eugene E. Hunt:

In other words on the same —

Byron R. White:

Well in all — in all commodity rate — rates just couldn’t ever exist within the same territory with a — with a class rate.

Eugene E. Hunt:

Well, I don’t think they’re entirely saying that, Your Honor.

I think what their saying is you can have all commodity rates so long as they’re higher than existing commodity rates on individual commodities that have moved under the all commodity rates.

Byron R. White:

Oh I see.

Eugene E. Hunt:

So in that sense they are saying you can have them but they really won’t be much good to you except — unless you want to move them next to you traffic.

And that isn’t what they New Haven wanted to do.

The New Haven wanted to move a great number of types of traffic of manufactured articles under these rates, and it didn’t wanted have to go through the problem of publishing an individual rate on each manufactured article.

Byron R. White:

Well, why didn’t it want to go through the jobs of — of publishing some new class rates?

Eugene E. Hunt:

Well, because if it had gone through an entirely new class rate system on publication of new class rates, then if they were called class rates and the Commission finally accepted them as such, then these would be the maximum then at which the traffic involved would move in transportation service.

Byron R. White:

Well then, I suppose also those rates wouldn’t have done the job you wanted them to do.

Eugene E. Hunt:

I think that’s correct, Your Honor.

Class rates are a little bit too inflexible to do the kind of job we had to do between these points, New England points and Chicago or St. Louis.

Byron R. White:

And have the other railroads involved here maintained their all commodity rates also?

Eugene E. Hunt:

They still have them in effect.

That’s correct, Your Honor.

Byron R. White:

But all of them now have piggyback, including you.

Eugene E. Hunt:

All of the lines involved are participating in this Section 2 rates to my — the best of my knowledge do have piggyback service, that’s correct.

But piggyback service doesn’t correct the empty boxcar problem which the New Haven had.

Byron R. White:

Well, now would the experience of the New Haven assume that this case were remanded to the Commission a new findings?

Would the experience of the New Haven in the last three years on these rates be meaningful to the — in terms of the points about which you’ve been talking?

I mean that you’ve been talking about this comparison that was made.

Eugene E. Hunt:

Yes.

My comparison would have to do simply —

Byron R. White:

You’d have to go to a certain period of time on certain shipments and it was the study that was made with the railroad, wasn’t it?

Eugene E. Hunt:

That’s correct.

Byron R. White:

Now, I suppose that — you would have a continued experience with the rates that might be examined.

Eugene E. Hunt:

Well, we would have continued experience with the rates.

I’m not sure if it would show anything different than it did in 76 days prior to hearing Justice White.

Byron R. White:

Unless you’re — you’re having piggyback and other factors that just dried up to traffic that are moving on these — on these rates.

Eugene E. Hunt:

Well, we — I — I think that it’s correct to say that piggyback and I think that it’s common knowledge that it’s becoming stronger and stronger as time goes along.

This is the best evidence that I know that these price that we’re talking about does not destructively create destructive competition.

Byron R. White:

To the extent that the piggyback is taking the traffic and to that extent as this whole issue less important.

Eugene E. Hunt:

I think it is, Your Honor.

I think that the Commission has approved piggyback rates, Plan III rates —

Byron R. White:

But the —

Eugene E. Hunt:

And I think they are the important rates today.

Byron R. White:

The issue you’re arguing about here then becomes progressively less important.

Eugene E. Hunt:

I think that’s correct, Your Honor.

William J. Brennan, Jr.:

This is to say that — that piggyback is getting now much more profit, you both were utilizing these empty boxcars whether they’re not to be utilized.

Eugene E. Hunt:

Well, we hope that we achieve these rates and at least to make maximum use of our boxcars, so that the boxcar rates will then be compatible with our piggyback rates.

William J. Brennan, Jr.:

Well, even though compatible with piggyback than a more desirable service.

Eugene E. Hunt:

I think as a general rule, I think that’s growing more and more so, Your Honor.

Mr. Kaier reminds me that 1(6) has already been decided in connection with piggyback by the Commission in which they found that there was no violation of the classification section of the Act.

Byron R. White:

Well, that’s was in the — which case was that in?

Eugene E. Hunt:

That was in the Eastern Central Motor Carriers Association v. Baltimore & Ohio Railroad Company.

Byron R. White:

That was on the Plan III of piggyback?

Eugene E. Hunt:

That was on Plan III piggyback.

That’s correct, Your Honor.

Byron R. White:

That’s not the mixture.

Eugene E. Hunt:

And that has a mixture but the trailers — there are two trailers in a shipment.

Each trailer can contain a solid shipment of one type of freight.

Byron R. White:

But now can — the New — the New Haven’s piggyback is moving under that class three.

Eugene E. Hunt:

The New Haven does have Plan III piggyback, that’s correct, Your Honor.

Whereas Mr. Justice Brennan has already suggested, this doesn’t correct our empty boxcar problem where we have empty boxcars.

Thank you very much.

Earl Warren:

Mr. Carpenter.

Homer S. Carpenter:

Mr. Chief Justice, may it please the Court.

I wanted to address myself first to a comment by Mr. Justice White with respect to the possibility that these rates have prevented an erosion of traffic.

I think it is dangerous to speculate as to what could have happened in the absence of these rates.

Homer S. Carpenter:

The fact is that either way — I think that’s correct.

The fact is that —

Byron R. White:

One of the (Inaudible).

Homer S. Carpenter:

No.

If the —

Byron R. White:

(Inaudible)

Homer S. Carpenter:

No, Mr. Justice White.

The Commission made the decision on it.

Now, these figures, these data from which the Commission drew its conclusion were put in by the New Haven Railroad and the witness of the New Haven testified specific in this record, that these disclosed the particular traffic which were — which was being affected by these rates.So that, this is an area within which the Commission has special cover.

I think that the Commission’s finding on that is dispositive of it.

Byron R. White:

(Inaudible)

Homer S. Carpenter:

Well, I — if Your Honor please it seems to me that somebody is going to have to make these determinations.

And when the Commission does it, if there’s a rational basis for it, I think the judicial inquiry ends right there.

That’s the position I take it.

And I think it is supported by a good many and of the opinions of this Court.

There is one area in which we agree with the railroad appellees here.

We think this case is right for decision.

We think that the value of service concept was injected into the case by the court below, and we know it was not relied upon by the Commission in its decision.

We repeat that we deal with it and — or that the Commission should deal with it if it wants to in the future, in a case where it is the central issue in the case not in this where it is at best a peripheral matter.

There are two bases for the Commission’s decision, the destruct — destructive competitive practice to which I’ve already referred.

And I want to point out that in that respect, the court below stated that the Commission had brought that issue in under Section 15a(3) and the Court was plainly wrong because the only way it gets in to Section 15a(3) is by reference to the National Transportation Policy and the National Transportation Policy came into the Act 18 years before 15a(3) was added to the Act.

As a matter of fact, the National Transportation Policy had a predecessor in the Motor Carrier Act in 1935, this destructive competitive practice provision and applied them just to the motor carriers.

It wasn’t until 1940 that it was made applicable to the — to the entire Act and by its own terms permeates the entire Act.

And as this Court has said in the Schaffer case is the yardstick by which you measure the correctness of the Commission’s decision.

Now, with respect to Section 1(6), I would like to point out again in response to a question asked by Mr. Justice White, the rates here, these all commodity rates which are in essence any commodity rates in as much as they don’t apply on any, or if they don’t require a mixture are measured by the Commission itself by reference to the class rates, the highest one that is assessed is 45% of first class and the lowest 19% of first class.

I unfortunately didn’t address very many on my earlier remarks to Section 1(6).

I would like at this time to adopt the argument of the government at pages 9 to 18 of its brief.

It’s a very lawyer-like presentation.

And I’d like to read very briefly from that because there was an early case in which the Commission did apply this principle of classification as used in 1(6) to commodity rates.

And it is in the rates on Lumber and Lumber Products 52 I.C.C. 598 at page 15 of the government brief, where the — where the Commission said, a classification of given articles is effected by a determination of the rate relationship.

Homer S. Carpenter:

In a measure, this is true when articles are grouped together under a commodity description in a commodity tariff, as well as when they are included in official western or southern classification.

Thank you very much.